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EX-31.2 - CERTIFICATION - Spartan Gold Ltd.spartan_10q-ex3101.htm
EX-32.1 - CERTIFICATION - Spartan Gold Ltd.spartan_10q-ex3201.htm
EX-31.2 - CERTIFICATION - Spartan Gold Ltd.spartan_10q-ex3102.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

 

FORM 10-Q

 

 

 

  

x     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2013

 

OR

 

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

 

  For the transition period from ______ to ______.

 

Commission File Number: 001-34996

    

 

SPARTAN GOLD LTD.

(Exact name of registrant as specified in its charter)

 

   

Nevada     27-3726384

(State or other jurisdiction of

incorporation or organization)

    (IRS Employer Identification No.)
       

122 Fourth Ave., Suite 103

Indialantic, FL

    32903
(Address of principal executive offices)     (Zip Code)

 

(480) 477-1585

 (Registrant’s telephone number, including area code)

 

 

    

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days.        Yes  x     No  o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).        Yes  x     No  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer  o Accelerated filer  o
Non-accelerated filer  o (Do not check if a smaller reporting company) Smaller reporting company  x

 

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act.      Yes  o    No  x

 

As of May 1, 2013 the registrant had 42,085,944 shares of its Common Stock, $0.001 par value, outstanding.  

 

 

 
 

 

 

SPARTAN GOLD LTD.

FORM 10-Q

MARCH 31, 2013

INDEX

 

PART I – FINANCIAL INFORMATION 3
     
Item 1. Financial Statements 3
  Consolidated Balance Sheets as of March 31, 2013 (unaudited) and December 31, 2012 3
  Consolidated Statements of Operations for the Three months Ended March 31, 2013 and 2012 and for the Period July 8, 2010 (Inception of Exploration Stage) to March 31, 2013 (unaudited) 4
  Consolidated Statements of Cash Flows for the Three months Ended March 31, 2013 and 2012 and for the Period July 8, 2010 (Inception of Exploration Stage) to March 31, 2013 (unaudited) 5
  Notes to Consolidated Financial Statements (unaudited) 7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations  
Item 3 Quantitative and Qualitative Disclosures About Market Risk 20
Item 4. Controls and Procedures 20
     
PART II – OTHER INFORMATION 21
     
Item 1. Legal Proceedings 21
Item 1.A. Risk Factors 21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Mine Safety Disclosures 21
Item 5. Other Information 21
Item 6. Exhibits 21
   
SIGNATURES   22

   

 

2
 

 

PART I – FINANCIAL INFORMATION

 

Item 1.    Financial Statements

 

SPARTAN GOLD LTD.

(An Exploration Stage Company)

Consolidated Balance Sheets

 

 

   March 31,   December 31, 
   2013   2012 
   (unaudited)     
ASSETS
         
Current assets:          
Cash  $1,866   $11,137 
           
Total current assets   1,866    11,137 
           
Property and equipment, net   1,777    2,284 
           
Total assets  $3,643   $13,421 
           
LIABILITIES AND STOCKHOLDERS' DEFICIT 
           
Current liabilities:          
Accounts payable (Note 3)  $187,389   $187,379 
Accrued expenses (Note 3)   124,164    74,213 
Due to related parties (Note 3)   34,160    28,000 
           
Total current liabilities   345,713    289,592 
           
Commitments and contingencies (Note 6)          
           
Stockholders' deficit (Note 4):          
Common stock $.001 par value 1,000,000,000 shares authorized, 42,085,944 shares issued and outstanding, at March 31, 2013 and December 31, 2012, respectively     42,086       42,086  
Common stock issuable, 250,000 shares issuable at March 31, 2013 and December 31, 2012, respectively     12,500       12,500  
Additional paid-in capital   18,332,114    18,332,114 
Deficit accumulated from prior operations   (208,131)   (208,131)
Deficit accumulated during the exploration stage   (18,520,639)   (18,454,740)
Total stockholders' deficit   (342,070)   (276,171)
           
Total liabilities and stockholders' deficit  $3,643   $13,421 

See accompanying notes to consolidated financial statements.

 

3
 

 

SPARTAN GOLD LTD.

(An Exploration Stage Company)

Consolidated Statements of Operations

(unaudited)

 

          For the Period 
          July 8, 2010 
          (Inception of 
  For the Three Months Ended   Exploration Stage) 
  March 31,   to March 31, 
   2013   2012   2013 
Operating expenses:               
General and administrative (Note 3)  $65,899   $249,608   $2,291,926 
Mineral property impairment (Note 2)           104,027 
Mineral property option payments (Note 2)           15,344,760 
Mineral property expenditures (Note 2)       36,560    93,120 
Mineral property exploration costs (Note 2)           320,733 
Total operating expenses   65,899    286,168    18,154,566 
                
Other income (expense):               
Gain on settlement of debt (Note 5)       75,000    75,000 
Interest expense           (441,073)
                
Net loss  $(65,899)  $(211,168)  $(18,520,639)
                
Net loss per share - Basic and diluted  $(0.00)  $(0.01)     
                
Weighted average number of shares  outstanding during the period -               
Basic and diluted   42,085,944    31,646,856      

 

See accompanying notes to consolidated financial statements.

4
 

 

SPARTAN GOLD LTD.

(An Exploration Stage Company)

Consolidated Statements of Cash Flows

(unaudited)

 

          For the Period 
          July 8, 2010 
          (Inception of 
  For the Three Months Ended   Exploration Stage) 
  March 31,   to March 31, 
   2013   2012   2013 
Cash flows used in operating activities:               
Net loss  $(65,899)  $(211,168)  $(18,520,639)
Adjustments to reconcile net loss to net cash used in operations:               
Depreciation   507    507    4,312 
Stock-based compensation       124,938    1,125,455 
Stock issuable for finance fees           12,500 
Accretion of discount on secured convertible promissory note for commitment shares and warrants                 344,594  
Accretion of beneficial conversion feature on secured convertible promissory notes and loans                 92,424  
Interest accrued on secured convertible promissory note           4,055 
Non-cash mineral property expenditures           15,254,760 
Impairment of mineral rights           104,027 
Gain on settlement of debt       (75,000)   (75,000)
Changes in operating assets and liabilities:               
Prepaid expenses       593     
Accounts payable   10    13,675    124,174 
Accrued expenses   49,951    55,936    337,173 
Net cash used in operating activities   (15,431)   (90,519)   (1,192,165)
Cash flows used in investing activities:               
Purchase of property and equipment           (6,089)
Acquisition of mineral rights           (50,000)
Net cash used in investing activities           (56,089)
Cash flows from financing activities:               
Advances from third parties           62,020 
Advances from related parties   12,160    90,000    180,160 
Payments to related parties   (6,000)       (23,360)
Proceeds from issuance of note payable, related parties           200,000 
Proceeds from sale of common stock           831,300 
Net cash provided by financing activities   6,160    90,000    1,250,120 
Net increase (decrease) in cash   (9,271)   (519)   1,866 
Cash at beginning of period   11,137    4,864     
Cash at end of period  $1,866   $4,345   $1,866 
Supplemental disclosure of cash flow information:               
Cash paid for interest  $   $   $ 
Cash paid for taxes  $   $   $ 

 

See accompanying notes to consolidated financial statements.

                 Continued 

 

5
 

 

SPARTAN GOLD LTD.

(An Exploration Stage Company)

Consolidated Statements of Cash Flows (Continued)

(unaudited)

 

          For the Period 
          July 8, 2010 
          (Inception of 
  For the Three Months Ended   Exploration Stage) to 
  March 31,   to March 31, 
   2013   2012   2013 
Non-cash investing and financing activities:               
Beneficial conversion feature on secured loan  $   $   $(62,019)
Additional paid in capital  $   $   $62,019 
Conversion of accrued compensation to common stock:               
Accrued compensation  $   $  $(79,764)
Common stock  $   $   $1,595 
Additional paid in capital  $   $   $78,169 
Conversion of amounts due to related parties to common stock:               
Amounts due to related parties  $   $  $(204,660)
Common stock  $   $   $4,093 
Additional paid in capital  $   $   $200,567 
Warrants issued for prepaid consulting fees  $   $(19,500)  $(19,500)
Additional paid in capital  $   $19,500   $19,500 
Conversion of secured convertible promissory note and accrued interest to common stock                        
Secured convertible promissory note  $   $   $(379,055)
Common stock  $   $   $18,953 
Additional paid in capital  $   $   $360,102 
Conversion of related party payable to capital  $   $   $19,603 
Additional paid in capital  $   $   $(19,603)
Value of mineral rights contributed to the Company  $   $   $(54,027)
Additional paid in capital  $   $   $54,027 
Contribution of 19,792,500 shares of common stock to treasury by principal shareholder:   $     $     $ (129,851 )
Additional paid in capital  $   $   $129,851 
Retirement and cancellation of 19,792,500 shares of common stock:               
Common stock  $   $   $(19,793)
Treasury stock  $   $   $129,851 
Deficit accumulated from prior operations  $   $   $(110,058)

 

See accompanying notes to consolidated financial statements.

 

6
 

 

SPARTAN GOLD LTD.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

March 31, 2013

(unaudited)

 

Note 1 – Nature of Business, Presentation, and Going Concern

 

Organization

 

Spartan Gold Ltd., (the “Company”), was incorporated in Nevada on September 6, 2007.

 

On May 21, 2010, the Company experienced a change in control and the Company abandoned its original plan of developing and operating biodiesel facilities to concentrate on gold exploration. Concurrent with the change in control transaction, all related party obligations were settled.

 

On July 8, 2010, the Company filed an amendment to its Articles of Incorporation in the State of Nevada to change its name to Spartan Gold Ltd.  The Company now operates as a U.S. based junior gold exploration company.  The Company is engaged in gold exploration activities on its two Nevada properties.

 

Stock Splits

 

On July 19, 2010, the Company's Board of Directors declared a one-to-forty forward stock split of all outstanding shares of common stock.

 

On November 9, 2011, the Company's Board of Directors declared a one-for-twenty reverse stock split of all outstanding shares of common stock.  All common share and per common share data in these consolidated financial statements and related notes hereto have been retroactively adjusted to account for the effect of the reverse stock splits for all periods presented prior to November 9, 2011.  The total number of authorized common shares and the par value thereof was not changed by the split.

 

Basis of Presentation

 

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial statement presentation and in accordance with Form 10-Q. Accordingly, they do not include all of the information and footnotes required in annual financial statements. In the opinion of management, the unaudited financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position and results of operations and cash flows. The results of operations presented are not necessarily indicative of the results to be expected for any other interim period or for the entire year.

 

These unaudited financial statements should be read in conjunction with the 2012 annual financial statements included in the Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (“SEC”) on April 15, 2013.

 

Reclassifications

 

Certain items on the 2012 statement of operations and statement of cash flows have been reclassified to conform to current period presentation.

 

Exploration Stage Company

 

As of July 8, 2010, the Company became an “exploration stage company” as defined in the SEC Industry Guide 7, and is subject to compliance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 915 “Development Stage Entities”.  For the period from September 6, 2007 (Inception) to July 8, 2010, the Company was a “development stage company” in accordance with ASC Topic 915.  Deficits accumulated prior to becoming an “exploration stage company” have been separately presented in the accompanying consolidated balance sheets.  To date, the Company's planned principal operations have not fully commenced.

 

7
 

 

SPARTAN GOLD LTD.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

March 31, 2013

(unaudited)

 

Note 1 – Nature of Business, Presentation, and Going Concern (Continued)

 

Going Concern

 

The accompanying unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The Company has incurred a net loss of $65,899 for the three months ended March 31, 2013 and has incurred cumulative losses since inception of the exploration stage of $18,520,639.  The Company has a stockholders’ deficit of $342,070 at March 31, 2013.  These factors raise substantial doubt about the ability of the Company to continue as a going concern.  The Company’s continuation as a going concern is dependent upon its ability to generate revenues, its ability to continue to raise investment capital, and to implement its business plan.  No assurance can be given that the Company will be successful in these efforts.

 

These unaudited consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.  Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern.

   

8
 

 

SPARTAN GOLD LTD.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

March 31, 2013

(unaudited)

 

Note 2 – Mineral Properties

 

For the three months ended March 31, 2013 and 2012, the Company has incurred $nil and $36,560 in mineral property costs which have been charged to operations.  A summary by property is as follows:

 

   Ziggurat   Poker Flats   Arbacoochee     
   Property   Property   Gold Prospect   Total 
                 
Three Months Ended March 31, 2013                    
                     
Impairment  $   $   $   $ 
                     
Option payments                
                     
Property expenditures                
                     
Exploration costs                
                     
   $   $   $     $                –-    
                     
                     
Three Months Ended March 31, 2012                    
                     
Impairment  $   $   $   $ 
                     
Option payments                
                     
Property expenditures       36,560        36,560 
                     
Exploration costs                
                     
   $   $36,560   $   $36,560 
                     
                     
From July 8, 2010 (Inception of Exploration Stage) to March 31, 2013                                
                     
Impairment  $   $   $104,027   $104,027 
                     
Option payments   10,288,010    5,056,750        15,344,760 
                     
Property expenditures       93,120        93,120 
                     
Exploration costs   205,725    111,188    3,820    320,733 
                     
   $10,493,735   $5,261,058   $107,847   $15,862,640 

 

Ziggurat Property

 

On December 27, 2010, the Company entered into an Option and Mining Claim Acquisition Agreement between Mexivada Mining Corporation (“MMC” or the “Optionor”) and Sphere Resources, Inc. (“Sphere”).  The agreement was amended on March 28, 2011 (the “First Amendment”) and further amended on December 22, 2011 (the “Second Amendment”).

 

9
 

 

SPARTAN GOLD LTD.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

March 31, 2013

(unaudited)

 

Note 2 – Mineral Properties (Continued)

 

Ziggurat Property (Continued)

 

MMC is the owner of a 100% interest in certain mining claims in Nye County, in the State of Nevada, known as the “Ziggurat” Property. Resulting from the Agreement and First and Second Amendments, the Company has the following rights and obligations:

 

·Issuance of 393,125 shares of common stock (issued at a fair value of $7,076,250) and 41,875 shares of common stock (issued at a fair value of $753,750) to Sphere and MMC, respectively on execution of the amended Option Agreement;
·Issuance of a warrant to purchase 193,100 shares (recorded at a fair value of $1,853,760) and a warrant to purchase 41,875 shares (recorded at a fair value of $402,000) to Sphere and MMC, respectively, with an exercise price of $20.00 per share until March 28, 2016;
·The Company has paid to MMC $25,000 upon executing the Option Agreement;
·The Company has paid to MMC $35,000 on May 27, 2011;
·The Company shall pay to MMC $25,000 on or before the second anniversary date of the Agreement ($17,160 paid and $7,840 accrued as of March 31, 2013);
·The Company shall pay to MMC $25,000 on or before the third anniversary date of the Agreement;
·An initial 51% interest in the property will be earned upon incurring exploration expenditures of $1,500,000 on or before the third anniversary date of the agreement, all of which will be paid by the Company;
·An additional 24% interest in the property will be earned upon incurring additional exploration expenditures of $1,000,000 and completing and delivering to Optionor an industry-standard mining feasibility study on or before the fifth anniversary date of the agreement;
·Sphere is required to issue certain shares of common stock to MMC;
·The Company granted a 2.5% Net Smelter Royalty (“NSR”) for any and all products that are produced from the Ziggurat mining claims to Sphere and a .5% NSR to MMC;
·If and when the Company elects to sell and convey all or a portion of its interest in the Ziggurat Property, the Company shall have the right to purchase up to 100% of the 2.5% NSR granted, conveyed and assigned by the Company to Sphere on its share of production from the Ziggurat Property, under terms to be agreed upon by the Company and Sphere.

 

Further, the Company paid $117,250 and $16,750 (not paid) to Sphere and MMC, respectively, of which 50% is to be paid within 60 days after the effective date of a S-1 to be filed with the SEC and the remainder after such date of the Company obtaining financing of $2,000,000. As of March 31, 2013, the Company has neither filed the S-1 nor obtained such financing.

 

Poker Flats Property

 

On December 22, 2010, the Company entered into an Option and Mining Claim Acquisition Agreement between MMC and Sphere. The agreement was amended on March 28, 2011 (the “First Amendment”) and further amended on December 22, 2011 (the “Second Amendment”).

 

MMC is the owner of a 100% interest in certain mining claims located in the Carlin Mining District in Elko County Nevada, known as the “Poker Flats” Property.  Resulting from the Agreement and First and Second Amendments, the Company has the following rights and obligations:

 

·Issuance of 194,375 shares of common stock (issued and recorded at a fair value of $3,498,750) and 20,625 shares of common stock (issued and recorded at a fair value of $371,250) to Sphere and MMC, respectively on execution of the amended Option Agreement;
·Issuance of a warrant to purchase 94,375 shares (recorded at a fair value of $906,000) and a warrant to purchase 20,625 shares (recorded at a fair value of $198,000) of common stock to Sphere and MMC, respectively, with an exercise price of $20.00 per share until March 28, 2016;
·The Company has paid to MMC $25,000 upon executing the Option Agreement;
·Sphere is required to issue certain shares of common stock to MMC;
·An initial 51% interest in the property will be earned upon incurring exploration expenditures of $500,000 on or before the third anniversary date of the agreement, all of which will be paid by the Company;
10
 

 

 

SPARTAN GOLD LTD.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

March 31, 2013

(unaudited)

 

Note 2 – Mineral Properties (Continued)

 

Poker Flats Property (Continued)

 

·An additional 24% interest in the property will be earned upon incurring additional exploration expenditures of $250,000 and completing and delivering to Optionor an industry-standard mining feasibility study on or before the fifth anniversary date of the agreement;
·Upon exercise of the option, the Company will assume a 75% interest in an existing Production Royalty Agreement which requires the payment of 3% NSR for any and all products that are produced from the Poker Flats mining claims to the lessor of the claims to MMC and a 2% NSR to Sphere;
·If and when the Company elects to sell and convey all or a portion of its interest in the Poker Flats Property, the Company shall have the right to purchase up to 75% and MMC shall have the right to purchase up to 25% of the 3% NSR on mineral production from the Poker Flats Property retained by the owner of the mining claims subject to the Poker Flats Option Agreement, for one million U.S. dollars (U.S. $1,000,000) per NSR percentage point;
·If and when the Company elects to sell and convey all or a portion of its interest in the Poker Flats Property, the Company shall have the right to purchase up to 100% of the 2% NSR granted, conveyed and assigned by the Company to Sphere on its share of production from the Poker Flats Property, under terms to be agreed upon by the Company and Sphere.

 

On April 1, 2011, the Company entered into a Mining Lease and Agreement (the “Agreement”) with K & K Tomera Lands, LLC, a Nevada Limited Liability Company (“Tomera”). This Mining Lease and Agreement pertains to the Poker Flats property located within the Carlin Mining District in Elko County, Nevada.

 

Under the terms of this Agreement, the Company agreed to pay Tomera a Production Royalty of 5% of NSR, as defined in the Agreement. In order to maintain this Agreement in effect, the Company shall pay to Tomera Advance Minimum Royalty (“AMR”) Payments. AMR payments are calculated based on the net mineral acres leased on an annual basis. The Company paid, at the execution of the Agreement, $30,800 for the first year of the lease based on the 1,760 net mineral acres leased at $17.50 per acre. Future AMR payments, on a per net mineral acre basis, are: $17.50 per acre on the first and second anniversaries of the Agreement, $21.00 per acre on the third and fourth anniversaries, $24.50 per acre on the fifth and sixth anniversaries, and $28.00 per acre on the seventh and any subsequent anniversaries. The Company paid $30,800 and $30,800 during the years ended December 31, 2012 and 2011, respectively. The term of the Agreement is for a period of ten years. The Company has the option to extend the initial term for an additional ten year period.

 

In connection with the Mining Lease and Agreement, the Company entered into a Surface Access and Use Agreement on April 1, 2011 with Kevin Tomera, a Nevada resident, which grants the Company general rights of ingress and egress over certain surface tracts and the right to use the surface tracts in conduct of its mineral exploration, development and mining activities. Additionally, Tomera has granted the Company an option to purchase portions of the surface tracts. Under the terms of the Surface Access and Use Agreement, the Company agrees to pay Kevin Tomera annual rental of $4.50 per acre for each acre of land included in the surface tracts. The Company paid $5,760 and $5,760 during the years ended December 31, 2012 and 2011, respectively. The term of the Agreement is for ten years.

 

Arbacoochee Gold Prospect

 

On October 22, 2010, the Company acquired all of the mineral rights in the Arbacoochee Gold Prospect located in northeastern Alabama. The acquisition includes all legal rights and equitable title to the mineral rights held by deed in the name of Alabama Mineral Properties, LLC (“AMP”).

 

The mineral rights were acquired for cash of $50,000 and 5,563,468 shares of the Company’s issued and outstanding common stock at a fair value of $54,027.  The shares were a contribution from shareholders, resulting in a capital contribution. The Company assumed an existing mineral royalty agreement which requires the payment of 6% NSR overriding royalty for any and all precious metals that are mined, processed or recovered from the Arbacoochee Gold Prospect to AMP.

 

At December 31, 2010, the Company impaired the Arbacoochee Gold Prospect and $104,027 was charged to operations.

11
 

 

SPARTAN GOLD LTD.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

March 31, 2013

(unaudited)

 

Note 3 – Related Party Transactions

 

During the three months ended March 31, 2013, Sphere advanced $12,160 to the Company for a balance of $21,160 (December 31, 2012 - $9,000).  The advance has no repayment date and does not bear interest.

 

During the year ended December 31, 2012, the Company’s President and Director advanced $19,000 to the Company for working capital purposes. $6,000 was repaid during the three months ended March 31, 2013, resulting in a balance of $13,000 at March 31, 2013. The advance has no repayment date and does not bear interest.

 

Accounts payable at March 31, 2013 includes $22,000 (December 31, 2012 - $19,000) of amounts due to the Company’s Chief Financial Officer for services rendered. Accrued expenses at March 31, 2013 and December 31, 2012 include $102,000 and $51,000, respectively, of accrued compensation for officers.

 

These transactions are in the normal course of business and are recorded at the exchange amount, which is the consideration agreed to by the related parties.

 

Note 4 – Stockholders’ Deficit

 

The Company’s authorized number of common shares is 1,000,000,000 with a $0.001 par value.

 

Warrants

 

The following table summarizes warrant transactions for the year ended December 31, 2012 and the three months ended March 31, 2013:

 

           Weighted     
       Weighted   average     
       average   remaining   Aggregate 
   Number   exercise   contracted   intrinsic 
   of warrants   price   term (years)   value 
                 
Outstanding at December 31, 2011   1,599,975   $5.94    4.59   $ 
Granted in 2012   900,000   $0.10           
                     
Outstanding at December 31, 2012   2,499,975   $3.84    3.80   $ 
Granted in 2013                   
                     
Outstanding at March 31, 2013   2,499,975   $3.84    3.55      
                     
Exercisable at March 31, 2013   2,499,975   $3.84    3.55   $ 
                     
Weighted Average Grant Date Fair Value       $2.09           

 

2012 Equity Plan

 

On March 28, 2012, the Company’s Board of Directors approved and adopted the Spartan Gold Ltd. 2012 Equity Incentive Plan (the “2012 Plan”) and reserved 4,750,000 shares of the Company’s common stock for issuance under the 2012 Plan to the Company’s directors, officers, consultants and other service providers.  The Plan allows for two types of grants: 1) options and 2) stock awards and stock purchase offers.  

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SPARTAN GOLD LTD.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

March 31, 2013

(unaudited)

 

Note 4 – Stockholders’ Deficit (Continued)

 

2012 Equity Plan (Continued)

 

The Company has granted stock options to employees. The following summarizes option activity under the 2012 Plan for the year ended December 31, 2012 and the three months ended March 31, 2013:

 

       Common   Weighted 
   Shares   stock   average 
   available for   options   exercise 
   grant   outstanding   price 
             
Shares issued at plan inception   4,750,000       $ 
                
Options granted   (4,000,000)   4,000,000    0.10 
                
Options exercised            
                
Options cancelled or expired            
                
Balance at December 31, 2012   750,000    4,000,000   $0.10 
                
Options granted            
                
Options exercised            
                
Options cancelled or expired            
                
Balance at March 31, 2013   750,000    4,000,000   $0.10 

 

The following table summarizes information with respect to stock options outstanding and exercisable by employees under the 2012 Plan at March 31, 2013:

 

      Options outstanding   Options vested and exercisable
          Weighted                    
          average   Weighted           Weighted    
          remaining   average   Aggregate       average   Aggregate
      Number   contractual   exercise   intrinsic   Number   exercise   intrinsic
Exercise price     outstanding   life (years)   price   value   vested   price   value
                               
$0.10          4,000,000                 9.75   $0.10    $   320,000        4,000,000   $0.10    $     320,000

 

During the year ended December 31, 2012, the Company issued 4,000,000 options to employees with a grant date fair value of $0.02. As the options were fully vested upon their grant, the entire fair value of $80,000 was recognized as stock option expense for the year ended December 31, 2012. No options were granted during the three months ended March 31, 2013.

 

Note 5 – Settlement of Debt

 

On February 10, 2012, two parties, a consultant and a former employee of the Company, released the Company of remaining contractual amounts due to them totaling $75,000 which were recorded in accrued liabilities at December 31, 2011.

 

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SPARTAN GOLD LTD.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements

March 31, 2013

(unaudited)

 

 

Note 6 – Commitments and Contingencies

 

See Note 2 – Mineral Properties.

 

As of September 1, 2012, the Company’s corporate office is leased from a company owned by its Chief Financial Officer for $1,000 per month on a month-to-month basis.

 

Note 7 – Subsequent Events

 

The Company has evaluated subsequent events through the date the financial statements were issued and filed with SEC. The Company has determined that there are no other events that warrant disclosure or recognition in the financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS

 

Certain statements made in this Form 10-Q are "forward-looking statements" (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company's plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate and, therefore, there can be no assurance the forward-looking statements included in this Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.

 

The forward-looking statements included in this Form 10-Q and referred to elsewhere are related to future events or our strategies or future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "believe," "anticipate," "future," "potential," "estimate," "encourage," "opportunity," "growth," "leader," "expect," "intend," "plan," "expand," "focus," "through," "strategy," "provide," "offer," "allow," commitment," "implement," "result," "increase," "establish," "perform," "make," "continue," "can," "ongoing," "include" or the negative of such terms or comparable terminology. All forward-looking statements included in this Form 10-Q are based on information available to us as of the filing date of this report, and the Company assumes no obligation to update any such forward-looking statements. Our actual results could differ materially from the forward-looking statements.

 

Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in the “Risk Factors” section of and elsewhere in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012 and in our subsequent filings with the Securities and Exchange Commission.  The following discussion of our results of operations should be read together with our financial statements and related notes included elsewhere in this report.

 

Company Overview

 

Spartan Gold Ltd. (the "Company", “Spartan”, “we”, “us” or “our”) is a U.S. based junior gold exploration company with gold exploration and development activities centered in both the Carlin-Rain and Round Mountain-Northumberland Gold Trends in Nevada. Spartan’s Poker Flats gold prospect is located within the Carlin-Rain region, and the Ziggurat gold prospect is located within the Round Mountain-Northumberland Mining District.

 

Each of these regions is endowed with major gold deposits operated by many of the world leaders in the mining industry. Major mining projects in the Carlin Trend are currently operated by Newmont Mining Corporation (trading on the NYSE) to the north and west of the Poker Flats prospects.  Additionally, some of the major mining projects in the Round Mountain-Northumberland districts are currently operated by Barrick Gold Corporation / Kinross Gold Corporation (NYSE) and also Newmont Mining Corporation which exist in close proximity to the Ziggurat prospect.  The Company also has mining interests in the northeast region of Alabama in the historical Arbacoochee Mining District.  The Company is currently pursuing opportunities for several acquisition targets around the world and focusing on operational plans for current projects.  The directors, management and advisers of Spartan Gold have over 90 years of combined experience in the exploration and development of global mining projects.

 

Spartan's commitment to asset growth and increased shareholder value will be sustained by the development of highly prospective projects, accelerated exploration activities and the acquisition of viable resources. Spartan has selected an international board of directors experienced in undertaking exploration, development and funding of numerous energy and minerals projects around the world.

 

Company History

 

Spartan Gold Ltd. was incorporated in Nevada on September 6, 2007 under the name Powergae, Inc. with the purpose of profitably constructing and operating biodiesel production facilities, establishing them in strategic locations, and selling the biodiesel through existing petroleum manufacturers and distributors.  On September 24, 2009, the Company changed its name to Algoil, Inc.  The central concept of Algoil, Inc. was making the production of biodiesel independent of its traditional sources such as soy bean, rape, sunflower seed or palm oil.

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On May 21, 2010, the Company experienced a change in control.  Magic Grace Ltd. (“Magic Grace”) acquired the majority of the issued and outstanding common stock of Algoil, Inc. in accordance with a stock purchase agreement by and between Andriy Kovalenko and Magic Grace.  On the closing date, May 21, 2010, pursuant to the terms of the Stock Purchase Agreement, Magic Grace purchased from Mr. Kovalenko 14,290,000 (pre-split) shares of Company’s outstanding common stock for $187,500.  In accordance with the agreement, all related party obligations were settled.   Also on May 21, 2010, Real Challenge Group, Ltd. (“Real Challenge”) acquired 935,000 (pre-split) free-trading shares of the Company’s outstanding common stock in accordance with a stock purchase agreement by and between Andriy Kovalenko, as a duly authorized representative of the selling shareholders, and Real Challenge for $187,500.   As a result of the change in control, the Company abandoned its original plan of developing and operating biodiesel facilities.

 

On July 8, 2010, the Company filed an amendment to its Articles of Incorporation in the State of Nevada to change its name to Spartan Gold Ltd.  The Company has adopted its new strategic plan of gold exploration, development and mining.

 

On July 19, 2010, the Company's Board of Directors declared a forty-to-one forward stock split of all outstanding shares of common stock.  Subsequently, on August 12, 2010, Magic Grace contributed to the treasury, and the Company retired, 9,896,250 common shares of stock (395,850,000 as adjusted for the stock split).  The effect of the stock split and retirement of shares increased the number of shares of common stock outstanding from 15,225,000 to 213,150,000 as of August 12, 2010.

 

On October 19, 2011, the Company issued 18,952,774 shares of its common stock to Sphere Resources, Inc. (“Sphere”) in conversion of a Secured Convertible Promissory Note totaling $379,055 (including accrued interest of $4,055).  As a result of the share issuance, Sphere became the majority shareholder of the Company.

 

On November 9, 2011, the Company's Board of Directors declared a one-for-twenty reverse stock split of all outstanding shares of common stock.  The effect of the reverse stock split decreased the number of shares of common stock outstanding from 632,892,868 to 31,644,658 as of November 9, 2011.

 

Plan of Operation

 

The immediate goal of Spartan’s management is to secure and augment the prospective land holdings under the Mexivada option agreements located in the Carlin-Rain and Round Mountain-Northumberland Gold Trends in Nevada.  We have options for the mineral concession rights at two projects in this region: Poker Flats and Ziggurat, both of which are located near existing operations of large mining corporations and have available mining and transportation infrastructures in place.

 

Both properties, Ziggurat and Poker Flats, require geological and geochemical mapping and analysis, in conjunction with geophysical mapping involving gravity and magnetic survey work, in order to better define future drill and exploration targets.  Our strategy is to advance each of these projects to the drilling stage as aggressively as prudent financing will allow and to determine the presence of gold, silver or other precious mineral reserves.   

 

If we are successful in doing so, we believe we can attract the attention of the existing mining companies already operating in the area or new mining companies to either enter into development agreements with us or to acquire the projects from us outright.

 

Additionally, we are currently identifying other acquisition opportunities.

  

Mineral Properties

 

Currently, we have completed two Option and Mining Claim Agreements to the mineral rights on two properties in the Carlin-Rain and Round Mountain-Northumberland Gold Trends in Nevada and own the mineral rights to one property in the northeast region of Alabama.  A description of each property is summarized below:

 

Poker Flats Property

 

On December 22, 2010, we entered into an Option and Mining Claim Acquisition Agreement between Mexivada Mining Corporation (“MMC” or the “Optionor”) and Sphere Resources, Inc. (“Sphere”). The agreement was amended on March 28, 2011 (the “First Amendment”) and further amended on December 22, 2011 (the “Second Amendment”).

 

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MMC is the owner of a 100% interest in 64 lode mining claims located in the Carlin Mining District in Elko County Nevada, known as the “Poker Flats” Property.  Resulting from the Agreement and First and Second Amendments, the Company has the following rights and obligations:

 

·An initial 51% interest in the property will be earned upon incurring exploration expenditures of $500,000 on or before the third anniversary date of the agreement, all of which will be paid by the Company,
·An additional 24% interest in the property will be earned upon incurring additional exploration expenditures of $250,000 and completing and delivering to the Optionor an industry-standard mining feasibility study on or before the fifth anniversary date of the agreement,
·The Company has paid to the Optionor $25,000 upon executing the Option Agreement,
·Sphere has issued to the Optionor 350,000 shares of Sphere Resources, Inc. common stock,
·Sphere will issue to the Optionor an additional 150,000 shares of Sphere Resources, Inc. common stock when the Company obtains a 75% in the mineral rights,
·Upon exercise of the option, the Company will assume a 75% interest in an existing Production Royalty Agreement which requires the payment of 3% Net Smelter Return (“NSR”) production royalty for any and all products that are produced from the Poker Flats mining claims to the lessor of the claims to MMC and a 2% NSR to Sphere,
·If and when the Company elects to sell and convey all or a portion of its interest in the Poker Flats Property, the Company shall have the right to purchase up to 75% and MMC shall have the right to purchase up to 25% of the 3% NSR on mineral production from the Poker Flats Property retained by the owner of the mining claims subject to the Poker Flats Option Agreement, for one million U.S. dollars (U.S. $1,000,000) per NSR percentage point,
·If and when the Company elects to sell and convey all or a portion of its interest in the Poker Flats Property, the Company shall have the right to purchase up to 100% of the 2% NSR granted, conveyed and assigned by the Company to Sphere on its share of production from the Poker Flats Property, under terms to be agreed upon by the Company and Sphere.

 

On April 1, 2011, the Company entered into a Mining Lease and Agreement (the “Agreement”) with K & K Tomera Lands, LLC, a Nevada Limited Liability Company (“Tomera”). This Mining Lease and Agreement pertains to the Poker Flats property. Under the terms of the Agreement, Tomera grants, lets and leases exclusively to Spartan Gold the property, together will all ores and minerals of every kind, except geothermal resources, coal and oil and gas and other hydrocarbons, water and sand and gravel, in, or under the property, with the exclusive right to prospect and explore for, mine by any method now known or hereafter discovered, process, mill, prepare for market, store, sell, and dispose of the same; and together with all such rights-of-way and easements to the extent owned by Tomera, if any, through, over, on or appertaining to the property. The property initially contains 1,760 net mineral acres and may be modified to increase or decrease over time at the option of the Company.

 

Poker Flats is located approximately 20 miles south-southwest of Elko, Nevada in the Carlin-Rain Trend.  Poker Flats began with 500 acres in the Carlin region which is home to some of the world's leaders in the mining industry.  Neighboring mining projects north and south of Poker Flats include Newmont Mining Corporation, Gold Standard Ventures Corporation, and Premier Gold Mines Limited.  The Company expanded Poker Flats to 3,600 acres in 2011, which was reduced to 3,040 acres in October, 2012, and now holds an option for 75% majority ownership of this project.  The geological mapping process is under way and an updated NI 43-101 report was completed on November 22, 2011.  The new claim blocks and private mineral rights now included in the Poker Flats project are surrounded by Newmont Mining Corporation's Emigrant project on the northern border and several other productive projects including Newmont's Rain-Tess and Emigrant Mines, Premier Gold Mines Limited's Saddle gold prospect and Gold Standard Ventures Corporations' Railroad gold project.  The Company’s team has completed geological mapping and analysis, in conjunction with geophysical mapping involving gravity and magnetic survey work.  

 

Additional geophysical, drilling and geological work is planned at Poker Flats under a two-phase exploration program. Since the property is situated adjacent to other current gold mining properties such as Pinon and Railroad, and as the mineralization appears similar to those at Newmont's Emigrant and Rain Mines and at the Railroad deposit, additional exploration expenditures are justified for the Poker Flats property.

 

The exploration goal at the Poker Flats prospect is to identify a 500,000 to 1,000,000 ounce open-pit gold mining resource. A major mining project is currently being developed by Newmont Mining Corporation immediately north of the Poker Flats prospects.

 

Ziggurat Property

 

On December 27, 2010, we entered into an Option and Mining Claim Acquisition Agreement between MMC (the “Optionor”) and Sphere.   The agreement was amended on March 28, 2011 (the “First Amendment”) and further amended on December 22, 2011 (the “Second Amendment”).

 

MMC is the owner of a 100% interest in 227 lode mining claims in Nye County, in the State of Nevada, known as the “Ziggurat” Property. Resulting from the Agreement and First and Second Amendments, the Company has the following rights and obligations:

 

·An initial 51% interest in the property will be earned upon incurring exploration expenditures of $1,500,000 on or before the third anniversary date of the agreement, all of which will be paid by the Company,
·An additional 24% interest in the property will be earned upon incurring additional exploration expenditures of $1,000,000 and completing and delivering to Optionor an industry-standard mining feasibility study on or before the fifth anniversary date of the agreement,
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·The Company has paid to the Optionor $25,000 upon executing the Option Agreement,
·The Company has paid to the Optionor $35,000 in 2011,
·The Company shall pay to the Optionor $25,000 on or before the second anniversary date of the Agreement ($17,160 paid as of March 31, 2013),
·The Company shall pay to Optionor $25,000 on or before the third anniversary date of the Agreement,
·Sphere has issued to Optionor 550,000 shares of Sphere Resources, Inc. common stock,
·Sphere will issue to Optionor an additional 250,000 shares of Sphere Resources, Inc. common stock when the Company obtains a 75% in the mineral rights,
·The Company granted a 2.5% NSR for any and all products that are produced from the Ziggurat mining claims to Sphere and a .5% NSR to MMC,
·If and when the Company elects to sell and convey all or a portion of its interest in the Ziggurat Property, the Company shall have the right to purchase up to 100% of the 2.5% NSR granted, conveyed and assigned by the Company to Sphere on its share of production from the Ziggurat Property, under terms to be agreed upon by the Company and Sphere.

 

The Ziggurat property is located approximately 22 kilometers north of Kinross Gold Corporation and Barrick Gold Corporation’s Round Mountain and Gold Hill gold mines in Nye County, Nevada.  The Ziggurat property began with 1,140 acres in the prolific Round Mountain-Northumberland Trend. The neighboring Northumberland mining project is located eight kilometers to the northeast of Ziggurat, and is owned by mining industry world leader Newmont Mining Corporation.  The Company previously expanded Ziggurat to 6,860 acres in 2011, which was reduced to 4,540 acres in September 2012, and now holds an option for 75% majority ownership of this project.  Previous geophysical and geological interpretations indicate that the Ziggurat property has favorable characteristics for Carlin-style gold mineralization.  Since the property is situated in close proximity to other current gold mining properties such as Northumberland, Gold Hill, and Round Mountain, and the geologic structure and surface-mineralized host rocks appear very favorable, the Ziggurat property justifies additional exploration expenditures. Spartan's team has completed geological mapping and analysis, in conjunction with geophysical mapping involving gravity and magnetic survey work.  

 

Additional geophysical, drilling and geological work is planned under a two-phase exploration program. Since the property is situated adjacent to other current gold mining properties such as Northumberland, Gold Hill, and Round Mountain, and the geologic structure and surface-mineralized host rocks appear very favorable, the Ziggurat property justifies additional exploration expenditure.

 

The exploration goal at the Ziggurat property is to identify a multi-million ounce open-pit gold mining resource. Major mining projects are currently operated by Barrick Gold Corporation and Newmont Mining Corporation which exist both south and north of the Ziggurat property, respectively.

 

Arbacoochee Gold Prospect

 

On October 22, 2010, we acquired the mineral rights to a Gold Prospect which is a tract of approximately 320 acres located in close proximity to the historic Arbacoochee Gold Mining District. This Prospect contains potentially minable placer located in Cleburne County, Alabama, 9 miles southeast of the city of Heflin. The property is located adjacent to the historic Gold Hill and is the central drain point for that hill. Most of the area’s historic gold production came from placer deposits near Gold Hill and Clear Creek. This property has not been worked in over 120 years. The recent price of gold has made the previously dormant properties a viable target to explore and bring online.

 

The Company assumed an existing mineral royalty agreement which requires the payment of 6% NSR overriding royalty for any and all precious metals that are mined, processed or recovered from the Arbacoochee Gold Prospect to AMP.

Results of Operations

 

For the three months ended March 31, 2013 compared to the three months ended March 31, 2012 and For the Period July 8, 2010 (Inception of Exploration Stage) to March 31, 2013

 

Revenues

 

The Company had no revenue for the period from July 8, 2010 (inception of exploration stage) to March 31, 2013 as we are still in the exploration stage.

 

Operating Expenses and Other Income

 

For the three months ended March 31, 2013 our total operating expenses were $65,899 compared to $286,168 for the three months ended March 31, 2012 resulting in a decrease of $220,269. The decrease is attributable to decreases in mineral property expenditures of $36,560. General and administrative expenses decreased $183,709 due primarily to decreases in consulting, legal and professional fees of $26,293; compensation of $14,657; stock compensation of $124,938; and general office, travel and overhead expense of $16,856.

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For the period from July 8, 2010 (inception of exploration stage) to March 31, 2013, total expenses and net loss were $18,520,639, composed of general and administrative expenses of $2,291,926, mineral exploration costs of $320,733, mineral property expenditures of $93,120, mineral property option payments of $15,344,760, impairment of mineral property costs of $104,027, and interest expense of $441,073, offset by a gain on the settlement of debts of $75,000.

 

Liquidity and Capital Resources

 

Overview

 

For the three months ended March 31, 2013 and 2012, we funded our operations through advances from third parties, shareholders and officers. Our principal use of funds during the three months ended March 31, 2013 has been for general corporate expenses.

 

Liquidity and Capital Resources during the three months ended March 31, 2013 compared to the three months ended March 31, 2012

 

As of March 31, 2013, we had cash of $1,866 and deficit in working capital of $343,847.  The Company generated a negative cash flow from operations of $15,431 for the three months ended March 31, 2013 compared to cash used in operations of $90,519 for the three months ended March 31, 2012. The negative cash flow from operating activities for the three months ended March 31, 2013 is primarily attributable to the Company's net loss from operations of $65,899, offset by depreciation of $507 and net changes in operating assets and liabilities of $49,961.  Cash used in operations for the three months ended March 31, 2012 is primarily attributable to the Company's net loss from operations of $211,168, offset by depreciation of $507, stock-based compensation of $124,938, and net changes in operating assets and liabilities of $70,204, and increased by gain on settlement of debt of $75,000.

 

During the three months ended March 31, 2013, the Company received advances from Sphere of $12,160, and made repayments to its President of $6,000. During the three months ended March 31, 2012, the Company received advances from Sphere of $90,000.

 

We will require additional financing during the current fiscal year according to our planned exploration activities. We plan to spend approximately $1,500,000 in the next twelve months to carry out exploration and administration activities on our Nevada mineral properties. We presently do not have sufficient financing to enable us to complete these activities and will require additional financing to perform future exploration work on all of our mineral properties. Our actual expenditures on these activities will depend on the amount of funds we have available as a result of our financing efforts. There is no assurance that we will be able to raise the necessary financing.

 

On August 31, 2012, the Company entered into a Memorandum of Understanding (“MOU”) with Tamimi Investments and Mining Co. (“TIMCO”), a Cyprus corporation. Under the MOU, TIMCO was to subscribe to a $2,000,000 private placement of the Company’s common stock at $0.05 per share (40,000,000 shares). TIMCO was to receive warrants to purchase an additional 30,000,000 shares within two years from the date of closing at an exercise price of $0.10 per share. In connection with the subscription, TIMCO was to receive a facilitation fee consisting of 5% of the placement amount in cash, 2,500,000 common shares of the Company’s stock, and warrants to purchase an additional 2,500,000 shares at $0.10 per share. Upon the completion of due diligence, TIMCO decided to not complete the transaction.

 

Also on August 31, 2012, as a condition of the MOU, the Company entered into a convertible secured loan with TIMCO and received $62,020. The loan is secured by, and convertible into, 1,240,400 shares of the Company’s common stock. The loan does not bear interest and was convertible at the end of the due diligence period.

 

Effective December 31, 2012, the Company, Sphere and TIMCO entered into an agreement whereby the debt of $62,020 was assigned to Sphere. The Company agreed to issue 250,000 shares of its common stock to TIMCO for consideration of the assignment. On December 31, 2012, Sphere elected to convert the $62,020 for 1,240,400 shares of the Company’s common stock at a conversion rate of $0.05 per share, the market rate at the date of conversion.

 

On December 27, 2012, the Company’s officers elected to convert a total of $292,764 of accrued salaries owed to them for 5,855,286 shares of the Company’s common stock at a conversion rate of $0.05 per share, the market rate at the date of conversion. Additionally on December 27, 2012, a vendor elected to convert $22,140 of accounts payable and accrued expenses due to them for 442,800 shares of the Company’s common stock at a conversion rate of $0.05 per share.

 

On December 27, 2012, Sphere elected to convert $142,640 of advances due to them for 2,852,800 shares of the Company’s common stock at a conversion rate of $0.05 per share, the market rate at the date of conversion.

 

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Going Concern

 

Due to the uncertainty of our ability to meet our current operating and capital expenses, our independent auditors included an explanatory paragraph in their report on the financial statements for the year ended December 31, 2012 regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.

 

Our unaudited financial statements have been prepared on a going concern basis, which assumes the realization of assets and settlement of liabilities in the normal course of business. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they become due. The outcome of these matters cannot be predicted with any certainty at this time and raise substantial doubt that we will be able to continue as a going concern. Our unaudited financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.

 

There is no assurance that our operations will be profitable. The Company has conducted private placements of its common stock, which have generated funds to satisfy the initial cash requirements of its planned Nevada exploration ventures. Our continued existence and plans for future growth depend on our ability to obtain the additional capital necessary to operate either through the generation of revenue or the issuance of additional debt or equity.

 

Off-Balance Sheet Arrangements

 

We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

 

Critical Accounting Policies

   

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make a number of 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. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experiences and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions and conditions. We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.

 

See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 2, “Summary of Significant Accounting Policies” in our audited consolidated financial statements for the year ended December 31, 2012, included in our Annual Report on Form 10-K as filed on April 15, 2013, for a discussion of our critical accounting policies and estimates.

 

Item 3.    Quantitative and Qualitative Disclosures About Market Risk.

  

The disclosure required under this item is not required to be reported by smaller reporting companies.

 

Item 4.    Controls and Procedures.

  

(a)Evaluation of Disclosure Controls and Procedures

   

The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean a company's controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its chief executive and chief financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to chief executive and chief financial officers to allow timely decisions regarding disclosure.

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As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective as of such date.  

 

(b)Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II – OTHER INFORMATION

 

Item 1.    Legal Proceedings

   

There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company's property is not the subject of any pending legal proceedings.

 

Item 1A.  Risk Factors

  

The disclosure required under this item is not required to be reported by smaller reporting companies.

 

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds.

   

None.

 

Item 3.    Defaults Upon Senior Securities.

  

None.

 

Item 4.    Mine Safety Disclosures.

 

As the Company is its exploration stage, no mining activities have occurred as of the date of this report.  Therefore, this item is not applicable.

 

Item 5.    Other Information.

 

None.

 

Item 6.    Exhibits

  

  Exhibit 31.1 Rule 13a-14(a) Certification by the Principal Executive Officer
  Exhibit 31.2 Rule 13a-14(a) Certification by the Principal Financial Officer
  Exhibit 32.1 Certification by the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  Exhibit 32.2 Certification by the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  Exhibit 101.INS XBRL Instance Document
  Exhibit 101.SCH XBRL Schema Document
  Exhibit 101.CAL XBRL Calculation Linkbase Document
  Exhibit 101.DEF XBRL Definition Linkbase Document
  Exhibit 101.LAB XBRL Label Linkbase Document
  Exhibit 101.PRE XBRL Presentation Linkbase Document

 

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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

Date:  May 10, 2013   By:  /s/ Malcolm Stevens
    Malcolm Stevens
   

Chief Executive Officer

(Principal Executive Officer)

 

 

Date:  May 10, 2013   By:  /s/ John S. Wittler
    John S. Wittler
   

Chief Financial Officer

(Principal Financial Officer)

 

 

 

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