SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For quarterly period ended April 30, 2014

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

For the transition period from ___________ to ___________

Commission file number 000-53627

Gold Hill Resources, Inc.
(Exact name of Registrant as specified in its charter)

3751 Seneca Ave., Pahrump, NV 89048

(Address of principal executive offices - Zip Code)

(775)-751-6931
(Registrant's telephone number, including area code)

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

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

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.

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 18,415,954 shares of common stock, par value $0.001, were outstanding on May 29, 2014.

GOLD HILL RESOURCES, INC.

FORM 10-Q

For the Quarterly Period April 30, 2014

Table of Contents

PART I FINANCIAL INFORMATION

PART II OTHER INFORMATION

PART I — FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (Unaudited)

Gold Hill Resources, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

NOTE 1 - Organization, Basis of Presentation and Going Concern

Organization

Gold Hill Resources, Inc., (the "Company", "we", "us" and "Our") a Nevada corporation, was incorporated on March 2, 2001. Prior to June 13, 2013, we were a public “shell” company.

On June 13, 2013, Gold Hill Resources, Inc. closed a share exchange transaction pursuant to which it became the parent of Accurate Locators, Inc., an Oregon corporation, and Imaging Locators, Inc., a Nevada Corporation and assumed the operations of Accurate Locators and Imaging Locators. Gold Hill Resources, Inc. was deemed the legal acquirer in the reverse merger. Consequently, the assets and liabilities and the historical operations of Accurate Locators, Inc. and Imaging Locators, Inc. are reflected in the financial statements. As a result, we are solely engaged in Accurate Locators’ and Imaging Locators' business. Accurate Locators has been a metal detector manufacturer and distributor since 1992 for dealers, treasure hunters, gold prospectors and utility companies world-wide. The Company provides industry standard metal detectors for treasure hunting, gold prospecting and locating under-ground cable, pipe and utilities. The Company’s products are used by many sectors of the US Government and many mining type operations including the likes of Westinghouse, Bureau of Land Management, Bechtel, Graybar, US Army, Navy and Marines.

Imaging Locators, Inc. operates a metal detector store with a wide variety of instruments. The Company specializes in underground Surveyor Apparatus units, Ground Penetrating Radar, Pulse Induction Metal Detectors and Tunnel Locators.

We are engaged in several research and development projects; we are evolving our current ground penetrating radar, induced polarization, pulse induction and other metal detection systems. We filed our first provisional patent on our blanket antenna technology on November 12, 2012. We also plan to file several additional patents in the next twelve months; which will further enhance and protect our intellectual property portfolio and greatly improve on our detection systems capabilities, thus positioning the Company to capture greater market share in the geophysics sector. Research and development expenses were not material during the periods presented.

In addition our core business of development, manufacturing and distribution of metal detection products and systems, and utilizing our evolving technology in metal detection products, we plan to identify potential acquisition and partnership opportunities within the precious metals mining sector.

Basis of Presentation

All transactions and accounts between and among Gold Hill Resources, Inc., Accurate Locators, Inc. and Imaging Locators, Inc. have been eliminated. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting, accordingly, they do not include all of the disclosures required by accounting principles generally accepted in the United States for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended October 31, 2013, as filed with the Securities and Exchange Commission as part of the Company's Form 10-K. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the interim financial information have been included. The results of operations for any interim period are not necessarily indicative of the results of operations for the entire year. The Company did not record an income tax provision during the periods presented due to net taxable losses.

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplate continuation of the Company as a going concern. In the course of funding development and sales and marketing activities, the Company has sustained operating losses and has an accumulated deficit of $408,198 at April 30, 2014. In addition, the Company has negative working capital of $92,690 at April 30, 2014. We have funded operations through accumulated earnings, borrowings from related parties, and proceeds from debt and equity.

We are in need of generating significant cash resources to achieve our future strategic plan. We anticipate that our existing cash on hand will not be sufficient to fund our business needs. These factors raise substantial doubt about the ability of the Company to continue as a going concern. In this regard, management is proposing to raise any necessary additional funds not provided by operations through loans or through additional sales of common stock. There is no assurance that the Company will be successful in raising this additional capital or in achieving profitable operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.

Reclassifications

A reclassification of commissions and discounts amounting to $379,187 has been made to the revenue and cost of revenue balances for the three months ended January 31, 2014 to conform with prior year presentation. As a result of the reclassification, the revenue balance for the six months ended April 30, 2014 is reported net of commissions and discounts.  The reclassification had no impact on gross profit, loss from operations, or net loss for the periods presented.

Note 2 - Inventories

Inventories include metal detectors for treasure hunting, gold and royal metal prospecting, forensic and military applications and also for locating under-ground utilities. Most inventory is finished goods. Inventories are valued at the lower of cost or market. Cost is determined using a weighted-average method. The reserves for obsolescence are maintained based on historical trends and specific identification, and therefore require management to make assumptions and to apply judgment about a number of factors, such as market conditions, the selling environment, historical results and current inventory trends. The reserve for obsolete inventory was $51,259 as of April 30, 2014 and October 31, 2013, respectively.

Note 3 - Property and Equipment

Property and equipment consisted of the following:

Note 4 - Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following:

Note 5 - Related Parties

As of April 30, 2014, The Company owed Wayne Good, our CEO, $60,036 for advances made to the Company. As of October 31, 2013, the $222,357 balance due to related parties included $66,357 due to Mr. Good and $156,000 due to Eric Stoppenhagen, our former Director and CFO. As a result of his resignation, Mr. Stoppenhagen's balance in the amount of $33,550 has been classified in accounts payable as of April 30, 2014. During the six months ended April 30, 2014, Mr. Stoppenhagen billed the Company $35,988 and was paid $158,438.

The Company leases its facilities from Mr. Good on a year to year basis for monthly rent of $1,800. Rent in the amount of $5,400 and $10,800 was paid to Mr. Good during the three and six months ended April 30, 2014, respectively. Rent in the amount of $5,400 and $10,800 was paid to Mr. Good during the three and six months ended April 30, 2013, respectively.

Note 6 - Debt

The Company’s debt is summarized below: 

Notes Payable

Notes payable consists of $29,800 due to Mr. Stoppenhagen. The note bears interest at 7% and has an accrued interest balance of $8,428 and $7,393 as of April 30, 2014 and October 31, 2013, respectively. The Company recognized interest expense on the note of $509 and $1,034 during the three and six months ended April 30, 2014, respectively.

Convertible Promissory Notes

On December 30, 2013 and January 28, 2014 the Company received proceeds of $63,000 and $42,500, respectively, in connection with issuing two identical convertible promissory notes ("CPN") to Asher Enterprises, Inc., ("Holder") a private corporation. The CPN accrues interest at 8% and matures nine months from the date of issuance. The Holder may convert the CPN beginning one hundred eighty days following the date of the each CPN. The conversion price is 61% multiplied by the average of the lowest three trading prices for the common stock during the ten trading day period ending on the latest trading day prior to the conversion date. The total intrinsic value of the beneficial conversion feature amounted to $90,929. The Company recorded a discount to the face amount of the CPN which is being accreted over the term of each CPN using the effective interest method.

During the three and six months ended April 30, 2014, the Company recognized $2,058 and $2,798, respectively, of interest expense related to the CPNs. During the three and six months ended April 30, 2014, the Company recognized $7,169 and $9,012, respectively of accretion related to the debt discount. The remaining debt discount of $81,917 will be amortized through October 31, 2014.

Secured Debt

The fixed, On Deck Capital, Inc. and Other Fixed credit facilities were secured by inventory, accounts receivable and equipment as of April 30, 2014 and October 31, 2013. The term financings were secured by vehicles.

Our fixed credit facility has a maturity date of November 1, 2014 with interest at 7%.

On April 4, 2014, the Company entered into a financing agreement with On Deck Capital Inc. (the "On Deck Financing"). Under the terms of the On Deck Financing, the Company borrowed $125,000, received net proceeds of $121,875 after paying an Origination fee of $3,125, and will repay the On Deck Financing over 15 months by making 314 payments including interest of $559.52 on each business day during the term.

The Company entered into a financing agreement with Direct Capital on December 31, 2013. The face amount of the debt was $61,001. The Company received net proceeds of $50,001 and recorded $11,000 of interest expense during the six months ended April 30, 2014. The loan was being repaid at the rate of approximately $5,400 per month. On April 7, 2014, this loan was repaid in full from the proceeds of the On Deck Financing.

Our term financing has a maturity date in March 2028 with interest at 6.25%.

Our Other Fixed facility with a balance of $85,959 as of April 30, 2014 was converted to a fixed credit facility on November 7, 2012 with an extended maturity date due on November 1, 2017.

During the three months ended April 30, 2014 and 2013, the Company recognized $9,383 and $2,967, respectively, of interest expense related to secured debt. During the six months ended April 30, 2014 and 2013, the Company recognized $27,760 and $10,048, respectively, of interest expense related to secured debt.

Note 7 - Stockholders' (Deficit)

During the six months ended April 30, 2014, the Company recognized the following equity related activity:

THIS FORM 10-Q CONTAINS "FORWARD-LOOKING STATEMENTS" THAT CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING WORDS SUCH AS "BELIEVES," "EXPECTS," "MAY," "WILL," "SHOULD," OR "ANTICIPATES," OR THE NEGATIVE OF THESE WORDS OR OTHER VARIATIONS OF THESE WORDS OR COMPARABLE WORDS, OR BY DISCUSSIONS OF PLANS OR STRATEGY THAT INVOLVE RISKS AND UNCERTAINTIES. MANAGEMENT WISHES TO CAUTION THE READER THAT THESE FORWARD-LOOKING STATEMENTS, INCLUDING, BUT NOT LIMITED TO, STATEMENTS REGARDING THE COMPANY'S MARKETING PLANS, GOALS, COMPETITIVE CONDITIONS, REGULATIONS THAT AFFECT PUBLIC COMPANIES THAT HAVE NO EXISTING BUSINESS AND OTHER MATTERS THAT ARE NOT HISTORICAL FACTS ARE ONLY PREDICTIONS. NO ASSURANCES CAN BE GIVEN THAT SUCH PREDICTIONS WILL PROVE CORRECT OR THAT THE ANTICIPATED FUTURE RESULTS WILL BE ACHIEVED. ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY EITHER BECAUSE ONE OR MORE PREDICTIONS PROVE TO BE ERRONEOUS OR AS A RESULT OF OTHER RISKS FACING THE COMPANY. FORWARD-LOOKING STATEMENTS SHOULD BE READ IN LIGHT OF THE CAUTIONARY STATEMENTS AND IMPORTANT FACTORS DESCRIBED IN THIS FORM 10-Q FOR GOLD HILL RESOURCES, INC., INCLUDING, BUT NOT LIMITED TO THE MATTERS SET FORTH IN MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. THE RISKS INCLUDE, BUT ARE NOT LIMITED TO, THE RISK FACTORS AND UNCERTAINTIES SET FORTH IN ITEM 1A, "RISK FACTORS" AND THE RISKS ASSOCIATED WITH A SMALL COMPANY THAT HAS ONLY A LIMITED HISTORY OF OPERATIONS, THE COMPARATIVELY LIMITED FINANCIAL RESOURCES OF THE COMPANY, THE INTENSE COMPETITION THE COMPANY FACES FROM OTHER ESTABLISHED COMPETITORS, ANY ONE OR MORE OF THESE OR OTHER RISKS COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE FUTURE RESULTS INDICATED, EXPRESSED, OR IMPLIED IN SUCH FORWARD-LOOKING STATEMENTS. WE UNDERTAKE NO OBLIGATION TO UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENT TO REFLECT EVENTS, CIRCUMSTANCES, OR NEW INFORMATION AFTER THE DATE OF THIS FORM 10-Q OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED OR OTHER SUBSEQUENT EVENTS.

As used herein, the term "the Company," “Gold Hill,” "we," "us," and "our" refer to Gold Hill Resources, Inc. and subsidiaries unless otherwise noted.

Overview

During 2013, the Company completed a reverse merger whereby Accurate Locators, Inc. and Imaging Locators, Inc. became subsidiaries of Gold Hill Resources, Inc. Gold Hill Resources, Inc. is engaged in the mining and mineral detection technology via our wholly owned subsidiary Accurate Locators, Inc. Utilizing our evolving technology in metal detection products, we plan to identify potential acquisition and partnership opportunities within the precious metals mining sector.

Accurate Locators is a leading all-purpose metal detector manufacturer and distributor. Accurate Locators has been in business since 1992 providing several industry benchmark metal detectors for treasure hunting, gold and royal metal prospecting, forensic and military applications and also for locating under-ground utilities. The products have been used by mining operators, treasure hunters and various sectors of the US Government, including the military branches. Our client list includes the following: Westinghouse, Bureau of Land Management, Bechtel, Graybar, General Services Administration and U.S. Army, Navy and Marines. The Company also operates a metal detector store through its subsidiary, Imaging Locators, Inc.

We are engaged in several research and development projects; we are evolving our current ground penetrating radar, induced polarization, pulse induction and other metal detection systems. We filed our first provisional patent on our blanket antenna technology on November 12, 2012. As of the date of this report, we have filed for a total of seven U.S. patents and plan to file additional patents in the next twelve months; which will further enhance and protect our intellectual property portfolio and greatly improve on our detection systems capabilities, thus positioning the Company to capture greater market share in the geophysics sector. 

Results of Operations

For the Three and Six Months Ended April 30, 2014 and 2013 

Revenue

Our revenues decreased $1,550 to $176,175 during the three months ended April 30, 2014 compared to $177,725 during the three months ended April 30, 2013. Our revenues decreased $157,317 to $272,499 during the six months ended April 30, 2014 compared to $429,816 during the six months ended April 30, 2013. Our revenues decreased from 2013 due to competitive pricing pressure resulting in lower unit sales and increased discounting. The Company believes its products are superior to the foreign competitors who have caused the pricing declines. The Company is currently developing two new U.S. patent pending metal detectors which will be released in the current fiscal quarter. The Company has filed for two patents related to these products and expects sales to increase over the coming quarters upon their release.

Cost of Revenue and Gross Profit

Our gross profit decreased $17,017 to $101,502 during the three months ended April 30, 2014 compared to $118,519 during the three months ended April 30, 2013. Our gross profit decreased $44,790 to $228,338 during the six months ended April 30, 2014 compared to $273,128 during the six months ended April 30, 2013. The decrease in our gross profit margin during the three months ended April 30, 2014 was primarily due to lower gross sales and increased discounts due to competitive pricing pressure and increased dealer vs. retail sales. Gross margin as a percent of revenue is expected to fluctuate due to our short operating history and inconsistent sales patterns. 

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expense increased $52,786 to $210,290 during the three months ended April 30, 2014 compared to $157,504 during the three months ended April 30, 2013. SG&A expense increased $145,356 to $453,990 during the six months ended April 30, 2014 compared to $308,634 during the six months ended April 30, 2013. The three and six month year-over-year increase is primarily due to increased professional and administrative costs as a result of the 2013 Merger and resulting inclusion of the parent company Gold Hill Resources, Inc. operating expenses in 2014 which costs were not included in 2013 prior to the Merger. Moving forward, the Company has implemented cost cutting measures and expects SG&A to decrease.

Other Income and (Expense)

Other income and (expense) consists of transactions not directly related to revenue generating activities, gain on sales of assets, interest related to our outstanding notes and, accretion related to the debt discount of the Asher Enterprises Convertible Note. Other expense was $6,262 and $4,212 during the three months ended April 30, 2014 and 2013, respectively, compared to income of $26,283 and expense of $9,443 during the six months ended April 30, 2014 and 2013, respectively. During the six months ended April 30, 2014, the Company received $54,031 from insurance proceeds related to product that was damaged in 2013 and previously written off as other expense. Additionally, the Company recognized $12,469 of gain on the sale of assets and $31,205 of interest expense compared to $10,048 of interest expense during the six months ended April 30, 2013. The $21,157 increase in interest expense is due to the recognition of $11,000 of interest expense related to a loan from Direct Capital Corporation in addition to the Company maintaining higher debt balances at relatively higher interest rates.

Liquidity and Capital Resources

Net cash used in operating activities was $237,174 and $20,721 during the six months ended April 30, 2014 and 2013, respectively.  

Net cash provided by (used in) investing activities was $13,200 and $(350) for the six months ended April 30, 2014 and 2013, respectively.

Net cash provided by (used in) financing activities was $222,651 and ($23,455) for the six months ended April 30, 2014 and 2013, respectively.  

Current liabilities of the Company at April 30, 2014 were $398,151 compared to cash of $85,405. To the extent our business erodes or we are unable to receive additional financing we would be unable to meet the payment terms of our debt and we would have difficulty continuing as a going concern. Certain debts are secured by inventory, accounts receivable, equipment and vehicles. As of April 30, 2014, we were in compliance in all material respects with our debt agreements. There are no financial covenants concerning debt-to-equity, tangible net equity and interest coverage ratios. Currently, we cannot borrow any more under our credit facilities. However, there are no covenants that restrict additional borrowing from other sources. There are no financial covenants under our promissory note agreements.

We have suffered recurring losses from operations during the six months ended April 30, 2014 and in the past two fiscal years. We have funded operations through operating cash flow, borrowings from related parties, and proceeds from debt. We are in need of generating significant cash resources to achieve our future strategic plan.  On June 4, 2013, the Company completed a private placement offering to certain institutional and accredited investors pursuant to which the Company sold an aggregate of 950,200 shares of the Company’s common stock resulting in gross proceeds of $283,173 to the Company. From June 14 to October 15, 2013, the Company completed a private placement offering to certain institutional and accredited investors pursuant to which the Company sold an aggregate of 390,000 shares of the Company’s common stock resulting in gross proceeds of $195,000 to the Company. During the six months ended April 30, 2014, the Company received proceeds of $285,501 from issuing notes payable and $25,000 from the sale of common stock. The Company intends to use these proceeds for working capital and to develop its element detecting technologies. Even with the proceeds we raised, we anticipate that our existing cash and cash equivalents will not be sufficient to fund our business needs for more than three months and we are currently seeking additional financing. In the event we were unsuccessful in raising additional funding and our existing cash and cash equivalents were not sufficient to fund our business needs, we would scale back all new product development besides our Ground Penetrating Radar project. This would delay the release of our future products. Our officers have also indicated their willingness to defer amounts owed to them. This would allow us to maintain our existing operations.

These conditions raise substantial doubt about our ability to continue as a going concern. Our auditor has issued a "going concern" qualification as part of their opinion in the Audit Report for the year ended October 31, 2013.

Capital Expenditures

We have not incurred any material capital expenditures.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.

Recently Issued Accounting Pronouncements

We review new accounting standards as issued. Although some of these accounting standards issued or effective after the end of our previous fiscal year may be applicable to us, we have not identified any standards that we believe merit further discussion. We believe that none of the new standards will have a significant impact on our consolidated financial statements.

Item 4.  Controls and Procedures.

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief 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) under the Securities Exchange Act of 1934 (the “Exchange Act”), as of the end of the period covered by this quarterly report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of April 30, 2014, that our disclosure controls and procedures were effective such that the information required to be disclosed in our United States Securities and Exchange Commission (the “SEC”) reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

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

On December 30, 2013 and January 28, 2014 the Company received proceeds of $63,000 and $42,500, respectively, in connection with issuing two identical Convertible Promissory Notes ("CPN") to Asher Enterprises, Inc. The CPN accrue interest at 8% and mature nine months from the date of issuance. The Holder may convert the CPN beginning one hundred eighty days following the date of the each CPN. The conversion price is 61% multiplied by the average of the lowest three trading prices for the common stock during the ten trading day period ending on the latest trading day prior to the conversion date. The intrinsic value of the beneficial conversion feature contained in each CPN amounted to $90,929. The Company recorded a discount to the face amount of the CPN which is being accreted over the term of each CPN using the effective interest method.

During the six months ended April 30, 2014, the Company issued 160,000 of shares pursuant a private placement offering to certain institutional and accredited investors. Additionally, the Company issued 20,000 shares of restricted common stock for services valued at $22,800.

In connection with the above stock sales, we did not pay any underwriting discounts or commissions. None of the sales of securities described or referred to above was registered under the Securities Act of 1933, as amended (the “Securities Act”). We had or one of our affiliates had a prior business relationship with each of the purchasers, and no general solicitation or advertising was used in connection with the sales. In making the sales without registration under the Securities Act, we relied upon the exemption from registration contained in Section 4(2) of the Securities Act.

Item 6. Exhibits

__________________

*Filed herewith

** Furnished herewith. XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 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.

 SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Gold Hill Resources, Inc.

(Registrant)