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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-K


 

 

[X]

Annual Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2013.

 

OR

[   ]

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: 000-54027

 

 

BONANZA GOLD CORP.

(Name of small business issuer in its charter)

 

 

 

Nevada

20-8560967

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification Number)

 

 

Columbia Tower

701 Fifth Avenue, Office 4263, Seattle, WA

98104

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (206) 262-7461

 

 

 

 

Securities registered pursuant to

Section 12(b) of the Act:

 

Name of each exchange on which registered

None

 

 

 

Securities registered pursuant to Section 12(g) of the Act:

Common Stock $.001 par value



Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

YES [   ]   NO [X]

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.

YES [   ]   NO [ X ]


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 [   ]   NO [ X  ]


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-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 if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained in this 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 definition of “accelerated filer,” “larger accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):


Large accelerated filer [   ]     Accelerated filer [   ]     Non- accelerated filer [   ]     Smaller reporting company [X]






Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES [   ]  NO [X]


The aggregate market value of the issuer’s common stock held by non-affiliates of the registrant as of June 30, 2013, was approximately $411,063 based on $.20, the price at which the registrant’s common stock was last sold on that date.

 

As of September 30, 2014, the issuer had 6,923,005 shares of common stock outstanding.


Documents incorporated by reference: None



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BONANZA GOLD CORP.


FORM 10-K

TABLE OF CONTENTS


 

 

 

 

 

 

 

 

 

 

 

Page

  PART I.

 

 

 

 

3

 

Item 1.

 

Business

 

 

3

 

Item 1A.

 

Risk Factors

 

 

5

 

Item 1B.

 

Unresolved Staff Comments

 

 

13

 

Item 2.

 

Properties

 

 

13

 

Item 3.

 

Legal Proceedings

 

 

13

 

Item 4.

 

Mine Safety Disclosures

 

 

13

 

  PART II.

 

 

 

 

14

 

Item 5.

 

Market for Registrant’s Common Equity Related Stockholder Matters and Issuer Purchases of Equity Securities

 

 

14

 

Item 6.

 

Selected Financial Data

 

 

14

 

Item 7.

 

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

 

 

14

 

Item 7A

 

Quantitative and Qualitative Disclosures About Market Risk

 

 

17

 

Item 8.

 

Financial Statements and Supplementary Data

 

 

18

 

Item 9.

 

Changes in and Discussions with Accountants on Accounting and Financial Disclosure

 

 

19

 

Item 9A.

 

Controls and Procedures

 

 

19

 

Item 9B.

 

Other Information

 

 

20

 

  PART III.

 

 

 

 

21

 

Item 10.

 

Directors, Executive Officers and Corporate Governance

 

 

21

 

Item 11.

 

Executive Compensation

 

 

22

 

Item 12.

 

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

 

 

23

 

Item 13.

 

Certain Relationships and Related Transactions, and Director Independence

 

 

24

 

Item 14.

 

Principal Accountant Fees and Services

 

 

24

 

  PART IV.

 

 

 

 

25

 

Item 15.

 

Exhibits and Financial Statement Schedules

 

 

25

 

 SIGNATURES

 

 

27

 





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PART I


Note about Forward-Looking Statements


Most of the matters discussed within this report include forward-looking statements on our current expectations and projections about future events.  In some cases you can identify forward-looking statements by terminology such as “may,” “should,” “potential,” “continue,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” and similar expressions.  These statements are based on our current beliefs, expectations, and assumptions and are subject to a number of risks and uncertainties, many of which are difficult to predict and generally beyond our control, that could cause actual results to differ materially from those expressed, projected or implied in or by the forward-looking statements.  Such risks and uncertainties include the risks noted under “Item 1A Risk Factors.”  We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.


ITEM 1.  BUSINESS


General


The Company was incorporated under the laws of the State of Delaware in December 2006 under the name “Cold Gin Corporation.”  On December 27, 2010, we entered into an Agreement and Plan of Reorganization with Bonanza Gold Corp., a wholly-owned subsidiary of the Company, pursuant to which we merged with and into Bonanza Gold Corp, with Bonanza Gold Corp. being the surviving corporation. In connection with the reincorporation merger we changed our domicile from Delaware to Nevada, our name to Bonanza Gold Corp. and each outstanding share of our common stock was exchanged for one hundred fifty shares of the common stock of the Nevada entity.  Thereafter, our trading market experienced some unusual activity.  In an effort to stabilize the market, we effectuated a 150:1 reverse stock split on March 4, 2011.


We were initially established to become a developer of Internet media content for mixed martial arts fans and consumers.  We have not derived any revenue from the martial arts business.  Due to a change of control that occurred in August 2010, we abandoned the martial arts business.   Effective December 10, 2010, we transitioned our business focus from that of a developer of Internet media for martial arts to a company engaged in the exploration and mining of minerals.


The Company’s management has experience in the field of mineral exploration and intends to continue to invest resources into our exploration and drilling program, and intends to extend the campaign over the next several years. Depending upon our ability to obtain sufficient funding, we may also acquire additional properties for exploration. In addition, assuming sufficient funding, we plan to engage an internationally recognized mining and geological consultancy firm to assist us in our drilling efforts.


We believe that an expanded exploration and drilling program is currently our best option for increasing the value of our Company. However, we have no revenues, our stock has no trading volume, and we believe our stock price does not reflect the true value of our Company. These factors limit our ability to obtain financing.  


In April, 2011, we executed a property purchase agreement for the acquisition of certain assets from Independent Resources, Inc. pursuant to which we acquired an undivided interest in six (6) claims representing 1002.16 ha that has been staked and recorded as MTO Cell Claims. The property is located east of Harrison Lake and northwest of Hope in southwestern British Columbia. We acquired the assets for Ten Thousand Dollars ($10,000), which was funded by a loan from our former Chief Executive Officer.  Due to the lack of capital, we have not commenced such exploitation program at this time, we have the legal and functional capability to do so, including the required exploitation permits.


In December 2010, in an effort to generate revenue to continue our operations, we acquired two properties, one located in Arizona and the other in Mexico. In May 2011, we assigned the property located in Arizona and the property located in Mexico back to the original owner that had sold us the properties in exchange for a termination of all of our payment obligations for such assets. In June 2011 we acquired a 75% interest in 28 lode claims and approximately 560 acres in Okanogan County, State of Washington. In May 2013, we assigned the property located in Okanogan County, State of Washington back to the original owner that had sold us the properties in exchange for a termination of all of our payment obligations for such assets.  In February 2012 we acquired one (1) patented mining claim (the “Zellweger Patented Claim”) and twenty-six (26) lode mining claims (the “Kelvin Prospect Claims”) in Sections 8, 9 and 17, Township 4 South, Range 13 East, G.&S.R.B.&M., Pinal County, Arizona.  In February 2013, we assigned the property located in Pinal County, Arizona back to the original owner that had sold us the properties in exchange for a termination of all of our payment obligations for such assets. While, due to the lack of capital, we have not commenced any exploration program at this time, we have the legal and functional capability to do so, including the required exploration permits when we obtain suitable properties.



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Recent Developments


On March 11, 2014, the Board of Directors of the Company increased the size of the Board of Directors to two and appointed Stephen Buxton.  The other member on our Board of Directors is Craig Russell, our Chief Executive Officer.


During the year ended December 31, 2013, the Company terminated two Property Purchase Agreements and the properties that had been purchased pursuant to the terms of the agreement reverted to the original property owners. On May 3, 2013, the Company and United Copper Holdings Ltd (“United Copper”) agreed to terminate the purchase agreement dated June 30, 2011 relating to the 28 Lode claims located in Okanogan County, Washington (the “United Copper Agreement”). On February 21, 2013, the Company notified Century Copper LLC of its termination of the a property purchase agreement  (the “Century Copper Agreement”) that it entered into with Century Copper LLC on February 21, 2013 for the acquisition of the property known as the Kelvin Project, consisting of one (1) patented mining claim (the “Zellweger Patented Claim”) and twenty-six (26) lode mining claims (the “Kelvin Prospect Claims”) in Sections 8, 9 and 17, Township 4 South, Range 13 East, G.&S.R.B.&M., Pinal County, Arizona.  In accordance with the termination provisions contained in the United Copper Agreement, United Copper LLC retained the 125,000 shares of common stock previously issued to it, all documents conveying title claims to the property were released to United Copper and the Company has no further obligations under the United Copper Agreement. In accordance with the termination provisions contained in the Century Copper Agreement, Century Copper LLC retained the Two Hundred Thousand Dollars ($200,000) cash payment previously made to it, all documents conveying title claims to the property were released to Century Copper LLC and the Company has no further obligations under the Century Copper Agreement.


Executive Officers of the Registrant


Craig Russell currently serves as our President, Chief Executive Officer, Treasurer and Secretary.  The Company does not have any other executive officers.


Employees


The Company currently has one employee, Craig Russell, who is also our sole officer and a director.


ITEM 1A.  RISK FACTORS


An investment in our common stock involves various risks. You should carefully consider the risk factors set forth below in conjunction with the other information contained in this report before purchasing our common stock. If any of the risks discussed in this report actually occur, our business, operating results, prospects and/or financial condition could be adversely impacted.  This could cause the market price of our common stock to decline and could cause you to lose all or part of your investment.


Risks Related to our Business and Our Industry


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


We are an exploration-state entity with limited operating history.


We are an exploration-state entity as we are devoting substantially all of our efforts to activities such as:  financial planning, raising capital, and acquiring operating assets such as mineral properties and rights.   We hope that successful completion of these activities will result in commencing planned principal operations and exploration for reserves. We face all of the risks commonly encountered by other businesses that lack an established operating history, including, but not limited to, the need for additional capital and personnel, and intense competition.  See exploration state entity associated risk below.


Our auditors have expressed a going concern opinion.


We have no established source of revenues, have incurred losses since inception, have a working capital deficit and are in need of capital to grow our operations so that we can become profitable. Accordingly, the opinion of our auditors for the years ended December 31, 2013 and December 31, 2012 expressed uncertainty as to whether we will be able to continue as a going concern.  This



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may negatively impact our ability to obtain funding that we may require or to do so on terms attractive to us and may negatively impact the market price of our stock.



A shortfall of funding will have a negative impact on our ability to implement our business plan.


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


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


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


We do not expect to generate revenues in the foreseeable future.


We are now an exploration stage company; therefore, we anticipate that we will continue to incur increased operating expenses into the foreseeable future without realizing any revenues. Consequently, we expect to incur significant losses into the foreseeable future. If we are unable to raise additional funding, we will not be able to continue our operations.


We are an exploration state company.


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


The exploration industry is capital intensive and of high risk.


The industry within which the Company expects to engage in is historically capital intensive and of high risk.  The Company’s ability to achieve profitable operations will be dependent upon many factors, including its ability to raise sufficient capital to explore the Assets and ability to discover viable and economic mineralized material.  The ability to discover such mineralized materials are subject to numerous factors, most of which are beyond the Company’s control and are not predictable.  Exploration for gold is speculative in nature, involves many risks and is frequently unsuccessful.  Any exploration program entails risks relating to:


· the ability to discover economic ore deposits;


· the subsurface location of economic ore deposits;


· the development of appropriate metallurgical processes;




6



· the receipt of necessary governmental approval; and,


· the construction of mining and processing facilities at any site chosen for mining.


In addition, the commercial viability of a mineral deposit is dependent on a number of factors including:


· the price;


· exchange rates; and,


· the particular attributes of the deposit, such as its size, grade and proximity to infrastructure, financing costs, taxation, royalties, land tenure, land use, water use, power use, importing and exporting, and environmental protection.


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


The speculative prices of gold, silver and copper may adversely impact commercialization efforts.


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


The mineral exploration industry is subject to numerous regulations which may adversely impact our mining efforts.


The mineral exploration and mining industry is subject to numerous statutory and regulatory requirements and controls at various governmental levels.  Regulations can impact the manner and methodology of mining activities undertaken by the Company.  The impact of such regulations cannot be predicted, and may cause unexpected delays, and/or become cost prohibitive, thereby rendering any prospect uneconomic.


The legal and regulatory environment that pertains to the mining industry is uncertain and may change. Uncertainty and new regulations could increase our operating costs and prevent us from exploring and drilling for mineralized material and developing the assets that we own, even if we determine such development is warranted. In addition to new laws and regulations being adopted, existing laws may be applied to mining operations that have not yet been so applied. Any such new laws may increase our operating costs which could have a material adverse effect on our results of operations and financial condition. Changes in regulatory policy could also have a material adverse effect on our exploration and future production activities. Any changes in government policy may result in changes to laws affecting, without limitation:


· ownership of our concessions;


· land tenure;


· development of infrastructure;


· mining policies;


· monetary policies;


· taxation;


· rates of exchange;


· environmental regulations; and/or


· labor relations.


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



7




Environmental and other risks could have a material adverse impact on our business.


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


We have no proven or probable reserves.


We have not established the presence of any proven or probable reserves, as those terms are defined by SEC, on the assets that we own. If such assets do not contain mineralized material that we can extract at a profit, any funds spent by us on exploration or development of such assets could be lost. The SEC defines a “reserve” as “that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination.” Any mineralized material discovered by us should not be considered proven or probable reserves.


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


Estimates of mineralized material are based on interpretation and assumptions which may be unreliable.


Estimates of our mineralized material, if any, will be based on interpretation and assumptions and may yield less under actual conditions than current estimates. When making determinations about whether to advance any of our projects to production, we must rely upon such estimated calculations as to the mineralized material on the property. Until the mineralized material is actually mined and processed, any amounts and values can only be considered estimates.


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


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


Our operations are subject to permitting requirements.


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


Competition in the mining industry is intense and we have limited financial and personnel resources with which to compete.


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




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We may experience supply and equipment shortages.


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


There are risks inherent in doing business in foreign countries.


Our property is located in British Columbia and in the past we have owned property located in Mexico. Risks of doing business in a foreign country could materially and adversely affect our results of operations and financial condition. We face risks normally associated with doing business in a foreign country. These risks include, but are not limited to:


· labor disputes;


· invalidity of governmental orders;


· uncertain or unpredictable political, legal and economic environments;


· war;


· civil and political unrest;


· crime and security issues including but not limited to drug cartel activity;


· property disputes;


· changes to existing laws or policies relating to the mining industry that increase our costs;


· unpredictable changes in or application of taxation regulations;


· delays in obtaining or the inability to obtain necessary governmental permits;


· governmental seizure of land or mining concessions;


· limitations on ownership;


· limitations on the repatriation of earnings;


· increased financial costs;


· import and export regulations, including restrictions on the export of gold, silver and copper; and/or,


· foreign exchange controls.


The occurrence of one or more of these events or a change in existing policy could have a material adverse effect on our cash flows, earnings, results of operations, and financial condition. These risks may limit or disrupt our operations, restrict the movement of funds, impair contract rights, or result in the taking of property by nationalization or expropriation without fair compensation. Finally, any country that is a developing country may make it more difficult for us to obtain required funding.


We are required to make payments to retain certain concessions.


Our ability to retain good title to our assets and continue our exploration and drilling program is subject to payment of surface taxes imposed by governments. The amount of surface taxes is set by regulation and may increase over the life of the concession and include periodic adjustments for inflation. Our failure or inability to pay the surface taxes to governmental agencies may cause us to lose our interest in one or more of our concessions.




9




Our concessions are located in a remote area.


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


Defective title to the Assets could have a material adverse effect on our exploration and exploitation activities.


There are uncertainties as to title matters in the mining industry. We believe we have good title to our asset however, any defects in such titles that cause us to lose our rights to the mineral property would seriously jeopardize our planned business operations. We have investigated our rights to explore, exploit and develop our assets in manners consistent with industry practice and, to the best of our knowledge, those rights are in good standing. However, we cannot guarantee that the title to or our rights to explore, exploit and develop our current asset will not be challenged by third parties or governmental agencies. In addition, there can be no assurance that our asset is not subject to prior unregistered agreements, transfers or claims. Our title may be affected by undetected defects. Any such defects could have a material adverse effect on us.


In the event of a dispute regarding title to our assets in foreign countries or any facet of our operations, it would likely be necessary for us to resolve the dispute in a foreign country, where we would be faced with unfamiliar laws and procedures. The resolution of disputes in foreign countries as well as in the U.S. can be costly and time consuming, similar to the situation in the United States. However, in a foreign country, we face the additional burden of understanding unfamiliar laws and procedures. We may not be entitled to a jury trial, as we might be in the United States. Further, to litigate in a foreign country, we would be faced with the necessity of hiring lawyers and other professionals who are familiar with the foreign laws. For these reasons, we may incur unforeseen losses if we are forced to resolve a dispute in a foreign country.


Material losses in excess of insurance coverage could adversely affect our exploration and future production activities.


We have limited insurance against losses or liabilities that could arise from our operations. If we incur material losses or liabilities in excess of our insurance coverage, our financial position could be materially and adversely affected. Mining operations involve a number of risks and hazards including without limitation:


· environmental hazards;


· industrial accidents;


· metallurgical and other processing problems;


· failure of pit walls or dams;


· acts of God; and/or,


· equipment and facility performance problems.


Such risks could have various negative consequences, including, without limitation:


· damage to, or destruction of, mineral properties or production facilities;


· personal injury or death;


· environmental damage;


· delays in exploration; and/or,


· monetary losses.


Industrial accidents could have a material adverse effect on our future business and operations. We do not currently have insurance in place that will cover the risks associated with our mining activities or that we will be able to acquire insurance to cover these risks at economically feasible premiums. We also might become subject to liability for pollution or other hazards which we cannot insure



10



against or which we may elect not to insure against because of premium costs or other reasons. Losses from such events may have a material adverse effect on our ability to continue operations.


We are dependent upon our sold executive officer.


The Company is dependent on Craig Russell, its Chief Executive and Financial Officer, to effectuate many of the Company’s services and plans for the implementation of our proposed activities and business.  Mr. Russell has significant experience in the area of exploring for and/or mining precious metals.   If he were to resign, there is no guarantee that we could replace him with qualified individual(s) in a timely or economic manner, or if at all.  Investors must be willing to entrust all of the affairs of the Company to current management.


At the present time we are unable to pay any dividends.


The Company has not paid any cash dividends and does not anticipate paying any cash dividends on its common stock in the foreseeable future.  It is anticipated that earnings, if any, which may be generated from operations will be used to finance the continued operations of the Company.  Investors who anticipate the immediate need of cash dividends from their investment should refrain from purchasing any of the securities offered hereby.


Future issuance of securities could cause dilution to existing shareholders.


The Company has the authority to issue up to 250,000,000 shares of common stock, and to issue options and warrants to purchase shares of our common stock without stockholder approval.  Future issuances of common will dilute the holdings of our existing stockholders and may reduce the market price of our common stock.  Holders of our common stock are not entitled to preemptive rights.


Certain of our officers may have conflicts of interest.


Certain conflicts of interest exist with respect to management and the operations of the Company.  Although management has committed to devote sufficient time and attention to the affairs of the business, management is not subject to any written agreement regarding such matters.  Consequently, other business interests may arise which could compromise the time and attention devoted by management to the affairs of the Company.


An adverse evaluation of our internal controls could result in loss of investor confidence.


We are required to annually evaluate our internal controls under Section 404 of the Sarbanes-Oxley Act of 2002 and any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and have a material adverse effect on the price of our common stock. Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we have furnished a report by our management on internal controls for the fiscal year ended December 31, 2013. Such a report contains, among other matters, our assessment of the effectiveness of our internal controls over financial reporting, including a statement as to whether or not our internal controls are effective. This assessment must include disclosure of any material weakness in our internal controls over financial reporting identified by our management. Due to among other things, our lack of segregation of duties, our internal controls over financial reporting are ineffective as of the date hereof, and there is no assurance that they will be effective in the future. If we are unable to effectuate and maintain the effectiveness of our controls, investors could lose confidence in our financial reports and our stock price may decline.


We are subject to adverse changes in currency values.


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


Risks related to Owning Our Stock


Our stock price may be volatile.


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




11



· changes in the worldwide price for gold, silver and copper;


· disappointing results from our exploration and drilling efforts;


· fluctuation in production costs that make mining uneconomical;


· unanticipated variations in grade and other geological problems;


· unusual or unexpected rock formations;


· failure to reach commercial production or producing at lower rates than those targeted;


· decline in demand for our common stock;


· downward revisions in securities analysts estimates or changes in general market conditions;


· investor perception of our industry or our Company; and/or,


· general economic trends.


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


There is currently a limited trading market for our common stock and our stock experiences price fluctuations.


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


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


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


The value of our common stock is partially related to the value of our mineralized material.


The value of our common stock may relate directly and/or indirectly to the value of the mineralized material contained in the assets we own and fluctuations in the price of any such mineralized material could have a material adverse effect on the value of any investment in our common stock.


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


· global supply and demand;


· global or regional political, economic or financial events and situations;


· investors expectations with respect to the rate of inflation;


· currency exchange rates;



12




· interest rates; and/or,


· investment and trading activities of hedge funds and commodity funds.


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


Reporting our investments in mineral properties as an expense may have a negative impact of our stock price.


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


ITEM 1B.  UNRESOLVED STAFF COMMENTS


Not applicable.


ITEM 2.  PROPERTIES


The Company rents office space located at Colombia Tower, 701 Fifth Avenue, Office 4263, Seattle, WA 98104, the rent charges are approximately $1,500 per month.


The Company has an undivided interest in six (6) claims representing 1002.16 ha that has been staked and recorded as MTO Cell Claims located east of Harrison Lake and northwest of Hope in southwestern British Columbia.


ITEM 3.  LEGAL PROCEEDINGS


We are not currently a party to any legal proceedings, and we are not aware of any proceeding pending or threatened against us by any governmental authority or other party.


ITEM 4.  MINE SAFETY DISCLOSURES


None.



13



PART II


ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES


Market Information


Our common stock has been listed on the OTC Bulletin Board under the symbol “BNZA” since January 5, 2011.  Prior to this, our common stock was listed on the OTC Bulletin Board under the symbol “CLGC”.  There has been limited trading activity for our common stock for each quarter since September 1, 2008 as reported on the OTC Bulletin Board.


 

 

 

2014

High

Low

Second Quarter

$0.62

$0.62

First Quarter

$0.62

$0.62

YEAR ENDED DECEMBER 31, 2013

 

 

Fourth quarter

$0.62

$0.62

Third quarter

$0.62

$0.62

Second quarter

$0.62

$0.62

First quarter

$0.62

$0.62

YEAR ENDED DECEMBER 31, 2012

 

 

Fourth quarter

$0.62

$0.62

Third quarter

$0.62

$0.62

Second quarter

$0.62

$0.62

First quarter

$0.00

$0.62


Holders


As of September 30, 2014, there were approximately 10 shareholders of record of our common stock and 6,923,005 shares of common stock deemed outstanding.


Dividends and Share Repurchases


We have not paid any dividends to our shareholders.  There are no restrictions which would limit our ability to pay dividends on common equity or that are likely to do so in the future.


Issuer Purchases of Equity Securities


None.


Equity Compensation Plan Information


Not applicable.


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


ITEM 6.  SELECTED FINANCIAL DATA


Not applicable because the Company is a smaller reporting company.


ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The following discussion of our financial condition and results of operations should be read in conjunction with the audited financial statements and notes thereto for the fiscal year ended December 31, 2013, found in this report. In addition to historical information, the following discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Where possible, we have tried to identify these forward looking statements by using words such as “anticipate,” “believe,” “intends,” or similar expressions. Our actual results could differ materially from those anticipated by the forward-looking statements due to important factors and risks including, but not limited to, those set forth under “Risk Factors” in Part I, Item 1A of this report.





14




Company Overview


The Company was incorporated under the laws of the State of Delaware in December 2006 under the name “Cold Gin Corporation.”  On December 27, 2010, we entered into an Agreement and Plan of Reorganization with Bonanza Gold Corp., a wholly-owned subsidiary of the Company, pursuant to which we merged with and into Bonanza Gold Corp, with Bonanza Gold Corp. being the surviving corporation. In connection with the reincorporation merger we changed our domicile from Delaware to Nevada, our name to Bonanza Gold Corp. and each outstanding share of our common stock was exchanged for one hundred fifty shares of the common stock of the Nevada entity.  Thereafter, our trading market experienced some unusual activity.  In an effort to stabilize the market, we effectuated a 150:1 reverse stock split on March 4, 2011.


We were initially established to become a developer of Internet media content for mixed martial arts fans and consumers.  We have not derived any revenue from the martial arts business.  Due to a change of control that occurred in August 2010, we abandoned the martial arts business.  Effective December 10, 2010, we transitioned our business focus from that of a developer of Internet media for martial arts to a company engaged in the exploration and mining of minerals.


Our management has experience in the field of mineral exploration and intends to continue to invest resources into our exploration and drilling program, and intends to extend the campaign over the next several years. Depending upon our ability to obtain sufficient funding, we may also acquire additional properties for exploration. In addition, assuming sufficient funding, we plan to engage an internationally recognized mining and geological consultancy firm to assist us in our drilling efforts.


We believe that an expanded exploration and drilling program is currently our best option for increasing the value of our Company. However, we have no revenues, our stock has no trading volume, and we believe our stock price does not reflect the true value of our Company.  These factors limit our ability to obtain financing. We currently have, one property that was acquired in 2011, located in British Columbia While due to the lack of capital, we have not commenced such exploitation program at this time, we have the legal and functional capability to do so, including the required exploitation permits.


Recent Developments


On May 3, 2013, the Company and United Copper Holdings Ltd (“United Copper”) agreed to terminate the purchase agreement dated June 30, 2011 relating to the 28 Lode claims located in Okanogan County, Washington (the “United Copper Agreement”).  It was agreed that United Copper would retain all payments it had received under the  United Copper Agreement, that no further payments would be required  under the United Copper Agreement as all outstanding payments due were forgiven  and that the Company would return to United Copper the property and any recorded claims it had previously acquired from United Copper.   On June 30, 2011, the Company executed the United Copper Agreement for the acquisition of certain property from United Copper Holdings Ltd. (the “Seller”) pursuant to which the Company acquired a 75% interest in 28 Lode claims and approximately 560 acres.  The property is located in Okanogan County, State of Washington. The Company acquired the property from United Copper in exchange for 200,000 shares of its common stock, which was to be issued to United Copper as follows: (i) 100,000 shares were issued upon the closing of the United Copper Agreement; (ii) 50,000 shares were to be issued within 6 months of the closing of the United Copper Agreement; and (iii) 50,000 shares were to be issued within 12 months of the closing of the United Copper Agreement.  In addition, United Copper retained a 5% Net Smelter Returns Royalty on the gross mineral production. Pursuant to the terms of the United Copper Agreement, the Company agreed to provide a work commitment (the “Work Commitment”) for the property of $1,000,000 over a 2-year period and the Company will be entitled to earn a further 25% interest in the property after $500,000 of the Work Commitment is expended.  The Company also agreed to grant to United Copper an additional 200,000 shares upon discovery of a 25 million ton copper deposit within the Work Commitment period.


In accordance with the termination provisions contained in the United Copper Agreement, United Copper LLC retained the 125,000 shares of common stock previously issued to it, all documents conveying title claims to the property were released to United Copper and the Company has no further obligations under the United Copper Agreement.


On February 21, 2013, the Company notified Century Copper LLC of its termination of the Century Copper Agreement that it entered into on February 21, 2013 for the acquisition of the property known as the Kelvin Project, consisting of one (1) patented mining claim (the “Zellweger Patented Claim”) and twenty-six (26) lode mining claims (the “Kelvin Prospect Claims”) in Sections 8, 9 and 17, Township 4 South, Range 13 East, G.&S.R.B.&M., Pinal County, Arizona.  The purchase price for the assets was Two Million Dollars ($2,000,000), which was to be paid as follows: (i) Fifty Thousand Dollars ($50,000) for the Zellweger Patented Claim, of which (x) Ten Thousand Dollars ($10,000) was previously paid upon execution of a letter of intent between the parties; and (y) Forty Thousand Dollars ($40,000) was payable upon execution of the Century Copper Agreement; and (ii) One Million Nine Hundred Fifty Thousand Dollars ($1,950,000), of which (x) One Hundred Fifty Thousand Dollars ($150,000) was payable on or before February 28, 2012; (ii) Two Hundred Thousand Dollars ($200,000) was to be paid annually thereafter commencing on February 28, 2013 until the total amount is paid or the agreement is mutually terminated.   In addition, we agreed to issue to the seller One Million (1,000,000) of our post-split shares of common stock, of which (i) Two Hundred Fifty Thousand (250,000) shares was to be issued within four (4) months of the closing of the transactions pursuant to the agreement; (ii) Two Hundred Fifty Thousand (250,000) shares was to be



15



issued within eight (8) months of the closing of the transactions pursuant to the agreement; (iii) Two Hundred Fifty Thousand (250,000) shares was to be issued within twelve (12) months of the closing of the transactions pursuant to the agreement; and (iv) Two Hundred Fifty Thousand (250,000) shares was to be issued within eighteen (18) months of the closing of the transactions pursuant to the agreement.


In accordance with the termination provisions contained in the Century Copper Agreement, Century Copper LLC retained the Two Hundred Thousand Dollars ($200,000) cash payment previously made to it, all documents conveying title claims to the property were released to Century Copper LLC and the Company has no further obligations under the Century Copper Agreement.


Critical Accounting Policies


We prepare our financial statements in conformity with GAAP, which requires management to make certain estimates and assumptions and apply judgments. We base our estimates and judgments on historical experience, current trends and other factors that management believes to be important at the time the financial statements are prepared and actual results could differ from our estimates and such differences could be material. We have identified below the critical accounting policies which are assumptions made by management about matters that are highly uncertain and that are of critical importance in the presentation of our financial position, results of operations and cash flows.  On a regular basis, we review our accounting policies and how they are applied and disclosed in our financial statements.


Use of Estimates


The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Estimates are based on historical experience, management expectations for future performance, and other assumptions as appropriate. Key areas affected by estimates include the assessment of the recoverability of long-lived assets, which is based on such factors as estimated future cash flows.  We re-evaluate estimates on an ongoing basis; therefore, actual results may vary from those estimates.


Fair Values of Financial Instruments


The carrying values of cash, accounts receivable, accounts payable and accrued expenses approximate the fair values of these instruments due to their short-term nature. The carrying amount for borrowings under the financing agreement approximates fair value because of the variable market interest rates charged for these borrowings.


Plan of Operations


We are developing a gold and metals exploration company.  Craig Russell, our Chief Executive Officer, President, Chief Financial Officer, Secretary and Treasurer, has experience in the precious metals industry.  The Company plans to leverage his vast knowledge of the industry to acquire properties for exploration.  .


Off Balance Sheet Arrangements


There are no off balance sheet arrangements.


Results of Operations for the years ended December 31, 2013 and 2012


For the year ended December 31, 2013 as compared to the year ended December 31, 2012, total revenues were $0 and $0, respectively; and net losses were $(382,584) and ($326,518), respectively.


The net losses were attributable to operating expenses and other expenses that primarily consisted of expenses related to disposition of properties.  The operating expenses for the year ended December 31, 2013 were primarily general and administrative in nature and included rent, legal fees, management and consulting fees, and audit and accounting fees.  The operating expenses for the year ended December 31, 2012 consisted of the same.  The decrease in operating expenses set forth below is attributable to less consulting fees as result of property dispositions.


The current year increase in other expense is attributable to the disposition of two properties and consists primarily of accelerated amortization of the associated debt discount.



16





 

2013

2012

Operating Expense-General and administrative

180,023

295,630

Other expense- Property related

218,630

 30,888

Other income-Accounts payable write-off

(16,069)

          0

TOTALS

384,654

326,518



Liquidity


At December 31, 2013 we had cash and cash equivalents of $5,457 and had a working capital deficit of $64,568.  We have incurred negative cash flows from operations since we started our business. We have spent and expect to continue to spend, substantial amounts in connection with implementing our business strategy, including our planned exploration activities. Net cash used in operating activities for the year ended December 31, 2013 consisted primarily of our net loss offset by a gain on disposal of mineral properties and amortization of discount on notes payable, all of which were repaid in 2012. Based on our current plans, we believe that our cash will not be sufficient to enable us to meet our planned operating needs in the next 12 months.


In 2013, our primary source of cash was from the sale of securities.  We raised $125,000 from the sale of 625,000 units, each unit comprised of a share of common stock and a three year warrant exercisable for one share of common stock at an exercise price of $1.25 per share.  During 2012, our primary source of cash was from the sale of common stock.  We raised $505,000 from the sale of 3,775,000 shares. Our cash used in investing activities during 2013 was for our website.  Our cash used in investing activities during 2012 were used for payments made in the acquisition of a mineral property for $47,280, for the acquisition of IT equipment in the amount of $2,906, and development of our website in the amount of $10,913.


Until we raise additional funds, we will be unable to commence drilling activities.  However, the actual amount of funds we will need to operate is subject to many factors, some of which are beyond our control. We have based our estimate on assumptions that may prove to be wrong. We may need to obtain additional funds sooner or in greater amounts than we currently anticipate. Potential sources of financing include strategic relationships, public or private sales of our shares or debt and other sources. We may seek to access the public or private equity markets when conditions are favorable due to our long-term capital requirements. We do not have any committed sources of financing at this time, and it is uncertain whether additional funding will be available when we need it on terms that will be acceptable to us, or at all. If we raise funds by selling additional shares of common stock or other securities convertible into common stock, the ownership interest of our existing stockholders will be diluted. If we are not able to obtain financing when needed, we may be unable to carry out our business plan. As a result, we may have to significantly limit our operations and our business, financial condition and results of operations would be materially harmed.


We have no known demands or commitments and are not aware of any events or uncertainties as of December 31, 2013, other than the work commitment previously mentioned, that will result in or that are reasonably likely to materially increase or decrease our current liquidity.


Capital Resources.


We had no material commitments for capital expenditures as of December 31, 2013 and 2012.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


Not applicable because the Company is a smaller reporting company.




17




ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



BONANZA GOLD CORP.

(AN EXPLORATION STATE COMPANY)


TABLE OF CONTENTS


DECEMBER 31, 2013



Reports of Independent Registered Public Accounting Firms

F-1 to F-2


Balance Sheets as of December 31, 2013 and 2012

F-3


Statements of Operations for the Years Ended

December 31, 2013 and 2012 and for the Period from

August 7, 2006 (inception) to December 31, 2013

F-4


Statement of Stockholders’ Equity (Deficit) as of

December 31, 2013

F-5


Statements of Cash Flows for the Years Ended

December 31, 2013 and 2012 and for the Period from

August 7, 2006 (inception) to December 31, 2013

F-6


Notes to Financial Statements

F-7 to F-16



18



RLB Certified Public Accountant PLLC

6314 11th Avenue South - Gulfport, FL  33707-3002

Cell 727-452-4803   Email robin@rlbcpa.biz


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors of:

BONANZA GOLD CORP.

Columbia Tower

701 Fifth Avenue – Office 4263

Seattle, WA 98104


I have audited the accompanying balance sheet of Bonanza Gold Corp. as of December 31, 2013 and the related statements of operations, stockholders' equity and cash flows for the year then ended and for the period from August 7, 2006 (inception) to December 31, 2013. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audit. The December 31, 2012 financial statements were audited by a predecessor independent registered accounting firm that issued an unqualified opinion on April 12, 2013.

I conducted my audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that I 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.  I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bonanza Gold Corp. as of December 31, 2013, and the results of its operations and its cash flows for the year then ended, and for the period from August 7, 2006 (inception) to December 31, 2013, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has recurring operating losses, working capital deficiencies, negative cash flows from operating activities, adverse financial ratios, and a stockholders' deficit. The Company is requiring traditional financing or equity funding to continue its operating activities. These conditions raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.


[bnza10k_123113apg001.jpg]

RLB Certified Public Accountant PLLC

October 6, 2014



F-1




[bnza10k_123113apg003.gif]

2451 North McMullen Booth Rd Ste. 308

Clearwater, FL  33759-1352

Toll Free: (855) 334-0934 

Main: (727) 444-1901

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors of:

Bonanza Gold Corp.

Seattle, WA


We have audited the accompanying balance sheet Bonanza Gold Corp. as of December 31, 2012 and the related statements of operations, stockholders' equity and cash flows for the year then ended and the period from August 7, 2006 (inception) to December 31, 2012. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.   The 2011 financial statements were audited by a predecessor independent registered accounting firm that issued an unqualified opinion on April 5, 2012.


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


In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bonanza Gold Corp. as of December 31, 2012 and the results of its operations and its cash flows for the year then ended and for the period from August 7, 2006 (inception) to December 31, 2012, in conformity with accounting principles generally accepted in the United States of America.


The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has recurring operating losses, working capital deficiencies, negative cash flows from operating activities, adverse financial ratios, and a stockholders' deficit. The Company is requiring traditional financing or equity funding to continue its operating activities. These conditions raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.


[bnza10k_123113apg004.jpg]

DKM Certified Public Accountants

Clearwater, Florida

April 12, 2013



F-2




BONANZA GOLD CORP.

(AN EXPLORATION STATE ENTITY)

BALANCE SHEETS

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

December 31,

 

 

 

 

2013

 

2012

 

 

ASSETS

 

 

 

 

Current Assets

 

 

 

 

 

Cash and cash equivalents

$

5,457 

$

10,698 

 

Total current assets

 

5,457 

 

10,698 

Equipment, net of accumulated depreciations of $1,270 and $301, respectively

1,636 

 

2,605 

Website, net of accumulated amortization of $0

 

 

10,913 

Mineral Properties, net

 

 

1,854,770 

TOTAL ASSETS

$

7,093 

 

1,878,985 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

LIABILITIES

 

 

 

 

Current Liabilities

 

 

 

 

 

Accounts Payable and Accrued Expenses

$

37,525 

$

28,290 

 

Accrued Payroll

 

32,500 

 

 

Note Payable - current portion

 

 

200,000 

 

Total current liabilities

 

70,025 

 

228,290 

Long-Term Liabilities

 

 

 

 

 

Note Payable

 

 

1,455,732 

 

Total long-term liabilities

 

 

1,455,732 

TOTAL LIABILITIES

 

70,025 

 

1,684,022 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES (NOTE 7)

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

Common stock, par $0.001, 250,000,000 shares authorized, 6,123,005 and 6,148,005 shares issued and outstanding at December 31, 2013 and December 31, 2012, respectively

 

6,123 

 

6,148 

 

Additional paid in capital

 

907,690 

 

907,690 

 

Stock payable

 

125,000 

 

 

Deficit accumulated during the exploration state

 

(1,101,459)

 

(718,875)

 

Accumulated other comprehensive income (loss)

 

(286)

 

TOTAL STOCKHOLDERS' (DEFICIT) EQUITY

 

(62,932)

 

194,963 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

$

7,093 

 

1,878,985 

 

 

 

 

 

 

 

The accompanying notes to the audited financial statements are an integral part of these statements.




F-3




BONANZA GOLD CORP.

(AN EXPLORATION STATE ENTITY)

STATEMENTS OF OPERATIONS

 

 

 

 

 

 Year Ended December 31,

 

From Inception (August 7, 2006) to December 31,

 

 

 

 

 2013

 

 2012

 

2013

 

 

 

 

 

 

 

 

 

REVENUE

$

$

$

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

Selling, general and administrative

 

180,023 

 

295,630 

 

1,867,431 

 

 

 

 

 

 

 

 

 

NET OPERATING LOSS

 

(180,023)

 

(295,630)

 

(1,867,431)

 

 

 

 

 

 

 

 

 

OTHER INCOME

 

16,069 

 

 

1,015,499 

INTEREST EXPENSE

 

(144,635)

 

(30,898)

 

(175,532)

LOSS ON DISPOSAL

 

(73,995)

 

 

(73,995)

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) BEFORE INCOME TAXES

 

(382,584)

 

(326,518)

 

(1,101,459)

 

 

 

 

 

 

 

 

 

PROVISION FOR INCOME TAXES

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS

$

(382,584)

$

(326,518)

$

(1,101,459)

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE LOSS

 

 

 

 

 

 

 

Foreign currency translation loss

 

(286)

 

 

(286)

 

 

 

 

 

 

 

 

 

TOTAL COMPREHENSIVE LOSS

$

(382,870)

$

(326,518)

$

(1,101,745)

 

 

 

 

 

 

 

 

 

Net Loss Per Share: basic and diluted

$

(0.06)

$

(0.07)

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Number of Shares Outstanding: basic and diluted

 

6,123,005 

 

4,964,908 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes to the audited financial statements are an integral part of these statements.




F-4




BONANZA GOLD CORP.

(AN EXPLORATION STATE ENTITY)

STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

PERIOD FROM AUGUST 7, 2006 (INCEPTION) TO DECEMBER 31, 2013

 

 

 

Common Stock

 

Amount

 

Additional Paid in Capital

 

Stock Payable

Deficit Accumulated During Exploration State

 

Accumulated Other Comprehensive Income (Loss)

Stockholders’ Equity (Deficit)

Beginning balance, August 7, 2006

 

$

$

$

 

$

Common stock issued for cash

 

850,000 

 

850 

 

1,000 

 

 

 

 

1,850 

Net (loss) for the period

 

 

 

 

 

(1,750)

 

 

(1,750)

Balance December 31, 2006

 

850,000 

 

850 

 

1,000 

 

 -

(1,750)

 

100 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) for the year

 

 

 

 

 

(2,382)

 

 

(2,382)

Balance December 31, 2007

 

850,000 

 

850 

 

1,000 

 

 -

 

(2,282)

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares Issued for cash

 

500,000 

 

500 

 

49,500 

 

 

 

 

50,000 

Shares issued for services

 

10,000 

 

10 

 

990 

 

 

 

 

1,000 

Net income (loss) for the year

 

 

 

 

 

(44,375)

 

 

(44,375)

Balance December 31, 2008

 

1,360,000 

 

1,360 

 

51,490 

 

 -

(47,564)

 

4,343 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) for the year

 

 

 

 

 

(24,356)

 

 

(24,356)

Balance December 31, 2009

 

1,360,000 

 

1,360 

 

51,490 

 

 -

(72,863)

 

(20,013)

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of debt to contributed capital

 

 

 

18,560 

 

 

 

 

18,560 

Cancellation of shares

 

(112,000)

 

(112)

 

112 

 

 

 

 

Shares issued for mineral property acquisition

 

5,000 

 

 

830 

 

 

 

 

835 

Shares issued for mineral property acquisition

 

5,000 

 

 

830 

 

 

 

 

835 

Stock split 1 to 150

 

 

187,442 

 

(187,442)

 

 

 

 

Net loss - December 31,2010

 

 

 

 

 

 

 

 

(1,103,671)

 

 

(1,103,671)

Balance December 31, 2010

 

1,258,000 

 

188,700 

 

(115,620)

 

 -

(1,176,534)

 

(1,103,454)

 

 

 

 

 

 

 

 

 

 

 

 

 

Reverse stock split 1:150

 

 

(187,442)

 

187,442 

 

 

 

 

Shares issued for rounding

 

 

 

 

 

 

 

Cancellation of shares issued for mineral property acquisition

(10,000)

 

(10)

 

 

 

 

 

 

(10)

Shares issued for mineral property acquisition

 

100,000 

 

100 

 

7,900 

 

 

 

 

8,000 

Equity units inclusive one common share and one warrant issued for cash on July 8, 2011 at $0.20 per unit

 

150,000 

 

150 

 

29,850 

 

 

 

 

30,000 

Equity units inclusive one common share and one warrant issued for cash on August 16, 2011 at $0.05 per unit

 

200,000 

 

200 

 

9,800 

 

 

 

 

10,000 

Equity units inclusive one common share and one warrant issued for cash on September 6, 2011 at $0.20 per unit

 

125,000 

 

125 

 

24,875 

 

 

 

 

25,000 

 

 

(continued on next page)

 



F-5






 

(continued from previous page)

 

Equity units inclusive one common share and one warrant issued for cash on October 27, 2011 at $0.20 per unit

 

250,000 

 

250 

 

49,750 

 

 

 

 

50,000 

Forgiveness of debt by former stockholders

 

 

 

152,768 

 

 

 

 

152,768 

Equity units inclusive one common share and one warrant issued for cash on December 1, 2011 at $0.20 per unit

 

250,000 

 

250 

 

49,750 

 

 

 

 

50,000 

Shares issued for mineral property acquisition

 

50,000 

 

50 

 

9,950 

 

 

 

 

10,000 

Net loss -December 31, 2011

 

 

 

 

 

 

 

 

784,177 

 

 

784,177 

Balance December 31, 2011

 

2,373,005 

 

2,373 

 

406,465 

 

 

(392,357)

 

16,481 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity units inclusive one common share and one warrant issued for cash on February 6, 2012 at $0.20 per unit

 

300,000 

 

300 

 

59,700 

 

 

 

 

60,000 

Equity units inclusive one common share and one warrant issued for cash on March 5, 2012 at $0.10 per unit

 

2,500,000 

 

2,500 

 

247,500 

 

 

 

 

250,000 

Equity units inclusive one common share and one warrant issued for cash on September 4, 2012 at $0.20 per unit

 

750,000 

 

750 

 

149,250 

 

 

 

 

150,000 

Equity units inclusive one common share and one warrant issued for cash on December 3, 2012 at $0.20 per unit

 

225,000 

 

225 

 

44,775 

 

 

 

 

45,000 

Net loss - December 31, 2012

 

 

 

 

 

 

 

 

(326,518)

 

 

(326,518)

Balance, December 31, 2012

 

6,148,005 

 

6,148 

 

907,690 

 

 

(718,875)

 

194,963 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares cancelled on cancelation of mining agreement

 

(25,000)

 

(25)

 

 

 

 

(25)

Common stock to be issued

 

 

 

 

125,000

 

125,000 

Foreign currency translation adjustment

 

 

 

 

 

 

(286)

(286)

Net loss - December 31, 2013

 

 

 

 

 

(382,584)

 

(382,584)

Balance, December 31, 2013

 

6,123,005 

$

6,123 

$

907,690 

$

125,000

(1,101,459)

 

(286)

(62,932)

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes to the audited financial statements are an integral part of these statements.



F-6






BONANZA GOLD CORP.

(AN EXPLORATION STATE ENTITY)

STATEMENTS OF CASH FLOWS

 

 

 

 

 

 

 

 

From Inception

 

 

 

 

 

 

 

 

(August 7, 2006) to

 

 

 

 

Year Ended December 31,

 

December 31,

 

 

 

 

2013

 

2012

 

2013

Cash (used in) operating activities:

 

 

 

 

 

 

 

Net loss for the period

$

(382,584)

$

(326,518)

$

(1,101,459)

Adjustments to Reconcile Net Loss to Net Cash Used in

 

 

 

 

 

 

Operating Activities:

 

 

 

 

 

 

 

Common stock issued for services

 

 

 

1,000 

 

Impairment of website

 

14,225 

 

 

14,225 

 

Impairment of mineral properties

 

 

 

1,011,670 

 

Gain (Loss) on disposal of mineral properties

 

59,745 

 

 

(940,265)

 

Depreciation expense

 

969 

 

301 

 

1,270 

 

Amortization of discount on note payable

 

144,267 

 

30,649 

 

174,917 

Changes in Assets and Liabilities

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

9,235 

 

(2,002)

 

37,525 

 

Accrued payroll

 

32,500 

 

 

 

32,500 

Net cash used in operating activities

 

(121,643)

 

(297,570)

 

(768,617)

Cash Flows from investing Activities:

 

 

 

 

 

 

 

Equipment

 

 

(2,906)

 

(2,906)

 

Website

 

(3,312)

 

(10,913)

 

(14,225)

 

Mineral Properties

 

(5,000)

 

(47,280)

 

(72,280)

Net cash used in Investing Activities

 

(8,312)

 

(61,099)

 

(89,411)

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

Advances from directors

 

 

 

166,901 

 

Proceeds from notes payable - affiliate

 

 

 

200 

 

Payments on notes payable

 

 

(150,000)

 

(150,180)

 

Proceeds from stock to be issued

 

125,000 

 

 

125,000 

 

Proceeds from sale of common stock

 

 

505,000 

 

721,850 

Net Cash Provided by Financing Activities

 

125,000 

 

355,000 

 

863,771 

Effect of Exchange Rate changes on cash and cash equivalents

 

(286)

 

 

(286)

Net Decrease in Cash and Cash Equivalents

 

(5,241)

 

(3,669)

 

5,457 

Cash and Cash Equivalents - Beginning

 

10,698 

 

14,367 

 

Cash and Cash Equivalents - End

$

5,457 

 

10,698 

 

5,457 

Supplemental disclosures:

 

 

 

 

 

 

 

Cash paid for interest

$

367 

$

248 

$

707 

 

Cash paid for income taxes

$

$

$

Supplemental Non-Cash Investing and Financing Information

 

 

 

 

 

 

 

Common stock issued for acquisition of mineral properties

$

(25)

$

$

19,635 

 

Note payable issued for acquisition of mineral properties

$

$

1,950,000 

$

1,950,000 

 

Discount on non-interest bearing note payable

$

144,267 

$

174,917 

$

174,917 

 

Conversion of related party debt

$

$

$

18,560 

 

Forgiveness of shareholder's loan

$

$

$

152,768 

 

Cancellation of note payable in connection with disposal of mineral property agreement

$

1,800,000 

$

$

2,800,000 

 

 

 

 

 

 

 

 

 

The accompanying notes to the audited financial statements are an integral part of these statements.




F-7



BONANZA GOLD CORP.

(AN EXPLORATION STATE ENTITY)

NOTES TO THE AUDITED FINANCIAL STATEMENTS

DECEMBER 31, 2013 AND 2012



NOTE 1 – ORGANIZATION AND BUSINESS


Bonanza Gold Corp. (“we” the “Company” or the “Registrant”) was incorporated under the laws of the State of Delaware in December 2006 under the name “Cold Gin Corporation.”  Effective December 10, 2010, we transitioned our business focus from that of a developer of Internet media for martial arts to a company engaged in the exploration and mining of minerals. On December 27, 2010, we entered into an Agreement and Plan of Reorganization with Bonanza Gold Corp., a wholly-owned subsidiary of the Company, pursuant to which we merged with and into Bonanza Gold Corp, with Bonanza Gold Corp. being the surviving corporation.


The Company is currently in the exploration state. All activities of the Company to date relate to its organization, operations funding and share issuances.


NOTE 2 – GOING CONCERN


The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying financial statements, the Company has recurring operating losses resulting in an accumulated deficit of $1,101,459, working capital deficiencies, negative cash flows from operating activities, and adverse financial ratios.  These factors raise substantial doubt about the Company's ability to continue as a going concern.


The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event that the Company cannot continue as a going concern. Management anticipates that it will be able to raise additional working capital through the issuance of stock and through additional loans and advances from investors.


The ability of the Company to continue as a going concern is dependent upon the Company’s ability to attain a satisfactory level of profitability and obtain suitable and adequate financing. There can be no assurance that management's plan will be successful.


NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Basis of Presentation


The Financial Statements and related disclosures have been prepared pursuant to the rules and regulations of the SEC.  The Financial Statements have been prepared using the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP” accounting). The Company has adopted a December 31 fiscal year end.  (See Note 2, Going Concern, regarding the assumption that the Company is a “going-concern”).


Use of Estimates


The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.


Cash and Cash Equivalents


The Company accounts for cash and cash equivalents under FASB ASC 305, “Cash and Cash Equivalents”, and considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.  The Company had $5,457 and $10,698 cash as of December 31, 2013 and 2012, respectively.


Cash Flows Reporting


The Company follows ASC 230, Statement of Cash Flows, for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by ASC 230, Statement of Cash Flows, to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency



F-8



equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period.


Commitments and Contingencies


The Company follows ASC 450-20, Loss Contingencies, to report accounting for contingencies.  Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.  There were no commitments or contingencies at December 31, 2013 and 2012.


Comprehensive Income


The Company has established standards for reporting and display of comprehensive income, its components and accumulated balances. When applicable, the Company would disclose this information on its Statement of Stockholders’ Equity.


Deferred Income Taxes and Valuation Allowance


The Company accounts for income taxes under ASC 740 Income Taxes.  Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs.  A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.  No deferred tax assets or liabilities were recognized as of December 31, 2013 or 2012.


Earnings (Loss) per Share


The Company computes basic and diluted earnings per share amounts in accordance with ASC Topic 260, Earnings per Share. Basic earnings per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company.  


Exploration State Company


Presently we have no established commercially minable reserves.  We are, however engaged in the search for mineral reserves; therefore, we are an exploration state company.  


Foreign Currency


The operations of the Company are located in United States. The Company maintains both U.S. Dollar and British Pound Sterling accounts. The functional currency is the United States Dollar. Transactions in foreign currencies other than the functional currency, if any, are re-measured into the functional currency at the rate in effect at the time of the transaction. Re-measurement gains and losses that arise from exchange rate fluctuations are included in income or loss from operations. Monetary assets and liabilities denominated in the functional currency are translated into U.S. Dollars at the rate in effect at the balance sheet date. Revenue and expenses denominated in the functional currency are translated at the spot exchange rate. Other comprehensive income includes the foreign exchange gains and losses that arise from translating from the functional currency into U.S. Dollars.


Financial Instruments


The Company’s balance sheet includes certain financial instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.


ASC 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the



F-9



circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:


·

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities

·

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

·

Level 3 - Inputs that are both significant to the fair value measurement and unobservable.

 

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2013. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments.


Long-lived Assets  


Long-lived assets such as property, equipment and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate that the carrying value may not be recoverable. When required impairment losses on assets to be held and used are recognized based on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset. When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets. We did not recognize any impairment losses for any periods presented.


Mineral Properties


The Company follows ASC 930, “Extractive Activities – Mining,” for its mineral properties.  Mineral properties and related mineral rights acquisition costs are capitalized pending determination of whether the drilling has found proved reserves.  If a mineral ore body is discovered, capitalized costs will be amortized on a unit-of-production basis following the commencement of production.  Otherwise, capitalized acquisition costs are expensed when it is determined that the mineral property has no future economic value.  General exploration costs and costs to maintain rights and leases, including rights of access to lands for geophysical work and salaries, equipment, and supplies for geologists and geophysical crews are expensed as incurred.  When it is determined that a mining deposit can be economically and legally extracted or produced based on established proven and probable reserves, further exploration costs and development costs as well as interest costs relating to exploration and development projects that require greater than six (6) months to be readied for their intended use incurred after such determination will be capitalized.  The establishment of proven and probable reserves is based on results of final feasibility studies which indicate whether a property is economically feasible.  Upon commencement of commercial production, capitalized costs will be transferred to the appropriate asset categories and amortized on a unit-of-production basis.  Capitalized costs, net of salvage values, relating to a deposit which is abandoned or considered uneconomic for the foreseeable future will be written off.  The sale of a partial interest in a proved property is accounted for as a cost recovery and no gain or loss is recognized as long as this treatment does not significantly affect the unit-of-production amortization rate.  A gain or loss will be recognized for all other sales of proved properties and will be classified in other operating revenues.  Maintenance and repairs are charged to expense, and renewals and betterments are capitalized to the appropriate property and equipment accounts.


The provision for depreciation, depletion and amortization (“DD&A”) of mineral properties is calculated on a property-by-property basis using the unit-of-production method.  Taken into consideration in the calculation of DD&A are estimated future dismantlement, restoration and abandonment costs, which are net of estimated salvage values.  Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts.


To date, the Company has not established the economic feasibility of any exploration prospects; therefore, all general exploration costs, if any, are expensed.


Property, Plant, and Equipment


The Company follows ASC 360, Property, Plant, and Equipment, for its fixed assets.  Equipment is stated at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets (3-7 years). All equipment with an acquisition value greater than $500 and a useful life of over one year is capitalized.





F-10



Related Parties


The Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions.


Restricted Stock


The Company issues restricted stock to consultants for various services. Cost for these transactions are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is measurable more reliably measurable. The value of the common stock is measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or (ii) the date at which the counterparty's performance is complete.


Stock-Based Compensation


FASB ASC 718 “Compensation – Stock Compensation” prescribes accounting and reporting standards for all stock-based payments award to employees, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights, may be classified as either equity or liabilities. The Company determines if a present obligation to settle the share-based payment transaction in cash or other assets exists. A present obligation to settle in cash or other assets exists if: (a) the option to settle by issuing equity instruments lacks commercial substance or (b) the present obligation is implied because of an entity’s past practices or stated policies. If a present obligation exists, the transaction should be recognized as a liability; otherwise, the transaction should be recognized as equity.


The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50 “Equity – Based Payments to Non-Employees.” Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.


Recently Issued Accounting Pronouncements


Except for rules and interpretive releases of the SEC under authority of federal securities laws and a limited number of grandfathered standards, the FASB Accounting Standards Codification (ASC) is the sole source of authoritative GAAP literature recognized by the FASB and applicable to the Company.


We have reviewed the FASB issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.


NOTE 4 – EMPLOYMENT AGREEMENTS


On June 24, 2011 the Company appointed Mr. Craig Russell to its board of directors.  Mr. Russell also serves as the Company’s Chief Executive Officer and has an employment agreement with the Company that requires monthly compensation of $6,500.


Total compensation paid on this employment agreement was $78,000 for each of the years ended December 31, 2013 and 2012.


NOTE 5 – WEBSITE


Website totaled $0 and $10,913 at December 31, 2013 and 2012, respectively.  


Costs represented expenses incurred in the application and infrastructure development phase. The website was never fully operational and was written off in conjunction with the termination of the Company’s property purchase agreements (See Note 6).


NOTE 6 – MINERAL PROPERTIES


On April 29, 2011, the Company executed an asset purchase agreement for the acquisition of certain assets from Independent Resources, Inc. pursuant to which the Company acquired an undivided interest in six (6) mineral claims representing 1002.16 ha that has been staked and recorded as MTO Cell Claims (the “Assets”). The property is located east of Harrison Lake and northwest of Hope in southwestern British Columbia. The Company acquired the Assets from the seller for $10,000, which was funded by a loan from the Chief Executive Officer to the Company at that time.




F-11



United Copper Holdings Ltd.


On June 30, 2011, the Company executed a Property Purchase Agreement (the “Agreement”) for the acquisition of certain property from United Copper Holdings Ltd. (the “Seller”) pursuant to which the Company acquired a 75% interest in 28 Lode claims and approximately 560 acres.  The property is located in Okanogan County, State of Washington (the “Assets”). The Company acquired the Assets from the Seller in exchange for 200,000 shares of its common stock (the Shares”), which was to be issued to the Seller as follows: (i) 100,000 Shares were issued upon the closing of the Agreement; (ii) 50,000 Shares to be issued within 6 months of the closing of the Agreement; and (iii) 50,000 Shares are to be issued within 12 months of the closing of the Agreement.  In addition, the Seller will retain a 5% Net Smelter Returns Royalty on the gross mineral production. Pursuant to the terms of the Agreement, the Company agreed to provide a work commitment (the “Work Commitment”) for the Assets of $1,000,000 over a 2-year period and the Company will be entitled to earn a further 25% interest in the Assets after $500,000 of the Work Commitment is expended.  The Company also agreed to grant to the Seller an additional 200,000 Shares upon discovery of a 25 million ton copper deposit within the Work Commitment period.


The parties further agreed to enter into a consulting agreement for a one-year term with an option to renew for an additional one year pursuant to which the Seller will act as a consulting prospector, engineer or financial consultant to the Company and will be solely responsible to lead activities related to the Assets.  The amounts to be paid to the Seller as consulting fees will be applied against the Work Commitment.  The Agreement also provides that the parties will enter into a joint venture agreement after the Company earns the additional 25% interest.


On May 3, 2013, the Company and United Copper Holdings Ltd (“United Copper”) agreed to terminate the purchase agreement dated June 30, 2011 relating to the 28 Lode claims located in Okanogan County, Washington (the “Agreement”).  It was agreed that United Copper would retain all payments it had received under the Agreement, that no further payments would be required  under the Agreement as all outstanding payments due were forgiven  and that the Company would return to United Copper the property and any recorded claims it had previously acquired from United Copper.  Additionally, $18,000 was removed from Mineral Properties Held for Disposal, net.


Century Copper LLC


On February 28, 2012, the Company executed a Property Purchase Agreement (the “Agreement”) for the acquisition of certain property from Century Copper LLC (the “Seller”) pursuant to which the Company acquired a 100% interest in 1 patented mining claim and 26 lode mining claims located in Pinal County, State of Arizona (the “Assets”). The Company acquired the Assets from the Seller for a purchase price of  $2,000,000 which was to be payable as follows: (i) Fifty Thousand Dollars ($50,000) for the Zellweger Patented Claim, of which (x) Ten Thousand Dollars ($10,000) was previously paid upon execution of a letter of intent between the parties; and (y) Forty Thousand Dollars ($40,000) was paid upon execution of the agreement; and (ii) One Million Nine Hundred Fifty Thousand Dollars ($1,950,000) was to be payable over a ten year period, of which (x) One Hundred Fifty Thousand Dollars ($150,000) was paid on or before February 28, 2012; and (ii) Two Hundred Thousand Dollars ($200,000) is to be paid annually thereafter commencing on February 28, 2013 until the total amount is paid or the agreement is mutually terminated.  The note was non-interest bearing (see Note 7).  The Company also agreed to issue 1,000,000 shares of its  common stock (the Shares”), which were to be issued to the Seller as follows: i) 250,000 of its shares were to be issued within 4 months of closing of the definitive agreement, ii) 250,000 of its shares were to be issued within 8 months of the closing of the definitive agreement, iii) 250,000 of its shares were to be issued within 12 months of the closing of the definitive agreement, and iv) 250,000 of its shares were to be issued within 18 months of the closing of the definitive agreement.  None of the shares were issued.  In addition, the Seller was to retain; i) a 5% Net Smelter Returns Royalty on the 26 mining claims included in the property, ii) a 2% Net Smelter Returns Royalty on the gross mineral production patented mining claim.  In addition, we agreed to provide a work commitment for the property of One Million Dollars ($1,000,000) over five (5) years and were to grant the seller an additional One Million (1,000,000) shares of post-split common stock upon discovery of a twenty-five million (25,000,000) ton copper deposit on said property.  


On February 21, 2013, the Company notified Century Copper LLC of the termination of its agreement with Century Copper LLC dated February 28, 2012 (the “Agreement”) pursuant to which the Company acquired certain property known as the Kelvin Project, consisting of one (1) patented mining claim (the “Zellweger Patented Claim”) and twenty-six (26) lode mining claims (the “Kelvin Prospect Claims”) in Sections 8, 9 and 17, Township 4 South, Range 13 East, G.&S.R.B.&M., Pinal County, Arizona.  In accordance with the termination provisions contained in the Agreement, Century Copper LLC retained the Two Hundred Thousand Dollars ($200,000) cash payment previously made to it, all documents conveying title claims to the property were released to Century Copper LLC and the Company has no further obligations under the Agreement.  Effective with the termination of the Agreement, the Company was relieved of the $1,800,000 Note Payable to Century Copper and (Note 7) no longer has the obligation to issue the One Million (1,000,000) of post-split shares of common stock.  Additionally, $1,836,770 was removed from Mineral Properties Held for Disposal, net.


NOTE 7 – NOTE PAYABLE


The note payable was incurred in February 2012 (Note 6), in the amount of $1,950,000 for the purchase of a mineral property.  The note was payable in annual installments of $200,000 each February, matures in February 2021 and bears no interest.  The note was



F-12



discounted using the Company’s effective borrowing rate of 2.04%.  The total discount on the note was $174,917 which will be amortized over the life of the note.


In February 2013, the note payable was cancelled in connection with the termination of the Property Purchase Agreement with Century Copper LLC; thereby removing the current portion of $200,000 and the remaining long-term portion of $1,455,732. Note payable totaled $0 and $1,655,733 at December 31, 2013 and 2012, respectively.


Due to the cancellation, the Company recognized the remaining discount of $144,268 during the quarter ended March 31, 2013.  The amount was recorded as interest expense. Interest expense totaled $144,268 and $30,649 for the periods ended December 31, 2013 and 2012.


NOTE 8 – SHAREHOLDERS’ EQUITY


Common Stock


The Company has authorized 250,000,000 common shares with a par value of $0.001 per share.  Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.


There were 6,123,005 and 6,148,005 common shares issued and outstanding at December 31, 2013 and 2012.  


During the years ended December 31, 2013 and 2012, the Company issued the following shares of common stock:


On January 1, 2013 25,000 shares issued in connection with a mineral property acquisition, with a par value of $.001 and totaling $25, were cancelled.

.

On February 6, 2012, the Company issued to one investor 300,000 units at an aggregate price of $0.20 per unit and totalling $60,000.   Each unit consists of one share of the Company’s common stock and one warrant exercisable over a three-year period for one share of common stock at $1.25 per share.


On March 5, 2012, the Company issued to one investor 2,500,000 units at an aggregate price of $0.10 per unit and totalling $250,000.  Each unit consists of one share of the Company’s common stock and one warrant exercisable over a three-year period for one share of common stock at $1.25 per share.


On September 4, 2012, the Company issued to one investor 750,000 units at an aggregate price of $0.20 per unit and totaling $150,000.  Each unit consists of one share of the Company’s common stock and one warrant exercisable over a three-year period for one share of common stock at $1.25 per share.


On December 3, 2012, the Company issued to one investor 225,000 units at an aggregate price of $0.20 per unit and totalling $45,000. Each unit consists of one share of the Company’s common stock and one warrant exercisable over a three-year period for one share of common stock at $1.25 per share.


Preferred Stock


The Company has no issued or authorized preferred stock.


Stock Payable


As of December 31, 2013, the Company received $125,000 from a single investor for 625,000 units, at an aggregate price of $0.20 per unit.  Each unit consists of one share of the Company’s common stock and one warrant exercisable over a three-year period for one share of common stock at $1.25 per share.


The above Units were issued March 24, 2014 (Note 12).


Warrants issued in connection with sale of common shares


Description of warrants


(iii) Warrants issued during quarterly period ended March 31, 2012


For the period ended March 31, 2012, in connection with the sale of 300,000 and 2,500,000 shares of its common stock at $0.20 and $0.10 per share respectively or $310,000 in gross proceeds to the investors, the Company issued warrants to purchase 2,800,000 shares of its common stock exercisable at $1.25 per share, such warrants expiring three (3) years from the date of issuance.



F-13




The fair value of the warrant grant estimated on the date of grant uses the Black-Scholes Option-Pricing Model with the following assumptions:


 

 

 

 

Expected life (year)

 

3.00

 

 

 

 

 

Expected volatility

 

40%

*

 

 

 

 

Risk-free interest rate

 

0.75%

 

 

 

 

 

Dividend yield

 

0.00%

 


* As a thinly traded public entity it is not practicable for the Company to estimate the expected volatility of its share price. The Company selected five (5) comparable public traded goldmine companies to calculate the expected volatility.  The reason for selecting comparable public traded goldmine companies is that the Company plans to engage in goldmine business.  The Company calculated five (5) comparable public traded goldmine companies’ historical volatility over the expect life of the warrants and averaged the five (5) comparable public traded goldmine companies’ historical volatility as its expected volatility.


The Company allocated the gross proceeds of $310,000 between common stock and warrants based on their relative fair value, estimated on the date of grant, valued common stock and the warrant at $257,920 and $52,080, respectively, using the Black-Scholes Option-Pricing Model with the above assumptions.


(iv) Warrants issued on September 4, 2012


On September 4, 2012, in connection with the sale of 750,000 shares of its common stock at $0.20 per share or $150,000 in gross proceeds to the investor, the Company issued warrants to purchase 750,000 shares of its common stock exercisable at $1.25 per share, such warrants expiring three (3) years from the date of issuance.


The fair value of the warrant grant estimated on the date of grant uses the Black-Scholes Option-Pricing Model with the following assumptions:


Expected life (year)

 

3.00

 

 

 

 

 

Expected volatility

 

35%

*

 

 

 

 

Risk-free interest rate

 

0.31%

 

 

 

 

 

Dividend yield

 

0.00%

 


* As a thinly traded public entity it is not practicable for the Company to estimate the expected volatility of its share price. The Company selected five (5) comparable public traded goldmine companies to calculate the expected volatility.  The reason for selecting comparable public traded goldmine companies is that the Company plans to engage in goldmine business.  The Company calculated five (5) comparable public traded goldmine companies’ historical volatility over the expect life of the warrants and averaged the five (5) comparable public traded goldmine companies’ historical volatility as its expected volatility.


The Company allocated the gross proceeds of $150,000 between common stock and warrants based on their relative fair value, estimated on the date of grant, valued common stock and the warrant at $115,230 and $34,770, respectively, using the Black-Scholes Option-Pricing Model with the above assumptions.


(v) Warrants issued on December 3, 2012


On December 3, 2012, in connection with the sale of 225,000 shares of its common stock at $0.20 per share or $45,000 in gross proceeds to the investor, the Company issued warrants to purchase 225,000 shares of its common stock exercisable at $1.25 per share, such warrant expiring three (3) years from the date of issuance.


The fair value of the warrant grant estimated on the date of grant uses the Black-Scholes Option-Pricing Model with the following assumptions:



F-14




Expected life (year)

 

3.00

 

 

 

 

 

Expected volatility

 

33.92%

*

 

 

 

 

Risk-free interest rate

 

0.34%

 

 

 

 

 

Dividend yield

 

0.00%

 


* As a thinly traded public entity it is not practicable for the Company to estimate the expected volatility of its share price. The Company selected five (5) comparable public traded goldmine companies to calculate the expected volatility.  The reason for selecting comparable public traded goldmine companies is that the Company plans to engage in goldmine business.  The Company calculated five (5) comparable public traded goldmine companies’ historical volatility over the expect life of the warrants and averaged the five (5) comparable public traded goldmine companies’ historical volatility as its expected volatility.

 


The Company allocated the gross proceeds of $45,000 between common stock and warrants based on their relative fair value, estimated on the date of grant, valued common stock and the warrant at $33,838 and $11,162, respectively, using the Black-Scholes Option-Pricing Model with the above assumptions.


Summary of warrant activities


The table below summarizes the Company’s non-derivative warrant activities through December 31, 2013:


 

Number of warrants

Exercise price per share

Weighted average exercise price

Fair value at grant date

Aggregate intrinsic value

Balance, December 31, 2012

4,550,000

$1.25

$1.25

$117,278

-

 

 

 

 

 

 

Granted

-

-

-

-

-

 

 

 

 

 

 

Cancelled

-

-

-

-

-

 

 

 

 

 

 

Exercised (Cashless)

-

-

-

-

-

 

 

 

 

 

 

Exercised

-

-

-

-

-

 

 

 

 

 

 

Expired

-

-

-

-

-

 

 

 

 

 

 

Balance, December 31, 2013

4,550,000

$1.25

$1.25

$117,278

-

 

 

 

 

 

 

Earned and exercisable, December 31, 2013

4,550,000

$1.25

$1.25

$117,278

-

 

 

 

 

 

 

Unvested, December 31, 2013

-

-

-

-

-

 

 

The following table summarizes information concerning outstanding and exercisable warrants as of December 31, 2013:


 

Warrants Outstanding

Warrants Exercisable

Range of exercise prices

Number outstanding

Average remaining life (in years)

Weighted average exercise price

Number outstanding

Average remaining life (in years)

Weighted average exercise price

 

 

 

 

 

 

 

$1.25

4,550,000

1.09

$1.25

4,550,000

1.09

$1.25





F-15



NOTE 9 – INCOME TAXES


The Company has not recognized an income tax benefit for its operating losses generated based on uncertainties concerning its ability to generate taxable income in future periods.  The tax benefit for the periods presented is offset by a valuation allowance established against deferred tax assets arising from the net operating losses and other temporary differences, the realization of which could not be considered more likely than not.  In future periods, tax benefits and related deferred tax assets will be recognized when management considers realization of such amounts to be more likely than not.  


As of December 31, 2013 the Company has incurred net losses of $1,101,459 resulting in a net operating loss carry-forward for income tax purposes.  Net operating losses begin expiring in 2026.  The loss also results in a deferred tax asset of approximately $371,440 at the effective statutory rate.  The deferred tax asset has been off-set by an equal valuation allowance.


 

 

December 31,

 

 

 

2013

 

2012

 

Deferred tax asset, generated from net operating loss at statutory rates

 

$

374,500 

 

$

244,000 

 

Valuation allowance

 

 

(374,500)

 

 

(244,000)

 

 

 

$

— 

 

$

 



The reconciliation of the effective income tax rate to the federal statutory rate is as follows:

 

Federal income tax rate

 

 

34.0

%

Increase in valuation allowance

 

 

(34.0

%)

Effective income tax rate

 

 

0.0

%



NOTE 10 – RELATED PARTY TRANSACTIONS


Mr. Craig Russell sits on the board of directors and also serves as the Company’s Chief Executive Officer.   His employment agreement with the Company stipulates monthly compensation of $6,500.


Total compensation paid or accrued on this employment agreement was $78,000 for each of the years ended December 31, 2013 and 2012.


NOTE 11 – PROPERTY, PLANT, AND EQUIPMENT


Capitalized property and equipment, net of accumulated depreciation, consisted of the following as of December 31:

 

 

2013

2012

Office Equipment

$

2,906 

$

2,906 

Less:  Accumulated Depreciation

$

(1,270)

$

(301)

Property, Plant, and Equipment, Net

$

1,636 

$

2,605 

 


Property and equipment are depreciated using the straight-line method. Depreciation expense was $969 and $301 for the years ended December 31, 2013 and 2012.


NOTE 12 – SUBSEQUENT EVENTS


Management has evaluated subsequent events through the date the financial statements were issued. Based on our evaluation these events require adjustment or disclosure:


On January 12, 2014, we received $35,000 for 175,000 units issued on March 24, 2014.


On March 24, 2014, Stock Payable in the amount of $125,000 (Note 8) was paid upon issuance of the 625,000 units.




F-16



ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE


Our financial statements were previously audited by the firm of DKM Certified Public Accountants (DKM).  In December 2012 Peter Messineo, CPA merged into the firm known as DKM.  DKM has audited our most recent financial statement, December 31, 2012.  In April 2013 the agreement of DKM and PM was terminated and the Company engaged Messineo & Co, CPAs, LLC (M&Co) of Clearwater, Florida.  M&Co is a continuation of the original audit firm PM. DKM performed the audit for the year ended December 31, 2012.  M&Co performed the interim reviews of financial statements for the periods ended March 31, June 30, and September 30, 2013.  On May 1, 2014, Messineo & Co., CPAs, LLC (M&Co) declined to stand for reappointment as our  independent auditors and the Company engaged RLB Certified Public Accountant PLLC (RLBCPA) of Gulfport, Florida, as its new registered independent public accountant.  Our Board of Directors participated in and approved the decision to engage RLBCPA.


There were no disagreements with accountants on accounting and financial disclosure for the year ended December 31, 2013.


ITEM 9A.  CONTROLS AND PROCEDURES


Disclosure Controls and Procedures


The Company has adopted and maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports filed under the Exchange Act, such as this annual report, is collected, recorded, processed, summarized and reported within the time periods specified in the rules of the SEC.  The Company’s disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management to allow timely decisions regarding required disclosure.  As required under Exchange Act Rule 13a-15, the Company’s management, including the Chief Executive Officer who also serves as our Principal Financial Officer, has conducted an evaluation of the effectiveness of disclosure controls and procedures as of the end of the period covered by this report.  Based on that evaluation, the Chief Executive Office who also serves as our Principal Financial Officer concluded that the disclosure controls and procedures are ineffective.


The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: domination of management by a single individual without adequate compensating controls, lack of a majority of outside directors on board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; inadequate segregation of duties consistent with control objectives, and lack of an audit committee.  These material weaknesses were identified by our Chief Executive Officer who also serves as our Chief Financial Officer in connection with the above annual evaluation.


Management believes that the material weaknesses did not have an effect on our financial results.  However, management believes that the lack of a functioning audit committee and inadequate segregation of duties results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.


Management recognizes that its controls and procedures would be substantially improved if we had an audit committee and two individuals serving as officers and as such is actively seeking to remediate this issue. 


Management’s Report on Internal Control over Financial Reporting


The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f).  The Company’s internal control over financial reporting is designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of published financial statements.  Management conducted an assessment of the Company’s internal control over financial reporting based on the framework and criteria established by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework.  Based on the assessment, management concluded that, as of December 31, 2013, the Company’s internal control over financial reporting is ineffective based on those criteria.


The Company’s management, including its Chief Executive Officer who also serves as our Chief Financial Officer, does not expect that the Company’s disclosure controls and procedures and its internal control processes will prevent all error and all fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of error or fraud, if any, within the Company have been detected.  These inherent limitations include the realities that judgments in decision-making can be faulty, and that the breakdowns can occur because of simple error or mistake.  Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.  The design of any system of controls also is




19



based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.  Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.  Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.  However, these inherent limitations are known features of the financial reporting process.  Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.


Management’s Remediation Initiatives


In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures:


We will create a position to segregate duties consistent with control objectives and will increase our personnel resources and technical accounting expertise within the accounting function when funds are available to us. And, we plan to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management when funds are available to us.


Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Board.


We will work as quickly as possible to implement these initiatives; however, the lack of adequate working capital and positive cash flow from operations will likely slow this implementation.


Changes in Internal Control


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


This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this annual report.


ITEM 9B.  OTHER INFORMATION


None.




20




PART III


ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE


Below is certain information regarding our directors and executive officers as of August 20, 2014.


Name

Age

Position


Craig Russell

29

Chairman, President, Chief Executive Officer and Chief Financial Officer


Stephen Buxton

30

Director


Craig Russell.  Mr. Russell, age 29, was appointed President and Chief Executive Officer of the Company on October 11, 2011.  Prior thereto, since July 2010, he had been acting as a consultant to the Company.  From September 2008 through July 2010, Mr. Russell worked in the ecommerce industry at Quidco as a business development analyst tasked with analyzing and developing new business processes. Prior thereto, from July 2006 through September 2008, Mr. Russell worked for John Lewis as a project coordinator. Mr. Russell holds a degree in Economics along with training in Mineral Project and Finance Appraisal from University College London.


Mr. Russell’s training in mineral project and finance appraisal make him a desirable director.  He has valuable knowledge about our industry.


Stephen Buxton.  Stephen Buxton, has over six- years’ experience in the Global IT and digital marketing industries and has a degree from a leading UK University along with other qualifications in IT, Communications and Management. Most recently, Mr. Buxton has held an executive role within one of the UK’s largest online affiliate marketing companies, Affiliate Window, where has worked since March 2012. Prior to this Mr. Buxton worked for another market leader in ecommerce, Maple Syrup Media, from May 2008 to March 2012. Where he was responsible for increasing their market presence and increasing growth through overseeing new project development. Mr. Buxton has consulted with government departments and worked within their IT infrastructure and network solutions. Mr. Buxton’s executive experience and understanding of corporate governance make him a valuable director.


Employees


At December 31, 2013 we had one employee.


Directors’ Term of Office


Directors will hold office until the next annual meeting of stockholders and the election and qualification of their successors.  Officers are elected annually by our board of directors and serve at the discretion of the board of directors.


Director Independence


Although our securities do not trade on any national securities exchange, for purposes of independence we use the NASDAQ definition of independence. Our director, Craig Russell, is not independent because of his position as an executive officer of the Company.  Stephen Buxton is independent in accordance with the NASDAQ definition for independence.


Audit Committee and Audit Committee Financial Expert


Our board of directors acts as our audit committee and compensation committee. We do not have an “audit committee financial expert,” as that term is defined in Item 407(d) of Regulation S-K promulgated under the Securities Act. The board of directors believes that its members are financially literate and experienced in business matters and are capable of (1) understanding generally accepted accounting principles (“GAAP”) and financial statements, (2) assessing the general application of GAAP principles in connection with our accounting for estimates, accruals and reserves, (3) analyzing and evaluating our financial statements, (4) understanding our internal controls and procedures for financial reporting, and (5) understanding audit committee functions, all of which are attributes of an audit committee financial expert. However, the board of directors believes that no audit committee member has obtained these attributes through the experience specified in the SEC's definition of “audit committee financial expert.” Further, as is the case with many small companies, it would be difficult for us to attract and retain board members who qualify as “audit committee financial experts,” and competition for such individuals is significant. The board of directors believes that its current audit committee is able to fulfill its role under SEC regulations despite not having a designated “audit committee financial expert.”





21



Section 16(a) Beneficial Ownership Reporting Compliance


Section 16(a) of the Exchange Act requires the Company’s executive officers, directors and persons who beneficially own more than ten percent of a registered class of the Company’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of the Company’s common stock.  Such officers, directors and persons are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms that they file with the SEC.


Based solely on a review of the copies of such forms that were received by the Company, or written representations from certain reporting persons that no Form 5s were required for those persons, the Company is not aware of any failures to file reports or report transactions in a timely manner during the Company’s fiscal year ended December 31, 2013 other than the filing of a Form 3 for Stephen Buxton following his appointment as a director and the filing of a Form 3 by Rare Earth Minerals International Ltd upon its acquisition of beneficial ownership of in excess of 10% of our common stock and subsequent Form4s upon its [nine] subsequent acquisitions of additional shares of our common stock.


Code of Ethics


We have adopted a Code of Ethics applicable to our officers and directors, which is filed as an exhibit to this Annual Report on Form 10-K.  At present we do not host a website; therefore, our Code of Ethics is not accessible.   We will provide any person without charge, upon written or oral request to our corporate headquarters, a copy of our Code of Ethics.


Procedure for Nominating Directors


In 2012, we have not made any material changes to the procedures by which security holders may recommend nominees to our Board of Directors.


Family Relationships


There are no family relationships among our directors, executive officers or persons nominated to become executive officers or directors.


Involvement in Certain Legal Proceedings


During the past ten (10) years, none of our directors, persons nominated to become directors, executive officers, promoters or control persons was involved in any of the legal proceedings listen in Item 401 (f) of Regulation S-K.


Arrangements


There are no arrangements or understandings between an executive officer, director or nominee and any other person pursuant to which he was or is to be selected as an executive officer or director.


ITEM 11.  EXECUTIVE COMPENSATION


There was compensation paid to our Chief Executive/Financial Officer for services rendered of $78,000 for each of the years ending December 31, 2013 and 2012.


The table below summarizes all compensation awarded to, earned by, or paid to our named executive officer for all services rendered in all capacities to us for the years ended December 31, 2013 and 2012.




22




 

 

 

 

 

 

 

 

 

 

SUMMARY COMPENSATION TABLE

Name and

principal position

Year

Salary

($)

Bonus

($)


Stock

Awards

($)

Option

Awards

($)

Non-Equity

Incentive Plan

Compensation

($)

Nonqualified

Deferred

Compensation

Earnings ($)

All Other

Compensation

($)

Total

($)

Craig Russell

President,

Chief Executive Officer,

Principal Executive Officer,

Chief Financial Officer,

Principal Financial Officer,

Principal Accounting Officer and Director

2013




2012

$78,000




$78,000

0




0

0




0

0




0

0




0

0




0

0




0

$78,000




$78,000



Option/SAR Grants in Last Fiscal Year


None.


Outstanding Equity Awards at Fiscal Year-End


None.


Compensation of Directors


None of the Company’s directors received any compensation for services as directors during the last fiscal year.


Equity Compensation Plan Information


Not applicable.


Employment Agreements


None.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS


The following table sets forth certain information regarding beneficial ownership of our common stock and warrants to purchase shares of our common stock as of July 31, 2014 by (i) each person (or group of affiliated persons) who is known by us to own more than five percent of the outstanding shares of our common stock, (ii) each of our directors and executive officers, and (iii) all of our directors and executive officers as a group.  As of September 30, 2014, there were [6,923,005] shares of common stock outstanding.


Beneficial ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. The principal address of each of the stockholders listed below is c/o Columbia Tower, 701 Fifth Avenue, Office 4263, Seattle, WA, 98104-5119.  We believe that all persons named in the table have sole voting and investment power with respect to shares beneficially owned by them. All share ownership figures include shares issuable upon exercise of options or warrants exercisable within 60 days of September 30, 2014, which are deemed outstanding and beneficially owned by such person for purposes of computing his or her percentage ownership, but not for purposes of computing the percentage ownership of any other person.  Such amounts include the 50,000 shares that were to be issued in connection with our acquisitions, but have not yet been issued.


All references to the number of shares and per share amounts have been retroactively restated to reflect a 150 for 1 reverse stock split of all the outstanding common stock of the Company, which was effective in March 2011.





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Principal Stockholders Table


 

 

 

 

 

 

 

 

 

Name of Owner

 

Shares Owned

 

Percentage of Shares

Outstanding

 Craig Russell

 

 

200,000

 

 

 

2.9

%

 Lynn Harrison

 

 

860,000

 

 

 

12.4

%

 James Buxton

 

 

 

 

 

 

 

 

 Rare Earth Minerals International Ltd.

 

 

9,600,000

(1)

 

 

84.78

%

 All officers and directors as a group (1 person)

 

 

200,000

 

 

 

2.9

 %


(1) Includes 5, 200,000 shares of common stock and 4,400,000 are shares of common stock underlying currently exercisable warrants.



ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE


None.


ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES


Aggregate fees including expenses billed to us for the years ended December 31, 2013 and 2012 for professional services performed:



 

 

 

 

 

 

 

 

 

  

 

2013

 

2012

Audit Fees  – Messineo & Co. CPAs

 

$

 3,500

 

 

 

3,750

 

DKM Certified Public Accountants

 

 

5,000

 

 

 

 

 

Audit Fees - Silberstein Ungar PLLC CPAs

 

 

3,000

 

 

 

 

 

RLB Certified Public Accountant PLLC

 

 

 6,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax Fees

 

 

 

 

 

 

 

 

All Other Fees

 

 

 

 

 

 

 

 

Total 

 

$

18,000

 

 

 

3,750

 


Board of Directors Pre-Approval Process, Policies and Procedures


Our principal auditors have performed their audit procedures in accordance with pre-approved policies and procedures established by our Board of Directors. Our principal auditors have informed our Board of Directors of the scope and nature of each service provided. With respect to the provisions of services other than audit, review, or attest services, our principal accountants brought such services to the attention of our Board of Directors prior to commencing such services.





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PART IV


ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES


(a)(1) The following financial statements are included in this Annual Report on Form 10-K for the fiscal year ended December 31, 2013:


 

 

 

 

1.

Reports of Independent Registered Public Accounting Firms

 

 

 

 

2.

Balance Sheets as of December 31, 2013 and 2012

 

 

3.

Statements of Operations for the years ended December 31, 2013 and 2012 and for the period from August 7, 2006 (inception) to December 31, 2013

 

 

 

 

4.

Statement of Changes in Stockholders’ Equity (Deficit) as of December 31, 2013

 

 

 

 

5.

Statements of Cash Flows for the years ended December 31, 2013 and 2012 and for the period from August 7, 2006 (inception) to December 31, 2013

 

 

6.

Notes to the Financial Statements


(a)(2) All financial statement schedules have been omitted as the required information is either inapplicable or included in the Consolidated Financial Statements or related notes.


(a)(3) The following exhibits are either filed as part of this report or are incorporated herein by reference:


3.1 Certificate of Incorporation of Cold Gin Corporation, as amended (incorporated herein by reference from the Company’s Exhibit to its Information Statement on Schedule 14C filed on December 3, 2010)


3.2 Articles of Incorporation of Bonanza Gold Corp., as amended (incorporated herein by reference from the Company’s Exhibit to its Information Statement on Schedule 14C filed on December 3, 2010)


3.3 Articles of Merger (incorporated herein by reference from the Company’s Exhibit to its Information Statement on Schedule 14C filed on December 3, 2010)


3.4 Certificate of Merger (incorporated herein by reference from the Company’s Exhibit to its Information Statement on Schedule 14C filed on December 3, 2010)


3.5 By-Laws of Bonanza Gold Corp. (incorporated herein by reference from the Company’s Exhibit to its Information Statement on Schedule 14C filed on December 3, 2010)


3.5 Certificate of Amendment to the Articles of Incorporation of Bonanza Gold Corp. (incorporated herein by reference from the Company’s Exhibit to its Information Statement on Schedule 14C filed on February 9, 2011)


10.1 Asset Purchase Agreement, dated December 10, 2010, by and between Precious Metals Exploration, Ltd. and Cold Gin Corporation (incorporated herein by reference from the Company’s Exhibit 10.1 to its Current Report on Form 8-K filed on December 14, 2010)


10.2 Asset Purchase Agreement, dated December 10, 2010, by and between Precious Metals Exploration, Ltd. and Cold Gin Corporation (incorporated herein by reference from the Company’s Exhibit 10.2 to its Current Report on Form 8-K filed on December 14, 2010)


10.3 Promissory Note in the amount of One Million Dollars ($1,000,000), dated December 14, 2010, payable to Precious Metals Exploration, Ltd. (incorporated herein by referenced from the Company’s Exhibit 10.3 to its Current Report on Form 8-K filed on December 14, 2010) 


10.4 Agreement and Plan of Reincorporation, dated as of December 27, 2010, by and between Cold Gin Corporation and Bonanza Gold Corp. (incorporated by reference from the Company’s Exhibit 10.4 to its Annual Report on Form 10-K for the year ended December 31, 2010 filed on March 31, 2011)





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10.5 Asset Purchase Agreement dated April 30, 2011 by and between Independent Resources Inc. and Bonanza Gold Corp (incorporated by reference from the Company’s Exhibit 10.1 to its Current Report on Form 8-K filed on May 5, 2011)


10.6 Termination Agreement dated May 19, 2011 by and between Precious Metals Exploration, Ltd and Bonanza Gold Corp. (incorporated by reference from the Company’s Exhibit 10.2 to its Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 filed on May 23, 2011)


10.7 Assignment and Assumption Agreement dated May 19, 2011 by and between Precious Metals Exploration, Ltd and Bonanza Gold Corp. (incorporated by reference from the Company’s Exhibit 10.3 to its Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 filed on May 23, 2011)


10.8 Asset Purchase Agreement dated June 27, 2011 by and between United Copper Holdings Ltd and Bonanza Gold Corp (incorporated by reference from the Company’s Exhibit 10.1 to its Current Report on Form 8-K filed on July 5, 2011)


10.9 Property Purchase agreement dated as of February 28, 2012 by and between Century Cooper, LLC (incorporated by reference from the Company’s Exhibit 10.9 to its Annual Report on Form 10-K filed April 16, 2012)


10.10 Form of Confidential Private Placement Subscription Agreement (incorporated by reference from the Company’s Exhibit 10.1 to its current Report on Form 8-K filed on September 10, 2013)


14.1 Code of Ethics (1)


31.1 Certification pursuant to Rule 13a-14(a)/15d-14(a) (1)


31.2 Certification pursuant to Rule 13a-14(a)/15d-14(a) (1)


32.1 Certification pursuant to Section 1350 of the Sarbanes-Oxley Act of 2002 (1)


**+101.INS XBRL Instance Document

**+101.SCH XBRL Taxonomy Extension Schema Document

**+101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

**+101.DEF XBRL Taxonomy Extension Definition Linkbase Document

**+101.LAB XBRL Taxonomy Extension Label Linkbase Document

**+101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

 

* Management contract or compensatory plan or arrangement required to be identified pursuant to Item 15(a)(3) of this report

** As provided in Rule 406T of Regulation S-T, this information is deemed furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933, as amended, and Section 18 of the Securities Exchange Act of 1934, as amended.

 

(1) Filed herewith.





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SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned.



 

BONANZA GOLD CORP.

 

 Date: October 8, 2014

By: /s/ Craig Russell

 

Craig Russell

 

President

Chief Executive Officer

Chief Financial Officer

Chairman

 

 Date: October 8, 2014

By: /s/ Stephen Buxton

 

Stephen Buxton

 

Director





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