0001091818-11-000600.txt : 20111114 0001091818-11-000600.hdr.sgml : 20111111 20111114162831 ACCESSION NUMBER: 0001091818-11-000600 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20110930 FILED AS OF DATE: 20111114 DATE AS OF CHANGE: 20111114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Silver Falcon Mining, Inc. CENTRAL INDEX KEY: 0001464830 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 261266967 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-53765 FILM NUMBER: 111203063 BUSINESS ADDRESS: STREET 1: 7322 MANATEE AVENUE, WEST, #299 CITY: BRADENTON STATE: FL ZIP: 34209 BUSINESS PHONE: 941-761-7819 MAIL ADDRESS: STREET 1: 7322 MANATEE AVENUE, WEST, #299 CITY: BRADENTON STATE: FL ZIP: 34209 10-Q 1 sfmi11041110q.htm QUARLERLY FILING

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form 10-Q

(Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011

or

[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to __________

Commission file number 000-53765

SILVER FALCON MINING, INC.

(Exact name of small business issuer as specified in its charter)

DELAWARE

26-1266967

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)

2520 Manatee Avenue West, Suite 200, Bradenton, Florida 34205

 (Address of principal executive offices)

(941) 761-7819

 (Issuer’s telephone number, including area code)

______________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

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.  [X] Yes  [  ] No

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).  [X]

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.

Large accelerated filer [  ]   Accelerated filer [  ]   Non-accelerated filer [  ]   Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes [  ]   No [X]

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:  344,966,817 and 3,884,321 shares of Class A Common Stock and Class B Common Stock, respectively, as of October 25, 2011.



1


SILVER FALCON MINING, INC.

(AN EXPLORATION STAGE COMPANY)

FORM 10-Q REPORT INDEX

PART I.  FINANCIAL INFORMATION

3

Item 1.  Financial Statements

3

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

19

Item 3.  Quantitative and Qualitative Disclosures about Market Risk.

27

Item 4.  Controls and Procedures.

27

PART II.  OTHER INFORMATION.

28

Item 1.  Legal Proceedings.

28

Item 1A.  Risk Factors.

28

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

28

Item 3.  Defaults upon Senior Securities.

28

Item  4. (Removed and Reserved)

28

Item 5.  Other Information.

28

Item 6.  Exhibits.

29

SIGNATURES

30



2




PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

SILVER FALCON MINING, INC.

(AN EXPLORATION STAGE COMPANY)

CONSOLIDATED BALANCE SHEET

SEPTEMBER 30, 2011 AND DECEMBER 31, 2010


 

SEPTEMBER 30, 2011

DECEMBER 31, 2010

 

(UNAUDITED)

(AUDITED)

ASSETS

  

Cash

$         34,914

$         61,530

Inventories

520,815

352,911

Total current assets

555,729

414,441

   

Mill equipment, net of accumulated depreciation of $641,593 and $392,299, respectively (see Note 4)

1,377,692

1,245,384

Mining property

2,059,940

1,772,390

Prepaid expenses (see Notes 5 and 8)

18,133

715,025

Other assets

31,000

6,000

Total Assets

$       4,042,494

$      4,153,240

   

LIABILITIES AND STOCKHOLDERS' DEFICIT

  

Accounts payable

$          272,916

$         310,297

Payroll liabilities

25,277

30,177

Accrued interest

91,844

19,221

Due to related party

1,212

6,000

Notes payable - current portion (see Note 3)

1,108,167

237,500

Director's Loan

-

323

Accrued compensation

633,521

727,633

Total current liabilities

2,132,937

1,331,151

   

Notes payable (see Note 3)

3,258,924

2,179,481

Total liabilities

5,391,861

3,510,632

   

STOCKHOLDERS' DEFICIT

  

Common stock, Class A, par value $0.0001, 10,000,000,000 shares authorized, 341,821,509 and 286,587,004, issued and outstanding at September 30, 2011 and December 31, 2010, respectively

34,182

28,658

Common stock, Class B, par value $0.0001, 12,500,000 shares authorized, 3,884,321 and 3,884,321 issued and outstanding at September 30, 2011 and December 31, 2010, respectively

389

389

Additional paid in capital

24,602,808

18,164,240

Accumulated deficit

(25,986,746)

(17,550,679)

 

(1,349,367)

642,608

Total liabilities and stockholders' deficit

 $       4,042,494

 $      4,153,240


See accompanying notes to financial statements.



3




SILVER FALCON MINING, INC.

(AN EXPLORATION STAGE COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010,

AND THE PERIOD FROM OCTOBER 15, 2007 (INCEPTION) TO SEPTEMBER 30, 2011

(UNAUDITED)


 

2011

2010

Cumulative from Inception

    

Revenue

 $                    -   

 $                 -   

$            8,234

Cost of sales

            -

-

         5,274

  Gross profit

-

-

2,960

    

Expenses

   

Consulting fees

 $    3,827,985

 $  4,491,570

$   13,098,488

Exploration and development

            1,079,912

        251,589

           2,177,384

Mill operating expenses

1,409,229

349,340

2,245,738

Property lease fees

            -

250,000

250,000

Compensation expense

          1,055,151

477,378

           3,852,582

Depreciation expense

            249,293

154,018

641,593

General and administrative

          634,066

        147,689

        3,141,237

 

       8,255,636

     6,121,584

25,407,022

 

 

 

 

 Loss from operations

     (8,255,636)

    (6,121,584)

(25,404,062)

    

 Interest expense

          (180,431)

(135,976)                    

(582,684)

    

Net Loss

$  (8,436,067)

$ (6,257,560)

$  (25,986,746)

    

Net loss per common share - basic and diluted

 $           (0.03)

 $          (0.03)

         (0.15)

    

 Weighted average number of common shares outstanding – basic and diluted

     316,543,677

215,016,164

171,449,435


See accompanying notes to financial statements.




4




SILVER FALCON MINING, INC.

(AN EXPLORATION STAGE COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010,

 (UNAUDITED)


 

2011

 

2010

    

Revenue

 $                    -

 

 $                 -

Cost of sales

            -

 

-

  Gross profit

-

 

-

    

Expenses

   

Consulting fees

 $    731,371

 

 $  599,264

Exploration and development

            407,999

 

        232,988

Mill operating expenses

554,523

 

266,331

Property lease fees

          -

 

250,000

Compensation expense

          282,685

 

225,655

Depreciation expense

            71,367

 

58,486

General and administrative

          113,364

 

        51,293

 

       2,161,309

 

     1,684,017

 

 

 

 

 Loss from operations

     (2,161,309)

 

    (1,684,017)

    

 Interest expense

          (75,782)

 

(61,377)                    

    

Net Loss

$  (2,237,091)

 

$ (1,745,394)

    

Net loss per common share - basic and diluted

 $           (0.01)

 

 $          (0.01)

    

 Weighted average number of common shares outstanding – basic and diluted

     333,438,236

 

239,786,420


See accompanying notes to financial statements.



5



SILVER FALCON MINING, INC.

(AN EXPLORATION STAGE COMPANY)

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010,

AND THE PERIOD FROM OCTOBER 15, 2007 (INCEPTION) TO SEPTEMBER 30, 2011

(UNAUDITED)


 

 2011

 2010

Cumulative from Inception

Cash flows from operating activities

   

Net Loss

 $   (8,436,067)

 $  (6,257,560)

$  (25,986,746)

Adjustments to reconcile net loss to net cash used in operating activities:

   

Issuance of common stock for services

      4,920,235

     5,164,351

17,036,063

Issuance of common stock for road access

-

-

13,050

Issuance of common stock for interest

13,822

-

63,822

Issuance of common stock for rent

-

        469,220

862,130

Options granted

-

-

1,163,542

Depreciation

           249,294

154,018

641,593

Increase (decrease) in operating assets and liabilities:

   

Inventories

(167,904)

(559,993)

(520,815)

Prepaid expenses

696,892

86,587

(18,133)

Due from related party

(4,788)

69,499

1,212

Other assets

(25,000)

-

 (26,000)

Accounts payable and accrued expenses

         (37,381)

        (94,522)

583,221

Accrued interest

72,623

(14,367)

104,854

Accrued payroll and payroll liabilities

         893,597

        323,238

1,651,407

Net cash used in operating activities

(1,824,677)

       (659,529)

(4,430,800)

    

Cash flows from investing activities

   

Purchase of equipment

        (356,776)

        (843,468)

(1,994,459)

Purchase of mill and mining properties

(287,550)

(155,983)

(1,305,852)

Cash acquired in acquisition

-

-

39,780

Net cash used in investing activities

        (644,326)

(999,451)

(3,260,531)

    

Cash flows from financing activities

   

Proceeds from notes payable

2,442,710

1,825,515

7,763,745

Proceeds from sale of common stock

-

75,000

75,000

Purchase of common stock

-

(63,000)

(63,000)

Repayments of notes payable

-

(42,500)

(49,500)

Proceeds from Directors loans

(323)

-

337,790

Repayments of Directors loans

-

(102,631)

(337,790)

Net cash provided by financing activities

      2,442,387

1,692,384

7,726,245

    

Net increase in cash

(26,616)

33,404

34,914

    

Cash - beginning of period

61,530

602

-

Cash - end of period

$            34,914

$   34,006

$           34,914


See accompanying notes to financial statements

 

SILVER FALCON MINING, INC.

(AN EXPLORATION STAGE COMPANY)

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010,

AND THE PERIOD FROM OCTOBER 15, 2007 (INCEPTION) TO SEPTEMBER 30, 2011

(UNAUDITED)

(continued)

SUPPLEMENTARY DISCLOSURE OF NONCASH TRANSACTIONS

2011

2010

Cumulative from Inception

 

 Shares issued for notes payable conversion

$      492,600

$                  -

$    3,360,165

 Shares issued for accrued compensation

$      992,609

$                  -

$      992,609

 Shares issued for acquisition

$                 -

$                  -

$      355,085

 Shares issued for purchase mining properties  

$                 -

$                  -

$      754,089

 Shares issued for additions to mining properties

$                 -

$       205,723

$      205,723

Shares issued for equipment

$        24,826

$                  -

$        24,826


See accompanying notes to financial statements

 

6



SILVER FALCON MINING, INC.

(AN EXPLORATION STAGE COMPANY)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011

(UNAUDITED)


  

 COMMON STOCK

 COMMON STOCK

 ADDITIONAL

  
  

SERIES A

SERIES B

PAID IN

ACCUMULATED

 
  

SHARES

AMOUNT

SHARES

AMOUNT

CAPITAL

DEFICIT

TOTAL

Balance as of December 31, 2010

286,587,004

$ 28,658

3,884,321

$    389

$   18,164,240

$    (17,550,679)

$    642,608

  

Issuance of Class A common stock for services

41,589,829

4,159

4,916,076

4,920,235

Issuance of Class A common stock for equipment

245,045

25

24,801

24,826

Issuance of Class A common stock for note payable

 conversion

5,898,483

590

492,010

492,600

Issuance of Class A common for accrued compensation

7,357,148

736

991,873

992,609

Issuance of Class A common stock for interest

144,000

14

13,808

13,822

Net loss

 

     (8,436,067)

(8,436,067)

  

Balance as of September 30, 2011

341,821,509

$  34,182

3,884,321

$       389

$ 24,602,808

$  (25,986,746)

$     (1,349,367)


See accompanying notes to financial statements.



7

SILVER FALCON MINING, INC.

(AN EXPLORATION STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 (UNAUDITED)


NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

Silver Falcon Mining, Inc. (the “Company,” “we” or “us”) was formed in the State of Delaware on October 11th, 2007.  On October 15, 2007, we completed a holding company reorganization with Dicut, Inc. (“Dicut”) pursuant to Section 251(g) of the Delaware General Corporation Law.  Dicut previously operated in the information technology business, but ceased operations in 2005.

On October 11, 2007, GoldLand leased its mineral rights on War Eagle Mountain to us.  Under the lease, we are responsible for all mining activities on War Eagle Mountain, and we are obligated to pay GoldLand annual lease payments of $1,000,000, payable on a monthly basis, a monthly non-accountable expense reimbursement of $10,000 during any month in which ore is mined from the leased premises, and a royalty of 15% of all amounts we receive from the processing of ore mined from the properties. The lease provides that lease payments must commence April 1, 2008, but by agreement with GoldLand we extended the commencement date to July 1, 2010. On the first quarter of 2011, we amended the above-described lease with GoldLand. The amendment provided that the annual lease payments would be deferred for a fifteen month period from October 2010 to December 2011, and the term of the Lease would be extended for an equal amount of time. We remain obligated to pay any royalties or the nonaccountable fee that accrues during the deferral period.  

Basis of Presentation

The foregoing unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles in the United States of America for complete financial statements. These unaudited interim financial statements should be read in conjunction with the audited financial statements and the notes thereto included on Form 10-K for the year ended December 31, 2010. In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented.

The preparation of financial statements in accordance with generally accepted accounting principles in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumption are inherent in the preparation of the Company’s financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions that could have a material effect on the reported amounts of the Company’s financial position and results of operations.

Operating results for the nine month period ended September 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.



8


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

Sales of all metals products sold directly to refiners or smelters, including by-product metals, are recorded as revenues when title and risk of loss transfer to the refiner or smelter (generally at the time of shipment) at estimated forward prices for the estimated month of settlement.  Due to the time elapsed from shipment to the refiner or smelter and the final settlement with the refiner or smelter, we must estimate the prices at which sales of our metals will be settled. Previously recorded sales are adjusted to estimated settlement metals prices until final settlement by the refiner or smelter.  Revenue is recognized, net of treatment and refining charges, from a sale when persuasive evidence of an arrangement exists, the price is determinable, the product has been delivered, the title has been transferred to the customer and collection of the sales price is reasonably assured. Concentrate sales or bullion dore bar sales are initially recorded based on 100% of the provisional sales prices. Until final settlement occurs, adjustments to the provisional sales prices are made to take into account the mark-to-market changes based on the forward prices for the estimated month of settlement. For changes in metal quantities upon receipt of new information and assay, the provisional sales quantities are adjusted as well. The principal risks associated with recognition of sales on a provisional basis include metal price fluctuations between the date initially recorded and the date of final settlement. If a significant decline in metal prices occurs between the provisional pricing date and the final settlement-date, it is reasonably possible that we could be required to return a portion of the sales proceeds received based on the provisional invoice.

Our sales based on a provisional sales price contain an embedded derivative that is required to be separated from the host contract for accounting purposes. The host contract is the receivable from the sale of the concentrates at the forward London Metal Exchange price at the time of sale. The embedded derivative, which does not qualify for hedge accounting, is marked to market through earnings each period prior to final settlement.

Cash and Cash Equivalents

Cash and cash equivalents consist of all cash balances and highly liquid investments with an original maturity of three months or less. Because of the short maturity of these investments, the carrying amounts approximate their fair value.

Investments

Management determines the appropriate classification of our investments in equity securities at the time of purchase and reevaluates such determinations at each reporting date. Investments in incorporated entities in which our ownership is greater than 20% and less than 50%, or which we do not control through majority ownership or means other than voting rights, are accounted for by the equity method and are included in long-term assets.  We account for our equity security investments as available for sale securities in accordance with Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“FAS”) No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” We periodically evaluate whether declines in fair values of our investments below our carrying value are other-than-temporary in accordance with FSP FAS 115 No. 115-1 and FAS 124-1, “The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments.” Our policy is to generally treat a decline in the investment’s quoted market value that has lasted continuously for more than six months as an other-than-temporary decline in value.  We also monitor our investments for events or changes in circumstances that have occurred that may have a significant adverse effect on the fair value of the investment and evaluates qualitative and quantitative factors regarding the severity and duration of the unrealized loss and our ability to hold the investment until a forecasted recovery occurs to determine if the decline in value of an investment is other-than-temporary. Declines in fair value below our carrying value deemed to be other-than-temporary are charged to earnings.



9



 

We account for our investments in auction rate securities in accordance with FAS No. 115. Specifically, when the underlying security of an auction rate security has a stated or contractual maturity date in excess of 90 days, regardless of the frequency of the interest rate reset date, the security is classified as an available-for-sale marketable debt security.

Inventories

Until we begin full operations, which is when we begin shipping bullion dore bars to a refiner, our inventories are stated at the lower of average costs incurred or estimated net realizable value. Major types of inventories include materials and supplies and metals product inventory, which is determined by the stage at which the ore is in the production process (stockpiled ore, work in process and finished goods).

Materials and supplies inventory will be valued at the lower of average cost or net realizable value.

Stockpiled ore inventory represents ore that has been mined, hauled to the surface, and is available for further processing. Stockpiles will be measured by estimating the number of tons added and removed from the stockpile, the number of contained metal ounces or pounds (based on assay data) and the estimated metallurgical recovery rates (based on the expected processing method). Stockpile ore tonnages will be verified by periodic surveys. Costs will be allocated to a stockpile based on relative values of material stockpiled and processed using current mining costs incurred up to the point of stockpiling the ore, including applicable overhead, depreciation, depletion and amortization relating to mining operations, and removed at each stockpile’s average cost per recoverable unit.

Work in process inventory represents materials that will be currently in the process of being converted to a saleable product and includes inventories in our milling process. In-process material is measured based on assays of the material fed into the process and the projected recoveries of the respective plants. In-process inventories will be valued at the average cost of the material fed into the process attributable to the source material coming from the mines and stockpiles, plus the in-process conversion costs, including applicable depreciation relating to the process facilities incurred to that point in the process.

Finished goods inventory includes bullion doré and concentrates at our operations, bullion doré in transit to refiners and bullion dore in our accounts at refineries. Inventories will be valued at the lower of full cost of production or net realizable value based on current metals prices.

At the present time, our inventories consist of the historical cost of transporting raw ore from our mine site to our milling site for further processing.  Until we begin receiving regular revenues from our milling and smelting operations, all milling and smelting costs are expensed as incurred.

Property, Plant and Equipment

Expenditures for new facilities or equipment and expenditures that extend the useful lives of existing facilities or equipment are capitalized and recorded at cost. The facilities and equipment are depreciated using the straight-line method at rates sufficient to depreciate such costs over the estimated productive lives.



10



Costs are capitalized when it has been determined an ore body can be economically developed as a result of establishing proven and probable reserves. The development stage begins at new projects when our management and/or Board of Directors makes the decision to bring a mine into commercial production, and ends when the production stage, or exploitation of reserves, begins.  Expenditures incurred during the development and production stages for new facilities, new assets or expenditures that extend the useful lives of existing facilities and major mine development expenditures are capitalized, including primary development costs such as costs of building access ways, shaft sinking, lateral development, drift development, ramps and infrastructure developments.

Costs for exploration, secondary development at operating mines, and maintenance and repairs on capitalized property, plant and equipment are charged to operations as incurred. Exploration costs include those relating to activities carried out (a) in search of previously unidentified mineral deposits, (b) at undeveloped concessions, or (c) at operating mines already containing proven and probable reserves, where a determination remains pending as to whether new target deposits outside of the existing reserve areas can be economically developed. Secondary development costs are incurred for preparation of an ore body for production in a specific ore block, stope or work area, providing a relatively short-lived benefit only to the mine area they relate to, and not to the ore body as a whole.

When assets are retired or sold, the costs and related allowances for depreciation and amortization are eliminated from the accounts and any resulting gain or loss is reflected in current period net income (loss). Idle facilities placed on standby basis are carried at the lower of net carrying value or estimated net realizable value.

Proven and Probable Ore Reserves 

At least annually, management reviews the reserves used to estimate the quantities and grades of ore at our mines which we believe can be recovered and sold economically.  Management’s calculations of proven and probable ore reserves are based on engineering and geological estimates, including future metals prices and operating costs. From time to time, management obtains external audits of reserves.  To date, we have not obtained any third party report regarding potential reserves on our owned and leased property at War Eagle Mountain, and accordingly we have not estimated that there are any proven or probable reserves on our property.

Reserve estimates will change as existing reserves are depleted through production and as production costs and/or metals prices change. A significant drop in metals prices may reduce reserves by making some portion of such ore uneconomic to develop and produce. Changes in reserves may also reflect that actual grades of ore processed may be different from stated reserve grades because of variation in grades in areas mined, mining dilution and other factors. Estimated reserves, particularly for properties that have not yet commenced production, may require revision based on actual production experience. It is reasonably possible that certain of our estimates of proven and probable ore reserves will change in the near term, which could result in a change to estimated future cash flows, associated carrying values of the asset and amortization rates in future reporting periods, among other things.

Declines in the market prices of metals, increased production or capital costs, reduction in the grade or tonnage of the deposit or an increase in the dilution of the ore or reduced recovery rates may render ore reserves uneconomic to exploit unless the utilization of forward sales contracts or other hedging techniques are sufficient to offset such effects. If our realized price for the metals we produce were to decline substantially below the levels set for calculation of reserves for an extended period, there could be material delays in the development of new projects, net losses, reduced cash flow, restatements or reductions in reserves and asset write-downs in the applicable accounting periods. Reserves should not be interpreted as assurances of mine life or of the profitability of current or future operations. No assurance can be given that the estimate of the amount of metal or the indicated level of recovery of these metals will be realized.

To date, we have not obtained any third party report regarding potential reserves on our owned and leased property at War Eagle Mountain, and accordingly we have not estimated that there are any proven or probable reserves on our property.

11



 

 

Depreciation, Depletion and Amortization

Capitalized costs are depreciated or depleted using the straight-line method or unit-of-production method at rates sufficient to depreciate such costs over the shorter of estimated productive lives of such facilities or the useful life of the individual assets. Productive lives do not exceed the useful life of the individual asset. Determination of expected useful lives for amortization calculations are made on a property-by-property or asset-by-asset basis at least annually. Our estimates for mineral reserves are a key component in determining our units of production depreciation rates. Our estimates of proven and probable ore reserves may change, possibly in the near term, resulting in changes to depreciation, depletion and amortization rates in future reporting periods.

Undeveloped mineral interests are amortized on a straight-line basis over their estimated useful lives taking into account residual values. At such time as an undeveloped mineral interest is converted to proven and probable reserves, the remaining unamortized basis is amortized on a unit-of-production basis as described above.

Impairment of Long-Lived Assets

We review and evaluate our long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable.  An impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the assets, including goodwill, if any.  An impairment loss is measured and recorded based on discounted estimated future cash flows. Future cash flows are estimated based on quantities of recoverable minerals, expected gold and other commodity prices (considering current and historical prices, price trends and related factors), production levels and operating costs of production and capital, all based on life-of-mine plans. Existing proven and probable reserves and value beyond proven and probable reserves, including mineralization other than proven and probable reserves and other material that is not part of the measured, indicated or inferred resource base, are included when determining the fair value of mine site reporting units at acquisition and, subsequently, in determining whether the assets are impaired. The term “recoverable minerals” refers to the estimated amount of gold or other commodities that will be obtained after taking into account losses during ore processing and treatment. Estimates of recoverable minerals from such exploration stage mineral interests are risk adjusted based on management’s relative confidence in such materials. In estimating future cash flows, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of future cash flows from other asset groups.  Our estimates of future cash flows are based on numerous assumptions and it is possible that actual future cash flows will be significantly different than the estimates, as actual future quantities of recoverable minerals, gold and other commodity prices, production levels and operating costs of production and capital are each subject to significant risks and uncertainties.



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Reclamation and Remediation Costs (Asset Retirement Obligations)

At our operating properties, we accrue costs associated with environmental remediation obligations in accordance with Statement of Financial Accounting Standards (SFAS) No. 143, “Accounting for Asset Retirement Obligations.” SFAS No. 143 requires us to record a liability for the present value of our estimated environmental remediation costs, and the related asset created with it, in the period in which the liability is incurred. The liability will be accreted and the asset will be depreciated over the life of the related assets. Adjustments for changes resulting from the passage of time and changes to either the timing or amount of the original present value estimate underlying the obligation will be made.

At our non-operating properties, we accrue costs associated with environmental remediation obligations when it is probable that such costs will be incurred and they are reasonably estimable. Estimates for reclamation and other closure costs are prepared in accordance with SFAS No. 5 “Accounting for Contingencies,” or Statement of Position 96-1 “Environmental Remediation Liabilities.” Costs of future expenditures for environmental remediation are not discounted to their present value unless subject to a contractually obligated fixed payment schedule. Such costs are based on management’s current estimate of amounts to be incurred when the remediation work is performed, within current laws and regulations.

Future closure, reclamation and environmental-related expenditures are difficult to estimate, in many circumstances, due to the early stage nature of investigations, and uncertainties associated with defining the nature and extent of environmental contamination and the application of laws and regulations by regulatory authorities and changes in reclamation or remediation technology. We periodically review accrued liabilities for such reclamation and remediation costs as evidence becomes available indicating that our liabilities have potentially changed. Changes in estimates at our non-operating properties are reflected in current period net income (loss).  Accruals for closure costs, reclamation and environmental matters for operating and nonoperating properties totaled $0 million at December 31, 2010.

Goodwill

We evaluate, on at least an annual basis during the fourth quarter, the carrying amount of goodwill to determine whether current events and circumstances indicate that such carrying amount may no longer be recoverable. To accomplish this, we compare the estimated fair value of our reporting units to their carrying amounts. If the carrying value of a reporting unit exceeds its estimated fair value, we compare the implied fair value of the reporting unit’s goodwill to its carrying amount, and any excess of the carrying value over the fair value is charged to earnings. Our fair value estimates are based on numerous assumptions and it is possible that actual fair value will be significantly different than the estimates, as actual future quantities of recoverable minerals, gold and other commodity prices, production levels and operating costs of production and capital are each subject to significant risks and uncertainties.

Stock Based Compensation

We have issued and may issue stock in lieu of cash for certain transactions. The fair value of the stock, which is based on comparable cash purchases, third party quotations, or the value of services, whichever is more readily determinable, is used to value the transaction

Use of Estimates

Our Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our Consolidated Financial Statements requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ significantly from these estimates under different assumptions or conditions.



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Basic and Diluted Per Common Share

Under Statement of Financial Accounting Standards (“SFAS”) No. 128, “Earnings Per Share,” basic  earnings  per common  share is computed by dividing income available to common stockholders by the weighted average number of common shares assumed to be outstanding during the period of computation. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Because we have incurred net losses, basic and diluted loss per share are the same since additional potential common shares would be anti-dilutive.

Significant Recent Accounting Pronouncements

In June 2009 the FASB established the Accounting Standards Codification (“Codification” or “ASC”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”).  Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) issued under authority of federal securities laws are also sources of GAAP for SEC registrants.  Existing GAAP was not intended to be changed as a result of the Codification, and accordingly the change did not impact our financial statements.  The ASC does change the way the guidance is organized and presented.

Accounting Standards Update (“ASU”) ASU No. 2009-05 (ASC Topic 820), which amends Fair Value Measurements and Disclosures – Overall, ASU No. 2009-13 (ASC Topic 605), Multiple-Deliverable Revenue Arrangements, ASU No. 2009-14 (ASC Topic 985), Certain Revenue Arrangements that include Software Elements, and various other ASU’s No. 2009-2 through ASU No. 2010-18 which contain technical corrections to existing guidance or affect guidance to specialized industries or entities were recently issued.  These updates have no current applicability to the Company or their effect on the financial statements would not have been significant.

In February 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-09, which, among other things, amends Subtopic 855-10 with respect to the date through which evaluation of subsequent events must occur and under which circumstances such date must be disclosed.  The update amends subtopic 855-10 so that an SEC filer is not required to disclose the date through which subsequent events have been evaluated. This change alleviates potential conflicts between Subtopic 855-10 and the SEC’s requirements. All of the amendments in this update are effective upon issuance, with limited exceptions.  Adoption of this guidance did not have a material impact on our financial statements.

During February 2010, the FASB also issued ASU 2010-08, which corrects existing guidance for various topics. The update is generally effective for the first reporting period (including interim periods) beginning after issuance.  We believe these corrections will have minimal, if any, impact on our financial statements.



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In January 2010, the FASB issued ASU 2010-06, which amends Subtopic 820-10 to require new disclosures regarding the amounts of and reasons for significant transfers in and out of Levels 1 and 2 fair value measurement categories, and separate information about purchases, sales, issuances, and settlements in Level 3 fair value measurements.  ASU 2010-06 also clarifies existing fair value measurement disclosures to provide for fair value measurement disclosures for each class of assets and liabilities, even within a line item in the statement of financial position, and to provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements that fall in either the Level 2 or Level 3 categories.

ASU 2010-06 also includes conforming amendments to the guidance on employers’ disclosures about post-retirement benefit plan assets (Subtopic 715-20), changes the terminology in Subtopic 715-20 from major categories of assets to classes of assets, and provides a cross reference to the guidance in Subtopic 820-10 on how to determine appropriate classes to present fair value disclosures.

The new disclosures and clarifications of existing disclosures in ASU 2010-06 are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements.  Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.  Adoption of this guidance has not had a material impact on our financial statements and is not expected to have a material impact on our financial statements in the future.

NOTE 3 – NOTES PAYABLE

As of September 30, 2011, we had outstanding $4,187,076 of two-year promissory notes that we have issued to various investors starting in 2009.  Interest accrues on the notes at the rate of 7% per year, and is payable monthly, except for notes issued to New Vision Financial, Ltd., which provide that interest is payable annually.  Principal and interest due on the notes is convertible into shares of Class A Common Stock at the election of the holder at conversion prices ranging from $0.015 to $0.276 per share.  The conversion price of the notes is set at the market price of the Class A Common Stock on the date of issuance.  The notes mature at various dates ranging from July 23, 2011 to September 21, 2013.  During the three and nine months ended September 30, 2011, we issued $922,000 and $2,442,709 of new notes, respectively.

During the three and nine months ended September 30, 2011, we issued 2,362,977 and 5,898,483 shares of our common stock, respectively, upon conversion of notes payable with an aggregate principal amount of $300,000 and $492,600, respectively.

The maturities of two-year notes payable are as follows:

2011

 

   $         165,000

2012

 

1,669,367

2013

 

         2,352,709

  Total

 

4,187,076

   

Less current maturities

 

        (1,085,667)

  Long term debt

 

  $      3,101,409


On December 3, 2009, we executed a promissory note for $225,000 as partial consideration for the purchase of land in Idaho. The promissory note is payable without interest in ten annual installments of $22,500 each, with the first installment being due on January 1, 2010.  The balance due on the note at September 30, 2011 was $180,000.

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NOTE 4 – MILL EQUIPMENT

The following table summarizes the Company’s equipment as of September 30, 2011.

Equipment

 

$       1,981,840

Vehicles

 

37,445

Accumulated depreciation

 

(641,593)

       Net

 

$       1,377,692


NOTE 5 – PREPAID EXPENSES

On October 1, 2008, we entered into a Commercial Lease Agreement, under which we leased office space in New York, New York.  Under the Commercial Lease Agreement, we issued the lessor 1,250,000 shares of our Class A Common Stock at the inception of the lease in full payment of lease payments under the lease totaling $110,160.  We capitalized the lease payment as a prepaid expense, and are amortizing the amount on a monthly basis over the life of the lease.   

We also lease office space at 641-2 Chrislea Road, Woodbridge, Ontario Canada, under a lease that runs from January 1, 2009 to December 31, 2011 at a rate of $400 per month.  We assumed the lease in March 2010.  Under the lease, we issued the lessor 480,000 shares of our common stock valued at $9,600 at the time we assumed the lease as payment of rent for the last two years of the lease term.

In 2008, we issued 5,750,000 shares of Class A Common Stock for consulting contracts with terms of 24 to 36 months.  The shares were valued at $404,840.  In 2009, we issued 10,000,000 shares of Class A Common Stock for consulting contracts with terms of 12 to 48 months totaling $454,500.  We capitalized these consulting fee payments as a prepaid expense, and amortize the amounts over the lives the consulting agreements.

NOTE 6 - RELATED PARTY TRANSACTIONS

On October 11, 2007, GoldLand leased its mineral rights on War Eagle Mountain to us.  Under the lease, we are responsible for all mining activities on War Eagle Mountain, and we are obligated to pay GoldLand annual lease payments of $1,000,000, payable on a monthly basis, a monthly non-accountable expense reimbursement of $10,000 during any month in which ore is mined from the leased premises, and a royalty of 15% of all amounts we receive from the processing of ore mined from the properties. We agreed with GoldLand to extend the date lease payments must commence to July 1, 2010, and extended the lease term by an equal amount of time.

On the first quarter of 2011, we amended the above-described lease with GoldLand.  The amendment provided that the annual lease payments would be deferred for a fifteen month period from October 2010 to December 2011, and the term of the Lease would be extended for an equal amount of time.  We remain obligated to pay any royalties or the nonaccountable fee that accrues during the deferral period.



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As of December 31, 2010 and June 30, 2011, we (including our subsidiaries) owed Goldland $6,000 and $36,450 respectively. At September 30, 2011, Pierre Quilliam and a company owned by him owed us a net amount of $35,238 due to timing differences in invoicing during the quarter.  The amounts are non-interest bearing, unsecured demand loans. This balance has since been settled with the receipt of current invoices.

Pierre Quilliam, Denise Quilliam, Christian Quilliam, Allan Breitkreuz and Roger Scammell are all officers and directors of GoldLand and us. Thomas C. Ridenour, who is an officer of us, is also an officer of GoldLand.

During the three and nine months ended September 30, 2011 we issued 61,253 and 165,177 shares of Class A Common Stock to Pascale Tutt for mineral claims administration valued at $5,000 and $19,000, respectively.  Ms. Tutt is the daughter of Mr. and Ms. Quilliam.

During the three and nine months ended September 30, 2011, we issued Pierre Quilliam 876,251 and 4,163,321 shares of Class A Common Stock valued at $63,966 and $585,035, respectively, in satisfaction of past and current payroll.  Mr. Quilliam is our chief executive officer. The shares were valued at the market price on the date of issuance.

During the nine months ended September 30, 2011, we issued Denise Quilliam 849,086 shares of Class A Common Stock valued at $134,006 in satisfaction of past and current payroll.  Ms. Quilliam is our secretary. The shares were valued at the market price on the date of issuance.

During the three and nine months ended September 30, 2011, we issued Christian Quilliam 341,738 and 1,311,195 shares of Class A Common Stock valued at $24,947 and $178,164, respectively, in satisfaction of past and current payroll.  Mr. Quilliam is our chief operating officer. The shares were valued at the market price on the date of issuance.

During the nine months ended September 30, 2011, we issued Alan Breitkreuz 61,586 shares of Class A Common Stock valued at $8,006 in satisfaction of current payroll.  Mr. Breitkreuz is our vice president. The shares were valued at the market price on the date of issuance.

During the three and nine months ended September 30, 2011, we issued Thomas Ridenour 683,476 and 809,890 shares of Class A Common Stock valued at $49,894 and $66,328, respectively, in satisfaction of current payroll.  Mr. Ridenour is our chief financial officer. The shares were valued at the market price on the date of issuance.

NOTE 7 - COMMITMENTS AND CONTINGENCIES

We are obligated under employment agreements with our officers to make total salary payments of $772,000 per year.

On October 11, 2007, we entered into a lease agreement with GoldLand, under which we leased its mineral rights on War Eagle Mountain.  Under the lease, we are responsible for all mining activities on War Eagle Mountain, and we are obligated to pay GoldLand annual lease payments of $1,000,000, payable on a monthly basis, a monthly non-accountable expense reimbursement of $10,000 during any month in which ore is mined from the leased premises, and a royalty of 15% of all amounts we receive from the processing of ore mined from the properties.  The lease provides that lease payments must commence April 1, 2008.  By agreement with GoldLand, we extended the commencement date to July 1, 2010, in which event the lease term was extended by an equal amount of time. On the first quarter of 2011, we amended the above-described lease with GoldLand.  The amendment provided that the annual lease payments would be deferred for a fifteen month period from October 2010 to December 2011, and the term of the Lease would be extended for an equal amount of time.  We remain obligated to pay any royalties or the nonaccountable fee that accrues during the deferral period.



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NOTE 8 - CAPITAL STOCK

At September 30, 2011, our authorized capital stock was 10,000,000,000 shares of Class A Common Stock, par value $0.0001 per share, and 12,500,000 shares of Class B Common Stock, par value $0.0001 per share.  Class A Common Stock and Class B Common Stock have equal rights to dividends and distributions.  However, each outstanding share of Class A Common Stock is entitled to one vote on all matters that may be voted upon by the owners thereof at meetings of the stockholders, while each outstanding share of Class B Common Stock is entitled to forty votes on all matters that may be voted upon by the owners thereof at meetings of the stockholders.  As of September 30, 2011, there were 341,821,509 and 3,884,321 shares of Class A Common Stock and Class B Common Stock issued and outstanding, respectively.

During the three and nine months ended September 30, 2011, we issued 20,329,003 and 55,234,505 shares of Class A Common Stock, respectively.  In the nine months ended September 30, 2011, we issued shares of Class A Common Stock in the following transactions:

·

5,898,483 shares of Class A Common Stock upon conversion of promissory notes with a principal balance of $492,600.

·

27,593,829 shares of Class A Common Stock were issued to various vendors for consulting services valued at $3,809,000.

·

7,357,148 shares of Class A Common Stock valued at $992,608 were issued in payment of accrued compensation.

·

245,045 shares of Class A Common Stock were issued to a vendor for the purchase of equipment valued at $24,825.

·

14,000,000 shares of Class A Common Stock valued at $1,553,300 were issued to a vendor for various exploration and construction projects at our mill site and mine sites.

·

144,000 shares of Class A Common Stock were issued to note holders for interest of $13,824.

As of September 30, 2011, the Company had outstanding notes payable to various investors in the original principal amount of $4,187,076.  All of the notes are convertible into shares of Class A Common Stock at election of the holder at conversion prices ranging from $0.015 to $0.276 per share.  Maturity dates range from July 23, 2011 to September 21, 2013.  At September 30, 2010, an aggregate of 49,213,228 shares of Class A Common Stock were issuable upon conversion of the notes.

Shares issued for services are valued at the market price on the date of the invoice for the services.  Shares issues for prepaid services are valued at the market price on the date of the contract for the services.  Shares issued for services which specify that a specific number of shares be issued are valued at the market price on the date of the contract.  The conversion prices on all convertible notes were set at the market price on the date on the issuance of the convertible note.



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NOTE 9 – GOING CONCERN

These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.  However, we incurred a net loss of ($8,436,067) for the nine months ended September 30, 2011.  We have remained in business primarily through the deferral of salaries by management, the issuance of stock to compensate employees and consultants, and raising funds from the sale of two year convertible notes. We intend on financing our future development activities from the same sources, until such time that funds provided by operations are sufficient to fund working capital requirements.

These factors, among others, raise substantial doubt about our ability to continue as a going concern for a reasonable period of time.

NOTE 10 – SUBSEQUENT EVENTS (UNAUDITED)

During October 2011, we issued 3,145,308 shares of Class A Common Stock to various vendors for consulting services valued at $188,718.



 

Since September 30, 2011, we borrowed $39,000 from various investors pursuant to promissory notes that accrue interest at a rate of 7% annually.  The notes provide that interest is payable annually, and all principal and interest on the notes is due two years after issuance of the notes. Principal and interest due on the notes is convertible at the election of the holder into shares of our Class A Common Stock at the price of the shares on the date of issuance of the note.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Disclosure Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q includes forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (“Forward Looking Statements”). All statements other than statements of historical fact included in this report are Forward Looking Statements. In the normal course of its business, the Company, in an effort to help keep its shareholders and the public informed about the Company’s operations, may from time-to-time issue certain statements, either in writing or orally, that contain or may contain Forward-Looking Statements. Although the Company believes that the expectations reflected in such Forward Looking Statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of such plans or strategies, past and possible future, of acquisitions and projected or anticipated benefits from acquisitions made by or to be made by the Company, or projections involving anticipated revenues, earnings, levels of capital expenditures or other aspects of operating results. All phases of the Company operations are subject to a number of uncertainties, risks and other influences, many of which are outside the control of the Company and any one of which, or a combination of which, could materially affect the results of the Company’s proposed operations and whether Forward Looking Statements made by the Company ultimately prove to be accurate. Such important factors (“Important Factors”) and other factors could cause actual results to differ materially from the Company’s expectations are disclosed in this report. All prior and subsequent written and oral Forward Looking Statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the Important Factors described below that could cause actual results to differ materially from the Company’s expectations as set forth in any Forward Looking Statement made by or on behalf of the Company.



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Overview

On September 14, 2007, GoldLand acquired an interest in 174.82 acres of land on War Eagle Mountain, consisting of a 100% interest in 103 acres, and a 29.166% interest in 71.82 acres.  GoldLand also has five placer claims on War Eagle Mountain from the U.S. Bureau of Land Management, each of which covers approximately 20 acres, or approximately 100 acres in total.

On October 11, 2007, GoldLand leased its mineral rights on War Eagle Mountain to us.  Under the lease, we are responsible for all mining activities on War Eagle Mountain, and we are obligated to pay GoldLand annual lease payments of $1,000,000, payable on a monthly basis, a monthly non-accountable expense reimbursement of $10,000 during any month in which ore is mined from the leased premises, and a royalty of 15% of all amounts we receive from the processing of ore mined from the properties.  The lease, as amended, provides that lease payments must commence July 1, 2010.  Effective October 1, 2010, GoldLand agreed to allow us to defer lease payments under December 31, 2011, and to extend the lease term by fifteen months.  

We began actual operations in May 2010.  Initially, as described below, actual operations consists of processing dump material left on the mine site from prior mining operations.  Later, after we complete an exploration program to prove up and locate reserves on our property, and make further capital improvements to the mine site, we plan to begin mining and processing raw ore.

On September 21, 2008, we acquired from Mineral Extraction, Inc. all mineral, mining and access rights to two mining claims on War Eagle Mountain, covering 18.877 total acres, as well as claims for four mill site locations and the Sinker Tunnel location.

Our plan to develop our mining properties into an active mine will take place in three phases.

Start-up Phase

Our initial phase involved completing construction of a mill, and using the mill to process tailings left over from prior mining operations.  We were successful in our negotiations to purchase a parcel of land about half way between Highway 78 and the Sinker Tunnel entrance where we have constructed our mill.  We closed on the purchase of this site in December 2009.  We have purchased all of the milling equipment we need, which is currently installed and operating in Murphy, Idaho.  As the mill is up and running, we plan to haul sufficient dump material, leftover from 6 prior mill sites on the mountain, during the summer months, to our mill site for processing during the summer and winter.  Our testing indicates that, as a result of milling techniques used in the 1800’s which failed to extract all of the gold and silver from the ore, there are sufficient quantities of gold and silver remaining in the dump material to justify further processing.  We elected to build the mill on private property that we own, rather than BLM property, because of lower reclamation costs, even though the offsite property will entail higher transportation costs. In early 2011, we began construction of a smelter at our mill site.  The smelter became operational in July 2011, although we still need to complete a building to house the smelter so that it can be used in the winter months.  



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The installation and startup of the mill and smelter, and the working capital to begin transport of ore to the mill for processing, has necessitated an investment of approximately $3.46 million, as follows:

·

The purchase and the preparation of property for mill use cost about $549,375;

·

The installation and certification of the mill cost about $517,283;

·

The purchase mill equipment cost about $1,617,368;

·

Moving ore to stockpile at the mill in 2010 cost about $352,911;

·

The purchase and installation of smelter equipment;

·

Start-up mill salaries to the end of 2010 cost $425,238, and are estimated to be an additional $700,000 until November 2011 when project that we will have sufficient quantity of bullion dore bars for us to begin receiving regular              revenues from our production.

We believe that we have sufficient capital to finance this phase of development.  

We closed on the purchase of our mill site in early December 2009, and began processing tailings into concentrate in May of 2010, and concentrate into bullion dore bars in July 2011.  Since the closing, we have made improvements to the road to the mill site, located an office on the property, removed the topsoil from an area of the mill site where our tailings are stacked and drilled a water well, erected a mill building with ancillary structures and fenced off the area. We intend to move a sufficient amount of tailings, including a possible increase in tonnage, for next winter's production, to the mill site before the roads became impassable on the mountain.  

In 2010, the roads to the Sinker Tunnel Complex were upgraded to allow 25-ton trucks access to the site, and an area 300x400 feet was prepared to act as a staging area at the 5,200 foot level. The Sinker Tunnel was aerated in its entire length and the entrance to the Sinker Tunnel was permanently extended to avoid land or snow slides to block access to the Sinker Tunnel. Permanent drainage pipes are being laid in the tunnel as it was determined that the Sinker Tunnel is the main drain for the War Eagle complex. Exploring and shoring or rock bolting of some weak points in the top wall is underway. Permitting for exploration of the Sinker Tunnel is underway with training for underground personnel and safety measures being installed as per the latest mining rules and regulations.

Exploration Phase

During 2010, we substantially revised the scope and cost of our exploration phase.  Our exploration phrase refers to a program to prove up and locate reserves on our property. We need to obtain a satisfactory estimate of the remaining reserves on the property and their location in order to develop a comprehensive plan for the full development of the mine site.  The program will involve building a three dimensional map of War Eagle Mountain showing the precise location of veins, shafts and tunnels.  Through exploratory drilling and core sampling, we hope to obtain as much information as possible about the location, thickness and quality of the vein systems near the main shafts, and later throughout the entire mountain.  The map will be a valuable tool in analyzing the extent of the remaining reserves, mineralization trends, and other pertinent geological and mining information.  The most significant change to the exploration phase contemplates a more comprehensive set of core samples, both from the surface of the mountain and from the inside of the mountain using the Sinker Tunnel, and associated costs, including locating drilling equipment at the site, and logistical costs for the crew, such as vehicles, meals, shelter on the mountain, and accommodations for a geologist, field technician and drill crew.  We decided to expand the scope of the exploration phase in order to obtain a National Instrument 43-101, which is a report developed by the Canadian Securities Administrators for mining companies.  A National Instrument 43-101 is necessary for listing our common stock on any exchange overseen by the Canadian Securities Authority, including the Toronto Stock Exchange.



21



 

We have recently hired Mr. Roger Scammell, a geologist with many years of experience in the mining industry, as our President and in late September, Mr. Scammell stepped down from his position as president due to health problems in his immediate family. However, Mr. Scammell remains as a Director and head of the geology department.  Mr. Scammell and Engineering Northwest, Inc., a surveying firm, will perform the exploration phase followed by a drilling program under his direction.

Another aspect of the exploration phase will involve the development of a plan to use the Sinker Tunnel to mine the interior of the mountain on a year round basis.  The plan will involve accessing and draining the mine shafts on the top of the mountain from the Sinker Tunnel, as well as relocating and collaring old shafts on the mountain.  We estimate that the exploration phase will take about 18 months, and will cost approximately $7,000,000. We began preliminary work on the exploration phase in mid-2010.

Development Phase

The development phase involves transitioning the mine from processing tailings leftover from prior mining activities to extracting and processing raw ore from the mountain.  We believe that full scale mining of raw ore will be profitable. In particular, historical records of mining on the site, and subsequent reports of the geology of the mountain, indicate that veins containing gold and silver extend much further vertically than could be mined when the site was last mined in the 1880’s.  In addition, historical records indicate that gold and silver exists in the veins in sufficient densities to warrant mining using modern extraction and milling techniques.  The scope of the development phase will depend on the outcome of the exploration Phase, which is designed to test the accuracy of our analysis.  Our goal is to develop a drilling program that reaches as many reserves as possible at the lowest cost.  Among the improvements to the mine site that we anticipate making in the development phase are:

·

We plan to connect the mine shafts on the top of the mountain to the Sinker Tunnel in order to provide drainage to those shafts;

·

We plan to install a transportation system in the Sinker Tunnel (either tire mounted trams, narrow gauge railway, or conveyor system) to move ore out of the Sinker Tunnel for transport to our mill site; and

·

Additional improvements include housing, storage, food preparation facilities, generators for power, etc.

During the year ended December 31, 2010, we started (and have since completed) some improvements to the mine site that were previously part of our development phase, including improving about four miles of the county road linking State Route 78 with Silver City, 1.8 miles of access road to the Sinker Tunnel Complex from the county road, and about 1.6 miles of access road to the Oro Fino vein outcrop area to permit heavier loads and year round access, as well improvements to the physical facilities at the milling location site and mine site to accommodate our workers.  



22



We estimate that the improvements during the exploration phase will cost about $6 million, and will take 14 to 18 months to complete.

Our revenue, profitability, and future growth rate depend substantially on factors beyond our control, including our success in the commencement of mining operations, as well as economic, political, and regulatory developments and fluctuations in the market prices of minerals processed from ore derived from our mining operations.

Results of Operations

Nine months ended September 30, 2011 and 2010

We are in the exploration stage and have generated no revenues in the nine months ended September 30, 2011 and 2010.  Our revenues in the nine months ended September 30, 2011 are not representative of our revenues in the future.  In May 2010, we began processing tailings from our mine site at our mill.  In July 2011, we began smelting the concentrate into bullion dore bars at our smelter. We project that we will have enough bullion dore bars to ship for final processing to a refiner in November 2011. The refiner would then pay us a market price for the minerals ultimately extracted from the bullion dore. We expect to begin recording regular revenues from the shipment of bullion dore bars in the fourth quarter.

We reported losses from operations during the nine months ended September 30, 2011 and 2010 of ($8,255,636) and ($6,121,584), respectively. The increased loss in 2011 as compared to 2010 was attributable to the following factors:

·

Consulting fees decreased from $4,491,570 in 2010 to $3,827,985 as a result of decreased use of consultants in 2011. The material components of expenses charged to consulting services in both years were as follows:

Type of Services

2011

 

2010

    

Accounting services

-

 

373,672

Shareholder relations services

942,293

 

765,500

Computer and IT services

-

 

21,770

Mineral claims administration

19,000

 

-

Technical consulting

180,292

 

17,946

Locating and due diligence services on future acquisition opportunities

452,100

 

637,925

Administrative, office and clerical

31,112

 

389,973

Legal services

-

 

10,422

Advice on debt and equity capital raising

1,743,000

 

1,852,833

Investment banking fees

496,000

 

-

Equity line fees

164,000

 

-

    

·

Compensation expense increased from $477,378 in 2010 to $1,055,151 in 2011 as a result of the addition of new employees, and the execution of employment agreements with officers at increased salary rates;

·

Depreciation expense increased from $154,018 in 2010 to $249,293 in 2011 as a result of the acquisition of substantial equipment to be used in our milling operations.

·

Exploration and development costs increased from $251,589 in 2010 to $1,079,912 in 2011 as a result of work on the Sinker Tunnel.



23



·

Mill operating expenses increased from $349,340 in 2010 to $1,409,229 in 2011.  The mill began operations in May 2010.

·

General and administrative expenses increased to $634,066 in 2011 as compared to $147,689 in 2010 as a result of increased expenses related to the new mill operations.

We reported net losses during the nine ended September 30, 2011 and 2010 of ($8,436,067) and ($6,257,560), respectively.  The increased loss in 2011 as compared to 2010 was largely attributable to an increase in loss from operations and by an increase in interest expense resulting from higher levels of interest bearing debt in 2011.  In particular, interest expense increased from $135,976 in 2010 to $180,431 in 2011.

Three months ended September 30, 2011 and 2010

We are in the exploration stage and have generated no revenues in the three months ended September 30, 2011 and 2010.  Our revenues in the three months ended September 30, 2011 are not representative of our revenues in the future.  In May 2010, we began processing tailings from our mine site at our mill.  In July 2011, we began smelting the concentrate into bullion dore bars at our smelter. We project that we will have enough bullion dore bars to ship for final processing to a refiner in November 2011. The refiner would then pay us a market price for the minerals ultimately extracted from the bullion dore. We expect to begin recording regular revenues from the shipment of bullion dore bars in the fourth quarter.

We reported losses from operations during the three months ended September 30, 2011 and 2010 of ($2,161,309) and ($1,684,0177), respectively.  The decreased loss in 2011 as compared to 2010 was attributable to the following factors:

·

Consulting fees increased from $599,264 in 2010 to $731,371 as a result of increase use of consultants in 2011.   The material components of expenses charged to consulting services in both years were as follows:

Type of Services

2011

 

2010

    

Shareholder relations services

21,000

 

436,270

Mineral claims administration

7,500

 

-

Technical consulting

-

 

1,938

Locating and due diligence services on future acquisition opportunities

445,700

 

193,200

Administrative, office and clerical

7,778

 

11,667

Legal services

-

 

1,458

Advice on debt and equity capital raising

95,000

 

221,667

Investment banking fees

158,000

 

-

    

·

Compensation expense increased from $225,655 in 2010 to $282,685 in 2011 as a result of the addition of new employees, and the execution of employment agreements with officers at increased salary rates;

·

Depreciation expense increased from $58,486 in 2010 to $71,367 in 2011 as a result of the acquisition of substantial equipment to be used in our milling operations.

·

Exploration and development costs increased from $232,988 in 2010 to $407,999 in 2011 as a result of work on the Sinker Tunnel.



24



·

Mill operating expenses increased from $266,331 in 2010 to $554,523 in 2011.  The mill began operations in May 2010.

·

General and administrative expenses increased to $113,364 in 2011 as compared to $51,293 in 2010 as a result of increased expenses related to the new mill operations.

We reported net losses during the three months ended September 30, 2011 and 2010 of ($2,237,091) and ($1,745,394), respectively.  The decreased loss in 2011 as compared to 2010 was largely attributable to an decrease in loss from operations and by an increase in interest expense resulting from higher levels of interest bearing debt in 2011.  In particular, interest expense increased from $61,377 in 2010 to $75,782 in 2011.

Liquidity and Sources of Capital

The following table sets forth the major sources and uses of cash for the six months ended June 30, 2011 and 2010:

 

Six months ended June 30,

 

2011

 

2010

Net cash provided by (used) in operating activities

$     (1,824,677)

 

$    (659,529)

Net cash provided by (used) in investing activities

(644,326)

 

(999,451)

Net cash provided by (used) in financing activities

2,442,387

 

1,692,384

Net (decrease) increase in unrestricted cash and cash equivalents

$         (26,616)

 

$         33,404

    

Comparison of 2011 and 2010

In the six months ended September 30, 2011 and 2010, we financed our operations primarily through the issuance of convertible notes and the issuance of common stock for services.

Operating activities used ($1,824,677) of cash in 2011, as compared to ($659,529) of cash in 2010.  Major non-cash items that affected our cash flow from operations in 2011 were non-cash charges of $249,294 for depreciation and amortization, $4,920,235 for the value of common stock issued for services. Other non-cash items include changes in operating assets and liabilities of $1,428,039, most of which resulted from a decrease in prepaid expenses of $696,892, offset by a decrease in accounts payable of ($37,381) and an increase in accrued payroll of $893,597.

Major non-cash items that affected our cash flow from operations in 2010 were non-cash charges of $154,018 for depreciation and amortization, $5,164,351 for the value of common stock issued for services, and $469,220 for the value of common stock issued for rent.  Other non-cash items include changes in operating assets and liabilities of ($189,558), most of which resulted from an decrease in prepaid expenses of $85,587, a decrease in accounts payable of ($94,522) offset by an increase in accrued payroll of $323,238.

Investing activities used ($644,326) of cash in 2011, as compared to ($999,451) of cash in 2010.  The decrease in cash used in investing activities was attributable to lower expenditures in 2011 for equipment used to construct our mill and smelter and improvements to our mining property as compared to 2010.  

Financing activities supplied $2,442,387 of cash in 2011 as compared to $1,692,384 of cash in 2010.  Substantially all of the cash supplied in both years derived from the issuance of notes, net of sums spent to repay notes.  In 2011, we issued $2,442,710 in notes, as compared to 2010 when we issued $1,825,515 of notes.  



25



Our balance sheet as of September 30, 2011 reflects current assets of $555,729, current liabilities of $2,132,937, and a working capital deficit of ($1,577,208).

We will need substantial capital over the next year. We project that we will need about $1,000,000 of capital until we begin receiving steady revenues from the processing of tailings at our mine site and sale of bullion dore, about $10,000,000 to complete an exploration process, including the cost of drafting and completing a 43-101 report, and another $6,000,000 to commence processing raw ore.  In addition, we financed a lot of prior activities by the issuance of convertible notes that mature two years after their issuance.  In particular, as of September 30, 2011, we had outstanding $4,187,076 in notes payable, of which $1,085,667 is due within one year of that date.  Also, beginning January 1, 2012, we are obligated to resume making monthly payments of $83,333 to GoldLand under our lease of its mining interests on War Eagle Mountain.  

We have recently entered into an equity line of credit with Centurion Private Equity, LLC, under which we are entitled to raise up to $7.2 million from the sale of our shares to Centurion over a 24 month period. Centurion is obligated to purchase our shares pursuant to put notices that we send from time to time at a purchase price equal to 97% of the market price of our common stock, as defined in the agreement.  In order to draw under the equity line of credit, we must first file and obtain approval of a registration statement covering all shares issuable under the equity line of credit.  The issuance of shares under the equity line of credit could result in substantial dilution to existing shareholders. We project that this financing will enable us to commence the exploration phase of our business plan, which is the prove up of reserves on our property.

The amount of capital that we currently have the capacity to raise is not sufficient to pay all of the capital expenses that we need to pay to commence operations, and pay our other liabilities as they come due.  However, we have a number of options that we believe will enable us to continue with our business plan despite insufficient capital.  For example, we plan to continue deferring payment of salaries to our management or paying their salaries in common stock, deferring certain accounts payable, and monthly lease payments to GoldLand, because in each case we do not expect the creditor to take any legal action against us as a result of the deferral.  GoldLand, for example, is controlled by our officers, and therefore we do not expect GoldLand to take any legal action as a result of our deferral of lease payments to it.  We also plan to continue issuing shares to certain service providers that are willing to accept shares for payment.  In the event we are able to raise some, but not all, of the capital that we need, we plan to request that note holders extend the maturity of their notes or convert their notes into shares of common stock.

Going Concern

Our financial statements have been presented on the basis that we continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  As shown in the accompanying financial statements, we incurred a net operating loss in the nine months ended September 30, 2011, and have no revenues at this time.  These factors create an uncertainty about our ability to continue as a going concern.  We are currently trying to raise capital through a private offering of convertible notes and to solicit existing convertible note holders to convert their notes into common stock. We have also entered into an equity line of credit agreement, but funding under the agreement is contingent upon the approval of a registration statement by the Securities and Exchange Commission. Our ability to continue as a going concern is dependent on the success of this plan.  The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

26



Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that 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 are material to investors.

Critical Accounting Estimates

Our significant accounting policies are described in Note 2 of Notes to Financial Statements. At this time, we are not required to make any material estimates and assumptions that affect the reported amounts and related disclosures of assets, liabilities, revenue, and expenses. However, as we begin actual mining operations, we will be required to make estimates and assumptions typical of other companies in the mining business.  

For example, we will be required to make critical accounting estimates related to future metals prices, obligations for environmental, reclamation, and closure matters, mineral reserves, and accounting for business combinations.  The estimates will require us to rely upon assumptions that were highly uncertain at the time the accounting estimates are made, and changes in them are reasonably likely to occur from period to period.  Changes in estimates used in these and other items could have a material impact on our financial statements in the future.

Our estimates will be based on our experience and our interpretation of economic, political, regulatory, and other factors that affect our business prospects. Actual results may differ significantly from our estimates.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Because the Company is a smaller reporting company, it is not required to provide the information called for by this Item.

ITEM 4.  CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Pierre Quilliam, our chief executive officer, and Tom Ridenour, our chief financial officer, are responsible for establishing and maintaining our disclosure controls and procedures.  Disclosure controls and procedures means controls and other procedures that are designed to ensure that information we are required to disclose in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and to ensure that information required to be disclosed by us in those reports is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.  Our chief executive officer and chief financial officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of September 30, 2011.  Based on that evaluation, our chief executive officer and chief financial officer concluded that, as of the evaluation date, such controls and procedures were adequate.

Changes in internal controls

There were no changes in our internal controls over financial reporting that occurred during the quarter ended September 30, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



27



PART II.  OTHER INFORMATION.

ITEM 1.  LEGAL PROCEEDINGS.I

None.

ITEM 1A.  RISK FACTORS.

Not applicable.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

During the three months ended September 30, 2011, we issued shares of Class A Common Stock in the following unregistered transactions:

·

2,362,977 shares of Class A Common Stock upon conversion of promissory notes with a principal balance of $300,000.  

·

7,810,925 shares of Class A Common Stock were issued to various vendors for consulting services valued at $721,500.

·

1,901,465 shares of Class A Common Stock valued at $138,807 were issued in payment of accrued compensation.

·

113,636 shares of Class A Common Stock were issued to a vendor for the purchase of equipment valued at $12,500.

·

8,000,000 shares of Class A Common Stock valued at $777,300 were issued to a vendor for various exploration and construction projects at our mill site and mine sites.

·

144,000 shares of Class A Common Stock were issued to note holders for interest of $13,824.

During the three months ended September 30, 2011, promissory notes with an original principal amount of $922,000 were issued to various investors.  Each note has a term of two years, bears interest at 7% per annum, and is convertible into shares of common stock at the holder’s election at the market price of the common stock on the date of issuance.

The shares and notes were issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act of 1933.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM  4. (REMOVED AND RESERVED)

ITEM 5.  OTHER INFORMATION.

None.



28



ITEM 6.  EXHIBITS.

31.1*

Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934

31.2*

Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934

32.1*

Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*

Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



29



SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

  

 

SILVER FALCON MINING, INC.

Date: November 14, 2011

/s/ Pierre Quilliam

 

By: Pierre Quilliam, Chief Executive Officer

(principal executive officer)

  

Date: November 14, 2011

/s/ Thomas C. Ridenour

 

By: Thomas C. Ridenour, Chief Financial Officer

(principal financial and accounting officer)





30



EX-31.1 2 ex311.htm CERTIFICATION

Exhibit 31.1

CERTIFICATIONS

I, Pierre Quilliam, hereby certify that:

(1) I have reviewed this quarterly report on Form 10-Q for the period ended September 30, 2011 (the “report”) of Silver Falcon Mining, Inc.;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5) The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


Dated: November 14, 2011

/s/ Pierre Quilliam

 

Pierre Quilliam

Chief Executive Officer

(principal executive officer)




EX-31.2 3 ex312.htm CERTIFICATION

Exhibit 31.2

CERTIFICATIONS

I, Thomas Ridenour, hereby certify that:

(1) I have reviewed this quarterly report on Form 10-Q for the period ended September 30, 2011 (the “report”) of Silver Falcon Mining, Inc.;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5) The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


Dated: November 14, 2011

/s/ Thomas Ridenour

 

Thomas Ridenour

Chief Financial Officer

(principal financial and accounting officer)




EX-32.1 4 ex321.htm CERTIFICATION

Exhibit 32.1


CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Silver Falcon Mining, Inc., a Delaware corporation (the "Company"), does hereby certify, to the best of his knowledge, that:

 

1.     The Quarterly Report on Form 10-Q for the period ending September 30, 2011 (the "Report") of the Company complies in all material respects with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and


2.     The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.  

 

/s/ Pierre Quilliam

 

Pierre Quilliam,

Chief Executive Officer

(principal executive officer)


Date:  November 14, 2011




EX-32.2 5 ex322.htm CERTIFICATION EXHIBIT 32.1 Blaser (A0040432-2).DOC

Exhibit 32.2


CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Silver Falcon Mining, Inc., a Delaware corporation (the "Company"), does hereby certify, to the best of his knowledge, that:

 

1.     The Quarterly Report on Form 10-Q for the period ending September 30, 2011 (the "Report") of the Company complies in all material respects with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

2.     The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.  

 

/s/ Thomas Ridenour

 

Thomas Ridenour,

Chief Financial Officer

(principal financial and accounting officer)


Date:  November 14, 2011




EX-101.INS 6 sfmi-20110930.xml INSTANCE DOCUMENT false --12-31 Q3 2011 2011-09-30 10-Q 0001464830 344966817 3884321 Smaller Reporting Company Silver Falcon Mining, Inc. <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <div> <div><!--StartFragment--> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> <strong>NOTE 9 - GOING CONCERN</strong></p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. &nbsp;However, we incurred a net loss of ($8,436,067) for the nine months ended September 30, 2011. &nbsp;We have remained in business primarily through the deferral of salaries by management, the issuance of stock to compensate employees and consultants, and raising funds from the sale of two year convertible notes. We intend on financing our future development activities from the same sources, until such time that funds provided by operations are sufficient to fund working capital requirements.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> These factors, among others, raise substantial doubt about our ability to continue as a going concern for a reasonable period of time.</p> <!--EndFragment--></div> </div> 554523 1409229 266331 349340 2245738 754089 205723 205723 333438236 316543677 239786420 215016164 171449435 272916 310297 323 633521 727633 641593 392299 24602808 18164240 4042494 4153240 555729 414441 39780 34914 61530 34006 602 -26616 33404 34914 <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <div> <div><!--StartFragment--> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> <strong>NOTE 7 - COMMITMENTS AND CONTINGENCIES</strong></p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> We are obligated under employment agreements with our officers to make total salary payments of $772,000 per year.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> On October 11, 2007, we entered into a lease agreement with GoldLand, under which we leased its mineral rights on War Eagle Mountain. &nbsp;Under the lease, we are responsible for all mining activities on War Eagle Mountain, and we are obligated to pay GoldLand annual lease payments of $1,000,000, payable on a monthly basis, a monthly non-accountable expense reimbursement of $10,000 during any month in which ore is mined from the leased premises, and a royalty of 15% of all amounts we receive from the processing of ore mined from the properties. &nbsp;The lease provides that lease payments must commence April 1, 2008. &nbsp;By agreement with GoldLand, we extended the commencement date to July 1, 2010, in which event the lease term was extended by an equal amount of time. On the first quarter of 2011, we amended the above-described lease with GoldLand. &nbsp;The amendment provided that the annual lease payments would be deferred for a fifteen month period from October 2010 to December 2011, and the term of the Lease would be extended for an equal amount of time. &nbsp;We remain obligated to pay any royalties or the nonaccountable fee that accrues during the deferral period.</p> <!--EndFragment--></div> </div> 0.0001 0.0001 0.0001 0.0001 12500000 12500000 10000000000 10000000000 341821509 286587004 3884321 3884321 341821509 286587004 3884321 3884321 3884321 3884321 341821509 286587004 34182 28658 389 389 34571 29047 5274 -13822 -63822 -469220 -862130 <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <div> <div><!--StartFragment--> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> <strong>NOTE 3 - NOTES PAYABLE</strong></p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> As of September 30, 2011, we had outstanding $4,187,076 of two-year promissory notes that we have issued to various investors starting in 2009. &nbsp;Interest accrues on the notes at the rate of 7% per year, and is payable monthly, except for notes issued to New Vision Financial, Ltd., which provide that interest is payable annually. &nbsp;Principal and interest due on the notes is convertible into shares of Class A Common Stock at the election of the holder at conversion prices ranging from $0.015 to $0.276 per share. &nbsp;The conversion price of the notes is set at the market price of the Class A Common Stock on the date of issuance. &nbsp;The notes mature at various dates ranging from July 23, 2011 to September 21, 2013. &nbsp;During the three and nine months ended September 30, 2011, we issued $922,000 and $2,442,709 of new notes, respectively.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> During the three and nine months ended September 30, 2011, we issued 2,362,977 and 5,898,483 shares of our common stock, respectively, upon conversion of notes payable with an aggregate principal amount of $300,000 and $492,600, respectively.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> The maturities of two-year notes payable are as follows:</p> <table style="FONT-SIZE: 10pt" cellspacing="0" align="center"> <tr> <td width="126">&nbsp;</td> <td width="18">&nbsp;</td> <td width="81">&nbsp;</td> </tr> <tr> <td valign="bottom" width="168"> <p style="FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN: 0pt; text-align: justify"> 2011</p> </td> <td valign="bottom" width="24">&nbsp;</td> <td valign="bottom" width="108"> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN: 0pt; text-align: right"> &nbsp;&nbsp;&nbsp;$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;165,000</p> </td> </tr> <tr> <td valign="bottom" width="168"> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN: 0pt; text-align: justify"> 2012</p> </td> <td valign="bottom" width="24">&nbsp;</td> <td valign="bottom" width="108"> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN: 0pt; text-align: right"> 1,669,367</p> </td> </tr> <tr> <td valign="bottom" width="168"> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN: 0pt; text-align: justify"> 2013</p> </td> <td valign="bottom" width="24">&nbsp;</td> <td valign="bottom" width="108"> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN: 0pt; text-align: right"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,352,709</p> </td> </tr> <tr> <td valign="bottom" width="168"> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN: 0pt; text-align: justify"> &nbsp;&nbsp;Total</p> </td> <td valign="bottom" width="24">&nbsp;</td> <td style="BORDER-BOTTOM: #000000 0.5pt solid; BORDER-TOP: #000000 0.5pt solid" valign="bottom" width="108"> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN: 0pt; text-align: right"> 4,187,076</p> </td> </tr> <tr> <td valign="bottom" width="168">&nbsp;</td> <td valign="bottom" width="24">&nbsp;</td> <td valign="bottom" width="108">&nbsp;</td> </tr> <tr> <td valign="bottom" width="168"> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN: 0pt; text-align: justify"> Less current maturities</p> </td> <td valign="bottom" width="24">&nbsp;</td> <td valign="bottom" width="108"> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN: 0pt; text-align: right"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1,085,667)</p> </td> </tr> <tr> <td valign="bottom" width="168"> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN: 0pt; text-align: justify"> &nbsp;&nbsp;Long term debt</p> </td> <td valign="bottom" width="24">&nbsp;</td> <td style="BORDER-BOTTOM: #000000 3pt double; BORDER-TOP: #000000 0.5pt solid" valign="bottom" width="108"> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN: 0pt; text-align: right"> &nbsp;&nbsp;$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,101,409</p> </td> </tr> </table> <p style="MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> <br /> </p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> On December 3, 2009, we executed a promissory note for $225,000 as partial consideration for the purchase of land in Idaho. The promissory note is payable without interest in ten annual installments of $22,500 each, with the first installment being due on January 1, 2010. &nbsp;The balance due on the note at September 30, 2011 was $180,000.</p> <!--EndFragment--></div> </div> 71367 249294 58486 154018 641593 1212 6000 -0.01 -0.03 -0.01 -0.03 -0.15 25277 30177 407999 1079912 232988 251589 2177384 113364 634065 51293 147689 3141237 2960 -37381 -94522 583221 4788 -69499 -1212 893597 323238 1651407 72623 -14367 104854 167904 559993 520815 25000 26000 -696892 -86587 18133 75782 180431 61377 135976 582684 91844 19221 520815 352911 4920235 5164351 17036063 282685 1055151 225655 477378 3852582 250000 250000 250000 5391861 3510632 4042494 4153240 2132937 1331151 3258924 2179481 2059940 1772390 2442387 1692384 7726245 -644326 -999451 -3260531 -1824677 -659529 -4430800 -2237091 -8436067 -1745394 -6257560 -25986746 -8436067 1108167 237500 2161309 8255636 1684017 6121584 25407022 -2161309 -8255636 -1684017 -6121584 -25404062 <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <div> <div><!--StartFragment--> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> <strong>NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS</strong></p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> Silver Falcon Mining, Inc. (the "Company," "we" or "us") was formed in the State of Delaware on October 11th, 2007. &nbsp;On October 15, 2007, we completed a holding company reorganization with Dicut, Inc. ("Dicut") pursuant to Section 251(g) of the Delaware General Corporation Law. &nbsp;Dicut previously operated in the information technology business, but ceased operations in 2005.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> On October 11, 2007, GoldLand leased its mineral rights on War Eagle Mountain to us. &nbsp;Under the lease, we are responsible for all mining activities on War Eagle Mountain, and we are obligated to pay GoldLand annual lease payments of $1,000,000, payable on a monthly basis, a monthly non-accountable expense reimbursement of $10,000 during any month in which ore is mined from the leased premises, and a royalty of 15% of all amounts we receive from the processing of ore mined from the properties. The lease provides that lease payments must commence April 1, 2008, but by agreement with GoldLand we extended the commencement date to July 1, 2010. On the first quarter of 2011, we amended the above-described lease with GoldLand. The amendment provided that the annual lease payments would be deferred for a fifteen month period from October 2010 to December 2011, and the term of the Lease would be extended for an equal amount of time. We remain obligated to pay any royalties or the nonaccountable fee that accrues during the deferral period. &nbsp;</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> <strong><em>Basis of Presentation</em></strong></p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> The foregoing unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Regulation S-X as promulgated by the Securities and Exchange Commission ("SEC"). Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles in the United States of America for complete financial statements. These unaudited interim financial statements should be read in conjunction with the audited financial statements and the notes thereto included on Form 10-K for the year ended December 31, 2010. In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> The preparation of financial statements in accordance with generally accepted accounting principles in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumption are inherent in the preparation of the Company&#39;s financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions that could have a material effect on the reported amounts of the Company&#39;s financial position and results of operations.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> Operating results for the nine month period ended September 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.</p> <!--EndFragment--></div> </div> 31000 6000 63000 63000 287550 155983 1305852 356776 843468 1994459 18133 715025 75000 75000 2442710 1825515 7763745 -323 337790 731371 3827985 599264 4491570 13098488 <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <div> <div><!--StartFragment--> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> <strong>NOTE 4 - MILL EQUIPMENT</strong></p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> The following table summarizes the Company&#39;s equipment as of September 30, 2011.</p> <table style="FONT-SIZE: 10pt" cellspacing="0" align="center"> <tr> <td width="164">&nbsp;</td> <td width="53">&nbsp;</td> <td width="73">&nbsp;</td> </tr> <tr> <td valign="bottom" width="218"> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN: 0pt; text-align: justify"> Equipment</p> </td> <td valign="bottom" width="70">&nbsp;</td> <td valign="bottom" width="97"> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN: 0pt; text-align: right"> $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,981,840</p> </td> </tr> <tr> <td valign="bottom" width="218"> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN: 0pt; text-align: justify"> Vehicles</p> </td> <td valign="bottom" width="70">&nbsp;</td> <td valign="bottom" width="97"> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN: 0pt; text-align: right"> 37,445</p> </td> </tr> <tr> <td valign="bottom" width="218"> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN: 0pt; text-align: justify"> Accumulated depreciation</p> </td> <td valign="bottom" width="70">&nbsp;</td> <td valign="bottom" width="97"> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN: 0pt; text-align: right"> (641,593)</p> </td> </tr> <tr> <td valign="bottom" width="218"> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN: 0pt; text-align: justify"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net</p> </td> <td valign="bottom" width="70">&nbsp;</td> <td style="BORDER-BOTTOM: #000000 3pt double; BORDER-TOP: #000000 0.5pt solid" valign="bottom" width="97"> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN: 0pt; text-align: right"> $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,377,692</p> </td> </tr> </table> <p style="MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> <br /> </p> <!--EndFragment--></div> </div> 1377692 1245384 <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <div> <div><!--StartFragment--> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> <strong>NOTE 6 - RELATED PARTY TRANSACTIONS</strong></p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> On October 11, 2007, GoldLand leased its mineral rights on War Eagle Mountain to us. &nbsp;Under the lease, we are responsible for all mining activities on War Eagle Mountain, and we are obligated to pay GoldLand annual lease payments of $1,000,000, payable on a monthly basis, a monthly non-accountable expense reimbursement of $10,000 during any month in which ore is mined from the leased premises, and a royalty of 15% of all amounts we receive from the processing of ore mined from the properties. We agreed with GoldLand to extend the date lease payments must commence to July 1, 2010, and extended the lease term by an equal amount of time.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> On the first quarter of 2011, we amended the above-described lease with GoldLand. &nbsp;The amendment provided that the annual lease payments would be deferred for a fifteen month period from October 2010 to December 2011, and the term of the Lease would be extended for an equal amount of time. &nbsp;We remain obligated to pay any royalties or the nonaccountable fee that accrues during the deferral period.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> As of December 31, 2010 and June 30, 2011, we (including our subsidiaries) owed Goldland $6,000 and $36,450 respectively. At September 30, 2011, Pierre Quilliam and a company owned by him owed us a net amount of $35,238 due to timing differences in invoicing during the quarter. &nbsp;The amounts are non-interest bearing, unsecured demand loans. This balance has since been settled with the receipt of current invoices.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> Pierre Quilliam, Denise Quilliam, Christian Quilliam, Allan Breitkreuz and Roger Scammell are all officers and directors of GoldLand and us. Thomas C. Ridenour, who is an officer of us, is also an officer of GoldLand.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> During the three and nine months ended September 30, 2011 we issued 61,253 and 165,177 shares of Class A Common Stock to Pascale Tutt for mineral claims administration valued at $5,000 and $19,000, respectively. &nbsp;Ms. Tutt is the daughter of Mr. and Ms. Quilliam.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> During the three and nine months ended September 30, 2011, we issued Pierre Quilliam 876,251 and 4,163,321 shares of Class A Common Stock valued at $63,966 and $585,035, respectively, in satisfaction of past and current payroll. &nbsp;Mr. Quilliam is our chief executive officer. The shares were valued at the market price on the date of issuance.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> During the nine months ended September 30, 2011, we issued Denise Quilliam 849,086 shares of Class A Common Stock valued and $134,006 in satisfaction of past and current payroll. &nbsp;Ms. Quilliam is our secretary. The shares were valued at the market price on the date of issuance.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> During the three and nine months ended September 30, 2011, we issued Christian Quilliam 341,738 and 1,311,195 shares of Class A Common Stock valued at $24,947 and $178,164, respectively, in satisfaction of past and current payroll. &nbsp;Mr. Quilliam is our chief operating officer. The shares were valued at the market price on the date of issuance.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> During the three and nine months ended September 30, 2011, we issued Alan Breitkreuz 61,586 shares of Class A Common Stock valued at $8,006 in satisfaction of current payroll. &nbsp;Mr. Breitkreuz is our vice president. The shares were valued at the market price on the date of issuance.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> During the three and nine months ended September 30, 2011, we issued Thomas Ridenour 683,476 and 809,890 shares of Class A Common Stock valued at $49,894 and $66,328, respectively, in satisfaction of current payroll. &nbsp;Mr. Ridenour is our chief financial officer. The shares were valued at the market price on the date of issuance.</p> <!--EndFragment--></div> </div> 42500 49500 102631 337790 -25986746 -17550679 8234 1163542 13050 <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <div> <div><!--StartFragment--> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> <strong>NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</strong></p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> <strong><em>Revenue Recognition</em></strong></p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> Sales of all metals products sold directly to refiners or smelters, including by-product metals, are recorded as revenues when title and risk of loss transfer to the refiner or smelter (generally at the time of shipment) at estimated forward prices for the estimated month of settlement. &nbsp;Due to the time elapsed from shipment to the refiner or smelter and the final settlement with the refiner or smelter, we must estimate the prices at which sales of our metals will be settled. Previously recorded sales are adjusted to estimated settlement metals prices until final settlement by the refiner or smelter. &nbsp;Revenue is recognized, net of treatment and refining charges, from a sale when persuasive evidence of an arrangement exists, the price is determinable, the product has been delivered, the title has been transferred to the customer and collection of the sales price is reasonably assured. Concentrate sales or bullion dore bar sales are initially recorded based on 100% of the provisional sales prices. Until final settlement occurs, adjustments to the provisional sales prices are made to take into account the mark-to-market changes based on the forward prices for the estimated month of settlement. For changes in metal quantities upon receipt of new information and assay, the provisional sales quantities are adjusted as well. The principal risks associated with recognition of sales on a provisional basis include metal price fluctuations between the date initially recorded and the date of final settlement. If a significant decline in metal prices occurs between the provisional pricing date and the final settlement-date, it is reasonably possible that we could be required to return a portion of the sales proceeds received based on the provisional invoice.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> Our sales based on a provisional sales price contain an embedded derivative that is required to be separated from the host contract for accounting purposes. The host contract is the receivable from the sale of the concentrates at the forward London Metal Exchange price at the time of sale. The embedded derivative, which does not qualify for hedge accounting, is marked to market through earnings each period prior to final settlement.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> <strong><em>Cash and Cash Equivalents</em></strong></p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> Cash and cash equivalents consist of all cash balances and highly liquid investments with an original maturity of three months or less. Because of the short maturity of these investments, the carrying amounts approximate their fair value.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> <strong><em>Investments</em></strong></p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> Management determines the appropriate classification of our investments in equity securities at the time of purchase and reevaluates such determinations at each reporting date. Investments in incorporated entities in which our ownership is greater than 20% and less than 50%, or which we do not control through majority ownership or means other than voting rights, are accounted for by the equity method and are included in long-term assets. &nbsp;We account for our equity security investments as available for sale securities in accordance with Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards ("FAS")&nbsp;No.&nbsp;115, "Accounting for Certain Investments in Debt and Equity Securities." We periodically evaluate whether declines in fair values of our investments below our carrying value are other-than-temporary in accordance with FSP FAS 115 No.&nbsp;115-1 and FAS 124-1, "The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments." Our policy is to generally treat a decline in the investment&#39;s quoted market value that has lasted continuously for more than six months as an other-than-temporary decline in value. &nbsp;We also monitor our investments for events or changes in circumstances that have occurred that may have a significant adverse effect on the fair value of the investment and evaluates qualitative and quantitative factors regarding the severity and duration of the unrealized loss and our ability to hold the investment until a forecasted recovery occurs to determine if the decline in value of an investment is other-than-temporary. Declines in fair value below our carrying value deemed to be other-than-temporary are charged to earnings.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> We account for our investments in auction rate securities in accordance with FAS&nbsp;No.&nbsp;115. Specifically, when the underlying security of an auction rate security has a stated or contractual maturity date in excess of 90 days, regardless of the frequency of the interest rate reset date, the security is classified as an available-for-sale marketable debt security.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> <strong><em>Inventories</em></strong></p> <p style="FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify; FONT-FAMILY: Times New Roman;"> Until we begin full operations, which is when we begin shipping bullion dore bars to a refiner, our inventories are stated at the lower of average costs incurred or estimated net realizable value. Major types of inventories include materials and supplies and metals product inventory, which is determined by the stage at which the ore is in the production process (stockpiled ore, work in process and finished goods).</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> Materials and supplies inventory will be valued at the lower of average cost or net realizable value.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> Stockpiled ore inventory represents ore that has been mined, hauled to the surface, and is available for further processing. Stockpiles will be measured by estimating the number of tons added and removed from the stockpile, the number of contained metal ounces or pounds (based on assay data) and the estimated metallurgical recovery rates (based on the expected processing method). Stockpile ore tonnages will be verified by periodic surveys. Costs will be allocated to a stockpile based on relative values of material stockpiled and processed using current mining costs incurred up to the point of stockpiling the ore, including applicable overhead, depreciation, depletion and amortization relating to mining operations, and removed at each stockpile&#39;s average cost per recoverable unit.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> Work in process inventory represents materials that will be currently in the process of being converted to a saleable product and includes inventories in our milling process. In-process material is measured based on assays of the material fed into the process and the projected recoveries of the respective plants. In-process inventories will be valued at the average cost of the material fed into the process attributable to the source material coming from the mines and stockpiles, plus the in-process conversion costs, including applicable depreciation relating to the process facilities incurred to that point in the process.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> Finished goods inventory includes bullion dor&eacute; and concentrates at our operations, bullion dor&eacute; in transit to refiners and bullion dore in our accounts at refineries. Inventories will be valued at the lower of full cost of production or net realizable value based on current metals prices.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> At the present time, our inventories consist of the historical cost of transporting raw ore from our mine site to our milling site for further processing. &nbsp;Until we begin receiving regular revenues from our milling and smelting operations, all milling and smelting costs are expensed as incurred.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> <strong><em>Property, Plant and Equipment</em></strong></p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> Expenditures for new facilities or equipment and expenditures that extend the useful lives of existing facilities or equipment are capitalized and recorded at cost. The facilities and equipment are depreciated using the straight-line method at rates sufficient to depreciate such costs over the estimated productive lives.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> Costs are capitalized when it has been determined an ore body can be economically developed as a result of establishing proven and probable reserves. The development stage begins at new projects when our management and/or Board of Directors makes the decision to bring a mine into commercial production, and ends when the production stage, or exploitation of reserves, begins. &nbsp;Expenditures incurred during the development and production stages for new facilities, new assets or expenditures that extend the useful lives of existing facilities and major mine development expenditures are capitalized, including primary development costs such as costs of building access ways, shaft sinking, lateral development, drift development, ramps and infrastructure developments.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> Costs for exploration, secondary development at operating mines, and maintenance and repairs on capitalized property, plant and equipment are charged to operations as incurred. Exploration costs include those relating to activities carried out (a) in search of previously unidentified mineral deposits, (b) at undeveloped concessions, or (c) at operating mines already containing proven and probable reserves, where a determination remains pending as to whether new target deposits outside of the existing reserve areas can be economically developed. Secondary development costs are incurred for preparation of an ore body for production in a specific ore block, stope or work area, providing a relatively short-lived benefit only to the mine area they relate to, and not to the ore body as a whole.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> When assets are retired or sold, the costs and related allowances for depreciation and amortization are eliminated from the accounts and any resulting gain or loss is reflected in current period net income (loss). Idle facilities placed on standby basis are carried at the lower of net carrying value or estimated net realizable value.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> <strong><em>Proven and Probable Ore Reserves&nbsp;</em></strong></p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> At least annually, management reviews the reserves used to estimate the quantities and grades of ore at our mines which we believe can be recovered and sold economically. &nbsp;Management&#39;s calculations of proven and probable ore reserves are based on engineering and geological estimates, including future metals prices and operating costs. From time to time, management obtains external audits of reserves. &nbsp;To date, we have not obtained any third party report regarding potential reserves on our owned and leased property at War Eagle Mountain, and accordingly we have not estimated that there are any proven or probable reserves on our property.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> Reserve estimates will change as existing reserves are depleted through production and as production costs and/or metals prices change. A significant drop in metals prices may reduce reserves by making some portion of such ore uneconomic to develop and produce. Changes in reserves may also reflect that actual grades of ore processed may be different from stated reserve grades because of variation in grades in areas mined, mining dilution and other factors. Estimated reserves, particularly for properties that have not yet commenced production, may require revision based on actual production experience. It is reasonably possible that certain of our estimates of proven and probable ore reserves will change in the near term, which could result in a change to estimated future cash flows, associated carrying values of the asset and amortization rates in future reporting periods, among other things.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> Declines in the market prices of metals, increased production or capital costs, reduction in the grade or tonnage of the deposit or an increase in the dilution of the ore or reduced recovery rates may render ore reserves uneconomic to exploit unless the utilization of forward sales contracts or other hedging techniques are sufficient to offset such effects. If our realized price for the metals we produce were to decline substantially below the levels set for calculation of reserves for an extended period, there could be material delays in the development of new projects, net losses, reduced cash flow, restatements or reductions in reserves and asset write-downs in the applicable accounting periods. Reserves should not be interpreted as assurances of mine life or of the profitability of current or future operations. No assurance can be given that the estimate of the amount of metal or the indicated level of recovery of these metals will be realized.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> To date, we have not obtained any third party report regarding potential reserves on our owned and leased property at War Eagle Mountain, and accordingly we have not estimated that there are any proven or probable reserves on our property.<br /> </p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> <strong><em>Depreciation, Depletion and Amortization</em></strong></p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> Capitalized costs are depreciated or depleted using the straight-line method or unit-of-production method at rates sufficient to depreciate such costs over the shorter of estimated productive lives of such facilities or the useful life of the individual assets. Productive lives do not exceed the useful life of the individual asset. Determination of expected useful lives for amortization calculations are made on a property-by-property or asset-by-asset basis at least annually. Our estimates for mineral reserves are a key component in determining our units of production depreciation rates. Our estimates of proven and probable ore reserves may change, possibly in the near term, resulting in changes to depreciation, depletion and amortization rates in future reporting periods.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> Undeveloped mineral interests are amortized on a straight-line basis over their estimated useful lives taking into account residual values. At such time as an undeveloped mineral interest is converted to proven and probable reserves, the remaining unamortized basis is amortized on a unit-of-production basis as described above.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> <strong><em>Impairment of Long-Lived Assets</em></strong></p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> We review and evaluate our long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. &nbsp;An impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the assets, including goodwill, if any. &nbsp;An impairment loss is measured and recorded based on discounted estimated future cash flows. Future cash flows are estimated based on quantities of recoverable minerals, expected gold and other commodity prices (considering current and historical prices, price trends and related factors), production levels and operating costs of production and capital, all based on life-of-mine plans. Existing proven and probable reserves and value beyond proven and probable reserves, including mineralization other than proven and probable reserves and other material that is not part of the measured, indicated or inferred resource base, are included when determining the fair value of mine site reporting units at acquisition and, subsequently, in determining whether the assets are impaired. The term "recoverable minerals" refers to the estimated amount of gold or other commodities that will be obtained after taking into account losses during ore processing and treatment. Estimates of recoverable minerals from such exploration stage mineral interests are risk adjusted based on management&#39;s relative confidence in such materials. In estimating future cash flows, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of future cash flows from other asset groups. &nbsp;Our estimates of future cash flows are based on numerous assumptions and it is possible that actual future cash flows will be significantly different than the estimates, as actual future quantities of recoverable minerals, gold and other commodity prices, production levels and operating costs of production and capital are each subject to significant risks and uncertainties.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> <strong><em>Reclamation and Remediation Costs (Asset Retirement Obligations)</em></strong></p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> At our operating properties, we accrue costs associated with environmental remediation obligations in accordance with Statement of Financial Accounting Standards (SFAS) No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 requires us to record a liability for the present value of our estimated environmental remediation costs, and the related asset created with it, in the period in which the liability is incurred. The liability will be accreted and the asset will be depreciated over the life of the related assets. Adjustments for changes resulting from the passage of time and changes to either the timing or amount of the original present value estimate underlying the obligation will be made.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> At our non-operating properties, we accrue costs associated with environmental remediation obligations when it is probable that such costs will be incurred and they are reasonably estimable. Estimates for reclamation and other closure costs are prepared in accordance with SFAS No. 5 "Accounting for Contingencies," or Statement of Position 96-1 "Environmental Remediation Liabilities." Costs of future expenditures for environmental remediation are not discounted to their present value unless subject to a contractually obligated fixed payment schedule. Such costs are based on management&#39;s current estimate of amounts to be incurred when the remediation work is performed, within current laws and regulations.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> Future closure, reclamation and environmental-related expenditures are difficult to estimate, in many circumstances, due to the early stage nature of investigations, and uncertainties associated with defining the nature and extent of environmental contamination and the application of laws and regulations by regulatory authorities and changes in reclamation or remediation technology. We periodically review accrued liabilities for such reclamation and remediation costs as evidence becomes available indicating that our liabilities have potentially changed. Changes in estimates at our non-operating properties are reflected in current period net income (loss). &nbsp;Accruals for closure costs, reclamation and environmental matters for operating and nonoperating properties totaled $0 million at December 31, 2010.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> <strong><em>Goodwill</em></strong></p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> We evaluate, on at least an annual basis during the fourth quarter, the carrying amount of goodwill to determine whether current events and circumstances indicate that such carrying amount may no longer be recoverable. To accomplish this, we compare the estimated fair value of our reporting units to their carrying amounts. If the carrying value of a reporting unit exceeds its estimated fair value, we compare the implied fair value of the reporting unit&#39;s goodwill to its carrying amount, and any excess of the carrying value over the fair value is charged to earnings. Our fair value estimates are based on numerous assumptions and it is possible that actual fair value will be significantly different than the estimates, as actual future quantities of recoverable minerals, gold and other commodity prices, production levels and operating costs of production and capital are each subject to significant risks and uncertainties.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> <strong><em>Stock Based Compensation</em></strong></p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> We have issued and may issue stock in lieu of cash for certain transactions. The fair value of the stock, which is based on comparable cash purchases, third party quotations, or the value of services, whichever is more readily determinable, is used to value the transaction</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> <strong><em>Use of Estimates</em></strong></p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> Our Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our Consolidated Financial Statements requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ significantly from these estimates under different assumptions or conditions.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> <strong><em>Basic and Diluted Per Common Share</em></strong></p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> Under Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share," basic &nbsp;earnings &nbsp;per common &nbsp;share is computed by dividing income available to common stockholders by the weighted average number of common shares assumed to be outstanding during the period of computation. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Because we have incurred net losses, basic and diluted loss per share are the same since additional potential common shares would be anti-dilutive.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> <strong><em>Significant Recent Accounting Pronouncements</em></strong></p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> In June 2009 the FASB established the Accounting Standards Codification ("Codification" or "ASC") as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with generally accepted accounting principles in the United States ("GAAP"). &nbsp;Rules and interpretive releases of the Securities and Exchange Commission ("SEC") issued under authority of federal securities laws are also sources of GAAP for SEC registrants. &nbsp;Existing GAAP was not intended to be changed as a result of the Codification, and accordingly the change did not impact our financial statements. &nbsp;The ASC does change the way the guidance is organized and presented.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> Accounting Standards Update ("ASU") ASU No. 2009-05 (ASC Topic 820), which amends Fair Value Measurements and Disclosures - Overall, ASU No. 2009-13 (ASC Topic 605), Multiple-Deliverable Revenue Arrangements, ASU No. 2009-14 (ASC Topic 985), Certain Revenue Arrangements that include Software Elements, and various other ASU&#39;s No. 2009-2 through ASU No. 2010-18 which contain technical corrections to existing guidance or affect guidance to specialized industries or entities were recently issued. &nbsp;These updates have no current applicability to the Company or their effect on the financial statements would not have been significant.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> In February 2010, the FASB issued Accounting Standards Update ("ASU") 2010-09, which, among other things, amends Subtopic 855-10 with respect to the date through which evaluation of subsequent events must occur and under which circumstances such date must be disclosed.&nbsp;&nbsp;The update amends subtopic 855-10 so that an SEC filer is not required to disclose the date through which subsequent events have been evaluated. This change alleviates potential conflicts between Subtopic 855-10 and the SEC&#39;s requirements. All of the amendments in this update are effective upon issuance, with limited exceptions.&nbsp;&nbsp;Adoption of this guidance did not have a material impact on our financial statements.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> During February 2010, the FASB also issued ASU 2010-08, which corrects existing guidance for various topics. The update is generally effective for the first reporting period (including interim periods) beginning after issuance.&nbsp;&nbsp;We believe these corrections will have minimal, if any, impact on our financial statements.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> In January 2010, the FASB issued ASU 2010-06, which amends Subtopic 820-10 to require new disclosures regarding the amounts of and reasons for significant transfers in and out of Levels 1 and 2 fair value measurement categories, and separate information about purchases, sales, issuances, and settlements in Level 3 fair value measurements.&nbsp;&nbsp;ASU 2010-06 also clarifies existing fair value measurement disclosures to provide for fair value measurement disclosures for each class of assets and liabilities, even within a line item in the statement of financial position, and to provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements that fall in either the Level 2 or Level 3 categories.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> ASU 2010-06 also includes conforming amendments to the guidance on employers&#39; disclosures about post-retirement benefit plan assets (Subtopic 715-20), changes the terminology in Subtopic 715-20 from major categories of assets to <em>classes</em> of assets, and provides a cross reference to the guidance in Subtopic 820-10 on how to determine appropriate classes to present fair value disclosures.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> The new disclosures and clarifications of existing disclosures in ASU 2010-06 are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements.&nbsp;&nbsp;Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.&nbsp;&nbsp;Adoption of this guidance has not had a material impact on our financial statements and is not expected to have a material impact on our financial statements in the future.</p> <!--EndFragment--></div> </div> -1349367 642608 34182 28658 389 389 24602808 18164240 -25986746 -17550679 -1349367 <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <div> <div><!--StartFragment--> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> <strong>NOTE 8 - CAPITAL STOCK</strong></p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> At September 30, 2011, our authorized capital stock was <font style="color: #000000">10,000,000,000</font> shares of Class A Common Stock, par value $0.0001 per share, and 12,500,000 shares of Class B Common Stock, par value $0.0001 per share. &nbsp;Class A Common Stock and Class B Common Stock have equal rights to dividends and distributions. &nbsp;However, each outstanding share of Class A Common Stock is entitled to one vote on all matters that may be voted upon by the owners thereof at meetings of the stockholders, while each outstanding share of Class B Common Stock is entitled to forty votes on all matters that may be voted upon by the owners thereof at meetings of the stockholders. &nbsp;As of September 30, 2011, there were 341,821,509 and <font style="color: #000000">3,884,321</font> shares of Class A Common Stock and Class B Common Stock issued and outstanding, respectively.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> During the three and nine months ended September 30, 2011, we issued 20,329,003 and 55,234,505 shares of Class A Common Stock, respectively. &nbsp;In the nine months ended September 30, 2011, we issued shares of Class A Common Stock in the following transactions:</p> <p style="font-family: Symbol; FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: -13pt; MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; text-align: justify; TEXT-INDENT: -18pt"> &middot;</p> <p style="font-family: Times New Roman; FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; text-align: justify"> 5,898,483 shares of Class A Common Stock upon conversion of promissory notes with a principal balance of $492,600.</p> <p style="font-family: Symbol; FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: -13pt; MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; text-align: justify; TEXT-INDENT: -18pt"> &middot;</p> <p style="font-family: Times New Roman; FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; text-align: justify"> 27,593,829 shares of Class A Common Stock were issued to various vendors for consulting services valued at $3,809,000.</p> <p style="font-family: Symbol; FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: -13pt; MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; text-align: justify; TEXT-INDENT: -18pt"> &middot;</p> <p style="font-family: Times New Roman; FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; text-align: justify"> 7,357,148 shares of Class A Common Stock valued at $992,608 were issued in payment of accrued compensation.</p> <p style="font-family: Symbol; FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: -13pt; MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; text-align: justify; TEXT-INDENT: -18pt"> &middot;</p> <p style="font-family: Times New Roman; FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; text-align: justify"> 245,045 shares of Class A Common Stock were issued to a vendor for the purchase of equipment valued at $24,825.</p> <p style="font-family: Symbol; FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: -13pt; MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; text-align: justify; TEXT-INDENT: -18pt"> &middot;</p> <p style="font-family: Times New Roman; FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; text-align: justify"> 14,000,000 shares of Class A Common Stock valued at $1,553,300 were issued to a vendor for various exploration and construction projects at our mill site and mine sites.</p> <p style="font-family: Symbol; FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: -13pt; MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; text-align: justify; TEXT-INDENT: -18pt"> &middot;</p> <p style="font-family: Times New Roman; FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; text-align: justify"> 144,000 shares of Class A Common Stock were issued to note holders for interest of $13,824.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> As of September 30, 2011, the Company had outstanding notes payable to various investors in the original principal amount of $4,187,076. &nbsp;All of the notes are convertible into shares of Class A Common Stock at election of the holder at conversion prices ranging from $0.015 to $0.276 per share. &nbsp;Maturity dates range from July 23, 2011 to September 21, 2013. &nbsp;At September 30, 2010, an aggregate of 49,213,228 shares of Class A Common Stock were issuable upon conversion of the notes.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> Shares issued for services are valued at the market price on the date of the invoice for the services. &nbsp;Shares issues for prepaid services are valued at the market price on the date of the contract for the services. &nbsp;Shares issued for services which specify that a specific number of shares be issued are valued at the market price on the date of the contract. &nbsp;The conversion prices on all convertible notes were set at the market price on the date on the issuance of the convertible note.</p> <!--EndFragment--></div> </div> 5898483 41589829 144000 245045 7357148 355085 590 492010 492600 3360165 4159 4916076 4920235 14 13808 13822 24801 24826 24826 25 736 991873 992609 992609 <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <div> <div><!--StartFragment--> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> <strong>NOTE 10 - SUBSEQUENT EVENTS (UNAUDITED)</strong></p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> During October 2011, we issued 3,145,308 shares of Class A Common Stock to various vendors for consulting services valued at $188,718.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> Since September 30, 2011, we borrowed $39,000 from various investors pursuant to promissory notes that accrue interest at a rate of 7% annually. &nbsp;The notes provide that interest is payable annually, and all principal and interest on the notes is due two years after issuance of the notes. Principal and interest due on the notes is convertible at the election of the holder into shares of our Class A Common Stock at the price of the shares on the date of issuance of the note.</p> <!--EndFragment--></div> </div> <!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" --> <div> <div><!--StartFragment--> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> <strong>NOTE 5 - PREPAID EXPENSES</strong></p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> On October 1, 2008, we entered into a Commercial Lease Agreement, under which we leased office space in New York, New York. &nbsp;Under the Commercial Lease Agreement, we issued the lessor 1,250,000 shares of our Class A Common Stock at the inception of the lease in full payment of lease payments under the lease totaling $110,160. &nbsp;We capitalized the lease payment as a prepaid expense, and are amortizing the amount on a monthly basis over the life of the lease. &nbsp;&nbsp;</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> We also lease office space at 641-2 Chrislea Road, Woodbridge, Ontario Canada, under a lease that runs from January 1, 2009 to December 31, 2011 at a rate of $400 per month. &nbsp;We assumed the lease in March 2010. &nbsp;Under the lease, we issued the lessor 480,000 shares of our common stock valued at $9,600 at the time we assumed the lease as payment of rent for the last two years of the lease term.</p> <p style="FONT-FAMILY: Times New Roman; FONT-SIZE: 11pt; LINE-HEIGHT: 13pt; MARGIN-BOTTOM: 11pt; MARGIN-TOP: 0pt; text-align: justify"> In 2008, we issued 5,750,000 shares of Class A Common Stock for consulting contracts with terms of 24 to 36 months. &nbsp;The shares were valued at $404,840. &nbsp;In 2009, we issued 10,000,000 shares of Class A Common Stock for consulting contracts with terms of 12 to 48 months totaling $454,500. &nbsp;We capitalized these consulting fee payments as a prepaid expense, and amortize the amounts over the lives the consulting agreements.</p> <!--EndFragment--></div> </div> xbrli:shares ISO4217:USD ISO4217:USD shares 0001464830 us-gaap:EquityComponentDomain 2011-09-30 0001464830 2011-07-01 2011-09-30 0001464830 us-gaap:RetainedEarningsMember 2011-01-01 2011-09-30 0001464830 us-gaap:AdditionalPaidInCapitalMember 2011-01-01 2011-09-30 0001464830 us-gaap:CommonClassAMember 2011-01-01 2011-09-30 0001464830 2011-01-01 2011-09-30 0001464830 2010-07-01 2010-09-30 0001464830 2010-01-01 2010-09-30 0001464830 2007-10-15 2011-09-30 0001464830 us-gaap:CommonClassBMember 2011-10-25 0001464830 us-gaap:CommonClassAMember 2011-10-25 0001464830 us-gaap:CommonClassBMember 2011-09-30 0001464830 us-gaap:CommonClassBMember 2011-09-30 0001464830 us-gaap:RetainedEarningsMember 2011-09-30 0001464830 us-gaap:AdditionalPaidInCapitalMember 2011-09-30 0001464830 us-gaap:CommonClassAMember 2011-09-30 0001464830 us-gaap:CommonClassAMember 2011-09-30 0001464830 2011-09-30 0001464830 us-gaap:CommonClassBMember 2010-12-31 0001464830 us-gaap:CommonClassBMember 2010-12-31 0001464830 us-gaap:RetainedEarningsMember 2010-12-31 0001464830 us-gaap:AdditionalPaidInCapitalMember 2010-12-31 0001464830 us-gaap:CommonClassAMember 2010-12-31 0001464830 us-gaap:CommonClassAMember 2010-12-31 0001464830 2010-12-31 0001464830 2010-09-30 0001464830 2009-12-31 EX-101.SCH 7 sfmi-20110930.xsd EXTENSION SCHEMA 108 - 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current portion (see Note 3) Other Assets Other assets Prepaid Expense Prepaid expenses (see Notes 5 and 8) Property, Plant and Equipment, Net Mill equipment, net of accumulated depreciation of $641,593 and $392,299, respectively (see Note 4) Retained Earnings (Accumulated Deficit) Accumulated deficit Class of Stock [Axis] Statement [Line Items] CONSOLIDATED BALANCE SHEET [Abstract] Statement [Table] Stockholders' Equity Attributable to Parent Total stockholders' deficit Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment Mill equipment, accumulated depreciation Common Stock, Par or Stated Value Per Share Common stock, par value per share Common Stock, Shares Authorized Common stock, shares authorized Common Stock, Shares, Issued Common stock, shares issued Common Stock, Shares, Outstanding Common stock, shares outstanding Cost of Revenue Cost of sales Depreciation expense Earnings Per Share, Basic and Diluted Net loss per common share - basic and diluted Exploration Expense, Mining Exploration and development General and Administrative Expense General and administrative Gross Profit Gross profit CONSOLIDATED STATEMENTS OF OPERATIONS [Abstract] Interest Expense Interest expense Labor and Related Expense Compensation expense Operating Leases, Rent Expense Property lease fees Mill Operating Expense Mining Mill operating expenses Mill operating expense for mining operations. 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Going Concern Note [Text Block] GOING CONCERN If there is a substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time (generally a year from the balance sheet date), disclose: (a) pertinent conditions and events giving rise to the assessment of substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time, (b) the possible effects of such conditions and events, (c) management's evaluation of the significance of those conditions and events and any mitigating factors, (d) possible discontinuance of operations, (e) management's plans (including relevant prospective financial information), and (f) information about the recoverability or classification of recorded asset amounts or the amounts or classification of liabilities. PREPAID EXPENSES, Deferred Costs[Abstract] SUBSEQUENT EVENTS (UNAUDITED) [Abstract] Subsequent Events [Text Block] SUBSEQUENT EVENTS (UNAUDITED) Amendment Flag Current Fiscal Year End Date Document and Entity Information [Abstract] Document and Entity Information [Abstract]. Document Fiscal Period Focus Document Fiscal Year Focus Document Period End Date Document Type Entity Central Index Key Entity Common Stock, Shares Outstanding Entity Filer Category Entity Listings, Instrument [Axis] Entity Listings [Table] Entity Registrant Name Instrument [Domain] EX-101.PRE 11 sfmi-20110930_pre.xml TAXONOMY PRESENTATION XML 12 R3.htm IDEA: XBRL DOCUMENT v2.3.0.15
CONSOLIDATED BALANCE SHEET (Parenthetical) (USD $)
Sep. 30, 2011
Dec. 31, 2010
Mill equipment, accumulated depreciation$ 641,593$ 392,299
Class A Common Stock [Member]
  
Common stock, par value per share$ 0.0001$ 0.0001
Common stock, shares authorized10,000,000,00010,000,000,000
Common stock, shares issued341,821,509286,587,004
Common stock, shares outstanding341,821,509286,587,004
Class B Common Stock [Member]
  
Common stock, par value per share$ 0.0001$ 0.0001
Common stock, shares authorized12,500,00012,500,000
Common stock, shares issued3,884,3213,884,321
Common stock, shares outstanding3,884,3213,884,321
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CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
3 Months Ended9 Months Ended48 Months Ended
Sep. 30, 2011
Sep. 30, 2010
Sep. 30, 2011
Sep. 30, 2010
Sep. 30, 2011
CONSOLIDATED STATEMENTS OF OPERATIONS [Abstract]     
Revenue    $ 8,234
Cost of sales    5,274
Gross profit    2,960
Expenses     
Consulting fees731,371599,2643,827,9854,491,57013,098,488
Exploration and development407,999232,9881,079,912251,5892,177,384
Mill operating expenses554,523266,3311,409,229349,3402,245,738
Property lease fees 250,000 250,000250,000
Compensation expense282,685225,6551,055,151477,3783,852,582
Depreciation expense71,36758,486249,294154,018641,593
General and administrative113,36451,293634,065147,6893,141,237
Total expenses2,161,3091,684,0178,255,6366,121,58425,407,022
Loss from operations(2,161,309)(1,684,017)(8,255,636)(6,121,584)(25,404,062)
Interest expense(75,782)(61,377)(180,431)(135,976)(582,684)
Net Loss$ (2,237,091)$ (1,745,394)$ (8,436,067)$ (6,257,560)$ (25,986,746)
Net loss per common share - basic and diluted$ (0.01)$ (0.01)$ (0.03)$ (0.03)$ (0.15)
Weighted average number of common shares outstanding - basic and diluted333,438,236239,786,420316,543,677215,016,164171,449,435
XML 14 R1.htm IDEA: XBRL DOCUMENT v2.3.0.15
Document and Entity Information
9 Months Ended
Sep. 30, 2011
Oct. 25, 2011
Class A Common Stock [Member]
Oct. 25, 2011
Class B Common Stock [Member]
Document Type10-Q  
Amendment Flagfalse  
Document Period End DateSep. 30, 2011
Entity Registrant NameSilver Falcon Mining, Inc.  
Entity Central Index Key0001464830  
Current Fiscal Year End Date--12-31  
Document Fiscal Year Focus2011  
Document Fiscal Period FocusQ3  
Entity Filer CategorySmaller Reporting Company  
Entity Common Stock, Shares Outstanding 344,966,8173,884,321
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XML 17 R12.htm IDEA: XBRL DOCUMENT v2.3.0.15
RELATED PARTY TRANSACTIONS
9 Months Ended
Sep. 30, 2011
RELATED PARTY TRANSACTIONS [Abstract] 
RELATED PARTY TRANSACTIONS

NOTE 6 - RELATED PARTY TRANSACTIONS

On October 11, 2007, GoldLand leased its mineral rights on War Eagle Mountain to us.  Under the lease, we are responsible for all mining activities on War Eagle Mountain, and we are obligated to pay GoldLand annual lease payments of $1,000,000, payable on a monthly basis, a monthly non-accountable expense reimbursement of $10,000 during any month in which ore is mined from the leased premises, and a royalty of 15% of all amounts we receive from the processing of ore mined from the properties. We agreed with GoldLand to extend the date lease payments must commence to July 1, 2010, and extended the lease term by an equal amount of time.

On the first quarter of 2011, we amended the above-described lease with GoldLand.  The amendment provided that the annual lease payments would be deferred for a fifteen month period from October 2010 to December 2011, and the term of the Lease would be extended for an equal amount of time.  We remain obligated to pay any royalties or the nonaccountable fee that accrues during the deferral period.

As of December 31, 2010 and June 30, 2011, we (including our subsidiaries) owed Goldland $6,000 and $36,450 respectively. At September 30, 2011, Pierre Quilliam and a company owned by him owed us a net amount of $35,238 due to timing differences in invoicing during the quarter.  The amounts are non-interest bearing, unsecured demand loans. This balance has since been settled with the receipt of current invoices.

Pierre Quilliam, Denise Quilliam, Christian Quilliam, Allan Breitkreuz and Roger Scammell are all officers and directors of GoldLand and us. Thomas C. Ridenour, who is an officer of us, is also an officer of GoldLand.

During the three and nine months ended September 30, 2011 we issued 61,253 and 165,177 shares of Class A Common Stock to Pascale Tutt for mineral claims administration valued at $5,000 and $19,000, respectively.  Ms. Tutt is the daughter of Mr. and Ms. Quilliam.

During the three and nine months ended September 30, 2011, we issued Pierre Quilliam 876,251 and 4,163,321 shares of Class A Common Stock valued at $63,966 and $585,035, respectively, in satisfaction of past and current payroll.  Mr. Quilliam is our chief executive officer. The shares were valued at the market price on the date of issuance.

During the nine months ended September 30, 2011, we issued Denise Quilliam 849,086 shares of Class A Common Stock valued and $134,006 in satisfaction of past and current payroll.  Ms. Quilliam is our secretary. The shares were valued at the market price on the date of issuance.

During the three and nine months ended September 30, 2011, we issued Christian Quilliam 341,738 and 1,311,195 shares of Class A Common Stock valued at $24,947 and $178,164, respectively, in satisfaction of past and current payroll.  Mr. Quilliam is our chief operating officer. The shares were valued at the market price on the date of issuance.

During the three and nine months ended September 30, 2011, we issued Alan Breitkreuz 61,586 shares of Class A Common Stock valued at $8,006 in satisfaction of current payroll.  Mr. Breitkreuz is our vice president. The shares were valued at the market price on the date of issuance.

During the three and nine months ended September 30, 2011, we issued Thomas Ridenour 683,476 and 809,890 shares of Class A Common Stock valued at $49,894 and $66,328, respectively, in satisfaction of current payroll.  Mr. Ridenour is our chief financial officer. The shares were valued at the market price on the date of issuance.

XML 18 R8.htm IDEA: XBRL DOCUMENT v2.3.0.15
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
9 Months Ended
Sep. 30, 2011
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

Sales of all metals products sold directly to refiners or smelters, including by-product metals, are recorded as revenues when title and risk of loss transfer to the refiner or smelter (generally at the time of shipment) at estimated forward prices for the estimated month of settlement.  Due to the time elapsed from shipment to the refiner or smelter and the final settlement with the refiner or smelter, we must estimate the prices at which sales of our metals will be settled. Previously recorded sales are adjusted to estimated settlement metals prices until final settlement by the refiner or smelter.  Revenue is recognized, net of treatment and refining charges, from a sale when persuasive evidence of an arrangement exists, the price is determinable, the product has been delivered, the title has been transferred to the customer and collection of the sales price is reasonably assured. Concentrate sales or bullion dore bar sales are initially recorded based on 100% of the provisional sales prices. Until final settlement occurs, adjustments to the provisional sales prices are made to take into account the mark-to-market changes based on the forward prices for the estimated month of settlement. For changes in metal quantities upon receipt of new information and assay, the provisional sales quantities are adjusted as well. The principal risks associated with recognition of sales on a provisional basis include metal price fluctuations between the date initially recorded and the date of final settlement. If a significant decline in metal prices occurs between the provisional pricing date and the final settlement-date, it is reasonably possible that we could be required to return a portion of the sales proceeds received based on the provisional invoice.

Our sales based on a provisional sales price contain an embedded derivative that is required to be separated from the host contract for accounting purposes. The host contract is the receivable from the sale of the concentrates at the forward London Metal Exchange price at the time of sale. The embedded derivative, which does not qualify for hedge accounting, is marked to market through earnings each period prior to final settlement.

Cash and Cash Equivalents

Cash and cash equivalents consist of all cash balances and highly liquid investments with an original maturity of three months or less. Because of the short maturity of these investments, the carrying amounts approximate their fair value.

Investments

Management determines the appropriate classification of our investments in equity securities at the time of purchase and reevaluates such determinations at each reporting date. Investments in incorporated entities in which our ownership is greater than 20% and less than 50%, or which we do not control through majority ownership or means other than voting rights, are accounted for by the equity method and are included in long-term assets.  We account for our equity security investments as available for sale securities in accordance with Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards ("FAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities." We periodically evaluate whether declines in fair values of our investments below our carrying value are other-than-temporary in accordance with FSP FAS 115 No. 115-1 and FAS 124-1, "The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments." Our policy is to generally treat a decline in the investment's quoted market value that has lasted continuously for more than six months as an other-than-temporary decline in value.  We also monitor our investments for events or changes in circumstances that have occurred that may have a significant adverse effect on the fair value of the investment and evaluates qualitative and quantitative factors regarding the severity and duration of the unrealized loss and our ability to hold the investment until a forecasted recovery occurs to determine if the decline in value of an investment is other-than-temporary. Declines in fair value below our carrying value deemed to be other-than-temporary are charged to earnings.

We account for our investments in auction rate securities in accordance with FAS No. 115. Specifically, when the underlying security of an auction rate security has a stated or contractual maturity date in excess of 90 days, regardless of the frequency of the interest rate reset date, the security is classified as an available-for-sale marketable debt security.

Inventories

Until we begin full operations, which is when we begin shipping bullion dore bars to a refiner, our inventories are stated at the lower of average costs incurred or estimated net realizable value. Major types of inventories include materials and supplies and metals product inventory, which is determined by the stage at which the ore is in the production process (stockpiled ore, work in process and finished goods).

Materials and supplies inventory will be valued at the lower of average cost or net realizable value.

Stockpiled ore inventory represents ore that has been mined, hauled to the surface, and is available for further processing. Stockpiles will be measured by estimating the number of tons added and removed from the stockpile, the number of contained metal ounces or pounds (based on assay data) and the estimated metallurgical recovery rates (based on the expected processing method). Stockpile ore tonnages will be verified by periodic surveys. Costs will be allocated to a stockpile based on relative values of material stockpiled and processed using current mining costs incurred up to the point of stockpiling the ore, including applicable overhead, depreciation, depletion and amortization relating to mining operations, and removed at each stockpile's average cost per recoverable unit.

Work in process inventory represents materials that will be currently in the process of being converted to a saleable product and includes inventories in our milling process. In-process material is measured based on assays of the material fed into the process and the projected recoveries of the respective plants. In-process inventories will be valued at the average cost of the material fed into the process attributable to the source material coming from the mines and stockpiles, plus the in-process conversion costs, including applicable depreciation relating to the process facilities incurred to that point in the process.

Finished goods inventory includes bullion doré and concentrates at our operations, bullion doré in transit to refiners and bullion dore in our accounts at refineries. Inventories will be valued at the lower of full cost of production or net realizable value based on current metals prices.

At the present time, our inventories consist of the historical cost of transporting raw ore from our mine site to our milling site for further processing.  Until we begin receiving regular revenues from our milling and smelting operations, all milling and smelting costs are expensed as incurred.

Property, Plant and Equipment

Expenditures for new facilities or equipment and expenditures that extend the useful lives of existing facilities or equipment are capitalized and recorded at cost. The facilities and equipment are depreciated using the straight-line method at rates sufficient to depreciate such costs over the estimated productive lives.

Costs are capitalized when it has been determined an ore body can be economically developed as a result of establishing proven and probable reserves. The development stage begins at new projects when our management and/or Board of Directors makes the decision to bring a mine into commercial production, and ends when the production stage, or exploitation of reserves, begins.  Expenditures incurred during the development and production stages for new facilities, new assets or expenditures that extend the useful lives of existing facilities and major mine development expenditures are capitalized, including primary development costs such as costs of building access ways, shaft sinking, lateral development, drift development, ramps and infrastructure developments.

Costs for exploration, secondary development at operating mines, and maintenance and repairs on capitalized property, plant and equipment are charged to operations as incurred. Exploration costs include those relating to activities carried out (a) in search of previously unidentified mineral deposits, (b) at undeveloped concessions, or (c) at operating mines already containing proven and probable reserves, where a determination remains pending as to whether new target deposits outside of the existing reserve areas can be economically developed. Secondary development costs are incurred for preparation of an ore body for production in a specific ore block, stope or work area, providing a relatively short-lived benefit only to the mine area they relate to, and not to the ore body as a whole.

When assets are retired or sold, the costs and related allowances for depreciation and amortization are eliminated from the accounts and any resulting gain or loss is reflected in current period net income (loss). Idle facilities placed on standby basis are carried at the lower of net carrying value or estimated net realizable value.

Proven and Probable Ore Reserves 

At least annually, management reviews the reserves used to estimate the quantities and grades of ore at our mines which we believe can be recovered and sold economically.  Management's calculations of proven and probable ore reserves are based on engineering and geological estimates, including future metals prices and operating costs. From time to time, management obtains external audits of reserves.  To date, we have not obtained any third party report regarding potential reserves on our owned and leased property at War Eagle Mountain, and accordingly we have not estimated that there are any proven or probable reserves on our property.

Reserve estimates will change as existing reserves are depleted through production and as production costs and/or metals prices change. A significant drop in metals prices may reduce reserves by making some portion of such ore uneconomic to develop and produce. Changes in reserves may also reflect that actual grades of ore processed may be different from stated reserve grades because of variation in grades in areas mined, mining dilution and other factors. Estimated reserves, particularly for properties that have not yet commenced production, may require revision based on actual production experience. It is reasonably possible that certain of our estimates of proven and probable ore reserves will change in the near term, which could result in a change to estimated future cash flows, associated carrying values of the asset and amortization rates in future reporting periods, among other things.

Declines in the market prices of metals, increased production or capital costs, reduction in the grade or tonnage of the deposit or an increase in the dilution of the ore or reduced recovery rates may render ore reserves uneconomic to exploit unless the utilization of forward sales contracts or other hedging techniques are sufficient to offset such effects. If our realized price for the metals we produce were to decline substantially below the levels set for calculation of reserves for an extended period, there could be material delays in the development of new projects, net losses, reduced cash flow, restatements or reductions in reserves and asset write-downs in the applicable accounting periods. Reserves should not be interpreted as assurances of mine life or of the profitability of current or future operations. No assurance can be given that the estimate of the amount of metal or the indicated level of recovery of these metals will be realized.

To date, we have not obtained any third party report regarding potential reserves on our owned and leased property at War Eagle Mountain, and accordingly we have not estimated that there are any proven or probable reserves on our property.

Depreciation, Depletion and Amortization

Capitalized costs are depreciated or depleted using the straight-line method or unit-of-production method at rates sufficient to depreciate such costs over the shorter of estimated productive lives of such facilities or the useful life of the individual assets. Productive lives do not exceed the useful life of the individual asset. Determination of expected useful lives for amortization calculations are made on a property-by-property or asset-by-asset basis at least annually. Our estimates for mineral reserves are a key component in determining our units of production depreciation rates. Our estimates of proven and probable ore reserves may change, possibly in the near term, resulting in changes to depreciation, depletion and amortization rates in future reporting periods.

Undeveloped mineral interests are amortized on a straight-line basis over their estimated useful lives taking into account residual values. At such time as an undeveloped mineral interest is converted to proven and probable reserves, the remaining unamortized basis is amortized on a unit-of-production basis as described above.

Impairment of Long-Lived Assets

We review and evaluate our long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable.  An impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the assets, including goodwill, if any.  An impairment loss is measured and recorded based on discounted estimated future cash flows. Future cash flows are estimated based on quantities of recoverable minerals, expected gold and other commodity prices (considering current and historical prices, price trends and related factors), production levels and operating costs of production and capital, all based on life-of-mine plans. Existing proven and probable reserves and value beyond proven and probable reserves, including mineralization other than proven and probable reserves and other material that is not part of the measured, indicated or inferred resource base, are included when determining the fair value of mine site reporting units at acquisition and, subsequently, in determining whether the assets are impaired. The term "recoverable minerals" refers to the estimated amount of gold or other commodities that will be obtained after taking into account losses during ore processing and treatment. Estimates of recoverable minerals from such exploration stage mineral interests are risk adjusted based on management's relative confidence in such materials. In estimating future cash flows, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of future cash flows from other asset groups.  Our estimates of future cash flows are based on numerous assumptions and it is possible that actual future cash flows will be significantly different than the estimates, as actual future quantities of recoverable minerals, gold and other commodity prices, production levels and operating costs of production and capital are each subject to significant risks and uncertainties.

Reclamation and Remediation Costs (Asset Retirement Obligations)

At our operating properties, we accrue costs associated with environmental remediation obligations in accordance with Statement of Financial Accounting Standards (SFAS) No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 requires us to record a liability for the present value of our estimated environmental remediation costs, and the related asset created with it, in the period in which the liability is incurred. The liability will be accreted and the asset will be depreciated over the life of the related assets. Adjustments for changes resulting from the passage of time and changes to either the timing or amount of the original present value estimate underlying the obligation will be made.

At our non-operating properties, we accrue costs associated with environmental remediation obligations when it is probable that such costs will be incurred and they are reasonably estimable. Estimates for reclamation and other closure costs are prepared in accordance with SFAS No. 5 "Accounting for Contingencies," or Statement of Position 96-1 "Environmental Remediation Liabilities." Costs of future expenditures for environmental remediation are not discounted to their present value unless subject to a contractually obligated fixed payment schedule. Such costs are based on management's current estimate of amounts to be incurred when the remediation work is performed, within current laws and regulations.

Future closure, reclamation and environmental-related expenditures are difficult to estimate, in many circumstances, due to the early stage nature of investigations, and uncertainties associated with defining the nature and extent of environmental contamination and the application of laws and regulations by regulatory authorities and changes in reclamation or remediation technology. We periodically review accrued liabilities for such reclamation and remediation costs as evidence becomes available indicating that our liabilities have potentially changed. Changes in estimates at our non-operating properties are reflected in current period net income (loss).  Accruals for closure costs, reclamation and environmental matters for operating and nonoperating properties totaled $0 million at December 31, 2010.

Goodwill

We evaluate, on at least an annual basis during the fourth quarter, the carrying amount of goodwill to determine whether current events and circumstances indicate that such carrying amount may no longer be recoverable. To accomplish this, we compare the estimated fair value of our reporting units to their carrying amounts. If the carrying value of a reporting unit exceeds its estimated fair value, we compare the implied fair value of the reporting unit's goodwill to its carrying amount, and any excess of the carrying value over the fair value is charged to earnings. Our fair value estimates are based on numerous assumptions and it is possible that actual fair value will be significantly different than the estimates, as actual future quantities of recoverable minerals, gold and other commodity prices, production levels and operating costs of production and capital are each subject to significant risks and uncertainties.

Stock Based Compensation

We have issued and may issue stock in lieu of cash for certain transactions. The fair value of the stock, which is based on comparable cash purchases, third party quotations, or the value of services, whichever is more readily determinable, is used to value the transaction

Use of Estimates

Our Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our Consolidated Financial Statements requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ significantly from these estimates under different assumptions or conditions.

Basic and Diluted Per Common Share

Under Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share," basic  earnings  per common  share is computed by dividing income available to common stockholders by the weighted average number of common shares assumed to be outstanding during the period of computation. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Because we have incurred net losses, basic and diluted loss per share are the same since additional potential common shares would be anti-dilutive.

Significant Recent Accounting Pronouncements

In June 2009 the FASB established the Accounting Standards Codification ("Codification" or "ASC") as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with generally accepted accounting principles in the United States ("GAAP").  Rules and interpretive releases of the Securities and Exchange Commission ("SEC") issued under authority of federal securities laws are also sources of GAAP for SEC registrants.  Existing GAAP was not intended to be changed as a result of the Codification, and accordingly the change did not impact our financial statements.  The ASC does change the way the guidance is organized and presented.

Accounting Standards Update ("ASU") ASU No. 2009-05 (ASC Topic 820), which amends Fair Value Measurements and Disclosures - Overall, ASU No. 2009-13 (ASC Topic 605), Multiple-Deliverable Revenue Arrangements, ASU No. 2009-14 (ASC Topic 985), Certain Revenue Arrangements that include Software Elements, and various other ASU's No. 2009-2 through ASU No. 2010-18 which contain technical corrections to existing guidance or affect guidance to specialized industries or entities were recently issued.  These updates have no current applicability to the Company or their effect on the financial statements would not have been significant.

In February 2010, the FASB issued Accounting Standards Update ("ASU") 2010-09, which, among other things, amends Subtopic 855-10 with respect to the date through which evaluation of subsequent events must occur and under which circumstances such date must be disclosed.  The update amends subtopic 855-10 so that an SEC filer is not required to disclose the date through which subsequent events have been evaluated. This change alleviates potential conflicts between Subtopic 855-10 and the SEC's requirements. All of the amendments in this update are effective upon issuance, with limited exceptions.  Adoption of this guidance did not have a material impact on our financial statements.

During February 2010, the FASB also issued ASU 2010-08, which corrects existing guidance for various topics. The update is generally effective for the first reporting period (including interim periods) beginning after issuance.  We believe these corrections will have minimal, if any, impact on our financial statements.

In January 2010, the FASB issued ASU 2010-06, which amends Subtopic 820-10 to require new disclosures regarding the amounts of and reasons for significant transfers in and out of Levels 1 and 2 fair value measurement categories, and separate information about purchases, sales, issuances, and settlements in Level 3 fair value measurements.  ASU 2010-06 also clarifies existing fair value measurement disclosures to provide for fair value measurement disclosures for each class of assets and liabilities, even within a line item in the statement of financial position, and to provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements that fall in either the Level 2 or Level 3 categories.

ASU 2010-06 also includes conforming amendments to the guidance on employers' disclosures about post-retirement benefit plan assets (Subtopic 715-20), changes the terminology in Subtopic 715-20 from major categories of assets to classes of assets, and provides a cross reference to the guidance in Subtopic 820-10 on how to determine appropriate classes to present fair value disclosures.

The new disclosures and clarifications of existing disclosures in ASU 2010-06 are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements.  Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.  Adoption of this guidance has not had a material impact on our financial statements and is not expected to have a material impact on our financial statements in the future.

XML 19 R14.htm IDEA: XBRL DOCUMENT v2.3.0.15
CAPITAL STOCK
9 Months Ended
Sep. 30, 2011
CAPITAL STOCK [Abstract] 
CAPITAL STOCK

NOTE 8 - CAPITAL STOCK

At September 30, 2011, our authorized capital stock was 10,000,000,000 shares of Class A Common Stock, par value $0.0001 per share, and 12,500,000 shares of Class B Common Stock, par value $0.0001 per share.  Class A Common Stock and Class B Common Stock have equal rights to dividends and distributions.  However, each outstanding share of Class A Common Stock is entitled to one vote on all matters that may be voted upon by the owners thereof at meetings of the stockholders, while each outstanding share of Class B Common Stock is entitled to forty votes on all matters that may be voted upon by the owners thereof at meetings of the stockholders.  As of September 30, 2011, there were 341,821,509 and 3,884,321 shares of Class A Common Stock and Class B Common Stock issued and outstanding, respectively.

During the three and nine months ended September 30, 2011, we issued 20,329,003 and 55,234,505 shares of Class A Common Stock, respectively.  In the nine months ended September 30, 2011, we issued shares of Class A Common Stock in the following transactions:

·

5,898,483 shares of Class A Common Stock upon conversion of promissory notes with a principal balance of $492,600.

·

27,593,829 shares of Class A Common Stock were issued to various vendors for consulting services valued at $3,809,000.

·

7,357,148 shares of Class A Common Stock valued at $992,608 were issued in payment of accrued compensation.

·

245,045 shares of Class A Common Stock were issued to a vendor for the purchase of equipment valued at $24,825.

·

14,000,000 shares of Class A Common Stock valued at $1,553,300 were issued to a vendor for various exploration and construction projects at our mill site and mine sites.

·

144,000 shares of Class A Common Stock were issued to note holders for interest of $13,824.

As of September 30, 2011, the Company had outstanding notes payable to various investors in the original principal amount of $4,187,076.  All of the notes are convertible into shares of Class A Common Stock at election of the holder at conversion prices ranging from $0.015 to $0.276 per share.  Maturity dates range from July 23, 2011 to September 21, 2013.  At September 30, 2010, an aggregate of 49,213,228 shares of Class A Common Stock were issuable upon conversion of the notes.

Shares issued for services are valued at the market price on the date of the invoice for the services.  Shares issues for prepaid services are valued at the market price on the date of the contract for the services.  Shares issued for services which specify that a specific number of shares be issued are valued at the market price on the date of the contract.  The conversion prices on all convertible notes were set at the market price on the date on the issuance of the convertible note.

XML 20 R15.htm IDEA: XBRL DOCUMENT v2.3.0.15
GOING CONCERN
9 Months Ended
Sep. 30, 2011
GOING CONCERN [Abstract] 
GOING CONCERN

NOTE 9 - GOING CONCERN

These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.  However, we incurred a net loss of ($8,436,067) for the nine months ended September 30, 2011.  We have remained in business primarily through the deferral of salaries by management, the issuance of stock to compensate employees and consultants, and raising funds from the sale of two year convertible notes. We intend on financing our future development activities from the same sources, until such time that funds provided by operations are sufficient to fund working capital requirements.

These factors, among others, raise substantial doubt about our ability to continue as a going concern for a reasonable period of time.

XML 21 R13.htm IDEA: XBRL DOCUMENT v2.3.0.15
COMMITMENTS AND CONTINGENCIES
9 Months Ended
Sep. 30, 2011
COMMITMENTS AND CONTINGENCIES [Abstract] 
COMMITMENTS AND CONTINGENCIES

NOTE 7 - COMMITMENTS AND CONTINGENCIES

We are obligated under employment agreements with our officers to make total salary payments of $772,000 per year.

On October 11, 2007, we entered into a lease agreement with GoldLand, under which we leased its mineral rights on War Eagle Mountain.  Under the lease, we are responsible for all mining activities on War Eagle Mountain, and we are obligated to pay GoldLand annual lease payments of $1,000,000, payable on a monthly basis, a monthly non-accountable expense reimbursement of $10,000 during any month in which ore is mined from the leased premises, and a royalty of 15% of all amounts we receive from the processing of ore mined from the properties.  The lease provides that lease payments must commence April 1, 2008.  By agreement with GoldLand, we extended the commencement date to July 1, 2010, in which event the lease term was extended by an equal amount of time. On the first quarter of 2011, we amended the above-described lease with GoldLand.  The amendment provided that the annual lease payments would be deferred for a fifteen month period from October 2010 to December 2011, and the term of the Lease would be extended for an equal amount of time.  We remain obligated to pay any royalties or the nonaccountable fee that accrues during the deferral period.

XML 22 R6.htm IDEA: XBRL DOCUMENT v2.3.0.15
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (USD $)
Total
Class A Common Stock [Member]
Class B Common Stock [Member]
ADDITIONAL PAID-IN CAPITAL [Member]
ACCUMULATED DEFICIT [Member]
Balance, values at Dec. 31, 2010$ 642,608$ 28,658$ 389$ 18,164,240$ (17,550,679)
Balance, shares at Dec. 31, 2010 286,587,0043,884,321  
Issuance of Class A common stock for services, values4,920,2354,159 4,916,076 
Issuance of Class A common stock for services, shares 41,589,829   
Issuance of Class A common stock for equipment, values24,82625 24,801 
Issuance of Class A common stock for equipment, shares 245,045   
Issuance of Class A common stock for note payable conversion, values492,600590 492,010 
Issuance of Class A common stock for note payable conversion, shares 5,898,483   
Issuance of Class A common for accrued compensation, values992,609736 991,873 
Issuance of Class A common for accrued compensation, shares 7,357,148   
Issuance of Class A common stock for interest, values13,82214 13,808 
Issuance of Class A common stock for interest, shares 144,000   
Net loss(8,436,067)   (8,436,067)
Balance, values at Sep. 30, 2011$ (1,349,367)$ 34,182$ 389$ 24,602,808$ (25,986,746)
Balance, shares at Sep. 30, 2011 341,821,5093,884,321  
XML 23 R9.htm IDEA: XBRL DOCUMENT v2.3.0.15
NOTES PAYABLE
9 Months Ended
Sep. 30, 2011
NOTES PAYABLE [Abstract] 
NOTES PAYABLE

NOTE 3 - NOTES PAYABLE

As of September 30, 2011, we had outstanding $4,187,076 of two-year promissory notes that we have issued to various investors starting in 2009.  Interest accrues on the notes at the rate of 7% per year, and is payable monthly, except for notes issued to New Vision Financial, Ltd., which provide that interest is payable annually.  Principal and interest due on the notes is convertible into shares of Class A Common Stock at the election of the holder at conversion prices ranging from $0.015 to $0.276 per share.  The conversion price of the notes is set at the market price of the Class A Common Stock on the date of issuance.  The notes mature at various dates ranging from July 23, 2011 to September 21, 2013.  During the three and nine months ended September 30, 2011, we issued $922,000 and $2,442,709 of new notes, respectively.

During the three and nine months ended September 30, 2011, we issued 2,362,977 and 5,898,483 shares of our common stock, respectively, upon conversion of notes payable with an aggregate principal amount of $300,000 and $492,600, respectively.

The maturities of two-year notes payable are as follows:

     

2011

 

   $         165,000

2012

 

1,669,367

2013

 

         2,352,709

  Total

 

4,187,076

     

Less current maturities

 

        (1,085,667)

  Long term debt

 

  $      3,101,409


On December 3, 2009, we executed a promissory note for $225,000 as partial consideration for the purchase of land in Idaho. The promissory note is payable without interest in ten annual installments of $22,500 each, with the first installment being due on January 1, 2010.  The balance due on the note at September 30, 2011 was $180,000.

XML 24 R10.htm IDEA: XBRL DOCUMENT v2.3.0.15
MILL EQUIPMENT
9 Months Ended
Sep. 30, 2011
MILL EQUIPMENT [Abstract] 
MILL EQUIPMENT

NOTE 4 - MILL EQUIPMENT

The following table summarizes the Company's equipment as of September 30, 2011.

     

Equipment

 

$       1,981,840

Vehicles

 

37,445

Accumulated depreciation

 

(641,593)

       Net

 

$       1,377,692


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PREPAID EXPENSES
9 Months Ended
Sep. 30, 2011
PREPAID EXPENSES [Abstract] 
PREPAID EXPENSES

NOTE 5 - PREPAID EXPENSES

On October 1, 2008, we entered into a Commercial Lease Agreement, under which we leased office space in New York, New York.  Under the Commercial Lease Agreement, we issued the lessor 1,250,000 shares of our Class A Common Stock at the inception of the lease in full payment of lease payments under the lease totaling $110,160.  We capitalized the lease payment as a prepaid expense, and are amortizing the amount on a monthly basis over the life of the lease.   

We also lease office space at 641-2 Chrislea Road, Woodbridge, Ontario Canada, under a lease that runs from January 1, 2009 to December 31, 2011 at a rate of $400 per month.  We assumed the lease in March 2010.  Under the lease, we issued the lessor 480,000 shares of our common stock valued at $9,600 at the time we assumed the lease as payment of rent for the last two years of the lease term.

In 2008, we issued 5,750,000 shares of Class A Common Stock for consulting contracts with terms of 24 to 36 months.  The shares were valued at $404,840.  In 2009, we issued 10,000,000 shares of Class A Common Stock for consulting contracts with terms of 12 to 48 months totaling $454,500.  We capitalized these consulting fee payments as a prepaid expense, and amortize the amounts over the lives the consulting agreements.

XML 27 R5.htm IDEA: XBRL DOCUMENT v2.3.0.15
CONSOLIDATED STATEMENT OF CASH FLOWS (USD $)
9 Months Ended48 Months Ended
Sep. 30, 2011
Sep. 30, 2010
Sep. 30, 2011
Cash flows from operating activities   
Net Loss$ (8,436,067)$ (6,257,560)$ (25,986,746)
Adjustments to reconcile net loss to net cash used in operating activities:   
Issuance of common stock for services4,920,2355,164,35117,036,063
Issuance of common stock for road access  13,050
Issuance of common stock for interest13,822 63,822
Issuance of common stock for rent 469,220862,130
Options granted  1,163,542
Depreciation249,294154,018641,593
Increase (decrease) in operating assets and liabilities:   
Inventories(167,904)(559,993)(520,815)
Prepaid expenses696,89286,587(18,133)
Due from related party(4,788)69,4991,212
Other assets(25,000) (26,000)
Accounts payable and accrued expenses(37,381)(94,522)583,221
Accrued interest72,623(14,367)104,854
Accrued payroll and payroll liabilities893,597323,2381,651,407
Net cash used in operating activities(1,824,677)(659,529)(4,430,800)
Cash flows from investing activities   
Purchase of equipment(356,776)(843,468)(1,994,459)
Purchase of mill and mining properties(287,550)(155,983)(1,305,852)
Cash acquired in acquisition  39,780
Net cash used in investing activities(644,326)(999,451)(3,260,531)
Cash flows from financing activities   
Proceeds from notes payable2,442,7101,825,5157,763,745
Proceeds from sale of common stock 75,00075,000
Purchase of common stock (63,000)(63,000)
Repayments of notes payable (42,500)(49,500)
Proceeds from Directors loans(323) 337,790
Repayments of Directors loans (102,631)(337,790)
Net cash provided by financing activities2,442,3871,692,3847,726,245
Net increase in cash(26,616)33,40434,914
Cash - beginning of year61,530602 
Cash - end of year34,91434,00634,914
SUPPLEMENTARY DISCLOSURE OF NONCASH TRANSACTIONS   
Shares issued for notes payable conversion492,600 3,360,165
Shares issued for accrued compensation992,609 992,609
Shares issued for acquisition  355,085
Shares issued for purchase mining properties  754,089
Shares issued for additions to mining properties 205,723205,723
Shares issued for equipment$ 24,826 $ 24,826
XML 28 R7.htm IDEA: XBRL DOCUMENT v2.3.0.15
ORGANIZATION AND DESCRIPTION OF BUSINESS
9 Months Ended
Sep. 30, 2011
ORGANIZATION AND DESCRIPTION OF BUSINESS [Abstract] 
ORGANIZATION AND DESCRIPTION OF BUSINESS

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

Silver Falcon Mining, Inc. (the "Company," "we" or "us") was formed in the State of Delaware on October 11th, 2007.  On October 15, 2007, we completed a holding company reorganization with Dicut, Inc. ("Dicut") pursuant to Section 251(g) of the Delaware General Corporation Law.  Dicut previously operated in the information technology business, but ceased operations in 2005.

On October 11, 2007, GoldLand leased its mineral rights on War Eagle Mountain to us.  Under the lease, we are responsible for all mining activities on War Eagle Mountain, and we are obligated to pay GoldLand annual lease payments of $1,000,000, payable on a monthly basis, a monthly non-accountable expense reimbursement of $10,000 during any month in which ore is mined from the leased premises, and a royalty of 15% of all amounts we receive from the processing of ore mined from the properties. The lease provides that lease payments must commence April 1, 2008, but by agreement with GoldLand we extended the commencement date to July 1, 2010. On the first quarter of 2011, we amended the above-described lease with GoldLand. The amendment provided that the annual lease payments would be deferred for a fifteen month period from October 2010 to December 2011, and the term of the Lease would be extended for an equal amount of time. We remain obligated to pay any royalties or the nonaccountable fee that accrues during the deferral period.  

Basis of Presentation

The foregoing unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Regulation S-X as promulgated by the Securities and Exchange Commission ("SEC"). Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles in the United States of America for complete financial statements. These unaudited interim financial statements should be read in conjunction with the audited financial statements and the notes thereto included on Form 10-K for the year ended December 31, 2010. In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented.

The preparation of financial statements in accordance with generally accepted accounting principles in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumption are inherent in the preparation of the Company's financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions that could have a material effect on the reported amounts of the Company's financial position and results of operations.

Operating results for the nine month period ended September 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.

XML 29 R16.htm IDEA: XBRL DOCUMENT v2.3.0.15
SUBSEQUENT EVENTS (UNAUDITED)
9 Months Ended
Sep. 30, 2011
SUBSEQUENT EVENTS (UNAUDITED) [Abstract] 
SUBSEQUENT EVENTS (UNAUDITED)

NOTE 10 - SUBSEQUENT EVENTS (UNAUDITED)

During October 2011, we issued 3,145,308 shares of Class A Common Stock to various vendors for consulting services valued at $188,718.

Since September 30, 2011, we borrowed $39,000 from various investors pursuant to promissory notes that accrue interest at a rate of 7% annually.  The notes provide that interest is payable annually, and all principal and interest on the notes is due two years after issuance of the notes. Principal and interest due on the notes is convertible at the election of the holder into shares of our Class A Common Stock at the price of the shares on the date of issuance of the note.

XML 30 R2.htm IDEA: XBRL DOCUMENT v2.3.0.15
CONSOLIDATED BALANCE SHEET (USD $)
Sep. 30, 2011
Dec. 31, 2010
ASSETS  
Cash$ 34,914$ 61,530
Inventories520,815352,911
Total current assets555,729414,441
Mill equipment, net of accumulated depreciation of $641,593 and $392,299, respectively (see Note 4)1,377,6921,245,384
Mining property2,059,9401,772,390
Prepaid expenses (see Notes 5 and 8)18,133715,025
Other assets31,0006,000
Total Assets4,042,4944,153,240
LIABILITIES AND STOCKHOLDERS' DEFICIT  
Accounts payable272,916310,297
Payroll liabilities25,27730,177
Accrued interest91,84419,221
Due to related party1,2126,000
Notes payable - current portion (see Note 3)1,108,167237,500
Director's Loan 323
Accrued compensation633,521727,633
Total current liabilities2,132,9371,331,151
Notes payable (see Note 3)3,258,9242,179,481
Total liabilities5,391,8613,510,632
STOCKHOLDERS' DEFICIT  
Common stock34,57129,047
Additional paid in capital24,602,80818,164,240
Accumulated deficit(25,986,746)(17,550,679)
Total stockholders' deficit(1,349,367)642,608
Total liabilities and stockholders' deficit4,042,4944,153,240
Class A Common Stock [Member]
  
STOCKHOLDERS' DEFICIT  
Common stock34,18228,658
Class B Common Stock [Member]
  
STOCKHOLDERS' DEFICIT  
Common stock$ 389$ 389
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