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EX-32.2 - EXHIBIT322 - FIRST COLOMBIA GOLD CORP.exhibit322.htm
EX-32.1 - EXHIBIT321 - FIRST COLOMBIA GOLD CORP.exhibit321.htm
EX-31.2 - EXHIBIT312 - FIRST COLOMBIA GOLD CORP.exhibit312.htm
EX-31.1 - EXHIBIT311 - FIRST COLOMBIA GOLD CORP.exhibit311.htm
EX-24.1 - EXHIBIT231 - FIRST COLOMBIA GOLD CORP.exhibit231.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ý ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2013

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ___________ to __________.

Commission file number: 000-51203

First Colombia Gold Corp.
(Exact name of registrant as specified in its charter)
 
Nevada
 
98-0425310
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
     
Paseo de Bernardez #59 FRACC, Lomas de Bernadez,Guadalupe 98610, Zacatecas,Mexico
(Address of principal executive offices) (Zip Code)
Registrant’s telephone, including area code: 1-888-224-6561
 
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
 
Not Applicable
(Title of class)
 
(Name of each exchange on which registered)
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No ý

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý 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. ¨

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  ¨                                                              Accelerated filer ¨
Non-accelerated filer    ¨                                                              Smaller reporting company ý
(Do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

As of June 30, 2013, the aggregate market value of the Company’s common equity held by non-affiliates computed by reference to the closing price $0.007 was:  $486,229.

The number of shares of our common stock outstanding as of April 17, 2014 was: 694,614,273.

Documents Incorporated by Reference: None.


 

 



FORM 10-K
FIRST COLOMBIA GOLD CORP.
DECEMBER 31, 2013

 
 
 
Page
   
PART I
 
   
Item 1.              Business.
4
Item 1A.           Risk Factors.
7
Item 1B.            Unresolved Staff Comments.
17
Item 2.              Properties.
17
Item 3.              Legal Proceedings.
30
Item 4.              Mine Safety Disclosures.
30
   
PART II



Item 15.           Exhibits, Financial Statement Schedules.
47

 
 
 
 

 


 

 
 
Cautionary Note Regarding Forward Looking Statements
 
This annual report contains 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.The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “may,” “should,” “could,” “will,” “plan,” “future,” “continue, ” and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. These forward-looking statements are based largely on our expectations or forecasts of future events, can be affected by inaccurate assumptions, and are subject to various business risks and known and unknown uncertainties, a number of which are beyond our control. Therefore, actual results could differ materially from the forward-looking statements contained in this document, and readers are cautioned not to place undue reliance on such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. A wide variety of factor could cause or contribute to such differences and could adversely impact revenues, profitability, cash flows and capital needs. There can be no assurance that the forward-looking statements contained in this document will, in fact, transpire or prove to be accurate. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors” that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by any forward-looking statements.

Important factors that may cause the actual results to differ from the forward-looking statements, projections or other expectations include, but are not limited to, the following:

risk that we will not be able to remediate identified material weaknesses in our internal control over financial reporting and disclosure controls and procedures;
 
risk that we fail to meet the requirements of the agreements under which we acquired our options to acquire mineral property interests, including any cash payments to the optionor or any exploration obligations that we have regarding these properties, which could result in the loss of our right to exercise these options to acquire certain mining and mineral rights underlying these properties;

risk that we will be unable to secure additional financing in the near future in order to commence and sustain our planned exploration work and be forced to cease our exploration and development program;
 
risk that we cannot attract, retain and motivate qualified personnel, particularly employees, consultants and contractors for our operations;

risks and uncertainties relating to the interpretation of drill results, the geology, grade and continuity of mineral deposits;
 
results of initial feasibility, pre-feasibility and feasibility studies, and the possibility that future exploration, development or mining results will not be consistent with our expectations;

mining and development risks, including risks related to accidents, equipment breakdowns, labor disputes or other unanticipated difficulties with or interruptions in production;
 
the potential for delays in exploration or development activities or the completion of feasibility studies;

risks related to the inherent uncertainty of production and cost estimates and the potential for unexpected costs and expenses;
 
risks related to commodity price fluctuations;

 
 

 




the uncertainty of profitability based upon our history of losses;
 
risks related to failure to obtain adequate financing on a timely basis and on acceptable terms for our planned exploration and development projects;

risks related to environmental regulation and liability;
 
risks that the amounts reserved or allocated for environmental compliance, reclamation, post-closure control measures, monitoring and on-going maintenance may not be sufficient to cover such costs;

risks related to tax assessments;
 
political and regulatory risks associated with mining development and exploration; and

other risks and uncertainties related to our prospects, properties and business strategy.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. Except as required by law, we do not undertake to update or revise any of the forward-looking statements to conform these statements to actual results, whether as a result of new information, future events or otherwise.

As used in this annual report, “First Colombia,” the “Company,” “we,” “us,” or “our” refer to First Colombia Gold Corp., unless otherwise indicated.

If you are not familiar with the mineral exploration terms used in this report, please refer to the definitions of these terms under the caption “Glossary” at the end of Item 15 of this report.
 
PART I

Corporate History

We were incorporated in the State of Nevada under the name Gondwana Energy, Ltd. on September 5, 1997, and previously operated under the name Finmetal Mining, Ltd and then Amazon Goldsands, Ltd. In 2011, we changed our name to First Colombia Gold Corp. Our operations have historically focused on the acquisition and development of mineral property interests in varying locations, including Finland and Peru. The current focus of our business and operations is on the development of our mineral property interests on properties located in the western United States and we are evaluating mineral property interests and seeking opportunities in other geographical areas, including Colombia and South America, to potentially acquire.

On November 15, 2012, the Company filed a Certificate of Designation for its Class Series A Preferred Convertible Stock with the Secretary of State of Nevada designating 50,000,000 shares of its authorized Preferred Stock as Class A Preferred Convertible Stock. The Class A Preferred Shares have a redeemable purchase price of $0.01 per share. The Class A Preferred Shares are convertible into shares of the Company’s common stock at a rate of 1 preferred share equals 2 common shares.

In addition, the Class A Preferred Shares rank senior to the Company’s common stock. The Class A Preferred Shares have voting rights equal to that of the common stockholders and may vote on any matter that common shareholders may vote. One Class A Preferred Shares is the voting equivalent of two common shares.

The Company does have the right, at its discretion, to redeem the Class A Preferred Shares at a price of $0.01 per share.
 
 
 
 

 


On January 31, 2013, the Company  issued 47,568,500 shares of its Class A Preferred Convertible Stock (“Class A Preferred”), in exchange for the settlement of debt of approximately $104,651 to both unrelated parties and certain officers and directors of the Company. The Class A Preferred shares were issued at a price of $0.0022 per share.

The Company’s Chief Executive Officer, Mr. Sutti-Kyser and its directors, Mr. Zapata and Sredl, received a total of 10,545,600 shares with a deemed market value of $23,200 to settle liabilities of approximately $32,300.

On January 31, 2013, the Majority Stockholders of the Company, of record, held 300,000 shares of the Company's common stock and 47,568,500 shares of the Company’s Class A Preferred Convertible Preferred stock representing the voting equivalent of 95,137,000 shares of common stock or approximately 50.48% of the Company's voting stock. As such they approved an amendment to the Company’s Articles of Incorporation to increase in the authorized common stock from 200,000,000 shares of common stock to 850,000,000 shares of common stock. The Articles were amended and the increase took effect twenty days after filing with the Nevada Secretary of State.

On December13, 2013_, the Company filed a Certificate of Designation for its Class Series B Preferred Convertible Stock with the Secretary of State of Nevada designating 33,181,818 shares of its authorized Preferred Stock as Class A Preferred Convertible Stock. The Class B Preferred Shares have a redeemable purchase price of $0.01 per share. The Class A Preferred Shares are convertible into shares of the Company’s common stock at a rate of 1 preferred share equals 1 common share.
 
On January 20, 2014, the Majority Stockholders of the Company, of record, holding 100,000 shares of the Company's common stock and 10,545,600 shares of the Company’s Class A Preferred Convertible Preferred stock, 2,000,000 shares of the Company’s Class B Preferred stock representing the voting equivalent of 61.26% of the voting stock, in total. As such they approved an amendment to the Company’s Articles of Incorporation to decrease in the issued common stock from 500 old shares to 1 new share of common stock. The Articles were amended and the reverse is expected to take effect by approximately April 19, 2014.

Exploration Stage Company

We are considered an exploration or exploratory stage company because we are involved in the examination and investigation of land that we believe may contain valuable minerals, for the purpose of discovering the presence of ore, if any, and its extent. There is no assurance that a commercially viable mineral deposit exists on any of the properties underlying our mineral property interests, and a great deal of further exploration will be required before a final evaluation as to the economic and legal feasibility for our future exploration is determined. We have no known reserves of any type of mineral. To date, we have not discovered an economically viable mineral deposit on any of the properties underlying our mineral property interests, and there is no assurance that we will discover one. If we cannot acquire or locate mineral deposits, or if it is not economical to recover any mineral deposits that we do find, our business and operations will be materially and adversely affected.

Our business model is to identify promising properties and prospects in historic mining districts for acquisition, lease, option or joint-venture. We aim to build a portfolio of properties that we can add value through exploration, development or to joint-venture, lease or sell to other companies where warranted. Our geographic focus is North and South America and southeastern Europe. We are primarily focused on the mining industry but will consider projects in other sectors.

Since October 2011, the Company has made the acquisition of projects in both Idaho and Montana. We have spent the last two years actively considering additional projects which resulted in the acquisition of unpatented mining claims comprising the Skip Silver Prospect in Montana. During 2012 our retained professional geologist has conducted exploration activity on behalf of the company in Montana, along with activity reviewing prospects in various states. The Company in 2012 also reviewed historical data on existing projects and began planning for filing exploration permits in 2014.Our consulting geologist also visited sites in Arizona during the year. In 2013 we began exploring eastern Washington for uranium prospects and staked unpatented mining claims, the LC uranium prospect during the fourth quarter of 2013.

Summary of our Mineral Property Interests

A description of our mineral property interests is set forth in Part I, Item 2 of this Annual Report.

Governmental Regulation

Our business is subject to extensive federal, state and local laws and regulations governing development, production, labor standards, occupational health, waste disposal, the use of toxic substances, environmental regulations, mine safety and other matters. We are subject to potential risks and liabilities occurring as a result of mineral exploration and production. Insurance against environmental risk (including potential liability for pollution or other hazards as a result of the disposal of waste products occurring from exploration and production) is not generally available to us (or to other companies in the minerals industry) at a reasonable price. To the extent that we become subject to environmental liabilities, the satisfaction of any such liabilities would reduce funds otherwise available to us and could have a material adverse effect on us. Laws and regulations intended to ensure the protection of the environment are constantly changing, and are generally becoming more restrictive.
 
 
 

 
 
 

 

All operating and exploration plans have been made in consideration of existing governmental regulations. Regulations that most affect operations are related to surface water quality and access to public lands. An approved plan of operations (POO) and a financial bond are usually required before exploration or mining activities can be conducted on public land that is administered by the United States Bureau of Land Management (BLM) or United States Forest Service (USFS).

Montana

In the State of Montana our exploration and mining operations will be under supervision of the Montana Department of Environmental Quality (“MDEQ”) which enforces Montana’s Environmental Policy Act and mining regulations. Exploration and mining activity at the Boulder Hill Project area and other areas in Montana under the GMRV discussions may be possible under a Small Miner Exclusion Statement (SMES). An SMES allows for expedited treatment for exploration/mining operations which affect no more than 25 square miles of property. While such a limitation makes mining under an SMES infeasible for large gold mining companies, the Company, by contrast, can operate efficiently in this smaller space as a small exploration company.

Idaho

The mining and exploration activities for the South Idaho Silver Project will be governed by the Bureau of Land Management and the US Forest Service. In Idaho, the BLM manages nearly 12 million acres of public lands, nearly one-fourth of the state's total land area. The Branch of Lands, Minerals & Water Rights administers the use and development of many of the resources found on these lands - including energy and mineral resources - along with managing real estate transactions involving public lands.

Termination of Sapo Agreement

We entered into an agreement (the “Agreement”) effective as of April 1, 2011 with Sapo Holdings SA (“Sapo”) to provide us guidance and expertise in evaluating and identifying potential properties for our review. The Agreement was for a one year term. Sapo is a consulting firm based in Colombia that has expertise indentifying potential exploration projects and working with professionals engaged in mineral exploration to providing staffing to and administration of mineral exploration projects. In exchange for providing us with theses services, we agreed to compensate Sapo 10% over the costs incurred for such exploration services, which would include hiring a field crew, technical staff and equipment, a monthly fee of $5,000 for project supervision services and a monthly fee of $17,500 for project administration, which would include secretarial services, office equipment, rent, public relations and utilities and local transportation. The Agreement could be terminated by either party with or without cause upon 60 days written notice to the other party, and was terminated in October 2011.

During the years ended December 31, 2012 and 2011, we appointed new management with specific administrative and operational experience in the mining field that made the continued engagement of Sapo not economical. Notwithstanding, we will supplement our management’s expertise with geological and engineering consultants, as required.

Competition

We are an exploration stage mineral resource exploration company that competes with other mineral resource exploration companies for financing and for the acquisition of new mineral properties. Many of the mineral resource exploration companies with whom we compete have greater financial and technical resources than those available to us. Accordingly, these competitors may be able to spend greater amounts on acquisitions of mineral properties of merit, on exploration of their mineral properties and on development of their mineral properties. In addition, they may be able to afford more geological expertise in the targeting and exploration of mineral properties. This competition could result in competitors having mineral properties of greater quality and interest to prospective investors who may finance additional exploration and development. This competition could adversely impact on our ability to achieve the financing necessary for us to conduct further exploration of our mineral properties. We will also compete with other mineral exploration companies for financing from a limited number of investors that are prepared to make investments in mineral exploration companies. The presence of competing mineral exploration companies may impact on our ability to raise additional capital in order to fund our exploration programs if investors are of the view that investments in competitors are more attractive based on the merit of the mineral properties under investigation and the price of the investment offered to investors. We will also compete with other mineral companies for available resources, including, but not limited to, professional geologists, camp staff, mineral exploration supplies and drill rigs.
 
 
 

 


 
 
Intellectual Property

We do not own, either legally or beneficially, any patent or trademark.

Employees

We have no full-time employees at the present time. Our executive officers do not devote their services full time to our operations. We engage contractors from time to time to consult with us on specific corporate affairs or to perform specific tasks in connection with our exploration programs. As of December 31, 2013, we engage four contractors that provided work to us on a recurring basis, including two professional geologists.

Research and Development Expenditures

We have not incurred any research or development expenditures since our incorporation.

Subsidiaries

During 2010, we acquired a fifty percent interest in the issued and outstanding stock of Beardmore Holdings, Inc. (“Beardmore”), a corporation incorporated under the laws of Panama. Beardmore indirectly owns the mineral rights to certain properties located in Peru held by its subsidiary, Rio Santiago Minerales S.A.C. On September 21, 2011, we entered into a Settlement and Mutual Release Agreement, which resulted in us relinquishing our fifty percent interest in the outstanding capital stock of Beardmore and as a result, we no longer have any ownership interest in any subsidiary entities.


You should carefully consider the following risk factors in evaluating our business and us. The factors listed below represent certain important factors that we believe could cause our business results to differ. These factors are not intended to represent a complete list of the general or specific risks that may affect us. It should be recognized that other risks may be significant, presently or in the future, and the risks set forth below may affect us to a greater extent than indicated. If any of the following risks occur, our business, financial condition or results of operations could be materially and adversely affected. You should also consider the other information included in this Annual Report and subsequent quarterly reports filed with the SEC.

Risk Factors

Risks Associated With Our Business

Our accountants have raised substantial doubt with respect to our ability to continue as a going concern.

As noted in our consolidated financial statements, we have incurred a accumulated net loss of $20,212,689 for the period from inception on September 5, 1997 to December 31, 2013 and have presently no source of revenue. At December 31, 2013, we had a working capital deficit of $963,352. As of December 31, 2013, we had cash and cash equivalents in the amount of $-0-. We will have to raise additional funds to meet our currently budgeted operating requirements for the next twelve months.

The audit report of James Stafford, Chartered Accountants for the year ended December 31, 2012 contained a paragraph that emphasizes the substantial doubt as to our continuance as a going concern. This is a significant risk that we may not be able to generate or raise enough capital to remain operational for an indefinite period of time.

The audit report of Sadler Gibb and Associates for the  year ended December 31, 2013 contained a paragraph that emphasizes the substantial doubt as to our continuance as a going concern. This is a significant risk that we may not be able to generate or raise enough capital to remain operational for an indefinite period of time.

 
 

 


 

In preparing our consolidated financial statements for the year ended December 31, 2011, our management identified material weaknesses in our internal control over financial reporting and our failure to remediate these material weaknesses could result in material misstatements in our consolidated financial statements and the loss of investor confidence in our reported financial information. Such weakness has neither been cured nor resolved during the year ended December 31, 2013.

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. Our management identified material weaknesses in our internal control over financial reporting as of December 31, 2011. Such weakness was not cured or  resolved during the year ended December 31, 2013. A material weakness is defined as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. The material weaknesses identified by management as of December 31, 2011 and again in 2012and 2013  were attributable to the size of the Company and the fact that we have only one financial expert on our management team and no audit committee. Although management believes that the material weakness set forth above has not had an effect on our financial statements, there can be no assurance that this will continue to be the case going forward.

If remedial measures are not taken or are insufficient to address this material weaknesses, or if additional material weaknesses or significant deficiencies in our internal control over our financial reporting are discovered or occur in the future, our consolidated financial statements may contain material misstatements and we could be required to restate our financial results. Any future restatement of consolidated financial statements could place a significant strain on our internal resources and harm our operating results. Further, any additional or un-remedied material weakness may preclude us from meeting our reporting obligations on a timely basis and cause investors to lose confidence in our reported financial information.

We may own options to acquire certain mining and mineral rights underlying certain properties and if we fail to perform the obligations necessary to exercise these options, we will lose our options and cease operations.

We have held andor are  re-negotiating renewals of options to acquire certain mining and mineral rights underlying properties located in Owyhee County, Idaho and Lincoln County, Montana, subject to certain conditions,and have a pending memorandum of understanding on the Nile Mine project. If we fail to meet the requirements of the agreement under which we acquired such options, including any cash payments to the option  nor or any exploration obligations that we have regarding these properties, we may lose our right to exercise the options to acquire certain mining and mineral rights underlying these properties. If we do not fulfill these conditions, then our ability to commence or continue operations could be materially limited. Accordingly, any adverse circumstances that affect the areas covered by these options and our rights thereto would affect us and your entire investment in shares of our common stock. If any of these situations were to arise, we would need to consider alternatives, both in terms of our prospective operations and for the financing of our activities. Management cannot provide assurance that we will ultimately achieve profitable operations or become cash-flow positive, or raise additional debt and/or equity capital. If we are unable to raise additional capital in the near future, we will experience liquidity problems and management expects that we will need to curtail operations, liquidate assets, seek additional capital on less favorable terms and/or pursue other remedial measures, including ceasing operations. Our existing agreements are in default and while we hope to re-negotiate, we may not be successful.

We have a history of losses that we expect to continue into the future.

We have not yet located any mineral reserve and we have never had any revenues from our operations. In addition, we have a history of losses that we expect to continue into the future. We have acquired and taken steps to engage in the exploration and development of mineral property interest located in Owyhee County, Idaho , Lincoln County, Montana and eastern Washinton.. Our business plan and exploration efforts as to our existing mineral property interest are in its early stages and faces numerous regulatory, practical, legal and other obstacles. At this early stage of our operation, we also expect to face the risks, uncertainties, expenses and difficulties frequently encountered by companies at the start-up stage of their business development. We cannot be sure that we will be successful in addressing these risks and uncertainties, and our failure to do so could have a materially adverse effect on our financial condition.

 
 
 

 
 
 
 
 
 
No assurance can be given that we will be able to successfully complete the purchase of mining rights to any properties, including the ones for which we currently hold options. Our ability to achieve and maintain profitability and positive cash flow over time will be dependent upon, among other things, our ability to (i) identify and acquire gold mining properties or interests therein that ultimately have probable or proven gold reserves, (ii) sell such gold mining properties or interests to strategic partners or third parties or commence mining of gold, (iii) produce and sell gold at profitable margins, and (iv) raise the necessary capital to operate during this possible extended period of time. At this stage in our development, it cannot be predicted how much financing will be required to accomplish these objectives.

We have unsecured convertible notes that came due in 2013 and will continue to come due in 2014 and we have limited resources to pay these notes on the maturity date.

Over the last several years, we have been funding our operations through the sale of both equity and debt securities. We have $39,798 worth of convertible notes outstanding at December 31, 2013(net of unamortized discount).

If the note holder decides not to convert these notes to common stock, we will have an obligation on the maturity date of each note to pay the note holder all accrued interest and principal on such note. In such case, we would have to find sources of cash to re-pay the note holder and there can be no assurance such resources will be available.

We will need to raise funds through financings in the future, which would dilute the ownership of our existing stockholders and possibly subordinate certain of their rights to the rights of new investors or creditors.

We expect to seek additional funds in debt or equity financings if they are available to us on terms we believe reasonable to provide for working capital, carry out exploration programs or to make acquisitions. Any sales of additional equity or convertible debt securities would result in dilution of the equity interests of our existing stockholders, which could be substantial. Additionally, if we issue shares of preferred stock or convertible debt to raise funds, the holders of those securities might be entitled to various preferential rights over the holders of our common stock, including repayment of their investment. Such additional debt, if authorized, would create rights and preferences that would be senior to, or otherwise adversely affect, the rights and the value of our common stock and would have to be repaid from future cash flow.

If we fail to raise additional capital to fund our business growth and project exploration, our business could fail.
We have to raise significant amounts of capital to meet our anticipated needs for working capital and other cash requirements for the near term to explore our mining properties. We will attempt to raise such capital through the sale of common stock or debt instruments. However, there is no assurance that we will be successful in raising or borrowing sufficient additional capital and we have no arrangements for future financing and there can be no assurance that additional financing will be available to us. If adequate funds are not available or are not available on acceptable terms, our ability to fund our exploration projects, take advantage of potential acquisition opportunities, possibly develop or enhance its properties in the future or respond to competitive pressures would be significantly limited. Such limitation could have a material adverse effect on our business and financial condition and cause our business to fail.

We have no known reserves and we may not find any mineral resources or, if we find mineral resources, the deposits may be uneconomic or production from those deposits may not be profitable.

We have not established that any of the properties for which we hold options or mining claims contain adequate amounts of gold or other mineral reserves to make mining any of the properties economically feasible to recover that gold or other mineral reserves, or to make a profit in doing so. If we do not, our business will fail. If we cannot find economic mineral resources or if it is not economic to recover the mineral resources, we will have to cease operations.
 
 
 
 

 

 
We may not have access to all of the supplies and materials we need to begin exploration that 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 and excavators, that we might need to conduct exploration. We have not attempted to locate or negotiate with any suppliers of products, equipment or materials. We will attempt to locate products, equipment and materials. If we cannot find the products and equipment we need, we will have to suspend our exploration plans until we do find the products and equipment we need.

Our success is dependent upon a limited number of people and we may not be able to attract and retain qualified personnel necessary for the implementation of our business strategy.

The ability to identify, negotiate and consummate transactions that will benefit us is dependent upon the efforts of our management team. The loss of the services of any member of our management could have a material adverse effect on not only the Company’s operational status, but also its financial health.

Our future success depends largely upon the continued service of board members, executive officers and other key personnel. Our success also depends on our ability to continue to attract, retain and motivate qualified personnel, particularly employees, consultants and contractors for our operations. Personnel do represent a significant asset, and the competition for such personnel is intense in the gold exploration industry. We may have particular difficulty attracting and retaining key personnel in the initial phases of our operations.

Our officers and directors do not devote full time to our operations.

Our officers do not devote their full time to our operations. Until such time that we can afford executive compensation commensurate with that being paid in the marketplace, our officers will not devote their full time and attention to our operations. No assurance can be given as to when we will be financially able to engage our officers on a full-time basis or engage additional officers.

Because all of our officers and directors are located outside of the United States, you may have no or limited effective recourse against us or our management for misconduct and may not be able to enforce judgment and civil liabilities against our officers, director, experts and agents.

All of our directors and officers are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons’ assets are located outside the United States. As a result, it may be difficult for investors to enforce within the United States any judgments obtained against our officers or our directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof.

Risks Associated With Mining

All of our properties are in the exploration stage. There is no assurance that we can establish the existence of any mineral resource on any of our properties in commercially exploitable quantities. Until we can do so, we cannot earn any revenues from operations and if we do not do so we will lose all of the funds that we expend on exploration. If we do not discover any mineral resource in a commercially exploitable quantity, our business will fail.

We have not established that any of our properties or project areas we are reviewing contain any commercially exploitable mineral reserve, nor can there be any assurance that we will be able to do so. If we do not, our business will fail. A mineral reserve is defined by the Securities and Exchange Commission’s Industry Guide 7, as that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. The probability of an individual prospect ever having a “reserve” that meets the requirements of the Securities and Exchange Commission’s Industry Guide 7 is extremely remote; in all probability our mineral resource property does not contain any ‘reserve’ and any funds that we spend on exploration will probably be lost.

 
 
 

 
 
- 10 -

 
 

 

Even if we do eventually discover a mineral reserve on one or more of our properties, there can be no assurance that we will be able to develop our properties into producing mines and extract those resources. Both mineral exploration and development involve a high degree of risk and few properties that are explored are ultimately developed into producing mines. If we do discover mineral resources in commercially exploitable quantities on any of our properties, we will be required to expend substantial sums of money to establish the extent of the resource, develop processes to extract it and develop extraction and processing facilities and infrastructure.

The commercial viability of an established mineral deposit will depend on a number of factors including, by way of example, the size, grade and other attributes of the mineral deposit, the proximity of the resource to infrastructure such as a smelter, roads and a point for shipping, government regulation and market prices. Most of these factors will be beyond our control, and any of them could increase costs and make extraction of any identified mineral resource unprofitable.

Mineral operations are subject to applicable law and government regulation. Even if we discover a mineral resource in a commercially exploitable quantity, these laws and regulations could restrict or prohibit the exploitation of that mineral resource. If we cannot exploit any mineral resource that we might discover on our properties, our business may fail.

Both mineral exploration and extraction require permits from various foreign, federal, state, provincial and local governmental authorities and are governed by laws and regulations, including those with respect to prospecting, mine development, mineral production, transport, export, taxation, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. There can be no assurance that we will be able to obtain or maintain any of the permits required for the continued exploration of our mineral properties or for the construction and operation of a mine on our properties at economically viable costs. If we cannot accomplish these objectives, our business could fail.

We believe that we are in compliance with all material laws and regulations that currently apply to our activities but there can be no assurance that we can continue to do so. Current laws and regulations could be amended and we might not be able to comply with them, as amended. Further, there can be no assurance that we will be able to obtain or maintain all permits necessary for our future operations, or that we will be able to obtain them on reasonable terms. To the extent such approvals are required and are not obtained, we may be delayed or prohibited from proceeding with planned exploration or development of our mineral properties.

Gold, Silver and mineral exploration is highly speculative in nature, involves substantial expenditures and is frequently non-productive.

Success in gold or other mineral exploration is dependent upon a number of factors including, but not limited to, quality of management, quality and availability of geological data and the expertise to interpret it, availability of trained miners and equipment and availability of exploration capital. The exploration process can be long and costly. Due to these and other factors, the probability of our identifying individual prospects having commercially significant reserves cannot be predicted. It is likely that many of the projects considered will not contain any commercially viable reserves. Consequently, substantial funds may be spent on project evaluation which may identify only a few, if any, projects having commercial development potential. In addition, if commercially viable reserves are identified, significant amounts of capital will be required to mine and process such reserves.

If we establish the existence of a mineral reserve on any of our properties, we will require additional capital in order to develop the property into a producing mine. If we cannot raise this additional capital, we will not be able to exploit the reserve and our business could fail.

If we do discover a mineral reserve on any of our properties, we will be required to expend substantial sums of money to establish the extent of the reserve, develop processes to extract it and develop extraction and processing facilities and infrastructure. Although we may derive substantial benefits from the discovery of a reserve, there can be no assurance that it will be large enough to justify commercial operations, nor can there be any assurance that we will be able to raise the funds required for development on a timely basis. If we cannot raise the necessary capital or complete the necessary facilities and infrastructure, our business may fail.
 
 
 
 
 
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Because we presently do not carry title insurance and do not plan to secure any in the future, we are vulnerable to loss of title.

We do not maintain insurance against title. Title on mineral properties and mining rights involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyance history characteristic of many mining properties. Disputes over land ownership are common, especially in the context of resource developments. We cannot give any assurance that title to such properties will not be challenged or impugned and cannot be certain that we will have or acquire valid title to these mining properties. The possibility also exists that title to existing properties or future prospective properties may be lost due to an omission in the claim of title. As a result, any claims against us may result in liabilities we will not be able to afford, resulting in the failure of our business.

Because we are subject to various governmental regulations and environmental risks, we may incur substantial costs to remain in compliance.

Our activities are subject to regulations regarding environmental matters, the abstraction of water, and the discharge of mining wastes and materials. Any significant mining operations will have some environmental impact, including land and habitat impact, arising from the use of land for mining and related activities, and certain impact on water resources near the project sites, resulting from water use, rock disposal and drainage run-off. No assurance can be given that such environmental issues will not cause our operations in the future to fail.

We could be required to remedy any negative environmental impact. The costs of such remediation could cause us to fail. Future environmental laws and regulations could impose increased capital or operating costs on us and could restrict the development or operation of any gold mines.


We have, and will in the future, engage consultants to assist us with respect to our operations. We are beginning to address the various regulatory and governmental agencies, and the rules and regulations of such agencies, in connection with our mineral property interests. No assurances can be given that we will be successful in our efforts. Further, in order for us to operate and grow our business, we need to continually conform to all applicable laws, rules and regulations. It is possible that the legal and regulatory environment pertaining to the exploration and development of gold mining properties will change. Uncertainty and new regulations and rules could dramatically increase our cost of doing business, or prevent us from conducting its business; both situations could cause us to fail.

Mineral exploration and development is subject to extraordinary operating risks. We do not currently insure against these risks. In the event of a cave-in or similar occurrence, our liabilities may exceed our resources, which could cause our business to fail.

Mineral exploration, development and production, involves many risks which even a combination of experience, knowledge and careful evaluation may not be able to overcome. Our operations will be subject to all the hazards and risks inherent in the exploration, development and production of resources, including liability for pollution, cave-ins or similar hazards against which we cannot insure or against which we may elect not to insure. Any such event could result in work stoppages and damage to property, including damage to the environment. We do not currently maintain any insurance coverage against these operating hazards. The payment of any liabilities that arise from any such occurrence could cause us to fail.

Mineral prices are subject to dramatic and unpredictable fluctuations.

We expect to derive revenues, if any, from the extraction and sale of precious and base metals such as gold and silver. The price of those commodities has fluctuated widely in recent years, and is affected by numerous factors beyond our control including international, economic and political trends, expectations of inflation, currency exchange fluctuations, interest rates, global or regional consumptive patterns, speculative activities and increased production due to new extraction developments and improved extraction and production methods. The effect of these factors on the price of base and precious metals, and, therefore, the economic viability of any of our exploration projects, cannot accurately be predicted.

 
 

 
 
- 12 -


 
 
 
The mining industry is highly competitive and there is no assurance that we will continue to be successful in acquiring property interests. If we cannot continue to acquire interests in properties to explore for mineral resources, we may be required to reduce or cease operations.

The mineral exploration, development, and production industry is largely unintegrated. We compete with other exploration companies looking for mineral resource properties. While we compete with other exploration companies in the effort to locate and license mineral resource properties, we will not compete with them for the removal or sales of mineral products from our properties if we should eventually discover the presence of them in quantities sufficient to make production economically feasible. Readily available markets exist worldwide for the sale of gold and other mineral products. Therefore, we will likely be able to sell any mineral products that we identify and produce.

We compete with many companies possessing greater financial resources and technical facilities. This competition could adversely affect our ability to acquire suitable prospects for exploration in the future as well as our ability to recruit and retain qualified personnel. Accordingly, there can be no assurance that we will acquire any interest in additional mineral resource properties that might yield reserves or result in commercial mining operations.

Legislation has previously been proposed that would significantly affect the mining industry.

Periodically, members of the U.S. Congress have introduced bills which would supplant or alter the provisions of the U.S. General Mining Law of 1872, which governs the unpatented claims that we control. One such amendment has become law and has imposed a moratorium on patenting of mining claims, which reduced the security of title provided by unpatented claims. Other bills have proposed, among other things, to make permanent the patent moratorium, to impose a federal royalty on production from unpatented mining claims and to declare certain lands as unsuitable for mining. If additional legislation is enacted, it could substantially increase the cost of holding unpatented mining claims by requiring payment of royalties, and could significantly impair our ability to develop mineral estimates on unpatented mining claims. Although it is impossible to predict at this time what royalties may be imposed in the future, the imposition of such royalties could adversely affect the potential for development of such mining claims. Passage of such legislation could adversely affect our business

We are subject to environmental laws, regulations and permits that may subject us to material costs, liabilities and obligations.

We are subject to environmental laws, regulations and permits in the various jurisdictions in which we operate, including those relating to, among other things, the removal and extraction of natural resources, the
emission and discharge of materials into the environment, including greenhouse gas emissions, plant and wildlife protection, remediation of soil and groundwater contamination, reclamation and closure of properties, including tailings and waste impoundments, groundwater quality and availability, and the handling, storage, transport and disposal of wastes and hazardous materials. Pursuant to such requirements we may be subject to inspections or reviews by governmental authorities. Failure to comply with these environmental requirements may expose us to litigation, fines or other sanctions, including the revocation of permits and suspension of operations. We expect we may incur in the future significant capital and other compliance costs related to such requirements. These laws, regulations and permits, and the enforcement and interpretation thereof, change frequently and generally have become more stringent over time.

We could be liable for any environmental contamination at or from our or our predecessors’ currently or formerly owned or operated properties or third-party waste disposal sites. Certain environmental laws impose strict joint and several liabilities for releases of hazardous substances at such properties or sites, without regard to fault or the legality of the original conduct. Accordingly, we may be held responsible for more than our share of the contamination or other damages, up to and including the entire amount of such damages. In addition to potentially significant investigation and remediation costs, such matters can give rise to claims from governmental authorities and other third parties, including for orders, inspections, fines or penalties, natural resource damages, personal injury, property damage, toxic torts and other damages.

Our costs, liabilities and obligations relating to environmental matters could have a material adverse effect on our financial performance, financial position and results of operations
 
 
 
 
 
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We are required to obtain, maintain and renew environmental, construction and mining permits, which is often a costly and time-consuming process.

Mining companies, including ours, need many environmental, construction and mining permits, each of which can be time-consuming and costly to obtain, maintain and renew. In connection with our current and future operations, we must obtain and maintain a number of permits that impose strict conditions, requirements and obligations, including those relating to various environmental and health and safety matters. To obtain, maintain and renew certain permits, we may in the future be required to conduct environmental studies, and make associated presentations to governmental authorities, pertaining to the potential impact of our current and future operations upon the environment and to take steps to avoid or mitigate those impacts. Permit terms and conditions can impose restrictions on how we conduct our operations and limit our flexibility in developing our mineral properties. Many o permits are subject to renewal from time to time, and renewed permits may contain more restrictive conditions than our existing permits, including those governing impacts on the environment. In addition, we may be required to obtain new permits, and the grant of such permits may be subject to an expansive governmental review of our operations. Alternatively, we may not be successful in obtaining such permits, which could prevent us from commencing or expanding operations or otherwise adversely affect our business. Renewal of existing permits or obtaining new permits may be more difficult if we are not able to comply with our existing permits. Applications for permits, permit area expansions, and permit renewals can also be subject to challenge by interested parties, which can delay or prevent receipt of needed permits. In addition, the permitting process can vary by jurisdiction in terms of its complexity and likely outcomes. The applicable laws and regulations, and the related judicial interpretations and enforcement policies, change frequently, which can make it difficult for us to obtain and renew permits and to comply with applicable requirements. Accordingly, permits required for our operations may not be issued, maintained or renewed in a timely fashion or at all, may be issued or renewed upon conditions that restrict our ability to conduct our operations economically, or may be subsequently revoked. Any such failure to obtain, maintain or renew permits, or other permitting delays or conditions, including in connection with any environmental impact analyses, could have a material adverse effect on our business, results of operations and financial condition.

Risks Relating to our Common Stock

Trading on the OTC pink sheets may be volatile and sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell their shares.

We have convertible notes outstanding that may be converted, at a discount, into shares of our common stock thus increasing the number of shares issued and outstanding we have and having a potential negative effect on our stock price.

We have never paid dividends and have no plans to in the future.

Holders of shares of our common stock are entitled to receive such dividends as may be declared by our board of directors. To date, we have paid no cash dividends on our shares of common stock and we do not expect to pay cash dividends on our common stock in the foreseeable future. We intend to retain future earnings, if any, to provide funds for operation of our business. Therefore, any return investors in our common stock will have to be in the form of appreciation, if any, in the market value of their shares of common stock.

We have additional securities available for issuance, which, if issued, could adversely affect the rights of the holders of our common stock.

Our Articles of Incorporation authorize the issuance of 850,000,000 shares of our common stock and 200,000,000 shares of blank check preferred stock. The common stock or blank check preferred stock can be issued by our board of directors, without stockholder approval. Any future issuances of our common stock would further dilute the percentage ownership of our common stock held by public shareholders. The Company has filed a certificate of designation for 50,000,000 of the blank check preferred shares previously authorized to be designated as Preferred A shares, described above, which are redeemable at $01 per share, and convertible to two common shares,; The company has filed a certificate of designation for 33,181,818 shares of the blank check preferred shares previously authorized to be designated as Preferred B shares, described above, and convertible to one common shares,;

On January 31, 2013, the a majority of the Company’s stockholders approved an increase in the authorized common stock from 200,000,000 shares of common stock to 850,000,000 shares of common stock.

If we issue shares of blank check preferred stock with superior rights than our common stock, it could result in the decrease in the value of our common stock and delay or prevent a change in control by outside third parties.

Our board of directors is authorized to issue up to 116,818,182 shares of blank check preferred stock. Our board of directors has the power to establish the dividend rates, liquidation preferences, voting rights, redemption and conversion terms and privileges with respect to any series of blank check preferred stock. The issuance of any shares of blank check preferred stock having rights superior to those of the common stock may result in a decrease in the value or market price of the common stock. Holders of blank check preferred stock may have the right to receive dividends, certain preferences in liquidation and conversion rights. The issuance of blank check preferred stock could, under certain circumstances, have the effect of delaying, deferring or preventing a change in control of us without further vote or action by the shareholders and may adversely affect the voting and other rights of the holders of common stock.
 
 
 
 
 
- 14 -

 

 
The following describes Preferred A and Preferred B stock authorized from the blank check stock previously designated, thus reducing the amount of blank check  stock that may be issued in the future.

On November 14,2012, the Company approved the terms of Preferred A stock which included a convertibility feature by which each share of Preferred A stock was convertible to two shares of common stock, and carried voting rights as if converted. In January 2013, the Company issued 47,568,500 shares of the Preferred A stock. The Company filed a Certificate of designation for the Preferred A stock with the Secretary of State of Nevada, and on February 13, 2013 filed a definitive 14C statement, with an effective date of March 25, 2013.
 
The Board of Directors  Company approved the terms of Preferred B stock which included a convertibility feature by which each share of Preferred B stock was convertible to one share of common stock, and carried voting rights of sixty percent of the total voting rights of the company.  On January 20, 2014, the Company issued 2,000,000 shares of the Preferred B stock. The Company filed a Certificate of designation for the Preferred B stock with the Secretary of State of Nevada, and on December 13, 2013.

Because the SEC imposes additional sales practice requirements on brokers who deal in our shares that are penny stocks, some brokers may be unwilling to trade them. This means that you may have difficulty in reselling your shares and may cause the price of the shares to decline.

Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in, and limit the marketability of, our common stock.
 
In addition to the “penny stock” rules promulgated by the Securities and Exchange Commission, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative, low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock.
 
 
 
 
 
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Our stock price is likely to be highly volatile because of several factors, including a limited public float.

The market price of our common stock is likely to be highly volatile because there has been a relatively thin trading market for our stock, which causes trades of small blocks of stock to have a significant impact on our stock price. You may not be able to resell shares of our common stock following periods of volatility because of the market’s adverse reaction to volatility.

Other factors that could cause such volatility may include, among other things:

·
actual or anticipated fluctuations in our operating results;
 
·
the absence of securities analysts covering us and distributing research and recommendations about us;

·
we expect our actual operating results to continue to fluctuate;
 
·
we may have a low trading volume for a number of reasons, including that a large amount of our stock is closely held;

·
overall stock market fluctuations;
 
·
economic conditions generally and in the mining industries in particular;

·
announcements concerning our business or those of our competitors or vendors;
 
·
our ability to raise capital when we require it, and to raise such capital on favorable terms;

·
conditions or trends in the industry;

·
litigation;
 
·
changes in market valuations of other similar companies;

·
announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships or joint ventures;
 
·
future sales of common stock;

·
actions initiated by the SEC or other regulatory bodies;

·
departure of key personnel or failure to hire key personnel; and
 
·
general market conditions.
 
·
* convertible note holders have the right to convert the notes to common shares at a discount which could have the effect of depressing the stock price


 

 
 
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Any of these factors could have a significant and adverse impact on the market price of our common stock. In addition, the stock market in general has at times experienced extreme volatility and rapid decline that has often been unrelated or disproportionate to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock, regardless of our actual operating performance.


None.


Description of our Mineral Property Interests

South Idaho Silver Project

On December 7, 2011 (the “Effective Date”), we entered into a Assignment and Assumption Agreement (“Assignment Agreement”) with Castle Creek Silver, Inc. (“Castle Creek”), a Idaho corporation, and Robert Ebisch (‘Ebisch”). Castle Creek and Ebisch are parties to an Option to Purchase and Royalty Agreement dated July 15, 2011 (the “Option Agreement”), for Castle Creek’s option to acquire an undivided 100% of the right, title and interest of Ebisch in and to the PB 7, 9, 11, 12, 23, 25, 27, and 29 lode mining claims (IMC #’s, respectively, 196852, 196854, 196856, 196857, 196866, 196867, 196868, and 196869), situated in Owyhee County, Idaho, (hereinafter together with any form of successor or substitute mineral tenure called the “South Idaho Silver Project”). Pursuant to the terms of the Assignment Agreement, Castle Creek transferred and assigned us all of its right, title and interest, in, to and under the Option Agreement and we assumed the assignment of the Option Agreement agreeing to be bound, the same extent as Castle Creek, to the terms and conditions of the Option Agreement. As consideration for the Assignment Agreement, we issued Castle Creek 1,000,000 restricted shares of our common stock and are obligated to pay Castle Creek $50,000 in cash within twelve (12) months of the Effective Date, which is December 7, 2012, and Castle Creek will be entitled to a 1% net smelter return (“NSR”) from any ore produced from the South Idaho Silver Project. At any time from the Effective Date, we have the right to acquire the 1% NSR payable to Castle Creek for $250,000.

We received a waiver on the payments of $2,500 to Castle Creek, making it due on March 31, 2013.

The Assignment Agreement includes customary representations and warranties. Under the terms of the Assignment Agreement, Castle Creek and Ebisch have agreed to indemnify us from claims resulting from any breach or inaccuracy of any representation or warranty made by Castle Creek or Ebisch in the Assignment Agreement and for any breaches of any representations, warranties, obligations, terms or covenants of either Castle Creek or Ebisch under or pursuant to the Option Agreement.

The Option Agreement and assignment of Castle Creek’s right, title and interest, in, to and under the Option Agreement provide that we will have exercised the option to acquire an undivided 100% of Ebisch’s right, title and interest in and to the South Idaho Silver Project after incurring an aggregate of $210,000 in exploration expenditures, paying Ebisch an aggregate of $80,000 plus five per cent (5%) of any joint-venture and buyout payments (hereafter referred to as “JV&BP”) and paying filing fees over the term of the Option Agreement. The Option Agreement provides that the cash payments payable to Ebisch shall be made according to the following schedule:

·
$2,500 on or before January 31, 2012 plus five per cent (5%) of any JV&BP;(paid)
·
$2,500 on or before September 15, 2012 plus five per cent (5%) of any JV&BP;(waived until March 31,2013and by June 30,2013);(paid)
·
$5,000 on or before September 15, 2013 plus five per cent (5%) of any JV&BP;plus as per the waiver an additional $1,500;(unpaid)
·
$10,000 on or before September 15, 2014 plus five per cent (5%) of any JV&BP;
·
$15,000 on or before September 15, 2015 plus five per cent (5%) of any JV&BP;
·
$20,000 on or before September 15, 2016 plus five per cent (5%) of any JV&BP; and
 
 
 
 
 
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·
$25,000 on or before September 15, 2017 plus five per cent (5%) of any JV&BP.
 
The Company (see below) has elected subsequent to September 30,2014, to either re-negotiate the agreement under similar terms outlined above and below,  or to utilize the database of exploration information developed to target through re-staking and leasing from the Ebisch party  a more favorable geological land position.
 
The Option Agreement provides that the exploration expenditures of an aggregate of not less than $210,000 on the Property shall be incurred as follows:

·
on or before April 15, 2012, incur not less than an aggregate of $10,000 in exploration expenditures;(in aggregate $10,000incurred)
 
·
on or before September 15, 2012, incur not less than an aggregate of $20,000 in exploration expenditures;(waived until June 20,2013)(in aggregate $30,620 incurred within the time frame)

·
on or before September 15, 2013, incur not less than an aggregate of $100,000 in exploration expenditures; and( not  incurred)

on or before September 15, 2014, incur not less than an aggregate of $210,000 in exploration expenditures.
 
In addition to the foregoing cash payments, exploration expenditures and filing fees, we will be responsible for the following, in order to maintain our interest in the South Idaho Silver Project:

make advance royalty payments to Ebisch, commencing on September 15, 2015 and continuing on the 15th day of September each and every year thereafter for so long as we or our assigns retains an interest in the South Idaho Silver Project, of $25,000 per year; and
 
incur a minimum of $100,000 of annual exploration expenditures on the South Idaho Silver Project on or before September 15th each and every year after September 15, 2015, which could be offset by exploration expenditures in excess of $100,000 in any prior annual period.
 
On 7 December 2012, the Company entered into an agreement with Castle Creek to waive certain required cash payment and/or exploration expenditure related to the South Idaho Property until renegotiation after 31 March 2013 and before 30 June 2013, provided that a cash payment of $1,200 is paid prior to 31 March 2013 (paid).
 
On 31 May 2013, the Company entered into an agreement with Castle Creek to waive certain required cash payment and/or exploration expenditure related to the South Idaho Property until 15 July 2013, provided that a cash payment of $3,500 is paid prior to 15 July 2013 (unpaid). Further, the Company may secure a waiver at any time during the year ended 31 December 2013 for the requirements that become due in 2014 in exchange for cash payment of or issuance of common shares valued at $50,000 (Note 10).
 
The Company has elected to not continue this agreement under currentt financial terms, and use its database developed to guide exploration efforts to re-stake the mining claims to a more geologically advantageous location, and as described above look to considering negotiating a similar agreement with the Ebisch interests with less short term cash requirements,  or re-target our area of operations in the district.

Description of South Idaho Silver Project

In connection with our consideration of entering into the Assignment Agreement, we conducted a diligence review of the South Idaho Silver Project. The description of property contained herein is the product of our due diligence of the South Idaho Silver Project underlying the Option Agreement.
 
 
 
 
 
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Property Description and Location

The general location of the South Idaho Silver Project is indentified on the map below:
 
graphic1
 
Location, Area, and Type of Mineral Tenure

The South Idaho Silver Project lies about 49 miles south of Boise, Idaho on the flanks of the Snake River Plain, a vast graben-like physiographic region. The South Idaho Silver Project lies in Sections 14 and 15, Township 6 South, Range 1 West, Boise Meridian, Owyhee County, Idaho. Mineral rights are held by eight federal unpatented lode mining clams. These cover approximately 160 acres (65 hectares).

 
 

 
 
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PROPERTY CORNER COORDINATES- UTM NAD 27 CONUS
 
NORTHING
 
EASTING
     
4750115
 
545650
4750115
 
546100
4749755
 
546100
4749755
 
547000
4749215
 
547000
4749215
 
546550
4749125
 
546550
4749125
 
546370
4749575
 
546370
4749575
 
545650

The eight unpatented mining claims are numbered PB 7 (IMC # 196852), PB 9 (IMC # 196854), PB 11 (IMC # 196856), PB 12 (IMC # 196857), PB 23 (IMC # 196866), PB 25 (IMC # 196867), PB 27 (IMC # 196868), and PB 29 (IMC # 196869).

Our ability to explore and mine the South Idaho Silver Project depends on the validity of title to the South Idaho Silver Project. The South Idaho Silver Project consists of unpatented mining claims. Maintenance of rights to unpatented mining claims contain certain requirements including sufficiency of mineral discovery, proper posting and marking of boundaries, failure to meet statutory guidelines, assessment work and possible conflicts with other claims. We have not obtained a title opinion nor title insurance on the underlying unpatented claims at this exploration stage.

Accessibility, Climate, Local resources, Infrastructure, Physiography

Topography, Elevation, and Vegetation

The South Idaho Silver Project is a steeply-incised drainage that drops about two hundred meters from the peneplain that lies to the immediate north. The elevation of the South Idaho Silver Project is about 3,937 feet above mean sea level. Vegetation consists primarily of sagebrush and short grasses.

Accessibility
The South Idaho Silver Project is readily accessed from Nampa, Idaho, which lies on Federal Interstate Highway 84. Nampa is the nearest large town that has services necessary for mineral exploration and mining. From Nampa, paved State Highway 78 is followed about 43 miles to the south to the Oreana turnoff. From there, about 3 miles of paved road and 6 miles of dirt road lead to the property. Unimproved tracks provide access to the claim group. Road access to the south side of the South Idaho Silver Project is limited. Mechanized work there may require construction of a temporary creek crossing, although one unimproved road crosses the South Idaho Silver Project at a ford.

 
 
 

 
 
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Climate
The climate is semi-arid with roughly 5.9 inches per year precipitation. Summer temperatures may rise to 104 degrees Fahrenheit while winter temperatures may fall to as low as 14 degrees Fahrenheit. The South Idaho Silver Project is commonly subject to strong winds. The South Idaho Silver Project can be accessed year-round because of the mild climate, good road access, and low elevation of about 3,937 feet above mean sea level.

Water Rights, Power, and Mining Personnel
The status of water rights at the South Idaho Silver Project is uncertain. The amount of water in the vicinity of the South Idaho Silver Project is adequate for exploratory drilling, but probably not for mineral processing. The nearest power lines are about 6 miles. Mining personnel are not available locally.

The most important natural feature on the South Idaho Silver Project is a perennial stream called castle creek. During the summer, it has estimated that it flows at a minimum rate of several hundred gallons per minute. A temporary water withdrawal permit from the State of Idaho would be required for drill water. If such a permit would be granted, water might be pumped to any drill site, with a substantial cost savings on water truck rental and driver wages. There is no assurance such a permit would be granted, and if granted requirements to such a permit would be cost-effective.

Tailings Storage Areas, Waste Disposal Areas, and Plant Sites

We have not identified private land adjacent to the South Idaho Silver Project or within close proximity that could be used for potential storage areas, waste disposal or processing sites. There is public land in the vicinity, but it is unknown whether permits would be granted for such uses.

Previous Exploration History

There is no verifiable information that the South Idaho Silver Project was a producing property in the past. Prior site visits indicate that up to one hundred meters of historic underground workings exist on the South Idaho Silver Project. These may have been completed approximately 100 years ago. It is unknown the state of repair of these workings and the extent of accessibility. No mineralized material or reserves have been identified or quantified on the South Idaho Silver Project. No known production has come from the South Idaho Silver Project.

In 2008, two private individuals located various mining claims in the area including those described herein and leased to a private exploration company, Castle Creek, which retained a professional geologist whose site visits and data review, are the primary source of the historical information described herein.

Geological Setting and Local Geology

The South Idaho Silver Project lies upon the margins of the Snake River Plain, a vast graben-like, Cenozoic Age structure that covers a large part of southern Idaho. Regionally, several mineral districts lie along the margin of the Snake River Plain.

The geology consists primarily of a Late Cretaceous Age granodiorite which hosts veins and breccia bodies that contain gold, silver, lead, zinc, copper sulfide mineralization. The granodiorite and breccias are covered locally by Tertiary Age, post-mineral basalts. The breccia bodies are the primary target on the South Idaho Silver Project. What are believed to be high-grade veins are of secondary interest.

Property Geology

Granite is widespread and covered locally by post-mineral basalts. Faulting consists primarily of extensional block-faulting. The granite commonly contains large xenoliths of schist. Locally, the granite has undergone argillic and silicic alteration. Veins and breccias of interest on the Property are granite-hosted. A detailed geologic map has not yet been completed on the South Idaho Silver Project.

 
 
 

 
 
- 21 -


 
 
 
 
Potential Deposit Type

Two potential deposit types are of interest at the South Idaho Silver Project. The first of these is the hydrothermal breccias that are found in several areas. The extent of this type of mineralization is uncertain. The second potential deposit type is high-grade quartz/sulfide veins that may be genetically associated to the breccias. An exploration program has been planned to identify steeply-dipping pipe-like bodies of quartz/sulfide mineralization. Both types of mineralization are probably of epithermal origin. Little data on the potential deposit types is available because the South Idaho Silver Project is in such an early stage of contemporary exploration.

Mineralization

Rock samples taken primarily from a sulfide-rich, siliceous hydrothermal breccia and associated rocks on the south side of the Property in 2008 by the prior owner give indication of the presence of gold and silver mineralization within a hydrothermal breccia. The breccia is hosted by altered granodiorite. The breccia contains locally massive pyrite, galena, sphalerite, arsenopyrite, chalcopyrite within a siliceous, sulfide-bearing matrix. Clasts within the breccia consist of dark grey rhyolite with semi-massive sulfides, massive pyrite with base metal sulfides and massive arsenopyrite, and light-grey quartz. Besides gold and silver, the mineralization contains anomalous arsenic, copper, lead, and zinc mineralization.

The geologic control on this breccia mineralization is uncertain. The breccia lies in the vicinity of the intersection of two topographic lineaments which control the orientation of the Property. The length, width, depth, and continuity of both the breccia mineralization and sporadic vein mineralization are uncertain.

Metallurgical

No metallurgical testing has been conducted.
Reserves

There are no established probable or proven reserves on the South Idaho Silver Project.
Exploration

Only a limited amount of work has been completed on the South Idaho Silver Project. This work has been confined primarily to rock sampling at historic prospects. The rock samples taken were grab samples indicating mineralization that are not representative of any specific length or width of mineralization. They do not reflect the average grade of mineralization on any of the mineralized zones sampled. The rock sampling completed thus far has shown primarily that mineralization of interest is found in several areas of the South Idaho Silver Project. The geologic and geochemical surveys completed on the South Idaho Silver Project have been done a professional geologist.

We are not aware of any drilling that has been completed on the South Idaho Silver Project.

Exploration Plan

Our primary exploration plan in this under-explored area is to discover and focus on areas of known gold/silver breccias mineralization; emphasizing exploration near the approximate intersection of northerly and easterly-trending topographic linears.

The above strategies would greatly limit the areas to be investigated by geophysics and possible subsequent drilling, which is anticipated to result in cost savings. However, all prospects in the area should have at least a cursory examination.

 
 
 

 
 
- 22 -

 
 
 

 
Comprehensive underground mapping and sampling of accessible historic mine workings is recommended. This will help determine the extent and average grade of mineralization on the property. Geophysics may also be necessary to enhance target definition. An Induced Polarization(IP) /Resistivity survey is recommended to delineate sub-surface sulfide mineral distribution. Gold/Silver mineralization found thus far often correlates positively with sulfide content.

On the eight-claim South Idaho Silver Project, several areas of structural intersections should be evaluated using electrical geophysical methods. These should be followed-up by drilling to test for any depth extension of the mineralization. An itemized budget for this work is shown below:

   
Proposed Budget
 
       
Geologist
 
$
45,000
 
Geotech
 
$
20,000
 
Geophysics
 
$
25,000
 
Field Expenses
 
$
10,000
 
Lease Payments
 
$
25,000
 
Bond
 
$
10,000
 
Site Prep/Reclamation
 
$
10,000
 
Water Truck
 
$
18,000
 
Assays
 
$
25,000
 
Drilling (1,200 meters @ $135/meter)
 
$
162,000
 
         
TOTAL
 
$
350,000
 
 
This work plan may be accomplished in a two-phase plan with the initial budget of $210,000 required meet work requirements required in the Option Agreement, for the period from 2012 to 2014. While the Company has determined it will re-stake the mining claims in a more geologically advantageous area, the forecast budget remains the same as the same tasks are rrquired,and the Company will consider working under the past agreement with the Ebisch interests provided either cash is available,or short term cash requirements are modified.

Our current cash on hand is insufficient to complete any of the planned exploration activities and the full implementation of any planned exploration program is dependent on our ability to secure sufficient financing. We can provide no assurance that we will secure sufficient financing. In the absence of such financing, we will not be able to pursue our planned exploration program and may not be able to maintain the option to acquire the South Idaho Silver Project or underlying mining claims in good standing. If we do not fulfill the terms of the Assignment Agreement or Option Agreement, then our ability to commence or continue operations could be materially limited. We also may be forced to abandon the South Idaho Silver Project. If we are unable to raise additional capital within the next twelve months, we will experience liquidity problems and management expects that we will need to curtail operations, liquidate assets, seek additional capital on less favorable terms and/or pursue other remedial measures. We may consider entering into a joint venture arrangement to provide the required funding to explore the South Idaho Silver Project. We have not undertaken efforts to locate a joint venture participant and there is no assurance that any third party would enter into a joint venture agreement with us in order to fund exploration of the South Idaho Silver Project. If we were to enter into a joint venture arrangement, we would likely have to assign a percentage of our interest in South Idaho Silver Project to the joint venture participant.

 
 

 
 
- 23 -

 
 
 

 
In 2012 we completed our review and compilation of historical documents, and have revise dour exploration plan note above to two different phases splitting up the forecast drilling program.  In 2013 our efforts focused on reviewing the required permits and land position of  our claims,and it was determined that the Company should re-stake the claims to claim a more advantageous claim position.

Boulder Hill Project

Purchase and Sale Agreement of Unpatented Mining Claims

On December 16, 2011, we entered into a Purchase and Sale Agreement (“Purchase Agreement”) with Boulder Hill Mines Inc., an Idaho corporation (“Boulder Hill”) relating to the purchase from Boulder Hill of three unpatented mining claims situated in Lincoln County, Montana (the “Boulder Hill Claims”). As consideration for the Boulder Hill Claims, we issued Boulder Hill 500,000 restricted shares of our common stock, are obligated to pay Boulder Hill $25,000 in cash within twelve (12) months of the Effective Date, which is December 16, 2012, and $25,000 in cash within twenty-four (24) months of the Effective Date, which is December 16, 2013. Boulder Hill sold, transferred and conveyed the Claims to us by executing and delivering quitclaim deeds to us.

We received a waiver of the $25,000 cash payment requirement, such payment is now due in May 2013.

The Purchase Agreement includes customary representations and warranties. Under the terms of the Purchase Agreement, Boulder Hill has agreed to indemnify us from claims resulting from any breach or inaccuracy of any representation or warranty made by Boulder Hill in the Purchase Agreement.

Assignment and Assumption of Lease Agreement

On December 16, 2011 (the “Effective Date”), we entered into an Assignment and Assumption Agreement (“Boulder Hill Assignment Agreement”) with Boulder Hill, and Jim Ebisch (“Ebisch”). Boulder Hill and Ebisch are parties to an Option to Purchase and Royalty Agreement dated July 15, 2008, as amended on August 1, 2011 (the “ Boulder Hill Option Agreement”) which granted to Boulder Hill an option to acquire an undivided 100% of the right, title and interest of Ebisch in and to that certain Montana State Metal ferrous Gold Lease M-1974-06 dated August 21,2006 he entered into with the State of Montana (the “Montana Gold Lease”) under which Ebisch was granted the exclusive right to prospect, explore, develop and mine for gold, silver and other minerals on property situated in Lincoln County, Montana. The Montana Gold Lease is for a ten (10) year term and is subject to the 5% net smelter return due to the State of Montana. Pursuant to the terms of the Boulder Hill Assignment Agreement, Boulder Hill transferred and assigned us all of its right, title and interest, in, to and under the Option Agreement and we assumed the assignment of the Boulder Hill Option Agreement agreeing to be bound, the same extent as Boulder Hill, to the terms and conditions of the Boulder Hill Option Agreement. As consideration for the Boulder Hill Assignment Agreement, we issued Boulder Hill 500,000 restricted shares of our common stock and are obligated to pay Boulder Hill $25,000 in cash within twelve (12) months of the Effective Date, which is December 16, 2012,waived until May 2013, and $25,000 in cash within twenty-four (24) months of the Effective Date, which is December 16, 2013.

The Boulder Hill Assignment Agreement includes customary representations and warranties. Under the terms of the Boulder Hill Assignment Agreement, Boulder Hill and Ebisch have agreed to indemnify us from claims resulting from any breach or inaccuracy of any representation or warranty made by Boulder Hill or Ebisch in the Boulder Hill Assignment Agreement and for any breaches of any representations, warranties, obligations, terms or covenants of either Boulder Hill or Ebisch under or pursuant to the Boulder Hill Option Agreement.

The Boulder Hill Option Agreement and assignment of Boulder Hill’s right, title and interest, in, to and under the Boulder Hill Option Agreement provide that we will have exercised the option to acquire an undivided 100% of Ebisch’s right, title and interest in and to the Montana Gold Lease after incurring an aggregate of $210,000 in exploration expenditures, paying Ebisch an aggregate of $80,000 plus five per cent (5%) of any joint-venture and buyout payments (hereafter referred to as ”JV&BP”) and paying filing fees over the term of the Boulder Hill Option Agreement. Our responsibility for the foregoing exploration expenditures and cash payments is inclusive of exploration expenditures incurred by Boulder Hill to the present and payments previously made by Boulder Hill to Ebisch under the terms of the Boulder Hill Option Agreement.

 
 

 
 
- 24 -

 
 
 

 
The Boulder Hill Option Agreement provides that the cash payments payable to Ebisch shall be made according to the following schedule:

·
$20,000 on or before October 14, 2012 plus five per cent (5%) of any joint-venture and buyout payments (hereafter referred to as “JV&BP”), of which an initial payment of $3,000 is to be made on or before October 30, 2011 ($3,000 paid, with the balance of $17,000 waived until May 2013);

·
$15,000 on or before July 15, 2013 plus five per cent (5%) of any JV&BP; (unpaid)

·
$20,000 on or before July 15, 2014 plus five per cent (5%) of any JV&BP; and

·
$25,000 on or before July 15, 2015 plus five per cent (5%) of any JV&BP.

The Option Agreement provides that the exploration expenditures of an aggregate of not less than $210,000 on the property underlying the Montana Gold Lease shall be incurred as follows:

·
on or before August 1, 2012, incur not less than an aggregate of $49,000 in exploration expenditures(this requirement has been waived until  May 2013- and was not met); and

·
on or before August 1, 2013, incur not less than an aggregate of $210,000 in exploration expenditures (not incurred)
 
 
In addition to the foregoing cash payments and exploration expenditures, we will be responsible for paying filing fees over the term of the Boulder Hill Option Agreement and the following in order to maintain Ebisch’s interest in the Montana Gold Lease:

In addition to the foregoing cash payments and exploration expenditures, we will be responsible for paying filing fees over the term of the Boulder Hill Option Agreement and the following in order to maintain Ebisch’s interest in the Montana Gold Lease:

·
make advance royalty payments to Ebisch, commencing on July 15, 2015 and continuing on the 15th day of July each and every year thereafter for so long as the Company or its assigns retains its interest in the in order to maintain Ebisch’s interest in the Montana Gold Lease, of $25,000 per year; and

·
incur a minimum of $100,000 of annual exploration expenditures on the property underlying the in order to maintain Ebisch’s interest in the Montana Gold Lease on or before July 15th each and every year after July 15, 2011, which could be offset by exploration expenditures in excess of $100,000 in any prior annual period.

Description of Boulder Hill Project

In connection with our consideration of entering into the foregoing agreements, we conducted a diligence review. The Claims and the property that is subject to the Montana Gold Lease are being referred to by us as the “Boulder Hill Project.” The description of the property underlying the Boulder Hill Project that is contained herein is the product of the Company’s due diligence review.

 
 
 

 
 
- 25 -

 
 
 
Location
 
The general location of the Boulder Hill is indentified on the map below:
 
graphic2
 
 
The Boulder Hill Project consists of approximately 60 acres comprised of three unpatented mining claims (the “Claims”) and an option to acquire certain rights under a contiguous lease with the State of Montana (Montana State Metalliferrous Gold Lease M-1974-06, the “Montana Gold Lease”) of approximately 114 acres located in Lincoln County, Montana. The property underlying the Claims and Montana Gold Lease lie in Township 29 North, Range 27 West, Montana Principal Meridian.

Land Status

Mineral rights on federal unpatented lode mining claims can be held indefinitely as long as the annual claim maintenance payments are current. At the present time, all of the required annual claim maintenance payments for the Claims have been made. The initial term on the Montana Gold Lease is for a ten-year period commencing on August 21, 2006, which may be renewable. The total area consisting of the Boulder Hill Project consists of approximately 174 acres. The total annual property maintenance costs due the state and federal government for the Boulder Hill Project is currently about $800/year.

History

The Boulder Hill Project contains several historic prospect pits and adits, which we believe were excavated in the late 19th century or early 20th century. Bright white quartz veins with low gold contents attracted early prospectors to the Boulder Hill Project area. In 1995, during a regional reconnaissance conducted by Jim Ebisch, these original mine workings were sampled. Quartz vein samples from these historic workings were found in 1995 to contain low-grade gold; however, one prospect pit further down the hill, also originally sampled at the same time, contained altered, siliceous metasediments that have a far different appearance than that of the bright white quartz veins. These metasediments, poorly exposed in the prospect pit, were found to contain gold grades much higher than that of the bright white quartz veins that attracted historic attention. We have not independently verified this information and can provide no assurance that any of our exploration work will result in similar results.

 
 
 

 
 
- 26 -

 
 
 
 
Regional Geology

The Boulder Hill Project is located within an area that includes the Belt Basin of the northwestern United States. Mineralization is hosted by the Precambrian Age Prichard Formation. The Boulder Hill Project lies near the crest of the Wolf Creek Anticline. The rocks exposed in that area are thought to belong to the G Member of the Prichard Formation. The Boulder Hill Project also lies immediately south of the Wolf Creek Fault, an important regional structure.

Boulder Hill Project Geology

Structurally the Boulder Hill Project is on the downthrown side of the Wolf Creek fault, and the project is considered by us as a stratiform sulfide target within the Middle Prichard Formation in Lincoln County, Montana

Our exploration plan at the Boulder Hill Project is designed to target what are believed to be Stratabound gold occurrences. Poorly-exposed gold mineralization found during the aforementioned reconnaissance exploration at the Boulder Hill Project within a prospect trench in 1995 is in contrast to the bright white quartz veins that were of historic interest. The rocks containing the gold mineralization found in 1995 consisted of silicified, sericitized, and pyritic to locally gossanous metasediments. We have not independently verified this historical information and can provide no assurance that any of our exploration work will result in similar results.

Project Infrastructure, Access and Power

The Boulder Hill Project is located in an area of low-lying hills, away from residential areas. A paved road, a power line, and a railway line passes within one mile of the subject area. An improved gravel road passes by northwestern portion of the property. Skid trails lead to the area where the gold mineralization was found during the 1995 exploration and a subsequent follow-up site visit in 2008 by Mr. Ebisch. There are no accessible tunnels or shafts on the subject area. The source of water for proposed drilling is currently uncertain, which may require initially hauling of water for drilling purposes.

Reserves

There are no established probable or proven reserves on the property underlying the Boulder Hill Project. Our due diligence activities have been limited, and to a great extent, have relied upon information provided to us by third parties. We have not established and cannot provide any assurance that any of the properties underlying the Boulder Hill Project contain adequate, if any, amounts of gold or other mineral reserves to make mining economically feasible to recover those gold or other mineral reserves, or to make a profit in doing so.

Proposed Exploration Plan

Several phases of exploration work will be necessary to move forward this project. Each successive phase of work is contingent upon the results of previous phases. The first phase will require geological mapping and sampling. Concurrent with this work, excavation of trenches on the underlying property will be necessary to expose and sample mineralization of interest. Geophysics may also be done on the property if the mineralization found by trenching has characteristics that lend to detection by geophysical methods. The total cost of this work is estimated to be $49,500.

The second phase of work will involve limited drilling, consisting of 3-5 diamond drill holes. These will test for near-surface strata bound gold. The total cost of this work is estimated to be $214,500.
 
The third phase of work will involve the drilling of one-two deep drill holes, each with an estimated depth of 1,500 feet. These will test for deep strata bound gold close to the Wolf Creek Fault. The total cost of this work is estimated to be $338,000.

 
 
 

 
 
- 27 -

 
 
 

 
Our current cash on hand is insufficient to complete any of the activities set forth in our planned exploration program. We have postponed the commencement of any exploration and development program until such time that we are able to secure sufficient financing, however we continued review of historical records for revising the below plan in 2013. We can provide no assurance that we will be successful in securing sufficient financing. Provided we are able to secure sufficient financing, we anticipate that we will incur the following costs for the next twelve months:

Proposed Exploration Budget
Stage 1 (Trenching and Geophysics)
 
Permitting and Bonding
 
$
6,500
 
Trench rehabilitation, new trenching, surveying and sampling
 
$
9,500
 
Supervision, geologic mapping and reporting
 
$
10,000
 
Analyses (100 samples @ $40 each)
 
$
4,000
 
Geophysics & Reclamation
 
$
15,000
 
Administration & overhead @ 10%
 
$
4,500
 
Subtotal
 
$
49,500
 

Stage 2 (Shallow Drilling)
 
Permitting and Bonding
 
$
10,000
 
Surface diamond drilling 3-5 holes @ 400 ft depth average @ $70/ft
 
$
140,000
 
Site Preparation & Reclamation
 
$
10,000
 
Supervision, core logging, sampling and reporting
 
$
25,000
 
Analyses (100 samples @ $50 each)
 
$
5,000
 
Core Handling/Storage
 
$
5,000
 
Administration & overhead @ 10%
 
$
19,500
 
         
Subtotal
 
$
214,500
 

Stage 3 (Deep Drilling)
 
Permitting and Bonding
 
$
5,000
 
Surface diamond drilling 2 holes @ 1,500 feet each @$90/foot
 
$
270,000
 
Site Preparation & Reclamation
 
$
3,000
 
Supervision, core logging, sampling, and reporting
 
$
20,000
 
Analyses (100 samples @$50/each)
 
$
5,000
 
Core Handling/Storage
 
$
5,000
 
Administration & overhead @ 10%
 
$
30,800
 
         
Subtotal
 
$
338,800
 
         
Grand Total
 
$
602,800
 
 
 
 
 
 
 
- 28 -

 

 
 
This exploration plan may change or be terminated depending on the results from each stage of exploration. We project that permitting activities will be prepared after the initial 2013 site visits. The Company is re-evaluating the proposed budget in light of its decision to not pursue the State Lease further , but to focus on unpatented mining claims in the area, which the Company believes may reduce the above exploration budget by ten percent, however the Company will if financially abel to seek tore-instate the prior agreement with the Ebisch interests.

The Peru Property and Settlement and Mutual Release Agreement

We entered into a Mineral Right Option Agreement with Temasek on September 18, 2008, as amended and supplemented by Amendment No. 1 dated May 12, 2009 (“Amendment No. 1”), Amendment No. 2 dated February 3, 2010 (“Amendment No. 2”), and Amendment No. 3 dated June 25, 2010 (“Amendment No. 3”) (collectively, the “ Temasek Option Agreement”). Pursuant to the Temasek Option Agreement, we acquired from Temasek a fifty percent equity interest in Beardmore Holdings, Inc. (“Beardmore”) and had the option to acquire the remaining fifty percent equity interest in Beardmore from Temasek, which would have resulted in our ownership of one hundred percent of Beardmore’s equity. Beardmore indirectly holds, through its subsidiary Rio Santiago Minerales S.A.C., certain mineral rights (the “Mineral Rights”) underlying properties located in Peru.

Under the terms of Amendment No. 3, we would have increased our ownership interest in the Mineral Rights from fifty percent to one-hundred percent resulting in its acquisition of all of the outstanding capital stock of Beardmore, if we had fulfilled the following conditions (collectively the “Temasek Option Requirements”) within ten business days following the effective date of Amendment No. 3:

·
Completion of the exercise of options resulting in our acquisition of a fifty percent interest in the Mineral Rights through our acquisition of fifty percent of the outstanding capital stock of Beardmore;
·
Issuance to Temasek of a total of 11,000,000 shares of our common stock (of which 5,000,000 shares were previously issued to Temasek);
·
Payment to Temasek of US $250,000 (which such payment was acknowledged by Temasek to have been made in March 2010);
·
Issuance of a convertible note for US $250,000 (the “$250,000 Convertible Note”) payable to the order and the direction of Temasek (which was issued on June 25, 2010); and
·
Issuance of a convertible note for US $3,250,000 (the “$3,250,000 Convertible Note” and, collectively with the $250,000 Convertible Note, the “Convertible Notes”) payable to the order and the direction of Temasek (which was issued on June 25, 2010).
 
The $250,000 Convertible Note had a term of ninety days and accrued interest at a rate of 12% per annum. We failed to pay the principle and interest under the $250,000 Convertible Note upon maturity, which caused us to default on the $250,000 Convertible Note.

The $3,250,000 Convertible Note had a term of three years and accrued interest at a rate of 12% per annum. Interest was payable annually and the principal was to be paid upon maturity.

As of the date we were required to fulfill the Temasek Option Requirements under Amendment No. 3, we did not issue the 6,000,000 shares of our common stock to Temasek and defaulted on the $250,000 Convertible Note resulting from our failure to pay the principal plus interest on such note on its maturity date. This also resulted in the options to acquire the remaining fifty percent interest in the Mineral Rights (which would have resulted in our acquisition of a one hundred percent interest in the Mineral Rights) having lapsed as of July 5, 2010.

On September 21, 2011, we entered into a Settlement and Mutual Release Agreement (“Settlement Agreement”) with Temasek, which resulted in our relinquishment and transfer to Temasek of our fifty percent interest in the outstanding capital stock of Beardmore in exchange for Temasek releasing us from all of our outstanding obligations under the terms of the Temasek Option Agreement. By execution of the Settlement Agreement, we no longer held any interest, directly or indirectly, in the Mineral Rights.

Under the terms of the Settlement Agreement, the $250,000 Convertible Note and the $3,250,000 Convertible Note were cancelled and we are no longer obligated to issue Temasek 6,000,000 shares of our common stock in exchange for our relinquishment and transfer to Temasek of our fifty percent interest in the outstanding capital stock of Beardmore. We are not entitled to recover any consideration previously paid to Temasek or any mineral property exploration expenditures incurred in connection with the exploration and development of the properties underlying the Mineral Rights. The Settlement Agreement included a mutual release of all claims arising out of or relating to the Option Agreement.

Skip Silver Prospect

The Company has staked two unpatented mining claims covering approximately forty acres in Montana in the vicinity of the Baltimore Silver Mine project. The property has no established reserves nor any history of production. The Company has not completed an initial geologic mapping nor a review of historical data on the project. The claims staked are part of ongoing work conducted in 2012 to identify potential mineral prospects for acquisition.

Location and Access

The property is approximately five miles from Boudler, Montana. Access is by unimproved county road.
 
 

 

 
- 29 -


 
 
 
Geology

The geology of the area is dominated by the monzonites of the Butte Batholith intruding into the older Elkhorn volcanics, consisting of green-gray welded tuffs and schists. East-westerly striking pyrite-galena bearing quartz veins have been deposited along or near to fault or shear zones in the area with some sericitic alteration. We do not know currently to what extent whether regional fault or shear zones extend onto this prospect.

Climate

Theclimate is temperate,and the elevation is estimated at 6,000 feet.

Metallurgy

There are no metaluurgical testing results available to the Company.

Reserves

There no established reserves on the property.

Prior Production History

There is no recorded prior production history.

Exploration Plans

The Company intends to follow-up on 2012 site visits and initial surveying conducted for filing the claims by preparing advanced geologic maps, soil sampling, and further review of regional and local geology.The Company intends to actively seek joint-venture partners for the project.We estimate 2014 exploration to begin in May 2014, and our estimated costs for exploration in 2014 range from $5,000 to $25,000 depending n financial resources available.

Nile Mine Project

Memorandum of Understanding to Earn-Interest in the Nile Mine Project

On May 1, 2013, First Colombia Gold Corp. (the “Company”) with GMRV, a branch of 4uX, LLC, a private Montana company (“GMRV”) entered into a Memorandum of Understanding (“MOU”) to enter into a Definitive Agreement within 180 days for the Company to earn a fifty percent interest in the Nile Mine project. The Company has not entered into a final and definitive agreement at this time. The description of the project may be found and hereby incorporated by reference in our 8k filing of May 1, 2013

The Company has not finalized a definitive agreement  and is in negotiation to establish a definitive agreement on the project.


None.

 
Not Applicable.
 
 
 
- 30 -

 

 

 
PART II

Market Prices

Our common stock is currently quoted on the OTC pink sheets electronic quotation system under the symbol “FCGD.” Prior to February 24, 2011, our shares were quoted on the over-the-counter bulletin board service of the Financial Industry Regulatory Authority (the “OTCBB”). The following table sets forth the range of high and low bid quotations for our common stock for each of the periods indicated as reported by either the OTC pink sheets or OTCBB. These quotations below reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

Fiscal Year Ended December 31, 2013
 
High Bid
Low Bid
Fiscal Quarter Ended:
   
     
March 31, 2013
$0.0025
$0.0008
June 30, 2013
$0.0026
$0.0007
September 30, 2013
$0.0008
$0.0004
December 31, 2013
$0.0002
$0.0001
 
Fiscal Year Ended December 31, 2012
 
High Bid
Low Bid
Fiscal Quarter Ended:
   
     
March 31, 2012
$0.0110
$0.0055
June 30, 2012
$0.0110
$0.0011
September 30, 2012
$0.0050
$0.0015
December 31, 2012
$0.0025
$0.0010

Holders of Common Stock

As of December 31, 2013, we had approximately one hundred nine (109) holders of record of our common stock. Several other shareholders hold shares in street name. Several other shareholders hold shares in street name; we estimate that there are approximately 1,200 shareholders in this category.
 
 
 
 
 
 
- 31 -


 
 
 
Dividend Policy

To date, we have not declared or paid cash dividends on our shares of common stock. The holders of our common stock will be entitled to non-cumulative dividends on the shares of common stock, when and as declared by our board of directors, in its discretion. We intend to retain all future earnings, if any, for our business and do not anticipate paying cash dividends in the foreseeable future.
Any future determination to pay cash dividends will be at the discretion of our board of directors and will be dependent upon our financial condition, results of operations, capital requirements, general business conditions and such other factors as our board of directors may deem relevant.

Securities Authorized for Issuance under Equity Compensation Plans

Our board of directors adopted the 2007 Stock Incentive Plan (the “Stock Incentive Plan”) in April 2007. The number of shares of common stock issuable under the Stock Incentive Plan was reduced from 10,000,000 shares to 500,000 shares resulting from the one share-for-twenty shares reverse stock split of our Common Stock (“reverse split”) which became effective at the close of business on June 6, 2008. As of December 31, 2011, there were no outstanding awards granted under the Stock Incentive Plan. After an adjustment to give effect to the reverse split, 500,000 shares remain available under the Stock Incentive Plan for future equity grants as of December 31, 2013.

The Stock Incentive Plan authorizes us to grant awards in the form of shares of common stock, including unrestricted shares of common stock; options to purchase shares of common stock; stock appreciation rights or similar rights with a fixed or variable price related to the fair market value of the shares of common stock and with an exercise or conversion privilege related to the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions; any other security with the value derived from the value of the shares of common stock, such as restricted stock and restricted stock units; deferred stock units; dividend equivalent rights; or any combination of the foregoing.

The Stock Incentive Plan allows for the grant of incentive stock options, non-qualified stock options and restricted stock awards. The exercise price of any option shall be determined at the time the option is granted by the board of directors. However, the exercise price may generally not be less than 100 percent of the fair market value of the shares of common stock on the date of the grant. Each option expires on the date determined by the board of directors, but not later than ten years after the grant date. The board of directors may determine in its discretion whether any option shall be subject to vesting and the terms and conditions of any such vesting. The Stock Incentive Plan also provides for the immediate vesting of options, as well as authorizes the board of directors, or any committee thereof, to cancel outstanding options or to make adjustments to the transfer restrictions on those options in the event of certain changes in corporate control of the company. Awards, including options, made under the Stock Incentive Plan are not assignable and also subject to any restrictions and conditions imposed by the board of directors, or any committee thereof.
 
The following table sets forth certain information regarding the Stock Incentive Plan as of December 31, 2013:
Plan category
 
Number of securities
to be issued upon
exercise of outstanding
options, warrants
and rights
(a)
 
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
 
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
(c)
             
Equity compensation plans approved
by stockholders
 
-
 
-
 
-
Equity compensation plans not approved
by stockholders 1
 
-
 
-
 
500,000
Total
 
-
 
-
 
500,000
______________
1
The Stock Incentive Plan was approved by our board of directors in April 2007 and 500,000 shares remain available for future awards under the Stock Incentive Plan as of December 31, 2013.

Recent Issuances of Unregistered Securities

Other than as described below, there were no issuances of securities without registration under the Securities Act of 1933 during the reporting period which were not previously included in a Quarterly Report on Form 10-Q or Current Report on Form 8-K.
 
 

 

 
- 32 -


 
 

 

The Company entered in convertible note agreements with a private and accredited investor, Asher (“Asher”) during November 2011 and through the year ended December 31, 2012. During 2012, the note holder converted a total of $34,900 for 42,182,653 shares of our common stock. The issuance was in accordance with Rule 144 and was not accompanied by advertising nor were any commissions paid.

As described in our Current Report on Form 8-k ( filed on December 18, June 6, and March 16,2012) which are incorporated herein by reference. The Company issued Notes convertible into shares of the Company’s restricted common stock, in a transaction pursuant to exemptions from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). Asher is an “accredited investor,” as such term is defined in Rule 501(a) of Regulation D of the Securities Act. The Transactions were made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act and Rule 506 of Regulation D of the Securities Act. The sale of the Notes did not involve a public offering and was made without general solicitation or general advertising. Asher represented that it was an accredited investor and was acquiring the securities for investment purposes only and not with a view to or for sale in connection with any distribution thereof. Neither the Notes nor the underlying shares of Common Stock issuable upon the conversion of the Notes have been registered under the Securities Act and neither may be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

There were no other issuances of unregistered securities in the calendar year ended December 31, 2012. As noted in the footnotes to our financial statements and in our Current Report on Form 8-K dated February 2, 2013, the Company authorized Convertible Series A Preferred Stock and on January 31, 2013 shares of the Convertible Series A Preferred Stock was issued to settle $104,561 in liabilities. Shares were issued to officers and directors of the Company.

The Company entered in convertible note agreements with a private and accredited investor, Asher (“Asher”) during the year ended December 31, 2013. During 2013, the note holder converted a total of $141,030 for 495,328,035 shares of our common stock. The issuance was in accordance with Rule 144 and was not accompanied by advertising nor were any commissions paid.

As described in our Current Report on Form 8-k ( filed on January 23, May 9, July 2 and November 21,2013 ) which are incorporated herein by reference, the Company issued Notes convertible into shares of the Company’s restricted common stock, in a transaction pursuant to exemptions from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). Asher is an “accredited investor,” as such term is defined in Rule 501(a) of Regulation D of the Securities Act. The Transactions were made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act and Rule 506 of Regulation D of the Securities Act. The sale of the Notes did not involve a public offering and was made without general solicitation or general advertising. Asher represented that it was an accredited investor and was acquiring the securities for investment purposes only and not with a view to or for sale in connection with any distribution thereof. Neither the Notes nor the underlying shares of Common Stock issuable upon the conversion of the Notes have been registered under the Securities Act and neither may be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

 As noted in the footnotes to our financial statements and in our Current Report on Form 8-K dated February 2, 2013(incorporated herein by reference), the Company authorized Convertible Series A Preferred Stock and on January 31, 2013 shares of the Convertible Series A Preferred Stock was issued to settle $104,561 in liabilities. Shares of the Preferred A Stock were issued to officers and directors of the Company as described above and below.

There were no other issuances of unregistered securities in the calendar year ended December 31, 2013


Not applicable.


The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” appearing elsewhere in this Annual Report on Form 10-K.
 
Plan of Operation

The Company is a junior exploration stage mining Company and as such it continually seeks out properties to gain an interest in, explore and advance. The Company has  outlined a $664,000 exploration program in the target areas of Boulder Hill and South Idaho projects, and for the Skip,Uranium and Nile Mine projects a further $25,000 to $50,000 would be required for initial acquisition, geological mapping and sampling,and at the Nile Mine project basic infrastructure rehabilitate we have budgeted at $50,000;and $120,000for general administrative expenses for the upcoming 12 months.(Pleasealso see “Liquidity and  Capital Resources” below)

Our plan of operation in 2014 is to continue evaluating project opportunities, seeking to advance our mineral property interests, but with consideration of our difficult financing position, to increase activities related to finding joint venture partners or other business arrangement sto reduce the Company’s working capital required, andt to lower expense. In 2013 we settled certain accounts payable with two year notes,and where possible plan t settle or extend  liabilities wherever possible during 2014.
 
 
 
 
 
- 33 -


 
 
 
For the Years Ended December 31, 2013 and 2012

Revenues

We have not generated any revenues from our operations since our inception. We do not anticipate generating revenues from our operations in the next twelve months.

Operating Expenses

We reported operating expenses in the amount of $273,310 for the year ended December 31, 2013, compared to operating expenses of $228,960 for the year ended December 31, 2012. Operating expenses were higher for the year ended December 31, 2013, as compared to the year ended December 31, 2012, primarily as a result of increase in professional fees (an increase of $41,987 in 2013), and shareholder communication expense (an increase of $23,600 in 2013).
 
We incurred an increase in professional fees to $60,177 for the year ended December 31, 2013 from professional fees of $58,975 incurred during the year ended December 31, 2012. The increase in professional fees is attributable to adding expense for corporate filings during the year..

Mineral property exploration expenditures for the year ended December 31, 2013 were $56,100 compared to $48,889 for the year ended December 31, 2012. Mineral property exploration expenditures incurred related to consulting services for the investigation, review and evaluation of potential exploration and development opportunities, that included unpatented mining claims situated in Lincoln County, Montana and lode mining claims situated in Owyhee County, Idaho which we acquired in December 2011, and the location and staking of the Skip claims in 2012, te uranium prospect staked, and the GMRV property memorandum of understanding evaluation . The increase in mineral property exploration expenditures is attributable to increased exploration activity and due diligence related to properties in the USA and Southeastern Europe.

The increase  in operating expenses for the year ended December 31, 2013, as compared to the same period in the prior year, was also partially as a result of increases in filing and transfer agent fees. The increasing in filing fees relates primarily to XBRL consulting fees. We incurred a increase in consulting and management fees to $63,700 for the year ended December 31, 2013 from consulting and management fees of $52,750 for the year ended December 31, 2012. The increase in consulting and management fees was due services we retained for both project supervision and administrative management services, and more work brought in-house.

Other Items

We incurred interest expense of $456,156 for the year ended  December 31, 2013 ($81,008 in the year ended December 31, 2012). This increase was mainly due to origination interest from the valuation of derivative liabilities . We incurred a loss on derivative liabilities  $446,183 in the year ended December 31,2013 , due to the calculation of  derivative liabilities related to convertible notes issued. We recorded in the year ended  December 31,2013 a gain on forgiveness of debt of  $50,730.

Net (Income) Loss

For the year ended December 31, 2012, we reported a net loss of $309,967,and for the year ended December 31, 2013 a loss of $1,124,919.

Basic and Diluted Loss per Share

As a result of the above, the basic and diluted operating loss per common share was $0.00 and $0.01 for the years ended December 31, 2013 and December 31, 2013, respectively.

Liquidity and Capital Resources

At December 31, 2013, we had cash and cash equivalents of nil, compared to $-0- at December 31, 2012, and a working capital deficit of $963,352, compared to a working capital deficit of $570,498 at December 31, 2012.The change in the working capital deficit was primarily due to the requirement to record derivative liabilities in 2013, offset by an increase in long term notes payable converted from accounts payable in 2013.
 
 
 
 
 
- 34 -


 
 
 
 
Our present capital resources are insufficient to commence and sustain any planned exploration activity. Our current cash on hand is insufficient to be able to make all cash payments required in connection with our acquisition of the Boulder Hill Project,should we successfully re-negotiate the agreements on the proect, and those cash payments and exploration expenditures which are required in order to exercise our option to acquire a 100% interest in mineral property interests situated in Owyhee County, Idaho that comprise of the South Idaho Silver Project. Depending on funding availability, our proposed plan of exploration anticipates that we will incur aggregate exploration related expenditures of $260,000 over the next twelve months, with a total of $664,000 in exploration planned for the next twenty four months. We have sought and received waivers on project payments due in the year ended December 31, 2012 and into 2013, and on two agreements further described above we are in default on the agreements. Currently the Company is re-evaluating the project to determine whether re-staking the mining claims will reduce forecast expenses, and has cancelled the state lease portion, and not sought waivers on various payment requirements on the contracts, and expects to re-negotiate the contracts upon determination of our expected land position during the upcoming work season.

In addition to any expenditures related to any exploration activity, our business plan provides for spending of approximately $10,000 in ongoing general and administrative expenses per month for the next twelve months, for a total anticipated expenditure for general and administrative expenses of $120,000 over the next twelve months. The general and administrative expenses for the year will consist primarily of professional fees for the audit and legal work relating to our regulatory filings throughout the year, as well as transfer agent fees and general office expenses, and management consulting.

Accordingly, we must obtain additional financing in order to continue our plan of operations during and beyond the next twelve months, which would include being able to commence and sustain any exploration activity. We believe that debt financing will not be an alternative for funding additional phases of exploration as we have limited tangible assets to secure any debt financing. We anticipate that additional funding will be in the form of equity financing from the sale of our common stock. We cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our complete exploration programs or any acquisition of additional property interests. Any issuance of common stock would dilute the interests of our existing stockholders. In the absence of such financing, we will not be able to pursue our exploration program and may not be able to maintain our mineral property interests in good standing. If we do not fulfill the terms of any of our option agreements according to our business plan, then our ability to commence or continue operations could be materially limited. We also may be forced to abandon our mineral property interests. If we are unable to raise additional capital in the near future, we will experience liquidity problems and management expects that we will need to curtail operations, liquidate assets, seek additional capital on less favorable terms and/or pursue other remedial measures.

We plan where possible to reduce our working capital deficit by re-negotiating liabilities to reduce via settlement, issuance of common or preferred stock, or issuance lf longer term notes. There is no assurance these efforts will be successful.We have been highly dependent on the issuance of convertible notes to a private party for our cash financing the past two years, there is no assurance this party will continue to provide this financing.

The Company’s main source of funding during 2012 and 2013 was from the issuance of convertible notes to Asher, there is no assurance this funding will be available in 2014. During the years ended December 31, 2012 and 2011, the Company received $92,500 and $37,500, respectively, and  during the year ended December 31,2013 $105,995.  At December 31, 2012, the Company had $62,604 in convertible promissory notes issued and outstanding, net of unamortized discount.  During the year ended December 31, 2012, $34,900 was converted into 42,182,653 shares of the Company’s common stock.

We may consider entering into a joint venture arrangement to provide the required funding to explore the properties underlying our mineral property interests, though no specific agreement has been established at this time . Even if we determine to pursue a joint venture participant, there is no assurance that any third party would enter into a joint venture agreement with us in order to fund exploration of the properties underlying our mineral property interests. If we enter into a joint venture arrangement, we would likely have to assign a percentage of our interest in our mineral property interests to the joint venture participant.

Cash Used in Operating Activities

Operating activities in the year ended December 31, 2013 and 2012 used cash of $101,845and $94,707, respectively, which reflect our recurring operating losses. Our net loss from continuing operations of $1,124,919 reported for year ended December 31, 2013 was the primary reason for our negative operating cash flow in 2013. Our net loss was partially offset by debt discount amortization and origination interest $444,387 and loss on derivative liabilities of $446,183. Our net loss of $309,967 for the year ended December 31,2012 was the primary reason for our negative operating cash flow in 2012.

 
 

 
 
- 35 -

.
 
 
 
Cash Used in Investing Activities

For the year ended December 31, 2012, cash flows used in investing activities was $Nil, as compared to $4,150 used in investing activities during the year ended December 31, 2013.

Cash from Financing Activities

Net cash flows provided by financing activities for the year ended December 31, 2013 was $105,995, which consisted of $105,995 related to the issuance of a convertible note to a private party.. Net cash provided by financing activities for the year ended December 31, 2012 was $92,500 related to the issuance of a convertible note to a private party. Net cash provided by financing activities for the year ended December 31, 2012 was $92,500 related to the issuance of a convertible note to a private party.

Commitments

Convertible Notes

On November 23, 2011, we entered into a Securities Purchase Agreement (“Purchase Agreement”) with Asher Enterprises, Inc., a Delaware corporation (“Asher”), relating to the issuance and sale to Asher of an unsecured convertible promissory note (the “ November 2011 Note”) in a private transaction (the “Transaction”) with a principal amount of $37,500. We received net proceeds of $35,000 from the Transaction on December 1, 2011. Interest on the November 2011 Note accrues at a rate of 8% annually and is to be paid with principal in full on the maturity date of August 28, 2012. The principal amount of the Note together with interest may be converted into shares of our common stock, par value $0.00001 (“Common Stock”), at the option of the Asher at a conversion price equal to fifty-eight percent (58%) of the Market Price (as defined in the November 2011 Note) for the Common Stock during the ten trading days prior to the conversion.

On March 16, 2012, we issued Asher an unsecured convertible promissory note (the “March 2012 Note”) with a principal amount of $37,500 with substantially the same terms and conditions as the November 2011 Note. The March 2012 Note has a maturity date of December 20, 2012, at which time interest, accruing at a rate of 8% annually, and principal are to be paid in full.

On June 6, 2012, we issued Asher an unsecured convertible promissory note (the “June 2012 Note”) with a principal amount of $27,500 with substantially the same terms and conditions as the November 2011 Note. The June 2012 Note has a maturity date of March 6, 2013, at which time interest, accruing at a rate of 8% annually, and principal are to be paid in full.

On December 18, 2012, we issued Asher an unsecured convertible promissory note (the “December 2012 Note”) with a principal amount of $27,500 with substantially the same terms and conditions as the November 2011 Note. The December 2012 Note has a maturity date of September 20, 2013, at which time interest, accruing at a rate of 8% annually, and principal are to be paid in full.

On December 18, 2012, we issued Asher an unsecured convertible promissory note (the “December 2012 Note”) with a principal amount of $27,500 with substantially the same terms and conditions as the November 2011 Note. The December 2012 Note has a maturity date of September 20, 2013, at which time interest, accruing at a rate of 8% annually, and principal are to be paid in full.

 

 

 
- 36 -


 
 
 
Cash Payments and Exploration Expenditures

Our obligations to make cash payments and incur exploration expenditures in connection with our plans   for exploration of mining properties are described above in Part I, Item 1 of this Annual Report on Form 10-K

Off Balance Sheet Arrangements

We do not have any off-balance sheet debt nor did we have any transactions, arrangements, obligations (including contingent obligations) or other relationships with any unconsolidated entities or other persons that may have material current or future effects on financial conditions, changes in the financial conditions, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenue or expenses.

Going Concern

We have incurred accumulated net losses for the period from inception on September 5, 1997 to December 31, 2013 of $20,212,689 and have no source of revenue. The continuity of our future operations is dependent on our ability to obtain financing and upon future acquisition, exploration and development of profitable operations from our mineral properties. These conditions raise substantial doubt about our ability to continue as a going concern.

Critical Accounting Policies

In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We believe the following critical accounting estimates affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:

Mineral property costs

Mineral property acquisition costs are initially capitalized as tangible assets when purchased. At the end of each fiscal quarter end, we assess the carrying costs for impairment. If proven and probable reserves are established for a property and it has been determined that a mineral property can be economically developed, costs will be amortized using the units-of-production method over the estimated life of the probable reserve.

Mineral property exploration costs are expensed as incurred.

Estimated future removal and site restoration costs, when determinable are provided over the life of proven reserves on a units-of-production basis. Costs, which include production equipment removal and environmental remediation, are estimated each period by management based on current regulations, actual expenses incurred, and technology and industry standards. Any charge is included in exploration expense or the provision for depletion and depreciation during the period and the actual restoration expenditures are charged to the accumulated provision amounts as incurred.

As of the date of these consolidated financial statements, we have not established any proven or probable reserves on our mineral properties and incurred only acquisition and exploration costs.

Although we have taken steps to verify title to mineral properties in which it has an interest, according to the usual industry standards for the stage of exploration of such properties, these procedures do not guarantee the Company’s title. Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects.

 
 

 
 
- 37 -

 
 
 
 
Convertible debt

The Company has adopted ASC 470-20, “Debt with Conversion and Other Options” and applies this guidance retrospectively to all periods presented upon those fiscal years. The Company records a beneficial conversion feature related to the issuance of convertible debts that have conversion features at fixed or adjustable rates. The beneficial conversion feature for the convertible instruments is recognized and measured by allocating a portion of the proceeds as an increase in additional paid-in capital and as a reduction to the carrying amount of the convertible instrument equal to the intrinsic value of the conversion features. The beneficial conversion feature will be accreted by recording additional non-cash interest expense over the expected life of the convertible notes.

As of January 1, 2013, it was determined that the conversion features in the convertible debt were derivative liabilities. Accordingly, we have separately measured and accounted for these derivative liabilities, in accordance with ASC 815-15.

Recent Accounting Pronouncements
 

Not applicable.


The financial statements are listed in Part IV Item 15 of this Annual Report on Form 10-K and are incorporated by reference in this Item 8.


None.

 
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

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 the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Based on their evaluation as of December 31, 2011,and as of December 31,2012, the end of the period covered by this Annual Report on Form 10-K, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective at a reasonable assurance level to ensure that the information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, including this Annual Report, were recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and was accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. The conclusion of our management was based on the material weaknesses described below is Management’s Report on Internal Control Over Financial reporting.
 
Management’s Report on Internal Control Over Financial Reporting

Our management (primarly our Chief Executive and Chief Financial Officers) is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is 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 the transactions and dispositions of the assets of the Company;
·
Provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
·
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
 
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

 
In connection with the filing of our Annual Report on Form 10-K, our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2013. In making this assessment, our management used the criteria set forth by Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework. Based on our assessment using those criteria, management believes that, as of December 31, 2013, our internal control over financial reporting is not effective based on those criteria because of the material weaknesses discussed below. This assessment was based on the size of our company and the fact that we have only one financial expert on our management team, no independent audit committee and no person on our board of directors that qualifies as an “audit committee financial expert”. Although management believes that the material weakness set forth above has not had an effect on our financial statements, there can be no assurance that this will continue to be the case going forward.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal controls over financial reporting during the quarter ended December 31, 2013, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
 
 
 
 
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PART III


The following information sets forth the names of our current director and executive officers, their ages and their present positions.
Name
 
Age
 
Position
 
Served
Since
             
Piero Sutti-Keyser
 
39
 
Chief Executive Officer, Director
 
2011
Gilberto Zapata
 
32
 
Chief Financial Officer, Secretary & Treasurer
 
2012
Robert Van Tassell
 
78
 
Director
 
2006
Gordan Sredl
 
41
 
Director
 
2012

Piero Sutti-Keyser, Chief Executive Officer & Director. Mr. Sutti-Keyser was appointed to serve as a member of our board of directors in October 2011 and has served as our Chief Executive Officer and Principal Executive Officer, since February 24, 2012. In 2005, Mr. Sutti-Keyser joined Sterling Mining de Mexico, SA. de C.V. as administrative manager for the exploration and production mining company. In 2006 to 2008, Mr. Sutti-Keyser was promoted to country manager for Sterling Mining de Mexico, SA. de C.V. Since 2008, Mr. Sutti-Keyser has worked as Vice-President responsible for management of administration, acquisition and oversight of exploration programs and as a member of the Board of Directors for LitioMex S.A. de C.V., a privately held exploration mining company in Mexico.
 
Mr. Sutti-Keyser serves on our board of directors because he has significant experience and expertise in mining administration and management of junior mining exploration activities.

Gilberto Zapata, Chief Financial Officer, Secretary and Treasurer. Mr. Zapata has served as our Chief Financial Officer, Principal Financial Officer, Secretary and Treasurer since February 24, 2012. In 2008, Mr. Zapata joined LitioMex S.A. de C.V., a privately held exploration mining company in Mexico, and currently serves as its Chief Financial Officer. From 2006 to 2008, Mr. Zapata worked as a general accountant at Sterling Mining De Mexico, an exploration and production mining company in Mexico. Mr. Zapata has also served since January 2010 as a consultant to Santa Fe Metals Corp., a company public traded on the Toronto Stock Ventures Exchange. Mr. Zapata has an MBA from Thunderbird University in Arizona.
 
Robert Van Tassell, Director. Mr. Van Tassell has served on our Board of Directors since December 2006. Mr. Van Tassell has been involved in the Canadian mining industry for over fifty years. Before retiring from full-time ventures in 1998, he spent the prior sixteen years (1982-1998) as Vice President of Exploration for the precious metals venture Goldcorp Inc., formerly known as Dickenson Mines. Exploration teams led by Mr. Van Tassell are credited with such discoveries as the Husky Mine, the Minto copper deposit currently being mined by Captstone Mining, and more recently, Goldcorp’s High Grade Zone. From 1984 through 1993, Mr. Van Tassell served as a board member of the Prospectors and Developers Association of Canada (PDAC), including as Chairman of the PDAC’s Program and Environmental Committees. Mr. Van Tassell also served as a director of the Yukon Chamber of mines for eleven years, two of them as President. He served four terms on the board of the Northern Resource Conferences, two of them as Chairman, and has taught introductory and advanced prospecting courses for the Chamber of Mines. He is a Life Member of the CIM and a member of the Geological Association of Canada.
Mr. Van Tassell has been credited with leading the discovery of mines in Canada and has served as Vice President of Exploration with a leading mining company. Mr. Van Tassell brings to our Board a depth of understanding as to our company’s business, history and organization and the various challenges we face in the current economic environment.

Gordan Sredl, Director. Mr. Sredl has served as a director since February 24, 2012. Since 2006, Mr. Sredl has served as Director of Association for Giu Promins, a business association for mining, quarrying, lime and explosives based in the Republic of Croatia. From 2003 to 2006, Mr. Sredl served as a Professional Associate in the Croatian Chamber of Commerce - association of nonmetal and business materials. From 1997 to 2002, Mr. Sredl served as an Assistant with the Croatian geological survey assisting in mapping mineral resources for the Republic of Croatia. Mr. Sredl brings to the Board a wealth of industry experience and this experience is a valued asset to our Board.

Mr. Sredl serves on our board of directors because he has significant experience and expertise in geology as he has received a degree in Geology and has been involved in the mining sector for over ten years.

Our Directors are elected annually and hold office until the next annual meeting of our stockholders or until their successors are elected and qualified. Officers are elected annually and serve at the discretion of the Board of Directors. Board vacancies are filled by a majority vote of the Board.
 
 
 
 
 
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Family Relationships

There are no family relationships between or among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers.

Audit Committee

We do not have a separately-designated standing audit committee. The Board of Directors performs the functions of an audit committee, but no written charter governs the actions of the Board when performing the functions of that would generally be performed by an audit committee. The Board approves the selection of our independent accountants and meets and interacts with the independent accountants to discuss issues related to financial reporting. In addition, the Board reviews the scope and results of the audit with the independent accountants, reviews with management and the independent accountants our annual operating results, considers the adequacy of our internal accounting procedures and considers other auditing and accounting matters including fees to be paid to the independent auditor and the performance of the independent auditor.
 
Audit Committee Financial Expert

Our Board of Directors examined the Commission’s definition of “audit committee financial expert” and concluded that we do not currently have a person that qualifies as such an expert. Currently, there are only two directors serving on our Board, and we are not in a position at this time to attract, retain and compensate additional directors in order to acquire a director who qualifies as an “audit committee financial expert,” but we intend to retain an additional director who will qualify as such an expert, as soon as reasonably practicable.

Selection Criteria for Directors

Our board of directors does not maintain a nominating committee. As a result, no written charter governs the director nomination process. The size of the company and the size of the board, at this time, do not require a separate nominating committee.

When evaluating director nominees, our directors consider the following factors:

·
The appropriate size of our board of directors;
 
·
Our needs with respect to the particular talents and experience of our directors;

·
The knowledge, skills and experience of nominees, including experience in finance, administration or public service, in light of prevailing business conditions and the knowledge, skills and experience already possessed by other members of the board;

·
Experience in political affairs;
 
·
Experience with accounting rules and practices; and

·
The desire to balance the benefit of continuity with the periodic injection of the fresh perspective provided by new board members.
 
 
Our goal is to assemble a board that brings together a variety of perspectives and skills derived from high quality business and professional experience. In doing so, the board will also consider candidates with appropriate non-business backgrounds.

Other than the foregoing, there are no stated minimum criteria for director nominees, although the board may also consider such other factors as it may deem are in our best interests. If any member of the board of directors does not wish to continue in service, the board then identifies the desired skills and experience of a new nominee in light of the criteria above. Current members of the board of directors are polled for suggestions as to individuals meeting the criteria described above. Our board of directors will also consider candidates for board membership suggested by our stockholders. It is the policy for our board of directors to consider recommendations for candidates to the board of directors from any stockholder of record in accordance with our bylaws. A director candidate recommended by our stockholders will be considered in the same manner as a nominee recommended by a board member, management or other sources. In addition, a stockholder may nominate a person directly for election to the board of directors at an annual meeting of stockholders, provided the stockholder meets the requirements set forth in our bylaws.
 
While the board does not have a formal diversity policy, it is our and the board’s policy to identify potential candidates without regard to any candidate’s race, color, disability, gender, national origin, religion or creed, and we seek to ensure the fair representation of shareholder interests on the board through the criteria set forth above. The board believes that the use of the general criteria set forth above, along with non-discriminatory policies, will best result in a board that shows diversity in many respects.
 
 
 
 
 
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Section 16(a) Beneficial Ownership Reporting

Section 16(a) of the Securities Act of 1934, as amended, requires our executive officers and directors, and persons who own more than ten percent (10%) of our common stock, to file with the Securities and Exchange Commission reports of ownership of, and transactions in, our securities and to provide us with copies of those filings. To our knowledge, based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during the year ended December 31, 2012, all filing requirements applicable to our officers, directors and greater than ten percent beneficial owners were complied with, with the following exceptions:

Code of Ethics and Conduct

Our Board of Directors has adopted a Code of Ethics and Conduct that is applicable to all of our employees, officers and directors. Our Code of Ethics and Conduct is intended to ensure that our employees act in accordance with the highest ethical standards.


The following table presents information concerning the total compensation of the Company’s Chief Executive Officer, Chief Financial Officer and the other most highly compensated officers whose total salary and bonus awards exceeded $100,000 during the last fiscal year (the “Named Executive Officers”) for services rendered to the Company in all capacities for the years ended December 31, 2013, 2012  and 2011:

Summary Compensation Table
 
Name (a)
Year
Salary
($)
Bonus ($)
Stock
Awards
($)
Option
Awards
($)(1)
All Other
Compensation
($) (2)
Total
($)
               
Pierro Sutti-Keyser, CEO (3)
2012
2013
0
0
0
0
10,000
12,640
10,000
12,640
Gilberto Zapata, CFO (4)
2012
2013
0
0
0
0
4,750
6,500
4,750
6,500
Norman Bracht
Former CEO (5)
2011
-
-
-
-
13,500
13,500
Tony Langford
Former CEO, CFO, Secretary & Treasurer (6)
2011
-
-
-
4,881
42,548
47,429
___________
(1)
The amounts in the table reflect the grant date fair value of options awards to the named executive officer in accordance with Accounting Standards Codification Topic 718. The ultimate values of the options awards to the executives generally will depend on the future market price of our common stock, which cannot be forecasted with reasonable accuracy. The actual value, if any that an optionee will realize upon exercise of an option will depend on the excess of the market value of the common stock over the exercise price on the date the option is exercised. See the “Outstanding Equity Awards at Fiscal Year-End” table below for information regarding all outstanding awards.
(2)
The amounts listed under the Column entitled “All Other Compensation” in the “Summary Compensation Table” related to the accrual of consulting fees during the period reported.
(3)
Mr. Sutti-Keyser was appointed Chief Executive Officer in February 2012. Mr. Sutti-Keyser received no cash compensation in 2011.
(4)
Mr. Zapata was appointed the Chief Financial Officer in February 2012.
(4)
Mr. Bracht served as our Chief Executive Officer from October 22, 2010 until his death on September 22, 2011.
(5)
Mr. Langford was appointed as our Chief Financial Officer, Secretary, and Treasurer on July 24, 2010 and was appointed as our Chief Executive Officer on October 10, 2011. Mr. Langford resigned from each of these positions on February 24, 2012.

There no directors fees paid or accrued in 2013, the Company did accrue $14,250 in geological consulting fees.

 
 

 
 
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Compensation Components

Base Salary. At this time, we do not compensate our executive officers by the payment of salaries, but did compensate Mr. Langford for his service as an executive officer in 2011 through the indirect payment fees to a company controlled by Mr. Langford. Mr. Langford is the President and Chief Executive Officer of The Langford Group, Inc. (“Langford Group”). On August 25, 2010, we entered into a Consulting Agreement (the “Agreement”) with Langford Group. The Agreement was effective as of July 24, 2010 and terminated on October 24, 2010. Pursuant to the terms of the Agreement, Langford Group was retained to provide us with financial management services. As compensation for such services, Langford Group received a monthly management fee of $2,500 U.S. Dollars, payable on the 15th day of the month to which payment of such management fee relates. Despite the termination of the Agreement, we continued to pay Langford Group the monthly management fee of $2,500 U.S. Dollars for each month that Mr. Langford served as an executive officer. Mr. Langford for his services as a consultant received an additional $12,548 during the year.

Mr. Bracht was paid $13,500 in consulting fees for the year ended December 31, 2011.

Bonuses. At this time, we do not compensate our executive officers by the payment of bonus compensation.

Stock Options. Stock option awards are determined by the Board of Directors based on numerous factors, some of which include responsibilities incumbent with the role of each executive to the Company and tenure with the Company. We did not grant any stock options to our executive officers during the years ended December 31, 2012. . In 2011, Mr. Langford, our former Chief Financial Officer received 100,000 options at a strike price of $0.07 that have an option expiration date of December 10, 2013.

At no time during the last fiscal year was any outstanding option repriced or otherwise modified. There was no tandem feature, reload feature, or tax-reimbursement feature associated with any of the stock options we granted to our executive officers or otherwise.

Outstanding Equity Awards at Fiscal Year-End

The following table contains information regarding outstanding equity awards held at December 31, 2012, by the named executive officers.
 
 
Option Awards
Name
Number of
Securities
Underlying Unexercised
Options
(#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
Option
Exercise
Price
($)
Option
Expiration
Date
         
Pietro Sutti-Keyser, CEO
75,000
75,000
-
-
         

 
 

 
 
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Stock Option Plan

In 2007, our Board adopted the 2007 Stock Incentive Plan (the “Stock Incentive Plan”). The Stock Incentive Plan authorizes us to reserve shares for future grants under it, of which 500,000 shares remain available for issuance.

The Stock Incentive Plan authorizes us to grant (i) to the key employees incentive stock options to purchase shares of common stock and non-qualified stock options to purchase shares of common stock and restricted stock awards, and (ii) to non-employee directors and consultants’ non-qualified stock options and restricted stock. The Plan Administrator will administer the Plan by making recommendations to the board or determinations regarding the persons to whom options or restricted stock should be granted and the amount, terms, conditions and restrictions of the awards.

Incentive stock options granted under the Stock Incentive Plan must have an exercise price at least equal to 100% of the fair market value of the common stock as of the date of grant. Incentive stock options granted to any person who owns, immediately after the grant, stock possessing more than 10% of the combined voting power of all classes of our stock, or of any parent or subsidiary corporation, must have an exercise price at least equal to 110% of the fair market value of the common stock on the date of grant. Non-statutory stock options may have exercise prices as determined by the Plan Administrator.

The Plan Administrator is also authorized to grant restricted stock awards under the Stock Incentive Plan. A restricted stock award is a grant of shares of the common stock that is subject to restrictions on transferability, risk of forfeiture and other restrictions and that may be forfeited in the event of certain terminations of employment or service prior to the end of a restricted period specified by the Plan Administrator.

Equity Compensation Plan Information
as of December 31, 2013
 
Plan category
 
Number of securities
to be issued
upon exercise of
outstanding options,
warrants and rights
(a)
   
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
   
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
(c)
 
                   
Equity compensation plans approved by security holders
   
-
   
$
-
     
-
 
                         
Equity compensation plans not approved by security holders
   
-
   
$
-
     
500,000
 
                         
Total
   
-
     
-
     
500,000
 


Employment Contracts; Termination of Employment and Change-in-Control Arrangements

We do not have any employment agreements with any of our executive officers.
 
Compensation of Directors

The following table provides compensation for non-employee directors who served during fiscal 2013:
 
Name
 
Fees Earned
or Paid in
Cash ($)
 
Option
Awards
($)(1)
 
All
Other
Compensation
($)
 
Total ($)
                 
Robert Van Tassell
 
-
 
-
 
-
 
-
                 
Piero Sutti-Keyser (2)(1)
 
-
 
-
 
10,000
 
10,000
                 
Gordon Sredl (3)(1)
     
-
 
11,017
 
11,017

(1)  
Mr. Sutti-Keyser and Mr. Sredl billed the company for consulting services during 2013 but earned no directors fees.
(2)  
During the year ended December 31, 2012, Mr. Sutti-Keyser, who also serves as our Chief Executive Officer, received $10,000 pursuant to a consulting agreement with the Company. This compensation is disclosed in the Executive Compensation Table above.
 (3)  During the year ended December 31, 2013, the Company recorded invoices for the geological services of Mr. Sredl.
 
 
 
 
 
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The following table sets forth, as of December 31, 2013, the number and percentage of outstanding shares of common stock beneficially owned by (a) each person known by us to beneficially own more than five percent of such stock, (b) each director of the Company, (c) each named officer of the Company, and (d) all our directors and executive officers as a group. We have no other class of capital stock outstanding.
 
Name
Number of
Shares of Common
Number of
Shares of Preferred (1)(4)
Total Number of
Voting Shares
Percentage (2)
         
Officers & Directors:
       
Pierro Sutti-Keyser, Chief Executive Officer & Director
100,000
4,545,600
9,191,200
1.36%
Gilberto Zapata, Director
-0-
2,000,000
4,000,000
0.59%
Gordon Sredl, Director
Robert Van Tassell
-0-
-0-
4,000,000
-0-
8,000,000
-0-
4.23%
0.00%
5% or Greater:
       
         
         
TOTAL
100,000
10,545,600
21,191,200
5.18%
 
(1)
1 share of Class A Preferred Convertible Share is equal to the vote of 2 shares of common stock.
(2)
Based upon  shares of common stock issued and outstanding on December 31 31, 2013 and the Class A Preferred Convertible Shares having a voting equivalent of 95,137,000 shares of common stock for total voting shares of 673,151,273.
(3)
(4)
Unless otherwise provided, the address of each person is c/o Carrera 49 No. 51-11 Suite 402, Copacabana, Antioquia, Colombia.
Shares of Preferred B stock have a voting power of 60% of all votes, and is subject to a voting trust agreement of which Piero Sutti-Keyser and Gordan Sredl have voting control and ownership.
 
The above beneficial ownership information is based on information furnished by the specified persons and is determined in accordance with Rule 13d-3 under the Exchange Act, as required for purposes of this annual report; accordingly, it includes shares of First Colombia Gold Corp. common stock that are issuable upon the exercise of stock options exercisable within 60 days of January 31, 2013. Such information is not necessarily to be construed as an admission of beneficial ownership for other purposes.
 

Except as set forth below, none of our directors or executive officers, nor any proposed nominee for election as a director, nor any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to all of our outstanding shares, nor any members of the immediate family (including spouse, parents, children, siblings, and in-laws) of any of the foregoing persons has any material interest, direct or indirect, in any transaction since the beginning of our last fiscal year on January 1, 2011 or in any presently proposed transaction which, in either case, has or will materially affect us.
Settlement and Mutual Release Agreement

We entered into a Mineral Right Option Agreement with Temasek on September 18, 2008, as amended and supplemented by Amendment No. 1 dated May 12, 2009 (“Amendment No. 1”), Amendment No. 2 dated February 3, 2010 (“Amendment No. 2”), and Amendment No. 3 dated June 25, 2010 (“Amendment No. 3”) (collectively, the “Option Agreement”). Pursuant to the Option Agreement, we acquired from Temasek a fifty percent equity interest in Beardmore Holdings, Inc. (“Beardmore”) and had the option to acquire the remaining fifty percent equity interest in Beardmore from Temasek, which would have resulted in our ownership of one hundred percent of Beardmore’s equity. Beardmore indirectly holds, through its subsidiary Rio Santiago Minerales S.A.C., certain mineral rights (the “Mineral Rights”) underlying properties located in Peru.
 
 
 
 
 
 
- 44 -


 
 

 
Under the terms of Amendment No. 3, we would have increased our ownership interest in the Mineral Rights from fifty percent to one-hundred percent resulting in its acquisition of all of the outstanding capital stock of Beardmore, if we had fulfilled the following conditions (collectively the “Option Requirements”) within ten business days following the effective date of Amendment No. 3:

·
Completion of the exercise of options resulting in our acquisition of a fifty percent interest in the Mineral Rights through our acquisition of fifty percent of the outstanding capital stock of Beardmore;
·
Issuance to Temasek of a total of 11,000,000 shares of our common stock (of which 5,000,000 were previously issued to Temasek);
·
Payment to Temasek of US $250,000 (which such payment was acknowledged by Temasek to have been made in March 2010);
·
Issuance of a convertible note for US $250,000 (the “$250,000 Convertible Note”) payable to the order and the direction of Temasek (which was issued on June 25, 2010); and
·
Issuance of a convertible note for US $3,250,000 (the “$3,250,000 Convertible Note” and, collectively with the $250,000 Convertible Note, the “Convertible Notes”) payable to the order and the direction of Temasek (which was issued on June 25, 2010).
 
The $250,000 Convertible Note had a term of ninety days and accrued interest at a rate of 12% per annum. We failed to pay the principle and interest under the $250,000 Convertible Note upon maturity, which caused us to default on the $250,000 Convertible Note.

The $3,250,000 Convertible Note had a term of three years and accrued interest at a rate of 12% per annum. Interest was payable annually and the principal was to be paid upon maturity.

As of the date we were required to fulfill the Option Requirements under Amendment No. 3, we did not issue the 6,000,000 shares of our common stock to Temasek and defaulted on the $250,000 Convertible Note resulting from our failure to pay the principal plus interest on such note on its maturity date. This also resulted in the options to acquire the remaining fifty percent interest in the Mineral Rights (which would have resulted in our acquisition of a one hundred percent interest in the Mineral Rights) having lapsed as of July 5, 2010.

On September 21, 2011, we entered into a Settlement and Mutual Release Agreement (“Settlement Agreement”) with Temasek, which resulted in our relinquishment and transfer to Temasek of our fifty percent interest in the outstanding capital stock of Beardmore in exchange for Temasek releasing us from all of our outstanding obligations under the terms of the Option Agreement. By execution of the Settlement Agreement, we no longer held any interest, directly or indirectly, in the Mineral Rights.

Under the terms of the Settlement Agreement, the $250,000 Convertible Note and the $3,250,000 Convertible Note were cancelled and we are no longer obligated to issue Temasek 6,000,000 shares of our common stock in exchange for our relinquishment and transfer to Temasek of our fifty percent interest in the outstanding capital stock of Beardmore. We are not entitled to recover any consideration previously paid to Temasek or any mineral property exploration expenditures incurred in connection with the exploration and development of the properties underlying the Mineral Rights. The Settlement Agreement included a mutual release of all claims arising out of or relating to the Option Agreement.

Options Issued to Officers & Directors

There were no options issued during the year ended December 31, 2013.

Preferred Shares Issued to Officers & Directors

In February 2013, the Company’s Chief Executive Officer, Mr. Sutti-Keyser and its directors, Mr. Zapata and Sredl, received a total of 14,682,100 shares with a deemed market value of $32,300 to settle liabilities of approximately $32,300

Director Independence

Our board of directors undertook its annual review of the independence of the directors and considered whether any director had a material relationship with us or our management that could compromise his ability to exercise independent judgment in carrying out his responsibilities. As a result of this review, the board of directors affirmatively determined that Mr. Robert Van Tassell and Mr. Gordan Sredl are each “independent” as such term is used under the rules and regulations of the Securities and Exchange Commission. Mr. Sutti-Keyser, as Chief Executive Officer of the Company, is not considered to be “independent.”
 
 
 
 
 
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The following table is a summary of the fees billed to us by James Stafford, Chartered Accountants for professional services for the fiscals year ended December 31, 2012 and  December 31,2013 and for professional services for the fiscal year ended December 31, 2013 by Sadler Gibb and Associates:
 
   
Fiscal
2013 Fees
   
Fiscal
2012 Fees
 
Fee Category
           
Audit Fees
 
$
29,824
   
$
24,258
 
Audit-Related Fees
 
$
     
$
9,365
 
Tax Fees
   
-
     
-
 
AllOOther Fees
   
-
     
-
 
                 
Total Fees
 
$
29,824
   
$
33,623
 
 
Audit Fees. Consists of fees billed for professional services rendered for the audit of our consolidated financial statements and review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by our independent registered public accounting firms 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.” These services include accounting consultations in connection with acquisitions and consultations concerning financial accounting and reporting standards.
 
During fiscal 2013 or 2012, our independent registered public accounting firm did not bill us for any Tax Fees or Other Fees.
 
Our practice is to consider and approve in advance all proposed audit and non-audit services to be provided by our independent registered public accounting firm.

The audit report of James Stafford, Chartered Accountants on the consolidated financial statements of the Company for the years ended December 31, 2012 and 2011 did not contain an adverse opinion or disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles, except that the audit reports on the consolidated financial statements of the Company for the fiscal years ended December 31, 2012 and December 31, 2011 contained an uncertainty about the Company’s ability to continue as a going concern.

The audit report of Sadler Gibb and Asociates on the consolidated financial statements of the Company for the year ended December 31, 2013 did not contain an adverse opinion or disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles, except that the audit reports on the consolidated financial statements of the Company for the fiscal year ended December 31, 2013contained an uncertainty about the Company’s ability to continue as a going concern.

During our fiscal years ended December 31, 2013 and 2012, there were no reportable events (as described in Item 304(a)(1)(v) of Regulation S-K), except we note than on  December 31,2013 ( as reported on our 8k report filed on January 10,2014) the following occurred  :

James Stafford, Inc. Chartered Accountants formerly the independent registered public accountant for First Colombia Gold, Inc. (“the Company”) resigned as the Company’s independent registered public accountant on December 31, 2013.

On January 6, 2014, the Board of Directors of the Company approved the engagement of new auditors, Sadler, Gibb & Associates, LLC, of Utah to be the Company’s independent registered public accountant. No audit committee exists, other than the members of the Board of Directors.

The action to engage new auditors was approved by the Board of Directors. No audit committee exists, other than the members of the Board of Directors.

In connection with audit of fiscal years ended December 31, 2012 and 2011 and the cumulative period of January 1, 2013 through September 30, 2013 and through the date of resignation of the accountants, no disagreements exist with the former independent registered public accountant on any matter of accounting principles or practices, financial statement disclosure, internal control assessment, or auditing scope of procedure, which disagreements if not resolved to the satisfaction of the former accountant would have caused them to make reference in connection with their reports to the subject of the disagreement(s) and there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.
 
 
 
 
- 46 -


 
The Independent Auditor Report by James Stafford, Inc. Chartered Accountants for the fiscal years ended December 31, 2012 and 2011, did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles, except that it included a paragraph discussing uncertainties related to continuation of the Company as a going concern.

Prior to engaging Sadler, Gibb & Associates, LLC, the Company had not consulted Sadler, Gibb & Associates, LLC regarding the application of accounting principles to a specified transaction, completed or proposed, the type of audit opinion that might be rendered on the Company’s financial statements or a reportable event, nor did the Company consult with Sadler, Gibb & Associates, LLC, regarding any disagreements with its prior auditor on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of the prior auditor, would have caused it to make a reference to the subject matter of the disagreements in connection with its reports.

The Company has provided James Stafford, Inc. Chartered Accountants with a copy of the foregoing disclosures and requested that James Stafford, Inc. Chartered Accountants furnish the Company with a letter addressed to the SEC stating whether or not it agrees with the above statements. A copy of such letter is filed as an exhibit to the 8k report filed on January 10,214.

 
PART IV

The following is a complete list of exhibits filed as part of this Form 10K. Exhibit number corresponds to the numbers in the Exhibit table of Item 601 of Regulation S-K.

Exhibit
Number
 
Description
     
2.1
 
Articles of Merger (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed May 27, 2008, and incorporated herein by reference)
     
2.2
 
Agreement and Plan of Merger (filed as Exhibit 2.2 to the Company’s Current Report on Form 8-K filed May 27, 2008,and incorporated herein by reference)
     
2.3
 
Articles of Merger (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed November 9, 2010, and incorporated herein by reference)
     
2.4
 
Agreement and Plan of Merger (filed as Exhibit 2.2 to the Company’s Current Report on Form 8-K filed November 9, 2010, and incorporated herein by reference)
 
 
 
 
 

 
 
- 47 -


 

 
Exhibit
Number
 
Description
     
3.1
 
Articles of Incorporation (filed as Exhibit 3.1 to the Company’s Form 10 Registration Statement (SEC File No. 000-51203, and incorporated herein by reference)
     
3.2
 
Certificate of Amendment to Articles of Incorporation, evidencing name change to “FinMetal Mining Ltd. ” ( filed as Exhibit 3.3 to the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007, and incorporated herein by reference)
     
3.3
 
Certificate of Change Pursuant to NRS 78.209 (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed May 27, 2008, and incorporated herein by reference)
     
3.4
 
Amended and Restated By-laws of the Company (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 2, 2008, and incorporated herein by reference)
     
3.5
 
Amendment to the Articles of Incorporation of the Company, dated February __, 2013, filed herewith.
     
4.1
 
Convertible Promissory Note Issued November 23, 2011 by the Company to Asher Enterprises, Inc. (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed December 7, 2011, and incorporated herein by reference)
     
4.2
 
Convertible Promissory Note Issued March 16, 2012 by the Company to Asher Enterprises, Inc. (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed April 3, 2012, and incorporated herein by reference)
     
4.3
 
Certificate of Designation of Class A Preferred Convertible Stock (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed November 15, 2012, and incorporated herein by reference)
 
     
4.4
 
Convertible Promissory Note Issued June 6, 2012 by the Company to Asher Enterprises, Inc. (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed July 9, 2012, and incorporated herein by reference)
     
4.5
 
Convertible Promissory Note Issued December 18, 2012 by the Company to Asher Enterprises, Inc. (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed February 4, 2013, and incorporated herein by reference)
     
10.1
 
Agreement between the Company and Sapo Holdings SA dated April 1, 2011 (filed as Exhibit 10.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010, and incorporated herein by reference)
     
10.2
 
Mineral Right Option Agreement between the Company and Temasek Investments Inc. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 22, 2008, and incorporated herein by reference)
     
10.3
 
Amendment to Mineral Right Option Agreement between the Company and Temasek Investments, Inc. (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended May 20, 2009, and incorporated herein by reference)
     
10.4
 
Second Amendment to Mineral Right Option Agreement, dated February 3, 2010 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed February 3, 2010, and incorporated herein by reference)
     
10.5
 
Third Amendment to Mineral Right Option Agreement, dated June 25, 2010 (filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K filed June 29, 2010, and incorporated herein by reference)
     
10.6
 
Consulting Agreement, dated as of August 25, 2010, between the Company and The Langford Group, Inc. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed August 26, 2010, and incorporated herein by reference)
     
10.7
 
2007 Stock Incentive Plan. (filed as Exhibit 10.6 to the Company’s Annual Report on Form 10KSB for the Year ending December 31, 2007, and incorporated herein by reference)
     
10.8
 
Settlement and Mutual Release Agreement, dated as of September 21, 2011, between the Company and Temasek Investments Inc. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 23, 2011, and incorporated herein by reference)
 
 

 
 
 
- 48 -


 

 

Exhibit
Number
 
Description
     
10.9
 
Securities Purchase Agreement, dated November 23, 2011, between the Company and Asher Enterprises, Inc. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed December 7, 2011, and incorporated herein by reference)
     
10.10
 
Assignment and Assumption Agreement, dated December 6, 2011, by and among the Company, Castle Creek Silver Inc. and Robert Ebisch (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed December 22, 2011, and incorporated herein by reference)
     
10.11
 
Purchase and Sale Agreement, dated December 16, 2011, by and among the Company and Boulder Hill Mines Inc. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed December 22, 2011, and incorporated herein by reference)
     
10.12
 
Assignment and Assumption Agreement, dated December 16, 2011, by and among the Company, Boulder Hill Mines Inc. and Jim Ebisch (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed December 7, 2011, and incorporated herein by reference)
     
10.13
 
Securities Purchase Agreement, dated March 16, 2012, between the Company and Asher Enterprises, Inc. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed April 3, 2012, and incorporated herein by reference)
     
14.1
 
Code of Ethics and Code of Conduct. (filed as Exhibit 14.1 to the Company’s Annual Report on Form 10KSB for the Year ending December 31, 2005, and incorporated herein by reference)
     
 23.1   Consent of James Stafford Chartered Accountants
     
31.1
 
     
31.2
 
     
32.1
 
     
32.1
 
     
101
 
The following materials from First Colombia Gold Corp.'s Annual Report on Form 10-K for the year ended December 31, 2013, formatted in XBRL (eXtensible Business Reporting Language): (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Stockholders Equity, (iv) the Statements of Cash Flows and (v) the Notes to Financial Statements, tagged as blocks of text, furnished herewith.*
     
101.INS
 
XBRL Instance Document *
     
101.SCH
 
XBRL Taxonomy Extension Schema Document *
     
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document *
     
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document *
     
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document *
     
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document *
     
* 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 Section 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

 
 
- 49 -


 
sglogo
 


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors
First Colombia Gold Corp.

We have audited the accompanying consolidated balance sheet of First Colombia Gold Corp. (the Company) as of December 31, 2013 and the related consolidated statements of operations, stockholders’ deficit and cash flows for the year then ended.  These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. The consolidated financial statements as of December 31, 2012 and for the period from September 5, 1997 (date of inception) through December 31, 2012, were audited by other auditors, whose report dated March 26, 2013, expressed an unqualified opinion on those statements

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 audit 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 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 First Colombia Gold Corp. as of December 31, 2013, and the results of their operations and cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the Company will need additional working capital to accomplish its intended purpose and to service its debt, which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 


/s/ Sadler, Gibb & Associates, LLC                                    
     Sadler, Gibb & Associates, LLC
 
Salt Lake City, UT
April 18, 2014

 
 
 

 

 
 
 
James Stafford
 
 
James Stafford, Inc.
Chartered Accountants
Suite 350 – 1111 Melville Street
Vancouver, British Columbia
Canada V6E 3V6
Telephone +1 604 669 0711
Facsimile +1 604 669 0754
www.jamesstafford.ca
 
 
 
 
 
 


Report of Independent Registered Public Accounting Firm



To the Board of Directors and Stockholders’ of
First Colombia Gold Corp.
(An Exploration Stage Company)


We have audited the accompanying consolidated balance sheets of First Colombia Gold Corp. (An Exploration Stage Company) (the “Company”) as of 31 December 2012 and 2011 and the related consolidated statements of operations, cash flows and changes in stockholders’ equity (deficiency) for each of the years in the three-year period ended 31 December 2012. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as, evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company at 31 December 2012 and 2011 and the consolidated results of its operations and its cash flows for each of the years in the three-year period ended 31 December 2012 in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, conditions exist which raise substantial doubt about the Company’s ability to continue as a going concern unless it is able to generate sufficient cash flows to meet its obligations and sustain its operations. Management’s plans in regards to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.




/s/ James Stafford                                              
     James Stafford
     Chartered Accountants
 
Vancouver, Canada
26 March 2013

 

 

 
 
 
 
 
FIRST COLOMBIA GOLD CORP.
(An Exploration Stage Company)
Consolidated Balance Sheets
             
   
As at
   
As at
 
   
31 December
   
31 December
 
   
2013
   
2012
 
   
$
   
$
 
             
Assets
           
Current Assets
           
Prepaid expenses
  $ 1,145     $ -  
Other receivable
    16,500       27,500  
Total current assets
    17,645       27,500  
                 
Mineral property interests
    -       32,500  
Property and Equipment
    4,113       5,874  
                 
Total Assets
  $ 21,758     $ 65,874  
                 
Liabilities and Stockholders' Deficit
               
Current Liabilities
               
Accounts payable and accrued liabilities
  $ 230,855     $ 506,551  
Accounts payable, related parties
    38,346       28,843  
Convertible notes payable, net of discounts of $38,697 and $0
    39,798       62,604  
Derivative liabilities
    671,998       -  
Total Current Liabilities
    980,997       597,998  
                 
Notes payable
    241,100       -  
                 
Total Liabilities
    1,222,097       597,998  
                 
Stockholders' Deficit
               
Preferred Stock
               
              Blank Check Preferred Stock, authorized 116,818,182 shares, 0 issued and            
   outstanding
     -        -  
Series A Convertible Preferred Stock, par value $.001, authorized
               
   50,000,000, 47,568,500 and 0 shares issued and outstanding, respectively
    47,569       -  
Series B Convertible Preferred Stock, par value $0, authorized
               
   33,181,818, 0 issued and outstanding
    -       -  
Common Stock
               
               Par value $.00001, authorized 850,000,000, 579,014,273 and 83,686,238            
   shares issued and outstanding at December 31, 2013 and 2012, respectively
    5,790       837  
Additional paid-in capital
    18,958,991       18,554,809  
Deficit accumulated during the exploration stage
    (20,212,689 )     (19,087,770 )
                 
Total Stockholders' Deficit
    (1,200,339 )     (532,124 )
                 
Total liabilities and stockholders' equity deficit
  $ 21,758     $ 65,874  
                 
                 
The accompanying notes are an integral part of these consolidated financial statements
         
 
 
 
 
 
 
 
 
 
FIRST COLOMBIA GOLD CORP.
 (Exploration Stage Company)
 
Consolidated Statements of Operations
 
               
(Unaudited)
 
               
For the period
 
               
from the date of
 
               
inception on
 
   
For the
   
For the
   
5 September
 
   
year ended
   
year ended
   
1997 to
 
   
31 December
   
31 December
   
31 December
 
   
2013
   
2012
   
2013
 
   
$
   
$
   
$
 
Expenses
                 
Depreciation and amortization
    1,761       2,517       85,497  
General and administrative
    183,299       144,554       7,859,794  
Impairment loss on mineral properties
    36,650       33,000       5,069,650  
Mineral property exploration expenditures
    51,600       48,889       5,154,674  
Total Operating Expense
    273,310       228,960       18,169,615  
                         
Loss from operations
    (273,310 )     (228,960 )     (18,169,615 )
                         
Other Items
                       
Gain on extinguishment of debt
    50,730       -       89,730  
Gain on sale of oil and gas property
    -       -       10,745  
Interest income
    -       -       102,561  
Recovery of expenses
    -       -       4,982  
Interest expense
    (456,156 )     (81,007 )     (2,098,211 )
Loss on derivative liabilities
    (446,183 )             (446,183 )
Write-down of incorporation cost
    -       -       (12,500 )
Write-down of assets
    -       -       (14,111 )
Total Other Items
    (851,609 )     (81,007 )     (2,362,987 )
                         
Net loss before income taxes
    (1,124,919 )     (309,967 )     (20,532,602 )
                         
Future income tax recovery
    -       -       2,319,871  
                         
Net loss from continuing operations
    (1,124,919 )     (309,967 )     (18,212,731 )
                         
Discontinued operations of Beardmore Holdings, Inc.
    -       -       (1,999,958 )
                         
Net loss
    (1,124,919 )     (309,967 )     (20,212,689 )
                         
Loss per common share - basic and diluted
                       
Continuing operations
  $ (0.00 )   $ (0.01 )        
                         
Weighted average shares outstanding of common - basic and diluted
    269,696,456       50,700,942          
                         
                         
The accompanying notes are an integral part of these consolidated financial statements
 
 
 
 
 
 
 
 
 
 
FIRST COLOMBIA GOLD CORP.
(Exploration Stage Company)
Consolidated Statement of Cash Flows
                   
               
For the period
 
               
from the date of
 
               
inception on
 
   
For the
   
For the
   
5 September
 
   
year ended
   
year ended
   
1997 to
 
   
31 December
   
31 December
   
31 December
 
   
2013
   
2012
   
2013
 
   
$
   
$
   
$
 
Cash Flows Used in Operating Activities:
             
 Net Income (Loss)
    (1,124,919 )     (309,967 )     (18,212,731 )
   Adjustments:
                       
 Amortization
    1,761       2,517       85,497  
 Debt discount amortization and origination interest
    444,387               444,387  
 Loss on derivative liabilities
    446,183               446,183  
 Consulting fees
    -       -       40,200  
 Gain on  extinguishment of debt
    (50,730 )     -       (74,730 )
 Future income tax recovery
    -       -       (2,319,871 )
 Accured interest     -       79,783       -  
 Gain on sale of oil and gas property
    -       -       (10,745 )
 Mineral property acquisition
                    1,816,000  
 Stock-based compensation (recovery)
    -       -       3,609,399  
 Write-down and impairment loss on mineral properties
    36,650       33,000       5,069,650  
Impairment loss on mineral properties
                 
 Changes in operating assets and liabilities
    -                  
 Other Receivable & Prepaid Expenses
    9,855       (27,500 )     (1,145 )
 Increase (decrease) in accounts payable and accrued liabilities
    134,968       127,458       2,288,922  
                         
 Net Cash used in Continuing Operating Activities
    (101,845 )     (94,707 )     (6,818,984 )
                         
 Net cash used in discontinued operations
    -       -       (186,440 )
                         
 Net Cash used in  Operating Activities
    (101,845 )     (174,492 )     (7,005,424 )
                         
Net Cash Used In Investing Activities
                 
 Bank over draft     -       13       -  
 Purchase of mineral property interests
    (4,150 )     -       (52,759 )
 Proceeds from sale of oil and gas property
    -       -       46,200  
 Oil and gas property acquisitions
    -       -       (2,846 )
 Oil and gas exploration
    -       -       (22,609 )
 Purchase of equipment
    -       -       (53,550 )
 Website development costs
    -       -       (40,000 )
                         
 Net Cash Provided by Used In Investing Activities
    (4,150 )     -       (125,564 )
                         
                         
Cash Flows From Financing Activities:
                 
 Proceeds from notes payable
    105,995       -       235,995  
 Cost of repurchase of common stock
    -       -       (1,000 )
 Warrants exercised
    -       -       100,000  
 Proceeds from common stock, net of share issue costs
    -       92,500       8,311,915  
                         
 Net Cash Provided by Financing Activities
    105,995       92,500       8,646,910  
                         
Net cash used in discontinued operations
              (1,499,422 )
                         
                         
 Net (Decrease) in Cash
    -       (2,194 )     -  
                         
 Cash at Beginning of Period
    -       2,194       -  
                         
 Cash at End of Period
    -       -       -  
                         
Supplemental disclosure of cash flow information:
         
                         
                         
  Foreign exchange loss
                    21,787.00  
Common shares issued for oil and gas property
      10,000.00  
Common shares issued for services
              50,000.00  
  Donated consulting services
                    16,200.00  
Commonn shares issued for equity acquisition of Finmetal
      1,280,000.00  
Restricted shares issued for stock-based compensation
      2,418,000.00  
Common shares issued as finders' fee
              254,500.00  
Common share issued for mineral rights
      2,320,000.00  
  Common shares issued upon conversion of promissory notes
    141,030       34,900       175,930.00  
  Notes payable issued for settlement of accounts payable
    241,200               241,200.00  
  Preferred A shares issued for settlment of accounts payable
    104,651               104,651.00