CNXS Connexus Corporation (CE)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

   X . ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2013

OR

        . TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ______________

Commission File Number 333-119566

BRAZIL GOLD CORP.

(Exact name of registrant as specified in its charter)

Nevada		98-0430746
State or other jurisdiction of		(I.R.S. Employer
incorporation or organization		Identification No.)

850 3 ^rd Avenue, Suite 16C, New York, NY 10022

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code 212-508-2175

Securities registered under Section 12(b) of the Exchange Act:

Title of each class		Name of each exchange on which registered
None		None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $0.001 Par Value

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned  issuer, as defined in Rule 405 of the Securities Act.   Yes       . No  X .

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Exchange Act   Yes       . No  X .

Indicate by check mark if the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  X . No       .

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files).    Yes       . No  X .

Indicate by check mark if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and will not be contained, to the best of the 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.            .

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	.	Accelerated filer	.
Non-accelerated filer	.  (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 Exchange Act).   Yes       . No  X .

Net revenues for our most recent and prior fiscal year were $Nil.

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Aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed fiscal quarter (June 2013 2012): $.0016. b) The number of currently outstanding shares, not including shares held by affiliates (officers, directors and 10% shareholders) is 87,304,812.

Number of common voting shares issued and outstanding as of September 30, 2013: 340,063,975 shares of common stock

DOCUMENTS INCORPORATED BY REFERENCE

If the following documents are incorporated by reference, briefly describe them and identify the part of the Form 10-K (e.g. Part I, Part II, etc.) into which the document is incorporated: (1) any annual report to security holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1990)

Transitional Small Business Disclosure Format (Check one): Yes  X . No       .

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TABLE OF CONTENTS

	Page
PART I
Item 1. Description of Business	4
Item 2. Description of Properties	7
Item 3. Legal Proceedings	7
Item 4. Submission of Matters to a Vote of Security Holders	7
PART II
Item 5. Market For Registrant’s Common Equity and Related Stockholder Matters	8
Item 6. Management’s Plan of Operation	10
Item 7. Financial Statements and Supplementary Data	11
Item 8. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	12
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons and Corporate Governance: compliance with Section 16(A) of the Exchange Act	13
Item 10. Executive Compensation	13
Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	14
Item 12. Certain Relationships and Related Transactions, and Director Independence	14
Item 13. Exhibits	15
Item 14. Principal Accountant Fees and Services	15
Signatures	16

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PART I

ITEM 1  DESCRIPTION OF BUSINESS

We incorporated as Dynamic Alert Limited (referred to herein as “Brazil Gold”, “we”, “us”, “our” and similar terms) on June 17, 2004, in the State of Nevada. On December 22, 2009, as amended February 25, 2010, pursuant to the provisions of Articles of Merger, Dynamic Alert Limited, and its wholly-owned subsidiary, Brazil Gold Corp., a Nevada Corporation which was incorporated on November 3, 2009, were merged, with Dynamic Alert Limited (“the Company”) being the surviving entity. In connection with such merger, our name was changed from Dynamic Alert Limited to Brazil Gold Corp. on March 15, 2010.  On March 15, 2010, the Company’s ticker symbol on OTCBB was changed to “BRZG”.  Our principal executive offices are located at 850 3rd Avenue, Suite 16C, NYC, NY  10022.  Our telephone number is 212-508-2175.  Our fiscal year end is June 30.

Since inception until November 2009, we attempted to build a business that assisted consumers with their security needs.  Our goal had been to help our customers create and implement a personalized security plan by offering a three-fold service.  Our first focus was to assist our clients in developing personalized security plans.  Our second focus was to source and market personal security products.  Our third focus was to provide personal protection on an as-needed basis.  We were actively seeking to add new products and/or services that we could offer.  The results were lack-luster, so it was decided to change our business focus and look for other opportunities and discontinue the security operation with effect from January 1, 2010.  Therefore, we started reviewing mineral exploration and other opportunities with the objective of bringing revenue to the Company.

It is for this reason that on November 13, 2009, the Company entered into a Letter of Intent with Rusheen Handels AG, a Swiss corporation ("Rusheen") for the acquisition by the Company of Rusheen's 99% ownership interest in its Brazilian subsidiary Amazônia Capital e Participaçơes Ltda. (   “  Amazonia   ”  ) in exchange for (a) 44 million restricted shares of the Company's common stock and a 2.5% net smelter return royalty on mineral production from Amazonia mineral claims located in Brazil. Amazonia is the owner of numerous poly-metallic mineral claims covering approximately 824,411 hectares (2,037,119 acres) in three states in the Tapajos Greenstone Belt in the Amazon Basin of Brazil.  The primary mineral target is gold, but copper, nickel, iron ore, manganese and tin are also found in the area.  The legal claims are located in three western states: Amazonas, Mato Grosso and Rondonia.

The consideration to be payable to Rusheen for transfer of the Amazonia ownership stake is 44 million restricted shares in the common stock of the Company, and a 2.5% NSR on mineral production from the Amazonia claims.

The agreement to acquire Rusheen's ownership interest in Amazonia was contingent on the parties entering into a written definitive acquisition agreement, approval by both parties' board of directors and upon the completion of a due diligence investigation by each party.

On March 15, 2010 Dynamic Alert Ltd. (the “Company”) announced its change-of-name to Brazil Gold Corp., and new trading symbol “BRZG”, effective immediately.  This change of name to Brazil Gold Corp. was made to more accurately reflect the new focus and vision of the Company – to be an explorer for precious metals, most significantly gold, in Brazil upon the successful completion of the due diligence to acquire Amazonia as more fully set out above.  This name change was achieved by combining the business of the Company and its subsidiary Brazil Gold Corp., which was specifically set up to protect this name.

On May19, 2010, Brazil Gold Corp., entered into an Acquisition Agreement (the “Acquisition Agreement”) with Rusheen whereby the Company was to acquire all of Rusheen’s ownership units in “Amazonia”, , which represents 99% of all of the issued and outstanding share capital of Amazonia. The acquisition of all of Rusheen’s ownership units in Amazonia was to be in exchange for 44 million shares of the Company’s common stock.  Amazonia has previously granted a 2.5% net smelter return royalty (“Royalty”) to Rusheen relating to its mineral claims as described below, which will remain in place following the closing of the Acquisition Agreement. As a condition to closing the Acquisition Agreement, the Company will be cancelling 44 million restricted shares that were returned as this transaction was not consummated successfully as mentioned below.

Amazonia is the registered owner of 102 claims covering approximately 860,000 hectares of mineral rights located in the three states of Amazonas, Mato Grosso and Rondonia in the Tapajos Greenstone Belt in the Amazon Basin of Brazil.  The primary mineral target is gold, however copper, nickel, iron ore, manganese and cassiterite (tin) are also found in the area.  Most properties are near existing roads and rivers, which have access to international ports, and small mining and farming communities with access to fuel, energy and manpower – all conditions suitable for low-cost bulk tonnage mining.

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Unfortunately, the size of the package of the mineral claims resulted in a lengthy due diligence exercise and upon completion and signing the definitive agreement on May 19, 2010, as set out above, the market conditions had changed, resulting in great difficulty in raising sufficient funds to conduct exploration work on the extensive mineral claims. It was for this reason that the parties agreed to rescind the agreement retroactive to June 1, 2010 in order to allow Rusheen to pursue other financing options with non-related third parties. It is for this reason that we are once more evaluating possible acquisitions; however as of the date of the filing of this annual report, we do not have any firm target.

It is for this reason on September 15, 2010, the Company, effective as of June 1, 2010, entered into a Mutual Rescission Agreement and General Release between the Company and Rusheen, pursuant to which the parties agreed that all agreements constituting and comprising the acquisition of Amazonia entered into on May 19, 2010, as amended and consummated on June 1, 2010, were rescinded.  As a result of such rescission, all of the 99% interest in the issued and outstanding share capital of Amazonia held by Brazil Gold Corp. was transferred back to Rusheen and Rusheen now owns 99% of the issued and outstanding ownership units of Amazonia.  Furthermore, the 44,000,000 shares of the Company’s common stock that were issued in connection with the acquisition were returned to treasury.  The accounts of the Company reflect such rescission as at June 30, 2010.

On December 23, 2010,  the Company, entered into a non-binding Letter of Intent with Mineracao Rio De Padreas Ltda., a private Brazilian corporation (“Mineracao”), whereby the Company will acquire up to 100% of Mineracao’s interests in the Luziania Gold Project located in Goias State, Brazil. The terms of the acquisition will be based on the results of the Company’s due diligence review of the project and done in accordance with industry standards.

The Luziania Gold Project (LGP) is located about 50 kilometers southwest of Brasilia, the capital of Brazil, and ten km from the City of Luziania with excellent roads and access to power, water and skilled labor. Under active development for the past 21 years, LGP carries mining permits, environmental impact studies and ore recovery analyses. Brazil’s National Department of Mineral Production has approved the LGP project, subject only to the customary Mining Concession by the Mine and Energy Ministry.  The City of Luziania offers all necessary logistic support including communication, health care and its own airport. As at the time of our June 30, 2011 year end the decision was made not to pursue this deal.

Effective April 1, 2011, Brazil the Company entered into a settlement agreement with Coach Capital, LLC (“Coach”). Under the terms of the settlement agreement, Coach has agreed to accept the Company’s $1.42 million Promissory Note from Armadillo Resources Limited and 10 million shares of the Company’s Restricted Common Stock as full settlement for the Company’s Convertible Promissory Note to Coach dated April 6, 2010 in the current principal amount of $1,700,000.

  

At the same date, the Company has determined to terminate its $5 million line of credit with Coach. This line of credit was originally established on February 16, 2011, and allowed for the Company to call upon funds at its discretion. The notes to be issued under the line of credit would have been convertible into shares of the Company’s common stock at conversion prices between $1.00 and $1.00 per share. However, the Company never elected to call upon funds under the line of credit. Therefore, upon its termination, there is no outstanding debt associated with the line of credit.

Principal Products and Services

We are reviewing exploration and other opportunities with the objective of bringing revenue to the Company.  Effective July 22, 2013 (the “Company”) entered into a Securities Purchase Agreement (the “Agreement”) with FAL Minerals LLC (“FAL”).  Pursuant to the Agreement the Company agreed to purchase from FAL newly issued membership interests of FAL representing twenty percent (20%) of the issued and outstanding membership interests of FAL (post issuance) (the “Interests”).  The purchase price for the Interests is One Hundred Thousand ($100,000) Dollars, payable in twelve equal installments of $8,333 commencing August 1, 2013.  The Interests will be issued pro rata (1/12 each month) by FAL to the Company upon each month closing.  Pursuant to the Agreement the Company will receive fifteen (15%) percent of the gross proceeds from all royalty payments made to FAL.  Such royalty payments are payable quarterly.  Please refer to the Form 8-K filing of the Company on July 25, 2013 for further detail on this transaction

The Market

The market for natural resources is broad and international in scope.  We cannot estimate the market for our product through FAL Resources LLC or any other potential joint venture partner at this time.

Competition and Competitive Strategy

We are presently unknown in the industry.  Our competitive position is not measurable.  

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Governmental Controls and Approvals

We are reviewing exploration and other opportunities with the objective of bringing revenue to the Company, so we are not able to highlight any Government controls or approvals required.

Existing or Probable Government Regulations

We are reviewing exploration and other opportunities with the objective of bringing revenue to the Company, so we are not able to highlight any Government regulations that may impact such venture.

Research and Development Activities and Costs

None

Compliance with Environmental Laws

We are reviewing exploration and other opportunities with the objective of bringing revenue to the Company, so we are not able to highlight any.

Employees

We have no employees at the present time.  Our officers and directors are responsible for all planning, developing and operational duties, and will continue to do so throughout the early stages of our growth.

We have no intention of hiring employees until our business has been successfully launched and we have sufficient, reliable revenue flow from our operations.

Risk Related to our Business

You should carefully consider the following risk factors and all other information contained herein as well as the information included in this Annual Report in evaluating our business and prospects.  The risks and uncertainties described below are not the only ones we face.  Additional unknown risks and uncertainties, or that we currently believe are immaterial, may also impair our business operations. If any of the following risks occur, our business and financial results could be harmed. You should refer to the other information contained in this Annual Report, including our financial statements and the related notes.

We Have a Limited Operating History.

We have a limited operating history.  Our operations will be subject to all the risks inherent in the establishment of a developing enterprise and the uncertainties arising from the absence of a significant operating history.  No assurance can be given that we may be able to operate on a profitable basis.

We may Require Significant Additional Financing and There is No Assurance that such Funds will be Available as, if and when Needed.

We are currently evaluating a wide range of  business opportunities, which will require additional financing.  There is no guarantee that we will be able to raise the necessary funding internally or that it will be made available to us through outside sources.

Inability Of Our Officers And Directors To Devote Sufficient Time To The Operation Of Our Business May Limit Our Success.

Presently, our officers and directors allocate only a portion of their time to the operation of our business. Should our business develop faster than anticipated, our officers may not be able to devote sufficient time to the operation of our business to ensure that it continues as a going concern.  Even if our management’s lack of sufficient time is not fatal to our existence, it may result in our limited growth and success.

Unproven Profitably Due to Lack of Operating History Makes an Investment in Us an Investment in an Unproven Venture.

We were formed on June 17, 2004.  Since our date of inception, we have not had significant revenues or operations and we have few assets.  Due to our lack of operating history, the revenue and income potential of our business is unproven.  If we cannot successfully implement our business strategies, we may not be able to generate sufficient revenues to operate profitably.  Since our resources are very limited, insufficient revenues would result in termination of our operations, as we cannot fund unprofitable operations unless additional equity or debt financing is obtained.

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We may conduct our operations through a joint venture, which subjects us to additional risks that could have a material adverse effect on our financial condition and results of operations

The company entered into an agreement with FAL Resources LLC (“FAL”) on July 22, 2013. (See Form 8-K filed on July 25, 2013 for more information.) We rely on FAL to be successful in order to meet our business goals. We may enter into other joint venture arrangements with third parties in the future.  These third parties may have obligations that are important to the success of the joint venture, such as the obligation to pay their share of capital and other costs of the joint venture. The performance of these third parties to satisfy their respective obligations is outside our control. If these parties do not satisfy their obligations under the arrangement, our business may be adversely affected.  Our joint venture arrangement may involve risks not otherwise present without such partner, including, for example:

·

our joint venture partner may take actions contrary to our instructions or requests or contrary to our policies or objectives;

·

we may owe contractual duties to our joint venture partners and its other owners, which may conflict with our interests and the interests of our equity holders; and

·

disputes between us and our joint venture partner may result in delays, litigation or operational impasses.

ITEM 2.  DESCRIPTION OF PROPERTIES.

Our office space is located at 850 3rd Avenue, Suite 16C, NYC, NY 10022

We do not have any manufacturing plants and have minimal equipment for the operation of our business.

We do not have any investments or interests in any real estate.

ITEM 3.  LEGAL PROCEEDINGS.

We are not currently party to any legal proceedings, nor are we aware of any contemplated or pending legal proceedings against us.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

We have not yet held our annual shareholders’ meeting or submitted any matters to a vote of shareholders during the fiscal year to which this Annual Report pertains.

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PART II

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market for Common Equity and Related Stockholder Matters

(a)  Market Information

Our shares of common stock, par value $0.001 per share, are quoted on the OTC Bulletin Board under the symbol “BRZG”.

Fiscal Year Ended June 30, 2013

Quarter Ended	September 30, 2012	December 31, 2012	March 31, 2013	June 30, 2013
High	$ 0.06	$0.0099	$0.009	$ 0.0029
Low	$ 0.0056	$ 0.005	$0.005	$0.001

Fiscal Year Ended June 30, 2012

Quarter Ended	September 30, 2011		December 31, 2011		March 31, 2012	June 30, 2012
High	$ 0.10	$0.10		$0.075		$ 0.07
Low	$ 0.06	$ 0.015		$0.015		$0.04

 

(b)  Holders

 

As of September 30, 2013, there were approximately 49 holders of record of our common stock.

(c)  Dividend Policy

We have never declared or paid dividends on our common stock.  We intend to retain earnings, if any, to support the development of our business and therefore do not anticipate paying cash dividends for the foreseeable future.  Payment of future dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including current financial condition, operating results and current and anticipated cash needs.

(d)  Securities authorized for issuance under equity compensation plans

None.

RECENT SALES OF UNREGISTERED SECURITIES

 

None

USE OF PROCEEDS FROM SALE OF REGISTERED SECURITIES

Not applicable.

DESCRIPTION OF SECURITIES

Common Stock

Each record holder of common stock is entitled to one vote for each share held in all matters properly submitted to the stockholders for their vote.  Cumulative voting for the election of directors is not permitted by the By-Laws of the Company.

Holders of outstanding shares of common stock are entitled to such dividends as may be declared from time to time by the Board of Directors out of legally available funds; and, in the event of liquidation, dissolution or winding up of the affairs of the Company, holders are entitled to receive, ratably, the net assets of Brazil Gold available to stockholders. Holders of outstanding shares of common stock have no preemptive, conversion or redemptive rights.  To the extent that additional shares of Brazil Gold’s common stock are issued, the relative interest of the existing stockholders may be diluted.

Stock Purchase Warrants

None.

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Stock Purchase Options

The Company accounts for stock-based compensation in accordance with ASC Topic 718, Compensation – Stock Compensation.  Under the fair value recognition provisions of the pronouncement, stock-based compensation cost is measure at the grant date based on the value of the award granted, using the Black-Scholes option pricing model, and recognized over the period in which the award vests.  The stock-based compensation expense included in general and administrative expenses for the year ended June 30, 2013 and 2012 was $nil and $49,817, respectively.  

On January 7, 2010, the Board of Directors of Brazil Gold Corp. adopted a 2010 Stock Option Plan, which plan authorizes the issuance of up to ten percent (10%) of the Company’s total issued and outstanding shares of common stock to the Company’s officers, directors, employees, advisors and consultants.

On January 7, 2010, the board approved the 2010 Stock Incentive & Compensation Plan thereby reserving an additional 8,000,000 common shares for issuance to employees, directors and consultants, of which 2,750,00 were granted at $0.57 exercise price.

The options shall be exercisable, in whole or in part, according to the following vesting schedule:

·

Twenty five percent (25%) of the total number of shares granted under the option plan vested immediately as January 7, 2010, the date they were approved at the board meeting; a further twenty-five percent (25%) were vested on July 6, 2010 and

·

The remaining Fifty percent (50%) of the shares granted under the option plan shall vest pro rata every six (6) months, on the same date of the month as the date of grant of the option, over the following twelve (12) months of continuous service as a director, employee or consultant.

On April 19, 2010, the board approved and granted an additional 50,000 common shares at a $1.00 exercise price to the internal general counsel.

The April 2010 options shall be exercisable, in whole or in part, according to the following vesting schedule:

·

Twenty five percent (25%) of the total number of shares granted under the option plan on  July 7, 2010, the date they were approved at the board meeting; a further twenty-five percent (25%) on September 30, 2011 and

·

The remaining fifty percent (50%) of the shares granted under the option plan shall vest pro rata every six (6) months, on the same date of the month as the date of grant of the option, over the following twelve (12) months of continuous service as a director.

On July 1, 2010, the board approved and granted an additional 500,000 common shares at a $0.56 exercise price to a director

The July 2010 options shall be exercisable, in whole or in part, according to the following vesting schedule:.

·

Twenty five percent (25%) of the total number of shares granted under the option plan vested immediately as July 1, 2010, the date they were approved at the board meeting; a further twenty-five percent (25%) on January 1, 2011 and

·

The remaining fifty percent (50%) of the shares granted under the option plan shall vest pro rata every six (6) months, on the same date of the month as the date of grant of the option, over the following twelve (12) months of continuous service as a director.

During the year ended, June 30, 2013, we did not incur any stock compensation expense. During the year ended June 30, 2012, the Company recognized stock based compensation expense in the amount of $49,817 for the vested portion of options issued January 7, 2010, April 19, 2010 and July 1, 2010.

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The Company uses the Black-Scholes option valuation model to value stock options granted.  The Black-Scholes model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable.  The model requires management to make estimates which are subjective and may not be representative of actual results.  Changes in assumptions can materially affect estimates of fair values.  For purposes of the calculation, the following assumptions were used:

Risk free interest rate	0.25%
Expected dividend yield	0.0%
Expected stock price volatility	266.8%
Expected Life of options at June 30, 2013	- years

The following table summarizes the activity under the Company’s stock option plan:

	Shares	Weighted Average Exercise Price
Balance, July 1, 2012	3,250,000	$0.56
Options granted for the period	-	-
Options cancelled	(3,250,000)	$0.56
Options exercised	-	-
Balance, June 30, 2013	-	$-
Options vested at June 30, 2013	-	$-

At the Balance sheet date, the Company had none of these options outstanding

ITEM 6.  MANAGEMENT’S PLAN OF OPERATION.

In November 2009 we started reviewing mineral exploration and other opportunities with the objective of bringing revenue to the Company.  However, there are no revenues generated from continuing operations for the year ended June 30, 2013.

Plan of Operation for the Next Twelve (12) Months

The following discussion of the plan of operation, financial condition, results of operations, cash flows and changes in financial position should be read in conjunction with our most recent financial statements and notes appearing elsewhere in this Form 10-K; our March 2013 10-Q filed July 11, 2013, our December 2012 10-Q filed   June 28, 2013, and our September 2012 10-Q filed May 9, 2013.  

Our continuing operations are dependent upon the identification and successful completion of additional long-term or permanent equity financing, the support of creditors and shareholders, and, ultimately, the achievement of profitable operations.  There can be no assurances that we will be successful, which would in turn significantly affect our ability find the right new exploration or other project and then roll-out of the respective business plan.  If not, we will likely be required to reduce operations or liquidate assets.  We will continue to evaluate our projected expenditures relative to our available cash and to seek additional means of financing in order to satisfy our working capital and other cash requirements.

Continuing lackluster performance of the U.S. economy has had an effect on our ability to attract long-term financing for our operations. The current status of U.S. economy has also made it more difficult to find investors that either have capital to invest or is willing to put capital at risk by investing in our company. We anticipate that both effects of the current economic climate will continue to hinder our abilities to become a profitable company and to grow our operations.

We will continue to consider additional investment opportunities, similar to the one we signed with FAL Resources, in the future.

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Management's Discussion and Analysis of Financial Condition and Results of Operations

Full Fiscal Years

At June 30, 2013, we had a working capital deficit of $1,026,441 (June 30, 2012: $636,712). Our assets consisted of cash of $5,552, Cash to be received upon Issuance of Note of $20,000, other current assets of $1,382 and capital assets of $164.  This compared to our assets as of June 30, 2012, which consisted of cash of $nil, prepaid expenses of $167, advances receivable of $4,249 and capital assets of $608.

At June 30, 2013, our total current liabilities increased to $1,053,375 (from $454,531 at June 30, 2012).

We recognized no revenue as there were no sales for the year ended June 30, 2012 (June 30, 2011: $Nil), resulting in a gross profit of $Nil (June 2011: $Nil). This has been disclosed as discontinued operations in the accompanying financial statements.

We have recognized $45,964 in revenue from inception.  Our short and long term survival is dependent on finding exploration projects that are viable.

Result of Operations

For the year ended June 30, 2013, operating expenses were $401,941. ($260,601 for the year end June 30, 2012) Operating expenses for the year end June 30, 2013 consisted of consulting fees of $260,000 (June 2012: $127,045), professional fees of $71,977 (June 2012: $31,247), compensation expense of $20,000 (June 2011: $49,817) and general and administrative expenses of $38,306 (June 2012: $52,492).

For the year ended June 30, 2013, Other Income/Expense were $468,727. ($195,751 for the year end June 30, 2012) Other income/expense for the year end June 30, 2013 consisted of derivative expense on newly issued securities of $251,144 (June 2012: $60,212), interest expense of 317,532 (June 2012 $143,920) principally relating to convertible loans, principally from the amortization of debt discount premiums, loss on settlement of debt of $66,880 (June 2012: $nil), and change in fair value of the derivative liability of ($166,829)  (June 2012: $8,345) and other income expense of $nil (June 2012: $36).

 

From inception to June 30, 2013 we have incurred an accumulated deficit of $7,079,905 (June 30, 2012: $6,209,236).

Liquidity and Capital Expenditures

As of June 30, 2013, our net cash balance was approximately $5,552.  We may attempt to sell additional equity shares or issue debt to support our operations.  Any sale of additional equity securities will result in dilution to our stockholders.  There can be no assurance that additional financing will be available to us or, if available to us, on acceptable terms.

On July 7, 2011, the  Company entered into an equity purchase agreement (the “Equity Purchase Agreement”) with an Institutional Investor (“Investor”)  Footnote 8 describes the Equity Purchase Agreement in detail.  To date, no funds have been advanced under this agreement, and we do not anticipate drawing down on this Equity Purchase Agreement during the upcoming year

We believe our market risk exposures arise primarily from exposures to fluctuations in interest rates and exchange rates.  We presently only transact business in United States Dollars.  We believe that the exchange rate risk surrounding our future transactions will not materially or adversely affect our future earnings.  We do not use derivative financial instruments to manage risks or for speculative or trading purposes.

At the current time, we do not anticipate any capital expenditures over the upcoming year.

Off Balance Sheet Arrangements.

None.

ITEM 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial statements required by this Item begin on Page F-14 of this Form 10-K, and include (1) Report of Independent Registered Public Accounting Firm; (2) Balance Sheets; (3) Statements of Operations, Statements of Cash Flows, Statement of Stockholders’ Deficit; and (4) Notes to Financial Statements.

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Brazil Gold Corp.

June 30, 2013 and 2012

Index to the financial statements

Contents

Page(s)

F-1

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Brazil Gold Corp.

New York, New York

We have audited the accompanying balance sheets of Brazil Gold Corp. (the “Company”) as of June 30, 2013 and 2012 and the related statements of operations, stockholders’ deficit and cash flows for the fiscal years then ended.  These financial statements are the responsibility of the Company’s 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 the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our 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’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2013 and 2012 and the results of its operations and its cash flows for the fiscal years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 3 to the financial statements, the Company had an accumulated deficit at June 30, 2013 and had a net loss and net cash used in operating activities for the fiscal year then ended.  These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 3.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/Li and Company, PC

Li and Company, PC

Skillman, New Jersey

September 30, 2013

F-2

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Brazil Gold Corp.
Balance Sheets
						June 30, 2013				June 30, 2012
ASSETS
CURRENT ASSETS:
	Cash					$	5,552			$	-
	Prepaid expenses						-				167
	Other current assets						-				1,382
		Total Current Assets					5,552				1,549
PROPERTY AND EQUIPMENT
	Property and equipment						1,524				1,524
	Accumulated depreciation						(1,332)				(916)
		Property and Equipment, net					192				608
			Total Assets			$	5,744			$	2,157
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
	Accounts payable					$	115,828			$	220,471
	Accrued expenses						19,007				18,806
	Advances payable						42,940				42,940
	Derivative liability						565,007				176,867
	Convertible debentures - stockholder, net						278,961				101,289
	Note payable - related party						-				77,888
		Total Current Liabilities					1,021,743				638,261
NON-CURRENT LIABILITIES:
	Note payable - related party						185,116				-
		Total Non-Current Liabilities					185,116				-
			Total Liabilities				1,206,859				638,261
STOCKHOLDERS' DEFICIT:
	Preferred stock par value $0.001: 10,000,000 shares authorized;     none issued or outstanding
							-				-
	Common stock par value $0.001: 950,000,000 shares authorized;     128,789,851 and 54,650,159 shares issued and outstanding, respectively
							128,790				54,650
	Additional paid-in capital						5,738,341				5,518,482
	Accumulated deficit						(7,068,246)				(6,209,236)
		Total Stockholders' Deficit					(1,201,115)				(636,104)
			Total Liabilities and Stockholders' Deficit			$	5,744			$	2,157
See accompanying notes to the financial statements.

F-3

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Brazil Gold Corp.
Statements of Operations
						For the Fiscal Year				For the Fiscal Year
						Ended				Ended
						June 30, 2013				June 30, 2012
NET REVENUES						$	-			$	-
OPERATING EXPENSES:
	Consulting fees						260,000				127,045
	Professional fees						71,977				31,247
	Compensation						20,000				49,817
	General and administrative expenses						38,306				52,492
		Total operating expenses					390,283				260,601
LOSS FROM OPERATIONS							(390,283)				(260,601)
OTHER (INCOME) EXPENSE:
	Derivative expense						251,144				60,212
	Interest expense						317,532				143,920
	Loss on settlement of debt						66,880				-
	Change in fair value of derivative liability						(166,829)				(8,345)
	Other (income) expense						-				(36)
		Other (income) expense, net					468,727				195,751
LOSS FROM OPERATIONS
	BEFORE INCOME TAX PROVISION						(859,010)				(456,352)
INCOME TAX PROVISION							-				-
NET LOSS						$	(859,010)			$	(456,352)
NET LOSS PER COMMON SHARE
	- BASIC AND DILUTED:					$	(0.01)			$	(0.01)
	Weighted average common shares outstanding
		- basic and diluted					85,908,563				54,641,564
See accompanying notes to the financial statements.

F-4

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F-5

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Brazil Gold Corp.
Statements of Cash Flows
					For the Fiscal Year				For the Fiscal Year
					Ended				Ended
					June 30, 2013				June 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss					$	(859,010)			$	(456,352)
Adjustments to reconcile net loss to net cash used in operating activities
	Depreciation expense					416				444
	Convertible notes issued for services					281,999				-
	Amortization of discount on convertible debt					315,000				101,289
	Loss on settlement of debt					66,880				-
	Stock based compensation									49,817
	Derivative expense					251,144				60,212
	Change in fair value of derivative liabilities					(166,829)				(8,345)
	Common stock issued for interest									36,000
	Changes in operating assets and liabilities:
		Prepaid expenses				167				11,613
		Cash to be Received on Issuance of Note				-				-
		Other current assets				1,382				(1,382)
		Accounts payable				737				136,909
		Accrued expenses				9,115				(14,254)
NET CASH USED IN OPERATING ACTIVITIES						(98,999)				(84,049)
CASH FLOWS FROM INVESTING ACTIVITIES:
	Collection of related party receivables					-				4,249
NET CASH PROVIDED BY INVESTING ACTIVITIES						-				4,249
CASH FLOWS FROM FINANCING ACTIVITIES:
	Amounts from (repayments to) related parties					-				(45,621)
	Note payable - related party					-				(996)
	Proceeds from convertible debentures					104,551				125,000
NET CASH PROVIDED BY FINANCING ACTIVITIES						104,551				78,383
EFFECT OF EXCHANGE RATE CHANGES ON CASH						-				-
NET CHANGE IN CASH						5,552				(1,417)
Cash at beginning of year						-				1,417
Cash at end of year					$	5,552			$	-
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
	Interest paid				$	-			$	-
	Income tax paid				$	-			$	-
See accompanying notes to the financial statements.

F-6

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Brazil Gold Corp.

June 30, 2013 and 2012

Notes to the Financial Statements

Note 1 - Organization and Operations

Brazil Gold Corp. (Formerly " Dynamic Alert Limited")

Dynamic Alert Limited (“the Company”) was incorporated in the State of Nevada, on June 17, 2004.  On December 22, 2009, as amended February 25, 2010, pursuant to the provisions of Articles of Merger, Dynamic Alert Limited, and its wholly-owned subsidiary, Brazil Gold Corp., a Nevada Corporation which was incorporated on November 3, 2009, were merged, with Dynamic Alert Limited being the surviving entity. In connection with such merger, on March 15, 2010, the Company’s name was changed from Dynamic Alert Limited to Brazil Gold Corp.

Since inception up until November, 2009 the Company engaged in the business of providing its customers with security professionals, who in turn would provide personal protection as needed, as well as selling a selection of personal security products. The Company changed its status from a development stage company to an operating company on June 30, 2008. Management realized that the results of operations from security products and services were lack-luster, and it was decided to change the Company’s business focus and plan for other strategic opportunities and discontinue the security operations with effect from January 1, 2010. Effective January 1, 2010, the Company started reviewing mineral exploration and other opportunities with the objective of generating revenue for the Company.

The Company is currently inactive and is evaluating possible new ventures and acquisitions.

Note 2 - Summary of Significant Accounting Policies

Basis of Presentation

The accompanying financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Fiscal Year End

The Company elected June 30 ^th as its fiscal year end date upon its formation.

Use of Estimates and Assumptions

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 amounts of revenues and expenses during the reporting period.

The Company’s significant estimates and assumptions include the fair value of financial instruments; income tax rate, income tax provision, deferred tax assets and the valuation allowance of deferred tax assets, and the assumption that the Company will continue as a going concern.  Those significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.

Actual results could differ from those estimates.

F-7

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Fair Value of Financial Instruments

The Company follows paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments and paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels.  The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

Level 1		Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2		Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3		Pricing inputs that are generally observable inputs and not corroborated by market data.

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.  If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable, accrued expenses and advances payable approximate their fair values because of the short maturity of these instruments.

The Company’s Level 3 financial liabilities consist of the derivative liability of the Company’s secured convertible promissory notes issued to Institutional InvestorInstitutional Investor , and the derivative warrants issued in connection with these convertible promissory notes. There is no current market for these securities such that the determination of fair value requires significant judgment or estimation.  The Company valued the automatic conditional conversion, re-pricing/down-round, change of control; default and follow-on offering provisions using a lattice model, with the assistance of a valuation specialist, for which management understands the methodologies.  These models incorporate transaction details such as Company stock price, contractual terms, maturity, risk free rates, as well as assumptions about future financings, volatility, and holder behavior as of the date of issuance and each balance sheet date.

Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.

Fair Value of Financial Assets and Liabilities Measured on a Recurring Basis

Level 3 Financial Liabilities – Derivative Warrant Liabilities

The Company uses Level 3 of the fair value hierarchy to measure the fair value of the derivative liabilities and revalues its derivative warrant liability at every reporting period and recognizes gains or losses in the consolidated statements of operations and comprehensive income (loss) that are attributable to the change in the fair value of the derivative warrant liability.

Carrying Value, Recoverability and Impairment of Long-Lived Assets

The Company has adopted paragraph 360-10-35-17 of the FASB Accounting Standards Codification for its long-lived assets. The Company’s long-lived assets, which include property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  At the balance sheet date, the Company has an immaterial amount of these assets.

Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

F-8

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Property and Equipment

Property and equipment is recorded at cost. Expenditures for major additions and betterments are capitalized.  Maintenance and repairs are charged to operations as incurred. Depreciation of property and equipment is computed by the straight-line method (after taking into account their respective estimated residual values) over the assets estimated useful life of three (3) to five (5) years.  Upon sale or retirement of furniture and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in statements of operations.

Derivative Instruments

The Company evaluates its convertible debt, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with Paragraph 810-10-05-4 of the Codification and Paragraph 815-40-25 of the Codification. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statements of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.

In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date.

The Company utilizes the Lattice model that values the liability of the derivatives based on a probability weighted discounted cash flow model with the assistance of the third party valuation firm.  The reason the Company picks the Lattice model is that in many cases there may be multiple embedded features or the features of the bifurcated derivatives may be so complex that a Black-Scholes valuation does not consider all of the terms of the instrument.  Therefore, the fair value may not be appropriately captured by simple models.  In other words, simple models such as Black-Scholes may not be appropriate in many situations given complex features and terms of conversion option (e.g., combined embedded derivatives).  The Lattice model is based on future projections of the various potential outcomes. The Lattice model analyzed the underlying economic factors that influenced which of these events would occur, when they were likely to occur, and the specific terms that would be in effect at the time (i.e. stock price, exercise price, volatility, etc.).  Projections were then made on the underlying factors which led to potential scenarios.  Probabilities were assigned to each scenario based on management projections.  This led to a cash flow projection and a probability associated with that cash flow.  A discounted weighted average cash flow over the various scenarios was completed to determine the value of the derivatives.

Related Parties

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.

Pursuant to Section 850-10-20 the Related parties include a. affiliates of the Company; b. Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

F-9

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The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the  financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

Commitment and Contingencies

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the  financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur.  The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.  In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements.  If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.  Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

Revenue Recognition

The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition.  The Company will recognize revenue when it is realized or realizable and earned.  The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

Stock-Based Compensation for Obtaining Employee Services

The Company accounts for its stock based compensation in which the Company obtains employee services in share-based payment transactions under the recognition and measurement principles of the fair value recognition provisions of section 718-10-30 of the FASB Accounting Standards Codification. Pursuant to paragraph 718-10-30-6 of the FASB Accounting Standards Codification, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.  The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. If the Company is a newly formed corporation or shares of the Company are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

The fair value of options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model. The ranges of assumptions for inputs are as follows:

F-10

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·

Expected term of share options and similar instruments: The expected life of options and similar instruments represents the period of time the option and/or warrant are expected to be outstanding.  Pursuant to Paragraph 718-10-50-2 of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and employees’ expected exercise and post-vesting employment termination behavior into the fair value (or calculated value) of the instruments.  Pursuant to paragraph 718-10-S99-1, it may be appropriate to use the  simplified method ,  i.e., expected term = ((vesting term + original contractual term) / 2) , if (i) A company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded; (ii) A company significantly changes the terms of its share option grants or the types of employees that receive share option grants such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term; or (iii) A company has or expects to have significant structural changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as the company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.

 

·

Expected volatility of the entity ’ s shares and the method used to estimate it.  Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index.  The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility.  If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

 

 

·

Expected annual rate of quarterly dividends.  An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends.  The expected dividend yield is based on the Company ’ s current dividend yield as the best estimate of projected dividend yield for periods within the expected contractual life of the option and similar instruments.

 

 

·

Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used.  The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the contractual life of the option and similar instruments.

The Company’s policy is to recognize compensation cost for awards with only service conditions and a graded vesting schedule on a straight-line basis over the requisite service period for the entire award.

Equity Instruments Issued to Parties other than Employees for Acquiring Goods or Services

The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of Subtopic 505-50 of the FASB Accounting Standards Codification (“Subtopic 505-50”).

Pursuant to ASC Section 505-50-30, all transactions in which goods or services are the consideration received for the issuance of

equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.  The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur.  If shares of the Company are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

The fair value of option or warrant award is estimated on the date of grant using a Black-Scholes option-pricing valuation model.  The ranges of assumptions for inputs are as follows:

 

 

·

Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments.  The Company uses historical data to estimate holder’s expected exercise behavior.  If the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.

F-11

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·

Expected volatility of the entity ’ s shares and the method used to estimate it.  Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index.  The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility.  If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

 

 

·

Expected annual rate of quarterly dividends.  An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends.  The expected dividend yield is based on the Company ’ s current dividend yield as the best estimate of projected dividend yield for periods within the expected contractual life of the option and similar instruments.

 

·

Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used.  The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the contractual life of the option and similar instruments.

Pursuant to Paragraphs 505-50-25-8, if fully vested, non-forfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached.  A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Whether the corresponding cost is an immediate expense or a prepaid asset (or whether the debit should be characterized as contra-equity under the requirements of paragraph 505-50-45-1) depends on the specific facts and circumstances. Pursuant to ASC paragraph 505-50-45-1, a grantor may conclude that an asset (other than a note or a receivable) has been received in return for fully vested, non-forfeitable equity instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific performance is required by the grantee in order to retain those equity instruments).  Such an asset shall not be displayed as contra-equity by the grantor of the equity instruments. The transferability (or lack thereof) of the equity instruments shall not affect the balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other than employees in exchange for goods or services. Section 505-50-30 provides guidance on the determination of the measurement date for transactions that are within the scope of this Subtopic.

Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9, an entity may grant fully vested, non-forfeitable equity instruments that are exercisable by the grantee only after a specified period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance conditions.  Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity had paid cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity instruments. A recognized asset, expense, or sales discount shall not be reversed if a stock option that the counterparty has the right to exercise expires unexercised.

Pursuant to ASC paragraph 505-50-30-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should be recorded.

Income Tax Provision

The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.  Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse.  Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Operations in the period that includes the enactment date.

F-12

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The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”) with regards to uncertainty income taxes.  Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements.  Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.  The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.

Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

Uncertain Tax Positions

The Company did not take any uncertain tax positions and had no adjustments to unrecognized income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the fiscal year ended June 30, 2013 or 2012.

Tax Returns Remaining subject to IRS Audits

It is not practicable to determine amounts of interest and/or penalties related to income tax matters that will be due as of June 30, 2013 as a result of non-filing of federal and state income tax returns and examination that may be conducted by federal and state tax authorities in the future. Accordingly, the Company had no accrual for interest or penalties on the Company’s balance sheet at June 30, 2013, and has not recognized interest and/or penalties in the accompanying statement of operations for the year ended June 30, 2013. However, management believes that the Company will not have a significant impact on its financial position and results of its operations and cash flows as a result of this uncertainty.

Net Income (Loss) per Common Share

Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification.  Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period.  Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through stock options and warrants.

The following table shows the potentially outstanding dilutive common shares excluded from the diluted net loss per share calculation as they were anti-dilutive:

		Potentially Outstanding Dilutive Common Shares
		For the Fiscal Year Ended June 30, 2013						For the Fiscal Year Ended June 30, 2012
Convertible debentures			668,463,631							3,514,739
Stock options			-							500,000
Warrants issued with convertible debentures			1,153,845							1,153,845
Total potentially outstanding dilutive common shares			669,617,476							5,168,584

F-13

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Cash Flows Reporting

 

The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments.  The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards Codification.

Subsequent Events

The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued.  Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.

Recently Issued Accounting Pronouncements

In January 2013, the FASB issued ASU No. 2013-01, " Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities ". This ASU clarifies that the scope of ASU No. 2011-11, " Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. " applies only to derivatives, repurchase agreements and reverse purchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with specific criteria contained in FASB Accounting Standards Codification or subject to a master netting arrangement or similar agreement. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013.

In February 2013, the FASB issued ASU No. 2013-02, " Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. " The ASU adds new disclosure requirements for items reclassified out of accumulated other comprehensive income by component and their corresponding effect on net income. The ASU is effective for public entities for fiscal years beginning after December 15, 2013.

In February 2013, the Financial Accounting Standards Board, or FASB, issued ASU No. 2013-04, " Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for which the Total Amount of the Obligation Is Fixed at the Reporting Date ."  This ASU addresses the recognition, measurement, and disclosure of certain obligations resulting from joint and several arrangements including debt arrangements, other contractual obligations, and settled litigation and judicial rulings. The ASU is effective for public entities for fiscal years, and interim periods within those years, beginning after December 15, 2013.

In March 2013, the FASB issued ASU No. 2013-05, " Foreign Currency Matters (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity ." This ASU addresses the accounting for the cumulative translation adjustment when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. The guidance outlines the events when cumulative translation adjustments should be released into net income and is intended by FASB to eliminate some disparity in current accounting practice. This ASU is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013.

F-14

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In March 2013, the FASB issued ASU 2013-07, “Presentation of Financial Statements (Topic 205): Liquidation Basis of Accounting.” The amendments require an entity to prepare its financial statements using the liquidation basis of accounting when liquidation is imminent. Liquidation is imminent when the likelihood is remote that the entity will return from liquidation and either (a) a plan for liquidation is approved by the person or persons with the authority to make such a plan effective and the likelihood is remote that the execution of the plan will be blocked by other parties or (b) a plan for liquidation is being imposed by other forces (for example, involuntary bankruptcy). If a plan for liquidation was specified in the entity’s governing documents from the entity’s inception (for example, limited-life entities), the entity should apply the liquidation basis of accounting only if the approved plan for liquidation differs from the plan for liquidation that was specified at the entity’s inception. The amendments require financial statements prepared using the liquidation basis of accounting to present relevant information about an entity’s expected resources in liquidation by measuring and presenting assets at the amount of the expected cash proceeds from liquidation. The entity should include in its presentation of assets any items it had not previously recognized under U.S. GAAP but that it expects to either sell in liquidation or use in settling liabilities (for example, trademarks). The amendments are effective for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. Entities should apply the requirements prospectively from the day that liquidation becomes imminent. Early adoption is permitted.

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.

Note 3 – Going Concern

The financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

As reflected in the financial statements, the Company had an accumulated deficit at June 30, 2013, a net loss and net cash used in operating activities for the fiscal year then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

While the Company is attempting to commence operations and generate sufficient revenues, the Company’s cash position may not be sufficient enough to support the Company’s daily operations.  Management intends to raise additional funds by way of a public or private offering.  Management believes that the actions presently being taken to further implement its business plan and generate sufficient revenues provide the opportunity for the Company to continue as a going concern.  While the Company believes in the viability of its strategy to increase revenues and in its ability to raise additional funds, there can be no assurances to that effect.  The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenues.

The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Note 4 – Property and Equipment

Property and equipment, stated at cost, less accumulated depreciation consisted of the following:

	Estimated Useful Life (Years)		June 30, 2012				June 30, 2011
Computer equipment	3		$	1,042			$	1,042
Furniture and fixture	5			482				482
				1,524				1,524
Less accumulated depreciation				(1,332)				(916)
			$	192			$	608

Depreciation Expense

Depreciation expense for the fiscal year ended June 30, 2013 and 2012 was $416 and $444, respectively.

F-15

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Note 5 – Advances Payable

As of   June 30, 2013, the Company had a total of $42,940, in advances payable to unrelated third parties for expenses paid on behalf of the Company in conjunction with the rescinded acquisition agreement.  These balances are non-interest bearing and due on demand.

Note 6 – Convertible Debentures – Related Parties

Converted debentures to related parties consisted of the following:

		J, 2013				June 30, 2012
Note issued July 6, 2011 with interest at 8% per annum, $50,000 of principal has been converted as of March 31, 2013.		$	-			$	50,000
Note issued July 29, 2011 with interest at 8% per annum. $25,000 of principal has been converted as of March 31, 2013.			-				25,000
Note issued August 25, 2011 with interest at 8% per annum. Principal and interest are currently past due.			-				25,000
Note issued June 20, 2012 with interest at 8% per annum. Principal and interest are currently past due.			25,000				25,000
Note issued July 23, 2012 with interest at 8% per annum. Principal and interest are currently past due.			62,500				-
Note issued August 1, 2012 with interest at 8% per annum. Principal and interest are currently past due.			5,000				-
Note issued August 21, 2012 with interest at 8% per annum. Principal and interest are currently past due.			2,110				-
Note issued September 26, 2012 with interest at 8% per annum. Principal and interest are currently past due.			40,000				-
Note issued October 18, 2012 with interest at 8% per annum. Principal and interest are currently past due.			20,000				-
Note issued November 1, 2012 with interest at 8% per annum. Principal and interest are currently past due.			20,000				-
Note issued November 8, 2012 with interest at 8% per annum. Principal and interest are payable on November 30, 2013.			20,000				-
Note issued December 1, 2012 with interest at 8% per annum. Principal and interest are currently past due.			20,000				-
Note issued January 1, 2013 with no interest.  The Note is currently past due			20,000				-
Note issued January 25, 2013 with interest at 8% per annum. Principal and interest are payable on July 31, 2013.			5,000				-
Note issued February 1, 2013 with no interest. Principal is payable on July 31, 2013.			20,000				-

F-16

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Note issued February 1, 2013 with no interest. Principal is payable on January 31, 2014.			4,000				-
Note issued February 20, 2013 with no interest. Principal is payable November 30, 2013.			8,000				-
Note issued February 20, 2013 with interest at 8% per annum. Principal and interest are payable November 30, 2013.			11,941				-
Note issued March 1, 2013 with no interest. Principal is payable on August 31, 2013.			20,000				-
Note issued March 1, 2013 with no interest.  Principal is payable on January 31, 2014.			4,000				-
Note issued March 8, 2013 with no interest.  Principal is payable on December 31, 2013.			10,000				-
Note issued April 1, 2013 with no interest. Principal is payable on September 30, 2013.			20,000				-
Note issued April 1, 2013 with no interest.  Principal is payable on February 28, 2014.			4,000				-
Note issued April 9, 2013 with no interest.  Principal is payable on March 31, 2014.			10,000				-
Note issued May 1, 2013 with no interest.  Principal is payable on October 31, 2013.			20,000				-
Note issued May 1, 2013 with no interest.  Principal is payable on March 31, 2014.			4,000				-
Note issued June 1, 2013 with no interest.  Principal is payable on November 30, 2013.			20,000				-
Note issued June 1, 2013 with no interest.  Principal is payable on May 31, 2014.			4,000				-
Note issued June 13, 2013 with no interest.  Principal is payable on December 31, 2013.			25,000				-
			424,551				125,000
Less unamortized discount			(145,590)				(23,711)
Convertible notes, net of discount		$	278,961			$	101,289

The July 6, 2011, July 29, 2011 and the August 25, 2011 notes included a stock warrant for each note in the amount of 384,615 shares of the Company’s common stock, or 1,153,845 in the aggregate. The Principal plus any interest are convertible into common stock of the Company at seventy percent (70%) of the average of two (2) low closing bid prices for the five (5) trading days prior to conversion of the Notes.

The June 20, 2012, July 23, 2012, August 1, 2012, August 21, 2012 September 26, 2012, October 18, 2012, November 1, 2012, November 18, 2012 and December 1, 2012 notes are convertible into common stock of the Company at sixty percent (60%) of the average of two (2) low closing bid prices for the five (5) trading days prior to conversion of the Notes.

F-17

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The January 1, 2013, January 25, 2013, February 1, 2013 $20,000, February 20, 2013, March 1, 2013 $20,000, March 8, 2013, April 1, 2013 $20,000, April 9, 2013, May 1, 2013 $20,000, June 1, 2013 $20,000 and June 13, 2013 notes are convertible into common stock of the Company at fifty percent (50%) of the average of the low closing bid prices for the twenty (20) trading days prior to conversion of the Notes.

The February 1, 2013 $4,000, March 1, 2013 $4,000, April 1, 2013 $4,000, May 1, 2013 $4,000 and June 1, 2013 $4,000 notes are convertible into common stock of the Company at eighty percent (80%) of the average of the low closing bid prices for the five (5) trading days prior to conversion of the Notes.

Note 7 – Derivative Financial Instruments

The Company’s derivative financial instruments are embedded derivatives associated with the Company’s convertible debentures. The Company’s convertible debentures issued to Institutional InvestorInstitutional Investor, are hybrid instruments which contain an embedded derivative feature which would individually warrant separate accounting as a derivative instrument under Paragraph 815-10-05-4.  The embedded derivative feature includes the conversion feature and the warrants attached to certain Notes. Pursuant to Paragraph 815-10-05-4, the value of the embedded derivative liability have been bifurcated from the debt host contract and recorded as a derivative liability resulting in a reduction of the initial carrying amount (as unamortized discount) of the notes, which are amortized as debt discount to be presented in other (income) expenses in the statements of operations using the effective interest method over the life of the notes.

The compound embedded derivatives within the notes have been valued using a layered discounted probability-weighted cash flow approach, recorded at fair value at the date of issuance; and marked-to-market at each reporting period end date with changes in fair value recorded in the Company’s statements of operations as “change in the fair value of derivative instrument”.

As of June 30, 2013, the estimated fair value of derivative liabilities for the conversion feature was $563,161.

As of June 30, 2013, the estimated fair value of derivative liabilities for the warrants was $1,846.

Summary of Fair Value of Financial Assets and Liabilities Measured on a Recurring Basis

Financial assets and liabilities measured at fair value on a recurring basis are summarized below and disclosed on the balance sheets:

						Fair Value Measurement Using
		Carrying Value				Level 1					Level 2					Level 3				Total
Derivative liabilities on conversion feature		$	563,161				$	-				$	-			$	563,161				$	563,161
Derivative liabilities on warrants			1,846					-					-				1,846					1,846
Total derivative liabilities		$	565,007				$	-				$	-			$	565,007				$	565,007

Summary of the Changes in Fair Value of Level 3 Financial Liabilities

The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the fiscal year ended June 30, 2013:

Fair Value Measurement Using Level 3 Inputs

							Derivative liability									Total
Balance, June 30, 2012								$	176,867								$	176,867
Purchases, issuances and settlements									554,969									554,969
Total gains or losses (realized/unrealized)
Included in net (income) loss									(166,829)									(166,829)
Included in other comprehensive income									-									-
Transfers in and/or out of Level 3									-									-
Balance, June 30, 2013								$	565,007								$	565,007

F-18

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Note 8 – Notes Payable - Related Party

Between April 1, 2011 and June 24, 2011, The President and Chief Operating Officer of the Company, Phillip Jennings, advanced the Company $77,884 in eight installments in the form of a promissory note (“Jennings Note”).  The Jennings Note was due on demand and had borne interest at 8% per annum.  On November 8, 2012, the Company issued promissory notes with its then Chief Executive Officer, Chief Financial Officer, Legal Counsel and Accountant totaling $105,380, which were originally recorded as accounts payable. In addition the Jennings Note was converted to these notes. With accrued interest included, the notes total $185,116 at June 30, 2013.

The notes mature on December 31, 2014 and bear interest at 1% per annum.

Note 9 – Equity Purchase Agreement

InstitutionalInvestor Agreement

The Company entered into an equity purchase agreement (the “Equity Purchase Agreement”) with Institutional Investor (“Institutional Investor”) on July 6, 2011.  Pursuant to the Equity Purchase Agreement, Institutional Investor committed to purchase up to $10,000,000 of the Company’s common stock, over a period of time terminating on the earlier of: (i) 24 months from the effective date of a registration statement to be filed in connection therewith or (ii) the date on which Institutional Investor has purchased shares of common stock pursuant to this agreement for an aggregate maximum purchase price of $10,000,000; such commitment is subject to certain conditions. The purchase price to be paid by Institutional Investor will be 92% of the price of the common stock on the date the purchase price is calculated under the Equity Purchase Agreement.

The maximum amount that the Company is entitled to put in any one notice is such number of shares of common stock as equals the lesser of $500,000 or 250% of the average of the dollar volume of Company common stock for the 20 trading days preceding the put, provided that the number of put shares to be purchased by Institutional Investor shall not exceed the number of such shares that, when aggregated with all other shares and securities of the Company then owned by Institutional Investor beneficially or deemed beneficially owned by Institutional Investor, would result in Institutional Investor owning more than 9.99% of all of the Company’s common stock as would be outstanding on such closing date.

The Company will not be entitled to put shares to Institutional Investor:

 

·

unless there is an effective registration statement under the Securities Act to cover the resale of the shares by Institutional Investor;

·

unless the common stock continues to be quoted on the OTC Bulletin Board and has not been suspended from trading;

·

if an injunction shall have been issued and remain in force, or action commenced by a governmental authority which has not been stayed or abandoned, prohibiting the purchase or the issuance of the shares to Institutional Investor;

·

if the Company has not complied with their obligations and are otherwise in breach of or in default under, the Equity Purchase Agreement, our registration rights agreement (the “Registration Rights Agreement”) with Institutional Investor or any other agreement executed in connection therewith with Institutional Investor;

·

since the date of the filing of the Company’s most recent filing with the Securities and Exchange Commission no event that had or is reasonably likely to have a Material Adverse Effect (as defined in the Equity Purchase Agreement) has occurred; and

·

to the extent that such shares would cause Institutional Investor’s beneficial ownership to exceed 9.99% of our outstanding shares.

The Equity Purchase Agreement further provides that Institutional Investor is entitled to customary indemnification from the Company for any losses or liabilities it suffers as a result of any breach of any provisions of the Equity Purchase Agreement or the Registration Rights Agreement, or as a result of any lawsuit brought by a third-party arising out of or resulting from Institutional Investor's execution, delivery, performance or enforcement of the Equity Purchase Agreement or the Registration Rights Agreement or from material misstatements or omissions in the prospectus accompanying the registration statement for the resale of the shares issued to Institutional Investor.

As a condition for the execution of the Equity Purchase Agreement, the Company issued to Institutional Investor, 450,000 shares of its restricted common stock pursuant to an exemption from registration under Section 4(2) of the Securities Act of 1933. As of the date of this filing, the Company has not filed a Registration Statement with the Securities and Exchange Commission

F-19

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Note 10 – Stockholders’ Deficit

Shares Authorized

Upon formation the total number of shares of all classes of stock which the Company is authorized to issue is Two Hundred and Sixty Million (260,000,000) shares of which Ten Million (1,000,000) shares shall be Preferred Stock, par value $0.001 per share, and Two Hundred and Fifty Million (250,000,000) shares shall be Common Stock, par value $0.001 per share.

On or about August 12, 2013, the Stockholders holding a majority voting rights of the Company’s Common Stock approved by written consent in lieu of a meeting of Stockholders: to amend and Restate the Amended Articles of Incorporation of the Corporation to specifically, amend ARTICLE FOUR of the Amended Articles of Incorporation of the Corporation in order to increase the number of shares of authorized capital stock to 960,000,000 shares, of which 950,000,000 shall be common stock and 10,000,000 shall be preferred stock of the Corporation, by filing with the Secretary of State of Nevada the Restated Articles of Incorporation.

Common Stock

In connection with the issuance of the convertible debentures during the fiscal year ended June 30, 2012, the Company issued 450,000 shares of its common stock valued at $0.08 per share, the price of the Company’s common stock on the date of issuance or $36,000, which was recorded as interest expense.

On August 2, 2012, the Company issued 4,372,407 shares of its common stock for the conversion of $26,300 of convertible debt and $4,307 of accrued interest.

On November 1, 2012, the Company issued 4,373,034 shares of its common stock for the conversion of $7,880 of convertible debt and $997 of accrued interest.

On November 21, 2012, the Company issued 4,371,600 shares of its common stock for the conversion of $3.300 of convertible debt and $219 of accrued interest.

On December 12, 2012, the Company issued 4,373,233 shares of its common stock for the conversion of $2,525 of convertible debt and $230 of accrued interest.

On January 3, 2013, the Company issued 4,371,708 shares of its common stock for the conversion of $1,912 of convertible debt and $230 of accrued interest.

On January 14, 2013, the Company issued 4,350,014 shares of its common stock for the conversion of $2,000 of convertible debt and $132 of accrued interest.

On January 29, 2013, the Company issued 6,581,866 shares of its common stock for the conversion of $2,600 of convertible debt and $164 of accrued interest.

On February 13, 2013, the Company issued 7,655,382 shares of its common stock for the conversion of $2,515 of convertible debt and $164 of accrued interest.

On February 26, 2013, the Company issued 792,456 shares of its common stock for the conversion of $968 of convertible debt and $3 of accrued interest.

On February 26, 2013, the Company issued 6,871,121 shares of its common stock for the conversion of $5,250 of convertible debt and $3,167 of accrued interest.

On March 7, 2013, the Company issued 7,439,458 shares of its common stock for the conversion of $19,750 of convertible debt and $39 of accrued interest.

On March 25, 2013, the Company issued 9,917,986 shares of its common stock for the conversion of $15,925 of convertible debt and $3,167 of accrued interest.

On April 8, 2013, the Company issued 8,669,378 shares of its common stock for the conversion of $9,075 of convertible debt and $27.85 of accrued interest.

F-20

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2010 Stock Incentive and Compensation Plan as Amended

Adoption of 2010 Stock Incentive and Compensation Plan

On January 7, 2010, the Board of Directors of the Company adopted the 2010 Stock Incentive and Compensation Plan, whereby the Board of Directors authorized 8,000,000 shares of the Company’s common stock to be reserved for issuance (the “2010 Stock Incentive Plan”). The purpose of the 2010 Stock Incentive Plan is to advance the interests of the Company by providing an incentive to attract, retain and motivate highly qualified and competent persons who are important to the Company and upon whose efforts and judgment the success of the Company is largely dependent. Grants to be made under the 2010 Stock Incentive Plan are limited to the Company’s employees, including employees of the Company’s subsidiaries, the Company’s directors and consultants to the Company. The recipient of any grant under the 2010 Stock Incentive Plan, and the amount and terms of a specific grant, is, determined by the board of directors.  Should any option granted or stock awarded under the 2010 Stock Incentive Plan expire or become un-exercisable for any reason without having been exercised in full or fail to vest, the shares subject to the portion of the option not so exercised or lapsed will become available for subsequent stock or option grants.

January 7, 2010 Issuance

On January 7, 2010, the board approved and granted options for employees to purchase 2,750,00 shares of the Company's common stock with exercise price at $0.56 per share expiring two (2) years from the date of grant exercisable, in whole or in part, according to the following vesting schedule:

·

Twenty five percent (25%) of the total number of shares granted under the option scheme vested immediately as January 7, 2010, the date they were approved at the board meeting; a further twenty-five percent (25%) were vested on July 6, 2010.

·

The remaining Fifty percent (50%) of the shares granted under the option scheme shall vest pro rata every six (6) months, on the same date of the month as the date of grant of the option, over the following twelve (12) months of continuous service as a director, employee or consultant.

The Company estimated the fair value of option granted, estimated on the date of grant, using the Black-Scholes option-pricing model with the following weighted-average assumptions:

						January 7, 2010
Expected life (year)							2.00
Expected volatility (*)							110.00	%
Risk-free rate(s)							0.5	%
Expected dividends							0.00	%

*

As a newly formed entity it is not practicable for the Company to estimate the expected volatility of its share price.  The Company selected five (5) comparable public companies listed on NYSE MKT and NASDAQ Capital Market within gold mining industry which the Company plans to engage in to calculate the expected volatility.  The Company calculated those five (5) comparable companies’ historical volatility over the expected life and averaged them as its expected volatility.

April 19, 2010 Issuance

On April 19, 2010, the board approved and granted an additional 50,000 common shares with an exercise price of $1.00 per share expiring two (2) years from the date of grant exercisable, in whole or in part, to the internal general counsel.

The April 2010 options shall be exercisable, in whole or in part, according to the following vesting schedule:

·

Twenty five percent (25%) of the total number of shares granted under the option plan on July 7, 2010, the date they were approved at the board meeting; a further twenty-five percent (25%) on October 19, 2011 and

·

The remaining fifty percent (50%) of the shares granted under the option plan shall vest pro rata every six (6) months, on the same date of the month as the date of grant of the option, over the following twelve (12) months of continuous service as a director.

F-21

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July 1, 2010 Issuance

On July 1, 2010, the board approved and granted options for a director to purchase 500,000 shares of the Company's common stock with exercise price at $0.56 per share expiring two (2) years from the date of grant exercisable, in whole or in part, according to the following vesting schedule:

·

Twenty five percent (25%) of the total number of shares granted under the option scheme vested immediately as July 1, 2010, the date they were approved at the board meeting; a further twenty-five percent (25%) on January 1, 2011.

·

The remaining fifty percent (50%) of the shares granted under the option scheme shall vest pro rata every six (6) months, on the same date of the month as the date of grant of the option, over the following twelve (12) months of continuous service as a director.

The Company estimated the fair value of option granted, estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

						July 1, 2010
Expected life (year)							1.99
Expected volatility (*)							110.00	%
Risk-free rate(s)							0.5	%
Expected dividends							0.00	%

*

As a newly formed entity it is not practicable for the Company to estimate the expected volatility of its share price.  The Company selected five (5) comparable public companies listed on NYSE MKT and NASDAQ Capital Market within gold mining industry which the Company plans to engage in to calculate the expected volatility.  The Company calculated those five (5) comparable companies’ historical volatility over the expected life and averaged them as its expected volatility.

Summary of the Company’s Stock Option Activities

The table below summarizes the Company’s stock option activities: