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EX-10 - STOCK PURCHASE AGREEMENT - Bullion Monarch Mining, Inc. (NEW)bullionstockpurchaseagreemen.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

____________________


FORM 8-K/A

AMENDMENT NO. 1


CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


Date of Report (Date of earliest event reported): April 1, 2011


BULLION MONARCH MINING, INC.


(Exact Name of Registrant as Specified in Charter)


   Utah   

        000-54045        

         20-1885668         

(State or Other Jurisdiction of Incorporation)

(Commission
File Number)

(I.R.S. Employer
Identification No.)


20 N. Main St., Suite 202

St. George, Utah 84770

(Address of Principal Executive Offices)

____________________


(801) 426-8111

(Registrant’s telephone number, including area code)

____________________


Not applicable

(Former name or former address, if changed since last report)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:


[ ]

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)


[ ]

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14.a-12)


[ ]

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))


[ ]

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))



STG_334917.1

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Item 1.01.

Entry Into a Material Definitive Agreement

On March 8, 2011, Bullion Monarch Mining, Inc., a Utah corporation (the “Company”), filed a Current Report on Form 8-K (“Original Form 8-K”) regarding the Company’s proposed acquisition of Dourave Mining and Exploration Inc., a corporation organized under the laws of Canada (“Dourave”).  On April 1, 2011, the Company entered into a revised Stock Purchase Agreement with the shareholders of Dourave listed on the signature page thereto (the “Principal Purchase Agreement”), which shareholders held approximately 81.37% of the outstanding capital shares of Dourave, that removed Dourave as a party to the Stock Purchase Agreement but was otherwise unchanged from the agreement filed with the Original Form 8-K.  On April 1, 2011, the Company also entered into Stock Purchase Agreements (the “Minority Purchase Agreements”, and collectively with the Principal Purchase Agreement, the “Purchase Agreements”) with the holders of all remaining outstanding capital shares of Dourave in the form attached as Exhibit 10.2 to the Original Form 8-K.  

On April 1, 2011, pursuant to the terms of the Purchase Agreements, the Company acquired the outstanding capital shares of Dourave and completed the issuance of 5,000,000 shares of the Company’s common stock and warrants to purchase up to 2,500,000 shares of its common stock at an exercise price equal to $1.20 per share as total consideration for all of the capital shares of Dourave acquired pursuant to the Purchase Agreements.

A complete copy of the revised Principal Purchase Agreement is filed as Exhibit 10.1 and is incorporated herein by reference.

Item 2.01:

Completion of Acquisition or Disposition of Assets.

As described in Item 1.01 above, on April 1, 2011, the Company completed the acquisition of the issued and outstanding capital shares of Dourave.  The information provided under Item 1.01 is incorporated herein by reference.

Item 3.02:

Unregistered Sales of Equity Securities.

As described in Item 1.01 above, on April 1, 2011, the Company issued an aggregate of 5,000,000 shares of its common stock and warrants to purchase 2,500,000 shares of its common stock to the holders of capital shares of Dourave.  The Company also assumed the obligation to issue up to 281,410 shares of the Company’s common stock under outstanding warrants to purchase capital shares of Dourave at an exercise price equal to $4.78 per share.  The Company believes that the issuance of the common stock and warrants to purchasers who are not U.S. persons is exempt from registration under Regulation S promulgated under the Act of 1933, as amended (the “Securities Act”), because the transaction was negotiated and consummated outside of the United States in an offshore transaction.  With respect to the shares and warrants issued to U.S. persons, the Company believes that the recipients of such shares and warrants are accredited investors under Rule 506 of Regulation D promulgated under the Securities Act and that the issuance of such common stock and warrants is exempt from registration pursuant to Regulation D promulgated under the Securities Act.  The information provided under Item 1.01 is incorporated herein by reference.



STG_334917.1

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Item 9.01.

Financial Statements and Exhibits

In the Original Form 8-K, the Company indicated that the financial statements and pro forma financial information required under Item 9.01 of Form 8-K would be filed by amendment to the Original Form 8-K no later than 71 calendar days after the date the Original Form 8-K was required to be filed.  This Amendment No. 1 to the Original Form 8-K contains the required financial statements and pro forma financial information.

(a)

Financial statements of business acquired.

Financial statements of Dourave Mining and Exploration Inc. for the years ended December 31, 2010 and 2009, and notes thereto.



STG_334917.1

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DOURAVE MINING AND EXPLORATION, INC.

AND SUBSIDIARIES


CONSOLIDATED FINANCIAL STATEMENTS


Years Ended December 31, 2010 and 2009

























STG_334917.1

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TABLE OF CONTENTS

           Page


INDEPENDENT AUDITOR’S REPORT

6


FINANCIAL STATEMENTS:


Consolidated Balance Sheets

7


Consolidated Statements of Operations

            8


Consolidated Statements of Stockholders’ Deficit

            9


Consolidated Statements of Cash Flows

          10


Notes to Consolidated Financial Statements

11


Pro Forma Financial Information

          21

























STG_334917.1

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


The Board of Directors and Shareholders

Dourave Mining and Exploration, Inc. and Subsidiaries


We have audited the accompanying consolidated balance sheets of Dourave Mining and Exploration, Inc. and Subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of operations, cash flows, and stockholders’ deficit, for the years ended December 31, 2010 and 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 audit.


We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit 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, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.


In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Dourave Mining and Exploration, Inc. and Subsidiaries as of December 31, 2010 and 2009, and the results of operations and cash flows for the years ended December 31, 2010 and 2009, in conformity with accounting principles generally accepted in the United States of America.


The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has working capital deficits and has incurred losses from operations and negative operating cash flows during the years ended December 31, 2010 and 2009. These issues raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustment that might result from the outcome of this uncertainty.


/s/Mantyla McReynolds, LLC


Mantyla McReynolds, LLC

Salt Lake City, Utah

April 1, 2011




STG_334917.1

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DOURAVE MINING AND EXPLORATION, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2010 and 2009

 

 

 

 

 

 

 

 

(Amounts reported in US Dollars)

 

2010

 

2009

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and cash equivalents

 

 $  124,728

 

 $     38,118

 

Employee Advance

 

        9,820

 

         37,890

 

Prepaid expenses

 

       12,421

 

           3,008

 

Total current assets

 

    146,969

 

         79,016

 

 

 

 

 

 

 

Property and Equipment, net

 

       73,119

 

         62,629

 

 

 

 

 

 

 

Interest in Mineral Rights

 

       55,489

 

         52,912

Total Assets

 

 $  275,577

 

 $   194,557

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Accounts payable

 

 $  149,372

 

 $   128,433

 

Leases payable

 

       89,536

 

      194,234

 

Payroll liabilities

 

       38,615

 

         10,895

 

Due to Bullion Monarch Mining Inc.

 

    473,694

 

      155,398

 

Due to Brazilian Gold Corp

 

    119,277

 

                 -   

 

Due to Shareholders

 

     235,383

 

      244,627

 

Total current liabilities

 

   105,877

 

      733,587

 

 

 

 

 

 

 

Stockholders' Deficit:

 

 

 

 

 

Common stock - no par value, unlimited shares authorized; 47,800,757 issued and outstanding as of December 31, 2010 and 47,467,425 issued and outstanding as of December 31, 2009

 

                 -   

 

                 -   

 

Additional paid-in capital

 

   2,332,326

 

   2,235,296

 

Cumulative Translation Adjustment

 

     (244,483)

 

     (219,562)

 

Accumulated Deficit

 

  (2,918,143)

 

  (2,554,764)

 

Total stockholders' deficit

 

     (830,300)

 

     (539,030)

Total Liabilities and Stockholders' Deficit

 

 $   275,577

 

 $   194,557



The accompanying notes are an integral part of these consolidated financial statements



STG_334917.1

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DOURAVE MINING AND EXPLORATION, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

Years Ended December 31, 2010 and 2009

 

 

 

 

 

 

 

 

 

(Amounts reported in US Dollars) 

2010

 

2009

 

 

 

 

 

Revenue

 $                   -   

 

 $                   -   

 

 

 

 

 

Operating Expenses:

 

 

 

 

General and administrative

          230,976

 

          152,836

 

Exploration costs

          172,398

 

          383,041

 

Total operating expenses

          403,374

 

          535,877

Operating Loss

        (403,374)

 

        (535,877)

Other Income (Expense)

 

 

 

 

Interest expense

        (112,144)

 

          (48,100)

 

Gain from sale of mineral right option

          151,904

 

                       -

 

Gain on foreign exchange

                 235

 

                       -

 

Total other expense

            39,995

 

          (48,100)

Net Loss Before Income Taxes

        (363,379)

 

        (583,977)

Provision For Income Taxes

                     -   

 

                     -   

Net Loss

 $     (363,379)

 

 $     (583,977)

 

 

 

 

 

Other Comprehensive Income

 

 

 

 

Foreign currency translation adjustment

          (24,921)

 

          (38,106)

Total Comprehensive Income (Loss)

 

        (388,300)

 

        (622,083)

 

 

 

 

 

 

Net Loss Per Share - Basic and Diluted

 $            (0.01)

 

 $            (0.01)

Weighted Average Shares Outstanding

    47,653,726

 

    47,084,091



The accompanying notes are an integral part of these consolidated financial statements



STG_334917.1

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DOURAVE MINING AND EXPLORATION, INC. AND SUBSIDIARIES

 

 

 

 

 

 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

For the Years Ended December 31, 2010 and 2009

 

 

 

 

 

 

 

(Amounts reported in US Dollars)

Common Shares Issued

 

Additional

 Paid-in Capital

 

Cumulative Translation Adjustment

 

Accumulated Deficit

 

Stockholders' Deficit

Balance, December 31, 2008

       46,658,570

 

 $      2,145,577

 

 $       (181,456)

 

 $(1,970,787)

 

 $       (6,666)

Shares issued upon maturity of liquidity entitlements

            458,855

 

                       -   

 

                       -   

 

                   -   

 

                    -   

Shares issued for cash

            200,000

 

               43,980

 

                       -   

 

                   -   

 

           43,980

Shares issued for acquisition of mineral rights

            150,000

 

               45,739

 

                       -   

 

                   -   

 

          45,739

Translation Adjustment

                       -   

 

                       -   

 

             (38,106)

 

                   -   

 

        (38,106)

Net income for the year ended December 31, 2009

                       -   

 

                       -   

 

                       -   

 

      (583,977)

 

      (583,977)

Balance, December 31, 2009

       47,467,425

 

 $      2,235,296

 

 $        (219,562)

 

 $(2,554,764)

 

 $   (539,030)

Shares issued for cash

            333,332

 

               97,030

 

                       -   

 

                   -   

 

           97,030

Translation Adjustment

                       -   

 

                       -   

 

             (24,921)

 

                   -   

 

        (24,921)

Net income for the year ended December 31, 2010

                       -   

 

                       -   

 

                       -   

 

      (363,379)

 

     (363,379)

Balance, December 31, 2010

       47,800,757

 

 $      2,332,326

 

 $        (244,483)

 

 $(2,918,143)

 

 $   (830,300)




DOURAVE MINING AND EXPLORATION, INC. AND SUBSIDIARIES

 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

For the Years Ended December 31, 2010 and 2009

 

 

 

 

 

 

 

 

 

 

(Amounts reported in US Dollars)

2010

 

2009

 

 

 

 

 

 

Cash Flows from Operating Activities:

 

 

 

 

Net loss

 $  (363,379)

 

 $     (583,977)

 

Adjustments to reconcile net loss to net cash

 

 

 

 

used in operating activities:

 

 

 

 

Depreciation

         16,746

 

            22,869

 

Changes in operating assets and liabilities:

 

 

 

 

Decrease in employee advance

           4,180

 

              4,286

 

(Increase) decrease in prepaid expenses

         (9,413)

 

                 862

 

Increase in accounts payable

         20,939

 

            23,606

 

Increase (decrease) in lease payable

     (104,698)

 

          204,091

 

Increase in accrued interest

         14,646

 

            13,676

 

Increase (decrease) in payroll liabilities

         27,720

 

                (654)

 

Net cash used in operating activities

     (393,259)

 

        (315,241)

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

Purchase of property, plant, and equipment

       (27,236)

 

          (12,946)

 

Net cash used in investing activities

       (27,236)

 

          (12,946)

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

Net receipts from Bullion Monarch Mining Inc.

      318,296

 

          155,398

 

Net receipts from Brazilian Gold Corp

      119,277

 

                     -   

 

Issuance of common stock

         97,030

 

            43,980

 

Net cash provided by financing activities

      534,603

 

          199,378

 

 

 

 

 

 

Effect of Rate Changes on Cash and Cash Equivalents

       (27,498)

 

             (6,397)

Net Increase (Decrease) in Cash

         86,610

 

        (135,206)

Cash at Beginning of Year

         38,118

 

          173,324

Cash at End of Year

 $   124,728

 

 $         38,118

 

 

 

 

 

 

Supplemental Disclosures of Cash Flow Information:

 

 

 

Cash paid during the period for interest

 $                    -   

 

 $                     -   

Cash paid during the period for taxes

 $                    -   

 

 $                     -   

Non-Cash Investing and Financing Activity:

 

 

 

 

Shares issued for mineral rights

 $                    -   

 

 $               45,739

 

Shareholder loan relieved by prior employee advances

$              23,890

 

 $                     -   



The accompanying notes are an integral part of these consolidated financial statements



STG_334917.1

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DOURAVE MINING AND EXPLORATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars unless otherwise noted


NOTE 1

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


(a)

Organization


Dourave Mining and Exploration Inc. and subsidiaries (the “Company”) is engaged in the acquisition and exploration of resource properties.  The Company currently holds interests in resource properties in South America.


The Company is in the process of exploring its Brazilian mineral property interests and has not yet determined whether they contain mineral reserves that are economically recoverable. As a result, the Company expenses these costs as they are incurred.


(b)

Going Concern


Management plans to seek a merger or other agreement for financing with a larger natural resources company with greater capital resources. The Company’s ability to continue operations is dependent on its ability to obtain additional financing. Although there are no assurances that management’s plan will be realized, management believes the Company will be able to secure the necessary financing to continue operations into the future. The financial statements do not include any adjustments to the recoverability and classification of recorded assets, or the amounts of, and classification of liabilities that would be necessary if the going concern assumption were not appropriate. Such adjustments could be material.


(c)

Consolidation


The consolidated financial statements include the accounts of Dourave Mining and Exploration, Inc. (Dourave), Dourave Mineracao E Exploracao Mineral LTDA (Dourave-Brazil) and Dourave-Bullion Mineracao e Exploracao Mineral LTDA (Dourave-Bullion). Dourave owns 100% of Dourave Mineracao E Exploracao Mineral LTDA common stock. Dourave Mineracao E Exploracao Mineral LTDA owns 66% of Dourave-Bullion.  There is no reportable activity allocable to the non-controlling interest (Bullion Monarch Mining, Inc.) in Dourave-Bullion.


All intercompany transactions and balances have been eliminated.


(d)

Use of Estimates in Preparation of Financial Statements


The preparation of financial statements in conformity with United States generally accepted accounting principles (GAAP) 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 reporting period.  Actual results could differ from those estimates.


(e)

Cash and Cash Equivalents


The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.


(f)

Revenue Recognition


The Company recognizes revenues in accordance ASC 605, which clarifies application of U. S. generally accepted accounting principles to revenue transactions.  Revenue is recognized when; [1] persuasive evidence of an agreement exists, [2] as precious metals are mined and the risks and rewards have been transferred (and sold on the market), [3] prices are fixed or determinable, [4] and cash collections are reasonably assured.  



STG_334917.1

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DOURAVE MINING AND EXPLORATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars unless otherwise noted


NOTE 1

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


(g)

Impairment of Long-Lived Assets


The Company reviews long-lived assets, at least annually, to determine if impairment has occurred and whether the economic benefit of the asset (fair value for assets to be used and fair value less disposal costs for assets to be disposed) is expected to be less than the carrying value.  Triggering events, which signal further analysis, consist of a significant decrease in the asset’s market value, a substantial change in the use of an asset, a significant physical change in the asset, a significant change in the legal or business climate that could affect the asset, an accumulation of costs significantly in excess of the amount originally expected to acquire or construct the asset, or a history of losses that imply continued losses associated with assets used to generate revenue.  No such adjustments were required for the fiscal years ended December 31, 2010 and 2009.


(h)

Property and Equipment and Mining Properties


Property and Equipment

Property and equipment are recorded at cost less accumulated depreciation and amortization. Property and equipment are depreciated and amortized over their estimated useful lives at the following rates and methods:


Computer equipment

30%

declining balance method

Computer software

20%

declining balance method

Other equipment

20%

declining balance method

Furniture and fixtures

20%

declining balance method


Exploration and Development Costs

Exploration expenditures are expensed as incurred except for certain expenditures, determined by the Company on specified properties identified through pre-feasibility or other assessments as having mineral reserves and/or resources with the potential of being developed into a mine, which are capitalized. To date, the Company's mineral properties have not advanced past the exploration stage and, accordingly, no amounts have been capitalized in respect of exploration costs.


(i)

Fair Values of Financial Instruments


The fair value of the Company’s cash and cash equivalents, accounts receivable, and accounts payable approximates the carrying amount due to the short duration of these accounts.


(j)

Income Taxes


The Company applies the guidance in ASC 740 which requires an asset and liability approach for financial accounting and reporting for income taxes, and the recognition of deferred tax assets and liabilities for the temporary differences between the financial reporting basis and tax basis of the Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. 




STG_334917.1

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DOURAVE MINING AND EXPLORATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars unless otherwise noted


NOTE 1

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


(j)

Income Taxes (Continued)


ASC 740 clarifies the accounting and disclosure for uncertainty in tax positions, as defined. ASC 740 seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes. The Company is subject to the provisions of ASC 740 and has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on the Company’s financial condition, results of operations, or cash flow. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740.


(k)

Net Income (Loss) Per Common Share


The Company computes basic earnings per share (“EPS”) by dividing net loss (the numerator) by the weighted average number of common shares outstanding during the period (the denominator). Diluted EPS is computed by dividing net loss by the weighted average number of common shares and potential common shares outstanding (if dilutive) during each period.  Potential common shares include warrants. The number of potential common shares outstanding relating to warrants is computed using the treasury stock method.  For the years ended December 31, 2010 and 2009, potentially dilutive common shares (relating to warrants outstanding at year end) totaling 1,118,949 and 2,523,711, respectively, were not included in the computation of loss per share because their effect was anti-dilutive. Therefore, diluted loss per share is the same as basic loss per share.


(l)

Impact of New Accounting Standards


Accounting Standards Update No. 2010-06: Editorial and maintenance update 2010-06

In January 2010, the FASB issued authoritative guidance requiring new disclosures and clarifying some existing disclosure requirements about fair value measurement.  Under the new guidance, a reporting entity should (a) disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers, and (b) present separately information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements using significant unobservable inputs.  This guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements.  Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.  The new guidance requires only enhanced disclosures and the Company does not expect this guidance to have a material impact on its consolidated financial statements.




STG_334917.1

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DOURAVE MINING AND EXPLORATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars unless otherwise noted


NOTE 2

INCOME TAXES


Below is a summary of deferred tax asset and liability calculations.  A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized.  

 

2010

 

2009

Deferred Tax Assets

 

 

 

 

 

 

Exploration Costs

$

1,227,954

 

$

1,024,041

 

Net Operating Losses

 

22,965

 

 

47,604

 

Stock Issuance Costs

 

4,954

 

 

6,830

 

Organizational Costs

 

2,990

 

 

3,166

 

Valuation Allowance

 

(1,258,863)

 

 

(1,081,641)

 

Net Deferred Taxes

 $

-

 

 $

-

 


The Company has the following operating loss carryforwards subject to expiration available at December 31, 2010:

Date of Operating Loss

 

Year of Expiration

 

Balance of Loss

12/31/2008

 

12/31/2028

 

$

32,811

12/31/2009

 

12/31/2029

 

 

43,738

Total NOL Carryforward subject to expiration

$

76,549


Reconciliation between federal income taxes at the statutory rate (34%) and the actual income tax provision for continuing operations follows:

 

2010

 

2009

Expected Provision (based on statutory rates)

34.00%

 

34.00% 

 

Effects of:

 

 

 

 

Change in Valuation Allowance

34.28%

 

34.32%

 

Other

(0.28%)

 

(0.32%)

 

Actual Provision

0.00%

 

0.00%

 


As mentioned in Note 1(j), the Company has adopted the provisions of ASC 740.  This adoption did not result in any adjustments to deferred tax assets or liabilities. We did not identify any material uncertain tax positions of the Company on returns that have been filed or that will be filed.


The Company has filed income tax returns in Canada (2007 through 2010) and Brazil (2008 through 2010). All years are open for examination.




STG_334917.1

-14-



DOURAVE MINING AND EXPLORATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars unless otherwise noted


NOTE 3

RESOURCE PROPERTIES


Tapajos Region, Para State

In 2007 the Company began acquiring claims in the Tapajos Gold Region. These claims comprise five main projects in Para state (Bom Jesus, Ouro Mil, Bom Jardim, Castelo dos Sonhos Sul and Serra do Bau) and one project in Mato Grosso state (Pontal do Paranaita). The significant terms of the property agreements are set out below.


Bom Jesus

In 2007 the Company acquired an option to acquire the Bom Jesus property, comprised of 183 prospector leases and two overlying exploration leases covering 9,150 hectares. In exchange for monthly payments of $10,000 to the vendor, the Company received the right to explore the property. Dourave made payments through February 28, 2010, and, in an amendment to the option agreement dated February 11, 2010, the parties agreed to defer subsequent payments, with no deadline set for payment. The other terms of the option were unchanged. In an agreement dated September 20, 2010, which superseded and replaced this Bom Jesus option agreement, the parties to the Bom Jesus option agreement agreed to increase the property subject to the option to 12,003 ha.      


See Bom Jesus and Bom Jardim – 2010 Agreement.


Ouro Mil

In 2007 the Company acquired an option, amended on December 8, 2010, to purchase the Ouro Mil property, comprised of 231 prospector leases and two overlying exploration leases covering 3,425 hectares. The Company paid R$5,000 (approx. $3,001) for the initial option, which has been capitalized.  In exchange for monthly payments of R$10,000 (approx. $6,003) to the vendor, the Company has the right to explore the property. If the Company decides to develop the project, upon commissioning a processing plant on the property, the Company must pay R$1 million (approx. $600,262) to the vendor to earn the mineral rights to a depth of 30 meters. If the Company mines below a depth of 30 meters, it must pay an additional R$2 million (approx.$1,200,524) to the vendor. Within ten days of the publication of a mining concession on the Ouro Mil property by the regulatory authorities in the Brazilian Government Official Daily Gazette, the Company must pay R$500,000(approx. $300,131) to the vendor. Dourave has made payments through August 31, 2009. In March 2009, the parties agreed to defer payments and add any amounts so deferred to the purchase price payment in item 3 above.


See Note 7 regarding an external option agreement entered into with respect to this property.


Bom Jardim

In 2008 the Company acquired an option, amended April 2, 2009, to purchase the Bom Jardim property from Joaquim Carlos Lima, comprised of one exploration lease covering 900 hectares, for $2 million On June 20, 2010 this Bom Jardim optioned expired. With the expiry of the original Bom Jardim option agreement, Dourave entered into an agreement with the parties to the Bom Jesus agreement, dated September 20, 2010, which superseded and replaced the existing Bom Jesus option agreement. In addition to the Bom Jesus option agreement, they also agreed to option to Dourave a 30,000 hectare property which they designated as the Bom Jardim property. This property is known by the same name as the original Bom Jardim property because it surrounds the original property. The property now under lease is comprised of three exploration tenements surrounding, but not including, the original 900Ha Bom Jardim option property owned by Joaquim Carlos Lima.


See Bom Jesus and Bom Jardim – 2010 Agreement.




STG_334917.1

-15-



DOURAVE MINING AND EXPLORATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars unless otherwise noted


NOTE 3

RESOURCE PROPERTIES (CONTINUED)


Pontal do Paranaita

In 2008 the Company acquired an option to purchase the Pontal do Paranaita property, comprised of one exploration lease covering 10,000hectares.   The Company issued 150,000 shares for the option valued at C$0.35 (approx. $0.35) per share or C$52,500 (approx. $52,488).Upon completion of a positive feasibility study, the Company may purchase 100% of the mineral rights to the property by issuing to the vendor 450,000 common shares of the Company, and by paying $200,000 to the vendor. The property is subject to a 1% net smelter royalty in favor of the vendor. The Company may purchase one half of the net smelter royalty at any time, by paying the vendor $1 million.


In February 2011, the Company amended this option agreement to reduce the property tenement from the original 10,000Ha to 873.45Ha directly overlying the area of interest. See Note 10 for subsequent events.


Bom Jesus and Bom Jardim – 2010 Agreement

On June 20, 2010 the original lease with Joaquim Carlos Lima on the Bom Jardim property expired. With the expiry of the original Bom Jardim option agreement, Dourave entered into an agreement with the parties to the Bom Jesus agreement, dated September 20, 2010, which superseded and replaced the existing Bom Jesus option agreement. In addition to increasing the property under the Bom Jesus option agreement to 12,003 hectares, the deal included an option on a 30,000 hectare property which the vendors designated  the Bom Jardim property. The property is known by the same name as the original Bom Jardim property, because it surrounds the original property. The property now under lease is comprised of three exploration tenements surrounding, but not including, the original 900Ha Bom Jardim option property owned by Joaquim Carlos Lima. The parties agreed to the following additional terms. In exchange for monthly lease payments of $10,000 to the vendors commencing September 30, 2010 the Company has the right to explore the properties. If the Company discovers an “exploitable resource” on either of the properties and commences to “exploit its resources”, the vendors shall transfer the relevant property to the Company upon receipt from the Company of $7 million, to be paid as follows:

a.

$1 million upon the submission of an “Economic Benefitting Plan” to the Departamento Nacional de Prodacao Mineral (“DNPM”);

b.

$1 million upon the approval of the Economic Benefitting Plan by the DNPM;

c.

$1 million within ten days following publication of a mining concession on the Bom Jesus or Bom Jardim property by the regulatory authorities in the Brazilian Government Official Daily Gazette;

d.

$1 million within ten days following issuance of an operating license by the appropriate licensing authority;

e.

$1 million within 180 days following the payment described in item (c) above;

f.

$1 million within 60 days following the payment described in item (d) above; and

g.

$1 million within 60 days following the payment described in item (e) above.


NOTE 4

ENVIRONMENTAL REMEDIATION OBLIGATIONS AND CONTINGENCIES


Because of the nature of the Company’s operations, there is the potential that the Company may be held liable for environmental remediation particularly in regards to the mineral leases acquired.  In those lease arrangements, the Company is required to remove all improvements, equipment, etc. within six (6) months following the termination of the lease.  The property must also be restored and reclaimed according to applicable laws.  Because operations have not commenced on these and other properties where such an obligation exists, no accrual has been made for these contingencies; such an estimate for accrual cannot be made.  The Company will continue to evaluate the status of their operations and appropriately accrue liabilities.




STG_334917.1

-16-



DOURAVE MINING AND EXPLORATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars unless otherwise noted


NOTE 5

PROPERTY AND EQUIPMENT


Property and equipment is stated at cost less accumulated depreciation and is summarized as follows at December 31, 2010:

 


Cost

 

Accumulated Depreciation

 


Net

Computer equipment

$

17,867

 

$

8,005

 

$

9,862

Computer software

 

14,638

 

 

362

 

 

14,276

Furniture and fixtures

 

41,381

 

 

20,077

 

 

21,304

Other equipment

 

45,877

 

 

18,200

 

 

27,677

   Total Property and Equipment

$

119,763

 

$

46,644

 

$

73,119


Property and equipment is stated at cost less accumulated depreciation and is summarized as follows at December 31, 2009:

 


Cost

 

Accumulated Depreciation

 


Net

Computer equipment

$

7,778

 

$

3,352

 

$

4,426

Computer software

 

13,959

 

 

182

 

 

13,777

Furniture and fixtures

 

35,351

 

 

11,575

 

 

23,776

Other equipment

 

30,317

 

 

9,667

 

 

20,650

   Total Property and Equipment

$

87,405

 

$

24,776

 

$

62,629


Depreciation expense was $16,746 and $22,869 for the years ended December 31, 2010 and 2009, respectively. The cost of repairs and maintenance is charged to operations as incurred.


NOTE 6

AGREEMENT WITH BULLION MONARCH MINING, INC.


During the year ended December 31, 2009, the Company entered into an agreement with Bullion Monarch Mining Inc. of St. George, Utah, U.S.A., (“BMM”), pursuant to which BMM received the right to receive a one-third interest in the Company’s interest in the Bom Jesus and Bom Jardim projects.


Under the terms of the agreement, BMM paid $250,000 to the Company, and was required to contribute a further $1.75 million in monthly installments during the period from July 2009 through April 2012 to be used by the Company in the exploration of the Bom Jesus and Bom Jardim properties.


The Company records BMM’s payments pursuant to the agreement as liabilities until the related exploration expenditures are made. During the year, BMM paid the entire remaining portion of its $2 million to the Company. The Company in turn incurred costs equal to $2 million on the related properties.


Pursuant to the agreement, BMM is entitled to receive the first $2 million of net cash flow from the properties, and any net cash flow in excess of $2 million will be distributed in proportion to each party’s respective interest.


During the year ended December 31, 2010, the Company received additional funds from BMM through promissory notes.  The funds from the promissory notes are to be spent on continued exploration of the Bom Jesus and Bom Jardim properties and continued operations of Dourave-Brazil.  The promissory notes bear interest at 5%, compounded monthly and are repayable within 180 days from the execution of the notes. See also Note 10.



STG_334917.1

-17-



DOURAVE MINING AND EXPLORATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars unless otherwise noted


NOTE 7

FUNDS RECEIVED UNDER OPTION AGREEMENT


On September 30, 2010, the Company entered into an option agreement with Brazilian Gold Corporation ("BGC") whereby BGC could earn up to a 70% interest in the property known as Ouro Mil. The agreement required an initial payment of $150,000 for the option.  Under the terms of this agreement, BGC will earn the first 55% of the interest in the property by paying $200,000 and incurring an additional $1,500,000 in exploration related expenses over the two years subsequent to the signing of the agreement. An additional 15% interest can be earned through payment of $350,000and incurring exploration expenditures on the property totaling $3,500,000through the third and fourth years after the signing of the agreement.


The balance in funds received under option agreement relates to funds received under the option agreement in excess of exploration expenses incurred by BGC.


NOTE 8

DUE TO SHAREHOLDERS


 

 

December 31, 2010

 

December 31, 2009

Sergio Aquino

$

201,819

$

212,385

Helio Tavares

 

33,564

 

32,242

 

$

235,383

$

244,627


Amounts due to Sergio Aquino and Helio Tavares in excess of $163,756 and $143,996as of December 31, 2010 and 2009, respectively, are non-interest bearing. The interest bearing portion is at the Bank of Brazil's Selic rate, which rate is 10.750% as of December 31, 2010. The entire balance owing is unsecured and has no set repayment terms. During the years ended December 31, 2010 and 2009, the Company has recorded $13,925 and $11,905, respectively, in interest expenses related to this loan.


All other amounts due to shareholders bear no interest, are unsecured and have no set repayment terms.


NOTE 9

EQUITY TRANSACTIONS


The Company’s Articles of Incorporation authorize the issuance of an unlimited number of shares.  The shares are classified in two classes, consisting of common stock with no par value per share, and preferred stock with no par value per share.  The Board of Directors is authorized to establish one or more series of preferred stock, setting forth the designation of each such series, and fixing the relative rights and preferences of each such series.  The Company has neither designated nor issued any shares of preferred stock.


Private Placements

During the year ended December 31, 2009, the Company issued 458,855 shares upon the maturity of liquidity entitlements. See Warrants below. The Company also issued 200,000 shares previously held for issuance at a price of C$0.25 (approx. $0.22) per share.


During the year ended December 31, 2010, the Company issued 333,332 shares for cash at a price of C$0.30 (approx. $0.29) per share.






STG_334917.1

-18-



DOURAVE MINING AND EXPLORATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars unless otherwise noted


NOTE 9

EQUITY TRANSACTIONS (CONTINUED)


Warrants

During the year ended December 31, 2008, shares were issued with Units. Included in each of the Units were one half of one warrant and one liquidity entitlement.


Each full warrant is exercisable to purchase one common share of the Company at a price of C$0.50 (approx. $0.50) per share during the period ending, subject to applicable regulatory approval, on the date which is the earlier of:

a)

The 30 month anniversary of the issue date of the respective warrant; and

b)

The 18 month anniversary of the date when the Company's shares become publicly listed for trading.


Each liquidity entitlement provided the subscriber with the right to receive 0.10 shares (under this entitlement, the total number of shares to be issued is 458,855 shares) in the Company and an additional 0.05 full warrants (under this entitlement, the total number of warrants to be issued is 229,427 warrants), as described above, if:

a)

The Company has not been listed on a public stock exchange within 12 months of the issue date of these shares;

b)

All of the outstanding common shares having been sold, transferred or exchanged pursuant to a take­over bid, amalgamation, plan of arrangement or other business combination, for cash or securities that are not subject to any restriction period or hold period, and are listed on a public stock exchange within 12 months of the issue date of these shares;

c)

Any combination of events or circumstances described in (a) and (b).


Upon the maturity of the liquidity entitlements, 12 months following the issue date of the Units, 455,855 shares of the Company, and 229,427 full warrants were issued on June 30, 2009.


In the issue of Units, 1,428,571 warrants were issued on June 30, 2008 and 865,713 warrants were issued on September 10, 2008. Included with each share sold during the year ended December 31, 2010, was one half of one warrant exercisable up to December 15, 2011 at a price of C$0.50 (approx. $0.50) per share, which resulted in 166,666 full warrants being issued on June 10, 2010.


On December 30, 2010, the 1,428,571 warrants issued on June 30, 2008 and 142,857 of the warrants issued on June 30, 2009 expired without being exercised. Below is a schedule of warrant activity for 2009 and 2010:

 


Warrants

 

Weighted Average Exercise Price

(Canadian Dollars)

Outstanding, January 1, 2009

2,294,284

 

$

0.50

Granted

229,427

 

 

0.50

Expired/Cancelled

-

 

 

-

Exercised

-

 

 

-

Outstanding, December 31, 2009

2,523,711

 

 

0.50

Granted

166,666

 

 

0.50

Expired/Cancelled

(1,571,428)

 

 

0.50

Exercised

-

 

 

-

Outstanding, December 31, 2010

1,118,949

 

$

0.50

Exercisable

1,118,949

 

$

0.50


All outstanding and exercisable warrants have an exercise price of C$0.50 (approx. $0.50). The weighted average remaining contractual life is 0.30 Years.





STG_334917.1

-19-



DOURAVE MINING AND EXPLORATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars unless otherwise noted


NOTE 10

SUBSEQUENT EVENTS


Property Acquisition of Niquelandia Property

On February 16, 2011, the Company acquired an option to acquire the "Niquelandia" property, which is comprised of ten exploration permits covering approximately 17,783 ha. in the state of Goias, Brazil. The property is subject to an effective royalty of $0.50 per tonne of proven reserves of aluminum ore or bauxite, if any, as at the fourth anniversary date of the agreement, payable to the optionor. To keep the option in good standing, the Company must make payments to the owner of $10.25 million and carry out exploration work in the amount of $10 million over four years on or before the anniversary dates as follows:

 

 

Payment

 

Work

On Signing

$

250,000

$

-

First Anniversary

 

1,000,000

 

1,500,000

Second Anniversary

 

2,000,000

 

2,000,000

Third Anniversary

 

3,000,000

 

3,000,000

Fourth Anniversary

 

4,000,000

 

3,500,000

 

$

10,250,000

$

10,000,000


To fund the initial payment, the Company borrowed $250,000 from Bullion Monarch Mining Inc., secured by a promissory note dated February 21, 2011, with the following key terms:

·

Interest accrues at an annual rate of 5%, compounded monthly;

·

Repayable 180 days after the date of the promissory note;

·

Secured by the Company's interest in the Niquelandia property; and

·

Repayable if, on or before March 15, 2011, holders of less than 63% of the shares of the Company have agreed to sell their shares of the Company to Bullion Monarch Mining Inc. under specified terms proposed by Bullion Monarch Mining Inc..


Option Agreement Amendment of Pontal do Paranaita

On February 7, 2011, the Company amended the existing option agreement to reduce the property tenement from the original 10,000Ha to 873.45Ha directly overlying the area of interest. There was no change in the option price.


Company Acquisition by Bullion Monarch Mining, Inc.

On March 8, 2011, the Company entered into an agreement with Bullion Monarch Mining, Inc., a Utah corporation whereby Bullion would purchase the outstanding capital shares of the Company.  On April 1, 2011, shareholders of Dourave entered into a revised Stock Purchase Agreement with Bullion, which shareholders held approximately 81.37% of the outstanding capital shares of Dourave. The revised agreement removed Dourave as a party to the Stock Purchase Agreement but was otherwise unchanged from the agreement filed with Bullion’s original Form 8-K and is referred to as the Principal Purchase Agreement. On April 1, 2011, shareholders of the Company also entered into Stock Purchase Agreements referred to as the Minority Purchase Agreements, whereby Bullion purchased all remaining outstanding capital shares of Dourave. Collectively the two agreements are referred to as the Purchase Agreements.  

On April 1, 2011, pursuant to the terms of the Purchase Agreements, Bullion acquired the outstanding capital shares of Dourave and completed the issuance of 5,000,000 shares of Bullion’s common stock and warrants to purchase up to 2,500,000 shares of its common stock at an exercise price equal to $1.20 per share as total consideration for all of the capital shares of Dourave acquired pursuant to the Purchase Agreements. Bullion also assumed the obligation to issue up to 281,410 shares of its common stock under outstanding warrants to purchase capital shares of Dourave at an exercise price equal to $4.78 per share.  



STG_334917.1

-20-




Item 9.01.

Financial Statements and Exhibits

(b)

Pro forma financial information.

Unaudited pro forma consolidated income statement and balance sheet of Bullion Monarch Mining, Inc. and its subsidiaries as of and for the nine months ended January 31, 2011 and as of and for the year ended April 30, 2010; and notes thereto.




STG_334917.1

-21-




BULLION MONARCH MINING, INC. AND SUBSIDIARIES

 

 

 

 

 

 

PRO FORMA CONSOLIDATED BALANCE SHEET

 

 

 

 

 

 

 

 

JANUARY 31, 2011

 

 

 Pro Forma Adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Historical Bullion January 31, 2011

 

Dourave Canada Acquisition at Fair Value

 (a)

 

Estimated Transaction Costs Associates with Acquisition (b)

 

Elimination of Related Party Receivables/ Payables

(c)

 

Pro forma Bullion January 31, 2011

 ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Current Assets:

 

 

 

 

 

 

 

 

 

 Cash and cash equivalents

 $    693,188

 

 $           124,728

 

 

 

 

 

 $      817,916

 Royalties receivable

       711,201

 

                         -   

 

 

 

 

 

         711,201

 Prepaid Expenses

         30,276

 

               12,421

 

 

 

 

 

           42,697

 Inventores

         72,990

 

                         -   

 

 

 

 

 

           72,990

 Deposits

         13,080

 

                         -   

 

 

 

 

 

           13,080

 Employee advances

           2,000

 

                 9,820

 

 

 

 

 

           11,820

 Payroll tax receivable

              476

 

                         -   

 

 

 

 

 

                476

 Total current assets

    1,523,211

 

             146,969

 

 

 

 

 

      1,670,180

 

 

 

 

 

 

 

 

 

 

 Property and Equipment net

    2,603,208

 

               73,119

 

 

 

 

 

      2,676,327

 

 

 

 

 

 

 

 

 

 

 Other Assets:

 

 

 

 

 

 

 

 

 

 Mining properties

       273,071

 

          4,105,789

 

 

 

 

 

      4,378,860

 Notes receivable

       719,656

 

                         -   

 

 

 

 $  (473,694)

 

         245,962

 Oil shale leases

           9,669

 

                         -   

 

 

 

 

 

             9,669

 Interest in mineral rights

       208,000

 

                         -   

 

 

 

 

 

         208,000

 Other investments

       132,455

 

                         -   

 

 

 

 

 

         132,455

 Deferred tax asset

       503,040

 

                         -   

 

 

 

 

 

         503,040

 Patent, net

       343,750

 

                         -   

 

 

 

 

 

         343,750

 Other

         10,000

 

                         -   

 

 

 

 

 

           10,000

 Total other assets

   2,199,641

 

         4,105,789

 

 

 

 

 

      5,831,736

 Total assets

 $ 6,326,060

 

 $        4,325,877

 

 

 

 

 

 $ 10,178,243

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Current Liabilities:

 

 

 

 

 

 

 

 

 

 Accounts payable

 $    333,306

 

 $          149,372

 

 $       95,000

 

 

 

 $      577,678

 Notes Payable to Shareholders

 

 

             235,383

 

 

 

 

 

         235,383

 Notes Payable to Bullion

 

 

             473,694

 

 

 

 $  (473,694)

 

                   -   

 Other

 

 

             247,428

 

 

 

 

 

         247,428

 Income taxes payable

       135,257

 

                         -   

 

 

 

 

 

         135,257

 Total current liabilities

       468,563

 

          1,105,877

 

 

 

 

 

      1,195,746

 

 

 

 

 

 

 

 

 

 

 Stockholders' Equity:

 

 

 

 

 

 

 

 

 

 Common stock

         38,638

 

 

 

 

 

 

 

           38,638

 Additional paid in capital

    1,435,263

 

 

 

 

 

 

 

      1,435,263

 Less treasury stock

     (104,309)

 

 

 

 

 

 

 

       (104,309)

 Accumulated other comprehensive income

       (62,841)

 

 

 

 

 

 

 

         (62,841)

 Retained Earnings

    5,115,853

 

 

 

 

 

 

 

      5,115,853

 Total Bullion Stockholders' Equity

    6,422,604

 

 

 

 

 

 

 

      6,422,604

 Non-controlling interests

     (565,107)

 

 

 

 

 

 

 

       (565,107)

 Total stockholders' equity

    5,857,497

 

          3,220,000

 

 $     (95,000)

 

 

 

      8,982,497

 Total liabilities and stockholders' equity

 $ 6,326,060

 

 $        4,325,877

 

 

 

 

 

 $ 10,178,243

 

 

 

 

 

 

 

 

 

 

 Common Shares Authorized

100,000,000

 

 

 

 

 

 

 

  100,000,000

 Common Shares Issued

  38,637,548

 

          5,000,000

 

 

 

 

 

    43,637,548

 Common Shares Outstanding

  38,504,093

 

          5,000,000

 

 

 

 

 

    43,504,093

 Warrants for Common Shares

 

 

          2,500,000

 

 

 

 

 

      2,500,000

 

 

 

 

 

 

 

 

 

 

 (a)  To record the acquisition of Dourave Canada, Inc and Subsidiaries in exchange for 5 million Common shares and 2.5 million  

     Common stock warrants ($1.20 exercise price) of Bullion Monarch Mining, Inc. for a total fair value of $3,220,000

 (b)  To record unpaid portion of estimated transaction costs associated with the acquisition of Dourave Canada, Inc. and Subsidiaries.  

 Total transaction fees estimated to be $135,000

 (c)  To record the elimination of the intercompany notes payable and notes receivable  




STG_334917.1

                                                     -23-




BULLION MONARCH MINING, INC. AND SUBSIDIARIES

PRO FORMA CONSOLIDATED INCOME STATEMENTS

FOR THE NINE MONTHS ENDED JANUARY 31, 2011

 

Pro Forma Adjustments

 

 

 

Historical Bullion Nine months Ended Jan 31, 2011

 

Dourave Canada Statement of Operations at Historical Cost (a)

 

Estimated Transaction Costs Associated with Acquisition (b)

 

Pro forma Bullion Nine months Ended Jan 31 2011

Revenue

 $        4,551,187

 

 $                       -   

 

 $                       -   

 

 $        4,551,187

Operating Expense

 

 

 

 

 

 

 

General and administrative

           1,656,642

 

              173,232

 

                95,000

 

           1,924,874

Exploration Costs

                          -   

 

              129,299

 

                          -   

 

              129,299

Gold Tax

              228,107

 

                          -   

 

                          -   

 

              228,107

Research and development

              362,923

 

                          -   

 

                          -   

 

              362,923

Total Operating Expenses

           2,247,672

 

              302,531

 

                95,000

 

           2,645,202

Operating Income

           2,303,516

 

            (302,531)

 

              (95,000)

 

           1,905,985

Other Income (Expense)

 

 

 

 

 

 

 

Interest income

                  7,719

 

                          -   

 

                          -   

 

                  7,719

Lease income

                    400

 

                          -   

 

                          -   

 

                     400

Loss from joint venture

            (406,765)

 

                          -   

 

                          -   

 

            (406,765)

Other

                          -   

 

              (83,932)

 

                          -   

 

              (83,932)

Loss from investment

                (1,500)

 

                          -   

 

                          -   

 

                (1,500)

Total Other (Expense) Income

            (400,146)

 

              (83,932)

 

                          -   

 

            (484,078)

Net Income Before Income Taxes

          1,903,370

 

            (386,462)

 

              (95,000)

 

          1,421,907

Provision (Benefit) For Income Taxes

             383,750

 

                          -   

 

                          -   

 

              383,750

Net Income

           1,519,620

 

           (386,462)

 

              (95,000)

 

          1,038,157

Plus:  Net Loss Attributable to Noncontrolling Interests

             111,165

 

                          -   

 

                          -   

 

             111,165

Net Income Attributable to Bullion Stockholders

          1,630,784

 

            (386,462)

 

              (95,000)

 

          1,149,322

Other Comprehensive Income (Loss)

 

 

 

 

 

 

 

Foreign currency translation adjustment

                          -   

 

              (18,691)

 

                          -   

 

              (18,691)

Change in unrealized loss on marketable securities

            (137,696)

 

                          -   

 

                          -   

 

            (137,696)

Net Comprehensive Income

 $       1,493,088

 

 $         (405,153)

 

 $           (95,000)

 

 $          992,935

Net Income Per Share - Basic and Diluted

 $                0.04

 

 

 

 

 

 $                0.02

Weighted Average Shares Outstanding

        38,571,498

 

 

 

 

 

        43,571,498



 (a)  To record the nine month financial activity of Dourave Canada, Inc and Subsidiaries  

 (b)  To record estimated transaction costs associated with the acquisition of Dourave Canada, Inc. and Subsidiaries.  Mining, Inc and Subsidiaries



STG_334917.1

                                                -24-




BULLION MONARCH MINING, INC. AND SUBSIDIARIES

 

 

 

 

 

 

PRO FORMA CONSOLIDATED INCOME STATEMENTS

 

 

 

 

 

 

FOR THE YEAR ENDED APRIL 30, 2010

 

 

 Pro Forma Adjustments

 

 

 

 Historical

 

 

 

 Estimated

 

 Pro forma

 

 Bullion

 

 Dourave Canada

 

 Transaction

 

 Bullion

 

Year Ended

 

 Statement of

 

 Costs

 

Year Ended

 

April 30,

 

 Operations at  

 

 Associated with

 

April 30,

 

2010

 

 Historical Cost (a)

 

 Acquisition (b)

 

2010

Revenue

$ 5,214,603

 

 $                       -   

 

 $                       -   

 

 $          5,214,603

Operating Expense

 

 

 

 

 

 

 

General and administrative

   2,113,996

 

                152,836

 

                135,000

 

             2,401,832

Exploration Costs

                 -   

 

                383,041

 

                          -   

 

                383,041

Gold Tax

     259,730

 

                          -   

 

                          -   

 

                259,730

Research and development

    451,733

 

                          -   

 

                          -   

 

                451,733

Total Operating Expenses

  2,825,459

 

                535,877

 

                135,000

 

             3,496,336

Operating Income

  2,389,144

 

               (535,877)

 

               (135,000)

 

             1,718,267

Other Income (Expense)

 

 

 

 

 

 

 

Interest income

      4,725

 

                          -   

 

                          -   

 

                    4,725

Lease income

             -   

 

                          -   

 

                          -   

 

                          -   

Loss from joint venture

 (1,593,235)

 

                          -   

 

                          -   

 

            (1,593,235)

Other

             -   

 

                 (48,100)

 

                          -   

 

                 (48,100)

Loss from investment

    (57,255)

 

                          -   

 

                          -   

 

                 (57,255)

Total Other (Expense) Income

(1,645,765)

 

                 (48,100)

 

                          -   

 

            (1,693,865)

Net Income Before Income Taxes

     743,379

 

               (583,977)

 

               (135,000)

 

                  24,402

Provision (Benefit) For Income Taxes

  (68,014)

 

                          -   

 

                          -   

 

                 (68,014)

Net Income

  811,393

 

               (583,977)

 

               (135,000)

 

                  92,416

Plus: Net Loss Attributable to Noncontrolling Interests

      125,652

 

                          -   

 

                          -   

 

                125,652

Net Income Attributable to Bullion Stockholders

   937,045

 

               (583,977)

 

               (135,000)

 

                218,068

Other Comprehensive Income (Loss)

 

 

 

 

 

 

 

Foreign currency translation adjustment

            -   

 

                 (38,106)

 

 

 

                 (38,106)

Change in unrealized loss on marketable securities

    82,861

 

                          -   

 

                          -   

 

                  82,861

Net Comprehensive Income

 $1,019,906

 

 $            (622,083)

 

 $            (135,000)

 

 $             262,823

Net Income Per Share - Basic and Diluted

 $         0.03

 

 

 

 

 

 $                   0.01

Weighted Average Shares Outstanding

 38,690,534

 

 

 

 

 

           43,690,534

 


 (a)  To record the 12 month financial activity of Dourave Canada, Inc and Subsidiaries  

 (b)  To record unpaid portion of estimated transaction costs associated with the acquisition of Dourave Canada, Inc. and Subsidiaries.   Total transaction fees estimated to be $135,000



STG_334917.1

                                       -25-






(d)

Exhibits.

10.1

Stock Purchase Agreement dated as of February 7, 2011 by and between the Company and the shareholders of Dourave identified on the signature page thereto.

10.2

Form of Stock Purchase Agreement dated as of February 7, 2011 by and between the Company and the shareholders of Dourave identified on the signature page thereto.*

99.1

Press Release, dated March 2, 2011, issued by Bullion Monarch Mining, Inc.*

__________
* Previously filed with the Securities and Exchange Commission on Form 8-K on March 8, 2011



STG_334917.1

-26-



SIGNATURES


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




Date:  April 6, 2011

BULLION MONARCH MINING, INC.




By:  

/s/ James A. Morris

Name:  James A. Morris

Its:  President




STG_334917.1

-27-