Item 1. Description of Business
We are an exploration stage mining company engaged in the acquisition and exploration of mineral properties with the objective of exploiting any mineral deposits we discover. The Company owns three properties in Peru respectively named the El Baron, Llipa Projects (collectively the “Peruvian claims”) and Linderos property. The Company has formed a wholly owned Peruvian subsidiary to hold title to these claims and any other claims which the company may acquire in the future. There is no assurance that a commercially viable mineral deposits exist on either property.
Mineral property exploration is typically conducted in phases. Each subsequent phase of exploration work is recommended by a geologist based on the results from the most recent phase of exploration. Although the Company has some geological information on the El Baron and Llipa properties, the Company has not yet commenced systematic exploration on those claims. Once an exploration phase is completed, the Company will decide as to whether or not we proceed with each successive phase based upon the analysis of the results of that program. Our directors will make this decision based upon the recommendations of the geologists who oversee the exploration programs and records the results.
Our plan of operation is to conduct exploration work on the Peruvian claims in order to ascertain whether they host economic quantities of copper, gold, or other metals. There can be no assurance that an economic mineral deposit exists on the Peruvian properties until appropriate exploration work is completed.
Even if we complete our proposed exploration programs on the Peruvian properties and we are successful in identifying a mineral deposit, the Company will have to spend substantial funds on further drilling and engineering studies before knowing if the deposit is commercially viable.
The Company is actively seeking additional mineral properties and is continually evaluating other opportunities in South and Central America. The Company is currently focused on attempting to locate a coal property for acquisition in Columbia, South America. The Company can make no assurances that it will be able to successfully locate any properties for acquisition or should it be able to locate a property, that it will be able to fund its acquisition.
Research and Development Expenditures
The Company has not incurred any research or development expenditures since our incorporation other than those incurred during in our development program on the Lucky Strike claim.
Subsidiaries
On or about November 23, 2007 the Company created, Nilam Resources Peru SA, a wholly owned subsidiary. The purpose of the new subsidiary is to hold the Company’s Peruvian properties and to carry on such business in Peru as is necessary to maintain, explore and develop the Company’s properties. Nilam Resources Peru SA, holds the Company’s material asset consisting of its rights in respect of the Llipa, El Baron and Linderos properties.
Patents and Trademarks
The Company does not own, either legally or beneficially, any patents or trademarks.
Reports to Security Holders
Although we are not required to deliver a copy of our annual report to our security holders, we will voluntarily send a copy of our annual report, including audited financial statements, to any registered shareholder who requests it. The Company undertook to file reports with the U.S. Securities and Exchange Commission when our registration statement on Form SB-2 was declared effective.
Item 1A.
Item 1A. Risk Factors
Inherent Risks in Our Business and the Mining Industry
The search for valuable minerals as a business involves substantial risks. The likelihood of our success and success in the mining industry must be considered in light of the substantial risks, problems, expenses, difficulties, complications and delays encountered in connection with the exploration of the mineral properties that the Company plans to undertake. These potential problems include, but are not limited to, the inherent speculative nature of exploration of mining properties, numerous hazards including pollution, cave-ins and other hazards against which we cannot, or may elect not to, insure, burdensome government regulations and other legal uncertainties, market fluctuations relating to the minerals and metals which we seek to exploit, other unanticipated problems relating to exploration, and additional costs and expenses that may exceed current estimates.
Compliance with Government Regulation
The Company will be required to comply with all regulations, rules and directives of governmental authorities and agencies applicable to the exploration of minerals in Peru.
The Company will have to sustain the cost of reclamation and environmental mediation for all exploration and development work undertaken. The amount of these costs is not known at this time as we do not know the extent of the exploration program that will be undertaken beyond completion of the currently planned work programs. Because there is presently no information on the size, tenor, or quality of any resource or reserves at this time, it is impossible to assess the impact of any capital expenditures on earnings or our competitive position in the event a potentially economic deposit is discovered.
If the Company enters into production, the cost of complying with permit and regulatory environment laws will be greater than in the exploration phases because the impact on the project area is greater. Permits and regulations will be required.
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Water discharge will have to meet water standards;
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Dust generation may have to be minimal or otherwise re-mediated;
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Dumping of material on the surface may have to be re-contoured and re-vegetated;
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An assessment of all material to be left on the surface will need to be environmentally benign;
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Ground water will have to be monitored for any potential contaminants;
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The socio-economic impact of the project will have to be evaluated and if deemed negative, will have to be re-mediated; and
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There will likely have to be an impact report of the work on the local fauna and flora.
Item 1B.
Item 1B. Unresolved Staff Comments
None.
Item 2.
Item 2. Description of Property
Mining Claims - Description, Location, Access and Mineralization
Lucky Strike Property - British Columbia, Canada
In 2006, the Company acquired a 100% undivided right, title, and interest in one mineral claim located in the Similkameen Region of British Columbia, Canada for $3,000. The Company hired qualified consultants and engineers who completed two phases of exploration on the property. Test results revealed that is was unlikely that the Lucky Strike claim contained economically viable mineralization. For that reason, the Company did not renew its rights to that claim and it expired March 13, 2008.
Llipa Claim - Peru
On November 28, 2007, the Company acquired the Llipa mineral concessions at a cost of $100,000 from MRC1 Explorations, ERIL. The Company has paid $50,000 and owes $50,000 on a promissory note to Mr. DeMelt. The title to the Llipa claim was transferred to the Company’s wholly owned subsidiary, Nilam Resources Peru, SA.
Immediately prior to Mr. Len DeMelt joining the Company as a Director, Mr. DeMelt was in the process of acquiring the Llipa property for his personal portfolio of mineral interests. He had placed a $50,000 deposit toward the $100,000 sale price of the property. Once Mr. DeMelt was appointed as a director, he agreed to transfer the sale contract to the Llipa property to the Company and, as a term of that conveyance, the Company committed to invest in exploration on the property. The Company paid to the seller the remaining balance of $50,000 in cash and executed a promissory note to Mr. DeMelt for the $50,000 deposit to fully acquire the Llipa mineral property.
The cash paid to the seller, MRC1 Explorations, EIRL, was raised by the sale of restricted equity securities to unrelated parties in reliance upon Regulation S under the Securities Act of 1933, as amended. MRC1 Explorations, EIRL, the seller of the Llipa property, is not a related party.
The Llipa Project is located in the Llipa District, Ocros Province, Ancash Department approximately 380 kilometers northeast of Lima, Peru by paved and gravel roads. The property is located within the following coordinates, UTM;
E 254,000, N 8’853,000
E 257,000, N 8’855,000
The property has access to water for both human consumption and mining operations. Further, the nearby Quebrada Shinbacoca waters could provide a source for hydroelectric power generation. Llipa Project property has been in production from 1988 to 1992 by Compania Minera Millotingo which have produced approximately 1 million tons of copper ore with gold as by product. Production was abandoned for social reasons.
Claim details are as follows;
History of Llipa Claim
The Llipa property was previously owned by the Milliotingo Mining Company, a Peruvian corporation, which was controlled by the Sacarias family. The mine was operated from approximately 1988 to 1992. The Llipa mine, like most others in that region, was closed in 1992 due to a combination of market forces and social reasons. During the early 1990’s, the Túpac Amaru Revolutionary Movement, a left-wing anti-government guerrilla rebel group, (herein “terrorists”) were over running the country of Peru. This civil unrest was occurring at the same time that international prices for precious metals were rapidly declining. It was common practice in the Ancash mining region for the terrorists to cut the power lines, invade the mining camps and steal the explosives for their rebellion. In some cases, those that resisted the invasion were killed. In the Gran Britanica Mine, located in the same region as the Llipa property, the terrorists executed the senior management of that mining company when they attempted to stop them.
Additionally, during this time of social unrest, the labor unions in the area became increasingly difficult to negotiate with. The unions were demanding higher wages, dramatically increased security and the implementation of expensive safety procedures. Ultimately, the Sacarias family was forced to close the Llipa mine due to the increased costs of Union demands, falling metal prices, safety concerns and to avoid the risk of terrorist invasion.
The terrorist activity in the country ended rather abruptly in 1997 after the internationally publicized incident where the terrorists held 72 people hostage in the Japanese Embassy in Lima, Peru for 126 days. Ultimately, military commandos stormed the embassy and ended the standoff. Most of the rebel forces were killed or imprisoned after that event.
Today, the international community considers Peru a stable country with a robust economy. This is evidenced by the United States Congress ratifying the US-Peru Trade Promotion Agreement in December of 2007. The Company’s management believes that Peru’s unique history, combined with the surging prices for gold, silver and copper creates a unique business opportunity for the Company and investors.
A recent estimate calculated over 1,000,000 metric tons of tailings on the Llipa property and the Company is studying the economic viability of the recovery and treatment of those tailings. The Company can provide no assurance that it will discover economic mineralization on the property, or if such minerals are discovered, that it will enter into commercial production.
El Baron Claim - Peru
On or about December 10, 2007, the Company’s wholly owned subsidiary, Nilam Resources Peru, SA, acquired the El Baron property (aka “El Baron”). The El Baron claim was staked by Mr. Len DeMelt, the Chairman of the Board of Directors of the Company. Mr. DeMelt transferred the claim to the Company for no consideration.
The El Baron property is located in the San Mateo District, Huarochiri Province, Lima Department, approximately 250 kilometer east-north-east of Lima, Peru. The property is located in the historical Central mining district along the main access road leading to Cerro de Pasco, a proven gold, silver, copper deposit and the Doe Run smelter located in the town of La Oroya.
Claim details are as follows;
No prior geological evaluations have been conducted on the El Baron claim. The Company intends to soon begin prospecting, geological mapping, and collecting grab samples and hand trenching. Prospecting is the process of evaluating the property by analyzing rocks on the property’s surface with a view to discovering indications of potential mineralization. Geological mapping consists of gathering chip samples and grab samples from areas on the property with the most potential to host economically significant mineralization. Grab samples are soil samples or pieces of rock that appear to contain precious metals such as gold, or industrial metals such as copper. All samples gathered are sent to a laboratory where they are crushed and analyzed for metal content. Trenching typically involves removing surface dirt and rock and gathering rock and soil samples from below the property’s surface in areas with the most potential to host economically significant mineralization.
The Company can provide no assurance that it will discover economic mineralization on the property, or if such minerals are discovered, that it will enter into commercial production.
Pativilca Claim - Peru
On January 13, 2008 the Company’s wholly owned subsidiary, Nilam Resources Peru SA, entered into a letter of intent with MC1 Exploration EIRL to purchase the Pativilca property. Under the terms of that agreement, the Company agreed to purchase the Pativilca property and the gold production plant on the property for $1,500,000 to be paid as follows: $250,000 at the signing of the transference of the deed(s) of mining concessions; $500,000 four months from the date of transference of the public deed(s); and $750,000 ten months from the transference of the public deed(s). Additionally, the Company agreed to grant MRC1 Exploration a three percent royalty from mineral production. The Company made a $10,000 deposit toward the purchase price.
The Pativilca property (also known as “Baco project”) is located in the last western reinforcement of the western of central Andes of Peru, about 235 kilometers NNW of Lima. The property consisted of 6 mining concessions that were a total of 2,100 hectares. The Baco project included a fully functioning gold production operation with cyanidation plant capable of 50 tons of ore per day. The Company was in the process of applying for the necessary water usage and explosive permits but has since stopped that process.
Due to the recent instability of the global capital markets, the Company’s finance team was unable to raise the capital necessary to complete the acquisition of the Pativilca property. In early June of 2008, MRC1 Exploration, EIRL, the seller of that property, revoked the offer to sell and declared the January 13, 2008 Letter of Intent null and void. The seller has refused to refund the initial deposit. The seller has indicated that they may be open to further negotiations should the Company raise the capital adequate to acquire and operate the property.
Linderos Property
On February 10, 2009, the Company, through its wholly owed Peruvian subsidiary, acquired the right, title and interest in and to Linderos mining concessions, Peru. In consideration for the property, the Company issued 20,000,000 of it common shares (Note 6).
The property is a subject to a 1% net smelter royalty. During the year ending April 30, 2010, the company was unable to allocate any economic values beyond the proven and probable reserves. In addition, the Company has no intention of pursuing the development of these properties. Therefore, the property is considered to be impaired and accordingly, has been written off.
Item 3.
Item 3. Legal Proceedings
Stephen A. Zrenda, JR., P.C. v. Nilam Resources, Inc.
Stephen A. Zrenda, JR, P.C., the Plaintiff, filed an action against Nilam Resources, Inc. on October, 16, 2009 in the DISTRICT COURT OF OKLAHOMA COUNTY STATE OF OKLAHOMA alleging there is an amount due of $24,803.50. The Plaintiff seeks the amount due plus the cost of litigation or approximately $40,000.00. The Company filed an answer denying the total amount due because the plaintiff did not provide a detailed invoice of the fees due. In addition, the Company asserts the Plaintiff overcharged the company by the amount due, and the Company had to hire another law firm to resolve the discrepancies made by the Plaintiff.
On February 2, 2010, both the Plaintiff and the Company settled the case, and the case was dismissed with prejudice on February 3, 2010.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5.
Item 5. Market Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
There is a limited public market for our common shares. Our common shares are quoted for trading on the OTC Bulletin Board under the symbol “NILA.” The market for our stock is highly volatile. We cannot assure you that there will be a market in the future for our common stock. OTC Bulletin Board stocks are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange.
Dividend Policy
We have not declared or paid any cash dividends since inception. We intend to retain future earnings, if any, for use in the operation and expansion of our business and do not intend to pay any cash dividends in the foreseeable future.
Recent Purchases of Equity Securities by us and our Affiliated Purchases
We have not repurchased any of our common stock and have not publicly announced repurchase plans or programs as of April 30, 2010.
Reverse Split
The Board of Directors of Nilam Resources, Inc. had determined that the number of common shares in the float is far too large given the size of the Company, which caused our Common Stock being priced at pennies per share. The low share price has hampered the Company’s ability to acquire new mineral properties, attract quality management and raise capital to develop our assets. For that reason, the Board of Directors and majority of our shareholders approved a one for fifty (1 for 50) reverse stock split to reduce the number of shares of Common Stock outstanding to approximately 1,160,800 shares. The Board of Directors is hopeful that the smaller number of shares outstanding will help the Company to develop an improved trading market and elevate the image of our Company.
Related Stockholder Matters
None.
Item 6.
Item 6. Selected Financial Data
None.
Item 7.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation
We are an exploration stage company with limited operations and no revenue from our business operations. This means there is substantial doubt that we can continue as an on going business for the next twelve months unless we obtain additional financing to fund our operations. Our only source of cash at this time is investments by others in our company.
Results of Operations
Lack of Revenues
We have not earned any revenues and have sustained operational losses since inception from July 11, 2005 to April 30, 2010. We anticipate that we will not earn any revenues during the current fiscal year or in the foreseeable future, as we plan to undertake the exploration of our mineral properties. We may not generate significant revenues even if our future exploration program indicates that mineral deposits may exist on our mineral claims. We anticipate that we will incur substantial losses over the next year, and our ability to earn any revenues at this time continues to be uncertain.
Expenses
Our total expenses from operations since inception from July 11, 2005 to April 30, 2010 were $1,498,531. The total expenses from operations increased by $110,548 to $593,625 for the year ended April, 2010 from $483,077 for the year ended April 30, 2009. The increase in total operating expenses was mainly due to our increase in write down of mineral property acquisition costs of $200,000.
Net Loss
As of April 30, 2010, we had an accumulated loss of $753,625. In the year ended April 30, 2010, our net loss increased $270,548 from $483,077 for the year ended April 30, 2009. The increase in loss was due to lack of revenues and increase in write down of mineral property acquisition costs and loss on settlement of debt.
Going Concern
We have not had profitable revenues from operations, and we are dependent upon obtaining financing to pursue exploration activities. For these reasons, our auditors stated in their report hat they have substantial doubts we will be able to continue as a going concern.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Not Applicable.
Item 8.
Item 8. Financial Statements and Supplementary Data
Our fiscal year end is April 30. We will provide audited financial statements to our stockholders on an annual basis. Our audited financial statements as of April 30, 2010 follow as pages 9 through 20.
NILAM RESOURCES INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2010
(Stated in US Dollars)
NILAM RESOURCES INC.
(AN EXPLORATION STAGE COMPANY)
CONTENTS
PAGE
CONSOLIDATED BALANCE SHEETS AS OF APRIL 30, 2010 AND APRIL 30, 2009.
PAGE
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEARS ENDED APRIL 30, 2010 AND 2009, AND FOR THE PERIOD FROM JULY 11, 2005 (INCEPTION) TO APRIL 30, 2010.
PAGE
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE PERIOD FROM JULY 11, 2005 (INCEPTION) TO APRIL 30, 2010.
PAGE
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED APRIL 30, 2010 AND 2009, AND FOR THE PERIOD FROM JULY 11, 2005 (INCEPTION) TO APRIL 30, 2010.
PAGES
16 - 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
NILAM RESOURCES INC.:
We have audited the consolidated balance sheets of Nilam Resources Inc. (the “Company”) as of April 30, 2010 and 2009 and the consolidated statements of operations, stockholders’ deficit and cash flows for the years then ended. The consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB) in the United States of America. 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 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 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 the consolidated financial statements present fairly, in all material respects, the financial position of the Company as at April 30, 2010 and 2009 and the consolidated results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles in the United States of America.
The accompanying consolidated financial statements referred to above have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations and a net working capital deficiency that raise substantial doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
MEYERS NORRIS PENNY LLP
Vancouver, Canada
July 16, 2010
CHARTERED ACCOUNTANTS & BUSINESS ADVISORS
2300 - 1055 DUNSMUIR STREET VANCOUVER, BC V7X 1J1
PH. (604) 685-8408 FAX (604) 685-8594 www.mnp.ca
NILAM RESOURCES INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
(STATED IN U.S. DOLLARS)
Nature of Operations (Note 1)
Subsequent Events (Note 9)
Contingencies (Note 12)
Approved on Behalf of the Board:
___________________________, Director
See accompanying notes to financial statements.
NILAM RESOURCES INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(STATED IN U.S. DOLLARS)
See accompanying notes to financial statements.
NILAM RESOURCES INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE PERIOD FROM JULY 11, 2005 (INCEPTION) TO APRIL 30, 2010
(STATED IN U.S. DOLLARS)
See accompanying notes to financial statements.
NILAM RESOURCES INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(STATED IN U.S. DOLLARS)
See accompanying notes to financial statements
NILAM RESOURCES INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF APRIL 30, 2010
NOTE 1 NATURE OF OPERATIONS
These consolidated financial statements inclusive of the accounts of the Nilam Resources Inc. and its Peruvian subsidiary Nilam Resources Peru SAC. Nilam Resources Inc. (an exploration stage company) (the “Company”) was incorporated under the laws of the State of Nevada on July 11, 2005. The Company is a natural resource exploration company with an objective of acquiring, exploring and if warranted and feasible, developing natural resource properties. On November 23, 2007, the Company incorporated Nilam Resources Peru SAC, in Peru, as a wholly-owned subsidiary. The purpose of the new subsidiary is to hold the Company’s Peruvian properties and to carry on such business in Peru as is necessary to maintain, explore and develop the Company’s properties. Nilam Resources Peru SAC. holds the Company’s rights in respect of the Llippa property. The continuation of the Company is in the exploration stage of its mineral property development and to date has not yet established any proven mineral reserves on its existing properties. The continued operations of the Company and the recoverability of the carrying value of its assets are ultimately dependent upon the ability of the Company to achieve profitable operations.
These 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. Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive, or raise additional debt and/or equity capital. If the Company is unable to raise additional capital in the near future, due to the Company’s liquidity problems, management expects that the Company will need to liquidate assets, seek additional capital on less favorable terms and/or pursue other remedial measures. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the Securities and Exchange Commission.
(B) Basis of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Nilam Resources Peru SAC. Intercompany accounts and transactions have been eliminated in consolidation.
(C) Use of Estimates
The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and revenues and expenses during the year reported. By their nature, these estimates are subject to measurement uncertainty and the effect on the financial statements of changes in such estimates in future periods could be significant. Significant areas requiring management’s estimates and assumptions are determining the fair value of transactions involving common stock, valuation of deferred taxes, valuation and impairment losses on mineral property acquisitions and valuation of convertible debentures.
(D) Cash and Cash Equivalents
For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.
(E) Mineral Properties
The Company is primarily engaged in the acquisition, exploration and development of mineral properties. Mineral property acquisition costs are initially capitalized when incurred. The Company assesses the carrying costs for impairment under Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 360-10, “Property Plant and Equipment”. The ASC requires mining companies to consider cash flows related to the economic value of mining assets (including mineral properties and rights) beyond those assets’ proven and probable reserves, as well as anticipated market price fluctuations, when testing the mining assets for impairment in accordance with FASB ASC 360-10.
(F) Loss Per Share
Basic and diluted net loss per common share is computed based upon the weighted average common shares outstanding as defined by FASB ASC 260, “Earnings Per Share.” Basic loss per share includes no dilution and it`s computed by dividing loss attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings (loss) of the Company. The common shares potentially issuable on conversion of outstanding warrants were not included in the calculation of weighted average number of shares outstanding because the effect would be anti-dilutive.
(G) Income Taxes
The Company accounts for income taxes under FASB ASC 740, “Income Taxes”. Under FASB ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
(H) Foreign Currency Translation
The financial statements are presented in United States dollars. In accordance with FASB ASC 830-30, “Translation of Financial Statements”, foreign denominated monetary assets and liabilities are translated to their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Revenue and expenses are translated at average rates of exchange during the year. Related translation adjustments are reported as a separate component of stockholders’ equity, whereas gains or losses resulting from foreign currency transactions are included in results of operations.
(I) Business Segments
The Company operates in one industry segment within two geographical areas, Canada and Peru. The mineral property is held solely in the Peru segment.
(J) Hierarchy of Generally Accepted Accounting Principles
In May 2008, the FASB issued ASC 105, The Hierarchy of Generally Accepted Accounting Principles (“ASC 105”). ASC 105 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP. ASC 105 directs the GAAP hierarchy to the entity, not the independent auditors, as the entity is responsible for selecting accounting principles for financial statements that are presented in conformity with GAAP. ASC 105 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to remove the GAAP hierarchy from the auditing standards. ASC 105 did not have a material impact on our financial statements.
(K) Accounting for Financial Guarantee Insurance Contracts
In May 2008, the FASB issued ASC 460, "Accounting for Financial Guarantee Insurance Contracts - an interpretation of FASB Statement No. 60." (“ASC 460”) requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. This Statement also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities. Those clarifications will increase comparability in financial reporting of financial guarantee insurance contracts by insurance enterprises. This Statement requires expanded disclosures about financial guarantee insurance contracts. The accounting and disclosure requirements of the Statement will improve the quality of information provided to users of financial statements. ASC 460 will be effective for financial statements issued for fiscal years beginning after December 15, 2008. The Company adopted ASC 460 on May 1, 2009. Adoption of this standard did not have a material impact on the Company’s financial position, results of operations or cash flows.
(L) Subsequent Events
In May 2009, the FASB issued ASC 855, "Subsequent Events," which establishes general standards for accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued. The pronouncement requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, whether that date represents the date the financial statements were issued or were available to be issued. ASC 855 is effective with interim and annual financial periods ending after June 15, 2009. The Company adopted ASC 855 on August 1, 2009. This standard did not have a material impact on the Company’s financial statements.
(M) Recent Accounting Pronouncements
In December 2007, the FASB issued FASB ASC 805 (revised 2007), “Business Combinations” (“ASC 805”). ASC 805 significantly changes the accounting for business combinations in a number of areas including the treatment of contingent consideration, pre acquisition contingencies, transaction costs, in-process research and development, and restructuring costs. In addition, under ASC 805, changes in an acquired entity's deferred tax assets and uncertain tax positions after the measurement period will impact income tax expense. ASC 805 is effective for fiscal periods beginning after December 15, 2008. The Company has adopted ASC 805 on May 1, 2009. This standard will change the accounting treatment for business combinations on a prospective basis.
In December 2007, the FASB issued ASC 810, “No controlling Interests in Consolidated Financial Statements - an amendment of Accounting Research Bulletin No. 51” (“ASC 810”), which establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the non controlling interest, changes in a parent’s ownership interest and the valuation of retained non-controlling equity investments when a subsidiary is deconsolidated. The Statement also establishes reporting requirements that clearly identify and distinguish between the interests of the parent and the interests of the non-controlling owners. ASC 810 is effective for fiscal periods beginning after December 15, 2008. The Company has adopted ASC 810 on May 1, 2009. Adoption of this standard did not have a material impact on the Company’s financial position, results of operations, or cash flows.
In March 2008, the FASB issued ASC 815, “Disclosures about Derivative Instruments and Hedging Activities” (“ASC 815”). ASC 815 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. This statement is effective for financial statements issued for fiscal periods beginning after November 15, 2008. The Company has adopted ASC 815 on May 1, 2009. Adoption of this standard did not have a material impact on the Company’s financial position, results of operations, or cash flows.
In June 2009, the FASB issued ASC 860, “Accounting for Transfers of Financial Assets-an amendment of FASB Statement” (“ASC 860”). ASC 860 is intended to establish standards of financial reporting for the transfer of assets to improve the relevance, representational faithfulness, and comparability of financial information. ASC 860 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2009. The Company will adopt ASC 860 on May 1, 2010. The Company has determined that adoption of ASC 860 will have no impact on its consolidated financial statements.
In June 2009, the FASB issued ASC 810, “Amendments to FASB Interpretation No. 46(R)” (“ASC 810”). ASC 810 eliminates the exception to consolidate a qualifying special-purpose entity, changes the approach to determining the primary beneficiary of a variable interest entity, and requires companies to more frequently re-assess whether they must consolidate variable interest entities. Under the new guidance, the primary beneficiary of a variable interest entity is identified qualitatively as the enterprise that has both (a) the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance, and (b) the obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. ASC 810 becomes effective for the Company’s fiscal 2011 year-end and interim reporting periods thereafter. The Company does not expect ASC 810 to have a material impact on its financial statements.
In July 2009, the FASB issued ASC 105-20-05, "FASB Accounting Standards Codification" ("ASC 105-10-05"), as the single source of authoritative nongovernmental U.S. generally accepted accounting principles (GAAP). The Codification is effective for interim and annual periods ending after September 15, 2009. All existing accounting standards are superseded as described in ASC 105- 10-05. All other accounting literature not included in the Codification is non-authoritative. Management is currently evaluating the impact of the adoption of ASC 105-10-05 but does not expect the adoption of ASC 105-10-05 to impact the Company's results of operations, financial position, or cash flows.
In September 2009, the FASB issued ASC 820-10 Measuring Liabilities at Fair Values (“ASC 820-10”). ASC 820-10 provides additional guidance on how companies should measure liabilities at fair value. Specifically, the fair value of a liability is not adjusted to reflect the impact of contractual restrictions that prevent its transfer. The Company does not expect adoption of this standard to have a material impact on its consolidated financial position, results of operations, and cash flows.
(N) Concentration of Credit Risk
Cash includes deposits at a Canadian financial institution in US currency which is not covered by either the US FDIC limits or the Canadian CDI limits. The Company has placed its cash in a high credit quality financial institution.
(O) Fair Value of Financial Instruments
FASB ASC 820, “Fair Value Measurements and Disclosures” requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. FASB ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. FASB ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company’s financial instruments consist principally of cash, accounts payable, amounts due to related parties, notes payable, and convertible debenture. Pursuant to FASB ASC 820, the fair value of the Company’s cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The Company believes that the recorded values of all of its other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
(P) Comprehensive Income
FASB ASC 220, “Comprehensive Income” establishes standards for the reporting and display of comprehensive income and its components in the financial statements. As at April 30, 2010, no element of comprehensive income or loss was noted.
NOTE 3 MINERAL PROPERTIES
The Company is in its early stages of exploration and unable to allocate any economic values beyond the proven and probable reserves. In the absence of proven and probable reserves, acquisition costs to date are considered to be impaired and accordingly, have been written off.
Llippa Property
On December 10, 2007, the Company, through its wholly owed Peruvian subsidiary, entered into an agreement with MRC 1 Exploraciones EIRL of Peru, to purchase the Llippa Project, Peru, for $100,000. Llippa is a mineral claim consisting of two major mining concessions, the Prospera mine and La Prospera XXI.
Linderos property
On February 10, 2009, the Company, through its wholly owed Peruvian subsidiary, acquired the right, title and interest in and to Linderos mining concessions, Peru. In consideration for the property, the Company issued 20,000,000 of it common shares (Note 6). The property is a subject to a 1% net smelter royalty. During the year ending April 30, 2010, the company was unable to allocate any economic values beyond the proven and probable reserves. In addition, the Company has no intention of pursuing the development of these properties. Therefore, the property is considered to be impaired and accordingly, has been written off.
NOTE 4 NOTES PAYABLE - RELATED PARTY
On August 28, 2007, the Company issued a promissory note in the amount of $10,000 to a related party. This promissory note is unsecured, bears no interest and is due on demand.
On November 6, 2007, a shareholder loaned the Company $338 to establish a bank account in Peru. There are no terms of repayment and the amount is non-interest bearing.
On November 20, 2007, the Company issued a promissory note in the amount of $50,000 to a related party for their interest in the Llippa property. The value of the transfer occurred at fair value. This promissory note is unsecured, bears no interest and is due on demand. On June 10, 2009, this promissory note was settled with 12,000,000 common shares of the Company (Notes 5 and 6).
NOTE 5 STOCKHOLDERS’ DEFICIT
On February 28, 2006, the Company issued 600,000 shares of common stock to its founders for cash of $6,000 ($0.01 per share).
On April 28, 2006, the Company issued 550,000 shares of common stock for cash of $55,000 ($0.10 per share).
On February 26, 2007, the Board of Directors approved a 5 for 1 forward stock split for all shareholders of the Company as of March 5, 2007. All share and per share amounts have been retroactively restated to reflect this stock split.
During fiscal 2007, a former officer and director gave the President and Chief Financial Officer 30,000 shares each of the Company’s common stock. The shares were valued for financial statements purpose at a recent price of $0.5 per share or $30,000.
On November 2, 2007, 600,000 restricted shares were transferred from two outgoing Directors to two incoming Directors split evenly between the two incoming Directors. No compensation expense was recognized as the transfer of shares was not intended to compensate the incoming Directors for services to the Company.
On December 3, 2007, the Company sold 6,810 units for cash of $170,208 ($25 per unit). Each unit consists of one share of common stock and one warrant to purchase one share of common stock at $30 per share exercisable for two years. Of the 6,810 units, 4,303 units were issued to a Director.
On January 16, 2008, the Company sold 3,969 units for cash of $99,229 ($25 per unit). Each unit consists of one share of common stock and one warrant to purchase one share of common stock at $30 per share exercisable for two years. Of the 3,969 units, 394 units were issued to a Director.
During fiscal 2008, a benefit of $100,997 was assigned to 4,697 units issued to the Directors of the Company.
During fiscal 2008, the Company calculated the fair value of a Director’s fee of $5,950; and staking right contribution from another Director in the amount of $5,000, which are all reflected as an in-kind contribution of expenses.
During fiscal 2009, the Company calculated imputed interest of $4,224; fair value of a Director’s fee of $6,000; and expenses paid by a former director and offices of the Company in the amount of $46,250, which are all reflected as an in-kind contribution of expenses.
On October 10, 2008, the Board of Directors approved a 1 for 50 reverse stock split for all shareholders of the Company as of as of August 22, 2008. All share and per share amounts have been retroactively restated to reflect this stock split.
On February 10, 2009, the Company issued 20,000,000 shares of common stock on the acquisition of Linderos property.
On June 10, 2009, the Company converted $60,000 of its debt into 12,000,000 common shares (Notes 4 and 6).
On February 4, 2010, the company converted $240,000 of its debt into 4,000,000 common shares. The common shares issued on settlement of the notes were assigned a value of $400,000, which was calculated based on the trading value of the Company’s stock on the date the settlement was approved by the Board of Directors. As a result of this settlement the Company recorded a loss of $160,000.
During fiscal 2010, the Company calculated imputed interest of $1,217 and fair value of a Director’s fee of $6,000, which are all reflected as an in-kind contribution of expenses.
Share Purchase Warrants
During fiscal 2010, all the warrants were expired.
NOTE 6 RELATED PARTY TRANSACTIONS
On August 28, 2007, the Company issued a promissory note in the amount of $10,000 to a director of the Company. This promissory note is unsecured, bears no interest and is due on demand (Note 5).
On November 20, 2007, the Company issued a promissory note in the amount of $50,000 to a director of the Company. This promissory note is unsecured, bears no interest and is due on demand (Note 5).
During the year ended April 30, 2010, Company settled the promissory notes of $10,000 and $50,000 as noted above through the issuance of 12,000,000 shares of common stock (Note 5). The common shares issued on settlement of the notes were assigned a value of $1,680,000, which was calculated based on the trading value of the Company’s stock on the date the settlement was approved by the Board of Directors. As this transaction was with a related party, the loss on the extinguishment of debt of $1,620,000 has been recorded as a capital transaction.
On November 2, 2007, 600,000 restricted shares were transferred from two outgoing Directors to two incoming Directors split evenly between the two incoming Directors. No compensation expense was recognized as the transfer of shares was not intended to compensate the incoming Directors for services to the Company.
On December 2007 and January 2008, a total of 4,697 units (Note 6) were sold to the Directors of the Company in connection with the private placement. The benefit of $100,997 was assigned to those units, computed by taking the difference between the market price per unit and the selling price per unit and multiplying it by number of shares issued to Directors.
During the fiscal 2008, the officer loaned the Company $338. This loan is unsecured, bears no interest and is due on demand (Note 4).
During the fiscal 2008, a director of the Company transferred the title of the El Baron property to the Company’s name without consideration. The value of $5,000 was assigned to the property (Note 4).
During fiscal 2009, the Company calculated imputed interest of $4,224 on the related parties’ notes.
During fiscal 2009, the officers of the Company incurred $14,705 for the expenses paid on behalf of the Company.
During fiscal 2009, the Company accrued $90,000 of management fees to the officers of the Company.
During the year ended April 30, 2010, the Company calculated imputed interest of $1,217 on the related parties’ notes.
During the year ended April 30, 2010, the officers of the Company incurred $10,454 for the expenses paid on behalf of the Company. As of April 30, 2010, $13,667 was owed to these officers.
During the year ended April 30, 2010, the Company accrued $120,000 of management fees to the officers of the Company. As of April 30, 2010, $210,000 was owed to these officers included in accounts payable.
NOTE 7 CONVERTIBLE DEBENTURES
On August 10, 2009, the Company issued a 5% convertible debenture with a principal amount of $10,187 which is due and payable on August 10, 2010. Interest is due at the maturity date payable at the option of the Company in cash or shares. The principal and accrued interest on the debenture may be converted at any time into shares of the Company’s common stock at a price of $0.05 per share, at the option of the holder.
On February 3, 2010, the Company issued a 10% convertible debenture with a principal amount of $10,000 which is due and payable on August 1, 2010. The principal and accrued interest on the debenture may be converted at any time, at the option of the holder, into shares of the Company’s common stock at a price that with 50% discount to the market on the day of conversion called by the holder. The debt carries a beneficial conversion feature which resulted in a debt discount of $10,000 which was recorded against the convertible debenture and offset in additional paid in capital. This discount will be amortized as interest expense over the life of the debt which resulted in amortization of approximately $4,000 for the year ended April 30, 2010.
During fiscal 2010, the Company issued a 5% convertible debenture with a principal amount of $4,000 which is due on January 1, 2010. The Company has defaulted on the convertible debenture therefore it is due and payable on demand from the creditor. The debt carries a beneficial conversion feature which resulted in a debt discount of $4,000 which was recorded against the convertible debenture and offset in additional paid in capital. This discount will be amortized as interest expense over the life of the debt which resulted in amortization of approximately $4,000 for the year ended April 30, 2010.
NOTE 8 DEFERRED INCOME TAXES
A reconciliation of income taxes at statutory rates with the reported taxes is as follows:
The significant components of the Company’s income tax assets and liabilities are as follows:
Deferred income tax assets are not recorded due to the uncertainty of their recovery. As at April 30, 2010 the Company had 1,450,969 (2009 - $805,411) in non-capital taxable losses for United States income tax purposes, subject to final determination by taxation authorities and expiring as follows:
NOTE 9 SUBSEQUENT EVENTS
There were no subsequent events as at the report date.
NOTE 10 COMPARATIVE FIGURES
Certain of the comparative figures have been classified to conform to the presentation adopted in the current period.
NOTE 11 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
During the year ended April 30, 2010, the Company settled disputed accounts payable of $24,803 for $10,000 (Note 12).
During the year ended April 30, 2010, the Company settled accounts payable of $240,000 through the issuance of 4,000,000 shares of common stock (Note 5).
During the year ended April 30, 2010, the Company recorded accretion interest on beneficial conversion features related to convertible debt of $8,000 (Note 7).
During the year ended April 30, 2010, the Company settled an amount of $10,000 (included in accounts payable) and an amount of $50,000 (included in notes payable) through the issuance of 12,000,000 common shares (Notes 5 and 6).
NOTE 12 CONTINGENCIES
On October 31, 2009, a creditor of the Company filed a claim for payment of outstanding accounts payable of $24,803 in the district court of Oklahoma County, state of Oklahoma. On February 3, 2010, the Company settled the claim for $10,000.
NOTE 13 SEGMENTED INFORMATION
The Company operates in one segment, which is the exploration and development of mineral properties. The Company has compiled segmented information based on the geographic regions in which the Company has acquired mineral properties and performs exploration activities.
Loss for the year ended April 30, 2010 by geographical segment:
Loss for the year ended April 30, 2009 by geographical segment:
Assets by geographical segment:
Item 9.
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.
We have had no changes in or disagreements with our accountants. Our audited financial statements for the period ended April 30, 2010 have been included in this form 10-K in reliance upon Meyers Norris Penny LLP, Chartered Accountants, as experts in accounting and auditing.
Item 9A.
Item 9A. Controls and Procedures
Not Applicable.
Item 9A(T). Controls and Procedures
Conclusions of Management Regarding Effectiveness of Disclosure Controls and Procedures.
The Company’s Chief Executive Officer/President is also as the chief financial officer/principal accounting officer (the “Certifying Officer”) of the Company, and this officer is responsible for establishing and maintaining disclosure controls and procedures for the Company. Our management has evaluated the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule 15d-15(e) as of the end of the period covered by this report. Based on that evaluation, the management has concluded that there was a material weakness affecting our internal control over financial reporting, and as a result, our disclosure controls and procedures were not effective as of April 30, 2010.
Management’s Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting for the company. The Company’s internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal controls over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have material effect on our financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.
We are required by the Sarbanes-Oxley Act to include an assessment of our internal control over financial reporting in our Annual Report on Form 10-KSB beginning with our filing for our fiscal year ended April 30, 2009 and attestation from an independent registered public accounting firm in our Annual Report on Form 10-K.
The management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as of April 30, 2010 based on the criteria for effective internal control over financial reporting established in “Internal Control - Integrated Framework,” issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. In its evaluation, Management evaluated whether the Company had sufficient “preventative controls” which are controls that have the objective of preventing the occurrence of errors or fraud that could result in a misstatement of the financial statements. In its evaluation, Management considered whether there were sufficient internal controls over financial reporting, in the context of the Company’s control environment, financial risk assessment, internal control activities, monitoring, and communication to determine whether sufficient controls are present and functioning effectively.
Based upon this assessment, we have determined that there was a material weakness affecting our internal control over financial reporting and, as a result of that weakness, our internal control over financial reporting procedures was not effective as of April 30, 2010. The material weakness which has been disclosed to and reviewed with, our independent auditor, is as follows:
The Company initially filed a Form 10-K for the year ended April 30, 2009, without a disclosure of Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of April 30, 2009. Such failure to disclose its report on internal control over financial reporting impacted its conclusions regarding the effectiveness of internal controls and procedures as of the end of fiscal year 2009, with a resulting weakness. The failure to disclose Management’s assessment became apparent to the Company, since the Company does not maintain a sufficient complement of personnel with an appropriate level of accounting knowledge, experience and training in the application of generally accepted accounting principles commensurate with our financial reporting requirements. Mr. Vare Grewall, the former treasurer of the Company, had performed all financial reporting and disclosure functions, however, he resigned. The Company intends to hire a new Chief Financial Officer.
Management’s Remediation Initiatives
The Company recognizes the importance of implementing and maintaining disclosure controls and procedures and internal controls over financial reporting and is working to implement an effective system of controls. Management is currently evaluating avenues for mitigating our internal controls weaknesses, but mitigating controls that are practical and cost effective based on the size, structure, and future existence of our organization. Since the Company has not engaged in any substantive operations since the loss of the right to purchase Pativlca Mineral Property in Peru, or generated any significant revenues, the Company is limited in its options for remediation efforts. Management, within the confines of its budgetary resources, will engage its outside accounting firm to assist with an assessment of the Company’s internal controls over financial reporting on an on-going basis.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based in part on 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 futu5re conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management’s report in this annual report.
Changes in internal control over financial reporting
There have been no changes during the quarter that ended April 30, 2010 in the Company’s internal controls over financial reporting hat have materially affected, or are reasonably likely to materially affect, internal controls over financial reporting.
Audit Committee
The Company does not have an audit committee or a financial expert serving on the Board of Directors. During the coming fiscal year the Company plans to form and implement an audit committee and hire a Chief Financial Officer who also may serve on the Board of Directors.
Item 9B.
Item 9B. Other Information
None.
PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance
Directors and Officers
According to our bylaws, the authorized number of directors of the corporation shall not be less than one and may be as many as set by resolution of the Board of Directors.
Our current director and officer is:
Mr. Len DeMelt is serving the Company as the Chairman of the Board of Directors, President, Treasurer and Secretary. He has held management positions with numerous mining companies internationally and was instrumental in starting and building six mines, including Gulf Oil's Rabbit Lake mine (uranium), Syncrude mine (oil sands), Denison Mines' Quintette (coal), Homestake's Golden Bear mine (gold), BHP's Ekati mine (diamonds) and Goldust's Croiner mine (gold). He has served as a director of the mining companies Norsemont Resources Inc. and Vena Resources Inc. Mr. DeMelt is an engineering technologist and a graduate of the Haileybury School of Mines. He also holds a Bachelor of Arts degree in business and economics and a diploma of mechanical studies from the British Columbia Institute of Technology. Mr. DeMelt is fluent in English and Spanish. He lives in Lima, Peru.
Term of Office
Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.
Significant Employees
The Company has no significant employees other than the executive employee described above.
No Audit Committee or Financial Expert
The Company does not have an audit committee or a financial expert serving on the Board of Directors. The Company plans to form and implement an audit committee and hire a Chief Financial Officer who also may serve on the Board of Directors.
Code of Ethics
The Company does not have a code of ethics for our principal executive and financial officers. The Company's management intends to promote honest and ethical conduct, full and fair disclosure in our reports to the SEC, and compliance with applicable governmental laws and regulations.
Section 16(a) Beneficial Ownership Reporting Compliance
Under Section 16(a) of the Exchange Act, all executive officers, directors, and each person who is the beneficial owner of more than 10% of the common stock of a company that files reports pursuant to Section 12 of the Exchange Act of 1934, are required to report the ownership of such common stock, options, and stock appreciation rights (other than certain cash only rights) and any changes in that ownership with the Securities and Exchange Commission. The Company has not registered as a public company under Section 12 of the Securities Exchange Act of 1934, and therefore no reports have been filed under Section 16(a) there under.
Item 11.
Item 11. Executive Compensation
The Company pays Len DeMelt a salary of $10,000 per month. At this time, no bonus, stock awards and option awards have been paid to Len DeMelt for the period ended April 30, 2010.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table provides the names and addresses of each person known to us that owns more than 5% of our outstanding Common Stock as of April 30, 2009, and by the officers and directors of the Company, individually and as a group. Except as otherwise indicated, all shares are owned directly.
The percent of class is based on 1,160,777 shares of common stock issued and outstanding as of October 23, 2008.
Item 13.
Item 13. Certain Relationships, Related Transactions, and Director Independence.
Share Transfers
On November 2, 2007, Ms. Sandy Sandhu, the Company’s Director, President, Treasurer, and Secretary, upon her resignation, transferred 15,000,000 shares of common stock to Mr. Len DeMelt the incoming Director.
On November 8, 2007, Mr. Karmjit Gill, the past president of the Company transferred 15,000,000 shares to Mr. Vare Grewal, the incoming Director, Treasurer and Secretary.
Note to Related Party for Mineral Claim
Prior to Mr. Len DeMelt joining the Company as a Director, Mr. DeMelt was in the process of acquiring the Llipa property for his personal portfolio of mineral interests. He had placed a $50,000 deposit toward the $100,000 sale price of the property. Once Mr. DeMelt was appointed as a director, he agreed to transfer the sale contract to the Llipa property to the Company and, as a term of that conveyance, the Company committed to invest in exploration on the property. The Company paid to the seller the remaining balance of $50,000 in cash and executed a promissory note to Mr. DeMelt for the $50,000 deposit to fully acquire the Llipa mineral property.
Assignment of Mineral Claim
During the fiscal 2008, a director of the Company transferred the title of the El Baron property to the Company’s name without consideration. The value of $5,000 was assigned to the property.
Loans
On August 28, 2007, the Company issued a promissory note in the amount of $10,000 to a related party. This promissory note is unsecured, bears no interest and is due on demand.
During the fiscal 2008, an officer loaned the Company $338. This loan is unsecured, bears no interest and is due on demand.
During the fiscal 2008, an officer loaned the Company $1,440. This loan is unsecured, bears no interest and is due on demand.
Assignment of Convertible Note and Issuance of Treasury Shares
On March 1, 2009, an officer of the company assigned a $60,000 convertible note. The assigned note is unsecured and bears no interest.
On June 10, 2009, the note holders converted the note to common stock, and the company issued 20,000,000 shares of treasury shares to eight separate shareholders.
Purchase of Common Stock by Officers and Directors
On December 2007 and January 2008, a total of 234,831 units were sold to Officers and Directors of the Company in connection with a private placement.
Item 14.
Item 14. Principal Accountant Fees and Services
Audit, Audit-Related and Non-Audit Fees
The following table represents fees for the professional audit services and fees billed for other services rendered by our current auditors, Meyers Norris Penny LLP, Chartered Accountants, for the audit of our annual financial statements for the years ended April 30, 2010. For the year ended April 30, 2009, the table represent fees for the professional services and fees billed for other services rendered by are former auditors, Cinnamon Jang Willoughby & Company, Chartered Accountants which was acquired by Meyers Norris Penny LLP,. For the year ended April 30, 2008, the table represents fees for the professional services and fees billed by both Cinnamon Jang Willoughby & Company, Chartered Accountants and Webb & Company, P.A., Certified Public Accountants.
PART IV
Item 15.
Item 15. Exhibits and Financial Statement Schedules
Exhibits
Number
Description
31.1
Certification of the Chief Executive Officer and Chief Financial Officer Pursuant to Rule 13a-14 or 15d-14 of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned thereunto duly authorized.
Nilam Resources, Inc.
Date: July 29, 2010
By: /s/ Len De Melt
Len De Melt
President, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Secretary, Treasurer and Director
Pursuant to the requirements of 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/ Len De Melt
Len De Melt
President, Chief Executive Officer, Chief Financial Officer, Acting Principal Accounting Officer, Secretary, Treasurer and Director
July 29, 2010