f10q0912_southernusa.htm

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Southern USA Resources, Inc.

(Formerly Atlantic Green Power Holding Company)

September 30, 2012 and 2011

Index to the Consolidated Financial Statements

Contents		Page(s)

Consolidated Balance Sheets at September 30, 2012 (Unaudited) and December 31,2011		F-2

Consolidated Statements of Operations for the Three Months and Nine Months Ended September 30, 2012 and 2011 and for the Period from April 27, 2012 (Exploration) through September 30, 2012 (Unaudited)		F-3

Consolidated Statement of Stockholders’ Deficit for the Interim Period Ended September 30, 2012 and for the Period from April 27, 2012 (Exploration) through September 30, 2012 (Unaudited)		F-4

Consolidated Statements of Cash Flows for the Nine Months Ended September 30,2012 and 2011 and for the Period from April 27, 2012 (Exploration) through September 30, 2012 (Unaudited)		F-5

Notes to the Consolidated Financial Statements (Unaudited)		F-6 - F-20

F-1

Southern USA Resources, Inc.

(Formerly Atlantic Green Power Holding Company)

(An Exploration Stage Company)

Consolidated Balance Sheets

	September 30, 2012			December 31, 2011
	(Unaudited)

ASSETS
CURRENT ASSETS:
Cash	$	16,384		$	-
Prepaid expenses and other current assets		102,116			-
Assets of discontinued operations		-			58,165

Total Current Assets		118,500			58,165

PROPERTY AND EQUIPMENT
Property and equipment		1,063,356			-
Accumulated depreciation		(37,519	)		-

Property and equipment, net		1,025,837			-

Debt issuance costs		35,078			-
Assets of discontinued operations		-			133,644

Total Assets	$	1,179,415		$	191,809

LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	253,504		$	-
Notes payable		250,000			250,000
Convertible notes payable, net of discount		500,000			402,778
Derivative liability - convertible notes payable		177,857			921,428
Derivative liability - warrants		294,384			1,098,214
Liabilities of discontinued operations		-			87,654

Total Current Liabilities		1,475,745			2,760,074

Secured convertible promissory notes, net of discount		1,491,033			-

Total Liabilities		2,966,778			2,760,074

STOCKHOLDERS' DEFICIT:
Preferred stock: $0.000001 par value; 20,000,000 shares authorized;
none issued or outstanding		-			-

Common stock: $0.000001 par value; 250,000,000 shares authorized;
29,043,528 and 43,528 shares issued and outstanding, respectively		29			1
Additional paid-in capital		8,768,480			1,518,508
Accumulated deficit		(4,363,970	)		(4,086,774	)
Deficit accumulated during the exploration stage		(6,191,902	)		-

Total stockholders' deficit		(1,787,363	)		(2,568,265	)

Total Liabilities and Stockholders' Deficit	$	1,179,415		$	191,809

See accompanying notes to the consolidated financial statements.

F-2

Southern USA Resources, Inc.

(Formerly Atlantic Green Power Holding Company)

( An Exploration Stage Company)

Consolidated Statements of Operations

		For the Three Months Ended September 30, 2012			For the Three Months Ended September 30, 2011			For the Nine Months Ended September 30, 2012			For the Nine Months Ended September 30, 2011			For the Period from April 27, 2012 (Exploration) through September 30, 2012
	(Unaudited)				(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)

Revenues earned during the exploration stage		$	-		$	-		$	-		$	-		$

Cost of revenues
Exploration costs			268,049			-			377,126			-			377,126

Total cost of revenues			268,049			-			377,126			-			377,126

Gross profit			(268,049	)		-			(377,126	)		-			(377,126	)

Operating Expenses
Compensation - Officer			148,217			-			7,126,631			-			7,126,631
General and administrative			127,731			-			192,494			-			192,494

Total operating expenses			275,948			-			7,319,125			-			7,319,125

Loss from continuing operations			(543,997	)		-			(7,696,251	)		-			(7,696,251	)
						-						-
Other (Income) Expenses
Interest income			(2	)		-			(7	)		-			(7	)
Interest expense			15,014			-			45,383			-			45,383
Interest expense - discount on notes			62,523						188,169						188,169
Change in fair value of derivative liabilities			45,131			-			(1,737,894	)		-			(1,737,894	)

Total other (income) expense			122,666			-			(1,504,349	)		-			(1,504,349	)

Loss from continuing operations before income tax provision			(666,663	)		-			(6,191,902	)		-			(6,191,902	)

Income tax provision			-			-			-			-			-

Net loss from continuing operations			(666,663	)		-			(6,191,902	)		-			(6,191,902	)

Discontinued operations
Loss from operations of discontinued operations, net of tax			-			(256,924	)		(127,594	)		(1,700,555	)
Loss from disposal of discontinued operations, net of tax			-			-			(149,602	)

Loss from discontinued operations, net of tax			-			(256,924	)		(277,196	)		(1,700,555	)		-

Net Loss		$	(666,663	)	$	(256,924	)	$	(6,469,098	)	$	(1,700,555	)	$	(6,191,902	)

Net Loss per Common Share
- BASIC AND DILUTED:
Continuing operations		$	(0.02	)	$	-		$	(0.37	)	$	-
Discontinued operations			-			(5.90	)		(0.02	)		(39.20	)
		$	(0.02	)	$	(5.90	)	$	(0.39	)	$	(39.20	)

Weighted average common shares outstanding
- Basic and Diluted			29,043,528			43,527			16,675,881			43,387

See accompanying notes to the consolidated financial statements.

F-3

Southern USA Resources, Inc.
(Formerly Atlantic Green Power Holding Company)
( An Exploration Stage Company)
Consolidated Statement of Stockholders' Deficit
For the Interim Period ended September 30, 2012
(Unaudited)

													Deficit
						Additional							Accumulated				Total
	Common Stock, $0.000001 Par Value					Paid-In			Accumulated				during the				Stockholders'
	Shares		Amount			Capital			Deficit				Exploration stage				Deficit

Balance, December 31, 2010		43,228		$	1		$	1,265,357		$	(1,874,175	)		$	-			$	(608,817	)

Common stock issued with convertible notes		300			-			250,000											250,000

Amortization of deferred compensation					-			3,151											3,151

Net loss											(2,212,599	)			-				(2,212,599	)

Balance, December 31, 2011		43,528			1			1,518,508			(4,086,774	)			-				(2,568,265	)

Common stock issued for equipment and compensation on April 27, 2012		29,000,000			28			7,249,972											7,250,000

Net loss											(277,196	)			(6,191,902	)			(6,469,098	)

Balance, September 30, 2012		29,043,528		$	29		$	8,768,480		$	(4,363,970	)		$	(6,191,902	)		$	(1,787,363	)

See accompanying notes to the consolidated financial statements.

F-4

Southern USA Resources, Inc.
(Formerly Atlantic Green Power Holding Company)
( An Exploration Stage Company)
Consolidated Statements of Cash Flows

	For the Nine Months Ended September 30, 2012			For the Nine Months Ended September 30, 2011			For the Period from April 27, 2012 (Exploration) through September 30, 2012
	(Unaudited)			(Unaudited)			(Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(6,469,098	)	$	(1,700,555)		$	(6,191,902	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		37,519			-			37,519
Write-off of western site investment		-			741,147			-
Stock based compensation		6,957,267			3,151			6,957,267
Amortization of debt discount		178,748			462,845			178,748
Amortization of debt issuace costs		9,421			-			9,421
Change in fair value of derivative financial instruments		(1,737,894	)		95,612			(1,737,894	)
Loss from discontinued operations, net of tax		-			-			(277,196	)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(88,468)			(560	)		(88,468	)
Debt issuance costs		(44,500	)		-			(44,500	)
Accounts payable and accrued expenses		103,350			(36,168	)		103,350

NET CASH USED IN OPERATING ACTIVITIES		(1,053,655	)		(434,528	)		(1,053,655	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Deposits		133,644			-			133,644
Purchase of property and equipment		(708,122	)		-			(708,122	)
Proceeds from sale of investment projects		-			168,000			-

NET CASH USED IN INVESTING ACTIVITIES		(574,478	)		168,000			(574,478	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceed from notes payable		60,000			250,000			60,000
Repayment of notes payable		-			(1,210	)		-
Proceed from convertible notes payable		1,540,000			-			1,540,000

NET CASH PROVIDED BY FINANCING ACTIVITIES		1,600,000			248,790			1,600,000

NET CHANGE IN CASH		(28,133	)		(17,738	)		(28,133	)

Cash at beginning of the period		44,517			135,325			44,517

Cash at end of the period	$	16,384		$	117,587		$	16,384

SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:

Interest paid	$	566		$	-		$	1,879
Income tax paid	$	-		$	-		$	-

See accompanying notes to the consolidated financial statements.

F-5

Southern USA Resources, Inc.

(Formerly Atlantic Green Power Holding Company)

(An Exploration Stage Company)

Note to the Consolidated Financial Statements

(Unaudited)

1.	Organization and Operations

Organization

Southern USA Resources, Inc. (the “Company”) was incorporated as “Lodestar Mining, Incorporated” on October 31, 2006 under the laws of the State of Delaware.

On February 4, 2010, the Company changed its name to Atlantic Green Power Holding Company.

On April 23, 2012, the Company changed its name to Southern USA Resources, Inc.

Discontinued Operations

On February 27, 2012, the Company acquired certain real property located in the State of Alabama (the “Land Purchase”). Upon closing of the Land Purchase on April 27, 2012, the Company changed the direction of its business. Since February 3, 2010, the Company has been engaged in the development of utility-scale solar energy generation projects in the Mid-Atlantic region of the United States through its wholly-owned subsidiary, Atlantic. Following the closing of the Land Purchase, the Company changed its business strategy to the exploitation of mineral mining rights with respect to the acquired real estate properties and discontinued the operations of its utility-scale solar energy generation projects. Therefore, as of April 27, 2012, the results of the operations of the utility-scale solar energy generation projects have been classified as discontinued operations for all periods presented.

Reverse Stock Split

Effective April 23, 2012, the Company effectuated a 1,000-to-1 reverse stock split with respect to its outstanding shares of common stock, par value $.000001 per share (the “Reverse Stock Split”), and amended and restated its certificate of incorporation to (i) change its corporate name to “Southern USA Resources Inc.,” (ii) change the number of authorized shares of capital stock to 270,000,000, consisting of 250,000,000 shares of common stock and 20,000,000 shares of preferred stock, and (iii) provide that the par value per share, the amount of stated capital of the Company and the amount of paid-in surplus of the Company will not be increased or decreased due to the Reverse Stock Split. Prior to the Reverse Stock Split, there were 43,527,248 shares of the Company’s common stock outstanding, and after the Reverse Stock Split, there were 43,528 shares of the Company’s common stock outstanding.

The consolidated financial statements and footnotes have been presented to give retroactive effect to the reverse stock split.

2.	Summary of Significant Accounting Policies

Basis of Presentation - Unaudited Interim Financial Information

The accompanying unaudited interim consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2011 and notes thereto contained in the Company’s Annual Report on Form 10-K filed with the SEC on March 30, 2012.

Principles of Consolidation

The Company applies the guidance of Topic 810 “Consolidation” of the FASB Accounting Standards Codification to determine whether and how to consolidate another entity. Pursuant to ASC Paragraph 810-10-15-10 all majority-owned subsidiaries—all entities in which a parent has a controlling financial interest—shall be consolidated except (1) when control does not rest with the parent, the majority owner; (2) if the parent is a broker-dealer within the scope of Topic 940 and control is likely to be temporary; (3) consolidation by an investment company within the scope of Topic 946 of a non-investment-company investee. Pursuant to ASC Paragraph 810-10-15-8 the usual condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, of more than 50 percent of the outstanding voting shares of another entity is a condition pointing toward consolidation. The power to control may also exist with a lesser percentage of ownership, for example, by contract, lease, agreement with other stockholders, or by court decree. The Company consolidates all less-than-majority-owned subsidiaries, in which the parent’s power to control exists.

F-6

The consolidated financial statements of the Company include all accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.

Reclassification

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported losses.

Exploration Stage Company

The Company is an exploration stage company as defined by section 915-235-50 of the FASB Accounting Standards Codification. The Company is still devoting substantially all of its efforts on establishing the business and its planned principal operations have not commenced. All losses accumulated since inception has been considered as part of the Company's exploration stage activities.

Use of Estimates and Assumptions

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

The Company’s significant estimates and assumptions include the fair value of financial instruments; the carrying value, recoverability and impairment, if any, of long-lived assets income tax rate, income tax provision, deferred tax assets and the valuation allowance of deferred tax assets, and the assumption that the Company will continue as a going concern. Those significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such reviews, and if deemed appropriate, those estimates are adjusted accordingly.

Actual results could differ from those estimates.

Fair Value of Financial Instruments

The Company follows paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments and paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

Level 1		Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

Level 2		Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

Level 3		Pricing inputs that are generally observable inputs and not corroborated by market data.

F-7

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses and other current assets, accounts payable and accrued liabilities approximate their fair values because of the short maturity of these instruments.

The Company’s notes payable and convertible notes payable approximate the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at September 30, 2012 and December 31, 2011.

The Company’s Level 3 financial liabilities consist of the derivative warrant issued in October 2010 for which there is no current market for this security such that the determination of fair value requires significant judgment or estimation. The Company valued the reset adjustments in the warrant on subsequent potential equity offerings using a lattice model, with the assistance of a valuation specialist, for which management understands the methodologies. These models incorporate transaction details such as the Company’s stock price, contractual terms, maturity, risk free rates, as well as assumptions about future financings, volatility, and holder behavior as of the date of issuance and each balance sheet date.

Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated. It is not, however, practical to determine the fair value of advances from stockholders due to their related party nature.

Fair Value of Financial Assets and Liabilities Measured on a Recurring Basis

The Company uses Level 3 of the fair value hierarchy to measure the fair value of the derivative liabilities and revalues its derivative warrant liability and derivative feature of convertible notes at every reporting period and recognizes gains or losses in the consolidated statements of operations are attributable to the change in the fair value of the derivatives. Financial assets and liabilities measured at fair value on a recurring basis are summarized below and disclosed on the consolidated balance sheets as follows:

			Fair Value Measurement Using
December 31, 2011	Carrying Value		Level 1		Level 2		Level 3		Total

Derivative conversion features and warrant liabilities	$	2,019,642	$	-	$	-	$	2,019,642	$	2,019,642

			Fair Value Measurement Using
September 30, 2012	Carrying Value		Level 1		Level 2		Level 3		Total

Derivative conversion features and warrant liabilities	$	472,241	$	-	$	-	$	472,241	$	472,241

The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

	Fair Value Measurement Using Level 3 Inputs
	Derivative Liabilities		Total
Balance, December 31, 2010	$	1,686,351	$	1,686,351

Purchases, issuances and settlements		-		-

Total gains or losses (realized/unrealized)
included in net loss		333,291		333,291

Transfers in and/or out of Level 3		-		-

Balance, December 31, 2011	$	2,019,642	$	2,019,642

Purchases, issuances and settlements		190,493		190,493

Total gains or losses (realized/unrealized)
included in net loss		(1,737,894)		(1,737,894)

Transfers in and/or out of Level 3		,		,

Balance, September 30, 2012	$	472,241	$	472,241

F-8

Carrying Value, Recoverability and Impairment of Long-Lived Assets

The Company has adopted paragraph 360-10-35-17 of the Codification for its long-lived assets. The Company’s long-lived assets, which include debt issuance costs and property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives.

The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.

The impairment charges, if any, are included in operating expenses in the accompanying consolidated statements of operations.

Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Debt Issuance Costs

Debt issuance costs are capitalized and amortized over the term of the underlying debt instrument. The unamortized amounts are included in other assets in the accompanying consolidated balance sheets. Early debt repayment results in expensing these costs.

Property and Equipment

Property and equipment is stated at cost. Replacements, maintenance and repairs that do not improve or extend the life of the respective asset are expensed as incurred. Depreciation and amortization of machinery and mining equipment is provided on a straight-line basis over the asset’s estimated useful life of five (5) years. Upon sale or retirement, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations.

Mineral Properties

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

F-9

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

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

Discount on Debt

The Company allocated the proceeds received from convertible debt instruments between the underlying debt instruments and has recorded the conversion feature as a liability in accordance with paragraph 815-15-25-1 of the Codification (“Paragraph 815-15-25-1”). The conversion feature and certain other features that are considered embedded derivative instruments, such as a conversion reset provision have been recorded at their fair value within the terms of Paragraph 815-15-25-1 as its fair value can be separated from the convertible note and its conversion is independent of the underlying note value. The conversion liability is marked to market each reporting period with the resulting gains or losses shown in the consolidated statements of operations.

Derivative Instruments

The Company evaluates its convertible debt, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with Paragraph 810-10-05-4 of the Codification and Paragraph 815-40-25 of the Codification. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the consolidated statements of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within twelve months of the balance sheet date.

Embedded Beneficial Conversion Feature of Convertible Instruments

The Company recognizes and measures the embedded beneficial conversion feature of applicable convertible instruments by allocating a portion of the proceeds from the convertible instruments equal to the intrinsic value of that feature to additional paid-in capital. The intrinsic value of the embedded beneficial conversion feature is calculated at the commitment date as the difference between the conversion price and the fair value of the securities into which the convertible instruments are convertible. The Company recognizes the intrinsic value of the embedded beneficial conversion feature of the convertible notes so computed as interest expense.

Related Parties

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions. Pursuant to Section 850-10-20 the Related parties include a. affiliates of the Company; b. Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

F-10

The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

Commitment and Contingencies

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

Revenue Recognition

The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

Mineral Exploration and Development Costs

All exploration expenditures are expensed as incurred. Costs of acquisition and option costs of mineral rights are capitalized upon acquisition. Mine development costs incurred to develop mineral deposits, to expand the capacity of mines or to develop mine areas substantially in advance of production are also capitalized once proven and probable reserves exist, and the property is determined to be a commercially mineable property. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. If the Company does not continue with exploration after the completion of the feasibility study, the cost of mineral rights will be expensed at that time. Costs of abandoned projects, including related property and equipment costs, are charged to mining costs. To determine if these costs are in excess of their recoverable amount, periodic evaluations of the carrying value of capitalized costs and any related property and equipment costs are performed. These evaluations are based upon expected future cash flows and/or estimated salvage value.

F-11

Stock-Based Compensation for Obtaining Employee Services

The Company accounts for its stock based compensation in which the Company obtains employee services in share-based payment transactions under the recognition and measurement principles of the fair value recognition provisions of section 718-10-30 of the FASB Accounting Standards Codification. Pursuant to paragraph 718-10-30-6 of the FASB Accounting Standards Codification, 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. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. If the Company is a newly formed corporation or shares of the Company are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

The fair value of options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model. The ranges of assumptions for inputs are as follows:

●

Expected term of share options and similar instruments: The expected life of options and similar instruments represents the period of time the option and/or warrant are expected to be outstanding. Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and employees’ expected exercise and post-vesting employment termination behavior into the fair value (or calculated value) of the instruments. Pursuant to paragraph 718-50-S99-1, it may be appropriate to use the simplified method, if (i) A company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded; (ii) A company significantly changes the terms of its share option grants or the types of employees that receive share option grants such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term; or (iii) A company has or expects to have significant structural changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as the company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.

●

Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

●

Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected contractual life of the option and similar instruments.

●

Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the contractual life of the option and similar instruments.

The Company’s policy is to recognize compensation cost for awards with only service conditions and a graded vesting schedule on a straight-line basis over the requisite service period for the entire award.

F-12

Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services

The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of Sub-topic 505-50 of the FASB Accounting Standards Codification (“Sub-topic 505-50”).

Pursuant to ASC Section 505-50-30, 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. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. If the Company is a newly formed corporation or shares of the Company are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

The fair value of option or warrant award is estimated on the date of grant using a Black-Scholes option-pricing valuation model. The ranges of assumptions for inputs are as follows:

●

Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate holder’s expected exercise behavior. If the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.

●

Pursuant to ASC paragraph 505-50-25-7, if fully vested, non-forfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached. A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Whether the corresponding cost is an immediate expense or a prepaid asset (or whether the debit should be characterized as contra-equity under the requirements of paragraph 505-50-45-1) depends on the specific facts and circumstances. Pursuant to ASC paragraph 505-50-45-1, a grantor may conclude that an asset (other than a note or a receivable) has been received in return for fully vested, non-forfeitable equity instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra-equity by the grantor of the equity instruments. The transferability (or lack thereof) of the equity instruments shall not affect the balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other than employees in exchange for goods or services. Section 505-50-30 provides guidance on the determination of the measurement date for transactions that are within the scope of this Subtopic.

F-13

Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9, an entity may grant fully vested, non-forfeitable equity instruments that are exercisable by the grantee only after a specified period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance conditions. Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity had paid cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity instruments. A recognized asset, expense, or sales discount shall not be reversed if a stock option that the counterparty has the right to exercise expires unexercised.

Pursuant to ASC paragraph 505-50-30-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should be recorded.

Income Tax Provision

The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Income and Comprehensive Income in the period that includes the enactment date.

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”) with regards to uncertainty income taxes. Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary.

Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

Uncertain Tax Positions

The Company did not take any uncertain tax positions and had no adjustments to unrecognized income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the interim period ended September 30, 2012 or 2011.

Net Income (Loss) per Common Share

Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through stock options and warrants. The following table shows the potentially outstanding dilutive common shares excluded from the diluted net loss per share calculation for the nine months ended September 30, 2012 and 2011 as they were anti-dilutive:

F-14

	For the Interim Period Ended September 30, 2012		For the Interim Period Ended September 30, 2011
Stock options issued on February 5, 2010 to Rania Pontikos, Director of Technology and Strategic Planning		200		200

Convertible notes issued on October 12, 2010		12,500,000		714,286

Notes payable issued on February 4, 2011		6,250,000		-

Convertible notes payable		7,680,000		-

Warrants issued with the convertible notes		535,714		535,714

Total		26,965,914		1,250,200

In July 2012, the Company granted to its Directors 2,000,000 shares of its common stock. The stock grant shall vest over two years in equal quarterly installments of 250,000 shares at the end of each 90-day period from the date of the grant. If Director ceases to be a director of the Company, the unvested stock grant will expire. The Company recorded $62,500 in accrued compensation expense for the three and nine months ended September 30, 2012.

Cash Flows Reporting

The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards Codification.

Subsequent Events

The Company’s management reviewed all material events through the issuance date of this quarterly report on Form 10-Q and determined that were no material subsequent events to report except as disclosed in Note 11.

Recently Issued Accounting Pronouncements

FASB Accounting Standards Update No. 2011-08

In September 2011, the FASB issued the FASB Accounting Standards Update No. 2011-08 “Intangibles—Goodwill and Other: Testing Goodwill for Impairment” (“ASU 2011-08”). This Update is to simplify how public and nonpublic entities test goodwill for impairment. The amendments permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. Under the amendments in this Update, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount.

The guidance is effective for interim and annual periods beginning on or after December 15, 2011. Early adoption is permitted.

FASB Accounting Standards Update No. 2011-11

In December 2011, the FASB issued the FASB Accounting Standards Update No. 2011-11 “Balance Sheet: Disclosures about Offsetting Assets and Liabilities” (“ASU 2011-11”). This Update requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The objective of this disclosure is to facilitate comparison between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis of IFRS.

The amended guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods.

FASB Accounting Standards Update No. 2012-02

In July 2012, the FASB issued the FASB Accounting Standards Update No. 2012-02 “Intangibles—Goodwill and Other (Topic 350) Testing Indefinite-Lived Intangible Assets for Impairment” (“ASU 2012-02”).

F-15

This Update is intended to reduce the cost and complexity of testing indefinite-lived intangible assets other than goodwill for impairment. This guidance builds upon the guidance in ASU 2011-08, entitled Testing Goodwill for Impairment. ASU 2011-08 was issued on September 15, 2011, and feedback from stakeholders during the exposure period related to the goodwill impairment testing guidance was that the guidance also would be helpful in impairment testing for intangible assets other than goodwill.

The revised standard allows an entity the option to first assess qualitatively whether it is more likely than not (that is, a likelihood of more than 50 percent) that an indefinite-lived intangible asset is impaired, thus necessitating that it perform the quantitative impairment test. An entity is not required to calculate the fair value of an indefinite-lived intangible asset and perform the quantitative impairment test unless the entity determines that it is more likely than not that the asset is impaired.

This Update is effective for annual and interim impairment tests performed in fiscal years beginning after September 15, 2012. Earlier implementation is permitted.

Other Recently Issued, but Not Yet Effective Accounting Pronouncements

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.

3.	Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

As reflected in the accompanying consolidated financial statements, the Company had a deficit accumulated during its exploration stage at September 30, 2012, a net loss and net cash used in operating activities for the interim months then ended, respectively. In addition, the Company has no lending relationships with commercial banks and is dependent upon the completion of one or more financings to fund its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

While the Company is attempting to commence operations and generate sufficient revenues, the Company’s cash position may not be sufficient enough to support the Company’s daily operations. Management intends to raise additional funds by way of a public or private offering. Management believes that the actions presently being taken to further implement its business plan and generate sufficient revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to increase revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenues.

The consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

F-16

4	Property and equipment

Property and equipment, stated at cost, less accumulated depreciation at September 30, 2012 and December 31, 2011 consisted of the following:

	September 30,			December 31,
	2012			2011

Land	$	468,447		$	-
Machinery and mining equipment		594,909			-
Property and equipment		1,063,356			-
Less: Accumulated depreciation and amortization		(37,519	)		-
Property and equipment, net	$	1,025,837		$	-

Depreciation and amortization expense, included in costs and expenses in the accompanying consolidated statements of operations, was approximately $ 37,519 for the nine month period ended September 30 2012.

On April 27, 2012, the Company consummated the acquisition of two (2) real estate properties of approximately 52 acres located in the Clay County, Alabama for $438,447. The acquisition is part of the Company’s new business strategy of exploitation of mineral mining rights with respect to the acquired properties.

5.	Notes Payable

Note Payable – Whalehaven

On February 4, 2011, the Company entered into a Subscription Agreement with Whalehaven Capital Fund Limited (“Whalehaven”), pursuant to which Whalehaven loaned the Company $250,000, evidenced by a promissory note which had a term of six months and accrued interest at a 6% per annum (the “Whalehaven Note”). In addition, pursuant to the terms of the Subscription Agreement, the Company issued to Whalehaven 300,000 shares of the Company’s common stock in reliance upon an exemption from registration for a private transaction not involving a public distribution provided by Section 4(2) of the Securities Act. On August 4, 2011, the Whalehaven Note matured. From and after August 4, 2011, the Whalehaven Note accrued interest at a default rate of 8% annually until March 30, 2012 when the maturity date of the Whalehaven Note was extended to June 20, 2012. Whalehaven subsequently assigned a part of the note in the aggregate principal amount of $130,000. On June 20, 2012, the maturity date of the note was extended to June 20, 2013. As of September 30, 2012, accrued and unpaid interest under the Whalehaven Note was approximately $31,000.

The fair value of the common stock issued, estimated on the date of grant, was $480,000, which was recorded as a discount up to the value of the short-term note of $250,000. The Company credited $250,000 to additional paid-in capital and debited the same amount to the discount to the short-term note payable. As of December 31, 2011 $250,000 had been amortized and included in interest expense.

The Company recorded $5,041 of interest expense for note payable - Whalehaven for the three months ended September 30, 2012. On March 30, 2012 the Company amended the Whalehaven Note in the aggregate principal amount of $250,000 and $20,692 of accrued interest to be convertible into shares of the Company’s common stock, par value $.000001 per share, at a conversion price of $0.04 per share. The conversion price is subject to adjustment (full ratchet reset).

Notes Payable

On February 27, 2012, the Company entered into a Subscription Agreement with certain accredited investors (the “Subscribers”), pursuant to which the Subscribers collectively loaned $60,000 to the Company, evidenced by promissory notes (the “Notes”) maturing on May 26, 2012 and accruing interest at a rate of six percent (6%) annually. On April 27, 2012, the Subscribers converted the Notes into the April 2012 convertible note (Note 6). The Company recorded $601 in interest expense for the Notes during the nine months ended September 30, 2012.

6.	Convertible Notes Payable

Convertible Notes Payable

On October 12, 2010, the Company entered into a Subscription Agreement with Alpha Capital Anstalt and Adventure Ventures LLC (collectively, the “Subscribers”), pursuant to which the Subscribers purchased convertible notes in the aggregate principal amount of $500,000, which are convertible into 12,500,000 shares of the Company’s common stock at a conversion price of $0.04 per share, and warrants to purchase 535,714 shares of common stock with an exercise price of $0.04 per share (as amended on March 30, 2012). The notes issued to the Subscribers had a maturity date of April 12, 2012 which was extended to April 12, 2013 on July 18, 2012.

Convertible notes payable consisted of the following:

	September 30, 2012			December 31, 2011
Convertible notes payable	$	500,000		$	500,000

Discount on note payable		(500,000	)		(500,000	)

Accumulated amortization of discount		500,000			402,778
	$	500.000		$	402,778

F-17

The Company recorded $97,222 amortization of the discount to the convertible notes payable for nine months ended September 30, 2012. The Company recorded $9,973 and in interest expense for the Notes during the three months ended September 30, 2012.

Secured Convertible Promissory Notes

On April 27, 2012 the Company consummated the sale to certain accredited investors of secured convertible promissory notes due April 27, 2014 (the “April 2012 Notes”) in the aggregate principal amount of $1,920,000. The notes were issued at an original issue discount of 20% and bear no additional interest. The Notes are convertible into shares of the Company’s common stock, par value $.000001 per share, at a conversion price of $0.25 per share. The conversion price is subject to adjustment (full ratchet reset).

Secured convertible promissory notes payable consisted of the following:

	September 30, 2012			December 31, 2011
Convertible notes payable	$	1,920,000		$	-

Discount on note payable		(510,493	)		(-	)

Accumulated amortization of discount		81,526			-
	$	1,491,033		$	402,778

The Company recorded $56,961 and $81,526 amortization of the discount to the April 2012 Notes for the three and nine months ended September 30, 2012, respectively. The Company recorded $5,562 and $9,422 amortization of the deferred financing costs for the April 2012 Notes for the three and nine months ended September 30, 2012, respectively.

Conversion Feature

Each October 12, 2010 Convertible Note and the Whalehaven Notes have amended terms and interest accrues at 8% per annum. The holder of the convertible notes has the right from and after the issuance thereof until such time as the convertible note is fully paid, to convert any outstanding and unpaid principal portion thereof into shares of common stock at a conversion price of $0.04 per share. The April 2012 Notes convert any outstanding and unpaid principal into shares of common stock at a conversion price of $0.25 per share. The conversion price and number and kind of shares to be issued upon conversion of the convertible notes are subject to adjustment from time to time as more fully described in the convertible notes.

Due to the fact that these convertible notes have full reset adjustments based upon the issuance of equity securities by the Company in the future, they are subject to derivative liability treatment under Section 815-40-15 of the Codification (formerly FASB Emerging Issues Task Force 07-5). The convertible notes have been measured at fair value using a lattice model at year end with gains and losses from the change in fair value of derivative liabilities recognized on the consolidated statements of operations.

The convertible notes, when issued, gave rise to a derivative liability which was recorded as a discount to the notes. A discount of $500,000 and interest expense of $831,765 on the October 2012 Note; the Whalehaven Notes has a derivative liability of $0; and the April 2012 Notes recorded a derivative liability of $190,493 as of issuance on April 27, 2012.

The embedded derivative of the convertible notes was re-measured at September 30, 2012 yielding a loss on the change in fair value of the derivatives of $49,060. The derivative value of the convertible notes at September 30, 2012 yielded a derivative liability at fair value of $177,857.

Derivative Warrants

Each of the warrants issued to the Subscribers has a term of five years from October 12, 2010 and was fully vested on the date of issuance. The warrants are exercisable at $0.04 per share (amended March 30, 2012). The number of shares of common stock underlying each warrant and the exercise price are subject to certain adjustments as more particularly described in the warrants.

F-18

The warrants, when issued, gave rise to a derivative liability which was recorded as interest expense of $937,364. The embedded derivative of the warrants was re-measured at September 30, 2012 yielding a loss on change in fair value of the derivative of $294,384, for the nine months ended September 30, 2012. The derivative value of these warrants at September 30, 2012 and December 31, 2011 yielded a derivative liability at fair value of $294,384 and $1,098,214, respectively

As of September 30, 2012 warrants to purchase 535,714 shares of Company common stock remain outstanding. The table below summarizes the Company’s derivative warrant activity:

	Warrant Activities
												(Gain) Loss
	Derivative Shares		Non-derivative Shares		Total Warrant Shares		Fair Value of Derivative Warrants			APIC Reclassification of Derivative Liability		Change in Fair Value of Derivative Liability

Derivative warrant at December 31, 2011		535,714		-		535,714		(1,098,214	)		-		160,850

Exercise of warrants		-		-		-		-			-		-

Derivative warrants remaining		-		-		-		-			-		-

Mark to market		-		-		-		1,392,598			-		(1,392,598	)

Derivative warrant at September 30, 2012		535,714		-		535,714		294,384			-		(1,231,748	)

7.	Commitments and Contingencies

Employment Agreement

On April 25, 2012, Charles Merchant, Sr. was appointed a director of the Company and on April 26, 2012, Mr. Merchant was appointed Chief Executive Officer, Chief Financial Officer, President, Secretary and Treasurer of the Company. On April 27, 2012, the Company entered into an employment agreement with Mr. Merchant. The term of the Employment Agreement is one year renewable automatically for an additional year unless either party provide a 30-day advance written notice of non-renewal. Mr. Merchant will be paid an annual salary of $91,000.

8.	Stockholders’ Deficit

Common Stock

Effective April 23, 2012, the “Company effectuated a 1,000-to-1 Reverse Stock Split with respect to its outstanding shares of common stock. Prior to the Reverse Stock Split, there were 43,527,248 shares of the Company’s common stock outstanding, and after the Reverse Stock Split, there were 43,528 shares of the Company’s common stock outstanding.

On April 27, 2012, the Company entered into an Equipment Contribution Agreement with Charles H. Merchant, Sr. whereby Mr. Merchant contributed certain mining equipment with his cost basis of approximate $355,262 to the Company in consideration of the issuance of 29,000,000 shares of the Company’s common stock. Upon issuance of the shares of common stock, the Company valued the 29,000,000 common shares at $0.25 per share, or $7,250,000, $355,262 of which were recorded as property and equipment and the remaining balance of $6,894,738 of which is recorded as stock compensation expense.

Stock Options

In February 2010, the Company’s stockholders approved the Atlantic Green Power Holding Company Equity Incentive Plan (the “Incentive Plan”). The Incentive Plan went into effect on February 3, 2010. Ten million (10,000,000) shares of the Company’s common stock were reserved for issuance under the Incentive Plan.

On February 5, 2010, the Company granted under the Incentive Plan a nonqualified option to purchase 200 shares of its common stock to Rania Pontikos, Director of Technology and Strategic Planning of the Company. The nonqualified option was granted as compensation for services to the Company. The nonqualified option granted to Ms. Pontikos has an exercise price of $250 per share and expires on February 4, 2015. The shares underlying the nonqualified option are fully vested.

F-19

The table below summarizes the Company’s Incentive Plan stock option activities:

	Number of Option Shares		Exercise Price Range Per Share		Weighted Average Exercise Price		Weighted Average Remaining (in years) Contractual Term		Intrinsic Value (in thousands)

Balance, December 31, 2011		200	$	250	$	250		3.10	$	37,820

Granted		-		-		-		-		-

Cancelled		-		-		-		-		-

Vested and Exercisable September 30, 2012		200	$	250	$	250		2.43	$	-

The following table summarizes information concerning outstanding and exercisable stock options as of September 30, 2012:

		Options Outstanding					Options Exercisable
Range of Exercise Prices		Number Outstanding		Average Remaining Contractual Life (in years)	Weighted Average Exercise Price		Number Exercisable	Average Remaining Contractual Life (in years)	Weighted Average Exercise Price

$	250		200	2.43	$	250	200	2.43	$	250

At September 30, 2012, 9,800,000 shares of common stock remained available for issuance under the Incentive Plan.

The fair value of stock-based awards was estimated using the Black-Scholes-Merton option-pricing model. The Company’s computation of expected life is based on historical exercise and forfeiture patterns. The interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield curve in effect at the time of grant. The key factors in the Company’s determination of expected volatility are historical and market-based implied volatility, comparable companies with longer stock trading periods than the Company and industry benchmarks. The Company did not issue options to purchase its common stock during the nine months ended September 30, 2012 and 2011.

9.	Credit Risk

Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents. As of September 30, 2012, a majority of the Company’s cash and cash equivalents was held by two major financial institutions located in the United States, the balance of those accounts may at times exceed the amount insured by the Federal Deposit Insurance Corp. However, the Company has not experienced losses on these accounts and management believes that the Company is not exposed to significant risks on such accounts.

10.	Subsequent Event

The Company has evaluated all events that occurred after the balance sheet date through the date when the financial statements were issued. The Management of the Company determined that there were certain reportable subsequent events to be disclosed as follows:

Secured Convertible Promissory Notes

On October 24, 2012 the Company entered into a Subscription Agreement (the “Subscription Agreement”) of Secured Convertible Promissory Notes due October 24, 2014 (the “Notes”) in the aggregate principal amount of $200,000. The Notes were issued at an original issue discount of 20% and bear no additional interest. The Notes are convertible into shares of the Company’s common stock, at a conversion price of $0.20 per share. The conversion price of the Notes will be reduced to seventy five percent (75%) of its then-current amount if the Company fails to deliver for refining at least 700 ounces of gold by December 31, 2012. The conversion price is subject to adjustment for certain events, including the dividends, distributions or split of Common Stock, the Company’s consolidation, merger or reorganization, or in the event of the Company’s issuance of securities at a price lower than the per share conversion price then in effect.

Under the Subscription Agreement, the Company agreed to file a registration statement within 60 days after receipt of a written demand from the investors representing not less than 50% of the shares issuable upon conversion of the Notes, and to have it declared effective within 120 days after its filing. The Company will incur liquidated damages if it fails to file the registration statement or have it declared effective within a required period of time or fails to respond to the comments of the U.S. Securities and Exchange Commission within 15 business days after their receipt.

F-20

Item 2.

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

Overview

The Company was incorporated in the state of Delaware on October 31, 2006 under the name “Lodestar Mining, Incorporated.” From its inception until January 28, 2010, the Company was an exploration stage company with plans to search for mineral deposits or reserves.

On February 3, 2010, the Company acquired all of the issued and outstanding shares of common stock of Atlantic Green Power Corporation (“Atlantic”) pursuant to the Share Exchange, and Atlantic became a wholly-owned subsidiary of the Company. The Company issued an aggregate of 38,099,250 shares of common stock to the former shareholders of Atlantic, and the Company changed its corporate name to “Atlantic Green Power Holding Company.” As a result of the Share Exchange, the Company ceased its prior operations and commenced the operation of Atlantic as its sole line of business. Atlantic is a renewable energy company primarily focused on the location and development of utility-scale solar energy generation projects in the Mid-Atlantic United States, with a particular focus on the development of solar projects in southern New Jersey.

On February 27, 2012, the Company entered into (i) an Assignment of Mineral Lease with Gerald Short, Carolyn Short and Charles H. Merchant, Sr., (ii) a Southern Real Estate Sales Contract with John Hancock Life Insurance Company (U.S.A.) and (iii) a Real Estate Sales Contract with David E. Riley (each a “Real Estate Contract” and collectively, the “Real Estate Contracts”), whereby the Company agreed to acquire certain real property located in the state of Alabama (the “Land Purchase”). The Land Purchased was closed on April 27, 2012. Following the foregoing transactions, the Company changed the direction of its business. Since February 3, 2010, the Company has engaged in the development of utility-scale solar energy generation projects in the Mid-Atlantic region of the United States through its wholly-owned subsidiary, Atlantic. Following the closing of the Land Purchase, the Company changed its business strategy to the exploitation of mineral mining rights with respect to the acquired real estate properties. The Company is currently in the process of distributing all of the issued and outstanding shares of Atlantic’s common stock to the holders of the Company’s common stock.

On April 27, 2012, the Company consummated a private placement to accredited investors of Secured Convertible Promissory Notes due April 27, 2014 in the aggregate principal amount of $1,920,000 that were issued at an original issue discount of 20% and bear no additional interest.

Concurrently with the closing of the debt financing, the Company entered into and consummated transactions pursuant to the Equipment Contribution Agreement with Charles H. Merchant, Sr. whereby Mr. Merchant contributed certain mining equipment to the Company in consideration of the issuance of 29,000,000 shares of Common Stock.

On October 24, 2012, the Company consummated a private placement to accredited investors of Secured Convertible Promissory Notes due October 24, 2014 in the aggregate principal amount of $160,000 that were issued at an original issue discount of 20% and bear no additional interest.

On November 2012, the Company consummated a private placement to accredited investors of Secured Convertible Promissory Notes due November 2014 in the aggregate principal amount of $160,000 that were issued at an original issue discount of 20% and bear no additional interest.

Critical Accounting Estimates

This discussion and analysis of our consolidated financial condition presented in this section is based upon our unaudited consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our unaudited consolidated financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses, and related disclosures. We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our unaudited consolidated financial statements and, therefore, consider these to be our critical accounting policies. On an ongoing basis, we evaluate our estimates and judgments, including those related to valuation of discounts on debt and other related debt-related issuance costs and the valuation of beneficial conversion features in convertible debt and valuation of derivative liabilities. We based our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Deferred Issuance and Other Debt-Related Costs

Deferred issuance costs are amortized over the term of its associated debt instrument. We evaluate the terms of the debt instruments to determine if any embedded derivatives or beneficial conversion features exist. We allocate the aggregate proceeds of the notes payable between the warrants and the notes based on their relative fair values in accordance with ASC 470. The fair value of the warrants issued to note holders or placement agents are calculated utilizing the weighted average probability option-pricing model or probability weighted outcomes using a binomial model, depending on the terms of the instruments. We amortize the resultant discount or other features over the terms of the notes through its earliest maturity date using the effective interest method. Under this method, interest expense recognized each period will increase significantly as the instrument approaches its maturity date. If the maturity of the debt is accelerated because of defaults or conversions, then the amortization is accelerated.

Fair Value of Liabilities for Warrant and Embedded Conversion Option Derivative Instruments

Under applicable accounting guidance, an evaluation of outstanding warrants is made to determine whether warrants issued are required to be classified as either equity or a liability. Because certain warrants we have issued in connection with past financings contain certain provisions that may result in an adjustment to their exercise price, we classify them as derivative liabilities, and accordingly, we are then required to estimate the fair value of such warrants, at the end of each quarter. We use the weighted average probabilities of potential down-round scenarios and other assumptions utilizing an unmodified binomial model to estimate such fair value, which requires the use of numerous assumptions, including, among others, expected life, volatility of the underlying equity security, fair value of the underlying common stock, expectations of pricing of the future financing rounds, a risk-free interest rate and expected dividends. The use of different values by management in connection with these assumptions in the weighted average probabilities of potential down-round scenarios and other assumptions utilizing an unmodified binomial model could produce substantially different results. Because we record changes in the fair value of warrants or other features classified as liabilities as either a charge or credit in our consolidated statement of operations, significant changes in the underlying assumptions could have a material effect on our results of operations

New Accounting Pronouncements

See Note 2 to our consolidated financial statements included in this Report for discussion of recent accounting pronouncements.

Results of Operations

Three Months Ended September 30, 2012 Compared to the Three Months Ended September 30, 2011

							Period-over- Period			Period-over- Period
	2012			2011			$ Change			% Change
Revenues	$	-		$	-		$	-			-	%
Exploration costs		268,049			-			268,049			100.0	%
Operating expenses		275,948			-			275,948			100.0	%
Other (income) expense		122,666			-			122,666			100.0	%
Net loss from continuing operations		666,663			-			666,663			100.0	%
Loss from discontinued operations		-			256,924			(256,924	)		(100.0	)%
Net loss	$	666,663		$	256,924		$	409,739			159.5	%
Income (loss) per common share from continuing operations– basic and diluted	$	(0.02	)	$	-
Income (loss) per common share from discontinued operations– basic and diluted	$	(0.02	)	$	(5.90	)

Revenue

In April 2012, we initiated a new business strategy of exploration of mineral mining rights. Accordingly, we had no revenues from our mining exploration activities for the three months ended September 30, 2012.

Exploration costs

Exploration costs of $268,049 include property maintenance, exploration, development including permitting and all other non-production related to our exploration mining activities in the three months ended September 30, 2012.

Operating Expenses

Operating expenses include compensation and related costs include salaries, payroll related taxes, and related employee benefits of approximately eight part time and full time employees hired during the three months ended June 30, 2012. General and administrative consist of legal, accounting and other compliance fees in connection with meeting our ongoing reporting obligations during the period.

Other (Income) Expense

Net other (income) expense for the three months ended September 30, 2012 were $122,666, which consisted of $(2) in interest income, $15,014 in interest expense, $ 62,523 in interest expense related to amortization of discount on notes and $45,131 of expense related to the change in fair value of derivative liabilities.

Net loss from continuing operations

Loss from continuing operations for the three months ended September 30, 2012 was $666,663. The increase in loss from continuing operations was primarily attributable to the changes in exploration costs and operating expenses as detailed above.

Loss from discontinued operations

On February 27, 2012, we acquired certain real property located in the state of Alabama (the “Land Purchase”). Upon closing of the Land Purchase on April 27, 2012, we changed the direction of our business. Since February 3, 2010, we have been engaged in the development of utility-scale solar energy generation projects in the Mid-Atlantic region of the United States through its wholly-owned subsidiary, Atlantic. Following the closing of the Land Purchase, we changed our business strategy to the exploitation of mineral mining rights with respect to the acquired real estate properties and discontinued the operations of its utility-scale solar energy generation projects. Therefore, as of April 27, 2012, the results of the operations of the utility-scale solar energy generation projects have been classified as discontinued operations for all periods presented. Loss from discontinued operations for the three months ended September 30, 2011 was $256,924.

Net Loss

Net loss for the three months ended September 30, 2012 was $666,663 as compared to net loss for the three months ended September 30, 2011 of $256,924. The change in net loss was primarily attributable to the exploration costs in the amount of $268,049 and increased operating costs of $ 275,948 recorded during the three months ended September 30, 2012.

Inflation did not have a material impact on the Company’s operations for the period. Other than the foregoing, management knows of no trends, demands, or uncertainties that are reasonably likely to have a material impact on the Company’s results of operations.

Nine Months Ended September 30, 2012 Compared to the Nine Months Ended September 30, 2011

							Period-over- Period			Period-over- Period
	2012			2011			$ Change			% Change
Revenues	$	-		$	-		$	-			-	%
Exploration costs		377,126			-			377,126			100.0	%
Operating expenses		7,319,125			-			7,319,125			100.0	%
Other (income) expense		(1,504,349	)		-			(1,504,349	)		100.0	%
Net loss from continuing operations		6,191,902			-			6,191,902			100.0	%
Income (loss) from discontinued operations		277,196			1,700,555			(1,423,359	)		(83.7	)%
Net loss	$	6,469,098		$	1,700,555		$	4,768,543			280.4	%
Income (loss) per common share from continuing operations– basic and diluted	$	(0.37	)	$	-
Income (loss) per common share from discontinued operations– basic and diluted	$	(0.02	)	$	(39.20	)

Revenue

In April 2012, we initiated a new business strategy of exploration of mineral mining rights. Accordingly, we had no revenues from our mining exploration activities for the nine months ended September 30, 2012.

Exploration costs

Exploration costs of $377,126 include property maintenance, exploration, development including permitting and all other non-production related to our exploration mining activities in the nine months ended September 30, 2012.

Operating Expenses

On April 27, 2012, we entered into an Equipment Contribution Agreement with Charles H. Merchant, Sr. whereby Mr. Merchant contributed certain mining equipment to us in consideration of the issuance of 29,000,000 shares of our common stock. Upon issuance of the of the shares of common stock, we recorded compensation expense in the amount of $6,894,738 in the consolidated statement of operations for the nine months period ended September 30, 2012.

Other Income (Expense)

Net other (income) expense for the nine months ended September 30, 2012 were $(1,504,349) which consisted of $(7) in interest income, $45,383 in interest expense, $188,169 in interest expense related to amortization of discount on notes and $(1,737,894) of income related to the change in fair value of derivative liabilities.

Net loss from continuing operations

Loss from continuing operations for the nine months ended September 30, 2012 was $6,191,902. The increase in net loss from continuing operations was primarily attributable to the changes in operating expenses as detailed above.

Loss from discontinued operations

On February 27, 2012, we acquired certain real property located in the state of Alabama (the “Land Purchase”). Upon closing of the Land Purchase on April 27, 2012, we changed the direction of our business. Since February 3, 2010, we have been engaged in the development of utility-scale solar energy generation projects in the Mid-Atlantic region of the United States through its wholly-owned subsidiary, Atlantic. Following the closing of the Land Purchase, we changed our business strategy to the exploitation of mineral mining rights with respect to the acquired real estate properties and discontinued the operations of its utility-scale solar energy generation projects. Therefore, as of April 27, 2012, the results of the operations of the utility-scale solar energy generation projects have been classified as discontinued operations for all periods presented. Loss from discontinued operations for the nine months ended September 30, 2012 was $277,196 as compared to $1,700,555 for the comparable period in the previous year.

Net Loss

Net loss for the nine months ended September 30, 2012 was $6,469,098, as compared to net loss for the nine months ended September 30, 2011 of $1,700,555. The change in net loss was primarily attributable to the $6,894,738 compensation expense recorded during the nine months ended September 30, 2012 partially offset by the $1,423,359 decrease in loss from discontinued operations and the decrease of $1,504,349 related to the change in fair value of derivative liabilities.

Liquidity and Capital Resources

The following table summarizes total current assets, liabilities and working capital at September 30, 2012 and December 31, 2011.

	September 30, 2012			December 31, 2011
Current Assets	$	118,500		$	58,165
Current Liabilities	$	1,475,745		$	2,760,074
Working Capital Deficit	$	(1,357,245	)	$	(2,701,909	)

At September 30, 2012 we had a working capital deficit of $(1,357,245) as compared to a working capital deficit of $(2,701,909), at December 31, 2011, an increase of $ 1,344,664. The increase is primarily related to a decrease in the fair market value of derivative liabilities.

For the Nine Months Ended September 30, 2012 and September 30, 2011

Net cash used in operating activities for the nine months ended September 30, 2012 and nine months ended September 30, 2011 was $1,053,655 and $434,528, respectively. The net loss for the nine months ended September 30, 2012 and nine months ended September 30, 2011 was $6,469,098 and $1,700,555, respectively. Cash used in operating activities for the nine months ended September 30, 2012 consisted of for Compensation and related costs, in legal and professional fees and for exploration costs.

Net cash (used in) provided by all investing activities for the nine months ended September 30, 2012 and nine months ended September 30, 2011, was $574,478 and $168,000, respectively. Cash used through investing activities for the nine months ended September 30, 2012 consisted of purchase of property and equipment of $708,122, partially offset by reduction in deposits of $133,644. Cash provided by investing activities for the nine months ended September 30, 2011 consisted of Proceeds from sale of investment projects of $168,000.

Net cash obtained through all financing activities for the nine months ended September 30, 2012 and nine months ended September 30, 2011, was $1,600,000 and $248,790, respectively. Cash obtained through financing activities for the nine months ended September 30, 2012 consisted of net proceeds from short-term and long-term notes entered into during the period. Cash obtained through financing activities for the nine months ended September 30, 2011 consisted of net proceeds from short-term notes entered into during the period.

On the Company’s Annual Report on Form 10-K, filed on March 30, 2012, our auditors have expressed their substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Our management has no formal plan in place to address this concern but considers that we will be able to obtain additional funds by, our mining operations, equity or debt financing and/or related party advances; however there is no assurance of additional funding being available.

Item 4.

Controls and Procedures

Disclosure Controls and Procedures

As required by Rule 13a-15 under the Exchange Act, as of the end of the period covered by this quarterly report on Form 10-Q, the Company carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of the Company’s management, including the Company’s President and Chief Executive Officer and the Company’s Chief Financial Officer, who concluded that the Company’s disclosure controls and procedures are effective to provide reasonable assurance that: (i) information required to be disclosed by the Company in reports filed or submitted under the Exchange Act is accumulated and communicated to management to allow timely decisions regarding required disclosure by the Company; and (ii) information required to be disclosed in reports that filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC’s rules and forms.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the Company’s reports filed under the Exchange Act is accumulated and communicated to management, including the Company’s President and Chief Executive Officer and Chief Financial Officer and Director of Business Development, to allow timely decisions regarding required disclosure.

Changes in Internal Controls over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

On October 8, 2012, the Company issued 6,000 shares of common stock to a consultant.

On October 15, 2012, the Company issued 726,875 shares of common stock upon conversion of interest accrued on outstanding notes.

The foregoing issuances of the shares were effectuated pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), provided by Section 4(2) of the Securities Act and/or Regulation D promulgated thereunder.

Item 6.

Exhibits

(a) The following exhibits are filed herewith:

31.1	Certifications by the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certifications by the 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.

101	Interactive Data Files.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Southern USA Resources Inc. Registrant

Date: November 14, 2012	By:	/s/ Charles H. Merchant, Sr.
		Charles H. Merchant, Sr.
		Chief Executive Officer, Chief Financial Officer and Director (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

Delaware		22-3757709
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x
(Do not check if a smaller reporting company)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2012.

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to ______.

PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements	F-1

	Consolidated Balance Sheets as of September 30, 2012 (Unaudited) and December 31, 2011	F-2

	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2012 and 2011 and for the Period from April 27, 2012 (Inception) through September 30, 2012 (Unaudited)	F-3

	Consolidated Statement of Stockholders’ Equity for the Period from April 27, 2012 (Inception) through September 30, 2012 (Unaudited)	F-4

	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2012 and 2011 and for the Period from April 27, 2012 (Inception) through September 30, 2012 (Unaudited)	F-5

	Notes to the Consolidated Financial Statements (Unaudited)	F-6

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	4

Item 4.	Controls and Procedures	11

PART II	OTHER INFORMATION

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	12

Item 6.	Exhibits	12

Signatures		13

Exhibits