Attached files
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| 8-K/A - MAINBODY.HTM - SOUTH AMERICAN GOLD CORP. | mainbody.htm |
| EX-23.1 - EXHIBIT231 - SOUTH AMERICAN GOLD CORP. | exhibit231.htm |
| EX-99.2 - EXHIBIT992 - SOUTH AMERICAN GOLD CORP. | exhibit992.htm |
Exhibit 99.1
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MADSEN & ASSOCIATES CPA’s INC.
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684 East Vine Street, #3
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Certified Public Accountants
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Murray, Utah, 84107
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Telephone 801-268-2632
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Fax 801-262-3978
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To the Board of Directors and
Stockholders of Kata Enterprises, Inc.
(A Pre-Exploration Stage Company)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have audited the accompanying consolidated balance sheet of Kata Enterprises, Inc. (A Pre-Exploration Stage Company) (The Company) as of December 31, 2010, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the period August 20, 2010 (date of inception) to December 31, 2010. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our 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 purposes 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Kata Enterprises, Inc. (a Pre-Exploration Stage Company) as of December 31, 2010, and the consolidated results of its operations and its cash flows for the period August 20, 2010 (date of inception) to December 31, 2010, 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. The Company will need additional working capital for its planned activity, which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are described in the notes to the consolidated financial statements. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Madsen & Associates, CPA's Inc.
“Madsen & Associates, CPA’s Inc.”
Salt Lake City, Utah
July 11, 2011
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KATA ENTERPRISES INC. AND SUBSIDIARIES
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(A Pre-Exploration Stage Company)
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Consolidated Balance Sheet
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December 31,
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2010
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Assets
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Current Assets
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Cash and cash equivalents
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$ | 7,842 | ||
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Total current assets
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7,842 | |||
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Deposit
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489,556 | |||
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Total Assets
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497,398 | |||
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Liabilities and Stockholders' Equity
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Current Liabilities
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Accounts payable
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157 | |||
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Total Liabilities
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157 | |||
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Stockholders' Equity
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Common stock, $100 par value, 100 shares
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authorized, 100 issued & outstanding
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as of December 31, 2010
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10,000 | |||
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Additional paid-in capital
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489,347 | |||
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Deficit accumulated during the pre-exploration stage
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(2,106 | ) | ||
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Total stockholders' equity
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497,241 | |||
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Total liabilities and stockholders' equity
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$ | 497,398 | ||
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The accompanying notes are an integral part of these financial statements
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KATA ENTERPRISES INC. AND SUBSIDIARIES
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(A Pre-Exploration Stage Company)
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Consolidated Statement of Operations
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For the Period
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August 20, 2010
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(Date of Inception)
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to December 31, 2010
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Revenues
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$ | - | ||
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Operating Expenses
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General & Administrative Expense
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2,106 | |||
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Total Operating Expense
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2,106 | |||
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Net (Loss)
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$ | (2,106 | ) | |
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Net loss per common share outstanding,
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basic and diluted
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** | |||
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Weighted average shares outstanding of common
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stock, basic and diluted
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100 | |||
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** Less than $0.01
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The accompanying notes are an integral part of these financial statements
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KATA ENTERPRISES INC. AND SUBSIDIARIES
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(A Pre-Exploration Stage Company)
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Consolidated Statement of Cash Flows
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For the Period
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August 20, 2010
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(Date of Inception)
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to December 31, 2010
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Cash Flows Used in Operating Activities:
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Net Loss
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$ | (2,106 | ) | |
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Adjustments to reconcile net loss to net cash used in operations
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Changes in operating assets and liabilities
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Accounts Payable
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157 | |||
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Net Cash Used In Operating Activities
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(1,949 | ) | ||
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Cash Flows From Investing Activities
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Deposit for mining claims
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(489,556 | ) | ||
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Net Cash Used In Investing Activities
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(489,556 | ) | ||
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Cash Flows From Financing Activities:
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Capital contributed by Minera Kata, S.A.
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499,347 | |||
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Net Cash Provided by Financing Activities
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499,347 | |||
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Net Increase (Decrease) in Cash
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7,842 | |||
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Cash at Beginning of Period
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- | |||
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Cash at End of Period
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$ | 7,842 | ||
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The accompanying notes are an integral part of these financial statements
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KATA ENTERPRISES INC. AND SUBSIDIARIES
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(A Pre-Exploration Stage Company)
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Statement of Stockholders' Equity
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For the Period August 20, 2010 (date of inception) to December 31, 2010
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Additional
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Total
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Common Stock
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Paid-in
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Retained
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Stockholders'
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Shares
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Amount
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Capital
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Deficit
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Equity
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Balance August 20, 2010 (inception)
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- | $ | - | $ | - | $ | - | $ | - | |||||||
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Issuance of common stock
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100 | 10,000 | (10,000 | ) | - | - | ||||||||||
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Capital contributed by Minera Kata S. A.
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- | - | 499,347 | - | 499,347 | |||||||||||
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Net loss
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- | - | - | (2,106 | ) | (2,106 | ) | |||||||||
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Balance, December 31, 2010
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100 | $ | 10,000 | $ | 489,347 | $ | (2,106 | ) | $ | 497,241 | ||||||
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The accompanying notes are an integral part of these financial statements
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Kata Enterprises, Inc. and Subsidiaries
(A Pre-Exploration Stage Company)
Notes To The Consolidated Financial Statements
December 31, 2010
1. ORGANIZATION AND GOING CONCERN
Organization
The Company, Kata Enterprises, Inc., was incorporated under the laws of the Panama on August 20. 2010.
The Company was organized for the purpose of acquiring and developing mineral properties. The Company has not begun exploration activities as of the balance sheet date, and is therefore considered to be in the pre-exploration stage.
The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), and are expressed in U.S. dollars. The Company’s fiscal year end is December 31.
The accompanying consolidated financial statements include the accounts of the Company, its wholly-owned subsidiary, Kata Enterprises SAS, a company incorporated under the laws of Colombia, and an 85% owned entity, Minera Nariño SAS (formed by the Company in November 2010).
Going Concern
The Company’s consolidated financial statements as of December 31, 2010 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company had a net loss of $2,106 for the period ended December 31, 2010, and has working capital of $7,685 at December 31, 2010.
Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive, or raise additional debt and/or equity capital. The company needs to raise additional capital adequate to fund its future operations and maintaining its business strategy during the fiscal year ending December 31, 2011. If the Company is unable to raise additional capital in the near future, management expects that the Company will need to curtail operations, liquidate assets, seek additional capital on less favorable terms and/or pursue other remedial measures. These consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies used in the preparation of these consolidated financial statements.
Principles of consolidation
All inter-company balances and transactions have been eliminated in these consolidated financial statements.
Cash and cash equivalents
Cash and cash equivalents include highly liquid investments with original maturities of three months or less.
Accounting Method
The Company recognizes income and expenses based on the accrual method of accounting.
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Kata Enterprises, Inc. and Subsidiaries
(A Pre-Exploration Stage Company)
Notes To The Consolidated Financial Statements
December 31, 2010
Dividend Policy
The Company has not yet adopted a policy regarding payment of dividends.
Basic and Diluted Net Income (loss) Per Share
Basic net income (loss) per share amounts are computed based on the weighted average number of shares actually outstanding. Diluted net income (loss) per share amounts are computed using the weighted average number of common and common equivalent shares outstanding as if shares had been issued on the exercise of the common share rights unless the exercise becomes antidilutive and then the basic and diluted per share amounts are the same.
Evaluation of Long-Lived Assets
The Company reviews and evaluates long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The assets are subject to impairment consideration under ASC 360-10-35-17 if events or circumstances indicate that their carrying amounts might not be recoverable. When the Company determines that an impairment analysis should be done, the analysis will be performed using rules of ASC 930-360-35, Asset Impairment, and 360-10-15-3 through 15-5, Impairment or Disposal of Long-Lived Assets.
Income Taxes
The Company utilizes the liability method of accounting for income taxes. Under the liability method deferred tax assets and liabilities are determined based on differences between financial reporting and the tax bases of the assets and liabilities and are measured using the enacted tax rates and laws that will be in effect, when the differences are expected to be reversed. An allowance against deferred tax assets is recorded, when it is more likely than not, that such tax benefits will not be realized.
Revenue Recognition
Revenue is recognized on the sale and delivery of a product or the completion of a service provided.
Advertising and Market Development
The company expenses advertising and market development costs as incurred.
Financial Instruments
The carrying amounts of financial instruments are considered by management to be their fair value due to their short term maturities.
Foreign currency translation
The Company’s functional currency is the Colombian Peso and its reporting currency is the U.S. dollar. The consolidated financial statements of the Company are translated to U.S. dollars in accordance with ASC 830, “Foreign Currency Matters”. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. The Company has not, to the date of these consolidated financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
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Kata Enterprises, Inc. and Subsidiaries
(A Pre-Exploration Stage Company)
Notes To The Consolidated Financial Statements
December 31, 2010
Estimates and Assumptions
Management uses estimates and assumptions in preparing financial statements in accordance with general accepted accounting principles. Those estimates and assumptions affect the reported amounts of the assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were assumed in preparing these consolidated financial statements.
Statement of Cash Flows
For the purposes of the statement of cash flows, the Company considers all highly liquid investments with a maturity of three months or less to be cash equivalents.
Mineral Property Acquisition Costs
Cost of acquisition and option costs of mineral rights are capitalized upon acquisition. Mine development costs incurred to develop new ore deposits, to expand the capacity of mines, or to develop mine areas substantially in advance of current production are also capitalized once proven and probable reserves exist and the property is a commercially mineable property. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. If the Company does not continue with exploration after completion of the feasibility study, the mineral rights will be expensed at that time. Costs of abandoned projects are charged to exploration costs, including related property and equipment costs. To determine if these costs are in excess of their recoverable amount periodic evaluation of carrying value of the capitalized costs and related property and equipment costs are based upon expected future cash flows and/or estimated salvage value in accordance with Accounting Standard Codification (ASC) 360-10-35-15, Impairment or Disposal of Long-Lived Assets.
Various factors could impact our ability to achieve forecasted production schedules. Additionally, commodity prices, capital expenditure requirements and reclamation costs could differ from the assumptions the Company may use in cash flow models used to assess impairment. The ability to achieve the estimated quantities of recoverable mineral from exploration stage mineral interests involve further risks in addition to those factors applicable to mineral interests when proven and probable reserves have been identified, due to low level of confidence that the identified mineralization material can ultimately be mined.
Equipment
Equipment is recorded at cost and amortization is provided over its estimated economic life at 30% or on a straight line basis over its economic life.
Environmental Requirements
At the report date environmental requirements related to the mineral claim acquired are unknown and therefore any estimate of any future cost cannot be made.
Recent Accounting Pronouncements
The Company does not expect that the adoption of other recent accounting pronouncements will have a material impact on its consolidated financial statements.
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Kata Enterprises, Inc. and Subsidiaries
(A Pre-Exploration Stage Company)
Notes To The Consolidated Financial Statements
December 31, 2010
3. STOCKHOLDERS’ EQUITY
The Company has 100 common shares authorized, and 100 shares issued and outstanding, at a par value of $100. These shares were issued to Minera Kata SAS (the Company’s parent company) for zero fair value.
In December 2010, Minera Kata SAS paid $499,347 to Kata SAS, as contributed capital.
4. DEPOSIT
In December 2010, the wholly owned subsidiary of the Company deposited $489,556 into a trust account under the terms of an agreement to acquire rights and concessions for the purpose of mineral exploration of gold and silver in Colombia.
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