Attached files
file | filename |
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8-K/A - INCEPTION MINING INC. | form8-ka.htm |
EX-99.3 - INCEPTION MINING INC. | ex99-3.htm |
EX-99.2 - INCEPTION MINING INC. | ex99-2.htm |
1 |
COMPAÑÍA MINERA CERROS DEL SUR, S.A. DE C.V. AND AFFILIATES
COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER. 2014 AND 2013
CONTENTS
Page | |
Audit Report | 3-4 |
Statement of financial position | 5 |
Statement of comprehensive income | 6 |
Statement of Changes in Equity | 7 |
Statement of Cash Flows | 8 |
Notes to the Financial Statements | 9-20 |
2 |
To the Board of Directors of
Compañía Minera Cerros del Sur, S.A. De C.V
and Affiliates.
We have audited the accompanying combined statement of financial position of Compañía Minera Cerros del Sur, S.A. de C.V. and Affiliates as of December 31, 2014 and 2013, and the related combined statement of comprehensive income, and combined cash flows for the years then ended. These combined 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.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these combined financial statements in accordance with accounting principles generally accepted in the United States of America. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
PBX (504) 2270 - 7364 al 7368
E-mail tovarlopez@pkfhonduras.com | pkfhonduras@yahoo.com |
www.pkfhonduras.com. P.O. Box 302091 Edificio Metropolis, Torre II, Nivel 24
Con oficinas en: Tegucigalpa, San Pedro Sula, La Ceiba | Honduras, C.A.
PKF-Tovar López is a member firm of PKF International Limited. PKF International Limited
is a network of legally independent member firms with representation in 125 countries.
3 |
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, except for the effects of such adjustments, the combined financial statements referred to above, present fairly, in all material respects, the combined financial position of Compañía Minera Cerros del Sur, S.A. de C.V. and Affiliates as of December 31, 2014 and 2013, and the combined results of its operations and its combined cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
We draw attention to Note 13 d) to the combined financial statements which describes the uncertainty related to the outcome of the lawsuit filed against the company. Our opinion is not qualified in respect of this matter.
Without qualifying our opinion, we draw attention to Note 13 e) in the combined financial statements which indicates that the Company incurred a net loss obtained during the current and prior years, as of that date, the Company’s working capital is insufficient. These conditions requires additional capital contribution; the management of the company plans to obtain these contributions from its headquarter Clavo Rico, Ltd. until its operations reach its break-even point and keep stable. These contributions were made by capitalizing supplement contributions made by stockholders in previous years.
Without qualifying our opinion, the company is member of Clavo Rico, Ltd located in Turks and Caicos Island. As expressed in the explanatory Note 2 to the financial statements, the company has important transactions with Clavo Rico, Ltd. Due to this relationship, it is possible that the terms of these transactions are not the same that would result from relationships with non-related companies.
Tegucigalpa, Honduras
April 30, 2015
4 |
COMPAÑÍA MINERA CERROS DEL SUR, S.A. DE C.V. AND AFFILIATES
COMBINED STATEMENT OF FINANCIAL POSITION
For the Years Ended December 31, 2014 and 2013
(All amounts in US$ unless otherwise stated)
Note | 2014 | 2013 | ||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | 3 | 157,718 | 39,833 | |||||||||
Inventories | 4 | 1,703,883 | 1,726,117 | |||||||||
Accounts receivable | 22,284 | 12,612 | ||||||||||
Accounts receivable- related companies | 18,983 | 18,409 | ||||||||||
Total current assets | 1,902,868 | 1,796,971 | ||||||||||
Non-current assets: | ||||||||||||
Property, plant and equipment-net | 5 | 2,719,650 | 2,491,383 | |||||||||
Intangible assets-mining rights an concession | 6 | 112,455 | 157,319 | |||||||||
Others assets | 95,591 | 140,686 | ||||||||||
Total non-current assets | 2,927,696 | 2,789,388 | ||||||||||
Total assets | 4,830,564 | 4,586,359 | ||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Account payables | 367,321 | 292,084 | ||||||||||
Employee withholdings and payroll taxes | 98,115 | 146,011 | ||||||||||
Employee benefit obligations | 8 | 28,180 | 28,180 | |||||||||
Mine reclamation | 33,508 | 33,508 | ||||||||||
Taxes other than income taxes | 16,366 | 17,791 | ||||||||||
Total current liabilities | 543,490 | 517,574 | ||||||||||
Non current liabilities: | ||||||||||||
Related companies-Loan | 7 | 5,850,644 | 5,472,350 | |||||||||
Total non-current liabilities | 5,850,644 | 5,472,350 | ||||||||||
Total Liabilities | 6,394,134 | 5,989,924 | ||||||||||
Shareholders’ equity: | ||||||||||||
Share capital | 1 | 1,051,116 | 1,051,116 | |||||||||
Supplementary equity contributions | 9 | 582,639 | 582,639 | |||||||||
Retained earnings (loss) | (3,197,325 | ) | (3,037,320 | ) | ||||||||
Total shareholders’ equity | (1,563,570 | ) | (1,403,565 | ) | ||||||||
Total liabilities and shareholders’ equity | 4,830,564 | 4,586,359 |
The accompanying notes are an integral part of these financial statements.
5 |
COMPAÑÍA MINERA CERROS DEL SUR. S.A. DE C.V. AND AFFILIATES
COMBINED STATEMENT OF COMPREHENSIVE INCOME
For the Years Ended December 31, 2014 and 2013
(All amounts in US$ unless otherwise stated)
Note | 2014 | 2013 | ||||||||||
REVENUE: | ||||||||||||
Sales of precious metal | 10 | 3,120,825 | 2,502,945 | |||||||||
Other income | 27,965 | 3,628 | ||||||||||
3,148,790 | 2,506,574 | |||||||||||
Cost of sales | 11 | 1,984,684 | 1,179,567 | |||||||||
Gross profit | 1,164,106 | 1,327,007 | ||||||||||
OPERATING EXPENSES: | ||||||||||||
General and administrative expenses | 12 | (845,267 | ) | (835,428 | ) | |||||||
Depreciation and amortisation expense | (405,287 | ) | (425,260 | ) | ||||||||
Interest expenses | (58,118 | ) | (5,151 | ) | ||||||||
Total expense | (1,308,672 | ) | (1,265,839 | ) | ||||||||
Profit before tax | (144,566 | ) | 61,168 | |||||||||
Income tax expense | (15,439 | ) | (17,791 | ) | ||||||||
PROFIT (LOSS) FOR THE YEAR | (160,005 | ) | 43,377 |
The accompanying notes are an integral part of these financial statements.
6 |
COMPAÑÍA MINERA CERROS DEL SUR, S.A. DE C.V. AND AFFILIATES
COMBINED STATEMENT OF CHANGES IN EQUITY
For the Years Ended December 31, 2014 and 2013
(All amounts in US$ unless otherwise stated)
Note | Share capital | Supplementary equity contributions | Retained earnings (loss) | Total | ||||||||||||||||
Year 2013: | ||||||||||||||||||||
Balance at 31, December 2012 | 1,051,116 | 582,639 | (3,080,697 | ) | (1,446,942 | ) | ||||||||||||||
Net income for the year | 43,377 | 43,377 | ||||||||||||||||||
Balance at 31, December 2013 | 1,051,116 | 582,639 | (3,037,320 | ) | (1,403,565 | ) | ||||||||||||||
Year 2014: | ||||||||||||||||||||
Balance at 31, December 2013 | 1,051,116 | 582,639 | (3,037,320 | ) | (1,403,565 | ) | ||||||||||||||
Net income for the year | (160,005 | ) | (160,005 | ) | ||||||||||||||||
Balance at 31, December 2014 | 1,051,116 | 582,639 | (3,197,325 | ) | (1,563,570 | ) |
The accompanying notes are an integral part of these financial statements.
7 |
COMPAÑÍA MINERA CERROS DEL SUR, S.A. DE C.V. AND AFFILIATES
COMBINED STATEMENT OF CASH FLOWS
For the Years Ended December 31, 2014 and 2013
(All amounts in US$ unless otherwise stated)
2014 | 2013 | |||||||
OPERATING ACTIVITIES: | ||||||||
Profit of the year | (160,005 | ) | 43,377 | |||||
Adjustments for non-cash expenses: | ||||||||
Depreciation and amortisation | 405,288 | 425,260 | ||||||
Changes in operating assets and liabilities: | ||||||||
(Increase) on assets: | ||||||||
Inventories | 22,234 | (544,980 | ) | |||||
decrease Accounts receivable | (9,672 | ) | (12,612 | ) | ||||
decrease Accounts receivable- related companies | (574 | ) | (18,409 | ) | ||||
Increase (decrease) on liabilities: | ||||||||
Account payables | 75,237 | 165,743 | ||||||
Increase Employee withholdings and payroll taxes | (47,896 | ) | 146,011 | |||||
Increase Taxes other than income taxes | (1,425 | ) | 17,791 | |||||
Current (decrease) portion of employee benefit obligations | - | (32,717 | ) | |||||
Cash flows (used in) operating activities | 283,187 | 189,464 | ||||||
INVESTING ACTIVITIES: | ||||||||
Purchases of equipment | (582,802 | ) | (430,133 | ) | ||||
Purchases of Intangible | (5,889 | ) | - | |||||
Increase in other assets | 45,095 | (117,637 | ) | |||||
Cash flows from investing activities | (543,596 | ) | (547,770 | ) | ||||
FINANCING ACTIVITIES: | ||||||||
Employee benefit obligations paid | - | (104,485 | ) | |||||
Increase related companies-Loan | 378,294 | 470,391 | ||||||
Cash flows from financing activities | 378,294 | 365,906 | ||||||
Net increase (decrease) in cash and cash equivalents | 117,885 | 7,600 | ||||||
Cash and cash equivalents at beginning of year | 39,833 | 32,233 | ||||||
CASH AND CASH EQUIVALENTS AT END OF YEAR | 157,718 | 39,833 |
The accompanying notes are an integral part of these financial statements.
8 |
COMPAÑÍA MINERA CERROS DEL SUR, S.A. DE C.V. AND AFFILIATES
NOTES TO THE COMBINED FINANCIAL STATEMENTS
YEAR ENDED AT DECEMBER 2014 AND 2013
(All amounts in US$ unless otherwise stated)
1. | HISTORY OF THE ENTITY |
History - Compañía Minera Cerros del Sur, S.A. de C.V. is a company incorporated in Honduras, Central America The address of its registered office and principal place of business is El Corpus, Choluteca. Compañía Minera Cerros del Sur, S.A. de C.V. Group consists of the Company and its parent Clavo Rico Ltd. (Turks and Caicos Island), Compañía Minera Clavo Rico, S.A.; and Cerros del Rio, S.A.. Their principal activities are the exploration and extraction of precious metal gold.
The company was organized on October 2, 1975 and recorded in the Honduran commerce register under number 1091-275, as a variable equity - Limited Liability company for an undefined period of time, in accordance with Honduran law.
On August 12, 2004, the company became into a variable equity- Joint-Stock company and registered in the Honduran commerce register under number 98-566. The company is based in Tegucigalpa and its major activity is the mining prospecting, exploiting, exploding and commercialization and other related commercial activities. The maximum legal equity as of December 31, 2014 and 2013 is US$1,051,116, which is totally subscribed and paid and divided in common shares of L100.
In April 2009, the board of directors approved a capital increase up to a maximum of US$1,500,000. This increase had already been contributed as supplement capital by Mayan Gold Inc. As of December 31, 2014, this supplement capital contribution has not yet been legally formalized.
2. | SUMMARY OF PREPARATION AND ACCOUNTING POLICIES |
The main accounting policies adopted by the entity regarding the preparation of the financial statements are described below:
Basis for the preparation of financial statements – The accompanying combined financial statements have been prepared in accordance with the generally accepted accounting principles (U.S. GAAP). The accounting principles comprising the framework are appropriate for the preparation and presentation of entity financial statements, based on the needs of the financial statement users and cost and benefit considerations.
a) | Revenue and cost recognition. Incomes from sales of mineral products are recognized when they are billed and delivered to clients. Sales are presented at their net value from discounts and returned sales. Costs and expenses are recognized when they are incurred. |
9 |
COMPAÑÍA MINERA CERROS DEL SUR, S.A. DE C.V. AND AFFILIATES
NOTES TO THE COMBINED FINANCIAL STATEMENTS
YEAR ENDED AT DECEMBER 2014 AND 2013
(All amounts in US$ unless otherwise stated)
b) | Inventories. The inventories of supplies are valued to the average price less than from the average market value. Inventory in-progress and completed products are valued based on the average production cost plus indirect expenses. | |
c) | Property, Plant, and Equipment. These assets are valued at their acquisition or construction cost less accumulated depreciation and amortisation. Depreciation and amortisation is charged so as to allocate the cost of assets less their residual values over their estimated useful lives as follow: |
Years | ||||
Mining machinery and equipment | 10 | |||
Vehicles | 5 | |||
Office equipment and furniture | 10 | |||
Buildings | 20 |
If there is an indication that there has been a significant change in depreciation rate, useful life or residual value of an asset, the depreciation of that asset is revised prospectively to reflect the new expectations. Gains and losses arising from the retirement or sale of assets are recognized in profit or loss, as well as repair and maintenance costs when they do not exceed the useful life of the assets.
d) | Intangible assets. Intangible assets-Mining rights and concession that is stated at cost less accumulated amortisation and any accumulated impairment losses. It is amortised over its estimated life of five years using the straight-line method. If there is an indication that there has been a significant change in amortization rate, useful life or residual value of an intangible asset, the amortization is revised prospectively to reflect the new expectations. | |
e) | Impairment of assets. At each reporting date, property, plant and equipment and intangible assets, are reviewed to determine whether there is any indication that those assets have suffered an impairment loss. If there is an indication of possible impairment, the recoverable amount of any affected asset (or group of related assets) is estimated and compared with its carrying amount. If estimated recoverable amount is lower, the carrying amount is reduced to its estimated recoverable amount, and an impairment loss is recognized immediately in profit or loss. Similarly, at each reporting date, inventories are assessed for impairment by comparing the carrying amount of each item of inventory (or group of similar items) with its selling price less costs to complete and sell. If an item of inventory (or group of similar items) is impaired, its carrying amount is reduced to selling price less costs to complete and sell, and an impairment loss is recognized immediately in profit or loss. If an impairment loss subsequently reverses, the carrying amount of the asset (or group of related assets) is increased to the revised estimate of its recoverable amount (selling price less costs to complete and sell, in the case of inventories), but not in excess of the amount that would have been determined had no impairment loss been recognized for the asset (group of related assets) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss. |
10 |
COMPAÑÍA MINERA CERROS DEL SUR, S.A. DE C.V. AND AFFILIATES
NOTES TO THE COMBINED FINANCIAL STATEMENTS
YEAR ENDED AT DECEMBER 2014 AND 2013
(All amounts in US$ unless otherwise stated)
e) | Leases. Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease. | |
f) | Use of Estimates. The preparation of financial statements in conformity with U.S GAAP requires the company management to make some estimates and assumptions that affect the balance of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements and the income and expenses for the reported years as well. Assets and liabilities are recognized in the financial statements when financial benefits are likely to flow to or from the company and that the different entries have cost or value, which can be fairly measured. If in the future these estimates and assumptions, which are based on the best knowledge of the management at the date of the financial statements, were modified with respect to the current circumstances, the original estimates and assumptions will be adequately adjusted in the period that such changes happen. | |
g) | Legal Reserve. Represents 5% of the net income of each year up to a minimum of 20% of the paid equity. | |
h) | Registration of foreign currency transactions – Foreign currency transactions are recorded at the exchange rate prevailing at the transaction date, with related balances adjusted to the prevailing exchange rate at the closing date. Gains or losses arising from these adjustments are recognized in profit or loss of the current year. | |
i) | Employee benefits – According to the Honduran Labor Code, Compañía Minera Cerros del Sur, S.A. de C.V. is obliged to pay compensation to employees dismissed under certain circumstances. As of December 31, 2014 and 2013, the employee benefit obligations is about US$ 28,180 in 2014 (US$ 28,180 in 2013); disbursements in excess to this amount are considered by the company as expenses of the year they are incurred. |
11 |
COMPAÑÍA MINERA CERROS DEL SUR, S.A. DE C.V. AND AFFILIATES
NOTES TO THE COMBINED FINANCIAL STATEMENTS
YEAR ENDED AT DECEMBER 2014 AND 2013
(All amounts in US$ unless otherwise stated)
The Honduran Labor Code was amended by Decree 150-2008, issued by Congress and published in the Official Gazette on November 5, 2008. Such decree establishes an employee’s right to receive a severance payment when, after 15 years or more of continuous work, he or she decides to voluntarily terminate the employment contract and is entitled to receive 35% of the amount that would correspond to the years of service. The entity does not maintain specific reserves to cope with this type of any work obligations.
j) | Exchange Rate. The accounting records of the company are maintained in Lempiras, official currency of Honduras. In June 1994, the Central Bank board liberalized the US$ exchange rate and it is ruled by the offer and demand through the Public Currency Bids (PCB) mechanism. As of December 31, 2014 and 2013, the exchange rate US$/Lempiras in the Honduran banking system was L 21.6630: US$1 and L20.7417: US$1 in 2013 | |
k) | Related party transaction - Shareholders, directors and other entities with whom the entity has shareholders in common are considered as related parties. | |
I) | Financial instruments - Financial instruments recognized in the financial statements include cash, accounts receivable and accounts payable. | |
Credit risk. Financial assets that expose the entity to credit risk consist primarily of cash and bank deposits. All cash and bank deposits are held by banks with high credit quality. | ||
Fluctuation risk. Bank deposits are subject to foreign currency exchange risks since a portion of such bank deposits are maintained in US dollars. The Lempira (official currency of Honduras) has experienced steady devaluations against the US dollar since 1990 and cash flows have been affected by fluctuations in the exchange rate. | ||
Fair value. The fair value of bank deposits, temporary investments and accounts receivable approximate their fair values due to their short term nature. | ||
m) | Reclassifications - At the end of the period, some reclassifications of balances were made, which were considered necessary for a more reasonable presentation of the financial statements. |
12 |
COMPAÑÍA MINERA CERROS DEL SUR, S.A. DE C.V. AND AFFILIATES
NOTES TO THE COMBINED FINANCIAL STATEMENTS
YEAR ENDED AT DECEMBER 2014 AND 2013
(All amounts in US$ unless otherwise stated)
3. | CASH AND CASH EQUIVALENTS |
Cash at December 31, was as follows:
2014 | 2013 | |||||||
Petty cash | 462 | 485 | ||||||
Cash in Banks | 129,462 | 10,153 | ||||||
Other Deposits | 27,794 | 29,195 | ||||||
Total | 157,718 | 39,833 |
4. | INVENTORIES |
Inventories at December 31, were as follows:
2014 | 2013 | |||||||
Metals in progress | 1,518,496 | 1,683,148 | ||||||
Mining supplies | 185,387 | 42,969 | ||||||
Total | 1,703,883 | 1,726,117 |
13 |
COMPAÑÍA MINERA CERROS DEL SUR, S.A. DE C.V. AND AFFILIATES
NOTES TO THE COMBINED FINANCIAL STATEMENTS
YEAR ENDED AT DECEMBER 2014 AND 2013
(All amounts in US$ unless otherwise stated)
5. | PROPERTY, PLANT AND EQUIPMENT. |
Fixed assets, changes to, and their depreciation at December 31, are as follows:
Land | Construction in progress | Mining - machinery and equipment | Vehicles | Office equipment and furniture | Buildings | Total | ||||||||||||||||||||||
Cost | ||||||||||||||||||||||||||||
31 December 2012 | 13,687 | 2,001,335 | 504,379 | 55,615 | 280 | 387,522 | 2,962,818 | |||||||||||||||||||||
Additions | - | 253,485 | 18,063 | 7,600 | 10,818 | 140,167 | 430,133 | |||||||||||||||||||||
Disposals | - | - | - | - | - | - | - | |||||||||||||||||||||
Transfers | - | (2,254,820 | ) | 258,138 | - | - | 1,996,682 | - | ||||||||||||||||||||
31 December 2013 | 13,687 | - | 780,579 | 63,215 | 11,098 | 2,524,371 | 3,392,951 | |||||||||||||||||||||
31 December 2013 | 13,687 | - | 780,579 | 63,215 | 11,098 | 2,524,371 | 3,392,951 | |||||||||||||||||||||
Additions | - | - | 53,809 | 27,872 | 14,987 | 487,683 | 584,350 | |||||||||||||||||||||
Disposals | - | - | - | - | (1,548 | ) | - | (1,548 | ) | |||||||||||||||||||
31 December 2014 | 13,687 | - | 834,388 | 91,087 | 24,536 | 3,012,055 | 3,975,753 | |||||||||||||||||||||
Accumulated depreciation | ||||||||||||||||||||||||||||
31 December 2012 | - | - | 375,187 | 25,880 | - | 127,582 | 528,649 | |||||||||||||||||||||
Annual depreciation | - | - | 120,094 | 11,425 | 1,033 | 240,067 | 372,919 | |||||||||||||||||||||
31 December 2013 | - | - | 495,281 | 37,305 | 1,033 | 367,649 | 901,568 | |||||||||||||||||||||
31 December 2013 | - | - | 495,281 | 37,305 | 1,033 | 367,649 | 901,568 | |||||||||||||||||||||
Annual depreciation | - | - | 53,476 | 15,554 | 4,772 | 280,732 | 354,534 | |||||||||||||||||||||
31 December 2014 | - | - | 548,757 | 52,859 | 6,106 | 648,381 | 1,256,103 | |||||||||||||||||||||
Carrying amount | ||||||||||||||||||||||||||||
31 December 2014 | 13,687 | - | 285,631 | 38,228 | 18,431 | 2,363,674 | 2,719,650 | |||||||||||||||||||||
31 December 2013 | 13,687 | - | 285,298 | 25,909 | 9,764 | 2,156,723 | 2,491,383 |
14 |
COMPAÑÍA MINERA CERROS DEL SUR, S.A. DE C.V.
NOTES TO COMBINED THE FINANCIAL STATEMENTS
YEAR ENDED AT DECEMBER 2013 AND 2012
(All amounts in US$ unless otherwise stated)
6. | INTANGIBLE ASSETS. |
Concessions | Leases | Softwares | Total | |||||||||||||
Cost | ||||||||||||||||
31 December 2012 | 443,686 | 122,024 | - | 565,710 | ||||||||||||
Additions | - | - | - | - | ||||||||||||
Disposals | - | - | - | - | ||||||||||||
31 December 2013 | 443,686 | 122,024 | - | 565,710 | ||||||||||||
31 December 2013 | 443,686 | 122,024 | - | 565,710 | ||||||||||||
Additions | - | - | 5,889 | 5,889 | ||||||||||||
Disposals | - | - | - | - | ||||||||||||
31 December 2014 | 443,686 | 122,024 | 5,889 | 571,599 | ||||||||||||
Accumulated amortisation | ||||||||||||||||
31 December 2012 | 305,940 | 50,110 | - | 356,050 | ||||||||||||
Annual amortisation | 41,051 | 11,290 | - | 52,340 | ||||||||||||
31 December 2013 | 346,991 | 61,400 | - | 408,390 | ||||||||||||
31 December 2013 | 346,991 | 61,400 | - | 408,391 | ||||||||||||
Annual amortisation | 39,806 | 10,948 | - | 50,753 | ||||||||||||
31 December 2014 | 386,796 | 72,347 | - | 459,144 | ||||||||||||
Carrying amount | ||||||||||||||||
31 December 2014 | 56,890 | 49,677 | 5,889 | 112,455 | ||||||||||||
31 December 2013 | 96,695 | 60,624 | - | 157,319 |
15 |
COMPAÑÍA MINERA CERROS DEL SUR, S.A. DE C.V.
NOTES TO COMBINED THE FINANCIAL STATEMENTS
YEAR ENDED AT DECEMBER 2013 AND 2012
(All amounts in US$ unless otherwise stated)
7. | RELATED PARTIES TRANSACTIONS |
The transactions and balance for accounts receivable and accounts payable related parties of corresponds to Clavo Rico, Ltd. (Mayan Gold, Inc. in 2012) and others affiliated companies. The most important transactions during the year are detailed below:
2014 | 2013 | |||||||
Accounts receivable | ||||||||
Compañía Minera Potosi, S.A. | 18,409 | 18,409 | ||||||
Compañía Minera Clavo Rico, inc | 3,960 | - | ||||||
Total accounts receivable | 22,369 | 18,409 | ||||||
Accounts payable | ||||||||
Compañía.Minera Cerros del Rio, S.A | 7,431 | 2,843 | ||||||
Inversiones Mustang Honduras | 1,166 | 32,018 | ||||||
Clavo Rico Inc. (USA) | 823,648 | 516,209 | ||||||
Total accounts payable | 832,245 | 551,070 | ||||||
Loan payable | ||||||||
Clavo Rico, Ltd | ||||||||
Transfers received of supplementary equity contributions | 1,500,000 | 1,500,000 | ||||||
Loan at 0% interest. | 3,518,399 | 3,421,280 | ||||||
Total loan payable | 5,018,399 | 4,921,280 | ||||||
Total accounts and loan payable | 5,850,644 | 5,472,350 | ||||||
Revenues | ||||||||
Clavo Rico, Inc | 3,120,825 | 2,502,945 |
16 |
COMPAÑÍA MINERA CERROS DEL SUR, S.A. DE C.V.
NOTES TO COMBINED THE FINANCIAL STATEMENTS
YEAR ENDED AT DECEMBER 2013 AND 2012
(All amounts in US$ unless otherwise stated)
8. | EMPLOYEE BENEFIT OBLIGATIONS |
The Company’s employee benefit obligations for long-service payments under a government mandated plan is based on a comprehensive valuation as of December 31, 2014 and 2013 and is as follows:
2014 | 2013 | |||||||
January 1 | 28,180 | 165,382 | ||||||
Additional accrual during the year | - | - | ||||||
Payment | - | (137,202 | ) | |||||
December 31 | 28,180 | 28,180 |
9. | SUPPLEMENTARY EQUITY CONTRIBUTIONS. |
Contributed as supplement capital by Clavo Rico, Ltd. As of December 31, 2014. This supplement capital contribution has not yet been legally formalized.
10. | REVENUES |
2014 | 2013 | |||||||
Sales of precious metal | ||||||||
Gold | 3,054,722 | 2,472,669 | ||||||
Silver | 66,104 | 30,277 | ||||||
3,120,825 | 2,502,945 | |||||||
Other income | 27,965 | 3,628 | ||||||
3,148,790 | 2,506,574 |
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COMPAÑÍA MINERA CERROS DEL SUR, S.A. DE C.V.
NOTES TO COMBINED THE FINANCIAL STATEMENTS
YEAR ENDED AT DECEMBER 2013 AND 2012
(All amounts in US$ unless otherwise stated)
11. | COST OF SALES |
Mining operation and geologists cost during the year ended December 31, are detailed as follows:
2014 | 2013 | |||||||
Payroll employees | 308,622 | 368,012 | ||||||
Employees Benefits | 121,717 | 93,985 | ||||||
Lixiviation-Materials | 306,123 | 663,659 | ||||||
Energy | 120,295 | 156,674 | ||||||
Transport | 70,828 | 57,347 | ||||||
Maintenance and y Repairs | 112,806 | 64,693 | ||||||
Rent and service | 709,289 | 257,694 | ||||||
Other Materials | 38,658 | 56,353 | ||||||
Diesel and lubricants | 63,696 | 44,513 | ||||||
Other | 37,917 | 34,421 | ||||||
Total | 1,889,950 | 1,797,352 | ||||||
(Transfer) to inventories in process | 94,734 | (617,785 | ) | |||||
Cost of sales | 1,984,684 | 1,179,567 |
12. | GENERAL AND ADMINISTRATIVE EXPENSES |
General and administrative expenses during the year ended December 31, are detailed as follows:
2014 | 2013 | |||||||
Payroll employees | 277,367 | 242,515 | ||||||
Employees benefits | 110,498 | 88,098 | ||||||
Legal Fees | 165,435 | 137,617 | ||||||
Materials | 2,288 | 1,033 | ||||||
Rent and services | 34,827 | 47,406 | ||||||
Office Supplies | 4,670 | 5,857 | ||||||
Energy | 3,226 | 3,902 | ||||||
Transport | 47,196 | 42,480 | ||||||
External Services (exploitation) | 103,723 | 165,634 | ||||||
Internal Tax | 23,879 | 29,118 | ||||||
Other | 72,160 | 71,768 | ||||||
Total | 845,267 | 835,428 |
18 |
COMPAÑÍA MINERA CERROS DEL SUR, S.A. DE C.V.
NOTES TO COMBINED THE FINANCIAL STATEMENTS
YEAR ENDED AT DECEMBER 2013 AND 2012
(All amounts in US$ unless otherwise stated)
13. | COMPROMISES. PROVISIONS AND CONTINGENCIES. |
Compromises:
a. | The company has signed leasing contracts for Employee housing. These contracts do not have termination date; future payments under them will be of US$25,490 per year. | |
b. | Income Tax – Article 136 of the Honduran Tax Code establishes the responsibilities of taxpayers and withholding tax agents, as well as Treasury’s powers to conduct reviews and investigations, report adjustments, determine and require the payment of relevant obligations, and to implement the measures provided for in the Code within the following terms: | |
Two (2) years in the case of taxpayers or responsible agents which have imported, exported or engaged in any other customs transaction; and five (5) years for all other taxpayers. | ||
The income tax and net assets statements, as well as sales tax and withholding income tax statements made by the entity for the years ended December 31, 2005 until December 31, 2010, are pending review by the tax authorities. However, management is certain that in due case the financial statements will remain unaffected. |
Provisions:
c. | The costs of dismantling and cleaning-up and restoring of the site obtained in concession are accounted as liabilities in the attached financial statements. |
Going Concern Assumption:
d. | The attached financial statements have been prepared taking into consideration that it will be operating as an On-Going concern. The company has a negative working capital due to the loses obtained in the current and prior years; the management’s plan regarding this condition is as follows: |
1. | Capitalization of additional contributions of equity in 2014, through its holding company Clavo Rico, Ltd. |
19 |
COMPAÑÍA MINERA CERROS DEL SUR, S.A. DE C.V.
NOTES TO COMBINED THE FINANCIAL STATEMENTS
YEAR ENDED AT DECEMBER 2013 AND 2012
(All amounts in US$ unless otherwise stated)
2. | Maximize the production of minerals to be sold through the acquisition of additional equipment to generate positive net incomes. | |
3. | Mayan Gold Inc. would be willing to keep subsidizing operating expenditures of its subsidiary company in Honduras as along as needed. | |
4. | Prepare budget to avoid unnecessary expenses in subsequent years. |
The management of the company expects cash flows through 2014, which includes positive net income starting in the first quarter of 2015. The financial statements do not include any accounting adjustment, which could result from this uncertainty.
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