Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes þ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes þ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No þ
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act. Yes o No þ
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter was $2,190,000.
State the number of shares outstanding of each of the issuer’s classes of equity securities, as of the latest practicable date: As at September 17, 2012 there were 320,862,680 shares of Common Stock, $0.0001 par value per share, issued and outstanding.
Documents Incorporated By Reference - None
FORM 10-K ANNUAL REPORT
FOR THE FISCAL YEARS ENDED JUNE 30, 2012 and 2011
TABLE OF CONTENTS
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FORWARD-LOOKING STATEMENTS
This Annual Report contains certain forward-looking statements regarding management’s plans and objectives for future operations including plans and objectives relating to our planned marketing efforts and future economic performance. The forward-looking statements and associated risks set forth in this Annual Report include or relate to, among other things, (a) our growth strategies, (b) anticipated trends in the mining industry, (c) our ability to obtain and retain sufficient capital for future operations, and (d) our anticipated needs for working capital. These statements may be found under “Management’s Discussion and Analysis or Plan of Operations” and “Business,” as well as in this Annual Report generally. These factors are not intended to represent a complete list of the general or specific factors that may affect us. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and matters described in this Annual Report generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this Annual Report will in fact occur.
The forward-looking statements herein are based on current expectations that involve a number of risks and uncertainties. Such forward-looking statements are based on assumptions described herein. The assumptions are based on judgments with respect to, among other things, future economic, competitive and market conditions, and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Accordingly, although we believe that the assumptions underlying the forward-looking statements are reasonable, any such assumption could prove to be inaccurate and therefore there can be no assurance that the results contemplated in forward-looking statements will be realized. In addition, as disclosed elsewhere in the “Risk Factors” section of this annual report, there are a number of other risks inherent in our business and operations which could cause our operating results to vary markedly and adversely from prior results or the results contemplated by the forward-looking statements. Management decisions, including budgeting, are subjective in many respects and periodic revisions must be made to reflect actual conditions and business developments, the impact of which may cause us to alter marketing, capital investment and other expenditures, which may also materially adversely affect our results of operations. In light of significant uncertainties inherent in the forward-looking information included in this annual report, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives or plans will be achieved.
Some of the information in this annual report contains forward-looking statements that involve substantial risks and uncertainties. Any statement in this annual report that is not a statement of an historical fact constitutes a “forward-looking statement”. Further, when we use the words “may”, “expect”, “anticipate”, “plan”, “believe”, “seek”, “estimate”, “internal”, and similar words, we intend to identify statements and expressions that may be forward- looking statements. We believe it is important to communicate certain of our expectations to our investors. Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions that could cause our future results to differ materially from those expressed in any forward-looking statements. Many factors are beyond our ability to control or predict. You are accordingly cautioned not to place undue reliance on such forward-looking statements. Important factors that may cause our actual results to differ from such forward-looking statements include, but are not limited to, the risk factors discussed herein.
All forward-looking statements speak only as of the date made. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements above and other cautionary statements included in this report. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.
As used in this annual report, “we”, “us”, “our”, “Bonanza”, “Company” or “our Company” refers to Bonanza Goldfields Corporation.
Overview
We are an exploration stage company and that there is no assurance that a commercially viable mineral deposit exist on any of our properties and that further exploration will be required. Our exploration target is to find exploitable minerals on our properties and to raise adequate funding to begin processing our land. Our success depends on achieving that target and becoming cash flow positive once production begins. There is the likelihood of our mineral claims containing little or no economic mineralization or reserves of gold and other minerals. There is the possibility that our claims do not contain any reserves and funds that we spend on exploration will be lost. Even if we complete our current exploration program and are successful in identifying a mineral deposit, we will be required to expend substantial funds to bring our claims to production. We are unable to assure you we will be able to raise the additional funds necessary to implement any future exploration or extraction program even if mineralization is found.
It is our objective to identify mineral prospect properties of merit, conduct preliminary exploration work, and if results are positive, to process mineral resources through in a market where we believe capital is transitioning to the safety of gold. Our management contends that this business model is timely in a world of financial and currency instability with escalating mineral demand.
Our areas of exploration are in geopolitically stable North American areas.
The company has acquired 3 sets of mineral properties in the state of Arizona. The first is federal mining claims on BLM land totaling 458 acres. The second is 130.76 acres of patented land we lease for an initial term of two years with an option to buy from Judgetown LLC. It has an effective date of October 15, 2012. The third property is referred to as the Hull land and is approximately 20 acres of patented land which we have purchased with borrowed funds. The note holder on this parcel is a company named Freedom Boat.
The Judgetown lease, with an effective date of October 15, 2012, was executed on or before September 30, 2012 between the company and Judgetown LLC, an Arizona Limited Liability Company located in Arizona. The leased premises consist of 130.76 acres in the county of Yavapai, Arizona in the Date Creek Mountain range. The lease is exclusive to company and its successors and assigns all of Lessors’ interest in and to all mining rights and minerals (hereafter the "Mineral Substance") beneath the surface of, within, or that may be produced from the Premises. The lease granted the following to the company for a period of two years unless terminated pursuant to the lease; Mining and Access Rights, Cross Mining, Commingling, Deposit of Waste Materials, Treatment and Water Rights. The lease amount as amended is $300,000 for the period commencing on January 15, 2013. An option to purchase the land was also granted in the amount of $1,500,000 less lease payments. The lease with option to purchase was amended on February 1, 2013 solely to reflect a new owner who had replaced an original owner of the lessor.
Bonanza Goldfields’ leased lands consist of 38 lode claims covering 600 acres of patented, private property claims and BLM claims in the Date Creek Mountains, Arizona consisting of both alluvial and mineralized quartz deposits, as well as the presence of certain rare earth elements. A Preliminary Geological Survey as well as subsequent testing and assays of the leased claims were prepared by Auric Resources International, Inc. of Wickenburg, Arizona. Shareholders can access the report and test results at Bonanza Goldfields' official website: www.bonanzagoldfields.com (such website and its contents are not to be incorporated by reference to this report).
Highlights from the report include:
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The large land package with widespread areas of anomalous gold values;
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Although some preliminary testing has been done on portions of the property, the majority of the land package has virgin placer gravels and large quartz veins that have never been explored or tested. The geologic setting of the property is favorable for the concentration of placer gold in the local gravels that occur in drainage channels and elevated benches and for lode gold that occurs within the early Proterozoic granitic rocks as auriferous quartz fissure veins with locally abundant sulfides and iron oxides.
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Auriferous quartz and quartz-sulfide veins occur on the leased claims. These veins ranged up to several feet in width and have strike lengths ranging from hundreds to thousands of feet.
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Prior to commencing the survey, extensive samplings were analyzed locally at multiple depths demonstrating the potential for high grade gold findings throughout the property. Modern access for heavy equipment is already in place through Bonanza’s privately constructed roads, and rail is localized. Unique features appear ubiquitous throughout the immediate area, including greenstone dike extensions, placer gravel deposits, and vestiges of numerous pre-historic waterfalls. Additionally, lode gold possibilities exist due to the extensions of schist and mineralized quartz veins in the immediate area of the Congress Mine. Bonanza management believes the alluvial deposits originate from two ancient rivers that flowed in opposing directions during separate geological periods.
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Our most recent gold assays occurred during the month of July 2012 and were surface level rock chip assays on the Company's Bureau of Land Management (BLM) claims located near the Piedmont Mine area.
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The assays were completed based on the geological teams' recommendation to study the Piedmont Mine. Bonanza's geological team staked out and acquired the Piedmont in December 2011 as part of the planned leased claims expansion. The assays were completed at a third party globally recognized assayer.
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Table 1: Surface area rock chip samples on our BLM land claims in the Piedmont Mine area
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TARANTULA
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Au (Fire)
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Au (Fire 2)
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Au (Fire 2)
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Control #
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ppb
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Grams/per ton
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Ounces/per ton
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681
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>3000
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20.2
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0.65
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682
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>3000
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45.5
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1.46
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683
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52
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684
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685
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13
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*Assays reported in grams and ounces per ton
**Conversion based on 31.1 grams = 1 troy ounce of gold
Rare Earth Metal Tests:
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The Company also tested for the most prevalent and critical rare earth metals (REM) in the Arizona geographic region, which are Cerium, Lanthanum, Scandium, Yttrium. The tests proved positive for all four rare earth elements. The Company is now planning future tests for the other 13 critical rare earth elements and for estimates of concentration. The plan is to test for the remaining 13 metals in Canadian testing facilities where more advanced analysis can be performed.
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Major Rare Earth Metals Uses (listed by metal):
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Cerium is used in auto catalysts, petroleum refining, and in metal alloys.
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Lanthanum is used in hybrid engines and metal alloys.
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Scandium is used in sports equipment, the firearms industry and dental applications.
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Yttrium is used in red color, fluorescent lamps, ceramics, and as an agent in metal alloys with applications to superconductors and medical devices.
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We expanded our geological footprint with the acquisition of the Piedmont Mine, gold and silver mine in operation until 1940. The Piedmont Mine has been deemed by the Bonanza geological team a strategic addition to leased claims. The acquisition expands the geological footprint to 38 lode mining claims covering over 600 acres of contiguous property.
There are gold-bearing quartz fissure veins that closely follow “greenstone” (andesite or diabase) dikes that occur along east-west and northwest-southeast trending structures in early Proterozoic granitic rocks. The veins range from a few inches to several feet in width, with up to several hundred feet and unknown depth. The mineralogy of the veins consists of auriferous quartz with silver and varying amounts of sulfides, primarily pyrite with smaller amounts of galena, chalcopyrite, and sphalerite, and locally molybdenite. Hematite is locally prevalent as masses and relic structures formed from oxidation of the pyrite. The highest grade gold is generally associated with the highest concentrations of pyrite.
There has been significant work completed on the property. First the roads have been improved to be completely usable for all types of equipment such as loaders, dump truck, back hoes, all types of cars, and even larger scale trucks.
Second, a water retention pond holding just under 1 million gallons of water and currently between 700,000 – 800,000 gallons. Third, a gold processing plant has been installed which is specifically a Goldfield International Yukon 25 plant and finishing table. Fourth, enhancement to the plant such as a new sluice system and a staging area for placer material processing. All of this was done on the Hull land which is patented property. Fifth, a slime pond was created along with a sophisticated water retention system connected between the plant and the large retention pond. Sixth, fencing around the pond for safety purposes. Seventh, an additional water well to the well already on the land. This all occurred between October 2012 and December 2012 and was financed by investors.
The Goldfield International Yukon 25 plant we purchased new in October 2012 along with the finishing table. The plant is therefore considered by us to be in very good condition. There have been no subsurface improvements since we have been pursuing placer material since setting up the plant.
The infrastructure has been newly established with competent personnel and functional equipment. Additionally, we have a tool shed needed for maintenance.
As of December 31, 2012 we ran approximately 700 tons of placer material and are currently running more placer material through our production plant this fiscal quarter. We have been trenching and testing several locations on the Judgetown LLC land as well as the Hull land. We have sent out this placer material as well as some rock chip samples of load material to obtain a multi-element analysis from an accredited third party assayer.
Total cost to date is $3,116,907 and future costs are being assessed currently but thus far if we implement an operation that would include load material and the BLM properties we feel that up to an additional $3 million may be needed.
We have two wells (one of which is solar powered) that have the capacity to pump a total 12 gallons per minute which is adequate for our present operations. Our power supply comes from 2 generators which are on the property.
We have not completed a Canadian 43101 report or an American equivalent and do not know what our proven reserves are, but we are in the process of doing an internal resource estimate based on the placer material run to date and the assays we have completed and are in the process of completing on our load material. This will include our rock chip analysis that can be used to estimate load material and is being conducted by our internal geologist and we are using an accredited external assayer in Prescott, Arizona named Copper State Labs.
On April 4, 2013, Bonanza Goldfields Corporation announced that three hand-collected samples from an 1,800 foot strike of an exposed quartz vein within the Bonanza patents were assayed at 0.08 ounce per ton (oz/ton), 0.192 oz/ton, and 0.62 oz/ton. A single sample collected from a second quartz vein on Bonanza's leased, patented property assayed at 2.73 oz/ton. A fifth sample collected from a pit on a separate leased Bonanza patented property assayed at 0.007 oz/ton. All assays were performed by Copper State Analytical Lab in Prescott, Arizona an independent registered assayer.
Arne Stenseth of Bonanza Goldfields Corp. has provided all geological analysis to the company.
Although some preliminary testing has been done on portions of the property, the majority of the land package has virgin placer gravels and large quartz veins that have never been explored or tested. Additional exploration (mapping, sampling, bulk-sampling geophysics, drilling, etc.) must beconducted in order to determine the areal extent, volumes, grades, and values of auriferous quartz veins and gravels within the expanded claim block. The large land package with widespread areas of anomalous gold values; proximity to the Congress Mine; large iron oxide rich quartz veins which exhibit mineralogic and structural similarities to the Congress, Niagra, Queen of the Hills, Golden Wave and other mineralized, economic vein systems in the area; and the presence of placer gold in widespread gravels indicates that the Tarantula Property may host a large, potentially economic gold deposit and undoubtedly represents an excellent exploration target with potential for both placer and lode gold production from auriferous placers and veins.
There was some surface disturbance before Bonanza Goldfields acquired the property. There are a few existing adits and test pits, and a network of roads built by the previous owner who was selling boulders to housing developments. There is no known contamination of the area. The mining activity appears to be limited to small adits and test pits. Remediation of the site will be an ongoing process. Excavations will first be filled with the oversize material which has been separated by grizzly from the bank run feed materials from each excavation. Finally, the upper 6” - 12” of soil, which has been stored during initial site preparation, will be placed on top of the oversize materials in order to enhance revegetation of the area. Care will be taken to prevent erosion on slopes, and where necessary runoff will be diverted by water bars and terracing. All improved access roads will be graded to natural contour and water bars will be utilized to prevent erosion. Since some of the area of operations is near a natural drainage, efforts will be taken to ensure the natural flow is restored upon completion of the operation.
A breakdown of the exploration timetable and budget, including estimated amounts that will be required for each exploration activity, such as geophysics, geochemistry, surface sampling, drilling, etc. for each prospect are as follows:
The timetable will depend on the availability of financing. The exploration plan would begin with a surface sampling program estimated to take 3 weeks and to cost approximately $35,000 to complete. Multi-element analyses will be performed on each sample and the geochemical analyses along with the local geology and the visible outcrops of mineralized quartz would be used to determine the best drill targets. The analyses and interpretation of the data will take an estimated 6 weeks to complete at a cost of $25,000. Assuming a cost of $50 per foot of core drilling, 8 drill targets, and an average depth of 500 feet, the drilling program will cost approximately $200,000.
Our first phase is to set up the plant and then run placer material and test the results (including rock chip samples) to obtain an internal resource estimate on our patented properties. Also, we plan to obtain all necessary licenses to operate on the BLM land. Our second phase would be to move as much placer volume through our plant as possible if the placer levels are economical and to expand that plant to have significantly more operating volume. Third, we plan to secure financing for a load operation to add to our placer capacity. If placer material is not economical and load tests to be more economical then we plan to move to load given financing is available.
Tonaquint is currently our main planned funding source. We will seek other sources of funding if our relationship with Tonaquint terminates.
We plan to utilize our internal Geochemist Arne Stenseth a graduate of the Montana College of Mineral Science and Technology with an American Chemical Society accredited Bachelor of Science Degree (1994) in Chemistry. He is a member in good standing of the Geochemistry Division of the American Chemical Society (ACSGEOC), the International Association of GeoChemistry (IAGC), the Geochemical Society, and the Association of Applied Geochemists (AAG). He is a Founder and Managing Member of Gruvedrift Enterprises, LLC, a mineral exploration company, and is currently working as a geochemist for Bonanza Goldfields, Inc. Arne Stenseth collects and maintains custody of the samples. The rock chip samples are collected as representative samples of the outcrop or vein. The rock chips are bagged and labeled. The labeled bags are sent to either Copper State Analytical Lab in Prescott, AZ or to Skyline Assayers & Laboratories in Tucson, AZ. The labs perform multi-element analyses by ICP, and gold and silver are determined by fire assay. Concentrates collected from the finishing table are also collected by Arne Stenseth, who maintains custody of the samples. The concentrates are bagged and labeled and sent to the same laboratories as above for the same analyses.
We have not completed a Canadian 43101 report or an American equivalent and do not know what our proven reserves are.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Limited Operating History; Need for Additional Capital
There is no historical financial information about us on which to base an evaluation of our performance. We are an exploration stage company and have not generated revenues from operations. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, possible delays in the exploration of our property, and possible cost overruns due to increases in the cost of services. To become profitable and competitive, we must conduct the exploration of our properties before we start into production of any minerals we may find.
Employees
As of fiscal year ended June 30, 2012, the Company had 6 employees.
WHERE YOU CAN FIND MORE INFORMATION
You are advised to read this Form 10-K in conjunction with other reports and documents that we file from time to time with the SEC. In particular, please read our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that we file from time to time. You may obtain copies of these reports directly from us or from the SEC at the SEC’s Public Reference Room at 100 F. Street, N.E. Washington, D.C. 20549, and you may obtain information about obtaining access to the Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains information for electronic filers at its website http://www.sec.gov.
An investment in our common stock involves a high degree of risk. You should carefully consider the following information about these risks, together with the other information contained in this Annual Report on Form 10-K, or the Company’s other filings with the Securities and Exchange Commission (the "SEC"). If any of the events anticipated by the risks described below occur, our results of operations and financial condition could be adversely affected which could result in a decline in the market price of our common stock, causing you to lose all or part of your investment.
An investment in our common stock involves a high degree of risk. You should carefully consider the following information about these risks, together with the other information contained in this Annual Report on Form 10-K, or the Company’s other filings with the Securities and Exchange Commission (the "SEC"). If any of the events anticipated by the risks described below occur, our results of operations and financial condition could be adversely affected which could result in a decline in the market price of our common stock, causing you to lose all or part of your investment.
Management lacks technical training and experience with exploring for, starting, and/or operating a mine; and that with no direct training or experience in these areas, management may not be fully aware of many of the specific requirements related to working within this industry. We do however, employ a geochemist who is very familiar with exploration and a subcontractor who has experience operating placer plants. This sub-contractor is an Engineer by training and he and his team operate the equipment on the site, which includes bulldozers, front end loaders, a Finley that screens material, and the maintenance of the plant. The sub-contractor has built two placer plants prior to being hired by Bonanza. Additionally, he has 25 years of construction and heavy equipment experience. Our staff retained an expert consultant for the first half of 2012 named Madan Singh to advise the company on how to effectively begin a placer operation.
The company believes that through an apparent fraudulent scheme 86,000,000 shares of our common stock were improperly issued. The company is in the process of rescinding this issuance however, if the company is not successful the stock value could be seriously impaired.
Securities issued in violation of the registration provisions of Section 5 of the Securities Act of 1933 are subject to rescission under Section 12(a)(1) of the Act. Section 12(a)(1) generally provides that a purchaser of securities sold in violation of Section 5 can recover the purchase price paid for such securities plus interest and less any income, or damages if the securities are no longer owned. Please quantify the registrant’s rescission liability.
The Report Of Our Independent Registered Public Accounting Firm Contains Explanatory Language That Substantial Doubt Exists About Our Ability To Continue As A Going Concern
The independent auditor’s report on our financial statements contains explanatory language that substantial doubt exists about our ability to continue as a going concern. If we are unable to obtain sufficient financing in the near term or achieve profitability, then we would, in all likelihood, experience severe liquidity problems and may have to curtail our operations. If we curtail our operations, we may be placed into bankruptcy or undergo liquidation, the result of which will adversely affect the value of our common shares.
Because the probability of an individual prospect ever having reserves economically recoverable is extremely remote, any funds spent on exploration will probably be lost.
The probability of an individual prospect ever having economically recoverable reserves is extremely remote. In all probability, our properties do contain reserves. As such, any funds spent on exploration will probably be lost, our Company and its business operations could be adversely impacted and there would be a material adverse impact on our Company’s business, results of operations and financial condition.
We lack an operating history and have losses which we expect to continue into the future. As a result, we may have to suspend or cease activities.
We were incorporated on March 6, 2008 and we have not started our proposed business activities or realized any revenues. We have no operating history upon which an evaluation of our future success or failure can be made. Our net loss was $6,606,854 from inception to June 30, 2012. Our ability to achieve and maintain profitability and positive cash flow is dependent upon:
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our ability to locate a profitable mineral property
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our ability to generate revenues
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our ability to reduce exploration costs.
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Based upon current plans, we expect to incur operating losses in future periods. This will happen because there are expenses associated with the research and exploration of our mineral properties. As a result, we may not generate revenues in the future. Failure to generate revenues will cause us to suspend or cease activities.
Because we will have to spend additional funds to determine if we have economically recoverable reserves, if we can't raise sufficient funds, we will have to cease operations.
Even if we complete our current exploration program and it is successful in identifying a mineral deposit, we will have to spend substantial funds on further drilling and engineering studies before we will know if we have a commercially viable mineral deposit, a reserve. If we do not have a commercially viable mineral reserve, it would have a material adverse impact on our Company’s business, results of operations and financial condition.
As we undertake exploration of our claims and interests, we will be subject to compliance of government regulation that may increase the anticipated time and cost of our exploration program.
There are several governmental regulations that materially restrict the exploration of minerals. We will be subject to the mining laws and regulations in force in the jurisdictions where our claims are located, and these laws and regulations may change over time. In order to comply with these regulations, we may be required to obtain work permits, post bonds and perform remediation work for any physical disturbance to land. While our planned budget for exploration programs includes a contingency for regulatory compliance, there is a risk that new regulations could increase our costs of doing business and prevent us from carrying out our exploration program, or that the budgeted amounts are inadequate.
Because of the inherent dangers involved in mineral exploration, there is a risk that we may incur liability or damages, which could hurt our financial position and possibly result in the failure of our business.
The search for valuable minerals involves numerous hazards. As a result, we may become subject to liability for such hazards, including pollution, cave-ins and other hazards against which we cannot insure or against which we may elect not to insure. The payment of such liabilities may have a material adverse effect on our financial position.
We may not have access to all of the supplies and materials we need to begin exploration which could cause us to delay or suspend activities.
Competition and unforeseen limited sources of supplies in the industry could result in occasional spot shortages of supplies, such as dynamite, and certain equipment such as bulldozers and excavators that we might need to conduct exploration. We have not attempted to locate or negotiate with any suppliers of products, equipment or materials. If we cannot find the products and equipment we need, we will have to suspend our exploration plans until we do find the products and equipment we need.
Due to external market factors in the mining business, we may not be able to market any minerals that may be found.
The mining industry, in general, is intensely competitive. Even if commercial quantities of minerals are discovered, we can provide no assurance to investors that a ready market will exist for the sale of these minerals. Numerous factors beyond our control may affect the marketability of any substances discovered. These factors include market fluctuations, the proximity and capacity of markets and processing equipment, and government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, mineral importing and exporting and environmental protection. The exact effect of these factors cannot be accurately predicted, but any combination of these factors may result in our not receiving an adequate return on invested capital.
Our performance may be subject to fluctuations in market prices of gold and other minerals.
The profitability of a mineral exploration project could be significantly affected by changes in the market price of the relevant minerals. The price of gold, while recently reaching record highs in the last 24 months, has been volatile over the past few months. Demand for gold can also be influenced by economic conditions, attractiveness as an investment vehicle and the relative strength of the U.S. dollar and local investment currencies. A number of other factors affect the market prices for other minerals. The aggregate effect of the factors affecting the prices of various minerals is impossible to predict with accuracy. Fluctuations in mineral prices may adversely affect the value of any mineral discoveries made on the properties with which we are involved, which may in turn affect the market price and liquidity of our common shares and our ability to pursue and implement our business plan.
Our operations are subject to strict environmental regulations, which result in added costs of operations and operational delays.
Our operations are subject to environmental regulations, which could result in additional costs and operational delays. All phases of our operations are subject to environmental regulation. Environmental legislation is evolving in some countries and jurisdictions in a manner that may require stricter standards, and enforcement, increased fines and penalties for non-compliance, more stringer environmental assessments of proposed projects, and a heightened degree of responsibility for companies and their officers, directors, and employees. There is no assurance that any future changes in environmental regulation will not negatively affect our projects.
We have no insurance for environmental problems.
Insurance against environmental risks, including potential liability for pollution or other hazards as a result of the disposal of waste products occurring from exploration and production, has not been available generally in the mining industry. We have no insurance coverage for most environmental risks. In the event of a problem, the payment of environmental liabilities and costs would reduce the funds available to us for future operations. If we are unable to fund fully the cost of remedying an environmental problem, we might be required to enter into an interim compliance measure pending completion of the required remedy.
Climate change and related regulatory responses may impact our business.
Climate change as a result of emissions of greenhouse gases is a significant topic of discussion and may generate government regulatory responses in the near future. It is impracticable to predict with any certainty the impact of climate change on our business or the regulatory responses to it, although we recognize that they could be significant. However, it is too soon for us to predict with any certainty the ultimate impact, either directionally or quantitatively, of climate change and related regulatory responses.
The current financial environment may have impacts on our business and financial condition that we cannot predict.
The continued instability in the global financial system and related limitation on availability of credit may continue to have an impact on our business and our financial condition, and we may continue to face challenges if conditions in the financial markets do not improve. Our ability to access the capital markets has been restricted as a result of the economic downturn and related financial market conditions and may be restricted in the future when we would like, or need, to raise capital. The difficult financial environment may also limit the number of prospects for potential joint venture, asset monetization or other capital raising transactions that we may pursue in the future or reduce the values we are able to realize in those transactions, making these transactions uneconomic or difficult to consummate.
Nevada Law And Our Articles Of Incorporation Protect Our Directors From Certain Types Of Lawsuits, Which Could Make It Difficult For Us To Recover Damages From Them In The Event Of A Lawsuit.
Nevada law provides that our directors will not be liable to our company or to our stockholders for monetary damages for all but certain types of conduct as directors. Our Articles of Incorporation require us to indemnify our directors and officers against all damages incurred in connection with our business to the fullest extent provided or allowed by law. The exculpation provisions may have the effect of preventing stockholders from recovering damages against our directors caused by their negligence, poor judgment or other circumstances. The indemnification provisions may require our company to use our assets to defend our directors and officers against claims, including claims arising out of their negligence, poor judgment, or other circumstances.
Because We Are Quoted On The OTC Pinksheets Instead Of An Exchange Or National Quotation System, Our Investors May Have A Tougher Time Selling Their Stock Or Experience Negative Volatility On The Market Price Of Our Stock.
Our common stock is traded on the Pinksheets. The Pinksheets is often highly illiquid, in part because it does not have a national quotation system by which potential investors can follow the market price of shares except through information received and generated by a limited number of broker-dealers that make markets in particular stocks. There is a greater chance of volatility for securities that trade on the Pinksheets as compared to a national exchange or quotation system. This volatility may be caused by a variety of factors, including the lack of readily available price quotations, the absence of consistent administrative supervision of bid and ask quotations, lower trading volume, and market conditions. Investors in our common stock may experience high fluctuations in the market price and volume of the trading market for our securities. These fluctuations, when they occur, may have a negative effect on the market price for our securities. Accordingly, our stockholders may not be able to realize a fair price from their shares when they determine to sell them or may have to hold them for a substantial period of time until the market for our common stock improves.
As a public company we are subject to complex legal and accounting requirements that will require us to incur significant expenses and will expose us to risk of non-compliance.
As a public company, we are subject to numerous legal and accounting requirements that do not apply to private companies. The cost of compliance with many of these requirements is material, not only in absolute terms but, more importantly, in relation to the overall scope of the operations of a small company. Our relative inexperience with these requirements may increase the cost of compliance and may also increase the risk that we will fail to comply. Failure to comply with these requirements can have numerous adverse consequences including, but not limited to, our inability to file required periodic reports on a timely basis, loss of market confidence, delisting of our securities and/or governmental or private actions against us. We cannot assure you that we will be able to comply with all of these requirements or that the cost of such compliance will not prove to be a substantial competitive disadvantage vis-à-vis our privately held and larger public competitors.
The application of the “penny stock” rules could adversely affect the market price of our common shares and increase your transaction costs to sell those shares. The Securities and Exchange Commission has adopted rule 3a51-1 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, rule 15g-9 require:
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that a broker or dealer approve a person’s account for transactions in penny stocks; and
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the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased
In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:
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obtain financial information and investment experience objectives of the person; and
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make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
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The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form:
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sets forth the basis on which the broker or dealer made the suitability determination; and
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that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
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Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
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FINRA sales practice requirements may also limit a stockholder's ability to buy and sell our stock.
In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority (FINRA) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
The market price for our common shares is particularly volatile given our status as a relatively unknown company with a small and thinly traded public float, limited operating history and lack of profits which could lead to wide fluctuations in our share price. The price at which you purchase our common shares may not be indicative of the price that will prevail in the trading market. You may be unable to sell your common shares at or above your purchase price, which may result in substantial losses to you.
The market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. The volatility in our share price is attributable to a number of factors. First, as noted above, our common shares are sporadically and thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer which could better absorb those sales without adverse impact on its share price. Secondly, we are a speculative or “risky” investment due to our limited operating history and lack of profits to date, and uncertainty of future market acceptance for our potential products. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer. Many of these factors are beyond our control and may decrease the market price of our common shares, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common shares will be at any time, including as to whether our common shares will sustain their current market prices, or as to what effect that the sale of shares or the availability of common shares for sale at any time will have on the prevailing market price.
Shareholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns or practices could increase the volatility of our share price.
Volatility in our common share price may subject us to securities litigation, thereby diverting our resources that may have a material effect on our profitability and results of operations.
As discussed in the preceding risk factors, the market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may in the future be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management’s attention and resources.
Compliance with changing regulation of corporate governance and public disclosure will result in additional expenses and pose challenges for our management team.
Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations promulgated there under, the Sarbanes-Oxley Act and SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the U.S. public markets. Our management team will need to devote significant time and financial resources to comply with both existing and evolving standards for public companies, which will lead to increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities.
We will incur increased costs and demands upon management as a result of complying with the laws and regulations that affect public companies, which could materially adversely affect our results of operations, financial condition, business and prospects.
As a public company and particularly after we cease to be an "emerging growth company," we will incur significant legal, accounting and other expenses that we have not incurred to date, including increased costs associated with public company reporting and corporate governance requirements. These requirements include compliance with Section 404 and other provisions of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, as well as rules implemented by the SEC. The increased costs associated with operating as a public company will decrease our net income or increase our net loss, and may require us to reduce costs in other areas of our business. Additionally, if these requirements divert our management's attention from other business concerns, they could have a material adverse effect on our results of operations, financial condition, business and prospects. However, for as long as we remain an "emerging growth company" as defined in the JOBS Act, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies" including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We may take advantage of these reporting exemptions until we are no longer an "emerging growth company." If the market value of our common stock that is held by non-affiliates exceeds $700 million as of any June 30, we would cease to be an "emerging growth company" as of the following June 30, or if we issue more than $1 billion in non-convertible debt in a three-year period, we would cease to be an "emerging growth company" immediately.
As disclosed in our annual and quarterly reports there have been shares issued in violation of Section 5 of the Securities Act of 1933.
The company believes that through an apparent fraudulent scheme 86,000,000 shares of our common stock were improperly issued. The company is in the process of rescinding this issuance however, if the company is not successful the stock value could be seriously impaired in that it did not receive any consideration for the shares and it will have an unwanted dilution impact on our shareholders. Securities issued in violation of the registration provisions of Section 5 of the Securities Act of 1933 are subject to rescission under Section 12(a)(1) of the Act. Section 12(a)(1) generally provides that a purchaser of securities sold in violation of Section 5 can recover the purchase price paid for such securities plus interest and less any income, or damages if the securities are no longer owned.
SHOULD ONE OR MORE OF THE FOREGOING RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD THE UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED, INTENDED OR PLANNED.
Not applicable.
We operate our corporate headquarters out of 736 East Braeburn Drive, Phoenix, AZ 85022
During fiscal 2011, the Company used the Treasurer’s office as the Company’s corporate headquarters at no cost to the Company. The Company has 3 sets of properties. The first are federal mining claims on BLM land totaling 458 acres. The company maintains the BLM maintenance fees annually. The second set of land is a two year lease with an option to buy from Judgetown LLC. This acreage is 130.76 acres of patented land with 2013 lease payments of $190,000 and in year 2 they will be $120,000 which are paid quarterly. Rick Thomas, who is a 50% owner of Judgetown LLC subsequently sold his rights to Michael Quigley of Utah. See attached Judgetown LLC agreement and amendment for Mr. Quigley. The last parcel of land is referred to as the Hull Land and is approximately 20 acres of patented land which is owned by Bonanza Goldfield. We borrowed the money for this purchase from Freedom Boat Company. The original arrangement has expired however, we continue to make the original monthly payments of $2500 (or 10% of the value of the note) and we have reached a tentative new agreement with Freedom under the same conditions with the added opportunity for Freedom to convert the principal to stock in the company.
There are no interests other than Bonanza’s as to the BLM land and we remit $4,200 as an annual maintenance fee. There are no royalties being paid for the Judgetown LLC leased properties only lease payments as indicated above. The Hull land is owned by Bonanza and the note holder is Freedom Boat. There are no royalties being paid and there is just a monthly note payment of $2,500.
For the Judgetown LLC land Bonanza owns all the mineral rights for the time period we are leasing the land. The BLM land we only have mineral rights and no land rights. The Hull we have mineral rights and ownership of the land recorded with the Yavapai county recorder. Bonanza acquired all claims based on the land’s proximity to the Congress mine, which was one of the nation’s largest producing mines. In June of 2012 a geological report provided enough support to pursue a small mining operation based on sample assays from all areas and to pursue a lease of the Judgetown LLC claims.
BLM properties are considered load claim and the Judgetown LLC leased land and the Hull claim are both load and placer claims.
The property consists of 8 patented lode mining claims and 30 unpatented lode mining claims which cover approximately 160 acres of private land and 435 acres of BLM land in Sections 9, 10, 15, and 16, Township 10 North, Range 6 West, Gila and Salt River Base Meridian, Yavapai County, West-Central Arizona. Bonanza Goldfields Corporation owns the Hull patented lode mining claim and has optioned 7 other patented lode mining claims, the Lincoln, Granite Reef, Granite Reef Extension, Prescott, State, Dakota, and Planet Mier from Judgetown LLC of Wickenburg, Arizona. In addition to holding approximately 160 acres of patented mining claims, Bonanza holds 30 contiguous unpatented lode mining claims (DCM 1-24, DCM 6 Extension, DCM 12 Extension, and Hawk 1-4) which cover approximately 435 acres in Sections 10, 15, and 16, T10N, R6W, G&SRM. The unpatented lode mining claims have been recorded with the Yavapai County Recorder's Office in Prescott, Arizona and the United States Bureau of Land Management (BLM) in Phoenix, Arizona.
The claims are more specifically described as follows:
Bonanza Goldfields Corporation Tarantula Project
Unpatented Lode Mining Claims
(Approximately 435 Acres)
Claim Name Book/Page
(Yavapai County Recorder's Office)
AMC Number
(BLM Serial Number)
DCM 1 4836 920 411442
DCM 2 4836 921 411443
DCM 3 4836 922 411444
DCM 4 4836 923 411445
DCM 5 4836 924 411446
DCM 6 4836 925 411447
DCM 6 Extension 4845 317 412202
DCM 7 4836 926 411448
DCM 8 4836 927 411449
DCM 9 4836 928 411450
DCM 10 4836 929 411451
DCM 11 4836 930 411452
DCM 12 4836 931 411453
DCM 12 Extension 4845 316 412203
DCM 13 4836 932 411454
DCM 14 4836 933 411455
DCM 15 4836 934 411456
DCM 16 4836 935 411457
DCM 17 4836 936 411458
DCM 18 4836 937 411459
DCM 19 4836 938 411460
DCM 20 4836 939 411461
DCM 21 4836 940 411462
DCM 22 4836 941 411463
DCM 23 4836 942 411464
DCM 24 4836 943 411465
Hawk 1 4836 944 411466
Hawk 2 4836 945 411467
Hawk 3 4836 946 411468
Hawk 4 4836 947 411469
The DCM 1-18 and DCM 6 Extension and DCM 12 Extension lode
mining claims are located in Section 10, T10N, R6W; the DCM 19-24 lode
mining claims are located in Section 15, T10N, R6W; and the Hawk 1-4 lode
mining claims are located in Section 16, T10N, R6W, G&SRM.
For the BLM Land maintenance fees are due every August and are approximately $4,200 and taxes to Yavapai county for all of our land were approximately $1,000 for 2012. Additionally, we pay $2,500 a month as a note for the Hull land and $190,000 for 2013 for the lease fees for Judgetown LLC claims and $120,000 in 2014 for those claims.
The project area is located approximately 4 miles north of Congress, Arizona, along the eastern flank of the Date Creek Mountains, in west-central Arizona. The property is easily accessible from Wickenburg, Arizona via approximately 17 miles of paved roads and 2 miles of graded gravel roads.
There are gold-bearing quartz fissure veins that closely follow “greenstone” (andesite or diabase) dikes that occur along east-west and northwest-southeast trending structures in early Proterozoic granitic rocks. The veins range from a few inches to several feet in width, with strike lengths up to several hundred feet and unknown depth. The mineralogy of the veins consists of auriferous quartz with silver and varying amounts of sulfides, primarily pyrite with smaller amounts of galena, chalcopyrite, and sphalerite, and locally molybdenite. Hematite is locally prevalent as masses and relic structures formed from oxidation of the pyrite. The highest grade gold is generally associated with the highest concentrations of pyrite.
Although some preliminary testing has been done on portions of the property, the majority of the land package has virgin placer gravels and large quartz veins that have never been explored or tested. Additional exploration (mapping, sampling, bulk-sampling geophysics, drilling, etc.) must beconducted in order to determine the areal extent, volumes, grades, and values of auriferous quartz veins and gravels within the expanded claim block. The large land package with widespread areas of anomalous gold values; proximity to the Congress Mine; large iron oxide rich quartz veins which exhibit mineralogic and structural similarities to the Congress, Niagra, Queen of the Hills, Golden Wave and other mineralized, economic vein systems in the area; and the presence of placer gold in widespread gravels indicates that the Tarantula Property may host a large, potentially economic gold deposit and undoubtedly represents an excellent exploration target with potential for both placer and lode gold production from auriferous placers andveins.
Initial exploration such as geological mapping and sampling can be done on BLM land without permits. If more than 5 acres are to be disturbed, a Notice of Intent to Conduct Exploration must be submitted to the BLM. The Notice will include a reclamation bond. The approved Notice will allow bulk sampling of up to 1000 tons of material. If the sampling program warrants further exploration with a drilling program, the Arizona Department of Water Resources will require permits for exploration drilling. To conduct exploration which disturbs more than 5 acres of surface, the BLM requires the filing of a Plan of Operation which must include a reclamation bond. The Plan of Operation must also be sent to other entities including the Arizona Department of Environmental Quality, the US Army Corps of Engineers, the Mine Safety and Health Administration, and the Arizona Department of Water Resources. Each of the entities will review the Plan of Operations and request any necessary changes.
The BLM will require either an Environmental Assessment or an Environmental Impact Statement for mining on BLM claims. Processing of the mined material will be done on patented claims owned by the company, but an Aquifer Protection Permit will still be required. A pollution prevention plan and an air quality permit may also be required by the State and County.
Biological and cultural surveys will also be required and will note any threatened or endangered species of plants and animals and any cultural or historical sites which must be protected. The permitting process for a mining operation is complex and can take considerable time. The effect of this permitting process and the government regulations are limited to the costs of outside consultants to perform the biological and cultural surveys and to write the Environmental Impact Statement, if required. It is not anticipated that any of these regulations or permits will prevent further development of the patented or BLM land.
We are currently not involved in any litigation that we believe could have a materially adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our company’s or our company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect except the following matters.
In October 2011, on the eve of the completion of the audit and the current filing of our Annual Report on Form 10-K management learned that the prior CEO/CFO failed to have entity level controls, lacked segregation of duties, among many other internal control deficiencies. The Company believes that the prior CEO/CFO concealed these matters from the professional advisors until those advisors requested David Janney for additional documentation in which Mr. Janney acknowledged the following to new management and independent legal counsel:
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The Company was informed that the prior CEO/CFO, created a series of promissory notes, such form of notes being provided by a lawyer named John Thomas, Esq. These promissory notes and documentation provided a signed assignment of two promissory notes with Venture Capital, Inc. a group from Switzerland. Over time, including discussions with the prior CEO/CFO, new management was able to directly contact a representative of Venture Capital who claims that its signatures on the notes and the later conversions to equity were forged. The alleged improper assignment orchestrated the issuance of converted allegedly improperly transferred debt for the following numbers of shares:
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a)
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December 9, 2010: Tucker Financial Services, Inc. received 12,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
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b)
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January 24, 2011; Tucker Financial Services, Inc. received 12,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
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c)
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February 16, 2011: Stock Loan Solutions received 12,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
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d)
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February 22, 2011: Nicolas Sprung of Tucker Financial Services, Inc. received 12,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
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e)
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April 18, 2011: Euroline Clearing Corporation received 7,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
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f)
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April 18, 2011: Enavest International S.A., received 7,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
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g)
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April 18, 2011: Vanilla Sky, S.A. received 7,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
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June 28, 2011: Scott Geisler received 17,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
All legal opinions related to these conversions, documentations, and issuances of shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 were prepared by John Thomas, Esq. from Salt Lake City, Utah.
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The prior CEO/CFO personally sent $39,000 to a cable company in the Dominican Republic in which current management has been informed that David Janney owns/controls this company. The prior CEO/CFO has, to date, refused to provide new management and our auditors’ invoices or evidence of the uses of these funds.
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John Thomas signed various documents as a Board member of the Company, a position which he has never lawfully held, including the transaction with Asher Enterprises, Inc., pursuant to which Asher received 53,000,000 shares of Bonanza common stock which represented about thirty-two (32%) percent of the issued and outstanding shares of the Company. Current management has negotiated the cash payment of this note and has cancelled the 53,000,000 common shares held in escrow.
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The prior CEO/CFO entered another problematic agreement with Amazon Holding LLC to pay a finder’s fee for raising $250,000 in the acquisition of mining property. These finder’s fees were 100% of the entire transaction with a 24% interest rate and current management is of the belief that David Janney was to receive 50% of those payments. Management disputes this agreement with Amazon Holdings, LLC.
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1.) David Janney was hired in of November 2010 as CEO. David Janney hired an attorney John Thomas from Utah to represent the company.
2.) Janney and Thomas began to convert debt held by Venture Capital Inc. who is a note holder of the company in January and February of 2011.
3.) Thomas wrote seven (7) opinion letters for Bonanza Goldfields Corp. converting this debt from Bonanza debt holder
Venture Capital Inc. and issuing shares to the following:
Tucker Financial Inc. (36 million shares),
Vanilla Sky (7 million shares),
Stock Loan Solutions LLC (12 million shares) ,
Euroline Cleaning (7 million shares) ,
Envest International (7 million shares),
Scott Geisler (17 million shares)
Total number of shares to this group was 86,000,000 shares.
This all occurred between January to May 2011.
Bonanza as part of their annual audit which began in August 2011 (working with their auditors GBH) began requesting confirmations for these debt conversions. The due date for the audit was October 15, 2011, which was an extended due date. Bonanza became aware that there was a problem on October 12, 2011 due to an email from a Bonanza debt holder named Venture Capital Inc. in which they stated to the company’s consulting accountant and GBH’s auditor on the account that they never assigned debt or received any money from a debt conversion.
Janney resigned October 24, 2011 and Scott Geisler became CEO October 26, 2011.
Bonanza hired outside attorney to try to stop the stock issuance who sent a demand letter to Transfer Online in November 2011. At that time the company was advised that all the stock had already been issued and Rule 144 legends removed based on a legal opinion from John Thomas and could not be reversed.
On or about October 12, 2011 prior to becoming CEO and Principle Accounting Officer, Geisler was informed of the fraud.
The company treats the shares as issued for accounting purposes. We continue to try to rectify the situation by attempting to rescind any shares that we can. The company believes that the exemptions under Rule 144 do not apply because proper due diligence appears to not have been performed by the issuing opinion attorney.
The stock was issued under a premise of conversion of debt that was two years or older and since there was no debt conversion (based on the email from Venture Capital Inc) the wasn’t proper polling of the debt. We do not believe that a rescission liability would be appropriate because the shares had already been traded in the market, except for the 17 million shares Mr. Geisler received with whom we are currently in discussion to resolve. Also, the company would have treated the shares as a rescission liability if the legal opinions on the stock issuance had not occurred. The company is currently treating the former CEO Scott Geisler’s shares as stock payable until a resolution is obtained.
On February 26, 2012, the Company entered into a settlement agreement with David Janney (our former CEO/CFO) for his actions outlined above related to wrongfully issued common stock of the Company, among many other things. The settlement agreement includes the following terms:
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The Company agreed to issue 5 million shares of restricted Bonanza Goldfields common stock to Mr. Janney as a form of compensation. The shares will be paid in two tranches. The first 2,500,000 shares should be issued upon the execution of the settlement and is issued on March 19, 2012. The second 2,500,000 shares were to be issued six months from the execution date of the settlement but have not been issued.
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b.
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The funds held in escrow by Christine Wright at the Wright Law Firm, P.A. on behalf of Freedom Boat, LLC for a loan under Mr. Janney’s name will be considered payment in full for Mr. Janney's return of 20,000,000 shares to the treasury on August 29, 2011.
|
|
c.
|
Mr. Janney agreed not to sell any more than 1,000,000 shares of his personal holdings of Bonanza Goldfields common stock in the open market in any thirty-day period.
|
|
d.
|
Mr. Janney agreed to return to the Company all of the Company’s property in his possession or in the possession of his family or agents including without limitation Bonanza's files and all documentation (and all copies thereof) dealing with the finances, operations and activities of the Company, its clients, employees or suppliers.
|
The Company recorded a loss of $59,000 on this settlement in the quarter ended December 31, 2011 as a recognized subsequent event.
Management is in the process of assessing these agreements and settlement with David Janney and learned that the title of the Midas Claim that the Company purchased from David Janney’s company, Global Minerals, Inc. never transferred to the Company. Since the title was never transferred, the transaction is being investigated and the Company is determining the validity of the David Janney settlement agreement.
On October 30, 2012, management learned that former President and CEO, Mr. Scott Geisler, filed suit against the Company on September 20, 2012, in the Circuit Court of the Sixth Judicial District in the State of Florida. The Company has not yet been served with the summons and complaint or filed an answer. Mr. Geisler asserts that the Company is in default with respect to payments under a Settlement and Mutual Release Agreement entered into upon his resignation as an officer and director of the Company and effective June 8, 2012. Mr. Geisler claims monetary damages "in excess of $15,000," attorneys' fees, court costs and seeks the issuance of 7,500,000 shares of common stock that is provided for under the Settlement and Mutual Release Agreement. We have engaged legal counsel to represent the Company in this dispute and counsel has identified defenses to the claims and setoffs. We are optimistic that a settlement of the dispute will be reached in the near future without having a materially adverse effect on our financial condition or results of operations.
During the year ended June 30, 2012, Bonanza Goldfields Corporation was not issued any Federal Mine Safety and Health Act of 1977 violations. In addition, there are no legal actions pending before the Federal Mine Safety and Health Review Commission as of June 30, 2012.
Bonanza common stock is traded in the over-the-counter market, and quoted in the National Association of Securities Dealers Inter-dealer Quotation System (“Electronic Bulletin Board) and can be accessed on the Internet at www.otcmarkets.com under the symbol “BONZ” We commenced trading in April, 2009.
At June 30, 2012, there were 320,862,680 shares of common stock of Bonanza were issued and outstanding and there were approximately 47 shareholders of record of the Company’s common stock.
The following table sets forth for the periods indicated the high and low bid quotations for Bonanza’s common stock. These quotations represent inter-dealer quotations, without adjustment for retail markup, markdown or commission and may not represent actual transactions.
|
Periods
|
|
High
|
|
|
Low
|
|
|
Fiscal Year 2012
|
|
|
|
|
|
|
|
First Quarter July – September 2011
|
|
$ |
0.007 |
|
|
$ |
0.018 |
|
|
Second Quarter October – December 2011
|
|
|
0.0069 |
|
|
|
0.018 |
|
|
Third Quarter January – March 2012
|
|
|
0.005 |
|
|
|
0.021 |
|
|
Fourth Quarter April – June 2012
|
|
|
0.018 |
|
|
$ |
0.0165 |
|
| |
|
|
|
|
|
|
|
|
|
Fiscal Year 2011
|
|
|
|
|
|
|
|
|
|
First Quarter July – September 2010
|
|
$ |
0.006 |
|
|
$ |
0.006 |
|
|
Second Quarter October – December 2010
|
|
|
0.01 |
|
|
|
0.0085 |
|
|
Third Quarter January – March 2011
|
|
|
0.0093 |
|
|
|
0.0081 |
|
|
Fourth Quarter April – June 2011
|
|
|
0.012 |
|
|
$ |
0.0085 |
|
On September 17, 2012, the closing bid price of our common stock was $0.0195
Dividends
We may never pay any dividends to our shareholders. We did not declare any dividends for the year ended June 30, 2012. Our Board of Directors does not intend to distribute dividends in the near future. The declaration, payment and amount of any future dividends will be made at the discretion of the Board of Directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors as the Board of Directors considers relevant. There is no assurance that future dividends will be paid, and if dividends are paid, there is no assurance with respect to the amount of any such dividend.
Transfer Agent
Bonanza’s Transfer Agent and Registrar for the common stock is Transfer Online, Inc. located in Portland, Oregon.
Recent sales of unregistered securities
Post-June 30, 2012
On July 27, 2012 the Company place in escrow 7,500,000 common shares to Scott Geisler in accordance with his waiver and settlement agreement with the Company, and is pending an internal investigation. The shares were valued at $0.0195 and expensed as compensation to Mr. Geisler of $146,250.
Fiscal year ended June 30, 2012
In the year ended June 30, 2012, the Company issued 55,904,764 common shares for $559,000 in cash. Within the 55,904,764 shares issued, 7,000,000 shares were issued to an investor with a right to sell the shares back to the Company at an interest rate of 12% after April 11, 2012. On April 12, 2012, the holder waived the right to sell the 7,000,000 shares back. As consideration, the Company issued the investor warrants to purchase 2,500,000 shares of the Company’s common stock at $0.02 per share. The warrants expire on October 11, 2013 and have a fair value of $66,330 on the grant date. Proceeds of $56,000 from this issuance were originally recorded as refundable subscriptions and following the waiver have been reclassified to additional paid-in capital.
On September 23, 2011, the Company issued 750,000 shares of common stock valued at $7,500 to purchase equipment.
During September 2011, as part of the resignation of David Janney, former Chief Executive Officer and Chief Financial Officer of the Company, Mr. Janney surrendered 20,000,000 common shares and 3,000,000 preferred shares of the Company. These shares were then cancelled and the Company recorded an adjustment to additional paid-in capital of $2,300. Additional paid-in capital was also increased by $19,327 to write off the accrued compensation payable to Mr. Janney initially recorded in prior periods.
During year ended June 30, 2012, the Company issued 2,200,000 shares of common stock to its director, officer and consultants for services valued at $20,100.
On December 28, 2011, the Company issued 500,000 shares of common stock in lieu of an interest payment on a note held by Mr. Charles Chapman. The shares were valued at $4,000.
On February 26, 2012, the Company issued 2,500,000 shares to David Janney, former officer, pursuant to a settlement agreement. See Note 10 of the Financial Statements in this report.
On March 19, 2012, the Company issued 500,000 shares to a note holder pursuant to an amendment to a note agreement. See Note 4 of the Financial Statements in this report.
During the nine months ended March 31, 2013, the Company received cash of $177,500 for the subscription of 10,793,445 common shares and issued 1,000,000 common shares for cash received in the year ended June 30, 2012. During the nine months ended March 31, 2013, the Company also received cash of $47,500 for the subscription of 2,187,500 common shares. At March 31, 2013, these shares have not been issued and were recorded as stock payable.
During the nine months ended March 31, 2013, the Company granted 21,000,000 shares of common stock for services of executives and a consultant. These shares were valued at $460,000 based on the trading price of the stock on the date granted. At March 31, 2013, these shares have not been issued and were recorded as stock payable.
On November 27, 2012, Leroy Steury converted a note with unpaid principal and accrued interest of $79,696 to 7,500,000 common shares.
On January 29, 2013, Bud Chapman and Fabio Piras were issued 300,000 common shares each, in aggregate of 600,000 shares valued at $11,700, for interest expense on a note.
On February 19, 2013, David Janney surrendered 3,670,000 common shares of the 6,170,000 common shares he held in the Company. David Janney was allowed to retain 2,500,000 shares as part of a settlement with the Company.
Fiscal year ended June 30, 2011
On July 29, 2010, the Company issued 8,300,000 common shares valued at $83,000 (or $0.01 per share based upon the closing price of the Company’s stock on the date the agreement was executed to Gold Exploration LLC towards a $10,000 payment on the promissory note for the Global Mineral Resources Corporation mining claim acquisition note held by Gold Exploration LLC. This payment of common stock reduced the outstanding balance with Gold Exploration LLC to $97,000 effective September 16, 2010, and the Company recognized a Loss on Debt Conversion of $73,000.
On August 7, 2010, the Company purchased a 160-acre placer mining claim from Global Mineral Resources Corporation. As partial consideration for the transaction, the Company transferred 41,700,000 restricted common shares valued at $458,700 or $0.011 per share based upon the closing price of the Company’s stock on the date the transaction was executed.
On November 22, 2010, the Company granted 7,220,000 common shares valued at $54,150 (or $0.0075 per share) based on the market price of the Company’s common stock on the date of grant to Summit Technology Corporation, Inc. in satisfaction of outstanding debt. The conversion of debt reduced the corresponding notes payable and accrued interest payable by $28,880, and the Company recognized a Loss on Debt Conversion of $25,270.
On February 7, 2011, the Company granted 5,000,000 common shares valued at $48,387 to Freedom Boat as compensation for modification of their note payable with the company. This note was discounted by $48,387 based on the fair value of common stock issued as part of the note. As of June 30, 2011, $18,957 of this discount had been amortized over the remaining life of the note.
On February 17, 2011, the Company granted 5,000,000 common shares valued at $62,500 (or $0.0125 per share) based on the market price of the Company’s common stock on the date of grant to Pop Holdings, Inc. in satisfaction of outstanding debt. The conversion of debt reduced the note payable and accrued interest payable by $39,000 and the Company recognized a Loss on Debt Conversion of $23,500.
On May 9, 2011, the Company granted 4,780,000 common shares valued at $42,064 (or $0.0088 per share) based on the market price of the Company’s common stock on the date of grant to Michael Cao in satisfaction of outstanding accounts payable. The share issuance satisfied $14,550 in accounts payables, and the Company recognized a Loss on Settlement of Accounts Payable of $27,514.
In the year ended June 30, 2011, the Company issued 3,777,778 common shares at a fair value quoted market price on the date of grant for $36,372 for the purchase of fixed assets.
In the year ended June 30, 2011, the Company issued 10,800,000 common shares for services at a fair value quoted market price on the date of grant for $88,940 and expensed that as stock issued for services.
In the year ended June 30, 2011, the Company issued 86,000,000 common shares for conversion of debt in October of 2011. New management of the Company learned that the conversion documents prepared by David Janney and John Thomas, Esq. were false documents and had treated the issuance as stock issued without proper authorization.
On June 14, 2011, the Company issued 3,000,000 preferred shares valued at $300 and subsequently after June 30, 2011, the Company’s prior CEO returned those shares are part of his resignation from the Company. The preferred shares were then cancelled in August 2011.
In the year ended June 30, 2011, the Company issued 34,000,000 common shares at a fair value quoted market price on the date of grant for $175,000 in cash.
The offer and sale of all such shares of our common stock were effected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Rule 506 promulgated under the Securities Act and in Section 4(2) of the Securities Act, based on the following: (a) the investors confirmed to us that they were “accredited investors,” as defined in Rule 501 of Regulation D promulgated under the Securities Act and had such background, education and experience in financial and business matters as to be able to evaluate the merits and risks of an investment in the securities; (b) there was no public offering or general solicitation with respect to the offering; (c) the investors were provided with certain disclosure materials and all other information requested with respect to our Company; (d) the investors acknowledged that all securities being purchased were “restricted securities” for purposes of the Securities Act, and agreed to transfer such securities only in a transaction registered under the Securities Act or exempt from registration under the Securities Act; and (e) a legend was placed on the certificates representing each such security stating that it was restricted and could only be transferred if subsequently registered under the Securities Act or transferred in a transaction exempt from registration under the Securities Act.
In addition to the shares issued for services as noted above, the Company recorded non-cash stock compensation totaling $985,100 for 86,000,000 shares originally thought to have been issued related to conversion of debt.
In October 2011, new management learned that the prior CEO/CFO failed to have entity level controls, lacked segregation of duties, among many other internal control deficiencies. The Company believes that the prior CEO/CFO concealed these matters from the professional advisors until those advisors requested David Janney for additional documentation in which Mr. Janney acknowledged the following to new management and independent legal counsel:
|
a)
|
December 9, 2010: Tucker Financial Services, Inc. received 12,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
|
|
b)
|
January 24, 2011; Tucker Financial Services, Inc. received 12,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
|
|
c)
|
February 16, 2011: Stock Loan Solutions received 12,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
|
|
d)
|
February 22, 2011: Nicolas Sprung of Tucker Financial Services Inc. received 12,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
|
|
e)
|
April 18, 2011: Euroline Clearing Corporation received 7,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
|
|
f)
|
April 18, 2011: Enavest International S.A., received 7,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
|
|
g)
|
April 18, 2011: Vanilla Sky, S.A. received 7,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
|
|
h)
|
June 28, 2011: Scott Geisler received 17,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
|
All legal opinions related to these conversions, documentations, and issuances of shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 were prepared by John Thomas, Esq. from Salt Lake City, Utah.
On February 26, 2012, the Company entered into a settlement agreement with David Janney (our former CEO/CFO) for his actions outlined in the June 30, 2011 Form 10-K related to wrongfully issued common stock of the Company, among many other things. The settlement agreement includes the following terms:
|
a.
|
The Company agreed to issue 5 million shares of restricted Bonanza Goldfields common stock to Mr. Janney as a form of compensation. The shares will be paid in two tranches. The first 2,500,000 shares should be issued upon the execution of the settlement and is issued on March 19, 2012. The second 2,500,000 shares were to be issued six months from the execution date of the settlement but have not been issued.
|
|
b.
|
The funds held in escrow by Christine Wright at the Wright Law Firm, P.A. on behalf of Freedom Boat, LLC for a loan under Mr. Janney’s name will be considered payment in full for Mr. Janney's return of 20,000,000 shares to the treasury on August 29, 2011.
|
|
c.
|
Mr. Janney agreed not to sell any more than 1,000,000 shares of his personal holdings of Bonanza Goldfields common stock in the open market in any thirty-day period.
|
|
d.
|
Mr. Janney agreed to return to the Company all of the Company’s property in his possession or in the possession of his family or agents including without limitation Bonanza's files and all documentation (and all copies thereof) dealing with the finances, operations and activities of the Company, its clients, employees or suppliers.
|
The Company recorded a loss of $59,000 on this settlement in the quarter ended December 31, 2011 as a recognized subsequent event.
Management is in the process of assessing these agreements and the settlement with David Janney and learned that the title of the Midas Claim that the Company purchased from David Janney’s Company, Global Minerals, Inc., was never transferred to the Company. Since the title was never transferred the transaction is being investigated and the Company is determining the validity of the David Janney settlement agreement. Currently, Mr. Janney’s remaining shares have not been transferred as part of an ongoing internal investigation.
The following information has been summarized from financial information included elsewhere and should be read in conjunction with such financial statements and notes thereto.
|
Statements of Operations Data:
|
|
|
|
|
|
|
| |
|
Year Ended June 30,
|
|
| |
|
2012
|
|
|
2011
|
|
| |
|
|
|
|
|
|
|
Revenues
|
|
$ |
- |
|
|
$ |
- |
|
|
Operating and Other Expenses
|
|
|
(1,091,355 |
) |
|
|
(2,409,959 |
) |
| |
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$ |
(1,091,355 |
) |
|
$ |
(2,409,959 |
) |
| |
|
|
|
|
|
|
|
|
|
Balance Sheets Data:
|
|
|
|
|
|
|
|
|
| |
|
As of June 30,
|
|
| |
|
|
2012 |
|
|
|
2011 |
|
| |
|
|
|
|
|
|
|
|
|
Current Assets
|
|
$ |
105,823 |
|
|
$ |
23,306 |
|
|
Total Assets
|
|
|
399,590 |
|
|
|
280,556 |
|
|
Current Liabilities
|
|
|
1,166,400 |
|
|
|
820,025 |
|
|
Non Current Liabilities
|
|
|
- |
|
|
|
- |
|
|
Total Liabilities
|
|
|
1,166,400 |
|
|
|
820,025 |
|
|
Working Capital (Deficit)
|
|
|
(1,060,577 |
) |
|
|
(796,719 |
) |
|
Shareholders' Equity (Deficit)
|
|
|
(766,810 |
) |
|
|
(539,469 |
) |
The following is management’s discussion and analysis of certain significant factors that have affected our financial position and operating results during the periods included in the accompanying consolidated financial statements, as well as information relating to the plans of our current management. This report includes forward-looking statements. Generally, the words “believes,” “anticipates,” “may,” “will,” “should,” “expect,” “intend,” “estimate,” “continue,” and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, including the matters set forth in this report or other reports or documents we file with the Securities and Exchange Commission from time to time, which could cause actual results or outcomes to differ materially from those projected. Undue reliance should not be placed on these forward-looking statements which speak only as of the date hereof. We undertake no obligation to update these forward-looking statements.
The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto and other financial information contained elsewhere in this Form 10-K.
The Company's financial statements have been prepared in accordance with United States generally accepted accounting principles. We urge you to carefully consider the information set forth in this report under the heading "Forward-Looking Statements" and "Risk Factors".
Our exploration target is to find exploitable minerals on our properties. Our success depends on achieving that target. There is the likelihood of our mineral claims containing little or no economic mineralization or reserves of gold and other minerals. There is the possibility that our claims do not contain any reserves and funds that we spend on exploration will be lost. Even if we complete our current exploration program and are successful in identifying a mineral deposit we will be required to expend substantial funds to bring our claim to production. We are unable to assure you we will be able to raise the additional funds necessary to implement any future exploration or extraction program even if mineralization is found.
Our Chief Executive Officer and Chief Financial Officer concluded that our internal controls over financial disclosure and procedures were not effective.
If the weaknesses in our disclosure controls and procedures are not remedied based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO the company may not be able to accurately disclose its financial condition.
Going Concern
The report of our independent registered public accounting firm contains explanatory language that substantial doubt exists about our ability to continue as a going concern. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills. This is because we have not generated revenues and no revenues are anticipated until we begin removing and selling minerals. There is no assurance we will ever reach that point.
Critical Accounting Policies
The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America. Significant accounting policies are as follows:
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. These estimates and assumptions also affect the reported amounts of revenues, costs and expenses during the reporting period. Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from those estimates.
Exploration Stage Enterprise
The Company's financial statements are prepared pursuant to the provisions of ASC Topic 26 “Accounting for Development Stage Enterprises,” as it devotes substantially all of its efforts to acquiring and exploring mining interests that will eventually provide sufficient net profits to sustain the Company’s existence. Until such interests are engaged in major commercial production, the Company will continue to prepare its financial statements and related disclosures in accordance with entities in the development stage. Mining companies subject to ASC Topic 26 are required to label their financial statements as an “Exploratory Stage Company,” pursuant to guidance provided by SEC Guide 7 for Mining Companies.
Mineral Properties
Significant payments related to the acquisition of mineral properties, mineral rights, and mineral leases are capitalized. If a commercially mineable ore body is discovered, such costs are amortized when production begins using the units-of-production method based on proven and probable reserves. If no commercially mineable ore body is discovered, or such rights are otherwise determined to have no value, such costs are expensed in the period in which it is determined the property has no future economic value.
Property Evaluations
Management of the Company will periodically review the net carrying value of its properties on a property-by-property basis. These reviews will consider the net realizable value of each property to determine whether a permanent impairment in value has occurred and the need for any asset write-down. An impairment loss will be recognized when the estimated future cash flows (undiscounted and without interest) expected to result from the use of an asset are less than the carrying amount of the asset. Measurement of an impairment loss will be based on the estimated fair value of the asset if the asset is expected to be held and used.
Although management will make its best estimate of the factors that affect net realizable value based on current conditions, it is reasonably possible that changes could occur in the near term which could adversely affect management's estimate of net cash flows expected to be generated from its assets, and necessitate asset impairment write-downs.
Mineral property rights
All direct costs related to the acquisition of mineral property rights are capitalized. Exploration costs are charged to operations in the period incurred until such time as it has been determined that a property has economically recoverable reserves, at which time subsequent exploration costs and the costs incurred to develop a property are capitalized. The Company reviews the carrying values of its mineral property rights whenever events or changes in circumstances indicate that their carrying values may exceed their estimated net recoverable amounts. An impairment loss is recognized when the carrying value of those assets is not recoverable and exceeds its fair value. As of June 30, 2012, management has determined that there was no impairment loss required as compared to impairment loss required of $615,700 as of June 30, 2011.
At such time as commercial production may commence, depletion of each mining property will be provided on a unit-of-production basis using estimated proven and probable recoverable reserves as the depletion base. In cases where there are no proven or probable reserves, depletion will be provided on the straight-line basis over the expected economic life of the mine.
Impairment of Long-Lived Assets
In accordance with ASC Topic 365, long-lived assets, such as property, plant, and equipment, and purchased intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Goodwill and other intangible assets are tested for impairment. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. As of June 30, 2011, management has determined that there was impairment loss required of $647,822, including the impairment of $615,700 for mineral property rights. There was no impairment loss required for June 30, 2012.
Share-Based Compensation
The Company applies Topic 718 “Share-Based Payments” (“Topic 718”) to share-based compensation, which requires the measurement of the cost of services received in exchange for an award of an equity instrument based on the grant-date fair value of the award. Compensation cost is recognized when the event occurs. The Black-Scholes option-pricing model is used to estimate the fair value of options granted. There are 12,000,000 options and no warrants outstanding as of June 30, 2012.
Recent Accounting Pronouncements
The Company’s management does not believe that any recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying financial statements.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors. Certain officers and directors of the Company have provided personal guarantees to our various lenders as required for the extension of credit to the Company.
Accounting policies subject to estimation and judgment
Management's Discussion and Analysis of Financial Condition and Results of Operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. When preparing our financial statements, we make estimates and judgments that affect the reported amounts on our balance sheets and income statements, and our related disclosure about contingent assets and liabilities. We continually evaluate our estimates, including those related to revenue, allowance for doubtful accounts, reserves for income taxes, and litigation. We base our estimates on historical experience and on various other assumptions, which we believe to be reasonable in order to form the basis for making judgments about the carrying values of assets and liabilities that are not readily ascertained from other sources. Actual results may deviate from these estimates if alternative assumptions or condition are used.
RECENT DEVELOPMENTS AND OPERATIONS
We are a junior mining and exploration company identifying and acquiring properties integrated with placer ore and hard rock mineralization in geo-politically stable regions. Management continues to focus all efforts on its 3 set of leased properties. The first are federal mining claims on BLM land totaling 458 acres. The company maintains the BLM maintenance fees annually. The second set of land is a two year lease with an option to buy from Judgetown LLC. This acreage is 130.76 acres of patented land with 2013 lease payments of $190,000 and in year 2 they will be $120,000 which are paid quarterly. Rick Thomas, who is a 50% owner of Judgetown LLC subsequently sold his rights to Michael Quigley of Utah. See attached Judgetown LLC agreement and amendment for Mr. Quigley. The last parcel of land is referred to as the Hull Land and is approximately 20 acres of patented land which is owned by Bonanza Goldfield.
Our managements’ strategy is to process feasible placer ore, while proving out hard rock structures of its leased properties. Our work effort has focused exclusively on the above leased properties. The project area is comprised of 38 lode claims covering 600 acres, with several low lying basins of what is believed to be ancient river beds. Furthermore, there are vestiges and hallmarks of major geological upheaval resulting in unique anomalies, such as extensive mineralized quartz veins. Initially, local non-qualified assay results showed high grades of gold, as well as lower grades of silver, platinum, and rare earth metals, convincing management of the existence of resources.
Bonanza Goldfields’ leased claims consist of 38 lode claims covering 600 acres of patented, private property claims and Bureau of Land Management (“BLM”) claims in the Date Creek Mountains, Arizona consisting of both alluvial and mineralized quartz deposits. A Preliminary Geological Survey of the claims and the immediate region is now completed of the Tarantula Project, prepared by Auric Resources International, Inc. of Wickenburg, Arizona. Shareholders can access the report at Bonanza Goldfields' official website: www.bonanzagoldfields.com (such website and its contents are not to be incorporated by reference to this report).
Additional testing was completed by Auric Resources on our BLM land which tested positive for gold deposits and certain critical rare earth elements. Those results can also be found on our website.
Highlights from the report include:
|
●
|
The large land package with widespread areas of anomalous gold values; large iron oxide rich quartz veins which exhibit mineralogical and structural similarities to the Congress, Niagara, Queen of the Hills, Golden Wave and other mineralized, economic vein systems in the area; and the presence of placer gold in widespread gravels indicates that the leased claims may host a large, potentially economic gold deposit and undoubtedly represents an excellent exploration target with potential for both placer and lode gold production from auriferous placers and veins.
|
|
●
|
Although some preliminary testing has been done on portions of the property, the majority of the land package has virgin placer gravels and large quartz veins that have never been explored or tested.
|
|
●
|
The geologic setting of the property is favorable for the concentration of placer gold in the local gravels that occur in drainage channels and elevated benches and for lode gold that occurs within the early Proterozoic granitic rocks as auriferous quartz fissure veins with locally abundant sulfides and iron oxides.
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Auriferous quartz and quartz-sulfide veins occur on the leased claims and many exhibit the same characteristics as those in the Congress Mine and other mines in the area. These veins ranged up to several feet in width and have strike lengths ranging from hundreds to thousands of feet.
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Prior to commencing the survey, extensive samplings were analyzed locally at multiple depths demonstrating the potential for high grade gold findings throughout the property. Modern access for heavy equipment is already in place via Bonanza’s privately constructed roads, and rail is localized. Unique features appear ubiquitous throughout the immediate area, including greenstone dike extensions, placer gravel deposits, and vestiges of numerous pre-historic waterfalls. Additionally, lode gold possibilities exist due to the extensions of schist and mineralized quartz veins. Our management believes the alluvial deposits originate from two ancient rivers that flowed in opposing directions during separate geological periods.
We expanded the flagship Tarantula Project with the acquisition of the Piedmont Mine. The Piedmont Mine has been deemed by the Bonanza geological team a highly prospective addition. The acquisition expands the leased claims to 38 lode mining claims covering over 600 acres of contiguous property.
While conducting a survey of the leased claims, explorations of the outlying region lead to the acquisition of additional claims. With the expansion of the land package, management believes an economically feasible resource estimate can be derived and “proved out.” Furthermore, with the added resource, small to medium scale placer production operations can commence. We have further engaged Auric Resources International to source and build its production operation on an economically viable basis. The level of viability is indexed at 1 gram/ton, and management believes these levels can be attained if not exceeded. With placer production commencing of placer material, we intend to move directly into core drilling of the property.
RESULTS OF OPERATIONS
Fiscal Year Ended June 30, 2012, Compared to Fiscal Year Ended June 30, 2011
We are an exploration stage company acquiring mineral properties or claims located in the State of Arizona, USA. The recoverability of amounts from the properties or claims will be dependent upon the discovery of economically recoverable reserves, confirmation of our interest in the underlying properties and/or claims, our ability to obtain necessary financing to satisfy the expenditure requirements under the property and/or claim agreements and to complete the development of the properties and/or claims, and upon future profitable production or proceeds for the sale thereof.
For the years ended June 30, 2012 and 2011, we generated no revenue. Our future revenue plan is uncertain and is dependent on our ability to effectively mine our products, generate sales, and obtain contract mining opportunities. There are no assurances of the ability of our Company to begin to mine our claim. The cost of mining is intensive so it is critical for us to raise appropriate capital to implement our business plan. We incurred losses of $1,091,355 and $2,409,959 for the years ended June 30, 2012 and 2011 and our losses since inception amount to $6,606,854.
Our operating expenses for exploration activities for the years ended June 30, 2012 and 2011 were $66,282 and $106,782, respectively. The costs associated with exploration activities included trenching, testing, hauling, and labor costs associated with the exploration of our gold mines claims.
We acquired several mining claims through the course of our exploration stage and through the course of this process impaired claims. The Midas Place Mining Claim title was never transferred to the Company and Orisis Gold Joint Venture agreement expired on June 2011. During the year ended June 30, 2011, we recorded $615,700 of impairment on mining claims and $32,122 on equipment.
Our general and administrative expenses for the year ended June 30, 2012 were $768,056 as compared to $1,411,239 for the year ended June 30, 2011. The decrease is primarily attributable to the reduction of stock issued for services and stock issued for conversion of debt. In the year ended June 30, 2011, we learned that the documents provided and other documents concealed by our prior CEO/CFO were forgeries which represented 86,000,000 common shares issued. We expensed $985,100 as non-cash compensation as follows:
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a)
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December 9, 2010: Tucker Financial Services, Inc. received 12,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
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b)
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January 24, 2011; Tucker Financial Services, Inc. received 12,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
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c)
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February 16, 2011: Stock Loan Solutions received 12,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
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d)
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February 22, 2011: Nicolas Sprung of Tucker Financial Services, Inc. received 12,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
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e)
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April 18, 2011: Euroline Clearing Corporation received 7,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
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f)
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April 18, 2011: Enavest International S.A., received 7,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
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g)
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April 18, 2011: Vanilla Sky, S.A. received 7,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
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h)
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June 28, 2011: Scott Geisler received 17,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
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Our interest expense for the year ended June 30, 2012 was $192,517 as compared to $94,832 for June 30, 2011. The increase is primarily attributable to the increase in average debt outstanding and the amortization of debt discount of $119,930for the year ended June 30, 2012 compared to 68,957 for the year ended June 30, 2011.
On February 26, 2012, the Company entered into a settlement agreement with David Janney, former CEO. Pursuant to the settlement agreement, the Company agreed to issue 5,000,000 common shares to David Janney.
These shares were valued at $59,000 and recorded as loss on settlement of litigation. No such loss was recorded for the year ended June 30, 2011.
Our loss on accounts payable and loss on conversion of debt for the years ended June 30, 2012 were $5,500 as compared to $149,284 for June 30, 2011.
An opinion of counsel pursuant to Rule 144 was prepared and executed by attorney Thomas for each of the issuances and sent to the company with instructions to issue the shares without restrictions. (see attached filings). The former CEO and only director at the time forwarded the opinion, instructions and the corporate resolution to the transfer agent directing that the share certificates be issued as new shares without a restriction to the designated shareholders. The transfer agent issued new shares to the recipients without a restriction based upon the legal opinion and directions from the CEO. A copy of each opinion, instructions and the corporate resolution are incorporated herein and filed as an attachment to the response to this comment and will be filed as exhibits to the amended Form 10-K. The above mentioned 86,000,000 shares are outstanding other than 12,000,000 shares that present management has been able to place in escrow with the transfer agent pending further review. The only note holder, Venture Capital International, never agreed to an assignment, did not receive payment from this above described transaction and the note is still outstanding. Present management believe the assignment was forged. The recipients of the 86,000,000 shares did not pay the company nor the note holder for the shares and we believe, based on information from one of the parties who purchased the stock, that the former CEO may have kept the funds received from the sale of the shares.
We do not believe that these shares are legally issued, fully paid or non-assessable in that the Rule 144 opinion of counsel is an attempt to issue new shares directly from the issuer without a restriction. It is our understanding that Rule 144 provides a safe harbor from the definition of an underwriter such that the Section 4(1) exemption from registration would be available however, Section 4(1) exemption does not apply to an issuer. It is our understanding that an exemption from registration was not available for the issuance of 86,000,000 shares. It is our understanding that the holders of these shares must receive an opinion of counsel acceptable to the company before they can be sold. The company is attempting to contact the present holders at this time. All shares issued by the company that have not been properly registered through the available effective registration statements are restricted. The company has treated these shares as compensation to the initial holders and has made the proper accounting entries.
We do not believe that these shares are legally issued, fully paid or non-assessable in that the Rule 144 opinion of counsel is an attempt to issue new shares directly from the issuer without a restriction. It is our understanding that Rule 144 provides a safe harbor from the definition of an underwriter such that the Section 4(1) exemption from registration would be available however, Section 4(1) exemption does not apply to an issuer. It is our understanding that an exemption from registration was not available for the issuance of 86,000,000 shares. It is our understanding that the holders of these shares must receive an opinion of counsel acceptable to the company before they can be sold. The company is attempting to contact the present holders at this time. All shares issued by the company that have not been properly registered through the available effective registration statements are restricted. The company has treated these shares as compensation to the initial holders and has made the proper accounting entries.
We do not believe that these shares are legally issued, fully paid or non-assessable in that the Rule 144 opinion of counsel is an attempt to issue new shares directly from the issuer without a restriction and Section 4(1) exemption does not apply to an issuer. It is our understanding that an exemption from registration was not available for the issuance of 86,000,000 shares. We do not believe that a rescission liability would be appropriate because the shares had already been traded in the market, except for the 17 million shares Mr. Geisler received with whom we are currently in discussion to resolve. Also, the company would have treated the shares as a rescission liability if the legal opinions on the stock issuance had not occurred.
Liquidity and Capital Resources
Our cash used in operating activities for the year ended June 30, 2012 was $542,385 as compared to $203,255 for the year ended June 30, 2011. The increase in cash flows used in operations was primarily attributable to payments made to vendors for general and administrative expenses and payments made to related parties during the year ended June 30, 2012.
Our cash used in investing activities for the year ended June 30, 2012 was $33,173 as compared to $50,000 for the year ended June 30, 2011. Payments made during fiscal year 2012 were related to the purchase of equipment for the exploration of our mining claims, and payment of $50,000 during fiscal year 2011 was related to the Osiris Gold Joint Venture which expired in June 2011.
Our cash provided by financing activities for the year ended June 30, 2012 was $637,875 as compared to $276,300 for the year ended June 30, 2011. The increase is mainly due to the issuance of common stock for $559,000 cash and proceeds from notes payable and convertible notes payable of $126,875 for fiscal year 2012 compared to proceeds from notes payable of $101,300 and proceeds of $175,000 from the issuance of common stock during fiscal year 2011.
To date, we have has succeeded in securing capital as needed, but there is no guarantee this will continue.
We believe we will have to rely on public and private equity and debt financings to fund our liquidity requirements over the intermediate term. We may be unable to obtain any additional financings on terms favorable to us, or obtain additional funding at all. If adequate funds are not available on acceptable terms, and if cash and cash equivalents together with any income generated from operations fall short of our liquidity requirements, we may be unable to sustain operations. Continued negative cash flows raise substantial doubt regarding our ability to fully implement our business plan and could render us unable to expand our operations or take advantage of acquisition opportunities, any of which may have a material adverse effect on our business. If we raise additional funds through the issuance of equity securities, our stockholders may experience dilution of their ownership interest, and the newly issued securities may have rights superior to those of our common stock. If we raise additional funds by issuing debt, we may be subject to limitations on our operations, including limitations on the payments of dividends.
The company is in need of approximately $65,000 per month in order to meet its operating expenses. If the company has insufficient revenue, it will be able to borrow the funds from Tonaquint pursuant to the agreements in place.
The company borrowed the funds pursuant to the Secured Convertible Promissory Note. The amount borrowed was $300,000 it is repaid in monthly payments of $93, 5333.83 (including interest) in cash or stock.
There are no set dates or requirements for the company to draw down on the Secured Convertible Promissory Note.
Other Considerations
There are numerous factors that affect the business and the results of its operations. Sources of these factors include general economic and business conditions, federal and state regulation of business and mining activities, changes to the tax code during or after the current congressional session, and our ability to continue to improve our infrastructure including personnel and systems to keep pace with the Company’s potential growth.
The will be included in our amended 10-K under the heading Other Considerations. The company will be subject to environmental and governmental regulations. Initial exploration such as geological mapping and sampling can be done on BLM land without permits. If more than 5 acres are to be disturbed, a Notice of Intent to Conduct Exploration must be submitted to the BLM. The Notice will include a reclamation bond. The approved Notice will allow bulk sampling of up to 1000 tons of material. If the sampling program warrants further exploration with a drilling program, the Arizona Department of Water Resources will require permits for exploration drilling.
To conduct exploration which disturbs more than 5 acres of surface, the BLM requires the filing of a Plan of Operation which must include a reclamation bond. The Plan of Operation must also be sent to other entities including the Arizona Department of Environmental Quality, the US Army Corps of Engineers, the Mine Safety and Health Administration, and the Arizona Department of Water Resources. Each of the entities will review the Plan of Operations and request any necessary changes.
The BLM will require either an Environmental Assessment or an Environmental Impact Statement for mining on BLM claims. Processing of the mined material will be done on patented claims owned by the company, but an Aquifer Protection Permit will still be required. A pollution prevention plan and an air quality permit may also be required by the State and County. Biological and cultural surveys will also be required and will note any threatened or endangered species of plants and animals and any cultural or historical sites which must be protected.
The permitting process for a mining operation is complex and can take considerable time. The effect of this permitting process and the government regulations are limited to the costs of outside consultants to perform the biological and cultural surveys and to write the Environmental Impact Statement, if required. It is not anticipated that any of these regulations or permits will prevent further development of the patented or BLM land.
We do not hold any derivative instruments and do not engage in any hedging activities.
(An Exploration Stage Company)
| TABLE OF CONTENTS |
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Report of Independent Registered Public Accounting Firm
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F-2 |
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Balance Sheets
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Statements of Operations
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Statements of Stockholders’ Deficit
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Statements of Cash Flows
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NOTES TO FINANCIAL STATEMENTS
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F-7 |
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To the Board of Directors and Stockholders
Bonanza Goldfields Corporation
(An Exploration Stage Company)
Phoenix, Arizona
We have audited the accompanying balance sheets of Bonanza Goldfields Corporation (an exploration stage company) as of June 30, 2012 and 2011, and the related statements of operations, stockholders’ deficit and cash flows for the years then ended and for the period from March 6, 2008 (inception) to June 30, 2012. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. The financial statements for the period from March 6, 2008 (inception) through June 30, 2010 were audited by other auditors whose reports expressed unqualified opinions on those statements. The financial statements for the period from March 6, 2008 (date of inception) to June 30, 2010 include total revenues and net loss of $0 and $3,105,540, respectively. Our opinion on the statements of operations, stockholders' deficit and cash flows for the period from March 6, 2008 (date of inception) through June 30, 2010, insofar as it relates to amounts for prior periods through June 30, 2010, is based solely on the reports of other auditors.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bonanza Goldfields Corporation as of June 30, 2012 and 2011, and the results of its operations and its cash flows for the years then ended and for the period from March 6, 2008, (inception) to June 30, 2012, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses and has an accumulated deficit at June 30, 2012. These factors raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ GBH CPAs, PC
GBH CPAs, PC
www.gbhcpas.com
Houston, Texas
September 28, 2012
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 – DESCRIPTION OF BUSINESS AND GOING CONCERN
Bonanza Goldfields Corp. (the “Company”) was incorporated under the laws of the State of Nevada on March 6, 2008. The Company’s fiscal year ends on June 30. The Company is in the process of acquiring mineral properties or claims located in the State of Arizona. The recoverability of amounts from the properties or claims will be dependent upon the discovery of economically recoverable reserves, confirmation of the Company's interest in the underlying properties and/or claims, the ability of the Company to obtain necessary financing to satisfy the expenditure requirements under the property and/or claim agreements and to complete the development of the properties and/or claims, and upon future profitable production or proceeds for the sale thereof.
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplate continuation of the Company as a going concern. However, the Company has a working deficit and has not generated revenues since inception. During the year ended June 30, 2012, the Company incurred a net loss of $1,091,355 and as of June 30, 2012 has an accumulated deficit of $6,606,854. Further, the Company has inadequate working capital to maintain or develop its operations, and is dependent upon funds from private investors and the support of certain stockholders. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. In this regard, Management is planning to raise any necessary additional funds through loans or additional sales of its common stock. There is no assurance that the Company will be successful in raising additional capital.
The Company's ability to meet its obligations and continue as a going concern is dependent upon its ability to obtain additional financing, achievement of profitable operations and/or the discovery, exploration, development and sale of mining reserves. The Company cannot reasonably be expected to earn revenue in the exploration stage of operations. Although the Company plans to pursue additional financing, there can be no assurance that the Company will be able to secure financing when needed or to obtain such financing on terms satisfactory to the Company, if at all.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and (iii) the reported amount of net sales and expenses recognized during the periods presented. Adjustments made with respect to the use of estimates often relate to improved information not previously available. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements; accordingly, actual results could differ from these estimates.
Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from those estimates.
Exploration Stage Enterprise
The Company's financial statements are prepared pursuant to SEC guidance and Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 915, Development Stage Entities, as it devotes substantially all of its efforts to acquiring and exploring mining interests that will eventually provide sufficient net profits to sustain the Company’s existence.
Mineral property rights
All direct costs related to the acquisition of mineral property rights are capitalized. Exploration costs are charged to operations in the period incurred until such time as it has been determined that a property has economically recoverable reserves, at which time subsequent exploration costs and the costs incurred to develop a property are capitalized. The Company reviews the carrying values of its mineral property rights whenever events or changes in circumstances indicate that their carrying values may exceed their estimated net recoverable amounts. An impairment loss is recognized when the carrying value of those assets is not recoverable and exceeds its fair value. As of June 30, 2012, management has determined that there was no impairment loss required as compared to impairment loss of $615,700 required on June 30, 2011.
At such time as commercial production may commence, depletion of each mining property will be provided on a unit-of-production basis using estimated proven and probable recoverable reserves as the depletion base. In cases where there are no proven or probable reserves, depletion will be provided on the straight-line basis over the expected economic life of the mine.
Impairment of Long-Lived Assets
Long-lived assets, such as property, plant, and equipment, and purchased intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Goodwill and other intangible assets are tested for impairment. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. As of June 30, 2011, management has determined that there was impairment loss required of $647,822. There was no impairment loss required for June 30, 2012.
Asset Retirement Obligations
The Company had no operating properties at June 30, 2012, but the Company’s mineral properties will be subject to standards for mine reclamation that are established by various governmental agencies. For these non-operating properties, the Company accrues costs associated with environmental remediation obligations when it is probable that such costs will be incurred and they are reasonably estimable. Costs of future expenditures for environmental remediation are not discounted to their present value. Such costs are based on management's current estimate of amounts that are expected to be incurred when the remediation work is performed within current laws and regulations.
It is reasonably possible that due to uncertainties associated with defining the nature and extent of possible environmental contamination, application of laws and regulations by regulatory authorities, and changes in remediation technology, the ultimate cost of remediation and reclamation could change in the future. The Company continually reviews its accrued liabilities for such remediation and reclamation costs as evidence becomes available indicating that its remediation and reclamation liability has changed.
The Company recognizes the fair value of a liability for an asset retirement obligation in the period in which it is incurred, if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the associated long-lived assets and depreciated over the lives of the assets on a units-of-production basis. Reclamation costs are accreted over the life of the related assets and are adjusted for changes resulting from the passage of time and changes to either the timing or amount of the original present value estimate on the underlying obligation. There were asset retirement obligations as of June 30, 2012 as there are presently no underlying obligations.
Property and Equipment
Property and equipment is recorded at cost and depreciated over the estimated useful lives of the assets using principally the straight-line method. When items are retired or otherwise disposed of, income is charged or credited for the difference between net book value and proceeds realized thereon. Ordinary maintenance and repairs are charged to expense as incurred, and replacements and betterments are capitalized.
The range of estimated useful lives used to calculated depreciation for principal items of property and equipment are as follow:
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Asset Category
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Depreciation/
Amortization Period
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Office equipment
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3 Years
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Income Taxes
Deferred income taxes are provided based on the provisions of ASC Topic 740, Income Taxes, to reflect the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
The Company follows a two-step approach to ultimately recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not, that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount, which is more than 50% likely of being realized upon ultimate settlement. The Company considers many factors when evaluating and estimating the Company's tax positions and tax benefits, which may require periodic adjustments. At June 30, 2012, the Company did not record any liabilities for uncertain tax positions.
Concentration of Credit Risk
The Company maintains its operating cash balances in banks in Phoenix, Arizona. The Federal Depository Insurance Corporation (“FDIC”) insures accounts at each institution up to $250,000.
Share-Based Compensation
The measurement of the cost of services received in exchange for an award of an equity instrument is based on the grant-date fair value of the award. Compensation cost is recognized when the event occurs. The Black-Scholes option-pricing model is used to estimate the fair value of options granted.
Basic and Diluted Net Loss Per Common Share
Net loss per common share was computed by dividing the net loss by the weighted average number of common shares outstanding during the period. The weighted average number of shares was calculated by taking the number of shares outstanding and weighting them by the amount of time that they were outstanding. Diluted net loss per share for the Company is the same as basic net loss per share, as during period where a net loss is reported, the inclusion of common stock equivalents would be antidilutive.
At June 30, 2012 and 2011, common stock equivalents consisted of warrants to purchase 25,500,000 and 6,000,000 shares of common stock, respectively.
Fair Value of Financial Instruments
The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties other than in a forced sale or liquidation.
The carrying amounts of the Company’s financial instruments, including cash, accounts payable and accrued liabilities, accrued interest and related party payable, approximate fair value due to their most maturities.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current period presentation for comparative purposes.
Recent Accounting Pronouncements
The Company’s management does not believe that any recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying financial statements.
NOTE 3 – MINING CLAIMS
The following is a detail of mining claims at June 30, 2012 and 2011:
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June 30, 2012
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June 30, 2011
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Midas Placer Mining Claim (fully impaired)
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$ |
565,700 |
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$ |
565,700 |
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Hull Lode Mining Claim (Freedom Boat Lease)
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250,000 |
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250,000 |
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Osiris Gold Joint Venture (fully impaired)
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50,000 |
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50,000 |
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Total mining and equipment activity
|
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865,700 |
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865,700 |
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Accumulated impairment of mining claims
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(615,700 |
) |
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(615,700 |
) |
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Total Mining Claims
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$ |
250,000 |
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$ |
250,000 |
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The Company has impaired all claims except for the (Hull Lode) mining claim.
During the year ended June 30, 2012, the Company learned that the title of Midas Placer Claim which the Company purchased from Global Minerals, Inc., was never transferred to the Company. The Company did not record any adjustment during the year ended June 30, 2012 as the Midas Placer Mining Claim was fully impaired during fiscal year 2011.
NOTE 4 – NOTES PAYABLE
The Company had the following notes payable outstanding as of June 30, 2012 and June 30, 2011:
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June 30, 2012
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June 30, 2011
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Gold Exploration LLC (a)
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$ |
52,699 |
|
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$ |
52,699 |
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Dated - June 1, 2008
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Venture Capital International (b)
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12,000 |
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12,000 |
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Dated – March 30, 2009
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Venture Capital International (c)
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|
17,000 |
|
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|
17,000 |
|
|
Dated - May 7, 2009
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Advantage Systems Enterprises Limited (d)
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17,000 |
|
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|
17,000 |
|
|
Dated – July 3, 2009
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Advantage Systems Enterprises Limited (e)
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|
|
10,000 |
|
|
|
10,000 |
|
|
Dated – August 7, 2009
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|
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| |
|
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|
Venture Capital International (f)
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|
|
10,000 |
|
|
|
10,000 |
|
|
Dated – October 15, 2009
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|
|
|
|
|
|
|
|
Venture Capital International (g)
|
|
|
7,000 |
|
|
|
7,000 |
|
|
Dated – October 27,2009
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Advantage Systems Enterprises Limited (h)
|
|
|
25,000 |
|
|
|
25,000 |
|
|
Dated – November 9, 2009
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Venture Capital International (i)
|
|
|
5,000 |
|
|
|
5,000 |
|
|
Dated – November 23, 2009
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Strategic Relations Consulting, Inc. (j)
|
|
|
15,000 |
|
|
|
15,000 |
|
|
Dated – March 31, 2010
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Summit Technology Corporation, Inc. (k)
|
|
|
2,000 |
|
|
|
7,000 |
|
|
Dated November 22, 2010
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Gold Exploration LLC (l)
|
|
|
97,000 |
|
|
|
97,000 |
|
|
Dated – July 29, 2010
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Freedom Boat, LLC (m)
|
|
|
250,000 |
|
|
|
250,000 |
|
|
Dated February 7, 2011
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Asher Enterprises, Inc. – Convertible Note (n)
|
|
|
- |
|
|
|
53,000 |
|
|
Dated April 6, 2011
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Dr. Linh Nguyen (o)
|
|
|
25,000 |
|
|
|
25,000 |
|
|
Dated May 23, 2011
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Charles Chapman (p)
|
|
|
50,000 |
|
|
|
- |
|
|
Dated December 27, 2011
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Leroy Steury (q)
|
|
|
76,875 |
|
|
|
- |
|
|
Dated March 12, 2012
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Total Notes payable
|
|
$ |
671,574 |
|
|
$ |
602,699 |
|
|
Less: current portion of long-term debt
|
|
|
(671,574 |
) |
|
|
(573,269 |
) |
|
Less: discount applicable to Freedom Boat, LLC Note
|
|
|
- |
|
|
|
(29,430 |
) |
|
Long-term debt
|
|
$ |
- |
|
|
$ |
- |
|
(a) The Company entered into a purchase agreement to purchase mining claims with Gold Exploration LLC in the amount of $99,000 on June 1, 2008. The Company paid $15,000 in cash and issued a note for $84,000 with an interest rate of 12% for the remaining balance. Pursuant to the purchase agreement, $7,000 should be paid each 90 days until the full principal balance plus accrued interest is paid off.As of June 30, 2012 and 2011 the Company principal and interest payable to Gold Exploration LLC for this note is $65,346 and $59,022, respectively. This note is presently in default.
(b) On March 30, 2009, the Company issued a $12,000 demand promissory note to Venture Capital International, Inc. The note is due on demand with an interest rate of 5%. As of June 30, 2012 and 2011, the Company principal and interest payable to Venture Capital International, Inc. related to this note is $13,932 and $13,332, respectively.
(c) On May 7, 2009, the Company issued a $17,000 demand promissory note to Venture Capital International, Inc. The note is due on demand and has an interest rate of 5%. As of June 30, 2012 and 2011, principal and interest payable to Venture Capital International, Inc. related to this note is $19,648 and $18,798, respectively.
(d) On July 3, 2009, the Company issued a $17,000 demand promissory note to Advantage Systems Enterprise Limited. The note is due on demand with an interest rate of 5%. As of June 30, 2012 and 2011, principal and interest payable to Advantage Systems Enterprise Limited related to this note is $19,550 and $18,700, respectively.
(e) On August 7, 2009, the Company issued a $10,000 demand promissory note to Advantage Systems Enterprises Limited. The note is due on demand with an interest rate of 5%. As of June 30, 2012 and 2011, principal and interest payable to Advantage Systems Enterprise Limited, Inc. related to this note is $11,448 and $10,948, respectively.
(f) On October 15, 2009, the Company issued a $10,000 demand promissory note to Venture Capital International. The note is due on demand with an interest rate of 5%. As of June 30, 2012 and 2011, principal and interest payable to Venture Capital International related to this note is $11,353 and $10,853, respectively.
(g) On October 27, 2009, the Company issued a $7,000 demand promissory note to Venture Capital. The note is due on demand with an interest rate of 5%. As of June 30, 2012 and 2011, principal and interest payable to Venture Capital International related to this note is $7,936 and $7,586, respectively.
(h) On November 9, 2009, the Company issued a $25,000 demand promissory note to Advantage Systems Enterprise Limited. The note is due on demand with an interest rate of 5%. As of June 30, 2012 and 2011, principal and interest payable to Advantage Systems Enterprise Limited related to this note is $28,322 and $27,072, respectively.
(i) On November 23, 2009, the Company issued a $5,000 demand promissory note to Venture Capital International. The note is due on demand with an interest rate of 5%. As of June 30, 2012 and 2011, principal and interest payable to Venture Capital International related to this note is $5,650 and $5,400, respectively.
(j) On March 31, 2010, the Company issued a $15,000 demand promissory note to Strategic Relations Consulting, Inc. The note is due on demand with an interest rate of 5%. As of June 30, 2012 and 2011 principal and interest payable to Strategic Relations Consulting, Inc. related to this note is $16,689 and $15,939, respectively.
(k) On November 22, 2010, the Company issued a $7,000 demand promissory note to Summit Technologies Corporation, Inc. The note is due on demand with an interest rate of 5%. As of June 30, 2012 and 2011, principal and interest payable to Strategic Relations Consulting, Inc. related to this note is $2,311 and $7,211, respectively.
All of the above demand promissory notes issued by the Company were unsecured.
(l) On July 29, 2010, the Company issued 8,300,000 common shares to Gold Exploration LLC, valued at $83,000 (or $0.01 per share) based upon the closing price of the Company’s stock on the date the agreement was executed, to partially repay $10,000 of principal on the promissory note held by Gold Exploration LLC initially issued to Global Mineral Resources Corporation. This payment of common stock reduced the outstanding balance of the note held by Gold Exploration LLC to $97,000. The Company recognized a loss on debt conversion of $73,000. During fiscal year 2012, the note holder called the balance of the note and demanded payment although the agreement states the note is not due until 2015. The note holder indicated that the note was in default because the Company failed to maintain the Midas Placer Mining Claim, collateral which secured the note. Pursuant to the note agreement, the note should accrue interest at 12% when due or declared due. The note is classified as a current liability on the balance sheets. As of June 30, 2012 and 2011, principal and interest payable to Gold Exploration LLC related to this note is $108,640 and $97,000, respectively.
(m) On February 7, 2011, the Company issued a $250,000 promissory note with an interest rate of 12% per annum to Freedom Boat LLC (“Freedom Boat”). Payment of $2,500 is due monthly from July 5, 2011 through December 5, 2011 with a final payment of interest and principal of $260,000 due on February 7, 2012. Freedom Boat also has a right to royalties under certain conditions. The note is secured by the Hull Lode claim, the West Acre Hull tract, property held by David Janney, former officer, and 10,000,000 of the Company’s common shares currently held in escrow. Proceeds from the note were used to purchase the Tarantula Mining Claim from Judgetown, LLC. As of June 30, 2012 and 2011, the remaining principal owed was $250,000. As of June 30, 2012, the Company has prepaid interest to Freedom Boat LLC of $7,500. This note is presently in default but the Company is negotiating with the holder for an extension of this note.
(n) The Company entered into a convertible promissory note with Asher Enterprises, Inc. on April 6, 2011 in the amount of $53,000. The note was due and payable on January 9, 2012 with an interest rate of 8%. The note is convertible into 53,127,506 common shares by the holder. In September 2011, the Company paid $63,125 to satisfy all of the outstanding principal and accrued interest. $10,125 was recorded as interest expense.
(o) The Company entered into a demand promissory note with Linh B. Ngnyen on May 23, 2011 in the amount of $25,000. The note is due on demand with an interest rate of 5%. As of June 30, 2012 and 2011, principal and interest payable to Linh B. Ngnyen related to this note is $26,377 and $25,127, respectively.
(p) On December 27, 2011, the Company issued a $50,000 promissory note to Mr. Charles Chapman. The note was due on February 15, 2012 with an interest rate of 12%. Pursuant to the note agreement, Mr. Chapman has the right to receive 500,000 shares of the Company’s common stock in lieu of interest payments. On December 28, 2011, the Company issued 500,000 shares valued at $4,000 in lieu of the interest. On March 19, 2012, the note agreement was amended to extend the due date to May 15, 2012. Pursuant to the amendment, the Company agreed to issue an additional 500,000 common shares valued at $15,500 which was recorded as debt discount and fully amortized during fiscal year 2012. As of June 30, 2012, the 500,000 common shares related to the March 19, 2012 amendment have not been issued and is recorded as stock payable of $15,500. On May 16, 2012, the Company entered into a second amendment to extend the loan to November 15, 2012. Pursuant to the second amendment, the Company will issue 100,000 shares of its common stock per month for a period of six months in lieu of interest. As of June 30, 2012, the Company has issued 500,000 common shares valued at $11,000, within which, $7,700 is recorded as prepaid interest.
(q) On March 12, 2012, the Company issued a $75,000 convertible note to Mr. Leroy Steury. The note was due on June 12, 2012 with an interest rate of 10%. Mr. Leroy Steury has the right to receive 7.5 million shares of common stock in lieu of unpaid principal and interest before June 17, 2012. The Company recorded a beneficial conversion feature of $75,000 which was fully amortized during fiscal year 2012. On June 13, 2012, the Company amended the agreement to include the accrued interest of $1,875 on the $75,000 in the principal and extended the note to September 13, 2012. On September 17, 2012, the Company entered into the second amendment to extend the note to December 17, 2012.
NOTE 5 - EQUITY
Common Stock
On March 31, 2011, the Company increased the authorized common shares to 500,000,000.
Preferred Stock
On June 14, 2011, the Company authorized 20,000,000 shares of Series A Preferred Stock at $0.0001 par value. The Preferred Stock contains certain rights, preferences, privileges, restrictions and other characteristics. Specifically, the Preferred Stock has 100 votes per share, whereas, each share of Common Stock has 1 vote. Preferred Stock holders may vote with holders of the Company’s Common Stock on all matters which common stockholders may vote.On June 14, 2011, the Company issued 3,000,000 preferred shares valued at $300 to its former CEO/CFO. In August 2011, the former CEO/CFO returned those shares as a result of his resignation from the Company. The preferred shares were then cancelled.
Year ended June 30, 2012
In the year ended June 30, 2012, the Company issued 55,904,764 common shares for $559,000 in cash. Within the 55,904,764 shares issued, 7,000,000 shares were issued to an investor with a right to sell the shares back to the Company at an interest rate of 12% after April 11, 2012. On April 12, 2012, the holder waived the right to sell the 7,000,000 shares back. As consideration, the Company issued the investor warrants to purchase 2,500,000 shares of the Company’s common stock at $0.02 per share. The warrants expire on October 11, 2013 and have a fair value of $66,330 on the grant date. Proceeds of $56,000 from this issuance originally recorded as refundable subscriptions have been reclassified to additional paid-in capital.
In June 2012, the Company received $10,000 for a common stock subscription. Those shares have not been issued and the cash received is recorded under common stock payable as of June 30, 2012.
On September 23, 2011, the Company issued 750,000 shares of common stock valued at $7,500 to settle a payable to purchase equipment valued at $2,000. The Company recorded a $5,500 loss on settlement of accounts payable related to this transaction.
During September 2011, as a result of the resignation of David Janney, former Chief Executive Officer and Chief Financial Officer of the Company, Mr. Janney surrendered 20,000,000 common shares and 3,000,000 preferred shares of the Company. These shares were then cancelled and the Company recorded an adjustment to additional paid-in capital of $2,300. Additional paid-in capital was also increased by $19,327 to write off the accrued compensation payable to Mr. Janney initially recorded in prior periods.
During year ended June 30, 2012, the Company issued 2,200,000 shares of common stock to its director, officer and consultants for services valued at $20,100.
During year ended June 30, 2012, the Company issued 1,000,000 shares of common stock for interest payments on a note held by Mr. Charles Chapman. The shares were valued at $15,000.
On February 26, 2012, the Company issued 2,500,000 shares to David Janney, former officer, pursuant to a settlement agreement. See Note 10.
On March 19, 2012, the Company agreed to issue 500,000 shares to a note holder pursuant to an amendment to a note agreement. See Note 4 (p). The shares were valued at $15,500 based on the grant date market price of the stock. Those shares have not been issued and are recorded under common stock payable as of June 30, 2012.
On October 25, 2011 and November 4, 2011, the Company granted its interim CFO, Mr. Peng Foo and a investor relations consultant, Mr. Jack Chow, 1,000,000 and 3,000,000 shares, respectively. Those shares, valued at $42,700, have not been issued and are recorded as common stock payable as of June 30, 2012.
On May 8, 2012, the Company entered into an employment agreement with Mr. Michael Stallings where the Company agreed to issue 500,000 shares of common stock. The 500,000 shares of common stock were valued at $12,500 based on the market price of grant date and were recorded as stock payable as of June 30, 2012.
Year ended June 30, 2011
On July 29, 2010, the Company issued 8,300,000 common shares valued at $83,000 (or $0.01 per share) based upon the closing price of the Company’s stock on the date the agreement was executed to Gold Exploration LLC towards a $10,000 payment on the promissory note for the Global Mineral Resources Corporation mining claim acquisition note held by Gold Exploration LLC. This payment of common stock reduced the outstanding balance with Gold Exploration LLC to $97,000 effective September 16, 2010, and the Company recognized a loss on debt conversion of $73,000.
On August 7, 2010, the Company purchased a 160 acre placer mining claim from Global Mineral Resources Corporation. As partial consideration for the transaction, the Company transferred 41,700,000 restricted common shares valued at $458,700 or $0.011 per share based upon the closing price of the Company’s stock on the date the transaction was executed.
On November 22, 2010, the Company granted 7,220,000 common shares valued at $54,150 (or $0.0075 per share) based on the market price of the Company’s common stock on the date of grant to Summit Technology Corporation, Inc. in satisfaction of outstanding debt. The conversion of debt reduced the corresponding notes payable and accrued interest payable by $28,880, and the Company recognized a loss on debt conversion of $25,270.
On February 7, 2011, the Company granted 5,000,000 common shares valued at $48,387 to Freedom Boat as compensation for modification of their note payable with the company. This note was discount by $48,387 based on the fair value of common stock issued as part of the note. As of June 30, 2011, $18,957 of this discount had been amortized over the remaining life of the note.
On February 17, 2011, the Company granted 5,000,000 common shares valued at $62,500 (or $0.0125 per share) based on the market price of the Company’s common stock on the date of grant to Pop Holdings, Inc. in satisfaction of outstanding debt. The conversion of debt reduced the note payable and accrued interest payable by $39,000 and the Company recognized a loss on debt conversion of $23,500.
On May 9, 2011, the Company granted 4,780,000 common shares valued at $42,064 (or $0.0088 per share) based on the market price of the Company’s common stock on the date of grant to Michael Cao in satisfaction of outstanding accounts payable. The share issuance satisfied $14,550 in accounts payables, and the Company recognized a loss on settlement of accounts payable of $27,514.
In the year ended June 30, 2011, the Company issued 34,000,000 common shares at a fair value quoted market price on the date of grant for $175,000 in cash.
In the year ended June 30, 2011, the Company issued 3,777,778 common shares at a fair value quoted market price on the date of grant for $36,372 in the purchase of fixed assets.
In the year ended June 30, 2011, the Company issued 10,800,000 common shares for services at a fair value quoted market price on the date of grant for $88,940 and expensed that as stock issued for services.
In addition to the shares issued for services as noted above, the Company recorded non-cash stock compensation totaling $985,100 for 86,000,000 shares originally thought to have been issued related to conversion of debt.
In October 2011, management learned that the prior CEO/CFO failed to have entity level controls, lacked segregation of duties, among many other internal control deficiencies. The Company believes that the prior CEO/CFO concealed these matters from the professional advisors until those advisors requested David Janney for additional documentation in which Mr. Janney acknowledged the following to the new Management and independent legal counsel:
|
a)
|
December 9, 2010: Tucker Financial Services, Inc. received 12,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
|
|
b)
|
January 24, 2011; Tucker Financial Services, Inc. received 12,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
|
|
c)
|
February 16, 2011: Stock Loan Solutions received 12,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
|
|
d)
|
February 22, 2011: Nicolas Sprung of Tucker Financial Services, Inc. received 12,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
|
|
e)
|
April 18, 2011: Euroline Clearing Corporation received 7,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
|
|
f)
|
April 18, 2011: Enavest International S.A., received 7,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
|
|
g)
|
April 18, 2011: Vanilla Sky, S.A. received 7,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
|
|
h)
|
June 28, 2011: Scott Geisler received 17,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
|
NOTE 6 – STOCK-BASED COMPENSATION
Effective June 18, 2008, the Board of Directors of the Company approved the 2008 Stock Option and Restricted Stock Plan (the "2008 Plan"). The Plan reserves 1,000,000 shares of common stock for grants of incentive stock options, nonqualified stock options, warrants and restricted stock awards to employees, non-employee directors and consultants performing services for the Company. Options and warrants granted under the Plan have an exercise price equal to or greater than the fair market value of the underlying common stock at the date of grant and become exercisable based on a vesting schedule determined at the date of grant. The options expire 2 years from the date of grant whereas warrants generally expire 5 years from the date of grant. Restricted stock awards granted under the Plan are subject to a vesting period determined at the date of grant.
On June 6, 2011, the Board of Directors of the Company amended the 2008 Plan to increase the reserved grant shares from 1,000,000 common shares to 25,000,000 common shares. On August 17, 2012, the Board of Directors of the Company amended the 2008 Plan to increase the authorized shares to be granted from 25,000,000 to 35,000,000.
The cost of all employee stock options, as well as other equity-based compensation arrangements, is reflected in the financial statements over the vesting period based on the estimated fair value of the awards.
A summary of warrant activity for the year ended June 30, 2012 and 2011 is presented below:
|
|
|
|
|
|
Outstanding Options
|
|
| |
|
Shares
Available for
Grant
|
|
|
Number of
Shares Granted
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted Average
Remaining
Contractual Life
(years)
|
|
|
Aggregate
Intrinsic Value
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010
|
|
|
1,000,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
$
|
-
|
|
|
Grants
|
|
|
|
|
|
|
6,000,000
|
|
|
$ |
0.01
|
|
|
|
|
|
|
|
|
|
|
Forfeitures
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
June 30, 2011
|
|
|
19,000,000
|
|
|
|
6,000,000
|
|
|
$ |
0.01
|
|
|
|
3.99
|
|
|
|
-
|
|
|
Grants
|
|
|
|
|
|
|
19,500,000
|
|
|
$ |
0.02
|
|
|
|
|
|
|
|
|
|
|
Forfeitures
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
June 30, 2012
|
|
|
9,500,000
|
|
|
|
25,500,000
|
|
|
$ |
0.02
|
|
|
|
3.72
|
|
|
|
120,000
|
|
The Company values all warrants using the Black-Scholes option-pricing model. Critical assumptions for the Black-Scholes option-pricing model include the market value of the stock price at the time of issuance, the risk-free interest rate corresponding to the term of the warrant, the volatility of the Company’s stock price, dividend yield on the common stock, as well as the exercise price and term of the warrant. The warrants are not subject to any form of vesting schedule and, therefore, are exercisable by the holders anytime at their discretion during the life of the warrant. No discounts were applied to the valuation determined by the Black-Scholes option-pricing model.
On November 4, 2011, the Company granted Mr. Jack Chow, consultant, 3,000,000 warrants to purchase common stock of the Company at a price of $0.01 per share. The warrants are fully vested, have a four-year expected life, and were valued at $29,814.
On August 23, 2011 and June 24, 2011, the Company granted Mr. Michael Cao, consultant, 6,000,000 and 6,000,000 warrants, respectively, to purchase common stock of the Company at a price of $0.01 per share. The warrants are fully vested, have a five-year expected life, and were valued at $42,600 and $42,599, respectively.
On May 8, 2012, the Company granted Mr. Peter Cao, a member of the Company’s Board of Directors, 8,000,000 options to purchase common stock of the Company at a price of $0.025 per share. The warrants are fully vested, have a five-year expected life, and were valued at $198,519.
The following inputs and assumptions were used in the option-pricing model:
| |
|
Fiscal Year 2012
|
|
Fiscal Year 2011
|
|
| |
|
|
|
|
|
|
|
Stock price on grant date
|
$ |
0.0071~$0.03
|
|
$ |
0.0071 |
|
|
Expected dividend yield
|
|
None
|
|
None
|
|
|
Volatility
|
|
238.96%~273.09 % |
|
|
270.33 |
% |
|
Weighted average risk free interest rate
|
|
0.77%~0.95 % |
|
|
1.40 |
% |
|
Weighted average expected life (in years)
|
|
4.00~5.00
|
|
|
4.00 |
|
NOTE 7 - INCOME TAXES
Deferred tax liabilities and assets are determined based on the difference between financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Temporary differences between taxable income reported for financial reporting purposes and income tax purposes are insignificant.
At June 30, 2012, the Company’s had net operating losses of approximately $4,141,107 which expire, if unused, in various years through 2029. Utilization of the net operation loss carry-forwards could be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code.
The Company fully reserved its deferred tax assets because, in the opinion of management, it is more likely than not that the benefits will not be realized based upon the earning history of the Company. The valuation allowance increased $350,580 for the year ended June 30, 2012.
The provision (benefit) for income taxes from continued operations for the year ended June 30, 2012 and 2011 consist of the following:
| |
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
Federal
|
|
$ |
- |
|
|
$ |
- |
|
|
State
|
|
|
- |
|
|
|
- |
|
| |
|
|
- |
|
|
|
- |
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(271,581 |
) |
|
|
(132,101 |
) |
|
State
|
|
|
(78,999 |
) |
|
|
(38,426 |
) |
| |
|
|
(350,580 |
) |
|
|
(170,527 |
) |
|
Valuation allowance
|
|
|
350,580 |
|
|
|
170,527 |
|
|
Provision (benefit) for income taxes, net
|
|
$ |
- |
|
|
$ |
- |
|
The difference between income tax expense computed by applying the federal statutory corporate tax rate and actual income tax expense is as follows:
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Statutory federal income tax rate
|
|
|
34.0 |
% |
|
|
34.0 |
% |
|
State income taxes and other
|
|
|
9.0 |
% |
|
|
9.0 |
% |
|
Valuation allowance
|
|
|
(43.0 |
%) |
|
|
(43.0 |
%) |
|
Effective tax rate
|
|
|
- |
|
|
|
- |
|
Deferred income taxes result from temporary differences in the recognition of income and expenses for the financial reporting purposes and for tax purposes. The tax effect of these temporary differences representing deferred tax asset and liabilities result principally from the following:
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Net operating loss carryforward
|
|
|
1,653,958 |
|
|
|
1,303,378 |
|
|
Valuation allowance
|
|
|
(1,653,958 |
) |
|
|
(1,303,378 |
) |
|
Deferred income tax asset
|
|
$ |
- |
|
|
|
- |
|
NOTE 8 – RELATED PARTY TRANSACTIONS
As of May 24, 2013, the Company has payables to 0, respectively, for services provided.
NOTE 9 – COMMITMENT AND CONTINGENCIES
On May 8, 2012, the Company entered into an employment contract with Mr. Peter Cao, Chief Operating Officer. Pursuant to the agreement, the Company will pay monthly compensation of $1,000. Mr. Cao is also entitled to 2,000,000 common shares for the increase in the Company’s market value for every $15 million up to $100 million. Additionally, Mr. Cao was granted options to purchase a total of 8,000,000 common shares. Options for 4 million common shares are exercisable at $0.025 per share and vested immediately. After six months of Mr. Cao’s employment with the Company, additional options to purchase 4,000,000 shares at $0.025 per share will vest. The 8,000,000 options were valued at $198,519, which is being expensed over the vesting periods.
On May 10, 2012, the Company entered into a two-year employment contract with Mr. Scott Geisler, Chief Executive Officer. The agreement allows the immediate accrual of unpaid salary from August 29, 2011 at $100,000 per year. The Company also issued stock options to purchase a total of 17,000,000 common shares. Options for 8,500,000 common shares at an exercise price of $0.01 per share vested immediately. Additional options to purchase 8,500,000 common shares at an exercise price of $0.01 per share will vest in August 2012. The 17,000,000 options are valued at $507,862. These options have a term of 5 years and could be exercised on a cashless basis. On June 2, 2012, the Company entered into a mutual release agreement with Mr. Geisler. That mutual release agreement superseded the employment agreement dated May 10, 2012. Pursuant to the mutual release agreement, Mr. Geisler would receive $75,000 in the next 25 months commencing July 15, 2012, and 7,500,000 shares of the Company’s common stock. On June 1, 2012, Mr. Geisler resigned as Chief Executive Officer of the Company. The Company disputes both agreements as all information was not fully disclosed to the Board of Directors and was negotiated in bad faith. As of June 30, 2012, a disputed payable of $221,250 is recorded related to this mutual release agreement.
On June 19, 2012, the Board of Directors appointed Mr. Michael Stojsavljevich as the new Chief Executive Officer, secretary and a member of the Board of Directors. Mr. Stojsavljevich will receive $5,500 for the first two months and $11,000 per month from the third month of his employment. Mr. Stojsavljevich is entitled to 2,500,000 shares of common stock quarterly from July 1, 2012 and every quarter thereafter to a total of 10,000,000 shares.
The Company entered into a purchase agreement to purchase mining claims from Gold Exploration LLC in the amount of $99,000 on June 1, 2008. The agreement requires the Company to make royalty payments equal to 2% of the Net Smelter Returns (“NSR”) per year. The Company had no Net Smelter Returns for the year ended June 30, 2012 and no royalties were paid. The agreement does not have any commitment dates of when production is to begin.
On June 17, 2011, the Company signed a joint venture agreement with Osiris Gold, Inc., a Colorado Corporation, and Sial Exploration, Inc., a Colorado Corporation (collectively, the “Partners”). The Partners are actively involved with the exploration, development, and mining of mineral deposits in the regional southwest. The agreement involves a 1,351 acre mining claim in the historic Red Mountain Mining District of Colorado’s San Juan Mountains. The Company and its Partners agreed to form Red Mountain LLC to operate and manage the joint venture through a joint venture company. The Company will receive an initial 10% ownership interest in the joint venture company with the potential to increase that share to a maximum of 49%. Pursuant to the agreement, the Company shall make a payment of $50,000 upon the execution of the agreement, a payment of $800,000 on July 1, 2011, and another payment of $700,000 on August 1, 2011. $50,000 was paid in June 2011 and fully impaired during the fiscal year ended June 30, 2011. No additional payments that were scheduled have been paid. The Company has settled this agreement and paid the outstanding legal fees of $3,170 during the fiscal year ended June 30, 2012.
On February 7, 2011 the Company entered into a $250,000 promissory note agreement with Freedom Boat which bears interest rate at 12%. The past agreement included a royalty payment which includes 5% in royalty of its gross profits from gold extraction form the Tarantula Placer Mine and 5% royalty payment from Hull Placer Mine.
We have $816,032 in Notes Payable of that $294,699 are due upon demand and we have not received any demand for payments on these notes. Further, we have a note for $50,000 that is in default and we are negotiating either a full payment of the note or conversion of debt for common stock of the Company. We are in default on our note to Freedom Boat, LLC for $250,000 which is secured by 10,000,000 shares of common stock of the Company. We have preliminarily agreed with Freedom Boat to create another 1 year interest only payment structure with the balance due at the end of the 12 month term and which is convertible to stock.
During the year ended June 30, 2011, prior management converted 80% of two notes from Venture Capital International for $12,000 dated March 30, 2009 and $17,000 dated May 7, 2009. 86,000,000 shares of common stock were issued to convert $23,200 in debt and $2,323 in accrued interest. The fair value of those shares was $985,100. The difference of $959,577 was expensed as compensation. The prior CEO/CFO requested that Venture Capital International assign those notes to Gustavo Cifuentes Palma. The Company was provided a signed debt purchase agreement purportedly executed by both Venture Capital International and Gustavo Cifuentes Palma dated November 2010. Gustavo Cifuentues Palma then assigned 10% of these notes each to Tucker Financial Services, Inc., Vanilly Sky, S.A., Stock Loan Solutions, Euroline Clearing Corporation, Enavest Internacional S.A., and Nicolas Sprung. In October 2011, the Company learned that the signatures on the original debt purchase agreement from Venture Capital International by Gustavo Cifuentes Palma were forgeries. The agreement was never executed by Venture Capital International and Venture Capital International was never paid for the debt purchase. Since the assignments have been deemed forgeries, the Company has recorded the stock issued as compensation and recorded compensation expense of $985,100. The Company is uncertain of the affiliation between the prior CEO/CFO and Gustavo Cifuentes Palma and if he had any knowledge of the forgeries.
On October 25, 2011, David Janney resigned from all positions he held at the Company, including but not limited to, Chief Executive Officer, Chief Financial Officer, Chairman and member of the Board of Directors, and Secretary. Scott Geisler was appointed Chief Executive Officer, President and Secretary of the Company. Pen-Mun Foo was appointed Chief Financial Officer of the Company.
In October 2011, new management learned that the prior CEO/CFO failed to have entity level controls, lacked segregation of duties, among many other internal control deficiencies. The Company believes that the prior CEO/CFO concealed these matters from the professional advisors until those advisors requested David Janney for additional documentation in which Mr. Janney acknowledged the following to new management and independent legal counsel:
|
1.
|
The Company was informed that the prior CEO/CFO, created a series of promissory notes, such form of notes being provided by a lawyer named John Thomas, Esq. These promissory notes and documentation provided a signed assignment of two promissory notes with Venture Capital, Inc. a group from Switzerland. Over time, including discussions with the prior CEO/CFO, new management was able to directly contact a representative of Venture Capital who claims that its signatures on the notes and the later conversions to equity were forged. The alleged improper assignment orchestrated the issuance of converted allegedly improperly transferred debt for the following numbers of shares:
|
|
a)
|
December 9, 2010: Tucker Financial Services, Inc. received 12,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
|
|
b)
|
January 24, 2011; Tucker Financial Services, Inc. received 12,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
|
|
c)
|
February 16, 2011: Stock Loan Solutions received 12,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
|
|
d)
|
February 22, 2011: Nicolas Sprung of Tucker Financial Services, Inc. received 12,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
|
|
e)
|
April 18, 2011: Euroline Clearing Corporation received 7,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
|
|
f)
|
April 18, 2011: Enavest International S.A., received 7,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
|
|
g)
|
April 18, 2011: Vanilla Sky, S.A. received 7,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although new management believes that such exemption was not available) for the conversion of $2,900 of debt.
|
|
h)
|
June 28, 2011: Scott Geisler received 17,000,000 common shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 (although Mr. Geisler had no knowledge of the documentation provided by John Thomas was false) for the conversion of $2,900 of debt. On February 23, 2012, the Company cancelled the common shares and reissued based upon the original pricing of the shares.
|
All legal opinions related to these conversions, documentations, and issuances of shares alleged to be exempt from registration under Rule 144 of the Securities Act of 1933 were prepared by John Thomas, Esq.
|
2.
|
The prior CEO/CFO personally sent $39,000 to a cable company in the Dominican Republic in which current management has been informed that David Janney owns/controls this company. The Company settled this issue with David Janney in the settlement agreement discussed in Note 10.
|
|
3.
|
John Thomas signed various documents as a Board member of the Company, a position which he has never lawfully held, including the transaction with Asher Enterprises, Inc., pursuant to which Asher received 53,000,000 shares of Bonanza common stock which represented about thirty-two (32%) percent of the issued and outstanding shares of the Company in exchange for a $53,000 promissory note. Current management has negotiated the cash payment of this note and has cancelled the 53,000,000 common shares held in escrow.
|
In September 2011, David Janney created Board of Directors minutes dated June 15, 2011 for shares issued to employees of the company and included 1,000,000 shares issued to Frank Baumgartner. Mr. Baumgartner was never issued the common shares as new management could not find any documents to support such issuance and the Company does not intend to issue these 1,000,000 common shares to Frank Baumgartner.
On February 7, 2011, David Janney entered an agreement with Amazon Holding LLC to pay a finder’s fee for raising $250,000 in the acquisition of mining property. On January 19, 2012, Amazon Holding LLC demanded the Company to make the payment. The dispute is still pending but the Company believes that it is not possible that Amazon Holding LLC will prevail if a suit is filed against the Company according to this agreement.
NOTE 10 – LOSS ON SETTLEMENT OF LITIGATION
On February 26, 2012, the Company entered into a settlement agreement with David Janney (our former CEO/CFO) for his actions related to wrongfully issued common stock of the Company, among many other things. The settlement agreement includes the following terms:
|
a.
|
The Company agreed to issue 5 million shares of restricted Bonanza Goldfields common stock to Mr. Janney as a form of compensation. The shares will be paid in two tranches. The first 2,500,000 shares should be issued upon the execution of the settlement and is issued on March 19, 2012. The second 2,500,000 shares were to be issued six months from the execution date of the settlement but have not been issued.
|
|
b.
|
The funds held in escrow by Christine Wright at the Wright Law Firm, P.A. on behalf of Freedom Boat, LLC for a loan under Mr. Janney’s name will be considered payment in full for Mr. Janney's return of 20,000,000 shares to the treasury on August 29, 2011.
|
|
c.
|
Mr. Janney agreed not to sell any more than 1,000,000 shares of his personal holdings of Bonanza Goldfields common stock in the open market in any thirty-day period.
|
|
d.
|
Mr. Janney agreed to return to the Company all of the Company’s property in his possession or in the possession of his family or agents including without limitation Bonanza's files and all documentation (and all copies thereof) dealing with the finances, operations and activities of the Company, its clients, employees or suppliers.
|
The Company recorded loss of $59,000 on this settlement during the year ended June 30, 2012.
During the year ended June 30, 2012, the Company learned that the title of Midas Placer Claim which the Company purchased from Global Minerals, Inc., a company controlled by Mr. David Janney, was never transferred to the Company. As such, the Company is currently in dispute with Mr. Janney.
NOTE 11 – SUBEQUENT EVENTS
On July 27, 2012, the Company issued 7,500,000 common shares to Scott Geisler in accordance with his mutual release agreement with the Company. The shares were valued at $146,250. The shares issued are currently held in escrow and are not considered outstanding.
On July 31, 2012, the Company appointed Baoky Vu as a member of the Board of Directors and granted 1,000,000 shares of the Company’s common stock to Mr. Vu as a bonus, valued at $20,000.
On September 13, 2012, the Company entered into an agreement with Choice Capital Group, Inc. for Choice Capital Group to act as a transaction facilitator to acquire certain proprietary extraction technology. According the agreement, the Company shall escrow 20,000,000 common shares during the testing period of this technology.
On September 18, 2012, the Company entered into a mining claims lease agreement with Judgetown LLC (“Judgetown”) to lease 130.76 acres land located in Yavapai, Arizona for 2 years. Under the lease agreement, the Company has the option to purchase the mining claims for $1,500,000, with all lease payments over the 2-year lease subtracted from the $1,500,000. As initial consideration for the lease, the Company shall pay to Judgetown $100,000 within ninety days after October 15, 2012. After the first lease payments, the Company needs to pay Judgetown $30,000 every 3 months for the rest of the lease term.
On October 1, 2012, the Company entered into a Secured Convertible Promissory Note and Warrant Purchase Agreement with Tonaquint, Inc., a Utah corporation ("Tonaquint"), whereby the Company issued (i) a Secured Convertible Promissory Note of the Company in the principal amount of $1,660,000 with a conversion price of $0.05 per share and an annual interest rate of 8% and (ii) a warrant to purchase 158,953,080 shares of the Company’s common stock. The warrant has an exercise price of $0.075 per share and can be exercised at any time within five years after October 1, 2012. Tonaquint has the right to convert, subject to restrictions described in the promissory note, all or a portion of the outstanding amount of the promissory note that is eligible for conversion into shares of the Company’s common stock.
The promissory note is on April 1, 2015 and the interest rate of 8% payable monthly. The promissory note, if prepaid, has a penalty of 135% prepayment obligation. The total amount to be funded is $1,500,000, representing the principal amount of $1,660,000 less an original issuance discount of $150,000 and the payment of $10,000 to cover Tonaquint’s fees. The shares of common stock underlying the Secured Convertible Promissory Note and Warrant were to be registered by a registration statement pursuant to the terms and conditions of a registration rights agreement. The registration statement has been withdrawn with Tonaquint’s consent.
Tonaquint's ability to fund the Company is evidenced by three Buyer Mortgage Notes, in the principal amount of $50,000, $150,000, and $400,000. The Buyer Mortgage Notes are secured by certain real property owned by Tonaquint located in Cook County, Illinois. Tonaquint’s obligation to fund the Company is further evidenced by a promissory note in the amount of $750,000.
Pursuant to the purchase agreement, the Company reserved 75,000,000 shares of common stock. The Company has agreed not to enter into any equity line of credit or financing arrangement or other transaction that involves issuing securities that are convertible into common stock (including without limitation selling convertible debt, warrants or convertible preferred stock), or otherwise issue common stock (a) with conversion, exercise or similar mechanics or reset provisions that vary according to the market price of the common stock without a floor at or higher than $0.01 or (b)at a fixed price which is lower than $0.01, without the prior written consent of Tonaquint. The Company agrees not to declare or make any dividend or other distributions of its assets.
The Company’s default status on that Freedom Boat note existed prior and during negotiations on the transaction with Tonaquint. The intent of the Tonaquint transaction was that the Company does not default on any notes in the future.
As of March 31, 2013, the Company has received $300,000 from Tonaquint and recorded $32,000 as a debt discount related to the promissory note. Pursuant to the purchase agreement, warrants to purchase 31,790,616 shares of the Company’s common stock were issued. The Company determined the estimated fair value of the warrants was $816,808. $232,856 of the promissory notes fair value was allocated to the warrants and was recorded as a discount on the note. The promissory note included a beneficial conversion feature of $57,153, which was also recorded as a discount on the promissory note. The total discount of $322,009 is being amortized over the life of the promissory note. For the three and nine months ended March 31, 2013, interest expense of $80,889 and $184,447, respectively, was recorded to amortize the debt discount of the promissory note.
Beginning on March 30, 2013, and each month thereafter, the Company shall pay to Tonaquint principal payments of $69,167 plus the sum of any accrued and unpaid interest due on such date by converting such amount at a conversion price equals to the lower of the (i) conversion price in effect ($0.05 per share if no anti-dilution adjustment) (ii) 65% of the arithmetic average of the three lowest volume-weighted average prices of the stock price during the 20 consecutive trading day period immediately preceding the date of the payment date; provided, however, the Company may, at its option as described in the agreement, pay all or any part of such installment amount by redeeming such installment amount in cash or by any combination of a Company conversion and a Company redemption.
As of March 31, 2013, principal and interest payable to Tonaquint, Inc. related to the promissory note is $342,357.
Our default status on that Freedom Boat note existed prior and during negotiations on the deal with Tonaquint. It was fully disclosed and was available in our filings. We disclosed
to Tonaquint that we are in negotiations with Freedom Boat. The intent of the Tonaquint deal was that we do not default on any notes in the future.
On April 17, 2013, Tonaquint exercised its right to convert debt to equity. The Company’s first monthly payment of principal and interest to Tonaquint has been paid in common stock of the Company. The Company issued 16,677,650 common shares and recorded a reduction of principal of $69,000 and interest expenses of $24,534 for a total of $93,534.
On May 6, 2013, the Company issued 2,000,000 common shares that were recorded as stock payable of $40,000 to the Company’s accounting consultant in accordance with the consulting agreement.
* * * * * *
We have no changes or disagreements with our auditors.
Evaluation of Effectiveness of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules, regulations and related forms, and that such information is accumulated and communicated to our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
As of June 30, 2012, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and our principal financial officer of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report.
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures were designed to provide reasonable assurance that the controls and procedures would meet their objectives. As required by SEC Rule 13a-15(b), our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective for fiscal year ending June 30, 2012.
Our Principal Executive Officer and Principal Financial Officer, currently the same person, our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of June 30, 2012 based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. Based on our evaluation and the material weaknesses described below, management concluded that the Company did not maintain effective internal control over financial reporting as of June 30, 2012, based on the COSO framework criteria. Management has identified control deficiencies regarding the lack of segregation of duties and the need for a stronger internal control environment. Our management believes that these material weaknesses are due to the small size of our accounting staff. The small size of our accounting staff may prevent adequate controls in the future, such as segregation of duties, due to the high cost of such remediation relative the benefit expected to be derived thereby.
We anticipate that by the filing deadline date of our June 31, 2013 10K (which is August 15, 2013) we will have resolved the segregation of duties issue by naming a CFO or new company officer that will resolve any issues surrounding segregation of duties.
In the interim period, to mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of external legal and accounting professionals. As we grow, we expect to create a new finance and accounting position that will allow for proper segregation of duties consistent with control objectives, and will increase our personnel resources and technical accounting expertise within the accounting function. As our financing staff grows we will prepare and implement appropriate written policies and checklists which set forth procedures for accounting and financial reporting with respect to the duties within the internal control framework. These current control deficiencies could result in a misstatement of account balances that would result in a reasonable possibility that a material misstatement to our consolidated financial statements may not be prevented or detected on a timely basis. Accordingly, we have determined that these control deficiencies as described above together constitute a material weakness.
(b) Limitations on Effectiveness of Controls and Procedures
Our management, including our chief executive officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.
Management's Report on Internal Control Over Financial Reporting
Our management is also responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. The Company's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Our internal control over financial reporting includes those policies and procedures that;
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; and
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and
That our receipts and expenditures are being made only in accordance with authorizations of the Company's management and directors; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
As of June 30, 2012, our management conducted an assessment of the effectiveness of the Company's internal control over financial reporting. In making this assessment, management followed an approach based on the framework in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, management has determined that the Company's internal control over financial reporting was not effective as of June 30, 2012.
Changes in Internal Control Over Financial Reporting
During the fiscal year ended June 30, 2012, there were changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Current management has hired independent counsel to investigate the control deficiencies, among many other things. The Company has removed Mr. David Janney, the prior CEO/CFO from all positions in the Company and he has no further affiliation with the company. The Company is still investigating whether the parties that participate in the forged debt conversions are victims or co-conspirators.
None.
Director and Executive Officer
Set forth below is information regarding the Company’s current and recent directors and executive officers. There are no family relationships between any of our directors or executive officers. The directors are elected annually by stockholders. The executive officers serve at the pleasure of the Board of Directors.
|
Name
|
|
Age
|
|
Title
|
| |
|
|
|
|
|
Michael Stojsavljevich
|
|
39
|
|
Chief Executive Officer, Principle Accounting Officer, President Secretary and Director(3)
|
| |
|
|
|
|
|
|
|
|
|
Former Chief Executive Officer, Principle Accounting Officer, President Secretary, and Director (1)
|
| |
|
|
|
|
| David Janney |
|
49 |
|
Former Chief Executive Officer, Principle Accounting Officer, President Secretary, and Director(5) |
| |
|
|
|
|
| Pen Foo |
|
51 |
|
Former Chief Financial Officer (2) |
| |
|
|
|
|
| William Berridge |
|
59
|
|
Former Director(4) |
| |
|
|
|
|
|
Peter Cao
|
|
|
|
Director (6)
|
| |
|
|
|
|
|
Baoky Vu
|
|
|
|
|
|
1.
|
Effective June 1, 2012, Scott Geisler resigned as Chief Executive Office, Principal Financial Officer and as a member of the Board of Directors;
|
|
2.
|
Effective May 11, 2012, Pen Foo resigned as Chief Financial Officer and Principle Accounting Officer;
|
|
3.
|
Effective June 20, 2012, Michael Stojsavljevich was appointed Chief Executive Officer, Principle Accounting Officer, President, Secretary and Director;
|
|
4.
|
Effective July 25, 2012, William Berridge resigned as Director and Baoky Vu was appointed new Director of the Company;
|
|
5.
|
Effective October 24, 2011, David Janney resigned as Chief Executive Office, Principal Financial Officer and as a member of the Board of Directors;
|
|
6.
|
Effective April 20, 2012, Peter Cao was appointed as Chief Executive Officer and Director and on June 26, 2012, Mr. Cao resigned as Chief Executive Officer and remained as a Director.
|
The background and principal occupations of the current officers and directors of the Company is as follows:
Officers and Directors:
Michael Stojsavljevich
From April 2011 to the present, Michael Stojsavljevich was a Managing Partner with Episteme Advisory Group, a Boutique Corporate Strategy and Marketing Advisory Consultancy firm. From February 2007 through February 2011, Mr. Stojsavljevich was Chief Strategy Officer at the United States Mint, an agency of the United States Treasury Department. From 1999 through 2007, Mr. Stojsavljevich was in managing positions in Marketing, Finance and Corporate Affairs departments at Altria Corporate Services, Philip Morris USA, and Miller Brewing Company. Mr. Stojsavljevich earned a Master’s Degree in Business Economics from Western Michigan University and a Bachelor’s Degree in Economics from Indiana University.
Peter Cao
From 2009 to the present, Mr. Cao was an advisor to the Board of Directors of International Gold Mining Reserve Corporation. From 2007 through 2009, Mr. Cao was Vice President of Commercial Lending for United Americas Bank. From 1989 to 2007, Mr. Cao was President and CEO of General Contractors, Inc.
Baoky Vu
From 2009 to the present, Baoky Vu has been a principal of Silverberry Capital LLC, a strategic advisory firm based in Atlanta. From 1995 through 2009, Mr. Vu was director of equity research, portfolio manager and equity analyst with A. Montag & Associates. Mr. Vu earned a Masters of Business Administration from Georgetown University and a Bachelor of Science in Management from Georgia Institute of Technology.
Mr. Stojsavljevich, having worked in the private sector and for the Treasury department is an experienced manager in marketing, finance and corporate affairs.
Mr. Cao has a background in managing, mining and finance.
Mr. Vu is experienced as a strategic advisory to public companies.
Audit Committee Financial Expert
The Company does not have an audit committee or a compensation committee of its board of directors. In addition, the Company’s board of directors has determined that the Company does not have an audit committee financial expert serving on the board. When the Company develops its operations, it will create an audit and a compensation committee and will seek an audit committee financial expert for its board and audit committee.
Conflicts of Interest
Members of our management are associated with other firms involved in a range of business activities. Consequently, there are potential inherent conflicts of interest in their acting as officers and directors of our company. Although the officers and directors are engaged in other business activities, we anticipate they will devote an important amount of time to our affairs.
Our officers and directors are now and may in the future become shareholders, officers or directors of other companies, which may be formed for the purpose of engaging in business activities similar to ours. Accordingly, additional direct conflicts of interest may arise in the future with respect to such individuals acting on behalf of us or other entities. Moreover, additional conflicts of interest may arise with respect to opportunities which come to the attention of such individuals in the performance of their duties or otherwise. Currently, we do not have a right of first refusal pertaining to opportunities that come to their attention and may relate to our business operations.
Our officers and directors are, so long as they are our officers or directors, subject to the restriction that all opportunities contemplated by our plan of operation which come to their attention, either in the performance of their duties or in any other manner, will be considered opportunities of, and be made available to us and the companies that they are affiliated with on an equal basis. A breach of this requirement will be a breach of the fiduciary duties of the officer or director. If we or the companies with which the officers and directors are affiliated both desire to take advantage of an opportunity, then said officers and directors would abstain from negotiating and voting upon the opportunity. However, all directors may still individually take advantage of opportunities if we should decline to do so. Except as set forth above, we have not adopted any other conflict of interest policy with respect to such transactions.
Involvement in Certain Legal Proceedings
None of the following events have occurred during the past ten years and are material to an evaluation of the ability or integrity of any director or officer of the Company:
| |
1.
|
A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;
|
| |
2.
|
Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);
|
| |
3.
|
Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:
|
| |
a.
|
Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;
|
| |
b.
|
Engaging in any type of business practice; or
|
| |
c.
|
Engaging in any activity in connection with the purchase or sale of any security or commodity or in
connection with any violation of Federal or State securities laws or Federal commodities laws;
|
| |
4.
|
Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity;
|
| |
5.
|
Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;
|
| |
6.
|
Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;
|
| |
7.
|
Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:
|
| |
a.
|
Any Federal or State securities or commodities law or regulation; or
|
| |
b.
|
Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or
|
| |
c.
|
Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
|
| |
8.
|
Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29)), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
|
Compliance with Section 16(A) Of The Exchange Act 9.A. Directors And Executive Officers, Promoters, And Control Persons:
The Company is aware that all filings of Forms 4 and 5 required of Section 16(a) of the Exchange Act of Directors, Officers or holders of 10% of the Company's shares have not been timely and the Company has instituted procedures to ensure compliance in the future. Current management and Directors have not filed their Forms 4 for 2011 but will file their Forms 5 for the year ended June 30, 2012.
Code of Ethics
We have adopted a code of ethics that applies to all of our executive officers, directors and employees. Code of ethics codifies the business and ethical principles that govern all aspects of our business. Our Code of Ethics was published as Exhibit 14.1 in the Annual Report on Form 10-K for year ended June 18, 2009. This document will be made available in print, free of charge, to any shareholder requesting a copy in writing from the Company.
General. From October 26, 2011, Mr. Scott Geisler, until his resignation on June 1, 2012, served as the Company’s Chief Executive Officer and Principle Accounting Officer. From October 26, 2011 until May 11, 2012, Mr. Pen-Mun Foo serviced as our Principal Accounting Officer. Until October 24, 2011, for the fiscal year of June 30, 2011, Mr. David Janney served as Chief Executive Officer and Principle Accounting Officer. Mr. Peter Cao served in that capacity between June 1, 2012 and June 20, 2012. On June 20, 2012, Mr. Michael Stojsavljevich was appointed President, Chief Executive Officer, and Principal Accounting Officer.
As it relates to Executive Compensation and stock granted to Mr. Stojsavljevich, Mr. Cao, and Mr. Vu, the stock awards were negotiated as a component of their compensation for joining the company. The calculation used in assessing their value is based on a 90 day moving average of the price of the stock as of June 30, 2011 and June 30, 2012, which is approximately 1 cent per share.
As it relates to Executive Compensation and stock granted to Mr. Stojsavljevich, Mr. Cao, and Mr. Vu, the stock awards have not been granted nor issued.
|
Name and Address of Owner
|
Title of Class
|
|
Number
of Shares
Owned (1)
|
|
|
Percentage
of Class
|
|
| |
|
|
|
|
|
|
|
|
Michael Stojsavljevich
2415 East Camelback Road, Suite 700, Phoenix, AZ 85016
|
Common Stock
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Peter Cao
2415 East Camelback Road, Suite 700, Phoenix, AZ 85016
|
Common Stock
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Baoky Vu
2415 East Camelback Road, Suite 700, Phoenix, AZ 85016
|
Common Stock
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
All Officers and Directors
As a Group (3 persons)
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Scott Geisler
19803 Gulf Blvd, #501
Indian Shores, FL 33785
|
Common Stock
|
|
|
19,500,000
|
(2) |
|
|
6.06
|
%
|
| |
|
|
|
|
|
|
|
|
|
|
Charles Chapman
206 South Grand Avenue
Santa Ana, CA 92701
|
Common Stock
|
|
|
17,937,500
|
|
|
|
5.57
|
%
|
| |
|
|
|
|
|
|
|
|
|
|
Terrill Beckerman
1212 Briar Creek Drive
Little Rock, Arkansas 72211
|
Common Stock
|
|
|
23,666,667
|
|
|
|
7.35
|
%
|
|
(1) Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities.
|
|
(2) The amount held by Scott Geisler includes 7,500,000 that is held in escrow by the transfer agent.
|
Summary Compensation Table
The following table sets forth for the year ended June 30, 2012 and 2011 compensation awarded to, paid to, or earned by, Mr. Scott Geisler, our former Director and Chief Executive Officer, and our other most highly compensated executive officers whose total compensation during the last fiscal year exceeded $100,000, if any.
2012 and 2011 SUMMARY COMPENSATION TABLE
|
Name and Principal Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
|
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
|
All Other
Compensation($)
|
|
|
Total
($)
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Stojsavljevich CEO & CFO, Director
|
|
2012
2011
|
|
|
|
1,650
-
|
|
|
|
-
-
|
|
|
|
-
-
|
|
|
|
-
-
|
|
|
|
-
-
|
|
|
|
-
-
|
|
|
|
-
-
|
|
|
|
1,650
-
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott Geisler, former CEO &CFO, Director
|
|
2012
2011
|
|
|
|
77,222
-
|
|
|
|
75,000
-
|
|
|
|
146,250
|
|
|
|
-
-
|
|
|
|
-
-
|
|
|
|
-
-
|
|
|
|
-
-
|
|
|
|
298,472
-
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Janney, former CEO & CFO, Director
|
|
2012
2011
|
|
|
|
-
155,900
|
|
|
|
-
-
|
|
|
|
29,500
465,620
|
|
|
|
-
-
|
|
|
|
-
-
|
|
|
|
-
-
|
|
|
|
-
-
|
|
|
|
29,500
621,520
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pen-Mun Foo, former CFO, Director
|
|
2012
2011
|
|
|
|
-
-
|
|
|
|
-
-
|
|
|
|
10,300
-
|
|
|
|
-
-
|
|
|
|
-
-
|
|
|
|
-
-
|
|
|
|
-
-
|
|
|
|
10,300
-
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William Berridge, former Director
|
|
2012
2011
|
|
|
|
37,725*
17,078
|
|
|
|
-
-
|
|
|
|
11,000
-
|
|
|
|
-
-
|
|
|
|
-
-
|
|
|
|
-
-
|
|
|
|
-
-
|
|
|
|
48,725
17,078
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter Cao, COO and Director
|
|
2012
2011
|
|
|
|
2,500 - |
|
|
|
-
-
|
|
|
|
-
-
|
|
|
|
198,519
-
|
|
|
|
-
-
|
|
|
|
-
-
|
|
|
|
-
-
|
|
|
|
201,019
-
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pamela Thompson, Treasurer
|
|
2012
2011
|
|
|
|
17,000
10,000
|
|
|
|
-
-
|
|
|
|
-
-
|
|
|
|
-
-
|
|
|
|
-
-
|
|
|
|
-
-
|
|
|
|
-
-
|
|
|
|
17,000
10,000
|
|
* Represents payment to Auric Resources International, Inc. a related party.
2012 and 2011 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
| |
|
Option Awards |
|
|
Stock Awards |
|
|
Name
|
|
Year
|
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
|
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
|
|
|
Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
|
|
|
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)
|
|
|
Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
(#)
|
|
|
Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
($)
|
|
| |
|
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Stojsavljevich
|
|
2012
2011
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott Geisler
|
|
2012
2011
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Janney
|
|
2012
2011
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pen-Mun Foo
|
|
2012
2011
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William Berridge,
|
|
2012
2011
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter Cao
|
|
2012
2011
|
|
|
4,000,000
-
|
|
|
8,000,000
-
|
|
|
-
-
|
|
|
0.025
-
|
|
|
May 8, 2017
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pamela Thompson
|
|
2012
2011
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
|
-
-
|
|
Compensation of Directors
Our current compensation policy for directors is to compensate them through options to purchase common stock or through common stock as consideration for their joining our board and/or providing continued services as a director. We do not currently provide our directors with cash compensation, although we do reimburse their expenses, with exception for a chairman of the board. No additional amounts are payable to the Company’s directors for committee participation or special assignments. There are no other arrangements pursuant to which any directors was compensated during the Company’s last completed fiscal year for any service provided except as follows:
On June 20, 2012, the Board of Directors appointed Michael Stojsavljevich as the new Chief Executive Officer, secretary and member of the Board of Directors. Mr. Stojsavljevich’s employment agreement will pay $5,500 for each of the first two months of his employment and $11,000 per month from the third month and allows for the Board of Directors to increase that monthly salary. The Company will pay for Mr. Stojsavljevich moving expenses of $5,000 also he will be entitled to 2,500,000 common shares of stock quarterly beginning July 1, 2012 and every quarter thereafter to a total of 10,000,000 shares. (See Exhibit 10.5 filed with this report).
On May 8, 2012, the Company entered into an employment contract with Mr. Cao. Pursuant to the agreement, the Company will pay monthly compensation of $1,000. Mr. Cao is also entitled to 2,000,000 common shares at $0.06 per share for the production or increase in the Company’s market value for every $15 million up to $100 million. Additionally, Mr. Cao is granted options to purchase a total of 8,000,000 common shares. Options for 4 million common shares exercisable at $0.025 per share vest immediately. After six months of Mr. Cao’s employment with the Company, additional options to purchase 4,000,000 shares at $0.025 per share will vest.
The following table lists stock ownership of our Common Stock as of September 18, 2012, based on 321,862,680 shares of common stock issued and outstanding. The information includes beneficial ownership by (i) holders of more than 5% of our Common Stock, (ii) each of three directors and executive officers and (iii) all of our directors and executive officers as a group. Except as noted below, to our knowledge, each person named in the table has sole voting and investment power with respect to all shares of our Common Stock beneficially owned by them.
|
Name and Address of Owner
|
Title of Class
|
|
Number
of Shares
Owned (1)
|
|
|
Percentage
of Class
|
|
| |
|
|
|
|
|
|
|
Michael Stojsavljevich
2415 East Camelback Road, Suite 700, Phoenix, AZ 85016
|
Common Stock
|
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
| Peter Cao
2415 East Camelback Road, Suite 700, Phoenix, AZ 85016
|
Common Stock
|
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
| Baoky Vu
2415 East Camelback Road, Suite 700, Phoenix, AZ 85016
|
Common Stock
|
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
| All Officers and Directors
As a Group (3 persons)
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Scott Geisler
19803 Gulf Blvd, #501
Indian Shores, FL 33785
|
|
|
|
19,500,000 |
|
|
|
6.06 |
% |
| |
|
|
|
|
|
|
|
|
|
|
Charles Chapman
206 South Grand Avenue
Santa Ana, CA 92701
|
|
|
|
17,937,500 |
|
|
|
5.57 |
% |
| |
|
|
|
|
|
|
|
|
|
|
Terrill Beckerman
1212 Briar Creek Drive
Little Rock, Arkansas 72211
|
|
|
|
23,666,667 |
|
|
|
7.35 |
% |
|
(1) Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities.
|
As it relates to Executive Compensation and stock granted to Mr. Stojsavljevich, Mr. Cao, and Mr. Vu, the stock awards have not been granted nor issued. The footnote regarding the Geisler information will be the amended language as set below and in the table as attached. (2) The amount held by Scott Geisler includes 7,500,000 that is held in escrow by the transfer agent.
DESCRIPTION OF SECURITIES
Common Stock
Our authorized capital stock consists of 500,000,000 shares of common stock, par value $ 0.0001.
Each holder of common stock is entitled to one vote for each share owned on all matters voted upon by shareholders, and a majority vote is required for all actions to be taken by shareholders. In the event we liquidate, dissolve or wind-up our operations, the holders of the common stock are entitled to share equally and ratably in our assets, if any, remaining after the payment of all our debts and liabilities and the liquidation preference of any shares of preferred stock that may then be outstanding. The common stock has no preemptive rights, no cumulative voting rights, and no redemption, sinking fund, or conversion provisions. Holders of common stock are entitled to receive dividends, if and when declared by the Board of Directors, out of funds legally available for such purpose, subject to the dividend and liquidation rights of any preferred stock that may then be outstanding.
Preferred Stock
The company authorized 20 million shares of Series A Preferred Stock. The Preferred Stock contains certain rights, preferences, privileges, restrictions and other characteristics as further detailed in the Certificate of Designation to the Company’s Articles of Incorporation. Significantly, the Preferred Stock has 100 votes per share, whereas, each share of Common Stock has 1 vote. Preferred Stock holders may vote with holders of the Company’s Common Stock on all matters which common stockholders may vote. The Preferred shares do not have conversion rights to common shares.
Voting Rights
Each holder of Common Stock is entitled to one vote for each share of Common Stock held on all matters submitted to a vote of stockholders. The Preferred Stock has 100 votes per share.
Dividends
Subject to preferences that may be applicable to any then-outstanding securities with greater rights, if any, and any other restrictions, holders of Common Stock are entitled to receive ratably those dividends, if any, as may be declared from time to time by the Company’s board of directors out of legally available funds. The Company and its predecessors have not declared any dividends in the past. Further, the Company does not presently contemplate that there will be any future payment of any dividends on Common Stock.
Options and Warrants:
As of June 30, 2012, there were 25,500,000 warrants and options outstanding.
Convertible Securities
At June 30, 2012, the Company has no convertible securities.
Transfer Agent
On June 1, 2008, the Company engaged Transfer Online, Inc. to serve in the capacity of transfer agent. Their mailing address and telephone number Transfer Online, Inc., 317 SW Alder Street, 2nd Floor, Portland, OR 97201 - Phone is (503) 227-2950.
As of May 24 2013, the Company has payables to related parties of $0.
Audit Fees. The aggregate fees billed by GBH CPAs, PC for professional services rendered for the audit of the Company’s annual financial statements for fiscal year ended June 30, 2012 and 2011 approximated $25,550 and $5,000, respectively. The aggregate fees billed by GBH CPAs for the review of the financial statements included in the Company’s Forms 10-Q for fiscal year 2012 and 2011 approximated $16,750 and $2,500, respectively. The aggregate fees billed by Tarvaran, Askelson & Company for the review of the financial statements included in the Company’s Forms 10-Q for fiscal year 2011 approximated $6,060.
Audit-Related Fees. The aggregate fees billed by GBH CPAs, PC for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements for the fiscal years ended June 30, 2012 and 2011, and that are not disclosed in the paragraph captioned “Audit Fees” above, were $0.
Tax Fees. The aggregate fees billed by GBH CPAs, PC and for professional services rendered for tax compliance, tax advice and tax planning for the fiscal year ended June 30, 2012 and 2011 were $0.
All Other Fees. The aggregate fees billed by GBH CPAs for products and services, other than the services described in the paragraphs “Audit Fees,” “Audit-Related Fees,” and “Tax Fees” above for the fiscal years ended June 30, 2012 and 2011 were $0.
The Board has received and reviewed the written disclosures and the letter from the independent registered public accounting firm required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), and has discussed with its auditors its independence from the Company.
The Board pre-approved all fees described above.
Exhibits
|
3.1
|
Articles of Incorporation(1)
|
|
3.2
|
Bylaws (4)
|
|
4.1
|
$1,660,000 Secured Convertible Note dated October 1, 2012 (3)
|
|
4.2
|
Common Stock Purchase Warrant dated October 1, 2012 (3)
|
|
10.1
|
Agreement with Gold Explorations, LLC and Bonanza Goldfields, Corp., dated July 1, 2009.(2)
|
|
10.2
|
Peter Cao Chief Operating Officer employment agreement (3)
|
|
10.3
|
Scott Geisler Chief Executive Officer employment agreement (3)
|
| 10.4 |
Note and Warrant Purchase Agreement dated October 1, 2012 (3)
|
|
10.5
|
Form of Promissory Note (3)
|
|
10.6
|
Form of Mortgage, dated October 1, 2012 (3)
|
|
10.7
|
Escrow Agreement dated October 1, 2012 (3)
|
|
10.8
|
Form of Buyer Mortgage Note 1 dated October 1, 2012. (3)
|
|
10.9
|
Form of Buyer Mortgage Note 2 dated October 1, 2012.(3)
|
|
10.10
|
Form of Buyer Mortgage Note 3 dated October 1, 2012. (3)
|
|
10.11
|
Registration rights Agreement, dated October 1, 2012 (3)
|
|
10.12
|
Security Agreement dated October 1, 2012 (3)
|
|
10.13
|
Judgetown Lease Agreement dated September 14, 2012 and Amended Agreement dated February 1, 2013 (4)
|
|
10.14
|
David Janney Mutual Release Dated February 19, 2013 (4)
|
|
10.15
|
Scott Geisler Settlement and Mutual Release Date June 14, 2012 (4)
|
|
10.16
|
Choice Capital Agreement dated September 13, 2012 (4)
|
|
|
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
|
|
|
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
|
|
|
Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
|
|
|
Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
|
|
(1)
|
Incorporated by reference to the Company’s filing on Form S1/A, as filed with the Securities and Exchange Commission on September 11, 2008.
|
|
(2)
|
Incorporated by reference to the corresponding exhibits on the Company’s filing on Form 10-Q, as filed with the Securities and Exchange Commission on March 14, 2012 for the period ended September 30, 2011.
|
|
(3)
|
Incorporated by reference to the corresponding exhibits on the Company’s filing on Form 8-K, as filed with the Securities and Exchange Commission on October 5, 2012.
|
|
(4)
|
Incorporated by reference to the corresponding Company’s filing on Form 10-Q, as filed with the Securities and Exchange Commission on May 14, 2013 for the period ending March 31, 2013.
|
ITEM 15: SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized.
| Registrant |
Bonanza Goldfields Corporation |
| |
|
|
|
Date: June 5, 2013
|
By: |
/s/ Michael Stojsavljevich |
|
| |
|
Michael Stojsavljevich
|
| |
|
Chief Executive Officer
|
|
Date: June 5, 2013
|
By: |
/s/ Michael Stojsavljevich |
|
| |
|
Michael Stojsavljevich
|
| |
|
Chief Financial Officer
|
| |
|
(Principal Accounting Officer) |
In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.
|
Date: June 5, 2013
|
By: |
/s/ Michael Stojsavljevich |
|
| |
|
Michael Stojsavljevich
|
| |
|
Director
|
|
Date: June 5, 2013
|
By: |
/s/ Peter Cao |
|
| |
|
Peter Cao
|
| |
|
Director
|
|
Date: June 5, 2013
|
By: |
/s/ Baoky Vu |
|
| |
|
Baoky Vu
|
| |
|
Director
|
49