Item 1. Business
We are an exploration stage company formed for the purposes of acquiring, exploring and, if warranted and feasible, developing natural resource properties.
Organization
On July 21, 2005, the Company was incorporated under the laws of the State of Nevada for the purpose of conducting mineral exploration activities. We were authorized to issue 400,000,000 shares of common stock, par value $.001 per share, and initially issued 100,000 shares of common stock to each of Jag Sandhu, our President, Chief Executive Officer and a director, and Johnny Astorino, our Chief Financial Officer. Said issuances were paid at a purchase price of the par value per share. Our wholly owned subsidiary, Nava Resources Canada Inc. (“Nava Canada”), was organized under the Federal laws of Canada on August 9, 2005.
On January 4, 2007, the Company obtained written consent from the shareholders to amend our Articles of Incorporation to change the par value of our common stock from $0.001 to $0.00001 per share. On February 28, 2007, the Board of Directors of the Company amended the Articles of Incorporation changing the par value of the Company’s common stock.
In March 2007 we issued 19,900,000 shares to each of Messrs. Sandhu and Astorino in consideration for the payment of par value per share. Mr. Astorino subsequently returned 18,000,000 shares to the Company’s treasury for cancellation.
On March 20, 2007, we accepted subscriptions for 874,104 shares of our common stock from 37 investors. The shares of common stock were sold at a purchase price of $0.15 per share, amounting in the aggregate to $131,116. The offering was made to non-U.S. persons in offshore transactions pursuant to the exemption from registration provided by Regulation S of the Securities Act of 1933, as amended (the “Securities Act”).
On April 18, 2007, Mr. Sandhu returned an aggregate of 10,000,000 shares and Mr. Astorino returned an aggregate of 1,000,000 shares of common stock to the Company’s treasury for cancellation.
On June 1, 2007, we accepted subscriptions for 352,000 units from 10 investors. The units were sold at a purchase price of $0.16 per unit, amounting in the aggregate to $56,320. Each unit was comprised of one share of our common stock and one warrant. Each warrant entitles the warrant holder to purchase one share of common stock at an exercise price of $0.20 per share. Each warrant expired on June 1, 2009. The offering was made to non-U.S. persons in offshore transactions pursuant to the exemption from registration provided by Regulation S of the Securities Act.
On November 10, 2011, Mr. Sandhu sold 4,500,000 shares of common stock of the Company held by him to Pamela Kathleen Pickett in consideration for 490,000 shares of common stock of PMI Gold Corp., a British Columbia corporation, valued at $235,200. Also on November 10, 2011, John Astorino, the Company’s former Chief Financial Officer, sold 1,000,000 shares of the Company’s common stock to Ms. Pickett for $30,000 in cash. After giving effect to these sales, (i) Mr. Sandhu beneficially owns an aggregate of 5,500,000 shares (which includes 2,000,000 shares held by Amarjit Sandhu, Mr. Sandhu’s wife), (ii) Mr. Astorino owns no shares, and (iii) Ms. Pickett beneficially owns 5,500,000 shares, of the Company’s common stock. Each of Mr. Sandhu and Ms. Pickett own approximately 44.6% of the issued and outstanding common stock of the Company based upon 12,338,604 shares issued and outstanding as of the date of the sales. These sales were made not pursuant to any written stock purchase or other agreement.
Exploratory Activities
In July 2005 we commenced our mineral exploration activities. On October 10, 2006, the Company entered into an agreement with Jag Sandhu, our President, Chief Executive Officer and Director, pursuant to which the Company obtained an option to acquire a 100% interest in and to the mineral claim located in Lillooett Mining Division called the Noel Creek Claim. On October 2, 2007, the option expired due to the Company not making the required payments as per the option agreement.
On August 28, 2007, Mr. Jag Sandhu, our President and Chief Executive Officer and a director, acquired two claims for a 637.39 hectare (approximately 1575.03 acres) mineral concession in the Cowichan Lake area of Vancouver Island, in the Province of British Columbia, Canada through British Columbia’s online staking service. These mineral claims are known as the North 1 and North 2 Claims. On November 22, 2007, Mr. Sandhu transferred the claims to Nava Canada using British
Columbia’s Mineral Title Online web site. Our intention was to conduct exploratory activities with respect to these claims, and if viable mineral deposits were discovered, develop and extract such minerals. In addition, subject to funding and exploration results, we anticipated acquiring additional properties of interest and either abandoning our existing properties or entering into agreements to sell all or a portion of those properties.
In October 2007, we engaged a professional mining engineering service and consulting firm, MineStart Management Inc. (“MineStart”), to review the geologic premise and information upon which the North Claims were staked, and to provide a technical report as to its merit as an exploration prospect, including recommendations on appropriate next steps. The report on the claims, entitled “North 1 and 2 Project - A VMS Investigation” and dated December 7, 2007, describes the mineral claim (tenures, location and access) and the regional, local and property geology. It also includes relevant information on targeted deposit types and mineralization, and recommendations with associated budgets, regarding the initial strategy that should be followed in exploring the claim.
We performed an exploration program on the North 1 and North 2 Claims in August 2008. This program involved a review of property geology based on government compilations, acquisition of relevant air photo coverage and a visit to the property by Jag Sandhu and Don Blackadar. The purpose of this visit was to become familiar with the general layout of the property and related road access, and to prospect and collect rock samples in readily accessible areas. Work was concentrated in the south part of the property on the North 2 Claim which is accessible just off of the Cowichan Lake highway, with foot access via an overgrown secondary road leading into the claim.
The North Claim is primarily underlain by felsic to intermediate volcanic and volcaniclastic rocks of the middle to upper Devonian Sicker Group (McLaughlin Ridge Formation), which is prospective for Kuroko-type massive sulphide deposits rich in copper, lead, zinc, gold and silver. Outcrop exposure in the area prospected was minimal due to overburden cover of bolder till with hardpan noted in some rock cuts. A total of 30 rock samples were taken for multi-element geochemical analysis. These samples were primarily float but several samples may have been from small outcrops visible in the road cut. All samples were of intermediate composition (andesite), ranging from fine to medium grained, and relatively massive in texture (weekly foliated in some cases), possibly representing intermediate tuffs with some intrusive equivalents. Samples were sent to Acme Labs in Vancouver, crushed to 200 mesh, and processed by Aqua Regia digestion CCP-MS analysis. Gold was also determined by fire assay fusion by ICP-ES. No significant anomalies were identified in the pathfinder suite. However, the first three samples demonstrate a weakly anomalous Cu-Pb-Zn-Ag-As-Ba signature, which may be of interest.
On October 24, 2010 we allowed our North Claims to expire in order to concentrate on our Molly1 claim.
The Molly1 claim was staked by Nava Canada on October 20, 2010. The claim comprises 20 contiguous units totaling 424.96 hectares.
The claim is located in the Cowichan Lake area, Vancouver Island, British Columbia, about 30 kilometers west of the city of Duncan and about 5 kilometers northwest of the town of Lake Cowichan. It is accessible via the Meade Lake forestry road from Highway 18, which extends along the north shore of Lake Cowichan from Duncan. The claim is about four kms east and along geologic strike from the North claim.
Sicker Group Geology and Mineral Potential
Vancouver Island is dominated by rocks of the Wrangellia Terrane, which is interpreted to represent a Paleozoic Island Arc assemblage, accreted to the North American content about 100 million years ago. Mid-Devonian volcanic rocks of the Sicker Group, representing the basement of this complex, are the oldest rocks on Vancouver Island and are exposed in four major structural uplifts - Buttle Lake, Beddington, Nanoose, and Cowichan Lake. The Molly1 Claim lies toward the southeast end of the Cowichan Lake Uplift, along the north shore of the east end of Cowichan Lake. In the Cowichan Lake Uplift, the Sicker Group comprises three distinct volcanic / volcaniclastic assemblages - the Duck Lake Formation as the oldest member and overlain by the Nitnat Formation, which in turn is overlain, possibly unconformably, by the McLaughlin Ridge Formation.
Volcanic rocks of the Sicker Group are highly prospective for economically viable volcanogenic massive sulphide (“VMS”) deposits, which are the primary exploration target on the Molly1 Claim. As a group, these deposits are rich in copper and zinc and also carry significant gold and silver values.
The most significant mineral deposit in the Sicker Group is the Myra Falls mine, a deposit located in the Buttle Lake Uplift. Other significant deposits, notably the Lara and Mount Sicker deposits, are located in the southeast part of the Cowichan Lake uplift, several kilometers northeast of the Molly1 Claim and separated from the property by a major geologic fault.
Massive sulphide mineralization was first discovered in the Sicker Group with the Mount Sicker discoveries in the late 1800s. Production was from one main ore body via three separate underground mines (Tyee, Lenora and Richard III), which operated for several years. These mines were subsequently amalgamated and re-operated as the Twin J mine from 1942 to 1952. Production from the Tyee mine (1901 - 09) totaled 5,840,593 kilograms copper and 13,725,069 grams silver, and 762,553 grams gold from 152,668 tonnes mined. The Buttle Lake mine, which has been in operation since 1966, currently produces approximately 1 million equivalent of ore per year. Over the 39 years to 2005, the mine yielded 24 million cqui with an average grade of 1.8% copper, 5.0% zinc, 2g/T gold and 52g/T silver. The Lara deposit, discovered in the mid-1980s, contains a drill indicated resource of 528,839 tonnes grading 1.01% copper, 1.22% lead, 5.87% zinc, 100.09 g/T sliver and 4.73 g/T gold.
Discovery of the Lara deposit and ongoing interest in the nearby Mount Sicker deposits, all of which are hosted in felsic volcanic rocks of the McLaughlin Ridge formation, stimulated significant interest and exploration activity in the Cowichan uplift during the mid-to late 1980s. During this period the Striker Property, comprising 31 contiguous mineral claims (528 units) and extending along virtually the entire north shore of Cowichan Lake, was explored by Utah Mines. This property is underlain predominantly by the Sicker Group, with Nitnat rocks dominant in the western part of the property and McLaughlin Ridge sediments and volcanics dominant in the east. Work on this property is documented in a number of BC government assessment reports, from which the following descriptions are derived. McLaughlin Ridge rocks, as mapped, divide grossly into 3 units, dominated by diverse sedimentary lithologies with volcanic members, particularly lower in the sequence. Volcanic rocks are described as interbedded lithic and crystal tuff, cherty dust tuff, chert and minor lapilli tuff. The lower unit consists of fine-grained andesitic lithic crystal tuffs and cherty tuffs with local coarse lapilli beds and dacitic tuff units.
Exploration on the Striker property included airborne geophysics, with ground follow-ups and grid work in selected areas in the eastern part of the property because of the distribution of geophysical and geochemical targets. While massive sulphides were not encountered, encouraging mineralization of various types was noted, including exhalative horizons, which occasionally contain anomalous molybdenum, copper and silver. Significant barium, silver, molybdenum and zinc values are also associated with syndepositional pyrite in argillite units and significant gold-silver-copper-zinc values are associated with several structures. Anomalous silt and heavy metal values (copper-lead-zinc-silver-gold) were also identified. The latest assessment report on the Striker property recommended further, more detailed work in the eastern part of the property including detailed mapping, sampling, trenching and limited drilling.
The Cowichan Lake area generally, has been the subject of mineral exploration since the late 1800s and a large number and variety of mineral showings in the area are documented in B.C. government Minfile records. Massey and Friday (1986) grouped Cowichan area mineral showings into five categories:
1. Volcanogenic gold-bearing massive sulphides (Sicker Group Kuroko deposits).
2. Gold-bearing, pyrite-chalcopyrite-quart-carbonate veins along shears, which are quite common cutting Sicker Group and Karmutsen Formation sills north of Cowichan Lake.
3. Epithermal gold-silver deposits within Bonanza Group volcanics.
4. Copper skarns developed in limy sediments apparently interbedded with basalts of the Karmutsen formation.
5. Copper-molybdenum quartz veins in granodiorite and adjacent country rock on several properties. Chalcopyrite and pyrite, with or without molybdenite are the principle sulphides and minor sphalerite, galena and arsenopyrite are also reported.
The Molly 1 Claim
The Molly1 claim, comprising 20 units (424.96 hectares) was staked in October 2010 to cover outcroppings of the prospective McLaughlin Ridge formation (within the Sicker), approximately 4.5 kilometers along geological strike to the east of the North claim, which was prospected by Nava in 2008 and was allowed to lapse in 2010. The Molly1 claim is bounded to the east by the Meade Creek valley, and is accessible via logging roads extending north from the main highway along the steep western slope of the valley.
Exploration on Molly1 during 2010 comprised a reconnaissance traverse of logging roads on and in the general vicinity of the claim. Outcroppings of Sicker Group and other rocks are exposed in road cuts over a distance of perhaps 2 kilometers along the Meade Creek access road that crosses the claim. The McLaughlin Ridge Formation is well exposed over a distance of about one kilometer in this area and comprises a relatively uniform section of steeply dipping, banded, medium grey fine grained
tuffites and cherty tuffites with occasional quartz veining and local finely disseminated pyrite. Exposures of siltstone and grit representing the much younger Nanaimo Group (Benson Formation) occur at the north end of this section, which is bounded to the south by outcroppings of the Mount Hall Gabbro and intermediate intrusive rocks of the Nitnat Formation.
This section of rocks was prospected over a distance of about one kilometer within the claim boundary, focusing on the McLaughlin Ridge Formation. No visible mineralization, other than occasional minor disseminated pyrite was noted. A total of 46 grab samples were taken at intervals across the section and sent for multi-element geochemical analysis (36 element suite), which included the Kuroko indicator elements copper, lead, zinc, silver, gold, barium, and arsenic. No significant anomalies were indicated in this analysis, though three samples (tuffite) demonstrated weakly anomalous barium concentrations.
McLaughlin Ridge rocks in the Cowichan Lake area are described on government geological maps as thickly-bedded tuffite and lithic tuffite, feldspar-crystal tuff, lapilli tuff, rhyolite, dacite, laminated tuff and chert. On the Molly1 claim, the assemblage is well-exposed in a logging road cut over a distance of about 1 km. This assemblage consists predominantly of bedded tuffites, which are locally siliceous and cherty. A total of 46 grab samples have been taken across strike in this area and will be analyzed geochemically for a multi-element suite (37 elements) in order to accrue a foundation of geochemical data, and to test for the presence of copper, lead, zinc, silver, gold, barium and arsenic values which are potential indications of Kuroko-type environments.
Property and Claim Position
The Molly1 claim was staked by Nava Canada on October 20, 2010. The claim comprises 20 contiguous units totaling 424.96 hectares. The Molly1 property is in the Victoria mining division of British Columbia and lies on the north shore of Cowhichan lake in southern Vancouver Island about 30km west of the town of Duncan and 10km west of the town of Lake Cowichan. (See location map below.)
Geology North of Cowichan Lake Including Molly1 Property
Conditions to Retain Title to the Claims
The Molly1 mineral titles are subject to annual renewal and government permits for specific field work. The Molly1 claims are valid until their next anniversary date of October 20, 2013. They can be renewed indefinitely by performance and recording of assessment work as defined in the Mineral Act (B.C.) or by payment of cash in lieu of work. Work or cash payment of the
equivalent of CAN$4.00 per hectare or approximately CAN$1,700 for each of the first, second and third anniversary years, and the equivalent of CAN$8.00 per hectare for each subsequent anniversary year is required. Contiguous claims may be grouped for purposes of applying the value of work from the site of work to other claims. Failure to perform and record valid exploration work or pay the equivalent sum to the Province of British Columbia on the anniversary dates will result in forfeiture of title to the claim.
Present Condition of the Claims
The Molly1 Claim was staked on October 20, 2010 by Nava Canada.. The Claim was staked to acquire a position in the Sicker Group, a sequence of volcanic rocks known to be very prospective for the occurrence of polymetallic volcanogenic massive sulphide deposits (VMS), commonly referred to as Kuroko type deposits.
Our objective is to conduct exploration activities on the Molly1 Claim to assess whether they possess evidence of mineralization sufficient to merit further exploration activities. The Molly1 Claim is without known reserves.
Competitive Conditions
The mineral exploration business is an extremely competitive industry. We are competing with many other exploration companies looking for minerals. We are a very early stage mineral exploration company and a very small participant in the mineral exploration business. Being a junior mineral exploration company, we compete with other companies like ours for financing and joint venture partners. Additionally, we compete for resources such as professional geologists, camp staff, helicopters and mineral exploration supplies.
Government Approvals and Recommendations
We will be required to comply with all regulations defined in the British Columbia Mineral Tenure Act for the Province of British Columbia (the “Act”). The Act sets forth rules for:
locating claims
posting claims
working claims
reporting work performed
We also have to comply with the British Columbia Mineral Exploration Code which dictates how and where we can explore for minerals. We must comply with these laws to operate our business. . In order to explore for minerals on our mineral claim we must submit our exploration plan for review. We believe that our exploration plan as described below will be accepted and an exploration permit will be issued to our agent or us. The exploration permit is the only permit or license we will need to explore for precious and base minerals on the mineral claim.
We will be required to obtain additional work permits from the British Columbia Ministry of Energy and Mines for any exploration work that results in a physical disturbance to the land. Accordingly, we may be required to obtain a work permit depending on the complexity and affect on the environment if we proceed beyond the exploration work contemplated by our proposed exploration programs. The time required to obtain a work permit is approximately four weeks. We will incur the expense of our consultants to prepare the required submissions to the Ministry of Energy and Mines. We will be required by the Mining Act of British Columbia to undertake remediation work on any work that results in physical disturbance to the land. The cost of remediation work will vary according to the degree of physical disturbance. No remediation work is anticipated as a result of completion of Stage One and Stage Two of our exploration program.
If we enter into substantial exploration, the cost of complying with permit and regulatory environment laws will be greater than in Stages One and Two because the impact on the project area is greater. Permits and regulations will control all aspects of any program if the project continues to that stage because of the potential impact on the environment. We may be required to conduct an environmental review process under the British Columbia Environmental Assessment Act if we determine to proceed with a substantial project. An environmental review is not required under the Environmental Assessment Act to proceed with the recommended Stage One and Two exploration programs on our Molly1 Claim.
Costs and Effects of Compliance with Environmental Laws
Although we currently have no costs to comply with environmental laws concerning our exploration program, we will have to sustain the cost of reclamation and environmental remediation for all work undertaken which causes sufficient surface disturbance to necessitate reclamation work. Both reclamation and environmental remediation refer to putting disturbed ground back as close to its original state as possible. Other potential pollution or damage must be cleaned and renewed along standard guidelines outlined in the usual permits. Reclamation is the process of bringing the land back to a natural state after completion of exploration activities. Environmental remediation refers to the physical activity of taking steps to remediate, or remedy, any environmental damage caused, i.e. refilling trenches after sampling or cleaning up fuel spills. Our initial programs do not require any reclamation or remediation other than minor clean up and removal of supplies because of minimal disturbance to the ground. The amount of these costs is not known at this time as we do not know the extent of the exploration program we will undertake, beyond completion of the recommended phases. Because there is presently no information on the size, tenor, or quality of any resource or reserve at this time, it is impossible to assess the impact of any capital expenditures on our earnings or competitive position in the event a potentially economic deposit is discovered.
Employees
We currently have no employees. Our officers and directors provide consulting services to us on a part time basis. We intend to retain the services of geologists, prospectors and consultants on a contract basis to conduct the exploration programs on our mineral claims and to assist with regulatory compliance and preparation of financial statements.
Item 1A.
Item 1A. Risk Factors
An investment in our common stock involves a number of very significant risks. You should carefully consider the following known material risks and uncertainties in addition to other information in this Annual Report in evaluating our Company and its business, before purchasing shares of our Company’s common stock. Additional risks not presently known to us may also impair our business operations. You could lose all or part of your investment due to any of these risks.
Risks Relating to Our Company
1. Our auditors have expressed substantial doubt about our ability to continue as a going concern.
We will be required to expend substantial amounts of working capital in order to explore and develop our mineral claim. We have not generated revenues since inception, have incurred losses in developing our business, and further losses are anticipated. Our operations to date were funded entirely from capital raised from our private offerings of securities. We will continue to require additional financing to meet our obligations and the costs of operations and to execute our business strategy. For the year ended June 30, 2012 we have incurred a loss of $24,064 and from inception on July 21, 2005 to June 30, 2012 we have incurred a loss of $217,938 and we expect losses to continue in the future. These factors raise substantial doubt about the Company’s ability to continue as a going concern. After auditing our financial statements, our independent auditor issued a going concern opinion and our ability to continue is dependent on our ability to raise additional capital. If we are unable to obtain necessary financing, we will likely be required to curtail our development plans which could cause us to become dormant and could cause our shareholders to lose their investment in our company. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
2. We will require additional funds which we plan to raise through the sale of our common stock, which requires favorable market conditions and interest in our activities by investors. We may not be able to sell our common stock and funding may not be available for continued operations.
Our ability to continue is dependent on our ability to raise additional capital and our operations could be curtailed if we are unable to obtain required additional funding when needed. We anticipate that our current assets of $25,651 as of June 30, 2012 will be sufficient to complete the first phase of our planned exploration program on the Molly1 Claim. Subsequent exploration activities will require additional funding. Our only present means of funding is through the sale of our common stock. The sale of common stock requires favorable market conditions for junior exploration companies like ours, as well as specific interest in our stock, neither of which may exist. If we are unable to raise additional funds in the future, we may have to cease our operations.
3. We have a very limited history of operations and accordingly there is no track record that would provide a basis for assessing our ability to conduct successful mineral exploration activities. We may not be successful in carrying out our business objectives.
We were incorporated on July 21, 2005, and to date have been involved primarily in organizational activities, obtaining financing, acquiring an interest in the claims and conducting exploration work on the claims. Accordingly we have no track record of successful exploration activities, strategic decision making by management, fund-raising ability, and other factors that would allow an investor to assess the likelihood that we will be successful as a junior resource exploration company. Junior exploration companies often fail to achieve or maintain successful operations, even in favorable market conditions. There is a substantial risk that we will not be successful in our exploration activities, or if initially successful, in thereafter generating any operating revenues or in achieving profitable operations.
4. Our failure to perform exploratory activities with respect to the claims, or our failure to make required payments or expenditures, could cause us to lose title to the mineral claim.
The Molly1 Claim has an expiration date of October 20, 2013. In order to maintain the tenure of our ownership of the claims in good standing, it will be necessary for us to coordinate an agent to perform and record valid exploration work with value of approximately $1,700 Canadian dollars, or pay the equivalent sum to the Province of British Columbia in lieu of the exploratory work. Failure to perform and record valid exploration work or pay the equivalent sum to the Province of British Columbia on October 20, 2013, will result in the forfeiture of our title to the claims.
5. Due to the speculative nature of mineral property exploration, there is substantial risk that no commercially viable mineral deposits will be found on our Molly1 Claim or other mineral properties that we may acquire.
In order for us to even commence mining operations we face a number of challenges which include finding qualified professionals to conduct our exploration program, obtaining adequate financing to continue our exploration program, locating a viable mineral body, partnering with a senior mining company, obtaining mining permits, and ultimately selling minerals in order to generate revenue. Moreover, exploration for commercially viable mineral deposits is highly speculative in nature and involves substantial risk that no viable mineral deposits will be located on any of our present or future mineral properties. There is a substantial risk that the exploration program that we will conduct on the claims may not result in the discovery of any significant mineralization, and therefore no commercially viable mineral deposit. There are numerous geological features that we may encounter that would limit our ability to locate mineralization or that could interfere with our exploration programs as planned, resulting in unsuccessful exploration efforts. In such a case, we may incur significant costs associated with an exploration program, without any benefit. This would likely result in a decrease in the value of our common stock.
6. Due to the inherent dangers involved in mineral exploration, there is a risk that we may incur liability or damages as we conduct our business.
The search for minerals involves numerous hazards. As a result, we may become subject to liability for such hazards, including pollution, cave-ins and other hazards against which we cannot insure or may elect not to insure. We currently have no such insurance nor do we expect to obtain such insurance for the foreseeable future. If a hazard were to occur, the costs of rectifying the hazard may exceed our asset value and cause us to liquidate all our assets and cease operations, resulting in the loss of your entire investment.
7. Access to the Molly1 Claim is seasonally restricted by inclement weather, which may delay our exploration and any future mining efforts.
Access to the Molly1 Claim could potentially be restricted to the period between October and May of each year due to snowfall in the area. This presents both a short and long term risk to us in that poor weather could delay our exploration program and prevent us from exploring the Claim as planned. Attempts to visit, test, or explore the property may be limited to the few
months of the year when weather permits such activities. These limitations can result in significant delays in exploration efforts, as well as mining and production in the event that commercial amounts of minerals are found. Such delays can result in our inability to meet deadlines for exploration expenditures required to be made in order to retain title to our claims under provincial mineral property laws.
8. The market price for precious metals is based on numerous factors outside of our control. There is a risk that the market price for precious metals will significantly decrease, which will make it difficult for us to fund further mineral exploration activities, and would decrease the probability that any significant mineralization that we locate can be economically extracted.
Numerous factors beyond our control may affect the marketability of minerals. These factors include market fluctuations, the proximity and capacity of natural resource markets and processing equipment, government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in our not receiving an adequate return on invested capital and you may lose your entire investment in the Company.
9. Changes in the exchange rates between the United States dollar and foreign currencies may be volatile and may negatively impact our costs, which in turn could adversely affect our operating results.
When operating in foreign countries, such as Canada, we expect to incur a certain amount of our expenses from our operations in foreign currency and translate these amounts into United States dollars for purposes of reporting operating results. As a result, fluctuations in foreign currency exchange rates may adversely affect our expenses and results of operations, as well as the value of our assets and liabilities. Fluctuations may adversely affect the comparability of period-to-period results. In addition, we anticipate holding foreign currency balances, which will create foreign exchange gains or losses, depending upon the relative values of the foreign currency at the beginning and end of the reporting period, which may affect our net income and earnings per share. Although we may use hedging techniques in the future (which we currently do not use), we may not be able to eliminate the effects of currency fluctuations. Thus, exchange rate fluctuations could have a material adverse impact on our operating results and stock price.
10. Since the majority of our shares of common stock are owned by our President, Chief Executive Officer and director, and one other significant stockholder our other stockholders may not be able to influence control of the Company or decision making by management of the Company.
Mr. Jag Sandhu, our President, Chief Executive Officer and a director and one other stockholder each beneficially own approximately 45% of our outstanding common stock. The interests of Mr. Sandhu and this stockholder may not be, at all times, the same as that of our other shareholders. As an executive officer and director of the Company, Mr. Sandhu’s interests as an executive may, at times be adverse to those of shareholders. Where those conflicts exist, our shareholders will be dependent upon Mr. Sandhu exercising, in a manner fair to all of our shareholders, his fiduciary duties as an officer or as a member of the Company’s Board of Directors. Also, Mr. Sandhu and the other significant stockholder will have the ability to significantly influence the outcome of most corporate actions requiring shareholder approval, including our merger with or into another company, the sale of all or substantially all of our assets and amendments to our articles of incorporation. This concentration of ownership may also have the effect of delaying, deferring or preventing a change of control of our company, which may be disadvantageous to minority shareholders.
11. Since our officers and directors have the ability to be employed by or consult for other companies, their other activities could slow down our operations.
Mr. Jag Sandhu, our President, Chief Executive Officer and a director, works with other mineral exploration companies. Our officers and directors are not required to work exclusively for us and do not devote all of their time to our operations. Therefore, it is possible that a conflict of interest with regard to their time may arise based on their employment by other companies. Their other activities may prevent them from devoting full-time to our operations which could slow our operations and may reduce our financial results because of the slowdown in operations. It is expected that each of our directors will devote between 10 and 20 hours per week to our operations on an ongoing basis, and when required will devote whole days and even multiple days at a stretch when property visits are required or when extensive analysis of information is needed. We do not have any written procedures in place to address conflicts of interest that may arise between our business and the business activities of Mr. Sandhu, or any of our other officers or directors.
12. Because our Officer and Directors work for other companies engaged in mineral exploration, a potential conflict of interest could negatively impact our ability to acquire properties to explore and to run our business.
Our directors and officers work for other mining and mineral exploration companies. Due to time demands placed on them and due to the competitive nature of the exploration business, the potential exists for conflicts of interest to occur from time to time that could adversely affect our ability to conduct our business. Their employment with other entities in addition to limiting the amount of time they can dedicate to us as a director or officer, may present a conflict of interest in helping us identify and obtain the rights to mineral properties and as to other business opportunities because they may also be considering the same properties or opportunities for other companies they work or consult for.
13. Damage to the environment could result from our operations. If our business is involved in one or more of these hazards, we may be subject to claims of a significant size which could force us to cease our operations.
Mineral resource exploration, production and related operations are subject to extensive rules and regulations. Failure to comply with these rules and regulations can result in substantial penalties. Our cost of doing business may be affected by the regulatory burden on the mineral industry since the rules and regulations frequently are amended or interpreted. We cannot predict the future cost or impact of complying with these laws.
Environmental enforcement efforts with respect to mineral operations have increased over the years, and it is possible that regulation could expand and have a greater impact on future mineral exploration operations. Although our management intends to comply with all legislation and/or actions of local, provincial, state and federal governments, non-compliance with applicable regulatory requirements could subject us to penalties, fines and regulatory actions, the cost of which could harm our results of operations. We cannot be sure that our proposed business operations will not violate environmental laws in the future.
We are subject to extensive regulations relating to environmental protection, including the generation, storage, handling, emission, transportation and discharge of materials into the environment, and relating to safety and health. We will also have to sustain the cost of reclamation and environmental remediation for all work undertaken which causes sufficient surface disturbance to necessitate reclamation work. Other potential pollution or damage must be cleaned and renewed. Our initial programs do not require any reclamation or remediation other than minor clean up and removal of supplies because of minimal disturbance to the ground. The amount of these costs is not known at this time as we do not know the extent of the exploration program we will undertake, beyond completion of the recommended phases. Because there is presently no information on the size, tenor, or quality of any resource or reserve at this time, it is impossible to assess the impact of any capital expenditures on our earnings or competitive position in the event a potentially economic deposit is discovered.
Risks Relating to Our Common Stock
14. Since public trading in our common stock is limited and sporadic, there can be no assurance that our stockholders will be able to liquidate their holdings of our common stock.
Our common stock price is currently quoted on the OTC Bulletin Board under the symbol “NAVA”. However, trading has been limited and sporadic and we can provide no assurance that the market for our common stock will be sustained. We cannot guarantee that any stockholder will find a willing buyer for our common stock at any price, much less a price that will result in realizing a profit on an investment in our shares. There may be limited opportunity for stockholders to liquidate any of their holdings in common stock of the Company. Trading volume may be insignificant and stockholders may be forced to hold their investment in Company shares for an extended period of time. The lack of liquidity may also cause stockholders to lose part or all of their investment in our common stock.
15. Since public trading in our common stock is limited and sporadic, the market price of our common stock may be subject to wide fluctuations.
There is currently a limited public market for our common stock and we can provide no assurance that the market for our common stock will be sustained. If a market is sustained, however, we anticipate that the market price of our common stock will be subject to wide fluctuations in response to several factors, including:
(1) actual or anticipated variations in our results of operations;
(2) our ability or inability to generate revenues;
(3) increased competition; and
(4) conditions and trends in the mining industry.
Further, our stock price may be impacted by factors that are unrelated or disproportionate to our operating performance. These market fluctuations, as well as general economic, political and market conditions, such as recessions, interest rates or international currency fluctuations, may adversely affect the market price of our common stock.
16. Our common stock is subject to the “penny stock” rules of the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.
Under U.S. federal securities legislation, our common stock will constitute “penny stock”. Penny stock is any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require that a broker or dealer approve a potential investor’s account for transactions in penny stocks, and the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve an investor’s account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience objectives of the person, and make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the Securities and Exchange Commission relating to the penny stock market, which, in highlight form, sets forth the basis on which the broker or dealer made the suitability determination. Brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
17. We may, in the future, issue additional shares of common stock, which would reduce investors’ percent of ownership and may dilute our share value.
Our Articles of Incorporation authorize the issuance of 400,000,000 shares of common stock. As of September 10, 2012, the Company had 12,338,604 shares of common stock outstanding. Accordingly, we may issue up to an additional 387,661,396 shares of common stock. The future issuance of common stock may result in substantial dilution in the percentage of our common stock held by our then existing shareholders. We may value any common stock issued in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors, and might have an adverse effect on any trading market for our common stock.
18. State securities laws may limit secondary trading, which may restrict the states in which and conditions under which you can sell shares of our common stock.
Secondary trading in our common stock will not be possible in any state until the common stock is qualified for sale under the applicable securities laws of the state or an exemption from registration is available for secondary trading in the state. If we fail to register or qualify, or to obtain or verify an exemption for the secondary trading of our common stock in any particular state, the common stock could not be offered or sold to, or purchased by, a resident of that state. In the event that a significant number of states refuse to permit secondary trading in our common stock, the liquidity for the common stock could be significantly impacted thus causing you to realize a loss on your investment.
19. Restrictions on the resale of securities for British Columbia residents and other Canadian residents may limit the ability of our shareholders to sell their securities.
Shareholders who are residents of British Columbia have to rely on an exemption from prospectus and registration requirements of B.C. securities laws to sell their shares. Shareholders have to comply with B.C. Securities Commission’s BC Instrument 72-502 “Trade In Securities of U.S. Registered Issuers” to resell their shares. BC Instrument 72-502 requires, among other conditions, that B.C. residents hold the shares for four months and limit the volume of shares sold in a 12-month
period. These restrictions will limit the ability of B.C. resident shareholders to resell our common stock in the United States, and therefore may materially affect the market value of your shares. Residents of other Canadian provinces have to rely on available prospectus exemptions to re-sell their securities, and if no exemptions can be relied upon then the shareholders may have to hold the securities for an indefinite period of time.
20. Because we do not intend to pay any cash dividends on our common stock, our stockholders will not be able to receive a return on their shares unless they sell them.
We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them. There is no assurance that stockholders will be able to sell shares when desired.
Item 1B.
Item 1B. Unresolved staff comments
None.
Item 2.
Item 2. Properties
Our executive offices are located at Suite 206 - 595 Howe Street, Vancouver, British Columbia, Canada, V6C 2T5. The space is being provided to us without charge. This space may not be available to us free of charge in the future. We believe that this space is sufficient until we are able to generate revenues, if at all, and hire employees.
We do not have any ownership or lease interests in any property other than our interest in the Molly1 Claim.
Item 3.
Item 3. Legal Proceedings
There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, or any owner of record or beneficially of more than 5% of any class of voting securities of the Company is a party adverse to the Company or has a material interest adverse to the Company. The Company’s property is not the subject of any pending legal proceedings.
Item 4.
Item 4. Mine Safety Disclosures
The Company currently has no mining operations.
PART II
Item 5.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Quotation of our shares of common stock on the OTC Bulletin Board (“OTCBB”) was approved on July 18, 2008 under the symbol “NAVA”. Prior to that date there was no active market for our common stock, and since that date there have only been limited or sporadic quotations and only a very limited public trading market for our common stock. The following table sets forth the high and low bid prices of our common stock for our fiscal years ended June 30, 2011 and June 30, 2012 as reported on the OTCBB. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.
Holders
As of September 10, 2012, the Company had 12,338,604 shares of our common stock issued and outstanding held by 50 holders of record.
The last reported sales price of our common stock on the OTCBB on September10, 2012, was $0.05
Dividend Policy
We have not declared or paid dividends on our common stock since our formation, and we do not anticipate paying dividends in the foreseeable future. Declaration or payment of dividends, if any, in the future, will be at the discretion of our Board of Directors and will depend on our then current financial condition, results of operations, capital requirements and other factors deemed relevant by the Board of Directors. There are no contractual restrictions on our ability to declare or pay dividends.
Securities Authorized Under Equity Compensation Plans
As of June 30, 2012, securities issued and securities available for future issuance under our Incentive Stock Plan were as follows:
Equity Compensation Plan Information
On October 26, 2009, our Board of Directors of Company adopted the Nava Resources, Inc. Stock Incentive Plan (the “Plan”). The Plan provides for the granting of up to 10,000,000 stock options to key employees, directors and consultants, of common shares of the Company. Options granted are not to exceed terms beyond five years.
Recent Sales of Unregistered Securities
None
Item 6.
Item 6. Selected Financial Data
A smaller reporting company, as defined by Item 10 of Regulation S-K, is not required to provide the information required by this item.
Item 7.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Certain statements contained in this prospectus, including statements regarding the anticipated development and expansion of our business, our intent, belief or current expectations, primarily with respect to the future operating performance of the Company and the products we expect to offer, and other statements contained herein regarding matters that are not historical facts, are “forward-looking” statements. Future filings with the Securities and Exchange Commission, future press releases and future oral or written statements made by us or with our approval, which are not statements of historical fact, may contain forward-looking statements. Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements.
All forward-looking statements speak only as of the date on which they are made. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made.
Plan of Operation
Our plan of operation for the next twelve months is to complete the following objectives within the time periods specified, subject to our obtaining any additional funding necessary for the continued exploration of our mineral claims. We believe that we currently have enough funds to complete our Phase one exploration program and possibly Phase two depending on scope and costs.
1. Prior to the next anniversary date of the Molly1Claims on October 20, 2013, we will need to arrange some exploration work worth approximately $1,700 or pay the Province of British Columbia $1,700 in lieu of filing exploration expenses in order to keep the Claims in good standing.
2. We conducted a phase one program of prospecting and lithogeochemical sampling of Sicker Group rocks in the Lake Cowichan area, Vancouver Island in 2010. The Sicker Group is prospective for polymetallic ‘Kuroko-type’ massive sulphide deposits rich in copper, lead, zinc, silver and gold and is exposed in a number of structural uplifts on Vancouver Island. Two of these uplifts host economically significant Kuroko deposits, including the Myra Falls mine in the Buttle Lake Uplift, and the Mount Sicker (intermittent producer up to 1952) and Lara deposits in the Cowichan Lake Uplift.
Nava’s exploration was focused in the southeast end of the Cowichan Lake uplift, which extends in an arcuate, northwest-trending belt over approximately 100 km between Saltspring Island (in the southeast) and Horne Lake in the north.
The Molly1 claim, comprising 20 units (424.96 hectares) was staked in October 2010 to cover outcroppings of the prospective McLaughlin Ridge formation (within the Sicker), approximately 4.5 kilometers along geological strike to the east of the North claim, which was prospected by Nava in 2008; this claim was allowed to lapse in 2010. The Molly1 claim is bounded to the east by the Meade Creek valley, and is accessible via logging roads extending north from the main highway along the steep western slope of the valley.
Exploration on Molly1 during 2010 comprised reconnaissance traverse of roads in the area in late October 2010. Outcroppings of Sicker Group and other rocks are exposed in road cuts over a distance of perhaps 2 kilometers along the main access road. The McLaughlin Ridge Formation is well exposed over a distance of about one kilometer in this area and comprises a relatively uniform section of steeply dipping, banded, medium grey fine grained tuffites and cherty tuffites with occasional quartz veining and local finely disseminated pyrite. Exposures of siltstone and grit representing the much younger Nanaimo Group (Benson Formation) occur at the north end of this section, which is bounded to the south by outcroppings of the Mount Hall Gabbro and intermediate intrusive rocks of the Nitnat Formation.
This section of rocks was prospected over a distance of about one kilometer within the claim boundary, focusing on the McLaughlin Ridge Formation. No visible mineralization, other than occasional minor disseminated pyrite was noted. A total of 46 grab samples were taken at intervals across the section and sent for multi-element geochemical analysis (36 element suite), which included the Kuroko indicator elements copper, lead, zinc, silver, gold, barium, and arsenic. No significant anomalies were indicated in this analysis, though three samples (tuffite) demonstrated weakly anomalous barium concentrations.
2. We plan to further analyze the data received and if warranted conduct further work on the Molly1 Claim in the spring of 2013, which may include geological mapping, a geochemical survey, trenching, sampling and analysis.
3. If we are able to complete the Phase Two exploration program, we plan to review its results in May 2013. Further work on the Molly1 Claim property may be undertaken if justified by the results of Phase Two. A joint venture relationship may be explored at some future point as justified to offset the costs of continued exploration and drilling if warranted.
We may consider entering into a joint venture with a major resource company to obtain funding necessary to complete exploration beyond Phase Two in exchange for a percentage of our interest in our mineral claims. We have not undertaken any efforts to locate a joint venture partner and there can be no assurances that we will be successful doing so or that a major resource company or any other third party would be interested in such a partnership or that sufficient funds would be available.
4. We will also be evaluating other opportunities that might be brought to our attention.
Results of Operations
We have had no operating revenues since our inception on July 21, 2005. We do not anticipate earning revenues until such time as we have entered into commercial production of our mineral property. We are presently in the exploration stage of our business and we can provide no assurance that we will discover commercially exploitable levels of mineral resources on our property, or if such resources are discovered, that we will enter into commercial production of our mineral property.
For the year ended June 30, 2012 we incurred expenses in the amount of $24,091, a decrease of approximately 69% as compared to expenses of $79,099 in the year ended June 30, 2011. Professional fees decreased from $27,466 in the year ended June 30, 2011 to $20,055 in the year ended June 30, 2012. In addition, in the year ended June 30, 2012 we incurred $2,850 of exploration costs, as compared to $4,598 of exploration costs in the year ended June 30, 2011, as a result of exploration work on our Molly1 claim.
In the year ended June 30, 2012 we had a net loss of $24,064, as compared to a net loss of $78,066 in the year ended June 30, 2011. For the period from July 21, 2005 (inception) to June 30, 2012, we have an accumulated loss of $217,938.
Liquidity and Capital resources
Our activities have been financed from the proceeds of share subscriptions. From our inception on July 21, 2005 to June 30, 2011 we have raised a total of $188,870 from private offerings of our common stock. At June 30, 2012, we had cash and cash equivalents in the amount of $23,075, a decrease of approximately 62% as compared to cash and cash equivalents in the amount of $62,180 on June 30, 2011. We believe that we have enough cash on hand to complete our Phase One exploration program and commence a fairly basic Phase Two program. If the results of the Phase One program are particularly encouraging, we may wish to raise additional funds for a more in depth Phase Two program starting in February 2013. Additional funds will need to be raised to support work that may be undertaken subsequent to Phase Two.
If additional funds are required, the additional funding will likely come from equity financing from the sale of our common stock or sale of part of our interest in our mineral claims. If we are successful in completing an equity financing, existing shareholders will experience dilution of their interest in our Company. We do not have any financing arranged and we cannot provide investors with any assurance that we will be able to raise sufficient funding, if any, from the sale of our common stock or any other form of additional financing to fund our exploration activities. In the absence of such financing, we will not be able to continue our exploration of the Claims and our business will likely fail.
Going Concern Consideration
We have not generated any revenues since inception. As of June 30, 2012, the Company had accumulated losses of $217,938. Our independent auditors included an explanatory paragraph in their report on the accompanying financial statements regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors. Our financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.
Off Balance Sheet Arrangements.
We have no off-balance sheet arrangements.
Summary of Critical Accounting Estimates
Recently issued accounting pronouncements
In June, 2011, the FASB issued ASU No. 2011-05, which amends ASC Topic 220, Comprehensive Income. Under the amendment, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This ASU eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. The amendments in this ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The amendments in this ASU should be applied retrospectively. Additionally, the FASB issued a second amendment to ASC Topic 220 in December 2011, ASU No. 2011-12, which allows companies the ability to defer certain aspects of ASU 2011-05. For public entities, these amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The amendments do not require any transition disclosures.
On September 15, 2011, the FASB issued ASU 2011-08, Intangibles - Goodwill and Other, which simplifies how an entity is required to test goodwill for impairment. This ASU will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Under the ASU, an entity would not be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The ASU includes a number of factors to consider in conducting the qualitative assessment. The ASU is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted.Item 7A.
Item 8. Financial Statements and Supplementary Data
The financial statements are set forth immediately following the signature page and are incorporated herein by reference.
Item 9.
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A.
Item 9A. Controls and Procedures
EVALUATION OF DISCLOSURE CONTROLS
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the Company conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as of June 30, 2012. Based on this evaluation, our principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that the Company’s disclosure and controls are designed to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure, except for the lack of segregation of accounting duties as a result of limited personnel resources.
Lack of Segregation of Duties
Management is aware that there is a lack of segregation of accounting duties as a result of limited personnel. However, at this time management has decided that considering the abilities of the personnel now involved and the control procedures in place, the risks associated with such lack of segregation are low and the potential benefits of adding employees to clearly segregate duties do not justify the substantial expenses associated with such increases. Management will periodically reevaluate this situation.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Rules 13a-15(f) under the Securities Exchange Act of 1934, internal control over financial reporting is a process designed by, or under the supervision of, the Company’s principal executive, principal operating and principal financial officers, or persons performing similar functions, and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
The Company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of the Company’s management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Company’s management, including the Company’s Chief Executive Officer and Principal Financial Officer assessed the effectiveness of the Company’s internal control over financial reporting as of June 30, 2012. In making this assessment, management used the framework in “Internal Control - Integrated Framework” promulgated by the Committee of Sponsoring Organizations of the Treadway Commission, commonly referred to as the “COSO” criteria.
In performing the assessment, management noted that our board of directors is performing the duties of the audit committee, there is only one independent director, and none of the members is considered a financial expert. Our management believes that the lack of a financial expert on our board of directors means that no member of our board of directors has the financial expertise to review our financial statements for potential errors and provide the necessary oversight over our management's activities in the event of a management override of our internal control policies. Our management believes that this lack of a financial expert on our board of directors raises a reasonable possibility that a material misstatement of our annual or interim financial statements may not be timely prevented or detected and that it should therefore be considered a material weakness in our internal control over financial reporting. Because of this material weakness, our management believes that as of June 30, 2012, our company’s internal controls over financial reporting were not effective. We do not currently have any plans to replace any existing member of our board of directors, nor do we have any current plans to add any additional directors.
This annual report does not include an attestation report of the Company’s independent 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.
CHANGES IN INTERNAL CONTOLS
There was no changes in our internal controls over financial reporting that occurred during our last fiscal quarter that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
The Company’s management, including the chief executive officer and principal financial officer, do not expect that its disclosure controls or internal controls 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. In addition, 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 fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that 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’s override of the control. The design of any systems of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of these inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Individual persons perform multiple tasks which normally would be allocated to separate persons and therefore extra diligence must be exercised during the period these tasks are combined. Management is aware of the risks associated with the lack of segregation of duties at the Company due to the small number of employees currently dealing with general administrative and financial matters. Although management will periodically reevaluate this situation, at this point it considers the risks associated with such lack of segregation of duties and that the potential benefits of adding employees to segregate such duties do not justify the substantial expense associated with such increases. It is also recognized the Company has not designated an audit committee and no member of the board of directors has been designated or qualifies as a financial expert. The Company should address these concerns at the earliest possible opportunity.
Item 9B.
Item 9B. Other Information
None.
PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance
The Directors and Officers currently serving our Company is as follows:
Name
Age Positions and Offices
Jag Sandhu President, Chief Executive Officer, Chief Financial Officer and Director
Don Blackadar Director
The business address of each our officers and directors is c/o Nava Resources, Inc., Suite 206 - 595 Howe Street, Vancouver, B.C., Canada V6C 2T5.
Our directors serve until the next annual meeting of the stockholders. Thereafter, directors will be elected for one-year terms at the annual stockholders’ meeting. Officers will hold their positions at the pleasure of the Board of Directors, absent any employment agreement, of which none currently exists or is contemplated.
Jag Sandhu
Jag Sandhu has been our President and Director since our inception on July 21, 2005 and has acted as our Chief Executive Officer since July 22, 2006 and our Chief Financial Officer since September 7, 2010. From January 2007 to present, Mr. Sandhu has been the president of JNS Capital Corp., a company engaged in providing Corporate Finance/Development and Investor Relations services to publicly traded junior exploration companies. From November 2004 to January 2007, Mr. Sandhu was Vice President of Corporate Finance for Pacific North West Capital Corp., a public company trading on the TSX Exchange and the OTCBB. From March 2002 to October 2004 Mr. Sandhu was Vice President of Corporate Development and Director of Nicer Canada Corp, a public company trading on the TSX Venture Exchange. From February 2000 to November 2001 Mr. Sandhu was the Chief Financial Officer and Director of Network Technology Professionals Inc., which was a public company trading on the TSX Venture Exchange. From September 1998 to January 2000, Mr. Sandhu was Vice President of Corporate Development of Group West Systems Ltd. which traded on the Toronto Stock Exchange. Mr. Sandhu’s experience in the mining exploration business and as an officer of a public company and as our President and Chief Executive Officer led to his appointment to the board of directors.
Don Blackadar
Don Blackadar has acted as a Director since June 1, 2007. Mr. Blackadar is a non-practicing geologist with an MSc in Geology from the University of Alberta. Mr. Blackadar has operated his own small consulting company for the past 10 years, offering services as a senior business analyst. He is also a partner in a small software development company specializing in software for the healthcare industry. Mr. Blackadar’s experience as a geologist led to his appointment to the board of directors.
Significant Employees and Consultants
Other than our officers and directors, we currently have no other significant employees.
Conflicts of Interest
Mr. Jag Sandhu works with other mineral exploration companies. We do not have any written procedures in place to address conflicts of interest that may arise between our business and the business activities of Mr. Sandhu.
The Board of Directors has not established an audit committee and does not have an audit committee financial expert, nor has the Board established compensation or nominating committees. The Board is of the opinion that such committees are not necessary since the Company is an early exploration stage company and has only two directors and, to date, the directors have been performing the functions of such committees. Thus, there is a potential conflict of interest in that our directors and officers have the authority to determine issues concerning management compensation, nominations, and audit issues that may affect management decisions.
There are no family relationships among our directors or officers. Other than as described above, we are not aware of any other conflicts of interest with any of our executive officers or directors.
Involvement in Certain Legal Proceedings
There are no legal proceedings that have occurred within the past ten years concerning our directors or control persons, which involved a criminal conviction, a criminal proceeding, an administrative or civil proceeding limiting one’s participation in the securities or banking industries, or a finding of securities or commodities law violations.
None of our directors or officers has been affiliated with any company that has filed for bankruptcy within the last ten years. We are not aware of any proceedings to which any of our officers or directors, or any associate of any such officer or director, is a party adverse to our company or has a material interest adverse to it.
Code of Ethics
The Company has not adopted a code of ethics because of the small size and limited resources of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance.
Section 16(a) of the Securities Exchange Act of 1934 requires officers and directors of the Company and persons who own more than 10% of a registered class of the Company's equity securities to file reports of ownership and changes in their ownership with the Securities and Exchange Commission, and forward copies of such filings to the Company. Based solely on our review of copies of such reports and representations from our executive officers and directors, we believe that our executive officers and directors complied with all Section 16(a) filing requirements during the fiscal year ended June 30, 2012 except that Mr. Blackadar failed to file a Form 4 to report his option grant to purchase 250,000 shares of common stock on August 30, 2010.
Item 11.
Item 11. Executive Compensation
The table below summarizes sets forth all compensation awarded to, earned by, or paid to our chief executive officer for all services rendered in all capacities to us for the last two fiscal years. No executive officer earned compensation in excess of $100,000 during our 2012 fiscal year.
SUMMARY COMPENSATION TABLE
(1) Represents compensation paid to Mr. Sandhu for consulting services provided to us.
Outstanding Equity Awards
There have been no equity awards of any kind granted to any of the Company’s executive officers since our inception on July 21, 2005.
Employment Agreements
We are not presently a party to any employment or consulting agreements. We will review the requirement for such agreementsif and when our operations increase in significance.
Director Compensation
Our directors have not received any compensation for services rendered in their capacity as directors of the Company other than the 250,000 stock options exercisable at $0.01 granted to Mr. Don Blackadar on August 31, 2010. There is no vesting for these stock options.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table lists, as of September 10, 2012, the number of shares of common stock of our Company that are beneficially owned by (i) each person or entity known to our Company to be the beneficial owner of more than 5% of the outstanding common stock; (ii) each officer and director of our Company; and (iii) all officers and directors as a group. Information relating to beneficial ownership of common stock by our principal shareholders and management is based upon information furnished by each person using “beneficial ownership” concepts under the rules of the Securities and Exchange Commission. Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to vote or direct the voting of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the Securities and Exchange Commission rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary beneficial interest. Except as noted below, each person has sole voting and investment power.
The percentages below are calculated based on 12,338,604 shares of our common stock issued and outstanding as of September 10, 2012. Unless otherwise indicated, the address of each person listed is c/o Nava Resources, Inc., Suite 206 - 595 Howe Street, Vancouver, B.C., Canada V6C 2T5.
Title of Class
Name of Beneficial Owner
Amount and
Nature of
Beneficial
Ownership
Percent of Class
Common Stock: Jag Sandhu
President, Chief Executive
Officer and Director
5,500,000 (1) 44.6%
Common Stock: Pamela Pickett
120 Caspian Way
Brigadoon
Perth, Australia 6069 5,500,000 44.6%
Common Stock: Don Blackadar
Director 3,340
250,000 (2) Less than 1%
All executive officers
and directors as a
group 2 persons)
5,503,340 44.6%
Item 13.
Item 13. Certain Relationships and Related Transactions
On August 28, 2007, Jag Sandhu, our President, Chief Executive Officer and a director, acquired two claims for a 637.39 hectare (approximately 1575.03 acres) mineral claim in the Province of British Columbia, Canada for a total of $254.96. On November 22, 2007, Mr. Jag Sandhu transferred the claims to Nava Canada.
Jag Sandhu provides consulting services to us that are recognized on our financial statements. From inception on July 21, 2005 to June 30, 2012, we recognized a total of $16,000 for his services.
During the current year, the Company incurred $Nil (2011 - $2,200) in exploration costs with two directors of the Company.
As at June 30, 2012 $1,026.41 was due to a director of the Company. This amount is unsecured and have no fixed terms of repayment.
Director Independence
We are not subject to the listing requirements of any national securities exchange or national securities association and, as a result, we are not at this time required to have our board comprised of a majority of “independent directors.” We do not believe that any of our directors currently meet the definition of “independent” as promulgated by the rules and regulations of the NYSE Alternext US (formerly known as the American Stock Exchange).
Item 14.
Item 14. Principal Accounting Fees and Services
On July 9, 2012 we changed our registered independent auditor to Dale Matheson Carr-Hilton Labonte LLP
Chartered Accountants ("DMCL”) from Mackay LLP. The fees billed to the Company from DMCL and Mackay are set forth below:
As of June 30, 2012, the Company did not have a formal documented pre-approval policy for the fees of the principal accountant.
PART IV
Item 15.
Item 15. Exhibits, Financial Statement Schedules
(a) Financial Statements:
Our financial statements, as indicated by the Index to Consolidated Financial Statements set forth below, begin on page of this Form 10-K, and are hereby incorporated by reference. Financial statement schedules have been omitted because they are not applicable or the required information is included in the financial statements or notes thereto.
NAVA RESOURCES, INC.
(An Exploration Stage Company)
June 30, 2011
Index
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of Nava Resources, Inc.
We have audited the accompanying consolidated balance sheets of Nava Resources, Inc. (an exploration stage company) as of June 30, 2012 and the related consolidated statements of operations, cash flows and stockholders’ equity for the year then ended and for the period from July 21, 2005 (date of inception) to June 30, 2012. These consolidated 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 Company’s consolidated financial statements as at June 30, 2011 were audited by other auditors whose report dated September 12, 2011 included an explanatory paragraph regarding the Company’s ability to continue as a going concern. The consolidated financial statements for the period from July 21, 2005 (date of inception) to June 30, 2011 reflect a total net loss of $193,874 of the related cumulative totals. The other auditor report has been furnished to us, and our opinion, insofar as it relates to amounts included for such prior periods, is based solely on the report of such other auditor.
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 an audit to obtain reasonable assurance whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated 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, based on our audit and the report of the other auditor, these consolidated financial statements present fairly, in all material respects, the financial position of Nava Resources, Inc. as of June 30, 2012 and the results of its operations and its cash flows for the year then ended and for the period from July 21, 2005 (date of inception) to June 30, 2012, in accordance with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has not generated revenues since inception, has incurred losses in developing its business, and further losses are anticipated. The Company requires additional funds to meet its obligations and the costs of its operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in this regard are described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ DMCL
DALE MATHESON CARR-HILTON LABONTE LLP
CHARTERED ACCOUNTANTS
September 10, 2012
Vancouver, Canada
REPORT OF INDPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - MacKay LLP
To the Stockholders of
Nava Resources, Inc.
(An Exploration Stage Company)
We have audited the accompanying consolidated balance sheet of Nava Resources, Inc. (an exploration stage company) as of June 30, 2011, and the consolidated statements of operations, stockholders' equity and cash flows for the year then ended and for the period from July 21, 2005 (date of inception) to June 30, 2011. 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 audits. The financial statements of Nava Resources, Inc., for the period from inception on July 21, 2005 through June 30, 2008 were audited by other auditors whose report, dated September 15, 2008, expressed an unqualified opinion on those statements and included an explanatory paragraph expressing concern about the Company’s ability to continue as a going concern. The financial statements as of June 30, 2008 reflect an accumulated deficit of $60,134. The other auditors’ report has been furnished to us, and our opinion, insofar as it relates to the amounts included for such prior periods, is based solely on the report of the other auditors.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the 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 audits provide a reasonable basis for our opinion.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2011, and the results of its operations and its cash flows for the year then ended and for the period from July 21, 2005 (date of inception) to June 30, 2011 in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has not generated revenues since inception, has incurred losses in developing its business, and further losses are anticipated. The Company requires additional funds to meet its obligations and the costs of its operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in this regard are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Vancouver, Canada
September 10, 2012 “MacKay LLP”
CHARTERED ACCOUNTANTS
NAVA RESOURCES, INC.
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
The accompanying notes are an integral part of these consolidated financial statements.
NAVA RESOURCES, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
The accompanying notes are an integral part of these consolidated financial statements.
NAVA RESOURCES, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplemental disclosures with respect to cash flows:
The accompanying notes are an integral part of these consolidated financial statements.
NAVA RESOURCES, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
The accompanying notes are an integral part of these consolidated financial statements.
NAVA RESOURCES, INC.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
1. NATURE OF BUSINESS AND CONTINUANCE OF OPERATIONS
Nava Resources Inc. (the "Company") was incorporated on July 21, 2005 under the laws of the state of Nevada. The Company’s wholly owned subsidiary, Nava Resources, Canada Inc. (“Nava Resources, Canada”), was incorporated in Canada on August 9, 2005. The Company is an exploration stage company. The Company’s principal business is the acquisition and exploration of mineral properties. The Company has not yet determined whether its properties contain mineral reserves that are economically recoverable.
Going Concern
These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated revenues since inception and has not paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The Company has incurred a net loss of $24,064 and $78,066 for the years ended June 30, 2012 and 2011, respectively, and has incurred cumulative losses since inception of $217,938. These factors raise substantial concern about the ability of the Company to continue as going concern. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations and to determine the existence, discovery and successful exploitation of economically recoverable reserves in its resource properties.
These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Management of the Company has undertaken steps as part of a plan with the goal of sustaining Company operations for the next twelve months and beyond. These steps include: (a) continuing efforts to raise additional capital and/or other forms of financing; and (b) controlling overhead and expenses. There can be no assurance that any of these efforts will be successful.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These financial statements are presented in accordance with generally accepted accounting principles in the United States (“US GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) and are expressed in US dollars. The Company’s fiscal year-end is June 30.
Principles of Consolidation
These financial statements include the accounts of the Company and Nava Resources, Canada. All intercompany balances and transactions have been eliminated upon consolidation.
Use of Estimates
The preparation of financial statements in conformity with US GAAP 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 of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant areas of estimate include the impairment of assets and rates for amortization, accrued liabilities, future income tax obligations and the inputs used in calculating stock-based compensation. Actual results could differ from those estimates.
NAVA RESOURCES, INC.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
Cash and Cash Equivalents
Cash and cash equivalents include cash and short-term investments with original maturities of less than three months.
Foreign Currency Translation
The Company's functional currency is the Canadian dollar. The financial statements of the Company are translated to United States dollar equivalents. Assets and liabilities denominated in foreign currencies are translated into United States dollar equivalents at rates of exchange in effect at the balance sheet date. Average rates for the year are used to translate revenues and expenses.
The cumulative translation adjustment, if any, on translation to the reporting currency is reported as a separate component of shareholders’ equity, whereas gains and losses arising from foreign currency transactions are included in results of operations.
Equipment
Amortization is provided in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives. Amortization is computed at 45% per annum using the declining balance method.
Impairment or Disposal of Long-Lived Assets
The Company accounts for the impairment or disposal of long-lived assets according to the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 360 “Property, Plant and Equipment”. ASC 360 clarifies the accounting for the impairment of long-lived assets and for long-lived assets to be disposed of, including the disposal of business segments and major lines of business. Long-lived assets are reviewed when facts and circumstances indicate that the carrying value of the asset may not be recoverable. When necessary, impaired assets are written down to estimated fair value based on the best information available. Estimated fair value is generally based on either appraised value or measured by discounting estimated future cash flows. Considerable management judgment is necessary to estimate discounted future cash flows. Accordingly, actual results could vary significantly from such estimates.
Mineral Property Interest
The Company is engaged in the acquisition, exploration and development of mineral properties. In accordance with the SEC Industry Guide 7, mineral property acquisition costs are capitalized and mineral property option payments and exploration costs are expensed to operations as incurred. Mineral property acquisition costs are capitalized when management has determined that probable future benefits consisting of a contribution to future cash inflows, have been identified and adequate financial resources are available or are expected to be available as required to meet the terms of property acquisition and budgeted exploration and development expenditures. Mineral property acquisition costs are expensed as incurred if the criteria for capitalization is not met. Mineral property exploration costs are expensed as incurred. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs incurred to develop such property are capitalized.
As of the date of these financial statements, the Company has incurred only acquisition and exploration costs which have been expensed. To date the Company has not established any proven or probable reserves on its mineral property.
NAVA RESOURCES, INC.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
Basic and Diluted Net Loss Per Share
The Company computes loss per share in accordance with ASC 260, "Earnings per Share", which requires presentation of both basic and diluted loss per share on the face of the statement of operations. Basic loss per share is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted loss per share gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted loss per share, the average stock price for the period issued in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted loss per share excludes all dilutive potential shares if their effect is anti-dilutive.
Stock Based Compensation
The Company accounts for Stock-Based Compensation under ASC 718 “Compensation - Stock Compensation”, which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. ASC 718-10 requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized.
The Company accounts for stock-based compensation awards to non-employees in accordance with ASC 505-50, Equity-Based Payments to Non-Employees. Under ASC 505-50, the Company determines the fair value of the warrants or stock-based compensation awards granted as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. Any stock options or warrants issued to non-employees are recorded in expense and additional paid-in capital in shareholders' equity/(deficit) over the applicable service periods using variable accounting through the vesting dates based on the fair value of the options or warrants at the end of each period.
The Company issues stock to consultants for various services. The costs for these transactions are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is 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. The Company recognized consulting expense and a corresponding increase to additional paid-in-capital related to stock issued for services.
Income Taxes
Income taxes are accounted for under the liability method of accounting for income taxes. Under the liability method, future tax liabilities and assets are recognized for the estimated future tax consequences attributable to differences between the amounts reported in the financial statement carrying amounts of assets and liabilities and their respective tax bases. Future tax assets and liabilities are measured using enacted or substantially enacted income tax rates expected to apply when the asset is realized or the liability settled. The effect of a change in income tax rates on future income tax liabilities and assets is recognized in income in the period that the change occurs. Future income tax assets are recognized to the extent that they are considered more likely than not to be realized.
NAVA RESOURCES, INC.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
Income Taxes (cont’d)
The FASB has issued ASC 740 “Income Taxes”. ASC 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. This standard requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements.
As a result of the implementation of this standard, the Company performed a review of its material tax positions in accordance with recognition and measurement standards established by ASC 740 and concluded that the tax position of the Company has not met the more-likely-than-not threshold as of June 30, 2012.
Fair Value of Financial Instruments
The following provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which fair value is observable:
Level 1 - fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 - fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3 - fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Financial instruments classified as Level 1 - quoted prices in active markets include cash and cash equivalents.
These consolidated financial instruments are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment to estimation. Valuations based on unobservable inputs are highly subjective and require significant judgments. Changes in such judgments could have a material impact on fair value estimates. In addition, since estimates are as of a specific point in time, they are susceptible to material near-term changes. Changes in economic conditions may also dramatically affect the estimated fair values.
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of June 30, 2012. The respective carrying value of certain financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash and cash equivalents, accounts payable and due to related parties.
Recent Accounting Pronouncements
In June, 2011, the FASB issued ASU No. 2011-05, which amends ASC Topic 220, Comprehensive Income. Under the amendment, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This ASU eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. The amendments in this ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The amendments in this ASU should be applied retrospectively. Additionally, the FASB issued a second amendment to ASC Topic 220 in December 2011, ASU No. 2011-12, which allows companies the ability to defer certain aspects of ASU 2011-05. For public entities, these amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The amendments do not require any transition disclosures.
NAVA RESOURCES, INC.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
Recent Accounting Pronouncements (cont’d)
On September 15, 2011, the FASB issued ASU 2011-08, Intangibles - Goodwill and Other, which simplifies how an entity is required to test goodwill for impairment. This ASU will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Under the ASU, an entity would not be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The ASU includes a number of factors to consider in conducting the qualitative assessment. The ASU is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted.
Management does not believe any other recently issued but not yet effective accounting pronouncements, if adopted, would have an effect on the accompanying consolidated financial statements.
3. EQUIPMENT
4. MINERAL PROPERTY INTEREST
On October 20, 2010, the Company staked a claim located in the Victoria mining division of the Province of British Columbia, Canada. During the year ended June 30, 2012, the Company incurred exploration costs amounting to $2,850 (2011 - $4,598) on the Property.
5. RELATED PARTY TRANSACTIONS
During the current year, the Company incurred $Nil (2011 - $2,220) in exploration costs with two directors of the Company.
As at June 30, 2012, $680 (2011 - $4,267) was due to a director of the Company and a company controlled by a director of the Company and $409 (2011 - $409) was due to a former director of the Company. These amounts are unsecured, do not bear interest and have no fixed terms of repayment.
6. STOCK OPTIONS
The Company has adopted a Stock Incentive Plan (the “Plan”). The Plan provides that the total number of shares of stock reserved and available for distribution under the plan shall be 10,000,000 shares of common stock of the Company. The stock options granted under the Plan shall have a maximum term of five years.
The Company did not issue any stock options during the year ended June 30, 2012.
NAVA RESOURCES, INC.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
6. STOCK OPTIONS (cont’d)
During the year ended June 30, 2011, the Company granted 275,000 stock options. The stock options vested immediately and were recorded at a fair value of $43,383. The fair value of the options granted during the year ended June 30, 2011 was estimated at the grant date using the Black-Scholes option pricing model with the following weighted average assumptions: expected annual volatility: 160.70%, risk-free interest rate: 1.34%, expected life: 5 years and expected dividend yield: 0%.
The Company recorded a further $1,866 for stock options which were granted during the year ended June 30, 2010 and vested during the year ended June 30, 2011. The fair value of the options was estimated at the grant date using the Black-Scholes option pricing model with the following weighted average assumptions: expected annual volatility: 126.69%, risk-free interest rate: 2.55%, expected life: 5 years and expected dividend yield: 0%.
A summary of the status of the Company’s stock options as of June 30, 2012 and changes during the year are as follows:
NAVA RESOURCES, INC.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
7. INCOME TAXES
A reconciliation of the provision for income taxes at the United States federal statutory rate compared to the Company’s income tax expense as reported is as follows:
The significant components of deferred income tax assets at June 30, 2012 and 2011 are as follows:
The amount taken into income as deferred income tax assets must reflect that portion of the income tax loss carry forwards that is more likely-than-not to be realized from future operations. The Company has chosen to provide a full valuation allowance against all available income tax loss carry forwards. The Company has recognized a valuation allowance for the deferred income tax asset since the Company cannot be assured that it is more likely than not that such benefit will be utilized in future years. The valuation allowance is reviewed annually. When circumstances change and which cause a change in management's judgment about the realizability of deferred income tax assets, the impact of the change on the valuation allowance is generally reflected in current income.
No provision for income taxes has been provided in these consolidated financial statements due to the net loss for the years ended June 30, 2012 and 2011. At June 30, 2012, the Company has net operating loss carry forwards of approximately $172,000, which expire commencing 2026. The potential tax benefit of these losses may be limited due to certain change in ownership provisions under Section 382 of the Internal Revenue Code (“IRS”) and similar state provisions. IRS Section 382 places limitations (the “Section 382 Limitation”) on the amount of taxable income which can be offset by net operating loss
NAVA RESOURCES, INC.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
7. INCOME TAXES (cont'd)
carry forwards after a change in control (generally greater than 50% change in ownership) of a loss corporation. Generally, after a change in control, a loss corporation cannot deduct operating loss carry forwards in excess of the Section 382 Limitation. Due to these “change in ownership” provisions, utilization of the net operating loss and tax credit carry forwards may be subject to an annual limitation regarding their utilization against taxable income in future periods. The Company has not concluded its analysis of Section 382 through June 30, 2012, but believes the provisions will not limit the availability of losses to offset future income.
8. SUBSEQUENT EVENTS
The Company has evaluated subsequent events through the date the consolidated financial statements were issued and filed with SEC. The Company has determined that there are no other events that warrant disclosure or recognition in the consolidated financial statements.
(b) Exhibits:
Exhibit
Description
3.1 Articles of Incorporation of Registrant*
3.2 Bylaws of the Registrant*
3.3 Articles of Incorporation of Nava Resources Canada, Inc.*
3.4 Certificate of Amendment to Articles of Incorporation of Registrant*
4.1 Specimen Common Stock Certificate*
4.2 Form of Regulation S Subscription Agreement for Shares of Common Stock*
4.3 Form of Regulation S Subscription Agreement for Units*
4.4 Form of Warrant Certificate*
10.1 Bill of Sale of North Claim 1 to Jag dated August 22, 2007*
10.2 Bill of Sale of North Claim 2 to Jag dated August 22, 2007*
10.3 Mineral Tenure Bill of Sale Completion for North Claim 1 dated November 22, 2007*
10.4 Mineral Tenure Bill of Sale Completion for North Claim 2 dated November 22, 2007*
10.5 Stock Option plan
21.1 Subsidiaries of Registrant*
Rule 13a-14(a)/15d14(a) Certifications
Section 1350 Certifications
99.1 Report of MineStart Management Inc. dated December 7, 2007*
* Incorporated by reference to the registration statement on Form S-1, as filed by the Company with the Securities and Exchange Commission on May 1, 2008.
GLOSSARY OF GEOLOGICAL AND MINING TERMS
Certain terms used in this section and elsewhere in this prospectus are defined below.
Assessment The amount of work, specified by provincial law, that must be performed each year in order to retain legal control of mining claims. An assessment report is a description of work performed, documented according to specific guidelines.
Exploration The work involved in looking for an economically viable mineral deposit (see “ore”). This work involves a variety of techniques including prospecting, geological mapping, geochemical sampling and assaying, geophysical surveying, trenching and drilling.
Exploration Stage A discrete activity or group of related activities performed at a specific point in an exploration program. Exploration programs typically proceed in stages as more information is obtained and the mineral potential becomes better understood. The nature of work performed varies with both the nature of the property and the level of knowledge that exists regarding the geology and mineral potential of the area. In areas or properties where little is known, mapping and geophysical and geochemical techniques are generally used to identify areas of particular interest which justify more detailed work. Drilling is ultimately undertaken to explore targets of particular interest.
Island Arc An arcuate chain of islands in volcanically and seismically active zones at destructive plate margins.
Kuroko A class of VMS deposit (see entry) formed in island arc environments. Named after mines on Honshu Island Japan. The main metals in Kuroko deposits, in decreasing order of abundance are iron-zinc-lead and copper with associated silver and gold values.
Mineral Deposit A mass of naturally occurring mineral material; e.g., metal ores or nonmetallic minerals, usually of economic value, without regard to mode of origin. Mineral occurrence of sufficient size and grade that it might, under favorable circumstances, be considered to have economic potential.
Mineral Reserve The economically mienable part of a Measured or Indicated Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A Mineral Reserve includes diluting materials and allowances for losses that may occur when the material is mined.
Mineral Resource A concentration or occurrence of diamonds, natural solid inorganic material, or natural solid fossilized organic material, including base and precious metals, coal, and industrial minerals in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge. Mineral resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories.
MINFILE A computerized mineral inventory system maintained by the BC Ministry of Energy Mines and Petroleum Resources. This represents a readily accessible information base for describing the nature and distribution of over 12,000 metallic, industrial mineral and coal occurrences within specific geological settings of British Columbia.
Ore The naturally occurring material from which a mineral or minerals of economic value can be extracted profitably or to satisfy social or political objectives. The term is generally but not always used to refer to metalliferous material, and is often modified by the names of the valuable constituent; e.g., iron ore.; ore mineral.
Polymetallic A mineral deposit with substantial metal values of different metals, for example, copper, lead, zinc, silver and gold.
VMS Volcanogenic Massive Sulphide. VMS deposits are associated with, and created by volcanic-associated hydrothermal events in submarine environments. Hence they occur within environments dominated by volcanic or volcanic-derived rocks. They typically occur as stratiform bodies within the enclosing host rocks.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NAVA RESOURCES, INC.
By: /s/ Jag Sandhu
Name: Jag Sandhu
Title: President and Chief Executive Officer
(Principal Executive, Financial and Accounting Officer)
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title
Date
/s/ Jag Sandhu
Jag Sandhu President, Chief Executive Officer
and Director, Principal Executive,
Financial and Accounting Officer September 10, 2012
/s/ Don Blackadar
Don Blackadar Director September 10, 2012