NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
Note 1 - Organization and summary of significant accounting policies:
Following is a summary of our organization and significant accounting policies:
Organization and nature of business –
Swingplane Ventures, Inc. (the “Company”), is a Nevada corporation, originally incorporated to operate as a men’s and women's golf fashion manufacturer in Broomfield, Colorado. The Company's first designs were intended to be marketed under the "Swingplane Ventures" brand– attracting the 12-35 year old male golfer market as an alternative to much higher priced brands with similar styling. The Company did not generate any revenues from its planned operations. On August 22, 2012, the Company underwent a change in control and management subsequently determined to cease operating the men’s and women’s golf manufacturing fashion line.
On October 15, 2012, the Company entered into an assignment agreement (the “Assignment Agrement”))with Mid Americas Corp. (“Mid Americas”). Under the terms of the assignment agreement the Company was to be assigned all of the rights under an option agreement between Mid Americas Corp and Gunter Stromberger and Elsa Dorila Durate Horta (the “Vendors”). Mid Americas have the rights to acquire 75% of certain mining concessions in Chile from the Vendors (the “Option Agreement”). With the entry into this agreement the Company determined to change its business focus to enter the Exploration Stage as defined by ASC Topic 915.
On January 21, 2013, the Company announced the renegotiation of the Assignment Agreement, whereby the Company would enter into a share exchange agreement with Mid Americas, which closed on February 22, 2013 (Note 3).
On February 8, 2013, the Company filed a certificate of designation with the State of Nevada whereby they designated of the series of 5,000,000 shares of Preferred Stock, as the Series A Preferred Stock. (the “
Series A Preferred Stock
”). The Series A Preferred Stock is entitled to a preference over all of the shares of common stock (the “
Common Stock
”) of the Corporation and shall rank
pari passu
with any other series of the Corporation’s Preferred Stock, with respect to the distribution of assets in the event of the liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, or any other distribution of the assets of the Corporation among its shareholders for the purpose of winding up its affairs. The holders of Series A Preferred Stock shall not be entitled to receive any dividends.
On February 22, 2013, the Company and Mid Americas closed the Share Exchange Agreement which effected a change in control. Under the terms of the Share Exchange Agreement, the Company acquired all of the issued and outstanding shares of Mid Americas in exchange for the issuance of a total of 100,000,000 shares of common stock and 5,000,000 shares of preferred stock of the Company issued to the shareholders of Mid Americas. The preferred stock is convertible into shares of common stock of the Company on the basis of 50 shares of common stock for each 1 share of preferred stock. Further, the preferred stock will carry voting rights of 100 shares of common stock for each one share of preferred stock.
The business combination will be accounted for as a reverse acquisition and recapitalization using accounting principles applicable to reverse acquisitions whereby the financial statements subsequent to the date of the transaction are presented as a continuation of Mid Americas. Under reverse acquisition accounting Mid Americas (subsidiary) is treated as the accounting parent (acquirer) and the Company (parent) is treated as the accounting subsidiary (acquiree). All outstanding shares will be restated to reflect the effect of the business combination. As of the date of this report, the transaction has not yet concluded.
Effective March 30, 2013 there is a default on the obligation under Section 3.4 of the Option Agreement whereby Mid Americas was required to place certain funds in trust for exploration expenditures, which amount as at the date of the default would have been $8,634,910.
Basis of presentation -
These consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). The consolidated financial statements of the Company include the Company and its wholly-owned subsidiary, Mid Americas. All material intercompany balances and transactions have been eliminated in consolidation.
(An Exploration Stage Corporation)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
Note 1 - Organization and summary of significant accounting policies: (continued)
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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and cash equivalents -
For purposes of the statement of cash flows, we consider all cash in banks, money market funds, and certificates of deposit with a maturity of less than three months to be cash equivalents.
Mineral Property and Development Costs
–The Company is a natural resource exploration stage company and anticipates acquiring, exploring, and if warranted and feasible, developing natural resource assets.
All direct costs related to the acquisition of mineral property interests are capitalized. Mineral property exploration expenditures are expensed when incurred. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves and pre-feasibility, the costs incurred to develop such property are capitalized. Capitalized costs will be amortized following commencement of commercial production using the unit of production method over the estimated life of proven and probable reserves.
Prior to the date of these financial statements, the Company has incurred only property option costs and exploration related costs which have been expensed in their entirety due to o the nature of the underlying terms of the agreement more fully discussed in Note 4 below.
To date the Company has not established any proven or probable reserves on its mineral properties.
Fair value of financial instruments and derivative financial instruments
- The carrying amounts of cash and current liabilities approximate fair value because of the short maturity of these items. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment, and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates. We do not hold or issue financial instruments for trading purposes, nor do we utilize derivative instruments in the management of our foreign exchange, commodity price or interest rate market risks.
The FASB Codification clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. It also requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability.
Level 3: Unobservable inputs in which there is little or no market data which require the reporting entity to develop its own assumptions.
The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
SWINGPLANE VENTURES, INC.
(An Exploration Stage Corporation)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
Note 1 - Organization and summary of significant accounting policies: (continued)
Federal income taxes
- Deferred income taxes are reported for timing differences between items of income or expense reported in the financial statements and those reported for income tax purposes in accordance with applicable FASB Codification regarding
Accounting for Income Taxes
, which require the use of the asset/liability method of accounting for income taxes. Deferred income taxes and tax benefits 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, and for tax loss and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company provides deferred taxes for the estimated future tax effects attributable to temporary differences and carryforwards when realization is more likely than not.
We have analyzed filing positions in all of the federal and state jurisdictions where we are required to file income tax returns, as well as all open tax years in these jurisdictions. We are not currently under examination by the Internal Revenue Service or any other jurisdiction. We believe that our income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material adverse effect on our financial condition, results of operations, or cash flow. Therefore, no reserves for uncertain income tax positions have been recorded.
Net income per share of common stock
– We have adopted applicable FASB Codification regarding Earnings per Share, which require presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying financial statements, basic earnings per share of common stock is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. At March 31, 2013 and June 30, 2012, there were no variances between the basic and diluted loss per share as there were no potentially dilutive securities outstanding.
Note 2 – Going concern:
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. For the period ended March 31, 2013, the Company has had limited operations. In view of these matters, the Company’s ability to continue as a going concern is dependent upon the Company’s ability to begin operations and to achieve a level of profitability. The Company intends to continue financing its future development activities and its working capital needs largely from the sale of public equity securities with some additional funding from other traditional financing sources, including term notes until such time that funds provided by operations are sufficient to fund working capital requirements. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.
Note 3 – Business combination:
On October 15, 2012, the Company entered an assignment agreement with Mid Americas Corp, a Belize corporation, (the “Assignment Agreement”) whereby the Company was to acquire all of the rights under an option agreement and two amendments thereto under which Mid Americas has the rights to acquire 75% of certain mining concessions in Chile (the “Option”).
Specifically, on April 23, 2012, Mid Americas entered into the Option with Gunter Stromberger and Elsa Dorila Durate Horta in respect to a property known as the Algarrobo. Under the terms of the Option, Mid Americas has the rights to acquire 75% of certain mining concessions in Chile from the Vendors in consideration for cash payments. On July 27, 2012, Mid Americas entered into Amendment Number 1 to the Option, and on September 27, 2012, Mid Americas entered into Amendment Number 2 to the Option.
SWINGPLANE VENTURES, INC.
(An Exploration Stage Corporation)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
Note 3 – Business combination: (continued)
The following actions were required to be taken to close the Assignment Agreement:
|
-
|
the Company was required to assume the November 30, 2012 payment obligation of $250,000 and all other payments thereafter, which were due under the Option;
|
|
-
|
cause the cancellation of a total of 337,500,000 of its common stock currently held by Michel Voyer, an officer and director of the Company;
|
|
-
|
file a registration statement with the requisite regulatory authorities to raise up to $10,000,000 by way of the sale of up to 40,000,000 shares of the common stock of the Company, of which no less than seventy-five percent of the funds raised under such registration statement was used to fund the required payments under the Option ;
|
|
-
|
issue a total of 300,000,000 shares of its common stock to Mid Americas or its directed assignees, of which a total of 10,000,000 shares of common stock to be issued to Mid Americas were to be included for registration in the registration statement.
|
In anticipation of closing, per the terms of the Assignment Agreement, the Company issued 300,000,000 shares of common stock to Mid Americas which was held in trust subject to final documentation and the Company’s controlling shareholder, Michel Voyer, returned a total of 337,500,000 shares to treasury.
As required under the Assignment Agreement, the Company undertook, during the period of closing, the payment of certain property taxes to maintain the property and funded $125,000 of the $250,000 required option payment due on November 30, 2012. The Company was in default on the remaining $125,000 payment due as of November 30, 2012 which amount was remitted on January 31, 2013.
Pending completion of the registration statement required for closing, the Company commissioned the preparation of a 43-101 property report on the mining concessions. The Company determined during this process that it was in the best interests of the Company to renegotiate the Assignment Agreement in order to acquire Mid Americas directly, thus giving the Company direct ownership of the Option through a wholly owned subsidiary. On January 21, 2013, the Company announced the renegotiation of the Assignment Agreement, whereby the Company would enter into a Share Exchange Agreement with Mid Americas.
Under the terms of the Share Exchange Agreement, which closed on February 22, 2013, the Company has acquired all of the issued and outstanding shares of Mid Americas in exchange for the issuance of a total of 100,000,000 shares of common stock of the Company and 5,000,000 shares of preferred stock of the Company to the shareholders of Mid Americas, also effecting a change in control. The preferred stock is convertible into shares of common stock of the Company on the basis of 50 shares of common stock for each 1 share of preferred stock. Further, the preferred stock carries voting rights of 100 shares per each share of preferred stock. All other terms of the Assignment Agreement are included in the Share Exchange agreement. The only terms that have been amended are the acquisition of Mid Americas rather than the assignment of the Option, the issuance of shares as defined above and the elimination of the requirement to register 10,000,000 shares of stock for Mid Americas.. Further, the Company is not required to file the registration statement for the 40,000,000 shares to raise $10,000,000.
SWINGPLANE VENTURES, INC.
(An Exploration Stage Corporation)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
Note 3 – Business combination: (continued)
Concurrent with closing of the Share Exchange Agreement, the 300,000,000 shares issued to Mid Americas in trust under the terms of the Assignment Agreement were returned to treasury and the Company issued a total of 100,000,000 shares of common stock and 5,000,000 shares of preferred stock to the shareholders of Mid Americas in exchange for all of the issued and outstanding capital stock of Mid Americas.
As a result of the transaction, the shareholders of Mid Americas acquired 42.5% of our issued and outstanding common stock and 100% of our issued and outstanding preferred stock, Mid Americas became our wholly-owned subsidiary, and we acquired the business and operations of Mid Americas.
The business combination is accounted for as a reverse acquisition and recapitalization using accounting principles applicable to reverse acquisitions whereby the financial statements subsequent to the date of the transaction will be presented as a continuation of the Mid Americas. Under reverse acquisition accounting Mid Americas (subsidiary) is treated as the accounting parent (acquirer) and the Company (parent) is treated as the accounting subsidiary (acquiree). All outstanding shares of the Company will be restated to reflect the effect of the business combination and Mid Ameicas will become a 100% owned subsidiary of the Company.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the business combination transaction date:
Cash and cash equivalents
|
|
$
|
20,477
|
|
Prepaid expenses in other expenses
|
|
|
21,322
|
|
Total identifiable assets
|
|
$
|
41,799
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
44,813
|
|
Accrued interest
|
|
|
14,110
|
|
Short term loan
|
|
|
246,414
|
|
Total identifiable liabilities
|
|
$
|
305,337
|
|
|
|
|
|
|
Net identifiable assets
|
|
|
(263,538)
|
|
Note 4 – Mineral Property Agreements:
On April 23, 2012
Mid Americas Corp., a corporation incorporated under the laws of the country of Belize (“Mid Americas”)
entered into a Mineral Property Option Agreement (the “Option Agreement”) with Gunter Stromberger and Elsa Dorila Durate Horta (the “Vendors”) in respect to a property known as the Algarrobo. Under the terms of the Option Agreement Mid Americas has the right to acquire 75% of certain mining concessions in Chile from the Vendors in consideration for cash payments. On July 27, 2012 Mid Americas entered into Amendment Number 1 to the Original Property Agreement, and on September 27, 2012, Mid Americas entered into Amendment Number 2 to the Original Property Agreement (the “Amendments”).
On October 15, 2012, the Company entered into an assignment agreement with Mid Americas (the “Assignment Agreement”). Under the terms of the assignment agreement the Company was to be assigned all of the rights under the Option Agreement between Mid Americas Corp and Gunter Stromberger and Elsa Dorila Durate Horta (the “Vendors”). On January 21, 2013 the Company and Mid Americas determined to renegotiate the Assignment Agreement in favor of a share exchange agreement which would supersede any previous agreements.
On February 22, 2013, the Company
closed a voluntary Share Exchange Agreement among the Company, Mid Americas, and the stockholders of Mid Americas whereby Mid Americas became a wholly owned subsidiary of the Company.
(ref: Note 3 – Business combination)
SWINGPLANE VENTURES, INC.
(An Exploration Stage Corporation)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
Note 4 – Mineral Property Agreements: (continued)
The Company’s wholly owned subsidiary has the following obligations under the Option Agreement:
(i)
|
$950,000 cash payments through to October 15, 2012 which have been paid
|
(ii)
|
$250,000 cash payment on November 30, 2012, which has been paid
|
(iii)
|
$750,000 cash payment on or before June 30, 2013
|
(iv)
|
$750,000 cash payment on or before June 30, 2014
|
(v)
|
$5,000,000 cash payment to be made from net proceeds of Production.
|
Further, the agreement calls for Mid Americas to incur expenditures in an aggregate amount of $20,000,000 over a period of three (3) years from the Effective Date, October 1, 2012, as well as certain additional obligations, as follows:
Section 3.4
(i)
|
$10,000,000 to be placed in trust with the Optionee for expenditure on the Property within 180 days from the Effective Date to be fully expended within eighteen (18) months of the Effective Date. (March 30, 2013);
|
|
|
(ii)
|
$10,000,000 to be expended on or before three years from the Effective Date (October 1, 2015);
|
|
|
(iii)
|
until the Option is earned retain the services of Gunter Stromberger at a fee of $25,000 per month, which fee shall commence with the commencement of operations on the mining concessions by the Company.
|
All sums paid to the Optionors under Section 3.2 shall be expressly understood to be Expenditures under Section 3.4 which the Optionee must incur pursuant to said Section in order to maintain in force and exercise the Option
A total of $1,365,090 has been paid pursuant to the Option Agreement to date, of which amount $951,000 was remitted by Mid Americas and $414,090 by the Company. Of amounts remitted by the Company $250,000 related to cash payments required under Section 3.2 to meet certain payment obligations, with a further $164,090 expended for geologist, analysis and consultancy fees. As of March 31, 2013, the Company has recorded $1,365,090 as exploration expenses, all of which amount is allocated to the total expenditure requirement in Section 3.4(a)(i) of $10,000,000.
Effective March 30, 2013 there is a default on the obligation under Section 3.4 of the Option Agreement whereby Mid Americas was required to place certain funds in trust for exploration expenditures, which amount as at the date of the default would have been $8,634,910.
Note 5 – Prepaid expenses:
The following table provides detail of the Company’s prepaid expenses as of March 31, 2013 and June 30, 2012:
|
|
March 31,
2013
|
|
|
June 30,
2012
|
|
Prepaid news dissemination fees
|
|
$
|
2,601
|
|
|
$
|
-
|
|
Prepaid legal fees
|
|
|
6,904
|
|
|
|
-
|
|
Tax preparation and bookkeeping expenses
|
|
|
1,400
|
|
|
|
-
|
|
|
|
|
10,905
|
|
|
|
-
|
|
SWINGPLANE VENTURES, INC.
(An Exploration Stage Corporation)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
Note 6 – Short term loans:
During the nine month period ended March 31, 2013, the Company received a series of loans in the cumulative amount of $725,000 from an unrelated third party lender. The loans are unsecured, extend for a term of one year from the date the funds are received, and bear interest at 10% per annum, payable on maturity.
During the nine month period ended March 31, 2013, the Company accrued interest expenses of $8,164 in relation to the aforementioned loans.
Note 7 – Related party transactions:
On August 22, 2012, Michel Voyer, the then sole director and officer of Swingplane Ventures, Inc. (the “Company”), entered into an agreement to acquire a total 350,000,000 shares of the Company’s common stock from Matthew Diehl, the Company’s former director and officer, in a private transaction for an aggregate total of $35,000. The funds used for this share purchase were Mr. Voyer’s personal funds. Upon conclusion of the transaction Mr. Voyer controlled 74.1% of the Company’s issued and outstanding common stock which effected a change in control of the Company. Mr. Voyer subsequently transferred a total of 2,500,000 to Johannes Lindorfer, a director of the Company.
On November 2, 2012, Mr. Voyer returned a total of 337,500,000 shares of the Company’s common stock in respect to the terms of an assignment agreement. On February 25, 2013, pursuant to the terms of the Share Exchange Agreement, Mr. Michel Voyer will resign as President, Chief Executive Officer, Chief Financial Officer Secretary, Treasurer of the Company. (ref Note 3 – Business combination)
On November 14, 2012, Mr. Lindorfer, an officer director of the Company was paid $5,000 in respect of services provided in preparation of a geological report for the Company with respect to the Algarrobo property.
On February 25, 2013, Mr. Carlos De la Torre was appointed as the Company’s President and Chief Executive Officer and as a director of the Company. Mr. De la Torre will also fill the role of acting Chief Financial Officer and Secretary until such time as those positions are filled. Mr. De la Torre received 10,000,000 common shares pursuant to the Share Exchange Agreement and a company of which Mr. De la Torre is an officer and director, Toucan Tropical Consulting Ltd. received a total of 3,250,000 shares of preferred stock and 10,000,000 shares of common stock which were issued to Gunter Stromberger at the director of Toucan. At the closing of the transaction, Toucan
Toucan holds a total of 3,250,000 shares of preferred stock convertible into 162,500,000 shares of common stock directly. Carlos De La Torre, the sole officer and director of Toucan holding voting and dispositive control over the shares held by Toucan holds a total of 10,000,000 common shares directly, thus collectively they control 69.1% of the votes, and as such are the controlling stockholders of the Company.
Mr. De la Torre entered into a verbal management agreement with the Company, whereby Mr. De la Torre would receive $10,000 per month as management fees, plus any out of pocket expenses. During the period ended March 31, 2013, Mr. Torre invoiced the Company $21,259, which included $20,000 in management fees and $1,259 for reimbursement of expenses. The Company made cash payments of $10,000, leaving $11,259 due and payable to Mr. Torre as of March 31, 2013.
SWINGPLANE VENTURES, INC.
(An Exploration Stage Corporation)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2013
Note 8 – Issuance of shares:
On February 22, 2013, we closed a Share
Exchange Agreement among the Company, Mid Americas, and the stockholders of Mid Americas. (ref: Note 3 – Business combination).
Under the terms of the Share
Exchange Agreement
,
we issued a total of 100,000,000 shares of common stock of the Company and 5,000,000 shares of preferred stock of the Company to the stockholders of Mid Americas in exchange for 100% of the issued and outstanding capital stock of Mid Americas.
All outstanding shares have been restated to reflect the effect of the business combination.
As at March 31, 2013, the Company had a total of 235,000,000 shares of common stock and 5,000,000 preferred shares issued and outstanding.
Note 9 - New accounting pronouncements:
The Financial Accounting Standards Board (“FASB”) periodically issues new accounting standards in a continuing effort to improve standards of financial accounting and reporting. The Company has reviewed the recently issued pronouncements and concluded that there are no new accounting standards are applicable to the Company.
Note 10 – Subsequent events:
On May 13, 2013, a default notice was issued to Swingplane from the Optionors. The Company has been in touch with the Optionors and a trip to Chile by representatives of the Company and Mid Americas has been set for May 23, 2013 in order to work out a go forward plan for the project. If the Optionors and the Company cannot reach an agreement by June13, 2013, then Mid Americas will have lost all rights and interest in and to the Property.
As of the date of this filing, the Company has had communications with potential joint venture partners who have expressed a serious interest in funding the further exploration and development of the Algarobbo property. No formal agreements can be entered into without the approval of the Optionors and a renegotiation of the current terms of the existing Option Agreement. All agreements will require a property visit by the interested parties. The Company also expects to meet with AMEC when in Chile to review a draft of their report and hopes to have a finalized report by May 31, 2013.