PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

4

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

5

Item 3.  Quantitative and Qualitative Disclosures About Market Risk .

6

Item 4 Controls and Procedures

6

PART II – OTHER INFORMATION

Item 1.  Legal Proceedings.

7

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

7

Item 3.  Defaults Upon Senior Securities.

7

Item 4.  Submission of Matters to a Vote of Security Holders.

7

Item 5.  Other Information.

7

Item 6.  Exhibits

7

SIGNATURES

8

2

 3               

USA GRAPHITE INC.

(Formerly MAGNUM OIL, INC.)

(A Development Stage Company)

CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2013

Audited

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO FINANCIAL STATEMENTS

4

USA GRAPHITE INC.

(Formerly MAGNUM OIL INC.)

(A Development Stage Company)

 CONSOLIDATED BALANCE SHEETS

Unaudited

May 31, 2013

February 28, 2011

Audited 

ASSETS

CURRENT ASSETS

Cash

$

-

$

-

Prepaid Expenses

16,506

-

16,506

-

FIXED ASSETS

3,780,000

3,780,000

TOTAL ASSETS

$

3,796,606

$

3,780,000

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT  LIABILITIES

Accounts payable and accrued liabilities

$

27,986

$

24,141

Note Payable

43,167

42,692

Loans from Related Party

162,571

129,841

TOTAL CURRENT LIABILITIES

$

233,723

$

196,674

STOCKHOLDERS' DEFICIT

Capital stock

Authorized

10,000,000 preferred shares, par value $0.001 par value

800,000,000 shares of common stock, $0.001 par value

        129,400,000 shares of common stock (169,400,000 on Feb 29, 2012)

$

129,400

$

129,400

        Additional Paid in Capital

18,715,600

18,715,600

Deficit accumulated during the development stage

(15,282,217)

(15,261,674)

TOTAL STOCKHOLDER'S EQUITY/(DEFICIT)

$

3,562,783

$

3,583,326

TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY/(DEFICIT)

$

3,796,506

$

3,780,000

The accompanying notes are an integral part of these financial statements

F-1               

USA GRAPHITE INC.

(Formerly MAGNUM OIL INC.)

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited

Cumulative results

3 months

3 months

from inception

ended

ended

(December 13, 2005) to

May 31, 2013

May 31, 20122

May 31, 2013

EXPENSES

Office and general

$

8,224

$

1,885

$

15,087,793

Professional Fees

11,845

15,975

120,732

Total Expenses

$

20,069

$

17,860

$

15,214,525

Operating Loss

(20,069)

(17,860)

(15,208,525)

Other Losses

Interest Expense

(475)

(475)

(5,483)

Foreign Currency transaction loss

-

-

(120)

Net Loss

(475)

(475)

(5,602)

Net Loss from continued operations

(20,543)

(18,335)

(15,214,127)

Discontinued Business

-    

-    

(151,510)

Forgiveness of Debt

-    

-    

83,420

Total other (Expenditure) Income

-    

-    

(68,090)

NET LOSS

$

(20,543)

$

(18,335)

$

(15,282,217)

BASIC AND DILUTED LOSS PER COMMON SHARE - DISCONTINUED OPERATION

$

-    

$

-    

WEIGHTED AVERAGE NUMBER OF COMMON     SHARES OUTSTANDING

129,400,000

169,400,000

The accompanying notes are an integral part of these financial statements

 F-2               

USA GRAPHITE INC.

(Formerly MAGNUM OIL INC.)

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

From inception (December 13, 2005) to May 31, 2013

Unaudited

Deficit

Common Stock

accumulated

Accumulated

Additional

during the

Other

Number of

Paid-in

development

Comprehensive

shares

Amount

Capital

stage

Income(loss)

Total

Common stock issued for cash at $0.000065

per share on December 14, 2005

77,000,000

$

77,000

$

(72,000)

$

-   

$

-   

$

5,000

Net loss, February 28, 2006

(983)

(983)

Foreign currency translation adjustments

34

34

Balance, February 28, 2006

77,000,000

$

77,000

$

(72,000)

$

(983)

$

34

$

4,051

Stock issued for cash during the quarter

August 31, 2006 @$0.00065 per share

92,400,000

92,400

(32,400)

60,000

Net loss, February 28, 2007

-   

-   

Foreign currency translation adjustments

2,683

2,683

Balance, February 28, 2007

169,400,000

$

169,400

$

(104,400)

$

(983)

$

2,717

$

66,734

Net loss, February 28, 2008

(52,058)

(52,058)

Foreign currency translation adjustments

350

350

Balance, February 28, 2008

169,400,000

$

169,400

$

(104,400)

$

(53,041)

$

3,067

$

15,026

Net loss, February 28, 2009

(75,309)

(75,309)

Foreign currency translation adjustments

5,988

5,988

Balance, February 28, 2009

169,400,000

$

169,400

$

(104,400)

$

(128,350)

$

9,055

$

(54,295)

Net loss, February 28, 2010

(45,238)

(45,238)

Foreign currency translation adjustments

(6,360)

(6,360)

Balance, February 28, 2010

169,400,000

$

169,400

$

(104,400)

$

(173,588)

$

2,695

$

(105,893)

Net loss, February 28, 2011

23,538

23,538

Foreign currency translation adjustments

(2,695)

(2,695)

Balance, February 28, 2011

169,400,000

$

169,400

$

(104,400)

$

(150,050)

$

-

$

(85,050)

Net Loss,  February 29, 2012

(54,722)

(54,722)

Balance,  February 29, 2012

169,400,000

$

169,400

$

(104,400)

$

(204,772)

$

-

$

(139,722)

Common stock retired December, 2012

(77,000,000)

(77,000)

77,000

-

- 

-

Common stock issued December, 2012

   37,000,000

   37,000

18,743,000

-

-

18,780,000

Net loss, February 28, 2013 

(15,056,902)

    (15,056,902)

-

Balance, February 28, 2013       

129,400,000  

129,400  

  18,715,600

   (15,261,674)

-

 3,583,326

Net Loss, May 31, 2013

(20,543) 

-

    (20,543) 

 Balance 

  129,400,000    

129,400

18,715,600

 (15,282,217) 

-

3,562783

 F-3               

USA GRAPHITE INC.

(Formerly MAGNUM OIL INC.)

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

3 months

3 months

December 13, 2005

ended

ended

(date of inception) to

May 31, 2013

May 31, 2012

May 31, 2013

 OPERATING ACTIVITIES

Net loss

$

(20,543)

$

(18,335)

$

(15,282,217)

Adjustment to reconcile net loss to net cash

used in operating activities

Forgiveness of debt

(83,420)

Depreciation

-

2,825

Stock issuance for compensation

15,000,000

Loss on Disposition of Assets

-    

-

4,607

Increase in Prepaid Expenses

(16,506)

2,663

(16,506)

Foreign Transaction loss

-    

-

696

Increase (decrease) in accrued expenses

3,845

10,852

111,408

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

$

(33,205)

$

(4,820)

$

(262,608)

INVESTING ACTIVITIES

Purchase of fixed assets

-    

-    

(11,468)

Disposition of fixed assets

-    

-

3,337

NET CASH PROVIDED BY INVESTING ACTIVITIES

$

-    

$

-

$

(8,131)

FINANCING ACTIVITIES

Proceeds from sale of common stock

-    

-    

2,200

Additional paid-in capital

-    

-    

62,800

Note Payable

475

475

43,167

Loan from related parties

32,730

1,500

162,572

NET CASH PROVIDED BY FINANCING ACTIVITIES

$

33,205

$

1,975

$

270,739

NET INCREASE ( DECREASE) IN CASH

$

-  

$

(2,845)

$

-

CASH, BEGINNING OF PERIOD

$

-   

$

2,935

$

-

CASH, END OF PERIOD

$

-   

$

90

$

-

Supplemental cash flow information and noncash financing activities:

Cash paid for:

Interest

$

-    

$

-    

$

-    

Income taxes

$

-    

$

-    

$

-    

The accompanying notes are an integral part of these financial statements

 F-4               

USA GRAPHITE, INC. (Formerly MAGNUM OIL, INC.) (the “Company”) was incorporated under the laws of the State of Nevada on December 13, 2005. The Company is in the development stage. Its activities to date have included capital formation, organization and development of its business plan. The Company has commenced operations. On April 12, 2012 the company changed its name to USA Graphite, Inc.

The Company operated through its lone subsidiary: PTM Publications Sdn Bhd, a Malaysian Corporation.

The Company decided to cease the operation of subsidiary in January 2011.

USA GRAPHITE, INC. (the parent company) is now a holding company.

Basis of Accounting

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

Cash Equivalents

The 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

The 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.

Mineral Property Costs

The Company has been in the exploration stage since its acquisition of mining option on November 19, 2012 and has not yet realized any revenues from its planned operations.  All exploration expenditures are expensed as incurred.  Costs of acquisition and option costs of mineral rights are capitalized upon acquisition.  Mine development costs incurred to develop new ore deposits, to expand the capacity of mines, or to develop mine areas substantially in advance of current production are also capitalized once proven and probable reserves exist and the property is a commercially mineable property.  Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations.

If the Company does not continue with exploration after the completion of the feasibility study, the mineral rights will be expensed at that time.  Costs of abandoned projects are charged to mining costs including related property and equipment costs.  To determine if these costs are in excess of their recoverable amount  periodic evaluation  of  carrying  value of capitalized  costs and any related  property and equipment  costs are based upon expected future cash flows and/or estimated salvage  value  in  accordance  with  Accounting   Standards Codification (ASC) 360-10-35-15, Impairment or Disposal of Long-Lived Assets.

Recent Accounting Pronouncements

The 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.

 F-5               

NOTE 5 - MINING OPTION AGREEMENT

On November 19, 2012, the Company entered into a Property Option Agreement with Nevada Minerals Holdings, Inc. Pursuant to the terms and conditions of the Option Agreement, NV Minerals shall grant the Company with the right and option to acquire 100% of the mining interests in that certain Property known as the Blue Wing Mountains Graphite Project which is comprised of a total 1,985 acres and is located in Pershing County of the State of Nevada. In order to exercise the Option, the Company shall be required to: (i) pay an initial cash payment of $50,000 to NV Minerals; (ii) issue an aggregate 5,000,000 restricted shares of the Company’s common stock to NV Minerals; (iii) pay an additional aggregate payment of $450,000 over a three (3) year period; and (iv) pay a Royalty to NV Minerals equal to 2% of the net smelter returns, per the terms and conditions of the Option Agreement. The Company 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 the Company shall have a one-time right to purchase 50% of the Royalty in the Property for $500,000. Pursuant to the Option Agreement, NV Minerals has agreed to enter into an 18 month voluntary lock up agreement for all of the shares it will receive upon execution of the Option Agreement.

On December 7, 2012, the Company entered into an Option Agreement with Nevada Minerals Holdings, Inc. Pursuant to the terms and conditions of the Agreement, NV Minerals shall grant the Company with the right and option to acquire 100% of the mining interests in that certain Property known as the Gordon Creek Graphite Property which is comprised of a total of 206 acres and is located in Elko County of the State of Nevada. In exchange, the Company is required to: (i) pay an aggregate payment of 200,000 over a 4 year period to NV Minerals; (ii) issue an aggregate of 2,000,000 restricted shares of the Company’s common stock to NV Minerals; and (iii) pay a production royalty to NV Minerals equal to 2% of the net smelter returns, per the terms and conditions of the Agreement.

On January 14, 2013, the Company entered into a Letter of Intent (the “LOI”) with Nevada Minerals Holdings, Inc. (“NV Minerals”). Pursuant to the terms and conditions of the LOI, NV Minerals shall grant the Company 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, the Company is 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 the Company’s 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. As of the Balance Sheet date the shares had not been issued.

As of February 28, 2013, there is a total of $109,543 that has been forwarded by previous officers of the Company and $10,298 by a current officer of the Company; no specific repayment terms have been established.

On December 10, 2012, the Company entered into an Employment Agreement with Wayne Yamamoto. Pursuant to the Agreement, Mr. Smith agreed to serve as Chief Executive Officer of the Company. In exchange, the Company has agreed to: (i) pay Mr. Yamamoto $2,000 per month; and (ii) issue 30,000,000 shares of the Company’s common stock to Mr. Yamamoto. This Agreement is at-will and can be terminated at any time by either the Company or Mr. Yamamoto. On December 5, 2012 the company issued the 30,000,000 common shares for compensation at $0.50 per share.

Wayne Yamamoto, the Company’s sole director and officer, is sole director and officer of Nevada Minerals Holdings, Inc. He has 100% ownership of Nevada Minerals Holdings, Inc. Company entered Mining Option Agreements with Nevada Minerals Holdings, Inc. on November 19, and December 7, 2012. Also, on January 14, 2013, the Company entered into a Letter of Intent (the “LOI”) with Nevada Minerals Holdings, Inc. (See Note 5. Mining Option Agreement).

 F-6               

We did not provide any current or deferred U.S. federal income tax provision or benefit for any of the periods presented because we have experienced operating losses since inception. Accounting for Uncertainty in Income Taxes when it is more likely than not that a tax asset cannot be realized through future income the Company must allow for this future tax benefit.  We provided a full valuation allowance on the net deferred tax asset, consisting of net operating loss carry forwards, because management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carry forward period.

The components of the Company’s deferred tax asset and reconciliation of income taxes computed at the statutory rate to the income tax amount recorded as of are as follows:

                                                                                                                            May 31, 2013

Net operating loss carryforwards                                                                             $15,282,217

Gross deferred tax assets                                                                                         $  5,348,776   

Valuation allowance                                                                                                $ (5,348,776)

Net deferred tax assets                                                                                            $        0

NOTE 11 - NET OPERATING LOSSES

As of May 31, 2013, the Company has a net operating loss carryforwards of approximately $15,282,217. Net operating loss carryforward expires twenty years from the date the loss was incurred.

NOTE 12 - STOCK TRANSACTIONS

Transactions, other than employees’ stock issuance, are in accordance with ASC 505. Thus issuances shall be accounted for based on the fair value of the consideration received. Transactions with employees’ stock issuance are in accordance with ASC 718. These issuances shall be accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, or whichever is more readily determinable.

On December 14, 2005, the company issued a total of 22,000,000 shares of $0.000455 par value common stock as founder's shares to Jasmin Bin Omar Jayaseelan, Jefferi Bin Omar Jayaseelan and Cheryl Lim Phaik Suan, all of whom are officers and directors of the company. Mr. Jasmin Jayaseelan and Mr. Jefferi Jayaseelan received 8,800,000 share each, and Ms. Lim received 4,400,000 shares. The shares were issued in exchange for cash in the aggregate amount of $5,000.

In August 2006, the company completed an offering of shares of common stock in accordance with an SB-2 registration statement declared effective by the Securities and Exchange Commission on May 4, 2006. The company sold 26,400,000

shares of common stock, par value $0.001, at a price of $0.0227 per share to approximately 32 investors. The aggregate offering price for the offering closed in August 2006 was $60,000, all of which was collected from the offering.

On May 23, 2010 the company received approval from FINRA for a forward split of common share of 22:1.

On April 17, 2012 the company received approval from FINRA for a forward slit of 3.5:1.  All share amounts have been restroactively adjusted for all periods presented.

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. None were previously authorized.

On December 7, 2012, 30,000,000 shares were issued to the president at $0.50 per share, Mr. Wayne Yamamoto in exchange for services, and 7,000,000 shares to Nevada Mineral Holdings, of which 5,000,000 were at a value of $0.50 per share and 2,000,000 were at a value of $0.64 per share.

On December 14, 2012 77,000,000 restricted shares held by the previous president, Patrick DeBlois, were retired and returned to Treasury.

As of May 31, 2013, the Company had 129,400,000 shares of common stock issued and outstanding.

NOTE 13 – STOCKHOLDERS’ EQUITY

The stockholders’ equity section of the Company contains the following classes of capital stock as at May 31, 2013:

Common stock, $0.001 par value: 800,000,000 shares authorized; 129,400,000 shares issued and outstanding.

Preferred stock, $0.001

NOTE 14 – SUBSEQUENT EVENTS

In accordance with ASC 855, Subsequent Events, the Company has evaluated subsequent events through the date of issuance of the consolidated financial statements.  During this period, the Company did not have any material recognizable subsequent events.  

F-7                

5                

 6               

Exhibit

Description

31.1

Certification of the Chief Executive Officer and Chief Financial Officer Pursuant to Rule 13a-14 or 15d-14 of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

EX-101.INS

XBRL Instance Document

EX-101.SCH

XBRL Taxonomy Extension Schema

EX-101.CAL

XBRL Taxonomy Extension Calculation Linkbase

EX-101.LAB

XBRL Taxonomy Extension Label Linkbase

EX-101.PRE

XBRL Taxonomy Extension Presentation Linkbase

EX-101.DEF

XBRL Taxonomy Extension Definition Linkbase

7                

USA GRAPHITE INC.

Date:  August 9, 2013

/s/ Wayne Yamamoto

Wayne Yamamoto

President, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Secretary, Treasurer and Director

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