Management’s Discussion and Analysis of Financial Conditions and Results of Operations
This document includes statements that may constitute forward-looking statements made pursuant to the Safe Harbor provisions of the
Private Securities Litigation Reform Act of 1995
. We caution readers regarding certain forward-looking statements in this document, press releases, securities filings, and all other documents and communications. All statements, other than statements of historical fact, including statements regarding industry prospects and future results of operations or financial position, made in this Quarterly Report on Form 10-Q ("
Report
") are forward looking. The words "
believes
," "
anticipates
," "
estimates
," "
expects
," and words of similar import, constitute "
forward-looking statements
." While we believe in the veracity of all statements made herein, forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by us, are inherently subject to significant business, economic and competitive uncertainties and contingencies and known and unknown risks. As a result of such risks, our actual results could differ materially from those expressed in any forward-looking statements made by, or on behalf of, our company. We will not necessarily update information if any forward-looking statement later turns out to be inaccurate. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including risks and uncertainties set forth in our S-1 Registration Statement, as well as in other documents we file with the Securities and Exchange Commission ("
SEC
").
The following information has not been audited. You should read this information in conjunction with the unaudited financial statements and related notes to the financial statements included in this report.
Our Business
We are an “exploration stage” company that has not realized any revenues to date. Our mission is to develop our company into a leading alternative financing company that specializes in royalty financing for mining operations with the intent to realize large, continuous profits from ongoing economic interest in the production or future production from mining property. We are gold focused but plan to create a diversified portfolio of royalties and streams wherever the value can be found regardless of commodity, geography, revenue type or stage of project. We are not an operator and therefore have none of the associated risks or capital requirements of mine operation.
On January 27, 2015, pursuant to a License Purchase Agreement, we acquired all of the right, title and interest in and to a license (the “
Handeni
License
”) to develop and mine for gold on approximately 80.4 square kilometers located southeast of Handeni in eastern Tanzania (the “
Mid-Green Hills Property
”). The Handeni License was acquired from AFGF (Tanzania) Ltd. (“
AFGF
”) for 500,000 shares of the Company’s Series A Preferred Stock (the “
Purchase Price
”). AFGF is a wholly-owned subsidiary of Kokanee Placer Ltd., a corporation wholly-owned by Laurence Stephenson, our former President, director and shareholder. Our Board reviewed the transaction, and Mr. Stephenson abstaining from voting, the transaction was approved. Our Board believes that the Purchase Price for this acquisition was fair and reasonable and at or below the fair market price that an independent third party would pay. Our Board further believes that this acquisition is in the best interests of both our company and our shareholders.
On February 28, 2016, the Handeni License expired and the Company has elected not to renew it and instead focus on royalty financing for mining interests primarily within North America. As of March 31, 2016, the previously capitalized $61,000 mining license has been charged to impairment expense.
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Plan of Operation
Our mission is to develop our company into a leading alternative financing company that specializes in royalty financing for mining operations with the intent to realize large, continuous profits from ongoing economic interest in the production or future production from mining property. We are gold focused but plan to create a diversified portfolio of royalties and streams wherever the value can be found regardless of commodity, geography, revenue type or stage of project. We are not an operator and therefore have none of the associated risks or capital requirements of mine operation.
On February 28, 2016 the Handeni License expired and the Company has elected not to renew it and instead focus on royalty financing for mining interests primarily within North America. As of March 31, 2016 the previously capitalized $61,000 mining license has been charged to impairment expense.
If we are not successful in raising additional financing, we anticipate that we will not be able to proceed with our business plan. In such a case, we may decide to discontinue our current business plan and seek other business opportunities in the resource or non-resource sector. Any business opportunity would require our management to perform diligence on possible acquisition of additional resource properties. Such due diligence would likely include purchase investigation costs, such as professional fees by consulting geologists, preparation of geological reports on the properties, conducting title searches and travel costs for site visits.
Based on the nature of our business, we anticipate incurring operating losses in the foreseeable future. We base this expectation, in part, on the fact that very few mineral claims in the exploration stage ultimately develop into producing, profitable mines. Our future financial results are also uncertain due to a number of factors, some of which are outside our control. These factors include the following:
• our ability to raise additional funding;
• our ability to locate and acquire a suitable interest in a mineral property;
• the market price for minerals;
• the results of our proposed exploration programs; and
• our ability to find joint venture partners for the development of any property interests
We have not attained profitable operations and are dependent upon obtaining financing to pursue exploration activities. For these reasons our auditors believe that there is substantial doubt that we will be able to continue as a going concern.
We have had no operating revenues during the six months ended March 31, 2016, and have incurred operating expenses in the amount of $116,403 for the same period. Our activities have been financed from the proceeds of advances.
Results of Operations for Three and Six Months Ending March 31, 2016
We did not earn any revenues during the three or six months ending March 31, 2016 and 2015. We incurred operating expenses in the amount of $95,159 and $116,403, for the three and six months ended March 31, 2016, respectively, compared to $17,169 and $33,702 for the three and six months ended March 31, 2015.
Liquidity and Capital Resources
As of March 31, 2016, we had total current assets of $5,074, consisting only of cash, and a working capital deficit of $154,326 compared to total currents assets of $10,977 and working capital deficit of $113,923 as of the year ended September 30, 2015. Our liabilities consisted of accounts payable, advances, and related party advances to us.
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We expect to continue incurring losses in the next twelve months. We have no agreements for additional financing and cannot provide any assurance that additional funding will be available to finance our operations on acceptable terms in order to enable us to complete our plan of operations. There are no assurances that we will be able to achieve further sales of our common stock or any other form of additional financing. If we are unable to achieve the financing necessary to continue our plan of operations, then we will not be able to continue our exploration of our mineral claim and our venture will fail.
We plan to continue to finance our activities in the short term through shareholder advances similar to the ones that have occurred to date. In the longer term it is hoped there will be further equity financings but none are planned at the moment.
Off-Balance Sheet Arrangements
We do not maintain any off-balance sheet transactions, arrangements, or obligations that are reasonably likely to have a material effect on our financial condition, results of operations, liquidity, or capital resources.
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
Item 4:
Controls and Procedures
Evaluation of Disclosure Controls
Based upon an evaluation of the effectiveness of our disclosure controls and procedures performed by our management, with participation of our Chief Executive Officer and Chief Financial Officer as of the end of the period covered by this report, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures have not been effective as a result of a weakness in the design of internal control over financial reporting.
As used herein, “
disclosure controls and procedures
” mean controls and other procedures of our company that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f) under the
Securities Exchange Act of 1934
. Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“
COSO
”). Based on our evaluation under the framework, management has concluded that our internal control over financial reporting was not effective as of March 31, 2016.
Certain internal control weaknesses became evident that, in the aggregate, represent material weaknesses, including: (i) lack of segregation of incompatible duties; (ii) insufficient Board of Directors representation; and (iii) insufficient personnel with an appropriate level of technical accounting knowledge, experience, and training in the application of GAAP commensurate with our complexity and our financial accounting and reporting requirements.
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There were no changes in our internal controls that occurred during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect our internal controls.