WHITE MOUNTAIN TITANIUM CORP - FORM 10-Q

Attached files

file	filename
EX-32.1 - WHITE MOUNTAIN TITANIUM CORP	v202409_ex32-1.htm
EX-31.2 - WHITE MOUNTAIN TITANIUM CORP	v202409_ex31-2.htm
EX-31.1 - WHITE MOUNTAIN TITANIUM CORP	v202409_ex31-1.htm
EX-10.1 - WHITE MOUNTAIN TITANIUM CORP	v202409_ex10-1.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2010

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

For the transition period from to

Commission File Number 333-129347

WHITE MOUNTAIN TITANIUM CORPORATION

(Name of small business issuer in its charter)

NEVADA	87-0577390
(State of incorporation or organization)	(IRS Identification No.)

Augusto Leguia 100, Oficina 812

Las Condes, Santiago

Chile

(Address of principal executive offices)

(56 2) 657-1800

(Issuer’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed under Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, 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-2 of the Exchange Act.

Large Accelerate Filer ¨

Accelerated Filer ¨

Non-Accelerated Filer ¨ (Do not check if a smaller reporting company)

Smaller Reporting Company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

44,382,012 shares of the issuer’s common stock, $.001 par value, were outstanding at October 20, 2010.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Consolidated Balance Sheets

(US Funds)

(Unaudited)

	September 30, 2010			December 31, 2009

Assets
Current
Cash and cash equivalents	$	1,275,603		$	1,343,994
Prepaid expenses		59,314			57,546
Receivables		46,700			50,443
Total Current Assets		1,381,617			1,451,983
Property and Equipment (Note 2)		54,800			73,927
Mineral Properties		651,950			651,950

Total Assets	$	2,088,367		$	2,177,860

Liabilities
Current
Accounts payable and accrued liabilities	$	12,890		$	188,534
Total Current Liabilities		12,890			188,534
Other Liabilities – Warrants (Note 3(d))		923,100			2,956,725

Total Liabilities		935,990			3,145,259

Stockholders’ Equity (Deficit)
Preferred Stock and Paid-in Capital in Excess of $0.001 Par Value (Note 3(a))
20,000,000 shares authorized
NIL (December 31, 2009 – 625,000) shares issued and outstanding		-			500,000

Common Stock and Paid-in Capital in Excess of $0.001 Par Value (Note 3(a))
100,000,000 shares authorized
40,382,012 (December 31, 2009 – 36,400,972) shares issued and outstanding		24,490,006			21,660,100
Deficit Accumulated During the Exploration Stage		(23,337,629	)		(23,127,499	)

Total Stockholders’ Equity (Deficit)		1,152,377			(967,399	)

Total Liabilities and Stockholders’ Equity (Deficit)	$	2,088,367		$	2,177,860

See notes to unaudited consolidated condensed financial statements.

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Consolidated Condensed Statements of Operations

(US Funds)

(Unaudited)

	Three Months Ended September 30						Nine Months Ended September 30						Cumulative From Inception November 13, 2001 Through September 30,
	2010			2009			2010			2009			2010

Expenses
Advertising and promotion	$	47,212		$	11,665		$	79,052		$	29,316		$	305,716
Amortization		7,363			3,645			21,166			15,206			162,271
Bank charges and interest		2,023			1,158			7,234			2,859			34,802
Consulting fees (Note 3(c))		23,573			-			177,367			294,438			2,159,152
Consulting fees – directors and officers (Note 3(c))		86,430			128,319			693,990			692,299			4,729,363
Engineering consulting		-			-			-			-			719,282
Exploration		110,007			119,756			246,091			335,719			4,766,615
Filing fees		-			788			22,236			4,776			75,113
Insurance		12,365			13,786			35,314			40,504			281,536
Investor relations, net (Note 3(c))		335			1,316			335			696,191			770,324
Licenses, taxes and filing fees, net		7,141			3,187			-			21,393			379,947
Management fees (Note 3(c))		95,026			34,800			556,542			104,400			2,092,132
Office (Note 3(c))		46,502			17,091			101,087			25,624			287,622
Professional fees		46,509			29,891			131,654			94,782			1,676,568
Rent		22,752			20,622			63,187			55,303			454,284
Telephone		4,594			4,234			11,532			10,120			101,338
Transfer agent fees		2,480			905			4,408			2,370			18,926
Travel and vehicle		30,181			42,270			78,008			96,825			1,081,637

Loss before other items		(544,493	)		(433,433	)		(2,229,203	)		(2,522,125	)		(20,096,628	)

Gain on sale of marketable securities		-			-			-			-			87,217
Loss on sale of assets		-			-			-			(7,465	)		(19,176	)
Adjustment to market for marketable securities		-			-			-			-			(67,922	)
Foreign exchange gain (loss)		3,062			9,056			(23,620	)		27,179			(246,720	)
Dividend income		-			-			-			-			4,597
Interest income		3,079			360			9,068			1,372			356,211
Change in fair value of warrants (Note 3(d))		808,775			998,012			2,033,625			(903,450	)		(1,122,099	)
Financing agreement penalty		-			-			-			-			(330,000	)

Net and comprehensive income (loss) for the period		270,423			573,995			(210,130	)		(3,404,489	)		(21,434,520	)
Preferred stock dividends		-			-			-			-			(1,537,500	)

Net Income (Loss) Available for Distribution	$	270,423		$	573,995		$	(210,130	)	$	(3,404,489	)	$	(22,972,020	)

Basic and Diluted Income (Loss) Per Share (Note 4)	$	0.01		$	0.02		$	(0.01	)	$	(0.10	)		-

Weighted Average Number of Common Shares Outstanding		37,885,782			34,472,520			37,257,392			33,477,669			-

See notes to unaudited consolidated condensed financial statements.

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Consolidated Condensed Statements of Cash Flows

(US Funds)

(Unaudited)

							Cumulative Period
							from Inception
							(November 13,
							2001) Through
	Nine Months Ended Sept. 30,						Sept. 30,
	2010			2009			2010
	(Unaudited)			(Unaudited)			(Unaudited)
Operating Activities
Net loss for period	$	(210,130	)	$	(3,404,489	)	$	(21,434,520	)
Items not involving cash
Amortization		21,166			15,206			150,560
Stock-based compensation		146,682			1,024,122			3,334,893
Loss on sale of assets		-			7,465			19,176
Fair value of common stock issued for services		842,400			164,000			3,360,030
Change in fair value of warrants		(2,033,625	)		903,450			1,122,099
Financing agreement penalty		-			-			330,000
Adjustment to market on marketable securities		-			-			67,922
Gain on sale of marketable securities		-			-			(87,217	)
Non-cash resource property expenditures		-			-			600,000
Changes in non-cash working capital
Prepaid expenses		(1,768	)		7,720			186,766
Receivables		3,743			(5,259	)		(46,700	)
Marketable securities		-			-			19,295
Accounts payable and accrued liabilities		(175,644	)		25,886			(233,190	)

Cash Used in Operating Activities		(1,407,176	)		(1,261,899	)		(12,610,886	)

Investing Activities
Additions to property and equipment, net		(2,039	)		(25,091	)		(224,536	)
Additions to mineral property		-			-			(651,950	)

Cash Used in Investing Activities		(2,039	)		(25,091	)		(876,486	)

Financing Activities
Repayment of long-term debt		-			-			(100,000	)
Issuance of preferred stock for cash		-			-			5,000,000
Issuance of common stock for cash		1,340,824			1,045,340			9,631,804
Stock subscriptions received		-			-			231,000
Working capital acquired on acquisition		-			-			171

Cash Provided by Financing Activities		1,340,824			1,053,702			14,762,975

Inflow (Outflow) of Cash and Cash Equivalents		(68,391	)		(233,288	)		1,275,603
Cash and Cash Equivalents,Beginning of Period		1,343,994			1,475,460			-

Cash and Cash Equivalents, End of Period	$	1,275,603		$	1,242,172		$	1,275,603

Supplemental Cash Flow Information
Income tax paid	$	-		$	-		$	-
Interest paid	$	-		$	-		$	-

Shares Issued for
Settlement of debt	$	-		$	-		$	830,000
Services	$	842,400		$	164,000		$	3,360,030
Issuance of common stock on conversion of preferred shares	$	500,000		$	-		$	500,000

See notes to unaudited consolidated condensed financial statements.

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Consolidated Statements of Stockholders’ Equity (Deficit)

(US Funds)

	Shares of Common Stock		Common Stock and Paid-In Capital in Excess of Par Value		Shares of Preferred Stock			Preferred Stock and Paid-in Capital in Excess of Par Value			Share Subscriptions Received/ Obligation to Issue Shares			Accumulated Deficit			Total Stockholders’ Equity (Deficit)

Balance, December 31, 2008		32,004,042	$	17,930,947		625,000		$	500,000		$	-		$	(16,183,119	)	$	2,247,828
Stock-based compensation (Note 3(c))		-		1,024,122		-			-			-			-			1,024,122
Warrants exercised (Note3(d))		2,100,000		1,045,340		-			-			-			-			1,045,340
Private placement (Note 3(b))		1,496,930		900,691		-			-			-			-			900,691
Reduction in warrant liability on exercise of 2,000,000 warrants		-		199,000		-			-			-			-			199,000
Common stock issued for services (Note 3(c))		800,000		560,000		-			-			-			-			560,000
Cumulative effect of change in accounting principle (Note 5)		-		-		-			-			-			(1,084,375	)		(1,084,375	)
Net loss for the year		-		-		-			-			-			(5,860,005	)		(5,860,005	)
Balance, December 31, 2009		36,400,972		21,660,100		625,000			500,000			-			(23,127,499	)		(967,399	)
Stock-based compensation (Note 3(c))		-		146,682		-			-			-			-			146,682
Common stock issued for services (Note 3(c))		738,000		842,400		-			-			-			-			842,400
Share subscriptions received/obligation to issue shares (Note 3(e))		-		-		-			-			660,000			-			660,000
Warrants exercised (Note3(d))		2,193,040		1,315,824		-			-			(660,000	)					655,824
Options exercised (Note 3(b))		50,000		25,000		-			-									25,000
Shares issued upon conversion of preferred shares (Note 3(a))		1,000,000		500,000		(625,000	)		(500,000	)								-
Net loss for the period		-		-		-			-			-			(210,130	)		(210,130	)
Balance, September 30, 2010 (Unaudited)		40,382,012	$	24,490,006		-		$	-		$	-		$	(23,337,629	)	$	1,152,377

See notes to unaudited consolidated condensed financial statements.

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

Nine Months Ended September 30, 2010 and 2009

(Unaudited)

(US Funds)

1.	NATURE OF BUSINESS AND BASIS OF PRESENTATION

White Mountain Titanium Corporation (the “Company”) currently has no ongoing operations. Its principal business is to advance exploration and development activities on the Cerro Blanco rutile (titanium dioxide) property (“Cerro Blanco”) located in Region III of northern Chile. The Company is considered an exploration stage company and its financial statements are presented in a manner similar to a development stage company as defined in Accounting Standards Codification Topic 915, Development Stage Entities.

The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at September 30, 2010 and for the period then ended have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these consolidated condensed financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s December 31, 2009 audited consolidated financial statements included in the Company’s 2009 annual report on Form 10-K filed with the United States Securities and Exchange Commission (“SEC”). The results of operations for the period ended September 30, 2010 are not necessarily indicative of the operating results for the full year.

2.	PROPERTY AND EQUIPMENT

	September 30, 2010
			Accumulated
	Cost		Amortization		Net

Vehicles	$	54,154	$	43,216	$	10,938
Office furniture		18,863		6,341		12,522
Office equipment		11,311		5,775		5,536
Computer equipment		8,197		6,424		1,773
Computer software		1,542		855		687
Field equipment		62,814		39,470		23,344

	$	156,881	$	102,081	$	54,800

	December 31, 2009
			Accumulated
	Cost		Amortization		Net

Vehicles	$	54,153	$	38,031	$	16,122
Office furniture		17,712		3,189		14,523
Office equipment		10,828		4,139		6,689
Computer equipment		8,197		5,192		3,005
Computer software		1,142		664		478
Field equipment		62,814		29,704		33,110

	$	154,846	$	80,919	$	73,927

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

Nine Months Ended September 30, 2010 and 2009

(Unaudited)

(US Funds)

3.	CAPITAL STOCK

(a)

Common and preferred stock

Common stock

During the nine months ended September 30, 2010:

738,000 shares of common stock were issued for services. Of this amount, 720,000 shares were issued as management compensation (Note 3(c));

2,193,040 shares of common stock were issued upon the exercise of warrants (Note 3(d));

50,000 shares of common stock were issued upon the exercise of stock options (Note 3(b)); and

1,000,000 shares of common stock were issued upon the conversion of 625,000 shares of preferred stock into common stock at the election of the holder.

ii)

Preferred stock

During the three months ended September 30, 2010, the holder of the preferred stock elected to convert the remaining 625,000 shares of preferred stock into 1,000,000 shares of common stock. Accordingly, the Company does not have any preferred stock outstanding as of September 30, 2010.

(b)

Stock options

On June 29, 2010, the Board of Directors adopted the 2010 Stock Option/Stock Issuance Plan (the “Plan”), which permits the Company to grant both incentive and non-statutory stock options and to grant restricted shares of common stock. The Plan authorizes the issuance of up to 3,800,000 shares of common stock. The number of shares of common stock available for issuance under the Plan will automatically increase by an amount such that on the first trading day of January each calendar year during the term of the Plan, beginning with calendar year 2011, the number of shares of common stock reserved and available for issuance under the Plan will represent 10% of the total number of shares of common stock outstanding on the last trading day in December of the immediately preceding calendar year. The Plan is administered initially by the Board of Directors. The persons eligible to participate in the Plan include: (a) employees of the Company and any of its subsidiaries; (b) non-employee members of the Board or non-employee members of the Board of Directors of any of its subsidiaries; (c) officers of the Company or any subsidiary; and (d) consultants and other independent advisors who provide services to the Company or any of its subsidiaries. The Plan will continue in effect until all of the stock available for grant or issuance has been acquired through exercise of options or grants of shares, or until ten years after the adoption of the Plan by the Board of Directors, whichever is earlier. The Plan may also be terminated in the event of certain corporate transactions such as a merger or consolidation or the sale, transfer or other disposition of all or substantially all of the Company’s assets.

During the quarter ended September 30, 2010, no stock options were granted. Options for 50,000 shares exercisable at $0.50 per share were exercised.

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

Nine Months Ended September 30, 2010 and 2009

(Unaudited)

(US Funds)

3.	CAPITAL STOCK (continued)

(b)

Stock options (continued)

The following table represents service based stock option activity during the nine months of 2010.

	September 30, 2010					December 31, 2009
	Number of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price

Outstanding - beginning of period		2,790,000		$	0.53		3,140,000		$	0.57
Expired		-			-		(100,000	)	$	2.00
Exercised		(50,000	)	$	0.50		-			-
Forfeited		-			-		(250,000	)	$	0.50

Outstanding – end of period		2,740,000		$	0.53		2,790,000		$	0.53
Exercisable – end of period		2,740,000		$	0.53		2,790,000		$	0.53

As at September 30, 2010 and December 31, 2009, the following director and consultant stock options were outstanding:

	Exercise		September 30,		December 31,
Expiry Date	Price		2010		2009

January 31, 2011	$	0.50		400,000		400,000
May 31, 2011	$	0.50		600,000		600,000
August 1, 2011	$	0.50		200,000		200,000
August 31, 2011	$	0.50		300,000		350,000
August 31, 2012	$	0.50		1,075,000		1,075,000
June 23, 2013	$	1.00		165,000		165,000

				2,740,000		2,790,000

The shares under option at September 30, 2010 were in the following exercise price ranges:

Weighted Average Exercise Price		Number of Shares under Option		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life in Years

$	0.50		2,575,000	$	1,155,000		1.18
$	1.00		165,000		-		2.73

$	0.53		2,740,000	$	1,155,000		1.27

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

Nine Months Ended September 30, 2010 and 2009

(Unaudited)

(US Funds)

3.	CAPITAL STOCK (continued)

(c)

Stock-based compensation

During the nine months ended September 30, 2010, the total stock-based compensation for warrants recognized under the fair value method charged to management fees was $146,682. This is a result of the issuance of 2,000,000 warrants to certain directors and officers (Note 3(d)). The total stock-based compensation calculated was $1,301,800. The remaining balance of $1,155,118 will be amortized through December 31, 2015. These warrants were fair valued using the Black-Scholes option pricing model with the following weighted average assumptions: risk-free interest rate of 1.63%, expected life of 5.9 years, an expected volatility factor of 69.30% and a dividend yield of 0.00%.

In February 2010, the Company granted 720,000 shares of common stock at a fair value of $828,000 to management, employees and consultants. The shares were granted under the 2010 Management Compensation Plan. The shares were issued without registration under the Securities Act by reason of the exemptions from registration afforded by the provisions of Section 4(2) of the Securities Act and regulations promulgated by the SEC. Each person acknowledged appropriate investment representations with respect to the issuance and consented to the imposition of restrictive legends upon the certificates. The remaining 18,000 shares of common stock, at a fair value of $14,400, were issued to market advisors of the Company during the three months ended September 30, 2010.

The total stock-based compensation recognized for shares issued, warrants granted and options granted for services was as follows:

	September 30,				December 31
	2010		2009		2009		2008

Consulting fees	$	62,100	$	77,130	$	77,130	$	-
Consulting fees - directors and officers		434,700		252,118		252,117		45,339
Investor relations		-		694,874		694,875		-
Management fees		436,482		-		-		-
Advertising and promotion		14,400		-		-		-
Office		41,400		-		-		-

	$	989,082	$	1,024,122	$	1,024,122	$	45,339

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

Nine Months Ended September 30, 2010 and 2009

(Unaudited)

(US Funds)

3.	CAPITAL STOCK (continued)

(d)

Warrants

Details of stock purchase warrant activity is as follows:

	September 30, 2010					December 31, 2009
	Number of Warrants			Weighted Average Exercise Price		Number of Warrants			Weighted Average Exercise Price

Outstanding - beginning of period		10,587,385		$	0.56		13,022,600		$	0.54
Issued		2,000,000		$	1.50		589,785		$	0.63
Exercised		(2,193,040	)	$	0.60		(2,100,000	)	$	0.50
Expired		(3,654,560	)	$	0.60		(925,000	)	$	0.50

Outstanding - end of period		6,739,785		$	0.81		10,587,385		$	0.56

As at September 30, 2010, the following share purchase warrants were outstanding:

Expiry Date	Exercise Price		September 30, 2010		December 31, 2009

August 10, 2010	$	0.60		-		5,847,600
April 1, 2011	$	0.50		4,250,000		4,250,000
June 30, 2011	$	0.75		150,000		150,000
June 30, 2012	$	0.50		235,000		235,000
June 30, 2013	$	0.90		104,785		104,785
December 31, 2015	$	1.50		2,000,000		-

				6,739,785		10,587,385

During the nine months ended September 30, 2010, 2,000,000 warrants were issued to two officers and directors of the Company as compensation as approved by the Board in January 2010. These warrants are exercisable at $1.50 per share expiring December 31, 2015 (Note 3(c)). These warrants vest only upon occurrence of one of the following events and are exercisable in full upon the first of the following events:

(i)

If on or before June 30, 2011, the closing price of the common stock of the Company is at least $2.00 per share for five consecutive trading days;

(ii)

If on or before December 31, 2012, the closing price of the common stock of the Company is at least $2.50 per share for five consecutive trading days; and

(iii)

If on or before December 31, 2015, the closing price of the common stock of the Company is at least $3.00 per share for five consecutive trading days.

These prices shall be subject to reasonable adjustment upon occurrence of certain conditions.

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

Nine Months Ended September 30, 2010 and 2009

(Unaudited)

(US Funds)

3. CAPITAL STOCK (continued)

(d)

Warrants (continued)

Effective January 1, 2009, the Company adopted the provisions of Emerging Issues Task Force (“EITF”) 07-05, Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock, which was primarily codified into ASC Topic 815, Derivatives and Hedging. ASC 815 applies to any freestanding financial instrument or embedded feature that have the characteristics of a derivative and to any freestanding financial instruments that are potentially settled in an entity’s own common stock.

As a result of adopting ASC 815, warrants to purchase 6,875,000 shares of common stock previously treated as equity pursuant to the derivative treatment exemption were no longer afforded equity treatment. The warrants had an exercise price of $0.50 per warrant and expire in July and September 2009, of which 4,250,000 warrants were extended to April 2011. Effective January 1, 2009, the Company reclassified the fair value of these 4,250,000 warrants to purchase common stock, which had exercise price reset features, from equity to liability status as if these warrants were treated as a derivative liability since their date of issue. On January 1, 2009, the Company reclassified $1,084,375 to beginning deficit and $1,084,375 to other liabilities - warrants to recognize the fair value of such warrants on such date.

As of September 30, 2010, the 4,250,000 warrants were fair valued using the Black-Scholes option pricing model with the following weighted average assumptions: risk-free interest rate of 1.63%, expected life of 1 year, an expected volatility factor of 53.19% and a dividend yield of 0.00%. The fair value of these warrants to purchase common stock decreased to $923,100 as of September 30, 2010. Accordingly, the Company recognized a $2,033,625 non-cash income from the change in fair value of these warrants for the nine-month period ended September 30, 2010.

4.	LOSS PER SHARE

Basic and diluted loss per share is computed using the weighted average number of common shares outstanding as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2009		2010			2009

Net income (loss) for period	$	270,423	$	573,995	$	(210,130	)	$	(3,404,489	)

Net income (loss) available for distribution	$	270,423	$	573,995	$	(210,130	)	$	(3,404,489	)

Allocation of undistributed income (loss)
Preferred shares (0.00%, 2009 - 1.80%)	$	-	$	10,332	$	-		$	(61,281	)
Common shares (100%, 2009 - 98.20%)		270,423		563,663		(210,130	)		(3,343,208	)

	$	270,423	$	573,995	$	(210,130	)	$	(3,404,489	)
Basic income (loss) per share amounts
Undistributed amounts
Income (loss) per preferred share	$	0.00	$	0.02	$	(0.00	)	$	(0.10	)
Income (loss) per common share	$	0.01	$	0.02	$	(0.01	)	$	(0.10	)

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

Nine Months Ended September 30, 2010 and 2009

(Unaudited)

(US Funds)

4.	LOSS PER SHARE (continued)

Weighted average number of shares:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2009		2010		2009

Weighted average number of shares for undistributed amounts
Preferred stock (common stock equivalent)		-		625,000		625,000		625,000
Common stock		37,885,782		34,472,520		37,257,392		34,472,520

Potentially dilutive securities not included in diluted weighted average shares outstanding include shares underlying 2,740,000 in outstanding options and 6,739,785 warrants.

5.	FAIR VALUE MEASUREMENTS

The Company’s financial instruments consist of cash and cash equivalents, receivables, and accounts payable and accrued liabilities. The carrying amounts of these instruments approximate their respective fair values because of the short maturities of those instruments.

The Company follows the accounting guidance, which is now part of ASC 820-10 (formerly Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157), Fair Value Measurements (“SFAS 157”). ASC 820 does not require any new fair value measurements; instead it defines fair value, establishes a framework for measuring fair value in accordance with existing generally accepted accounting principles and expands disclosure about fair value measurements. The adoption of ASC 820 for the Company’s financial assets and liabilities did not have an impact on the Company’s financial position or operating results. Beginning January 1, 2008, assets and liabilities recorded at fair value in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure fair value. Level inputs, as defined by ASC 820, are as follows:

Level 1 - quoted prices in active markets for identical assets or liabilities

Level 2 - other significant observable inputs for the assets or liabilities through corroboration with market data at the measurement date

Level 3 - significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date.

The following table summarizes fair value measurement by level at September 30, 2010 for assets and liabilities measured at fair value on a recurring basis.

	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	1,275,603	$	-	$	-	$	1,275,603
Receivables	$	46,700	$	-	$	-	$	46,700
Accounts payable and accrued liabilities	$	12,890	$	-	$	-	$	12,890
Other liabilities - warrants	$	-	$	923,100	$	-	$	923,100

WHITE MOUNTAIN TITANIUM CORPORATION

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

Nine Months Ended September 30, 2010 and 2009

(Unaudited)

(US Funds)

6.	SUBSEQUENT EVENTS

The Company has evaluated its activities subsequent to September 30, 2010 and has concluded that no subsequent events have occurred that would require recognition or disclosure in the consolidated condensed financial statements, except as follows:

On October 1, 2010, the Company issued 4,000,000 shares of common stock pursuant to the terms of the non-exclusive, sublicensing agreement of the titanium metal technology developed by Chinuka Limited plc (“Chinuka” or the “Chinuka Process”). The Company now has access to the Chinuka Process for the Cerro Blanco project. La Serena Technologies Ltd. (“La Serena”) executed the sublicensing agreement as holder of the Chinuka Process master license. As consideration for the sublicense, the terms of the agreement between the Company and La Serena are:

4,000,000 restricted shares of common stock were issued to Chinuka and La Serena (800,000 to Chinuka and 3,200,000 to La Serena). These shares are to be released from escrow over 24 months with 500,000 shares released to each Chinuka and La Serena on closing and the balance released from escrow at the end of each subsequent fiscal quarter on the basis of 37,500 to Chinuka and 337,500 to La Serena. The Company may cancel the sublicense agreement (and related escrow share releases) at any time following the initial release of shares;

The expenditure of $5,000,000 by the Company within five years of closing to advance development of the Chinuka Process towards commercialization;

A 2% gross royalty payment to La Serena on any revenue generated by the Cerro Blanco project, which is attributable to the Chinuka Process, and to make advance minimum royalty payments to La Serena of $200,000 per year commencing five years after closing; and

Commercial production of titanium metal using the Chinuka Process and feed stock derived from the Cerro Blanco project within nine years after closing.

On October 13, 2010, the Company announced the signing of its first Letter of Intent off-take agreement with a major pigment producer for the supply of standard grade rutile concentrate. The Letter of Intent, which at this stage is non-binding on the parties and subject to the successful completion of a bankable feasibility study, is covered by a non-disclosure agreement.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our unaudited consolidated financial statements and related notes thereto as filed with this report.

Forward Looking Statements

The statements contained in this report that are not historical facts are forward-looking statements that represent management’s beliefs and assumptions based on currently available information. Forward-looking statements include the information concerning our possible or assumed future results of operations, business strategies, need for financing, competitive position, potential growth opportunities, potential operating performance improvements, ability to retain and recruit personnel, the effects of competition and the effects of future legislation or regulations. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believes,” “intends,” “may,” “will,” “should,” “anticipates,” “expects,” “could,” “plans,” or comparable terminology or by discussions of strategy or trends. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurances that these expectations will prove to be correct. Such statements by their nature involve risks and uncertainties that could significantly affect expected results, and actual future results could differ materially from those described in such forward-looking statements.

Among the factors that could cause actual future results to differ materially are the risks and uncertainties discussed in this report. While it is not possible to identify all factors, we continue to face many risks and uncertainties including, but not limited to, the cyclicality of the titanium dioxide industry, global economic and political conditions, global productive capacity, customer inventory levels, changes in product pricing, changes in product costing, changes in foreign currency exchange rates, competitive technology positions and operating interruptions (including, but not limited to, labor disputes, leaks, fires, explosions, unscheduled downtime, transportation interruptions, war and terrorist activities). Mining operations are subject to a variety of existing laws and regulations relating to exploration and development, permitting procedures, safety precautions, property reclamation, employee health and safety, air and water quality standards, pollution and other environmental protection controls, all of which are subject to change and are becoming more stringent and costly to comply with. Should one or more of these risks materialize (or the consequences of such a development worsen), or should the underlying assumptions prove incorrect, actual results could differ materially from those expected. We disclaim any intention or obligation to update publicly or revise such statements whether as a result of new information, future events or otherwise.

There may also be other risks and uncertainties that we are unable to predict at this time or that we do not now expect to have a material adverse impact on our business.

Background

We are a mineral exploration company. We hold mining concessions composed of 33 registered mining exploitation concessions, and 5 exploration concessions, over approximately 8,225 hectares located approximately 39 kilometers west of the City of Vallenar in the Atacama, or Region III, geographic region of northern Chile (hereinafter referred to as “Cerro Blanco”). We are in the exploration stage, which means we are engaged in the search for mineral deposits or reserves which could be economically and legally extracted or recovered. Our primary expenditures at this stage consist of acquisition and exploration costs and general and administration expenses. We have produced no revenues, have achieved losses since inception, have no operations, and currently rely upon the sale of our securities to fund our operations.

Plan of Operation and Financial Condition

We completed the acquisition of an undivided interest in Cerro Blanco in September 2005. Exploration drilling by us and the previous owner has defined rutile mineralization. Metallurgical test work performed by Lakefield Research has demonstrated that this mineralization can be concentrated to a level meeting buyer specifications and can be produced using a conventional milling and flotation process.

Over the next twelve to twenty-four months we have two principal objectives: to advance the project towards a final engineering feasibility level and to secure off-take contracts for the planned rutile concentrate output. We also continue to investigate the commercial viability of producing a feldspar co-product. The feldspar could find applications in the glass and ceramics industries.

We now have a considerable body of engineering design and process engineering work completed, both by us and previous owners, for the development of a large open pit mine and milling operation. The extent to which this engineering work could be incorporated into a feasibility study will depend on factors such as optimal plant sizing and configuration based on product volumes and specifications set out in off-take contracts and process design, the latter to be determined by refinements coming out of the metallurgical test work and pilot scale testing completed last year. With commencement of our marketing plan to seek suitable off-take contracts, we intend to undertake a program of drilling to provide data for mine planning and design, for an environmental impact assessment and permitting program, and to commission a feasibility study. As some of these activities would be undertaken in tandem, we believe a feasibility study could be completed by second quarter 2011, subject to the availability of funds, personnel and equipment. We estimate the cost to take the project to the point of completing a final engineering feasibility study at approximately $3,810,000, including general and administrative and marketing expenses. As of November 10, 2010, our cash position was approximately $1,003,000. We currently do not have sufficient capital to complete this plan and we will require additional financing to do so.

On October 1, 2010 the Company issued 4,000,000 shares of common stock pursuant to the terms of the non-exclusive, sublicensing agreement of the titanium metal technology developed by Chinuka Limited plc (“Chinuka” or the “Chinuka Process”). The Company now has access to the Chinuka Process for the Cerro Blanco project. La Serena Technologies Ltd. (“La Serena”) executed the sublicensing agreement as holder of the Chinuka Process master license. As consideration for the sublicense, the terms of the agreement between the Company and La Serena are:

The expenditure of $5,000,000 by the Company within five years of closing to advance development of the Chinuka Process towards commercialization;

Commercial production of titanium metal using the Chinuka Process and feed stock derived from the Cerro Blanco project within nine years after closing.

The Chinuka Process was developed under the direction of Dr. Derek Fray, Professor and Director of Research, Materials Science and Metallurgy, University of Cambridge, UK. Unlike the industry-standard, multi-step Kroll batch process which uses titanium pigment as a feed stock to produce titanium sponge metal, the Chinuka Process is essentially a one-step process and uses titanium ores and concentrates as a feed stock. By replacing a multi-step process with a process in which refining and electro-deposition take place simultaneously and substituting ores and concentrates as a feed stock, the Chinuka Process holds forth potentially significant cost and production time saving over the Kroll process.

We anticipate the sublicensing of the Chinuka Process will create an opportunity to add value to the Cerro Blanco project, particularly with respect to the planned minus 53 micron titanium concentrate product.

On October 13, 2010 the Company announced that it has signed its first Letter of Intent off-take agreement with a major pigment producer for the supply of standard grade rutile concentrate. The Letter of Intent, which at this stage is non-binding on the parties and subject to the successful completion of a bankable feasibility study, is covered by a non-disclosure agreement.

Results of Operations

We recorded an income for the three months ended September 30, 2010 of $270,423 or $0.01 per weighted average common share outstanding compared to an income of $573,995 ($0.02 per share) for the comparable interim period in 2009. On a year to date basis, for the nine months ended September 30, 2010 the loss was $210,130 ($0.01 per share) compared to $3,404,489 ($0.10 per share) for the comparable period in 2009.

The income in the third quarter of both 2010 and 2009 is a direct result of the adoption of Emerging Issues Task Force (“EITF”) 07-05, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock, which was primarily codified into ASC Topic 815, Derivatives and Hedging. ASC 815 applies to any freestanding financial instruments or embedded features that have the characteristics of a derivative and to any freestanding financial instruments that are potentially settled in an entity’s own common stock.

ASC Topic 815 was effective January 1, 2009 resulted in a cumulative adjustment of $1,084,375 to accumulated deficit as of January 1, 2009. For the three months ended September 30, 2010 we recorded a fair value change (gain) of $808,775 (gain of $2,033,625 year to date). The comparable effects in 2009 were a gain of $998,012 in the third quarter (loss of $903,450 year to date). See Note 3(d) for a more detailed discussion.

Excluding the above, and other items such as interest and foreign exchange, our loss from our operations was $544,493 for the third quarter of 2010 (Year to date: $2,229,203). The results for the same period of 2009 were losses of $433,433 (2009 Year to date: $2,522,125).

Generally most expenses continue to be comparable this quarter to the comparable quarter of 2009 and on a year to date basis, except for the following material items:

During the third quarter of 2010, stock-based compensation of $55,005 (YTD: $146,682) was recognized as management fees expense (note 3(c). This is a result of the issuance of 2,000,000 warrants to certain directors and officers (Note 3(d)). The total stock-based compensation calculated was $1,301,800, and will be amortized until December 31, 2015. During the same nine month period of 2009, $1,024,122 of stock based compensation was recognized, including $694,875 as investor relations expense, resulting from the extension of warrants held by the European institutional investor who exercised two million warrants during the quarter. There was no such charge in the second quarter of 2010. In 2009 the Board of Directors approved an employee benefit plan for officers, directors, and employees to increase stockholder value and the success of the company by motivating members of management to provide services to the company and perform to the best of their abilities, to achieve the company’s objectives, and to allow us to minimize the cash component of compensation. The pool consists of up to 1% of the outstanding shares at the end of each year. During the first quarter or 2010 we issued 720,000 shares at a fair value of $828,000. This expense was allocated to Consulting fees, Consulting fees – directors and officers, Management fees and office (see note 3(c) of the quarterly financial statements). There was no such expense in the current quarter.

During the first quarter of 2010 we commenced a brokered offering of shares to raise up to $6 million. After discussions with our advisors during the second quarter, we elected to withdraw this offering based on market conditions. As a result, during the second quarter we wrote off deferred offering costs of approximately $80,000 to Advertising ($3,000), Consulting ($30,000), Filing fees ($17,000) and Professional fees ($30,000).

Advertising and Promotion was $47,212 in the quarter (year to date $79,052), compared to $11,665 and $29,316 respectively for 2009. This was a result of fees paid to a market advisor of $32,400 in cash and stock, increased news releases and filings, and attendance at conferences

During the current quarter we incurred lower exploration expense of $110,007 (YTD: $246,091) (2009: $119,756 and $335,719), as our work was primarily restricted to planning for upcoming drilling and final feasibility activities. Similarly we incurred Engineering Consulting fees of $nil (YTD: $nil) (2009: $128,319 and $200,674). We anticipate that both of these expenses will increase significantly in the fourth quarter and subsequent quarters of the new year as we commence infill drilling and final feasibility.

Recent Accounting Pronouncements

Codification

In June 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of SFAS No. 162 (the “Codification”). The Codification will be the single source of authoritative non-governmental US accounting and reporting standards, superseding existing FASB, AICPA, EITF and related literature. The Codification eliminates the hierarchy of GAAP contained in SFAS No. 162 and establishes one level of authoritative GAAP. All other literature is considered non-authoritative. This Statement was effective for the Company’s September 30, 2009 financial statements for interim and annual periods. All accounting references have been updated with Accounting Standard Codification (“ASC”) references.

Fair value measurements

In August 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-05, which amends ASC Topic 820, Measuring Liabilities at Fair Value, which provides additional guidance on the measurement of liabilities at fair value. These amended standards clarify that in circumstances in which a quoted price in an active market for the identical liability is not available, the Company is required to use the quoted price of the identical liability when traded as an asset, quoted prices for similar liabilities, or quoted prices for similar liabilities when traded as assets. If these quoted prices are not available, the Company is required to use another valuation technique, such as an income approach or a market approach. These amended standards were effective on October 1, 2009 and did not have a material impact on the consolidated financial statements.

In January 2010, the FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures, which amends ASC Topic 820, adding new requirements for disclosures for Levels 1 and 2, separate disclosures of purchases, sales, issuances and settlements relating to Level 3 measurements and clarification of existing fair value disclosures.

ASU 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for the requirement to provide Level 3 activity of purchases, sales, issuances and settlements on a gross basis, which will be effective for fiscal years beginning after December 15, 2010 (the Company’s fiscal year 2011); early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2009-14 on its consolidated financial statements.

In June 2008, the FASB ratified the consensus reached on ASC 815-40 Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock. ASC 815-40 clarifies the determination of whether an instrument (or an embedded feature) is indexed to an entity’s own stock, which would qualify as a scope exception under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. The Company adopted ASC 815-40 as of January 1, 2009 (Note 11).

In May 2009, the FASB issued ASC 855. ASC 855 is intended to establish 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. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date—that is, whether that date represents the date the financial statements were issued or were available to be issued. In February 2010, the FASB amended ASC 855 to remove the requirement for an SEC registrant to disclose the date through which subsequent events were evaluated as this requirement would have potentially conflicted with SEC requirements. Removal of this disclosure requirement is not expected to affect the nature or timing of subsequent events evaluations performed by the Company.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, we have elected not to provide the disclosure required by this item.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Our President and our CFO, after evaluating the effectiveness of our “disclosure controls and procedures” (as defined in the Rule 15d-15 (e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”), have concluded that as of the Evaluation Date, our disclosure controls and procedures were effective to provide assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 15d-15(f) under the Exchange Act) that occurred during our most recent quarter ended September 30, 2010, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable and not absolute assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there is only reasonable assurance that our controls will succeed in achieving their stated goals under all potential future conditions.

PART II. OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On July 1, 2010, we signed a consulting agreement with DRC Partners, LLC, a New Jersey limited liability company. We engaged the service provider on a non-exclusive basis to provide certain investor relations services for us. Pursuant to the consulting agreement, we issued 18,000 shares as compensation for the services. These shares were issued without registration under the Securities Act by reason of the exemption from registration afforded by the provisions of Sections 4(2) and 4(5) thereof, and Rule 506 promulgated thereunder, as a transaction by an issuer not involving any public offering. DRC Partners was an accredited investor at the time of the issuance. It delivered appropriate investment representations with respect to the issuance and consented to the imposition of restrictive legends upon the stock certificates. DRC Partners did not enter into the consulting agreement with us as a result of or subsequent to any advertisement, article, notice, or other communication published in any newspaper, magazine, or similar media or broadcast on television or radio, or presented at any seminar or meeting and had a preexisting relationship with persons representing our company at the time of the transaction. Representatives of DRC Partners were afforded the opportunity to ask questions of our management and to receive answers concerning the terms and conditions of the warrant issuance. No underwriting discounts or commissions were paid in connection with the transaction.

In September 2006 we issued 350,000 options to purchase shares of our common stock on or before August 31, 2011. As of September 22, 2010, one of these option holders, Charles E. Jenkins, our CFO and a director, exercised his options and purchased an aggregate of 50,000 shares of our common stock at $0.50 per share for total gross proceeds of $25,000. The remaining 300,000 outstanding options are still outstanding and will expire August 31, 2011. The shares were issued without registration under the Securities Act by reason of the exemption from registration afforded by the provisions of Regulation S. Mr. Jenkins was a non-U.S. person at the time of the exercise. The issuance of the shares was made in an offshore transaction and no directed selling efforts were made in the U.S. by us or anyone acting on our behalf. No underwriting discounts or commissions were paid in connection with the issuance of the shares.

Item 6. Exhibits

The following exhibits are furnished with this report:

10.1

Sublicense Agreement dated September 15, 2010, between Sociedad Contractual Minera White Mountain Titanium and La Serena Technologies Limited (confidential information has been redacted)

31.1

Rule 15d-14(a) Certification by Principal Executive Officer

31.2

Rule 15d-14(a) Certification by Chief Financial Officer

32.1

Section 1350 Certification of Principal Executive Officer

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	White Mountain Titanium Corporation

Date: November 12, 2010	By	/s/ M. P. Kurtanjek
		Michael P. Kurtanjek, President
		(Principal Executive Officer)

Date: November 12, 2010	By	/s/ C.E. Jenkins
		Charles E. Jenkins, Chief Financial Officer
		(Principal Financial Officer)

Attached files

Stock widget

Investing forum

WHITE MOUNTAIN TITANIUM CORP Reports