Attached files
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EX-32.1 - CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 - Piedmont Mining Company, Inc. | pied10k20091231ex32-1.htm |
EX-31.1 - CERTIFICATION PURSUANT TO SECTION 302 - Piedmont Mining Company, Inc. | pied10k20091231ex31-1.htm |
EX-31.2 - CERTIFICATION PURSUANT TO SECTION 302 - Piedmont Mining Company, Inc. | pied10k20091231ex31-2.htm |
EX-32.2 - CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 - Piedmont Mining Company, Inc. | pied10k20091231ex32-2.htm |
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
þ
|
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
|
For
the Fiscal Year Ended December 31, 2009
OR
|
|
o
|
TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
|
Commission
File No. 001-34075
PIEDMONT MINING
COMPANY, INC.
(Exact
Name of Registrant as Specified in Its Charter)
North
Carolina
|
56-1378516
|
|
(State
or Other Jurisdiction
|
(I.R.S.
Employer Identification
|
|
Of
Incorporation or Organization)
|
Number)
|
|
18124
Wedge Parkway, Suite 214, Reno, Nevada
|
89511
|
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
Registrant’s
telephone number, including area code (212)
734-9848
Securities
registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
per share
(Title of
Class)
Indicate
by check mark if the registrant is a well-known seasoned issue, as defined in
Rule 405 of the Securities Act.
o
Yes
|
No
x
|
Check by
check mark if the registrant is not required to file reports pursuant to Section
13 or 15(d) of the Exchange Act.
o
Yes
|
No
x
|
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
o
|
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment of this
Form 10-K. o
Indicate
by check mark whether the registrant is a large accelerated filer, an
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-3 of the
Exchange Act. (Check one):
Large
accelerated filer
|
o
|
Accelerated
filer
|
o
|
|
Non-accelerated
filer
|
o
|
Smaller
reporting company
|
x
|
|
(Do
not check if a smaller reporting company)
|
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
aggregate market value of the voting and non-voting common stock held by
non-affiliates of the registrant was approximately $2,325,124.55 based on the
average bid and asked price of the registrant’s common stock as reported on the
OTC Bulletin Board under the symbol “PIED” as of June 30, 2009.
The
number of shares of the issuer’s common stock outstanding as of March 15, 2010
was 71,623,643.
PIEDMONT
MINING COMPANY, INC.
FORM
10-K INDEX
PART
I
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||
ITEM
1.
|
BUSINESS
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3
|
ITEM
1A.
|
RISK
FACTORS
|
6
|
ITEM
1B.
|
UNRESOLVED
STAFF COMMENTS
|
15
|
ITEM
2.
|
PROPERTIES
|
15
|
ITEM
3.
|
LEGAL
PROCEEDINGS
|
20
|
ITEM
4.
|
REMOVED
AND RESERVED
|
20
|
PART
II
|
||
ITEM
5.
|
MARKET
FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
|
20
|
ITEM
6.
|
SELECTED
FINANCIAL DATA
|
22
|
ITEM
7.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
22
|
ITEM
7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
29
|
ITEM
8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
29
|
ITEM
9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
30
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ITEM
9A(T).
|
CONTROLS
AND PROCEDURES
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30
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ITEM
9B.
|
OTHER
INFORMATION
|
31
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PART
III
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||
ITEM
10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
31
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ITEM
11.
|
EXECUTIVE
COMPENSATION
|
35
|
ITEM
12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
36
|
ITEM
13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
37
|
ITEM
14.
|
PRINCIPAL
ACCOUNTING FEES AND SERVICES
|
38
|
PART
IV
|
||
ITEM
15.
|
EXHIBITS,
FINANCIAL STATEMENT AND SCHEDULES
|
39
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SIGNATURES
|
41
|
PART
I
ITEM
1. BUSINESS
Forward-Looking
Statements and Associated Risks. This Report contains forward-looking
statements. Such forward-looking statements include statements
regarding, among other things, (a) our estimates of mineral reserves and
mineralized material, (b) our projected sales and profitability, (c) our growth
strategies, (d) anticipated trends in our industry, (e) our future financing
plans, (f) our anticipated needs for working capital, (g) our lack of
operational experience and (h) the benefits related to ownership of our common
stock. Forward-looking statements, which involve assumptions and describe our
future plans, strategies, and expectations, are generally identifiable by use of
the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,”
“believe,” “intend,” or “project” or the negative of these words or other
variations on these words or comparable terminology. This information
may involve known and unknown risks, uncertainties, and other factors that may
cause our actual results, performance, or achievements to be materially
different from the future results, performance, or achievements expressed or
implied by any forward-looking statements. These statements may be
found under “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and “Business,” as well as in this Report
generally. Actual events or results may differ materially from those
discussed in forward-looking statements as a result of various factors,
including, without limitation, the risks outlined under “Risk Factors” and
matters described in this Report generally. In light of these risks
and uncertainties, there can be no assurance that the forward-looking statements
contained in this Report will in fact occur as projected.
Overview
of Business
Piedmont
Mining Company, Inc. (herein after the “Company” or “Piedmont”) is a North
Carolina corporation formed in 1983. From our inception until
mid-1992, we were engaged in the exploration for, and production of, gold and
other precious metals and the evaluation of gold properties in North and South
Carolina. From 1983 we were engaged in exploration and from early
1985 until May 1992, we were also engaged in the mining and production of gold
and silver at our Haile Mine Property near Kershaw, South
Carolina. In May 1992, we entered into a joint venture at our Haile
Mine Property with Amax Gold Inc. (“AGI”). Our activities ceased at
the Haile Mine Property in 1994. We did not again become
engaged in exploration activities until 2004, when we relocated our principal
place of business to Reno, Nevada. Since October 2003, we have been
an exploration stage company engaged in the acquisition and exploration of
mineral properties. We have entered into agreements on ten (10)
exploration properties in the state of Nevada, but six of them have subsequently
been terminated. The description of our current exploration
properties are set forth under Item 2 of this Report. Our plan is to conduct
exploration for gold and silver at these properties to assess whether they
possess economic deposits of gold and/or silver, which could be recovered at a
profit. We do not intend to build an exploration staff, but rather to
joint venture our projects with competent exploration groups who can manage the
exploration activities with our funding, although in some cases we may conduct
exploration on our own using contractors. We do not know whether a
commercially viable ore body will be located on any of our mineral claims or
leased properties. Our current plans are limited to exploration in the state of
Nevada which is dependent on us securing additional financing or seeking
alternative sources of cash flow. In 2009, we were also granted a
carried interests in two small oil wells in the United States to
provide minor cash flow to fund some of our expenses.
Our
directors and officers are individuals with prior experience in gold and silver
exploration, development and operations. Our directors and officers
have in excess of 150 years of combined experience with gold and silver
exploration, development and mining. We believe that we have
assembled a highly qualified group of individuals with extensive experience in
this sector.
3
In the
state of Nevada, there are five (5) types of land that can be available for
exploration, development and mining: public lands, private fee lands, unpatented
mining claims, patented mining claims, and tribal lands. The primary sources of
land for exploration and mining activities are lands owned by the United States
Federal government, through the Bureau of Land Management and the United States
Forest Service, land owned by state governments, tribal governments and
individuals, or land obtained from entities that currently hold title to or
lease government and private lands.
If
mineralized material is found on any of our exploration properties and
production is warranted, but we do not have adequate working capital to do so,
we may have to sell additional shares of Common Stock or borrow money to finance
the cost of development. We may not have the working capital to maintain our
interest in our current exploration properties or commence profitable mining
operations on any of our properties if economically viable gold and/or silver
reserves were located on them in the future, and equity or debt financings may
not provide us with the additional working capital necessary to continue
operations.
We
maintain a worldwide web site at http://www.piedmontmining.com. The
reference to our worldwide web address does not constitute incorporation by
reference into this report information contained at that site.
Competition
We
compete with other mining and exploration companies, many of which possess
greater financial resources and technical facilities than we do, in connection
with the acquisition of suitable exploration properties and in connection with
the engagement of qualified personnel. The gold and silver exploration and
mining industry is fragmented, and we are a very small participant in this
sector. Many of our competitors explore for a variety of minerals and control
many different properties around the world. Many of them have been in business
longer than we have and have established more strategic partnerships and
relationships and have greater financial accessibility than we
have.
There is
significant competition for gold and silver exploration properties and, as a
result, we may be unable to continue to acquire interests in attractive gold and
silver mineral exploration properties on terms we consider
acceptable.
While we
compete with other exploration companies in acquiring suitable properties, we
believe that there would be readily available purchasers of gold and/or silver
and other precious metals if they were to be produced from any of our leased
properties. The price of precious metals can be affected by a number of factors
beyond our control, including:
·
|
fluctuations
in the market prices for gold and silver;
|
|
·
|
fluctuating
supplies of gold and silver;
|
|
·
|
fluctuating
demand for gold and silver; and
|
|
·
|
mining
activities of others.
|
If we
find gold and/or silver mineralization that is determined to be of economic
grade and in sufficient quantity to justify production, we may then seek
additional capital through equity or debt financing to develop, mine and sell
our production. Our production would probably be sold to a refiner that would in
turn purify our material and then sell it on the open market or through its
agents or dealers. In the event we should find economic concentrations of gold
or silver mineralization and were able to commence production, we do not believe
that we would have any difficulty selling the gold or silver we would
produce.
We do not
engage in hedging transactions and we have no hedged mineral
resources.
4
Compliance
with Government Regulations
Various
levels of governmental controls and regulations address, among other things, the
environmental impact of mineral exploration and mineral processing operations
and establish requirements for decommissioning of mineral exploration properties
after operations have ceased. With respect to the regulation of mineral
exploration and processing, legislation and regulations in various jurisdictions
establish performance standards, air and water quality emission standards and
other design or operational requirements for various aspects of the operations,
including health and safety standards. Legislation and regulations also
establish requirements for decommissioning, reclamation and rehabilitation of
mineral exploration properties following the cessation of operations and may
require that some former mineral properties be managed for long periods of
time.
Our
exploration activities are subject to various levels of federal and state laws
and regulations relating to protection of the environment, including
requirements for closure and reclamation of mineral exploration properties. Some
of the laws and regulations include the Clean Air Act, the Clean Water Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the
Emergency Planning and Community Right-to-Know Act, the Endangered Species Act,
the Federal Land Policy and Management Act, the National Environmental Policy
Act, the Resource Conservation and Recovery Act, and all the related state laws
in Nevada.
The state
of Nevada adopted the Mined Land Reclamation Act (the “Nevada Act”) in 1989 that
established design, operation, monitoring and closure requirements for all
mining operations in the state. The Nevada Act has increased the cost of
designing, operating, monitoring and closing new mining facilities and could
affect the cost of operating, monitoring and closing existing mining facilities.
New facilities are also required to provide a reclamation plan and financial
assurance to ensure that the reclamation plan is implemented upon completion of
operations. The Nevada Act also requires reclamation plans and permits for
exploration projects that will result in more than five acres of surface
disturbance.
We plan
to secure all necessary permits for our exploration activities and we intend to
file for the required permits to conduct our exploration programs as necessary.
These permits are usually obtained from either the Bureau of Land Management or
the United States Forest Service. Obtaining such permits usually requires the
posting of small bonds for subsequent remediation of trenching, drilling and
bulk-sampling.
We do not
anticipate discharging water into active streams, creeks, rivers, lakes or any
other bodies of water without an appropriate permit. We also do not anticipate
disturbing any endangered species or archaeological sites or causing damage to
our leased properties. Re-contouring and re-vegetation of disturbed surface
areas will be completed pursuant to the applicable permits. The cost of
remediation work varies according to the degree of physical disturbance. It is
difficult to estimate the cost of compliance with environmental laws since the
full nature and extent of our proposed activities cannot be determined at
present.
5
Employees
and Employment Agreements
We
currently have no full-time employees or employment agreements. We may
attempt to engage qualified consultants or employees in the future, as needed,
if when our activities grow. We do not intend to build an exploration
staff, but rather to joint venture our projects with competent exploration
groups who can manage the exploration activities with our funding, although in
some cases we may conduct exploration on our own using contractors.
Research
and Development Expenditures
We are
not currently conducting any research and development activities other than
those relating to the possible acquisition of new gold and/or silver properties
or projects. As we proceed with our exploration programs, we may need to engage
additional contractors and consider the possibility of adding permanent
employees, as well as the possible purchase or lease of equipment.
Subsidiaries
Piedmont
Gold Company, Inc., a North Carolina corporation, and Net Colony LLC, are
wholly-owned subsidiaries of the Company.
Patents/Trade
Marks/Licenses/Franchises/Concessions/Royalty Agreements or Labor
Contracts
We do not
currently own any patents or trademarks. Also, we are not a party to any license
or franchise agreements, concessions, royalty agreements or labor contracts
arising from any patents or trademarks.
ITEM
1A. RISK FACTORS
Investment
in our Common Stock involves risk. You should carefully consider the
risks described below before deciding to invest. Our business, financial
condition and results of operations could be affected materially and adversely
by any of the risks discussed below and any others not
foreseen. The market price of our Common Stock could also
decline due to any of these risks, in which case you could lose part or all of
your investment. In assessing these risks, you should also refer to
the other information included in this Report, including our consolidated
financial statements and the accompanying notes. This discussion
contains forward-looking statements.
Risks Associated With Our
Business
We
have experienced losses since fiscal year ended December 31, 1992, and we expect
losses to continue for the foreseeable future.
We are in
the exploration stage and to date has not yet generated any net revenues or cash
flow from its activities since 1992, except for some minor cash flow from
interests in two oil wells. We incurred operating losses of $545,737 and
$1,435,532 in the years ended December 31, 2009 and 2008,
respectively. We had an accumulated deficit of $18,350,491 as of
December 31, 2009. We had a working capital deficit of $923,272 at
December 31, 2009. Revenues are not normally generated during the
exploration stage of operations. We do not anticipate generating
revenues from exploration or production in the foreseeable future. Profitability
will require the successful development of one or more of our leased properties
or the joint venture or outright sale of one or more of our option rights to
acquire an interest in the properties that we currently lease. We may not be
able to successfully commercialize any of our mineral properties and thereby
become profitable.
6
There
is substantial doubt about our ability to continue as a going concern due to
significant recurring losses from our operations, our accumulated deficit and
our working capital deficit, all of which means that we will need to obtain
additional funding in order to continue operations.
Our
independent auditors have added an explanatory paragraph in their opinion issued
in connection with our financial statements for the years ended December 31,
2009 and 2008 with respect to their substantial doubt about our ability to
continue as a going concern. We have been generating significant
losses from our operations. Since our incorporation in July 1983, we have
amassed an accumulated deficit of $18,350,491 as of December 31,
2009. We also had a working capital deficit of $923,272 as of
December 31, 2009, which raises substantial doubt about our ability to continue
as a going concern. As discussed in Note 1 to our financial statements for the
fiscal year ended December 31, 2009, we are dependent on the continued support
of our creditors and our ability to raise further capital
to fund ongoing expenditures for exploration and administration. In current
market conditions there is uncertainty that the necessary funding can be
obtained as needed raising substantial doubt as to the ability of the Company to
continue operating as a going concern.
We
may fail to secure additional financing to meet our future capital
needs.
We need
significant additional capital to conduct our planned exploration activities on
all of our leased properties. We will also need capital more rapidly
than currently anticipated and/or we may incur higher than expected exploration
expenses. We may fail to secure additional debt or equity financing
on terms acceptable to us, or at all, at times when we need such
funding. If we do raise funds by issuing additional equity or
convertible debt securities, the ownership percentages of existing shareholders
would be reduced and the securities that we issue may have rights, preferences
or privileges senior to those of the current holders of our Common
Stock. Such securities may also be issued at a discount to the market
price of our Common Stock, resulting in further dilution to our existing
shareholders. If we raise additional funds by issuing debt, we could
be subject to debt covenants that could place limitations on our operations and
financial flexibility. Our inability to raise additional funds on a
timely basis will make it difficult for us to achieve our business objectives
and will have a negative impact on our business, financial condition, results of
operations and the value of our Common Stock.
We may not be able to secure
additional financing to meet our future capital needs due to changes in general
economic conditions.
We will
need significant capital to satisfy our current working capital
requirements. Any sustained weakness in the general economic conditions and/or
financial markets in the United States or globally could affect adversely our
ability to raise capital on favorable terms or at all. We have relied, and may
also rely in the future, on access to financial markets as a source of liquidity
to satisfy working capital requirements and for general corporate purposes. We
may be unable to secure additional debt or equity financing on terms acceptable
to us, or at all, at the time when we need such funding. If we do
raise funds by issuing additional equity or convertible debt securities, the
ownership percentages of existing shareholders would be reduced, and the
securities that we issue may have rights, preferences or privileges senior to
those of the holders of our common stock or may be issued at a discount to the
market price of our common stock which would result in dilution to our existing
shareholders. If we raise additional funds by issuing debt, we may be
subject to debt covenants, such as the debt covenants under our secured credit
facility, which could place limitations on our operations including our ability
to declare and pay dividends. Our inability to raise additional funds
on a timely basis would make it difficult for us to achieve our business
objectives and would have a negative impact on our
business.
7
We
do not currently have sufficient funds to complete all of our proposed mineral
exploration programs, and as a result we may have to suspend operations on, or
terminate, some of them.
Our
mineral exploration programs are limited and restricted by the amount of working
capital that we have and are able to raise from financings. Since 2008, we have
terminated our interests in six of our properties because of our inability to
meet the capital requirements for such properties. We do not have sufficient
funds to complete all of our proposed mineral exploration programs at present.
As a result, unless we raise additional funds, we may have to suspend or
terminate operations on certain exploration projects or sell one or more of our
option rights to acquire an interest in the properties that we currently lease.
We will need to obtain additional financing in order to complete our proposed
mineral exploration programs. As of December 31, 2009, we only had cash in the
amount of $16,466. We currently have cash flow only from small
carried interests in two small oil wells. For fiscal year 2009, we received
approximately $3,000 from our carried interests. Our exploration
programs call for significant expenditures. We will also require additional
financing if the costs of the proposed exploration programs are greater than
anticipated. We may fail to secure additional financing to meet our future
capital needs. Obtaining additional financing would be subject to a
number of factors, including the market prices for gold and silver, investor
sentiment and investor acceptance of our exploration programs. These factors may
make the timing, amount, terms or conditions of additional financing
unacceptable or unavailable to us. The most likely source of future funding is
through the sale of equity capital. Any sale of equity capital would result in
dilution to our existing shareholders. The only other alternatives for the
financing of further exploration would be the offering by us of an interest in
one or more of our projects to another party or parties to carry out further
exploration or the issuance of debt, neither of which is presently
contemplated.
Our
business is susceptible to uncontrollable and unpredictable outside developments
and hazards that may affect our ability to carry out our
operations.
Our
business is vulnerable to many hazards and risks that are not presently
foreseeable or predictable. Floods or excessive snowfall could
seriously impede or halt our operations resulting in unexpected costs and delays
in our planned activities. Earthquakes could result in serious damage
or destruction to facilities, equipment and roadways. Large volcanic
eruptions, especially of the Long Valley Caldera, could cripple our
operations. Rapid and unexpected outbreaks of plagues and pestilence,
such as ‘bird flu’ or ‘swine flu’, small pox and bubonic plague, could have
serious negative consequences on our operations. Acts of war or
attacks by terrorists could also seriously disrupt our operations, adversely
affecting our management and causing a significant or total loss of your
investment. You should carefully consider the prospects and consequences of each
of these unpredictable hazards before deciding whether or not to make your
investment in our Common Stock.
The
validity of our unpatented mining claims could be challenged, which could force
us to curtail or cease our business operations.
A
majority of our leased properties consist of unpatented mining claims. These
claims are located on federal land and involve mineral rights that are subject
to the claims procedures established by the General Mining Law of 1872, as
amended.
We must
make certain filings with the county in which the lands are situated and with
the Bureau of Land Management and pay an annual holding fee of $140 per claim.
If we fail to make the annual holding payments or to make the required filings,
our mining claims could become invalid. Because mining claims are self-initiated
and self-maintained rights, they are subject to unique vulnerabilities not
associated with other types of properties. It is difficult to ascertain the
validity of unpatented mining claims from public records and, therefore, it is
difficult to confirm that a claimant has followed all of the requisite steps for
the initiation and maintenance of a claim. No title insurance is available for
mining claims. In the event we do not have acceptable title to our leased
properties, we could be forced to curtail or cease our exploration
activities.
8
We
may not have access to the supplies and materials needed for exploration, which
could cause delays or suspension of our operations.
Competitive
demands for contractors and unforeseen shortages of supplies and/or
equipment could result in the disruption of planned exploration
activities. Current demand for exploration drilling services, equipment
and supplies is robust and could result in suitable equipment and skilled
manpower being unavailable at scheduled times in our exploration
program. Furthermore, fuel prices are rising
rapidly. We will attempt to locate suitable equipment, materials,
manpower and fuel if sufficient funds are available. If we cannot find the
equipment and supplies needed for our various exploration programs, we may have
to suspend some or all of them until equipment, supplies, funds and/or skilled
manpower can be obtained.
We
do not and cannot insure against all risks, and we may be unable to obtain or
maintain adequate insurance to cover the risks associated with our exploration
activities at economically acceptable premiums. Losses from uninsured events
could cause us to incur significant liabilities and costs that could have
material adverse consequences upon our financial condition.
Our
insurance will not and cannot cover all the potential risks associated with our
exploration activities. Cost prohibitive premiums may make it economically
unfeasible to obtain or maintain insurance to cover many
risks. Insurance coverage may not be available or may not be adequate
to cover any resulting liabilities. Moreover, insurance coverage against risks
such as environmental pollution or other hazards as a result of exploration
activities could be prohibitively expensive to obtain for a company of our size
and financial means. We might also become subject to liabilities for air, water
or ground pollution or other hazards which we may not be insured against or
which we may elect not to insure against because of premium costs or other
reasons. Losses from such events could cause us to incur significant costs and
liabilities that could have a material adverse effect upon our financial
condition and our exploration activities.
We
have no known mineral reserves at present, and if we cannot find and develop
any, we may have to cease operations.
We have
no known mineral reserves at present. If we cannot find reserves of
gold, silver or other metals or if we cannot adequately explore and drill and
prove up any mineral reserves, either because we do not have the money to do so,
or because it would not be economically feasible to do so, or because it is
determined that the property does not contain economic mineral reserves, we may
have to cease operations which could seriously impair the value of your
investment. Mineral exploration is highly speculative, involves many risks and
is frequently unsuccessful.
In the
event we were able to locate and prove up mineral reserves on our leased
properties yet were unable to find a buyer for them, our capability to develop
them and bring them into production could then be subject to further risks
including:
·
|
costs
of bringing the properties into production including further exploration
work, preparation of feasibility studies, metallurgical test work and
construction of production facilities, all of which we have not budgeted
for;
|
|
·
|
obtaining
the necessary permits required to commence production;
|
|
·
|
availability
and cost of financing;
|
|
·
|
ongoing
costs of production;
|
|
·
|
adverse
changes in gold and silver prices; and
|
|
·
|
environmental
regulations and constraints.
|
9
The
marketability of any mineral may also be affected by numerous factors which are
beyond our control and which cannot be accurately predicted, such as market
price fluctuations, the lack of processing facilities and equipment, government
regulations and restrictions, including regulations relating to allowable
production, importing and exporting of minerals and mineral products and
environmental protection. Accordingly, funds expended on exploration
may not be recovered.
Our business and operating results
could be harmed if we fail to manage our growth or change.
Our
business may experience periods of rapid change and/or growth that could place
significant demands on our personnel and financial resources. To manage possible
growth and change, we must continue to try to locate skilled geologists,
mappers, drillers, engineers, technical personnel and adequate funds in a timely
manner.
An
unsuccessful material strategic transaction or relationship could result in
operating difficulties and other harmful consequences to our
business.
We have
evaluated, and expect to continue to evaluate, a variety of potential strategic
transactions and relationships with third parties. From time to
time, we may engage in discussions regarding potential acquisitions or joint
ventures. Any of these transactions could be material to our financial condition
and results of operations, and the failure of any of these material
relationships and transactions may have a negative financial impact on our
business.
Attraction and retention of qualified
personnel is necessary to implement and conduct our mineral exploration
programs.
Our
future success will depend largely upon the continued services of our Board
members, executive officers and other key personnel. Our success will also
depend on our ability to continue to attract, retain and motivate other
qualified personnel. Key personnel represent a significant asset for us, and the
competition for qualified personnel is intense in the mineral exploration
industry.
We may
have particular difficulty attracting and retaining key personnel in the initial
phases of our exploration programs. We do not have key-person life insurance
coverage on any of our personnel. The loss of one or more of our key people or
our inability to attract, retain and motivate other qualified personnel could
negatively impact our ability to complete our exploration programs.
We
are highly dependent upon Robert M. Shields, Jr., who is our Chairman of the
Board of Directors, President, Chief Executive Officer and Chief Financial
Officer and upon Lewis B. Gustafson, our Director and Vice President of
Exploration and any loss of Messrs. Shields or Gustafson could have a material
adverse effect upon our business and our ability to continue as a going
concern.
Our
success is highly dependent upon the key business relationships and expertise of
Robert M. Shields, Jr., who is our Chairman of the Board of Directors,
President, Chief Executive Officer and Chief Financial Officer, and Lewis B.
Gustafson, our Director and Vice President of
Exploration. We do not have a succession plan in
place. We do not have employment agreements with Mr. Shields or Mr.
Gustafson or any insurance to cover the loss of their services. The
loss of the services of Mr. Shields, our Chairman, President, Chief Executive
Officer and Chief Financial Officer or the loss of Mr. Gustafson our Vice
President of Exploration and Director, along with the loss of their numerous
contacts and relationships and their extensive knowledge and experience in the
industry, would have a material adverse effect on our business and on our
ability to continue as a going concern.
10
Our officers and directors may have
conflicts of interest in that they are officers and/or directors of other
exploration or mining companies and that could prevent them from devoting the
necessary time to our management and operations, which could materially affect
our performance.
Certain
directors could have conflicts of interest in that they are or become officers
and/or directors of other exploration or mining companies. This could
impact or retard our operations and thereby adversely affect our
performance.
Risks Associated With Our
Industry
Due to the uncertain nature of
exploration, there is a substantial risk that we may not find economically
exploitable reserves of gold and/or silver.
The
search for valuable minerals is an extremely risky business. We do not know
whether the claims and properties that we have optioned contain commercially
exploitable reserves of gold and/or silver. The likelihood of success must be
considered in light of the costs, difficulties, complications, problems and
delays encountered in connection with the exploration of mineral
properties. These potential problems include, but are not limited to,
additional costs and unanticipated delays and expenses that may exceed current
estimates.
Because
of the inherent dangers involved in exploration, there is a risk that we may
incur liabilities or damages as we conduct our business activities.
Exploration
for minerals involves numerous hazards. As a result, we may become subject to
hazards, such as pollution, cave-ins, faulting, slumping, flooding, excess
moisture, dust, dangerous animals, snakes, sun stroke, heat exhaustion, fires,
armed trespassers and other hazards which could result in damage to life or
property, environmental damages and legal liabilities against which we cannot
insure or may elect not to insure. At the present time we have no insurance
coverage to insure ourselves against such hazards. Liability for such
occurrences could result in our inability to complete our planned exploration
programs and/or obtain additional financings to fund our exploration programs
and could have a material adverse effect on our financial condition and
value.
The
gold and silver markets are volatile markets that have a direct impact on the
value of resources or reserves, our ability to raise additional funds and our
potential revenues and profits. These market conditions may seriously
affect whether or not we will be able to continue with our exploration
programs.
The price
of gold and silver are subject to price fluctuations. Large
participants in the market can cause significant prices changes very quickly and
without warning and for no apparent reason. In order to maintain
profitable operations, an operating mine must sell its gold and silver for more
than its cost of producing it. The lower the price of the metal, the more
difficult it is to make a profit. While current prices are economically
attractive, if gold and/or silver prices should decline significantly, this
could have a significant adverse effect on our ability to raise funds and cause
us to cease activities until the price of gold and/or silver increases or cease
our operations all together. Because mining costs are relatively fixed, the
lower the market price of gold and/or silver, the greater the chance that
investors might be unwilling to provide us with necessary funds and that we
would therefore have to cease our operations.
11
In recent
decades, there have been periods of both worldwide overproduction and periods of
worldwide underproduction of many mineral commodities. A surplus or a
shortage of any mineral can result in significant price change for that mineral
commodity. General downturns in the overall economy or currency
fluctuations can also affect the price of any commodity. Substantial
adverse and ongoing economic, currency, governmental or political conditions and
developments in various countries may also have a significant impact on our
value and our ability to continue to fund our exploration
activities.
We
face significant competition in the mineral exploration industry.
We
compete with other mining and exploration companies possessing greater financial
resources and technical facilities than we do in connection with the acquisition
of exploration properties and leases on prospects and properties and in
connection with the recruitment and retention of qualified personnel. Such
competition may result in our being unable to acquire interests in economically
viable gold and silver exploration properties or qualified
personnel.
Our
applications for exploration permits may be delayed or may be denied in the
future.
Exploration
activities usually require the granting of permits from various governmental
agencies. For exploration drilling on unpatented mineral claims, a
drilling plan must be filed with the Bureau of Land Management or the United
States Forest Service, which may then take several months or more to grant the
requested permit. Depending on the size, location and scope of the
exploration program, additional permits may also be required before exploration
activities can be undertaken. Prehistoric or Indian grave yards,
threatened or endangered species, archeological sites or the possibility
thereof, difficult access, excessive dust and important nearby water resources
may all result in the need for additional permits before exploration activities
can commence. With all permitting processes, there is the risk that
unexpected delays and excessive costs may be experienced in obtaining required
permits or the refusal to grant required permits may not be granted at all, all
of which may cause delays and unanticipated costs in conducting planned
exploration activities. This could result in serious adverse consequences to the
price of our stock and to the value of your investment.
Our
operations are subject to environmental risks and environmental regulations. Our
failure to manage such risks or comply with such regulations could potentially
expose us to significant liabilities for which we may not be
insured.
All
phases of our operations are subject to federal, state and local environmental
regulations. These regulations mandate, among other things, the maintenance of
air and water quality standards and land reclamation. They also set forth
limitations on the generation, transportation, storage and disposal of solid,
liquid and hazardous wastes. Environmental legislation is evolving in a manner
which could involve stricter standards and enforcement, increased fines and
penalties for non-compliance, more stringent environmental assessments of
proposed projects and a heightened degree of responsibility for companies and
their officers, directors and employees. Future changes in environmental
regulations could adversely affect our activities. Environmental hazards may
exist on properties which we hold or may acquire in the future that are unknown
to us at present and that have been caused by previous or existing owners or
operators of the properties.
Failure
to comply with applicable laws, regulations and permitting requirements may
result in enforcement actions, including orders issued by regulatory or judicial
authorities causing our 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 or in
exploration or development of mineral properties may be required to compensate
those suffering loss or damage by reason of such activities and may have civil
or criminal fines or penalties imposed for violations of applicable laws or
regulations.
12
Production,
if any, from any of the properties that we hold or may acquire in the future
could involve the use of hazardous materials. Should these materials leak or
otherwise be discharged from their containment systems, we may become subject to
liabilities for hazards or clean-up work that we may not be insured
against.
Government
regulations affecting the exploration and mining industry, such as those
relating to exploration, mining, taxes, labor standards, occupational health and
land use, may adversely affect our business and planned activities.
Exploration,
development, mining and processing activities are subject to taxes and various
laws and regulations governing labor standards and occupational health, mine
safety, toxic substances, land use, water use, land claims of local people and
other matters. New rules and regulations may be enacted or existing rules and
regulations may be applied or changed in such a manner as to limit or curtail
our exploration activities. Amendments to current laws and regulations governing
exploration, development, and mining or more stringent implementation of these
laws could have a material adverse impact upon our business and financial
condition and cause increases in our exploration costs, capital expenditures or
estimated production costs or a reduction in levels of production, assuming we
achieve production, or require abandonment or delays in the exploration and
development of new mineral properties.
During
the past several years, the United States Congress considered a number of
proposed amendments to the General Mining Law of 1872, which governs mining
claims and related activities on federal lands. For example, a broad based bill
to reform the General Mining Law of 1872, the Hardrock Mining and Reclamation
Act of 2007 (H.R. 2262) was introduced in the U.S. House of Representatives on
May 10, 2007 and was passed by the U.S. House of Representatives on November 1,
2007, but no new legislation has been passed that we are aware
of.
In 1992,
a federal holding fee of $100 per claim was imposed upon unpatented mining
claims located on federal lands. This fee was increased to $125 per claim in
2005 ($133.50 total with the accompanying County fees included) and then in 2009
increased again to $140 per claim. Beginning in October 1994, a moratorium on
processing of new patent applications was approved. In addition, a variety of
legislation over the years has been proposed by the United States Congress to
further amend the General Mining Law. If any of this legislation is enacted, the
proposed legislation would, among other things, change the current patenting
procedures, limit the rights obtained in a patent, impose royalties on
unpatented claims, and enact new reclamation, environmental controls and
restoration requirements.
For
example, The Hardrock Mining and Reclamation Act of 2007 (H.R. 2262), if
enacted, would have several negative impacts on the Company including but not
limited to: requiring royalty payments of 8% of gross income from mining a claim
on Federal land, or 4% of claims on Federal land that existed prior to the
passage of this act; and prohibition of certain areas from being open to the
location of mining claims, including wilderness study areas, areas of critical
environmental concern, areas included in the National Wild and Scenic Rivers
System, and any area included in maps made for the Forest Service Roadless Area
Conservation Final Environmental Impact Statement.
The
extent of any such changes to the General Mining Law of 1872 that may be enacted
is not presently known, and the potential impact on us as a result of future
congressional action is difficult to predict. If enacted, the proposed
legislation could adversely affect the economics of developing and operating our
mines because many of our properties consist of unpatented mining claims on
federal lands. Our financial performance could therefore be materially and
adversely affected by passage of all or pertinent parts of the proposed
legislation, which could force us to curtail or cease our business
operations.
13
Risks Associated With Our
Common Stock
The market price of our Common Stock
is volatile and may
fluctuate significantly in response to a variety of external
factors.
Stock
markets in general, and in particular the stock prices of exploration companies,
can experience extreme volatility, often unrelated to the operating performance
of the company. The market price of our Common Stock has fluctuated in the past
and will fluctuate in the future as well, especially if our common shares
continue to be thinly traded. Factors that may have a significant impact on the
market price of our Common Stock include:
·
|
actual
or anticipated exploration results;
|
|
·
|
our
ability or inability to raise additional funds;
|
|
·
|
increased
competition in the exploration sector;
|
|
·
|
government
regulations and changes or anticipated changes in government
regulations;
|
|
·
|
conditions
and developments in the mineral exploration industry;
|
|
·
|
property
rights;
|
|
·
|
rumors
or allegations regarding financial disclosures or reporting practices;
and/or
|
|
·
|
volatility
in the prices of gold and silver.
|
Our stock
price may be impacted by factors that are unrelated or disproportionate to
our performance, such as general economic, political and/or market
conditions, recessions or the threat thereof, interest rate changes or
international currency fluctuations, all of which may adversely affect the
market price of our Common Stock.
We do not expect to pay any dividends
in the foreseeable future.
We have
never paid cash dividends on our Common Stock and have no plans to do so in the
foreseeable future. We intend to retain our earnings, if any, to develop and
expand our exploration activities.
Penny
Stock Regulations Affect Our Stock Price, Which May Make It More Difficult For
Investors To Sell Their Stock.
Broker-dealer
practices in connection with transactions in “penny stocks” are regulated by
certain penny stock rules adopted by the SEC. Penny stocks generally are equity
securities with a price per share of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the NASDAQ
Stock Market, provided that current price and volume information with respect to
transactions in such securities is provided by the exchange or system). The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document that provides information about penny stocks and the risks
in the penny stock market. The broker-dealer must also provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction, and monthly account
statements showing the market value of each penny stock held in the customer’s
account. In addition, the penny stock rules generally require that prior to a
transaction in a penny stock the broker-dealer make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser’s written agreement to the transaction. These
disclosure requirements may have the effect of reducing the level of trading
activity in the secondary market for a stock that becomes subject to the penny
stock rules. Our securities are subject to the penny stock rules, and investors
may find it more difficult to sell their securities.
14
ITEM
1B. UNRESOLVED STAFF COMMENTS
Not
Applicable.
ITEM
2. PROPERTIES
The
following describes the properties in Nevada on which we
signed agreements or letters of intent, six of which have been terminated
as further described below.
1. Antelope Ridge Silver/Gold
Project - Eureka County, Nevada
The
Company entered into a 10 year Mining Lease with Option to Purchase dated April
26, 2005 on 50 claims in the Fish Creek Mining District, Eureka County,
Nevada. The Company made lease and option payments totaling $68,500
and incurred $189,746 in exploration costs with respect to this
Project. In June, 2008, the Company terminated this agreement and
recorded an impairment loss of $68,500.
2. Dome - HiHo Gold Project -
Lander County, Nevada
Effective
in April 2005, the Company entered into a five year Exploration and Option to
Enter into a Joint Venture Agreement on 44 claims in Lander County,
Nevada. The Company made lease and option payments totaling $137,000
and incurred $350,510 in exploration costs with respect to the
Project. In June, 2008, the Company terminated this agreement and
recorded an impairment loss of $137,000
3. Trinity Silver Project -
Pershing County, Nevada
The
Trinity Silver Project (“Trinity Silver”) is located 16 miles northwest of the
town of Lovelock in Pershing County, Nevada. The property is accessed
on the west side from a well-maintained dirt road off of state Highway 399.
Heavy trucks can directly access the site by this route.
Trinity
Silver consists of unpatented mining claims and about 5,000 acres of fee land,
or about 5,800 acres in total, located in Pershing County, Nevada. AuEx, Inc.
(“AuEx”), a wholly owned subsidiary of AuEx Ventures, Inc., leased this property
package from Newmont Mining Corporation (“Newmont”) in late July
2005.
We
entered into a five (5) year Exploration and Development Agreement with AuEx on
September 16, 2005. Upon executing the agreement, we made a cash
payment to AuEx in the amount of $10,000. We completed both the first
and second year’s work commitment, and expended a total of more than $620,000 on
the Trinity Silver Property.
The
Company had made lease payments totaling $10,000 and incurred $619,408 in
exploration and property maintenance costs with respect to the Trinity Silver
Project as of August 2009.
This
project was terminated in the third quarter of 2009 because the Company was
unable to fund the forthcoming required exploration expenditure requirements and
recorded an impairment loss of $10,000.
15
4. Bullion Mountain Gold
Project - Lander County, Nevada
The
Bullion Mountain Gold Project (“Bullion Mountain”) is located approximately
21 miles southeast of the town of Battle Mountain and approximately 8 miles
west-southwest of Crescent Valley in Lander County, Nevada. The
property is accessed on the west side from Battle Mountain via the Hilltop
Road with four wheel drive trucks or on the east side from a well-maintained
dirt road from Crescent Valley.
Bullion Mountain
consists of the 17 unpatented ‘Bully’ claims, plus an additional 4 claims staked
in late 2006, on Bullion Mountain in the northern Shoshone Range and
in the Battle Mountain - Cortez trend. This property is located
approximately 30 miles southeast of our Dome-HiHo property. The
Shoshone Range is underlain by siliceous and volcanic rocks of Ordovician
and Devonian age, in a complex array of fault slices in the upper plate of the
Roberts Mountain Thrust. These sequences were subsequently intruded by an
approximately 38 million year old (Eocene) granodiorite and overlain by Miocene
basalts and andesites.
The
Company entered into a ten-year Lease Agreement with Option to Purchase with
Nevada Eagle Resources (“NER”) on March 1, 2006, effective November 11,
2005. Upon executing the agreement, we made a cash payment to NER in
the amount of $5,000 and also reimbursed NER for $2,274 of claims holding fees.
Work commitment expenditures were $20,000 during the first lease
year and $50,000 in the second lease year, and in addition the Company is
required to pay all property maintenance costs while the agreement is in effect.
The first year’s work commitment was completed.
On
September 12, 2007, a ‘First Amendment to Mining Lease’ was signed extending the
time for completing the required work obligation indefinitely to accommodate the
Company’s efforts to consolidate its property position with those of adjacent
property owners
As of
December 31, 2009, the Company had made lease payments totaling $23,000 and had
incurred $27,305 in exploration costs.
This
agreement was terminated in the first quarter of 2010 and an impairment loss of
$27,000 was recorded at December 31, 2009.
5. Pasco Canyon Gold
Project - Nye County, Nevada
The Pasco
Canyon Gold Project (“Pasco Canyon”) is located approximately 55 miles
north of the town of Tonopah, Nevada. This property is located in Nye County,
Nevada, and consists of 24 contiguous unpatented mining claims. The
property is accessed from state Highway 82 on the east side from a
well-maintained dirt road. Heavy trucks can access the site by way of
state Highway 82, which connects to U. S. Highway 50.
This
property is located at the junction of two calderas, within the Toquima Caldera
Complex. No claims had ever been filed on this property prior to its
staking by AuEx in 2003. Two (2) holes were drilled by NDT Ventures,
Ltd. in 2004, but they tested only the most accessible east fringe of the
property to a depth of only about 600 feet. We completed detailed
geologic mapping and submitted to the United States Forest Service a plan for
road building and drilling.
We
entered into a five (5) year Option Agreement with AuEx on February 14,
2006. Upon executing the agreement, we made a cash payment to AuEx in
the amount of $10,000. We paid all required claims maintenance fees
through September 2009 and expended $60, 971 in required exploration
expenditures on the property.
In
December 2009, this Option Agreement was terminated because the Company was
unable to fund the required work commitment expenditure requirements. The
Company recorded an impairment loss of $10,000 at December 31,
2009.
16
6. Dutch Flat Gold Project –
Humboldt County, Nevada
The Dutch
Flat gold project is located 19 miles northeast of the town of Winnemucca and 15
miles north of Golconda in Humboldt County, Nevada (“Dutch
Flat”). The property is accessed on the west side from Dutch Flat
Road, a well maintained paved/dirt road. Heavy trucks can access the
site by Dutch Flat Road, which connects to state Highway 95 and to U.S.
Interstate Highway I-80 at Winnemucca.
Dutch
Flat consists of 114 unpatented mining claims that are located at the northern
end of the Battle Mountain – Eureka Trend and, at the southwest end of the
Hot Springs Range. The host rocks are shales and feldspathic
sandstones of the Cambrian Harmony Formation, which have been intruded by a
younger, possibly Cretaceous age, granodiorite stock. The sedimentary
rocks have been metamorphosed to hornfels with quartz veinlets at the contact
with the intrusive.
Gold
production of $211,276 is recorded from this district prior to
1950. Mercury production from 1936 to 1957 is recorded at 1,098
flasks. AGI explored this district from 1982 to 1988. They
drilled 49 rotary holes totaling 14,381 feet with Brican Resources Ltd. between
1985 and 1988 and discovered a low-grade gold resource in the
property.
Cordex
Exploration Co. (“Cordex”) and Columbus Gold (U.S.) Corporation (“Columbus”)
have consolidated and extended this claim position in recent
years. They have also completed geologic mapping and sampling of the
property and assembled the data and reports from previous exploration. A ground
magnetic survey of the property has been completed and a shallow reverse
circulation drilling program of about 2,550 feet was conducted on the property
last fall. Based on the results of this shallow drilling program, a
second drilling program consisting of 24 angled reverse circulation drill holes
totaling 10,280 feet was conducted in October 2007. These holes were
drilled to depths of from 245 to 820 feet. All but 4 of these holes
encountered at least 10 feet of low grade gold. The two best
intercepts were 145 feet averaging 0.021 ounces of gold per ton and 160 feet
averaging 0.011 ounces of gold per ton. The mineralization is still
open to the north and to the south. As of December 31, 2008, the
Company had made the initial payment of $35,000 and incurred $508,516 in
exploration costs with respect to this property.
We
entered into a five (5) year Exploration Agreement With Option To Form Joint
Venture with Columbus on July 2, 2006. Upon executing the agreement,
we made a cash payment of $35,000. In accordance with the agreement
we must expend at least $200,000 in exploration expenditures during the first
year; $300,000 during the second year; and $500,000 during each of the third,
fourth and fifth years of the agreement. Except for the initial
$35,000 cash payment, all payments made by us for the benefit of the project
shall be credited towards the work expenditure requirements, including payment
of the annual claims maintenance fees. More than $525,677 has been
incurred by the Company on exploration at Dutch Flat to date. We
shall have the right to appoint the operator of the exploration work program at
the commencement of each agreement year. Upon completion of the
$2,000,000 in exploration expenditures over the five (5) year period, we shall
have earned a 51% interest in the property. We can then elect to (i)
earn an additional 19% interest by funding a positive feasibility study for the
project, or (ii) form a 51% joint venture with Columbus. We would be
the operator of the joint venture. We may terminate this agreement at
any time after the first year upon 30 days notice.
Six (6)
of the claims are subject to a one and one half percent (1.5%) Net Smelter
Returns royalty. An Area of Interest extending two (2) miles from the
exterior boundaries of the property has been established by the
parties. Also, one (1) of our current directors has an interest in a
company that holds a one percent (1%) Net Smelter Returns royalty on 16 of the
claims as well as additional claims located within a portion of the Area of
Interest.
17
We do not
know whether we will succeed in locating an economic mineral deposit on this
property. As of December 31, 2009, the Company has made the initial payment
of $35,000 and has incurred $525,677 in exploration costs with respect to the
Dutch Flat Gold Project.
The
Company has not been able to meet its work expenditure requirements in a timely
manner due to lack of adequate funding but is planning to do further exploration
work when funds become available. As a result, the Company has
written down the carrying value of this project to $1.00.
7. PPM Gold Project –
Humboldt County, Nevada
In April,
2007, the Company signed an “Exploration Agreement with Option to Form Joint
Venture” (the “Exploration Agreement”) with Miranda US, Inc., a wholly-owned
subsidiary of Miranda Gold Corp. (“Miranda”), a Canadian corporation listed on
the TSX Venture Exchange.
The PPM
Gold Project is located at the north end of the Battle Mountain-Eureka gold
trend on the west flank of the Hot Springs mountains and about 30 miles north of
the town of Winnemucca. It is about 12 miles northwest of the Twin Creeks,
Turquoise Ridge and Pinson gold deposits where past production and current
resources now exceed 23 million ounces of gold. This property now consists of 81
unpatented claims. The property overlies a northeast striking fault
system that intersects biogeochemical gold-in sagebrush anomalies near the
margin of an inferred buried intrusive and adjacent to a sediment hosted mercury
district. Such mercury occurrences are frequently closely associated with
sediment hosted gold systems in Nevada. Further gold and mercury in
sagebrush surveys were conducted in late 2007 and have further refined drill
targets. Current plans are to conduct the first drill program as soon
as funding becomes available.
Under the
terms of the Exploration Agreement, the Company has an option to earn a 55%
interest in 44 mining claims, located in Humboldt County, Nevada by incurring
$1,750,000 in exploration work during a five year period as
follows:
(i)
|
paying $25,000
within 30 days of the effective date of the Exploration Agreement
(paid);
|
|
(ii)
|
incurring
at least $175,000 in exploration work during the first year of the
Exploration Agreement;
|
|
(iii)
|
incurring
an additional $200,000 in exploration work during the second
year;
|
|
(iv)
|
incurring
an additional $300,000 in exploration work during the third
year;
|
|
(v)
|
incurring
an additional $425,000 in exploration work during the fourth year;
and
|
|
(vi)
|
incurring
an additional $650,000 in exploration work during the fifth
year.
|
Upon
completing the total $1,750,000 work expenditure requirement, the Company will
have earned a 55% interest in the property and the project. At that
point, the Company will enter into a joint venture with Miranda, with the
Company being the operator. After the first year of the agreement,
the Company may terminate the agreement at any time on 30 days written notice.
The Company must pay all claims maintenance fees, which will be creditable
against the work commitment expenditure requirement.
As of
December 31, 2009, the Company has incurred $151,127, which includes an initial
payment of $25,000 on signing and a reclamation bond of $11,566 on this
property. The Company has not been able to meet its work expenditure
requirements in a timely manner but is planning to do further exploration work
when funds become available. As a result, the Company has written
down the carrying value of this project to $1.00.
18
8. Willow Creek Gold Project -
Elko County, Nevada
On June
16, 2008, the Company entered into an Exploration Agreement with Option to Form
a Joint Venture with Carlin Gold Corporation (“Carlin”). A Letter of
Intent was signed with Carlin Gold Corporation on the Willow Creek property,
Elko County, Nevada. An initial payment of $10,000 was made in
November, 2007 and $300,000 was advanced to Carlin on signing the agreement, to
cover the first year’s work commitment. In addition, 100,000 common
shares valued at $15,000 were issued to Carlin on July 8, 2008 to acquire the
option interest which was capitalized as a mineral property acquisition
cost.
As of
December 31 2009, the Company had expended $300,000 in exploration costs
including the cost of a reclamation bond of $17,733. During the
fourth quarter of the year ended December 31, 2009 this agreement was terminated
and as a result the Company recorded an impairment loss of $15,000 at December
31, 2009. In addition, the Company has written off a reclamation bond
in the amount of $15,976, net of recoveries, due to the uncertainty of
recovery.
The
Company was advised by its attorneys that Carlin claims a balance of $87,372 for
the uncompleted first year’s work expenditure requirement is owing to them under
the above agreement. The Company believes this claim is without
foundation or merit and is disputing the amount. The Company has not
recorded a liability in relation to the foregoing matters as the amount and
likelihood of loss, if any, cannot be determined at this time.
9. Morgan Pass Project -
Elko County, Nevada
On May
20, 2008, the Company signed a Letter of Intent with Nevada Eagle Resources LLC,
a wholly owned subsidiary of Gryphon Gold Corporation on the Morgan Pass
property in Elko County, Nevada. The Letter of Intent is effective
for five years, during which time the parties will negotiate an “Exploration
Agreement with Option to Form Joint Venture” at such time as the property is
released into “multiple use” from a “wilderness study area”. During this time
the Company must:
-
|
Pay
for staking and registration of initial claims.
|
|
-
|
Commencing
with the 2008-2009 assessment year, pay all maintenance
requirements.
|
|
-
|
Pay
$20,000 upon release of the properties into “multiple use”
classification.
|
|
-
|
Upon
release of the properties into “multiple use”, a five year option and earn
in agreement would be signed and a work program totaling $750,000 over a
five year period would commence beginning from the date of the
signing of the formal agreement.
|
As of
December 31, 2009, the Company had incurred $17,666 in exploration costs, and
the property is still classified as a “wilderness study area.”
19
10. Argentite
Gold Property – Esmeralda County, Nevada
On March
10, 2009, upon paying $2,500, the Company signed a Letter of Intent to enter
into an Exploration Agreement with Option to form a Joint Venture on the
Argentite gold property in western Nevada. The Agreement has not been
prepared or signed. On signing a formal agreement, the Company would
pay $8,000 and would then undertake a work commitment of $750,000 over a 5 year
period to earn a 51% interest in the property and the project, or up to a 70%
interest upon completion of a bankable feasibility study. In
addition, the Company would make annual payments of $10,000 by the first
anniversary of the agreement, $15,000 on the second anniversary, $20,000 by the
third anniversary and $25,000 by the fourth anniversary, all of which would be
creditable against the work commitment. Claims maintenance fees were paid
through August 31, 2010. The Option and Earn-In Agreement was not signed at
December 31, 2009 and the Company has written off the $2,500.
ITEM
3. LEGAL PROCEEDINGS
We were
advised by our attorneys that Carlin claims a balance of $87,372 for the
uncompleted first year’s work expenditure requirement is owing to them under the
above Willow Creek agreement. We believe this claim is without
foundation or merit and is disputing the amount. We have not recorded
a liability in relation to the foregoing matters as the amount and likelihood of
loss, if any, cannot be determined at this time. There is no formal
legal proceeding at this time.
We are
not aware of any other pending or threatened material legal proceedings against
us.
ITEM
4. REMOVED AND RESERVED
PART
II
ITEM
5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES.
Our
common stock has been publicly traded since September 18, 1987. It is traded on
the over-the-counter market, and quoted on the NASDAQ Electronic Bulletin Board
(“Bulletin Board”) under the symbol “PIED.” The following table sets forth for
the periods indicated the range of high and low closing bid quotations per share
as reported by the over-the-counter market for the past two (2) years. These
quotations represent inter-dealer prices, without retail markups, markdowns or
commissions and may not necessarily represent actual transactions.
Year
2009
|
High
|
Low
|
First
Quarter
|
$0.08
|
$0.03
|
Second
Quarter
|
$0.06
|
$0.024
|
Third
Quarter
|
$0.08
|
$0.023
|
Fourth
Quarter
|
$0.049
|
$0.013
|
Year
2008
|
||
First
Quarter
|
$0.33
|
$0.15
|
Second
Quarter
|
$0.21
|
$0.11
|
Third
Quarter
|
$0.16
|
$0.10
|
Fourth
Quarter
|
$0.12
|
$0.01
|
20
On
December 31, 2009, the closing price of our common stock as reported on the
Bulletin Board was $0.022 per share.
As of
February 19, 2010, we had 326 registered shareholders, not including beneficial
owners whose shares are held by banks, brokers or other nominees.
Dividends
We have
not paid any dividends on our common stock and do not anticipate paying any cash
dividends in the foreseeable future. We intend to retain any earnings to finance
the growth of the business. We cannot assure you that we will ever pay cash
dividends.
Stock
Option Plans
There are
no stock option plans.
Recent
Sales Of Unregistered Securities
In
January, 2009, the Company completed a private placement offering of 125,000
Units, consisting of one share of Common Stock and one Common Stock Purchase
Warrant at a price of $0.04 per Unit for proceeds of $5,000. The
Warrants are exercisable for a period of two years and entitle the holder to
purchase one share of Common Stock for $0.10 per Share.
In March,
2009, the Company completed a private placement offering of 100,000 Units,
consisting of one share of Common Stock and one Common Stock Purchase Warrant at
a price of $0.05 per Unit for proceeds of $5,000. The Warrants are
exercisable for a period of two years and entitle the holder to purchase one
share of Common Stock for $0.15 per Share.
In March,
2009, the Company completed a private placement offering of 200,000 Units,
consisting of one share of Common Stock and one Common Stock Purchase Warrant at
a price of $0.05 per Unit for proceeds of $10,000. The Warrants are
exercisable for a period of two years and entitle the holder to purchase one
share of Common Stock for $0.10 per Share
In March,
2009, the Company issued 500,000 shares of Common Stock with a fair value of
$0.05 per share or $25,000, pursuant to a letter agreement, as partial
satisfaction of outstanding debt.
In May,
2009, the Company completed a private placement offering of 500,000 Units,
consisting of one share of Common Stock and one Common Stock Purchase Warrant at
a price of $0.03 per Unit for proceeds of $15,000. The Warrants are
exercisable for a period of three years and entitle the holder to purchase one
share of Common Stock for $0.05 per Share.
In July,
2009, the Company completed a private placement offering of 83,333 Units,
consisting of one share of Common Stock and one Common Stock Purchase Warrant at
a price of $0.06 per Unit for proceeds of $5,000. The Warrants are
exercisable for a period of two years and entitle the holder to purchase one
share of Common Stock for $0.10 per Share.
The
issuances of Common Stock was made by us in reliance upon the exemptions from
registration provided under Section 4(2) and 4(6) of the Securities Act and Rule
506 of Regulation D, promulgated by the SEC under federal securities laws and
comparable exemptions for sales to “accredited” investors under state securities
laws.
21
Repurchase
of Equity Securities
We did
not repurchase any shares of our common stock during the year ended December 31,
2009.
ITEM
6. SELECTED FINANCIAL DATA
Not
Applicable.
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Our
actual results could differ materially from those reflected in these
forward-looking statements as a result of certain factors that include, but are
not limited to, the risks discussed in the Section entitled “Risk Factors”.
Please see the statements contained under the Section entitled “Forward-Looking
Statements.”
Except
for historical information, the following Management’s Discussion and Analysis
contains forward-looking statements based upon current expectations that involve
certain risks and uncertainties. Such forward-looking statements include
statements regarding, among other things, (a) our estimates of mineral reserves
and mineralized material, (b) our projected sales and profitability, (c) our
growth strategies, (d) anticipated trends in our industry, (e) our future
financing plans, (f) our anticipated needs for working capital, (g) our lack of
operational experience and (h) the benefits related to ownership of our common
stock. Forward-looking statements, which involve assumptions and describe our
future plans, strategies, and expectations, are generally identifiable by use of
the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,”
“believe,” “intend,” or “project” or the negative of these words or other
variations on these words or comparable terminology. This information may
involve known and unknown risks, uncertainties, and other factors that may cause
our actual results, performance, or achievements to be materially different from
the future results, performance, or achievements expressed or implied by any
forward-looking statements. These statements may be found under “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and
“Business,” as well as in this Annual Report generally. Actual events or results
may differ materially from those discussed in forward-looking statements as a
result of various factors, including, without limitation, the risks outlined
under “Risk Factors” and matters described in this Annual Report generally. In
light of these risks and uncertainties, there can be no assurance that the
forward-looking statements contained in this Annual Report will in fact occur as
projected.
Overview
of Business
We are a
North Carolina corporation formed in 1983. From our inception until mid-1992, we
were engaged in the exploration for, and production of, gold and other precious
metals and the evaluation of gold properties in North and South Carolina. From
1983 we were engaged in exploration and from early 1985 until May 1992, we were
also engaged in the mining and production of gold and silver at our Haile Mine
Property near Kershaw, South Carolina. In May 1992, we entered into a joint
venture at our Haile Mine Property with Amax Gold Inc. Our operations ceased at
the Haile Mine Property in 1994. We did not again become engaged in
exploration activities until 2004, when we relocated our principal place of
business to Reno, Nevada. Since October 2003, we have been an exploration stage
company engaged in the acquisition and exploration of mineral properties. We
have entered into option and earn-in agreements and letter of intent on
exploration properties in the state of Nevada. Our plan is to conduct
exploration for gold and silver at each of these properties to assess whether
they possess economic deposits of gold and/or silver that can be recovered at a
profit. We do not intend to build an exploration staff, but rather to joint
venture our projects with competent exploration groups who can manage the
exploration activities with our funding, although in some cases we may conduct
exploration on our own using contractors. We do not know whether a commercially
viable ore body will be located on any of our mineral claims or properties. Our
current plans are limited to evaluation and exploration of mineral properties in
the state of Nevada. Our focus for the foreseeable future will be on
the exploration of gold and silver mineral properties in Nevada and
also the acquisition of interests in producing oil and gas
properties.
22
Recent
Events
Since the
end of the fiscal year 2009, the following events have occurred:
In
January, 2010, the Company completed a private placement offering of 1,000,000
Units, consisting of one share of Common Stock and one Common Stock Purchase
Warrant at a price of $0.016 per Unit for proceeds of $16,000. The
Warrants are exercisable for a period of three years and entitle the holder to
purchase one share of Common Stock for $0.03 per Share.
In
February, 2010, the Company completed a private placement offering of 500,000
units, consisting of one share of Common Stock and one common stock purchase
warrant at a price of $0.02 per unit for proceeds of $10,000. The
warrants are exercisable for a period of three years and entitle the holder to
purchase one share of common stock for $0.04 per share.
Going
Concern
The
report of our independent auditors in our December 31, 2009 financial statements
includes an explanatory paragraph indicating that there is substantial doubt
about our ability to continue as a going concern due to recurring losses from
operations, an accumulated deficit of $18,350,491 and a working capital deficit
of $923,272 at December 31, 2009. Our ability to continue as a going concern
will be determined by our ability to raise adequate funds and conduct one or
more successful exploration programs. Our financial statements do not include
any adjustments that might result from the outcome of this
uncertainty.
Critical
Accounting Policies
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make a
wide variety of estimates and assumptions that affect: (1) the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities as
of the date of the financial statements, and (2) the reported amounts of
revenues and expenses during the reporting periods covered by the financial
statements. Our management routinely makes judgments and estimates about the
effect of matters that are inherently uncertain. As the number of variables and
assumptions affecting the future resolution of the uncertainties increases,
these judgments become even more subjective and complex. We have identified
certain accounting policies that are most important to the portrayal of our
current financial condition and results of operations. Our significant
accounting policies are disclosed in Note 2 of the Notes to the Financial
Statements, and several of those critical accounting policies are as
follows:
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles 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. Significant areas requiring management’s estimates and
assumptions are determining the fair value of stock based transactions and
financial instruments. Impairment provisions and fair value considerations for
mineral properties involve subjective considerations and fair value
methodologies primarily dependant on management inputs and not on active trading
market indicators. Other areas requiring estimates include deferred tax
balances, valuation allowances, allocations of expenditures to mineral property
interests and related impairment tests.
23
Mineral
Property Costs
The
Company is primarily engaged in the acquisition, exploration and development of
mineral properties. The acquisition costs of mineral rights are capitalized.
These include lease and option payments under exploration agreements. The
projects are assessed for impairment when facts and circumstances indicate their
carrying values exceed the recoverable values. Such factors include poor
exploration results or failure to discover mineable ore. If a
mineable ore body is found, these costs will be amortized when production begins
using a units-of-production method. These costs are recorded to
exploration projects on the consolidated balance sheets. Other exploration,
geological and geophysical costs are expensed as incurred
In the
event that mineral property acquisition costs are paid or settled with Company
shares, those shares are recorded at fair value at the time the shares are
issued.
When it
has been determined that a mineral property can be economically developed as a
result of establishing proven and probable reserves with pre-feasibility
studies, the costs incurred after such determination to develop a property to
production are capitalized.
Estimated
future removal and site restoration costs, when determinable, are provided over
the life of proven reserves on a units-of-production basis. Costs,
which include production, equipment removal and environmental remediation, are
estimated each period by management based on current regulations, actual
expenses incurred, and technology and industry standards. Any charge
is included in exploration expense or the provision for depletion and
depreciation during the period and the actual restoration expenditures are
charged to the accumulated provision amounts as incurred.
As of the
date of these financial statements, all of the Company’s exploration costs have
been expensed. To date the Company has not established any proven or
probable reserves on its mineral properties.
Financial
Instruments
The fair
value of the Company’s financial instruments, consisting of cash, accounts
payable and amounts due to related parties were estimated to approximate their
carrying values due to the immediate or short-term maturity of these financial
instruments. The fair value of the Company’s net smelter royalty
obligations (refer to Note 4) is not determinable at the current stage of the
Company’s exploration program. Accordingly, no value has been
assigned by management.
Asset
Retirement Obligations
The
Company records the fair value of an asset retirement obligation as a liability
in the period in which it incurs an obligation associated with the retirement of
tangible long-lived assets that result from the acquisition, construction,
development and/or normal use of the assets. The estimated fair value of the
asset retirement obligation is based on the current cost escalated at an
inflation rate and discounted at a credit adjusted risk-free
rate. This liability is capitalized as part of the cost of the
related asset and amortized over its useful life. The liability
accretes until the Company settles the obligation. To December 31,
2009 any potential costs relating to the ultimate disposition of the Company's
mineral property interests are not determinable.
24
Impairment
of Long-Lived Assets
The
Company reviews property and equipment and certain identifiable intangibles,
excluding goodwill, for impairment. Long-lived assets are reviewed
for impairment whenever events or changes in circumstances indicate the carrying
amount of an asset may not be recoverable. Recoverability of these
assets is measured by comparison of the carrying amount to management’s
estimates of future undiscounted cash flows the assets are expected to
generate. If property, plant, and equipment and certain identifiable
intangibles are considered to be impaired, the impairment to be recognized
equals the amount by which the carrying value of the assets exceeds fair market
value.
Revenue
Recognition
Oil
revenues are recorded using the sales method whereby the company recognizes oil
revenue based on the amount of oil sold to purchasers when title passes, the
amount is determinable and collection is reasonably assured. Actual sales are
based on sales, net of the associated volume charges for processing fees and for
costs associated with delivery, transportation, marketing, and royalties in
accordance with industry standards.
Loss
per Common Share
Basic
loss per share (“LPS”) includes no dilution and is computed by dividing loss
attributable to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted earnings per share reflect
the potential dilution of securities that could share in the earnings (loss) of
the Company. The common shares potentially issuable upon exercise of
stock options and warrants were not included in the calculation of weighted
average number of shares outstanding as the effect would be
anti-dilutive.
Foreign
Currency Translation
The
financial statements are presented in United States dollars. Foreign
denominated monetary assets and liabilities are translated to their United
States dollar equivalents using foreign exchange rates at the balance sheet
date. Revenue and expenses are translated at average rates of
exchange during the year. Related translation adjustments are reported as a
separate component of stockholders’ equity, whereas gains or losses resulting
from foreign currency transactions are included in results of
operations.
Income
Taxes
The
Company follows the liability method of accounting for income
taxes. Under this method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax balances. Deferred tax assets and liabilities
are measured using enacted or substantially enacted tax rates expected to apply
to the taxable income in the years in which those differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the date of enactment or substantive enactment. As at
December 31, 2009, the Company had net operating loss carry forwards; however,
due to the uncertainty of realization, the Company has provided a full valuation
allowance for the potential deferred tax assets resulting from these losses
carry forwards.
25
Stock-Based
Compensation
The
Company records stock-based compensation using the fair value method. All
transactions in which goods or services are the consideration received for the
issuance of equity instruments are accounted for based on the fair value of the
consideration received or the fair value of the equity instrument issued,
whichever is more reliably measurable. Equity instruments issued to employees
and the cost of the services received as consideration are measured and
recognized based on the fair value of the equity instruments
issued.
New
Accounting Pronouncements
In June
2009, the Company adopted ASC 105, Generally Accepted Accounting Principles
(“ASC 105”). ASC 105 defines the new hierarchy for U.S. GAAP and supersedes all
accounting standards in U.S. GAAP, aside from those issued by the Securities and
Exchange Commission. The Codification was effective for financial statements
issued for reporting periods ending after September 15, 2009. The adoption of
the Codification did not result in any overall changes to the accounting
principles utilized and accordingly did not have a material impact on financial
position, results of operations or cash flows.
In June
2009, the Company adopted ASC 855, Subsequent Events (“ASC 855”), which
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued or
are available to be issued. The new standard was effective for the Company for
the quarter ended June 30, 2009. The adoption of this guidance did not have a
material impact on the Company’s results of operations and financial
position.
In August
2009, the Company adopted ASC 820, Fair Value Measurements and Disclosures –
Measuring Liabilities at Fair Value (“ASC 820”), which provides additional
guidance for estimating fair value when the volume and level of activity for the
asset or liability have significantly decreased. This also includes guidance on
identifying circumstances that indicate a transaction is not orderly. This
requires the disclosure of the inputs and valuation technique(s) used to measure
fair value and a discussion of changes in valuation techniques and related
inputs, if any, during the period. The adoption of this statement did not have a
material impact on the Company’s results of operations and financial
position.
Recent
Accounting Guidance Not Yet Adopted
In June
2009, the FASB issued authoritative guidance on the consolidation of variable
interest entities, which is effective for the Company beginning January 1,
2010. The new guidance requires revised evaluations of whether entities
represent variable interest entities, ongoing assessments of control over such
entities, and additional disclosures for variable interests. We believe adoption
of this new guidance will not have a material impact on our financial
statements.
Certain
other recent accounting pronouncements have not been disclosed as they are not
applicable to the Company.
Results Of Operations For The Fiscal
Year Ended December 31, 2009 Compared To Fiscal Year Ended December 31,
2008.
We have
no revenues at this time and have not had any revenues in recent years, because
we are an exploration company. We do not anticipate that significant revenues
will be achieved until we either:
·
|
locate
one or more economic mineral deposits which could then be put into
production, from which we would then be able to extract gold or silver at
a profit; or
|
|
·
|
enter
into a joint venture arrangement on one or more of our leased properties;
or
|
|
·
|
consummate
a merger or acquisition with another
company.
|
26
There is
no guarantee that our exploration activities will locate viable gold and/or
silver reserves, or if an economic mineral deposit were discovered that we would
be able to commence commercial production, or that if we do locate viable
mineralization that we would be able to secure the funding necessary to proceed
with the mining and production of the ore.
Expenses
for the Year Ended December 31, 2009 Compared to December 31, 2008
Exploration,
geological and geophysical costs decreased by $382,965, or 85.083%, to $67,144
for the year ended December 31, 2009 as compared to $450,109 for the year ended
December 31, 2008. The principal reason for this decrease was that
sufficient funds were not available to continue exploration
operations.
Management
fees decreased by $93,233, or 32.69%, to $191,984 for the year ended December
31, 2009 as compared to $285,217 for the year ended December 31,
2008. The principal reason for this decrease was due to the final
expensing of stock options.
Professional
fees decreased by $95,200, or 52.72%, to $85,383 for the year ended December 31,
2009 as compared to $180,583 for the year ended December 31,
2008. The principal reason for this change was due to a decrease in
legal fees as no new ventures or significant transactions were entered
into.
General
and administrative expenses decreased by $124,239 or 58.26% to $89,020 for the
year ended December 31, 2009 as compared to $213,259 for the year ended December
31, 2008. The principal reasons for this change were reductions in
activities related to investor relations, public reporting, advertising and
insurance. Interest expense increased due to interest bearing advances made to
the Company by certain of its directors.
Impairment
of mineral properties decreased by $69,026 or 33.59% to $136,474 for the year
ended December 31, 2009 as compared to $205,500 for the year ended December 31,
2008. The reason for this change was due to the abandonment of certain mineral
properties in 2009 that were still being explored for potential revenue
producing reserves in 2008.
There
were no finance fees for the year ended December 31, 2009 as compared to
$100,000 for the year ended December 31, 2008. In 2008, the Company issued
common shares with a market value of $100,000 in lieu of cash for private
placement efforts.
Depreciation
expense decreased by $799 or 92.48%, to $65 for the year ended December 31, 2009
as compared to $864 for the year ended December 31, 2008. The
principal reason for this decrease was that certain equipment was fully
depreciated in 2009.
27
Liquidity
And Capital Resources
Cash
and Working Capital
We had
an increase of $300,918 in our working capital deficit at December 31, 2009
as compared to the working capital deficit at December 31, 2008, due to a
decrease in current assets of $16,547 and an increase in current liabilities of
$284,371. We had an accumulated deficit of $18,350,491 from our
inception in 1983 to December 31, 2009. We have no contingencies or long-term
obligations except for our work commitments under our option and earn-in
agreements. These agreements can be terminated by us upon either 30
or 60 days notice.
Subject
to the availability of funds, we were and are committed to making certain
exploration work expenditures, lease and option payments, and claims maintenance
payments on the following current properties in the forthcoming 12 months
period:
Dutch Flat
Project:
·
|
Required
work expenditure: $1,000,000 by 12/31/09 and $1,500,000 by 12/31/10, of
which $525,677 was completed by 12/31/09; Further work will depend upon
the amount and timing of funding received.
|
|
·
|
Annual
claims maintenance: $14,250; claims maintenance fees have been
paid through August 31, 2010.
|
|
·
|
Annual
payments: $0.
|
PPM Gold Project:
·
|
Required
work expenditure: $375,000 through 12/31/09, and $675,000
through 12/31/10, of which $151,127 was completed by 12/31/09; Further
work will depend upon the timing and amount of funds
received.
|
|
·
|
Annual
claims maintenance: $10,980. Claims maintenance fees
have been paid through August 31, 2010.
|
|
·
|
Annual
payments: $0
|
As of
December 31, 2009, no annual payments were required for the Dutch Flat or PPM
Gold projects or the Morgan Pass or the Argentite projects. As of the
date of this report, the claims maintenance fees for 2010 for the aforementioned
projects are not due until July at the earliest.
We had a
cash balance of $16,466 on December 31, 2009. For the year ended
December 31, 2009 we had a net cash outflow of $15,884.
During
the twelve months ended December 31, 2009, we raised approximately $40,000, net
of issuance costs, from the sale of common stock and warrants. These funds were
used primarily for exploration activities, general and administrative including
salaries, and to pay attorney’s and auditor’s fees in connection with the
preparation of audited financial statements, and the preparation and filing
of reports to the Securities and Exchange Commission.
Internal
and External Sources of Liquidity
As of
December 31, 2009, we had current assets of $16,466 compared to $33,013 at
December 31, 2008. This decrease was due to the use of cash proceeds from the
sale of our Common Stock for exploration activities and operating expenses.
Current liabilities at December 31, 2009 of $939,738 were higher than the
December 31, 2008 balance of $655,367 as additional funds were advanced by the
Company’s directors. This resulted in a working capital deficit of $923,272 and
$622,354 as of December 31, 2009 and 2008, respectively. Due to the sale of
shares of our Common Stock, we were able to generate cash that was used to
partially meet our working capital needs. In addition, shares were issued to a
Joint Venture partner in lieu of cash in partial settlement of exploration costs
paid. As a result of the additional issuances of our shares of Common Stock, any
net income per share would be lower in future periods.
28
As
discussed in this Report, for the remainder of the fiscal year 2010 we will need
to raise additional funds to satisfy our work commitments on our exploration
properties and pay for ongoing general and administrative
expenses. We intend to raise additional funds through the sale of our
securities, consisting of common stock and warrants attempt to seek other
alternative sources of cash flow. We believe continued efforts
to sell stock and warrants as well as advances from management will contribute
toward funding our activities until appropriate levels of funding can
be arranged and/or revenue can be earned from the properties either through
production or sale. The global financial situation in 2008 and 2009
and the ensuing downturn in the economy and in the mineral exploration industry
have severely restricted the ability of many junior resource companies to raise
equity financing. Accordingly, we cannot assure that additional capital required
to finance our operations will be available on acceptable terms, if at all. Any
failure to secure additional financing may force us to modify our business plan
and our exploration activity will continue to be postponed until market
conditions improve.
In the
event we are able to fund our working capital needs through the issuance of
equity, our existing and future shareholders will be diluted and any net income
per share would be lower in future periods.
In
addition, we may enter into a joint venture arrangement on one or more of our
leased properties. In the event our exploration is successful and mining
eventually commences on one or more of our leased properties, we could then
commence receiving revenues from the sale of gold and/or silver produced on
these properties. In addition, we cannot be assured of profitability
in the future. We continue to investigate other potential financing
sources, including additional cash flow from small oil wells and to entertain
potential joint venture partners.
We plan
to continue doing some research and development with regard to investigating
possible new exploration properties or new ventures.
At this
time, we do not expect to purchase or sell any property or equipment over the
next 12 months.
The
Company does not currently expect a significant change in the number of its
employees over the next 12 months.
Off-Balance
Sheet Arrangement
At
December 31, 2009, we were not a party to any transactions, obligations or
relationships that could be considered off-balance sheet
arrangements.
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Not
applicable.
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our
consolidated financial statements appear beginning at page F-1.
29
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM
9A(T). CONTROLS AND PROCEDURES
The
management of the Company is responsible for establishing and maintaining
adequate internal controls over financial reporting, as required by
Sarbanes-Oxley (SOX) Section 404 A. The Company’s internal controls over
financial reporting is a process designed under the supervision of the Company’s
Chief Executive Officer and Chief Financial Officer to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of the Company’s financial statements for external purposes in accordance with
U.S. generally accepted accounting principles.
As of
December 31, 2009, management assessed the effectiveness of the Company’s
internal control over financial reporting based on the criteria for effective
internal control over financial reporting established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (“COSO”) and SEC guidance on conducting such
assessments. Based on that evaluation, they concluded that, during
the period covered by this report, such internal controls and procedures could
have been more effective in detecting inappropriate application of US GAAP rules
as more fully described below if the Company had had more financial resources
and personnel.
The
matters involving internal controls and procedures that the Company’s management
identified as material weaknesses under COSO and SEC rules were: (1) inadequate
segregation of duties consistent with control objectives; (2) insufficient
written policies and procedures for accounting and financial reporting with
respect to the requirements and application of US GAAP and SEC disclosure
requirements; and (3) ineffective controls over period end financial disclosure
and reporting processes. The aforementioned material weaknesses were identified
by the Company's Chief Financial Officer (who is also its Chief Executive
Officer and Corporate Secretary) in connection with the preparation of our
financial statements as of December 31, 2009 and communicated the matters to our
Board of Directors.
Management
believes that the material weaknesses set forth above did not have an effect on
the Company's financial results. However, management believes that the lack of a
well functioning audit committee may have resulted in ineffective oversight in
the establishment and monitoring of certain internal controls and procedures,
which could impact the Company's financial statements in future
years.
We are
committed to improving our financial controls. As part of this commitment, we
plan to create a position to segregate duties consistent with control
objectives and plan to increase our personnel resources and technical accounting
expertise within the accounting function when funds become available to the
Company: i) Appointing additional outside directors to our Board of Directors
who shall be appointed to the audit committee of the Company resulting in a
fully functioning audit committee who would undertake the oversight in the
establishment and monitoring of required internal controls and procedures; and
ii) Preparing and implementing sufficient written policies and checklists which
will set forth procedures for accounting and financial reporting with respect to
the requirements and application of US GAAP and SEC disclosure
requirements.
Management
believes that the appointment of additional directors, who could be appointed to
a fully functioning audit committee, would remedy the lack of a functioning
audit committee. In addition, management believes that preparing and
implementing sufficient written policies would remedy the following material
weaknesses (i) insufficient written policies and procedures for accounting and
financial reporting with respect to the requirements and application of US GAAP
and SEC disclosure requirements; and (ii) ineffective controls over period end
financial close and reporting processes. Further, management believes that when
funds become available the hiring of additional personnel who have the technical
expertise and knowledge would result in proper segregation of duties and provide
more checks and balances. Additional personnel would also provide the cross
training needed to support the Company if personnel turn over occurs. This
coupled with the appointment of additional outside directors would greatly
decrease any control and procedure issues the company might encounter in the
future.
30
We will
continue to monitor and evaluate the effectiveness of our internal controls and
procedures and our internal controls over financial reporting and are committed
to taking further action and implementing additional enhancements or
improvements, as necessary and as funds permit.
Changes
in Internal Control over Financial Reporting
There
have been no changes in our internal controls over financial reporting
identified in connection with the evaluation required by paragraph (d) of Rules
13a-15 or 15d-15 under the Exchange Act that occurred during the small business
issuer's last fiscal quarter that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.
ITEM 9B. OTHER
INFORMATION
None.
PART
III
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
Directors,
Executive Officers and Significant Employees
The
following table sets forth the names and ages of our current directors,
executive officers, significant employees, the principal offices and positions
with us held by each person and the date such person became our director,
executive officer or significant employee. Our executive officers are
appointed by our Board of Directors. Our directors serve until the
earlier occurrence of the appointment of his or her successor at the next
meeting of shareholders, death, resignation or removal by the Board of
Directors. There are no family relationships among our directors,
executive officers, director nominees or significant employees.
Name
|
Age
|
Position
|
||
R
Robert M. Shields, Jr.
|
71
|
Chief
Executive Officer, President, Chief Financial Officer and Director, since
1983
|
||
Lewis
B. Gustafson
|
76
|
Vice
President of Exploration and Director, since 2005 and 2004
respectively
|
||
Ian
C. MacDonald
|
63
|
Director,
since 2007
|
||
John
P. Ingersoll
|
79
|
Director,
since 2004
|
||
Ralph
W. Kettell, II
|
50
|
Director,
since 2004
|
Biographies
Robert M.
Shields, Jr. Mr. Shields has
been Chairman of the Board of Directors, Chief Executive Officer, Chief
Financial Officer and Treasurer of Piedmont since 1983. Mr. Shields has over 25
years of experience in the exploration and mining industry and has over 35 years
of business experience. He founded Piedmont Mining Company, Inc. in 1983. In
April 1985 Piedmont put into production the first operating gold mine in the
eastern United States since 1942 at its Haile Mine property in South
Carolina.
31
Mr.
Shields was an Associate with Morgan Stanley & Co. in corporate finance in
the early 1970s and a security analyst with Paine, Webber, Jackson and Curtis in
the mid-1960s. He is a member of the American Geophysical Union, the M.I.T.
Enterprise Forum of New York City, the Society of Economic Geologists, the
Geological Society of Nevada, the New York Academy of Sciences and the New York
Section of The Society of Mining Engineers.
He
graduated Cum Laude and with high distinction in Geology from Dartmouth College
in 1960 and received a PhD in Geochemistry from the Massachusetts Institute of
Technology in 1965, where he was elected to Sigma Xi, Honorary Scientific
Society, and Phi Lambda Upsilon, Honorary Chemical Society. He also received an
MBA from the Stanford University Graduate School of Business Administration in
1971. He was an officer in the US Army Corps of Engineers from 1967 to 1969 and
was honorably discharged with the rank of Captain.
Lewis B.
Gustafson. Mr. Gustafson has been a Director of Piedmont since
November 2004 and its Vice President-Exploration since March 2005. Mr. Gustafson
has over 35 years of experience in exploration and economic
geology. He began his career as a geologist with The Anaconda
Company. He spent seven years at the El Salvador mine in Chile, and then six
years in Arizona where he became Chief Geologist in 1975. He then was Professor
of Economic Geology for six years at the Australian National University in
Canberra, Australia. From 1982 to 1986 he was Senior Staff Geologist and then
Chief Research Geologist at Freeport Exploration Company in Reno, Nevada. From
1986 to 1991 he was a General Partner in Annapurna Exploration and a Vice
President of REX Resources, Inc. Since 1986 he has been an Independent
Geological Consultant to numerous international mining companies.
Mr.
Gustafson has authored or co-authored seventeen publications in economic and
exploration geology. He is a member of the Geological Society of America, the
Society of Economic Geologists, the Society of Mining Engineers, the Geological
Society of Nevada and the Nevada Petroleum Society and is a frequent lecturer at
exploration and mining meetings.
From the
Society of Economic Geologists Mr. Gustafson received the Lindgren Award in 1962
and was a member of their Editorial Board from 1970 to 1980. From 1973 to 1974
he was their Thayer Lindsey Visiting Lecturer, their Distinguished Lecturer in
Applied Geology in 1989, Chairman of their Ad Hoc Committee on Geologic Mapping
from 1989 to 1993 and a Trustee of the SEG Foundation from 1996 to 2001. From
1981 to 1984 and from 1997 to 2000 he was a member of their Research Committee
and Chairman of it in 1984. He was also a Councilor of the Australian Mineral
Foundation from 1977 to 1979 and is currently on the Advisory Committee of the
Nevada Bureau of Mines and Geology.
Mr.
Gustafson received a B.S.E degree from Princeton University, an M.S. degree from
the California Institute of Technology and a Ph.D. degree from Harvard
University.
Ian C.
MacDonald. Mr. MacDonald has been a director since
2007. Mr. MacDonald has over thirty years of experience in precious
metals trading and investment banking. From 2007 to 2009 Mr. MacDonald has
served as Executive Director of the Gold and Precious Metals Division of the
Dubai Multi Commodities Centre (the “DMCC”). The DMCC was created by
the Dubai government to establish a commodity market place in
Dubai. Since 2004 he has operated his own precious metals advisory
service, Ian C. MacDonald, LLC. From 1999 to 2004 he was Vice President and
Manager of the Global Precious Metals department of Commerzbank AG in New York,
where he managed their precious metals operations and dealings with central
banks, mines, funds and industrial users of precious metals. He was then
Executive Vice President of MKS Finance (USA) Inc., a Geneva based corporation
providing advice to their precious metals clients. From 1988 to 2003 he was a
director of The Gold Institute in Washington, DC. From 1982 to 1998 Mr.
MacDonald was the founder and Manager of Credit Suisse’s Precious Metals
Divisions. From 1969 to 1979 he was a director of Billiton (UK) Ltd. Mr.
MacDonald was a director of the COMEX Division of the New York Mercantile
Exchange for twenty years where he served on the advisory
committee.
32
Mr.
MacDonald holds a BA degree in Business (Marketing) from Highbury College in
England. He is also a graduate of the Royal Marines Officer Training School in
England and served more than three years in the Royal Marine
Commandos.
John Phelps
“Pete” Ingersoll Jr. Mr. Ingersoll has been a director of
Piedmont since 2004. Mr. Ingersoll has had more than 47 years of experience as a
financial analyst in the metals and mining industry. Since July 2001, he has
been a Director of Concentric Energy Corp., a natural resource company
specializing in uranium and other mineral resources. Since 1999, he
has been a Director of E-VAT INC., a private research and development company
developing an electrochemical process for recovering gold without the use of
cyanide. He was a financial analyst in the mining industry with Salomon Brothers
from 1982 to 1987, and then with Lehman Brothers from 1987 to 1992.
Mr.
Ingersoll was a Director of Getchell Gold Corporation (formerly FirstMiss Gold
Inc.), a mid-sized Nevada gold producer, from 1994 to 1999 when it was acquired
by Placer Dome Inc. He was a Director of Stillwater Mining Company, a Montana
producer of platinum and palladium, from May 1997 to December 1998.
Mr.
Ingersoll is a Chartered Financial Analyst, a member of the New York Society of
Security Analysts, the American Institute of Mining Engineers and a past
President and retired member of the Nonferrous Metals Analysts of New York. He
received a BA degree from Williams College in 1952 and an MBA degree from the
Harvard University Graduate School of Business Administration in
1957.
Ralph W.
Kettell,
II. Mr. Kettell has been a director of Piedmont since 2004.
Mr. Kettell has held a variety of positions in high-tech engineering design,
commercial real estate and exploration for precious and energy related
minerals. Since 2005, Mr. Kettell has acted as the President and
Chief Executive Officer for Nevada Fluorspar, Inc., a privately held natural
resource company focused on resources related to the steel
industry. In 2003, he founded Concentric Energy Corp., a privately
held natural resource company specializing in energy and industrial mineral
resources. Mr. Kettell served as the President and CEO of Concentric
Energy Corp., from June 2003 until December 2005, and as Chairman and CEO from
January 2006 until December 2006. In 2003, Mr. Kettell co-founded
AuEx, Inc., a Nevada based exploration company with properties in
Nevada. Mr. Kettell was also a director of AuEx, Inc. from 2003 until
November 2005. From September 2003 until May 2005, he was the
Marketing Director of 321gold.com, a gold website on the
Internet. From 1990 to 2003, Mr. Kettell was the Vice President of
Engineering of Lark Enterprises, Ltd., a high-tech R&D
start-up. Mr. Kettell holds a BS degree and an MS degree in
Electrical Engineering from Lehigh University. He was certified as a
Professional Engineer in New York in 1985.
There are
no family relationships among the directors of our Company or any executive
officers of the Company.
Committees
of the Board of Directors
The Board
has set up three committees as part of the compliance with new reporting
regulations that were enacted during 2002 under the Sarbanes-Oxley Act. The
following is a list of committees that are presently active and staffed by
independent directors of the Company.
33
Committee
|
Chairman
|
Members
|
||
Audit
Committee
|
John
P. Ingersoll
|
Ian
C. MacDonald, Ralph W. Kettell, II
|
||
Compensation
Committee
|
John
P. Ingersoll
|
Ian
C. MacDonald, Ralph W. Kettell, II
|
||
Governance
Committee
|
Ian
C. MacDonald
|
Pete
Ingersoll, Ralph W. Kettell, II
|
Audit
Committee and Audit Committee Financial Expert
The Audit
Committee of the Board of Directors makes recommendations regarding the
retention of the independent registered public accounting firm, reviews the
scope of the annual audit undertaken by our independent registered public
accounting firm and the progress and results of their work, reviews our
financial statements, and oversees the internal controls over financial
reporting and corporate programs to ensure compliance with applicable laws. The
Audit Committee reviews the services performed by the independent registered
public accounting firm and determines whether they are compatible with
maintaining the registered public accounting firm’s independence. The Audit
Committee consists of three independent directors: Mr. Ingersoll (Audit
Committee Chairman), Mr. MacDonald and Mr. Kettell.
Our Board
of Directors has not made a determination whether a director on the audit
committee qualifies as an “audit committee financial expert.” Our Board of
Director plans to make this determination in the near future.
In
fulfilling its oversight responsibilities, the Audit Committee has reviewed and
discussed the audited financial statements with management and discussed with
the independent auditors the matters required to be discussed by SAS 90.
Management is responsible for the financial statements and the reporting
process, including the system of internal controls. The independent auditors are
responsible for expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles.
The Audit
Committee discussed with the independent auditors, the auditors' independence
from the management of the Company and received written disclosures and the
letter from the independent accountants required by Independence Standards Board
Standard No. 1.
After
review and discussions, the Audit Committee recommended to the Board that the
audited financial statements be included in the Company's Annual Report on Form
10-K for the year ended December 31, 2009.
Compensation
Committee
The
Compensation Committee has not adopted a formal charter. The
Compensation Committee reviews and approves executive compensation policies and
practices, reviews compensation for our officers, and considers other matters as
may, from time to time, be referred to them by the Board of
Directors. The Compensation Committee consists of three independent
directors: Mr. Ingersoll (Compensation Committee Chairman),
Mr. Kettell and Mr. MacDonald.
Governance
Committee and Nominations to the Board of Directors
There
were no material changes to the procedures by which security holders may
recommend nominees to our Board of Directors.
34
Code
of Ethics
Our Board
of Directors have not adopted a code of ethics.
Compliance
with Section 16(a) of the Exchange Act
Section
16(a) of the Securities and Exchange Act of 1934, as amended, requires our
officers and directors and persons who own more than 10% of a registered class
of our securities to file reports of change of ownership with the
SEC. Officers, directors and greater than 10% beneficial owners are
required by SEC regulation to furnish us with copies of all 16(a) forms they
file.
Based
solely on our review of the copies of such forms that we received, or written
representations from certain reporting persons that no forms were required for
those persons, we believe that during fiscal year 2009 all filing requirements
applicable to our officers, directors and greater than 10% beneficial owners
were complied with by such persons in a timely manner except for Mr.
MacDonald. Mr. Shields and Mr. Kettell each filed Forms 4 during the
year for voluntary transactions that otherwise would have been required to be
filed on Forms 5. Accordingly, they are not deemed “late” under voluntary
provisions.
ITEM
11. EXECUTIVE COMPENSATION
The
following table summarizes all compensation paid to our Chief Executive Officer,
President and Chief Financial Officer, and our Vice President of Exploration
(the “Named Executive Officers”) for services rendered in all capacities for the
years ended December 31, 2008 and 2009.
Summary
of Paid Compensation Table*
Name
and
Principal
Position
|
Year
|
Salary
|
Bonus
|
Stock
Awards
|
Option
Awards
|
Non-Equity
Incentive
Plan
Compensation
|
Non-Qualified
Deferred
Compensation
on
Earnings
|
All
Other
Compensation
|
Total
|
|||||||||||||||||||||||||||
Robert
M. Shields, Jr.
|
2009
|
$
|
0
|
$
|
0
|
0
|
0
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
||||||||||||||||||||||
CEO,
CFO
|
2008
|
$
|
98,750
|
$
|
0
|
0
|
0
|
0
|
$
|
0
|
$
|
0
|
$
|
98,750
|
||||||||||||||||||||||
Lewis
B. Gustafson
|
2009
|
$
|
0
|
$
|
0
|
0
|
0
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
||||||||||||||||||||||
Vice
President
|
2008
|
$
|
5,950
|
$
|
0
|
0
|
0
|
0
|
$
|
0
|
$
|
0
|
$
|
5,950
|
35
Outstanding
Equity Awards at Fiscal Year-End
Option
Awards
|
|||||||||||||||||
Name
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable
|
Number
of Securities Underlying Unexercised Options (#)
Unexercisable
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options (#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
||||||||||||
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
||||||||||||
Robert
M. Shields, Jr.
|
1,500,000
|
0
|
0
|
$
|
0.25
|
02/03/2012
|
|||||||||||
Robert
M. Shields, Jr.
|
500,000
|
0
|
0
|
$
|
0.23
|
02/28/2011
|
|||||||||||
Robert
M. Shields, Jr.
|
1,000,000
|
0
|
0
|
$
|
0.25
|
06/16/2011
|
|||||||||||
Lewis
B. Gustafson
|
250,000
|
0
|
0
|
$
|
0.20
|
02/03/2010
|
|||||||||||
Lewis
B. Gustafson
|
700,000
|
0
|
0
|
$
|
0.23
|
02/28/2011
|
|||||||||||
Lewis
B. Gustafson
|
100,000
|
0
|
0
|
$
|
0.25
|
06/16/2011
|
|||||||||||
Lewis
B. Gustafson
|
100,000
|
0
|
0
|
$
|
0.25
|
07/03/2010
|
|||||||||||
John
P. Ingersoll
|
250,000
|
0
|
0
|
$
|
0.20
|
02/03/2010
|
|||||||||||
John
P. Ingersoll
|
100,000
|
0
|
0
|
$
|
0.25
|
07/03/2010
|
|||||||||||
Ralph
W. Kettell, II
|
250,000
|
0
|
0
|
$
|
0.20
|
02/03/2010
|
|||||||||||
Ian
C. MacDonald
|
250,000
|
0
|
0
|
$
|
0.25
|
03/29/2012
|
Compensation
of Directors
Reasonable
expenses related to the performance of duties as a director are reimbursed upon
submission of evidence for payment there from. No compensation
was paid or accrued to the Company’s directors for the fiscal year
ended December 31, 2009. The Company did not grant any stock
awards in 2009.
Employment
Agreements
We have
no employment agreements.
Stock
Option Plans
There are
no stock option plans.
ITEM 12. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
The
following table presents certain information regarding the beneficial ownership
of all shares of common stock at February 19, 2010 for each executive officer
and director of our Company and for each person known to us who owns
beneficially more than five percent (5%) of the outstanding shares of our common
stock. Beneficial ownership is calculated based upon 71,123,643
issued and outstanding as of February 19, 2010.
36
Common
Shares
Owned
|
Exercisable
Options
and
Warrants
|
Total
|
Percentage
|
|||||||||||||
Robert
M. Shields, Jr.
|
3,056,006
|
3,000,000
|
6,056,006
|
8.17
|
%
|
|||||||||||
Lewis
B. Gustafson
|
100,000
|
900,000
|
1,000,000
|
1.39
|
%
|
|||||||||||
John
P. Ingersoll
|
50,000
|
100,000
|
150,000
|
*
|
||||||||||||
Ralph
W. Kettell II
|
972,578
|
0
|
972,578
|
1.37
|
%
|
|||||||||||
Ian
MacDonald
|
35,000
|
250,000
|
285,000
|
*
|
||||||||||||
All
directors and officers as a group (5 persons)
|
4,213,584
|
4,250,000
|
8,463,584
|
11.23
|
%
|
|||||||||||
Frank
G. Diegmann
|
4,231,949
|
0
|
4,231,949
|
5.95
|
%
|
|||||||||||
Stephen
Jones
|
5,448,864
|
1,812,500
|
7,261,364
|
9.96
|
%
|
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Related
Transactions
During
the year ended December 31, 2009 the Company incurred management fees of
$168,000 (2008: $164,000) to the Company’s President and CEO. In addition, the
Company reimburses the President for office rent which totaled $19,200 for the
year ended December 31, 2009 (2008: $19,200). At December 31, 2009 a
balance of $366,957 (2008: $166,316) was owing to the President and CEO for
unpaid management fees, rent and expense reimbursements.
During
the year ended December 31, 2009 the Company incurred exploration costs and fees
of $4,984 (2008: $28,270) to the Company’s Vice-President. At
December 31, 2009 a balance of $33,254 (2008: $28,270) was owing to the
Vice-President for unpaid fees, exploration costs and expense
reimbursements.
From time
to time, the Company’s officers and directors advance monies to the Company.
These loans bear interest at 5% per annum. These loans are unsecured and have no
fixed repayment terms. The unpaid balances relating to these advances, which
include accrued interest, at December 31, 2009 and 2008 were $138,513 and
$57,943 respectively.
No stock
options were granted to its officers or directors by the Company for the year
ended December 31, 2009. All related party transactions involving
provision of services or transfer of tangible assets in the normal course of
business were recorded at the exchange amount, which is the value established
and agreed to by the related parties reflecting arms length consideration
payable for similar services or transfers.
37
Director
Independence
It is the
current policy of the Board that a majority of its members be independent of the
Company’s management. A Director is considered independent if the
Board affirmatively determines that the Director (or an immediate family member)
does not have any direct or indirect material relationship with the Company or
its affiliates or any member of senior management of the Company or his or her
affiliates. The term “affiliate” means any corporation or other
entity that controls, is controlled by, or under common control with the
Company, evidenced by the power to elect a majority of the Board of Directors or
comparable governing body of such entity. The term “immediate family
member” means spouse, parents, children, siblings, mothers- and fathers-in-law,
sons- and daughters-in law, brothers- and sisters-in-laws and anyone (other than
domestic employees) sharing the Director’s home.
In
accordance with these guidelines, the Board has determined that Ian C.
MacDonald, John P. Ingersoll and Ralph W. Kettell, II are independent
directors.
ITEM
14. PRINCIPAL ACCOUNTING FEES AND SERVICES
At the
meeting of stockholders in August 2008 the stockholders approved the engagement
Dale Matheson Carr-Hilton LaBonte LLP as our independent accountant to audit our
financial statements for the fiscal year ending December 31, 2008 and our
interim statements for 2009.
Our Audit
Committee and has unanimously approved all audit and non-audit services provided
by the independent auditors. The independent accountants and management are
required to periodically report to the Audit Committee regarding the extent of
services provided by the independent accountants, and the fees for the services
performed to date.
Audit
Fees
For the
fiscal years ended 2009 and 2008, the aggregate fees billed for services
rendered for the audits of the annual financial statements and the review of the
financial statements included in the quarterly reports on Form 10-Q and the
services provided in connection with the statutory and regulatory filings or
engagements for those fiscal years and registration statements filed with the
SEC was $32,000 and $38,500, respectively.
Audit-Related
Fees
For the
fiscal years ended December 31, 2009 and 2008, there were no fees billed
for the audit or review of the financial statements that are not reported above
under Audit Fees.
Tax
Fees
For the
fiscal years ended December 31, 2009 and 2008, there were no fees billed
for tax services.
All
Other Fees
For the
fiscal years ended December 31, 2009 and 2008 there were no fees billed for
services other than services described above.
38
PART
IV
ITEM
15. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES
(a)(1)
|
Financial
Statements. Consolidated balance sheet as of December 31, 2009 and
December 31, 2008, and the related consolidated statements of operations,
stockholders’ deficit, and cash flows for each of the years in the 2 year
period ended December 31, 2009.
|
(a)(2)
|
Schedules. All
schedule have been omitted because they are not required, not applicable,
or the information is otherwise set forth in the consolidated financial
statements or the notes thereto.
|
(a)(3)
|
Exhibits.
|
Exhibit
No.
|
Description
|
313.1
|
Articles
of Incorporation of Piedmont Mining Company, Inc., filed July 25,
1983(1)
|
233.2
|
Amendment
to Articles of Incorporation, filed August 1, 1983(1)
|
3.3.3
|
Amendment
to Articles of Incorporation, filed June 11, 1984(1)
|
33.4
|
Amendment
to Articles of Incorporation, filed June 24, 1984(1)
|
33.5
|
Amendment
to Articles of Incorporation, filed July 23, 1987(1)
|
33.6
|
Amendment
to Articles of Incorporation, filed September 2, 1987(1)
|
333.7
|
Amendment
to Articles of Incorporation, filed June 7, 1988(1)
|
3 3.8
|
Amendment
to Articles of Incorporation, filed June 15, 1994(1)
|
3.9
|
Amended
and Restated Articles of Incorporation, filed December 17, 2007(2)
|
3.10
|
Bylaws
of Piedmont Mining Company, Inc.(1)
|
3.11
|
Amendment
to Bylaws adopted June 25, 1984(1)
|
3.12
|
Amendment
to Bylaws adopted in 1988(1)
|
3.13
|
Amendment
to Bylaws adopted May 17, 1988(1)
|
3.14
|
Amendment
to Bylaws adopted May 17, 1988(1)
|
3.15
|
Amendment
to Bylaws adopted April 7, 1989(1)
|
3.16
|
Amendment
to Bylaws adopted March 14, 1990(1)
|
3.17
|
Amendment
to Bylaws adopted September 26, 1990(1)
|
4 4.1
|
Form
of Stock Specimen(3)
|
4.2
|
Form
of Subscription Agreement(3)
|
4.3
|
Form
of Warrant Agreement(3)
|
4.4
|
Form
of Registration Rights Agreement(3)
|
4.5
|
Form
of Investor Warrant(4)
|
4.6
|
Form
of Placement Agent Warrant for Units(4)
|
4.7
|
Form
of Subscription Agreement with Registration Rights(4)
|
4.8
|
Form
of Subscription Agreement with Piggy Back Registration Right(4)
|
10.1
|
Mining
Lease with Option to Purchase by and between Nevada Eagle Resources LLC
and Piedmont Mining Company, Inc. dated as of November 11, 2005(3)
|
10.2
|
Exploration
Agreement With Option to Form Joint Venture by and between Piedmont Mining
Company, Inc. and Columbus Gold (U.S.) Corporation dated as of July 2,
2006(5)
|
10.3
|
Exploration
Agreement with Option to Form a Joint Venture by and between Piedmont
Mining Company, Inc. and Miranda U.S.A., Inc., dated April 17, 2007(7)
|
10.4
|
Services
Agreement by and between Piedmont Mining Company, Inc. and Miranda Gold
U.S.A., dated April 17, 2007(7)
|
10.5
|
Non-Qualified
Stock Option Agreement by and between Piedmont Mining Company, Inc. and V.
Richard Rabbito, dated April 9, 2008(8)
|
10.6
|
Services
Agreement by and between Piedmont Mining Company, Inc. and Carlin Gold US,
Inc., dated June 16, 2008(10)
|
10.7
|
Exploration
Agreement with Option to Form Joint Venture by and between Piedmont Mining
Company, Inc. and Carlin Gold US Inc., effective June 16, 2008
(10)
|
10.8
|
Letter
of Intent by and between Piedmont Mining Company, Inc. and Nevada Eagle
Resources LLC, dated March 10, 2009(11)
|
2121
|
Subsidiaries
of Piedmont Mining Company, Inc.(3)
|
3132.1
|
Certification
Pursuant to Section 302*
|
3132.2
|
Certification
Pursuant to Section 302*
|
3232.1
|
Certification
Pursuant to 18 U.S.C. Section 1350*
|
3232.2
|
Certification
Pursuant to 18 U.S.C. Section 1350*
|
______________________________________
* filed
with this Form 10-K
39
(1)
|
Incorporated
by reference to Company’s Form 10-KSB (File No. 333-135376) filed with the
Securities and Exchange Commission on March 31, 2008.
|
(2)
|
Incorporated
by reference to Company’s Form 8-K (File No. 333-135376) filed with the
Securities and Exchange Commission on December 20,
2007.
|
(3)
|
Incorporated
by reference to Company’s Form SB-2 (File No. 333-135376) filed with the
Securities and Exchange Commission on June 27, 2006.
|
(4)
|
Incorporated
by reference to Company’s Form 8-K (File No. 333-135376) filed with the
Securities and Exchange Commission on July 26, 2007.
|
(5)
|
Incorporated
by reference to Company’s SB-2/A (File No. 333-135376) filed with the
Securities and Exchange Commission on August 16, 2006.
|
(6)
|
Incorporated
by reference to Company’s Form 8-K (File No. 333-135376) filed with the
Securities and Exchange Commission on March 23, 2007.
|
(7)
|
Incorporated
by reference to Company’s Form 8-K (File No. 333-135376) filed with the
Securities and Exchange Commission on April 23, 2007.
|
(8)
|
Incorporated
by reference to Company’s Form 8-K (File No. 333-135376) filed with the
Securities and Exchange Commission on April 15, 2008.
|
(9)
|
Incorporated
by reference to Company’s Form 8-K (File No. 001-34075) filed with the
Securities and Exchange Commission on May 27, 2008.
|
(10)
|
Incorporated
by reference to Company’s Form 8-K (File No. 001-34075) filed with the
Securities and Exchange Commission on June 23, 2008.
|
(11)
|
Incorporated
by reference to Company’s Form 8-K (File No. 001-34075) filed with the
Securities and Exchange Commission on March 16,
2009.
|
40
SIGNATURES
Pursuant
to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this Annual Report on Form 10-K to be
signed on its behalf by the undersigned, thereto duly authorized.
PIEDMONT
MINING COMPANY, INC.
|
||
Date: March
31, 2010
|
By:
|
/s/ Robert M.
Shields, Jr.
|
Name:
Robert M. Shields, Jr.
|
||
Title:
Chief Executive Officer (Principal Executive
|
||
Officer)
and Chief Financial Officer (Principal
|
||
Financial
Officer and Principal Accounting Officer),
|
||
President,
Director, Chairman of the Board of
|
||
Directors
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
SIGNATURE
|
TITLE
|
DATE
|
||
/s/ Robert M. Shields, Jr.
|
Chief
Executive Officer (Principal
Executive
Officer) and Chief Financial Officer (Principal Financial Officer and
Principal Accounting Officer), President, Director, Chairman of the Board
of Directors
|
March
31, 2010
|
||
Robert
M. Shields, Jr.
|
||||
/s/ Lewis B. Gustafson |
Director
and Vice President of Explorations
|
March
31, 2010
|
||
Lewis
B. Gustafson
|
||||
/s/ John Phelps “Pete” Ingersoll |
Director
|
March
31, 2010
|
||
John
Phelps “Pete” Ingersoll
|
||||
/s/ Ian
C. MacDonald
|
Director
|
March
31, 2010
|
||
Ian
C. MacDonald
|
||||
Director
|
March
31, 2010
|
|||
Ralph
W. Kettell, II
|
41
PIEDMONT
MINING COMPANY, INC.
(An
Exploration Stage Company)
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2009
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
F-2
|
CONSOLIDATED
BALANCE SHEETS
|
F-3
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
F-4
|
CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ DEFICIT
|
F-5
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
F-7
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
F-8
|
F-1
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Stockholders and Board of Directors of Piedmont Mining Company, Inc. (an
Exploration Stage Company)
We have
audited the accompanying consolidated balance sheets of Piedmont Mining Company,
Inc. (an Exploration Stage Company) as of December 31, 2009 and 2008 and the
consolidated statements of operations, stockholders’ deficit and cash flows for
the years then ended and the period from January 1, 2002 (Date of Inception of
Exploration Stage) to December 31, 2009. These financial statements
are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform an audit to obtain reasonable assurance whether the
financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our
opinion, these consolidated financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2009 and 2008
and the results of its operations and its cash flows and the changes in
stockholders’ deficit for the years then ended and the period from January 1,
2002 (Date of Inception of Exploration Stage) to December 31, 2009 in accordance
with accounting principles generally accepted in the United States of
America.
The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern. As discussed in Note 1 to the financial statements,
the Company is in the exploration stage and has not generated
revenues since inception, has incurred losses in developing its business, and
further losses are anticipated. The Company has a working capital
deficiency of $923,272 at December 31, 2009 and requires additional funds to
meet its obligations and the costs of its operations. These factors
raise substantial doubt about the Company’s ability to continue as a going
concern. Management’s plans in this regard are described in Note
1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/
DMCL
|
|
DALE
MATHESON CARR-HILTON LABONTE LLP
|
|
CHARTERED
ACCOUNTANTS
|
Vancouver,
Canada
March 23,
2010
F-2
PIEDMONT
MINING COMPANY, INC.
(An
Exploration Stage Company)
CONSOLIDATED
BALANCE SHEETS
December
31,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
ASSETS
|
$ | $ | ||||||
CURRENT
ASSETS
|
||||||||
Cash
|
16,466 | 582 | ||||||
Prepaid
expenses and other
|
- | 32,431 | ||||||
16,466 | 33,013 | |||||||
MINERAL PROPERTIES (Note
3)
|
2 | 122,000 | ||||||
RECLAMATION BONDS (Note
3)
|
11,565 | 29,339 | ||||||
INTEREST IN OIL LEASES
(Note 4)
|
2 | - | ||||||
PROPERTY AND EQUIPMENT
(Note 5)
|
- | 65 | ||||||
TOTAL
ASSETS
|
28,035 | 184,417 | ||||||
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
||||||||
CURRENT
LIABILITIES
|
||||||||
Accounts
payable
|
401,014 | 401,438 | ||||||
Due
to related parties (Note 6)
|
538,724 | 253,929 | ||||||
TOTAL
LIABILITIES
|
939,738 | 655,367 | ||||||
CONTINGENCIES AND
COMMITMENTS (Notes 1 and 4)
|
||||||||
STOCKHOLDERS'
DEFICIT
|
||||||||
Capital
stock (Note 7)
|
||||||||
Authorized:
50,000,000
Preferred stock $1.00 par value
200,000,000
Common stock no par value
Common
stock issued and outstanding:
70,123,643
shares (2008 – 68,615,310)
|
16,550,144 | 16,485,145 | ||||||
Additional
paid-in capital
|
872,644 | 848,659 | ||||||
Share
subscriptions received
|
16,000 | - | ||||||
Accumulated
deficit
|
(12,564,287 | ) | (12,564,287 | ) | ||||
Deficit
accumulated during the exploration stage
|
(5,786,204 | ) | (5,240,467 | ) | ||||
Total
stockholders deficit
|
(911,703 | ) | (470,950 | ) | ||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
28,035 | 184,417 |
The
accompanying notes are an integral part of these consolidated financial
statements
F-3
PIEDMONT
MINING COMPANY, INC.
(An
Exploration Stage Company)
CONSOLIDATED
STATEMENTS OF OPERATIONS
For
the Year
Ended
December
31, 2009
|
For
the Year
Ended
December
31, 2008
|
For
the Period from January 1, 2002 (Date of Inception of Exploration Stage)
to
December
31, 2009
|
||||||||||
$ | $ | $ | ||||||||||
REVENUES
|
||||||||||||
Oil
revenues (Note 3)
|
3,233 | - | 3,233 | |||||||||
EXPENSES
|
||||||||||||
Depreciation
|
65 | 864 | 146,383 | |||||||||
Exploration,
geological and geophysical costs
|
67,144 | 450,109 | 2,319,510 | |||||||||
Finance
fees
|
- | 100,000 | 191,200 | |||||||||
General
and administrative
|
89,020 | 213,259 | 898,572 | |||||||||
Impairment
of mineral properties (Note 4)
|
136,474 | 205,500 | 341,974 | |||||||||
Management
fees
|
191,984 | 285,217 | 1,014,872 | |||||||||
Professional
fees
|
85,383 | 180,583 | 862,661 | |||||||||
570,070 | 1,435,532 | 5,775,172 | ||||||||||
LOSS
BEFORE OTHER ITEMS
|
(566,837 | ) | (1,435,532 | ) | (5,771,939 | ) | ||||||
INTEREST
AND OTHER INCOME
|
21,100 | 3,198 | 32,325 | |||||||||
OTHER
NON-OPERATING LOSSES
|
- | - | (46,590 | ) | ||||||||
NET
LOSS FOR THE YEAR
|
(545,737 | ) | (1,432,334 | ) | (5,786,204 | ) | ||||||
BASIC
AND DILUTED LOSS PER SHARE
|
(0.01 | ) | (0.02 | ) | ||||||||
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND
DILUTED
|
69,692,981 | 66,241,138 |
The
accompanying notes are an integral part of these consolidated financial
statements
F-4
PIEDMONT
MINING COMPANY, INC.
(An
Exploration Stage Company)
CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ DEFICIT
For
the Period from January 1, 2002 (Date of Inception of Exploration Stage) to
December 31, 2009
Deficit
|
||||||||||||||||||||||||
Accumulated
|
Total
|
|||||||||||||||||||||||
Common
Stock
|
Additional
|
Accumulated
|
During
|
Stockholders'
|
||||||||||||||||||||
Shares
|
Amount
|
Paid-in
Capital
|
Deficit
|
Exploration
Stage
|
Deficit
|
|||||||||||||||||||
$ | $ | $ | $ | $ | ||||||||||||||||||||
Balance,
December 31, 2001
|
37,152,646 | 12,335,434 | 371,075 | (12,564,287 | ) | - | 142,222 | |||||||||||||||||
Net
loss
|
- | - | - | - | (202,264 | ) | (202,264 | ) | ||||||||||||||||
Balance,
December 31, 2002
|
37,152,646 | 12,335,434 | 371,075 | (12,564,287 | ) | (202,264 | ) | (60,042 | ) | |||||||||||||||
Net
loss
|
- | - | - | - | (181,391 | ) | (181,391 | ) | ||||||||||||||||
Balance,
December 31, 2003 as restated
|
37,152,646 | 12,335,434 | 371,075 | (12,564,287 | ) | (383,655 | ) | (241,433 | ) | |||||||||||||||
Net
loss
|
- | - | - | - | (162,439 | ) | (162,439 | ) | ||||||||||||||||
Balance,
December 31, 2004
|
37,152,646 | 12,335,434 | 371,075 | (12,564,287 | ) | (546,094 | ) | (403,872 | ) | |||||||||||||||
Stock
issued upon conversion of debt
|
4,063,403 | 316,037 | - | - | - | 316,037 | ||||||||||||||||||
Sale
of common stock
|
2,441,992 | 145,000 | - | - | - | 145,000 | ||||||||||||||||||
Common
shares issued for mineral properties
|
300,000 | 24,500 | - | - | - | 24,500 | ||||||||||||||||||
Net
loss
|
- | - | - | - | (462,889 | ) | (462,889 | ) | ||||||||||||||||
Balance,
December 31, 2005
|
43,958,041 | 12,820,971 | 371,075 | (12,564,287 | ) | (1,008,983 | ) | (381,224 | ) | |||||||||||||||
Sale
of common stock, net of issuance costs
|
10,062,141 | 1,358,998 | - | - | - | 1,358,998 | ||||||||||||||||||
Common
shares issued pursuant to
mineral
property option agreements
|
43,478 | 10,000 | - | - | - | 10,000 | ||||||||||||||||||
Stock-based
compensation
|
- | - | 123,367 | - | - | 123,367 | ||||||||||||||||||
Net
loss
|
- | - | - | - | (1,140,612 | ) | (1,140,612 | ) | ||||||||||||||||
Balance,
December 31, 2006
|
54,063,660 | 14,189,969 | 494,442 | (12,564,287 | ) | (2,149,595 | ) | (29,471 | ) | |||||||||||||||
Sale
of common stock, net of issuance costs
|
8,894,480 | 1,495,726 | - | - | - | 1,495,726 | ||||||||||||||||||
Common
shares issued pursuant to
mineral
property option agreements
|
105,634 | 15,000 | - | - | - | 15,000 | ||||||||||||||||||
Warrants
issued as finance fees
|
- | - | 92,100 | - | - | 92,100 | ||||||||||||||||||
Stock-based
compensation
|
- | - | 143,500 | - | - | 143,500 | ||||||||||||||||||
Net
loss
|
- | - | - | - | (1,658,538 | ) | (1,658,538 | ) | ||||||||||||||||
Balance,
December 31, 2007
|
63,063,774 | 15,700,695 | 730,042 | (12,564,287 | ) | (3,808,133 | ) | 58,317 | ||||||||||||||||
Sale
of common stock, net of issuance costs
|
4,784,869 | 669,450 | - | - | - | 669,450 | ||||||||||||||||||
Common
shares issued pursuant to
mineral
property option agreements
|
100,000 | 15,000 | - | - | - | 15,000 | ||||||||||||||||||
Common
shares issued as finance fees
|
666,667 | 100,000 | - | - | - | 100,000 | ||||||||||||||||||
Stock-based
compensation
|
- | - | 118,617 | - | - | 118,617 | ||||||||||||||||||
Net
loss
|
- | - | - | - | (1,432,334 | ) | (1,432,334 | ) | ||||||||||||||||
Balance,
December 31, 2008
|
68,615,310 | 16,485,145 | 848,659 | (12,564,287 | ) | (5,240,467 | ) | (470,950 | ) |
F-5
PIEDMONT
MINING COMPANY, INC.
(An
Exploration Stage Company)
CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ DEFICIT
For
the Period from January 1, 2002 (Date of Inception of Exploration Stage) to
December 31, 2009
Deficit
|
||||||||||||||||||||||||||||
Share
|
Accumulated
|
Total
|
||||||||||||||||||||||||||
Common
Stock
|
Additional
|
Subscriptions
|
Accumulated
|
During
|
Stockholders'
|
|||||||||||||||||||||||
Shares
|
Amount
|
Paid-in
Capital
|
Received
|
Deficit
|
Exploration
Stage
|
Deficit
|
||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
Balance,
December 31, 2008
|
68,615,310 | 16,485,145 | 848,659 | - | (12,564,287 | ) | (5,240,467 | ) | (470,950 | ) | ||||||||||||||||||
Sale
of common stock, net of issuance costs
|
1,008,333 | 40,000 | - | 16,000 | - | - | 56,000 | |||||||||||||||||||||
Common
shares issued in settlement of debt
|
500,000 | 25,000 | - | - | - | - | 25,000 | |||||||||||||||||||||
Stock-based
compensation
|
- | - | 23,984 | - | - | - | 23,984 | |||||||||||||||||||||
Net
loss
|
- | - | - | - | - | (545,737 | ) | (545,737 | ) | |||||||||||||||||||
Balance,
December 31, 2009
|
70,123,643 | 16,550,145 | 872,643 | 16,000 | (12,564,287 | ) | (5,786,204 | ) | (911,703 | ) |
The
accompanying notes are an integral part of these consolidated financial
statements
F-6
PIEDMONT
MINING COMPANY, INC.
(An
Exploration Stage Company)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
For
the Year
Ended
December
31,
2009
|
For
the Year
Ended
December
31,
2008
|
For
the Period from January 1, 2002 (Date of Inception of Exploration Stage)
to December 31, 2009
|
||||||||||
$ | $ | $ | ||||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||||||
Net
loss for the year
|
(545,737 | ) | (1,432,334 | ) | (5,786,204 | ) | ||||||
Adjustments
to reconcile net loss to net cash from
operating activities:
|
||||||||||||
Mineral
property impairments
|
136,475 | 205,500 | 341,974 | |||||||||
Stock
based compensation
|
23,984 | 118,617 | 409,468 | |||||||||
Warrants
issued as finance fees
|
- | - | 92,100 | |||||||||
Stock
issued as finance fees
|
- | 100,000 | 100,000 | |||||||||
Other
income
|
21,100 | - | 21,100 | |||||||||
Depreciation
|
65 | 864 | 146,383 | |||||||||
Gain
(loss) on other non-operating activities
|
- | - | (21,000 | ) | ||||||||
Changes
in operating assets and liabilities:
|
||||||||||||
Prepaid
expenses and other
|
32,431 | (11,263 | ) | 949 | ||||||||
Due
to related parties
|
283,395 | 170,921 | 443,516 | |||||||||
Accounts
payable and accrued liabilities
|
8,876 | 79,289 | 453,865 | |||||||||
NET
CASH FLOWS USED IN
OPERATING
ACTIVITIES
|
(39,411 | ) | (768,406 | ) | (3,797,849 | ) | ||||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||
Issuance
of shares for cash, net of issuance costs
|
40,000 | 669,450 | 3,709,174 | |||||||||
Common
share subscriptions
|
16,000 | - | 16,000 | |||||||||
Convertible
notes
|
- | - | 291,145 | |||||||||
NET
CASH FLOWS PROVIDED BY
FINANCING
ACTIVITIES
|
56,000 | 669,450 | 4,016,319 | |||||||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||
Purchase
of property and equipment
|
- | - | (5,579 | ) | ||||||||
Purchase
of oil and gas interest
|
(2 | ) | - | (2 | ) | |||||||
Reclamation
bond refund
|
1,797 | - | 1,797 | |||||||||
Proceeds
from non-operating activities
|
- | - | 97,125 | |||||||||
Mineral
property costs
|
(2,500 | ) | (66,339 | ) | (296,042 | ) | ||||||
NET
CASH FLOWS USED IN
INVESTING
ACTIVITIES
|
(705 | ) | (66,339 | ) | (202,701 | ) | ||||||
INCREASE
(DECREASE) IN CASH
|
15,884 | (165,295 | ) | 15,769 | ||||||||
CASH,
BEGINNING
|
582 | 165,877 | 697 | |||||||||
CASH, ENDING
|
16,466 | 582 | 16,466 | |||||||||
SUPPLEMENTAL
CASH FLOW INFORMATION AND
NON-CASH INVESTING AND
FINANCING ACTIVITIES (Note 9)
|
The
accompanying notes are an integral part of these consolidated financial
statements
F-7
PIEDMONT
MINING COMPANY, INC.
(An
Exploration Stage Company)
NOTES
TO CONSOLIDATED STATEMENTS
December
31, 2009
NOTE
1: NATURE
OF OPERATIONS
Piedmont
Mining Company, Inc. (the Company) was formed in 1983 under the laws of North
Carolina, USA and is currently in the exploration stage. Since 2002 the Company
has been primarily involved in the evaluation and exploration of mineral
properties.
The
Company’s focus for the foreseeable future will be on the exploration of gold
and silver mineral properties in Nevada and also the acquisition of
interests in producing oil and gas properties.
Going
Concern
These
financial statements have been prepared in accordance with generally accepted
accounting principles in the United States of America with the assumption
applicable to a going concern which contemplates the realization of assets and
the satisfaction of liabilities and commitments in the normal course of
business.
The
Company is in the exploration stage and to date has not yet generated any net
revenues or cash flow from its activities, except for some minor cash flow from
interests in two oil wells. The Company has a history of losses and has a
working capital deficit of $923,272 and an accumulated deficit of $18,350,491 at
December 31, 2009. The Company is dependent on the continued support
of its creditors and its ability to raise further capital to fund ongoing
expenditures for exploration and administration. In current market conditions
there is uncertainty that the necessary funding can be obtained as needed
raising substantial doubt as to the ability of the Company to continue operating
as a going concern. These financial statements do not reflect any
adjustments to the carrying values of assets that might result from the outcome
of this uncertainty.
The
Company plans to fund its ongoing operations primarily by way of private
placements of its securities, cash flow from interests in producing oil wells
and advances from management. Management believes continued efforts to sell
stock and warrants as well as advances from management will contribute toward
funding the Company’s activities until appropriate levels of funding can be
arranged and/or revenue can be earned from the properties either through
production or sale. The global financial situation in 2008 and 2009
and the ensuing downturn in the economy and in the mineral exploration industry
have severely restricted the ability of many junior resource companies to raise
equity financing. If the Company is unsuccessful in raising adequate funding,
exploration activity will continue to be postponed until market conditions
improve.
NOTE
2: SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
These
financial statements are presented in United States dollars and have been
prepared in accordance with accounting principals generally accepted in the
United States of America.
Basis
of Consolidation
The
accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, Net Colony, LLC and Piedmont Gold
Company, Inc. These subsidiaries have no material operations,
tangible assets or liabilities. All significant intercompany accounts
and transactions, if any, have been eliminated in consolidation.
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles 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. Significant areas requiring management’s estimates and
assumptions are determining the fair value of stock based transactions and
financial instruments. Impairment provisions and fair value considerations for
mineral properties involve subjective considerations and fair value
methodologies primarily dependant on management inputs and not on active trading
market indicators. Other areas requiring estimates include deferred tax
balances, valuation allowances, allocations of expenditures to mineral property
interests and related impairment tests.
F-8
PIEDMONT
MINING COMPANY, INC.
(An
Exploration Stage Company)
NOTES
TO CONSOLIDATED STATEMENTS
December
31, 2009
NOTE
2: SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Comparative Figures
Certain
comparative figures have been reclassified in order to conform to the current
year’s financial statement presentation.
Cash
The
Company considers all highly liquid instruments with an original maturity of
three months or less at the time of issuance to be cash
equivalents.
Mineral
Property Costs
The
Company is primarily engaged in the acquisition, exploration and development of
mineral properties. The acquisition costs of mineral rights are capitalized.
These include lease and option payments under exploration agreements. The
projects are assessed for impairment when facts and circumstances indicate their
carrying values exceed the recoverable values. Such factors include poor
exploration results or failure to discover mineable ore. If a
mineable ore body is found, these costs will be amortized when production begins
using a units-of-production method. These costs are recorded to
exploration projects on the consolidated balance sheets. Other exploration,
geological and geophysical costs are expensed as incurred
In the
event that mineral property acquisition costs are paid or settled with Company
shares, those shares are recorded at fair value at the time the shares are
issued.
When it
has been determined that a mineral property can be economically developed as a
result of establishing proven and probable reserves with pre-feasibility
studies, the costs incurred after such determination to develop a property to
production are capitalized.
Estimated
future removal and site restoration costs, when determinable, are provided over
the life of proven reserves on a units-of-production basis. Costs,
which include production, equipment removal and environmental remediation, are
estimated each period by management based on current regulations, actual
expenses incurred, and technology and industry standards. Any charge
is included in exploration expense or the provision for depletion and
depreciation during the period and the actual restoration expenditures are
charged to the accumulated provision amounts as incurred.
As of the
date of these financial statements, all of the Company’s exploration costs have
been expensed. To date the Company has not established any proven or
probable reserves on its mineral properties.
Financial
Instruments
The fair
value of the Company’s financial instruments, consisting of cash, accounts
payable and amounts due to related parties were estimated to approximate their
carrying values due to the immediate or short-term maturity of these financial
instruments. The fair value of the Company’s net smelter royalty
obligations (refer to Note 4) is not determinable at the current stage of the
Company’s exploration program. Accordingly, no value has been
assigned by management.
Asset
Retirement Obligations
The
Company records the fair value of an asset retirement obligation as a liability
in the period in which it incurs an obligation associated with the retirement of
tangible long-lived assets that result from the acquisition, construction,
development and/or normal use of the assets. The estimated fair value of the
asset retirement obligation is based on the current cost escalated at an
inflation rate and discounted at a credit adjusted risk-free
rate. This liability is capitalized as part of the cost of the
related asset and amortized over its useful life. The liability
accretes until the Company settles the obligation. To December 31,
2009 any potential costs relating to the ultimate disposition of the Company's
mineral property interests are not determinable.
F-9
PIEDMONT
MINING COMPANY, INC.
(An
Exploration Stage Company)
NOTES
TO CONSOLIDATED STATEMENTS
December
31, 2009
NOTE
2: SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Impairment
of Long-Lived Assets
The
Company reviews property and equipment and certain identifiable intangibles,
excluding goodwill, for impairment. Long-lived assets are reviewed for
impairment whenever events or changes in circumstances indicate the carrying
amount of an asset may not be recoverable. Recoverability of these
assets is measured by comparison of the carrying amount to management’s
estimates of future undiscounted cash flows the assets are expected to
generate. If property, plant, and equipment and certain identifiable
intangibles are considered to be impaired, the impairment to be recognized
equals the amount by which the carrying value of the assets exceeds fair market
value.
Revenue
Recognition
Oil
revenues are recorded using the sales method whereby the company recognizes oil
revenue based on the amount of oil sold to purchasers when title passes, the
amount is determinable and collection is reasonably assured. Actual sales are
based on sales, net of the associated volume charges for processing fees and for
costs associated with delivery, transportation, marketing, and royalties in
accordance with industry standards.
Loss
per Common Share
Basic
loss per share (“LPS”) includes no dilution and is computed by dividing loss
attributable to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted earnings per share reflect the
potential dilution of securities that could share in the earnings (loss) of the
Company. The common shares potentially issuable upon exercise of stock options
and warrants were not included in the calculation of weighted average number of
shares outstanding as the effect would be anti-dilutive.
Foreign
Currency Translation
The
financial statements are presented in United States dollars. Foreign
denominated monetary assets and liabilities are translated to their United
States dollar equivalents using foreign exchange rates at the balance sheet
date. Revenue and expenses are translated at average rates of
exchange during the year. Related translation adjustments are reported as a
separate component of stockholders’ equity, whereas gains or losses resulting
from foreign currency transactions are included in results of
operations.
Income
Taxes
The
Company follows the liability method of accounting for income
taxes. Under this method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax balances. Deferred tax assets and liabilities
are measured using enacted or substantially enacted tax rates expected to apply
to the taxable income in the years in which those differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the date of enactment or substantive enactment. As at
December 31, 2009, the Company had net operating loss carry forwards; however,
due to the uncertainty of realization, the Company has provided a full valuation
allowance for the potential deferred tax assets resulting from these losses
carry forwards.
Stock-Based
Compensation
The
Company records stock-based compensation using the fair value method. All
transactions in which goods or services are the consideration received for the
issuance of equity instruments are accounted for based on the fair value of the
consideration received or the fair value of the equity instrument issued,
whichever is more reliably measurable. Equity instruments issued to employees
and the cost of the services received as consideration are measured and
recognized based on the fair value of the equity instruments
issued.
Recently
Adopted Accounting Pronouncements
In June
2009, the Company adopted ASC 105, Generally Accepted Accounting Principles
(“ASC 105”). ASC 105 defines the new hierarchy for U.S. GAAP and supersedes all
accounting standards in U.S. GAAP, aside from those issued by the Securities and
Exchange Commission. The Codification was effective for financial statements
issued for reporting periods ending after September 15, 2009. The adoption of
the Codification did not result in any overall changes to the accounting
principles utilized and accordingly did not have a material impact on financial
position, results of operations or cash flows.
F-10
PIEDMONT
MINING COMPANY, INC.
(An
Exploration Stage Company)
NOTES
TO CONSOLIDATED STATEMENTS
December
31, 2009
NOTE
2: SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recently
Adopted Accounting Pronouncements (continued)
In June
2009, the Company adopted ASC 855, Subsequent Events (“ASC 855”), which
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued or
are available to be issued. The new standard was effective for the Company for
the quarter ended June 30, 2009. The adoption of this guidance did not have a
material impact on the Company’s results of operations and financial
position.
In August
2009, the Company adopted ASC 820, Fair Value Measurements and Disclosures –
Measuring Liabilities at Fair Value (“ASC 820”), which provides additional
guidance for estimating fair value when the volume and level of activity for the
asset or liability have significantly decreased. This also includes guidance on
identifying circumstances that indicate a transaction is not orderly. This
requires the disclosure of the inputs and valuation technique(s) used to measure
fair value and a discussion of changes in valuation techniques and related
inputs, if any, during the period. The adoption of this statement did not have a
material impact on the Company’s results of operations and financial
position.
Recent
Accounting Guidance Not Yet Adopted
In June
2009, the FASB issued authoritative guidance on the consolidation of variable
interest entities, which is effective for the Company beginning January 1,
2010. The new guidance requires revised evaluations of whether entities
represent variable interest entities, ongoing assessments of control over such
entities, and additional disclosures for variable interests. We believe adoption
of this new guidance will not have a material impact on our financial
statements.
Certain
other recent accounting pronouncements have not been disclosed as they are not
applicable to the Company.
NOTE
3: INTEREST
IN OIL LEASES
The
Company has been granted interests in two oil wells in Tennessee in
consideration for $2 consisting of a 10.5% undivided working interest in one
well and a 6% over-riding royalty interest in another. Cash flow from
oil production commenced during the third quarter of 2009.
NOTE
4:
MINERAL PROPERTIES
The
Company has entered into mineral property agreements as described below. A
summary of capitalized costs is as follows:
Balance
as at December 31, 2007
|
Incurred
during the year
|
Impairments
|
Balance
as at December 31, 2008
|
Incurred
during the year
|
Impairments
|
Balance
as at December 31, 2009
|
||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
Antelope
Ridge
|
68,500 | - | (68,500 | ) | - | - | - | - | ||||||||||||||||||||
Argentite
Gold
|
- | - | - | - | 2,500 | (2,500 | ) | - | ||||||||||||||||||||
Bullion
Mountain
|
20,000 | 7,000 | - | 27,000 | 8,000 | (35,000 | ) | - | ||||||||||||||||||||
Dome
Hi-Ho
|
107,000 | 30,000 | (137,000 | ) | - | - | - | - | ||||||||||||||||||||
Dutch
Flat
|
35,000 | - | - | 35,000 | - | (34,999 | ) | 1 | ||||||||||||||||||||
Pasco
Canyon
|
10,000 | - | - | 10,000 | - | (10,000 | ) | - | ||||||||||||||||||||
PPM
Gold
|
25,000 | - | 25,000 | - | (24,999 | ) | 1 | |||||||||||||||||||||
Trinity
Silver
|
10,000 | - | - | 10,000 | - | (10,000 | ) | - | ||||||||||||||||||||
Willow
Creek
|
- | 15,000 | - | 15,000 | - | (15,000 | ) | - | ||||||||||||||||||||
275,500 | 52,000 | (205,500 | ) | 122,000 | 10,500 | (132,498 | ) | 2 |
Reclamation
Bonds
|
|||||||||||||||||||||||||||||
PPM
Gold
|
- | 11,565 | - | 11,565 | - | - | 11,565 | ||||||||||||||||||||||
Willow
Creek
|
- | 17,773 | - | 17,773 | (1,797 | ) | (15,976 | ) | - | ||||||||||||||||||||
- | 29,338 | - | 29,338 | (1,797 | ) | (15,976 | ) | 11,565 |
F-11
PIEDMONT
MINING COMPANY, INC.
(An
Exploration Stage Company)
NOTES
TO CONSOLIDATED STATEMENTS
December
31, 2009
NOTE
4: MINERAL
PROPERTIES (continued)
Antelope
Ridge Project
The
Company entered into a 10 year Mining Lease with Option to Purchase dated April
26, 2005 on 50 claims in the Fish Creek Mining District, Eureka County, Nevada.
The Company made lease and option payments totaling $68,500 and incurred
$189,746 in exploration costs with respect to this Project. In June,
2008, due to unsatisfactory results, the Company terminated this agreement and
recorded an impairment loss of $68,500.
Argentite
Gold Project
On March
10, 2009, upon paying $2,500, the Company signed a Letter of Intent to enter
into an Exploration Agreement with Option to form Joint Venture on the Argentite
gold property in western Nevada once the gold price exceeds $1,000 per ounce for
more than 25 consecutive business days, after 90 days from the date of signing
the Letter of Intent or after further negotiations. On signing the
formal agreement, the Company would pay $8,000 and then undertake a work
commitment of $750,000 over a five year period to earn a 51% interest in the
property and the project, or up to a 70% interest upon completion of a bankable
feasibility study. In addition, the Company would make annual
payments of $10,000 by the first anniversary of the agreement, $15,000 on the
second anniversary, $20,000 by the third anniversary and $25,000 by the fourth
anniversary, all of which would be creditable against the work commitment. The
Option and Earn-In Agreement was not signed at December 31, 2009 and the company
has written off the $2,500.
Bullion
Mountain Project
Effective
November 11, 2005, the Company entered into a ten year Mining Lease with Option
to Purchase on 17 claims in Lander County, Nevada pursuant to the following
terms:
1.
|
Lease
payments required:
|
||
a)
|
On
signing:
|
$5,000
plus $2,274 in claims fees reimbursement, paid
|
|
b)
|
First
anniversary:
|
$5,000,
paid
|
|
c)
|
Second
anniversary:
|
$10,000,
paid
|
|
d)
|
Third
anniversary and each thereafter:
|
$15,000
|
|
2.
|
The
Company must expend the following additional amounts in exploration and
maintenance of the property during the first two years of the
Agreement:
|
||
a)
|
By
November 2006:
|
$20,000,
completed
|
|
b)
|
By
November 2007:
|
$50,000
|
|
In
September, 2007, this agreement was amended. The time for completing the
remaining work obligation was extended
indefinitely.
|
This
agreement was terminated subsequent to year end. As a result, the
Company recorded an impairment loss of $35,000 at December 31,
2009.
Dome-Hi-Ho
Project
Effective
on April 26, 2005, the Company entered into a five year Exploration and Option
to enter into a Joint Venture Agreement on 44 claims in Lander County, Nevada.
The Company made lease and option payments totaling $137,000 and incurred
$350,510 in exploration costs with respect to the Project. In June, 2008, the
Company terminated this agreement because the drilling results were not
sufficiently encouraging to warrant further expenditures on the project and
recorded an impairment loss of $137,000 in the year ended December 31,
2008.
F-12
PIEDMONT
MINING COMPANY, INC.
(An
Exploration Stage Company)
NOTES
TO CONSOLIDATED STATEMENTS
December
31, 2009
NOTE
4:
MINERAL PROPERTIES (continued)
Dutch
Flat Gold Project
On July
2, 2006, the Company entered into a five year Exploration Agreement with Option
to form Joint Venture on 114 claims in Humboldt County, Nevada (the ‘Dutch Flat
Project’) pursuant to the following terms:
1.
|
Payment
upon signing: $35,000,
paid
|
2.
|
The
Company shall expend the following sums on exploration and maintenance of
the property during the first 5 years of the
Agreement:
|
Year
1
|
$200,000,
completed
|
|
Year
2
|
$300,000,
completed
|
|
Year
3
|
$500,000
|
|
Year
4
|
$500,000
|
|
Year
5
|
$500,000
|
3.
|
Upon
completion of the $2,000,000 in exploration expenditures over the 5-year
period, the Company shall have earned a 51% interest in the property and
can then elect to either 1) form a joint venture at that point whereby the
Company would own 51%, or 2) earn an additional 19% interest in the
property by funding a positive feasibility study and then form a joint
venture. The Company would be the operator of the joint
venture.
|
4.
|
Six
of these claims are subject to a 1.5% net smelter returns
royalty. Another company, in which one of the Company’s
Directors has an interest, holds a 1% net smelter returns royalty on
another sixteen of these claims.
|
5.
|
The
Company may terminate this Agreement at any time after the first year on
30 days notice.
|
As of
December 31, 2009, the Company has made the initial payment of $35,000 and has
incurred $525,677 in exploration costs with respect to the Dutch Flat
Project. The Company has not been able to meet its work expenditure
requirements in a timely manner due to lack of adequate funding but is planning to do further
exploration work when funds become available. As a result, the
Company has written down the carrying value of this project to
$1.00.
Pasco
Canyon Project
On
February 14, 2006, the Company entered into a five year Option Agreement on 24
claims in Nye County, Nevada.
As of
December 31, 2009, the Company had made lease payments totaling $10,000 and had
incurred $47,315 in exploration expenditures with respect to the Pasco Canyon
Project. In December 2009, this agreement was terminated due to the Company’s
inability to fund the required exploration expenditures in a timely
manner. As a result, the Company recorded an impairment loss of
$10,000 at December 31, 2009.
PPM
Gold Project
In April,
2007, the Company signed an “Exploration Agreement with Option to form Joint
Venture” (the “Exploration Agreement”) with Miranda US, Inc., a wholly-owned
subsidiary of Miranda Gold Corp. (“Miranda”), a Canadian corporation listed on
the TSX Venture Exchange.
Under the
terms of the Exploration Agreement, the Company has an option to earn a 55%
interest in 81 mining claims, located in Humboldt County, Nevada pursuant to the
following terms:
1.
|
On
signing: $25,000 to within 30 days of the effective date of the
Exploration Agreement, paid
|
2.
|
The
Company shall incur a total of $1,750,000 in exploration work during a
five year period as follows:
|
Year
1
|
$175,000,
partial completion
|
|
Year
2
|
An
additional $200,000
|
|
Year
3
|
An
additional $300,000
|
|
Year
4
|
An
additional $425,000
|
|
Year
5
|
An
additional $650,000 .
|
Upon
completing the total $1,750,000 work expenditure requirement, the Company will
have earned a 55% interest in the property and the project. At that
point, the Company may enter into a joint venture with PPM Miranda, with the
Company being the operator. After the first year of the agreement,
the Company may terminate the agreement at any time on 30 days written notice.
The Company must pay all claims maintenance fees, which will be creditable
against the work commitment expenditure requirement.
F-13
PIEDMONT
MINING COMPANY, INC.
(An
Exploration Stage Company)
NOTES
TO CONSOLIDATED STATEMENTS
December
31, 2009
NOTE
4: MINERAL
PROPERTIES (continued)
PPM
Gold Project (continued)
As of
December 31, 2009, the Company had expended $114,561 on this
property. The Company has not been able to meet its work expenditure
requirements in a timely manner but is planning to do further exploration work
when funds become available. As a result, the Company has written
down the carrying value of this project to $1.00.
Trinity
Silver Project
Effective
on September 15, 2005, the Company entered into an Exploration and Development
Agreement on the Trinity Silver Project in Pershing County,
Nevada. The TSP consists of various claims, 1,280 acres of fee land
and 2,560 acres of sub-leased fee land.
The
Company made lease payments totaling $10,000 and incurred $619,408 in
exploration and property maintenance through June 30, 2009. This
agreement was terminated during the year ended December 31, 2009 due to the
Company’s inability to fund its exploration expenditure requirements on the
project. As a result, the Company has recorded an impairment loss of
$10,000.
Willow
Creek Project
On June
16, 2008, the Company entered into an Exploration Agreement with Option to form
a Joint Venture with Carlin Gold Corporation (“Carlin”) on the Willow Creek
property, located in Elko County, Nevada. An initial payment of $10,000 had been
made in November, 2007 and $300,000 was advanced to Carlin on signing the
agreement to cover the first year’s work commitment. In addition,
100,000 common shares valued at $15,000 were issued to Carlin on July 8, 2008 to
acquire the option interest which was capitalized as a mineral property
acquisition cost.
As of
December 31 2009, the Company had expended $300,000 in exploration costs
including the cost of a reclamation bond of $17,733. During the
fourth quarter of the year ended December 31, 2009 this agreement was terminated
and as a result the Company recorded an impairment loss of $15,000 at December
31, 2009. In addition, the Company has written off a reclamation bond
in the amount of $15,976, net of recoveries, due to the uncertainty of
recovery.
The
Company was advised by its attorneys that Carlin claims a balance of $87,372 for
uncompleted work expenditure requirements owing to them under the above
agreement. The Company believes this claim is without foundation or
merit and is disputing the amount. The Company has not recorded a
liability in relation to the foregoing matters as the amount and likelihood of
loss, if any, cannot be determined at this time.
Morgan
Pass Project
On May
20, 2008, the Company signed a Letter of Intent with Nevada Eagle Resources LLC,
a wholly owned subsidiary of Gryphon Gold Corporation on the Morgan Pass
property located in Elko County, Nevada. The Letter of Intent is
effective for five years, during which the parties will negotiate an
“Exploration Agreement with Option to Form Joint Venture” at such time as the
property is released into “multiple use” from a “wilderness study area”. Mineral
exploration is not permitted on BLM land that is classified as ‘Wilderness
Study’. However, the BLM has recommended that this area be removed
from Wilderness Study and placed back into the ‘Multiple Use’ category,
whereupon exploration and drilling may then be permitted.
The
Company must:
|
-
|
Make
payments for staking and registration of initial claims
(paid)
|
|
-
|
Commencing
with the 2008-2009 assessment year, make all required maintenance payments
(paid to 2009)
|
|
-
|
Make
a payment of $20,000 upon release of the properties into “multiple use”
classification
|
|
-
|
Upon
release of the properties into “multiple use”, a five year option and earn
in agreement would be signed and a work program totaling $750,000 over a
five year period would commence from the date of signing of the formal
agreement.
|
As of
December 31, 2009, the Company had incurred $17,666 in exploration and
maintenance costs and the property is still classified as a “wilderness study
area”.
F-14
PIEDMONT
MINING COMPANY, INC.
(An
Exploration Stage Company)
NOTES
TO CONSOLIDATED STATEMENTS
December
31, 2009
NOTE
5: EQUIPMENT
December
31, 2009
|
December
31, 2008
|
|||||||
Computer
Equipment
|
$ | 5,579 | $ | 5,579 | ||||
Less:
accumulated depreciation
|
(5,579 | ) | (5,514 | ) | ||||
$ | - | $ | 65 |
NOTE
6: DUE TO
RELATED PARTIES AND RELATED PARTY TRANSACTIONS
During
the year ended December 31, 2009 the Company incurred management fees of
$168,000 (2008: $164,000) to the Company’s President and CEO. In addition, the
Company reimburses the President for office rent which totaled $19,200 for the
year ended December 31, 2009 (2008: $19,200). At December 31, 2009 a
balance of $366,957 (2008: $166,316) was owing to the President and CEO for
unpaid management fees, rent and expense reimbursements.
During
the year ended December 31, 2009 the Company incurred exploration costs and fees
of $4,984 (2008: $28,270) to the Company’s Vice-President. At
December 31, 2009 a balance of $33,254 (2008: $28,270) was owing to the
Vice-President for unpaid fees, exploration costs and expense
reimbursements.
From time
to time, the Company’s officers and directors advance monies to the Company.
These loans bear interest at 5% per annum. These loans are unsecured and have no
fixed repayment terms. The unpaid balances relating to these advances, which
include accrued interest, at December 31, 2009 and 2008 were $138,513 and
$57,943 respectively.
No stock
options were granted to its officers or directors by the Company for the year
ended December 31, 2009. All related party transactions involving
provision of services or transfer of tangible assets in the normal course of
business were recorded at the exchange amount, which is the value established
and agreed to by the related parties reflecting arms length consideration
payable for similar services or transfers.
NOTE
7: CAPITAL
STOCK
Share
Capital
The
Company’s capitalization is 50,000,000 authorized preferred shares with a par
value of $1.00 per share and 200,000,000 common shares with no par
value.
Common
share transactions:
During
the year ended December 31, 2009, the Company completed the following equity
transactions:
In
January, 2009, the Company completed a private placement offering of 125,000
units, consisting of one share of common stock and one common stock purchase
warrant at a price of $0.04 per unit, for proceeds of $5,000. The
warrants are exercisable for a period of two years and entitle the holder to
purchase one share of common stock for $0.10 per share.
In March,
2009, the Company completed a private placement offering of 100,000 units,
consisting of one share of common stock and one common stock purchase warrant at
a price at a price of $0.05 per unit, for proceeds of $5,000. The
warrants are exercisable for a period of two years and entitle the holder to
purchase one share of common stock for $0.15 per share.
In March,
2009, the Company completed a private placement offering of 200,000 units,
consisting of one share of common stock and one common stock purchase warrant at
a price at a price of $0.05 per unit, for proceeds of $10,000. The
warrants are exercisable for a period of two years and entitle the holder to
purchase one share of common stock for $0.10 per share.
In March,
2009, the Company issued 500,000 shares of common stock for $25,000 valued at
market at $0.05 per share, pursuant to a letter agreement, as partial
satisfaction of outstanding debt.
F-15
PIEDMONT
MINING COMPANY, INC.
(An
Exploration Stage Company)
NOTES
TO CONSOLIDATED STATEMENTS
December
31, 2009
NOTE
7: CAPITAL
STOCK (continued)
In May,
2009, the Company completed a private placement offering of 500,000 units,
consisting of one share of common stock and one common stock purchase warrant at
a price at a price of $0.03 per unit, for proceeds of $15,000. The
warrants are exercisable for a period of three years and entitle the holder to
purchase one share of common stock for $0.05 per share.
In July,
2009, the Company completed a private placement offering of 83,333 units,
consisting of one share of common stock and one common stock purchase warrant at
a price at a price of $0.06 per unit, for proceeds of $5,000. The
warrants are exercisable for a period of two years and entitle the holder to
purchase one share of common Stock for $0.10 per Share.
During
the year ended December 31, 2008, the Company completed the following equity
transactions:
In
February, 2008, the Company completed a private placement offering of 74,967
units, consisting of one share of common stock and one common stock purchase
warrant at a price at a price of $0.30 per unit, for proceeds of
$22,490. The warrants are exercisable for a period of two years and
entitle the holder to purchase one share of common stock (the “warrant shares”)
for $0.60 per warrant share.
In March,
2008, the Company completed a private placement offering of 53,571 units,
consisting of one share of common stock and one common stock purchase warrant at
a price at a price of $0.28 per unit, for proceeds of $15,000. The
warrants are exercisable for a period of two years and entitle the holder to
purchase one share of common stock (the “warrant shares”) for $0.50 per warrant
share.
In April,
2008, the Company completed a private placement offering of 86,000 units,
consisting of one share of common stock and one common stock purchase warrant at
a price at a price of $0.175 per unit, for proceeds of $15,050. The
warrants are exercisable for a period of two years and entitle the holder to
purchase one share of common stock for $0.27 per share.
In April,
2008, the Company completed a private placement offering of 312,500 units,
consisting of one share of common stock and one common stock purchase warrant at
a price at a price of $0.16 per unit, for proceeds of $50,000. The
warrants are exercisable for a period of two years and entitle the holder to
purchase one share of common stock for $0.25 per share.
In April,
2008, 737,833 shares of common stock were issued upon the exercise of warrants.
The exercise price of the warrants was $0.15, which resulted in gross proceeds
to the company of $110,675.
In May,
2008, the Company completed a private placement offering of 3,203,331 units,
consisting of one share of common stock and one common stock purchase warrant at
a price at a price of $0.15 per unit, for proceeds of $480,500 less broker
commission of $43,245 for net proceeds of $437,255. The warrants are
exercisable for a period of two years and entitle the holder to purchase one
share of common stock for $0.26 per share. In addition to the cash commission,
the broker received a warrant exercisable for a period of two years which
entitles the broker to purchase up to 320,333 shares of common stock for $0.15
per warrant share.
In July,
2008, 100,000 shares of common stock for $15,000 valued at market were issued on
signing a 5 year option and earn in agreement on the Willow Creek
property.
In
August, 2008, 666,667 shares of common stock were issued in lieu of cash
pursuant to two Engagement Letters with funding groups. The shares were valued
at market at $0.15 per share for a total of $100,000. Both engagements have been
terminated and no funds were raised and as a result, the $100,000 has been fully
expensed.
In
October, 2008, the Company completed a private placement offering of 166,667
units, consisting of one share of common stock and one common stock purchase
warrant at a price at a price of $0.06 per unit, for proceeds of
$10,000. The warrants are exercisable for a period of two years and
entitle the holder to purchase one share of common stock for $0.15 per
share.
In
October, 2008, the Company completed a private placement offering of 150,000
units, consisting of one share of common stock and one common stock purchase
warrant at a price at a price of $0.06 per unit, for proceeds of
$9,000. The warrants are exercisable for a period of two years,
entitling the holder to purchase one share of common stock for $0.15 per
share.
F-16
PIEDMONT
MINING COMPANY, INC.
(An
Exploration Stage Company)
NOTES
TO CONSOLIDATED STATEMENTS
December
31, 2009
NOTE
7: CAPITAL
STOCK (continued)
Stock-Based
Compensation and Other Equity Transactions
The
Company does not have a stock-based compensation plan. The Company’s
Compensation Committee makes recommendations to the Board of Directors for the
granting of awards of stock options to its officers and directors on a
discretionary basis.
On April
9, 2008, 150,000 stock options were granted to a consultant, of which 75,000
vested immediately and 75,000 vested on the first anniversary in 2009. The term
of this award is three years. The Company estimated the fair value of these
options to be $18,700 at the date of grant, using the BSM pricing model using an
expected life of 3 years, a risk-free interest rate of 4.45% and an expected
volatility of 109%.
Of the
450,000 stock options granted during the year ended December 31, 2007, 150,000
vested in 2007; 150,000 vested in 2008; and the remainder vested in 2009. The
terms of these awards are three to five years. The fair value of
these options was $43,900 at the 2007 grant date.
Total
compensation expense for the years ended December 31, 2009 and 2008 were
$23,984 and $118,617, respectively, according to the vesting schedule. As
of December 31, 2009, all stock options were fully vested.
Below is
a summary of the stock option activity for the year ended December 31, 2009 and
2008:
Weighted
|
||||||||
Number
of
|
Average
|
|||||||
Options
|
Exercise
Price
|
|||||||
Total
Options:
|
$ | |||||||
Outstanding,
December 31, 2007
|
5,975,000 | 0.235 | ||||||
Cancelled
March 4, 2008
|
(400,000 | ) | 0.200 | |||||
Granted
April 9, 2008
|
150,000 | 0.280 | ||||||
Outstanding,
December 31, 2008
|
5,725,000 | 0.239 | ||||||
Expired
December 28, 2009
|
(250,000 | ) | 0.270 | |||||
Outstanding,
December 31, 2009
|
5,475,000 | 0.237 |
Weighted
|
||||||||
Number
of
|
Average
|
|||||||
Options
|
Fair
Value
|
|||||||
Non-vested
Options
|
$ | |||||||
Non-vested
options, December 31, 2007
|
1,150,000 | 0.11 | ||||||
Granted
April 9, 2008
|
150,000 | 0.12 | ||||||
Vested
|
(1,075,000 | ) | 0.11 | |||||
Non-vested
options, December 31, 2008
|
225,000 | 0.11 | ||||||
Vested
|
(225,000 | ) | 0.11 | |||||
Non-vested
options, December 31, 2009
|
- | 0.00 |
The
following tables summarize information and terms of the options outstanding and
exercisable:
Weighted
|
Weighted
|
|||||||
Average
|
Average
|
|||||||
Remaining
|
Weighted
|
Remaining
|
Weighted
|
|||||
Range
of
|
Number
|
Contractual
|
Average
|
Number
|
Contractual
|
Average
|
||
Exercise
Prices
|
of
Shares
|
Life
(in years)
|
Exercise
Price
|
of
Shares
|
Life
(in years)
|
Exercise
Price
|
||
Options
outstanding at December 31, 2009
|
Options
exercisable at December 31, 2009
|
|||||||
$
0.20 – 0.28
|
5,475,000
|
1.30
|
$ 0.237
|
5,475,000
|
1.30
|
$ 0.237
|
||
Options
outstanding at December 31, 2008
|
Options
exercisable at December 31, 2008
|
|||||||
$
0.20 – 0.28
|
5,725,000
|
2.23
|
$ 0.239
|
5,500,000
|
2.135
|
$ 0.238
|
The
outstanding and exercisable stock options had no intrinsic value at December 31,
2009.
F-17
PIEDMONT
MINING COMPANY, INC.
(An
Exploration Stage Company)
NOTES
TO CONSOLIDATED STATEMENTS
December
31, 2009
NOTE
7: CAPITAL STOCK
(continued)
Common
stock purchase warrants
Total
outstanding warrants at December 31, 2009 were 6,454,868. The
exercise prices on all warrants range from $0.05 to $0.60 per share. The
warrants are exercisable immediately upon issuance and the expiration dates
range between two and five years after issuance.
Total
outstanding warrants at December 31, 2008 were 10,479,035. The
exercise prices on all warrants range from $0.15 to $0.60 per share. The
warrants are exercisable immediately upon issuance and the expiration dates
range between two and five years after issuance.
During
the year ended December 31, 2009, the Company issued warrants relating to unit
private placements granting holders the right to purchase 1,008,333 shares of
common stock. The exercise price on these warrants range from $0.05 to $0.15 per
share. The warrants were exercisable immediately upon issuance and the
expiration dates are two years after issuance. The Company estimated the total
fair market value of these warrants to be $6,200 at the date of grant, using the
BSM pricing model using an expected life of one year, a risk-free interest rate
of 2% and an expected volatility of 109%. The fair value of the warrants has
been included in capital stock.
During
the year ended December 31, 2008, the Company issued warrants relating to unit
private placements granting holders the right to purchase 4,209,035 shares of
common stock. The exercise price on these warrants range from $0.15 to $0.60 per
share. The warrants were exercisable immediately upon issuance and the
expiration dates are two years after issuance. The Company estimated the total
fair market value of these warrants to be $144,800 at the date of grant, using
the BSM pricing model using an expected life of one year, a risk-free interest
rate of 4.45% and an expected volatility of 109%. The fair value of the warrants
has been included in capital stock
The
warrants exercisable at December 31, 2009 had no intrinsic value.
A summary
of the Company’s stock purchase warrants as of December 31, 2009 is presented
below:
Number
of
Warrants
|
Weighted
average
exercise
price
|
Weighted
average
remaining
life (years)
|
||||||||||
Balance,
December 31, 2008
|
10,479,035 | 0.32 | 1.09 | |||||||||
Issued
|
1,008,333 | 0.08 | 1.07 | |||||||||
Exercised
|
- | - | ||||||||||
Expired
|
(5,032,500 | ) | 0.37 | - | ||||||||
Balance,
December 31, 2009
|
6,454,868 | 0.24 | 0.69 |
NOTE
8: INCOME TAXES
The
provision for income taxes differs from the result which would be obtained by
applying the statutory income tax rate to income before income
taxes. The difference results from the following items:
2009
|
2008
|
|||||||
Net
loss before income taxes
|
$ | (545,737 | ) | $ | (1,432,334 | ) | ||
Statutory
tax rate
|
42 | % | 42 | % | ||||
Expected
tax expense (recovery)
|
(229,210 | ) | (601,580 | ) | ||||
Increase
in valuation allowance
|
229,210 | 601,580 | ||||||
Income
tax provision
|
$ | - | $ | - |
F-18
PIEDMONT
MINING COMPANY, INC.
(An
Exploration Stage Company)
NOTES
TO CONSOLIDATED STATEMENTS
December
31, 2009
NOTE
8: INCOME TAXES
(continued)
As of
December 31, 2009, the Company has net operating loss carry-forwards amounting
to approximately $13,294,617 which may be available to reduce future year’s
taxable income. These carry-forwards will expire, if not utilized,
commencing in 2009. Management believes that the realization of the
benefits from this deferred tax assets appears uncertain due to the Company’s
limited operating history and continuing losses. Accordingly a full,
deferred tax asset valuation allowance has been provided and no deferred tax
asset benefit has been recorded.
The
Company’s tax-effected deferred income tax assets are estimated as
follows:
2009
|
2008
|
|||||||
Potential
future income tax assets:
|
||||||||
Non-capital
losses available
|
$ | 5,583,739 | $ | 5,880,247 | ||||
Less:
valuation allowance
|
(5,583,739 | ) | (5,880,247 | ) | ||||
Net
deferred income tax asset
|
$ | - | $ | - |
The
Company has uncertain tax positions for which the possible liability for
penalties and interest is not currently reliably estimable by
management. Management has considered the likelihood and significance of
possible penalties associated with its current and intended filing positions and
has determined, based on their assessment, that such penalties, if any, would
not be expected to be material.
As the
Company has incurred losses since inception there it is not likely there would
be significant exposure to penalties for income tax
liability.
Inherent
uncertainties arise over tax positions taken, or expected to be taken, with
respect to transfer pricing, financing charges, fees, related party
transactions, tax credits, tax based incentives and stock based
transactions. Management has not recognized any tax benefits related to
these uncertainties.
Disclosure
concerning certain carry-forward tax pools, temporary and permanent timing
differences in tax basis versus reported amounts may be impacted by assessing
practices and tax code regulations when income tax returns are filed up to date.
As a 100% valuation allowance has been provided against deferred tax assets
reported in these financial statements, there would be no significant net impact
to the current and deferred income tax disclosures or reconciliations
reported.
The
Company's policy is to accrue any interest and penalties related to unrecognized
tax benefits in its provision for income taxes. Additionally, FIN 48
requires that a company recognize in its financial statements the impact of a
tax position that is more likely than not to be sustained upon examination based
on the technical merits of the position. The Company has incurred
taxable losses for all tax years since inception and accordingly, no provision
for taxes has been recorded for the current or any prior fiscal
year.
During
the year 2009, the Company did not recognize any interest and
penalties.
F-19
PIEDMONT
MINING COMPANY, INC.
(An
Exploration Stage Company)
NOTES
TO CONSOLIDATED STATEMENTS
December
31, 2009
NOTE
9: SUPPLEMENTAL
CASH FLOW INFORMATION AND NONCASH INVESTING AND FINANCING ACTIVITIES
In March,
2009, the Company issued 500,000 shares of Common Stock with a fair value of
$0.05 per share or $25,000, pursuant to a letter agreement as partial
satisfaction of outstanding debt.
In July,
2008, 100,000 shares of Common Stock valued at $15,000 were issued on signing an
agreement on the Willow Creek property.
In
August, 2008, 666,667 shares of Common Stock valued at $100,000 were issued
pursuant to two engagement letters with funding groups. Both
engagements have been terminated and no funds have been raised and as a result
the $100,000 has been fully expensed.
Year
Ended December 31,
|
||||||||
Other
Information:
|
2009
|
2008
|
||||||
$ | $ | |||||||
Interest
paid
|
- | - | ||||||
Income
taxes paid
|
- | - |
NOTE
10: SUBSEQUENT EVENTS
In
January, 2010, the Company completed a private placement offering of 1,000,000
units, consisting of one share of Common Stock and one common stock purchase
warrant at a price of $0.016 per unit, for proceeds of $16,000. The
warrants are exercisable for a period of three years and entitle the holder to
purchase one share of common stock for $0.03 per share. At December
31, 2009, the $16,000 had been received.
In
February, 2010, the Company completed a private placement offering of 500,000
units, consisting of one share of Common Stock and one common stock purchase
warrant at a price of $0.02 per unit, for proceeds of $10,000. The
warrants are exercisable for a period of three years and entitle the holder to
purchase one share of common stock for $0.04 per share.
In March,
2010, the Company completed a private placement offering of 300,000 units,
consisting of one share of Common Stock and one common stock purchase warrant at
a price of $0.025 per unit, for proceeds of $7,500. The warrants are
exercisable for a period of two years and entitle the holder to purchase one
share of common stock for $0.04 per share.
F-20