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EX-31 - MANAGEMENT CERTIFICATION - UNITED MINES INCexhibit_31.htm
EX-32 - SARBANES-OXLEY ACT - UNITED MINES INCexhibit_32.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

Form 10-K

þ
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2011

OR
o
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from_____________ to _____________.

Commission file number 000-53727

UNITED MINES, INC.

(Exact name of registrant as specified in its charter)

 
Arizona
   
83-0452269
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
     
 11924 N. Centaurus Place
Oro Valley, AZ
   85737
 (Address of principal executive offices)
 
 (Zip Code)

Registrant’s telephone number, including area code   (520) 742-3111

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
 
Name of each exchange on which registered
None
 
Over the Counter Bulletin Board

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001 

(Title of class)


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes Noþ    

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes No þ       
 

 
i

 

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ      No
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such a shorter period that the registrant was required to submit and post such files).    Yes þ      No

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K contained in this form, and no disclosure will 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  þ 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or smaller reporting company. See definition of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
 Large accelerated filer  o    Accelerated filer   o
         
 Non-accelerated filer  o    Smaller reporting company  þ
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act. Yes  No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

     
Class
 
Outstanding at April 1,2012
Common stock, $0.001 par value
 
13,739,307

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the 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. Solely for purposes of the foregoing calculation, all of the registrant’s directors and officers are deemed to be affiliates.  This determination of affiliate status for this purpose does not reflect a determination that any persons are affiliates for any other purposes.  $1,483,845.

Transitional Small Business Disclosure Format Yes o No   þ 
 

Documents Incorporated By Reference 

None


 
ii

 

United Mines, Inc.

FORM 10-K ANNUAL REPORT
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2011 and 2010
TABLE OF CONTENTS




PART I
  
 
ITEM 1.
  
BUSINESS
  
1
ITEM 1A.
  
RISK FACTORS
  
17
ITEM 1B.
  
UNRESOLVED STAFF COMMENTS
  
27
ITEM 2.
  
PROPERTIES
  
27
ITEM 3.
  
LEGAL PROCEEDINGS
  
27
ITEM 4.
  
REMOVED AND RESERVED
  
27
PART II
  
 
ITEM 5.
  
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
  
28
ITEM 6.
  
SELECTED FINANCIAL DATA
  
30
ITEM 7.
  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  
30
ITEM 7A.
  
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
39
ITEM 8.
  
CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
40
ITEM 9.
  
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
40
ITEM 9A.
  
CONTROLS AND PROCEDURES
  
40
ITEM 9B.
  
OTHER INFORMATION
  
40
PART III
  
 
ITEM 10.
  
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.
  
42
ITEM 11.
  
EXECUTIVE COMPENSATION
  
45
ITEM 12.
  
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
  
49
ITEM 13.
  
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
50
ITEM 14.
  
PRINCIPAL ACCOUNTANT FEES AND SERVICES
  
51
PART IV
  
 
ITEM 15.
  
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
  
52
 
  
SIGNATURES
  
53
         
 
CERTIFICATIONS
   
Exhibit 31   Management certification    
         
Exhibit 32   Sarbanes-Oxley Act    
 











 
iii

 

Special Note Regarding Forward-Looking Statements

Some of our statements under "Business," "Properties," "Legal Proceedings," "Management's Discussion and Analysis of Financial Condition and Results of Operations,"" the Notes to Financial Statements and elsewhere in this report constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are subject to certain events, risks and uncertainties that may be outside our control. Some of these forward-looking statements include statements of:

 
·
management's plans, objectives and budgets for its future operations and future economic performance;
 
·
capital budget and future capital requirements;
 
·
meeting future capital needs;
 
·
realization of any deferred tax assets;
 
·
the level of future expenditures;
 
·
impact of recent accounting pronouncements;
 
·
the outcome of regulatory and litigation matters; and
 
·
the assumptions described in this report underlying such forward-looking statements.


Actual results and developments may materially differ from those expressed in or implied by such statements due to a number of factors, including:
 
·
those described in the context of such forward-looking statements;
 
·
future development and related costs;
 
·
changes in our incentive plans;
 
·
market price for minerals;
 
·
the markets for mineral commodities; and
 
·
the risk factors described in other documents and reports filed with the Securities and Exchange Commission.

In some cases, forward-looking statements are identified by terminology such as "may," "will," "should," "could," "would," "expects," "plans," "intends," "anticipates," "believes," "estimates," "approximates," "predicts," "potential" or "continue" or the negative of such terms and other comparable terminology.

Although we believe that the expectations reflected in these forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor anyone else assumes responsibility for the accuracy and completeness of such statements and is under no duty to update any of the forward-looking statements after the date of this report.

Unless otherwise noted, references in this Form 10-K to “United Mines, Inc.”, “UNMN”,“UMI” “we”, “us”, “our”, and the “Company” means United Mines, Inc., an Arizona corporation.  Our principal place of business is located at 11924 N. Centaurus Place, Oro Valley, AZ 85737.   Our telephone number is (520) 742-3111.

 
iv

 

  PART I

ITEM 1 – BUSINESS

Corporate History

The Mining Industry

Mining operations generally progress through four stages:  (1) prospecting, or the search for mineral deposits; (2) exploration, or the work involved in assessing the size, shape, location, and economic value of the deposit; (3) development, or the work of preparing access to the deposit so that the minerals can be extracted from it; and (4) exploitation, the work of extracting the minerals.

Companies in the mining industry are categorized based on the current activities taking place at the properties where they own rights.  An exploration stage company is one that is engaged in the search for minerals (reserves) which are not in either the development stage or production stage.  A development stage company is one that is engaged in the preparation of an established commercially mineable deposit (reserves) for its extraction which is not in the production stage.  A production stage company is one that is engaged in the exploitation of a mineral deposit (reserve).

The exploration stage of mining consists of numerous steps, including:  i) locate vein structures; ii) rock chip sample along the lengths of the vein; iii) rock chip sample the surrounding host rock; iv) send samples to assay labs for assay results; v) upon favorable results, perform a soil geochemical assay test along and around the vein structure to get a better detail of where the vein runs; vi) assay the soils that are collected; vii) using test results, map out a test drill pattern for the Diamond Core drilling; viii) drill the cores based on the drill map created; ix) sample the cores at various depths and send to assay; and x) either plot out a total drilling program or put together a pilot production plant for approximately the same cost as a full drill program (approximately $1.2 million).

A glossary of the mining and mineral resource terms used in this Annual Report is incorporated by reference to Exhibit 99.3, from our registration statement on Form S-1 (Amendment #1), filed with the Securities and Exchange Commission on March 20, 2010.

Company Overview

We were originally incorporated under the name Plae, Inc., in the State of Arizona on August 20, 1999.  At the time we operated under the name Plae, Inc., no business was conducted.  No books or records were maintained and no meetings were held.   In essence, nothing was done after incorporation until Glenn E. Martin took possession of Plae, Inc. in January 2005.  On February 18, 2005, the corporate name was changed to King Mines, Inc. and then subsequently changed to its current name, United Mines, Inc., on March 30, 2005.  No shares were issued until the Company became United Mines, Inc.

 
1

 

ITEM 1 – BUSINESS - continued
 
We are an exploration stage mineral exploration company and have been in the mining industry since January 2005.  An exploration stage company is one engaged in the search for mineral deposits or reserves which are not in either the development or production stage.  We currently own four groups of mining claims.  These groups include one primary silver exploration stage mining project, three gold exploration stage mining projects, three copper exploration stage projects, and one  gold-tailings exploration stage project, all in Arizona, USA.  To date, we have no assurance that commercially viable mineral deposits exist on any of the properties we own or where we have mineral rights. Further exploration, at a significant cost to us, will be required before a final evaluation as to the economic and legal feasibility of the properties is determined.  If this evaluation determines that some of the properties do have mineral deposits we will have to spend substantial funds for their drilling and engineering studies before we will know if we have a commercially viable mineral deposit (a reserve).

In October, 2005, we contracted with Glynn A. Burkhardt and Glynn G. Burkhardt, our current Senior Vice President and our former Emeritus Chairman of the Board, respectively, to transfer the rights and interests they held in 23 mining claim to us, by quitclaim deed, in exchange for 3,600,000 shares of our common stock.  These rights and interests were subsequently transferred to us in June 2006.

In March and April 2006, we obtained 3 state “exploration permits” from the state of Arizona, which are renewable on an annual basis for a maximum of 5 years.  The “exploration permits” are the precursor to obtaining a "mineral" lease from the state, but leases cannot be obtained until we either conduct exploration for a year on the properties or show economic feasibility.

During 2006-2010 period, we acquired 77 additional unpatented mining claims on BLM land, including the 9 claims that make up the Blue Copper mining property.

As a result of these acquisitions, we currently own four groups of mining claims.  As detailed below, these groups include one primary silver exploration stage mining project, three gold exploration stage mining projects, three copper exploration stage projects, and one  gold-tailings exploration stage project, all in Arizona, USA.

Our four groups of mining claims include 100 unpatented Bureau of Land Management (BLM) mining claims in Southern Arizona, USA, totaling 2,000 acres.  These claims are renewable annually for $140 per claim and currently paid through August 31, 2012.

In addition to the unpatented mining claims, we own three Arizona State Land Department (ASLD) Mineral Exploration Permits, Nos. 08-110135, 08-110136 and 08-110137, each of which are each good for 5 years, currently thru April 13, 2011.  This Arizona state land department position totals 1,920 acres of land.  These are renewable annually, at $2.00 per acre for year one, no charge per acre for the second year, and $1.00 per acre for years 3-5, plus a $500 renew application fee.  This fee was initially paid thru April 13, 2011. Subsequently, we executed and finalized new 5 year permits for all 3 of our ASLD Mineral Permits.  Our new Mineral Permit #'s are; 08-115655,08-115656, and 08-115657. The $2.00 per acre rental fee of $1280.00 per permit has been paid thru June 16th. 2012.

A brief description of the properties where we have mineral rights are discussed below.  For ease of reference we have split our claims and permitted land into “material” projects, those where we plan to begin our exploration activities, and “non-material” projects, those that we will begin any activity on until after we have begun initial exploration on our “material” projects.  For our material projects we have included various maps and information related to the project in our exhibits.  For our non-material projects we do not include as much in-depth information.

 
2

 

ITEM 1 – BUSINESS - continued
 
Our Current Material Projects

Primary Silver Mining Exploration Project (Group 1 Claims and State Exploration Permits)

Overview

Our primary silver exploration project is known as “The Cerro Colorado Silver Mining Project.”  A.K.A. The Cerro Colorado, Nuevo Colorado and the Esperanza silver projects”. These projects contain the famous “Cerro Colorado” mine, also known as the Heintzelman Silver Mines.  The Cerro Colorado mines have produced silver in the past, but, to date, we have not extracted any silver from this mine, but we have conducted test sampling.

Size:  This project encompasses 24 separate and 8 overlapping unpatented lode claims totaling 480 acres and three state mineral exploration permits, encompassing 1,920 acres.   All land under this project falls within T.20S. R10E of the Salt River Base Meridian, Pima County, Arizona.
 
Lode claims CC-1 through CC-9 and LC 58 and LC 59 form a contiguous block in Section 25 and the north 1/2 of Section 36.   One additional 20 acre lode claim covers the Waterman Mine on the SW 1/4 of Section 22.   Claim corner posts and DM monuments were observed on the ground, and appear in accordance with federal staking regulations.  These are the lode claims that were purchased from the Burkhardts.

Permitted heap leach facilities, under lead agency jurisdiction of the Arizona State Department of Environmental Quality, are located in central portions of lode claim 58 and 59 (LC58 and LC59).  The permitted twin plant facility is discussed in further detail under “Mill Sites” below.
 
The reclamation bonds are currently held by Glynn A. Burkhardt in the name of Glynn A. Burkhardt and Glynn G. Burkhardt, under contract to us.  A BLM required Reclamation Bond of $9,000 is in place.   In addition, a $5,000 ADEQ bond is in place for aquifer protection permit #P-101031.  Transfer of these bonds from the Burkhardts to UMI, is in process.
 
Bonding requirements for proposed exploration and mining activities on state land have been met.  Currently, we have $11,000 in mineral exploration reclamation bonds covering UMI’s 3 Arizona State Land Department Mineral Exploration Permits 08-110135, 08-110136 and 08-110137. Our reclamation bonds were transferred to new Mineral Exploration Permit #'s ; 08-115655,08-115656, and 08-115657.
 
Cerro Colorado Exploration:   Several groups of mining claims on the Cerro Colorado properties are currently being evaluated for various phases of exploration activity.  Planned 2012 exploration includes underground and surface drilling on The South Clark properties in an effort to discover any possible mineralized materials.

Cerro Colorado Strategy:   This is the location we plan on exploring first.  We hope to establish precious metals production from this location in order to produce cash flow which will sustain the company while exploration of further company owned sites is begun.  We will initiate bulk sample metallurgical testing of mineralized material from several of our silver mines at this location.

 
3

 
 
 
ITEM 1 – BUSINESS - continued
 
United Mines Assets at Cerro Colorado and Processing Facility:  Currently, we have mineralized materials containing silver in side cast mine dumps, ready to process.   However, this material is not listed on our financial statements as we will not consider these materials as assets until the mineralized materials from the property is processed and extracted.  Bureau of Land Management Inspector William Auby visited our Twin Plant processing facility on September 28, 2007, BLM Inspector Daniel Moore visited our processing facility in Dec. 2010 and again in February 2011 and gave permission to go ahead under the current Plan of Operations to start to processing mineralized material with our permitted 100-ton a day gravity float and to upgrade our heap leach system.   A modified Plan of Operations will be submitted for approval once we receive sufficient funding to cover our anticipated costs associated with these operations.  In November 2007 & November 2010, our Twin Plant mill site passed our ADEQ permitting processing.

Nicholas Barr, Geologist, was commissioned in 2000 by Glynn A. Burkhardt and Glynn G. Burkhardt, to do a pre-feasibility geological investigation on the Cerro Colorado Mining District.   Ongoing sampling and assays reported from 2001 through 2005 were incorporated into the Barr pre-feasibility report, complete thru 2006.

UMI Group 1 Claims:

The UMI Group 1 Claims comprising our Cerro Colorado silver properties consist of 6 sub-groups of claims and 3 AZ State Exploration Permits which, all total, contain 2,400 acres are as follows:

1.
Twin Plant Mineralized Material Processing Facility (claims LC58 and LC59)
 
T20S, R10E, Sec 25, G & SR Meridian 2 X 20 acre claims or 40 acres.
   
1.a.
Twin Plant contiguous Cerro Colorado mining claims (claims C1-9)
 
T20S, R10E, Sec 25, G & SR Meridian 9 X 20 acre claims or 180 acres.
   
2.
Silver Hill: T20S, R10E, Sec. 17, G&SR Meridian 2 X 20 acre claims or 40 acres
   
3.
Walapi Tiger:  T20S, R10E, Sec. 22, G&SR Meridian  4 X 20 acre claims or 80 acres
   
4.
Walapi Tiger:  T20S, R10E, Sec. 22, G&SR Meridian  2 X 20 acre claims or 40 acres
   
5.
Liberty:  T20S, R10E, Sec. 16, G&SR Meridian  4 X 20 acre claims or 80 acres
   
6.
Waterman  #1:  T20S, R10E, Sec 22, G&SR Meridian   1 X 20 acre claim or 20 acres
   
7.
Mary G:  T20S, R10E, Sec. 21, G&SR Meridian.  State Lease   08-115657 formally 08-110136
 
 
 
 
4

 
 
ITEM 1 – BUSINESS - continued
 
   
8.
South Clark:  T20S, R10E, Sec. 35 G&SR Meridian.
State Lease 08-115655 formerly 08-110135
   
9.
Central Clark;  T20S, R10E, Sec. 26 G&SR Meridian.
State Lease 08-115656 formally 08-110137
   
10.
North Clark:  T20S, R10E, Sec. 26 G&SR Meridian.
State Lease 08-115656 formally 08-110137
   
11.
State Mineral Exploration Permit No. 08-115655
T20S, R10E, Sec. 26, G & SR Meridian. 640 acres.
   
12.
State Mineral Exploration Permit No. 08-115657
T20S, R10E, Sec. 21, G & SR Meridian. 640 acres.
   
13.
State Mineral Exploration Permit No. 08-115656
T20S, R10E, Sec. 35, G & SR Meridian. 640 acres

Location and Access

The UMI Group 1 claims are located in Pima County, Arizona, about 40 miles southwest of Tucson, off exit 48 on Interstate 19 going to Nogales.  Take Amado/Arivaca Rd west 15 miles to properties.  Various gravel/dirt roads go north into the claim group area.

Geology of Group One Claims Area

Mineralization is hosted by a low relief sequence of Tertiary or Cretaceous-age andesite porphyry, quartz latite porphyry, rhyodacite and flow breccia.  Extensive faulting, including numerous broad hematitic fracture zones is thought related to multiple episodes of uplift and fracturing generated by Laramide intrusive activity allowed by Tertiary caldera formation and basin and range extension.  A long duration of tectonic activity has allowed for deep penetration of descending solutions and development of secondary mineralization to depths of 300 feet or greater.

Mill Site Buildings

We own a twin plant facility which includes a heap leach mill with a 100-ton a day gravitational float mill.  In November 2010, we received our current Arizona Department of Environmental Quality (ADEQ) permit, approving this mill for general use.  We must still obtain operating permits when we actually begin processing minerals through the mill, but the ADEQ permit is the primary permit approving the mill for operations.  Within one year of sufficient funding we plan on having limited production on our side cast mine dumps at the Cerro Colorado mine site, and gradually increase production thereafter.

 
5

 

ITEM 1 – BUSINESS - continued
 
Existing buildings include the precipitation house, spare parts and hardware storage building and a laboratory.  There are four small mobile homes used for on-site housing.   During the expansion of mining activities, the heap leach pad and ponds will be reconstructed, as will a shower/locker room/restroom building and a 120' by 40' maintenance and storage building.   The precipitation house will eventually be upgraded with higher capacity processing equipment.

We will operate strictly in accordance with Mine Safety and Health Administration (MSHA), Occupational Safety and Health Administration (OSHA), Arizona State Mine Inspector and ADEQ regulations.  We will install heavier gauge geomembranes (a kind of geosynthetic material, specifically impermeable membranes used widely as cut-offs and liners) in the heap leach pad and ponds than required by ADEQ together with a compacted clay liner underneath the geomembranes in order to further decrease the potential for cyanide solution leakage into the ground.

Chain link fence topped with barbed wire will be erected to surround the heap leach pad, the pregnant solution pond and the overflow pond.  Each of these fences will be lined at the bottom with 2 inch mesh chicken wire from ground level to two feet high to keep out small animals and snakes.  To avoid birds landing in the two ponds, the ponds will be protected by one inch netting that is stretched from the top of the fences and supported by cables.

All employees will be required to take mine safety training and cyanide safe handling training. Employees will be equipped with safety equipment including hard hats, gloves, ear plugs, respirators and protective clothing suitable for their particular jobs.  Emergency showers and emergency eye washes will be provided.

The heap leach pad and ponds, and all the buildings, will be lighted with bright lights on 25 foot poles for safety and security.  We will provide several gasoline and diesel engine generators to keep the processing going 24 hours a day in case of power failure. A 125K generator was purchased for backup power to avoid any production delays at the La Colorada mill site.

Heap Leach Pad and Ponds

The heap leach facility is a hydrometallurgical silver leaching operation that will process mineralized material from active and inactive mines throughout the Cerro Colorado Mining District as well as open pit mined mineralized material.  The heap leach facility will consist of a lined heap leach pad (initially one acre in size); a double-lined, pregnant (metal-bearing) solution pond (25 feet by 25 feet); a non-storm water, single-lined overflow pond (60 feet by 145 feet); process pipelines, pumps and holding tanks; and storm water berms and diversion trenches.

Mineralized Material Crushing, Screening and Agglomeration

Mineralized material will be deposited on the lined heap leach pad.  The pad has been designed to accommodate 55,000 tons of mineralized material for processing.  Mineralized material bearing rock will be crushed and conveyed to a vibrator screen. Mineralized material that is +1/2" to 3/4" will be transferred directly to the mineralized material heap via conveyor belt.  Mineralized material that is less than 1/2" will move to a cement agglomeration unit and, after agglomeration, be transported via conveyor belt to the mineralized material heap.  The mineralized material will be stacked on the leach pad in 5 foot lifts to a height of 55 feet.

 
6

 

ITEM 1 – BUSINESS - continued
 
The maximum height of the mineralized material heap will be 55 feet; however, after it is at that height, tests will be conducted, and an engineering opinion obtained, in the interest of adding another 10,000 to 20,000 tons to the original pad.  If compression test and slope stability check out, the angle of repose may be amended to accommodate the additional mineralized material.  This is a cost saving measure and offers the added benefit of leaching small amounts of gold and silver that will result from the additional leaching time for the earlier lifts.  Each 5,000 ton lift is projected to yield 10 oz Ag per ton and 0.03 oz Au per ton based on a 75% recovery rate.  Pilot testing without fine crushing has yielded 72-77% recovery.  With agglomeration, the actual recovery rate should be in the 77%-82% range.

While the one acre heap leach pad is being constructed, UMI will begin preparing an application for the ADEQ to permit expansion of the pad to 4.9 acres.  When the additional 3.9 acre pad is available, it will be loaded and heap leached as two sections.  Each section will take one month to load and will be leached for two months.  Lifts for each section will be 10 feet high and cover nearly twice the area of the one acre pad resulting in approximately 3.75 times as much production as the original one acre pad.  The larger pad will permit the height to be increased to at least 100 feet, perhaps as high as 150 feet depending on test results.

Heap Leach Process

Each lift of mineralized material on the one acre pad will be leached for approximately 21 days with a dilute solution of sodium cyanide.  The solution will be dripped onto the mineralized material from a grid of PVC pipes.  The resulting pregnant solution will be collected by another grid of perforated piping which overlays the geomembranes pad liner.  The piping network will transport the pregnant solution from the leach pad to the pregnant solution pond.

Extraction Process and Cyanide Recirculation

The pregnant solution from the pond is pumped to the precipitation house where a Merrill-Crowe zinc extraction plant will be used to extract the silver.  Barren solution from the extraction plant will flow by gravity to a 500 gallon tank where it is pumped to a 1,000 gallon makeup tank for the addition of cyanide.  The solution is then re-circulated to the heap leach pad.

Primary Copper Exploration Project (Group 2)

Overview

Our Three primary copper exploration projects are called the Blue MINE/Green MINE/Red MINE mining exploration projects.

Size:  These 3 projects consists of 14 material BLM mining claims and 4 non-material BLM mining claims totaling 20 acres each.
 
 
 
 
7

 

UMI Group 2 Claims

The UMI Group 2 Claims consist of 3 sub-groups of claims as follows:

1. BLUE MINE; T8S, R12E, Sec 18 and 19, G and SR Meridian.
13 X 20 acre claims or 260 acres. This includes 9 material claims and 4 non-material claims
 
2. GREEN MINE; T9S, R12E, Sec 15, G and SR Meridian.
1 x 20 acre claims or 20 acres.

3. RED MINE; T8S, R12E, Sec 33 and 34.
4 x 20 acre claims or 80 acres.


The above Group 2 Claims contain a total of 360 acres.

To date we have not performed any work on these Group 2 UMI 100% owned properties.   We are presently in the exploration stage and there is no assurance that commercially viable mineralized material, or a reserve, exists on this property.   We will not be able to make such a determination until exploration and drilling programs are completed and a comprehensive evaluation concludes economic and legal feasibility.

Blue Mine Project 2013/2014 Exploration:  We plan on road repair, surface mapping/ sampling, possible geo-physical and drilling, and then initiate surface and underground mapping/ sampling, exploration, bulk sample metallurgical testing, drilling, step out and possible in-fill reverse circulation and core drilling of high grade areas, at some point in the future.  However, we will not begin any of these activities until we submit a proposed Plan of Operations.  We do not plan on submitting a proposed Plan of Operations for this property until we receive sufficient funding to move forward with activities at this location.

Location and Access

Our Group 2 Claims are located 25 miles northwest of Oracle, AZ, in Pinal County, Arizona along state highway 77.  Turn at mile post 106, 5 miles west to Red Beds property, turn at mile post 108, turn west on dirt road ½ mile to Blue Copper, and Green Copper properties.  Electrical access is 1/2 mile away on highway 77 and there are no current water facilities at these claims.

Physiographic

The Durham Hills are located approximately 30 mi NW of Tucson, Pinal County, Arizona off State highway 77 at between Mile Posts 104 and 108.  Two main Cr0x deposits are hosted in two structural blocks, a west block and an east block, separated by a NW-trending high-angle normal fault.  There are two deposits known as the Cross Triangle Ranch deposit, located in the western block and the Magna Well deposit, located in the eastern.  The Magma Well deposit has also been referred to as the Edwards Mine, the Owen Mine and more regularly as the Blue Mine.  In this annual report, the name Blue Mine will be used.

The Cross Triangle ranch deposit is located in a series of NW to NS trending, low-lying hills, informally referred to by the owners as, from north to south, Rattlesnake Hill, Green Hill, and Blue Hill.  The Cross Triangle has been heavily prospected by trenches and pits, and minor amounts of Cu0x-strained building stone have been shipped.  The Blue MINE is located approximately ¾ of a mile NE of the Cross Triangle and consists of a heavily prospected, low lying hill adjacent to a cattle tank with several surrounding small prospect pits.  Building stone has also reportedly been shipped from this deposit.

 
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ITEM 1 – BUSINESS - continued
 
Structural Geology

Foliation and lineation in the quartz monzonite and mylonitic schist is highly suggestive of detachment fault processes.  The overall strike and dip of the foliation and lineation would seem to suggest a top to the NE extension.  However, preliminary analysis of possible shear indicators in the mylonite (stretched and rotated quartz grains) suggests top to the SW extension, which is consistent with the regional sense of shear in the Catalina-Tortolita metamorphic core complex.  This geometry indicates that the rocks in the Durham Hills have been rotated and back-tilted along high-angle, listric normal faults.

Our Current Non-Material Projects (Group 3 and 4 Claims)

Description of Properties

To complement the primary silver and copper projects under exclusive control and operation of United Mines, Inc., we also own 100% of the following unpatented non-material mining properties under jurisdiction of the Bureau of Land Management, Department of Interior.

Primary Gold Mining Exploration Projects

Overview

Our primary gold exploration consists of three projects: Cobre Ridge Gold Project (formally known as the Edwards/Ajax), Oro Blanco Gold Project (formally known as Ostrich/Big Three) and Bartlett Mountain Gold Project (formally known as The Tres Amigos/Sorrel Top).
 
Size:  The Cobre Ridge Gold Project consists of 13 BLM mining claims (20 acres each) and the Oro Blanco (17 claims) and Bartlett Mountain Gold Project consists of 18 BLM mining claims (20 acres each).
 
Cobre Ridge Gold Project 2013/2014 Explorations:  We will handle road repair, surface mapping and/or sampling and possible geo-physical & drilling.  Cleanup of the mine portals as well as collar repair and/or replacement will be accomplished as required.  In the future we also hope to proceed with road repair, surface and underground mapping and/sampling, underground clean out, repair and exploration, bulk sample metallurgical testing, surface and possible underground drilling.  We will not begin any of these activities until we submit a proposed Plan of Operations.  The Plan of Operations will not be submitted to BLM until we receive sufficient funding to conduct operations at this property.

Oro Blanco and Bartlett Mountain Gold Projects 2013/2014 Exploration: Several portions of mining claims on the Oro Blanco and Bartlett Mountain Gold Projects properties are currently being evaluated. After we receive sufficient funding to conduct operations at this property, exploration activities will include underground and surface drilling on the Oro Blanco and Bartlett Mountain Gold Projects properties. Surface and underground mapping & sampling, geo-chem, and possible geo-physical exploration is also planned for this site once we receive sufficient funding to conduct operations at this property.

 
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ITEM 1 – BUSINESS - continued
 
Cobre Ridge Gold Project, Oro Blanco Gold Project and Bartlett Mountain Gold Project: Once we receive sufficient funding, we plan to establish precious metals exploration which, in the future, we believe will produce cash flow to sustain us and allow the opportunity to then initiate core drilling & bulk sample metallurgical testing of mineralized materials from our gold mining claims.

UMI Group 3 Non-Material Claims:

The UMI Group 3 claims consist of 3 sub-groups of claims as follows:

1.  Cobre Ridge Gold Project; T22S, R10E, Sec. 22; G & SR Meridian.
13 X 20 acre claims or 260 acres.

2. Oro Blanco Gold Project; T23S, R11E Sec. 19; G & SR Meridian.
17 X 20 acre claims or 340 acres.

3.  Bartlett Mountain Gold Project; T23S, R11E, Sec. 18 & 19, G & SR Meridian.
18 X 20 acre claim or 360acres

The above UMI Group 3 claims contain a total of 960 acres.

To date we have not performed any work on these four properties.  We are presently in the exploration stage and there is no assurance that commercially viable mineralized material, or a reserve, exists on this property.  We will not be able to make such a determination until exploration and drilling programs are completed and a comprehensive evaluation concludes economic and legal feasibility.

Location and Access

The UMI Group 3 claims are located in Santa Cruz County, Arizona, about 62 miles southwest of Tucson off exit 48 on Interstate 19 going to Nogales.

ORO BLANCO Gold Project mining claims: Take Amado/Arivaca Rd west 24 miles to Town of Arivaca; then south on Ruby road (paved) 3.5 miles to Yellow Jacket Road (dirt), follow 5 miles to past Cobre Ridge Gold Project to mining properties.

COBRE RIDGE and Bartlett Mountain Gold Projects mining claims: Take Amado/Arivaca Rd west 24 miles to Town of Arivaca, then south on Ruby road (paved) 12 miles east to various gravel/dirt roads going south & east on to the claim group area.

Geology of Group 3 Claim Area

Physical Geology

Topography of the project area is moderately steep with elevations ranging from about 4,200 to 4,700 feet.  NW-SE trending Cobre Ridge, characterized by mostly bluffy outcrops, flanks the project area.  Fraguita Peak (elev. 5,374), is a prominent landmark about 1 mile to the northwest.

 
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ITEM 1 – BUSINESS - continued
 
Regional Geology and Mineralization

The Oro Blanco Mining District, extending from Arivaca south to the international boundary, encompasses roughly 40 square miles and lies within the southern part of the Basin and Range Province of Arizona.   Jurassic-age welded and non-welded quartz latite tuff and rhyolite tuff, underlying Cobre Ridge and central portions of the district are the oldest rocks.  Outcrops of conglomerate and sandstone of the Cretaceous Oro Blanco Formation are common east of Cobre Ridge and across southern sections of the District. Mostly flat lying and bluff forming   Tertiary-age dacite and andesite flows, tuffs and pryoclastics mark the south and east edge of the area.  Plutonic rocks, consisting of Jurassic quartz monzonite and Cretaceous diorite and andesite are widely scattered as irregular masses up to 0.5 to 1 mile in aerial extent.  Aligned closely with the northwest tectonic fabric of the region are conspicuous dikes, dike swarms and elongate plugs of Tertiary-age quartz monzonite and lesser andesite and porphyritic rhyolite.

UMI Group 4 Non-Material Claims

The UMI Group 4 Claims consist of 3 sub-groups of claims as follows:

1. Cobre Ridge Gold Projects ( formally known as the EDWARDS GOLD MINE); T22S, R10E, Sec 8, G and SR Meridian.
6 X 20 acre claims or 120 acres.

2. Cobre Ridge Gold Projects (also formally known as the AJAX GOLD MINE); T22S, R10E, Sec 5, G and SR Meridian.
7 X 20 acre claims or 140 acres
 
3. Placer gold claims; T22S, R10E, Sec. 22 and 27, G and SR Meridian.
2 X 20 acre claims or 40 acres
 
The above Group 4 Claims contain a total of 300 acres.
  
To date we have not performed any work on these 3 UMI 100% owned properties.   We are presently in the exploration stage and there is no assurance that commercially viable mineralized material, or a reserve, exists on this property.   We will not be able to make such a determination until exploration and drilling programs are completed and a comprehensive evaluation concludes economic and legal feasibility.
 
Location and Access
 
Take Interstate 19 south to exit 48 at Amado.  Then take Amado/Arivaca Rd west 24 miles to Town of Arivaca; then south on Ruby road (paved) 3.5 miles to Yellow Jacket Road (dirt), follow 6 miles on Yellow Jacket Road past Cobre Ridge Gold Projects mines to placer gold mining properties.
 
UMI Placer Gold Claims and Pilgrim Gold-Tail Project
 
The placer gold claims (GPA-1 and 2) are primarily a recreational gold panning area and do not anticipate active exploration on commercial level until future circumstances warrant. The Pilgrim Gold-Tail Project consists of 2 unpatented BLM claims 14 miles NW of Kingman Az. The company has no current plans and do not anticipate active exploration on commercial level until future circumstances warrant for this 100% company owned property

 
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ITEM 1 – BUSINESS - continued

Overview

Due to our fairly recent formation and acquisition of the mineral rights associated with the above properties, we are still early in the process of mapping and sampling these properties for potential mineral deposits.  Therefore, despite our ownership of the mineral rights described above and the fact we have begun plotting, mapping, and sampling from some of the properties, as of the date of this Annual report, we have not extracted any minerals from these properties, other than samples, and have not received any revenue from these exploration activities.  We do not know when, or if, we will begin to receive revenue from these activities.

As noted above, our current and immediate plans for exploration are only at the Cerro Colorado Silver Mining Project.  Though we have had a geologist out to the other properties, we do not intend to move ahead with any exploration activities at the other properties, until we receive sufficient money to fund operations at the properties.

At our properties we have controls in place to ensure that no unauthorized individuals tamper with any mineralized material.  To that effect we have hired independent geologists and Burkhardt Mining to gather samples being used for assay.  The samples are sent to, or dropped off at, a certified assay lab by the person that removed the sample from the property.  The assays are prepared and the data is sent via email with a hard copy follow-up (in most cases) to the independent geologist and/or mining engineer with copies to us.  At no time does the sample leave the professional handling the sampling of the mineralized material.  When we are ready to proceed with assay work we plan on utilizing the services of , BSI Spectorate, IPL Laboratories and other qualified labs to conduct our assay work.  The assay work is what determines what minerals, if any, are contained in the rock samples.

Our Growth Strategy

Our objective is to successfully locate properties with mineral deposits, acquire the necessary rights to explore those properties, and then sell those minerals on the open market.

We intend to grow in two ways.  First, we intend to continue exploring the existing properties where we have mineral rights to hopefully locate mineral reserves that we can excavate and sell on the open market.  Second, we intend to be active in locating and acquiring mineral rights at properties that we explore and that we believe will have a high probability of having mineral reserves.  As noted above, we are currently in the various stages of exploring the locations where we have mineral rights.  Currently, in addition to our existing properties, we are targeting the Southwestern United States in our search for additional mineral rights that we may be interested in purchasing.

New Product Development

As our Company is in the mining industry we are not involved in any new product development.

 
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ITEM 1 – BUSINESS - continued
 
Competition

We are a 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 our ability to finance further exploration and to achieve the financing necessary for us to explore our mineral properties.

Sources and Availability of Raw Materials

As a company in the mining industry we do not utilize raw materials in our business.

Dependence on Major Customers

We have not mined any minerals from our properties and, therefore, do not depend on any major customers.

Patents, Trademarks and Licenses
 
We do not have any trademarks, patents, or other intellectual property.
 
Need for Government Approval

As an exploration stage company in the mining industry, we must obtain government approval for the following.  We are granted right to mine by the Mining Act of 1872, which allow us to go on land and explore, develop and extract minerals from the land.  This is done through a permitting process.  On federal land, we have permits from the Department of the Interior, Bureau of Land Management.  We will have to obtain additional permits to drill and extract any minerals from the land.  On the state side we are governed by the Arizona State Mining Department, which also a permitting process for state-owned land.  The permitting processes at both the federal and state level can take years to complete.

Having a currently permitted mill site, we are approved to extract any mineralized material from the Cerro Colorado properties.  Before doing this we must obtain a Notice of Intent (NOI) to extract these mineralized materials from our side cast mine dumps.

In addition we need to complete environment and archeological studies on all properties where we disturb the surface of the land.  We must also meet all ADEQ laws and regulations.  UMI passed the most recent ADEQ inspection in November 2010 with no reported deficiencies.

Normally, mining companies must obtain government-approved water well in order to begin any mining operations.  However, our water well is “grandfathered” in, which will allow us to begin operating our mill site and permitted under our current BLM "Plan of Operations".  Electrical supply is currently active at the mill site.  We plan on upgrading the electrical supply as needed once adequate funding is secured.

Effect of Government Regulation on Business

As a company in the mining industry government regulations, primarily environmental regulations, affect our business and the processes and methodologies we utilize in all facets of our business, beginning with government permitting prior to any activities taking place at the mines, all the way through extraction of any minerals found at the mines.

As such, we will operate strictly in accordance with Mine Safety and Health Administration (MSHA), Occupational Safety and Health Administration (OSHA), Arizona State Mine Inspector and Arizona Department of Environmental Quality (ADEQ) regulations.   Compliance with these government regulations is expected to cost us approximately $75,000 per year.  Once we are in the test productions phase, we anticipate our bonds will increase to over $250,000 to $300,000 per year.  Currently, we are undertaking the following to help keep us in compliance with various government regulations.

We will install heavier gauge geomembranes in the heap leach pad and ponds than required by ADEQ together with a compacted clay liner underneath the geomembranes in order to further decrease the potential for cyanide solution leakage into the ground.

 
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ITEM 1 – BUSINESS - continued
 
We will erect chain link fence topped with barbed wire to surround the heap leach pad, the pregnant solution pond and the overflow pond.  Each of these fences will be lined at the bottom with 2 inch mesh chicken wire from ground level to two feet high to keep out small animals and snakes.  To avoid birds landing in the two ponds, the ponds will be protected by one inch netting that is stretched from the top of the fences and supported by cables.

All employees will be required to take mine safety training and cyanide safe handling training.  Employees will be equipped with safety equipment including hard hats, gloves, ear plugs, respirators and protective clothing suitable for their particular jobs.  Emergency showers and emergency eye washes will be provided.

The heap leach pad and ponds, and all the buildings, will be lighted with bright lights on 25 foot poles for safety and security.  We will provide several gasoline and diesel engine generators to keep the processing going 24 hours a day in case of power failure.

Mill Site Buildings

Existing buildings include the precipitation house, spare parts and hardware storage building and a laboratory.  There are four small mobile homes used for on-site housing.  During the expansion of mining activities, the heap leach pad and ponds will be constructed, as will a shower/locker room/restroom building and a 120' by 40' maintenance and storage building.  The precipitation house will be upgraded with higher capacity processing equipment.

Heap Leach Pad and Ponds

The heap leach facility is a hydrometallurgical silver leaching operation that will process mineralized material from active and inactive mines throughout the Cerro Colorado Mining District as well as open pit mined mineralized material.  The heap leach facility will consist of a lined heap leach pad (initially one acre in size); a double-lined, pregnant (metal-bearing) solution pond (25 feet by 25 feet); a non-storm water, single-lined overflow pond (60 feet by 145 feet); process pipelines, pumps and holding tanks; and storm water berms and diversion trenches.

Mineralized Material Crushing, Screening and Agglomeration

Mineralized material will be deposited on the lined heap leach pad.  The pad has been designed to accommodate 55,000 tons of mineralized material for processing.  Mineralized material will be crushed and conveyed to a vibrator screen.  Mineralized material that is +1/2" to 3/4" will be transferred directly to the mineralized material heap via conveyor belt.  Mineralized material that is less than 1/2" will move to a cement agglomeration unit and, after agglomeration, be transported via conveyor belt to the mineralized material heap.  The mineralized material will be stacked on the leach pad in 5 foot lifts to a height of 55 feet.

The maximum height of the mineralized material heap will be 55 feet; however, after it is at that height, tests will be conducted, and an engineering opinion obtained, in the interest of adding another 10,000 to 20,000 tons to the original pad.  If compression test and slope stability check out, the angle of repose may be amended to accommodate the additional mineralized material.  This is a cost saving measure and offers the added benefit of leaching small amounts of gold and silver that will result from the additional leaching time for the earlier lifts.

 
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ITEM 1 – BUSINESS - continued
 
While the one acre heap leach pad is being reconstructed, we will begin preparing an application for the ADEQ to permit expansion of the pad to 4.9 acres.  When the additional 3.9 acre pad is available, it will be loaded and heap leached as two sections.  Each section will take one month to load and will be leached for two months.  Lifts for each section will be 10 feet high and cover nearly twice the area of the one acre pad resulting in approximately 3.75 times as much production as the original one acre pad.   The larger pad will permit the height to be increased to at least 100 feet, perhaps as high as 150 feet depending on test results.

Heap Leach Process

Each lift of mineralized material on the one acre pad will be leached for approximately 21 days with a dilute solution of sodium cyanide.  The solution will be dripped onto the mineralized material from a grid of PVC pipes.  The resulting pregnant solution will be collected by another grid of perforated piping which overlies the geomembranes pad liner.  The piping network will transport the pregnant solution from the leach pad to the pregnant solution pond.

Extraction Process and Cyanide Recirculation

The pregnant solution from the pond is pumped to the precipitation house where a Merrill-Crowe zinc extraction plant will be used to extract the silver.  Barren solution from the extraction plant will flow by gravity to a 500 gallon tank where it is pumped to a 1,000 gallon makeup tank for the addition of cyanide.  The solution is then re-circulated to the heap leach pad.  The solution will be continuously monitored and concentration and pH carefully adjusted for maximum leaching action.

Research and Development

As an exploration stage company in the mining industry we are not involved in any research and development.

Effects of Compliance with Environmental Laws

As a company in the mining industry we are subject to numerous environmental laws and regulations.  We strive to comply with all applicable environmental, health and safety laws and regulations are currently taking the steps indicated above.  We believe that our operations are in compliance with all applicable laws and regulations on environmental matters.  These laws and regulations, on federal, state and local levels, are evolving and frequently modified and we cannot predict accurately the effect, if any, they will have on its business in the future.  In many instances, the regulations have not been finalized, or are frequently being modified. Even where regulations have been adopted, they are subject to varying and contradicting interpretations and implementation. In some cases, compliance can only be achieved by capital expenditure and we cannot accurately predict what capital expenditures, if any, may be required.

Environmental laws could become more stringent over time, imposing greater compliance costs and increasing risks and penalties associated with any violations. As a handler and generator of hazardous materials, we are subject to financial exposure with regard to intentional or unintentional violations.  Any present or future noncompliance with environmental laws or future discovery of contamination could have a material adverse effect on our results of operations or financial condition.

 
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ITEM 1 – BUSINESS - continued
 
Employees
 
As of December 31, 2011, we, employ a total of 3 full-time employees, all at the executive level.

We are not aware of any problems in our relationships with our employees and pride ourselves that a majority of our employees have worked with us (including our subsidiaries) for several years.  Our employees are not represented by a collective bargaining organization and we have never experienced any work stoppage.

WHERE YOU CAN FIND MORE INFORMATION

You are advised to read this Form 10-K in conjunction with other reports and documents that we file from time to time with the SEC. In particular, please read our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that we file from time to time. You may obtain copies of these reports directly from us or from the SEC at the SEC’s Public Reference Room at 100 F. Street, N.E. Washington, D.C. 20549, and you may obtain information about obtaining access to the Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains information for electronic filers at its website http://www.sec.gov.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

 
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ITEM 1A. – RISK FACTORS.

As a smaller reporting company we are not required to provide a statement of risk factors. However, we believe this information may be valuable to our shareholders for this filing although we reserve the right to not provide risk factors in our future filings. You should carefully consider the following risk factors together with the other information contained in this Annual Report on Form 10-K, and in prior reports pursuant to the Securities Exchange Act of 1934, as amended and the Securities Act of 1933, as amended.  If any of the risks factors actually occur, our business, financial condition or results of operations could be materially adversely affected. In such cases, the trading price of our common stock could decline. We believe there are no changes that constitute material changes from the risk factors previously disclosed in the prior reports pursuant to the Securities Exchange Act of 1934, as amended and the Securities Act of 1933 and include or reiterate the following risk factors:

We have a limited operating history and limited historical financial information upon which you may evaluate our performance.

We only have a limited history and we are subject to all risks inherent in a developing business enterprise.  Our likelihood of success must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with a new business in general and those specific to the mineral exploration and extraction businesses and the competitive and regulatory environment in which we operate. You should consider, among other factors, our prospects for success in light of the risks and uncertainties encountered by companies that, like us, are in their early stages of exploration.  We may not successfully address these risks and uncertainties or successfully implement our operating and acquisition strategies.  If we fail to do so, it could materially harm our business to the point of having to cease operations and could impair the value of our common stock to the point investors may lose their entire investment.  Even if we accomplish these objectives, we may not generate positive cash flows or profits we anticipate in the future.

The only known mineralized materials we have at any of the properties where we have mineral rights is at the Cerro Colorado property.

According to the pre-feasibility report entitled, Geological Studies of the Cerro Colorado, by Nicholas Barr, Geologist, the Cerro Colorado property has mineralized material containing silver in side cast mine dumps, ready to process. No proved reserves have been discovered at any of the exploration properties where we have mineral rights.  Although we have geological reports that indicate possible mineralized material on a couple of the properties, the probability of any of the exploration properties ever having reserves that are commercially viable is remote.  The failure to locate proved reserves at the exploration properties we own would render those properties valueless.  If those mineral rights are found to be valueless, or if we run out of funds prior to discovering proved reserves at these locations, then we may have to cease operations, which would impair the value of our common stock to the point investors may lose their entire investment.

Our strategy of exploring the existing exploration properties and acquiring additional mineral rights may not produce positive financial results for us.

Our strategy of exploring the existing exploration properties and acquiring additional mineral rights is subject to a variety of risks, including the:

 
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ITEM 1A. – RISK FACTORS - continued
 
 
·
Inability to locate valuable minerals at the properties;
 
·
Failure or unanticipated delays in exploring the exploration properties where we have mineral rights;
 
·
Property ownership rights on the property where the mineral rights are located;
 
·
Inability to negotiate favorable mineral rights agreements on satisfactory terms and conditions;
 
·
Increases in the prices of mining equipment due to increased competition for acquisition opportunities or other factors; and
 
·
Inability to sell any mined minerals

If we are not able to successfully address these risks, it would materially harm our business to the point of having to cease operations and impair the value of our common stock to the point investors may lose their entire investment.

If we do not obtain new financings in an amount sufficient to pursue mineral exploration activities at the exploration properties, and to pursue exploration and mineral rights at other mineral properties, our exploration operations will be reduced.

To date, we have relied on recent private placement financings in order to fund exploration of the properties.  We will continue to require additional financing to complete our plan of operations for exploration work at the properties and to pursue additional exploration at other mineral properties.  While our financing requirements may be reduced if we successfully extract valuable minerals, any impairment in our ability to raise additional funds through financings would reduce the available funds for the exploration of the properties, including additional exploration activities, with the result that our plan of operations may be adversely affected and potential recoveries reduced or delayed.  We believe we currently have working capital to remain in business for three months under our current business plan.

We have never had any revenues since our inception and there is no assurance that we will be able to achieve the financing necessary to enable us to precede with our exploration activities.

We have never had any revenues since our inception.  We will apply any proceeds from gold or other mineral sales generated from our exploration activities at the properties to help cover our exploration expenditures, but we anticipate that our projected expenditures will far exceed any proceeds from those sales over the next twelve months, which will require that we obtain substantial financing in order for us to pursue our current plan of operations.  If we do not achieve the necessary financing, then we will not be able to proceed with our planned exploration activities, including our planned exploration activities, and our financial condition, business prospects and results of operations will be materially adversely affected to the point of having to cease operations, which would likely cause our investors to lose their entire investment.

We have not established that there are any commercially viable mineral deposits on any of the properties and we have not established commercially viable operations on the properties, and, therefore, there is no assurance that we will recover any gold or other minerals from the properties, or if we do that any amounts we recover from exploration activities will be sufficient to continue our operations.

 
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ITEM 1A. – RISK FACTORS - continued
 
Our activities at the properties are currently in the exploration stage. We have permitted Plans of Operations for our three state permit properties, which include mapping, surveying, rock-chip sampling, road improvement, assay tests, and other exploration activities at the properties as part of our exploration program, but we have not yet established a commercially viable operation on the properties.  There is no requirement that we have any activities at the 100 unpatented mining claims, as these claims are renewable annually at $140 per claim. We are currently paid through August 31st 2012 on these claims.  There is no assurance that we will recover any gold, silver, copper or other minerals on any of our properties, and no assurance that if we do, that we will recover quantities that will enable us to continue our operations.  If we are not able to continue our operations our investors would likely lose their entire investments.

If we are unable to achieve projected mineral recoveries from our exploration activities at the properties, then our financial condition will be adversely affected and we will have less cash with which to pursue our operations.

We plan to undertake exploration activities as part of our plan for the properties.  Our objective is to recover minerals from exploration activities to help offset the cost of those exploration activities.  As we have not established any reserves on these properties, there is no assurance that actual recoveries of minerals from material excavated during the exploration activities will equal or exceed our exploration costs.  If our mineral recoveries are less than projected, then our mineral sales will be less than anticipated and may not equal or exceed the cost of exploration and recovery in which case our operating results and financial condition will be adversely affected.

If the cost of recovering mineralized material at the properties is higher than anticipated, then our financial condition and ability to pursue additional exploration will be adversely affected.

We have proceeded with geological surveys and sampling.  If the actual costs are greater than anticipated, then cash used in the exploration activities at the properties will be greater than anticipated.  An increase in the funds used in sampling and surveying activities will cause us to have fewer funds for other expenses, such as administrative and overhead expenses and exploration of our other mineral properties.  In this event, our financial condition will be adversely affected and will have fewer funds with which to pursue our exploration programs.

The mineral exploration industry is highly speculative and subject to many outside risks and influences.

Gold, silver and strategic metals exploration is highly speculative in nature, involving many risks which even a combination of scientific knowledge and experience frequently cannot overcome, often resulting in unproductive efforts.  Further, the market price of gold, silver and other minerals is quite volatile and beyond our control.  If the price of any of these precious metals drops dramatically, our exploration efforts, which have been limited and have not, to date, been profitable, could be further reduced or continue to be rendered uneconomical.  The degree of speculation is further magnified when a company is in the exploration stages and is operating at a loss, as has been the case with us.  Despite the business experience of our officers, directors and principal shareholders, there can be no assurance that the mining properties acquired by us will be productive and/or profitable, or that such production and/or profitability will be sufficient to permit us to be successful in the future or to expand or continue to operate. As such, any investment in our company is extremely risky and, where, as here, the mining exploration is poorly financed, the risks become even higher and the most common result would be a loss of the investor’s entire investment.

 
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ITEM 1A. – RISK FACTORS - continued
 
Exploration activities are inherently hazardous.

Mineral exploration activities involve many risks that even a combination of experience, knowledge and careful evaluation may not be able to overcome.  Operations that we undertake will be subject to all the hazards and risks normally incidental to the exploration for minerals, any of which could result in work stoppages, damage to property and possible environmental damage.  The nature of these risks are such that liabilities might result in us being forced to incur significant costs that could have a material adverse effect on our financial condition and business prospects.

If we experience exploration accidents or other adverse events at the properties then our financial condition and profitability could be adversely affected.

Our exploration activities are subject to adverse operating conditions.  Exploration accidents or other adverse incidents, such as cave-ins or flooding, could affect our ability to continue mining activities.  The occurrence of any of these events could cause a substantial delay in the exploration of minerals or could reduce the amount of gold, silver, copper or other minerals that we may be able to recover, with the result that our ability to achieve recoveries from sales of the minerals and to sustain operations would be adversely impacted.  Adverse operating conditions may also cause our operating costs to increase.  Exploration accidents or other adverse events could also result in an adverse environmental impact to the land on which our operations are located with the result that we may become subject to the liabilities for environmental cleanup and remediation.

As we have never reported revenues since our inception, there is no assurance that we will be able to continue as a going concern.

Our financial statements included with this Annual Report for the years ended December 31, 2011 and 2010, have been prepared assuming that we will continue as a going concern.  Our auditors have made reference to the substantial doubt as to our ability to continue as a going concern in their audit report on our audited financial statements for the years ended December 31, 2011 and 2010.  If we are not able to achieve revenues, then we likely will be forced to cease operations and investors will likely lose their entire investment.

Our current liabilities exceed our current assets and we are reliant on loans from certain of our officers and directors to pay our obligations as they become due, if those officers and directors cease loaning us money we would have problems paying our liabilities as they become due.

As of December 31, 2011, we had working capital of over ($110,848).  We also rely on loans from certain officers and directors and the sale of our common stock in private sales to pay our obligations as they become due.  If those officers and directors do not continue to loan us money in the future, or if we are unable to continue to sell our common stock, then we will have problems paying our obligations as they become due.  Obviously if we are unable to pay our obligations as they become due we could be forced to cease operations and investors would likely lose their entire investment.

 
20

 
 
ITEM 1A. – RISK FACTORS - continued
 
We face intense competition in the mineral exploration industry and must compete with our competitors for financing and for qualified managerial and technical employees.

The mineral exploration industry is intensely competitive in all of its phases.  Competition includes large established exploration companies with substantial capabilities and with greater financial and technical resources than we have.  As a result of this competition, we may be unable to acquire additional attractive properties or financing on terms we consider acceptable.  We also compete with other exploration companies in the recruitment and retention of qualified managerial and technical employees.  If we are unable to successfully compete for financing or for qualified employees, our exploration programs may be slowed down, suspended, or cease altogether.  If we were to cease operations our investors would lose their entire investment.

There may be challenges to the titles to our property.

Titles to mining properties in the western United States involves certain inherent risks due to the impossibility of determining the validity of unpatented claims from real estate records, as well as the potential for problems arising from the frequently ambiguous conveyance history characteristic of many mining properties.  Although we believe we have conducted reasonable investigations (in accordance with standard mining industry practice) of the validity of ownership of and the ability of certain holders of certain mining claims to transfer to certain rights and other interests therein to us, there can be no assurance that we hold good and marketable title to all of our U.S. properties.  There may be challenges to the title to our properties.  If there are title defects with respect to any of the properties, we might be required to compensate other persons or perhaps reduce or change our interest in the affected property.  Also, in any such case, the investigation and resolution of title issues would divert management's time from ongoing exploration programs.  Any significant successful challenges to our mineral rights would cause us to cease operations and for our investors to lose their entire investment.  We have conducted limited reviews of title and obtained representations regarding ownership from holders of mineral rights.  Our practice will be, if possible, to obtain title insurance with respect to its major mineral properties when a decision is made to proceed with large scale mining. This insurance however may not be sufficient to cover loss of investment or guarantee of future profits.

Certain shares of our common stock are restricted from immediate resale.  The lapse of those restrictions, coupled with the sale of the related shares in the market, or the market’s expectation of such sales, could result in an immediate and substantial decline in the market price of our common stock.

Most of our shares of common stock are restricted from immediate resale in the public market.  The restricted shares are restricted in accordance with Rule 144, which states that if unregistered, restricted securities are to be sold, a minimum of one year must elapse between the later of the date of acquisition of the securities from the issuer or from an affiliate of the issuer, and any resale of those securities in reliance on Rule 144.  The Rule 144 restrictive legend remains on the stock until the holder of the stock holds the stock for longer than six months (unless an affiliate) and meets the other requirements of Rule 144 to have the restriction removed.  The sale or resale of those shares in the public market, or the market’s expectation of such sales, may result in an immediate and substantial decline in the market price of our shares.  Such a decline will adversely affect our investors, and make it more difficult for us to raise additional funds through equity offerings in the future.

 
21

 
 
ITEM 1A. – RISK FACTORS - continued
 
Our management controls a large block of our common stock.

As of December 31, 2011, our officers and directors owned approximately 73.3% of our outstanding common stock, and are able to elect all of the directors and continue to control United Mines, Inc.  Non-affiliate shareholders own a minority percentage of our common stock and will have minority voting rights.  Investors will not have the ability to control either a vote of our shareholders or Board of Directors.

Some of our officers and directors have other business ventures.

As disclosed in their biographies contained herein, some of our officers and directors work with other companies in addition to their work for us, including some in the mining industry.  Although none of our officers and directors are currently working for any other companies in the mining industry, they are not prohibited from doing so.  If one or more of our officers or directors began working for another mining company it could take away from the time they currently spend working on our business affairs and could create a potential conflict of interest.

Holders of our common stock have a risk of potential dilution if we issue additional shares of common stock in the future.

Although our Board of Directors intends to utilize its reasonable business judgment to fulfill its fiduciary obligations to our then existing stockholders in connection with any future issuance of our common stock, the future issuance of additional shares of our common stock would cause immediate, and potentially substantial, dilution to the net tangible book value of those shares of common stock that are issued and outstanding immediately prior to such transaction.  Any future decrease in the net tangible book value of our issued and outstanding shares could have a material effect on the market value of the shares.

Shares of our common stock have limited transferability and liquidity.

To satisfy the requirements of certain exemptions from registration under the Securities Act of 1933, and to conform with applicable state securities laws, each investor must acquire his Shares for investment purposes only and not with a view towards distribution.  Consequently, certain conditions of the Securities Act may need to be satisfied prior to any sale, transfer, or other disposition of the shares.  Some of these conditions may include a minimum holding period, availability of certain reports, including financial statements from United Mines, Inc., limitations on the percentage of shares sold and the manner in which they are sold.  United Mines, Inc. can prohibit any sale, transfer or disposition unless it receives an opinion of counsel provided at the holder’s expense, in a form satisfactory to United Mines, Inc., stating that the proposed sale, transfer or other disposition will not result in a violation of applicable federal or state securities laws and regulations.  The public market for our shares of common stock has been extremely limited since we became public on July 14, 2010.  Consequently, owners of our shares may have to hold their investment indefinitely and may not be able to liquidate their investments in United Mines, Inc. or pledge them as collateral for a loan in the event of an emergency.

 
22

 
 
ITEM 1A. – RISK FACTORS - continued
 
Sales of shares of our common stock by broker – dealers may not be permitted.

Although our common stock is quoted on the over the counter bulletin board (OTCBB) & OTC Markets (OTCQB), there can be no assurances that a trading market for the stock will develop.  As a result, our common stock is covered by a Securities and Exchange Commission rule that opposes additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors.  For transactions covered by the rule, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser’s written agreement to the transaction prior to the sale.  Consequently, the rule may affect the ability of broker-dealers to sell our securities and may also affect the ability of shareholders to sell their shares in any secondary market.

Currently, there is no market for our securities.

Although our common stock is quoted on the over the counter bulletin board (OTCBB) & OTC Markets (OTCQB), there is presently no market for our securities and there can be no assurance that any such market will develop. In the event a public trading market does develop, there is no assurance it will continue. Therefore, any investment in our common stock may be highly illiquid and without a market value.

We do not have insurance and, therefore, liability we incur could have substantial impact on our ability to continue as a going concern.

We have limited capital and, therefore, we do not currently have a policy of insurance against liabilities arising out of the negligence of our officers and directors and/or arising from deficiencies in any of our business operations. Even assuming we obtained insurance, there is no assurance that such insurance coverage would be adequate to satisfy any potential claims made against us, our officers and directors, or our business operations or assets.  Any such liability which might arise could be substantial and would likely exceed our total assets. However, our Articles of Incorporation and Bylaws provide for indemnification of officers and directors to the fullest extent permitted under Arizona law.  Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officer and controlling persons, it is the opinion of the Securities and Exchange Commission that such indemnification is against public policy, as expressed in the Act, and is therefore, unenforceable.

We are subject to all governmental rules, laws and regulations relating to the mining industry in the U.S.

We are subject to all governmental rules, laws and regulations relating to the mining industry in the U.S., and we fully intend to comply therewith.  However, there is no assurance the governmental agencies having jurisdiction over us, our operations and properties, will not enact laws, rules and/or regulations in the future which may have an adverse impact on us and our operations.

 
23

 
 
ITEM 1A. – RISK FACTORS - continued
 
Failure or circumvention of our disclosure controls and procedures or internal controls over financial reporting could seriously harm our financial condition, results of operations, and our business.

We plan to continue to maintain and strengthen internal controls and procedures to enhance the effectiveness of our disclosure controls and internal controls over financial reporting. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, and not absolute, assurances that the objectives of the system are met. Any failure of our disclosure controls and procedures or internal controls over financial reporting could harm our financial condition and results of operations.

The regulation of penny stocks by SEC and FINRA may discourage the tradability of the company’s securities.

The Company is a "penny stock" company.  None of its securities  currently trade in any  market  and,  if  ever  available  for  trading,  will be  subject  to a Securities  and Exchange  Commission  rule that imposes  special sales  practice requirements upon  broker-dealers who sell such securities to persons other than established customers or accredited  investors.  For purposes of the rule,  the phrase "accredited investors" means, in general terms,  institutions with assets in  excess  of  $5,000,000,  or  individuals  having a net  worth in  excess  of $1,000,000  or having an annual  income that  exceeds  $200,000  (or that,  when combined with a spouse's income, exceeds $300,000).  For transactions covered by the rule, the broker-dealer must make a special suitability determination of the purchaser and receive the purchaser's written agreement to the transaction prior to the sale. Effectively, this discourages broker-dealers from executing trades in penny stocks. Consequently, the rule will affect the ability of purchasers in this offering to sell their securities in any market that might develop, because it imposes additional regulatory burdens on penny stock transactions.

In addition, the Securities and Exchange Commission has adopted a number of rules to regulate "penny stocks". Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3,  15g-4,  15g-5, 15g-6, 15g-7, and 15g-9 under the Securities and Exchange Act of 1934,  as amended.  Because our securities constitute “penny stocks" within the meaning of the rules, the rules would apply to us and to our securities.  The rules will further affect the ability of owners of shares to sell their securities in any market that might develop for them because it imposes additional regulatory burdens on penny stock transactions.

Shareholders  should  be  aware  that,  according  to  Securities  and  Exchange Commission,  the  market  for penny  stocks has  suffered  in recent  years from patterns of fraud and abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that are  often  related  to the promoter or issuer; (ii) manipulation of prices through prearranged  matching of purchases and sales and false and misleading press releases; (iii) "boiler room" practices   involving   high-pressure   sales  tactics  and  unrealistic   price projections  by  inexperienced  sales persons;  (iv)  excessive and  undisclosed bid-ask  differentials  and  markups  by  selling  broker-dealers;  and  (v) the wholesale dumping of the same securities by promoters and  broker-dealers  after prices have been manipulated to a desired level,  leaving investors with losses. Our management is aware of the abuses that have occurred historically in the penny stock market.  Although  we do not expect to be in a position  to  dictate  the  behavior  of the  market  or of  broker-dealers  who participate  in the  market,  management  will  strive  within the  confines  of practical  limitations to prevent the described  patterns from being established  with respect to the Company's securities.

 
24

 

ITEM 1A. – RISK FACTORS - continued
 
Failure To Achieve And Maintain Effective Internal Controls In Accordance With Section 404 Of The Sarbanes-Oxley Act Could Have A Material Adverse Effect On Our Business And Operating Results.
 
It may be time consuming, difficult and costly for us to develop and implement the additional internal controls, processes and reporting procedures required by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal auditing and other finance staff in order to develop and implement appropriate additional internal controls, processes and reporting procedures. If we are unable to comply with these requirements of the Sarbanes-Oxley Act, we may not be able to obtain the independent accountant certifications that the Sarbanes-Oxley Act requires of publicly traded companies.
 
If we fail to comply in a timely manner with the requirements of Section 404 of the Sarbanes-Oxley Act regarding internal control over financial reporting or to remedy any material weaknesses in our internal controls that we may identify, such failure could result in material misstatements in our financial statements, cause investors to lose confidence in our reported financial information and have a negative effect on the trading price of our common stock.
 
Pursuant to Section 404 of the Sarbanes-Oxley Act and current SEC regulations, we are required to prepare assessments regarding internal controls over financial reporting and, furnish a report by our management on our internal control over financial reporting. We have begun the process of documenting and testing our internal control procedures in order to satisfy these requirements, which is likely to result in increased general and administrative expenses and may shift management time and attention from revenue-generating activities to compliance activities. While our management is expending significant resources in an effort to complete this important project, there can be no assurance that we will be able to achieve our objective on a timely basis. Failure to achieve and maintain an effective internal control environment or complete our Section 404 certifications could have a material adverse effect on our stock price.
 
In addition, in connection with our on-going assessment of the effectiveness of our internal control over financial reporting, we may discover “material weaknesses” in our internal controls as defined in standards established by the Public Company Accounting Oversight Board, or the PCAOB. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The PCAOB defines “significant deficiency” as a deficiency that results in more than a remote likelihood that a misstatement of the financial statements that is more than inconsequential will not be prevented or detected.
 
In the event that a material weakness is identified, we will employ qualified personnel and adopt and implement policies and procedures to address any material weaknesses that we identify. However, the process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. We cannot assure you that the measures we will take will remediate any material weaknesses that we may identify or that we will implement and maintain adequate controls over our financial process and reporting in the future.
 
 
 

 
25

 
 
ITEM 1A. – RISK FACTORS - continued
 
Any failure to complete our assessment of our internal control over financial reporting, to remediate any material weaknesses that we may identify or to implement new or improved controls, or difficulties encountered in their implementation, could harm our operating results, cause us to fail to meet our reporting obligations or result in material misstatements in our financial statements. Any such failure could also adversely affect the results of the periodic management evaluations of our internal controls and, in the case of a failure to remediate any material weaknesses that we may identify, would adversely affect the annual auditor attestation reports regarding the effectiveness of our internal control over financial reporting that are required under Section 404 of the Sarbanes-Oxley Act. Inadequate internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.
 
Climate change and related regulatory responses may impact our business.
 
Climate change as a result of emissions of greenhouse gases is a significant topic of discussion and may generate U.S. federal and other regulatory responses in the near future. It is impracticable to predict with any certainty the impact of climate change on our business or the regulatory responses to it, although we recognize that they could be significant. However, it is too soon for us to predict with any certainty the ultimate impact, either directionally or quantitatively, of climate change and related regulatory responses.
 
To the extent that climate change increases the risk of natural disasters or other disruptive events in the areas in which we operate, we could be harmed. While we maintain business recovery plans that are intended to allow us to recover from natural disasters or other events that can be disruptive to our business, our plans may not fully protect us from all such disasters or events.
 
Compliance with changing regulation of corporate governance and public disclosure will result in additional expenses and pose challenges for our management.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations promulgated there under, the Sarbanes-Oxley Act and SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the U.S. public markets. Our management team will need to devote significant time and financial resources to comply with both existing and evolving standards for public companies, which will lead to increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities.

SHOULD ONE OR MORE OF THE FOREGOING RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD THE UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED, INTENDED OR PLANNED.

 
26

 


ITEM 1B – UNRESOLVED STAFF COMMENTS

This Item is not applicable to us as we are not an accelerated filer, a large accelerated filer, or a well-seasoned issuer; however, we have not received written comments from the Commission staff regarding our periodic or current reports under the Securities Exchange Act of 1934 within the last 180 days before the end of our last fiscal year.

ITEM 2 – PROPERTIES

Our executive offices are located in Tucson, Arizona, at11924 N. Centaurus Place, Oro Valley, AZ85737, Tel: 520-742-3111.  We rent our executive offices from GEM Management Group, LLC, an entity controlled by Glenn E. Martin, our President,  and one of our directors.  Our offices are approximately 1,000 square feet.  We have completed a three year lease, which expired in May 2010 and continue on month-to-month basis and our rent is $1,500 per month, which includes all utilities.

As noted above, we own mineral rights on various mining properties, the size and locations of which are listed in detail above.


ITEM 3 - LEGAL PROCEEDINGS

We are not a party to or otherwise involved in any legal proceedings.

In the ordinary course of business, we are from time to time involved in various pending or threatened legal actions.  The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations.  However, in the opinion of our management, other than as set forth herein, matters currently pending or threatened against us are not expected to have a material adverse effect on our financial position or results of operations.

ITEM 4 – (REMOVED AND RESERVED)
















 
27

 


PART II

ITEM 5 - MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is currently quoted on the OTC Bulletin Board (OTCBB) & OTC Markets (OTCQB) under the symbol “UNMN.”  Our common stock began listing on the OTC Bulletin Board on November 10, 2010.  Our common stock is only expected to trade on a limited or sporadic basis and should not be deemed to constitute an established public trading market.  There is no assurance that there will be liquidity in the common stock.

The following table sets forth the high and low bid information for each quarter within the two most recent fiscal years, as provided by the NASDAQ Stock Markets, Inc  The information reflects prices between dealers, and does not include retail markup, markdown, or commission, and may not represent actual transactions.

Fiscal Year
Ended
December 31,
     
Bid Prices
 
Period
 
High
 
Low
             
             
2010
 
First Quarter
 
N/A
 
N/A
   
Second Quarter
 
N/A
 
N/A
   
Third Quarter
 
N/A
 
N/A
   
Fourth Quarter
 
$5.00
 
$0.25
 
2011
 
 
First Quarter
 
 
$2.40
 
 
$1.00
   
Second Quarter
 
$2.40
 
$0.25
   
Third Quarter
 
$1.00
 
$0.29
   
Fourth Quarter
 
$0.99
 
$0.20

On April 9, 2012, the closing bid price of our common stock was $.50.

The Securities Enforcement and Penny Stock Reform Act of 1990 require additional disclosure relating to the market for penny stocks in connection with trades in any stock defined as a penny stock.  The Commission has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to a few exceptions which we do not meet.  Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated therewith.

Holders

As of December 31, 2011, there were 13,739,307 shares of our common stock issued and outstanding and held by 223 holders of record.  We believe many of the shares of our common stock are held in “street name” and, therefore, we believe the actual number of shareholders is slightly higher.

 
28

 

ITEM 5 - MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES - continued

Dividend Policy

For the year ended December 31, 2011, we had paid 174,477 shares of common stock dividends. This was the final payment for the 2010 stock dividend program.  Our stock dividend program was set at a 6% annual rate for 2010 , payable 1.5% per quarter. Shareholders who owned our common stock at the end of each our fiscal quarters for 2010 , were entitled to a stock dividend of 1.5% of our common stock they own on the applicable record dates.  Any future dividends, stock or cash, will be at the discretion of our Board of Directors and will depend upon such factors as earnings levels, capital requirements, our financial condition and other factors deemed relevant by the Board of Directors.  Our 2010 stock dividend program should not be taken as an indication we will have stock or cash dividends in any future quarters or years.

Transfer Agent

Pacific Stock Transfer Company is our transfer agent of record located at 4045 S. Spencer Street, Suite 403, Las Vegas, Nevada 89119, 702-361-3033..

Securities Authorized for Issuance Under Equity Compensation Plans

There are no outstanding options  to purchase, or securities convertible into, shares of our common stock, and we do not have any equity compensation plans.

As a result, we did not have any options, and 804,000 stock warrants or rights were outstanding as of December, 2011.  These warrants expire in December 2012 and have a one year life.

Plan Category
Number of Securities to be issued upon exercise of outstanding options, warrants and rights
Weighted-average exercise price of outstanding options, warrants and rights
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
 
(a)
(b)
(c)
Equity compensation plans approved by security holders
 
 
- 0 -
 
 
- 0 -
 
 
- 0 -
Equity compensation plans not approved by security holders
 
 
- 0 -
 
 
- 0 -
 
 
- 0 -
Total
 
- 0 -
 
- 0 -
 
- 0 -



 
29

 
 
ITEM 5 - MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES - continued
 
Recent Issuance of Unregistered Securities

During the year ended December 31, 2011, the Company issued 1,877,000 common shares for services and expensed $4,728,125 as consulting and director services.  The Company issued 53,140 in common shares for $109,600 of cash.

The issuances were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, and the investors were sophisticated investors, familiar with our operations.

ITEM 6 – SELECTED FINANCIAL DATA


The following information has been summarized from financial information included elsewhere and should be read in conjunction with such financial statements and notes thereto.

Summary of Statements of Operations of UNMN

Year Ended December 31, 2011 and 2010
Statement of Opertations Data
 
December 31,
 
   
2011
   
2010
 
             
Revenues
  $ -       0  
Operating and Other Expenses
    (2,086,635 )     (497,644 )
                 
Net Loss
  $ (2,086,635 )   $ (497,644 )
                 
Balance Sheet Data:
               
   
December 31,
 
      2011       2010  
Current Assets
  $ 3,356     $ 52,789  
Total Assets
    132,267       183,261  
Current Liabilities
    243,116       190,575  
Non Current Liabilites
    -       -  
Total Liabilities
    243,116       190,575  
Working (Deficit)
    (239,760 )     (137,786 )
Shareholders' (Deficit)
  $ (110,849 )   $ (7,314 )

 

ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

Disclaimer Regarding Forward Looking Statements

The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this annual report. Portions of this document that are not statements of historical or current fact are forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, expectations and intentions. The cautionary statements made in this annual report should be read as applying to all related forward-looking statements wherever they appear in this annual report. From time to time, we may publish forward-looking statements relative to such matters as anticipated financial performance, business prospects, technological developments and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. All statements other than statements of historical fact included in this section or elsewhere in this report are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

 
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ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION - continued
 
You should read the following discussion in conjunction with our financial statements and the related notes and other financial information included in this Annual Report on Form 10-K. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Form 10-K, particularly in the Section titled Risk Factors.

Although the forward-looking statements in this Annual Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them.  Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements.  You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.

Critical Accounting Policies
 
The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America. Significant accounting policies are as follows:
 
Basis of Presentation
 
The Company has produced minimal revenue from its principal business and is an exploration stage company as defined by ASCTopic 26 “Accounting and Reporting by Exploration State Enterprises”.
 
Use of Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. These estimates and assumptions also affect the reported amounts of revenues, costs and expenses during the reporting period. Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from those estimates.
 
Exploration Stage Enterprise
 
The Company's financial statements are prepared pursuant to the provisions of ASC Topic 26 “Accounting for Development Stage Enterprises,” as it devotes substantially all of its efforts to acquiring and exploring mining interests that will eventually provide sufficient net profits to sustain the Company’s existence. Until such interests are engaged in major commercial production, the Company will continue to prepare its financial statements and related disclosures in accordance with entities in the development stage. Mining companies subject to ASC Topic 26 are required to label their financial statements as an “Exploratory Stage Company,” pursuant to guidance provided by SEC Guide 7 for Mining Companies.
 

 
31

 
 
ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION - continued

 
Revenue Recognition
 
As the Company is continuing exploration of its mineral properties, no significant revenues have been earned to date. The Company recognizes revenues at the time of delivery of the product.  Revenue includes sales value received for our principle product, gold, and associated by-product revenues from the sale of by-product metals consisting primarily of gold. Revenue is recognized when title to gold passes to the buyer and when collectibility is reasonably assured. The passing of title to the customer is based on terms of the sales contract. Product pricing is determined at the point revenue is recognized by reference to active and freely traded commodity markets for example, the London Bullion Market, an active and freely traded commodity market, for both gold and silver, in an identical form to the product sold.
 
Pursuant to guidance in Topic 605, "Revenue Recognition for Financial Statements", revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable, no obligations remain and collectibility is probable. The passing of title to the customer is based on the terms of the sales contract. Product pricing is determined at the point revenue is recognized by reference to active and freely traded commodity markets, for example the London Bullion Market for both gold and silver, in an identical form to the product sold.
 
Cash and Cash Equivalents
 
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At December 31, 2011, cash and cash equivalents include cash on hand and cash in the bank.
 
Property and Equipment
 
Property and equipment is recorded at cost and depreciated over the estimated useful lives of the assets using principally the straight-line method. When items are retired or otherwise disposed of, income is charged or credited for the difference between net book value and proceeds realized thereon. Ordinary maintenance and repairs are charged to expense as incurred, and replacements and betterments are capitalized.
 
The range of estimated useful lives used to calculated depreciation for principal items of property and equipment are as follow:
 
     
Asset Category
 
Depreciation/
Amortization Period
Furniture and Fixture
 
3 Years
Office equipment
 
3 Years
Leasehold improvements
 
5 Years


The Company's corporate office is located in ORO VALLEY, Arizona and the office is provided by our President.

 
32

 
 
ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION - continued

 
Mine Exploration and Development Costs
 
All exploration costs are expensed as incurred. Mine development costs are capitalized after proven and probable reserves have been identified. Amortization is calculated using the units-of-production method over the expected life of the operation based on the estimated recoverable mineral ounces.
 
Mineral Properties
 
Significant payments related to the acquisition of mineral properties, mineral rights, and mineral leases are capitalized. If a commercially mineable ore body is discovered, such costs are amortized when production begins using the units-of-production method based on proven and probable reserves. If no commercially mineable ore body is discovered, or such rights are otherwise determined to have no value, such costs are expensed in the period in which it is determined the property has no future economic value.
 
Property Evaluations
 
Management of the Company will periodically review the net carrying value of its properties on a property-by-property basis. These reviews will consider the net realizable value of each property to determine whether a permanent impairment in value has occurred and the need for any asset write-down. An impairment loss will be recognized when the estimated future cash flows (undiscounted and without interest) expected to result from the use of an asset are less than the carrying amount of the asset. Measurement of an impairment loss will be based on the estimated fair value of the asset if the asset is expected to be held and used.
 
Although management will make its best estimate of the factors that affect net realizable value based on current conditions, it is reasonably possible that changes could occur in the near term which could adversely affect management's estimate of net cash flows expected to be generated from its assets, and necessitate asset impairment write-downs.
 
Reclamation and Remediation Costs (Asset Retirement Obligations)
 
The Company had no operating properties at December 31, 2011, but the Company’s mineral properties will be subject to standards for mine reclamation that are established by various governmental agencies. For these non-operating properties, the Company accrues costs associated with environmental remediation obligations when it is probable that such costs will be incurred and they are reasonably estimable. Costs of future expenditures for environmental remediation are not discounted to their present value. Such costs are based on management's current estimate of amounts that are expected to be incurred when the remediation work is performed within current laws and regulations.
 
It is reasonably possible that due to uncertainties associated with defining the nature and extent of environmental contamination, application of laws and regulations by regulatory authorities, and changes in remediation technology, the ultimate cost of remediation and reclamation could change in the future. The Company continually reviews its accrued liabilities for such remediation and reclamation costs as evidence becomes available indicating that its remediation and reclamation liability has changed.
 
 The Company recognizes the fair value of a liability for an asset retirement obligation in the period in which it is incurred, if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the associated long-lived assets and depreciated over the lives of the assets on a units-of-production basis. Reclamation costs are accreted over the life of the related assets and are adjusted for changes resulting from the passage of time and changes to either the timing or amount of the original present value estimate on the underlying obligation.
 

 
33

 

ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION - continued
 
Mineral property rights
 
All direct costs related to the acquisition of mineral property rights are capitalized. Exploration costs are charged to operations in the period incurred until such time as it has been determined that a property has economically recoverable reserves, at which time subsequent exploration costs and the costs incurred to develop a property are capitalized. The Company reviews the carrying values of its mineral property rights whenever events or changes in circumstances indicate that their carrying values may exceed their estimated net recoverable amounts. An impairment loss is recognized when the carrying value of those assets is not recoverable and exceeds its fair value. As of December 31, 2011, management has determined that no impairment loss is required.
 
At such time as commercial production may commence, depletion of each mining property will be provided on a unit-of-production basis using estimated proven and probable recoverable reserves as the depletion base. In cases where there are no proven or probable reserves, depletion will be provided on the straight-line basis over the expected economic life of the mine.
 
Asset retirement obligations
 
The Company plans to recognize liabilities for statutory, contractual or legal obligations, including those associated with the reclamation of mineral and mining properties and any plant and equipment, when those obligations result from the acquisition, construction, development or normal operation of the assets. Initially, a liability for an asset retirement obligation will be recognized at its fair value in the period in which it is incurred. Upon initial recognition of the liability, the corresponding asset retirement cost will be added to the carrying amount of the related asset and the cost will be amortized as an expense over the economic life of the asset using either the unit-of-production method or the straight-line method, as appropriate. Following the initial recognition of the asset retirement obligation, the carrying amount of the liability will be increased for the passage of time and adjusted for changes to the amount or timing of the underlying cash flows needed to settle the obligation.
 
The Company has posted reclamation bonds with the State of Arizona Reclamation Bond Pool for its properties as required by the United States Bureau of Land Management, to secure potential clean-up and land restoration costs if the projects were to be abandoned or closed. The Company has recorded the cost of these bonds as an asset in the accompanying balance sheets.
 
Impairment of Long-Lived Assets

In accordance with ASC Topic 365, long-lived assets, such as property, plant, and equipment, and purchased intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Goodwill and other intangible assets are tested for impairment.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. There were no events or changes in circumstances that necessitated an impairment of long lived assets.

 
34

 
 
ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION - continued
 
Income Taxes
 
Deferred income taxes are provided based on the provisions of ASC Topic 740, "Accounting for Income Taxes", to reflect the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.  Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

The Company adopted the provisions of ASC Topic 740; "Accounting For Uncertainty In Income Taxes-An Interpretation Of ASC Topic 740 ("Topic 740").  Topic 740 contains a two-step approach to recognizing and measuring uncertain tax positions.  The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not, that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount, which is more than 50% likely of being realized upon ultimate settlement.  The Company considers many factors when evaluating and estimating the Company's tax positions and tax benefits, which may require periodic adjustments. At December 31, 2011, the Company did not record any liabilities for uncertain tax positions.
 
Concentration of Credit Risk
 
The Company maintains its operating cash balances in banks in Oro Valley, Arizona. The Federal Depository Insurance Corporation (FDIC) insures accounts at each institution up to $250,000 until December 31, 2011.
 
Share-Based Compensation
 
The Company applies Topic 718 “Share-Based Payments” (“Topic 718”) to share-based compensation, which requires the measurement of the cost of services received in exchange for an award of an equity instrument based on the grant-date fair value of the award.  Compensation cost is recognized when the event occurs.  The Black-Scholes option-pricing model is used to estimate the fair value of options granted.
 
Basic and Diluted Net Loss Per Share
 
Net loss per share was computed by dividing the net loss by the weighted average number of common shares outstanding during the period.  The weighted average number of shares was calculated by taking the number of shares outstanding and weighting them by the amount of time that they were outstanding.  Diluted net loss per share for the Company is the same as basic net loss per share, as the inclusion of common stock equivalents would be antidilutive.  At December 31, 2011 the common stock equivalents consisted of 804,000 in common stock warrants.
 
Fair Value of Financial Instruments
 
The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties other than in a forced sale or liquidation.

 
35

 
 
ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION - continued
 
The carrying amounts of the Company’s financial instruments, including cash, accounts payable and accrued liabilities, income tax payable and related party payable approximate fair value due to their most maturities.

Reclassifications
 
Certain prior year amounts have been reclassified to conform to the current period presentation for comparative purposes.

Summary Overview

We are a company involved in the exploration of natural minerals at several locations, which we own some or all of the minerals rights to explore.  As discussed above, we own  material and  non-material properties.  To date, we have conducted exploratory activities at several of these locations but have not located or excavated any minerals from the properties, other than samples, and have not derived any revenues from our current business operations and have never had any revenues.

Plan of Operation

As of the date of this Annual Report, we have serious concerns as to whether we have, and will have, sufficient cash flow to continue to operate for the next twelve months if we are not successful in obtaining financing.  We will apply any proceeds from gold or other mineral sales generated from our activities at the properties to help cover our exploration expenditures, but we anticipate that our projected expenditures will far exceed any proceeds from those sales over the next twelve months, which will require that we obtain substantial financing in order for us to pursue our current plan of operations.  We are looking for both public and private sources of financing.  There can be no assurance, however, that we can obtain sufficient capital on acceptable terms, if at all.  If we do not achieve the necessary financing, then we will not be able to proceed with our planned exploration activities, which would materially adversely effect our financial condition, business prospects and results of operations.

For our exploration activities at the properties, we will evaluate the results from future drilling programs and the current surface sampling at the properties.  We are determining the optimal method for determining if mineral reserves exist at the locations.  At the same time, we are evaluating other minerals opportunities with a view to diversifying our activities through the acquisition of additional mineral rights and entering into other business ventures our Management believes will provide value to our shareholders.  We are not currently in active negotiations with any third parties regarding additional mineral rights opportunities or expanding into other business ventures.

Change in Employees

We do not have any plans to change our number of employees in the foreseeable future.  We plan to continue to utilize independent contractors for the exploration activities, located possible new mineral rights opportunities, and for some of our general business affairs.
 
 
 
 
36

 
 
ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION - continued
 
Explanatory Paragraph in Our Independent Registered Public Accounting Firm Report
 
Our independent accountants have included an explanatory paragraph in their most recent report, stating that our audited financial statements for the years ending December 31, 2011 and 2010, were prepared assuming that we will continue as a going concern.  They note that we have not yet generated significant revenues, that we have an accumulated working capital deficit, and that there are no assurances that we will be able to meet our financial obligations in the future.

Background

We were originally incorporated under the name Plae, Inc., in the State of Arizona on August 20, 1999.  At the time we operated under the name Plae, Inc., no business was conducted.   No books or records were maintained and no meetings were held.   In essence, nothing was done after incorporation until Glenn E. Martin took possession of Plae, Inc.  On February 18, 2005, the corporate name was changed to King Mines, Inc. and then subsequently changed to its current name, United Mines, Inc., on March 30, 2005.   No shares were issued until we became United Mines, Inc.

We are an exploration stage mineral exploration company and have been in the mining industry since January 2005, when we began doing business in the mining industry.  An exploration stage company is one engaged in the search for mineral deposits or reserves which are not in either the development or production stage.  We currently own four groups of mining claims.  These groups include one primary silver exploration stage mining project, three gold exploration stage mining projects, three copper exploration stage projects, and one  gold-tailings exploration stage project, all in Arizona, USA.  To date we have no assurance that commercially viable mineral deposits exist on any of the properties we own or where we have mineral rights. Further exploration, at a significant cost to us, will be required before a final evaluation as to the economic and legal feasibility of the properties is determined.  If this evaluation determines that some of the properties do have mineral deposits we will have to spend substantial funds for their drilling and engineering studies before we will know if we have a commercially viable mineral deposit (a reserve).

Year ended December 31, 2011 compared to year ended December 31, 2010

Introduction

Our business operations for the year ended 2011 versus 2010 are very similar, reflecting our status as a company that owns several mining properties, but is only in the exploration stage engaged in the search for mineral deposits or reserves, and we are not in either the development or production stage.  While we had no revenues for the years ended December 31, 2011, and 2010, we incurred significant operating costs due to our acquisition of certain mining rights and therefore we continue to operate at a substantial loss.

Revenues, Expenses and Loss from Operations
 

We had no revenue for the years ended December 31, 2011 or December 31, 2010.  Our general and administrative expenses, other expenses, and net loss for the years ended December 31, 2011 and 2010, and the period since our inception (August 20, 1999) through December 31, 2011, respectively, are as follows:
   
December 31, 2011
   
December 31, 2010
   
Period from August 20, 1999 (inception) through December 31, 2011
 
                   
Revenue
  $ -     $ -       -  
General and Administrative Expenses
    2,043,278       420,543       6,895,0512  
Sales and Marketing Expenses
    12,950       40,187       129,219  
Depreciation and Amortization
    1,760       1,760       8,071  
Exploration Expenses
    28,647       31,654       127,740  
Net Loss
  $ 2,090,135       494,144       7,181,099  

As noted above, we did not have any revenues for the years ended December 31, 2011, 2010, or since our inception on August 20, 1999.  For the year ended December 31, 2011, we do not anticipate any revenues from our current 100% owned mining properties.

Our operating expenses for the year ended December 31, 2011, consisted of general and administrative expenses of $2,043,278, sales and marketing expenses of $12,950, depreciation and amortization of $1,760, and exploration expenses of $28,647.  Our general and administrative expenses for the year ended December 31, 2011, consisted of: compensation to officers, directors and consultants of $1,877,000 (paid all in stock, valued at $1.00 per share),  and other miscellaneous expenses such as postage and delivery, telephone, auto and office support staff.  Our operating expenses for the year ended December 31, 2010, consisted of general and administrative expenses of $420,543, sales and marketing expenses of $40,187, depreciation and amortization of $1,760, and exploration expenses of $31,654.  Our general and administrative expenses for the year ended December 31, 2010, consisted of: compensation to officers, directors and consultants of $31,200 (paid all in stock, valued at $2.50 per share), mine claim maintenance of $34,650, and mining fees of  $5,599, and other miscellaneous expenses such as postage and delivery, telephone, auto and office support staff.

Our operating expenses and corresponding net loss were substantially greater in 2011 compared to 2010.  This is for several reasons.  During the year ended December 31, 2011, the Company issued 1,885,250 common shares for services and expensed $1,877,000 as consulting and director services.  The Company also issued 53,140 in common shares for $109,600 of cash.

Our net loss for the years ended December 31, 2011 and 2010 was $2,090,135 and $494,144 respectively.  For the year ended December 31, 2011, our net loss was the result of our operating expenses plus $3,500 in interest expense.  For the year ended December 31, 2010 our net loss consisted of our operating expenses plus $3,500 in interest expense.

 
37

 
 
ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION - continued
 
Liquidity and Capital Resources

Introduction
 

During the years ended December 31, 2011 and 2010, we did not generate positive operating cash flows. Cash totaled $23 and $1,123 at December 31, 2011 and 2010, respectively.

Our cash, current assets, total assets, current liabilities, and total liabilities as of December 31, 2011 and 2010, respectively, are as follows:

   
December 31, 2011
   
December 31, 2010
   
Change
 
                   
Cash
  $ 23     $ 1,123     $ 1,100  
Total Current Assets
    3,356       52,789       49,433  
Total Assets
    132,267       183,261       (50,994 )
Total Current Liabilities
    243,116       190,575       (52,540 )
Total Liabilities
  $ 243,116       190,575       (52,540 )

Cash Requirements

We have very little cash available as of December 31, 2011.  It is very unlikely we will generate any measurable revenues from our operations in 2012, even if we begin exploration.  And even if we do it will not be sufficient revenue to fund our operations. Therefore, we must rely on raising money in private offerings of our common stock during 2012, or on loans from our officers and directors.  If we are not successful in raising funds through private offerings of our common stock, one of our principals, Glenn E. Martin, our President, has committed to put in up to $25,000 per quarter as necessary to pay for our necessary business expenses for at least the next twelve months.  On October 1, 2008, Mr. Martin agreed to loan us up to $100,000, interest free and unsecured, as needed, during the twelve months ending December 31, 2011, with any amounts loaned due to be paid back one year from the date the money is given to us.  As of December 31, 2008, we had $49,600 in advances from Mr. Martin.  Under the loan agreement, through December 31, 2011, Mr. Martin had loaned us $121,011.  These loans are pursuant to an oral agreement between Mr. Martin, and our company.  This agreement was ratified by our Board of Directors.  However, we will require additional capital over and above $25,000 per quarter to get our business operating at full strength and while we hope to raise this capital through private offerings of our common stock, but we cannot be assured that such funding will be available.  Mr. Martin has indicated he would be willing to loan us up to an additional $250,000 total on similar terms as the existing loans in the event it becomes necessary thru December 31, 2012.

 
38

 
 
ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION - continued
 
Sources and Uses of Cash

Operations

We did not receive any cash from operations for the year ended December 31, 2011.  We used $123,736 in cash for operating activities during this period, compared to $139,588 for the same period one year ago.  Our net cash used in operating activities for the year ended December 31, 2011 consisted of a net loss of $2,086,635, $1,877,000 increase in common stock issued for compensation, $36,004 increase in accounts payable, $3,500 increase in accrued liabilities, $48,135 decrease in prepaid expenses, and $1,760 in depreciation and amortization.  Until we have operations we do not anticipate we will generate any cash from operating activities.  Until that time we believe this figure will be fairly indicative our cash generation and cash used for operations in a year period.


Investments

We did not use any cash for investment activities during the year ended December 31, 2011.

Financing

During the year ended December 31, 2011 we had $122,636 in cash provided by financing activities, compared to $117,614 for the same period one year ago.  Of our $122,636 of cash provided by financing activities for the year ended December 31, 2011, $109,600 was from the issuance of common stock, and $13,036 from advances from affiliates, primarily from Glenn E. Martin as no interest loans to cover daily operational expenses.  We anticipate that for the foreseeable future we will have to rely on money raised from the sale of our stock and from advances from our principals to pay our operating expenses.

Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risks, which include interest rate risk and potentially the prices of commodities.  We do not engage in financial transactions for trading or speculative purposes.
 
Interest Rate Risk. The interest payable on our long term debt is based on variable interest rates and therefore affected by changes in market interest rates.  In addition, there may be interest charged on our accounts payable, as well as interest we charge on our accounts receivable, depending on their age.  Typically these interest rates are fixed are not affected by changes in market interest rates.

Commodity Prices. We are exposed to fluctuation in market prices for our raw materials.  To mitigate risk associated with increases in market prices and commodity availability, we negotiate contracts with favorable terms directly with vendors.  We do not enter into forward contracts or other market instruments as a means of achieving our objectives or minimizing our risk exposures on these materials.
 
ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION - continued
 
Off Balance Sheet Arrangements
 
We have no off balance sheet arrangements.

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.
 
39

 
 
 
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


Report of Registered Public Accounting Firm                                                                                         
F-2
   
Balance Sheets as of December 31, 2011 and 2010                                                                                         
F-3
   
Statements of Operations for the years ended December 31, 2011 and 2010
F-4
   
Statements of Shareholders’ Equity for the years ended December 31, 2011 and 2010
F-5 to F-6
   
Statements of Cash Flows for the years ended December 31, 2011 and 2010
F-7
   
Notes to Financial Statements                                                                                         
F-8
 
 
 
 
 
 
 
 
 
F-1

 
 
 
S.E.Clark & Company, P.C.

 Registered Firm:  Public Company Accounting Oversight Board

Report of Independent Registered Public Accounting Firm

Board of Directors
and Stockholders
United Mines Inc.
Tucson, Arizona

We have audited the accompanying balance sheet of United Mines Inc. (the “Company”) as of December 31, 2011 and 2010 and the related statements of operations, changes in stockholders’ deficit, and cash flows for the years then ended, and for the period from August 20, 1999 (inception) through December 31, 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes 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 United Mines Inc. as of December 31, 2011 and 2010 and the results of its operations and its cash flows for the years then ended, and for the period from August 20, 1999 (inception) through December 31, 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 2 to the financial statements, the accumulation of losses and shortage of capital raise substantial doubt about its ability to continue as a going concern. Management's plans concerning these matters are also described in Note 2  The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.

/s/ S.E.Clark & Company, P.C.

Tucson, Arizona
April 12, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
F-2

 
 
 
UNITED MINES, INC.
 
(An Exploration Stage Company)
 
BALANCE SHEETS
 
             
ASSETS:
 
December 31,
 
   
2011
   
2010
 
             
             
CURRENT ASSETS
           
   Cash
  $ 23     $ 1,123  
   Prepaid expense paid with common stock
    3,333       51,667  
      Total current assets
    3,356       52,789  
                 
PROPERTY AND EQUIPMENT, net
    17,412       18,972  
                 
OTHER ASSETS
               
   Other assets - mining claims
    100,500       100,500  
   Deposit
    11,000       11,000  
 
    111,500       111,500  
                 
    TOTAL ASSETS
  $ 132,267     $ 183,261  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT:
               
                 
CURRENT LIABILITIES:
               
   Notes payable
  $ 35,000     $ 35,000  
   Accounts payable
    62,504       26,500  
   Accrued expenses and other liabilities
    13,990       10,491  
   Advances from affiliates
    131,622       118,584  
      Total current liabilities
    243,116       190,575  
      Total liabilities
    243,116       190,575  
                 
  COMMITMENTS AND CONTINGENCIES
    -       -  
                 
STOCKHOLDERS' DEFICIT:
               
    Common stock, $.001 par value, 100,000,000 shares authorized;
               
     13,739,307 and 11,624,440 issued and outstanding as of
               
     December 31, 2011 and 2010, respectively
    13,739       11,625  
    Additional paid-in capital
    7,056,512       5,072,026  
    Accumulated deficit during this exploration stage
    (7,181,099 )     (5,090,964 )
      Total stockholders' (deficit)
    (110,849 )     (7,314 )
                 
    TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT)
  $ 132,267     $ 183,261  
                 
                 
The accompanying notes are an integral part of these financial statements.
 

 
 
 
 
 
F-3

 
 
UNITED MINES, INC.
 
(An Exploration Stage Company)
 
STATEMENTS OF OPERATIONS
 
               
For the Period
 
               
from August 20, 1999
 
   
December 31,
   
(inception) through
 
   
2011
   
2010
   
December 31, 2011
 
                   
 REVENUES:
                 
     Revenues
  $ -     $ -     $ -  
                         
OPERATING EXPENSES:
                       
     General and administrative expenses
    2,043,278       420,543       6,895,051  
     Sales and marketing expenses
    12,950       40,187       129,219  
     Depreciation and amortization
    1,760       1,760       8,071  
     Exploration expenses
    28,647       31,654       127,740  
         Total operating expenses
    2,086,635       494,144       7,160,081  
OPERATING LOSS
    2,086,635       494,144       7,160,081  
                         
OTHER (INCOME) EXPENSE
                       
     Interest expense
    3,500       3,500       21,017  
TOTAL OTHER (INCOME) EXPENSE
    3,500       3,500       21,017  
                         
NET LOSS
  $ (2,090,135 )   $ (497,644 )   $ (7,181,099 )
                         
NET LOSS PER SHARE:
                       
                         
 Basic loss per share:
  $ (0.17 )   $ (0.04 )        
                         
Weighted average of number of shares outstanding
    12,131,928       11,261,237          
                         
The accompanying notes are an integral part of these financial statements.
 

 
 
 
 
F-4

 
 
UNITED MINES, INC.
 
( An Exploration Stage Company)
 
STATEMENT OF STOCKHOLDER' EQUITY (DEFICIT)
 
                                     
                     
Additional
             
   
Common Stock
   
Stock
   
Paid-in
   
Accumulated
       
   
Shares
   
Amount
   
Subscription
   
Capital
   
Deficit
   
Total
 
 
                                   
  AUGUST 20, 1999
    -     $ -     $ -     $ -     $ -     $ -  
                                                 
 Common stock issued for services
    4,426,000     $ 4,426       -       2,208,574               2,213,000  
                                                 
Stock issued for 23 mining claims and mining reports
    3,600,000       3,600               96,400               100,000  
                                                 
 Net loss
    -       -       -       -       (2,213,000 )     (2,213,000 )
                                                 
  DECEMBER 31, 2005
    8,026,000     $ 8,026     $ -     $ 2,304,974     $ (2,213,000 )   $ 100,000  
                                                 
 Common stock issued for services
    417,007       417       -       346,933       -       347,350  
                                                 
 Common stock issued for cash
    300,000       300       (20,000 )     149,700       -       130,000  
                                                 
 Net loss
    -       -       -       -       (458,492 )     (458,492 )
                                                 
  DECEMBER 31, 2006
    8,743,007     $ 8,743     $ (20,000 )   $ 2,801,607     $ (2,671,492 )   $ 118,858  
                                                 
 Common stock issued for services
    1,079,157       1,079       -       573,969       -       575,049  
                                                 
 Common stock issued for cash
    177,000       177       -       105,823       -       106,000  
                                                 
 Cash received from stock subscription
                    20,000                       20,000  
                                                 
  Convertible note payable
                            8,750               8,750  
                                                 
  Net loss
    -       -       -       -       (667,694 )     (667,694 )
                                                 
  DECEMBER 31, 2007
    9,999,164       9,999     $ -     $ 3,490,149     $ (3,339,186 )   $ 160,962  
                                                 
 Common stock issued for services
    466,433       466       -       231,522       -       231,988  
                                                 
 Common stock issued for cash
    177,300       177       -       92,873       -       93,051  
                                                 
  Net loss
    -       -       -       -       (419,065 )     (419,065 )
                                                 
  DECEMBER 31, 2008
    10,642,897       10,643     $ -     $ 3,814,544     $ (3,758,251 )   $ 66,937  
                                                 
 Common stock issued for compensation
    239,200       239       -       597,761       -       598,000  
                                                 
 Common stock issued for cash
    100,000       100       -       249,900       -       250,000  
                                                 
 Common stock issued for debt
    5,500       6               5,495               5,500  
                                                 
 Costs of raising capital
    -       -               (35,500 )             (35,500 )
                                                 
  Net loss
    -       -       -       -       (835,069 )     (835,069 )
 
 
 
F-5

 
 
STATEMENT OF STOCKHOLDER' EQUITY (DEFICIT) -continued
 
                                                 
  DECEMBER 31, 2009
    10,987,597       10,988     $ -     $ 4,632,199     $ (4,593,320 )   $ 49,867  
                                                 
 Common stock issued for services
    128,333       128       -       344,920       -       345,047  
                                                 
 Common stock issued for prepaid services
    16,667       17       -       51,650       -       51,667  
                                                 
 Common stock cancelled
    (37,500 )     (38 )     -       (18,713 )     -       (18,750 )
                                                 
 Common stock issued for purchase of equipment
    6,000       6               14,994               15,000  
                                                 
 Common stock issued for cash
    17,500       18               47,483               47,500  
                                                 
 Dividends
    505,843       506               (506 )             -  
                                                 
  Net loss
    -       -       -       -       (497,644 )     (497,644 )
                                                 
  DECEMBER 31, 2010
    11,624,440       11,625     $ -     $ 5,072,026     $ (5,090,964 )   $ (7,314 )
                                                 
 Common stock issued for consulting services
    185,250       185               176,815               177,000  
                                                 
 Common stock issued for officer and directors
    1,700,000       1,700               1,698,300               1,700,000  
                                                 
 Common stock issued for cash
    53,140       55               109,545               109,600  
                                                 
 Dividends
    174,477       174               (174 )             -  
                                                 
  Net loss
    -       -       -       -       (2,090,135 )     (2,090,135 )
                                                 
  DECEMBER 31, 2010
    13,737,307       13,739     $ -     $ 7,056,512     $ (7,181,099 )   $ (110,849 )
                                                 
The accompanying notes are an integral part of these financial statements.
 
 
 
 
 

 
 
 
F-6

 
 
UNITED MINES, INC
 
( An Exploration Stage Company)
 
STATEMENTS OF CASH FLOWS
 
               
For the Period from
 
               
August 20, 1999
 
   
December 31,
   
(inception) to
 
   
2011
   
2010
   
December 31, 2011
 
CASH FLOWS FROM OPERATING ACTIVITIES:
                 
                   
  Net Loss
  $ (2,090,135 )   $ (497,644 )   $ (7,181,099 )
  Adjustments to reconcile net loss to net cash
                       
     (used in) operating activities:
                       
  Depreciation and amortization
    1,760       1,760       8,070  
  Amortization of conversion feature
    -       -       8,750  
  Common stock issued for compensation
    1,877,000       345,047       6,186,878  
  Common Stock Cancelled
    -       (18,750 )     (18,750 )
  Changes in assets and liabilities:
                       
    Prepaid expenses
    48,135       -       48,135  
    Accounts payable
    36,004       26,500       62,503  
    Accrued liabilities
    3,500       3,500       13,990  
          Net cash used in operating activities
    (123,736 )     (139,588 )     (871,523 )
                         
CASH FLOWS FROM INVESTING ACTIVITIES:
                       
    Deposit
    -       -       (11,000 )
    Purchase of Intangible Asset
    -       -       (5,784 )
    Purchase of Property and Equipment
    -       (5,000 )     (5,000 )
          Net cash used in investing activities
    -       (5,000 )     (21,784 )
                         
CASH FLOWS FROM FINANCING ACTIVITIES:
                       
  Advances from affiliates
    13,036       70,114       211,760  
  Repayments of advances from affiliates
    -       -       (74,580 )
 Proceeds from the issuance of common stock
    109,600       47,500       756,150  
          Net cash provided by financing activities
    122,636       117,614       893,330  
                      -  
INCREASE (DECREASE) IN CASH
    (1,100 )     (26,974 )     23  
CASH, BEGINNING OF PERIOD
    1,123       28,097       -  
CASH, END OF PERIOD
  $ 23     $ 1,123     $ 23  
                         
SUPPLEMENTAL CASH FLOW INFORMATION:
                       
                         
Interest paid
  $ -     $ -     $ -  
Taxes paid
  $ -     $ -     $ -  
Stock issued for prepaid services
  $ -     $ 51,667     $ 51,667  
Stock issued for purchase of equipment
  $ -     $ 15,000     $ 15,000  
Stock issued for mining claims
  $ -     $ -     $ 100,000  
                         
The accompanying notes are an integral part of these financial statements.