NOTE 1 - ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Sanborn Resources, Ltd., formerly Universal Tech Corp. (the “Company”), is in the development stage, and has limited operations. The Company was incorporated under the laws of the State of Delaware on May 17, 2011. The business plan of the Company was in the field of direct marketing and sale of art.
On March 4, 2013, the Company filed an Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to, among other things, (1) effect a one hundred for one (100:1) forward split of the Company’s common stock, (2) change the name of the Company to Sanborn Resources, Ltd. and (iii) change the authorized stock to one billion (1,000,000,000) shares of common stock and twenty million (20,000,000) shares of preferred stock. All share and per share values for all periods presented in the accompanying financial statements are retroactively restated for the effect of the forward split.
On April 17, 2013, Inti Holdings Limited, a corporation incorporated pursuant to the laws of the Cayman Islands (“Inti Holdings”), and a newly formed wholly owned subsidiary of the Company, purchased, effective April 3, 2013, 100% of the outstanding capital stock of Rae Wallace Peru S.A.C., a corporation formed under the laws of Peru (“Rae Wallace”), pursuant to the terms of a Share Purchase Agreement by and among Inti Holdings, Rae Wallace and Rae-Wallace Mining Company and George Cole, the sole shareholders of Rae Wallace (the “Rae Wallace Shareholders, and the agreement, the “Share Purchase Agreement”). In consideration for the acquisition of Rae Wallace, Inti Holdings paid the Rae Wallace Shareholders an aggregate purchase price of $700,000. Rae Wallace is the owner of certain properties and mineral rights located in Peru. Certain of these properties are subject to third party royalty payments from the sale or disposition of all minerals produced by such covered properties. Following the acquisition, the Company intends to focus its efforts on mining and minerals in Peru.
Basis of presentation
Management acknowledges its responsibility for the preparation of the accompanying interim financial statements which reflect all adjustments, consisting of normal recurring adjustments, considered necessary in its opinion for a fair statement of its financial position and the results of its operations for the interim period presented. These financial statements should be read in conjunction with the summary of significant accounting policies and notes to financial statements included in the Company’s Form 10-K annual report for the year ended December 31, 2012. The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (the “U.S.”) for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole.
Use of Estimates and Assumptions
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Development Stage Company
The Company is presented as a development stage company. Activities during the development stage include organizing the business and raising capital. The Company is a development stage company with insignificant revenues and no profits. The Company has not commenced significant operations and, in accordance with Accounting Standards Codification (“ASC”) Topic 915 “Development Stage Entities”, is considered a
development
stage company.
NOTE 1 - ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when acquired to be cash equivalents. The Company places its cash with a high credit quality financial institution. The Company’s account at this institution is insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000. At March 31, 2013, the Company has not reached bank balances exceeding the FDIC insurance limit. To reduce its risk associated with the failure of such financial institution, the Company evaluates at least annually the rating of the financial institution in which it holds deposits.
Prepaid expenses
Prepaid expenses of $18,095 and $0 at March 31, 2013 and December 31, 2012, respectively, consist primarily of prepayments in cash for legal services and prepaid compensation which are being amortized over the terms of their respective agreements.
Revenue Recognition
The Company recognizes revenues when delivery of goods or completion of services has occurred provided there is persuasive evidence of an agreement, acceptance has been approved by its customers, the fee is fixed or determinable based on the completion of stated terms and conditions, and collection of any related receivable is probable.
Fair Value of Financial Instruments and Fair Value Measurements
The Company adopted FASB ASC 820, “Fair Value Measurements and Disclosures”, for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing US GAAP that require the use of fair value measurements which establishes a framework for measuring fair value and expands disclosure about such fair value measurements.
ASC 820 defines fair value 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. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:
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Level 1:
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Observable inputs such as quoted market prices in active markets for identical assets or liabilities;
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Level 2:
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Observable market-based inputs or unobservable inputs that are corroborated by market data; and
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Level 3:
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Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.
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The carrying amounts reported in the balance sheet for prepaid expense, accounts payable and accrued expenses approximate their estimated fair market value based on the short-term maturity of these instruments. The carrying amount of the note payable at March 31, 2013, approximate their respective fair value based on the Company’s incremental borrowing rate. The Company did not identify any other assets or liabilities that are required to be presented on the balance sheets at fair value in accordance with the accounting guidance.
In addition, FASB ASC 825-10-25 “Fair Value Option” was effective for January 1, 2008. ASC 825-10-25 expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value.
NOTE 1 - ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Stock-based compensation
Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.
Pursuant to ASC Topic 505-50, for share-based payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the non-employee’s service period.
Basic and Diluted Net Loss per Share
Net loss per common share is calculated in accordance with ASC Topic 260: Earnings Per Share. Basic loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. The computation of diluted net loss per share does not include dilutive common stock equivalents in the weighted average shares outstanding as they would be anti-dilutive. There were no dilutive financial instruments issued or outstanding for the three months ended March 31, 2013 and 2012.
Income Taxes
The Company accounts for income taxes pursuant to the provision of ASC 740-10, “Accounting for Income Taxes” which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.
The Company follows the provision of the ASC 740-10 related to Accounting for Uncertain Income Tax Position. When tax returns are filed, it is highly certain that some positions taken would be situated upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is most likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions.
Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.
The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.
NOTE 1 - ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The Company has adopted ASC 740-10-25 Definition of Settlement, which provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion and examination by a taxing authority without being legally extinguished. For tax position considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely that not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. The federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they were filed.
Deferred Offering Costs
The Company defers as other assets the direct incremental costs of raising capital until such time as the offering is completed. At the time of the completion of the offering, the costs are charged against the capital raised. Should the offering be terminated, deferred offering costs are charged to operations during the period in which the offering is terminated.
Common Stock Registration Expenses
The Company considers incremental costs and expenses related to the registration of equity securities with the Securities and Exchange Commission (“SEC”), whether by contractual arrangement as of a certain date or by demand, to be unrelated to original issuance transactions. As such, subsequent registration costs and expenses are reflected in the accompanying financial statements as general and administrative expenses, and are expensed as incurred.
Fiscal Year End
The Company has adopted a fiscal year end of December 31.
Recent Accounting Pronouncements
Updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
NOTE 2 - GOING CONCERN
The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has a stockholders’ deficit and accumulated deficit of $124,429 and $193,682, respectively, as of March 31, 2013, negative cash flows from operating activities and net loss of $70,894 and $57,737, respectively, for the three months ended March 31, 2013. The Company anticipates further losses in the development of its business raising substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. The Company’s ability to raise additional capital through the future issuances of common stock is unknown. The obtainment of additional financing, the successful development of the Company’s contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.
NOTE 3 – NOTE RECEIVABLE
In January 2013, the Company was issued a note receivable of $10,000 by Rae Wallace (see Note 1). The note is non-interest bearing. The Borrower has the option of paying the principal sum to the Company in advance in full or in part at any time without premium or penalty. The principal shall become due and be paid in full on demand, which demand may be made by the Company at any time after March 1, 2013. Note receivable as of March 31, 2013 amounted to $10,000.
NOTE 4 – NOTES PAYABLE
On October 10, 2012, the Company issued a note payable amounting to $50,000. The note bears interest at 16% per annum and is due on demand. The note was used for working capital purposes.
On January 16, 2013, the Company issued a note payable amounting to $50,000. The note bears interest at 16% per annum and is due on demand. The note was used for working capital purposes.
On February 27, 2013, the Company issued a note payable amounting to $50,000. The note bears interest at 16% per annum and is due on demand. The note was used for working capital purposes.
Notes payable and accrued interest as of March 31, 2013 amounted to $150,000 and $6,005, respectively.
NOTE 5 – STOCKHOLDERS’ DEFICIT
On May 18, 2011, the Company sold 150,000,000 shares of common stock to a former director of the Company for gross proceeds of $22,500, at a price of $0.00015 per share.
On May 23, 2011, the Company sold 50,000,000 post-split shares of common stock to the former secretary of the Company for gross proceeds of $7,500, at a price of $0.00015 per share.
The Company has commenced a capital formation activity by filing a Registration Statement on Form S-1 to the SEC to register and sell in a self-directed offering 120,000,000 shares of newly issued common stock at an offering price of $0.001 per share for proceeds of up to $120,000. On March 16, 2012, the Company sold 40,000,000 shares of common stock pursuant to the Registration Statement on Form S-1 for gross proceeds of $40,000. The Company paid offering costs of $19,500 related to this sale of the Company’s common stock and were charged against additional paid in capital.
NOTE 6 – RELATED PARTY TRANSACTIONS
On May 18, 2011, the Company sold 150,000,000 shares of common stock to a former director of the Company for gross proceeds of $22,500, at a price of $0.00015 per share.
On May 23, 2011, the Company sold 50,000,000 shares of common stock to the former secretary of the Company for gross proceeds of $7,500, at a price of $0.00015 per share.
On October 3, 2012, the former director of the Company contributed capital for operating expenses amounting to $18,753. The Company recorded such contributed capital to additional paid in capital.
NOTE 7 – SUBSEQUENT EVENTS
On April 17, 2013, Inti Holdings, a corporation incorporated pursuant to the laws of the Cayman Islands, and a newly formed wholly owned subsidiary of the Company, purchased, effective April 3, 2013, 100% of the outstanding capital stock of Rae Wallace, pursuant to the terms of a Share Purchase Agreement by and among Inti Holdings, Rae Wallace and Rae-Wallace Mining Company and George Cole, the sole shareholders of Rae Wallace (see Note 1). In consideration for the acquisition of Rae Wallace, Inti Holdings paid the Rae Wallace Shareholders an aggregate purchase price of $700,000. Rae Wallace is the owner of certain properties and mineral rights located in Peru. Certain of these properties are subject to third party royalty payments from the sale or disposition of all minerals produced by such covered properties.
In April 2013, contemporaneously with the closing of the acquisition of Rae Wallace, the Company collected the $10,000 note receivable (see Note 3).
On April 10, 2013, the Company issued a note payable amounting to $775,000. The note bears interest at 8% per annum and is due after thirteen months, unless extended by the holder. This note may be accelerated upon the sale of any equity or equity-linked securities in the minimum amount of $1,000,000 net proceeds to the Company. The proceeds of this note was used for the acquisition of Rae Wallace and working capital purposes.
In May 2013, the Company cancelled 199,750,000 shares of common stock owned by the Company’s Chief Executive Officer. In connection with the return of the 199,750,000 shares of common stock, the Company valued the cancelled shares at par value of $0.0001 per share and recorded it against paid in capital.