2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements of the Company have
been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for
consolidated financial information and pursuant to the rules and regulations of the SEC. Accordingly; they do not include all the
information and footnotes required by GAAP for complete consolidated financial statements. However, management believes that the
disclosures made are adequate to make the information not misleading. Management has evaluated subsequent events through the date
the financial statements were issued.
The consolidated financial statements have been prepared
on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal
course of business for the foreseeable future. The Company has incurred losses since Inception resulting in an accumulated deficit
of $604,827 as of September 30, 2012 and further losses are anticipated in the development of its business raising substantial
doubt about the Companys ability to continue as a going concern. The ability to continue as a going concern is dependent
upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations
and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs
over the next twelve months with existing cash on hand and loans as may be negotiated and/or private placement of common stock.
These financials do not include any adjustments relating to the recoverability and reclassification of recorded asset amounts,
or amounts and classifications of liabilities that might result from this uncertainty.
Cash and Cash equivalents
The Company considers all highly liquid debt instruments
purchased with a maturity date of three months or less to be cash equivalents.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the period. Actual results could differ from those estimates.
Foreign Currency Translation
The Company's functional currency and its reporting currency
is the United States dollar.
Fair Value of Financial Instruments
The carrying value of cash and accounts payable and accrued
liabilities approximates their fair value because of the short maturity of these instruments. Unless otherwise noted, it is managements
opinion the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.
The Company follows the liability method of accounting for
income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable
to differences between the financial statement carrying values and their respective income tax basis (temporary differences). The
effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes
the enactment date.
Basic and Diluted Loss
The Company computes loss per share in accordance with ASC-260,
Earnings per Share which requires presentation of both basic and diluted earnings per share on the face of the statement
of operations. Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number
of outstanding common shares during the period. Diluted loss per share gives effect to all dilutive potential common shares outstanding
during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive. Diluted loss
per share is the same as basic loss per share for the fiscal year ended September 30, 2012 and 2011. We incurred losses during
these periods and the effects of the additional securities would be anti-dilutive.
The Company records stock based compensation in accordance
with the guidance in ASC Topic 718 which requires the Company to recognize expenses related to the fair value of its employee stock
option awards. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead
that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards
on a graded vesting basis over the vesting period of the award.
Mineral Property Costs
Mineral exploration and development costs are accounted for
using the successful efforts method of accounting.
Property acquisition costs - Mineral property acquisition
costs are capitalized as mineral exploration properties. Upon achievement of all conditions necessary for reserves to be classified
as proved, the associated acquisition costs are reclassified to proven properties
Exploration costs - Geological and geophysical costs and
the costs of carrying and retaining undeveloped properties are expensed as incurred.
Impairment of Mineral Properties
Unproven mineral properties are assessed at each reporting
period for impairment of value, and a loss is recognized at the time of the impairment by providing an impairment allowance. An
asset would be impaired if the undiscounted cash flows were less than its carrying value. Impairments are measured by the amount
by which the carrying value exceeds its fair value. Because the Company uses the successful efforts method, the Company assesses
its properties individually for impairment, instead of on an aggregate pool of costs. Impairment of unproven properties is based
on the facts and circumstances surrounding each lease and is recognized based on managements evaluation. Managements
evaluation follows a two-step process where (1) recoverability of the carrying value of the asset is reviewed to determine if there
is sufficient value recoverable to support the capitalized value at the report date; and, (2) if assets fail the recoverability
test, impairment testing is conducted, including the evaluation of various criteria such as: prior history of successful operations;
production currently in place and/or future projected cash flows (if any); reserve reports or evaluations from which management
can prepare future cash flow analyses; the Companys ability to monetize the asset(s) under evaluation; and, Managements
intent regarding future development.
During the fiscal year ended September 30, 2012, the Company
recognized an impairment charge in respect of its mineral property option agreement of $ $225,000 (2011-$0).
Beneficial Conversion Feature
From time to time, the Company may issue convertible notes
that may have conversion prices that create an embedded beneficial conversion feature pursuant to the Emerging Issues Task Force
guidance on beneficial conversion features. A beneficial conversion feature exists on the date a convertible note is issued when
the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds
of the note after first considering the allocation of a portion of the note proceeds to the fair value of any attached equity instruments,
if any related equity instruments were granted with the debt. In accordance with this guidance, the intrinsic value of the beneficial
conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discounts
amortized to interest expense over the life of the note using the effective interest method.