NOTES TO THE FINANCIAL STATEMENTS
December 31, 2012
(Restated)
(Unaudited)
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 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 in regard to the acquisition of certain mining concessions in Chile. Under the renegotiated terms, the Company will enter into a Share Exchange Agreement with Mid Americas whereby the Company will acquire 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. The preferred stock will be 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 and will have voting rights of 100 votes for each preferred share held.
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.
Basis of presentation -
The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principles applicable to exploration stage enterprises.
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.
SWINGPLANE VENTURES, INC.
(An Exploration Stage Corporation)
NOTES TO THE FINANCIAL STATEMENTS
(Restated)
(Unaudited)
December 31, 2012
Note 1 - Organization and summary of significant accounting policies: (continued)
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 3 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.
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.
SWINGPLANE VENTURES, INC.
(An Exploration Stage Corporation)
NOTES TO THE FINANCIAL STATEMENTS
(Restated)
(Unaudited)
December 31, 2012
Note 1 - Organization and summary of significant accounting policies: (continued)
Federal income taxes (continued) -
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 December 31, 2012 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 December 31, 2012, the Company has had limited operations. As of December 31, 2012, the Company has not emerged from the exploration stage. 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 exploration and 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 – Mineral Property Agreements:
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 acquire all of the rights under an option agreement between Mid Americas Corp and Gunter Stromber and Elsa Dorila Durate Horta (the “Vendors”) whereby Mid Americas has the rights to acquire 75% of certain mining concessions in Chile (the “Option Agreement”). The Option Agreement required the following actions to be taken to finalize closing:
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·
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the Company was required to assume the December 1, 2012 payment obligation of $250,000 and all other payments thereafter, which were due under the Option Agreement;
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·
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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;
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·
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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 Agreement;
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·
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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.
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SWINGPLANE VENTURES, INC.
(An Exploration Stage Corporation)
NOTES TO THE FINANCIAL STATEMENTS
(Restated)
(Unaudited)
December 31, 2012
Note 3 – Mineral Property Agreements (continued):
In anticipation of closing, the Company issued 300,000,000 shares of common stock to Mid Americas and the Company’s controlling shareholder, Michel Voyer, returned a total of 337,500,000 shares to treasury. Further 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 certain other exploration expenses 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 on November 30, 2012 under the Assignment Agreement. 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 acquisition of the Assignment Agreement to acquire Mid Americas directly thus giving the Company direct ownership of the Option agreement 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 newly negotiated agreement, the Company will acquire 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. The preferred stock will be 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 per each share of preferred stock. All other terms of the original acquisition agreement are to be included in this acquisition agreement. The only terms that have been amended are the acquisition of Mid Americas rather than the assignment of the option agreement, the issuance of shares as defined above and the requirement to register 10,000,000 shares is eliminated. Further, the Company is not required to file the registration statement for the 40,000,000 shares in order to close the acquisition, but must file the registration statement within three months of closing.
Concurrent with closing of the share exchange agreement, the 300,000,000 shares issued to Mid Americas in trust will be returned to treasury and the Company will issue 100,000,000 shares of common stock and 5,000,000 shares of preferred stock to the Mid Americas stockholders in exchange for all of the issued and outstanding shares of Mid Americas.
Under the Option Agreement, Section 3.2, and certain amendments thereto, Mid Americas is required to pay the following payments:
(i)
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$950,000 cash payments through to October 15, 2012 which have been paid
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(ii)
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$250,000 cash payment on November 30, 2012, which has been paid
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(iii)
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$750,000 cash payment on or before June 30, 2013
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(iv)
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$750,000 cash payment on or before June 30, 2014
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(v)
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$5,000,000 cash payment to be made from net proceeds of Production.
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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
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(a)
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Incur Expenditures in an aggregate amount of $20,000,000 over a period of three (3) years from the Effective Date as follows:
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(i)
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$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);
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SWINGPLANE VENTURES, INC.
(An Exploration Stage Corporation)
NOTES TO THE FINANCIAL STATEMENTS
(Restated)
(Unaudited)
December 31, 2012
Note 3 – Mineral Property Agreements (continued):
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(ii)
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$10,000,000 to be expended on or before three years from the Effective Date (October 1, 2015);
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(iii)
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until the Option is earned retain the services of Gunter Stromberget at a fee of $25,000 per month, which fee shall commence with the commencement of operations on the mining concessions by the Company.
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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
As at December 31, 2012, a total of $951,000 has been remitted by Mid Americas as option payments under the terms of the Option Agreement which amount has been allocated to exploration expenses, and a further $239,185 (including $125,000 of the Option payment due as of November 30, 2012 totaling $250,000) has been paid by Swingplane. The amount of $125,000 has been accrued as a current liability on Swingplane’s balance sheet representing the remaining $125,000 payment as due and payable. Payments made and incurred by Swingplane are reflected in their entirety as Exploration Expenses on the Company’s Statements of Operations. Swingplane remitted the remaining $125,000 which was due on November 30, 2012 on January 31, 2013 to retire the current obligation, refer to Note 8 – Subsequent events for additional details.
As of December 31, 2012 the Company and Mid Americas have incurred total expenditures in relation to the Option Agreement totaling $1,315,185.
The Company is currently preparing a Share Exchange Agreement for execution by all parties based on the terms detailed above and expects to execute this agreement by February 10, 2013. The closing of this transaction will require audited financial statements of Mid Americas and the filing of a Super 8K.
The closing of this transaction may effect a change in control of the Company.
The business combination will be accounted for as a reverse acquisition and recapitalization using accounting principles applicable to reverse acquisitions whereby the financial statements subsequent to the date of the transaction are presented as a continuation of Mid Americas. Under reverse acquisition accounting Mid Americas (subsidiary) is treated as the accounting parent (acquirer) and the Company (parent) is treated as the accounting subsidiary (acquiree). All outstanding shares will be restated to reflect the effect of the business combination. As of the date of this report, the transaction has not yet concluded.
SWINGPLANE VENTURES, INC.
(An Exploration Stage Corporation)
NOTES TO THE FINANCIAL STATEMENTS
(Restated)
(Unaudited)
December 31, 2012
Note 4 – Prepaid expenses:
The following table provides detail of the Company’s prepaid expenses as of December 31, 2012 and June 30, 2012:
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December 31,
2012
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June 30,
2012
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Prepaid news dissemination fees
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$
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1,880
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$
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-
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Tax preparation and bookkeeping expenses
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1,400
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-
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3,280
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-
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Note 5 – Short term loans:
During the six month period ended December 31, 2012, the Company received a series of loans in the cumulative amount of $425,000 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 six month period ended December 31, 2012, the Company accrued interest expenses of $7,520 in relation to the aforementioned loans.
Note 6 – Commitment:
On October 15, 2012, the Company entered into a consulting agreement for a period of three months at the rate of $3,500 per month which agreement concluded on the close of business on December 1, 2012. The Company recorded the amount $10,500 as consulting fees, and paid $3,500 in cash, leaving amount of $7,000 due and payable as of December 31, 2012. Subsequently, the amount of $7,000 was paid in full.
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 September 10, 2012 and effective on the October 1, 2012,
the Company entered into a one-year consulting agreement with Mr. Voyer, in consideration of his management and operation of the Company. Under the terms of the agreement, Mr. Voyer is to be paid $10,000 a month, payable on the 1st
of each month, for services to be rendered. During the three month period ended December 31, 2012, Mr. Voyer invoiced the Company $32,157, which included $30,000 in management fees and $2,157 for reimbursement of expenses. The Company made cash payments of $17,057, leaving $15,100 due and payable to Mr. Voyer as of December 31, 2012.
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. (Note 3 – Mineral Property Agreements).
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 discussed above in Note 3.
SWINGPLANE VENTURES, INC.
(An Exploration Stage Corporation)
NOTES TO THE FINANCIAL STATEMENTS
(Restated)
(Unaudited)
December 31, 2012
Note 8 – Issuance of shares:
On November 2, 2012, 337,500,000 shares of common stock were cancelled and 300,000,000 shares of common stock were issued pursuant to certain mineral property option agreements (Note 3).
As of December 31, 2012, there were a total of 435,000,000 shares issued and outstanding, of which a total of 300,000,000 shares are held by the Company for cancelation.
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 – Reclassifications:
After completion of a detailed review of the Mineral Property Agreements described above (ref Note 3), the Company determined to reclassify amounts previously recorded on the Company's Balance Sheets as Prepaid Expenses - Advances related to Mineral Property Option Agreements, as Exploration expenses, in order to more clearly reflect the accounting treatment described under the terms of the Option Agreement, Section 3.4, whereby 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
The effect of the reclassification on the Company’s balance sheets as of December 31, 2012 and the statements of operations, statements of cash flows and statement of changes in stockholders’ deficit for the six month period ended December 31, 2012 is that payments remitted under the terms of the Option Agreement previously recorded as prepaid advances are now expensed and reflected as exploration expenses.
Note 11 – Subsequent events:
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 January 31, 2013, the Company received a short term loan in the amount of $125,000. The loan is unsecured, extends for a term of one year from the date the funds are received, and bears interest at 10% per annum, payable on maturity. The funds were used to pay the $125,000 which was due under the Option Agreement, bringing the Option agreement into good standing.