Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended November 30, 2011
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______________ to________________
Commission file number 000-54327
FIRST AMERICAN SILVER CORP.
(Exact name of registrant as specified in its charter)
Nevada 98-0579157
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
10597 Double R Blvd., Suite 2, Reno, NV 89521
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 775. 323-3278
Securities registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
None N/A
Securities registered under Section 12(g) of the Act:
None
(Title of class)
Indicate by checkmark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by checkmark if the registrant is not required to file reports pursuant
to Section 13 or 15(d) of the Act. Yes [ ] No [X]
Indicate by checkmark 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 [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 (ss. 232.405
of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
Indicate by checkmark 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 [ ] Accelerated Filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a Smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act). Yes [ ] No [X]
The aggregate market value of Common Stock held by non-affiliates of the
Registrant on May 31, 2011 was $Nil based on a $Nil average bid and asked price
of such common equity, as of the last business day of the registrant's most
recently completed second fiscal quarter. (There was no bid or ask price of our
common shares during this quarter).
Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of the latest practicable date.
55,700,000 as of February 8, 2012
DOCUMENTS INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
Item 1. Business........................................................... 3
Item 1A. Risk Factors....................................................... 7
Item 1B. Unresolved Staff Comments.......................................... 10
Item 2. Properties......................................................... 10
Item 3. Legal Proceedings.................................................. 12
Item 4. Mine Safety Disclosures............................................ 12
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities.......................... 12
Item 6. Selected Financial Data............................................ 13
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................. 13
Item 7A. Quantitative and Qualitative Disclosures About Market Risk......... 19
Item 8. Financial Statements and Supplementary Data........................ 20
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure............................................... 37
Item 9A. Controls and Procedures ........................................... 37
Item 9B. Other Information.................................................. 38
Item 10. Directors, Executive Officers and Corporate Governance............. 38
Item 11. Executive Compensation............................................. 42
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters........................................ 44
Item 13. Certain Relationships and Related Transactions, and Director
Independence....................................................... 44
Item 14. Principal Accounting Fees and Services............................. 45
Item 15. Exhibits, Financial Statement Schedules............................ 45
2
PART I
ITEM 1. BUSINESS
This annual report contains forward-looking statements. These statements relate
to future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may", "should",
"expects", "plans", "anticipates", "believes", "estimates", "predicts",
"potential" or "continue" or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks in the section
entitled "Risk Factors", that may cause our or our industry's actual results,
levels of activity, performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed or
implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Except as required by applicable law,
including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to actual
results.
Our financial statements are stated in United States Dollars (US$) and are
prepared in accordance with United States Generally Accepted Accounting
Principles.
In this annual report, unless otherwise specified, all dollar amounts are
expressed in United States dollars and all references to "common shares" refer
to the common shares in our capital stock.
As used in this annual report, the terms "we", "us", "our", and "company" mean
First American Silver Corp., unless the context clearly requires or states
otherwise.
CORPORATE OVERVIEW
We are an exploration stage company engaged in the acquisition, exploration and
development of mineral properties.
The address of our principal executive office is located at 10597 Double R Blvd,
Suite 2, Reno, Nevada, 89521. Our telephone number is (775) 323-3278.
Our common stock is quoted on the OTC Bulletin Board under the symbol "FASV".
CORPORATE HISTORY
We were incorporated in the State of Nevada on April 29, 2008, under the name
"Mayetok, Inc.". As Mayetok, Inc. we were engaged in the development of a
website to market vacation properties in the Ukraine.
On June 8, 2010, we initiated a one (1) old for 35 new forward stock split of
our issued and outstanding common stock. As a result, our authorized capital
increased from 100,000,000 to 3,500,000,000 shares of common stock and the
issued and outstanding increased from 2,200,000 shares of common stock to
77,000,000 shares of common stock, all with a par value of $0.001.
Also on June 8, 2010, we changed our name from "Mayetok, Inc." to "First
American Silver Corp.", by way of a merger with our wholly owned subsidiary
First American Silver Corp., which was formed solely for the change of name. We
changed the name of our company to reflect the new direction of our company in
the business of acquiring, exploring and developing mineral properties. As of
June, 2010, we had abandoned our former business plan of seeking to market
vacation properties.
Our name change and forward stock split becomes effective with the
Over-the-Counter Bulletin Board at the opening of trading on June 16, 2010, on
which date we adopted the new stock symbol "FASV".
3
OUR CURRENT BUSINESS
On November 26, 2010 we entered into three option agreements with All American
Resources LLC for the acquisition of certain mineral property interests located
in Elko County and White Pine County, Nevada. The interests that we have
acquired are as follows:
* An option to acquire a 100% interest in a mineral exploration property
called the "Eagan Canyon" property in White Pine County, Nevada;
* An option to acquire a 100% interest in a mineral exploration property
called the "Muncy Creek" property in White Pine County, Nevada; and
* An option to acquire a 100% interest in a mineral exploration property
called the "Mountain City" property in Elko County, Nevada.
Pursuant to the above described option agreements, we may, at our option,
purchase any of the applicable properties by providing to All American Resources
LLC the following compensation in respect of each applicable property over the
nine year option term:
* making annual periodic payments in the aggregate amount of $180,000
ranging from $10,000 to $50,000;
* issuing to All American Resources 300,000 common shares in our capital
stock in the aggregate, with 100,000 shares issuable before the 1st
anniversary of the option agreement and 25,000 shares issuable each
year thereafter until the ninth anniversary of the option agreement;
and
* on or before the tenth anniversary of the option agreement either (i)
paying to All American Resources $1,000,000, in which case All
American Resources shall retain a two percent (2%) mineral production
royalty; or (ii) paying to All American Resources $2,000,000, in which
case All American Resources shall retain a one percent (1%) mineral
production royalty.
To date, we have issued 375,000 shares of our common stock and paid $30,000 in
the aggregate to All American Resources LLC pursuant to the three mineral
property option agreement.
On April 15, 2011, we entered into a mining lease and option to purchase
agreement with Pyramid Lake LLC and Anthony A. Longo, on an ongoing basis
expiring April 15, 2031 with respect to the Mount Jackson Project located in
Esmeralda County, Nevada, wherein the owners will retain a production royalty of
3% of the net smelter returns. Pursuant to the lease and option agreement, we
are required to make the following payments:
Payment
Payment Date Amount ($)
------------ ----------
April 15, 2011 30,000 (paid)
April 15, 2012 40,000
April 15, 2013 50,000
April 15, 2014 60,000
April 15, 2015 70,000
April 15, 2016 80,000
April 15, 2017 90,000
April 15, 2018 100,000
April 15, 2019 - April 15, 2031 100,000*
----------
* Commencing April 15, 2019, the amount of payments will be increased (and
never decreased) for inflation.
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In addition to the payments described above we issued an aggregate 100,000
shares of our common stock, pursuant to the terms of the lease and option
agreement.
On September 22, 2011, we entered into a License and Assignment Agreement dated
and effective as of September 16, 2011 with our president and director, Thomas
J. Menning. Mr. Menning is the successor in interest of the rights of Universal
Gas, Inc. and Universal Exploration, Ltd. (together "Universal") pursuant to an
agreement among Universal, Bullion Monarch Company, Polar Resources Co., Camsell
River Investments, Ltd., Lameert Management Ltd., and Etel Holdings Ltd. dated
May 10, 1979 (the "1979 Agreement"). Pursuant to the License Agreement, we have
acquired the rights and obligations of Universal established by the 1979
Agreement and pertaining to 256-square-miles of the Carlin Gold Trend in Elko
County, Nevada.
Under the terms of the 1979 Agreement and the License Agreement, we will now be
deemed the successor of a specific Right to Participate on a 50 percent basis
with ongoing and future projects operated, controlled and/or conveyed by Newmont
Mining and Barrick Gold Corporation within the area of interest.
Under the terms of the License Agreement, we will finance the cost of pursuing
the rights established in the 1979 Agreement. The distribution of any proceeds
will be as follows: After First American has been reimbursed for any and all
out-of-pocket expenses, it will share proceeds on an 80/20 percent basis with
Mr. Menning. The term of the licensing agreement will be for 10 years with an
option to renew for an additional 10 years.
Under the terms of the agreement, a notification of assignment to the operator
is required. Both Newmont Mining and Barrick Gold Corp. have been notified.
COMPETITION
We are a development stage mineral resource exploration company. We compete with
other mineral resource exploration companies for financing and for the
acquisition of new mineral properties. Many of the mineral resource exploration
companies with whom we compete have greater financial and technical resources
than those available to us. Accordingly, these competitors may be able to spend
greater amounts on acquisitions of mineral properties of merit, on exploration
of their mineral properties and on development of their mineral properties. In
addition, they may be able to afford more geological expertise in the targeting
and exploration of mineral properties. This competition could result in
competitors having mineral properties of greater quality and interest to
prospective investors who may finance additional exploration. This competition
could adversely impact on our ability to finance further exploration and to
achieve the financing necessary for us to develop our mineral properties.
COMPLIANCE WITH GOVERNMENT REGULATION
We are committed to complying with and are, to our knowledge, in compliance
with, all governmental and environmental regulations applicable to our company
and our properties. Permits from a variety of regulatory authorities are
required for many aspects of mine operation and reclamation. We cannot predict
the extent to which these requirements will affect our company or our properties
if we identify the existence of minerals in commercially exploitable quantities.
In addition, future legislation and regulation could cause additional expense,
capital expenditure, restrictions and delays in the exploration of our
properties.
RESEARCH AND DEVELOPMENT
We have not incurred any research and development expenditures over the past two
fiscal years.
PURCHASE OF SIGNIFICANT EQUIPMENT
We do not intend to purchase any significant equipment over the twelve months
ending November 30, 2012.
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SUBSIDIARIES
We do not have any subsidiaries.
CORPORATE OFFICES
Our principal office is located at 10597 Double R Blvd, Suite 2, Reno, Nevada,
89521. Our office space is leased to us at a cost of $1925.00 per month. The
office space is currently leased from a third party witch has no affiliation
with our company. Additionally, part of the office space is sublet to an
unaffiliated third party at the rate of $500.00 per month. We believe that this
space is sufficient to meet our present needs and do not anticipate any
difficulty in securing alternative or additional space, as needed, on terms
acceptable to us.
EMPLOYEES
We have no employees other than our management who devote 90 percent of their
time to the business and there are no employment contracts.
INTELLECTUAL PROPERTY
Other than the registered internet name, www.firstamericansilver.com which we
own and operate, we do not own, either legally or beneficially, any patent or
trademark, and have not registered any rights we may have under copyright.
DESCRIPTION OF SECURITIES
Common Stock
Our authorized capital stock consists of 3,500,000,000 shares of common stock,
par value $0.001 per share, and 20,000,000 shares of preferred stock, par value
$0.001 per share.
The holders of our common stock:
* Have equal ratable rights to dividends from funds legally available
therefore, when, as and if declared by our Board of Directors;
* Are entitled to share ratably in all of our assets available for
distribution to holders of common stock upon liquidation, dissolution
or winding up of our affairs;
* Do not have pre-emptive, subscription or conversion rights and there
are no redemption or sinking fund provisions or rights; and
* Are entitled to one non-cumulative vote per share on all matters on
which stockholders may vote.
The shares of common stock are not subject to any future call or assessment and
all have equal voting rights. There are no special rights or restrictions of any
nature attached to any of the common shares and they all rank at equal rate or
PARI PASSU, each with the other, as to all benefits, which might accrue to the
holders of the common shares. All registered stockholders are entitled to
receive a notice of any general annual meeting to be convened by our Board of
Directors.
At any general meeting, subject to the restrictions on joint registered owners
of common shares, on a showing of hands every stockholder who is present in
person and entitled to vote has one vote, and on a poll every stockholder has
one vote for each share of common stock of which he is the registered owner and
may exercise such vote either in person or by proxy. To the knowledge of our
management, at the date hereof, our sole officer and director is the only person
to exercise control, directly or indirectly, over more than 10% of our
outstanding common shares. See "Security Ownership of Certain Beneficial Owners
and Management."
6
We refer you to our Articles of Incorporation and Bylaws, copies of which were
filed with the registration statement of which this prospectus is a part, and to
the applicable statutes of the State of Nevada for a more complete description
of the rights and liabilities of holders of our securities.
REPORTS TO SECURITY HOLDERS
We are required to file annual, quarterly and current reports, proxy statements
and other information with the Securities and Exchange Commission and our
filings are available to the public over the internet at the Securities and
Exchange Commission's website at http://www.sec.gov. The public may read and
copy any materials filed by us with the Securities and Exchange Commission at
the Securities and Exchange Commission's Public Reference Room at 100 F Street
N.E. Washington D.C. 20549. The public may obtain information on the operation
of the Public Reference Room by calling the Securities and Exchange Commission
at 1-800-732-0330. The SEC also maintains an Internet site that contains
reports, proxy and formation statements, and other information regarding issuers
that file electronically with the SEC, at http://www.sec.gov.
ITEM 1A. RISK FACTORS
RISKS ASSOCIATED WITH MINING
OUR PROPERTIES ARE IN THE EXPLORATION STAGE AND THERE IS NO ASSURANCE THAT WE
CAN ESTABLISH THE EXISTENCE OF ANY MINERAL RESOURCE ON OUR PROPERTIES IN
COMMERCIALLY EXPLOITABLE QUANTITIES. UNLESS WE ESTABLISH THE PRESENCE OF A
COMMERCIALLY EXPLOITABLE MINERAL RESOURCE, WE CANNOT EARN ANY REVENUES FROM
OPERATIONS AND, IF WE FAIL TO DO SO, WE WILL LOSE ALL OF THE FUNDS THAT WE MAY
EXPEND ON EXPLORATION. IF WE DO NOT DISCOVER ANY MINERAL RESOURCE IN A
COMMERCIALLY EXPLOITABLE QUANTITY, OUR BUSINESS COULD FAIL.
We have not conducted any exploration work on our mineral properties and have
not established that they contain any mineral reserve. Even if we successfully
carry out a program of exploration on our mineral properties, we may fail to
establish that any of our properties contain any mineral reserve, which could
result in the failure of our business.
A mineral reserve is defined by the Securities and Exchange Commission in its
Industry Guide 7 (which can be viewed over the Internet at
http://www.sec.gov/divisions/corpfin/forms/industry.htm#secguide7) as that part
of a mineral deposit which could be economically and legally extracted or
produced at the time of the reserve determination. The probability of an
individual prospect ever having a "reserve" that meets the requirements of the
Securities and Exchange Commission's Industry Guide 7 is extremely remote. In
all probability our mineral resource properties do not contain any 'reserve' and
any funds that we spend on exploration will probably be lost.
Even if we do eventually discover a mineral reserve on our properties, there can
be no assurance that we will be able to develop any of our properties into a
producing mine and extract those resources. Both mineral exploration and
development involve a high degree of risk and few properties which are explored
are ultimately developed into producing mines.
The commercial viability of an established mineral deposit will depend on a
number of factors including, by way of example, the size, grade and other
attributes of the mineral deposit, the proximity of the resource to
infrastructure such as a smelter, roads and a point for shipping, government
regulation and market prices. Most of these factors will be beyond our control,
and any of them could increase costs and make extraction of any identified
mineral resource unprofitable.
MINERAL OPERATIONS ARE SUBJECT TO APPLICABLE LAW AND GOVERNMENT REGULATION. EVEN
IF WE DISCOVER A MINERAL RESOURCE IN A COMMERCIALLY EXPLOITABLE QUANTITY, THESE
LAWS AND REGULATIONS COULD RESTRICT OR PROHIBIT THE EXPLOITATION OF THAT MINERAL
RESOURCE. IF WE CANNOT EXPLOIT ANY MINERAL RESOURCE THAT WE MIGHT DISCOVER ON
OUR PROPERTIES, OUR BUSINESS MAY FAIL.
Both mineral exploration and extraction require permits from various, federal,
provincial, and local governmental authorities and are governed by laws and
regulations, including those with respect to prospecting, mine development,
7
mineral production, transport, export, taxation, labor standards, occupational
health, waste disposal, toxic substances, land use, environmental protection,
mine safety and other matters. We have yet to undertake any exploration
activities on any of our properties, and there can be no assurance that we will
be able to obtain or maintain any of the permits required for the exploration of
our mineral properties or for the construction and operation of a mine on our
properties on reasonable terms or at economically viable costs. If we cannot
accomplish these objectives, our business could fail.
IF WE ESTABLISH THE EXISTENCE OF A MINERAL RESOURCE ON OUR PROPERTIES IN A
COMMERCIALLY EXPLOITABLE QUANTITY, WE WILL REQUIRE ADDITIONAL CAPITAL IN ORDER
TO DEVELOP THE APPLICABLE PROPERTIES INTO A PRODUCING MINE. IF WE CANNOT RAISE
THIS ADDITIONAL CAPITAL, WE WILL NOT BE ABLE TO EXPLOIT THE RESOURCE, AND OUR
BUSINESS COULD FAIL.
If we do discover mineral resources in commercially exploitable quantities on
our properties, we will be required to expend substantial sums of money to
establish the extent of the resource, develop processes to extract it and
develop extraction and processing facilities and infrastructure. Although we may
derive substantial benefits from the discovery of a major deposit, there can be
no assurance that any discovered resource will be large enough to justify
commercial operations, nor can there be any assurance that we will be able to
raise the funds required for development on a timely basis. If we cannot raise
the necessary capital or complete the necessary facilities and infrastructure,
our business may fail.
MINERAL EXPLORATION AND DEVELOPMENT IS SUBJECT TO EXTRAORDINARY OPERATING RISKS.
WE MAY NOT INSURE AGAINST THESE RISKS. IN THE EVENT OF A CAVE-IN OR SIMILAR
OCCURRENCE, OUR LIABILITY MAY EXCEED OUR RESOURCES, WHICH WOULD HAVE AN ADVERSE
IMPACT ON OUR COMPANY.
Mineral exploration, development and production involve many risks which even a
combination of experience, knowledge and careful evaluation may not be able to
overcome. Our future operations will be subject to all the hazards and risks
inherent in the exploration for mineral resources and, if we discover a mineral
resource in commercially exploitable quantity, our operations could be subject
to all of the hazards and risks inherent in the development and production of
resources, including liability for pollution, cave-ins or similar hazards
against which we cannot insure or against which we may elect not to insure. Any
such event could result in physical injury or death, work stoppages, and damage
to property, including damage to the environment. We do not currently maintain
any insurance coverage against these operating hazards and may not have
sufficient financial resources to obtain such insurance coverage when it becomes
advisable or required. The payment of any liabilities that arise from the
occurrence of any operating hazard against which we do not maintain insurance
coverage would have a material adverse impact on our company.
MINERAL PRICES ARE SUBJECT TO DRAMATIC AND UNPREDICTABLE FLUCTUATIONS.
We aim to derive revenues either from the sale of our mineral resource
properties or from the extraction and sale of ore. The price of those
commodities has fluctuated widely in recent years, and is affected by numerous
factors beyond our control, including international, economic and political
trends, expectations of inflation, currency exchange fluctuations, interest
rates, global or regional consumptive patterns, speculative activities and
increased production due to new extraction developments and improved extraction
and production methods. The effect of these factors on the price of base and
precious metals, and therefore the economic viability of any of our exploration
properties and projects, cannot accurately be predicted.
THE MINING INDUSTRY IS HIGHLY COMPETITIVE AND THERE IS NO ASSURANCE THAT WE WILL
BE SUCCESSFUL IN ACQUIRING ANY MINERAL CLAIMS. IF WE CANNOT ACQUIRE PROPERTIES
TO EXPLORE FOR MINERAL RESOURCES, WE MAY BE REQUIRED TO REDUCE OR CEASE
OPERATIONS.
The mineral exploration, development, and production industry is largely
un-integrated. We compete with other exploration companies looking for mineral
resource properties. While we compete with other exploration companies in the
effort to locate and acquire mineral resource properties, we will not compete
with them for the removal or sales of mineral products from our properties if we
should eventually discover the presence of them in quantities sufficient to make
production economically feasible. Readily accessible and liquid markets exist
worldwide for the sale of mineral products. Therefore, we will likely be able to
sell any mineral products that we identify and produce.
8
In identifying and acquiring additional mineral resource properties, we will
compete with many companies possessing greater financial resources and technical
facilities. This competition could adversely affect our ability to acquire
suitable prospects for exploration in the future. Accordingly, there can be no
assurance that we will acquire any interest in additional mineral resource
properties that might yield reserves or result in commercial mining operations.
RISKS RELATED TO OUR COMPANY
THE FACT THAT WE HAVE NOT EARNED ANY OPERATING REVENUES SINCE OUR INCORPORATION
RAISES SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE TO EXPLORE OUR MINERAL
PROPERTIES AS A GOING CONCERN.
We have not generated any revenue from operations since our incorporation and we
anticipate that we will continue to incur operating expenses without revenues
unless and until we are able to identify a mineral resource in a commercially
exploitable quantity on our mineral property and we build and operate a mine. We
had cash in the amount of $33,850 as of November 30, 2011 and working capital of
$47,894. We have also incurred a cumulative net loss of $613,105 from our
inception on April 29, 2008 through November 30, 2011. We estimate that our
average monthly operating expenses will be approximately $35,000, including
anticipated exploration costs, management services and administrative costs.
Should the results of our planned exploration require us to increase our current
operating budget, we may have to raise additional funds to meet our currently
budgeted operating requirements for the next 12 months. As we cannot assure a
lender that we will be able to successfully explore and develop our mineral
property, we will probably find it difficult to raise debt financing from
traditional lending sources. We have in the past raised our operating capital
from sales of equity securities, but there can be no assurance that we will
continue to be able to do so. If we cannot raise the money that we need to
continue exploration of our mineral property, we may be forced to delay, scale
back, or eliminate our exploration activities. If any of these were to occur,
there is a substantial risk that our business would fail.
These circumstances lead our independent registered public accounting firm, in
their report dated February 12, 2012, to comment about our company's ability to
continue as a going concern. Management plans to seek additional capital through
a private placement of its capital stock. These conditions raise substantial
doubt about our company's ability to continue as a going concern. Although there
are no assurances that management's plans will be realized, management believes
that our company will be able to continue operations in the future. The
financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts of and
classification of liabilities that might be necessary in the event our company
cannot continue in existence." We continue to experience net operating losses.
RISKS ASSOCIATED WITH OUR COMMON STOCK
TRADING ON THE OTC BULLETIN BOARD MAY BE VOLATILE AND SPORADIC, WHICH COULD
DEPRESS THE MARKET PRICE OF OUR COMMON STOCK AND MAKE IT DIFFICULT FOR OUR
STOCKHOLDERS TO RESELL THEIR SHARES.
Our common stock is quoted on the OTC Bulletin Board service of the Financial
Industry Regulatory Authority. Trading in stock quoted on the OTC Bulletin Board
is often thin and characterized by wide fluctuations in trading prices due to
many factors that may have little to do with our operations or business
prospects. This volatility could depress the market price of our common stock
for reasons unrelated to operating performance. Moreover, the OTC Bulletin Board
is not a stock exchange, and trading of securities on the OTC Bulletin Board is
often more sporadic than the trading of securities listed on a quotation system
like Nasdaq or a stock exchange like the American Stock Exchange. Accordingly,
our shareholders may have difficulty reselling any of their shares.
OUR STOCK IS A PENNY STOCK. TRADING OF OUR STOCK MAY BE RESTRICTED BY THE SEC'S
PENNY STOCK REGULATIONS AND FINRA'S SALES PRACTICE REQUIREMENTS, WHICH MAY LIMIT
A STOCKHOLDER'S ABILITY TO BUY AND SELL OUR STOCK.
Our stock is a penny stock. The Securities and Exchange Commission has adopted
Rule 15g-9 which generally defines "penny stock" to be any equity security that
has a market price (as defined) less than $5.00 per share or an exercise price
of less than $5.00 per share, subject to certain exceptions. Our securities are
covered by the penny stock rules, which impose additional sales practice
requirements on broker-dealers who sell to persons other than established
9
customers and "accredited investors". The term "accredited investor" refers
generally to institutions with assets in excess of $5,000,000 or individuals
with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 jointly with their spouse. The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure document in a form prepared
by the SEC which provides information about penny stocks and the nature and
level of risks in the penny stock market. The broker-dealer also must provide
the customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customer's confirmation. In addition, the penny stock
rules require that prior to a transaction in a penny stock not otherwise exempt
from these rules; the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in, and limit the marketability of, our common stock.
In addition to the "penny stock" rules promulgated by the Securities and
Exchange Commission, FINRA has adopted rules that require that in recommending
an investment to a customer, a broker-dealer must have reasonable grounds for
believing that the investment is suitable for that customer. Prior to
recommending speculative low priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information
about the customer's financial status, tax status, investment objectives and
other information. Under interpretations of these rules, FINRA believes that
there is a high probability that speculative low-priced securities will not be
suitable for at least some customers. FINRA requirements make it more difficult
for broker-dealers to recommend that their customers buy our common stock, which
may limit your ability to buy and sell our stock.
TRENDS, RISKS AND UNCERTAINTIES
We have sought to identify what we believe to be the most significant risks to
our business, but we cannot predict whether, or to what extent, any of such
risks may be realized nor can we guarantee that we have identified all possible
risks that might arise. Investors should carefully consider all of such risk
factors before making an investment decision with respect to our common shares.
ITEM 1B. UNRESOLVED STAFF COMMENTS
As a "smaller reporting company", we are not required to provide the information
required by this Item.
ITEM 2. PROPERTIES
Our principal office is located at 10597 Double R Blvd, Suite 2, Reno, Nevada,
89521. Our office space is leased to us at a cost of $1925.00 per month. The
office space is currently leased from a third party witch has no affiliation
with the company. Additionally, part of the office space is sublet to an
unaffiliated third party at the rate of $500.00 per month. We believe that this
space is sufficient to meet our present needs and do not anticipate any
difficulty in securing alternative or additional space, as needed, on terms
acceptable to us.
DESCRIPTION OF MINERAL PROPERTIES
MOUNTAIN CITY PROPERTY
The Mountain City Property is located in north-eastern Nevada, northern Elko
County, It is situated about 0.5 miles (0.8 km) north from the town of Mountain
City and ten miles from the border with the state of Idaho in what is known as
the Cope Mining District. These claims are located in Section 36, Township 46
North, Range 53 East. Other historic mining properties are present in the
vicinity including the Rio Tinto copper-gold mine, a historic producer located
one mile (1.6km) to the southeast.
10
The property consists of three contiguous patented mining claims totaling
approximately 40 acres (16 ha) surrounded by 22 unpatented mining claims
covering 400 acres (162 ha) for a total of 440 acres (178 ha). These fall within
the Humboldt National Forest which is administered by the U.S. Forest Service.
The patented claims are considered private land, whereas the unpatented claims
require an annual maintenance fee and filing with the Bureau of Land Management
as well an annual filing and fee to the county.
The mineralization present within the Mountain City Property consists of silver
and gold-bearing quartz veins hosted in a coarse-grained quartz monzonite
intrusive. Several parallel, northeast trending quartz veins are present within
the property. Several prospect cuts along these veins define the trend of the
veins, and reveal milky, glassy quartz up to 4 feet (1.3m) wide. The veins often
contain coarse sulfide minerals, including pyrite, sphalerite, galena and
chalcopyrite. Past sampling of these veins indicate gold values up to 6.8 ppm
and silver up to 84.9 ounces per ton (opt). The association of anomalous base
metal values with the precious metals indicates a mesothermal vein system. The
vein density will be an important aspect of the property potential. As many of
the veins are covered, the number of veins present will be important to
determine in the evaluation of the economic potential of the property. This can
be best done by additional trenching and drilling of the veins. A grid soil
sampling survey program was completed over the property but the results of this
are not presently available. These results should aid in the definition of other
precious metal bearing quartz vein not obvious at the surface.
EGAN CANYON PROPERTY
The Egan Canyon Property is located in east-central Nevada approximately 3.5
miles southwest of the small town of Cherry Creek, White Pine County. It is
situated along the steep sided Egan Canyon at elevations up to 7000 feet (2300m)
in Section 14, Township 23 North, Range 62 East. The patented claims are within
the Cherry Creek mining district, at the northern end of the Egan Range. The
surrounding land is federal land administered by the Bureau of Land Management
The property is composed of four contiguous patented mining claims comprising a
total of 68 acres (27.5 ha). There are no unpatented claims associated with
these patents. The mine area is part of the historic Cherry Creek Mining
district where gold in quartz veins were discovered in 1863. A number of large
mine dumps from a series of adits and shafts are present in the Egan Canyon
property. While no outcropping quartz veins are exposed on the talus and debris
covered surface, the large amount of quartz in the mine dumps and float suggest
a north-south trending vein or vein system was developed in the old workings.
Quartz float and dump material show a variety of textures including quartz
stockwork veining. Limited sampling of the dump material and float show gold
values up to 25.4 ppm and silver values to 6.04 ounces per ton. Sparse outcrops
show the vein system likely follows a sheared and foliated contact between a
light-colored felsic intrusive and a darker diorite intrusive. A green shale is
apparently wedged along this contact. High precious metals values in the dump
material with the limited exposures leads to the suggestion that there is
unknown potential for defining a significant resource on the property.
Additional work including soil and ground geophysical surveys may outline
potential targets.
MUNCY CREEK PROPERTY
The Muncy Creek Property is located in east-central Nevada along the east flank
of the Schell Creek Range, in Sections 7 and 8, Township 20 North, Range 66
East, White Pine County. The nearest town is Ely, located roughly 40 miles
line-of sight to the property. The property consists of seven contiguous
patented mining claims covering a total of 110 combined acres (44.5 ha) located
within surrounding Humboldt National Forest.
The Muncy Creek property falls in the Aurum mining district. The Muncy Creek
sub-district which the property is within reportedly produced much of the
high-grade, oxidized lead, zinc and silver ores from deeply oxidized solution
cavities developed in limestone formations from the district. The reported local
association of syenitic dike rocks with skarn mineral development in the
district suggests the oxidized mineralization was likely originally sulfide
replacement mineralization associated with these intrusive bodies. There is not
much in the way of descriptions of the property itself, although a few recent
assays from the mine dumps on the property show high lead, zinc, manganese and
silver values with anomalous copper. These high values are consistent with a
skarn-replacement style of mineralization. With these high silver and base
metals values from the property, further investigation of the property to
determine the nature and extent of the mineralization is warranted.
11
MOUNT JACKSON PROJECT
The Mount Jackson project is located in southwestern Nevada approximately 225
kilometres northwest of Las Vegas, and 25 kilometres southwest of the small town
of Goldfield. Goldfield is the seat of Esmeralda County, and is a small
historically significant mining community on Highway 95. The project is located
at the western end of the Cuprite District, and consists of 154 claims totaling
approximately 3080 acres (1246 hectares) covering a number of old workings. All
of these claims are registered in the names of Anthony Longo and Pyramid Lake
LLC and are optioned to First American Silver Corporation. All claims were
acquired in 2011.
The project is located within the Walker Lane disturbed belt to the south of
Goldfield Caldera. It is underlain by predominately felsic Cenozic volcanic
rocks and Cambrian sediments, including the Harkless siltstones and the Emigrant
Formation limestones as depicted on the United States Geological Survey Map
MF-298, 1972. A dark drusy or vuggy jasperoidal type quartz has been noted to
occur in various locations on the property below and proximal to a possible
thrust contact between the Harkless formation and the overlying Emigrant
limestones. Mineralization is found on the surface along the crest of an
antiform near the faulted contact of Harkless sediments and overlying Emigrant
limestones. The gold and silver mineralization discovered to date is associated
with this siliceous horizon. No mineralogical studies are known at this time,
however it appears that the precious metals are associated with finely
disseminated sulphides.
ITEM 3. LEGAL PROCEEDINGS
We know of no material, existing or pending legal proceedings against our
company, nor are we involved as a plaintiff in any material proceeding or
pending litigation. There are no proceedings in which any of our directors,
officers or affiliates, or any registered or beneficial stockholder, is an
adverse party or has a material interest adverse to our interest.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Our shares of common stock are currently trading on the OTC Bulletin Board under
the Symbol "FASV". Our common shares became quoted for trading on the OTCBB on
August 13, 2009 under the symbol "MAYT". On June 16, 2010 our symbol changed to
"FASV" in connection with the change of the name of our company from Mayetok
Inc. to First American Silver Corp. and our 35 for one (1) forward stock split.
The following table reflects the high and low bid information for our common
stock obtained from Stockwatch and reflects inter-dealer prices, without retail
mark-up, markdown or commission, and may not necessarily represent actual
transactions.
The high and low bid prices of our common stock for the periods indicated below
are as follows:
OTC BULLETIN BOARD
Quarter Ended High Low
------------- ---- ---
November 30, 2011 $0.26 $0.14
August 31, 2011 $0.52 $0.301
May 31, 2011 $1.39 $0.425
12
OTC BULLETIN BOARD
Quarter Ended High Low
------------- ---- ---
February 28, 2011 $0.78 $0.73
November 30, 2010 $0.50 $0.50
August 31, 2010 $0.60 $0.60
May 31, 2010(1) N/A N/A
----------
(1) Our stock was first quoted for trading on the OTC Bulletin Board on August
13, 2009, the first trade did not occur until June 25, 2010.
As of February 8, 2012, there were 15 registered holders of record of our common
stock and 55,700,000 shares of our common stock were issued and outstanding.
Our common shares are issued in registered form. Our securities registrar and
transfer agent is Securities Transfer Corporation, 2591 Dallas Parkway, Suite
102, Frisco, Texas 75034. Their telephone number is (469) 633-0101. The
registrar and transfer agent is responsible for all record-keeping and
administrative functions in connection with our issued and outstanding common
stock.
DIVIDEND POLICY
We have not paid any cash dividends on our common stock and have no present
intention of paying any dividends on the shares of our common stock. Our current
policy is to retain earnings, if any, for use in our operations and in the
development of our business. Our future dividend policy will be determined from
time to time by our board of directors.
RECENT SALES OF UNREGISTERED SECURITIES; USE OF PROCEEDS FROM REGISTERED
SECURITIES
We did not sell any equity securities which were not registered under the
Securities Act during the year ended November 30, 2011 that were not otherwise
disclosed on our quarterly reports on Form 10-Q or our current reports on Form
8-K filed during the year ended November 30, 2011.
EQUITY COMPENSATION PLAN INFORMATION
Except as disclosed below, we do not have a stock option plan in favor of any
director, officer, consultant or employee of our company.
PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
We did not purchase any of our shares of common stock or other securities during
our fiscal year ended November 30, 2011.
ITEM 6. SELECTED FINANCIAL DATA
As a "smaller reporting company", we are not required to provide the information
required by this Item.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with our audited
consolidated financial statements and the related notes for the years ended
November 30, 2011 and November 30, 2010 that appear elsewhere in this annual
report. The following discussion contains forward-looking statements that
reflect our plans, estimates and beliefs. Our actual results could differ
materially from those discussed in the forward looking statements. Factors that
13
could cause or contribute to such differences include, but are not limited to
those discussed below and elsewhere in this annual report, particularly in the
section entitled "Risk Factors" beginning on page 8 of this annual report.
Our audited consolidated financial statements are stated in United States
Dollars and are prepared in accordance with United States Generally Accepted
Accounting Principles.
CASH REQUIREMENTS
We intend to conduct exploration activities on our optioned properties during
the next twelve months. We estimate our operating expenses and working capital
requirements for the next twelve months to be as follows:
Expense Cost
------- --------
General and administrative expenses $ 45,000
Management and administrative costs $ 60,000
Legal Fees $ 15,000
Exploration expenses $250,000
Option payment expenses $ 30,000
Auditor Fees $ 10,000
--------
$410,000
========
Of the $410,000 that we require for the next 12 months, we have $33,850 in cash
as of November 30, 2011, and a working capital of $47,894. In order to improve
our liquidity, we plan pursue additional equity financing from private investors
or possibly a registered public offering. We do not currently have any
definitive arrangements in place for the completion of any further private
placement financings and there is no assurance that we will be successful in
completing any further private placement financings. If we are unable to achieve
the necessary additional financing, then we plan to reduce the amounts that we
spend on our business activities and administrative expenses in order to be
within the amount of capital resources that are available to us.
PURCHASE OF SIGNIFICANT EQUIPMENT
We do not intend to purchase any significant equipment over the twelve months
ending November 30, 2012.
RESEARCH AND DEVELOPMENT
We have not expended any funds on research and development since inception and
we do not intend to allocate any funds to research and development over the
twelve months ending November 30, 2012.
RESULTS OF OPERATIONS FOR THE YEARS ENDED NOVEMBER 30, 2011.
The following summary of our results of operations should be read in conjunction
with our audited financial statements for the year ended November 30, 2011.
Our operating results for the year ended November 30, 2011 are summarized as
follows in comparison to our operating results for the same period ended
November 30, 2010:
Year Ended
November 30,
2011 2010
-------- --------
Revenue $ Nil $ Nil
Operating Expenses $ 537,359 $ 45,762
Net Loss $(537,359) $(45,762)
14
REVENUE
We have not earned any revenues since our inception and we do not anticipate
earning revenues in the near future.
GENERAL AND ADMINISTRATIVE EXPENSES
Our general and administrative expenses for the year ended November 30, 2011 are
outlined in the table below in comparison to our general and administrative
expenses for the same period ended November 30, 2010:
Year Ended
November 30,
2011 2010
-------- --------
Accounting and legal $ 83,437 $ 25,574
Exploration costs $111,182 $ Nil
Consulting fees $ 54,146 $ Nil
Impairment of mineral properties $197,336 $ Nil
Transfer agent and filing fees $ 6,108 $ 1,810
Miscellaneous fees $ Nil $ 3,198
General and administrative $ 85,150 $ 15,000
The increase in accounting and legal expenses for the year ended November 30,
2011, compared to the same period in fiscal 2010, was mainly due to to increased
activity related to the acquisition and maintenance of our mineral properties.
LIQUIDITY AND FINANCIAL CONDITION
WORKING CAPITAL
At At
November 30, November 30, Percentage
2011 2010 Increase/Decrease
-------- -------- -----------------
Current Assets $ 84,514 $238,205 (65)%
Current Liabilities $ 36,620 $ 43,951 (17)%
Working Capital $ 47,894 $194,254 (75)%
CASH FLOWS
At At
November 30, November 30,
2011 2010
---------- ----------
Net cash from (used in) operations $ (330,267) $ 7,689
Net cash (used in) investing activities $ (224,088) $ (30,000)
Net cash provided by financing activities $ 350,000 $ 250,000
Increase (Decrease) In Cash During The Period $ (204,355) $ 227,689
We had cash in the amount of $33,850 as of November 30, 2011 as compared to
$238,205 as of November 30, 2010. We had working capital of $47,894 as of
November 30, 2011 compared to working capital of $194,254 as of November 30,
2010.
We have suffered recurring losses from operations. The continuation of our
company is dependent upon our company attaining and maintaining profitable
operations and raising additional capital as needed, but there can be no
assurance that we will be able to raise any further financing.
15
FUTURE FINANCINGS
We will require additional funds to implement our growth strategy for our new
business. These funds may be raised through equity financing, debt financing, or
other sources, which may result in further dilution in the equity ownership of
our shares.
There can be no assurance that additional financing will be available to us when
needed or, if available, that it can be obtained on commercially reasonable
terms. If we are not able to obtain the additional financing on a timely basis
should it be required, or generate significant material revenues from
operations, 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 our operations.
CONTRACTUAL OBLIGATIONS
As a "smaller reporting company", we are not required to provide tabular
disclosure obligations.
GOING CONCERN
We have suffered recurring losses from operations and are dependent on our
ability to raise capital from stockholders or other sources to meet our
obligations and repay our liabilities arising from normal business operations
when they become due. In their report on our audited financial statements for
the year ended November 30, 2011, our independent auditors included an
explanatory paragraph regarding concerns about our ability to continue as a
going concern. Our financial statements contain additional note disclosure
describing the circumstances that lead to this disclosure by our independent
auditors.
OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to stockholders.
CRITICAL ACCOUNTING POLICIES
The discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with the accounting principles generally accepted in the United
States of America. Preparing financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue, and expenses. These estimates and assumptions are affected
by management's application of accounting policies. We believe that
understanding the basis and nature of the estimates and assumptions involved
with the following aspects of our financial statements is critical to an
understanding of our financial statements.
EXPLORATION STAGE COMPANY
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles related to accounting and reporting by
exploration-stage companies. An exploration-stage company is one in which
planned principal operations have not commenced or if its operations have
commenced, there has been no significant revenues there from.
BASIS OF PRESENTATION
Our financial statements have been prepared in accordance with generally
accepted accounting principles in the United States of America and are presented
in US dollars.
16
ACCOUNTING BASIS
We use the accrual basis of accounting and accounting principles generally
accepted in the United States of America ("GAAP" accounting). We adopted a
November 30 fiscal year end.
CASH AND CASH EQUIVALENTS
We consider all highly liquid investments with maturities of three months or
less to be cash equivalents. At November 30, 2011 and 2010, respectively, we had
$33,850 and $238,205 of unrestricted cash to be used for future business
operations. Our bank accounts are deposited in insured institutions. The funds
are insured up to $250,000. At times, our bank deposits may exceed the insured
amount. Management believes it has little risk related to the excess deposits.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Our financial instruments consist of cash, prepaid expenses, accounts payable,
accrued professional fees, and amount due to a related party. The carrying
amount of these financial instruments approximates fair value due to either
length of maturity or interest rates that approximate prevailing market rates
unless otherwise disclosed in these financial statements.
CONCENTRATIONS OF CREDIT RISK
Our company maintains its cash in bank deposit accounts, the balances of which
at times may exceed federally insured limits. Our company continually monitors
its banking relationships and consequently has not experienced any losses in
such accounts. Our company believes it is not exposed to any significant credit
risk on cash and cash equivalents.
STOCK-BASED COMPENSATION
We account for employee stock-based compensation in accordance with the guidance
of ASC Topic 718, COMPENSATION - STOCK COMPENSATION which requires all
share-based payments to employees, including grants of employee stock options,
to be recognized in the financial statements based on their fair values. There
has been no stock-based compensation issued to employees.
We follow ASC Topic 505-50, formerly EITF 96-18, "ACCOUNTING FOR EQUITY
INSTRUMENTS THAT ARE ISSUED TO OTHER THAN EMPLOYEES FOR ACQUIRING, OR IN
CONJUNCTION WITH SELLING GOODS AND SERVICES," for stock options and warrants
issued to consultants and other non-employees. In accordance with ASC Topic
505-50, these stock options and warrants issued as compensation for services
provided to the Company are accounted for based upon the fair value of the
services provided or the estimated fair market value of the option or warrant,
whichever can be more clearly determined. The fair value of the equity
instrument is charged directly to compensation expense and additional paid-in
capital over the period during which services are rendered. We issued 300,000
options to consultants in the current fiscal year.
INCOME TAXES
Income taxes are computed using the asset and liability method. Under the asset
and liability method, deferred income tax assets and liabilities are determined
based on the differences between the financial reporting and tax bases of assets
and liabilities and are measured using the currently enacted tax rates and laws.
A valuation allowance is provided for the amount of deferred tax assets that,
based on available evidence, are not expected to be realized. It is our
company's policy to classify interest and penalties on income taxes as interest
expense or penalties expense. As of November 30, 2011, there have been no
interest or penalties incurred on income taxes.
17
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles 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 the financial statements and the
reported amount of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
REVENUE RECOGNITION
We are in the exploration stage and have yet to realize revenues from
operations. Once our company has commenced operations, it will recognize
revenues when delivery of goods or completion of services has occurred provided
there is persuasive evidence of an agreement, acceptance has been approved by
its customers, the fee is fixed or determinable based on the completion of
stated terms and conditions, and collection of any related receivable is
probable.
BASIC INCOME (LOSS) PER SHARE
Basic income (loss) per share is calculated by dividing our company's net loss
applicable to common shareholders by the weighted average number of common
shares during the period. Diluted earnings per share is calculated by dividing
the Company's net income available to common shareholders by the diluted
weighted average number of shares outstanding during the year. The diluted
weighted average number of shares outstanding is the basic weighted number of
shares adjusted for any potentially dilutive debt or equity. Common share
equivalents totalling 2,300,000 at November 30, 2011, representing outstanding
warrants and options were not included in the computation of diluted earnings
per share for the year ended November 30, 2011, as their effect would have been
anti-dilutive. Common share equivalents totalling 1,000,000 at November 30,
2010, representing outstanding warrants were not included in the computation of
diluted earnings per share for the year ended November 30, 2010, as their effect
would have been anti-dilutive.
On June 8, 2010, we affected a 35:1 forward stock split of its common shares.
All share and per share data have been adjusted to reflect such stock split.
DIVIDENDS
We have not adopted any policy regarding payment of dividends. No dividends have
been paid during the periods shown.
MINERAL PROPERTIES
Costs of exploration, carrying and retaining unproven mineral lease properties
are expensed as incurred. Mineral property acquisition costs are capitalized
including licenses and lease payments. Although we have taken steps to verify
title to mineral properties in which it has an interest, these procedures do not
guarantee our company's title. Such properties may be subject to prior
agreements or transfers and title may be affected by undetected defects.
Impairment losses will be recorded on mineral properties used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount. In
accordance with ASC 360-10-35-17, an impairment loss will be recognized only if
the carrying amount of a long-lived asset is not recoverable and exceeds its
fair value. The carrying amount of a long-lived asset is not recoverable if it
exceeds the sum of the undiscounted cash flows expected to result from the use
and eventual disposition of the asset. That assessment shall be based on the
carrying amount of the asset at the date it is tested for recoverability,
whether in use or under development. An impairment loss shall be measured as the
amount by which the carrying amount of a long-lived asset exceeds its fair
value.
Impairment losses totalling $197,336 were recorded in 2011 relating to three
unproven properties. No impairment losses were recorded in 2010.
18
RECENT ACCOUNTING PRONOUNCEMENTS
Our company does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on our results of operations,
financial position or cash flows.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a "smaller reporting company", we are not required to provide the information
required by this Item.
19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FIRST AMERICAN SILVER CORP.
(AN EXPLORATION STAGE COMPANY)
TABLE OF CONTENTS
NOVEMBER 30, 2011
Report of Independent Registered Public Accounting Firm 21
Balance Sheets as of November 30, 2011 and 2010 22
Statements of Operations for the years ended November 30, 2011 and
2010 and the period from April 29, 2008 (inception) to November 30, 2011 23
Statement of Stockholders' Equity as of November 30, 2011 24
Statements of Cash Flows for the years ended November 30, 2011 and
2010 and the period from April 29, 2008 (inception) to November 30, 2011 25
Notes to the Financial Statements 26
20
Silberstein Ungar, PLLC CPAs and Business Advisors
--------------------------------------------------------------------------------
Phone (248) 203-0080
Fax (248) 281-0940
30600 Telegraph Road, Suite 2175
Bingham Farms, MI 48025-4586
www.sucpas.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of
First American Silver Corp.
Reno, Nevada
We have audited the accompanying balance sheets of First American Silver Corp.
(the "Company") as of November 30, 2011 and 2010, and the related statements of
operations, stockholders' equity, and cash flows for the years then ended and
for the period from April 29, 2008 (inception) through November 30, 2011. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of First American Silver Corp. as
of November 30, 2011 and 2010 and the results of its operations and its cash
flows for the years then ended and the period from April 29, 2008 (inception)
through November 30, 2011 in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 13 to the
financial statements, the Company has limited working capital, has not yet
received revenue from sales of products or services, and has incurred losses
from operations. These factors raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans with regard to these
matters are described in Note 13. The accompanying financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Silberstein Ungar, PLLC
-----------------------------------
Bingham Farms, Michigan
February 23, 2012
21
FIRST AMERICAN SILVER CORP.
(AN EXPLORATION STAGE COMPANY)
BALANCE SHEETS
NOVEMBER 30, 2011 AND 2010
2011 2010
---------- ----------
ASSETS
Current assets
Cash and bank accounts $ 33,850 $ 238,205
Prepaid expenses 50,664 0
---------- ----------
Total current assets 84,514 238,205
---------- ----------
Property and equipment - net 4,909 0
---------- ----------
Other assets
Mineral properties 188,226 180,000
Deposits 101,925 0
Reclamation bond 8,879 0
Website - net 4,167 0
---------- ----------
Total other assets 303,197 180,000
---------- ----------
Total Assets $ 392,620 $ 418,205
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 29,620 $ 36,501
Accrued professional fees 7,000 5,600
Due to related party 0 1,850
---------- ----------
Total liabilities 36,620 43,951
---------- ----------
Stockholders' Equity
Preferred stock, par value $0.001, 20,000,000 shares authorized,
no shares issued and outstanding 0 0
Common stock, par value $0.001, 3,500,000,000 shares authorized,
55,600,000 shares issued and outstanding (78,300,000 - 2010) 55,600 78,300
Additional paid-in capital 769,388 359,218
Common stock warrants 144,117 12,482
Deficit accumulated during the exploration stage (613,105) (75,746)
---------- ----------
Total Stockholders' Equity 356,000 374,254
---------- ----------
Total Liabilities and Stockholders' Equity $ 392,620 $ 418,205
========== ==========
The accompanying notes are an integral part of these financial statements.
22
FIRST AMERICAN SILVER CORP.
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED NOVEMBER 30, 2011 AND 2010
AND THE PERIOD FROM APRIL 29, 2008 (INCEPTION) TO NOVEMBER 30, 2011
April 29, 2008
Year Ended Year Ended (Inception) to
November 30, November 30, November 30,
2011 2010 2011
------------ ------------ ------------
REVENUES $ 0 $ 0 $ 0
------------ ------------ ------------
OPERATING EXPENSES
Exploration costs 111,182 0 111,182
Accounting and legal 83,437 25,574 132,083
Impairment loss on mineral properties 197,336 0 197,336
Consulting fees 54,146 0 54,146
Transfer agent and filing fees 6,108 1,810 11,285
Miscellaneous fees 0 3,198 5,536
Incorporation costs 0 0 1,387
General and administrative 85,150 15,000 100,150
------------ ------------ ------------
TOTAL OPERATING EXPENSES 537,359 45,762 613,105
------------ ------------ ------------
LOSS FROM OPERATIONS BEFORE PROVISION FOR INCOME TAX (537,359) (45,762) (613,105)
PROVISION FOR INCOME TAX 0 0 0
------------ ------------ ------------
NET LOSS $ (537,359) $ (45,762) $ (613,105)
============ ============ ============
LOSS PER SHARE: BASIC AND DILUTED $ (0.01) $ (0.00)
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
BASIC AND DILUTED 56,678,904 77,201,370
============ ============
The accompanying notes are an integral part of these financial statements.
23
FIRST AMERICAN SILVER CORP.
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
AS OF NOVEMBER 30, 2011
Deficit
Accumulated
Common Stock Additional Common During the Total
---------------------- Paid in Stock Exploration Stockholders'
Shares Amount Capital Warrants Stage Equity
------ ------ ------- -------- ----- ------
Inception, April 29, 2008 -- $ -- $ -- $ -- $ -- $ --
Shares issued to founder on June 30,
2008 @ $0.00028 per share 52,500,000 1,500 13,500 -- -- 15,000
Private placement on April 30, 2008
@ $0.00143 per share 24,500,000 700 34,300 -- -- 35,000
Net loss for the period -- -- -- -- (13,639) (13,639)
---------- -------- -------- -------- --------- ---------
Balance, November 30, 2008 77,000,000 2,200 47,800 -- (13,639) 36,361
Net loss for the year ended
November 30, 2009 -- -- -- -- (16,345) (16,345)
---------- -------- -------- -------- --------- ---------
Balance, November 30, 2009 77,000,000 2,200 47,800 -- (29,984) 20,016
Adjust for 35:1 forward stock split -- 74,800 (74,800) -- -- 0
Private placement on October 29, 2010
@ $0.25 per share 1,000,000 1,000 236,518 12,482 -- 250,000
Common stock issued in relation to
acquisition of mineral properties 300,000 300 149,700 -- -- 150,000
Net loss for the year ended
November 30, 2010 -- -- -- -- (45,762) (45,762)
---------- -------- -------- -------- --------- ---------
Balance, November 30, 2010 78,300,000 78,300 359,218 12,482 (75,746) 374,254
Cancellation of common shares 23,850,000) (23,850) 23,850 -- -- 0
Common stock issued in relation to
acquisition of mineral properties 100,000 100 102,900 -- -- 103,000
Private placement on October 29, 2010
@ $0.25 per share 1,000,000 1,000 217,365 131,635 -- 350,000
Common stock issued for services 50,000 50 15,200 -- -- 15,250
Options issued to consultant -- -- 50,855 -- -- 50,855
Net loss for the year ended
November 30, 2011 -- -- -- -- (537,359) (537,359)
---------- -------- -------- -------- --------- ---------
Balance, November 30, 2011 55,600,000 $ 55,600 $769,388 $144,117 $(613,105) $ 356,000
========== ======== ======== ======== ========= =========
The accompanying notes are an integral part of these financial statements.
24
FIRST AMERICAN SILVER CORP.
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED NOVEMBER 30, 2011 AND 2010
FOR THE PERIOD FROM APRIL 29, 2008 (INCEPTION) TO NOVEMBER 30, 2011
April 29, 2008
Year Ended Year Ended (Inception) to
November 30, November 30, November 30,
2011 2010 2011
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (537,359) $ (45,762) $ (613,105)
Adjustments to Reconcile Net Loss to Net Cash
Provided by (Used In) Operating Activities:
Depreciation and amortization 1,646 0 1,646
Stock issued for services 15,250 0 15,250
Stock options issued for services 50,855 0 50,855
Impairment loss on mineral properties 197,336 0 197,336
Changes in operating assets and liabilities:
Increase in prepaid expenses (50,664) 15,000 (50,664)
Decrease in accounts payable (6,881) 34,601 29,620
Increase in accrued expenses 1,400 2,100 7,000
Decrease in due to related party (1,850) 1,750 0
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (330,267) 7,689 (362,062)
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (5,722) 0 (5,722)
Purchase of reclamation bond (8,879) 0 (8,879)
Website development costs (5,000) 0 (5,000)
Increase in deposits (101,925) 0 (101,925)
Acquisition of mineral properties (102,562) (30,000) (132,562)
---------- ---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (224,088) (30,000) (254,088)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of common stock 350,000 250,000 650,000
NET CASH PROVIDED BY FINANCING ACTIVITIES 350,000 250,000 650,000
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (204,355) 227,689 33,850
CASH, BEGINNING OF PERIOD 238,205 10,516 0
---------- ---------- ----------
CASH, END OF PERIOD $ 33,850 $ 238,205 $ 33,850
========== ========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income taxes $ 0 $ 0 $ 0
========== ========== ==========
Cash paid for interest $ 0 $ 0 $ 0
========== ========== ==========
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:
Cancellation of common shares $ 23,850 $ 0 $ 23,850
========== ========== ==========
Common stock issued to acquire mineral properties $ 103,000 $ 150,000 $ 253,000
========== ========== ==========
The accompanying notes are an integral part of these financial statements
25
FIRST AMERICAN SILVER CORP.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2011
NOTE 1 - NATURE OF OPERATIONS
Mayetok, Inc. ("the Company") was incorporated in the state of Nevada on April
29, 2008.
On June 8, 2010, the Company changed its name to First American Silver Corp.
In October 2010, the Company entered into Property Option Agreements to acquire
100% interests in three mineral properties located in Nevada. On April 15, 2011
the Company entered into a Property Option Agreement with Pyramid Lake LLC and
Anthony A. Longo to acquire a 100% interest in the Esmeralda Property, also
located in Nevada. These properties have been acquired for prospecting,
exploration and production of gold, silver, and all other metals. Development
and exploration activities are currently being undertaken.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
EXPLORATION STAGE COMPANY
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles related to accounting and reporting by
exploration-stage companies. An exploration-stage company is one in which
planned principal operations have not commenced or if its operations have
commenced, there has been no significant revenues there from.
BASIS OF PRESENTATION
The financial statements of the Company have been prepared in accordance with
generally accepted accounting principles in the United States of America and are
presented in US dollars.
ACCOUNTING BASIS
The Company uses the accrual basis of accounting and accounting principles
generally accepted in the United States of America ("GAAP" accounting). The
Company has adopted a November 30 fiscal year end.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities of three
months or less to be cash equivalents. At November 30, 2011 and 2010,
respectively, the Company had $33,850 and $238,205 of unrestricted cash to be
used for future business operations
The Company's bank accounts are deposited in insured institutions. The funds are
insured up to $250,000. At times, the Company's bank deposits may exceed the
insured amount. Management believes it has little risk related to the excess
deposits.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, prepaid expenses, accounts
payable, accrued professional fees, and amount due to a related party. The
carrying amount of these financial instruments approximates fair value due to
either length of maturity or interest rates that approximate prevailing market
rates unless otherwise disclosed in these financial statements.
26
FIRST AMERICAN SILVER CORP.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2011
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATIONS OF CREDIT RISK
The Company maintains its cash in bank deposit accounts, the balances of which
at times may exceed federally insured limits. The Company continually monitors
its banking relationships and consequently has not experienced any losses in
such accounts. The Company believes it is not exposed to any significant credit
risk on cash and cash equivalents.
STOCK-BASED COMPENSATION
The Company accounts for employee stock-based compensation in accordance with
the guidance of ASC Topic 718, COMPENSATION - STOCK COMPENSATION which requires
all share-based payments to employees, including grants of employee stock
options, to be recognized in the financial statements based on their fair
values. There has been no stock-based compensation issued to employees.
The Company follows ASC Topic 505-50, formerly EITF 96-18, "ACCOUNTING FOR
EQUITY INSTRUMENTS THAT ARE ISSUED TO OTHER THAN EMPLOYEES FOR ACQUIRING, OR IN
CONJUNCTION WITH SELLING GOODS AND SERVICES," for stock options and warrants
issued to consultants and other non-employees. In accordance with ASC Topic
505-50, these stock options and warrants issued as compensation for services
provided to the Company are accounted for based upon the fair value of the
services provided or the estimated fair market value of the option or warrant,
whichever can be more clearly determined. The fair value of the equity
instrument is charged directly to compensation expense and additional paid-in
capital over the period during which services are rendered. The Company issued
300,000 options to consultants in the current fiscal year.
INCOME TAXES
Income taxes are computed using the asset and liability method. Under the asset
and liability method, deferred income tax assets and liabilities are determined
based on the differences between the financial reporting and tax bases of assets
and liabilities and are measured using the currently enacted tax rates and laws.
A valuation allowance is provided for the amount of deferred tax assets that,
based on available evidence, are not expected to be realized. It is the
Company's policy to classify interest and penalties on income taxes as interest
expense or penalties expense. As of November 30, 2011, there have been no
interest or penalties incurred on income taxes.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles 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 the financial statements and the
reported amount of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
REVENUE RECOGNITION
The Company is in the exploration stage and has yet to realize revenues from
operations. Once the Company has commenced operations, it will recognize
revenues when delivery of goods or completion of services has occurred provided
there is persuasive evidence of an agreement, acceptance has been approved by
its customers, the fee is fixed or determinable based on the completion of
stated terms and conditions, and collection of any related receivable is
probable.
27
FIRST AMERICAN SILVER CORP.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2011
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BASIC INCOME (LOSS) PER SHARE
Basic income (loss) per share is calculated by dividing the Company's net loss
applicable to common shareholders by the weighted average number of common
shares during the period. Diluted earnings per share is calculated by dividing
the Company's net income available to common shareholders by the diluted
weighted average number of shares outstanding during the year. The diluted
weighted average number of shares outstanding is the basic weighted number of
shares adjusted for any potentially dilutive debt or equity. Common share
equivalents totalling 2,300,000 at November 30, 2011, representing outstanding
warrants and options were not included in the computation of diluted earnings
per share for the year ended November 30, 2011, as their effect would have been
anti-dilutive. Common share equivalents totalling 1,000,000 at November 30,
2010, representing outstanding warrants were not included in the computation of
diluted earnings per share for the year ended November 30, 2010, as their effect
would have been anti-dilutive.
On June 8, 2010, the Company affected a 35:1 forward stock split of its common
shares. All share and per share data have been adjusted to reflect such stock
split.
DIVIDENDS
The Company has not adopted any policy regarding payment of dividends. No
dividends have been paid during the periods shown.
MINERAL PROPERTIES
Costs of exploration, carrying and retaining unproven mineral lease properties
are expensed as incurred. Mineral property acquisition costs are capitalized
including licenses and lease payments. Although the Company has taken steps to
verify title to mineral properties in which it has an interest, these procedures
do not guarantee the Company's title. Such properties may be subject to prior
agreements or transfers and title may be affected by undetected defects.
Impairment losses will be recorded on mineral properties used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount. In
accordance with ASC 360-10-35-17, an impairment loss will be recognized only if
the carrying amount of a long-lived asset is not recoverable and exceeds its
fair value. The carrying amount of a long-lived asset is not recoverable if it
exceeds the sum of the undiscounted cash flows expected to result from the use
and eventual disposition of the asset. That assessment shall be based on the
carrying amount of the asset at the date it is tested for recoverability,
whether in use or under development. An impairment loss shall be measured as the
amount by which the carrying amount of a long-lived asset exceeds its fair
value.
Impairment losses totalling $197,336 were recorded in 2011 relating to three
unproven properties. No impairment losses were recorded in 2010.
RECENT ACCOUNTING PRONOUNCEMENTS
First American Silver does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on the Company's results of
operations, financial position or cash flows.
28
FIRST AMERICAN SILVER CORP.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2011
NOTE 3 - MINERAL PROPERTIES
MOUNTAIN CITY PROPERTY
On October 29, 2010 the Company entered into a Property Option Agreement with
All American Resources. Pursuant to this agreement, the Company has the option
to acquire a 100% interest in the Elko Property making payments in aggregate of
$180,000, a $1,000,000 or $2,000,000 final balloon payment (see October 29, 2020
below), issuing 300,000 common shares and by paying all property maintenance
fees and obligations as they come due. The payments are to completing under the
following terms:
Date Cash Common Stock
---- ---- ------------
November 2, 2010 $ 10,000 100,000 Paid
October 29, 2012 -- 25,000
October 29, 2013 $ 10,000 25,000
October 29, 2014 $ 10,000 25,000
October 29, 2015 $ 10,000 25,000
October 29, 2016 $ 20,000 25,000
October 29, 2017 $ 30,000 25,000
October 29, 2018 $ 40,000 25,000
October 29, 2019 $ 50,000 25,000
October 29, 2020 $1,000,000 In case of $1,000,000 payment, the
or optionor shall retain a 2% NSR (Net
$2,000,000 Smelter Royalty). In case of a
$2,000,000, the optionor shall retain
a 1% NSR.
EAGAN CANYON PROPERTY
On October 29, 2010 the Company entered into a Property Option Agreement with
All American Resources. Pursuant to this agreement, the Company has the option
to acquire a 100% interest in the White Pine Property #1 making payments in
aggregate of $180,000, a $1,000,000 or $2,000,000 final balloon payment (see
October 29, 2020 below), issuing 300,000 common shares and by paying all
property maintenance fees and obligations as they come due. The payments are to
completing under the following terms:
Date Cash Common Stock
---- ---- ------------
November 2, 2010 $ 10,000 100,000 Paid
October 29, 2012 -- 25,000
October 29, 2013 $ 10,000 25,000
October 29, 2014 $ 10,000 25,000
October 29, 2015 $ 10,000 25,000
October 29, 2016 $ 20,000 25,000
October 29, 2017 $ 30,000 25,000
October 29, 2018 $ 40,000 25,000
October 29, 2019 $ 50,000 25,000
October 29, 2020 $1,000,000 In case of $1,000,000 payment, the
or optionor shall retain a 2% NSR (Net
$2,000,000 Smelter Royalty). In case of a
$2,000,000, the optionor shall retain
a 1% NSR.
29
FIRST AMERICAN SILVER CORP.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2011
NOTE 3 - MINERAL PROPERTIES (CONTINUED)
MUNCY CREEK PROPERTY
On October 29, 2010 the Company entered into a Property Option Agreement with
All American Resources. Pursuant to this agreement, the Company has the option
to acquire a 100% interest in the White Pine Property #2 making payments in
aggregate of $180,000, a $1,000,000 or $2,000,000 final balloon payment (see
October 29, 2020 below), issuing 300,000 common shares and by paying all
property maintenance fees and obligations as they come due. The payments are to
completing under the following terms:
Date Cash Common Stock
---- ---- ------------
November 2, 2010 $ 10,000 100,000 Paid
October 29, 2012 -- 25,000
October 29, 2013 $ 10,000 25,000
October 29, 2014 $ 10,000 25,000
October 29, 2015 $ 10,000 25,000
October 29, 2016 $ 20,000 25,000
October 29, 2017 $ 30,000 25,000
October 29, 2018 $ 40,000 25,000
October 29, 2019 $ 50,000 25,000
October 29, 2020 $1,000,000 In case of $1,000,000 payment, the
or optionor shall retain a 2% NSR (Net
$2,000,000 Smelter Royalty). In case of a
$2,000,000, the optionor shall retain
a 1% NSR.
ESMERALDA PROPERTY
On April 15, 2011 the Company entered into a Property Option Agreement with
Pyramid Lake LLC and Anthony A. Longo. Pursuant to this agreement, the Company
has the option to acquire a 100% interest in the Esmeralda Property by making
payments in aggregate of $505,000 and issuing 100,000 common shares and by
paying all property maintenance fees and obligations as they come due. The
payments are to completing under the following terms:
Date Cash Common Stock
---- ---- ------------
April 15, 2011 $ 30,000 100,000 Paid
April 15, 2012 $ 40,000 --
April 15, 2013 $ 50,000 --
April 15, 2014 $ 60,000 --
April 15, 2015 $ 70,000 --
April 15, 2016 $ 80,000 --
April 15, 2017 $ 90,000 --
April 15, 2018 $ 100,000 --
30
FIRST AMERICAN SILVER CORP.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2011
NOTE 4 - PREPAID EXPENSES
Prepaid expenses consisted of the following at November 30, 2011:
2011
--------
Rent $ 9,625
Consulting 38,140
Other 2,899
--------
Total prepaid expenses $ 50,664
========
NOTE 5 - DEPOSITS
Deposits consisted of the following at November 30, 2011:
2011
--------
Deposit paid to drilling company $100,000
Security deposit 1,925
--------
Total deposits $101,925
========
NOTE 6 - PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and consisted of the following at
November 30, 2011:
2011
--------
Office furniture and equipment $ 5,722
Less: Accumulated depreciation (813)
--------
Property and equipment - net $ 4,909
========
Depreciation expense was $1,750 and $1,689 for the years ended November 30, 2011
and 2010, respectively.
NOTE 7 - WEBSITE
The cost of developing the Company website has been capitalized and is being
amortized over a 5 year period using straight-line amortization:
2011
--------
Website development costs $ 5,000
Less: accumulated amortization (833)
--------
Website development costs, net $ 4,167
========
Amortization expense was $833 and $0 for the years ended November 30, 2011 and
2010, respectively.
31
FIRST AMERICAN SILVER CORP.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2011
NOTE 8 - RELATED PARTY TRANSACTION
As of November 30, 2010, there was a balance owing to a former director of the
Company in the amount of $1,850. The amount was unsecured, non-interest bearing
and had no specific terms of repayment. It was repaid during the year ended
November 30, 2011.
NOTE 9 - COMMON STOCK WARRANTS
The Company issued 1,000,000 common stock warrants in 2011 and 2010 in
connection with private placements to unrelated third parties. The Company has
accounted for these warrants as equity instruments in accordance with EITF 00-19
(ASC 815-40), Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Company's Own Stock, and as such, will be classified
in stockholders' equity as they meet the definition of "...indexed to the
issuer's stock" in EITF 01-06 (ASC 815-40) The Meaning of Indexed to a Company's
Own Stock. The Company has estimated the fair value of the warrants issued in
connection with the private placements at $131,635 for the 2011 warrants and
$12,482 for the 2010 warrants as of the grant date using the Black-Scholes
option pricing model.
The warrants issued in connection with the private placements have been
accounted for as equity transactions for the years ended November 30, 2011 and
2010.
Key assumptions used by the Company in the Black-Scholes pricing models are
summarized as follows:
2011 2010
PPM Warrants PPM Warrants
------------ ------------
Stock price $ .35 $ .25
Exercise price .65 .50
Expected volatility 147% 42%
Expected dividend yield 0.00% 0.00%
Risk-free rate over the estimated
expected term of the warrants .37% .34%
Expected term (in years) 2 2
NOTE 10 - COMMON STOCK OPTIONS
The Company follows ASC Topic 505-50, formerly EITF 96-18, "ACCOUNTING FOR
EQUITY INSTRUMENTS THAT ARE ISSUED TO OTHER THAN EMPLOYEES FOR ACQUIRING, OR IN
CONJUNCTION WITH SELLING GOODS AND SERVICES," for stock options and warrants
issued to consultants and other non-employees. In accordance with ASC Topic
505-50, these stock options and warrants issued as compensation for services
provided to the Company are accounted for based upon the fair value of the
services provided or the estimated fair market value of the option or warrant,
whichever can be more clearly determined. The fair value of the equity
instrument is charged to compensation expense and additional paid-in capital
over the period during which services are rendered. The Company issued 50,000
common shares, and 300,000 options, to consultants in the current fiscal year.
The Company has estimated the fair value of the options issued at $50,855 as of
the grant date using the Black-Scholes option pricing model. The expense is
being recognized over the vesting term of the options. As such, $38,141 has been
recorded as a prepaid expense, and $12,714 has been recognized as consulting
expense in the current year.
32
FIRST AMERICAN SILVER CORP.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2011
NOTE 10 - COMMON STOCK OPTIONS
Key assumptions used by the Company in the Black-Scholes pricing model are
summarized as follows:
2011 Consultant
Options
-------
Stock price $.22
Exercise price $.24
Expected volatility 109%
Expected dividend yield 0.00%
Risk-free rate over the estimated expected
life of the warrants 0.93%
Expected term (in years) 5
NOTE 11 - STOCKHOLDERS' EQUITY
The company has 3,500,000,000 common shares authorized at a par value of $0.001
per share.
The company has 20,000,000 preferred shares authorized at a par value of $0.001
per share.
In 2008, the Company issued 77,000,000 common shares for total proceeds of
$50,000.
On June 8, 2010, the Company affected a 35:1 forward stock split of its common
shares. All share and per share data have been adjusted to reflect such stock
split.
On October 29, 2010, the Company completed a private placement whereby it issued
1,000,000 units at $0.25 each for gross proceeds of $250,000 to an unrelated
third party. Each unit consists of one common share and one share purchase
warrant exercisable at a price of $0.50 expiring on October 29, 2012.
On November 26, 2010, the Company issued 300,000 common shares as part of the
acquisition of interests in three mineral properties. These shares were valued
at a fair market value of $.50 per share on the date of issuance for total value
of $150,000.
On December 20, 2010, the Company cancelled 23,850,000 common shares.
On April 15, 2011, the Company issued 100,000 common shares as part of the
acquisition of an interest in a mineral property. These shares were valued at a
fair market value of $1.03 per share on the date of issuance for total value of
$103,000.
On July 1, and October 1, 2011, the Company issued 25,000 common shares to a
consultant for services. The shares issued on July 1, 2011 were valued at
$4,500; the shares issued on October 1, 2011 were valued at $10,725.
On July 13, 2011, the Company completed a private placement whereby it issued
1,000,000 units at $0.35 each for gross proceeds of $350,000 to an unrelated
third party. Each unit consists of one common share and one share purchase
warrant exercisable at a price of $0.65 expiring on July 13, 2013.
33
FIRST AMERICAN SILVER CORP.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2011
NOTE 12 - INCOME TAXES
For the years ended November 30, 2011 and 2010, the Company has incurred net
losses and, therefore, has no tax liability. The net deferred tax asset
generated by the loss carry-forward has been fully reserved. The cumulative net
operating loss carry-forward is $613,105 at November 30, 2011, and will begin to
expire in the year 2028.
The provision for Federal income tax consists of the following as of November
30, 2011 and 2010:
2011 2010
---------- ----------
Federal income tax attributable to:
Current operations $ 182,702 $ 15,559
Less: valuation allowance (182,702) (15,559)
---------- ----------
Net provision for Federal income taxes $ 0 $ 0
========== ==========
The cumulative tax effect at the expected rate of 34% of significant items
comprising our net deferred tax amount is as follows as of November 30, 2011 and
2010:
2011 2010
---------- ----------
Deferred tax asset attributable to:
Net operating loss carryover $ 208,456 $ 25,754
Less: valuation allowance (208,456) (25,754)
---------- ----------
Net deferred tax asset $ 0 $ 0
========== ==========
Due to the change in ownership provisions of the Tax Reform Act of 1986, net
operating loss carry forwards for federal income tax reporting purposes are
subject to annual limitations. Should a change in ownership occur net operating
loss carry forwards may be limited as to use in future years.
NOTE 13 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. The Company has no established source
of revenue. This raises substantial doubt about the Company's ability to
continue as a going concern. Without realization of additional capital, it would
be unlikely for the Company to continue as a going concern. The financial
statements do not include any adjustments that might result from this
uncertainty.
The Company's activities to date have been supported by equity financing. It has
sustained losses in all previous reporting periods with an inception to date
loss of $613,105 as of November 30, 2011. Management continues to seek funding
from its shareholders and other qualified investors.
34
FIRST AMERICAN SILVER CORP.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2011
NOTE 14 - COMMITMENTS AND CONTINGENCIES
On November 26, 2010 we entered into three agreements with All American
Resources LLC in regard to the acquisition of certain property interests. The
interests that we have acquired are as follows:
* An option to acquire a 100% interest in a mineral exploration property
called the "Eagan Canyon" property in White Pine County, Nevada;
* An option to acquire a 100% interest in a mineral exploration property
called the "Muncy Creek" property in White Pine County, Nevada; and
* An option to acquire a 100% interest in a mineral exploration property
called the "Mountain City" property in Elko County, Nevada.
In regard to the above option agreements for the properties, our obligations for
each property consist of:
Making payments in the aggregate amount of $180,000 in annual periodic payments
ranging from $10,000 to $50,000, to the ninth anniversary of the option
agreement.
Make certain restricted common stock share issuances to All American Resources
LLC under the terms of the option agreements, periodically to the ninth
anniversary of the agreement (300,000 shares in regard to each property, with
100,000 shares in the first year and 25,000 shares each year thereafter).
On or before the tenth anniversary of the option agreement, in addition to the
payments described above, paying to All American Resources $1,000,000, in which
case All American Resources shall retain a two percent (2%) mineral production
royalty (the "Royalty") or, paying to All American Resources $2,000,000, in
which case All American Resources shall retain a one percent (1%) royalty.
On April 15, 2011, the Company entered into a mining lease and option purchase
agreement with Pyramid Lake LLC and Anthony A. Longo whereby we acquired an
interest in the Esmeralda property.
In regard to the above option agreement, our obligations for each property
consist of:
Making payments in the aggregate amount of $1,820,000 ranging from $30,000 to
$100,000 commencing in the year 2011 and completing in the year 2031.
On September 22, 2011, the Company entered into a License and Assignment
Agreement with its President, Mr. Tom Menning, whereby Mr. Menning has assigned
80% of his rights to participate on a 50% basis with ongoing and future projects
operated, controlled and conveyed within the area of interest.
Under the terms of the License Agreement, the Company will finance the cost of
pursuing rights for 80% percent of future proceeds received from the rights. The
term of the agreement is 10 years with an option to renew for an additional 10
years.
The officers and directors of the Company are involved in other business
activities and may, in the future, become involved in other business
opportunities that become available. They may face a conflict in selecting
between the Company and other business interests. The Company has not formulated
a policy for the resolution of such conflicts.
35
FIRST AMERICAN SILVER CORP.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2011
NOTE 15 - SUBSEQUENT EVENTS
In accordance with ASC Topic 855-10, the Company has analyzed its operations
subsequent to November 30, 2011 to the date these financial statements were
issued, and has determined that it does not have any material subsequent events
to disclose in these financial statements.
36
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no disagreements with our accountants related to accounting
principles or practices, financial statement disclosure, internal controls or
auditing scope or procedure during the two fiscal years and subsequent interim
periods.
ITEM 9A. CONTROLS AND PROCEDURES
MANAGEMENT'S REPORT ON DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure that
the information disclosed in the reports we file with the Securities and
Exchange Commission 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, and that such information is accumulated and
communicated to our president (our principal executive officer and our principal
financial and accounting officer), as appropriate, to allow timely decisions
regarding required disclosure.
Management, including our president (our principal executive officer and our
principal financial and accounting officer), evaluated the effectiveness of our
disclosure controls and procedures, as of November 30, 2011, in accordance with
Rules 13a-15(b) and 15d-15(b) of the Securities and Exchange Act of 1934, as
amended are effective to ensure the information required to be disclosed by us
in the reports that we file or submit under the Securities and Exchange Act of
1934, as amended is recorded, processed, summarized and reported within the time
period specified in SEC rules and forms.
Our management, including our president (our principal executive officer and our
principal financial and accounting officer), do not expect that our disclosure
controls, and procedures or internal controls will prevent all possible error
and fraud. Our disclosure controls and procedures are, however, designed to
provide reasonable assurance of achieving their objectives, and our president
(our principal executive officer and our principal financial and accounting
officer) have concluded that our financial controls and procedures are effective
at that reasonable assurance level.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting. Responsibility, estimates and judgments by
management are required to assess the expected benefits and related costs of
control procedures. The objectives of internal control include providing
management with reasonable, but not absolute, assurance that assets are
safeguarded against loss from unauthorized use or disposition, and that
transactions are executed in accordance with management's authorization and
recorded properly to permit the preparation of consolidated financial statements
in conformity with accounting principles generally accepted in the United
States. Our management assessed the effectiveness of our internal control over
financial reporting as of November 30, 2011. In making this assessment, our
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission ("COSO") in INTERNAL CONTROL-INTEGRATED
FRAMEWORK. Our management has concluded that, as of November 30, 2011, our
internal control over financial reporting was effective in providing reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with US generally
accepted accounting principles. Our management reviewed the results of their
assessment with our Board of Directors.
This annual report does not include an attestation report of our company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by our Company's
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit our company to provide only management's
report in this annual report.
37
INHERENT LIMITATIONS ON EFFECTIVENESS OF CONTROLS
Internal control over financial reporting has inherent limitations which include
but is not limited to the use of independent professionals for advice and
guidance, interpretation of existing and/or changing rules and principles,
segregation of management duties, scale of organization, and personnel factors.
Internal control over financial reporting is a process which involves human
diligence and compliance and is subject to lapses in judgment and breakdowns
resulting from human failures. Internal control over financial reporting also
can be circumvented by collusion or improper management override. Because of its
inherent limitations, internal control over financial reporting may not prevent
or detect misstatements on a timely basis, however these inherent limitations
are known features of the financial reporting process and it is possible to
design into the process safeguards to reduce, though not eliminate, this risk.
Therefore, even those systems determined to be effective can provide only
reasonable assurance with respect to financial statement preparation and
presentation. 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 controls over financial reporting
that occurred during the year ended November 30, 2011 that have materially or
are reasonably likely to materially affect, our internal controls over financial
reporting.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following individuals serve as the directors and executive officers of our
company as of the date of this annual report. All directors of our company hold
office until the next annual meeting of our shareholders or until their
successors have been elected and qualified. The executive officers of our
company are appointed by our board of directors and hold office until their
death, resignation or removal from office.
Position Held Date First Elected
Name with the Company Age or Appointed
---- ---------------- --- ------------
Thomas Menning President, Chief Financial 60 March 2, 2011
Officer, Secretary,
Treasurer and Director
Robert Suda Director 60 May 4, 2010
BUSINESS EXPERIENCE
The following is a brief account of the education and business experience during
at least the past five years of each director, executive officer and key
employee of our company, indicating the person's principal occupation during
that period, and the name and principal business of the organization in which
such occupation and employment were carried out.
38
THOMAS MENNING - PRESIDENT, CHIEF FINANCIAL OFFICER, SECRETARY, TREASURER AND
DIRECTOR
Mr. Menning has been semi retired for the last eleven years. However, during
this time, he did start up two new ventures involved in the mining industry.
Canadian American Mining Company, LLC, incorporated on October 25, 1999 and All
American Resources LLC, incorporated on May 15, 2011. Since their inception, Mr.
Menning has served as the managing partner for both entities and continues to do
so to this day. Canadian American Mining Company, LLC was formed for the purpose
of holding various long and short-term investments. The company has never had
any employees and its' revenues have been driven by mining royalty income, the
sale of securities and the sale of real estate assets. All American Resources,
LLC was formed for the purpose of acquiring distressed real estate primarily in
the State of Nevada. Over time the company has acquired many undeveloped
properties, patented mining claims and invested in publicly traded mining
companies (primarily through private placements).
ROBERT SUDA - VICE PRESIDENT, EXPLORATION AND DIRECTOR
Robert Suda has 34 years of exploration experience including 15 years with
Cominco American in U.S. Exploration as a senior geologist. He built and led the
initial exploration organization at the Pend Oreille mine in Washington, which
led to an expansion of the reserves and ultimately to the discovery of the
Washington Rock ore body. He was also directly associated with the discovery of
a gold deposit in Nevada that was sold by Teck Cominco, but eventually mined by
a junior company. Robert has a Master's degree in Geology from Northern Illinois
University and since 1999 has worked on many projects in the U.S., Canada and
internationally for numerous junior mining companies. Robert currently is
Vice-President of Exploration for FDG Mining Inc., and formerly was
Vice-President of Exploration for Portage Minerals.
FAMILY RELATIONSHIPS
There are no family relationships between any of our directors, executive
officers and proposed directors or executive officers.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
To the best of our knowledge, none of our directors or executive officers has,
during the past ten years:
1. been convicted in a criminal proceeding or been subject to a pending
criminal proceeding (excluding traffic violations and other minor
offences);
2. had any bankruptcy petition filed by or against the business or
property of the person, or of any partnership, corporation or business
association of which he was a general partner or executive officer,
either at the time of the bankruptcy filing or within two years prior
to that time;
3. been subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction
or federal or state authority, permanently or temporarily enjoining,
barring, suspending or otherwise limiting, his involvement in any type
of business, securities, futures, commodities, investment, banking,
savings and loan, or insurance activities, or to be associated with
persons engaged in any such activity;
4. been found by a court of competent jurisdiction in a civil action or
by the SEC or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law, and the
judgment has not been reversed, suspended, or vacated;
5. been the subject of, or a party to, any federal or state judicial or
administrative order, judgment, decree, or finding, not subsequently
reversed, suspended or vacated (not including any settlement of a
civil proceeding among private litigants), relating to an alleged
violation of any federal or state securities or commodities law or
regulation, any law or regulation respecting financial institutions or
insurance companies including, but not limited to, a temporary or
permanent injunction, order of disgorgement or restitution, civil
money penalty or temporary or permanent cease-and-desist order, or
39
removal or prohibition order, or any law or regulation prohibiting
mail or wire fraud or fraud in connection with any business entity; or
6. been the subject of, or a party to, any sanction or order, not
subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Exchange Act (15
U.S.C. 78c(a)(26))), any registered entity (as defined in Section
1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any
equivalent exchange, association, entity or organization that has
disciplinary authority over its members or persons associated with a
member.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our
executive officers and directors and persons who own more than 10% of a
registered class of our equity securities to file with the Securities and
Exchange Commission initial statements of beneficial ownership, reports of
changes in ownership and annual reports concerning their ownership of our shares
of common stock and other equity securities, on Forms 3, 4 and 5, respectively.
Executive officers, directors and greater than 10% shareholders are required by
the Securities and Exchange Commission regulations to furnish us with copies of
all Section 16(a) reports they file.
Based solely on our review of the copies of such forms received by our company,
or written representations from certain reporting persons that no Form 5s were
required for those persons, we believe that, during the fiscal year ended
November 30, 2011, all filing requirements applicable to our officers, directors
and greater than 10% beneficial owners as well as our officers, directors and
greater than 10% beneficial owners of our subsidiaries were complied with, with
the exception of the following:
Number of
Transactions Not
Number of Late Reported on a Failure to File
Name Reports Timely Basis Requested Forms
---- ------- ------------ ---------------
Thomas Menning 1 (1) 3 Nil
----------
(1) the director or office was late filing a Form 4, Notice of Change of
Beneficial Ownership.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our officers and directors are indemnified as provided by the Nevada Revised
Statutes and by our Bylaws.
Under the Nevada Revised Statutes, director immunity from liability to a company
or its stockholders for monetary liabilities applies automatically unless it is
specifically limited by a company's Articles of Incorporation. Our Articles of
Incorporation do not specifically limit our directors' immunity. Excepted from
that immunity are: (a) a willful failure to deal fairly with the company or its
stockholders in connection with a matter in which the director has a material
conflict of interest; (b) a violation of criminal law, unless the director had
reasonable cause to believe that his or her conduct was lawful or no reasonable
cause to believe that his or her conduct was unlawful; (c) a transaction from
which the director derived an improper personal profit; and (d) willful
misconduct.
Our Bylaws provide that we will indemnify our directors and officers to the
fullest extent not prohibited by Nevada law; provided, however, that we may
modify the extent of such indemnification by individual contracts with our
directors and officers; and, provided, further, that we shall not be required to
indemnify any director or officer in connection with any proceeding, or part
thereof, initiated by such person unless such indemnification: (a) is expressly
required to be made by law, (b) the proceeding was authorized by our Board of
Directors, (c) is provided by us, in our sole discretion, pursuant to the powers
vested in us under Nevada law or (d) is required to be made pursuant to the
Bylaws.
40
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to our directors, officers and control persons pursuant to the
foregoing provisions or otherwise, we have been advised that, in the opinion of
the Securities and Exchange Commission, such indemnification is against public
policy, and is, therefore, unenforceable.
CODE OF ETHICS
On February 13, 2012, our board of directors adopted a Code of Ethics and
Business Conduct that applies to, among other persons, our company's chief
executive officer, president and chief financial officer (being our principal
executive officer, principal financial officer and principal accounting
officer), as well as persons performing similar functions. As adopted, our Code
of Ethics and Business Conduct sets forth written standards that are designed to
deter wrongdoing and to promote:
1. honest and ethical conduct, including the ethical handling of actual
or apparent conflicts of interest between personal and professional
relationships;
2. full, fair, accurate, timely, and understandable disclosure in reports
and documents that we file with, or submit to, the Securities and
Exchange Commission and in other public communications made by us;
3. compliance with applicable governmental laws, rules and regulations;
4. the prompt internal reporting of violations of the Code of Ethics and
Business Conduct to an appropriate person or persons identified in the
Code of Ethics and Business Conduct; and
5. accountability for adherence to the Code of Ethics and Business
Conduct.
Our Code of Ethics and Business Conduct requires, among other things, that all
of our company's senior officers commit to timely, accurate and consistent
disclosure of information; that they maintain confidential information; and that
they act with honesty and integrity.
In addition, our Code of Ethics and Business Conduct emphasizes that all
employees have a responsibility for maintaining financial integrity within our
company, consistent with generally accepted accounting principles, and federal
and state securities laws. Any employee who becomes aware of any incidents
involving financial or accounting manipulation or other irregularities, whether
by witnessing the incident or being told of it, must report it to our company.
Any failure to report such inappropriate or irregular conduct of others is to be
treated as a severe disciplinary matter. It is against our company policy to
retaliate against any individual who reports in good faith the violation or
potential violation of our company's Code of Ethics and Business Conduct by
another.
Our Code of Ethics and Business Conduct will be filed with the Securities and
Exchange Commission as Exhibit 14.1 to this annual report on Form 10-K. We will
provide a copy of the Code of Ethics and Business Conduct to any person without
charge, upon request. Requests can be sent to: First American Silver Corp.,
10597 Double R. Boulevard, Suite 2, Reno, Nevada 89521.
AUDIT COMMITTEE AND AUDIT COMMITTEE FINANCIAL EXPERT
Our board of directors has determined that it does not have a member of its
audit committee that qualifies as an "audit committee financial expert" as
defined in Item 407(d)(5)(ii) of Regulation S-K, and is "independent" as the
term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange
Act of 1934, as amended.
We believe that the members of our board of directors are collectively capable
of analyzing and evaluating our financial statements and understanding internal
controls and procedures for financial reporting. We believe that retaining an
independent director who would qualify as an "audit committee financial expert"
would be overly costly and burdensome and is not warranted in our circumstances
given the early stages of our development and the fact that we have not
generated any material revenues to date. In addition, we currently do not have
nominating, compensation or audit committees or committees performing similar
41
functions nor do we have a written nominating, compensation or audit committee
charter. Our board of directors does not believe that it is necessary to have
such committees because it believes the functions of such committees can be
adequately performed by our board of directors.
ITEM 11. EXECUTIVE COMPENSATION
The particulars of the compensation paid to the following persons:
* our principal executive officer;
* each of our two most highly compensated executive officers who were
serving as executive officers at the end of the years ended November
30, 2011 and 2010; and
* up to two additional individuals for whom disclosure would have been
provided under (b) but for the fact that the individual was not
serving as our executive officer at the end of the years ended
November 30, 2011 and 2010,
who we will collectively refer to as the named executive officers of our
company, are set out in the following summary compensation table, except that no
disclosure is provided for any named executive officer, other than our principal
executive officers, whose total compensation did not exceed $100,000 for the
respective fiscal year:
SUMMARY COMPENSATION TABLE
Change in
Pension
Value and
Non-Equity Nonqualified
Name and Incentive Deferred
Principal Stock Option Plan Compensation All Other
Position Year Salary($) Bonus($) Awards($) Awards($) Compensation($) Earnings($) Compensation($) Totals($)
-------- ---- --------- -------- --------- --------- --------------- ----------- --------------- ---------
Thomas Menning(1) 2011 N/A N/A N/A N/A N/A N/A N/A N/A
President, Chief 2010 N/A N/A N/A N/A N/A N/A N/A N/A
Executive Officer,
Chief Financial
Officer, Secretary,
Treasurer and
Director
Robert Suda(2) 2011 N/A N/A N/A N/A N/A N/A N/A N/A
Director and Vice 2010 N/A N/A N/A N/A N/A N/A N/A N/A
President of
Exploration,
former President,
Chief Executive
Officer, Chief
Financial Officer,
Secretary,
Treasurer
----------
(1) Mr. Menning was appointed President, Chief Executive Officer, Chief
Financial Officer, Secretary, Treasurer and as a Director on March 2, 2011.
(2) Mr. Suda was appointed President, Chief Executive Officer, Chief Financial
Officer, Secretary, Treasurer and as a Director on May 4, 2010 and resigned
from all officer positions on March 2, 2011.
There are no compensatory plans or arrangements with respect to our executive
officers resulting from their resignation, retirement or other termination of
employment or from a change of control.
42
STOCK OPTION PLAN
On November 10, 2011, our directors approved the adoption of our 2011 Stock
Option Plan which permits our company to issue options to acquire up to
2,500,000 shares of our common stock by directors, officers, employees and
consultants of our company.
STOCK OPTIONS/SAR GRANTS
During our fiscal year ended November 30, 2011 there were no options granted to
our named officers or directors.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
No equity awards were outstanding as of the year ended November 30, 2011.
OPTION EXERCISES
During our Fiscal year ended November 30, 2011 there were no options exercised
by our named officers. \
COMPENSATION OF DIRECTORS
We do not have any agreements for compensating our directors for their services
in their capacity as directors, although such directors are expected in the
future to receive stock options to purchase shares of our common stock as
awarded by our board of directors.
We have determined that none of our directors are independent directors, as that
term is used in Item 7(d)(3)(iv)(B) of Schedule 14A under the SECURITIES
EXCHANGE ACT OF 1934, as amended, and as defined by Rule 4200(a)(15) of the
NASDAQ Marketplace Rules.
PENSION, RETIREMENT OR SIMILAR BENEFIT PLANS
There are no arrangements or plans in which we provide pension, retirement or
similar benefits for directors or executive officers. We have no material bonus
or profit sharing plans pursuant to which cash or non-cash compensation is or
may be paid to our directors or executive officers, except that stock options
may be granted at the discretion of the board of directors or a committee
thereof.
INDEBTEDNESS OF DIRECTORS, SENIOR OFFICERS, EXECUTIVE OFFICERS AND OTHER
MANAGEMENT
None of our directors or executive officers or any associate or affiliate of our
company during the last two fiscal years, is or has been indebted to our company
by way of guarantee, support agreement, letter of credit or other similar
agreement or understanding currently outstanding.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 2011, we did not have a compensation committee or another
committee of the board of directors performing equivalent functions. Instead the
entire board of directors performed the function of compensation committee. Our
board of directors approved the executive compensation, however, there were no
deliberations relating to executive officer compensation during fiscal 2011.
COMPENSATION COMMITTEE REPORT
None.
43
FAMILY RELATIONSHIPS
There are no family relationships between any of our directors, executive
officers or directors.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table sets forth, as of February 8, 2012, certain information with
respect to the beneficial ownership of our common shares by each shareholder
known by us to be the beneficial owner of more than 5% of our common shares, as
well as by each of our current directors and executive officers as a group. Each
person has sole voting and investment power with respect to the shares of common
stock, except as otherwise indicated. Beneficial ownership consists of a direct
interest in the shares of common stock, except as otherwise indicated.
Amount and Nature
Name and Address Title of Beneficial Percentage of
of Beneficial Owner of Class Ownership Class (1)
------------------- -------- --------- ---------
Thomas J. Menning Common 7,936,000 14.24%
11380 S. Virginia Street, #2011
Reno, NV 89511
Robert Suda Common 8,000,000 14.36%
4323 S. Evergreen Rd.
Veradale, WA 99037
Directors and Officers as a group Common 15,936,000 28.61%
Henry H. Tonking Common 8,000,000 14.36%
546 Lantern Ct.
Incline Village, NV 89451
----------
(1) Under Rule 13d-3, a beneficial owner of a security includes any person who,
directly or indirectly, through any contract, arrangement, understanding,
relationship, or otherwise has or shares: (i) voting power, which includes
the power to vote, or to direct the voting of shares; and (ii) investment
power, which includes the power to dispose or direct the disposition of
shares. Certain shares may be deemed to be beneficially owned by more than
one person (if, for example, persons share the power to vote or the power
to dispose of the shares).In addition, shares are deemed to be beneficially
owned by a person if the person has the right to acquire the shares (for
example, upon exercise of an option) within 60 days of the date as of which
the information is provided .In computing the percentage ownership of any
person, the amount of shares outstanding is deemed to include the amount of
shares beneficially owned by such person (and only such person) by reason
of these acquisition rights. As a result, the percentage of outstanding
shares of any person as shown in this table does not necessarily reflect
the person's actual ownership or voting power with respect to the number of
shares of common stock actually outstanding on February 8, 2012 .As of
February 8, 2012, there were 55,700,000 shares of our company's common
stock issued and outstanding.
CHANGES IN CONTROL
We are unaware of any contract or other arrangement or provisions of our
Articles or Bylaws the operation of which may at a subsequent date result in a
change of control of our company. There are not any provisions in our Articles
or Bylaws, the operation of which would delay, defer, or prevent a change in
control of our company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Except as disclosed herein, no director, executive officer, shareholder holding
at least 5% of shares of our common stock, or any family member thereof, had any
material interest, direct or indirect, in any transaction, or proposed
transaction since the year ended November 30, 2011, in which the amount involved
in the transaction exceeded or exceeds the lesser of $120,000 or one percent of
the average of our total assets at the year end for the last three completed
fiscal years.
44
DIRECTOR INDEPENDENCE
We currently act with two directors, including Robert Suda and Thomas Menning.
We have determined that neither of our directors is an "independent director" as
defined in NASDAQ Marketplace Rule 4200(a)(15).
We do not have a standing audit, compensation or nominating committee, but our
entire board of directors acts in such capacities. We believe that our members
of our board of directors are capable of analyzing and evaluating our financial
statements and understanding internal controls and procedures for financial
reporting. The board of directors of our company does not believe that it is
necessary to have an audit committee because we believe that the functions of an
audit committee can be adequately performed by the board of directors. In
addition, we believe that retaining an independent director who would qualify as
an "audit committee financial expert" would be overly costly and burdensome and
is not warranted in our circumstances given the early stages of our development.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The aggregate fees billed for the most recently completed fiscal year ended
November 30, 2011 and for the fiscal year ended November 30, 2010 for
professional services rendered by the principal accountant for the audit of our
annual financial statements and review of the financial statements included in
our quarterly reports on Form 10-Q and services that are normally provided by
the accountant in connection with statutory and regulatory filings or
engagements for these fiscal periods were as follows:
Year Ended
November 30, 2011 November 30, 2010
----------------- -----------------
$ $
Audit Fees 7,000 4,500
Audit Related Fees 2,725 2,600
Tax Fees Nil Nil
All Other Fees Nil Nil
Total 9,725 7,100
Our board of directors pre-approves all services provided by our independent
auditors. All of the above services and fees were reviewed and approved by the
board of directors either before or after the respective services were rendered.
Our board of directors has considered the nature and amount of fees billed by
our independent auditors and believes that the provision of services for
activities unrelated to the audit is compatible with maintaining our independent
auditors' independence.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) Financial Statements
(1) Financial statements for our company are listed in the index under
Item 8 of this document
(2) All financial statement schedules are omitted because they are not
applicable, not material or the required information is shown in the
financial statements or notes thereto.
45
(b) Exhibits
Exhibit
Number Description
------ -----------
(3) (I) ARTICLES OF INCORPORATION; (II) BY-LAWS
3.1 Articles of Incorporation (incorporated by reference to our
Registration Statement filed on Form S-1 on February 25, 2009).
3.2 By-laws (incorporated by reference to our Registration Statement filed
on Form S-1 on February 25, 2009)
3.3 Certificate of Amendment (incorporated by reference to our
Registration Statement filed on Form S-1 on February 25, 2009).
3.4 Articles of Merger (incorporated by reference to our Current Report
filed on Form 8-K on July 15, 2010).
3.5 Certificate of Change (incorporated by reference to our Current Report
filed on Form 8-K on July 15, 2010).
(10) MATERIAL CONTRACTS
10.1 Property Option Agreement between our company and All American
Resources LLC with respect to the Mountain City claim dated November
26, 2010 (incorporated by reference to our Current Report filed on
Form 8-K on December 21, 2010).
10.2 Property Option Agreement between our company and All American
Resources LLC with respect to the Eagan Canyon claim dated November
26, 2010 (incorporated by reference to our Current Report filed on
Form 8-K on December 21, 2010).
10.3 Property Option Agreement between our company and All American
Resources LLC with respect to the Muncy Creek claim dated November 26,
2010 (incorporated by reference to our Current Report filed on Form
8-K on December 21, 2010).
10.4 Mining Lease and Option to Purchase Agreement between our company,
Pyramid Lake LLC and Anthony A. Longo dated April 15, 2011
(incorporated by reference to our Current Report filed on Form 8-K on
May 17, 2011).
10.5 Assignment and License Agreement between Thomas J. Menning and our
company dated September 16, 2011(incorporated by reference to our
Current Report filed on Form 8-K on October 14, 2011).
(14) CODE OF ETHICS
14.1* Code of Ethics
(31) RULE 13A-14(A) / 15D-14(A) CERTIFICATIONS
31.1* Certification pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 of the Principal Executive Officer, Principal Financial Officer
and Principal Accounting Officer.
(32) SECTION 1350 CERTIFICATIONS
32.1* Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 of the Principal Executive Officer, Principal Financial Officer
and Principal Accounting Officer.
46
101 INTERACTIVE DATA FILE
101** Interactive Data File (Form 10-K for the year ended November 30, 2011
furnished in XBRL).
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
----------
* Filed herewith.
** Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the
Interactive Data Files on Exhibit 101 hereto are deemed not filed or part
of any registration statement or prospectus for purposes of Sections 11 or
12 of the Securities Act of 1933, are deemed not filed for purposes of
Section 18 of the Securities and Exchange Act of 1934, and otherwise are
not subject to liability under those sections.
47
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FIRST AMERICAN SILVER CORP.
(Registrant)
Dated: March 5, 2012 /s/ Thomas Menning
----------------------------------------------
Thomas Menning
President, Chief Financial Officer, Secretary,
Treasurer and Director
(Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Dated: March 5, 2012 /s/ Thomas Menning
----------------------------------------------
Thomas Menning
President, Chief Financial Officer, Secretary,
Treasurer and Director
(Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer)
Dated: March 5, 2012 /s/ Robert Suda
----------------------------------------------
Robert Suda
Vice President, Exploration and Director
4