UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-K
x(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year endedAugust 31, 2011[ ]2012
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____to _____
COMMISSION FILE NUMBER000-53556
YATERRA VENTURES CORP.
(Exact
(Exact name of registrant as specified in its charter)
| NEVADA | | 73-3249571 |
| (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
| | |
| 240 Martin Street, #3 | | |
| Blaine, WA | | 98230 |
| (Address of principal executive offices) | | (Zip Code) |
(360) 510-8998
(416) 792 - 5555
Issuer's telephone number
Securities registered under Section 12(b) of the Exchange Act:NONE.N/A.
Securities registered under Section 12(g) of the Exchange Act:Common Stock, $0.001 Par Value Per Share. Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act.
Yes [ ] oNo [X]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 [ ] oNo [X]x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X]o No [ ]x
Indicate by check mark whether the registrant has submitted electronically and posted on it’s corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.
Yes [ ]o No [ ]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 registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] | o | Accelerated filer [ ] | o |
Non-accelerated filer [ ] (Do | o | Smaller reporting company | x |
| (Do not check if a smaller reporting company) | Smaller reporting company [ X ] | | |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes [ ] oNo [X]x
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 sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter:
$328,500 $482,658 as of February 28, 2011,29, 2013 basedon a price of $0.45,$0.0029, being the last price at which the registrant sold shares of its common stock prior to that date.Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.date:
As of January 17, 2012,November 20, 2013, the Registrant had 1,630,0001,588,288,119 shares of common stock outstanding.
outstanding.
| YATERRA VENTURES CORP. |
| ANNUAL REPORT ON FORM 10-K |
FOR THE YEAR ENDED AUGUST 31, 20112012 |
| TABLE OF CONTENTS |
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Annual Report constitute "forward-looking statements.” These statements, identified by words such as “plan,” "anticipate,” "believe,” "estimate,” "should,” "expect" and similar expressions include our expectations and objectives regarding our future financial position, operating results and business strategy. These statements reflect the current views of management with respect to future events and are subject to risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from those described in the forward-looking statements.
Such risks and uncertainties include those set forth under the caption, "Part I - Item 1A. Risk Factors,” and elsewhere in this Annual Report.Forward looking statements are based on the reasonable assumptions, estimates, analysis and opinions of management made in light of its experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable at the date the such statement are made.
We intend to discuss in our Quarterly Reports and Annual Reports any events or circumstances that occurred during the period to which such documents relate that are reasonably likely to cause actual events or circumstances to differ materially from those disclosed in this Annual Report. New factors emerge from time to time, and it is not possible for management to predict all of such factors and to assess in advance the impact of each such factor on the Company’s business or the extent to which any factor, or combination of such factors, may cause actual results to differ materially from those contained in any forwarding looking statement.
We advise you to carefully review the reports and documents we file from time to time with the United States Securities and Exchange Commission (the “SEC”), particularly our periodic reports filed with the SEC pursuant to the Securities Exchange Act of 1934 (the "Exchange Act").
As used in this Annual Report, the terms “we,” “us,” “our,” “Yaterra,”“we”, “us”, “our”, and the “Company” refer to Yaterra Ventures Corp., unless otherwise indicated. All dollar amounts in this Annual Report are expressed in U.S. dollars, unless otherwise indicated.
We were incorporated on November 20, 2006
pursuant to the laws of the State ofin Nevada.
We are
Until May 2012 we were an exploration stage company engaged in the acquisition and exploration of mineral properties.oil, gas and minerals. In connection with the share exchange that occurred in May 2012, we expanded our operations to include oil and gas exploration. We primarily concentrate on the acquisition of hydrocarbon leases, interests and properties in the Permian Basin and the Bend Arch-Fort Worth Basin. Currently, we hold a 100% interest in two mineral properties that we call the “Blue Jack Property” and the “Minnie Claim”. The Blue Jack Property is comprised of 10 mineral claims covering approximately 206 acres located in Humboldt County, Nevada. The Minnie Claim covers an area of 20 acres, located in the Leecher Creek Mining Division, Washington State. We plan to focus our resources on the (i) Blue Jack Property in order to assess whether it possesses mineral deposits of gold, silver, copper and rare earth minerals capable of commercial extraction.extraction and (ii) acquiring oil and gas properties. To date, we have not acquired any oil or gas leases due to lack of capital.
In September 2011, we allowed our option to acquire up to a 60% interest in the Frances Property located in the Vancouver Mining Division, British Columbia to lapse. We made this determination in order to focus our financial resources on implementing an exploration program on the Blue Jack Property.
In November 2011, we completed a preliminary rock sampling program on the Blue Jack Property. The results of this initial program indicated that the Blue Jack Property contained anomalous values of rare earth minerals. Based on these results, we plan to commence Phase I of the Blue Jack exploration program in Spring 2012. See “Properties – Blue Jack Property – Exploration Program.”
On May 21, 2012, we completed the acquisition of Pure Spectrum Oil, Inc. (“Pure Spectrum”), a company incorporated under the laws of the State of Nevada, in the United States of America, pursuant to which we acquired all of the issued and outstanding common shares of Pure Spectrum from its shareholders in exchange for the issuance of a total of 4,000,000 shares of our common stock and the assumption of amounts payable in the amount of $1,035,068. As a result of the acquisition of the Pure Spectrum shares, we are also now engaged in the business of oil and gas exploration.
For accounting purposes, the acquisition of Pure Spectrum is being accounted for at historical carrying values in a manner similar to acquisition under common control method since our Chief Executive Officer and controlling shareholder is also the Chief Executive Officer and controlling shareholder of Pure Spectrum. Transfers or exchanges of equity instruments between entities under common control are recorded at the carrying amount of the transferring entity at the date of transfer with no goodwill or other intangible assets recognized. We did not recognize a gain or loss on the acquisition of Pure Spectrum because this acquisition is accounted for as an acquisition under common control. Our consolidated financial statements and reported results of operations reflect the Pure Spectrum carryover values, and our reported results of operations and stockholders’ equity have been retroactively restated for all periods presented to reflect the operations of Pure Spectrum and the Company as if the acquisition had occurred on May 21, 2012, the date the Company and Pure Spectrum commenced common control. All intercompany accounts and balances have been eliminated in consolidation.
In the third Fiscal Quarter of 2013, we expanded our operations into digital media. We plan to release our expanded business plan in the first fiscal quarter of 2014, in conjunction with our launch. However, to date our core business will remain Oil, Gas and Mineral Exploration.
We have not earned any revenues to date. We do not anticipate earning revenues until such time as we enter into commercial production of our mineral properties. We are presently in the exploration stage of our business and we can provide no assurance that we will discover commercially exploitable levels of mineral resources on our properties, or if such deposits are discovered, that we will enter into further substantial exploration programs.
Company Summary
Introduction and Business
We are an oil and gas exploration and exploitation corporation focused on acquisition and production in and around the Permian Basin and the Bend Arch-Fort Worth Basin (collectively the “Basins”). Containing one of the world’s thickest deposits of rocks from the Permian geologic period, the Permian Basin spans approximately Two Hundred Fifty (250) miles wide and Three Hundred (300) miles long. It is largely contained in the western part of Texas .
The Bend Arch-Fort Worth Basin is a geological system covering Fifty-Four Thousand (54,000) square miles, primarily comprised within north-central Texas and southwestern Oklahoma (see image on the left). The United States Geological Survey estimated an average of Twenty-Six Trillion Seven Hundred Billion (26,700,000,000,000) cubic feet of undiscovered natural gas and a mean of One Billion One Hundred Million (1,100,000,000) barrels of undiscovered natural gas liquids in the Bend Arch-Fort Worth Basin. According to the United States Geological Survey. National Assessment of Oil and Gas Fact Sheet. 2003. Web. 14 June 2011, the market for oil hydrocarbons and petroleum in the United States has grown exponentially, creating an unprecedented demand for refined oil and gas. We plan to launch an operating infrastructure for the profitable production of oil and gas through a sustainable business model for the acquisition and retention of valuable leases, wells and other related properties.
We plan to seek funding to procure long-term leases and the equipment necessary for gainful drilling. We intend to enter into operating agreements for the production of oil and gas through the existing orphan well program with the Railroad Commission of Texas on acquired properties, sell existing interests and rights to leases and properties, and acquire new interests and properties to generate a base cash-flow. However, they can be no assurance that we will be able to obtain financing for these leases.
We expect to focus our search for petrochemicals on distressed and orphaned oil and gas properties near areas of proven production. The Railroad Commission of Texas identifies such wells as “non-compliant” properties. These wells have been inactive for a minimum of twelve (12) months with the responsible operator's Organizational Report (“Form P-5”) delinquent for more than Twelve (12) months. In order to obtain the right, title and related interest in these wells, we must have an active Form P-5 and provide a good faith claim to operate the wells upon request. To date, we do not have an active Form P-5 and there can be no assurance that we will obtain an active P-5.
It should be noted that the Form P-5 process is as follows according to Railroad Commission of Texas Statewide Rule 1, revised February 1986 Who Is To File Form P-5: any entity, i.e., person, firm, partnership, joint stock association, corporation, or any other organization, domestic or foreign, operating wholly or partially within this state, acting as principal or agent for another, for the purpose of performing operations within the jurisdiction of the Commission, as shown in Statewide Rule 1. When To File Form P-5: Initial Filing - the initial Form P-5 must be filed prior to beginning the first operation that is within Commission jurisdiction or when an organization name is being changed. This initial filing will cover all subsequent operations.”
Purchasing orphaned and distressed wells is common practice in the oil and gas industry. There is direct competition from both smaller and larger oil producers distributing to the One Hundred Forty-Eight (148) refineries in the United States.
Yaterra and the Oil and Gas Industry
According to Alex Epstein’s Four Dirty Secrets about Clean Energy. 2011 and Steve Hargreaves. Oil Demand to Hit Highest Level Ever. 2011, the demand for oil and natural gas has increased in recent years and is expected to increase in the future. Consistent with this trend consumption of oil in the United States is projected to rise from Eighteen Million Five Hundred Fifty Thousand (18,550,000) barrels of oil per day in 2012 to Eighteen Million Six Hundred Sixty Nine Thousand (18,690,000) barrels of oil per day in 2014 as stated by the United States. Energy Information Administration. Short-Term Energy Outlook. The average price of imported crude oil for refineries in the United States is expected to decrease from the 2013 average of Ninety-Nine Dollars and Forty-Seven Cents ($99.47) per barrel to Ninety-Six Dollars and Ninety-Nine Cents ($96.99) per barrel in 2014.
In addition, the United States Energy Information Administration. Short-Term Energy Outlook projects natural gas production to increase from 70 bcf/d in 2013 to 70.4 Bcf/d in 2014, which is an increase from 69.2 Bcf/d in 2012.
Significant Challenges
Our lack of operating capital and stretched cash-flow impose both short and long-term challenges. Acquiring an orphaned well requires an active Form P-5 Organization Report, which details an applicant’s operations. This form must be filed with the Texas Railroad Commission (“TRRC”) by any entity or person operating under the commission of the TRRC within the State of Texas. According to the Railroad Commission’s website, we must be a “Bonded Operator” and have a good faith claim to operate acquired wells. Furthermore, the Railroad Commission of Texas. Instructions: Individual & Blanket Performance Bonds Letters of Credit or Cash Deposits. Austin, TX. published July 2011, requires that a Blanket Performance Bond be submitted to cover all wells and operations. The minimum amount for a Blanket Performance Bond is Twenty-Five Thousand Dollars ($25,000.00) which covers acquisition and operation of up to Ten (10) wells. The equipment, maintenance and general overhead necessary to produce oil at an efficient rate requires significant additional working capital.
We also anticipate possible legal and regulatory challenges. Expenditures of time and resources may be required in accordance with various state and federal compliance laws, including licensing and operating requirements. Crude oil and natural gas reserve engineering is a subjective process that is inherently risky. Various uncertainties exist when estimating quantities of proved crude oil and natural gas reserves. Accordingly, estimating underground accumulations of crude oil and natural gas cannot be precisely measured. The accuracy of any reserve estimate is the function of the quality of available data and engineering and geological interpretation. Numerous market uncertainties may impact our performance, including future hydrocarbon production, changes in the price of oil, availability of indispensible equipment and services, and competitors with greater financial resources.
We are also subject to several categories of risk associated with development stage activities.
Operations and Services
Operational Goals
We are seeking to become a Bonded Operator, which will enable us to acquire the rights to orphaned wells and distressed properties through the Railroad Commission of Texas (“TRRC” or the “Commission”). Management believes that this method of acquiring assets will strategically position the Company to obtain the properties and leases at discounted rates, thus reserving cash for subsequent overhead and operational expenditures. Our short-term goal is to identify the orphaned and distressed properties retaining the highest expected rate of production, including the quality of the oil extracted and the progress of the previous owner’s well development.
Once sufficient funds for adequate working capital are received and the Blanket Performance Bond is filed with the TRRC allowing for the operation and acquisition of the orphaned wells and distressed properties, we expect to shift considerable resources to drilling and acquiring necessary equipment. We anticipate that with adequate capital the newly acquired wells will be fully operational and productive within months; however no assurance can be given as to the timing of such operations. We further expect to harmonize our plan for growth with production by retaining long-term operational staff and permanent corporate directors and officers.
Acquiring Orphaned Properties
Once we are funded and considered a Bonded Operator under Commission rules, we can acquire up to Ten (10) orphaned and distressed oil and gas properties. Based on projected costs and levels of oil and gas production, Management expects expansion to begin in Texas. To acquire more than Ten (10) wells, we must increase the amount of its Blanket Performance Bond to Fifty Thousand Dollars ($50,000.00) as expressly stated in the Railroad Commission of Texas. Instructions: Individual & Blanket Performance Bonds Letters of Credit or Cash Deposits, July 2011
Becoming a Bonded Operator with the Commission enables us to acquire the rights and interests of the orphaned properties. Properties will be selected based on perceived risk, whereby Management will identify low to moderate risk oil and natural gas reserves by reviewing and reprocessing previously recorded seismic data, third-party geological data, and third-party engineering economic analysis. The TRRC releases a complete list of distressed wells available for acquisition monthly, and we expect to thoroughly review the available properties and make cognizant and calculated selections based upon our years of experience in the oil and natural gas industry.
Location
We plan to concentrate our initial expansion in the Bend Arch-Fort Worth Basin. We predict that both the Permian Basin and the Bend Arch-Fort Worth Basin contain worthwhile acquisition prospects. With adequate initial capital, of which there can be no assurance that we will receive, we plan to expand into several counties in Texas.
Regulatory Matters
The Railroad Commission of Texas (“TRRC”) has primary regulatory jurisdiction over the oil and natural gas industry, pipeline transporters, natural gas and hazardous liquid pipeline industry, natural gas utilities, the petroleum industry and coal and uranium surface mining operations.
Acquiring an orphaned well requires an active Organization Report, or Form P-5. This form details an applicant’s operations and must be filed with the TRRC by any entity or person operating under the commission of the TRRC within the State of Texas. Furthermore, we must be a “bonded operator” and have a good faith claim to operate the acquired wells in order to acquire an orphaned well. At this present time, we have yet to acquire orphan wells.
An operator that acquires an orphan well is responsible for regulatory compliance. The TRRC requires that any wells acquired must be properly plugged pursuant to Statewide Rule 14. The acquiring operator assumes responsibility for the physical operation and control of the wells and the duty to comply with all the Commission’s rules and filings requirements.
Compliance with Regulation
There are several governmental regulations that materially restrict mineral exploration. We may be required to obtain work permits, post bonds and perform remediation work for any physical disturbance to the land in order to comply with these laws. If we enter the production phase, the cost of complying with permit and regulatory environment laws will be greater because the impact on the project area is greater. Permits and regulations will control all aspects of the production program if the project continues to that stage. Examples of regulatory requirements include:
| | (i) | Water discharge will have to meet drinking water standards; |
| | (ii) | Dust generation will have to be minimal or otherwise re-mediated; |
| | (iii) | Dumping of material on the surface will have to be re-contoured and re-vegetated with natural vegetation; |
| | (iv) | An assessment of all material to be left on the surface will need to be environmentally benign; |
| | (v) | Ground water will have to be monitored for any potential contaminants; |
| | (vi) | The socio-economic impact of the project will have to be evaluated and if deemed negative, will have to be re-mediated; and |
| | (vii) | There will have to be an impact report of the work on the local fauna and flora including a study of potentially endangered species. |
We are an exploration stage company. We compete with other mineral resource exploration and development companies for financing and for the acquisition of new mineral properties. Many of the mineral resource exploration and development companies with whom we compete have greater financial and technical resources than we do. Accordingly, these competitors may be able to spend greater amounts on acquisitions of mineral properties of merit, on exploration of their mineral properties and on development of their mineral properties. In addition, they may be able to afford greater geological expertise in the targeting and exploration of mineral properties. This competition could result in competitors having mineral properties of greater quality and interest to prospective investors who may finance additional exploration and development. This competition could adversely impact our ability to finance further exploration and to achieve the financing necessary for us to develop our mineral properties. Research and Development Expenditures
We have not incurred any research expenditures since our incorporation.
We do not own, either legally or beneficially, any patents or trademarks.
We have no employees other than our sole executive officerChief Executive Officer, Cedric Atkinson and directors.our interim Chief Financial Officer, Gregory K. Clements. We conduct our business largely through consultants.The following are some of the important factors that could affect our financial performance or could cause actual results to differ materially from estimates contained in our forward-looking statements. We may encounter risks in addition to those described below. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, may also impair or adversely affect our business, financial condition or results of operation.
4
If we do not obtain additional financing, our business will fail.
As at August 31, 2011, we had no cash on hand. Our ability to implement our exploration program on the Blue Jack Property will be subject to our obtaining additional financing. Our ability to obtain additional financing could be subject to a number of factors outside of our control, including the results from our exploration program, and any unanticipated problems relating to our mineral exploration activities, including environmental assessments and additional costs and expenses that may exceed our current estimates. Our Board of Directors approved an offering of up to $100,000 of 10% convertible notes (the “Offering”) pursuant to Regulation S of the Securities Act of 1933 (the “Securities Act”). If we are unable to obtain additional financing in the amounts and when needed, our business could fail.
Because of the unique difficulties and uncertainties inherent in mineral exploration ventures, we face a high risk of business failure.
Investors should be aware of the difficulties normally encountered by new mineral exploration companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration of the mineral properties that we plan to undertake. These potential problems include, but are not limited to, unanticipated problems relating to exploration, and additional costs and expenses that may exceed current estimates. Our mineral properties do not contain a known body of commercial ore and, therefore, any program conducted on our mineral properties would be an exploratory search of ore. There is no certainty that any expenditures made in the exploration of our mineral properties will result in discoveries of commercial quantities of ore. Most exploration projects do not result in the discovery of commercially mineable deposits of ore. Problems such as unusual or unexpected formations and other conditions are involved in mineral exploration and often result in unsuccessful exploration efforts. If the results of our exploration program do not reveal viable commercial mineralization, we may decide to abandon our claim and acquire new claims for new exploration. The acquisition of additional claims will be dependent upon our possessing sufficient capital resources to purchase such claims. If we do not have sufficient capital resources and are unable to obtain sufficient financing, we may be forced to abandon our operations.
We have no known mineral reserves and if we cannot find any, we may have to cease operations.
We are in the initial phase of our exploration program for the Blue Jack Property. It is unknown whether this property contains viable mineral reserves. If we do not find a viable mineral reserve, or if we cannot exploit the mineral reserve, either because we do not have the money to do it or because it will not be economically feasible to do it, we may have to cease operations and investors may lose their investment. Mineral exploration is a highly speculative endeavor. It involves many risks and is often non-productive. Even if mineral reserves are discovered on our properties our production capabilities will be subject to further risks and uncertainties including:
| (i) | Costs of bringing the property into production including exploration work, preparation of production feasibility studies, and construction of production facilities, all of which we have not budgeted for;
|
| (ii) | Availability and costs of financing;
|
| (iii) | Ongoing costs of production; and
|
| (iv) | Environmental compliance regulations and restraints.
|
The marketability of any minerals acquired or discovered may be affected by numerous factors which are beyond our control and which cannot be accurately predicted, such as market fluctuations, the lack of milling facilities and processing equipment near the Blue Jack Property and such other factors as government regulations, including regulations relating to allowable production, importing and exporting of minerals, and environmental protection.
5
We face significant competition in the mineral exploration industry.
We compete with other mining and exploration companies possessing greater financial resources and technical facilities than we do. Due to our weaker competitive position, we may have greater difficulty in hiring and retaining qualified personnel to conduct our planned exploration activities, which could cause delays in our exploration programs. In addition, there is significant competition for a limited number of mineral properties. Due to our weaker financial position, we may be unable to acquire rights to new mineral properties on a continuing basis.
Because of the inherent dangers involved in mineral exploration, there is a risk that we may incur liability or damages as we conduct our business.
The search for valuable minerals involves numerous hazards. As a result, we may become subject to liability for such hazards, including pollution, cave-ins and other hazards against which we cannot insure or against which we may elect not to insure. At the present time we have no coverage to insure against these hazards. The payment of such liabilities may result in our inability to complete our planned exploration program and/or obtain additional financing to fund our exploration program.
As we undertake exploration of our mineral properties, we will be subject to compliance with government regulations that may increase the anticipated cost of our exploration program.
There are several governmental regulations that materially restrict mineral exploration. We may be required to obtain work permits, post bonds and perform remediation work for any physical disturbance to the land in order to comply with these laws. If we enter the production phase, the cost of complying with permit and regulatory environment laws will be greater because the impact on the project area is greater. Permits and regulations will control all aspects of the production program if the project continues to that stage. Examples of regulatory requirements include:
| (i) | Water discharge will have to meet drinking water standards;
|
| (ii) | Dust generation will have to be minimal or otherwise re-mediated;
|
| (iii) | Dumping of material on the surface will have to be re-contoured and re-vegetated with natural vegetation;
|
| (iv) | An assessment of all material to be left on the surface will need to be environmentally benign;
|
| (v) | Ground water will have to be monitored for any potential contaminants;
|
| (vi) | The socio-economic impact of the project will have to be evaluated and if deemed negative, will have to be re-mediated; and
|
| (vii) | There will have to be an impact report of the work on the local fauna and flora including a study of potentially endangered species.
|
At this stage of our development, the annual cost of complying with regulatory requirements in the State of Nevada is expected to be minimal. There is a risk that new regulations could increase our costs of doing business and prevent us from carrying out our exploration program. We will also have to sustain the cost of reclamation and environmental remediation for all exploration work undertaken. Both reclamation and environmental remediation refer to putting disturbed ground back as close to its original state as possible. Other potential pollution or damage must be cleaned-up and renewed along standard guidelines outlined in the usual permits. Reclamation is the process of bringing the land back to its natural state after completion of exploration activities. Environmental remediation refers to the physical activity of taking steps to remediate, or remedy, any environmental damage caused. The amount of these costs is not known at this time as we do not know the extent of the exploration program that will be undertaken beyond completion of the recommended work program. If remediation costs exceed our cash reserves we may be unable to complete our exploration program and have to abandon our operations.
Because our executive officers and directors do not have formal training specific to the technicalities of mineral exploration, there is a higher risk that our business will fail.
None of our executive officers and directors has any formal training as a geologist. With the exception of Mr. Gorrill, our executive officers and directors have only limited training in the technical aspects of managing a mineral exploration company. With very limited direct training or experience in these areas, our management may not be fully aware of the specific requirements related to working within this industry. Our management's decisions and choices may not take into account standard engineering or managerial approaches mineral exploration companies commonly use. Consequently, our operations, earnings, and ultimate financial success could suffer irreparable harm due to management's lack of experience in this industry.
6
If we are unable to hire and retain key personnel, we may not be able to implement our business plan and our business will fail
Our success will largely depend on our ability to hire highly qualified personnel with experience in geological exploration. These individuals may be in high demand and we may not be able to attract the staff we need. In addition, we may not be able to afford the high salaries and fees demanded by qualified personnel, or may lose such employees after they are hired. Currently, we have not hired any key personnel. Our failure to hire key personnel when needed could have a significant negative effect on our business.
Because the prices of metals fluctuate, if the price of metals for which we are exploring decreases below a specified level, it may no longer be profitable to explore for those metals and we will cease operations.
Metal prices are determined by such factors as expectations for inflation, the strength of the United States dollar, global and regional supply and demand, and political and economic conditions and production costs in metals producing regions of the world. The aggregate effect of these factors on metal prices is impossible for us to predict. In addition, the prices of metals such as lead, zinc, copper, silver, gold or uranium are sometimes subject to rapid short-term and/or prolonged changes because of speculative activities. The current demand for and supply of these metals affect the metal prices, but not necessarily in the same manner as current supply and demand affect the prices of other commodities. The supply of these metals primarily consists of new production from mining. If the prices of the metals are, for a substantial period, below our foreseeable cost of production, it may not be economical for us to continue operations and investors could lose their entire investment.
Because our President, Secretary, Treasurer and Director, David K. Ryan, owns 55.2% of our outstanding common stock, investors may find that corporate decisions controlled by Mr. Ryan are inconsistent with the interests of other stockholders.
David K. Ryan, our President, Secretary, Treasurer and Director, controls 55.2% of our issued and outstanding shares of common stock. Accordingly, in accordance with our Articles of Incorporation and Bylaws, Mr. Ryan is able to control who is elected to our board of directors and thus could act, or could have the power to act, as our management. Since Mr. Ryan is not simply a passive investor, but is also our principal executive officer, his interests as an executive officer may, at times, be adverse to those of passive investors. Where those conflicts exist, our shareholders will be dependent upon Mr. Ryan exercising, in a manner fair to all of our shareholders, his fiduciary duties as an officer or as a member of our board of directors. Also, due to his stock ownership position, Mr. Ryan will have: (i) the ability to control the outcome of most corporate actions requiring stockholder approval, including amendments to our Articles of Incorporation; (ii) the ability to control corporate combinations or similar transactions that might benefit minority stockholders which may be rejected by Mr. Ryan to their detriment, and (iii) control over transactions between him and Yaterra.
We will likely conduct further offerings of our equity securities in the future, in which case our stockholders’ interest may become diluted.
Since our inception, we have relied on such sales of our common stock to fund our operations. We will likely be required to conduct additional equity offerings in the future to finance our current projects or to finance subsequent projects that we decide to undertake. If common stock is issued in return for additional funds, the price per share could be lower than that paid by our current stockholders. We anticipate continuing to rely on equity sales of our common stock in order to fund our business operations. If we issue additional stock, stockholders' percentage interest in us could become diluted.
The quotation price of our common stock may be volatile, with the result that an investor may not be able to sell any shares acquired at a price equal to or greater than the price paid by the investor.
Our stock is quoted on the OTC Bulletin Board under the symbol "YTRVE.” Companies quoted on the OTC Bulletin Board have traditionally experienced extreme price and volume fluctuations. In addition, our stock price may be adversely affected by factors that are unrelated or disproportionate to our operating performance. Market fluctuations, as well as general economic, political and market conditions such as recessions, interest rates or international currency fluctuations may adversely affect the market price of our common stock. As a result of this potential volatility and potential lack of a trading market, an investor may not be able to sell any of our common stock that they acquire at a price equal or greater than the price paid by the investor.
7
Because our stock is a penny stock, shareholders will be more limited in their ability to sell their stock.
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or quotation system. Because our securities constitute “penny stocks” within the meaning of the rules, the rules apply to us and to our securities. The rules may further affect the ability of owners of shares to sell our securities in any market that might develop for them. As long as the trading price of our common stock is less than $5.00 per share, the common stock will be subject to Rule 15g-9 under the Exchange Act. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that:
1. | contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading;
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2. | contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of securities laws;
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3. | contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price;
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4. | contains a toll-free telephone number for inquiries on disciplinary actions;
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5. | defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and
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6. | contains such other information and is in such form, including language, type, size and format, as the SEC shall require by rule or regulation.
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The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with: (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitably statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our stock.
We rent office space located at 240 Martin Street, #3, Blaine, Washington, 98230. The office space consists of 80 square
feet.feet that we rent at a monthly price of $316.
We currently do not own any physical property or any real property. We own a 100% interest in our lead mineral project called the Blue Jack Property. We also hold a 100% interest in another mineral property called the Minnie Claim.
8
Our lead mineral property is the Blue Jack Property. We acquired the Blue Jack Property in September 2008 for $16,000. The Blue Jack Property is comprised of 10 mineral claims, located in Humboldt County, Nevada. Each claim covers 20.67 acres for an aggregate 206.66 acres.
The Blue Jack Property is recorded with the Bureau of Land Management in the State of Nevada under the following name and record numbers:
Name of Mineral Claims | | Nevada NMC Number | | Expiry Date |
| PT 10 | | 984039 | | September 1, 20122013 |
| PT 11 | | 984040 | | September 1, 20122013 |
| PT 12 | | 984041 | | September 1, 20122013 |
| PT 13 | | 984042 | | September 1, 20122013 |
| PT 14 | | 984043 | | September 1, 20122013 |
| PT 15 | | 984044 | | September 1, 20122013 |
| PT 16 | | 984045 | | September 1, 20122013 |
| PT 17 | | 984046 | | September 1, 20122013 |
| PT 18 | | 984047 | | September 1, 20122013 |
| PT 19 | | 984048 | | September 1, 20122013 |
Federal regulations require a yearly maintenance fee to keep the claims in good standing. In accordance with Federal regulations, the Blue Jack Property is in good standing to September 1, 2012.2013. A yearly maintenance fee of $140 per claim is required to be paid to the Bureau of Land Management prior to the expiry date to keep the claims in good standing for an additional year. If we fail to pay the required amount of the maintenance fee of this exploration work, then our Blue Jack Property will lapse on September 1, 2012 and we willmay lose all interest that we have in the Blue Jack Property.9
As of this date, we have not made the current payment due to the Bureau of Land Management. We are currently reevaluating the project’s viability. If we do decide to proceed with these claims, we due stand a chance to lose all interest in these claims if we fail to pay the maintenance fee before the claims are purchased by a 3rd party.
Figure 1
Location of the Blue Jack Property
10
The Blue Jack Property is located in Humboldt County in northwestern Nevada. The property is located 102 miles northwest of Winnemucca, Nevada. Winnemucca is located 166 miles northeast of Reno, Nevada.
The property is easily accessible from Winnemucca by paved highway for 76 miles, then by a gravel road for 24 miles and then by a desert trail for 3 miles.
Average temperatures in the area range from 18°F in December to 95°F in July. The region is extremely dry, receiving only 7.9 inches of precipitation annually. An average of 1.1 inches of precipitation falls during the month of May. July is the driest month with a total average of 0.3 inches of precipitation.
The Blue Jack Property is located at the northern margin of the Black Rock Valley Desert along the eastern flanks of the transition between the Black Rock Range to the south and Pine Forest Range to the north. The valley floor is located at an elevation of approximately 4200 feet. Elevations on the property are moderate, ranging from 4600 to 5300 feet, and quickly rise to above 8650 feet in the mountains to the east of the property. The main showing and historic workings are located in the centre of the property at an elevation of 4875 feet.
The area consists of sagebrush and desert grass covered flats and hills typical of the Nevada desert. The region is well populated with desert jack rabbits and antelope.
The Blue Jack Property is located within the Varyville mining district of Humboldt County. This area is centered around Bartlett Peak between the Black Rock Range to the south and the Pine Forest Range to the north. The district and subsequent
townsitetown site were named after a lode discovery in the 1870’s. The Varyville district has been referred to in various publications over the years as the Columbia, the Leonard Creek and the Bartlett district.
Gold mining in the district was the dominant production with small amounts of copper, lead and silver reported. In 1953, Tungsten ore was produced on the Lincoln Greenhorn claims, which is approximately a half mile south of Bartlett peak.
Other properties throughout the district have extensive workings, but no recorded production of ore.
Records indicate that geologists conducted a sampling of a trench located on the Blue Jack Property in order to determine whether uranium mineralization existed on the property. Previous reports also indicated that the Resource Investigation Division of the US Atomic Energy Commission (“AEC”) located and investigated radioactive localities in the 1950’s. AEC geologists compiled detailed data on select uranium deposits, one of which was a showing on the Blue Jack Property.
The region in which the Blue Jack Property is found consists mainly of Tertiary volcanic rocks. The region also contains some metamorphosed fine clastic sedimentary formations mainly from the Triassic and Jurassic Periods. Sediments in the region are also overlain by basalts, tuffs and gravels. Older rocks have been intruded by several different bodies of granodiorites, quartz-monzonites and diorites from the Cretaceous and Tertiary Periods.
In the Pine Forest Range, several intrusive
stocksrocks are exposed, which indicates that the deposits in the region have a deep-seated source. The host rock for most of the deposits in the region is a metasedimentary and metavolcanic complex in fault contact with the core plutonic complex underlying the range. The deposits are virtually all structurally controlled. Faulting provided a conduit for the hydrothermal fluids to migrate, resulting in mineralization along the trend.
The Blue Jack Property is defined by diorites and granodiorites in fault contact with highly foliated and fractured shaley silicified limestones and metasediments. A strong shear zone defines the faulted contact, which strikes at 320 degrees and dips steeply to the northeast. The ground to the south of the property is overlain by Quaternary alluvium and boulders of basaltic and andesitic composition. Based on regional geological mapping, these are likely from the Triassic Period as well.
11
On the Blue Jack Property, there is mineralization exposed in a historic trench, being approximately 248 feet long by 33 feet wide, located along a strike with the fault contact. The fault is marked by intensely fractured limestones and metasediments in the foot wall and fractured granodiorites in the hanging wall to the west. Fault gouge is significantly abundant in many areas along the trench.
Faulting appears to be the controlling factor in mineralization. Copper mineralization appears to be consistent throughout the exposed fractured rocks. Jasper veining and chalcedony are present in the northern exposures of the trench, indicating a possibility that gold mineralization may exist on the property.
Our exploration program for the Blue Jack Property is expected to include the following:
Phase |
Recommended Exploration Program | Estimated
Cost |
Status |
Phase
Ia
| Detailed geological mapping and radiometric surveys and rock and soil sampling along grid.
| $25,700
| To be implemented in Spring 2012, subject to obtaining additional financing. |
Phase
Ib | Geophysical survey (IP and magnetometer).
| $43,050
| Planned for Spring 2012.
|
Phase
IIa | Conducting trenching along the fault zones.
| $40,500
| To be determined based on the Results of Phase 1a and 1b. |
Phase
IIb | Reverse circular drill testing of the property.
| $206,000
| To be determined based on the Results of Phase 1a and 1b. |
| Total Estimated Cost | $314,800 | |
| Phase | | Recommended Exploration Program | | Estimated Cost | | Status |
| Phase Ia | | Detailed geological mapping and radiometric surveys and rock and soil sampling along grid. | | $ | 25,700 | | To be reevaluated in the 4th quarter of 2013. A decision will be made subject to market conditions, demand and obtaining additional financing. |
| Phase Ib | | Geophysical survey (IP and magnetometer). | | $ | 43,050 | | To be reevaluated in the 4th quarter of 2013. A decision will be made subject to market conditions, demand and obtaining additional financing. |
| Phase IIa | | Conducting trenching along the fault zones. | | $ | 40,500 | | To be determined based on the Results of Phase 1a and 1b. |
| Phase IIb | | Reverse circular drill testing of the property. | | $ | 206,000 | | To be determined based on the Results of Phase 1a and 1b. |
| | | Total Estimated Cost | | $ | 315,250 | | |
In November 2011, we completed a preliminary rock sampling program on the Blue Jack Property. For this program, we obtained four rock samples in order to determine the appropriate target for Phase I of our exploration program. Results of the program showed a presence of rare earth minerals that
we believe justifies some follow up work. The samples were fire assayed by ALS Minerals located in Reno Nevada. Based on the above, we have elected to proceed with Phase Ia of our exploration program, subject to obtaining additional financing.
We acquired a 100% interest in the Minnie Claim in March 28, 2007 for $6,000 in cash. We have suspended our exploration program on the Minnie Claim in order to focus our resources on the Blue Jack Property.
The Minnie Claim is recorded with the Bureau of Land Management in the State of Washington under number 3115896. The Minnie Claim is in good standing until September 1, 2012.2013. In order to maintain the Minnie Claim in good standing we will need to pay $140 to the Bureau of Land Management on September 1, 2012.12
2013. As of this date, we have not made the current payment due to the Bureau of Land Management. We are currently reevaluating the projects viability. If we do decide to proceed with these claims, we due stand a chance to lose all interest in these claims if we fail to pay the maintenance fee before the claims are purchased by a third party. Figure 2
Location of the Minnie Claim
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The Minnie Mining Claim is located between the towns of Twisp and Carlton in Okanogan County, Washington. The center of the property is approximately 2.8 miles northeast of Carlton, within what is referred to as Leecher Canyon.
The property is accessible by a paved highway within 2.7 miles of the claim. A well maintained gravel road provides access to the Minnie Claim.
Mining history in the Cascades dates back to 1853 when placer gold was discovered in the Yakima Valley. This led to a brief gold rush in the area, and gold occurrences were reported throughout the Cascades. Placer gold was discovered in Okanogan River in 1860, which possibly led to the discovery of gold at nearby Gold Ridge and Leecher Canyon.
The area covered by the Minnie Claim has a recorded history of work dating back to 1949, when it was owned by Franklin Blocksom. Historical records indicate the property contains gold, silver, and zinc in a leached and honeycombed quartz vein located in metamorphic rocks. The vein is up to 3 feet wide, and was developed and explored by several open cuts including a 160 foot adit with a 55 foot winze, a 25 foot drift and a 30 foot stope.
The Minnie Claim is located within the North Cascade Range, and consists of an active volcanic arc superimposed upon a Tertiary-age bedrock. Recent uplift has created high topographic relief. The North Cascades are composed of faulted and folded Mesozoic and Paleozoic crystalline and metamorphic rocks and tertiary intrusive, volcanic and sedimentary rocks.
Regionally, the center of gold mining is found in the Republic Graben, located in the Republic District of Washington. As of 1989, records indicate that the district produced over 2.5 million ounces of gold and 14 million ounces of silver, mainly in epithermal systems related to the final stages of Eocene calc-alkaline volcanism. In the Okanogan County, gold mineralization occurs in a skarn on Buckhorn property which also contains bismuth and cobalt mineralization. Porphyry copper-molybdenum deposits have been drilled at Oroville and Keller. The Mount Tolman deposit at Keller is the third or fourth largest molybdenum reserve in the United States.
The Minnie Claim is underlain by Pre-Tertiary metamorphic rocks. Mineralization of the claim consists of gold, silver, and zinc minerals within epithermal quartz veins up to a meter in width.
Records indicate the leached and honeycomb quartz veins contain pyrite, chalcopyrite, sheelite and marcasite. The open structure of the quartz veins are entirely filled with sulfide mineralization.
Three rock samples were collected earlier in the year, indicating a potential for economic mineralization may exist on the property with elevated gold, silver, copper and zinc values.
Current State of Exploration Activities
We have suspended our exploration program on the Minnie Claim in order to focus our resources on the Blue Jack Property.
Prior to our suspension of the exploration program on the Minnie Claim, our consulting geologist had commenced Phase I of our exploration program. He collected nine rock samples from the Minnie Claim. The samples consisted of outcrop grabs across strike as well as float samples of mineralized veins near historical workings. These samples were sent to an independent laboratory for testing. In January 2009, we received the fire assay results on the rock samples and they indicated the occurrence of gold mineralization on the Minnie Claim. The fire assay results on the rock samples are summarized as follows:
14
Sample No.
| | Au Results
(oz/t) | | Ag Results
(oz/t) | | Cu Results
(%) | | Zn Results
(%) | |
ML001
| | n/a
(13 ppb) | | n/a
(<0.5 ppm) | | 0.08
(792 ppm) | | 0.38
(3810 ppm) | |
ML002
| | n/a
(10 ppb) | | n/a
(<0.5 ppm) | | 0.01
(134 ppm) | | 0.40
(3950 ppm) | |
ML003
| | 0.112
(3850 ppb) | | 1.823
(62.5 ppm) | | 0.02
(173 ppm) | | 0.04
(441 ppm) | |
ML004
| | 0.037
(1265 ppb) | | 3.208
(110 ppm) | | 0.28
(2800 ppm) | | 0.44
(4350 ppm) | |
ML005
| | 0.057
(1965 ppb) | | 0.645
(22.1 ppm) | | 0.06
(605 ppm) | | 0.05
(512 ppm) | |
ML006
| | 0.098
(3360 ppb) | | 15.779
(541 ppm) | | 0.65
(6480 ppm) | | | 3.70
| |
ML007
| | 0.063
(2170 ppb) | | 9.188
(315 ppm) | | 0.65
(6480 ppm) | | 0.77
(7720 ppm) | |
ML008
| | 0.010
(359 ppb) | | 0.505
(17.3 ppm) | | 0.11
(1080 ppm) | | 0.07
(716 ppm) | |
ML009
| | 0.028
(972 ppb) | | 1.350
(46.3 ppm) | | 0.15
(1450 ppm) | | 0.03
(347 ppm) | |
Note: Conversions to ounces per ton (oz/ton) on the tables above employ a factor of 34285.7 ppb equaling 1 troy ounce per short ton and 34.2857 ppm equaling 1 troy ounce per short ton.
| ITEM 3. | LEGAL PROCEEDINGS. |
We are not a party to any other legal proceedings and, to our knowledge, no other legal proceedings are pending, threatened or contemplated.
| ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.MINE SAFETY DISCLOSURE |
None.
15
Not applicable
| ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERSAND ISSUER PURCHASES OF EQUITY SECURITIES. |
The principal market for our common stock is the OTC Bulletin Board. Our shares commenced quotation on the OTC Bulletin Board on May 19, 2009 under the symbol “YTRV.” The following is the high and low bid information for our common stock during each fiscal quarter of our last two fiscal years.
QUARTER
| HIGH
($) | LOW
($) |
| 1stQuarter 2010 | 1.00 | 1.00 |
| 2ndQuarter 2010 | n/a | n/a |
| 3rdQuarter 2010 | n/a | n/a |
| 4thQuarter 2010 | 1.00 | 0.99 |
| 1stQuarter 2011 | 0.99 | 0.30 |
| 2ndQuarter 2011 | 1.00 | 0.30 |
| 3rdQuarter 2011 | 0.45 | 0.30 |
| 4thQuarter 2011 | 0.30 | 0.30 |
| | | HIGH | | | LOW | |
| QUARTER | | ($) | | | ($) | |
| |
| 1st Quarter 2011 | | | 0.99 | | | | 0.3 | |
| 2nd Quarter 2011 | | | 1 | | | | 0.3 | |
| 3rd Quarter 2011 | | | 0.45 | | | | 0.3 | |
| 4th Quarter 2011 | | | 0.3 | | | | 0.3 | |
| 1st Quarter 2012 | | | 0.51 | | | | 0.3 | |
| 2nd Quarter 2012 | | | 0.51 | | | | 0.51 | |
| 3rd Quarter 2012 | | | 0.51 | | | | 0.3 | |
| 4th Quarter 2012 | | | 0.5 | | | | 0.012 | |
| 1st Quarter 2013 | | | 0.0265 | | | | 0.0017 | |
| 2nd Quarter 2013 | | | 0.0099 | | | | 0.001 | |
| 3rd Quarter 2013 | | | 0.0039 | | | | 0.0002 | |
| 4th Quarter 2013 to date | | | 0.0003 | | | | 0.0001 | |
REGISTERED HOLDERS OF OUR COMMON STOCK
As of
Jaunuary 17, 2012,November 20, 2013, there were
916 registered holders of our common stock. We believe that a number of stockholders hold stock on deposit with their brokers or investment bankers registered in the name of stock depositories.
We have not declared any dividends on our common stock since our inception. There are no dividend restrictions that limit our ability to pay dividends on our common stock in our Articles of Incorporation or Bylaws. Chapter 78 of the Nevada Revised Statutes (the “NRS”), does provide certain limitations on our ability to declare dividends. Section 78.288 of Chapter 78 of the NRS prohibits us from declaring dividends where, after giving effect to the distribution of the dividend:
| (a) | we would not be able to pay our debts as they become due in the usual course of business; or |
| | |
| (b) | except as may be allowed by our Articles of Incorporation, our total assets would be less than the sum of our total liabilities plus the amount that would be needed, if we were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of stockholders who may have preferential rights and whose preferential rights are superior to those receiving the distribution. |
We have neither declared nor paid any cash dividends on our capital stock and do not anticipate paying cash dividends in the foreseeable future. Our current policy is to retain any earnings in order to finance the expansion of our operations. Our board of directors will determine future declaration and payment of dividends, if any, in light of the then-current conditions they deem relevant and in accordance with the NRS.
RECENT SALES OF UNREGISTERED SECURITIES
None.
On May 21, 2012, we issued, in advance, 10,000,000 common shares to our CEO. The shares vest 2,000,000 per annum over a 5 year term. These securities were issued pursuant to Section 4(a)(2) of the Securities Act of 1933. Our CEO represented hisr intention to acquire the securities for investment only and not with a view towards distribution, and he had been given adequate information about us to make an informed investment decision and he was an accredited investor. We did not engage in any general solicitation or advertising.
On May 21, 2012, we issued 4,000,000 common shares to Five Individuals for the acquisition of Pure Spectrum Oil, Inc. These securities were issued pursuant to Section 4(a)(2) of the Securities Act of 1933. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution, and that they were accredited investors. The holders were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising.
On June 6, 2012, we issued 1,900,000 common shares for consulting services valued at $950,000. These securities were issued pursuant to Section 4(a)(2) of the Securities Act of 1933. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution and that they were accredited investors. The holders were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising.
Between June and August, 2012, we issued 17,426,097 common shares for the settlement of $30,000 in debt. These securities were issued pursuant to Section 4(a)(2) of the Securities Act of 1933. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution and that they were accredited investors. The holders were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising.
During June 2012, we issued 750,000 shares upon the conversion of $37,500 convertible note payables. The 750,000 exchange was consummated and conversion shares were issued in reliance upon Section 3(a)(9) of the Securities Act of 1933.
During the year ended August 31, 2012, we issued a convertible notes in the aggregate principal amount of $135,000. The notes bear interest at 8% -36% per annum, are unsecured and are repayable one year after the issue date. The September note is convertible into shares of our common stock at a conversion price equal to 75% of the lowest trading price of our common stock during the 10 consecutive trading days prior to the conversion date. These securities were issued pursuant to Section 4(a)(2) of the Securities Act of 1933. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution and that they were accredited investors. The holders were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising.
On each of September 4, 2012 and March 29, 2013, we issued convertible notes in the principal amount of $25,000 and $20,000, respectively. The notes bear interest at 8% per annum, are unsecured and are repayable one year after the issue date. The September note is convertible into shares of our common stock at a conversion price equal to 50% of the lowest trading price of our common stock during the 10 consecutive trading days prior to the conversion date. The March note is convertible into shares of our common stock at a conversion price equal to 58% of the 3 day average of the lowest trading price of our common stock during the 10 consecutive trading days prior to the conversion date These securities were issued pursuant to Section 4(a)(2) of the Securities Act of 1933. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution and that they were accredited investors. The holders were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising. and that they were accredited investors.
On October 1, 2012, we issued an aggregate of 65,000,000 shares to three individuals as compensation for services. These securities were issued pursuant to Section 4(a)(2) of the Securities Act of 1933. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution and that they were accredited investors. The holders were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising.
On October 1, 2012 we issued 5,000,000 shares to one consulting company as compensation for services. These securities were issued pursuant to Section 4(a)(2) of the Securities Act of 1933. The holder represented its intention to acquire the securities for investment only and not with a view towards distribution and that they were accredited investors. The holders were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising.
On October 7, 2012 we issued a 10% convertible note in the principal amount of $63,040 in exchange for seventeen (17) 10% promissory notes with principal balances of an aggregate of $47,628 and an aggregate of $15,412 in accrued interest. The issued note is convertible into common stock at a conversion price of 45% of the average of the lowest 3 trading prices for the common stock during the 30 trading day period ending one trading day prior to the date the conversion notice. The note exchange was effected in reliance upon Section 3(a)(9) of the Securities Act of 1933.
During the quarter ended November 30, 2012, an aggregate of 23,068,269 shares were issued upon an aggregate of $47,136 in debt conversions from two note holders. These exchanges were consummated and conversion shares were issued in reliance upon Section 3(a)(9) of the Securities Act of 1933.
On January 22, 2013, we issued a 21% convertible note in the principal amount of $25,000 in exchange for a 21% convertible note dated 06/20/202 with outstanding principal and accrued interest of $25,000. The issued note is convertible at any time after the issue date into shares of Common Stock at a conversion price of $0.00055. The note exchange was effected in reliance upon Section 3(a)(9) of the Securities Act of 1933.
On January 22, 2013, we issued a 21% convertible note in the principal amount of $34,018 in exchange for a 21% convertible note dated 06/20/202 with outstanding principal and accrued interest of $34,018.08. The issued note is convertible at any time after the issue date into shares of Common Stock at a conversion price of $0.00055. The note exchange was effected in reliance upon Section 3(a)(9) of the Securities Act of 1933.
On February 14, 2013, we issued a 21% convertible note in the principal amount of $34,105 in exchange for a 21% convertible note dated 06/20/202 with outstanding principal and accrued interest of $34,104.83. The issued note is convertible at any time after the issue date into shares of Common Stock at a conversion price of $0.00055. The note exchange was effected in reliance upon Section 3(a)(9) of the Securities Act of 1933.
On each of February 22, 2013, March 19, 2013, April 2, 2013, May 6, 2013, we issued convertible notes in the principal amount of $35,000, $50,000, $19,250 and $25,000, respectively due on October 22, 2013, March 18, 2014, April 1, 2014 and May 5, 2014. The notes bear interest at 12% per annum, are unsecured. The February note is convertible into shares of our common stock at a conversion price equal to 55% of the lowest trading price of our common stock during the 5 consecutive trading days prior to the conversion date. The March and May notes are convertible into shares of our common stock at a conversion price equal to 50% of the average of the 5 lowest trading price of our common stock during the 20 consecutive trading days prior to the conversion date. The April note is convertible into shares of our common stock at a conversion price equal to 55% of the lowest trading price of our common stock during the 5 consecutive trading days prior to the conversion date. These securities were issued pursuant to Section 4(a)(2) of the Securities Act of 1933. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution, and that they were accredited investors. The holders were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising.
On February 26, 2013, we issued a 12% convertible note in the principal amount of $76,416 in exchange for a convertible note with outstanding principal and accrued interest of $76,416. The issued note is convertible at any time after the issue date into shares of Common Stock at 50% of the lowest trading price in 20 days prior to the date of conversion, as reported by Quotestream. The note exchange was effected in reliance upon Section 3(a)(9) of the Securities Act of 1933.
During the quarter ended February 28, 2013, an aggregate of 124,459,466 shares were issued upon an aggregate of $116,458 in debt conversions from four note holders.The exchanges were consummated and conversion shares were issued in reliance upon Section 3(a)(9) of the Securities Act of 1933.
On each of March 1, 2013, March 1, 2013, March 22, 2013 and May 6, 2013, we issued convertible notes in the principal amount of $55,000, $1,045, $8,000 and $25,000, respectively. The notes bear interest at 21% per annum, are unsecured and are repayable one year after the issue date. The March and April notes are convertible into shares of our common stock at a conversion price equal to 50% of the lowest trading price of our common stock during the 90 consecutive trading days prior to the conversion date. The May note is convertible into shares of our common stock at a conversion price equal to 50% of the average of the 3 lowest trading price of our common stock during the 10 consecutive trading days prior to the conversion date. These securities were issued pursuant to Section 4(a)(2) of the Securities Act of 1933. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution, and that they were accredited investors. The holders were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising.
On March 4, 2013, the Company issued to its President 1,500,000 shares of Series Preferred A Stock and 500,000 shares of Series Preferred A Stock and 20,000,000 shares of common stock to a member of management as compensation for services. These securities were issued pursuant to Section 4(a)(2) of the Securities Act of 1933. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution. The holders were given adequate information about us to make an informed investment decision, and that they were accredited investors. We did not engage in any general solicitation or advertising.
On March 19, 2013, we issued a 12% convertible note in the principal amount of $100,098 due December 19, 2013 in exchange for three (3) 10% promissory notes in the aggregate principal amount of $23,000 together with accrued interest of $6,718.05 and six (6) 10% convertible notes in the aggregate principal amount of $63,000, respectively and accrued interest of $7,381. The issued note is convertible principal and unpaid interest into shares of common stock at conversion price of 50% of lowest 5 days prior to conversion, but no less than $0.00004. The note exchange was effected in reliance upon Section 3(a)(9) of the Securities Act of 1933.
On April 16, 2013, we issued a 10% convertible note in the principal amount of $29,275 that is payable on demand in exchange for nine (9) 10% promissory notes with aggregate principal amounts of $29,275. The issued note is convertible into shares of our common stock at a conversion price equal to 45% of the average of the lowest 3 trading prices for the common stock during the 30 trading day period ending one trading day prior to the date the conversion notice. The note exchange was effected in reliance upon Section 3(a)(9) of the Securities Act of 1933.
On May 6, 2013, we issued a 10% convertible note in the principal amount of $50,000 in exchange for a $50,000 note (principal plus accrued interest). The issued note can be converted at any time after the issue date into a shares of Common Shares at 70% of the average five(5) days lowest trading price within the 20 days prior to the date of conversion, as reported by Quotestream. This note exchange was effected in reliance upon Section 3(a)(9) of the Securities Act of 1933.
During the quarter ended May 31, 2013, an aggregate of 711,987,619 shares were issued upon an aggregate of $221,275 in debt conversions from four note holders. The conversion shares were issued in reliance upon Section 3(a)(9) of the Securities Act of 1933.
During the quarter ended August 31, 2013, an aggregate of 603,066,667 shares were issued upon an aggregate of $32,820 in debt conversions from four note holders. The conversion shares were issued in reliance upon Section 3(a)(9) of the Securities Act of 1933.
| ITEM 7. | MANAGEMENT'S DISCUSSIONANDANALYSISOFFINANCIALCONDITIONANDRESULTS OF OPERATIONS. |
PLAN OF OPERATION
During the next twelve months and subject to our ability to obtain additional financing, we intend to conduct mineral exploration activities on the Blue Jack Property in order to assess whether it possesses mineral reserves capable of commercial extraction. We have decided to suspend our operations on the Minnie Claim in order to focus our resources on the Blue Jack Property.
Blue Jack Property
Our plan is to conduct Phase Ia of our exploration program on the Blue Jack Property in Spring 2012. However, we will require additional financing in order to implement Phase Ia of our exploration program on the Blue Jack Property. If we are able to raise additional financing, of which there is no assurance, our plan for the Blue Jack Property is as follows:
Phase |
Recommended Exploration Program | Estimated
Cost |
Status |
Phase Ia
| Detailed geological mapping and radiometric surveys and soil and rock sampling along grid.
| $25,700
| To be implemented in Spring 2012, subject to obtaining dditional financing. |
Phase Ib | Geophysical survey (IP and magnetometer). | $43,050 | Planned for Spring 2012. |
Phase IIa
| Trenching and geochemical analysis
| $40,500
| Dependent on the Results of Phases Ia and Ib |
We anticipate that we will incur the following expenses over the next twelve months:
Category | Planned Expenditures Over
The Next 12 Months (US$) |
Legal and Accounting Fees | $30,000 |
Office Expenses | 6,000 |
Consulting Fees | 48,000 |
Phase I Exploration Expenses | 68,750 |
TOTAL | $152,750 |
To date, we have not earned any revenues and we do not anticipate earning revenues in the near future. As at August 31, 2011, we had no cash on hand. As such, we do not have sufficient financial resources to meet the anticipated costs of completing our exploration program for the Blue Jack Property. Accordingly, we will need to obtain additional financing in order to complete our plan of operation and meet our current obligations as they come due. Our Board of Directors approved an offering of up to $100,000 of 10% convertible notes (the “Offering”) pursuant to Regulation S of the Securities Act. Completion of the Offering is subject to a number of factors outside of our control, including the results from our exploration program, and any unanticipated problems relating to our mineral exploration activities, such as environmental assessments and additional costs and expenses that may exceed our current estimates. These factors may make the timing, amount, terms or conditions of additional financing unavailable to us in which case our business will fail.
17
RESULTS OF OPERATIONS
| Summary of Year End Results | | | | | | | | | |
| | | | | | | | | | |
| | | Year Ended August 31, | | | Percentage | |
| | | 2011 | | | 2010 | | | Increase / (Decrease) | |
| Revenue | $ | -- | | $ | -- | | | N/A | |
| Expenses | | (179,188 | ) | | (150,984 | ) | | 18.7% | |
| Net Loss | $ | (179,188 | ) | $ | (150,984 | ) | | 18.7% | |
We have not earned any revenues to date. We do not anticipate earning revenues until such time as we enter into commercial production of our mineral properties. We are presently in the exploration stage of our business and we can provide no assurance that we will discover commercially exploitable levels of mineral resources on our properties, or if such deposits are discovered, that we will enter into further substantial exploration programs.
The major components of our expenses for the year ended August 31,
20112012 and
20102011 are outlined in the table below:
| | | Year Ended | | | Year Ended | | | Percentage Increase | |
| | | August 31, 2011 | | | August 31, 2010 | | | / (Decrease) | |
| Accounting and Audit | $ | 37,965 | | $ | 37,757 | | | 0.6% | |
| Bank Charges and Interest | | 25,381 | | | 13,481 | | | 88.3% | |
| Consulting Fees | | 600 | | | 600 | | | 0.0% | |
| Depreciation | | 98 | | | 395 | | | (75.2)% | |
| Management Fees | | 48,000 | | | 48,000 | | | 0.0% | |
| Mineral Property | | 11,333 | | | 7,300 | | | 55.2% | |
| Exploration Costs | | | | | | | | | |
| Office and Administrative | | 18,392 | | | 17,842 | | | 3.1% | |
| Professional Fees | | 25,098 | | | 19,655 | | | 27.7% | |
| Transfer Agent and Filing | | 8,464 | | | 4,242 | | | 99.5% | |
| Fees | | | | | | | | | |
| Travel and Promotion | | 488 | | | 1,712 | | | (71.5)% | |
| Write-off of Mineral | | 3,369 | | | - | | | 100% | |
| Property Costs | | | | | | | | | |
| Total Expenses | $ | 179,188 | | $ | 150,984 | | | 18.7% | |
| | | | | | | | | Percentage | |
| | | Years Ended August 31, | | | Increase | |
| | | 2012 | | | 2011 | | | (Decrease) | |
| Operating Expenses: | | | | | | | | | |
| Selling, general and administrative | | $ | 14,483 | | | $ | 27,344 | | | | (47 | %) |
| Mineral property costs | | | 7,474 | | | | 11,333 | | | | (34 | %) |
| Professional fees and compensation | | | 85,035 | | | | 63,663 | | | | 34 | % |
| Management compensation | | | 173,529 | | | | 48,000 | | | | 262 | % |
| Stock-based compensation | | | 965,706 | | | | - | | | | N/A | |
| Depreciation and amortization expense | | | - | | | | 98 | | | | (100 | %) |
| Impairment of mineral property | | | - | | | | 25,369 | | | | (100 | %) |
| Total operating expenses | | | 1,246,227 | | | | 175,807 | | | | 609 | % |
| Other Expenses: | | | | | | | | | | | | |
| Loss on change in fair value of derivative liabilities | | | (430,591 | ) | | | - | | | | N/A | |
| Interest expense | | | (1,262,311 | ) | | | (25,381 | ) | | | 4,873 | % |
| Loss on extinguishment of debt | | | (1,783,048 | ) | | | - | | | | N/A | |
| Total other expenses | | | (3,475,950 | ) | | | (25,381 | ) | | | 13,595 | % |
| | | | | | | | | | | | | |
| Net loss | | $ | (4,722,177 | ) | | $ | (201,188 | ) | | | 2,247 | % |
Our operating expenses increased from $150,984,$175,807 during the year ended August 31, 2010,2011, to $179,188,$1,246,227, during the year ended August 31, 2011.2012. The increase was due primarily to increased management compensation and we issued stock to outside professionals and consultants for work performed that created an additional expense for the year ended August 31, 2012 of $965,706 for these services.
Our other expenses increased from $25,381 during the year ended August 31, 2011, to $3,475,950, during the year ended August 31, 2012. The increase was primarily due to increases in
the accounting
treatment of new debt acquired to raise operating capital and
auditthe acquisition of Pure Spectrum. We recorded expenses
bank chargesfor the loss on extinguishment of debt of $1,783,048. We also recorded a loss on the change in fair value of our derivative liabilities of $430,591 and
we recorded $1,262,311 in interest
mineral property exploration costs, office and administrative expenses, professional fees, transfer agent and filing fees, and write-off of mineral property costs. This was partially offset by decreases in depreciation and travel and promotion.Audit and accounting expenses and professional expenses primarily relate to expenses incurred in connection with meeting our ongoing reporting requirements underexpense for the Exchange Act.
year ended August 31, 2012.
Management
feescompensation consists of
feessalaries and stock compensation incurred to our executive directors and officers.
18
The mineral property costs for During the year ended August 31, 2011 relatewe recorded $48,000 in salary and during the year ended August 31, 2012 we recorded $131,955 in salary, $15,706 in stock-based compensation and we accrued an additional $41,574 in stock-based compensation per our CEO’s stock grant. This increase was primarily due to expenses incurred with maintaininga change in management during the Blue Jack Property, the Minnie Claim and the Frances Property in good standing.
year ended August 31, 2012.
If we are able to obtain sufficient financing to proceed with our plan of operation, of which there is no assurance, we expect that our expenses will increase significantly as we engage in mining and exploration activities.
LIQUIDITY AND CAPITAL RESOURCES| Cash Flows | | | | | | |
| | | | | | | |
| | | Year Ended August 31 | |
| | | 2011 | | | 2010 | |
| Net Cash used in Operating Activities | $ | (93,169 | ) | $ | (85,188 | ) |
| Net Cash used in Investing Activities | | (1,007 | ) | | (1,919 | ) |
| Net Cash from Financing Activities | | 93,432 | | | 85,217 | |
| Net Increase (Decrease) in Cash During Period | $ | (744 | ) | $ | (1,890 | ) |
| Working Capital | | | | | | | | | |
| | | | | | | | | Percentage | |
| | | At August 31, 2011 | | | At August 31, 2010 | | | Increase / (Decrease) | |
| Current Assets | $ | 360 | | $ | 51 | | | 605.9% | |
| Current Liabilities | | 485,367 | | | 308,330 | | | 57.4% | |
| Working Capital Deficit | $ | (485,007 | ) | $ | (308,279 | ) | | 57.3% | |
| | | Years Ended August 31, | |
| | | 2012 | | | 2011 | |
| Net cash used in operating activities | | $ | (138,979 | ) | | $ | (92,462 | ) |
| Net cash used in investing activities | | | - | | | | (1,007 | ) |
| Net cash provided by financing activities | | | 138,979 | | | | 93,418 | |
| Net decrease in cash during the period | | $ | - | | | $ | (51 | ) |
| | | | | | | | | Percentage | |
| | | At August 31, 2012 | | At August 31, 2011 | | Increase / (Decrease) | |
| Current Assets | | $ | 37,500 | | | $ | 360 | | | | 10316.67 | % |
| Current Liabilities | | | 3,372,585 | | | | 485,367 | | | | 594.85 | % |
| Working Capital Deficit | | $ | (3,335,085 | ) | | $ | (485,007 | ) | | | 587.64 | % |
As of August 31,
2011,2012, we had no cash on hand and a working capital deficit of
$485,007$3,335,085. The increase in our working capital deficit is primarily a result of: (i) an increase in accounts payable due to a lack of capital to meet our ongoing expenditures; and (ii) the fact that
as we secure financing to continue our operations, we have secured loans to fund the acquisition of Pure Spectrum, and we received
$83,946$135,500 in
short term loans from arms length parties.convertible loans. The loans bear interest at
10%8% to 12%, are unsecured and due on demand. We have incurred a cumulative net loss of
$654,007$5,398,184 for the period from the date of our inception on November 20, 2006 to August 31,
20112012 and have not attained profitable operations to date.
Since our inception, we have used our common stock to raise money for our operations and to fund our property acquisitions. We have not obtained profitable operations and are dependent upon obtaining additional financing to pursue our plan of operation.
We currently do not have sufficient financial resources to implement Phase Ia of our exploration program on the Blue Jack Property. Therefore, we will need to obtain additional financing in order to implement our exploration program on the Blue Jack
Property.On December 9, 2011, our BoardProperty as well as for the acquisition of Directors approved an offering of up to $100,000 of 10% convertible notes (the “Offering”). The Offering will be completed pursuant to Regulation S of the Securities Act to persons who are not U.S. Persons as contemplated under Regulation S. The proceeds of the Offering will be used to fund our business and for working capital purposes. There is no assurance that the Offering will be completed on the above terms or at all.
any additional properties. Our plan of operation calls for us to spend significantly more than our current capital resources or the amount of financing that we have been able to obtain to date. As such, there is a substantial doubt that we will be able to raise significant financing to complete our stated plan of operation. Any substantial financing that we are able to obtain is expected to be in the form of equity financing, which will result in dilution to existing Shareholders.
19
shareholders.OFF-BALANCE SHEET ARRANGEMENTS
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
CRITICAL ACCOUNTING POLICIES
Our significant accounting policies are disclosed in Note 2 of our audited financial statements for the year ended August 31,
20112012 included in this Annual Report on Form 10-K. We have identified certain accounting policies, described below, that are most important to the portrayal of our current financial condition and results of operations.
The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Actual results may differ from the estimates.
Significant accounts that require estimates as a basis for determining the stated amounts include mineral property acquisition costs and impairment, accrued liabilities and the valuation allowance of deferred tax assets.
Exploration Stage Enterprise
Our financial statements are prepared using the accrual method of accounting. Until such properties are acquired and developed, we will continue to prepare our financial statements and related disclosures in accordance with entities in the exploration stage.
20
Mineral Property Interests
We are an exploration stage mining company and have not yet realized any revenue from our operations. We are primarily engaged in the acquisition, exploration and development of mining properties. Exploration costs are expensed as incurred regardless of the stage of development or existence of reserves. Costs of acquisition are capitalized subject to impairment testing when facts and circumstances indicate impairment may exist.
We regularly perform evaluations of any investment in mineral properties to assess the recoverability and/or the residual value of our investments in these assets. All long-lived assets are reviewed for impairment whenever events or circumstances change which indicate the carrying amount of an asset may not be recoverable.
Our management periodically reviews the carrying value of our investments in mineral leases and claims with internal and external mining related professionals. A decision to abandon, reduce or expand a specific project is based upon many factors including general and specific assessments of mineral deposits, anticipated future mineral prices, anticipated future costs of exploring, developing and operating a production mine, the expiration term and ongoing expenses of maintaining mineral properties and the general likelihood that we will continue exploration on such project. We do not set a pre-determined holding period for properties with unproven deposits; however, properties which have not demonstrated suitable metal concentrations at the conclusion of each phase of an exploration program are re-evaluated to determine if future exploration is warranted, whether there has been any impairment in value and that their carrying values are appropriate.
If an area of interest is abandoned or it is determined that its carrying value cannot be supported by future production or sale, the related costs are charged against operations in the year of abandonment or determination of value. The amounts recorded as mineral leases and claims represent costs to date and do not necessarily reflect present or future values.
Our exploration activities and proposed mine development are subject to various laws and regulations governing the protection of the environment. These laws are continually changing, generally becoming more restrictive. We have made, and expect to make in the future, expenditures to comply with such laws and regulations.
| ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. |
Audited
Yaterra Ventures Corp.
INDEX TO FINANCIAL STATEMENTS
Consolidated financial statements for the years ended August 31, 2012 and 2011, and 2010, including:
| 1. | Report of Independent Registered Public Accounting Firm; |
| | |
| 2. | Consolidated Balance Sheets as of August 31, 20112012 and 2010; 2011; |
| | |
| 3. | Consolidated Statements of OperationsExpenses for the years ended August 31, 2012 and 2011 and 2010 and cumulativefor the period from inception on November 20, 2006 (Inception) to August 31, 2011; 2012; |
| | |
| 4. | Consolidated Statements of Cash Flows for the years ended August 31, 2012 and 2011 and 2010 and cumulativefor the period from inception on November 20, 2006 (Inception) to August 31, 2011; 2012; |
| | |
| 5. | Consolidated Statement of Stockholders’ DeficiencyEquity (Deficit) from inception on November 20, 2006 (Inception) to August 31, 2011;2012; and |
| | |
| 6. | Notes to the Consolidated Financial Statements. |
(An Exploration Stage Company)FINANCIAL STATEMENTS
YEARS ENDED AUGUST 31, 2011 AND 2010
Report of Independent Registered Public Accounting Firm
(Stated in U.S. Dollars)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
(An Exploration Stage Company)
Toronto, Ontario Canada
We have audited the accompanying
consolidated balance sheets of Yaterra Ventures Corp.
(an exploration stage company) and its subsidiary (collectively, the “Company”) as of August 31,
20112012 and
2010,2011, and the related
consolidated statements of
operations,expenses, stockholders’ equity (deficit), and cash flows
and stockholders’ deficiency for
each of the years
then ended
August 31, 2011 and 2010 and for the period from November 20, 2006
(date of inception) to(inception) through August 31,
2011. The2012. These financial statements are the responsibility of the Company’s
management is responsible for these financial statements.management. 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
thean audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Company'sCompany’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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
consolidated financial statements referred to above present fairly, in all material respects, the financial position of Yaterra Ventures Corp.
(an exploration stage company) and its subsidiary as of August 31,
20112012 and
2010,2011, and the results of
itstheir operations and
itstheir cash flows for
each of the years
then ended
August 31, 2011 and 2010 and for
the period from November 20, 2006
(date of inception) to(inception) through August 31,
20112012 in conformity with accounting principles generally accepted in the United States of America.
The accompanying
consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has
experienced recurringsuffered losses from operations
since inception,and has a working capital deficit and
has aan accumulated deficit
accumulated during the exploration stage. These conditionsas of August 31, 2012, which raise substantial doubt about
the Company’sits ability to continue as a going concern. Management’s plans regarding
thesethose matters
also are
also discusseddescribed in Note 1. The
consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
“DAVIDSON & COMPANY LLP”
Vancouver, Canada/s/ MaloneBailey, LLP |
Chartered Accountantswww.malonebailey.comHouston, Texas November 20, 2013 |
January 16, 2012
| YATERRA VENTURES CORP. |
| (An Exploration Stage Company) |
|
| CONSOLIDATED BALANCE SHEETS |
(Stated in U.S. Dollars) |
| | | AUGUST 31 | |
| | | 2011 | | | 2010 | |
| | | | | | | |
| ASSETS | | | | | | |
| | | | | | | |
| Current | | | | | | |
| Cash | $ | - | | $ | 51 | |
| Prepaid expense | | 360 | | | - | |
| Total Current Assets | | 360 | | | 51 | |
| | | | | | | |
| Computer Equipment(Note 4) | | - | | | 98 | |
| Mineral Property Acquisition Costs(Note 5) | | 22,000 | | | 24,362 | |
| | | | | | | |
| Total Assets | $ | 22,360 | | $ | 24,511 | |
| | | | | | | |
| LIABILITIES | | | | | | |
| | | | | | | |
| Current | | | | | | |
| Excess of checks issued over funds on deposit | $ | 693 | | $ | - | |
| Accounts payable and accrued liabilities | | 160,548 | | | 116,739 | |
| Amounts payable to related parties (Note 9) | | 47,033 | | | 30,500 | |
| Promissory notes payable (Note 6) | | 267,500 | | | 161,091 | |
| Promissory notes payable to related parties (Note 7) | | 9,593 | | | - | |
| Total Current Liabilities | | 485,367 | | | 308,330 | |
| | | | | | | |
| STOCKHOLDERS’ DEFICIENCY | | | | | | |
| | | | | | | |
| Capital Stock(Note 8) | | | | | | |
| Authorized: | | | | | | |
100,000,000 common voting stock with a par value of
$0.001 per share | |
| | |
| |
100,000,000 preferred stock with a par value of
$0.001 per share – none issued | |
| | |
| |
| | | | | | | |
| Issued: | | | | | | |
1,630,000 common shares as at August 31, 2011 and
2010 | |
1,630 | | |
1,630 | |
| | | | | | | |
| Additional Paid-In Capital | | 189,370 | | | 189,370 | |
| Deficit Accumulated During The Exploration Stage | | (654,007 | ) | | (474,819 | ) |
| Total Stockholders’ Deficiency | | (463,007 | ) | | (283,819 | ) |
| | | | | | | |
| Total Liabilities and Stockholders’ Deficiency | $ | 22,360 | | $ | 24,511 | |
| | | August 31, | |
| | | 2012 | | | 2011 | |
| | | | | | | |
| ASSETS | | | | | | |
| Current Assets: | | | | | | |
| Deposits | | $ | 25,000 | | | $ | - | |
| Prepaid expense and other current assets | | | 12,500 | | | | 360 | |
| Total Current Assets | | | 37,500 | | | | 360 | |
| | | | | | | | | |
| Total Assets | | $ | 37,500 | | | $ | 360 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | | | | | | | | |
| Current Liabilities: | | | | | | | | |
| Accounts payable and accrued liabilities | | $ | 224,610 | | | $ | 208,274 | |
| Amounts payable to related parties | | | 125,250 | | | | - | |
| Accrued interest | | | 172,002 | | | | 36,257 | |
| Accrued interest on related party notes | | | 3,797 | | | | 70 | |
| Debt | | | 161,589 | | | | 233,680 | |
| Related party debt | | | 23,544 | | | | 7,086 | |
| Related party convertible debt, net of unamortized discounts of $18,750 and $0 | | | 6,250 | | | | - | |
| Convertible debt, net of unamortized discounts of $64,739 and $0 | | | 1,096,026 | | | | - | |
| Derivative liabilities | | | 1,559,517 | | | | - | |
| Total Current Liabilities | | | 3,372,585 | | | | 485,367 | |
| | | | | | | | | |
| Stockholders’ Deficit: | | | | | | | | |
| Preferred stock, $0.001 par value, 100,000,000 shares authorized, none issued and outstanding | | | - | | | | - | |
| Common stock, $0.001 par value, 100,000,000 shares authorized, 35,706,097 and 1,630,000 shares issued and outstanding | | | 35,706 | | | | 1,630 | |
| Additional paid-in capital | | | 2,027,393 | | | | 189,370 | |
| Deficit accumulated during the exploration stage | | | (5,398,184 | ) | | | (676,007 | ) |
| Total Stockholders’ Deficit | | | (3,335,085 | ) | | | (485,007 | ) |
| Total Liabilities and Stockholders’ Deficit | | $ | 37,500 | | | $ | 360 | |
The accompanying notes are an integral part of these
consolidated financial statements.
| YATERRA VENTURES CORP. |
| (An Exploration Stage Company) |
|
CONSOLIDATED STATEMENTS OF OPERATIONS |
(Stated in U.S. Dollars)EXPENSES |
| | | | | | | | | CUMULATIVE | |
| | | | | | | | | PERIOD FROM | |
| | | | | | INCEPTION | |
| | | YEARS | | | NOVEMBER 20, | |
| | | ENDED | | | 2006 TO | |
| | | AUGUST 31 | | | AUGUST 31, | |
| | | 2011 | | | 2010 | | | 2011 | |
| | | | | | | | | | |
| Expenses | | | | | | | | | |
| Accounting and audit | $ | 37,965 | | $ | 37,757 | | $ | 146,642 | |
| Bank charges and interest | | 25,381 | | | 13,481 | | | 42,806 | |
| Consulting fees | | 600 | | | 600 | | | 2,750 | |
| Depreciation | | 98 | | | 395 | | | 1,184 | |
| Management fees | | 48,000 | | | 48,000 | | | 195,500 | |
| Mineral property exploration costs | | 11,333 | | | 7,300 | | | 49,571 | |
| Office and administrative | | 18,392 | | | 17,842 | | | 61,747 | |
| Professional fees | | 25,098 | | | 19,655 | | | 110,756 | |
| Transfer agent and filing fees | | 8,464 | | | 4,242 | | | 23,859 | |
| Travel and promotion | | 488 | | | 1,712 | | | 15,823 | |
| Write-off of mineral property costs | | 3,369 | | | - | | | 3,369 | |
| | | | | | | | | | |
| Net Loss For The Period | $ | (179,188 | ) | $ | (150,984 | ) | $ | (654,007 | ) |
| | | | | | | | | | |
| Basic And Diluted Loss Per Share | $ | (0.11 | ) | $ | (0.09 | ) | | | |
| | | | | | | | | | |
| Weighted Average Number Of CommonShares Outstanding | | 1,630,000 | | | 1,630,000 | | | | |
The accompanying notes are an integral part of these financial statements.
| | | | | | November 20, 2006 | |
| | | | | | (Inception) | |
| | | Years Ended August 31, | | | Through | |
| | | 2012 | | | 2011 | | | August 31, 2012 | |
| | | | | | | | | | |
| Operating Expenses: | | | | | | | | | |
| Selling, general and administrative | | $ | 14,483 | | | $ | 27,344 | | | $ | 112,641 | |
| Mineral property costs | | | 7,474 | | | | 11,333 | | | | 60,414 | |
| Professional fees and compensation | | | 1,224,270 | | | | 111,663 | | | | 1,679,918 | |
| Depreciation and amortization expense | | | - | | | | 98 | | | | 1,086 | |
| Impairment of mineral property | | | - | | | | 25,369 | | | | 25,369 | |
| Total operating expenses | | | 1,246,227 | | | | 175,807 | | | | 1,879,4278 | |
| | | | | | | | | | | | | |
| Other Expenses: | | | | | | | | | | | | |
| Loss on change in fair value of derivative liabilities | | | (430,591 | ) | | | - | | | | (430,591 | ) |
| Interest expense | | | (1,262,311 | ) | | | (25,381 | ) | | | (1,305,117 | ) |
| Loss on extinguishment of debt | | | (1,783,048 | ) | | | - | | | | (1,783,048 | ) |
| Total other expenses | | | (3,475,950 | ) | | | (25,381 | ) | | | (3,518,756 | ) |
| | | | | | | | | | | | | |
| Net loss | | $ | (4,722,177 | ) | | $ | (201,188 | ) | | $ | (5,398,184 | ) |
| | | | | | | | | | | | | |
| Net Loss Per Share - Basic and Diluted | | $ | (0.59 | ) | | $ | (0.12 | ) | | | | |
| | | | | | | | | | | | | |
Weighted Average Number of Common Shares Outstanding - Basic and Diluted | | | 7,981,849 | | | | 1,630,000 | | | | | |
The accompanying notes are an integral part of these consolidated financial statements. | |
| YATERRA VENTURES CORP. |
| (An Exploration Stage Company) |
|
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
(Stated in U.S. Dollars) |
| | | | | | | | | CUMULATIVE | |
| | | | | | PERIOD FROM | |
| | | | | | INCEPTION | |
| | | YEARS | | | NOVEMBER 20 | |
| | | ENDED | | | 2006 TO | |
| | | AUGUST 31 | | | AUGUST 31 | |
| | | 2011 | | | 2010 | | | 2011 | |
| | | | | | | | | | |
| Cash (Used In) Operating Activities | | | | | | | | | |
| Net loss for the period | $ | (179,188 | ) | $ | (150,984 | ) | $ | (654,007 | ) |
| Depreciation | | 98 | | | 395 | | | 1,184 | |
| Interest accrued on promissory notes | | 22,570 | | | 11,535 | | | 36,314 | |
| Write-off of mineral property costs | | 3,369 | | | - | | | 3,369 | |
| Changes in non-cash operating working capital items: | | | | | | | | | |
| Accounts payable and accrued liabilities | | 43,809 | | | 42,406 | | | 160,548 | |
| Amounts due to related parties | | 16,533 | | | 11,460 | | | 47,033 | |
| Prepaid expense | | (360 | ) | | - | | | (360 | ) |
| | | (93,169 | ) | | (85,188 | ) | | (405,919 | ) |
| Cash (Used In) Investing Activities | | | | | | | | | |
| Mineral property acquisition costs | | (1,007 | ) | | (1,919 | ) | | (25,369 | ) |
| Computer equipment | | - | | | - | | | (1,184 | ) |
| | | (1,007 | ) | | (1,919 | ) | | (26,553 | ) |
| Cash Provided By Financing Activities | | | | | | | | | |
| Issue of share capital | | - | | | - | | | 191,000 | |
| Promissory notes payable | | 83,946 | | | 85,217 | | | 233,890 | |
| Promissory notes payable to related parties | | 12,083 | | | - | | | 9,486 | |
| Repayment of promissory note payable to related party | | (2,597 | ) | | - | | | (2,597 | ) |
| | | 93,432 | | | 85,217 | | | 431,779 | |
| | | | | | | | | | |
| Decrease In Cash | | (744 | ) | | (1,890 | ) | | (693 | ) |
| | | | | | | | | | |
| Cash, Beginning Of Period | | 51 | | | 1,941 | | | - | |
| | | | | | | | | | |
| (Excess of Checks Issued Over Funds onDeposit) Cash, End Of Period | $ | (693 | ) | $ | 51 | | $ | (693 | ) |
| | | | | | | | | | |
| Supplemental Disclosure Of Cash FlowInformation | | | | | | | | | |
| Cash paid during the period for: | | | | | | | | | |
| Interest | $ | - | | $ | - | | $ | - | |
| Income taxes | $ | - | | $ | - | | $ | - | |
There were no material non-cash financing or investing activities during the periods presented.
| | | | | | | | | November 20, 2006 | |
| | | | | | | | | (Inception) | |
| | | Years Ended August 31, | | | Through | |
| | | 2012 | | | 2011 | | | August 31, 2012 | |
| Cash Flows from Operating Activities | | | | | | | | | |
| Net loss | | $ | (4,722,177 | ) | | $ | (201,188 | ) | | $ | (5,398,184 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | | | | | |
| Amortization of debt discounts | | | 1,103,164 | | | | - | | | | 1,103,164 | |
| Depreciation | | | - | | | | 98 | | | | 1,086 | |
| Loss on change in fair value of derivatives | | | 430,591 | | | | - | | | | 430,591 | |
| Loss on extinguishment of debt | | | 1,783,048 | | | | - | | | | 1,783,048 | |
| Accrued preferred stock compensation | | | 41,574 | | | | - | | | | 41,574 | |
| Stock-based compensation | | | 965,706 | | | | - | | | | 965,706 | |
| Impairment of mineral property | | | - | | | | 25,369 | | | | 25,369 | |
| Changes in operating assets and liabilities: | | | | | | | | | | | | |
| Prepaid expenses and other current assets | | | (12,140 | ) | | | (360 | ) | | | (12,402 | ) |
| Accounts payable and accrued liabilities | | | 142,278 | | | | 83,549 | | | | 352,941 | |
| Accounts payable and accrued liabilities to related parties | | | 128,977 | | | | 70 | | | | 159,547 | |
| Net cash used in operating activities | | | (138,979 | ) | | | (92,462 | ) | | | (547,560 | ) |
| | | | | | | | | | | | | |
| Cash Flows from Investing Activities | | | | | | | | | | | | |
| Mineral property acquisition costs | | | - | | | | (1,007 | ) | | | (22,000 | ) |
| Computer equipment | | | - | | | | - | | | | (1,184 | ) |
| Net cash used in investing activities | | | - | | | | (1,007 | ) | | | (23,184 | ) |
| | | | | | | | | | | | | |
| Cash Flows from Financing Activities | | | | | | | | | | | | |
| Proceeds from the sale of common stock | | | - | | | | - | | | | 191,000 | |
| Proceeds from convertible debt | | | 110,500 | | | | - | | | | 110,500 | |
| Proceeds from related party convertible debt | | | 25,000 | | | | - | | | | 25,000 | |
| Proceeds from debt | | | 6,239 | | | | 88,086 | | | | 241,672 | |
| Proceeds from related party debt | | | 26,117 | | | | 7,194 | | | | 33,311 | |
| Payments on debt | | | (10,830 | ) | | | (1,754 | ) | | | (12,584 | ) |
| Payments on convertible debt | | | (8,388 | ) | | | - | | | | (8,388 | ) |
| Payments on related party debt | | | (9,659 | ) | | | (108 | ) | | | (9,767 | ) |
| Net cash provided by financing activities | | | 138,979 | | | | 93,418 | | | | 570,744 | |
| | | | | | | | | | | | | |
| Net decrease in cash | | | - | | | | (51 | ) | | | - | |
| Cash at the beginning of period | | | - | | | | 51 | | | | - | |
| Cash at end of the period | | $ | - | | | $ | - | | | $ | - | |
| | | | | | | | | | | | | |
| Supplemental Disclosures of Cash Flow Information | | | | | | | | | | | | |
| Cash paid during the period for: | | | | | | | | | | | | |
| Interest | | $ | - | | | $ | - | | | $ | - | |
| Income taxes | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | |
| Non-Cash Investing and Financing Activities | | | | | | | | | | | | |
| Acquisition of Pure Spectrum Oil, Inc. | | $ | 1,035,068 | | | $ | - | | | $ | 1,035,068 | |
| Common stock issued for debt | | | 30,000 | | | | - | | | | 30,000 | |
| Common stock issued for convertible debt | | | 37,500 | | | | - | | | | 37,500 | |
| Resolution of derivative liabilities | | | 49,339 | | | | - | | | | 49,339 | |
| Debt discounts due to derivative liabilities | | | 1,178,265 | | | | - | | | | 1,178,265 | |
The accompanying notes are an integral part of these
consolidated financial statements.
| YATERRA VENTURES CORP. |
| (An Exploration Stage Company) |
| CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) |
STATEMENT OF STOCKHOLDERS’ DEFICIENCY |
|
PERIOD FROM INCEPTION, NOVEMBERNovember 20, 2006 TO AUGUST(Inception) through August 31, 2011 |
(Stated in U.S. Dollars)2012 |
| | | | | | | | | | | | DEFICIT | | | | |
| | | COMMON STOCK | | | ACCUMULATED | | | | |
| | | | | | | | | ADDITIONAL | | | DURING THE | | | | |
| | | | | | | | | PAID-IN | | | EXPLORATION | | | | |
| | | SHARES | | | AMOUNT | | | CAPITAL | | | STAGE | | | TOTAL | |
| Shares issued for cash at $0.01 | | 900,000 | | $ | 900 | | $ | 8,100 | | $ | - | | $ | 9,000 | |
| Shares issued for cash at $0.20 | | 610,000 | | | 610 | | | 121,390 | | | - | | | 122,000 | |
| Net loss for the period | | - | | | - | | | - | | | (30,468 | ) | | (30,468 | ) |
| Balance, August 31, 2007 | | 1,510,000 | | | 1,510 | | | 129,490 | | | (30,468 | ) | | 100,532 | |
| Net loss for the year | | - | | | - | | | - | | | (105,613 | ) | | (105,613 | ) |
| Balance, August 31, 2008 | | 1,510,000 | | | 1,510 | | | 129,490 | | | (136,081 | ) | | (5,081 | ) |
| Shares issued for cash at $0.50 | | 120,000 | | | 120 | | | 59,880 | | | - | | | 60,000 | |
| Net loss for the year | | - | | | - | | | - | | | (187,754 | ) | | (187,754 | ) |
| Balance, August 31, 2009 | | 1,630,000 | | | 1,630 | | | 189,370 | | | (323,835 | ) | | (132,835 | ) |
| Net loss for the year | | - | | | - | | | - | | | (150,984 | ) | | (150,984 | ) |
| Balance, August 31, 2010 | | 1,630,000 | | | 1,630 | | | 189,370 | | | (474,819 | ) | | (283,819 | ) |
| Net loss for the year | | - | | | - | | | - | | | (179,188 | ) | | (179,188 | ) |
| Balance, August 31, 2011 | | 1,630,000 | | $ | 1,630 | | $ | 189,370 | | $ | (654,007 | ) | $ | (463,007 | ) |
| | | | | | | | | DEFICIT | | | | |
| | | | | | | | | ACCUMULATED | | | TOTAL | |
| | | | | | ADDITIONAL | | | DURING THE | | | STOCKHOLDERS' | |
| | | COMMON STOCK | | | PAID-IN | | | EXPLORATION | | | EQUITY | |
| | | SHARES | | | AMOUNT | | | CAPITAL | | | STAGE | | | (DEFICIT) | |
| November 20, 2006 (inception) | | | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| Shares issued for cash at $0.01 | | | 900,000 | | | | 900 | | | | 8,100 | | | | - | | | | 9,000 | |
| Shares issued for cash at $0.20 | | | 610,000 | | | | 610 | | | | 121,390 | | | | - | | | | 122,000 | |
| Net loss | | | - | | | | - | | | | - | | | | (30,468 | ) | | | (30,468 | ) |
| Balance, August 31, 2007 | | | 1,510,000 | | | | 1,510 | | | | 129,490 | | | | (30,468 | ) | | | 100,532 | |
| Net loss | | | - | | | | - | | | | - | | | | (105,613 | ) | | | (105,613 | ) |
| Balance, August 31, 2008 | | | 1,510,000 | | | | 1,510 | | | | 129,490 | | | | (136,081 | ) | | | (5,081 | ) |
| Shares issued for cash at $0.50 | | | 120,000 | | | | 120 | | | | 59,880 | | | | - | | | | 60,000 | |
| Net loss | | | - | | | | - | | | | - | | | | (187,754 | ) | | | (187,754 | ) |
| Balance, August 31, 2009 | | | 1,630,000 | | | | 1,630 | | | | 189,370 | | | | (323,835 | ) | | | (132,835 | ) |
| Net loss | | | - | | | | - | | | | - | | | | (150,984 | ) | | | (150,984 | ) |
| Balance, August 31, 2010 | | | 1,630,000 | | | | 1,630 | | | | 189,370 | | | | (474,819 | ) | | | (283,819 | ) |
| Net loss | | | - | | | | - | | | | - | | | | (201,188 | ) | | | (201,188 | ) |
| Balance, August 31, 2011 | | | 1,630,000 | | | | 1,630 | | | | 189,370 | | | | (676,007 | ) | | | (485,007 | ) |
| Accrued preferred stock compensation | | | - | | | | - | | | | 41,574 | | | | - | | | | 41,574 | |
| Stock issued for acquisition of Pure Spectrum Oil, Inc. | | | 4,000,000 | | | | 4,000 | | | | (1,039,068 | ) | | | - | | | | (1,035,068 | ) |
| Shares issued for debt | | | 750,000 | | | | 750 | | | | 36,750 | | | | - | | | | 37,500 | |
| Stock issued for extinguishment of debt | | | 17,426,097 | | | | 17,426 | | | | 1,795,622 | | | | - | | | | 1,813,048 | |
| Shares issued for services | | | 11,900,000 | | | | 11,900 | | | | 953,806 | | | | - | | | | 965,706 | |
| Resolution of derivative liabilities | | | - | | | | - | | | | 49,339 | | | | - | | | | 49,339 | |
| Net loss | | | - | | | | - | | | | - | | | | (4,722,177 | ) | | | (4,722,177 | ) |
| Balance, August 31, 2012 | | | 35,706,097 | | | $ | 35,706 | | | $ | 2,027,393 | | | $ | (5,398,184 | ) | | $ | (3,335,085 | ) |
The accompanying notes are an integral part of these
consolidated financial statements.
YATERRA VENTURES CORP. |
(An Exploration Stage Company) |
|
NOTES TO FINANCIAL STATEMENTS |
|
YEARS ENDED AUGUST 31, 2011 AND 2010 |
(Stated in U.S. Dollars) |
YATERRA VENTURES CORP.(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 1. | BASIS OF PRESENTATION AND NATURE OF OPERATIONS
AND GOING CONCERN |
Organization
and Acquisition
Yaterra Ventures Corp. (“the Company”) was incorporated in the State of Nevada U.S.A., on November 20, 2006. On May 21, 2012, the Company acquired 100% of Pure Spectrum Oil, Inc., a company incorporated in Nevada in exchange for 4,000,000 common shares. In connection with the acquisition, the Company acquired a deposit of $25,000 and assumed accounts payable of $9,803 and convertible notes payable of $1,050,265. As a result of the acquisition of the Pure Spectrum Oil shares, the Company is planning to go into the business of oil and gas exploration.
The
Company’s principal executive officesCompany and Pure Spectrum Oil were under common control as of the date of the acquisition. On December 5, 2011, Cedric Atkinson (the Chief Executive Officer of the Company) acquired control of Pure Spectrum, Inc. (the parent of Pure Spectrum Oil) through the acquisition of Series B voting preferred stock in Pure Spectrum, Inc. The acquisition of these Series B preferred shares provided Cedric Atkinson with majority ownership in Pure Spectrum, Inc. In addition, on March 2, 2012, Cedric Atkinson obtained control of Yaterra Ventures, Corp. through the purchase of 900,000 common shares from the previous owner of the Company. Accordingly, for accounting purposes, the acquisition of Pure Spectrum is being accounted for at historical carrying values. The Chief Executive Officer and controlling shareholder of the Company is also the Chief Executive Officer and controlling shareholder of Pure Spectrum. Transfers or exchanges of equity instruments between entities under common control are
recorded at the carrying amount of the transferring entity at the date of transfer with no goodwill or other intangible assets recognized. Our consolidated financial statements and reported results of operations reflect the Pure Spectrum Oil carryover values, and our reported results of operations and stockholders’ equity have been retroactively restated for all periods presented to reflect the operations of Pure Spectrum Oil and the Company as if the acquisition had occurred on March 2, 2012, the date the Company and Pure Spectrum Oil commenced common control. All intercompany accounts and balances have been eliminated in
Bellingham, Washington, U.S.A.consolidation.
Exploration Stage Activities
The Company has been in the exploration stage since its formation and has not yet realized any revenues from its planned operations.
The Company was formed for the purpose of acquiring exploration and development stage natural resource properties. The Company has not commenced business operations. The Company is an exploration stage company
as defined in
the Securities and Exchange Commission (“S.E.C.”) Industry Guide No. 7.accordance with FASB ASC 915, Development Stage Entities.
The accompanying
consolidated financial statements have been prepared assuming the Company will continue as a going concern.
As shown in the accompanying financial statements, the Company has incurred a net losslosses of $654,007$5,398,184 for the period from November 20, 2006 (inception) to August 31, 2011,2012 and has no sales.not yet generated revenue. In addition, the company has a working capital deficit and an accumulated deficit as of August 31, 2012. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the development of its natural resource properties. Management has plans to seek additional capital through a private placement and public offering of its common stock. 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.
The
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a.) Basis of Presentation
These consolidated financial statements and notes are presented in accordance with accounting principles generally accepted in the United States.
b.) Principles of Consolidation
The Company’s consolidated financial statements include the assets, liabilities and operating results of its wholly owned subsidiary. The Company does not hold significant variable interests in any variable interest entities. All significant intercompany accounts, ownership and transactions have been eliminated.
c.) Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market. The Company uses a three-tier fair value hierarchy which prioritizes the inputs in measuring fair value as follows:
Level 1: Observable inputs such as quoted prices in active markets;
Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions
The Company determined the fair value of its derivative liabilities related to conversion options in outstanding debt using Level 3 inputs.
The following table summarizes assets and liabilities measured at fair value on a recurring basis as of August 31, 2012:
| | | Quoted Prices in | | | Significant | | | | | | | |
| | | Active Markets for | | | Other | | | Significant | | | | |
| | | Identical Assets and | | | Observable | | | Unobservable | | | Balance as of | |
| | | Liabilities | | | Inputs | | | Inputs | | | August 31, | |
| Description | | (Level 1) | | | (Level 2) | | | (Level 3) | | | 2012 | |
| Liabilities: | | | | | | | | | | | | |
| Derivative financial instruments | | $ | - | | | $ | - | | | $ | 1,559,517 | | | $ | 1,559,517 | |
There were no assets and liabilities measured at fair value on a recurring basis as of August 31, 2011.
The following table provides a summary of the Companychanges in fair value, including net transfers in and/or out of Level 3, of the derivative liabilities measured at fair value under level 3 on a recurring basis using significant unobservable inputs during the year ended August 31, 2012:
| Fair value at August 31, 2011 | | $ | - | |
| Additions during the period | | | 1,551,642 | |
| Resolution of derivative liabilities | | | (49,339 | ) |
| Change in the fair value | | | 57,214 | |
| Fair value at August 31, 2012 | | $ | 1,559,517 | |
d.) Cash and Cash Equivalents
Cash consists of cash on deposit with high quality major financial institutions, and to date has not experienced losses on any of its balances. The carrying amounts approximate fair market value due to the liquidity of these deposits.
e.) Basic and Diluted Loss Per Share
Basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been preparedoutstanding if the potential common shares had been issued and if the additional common shares were dilutive. At August 31, 2012 and 2011, the Company has no common stock equivalents that were anti-dilutive and excluded in accordancethe earnings per share computation.
f.) Income Taxes
Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted ASC 740, “Accounting for Income Taxes ”, as of its inception. Pursuant to ASC 740 the Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.
g.) Use of Estimates
The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the amounts reported in the United States. Becausefinancial statements and accompanying disclosures. Actual results may differ from the estimates.
h.) Long Lived Assets
Long-lived assets, including mineral properties, are evaluated for impairment whenever events or conditions indicate that the carrying value of an asset may not be recoverable. If the sum of the expected undiscounted cash flows is less than the carrying value of the related asset or group of assets, a precise determinationloss is recognized for the difference between the fair value and carrying value of many assets and liabilities is dependent uponthe asset or group of assets. During the year ended August 31, 2011, the Company fully impaired its mineral properties.
i.) Reclassifications
Certain prior period amounts have been reclassified to conform to current period presentation.
j.) Recent Accounting Pronouncements
The adoption of recently issued accounting pronouncements are not expected to have a material effect on the Company's future events,reported financial position or results of operations.
| 3. | CORRECTION OF PRIOR YEAR INFORMATION |
During September 2013, we identified errors in the
preparation ofpreviously reported financial statements for
a period necessarily involves the
useyear ended August 31, 2011. We determined that the mineral property rights were impaired as of
estimates.F-5
August 31, 2011. Further, we identified errors in the classification of certain assets and liabilities. This resulted in adjustments to the previously reported amounts in the consolidated financial statements for the year ended August 31, 2011.
In accordance with the SEC's Staff Accounting Bulletin Nos. 99 and 108 (SAB 99 and SAB 108), the Company evaluated these errors and, based on an analysis of quantitative and qualitative factors, determined that the error was immaterial to each of the prior reporting periods affected. However, if the adjustments to correct the cumulative effect of the above error had been recorded in the year ended August 31, 2012, the Company believes the impact would have been significant and would impact comparisons to prior periods. Therefore, as permitted by SAB 108, the Company corrected, in the current filing, previously reported results for the year ended August 31, 2011.
The following table presents the comparative effect of the correction of prior year information and the impact on the Company’s consolidated financial statements for the year ended August 31, 2011:
| | | August 31, 2011 | |
| | | As Reported | | | Adjustments | | | As Amended | |
| Consolidated Balance Sheet | | | | | | | | | |
| Assets | | | | | | | | | |
| Current Assets: | | | | | | | | | |
| Prepaid expense | | $ | 360 | | | $ | - | | | $ | 360 | |
| Mineral property acquisition costs | | | 22,000 | | | | (22,000 | ) | | | - | |
| Liabilities and Stockholders’ Deficit | | | | | | | | | | | | |
| Current Liabilities: | | | | | | | | | | | | |
| Excess of checks issued over funds on deposit | | | 693 | | | | (693 | ) | | | - | |
| Accounts payable and accrued liabilities | | | 160,548 | | | | 47,726 | | | | 208,274 | |
| Accrued interest | | | - | | | | 36,257 | | | | 36,257 | |
| Accrued interest on related party notes | | | 47,033 | | | | (46,963 | ) | | | 70 | |
| Debt | | | 267,500 | | | | (33,820 | ) | | | 233,680 | |
| Related party debt | | | 9,593 | | | | (2,507 | ) | | | 7,086 | |
| Stockholders’ Deficit: | | | | | | | | | | | | |
| Deficit accumulated during the exploration stage | | | (654,007 | ) | | | (22,000 | ) | | | (676,007 | ) |
| | | | | | | | | | | | | |
| Consolidated Statement of Expenses | | | | | | | | | | | | |
| Operating Expenses: | | | | | | | | | | | | |
| Impairment of mineral property | | | 3,369 | | | | 22,000 | | | | 25,369 | |
| Net loss | | | (179,188 | ) | | | (22,000 | ) | | | (201,188 | ) |
| | | | | | | | | | | | | |
| Consolidated Statement of Cash Flows | | | | | | | | | | | | |
| Cash flows from operating activities: | | | | | | | | | | | | |
| Net loss | | | (179,188 | ) | | | (22,000 | ) | | | (201,188 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | | | | | |
| Impairment of mineral property | | | 3,369 | | | | 22,000 | | | | 25,369 | |
| Interest accrued on promissory notes | | | 22,570 | | | | (22,570 | ) | | | - | |
| Changes in operating assets and liabilities: | | | | | | | | | | | | |
| Accounts payable and accrued liabilities | | | 43,809 | | | | 39,740 | | | | 83,549 | |
| Accounts payable and accrued liabilities to related parties | | | 16,533 | | | | (16,463 | ) | | | 70 | |
| Prepaid expenses and other current assets | | | (360 | ) | | | - | | | | (360 | ) |
| Net cash (used in) provided by operating activities | | | (93,169 | ) | | | 707 | | | | (92,462 | ) |
| | | | | | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | | | | | |
| Proceeds from debt | | | 83,946 | | | | 4,140 | | | | 88,086 | |
| Proceeds from related party debt | | | 12,083 | | | | (4,889 | ) | | | 7,194 | |
| Payments on debt | | | - | | | | (1,754 | ) | | | (1,754 | ) |
| Payments on related party debt | | | (2,597 | ) | | | 2,489 | | | | (108 | ) |
| Net cash provided by (used in) financing activities | | $ | 93,432 | | | $ | (14 | ) | | $ | 93,418 | |
YATERRA VENTURES CORP.4. |
(An Exploration Stage Company) |
|
NOTES TO FINANCIAL STATEMENTS |
|
YEARS ENDED AUGUST 31, 2011 AND 2010 |
(Stated in U.S. Dollars)MINERAL PROPERTIES |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
| | |
| The financial statements have been properly prepared within the framework of the significant accounting policies summarized below:
|
| | |
| a) | Organization and Start-up Costs
|
| | |
| | Costs of start up activities, including organizational and incorporation costs, are expensed as incurred.
|
| | |
| b) | Exploration Stage Enterprise
|
| | |
| | The Company’s financial statements are prepared using the accrual method of accounting. Until such properties are acquired and developed, the Company will continue to prepare its financial statements and related disclosures in accordance with entities in the exploration stage.
|
| | |
| c) | Mineral Property Interests
|
| | |
| | The Company is an exploration stage mining company and has not yet realized any revenue from its operations. It is primarily engaged in the acquisition, exploration and development of mining properties. Exploration costs are expensed as incurred regardless of the stage of development or existence of reserves. Costs of acquisition are capitalized subject to impairment testing when facts and circumstances indicate impairment may exist.
|
| | |
| | The Company regularly performs evaluations of any investment in mineral properties to assess the recoverability and/or the residual value of its investments in these assets. All long-lived assets are reviewed for impairment whenever events or circumstances change which indicate the carrying amount of an asset may not be recoverable.
|
| | |
| | Management periodically reviews the carrying value of its investments in mineral leases and claims with internal and external mining related professionals. A decision to abandon, reduce or expand a specific project is based upon many factors including general and specific assessments of mineral deposits, anticipated future mineral prices, anticipated future costs of exploring, developing and operating a producing mine, the expiration term and ongoing expenses of maintaining mineral properties and the general likelihood that the Company will continue exploration on such project. The Company does not set a pre-determined holding period for properties with unproven deposits, however, properties which have not demonstrated suitable metal concentrations at the conclusion of each phase of an exploration program are re-evaluated to determine if future exploration is warranted, whether there has been any impairment in value and that their carrying values are appropriate.
|
F-6
YATERRA VENTURES CORP. |
(An Exploration Stage Company) |
|
NOTES TO FINANCIAL STATEMENTS |
|
YEARS ENDED AUGUST 31, 2011 AND 2010 |
(Stated in U.S. Dollars) |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
|
| | |
| c) | Mineral Property Interests (Continued)
|
| | |
| | If an area of interest is abandoned or it is determined that its carrying value cannot be supported by future production or sale, the related costs are charged against operations in the year of abandonment or determination of value. The amounts recorded as mineral leases and claims represent costs to date and do not necessarily reflect present or future values.
|
| | |
| | The Company’s exploration activities are subject to various laws and regulations governing the protection of the environment. These laws are continually changing, generally becoming more restrictive. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations.
|
| | |
| d) | Cash
|
| | |
| | Cash consists of cash on deposit with high quality major financial institutions, and to date has not experienced losses on any of its balances. The carrying amounts approximate fair market value due to the liquidity of these deposits.
|
| | |
| e) | Computer Equipment
|
| | |
| | Computer equipment is recorded at cost and will be depreciated over an estimated useful life of three years on a straight-line basis.
|
| | |
| f) | Financial Instruments
|
| | |
| | All financial instruments are classified into one of five categories; held-for-trading, held- to-maturity investments, loans and receivables, available-for-sale assets or liabilities. All instruments and derivatives are measured in the balance sheet at fair value, except for loans and receivables, held-to-maturity investments and other financial liabilities, which are measured at amortized costs. Subsequent measurement and changes in fair value will depend on their initial classification. Held-for-trading financial assets are measured at fair value and changes in fair value are recognized in the statement of operations. Available-for-sale financial instruments are measured at fair value with changes in fair value recorded in other comprehensive income until the instrument is derecognized or impaired.
|
| | |
| | The Company classified its cash as held-for-trading, excess of checks issued over funds on deposit, accounts payable and accrued liabilities, accounts payable to related parties, promissory notes payable and promissory notes payable to related parties as other financial liabilities, all of which are measured at amortized cost.
|
F-7
YATERRA VENTURES CORP. |
(An Exploration Stage Company) |
NOTES TO FINANCIAL STATEMENTS |
|
|
YEARS ENDED AUGUST 31, 2011 AND 2010 |
(Stated in U.S. Dollars) |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
|
| | | |
| g) | Basic and Diluted Loss Per Share
|
| | | |
| | Basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. At August 31, 2011 and 2010, the Company has no common stock equivalents that were anti-dilutive and excluded in the earnings per share computation.
|
| | | |
| h) | Income Taxes
|
| | | |
| | The Company follows the asset and liability method of accounting for income taxes whereby deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted or substantially enacted tax rates and laws expected to apply in the years in which temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred income tax assets and liabilities is recognized in operations in the period that includes the substantive enactment date.
|
| | | |
| | A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. To the extent that the Company does not consider it probable that a deferred tax asset will be recovered, it provides a valuation allowance against that excess. |
| | | |
| i) | Foreign Currency Translation
|
| | | |
| | The Company’s functional currency is the U.S. dollar. Transactions in foreign currencies are translated into U.S. dollars as follows:
|
| | | |
| | i) | monetary items are translated at the exchange rate prevailing at the balance sheet date; |
| | ii)
| non-monetary items are translated at the historical exchange rate; iii) revenue and expenses are translated at the average rate in effect during the applicable accounting period. |
| | | |
| | The Company has an operating bank account held in Canadian dollars that may expose them to certain translation risks due to foreign exchange fluctuations between the Canadian and US currencies. Foreign exchange gains and losses are reflected in the statement of operations for the period.
|
F-8
YATERRA VENTURES CORP. |
(An Exploration Stage Company) |
NOTES TO FINANCIAL STATEMENTS |
|
|
YEARS ENDED AUGUST 31, 2011 AND 2010 |
(Stated in U.S. Dollars) |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
|
| | |
| j) | Use of Estimates
|
| | |
| | The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Actual results may differ from the estimates.
|
| | |
| | Significant accounts that require estimates as a basis for determining the stated amounts include mineral property acquisition costs and impairment, accrued liabilities and the valuation allowance of deferred tax assets.
|
| | |
| k) | Impairment of Long-Lived Assets
|
| | |
| | The Company records impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount. In such cases, the amount of the impairment is determined based on the relative fair values of the impaired assets. The Company tests the recoverability of the assets whenever events or changes in circumstances indicate that its carrying amount may not be recoverable.
|
| | |
| l) | Asset Retirement Obligations
|
| | |
| | An asset retirement obligation (“ARO”) is a legal obligation associated with the retirement of a tangible long-lived asset that the Company is required to settle. The Company recognizes the fair value of a liability for the ARO in the year in which it is incurred when a reasonable estimate of fair value can be made. The carrying amount of the related long-lived asset is increased by the same amount as the liability.
|
| | |
| | The cost of the tangible asset, including the initially recognized ARO, is depleted, such that the cost of the ARO is recognized over the useful life of the asset. The ARO is recorded at fair value, and accretion expense is recognized over time as the discounted liability is accreted to its expected settlement value. The fair value of the ARO is measured using expected future cash flows, discounted at the Company’s credit-adjusted risk-free interest rate. To date, no significant asset retirement obligation exists due to the early stage of exploration. Accordingly, no liability has been recorded.
|
| | |
| m) | Environmental Protection and Reclamation Costs
|
| | |
| | The operations of the Company have been, and may in the future be affected from time to time in varying degrees by changes in environmental regulations, including those for future removal and site restorations costs. Both the likelihood of new regulations and their overall effect upon the Company may vary from region to region and are not predictable.
|
F-9
YATERRA VENTURES CORP. |
(An Exploration Stage Company) |
NOTES TO FINANCIAL STATEMENTS |
|
|
YEARS ENDED AUGUST 31, 2011 AND 2010 |
(Stated in U.S. Dollars) |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
|
| | |
| m) | Environmental Protection and Reclamation Costs (Continued)
|
| | |
| | Environmental expenditures that relate to ongoing environmental and reclamation programs are charged against the statement of operations as incurred or capitalized and amortized depending upon their future economic benefits. The Company does not currently anticipate any material capital expenditures for environmental control facilities because its property holding is at an early stage of exploration.
|
| | |
| n) | Fair Value of Financial Instruments
|
| | |
| | Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market. The Company uses a three-tier fair value hierarchy which prioritizes the inputs in measuring fair value as follows:
|
| Level 1: | Observable inputs such as quoted prices in active markets; |
| | |
| Level 2: | Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and |
| | |
| Level 3: | Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
The Company classified its cash as Level 1.
3. | RECENT ACCOUNTING PRONOUNCEMENTS
|
| |
| In May 2011, the FASB issued new authoritative guidance to provide a consistent definition of fair value and ensure that fair value measurements and disclosure requirements are similar between GAAP and International Financial Reporting Standards. This guidance changes certain fair value measurement principles and enhances the disclosure requirements for fair value measurements. This guidance is effective for interim and annual periods beginning after December 15, 2011 and is applied prospectively. The Company does not expect that the adoption of this guidance will have a material impact on its financial statements.
|
F-10
YATERRA VENTURES CORP. |
(An Exploration Stage Company) |
|
NOTES TO FINANCIAL STATEMENTS |
|
YEARS ENDED AUGUST 31, 2011 AND 2010 |
(Stated in U.S. Dollars) |
3. | RECENT ACCOUNTING PRONOUNCEMENTS(Continued)
|
| |
| In April 2010, the FASB provided an update to address the classification of an employee share-based payment award with an exercise price denominated in the currency of a market in which the underlying equity security trades. FASB Accounting Standards Codification Topic 718, Compensation—Stock Compensation, provides guidance on the classification of a share-based payment award as either equity or a liability. A share-based payment award that contains a condition that is not a market, performance, or service condition is required to be classified as a liability. This standard is effective for years beginning after December 15, 2010, and for subsequent interim and annual reporting periods thereafter. The Company does not expect the adoption of this standard to have a significant effect on the Company's results of operations or financial position.
|
| |
| In January 2010, the FASB issued ASU 2010-06,Fair Value Measurements and Disclosures (Topic 820), Improving Disclosures about Fair Value Measurements,amending ASC 820. ASU 2010-06 requires entities to provide new disclosures and clarify existing disclosures relating to fair value measurements. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in Level 3 fair value measurements, which are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. The Company is currently evaluating the impact of ASU 2010-06, but does not expect its adoption to have a material impact on the Company’s financial position or results of operations.
|
| |
4. | COMPUTER EQUIPMENT
|
| | | | AUGUST 31 | | | AUGUST 31 | |
| | | | 2011 | | | 2010 | |
| | | | | | | ACCUMULATED | | | NET BOOK | | | NET BOOK | |
| | | | COST | | | AMORTIZATION | | | VALUE | | | VALUE | |
| | | | | | | | | | | | | | |
| | Computer equipment | $ | 1,184 | | $ | 1,184 | | $ | - | | $ | 98 | |
| | | | AUGUST 31 | | | | | | ABANDONED, | | | AUGUST 31 | |
| | | | 2010 | | | ADDITIONS | | | IMPAIRED | | | 2011 | |
| | Mineral Property | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | Blue Jack claims | $ | 16,000 | | $ | - | | $ | - | | $ | 16,000 | |
| | Frances claims | | 2,362 | | | 1,007 | | | (3,369 | ) | | - | |
| | Minnie Lode claims | | 6,000 | | | - | | | - | | | 6,000 | |
| | | | | | | | | | | | | | |
| | | $ | 24,362 | | $ | 1,007 | | $ | (3,369 | ) | $ | 22,000 | |
F-11
YATERRA VENTURES CORP. |
(An Exploration Stage Company) |
|
NOTES TO FINANCIAL STATEMENTS |
|
YEARS ENDED AUGUST 31, 2011 AND 2010 |
(Stated in U.S. Dollars) |
5. | MINERAL PROPERTIES(Continued)
|
| | | | AUGUST 31 | | | | | | ABANDONED, | | | AUGUST 31 | |
| | | | 2009 | | | ADDITIONS | | | IMPAIRED | | | 2010 | |
| | Mineral Property | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | Blue Jack claims | $ | 16,000 | | $ | - | | $ | - | | $ | 16,000 | |
| | Frances claims | | 443 | | | 1,919 | | | - | | | 2,362 | |
| | Minnie Lode claims | | 6,000 | | | - | | | - | | | 6,000 | |
| | | | | | | | | | | | | | |
| | | $ | 22,443 | | $ | 1,919 | | $ | - | | $ | 24,362 | |
During the period ended August 31, 2007, the Company
entered into a purchase agreement to acquireacquired an undivided 100% interest in a mineral claim (known as the “Minnie Lode Claims”) located in the Leecher Creek Mining District, Okanogan County,
Washington. The consideration was $6,000 cash (paid) on execution of the agreement.Washington, for $6,000.
During the year ended August 31, 2009, the Company
entered into a purchase agreement to acquireacquired an undivided interest in a series of ten mineral claims (collectively referred to as the “Blue Jack Claims”) located in Humboldt County,
Nevada. The consideration was $16,000 (paid) on execution of the agreement.Nevada, for $16,000.
On July 14, 2009, the Company
entered into an assignment agreement to acquireacquired an undivided 60% interest in a mineral claim (known as the “Frances” claim) situated in the Vancouver Mining District, British Columbia,
Canada. The Company paid $500 CDN on execution of the agreement.The assignment agreement was amended on October 27, 2009 (the “First Amendment Agreement”), December 10, 2009 (the “Second Amendment Agreement”), February 11, 2010 (the “Third Amendment Agreement”), June 1, 2010 (the “Fourth Amendment Agreement”), September 1, 2010 (the “Fifth Amendment Agreement”), and March 15, 2011 (the “Sixth Amendment Agreement”), and considerationCanada, for the claim is as follows:
| 1. | $500 CDN on execution of the First Amendment Agreement (paid);
$500 CDN on execution of the Second Amendment Agreement (paid);
$500 CDN on execution of the Third Amendment Agreement (paid);
$500 CDN on execution of the Fourth Amendment Agreement (paid);
$500 CDN on execution of the Fifth Amendment Agreement (paid);
$500 CDN on execution of the Sixth Amendment Agreement (paid);
|
F-12
$500.YATERRA VENTURES CORP. |
(An Exploration Stage Company) |
|
NOTES TO FINANCIAL STATEMENTS |
|
YEARS ENDED AUGUST 31, 2011 AND 2010 |
(Stated in U.S. Dollars) |
5. | MINERAL PROPERTIES(Continued)
|
| 2. | incurring $10,000 CDN in exploration expenditures September 15, 2011;
|
| 3. | 2,000 common shares due on or before September 15, 2011;
|
| 4. | additional $2,000 CDN on October 15, 2011;
|
| 5. | an additional 3,000 commons shares due on or before October 15, 2011;
|
| 6. | additional $10,000 CDN on December 15, 2011;
|
| 7. | an additional 10,000 common shares due on or before December 15, 2011;
|
| 8. | incurring an additional $150,000 CDN in exploration expenditures by July 14, 2012.
|
All other terms of the agreement remain unchanged.
During the year ended August 31, 2011, the Company abandoned and wrote offfully impaired all costs incurredmineral properties. Aggregate impairment expense for the year was $25,369.
As part of the acquisition of Pure Spectrum Oil, the Company acquired a deposit of $25,000 with respectthe Railroad Commission of Texas for the right to acquire and hold drilling permits in the state.
| 6. | RELATED PARTY TRANSACTIONS |
During the years ended August 31, 2012 and 2011, the Company entered into promissory note agreements, whereby it borrowed $26,117 and $7,194, respectively from related parties (current and former directors). The Company repaid $9,659 and $108 on these noted during the years ended August 31, 2012 and 2011, respectively. These notes bear interest at 10% per annum, are unsecured and are payable on demand. As of August 31, 2012 and 2011 outstanding balance under these notes was $23,544 and $7,086, respectively. As of August 31, 2012 and 2011, a total of $3,797 and $70, respectively has been accrued as interest on the notes.
During the year ended August 31, 2012, the Company issued convertible notes to a single related party (former director) for $25,000. The notes are unsecured, bear interest at 10% per annum and mature on December 31, 2014. The notes are convertible into common stock at 75% of the average quoted price for the 10 days preceding conversion. The notes qualify as derivative liabilities and are accounted for as such (see Note 10). A total of $1,689 has been accrued as interest on the notes as of August 31, 2012.
During the year ended August 31, 2012 and 2011, the Company accrued management fees for services performed in the amount of $125,250 and $0, respectively. Additionally during the years ended August 31, 2012 and 2011, the Company paid $38,470 and $6,310, respectively in management fees for services performed by Directors.
During the years ended August 31, 2012 and 2011, the Company entered into promissory note agreements, whereby it borrowed an aggregate of $6,239 and $88,086, respectively. The company had outstanding debt of $147,348 as of August 31, 2010. The Company repaid an aggregate of $10,830 and $1,754 on these noted during the years ended August 31, 2012 and 2011, respectively. These notes bear interest between 10% and 12% per annum, are unsecured and are payable between on demand and July 13, 2013. As of August 31, 2012 and 2011, the aggregate outstanding balance under these notes was $161,589 and $233,680, respectively. As of August 31, 2012 and 2011, a total of $57,916 and $36,257, respectively has been accrued as interest on the notes. During the year ended August 31, 2012, the Company issued an aggregate of 17,426,097 common shares to repay $30,000 of these notes resulting in a loss on the extinguishment of debt of $1,783,048 (see Note 8).
During the year ended August 31, 2007, the Company issued 900,000 founder shares at $0.01 for gross proceeds of $9,000 and the Company issued 610,000 common shares at $0.20 per share for gross proceeds of $122,000.
During the year ended August 31, 2009, the Company issued 120,000 common shares at $0.50 for gross proceeds of $60,000.
On May 21, 2012, the Company issued, in advance, 10,000,000 common shares to the Frances property.CEO of the company (see Note 9). The shares vest 2,000,000 per annum over a 5 year term. The fair value of the grant was determined to be $281,008 and $15,706 was recognized as stock-based compensation during the year ended August 31, 2012. The remaining $265,302 will be expensed over the remaining vesting period.
On June 6, 2012, the Company issued 1,900,000 common shares for consulting services valued at $950,000. These services were provided as of August 31, 2012 and the total fair value is recognized as stock-based compensation during the year ended August 31, 2012.
On May 21, 2012, the Company issued 4,000,000 common shares for the acquisition of Pure Spectrum Oil, Inc. (see Note 1). The shares were valued at the carryover value of the net liabilities assumed of $1,035,068 which consisted of a deposit of $25,000, accounts payable of $9,803 and notes payable of $1,050,265.
Between June and August, 2012, the Company issued 17,426,097 common shares for the settlement of $30,000 in debt. The fair value of the shares was determined to be $1,813,048 resulting in a loss on extinguishment of debt of $1,783,048 during the year ended August 31, 2012.
During June 2012, the Company issued 750,000 shares for the conversion of $37,500 convertible note payables (see Note 10).
6.9. | PROMISSORY NOTES PAYABLE
COMMITMENTS AND CONTRACTUAL OBLIGATIONS |
On May 15, 2012, the Company reserved 1,000,000 Series A Preferred Shares to be held in escrow and to be issued to the new CEO after the closing of the Pure Spectrum Oil purchase and the completion of a 2 year term. The fair value of the grant was determined to be $281,008 and is being expensed over the vesting period of 2 years. The Company has accrued $41,574 in preferred stock-based compensation related to this award as of August 31, 2012. The remaining $239,434 will be recognized over the remaining vesting period.
Additionally, on May 15, 2012, the Company approved executive compensation shares to be issued to one director. The director will be paid 20,000 common shares for each fiscal quarter in which the Company’s Form 10Q is timely filed and 15,000 shares for each fiscal quarter in which the Company’s Form 10Q is filed after an extension is filed. As of August 31, 2012, no shares have been earned under these agreements.
On May 21, 2012, the Company entered into a five year employment agreement, effective May 1, 2012, with Cedric Atkinson to serve as its CEO for compensation of a cash payment of $20,000 per month and the issuance on the effective date of the agreement of 10,000,000 common shares which will vest 2,000,000 shares per annum upon completion of each 12 months term of service. The fair value of the grant was determined to be $281,008 of which $15,706 was recognized as stock-based compensation during the year ended August 31, 2012. The remaining $265,302 will be expensed over the remaining vesting period.
| 10. | CONVERTIBLE DEBT AND DERIVATIVE LIABILITIES |
During the year ended August 31, 2012, the Company borrowed an aggregate of $135,500 under convertible notes (including $25,000 borrowed under related party convertible notes) and assumed an aggregate of $1,050,265 under convertible notes in the acquisition of Pure Spectrum Oil. The notes are unsecured, bear interest between 8% and 36% per annum and mature between May 21, 2012 and December 31, 2014. The notes are convertible into common stock at 75% of the average quoted price for the 10 days preceding conversion. During the year ended August 31, 2012, the Company made cash payments of $8,388 on these notes and issued an aggregate of 750,000 common shares for the conversion of $37,500 of convertible debt. As of August 31, 2012, the Company has accrued interest of $114,086 on these third party notes and $1,689 on the related party convertible notes.
The Company evaluated the notes under ASC 815 and determined that they qualify as derivative liabilities. The aggregate fair value of the derivative liability was determined to be $1,551,642 as of the initial loan dates resulting in an initial loss on derivative liabilities of $373,377 and a debt discount of $1,178,265. The fair value of the derivative liabilities on the notes that were converted to common stock during the year ended August 31, 2012 was determined to be $49,339 and the fair value of the remaining derivative liabilities as of August 31, 2012 was determined to be $1,559,517. The change in the fair value of the derivative liabilities during the year ended August 31, 2012 was $57,214 resulting in an aggregate loss on derivative liabilities of $430,591 for the year ended August 31, 2012. The debt discount is being amortized to interest expense over the lives of the notes using the effective interest rate method. During the year ended August 31, 2012, aggregate amortization expense was $1,103,164.
The following table summarizes the change in the derivative liabilities during the year ended August 31, 2012:
| Balance as of August 31, 2011 | | $ | - | |
| Debt discount | | | 1,178,265 | |
| Initial loss on derivative liabilities | | | 373,377 | |
| Loss on change in fair value | | | 57,214 | |
| Resolution of derivative liabilities due to conversion | | | (49,339 | ) |
| Balance at August 31, 2012 | | $ | 1,559,517 | |
The Company estimated the fair value of the derivative liabilities using the Black-Scholes Option Pricing Model with the following assumptions:
| Market prices | | $ | 0.019 - $0.51 | |
| Conversion prices | During the year ended August 31, 2010, the Company entered into various promissory note agreements, whereby it borrowed an additional $85,217 (2009
| $ | 0.01 - $62,130) from arms’ length parties. These notes bear interest at 10% to 12% per annum, are unsecured and are repayable on demand. As at August 31, 2010, the promissory notes consist of a total of $147,347 in principal and a total of $13,744 (2009 - $2,209) has been accrued as interest. |
| $0.383 | |
| Expected volatilities | During the year ended August 31, 2011, the Company entered into additional promissory note agreements, whereby it borrowed an additional $83,946 from arms’ length parties. These notes bear interest at 10%, are unsecured and are repayable on demand. As at August 31, 2011, the promissory notes consist of $231,293 in principal and a total of $36,207 has been accrued as interest.
| | 127% - 186 | % |
| Expected dividends | | | - | |
7.Expected terms | PROMISSORY NOTES PAYABLE TO RELATED PARTIES
|
| 0.26 - 3.07 years | |
| Risk-free rates | During the year ended August 31, 2011, the Company entered into promissory note agreements, whereby it borrowed $12,083 from related parties. The Company paid back $2,597 of this balance during the year. These notes bear interest at 10%, are unsecured and are repayable on demand. As at August 31, 2011, a total of $107 has been accrued as interest on the notes.
|
F-13
YATERRA VENTURES CORP. |
(An Exploration Stage Company) |
|
NOTES TO FINANCIAL STATEMENTS |
|
YEARS ENDED AUGUST 31, 2011 AND 2010 |
(Stated in U.S. Dollars) |
8.
| CAPITAL STOCK
|
| |
| During the year ended August 31, 2007, the Company issued 900,000 founder shares at par value for gross proceeds of $9,000 and the Company issued 610,000 common shares at $0.20 per share for gross proceeds of $122,000.
|
| |
| During the year ended August 31, 2009, the Company completed an offering of 120,000 shares of common stock at a price of $0.50 per share for gross proceeds of $60,000.
|
| |
| Included in issued share capital are 900,000 restricted common shares of the Company (2010 – 900,000).
|
| |
9.
| RELATED PARTY TRANSACTIONS
|
| |
| During the year ended August 31, 2011, the Company paid or accrued management fees for services performed in the amount of $42,000 (2010 - $42,000) to directors and also paid or accrued during the year, $6,000 to two members of management (2010 - $6,000).
|
| |
| As at August 31, 2011, a total of $47,033 (2010 - $30,500) is owing to a director and two members of management. These amounts are unsecured, do not bear interest and are due on demand.
|
| |
| These transactions were in the normal course of operations and were recorded at their exchange amount, which is the amount of consideration established and agreed to by the related parties.
|
| |
10.
| COMMITMENTS AND CONTRACTUAL OBLIGATIONS
|
| |
| The Company has no significant commitments or contractual obligations with any parties respecting executive compensation or consulting arrangements. Rental of premises is on a month-to-month basis.
|
F-14
YATERRA VENTURES CORP. |
(An Exploration Stage Company) |
|
NOTES TO FINANCIAL STATEMENTS |
|
YEARS ENDED AUGUST 31, 2011 AND 2010 |
(Stated in U.S. Dollars) |
11. | SEGMENT INFORMATION
|
| |
| The Company has one reportable operating segment, being the acquisition and exploration of mineral properties. Details of identifiable assets by geographic segments are as follows:
|
| | | | | | | MINERAL | |
| | | | COMPUTER | | | PROPERTY | |
| | | | EQUIPMENT | | | INTERESTS | |
| | | | | | | | |
| | August 31, 2011 | | | | | | |
| | USA | $ | - | | $ | 22,000 | |
| | | | | | | | |
| | August 31, 2010 | | | | | | |
| | USA | $ | - | | $ | 22,000 | |
| | Canada | | 98 | | | 2,362 | |
| | | | | | | | |
| | | $ | 98 | | $ | 24,362 | |
12. | INCOME TAX
|
| | | |
| 0.16% - 0.43 | a) | Income Tax Provision
|
| | |
| | The provision for income taxes differs from the result which would be obtained by applying the statutory income tax rate of 34% (2010 – 34%) to income before income taxes. The difference results from the following items:
% |
| | | | 2011 | | | 2010 | |
| | | | | | | | |
| | Loss for the year | $ | (179,188 | ) | $ | (150,984 | ) |
| | | | | | | | |
| | Computed expected income taxes recovery | | (60,924 | ) | | (51,335 | ) |
| | Non-deductible item | | 4,999 | | | 2,482 | |
| | Other | | (4,075 | ) | | 5,553 | |
| | Increase in valuation allowance | | 60,000 | | | 43,300 | |
| | | | | | | | |
| | Income tax provision | $ | - | | $ | - | |
F-15
YATERRA VENTURES CORP.11. |
(An Exploration Stage Company) |
|
NOTES TO FINANCIAL STATEMENTS |
|
YEARS ENDED AUGUST 31, 2011 AND 2010 |
(Stated in U.S. Dollars)INCOME TAXES |
Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has an accumulated net operating loss carry forward of $1,023,412 which begins to expire in 2028. Pursuant to ASC 740 the Company is required to compute tax asset benefits for non-capital losses carried forward. The potential benefit of the net operating loss has not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the loss carried forward in future years.
Significant components of the Company’s deferred tax assets and liabilities as at August 31, 2012 and 2011, after applying enacted corporate income tax rates, are as follows:
| | | August 31, | | | August 31, | |
| | | 2012 | | | 2011 | |
| Deferred tax assets: | | | | | | |
| Net operating loss carry forward | | $ | 347,960 | | | $ | 208,358 | |
| Valuation allowance | | | (347,960 | ) | | | (208,358 | ) |
| Net deferred tax assets | | $ | - | | | $ | - | |
| 12. | INCOME TAX(Continued)
SUBSEQUENT EVENTS |
| b) | Significant components of the Company’s deferred income tax assets are as follows:
|
Between February and September 2013, the Company borrowed an aggregate of $263,295 under convertible notes. The notes are unsecured, bear interest between 8% and 21% per annum and mature on December 31, 2014. The notes are convertible into common stock at 75% of the average quoted price for the 10 days preceding conversion.
| | | | 2011 | | | 2010 | |
| | | | | | | | |
| | Deferred income tax assets: | | | | | | |
| | Non-capital loss carryforward | $ | 204,000 | | $ | 148,500 | |
| | Mineral property and exploration expenditures | | 17,000 | | | 12,500 | |
| | | | 221,000 | | | 161,000 | |
| | Valuation allowance | | (221,000 | ) | | (161,000 | ) |
| | | | | | | | |
| | Net deferred income tax assets | $ | - | | $ | - | |
Between September 2012 and September 2013, the Company issued an aggregate of 1,462,582,021 common shares for the conversion of $417,689 of convertible note payables.
| c) | The Company has incurred operating losses of approximately $601,200 (2010 - $437,000) which, if unutilized, will begin to expire in 2028. Subject to certain restrictions, the Company has mineral property and exploration expenditures of $73,201 (2010 - $60,861) available to reduce future taxable income. Future tax benefits, which may arise as a result of these losses, have not been recognized in these financial statements, and have been offset by a valuation allowance.
|
On September 24, 2012, the Company increased the Authorized Common Stock from 100,000,000 to 400,000,000
13. | SUBSEQUENT EVENTS
|
| | |
| Subsequent to August 31, 2011:
|
| | |
| a) | The Company entered into six promissory note agreements whereby it borrowed a total of $17,642 from two related parties and $5,860 from an arms’ length party. The notes bear interest at 10% per annum, are unsecured and are repayable on demand.
|
| | |
| b) | The Company’s Board of Directors approved the offering of up to $100,000 of 10% convertible notes. Each note will be due on December 31, 2014 and bears interest at 10% per annum payable annually. The notes may be converted into common shares of the Company equal to the principal amount of the note divided by 75% of the average trading price of the Company’s common shares for 10 business days prior to the date of conversion. The Company may elect at its option to pay the interest required annually by an issuance of common shares using the same terms for the conversion of the notes. To date, the Company has issued $61,277 convertible notes.
|
F-16
On October 1, 2012, the Company issued 65,000,000 common shares for services to management and directors.
On October 1, 2012, the Company issued 5,000,000 common shares for consulting services. The Consulting agreement has a term of six months starting October 1, 2012 and ending March 1, 2013.
On March 4, 2013, the Company issued 20,000,000 common shares for services to a member of management.
On March 4, 2013, the Company issued to its President 1,500,000 shares of Series Preferred A Stock. Additionally, the Company issued 500,000 shares of Series Preferred A Stock to a member of management.
On March 13, 2013, the Company increased the Authorized Common Stock from 400,000,000 to 1,000,000,000
On April 9, 2013, the Company increased the Authorized Common Stock from 1,000,000,000 to 1,400,000,000
On May 6, 2013, the Company increased the Authorized Common Stock from 1,400,000,000 to 2,400,000,000
| ITEM 9. | CHANGES IN AND DISAGREEMENTSWITHACCOUNTANTSONACCOUNTINGANDFINANCIAL DISCLOSURE. |
| ITEM 9A. | CONTROLS AND PROCEDURES. |
Under the supervision and with the participation of our management, including our Principal Executive Officer and
Principal AccountingInterim Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rules 13a-15(e) and 15(d)-15(e) as of August 31,
20112012 (the “Evaluation Date”). Based upon that evaluation, our Principal Executive Officer and
Principal AccountingInterim Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of the Evaluation Date as a result of the material weaknesses in internal control over financial reporting discussed below.
The framework used to evaluate the effectiveness of our internal controls over financial reporting is based upon guiding principles advocated by The Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 1992. This guidance provides a set of twenty basic principles representing the fundamental concepts associated with, and drawn directly from, the five components of the framework i.e. control environment, risk assessment, control activities, information and communication and monitoring.
Internal controls over financial reporting is defined in the SEC's rules as those controls designed by the company's principal executive and financial officers to provide reasonable assurance regarding the reliability of the company's financial reporting and the preparation of financial statements in accordance with GAAP.
Notwithstanding the assessment that our internal control over financial reporting was not effective and that there were material weaknesses as identified in this report, we believe that our financial statements contained in our Annual Report on Form 10-K for the year ended August 31,
20112012 fairly present our financial condition, results of operations and cash flows in all material respects.
Management’s Assessment on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Securities Exchange Act
of 1934, for the Company.
Internal controls over financial reporting include those policies and procedures that:
| 1. | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; our assets; |
| | | |
| 2. | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of our management and directors of the Company;directors; and |
| | | |
| 3. | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company'sour assets that could have a material effect on the financial statements. |
Management recognizes that there are inherent limitations in the effectiveness of any system of internal control, and accordingly, even effective internal control can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect material misstatements. In addition, effective internal control at a point in time may become ineffective in future periods because of changes in conditions or due to deterioration in the degree of compliance with our established policies and procedures.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in there being a more than remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.
Under the supervision and with the participation of our Principal Executive Officer and
Principal AccountingInterim Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting, as of the Evaluation Date, based on the framework set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its evaluation under this framework, management concluded that our internal control over financial reporting was not effective as of the Evaluation Date and identified the following material weaknesses:
23
Insufficient Resources:We have an inadequate number of personnel with requisite expertise in the key functional areas of finance and accounting.accounting resulting in an over-reliance on consultants and a lack of formal procedures that provide for multiple levels of supervision and review.
Inadequate Segregation of Duties: We have an inadequate number of personnel to properly implement control procedures.
Insufficient Written Policies & Procedures:We have insufficient written policies and procedures for accounting and financial reporting.
Inadequate Financial Statement Closing Process:We have an inadequate financial statement closing process.
Lack of Outside Directors on the Company’s Board of Directors:We have a lack of outside directors on the Company’sour Board of Directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures. Management is committed to improving its internal controls and will (1) continue to use third party specialists to address shortfalls in staffing and to assist
the Companyus with accounting and finance responsibilities, (2) increase the frequency of independent reconciliations of significant accounts which will mitigate the lack of segregation of duties until there are sufficient personnel
and (3) prepare and implement sufficient written policies and checklists for financial reporting and closing processes and (4) may consider appointing outside directors and audit committee members in the future.
Management, including our Principal Executive Officer and
the Principal AccountingInterim Chief Financial Officer,
hashave discussed the material weakness noted above with our third party consulting accountant. Due to the nature of this material weakness, there is a more than remote likelihood that misstatements which could be material to the annual or interim financial statements could occur that would not be prevented or detected.
This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to the rules of the SEC that permit us to provide only management's report in this annual report.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended August 31,
20112012 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls and Procedures
Our management, including our Principal Executive Officer and the Principal AccountingInterim Chief Financial Officer, do not expect that the our controls and procedures will prevent all potential errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
| ITEM 9B. | OTHER INFORMATION. |
On December 9, 2011, our Board of Directors approved a private placement offering of up to $100,000 of 10% convertible notes (the “Offering”). The Offering will be completed pursuant to Regulation S of the Securities Act to persons who are not U.S. Persons as contemplated under Regulation S. The proceeds of the Offering will be used to fund our business and for working capital purposes. There is no assurance that the Offering will be completed on the above terms or at all.
24
None.
| ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. |
Our executive officers and directors and their age and titles are as follows:
| Name of Director | | Age | | Position |
David K. RyanCedric Atkinson | 45 | 36 | | President, Secretary, Treasurer and Director |
Shane Epp | 39 | Executive Vice-President | | |
Lindsay E. GorrillGregory Clements | 49 | 60 | | Interim Chief Financial Officer and Director |
| | | | |
| David K. Ryan | | 47 | | Director |
Cedric Atkinson, President, Secretary, Treasurer and Director
From 2006 – 2011 Mr. David K. RyanAtkinson was a Business Development consultant with Bl Clark. From 2011 – 2012. Mr. Atkinson was CEO of Stratton Holdings. Mr. Atkinson was appointed as our President, Secretary, Treasurer and Director on August 29,May 1, 2012 During his business career, Mr. Atkinson, has focused on sales and marketing as well as contract consulting in the financial markets to both privately held and public companies. Mr. Atkinson has established a reputation for creating effective strategies for asset acquisitions and long-term success. Mr. Atkinson studied Public Policy at York University, one of Canada’s leading interdisciplinary research and teaching institutions.
Due to his sales and marketing experience, we believe that Mr. Atkinson possesses skills that make him a valuable director.
Gregory Clements, Interim Chief Financial Officer and Director
From 2007 - 2008, Mr. Clements was the CFO for Four Rivers Peterbuilt. From 2008 to 2010 Mr. Clements was CFO and V.P. of Operations for Comdoc. From February 2010 to October 2010 Mr. Clements was CEO and CFO for PureSpectrum, Inc. From 2011 to present Mr. Clements is CFO of J.T. Turner Construction Co. Mr. Clements brings over thirty years of experience in accounting, IT, and as our Vice-President,administrative leadership to Yaterra. During his career in Finance on April 4, 2007. and Accounting, Mr. Clements has been responsible for the reorganization of multiple companies, helping them to achieve timely and accurate reporting with decreased personnel costs. Throughout his career, he has proven his ability to convert and automate accounting systems, resolve stressed financial situations and to reorganize financial functions
Due to his accounting experience, we believe that Mr. Clements possesses skills that make him a valuable director.
David K. Ryan, Director
From 1989 to 1995, Mr. Ryan was an account executive at Georgia Pacific Securities in Vancouver. From 1995 to present, Mr. Ryan has worked as an independent investor relations consultant and has participated in raising venture capital through private placements. Mr. Ryan is a former director or officer of DRC Resources and Universal Domains Incorporated. Mr. Ryan completed the Canadian Securities Course in 1988. From 2005 to October 2009, Mr. Ryan served as an executive officer and director of Cignus Ventures Inc. (now called Smartlinx Inc.), a company quoted on the OTC Bulletin Board and engaged in the acquisition and exploration of mineral properties at the time Mr. Ryan was a director and officer. Mr. Ryan also serves as a director of Manado Gold Corp., a company engaged in the exploration of mineral resource properties in British Columbia and is a reporting issuer in British Columbia Canada.
Mr. Shane Eppis our Executive Vice-President. Mr. EppRyan was appointed an officeras our Vice-President, Finance on April 4, 2007. Mr. Epp, (B. Comm.) has been employed by CB Richard Ellis Limited, one2007 and as our President, Secretary, Treasurer and Director on August 29, 2011 and. Mr Ryan resigned from his position of the largest full service real estate brokeragePresident, Secretary and Treasurer in April 2012.
Due to his prior experience with companies in
our industry, we believe Mr. Ryan possesses the
world, since January 2007. Currently an Associate Vice-President of the CBRE Retail Properties Group, he spent the 5 years previous with another large international real estate brokerage firm, Colliers International. Mr. Epp graduated from the University of British Columbia in 1993 withskills to make him a
Bachelor of Commerce, majoring in Urban Land Economics, with a minor in Finance. In addition to his work in the real estate industry, Mr. Epp has been an active investor in public markets for close to 20 years, and has participated in raising venture capital for both public and private companies through limited partnerships, private placements and debt financing.Mr. Lindsay E. Gorrillis a member of our Board of Directors. Mr. Gorrill was appointed as a member of the Board of Directors on August 28, 2008. Mr. Gorrill has twenty years of senior management experience and has a diverse background with publicly listed companies. Mr. Gorrill serves as President of Star Gold Corp. a mining exploration company, quoted on the OTC Bulletin Board. Since July 9, 2007, Mr. Gorrill has acted as Chief Executive Officer and as a direcctor of Jayhawk Energy, Inc., a company quoted on the OTC Bulletin Board. From August 2007 to July 2008, Mr. Gorrill served as Chief Financial Officer of Quinto Mining Corp., a company listed on the TSX Venture Exchange. Mr. Gorrill has also held management positions Berkley Resources Inc., a company listed on the TSX Venture Exchange. Until April 2005, Mr. Gorrill acted as President and Chief Executive Officer of WGI Heavy Minerals Inc., a company listed on the Toronto Stock Exchange and engaged in the exploration, production and marketing of industrial metals. Mr. Gorrill is a Chartered Accountant and graduated from Simon Fraser University with a BBA in Finance and Marketing.
valuable director.
None of our executive officers or directors has any formal training as geologists. With the exception of Mr. Gorrill, ourOur executive officers and directors have very limited training on the technical and managerial aspects of managing a Oil, Gas and mineral exploration company. None of their prior managerial and consulting positions have been in the mineral exploration industry. Accordingly, we will have to rely on the technical services of others to advise us on the managerial aspects specifically associated with a Oil, Gas and mineral exploration company. We do not have any employees who have professional training or experience in the mining industry. We rely on independent geological consultants to make recommendations to us on work programs on our property, to hire appropriately skilled persons on a contract basis to complete work programs and to supervise, review, and report on such programs to us.25
Members of our board of directors are appointed to hold office until the next annual meeting of our stockholders or until his or her successor is elected and qualified, or until they resign or are removed in accordance with the provisions of the Nevada Revised Statutes. Our officers are appointed by our board of directors and hold office until removed by the board.
We have no significant employees other than our executive officers and directors.
We conduct our business through agreements with consultants and arms-length third parties. Currently, we have no formal consulting agreements in place. We have a verbal arrangement with the consulting geologist currently conducting the exploratory work on the Blue Jack Property. We pay to this geologist the usual and customary rates received by geologists performing similar consulting services.
Committees of the Board of Directors
Audit Committee
We have a separately designated audit committee and it consists of the following directors and officers: Lindsay Gorrill and David K. Ryan. Mr. Ryan is not an independent director as he currently acts as President, Secretary and Treasurer. Mr. Gorrill is an independent member of our Board of Directors.
Our board of directors has adopted an Audit Committee Charter which provides appropriate guidance to Audit Committee members as to their duties
Audit Committee Financial Expert
Our Board of Directors has determined that we do not presently have a director who meets the definition of an “audit committee financial expert.” We believe that the cost related to appointing a financial expert to our Board of Directors at this time is prohibitive.
We adopted a Code of Ethics applicable to our officers and directors which is a “code of ethics” as defined by applicable rules of the SEC. Our code of ethics is attached as an exhibit to
ourthis Annual Report for the year ended August 31,
2010 filed with the SEC on December 15, 2010.2012. If we make any amendments to our Code of Ethics other than technical, administrative, or other non-substantive amendments, or grant any waivers, including implicit waivers, from a provision of our Code of Ethics to our President, Treasurer, or certain other finance executives, we will disclose the nature of the amendment or waiver, its effective date and to whom it applies in a current report on Form 8-K filed with the SEC.
Director Independence and Committees
Although our common stock is not listed on any national securities exchange, for purposes of independence we use the definition applied by the NASDAQ Stock Market. The Board has determined that none of our directors are “independent” in accordance with that definition due to their current or former positions as our executive officers.
Committee and Audit Committee Financial Expert.
Our board has no designated committees and our entire board acts as our audit committee. Gregory Clements is an “audit committee financial expert” as that term is defined in Item 407 (d) of Regulation S-K promulgated under the Securities Act.
Board Leadership Structure
Our Chief Executive Officer serves as our Chairman Of the Board of Directors and we do not have a lead independent director. Due to our size, we feel that this leadership structure is appropriate.
Compliance with Section 16(a) of the Securities Exchange Act
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who own more than 10% of a registered class of our securities (“Reporting Persons”), to file reports of ownership and changes in ownership with the SEC. Reporting Persons are required by SEC regulations to furnish us with copies of all forms they file pursuant to Section 16(a). Other than as disclosed below, based on our review of such reports received by the Company, we believe that, during the year ended August 31,
2011,2012, all Reporting Persons complied with all Section 16(a) filing requirements applicable to them.
26
Each of Cedric Atkinson, our President, Secretary, Treasurer and Director, and Gregory Clements, our Interim Chief Financial Officer and Director failed to timely file a Form 3 upon their appointment as an officer and director
Name and Principal Position | Number of Late
Insider Reports | Transactions Not Timely
Reported | Known Failures to File a
Required Form |
Jarrett F. Bousquet
Former President, Former Secretary, Former
Treasurer and Former Director | None
| None
| One
|
| ITEM 11. | EXECUTIVE COMPENSATION. |
Summary Compensation Table The following table sets forth the total compensation paid to or earned by our named executive officers, as that term is defined in Item 402(m)(2) of Regulation S-K as of our fiscal years ended August 31, 20112012 and 2010.2011.
Name & Principal
Position |
Year |
Salary
($) |
Bonus
($) |
Stock
Awards
($) |
Option
Awards
($) | Non-
Equity
Incentive
Plan
Compen-
sation
($) | Non-
qualified
Deferred
Compen-
sation
Earnings
($) |
All Other
Compen-
sation
($) |
Total
($) |
David K. Ryan(2)
President, Secretary,
Treasurer and Vice-
President Finance | 2011
2010
| 3,000
3,000
| -
-
| -
-
| -
-
| -
-
| -
-
| -
-
| 3,000
3,000
|
Shane Epp(3)
Executive Vice-
President
| 2011
2010
| 3,000
3,000
| -
-
| -
-
| -
-
| -
-
| -
-
| -
-
| 3,000
3,000
|
Jarrett F. Bousquet(1)
Former President,
Former Secretary,
Former Treasurer and
Former Director | 2011
2010
| 30,000
30,000
| -
-
| -
-
| -
-
| -
-
| -
-
| -
-
| 30,000
30,000
|
| Name & Principal | | | Salary | | | Bonus | | | Stock Awards | | | Option Awards | | | Non-Qualified Deferred Compensation Earnings Plan Compensation | | | Non-Equity Incentive Plan Compensation | | | All Other Compensation | | | Total | |
| Position | Year | | ($) | | | ($) | | | ($) | | | ($) | | | ($) | | | ($) | | | ($) | | | ($) | |
| Cedric Atkinson | 2012 | | | 96,955 | | | | - | | | | 562,016 | (3) | | | - | | | | - | | | | - | | | | - | | | | 658,971 | |
| President, Secretary and Treasurer | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
David K. Ryan (2) | 2012 | | | 27,500 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 27,500 | |
| Former President, Secretary, | 2011 | | | 3,000 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 3,000 | |
| Treasurer and Vice-President Finance | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Shane Epp (2) | 2012 | | | 1,500 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 1,500 | |
| Former Executive Vice-President | 2011 | | | 3,000 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 3,000 | |
Jarrett F. Bousquet (1) | 2012 | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| Former President, Former Secretary, Former Treasurer and Former Director | 2011 | | | 30,000 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 30,000 | |
Notes:
(1) Mr. Bousquet resigned as President, Secretary, Treasurer and Director on August 29, 2011. Under the terms of a verbal agreement, Mr. Bousquet was paid $2,500 per month for his services.
(2) We have accrued $250 per month forEach of Mr. Ryan acting as President, Secretary, Treasurer and Vice-President Finance.
(3) We have accrued $250 per month for Mr. Epp actingresigned as officers and directors on May 1, 2012
(3) Amount reflects the aggregate grant date fair value of the two stock awards granted to Mr. Atkinson during 2012 calculated based upon the estimated enterprise value of the Company as each award represented a controlling block of ownership. On May 15, 2012, Mr. Atkinson was granted 1,000,000 shares of Series A preferred stock. The preferred shares vest on May 15, 2014. The estimated fair value of this award was determined to be $281,008 based upon the estimated enterprise value of the Company. $41,574 was recognized as expense under this award during the year ended August 31, 2012. On May 21, 2012, Mr. Atkinson was granted 10,000,000 shares of common stock in connection with his employment agreement. The common shares vest 2,000,000 shares per year through May 21, 2013. The estimated fair value of this award was determined to be $281,008 based upon the estimated enterprise value of the Company. $15,706 was recognized as expense under this award during the year ended August 31, 2012.
On May 1, 2012, we entered into a five year employment agreement with Cedric Atkinson to serve as our Chief Executive
Vice-President.Officer and President (the “Atkinson Employment Agreement”). Pursuant to the Atkinson Employment Agreement, Mr. Atkinson will be entitled to a monthly base salary of $20,000 and an initial stock grant of 10,000,000 shares of our common stock, which vests 2,000,000 shares per year Mr. Atkinson will be eligible for discretionary performance as well as certain other specified benefits.
If Mr. Atkinson’s employment is terminated for any reason, he or his estate as the case may be, will be entitled to receive the accrued base salary, vacation pay, expense reimbursement and any other entitlements accrued by him to the extent not previously paid (the “Accrued Obligations”); provided, however, upon a change of control as defined in the agreement, then in addition to paying the accrued obligations, he shall be entitled to a severance payment of $240,000.
On September 4, 2012, we entered into a one year employment agreement with Greg Clements to serve as our Interim Chief Financial Officer (the “ Clements Employment Agreement”). Pursuant to the Clements Employment Agreement, Mr. Clements will be entitled to a monthly base salary of $7,000 and an initial stock grant of 1,000,000 shares of our common stock. In addition, he is entitles to a $50,000 sign on bonus payable in four equal quarterly installments.
If Mr. Clements’s employment is terminated for any reason, he or his estate as the case may be, will be entitled to receive the Accrued Obligations; provided, however, upon a change of control as defined in the agreement, then in addition to paying the accrued obligations, he shall be entitled to a severance payment of $84,000.
Outstanding Equity Awards at Fiscal Year End
As at August 31,
2011,2012, we did not have any outstanding equity awards.
| OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END |
|
| OPTION AWARDS | | STOCK AWARDS |
| Name (a) | | Number of Securities Underlying Unexercised options (#) (b) | | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) (c) | | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) (d) | | | Option Exercise Price ($) (e) | | | Option Expiration Date ($) (f) | | | Number of Shares or Units of Stock that have not Vested (#) (g) | | | Market Value of Shares of Units of Stock that Have not Vested ($) (h) | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that have not Vested (#) (i) | | | Equity Incentive Plan Awards Market or Payout Value of Unearned Shares Units or other Rights that have not Vested ($) (j) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cedric Atkinson | | | - | | | | - | | | | - | | | | - | | | | - | | | | 10,293,151 | (1) | | | 504,737 | (1) | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Gregory K. Clements | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Dave Ryan | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | | | | | - | | | | - | |
Notes:
| (1) | Mr. Atkinson was granted 1,000,000 shares of Series A preferred stock. The preferred shares vest on May 15, 2014. The estimated fair value of this award was determined to be $281,008 based upon the estimated enterprise value of the Company. $41,574 was recognized as expense under this award during the year ended August 31, 2012. On May 21, 2012, Mr. Atkinson was granted 10,000,000 shares of common stock in connection with his employment agreement. The common shares vest 2,000,000 shares per year through May 21, 2013. The estimated fair value of this award was determined to be $281,008 based upon the estimated enterprise value of the Company. $15,706 was recognized as expense under this award during the year ended August 31, 2012. |
The following table sets forth the compensation paid to our directors for the fiscal year ended August 31, 2011.2012.
Name | Fees
Earned or
Paid in
Cash
($) |
Stock
Awards
($) |
Option
Awards
($) |
Non-Equity
Incentive Plan
Compensation
($) | Nonqualified
Deferred
Compensation
Earnings
($) |
All Other
Compensation
($) |
Total
($) |
| Lindsay E. Gorrill(1) | 12,000 | - | - | - | - | - | 12,000 |
| | | Fees Earned of Paid in Cash | | | Stock Awards | | | Options Awards | | | Non-Equity Incentive Plan Compensation | | | Deferred Compensation Earnings | | | All Other Compensation | | | Total | |
| Name | | ($) | | | ($) | | | ($) | | | ($) | | | ($) | | | ($) | | | ($) | |
| Lindsay E. Gorrill | | | 6,000 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 6,000 | |
| Gregory K. Clements | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| Dave Ryan | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Note:
(1) Under the terms of a verbal agreement, Mr. Gorrill
iswas paid $1,000 per month for his services.
27
(2) Under the terms of Mr. Ryan’s director agreement he will earn 20,000 shares per timely filing of the Company’s 10-Q quarterly reports and if the filing is late then the amount of shares is reduced to 15,000 shares that will vest one day after the filings. In addition, he will earn 20,000 shares for the timely filing of the Company’s Form 10-K Annual Report to Shareholders and if the filing is late then the amount is reduced to 15,000 shares that will vest one day after the filing.
| ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ANDRELATED STOCKHOLDER MATTERS. |
EQUITY COMPENSATION PLANS
We have no equity compensation plans (including individual compensation arrangements) under which our equity securities are authorized for issuance.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the number of shares of our common stock owned beneficially as of January 17, 2012November 20, 2013 by: (i) each person (including any group) known to us to own more than five percent (5%) of any class of our voting securities of our shares of common stock, (ii) our executive officers and directors, and (iii) our named executive officers as defined in Item 402(m)(2) of Regulation S-K. Unless otherwise indicated, the stockholders listed possess sole voting and investment power with respect to the shares shown. Principal Stockholders Table
| | | Shares Owned (1) | | | |
Name and Address of Beneficial Ownership (2) | | Number of Shares of Common Stock | | Percentage of Common Stock | Number of Shares of Preferred Stock | | Percentage of Preferred Stock |
| Cedric Atkinson | | | 785,000,000 | (3) | 34.59% | 1,500,000,000(3) | | 75% |
| Gregory Clements | | | 290,000,000 | (4) | 16.39% | 500,000(4) | | 25% |
| Dave Ryan | | | 20,900,000 | | 1.18% | - | | - |
| 5% Shareholders | | | | | | | | |
| Oxygen Management Group, LTD | | | 750,000,000 | | 33% | 1,500,000(3) | | 100% |
| Magna Group, LLC | | | 130,000,000 | | 9% | | | |
| All officers and directors as a group (3 persons) | | | 1,095,900,000 | | 43.87% | 2,000,000(3) | | 100% |
Title of Class |
Name and Address of Beneficial Owner | Amount and Nature
of Beneficial
Ownership | Percentage of
Common
Stock(1) |
Security Ownership of Management
|
Common Stock
| David K. Ryan
Vice-President, Finance | 900,000
(Direct) | 55.2%
|
Common Stock
| Shane Epp
Executive Vice-President | Nil
| Nil
|
Common Stock
| Lindsay E. Gorrill
Director | Nil
| Nil
|
Common Stock
| All Officers and Directors as a Group
(3 persons) | 900,000
(Direct) | 55.2%
|
Security Ownership of Certain Beneficial Owners
|
Common Stock
| David K. Ryan
P.O. BOX 61605
Brookswood RPO
Langley, BC V3A 8C8 | 900,000
(Direct)
| 55.2%
|
| Note: | |
(1)
| (1) A beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding on January 17, 2012.September 25, 2013. As of January 17, 2012,September 25, 2013, there were 1,630,0001,662,886,117 shares of our common stock issued and outstanding. (2)The address for each beneficial owner except Magna Group, LLC is 240 Martin Street, #3, Blaine, WA 98230 The address for Magna Group, LLC is 5 Hanover Square, New York, New York 10004. (3)Includes 1,500,000 Series A Preferred Shares held by Oxygen Management Group, LTD which is entitled to 750,000,000 votes. Each share of the Series A Preferred Stock has 500 votes of common stock per share of Series A Preferred. Mr. Atkinson is the sole member of Oxygen Management Group, LTD. As such, Mr. Atkinson may be considered to have control over the voting and disposition of the shares registered in the name of Oxygen Management Group, LTD, and therefore, such shares are also included in the shares listed for Mr. Atkinson. (4) Includes 500,000 Series A Preferred Shares held by Mr. Clements which is entitled to 250,000,000 votes. Each share of the Series A Preferred Stock has 500 votes of common stock per share of Series A Preferred. |
We are not aware of any arrangement which may result in a change in control in the future.
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| ITEM 13. | CERTAIN RELATIONSHIPSANDRELATEDTRANSACTIONS,ANDDIRECTORINDEPENDENCE. |
Except as set forth below, none of the following parties has, during our last two fiscal years, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us:
| | (i) | Any of our directors or officers; |
| | (ii) | Any person proposed as a nominee for election as a director; |
| | (iii) | Any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to our outstanding shares of common stock; |
| | (iv) | Any of our promoters; and |
| | (v) | Any relative or spouse of any of the foregoing persons who has the same house as such person. On May 1, 2012, we entered into a five year employment agreement with Cedric Atkinson to serve as our Chief Executive Officer and President (the “Employment Agreement”). Pursuant to the Employment Agreement, Mr. Atkinson will be entitled to a monthly base salary of $20,000 and an initial stock grant of 10,000,000 shares of our common stock, which vests monthly for twelve months. Mr. Atkinson will be eligible for discretionary performance as well as certain other specified benefits. If Mr. Atkinson’s employment is terminated for any reason, he or his estate as the case may be, will be entitled to receive the accrued base salary, vacation pay, expense reimbursement and any other entitlements accrued by him to the extent not previously paid (the “Accrued Obligations”); provided, however, that if his employment is terminated: by the Company without Cause (as defined in the Employment Agreement) or by Dr. Warner for Good Reason (as defined in the Employment Agreement) then in addition to paying the Accrued Obligations, he shall be entitled to a severance payment. |
DIRECTOR INDEPENDENCE
Our common stock is quoted
During the year ended August 31, 2012, the Company entered into promissory note agreements with current board member, Mr. Dave Ryan, whereby it borrowed a total of 11,547. The Company paid back $6,470 of this balance during the year. These notes bear interest at 10%, are unsecured and are repayable on demand. As at August 31, 2012, a total of $243 has been accrued as interest on the OTC Bulletin Board inter-dealer quotation system, which does not have director independence requirements.notes.
During the year ended August 31, 2012, the Company entered into promissory note agreements with former officer and board member, Mr. Shane Epp, whereby it borrowed a total of 14,570. The Company paid back $2,000 of this balance during the year. These notes bear interest at 10%, are unsecured and are repayable on demand. As we areat August 31, 2012, a reporting issuer in British Columbia, Canada, we have adoptedtotal of $1,866 has been accrued as interest on the independence requirementsnotes.
Also during the year ended August 31, 2012, the Company issued 10% convertible notes to former officer and board member, Mr. Shane Epp, for $25,000 that has a maturity date of
Canadian National Instrument 52-101 – Audit Committees (“NI 52-101”). Under NI 52-101, an independent director isDecember 31, 2014. There has been no repayment of these notes during the year and a
director whototal of $1,689 has
no direct or indirect material relationships with us. A material relationship is a relationship, which could, inbeen accrued as interest on the
view of the Board of Directors reasonably interfere with the exercise of the director’s independent judgment. Lindsay Gorrill is our sole independent director. David Ryan is not an independent director because of his position as President, Secretary, Treasurer and Vice-President Finance.As a result of our limited operating history and minimal resources, our management believes that it will have difficulty in attracting independent directors. In addition, we would likely be required to obtain directors and officers insurance coverage in order to attract and retain independent directors. Our management believes that the costs associated with maintaining such insurance is prohibitive at this time.
CANADIAN NATIONAL INSTRUMENT 58-101
We are a reporting issuer in the Province of British Columbia. Canadian National Instrument 58-101 – Disclosure of Corporate Governance Practices of the Canadian Securities Administrators requires our company to disclose annually on our Annual Report certain information concerning corporate governance.
Board of Directors
Our Board of Directors is currently comprised of two members, Mr. Ryan and Mr. Gorrill. Mr Ryan is not “independent”, as that term is defined in Nation Instrument 52-110, due to the fact that he is our President, Secretary, Treasurer and Vice-President Finance.
Directorships
Our directors currently serve as directors or officers of the following reporting issuers (or the equivalent in a foreign jurisdiction):
notes. Name | Reporting Issuer | Reporting Jurisdiction |
David Ryan | Manado Gold Corp. | British Columbia |
Lindsay Gorril | Jayhawk Energy Inc. | United States |
| Star Gold Corp. | United States |
Orientation and Continuing Education
Mr.
RyanAtkinson and Mr.
GorrillClements provided an overview of the
our business activities, systems and business plan to all new directors. New director candidates have free access to any of our records, employees or senior management in order to conduct their own due diligence and will be briefed on the strategic plans, short, medium and long term corporate objectives, business risks and mitigation strategies, corporate governance guidelines and existing policies of the Company. Directors are encouraged to update their skills and knowledge by taking courses and attending professional seminars.
30
Our directors believe good corporate governance is an integral component to the success of the Company and to meet responsibilities to shareholders. Generally, our directors have found that the fiduciary duties placed on individual directors by the Company’s governing corporate legislation and the common law and the restrictions placed by applicable corporate legislation on an individual director’s participation in decisions of the Board of Directors in which the director has an interest have been sufficient to ensure that the Board of Directors operates independently of management and in the best interests of the Company.
Our directors are also responsible for applying governance principles and practices, and tracking development in corporate governance, and adapting “best practices” to suit the needs of the Company. The directors may also be directors and officers of other companies, and conflicts of interest may arise between their duties. Such conflicts must be disclosed in accordance with, and are subject to such other procedures and remedies as applicable under the Nevada Revised Statutes.
Our directors have not formed a nominating committee or similar committee to assist them with the nomination of directors for the Company. Our directors consider the size of the Board of Directors to be too small to warrant creation of such a committee; and our directors have contacts they can draw upon to identify new members of the Board of Directors as needed from time to time.
Our directors will continually assess the size, structure and composition of the Board of Directors, taking into consideration its current strengths, skills and experience, proposed retirements and the requirements and strategic direction of the Company. As required, directors will recommend suitable candidates for consideration as members of the Board of Directors.
Our directors have not implemented a process for assessing his effectiveness. As a result of our small size and stage of development, our directors consider a formal assessment process to be inappropriate at this time. Our directors plan to continue evaluating their own effectiveness on an ad hoc basis. | ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES. |
The aggregate fees billed for the two most recently completed fiscal years for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal periods were as follows:| | | Year Ended August 31, 2011 | | | Year Ended August 31, 2010 | |
| | | | | | | |
| Audit Fees | $ | 14,850 | | $ | 14,397 | |
| Audit-Related Fees | | 15,000 | | | 11,460 | |
| Tax Fees | | NIL | | | NIL | |
| All Other Fees | | NIL | | | NIL | |
| Total | $ | 29,850 | | $ | 25,857 | |
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| | | Year Ended August 31, 2012 | | | Year Ended August 31, 2011 | |
| | | | | | | |
| Audit Fees | | $ | 35,539 | | | $ | 14,850 | |
| Audit-Related Fees | | | NIL | | | | NIL | |
| Tax Fees | | NIL | | | NIL | |
| All Other Fees | | NIL | | | NIL | |
| Total | | $ | 35,539 | | | $ | 14,850 | |
| ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES. |
The following exhibits are either provided with this Annual Report or are incorporated herein by reference:
| | |
| Number | | Description of Exhibits |
| 3.1 | | Articles of Incorporation.(1) |
| 3.2 | | Bylaws, as amended.(1) |
| 10.1 | | Purchase Agreement (Minnie Claim) dated March 28, 2007 between Yaterra and Multi Metal Mining Corp.(1) |
| 10.2 | | Purchase Agreement (Blue Jack Property) dated August 29, 2008 between Yaterra and Howard V. Metzler.(1) |
| 10.3 | | Option Agreement (Frances Property) dated July 14, 2009 between Yaterra and Geoffrey Goodall.(2) |
| 10.4 | | Amendment Agreement (Frances Property) dated October 27, 2009 between Yaterra and Geoffrey Goodall.(3) |
| 10.5 | | Second Amendment Agreement (Frances Property) dated December 10, 2009 between Yaterra and Geoffrey Goodall.(3) |
| 10.6 | | Third Amendment Agreement (Frances Property) dated February 11, 2010 between Yaterra and Geoffrey Goodall.(4) |
| 10.7 | | Fourth Amendment Agreement (Frances Property) dated June 1, 2010 between Yaterra and Geoffrey Goodall.(5) |
| 10.8 | | Fifth Amendment Agreement (Frances Property) dated for reference September 1, 2010 between Yaterra and Geoffrey Goodall.(7) |
| 10.9 | | Sixth Amendment Agreement (Frances Property) dated for reference March 15, 2011 between Yaterra and Geoffrey Goodall.(9) |
| 10.10 | | Employment Agreement by and between Cedric Atkinson and Yaterra dated May 1, 2012(10) |
| 10.11 | | Agreement and Plan of Share Exchange dated May 21, 2012 by and between Yaterra and PurSpectrum Oil and Gas, Inc. (10) |
| 10.12 | | Stock Purchase Agreement dated February 29, 2012 by and between Cedric Atkinson and David K. Ryan(11) |
| 10.13 | | Extension to Stock Purchase Agreement, dated June 1, 2012 by and between Cedric Atkinson and David K. Ryan(11) |
| 10.14 | | Extension to Stock Purchase Agreement, dated July 11, 2012 by and between Cedric Atkinson and David K. Ryan(12) |
| 10.15 | | Agreement dated September 4, 2012 by and between Yaterra and Greg Clements.(3) |
| 14.1 | | Code of Ethics.(3) |
| 31.1 | | Certification of Principal Executive Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.131.2 | | Certification of Principal Financial Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 32.1 | | Certification of Principal Executive Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
99.132.2 | Audit Committee Charter.(3) | Certification of Principal Executive Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 101.INS** | | XBRL Instance Document |
99.2101.SCH** | Letter of Intent between the Company and Healthcare of Today, Inc.(6) | XBRL Schema Document |
99.3101.CAL** | Letter of Intent between the Company and NanoCrypt AG.(8) | XBRL Calculation Linkbase Document |
| 101.DEF** | | XBRL Definition Linkbase Document |
| 101.LAB** | | XBRL Label Linkbase Document |
| 101.PRE** | | XBRL Presentation Linkbase Document |
| Notes: |
| (1) | | Previously filed as an exhibit to our Registration Statement on Form S-1 originally filed with the SEC on December 8, 2008, as amended January 8, 2009 and declared effective January 13, 2009. |
| (2) | | Previously filed as an exhibit to our Quarterly Report on Form 10-Q filed with the SEC on July 16, 2009. |
| (3) | Previously filed as an exhibit to our Annual Report on Form 10-K filed with the SEC on December 15, 2009.
| Filed herewith. |
| (4) | | Previously filed as an exhibit to our Quarterly Report on Form 10-Q filed with the SEC on April 19, 2010. |
| (5) | | Previously filed as an exhibit to our Quarterly Report on Form 10-Q filed with the SEC on July 15, 2010. |
| (6) | Previously filed as an exhibit to our Current Report on Form 8-K filed with the SEC on November 10, 2010. |
(7) | Previously filed as an exhibit to our Annual Report on Form 10-K filed with the SEC on December 14, 2010. |
(8)(7) | Previously filed as an exhibit to our Quarterly Report on Form 10-Q filed with the SEC on January 19, 2011. |
(9) | Previously filed as an exhibit to our Quarterly Report on Form 10-Q filed with the SEC on July 20, 2011. |
| (8) | | Previously filed as an exhibit to our Current Report on Form 8-K filed with the SEC on May 24, 2012. |
| (9) | | Previously filed as an exhibit to our Current Report on Form 8-K filed with the SEC on June 19, 2012. |
| (10) | | Previously filed as an exhibit to our Current Report on Form 8-K filed with the SEC on June 19, 2012. |
32
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrantRegistrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | YATERRA VENTURES CORP. |
| �� | | Yaterra Ventures, Corp. (Registrant) | |
| | | | |
Dated: November 22, 2013 | By: | /s/ Cedric Atkinson | |
| | | | Cedric AtkinsonChief Executive Officer | |
Date: | January 19, 2012 | | By: | /s/ David K. Ryan |
| | | | DAVID K. RYAN |
| | | | President, Secretary, Treasurer, Vice-President |
| | | | Finance and Director |
| | | | (Principal Executive Officer and Principal |
| | | | Accounting Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Date: | January 19, 2012 | November 22, 2013 | By: | /s/ David K. Ryan |
| | | | DAVID K. RYAN |
| | | | President, Secretary, Treasurer, Vice-President |
| | | | Finance and Director |
| | | | (Principal Executive Officer and Principal |
| | | | Accounting Officer) |
| | | Cedric Atkinson | |
| | | Cedric AtkinsonChief Executive Officer and Chairman(Principal Executive Officer and Chairman) | |
| Date: November 22, 2013 | By: | /s/ Greg Clements | |
| | | Greg ClementsChief Financial Officer and Director | |
| Date: November 22, 2013 | By: | /s/ David K. Ryan | |
| | | | David K. Ryan | |
Date: | January 19, 2012 | | By: | /s/ Lindsay E. Gorrill |
| | | | LINDSAY E. GORRILL |
| | | | Director |
43
