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EX-21 - EXHIBIT 21 - U S PRECIOUS METALS INCex21.htm
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
x
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
     
   
For the fiscal year ended: May 31, 2013
     
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
For the transition period:
   
Commission file number: 000-50703
 
U.S. PRECIOUS METALS, INC.
(Exact name of registrant as specified in its charter)

Delaware
 
14-1839426
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
     
176 Route 9 North, Suite 306
Marlboro, New Jersey
 
 
07728
(Address of principal executive offices)
 
(Zip Code)
     
 
(732) 851-7707
 
 
(Registrant’s telephone number, including area code)
 
 
(Former name, former address and former fiscal year, if changed since last report)
 
   
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock  $0.00001 par value
 
          (Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes  x No
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. o Yes   x No
 
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. x Yes    o No
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-K (§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). x Yes  o No
 
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 definitions 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
 
Smaller reporting  company
x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  o Yes  x No
 
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s as of the last business day of the registrant’s most recently completed second fiscal quarter: $24,032,444 at November 30, 2012.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. The registrant had 123,681,244 shares of common stock issued and outstanding as of September 6, 2013.

DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933, as amended (the “Securities Act”): None
 
 
 
 

 
U.S. PRECIOUS METALS, INC.
FORM 10-K
MAY 31, 2013
 
TABLE OF CONTENTS
 
 
 
PART I Page
ITEM NO.  
1
BUSINESS
 3
1A
RISK FACTORS 
 8
1B
UNRESOLVED STAFF COMMENTS
 19
2
PROPERTIES
 19
3
LEGAL PROCEEDINGS
 22
4
MINE SAFETY DISCLOSURES 
 23
     
PART II
 
5
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 
 24
6
SELECTED FINANCIAL DATA 
 27
7
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 
 27
7A
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 
 35
8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 
 35
9
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 
 36
9A
CONTROLS AND PROCEDURES 
 36
9B
OTHER INFORMATION 
 37
     
PART III
 
10
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 
 37
11
EXECUTIVE COMPENSATION 
 41
12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 
 44
13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 
 45
14
PRINCIPAL ACCOUNTANT FEES AND SERVICES 
 47
     
PART IV
 
15
EXHIBITS, FINANCIAL STATEMENT SCHEDULES 
 48
 
SIGNATURES
 80
 
 
 
1

 
 
NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements. This annual report on Form 10-K (this “Annual Report”) contains certain forward-looking statements that are subject to risks and uncertainties. The statements contained in this Annual Report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used in this Annual Report, the words “anticipate,” “believe,” “plan,” “target,” “estimate,” “intend,” “expect” and similar expressions are intended to identify such forward-looking statements. Such forward-looking statements include, but are not limited to, statements regarding our strategy, future plans for exploration and production, future expenses and costs, future liquidity and capital resources, and estimates of mineralized material. All forward-looking statements in this Annual Report are based upon information available to our management on the date of this Annual Report.
 
Forward-looking statements are subject to a number of risks and uncertainties and there can be no assurance that such statements will be accurate. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may differ materially and adversely from those described herein as anticipated, believed, planned, targeted, estimated, intended or expected. Although we believe the assumptions underlying and expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or achievements. Actual results could differ materially and adversely from those discussed in this Annual Report.
 
Factors that could affect the accuracy of our forward-looking statements include, but are not limited to, those factors discussed under “Item 1A. Risk Factors.” More broadly, these factors include, but are not limited to:
 
-  
Our ability to raise capital;
-  
Our auditors have expressed a going concern opinion;
-  
Our current financial condition which reflects significant  debt;
-  
Dilution resulting from additional funds;
-  
Lack of revenues;
-  
Limited geological work performed on our properties;
-  
No proven or probable reserves;
-  
Cost of exploration and exploitation;
-  
Changes in exploration and overhead costs;
-  
Access to and availability of materials, equipment, supplies, labor and supervision, power and water;
-  
Results of future feasibility studies, if any;
-  
Risks inherent in doing business in Mexico;
-  
Environmental concerns;
-  
Interpretation of drill hole results and the geology, grade and continuity of mineralization;
-  
Uncertainty of mineralized material estimates and timing of development expenditures;
-  
Commodity price fluctuations; and
-  
Existing litigation in Mexico.

We qualify all of our forward-looking statements by the cautionary statements listed above, as well as those factors described under “Item 1A. Risk Factors.” The list above, together with the factors described under “Item 1A. Risk Factors,” is not exhaustive of the factors that may affect the accuracy of our forward-looking statements. You should read this Annual Report completely and with the understanding that our actual future results may be materially and adversely different from what we expect. These forward-looking statements represent our beliefs, expectations and opinions only as of the date of this Annual Report. Except as required by applicable law, including the securities laws of the United States, we assume no obligation to update any such forward-looking statements.
 

 
2

 
PART I

ITEM 1.
BUSINESS
 
Summary Of Business
 
U.S. Precious Metals, Inc. (OTC-QB: Symbol “USPR”) was incorporated in the State of Delaware on January 21, 1998. As used herein, “ we ,” “ us ,” “ our ,” the “ Company ” or “ USPR ” mean U.S. Precious Metals, Inc. and U.S. Precious Metals de Mexico, S.A. de C.V. (our “ Mexican Subsidiary ”) unless otherwise indicated. We are an exploration stage company engaged in the acquisition, exploration and development of mineral properties. We focus on gold, silver and copper primarily located in the State of Michoacán, Mexico where we own exploration and exploitation concessions to approximately 37,000 contiguous acres of land (the “Solidaridad Property”). Our mining concessions grant us the right to explore and exploit the minerals found in the ground pursuant to the regulations, rules and directives imposed by the Mexican government. See “Item 2. Properties” for more information about our mining concessions.
 
Geology and Mineralization
 
The Solidaridad Property is located within the geographic region of southern Michoacán referred to as Tierra Caliente and south of the Trans-Mexican Volcanic Belt. This geographic region is characterized by rugged volcanic mountain terrain.
 
Our drilling programs have identified a sedimentary sequence consisting of phyllites and schists on the surface. The sedimentary sequence is believed to be Cretaceous/Tertiary in age. Below the metasediments are black shales and mudstones with interbedded volcanic dikes and sills. The entire sequence is dipping approximately 50 degrees. The property is heavily faulted. Quartz sulfide veins also exist, frequently concordant with the sedimentary units and are enriched in sulfide mineralization consisting mainly of pyrite and chalcopyrite in varying proportions. Galena and sphalerite occur infrequently. Gold appears to be more closely associated with the pyrite while the silver is associated with the chalcopyrite. Gold, silver and copper have been identified in assays samples; however, no petrographic or mineralogic study of the ore has been completed to date.
 
Prior Exploration Activities
 
The property was discovered in 1995 by La Esperanza de Oro, SA de CV. (“La Esperanza”) after a favorable report by their geologist. Exploration on the property was conducted by La Esperanza in 1996 and M.I.M. Holdings (now Xstrata) (“M.I.M.”) in 1997 – 1998. Geochemical soil surveys by La Esperanza showed anomalous ore grade readings for gold, silver and copper. The anomalies extended out several thousand feet both north and south of the workings. M.I.M. also identified large coincident gold-in-soil and induced-polarization anomalies, which broadly define a mineralized area measuring 3 kilometers north-south by 500 meters east-west. M.I.M. identified several NE/SW trending mineralized structures within this area, and tested them with 21 reverse circulation (RC) drill holes.  Most of the drill holes reached depths of only 150 meters. The drilling identified an area known as the Main Zone and indicated gold-copper-silver mineralization. Based on M.I.M.’s drilling, which was limited to depths of 150 meters, the Main Zone suggests 3 million tons of mineralized material grading 3.0 g/t gold, 20 g/t silver, and 0.5% copper. Two other areas of mineralization identified by M.I.M. include the North Zone, which lies 300 meters north of the Main Zone, and Cuendeo, which lies 2 kilometers to the south. Little is known of the sampling methods made by La Esperanza or M.I.M. Holdings. We have not substantiated their findings and do not currently have the funding to do so.
 
Present Condition of Our Property
 
To date, we have invested approximately $2,091,000 in our preliminary determinations of mineralized material located on the Solidaridad Property, which includes two core drilling programs conducted in 2008 and 2010.
 
 
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As part of our 2008 core drilling program, we completed fourteen drill holes within an area of approximately five acres. Ten of the drill holes demonstrated significant mineralized material, of which four holes twinned the M.I.M. RC drill holes, and confirmed the prior M.I.M. results. The remaining six drill holes expanded the Main Zone, and provided information to assist in calculating a resource estimate. Additional drilling in this area will be necessary in order to provide an accepted resource estimate. Four of the drill holes did not demonstrate significant results however they did provide parameters of the mineralized zones. As a result of this drilling program, we determined that gold, silver and copper are present in the drilled portion of the Solidaridad Property. This five acre area drilled in 2008 represents approximately 0.00135% of the Solidaridad Property (the “Explored Area”), meaning approximately 99.965% of the Solidaridad Property remains unexplored (the “Unexplored Area”).
 
Based on the results of the 2008 drilling campaign, the Company’s Board of Directors decided that a second phase of drilling was appropriate to understand more about the mineral occurrence within the concessions. The second phase was initiated in April 2010 with plans to drill an additional 10,000 meters. We completed 11 additional drill holes or approximately 3,000 meters in the 2010 drilling campaign. Our drilling program was reduced due to lack of funds at the time. Our drilling focused on defining the previously discovered mineralized zones from 2008 and expanding to new areas and targets that met specific guidelines. This approach has resulted in the discovery of additional zones of mineralized material.  Of the 11 drill holes, we believe that 2 important drill holes (intercepts) changed our drilling strategy for our next drilling campaign.   One drill hole located approximately 200 meters south of the Main Zone and referred to as the “Southern Extension,” intersected a 3 meter section of sulfide ore approximately 600 feet below the valley floor.  Previous drilling was not conducted at these depths.  A second core hole was drilled between the North Zone identified by M.I.M. and the Main Zone to investigate whether these two zones (approximately 1 kilometer apart) are connected at depth.  Mineralized material was intersected in the second hole but additional drilling is required to define the mineralized zone that possibly connects the North Zone and Main Zone. The results of the 2010 drilling campaign further indicate that gold, silver and copper are present on a portion of the Solidaridad Property, and that additional exploration on the property is warranted.

As mentioned, we have completed a total of twenty five drill holes. Of the total, five holes have not shown significant mineralization.  As part of our core drilling program approximately 7,300 meters of core samples were produced. The core samples are sent to our core laboratory in Morelia where the samples are logged in detail and mineralized intercepts are sawed and sampled. These processed samples are then shipped to ALS Chemex Laboratory in Guadalajara, Mexico, where the core is processed, prepared and shipped to facility in Vancouver, Canada. The information from the core logs and assays are then plotted on cross sections and plan maps are generated by the geologic staff and the data is entered into a computer modeling program so that analyses can be made by our staff
 
During the later part of fiscal 2010 and through the current fiscal year, we were unable to raise sufficient funds to complete the entire proposed 2010 drill program. During the current fiscal year, we also experienced a substantial change in management. Our current management believes that our property is highly prospective and will continue to invest resources into the exploration of the Solidaridad Property. Subject to the availability of funds, we expect to further define through surface exploration and additional drilling the mineral potential of the Explored Area, as well as determine whether the Unexplored Area contains mineralized material.  Proposed future exploration would include mapping and sampling of the Unexplored Area designed to increase our understanding of any mineralized material present. To help us determine future drill locations, we would enter data about our current samples into a computer modeling program. We currently expect to focus our future exploration and drilling program on three areas which we refer to as the Main Zone, the North Zone and Cuendeo. We have identified these three areas based on a number of data points, including surface samples taken during 2008. However, we will need to conduct further exploration and field mapping before we finalize our decisions as to target locations.
 
Our proposed exploration and drilling strategy has two components: (i) definition drilling designed to increase our understanding of any mineralized material located on the Explored Area; and (ii) exploratory drilling on targets generated by field mapping, soil surveys and stream sediment surveys on the Unexplored Area.
 
 
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We also may engage mining professionals as consultants and/or employees to survey the property, apply industry standard methodologies and to develop and implement a business plan appropriate for the size of the Solidaridad Property as well as any mineralized material identified during the exploration process.  We can not predict the likely results of our efforts.
 
We believe that an expanded exploration and possibly a drilling program is currently our best option for increasing the value of our Company. However, we have no revenues, our stock is thinly traded, and we believe our stock price does not reflect the true value of our Company. These factors limit our ability to obtain financing. Therefore, in an effort to generate revenue to continue our operations and to support our exploration and drilling program on the Solidaridad Property, we also may consider a small exploitation program on the Explored Area. In order to implement such exploitation program, we will be required to raise sufficient funds. On May 22, 2013, we entered into a Mining Services Agreement with Mesa Acquisitions Group, LLC, a Florida limited liability company (“Mesa Acquisitions”), in association with Alba Petroleos De El Salvador Sem De CV, a Venezuelan company. Under the agreement, Contractor has agreed to perform certain mining services on a portion of the Company’s Mexican mining concessions (See Item 7 Management’s Discussion And Analysis Of Financial Condition And Results Of Operations – Recent Events”). While we have not commenced an exploitation program at this time, we have the legal and functional capability to do so, including the required exploitation permit from the Mexican government. (See “Government Regulations and Permits” below for a more detailed discussion of the regulations, rules and directives imposed by the Mexican government). We believe a more comprehensive understanding of the estimated mineralized material on the property and a Prefeasibility Study, followed by a Feasibility Study, would allow the Company more options as we look to monetize the value of the mineralized materials. The Prefeasibility Study is an industry standard report that would assess our estimates of mineralized material by evaluating and analyzing the core, assay results, maps, ore calculations, metallurgical testing and geologic data against accepted standards. This study will substantiate or question the validity of our exploration data. If our data is substantiated and we have sufficient funding, we currently plan to move toward producing a Feasibility Study. A Feasibility Study would analyze the potential economics of exploiting the mineralized material from the Solidaridad Property, the infrastructure necessary to mine and produce metals, the available markets for the metals, the taxation requirements and the environmental and socio-economic impact for the State of Michoacán, Mexico. We believe this study would provide sufficient information about the potential value and exploitability of the mineralized material to assist us in determining whether we could seek bank financing or additional debt or equity investment through the public markets and on what terms.
 
Our options for our mining property may include, but are not limited to, entering into a joint venture with an operating company, including Mesa Acquisitions as described herein, permitting an operating company to undertake exploration work at the Solidaridad Property, seeking equity or debt financing (including borrowing from commercial lenders) or a sale of the Company or its assets. Of course there can be no guarantee that we will be able to raise sufficient capital to execute our current business plan or remain in business, or that if we do obtain sufficient funding, that our estimates of mineralized material will increase or that circumstances or market conditions will be sufficient to allow us to benefit from any of these options.
 
We have determined there is sufficient access to and from the Solidaridad Property as well as between the Solidaridad Property and regional ports, although we will have to develop additional infrastructure in order to access the entire Solidaridad Property and to engage in meaningful exploration and drilling. There is currently limited or no infrastructure on the Solidaridad Property. Additional information on the necessary infrastructure for the Solidaridad Property will be determined through development of our mining activities. We believe that in Morelia, which is the city closest to the Solidaridad Property, we will have sufficient access to personnel and supplies to support our expanded exploration and drilling operations as well as our planned exploitation program. We have not yet drilled any wells in an attempt to locate water on the Solidaridad Property. However, water was located within three feet of the surface in drill hole number one of our 2008 campaign. The water level in drill hole number one fluctuates but generally remains close to the surface, which we believe indicates that water may lie close to the surface. The local climate is conducive to year-round operations and is not expected to pose any significant barriers to our exploration and drilling program or our planned exploitation program. During 2010, a heavy rainfall washed out access roads to the claim sites and created water drainage problems, therefore we made road improvements to allow access to the sites. We have made limited road improvements to address the water drainage problems included creating some concrete drainage ditches and water sumps. We still need to build more roads to access other areas targeted for exploration and drilling. We will need additional funding to complete roads and drill paths moving forward.
 
 
5

 
If we raise sufficient funds to complete an on-site metallurgical laboratory, we expect to transition our metallurgical testing of the ore from outside laboratories to an on-site laboratory. We have a limited laboratory in Morelia that includes two pilot plants. Additional laboratory equipment is necessary to complete the Lab.  

In June 2011, we completed a Technical Report on its mining property located in Michaocan, Mexico (“Technical Report”). The Technical Report is entitled PRECIOUS AND BASE METALS DEPOSIT AT LA SABILA RANCH IN SOUTHERN MICHOACAN, MEXICO. The Technical Report has been authored jointly as Qualified Persons by Michael Floersch of Applied Minerals, Inc., Thompson Falls, Montana and Betty Gibbs of Gibbs Associates, Boulder, Colorado. The Company believes that the Technical Report is compliant with National Instrument 43-101Standards of Disclosure for Mineral Projects implemented by the Canadian Securities Administrators, however, the Company has not filed its report with any Canadian authority to determine compliance. Moreover, the Technical Report has not been reviewed and/or accepted by any Canadian or US regulatory authority. Please refer to the Company Form 8-K filed on June 9, 2011 or to the Company’s website for a complete copy of the Technical Report (usprgold.com).
 
Company Background
 
We were incorporated in the State of Delaware on January 21, 1998 as a wholly owned subsidiary of American International Ventures, Inc. (“American International”). On May 9, 2002, the board of directors of American International declared a dividend, in the form of our common stock to be issued to its shareholders of record on such date. On the record date of such dividend, American International had 274 shareholders of record. The ratio of common shares of the Company received by each American International shareholder was one share of Company common stock for each 10 shares of American International common stock held by such record owner. On or about June 10, 2004, a total of 1,961,184 shares of common stock were issued to the shareholders of American International on the record date. These shares represented all of the issued and outstanding capital stock of the Company on such date. American International did not retain any shares of our common stock.
 
In March 2002, we entered into an oral arrangement with the owners of a mining property located in Mexico known locally as the Solidaridad mining claims. At the time, little geological information was known about the property to American International other than information collected by local residents. Based upon available information, the board of directors of American International determined that they were more interested in identifying mineral properties in the United States that had proven or probable resources, and were not interested in properties outside the United States requiring significant exploration work. Consequently, the board of directors of American International determined to separate the two companies by declaring the stock dividend discussed above so that each company could focus exclusively on it respective business.
 
On March 5, 2003, we formed our Mexican Subsidiary. Virtually all of our activities take place in Mexico through our Mexican Subsidiary.
 
Employees
 
Our directors and officers devote such time and attention as is required to the business and affairs of the Company. One of our directors is employed by the Company on a part time basis. We also employ three Mexican nationals as permanent, full time employees of the Mexican Subsidiary.
 
Competitive Business Conditions
 
The exploration for, and the acquisition of gold, silver and copper properties, are subject to intense competition. Due to our limited capital and personnel, we are at a competitive disadvantage compared to other companies with regard to exploration and, if warranted, development of the Solidaridad Property. Our present limited funding means that we are currently unable to compete for additional properties to be explored and developed. We believe the competition in our sector will continue to be intense in the future, including the competition for funding.
 
The availability of funds for exploration is sometimes limited, and we may find it difficult to compete with larger and well established companies for capital. Our inability to develop the Solidaridad Property due to a lack of funding, even if such development is warranted, would have a material adverse effect on our operations and financial position.
 
6

 
 
Governmental Regulations and Permits
 
In connection with our mining and business activities in Mexico, we must comply with all regulations, rules and directives imposed by the Mexican government. We are subject to extensive Mexican federal, state and local laws and regulations governing the protection of the environment, including laws and regulations relating to protection of air and water quality, hazardous waste management and mine reclamation as well as protection of endangered or threatened species. The department responsible for environmental protection in Mexico is SEMARNAT, which is similar to the United States Environmental Protection Agency. SEMARNAT has broad authority to shut down and/or levy fines against facilities that do not comply with its environmental regulations or standards. Potential areas of environmental consideration for mining companies, including ours if we are successful in commencing mining operations, include, but are not limited to, acid rock drainage, cyanide containment and handling, contamination of water courses, dust and noise.
 
Prior to the commencement of any exploitation program, we will secure various regulatory permits from federal, state and local agencies. These government and regulatory permits generally govern the processes being used to operate, the stipulations concerning air quality and water issues, and the plans and obligations for reclamation of the properties at the conclusion of operations. Regulations require that an environmental impact statement, known in Mexico as a Manifiestacion de Impacto Ambiental (“MIA”), be prepared by a third-party contractor for submission to SEMARNAT. We have submitted our MIA to SEMARNAT for their review and it has been approved. Studies required to support the MIA include a detailed analysis of the following areas, among others: soil, water, vegetation, wildlife, cultural resources and socio-economic impacts. The MIA has only been submitted and approved with respect to a small portion of the Solidaridad Property. We plan to submit a MIA for other portions of the Solidaridad Property depending upon obtaining sufficient funding.
 
We have obtained, and will obtain at the appropriate time, environmental permits, licenses or approvals required for operations. We are not aware of any material violation of environmental permits, licenses or approvals issued with respect to our operations.
 
Likewise, we must comply with all mining regulations imposed by the Mexican government, including the periodic filing of mining work reports and the payment of surface taxes with respect to our mining concessions. The department responsible for all mining activities is the Ministry of Economy through its General Mining Bureau Dirección General de Minas. The General Mining Bureau issues all mining permits, licenses and approvals required with respect to mining concessions. All mining companies, agreements, resolutions and other rights and obligations related to mining concessions have to be recorded before the Public Registry of Mining Registro Publico de Mineria. We are not aware of any material violation of mining regulations, permits, licenses or approvals issued with respect to our mining concessions.
 
In connection with our business activities in Mexico, under Mexican law, all Mexican corporations in which foreign investors participate as shareholders, regardless of the amount of the investment, must be registered before the National Registry of Foreign Investment Registro Nacional de Inversiones Extranjeras (“NRFI”) and shall comply with the periodical obligations and filings provided by the Foreign Investment Law Ley de Inversión Extranjera (“FIL”). We have registered our Mexican Subsidiary before the NRFI and complied with all obligations under the FIL. In addition, Mexican law imposes certain corporate obligations to all Mexican companies under the General Law of Commercial Companies Ley General de Sociedades Mercantiles and our Mexican Subsidiary is in compliance of all its corporate obligations imposed by such law.
 
Because we have employees in Mexico, we are also subject to regulations affecting employee pay, benefits and the like. These laws are different in Mexico than they are in the U.S. and can be more costly to the Company.
 
 
7

 

ITEM 1A.
RISK FACTORS
 
RISKS RELATING TO OUR COMPANY
Our business, exploration results and financial condition are subject to various risks and uncertainties, including, without limitation, those set forth below, any one of which could cause a material reduction in the value of our Company or our ability to raise capital or cause our ability to operate in accordance with our current business plan to vary materially and adversely from recent results or from our anticipated future results. An investment in our securities is highly speculative and involves an extremely high degree of risk. Therefore, you should thoroughly consider the risk factors discussed below and elsewhere in this Annual Report before purchasing our securities. You should understand that you may lose all or part of your investment. No person should consider investing who cannot afford to lose their entire investment or who is in any significant way dependent upon the funds that they are investing. The risk factors contained herein are not meant to be exhaustive.

WE ARE AN EXPLORATION STAGE COMPANY WITH LIMITED OPERATING HISTORY
We are an exploration stage company with limited operating history. These two factors make it impossible to reliably predict future growth and operating results. Accordingly, we are subject to all the risks and uncertainties which are characteristic of a relatively new business enterprise, including the substantial problems, expenses and other difficulties typically encountered in the course of its business, in addition to normal business risks.  We face a high risk of business failure because we have commenced extremely limited business operations and have no revenues. We were organized in 1998, have not earned any revenues as of the date of this Annual Report and have had only losses since our inception. We expect to continue to incur losses well into the future. Our activities to date have been limited to organizational efforts, including fundraising, acquiring the Solidaridad Concessions (as defined below), and conducting limited exploration on a small portion of the Solidaridad Property. There is no history upon which to base any assumption as to the likelihood that our business will be successful, and there can be no assurance that we will be able to raise sufficient capital to begin operations, that we will generate significant operating revenues in the future or that we will ever be able to achieve profitable operations in the future. We face all of the risks commonly encountered by other businesses that lack an established operating history, including, but not limited to, the need for additional capital and personnel, and intense competition.

OUR COMPANY HAS LIMITED OPERATING HISTORY MAKING AN EVALUATION OF THE COMPANY DIFFICULT.
The Company has only had limited operations to date and requires additional financing for working capital, exploration and mining initiatives, including its proposed exploration program on the Solidaridad Property.  While the results of an initial geological study conducted by two independent geologists on the property appear to be promising, nonetheless it may be difficult for the Company to attract funding necessary to conduct additional exploration activities on the property.  The Company cannot predict whether its exploration program will be successful.  Moreover, no assurances can be given that, even with a capital infusion, the Company will be able to successfully and profitably develop the Solidaridad Property.

OUR AUDITORS HAVE EXPRESSED A GOING CONCERN OPINION
As shown in the accompanying financial statements, we have experienced continuing losses since Inception (January 21, 1998), and as at May 31, 2013, have a working capital deficit of $3,844,147, accumulated losses of $28,977,646 since Inception (January 21, 1998), recurring negative cash flows from operations and presently do not have sufficient resources to meet our outstanding liabilities or accomplish our objectives during the next twelve months. Accordingly, the opinion of our auditors for the years ended May 31, 2013 and 2012 is qualified and subject to uncertainty as to whether we will be able to continue as a going concern.  This may negatively impact our ability to obtain additional funding that we may require or to do so on terms attractive to us and may negatively impact the market price of our stock.


 
8

 
 
CURRENT FINANCIAL CONDITION AND SHORTFALL OF FUNDING
Our independent registered public accounting firm’s report to our audited financial statements for the fiscal year ended May 31, 2013, indicates there are a number of factors that raise substantial doubt about our ability to continue as a going concern, including the amount of our past due convertible note obligations ($930,923) and a past due liability to our former attorneys ($1,696,253), which collectively total $2,627,176. If we are unable to pay our outstanding debt and continue our exploration and drilling program, it is likely that we will go out of business and our investors will lose all of their investments. We currently have minimal operations and are not generating any revenues.

Pursuit of the Company’s business plan is dependent upon obtaining sufficient funding to support such plan. If we do not obtain sufficient funding, our business will fail. Our current operating funds are insufficient to pay down our debt, complete our planned exploration of the Solidaridad Property or begin a limited exploitation program. Therefore, we will need to obtain additional funding in order to implement our business plan. There is no guarantee that such funding will be available on terms acceptable to us or at all. Additionally, even if we are able to obtain sufficient funding, there can be no assurance that we will be able to successfully implement our plan or that unanticipated expenses, problems or difficulties will not occur which would result in material delays in its implementation.

Our current business plan contemplates that we will incur significant expenses in connection with the exploration and, if warranted, exploitation of the Solidaridad Property. We do not currently have sufficient funds to continue our exploration and drilling program or to commence a small scale exploitation program on the Solidaridad Property. We will require additional funding even to continue our limited mining activities. We will also require additional funding if the costs of our exploration or exploitation, if any, on the Solidaridad Property are greater than anticipated.

We will require additional funding to sustain our business operations. We do not currently have any arrangements for funding and we can provide no assurance to investors that we will be able to find such funding on terms acceptable to us or at all. Obtaining additional funding would be subject to a number of factors, including, without limitation, the market prices for copper, silver and gold, investor acceptance of our business plan, the credibility of our exploration results, investor confidence and interest in our sector generally and our Company in particular and general market conditions. These factors may make the timing, amount, terms or conditions of additional funding unavailable to us.

SIGNIFICANT DEBT OBLIGATIONS
As of May 31, 2013, we have significant current debt obligations.  The amount includes $930,923 in obligations resulting from the issuance of convertible debt instruments during 2009 and 2010 all of which are past due. In addition on May 24, 2011, we settled outstanding litigation with our former attorneys. This settlement requires us to pay, absent certain funding accelerations, a total of $1,614,216 in four equal incremental payments, beginning in May 2012 followed by subsequent payment every 90 days. Prior to the litigation, we entered into a Pledge and Payment Agreements in January 2011 with our former attorneys to secure approximately $2 million in legal fees wherein we pledged and created a lien on our Solidaridad Property in favor of our former attorneys. The agreement also imposed certain other conditions and restrictions on our company and our operations. Our new management initiated litigation against our former attorneys which resulted in the May 2011 Settlement Agreement. We amended our Settlement Agreement and Payment Agreement with our former attorneys on May 23, 2012. As result of the amendment, the payment of the initial installment of $403,554 originally due on May 24, 2012, was extended to July 24, 2012. In addition, commencing May 23, 2012, interest accrued on the amount due, which is $1,614,216, at the rate of 5% per annum. We were unable to make the scheduled payment of $403,554 and accrued interest on July 24, 2012. On October 1, 2012, we entered into a second amendment to our Settlement Agreement and Payment Agreement with our former attorneys effective July 23, 2012. As a result of the second amendment, the date for the payment of the initial installment of $403,554 was extended to December 1, 2012.


 
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We have failed to make this schedule payment on December 1, 2012. Thus, our former attorneys have the ability to avail themselves of all rights and privileges under the existing agreements with us and under the laws of Mexico and the United States. The total balance due to our former attorneys, including accrued interest, at May 31, 2013 was $1,696,253.

In addition, we owe another former attorney the sum of approximately $90,000 under an arbitration award. The attorney has initiated efforts to effect a judgment against the Company.

Consequently, if we are unable to pay our debtholders and/or our former attorneys, we may be required to file for bankruptcy protection.

DILUTION RESULTING FROM OUR FUND RAISING EFFORTS
Since May 31, 2011, new management was successful in raising sufficient funds to enable it to continue meet its minimal operating needs. However, we have incurred significant dilution as a result of these fund raising efforts.   In the future, we will be required to raise significant additional funding to meet our existing debt obligations and to continue with our proposed operations. As a result, we expect to incur significant dilution to our existing shareholders in the future.  

WE DO NOT EXPECT TO GENERATE REVENUES
We are an exploration stage company; therefore, we anticipate that we will continue to incur increased operating expenses into the foreseeable future without realizing any revenues. Consequently, we expect to incur significant losses into the foreseeable future. If we are unable to raise additional funding, we will not be able to continue our operations.
 
RELIANCE ON THIRD PARTY FOR EXPLORATION/DEVELOPMENT EFFORTS
On May 22, 2013, we entered into a Mining Services Agreement with Mesa Acquisitions Group, LLC, a Florida limited liability company (“Contractor”), in association with Alba Petroleos De El Salvador Sem De CV, a Venezuelan company. The agreement provides for the exploration and potential development of a portion of our Solidaridad Property by the Contractor, subject to certain conditions, including the results of the satellite imaging to be conducted. (See “Item 7 Management’s Discussion And Analysis Of Financial Condition And Results Of Operations – Recent Events”). Notwithstanding the positive results of the satellite imaging program, if any, the Contractor’s inability to proceed with the further exploration and/or development of our mining property as required under our agreement for any reason, including financial, will have a negative impact on us and our operations.
 
THE EXPLORATION INDUSTRY IS CAPITAL INTENSIVE AND HIGH RISK
The industry within which the Company expects to engage in is historically capital intensive and of high risk.  The Company’s ability to achieve profitable operations will be dependent upon many factors, including its ability to raise sufficient capital to explore the Solidaridad Property and ability to discover viable and economic mineralized material.  The ability to discover such mineralized materials are subject to numerous factors, most of which are beyond the Company’s control and are not predictable.  Exploration for gold is speculative in nature, involves many risks and is frequently unsuccessful.  Any exploration program entails risks relating to:
 
-  
The ability to discover economic ore deposits;
-  
The subsurface location of economic ore deposits;
-  
The development of appropriate metallurgical processes;
-  
The receipt of necessary governmental approval; and
-  
The construction of mining and processing facilities at any site chosen for mining.

In addition, the commercial viability of a mineral deposit is dependent on a number of factors including:
 
-  
The current market price of the respective commodities;
-  
Exchange rates among the various countries, such as the United States, Mexico and any third party purchaser; and
-  
The particular attributes of the deposit, such as its size, grade and proximity to infrastructure, financing costs, taxation, royalties, land tenure, land use, water use, power use, importing and exporting, and environmental protection.

The effect of these factors cannot be accurately predicted, and the occurrence of any one or more factors could have a material adverse impact on the Company and its proposed operations.

 
10

 
LIMITED GEOLOGICAL WORK HAS BEEN CONDUCTED ON EXISTING MINING CLAIMS THEREFORE THE COMPANY DOES NOT HAVE EVIDENCE THAT ECONOMIC RESOURCES EXIST ON THE PROPERTY
The Company has conducted limited geological work on the Solidaridad Property.  The work consisted of preliminary geological sampling and surveys performed by two independent mining geologists.  In June 2011, we completed a Technical Report on its mining property located in Michaocan, Mexico (“Technical Report”). The Technical Report discloses certain technical information about the Company’s mineral project. Additional exploration work will be required by the Company to determine, whether economic resources exist on the claims, and if such resources do indeed exist, whether they are economically recoverable.  The amount and cost of such exploration work cannot be determined at this time.  No assurances can be given that additional mapping, surveying, and drilling will be sufficient to conclude that economic mineral deposits exist on such claims, and whether such mineral deposits, if any, are recoverable.  Therefore, the Company may be required to conduct additional exploration activities in addition to those proposed herein, the results of which likewise cannot be predicted.  No assurances can be given that the Company will be able to raise additional capital to conduct the additional exploration activities, or that such additional activities will prove successful.

THE SPECULATIVE PRICES OF GOLD, SILVER, AND COPPER MAY ADVERSELY IMPACT COMMERCIALIZATION EFFORTS
As stated above, exploration and production is highly speculative and involves numerous natural risks that may not be overcome by knowledge and experience.  In particular, even if the Company is successful in identifying gold, silver, or copper deposits, for which no assurances can be given, the commercialization will be dependent upon the existing market price for gold, silver, or copper, among other factors.  The market price of gold, silver, and copper has historically been unpredictable, and subject to wide fluctuations.  The decline in the price of gold, silver, or copper could render a discovered property uneconomic for unpredictable periods of time.

THE MINERAL EXPLORATION INDUSTRY IS SUBJECT TO NUMEROUS REGULATIONS WHICH MAY ADVERSELY IMPACT OUR MINING EFFORTS
The mineral exploration and mining industry is subject to numerous statutory and regulatory requirements and controls at various governmental levels.  Regulations can impact the manner and methodology of mining activities undertaken by the Company.  The impact of such regulations cannot be predicted, and may cause unexpected delays, and/or become cost prohibitive, thereby rendering any prospect uneconomic.

The legal and regulatory environment that pertains to the mining industry is uncertain and may change. Uncertainty and new regulations could increase our operating costs and prevent us from exploring and drilling for mineralized material and developing the Solidaridad Property, even if we determine such development is warranted. In addition to new laws and regulations being adopted, existing laws may be applied to mining operations that have not yet been so applied. Any such new laws may increase our operating costs which could have a material adverse effect on our results of operations and financial condition. Changes in regulatory policy could also have a material adverse effect on our exploration and future production activities. Any changes in government policy may result in changes to laws affecting, without limitation:
 
-  
ownership of our concessions;
-  
land tenure;
-  
development of infrastructure;
-  
mining policies;
-  
monetary policies;
-  
taxation;
-  
rates of exchange;
-  
environmental regulations; and/or labor relations.

Any such changes may affect our ability to continue our exploration and drilling program, to undertake mining operations with respect to the Solidiaridad Property in the manner currently contemplated, or our ability to explore or develop future properties. We must take into account the possibility, particularly in Mexico, that future governments may adopt substantially different policies, which might extend to expropriation of assets.

 
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ENVIRONMENTAL AND OTHER RISKS COULD HAVE A MATERIAL ADVERSE IMPACT ON OUR BUSINESS
Mining activities pose certain environmental risks, as well as personal injury risks.  While the Company will attempt to manage its risks, one or more incidents of environmental damage or personal injury resulting from its mining activities could have a material adverse impact on the business of the Company. Our mining operations are subject to environmental regulation by the SEMARNAT, the environmental protection agency of Mexico. If we become subject to onerous government regulations or other legal uncertainties, our business would likely be negatively affected. The government regulates the environmental impacts of mining operations and requires, under certain circumstances, certain environmental permits, work permits, posting of bonds, and the performance of remediation work for any physical or other disturbance to the land or the environment. We may incur significant costs and expenses in connection to comply with such governmental regulations. Depending on market conditions and the options available to us, we may attempt to enter into a joint venture with an operating company or permit an operating company to undertake exploration work on the Solidaridad Property. We may also consider seeking equity or debt financing (including borrowing from commercial lenders) or a sale of the Company or its assets.

WE ARE AN EXPLORATION STAGE COMPANY
We are an exploration stage company and face a high risk of business failure because of the unique difficulties and uncertainties inherent in mineral exploration ventures. Potential investors should be aware of the difficulties normally encountered by mineral exploration companies and the high rate of failure of such companies. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays that could be encountered in connection with our planned exploration and drilling of the Solidaridad Property. These potential problems include, but are not limited to, unanticipated problems relating to exploration and additional costs and expenses that may exceed current estimates. Additional expenditures related to exploration of the Solidaridad Property may not result in the discovery of additional mineralized material. Problems such as unusual or unexpected formations and other conditions are involved in mineral exploration and often result in unsuccessful exploration efforts. If the results of our exploration do not reveal viable commercial mineralized material, we may decide to abandon the Solidaridad Concessions and acquire new concessions for new exploration or terminate our activities all together. The acquisition of additional concessions will be dependent upon us possessing capital resources at that time in order to purchase and/or maintain such concessions. If no funding is available, we may be forced to cease our operations.

WE HAVE NO PROVEN OR PROBABLE RESERVES
We have not established the presence of any proven or probable reserves, as those terms are defined by the U.S. Securities and Exchange Commission (the “SEC”), on the Solidaridad Property. If the Solidaridad Property does not contain mineralized material that we can extract at a profit, any funds spent by us on exploration or development of the Solidaridad Property could be lost. The SEC defines a “reserve” as “that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination.” Any mineralized material discovered by us should not be considered proven or probable reserves.

In order to demonstrate the existence of proven or probable reserves under SEC Guidelines, it would be necessary for us to continue exploration to demonstrate the existence of sufficient mineralized material with satisfactory continuity and then obtain a positive feasibility study that demonstrates with reasonable certainty that the mineralized material can be economically extracted and produced. We have not completed a feasibility study with regard to the Solidaridad Property, nor do we intend to perform such feasibility study until such time as we obtain sufficient funding and it is advisable under our then current business plan. Exploration is inherently risky, the probability of any individual property having reserves is extremely remote and few properties ultimately prove economically successful.

ESTIMATES OF MINERALIZED MATERIAL ARE BASED ON INTERPRETATION AND ASSUMPTIONS WHICH MAY BE UNRELIABLE
Estimates of our mineralized material located on the Solidaridad Property are based on interpretation and assumptions and may yield less under actual conditions than current estimates. Unless otherwise indicated, the mineralized material presented in our filings with the SEC and in press releases and other public statements are based upon estimates made by our consultants. When making determinations about whether to advance any of our projects to production, we must rely upon such estimated calculations as to the mineralized material on the Solidaridad Property. Until the mineralized material is actually mined and processed, any amounts and values can only be considered estimates.

 
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These estimates are imprecise and depend on geological interpretation and statistical inferences drawn from drilling and assay sampling analysis, which may prove to be unreliable. We cannot assure you that the estimates of our mineralized material will be accurate or that we can mine or process this mineralized material profitably.

Any material changes in estimates of our mineralized material could affect the economic viability of the Solidaridad Property and could have a material adverse effect on our operations and financial position. There can be no assurance that minerals recovered in small scale will be recovered at production scale.

OUR OPERATIONS ARE SUBJECT TO PERMITTING REQUIREMENTS
Our operations are subject to permitting requirements which could require us to delay, suspend or terminate our operations. Our operations, including, but not limited to, any exploitation program, require permits from the Mexican government. We may be unable to obtain these permits in a timely manner, on reasonable terms, or at all. If we cannot obtain or maintain the necessary permits, or if there is a delay in receiving these permits, our timetable and business plan for exploration and/or exploitation, if any, of the Solidaridad Property may be materially and adversely affected.

COMPETITION IN THE MINING INDUSTRY IS INTENSE AND WE HAVE LIMITED FINANCIAL AND PERSONNEL RESOURCES WITH WHICH TO COMPETE
Competition in the mining industry is extremely intense in all aspects, including, but not limited to, raising investment capital for exploration and obtaining qualified managerial and technical employees. We are an insignificant participant in the mining industry due to our limited financial and personnel resources. Our competition includes large established mining companies, with substantial capabilities and with greater financial and technical resources than we have, as well as the myriad of other exploration stage companies. As a result of this competition, we may be unable to attract the necessary funding or qualified personnel. If we are unable to successfully compete for funding or for qualified personnel, our mining activities may be slowed, suspended or terminated, any of which would have a material adverse effect on our ability to continue operations.

WE MAY EXPERIENCE SUPPLY AND EQUIPMENT SHORTAGES
We may not be able to purchase all of the supplies and materials we need to continue our mining activities due to shortage of funds, lack of availability or other reasons. This could cause us to delay or suspend operations. Competition and unforeseen limited sources of supplies in the industry could result in occasional spot shortages of supplies, such as explosives, and certain equipment, such as bulldozers, drilling equipment and excavators, that we might need to conduct our mining activities. If we cannot find the supplies and equipment we need, we may have to suspend our operations until we do find the supplies and equipment we need. If we are unable to find the supplies in Mexico but can find them in another location, the cost will increase significantly, as will the time to deliver.

THERE ARE RISKS INHERENT IN DOING BUSINESS IN MEXICO
The Solidaridad Property is located in the State of Michoacán, Mexico. Risks of doing business in a foreign country could materially and adversely affect our results of operations and financial condition. We face risks normally associated with doing business in a foreign country. These risks include, but are not limited to:
 
-  
labor disputes;
-  
invalidity of governmental orders;
-  
uncertain or unpredictable political, legal and economic environments;
-  
war;
-  
civil and political unrest;
-  
crime and security issues including but not limited to drug cartel activity;
-  
property disputes;
-  
changes to existing laws or policies relating to the mining industry that increase our costs;
-  
unpredictable changes in or application of taxation regulations;
-  
delays in obtaining or the inability to obtain necessary governmental permits;
-  
governmental seizure of land or mining concessions;
-  
limitations on ownership;
-  
limitations on the repatriation of earnings;
 
 
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-  
increased financial costs;
-  
import and export regulations, including restrictions on the export of gold, silver and copper; and/or
-  
foreign exchange controls.
 
The occurrence of one or more of these events or a change in existing policy could have a material adverse effect on our cash flows, earnings, results of operations, and financial condition. These risks may limit or disrupt our operations, restrict the movement of funds, impair contract rights, or result in the taking of property by nationalization or expropriation without fair compensation. Finally, Mexico’s status as a developing country may make it more difficult for us to obtain required funding.

WE ARE REQUIRED TO MAKE PAYMENTS TO RETAIN THE SOLIDARIDAD CONCESSIONS
Our ability to retain good title to the Solidaridad Concessions and continue our exploration and drilling program is subject to payment of surface taxes imposed by the Mexican government. The amount of surface taxes is set by regulation and may increase over the life of the concession and include periodic adjustments for inflation. Our failure or inability to pay the surface taxes to the Mexican government may cause us to lose our rights in one or more of our concessions.

OUR CONCESSIONS ARE LOCATED IN A REMOTE AREA
There is extremely limited infrastructure on the Solidaridad Property, which may impair our access to the property. Inclement weather and/or natural disasters may affect the roads surrounding the Solidaridad Property, which may delay or prevent us from conducting our proposed business operations or cause significant damage to costly infrastructure, for which we may or may not be insured. While we plan to conduct our exploration and drilling year round, it is possible that inclement weather and/or natural disasters could delay our mining activities, which could have a material adverse effect on our business, results of operations and financial condition.

DEFECTIVE TITLE TO THE SOLIDARIDAD CONCESSIONS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR EXPLORATION AND EXPLOITATION ACTIVITIES
There are uncertainties as to title matters in the mining industry, and in particular Mexico. We believe we have good title to the Solidaridad Concessions; however, any defects in such titles that cause us to lose our rights in these mineral properties would seriously jeopardize our planned business operations. We have investigated our rights to explore, exploit and develop the Solidaridad Property in manners consistent with industry practice and, to the best of our knowledge, those rights are in good standing. However, we cannot guarantee that the title to or our rights to explore, exploit and develop the Solidaridad Property will not be challenged by third parties or governmental agencies. In addition, there can be no assurance that the Solidaridad Concessions and the Solidaridad Property to which the concessions relate, are not subject to prior unregistered agreements, transfers or claims. Our title may be affected by undetected defects. Any such defects could have a material adverse effect on us.

In the event of a dispute regarding title to the Solidaridad Concessions or any facet of our operations, it will likely be necessary for us to resolve the dispute in Mexico, where we would be faced with unfamiliar laws and procedures. The resolution of disputes in foreign countries can be costly and time consuming, similar to the situation in the United States. However, in a foreign country, we face the additional burden of understanding unfamiliar laws and procedures. We may not be entitled to a jury trial, as we might be in the United States. Further, to litigate in a foreign country, we would be faced with the necessity of hiring lawyers and other professionals who are familiar with the foreign laws. For these reasons, we may incur unforeseen losses if we are forced to resolve a dispute in Mexico or any other foreign country (See Risk Factor - Existing Litigation and Item 3. - Legal Proceedings).

EXISTING LITIGATION
As disclosed herein in Item 3. - Legal Proceeding of this Part, on April 3, 2012, our Mexican subsidiary company, US Precious Metals SA de CV, was served with a lawsuit by Mr. Israel Tentory Garcia (“Plaintiff”) regarding one of our mining concessions. Plaintiff alleges that a $1 million payment was due and payable on or about 2009 under a pre-existing agreement with Plaintiff and others,  and that ownership of the mining concession should revert back to him.

 
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We have retained counsel in Mexico to represent our subsidiary in this matter. We strongly dispute the allegations raised in the lawsuit and intend to vigorously defend our rights to the mining concession. We have filed an answer to the complaint pursuant to which we alleged numerous defects in both fact and law. While we will vigorously defend the lawsuit, we cannot predict the likely outcome of this litigation in the Mexican judicial system. If we are unable to prevail in this matter and the Plaintiff is found to be entitled to the reversion of the concession, such event would have a material adverse impact on us and our plans for this concession.

On May 21, 2013, we were informed by our Mexican counsel that the Court issued a ruling dismissing the lawsuit filed by Plaintiff against our subsidiary, US Precious Metals SA de CV. The Court ruled that the Plaintiff did not prove the claims asserted in the lawsuit, and that our subsidiary is not liable to Plaintiff’s for any of such claims. Our Mexican counsel has informed us that Plaintiff has the right to appeal the ruling, however, we will vigorously contest any such appeal. In June 2013, Plaintiff filed an appeal of the Court ruling described in the preceding sentence and we filed a responsive brief in support of our position. On August 14, 2013, we were informed that the Court dismissed Plaintiff’s appeal without prejudice. According to our Mexican counsel, Plaintiff maintains the right to re-file his lawsuit against our subsidiary, US Precious Metals SA de CV.

RESTRICTED ACCESS TO THE SOLIDARIDAD CONCESSIONS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR EXPLORATION AND FUTURE PRODUCTION ACTIVITIES
There are uncertainties as to our ability to gain access rights to the Solidaridad Property where the Solidaridad Concessions are located. We currently have secured access rights to the portion of the Solidaridad Property where our concessions Solidaridad I, Solidaridad III, and Solidaridad V are located by way of a written agreement entered into by and between our Mexican Subsidiary and the owners of the portion of the Solidaridad Property where these concessions are located. We are in the process of securing, but have not yet secured, access rights to other portions of the Soldiaridad Property, which we plan to do in the future in connection with any decision to begin exploration and/or exploitation of those areas. If we are ultimately unable to receive access, or unable to receive access at a reasonable price, it may affect our ability to explore for, or exploit, mineralized material from those areas and could have a material adverse effect on us.

OUR PRIMARY TARGETS FOR EXPLORATION AND EXPLOITATION ARE SUBJECT TO A TEMPORARY OCCUPANCY AGREEMENT IN FAVOR OF A THIRD PARTY WHICH REQUIRES US TO PAY ANNUAL RENT
Our current primary targets for exploration and exploitation are located on the portion of the Solidaridad Property where our concessions Solidaridad I, Solidaridad III, and Solidaridad V are located. We have secured access rights to the portion of the Solidaridad Property where these concessions are located by way of a Temporary Occupancy Agreement with a third party. This agreement requires us to pay annual rent to the owners of the portion of the Solidaridad Property where these concessions are located. Our failure or inability to pay the annual rent may cause us to lose our right to access the portion of the Solidaridad Property where these concessions are located and could have a material adverse effect on our business operations. Any breach of the agreement by the property owner could also cause costly litigation.

OUR ABILITY TO DEVELOP THE SOLIDARIDAD CONCESSIONS ARE SUBJECT TO THE RIGHTS OF THE EJIDO (LOCAL INHABITANTS)
Our ability to develop the Solidaridad Property are subject to the rights of the Ejido. Ejidos are groups of local inhabitants who are granted rights by the Mexican government to conduct agricultural activities on the surface of the property. Our ability to exploit the mineralized material from the portion of the Solidaridad Property where these concessions are located is subject to making satisfactory arrangements with the Ejido for access and surface disturbances. We must negotiate and maintain a satisfactory arrangement with these inhabitants in order to disturb or discontinue their rights to conduct such agricultural activities. We plan to negotiate such arrangements at such time as we make a decision to begin exploitation of those areas. If we are ultimately unable to successfully negotiate such an arrangement or, if we are successful in negotiating such an arrangement but are ultimately unable to maintain such arrangement, it could impair or impede our ability to successfully exploit the minerals from the portion of the Solidaridad Property where these concessions are located.

 
15

 
MATERIAL LOSSES IN EXCESS OF INSURANCE COVERAGE COULD ADVERSELY AFFECT OUR EXPLORATION AND FUTURE PRODUCTION ACTIVITIES
We have limited insurance against losses or liabilities that could arise from our operations. If we incur material losses or liabilities in excess of our insurance coverage, our financial position could be materially and adversely affected. Mining operations involve a number of risks and hazards, including, without limitation:
 
-  
environmental hazards;
-  
industrial accidents;
-  
metallurgical and other processing problems;
-  
failure of pit walls or dams;
-  
acts of God; and/or
-  
equipment and facility performance problems.

Such risks could have various negative consequences, including, without limitation:
 
-  
damage to, or destruction of, mineral properties or production facilities;
-  
personal injury or death;
-  
environmental damage;
-  
delays in exploration; and/or
-  
monetary losses.
 
Industrial accidents could have a material adverse effect on our future business and operations. We currently maintain general liability insurance and automobile insurance coverage. We cannot be certain the insurance we have in place will cover all of the risks associated with our mining activities or that we will be able to maintain insurance to cover these risks at economically feasible premiums. We also might become subject to liability for pollution or other hazards which we cannot insure against or which we may elect not to insure against because of premium costs or other reasons. Losses from such events may have a material adverse effect on our ability to continue operations.

WE ARE DEPENDENT UPON OUR OFFICERS
The Company is dependent on its current officers, directors, and consultants to effectuate many of the Company’s services and plans for the implementation of the Company’s proposed activities and business.  The Company’s former President and current director has significant experience in the area of exploring for and/or mining precious metals.  None of our officers or board members has made any long term commitment to the Company.  If one or more of these individuals were to resign, there is no guarantee that we could replace them with qualified individuals in a timely or economic manner or if at all.  Investors must be willing to entrust all of the affairs of the Company to current management.

AT THE PRESENT TIME WE ARE UNABLE TO PAY ANY DIVIDENDS
The Company has not paid any cash dividends and does not anticipate paying any cash dividends on its Common Stock in the foreseeable future.  It is anticipated that earnings, if any, which may be generated from operations will be used to finance the continued operations of the Company.  Investors who anticipate the immediate need of cash dividends from their investment should refrain from purchasing any of the securities offered hereby.

FUTURE ISSUANCE OF SECURITIES COULD CAUSE DILUTION TO EXISTING SHAREHOLDERS
The Company has the authority to issue up to 150,000,000 shares of common stock, 10,000,000 shares of preferred stock and to issue options and warrants to purchase shares of our common stock without stockholder approval.  Future issuances of common and preferred stock will dilute the holdings of our existing stockholders and may reduce the market price of our common stock.  Holders of our common stock are not entitled to preemptive.

CERTAIN OF OUR OFFICERS MAY HAVE CONFLICTS OF INTEREST
Certain conflicts of interest exist with respect to management and the operations of the Company, including our recent transaction with Resource Technology Group Corporation.  Although management has committed to devote sufficient time and attention to the affairs of the business, management is not subject to any written agreement regarding such matters.  Consequently, other business interests may arise which could compromise the time and attention devoted by management to the affairs of the Company.

 
16

 
AN ADVERSE EVALUATION OF OUR INTERNAL CONTROLS COULD RESULT IN LOSS OF INVESTOR CONFIDENCE
While we presently believe that we have adequate internal controls over financial reporting, we will be required to evaluate our internal controls under Section 404 of the Sarbanes-Oxley Act of 2002 annually and any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and have a material adverse effect on the price of our common stock. Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we have furnished a report by our management on internal controls for the fiscal year ended May 31, 2010. Such a report contains, among other matters, our assessment of the effectiveness of our internal controls over financial reporting, including a statement as to whether or not our internal controls are effective. This assessment must include disclosure of any material weakness in our internal controls over financial reporting identified by our management. While we believe our internal controls over financial reporting are effective as of the date of this Annual Report, there is no assurance that we can retain that control in the future as our business expands. If we are unable to maintain the effectiveness of our controls, investors could lose confidence in our financial reports and our stock price may decline.

WE INDEMNIFY OUR OFFICERS AND DIRECTORS TO THE FULLEST EXTENT PROVIDED BY LAW
The laws of the State of Delaware permit us to indemnify our directors and officers who were or are parties, or are threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that the person is or was a director or officer of the Company. Our Amended and Restated Bylaws permit us to indemnify our officers and directors against all damages incurred in connection with our business to the fullest extent provided or allowed by law. These indemnification provisions may require us to use our limited assets to defend our directors and officers against claims, including claims arising out of their negligence, poor judgment or other circumstances.

WE ARE SUBJECT TO ADVERSE CHANGES IN CURRENCY VALUES
Since most of our expenses are paid in Mexican pesos, and our investment capital is in United States dollars, we are subject to adverse changes in currency values which will be difficult to prevent or predict. Our operations in the future could be affected by changes in the value of the Mexican peso against the United States dollar. At the present time, since we have no production and limited investment, we have no plans or policies to utilize forward sales contracts or currency options to minimize this exposure. If and when these measures are implemented, there is no assurance they will be cost effective or be able to fully offset the effect of any currency fluctuations.

STOCK PRICE VOLATILITY
Our stock price may be volatile and as a result investors could lose all or part of their investment. In addition to volatility associated with over-the-counter securities in general, the value of any investment could decline due to the impact of any of the following factors upon the market price of our common stock:

-  
changes in the worldwide price for gold, silver and copper;
-  
disappointing results from our exploration and drilling efforts;
-  
fluctuation in production costs that make mining uneconomical;
-  
unanticipated variations in grade and other geological problems;
-  
unusual or unexpected rock formations;
-  
failure to reach commercial production or producing at rates lower than those targeted;
-  
decline in demand for our common stock;
-  
downward revisions in securities analysts’ estimates or changes in general market conditions;
-  
investor perception of our industry, our Company or the Solidaridad Concessions; and/or
-  
general economic trends.

In addition, stock markets have experienced extreme price and volume fluctuations and the market price of securities has been highly volatile. These fluctuations are often unrelated to asset value and may have a material adverse effect on the market price of our common stock. As a result, investors may be unable to resell their shares at a fair price.

 
17

 
THERE IS CURRENTLY A LIMITED TRADING MARKET FOR OUR COMMON STOCK AND OUR STOCK EXPERIENCES PRICE FLUCTUATIONS
There is currently a limited market for our common stock and we can provide no assurance to investors that a more robust market will develop. If a market for our common stock does not develop, our shareholders may not be able to resell the shares of our common stock they have purchased and they may lose all of their investment. Our stock is thinly traded and is therefore subject to significant fluctuations if the amount of trading increases significantly for a short period of time. Even one large trade could materially affect the price of the stock even though the status of the Company remains unchanged.

The trading price of our common stock may be subject to wide fluctuations. Trading prices of our common stock may fluctuate in response to a number of factors, many of which will be beyond our control, including, without limitation, public announcements regarding our Company, purchases or sales by existing stockholders, changes in government regulations, conditions in our market segment or changes in earnings estimates by analysts. These fluctuations may have a material adverse effect on the trading price of our common stock.

In addition, the stock market in general, and the market for mining companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of such companies. Market and industry factors may adversely affect the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation has often been instituted. Such litigation, if instituted, could result in substantial costs and a diversion of management’s attention and resources. In addition, we may not have complied in the past with federal and/or state securities laws and regulations, which could potentially result in litigation, penalties and/or fines, other substantial costs and expenses and a substantial diversion of management’s attention and resources.

THE VALUE OF OUR COMMON STOCK IS PARTIALLY RELATED TO THE VALUE OF OUR MINERALIZED MATERIAL
The value of our common stock may relate directly and/or indirectly to the value of the mineralized material contained in the Solidaridad Property and fluctuations in the price of any such mineralized material could have a material adverse effect on the value of any investment in our common stock.

Several factors may affect the prices for mineralized material, including, without limitation:

-  
global supply and demand;
-  
global or regional political, economic or financial events and situations;
-  
investors’ expectations with respect to the rate of inflation;
-  
currency exchange rates;
-  
interest rates; and/or
-  
investment and trading activities of hedge funds and commodity funds.

In addition, investors should be aware that there is no assurance that our mineralized material will maintain a constant price or have long term value. In the event the price of our mineralized material declines, the value of an investment in our common stock may also decline.

REPORTING OUR INVESTMENTS IN MINERAL PROPERTIES AS AN EXPENSE MAY HAVE A NEGATIVE IMPACT ON OUR STOCK PRICE
Since we have no proven or probable reserves, our investment in the Solidaridad Property is not reported as an asset in our financial statements which may have a negative impact on the price of our stock. We prepare our financial statements in accordance with accounting principles generally accepted in the United States of America and intend to report substantially all exploration and drilling expenditures as expenses until we are able to establish proven or probable reserves. If we are able to establish proven or probable reserves, we would report development expenditures as an asset subject to future amortization using the units-of-production method. Since it is uncertain when, if ever, we will establish proven or probable reserves, it is uncertain whether we will ever report these expenditures as an asset. Accordingly, our financial statements report fewer assets and greater expenses than would be the case if we had proven or probable reserves, which could have a negative impact on our stock price.

 
18

 
ITEM 1B.
UNRESOLVED STAFF COMMENTS

None.


ITEM 2.
PROPERTIES
 
Description of Our Concessions
 
Mineral rights in Mexico belong to the Mexican government and are administered pursuant to Article 27 of the Mexican Constitution. Mining concessions may be granted to Mexican citizens or companies incorporated under Mexican law and grant the holder the right to explore and exploit all minerals found in the ground. The table below reflects certain information about the mining concessions we currently hold through our Mexican Subsidiary. These concessions are registered with the Public Registry of Mining in Mexico City. The Solidaridad Property to which the following concessions relate is in the exploration stage and has no proven or probable reserves.

Name of Concession
Title Number
Hectares
Date Acquired
Expiration Date
Solidaridad I
220315
174.5408
July 11, 2003
July 10, 2053
Solidaridad II
220503
2162.2311
August 14, 2003
August 13, 2053
Solidaridad II, Fraction A
220504
1.4544
August 14, 2003
August 13, 2053
Solidaridad II, Fraction B
220505
0.0072
August 14, 2003
August 13, 2053
Solidaridad III
223444
294.0620
December 14, 2004
December 13, 2054
Solidaridad IV
220612
149.4244
September 4, 2003
September 3, 2053
Solidaridad V
(also known as Le Ceiba)
223119
921.3201
October 19, 2004
October 18, 2054
La Sabila
227272
11,405.000
June 2, 2006
June 1, 2056
 
The above group of concessions are collectively referred to as the “ Solidaridad Concessions .” Our concessions have a term of fifty years from the date first acquired and can be renewed for another fifty years. In order to maintain the concessions, the Company must pay surface taxes semi-annually in January and July and perform a minimum amount of assessment work on a calendar year basis. Assessment work reports are required to be filed annually in May for the preceding calendar year. The amount of surface taxes and annual assessments are set by regulation and may increase over the life of the concession and include periodic adjustments for inflation
 
Location and Access
 
The Company’s mining concessions, or mineral rights related to specific parcels of property, are located in southern Michoacán, which is in the southeastern portion of Mexico. Local and regional geologic evidence strongly suggests the possibility that the concessions owned by the Company are located within a mineral rich area of the state. Approximately 30 miles to the southwest of the Solidaridad Property is a mine from which copper has been produced for over 100 years. The owners of that mine have continued exploration, which resulted in the discovery of another mineral deposit separate from the 100 year old working mine. According to information we have obtained, the ore produced at that mine has similar characteristics to the mineralized material we have found from the exploration we have conducted to date on the Solidaridad Property. In the northern part of the Solidaridad Property are two abandoned mines and a few small hand worked mines. To the south of and within the Solidaridad Property exist two additional abandoned mines, all of which will require routine but formal investigation.
 
The Solidaridad Property is accessible by a paved road from the city of Morelia, the capital of Michoacán, and the claim sites are accessible by a gravel road from the village of Paso de Nunez. The Solidaridad Property lies within the Tierra Caliente basin of southeastern Michoacan, and rests in an area of valleys and peaks ranging from 610 to 1,100 meters in elevation. The surrounding area is predominantly agrarian. Villages immediately near the claim sites offer little or no amenities; however, there are some hardware, cement, and other suppliers in relatively close proximity. There is no heavy industry in the region. Electricity is currently being provided to us by our contractors through generators.
 
 
19

 
Mining concessions do not automatically grant the holder the right to enter or use the surface land of the property where such mining concessions are located. In order to access the surface land, the holder must obtain permission from the surface owner. We currently have secured access rights to the portion of the Solidaridad Property where our concessions Solidaridad I, Solidaridad III, and Solidaridad V are located by way of a written agreement entered into by and between our Mexican Subsidiary and the owners of the portion of the Solidaridad Property where these concessions are located. This agreement requires us to pay an annual rent to the landowner. We are in the process of securing, but have not yet secured, access rights to other portions of the Solidaridad Property, which we plan to do in the future in connection with any decision to begin exploration and/or exploitation of those areas. If we are ultimately unable to receive access, or unable to receive access at a reasonable price, it may affect our ability to explore for, or exploit, mineralized material from those areas.
 
All or portion of the Solidaridad Property where concessions Solidaridad II, Solidaridad III, Solidaridad IV, Solidaridad V and La Sabila are located are Ejido lands. Ejidos are groups of local inhabitants who are granted rights by the Mexican government to conduct agricultural activities on the surface of the property. Our ability to exploit the mineralized material from the portion of the Solidaridad Property where these concessions are located is subject to making satisfactory arrangements with the Ejido for access and surface disturbances. We must negotiate and maintain a satisfactory arrangement with these inhabitants in order to disturb or discontinue their rights to conduct such agricultural activities. Amendments to Article 27 of the Mexican Constitution in 1994 allow the Ejido to enter into commercial ventures with individuals or entities. However, we currently do not have an agreement with the local Ejidos allowing us to explore for, or exploit, the mineralized material in the property where these concessions are located. We plan to negotiate such arrangements at such time as we make a decision to begin exploitation of those areas.
 
Mexican law recognizes mining as a land use generally superior to agricultural. However, the law also recognizes the rights of the Ejido to compensation in the event mining activities interrupt or discontinues their use of the agricultural lands. Compensation is typically made in the form of a cash payment to the holder of the agricultural rights. The amount of such compensation is generally related to the perceived value of the agricultural rights as would be negotiated between the Ejidos and the Company. If the parties are unable to reach agreement on the amount of the compensation, the decision will be referred to the Mexican government. If we are ultimately unable to successfully negotiate such an arrangement or, if we are successful in negotiating such an arrangement but are ultimately unable to maintain such agreement, it may impair or impede our ability to successfully exploit the mineralized material from the portion of the Solidaridad Property where these concessions are located.

Office Facilities
In August 2011, we relocated our headquarters from Lake Mary, Florida to Lithia, Florida to the premises of our then Chairman. The space was rent free based on an oral arrangement between the parties.
 
During the first fiscal quarter of 2012, we relocated our headquarters from Lithia, Florida to Odessa, Missouri to the premises of one of our directors and our then President. The space was rent free based on an oral arrangement between the parties.
 
During July 2012, we relocated our headquarters from Odessa, Missouri to Marlboro, New Jersey where we are now renting office space under a 12 month lease, with an option to extend the term of the lease for a further 12 months, at $1,300 per month and operating expenses. This lease is personally guaranteed by one of our directors.

The Company leases a warehouse (storage) facility in the city of Morelia, Michoacán, Mexico. This lease expired February 1, 2013 and effective February 1, 2013, we extended the lease for a one year term to February 1, 2014 at a monthly rental payment of $2,234.
 

 
20

 
 
The warehouse in Morelia houses the core laboratory, provides a core sample storage area and temporary offices. We have not completed the metallurgical and chemistry laboratory due to lack of funds. The Company has suspended any construction efforts until such time as it receives sufficient funding to move forward. If and when the laboratory becomes functional, we currently plan to use it to assist the technical staff in all necessary real time testing and evaluations of mineralization during the exploration and drilling stages as well as in developing the Feasibility A and B reports at the end of the two year exploration and drilling program discussed above. Otherwise, we will continue to have the metallurgical testing conducted by outside laboratories.
 
Glossary
 
 
Core Samples
Cylindrical pieces of subsurface material removed by a drill and brought to the surface for examination.

 
Development
The process following exploration, whereby a mineral deposit is further evaluated and prepared for production. This generally involves significant drilling and may include underground work.

 
Dike
A vertical or near vertical tabular body of igneous rock that cross cuts across the existing country rock. Dikes form when magma rises into an existing fracture, or creates a new crack by forcing its way through existing rock, and then solidifies.

 
Drilling
The process of boring a hole in the rock to obtain a sample for determination of metal content. “Reverse Circulation Drilling” involves chips of rock being forced back through the center of the drill pipe using air or water.

 
Ejido
Are agrarian cooperative lands granted by the Mexican federal government to local inhabitants to conduct agricultural activities on the property pursuant to Article 27 of the Mexican Constitution.

 
Exploration
The search for mineral deposits using prospecting, geological mapping, geochemical and geophysical surveys, drilling, sampling and other means used to detect and perform initial evaluations of mineral deposits.

 
Hectare
A metric unit of measurement for surface area. One hectare equals 1/200 th of a square kilometer, 10,000 square meters or 2.47 acres.
 
 
Igneous
A type of rock which has been formed by the consolidation of magma, a molten substance from the earth’s core.

 
Metallurgy Testing
The testing of metals and their physical and chemical properties in bulk.

 
Mineralized Material
Minerals or any mass of host rock in which minerals of potential commercial value occur.
 
 
Mudstone
Fine grained sedimentary rock whose original constituents were clays or muds.

 
Ore
A natural mineral compound of elements of which one at least is a metal (e.g. copper, lead, molybdenum, zinc, gold). The term is applied more loosely to all metalliferous rock and occasionally to compounds of nonmetallic substances and industrial minerals such as sulphur ore. In economic terms, an ore is a mineral of sufficient value as to quality and quantity that it may be mined at a profit.

 
Phyllite
A type of foliated metamorphic rock primarily composed of quartz, sericite mica, and chlorite. The rock represents a gradation in the degree of metamorphism between slate and mica schist. Minute crystals of graphite, sericite, or chlorite impart a silky, sometimes golden sheen to the surfaces of cleavage (or schistosity). Phylite is formed from the continued metamorphism of slate.
 
 
 
21

 
 
 
Production
The process following development whereby mineral deposits are exploited from the ground, and as required, the subsequent processing into products.
 
 
 
 
Reserves
That part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination.
 
 
 
 
 
(1) Proven (Measured) Reserves: Reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content or reserves are well-established.
 
 
 
 
 
(2) Probable (Indicated) Reserves: Reserves for which quantity and grade and/or quality are computed from information similar to that used from proven (measured) reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven (measured) reserves, is high enough to assume continuity between points of observation.
 
 
 
 
Schists
A group of medium-grade metamorphic rocks, chiefly notable for the predominance of lamellar minerals such as micas, chlorite, talc, hornblende, graphite, and others. Quartz often occurs in drawn-out grains to such an extent that a particular form called quartz schist is produced. By definition, schist contains more than 50% platy and elongated minerals, often finely interleaved with quartz and feldspar. Schist is often garnetiferous.
 
 
 
 
Shale
Fine grained sedimentary rock whose original constituents were clay minerals or muds. Black Shales are dark, as a result of being especially rich in unoxidized carbon.
 
 
 
 
Sills
A tabular body of intrusive igneous rock, parallel to the layering of the rocks into which it intrudes.
 
 
 
 
Tierra Caliente
Used in Latin America to refer to those places within that realm which have a distinctly tropical climate. The Tierra Caliente forms at Sea Level to about 2,500 ft.
 
 
ITEM 3.
LEGAL PROCEEDINGS

Title Dispute

On April 3, 2012, our Mexican subsidiary company, US Precious Metals SA de CV, was served with a lawsuit under case number 293/2012 by Mr. Israel Tentory Garcia (“Plaintiff”) regarding one of our mining concessions. The case was filed in a local court in the Federal District of Mexico City.

By way of background, during 2003, we contracted with eight private individuals, including the Plaintiff, to acquire an exploration concession to 174.54 hectares (the Solidaridad I claim). Pursuant to this agreement, we paid the former holders 1.5 million shares of our common stock. The Agreement further provided for the payment of $1 million to the former holders upon the occurrence of certain conditions. In his lawsuit, the Plaintiff alleges that the payment was due and payable on or about 2009 and ownership of the mining concession should revert back to him.

We have retained counsel in Mexico to represent our subsidiary in this matter. We strongly dispute the allegations raised in the lawsuit and intend to vigorously defend our rights to the mining concession. We have filed an answer to the complaint pursuant to which we alleged numerous defects in both fact and law. Part of our answer includes the position that when we contracted with Plaintiff and the seven other parties in 2003, their rights to the Solidaridad I exploration concession had expired in 2001, and thus they had no ownership rights to convey to us in 2003. As a result, we have asserted that they are not entitled to receive any additional consideration from us, and, in addition, we have demanded a return of the 1.5 million shares previously issued to them. In addition, we have filed a proceeding in a separate court (Superior Court, Mexico City) under Mexican law seeking a dismissal of the case due to the lack of jurisdiction by the current court.

 
22

 
At the time of this filing, there have not been any determinations by either Court. While we will vigorously defend the lawsuit, we cannot predict the likely outcome of this litigation in the Mexican judicial system. If we are unable to prevail in this matter and the Plaintiff is found to be entitled to the reversion of the concession, such event would have a material adverse impact on us and our plans for this concession.

On May 21, 2013, we were informed by our Mexican counsel that the Court issued a ruling dismissing the lawsuit filed by Plaintiff against our subsidiary, US Precious Metals SA de CV. The Court ruled that the Plaintiff did not prove the claims asserted in the lawsuit, and that our subsidiary is not liable to Plaintiff’s for any of such claims. In June 2013, Plaintiff filed an appeal of the Court ruling described in the preceding sentence and we filed a responsive brief in support of our position. On August 14, 2013, we were informed that the Court dismissed Plaintiff’s appeal without prejudice. According to our Mexican counsel, Plaintiff maintains the right to re-file his lawsuit against our subsidiary, US Precious Metals SA de CV., however, we will vigorously contest any such appeal.


ITEM 4.
MINE SAFETY DISCLOSURES

Mining operations and properties in the United States are subject to regulation by the Federal Mine Safety and Health Administration (“MSHA”) under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”). Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), issuers are required to disclose specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities.

During the twelve months ending May 31, 2013 and 2012, we did not conduct mining operations nor maintain any mining properties in the US. Consequently we were not subject to any health or safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities during the twelve months ending May 31, 2013 and 2012.

 
 
23

 
PART II

ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 
Market Information
 
Our common stock currently trades on the OTC-QB Market under the symbol “USPR”. Prior to January 14, 2006, our common stock was not publicly traded. The table below sets forth, for the fiscal quarters indicated, the high and low bid prices per share of our common stock as reflected on the OTCBB. The quotations represent inter-dealer prices without adjustment for retail markups, markdowns or commissions, and may not necessarily represent actual transactions.

Quarterly Period
 
High
   
Low
 
Fiscal year ended May 31, 2012:
           
First Quarter
    0.38       0.05  
Second Quarter
    0.50       0.12  
Third Quarter
    0.38       0.13  
Fourth Quarter
    0.34       0.09  
                 
Fiscal year ended May 31, 2013:
               
First Quarter
    0.20       0.10  
Second Quarter
    0.27       0.09  
Third Quarter
    0.26       0.16  
Fourth Quarter
    0.27       0.10  
 
 
Penny Stock Rules
 
Due to the price of our common stock, as well as the fact that we are not listed on NASDAQ or a national securities exchange, our stock is characterized as a  “penny stock” under applicable securities regulations. Our stock will therefore be subject to rules adopted by the SEC regulating broker-dealer practices in connection with transactions in penny stocks. The broker or dealer proposing to effect a transaction in a penny stock must furnish the customer a document containing information prescribed by the SEC and obtain from the customer an executed acknowledgement of receipt of that document. The broker or dealer must also provide the customer with pricing information regarding the security prior to the transaction and with the written confirmation of the transaction. The broker or dealer must also disclose the aggregate amount of any compensation received or receivable by him in connection with such transaction prior to consummating the transaction and with the written confirmation of the trade. The broker or dealer must also send an account statement to each customer for which he has executed a transaction in a penny stock each month in which such security is held for the customer’s account. The existence of these rules may have an effect on the price of our stock, and the willingness of certain brokers to effect transactions in our stock.
 
 
24

 
Transfer Agent
 
Until July 2012, Interwest Transfer Company, Inc. (“Interwest”) was the transfer agent for our common stock. The principal office of Interwest is located at 1981 Murray Holladay Road, Suite 100, Salt Lake City, UT  84117 and its telephone number is (801) 272-9294.  On July 13, 2012, we appointed Issuer Direct Corporation (‘Issuer Direct”) as the transfer agent for our common stock. The principal office of Issuer Direct is located at 500 Perimeter Park Drive, Suite D, Morrisville, NC, 27560 and its telephone number is (919) 481-4000.
 
Holders
 
As of May 31, 2013, there were approximately 329 holders of record of our common stock. This does not reflect persons or entities that hold their stock in nominee or “street name.”
 
Warrants Outstanding
 
As of May 31, 2013, there were warrants to purchase 7,827,180 shares of common stock outstanding.
 
Dividends
 
There are no restrictions in our Amended and Restated Certificate of Incorporation or our Amended and Restated Bylaws that restrict us from declaring dividends except for restrictions imposed by law. The General Corporation Law of the State of Delaware, however, does prohibit us from declaring dividends where, after giving effect to the distribution of the dividend, we would not be able to pay our debts as they become due in the usual course of business or our total assets would be less than the sum of our total liabilities, plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.
 
We have never declared or paid cash dividends on our common stock and do not currently intend to declare a cash dividend on our common stock in the foreseeable future. The declaration and payment of dividends is subject to the discretion of our Board of Directors and to the above mentioned limitations imposed under the General Corporation Law of the State of Delaware. The timing, amount and form of dividends, if any, will depend on, among other things, our results of operation, financial condition, cash requirements and other factors deemed relevant by our Board of Directors.
 
 
25

 
Securities Authorized for Issuance Under Equity Compensation Plans
 
The following table shows information with respect to each equity compensation plan under which the Company’s common stock is authorized for issuance as of the fiscal year ended May 31, 2013.
 
Equity Compensation Plan Information
 
Plan Category
Number of Securities to be Issued
upon Exercise of Outstanding Options
Weighted-Average Exercise Price of Outstanding Options, Warrants, and Rights
 
Number of Securities Remaining Available for
 Future Issuance Under Equity Compensation Plans
             
Equity compensation plans approved by security holders
16,500,000(1)(2)
0.13
 
3,500,000(3)
 
           
Equity compensation plans not approved by security holders
0
   
0
 
 
(1). In December 2007, the Company’s Board of Directors approved the 2007 Stock Option Plan (the “Plan”) and in August 2008, the shareholders of the Company approved the Plan. The following issuances were effected under the Plan:
 
a. In August 2010, the Company granted to (i) its new Chairman stock option to acquire 1,000,000 shares of common stock at a $0.11 per share exercise price, and (ii) two existing officers and directors each a stock option to acquire 1,000,000 shares of common stock.

b. During the year ended May 31, 2011, the Company appointed three new directors to its Board of Directors, and awarded each director with a stock option to acquire 1,000,000 shares of common stock. The per share exercise price for each director set of options was $0.065, $0.69, and $0.105. In March 2011, the Company and each of the eight directors agreed to cancel 8,000,000 in existing options and the Company granted new options to each of the existing directors. The new options have an exercise price of $0.065 per share.   All options granted during the fiscal year ended May 31, 2011 to existing and new directors were priced at a penny per share above the closing price of our common stock on the date of grant (which in the case of a new director, is the date of the appointment).  One officer and director resigned in April 2011, and his option for 1,000,000 shares expired 90 days thereafter.

c. During the year ended May 31, 2012, the Company appointed (i) two new directors to its Board of Directors, and awarded each director with a stock option to acquire 1,000,000 shares of common stock, with a per exercise price of $0.16 for one director and $0.18 for the second director, and (ii) two new officers, and awarded each officer with a stock option to acquire 1,000,000 shares of common stock, with an exercise price of $0.16 per share. In addition, each officer received an additional 250,000 incentive stock options with an exercise price of $0.16. In addition during the period, the Company appointed a new Chief Executive Officer and a new Chief Financial Officer and granted each of these officers stock options to receive 500,000 shares of common stock at exercise prices of $0.20 and$0.18, respectively.

d. During the year ended May 31, 2013, 2,000,000 fully vested stock options valued at $420,995 were issued, 1,000,000 to each of two newly appointed directors with exercise prices of $0.19 and $0.25. The Company also issued 1,000,000 fully vested stock options valued at $114,682 to a newly appointed officer of the Company with an exercise price of $0.12.

(2). The amount includes 3,000,000 stock options granted to consultants for 1,000,000 each exercise prices of $0.065, $0.07 and $0.185.
 
(3). Represents the number of stock options and warrants remaining in the 2007 Stock Option Plan.
 
 
26

 
Recent Sales of Unregistered Equity Securities
 
During the three months ending May 31, 2013, we issued 15,075,714 shares of common stock and 1,270,000 stock purchase warrants as follows:
 
Between March 27, 2013 and May 22, 2013, we issued units consisting of 2,540,000 shares of our common stock and 1,270,000 stock purchase warrants to three investors for cash consideration of $195,500. Units were sold at $0.075 and $0.10 per unit and the stock purchase warrants have terms of 6 or 12 months and exercise prices of $0.125 or $0.15. Each stock purchase warrant enables to holder to acquire one share of common stock.
 
Between March 12, 2013 and May 7, 2013, we issued 2,000,000 shares of our common stock valued at $360,000 to three consultants who performed services for us. The shares were issued at $0.10 and $0.19 per share.
 
On April 2, 2013, an option holder exercised 1,000,000 stock options with an exercise price of $0.065 on a cashless basis to acquire 535,714 shares of our common stock.
 
On May 22, 2013, we issued 10,000,000 shares of our common stock valued at $1.9 million to a company in connection with the exploration, and potentially the development, of a portion of our Solidaridad Property.
 
Each investor was an accredited investor and agreed to hold such shares for investment purposes. In addition, the shares issued to the investor contained a restricted legend. The option exercise was a result of an option issued to a former director of the company under a stock option plan. All of the securities issuances referred to above were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “Act”) or the rules and regulations promulgated thereunder, including Regulation D and Rule 701.
 
Issuer Repurchases of Equity Securities

None.
 

ITEM 6.
SELECTED FINANCIAL DATA

As a "smaller reporting company" as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.
 

ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
Management’s discussion and analysis of financial condition, changes in financial condition and results of operations is provided as a supplement to the accompanying consolidated financial statements and notes to help provide an understanding of the Company’s financial condition and results of operations.
 
Overview
 
We were formed as a mineral exploration company on January 21, 1998. We are engaged in the acquisition, exploration and development of mineral properties. We focus on gold and base minerals primarily located in the State of Michoacán, Mexico where we own exploration and exploitation concessions to approximately 37,000 acres of land (the “Solidaridad Property”). See “Item 2. Properties” for more information about our mining concessions. Mineral exploration requires significant capital and our assets and resources are limited. We have never earned revenue from our operations and have relied on equity and debt financing to fund our operations to date.

We are considered an exploration stage company for accounting purposes because we have not demonstrated the existence of proven or probable reserves. In accordance with accounting principles generally accepted in the United States of America, all expenditures for exploration and evaluation of our properties have been expensed as incurred. Furthermore, unless our mineralized material is classified as proven or probable reserves, substantially all expenditures have been or will be expensed as incurred. Since substantially all of our expenditures to date have been expensed and we have expensed significant expenditures during the fiscal year 2013, most of our investment in mining properties do not appear as an asset on our balance sheet.
 
 
 
 
27

 
During the year ended May 31, 2013:
 
-  
we sold 6,750,000 shares of our common stock and warrants to purchase 3,375,000 shares of our common stock or total cash proceeds of $587,500. Shares were sold at prices between $0.075 and $0.15. The warrants had terms of 6 or 12 months and exercise prices or between $0.10 and $0.22.
 
-  
155,986 warrants were exercised at $0.15 and $0.16 per share for total cash proceeds of $23,624.
 
-  
we converted a convertible note with a principal balance of $15,000 and accrued interest of $8,107 into 77,124 shares of our common stock at $0.30 per share.
 
-  
we issued 740,571 shares of our common stock on the cashless exercise of 1,438,466 stock options.
 
-  
we issued 1,750,000 shares of our common stock, valued at $315,000, as compensation to our directors.
 
-  
we issued 2,000,000  shares of our common stock, valued at $360,000, as compensation to consultants for services they had provided to us
 
-  
we issued 10,000,000 shares of our common stock valued at $1.9 million to a company in connection with the exploration, and potentially the development, of a portion of our Solidaridad Property.
 
Recent Events

Effective June 13, 2012, as indicated above, our board of directors approved the issuance a total of 1,750,000 shares of our common stock, valued at $315,000, as compensation to our directors. Each of our seven directors received 250,000 shares of our common stock as compensation.

On July 1, 2012, we relocated our headquarters from Odessa, Missouri to Marlboro, New Jersey where we are now renting office space under a 12 month lease, with an option to extend the term of the lease for a further 12 months, at $1,300 per month and operating expenses. This lease is personally guaranteed by one of our directors.

On September 21, 2012, we appointed Mr. George Mesa Sr. as the Director of Security for our Mexican mining claims. As consideration for his appointment we granted Mr. Mesa 1 million stock options with a term of five years and an exercise price of $0.12 per share (closing price of our common stock on the date of grant) valued at $114,682.

On October 1, 2012, we completed an Amendment No. 2 to Settlement Agreement and Payment Agreement with Duane Morris, LLP and Keli Isaacson Whitlock. As result of the amendment, the payment of the initial installment of $403,554, has been extended to December 1, 2012. The parties had previously entered into the first amendment to Settlement Agreement and Payment Agreement on May 23, 2012 (See Form 8-K of the Company on such date). Except as stated above, all other terms and conditions of the referenced Settlement Agreement and Payment Agreement, as amended on May 23, 2012, remain unchanged, including the fact that commencing May 23, 2012, interest accrues on the amount due, which is $1,614,216, at the rate of 5% per annum.  We have failed to make this schedule payment on December 1, 2012. Thus, our former attorneys will be able to avail themselves of all rights and privileges under the existing agreements with us and under the laws of Mexico and the United States.

On November 6, 2012, we entered into a letter of intent with private investment group (“PE Group”) regarding the funding of the Company. The PE Group has a pre-existing investment banking agreement with a FINRA regulated broker dealer (“Firm”) to raise $100 million for its projects. Pursuant to the letter of intent, the PE Group had agreed to assign and/or invest the proceeds under the pre-existing investment banking agreement with us. In exchange, the PE Group was to receive:

(i)
Ten million shares of common stock payable as follows; one million shares being issued upon the execution of an investment banking agreement with Firm, and nine million shares paid upon benchmark completion of the funding of the $100 million.
(ii)
A one time expense re-imbursement fee of $250,000 payable upon our receipt of the first deposit exceeding $20 million pursuant to the investment banking agreement with the Firm.

 
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The funding, if received, would have been used by us to further develop our approximately 37,000 contiguous acres of mining concessions located in the State of Michoacán, Mexico (“Concessions”). In addition, in exchange for receipt of the $100 million the investor party would have received 49% of the Concessions. As stated above,  we are obligated to issue 1 million shares of our common stock, valued at $240,000,  to PE Group when we signed an investment banking agreement with the Firm.  While we subsequently signed an investment banking agreement with the Firm, it is our position that the investment banking agreement was not of the nature contemplated in the letter of intent. Consequently, as a result of that fact and other concerns, a dispute exists with respect to the issuance of the one million shares to the  PE Group, and we have not issued the shares to the PE Group and are not currently reflected in our financial statements.
 
One of our directors serves as a director of PE Group.

On November 29, 2012, we entered into an Exclusive Investment Banking Agreement (‘the Agreement”) with a prominent, New York investment banking firm (“Firm”). The Firm is a FINRA/SEC registered broker/dealer. Under the agreement, the Firm agreed to provide a range of investment advisory services to us, including the introduction to potential lenders, investors and acquiring entities. The agreement contemplates potential equity financings, business combinations and/or asset sales, and/or debt financings. Under the agreement, we paid a non-refundable retainer in the amount of $50,000 and agreed to issue the Firm an initial stock purchase warrant to purchase 9.99% of our fully diluted shares of common stock as of the date of the Agreement. The initial warrant has a term of five years with a per share exercise price of $0.40. The term of the agreement is one year with successive yearly renewals.
 
This agreement was subsequently terminated on March 12, 2013 pursuant to a Termination Agreement and Mutual Release with the Firm. Under the termination agreement, the Firm returned $20,000 of the retainer and no further consideration will be issued to the Firm by us.

In December 2012, three million shares of our common stock previously issued to a consultant in May 2011 at a value of $180,000 were returned to us by the consultant and we cancelled such shares.

On May 11, 2013, the Company entered into a Share Exchange Agreement with Resource Technology Corp., a newly formed Florida corporation (“RTC”), and the RTC shareholders to acquire all of the issued and outstanding shares of RTC in exchange for 300 million shares of common stock of the Company. The total number of shares issuable to the RTC shareholders may be reduced as described below. RTC maintains three ore supply contracts with third party suppliers, and a Plasmafication™ Toll Processing Agreement with Plasma Processing, LP., a Florida limited partnership (“PP LP”). The ore supply agreements and the Toll Processing Agreement enables RTC to receive 1/3rd of the revenues derived from the plasma processing of ore concentrates from the ore supply agreements.
 
The Plasma Plant and Plasma Processing.
PP LP owns the right to operate a plasma processing facility located in 29 Palms, California. The plant took three years to build and is permitted to process ore concentrate. The parties believe that initial upgrades to the facility will commence within 90 to 120 days which will enable the facility to process concentrates at the rate of approximately 9 tons/day. PP LP expects to make further upgrades to the facility which would increase its capacity to approximately 27 tons/day.
 
Plasmafication™ or plasma processing employs extreme temperatures (in excess of 7,000 F) to dissociate ore concentrates into their basic elemental state. Plasmafication™ is unique to the mining industry, and the parties believe that this process will yield significantly greater processing returns than milling processes currently employed in the mining industry. Current milling methods will recover the desired mineral down to a certain particle size (ie 300 or 600 mesh) based on the parameters of the existing machinery. However, conventional processes are not highly effective in recovering precious metals from highly complex ore structures. The high temperatures of plasma processing separate the metals from the substrate and turns organics from a solid to a gas. The metalloid fractions are then sent through a hydraulic cooling system to produce ore pellets. Secondary and tertiary processing is then applied to further recover and refine the desired precious metal constituents.
 
 
29

 
Ore Supply Agreements.
RTC holds ore supply agreements and arrangements with three, separate third parties, two of whom are from domestic mining properties and the third is from a mining property located in the Far East. Each of the ore concentrate suppliers have agreed to split the revenues post plasma processing three equal ways among the ore supplier, RTC and PP LP. Under the Plasmafication Toll Processing Agreement discussed below, PP LP will bear the costs and expense of the plasma processing.
 
Plasmafication™ Toll Processing Agreement.
The Toll Processing Agreement between PP LP and RTC provides that PP LP will provide a range of services, including the Plasmafication™ of the RTC concentrate from the ore supply contracts. These services will be provided at the sole cost and expense of PP LP. The agreement further provides for an initial processing capacity of 5 tons/day of RTC concentrate for approximately 200 days per annum. PP LP will be required to upgrade its current plant to achieve this processing rate which as mentioned above is expected to occur within 90 to 120 days. These upgrades are expected to bring the total processing rate of the plant to about 9 tons/day. The agreement allows for an increased capacity to process 10 tons/day of RTC concentrate for approximately 300 days per annum. In order to achieve this rate, total plant capacity will have to be increased to about 29 tons/day.
 
PP LP has guaranteed a benchmark run of 5 tons/day for 20 consecutive days (“Benchmark Run”) with a minimum value of $50,000 (net to RTC) per ton using the RTC concentrate (or a total of $5,000,000 in net proceeds to RTC) from the existing ore supply contracts. The guarantee is limited to the proportionate reduction of the number of shares of USPR common stock issuable to the RTC shareholders (as described below). The benchmark run must be completed prior to June 1, 2014.
 
PP LP and RTC have agreed to split any costs required to ship the RTC concentrate to the plasma facility in California, among other terms and conditions.
 
Share Exchange Agreement.
As stated above, pursuant to the Share Exchange Agreement, the Company has agreed to acquire all of the issued and outstanding shares of RTC (“RTC Shares”) from the RTC shareholders in exchange for 300 million shares of common stock of the Company (“USPR Shares”). The RTC Shares and the USPR Shares issuable to the respective parties will be held in escrow and the USPR shares issuable to the RTC shareholders may be reduced as stated herein. While the shares are in escrow, voting rights will remain with the named party. The agreement provides that if the Benchmark Run does not yield net cash proceeds of Five Million Dollars ($5,000,000) to RTC, then the number of Exchange Shares in total will be proportionately reduced. The closing of the transactions contemplated by the Agreement will occur no later than June 1, 2014. The agreement contains customary representations and warranties by all parties.
 
The RTC shareholders are Wolz International, LLC (“Wolz”), Titan Productions, Inc. (“Titan”), and Mercury6, LP (“Mercury6”). Assuming a completion of the transaction without a proportionate reduction in the USPR Shares, Wolz, Titan and Mercury each will receive 150 million shares, 75 million shares and 75 million shares, of common stock of USPR, respectively. Mr. Gennaro Pane, our Chairman and Chief Executive Officer, is the sole officer and member of Wolz (and will own approximately 51% of such shares), and Chad Altieri, our Board member, is the sole owner of Mercury. In addition, Messrs Pane and Altieri own or control limited partnership interests in PP LP.
 
The Share Exchange Agreement was approved an independent committee of Directors, consisting of John Gildea, Daniel Luciano, and Dave Burney, subject however to shareholder approval. In addition to normal closing conditions, the Company will be required to obtain shareholder approval of the transaction, as well as shareholder approval to increase its authorized shares necessary to complete the transaction. The Company intends to seek shareholder approval in the immediate future. The Company cannot predict whether it will successful in closing the transaction with RTC.

 
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On May 22, 2013, we entered into a Mining Services Agreement with Mesa Acquisitions Group, LLC, a Florida limited liability company (“Contractor”), in association with Alba Petroleos De El Salvador Sem De CV, a Venezuelan company. Under the agreement, Contractor has agreed to perform certain mining services on a portion of the Company’s Mexican mining concessions. The Company maintains approximately 37,000 acres of mining concessions located in the State of Michoacán, Mexico, and the agreement covers the Solidaridad I & II mining concessions (or approximately 5,000 acres). Under the agreement, Contractor has agreed to perform the various mining services in three, separate phases described below:
 
 
Ø
Phase 1 entails the immediate commission of high-tech satellite imaging to identify mineralization and confirm the two previous drilling campaigns on the mining concessions known as Solidaridad I and/or Solidaridad II.
 
The estimated costs of Phase 1 is approximately $400,000.
 
 
Ø
Phase 2 entails the development of the necessary infrastructure to conduct full scale mining operations on the Solidaridad I and/or Solidaridad II mining concessions, including limited exploration, establishment of roads, water, power (electricity) and staging area for employees on site.
 
The estimated costs of Phase 1 is approximately $400,000.
 
 
Ø
Phase 3 entails the construction of a processing plant to process the ore, which will be owned by the Company.
 
The estimated costs for the construction of the processing plant is approximately $40 million.
 
Contractor will be responsible for the costs and expenses of; the satellite imaging described in Phase 1, the limited exploration and build out of the infrastructure described in Phase 2, and the construction of the processing plant described in Phase 3. The obligation of contractor to proceed to Phases 2 and 3 will be dependent upon the company receiving positive results of the satellite imaging. The size and capacity of the processing plant to be constructed by the Contractor will be determined by parties, subject however to the results of the satellite imaging. Actual mining and processing expenses will be allocated between the parties in proportion to their revenue allocation described below (70% for Company/30% for Contractor).
 
As consideration for the mining services, Contractor will receive the following consideration from the Company:
 
Phase 1 and Phase 2. As consideration for Phases 1 and 2, the Company issued to Contractor 10 million shares of its common stock.
 
Phase 3. As consideration for completion of Phase 3, Contractor will earn a 30% revenue interest in the revenues resulting from the sale of the ore, subject to it paying its proportionate share of the mining and milling expenses. If Contractor fails to perform or elects not to perform Phase 3 for any reason within 12 months from the completion of Phase 2, Contractor will forfeit all rights to the project.

In addition to the consideration stated above, as a further inducement for Contractor to enter into the Mining Services Agreement, the Company’s Chairman has agreed to issue to Contractor an additional 5 million shares of our common stock held or to be received by the Chairman.

The parties will be obligated to share in the mining and processing costs and revenues generated from any ore processing on a proportionate basis, that is 70% to the Company and 30% to Contractor.
  
Mr. George Mesa, the sole owner of Contractor, has been the Company’s Director of Security for the Company’s Mexican mining concessions since September 2012. Mr. Mesa received stock options to acquire 1 million share of our common stock at an exercise price of $0.12 in connection with that appointment.
 
The Company cannot predict the results of the satellite imaging to be undertaken by Contractor. If the results of such imaging are such that Contractor elects not to proceed with Phase 2 and/or Phase 3, such event will have a negative impact on the Company. Moreover, notwithstanding the positive results from the satellite imaging program, if any, the Company can not predict whether the Contractor will be successful in developing the Solidaridad I & II mining concessions.

 
 
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On July 9, 2013, our Board of Directors approved and recommended that the Company increase its authorized shares of common stock from 150,000,000 to 475,000,000 and that the proposed action be submitted to a vote of its shareholders. The purpose of the action is to enable us to complete the Share Exchange Agreement with Resource Technology Corporation pursuant to which the Company will be required to issue 300,000,000 shares of its common stock to the shareholders of Resource Technology Corporation (“RTC Transaction”) (See Company’s Form 8-K filed with the Securities and Exchange Commission on May 17, 2013). The Share Exchange Agreement was previously approved by an independent committee of Directors, however subject to subsequent approval of the Company’s shareholders. The record date established by the Board of Directors was July 9, 2013.

Liquidity and Capital Resources

As shown in the accompanying financial statements, we have experienced continuing losses since Inception (January 21, 1998), and as at May 31, 2013, have a working capital deficit of $3,844,147, accumulated losses of $28,977,646 since Inception (January 21, 1998), recurring negative cash flows from operations and presently do not have sufficient resources to meet our outstanding liabilities or accomplish our objectives during the next twelve months.

As at May 31, 2013, we were in default on repayment of convertible promissory notes with principal balances of $575,000 together with accrued interest of $355,923 totaling $930,923.

Moreover, effective May 23, 2012, we amended our Settlement Agreement and Payment Agreement with our former attorneys. As result of the amendment, the payment of the initial installment of $403,554, originally due on May 24, 2012, was extended to July 24, 2012. In addition, commencing May 23, 2012, interest accrued on the amount due, which is $1,614,216, at the rate of 5% per annum. We were unable to make the scheduled payment of $403,554 and accrued interest on July 24, 2012 and defaulted under the terms of this agreement, and the entire amount, including interest, became due and payable. On October 1, 2012, we entered into a second amendment to our Settlement Agreement and Payment Agreement with our former attorneys effective July 23, 2012. As a result of the second amendment, the date for the payment of the initial installment of $403,554 was extended to December 1, 2012. We have failed to make this schedule payment on December 1, 2012. Thus, our former attorneys have the ability to avail themselves of all rights and privileges under the existing agreements with us and under the laws of Mexico and the United States. The total balance due to our former attorneys, including accrued interest, at May 31, 2013 was $1,696,253.

In addition, we owe another former attorney the sum of approximately $90,000 under an arbitration award. The attorney has initiated efforts to effect a judgment against the Company.

At the time of this report, we do not have the funding available to repay the convertible promissory notes, make the payment required under the amended agreement with our former attorneys or pay the arbitration award to the other former attorney.

These conditions raise substantial doubt about our ability to continue as a going concern.

In our audited financial statements for the fiscal years ended May 31, 2013 and 2012, contained in our Annual Report, the Report of the Independent Registered Public Accounting Firm includes an explanatory paragraph that describes substantial doubt about our ability to continue as a going concern.

Our present plans to overcome these difficulties, the realization of which cannot be assured, include, but are not limited to, continuing efforts to raise new funding in the public and private markets, to sell some or all of our assets and to initiate a renegotiation of the terms of scheduled repayments to our creditors.
 
There is no assurance that commercially viable mineral deposits exist in sufficient amounts in our areas of exploration to justify exploitation. Further exploration will be required before a final evaluation as to the economic and legal feasibility of the mining rights we own can occur. Because we are still in our exploration stage, we have no revenues and have had only losses since our inception. Our plan of operations for the next 12 months is to continue the drilling program and begin a small exploitation program, provided that we receive sufficient funding to do so. However, we have made no commitments for capital expenditures over the next 12 months.
 
 
32

 
Depending on market conditions and the options available to us, we may attempt to enter into a joint venture with an operating company or permit an operating company to undertake exploration work on the Solidaridad Property, or we may seek equity or debt financing (including borrowing from commercial lenders) or we may consider a sale of the Company or its assets.
 
We do not intend to hire any additional employees at this time. All of the work related to our business will be conducted by our current employees and independent contractors. To the extent we receive funding, this is likely to change.
 
All of the Company’s plans are predicated on the Company’s ability to raise sufficient capital to implement and complete such plan, which we cannot assure you will occur in a timely manner, on terms acceptable to the Company, or at all. Because the exploration phase of our business plan is essentially a research and development activity, the results of our exploration activities will have a significant effect on our future business model. This model can change substantially based upon our exploration activities, liquidity position or other factors. Accordingly, estimating expenditures is an imprecise process, made even more so by the unpredictable nature of our business plan. We believe it would, therefore, not be helpful to estimate beyond the next 12 months. Even these estimates are subject to change depending on our ability to raise additional capital and execute our business plan in accordance with our estimates.
 
For the fiscal years ended May 31, 2013 and May 31, 2012 respectively, we raised $587,500 and $615,000 from the sale of shares of our common stock and $23,624 and $138,850 from the exercise of warrants. At this time, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock or through sales of additional convertible promissory notes or otherwise to meet our obligations over the next 12 months.
 
We must obtain additional financing to continue our operations. There can be no guarantee that we will be able to obtain additional funding on terms that are favorable to the Company or at all. As an exploration stage company, the Company has no current ability to generate revenue and no plans to do so in the foreseeable future. Our assets consist of cash, prepaid expenses, nominal equipment and certain mineral property interests. There can be no assurance that we will obtain sufficient funding to continue operations, or if we do receive funding, to generate revenues in the future or to operate profitably in the future. We have incurred net losses in each fiscal year since inception of our operations. These conditions raise substantial doubt about our ability to continue as a going concern.

RESULTS OF OPERATIONS FOR THE YEAR ENDED MAY 31, 2013 COMPARED TO YEAR ENDED MAY 31, 2012
 
Revenue
 
We did not earn any revenues during the years ending May 31, 2013 and 2012.
 
We do not anticipate earning revenues until such time, if any, that we are able to begin exploitation of mineralized material from the land related to our mining rights. Although our exploration drilling program has produced limited results which we believe to be positive, we can provide no assurance that we will discover mineralized material in sufficient quantities and of sufficient quality that we can obtain funding to monetize the mineralized material through additional funding for exploitation, joint venture, sale or otherwise.
 
Operating expenses
 
We incurred operating expenses in the amount of $4,213,963 and $2,453,863 during the year ended May 31, 2013 and 2012, respectively.  The increase in expenses of $1,760,100 is largely due to our issuance of 10,000,000 shares of our common stock valued at $1.9 million to a company in connection with the exploration, and potentially the development, of a portion of our Solidaridad Property.
 
 
33

 
Operating Loss

We incurred an operating loss of $4,213,963 and $2,453,863 respectively for the twelve months ended May 31, 2013 and 2012 due to the factors discussed above.
 
Interest Expense
 
Interest expense for the years ended May 31, 2013 and 2012 was $213,054 and $432,716 respectively, a decrease of $219,662
 
The decrease in interest expense for the current annual period compared with the prior annual period was due to the fact that debt discount of $157,996 was amortized in 2012 that was not amortized in 2013 and the principal balance on which interest was accrued was substantially lower in 2013 than in 2012, as $2,142,500 of promissory notes were converted into equity during the course of 2012.
 
Loss Before Income Taxes
 
We incurred losses before income taxes of $4,427,017 and $2,886,579 respectively for the twelve months ended May 31, 2013 and 2012 due to the factors discussed above.
 
Provision for Income Taxes
 
We incurred taxable losses in both the twelve months ended May 31, 2013 and 2012 and consequently no provision was required for income taxes in either year.
 
Net Loss
 
The Company incurred net losses of $4,427,017 and $2,886,579 respectively for the twelve months ended May 31, 2012 and 2011 due to the factors discussed above.

CASH FLOW INFORMATION FOR THE YEAR ENDED MAY 31, 2013 COMPARED TO YEAR ENDED MAY 31, 2012

Net cash flow used in operations in the year ended May 31, 2013 was $699,076 compared to $823,632 for year ended May 31, 2012, a decrease of $124,556, or 15%.

In the year ended May 31, 2013, our net loss was $4,427,017 which was offset by $3,127,149 in non cash items and a positive movement in operating assets and liabilities of $600,792 to arrive at net cash used in operations of $699,076. By comparison, in the year ended May 31, 2012, our net loss was $2,886,579 which was offset by $1,887,416 in non cash items and a positive movement in operating assets and liabilities of $175,531 to arrive at net cash used in operations of $823,632.

Net cash flow used in investing activities in the fiscal years ended May 31, 2013 and May 31, 2013 2012 was $0.

Net cash flow generated from financing activities was $611,098 in the year ended May 31, 2013 compared to $753,750 for the year ended May 31, 2012, a decrease of $142,712, or 19%. In the year ended May 31, 2013, we generated net cash of $587,474 from the sale of shares of our common stock, and $23,624 through the exercise of our warrants. By comparison, in the year ended May 31, 2012, we generated net cash of $615,000 from the sale of shares of our common stock, and $138,750 through the exercise of our warrants
 
Off-Balance Sheet Arrangements
 
We do not have any 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 is material to investors.
 
Critical Accounting Policies and Estimates
 
The Company has determined from the significant accounting policies disclosed in Note 2 of the Company’s financial statements, that the following disclosures are critical accounting policies.
 
 
34

 
Proven and Probable Reserves
 
The definition of proven and probable reserves is set forth in SEC Industry Guide 7. Proven reserves are reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well established. Probable reserves are reserves for which quantity and grade and/or quality are computed from information similar to that used for proven reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation. In addition, reserves cannot be considered proven and probable until they are supported by a feasibility study, indicating that the reserves have had the requisite geologic, technical and economic work performed and are economically and legally extractable at the time of the reserve determination.
 
Mine Development Costs
 
Mine development costs include engineering and metallurgical studies, drilling and other related costs to delineate an ore body, the removal of overburden to initially expose an ore body at open pit surface mines and the building of access ways, shafts, lateral access, drifts, ramps and other infrastructure at underground mines. Costs incurred before the mineralized material is classified as proven and probable reserves are expensed and classified as mine development costs.
 
Revenue Recognition Policy
 
Revenue will be recognized when the price is determinable, upon delivery and transfer of title to the customer and when there is a reasonable assurance of collection of the sales proceeds. The Company has not yet entered into any contractual obligation to deliver ore product or finished metals.
 
Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating losses. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount that is expected to be realized.  At May 31, 2013 and 2012, based upon its evaluation, the Company had a full valuation allowance against its deferred tax assets.
 
Share Based Compensation

The cost of equity instruments issued to non-employees in return for goods and services is measured by the fair value of the goods or services received or the measurement date fair value of the equity instruments issued, whichever is the more readily determinable.  The cost of employee services received in exchange for equity instruments is based on the grant date fair value of the equity instruments issued.

ITEM 7A.
SELECTED FINANCIAL DATA

As a "smaller reporting company" as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.

ITEM 8.
FINANCIAL STATEMENTS

The financial statements required by this Item are set forth on page 50 below.
 

 
 
35

 
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
 
None.

ITEM 9A.
CONTROLS AND PROCEDURES
 
Evaluation of Disclosure Controls and Procedures.
 
The Company maintains disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Disclosure controls and procedures are designed to ensure that information required to be disclosed in an issuer’s reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.
 
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 of the Exchange Act.
 
Based on such evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered by this Annual Report on Form 10-K, our disclosure controls and procedures are effective.
 
Management’s Annual Report on Internal Control Over Financial Reporting.
 
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. The Securities Exchange Act of 1934 defines internal control over financial reporting in Rules 13a-15(f) and 15d-15(f) as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

-  
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and any disposition of our assets;
-  
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
-  
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
 
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of the end of fiscal year May 31, 2013. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework. Our management has concluded that as of May 31, 2013, our internal control over financial reporting was not effective based on these criteria.
 
However, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Because of the inherent limitations in a control system, misstatements due to error or fraud may occur and may not be detected.
 
 
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This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to “Dodd-Frank Wall Street Reform and Consumer Protection Act” (Wall Street Reform Act) recently approved which permanently exempts small public companies with less than $75 million in market capitalization (non-accelerated filers) from the requirement to obtain an external audit on the effectiveness of internal financial reporting controls provided in Section 404(b) of the Sarbanes-Oxley Act of 2002 (SOX). Section 404(b) requires a registrant to provide an attestation report on management’s assessment of internal controls over financial reporting by the registrant’s external auditor. Disclosure of management attestations on internal control over financial reporting under existing Section 404(a) is included as required in this report
 
Changes in Internal Control over Financial Reporting.
 
There were no changes in our internal control over financial reporting during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 

ITEM 9B.
OTHER INFORMATION
 
None.

PART III

ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 
Identification of Directors and Executive Officers

MANAGEMENT
The directors and executive officers of the Company, their ages, and the positions they hold are set forth below.  The directors of the Company hold office until the next annual meeting of stockholders of the Company and until their successors in office are elected and qualified.  All officers serve at the discretion of the Board of Directors.
 
Name
Age
Title
Gennaro (Jerry) Pane
50
Chief Executive Officer, Acting Chief Finanical Officer and Director
Hans H. Hertell
62
President and Director
David W. Burney
61
Director
Sheldon Baer
73
Director
John Gildea
41
Director
Daniel H. Luciano
61
Director
Chad Altieri
32
Director
Edgar Choueiri
59
Director
Daniel  Joonsikk Moon
65
Former President and Director
Ruben Fiqueredo
60
Chief Operating Officer

Gennaro (Jerry) Pane.  Mr. Pane was appointed as a Director of the Company in 2007 and as Chief Executive Officer of the Company on October 3, 2011.  He is currently acting Chief Financial Officer of the Company. Since 2002, he has been a partner in Madison Trading, LLC, and since 2006 a partner in LeTigre Clothing line.  In addition, he has been an owner of several small businesses in the hospitality industry.

 
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Hans H. Hertell. Ambassador Hans H. Hertell was appointed to the Company’s Board of Directors on May 31, 2013, and was appointed President of the Company effective September 4, 2013. Mr. Hertell is an attorney with over 30 years experience in government, public affairs, business, and banking, Ambassador Hans H. Hertell was sworn in as the United States Ambassador to the Dominican Republic on November 8, 2001. At the time, the Dominican Republic was the fourth largest trading partner of the United States in the Western Hemisphere after Canada, Brazil and Mexico and the largest economy in Central America and the Caribbean. When he finished his tour on May 1, 2007, Ambassador Hertell was the second longest serving U.S. Ambassador in the world. Since 2008 to the present, he has been Chairman and Chief Executive Officer of The Hertell Group LLC, an international consulting company with offices in San Juan, Puerto Rico. From 1992 to 1996 Ambassador Hertell was Managing Director of Latin America and the Caribbean for Black, Kelly, Scruggs and Healey, a government and public affairs company based in Washington, D.C. He was responsible for all aspects of the firm's activities in Latin America and the Caribbean. In that capacity, Ambassador Hertell represented several Fortune 50 companies as well as governments in the region. Previously, he was Chief Executive Officer and Chairman of Ponce Federal Bank (NYSE), one of the largest publicly traded corporations in the Caribbean, with $1.3 billion in assets. Ambassador Hertell was also one of the founding partners of the third largest full service law firm in Puerto Rico, Goldman, Antonetti, Ferraiuoli, Axtmayer and Hertell.

David W. Burney. Mr. Burney was as a Director of the Company on October 1, 2009.  Mr. Burney was an underground mine geologist for Amax Lead Company of Missouri, Buick Mine, and was later assigned to the mine’s exploration group.  During the 1990’s, as adjunct faculty with Cochise College, Sierra Vista, AZ, Mr. Burney taught several geology courses while continuing his quest for mineral resources. Additionally, Mr. Burney has explored for copper resources in the Southwest United States.  Mr. Burney holds a Master’s Degree in Geology, Ore Deposits Exploration from the New Mexico Institute of Mining and Technology.  In addition, he is a “Qualified Person” in Geology as determined by Mining and Metallurgical Society of America.

Sheldon Baer.  Mr. Baer has been a director since December 6, 2007.  Mr. Baer is also currently the President of Golden Hands Construction Inc., a company which he personally founded in 1977.  Golden Hands specializes in construction of medical, commercial and industrial facilities, including mining facilities.  It has been featured in prestigious publications such as the Physician Magazine of the Los Angeles Medical Association and Contract Magazine.

John Gildea. Mr. Gildea was appointed to the Company’s Board of Directors on January 6, 2011. From 1998 to 2007, Mr. Gildea worked in various capacities with Allied Irish Bank plc. In 2007, Mr. Gildea is the founder and Director of SGG Enterprises, Dublin, Ireland, which provides venture capital and management restructuring services, to public and private companies..

Daniel H. Luciano. Mr. Luciano was appointed to the Company’s Board of Directors on September 21, 2010.  Mr. Luciano has been an attorney since 1977 and is a member of the New Jersey Bar and Texas Bar. Mr. Luciano specializes in corporate and securities law providing services to small and mid-sized public and private companies

Chad Altieri. Mr. Altieri was appointed to the Company’s Board of Directors on May 11, 2012. Mr. Altieri is a corporate attorney and business affairs executive with a strong background in strategy and tactical planning. Since 2008, Mr. Altieri has been a member of the firm Altieri & Associates, specializing in corporate and energy law, and strategic business consulting. Since 2007, he has been corporate counsel and a member of the Board of Directors for a federally approved United States contractor, Plasma Arc Technologies, which holds designation for the destruction of government classified and declassified digital data devices. Mr. Altieri is licensed in the State of Florida. Mr. Altieri graduated from Saint Thomas University with a Law Degree and a Masters Degree and from the Columbia University Business School Senior Executive Program.
 
Edgar Choueiri. Professor Choueiri was appointed to the Company’s Board of Directors on May 15, 2013. Professor Choueiri is one of the world’s leading authorities on plasma technology. Currently, he is Director of Princeton University's Program in Engineering Physics, and Director of Princeton's Electric Propulsion and Plasma Dynamics Laboratory (EPPDyL) and has held those positions since 2008. He is tenured Full Professor in the Applied Physics Group at the Mechanical and Aerospace Engineering Department, and associated faculty at the Astrophysical Sciences Dept./Program in Plasma Physics at Princeton University. He holds a PhD in Aerospace Engineering/Plasma Science (1991) from Princeton University. He has been the Principle Investigator (PI) in charge of directing and managing 40 competitively selected research projects, funded by NASA, AFOSR, the National Science Foundation, and other governmental and private institutions. He has been PI and Co-PI on two space experimentson board the Space Shuttle and the Russian scientific spacecraft APEX. Professor Choueiri's laboratory (EPPDyL) at Princeton University, a recognized center of excellence in research in the field of advanced spacecraft propulsion, has been continuously funded by NASA since he became EPPDyL's Chief Scientist in 1996.

 
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Daniel Joonsikk Moon. Mr. Moon was appointed as a Director of the Company on December 29, 2011 and President of the Company on June 13, 2012. Mr. Moon resigned as President of the Company on September 4, 2013, however he remains as a director of the Company. Mr. Moon has been President and Chief Executive Officer of LUCKY TCL from 1993 to the present. LUCKY TCL, with offices in Beijing, Hong Kong and Seoul, core business is designing and manufacturing smelters for the mining industry with a primary focus on gold, copper and iron ores. From 1996 to present, Mr. Moon also has been President and Chief Executive Officer of FLAMBAU Ltd, a commodity trading business located in Hong Kong. Mr. Moon is a graduate of Han Yang University, Seoul Korea with a degree in architectural engineering and also is a graduate from South Dakota State University with a degree in Civil Engineering.

Juan A Serrat. Mr. Serrat was appointed Chief Technology Officer on May 11, 2012. Mr. Serrat has over 20 years in the construction field designing and supervising the construction of numerous mining and milling projects worldwide. From 2000 to 2009, he was the project manager of Titan America, one of the world’s largest cement and aggregate company. During his tenure at Titan, he was responsible for supervising the construction of nine projects valued over $582 million. Mr. Serrat has been President of ECI Unlimited Services, Inc., of Miami, Florida. ECI Unlimited is a family owned business and is involved purchasing and refining precious metals. Mr. Serrat is fluent in Russian, Spanish and English.

Ruben Fiqueredo. Mr. Fiqueredo was appointed Chief Operating Officer on May 11, 2012. Mr. Figueredo has over 30 years a certified and dual degreed engineer (telecommunications and electrical) with over thirty years of hands on project development and management experience. Since 1992, Mr. Figueredo has been President and Chairman of the Board for CompuVid, Inc, of Miami, Florida, where he has been responsible for the design, development, and installation of a multitude of industrial projects specializing in mining and aggregate processes.

Conflicts of Interest; Lack of Employment Contracts

All of the Company’s officers are not full time employees and are involved in other outside business activities, including, at least one other publicly held company. Presently, the Company does not have a formal conflicts of interest policy governing its officers and directors. In addition, the Company does not have written employment agreements with any of its officers, other than Mr. Hans H. Hertell, the Company’s President. Its officers intend to devote sufficient business time and attention to the affairs of the Company to develop the Company’s business in a prudent and business-like manner. However, the officers may engage in other businesses related and unrelated to the business of the Company. As a result, the officers of the Company may have a conflict of interest in allocating their respective time, services, and future resources, and in exercising independent business judgment with respect to their other businesses and that of the Company (See “Item 13 - Certain Relationships and Related Transactions, and Director Independence”).
 
None of our employees have employment contracts, other than Mr. Hans H. Hertell (See “Item 13 - Certain Relationships and Related Transactions, and Director Independence”). Accordingly, other than Mr. Hertell, our officers can terminate their employment at anytime. Mr. Hertell’s employment agreement may be terminated by either party with 10 days prior written notice. Therefore, if any or all of our officers were terminated, their employment replacements may be difficult to find, and it could have a material adverse effect on our business plans.
 
Involvement in Certain Legal Proceedings
To the knowledge of the Company, none of its executive officers or directors has been personally involved in any of the following:

(1) A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;

 
39

 
(2) Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

(3) Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:

(i)  
Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

(ii)  
Engaging in any type of business practice; or

(iii)  
Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;

(4) Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity;

(5) Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;

(6) Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;

(7) Such person was 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, relating to an alleged violation of:

(i)  
Any Federal or State securities or commodities law or regulation; or

(ii)  
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
 
(iii)  
Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

(8) Such person was 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.
 
Section 16(a) Beneficial Ownership Reporting Compliance
 
Section 16(a) of the Securities Exchange Act of 1934 requires our directors, officers, and every person who is directly or indirectly the beneficial owner of more than 10 percent of any class of the Company’s equity securities (the “Beneficial Owners”) to file with the Securities and Exchange Commission (the “SEC”) initial statements of beneficial ownership on Form 3, statements of changes in beneficial ownership on Form 4, and/or annual statements of changes in beneficial ownership on Form 5. Our directors, officers and Beneficial Owners are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.
 
 
40

 
Based solely on the Company’s review of such Section 16(a) forms received by it, the Company believes that, with respect to the fiscal year ended May 31, 2013, the Company’s directors, officers and Beneficial Owners were not in compliance with all Section 16(a) filing requirements.
 
The current officers, directors and Beneficial Owners have indicated that they intend bring their filings current and to file timely in the future.
 
Code of Ethics
 
The Company has adopted a Code of Ethics which is filed as an exhibit to its Form 10-K for the Annual Period ended May 31, 2010. The Code of Ethics is  designed to deter wrong-doing and promote honest and ethical conduct, full, fair, accurate, timely, and understandable disclosure, and compliance with applicable laws.
 
Audit Committee and Financial Expert

Our Board of Directors currently serves as our audit committee.  Our board members are not “independent” in accordance with rule 4200(a)(14) of the Nasdaq Marketplace Rules. Our board of directors does not have an “audit committee financial expert,” within the meaning of that phrase under applicable regulations of the Securities and Exchange Commission because it has no audit committee and is not required to have an audit committee because its securities are not listed on any exchange. The board of directors believes that each member is financially literate and experienced in business matters and is capable of (1) understanding generally accepted accounting principles (“GAAP”) and financial statements, (2) assessing the general application of GAAP principles in connection with our accounting for estimates, accruals and reserves, (3) analyzing and evaluating our financial statements, (4) understanding our internal controls and procedures for financial reporting, and (5) understanding audit committee functions, all of which are attributes of an audit committee financial expert. However, the board of directors believes that no audit committee member has obtained these attributes through the experience specified in the SEC's definition of “audit committee financial expert.” Further, as is the case with many small companies, it would be difficult for us to attract and retain board members who qualify as “audit committee financial experts,” and competition for such individuals is significant. The board of directors believes that its current members are able to fulfill its role under SEC regulations despite not having a designated “audit committee financial expert.”

ITEM 11.
EXECUTIVE COMPENSATION
 
Summary Compensation
 
Set forth below in the Summary Compensation Table are the particulars of compensation paid to the following persons:

-  
our principal executive officer;
-  
our principal financial officer
-  
our two most highly compensated executive officers other than our principal executive officer who were serving as executive officers at the end of the fiscal year ended May 31, 2013; and
-  
who we will collectively refer to as the “Named Executive Officers” for the fiscal year ended May 31, 2013.
 
 
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The following Summary Compensation Table summarizes the total compensation awarded to, earned by, or paid to our Named Executive Officers for all services rendered in all capacities to us for during the fiscal years ended May 31, 2013 and 2012:
 
SUMMARY COMPENSATION TABLE
 
 
Name and
Principal
 
Fiscal
Year
Salary Bonus  
Stock
Awards
Option Awards  
Incentive
Plan
Compensation
 
Non-Qualified
Compensation
Deferred
Earnings
   
All Other
Compensation
position
 Ended
 ($)
 ($)
($)
($)
($)
 ($)
  $ ($)  
Total ($)
Gennaro (Jerry) Pane, CEO and acting CFO (1)
2013
0 0 0 0 0 0     0   0
 
2012
0 0 0 90,000 0 0     0   90,000
David Cutler, former CFO (2)
2013
0 0 0 0 0 0     60,000   60,000
 
2012
0 0 0 80,000 0 0     30,000   110,000
Juan Serrat, COO (3)
2013
180,000 60,000 0 35,628 0 0     0   275,628
 
2012
9,863 3,288 0 164,371 0 0     0   177,522
Ruben Fiqueredo, CTO (4)
2013
180,000 60,000 0 35,628 0 0     0   275,628
 
2012
9,863 3,288 0 164,371 0 0     0   177,522

(1) Mr. Pane was appointed as our Chief Executive Officer on October 3, 2011. As consideration for his services in such capacity, Mr. Pane was granted five year, fully vested, stock options to purchase 500,000 shares of our common stock at $0.20 per share. Mr. Pane is our acting Chief Financial Officer.

(2) Mr. Cutler was appointed as our Chief Financial Officer on November 29, 2011. As consideration for his services in such capacity, Mr. Cutler was paid a monthly consulting fee of $5,000 and was granted five year, fully vested, stock options to purchase 500,000 shares of our common stock at $0.18 per share. On July 17, 2013, Mr. Cutler resigned as our Chief Financial Officer.

(3) Mr. Serrat was appointed our Chief Operating Officer on May 11, 2012. Mr. Serrat is to be paid an annual salary of $180,000 and entitled to an annual bonus of $60,000. Payment of the salary is deferred until the Company receives sufficient funding to support the salary requirement. Mr. Serrat also was granted five year, stock options to purchase 1,000,000 shares of our common stock at $0.16 per share, which vested immediately and stock options to purchase a further 250,000 shares of our common stock, also at $0.16 per share, but subject to a 6 month vesting period.

(4) Mr. Fiqueredo was appointed our Chief Technical Officer on May 11, 2012. Mr. Fiqueredo is paid an annual salary of $180,000 and entitled to an annual bonus of $60,000. Payment of the salary is deferred until the Company receives sufficient funding to support the salary requirement. Mr. Fiqueredo also was granted five year, stock options to purchase 1,000,000 shares of our common stock at $0.16 per share, which vested immediately and stock options to purchase a further 250,000 shares of our common stock, also at $0.16 per share, but subject to a 6 month vesting period.
 
As of the date of this Report, the Company has no written or oral agreements with any of its officers regarding compensation or any other form of remuneration, and has no compensation or remuneration of any kind due or accrued and unpaid to any officer other than as indicated above. Any compensation paid to an officer is a result of an agreement between the parties.
 
 
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Director Compensation
Except as stated herein, the directors receive no monetary compensation for their work for the Company during the year ended May 31, 2013.

The following Director Compensation Table lists all compensation (cash, equity or other) received by each person in their respective capacity as a director during the fiscal year ended May 31, 2013:

Name
Fees
Earned
or Paid
in Cash
$
Stock
Awards
($) (3)
Option
Awards ($)
Non-Equity
Incentive
Plan
Compensation
$
Non-Qualified
Deferred
Compensation
Earnings ($)
All Other
Compensation ($)
Total ($)
David W. Burney
-
45,000
-
-
-
-
45,000
Gennaro (Jerry) Pane
-
45,000
-
-
-
-
45,000
Sheldon Baer
-
45,000
-
-
-
-
45,000
Daniel Luciano
-
45,000
-
-
-
-
45,000
John Gildea
-
45,000
-
-
-
-
45,000
Daniel Moon
-
45,000
-
-
-
-
45,000
Chad Altieri
-
45,000
-
-
-
-
45,000
Edgar Choueiri (1)
-
-
239,123
-
-
-
239,123
Hans H. Hertell (2)
-
-
181,872
-
-
-
181,872
 
(1) Professor Choueiri was appointed a director on May 15, 2013. Professor Choueiri was granted five year, fully vested, stock options to purchase 1,000,000 shares of our common stock at $0.25 per share.

(2) Ambassador Hans H. Hertell was appointed as a director on May 31, 2013. Ambassador Hans H. Hertell was granted five year, fully vested, stock options to purchase 1,000,000 shares of our common stock at $0.19 per share.

(3) During the year ended May 31, 2013, we issued to our directors a total of 1,750,000 shares of common stock, collectively valued at $315,000. Each of our directors at the time received 250,000 shares of common stock.

 
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ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
 
Security Ownership of Certain Beneficial Owners and Management. As of September 6, 2013, there were a total of 121,781,244 shares of our common stock, our only class of voting securities currently outstanding. The following table describes the beneficial ownership of our voting securities by: (i) each of our officers and directors; (ii) all of our officers and directors as a group; and (iii) each shareholder known to us to own beneficially more than 5% of our common stock. Unless otherwise stated, the address of each individual is our address, 176 Route 9 North, Suite 306, Marlboro, New Jersey, 07728. All ownership is direct, unless otherwise stated.
 
In calculating the percentage ownership for each shareholder we assumed the exercise and conversion of all outstanding options and convertible promissory notes owned by such shareholders.
 
Name and Address of Beneficial Owner
 
Title of Class
 
Amount and Nature of
Beneficial Ownership
   
Percent of Class*
 
5% Holders
               
                     
George Mesa (2)
201 South Biscayne Blvd.
Miami, Fl 33131
 
Common
    11,000,000       8.9 %
                     
Mesa Acquisitions Group, LLC (3)
201 South Biscayne Blvd.
Miami, Fl 33131
 
Common
    10,000,000       8.2 %
                     
The Hertell Group, LLC (14)
206 Tetuan
San Juan, Puerto Rico
  Common     9,000,000       6.9
                     
Officer and Directors
                   
                     
Gennaro Pane (4)
 
Common
    3,950,000       3.0 %
Sheldon Baer (5)
 
Common
    2,521,395       1.9 %
Dave Burney (6)
 
Common
    2,450,000       1.8 %
Daniel H. Luciano (7)
 
Common
    1,844,000       1.3 %
John Gildea (8)
 
Common
    1,750,000       1.2 %
Daniel Moon (9)
 
Common
    1,500,000       1.0 %
Chad Altieri (10)
 
Common
    1,500,000       1.0 %
Juan Serrat (11)
 
Common
    1,250,000       1.0 %
Ruben Fiqueredo (12)
 
Common
    1,250,000       1.0 %
Edgar Choueiri (13)
 
Common
    1,250,000       0.8 %
Hans H. Hertell (14)
 
Common
    10,250,000       7.6 %
All officers and directors (11 persons)
 
 Common
    29,515,395       21 %

(1)  “Beneficial ownership" means having or sharing, directly or indirectly (i) voting power, which includes the power to vote or to direct the voting, or (ii) investment power, which includes the power to dispose or to direct the disposition, of shares of the common stock of an issuer. The definition of beneficial ownership includes shares underlying options or warrants to purchase common stock, or other securities convertible into common stock, that currently are exercisable or convertible or that will become exercisable or convertible within 60 days. Unless otherwise indicated, the beneficial owner has sole voting and investment power.

(2) The principal shareholder and principal officer of the reporting person is Mr. George Messa.

(3) Represents 10,000,000 shares of common stock owned by a company controlled by the reporting person and stock options to acquire 1,000,000 shares held by the reporting person.

 
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(4)  Represents stock options to acquire 1,500,000 shares held by the reporting person, 2,200,000 shares held by the reporting person, and a stock grant in the amount of 250,000 shares to be issued to the reporting person as a Company director for the 2013 period.
 
(5) Represents stock options to acquire 1,000,000 shares held by the reporting person, 1,271,395 shares held by the reporting person, and a stock grant in the amount of 250,000 shares to be issued to the reporting person as a Company director for the 2013 period.
 
(6) Represents stock options to acquire 1,000,000 shares held by the reporting person and 1,200,000 shares held by the reporting person, and a stock grant in the amount of 250,000 shares to be issued to the reporting person as a Company director for the 2013 period.
 
(7) Represents stock options to acquire 1,000,000 shares held by the reporting person and 594,000 shares of common stock owned by the reporting person, and a stock grant in the amount of 250,000 shares to be issued to the reporting person as a Company director for the 2013 period.
 
(8) Represents stock options to acquire 1,000,000 shares held by the reporting person and 500,000 shares of common stock owned by the reporting person, and a stock grant in the amount of 250,000 shares to be issued to the reporting person as a Company director for the 2013 period.
 
(9) Represents stock options to acquire 1,000,000 shares held by the reporting person and 250,000 shares of common stock owned by the reporting person, and a stock grant in the amount of 250,000 shares to be issued to the reporting person as a Company director for the 2013 period.
 
(10) Represents stock options to acquire 1,000,000 shares held by the reporting person and 250,000 shares of common stock owned by the reporting person, and a stock grant in the amount of 250,000 shares to be issued to the reporting person as a Company director for the 2013 period.
 
(11) Represents stock options to acquire 1,250,000 shares held by the reporting person.
 
(12) Represents stock options to acquire 1,250,000 shares held by the reporting person.
 
(13) Represents stock options to acquire 1,000,000 shares held by the reporting person, and a stock grant in the amount of 250,000 shares to be issued to the reporting person as a Company director for the 2013 period.
 
(14) Represents stock options to acquire 1,000,000 shares held by the reporting person, a stock grant in the amount of 250,000 shares to be issued to the reporting person as a Company director for the 2013 period, and 9,000,000 shares of common stock issuable to the Hertell Group, LLC under a consulting agreement with the Company. Mr. Hertell is Chairman and Chief Executive Officer of The Hertell Group LLC.
 
Securities Authorized for Issuance Under Equity Compensation Plans
 
Details of securities authorized for issuance under equity compensation plans are provided in Note 9 – Shareholder’s Deficit of our audited financial statements on page 67 below.

As of May 31, 2013, 16,500,000 stock options remain outstanding, of which 10,500,000 are held by former and existing directors, 4,000,000 are held by officers of the Company and 2,000,000 held by consultants to the Company.

ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE   
 
Certain Relationships and Related Transactions

On September 4, 2013, we appointed Mr. Hans H. Hertell as the Company’s President, and in connection with such appointment, Daniel Moon resigned as the Company’s President. In addition, on that same date, our   Board of Directors approved an Employment Agreement with Mr. Hertell and a Consulting Agreement with Hertell Group, LLC. (“Hertell Group”). Mr. Hertell is the sole officer and member of Hertell Group. The effective date of both agreements is August 28, 2013.
 
 
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Under the Employment Agreement, among other terms, we agreed to pay Mr. Hertell an annual salary of $500,000. The salary commences at such time as we generate monthly gross revenues from our plasma processing operations of at least one million dollars ($1,000,000) for two (2) consecutive months (“Performance Event”), and (ii) upon our achievement of the Performance Event, the Base Salary shall commence effective as of the first day of the stated two (2) consecutive month period and shall continue throughout the Term. In addition, upon occurrence of the Performance Event, the Executive will be entitled to receive a stock award of 1,000,000 shares of common stock (“Stock Grant”), which shall vest immediately. Either party may terminate this Agreement by providing at least ten (10) days written notice to the other party.
 
Under the Consulting Agreement, among other terms, the Hertell Group will provide general business consulting services including but not limited to business development strategy, introduction of prospective business acquisitions or joint venture participation, deal-making, introduction to capital markets, marketing strategies, and other duties as mutually agreed upon by the parties. As consideration or the services, the Hertell Group will receive 9,000,000 shares of our common stock which will be issued immediately. The term of the Consulting Agreement is three years.

On September 4, 2013, the Company’s Board of Directors approved a stock grant of 250,000 shares of common stock issuable to each member of the Board of Directors on such date. A total of 2,000,000 shares of common stock are issuable as of such stock grant.

During the year ended May 31, 2013, the Company issued to its directors a total of 1,750,000 shares of common stock, valued at $315,000, and 2,000,000 stock options, valued at $420,995. Each director received 250,000 shares of common stock. In addition, 1,000,000 fully vested stock options were issued to each of two newly appointed directors (2,000,000 in total).

On March 19, 2013, Mr. Jerry Pane, our Chief Executive Officer and a director of the Company, advanced to us $50,000 by way of loan. The loan was unsecured, interest free and repayable on demand. The loan was repaid as follows: $10,000 of the loan was repaid on March 25, 2013, $20,000 of the loan was repaid on April 15, 2013 and the remaining $20,000 balance of the loan was repaid on April 19, 2013.
 
On May 11, 2013, the Company entered into a Share Exchange Agreement with Resource Technology Corporation, a newly formed Florida corporation (“RTC”), and the RTC shareholders to acquire all of the issued and outstanding shares of RTC in exchange for 300 million shares of common stock of the Company. The RTC shareholders are Wolz International, LLC (“Wolz”), Titan Productions, Inc. (“Titan”), and Mercury6, LP (“Mercury6”). Assuming a completion of the transaction without a proportionate reduction in the USPR Shares, Wolz, Titan and Mercury each will receive 150 million shares, 75 million shares and 75 million shares, of common stock of USPR, respectively. Mr. Gennaro Pane, our Chairman and Chief Executive Officer, is the sole officer and member of Wolz (and will own approximately 51% of such shares), and Chad Altieri, our Board member, is the sole owner of Mercury. In addition, Messrs Pane and Altieri own or control limited partnership interests in PP LP.

On May 22, 2013, the Company issued 10,000,000 shares of its common stock valued at $1.9 million to a company in connection with the exploration, and potentially the development, of a portion of our Solidaridad Property. In addition, in 2013, we issued 1,000,000 fully vested stock options valued at $114,682 to the principal of this company as consideration for acting as Director of Security of our Solidaridad Property.

During the year ended May 31, 2012, the Company issued to its directors a total of 1,750,000 shares of common stock, valued at $175,000, and 2,500,000 stock options, valued at $419,999. Each director received 250,000 shares of common stock, except that the Chairman, who received 500,000 shares of common stock. In addition, 1,000,000 fully vested stock options were issued to each of two newly appointed directors (2,000,000 in total) and 500,000 fully vested stock options were issued to an officer who is also a director. The Company further issued 3,000,000 stock options, valued at $480,000, to three newly appointed officers of the Company, 2,500,000 of these options vested immediately, the remaining 500,000 options will vest in 2013.

Director independence
 
Our common stock is quoted on the OTC-QB interdealer quotation system, which does not have director independence requirements. Under NASDAQ rule 4200(a)(15), a director is not considered to be independent if he or she is also an executive officer or employee of the corporation.

 
46

 
Employment Contracts and Termination of Employment and Change in Control Arrangements
 
Except as stated herein, we have not entered into an employment agreement or consulting agreement with our board of directors and executive officers.

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 under the Company’s 2007 Stock Option Plan.
 
We have no plans or arrangements in respect of remuneration received or that may be received by our executive officers to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control, where the value of such compensation exceeds $60,000 per executive officer.


ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
 
The following table sets forth fees billed to us by the principal accountants to the Company for professional services rendered for the fiscal years ended May 31, 2012 and 2011:
 
Fee Category
 
Fiscal Year
2013 Fees
(Estimate)
   
Fiscal Year
2012 Fees
 
Audit Fees
  $ 35,500     $ 34,105  
Audit Related Fees
    0       0  
Tax Fees
    6,000       5,400  
All Other Fees
    0       0  
Total Fees
  $ 41,500     $ 39,605  

Audit Fees
 
Consists of fees billed for professional services rendered for the audit of our financial statements and review of interim consolidated financial statements included in quarterly reports and services that are normally provided by the principal accountants in connection with statutory and regulatory filings or engagements.
 
Audit Related Fees
 
Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit Fees.”
 
Tax Fees
 
Consists of fees billed for professional services for tax compliance, tax advice and tax planning. These services include preparation of federal and state income tax returns.

All Other Fees

Consists of fees for product and services other than the services reported above.
 
Pre-Approval Policies and Procedures
 
Prior to engaging its accountants to perform a particular service, the Company’s Board of Directors obtains an estimate for the service to be performed. All of the services described above were approved by the Board of Directors in accordance with its procedures.
 
 
47

 
PART IV

ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES

   
Incorporation by Reference   
Exhibit
Number
Exhibit Description
Form
Exhibit
File Date
Filed
herewith
3.1
Certificate of Incorporation for the Company
10-SB
3 (i)(a)
04/23/2004
 
3.2
Amended and Restated Certificate of Incorporation for the Company
10-SB
3(i)(b)
04/23/2004
 
3.3
Articles of U.S. Precious Metals de Mexico, S.A. de C.V.
10-SB
3(i)(c)
04/23/2004
 
3.4
Bylaws of the Company
10-SB
3(ii)(a)
04/23/2004
 
3.5
Amended and Restated Bylaws of the Company
8-K
3.1
12/03/2008
 
3.6
Certificate of Designations of Series A Preferred Stock
8-A
3.1
03/19/2009
 
4.2
Rights Agreement dated March 17, 2009, by and between the Company and Interwest Transfer Company, Inc., as rights agent
8-A
4.1
03/19/2009
 
10.1
2007 Stock Option Plan
PRE 14A
App. A
05/20/2008
 
10.2
Temporary Occupation and Right of Way Agreement by and between Victorio Gutierrez Cardenas, Irma Banuelos Serrato and the Mexican Subsidiary dated August 20, 2007
10-K
 
 
 
10.2
 
 
 
09/16/2009
 
 
 
10.3
Temporary Occupation and Right of Way Agreement by and between Victorio Gutierrez Cardenas, Irma Banuelos Serrato and the Mexican Subsidiary dated August 20, 2007 (English Translation)
10-K
 
 
 
 
10.3
 
 
 
 
09/16/2009
 
 
 
 
10.4
Amendment to the Temporary Occupation by and between Victorio Gutierrez Cardenas, Irma Banuelos Serrato and the Mexican Subsidiary dated June 23, 2009
10-K
 
 
 
10.4
 
 
 
09/16/2009
 
 
 
10.5
Amendment to the Temporary Occupation by and between Victorio Gutierrez Cardenas, Irma Banuelos Serrato and the Mexican Subsidiary dated June 23, 2009 (English Translation)
10-K
 
 
 
10.5
 
 
 
09/16/2009
 
 
 
10.6
Lease Agreement by and between Salomon Rosales Lira and the Mexican Subsidiary dated February 1, 2009 for the warehouse facility located in Morelia, Michoacán, Mexico
10-K
 
 
 
10.6
 
 
09/16/2009
 
 
 
10.7
Lease Agreement by and between Salomon Rosales Lira and the Mexican Subsidiary dated February 1, 2009 for the warehouse facility located in Morelia, Michoacán, Mexico (English Translation)
10-K
10.7
 
 
 
09/16/2009
 
 
 
 
 
 
48

 
10.8
Payment Agreement and General Release
 
10.1
01/19/2010
 
10.9
Pledge Agreement
 
10.2
01/19/2010
 
10.10
Pledge Agreement (English Translation)
 
10.3
01/19/2010
 
10.11
Stock Exchange Agreement dated May 11, 2012 by and between US Precious Metals, Inc., Resource Technology Corp. and the Shareholders of Resource Technology Corp.
8-K
10.11
5/17/2013
 
10.12
 Escrow Agreement by and between US Precious Metals, Inc., Resource Technology Corp. and the Shareholders of Resource Technology Corp. and the Escrow Agent.
8-K
10.12
5/17/2013
 
10.13
Mining Services Contract  by and between US Precious Metals, Inc. and Mesa Acquisitions LLC.
8-K
10.13
5/29/2013
 
10.14
Employment Agreement dated August 28, 2013 by and between US Precious Metals, Inc., and Hans H. Hertell.
8-K
10.14
9/10/2013
 
10.15
 Consultant Agreement dated August 28, 2013 by and between US Precious Metals, Inc., and  Hertell Group, LLC.
8-K
10.15
9/10/2013
 
14.
Code of Ethics
10-K 14 9/14/2010  
16.1
Letter dated March 9, 2009 from Robert Jeffrey, to the Securities Exchange Commission
 
16.1
03/10/2009
 
21.1
List of Subsidiaries of the Company
     
X
31
Certification of Principal Executive Officer as required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
     
X
32
Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
     
X
101.INS
XBRL Instance Document (1)
       
101.SCH
XBRL Taxonomy Extension Schema Document (1)
       
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document (1)
       
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document (1)
       
101.LAB
XBRL Taxonomy Extension Label Linkbase Document (1)
       
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document (1)
       

 
(1) Pursuant to Rule 406T of  Regulation  S-T,  this  interactive  data file is deemed not filed or part of a registration  statement or prospectus for purposes of  sections  11 or 12 of the  Securities  Act of 1933,  is deemed not filed for purposes of section 18 of the Securities  Exchange Act of 1934, and otherwise is not subject to liability under these sections.

 
 
49

 
U.S. PRECIOUS METALS, INC.
(An Exploration Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2013
 

 
ITEM 8.            FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 

 
CONTENTS
 
  Page
Report of Independent Registered Public Accounting Firm  51
Consolidated Balance Sheets   52
Consolidated Statements of Operations  53
Consolidated Statements of Changes in Stockholders’ Deficit   54-59
Consolidated Statements of Cash Flows  60
Notes to Consolidated Financial Statements  61
 
 


 
 
50

 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 

 
To the Board of Directors and Stockholders of
U.S. Precious Metals, Inc.
 
We have audited the accompanying consolidated balance sheets of U. S. Precious Metals, Inc. (an exploration stage company) as of May 31, 2013 and 2012 and the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for the years then ended and for the period from January 21, 1998 (date of Inception of exploration stage) to May 31, 2013. These financial statements are the responsibility of the Company management. Our responsibility is to express an opinion on these financial statements based on our audit.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of U.S. Precious Metals, Inc. and subsidiary at May 31, 2013 and 2012, and the results of their operations and their cash flows for the years then ended, and for the period from January 21, 1998 (date of Inception of exploration stage) to May 31, 2013 in conformity with accounting principles generally accepted in the United States of America.
 
The accompanying consolidated financial statements have been prepared assuming that U.S. Precious Metals, Inc. and subsidiary will continue as a going concern. As more fully described in Note 3, at May 31, 2013 the Company had no established source of revenues, a working capital deficit of $3,844,147 and had accumulated losses of  $28,977,046 since Inception (January 21, 1998). These conditions raise substantial doubt about the ability of the Company to continue as a going concern. Management’s plans in regards to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
 
 
/s/ Jeffrey & Company, Certified Public Accountants
Wayne, New Jersey
September 13, 2012
 
 
51

 
U.S. PRECIOUS METALS, INC.
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS

   
May 31, 2013
   
May 31, 2012
 
ASSETS
       
 
 
Current Assets:
           
  Cash
  $ 28,691     $ 116,669  
  Prepaid and other current assets
    8,762       14,117  
  Total current assets
    37,453       130,786  
                 
Fixed Assets, net
    35,653       45,762  
                 
Other Assets:
               
  Investment in mining rights
    155,331       155,331  
  Deposits
    2,090       4,423  
   Total other assets
    157,421       159,754  
                 
  Total Assets
  $ 230,527     $ 336,302  
                 
LIABILITES AND STOCKHOLDERS' DEFICIT
               
Current Liabilities:
               
  Accounts payable and accrued expenses
  $ 2,950,677     $ 2,357,575  
  Convertible notes payable
    930,923       838,923  
  Total current liabilities
    3,881,600       3,196,498  
                 
 Commitments and Contingencies
               
Stockholders' Deficit:
               
Preferred stock: authorized 10,000,000 shares of  $0.00001  par value: no shares issued or outstanding
    -       -  
                 
Common stock: authorized 150,000,000 of $0.00001 par value , issued and outstanding 121,781,244 and 103,307,633 shares, respectively
    1,218       1,033  
  Additional paid in capital
    25,325,355       21,689,400  
  Deficit accumulated during exploration stage
    (28,977,646 )     (24,550,629 )
  Total stockholders' deficit
    (3,651,073 )     (2,860,196 )
                 
  Total Liabilities and Stockholders' Deficit
  $ 230,527     $ 336,302  
 
The accompanying notes are an integral part of these financial statements.
 
 
52

 

 
U.S. PRECIOUS METALS, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
 

   
For the Years Ended May 31,
   
January 21, 1998
(Date of Inception of Exploration Stage) 
to May 31,
 
   
2013
   
2012
   
 2013
 
                   
Revenues
  $ -     $ -     $ -  
                         
Expenses
    4,213,963       2,453,863       28,131,929  
Debt reduction through legal settlements
    -       -       (692,315 )
Operating Loss
    (4,213,963 )     (2,453,863 )     (27,439,614 )
                         
Other Income (Expense):
                       
     Interest income
     -        -       17,960  
     Interest expense
    (213,054 )     (432,716 )     (1,555,992 )
Net other expense
    (213,054 )     (432,716 )     (1,538,032 )
                         
Loss before income taxes
    (4,427,017 )     (2,886,579 )     (28,977,646 )
Provision for income taxes
    -       -       -  
   Net Loss
  $ (4,427,017 )   $ (2,886,579 )   $ (28,977,646 )
                         
Net Loss per Share - Basic and Diluted
  $ (0.04 )   $ (0.03 )        
Weighted Average Number of Shares
   Outstanding - Basic and Diluted
    107,467,729       92,563,149          
 
 
The accompanying notes are an integral part of these financial statements.

 
53

 
 
U.S. PRECIOUS METALS, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE PERIOD FROM INCEPTION (JANUARY 21, 1998) TO MAY 31, 2013
 
 

   
Common Stock
   
Additional
Paid in
   
Deficit
Accumulated
During
Exploration
       
   
Shares
   
Amount
   
Capital
   
Stage
   
Total
 
  Balance, May 31, 2001
  $     $     $     $     $  
  Shares issued to incorporator
    1,961,184       19       (19 )            
                                         
  Balance, May 31, 2002
    1,961,184       19       (19 )            
                                         
  Sales of common stock
    5,000,000       50       124,950               125,000  
  Shares issued for services
    13,100,000       131       133,869               134,000  
  Shares issued in exchange for  
                                       
    mining rights
    1,500,000       15       14,985               15,000  
  Net loss for the period
                            (215,924 )     (215,924 )
                                         
  Balance, May 31, 2003
    21,561,184       215       273,785       (215,924 )     58,076  
                                         
  Sales of common stock
    1,880,000       19       229,981               230,000  
  Shares issued for services
    2,910,000       29       88,721               88,750  
  Cancellation of shares
    (400,000 )     (4 )     4               0  
  Net loss for the period
                            (313,127 )     (313,127 )
  
                                       
  Balance, May 31, 2004
    25,951,184       259       592,491       (529,051 )     63,699  
 
The accompanying notes are an integral part of these financial statements.

 
54

 
 
U.S. PRECIOUS METALS, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE PERIOD FROM INCEPTION (JANUARY 21, 1998) TO MAY 31, 2013
CONTINUED
 
 
   
Common Stock
   
Additional
Paid in
   
Deficit
Accumulated
During
Exploration
       
   
Shares
Amount
   
Capital
   
Stage
   
Total
 
  Balance, May 31, 2004
                             
  (carried forward)
    25,951,184     $ 259     $ 592,491     $ (529,051 )   $ 63,699  
                                         
  Sales of common stock
    860,000       9       177,491               177,500  
  Shares issued for services
    100,000       1       24,999               25,000  
  Issuance of stock paid in  
                                       
    prior year
    80,000       1       19,999               20,000  
  Retirement of stock due to
                                     
    settlement agreement
    (175,166 )     (2 )     2                  
  Net loss for the period
                            (226,093 )     (226,093 )
                                         
  Balance, May 31, 2005
    26,816,018       268       814,982       (755,144 )     60,106  
    
                                       
  Sales of common stock
    4,332,500       43       1,122,457               1,122,500  
  Shares issued for services
    233,961       3       96,252               96,255  
  Exercise of warrants
    10,000               2,500               2,500  
  Net loss for the period
                            (280,014 )     (280,014 )
                                         
  Balance, May 31, 2006
    31,392,479       314       2,036,191       (1,035,158 )     1,001,347  
 

 
The accompanying notes are an integral part of these financial statements.
 
 
55

 

 
U.S. PRECIOUS METALS, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE PERIOD FROM INCEPTION (JANUARY 21, 1998) TO MAY 31, 2013
CONTINUED
 

   
Common Stock
   
Additional
Paid in
   
Deficit
Accumulated
During
Exploration
       
   
Shares
   
Amount
   
Capital
   
Stage
   
Total
 
                               
  Balance, May 31, 2006
                             
  (carried forward)
    31,392,479     $ 314     $ 2,036,191     $ (1,035,158 )   $ 1,001,347  
                                         
  Shares issued for services
    905,355       9       232,618               232,627  
  Retirement shares issued in  
                                     
    prior year for which no
                                       
    consideration was   
                                       
    received
    (452,835 )     (5 )     5                  
  Issuance of stock paid in
                                     
    prior year
    267,500       3       (3 )                
  Net loss for the period
                            (898,843 )     (898,843 )
                                         
  Balance, May 31, 2007
    32,112,499       321       2,268,811       (1,934,001 )     335,131  
                                         
  Sales of common stock
    10,175,000       102       1,417,398               1,417,500  
  Shares issued for services
    4,808,000       48       4,009,152               4,009,200  
  Exercise of warrants
    320,000       3       79,997               80,000  
  Options granted
                                       
  Net loss for the period
                            (5,028,449 )     (5,028,449 )
                                         
  Balance, May 31, 2008
    47,415,499       474       7,775,358       (6,962,450 )     813,382  
 
The accompanying notes are an integral part of these financial statements.

 
56

 

U.S. PRECIOUS METALS, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE PERIOD FROM INCEPTION (JANUARY 21, 1998) TO MAY 31, 2013
CONTINUED
 
 

   
Common Stock
   
Additional