UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
Amendment No. 1
[X] | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the fiscal year ended August 31, 2012 |
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[ ] | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT |
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| For the transition period from _________ to ________ |
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| Commission file number: 000-54577 |
LAREDO RESOURCES CORP | |
(Exact name of registrant as specified in its charter) | |
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Nevada | 90-0822497 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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300 Jameson House 838 West Hastings Street Vancouver, B.C., Canada | V6C 0A6 |
(Address of principal executive offices) | (Zip Code) |
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Registrants telephone number: (604) 669-9000 | |
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Securities registered under Section 12(b) of the Exchange Act: | |
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Title of each class | Name of each exchange on which registered |
none | not applicable |
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Securities registered under Section 12(g) of the Exchange Act: | |
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Title of class |
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none |
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] 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). Yes [ ] No [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [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 [X] No [ ]
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrants most recently completed second fiscal quarter. n/a
Indicate the number of shares outstanding of each of the registrants classes of common stock, as of the latest practicable date: 178,500,000 shares as of November 20, 2012.
EXPLANATORY NOTE
This Amendment No. 1 to the Annual Report on Form 10-K/A (the Amendment) amends the Annual Report on Form 10-K of Laredo Resources Corp. (the Company) for the year ended August 31, 2012 (the Original Filing), that was originally filed with the U.S. Securities and Exchange Commission on November 29, 2012. The Amendment is being filed to submit Exhibit 99.1, 99.2, 99.3 and 99.4. The Amendment revises the exhibit index included in Part II, Item 6 of the Original Filing. In addition, the Amendment revises certain disclosures related to the Companys Audit Committee.
Except as described above, the Amendment does not modify or update the disclosures presented in, or exhibits to, the Original Filing in any way. Those sections of the Original Filing that are unaffected by the Amendment are not included herein. The Amendment continues to speak as of the date of the Original Filing. Furthermore, the Amendment does not reflect events occurring after the filing of the Original Filing. Accordingly, the Amendment should be read in conjunction with the Original Filing, as well as the Companys other filings made with the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act subsequent to the filing of the Original Filing.
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PART I
Item 1. Business
Company Overview
We were incorporated on August 17, 2010, under the laws of the state of Nevada. We were originally engaged in the exploration of certain mineral claims located in Elko County, Nevada. On September 10, 2012, we entered into an Agreement of Conveyance, Transfer and Assignment of Membership Interests and Assumption of Obligations (the Agreement) with our former sole officer and director, Ruth Cruz Santos. Pursuant to the Agreement, we transferred all membership interests in our operating subsidiary, LRE Exploration LLC, to Ms. Santos. In exchange for this assignment of membership interests, Ms. Santos agreed to assume and cancel all liabilities relating to our former business of exploring certain mining claims located in Elko County, Nevada. In addition, Ms. Santos agreed to release all liability under certain promissory notes due and owing to her. As a result of the Agreement, we are no longer pursuing the mineral exploration opportunities located in Elko County, Nevada.
We are currently pursuing a new mineral exploration opportunities under the direction of new management. On November 2, 2012, we entered into a letter agreement with Magna Management Ltd. (Magna) under which we have been granted the exclusive right, for a period of sixty (60) days, to negotiate for the purchase of all rights held by Magna in the mineral property known as Pony Mountain Gold, located in the Mineral Hills District (commonly called the Pony District) in southwestern Montana. During the exclusive negotiation period, we will have access to all documentation and information regarding the title and geology of the property and any other information necessary for the completion of our due diligence. We anticipate that our purchase of Magnas rights to the property, if consummated, would be made through a combination of cash payment and issuance of common stock, with the rights being assigned to a wholly-owned subsidiary to be formed. Pricing and other details of the potential acquisition of Magnas rights are the subject of ongoing negotiations.
The Pony Mountain Gold property is comprised of an approximately 4000-acre package of properties, assembled over the years by a local family and local geologist. The property contains several previously-mined, underground hard-rock vein systems, such as the Mountain Cliff, Strawberry-Keystone, Amy, and Atlantic-Pacific (A-P) mines. Historically, the Pony Mountain Gold property has been productive, and we believe it has potential for new productivity.
In the event that we acquire Magnas rights to the Pony Mountain Gold property, we will assume Magnas rights and duties under a Memorandum of Understanding between Magna and the various owners of the property (the MOU). As the assignee of Magnas rights under the MOU, we would be entitled to exclusive proprietary marketing rights for the property in exchange for total payments of $3,000,000 to be made in quarterly installments of $250,000 each. The deadline for the first installment payment to the owners, as currently extended, is December 5, 2012. All net revenues received from third-party processors of material mined from the property will be paid to the owners of the property and applied to the total purchase price until paid in full. The owners will retain a perpetual 2% net smelter royalty. Closing of the transaction contemplated by the MOU will be documented under a definitive Mining Lease and Option Agreement.
Magna has engaged Moen Excavating, LLC to take and prepare samples from dumps located on the Pony Mountain Gold property, to coordinate laboratory testing of samples taken from the property, and to conduct negotiations with the Golden Sunlight-Barrick mill for the processing of material from the property. Magna has also agreed to engage Moen Excavating for all surface work on the property and for the future hauling of dump material from the property to the mill. In the event that we are assigned Magnas rights to the property, we plan to continue the engagement with Moen Excavating as Magnas assignee.
Item 2. Properties
We do not currently own or lease any real property.
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Item 3. Legal Proceedings
We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrants Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is quoted under the symbol LRDR on the OTCBB operated by the Financial Industry Regulatory Authority, Inc. (FINRA) and the OTCQB operated by OTC Markets Group, Inc. Few market makers continue to participate in the OTCBB system because of high fees charged by FINRA. Consequently, market makers that once quoted our shares on the OTCBB system may no longer be posting a quotation for our shares. As of the date of this report, however, our shares are quoted by several market makers on the OTCQB. The criteria for listing on either the OTCBB or OTCQB are similar and include that we remain current in our SEC reporting. Our reporting is presently current and, since inception, we have filed our SEC reports on time.
A trading market for our securities did not begin to develop until after the fiscal year ended August 31, 2012.
The following tables set forth the range of high and low prices for our common stock for the each of the periods indicated as reported by the OTCQB. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
Fiscal Year Ending August 31, 2012 | ||||
Quarter Ended |
| High $ |
| Low $ |
August 31, 2012 |
| N/A |
| N/A |
May 31, 2012 |
| N/A |
| N/A |
February 29, 2012 |
| N/A |
| N/A |
November 30, 2011 |
| N/A |
| N/A |
Fiscal Year Ending August 31, 2011 | ||||
Quarter Ended |
| High $ |
| Low $ |
August 31, 2011 |
| N/A |
| N/A |
May 31, 2011 |
| N/A |
| N/A |
February 29, 2011 |
| N/A |
| N/A |
November 30, 2010 |
| N/A |
| N/A |
5
Penny Stock
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer's account.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.
Holders of Our Common Stock
As of November 20, 2012, we had 178,500,000 shares of our common stock issued and outstanding, held by seventy-seven (77) shareholders of record.
Dividends
There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where after giving effect to the distribution of the dividend:
1. | we would not be able to pay our debts as they become due in the usual course of business, or; |
2. | our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution. |
We have not declared any dividends and we do not plan to declare any dividends in the foreseeable future.
Item 6. Selected Financial Data
A smaller reporting company is not required to provide the information required by this Item.
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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are forward-looking statements. These forward-looking statements generally are identified by the words believes, project, expects, anticipates, estimates, intends, strategy, plan, may, will, would, will be, will continue, will likely result, and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.
Results of Operations for the Years Ended August 31, 2012 and August 31, 2011, and the Period From Inception (August 17, 2010) to August 31, 2012
We have had no revenue for the years ended August 31, 2012 and August 31, 2011, or for the period from Inception (August 17, 2010) through August 31, 2012. Our total expenses and net loss for the year ended August 31, 2012 were $56,356, and consisted of accounting and audit fees of $19,314, a loss on foreign exchange of $4, legal fees of $11,225, office expenses of $6,337, transfer and filing fees of $5,092, impairment of a former mineral property option in the amount of $20,000, interest expense of $4,384, and gain on forgiveness of debt in the amount of $10,000. By comparison, our total expenses and net loss for the year ended August 31, 2011 were $56,789, and consisted of audit and accounting fees of $15,328, a gain on foreign exchange of $4, legal fees of $26,034, mineral exploration costs of $4,500, office expenses of $6,380, transfer and filing fees of $3,140, and interest expense of $1,411. Our total expenses and net loss for the period from Inception (August 17, 2010) through August 31, 2012 were $120,470.
Liquidity and Capital Resources
As of August 31, 2012, we had total current assets of $368, consisting entirely of cash. Our total current liabilities as of August 31, 2012 were $91,056, and consisted of a related party note payable of $86,500, accrued interest due to a related party of $3,998, and accounts payable of $558. We had a working capital deficit of $90,688 as of August 31, 2012.
Operating activities used $48,674 in net cash during the fiscal year ended August 31, 2012. Operating activities used $54,858 in net cash during the fiscal year ended August 31, 2011. From Inception (August 17, 2010) through August 31, 2012, operating activities used a total of $104,117 in net cash. Our net losses during these periods were the primary negative components of our operating cash flows. Financing activities generated cash of $47,500 during the fiscal year ended August 31, 2012, as against $39,000 during the fiscal year ended August 31, 2011 and $114,485 from inception (August 17, 2010) through August 31, 2010. The source of this cash was the proceeds of related party notes payable.
On September 10, 2012, pursuant to the terms of the Agreement of Conveyance, Transfer and Assignment of Membership Interests and Assumption of Obligations with our former sole officer and director, Ruth Cruz Santos, our liability under the related party notes payable reported for the fiscal year ended August 31, 2012 was discharged.
Also, on September 10, 2012, we received new financing in the amount of $20,000 from our current President, Robert Gardner, under the terms of a Promissory Note. The promissory note is unsecured, bears interest at 6% per annum, and matures on September 30, 2014.
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As discussed above, we will require financing in the amount of $3,000,000 to complete our planned acquisition of the Pony Mountain Gold property. Also, significant additional financing may be required in order to commence the active production of precious metals on those mining claims. We intend to fund our acquisition of the Pony Mountain Gold property rights, as well as our initial operations, through debt and/or equity financing arrangements. We do not have any formal commitments or arrangements for the sales of stock or the advancement or loan of funds at this time. There can be no assurance that such additional financing will be available to us on acceptable terms, in amounts sufficient to fund our planned acquisitions and other activities, or at all.
Off Balance Sheet Arrangements
As of August 31, 2012, there were no off balance sheet arrangements.
Going Concern
We have yet to achieve profitable operations, have accumulated losses of $120,470 since our inception and expect to incur further losses in the development of our business, all of which casts substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing from shareholders or other sources to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that we will be able to obtain additional funds by equity financing and/or related party advances, however there is no assurance of additional funding being available or on acceptable terms, if at all.
Critical Accounting Policies
In December 2001, the SEC requested that all registrants list their most critical accounting polices in the Management Discussion and Analysis. The SEC indicated that a critical accounting policy is one which is both important to the portrayal of a companys financial condition and results, and requires managements most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. At this time, management does not believe that any of our accounting policies fit this definition.
Recently Issued Accounting Pronouncements
The Company has reviewed issued accounting pronouncements and plans to adopt those that are applicable to it. The Company does not expect the adoption of any other pronouncements to have an impact on its results of operations or financial position.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
A smaller reporting company is not required to provide the information required by this Item.
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Item 8. Financial Statements and Supplementary Data
Index to Financial Statements Required by Article 8 of Regulation S-X:
Audited Financial Statements: | |
| |
F-1 | Report of Report of Independent Registered Public Accounting Firm |
F-2 | Consolidated Balance Sheets as of August 31, 2012 and 2011; |
F-3 | Consolidated Statements of Operations for the years ended August 31, 2012 and August 31, 2011, and for the period from Inception (August 17, 2010) through August 31, 2012; |
F-4 | Consolidated Statement of Stockholders Equity (Deficit) from Inception (August 17, 2010) to August 31, 2012; |
F-5 | Consolidated Statements of Cash Flows for the years ended August 31, 2012 and August 31, 2011, and for the period from Inception (August 17, 2010) through August 31, 2012; |
F-6 | Notes to Financial Statements |
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LAREDO RESOURCES CORP.
(An Exploration Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2012 and 2011
(Stated in US Dollars)
10
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Laredo Resources Corp.
We have audited the accompanying consolidated balance sheets of Laredo Resources Corp. (An Exploration Stage Company) (the Company) as of August 31, 2012 and 2011 and the consolidated related statements of operations, stockholders equity (deficit) and cash flows for each of the years then ended and for the period from inception (August 17, 2010) through August 31, 2012. Laredo Resources Corp. management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Laredo Resources Corp. (An Exploration Stage Company) as of August 31, 2012 and 2011 and the results of its operations and its cash flows for each of the years then ended and for the period from inception (August 17, 2010) through August 31, 2012 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered losses from operations, which raise substantial doubt about its ability to continue as a going concern. Managements plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ De Joya Griffith, LLC
Henderson, Nevada
November 1, 2012
______________________________________________________________________
De Joya Griffith, LLC ● 2580 Anthem Village Dr. ● Henderson, NV ● 89052
Telephone (702) 563-1600 ● Facsimile (702) 920-8049
www.dejoyagriffith.com
F-1
LAREDO RESOURCES CORP.
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
(Stated in US Dollars)
(Audited)
|
| August 31, | ||||
ASSETS |
| 2012 |
| 2011 | ||
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Current assets |
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Cash |
| $ | 368 |
| $ | 1,542 |
Prepaid expenses |
|
| - |
|
| 3,000 |
Total current assets |
|
| 368 |
|
| 4,542 |
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|
Property option - Note 4 |
|
| - |
|
| 10,000 |
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Total assets |
| $ | 368 |
| $ | 14,542 |
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|
LIABILITIES AND STOCKHOLDERS DEFICIT |
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Current liabilities |
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Accounts payable and accrued liabilities |
| $ | 558 |
| $ | 10,260 |
Accrued interest, related party - Note 5 |
|
| 3,998 |
|
| - |
Note payable, related party - Note 5 |
|
| 86,500 |
|
| - |
Total current liabilities |
|
| 91,056 |
|
| 10,260 |
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Long term liabilities |
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Accrued interest, related party - Note 5 |
|
| - |
|
| 516 |
Note payable, related party - Note 5 |
|
| - |
|
| 39,000 |
Total long term liabilities |
|
| - |
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| 39,516 |
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Total liabilities |
| $ | 91,056 |
| $ | 49,776 |
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Stockholders deficit |
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Preferred stock, $0.001 par value |
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10,000,000 shares authorized, none outstanding |
|
| - |
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| - |
Common stock, $0.001 par value |
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4,500,000,000 shares authorized |
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|
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178,500,000 shares issued and outstanding - Notes 6 |
|
| 178,500 |
|
| 178,500 |
Additional paid-in capital |
|
| - |
|
| - |
Deficit accumulated during the exploration stage |
|
| (269,188) |
|
| (213,734) |
Total stockholders deficit |
|
| (90,688) |
|
| (35,234) |
|
|
|
|
|
|
|
Total liabilities and stockholders deficit |
| $ | 368 |
| $ | 14,542 |
The accompanying notes are an integral part of these financial statements.
F-2
LAREDO RESOURCES CORP.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in US Dollars)
(Audited)
|
|
|
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| From | |||
|
|
|
|
|
| Inception | |||
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|
|
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|
| (August 17, | |||
|
| Year Ended |
| Year Ended |
| 2010) to | |||
|
| August 31, |
| August 31, |
| August 31, | |||
|
| 2012 |
| 2011 |
| 2012 | |||
|
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| |||
Expenses |
|
|
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|
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| |||
Accounting and audit |
| $ | 19,314 |
| $ | 15,328 |
| $ | 34,642 |
Foreign exchange (gain) loss |
|
| 4 |
|
| (4) |
|
| 785 |
Legal fees |
|
| 11,225 |
|
| 26,034 |
|
| 43,549 |
Mineral property exploration costs |
|
| - |
|
| 4,500 |
|
| 4,500 |
Office expenses |
|
| 6,337 |
|
| 6,380 |
|
| 12,967 |
Transfer and filing fees |
|
| 5,092 |
|
| 3,140 |
|
| 8,232 |
Impairment of mineral property option |
|
| 20,000 |
|
| - |
|
| 20,000 |
|
|
|
|
|
|
|
|
|
|
Net operating loss |
|
| (61,972) |
|
| (55,378) |
|
| (124,675) |
|
|
|
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|
|
|
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Other expense |
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|
|
|
|
|
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|
Forgiveness of debt - Note 4 |
|
| 10,000 |
|
| - |
|
| 10,000 |
Interest expense - Note 5 |
|
| (4,384) |
|
| (1,411) |
|
| (5,795) |
|
|
|
|
|
|
|
|
|
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Net loss |
| $ | (56,356) |
| $ | (56,789) |
| $ | (120,470) |
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Basic loss per share |
| $ | (0.00) |
| $ | (0.00) |
|
|
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|
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|
|
|
|
|
|
Weighted average number of shares outstanding - basic |
|
| 178,500,000 |
|
| 178,500,000 |
|
|
|
The accompanying notes are an integral part of these financial statements.
F-3
LAREDO RESOURCES CORP.
(An Exploration Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT)
For the Period from Inception (August 17, 2010) to August 31, 2012
(Stated in US Dollars)
(Audited)
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| Deficit |
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| Additional |
| Accumulated |
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| Paid-in |
| During the |
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| Preferred Shares |
| Common Shares |
| Capital |
| Exploration Stage |
| Total | |||||||||
|
| Number |
| Amount |
| Number |
| Amount |
|
|
|
|
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| |||||
Balance, inception (August 17, 2010) |
| - |
| $ | - |
| - |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital stock issued to founder for cash |
| - |
|
| - |
| 100,000,000 |
|
| 100,000 |
|
| - |
|
| (84,375) |
|
| 15,625 |
Capital stock issued for cash, net of commission |
| - |
|
| - |
| 78,500,000 |
|
| 78,500 |
|
| - |
|
| (66,140) |
|
| 12,360 |
Net loss |
| - |
|
| - |
| - |
|
| - |
|
| - |
|
| (7,325) |
|
| (7,325) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, August 31, 2010 |
| - |
|
| - |
| 178,500,000 |
|
| 178,500 |
|
| - |
|
| (157,840) |
|
| 20,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital contribution by president - Note 5 |
| - |
|
| - |
| - |
|
| - |
|
| - |
|
| 895 |
|
| 895 |
Net loss |
| - |
|
| - |
| - |
|
| - |
|
| - |
|
| (56,789) |
|
| (56,789) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, August 31, 2011 |
| - |
| $ | - |
| 178,500,000 |
|
| 178,500 |
|
| - |
|
| (213,734) |
|
| (35,234) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital contribution by president - Note 5 |
| - |
|
| - |
| - |
|
| - |
|
| - |
|
| 902 |
|
| 902 |
Net loss |
| - |
|
| - |
| - |
|
| - |
|
| - |
|
| (56,356) |
|
| (56,356) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, August 31, 2012 |
| - |
| $ | - |
| 178,500,000 |
| $ | 178,500 |
| $ | - |
| $ | (269,188) |
| $ | (90,688) |
The accompanying notes are an integral part of these financial statements.
F-4
LAREDO RESOURCES CORP.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in US Dollars)
(Audited)
|
|
|
| From | |||||
|
|
|
| Inception | |||||
|
|
|
| (August 17 | |||||
|
| Year Ended |
| 2010) to | |||||
|
| August 31 |
| August 31, | |||||
|
| 2012 |
| 2011 |
| 2012 | |||
|
|
|
|
|
|
| |||
Cash Flows from Operating Activities |
|
|
|
|
|
|
|
| |
Net loss |
| $ | (56,356) |
| $ | (56,789) |
| $ | (120,470) |
Adjustments to reconcile net loss to net cash used by operating activities |
|
|
|
|
|
|
|
|
|
Non cash interest expense - capital contribution |
|
| 902 |
|
| 895 |
|
| 1,797 |
Forgiveness of debt |
|
| (10,000) |
|
| - |
|
| (10,000) |
Write off of property option |
|
| 20,000 |
|
| - |
|
| 20,000 |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
Accrued interest |
|
| 3,482 |
|
| 516 |
|
| 3,998 |
Prepaid expenses |
|
| 3,000 |
|
| (3,000) |
|
| - |
Accounts payable and accrued liabilities |
|
| (9,702) |
|
| 3,520 |
|
| 558 |
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
| (48,674) |
|
| (54,858) |
|
| (104,117) |
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
|
Acquisition of property option |
|
| - |
|
| (10,000) |
|
| (10,000) |
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activity |
|
| - |
|
| (10,000) |
|
| (10,000) |
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
|
Capital stock issued |
|
| - |
|
| - |
|
| 27,985 |
Notes payable, related party |
|
| 47,500 |
|
| 39,000 |
|
| 86,500 |
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
| 47,500 |
|
| 39,000 |
|
| 114,485 |
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash during the year |
|
| (1,174) |
|
| (25,858) |
|
| 368 |
|
|
|
|
|
|
|
|
|
|
Cash, beginning of the year |
|
| 1,542 |
|
| 27,400 |
|
| - |
|
|
|
|
|
|
|
|
|
|
Cash, end of the year |
| $ | 368 |
| $ | 1,542 |
| $ | 368 |
|
|
|
|
|
|
|
|
|
|
Supplemental information |
|
|
|
|
|
|
|
|
|
Cash paid for: |
|
|
|
|
|
|
|
|
|
Accrual of mineral property |
| $ | 10,000 |
| $ | - |
| $ | 10,000 |
The accompanying notes are an integral part of these financial statements.
F-5
LAREDO RESOURCES CORP.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
August 31, 2012 and 2011
(Stated in US Dollars)
Note 1
Nature of Operations and Ability to Continue as a Going Concern
The Company was incorporated in the state of Nevada, United States of America on August 17, 2010. The Company is an exploration stage company and was formed for the purpose of acquiring exploration and development stage mineral properties. The Companys year-end is August 31.
On August 31, 2010, the Company incorporated a wholly-owned subsidiary, LRE Exploration LLC, (LRE) in the State of Nevada, United States of America (USA) for the purpose of mineral exploration in the USA.
On November 30, 2010, LRE entered into a property option agreement with Arbutus Minerals LLC. (Arbutus) whereby the Company was granted an option to earn up to a 100% interest in 20 mineral claims (the ABR Claims) located approximately 15 miles north of Elko, Nevada. (Note 4). During the year ended August 31, 2012, the Company abandoned the property.
Effective October 30, 2012, the Company increased the number of authorized common shares of the Company from 90,000,000 to 4,500,000,000 shares per directors resolution dated October 30, 2012. The Company also conducted a fifty to one forward stock split of the Companys issued and outstanding common shares per directors resolution. Following this stock split, the number of outstanding shares of the Companys common stock increased from 3,570,000 shares to 178,500,000 shares. All share and per share information in these financial statements has been retro-actively restated for all periods presented to give effect of this stock split.
These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. The Company has yet to achieve profitable operations, has accumulated losses of $120,470 since its inception and expects to incur further losses in the development of its business, all of which casts substantial doubt about the Companys ability to continue as a going concern.
The Companys ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing from shareholders or other sources to meet its obligations and repay its liabilities arising from normal business operations when they become due. Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity financing and/or related party advances, however there is no assurance of additional funding being available or on acceptable terms, if at all. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the company cannot continue in existence.
F-6
LAREDO RESOURCES CORP.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
August 31, 2012 and 2011
(Stated in US Dollars)
Note 2
Summary of Significant Accounting Policies
The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and are stated in US dollars. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expense during the reporting period. Actual results could differ from those estimates.
The financial statements have, in managements opinion, been properly prepared within the framework of the significant accounting policies summarized below:
Principles of Consolidation
These consolidated financial statements include the accounts of the Company and LRE Exploration LLC., a wholly owned subsidiary incorporated in Nevada, USA on August 31, 2010. All significant inter-company transactions and balances have been eliminated.
Exploration Stage Company
The Company is an exploration stage company. All losses accumulated since inception are considered part of the Companys exploration stage activities.
Cash and cash equivalents
The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents. There were no cash equivalents at August 31, 2012.
The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured limits. At August 31, 2012, the balance did not exceed the federally insured limit.
Mineral Property
The Company is primarily engaged in the acquisition, exploration and development of mineral properties.
Mineral property acquisition costs are capitalized in accordance with FASB ASC 930, Extractive Activities-Mining, when management has determined that probable future benefits consisting of a contribution to future cash inflows have been identified and adequate financial resources are available or are expected to be available as required to meet the terms of property acquisition and budgeted exploration and development expenditures. Mineral property acquisition costs are expensed as incurred if the criteria for capitalization are not met.
F-7
LAREDO RESOURCES CORP.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
August 31, 2012 and 2011
(Stated in US Dollars)
Note 2
Summary of Significant Accounting Policies - (continued)
Mineral Property - (continued)
In the event that mineral property acquisition costs are paid with Company shares, those shares are recorded at the estimated fair value at the time the shares are due in accordance with the terms of the property agreements.
Mineral property exploration costs are expensed as incurred.
When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves and pre-feasibility, the costs incurred to develop such property are capitalized.
Estimated future removal and site restoration costs, when determinable are provided over the life of proven reserves on a units-of-production basis. Costs, which include production equipment removal and environmental remediation, are estimated each period by management based on current regulations, actual expenses incurred, and technology and industry standards. Any charge is included in exploration expense or the provision for depletion and depreciation during the period and the actual restoration expenditures are charged to the accumulated provision amounts as incurred.
To date the Company has not established any proven or probable reserves on its mineral properties.
Asset Retirement Obligations
Asset retirement obligations (ARO) associated with the retirement of a tangible long-lived asset, are recognized as liabilities in the period in which it is incurred and becomes determinable, with an offsetting increase in the carrying amount of the associated assets. The cost of tangible long-lived assets, including the initially recognized ARO, is amortized, such that the cost of the ARO is recognized over the useful life of the assets. The ARO is recorded at fair value, and accretion expense is recognized over time as the discounted fair value is accreted to the expected settlement value.
The fair value of the ARO is measured using expected future cash flow, discounted at the Companys credit-adjusted risk-free interest rate. As of August 31, 2012, the Company has determined no provision for AROs is required.
Impairment of Long- Lived Assets
The Company reviews and evaluates long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The assets are subject to impairment consideration under FASB ASC 360-10-35-17 if events or circumstances indicate that their carrying amount might not be recoverable. When the Company determines that an impairment analysis should be done, the analysis will be performed using the rules of FASB ASC 930-360-35, Asset Impairment, and 360- 0 through 15-5, Impairment or Disposal of Long- Lived Assets.
F-8
LAREDO RESOURCES CORP.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
August 31, 2012 and 2011
(Stated in US Dollars)
Note 2
Summary of Significant Accounting Policies - (continued)
Foreign Currency Translation
The Companys functional currency is the United States dollar as substantially all of the Companys operations are in the USA. The Company uses the United States dollar as its reporting currency for consistency with registrants of the Securities and Exchange Commission (SEC).
Assets and liabilities denominated in a foreign currency are translated at the exchange rate in effect at the balance sheet date and capital accounts are translated at historical rates. Income statement accounts are translated at the average rates of exchange prevailing during the period.
Translation adjustments from the use of different exchange rates from period to period are included in the Accumulated Other Comprehensive Income account in Stockholders Equity, if applicable.
Transactions undertaken in currencies other than the functional currency of the entity are translated using the exchange rate in effect as of the transaction date. Any exchange gains and losses are included in the Statement of Operations and Comprehensive Loss.
Earnings per share
In accordance with accounting guidance now codified as FASB ASC Topic 260, Earnings per Share, basic earnings per share (EPS) is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to all dilutive potential of shares of common stock outstanding during the period including stock options or warrants, using the treasury stock method (by using the average stock price for the period to determine the number of shares assumed to be purchased from the exercise of stock options or warrants), and convertible debt or convertible preferred stock, using the if-converted method. Diluted EPS excludes all dilutive potential of shares of common stock if their effect is anti-dilutive. As there are no common stock equivalents outstanding, diluted and basic loss per share are the same.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and loss carry-forwards and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The effect of a change in tax rules on deferred tax assets and liabilities is recognized in operations in the year of change. A valuation allowance is recorded when it is more likely-than-not that a deferred tax asset will not be realized.
F-9
LAREDO RESOURCES CORP.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
August 31, 2012 and 2011
(Stated in US Dollars)
Note 2
Summary of Significant Accounting Policies - (continued)
Stock-based Compensation
The Company is required to record compensation expense, based on the fair value of the awards, for all awards granted after the date of the adoption.
Comprehensive Income
The Company is required to report comprehensive income, which includes net loss as well as changes in equity from non-owner sources.
Note 3
Financial Instruments
Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability.
The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.
In addition to defining fair value, the standard expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which is determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:
Level 1 -
inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.
Level 2 -
inputs are based upon significant observable inputs other than quoted prices included in Level 1, such as quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 -
inputs are generally unobservable and typically reflect managements estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.
F-10
LAREDO RESOURCES CORP.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
August 31, 2012 and 2011
(Stated in US Dollars)
Note 3
Financial Instruments - (continued)
The carrying value of the Companys financial assets and liabilities which consist of cash, accounts payable and accrued liabilities, and notes payable in managements opinion approximates fair value due to the short maturity of such instruments. These financial assets and liabilities are valued using level 3 inputs, except for cash which is at level 1. Unless otherwise noted, it is managements opinion that the Company is not exposed to significant interest, exchange or credit risks arising from these financial instruments.
Note 4
Mineral Property
| August 31, | August 31, | ||
| 2012 | 2011 | ||
ABR Claims | ||||
Option Costs | $ | - | $ | 10,000 |
|
|
|
|
|
Net cost | $ | - | $ | 10,000 |
On November 30, 2010, LRE entered into a property option agreement (amended April 3, 2012) with Arbutus Minerals LLC (Arbutus) whereby the Company was granted an option to earn up to a 100% interest in 20 mineral claims (the ABR Claims) located approximately 15 miles north of Elko, Nevada. Arbutus holds only the mineral rights to the ABR Claims as the ABR Claims are on Bureau of Land Management managed land. Consideration for the option consists of cash payments to Arbutus totalling $90,000, and aggregate exploration expenditures of $295,000 as follows:
Payments to Arbutus
·
$10,000 upon execution of option agreement;
·
$10,000 on or before November 30, 2011 (payment extended to November 30, 2012);
·
$20,000 on or before November 30, 2012; and
·
$50,000 on or before November 30, 2013.
Exploration Expenditures
·
$15,000 in aggregate exploration expenditures prior to November 30, 2012;
·
$65,000 in aggregate exploration expenditures prior to November 30, 2013; and
·
$215,000 in aggregate exploration expenditures prior to November 30, 2014.
As at August 31, 2012, the Company had incurred $10,000 in acquisition costs and accrued an additional $10,000 in the form of option payments to Arbutus per the option agreement. When a property reaches the production stage, the related capitalized costs will be amortized, using the units of production method on the basis of periodic estimates of ore reserves, currently no property has reached the production stage. When the Company has capitalized mineral properties, these properties will be periodically assessed for impairment of value and any diminution in value.
F-11
LAREDO RESOURCES CORP.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
August 31, 2012 and 2011
(Stated in US Dollars)
Note 4
Mineral Property - (continued)
From Inception (August 17, 2010) to August 31, 2012, the Company had incurred an aggregate amount of $4,500 for geological surveys, which are considered geological and geophysical costs which are expensed when incurred.
During August 2012, the Company abandoned the property and all property option costs incurred were written off. The Company also negotiated the forgiveness of $10,000 which was due pursuant to the property option agreement on November 30, 2012.
Note 5
Related Party Transactions
On May 21, 2012, the Company President loaned $10,000 to the Company and the Company issued a promissory note in the amount of $10,000. The promissory note is unsecured, bears interest at 6% per annum, and matures on May 31, 2014. During the year ended August 31, 2012, the Company accrued $270 (2011 - $nil) of interest expense in respect of this note payable. Total accrued interest on this note as of August 31, 2012 was $270 (2011 - $nil).
On March 20, 2012, the Company President loaned $7,500 to the Company and the Company issued a promissory note in the amount of $7,500. The promissory note is unsecured, bears interest at 6% per annum, and matures on March 31, 2013. During the year ended August 31, 2012, the Company accrued $202 (2011 - $nil) of interest expense in respect of this note payable. Total accrued interest on this note as of August 31, 2012 was $202 (2011 - $nil).
On November 22, 2011, the Company President loaned $15,000 to the Company and the Company issued a promissory note in the amount of $15,000. The promissory note is unsecured, bears interest at 6% per annum, and matures on November 30, 2013. During the year ended August 31, 2012, the Company accrued $698 (2011 - $nil) of interest expense in respect of this note payable. Total accrued interest on this note as of August, 2012 was $698 (2011 - $nil).
On September 13, 2011, the Company President loaned $15,000 to the Company and the Company issued a promissory note in the amount of $15,000. The promissory note is unsecured, bears interest at 6% per annum, and matures on September 30, 2013. During the year ended August 31, 2012, the Company accrued $870 (2011 - $nil) of interest expense in respect of this note payable. Total accrued interest on this note as of August 31, 2012 was $870 (2011 - $nil).
On August 22, 2011, the Company President loaned $4,000 to the Company and the Company issued a promissory note in the amount of $4,000. The promissory note is unsecured, bears interest at 6% per annum, and matures on August 31, 2013. During the year ended August 31, 2012, the Company accrued $240 (2011 - $6) of interest expense in respect of this note payable. Total accrued interest on this note as of August 31, 2012 was $246 (2011 - $6).
F-12
LAREDO RESOURCES CORP.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
August 31, 2012 and 2011
(Stated in US Dollars)
Note 5
Related Party Transactions - (continued)
On May 10, 2011, the Company President loaned $10,000 to the Company and the Company issued a promissory note in the amount of $10,000. The promissory note is unsecured, bears interest at 6% per annum, and matures on May 31, 2013. During the year ended August 31, 2012, the Company accrued $601 (2011 - $186) of interest expense in respect of this note payable. Total accrued interest on this note as of August 31, 2012 was $787 (2011 - $186).
On February 15, 2011, the Company President loaned $10,000 to the Company and the Company issued a promissory note in the amount of $10,000. The promissory note is unsecured, bears interest at 6% per annum, and matures on February 28, 2013. During the year ended August 31, 2012, the Company accrued $601 (2011 - $324) of interest expense in respect of this note payable. Total accrued interest on this note as of August 31, 2012 was $925 (2011 - $324).
On September 2, 2010, the Company President loaned $15,000 to the Company and the Company issued a promissory note in the amount of $15,000. The promissory note is unsecured, non-interest bearing, and matures on September 30, 2012. During the year ended August 31, 2012, the Company accrued $902 (2011 - $895) of interest expense in respect of this note payable. The Company also recorded a capital contribution for the year ended August 31, 2012 of $902 (2011 - $895) in respect of the imputed interest charged on this note payable.
On August 19, 2010, the Company received and accepted a subscription to purchase 2,000,000 shares of common stock at $0.0078 per share for aggregate proceeds of $15,625 from the Companys president. The subscription agreement permitted the Company to accept 200,000 Mexican Pesos in full settlement of the share subscription. The share subscription was settled in Mexican Pesos.
Subsequent to the year end, on September 10, 2012, the President resigned and her controlling interest of 100,000,000 post split shares was transferred to a third party who subsequently was appointed President.
On September 10, 2012, the Company assigned all membership units of LRE to the former President of the Company and received as consideration the release and discharge of all liabilities under all the promissory notes and accrued interest to the date of the transaction. As at August 31, 2012, this amount aggregated $90,688.
F-13
LAREDO RESOURCES CORP.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
August 31, 2012 and 2011
(Stated in US Dollars)
Note 6
Capital Stock
The Company has 10,000,000 shares of authorized preferred stock with a par value of 0.001 per share. There were zero shares of preferred stock issued and outstanding as of August 31, 2012 and 2011.
The Company has 4,500,000,000 shares of authorized common stock, with a par value of 0.001 per share. There were 3,570,000 shares of common stock issued and outstanding as of August 31, 2012 and 2011. Following a forward split on the basis of 50 for 1 effective October 30, 2012, there were 178,500,000 shares of common stock issued and outstanding.
Issued:
On August 19, 2010, the Company issued 100,000,000 post split shares of common stock to the Companys president at $0.000156 per share for total proceeds of $15,625.
On August 27, 2010, the Company issued 78,500,000 shares of common stock at $0.000157 per share for total proceeds of $12,560 pursuant to a private placement. The Company paid commissions of $200 for net proceeds of $12,360.
All references in these financial statements to number of common shares, price per share and weighted number of common shares outstanding prior to 50 to 1 stock split on October 30, 2012 have been adjusted to reflect this stock split on a retroactive basis, unless otherwise noted.
Note 7
Income Taxes
A reconciliation of the income tax provision computed at statutory rates to the reported tax provision is as follows:
| Year Ended | ||||
| August 31, | ||||
| 2012 |
| 2011 | ||
|
|
|
| ||
Basic statutory and state income tax rate |
| 35.0% |
|
| 35.0% |
|
|
|
|
|
|
Approximate loss before income taxes | $ | 56,356 |
| $ | 56,789 |
|
|
|
|
|
|
Expected approximate tax recovery on net loss, before income tax | $ | 19,700 |
| $ | 19,900 |
Valuation allowance |
| (19,700) |
|
| (19,900) |
|
|
|
|
|
|
Deferred income tax recovery | $ | - |
| $ | - |
Significant components of the Companys deferred tax assets and liabilities are as follows:
|
|
| ||
|
|
| ||
| Year Ended | Year Ended | ||
| August 31, | August 31, | ||
| 2012 | 2011 | ||
|
|
| ||
Deferred income tax assets |
|
| ||
Non-capital losses carried forward | $ | 42,200 | $ | 22,500 |
Less: valuation allowance |
| (42,200) |
| (22,500) |
|
|
|
|
|
Deferred income tax assets | $ | - | $ | - |
F-14
LAREDO RESOURCES CORP.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
August 31, 2012 and 2011
(Stated in US Dollars)
Note 7
Income Taxes - (continued)
At August 31, 2012, the Company has incurred accumulated net operating losses in the United States of America totalling approximately $120,470 which are available to reduce taxable income in future years.
These losses expire as follows:
Year of Expiry | Amount | |
|
| |
2030 | $ | 7,325 |
2031 | $ | 56,789 |
2032 | $ | 56,356 |
The amount taken into income as deferred tax assets must reflect that portion of the income tax loss carryforwards that is more-likely-than-not to be realized from future operations. The Company has chosen to provide an allowance of 100% against all available income tax loss carryforwards, regardless of their time of expiry.
Note 8
Subsequent Events
i)
On September 10, 2012, the Company assigned all membership units of LRE to the former President of the Company and received as consideration the release and discharge of all liabilities under all the promissory notes and accrued interest entered into prior to August 31, 2012.
ii)
On September 10, 2012, the Company issued a promissory note of $20,000 to the Companys newly appointed president and received $20,000 cash in exchange. The promissory note is unsecured, bears interest at 6% per annum, and matures on September 30, 2014.
iii)
Effective October 30, 2012, the Company increased the number of authorized common shares of the Company from 90,000,000 to 4,500,000,000 shares per directors resolution dated October 30, 2012. The Company also conducted a fifty to one forward stock split of the Companys issued and outstanding common shares per directors resolution. Following this stock split, the number of outstanding shares of the Companys common stock increased from 3,570,000 shares to 178,500,000 shares. All share and per share information in these financial statements has been retro-actively restated for all periods presented to give effect of this stock split.
iv)
On November 2, 2012, the Company entered into a letter agreement with Magna Management Ltd. (Magna) whereby the Company was granted the exclusive right, for a period of sixty days, to negotiate for the acquisition of all rights held by Magna in a mineral Property known as Pony Gold Mountain located in southwestern Montana.
F-15
Note 8
Subsequent Events (Continued)
Should the acquisition be completed as contemplated the Company pay $3,000,000 in quarterly instalments of $250,000 commencing December 5, 2012. for the property. The agreement is subject to a 2% net smelter royalty.
F-16
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
As required by Rule 13a-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report, being August 31, 2012. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commissions rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our companys reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Based upon that evaluation, including our Chief Executive Officer and Chief Financial Officer, we have concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this annual report.
Managements Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934). Management has assessed the effectiveness of our internal control over financial reporting as of August 31, 2012 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As a result of this assessment, management concluded that, as of August 31, 2012, our internal control over financial reporting was not effective. Our management identified the following material weaknesses in our internal control over financial reporting, which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.
We plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered by this annual report on Form 10-K, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we hope to implement the following changes during our fiscal year ending August 31, 2012: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out in (i) and (ii) are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation by our registered public accounting firm pursuant to an exemption for non-accelerated filers set forth in Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Item 9B. Other Information
None.
11
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Our sole executive officer and director is as follows:
Name | Age | Position(s) and Office(s) Held |
Robert Gardner | 72 | President, Chief Executive Officer, Chief Financial Officer, and Director |
Set forth below is a brief description of the background and business experience of each of our current executive officers and directors.
Robert Gardner was appointed President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer, and Director on September 10, 2012. He is the Proprietor and Principal of Gardner & Associates in Vancouver. He is a Barrister and Solicitor in the Province of British Columbia where he was called and admitted in 1966. He is currently President of Q-Gold Resources Ltd., a position he has held since approximately July of 2010. Formerly, he was Chairman of Viridis Energy, Inc. from approximately December 2009 until April 2011. He also served as President, CFO and Secretary of First Star Resources, Inc. from November 2010 through approximately December 2011. He was a member of the Board and Chairman of Stealth Energy from approximately 2006 until his resignation in approximately July 2011. He was Chairman and a member of the Board of Genco Resources (now Silvermex Resources, Inc.) from approximately February 2003 until his resignation in May 2010. During his time at Genco Resources, he also served as acting CEO from January 2009 to February 2010. He was a Director for Kootenay Gold, Inc. from June 2003 until his resignation in March 2009. He served as Chairman of Andover Resources from December 2006 until his resignation in September 2008. He was on the Board of Chief Consolidated Mining as an U.S.-associated company to Andover from March 2008 until his resignation in 2010. He was a Director for Atlas Technology Group from August 2005 until his resignation in February 2009. He served as Chairman of Bolero Resources Corp. from February 2006 until his resignation in February 2008. He was on the Board of Directors of Getty Copper from approximately 2003 until his resignation in November 2004. He was a director of Triple Dragon Resources, Inc. from February 23, 2006 to June 4, 2007.
Mr. Gardner was called to the Bar of England and Wales in 1964 and called and admitted in British Columbia in 1966. He is a member of the Honourable Society of the Inner Temple (London). He graduated from Cambridge University in 1961 with a BA, in 1962 with an LLB, in 1965 with an MA, and in 1995 with an LLM. He was made a Queens Counsel in 1989.
Term of Office
Our Directors are appointed for a one year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.
Family Relationships
There are no family relationships between or among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers.
12
Involvement in Certain Legal Proceedings
To the best of our knowledge, during the past ten years, none of the following occurred with respect to a present or former director, executive officer, or employee: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended, vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
Committees of the Board
We do not currently have a compensation committee, executive committee, or stock plan committee.
Audit Committee
Our Audit Committee currently consists of our sole director, Robert Gardner. The Audit Committee is governed by a written Charter, a copy of which is furnished as Exhibit 99.1. A copy of the Audit Committee Charter is not currently available on our website. The Audit Committee approves the selection of our independent accountants and meets and interacts with the independent accountants to discuss issues related to financial reporting. In addition, the Audit Committee reviews the scope and results of the audit with the independent accountants, reviews with management and the independent accountants our annual operating results, considers the adequacy of our internal accounting procedures and considers other auditing and accounting matters including fees to be paid to the independent auditor and the performance of the independent auditor. Our Audit Committee does not have a member who would qualify as an audit committee financial expert within the definition of Item 407(d)(5)(ii) of Regulation S-K. We believe that, at our current size and stage of development, the addition of a special audit committee financial expert to the Board is not necessary.
Report of the Audit Committee
In connection with the financial statements for the year ended August 31, 2012, the Audit Committee has:
(1) Reviewed and discussed the audited financial statements with management;
(2) Discussed with De Joya Griffith, LLC, the Company's independent registered public accounting firm, the matters required to be discussed by the Statement on Auditing Standards No. 61, as amended and as adopted by the Public Company Accounting Oversight Board; and
(3) Received the written disclosure and letter from De Joya Griffith, LLC regarding the auditors' independence required by PCAOB Ethics and Independence Rule 3526, Communication with Audit Committees Concerning Independence, and has discussed with the independent auditors, the independent auditor's independence.
Based upon these reviews and discussions, the Audit Committee recommended to the Board that the Company's audited financial statements be included in the Annual Report on Form 10-K for the year ended August 31, 2012, filed with the Securities and Exchange Commission. The Board approved this inclusion.
The Audit Committee
Robert Gardner, sole member.
Nomination Committee
Our Board of Directors does not maintain a nominating committee. As a result, no written charter governs the director nomination process. Our size and the size of our Board, at this time, do not require a separate nominating committee.
When evaluating director nominees, our directors consider the following factors:
- | The appropriate size of our Board of Directors; |
- | Our needs with respect to the particular talents and experience of our directors; |
- | The knowledge, skills and experience of nominees, including experience in finance, administration or public service, in light of prevailing business conditions and the knowledge, skills and experience already possessed by other members of the Board; |
- | Experience in political affairs; |
- | Experience with accounting rules and practices; and |
- | The desire to balance the benefit of continuity with the periodic injection of the fresh perspective provided by new Board members. |
Our goal is to assemble a Board that brings together a variety of perspectives and skills derived from high quality business and professional experience. In doing so, the Board will also consider candidates with appropriate non-business backgrounds.
13
Other than the foregoing, there are no stated minimum criteria for director nominees, although the Board may also consider such other factors as it may deem are in our best interests as well as our stockholders. In addition, the Board identifies nominees by first evaluating the current members of the Board willing to continue in service. Current members of the Board with skills and experience that are relevant to our business and who are willing to continue in service are considered for re-nomination. If any member of the Board does not wish to continue in service or if the Board decides not to re-nominate a member for re-election, the Board then identifies the desired skills and experience of a new nominee in light of the criteria above. Current members of the Board are polled for suggestions as to individuals meeting the criteria described above. The Board may also engage in research to identify qualified individuals. To date, we have not engaged third parties to identify or evaluate or assist in identifying potential nominees, although we reserve the right in the future to retain a third party search firm, if necessary. The Board does not typically consider shareholder nominees because it believes that its current nomination process is sufficient to identify directors who serve our best interests.
Code of Ethics
As of August 31, 2012, we had not adopted a Code of Ethics for Financial Executives, which would include our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.
Item 11. Executive Compensation
Compensation Discussion and Analysis
We do not currently pay compensation to our sole officer and director, Robert Gardner. Our sole executive officer holds substantial ownership in the company and is generally motivated by a strong entrepreneurial interest in expanding our operations and revenue base to the best of his ability.
Summary Compensation Table
The table below summarizes all compensation awarded to, earned by, or paid to our former or current executive officers for the fiscal years ended 2012 and 2011.
SUMMARY COMPENSATION TABLE | |||||||||
Name and principal position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) |
Robert Gardner, President, CEO, and CFO | 2012 2011 | $ n/a $ n/a | $ n/a $ n/a | $ n/a $ n/a | $ n/a $ n/a | $ n/a $ n/a | $ n/a $ n/a | $ n/a $ n/a | $ n/a $ n/a |
Ruth Cruz Santos, former officer | 2012 2011 | $0 $0 | $0 $0 | $0 $0 | $0 $0 | $0 $0 | $0 $0 | $0 $0 | $0 $0 |
Narrative Disclosure to the Summary Compensation Table
We have not entered into any employment agreement or consulting agreement with our executive officers. There are no arrangements or plans in which we provide pension, retirement, or similar benefits for executive officers.
Although we do not currently compensate our officers, we reserve the right to provide compensation at some time in the future. Our decision to compensate officers depends on the availability of our cash resources with respect to the need for cash to further our business purposes.
14
Outstanding Equity Awards at Fiscal Year-End
The table below summarizes all unexercised options, stock that has not vested, and equity incentive plan awards for each named executive officer as of August 31, 2012.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END | |||||||||
OPTION AWARDS | STOCK AWARDS | ||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Shares of Stock That Have Not Vested (#) | Market Value of Shares or Shares of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Shares or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Shares or Other Rights That Have Not Vested (#) |
Robert Gardner | - | - | - | - | - | - | - | - | - |
Ruth Cruz Santos, former officer | - | - | - | - | - | - | - | - | - |
Director Compensation
The table below summarizes all compensation of our directors for the year ended August 31, 2012.
DIRECTOR COMPENSATION | |||||||
Name | Fees Earned or Paid in Cash | Stock Awards | Option Awards | Non-Equity Incentive Plan Compensation | Non-Qualified Deferred Compensation Earnings | All Other Compensation | Total |
Robert Gardner | - | - | - | - | - | - | - |
Ruth Cruz Santos, former director | - | - | - | - | - | - | - |
Narrative Disclosure to the Director Compensation Table
We do not compensate our directors for their service at this time.
15
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth, as of November 20, 2012, the beneficial ownership of our common stock by each executive officer and director, by each person known by us to beneficially own more than 5% of the our common stock and by the executive officers and directors as a group:
Title of class | Name and address of beneficial owner (1) | Amount of beneficial ownership | Percent of class* | |
Executive Officers & Directors: | ||||
| ||||
Common | Robert Gardner 300 Jameson House 838 West Hastings Street Vancouver, B.C. V6C 0A6 Canada | 100,000,000 | 56.02% | |
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|
|
| |
Common | Total all executive officers and directors | 100,000,000 | 56.02% | |
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| |
Common | 5% Shareholders | None |
|
(1) | As used in this table, "beneficial ownership" means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security). In addition, for purposes of this table, a person is deemed, as of any date, to have "beneficial ownership" of any security that such person has the right to acquire within 60 days after such date. |
Item 13. Certain Relationships and Related Transactions, and Director Independence
Except as stated herein, none of our directors or executive officers, nor any proposed nominee for election as a director, nor any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to all of our outstanding shares, nor any members of the immediate family (including spouse, parents, children, siblings, and in-laws) of any of the foregoing persons has any material interest, direct or indirect, in any transaction over the last two years or in any presently proposed transaction which, in either case, has or will materially affect us.
1.
On September 10, 2012, we entered into an Agreement of Conveyance, Transfer and Assignment of Membership Interests and Assumption of Obligations (the Agreement) with our sole officer and director, Ruth Cruz Santos. Pursuant to the Agreement, we transferred all membership interests in our operating subsidiary, LRE Exploration LLC, to Ms. Santos. In exchange for this assignment of membership interests, Ms. Santos agreed to assume and cancel all liabilities relating to our former business of exploring certain mining claims located in Elko County, Nevada. In addition, Ms. Santos agreed to release all liability under certain promissory notes due and owing to her.
2.
On September 10, 2012, we received new financing in the amount of $20,000 from our current President, Robert Gardner, under the terms of a Promissory Note. The promissory note is unsecured, bears interest at 6% per annum, and matures on September 30, 2014.
Director Independence
We are not a listed issuer within the meaning of Item 407 of Regulation S-K and there are no applicable listing standards for determining the independence of our directors. Applying the definition of independence set forth in Rule 4200(a)(15) of The Nasdaq Stock Market, Inc., we do not have any independent directors.
16
Item 14. Principal Accounting Fees and Services
Below is the table of Audit Fees (amounts in US$) billed by our auditor in connection with the audit of the Companys annual financial statements for the years ended:
Financial Statements for the Year Ended August 31 | Audit Services | Audit Related Fees | Tax Fees | Other Fees |
2012 | $4,000 | $0 | $1,700 | $0 |
2011 | $5,000 | $0 | $0 | $0 |
PART IV
Item 15. Exhibits, Financial Statements Schedules
(a) | Financial Statements and Schedules |
The following financial statements and schedules listed below are included in this Form 10-K.
Financial Statements (See Item 8)
(b) | Exhibits |
Exhibit Number | Description |
3.1 | Articles of Incorporation(1) |
3.2 | Bylaws(1) |
10.1 | Agreement of Conveyance, Transfer and Assignment of Membership Interests and Assumption of Obligations(2) |
10.2 | Promissory Note issued to Robert Gardner(3) |
31.1 | Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2 | Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
99.1 | Audit Committee Charter |
99.2 | Whistle Blower Policy |
99.3 | Canadian NP 58-101 Disclosures |
99.4 | Canadian NP 52-110 Disclosures |
(1) Incorporated by reference to Registration Statement on Form S-1 filed December 26, 2010.
(2) Incorporated by reference to Current Report on Form 8-K filed September 14, 2012
(3) Incorporated by reference to Annual Report on Form 10-K filed November 29, 2012.
17
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
LAREDO RESOURCES CORP
By: | /s/ Robert Gardner |
| Robert Gardner |
Title: | Chief Executive Officer, Chief Financial Officer and Director |
Date: | December 21, 2012 |
In accordance with Section 13 or 15(d) of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
By: | /s/ Robert Gardner |
| Robert Gardner |
Title: | Chief Executive Officer, Chief Financial Officer and Director |
Date: | December 21, 2012 |
18
CERTIFICATIONS
I, Robert Gardner, certify that;
1. |
| I have reviewed this amended annual report on Form 10-K/A for the year ended August 31, 2012 of Laredo Resources Corp.; | ||
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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; | ||
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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; | ||
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4. |
| The registrants other certifying officer 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: | ||
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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; | ||
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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; | ||
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c. |
| Evaluated the effectiveness of the registrants 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 | ||
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d. |
| Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants 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 registrants internal control over financial reporting; and | ||
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5. |
| The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): | ||
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a. |
| All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
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b. |
| Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: December 21, 2012 |
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/s/ Robert Gardner |
By: Robert Gardner |
Title: Chief Executive Officer |
CERTIFICATIONS
I, Robert Gardner, certify that;
1. |
| I have reviewed this amended annual report on Form 10-K/A for the year ended August 31, 2012 of Laredo Resources Corp.; | ||
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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; | ||
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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; | ||
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4. |
| The registrants other certifying officer 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: | ||
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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; | ||
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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; | ||
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c. |
| Evaluated the effectiveness of the registrants 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 | ||
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d. |
| Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants 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 registrants internal control over financial reporting; and | ||
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5. |
| The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): | ||
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a. |
| All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
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b. |
| Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: December 21, 2012 |
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/s/ Robert Gardner |
By: Robert Gardner |
Title: Chief Financial Officer |
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND
CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the amended annual report of Laredo Resources Corp. (the Company) on Form 10-K/A for the year ended August 31, 2012 filed with the Securities and Exchange Commission (the Report), I, Robert Gardner, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.
The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the dates presented and the consolidated result of operations of the Company for the periods presented.
By: | /s/ Robert Gardner |
Name: | Robert Gardner |
Title: | Principal Executive Officer, Principal Financial Officer and Director |
Date: | December 21, 2012 |
This certification has been furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
CHARTER
FOR
THE AUDIT COMMITTEE
OF
THE BOARD OF DIRECTORS
OF
LAREDO RESOURCES, INC.
I.
MANDATE
The Audit Committee (the Committee) of the Board of Directors (the Board) of Laredo Resources, Inc. (the Company) shall assist the Board in fulfilling its financial oversight responsibilities. The Committees primary duties and responsibilities under this mandate are to serve as an independent and objective party to monitor:
1.
The quality and integrity of the Companys financial statements and other financial information;
2.
The compliance of such statements and information with legal and regulatory requirements;
3.
The qualifications and independence of the Companys independent external auditor (the Auditor); and
4.
The performance of the Companys internal accounting procedures and Auditor.
II.
STRUCTURE AND OPERATIONS
Composition
At all times during which the Company has three or more Directors, the Committee shall be comprised of three or more members, each of whom is a director of the Company.
At all times during which the Company has two or more independent directors, a majority of the members of the Committee shall not be officers, employees or control persons of the Company or of an associate or affiliate of the Company.
Qualifications
Each member of the Committee must be able to read and understand fundamental financial statements, including the Companys balance sheet, income statement, and cash flow statement.
First Adopted by the Board: December 21, 2012
Last Amended by the Board: N/A
-2-
C.
Appointment and Removal
In accordance with the Companys By-Laws, the members of the Committee shall be appointed by the Board and shall serve until such members successor is duly elected and qualified or until such members earlier resignation or removal. Any member of the Committee may be removed, with or without cause, by a majority vote of the Board.
D.
Chair
Unless the Board shall appoint a Chair, the members of the Committee shall designate a Chair by the majority vote of all of the members of the Committee. The Chair shall call, set the agendas for and chair all meetings of the Committee.
E.
Sub-Committees
The Committee may form and delegate authority to subcommittees consisting of one or more members when appropriate, including the authority to grant pre-approvals of audit and permitted non-audit services, provided that a decision of such subcommittee to grant a pre-approval shall be presented to the full Committee at its next scheduled meeting.
F.
Meetings
The Committee shall meet as frequently as required but not less than once per year respecting the Companys annual financial statements. The Committee should meet with the Auditor and management to review the Companys annual financial statements in a manner consistent with, and to discharge its duties under, Section III of this Charter. The Committee may discharge its duties respecting the Companys three, six and nine month financial statements by each member signing a resolution in writing respecting such statements rather than meeting in person or by conference telephone.
The Auditor shall be given reasonable notice of, and be entitled to attend and speak at, each meeting of the Committee concerning the Companys annual financial statements and, if the Committee feels it is necessary or appropriate, at every other meeting. On request by the Auditor, the Chair shall call a meeting of the Committee to consider any matter that the Auditor believes should be brought to the attention of the Committee, the Board or the shareholders of the Company.
At each meeting, a quorum shall consist of a majority of members that are not officers or employees of the Company or of an affiliate of the Company.
As part of its goal to foster open communication, the Committee may periodically meet separately with each of management and the Auditor to discuss any matters that the Committee believes would be appropriate to discuss privately.
First Adopted by the Board: December 21, 2012
Last Amended by the Board: N/A
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The Committee may invite to its meetings any director, any manager of the Company, and any other person whom it deems appropriate to consult in order to carry out its responsibilities. The Committee may also exclude from its meetings any person it deems appropriate to exclude in order to carry out its responsibilities.
III.
DUTIES
A.
Introduction
The following functions shall be the common recurring duties of the Committee in carrying out its purposes outlined in Section I of this Charter. These duties should serve as a guide with the understanding that the Committee may fulfill additional duties and adopt additional policies and procedures as may be appropriate in light of changing business, legislative, regulatory or other conditions. The Committee shall also carry out any other responsibilities and duties delegated to it by the Board from time to time related to the purposes of the Committee outlined in Section I of this Charter.
The Committee, in discharging its oversight role, is empowered to study or investigate any matter of interest or concern which the Committee in its sole discretion deems appropriate for study or investigation by the Committee.
The Committee shall be given full access to the Companys internal accounting staff, managers, other staff and Auditor as necessary to carry out these duties. While acting within the scope of its stated purpose, the Committee shall have all the authority of, but shall remain subject to, the Board.
B.
Powers and Responsibilities
The Committee will have the following responsibilities and, in order to perform and discharge these responsibilities, will be vested with the powers and authorities set forth below, namely, the Committee shall:
Independence of Auditor
1.
Review and discuss with the Auditor any disclosed relationships or services that may impact the objectivity and independence of the Auditor and, if necessary, obtain a formal written statement from the Auditor setting forth all relationships between the Auditor and the Company.
2.
Take, or recommend that the Board take, appropriate action to oversee the independence of the Auditor.
3.
Require the Auditor to report directly to the Committee.
First Adopted by the Board: December 21, 2012
Last Amended by the Board: N/A
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4.
Review and approve the Companys hiring policies regarding partners, employees and former partners and employees of the Auditor and former independent external auditor of the Company.
Performance & Completion by Auditor of its Work
5.
Be directly responsible for the oversight of the work by the Auditor (including resolution of disagreements between management and the Auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work.
6.
Review annually the performance of the Auditor and recommend the appointment by the Board of a new, or re-election by the Companys shareholders of the existing, Auditor.
7.
Pre-approve all auditing services and permitted non-audit services, and the fees and terms thereof, to be performed for the Company by the Auditor unless such non-audit services:
(a)
which are not pre-approved, are reasonably expected not to constitute, in the aggregate, more than 5% of the total amount of fees paid by the Company to the Auditor during the fiscal year in which the non-audit services are provided;
(b)
were not recognized by the Company at the time of the engagement to be non-audit services; and
(c)
are promptly brought to the attention of the Committee by the Companys management and approved prior to the completion of the audit by the Committee or by one or more members of the Committee to whom authority to grant such approvals has been delegated by the Committee.
Internal Financial Controls & Whistleblower Policy
8.
Establish procedures for:
(a)
the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and
(b)
the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.
Preparation of Financial Statements
9.
Discuss with management and the Auditor significant financial reporting issues and judgments made in connection with the preparation of the Companys financial statements, including any significant changes in the Companys selection or application of accounting principles, any major issues as to the adequacy of the Companys internal controls and any special steps adopted in light of material control deficiencies.
First Adopted by the Board: December 21, 2012
Last Amended by the Board: N/A
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10.
Discuss with management and the Auditor any correspondence with regulators or governmental agencies and any employee complaints or published reports which raise material issues regarding the Companys financial statements or accounting policies.
11.
Discuss with management and the Auditor the effect of regulatory and accounting initiatives as well as off-balance sheet structures on the Companys financial statements.
12.
Discuss with management the Companys major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Companys risk assessment and risk management policies.
13.
Discuss with the Auditor the matters required to be discussed relating to the conduct of any audit, in particular:
(a)
The adoption of, or changes to, the Companys significant auditing and accounting principles and practices as suggested by the Auditor, internal auditor or management.
(b)
Any difficulties encountered in the course of the audit work, including any restrictions on the scope of activities or access to requested information, and any significant disagreements with management.
Public Disclosure by the Company
14.
Review the Companys annual and quarterly financial statements, management discussion and analysis (MD&A) and press releases respecting earnings before the Board approves and the Company publicly discloses this information.
15.
Review the Companys financial reporting procedures and internal controls to be satisfied that adequate procedures are in place for the review of the Companys public disclosure of financial information extracted or derived from its financial statements, other than disclosure described in the previous paragraph, and periodically assessing the adequacy of those procedures.
16.
Review disclosures made to the Committee by the Companys Chief Executive Officer and Chief Financial Officer during their certification process of the Companys financial statements about any significant deficiencies in the design or operation of internal controls or material weaknesses therein and any fraud involving management or other employees who have a significant role in the Companys internal controls.
Manner of Carrying Out its Mandate
17.
Consult, to the extent it deems necessary or appropriate, with the Auditor, but without the presence of management, about the quality of the Companys accounting principles, internal controls and the completeness and accuracy of the Companys financial statements.
First Adopted by the Board: December 21, 2012
Last Amended by the Board: N/A
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18.
Request any officer or employee of the Company or the Companys outside counsel or Auditor to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee.
19.
Meet separately, to the extent it deems necessary or appropriate, with management, any internal auditor and the Auditor.
20.
Have the authority, to the extent it deems necessary or appropriate, to retain special independent legal, accounting or other consultants to advise the Committee advisors.
21.
Make periodic reports to the Board, as necessary.
22.
Review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for approval.
23.
Annually review the Committees own performance.
24.
Provide an open avenue of communication among the Auditor, the Companys financial and senior management and the Board.
25.
Not delegate these responsibilities other than to one or more independent members of the Committee the authority to pre-approve, which the Committee must ratify at its next meeting, non-audit services to be provided by the Auditor.
C.
Limitation of Audit Committees Role
While the Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Committee to plan or conduct audits or to determine that the Companys financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles and applicable rules and regulations. These are the responsibilities of management and the Auditor.
First Adopted by the Board: December 21, 2012
Last Amended by the Board: N/A
LAREDO RESOURCES, INC.
WHISTLE-BLOWER POLICY
General
Laredo Resources, Inc. (the Company) strives to maintain financial records and prepare financial statements and reports which comply with all applicable accounting principles and laws. In addition, the Company requires employees, officers and directors of the Company to observe high standards of business and personal ethics in the conduct of their duties and responsibilities. To that end, employees, officers and directors of the Company must practice honesty and integrity in fulfilling their responsibilities and comply with all applicable laws and regulations. Unlawful activity of any kind is prohibited.
Purpose
The goal of this Whistle-Blower Policy (the Policy) is to discourage illegal activity and business conduct that damages the Companys good name, business interests, and relationship with security holders, stakeholders and the community at large. This Policy provides an avenue for employees to raise concerns regarding improper conduct and questionable accounting, internal accounting controls or auditing matters and provides reassurance that they will be protected from reprisals or victimization for whistle-blowing in good faith.
Reporting Responsibility
It is the responsibility of all employees, officers and directors of the Company to report any suspected illegal or improper activities and any concerns regarding accounting, financial statement disclosure, internal accounting or disclosure controls or auditing matters (a Complaint) in accordance with this Policy.
No Retaliation against Whistle-Blowers
No employee, officer or director of the Company making a Complaint in good faith shall suffer harassment, retaliation or adverse employment consequences. An employee that retaliates against someone who has made a Complaint in good faith is subject to discipline up to and including termination of employment.
Reporting Violations
This Policy is intended to encourage and enable employees, officers and directors to raise serious concerns within the Company rather than seeking resolution outside the Company. The Company has an open door policy and encourages employees to share their questions, concerns, suggestions or complaints with someone who can address them properly.
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For suspected accounting, financial statement disclosure, internal accounting or disclosure controls or auditing matters, including fraud or securities law violations, individuals should directly file a Complaint with the Chairman of the Companys Audit Committee. A sample Complaint Form is attached hereto as Exhibit A. Completed forms should be sent to the Chairman of the Audit Committee in a sealed envelope marked To be opened only by the Audit Committee. The Audit Committee will retain all Complaint Forms for no less than seven years.
Chairman of the Companys Audit Committee
The Chairman of the Companys Audit Committee is responsible for investigating all reported Complaints.
Resolution of Complaints
The Audit Committee shall address all reported Complaints. The Chairman of the Companys Audit Committee shall immediately notify the Audit Committee of any Complaint and work with the Audit Committee until the matter is resolved.
Investigations into Complaints will be conducted as quickly as possible, taking into account the nature and complexity of the Complaint and the issues raised therein.
Acting in Good Faith
Anyone filing a Complaint must be acting in good faith and have reasonable grounds for believing the information disclosed indicates illegal or improper activity or constitutes a questionable accounting or auditing matter. Any allegations that prove not to be substantiated and which prove to have been made maliciously or knowingly to be false will be viewed as a serious disciplinary offence.
Confidentiality
Complaints may be submitted on a confidential basis by the complainant or may be submitted anonymously. Complaints will be kept confidential to the extent possible, consistent with the need to conduct an adequate investigation.
The Audit Committee will treat all Complaints as confidential and privileged to the fullest extent permitted by law. The Audit Committee will exercise particular care to keep confidential the identity of any person making a Complaint under this procedure until a formal investigation is launched. Thereafter, the identity of the person making the Complaint may be kept confidential, if requested, unless:
(i)
such confidentiality is incompatible with a fair investigation;
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(ii)
there is an overriding reason for identifying or otherwise disclosing the identity of the person; or
(iii)
such disclosure is required by law.
In such an instance, the person making the Complaint will be so informed in advance of them being identified in connection with the Complaint. Where disciplinary proceedings are invoked against any individual following a Complaint, the Company will normally require the name of the person making the Complaint to be disclosed to the person subject to such proceedings.
The Company encourages individuals to put their name to any Complaint they make, but any person may also make anonymous Complaints. In responding to an anonymous Compliant, the Company will pay due regard to fairness to any individual named in the Complaint, the seriousness of the issue raised, the credibility of the information or allegations in the Complaint and the prospects of an effective investigation and discovery of evidence.
This Policy encourages employees to put their names to allegations because appropriate follow-up questions and investigation may not be possible unless the source of the information is identified. Reported violations or suspected violations expressed anonymously will be investigated, but consideration will be given to the following factors:
(i)
the seriousness of the issue;
(ii)
the creditability of the concern; and
(iii)
the likelihood of confirming the allegation from a reliable source.
Effective Date
This Policy is in effect as of December 21, 2012.
The Board of Directors reserves the right to modify or amend this Policy at any time as it may deem necessary.
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EXHIBIT A
COMPLAINT FORM
Case Number: _______________________
Name: __________________________
Tel: _______________________________
E-mail:__________________________
Department: _________________________
Supervisor: _______________________
Type of Violation: Legal Accounting/Auditing Breach of a Company Policy Retaliation
Date Caller became aware of potential violation: _______________________________________
Violation is: Ongoing Completed Unclear whether ongoing or completed
Department suspected of violation: _________________________________________________
Individual(s) suspected of violation: _________________________________________________
Describe all of the relevant facts of the violation:
__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
How did Caller become aware of the violation?
__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
Steps taken by Caller prior to contact:
____________________________________________________________________________________________________________________________________________________________
Who, if anyone, may be harmed or affected by the violation?
______________________________________________________________________________
If violation is legal, estimate amount of loss to the Company as a result of violation:
Actual: _________________________ Potential: ___________________________
If the violation relates to accounting/auditing matter, estimate the amount of the misreporting and indicate the affected category (or categories) of misreporting:
Amount _________________________
Category:
Assets
Liabilities
Expenses
Revenues
Valuation
Equity
Provide any suggestions for remedying the violation:
____________________________________________________________________________________________________________________________________________________________
Do you wish to be contacted by the investigation officers regarding the status of the investigation?
Yes No
CORPORATE GOVERNANCE
National Policy 58-101 Disclosure of Corporate Governance Practices of the Canadian securities administrators requires the Corporation to annually disclose certain information regarding its corporate governance practices. That information is disclosed below.
Board of Directors
The Board has responsibility for the stewardship of the Corporation including responsibility for strategic planning, identification of the principal risks of the Corporations business and implementation of appropriate systems to manage these risks, succession planning (including appointing, training and monitoring senior management), communications with investors and the financial community and the integrity of the Corporations internal control and management information systems.
The Board sets long term goals and objectives for the Corporation and formulates the plans and strategies necessary to achieve those objectives and to supervise senior management in their implementation. The Board delegates the responsibility for managing the day-to-day affairs of the Corporation to senior management but retains a supervisory role in respect of, and ultimate responsibility for, all matters relating to the Corporation and its business. The Board is responsible for protecting shareholders interests and ensuring that the incentives of the shareholders and of management are aligned.
As part of its ongoing review of business operations, the Board reviews, as frequently as required, the principal risks inherent in the Corporations business including financial risks, through periodic reports from management of such risks, and assesses the systems established to manage those risks. Directly and in its capacity as the Audit Committee, the Board also assesses the integrity of internal control over financial reporting and management information systems.
In addition to those matters that must, by law, be approved by the Board, the Board is required to approve any material dispositions, acquisitions and investments outside the ordinary course of business, long-term strategy, and organizational development plans. Management of the Corporation is authorized to act without Board approval, on all ordinary course matters relating to the Corporations business.
The Board also monitors the Corporations compliance with timely disclosure obligations and reviews material disclosure documents prior to distribution.
The Board is responsible for selecting the President and appointment senior management and for monitoring their performance.
The Board currently consists of a single member, Robert Gardner. Mr. Gardner is not considered an independent director because he also serves as the Corporations President and CEO and is its principal stockholder.
Directorships
Mr. Gardner, our sole director, is also a director of Olie Inc., a reporting issuer under United States securities laws.
Orientation and Continuing Education
The Board does not currently have any formal procedures in place to provide for the orientation or continuing education of its directors.
Ethical Business Conduct
The Board does not currently have a written Code of Conduct or Ethics for its directors, though it may adopt such a formal written policy if it expands beyond its current sole member, Robert Gardner.
The Board must also comply with the conflict of interest provisions of Chapter 78 of the Nevada Revised Statutes to ensure that directors exercise independent judgment in considering transactions and agreements in respect of which a director or Executive Officer has a material interest.
Nomination of Directors
Our Board of Directors does not maintain a nominating committee. As a result, no written charter governs the director nomination process. Our size and the size of our Board, at this time, do not require a separate nominating committee.
When evaluating director nominees, our directors consider the following factors:
- | The appropriate size of our Board of Directors; |
- | Our needs with respect to the particular talents and experience of our directors; |
- | The knowledge, skills and experience of nominees, including experience in finance, administration or public service, in light of prevailing business conditions and the knowledge, skills and experience already possessed by other members of the Board; |
- | Experience in corporate and political affairs; |
- | Experience with accounting rules and practices; and |
- | The desire to balance the benefit of continuity with the periodic injection of the fresh perspective provided by new Board members. |
Our goal is to assemble a Board that brings together a variety of perspectives and skills derived from high quality business and professional experience. In doing so, the Board will also consider candidates with appropriate non-business backgrounds.
Other than the foregoing, there are no stated minimum criteria for director nominees, although the Board may also consider such other factors as it may deem are in our best interests as well as our stockholders. In addition, the Board identifies nominees by first evaluating the current members of the Board willing to continue in service. Current members of the Board with skills and experience that are relevant to our business and who are willing to continue in service are considered for re-nomination. If any member of the Board does not wish to continue in service or if the Board decides not to re-nominate a member for re-election, the Board then identifies the desired skills and experience of a new nominee in light of the criteria above. Current members of the Board are polled for suggestions as to individuals meeting the criteria described above. The Board may also engage in research to identify qualified individuals. To date, we have not engaged third parties to identify or evaluate or assist in identifying potential nominees, although we reserve the right in the future to retain a third party search firm, if necessary. The Board does not typically consider shareholder nominees because it believes that its current nomination process is sufficient to identify directors who serve our best interests.
Compensation
The Board does not have any formal procedures for determining the compensation of the directors or the CEO at this time.
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Other Board Committees
The Board does not have any separately-designated standing committees, as it currently consists of a single member, Robert Gardner.
Assessments
The Board has not, as yet, adopted any formal procedures for regularly assessing the effectiveness of the Board, its Committees or individual directors with respect to their effectiveness and contributions.
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AUDIT COMMITTEE
National Instrument 52-110 Audit Committees (NI 52-110) of the Canadian securities administrators requires the Audit Committee of the Board to meet certain requirements. It also requires the Company to disclose in this Circular certain information regarding the Audit Committee. That information is disclosed below.
Overview
The Company does not have a separately-designated standing Audit Committee. The entire Board of Directors performs the functions of an Audit Committee. The Board approves the selection of the Companys independent accountants and meets and interacts with the independent accountants to discuss issues related to financial reporting. In addition, the Board reviews the scope and results of the audit with the independent accountants, reviews with management and the independent accountants our annual operating results, considers the adequacy of the Companys internal accounting procedures and considers other auditing and accounting matters including fees to be paid to the independent auditor and the performance of the independent auditor.
The Audit Committees Charter
The Board has adopted a Charter for the Audit Committee which sets out the Committees mandate, organization, powers and responsibilities. The Charter is attached as an Exhibit to this Form 10-K.
Composition of the Audit Committee
We do not have a separately-designated standing Audit Committee. The entire Board of Directors, which currently consists of a single member, performs the functions of an Audit Committee.
The following table sets out the names of the members of the Audit Committee and whether they are officers or employees, independent or financially literate.
Name of Member | Officer or Employee | Independent (1) | Financially Literate (2) |
Robert Gardner | President and CEO | No | Yes |
(1)
To be considered to be independent, a member of the Committee must not have any direct or indirect material relationship with the Company. A material relationship is a relationship which could, in the view of the Board, reasonably interfere with the exercise of a members independent judgment.
(2)
To be considered financially literate, a member of the Committee must have the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Companys financial statements.
Relevant Education and Experience
The education and experience of each member of the Audit Committee that is relevant to the performance of his responsibilities as an Audit Committee member and, in particular, any education or experience that would provide the member with:
·
an understanding of the accounting principles used by the Company to prepare its financial statements;
·
the ability to assess the general application of such accounting principles in connection with the accounting for estimates, accruals and reserves;
·
experience preparing, auditing, analysing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the Companys financial statements, or experience actively supervising one or more persons engaged in such activities; and
·
an understanding of internal controls and procedures for financial reporting,
are as follows:
Name of Member | Education | Experience |
Robert Gardner | B.A., Cambridge University (1961); LLB, Cambridge University (1962); MA, Cambridge University (1965); LLM, Cambridge University (1995) | Former officer and director of, and investor in, various energy and mineral exploration companies and, as such, he has reviewed and analysed numerous financial statements. |
Audit Committee Oversight
Since the commencement of the Companys most recently completed financial year, there has not been a recommendation of the Audit Committee to nominate or compensate an external auditor which was not adopted by the Board.
Reliance on Exemptions in NI 52-110 regarding
De Minimis Non-audit Services or on a Regulatory Order Generally
Since the commencement of the Companys most recently completed financial year, the Company has not relied on:
1.
the exemption in section 2.4 (De Minimis Non-audit Services) of NI 52-110 (which exempts all non-audit services provided by the Companys auditor from the requirement to be pre-approved by the Audit Committee if such services are less than 5% of the auditors annual fees charged to the Company, are not recognized as non-audit services at the time of the engagement of the auditor to perform them and are subsequently approved by the Audit Committee prior to the completion of that years audit); or
2.
an exemption from the requirements of NI 52-110, in whole or in part, granted by a securities regulator under Part 8 (Exemptions) of NI 52-110.
Pre-Approval Policies and Procedures
The Audit Committee has not adopted specific policies and procedures for the engagement of non-audit services.
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External Auditor Service Fees (By Category)
The following table discloses the fees billed to the Company by its external auditor during the last two financial years.
Financial Year Ending August 31 | Audit Fees (1) | Audit Related Fees (2) | Tax Fees (3) | All Other Fees (4) |
2012 | $4,000 | $0 | $1,700 | $0 |
2011 | $5,000 | $0 | $0 | $0 |
(1)
The aggregate fees billed for audit services.
(2)
The aggregate fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Companys financial statements and are not disclosed in the Audit Fees column.
(3)
The aggregate fees billed for tax compliance, tax advice, and tax planning services. These services involved the preparation of an annual tax return to be filed with the U.S. Internal Revenue Service.
(4)
The aggregate fees billed for professional services other than those listed in the other three columns.
Reliance on Exemptions in NI 52-110 regarding
Audit Committee Composition & Reporting Obligations
Since the Company was a Venture Issuer at the end of its last financial year, it relies on the exemption contained in section 6.1 of NI 52-110 from the requirements of Part 3 Composition of the Audit Committee (as described in Composition of the Audit Committee above) and Part 5 Reporting Obligations of NI 52-110 (which requires certain prescribed disclosure about the Audit Committee in the Companys Annual Information Form, if any).
Complaints
The Audit Committee has not, at this time, established a written Whistleblower Policy. The Audit Committee will retain as part of its records, any information, complaints or concerns received. Furthermore, it will keep a written record of all such reports or inquiries and make quarterly reports on any ongoing investigation which will include steps taken to satisfactorily address each complaint.
The Audit Committee has established a written Whistleblower Policy which creates procedures for the confidential and anonymous submission by employees of complaints and concerns regarding the Companys accounting, auditing and financial reporting procedures and obligations, without fear of retaliation of any kind.
The Policy provides that if an employee has any information, complaints or concerns regarding such matters being questionable, incorrect, misleading or fraudulent they are urged under the Policy to present such information, complaints or concerns to the Audit Committee, without regard to the position of the persons responsible for the subject matter of the information, complaint or concern. Promptly following the receipt of any information, complaints and concerns submitted to it, the Audit Committee will investigate each matter and take appropriate corrective actions.
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