ITEM 1. BUSINESS.
Overview
We were incorporated on February 20, 2001 under the laws of the State of Nevada.
Our business plan is to assemble a portfolio of mineral properties with gold potential and to engage in the exploration and development of these properties. We currently have an earn-in agreement to acquire 75% interest in Pengram Corporation's agreement with Scoonover Exploration LLC and JR Exploration LLC (the “Underlying Agreement”) to acquire the Golden Snow Property (as described below).
GOLDEN SNOW PROJECT
Earn-In Agreement
On April 26, 2011, we entered into an agreement with Pengram Corporation ("Pengram") dated April 26, 2011, as amended on June 29, 2011, September 20, 2012, November 17, 2012, May 30, 2013 and December 18, 2013 (the "Earn-In Agreement") whereby we will earn up to a 75% interest in Pengram's agreement with Scoonover Exploration LLC and JR Exploration LLC (the “Underlying Agreement”) to acquire the Golden Snow Property by paying to Pengram up to $175,000 and expending up to $1,250,000 to do exploration work on the Golden Snow Property as follows:
(ii) An additional 25% interest in the Underlying Agreement upon the Company:
(iii) An additional 25% interest in the Underlying Agreement upon the Company:
The Company is also obligated to pay all advance royalties, county and BLM claim fees and Nevada state taxes during the currency of the Earn-In Agreement. There is no assurance that the Company will be able to perform its obligations under the Earn-In Agreement.
Description of Property
The Golden Snow Project consists of 128 unpatented mining claims covering approximately 3.5 square miles. The titles to the property will expire on September 1, 2014 if we do not renew the claims.
Location, Access, and Physiography
The Golden Snow Project is contiguous to the southern end of Staccato Gold’s Lookout Mountain property, which has identified several mineralized areas. The Golden Snow Project is located in the Battle Mountain-Eureka Trend, approximately eight miles south of the East Archimedes gold deposit where Barrick Gold Corporation is currently mining a Carlin- type sediment hosted gold deposit. The Eureka district is at the south end of a northerly trending series of intrusives.
Figure 2
Location of Golden Snow Project
Property History
Exploration in the Eureka District commenced in the 1860s. The Company does not have any records of exploration work conducted on the Golden Snow Project prior to 2006.
In 2006, Minterra Resources acquired the Golden Snow Project. After its acquisition, Minterra Resources commenced a gravity survey and a 95 line kilometer ground magnetic survey across the Golden Snow Project. The gravity data identified two up-thrown (horst) blocks and the magnetic data indicate a prominent circular high that is approximately 2,782 feet in diameter and has a similar signature to Eocene age intrusive and extrusive rocks throughout the Eureka District. Processing of the gravity data by Wright Geophysics identified a number of geophysical linears and Wright also interpreted the magnetic data which shows a prominent circular high that is approximately 2,800 feet in diameter; this has a signature similar to Eocene age intrusive and extrusive rocks associated with mineralization throughout the Eureka District.
In 2007, Minterra Resources completed a 932 sample soil geochemistry program designed to further refine and evaluate the prominent horst-bounding faults. Analysis of the data produced numerous large, coherent, multipoint clusters of anomalous gold, arsenic, antimony, mercury, lead, zinc and barite. Anomalous gold, silver and trace element values from the 2006 soil geochemical program coincided with fault zones outlined by the geophysical-gravity data.
Geology
Many of the sediment-hosted gold deposits in Nevada appear to have developed at or near platform margin/basin margin sites where mineralization is found to be disseminated along the “low-stands” or karsted zone separated different stratigraphic units. The Golden Snow Project is positioned along this major platform margin that extends northwards to Cortez Hills, Pipeline and beyond. Future study of the location of these platform margins may result in the discovery of additional world-class gold deposits in Nevada.
Gold mineralization has come up along the host margin where Devonian age rocks are in contract with the Cambrian age rocks. The mineralization is not only found within the feeder fault, but it is also disseminated out along these “low-stand zones” which are commonly the break between different rock formations. Another example of the same host margin mineralization can be seen in a cross section of the mineralization at Lone Tree. Mineralization has also been discovered along the Wayne Zone Fault, which forms the western edge of the horst, and spreads out along favorable host rocks. Both styles of mineralization appear to potentially exist at the Golden Snow Project.
The geology of the Golden Snow Project has been interpreted to consist of Devonian age rocks striking north/south and trending southward under pediment cover. It has also been interpreted that the Cambrian section is possibly in fault contact with the Devonian section. Both rock types are favorable host rocks for Carlin-style mineralization throughout Nevada, especially in the Eureka Area.
The following sets out the geological units exposed on the Golden Snow Project:
Bay State Dolomite - The Bay State Dolomite is a massive dark grey to black to purplish dolomite which is reported to be 600-850 feet thick in the Eureka Area. The lower portion of this unit is made up of irregular bedded light-grey, dolomite sandstone. The upper portion is in gradational contact with the overlying Devils Gate Limestone.
Sentinel Mountain Dolomite - The Sentinel Mountain Dolomite gradationally overlies Oxyoke Canyon. It is composed of alternating, thick-bedded, coarse-grained, light-gray dolomite and motted, finely laminated, chocolate brown dolomites with a strong petroliferous odor when broken. It ranges in thickness from 410 feet to 600 feet.
Oxyoke Canyon - The Oxyoke is predominantly light gray to brown weathering, fine to medium-grained, quartz sandstone with a dolomatic matrix. It ranges in thickness of less than 20 feet up to 400 feet thick throughout the Eureka Area.
Sadler Ranch - The Sadler Ranch locally has been divided up into an upper and lower dolomite and a middle crinoidal dolomite. The lower dolomite is a medium to thick-bedded, very finely grained, light gray to yellowish-gray dolomite. The middle crinoidal dolomite is a light to medium-gray, poorly bedded, laminated to cross-laminated, crinoidal packstone with thin lenses of mudstone and packstone. The upper dolomite is a medium to thick-bedded, very fine-grained, light-gray laminated dolomite. The thickness of this unit varies from 90 feet to 450 feet.
McColley Canyon/Bartine Member - The McColley Canyon is dominantly a medium to thick bedded gray limestone with interbedded light brown-gray fossiliferous and organic-rich dolomite. The Bartine is composed of thin to medium-bedded, medium-gray, fine grained limestone and yellowish argillaceous limestone with abundant brachiopods. Some people combine these units whereas others map them as separate units. These rocks vary from 330 feet to 650 feet thick.
Beacon Peak Dolomite - This unit is a massive, light gray to brown, finely laminated dolomite, with local thin beds of finely laminated dolomite and thin lenses of well rounded, quartz-rich sandstones with a dolomitic matrix. The average thickness is 328 feet.
Mineralization
Two major target zones exist on the Golden Snow Project. These primary targets would be eastern and western boundary of the horst block. Both the eastern and western edge extends for over 15,000 feet as shown by gravity geophysics. Only drill hole ELP-8 drilled close enough to the eastern edge of the gravity high to test for possible mineralization. The remaining holes were either far to east and out into the abyss, or too far west of the eastern horst fault and on top of the gravity high.
A magnetic survey run over the eastern portion of the claim block shows a magnetic high and has been interpreted to be an intrusive as opposed to volcanics. This area is also a potential favorable target area for gold and base-metal mineralization.
Numerous anomalous zones with large, coherent clusters of anomalous gold, arsenic, antimony, mercury, lead and barite have been identified on the Golden Snow Project. The majority of the anomalies appear to be located in the northeastern and eastern and eastern portion of the claim block because of surface or near surface bedrock. These values are probably related to mineralization associated with the buried intrusive. Anomalous arsenic, antimony and mercury are present in the area of the Ratto Fault. Since these minerals are usually formed distal to gold in Carlin-style systems the geochemistry may indicate gold mineralization at depth.
Soil and Rock Geochemistry
Soil and Rock Geochemistry Previous lessors completed a widespread soil geochemical sampling program on the Golden Snow Project (Minterra Resource Corp./Britannia Gold). The 2006 program was designed as a follow-up to their gravity and ground magnetic geophysical programs.
932 soils were collected on the west half of the property on lines spaced 800 feet apart with samples taken every 200 feet along each line. The lines were located to bracket the gravity linears; interpreted by Wright as bounding features of north-south trending “horst” and “graben” blocks. The linears are also interpreted as southward continuation(s) of the Ratto Ridge Fault zone which localized the mineralization drilled by Timberline Resources in the Lookout Pit and South Adit areas.
Reconnaissance geology and rock chip sampling during late 2011 and early 2012 identified “collapse breccia” features within the central portion of the claim block where it wraps around the Timberline claims. These contact and fault zones are located in areas not previously sampled and project under colluvial cover into areas targeted for exploration by the geophysical and 2006 geochemistry.
Seventy-two follow up soils were collected using the same layout as the 2006 samples to fill in the un- sampled prospective gap where the collapse brecciation was note. The samples were analyzed using the same protocol as the 2006 sample program.
Key data was contoured and incorporated with the previous property- wide dataset. The most significant results are shown by arsenic and gold. These are significant because the NE trends are parallel to both the favorable Bay State Dolomite (Dbp)/Oxyoke (Doc) contact along which distinct collapse zones were mapped.
Additionally, the NE trending faults appear to control these collapse zones as well as disrupt and offset the favorable host rocks.
There is a narrow zone of detectable gold which also parallels that trend and is similar to other gold- bearing contour zones in the north.
Barium shows a distinct anomalous zone in the new data that lies along the east side of the arsenic values and suggests zoning. This is what would be expected due to the barite associated with the gold deposits at Archimedes (Barrick-Ruby Hill) and the Lookout Pit (Timberline).
Silver and antimony do not appear to be significant relative to the collapse breccia features. However, recontouring the silver and antimony did indicate some distinct zoning peripheral to the magnetic high which Wright interpreted as a shallow intrusive on the east side of the project.
Gold in rock chip sampling also is correlative with the magnetically indicated intrusive margin. Although not spectacular in their magnitude, the data are very encouraging because all of the samples had detectable gold with a high value of 0.052 ppm Au. Most of the samples were collected from areas with a preponderance of jasperoid as subcrop or large boulders. These data are interpreted as representative of nearby bedrock rather than transported boulders or colluvium.
Current Exploration Activities
Mapping and reconnaissance work was conducted in late 2011 and early 2012 and identified collapse breccia features which have been recently identified in association with major Carlin-type sediment hosted gold deposits at Cortez Hills. Previous work by Timberline Resources mineralization was within collapse breccia zones. Gold is also associated with collapse breccia at the:
Meikle Mine
Rain Mine
Railroad district in the southern Carlin Trend
An additional 72 soil samples were collected to help delineate the possible extension of the collapse breccia zones on the Golden Snow Project. Fourteen rock samples were collected to help characterize the area around the magnetically indicated intrusive.
Our consulting geologist recommends three reverse circulation drill holes for a total of 3,000 feet are proposed based on the compilation and evaluation of the data. Two of these holes will test likely locations for gold-bearing collapse breccias. The third hole will test adjacent to the probable intrusive indicated by the ground magnetic data.
The proposed drill program would cost approximately $175,000, summarized as follows:
Compliance with Government Regulations
Exploration and development activities are all subject to stringent national, state and local regulations. All permits for exploration and testing must be obtained through the local Bureau of Land Management (“BLM”) offices of the Department of Interior in the State of Nevada. The granting of permits requires detailed applications and filing of a bond to cover the reclamation of areas of exploration. From time to time, an archaeological clearance may need to be obtained prior to proceeding with any exploration programs.We plan to secure all necessary permits for any future exploration.
We have to apply for and receive permits from the BLM to conduct drilling activities on BLM administered lands. Mining operations are regulated by the Mine and Safety Health Administration (“MSHA”). MSHA inspectors periodically visit projects to monitor health and safety for the workers, and to inspect equipment and installations for code requirements. Workers must have completed MSHA safety training and must take refresher courses annually when working on a project. A safety officer for the project should also on site.
Other regulatory requirements monitor the following:
(i) Explosives and explosives handling.
(ii) Use and occupancy of site structures associated with mining.
(iii) Hazardous materials and waste disposal.
(iv) State Historic site preservation.
(v) Archaeological and paleontological finds associated with mining.
We believe that we are in compliance with all laws and plan to continue to comply with the laws in the future. We believe that compliance with the laws will not adversely affect its business operations. There is however no assurance that any change in government regulation in the future will not adversely affect our business operations.
Each year we must pay a maintenance fee of $140 per claim to the Nevada State Office of the Bureau of Land Management and on September 1 of each year we must file an affidavit and Notice of Intent to Hold the claims in Mineral County. With respect to the Golden Snow Project, we have paid the required maintenance fees and filed the affidavits required in order to extend the claims to August 31, 2014.
Compliance with Environmental Regulation
We will have to sustain the cost of reclamation and environmental remediation for all exploration work undertaken. 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 up and renewed along standard guidelines outlined in the usual permits. Reclamation is the process of bringing the land back to its 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. 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 recommended work program. 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 earnings, our competitive position or us in the event that a potentially economic deposit is discovered.
Prior to undertaking mineral exploration activities, we must make application for a permit, if we anticipate disturbing land. A permit is issued after review of a complete and satisfactory application. We do not anticipate any difficulties in obtaining a permit, if needed. If we enter the production phase, the cost of complying with permit and regulatory environment laws will be greater because the impact on the project area is greater. Permits and regulations will control all aspects of the production program if the project continues to that stage. Examples of regulatory requirements include:
(i) Water discharge will have to meet drinking water standards;
(ii) Dust generation will have to be minimal or otherwise re-mediated;
(iii) Dumping of material on the surface will have to be re-contoured and re-vegetated with natural vegetation;
(iv) An assessment of all material to be left on the surface will need to be environmentally benign;
(v) Ground water will have to be monitored for any potential contaminants;
(vi) The socio-economic impact of the project will have to be evaluated and if deemed negative, will have to be re-mediated; and
(vii) There will have to be an impact report of the work on the local fauna and flora including a study of potentially endangered species.
Competition
We are an exploration stage company. We compete with other mineral resource exploration and development companies for financing and for the acquisition of new mineral properties. Many of the mineral resource exploration and development companies with whom we compete have greater financial and technical resources than we do. Accordingly, these competitors may be able to spend greater amounts on acquisitions of mineral properties of merit, on exploration of their mineral properties and on development of their mineral properties. In addition, they may be able to afford greater geological expertise in the targeting and exploration of mineral properties. This competition could result in competitors having mineral properties of greater quality and interest to prospective investors who may finance additional exploration and development. This competition could adversely impact our ability to finance further exploration and to achieve the financing necessary for us to develop our mineral properties.
Employees
We have no employees as of the date of this Annual Report on Form 10-K other than our sole executive officer and director. We conduct our business largely through agreements with consultants and arms-length third parties.
Research And Development Expenditures
We have not incurred any research expenditures since our incorporation.
Patents And Trademarks
We do not own, either legally or beneficially, any patent or trademark.
ITEM 1A.
ITEM 1A. RISK FACTORS.
The following are some of the important factors that could affect our financial performance or could cause actual results to differ materially from estimates contained in our forward-looking statements. We may encounter risks in addition to those described below. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, may also impair or adversely affect our business, financial condition or results of operation.
If we do not obtain additional financing, our business will fail.
As at April 30, 2013, we had cash on hand of $716. Our plan of operation calls for significant expenses in order to meet our obligations under the Earn-In Agreement. There is no guarantee that we will exercise our option.
Obtaining financing would be subject to a number of factors outside of our control, including market conditions and additional costs and expenses that might exceed current estimates. These factors may make the timing, amount, terms or conditions of financing unavailable to us in which case we will be unable to complete our plan of operation on our mineral properties and to meet our obligations under our option agreements.
We have yet to attain profitable operations and because we will need to obtain financing to continue our business operations, our accountants believe that there is substantial doubt about our ability to continue as a going concern.
We have incurred a net loss of $2,385,215 for the period from February 20, 2001 (inception) to April 30, 2013 and have no revenues to date. Our future is dependent upon our ability to obtain financing. Our auditors have expressed substantial doubt about our ability to continue as a going concern given our accumulated losses and working capital deficiency. This opinion could materially limit our ability to raise additional funds by issuing new debt or equity securities or otherwise. If we fail to raise sufficient capital, we will not be able to complete our business plan. As a result, we may have to liquidate our business and investors may lose their investment.
We may conduct further offerings in the future in which case investors’ shareholdings will be diluted.
Since our inception, we have relied on equity sales of our common stock to fund our operations. We may conduct additional equity offerings in the future to finance any future business projects that we decide to undertake. If common stock is issued in return for additional funds, the price per share could be lower than that paid by our current stockholders. We anticipate continuing to rely on equity sales of our common stock in order to fund our business operations. If we issue additional stock, investors’ percentage interest in us will be diluted. The result of this could reduce the value of their stock.
Because of the unique difficulties and uncertainties inherent in mineral exploration ventures, we face a high risk of business failure.
Investors should be aware of the difficulties normally encountered by new mineral exploration companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration of the mineral properties that we plan to undertake. These potential problems include, but are not limited to, unanticipated problems relating to exploration, and additional costs and expenses that may exceed current estimates.
We have no known mineral reserves and if we cannot find any, we will have to cease operations.
We have no mineral reserves. If we do not find a mineral reserve containing gold or if we cannot explore the mineral reserve, either because we do not have the money to do it or because it will not be economically feasible to do it, we will have to cease operations and you will lose your investment. Mineral exploration, particularly for gold, is highly speculative. It involves many risks and is often non-productive. Even if we are able to find mineral reserves on our properties, our production capability is subject to further risks including:
- Costs of bringing the property into production including exploration work, preparation of production feasibility studies, and construction of production facilities, all of which we have not budgeted for;
- Availability and costs of financing;
- Ongoing costs of production; and
- Environmental compliance regulations and restraints.
The marketability of any minerals acquired or discovered may be affected by numerous factors which are beyond our control and which cannot be accurately predicted, such as market fluctuations, the lack of milling facilities and processing equipment near our mineral properties, and such other factors as government regulations, including regulations relating to allowable production, importing and exporting of minerals, and environmental protection.
Given the above noted risks, the chances of finding reserves on our mineral properties are remote and funds expended on exploration will likely be lost.
Even if we discover proven reserves of precious metals on our mineral properties, we may not be able to successfully commence commercial production.
Our mineral properties do not contain any known bodies of ore. If our exploration programs are successful in discovering proven reserves on our mineral properties, we will require additional funds in order to place the mineral properties into commercial production. The expenditures to be made by us in the exploration of mineral properties in all probability will be lost as it is an extremely remote possibility that the mineral claims will contain proven reserves. If our exploration programs are successful in discovering proven reserves, we will require additional funds in order to place the mineral properties into commercial production. The funds required for commercial mineral production can range from several millions to hundreds of millions. We currently do not have sufficient funds to place our mineral claims into commercial production. Obtaining additional financing would be subject to a number of factors, including the market price for gold and the costs of exploring for or mining these materials. These factors may make the timing, amount, terms or conditions of additional financing unavailable to us. Because we will need additional financing to fund our exploration activities there is substantial doubt about our ability to continue as a going concern. At this time, there is a risk that we will not be able to obtain such financing as and when needed.
We face significant competition in the mineral exploration industry.
We compete with other mining and exploration companies possessing greater financial resources and technical facilities than we do in connection with the acquisition of mineral exploration claims and leases on precious metal prospects and in connection with the recruitment and retention of qualified personnel. There is significant competition for precious metals and, as a result, we may be unable to acquire an interest in attractive mineral exploration properties on terms we consider acceptable on a continuing basis.
There is no assurance that we will be able to comply with our obligations under the Earn-In Agreement.
In order comply with our obligations under the Earn-In Agreement we are required to make a series of cash payments and meet the annual claim maintenance fees. In order to meet these payments we will need to obtain substantial financing. If we are unable to meet these payments, we will lose our options to acquire these properties.
Because our sole director and executive officer does not have formal training specific to the technicalities of mineral exploration, there is a higher risk that our business will fail.
Howard Thomson, our sole director and executive officer, does not have any formal training as a geologist or in the technical aspects of managing a mineral exploration company. Mr. Thomson’s lack of expertise could cause irreparable harm to our operations, earnings, and ultimate financial success could suffer irreparable harm due to management's lack of experience in this industry.
Because the prices of metals fluctuate, if the price of metals for which we are exploring decreases below a specified level, it may no longer be profitable to explore for those metals and we will cease operations.
Prices of metals are determined by such factors as expectations for inflation, the strength of the United States dollar, global and regional supply and demand, and political and economic conditions and production costs in metals producing regions of the world. The aggregate effect of these factors on metal prices is impossible for us to predict. In addition, the prices of precious metals are sometimes subject to rapid short-term and/or prolonged changes because of speculative activities. The current demand for and supply of these metals affect the metal prices, but not necessarily in the same manner as current supply and demand affect the prices of other commodities. The supply of these metals primarily consists of new production from mining. If the prices of the metals are, for a substantial period, below our foreseeable cost of production, we could cease operations and investors could lose their entire investment.
The quotation price of our common stock may be volatile, with the result that an investor may not be able to sell any shares acquired at a price equal to or greater than the price paid by the investor.
Our common shares are quoted on the OTC Markets under the symbol "TVER”. Companies quoted on the OTC Markets have traditionally experienced extreme price and volume fluctuations. In addition, our stock price may be adversely affected by factors that are unrelated or disproportionate to our operating performance. 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. As a result of this potential volatility and potential lack of a trading market, an investor may not be able to sell any of our common stock that they acquire at a price equal or greater than the price paid by the investor.
Because our stock is a penny stock, shareholders will be more limited in their ability to sell their stock.
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the Nasdaq system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or quotation system. Because our securities constitute “penny stocks” within the meaning of the rules, the rules apply to us and to our securities. The rules may further affect the ability of owners of shares to sell our securities in any market that might develop for them. As long as the trading price of our common stock is less than $5.00 per share, the common stock will be subject to Rule 15g-9 under the Exchange Act. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that:
1. contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading;
2. contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of securities laws;
3. contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price;
4. contains a toll-free telephone number for inquiries on disciplinary actions;
5. defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and
6. contains such other information and is in such form, including language, type, size and format, as the SEC shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with: (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitably statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our stock.
ITEM 2.
ITEM 2. PROPERTIES.
We rent office space at Suite 201, 810 Peace Portal Drive, Blaine, WA 98230, at a cost of $1,500 per year. This rental is on a month-to-month basis without a formal contract.
Our mineral property is discussed in detail above under the heading “ITEM 1. BUSINESS”.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
We are not a party to any other legal proceedings and, to our knowledge, no other legal proceedings are pending, threatened or contemplated.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES.
We are not a party to any other legal proceedings and, to our knowledge, no other legal proceedings are pending, threatened or contemplated.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
MARKET INFORMATION
Our shares are quoted on the OTC Markets Pink Sheets under the symbol “TVER”. The high and the low prices for our shares for each quarter of our last two fiscal years of actual trading were:
Quotations provided by the OTC Markets Pink Sheets reflect inter-dealer prices, without retail mark-up, markdown or commission and may not represent actual transactions. The high and low price information provided above was obtained from Stockwatch. The market quotations provided reflect inter-dealer prices, without retail mark-up, markdown or commission and may not represent actual transactions.
REGISTERED HOLDERS OF OUR COMMON STOCK
As of August 13, 2013, there were one hundred and forty one (141) registered holders of our common stock. We believe that a large number of stockholders hold stock on deposit with their brokers or investment bankers registered in the name of stock depositories.
DIVIDENDS
We have not declared any dividends on our common stock since our inception. There are no dividend restrictions that limit our ability to pay dividends on our common stock in our Articles of Incorporation or bylaws. Chapter 78 of the Nevada Revised Statutes (the “NRS”), does provide certain limitations on our ability to declare dividends. Section 78.288 of Chapter 78 of the NRS prohibits us from declaring dividends where, after giving effect to the distribution of the dividend:
(a) we would not be able to pay our debts as they become due in the usual course of business; or
(b) except as may be allowed by our Articles of Incorporation, our total assets would be less than the sum of our total liabilities plus the amount that would be needed, if we were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of stockholders who may have preferential rights and whose preferential rights are superior to those receiving the distribution.
We have neither declared nor paid any cash dividends on our capital stock and do not anticipate paying cash dividends in the foreseeable future. Our current policy is to retain any earnings in order to finance the expansion of our operations. Our board of directors will determine future declaration and payment of dividends, if any, in light of the then-current conditions they deem relevant and in accordance with the Nevada Revised Statutes.
RECENT SALES OF UNREGISTERED SECURITIES
Other than as disclosed in our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, we did not complete any sales of unregistered securities during the year ended April 30, 2013.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
PLAN OF OPERATION
During the next twelve months, we will be required to make a number of payments in order to maintain our interest to acquire a 75% interest in the Golden Snow Project. Under the terms of our Earn-In Agreement, in order to keep the Golden Snow Property in good standing, we are required: (i) to pay to Pengram $75,000 being the amount payable on June 30, 2014; (ii) complete cumulative exploration expenditures of $250,000 by June 30, 2014; (iii) pay the Bureau of Land Management maintenance and claim fees by September 1, 2014; and (iv) pay any advance royalty payments. If we are unable to make the payments to Claremont or the Bureau of Land Management we will lose our interest in the Golden Snow Property.
As the agreement is an option, we may decide at any time not to proceed in which case we would not be liable to pay any funds beyond the amounts due at the time we provide notice that we are not proceeding. There is no assurance that we will exercise the option.
As at April 30, 2013, we had $716 cash on hand. Accordingly, we have insufficient cash on hand to proceed with our exploration on the Golden Snow Project and meet our ongoing operating costs. As such, we will require substantial financing in order to meet our obligations. There is no assurance that we will be able to acquire such financing on terms that are acceptable to us, or at all.
RESULTS OF OPERATIONS
Summary of Year End Results
Revenues
We have not earned any revenues since our inception. We do not anticipate earning revenues until such time as we enter into commercial production of our mineral properties. 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 properties or if such deposits are discovered, that we will enter into further substantial exploration programs.
Operating Expenses
The major components of our expenses for the year ended April 30, 2013 and 2012 are outlined in the table below:
Our operating expenses increased from $142,966 during the year ended April 30, 2012, to $165,996, during the year ended April 30, 2013. The increase in our operating expenses is due to increases in mineral exploration costs, professional fees and transfer agent and regulatory fees. The increase in our operating expenses was partially offset by decreases in general and administrative expenses, and the fact that we recorded an impairment of mineral property costs during the year ended April 30, 2012.
Mineral exploration costs primarily relate to expenses incurred in connection with the Earn-In Agreement with Pengram.
Professional fees primarily relate to expenses incurred in connection with meeting our ongoing reporting obligations under the Exchange Act.
Management fees consist of amounts incurred to our sole executive officer and director for his management consulting services.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Working Capital
We had cash on hand of $716 and a working capital deficit of $185,495 as of April 30, 2013 compared to a working capital deficit of $38,980 as of April 30, 2012. The increase in our working capital deficit is due to an increase in accounts payable and accrued expenses as a result of our lack of capital to meet ongoing costs.
Financing Requirements
Currently, we do not have sufficient financial resources to meet our ongoing operating expenditures. As such, our ability to complete our plan of operation is dependent upon our ability to obtain additional financing in the near term.
We anticipate continuing to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing shareholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our business operations.
OFF-BALANCE SHEET ARRANGEMENTS
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with United States generally accepted accounting principles requires our management to make estimates and assumptions that affect the reported amount 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. Actual results could differ from those estimates. Our management routinely makes judgments and estimates about the effects of matters that are inherently uncertain.
Our significant accounting policies are disclosed in Note 2 to the audited financial statements included in this Annual Report.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Audited Financial Statements for the Years Ended April 30, 2013 and 2012, including:
1.
Report of Saturna Group Chartered Accountants LLP;
2.
Report of Sarna & Company, Certified Public Accountants;
3.
Balance Sheets as at April 30, 2013 and 2012;
4.
Statements of Operations for the years ended April 30, 2013 and 2012 and the period from inception on February 20, 2001 to April 30, 2013;
5.
Statements of Changes in Stockholders’ Equity (Deficit) for the period from inception on February 20, 2001 to April 30, 2013;
7.
Statements of Cash Flows for the years ended April 30, 2013 and 2012 and the period from inception on February 20, 2001 to April 30, 2013; and
8.
Notes to the Financial Statements.
TERRACE VENTURES INC.
(An Exploration Stage Company)
April 30,
(Expressed in US dollars)
Index
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Terrace Ventures Inc.
(An Exploration Stage Company)
We have audited the accompanying balance sheets of Terrace Ventures Inc. (An Exploration Stage Company) as of April 30, 2013, and the related statements of operations, stockholders’ equity (deficit), and cash flows for the year then ended and accumulated from May 1, 2012 to April 30, 2013. 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.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. An audit includes 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 internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of April 30, 2013, and the results of its operations and its cash flows for the year then ended and accumulated from May 1, 2012 to April 30, 2013, in conformity with accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has not generated any revenues, has a working capital deficit, and has incurred operating losses since inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also discussed in Note 1 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ SATURNA GROUP CHARTERED ACCOUNTANTS LLP
Saturna Group Chartered Accountants LLP
Vancouver, Canada
February 27, 2014
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Terrace Ventures Inc.
Blaine, Washington
We have audited the accompanying balance sheet of Terrace Ventures Inc., an exploration stage company, as of April 30, 2012, and the related statements of operations, stockholders’ equity (deficit), and cash flows for the year then ended, and for the period February 20, 2001 (date of inception) to April 30, 2012. These financial statements are the responsibility of Terrace Ventures Inc.’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. 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 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, the financial statements referred to above present fairly, in all material respects, the financial position of Terrace Ventures Inc., an exploration stage company, as of April 30, 2012, and the results of its operations and its cash flows for the year then ended, and for the period February 20, 2001 (date of inception) to April 30, 2012, in conformity with accounting principles generally accepted in the United States of America.
Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental statement of operating expenses is presented for the purposes of additional analysis and is not a required part of the basic financial statements, and in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
The accompanying 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 suffered recurring losses from operations, which raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ SARNA & COMPANY
Sarna & Company
Certified Public Accountants
Westlake Village, California
August 10, 2012
TERRACE VENTURES INC.
(An Exploration Stage Company)
Balance Sheets
(Expressed in US dollars)
(The accompanying notes are an integral part of these financial statements)
TERRACE VENTURES INC.
(An Exploration Stage Company)
Statements of Operations
(Expressed in US dollars)
(The accompanying notes are an integral part of these financial statements)
TERRACE VENTURES INC.
(An Exploration Stage Company)
Statements of Stockholders’ Equity (Deficit)
For the Period from February 20, 2011 (Date of Inception) to April 30, 2013
(Expressed in U.S. dollars)
(The accompanying notes are an integral part of these financial statements)
TERRACE VENTURES INC.
(An Exploration Stage Company)
Statements of Stockholders’ Equity (Deficit)
For the Period from February 20, 2011 (Date of Inception) to April 30, 2013
(Expressed in U.S. dollars)
(The accompanying notes are an integral part of these financial statements)
TERRACE VENTURES INC.
(An Exploration Stage Company)
Statements of Cash Flows
(Expressed in US dollars)
(The accompanying notes are an integral part of these financial statements)
TERRACE VENTURES INC.
(An Exploration Stage Company)
Notes to the financial statements
April 30, 2013
(Expressed in US dollars)
1. Nature of Operations and Continuance of Business
Terrace Ventures Inc. (the “Company”) was incorporated on February 20, 2001 in the State of Nevada. The Company is an exploration stage company, as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915, “Development Stage Entities”. The Company is in the business of acquiring, exploring, and developing mineral properties.
These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize it assets and discharge its liabilities in the normal course of business. During the year ended April 30, 2013, the Company has not generated any revenues, has a working capital deficit of $185,495, and has an accumulated deficit of $2,385,215. 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 the attainment of profitable operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These 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.
2. Summary of Significant Accounting Principles
These financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States.
(b) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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. The Company regularly evaluates estimates and assumptions related to impairment of mineral properties and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.
(d) Mineral Property Costs
The Company has been in the exploration stage since its inception and has not yet realized any revenues from its planned operations. It is primarily engaged in the acquisition and exploration of mining properties. Mineral property acquisition costs are capitalized as incurred. Exploration and evaluation costs are expensed as incurred until proven and probable reserves are established. The Company assesses the carrying costs for impairment under ASC 360, “Property, Plant, and Equipment” at each fiscal quarter end. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs then incurred to develop such property, are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserve. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.
TERRACE VENTURES INC.
(An Exploration Stage Company)
Notes to the financial statements
April 30, 2013
(Expressed in US dollars)
2.
Summary of Significant Accounting Principles (continued)
(e) Long-lived Assets
In accordance with ASC 360, “Property Plant and Equipment”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.
(f) Asset Retirement Obligations
The Company follows the provisions of ASC 440, “Asset Retirement and Environmental Obligations”, which establishes standards for the initial measurement and subsequent accounting for obligations associated with the sale, abandonment or other disposal of long-lived tangible assets arising from the acquisition, construction or development and for normal operations of such assets.
(g) Financial Instruments
Pursuant to ASC 820, “Fair Value Measurements and Disclosures”, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. 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. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
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 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 and cash equivalents, accounts payable and accrued liabilities, and loans payable. Pursuant to ASC 820, the fair value of our cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
TERRACE VENTURES INC.
(An Exploration Stage Company)
Notes to the financial statements
April 30, 2013
(Expressed in US dollars)
2.
Summary of Significant Accounting Principles (continued)
(h) Income Taxes
The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
(i) Foreign Currency Translation
The Company’s functional and reporting currency is the U.S. dollar. Transactions in foreign currencies are translated into the currency of measurement at the exchange rates in effect on the transaction date. Monetary balance sheet items expressed in foreign currencies are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are translated at historical rates. Revenues and expenses are translated at average rates for the period. The resulting exchange gains or losses are recognized in income.
(j) Stock-based Compensation
The Company records stock-based compensation in accordance with ASC 718, “Compensation - Stock Compensation” and ASC 505, “Equity Based Payments to Non-Employees”, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.
(k) Loss Per Share
The Company computes net loss per share in accordance with ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS 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 EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As at April30, 2013 and 2012, the Company had no potentially dilutive shares outstanding.
(l) Comprehensive Loss
ASC 220, “Comprehensive Income”, establishes standards for the reporting and display of comprehensive loss and its components in the consolidated financial statements. As of April 30, 2013 and 2012, the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the consolidated financial statements.
(m) Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
(n) Reclassifications
Certain balances in previously issued financial statements have been reclassified to be consistent with the current period presentation.
TERRACE VENTURES INC.
(An Exploration Stage Company)
Notes to the financial statements
April 30, 2013
(Expressed in US dollars)
To earn the first 25% interest, the Company must:
issue a $25,000 promissory note which was originally due on June 10, 2011 (issued); and
incur exploration expenditures of $250,000 on or before June 30, 2014.
To earn an additional 25% interest, the Company must:
pay $75,000 on or before June 30, 2014; and
incur total exploration expenditures of $750,000 on or before December 31, 2014.
To earn a further 25% interest, the Company must:
pay $100,000 on or before June 30, 2015; and
incur total exploration expenditures of $1,250,000 on or before December 31, 2015.
4. Related Party Transactions
TERRACE VENTURES INC.
(An Exploration Stage Company)
Notes to the financial statements
April 30, 2013
(Expressed in US dollars)
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
On June 27, 2013, we received a notice of resignation from Sarna & Company (“Sarna”), as the Company’s independent registered public accounting firm. Sarna's reports on our financial statements for the years ended April 30, 2012 and 2011 did not contain an adverse opinion or disclaimer of opinion, nor were they modified or qualified as to uncertainty, audit scope or accounting principles with the exception of a statement regarding the uncertainty of our ability to continue as a going concern. There have been no disagreements during the fiscal years ended April 30, 2012 and 2011 and the subsequent interim period up to and including the date of dismissal between Sarna and us on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which, if not resolved to the satisfaction of Sarna, would have caused them to make reference to the subject matter of the disagreement in connection with Sarna's report.
On June 27, 2013, we appointed Saturna Group Chartered Accountants LLP ("Saturna") as our new independent registered public accounting firm. We did not consult with Saturna during the fiscal years ended April 30, 2012 and 2011 and any subsequent interim period prior to their engagement regarding: (i) the application of accounting principles to a specific completed or proposed transaction or the type of audit opinion that might be rendered on our financial statements, and neither a written report was provided to us nor oral advice was provided that the newly appointed accountant concluded was an important factor in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement or a reportable event in response to paragraph (a)(1)(iv) of Item 304 of Regulation S-K, promulgated under the Securities Exchange Act of 1934, as amended.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
We carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of April 30, 2013 (the “Evaluation Date”). This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of the Evaluation Date as a result of the material weaknesses in internal control over financial reporting discussed below.
Notwithstanding the assessment that our internal control over financial reporting was not effective and that there were material weaknesses as identified in this report, we believe that our financial statements contained in our Annual Report on Form 10-K for the year ended April 30, 2013 fairly present our financial condition, results of operations and cash flows in all material respects.
Management's Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, for the Company.
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 our 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 our receipts and expenditures are being made only in accordance with authorizations of its management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Management recognizes that there are inherent limitations in the effectiveness of any system of internal control, and accordingly, even effective internal control can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect material misstatements. In addition, effective internal control at a point in time may become ineffective in future periods because of changes in conditions or due to deterioration in the degree of compliance with our established policies and procedures.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in there being a more than remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.
Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting, as of the Evaluation Date, based on the framework set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its evaluation under this framework, management concluded that our internal control over financial reporting was not effective as of the Evaluation Date.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of Evaluation Date and identified the following material weaknesses:
Insufficient Resources: We have an inadequate number of personnel with requisite expertise in the key functional areas of finance and accounting.
Inadequate Segregation of Duties: We have an inadequate number of personnel to properly implement control procedures.
Insufficient Written Policies & Procedures: We have insufficient written policies and procedures for accounting and financial reporting.
Inadequate Financial Statement Closing Process: We have an inadequate financial statement closing process.
Lack of Audit Committee & Outside Directors on the Company’s Board of Directors: We do not have a functioning audit committee and outside directors on the Company’s Board of Directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures.
Management is committed to improving its internal controls and will (1) continue to use third party specialists to address shortfalls in staffing and to assist the Company with accounting and finance responsibilities, (2) increase the frequency of independent reconciliations of significant accounts which will mitigate the lack of segregation of duties until there are sufficient personnel and (3) prepare and implement sufficient written policies and checklists for financial reporting and closing processes and (4) may consider appointing outside directors and audit committee members in the future.
Management, including our Chief Executive Officer and the Chief Financial Officer, has discussed the material weakness noted above with our independent registered public accounting firm. Due to the nature of this material weakness, there is a more than remote likelihood that misstatements which could be material to the annual or interim financial statements could occur that would not be prevented or detected.
This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management's report in this Annual Report.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended April 30, 2013 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls and Procedures
Our management, including our Chief Executive Officer and the Chief Financial Officer, do not expect that the our controls and procedures will prevent all potential errors or 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.
ITEM 9B.
ITEM 9B. OTHER INFORMATION.
We have become aware that six of the persons who acquired shares under the our Regulation S private placement offering had misrepresented to us that they were “accredited investors” as that term is defined in National Instrument 45-106 as adopted by Canadian Securities Administrators. Although we are not legally required to do so, we have advised the British Columbia Securities Commission that we intend to make a rescission offer to those investors. The exact terms of the offer have not been determined. If the offer is accepted by all of the investors the total cost of the rescission will be $62,000.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The following table sets forth the name and positions of our sole executive officer and director.
Name
Age
Positions
Howard Thomson
President, Secretary, Treasurer,
Chief Executive Officer, Chief Financial Officer
and Sole Director
Set forth below is a brief description of the background and business experience of our sole executive officer and director:
Howard Thomson is our President, Secretary, Treasurer, Chief Executive Officer, Chief Financial Officer, and the sole member of our Board of Directors. Mr. Thomson was appointed a director on January 16, 2006 and has served as our President, Secretary, Treasurer, Chief Executive Officer and Chief Financial Officer since January 16, 2006. Mr. Thomson was employed from 1981 to 1998 in senior management positions with the Bank of Montreal, including five years as Branch Manager, four years as Regional Marketing Manager and five years as Senior Private Banker. Mr. Thomson retired from the Bank of Montreal in 1998. From February 1999 to August 2006, Mr. Thomson served as a director and officer of Royalite Petroleum Company Inc. (formerly Worldbid Corporation), a public company quoted on the OTC Bulletin Board, engaged in the acquisition and exploration of oil and gas properties. Since February 16, 2008, Mr. Thomson has served as the sole executive officer and sole director of Greenlite Ventures Inc., a public company quoted on the OTC Bulletin Board, engaged in the exploration of mineral properties.
Mr. Thomson provides his services on a part-time basis as required for our business. Mr. Thomson presently commits approximately 6 to 8 hours a week of his business time to our business. On March 21, 2006, we entered into a management agreement with Howard Thomson. See “Employment Contracts” below.
Terms of Office
Our directors are appointed for one year terms to hold office until the next annual general meeting of the holders of the our common stock, as provided by Article 330 of Chapter 78 “Private Corporations” of the Nevada Revised Statutes, or until removed from office in accordance with our by-laws. Our officers are appointed by our board of directors and hold office until removed by our board.
We do not pay to our directors any compensation for each director serving as a director on our board of directors. We anticipate that compensation may be paid to officers in the event that we determine to proceed with additional exploration programs beyond the fourth phase of our exploration program.
Significant Employees
We have no significant employees other than our sole officer and director. We conduct our business through agreements with consultants and arms-length third parties.
Committees of the Board Of Directors
Our audit committee presently consists of our sole director. We do not have a compensation committee, nominating committee, an executive committee of our board of directors, stock plan committee or any other committees. Our sole director performs the functions of a nominating committee and oversees the process by which individuals may be nominated to our board of directors. The current size of our board of directors does not facilitate the establishment of a separate committee. We hope to establish a separate nominating committee consisting of independent directors, if the number of our directors is expanded.
Audit Committee Financial Expert
We have no audit committee financial expert serving on our audit committee. We believe the cost related to retaining a financial expert at this time is prohibitive. Further, because of our stage of development, we believe the services of a financial expert are not warranted.
Code Of Ethics
We adopted a Code of Ethics applicable to our Chief Executive Officer, Chief Financial Officer, Corporate Controller and certain other finance executives, which is a "code of ethics" as defined by applicable rules of the SEC. Our Code of Ethics was attached as an exhibit to our Annual Report on Form 10-KSB for the year ended April 30, 2004. If we make any amendments to our Code of Ethics other than technical, administrative, or other non-substantive amendments, or grant any waivers, including implicit waivers, from a provision of our Code of Ethics to our Chief Executive Officer, Chief Financial Officer, or certain other finance executives, we will disclose the nature of the amendment or waiver, its effective date and to whom it applies in a Current Report on Form 8-K filed with the SEC.
Compliance with Section 16(a) of the Securities Exchange Act
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who beneficially own more than 10% of our equity securities (collectively, the “Reporting Persons”), to file reports of ownership and changes in ownership with the SEC. Reporting Persons are required by SEC regulations to furnish us with copies of all forms they file pursuant to Section 16(a). Based solely on our review of such reports received by the Company, no other reports were required for those persons.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
Summary Compensation Table
The following table sets forth total compensation paid to or earned by our named executive officers, as that term is defined in Item 402(m)(2) of Regulation S-K, during the fiscal years ended April 30, 2013 and 2012.
Outstanding Equity Awards at Fiscal Year End
As at April 30, 2013, we had no outstanding equity awards.
Employment Contracts
Other than as described below, we are not party to any employment contracts.
On March 21, 2006, we entered into a management consulting agreement with Mr. Thomson, pursuant to which he agreed to act as our President, Secretary, Treasurer, Chief Executive Officer and Chief Financial Officer and provide certain management consulting services in consideration of which we agreed to pay a fee of $2,500 per month and make a payment of $2,500 for prior services provided in the month of February, 2006. Pursuant to the terms of the agreement, Mr. Thomson may also be granted incentive stock options from time to time as the board of Terrace may determine in their discretion. The agreement may be terminated by Terrace at any time on three months notice to Mr. Thomson and Mr. Thomson may terminate on 30 days notice. The management consulting agreement with Mr. Thomson expired effective March 21, 2008. Although this agreement has expired, we have agreed to continue to pay Mr. Thomson $2,500 for his management services.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
EQUITY COMPENSATION PLANS
On March 21, 2006, our Board of Directors approved the 2006 Stock Incentive Plan (the "2006 Option Plan"). The 2006 Option Plan provides that the option price be the fair market value of the stock at the date of grant as determined by our Board of Directors. Options granted become exercisable and expire as determined by our Board of Directors.
The following table sets forth certain information concerning all equity compensation plans previously approved by stockholders and all previous equity compensation plans not previously approved by stockholders, as of the most recently completed fiscal year.
Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
(Excluding Securities
Reflected in column (a))
Plan Category
(a)
(b)
(c)
Equity Compensation Plans
Approved By Security Holders
Nil
N/A
N/A
Equity Compensation Plans Not
Approved By Security Holders
Nil
N/A
4,000,000
2006 Stock Incentive Plan
On March 21, 2006, we established our 2006 Stock Incentive Plan. The purpose of the 2006 Option Plan is to enhance the long-term stockholder value of Terrace by offering opportunities to our directors, officers, employees and eligible consultants and any entity that directly or indirectly is in control of or is controlled by Terrace (a “Related Company”) to acquire and maintain stock ownership in Terrace in order to give these persons the opportunity to participate in our growth and success, and to encourage them to remain in our service or a Related Company.
The 2006 Option Plan is administered by our Board of Directors or by a committee of two or more non-employee directors appointed by our Board of Directors (the "Plan Administrator"). Subject to the provisions of the 2006 Option Plan, the Plan Administrator has full and final authority to grant the awards of stock options and to determine the terms and conditions of the awards and the number of shares to be issued pursuant thereto. Options granted under the 2006 Option Plan may be either "incentive stock options," which qualify for special tax treatment under the Internal Revenue Code of 1986, as amended, (the "Code"), non-qualified stock options or restricted shares.
All of our employees and members of our Board of Directors are eligible to be granted options. Individuals who have rendered or are expected to render advisory or consulting services to us are also eligible to receive options. The maximum number of shares of our Common Stock with respect to which options or rights may be granted under the 2006 Option Plan to any participant is 1,000,000 shares with the number of authorized shares under the 2006 Option Plan increasing on the first day of each quarter beginning with the fiscal quarter commencing May 1, 2006 by the lesser of the following amounts: (1) 15% of the total increase in the number of shares of Common Stock outstanding during the previous fiscal quarter; or (2) a lesser number of shares of Common Stock as may be determined by the Board, subject to certain adjustments to prevent dilution.
The exact terms of the option granted are contained in an option agreement between us and the person to whom such option is granted. Eligible employees are not required to pay anything to receive options. The exercise price for incentive stock options must be no less than 75% of the fair market value of the Common Stock on the date of grant. The exercise price for non-qualified stock options is determined by the Plan Administrator in its sole and complete discretion. An option holder may exercise options from time to time, subject to vesting. Options will vest immediately upon death or disability of a participant and upon certain change of control events.
The Plan Administrator may amend the 2006 Option Plan at any time and in any manner, subject to the following: (1) no recipient of any award may, without his or her consent, be deprived thereof or of any of his or her rights thereunder or with respect thereto as a result of such amendment or termination; and (2) any outstanding incentive stock option that is modified, extended, renewed, or otherwise altered must be treated in accordance with Section 424(h) of the Code.
The 2006 Option Plan terminates on March 21, 2016 unless sooner terminated by action of our Board of Directors. All awards granted under the 2006 Option Plan expire ten years from the date of grant, or such shorter period as is determined by the Plan Administrator. No option is exercisable by any person after such expiration. If an award expires, terminates or is canceled, the shares of our Common Stock not purchased thereunder may again be available for issuance under the 2006 Option Plan.
We have not yet filed a registration statement under the Securities Act to register the shares of our Common Stock reserved for issuance under the 2006 Option Plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the number of shares of our common stock owned beneficially as of March 17, 2014 by: (i) each person (including any group) known to us to own more than five percent (5%) of any class of our voting securities, (ii) each of our directors and each of our named executive officers (as defined under Item 402(m)(2) of Regulation S-K), and (iii) officers and directors as a group. Unless otherwise indicated, the shareholders listed possess sole voting and investment power with respect to the shares shown.
(1) Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding on March 17, 2014. As of March 17, 2014, there were 33,160,660 shares of our common stock issued and outstanding.
CHANGES IN CONTROL
We are not aware of any arrangement that might result in a change in control in the future.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
RELATED TRANSACTIONS
None of the following parties has, during our last two fiscal years, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us, in which the Company is a participant:
(i) Any of our directors or officers;
(ii) Any person proposed as a nominee for election as a director;
(iii) Any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to our outstanding shares of common stock;
(iv) Any of our promoters; and
(v) Any relative or spouse of any of the foregoing persons who has the same house as such person.
DIRECTOR INDEPENDENCE
Our common stock is quoted on the OTC Markets Pink Sheets inter-dealer quotation system, which does not have director independence requirements. Under NASDAQ Rule 5605(a)(2), a director is not considered to be independent if he or she is also an executive officer or employee of the corporation. Our sole director, Howard Thomson, is also our sole executive officer. As a result, we do not have any independent directors.
As a result of our limited operating history and minimal resources, our management believes that it will have difficulty in attracting independent directors. In addition, we would likely be required to obtain directors and officers insurance coverage in order to attract and retain independent directors. Our management believes that the costs associated with maintaining such insurance is prohibitive at this time.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
During the fiscal years ended April 30, 2013 and 2012, we retained our independent auditors, Sarna & Company, Certified Public Accountants (“Sarna”), and Saturna Group Chartered Accountants LLP (“Saturna”) to provide services in the following categories and amounts:
Note:
Our Audit Committee has considered whether the provision of non-audit services is compatible with maintaining the independence of Sarna and Saturna, and has concluded that it is.
Policy on Pre-Approval by Audit Committee of Services Performed by Independent Auditors
The policy of our Audit Committee is to pre-approve all audit and permissible non-audit services to be performed by our independent auditors during the fiscal year.
No services related to Audit-Related Fees, Tax Fees or All Other Fees described above that were approved by the Audit Committee pursuant to the waiver of pre-approval provisions set forth in the applicable rules of the SEC.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
Notes:
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TERRACE VENTURES INC.
Date:
March 18, 2014
By:
/s/ Howard Thomson
HOWARD THOMSON
Chief Executive Officer, Chief Financial Officer ,
President, Secretary and Treasurer
(Principal Executive Officer & Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date:
March 18, 2014
By:
/s/ Howard Thomson
HOWARD THOMSON
Chief Executive Officer, Chief Financial Officer ,
President, Secretary, Treasurer and
Director