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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

  

  

FORM 10-Q

 

    

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

  

For the quarterly period ended October 31, 2011

  

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT

  

For the transition period from ____________ to____________

  

Commission File No. 000-54045

BULLION MONARCH MINING, INC.

(Exact name of Registrant as specified in its charter)


Utah

20-1885668

(State or Other Jurisdiction of

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

incorporation or organization)

  


20 N. Main St.

 Suite 202

 St. George, UT 84770

 (Address of Principal Executive Offices)


(801) 426-8111

(Registrant’s telephone number, including area code)



Indicate by check mark whether the Registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [  ]


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

Yes [X]   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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):


Large accelerated filer [  ]      Accelerated filer [  ]       Non-accelerated filer [  ]      Smaller reporting company [X]


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

Yes [  ] No [X]


Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date: 39,260,518 shares of common stock as of December 14, 2011.



1




PART I

Item 1.  Financial Statements

BULLION MONARCH MINING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

October 31, 2011 and April 30, 2011

 

 

 

 

October 31, 2011

(Unaudited)

 

April 30, 2011

(Audited)

ASSETS

 

 

 

 

 

     Current Assets

 

 

 

 

 

Cash and cash equivalents

 $             587,918

 

 $        570,551

 

Royalty receivables

                449,970

 

           527,959

 

Prepaid expenses

 

                174,860

 

             74,237

 

Inventories

 

                  66,590

 

             70,790

 

Deposits

 

                  13,080

 

             13,080

 

Employee advances

 

                    5,375

 

             17,207

 

Notes receivable, current

 

                108,267

 

-

 

Payroll tax receivable

                       476

 

                  476

 

        Total current assets

 

             1,406,536

 

        1,274,300

     Property, Plant, and Equipment, net

             2,567,622

 

        2,740,908

     Other Assets

 

 

 

 

 

 

Mining properties, at cost

 

             3,826,713

 

        5,342,665

 

Notes receivable

 

-

 

           106,121

 

Oil shale leases

 

                    9,669

 

               9,669

 

Interest in mineral rights

                  54,638

 

             58,459

 

Other investments

 

                220,992

 

           168,965

 

Deferred tax asset

 

                807,912

 

           371,801

 

Patent, net

 

                320,313

 

           335,938

 

Other

 

                  10,000

 

           190,826

 

        Total other assets

             5,250,237

 

        6,584,444

 

             Total assets

 $          9,224,395

 

 $   10,599,652

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

     Current Liabilities

 

 

 

 

 

Accounts payable

 

 $             337,481

 

 $        369,947

 

Leases payable

 

                  58,742

 

             87,493

 

Income taxes payable

-

 

           128,246

 

Due to shareholders

                247,750

 

           254,176

 

        Total current liabilities

 

 

                643,973

 

           839,862

     Long-Term Liability

 

-

 

                     - 

 

        Total liabilities

 

                643,973

 

           839,862

     Stockholders' Equity

 

 

 

 

 

Preferred stock - par value $0.001, 10,000,000 shares authorized No shares issued

   and outstanding

-

 

                     - 

 

Common stock - par value $0.001, 100,000,000 shares authorized; 39,208,210

   issued and 39,074,755outstanding as of October 31, 2011 43,637,548 issued and

   43,504,093 outstanding as of April 30, 2011

                  39,208

 

             43,638

 

Additional paid-in capital

             4,654,693

 

        4,650,263

 

Less treasury stock

               (104,309)

 

         (104,309)

 

Accumulated other comprehensive loss

                    6,826

 

             (5,816)

 

Cumulative translation adjustment

               (19,011)

 

           182,483

 

Retained earnings since September 27, 2006 ($3,632,043 accumulated deficit

    eliminated)

             4,668,761

 

        5,593,529

 

Total Bullion stockholders' equity

             9,246,168

 

      10,359,788

 

Noncontrolling interests

               (665,746)

 

         (599,998)

 

        Total stockholders' equity

             8,580,422

 

        9,759,790

 

             Total liabilities and stockholders' equity

 $          9,224,395

 

 $   10,599,652

 

See accompanying notes to condensed consolidated financial statements.



2




BULLION MONARCH MINING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Six Months Ended October 31, 2011 and 2010

(Unaudited)


 

For the Three Months Ended October 31, 2011

 

For the Three Months Ended October 31, 2010

 

For the Six Months Ended October 31, 2011

 

For the Six Months Ended October 31, 2010

 

   Royalty Revenue

 $   1,636,989

 

 $    1,411,196

 

 $     2,852,120

 

 $     2,772,118

 

   Operating Expense

 

 

 

 

 

 

 

 

     Professional fees

   316,140

 

     147,803

 

      540,918

 

      490,888

 

     Salaries and benefits

  224,629

 

     169,311

 

    468,214

 

     335,258

 

     General and administrative

    198,808

 

     159,967

 

     390,378

 

    244,024

 

     Gold tax

  75,849

 

   68,560

 

  136,606

 

  139,154

 

     Exploration

      500,060

 

-

 

   1,073,271

 

-

 

     Write down of mining property

1,365,879

 

-

 

1,365,879

 

-

 

     Research and development

      86,457

 

     128,160

 

      172,072

 

      234,187

 

   Total Operating Expenses

2,767,822

 

 673,801

 

4,147,338

 

   1,443,511

 

   Operating Income (Loss)

(1,130,833)

 

    737,395

 

(1,295,218)

 

  1,328,607

 

   Other Income (Expense)

 

 

 

 

 

 

 

 

     Interest income

       1,143

 

  1,847

 

    2,245

 

        2,912

 

     Interest expense

    (18,045)

 

-

 

   (25,340)

 

-

 

     Gain on foreign exchange

      1,844

 

-

 

     2,081

 

-

 

     Loss on sale of assets

-

 

-

 

   (23,662)

 

-

 

     Loss from joint venture

-

   

-

 

-

 

    (406,765)

 

     Loss on investment

-

 

-

 

-

 

       (1,500)

 

   Total Other Income (Expense)

    (15,058)

 

      1,847

 

 (44,676)

 

  (405,353)

 

   Net Income (Loss) Before Income

      Taxes

(1,145,891)

 

      739,242

 

(1,339,894)

 

    923,254

 

   Provision (Benefit) For Income Taxes

   (484,489)

 

      172,838

 

   (349,379)

 

    157,457

 

   Net Income (Loss)

(661,402)

 

   566,404

 

(990,515)

 

  765,797

 

   Plus:  Net Loss Attributable to

      Noncontrolling Interests

      31,968

 

        38,235

 

       65,748

 

      71,826

 

   Net Income (Loss) Attributable to

      Bullion Stockholders

(629,434)

 

  604,639

 

(924,767)

 

   837,623

 

   Other Comprehensive Income (Loss)

 

 

 

 

 

 

 

 

     Foreign currency translation adjustment

(106,353)

 

-

 

(17,057)

 

-

 

     Change in unrealized gain (loss) on

        marketable securities

    (12,453)

 

   (45,321)

 

     12,645

 

   (115,032)

 

   Net Comprehensive Income (Loss)

 $     (748,240)

 

 $        559,318

 

 $       (929,179)

 

 $         722,591

 

   Net Income (Loss) Per Share - Basic

      and Diluted

 $           (0.02)

 

 $              0.01

 

 $             (0.02)

 

 $               0.02

 

   Weighted Average Shares Outstanding

             41,819,019

 

               38,559,092

 

               42,661,556

 

              38,602,157

 


See accompanying notes to condensed consolidated financial statements.



3




BULLION MONARCH MINING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended October 31, 2011 and 2010

(Unaudited)

 

For the Six Months Ended October 31, 2011

 

For the Six Months Ended October 31,

2010

   Cash Flows from Operating Activities:

 

 

 

     Net income (loss)

 $       (990,515)

 

 $         765,797

     Adjustments to reconcile net income (loss) to net cash from (used in)

      operating activities:

 

 

 

     Write down of mining property

1,365,879

 

-

     Loss from joint venture

-

 

   406,765

     Loss on sale of assets

    23,662

 

-

     Depreciation

   36,458

 

    26,794

     Amortization

   15,625

 

  15,625

     Deferred income taxes

  (455,496)

 

     3,645

     Securities received in lieu of cash from revenues

      (20,000)

 

  (40,000)

     Common stock issued for services

-

 

      9,600

     Decrease in royalties receivable

   77,989

 

      13,533

     (Increase) in income tax receivable

-

 

   (96,154)

     (Increase) in prepaid expenses

   (100,622)

 

   (4,071)

     Decrease in inventories

       4,200

 

      5,000

     (Increase) in deposits

-

 

     (12,080)

     Decrease in employee advances

     11,832

 

         3,321

     (Increase) in interest accrued on notes

  (2,146)

 

     (2,825)

     Increase (decrease) in income taxes payable

    (128,246)

 

     183,966

     (Decrease) in accounts payable and other liabilities

    (98,593)

 

  (159,428)

   Net cash from  (used in) operating activities

     (259,973)

 

   1,119,488

   Cash Flows from Investing Activity:

 

 

 

     Purchase of property, plant, and equipment

    (21,957)

 

      (97,149)

     Proceeds from sale of assets

     119,499

 

-

     Issuance of notes receivable

-

 

   (183,000)

     Purchase of interest in mineral rights

-

 

  (108,000)

     Funding of exploration of joint venture

-

 

     (406,765)

   Net cash used in investing activities

       97,542

 

   (794,914)

   Cash Flows From Financing Activity:

 

 

 

     Purchase of treasury stock

-

 

    (127,537)

     Write off previously capitalized exchange fees

 180,826

 

-

   Net cash from (used in) financing activities

    180,826

 

   (127,537)

   Effect of Rate Changes on Cash and Cash Equivalents

(1,028)

 

-

   Net Increase (Decrease) in Cash

17,367

 

       197,037

   Cash at Beginning of Period

    570,551

 

      459,505

   Cash at End of Period

 $            587,918

 

 $            656,542

   Supplemental Disclosures of Cash Flow Information:

 

 

 

     Cash paid during the period for interest

 $                        -

 

 $                        -

     Cash paid during the period for taxes

 $            356,000

 

 $              66,000

 

Non-cash Financing Activity:

 

During the six months ended October 31, 2011, 4,429,338 stock rights of the Company expired, which reduced shares issued and outstanding. Common stock was closed against Additional Paid-in Capital.

 

During the six months ended October 31, 2010, the Company retired 71,573 shares of treasury stock, reducing the par value of Common Stock by $72, Additional Paid-in Capital by $1,778 and Retained Earnings by $44,456.

 

See accompanying notes to condensed consolidated financial statements.



4




Bullion Monarch Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements


NOTE 1   ORGANIZATION


The condensed consolidated financial statements include the accounts of Bullion Monarch Mining, Inc., EnShale, Inc., Dourave Mining and Exploration, Inc., Dourave Mineracao E Exploracao Mineral LTDA, Dourave-Bullion Limited Partnership and Dourave-Bullion Mineracao E Exploracao Mineral LTDA (collectively referred to as “Bullion” or “the Company”). All significant intercompany transactions and balances have been eliminated in these consolidated financial statements.


Bullion derives its revenues from royalties as a result of exploring, acquiring and developing mining properties in the western United States and South America.  Bullion currently has interests in properties in Nevada, Utah, Oregon and Brazil. Bullion currently has four mines producing royalties in the Carlin Trend, Nevada.


EnShale, Inc. (“EnShale”), a majority-owned subsidiary of Bullion, is a Wyoming corporation and is engaged in several activities associated with the development of technology for the extraction of oil from oil shale deposits.


Dourave Mining and Exploration Inc. (“Dourave Canada”) is a wholly owned subsidiary of Bullion. Dourave Mineracao E Exploracao Mineral LTDA (“Dourave Brazil”) is a majority-owned subsidiary of Dourave Canada. Dourave-Bullion Joint Venture, L.P., DBA Dourave-Bullion Limited Partnership (“DB Partnership”) is owned 33% by Bullion and 66% by Dourave Brazil. Dourave-Bullion Mineracao E Exploracao Mineral LTDA (“DBM”) is 99% owned by DB Partnership. Dourave currently holds interests in resource properties in Brazil.


NOTE 2   BASIS OF PRESENTATION


The accompanying financial statements have been prepared in accordance with the requirements of the SEC for unaudited interim financial information.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.  Operating results for the three-month period ended October 31, 2011, are not necessarily indicative of the results that may be expected for the fiscal year ending April 30, 2012.  For further information, refer to the audited consolidated financial statements for the fiscal year ended April 30, 2011, and footnotes thereto included in Bullion’s Annual Report on Form 10-K for the fiscal year ended April 30, 2011.


The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 as well as the reported amount of revenues and expenses during the reporting period. Actual results may differ from these estimates.


Certain immaterial reclassifications have been made to the income statements for the three month period ended October 31, 2010, to conform to the 2011 presentation.


NOTE 3   SIGNIFICANT ACCOUNTING POLICIES


Exploration and Development Costs

In general, exploration costs are expensed as incurred.  When Bullion has determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs incurred to acquire and develop such property are capitalized.  Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations.  Costs of abandoned projects are charged to operations upon abandonment.






5




Bullion Monarch Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements


NOTE 4   TREASURY STOCK


During the three months ended October 31, 2011, Bullion did not purchase or retire any stock. As of October 31, 2011, the number of shares in treasury totaled 133,455, with a cost of $104,309.


NOTE 5   RECENT ACCOUNTING PRONOUNCEMENTS


Accounting Standards Update No. 2011-05: Presentation of Comprehensive Income 2011-05

In June 2011, the Financial Accounting Standards Board (“FASB”) issued an update related to presentation of Comprehensive Income.  ASU 2011-05 requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. Under the two-statement approach, the first statement would include components of net income, and the second statement would include components of other comprehensive income. This ASU does not change the items that must be reported in other comprehensive income. These provisions are effective for fiscal years beginning after December 15, 2011 and for interim periods within those fiscal years; however, early adoption is permitted. The provisions of ASU 2011-05, when adopted, are not expected to have a material impact on Bullion’s consolidated financial statements.


Accounting Standards Update No. 2011-04: Fair value measurements update 2011-04

In May 2011, the FASB issued an update to the authoritative guidance related to fair value measurements as a result of the FASB and the IASB working together to develop common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. generally accepted accounting principles (“GAAP”) and International Financial Reporting Standards (“IFRS”). The amendments will add new disclosures, with a particular focus on Level 3 measurements. The objective of these amendments is to improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRS. The amendments in this update are to be applied prospectively. The amendments are effective during interim and annual periods beginning after December 15, 2011. Early application is not permitted. Bullion does not expect this guidance to have a material impact on its consolidated financial statements.


NOTE 6   STOCK OFFERING


Earlier in 2011 the Company began working on a potential offering of its common stock in Canada to be undertaken in conjunction with a listing on a Canadian exchange. Because of unfavorable market conditions the Company has decided not to pursue an offering of its stock. The Company is exploring the option of listing on a Canadian exchange without an offering of its stock. The Company has expensed the costs that were previously capitalized of $180,826 related to the potential offering.


NOTE 7   STOCK OPTION PLAN


On February 18, 2011, the Board of Directors of Bullion approved the 2011 Stock Option Plan of Bullion Monarch Mining, Inc. (the “2011 Plan”). The 2011 Plan provides for the granting of options to purchase up to 3,000,000 shares of Bullion’s common stock to directors, employees and consultants of Bullion, including officers and directors who are employees of Bullion.  Under the 2011 Plan, the granting of options, exercise prices and terms are determined by the Company’s Board, or a committee designated by the Board to administer the 2011 Plan.  The term of options granted under the 2011 Plan may not exceed 10 years. No options have been granted under the 2011 Plan.


NOTE 8   STOCK RIGHTS EXPIRATION


Bullion Monarch Mining, Inc. recorded the expiration of rights held by shareholders of Bullion Monarch Company, which were exchangeable for shares of Bullion Monarch Mining, Inc. prior to September 26, 2011, pursuant to a court-approved reorganization of Bullion Monarch Company. Pursuant to the reorganization, the rights were subject to a five year limitation to convert to shares of Bullion Monarch Mining, Inc. As a result of the expiration of such rights, the outstanding number of shares of Bullion Monarch Mining, Inc. was reduced by 4,429,338 shares.



6




Bullion Monarch Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements


NOTE 9   AMOUNTS DUE TO SHAREHOLDERS


On September 13, 2011 the Company agreed to repay amounts owed to Sergio Aquino, a shareholder of the Company, as a result of loans he made as a shareholder to Dourave prior to Bullion’s acquisition of Dourave, by issuing 185,763 shares of Bullion stock as full repayment of principal and interest in the amount of R$357,468 at an exchange rate of R$1.6036. The US dollar amount resulting was settled at price of $1.20 per share of Bullion common stock. The stock was issued subsequent to the quarter-end (see Note 12).


NOTE 10   NIQUELANDIA PROJECT


After carefully reviewing the results of exploration and related testing completed on the Niquelandia bauxite project, the Company has determined that the project lacks the economic basis to perform further work or to continue holding rights to the property. Although the property contains a large deposit of bauxite, the silica content was too high to allow for economic processing of the bauxite. Under terms of its contract, the Company has contacted the underlying claim holders to inform them of its decision. The mining property has been written down to reflect the Company’s decision not to proceed with the development of this property and project.


NOTE 11   ACQUISITION OF DOURAVE


On April 1, 2011, Bullion acquired the outstanding capital shares of Dourave Canada 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 Canada.


For the period after acquisition from May 1, 2011 through October 31, 2011, Dourave had $100,000 in lease revenue and incurred $237,136 in losses. The following supplemental proforma information reflects revenue and earnings of the combined entity for the three months ended October 31, 2010, as though the Dourave acquisition that occurred on May 1, 2010 the beginning of the comparative periods.

 

 

October 31, 2010

Revenues

$

1,411,196

Net Income

$

475,559

Earnings per share

$

0.01


NOTE 12

SUBSEQUENT EVENTS


On November 8, 2011, the Company issued 185,763 shares to Sergio Aquino, a shareholder of the Company, in settlement     of amounts owed to him by Dourave for loans he made as a shareholder to Dourave prior to its acquisition by Bullion (see Note 9).


On November 22, 2011, the Company signed a contract for the sale of its office facility in Vernal, Utah.


On November 23, 2011 $30,946 was paid to Helio Tavarez, a shareholder of the Company, in settlement of amounts owed to him by Dourave for loans he made as a shareholder to Dourave prior to its acquisition by Bullion. The total amount owed to Mr. Tavarez was R$55.915,42. The transaction was completed at the then prevailing exchange rate of R$1.8069.




7




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


Forward-looking Statements


Statements made in this Quarterly Report which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, future performance and our business, including, without limitation, and statements preceded by, followed by or that include the words “may,” “would,” “could,” “should,” “expects,” “projects,” “anticipates,” “believes,” “estimates,” “plans,” “intends,” “targets” or similar expressions.


Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including general economic or industry conditions nationally and/or in the communities in which we may conduct business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, our ability to raise capital, changes in accounting principles, policies or guidelines, financial or political instability, acts of war or terrorism, other economic, competitive, governmental, regulatory and technical factors affecting our current or potential business and related matters.


Accordingly, results actually achieved may differ materially from expected results in these statements.  Forward-looking statements speak only as of the date they are made.  We do not undertake, and specifically disclaim, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.  Any forward-looking statements should also be considered in light of the information provided in “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended April 30, 2011 and in Item 1A. Risk Factors in Part II - Other Information of this Quarterly Report on Form 10-Q.


Plan of Operation


Bullion Monarch Mining, Inc. (“Bullion”) is a gold-focused royalty company with additional interests in oil-shale technology and other mineral assets directly and through its subsidiaries.  Unless the context otherwise requires, all references in this section to the “Company” “we”, “us” or “our” refer, collectively, to Bullion Monarch Mining, Inc. and its subsidiaries, and all references in this section to “Bullion” refer to Bullion Monarch Mining, Inc.  We seek to acquire existing mineral royalties or to finance mining projects that are in production or in development stage in exchange for royalty interests or a participating interest. We are engaged in a continual review of opportunities to create new royalties or participating interests through the financing of mine development or exploration, or the acquisition of companies that hold royalties. The majority of our current revenues are derived from a high-quality royalty claim block located in Northeastern Nevada’s Carlin Trend, which we call our Carlin Trend Royalty. We also have an interest in various mineral assets in North and South America in the exploration and development stages, which have the potential to generate future royalty or other revenues.


Bullion has the following subsidiaries: Dourave Mining and Exploration Inc. (“Dourave Canada”), Dourave Mineracao E Exploracao Mineral Ltda (“Dourave Brazil” and collectively with Dourave Canada, “Dourave”), Dourave-Bullion Joint Venture, L.P. DBA Dourave-Bullion Limited Partnership (“DB Partnership”), Dourave-Bullion Mineracao E Exploracao Mineral LTDA (“DBM”) and EnShale Inc. (“EnShale”).


Dourave Canada is a wholly owned subsidiary of Bullion and through Dourave Canada, Bullion holds a 99.99% ownership interest in Dourave Brazil.  Dourave Canada was federally incorporated under the laws of Canada as 6854893 Canada Inc. in November 2007 and changed its name to Dourave Mining and Exploration Inc. in December 2007.  The registered office of Dourave Canada is c/o Peterson Law Professional Corporation Suite 806, 390 Bay Street, Toronto, Ontario M5H 2Y2.


Dourave Brazil was incorporated under the laws of Brazil in September 2007. The registered office of Dourave Brazil is c/o Avenida Alcindo Cacela, 1264 Bairro – Nazare, CEP 66.060-000, Belem, Para Brazil. The DB Partnership is organized under the laws of the state of Utah and is owned 33% by Bullion and 66% by Dourave Brazil. DBM was organized under the laws of Brazil and is 99% owned by DB Partnership.


Bullion holds an 80% ownership interest in EnShale. EnShale was incorporated under the laws of Wyoming in July 2000 under the name International Energy Resource Development, Inc. and subsequently changed its name to EnShale, Inc. in September 2005.  The registered office of EnShale is 2710 Thomes Ave. Cheyenne, WY 82001.




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We are a self-funded natural resource company focused on the generation of royalties from exploring for and developing world class mining opportunities.  Our financial results are primarily tied to the price of gold and production from our producing stage royalty interests. Our current royalty portfolio generates high-margin free cash flow with lower exposure to operating and capital costs than typical operating companies.  Our royalties also provide for direct leverage to commodity prices and the exploration potential of world-class ore deposits and mineral exploration trends where we have existing royalty interests. In the past we have internally funded our mineral exploration projects as well as our oil shale technology subsidiary, EnShale. We are working to monetize our substantial oil-shale assets through EnShale.


As of October 31, 2011, the Company owns royalties on four (4) producing properties, one (1) development stage property, one (1) exploration stage property and one (1) property not currently being explored. Additionally, the Company holds 100% of the exploration and development rights to six properties in Brazil and two (2) properties in the United States.  During the three months ended October 31, 2011, we focused primarily on the development of our exploration stage properties and the management of our existing royalty interests.


We plan to continue seeking new mining projects with the potential to increase our royalty portfolio.  We are currently focused on exploring and evaluating properties in Brazil. The Company has three primary exploration and development projects in Brazil; Bom Jesus, Bom Jardim and Ouro Mil, which are gold-focused. Based on extensive stream sediment sampling programs on both Bom Jesus and Bom Jardim already completed, which resulted in anomalous results that we believe to be encouraging, we are planning our next phase of exploration on these properties. In addition we are speaking with potential exploration partners regarding advancement of the properties.  


We began exploration on a bauxite property earlier in the year. Samples of our initial work were submitted to labs for analysis to determine if the Niquelândia property appeared to host commercial grade bauxite ore. After carefully reviewing the results of exploration and related testing completed on the Niquelandia bauxite project, the Company has determined that the project lacks the economic basis to perform further work or to continue holding rights to the property. Although the property contains a large deposit of bauxite, the silica content was too high to allow for economic processing of the bauxite. Under terms of its contract, the Company has contacted the underlying claim holders to inform them of its decision.


In addition to the properties mentioned above we are working with larger mining companies on possible joint venture agreements on some of our other Brazilian properties. We also have interests in various mineral assets in North and South America which are presently at the exploration stage and which are not currently producing any ore or income.


We continue to develop a process through our subsidiary EnShale, which we believe can extract the oil content from oil shale on a commercially reasonable and economically beneficial basis.  EnShale intends to continue evaluating alternatives to fund the construction of the expected full production plant and underground mining operation in the Vernal, Utah area, in anticipation of successful results from EnShale’s demonstration plant.


Earlier in 2011, we began working on a potential offering of common stock in Canada to be undertaken in conjunction with a listing on a Canadian exchange. Because of unfavorable market conditions we have decided not to pursue an offering of our stock. We are exploring the option of listing on a Canadian exchange without a stock offering.  

 

Results of Operations


Quarter Ended October 31, 2011, compared to the Quarter Ended October 31, 2010


Our largest revenue source is produced from our 1% Carlin Trend Royalty.  Currently the primary source of revenue from this royalty is derived from production at Newmont’s Leeville Mine. Our revenue for the quarter ended October 31st was $1,636,989 compared to $1,411,196 for the same quarter last year. The increase of $225,793 was due to an increase in the price of gold. The average price per ounce received on our royalty payments for the quarter ended October 2011 being $1,729.33 compared with an average price per ounce received on our royalty payments of $1,271.78 for the quarter ended October 31, 2010. The price and marketability of gold are influenced by various factors beyond the control of the Company and may have a material and



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adverse effect on the Company’s results of operations and financial condition. Additionally our revenue is based on gold production from mines on which we have royalties but that we do not operate, which creates a level of unpredictability that could have a material, adverse effect on our results.


Total operating expenses in the quarter ended October 31, 2011, were $ 2,767,822 compared to $673,801 for the quarter ended October 31, 2010, an increase of $ 2,094,021. The increased operating expense was attributable primarily to exploration on our Brazilian properties, a write-down of the mining property cost of the Niquelandia project and increased G&A expenses and salaries & benefits expenses related to our acquisition of Dourave. General and administrative expense for the quarter ended October 31, 2011, was $198,808 compared to $159,967 for the quarter ended October 31, 2010, an increase of $38,841. Salary & benefits expense increased to $224,629 for the quarter ended October 31, 2011, compared to $169,311 for the quarter ended October 31, 2010. Professional fees expense for the quarter ended October 31, 2011, increased to $316,140, compared with professional fees expense of $147,803 for the quarter ended October 31, 2010, an increase of $168,337. The primary reason for this increase is that we are required to expense costs related to the proposed stock offering we decided to cancel, as professional fees in the current quarter. Research and development expense related to EnShale’s research on oil shale processing was $86,457 for the quarter ended October 31, 2011, compared to $128,160 for the quarter ended October 31, 2010, a decrease of $41,703. The decrease in R&D expense was a result of less activity at our demonstration plant compared to the same period a year earlier.  The increase in revenue combined with higher operating expenses resulted in a decrease in operating income of $1,868,228, with operating loss for the quarter ended October 31, 2011, of $1,130,833compared with operating income of $737,395 for the quarter ended October 31, 2010.

 

In the quarter ended October 31, 2010, other income was $1,847. This compares to other expense of $15,058 in the quarter ended October 31, 2011, in which we incurred interest expense of $18,045, offset by interest income of $1,143 and gain on foreign currency exchange of $1,844. In the quarter ended October 31, 2011, we had an income tax benefit of $484,489 compared to the quarter ended October 31, 2010, in which we had a provision for income taxes of $172,838. For the quarter ended October 31, 2011, we recorded a net loss attributable to our shareholders of $629,434, or $(0.02) per basic and diluted share, as compared to net income attributable to our shareholders of $604,639, or $0.01 per basic share and diluted share, for the quarter ended October 31, 2010. In the quarter ended October 31, 2011, we had a loss on foreign currency translation of $106,353 and an unrealized loss on marketable securities of $12,453, resulting in a net comprehensive loss of $ $748,240  versus a net comprehensive income of $559,318 for the quarter ended October 31, 2010.


Six Months Ended October 31, 2011, compared to the Six Months Ended October 31, 2010


As stated above, our financial results are primarily tied to the production from our producing stage royalty interests and the price of gold. Royalty revenues increased by $80,002 to $2,852,120 for the six months ended October 31, 2010, as compared to $2,772,118 for the six months ended October 31, 2010. The increase in royalty revenue is primarily a result of higher gold prices received on the production ounces on our royalties.   


Professional fees for the six months ended October 31, 2011, were $540,918 compared to $490,888 for the six month period ended October 31, 2010, an increase of $50,030. Salaries & benefits expense increased to $468,214 in the six months ended October 31, 2011, from $335,258 in the six month period ended October 31, 2010. The increase of $132,956 is primarily related to the growth of Bullion and the additional salary & benefits expense of Dourave.  General and administrative expenses for the six months ended October 31, 2011, were $390,378 compared to $244,024 for the six months ended October 31, 2010. For the six month period ended October 31, 2011, total operating expenses were $4,147,338 versus $1,443,511 for the six months ended October 31, 2010. The increase in operating expense of $2,703,827 is mostly related to higher exploration expenses on our Brazilian properties, a write-down of the mining property cost of the Niquelandia project, and is also a reflection of the increased costs of absorbing Dourave overhead expenses. We had operating loss of $1,295,218for the six months ended October 31, 2011, compared to operating income of $1,328,607 for the six months ended October 31, 2010, a decrease of $2,623,825. We had a net loss attributable to our shareholders of $924,767for the six months ended October 31, 2011, or ($.02) per basic and diluted share, which represents a decrease of $1,762,390from the net income attributable to shareholders in the six month period ended October 31, 2010, of $837,623 or $.02 per basic and diluted share. The change in unrealized loss on marketable securities for the six months ended October 31, 2010, was $115,032, compared to a change in unrealized gain of $12,645 for the six months ended October 31, 2011.  For the period ended October 31, 2011, we had a net comprehensive loss of $ $929,179, compared to a net comprehensive income of $722,591 last year, a decrease of $1,651,770.








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Liquidity and Capital Resources


During the quarter ended October 31, 2011, liquidity needs were met from $1,636,989 in royalty revenues. At October 31, 2011, we had current assets of $1,406,536 compared to current liabilities of $643,973, for a current ratio of 2.18 to 1. This compares to current assets of $1,274,300 and current liabilities of $839,862 at April 30, 2010, resulting in a current ratio of approximately 1.52 to 1.


We believe that our current financial resources and funds generated from operations will be adequate to cover anticipated expenditures for cost of operations expenses including: general and administrative, exploration, research and development, business development expenses, capital expenditures, and property and royalty acquisition for the foreseeable future. We currently have, and generally at any time, may have acquisition opportunities in various stages of active review.  In the event of a substantial royalty or other acquisition, we may seek additional debt or equity financing opportunities. We operate in a rapidly evolving and often unpredictable business environment that may change the timing or amount of expected future cash receipts and expenditures. Accordingly, there can be no assurance that we may not be required to raise additional funds through the sale of equity or debt securities or from additional credit facilities. Additional capital, if needed, may not be available on satisfactory terms, if at all.


Please refer to our Risk Factors included in Part 1, Item 1A of our Form 10-K for the fiscal year ended April 30, 2011, for a discussion of certain risks that may impact the our liquidity and capital resources in light of the recent economic downturn.  


On April 26, 2011, we established a commercial line of credit with JP Morgan Chase Bank, in the amount of $500,000. The interest rate applied to any unpaid principal balance is LIBOR+3.081%. The line of credit is reviewed annually for renewal. As of October 31, 2011, there were no outstanding advances on this line of credit.


Off-Balance Sheet Arrangements


We had no off-balance sheet arrangements during the period or periods covered by this Quarterly Report or our consolidated financial statements that accompany this Quarterly Report.


Item 3.  Quantitative and Qualitative Disclosures About Market Risk.


Not required of smaller reporting companies.


Item 4.  Controls and Procedures.


Evaluation of Disclosure Controls and Procedures


Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report.  Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures, as of the end of the period covered by this Quarterly Report, were effective at the reasonable assurance level to ensure that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure.  A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.


Changes in Internal Control over Financial Reporting


There have been no changes in internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Our process for evaluating controls and procedures is continuous and encompasses constant improvement of the design and effectiveness of established controls and procedures and the remediation of any deficiencies which may be identified during this process.




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PART II - OTHER INFORMATION


Item 1. Legal Proceedings.


From time to time, we may be a party to legal proceedings, lawsuits and other claims that arise in the ordinary course of our business. Regardless of their merits, these matters may force us to expend significant financial resources. Except as indicated below, we are not a party to any pending material legal proceeding. To the knowledge of management, no federal, state or local governmental agency is presently contemplating any proceeding against us. No director, executive officer or affiliate of ours or owner of record or beneficially of more than five percent of our common stock is a party adverse to us or has a material interest adverse to us in any proceeding.


We filed Bullion Monarch Mining, Inc. v. Newmont USA Limited (Case No. 3:08-cv-00227-ECR-VPC ) in the United States District Court, District of Nevada (Reno) on April 28, 2008.  The case concerns whether Newmont USA Limited ("Newmont") is required to pay us, in addition to the underlying one percent (1.0%) gross smelter return royalty on the core property which is not in dispute, a one percent (1.0%) gross smelter return royalty on any mineral properties within the "area of interest" defined in the 1979 Agreement.   On September 16, 2010, the Court granted Newmont's Motion for Summary Judgment on the issue of laches and did not reach the merits of Newmont's remaining Motions for Summary Judgment.  The Court also denied our Motion for Summary Judgment. On or about September 23, 2010, we filed a Motion to Reconsider, which was denied on or about January 25, 2011.  On October 14, 2010, we filed a Notice of Appeal with the United States Court of Appeals for the Ninth Circuit as to whether the District Court erred in applying the doctrine of laches.   Bullion's opening brief has been filed with the Court of Appeals and we are awaiting Newmont's response.  We anticipate it will be several months before the Ninth Circuit Court of Appeals decides the matter.  Given the status of the litigation, we are unable to determine the outcome of the case and intend to continue to prosecute the case in the best interest of our company.


Item 1A.  Risk Factors.


The Company’s business, results of operations and financial condition are subject to various risks. These risks are described elsewhere in this Quarterly Report on Form 10-Q and in the Company’s other filings with the United States Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the year ended April 30, 2011. The risk factors identified in the Company’s Annual Report on Form 10-K for the year ended April 30, 2011 have not changed in any material respect.


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


On November 8, 2011, the Company issued 185,763 shares of common stock to Sergio Aquino, a shareholder of the Company, in full repayment of principal and interest in the amount of R$357,468 under loans Mr. Aquino made as a shareholder to Dourave prior to Bullion’s acquisition of Dourave, The loan amount was converted to U.S. dollars at an exchange rate of R$ 1.6036 and the shares were issued at an issue price of $1.20 per share. The shares were issued in a private transaction exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(2).


Item 3. Defaults Upon Senior Securities.


None; not applicable.


Item 4. Removed and Reserved.


Item 5. Other Information.


On December 15, 2011, the Board of Directors of the Company approved an increase in the compensation payable to non-employee directors of the Company to $2,500 per month, effective for the month ended November 30, 2011.  Board members do not receive any additional compensation for Board meetings or service on Board committees.



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Item 6. Exhibits.


                       Identification of Exhibit


Exhibit No.

Title of Document

 

 

 

 

31.1

Certification of Registrant’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

31.2

Certification of Registrant’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

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Certification of Registrant’s Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002. This certification is being furnished solely to accompany this Quarterly Report on Form 10-Q and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company.

 

101

The following financial information from the Quarterly Report on

Form 10-Q for the fiscal quarter ended October 31, 2011, formatted in

XBRL (Extensible Business Reporting Language) and furnished

electronically herewith: (i) the Consolidated Balance Sheets; (ii) the

Consolidated Statements of Operations; (iii) the Consolidated

Statements of Comprehensive Income; (iv) the Consolidated

Statements of Cash Flows; and (v) the Condensed Notes to the

Consolidated Financial Statements.




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 thereunto duly authorized

  

BULLION MONARCH MINING, INC.


Date:

December 15, 2011

 

By:

/s/R. Don Morris

 

 

 

 

R. Don Morris

 

 

 

 

Chief Executive Officer

 

 

 

 

 

Date:

December 15, 2011

 

By:

/s/Philip Manning

 

 

 

 

Philip Manning

 

 

 

 

Chief Financial Officer




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