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EXCEL - IDEA: XBRL DOCUMENT - EL CAPITAN PRECIOUS METALS INCFinancial_Report.xls
EX-32.1 - 906 CERTIFICATION OF CEO AND CFO - EL CAPITAN PRECIOUS METALS INCp0136_ex32-1.htm
EX-31.2 - 302 CERTIFICATION OF CFO - EL CAPITAN PRECIOUS METALS INCp0136_ex31-2.htm
EX-31.1 - 302 CERTIFICATION OF CEO - EL CAPITAN PRECIOUS METALS INCp0136_ex31-1.htm
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
 
þ  
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
     
For The Quarterly Period Ended December 31, 2011
     
o
 
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
 
Commission file number:  333-56262
COMPANY LOGO
(Exact name of registrant as specified in its charter)
 
NEVADA
 
88-0482413
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
 
15225 North 49th Street
Scottsdale, AZ 85254
 (Address of principal executive offices)
 
  (602) 595-4997
(Registrant’s telephone number, including area code)
 
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 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  þ No o
 
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  þ No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
 
Large accelerated filer    o Accelerated filer    þ
Non-accelerated filer    o Smaller reporting company o  
 
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).  Yes  o No þ
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  247,187,945 shares of common stock, par value $0.001, of the issuer were issued and outstanding as of February 9, 2012.
 
(An Exploration Stage Company)

 
Table of Contents
 
 
Page
   
PART I.  FINANCIAL INFORMATION
     
3
 
3
 
4
  5
 
9
 
11
14
16
16
     
 
     
18
18
18
18
18
18
18
     
SIGNATURES
20
 
PART I.
FINANCIAL INFORMATION
 
Item 1.
Financial Statements
 
(An Exploration Stage Company)

CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
    December 31,     September 30,  
   
2011
   
2011
 
             
ASSETS
           
CURRENT ASSETS:
           
Cash
 
$
353,358
   
$
319,939
 
Prepaid expenses
   
82,543
     
35,389
 
Total Current Assets
   
435,901
     
355,328
 
                 
Furniture and equipment net of accumulated depreciation of $34,889 and $34,197, respectively
   
3,015
     
3,707
 
Mineral property
   
1,879,608
     
1,879,608
 
Deposits
   
22,440
     
22,440
 
Total Assets
 
$
2,340,964
   
$
2,261,083
 
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
CURRENT LIABILITIES:
               
Accounts payable
 
$
102,023
   
$
111,406
 
Accrued liabilities
   
50,700
     
54,141
 
Total Current Liabilities
   
152,723
     
165,547
 
                 
STOCKHOLDERS’ EQUITY:
               
Preferred stock, $0.001 par value; 5,000,000 shares authorized; none issued and outstanding
   
     
 
Common stock, $0.001 par value; 300,000,000 shares authorized; 246,857,580 and 245,582,461 issued and outstanding, respectively
   
246,857
     
245,582
 
Additional paid-in capital
   
200,471,531
     
200,010,493
 
Deficit accumulated during the exploration stage
   
(198,530,147
)
   
(198,160,539
)
Total Stockholders’ Equity
   
2,188,241
     
2,095,536
 
Total Liabilities and Stockholders’ Equity
 
$
2,340,964
   
$
2,261,083
 
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
(An Exploration Stage Company)
 
CONSOLIDATED STATEMENTS OF EXPENSES
(Unaudited)
 
   
Three Months Ended 
December 31,
   
July 26, 2002 
(Inception)
Through
December 31,
 
    2011     2010      2011  
                   
OPERATING EXPENSES:
                 
Professional fees
 
$
1,595
   
$
7,925
   
$
3,504,874
 
Officer compensation expense
   
     
     
2,863,833
 
Administrative consulting fees
   
65,000
     
65,000
     
2,235,766
 
Management fees, related party
   
     
     
320,500
 
Legal and accounting fees
   
50,900
     
55,050
     
1,752,247
 
Exploration expenses
   
197,937
     
86,452
     
3,197,403
 
Warrant and option expenses
   
12,313
     
     
4,901,044
 
Other general and administrative
   
41,924
     
37,520
     
1,663,663
 
Write-off of accounts payable and accrued interest
   
     
     
(63,364
Loss on impairment of mineral property
   
     
     
176,567,424
 
Loss on asset dispositions
   
     
     
34,733
 
Total Operating Expenses
   
369,669
     
251,947
     
196,978,123
 
                         
LOSS FROM OPERATIONS
   
(369,669
)
   
(251,947
)
   
(196,978,123
)
                         
OTHER INCOME (EXPENSE):
                       
Interest income
   
61
     
384
     
39,309
 
Other income
   
     
     
18,632
 
Forgiveness of debt
   
     
     
115,214
 
Interest expense:
                       
Related parties
   
     
     
(68,806
)
Other
   
     
     
(308,740
)
Gain (loss) on extinguishment of liabilities
   
     
     
(222,748
)
Gain on derivative instrument liability
   
     
     
7,203
 
Accretion of notes payable discounts
   
     
     
(1,132,088
)
Total Other Income (Expense)
   
61
     
384
     
(1,552,024
)
                         
NET LOSS
 
$
(369,608
)
 
$
(251,563
)
 
$
(198,530,147
)
                         
Net loss per common share, basic and diluted
  $
(0.00)
    $
(0.00)
         
                         
Weighted average number of common shares outstanding, basic and diluted
   
245,970,992
     
95,818,434
         
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
 
(An Exploration Stage Company)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
July 26, 2002 (Inception) through December 31, 2011
(Unaudited)

   
Common
Stock Shares
   
Common
Stock
Amount
   
Stock
Subscriptions
   
Additional
Paid-in
Capital
   
Deficit
Accumulated
During the
Exploration
Stage
   
Total
 
                                                 
Initial Issuance of Common Stock
   
3,315,000
   
$
3,315
   
   
$
(3,306
)
 
$
   
$
9
 
Net loss
   
     
     
     
     
(21,577
)
   
(21,577
)
Balances at September 30, 2002 (Unaudited)
   
3,315,000
   
$
3,315
   
$
   
$
(3,306
)
 
$
(21,577
)
 
$
(21,568
)
                                                 
Acquisition of DML Services on March 17, 2003
   
6,720,000
     
6,720
     
     
(56,720
)
   
     
(50,000
)
Common stock and warrants issued for services
   
150,000
     
150
     
     
188,850
     
     
189,000
 
Common stock issued for compensation
   
2,114,280
     
2,115
     
     
847,885
     
     
850,000
 
Common stock issued for interest expense related to a note payable
   
525,000
     
525
     
     
16,975
     
     
17,500
 
Issuance of common stock to Gold and Minerals Company, Inc. in connection with purchase of interests in assets of El Capitan, Ltd. in November 2002
   
35,685,000
     
35,685
     
     
(35,663
)
   
     
22
 
Issuance of common stock to Gold and Minerals Company, Inc. in connection with purchase of COD property in August 2003
   
3,600,000
     
3,600
     
     
(3,600
)
   
     
 
Net loss
   
     
     
     
     
(1,561,669
)
   
(1,561,669
)
Balances at September 30, 2003 (Unaudited)
   
52,109,280
   
$
52,110
   
$
   
$
954,421
   
$
(1,583,246
)
 
$
(576,715
)
                                                 
Beneficial conversion of notes payable
   
     
     
     
75,000
     
     
75,000
 
Common stock issued for acquisition of Weaver property interest in July 2004
   
3,000,000
     
3,000
     
     
(3,000
)
   
     
 
Common stock issued for compensation
   
3,650,164
     
3,650
     
     
516,350
     
     
520,000
 
Common stock issued for notes payable
   
1,827,938
     
1,827
     
     
381,173
     
     
383,000
 
Common stock issued for services and expenses
   
2,082,234
     
2,083
     
     
393,682
     
     
395,765
 
Costs associated with warrants and options issued
   
     
     
     
108,000
     
     
108,000
 
Stock subscriptions
   
     
     
50,000
     
     
     
50,000
 
Net loss
   
     
     
     
     
(1,314,320
)
   
(1,314,320
)
Balances at September 30, 2004 (Unaudited)
   
62,669,616
   
$
62,670
   
$
50,000
   
$
2,425,626
   
$
(2,897,566
)
 
$
(359,270
)
(Continued)
 
The accompanying notes are an integral part of these consolidated financial statements.
 
(An Exploration Stage Company)
 
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
July 26, 2002 (Inception) through December 31, 2011 (Continued)
(Unaudited)
 
   
Common
Stock Shares
   
Common
Stock
Amount
   
Stock
Subscriptions
   
Additional
Paid-in
Capital
   
Deficit
Accumulated
During the
Exploration
Stage
   
Total
 
                                                 
Beneficial conversion of notes payable
   
     
     
     
21,635
     
     
21,635
 
Common stock issued for notes payable
   
383,576
     
384
     
     
153,042
     
     
153,426
 
Common stock issued for services
   
2,290,557
     
2,290
     
     
1,254,245
     
     
1,256,535
 
Common stock sold in private placement
   
3,865,000
     
3,865
     
     
1,785,272
     
     
1,789,137
 
Costs associated with warrants and options issued
   
     
     
     
149,004
     
     
149,004
 
Discounts on issuance of notes payable
   
     
     
     
113,448
     
     
113,448
 
Subscribed stock issued
   
200,000
     
200
     
(50,000
)
   
49,800
     
     
 
Net loss
   
     
     
     
     
(3,244,841
)
   
(3,244,841
)
Balances at September 30, 2005 (Unaudited)
   
69,408,749
   
$
69,409
   
$
   
$
5,952,072
   
$
(6,142,407
)
 
$
(120,926
)
                                                 
Beneficial conversion of notes payable
   
     
     
     
128,572
     
     
128,572
 
Common stock issued for compensation
   
364,912
     
364
     
     
286,772
     
     
287,136
 
Common stock issued for exercise of options and warrants
   
498,825
     
499
     
     
256,251
     
     
256,750
 
Common stock issued for notes payable
   
2,124,726
     
2,125
     
     
1,147,875
     
     
1,150,000
 
Common stock issued for services
   
310,000
     
310
     
     
274,690
     
     
275,000
 
Common stock sold in private placement
   
2,189,697
     
2,190
     
     
1,158,775
     
     
1,160,965
 
Costs associated with warrants and options issued
   
     
     
     
163,750
     
     
163,750
 
Discounts on issuance of convertible notes payable
   
     
     
     
1,018,640
     
     
1,018,640
 
Provision for deferred income tax related to a timing difference on debt discount
   
     
     
     
(80,322
)
   
     
(80,322
)
Net loss
   
     
     
     
     
(4,041,802
)
   
(4,041,802
)
Balances at September 30, 2006 (Unaudited)
   
74,896,909
   
$
74,897
   
$
   
$
10,307,075
   
$
(10,184,209
)
 
$
197,763
 
(Continued)
 
The accompanying notes are an integral part of these consolidated financial statements.
 
6

 
(An Exploration Stage Company)
 
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
July 26, 2002 (Inception) through December 31, 2011 (Continued)
(Unaudited)
 
   
Common
Stock Shares
   
Common
Stock
Amount
   
Stock
Subscriptions
   
Additional
Paid-in
Capital
   
Deficit
Accumulated
During the
Exploration
Stage
   
Total
 
                                                 
Common stock issued for compensation
   
966,994
     
968
     
     
604,583
     
     
605,551
 
Common stock issued for exercise of options and warrants
   
2,258,000
     
2,258
     
     
1,121,742
     
     
1,124,000
 
Common stock issued for notes payable
   
1,500,000
     
1,500
     
     
748,500
     
     
750,000
 
Common stock issued for services
   
80,216
     
81
     
     
52,325
     
     
52,406
 
Common stock sold in private placement
   
50,000
     
50
     
     
24,950
     
     
25,000
 
Costs associated with warrants and options issued
   
     
     
     
2,249,475
     
     
2,249,475
 
Reverse provision for deferred income tax related to a timing difference on debt discount
   
     
     
     
80,322
     
     
80,322
 
Net loss
   
     
     
     
     
(4,437,775
)
   
(4,437,775
)
Balances at September 30, 2007
   
79,752,119
   
$
79,754
   
$
   
$
15,188,972
   
$
(14,621,984
)
 
$
646,742
 
                                                 
Common stock issued for compensation
   
1,637,356
     
1,637
     
     
358,774
     
     
360,411
 
Common stock issued for exercise of options and warrants
   
1,257,500
     
1,257
     
     
176,568
     
     
177,825
 
Common stock issued for exercise of cashless warrants
   
12,000
     
12
     
     
(12
)
   
     
 
Common stock issued for services
   
3,213,150
     
3,212
     
     
662,035
     
     
665,247
 
Common stock sold in private placement
   
300,000
     
300
     
     
149,700
     
     
150,000
 
Costs associated with warrants and options issued
   
     
     
     
1,156,590
     
     
1,156,590
 
Net loss
   
     
     
     
     
(2,387,483
)
   
(2,387,483
)
Balances at September 30, 2008
   
86,172,125
   
$
86,172
   
$
   
$
17,692,627
   
$
(17,009,467
)
 
$
769,332
 
                                                 
Common stock issued for compensation
   
562,500
     
563
     
     
44,437
     
     
45,000
 
Common stock issued for exercise of options and warrants
   
725,000
     
725
     
     
35,525
     
     
36,250
 
Common stock issued for services
   
1,127,744
     
1,127
     
     
95,205
     
     
96,332
 
Costs associated with warrants and options issued
   
     
     
     
249,759
     
     
249,759
 
Net loss
   
     
     
     
     
(953,501
)
   
(953,501
)
Balances at September 30, 2009
   
88,587,369
   
$
88,587
   
$
   
$
18,117,553
   
$
(17,962,968
 
$
243,172
 
(Continued)
 
The accompanying notes are an integral part of these consolidated financial statements.
 
7

 
(An Exploration Stage Company)
 
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
July 26, 2002 (Inception) through December 31, 2011 (Continued)
(Unaudited)
 
   
Common
Stock Shares
   
Common
Stock
Amount
   
Stock
Subscriptions
   
Additional
Paid-in
Capital
   
Deficit
Accumulated
During the
Exploration
Stage
   
Total
 
                                                 
Common stock issued for compensation
   
2,075,927
     
2,076
     
     
647,234
     
     
649,310
 
Common stock issued for services
   
525,000
     
525
     
     
180,975
     
     
181,500
 
Common stock sold in private placement
   
4,255,374
     
4,255
     
     
1,485,111
     
     
1,489,366
 
Conversion of accounts payable and accrued liabilities to equity
   
346,399
     
347
     
     
30,829
     
     
31,176
 
Net loss
   
     
     
     
     
(1,276,529
)
   
(1,276,529
)
Balances at September 30, 2010
   
95,790,069
   
$
95,790
   
$
   
$
20,461,702
   
$
(19,239,497
)
 
$
1,317,995
 
                                                 
Common stock issued for services
   
183,000
     
183
     
     
175,757
     
     
175,940
 
Common stock issued for the acquisition of Gold and Minerals Company, Inc.
   
148,127,043
     
148,127
     
     
177,604,325
     
     
177,752,452
 
Common stock issued for exercise of warrants
   
366,667
     
367
     
     
212,300
     
     
212,667
 
Common stock issued under settlement agreement
   
332,285
     
332
     
     
328,683
     
     
329,015
 
Common stock sold in private placement
   
783,396
     
783
     
     
514,836
     
     
515,619
 
Costs associated with options
   
     
     
     
745,213
     
     
745,213
 
Merger rounding share issued
   
1
     
     
     
1
     
     
1
 
Stock issuance costs for the acquisition
   
     
     
     
(32,324
)
   
     
(32,324
)
Net loss
   
     
     
     
     
(178,921,042
)
   
(178,921,042
)
Balances at September 30, 2011
   
245,582,461
   
$
245,582
   
$
   
$
200,010,493
   
$
(198,160,539
)
 
$
2,095,536
 
                                                 
Common stock sold in private placement
   
1,275,119
     
1,275
     
 
     
448,725
     
     
450,000
 
Costs associated with options
   
 
     
     
     
12,313
     
     
12,313
 
Net loss
   
     
     
     
     
(369,608
   
(369,608
Balances at December 31, 2011 (Unaudited)
 
$
 246,857,580
   
246,857
   
 –
   
$
200,471,531
   
$
(198,530,147
 
$
2,188,241
 
 
The accompanying notes are an integral part of these consolidated financial statements.
  
(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
   
Three Months Ended
December 31,
   
July 26, 2002 
(Inception)
Through
December 31,
 
   
2011
   
2010
   
2011
 
                   
CASH FLOWS FROM OPERATING ACTIVITIES:
                 
Net loss
 
 $
(369,608
)
 
 $
(251,563
)
 
 $
(198,530.147
)
                         
Adjustments to reconcile net (loss) to net cash used in operating activities:
                       
Warrant and option expense
   
12,313
     
     
4,834,104
 
Beneficial conversion feature of notes payable
   
     
     
225,207
 
Non-cash expense with affiliate
   
     
     
7,801
 
Stock-based compensation
   
     
     
6,605,133
 
Non-cash merger related costs
   
     
     
1
 
Accretion of discounts on notes payable
   
     
     
1,132,088
 
(Gain) loss on sale of fixed assets
   
     
     
34,733
 
Gain on derivative instruments liability
   
     
     
(7,203
)
Loss on impairment of mineral property
   
     
     
176,567,424
 
Write-off accounts payable and accrued interest
   
     
     
(63,364
)
Forgiveness of debt
   
     
     
(115,214
)
Gain on conversion of debt
   
     
     
(2,459
Provision for uncollectible note receivable
   
     
     
62,500
 
Non-cash litigation settlement
   
     
     
214,642
 
Depreciation
   
692
     
1,432
     
80,288
 
Changes in operating assets and liabilities: 
                       
Miscellaneous receivable
   
     
     
4,863
 
Interest receivable
   
     
     
(13,611
)
Prepaid expenses and other current assets
   
(47,154
)
   
12,057
     
(80,816
)
Advances on behalf of affiliated company
   
     
(28,117
)
   
(562,990
)
Accounts payable
   
(9,383
)
   
(36,753
)
   
111,443
 
Accounts payable - related party
   
     
     
364
 
Accrued liabilities
   
(3,441
)
   
(30,980
)
   
271,006
 
Interest payable, other
   
     
     
49,750
 
Net Cash (Used in) Operating Activities
   
(416,581
)
   
(333,924
)
   
(9,174,457
)
                         
CASH FLOWS FROM INVESTING ACTIVITIES:
                       
Purchase of property interest
   
     
     
(100,000
)
Purchase of furniture and equipment
   
     
     
(148,740
)
Proceeds from sale of fixed assets
   
     
     
32,001
 
Deposits
   
     
     
(22,440
)
Issuance of notes receivable
   
     
     
(249,430
)
Payments received on notes receivable
   
     
     
129,450
 
Cash received in acquisition of Gold and Minerals Company, Inc.
   
     
     
89,902
 
Costs associated with acquisition share issuance
   
     
     
(32,324
)
Cash paid in connection with acquisition of DML Services, Inc.
   
     
     
(50,000
)
Net Cash (Used in) Investing Activities
   
     
     
(351,581
)
(Continued)
The accompanying notes are an integral part of these unaudited consolidated financial statements.
 EL CAPITAN PRECIOUS METALS, INC.
(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)

   
Three Months Ended
December 31,
   
July 26, 2002 
(Inception)
Through
December 31,
 
   
2011
   
2010
   
2011
 
                   
CASH FLOWS FROM FINANCING ACTIVITIES:
                 
Proceeds from the sale of common stock
   
450,000
     
15,619
     
5,911,591
 
Costs associated with the sale of stock
   
     
     
(19,363
)
Proceeds from notes payable, related parties
   
     
     
219,900
 
Proceeds from warrant exercise
   
     
     
1,550,742
 
Proceeds from notes payable, other
   
     
     
2,322,300
 
Increase in finance contracts
   
     
     
117,479
 
Repayment of notes payable, related parties
   
     
     
(61,900
)
Payments on finance contracts
   
     
     
(117,479
)
Repayment of notes payable, other
   
     
     
(43,874
)
              Net Cash Provided Financing Activities
   
450,000
     
15,619
     
9,879,396
 
                         
NET INCREASE (DECREASE)  IN CASH AND CASH EQUIVALENTS
   
33,419
     
(318,305
)
   
353,358
 
                         
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
   
319,939
     
955,023
     
 
                         
CASH AND CASH EQUIVALENTS, END OF PERIOD
 
$
353,358
   
636,718
   
353,358
 
                         
SUPPLEMENTAL CASH FLOW INFORMATION:
                       
Cash paid for interest
 
$
            –
   
$
        –
   
$
     172,917
 
Cash paid for income taxes
   
            –
     
           –
     
               –
 
                         
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
                       
Fixed assets disposed for accrued liabilities
 
$
            –
   
$
        –
   
$
         1,991
 
Issuance of common stock to Gold and Minerals Company, Inc. in connection with the purchase of interest in El Capitan, Ltd.
   
           –
     
           –
     
                                      8
 
Issuance of common stock to Gold and Minerals Company, Inc. in connection with the purchase of the COD property
   
           –
     
           –
     
            3,600
 
Issuance of common stock to Gold and Minerals Company, Inc. in connection with the purchase of the Weaver property
   
           –
     
           –
     
        3,000
 
Net non-cash advances from affiliated company
   
           –
     
           –
     
       562,990
 
Notes payable and accrued interest converted to equity
   
           –
     
           –
     
2,495,544
 
Accounts payable and accrued liabilities converted to equity
   
    –
     
          –
     
        31,176
 
Issuance of common stock to former Company officers under a settlement
   
     
     
329,015 
 
Issuance of common stock to Gold and Minerals Company, Inc. stockholders in connection with the merger of Gold and Minerals Company, Inc.
   
     
     
177,752,452
 
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
 (An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1  BASIS OF PRESENTATION

The accompanying unaudited interim financial statements of El Capitan Precious Metals, Inc. (“El Capitan” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) for interim financial information. Accordingly, the financial statements do not include all information and footnotes required by generally accepted accounting principles in the United States (“GAAP”) for complete annual financial statements. In the opinion of management, the accompanying unaudited condensed interim financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation. Interim operating results are not necessarily indicative of results that may be expected for the year ending September 30, 2012, or for any subsequent period. These interim financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended September 30, 2011, included in the Company’s Annual Report on Form 10-K, filed December 29, 2011. The consolidated balance sheet at September 30, 2011, has been derived from the audited financial statements included in the 2011 Annual Report.

Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for fiscal 2011 as reported in the Form 10-K have been omitted. Certain prior year amounts have been reclassified to conform to the current year presentation.
 
Principles of Consolidation
 
With the acquisition of Gold and Minerals Company, Inc. (“Minerals”), the Company also became the 100% owner of EL Capitan, LTD. (“ECL”). The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries El Capitan Precious Metals, Inc., a Delaware corporation; Minerals, a Nevada corporation; and ECL, an Arizona corporation. All significant inter-company accounts and transactions have been eliminated in consolidation.

New Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.
 
Management Estimates and Assumptions
 
The preparation of El Capitan’s consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made; however, actual results could differ materially from these estimates.

NOTE 2 – MINERAL PROPERTY COSTS
 
Mineral property exploration costs are expensed as incurred until such time as economic reserves are quantified. To date El Capitan has not established any proven or probable reserves on its mineral properties. The Company has capitalized $1,879,608 of mineral property acquisition costs reflecting its investment in the El Capitan site as of December 31, 2011.
 
NOTE 3 – STOCKHOLDERS’ EQUITY

Equity Purchase Agreement

On July 11, 2011, the Company entered into an Equity Purchase Agreement (the “Agreement”) with Southridge Partners II, LP (“Southridge”), pursuant to which the Company may from time to time, in its discretion, sell newly-issued shares of its common stock to Southridge for aggregate gross proceeds of up to $5,000,000. Unless terminated earlier, Southridge’s purchase commitment will automatically terminate on the earlier of July 11, 2013 or the date on which aggregate purchases of shares of common stock by Southridge under the Agreement total $5,000,000. El Capitan has no obligation to sell any shares under the Agreement. The Agreement may be terminated by the Company at any time. Southridge will have no obligation to purchase shares under the Agreement to the extent that such purchase would cause Southridge to own more the 9.99% of the El Capitan’s common stock.
 
For each share of the Company’s common stock purchased under the Agreement, Southridge will pay 94.0% of the Market Price, which is defined as the average of the two lowest closing bid prices on the Over-the-Counter Bulletin Board, as reported by Bloomberg Finance L.P., during the five trading days following the put notice (the “Valuation Period”).  After the expiration of the Valuation Period, Southridge will purchase the applicable number of shares subject to customary closing conditions.
 
As of December 31, 2011 the Company has received aggregate proceeds of $950,000 under the Agreement and $100,000 subsequent to December 31, 2011. The Company has remaining options to sell to Southridge $3,950,000 in shares of common stock of the Company under the Agreement.

Issuances of Common Stock, Warrants and Options

Common Stock
 
During the quarter ended December 31, 2011, El Capitan issued 1,275,119 shares of common stock at prices ranging from $0.421 to $0.281 per share under the terms of Equity Purchase Agreement and received cash proceeds of $450,000.

Warrants

During the three months ended December 31, 2011, the Company did not issue any warrants.  There were no warrants outstanding as of September 30, 2011 or December 31, 2011.
 
Options
 
On November 1, 2011, pursuant to the 2005 Stock Incentive Plan, the Company granted to a consultant a two-year stock option to purchase 100,000 shares of the Company common stock, at an exercise price of $0.42 per share. The option becomes fully vested upon the execution of an engagement agreement between the Company and specified investment banker or one of its affiliates. The fair value of the options was determined to be $24,627, using the Black-Scholes option pricing model, and $12,313 was expensed as stock-based compensation during the quarter ending December 31, 2011. The significant assumptions used in the valuation were: the exercise price $0.42, on November 1, 2011, the market value of the Company’s common stock, expected volatility of 115.379%, risk free interest rate of 0.23%, expected term of  2 years and expected dividend yield of zero.
 
The following table sets forth certain terms of the Company’s outstanding options and exercisable options for the three months ended December 31, 2011:
 
   
Options Outstanding
   
Options Exercisable
 
   
Number of 
Shares
   
Weighted Average 
Exercise Price
   
Number of 
Shares
   
Weighted Average 
Exercise Price
 
                             
Balance, September 30, 2011
   
2,450,000
    $ 0.84      
2,450,000
    $ 0.84  
   Granted
   
100,000
    $ 0.42      
   
 
   Exercised
   
   
     
   
 
   Expired/Cancelled
   
   
     
   
 
Balance, December 31, 2011
   
2,550,000
    $ .0.83      
2,450,000
    $ 0.84  
                                 
Weighted average contractual life in years
   
2.05
             
2.06
         
                                 
Aggregate intrinsic value
  $
0
            $
0
         
 
The intrinsic value of each option or warrant share is the difference between the fair market value of the common stock and the exercise price of such option or warrant share to the extent it is "in-the-money.” Aggregate intrinsic value represents the pretax value that would have been received by the holders of in-the-money options had they exercised their options on the last trading day of the quarter and sold the underlying shares at the closing stock price on such day. The intrinsic value calculation is based on the $0.39 closing stock price of the Company’s common stock on December 31, 2011, and there were options in-the-money on the date of measurement. The intrinsic value amounts change based on the market price of the Company’s stock.

The Company has a 2005 Stock Incentive Plan under which 30,000,000 shares are reserved and registered for stock and option grants. There were 15,919,460 shares available for grant under the Plan at December 31, 2011, excluding the 2,550,000 options outstanding.

NOTE 4 – SUBSEQUENT EVENTS

Subsequent to December 31, 2011, and through February 9, 2012, El Capitan sold an aggregate of 330,365 shares to Southridge Partners under the Equity Purchase Agreement for aggregate cash proceeds of $100,000.
 
On January 31, 2012, the Company engaged Houlihan Lokey Capital, Inc. to act as its exclusive financial advisor to assist the Company in evaluating potential strategic alternatives related to the approximately 3,000 acre property located near Capitan, New Mexico, including the potential sale of the property.
 
On January 31, 2012, pursuant to the 2005 Stock Incentive Plan, the Company granted to a director of our board a two-year vested stock option to purchase 500,000 shares of the Company’s common stock, at an exercise price of $0.38 per share.

Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
The following management discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited interim consolidated financial statements and related notes which are included in Item 1 of this Quarterly Report on Form 10-Q, and with our audited financial statements and the “Risk Factors” section included in our Form 10-K for the year ended September 30, 2011, filed with the U.S Securities and Exchange Commission on December 29, 2011.
 
Cautionary Statement on Forward-Looking Statements

This Quarterly Report on Form 10-Q may contain certain “forward-looking” statements as such term is defined by the Securities and Exchange Commission in its rules, regulations and releases, which represent the registrant’s expectations or beliefs, including but not limited to, statements concerning the registrant’s operations, economic performance, financial condition, growth and acquisition strategies, investments, and future operational plans. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” “might,” “plan,” “predict” or “continue” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, certain of which are beyond the registrant’s control, and actual results may differ materially depending on a variety of important factors, including uncertainty related to acquisitions, governmental regulation, managing and maintaining growth, the operations of the Company and its subsidiaries, volatility of stock price, commercial viability of any mineral deposits and any other factors discussed in this and other registrant filings with the Securities and Exchange Commission.  The Company does not intend or undertake to update the information in this Form 10-Q if any forward-looking statement later turns out to be inaccurate.

Company Overview

We are an exploration stage company that has owned interests in several properties located in the southwestern United States in the past. We are principally engaged in the exploration of precious metals and other minerals. At this time, we are not engaged in any revenue-producing operations. We are considered an exploration stage company under the SEC criteria since we have not yet demonstrated the existence of proven or probable reserves at our El Capitan property.  As a result, and in accordance with accounting principles generally accepted in the United States for exploration stage companies, all expenditures for exploration and evaluation of our properties are expensed as incurred. 
 
We are concentrating on the exploration of our El Capitan property. After completing further testing to determine the existence and concentration of commercially extractable precious metals or other minerals at this property site, and if the results of such testing are positive, we anticipate formalizing plans for the development of the asset by either selling or entering into a joint venture with a producing mining company.

Financial Condition, Liquidity and Capital Resources
 
Historically we have relied on equity and debt financings to finance our ongoing operations.  To continue our exploration, metallurgical and recovery program efforts on the El Capitan project and continue our business strategies for our fiscal year 2012, on July 11, 2011, we entered into an Equity Purchase Agreement (the “Agreement”), with Southridge Partners II, LP (“Southridge). The term of the Agreement is two years, and can be terminated by the Company at any time.  The Agreement permits the Company to sell newly-issued shares of our common stock for aggregate proceeds of up to $5,000,000.  We have no obligation to sell any shares under the Agreement. The shares to be sold under the Agreement will be made pursuant to our effective registration statement on Form S-3 filed with the Securities and Exchange Commission.  As of February 9, 2012, we have sold Southridge shares of common stock for aggregate proceeds of $1,050,000 and have a remaining option to sell to Southridge $3,950,000 in shares of common stock of the Company under the Agreement.  The Company expects that the proceeds received from the Agreement will permit the Company to continue its development of the El Capitan property to sell to or enter into a joint venture with a producing mining company.
 
We expect that the Agreement will provide the Company with adequate funding to sustain its planned operations and provide a source of funds for the final phases of our business plan strategy. At this time the Company plans to utilize the funds for the finalization of the recovery process project for the El Capitan deposit, complete any additional exploration and metallurgical efforts that may be required on the El Capitan project, necessary corporate personnel and general and administrative operating costs and expenses to be incurred in the marketing of the El Capitan site.
 
As of December 31 2011, we had cash on hand of $353,358, and an accumulated deficit of $198,530,147. Based upon our budgeted burn rate we currently have operating capital for approximately five months, excluding any cash that would be received by the Company upon the sale of its shares of common stock under the terms of the Agreement. If management’s plans are not successful, operations and liquidity may be adversely impacted.

RESULTS OF OPERATIONS

Three Months Ended December 31, 2011 Compared to Three Months Ended December 31, 2010

Revenues 

We have not yet realized any revenue from operations, nor do we expect to realize potential revenues until our property is sold or a joint venture is entered into for development and deployment of the El Capitan site. There is no guarantee that we will achieve proven commercially viable recovery of precious metals at the El Capitan site.

Expenses and Net Loss

Our operating expenses increased $117,722 from $251,947 for the three months ended December 31, 2010 to $369,669 for the three months ended December 31, 2011. The increase is mainly attributable to an increase in exploration expenses aggregating $111,485; non-cash warrant and option expense of $12,313 and increased other general and administrative of $4,404. These increases were offset by decreases in professional fees of $6,330 and legal and accounting fees of $4,150.

The increase in exploration expenses resulted from increased assay tests on our precious metals recovery project and increased time spent on this project by our outside mine consultants. The increase in other general and administrative is mainly attributable increased costs incurred in business/shareholder relations of $7,905; monthly meetings of our board of directors aggregating $6,869; web site design and maintenance of $9,035 and $3,875 in director and officer insurance. These increases were offset by decreases in transfer agent fees of $15,537, which were mainly related to proxy statement costs; $3,325 in filing fees related to the S-4 Registration Statement and decreased supplies and repair costs of $1,051.

Our net loss for the three months ended December 31, 2011 increased to $369,608 from a net loss of $251,563 incurred for the comparable three month period ended December 31, 2010. The increase in net loss of $118,045 for the current period is attributable to the aforementioned net increases in operating expenses.

Factors Affecting Future Operating Results

We have generated no revenues, other than interest income, since inception. As a result, we have only a limited operating history upon which to evaluate our future potential performance. Our potential must be considered by evaluation of all risks and difficulties encountered by exploration companies which have not yet established business operations.
 
The price of gold and other precious metals has experienced an increase in value over the past three years. Any significant drop in the price of gold, other precious metals or iron ore prices may have a materially adverse affect on the future results of potential operations unless we are able to offset such a price drop by substantially decreased estimated costs of extraction of production, if involved in a joint venture, or may affect our ability to market the sale of the El Capitan property site.
We currently are continuing to have geological and metallurgical work performed on samples from our site and developing and finalizing an economically feasible precious metals recovery process for our El Capitan ore.

Off-Balance Sheet Arrangements
 
During the three months ended December 31, 2011, we did not engage in any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

Critical Accounting Policies
 
Our unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which require us to make estimates and judgments that significantly affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Note 1, “Significant Accounting Policies” in the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended September 30, 2011, describe our significant accounting policies which are reviewed by management on a regular basis
 
New Accounting Pronouncements
 
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
 
Our exposure to market risks is limited to changes in interest rates. We do not use derivative financial instruments as part of an overall strategy to manage market risk.

We have no debt outstanding nor do we have any investment in debt instruments other than highly liquid short-term investments. Accordingly, we consider our interest rate risk exposure to be insignificant at this time.
 
Item 4.
Controls and Procedures
 
The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in its periodic reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the principal executive officer/principal financial officer, to allow timely decisions regarding required disclosure.
 
As of as of the end of period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act).  The evaluation included certain control areas which are material to the Company and its size as an Exploration Stage Company. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Based upon the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at a reasonable assurance level to ensure that information required to be disclosed by it in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.  In addition, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at a reasonable assurance level to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements or fraud. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.  Also, 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.

Changes in Internal Control over Financial Reporting
 
There have been no changes in our internal control over financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, during the quarter ended December 31, 2011, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II.
OTHER INFORMATION
 
Item 1.
Legal Proceedings
 
We are not a party to any material pending legal proceedings, and to the best of our knowledge, no such proceedings by or against the Company have been threatened.
 
Item 1A.
Risk Factors
 
Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described in our Annual Report on Form 10-K for the year ended September 30, 2011, filed with the U.S. Securities and Exchange Commission on December 29, 2011, in addition to the other information included in forward-looking statements made in this Quarterly Report on Form 10-Q or elsewhere by management from time to time prior to investing in our common stock.
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
None.
 
Item 3.
Defaults Upon Senior Securities
 
None.
 
Item 4.
Mine Safety Disclosures
 
Not applicable.
 
Item 5.
Other Information
 
None.
 
Exhibits
 
(a) 
Exhibits
 
Exhibit
Number
 
Description
     
2.1
 
Agreement and Plan of Merger between the Company, Gold and Minerals Company, Inc. and MergerCo, dated June 28, 2010 (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed July 7, 2010).
3.1
 
Articles of Incorporation, as amended (incorporated by reference to Exhibit 3.1 to the Company’s Form S-4 Registration Statement #333-170281 filed on November 2, 2010).
3.2
 
Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s Form S-4 Registration Statement #333-170281 filed on November 2, 2010).
10.1
 
Joint Venture Agreement dated as of May 4, 2010, between the Company, El Capitan, Ltd. and Planet Resource Recovery, Inc. (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10-K for the year ended September 30, 2010 filed on January 13, 2011).
 10.2  
Equity Purchase Agreement dated July 11, 2011 between the Company and Southridge Partners II, LP (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed July 12, 2011).
(Continued)
 
Exhibit
Number
 
Description
     
31.1*
 
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
 
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*
 
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*   XBRL Instance Document** 
 101.SCH*   XBRL Extension Schema Document**
 101.CAL*   XBRL Extension Calculation Linkbase Document**
 101.DEF*   XBRL Extension Definition Linkbase Document**
 101.LAB*   XBRL Extension Labels Linkbase Document**
 101.PRE*   XBRL Extension Presentation Linkbase Document**
__________________
Filed herewith.
**
In accordance with Rule 406T of Regulation S-T, this information is deemed not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
 

In accordance with 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.
 
 
EL CAPITAN PRECIOUS METALS, INC.
 
       
       
Dated:   February 9, 2012
By:
/s/  Charles C. Mottley  
   
Charles C. Mottley
Chief Executive Officer, President and Director
(Principal Executive Officer)
 
       
 
Dated:   February 9, 2012
By:
/s/  Stephen J. Antol  
   
Stephen J. Antol
Chief Financial Officer
(Principal Financial Officer)
 
       
 
 
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