UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended February 28, 2013

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

For the transition period from ___________ to ___________.

Commission file number 000-52044

USA GRAPHITE INC.

(Exact name of registrant as specified in its charter)

848 N. Rainbow Blvd., #3550, Las Vegas, Nevada 89107

 (Address of principal executive offices)

(619) 798-8083

(Registrant’s telephone number, including area code)

Securities registered under Section 12(b) of the Exchange Act: None

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o    No þ

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 o     No þ

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definition of “large accelerated filer and “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) Yeso  No þ

Aggregate market value Common Stock held by non-affiliates of the Registrant on August 31, 2012 was $66,160,640 based on a $0.6656 closing price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.

As of July 30, 2013 the registrant’s outstanding stock consisted of 129,400,000 common shares.

USA GRAPHITE INC.

TABLE OF CONTENTS

Item 1.    Business. 4

Item 1A.Risk Factors.  8

Item 1B.  Unresolved Staff Comments. 8

Item 2.    Properties. 9

Item 3.    Legal Proceedings. 9

Item 4.    Mine Safety Disclosures. 9

Item 5.    Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities  9

Item 6.    Selected Financial Data. 10

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations. 11

Item 7A.Quantitative and Qualitative Disclosures About Market Risk. 14

Item 8.    Financial Statements and Supplementary Data. 14

Item 9.    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. 25

Item 9A.Controls and Procedures. 25

Item 10.  Directors, Executive Officers and Corporate Governance. 26

Item 11.  Executive Compensation. 28

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters  30

Item 13.  Certain Relationships and Related Transactions, and Director Independence. 31

Item 14.  Principal Accountant Fees and Services. 32

Item 15.  Exhibits, Financial Statement Schedules. 33

PART I

Item 1.

Business

Corporate Overview

Our company was incorporated in the State of Nevada on December 13, 2005 under the name PTM Publications Incorporated.  We were formed to engage in the magazine publishing business in Malaysia.  In January of 2010, our management decided to abandon the company’s business in search of other opportunities.

On June 17, 2010, our company filed Articles of Merger with the Nevada Secretary of State to change the name of our company to “Magnum Oil Inc.” to be effected by way of a merger with its wholly-owned subsidiary Magnum Oil Inc, which was created solely for the name change.

On April 11, 2012, our company filed Articles of Merger with the Nevada Secretary of State to change the name of our company to “USA Graphite Inc.”, to be effected by way of a merger with its wholly-owned subsidiary USA Graphite Inc., which was created solely for the name change.  We changed our name to reflect our anticipated change in business focus.  We are now involved in mineral exploration.

Also on April 11, 2012, our company filed a Certificate of Change with the Nevada Secretary of State to give effect to a forward split of our company’s authorized and issued and outstanding shares of common stock on a 3.5 new for 1 old basis and, consequently, our company’s authorized capital increased from 50,000,000 to 175,000,000 shares of common stock and our issued and outstanding shares of common stock increased from 48,400,000 to 169,400,000 shares of common stock, all with a par value of $0.001. On August 28, 2012 the company amended the authorized common shares from 175,000,000 to 800,000,000 common shares of $0.001 per share. On the same day the company authorized 10,000,000 preferred shares, par value $0.001 per share.

These amendments became effective on April 17, 2012 upon approval from the Financial Industry Regulatory Authority (“FINRA”).

The forward split and name change became effective with the Over-the-Counter Bulletin Board at the opening of trading on April 17, 2012 under the symbol “MGNI”. 

Effective May 29, 2012, the company’s ticker symbol changed from “MGNI” to “USGT” to better reflect out name change to USA Graphite, Inc. that was completed in April of 2012.

On August 28, 2012, our company filed a Certificate of Amendment with the Nevada Secretary of State amending the authorized common shares to increase from 175,000,000 shares to 800,000,000, par value $0.001 per share. Additionally, the preferred shares increased from 0 to 10,000,000, par value $0.001 per share.

Our Business

On November 19, 2012, we entered into a Property Option Agreement (the "Option Agreement") with Nevada Minerals Holdings, Inc. (“NV Minerals”). Pursuant to the terms and conditions of the Option Agreement, NV Minerals shall grant us with the right and option (the “Option”) to acquire one hundred percent (100%) of the mining interests in that certain Property known as the Blue Wing Mountains Graphite Project (the “Property”) which is comprised of a total of one-thousand nine-hundred and eighty-five acres (1985 acres) and is located in Pershing County of the State of Nevada. In order to exercise the Option, we shall be required to: (i) pay an initial cash payment of fifty thousand dollars ($50,000) to NV Minerals; (ii) issue an aggregate of five million (5,000,000) restricted shares of our common stock to NV Minerals; (iii) pay an additional aggregate payment of four hundred fifty thousand dollars ($450,000) over a three (3) year period; and (iv) pay a production royalty (the “Royalty”) to NV Minerals equal to two percent (2%) of the net smelter returns, per the terms and conditions of the Option Agreement.

We will also provide funds for the conduct of a program of work to be undertaken by NV Minerals for the benefit of the Property of not less than $1,000,000 over four years. The Option Agreement also provides that we shall have a one-time right to purchase fifty percent (50%) of the Royalty in the Property for five hundred thousand dollars ($500,000). Pursuant to the Option Agreement, NV Minerals has agreed to enter into an eighteen month voluntary lock up agreement for all of the shares it will receive upon execution of the Option Agreement.

The above description of the Option Agreement is intended as a summary only and which is qualified in its entirety by the terms and conditions set forth therein, and may not contain all information that is of interest to the reader. For further information regarding the terms and conditions of the Option Agreement, this reference is made to such agreement, which is filed as Exhibit 10.1 to our Form 8-K/A which was filed with Commission on December 7, 2012 and is incorporated herein by this reference.

On December 7, 2012, we entered into an Option Agreement (the "Agreement") with NV Minerals. Pursuant to the terms and conditions of the Agreement, NV Minerals shall grant us with the right and option (the “Option”) to acquire one hundred percent (100%) of the mining interests in that certain Property known as the Gordon Creek Graphite Property (the “Property”) which is comprised of a total of two hundred and six acres (206 acres) and is located in Elko County of the State of Nevada. In exchange, we are required to: (i) pay an aggregate payment of two hundred thousand dollars ($200,000) over a four (4) year period to NV Minerals; (ii) issue an aggregate of two million (2,000,000) restricted shares of our common stock to NV Minerals; and (iii) pay a production royalty (the “Royalty”) to NV Minerals equal to two percent (2%) of the net smelter returns, per the terms and conditions of the Agreement.

We will also provide funds for the conduct of a program of work to be undertaken by NV Minerals for the benefit of the Property of not less than $500,000 over four years. The Option Agreement also provides that we shall have a one-time right to purchase fifty percent (50%) of the Royalty in the Property for five hundred thousand dollars ($500,000). Pursuant to the Option Agreement, NV Minerals has agreed to enter into an eighteen month voluntary lock up agreement for all of the shares it will receive upon execution of the Option Agreement.

We will also provide funds for the conduct of a program of work to be undertaken by NV Minerals for the benefit of the Property of not less than $500,000 over four years. The Option Agreement also provides that we shall have a one-time right to purchase fifty percent (50%) of the Royalty in the Property for five hundred thousand dollars ($500,000). Pursuant to the Option Agreement, NV Minerals has agreed to enter into an eighteen month voluntary lock up agreement for all of the shares it will receive upon execution of the Option Agreement.

The above description of the Agreement is intended as a summary only and which is qualified in its entirety by the terms and conditions set forth therein, and may not contain all information that is of interest to the reader. For further information regarding the terms and conditions of the Option Agreement, this reference is made to such agreement, which is filed as Exhibit 10.1 to our Form 8-K which was filed with the Commission on December 7, 2012 and is incorporated herein by this reference

On January 14, 2013, we entered into a Letter of Intent (the "LOI") with NV Minerals. Pursuant to the terms and conditions of the LOI, NV Minerals shall grant us with the right and option (the “Option”) to acquire one hundred percent (100%) of the mining interests in that certain Property known as the Ruby Mountains Graphite Property (the “Property”) which is comprised of a total of approximately Seven Hundred and Eighty Five acres (785 acres) and is located in Elko County of the State of Nevada. In exchange, we are required to: (i) pay an initial cash payment of twenty five thousand dollars ($25,000) to NV Minerals; (ii) issue an aggregate of four million six hundred and fifteen thousand (4,615,000) restricted shares of our common stock to NV Minerals; (iii) pay an additional aggregate payment of one hundred seventy five thousand dollars ($175,000) over a three (3) year period; and (iv) pay a production royalty (the “Royalty”) to NV Minerals equal to two percent (2%) of the net smelter returns, per the terms and conditions of the LOI.

The above description of the LOI is intended as a summary only and which is qualified in its entirety by the terms and conditions set forth therein, and may not contain all information that is of interest to the reader. For further information regarding the terms and conditions of the LOI, this reference is made to such agreement, which is filed as Exhibit 10.1 to our Form 8-K filed with the Commission on January 15, 2013 and is incorporated herein by this reference.

Competition

We are a new and un-established 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 and development. This competition could adversely impact our ability to achieve the financing necessary for us to conduct further exploration of our mineral properties.

We also compete with other junior mineral exploration companies for financing from a limited number of investors that are prepared to make investments in junior mineral exploration companies. The presence of competing junior mineral exploration companies may impact on our ability to raise additional capital in order to fund our exploration programs if investors are of the view that investments in competitors are more attractive based on the merit of the mineral properties under investigation and the price of the investment offered to investors.

We also compete with other junior and senior mineral companies for available resources, including, but not limited to, professional geologists, camp staff, helicopter or float planes, mineral exploration supplies and drill rigs.

Compliance with Government Regulations

We are required to comply with all regulations, rules and directives of governmental authorities and agencies applicable to the exploration of minerals in any area where we will carry out future exploration programs.

Patents, Trademarks, Franchises, Royalty Agreements or Labor Contracts

We have no current plans for any registrations such as patents, trademarks, copyrights, franchises, concessions, royalty agreements or labor contracts. We will assess the need for any copyright, trademark or patent applications on an ongoing basis.

Research and Development

We have not spent any amounts on research and development activities during the year ended February 28, 2013.  We anticipate that we will not incur any expenses on research and development over the next 12 months.  Our planned expenditures on our operations or a business combination are summarized under the section of this annual report entitled “Management’s Discussion and Analysis of Financial Position and Results of Operations”.

Employees and Employment Agreements

At present, we have no employees other than our sole officer director. We presently do not have pension, health, annuity, insurance, stock options, profit sharing or similar benefit plans; however, we may adopt such plans in the future.  There are presently no personal benefits available to any officers, directors or employees.

WHERE YOU CAN GET ADDITIONAL INFORMATION

We file annual, quarterly and current reports, proxy statements and other information with the SEC.  You may read and copy our reports or other filings made with the SEC at the SEC’s Public Reference Room, located at 100 F Street, N.W., Washington, DC 20549.  You can obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  You can also access these reports and other filings electronically on the SEC’s web site, www.sec.gov.

Item 1A.

Risk Factors

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 1B.

Unresolved Staff Comments

As a “smaller reporting company”, we are not required to provide the information required by this Item.

Item 2.

Properties

We do not currently own any property or real estate of any kind.  Our business offices are located at 848 N. Rainbow Blvd. #3550, Las Vegas, Nevada 89107. Our telephone number at that facility is (603) 525-3380. It is our belief that the space is adequate for our immediate needs. Additional space may be required as we expand our operations.

Legal Proceedings

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation.  There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.

Item 4.

Mine Safety Disclosures

Not applicable.

PART II

Item 5.

Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock quoted on the OTC Bulletin Board under the Symbol “USGT”.  Our common stock was listed for quotation on May 15, 2007.

The following table reflects the high and low bid information for our common stock obtained from Stockwatch and reflects inter-dealer prices, without retail mark-up, markdown or commission, and may not necessarily represent actual transactions.  

The high and low bid prices of our common stock for the periods indicated below are as follows:

Our common stock was listed for quotation on May 15, 2007.  Our company was trading until January 31, 2003 and then no further trading occurred until August 6, 2010.

Number of Holders

As of July 30, 2013, the 129,400,000 issued and outstanding shares of common stock were held by a total of 8 shareholders of record.

Our common shares are issued in registered form.  Holladay Stock Transfer, 2939 N 67th Pl # C, Scottsdale, AZ 85251-6015, (telephone number (480) 481-3940) is the registrar and transfer agent for our common shares.

Dividend Policy

We have not paid any cash dividends on our common stock since inception and presently anticipate that all earnings, if any, will be retained for development of our business and that no dividends on our common stock will be declared in the foreseeable future.  Any future dividends will be subject to the discretion of our Board of Directors and will depend upon, among other things, future earnings, operating and financial condition, capital requirements, general business conditions and other pertinent facts.  Therefore, there can be no assurance that any dividends on our common stock will be paid in the future.

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

Other than as disclosed below, we did not sell any equity securities which were not registered under the Securities Act during the year ended February 28, 2013 that were not otherwise disclosed on our quarterly reports on Form 10-Q or our current reports on Form 8-K filed during the year ended February 28, 2013.

Equity Compensation Plan Information

We do not have in effect any compensation plans under which our equity securities are authorized for issuance and we do not have any outstanding stock options.

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

We did not purchase any of our shares of common stock or other securities during the fourth quarter of our fiscal year ended February 28, 2013.

Item 6.

Selected Financial Data

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis in conjunction with our financial statements, including the notes thereto, included in this Report.  Some of the information contained in this Report may contain forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1933, as amended (the “Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements.  Forward-looking statements which involve assumptions and describe our future plans, strategies and expectations, are generally identifiable by the use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project” or the negative of these words or other variations on these words or comparable terminology.  These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that the projections included in these forward-looking statements will come to pass.  Our actual results could differ materially from those expressed or implied by the forward looking statements as a result of various factors.  We undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

Our auditors’ reports contain a statement that our net loss and limited working capital raise substantial doubt about our ability to continue as a going concern.  Our independent registered public accountants have stated in their report, included in Item 3 to our financial statements that our significant operating losses and working capital deficit raise substantial doubt about our ability to continue as a going concern.  We had net losses of $15,056,902 and $54,722, from continuing operation respectively, for the fiscal years ended February 28, 2013 and February 29, 2012.  We will be required to raise substantial capital to fund our capital expenditures, working capital, and other cash requirements since our current cash assets are exhausted and revenues are not yet sufficient to sustain our operations.  We will need to seek other financing to complete our business plans.  The successful outcome of future financing activities cannot be determined at this time and there are no assurances that, if achieved, we will have sufficient funds to execute our intended business plan or generate positive operational results.

In addition to our current deficit, we expect to incur additional losses during the foreseeable future.  Until we are able to locate and acquire a target business, we will not be profitable.  Consequently, we will require substantial additional capital to continue our development and marketing activities.  Since our current cash in the bank is exhausted, we are currently seeking alternative financing to sustain our operations; however, there is no assurance we will be successful in finding the cash required to locate and acquire a target business or that we will not incur additional and unplanned expenses.  There is no assurance that we will be able to obtain additional financing through private placements and/or public offerings necessary to support our working capital requirements.  To the extent that funds generated from any private placements and/or public offerings are insufficient, we will have to raise additional working capital through other sources, such as bank loans and/or financings.  No assurance can be given that additional financing will be available, or if available, will be on acceptable terms.

We are incurring increased costs as a result of being a publicly-traded company.  As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company.  In addition, the Sarbanes-Oxley Act of 2002, as well as new rules subsequently implemented by the Securities and Exchange Commission, have required changes in corporate governance practices of public companies.  These new rules and regulations have increased our legal and financial compliance costs and have made some activities more time-consuming and costly.  For example, as a result of becoming a public company, we have created additional board committees and have adopted policies regarding internal controls and disclosure controls and procedures.  In addition, we have incurred additional costs associated with our public company reporting requirements.  In addition, these new rules and regulations have made it more difficult and more expensive for us to obtain director and officer liability insurance, which we currently cannot afford to do.  As a result of the new rules, it may become more difficult for us to attract and retain qualified persons to serve on our Board of Directors or as executive officers.  We cannot predict or estimate the amount of additional costs we may incur as a result of being a public company or the timing of such costs.

Purchase of Significant Equipment

We do not intend to purchase any significant equipment over the next twelve months.

Personnel Plan

We do not expect any material changes in the number of employees over the next 12 month period (although we may enter into employment or consulting agreements with our officers or directors).  We do and will continue to outsource contract employment as needed.

Results of Operations

For the Years Ended February 28, 2013 and February 29, 2012

Expenses

Our operating expenses for our years ended February 28, 2013 and February 29, 2012 are outlined in the table below:

Liquidity and Financial Condition

We did not generate any revenues for the fiscal year ended February 28, 2013 or February 29, 2012.  We incurred operating expenses of $15,055,018 and $52,833, respectively, for fiscal years ended February 28, 2013 and February 29, 2012.  The expenses for the fiscal year ended February 28, 2013 consisted of professional fees in the amount of $35,671 (2012 - $22,031; cumulative - $108,887 and office and general fees of $15,019,347 (2012 - $22,031; cumulative - $15,188,456).  

Our comprehensive net income for the fiscal year ended February 28, 2013, adjusted for foreign currency translation adjustment, was $15,056,902 or $(0.09) per share, compared to $54,722, or $0.00 per share for the fiscal year ended February 29, 2012.  We do not currently have sufficient capital to fund our estimated expenditures for the fiscal year and intend to fund the expenditures through equity and/or debt financing.  There can be no assurance that financing will be available to us on acceptable terms, if at all.

At February 28, 2013, we had $nil in cash in the bank and prepaid expenses of $nil.

Our accounts payable and accrued liabilities at February 28, 2013 was $24,141, we had a note payable in the amount of $42,692 at February 28, 2013 and loans from related party of $129,841 at February 28, 2013.

Our stockholders' deficit was $3,583,326 at February 28, 2013, as compared to $139,772 at February 29, 2012.

In the next 12 months, we do not intend to spend any substantial funds on research and development and do not intend to purchase any major equipment.

We do not anticipate any material commitments for capital expenditures in the near term.  While we continue to work towards 100% capacity, we feel that current cash on hand is insufficient to satisfy cash requirements.  If we are unable to continue to develop and implement a profitable business plan, we will be required to seek additional avenues to obtain funds necessary to sustain operations, including equity and/or debt financing.  There can be no assurance that financing will be available to us on acceptable terms, if at all.

Given that we have not achieved significant profitable operations to date, our cash requirements are subject to numerous contingencies and risk factors beyond our control, including operational and development risks, competition from well-funded competitors and our ability to manage growth.  We can offer no assurance that we will generate cash flow sufficient to achieve profitable operations or that our expenses will not exceed our projections.  If our expenses exceed estimates, we will require additional monies during the next twelve months.

Off-Balance Sheet Arrangements

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

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America.  Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses.  These estimates and assumptions are affected by management’s application of accounting policies.  We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financial statements.

Our company’s financial statements are prepared using the accrual method of accounting.  The Company has elected a February year-end.

Cash Equivalents

Our company considers all highly liquid investments purchased with an original maturity 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 reporting period.  Actual results could differ from those estimates.

Stock-Based Compensation

Our company records stock-based compensation in accordance with ASC 718, Compensation – Stock Based Compensation, using the fair value method.  All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.  Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.

Recently Issued Accounting Pronouncements

Our company has evaluated all the recent accounting pronouncements and believes that none of them will have a material effect on the company’s financial statement.

Contractual Obligations

As a “smaller reporting company”, we are not required to provide tabular disclosure obligations.

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 8.

Financial Statements and Supplementary Data

PLS CPA, A Professional Corp.

t4725 MERCURY STREET SUITE 210 tSAN DIEGO tCALIFORNIA 92111 t

tTELEPHONE (858)722-5953 tFAX (858) 761-0341  tFAX (858) 764-5480

tE-MAIL changgpark@gmail.com t

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

USA Graphite, Inc.

(Formerly Magnum Oil, Inc.)

We have audited the accompanying consolidated balance sheets of USA Graphite, Inc. (formerly Magnum Oil, Inc.) and subsidiary (the “Company”) as of February 28, 2013 and 2012 and the related consolidated statements of operations, changes in shareholders’ equity and cash flows for the years then ended and for the period from December 13, 2005 (inception) through February 28, 2013. These consolidated financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audit 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.  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 audit provides a reasonable basis for our opinion.  

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of USA Graphite, Inc. (formerly Magnum Oil, Inc.)  and subsidiary as of February 28, 2013 and 2012, and the result of its operations and its cash flows for the years then ended and for the period from December 13, 2005 (inception) through February 28, 2013 in conformity with U.S. generally accepted accounting principles.

The consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 3 to the consolidated financial statements, the Company’s losses from operations raise substantial doubt about its ability to continue as a going concern.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/PLS CPA                                        
PLS CPA, A Professional Corp.

July 31, 2013

San Diego, CA. 92111

The accompanying notes are an integral part of these financial statements

The accompanying notes are an integral part of these financial statements

The accompanying notes are an integral part of these financial statements

The accompanying notes are an integral part of these financial statements

Item 10.

Directors, Executive Officers and Corporate Governance

Directors and Executive Officers

All directors of our company hold office until the next annual meeting of the security holders or until their successors have been elected and qualified.  The officers of our company are appointed by our board of directors and hold office until their death, resignation or removal from office.  Our directors and executive officers, their ages, positions held, and duration as such, are as follows:

The board of directors has no nominating, audit or compensation committee at this time.

Business Experience

The following is a brief account of the education and business experience during at least the past five years of each director, executive officer and key employee of our company, indicating the person’s principal occupation during that period, and the name and principal business of the organization in which such occupation and employment were carried out.

Background of Directors and Executive Officers

Wayne Y. Yamamoto brings over 30 years of successful leadership and innovation in the area of information technology, software development and corporate financing. Mr. Yamamoto was the President of Call/Recall which is the first company to develop and patent terabyte optical storage technology. As the CTO of W&W, Mr. Yamamoto led a team to create the first interactive television system for the cable industry. At Quark, Mr. Yamamoto was a member of a 5 man executive management team that led Quark to worldwide expansion, while maintaining industry high profit margins. Mr. Yamamoto has also held executive positions or served as a board member of several startups including ResTech, Sierra Medical, Photonic Storage Systems, Clareos, Arbor Software, and Solutions Technology.

Since 1998, Mr. Yamamoto has been focused on investment banking and structuring financial transactions as the Managing Director of a private investment fund, a director for First Wall Street Capital and as an independent consultant with experience in international commodities trading (petroleum products and Iron Ore), technology, gaming, hospitality, entertainment and large commercial real estate development. Mr. Yamamoto has complete deal making experience including:

Term of Office of Directors

Our directors are appointed for a one-year term to hold office until the next annual general meeting of our stockholders or until removed from office in accordance with our bylaws.  Our officers are appointed by our Board of Directors and hold office until the officer dies or resigns or the Board elects a successor or removes the officer.

Identification of Significant Employees

We have no significant employees, other than Wayne Yamamoto, our sole officer and director.

Family Relationships

There are no family relationships between any of our directors, executive officers and proposed directors or executive officers.

Involvement in Certain Legal Proceedings

To the best of our knowledge, none of our directors or executive officers has, during the past ten years:

1.

been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);

2.

had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;  

3.

been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;

4.

been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

5.

been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

6.

been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26)), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29)), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Our company does not have an audit committee or an audit committee financial expert (as defined in Item 407 of Regulation S-K) serving on its Board of Directors.  All current members of the Board of Directors lack sufficient financial expertise for overseeing financial reporting responsibilities.  Our company has not yet employed an audit committee financial expert on its Board due to the inability to attract such a person.

Our company intends to establish an audit committee of the board of directors, which will consist of independent directors.  The audit committee’s duties will be to recommend to our company’s board of directors the engagement of an independent registered public accounting firm to audit our company’s financial statements and to review our company’s accounting and auditing principles.  The audit committee will review the scope, timing and fees for the annual audit and the results of audit examinations performed by the internal auditors and independent registered public accounting firm, including their recommendations to improve the system of accounting and internal controls.  The audit committee will at all times be composed exclusively of directors who are, in the opinion of our company’s board of directors, free from any relationship which would interfere with the exercise of independent judgment as a committee member and who possess an understanding of financial statements and generally accepted accounting principles.

Code of Ethics

Our company's board of directors adopted a Code of Business Conduct and Ethics that applies to, among other persons, members of our board of directors, our company's officers including our president, chief executive officer and chief financial officer, employees, consultants and advisors.  As adopted, our Code of Business Conduct and Ethics sets forth written standards that are designed to deter wrongdoing and to promote:

1.

honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

2.

full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the Securities and Exchange Commission and in other public communications made by us;

3.

compliance with applicable governmental laws, rules and regulations;

4.

the prompt internal reporting of violations of the Code of Business Conduct and Ethics to an appropriate person or persons identified in the Code of Business Conduct and Ethics; and

5.

accountability for adherence to the Code of Business Conduct and Ethics.

Our Code of Business Conduct and Ethics requires, among other things, that all of our company's Senior Officers commit to timely, accurate and consistent disclosure of information; that they maintain confidential information; and that they act with honesty and integrity.

Our Code of Business Conduct and Ethics is being filed with the Securities and Exchange Commission as Exhibit 14.1 to this Annual Report of on Form 10-K.  We will provide a copy of the Code of Business Conduct and Ethics to any person without charge, upon request.  Requests can be sent to: USA Graphite Inc., 848 N. Rainbow Blvd., #3550, Las Vegas, Nevada, 89107.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers and persons who beneficially own more than ten percent of a registered class of our equity securities to file with the SEC initial reports of ownership and reports of change in ownership of common stock and other equity securities of the Company. Officers, directors and greater than ten percent stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to us under Rule 16a-3(e) during the year ended February 28, 2013, Forms 5 and any amendments thereto furnished to us with respect to the year ended February 28, 2013, and the representations made by the reporting persons to us, we believe that during the year ended February 28, 2013, our executive officers and directors and all persons who own more than ten percent of a registered class of our equity securities have not yet complied with all Section 16(a) filing requirements. However, Company Officers and Directors are working to become compliant with Section 16(a) and the Company expects to become fully compliant by the completion of the next fiscal year end.

Item 11.

Executive Compensation

The particulars of the compensation paid to the following persons:

• our principal executive officer;
• each of our two most highly compensated executive officers who were serving as executive officers at the end of the years ended February 28, 2013 and February 29, 2012; and
• up to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as our executive officer at the end of the years ended February 28, 2013 and February 29, 2012, who we will collectively refer to as the named executive officers of our company,are set out in the following summary compensation table, except that no disclosure is provided for any named executive officer, other than our principal executive officers, whose total compensation did not exceed $100,000 for the respective fiscal year:  

(1)   Wayne Yamamoto is our sole officer and director as of November 8, 2012.

(2)   Patrick DeBlois was our president, chief executive officer, chief financial officer, treasurer and director from October 27, 2010 to November 8, 2012.

(3)   Eden Clark was our secretary from December 15, 2010 to November 8, 2012.

Narrative Disclosure to Summary Compensation Table

There are no employment contracts, compensatory plans or arrangements, including payments to be received from our company with respect to any executive officer, that would result in payments to such person because of his or her resignation, retirement or other termination of employment with our company, or its subsidiaries, any change in control, or a change in the person’s responsibilities following a change in control of our company.

Stock Option Plan

Currently, we do not have a stock option plan in favor of any director, officer, consultant or employee of our company.

Stock Options/SAR Grants

During our fiscal year ended February 28, 2013 there were no options granted to our named officers or directors.

Outstanding Equity Awards at Fiscal Year End

No equity awards were outstanding as of the year ended February 28, 2013.

During our fiscal year ended February 28, 2013 there were no options exercised by our named officers.

Compensation of Directors

We do not have any agreements for compensating our directors for their services in their capacity as directors, although such directors are expected in the future to receive stock options to purchase shares of our common stock as awarded by our board of directors.

We have determined that none of our directors are independent directors, as that term is used in Item 7(d)(3)(iv)(B) of Schedule 14A under the Securities Exchange Act of 1934, as amended, and as defined by Rule 4200(a)(15) of the NASDAQ Marketplace Rules.

Pension, Retirement or Similar Benefit Plans

There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers.  We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the board of directors or a committee thereof.

Indebtedness of Directors, Senior Officers, Executive Officers and Other Management

None of our directors or executive officers or any associate or affiliate of our company during the last two fiscal years, is or has been indebted to our company by way of guarantee, support agreement, letter of credit or other similar agreement or understanding currently outstanding.

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Security Ownership of Management

The following table sets forth certain information concerning the number of shares of our common stock owned beneficially as of May 22, 2013, by: (i) each of our directors; (ii) each of our named executive officers; and (iii) each person or group known by us to beneficially own more than 5% of our outstanding shares of common stock.  Unless otherwise indicated, the shareholders listed below possess sole voting and investment power with respect to the shares they own.

(1)      The number and percentage of shares beneficially owned is determined under rules of the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose.  Under such rules, beneficial ownership includes any shares as to which the individual has sole or shared voting power or investment power and also any shares which the individual has the right to acquire within 60 days through the exercise of any stock option or other right.  The persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws where applicable and the information contained in the footnotes to this table.

(2)      Based on 129,400,000 issued and outstanding shares of common stock as of July 30, 2013.

(3)      Wayne Yamamoto is our sole officer and director.

Changes in Control

We are unaware of any contract or other arrangement or provisions of our Articles or Bylaws the operation of which may at a subsequent date result in a change of control of our company.  There are not any provisions in our Articles or Bylaws, the operation of which would delay, defer, or prevent a change in control of our company.

Item 13.

Certain Relationships and Related Transactions, and Director Independence

Except as disclosed herein, no director, executive officer, shareholder holding at least 5% of shares of our common stock, or any family member thereof, had any material interest, direct or indirect, in any transaction, or proposed transaction since the year ended February 28, 2013, in which the amount involved in the transaction exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at the year-end for the last three completed fiscal years.

Director Independence

We currently act with one director, consisting of Wayne Yamamoto.  We have determined that our directors are not “independent directors” as defined in NASDAQ Marketplace Rule 4200(a)(15).

We do not have a standing audit, compensation or nominating committee, but our entire board of directors acts in such capacities.  We believe that our members of our board of directors are capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting.  The board of directors of our company does not believe that it is necessary to have an audit committee because we believe that the functions of an audit committee can be adequately performed by the board of directors.  In addition, we believe that retaining an independent director who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development.

Item 14.

Principal Accountant Fees and Services 

Our board of directors pre-approves all services provided by our independent auditors.  All of the above services and fees were reviewed and approved by the board of directors either before or after the respective services were rendered.

Our board of directors has considered the nature and amount of fees billed by our independent auditors and believes that the provision of services for activities unrelated to the audit is compatible with maintaining our independent auditors’ independence.

PART IV

Item 15.

Exhibits, Financial Statement Schedules

*

Filed herewith.

**

Furnished herewith.  Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections.

SIGNATURES

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

Pursuant to the requirements of the Exchange Act this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.