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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549
 
FORM 10-Q
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the quarterly period ended November 30, 2011
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the transition period from _________________ to _________________
 
Commission File Number: 000-53700
__________________________
 
PANA-MINERALES S.A.
 
(Exact name of registrant as specified in its charter)
 
Nevada
98-0515701
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification Number)
 
First Floor Commercial Area, Calle 53
Marbella, Panama City
Panama
(Address of principal executive offices)
 
011-51-205-1994
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  x  No  ¨
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  ¨  No  ¨
 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “larger 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  ¨
(Do not check if a smaller reporting company)
Smaller reporting company  x
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ¨  No  x
 
The number of shares outstanding of the registrant’s common stock at January 10, 2012 was 112,000,000.

 
 

 
 
TABLE OF CONTENTS

   
Page
 
PART I – FINANCIAL INFORMATION
 
Item 1.
Consolidated Financial Statements
  4
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
  5
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
  7
Item 4
Controls and Procedures
  7
     
 
PART II – OTHER INFORMATION
 
Item 1.
Legal Proceedings
  9
Item 1A.
Risk Factors
  9
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
  9
Item 3.
Defaults Upon Senior Securities
  9
Item 4.
(Removed and Reserved)
  9
Item 5.
Other Information
  9
Item 6.
Exhibits
  9
 
Signatures
  10
 

 
2

 

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
 
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.  Reference is made in particular to the description of our plans and objectives for future operations, assumptions underlying such plans and objectives, and other forward-looking statements included in this report.  Such statements may be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “believe,” “estimate,” “anticipate,” “intend,” “continue,” or similar terms, variations of such terms, or the negative of such terms.  Such statements are based on management’s current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements.  Such statements address future events and conditions concerning, among others, capital expenditures, earnings, litigation, regulatory matters, liquidity and capital resources, and accounting matters.  Actual results in each case could differ materially from those anticipated in such statements by reason of factors such as future economic conditions, changes in consumer demand, legislative, regulatory and competitive developments in markets in which we operate, results of litigation, and other circumstances affecting anticipated revenues and costs, and the risk factors set forth under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended August 31, 2011 filed on December 14, 2011.
 
In this Quarterly Report on Form 10-Q, references to “dollars” and “$” are to United States dollars and references to “we,” “us,” “Company,” “our” and “Pana-Minerales” mean Pana-Minerales S.A., unless otherwise indicated.
 
YOU SHOULD NOT PLACE UNDUE RELIANCE ON THESE FORWARD LOOKING STATEMENTS
 
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events or information as of the date on which the statements are made in this Quarterly Report on Form 10-Q.  Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.  You should read this report and the documents that we reference in this report, including documents referenced by incorporation, completely and with the understanding that our actual future results may be materially different from what we expect or hope.
 

 
3

 

PART I. FINANCIAL INFORMATION
 
ITEM 1.                 FINANCIAL STATEMENTS
 
The accompanying balance sheets of Pana-Minerales S.A. (an exploration stage company) (the “Company”) at November 30, 2011 (with comparative figures as at August 31, 2011) and the statement of operations for the three months ended November 30, 2011 and 2010 and from October 4, 2006 (date of incorporation) to November 30, 2011 and the statement of cash flows for the three months ended November 30, 2011 and 2010 and for the period from October 4, 2006 (date of incorporation) to November 30, 2011, have been prepared by the Company’s management in conformity with accounting principles generally accepted in the United States of America.  In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.
 
Operating results for the three months ended November 30, 2011 are not necessarily indicative of the results that can be expected for the year ending August 31, 2012.
 

 
  Page
Unaudited Financial Statements
 
Balance Sheets
 F-1
Statements of Operations
 F-2
Statements of Cash Flows
 F-3
Notes to Financial Statements
 F-4 to F-9

 
 
4

 

PANA-MINERALES S.A.
(An Exploration Stage Company)

BALANCE SHEETS
   
November 30,
2011
(Unaudited)
   
August 31,
2011
(Audited)
 
ASSETS
           
      Cash
    39,794       -  
      Prepaid exploration expenses
    33,856       -  
Total Assets
  $ 73,650     $ -  
                 
LIABILTIES  AND STOCKHOLDERS’ DEFICIENCY
               
Current liabilities
               
      Accounts payable
  $ 42,552     $ 24,582  
      Accrued interest
    9,455       5,041  
  Due to related parties
    37,652       34,358  
  Notes payable
    230,798       131,000  
Total Current Liabilities
    320,457       194,981  
                 
STOCKHOLDERS’ DEFICIENCY
               
        Common stock: 800,000,000 shares authorized, at $0.001 par value, 112,000,000 shares issued and outstanding at November 30, 2011 and November 30,2010, respectively
    112,000       112,000  
Capital in excess of par value
    (78,500 )     (78,500 )
Deficit accumulated during the exploration stage
    (280,307 )     (228,481 )
Total Stockholders’ Deficiency
    (246,807 )     (194,981 )
Total Liabilities and Stockholders’ Deficiency
  $ 73,650     $ -  

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

 
F-1

 


PANA-MINERALES S.A.
(An Exploration Stage Company)
STATEMENTS OF OPERATIONS
Three Months Ended November 30, 2011 and 2010 and
the Period from October 4, 2006 (Inception) to November 30, 2011
(Unaudited)

   
Three Months Ended November 30,
   
October 4, 2006 (date of inception) to November 30,
 
   
2011
   
2010
   
2011
 
                   
REVENUE
  $ -     $ -     $ -  
                         
EXPENSES
                       
Exploration costs
    25,138       -       57,981  
Impairment loss on mineral claim
    -       -       5,000  
Professional fees
    20,494       4,934       37,273  
Impairment loss on note receivable
    -       -       100,000  
General and administrative expenses
    1,780       316       70,598  
OPERATING LOSS
    (47,412 )   $ (5,250 )     (270,852 )
                         
Other income and expense
                       
Interest expense
    (4,414 )     -       (9,455 )
                         
NET LOSS
  $ (51,826 )   $ (5,250 )     (280,307 )
                         
Basic and diluted loss per share
  $ (0.000 )   $ (0.000 )        
                         
Weighted average number of shares outstanding, basic and diluted
    112,000,000       112,000,000          
                         

The accompanying notes are an integral part of these unaudited financial statements.


 
F-2

 


PANA-MINERALES S.A.
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS Three Months Ended November 30, 2011 and 2010
 Period from October 4, 2006 (Inception) to November 30, 2011
(Unaudited)

   
For the three months ended November 30, 2011
   
For the three months ended November 30, 2010
   
From inception (October 4, 2006) to November 30, 2011
 
                   
CASH FLOWS FROM OPERATING ACTIVITIES:
                 
Net loss
  $ (51,826 )   $ (5,250 )   $ (280,307 )
Adjustment to reconcile net loss to net cash (used in) operating activities:
                       
Impairment on note receivable
    -       -       100,000  
Expenses paid by third party
    -       -       31,000  
Impairment loss on mineral claim
    -       -       5,000  
Accrued interest
    4,414       -       9,455  
Capital contributions – expenses paid by Officers
    -       -       19,500  
Prepaid exploration expense
    (33,856 )     -       (33,856 )
Accounts payable and accrued liabilities
    17,970       2,398       42,552  
Net cash provided by (used) in operating activities
    (63,298 )     (2,852 )     (106,656 )
                         
CASH FLOWS FROM INVESTING ACTIVITIES:
                       
Acquisition of mineral claim
    -       -       (5,000 )
Net cash provided by ( used) in investing activities
    -       -       (5,000 )
                         
CASH FLOWS FROM FINANCING ACTIVITIES:
                       
Advances from related party
    3,294       2,852       37,652  
Proceeds from notes payable
    99,798       -       99,798  
Proceeds from issuance of common stock
    -       -       14,000  
Net cash provided by financing activities
    103,092       2,852       151,450  
                         
Increase (decrease) in cash during the period
    39,794       -       39,794  
Cash, beginning of period
    -       -       -  
Cash, end of period
  $ 39,794     $ -     $ 39,794  
                         
                         
Supplemental disclosure of non-cash investing and financing activities:
                       
Capital contribution – non cash expenses
  $ -     $ -     $ 19,500  
Note payable issued for note receivable
    -       -       100,000  
Note payable issued for expenses paid by third party
    -       -       31,000  
    $ -     $ -     $ 150,500  

The accompanying notes are an integral part of these unaudited financial statements.
 
 
F-3

 

PANA-MINERALES S.A.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
November 30, 2011
(Unaudited)


1. ORGANIZATION

The Company, Pana-Minerales S.A., was incorporated under the laws of the State of Nevada on October 4, 2006 with authorized capital stock of 100,000,000 shares at $0.001 par value.  The Company was organized for the purpose of acquiring and developing mineral properties. At the report date mineral claims, with unknown reserves, have been acquired. The Company has not established the existence of a commercially mineable ore deposit and therefore has not reached the development stage and is considered to be in the pre-exploration stage.

On September 7, 2011 the Company effected a stock dividend of 7 shares for every 1 share of common stock held by each shareholder of record as of August 16, 2011.  As at the date of this report the Company has a total of 112,000,000 issued and outstanding shares of common stock and authorized capital stock of 800,000,000.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting Method

The Company recognizes income and expenses based on the accrual method of accounting.

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 is 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 any 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 periodically reviews its long term assets and makes adjustments, if the carrying value exceeds fair value.

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.

 
F-4

 

PANA-MINERALES S.A.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
November 30, 2011
(Unaudited)


2, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Income Taxes - Continued

The Company’s deferred tax assets, valuation allowance, and change in valuation allowance are as follows (“NOL” denotes Net Operating Loss):

Period Ending
 
Estimated NOL
 Carry-Forward
$
   
NOL expires
   
Estimated Tax Benefit
 from NOL
$
   
Valuation Allowance
$
   
Net Tax Benefit
 
                               
2007
    3,940       2027       1,182       (1,182 )     -  
2008
    17,670       2028       5,301       (5,301 )     -  
2009
    32,318       2029       9,695       (9,695 )     -  
2010
    22,443       2030       6,733       (6,733 )     -  
2011
    152,110       2031       45,633       (45,633 )     -  
2012
    51,826       2032       15,548       (15,548 )        
      280,307               84,092       (84,092 )     -  

The total valuation allowance as of November 30, 2011 is $(84,092) which increased by $(15,548) for the reported period.

Due to a change in control, some of the net loss carryforward may not be available to offset future taxable income pursuant to Section 382 of the Internal Revenue Code.

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.

Impairment 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.

 
F-5

 

PANA-MINERALES S.A.
(An exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
November 30, 2011
(Unaudited)


2, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Financial Instruments

The carrying amounts of financial instruments are considered by management to be their fair value due to their short term maturities.

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 financial statements.

Mineral Property Acquisition and Exploration Costs

Mineral property acquisition costs are initially capitalized when incurred. These costs are then assessed for impairment when factors are present to indicate the carrying costs may be not recoverable. Mineral exploration costs are expensed when incurred.

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.

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.

Reclassification

Certain prior period amounts have been reclassified to conform with the current period’s financial statement presentation.

Recent Accounting Pronouncements

The Company does not expect that the adoption of other recent accounting pronouncements will have a material impact on its financial statements.

 
F-6

 

PANA-MINERALES S.A.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
November 30, 2011
(Unaudited)


3. GOING CONCERN

The Company will need additional working capital to service its debt, for the current obligation under its option agreement, and for its intended purpose of acquiring and developing mineral properties, which raises substantial doubt about its ability to continue as a going concern. Management of the Company has developed a strategy, which it believes will accomplish this objective through additional advances from related parties, equity funding, and long term financing, which will enable the Company to operate for the coming year.

4. ACQUISITION OF MINERAL CLAIMS
 
 
a)
On January 15, 2008, the Company purchased the Marawi Gold Claims located in the Philippines for $5,000 and obtained a mining license for an additional payment of $1,843. The Company has not established the existence of a commercially mineable ore deposit on the Marawi Gold Claims. These claims have no expiry date and only if the Company decides to abandon them will it no longer have an interest in the minerals thereon.

On August 31, 2008 the Company determined the $5,000 mineral property acquisition cost was impaired, and recorded a related impairment loss in the statement of operations.
 
 
b)
On April 30, 2011, the Company entered into a mining option agreement with Brookmount Explorations Inc. (“Brookmount”) for the Mercedes mining concessions located in the District of Comas, Province of Concepcion, Department of Junin in the Republic of Peru (the “Option”).  Under the terms of the Option, Brookmount granted the Company an exclusive option to acquire a 50% interest in the concessions subject to the Company undertaking certain expenditures described below on or before April 30, 2013.

Consideration for the Option is as follows:

1) Upon execution of the agreement, a third party of the Company paid $100,000 to Brookmount on behalf of the Company, pursuant to the Option agreement. Brookmount then executed a promissory note payable to the Company for $100,000, due and payable on May 5, 2012 (“maturity”) with interest accruing at ten (10%) percent per annum. Principal and interest are payable on the maturity date (see Footnote 5 below);

2) On or before November 1, 2012, the Company is required to expend a minimum of $2,000,000 on exploration with a minimum expenditure of $750,000 to be expended before April 30, 2012;

3)  The Company must expend an additional $1,000,000 on exploration on or before April 30, 2013.

If the incurred expenditures are less than the required expenditures, the Company must make a shortfall payment to Brookmount, including an administration fee equal to 5 percent of the shortfall amount.

The Option shall automatically terminate and be of no force and effect if, during the option period, the Company fails to meet any terms or conditions of the Option, including but not limited to timely expenditure of the amounts noted above.

As of November 30, 2011 the Company had expended accumulated exploration expenses in the amount of $57,981 including mineral license fees on the concessions.

 
F-7

 

PANA-MINERALES S.A.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
November 30, 2011
(Unaudited)

5. PREPAID EXPENSES

During the quarter ended November 30, 2011 the Company advanced $49,799 to the operator of the Mercedes mining concessions, referenced above in Note 4, to be applied to ongoing exploration activities. These amounts are allocated to expense based on work performed.  As at November 30, 2011 $33,856 remained in the prepaid account.  

6. LOANS PAYABLE

On April 15, 2011, the Company borrowed $50,000 from an unrelated third party under a promissory note.  On May 6, 2011, the Company borrowed an additional $50,000 from the same lender.  On May 6, 2011, the Company executed a secured promissory note with the lender in the amount of $100,000, due and payable on May 6, 2012 (the “Maturity Date”) with accrued interest at ten (10%) percent per annum due on the Maturity Date.  Security for the above noted loans is a Promissory Note from Brookmount in the amount of $100,000 described in Note 4 (b) (1) above.

On May 26, 2011, the Company borrowed a further $31,000 from the same third party lender, which amount was unsecured, bears interest at ten (10%)  percent per annum, and is due on or before May 26, 2012 (“Maturity”).  Interest shall accrue during the term of the loan and is due and payable on Maturity.

On September 30, 2011 the Company received a further advance from the same third party lender of $49,798 which amount is unsecured, bears interest at 10% per annum, and is due on or before September 30, 2012 (“Maturity”).  Interest shall accrue during the term of the loan and is payable on Maturity.  The funds were paid directly towards an exploration expenditure account with respect to the Mercedes mining concessions in Peru.

On November 7, 2011 the Company received a further advance from the same third party lender of $50,000 which amount is unsecured, bears interest at 10% per annum, and is due on or before November 7, 2012 (“Maturity”).  Interest shall accrue during the term of the loan and is payable on Maturity.

The principal amount of the loans totaling $230,798 is reflected on the Company’s balance sheets as Loans payable.  The accrued interest for the three months period ended November 30, 2011 is $4,414 in respect of the loans. The company did not make any payments to the accrued interest, leaving amount of $9,455 reflected on the Company’s balance sheet as Accrued Interest.

7. CAPITAL STOCK

On August 31, 2007, the Company completed a private placement of 8,000,000 common shares at a price of $0.000125 per share for $1,000.

On August 23, 2008, the Company issued a further 104,000,000 common shares at a price of $0.000125 per share for $13,000.

On September 7, 2011, the Company effected an 8 to 1 stock dividend with a corresponding increase (from 100,000,000 to 800,000,000) in the number of authorized shares of the Company’s common stock. Shareholders of the Company received a stock dividend of seven (7) additional shares for each one (1) share of the Company’s issued and outstanding common stock prior to the dividend. The stock dividend has been retroactively reflected in all shares and per share numbers in these financial statements, unless otherwise noted.

As of November 30, 2011, the Company had a total of 112,000,000 shares of common stock issued and outstanding.
 
 
F-8

 

PANA-MINERALES S.A.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
November 30, 2011
(Unaudited)


8.  RELATED PARTY TRANSACTIONS

During the three months period ended November 30, 2011, Mr. Gibson, a director of the Company, provided consulting services related to the Mercedes mining project, valued at $3,294 (this amount was recorded in the Due to related parties account on the Balance Sheet). All amounts due to related parties are payable on demand and bear no interest.

 
F-9

 

ITEM 2.                 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion should be read in conjunction with our financial statements and notes thereto included elsewhere in this quarterly report.  Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results, or other developments.  Forward-looking statements are based upon estimates, forecasts, and assumptions that are inherently subject to significant business, economic, and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change.  These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by us, or on our behalf.  We disclaim any obligation to update forward-looking statements.

Overview
 
Pana-Minerales S.A. (the “Company,” “we,” “us,” or “our”) was incorporated under the laws of the State of Nevada on October 4, 2006 with authorized capital stock of 100,000,000 (pre-split) shares at $0.001 par value.  We were formed to engage in the exploration of mineral properties in the Republic of the Philippines for gold and silver. We have expanded our operations to include the exploration of mineral claims in Peru, primarily for silver deposits.  As of the date of this report, we have acquired mineral claims with unknown reserves, as further described below.  We have not established the existence of a commercially mineable ore deposit and therefore have not reached the development stage and are considered to be in the exploration stage.

On September 7, 2011, we effected a stock dividend of 7 shares for every 1 share of common stock held by each shareholder of record as of August 16, 2011.  As at the date of this report, we have a total of 112,000,000 issued and outstanding shares of common stock and authorized capital stock of 800,000,000.

Our Current Business

We are an exploration stage company engaged in the exploration of mineral properties.

On January 15, 2008, we purchased the Marawi Gold Claims located in the Philippines for $5,000 and obtained a mining license for an additional payment of $1,843. We have not established the existence of a commercially mineable ore deposit on the Marawi Gold Claims. These claims have no expiry date and only if we decide to abandon them will we no longer have an interest in the minerals thereon.   We have undertaken no exploration work on these claims to date and do not currently intend to undertake any exploration work on the claims, choosing to concentrate our exploration and exploitation activities on the Mercedes mining concessions more particularly described below.
 
On April 30, 2011, we entered into a mining option agreement with Brookmount Explorations Inc. (the “Option”) for the Mercedes mining concessions located in the District of Comas, Province of Concepcion, Department of Junin in the Republic of Peru. Unlike the Marawi Gold Claims, the Mercedes concessions will focus mainly on silver exploration.  Under the terms of the mining option agreement, Brookmount Explorations granted us an exclusive option to acquire a 50% interest in the property subject to us undertaking expenditures in the amount of $3,100,000 before April 30, 2013.   As of November 30, 2011, we had expended accumulated exploration expenses in the amount of $57,981, including mineral license fees on the concessions.

We plan to undertake exploration work on the Mercedes mining claims to fulfill our $750,000 exploration commitment on or before April 30, 2012.  We do not currently have funds available to undertake the exploration but are negotiating financing with various parties.

Our exploration program will be exploratory in nature, and there is no assurance that a commercially viable mineral deposit, a reserve, exists until further exploration, particularly drilling, is undertaken and a comprehensive evaluation concludes economic and legal feasibility.  We have not yet generated or realized any revenues from our business operations.

Should we be successful in raising sufficient funds in order to conduct our additional exploration programs, the full extent and cost of which is not presently known beyond that required by our proposed drilling program and mandatory work programs as set forth in our Annual Report on Form 10-K filed on December 14, 2011, and such exploration programs result in an indication that production of our minerals of interest is economically feasible, then at that point in time we would make a determination as to the best and most viable approach for mineral extraction.

 
5

 

Results of Operations

The following discussion of the financial condition, results of operations, cash flows, and changes in our financial position should be read in conjunction with our audited financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended August 31, 2011, filed on December 14, 2011.

We have suffered recurring losses from operations. The continuation of our Company is dependent upon us attaining and maintaining profitable operations and raising additional capital as needed.  In this regard, we have successfully raised additional capital through equity offerings and loan transactions in the past and presently believe we will be able to do so in the future, though we can offer no assurance of this outcome as no specific arrangements are in place.

Comparison of three month periods ended November 30, 2011 and November 30, 2010

During the three month periods ended November 30, 2011 and November 30, 2010, we earned no revenues from operations.

For the three month periods ended November 30, 2011 and November 30, 2010, we incurred a net loss of $51,826 and $5,250, respectively.  This increase for the period ended November 30, 2011 is primarily attributed to exploration expenses on our mineral concessions of $25,138 ($nil – 2010) and professional fees of $20,494 ($4,934-2010) as we acquired new mining concessions and commenced increased operations.  We also incurred interest of $4,414 ($Nil – 2010) on loans for operations.

Period from inception, October 4, 2006  to November 30, 2011

Our revenues since inception to date have been $nil.  Since inception, we have an accumulated deficit during the exploration stage of $280,307.  We expect to continue to incur losses as a result of continued exploration of our Peruvian mineral property and as a result of expenditures for general and administrative activities while we remain in the exploration stage.

Liquidity and Capital Resources
 
As of November 30, 2011, we had approximately $39,794 in cash, prepaid exploration expenses of $33,856 and working capital deficiency of $246,807.  During the three months ended November 30, 2011, we used net cash of $63,298 in operating activities.  

During the three months ended November 30, 2011, we received $99,798 in cash from an unrelated third party. Specifically, during the period covered by this report, we received two loans in the aggregate principal amount of $99,798 in order to fund operations.  First, on September 30, 2011, we received an advance from a third party lender of $49,798, which amount is unsecured, bears interest at 10% per annum, and is due on or before September 30, 2012.  Interest shall accrue during the term of the loan and is payable on such date.  The funds were paid to Brookmount to cover exploration costs with respect to the Mercedes mining concessions in Peru, and were recorded as a prepaid expense. As work is performed on these concessions, the related amounts are being expensed. Second, on November 7, 2011, we received a further advance from the same third party lender of $50,000, which amount is unsecured, bears interest at 10% per annum, and is due on or before November 7, 2012.  Interest shall accrue during the term of the loan and is payable on such date. We will not have sufficient funds for our planned operations or to meet ongoing obligations unless we are successful in raising additional capital.
 
During the three months ended November 30, 2011, we used net cash of $Nil in investing activities.  This remains unchanged from the three months ended November 30, 2010.

In order to meet all of our current commitments and fund operations for the next twelve months, we estimate that we will require a minimum of $1,000,000.  This figure is based on our current general and administrative costs and our obligations for our mineral properties for the year. We currently have minimal funds and there is no assurance that sufficient funds will be available if and when required.

Our ability to meet our financial commitments is primarily dependent upon the continued issuance of equity to new stockholders, the ability to borrow funds, and ultimately upon our ability to achieve and maintain profitable operations. There are no assurances that we will be able to obtain required funds for our continued operations or that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms.  

 
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If we are not able to obtain the additional financing on a timely basis, we will not be able to meet our other obligations as they become due and we will be forced to scale down or perhaps even cease the operation of our business. 

There is substantial doubt about our ability to continue as a going concern, as the continuation of our business is dependent upon obtaining further short and long-term financing and achieving a profitable level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholder. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

Off-Balance Sheet Arrangements
  
The Company presently does not have any off-balance sheet arrangements.

Critical Accounting Policies and Estimates

The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the 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.  On an on-going basis, management evaluates its estimates and judgments which are based on historical experience and on various other factors that are believed to be reasonable under the circumstances.  The results of their evaluation form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions and circumstances.  Our significant accounting policies are more fully discussed in the Notes to our Financial Statements contained in our Annual Report on Form 10-K for the year ended August 31, 2011 filed with the SEC on December 14, 2011. 

ITEM 3.                 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
 
Not Applicable.
 
ITEM 4.                 CONTROLS AND PROCEDURES
 
Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including Harry Ruskowsky, our Principal Executive Officer who is also our Principal Financial Officer, of the effectiveness of the design of our disclosure controls and procedures (as defined by Exchange Act Rules 13a-15(e) or 15d-15(e)) as of November 30, 2011 pursuant to Exchange Act Rule 13a-15.  Based upon that evaluation, our Principal Executive Officer who is also our Principal Financial Officer concluded that our disclosure controls and procedures are not effective as of November 30, 2011 in ensuring that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.  This conclusion is based on findings that constituted material weaknesses.  A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s interim financial statements will not be prevented or detected on a timely basis.

In performing the above-referenced assessment, our management identified the following material weaknesses:

1)  
We currently do not have an audit committee or an independent audit committee financial expert. While not being legally obligated to have an audit committee or independent audit committee financial expert, it is the management’s view that to have an audit committee, comprised of independent board members, and an independent audit committee financial expert is an important entity-level control over financial statements;

2)  
Inadequate staffing and supervision within our bookkeeping operations.  We have one consultant involved in bookkeeping functions, who provides two staff members.  The relatively small number of people who are responsible for bookkeeping functions and the fact that they are from the same firm of consultants prevents us from segregating duties within our internal control system.  The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews. This may result in a failure to detect errors in spreadsheets, calculations or assumptions used to compile the financial statements and related disclosures as filed with the SEC;


 
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3)  
Outsourcing of our accounting operations.  Because there are no employees in our administration, we have outsourced all of our accounting functions to an independent firm.  The employees of this firm are managed by supervisors within the firm and are not answerable to our management.  This is a material weakness because it could result in a disjunction between the accounting policies adopted by our Board of Directors and the accounting practices applied by the independent firm;

4)  
Insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements;

5)  
Ineffective controls over period end financial disclosure and reporting processes.

We continue to review our disclosure controls and procedures related to these material weaknesses and expect to implement changes in the near term, including identifying specific areas within our governance, accounting and financial reporting processes to add adequate resources and personnel to potentially mitigate these material weaknesses.  Our present management will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.  All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
 
Changes in Internal Control Over Financial Reporting
 
There were no changes in our internal controls over financial reporting that occurred during the three months ended November 30, 2011 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.  We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within any company have been detected.


 
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PART II - OTHER INFORMATION
 
ITEM 1.
LEGAL PROCEEDINGS
 
 
To the best of management’s knowledge, there are no material legal proceedings pending against the Company.

ITEM 1A.
RISK FACTORS
 
                Not Applicable.
 
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
                None

ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
 
None.
 
ITEM 4.
REMOVED AND RESERVED
 
ITEM 5.
OTHER INFORMATION
 
                None.

ITEM 6.
EXHIBITS

The following exhibits are included as part of this report by reference:

Exhibit Number
Description
3.1(a)
Articles of Incorporation (incorporated by reference to the Registrant’s Registration Statement on Form S-1 filed on October 14, 2008).
3.1(b)
Amendment to Articles of Incorporation (incorporated by reference to the Registrant’s Current Report on Form 8-K filed on September 9, 2011).
3.2(a)
Bylaws (incorporated by reference to the Registrant’s Registration Statement on Form S-1 filed on October 14, 2008).
3.2(b)
Amendment to Bylaws (incorporated by reference to the Registrant’s Current Report on Form 8-K filed on September 28, 2011).
31.1
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1
Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101.INS
XBRL Instance Document**
101.SCH
XBRL Taxonomy Extension Schema**
101.CAL
XBRL Taxonomy Extension Calculation Linkbase**
101.DEF
XBRL Taxonomy Extension Definition Linkbase**
101.LAB
XBRL Taxonomy Extension Label Linkbase**
101.PRE
XBRL Taxonomy Extension Presentation Linkbase**
______________
* Filed herewith
**Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.

 
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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
  PANA-MINERALES S.A.  
       
Date: January 11, 2012
By:
/s/ Harry Ruskowsky  
    Name: Harry Ruskowsky  
    Title: President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and Director  
     (Principal Executive Officer, Principal Financial Officer & Principal Accounting Officer)  

 
 
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