UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-K
ý ANNUAL REPORT
UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
fiscal year ended December 31,
2008
¨ TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
transition period from
to _______.
Commission
file number: 000-51203
Amazon Goldsands
Ltd.
(Exact
name of registrant as specified in its charter)
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Nevada
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98-0425310
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(State
or other jurisdiction of incorporation or organization)
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(I.R.S.
Employer Identification No.)
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Jiron Caracas 2226, Jesús María, Lima,
Peru
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(Address
of principal executive
offices) (Zip
Code)
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Registrant’s
telephone, including area code: +(51 1) 989
184706
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Securities
registered under Section 12(b) of the Exchange
Act: None.
Securities
registered under Section 12(g) of the Exchange Act:
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Common Stock, $0.00001 par
value
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Not Applicable
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(Title
of class)
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(Name
of each exchange on which
registered)
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Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes ¨ No ý
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes ¨ No ý
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 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 ý No ¨
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (229.405 of this chapter) is not contained herein, and will be
contained, to the best of 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. ý
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“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 ý
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ¨ No ý
As of
June 30, 2008, the aggregate market value of the Company’s common equity held by
non-affiliates computed by reference to the closing price ($0.42)
was: $708,226.
The
number of shares of our common stock outstanding as of February 25, 2009 was:
4,191,252
FORM
10-K
AMAZON
GOLDSANDS LTD.
DECEMBER
31, 2008
PART
I
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Page
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Item
1. Business.
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4
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Item
1A. Risk
Factors.
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10
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Item
1B. Unresolved
Staff Comments.
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17
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Item
2. Properties.
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17
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Item
3. Legal Proceedings.
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24
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24
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PART
II
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25
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Item
6. Selected Financial Data.
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27
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27
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32
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32
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32
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Item
9A. Controls and
Procedures.
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32
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Item
9B. Other
Information.
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34
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PART
III
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35
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Item
11. Executive Compensation.
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37
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42
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42
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43
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PART
IV
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Note
Regarding Forward Looking Statements
This
annual report contains forward-looking statements as that term is defined in
Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended. In some cases,
you can identify forward-looking statements by terminology such as “may,”
“should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,”
“predicts,” “potential,” “continue,” “intends,” and other variations of these
words or comparable words. In addition, any statements that refer to
expectations, projections or other characterizations of events, circumstances or
trends and that do not relate to historical matters are forward-looking
statements. These forward-looking statements are based largely on our
expectations or forecasts of future events, can be affected by inaccurate
assumptions, and are subject to various business risks and known and unknown
uncertainties, a number of which are beyond our control. Therefore,
actual results could differ materially from the forward-looking statements
contained in this document, and readers are cautioned not to place undue
reliance on such forward-looking statements. These statements are
only predictions and involve known and unknown risks, uncertainties and other
factors, including the risks in the section entitled “Risk Factors” that may
cause our or our industry’s actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements.
Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. You should not place undue reliance on these
forward-looking statements, which speak only as of the date of this
report. Except as required by law, we do not undertake to update or
revise any of the forward-looking statements to conform these statements to
actual results, whether as a result of new information, future events or
otherwise.
As used
in this annual report, “Amazon,” the “Company,” “we,” “us,” or “our” refer to
Amazon Goldsands Ltd., unless otherwise indicated.
PART
I
ITEM 1. Business.
Corporate
History
We were incorporated in the state of
Nevada under the name Gondwana Energy, Ltd. on September 5, 1997, and previously
operated under the name Finmetal Mining Ltd. We were previously
focused on the acquisition and development of our interests in the mineral
rights on properties located in Finland.
In September 2008, we reorganized our
operations and our current focus is on the acquisition and development of our
interests in the mineral rights on properties located in
Peru. Effective June 6, 2008, we merged with our wholly-owned
subsidiary, Amazon Goldsands Ltd., pursuant to Articles of Merger that we filed
with the Nevada Secretary of State. We decided to change our name to
"Amazon Goldsands Ltd." to better reflect our current focus on the acquisition
and development of the mineral and mining rights underlying properties located
in South America.
We no longer have any interest in any
properties located in Finland and have allowed our options on these properties
to lapse and revert back to the optionors so that we can pursue the development
of our interests in the mineral rights on properties located in
Peru. The disclosure that follows is a summary of those mineral
property interests in Finland that we have decided not to pursue during 2008 by
allowing our options to lapse and revert back to the optionors.
The
FinMetal Oy Properties
On November 27, 2006, we acquired our
wholly-owned subsidiary, FinMetal OY, a corporation organized under the laws of
Finland, on November 27, 2006. At the time we acquired FinMetal
OY, FinMetal OY owned the option, pursuant to an October 6, 2006 option
agreement by and between FinMetal OY and Magnus Minerals OY, a Finnish
corporation ("Magnus"), to acquire a 100% interest in certain mineral rights to
four mineral properties located in Finland, and better known as the Petrovaara,
Poskijärvi-Kokka, Rautavaara and Tainiovaara properties, along with all existing
property data. As indicated above, our options with respect to the
Rautavaara and Tainiovarra properties have lapsed and reverted back to
Magnus. We are seeking to dissolve our wholly-owned subsidiary,
FinMetal OY.
The
Apofas Properties
On January 22, 2007, we entered into a
letter agreement with Ab Apofas OY ("Apofas"), pursuant to which Apofas granted
to us the sole and exclusive option to acquire, subject to a 2% gross proceeds
royalty, a 100% undivided interest in five mineral property concession
registration interest assets known as the Poronmannikko and Sarkiahonkangas gold
prospects, which are located in northern Finland (collectively, the "Apofas
Properties" and also known as the Oijarvi Gold Project). We decided
to allow this option to lapse and did not make the scheduled option payment or
any subsequent option payments. As a result, our option with respect to the
Apofas Properties has lapsed and reverted back to Apofas.
The
Enonkoski Property
On June 11, 2007, we entered into a
definitive Mineral Property Option and Joint Venture Agreement with Magnus,
pursuant to which we and Magnus agreed to an option and a joint venture to
explore the "Enonkoski area" in Finland (collectively, the "Enonkoski Property")
primarily for nickel-copper-platinum group elements. It was intended
that we would be the operator of the joint venture and we could earn a 51%
interest in certain valid claim reservations and pending claims comprising the
Enonkoski Property by fulfilling certain specified conditions. As
indicated above, our options with respect to the Enonkoski area have lapsed and
reverted back to Magnus.
Summary
of our Mineral Property Interests
A
description of each of our options to acquire the mineral and mining rights
underlying properties located in Peru and the conditions that we must meet in
order to exercise these options is set forth in Item 2 of this annual
report.
We are also focusing on seeking
additional mining opportunities, some of which may be mineral deposits that are
fully defined and have already completed the feasibility stage of development
and are ready to produce. In other cases, the mineral deposits we
seek to acquire may have a significant amount of proven and probable resources
with what we believe to be excellent potential for expansion. We may also seek
to acquire other drill-ready exploration projects that contain little or no
proven resources, as with the options we currently hold to acquire existing
mining projects in Peru, but that are strategically positioned to offer what we
perceive as exceptional potential at a comparatively minimal
expense.
Due to the extensive and expensive
development programs required to prove mineral resources and reserves, as is
typical in the mining business, companies such as ours sometimes are able to
acquire deposits at significant discounts of the known in-the-ground value of
the gold, silver, or other minerals. In the event that we do
locate a commercially exploitable mineral deposits, we may determine that it is
commercially advantageous to sell our property interests rather than enter into
production of any commercially mineral deposits on the property
ourselves.
Exploration
Stage Company
We are
considered an exploration or exploratory stage company because we are involved
in the examination and investigation of land that we believe may contain
valuable minerals, for the purpose of discovering the presence of ore, if any,
and its extent. There is no assurance that a commercially viable mineral deposit
exists on any of the properties underlying our mineral property interests, and a
great deal of further exploration will be required before a final evaluation as
to the economic and legal feasibility for our future exploration is determined.
We have no known reserves of any type of mineral. To date, we have not
discovered an economically viable mineral deposit on any of the properties
underlying our mineral property interests, and there is no assurance that we
will discover one. If we cannot acquire or locate mineral deposits,
or if it is not economical to recover any mineral deposits that we do find, our
business and operations will be materially and adversely affected.
Recent
Changes in Our Capital Structure
On May 22, 2008, our board of directors
approved a one (1) share for each twenty (20) shares reverse stock split (the
“Reverse Split”) of our common stock, par value $0.00001 per share (the “Common
Stock”), together with a corresponding reduction from one hundred million
(100,000,000) shares to five million (5,000,000) shares of our authorized shares
of Common Stock. The Reverse Split was duly approved by our
board of directors without shareholder approval, in accordance with the
authority conferred by Section 78.207 of the Nevada Revised
Statutes. The Reverse Split was affected by filing a Certificate of
Change pursuant to Section 78.209 of the Nevada Revised Statutes with the Nevada
Secretary of State. The Reverse Split was effective at the close of
business on June 6, 2008 and operated to amend our Articles of Incorporation to
decrease the authorized number of shares of our Common Stock from one hundred
million (100,000,000) shares to five million (5,000,000) shares. No
fractional shares of our Common Stock were issued and shareholders who were
entitled to a fractional post-split share received one whole share in lieu
thereof. All share and per share data in the consolidated financial
statements and related notes of the Company have been adjusted to give
retroactive effect to the Reverse Split and for the change in the number of
authorized shares of Common Stock.
On
October 6, 2008, all of the members of our board of directors and the
shareholders holding a majority of the voting power of the Company approved
certain resolutions, including an amendment to our Articles of Incorporation to
increase the aggregate number of our authorized shares of capital stock to four
hundred million (400,000,000) shares and to create a series of blank check
preferred stock, as follows: (i) to increase the number of
authorized shares of Common Stock from five million (5,000,000) shares to two
hundred million (200,000,000) shares, and (ii) to authorize the creation of two
hundred million (200,000,000) shares of blank check preferred
stock.
Effect
of Governmental Regulation on Our Business
We will be required to comply with all
regulations, rules and directives of governmental authorities and agencies
applicable to the exploration of minerals in Peru. The discussion that
follows is a summary of the most significant government regulations which we
anticipate will impact our operations.
Peru is located on the western coast
of South America and has a population of approximately 28 million
people. It covers a geographic area of approximately 1.3 million
square kilometres and is bordered by Bolivia, Brazil, Chile, Colombia and
Ecuador. Lima is the capital of Peru and its principal city with a
population of approximately 7 million.
Peru has become a leading country for
mining activities. No special taxes or registration requirements are
imposed on foreign-owned companies and foreign investment is treated as equal to
domestic capital. Peruvian law allows for full repatriation of
capital and profits and the country’s mining legislation provides access to
mining concessions under an efficient registration system.
Peruvian
Mining Law
Under Peru’s Uniform Text of Mining Law
(“UTM”), the right to explore for and exploit minerals is granted by the
government by way of concessions. A Peruvian mining concession is a
property right, independent from the ownership of surface land on which it is
located. There are no restrictions or special requirements applicable
to foreign companies or individuals regarding the holding of mining concessions
in Peru unless the concessions are within 50 kilometres of Peru's
borders. The rights granted by a mining concession can be
transferred, or sold and, in general, may be the subject of any transaction or
contract. Mining concessions may be privately owned and no state
participation is required.
The application for a mining concession
involves the filing of documents before the mining administrative
authority. The mining concession boundaries are specified in the
application documents, with no requirement to mark the concession boundaries in
the field since the boundaries are fixed by UTM coordinates. In order
to conduct exploration or mining activities, the holder of a mining concession
must purchase the surface land required for the project or reach agreement with
the owner for its temporary use. If any of this is not possible, a
legal easement may be requested from the mining authorities, although these
easements have been rarely granted.
Mining concessions are irrevocable as
long as their holders pay an annual fee of US $3 per hectare and reach minimum
production levels within the terms set forth by law or otherwise pay penalties,
as applicable. Non-compliance with any of these mining obligations
for two consecutive years will result in the cancellation of the mining
concession.
Pursuant to the original legal
framework, in force since 1992, holders of mining concessions are obliged to
achieve a minimum production of US $100 per hectare per year within six years
following the year in which the respective mining concession title is granted.
If this minimum production is not reached, as of the first six months of the
seventh year, the holder of the concession shall pay a US $6 penalty per hectare
per year until such production is reached and penalties increase to US $20 in
the twelfth year. Likewise, it is possible to avoid payment of the penalty if
evidence is submitted to the mining authorities that an amount ten times the
applicable penalty or more had been invested.
However, this regime has been recently
and partially amended providing for, among other matters, increased minimum
production levels, new terms for obtaining such minimum production, increased
penalties in case such minimum production is not reached, and even the
cancellation of mining concessions if minimum production is not reached within
certain terms. Pursuant to this new regime, the holder of the mining
concession should achieve a minimum production of at least one tax unit (S/.
3,500, approximately US $1,100) per hectare per year, within a ten-year term
following the year in which the mining concession title is
granted. If such minimum
production
is not reached within the referred term, the holder of the concession shall pay
penalties equivalent to 10% of the tax unit.
If the minimum production is not reached
within a fifteen-year term following the granting of the concession title, the
mining concession shall be cancelled by the mining authority, unless (i) a
qualified force majeure event is evidenced to and approved by the mining
authority, or (ii) by paying the applicable penalties and concurrently
evidencing minimum investments of at least ten times the amount of the
applicable penalties; in which cases the concession may not be cancelled up to a
maximum term of five additional years. If minimum production is not
reached within a twenty-year term following the granting of the concession
title, the concession shall inevitably be cancelled.
This amended regime is currently
applicable to all new mining concessions granted since October 11,
2008. Regarding those mining concessions existing prior to such date,
the new term for obtaining the increased minimum production level or otherwise
being required to pay the increased penalties pursuant to the amended regime
shall be counted as from the first business day of
2009. Nevertheless, until such new term for obtaining the increased
minimum production level does not expire, the minimum production level, the term
for obtaining such minimum production, the amount of the penalties and the
causes for cancellation of the mining concessions shall continue to be those
provided in the original legal framework existing since 1992.
The amended regime shall not be
applicable to those concessions handed by the Peruvian State through private
investment promotion procedures, which shall maintain the production and
investment obligations contained in their respective agreements, or to
titleholders of concessions with mining stability agreements in
force.
Environmental
Laws
The Peruvian Ministry of Energy and
Mines ("MEM") regulates environmental affairs in the mining sector, including
establishing environmental protection regulations; while the Organism for
Supervising Investment in Energy and Mining verifies environmental compliance
and imposes administrative sanctions, although it is likely that in the near
future these functions be assumed by the recently created Ministry of
Environment.
Each stage of exploration or mining
requires some type of authorization or permit, beginning with an application for
an environmental permit for initial exploration and continuing with an
Environmental Impact Assessment ("EIA") for mining, which includes public
hearings.
For permitting purposes, exploration
activities in Peru are classified in two categories:
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·
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Category
I projects: Mining exploration activities that comprise
any of the following: (i) a maximum of twenty drilling
platforms; (ii) a disturbed area of less than ten hectares considering
drilling platforms, trenches, auxiliary facilities and access means; and,
(iii) the construction of tunnels with a total maximum length of fifty
meters. Holders of these projects must submit an Environmental
Impact Statement (“EIS”) before the MEM, which in principle, is subject to
automatic approval upon its filing, and subject to subsequent (ex post)
review by the latter. Nevertheless, in any of the following
cases, the project shall not be subject to automatic approval and shall
necessarily obtain an express prior approval by MEM, which should be
granted, in principle, within a term of two months since filing the EIS:
(i) the project is located in a protected natural area or its buffer zone;
(ii) the project is oriented to determining the existence of radioactive
minerals; (iii) the platforms, drill holes, trenches, tunnels or other
components would be located within certain specially environmental
sensitive areas specified in the applicable regulations (e.g., glaciers,
springs, water wells, groundwater wells, protection lands, primary woods,
etc.); (iv) the project covers areas where mining environmental
contingencies or non-environmental rehabilitated previous mining works,
already exist
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·
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Category
II projects: Mining exploration activities that comprise
any of the following: (i) more than twenty drilling platforms; (ii) a
disturbed area of more than ten hectares considering drilling plants,
trenches, auxiliary facilities and access means; and, (iii) the
construction of tunnels over a total length of fifty
meters. These projects require an authorization that are
typically granted once the semi-detailed Environmental Impact Assessment
(EIA) is approved by the MEM. In general, such authorization
should be complete within approximately four
months.
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Before initiating construction or
exploitation activities and before the expansion of existing operations, an EIA
approval should be obtained. This process of authorization involves
public hearings in the place where the project is located and, in general,
should conclude within a term of 120 calendar days, although such process can
require between eight months and one year.
Holders of mining activities performing
mining exploration are required to conduct remediation works of disturbed areas,
as part of the progressive closure of the project. Likewise, they are
required to undertake the final closure and post closure actions as set forth in
the terms and conditions in the approved environmental instrument.
If the holder carries out mining
exploration activities involving the removal of more than 10,000 tonnes of
material, or more than 1,000 tonnes of material with a potential neutralization
(“PN”) over potential acidity (“PA”) relation lower than 3 (PN/PA<3), then
they shall be required to file a Mine Closure Plan, along with the corresponding
environmental instrument, as well as to establish a financial guarantee to
secure compliance with such Mine Closure Plan.
Holders of mining exploitation
activities must file a Mine Closure Plan with the MEM within one year of the
approval of their EIA. The Mine Closure Plan must be implemented from
the beginning of the mining operation. Semi-annual reports must be
filed evidencing compliance with the Mine Closure Plan. An
environmental guarantee covering the Mine Closure Plan’s estimated costs is also
required to be granted.
Mining
Royalties
Peruvian law requires that concession
holders pay a mining royalty as consideration for the extraction of mineral
resources. The mining royalty is payable monthly on a variable
cumulative rate of 1% to 3% of the value of the ore concentrate or equivalent,
calculated in accordance with price quotations in international markets, subject
to certain deductions such as indirect taxes, insurance, freight and other
specified expenses. The mining royalty payable is determined based on
the following schedule: (i) under US $60 million of annual sales of
concentrates: 1% royalty; (ii) in excess of US $60 million and up to US
$120 million of annual sales: 2% royalty; and (iii) in excess of US $120
million of annual sales: 3% royalty.
Competition
We are an
exploration stage mineral resource exploration company that competes with other
mineral resource exploration companies for financing and for the acquisition of
new mineral properties. Many of the mineral resource exploration companies with
whom we compete have greater financial and technical resources than those
available to us. Accordingly, these competitors may be able to spend greater
amounts on acquisitions of mineral properties of merit, on exploration of their
mineral properties and on development of their mineral properties. In addition,
they may be able to afford more geological expertise in the targeting and
exploration of mineral properties. This competition could result in competitors
having mineral properties of greater quality and interest to prospective
investors who may finance additional exploration and development. This
competition could adversely impact on our ability to achieve the financing
necessary for us to conduct further exploration of our mineral properties. We
will also compete with other mineral exploration companies for financing from a
limited number of investors that are prepared to make investments in mineral
exploration companies. The presence of competing mineral exploration companies
may impact on our ability to raise additional capital in order to fund our
exploration programs if investors are of the view that investments in
competitors are more attractive based on the merit of the
mineral
properties
under investigation and the price of the investment offered to investors. We
will also be compete with other mineral companies for available resources,
including, but not limited to, professional geologists, camp staff, mineral
exploration supplies and drill rigs.
Intellectual
Property
We do not
own, either legally or beneficially, any patent or trademark.
Employees
We have
no full-time employees at the present time. Our executive
officers do not devote their services full time to our
operations.
We engage contractors from time to time
to consult with us on specific corporate affairs or to perform specific tasks in
connection with our exploration programs.
Research
and Development Expenditures
We have
not incurred any research or development expenditures since our
incorporation.
Subsidiaries
We have one subsidiary, Finmetal Mining
OY, a company incorporated under the laws of Finland.
Glossary
of Certain Mining Terms
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Bowl
concentrators -
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A
device for removing gold from black sand concentrates.
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Churn
drills -
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A
large drilling machine that bores large diameter holes in the ground. In
mining, churn drills are used to drill into the soft carbonate rocks of
lead and zinc hosted regions to extract bulk samples of the
ore.
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Convergent
plate boundaries -
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The
point at which the seismic plates of the earth’s crust are destroyed and
recycled back into the interior of the earth as one plate dives under
another.
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Drill-collar
positions -
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Points
at which the drill collar is tightened or loosened to control the amount
of force applied to the bit, used to carefully monitor the surface weight
measured while the bit is just off the bottom of the
wellbore.
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Eocene-aged
tectonism -
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Movement
of the seismic plates of the Earth during the Eocene
period.
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Fluvial
transport -
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The
movement of sediment and minerals by water.
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Fold-belt
of anticlines -
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A
fold or wrinkle in the earth’s surface that is convex up and has its
oldest beds at its core.
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Glacio-fluvial
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Pertaining
to streams fed by melting glaciers, or to the deposits and landforms
produced by such streams.
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Gravel-bedrock
contact -
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Contact
with the layer of earth’s surface defined as where gravel gives way to
bedrock.
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Jig
-
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A
piece of milling equipment used to concentrate ore on a screen submerged
in water, either by the reciprocating motion of the screen or by the
pulsation of water through it.
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Metallurgical
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Extraction
of metal from ore.
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Mineral
-
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A
naturally occurring homogeneous substance having definite physical
properties and chemical composition and, if formed under favorable
conditions, a definite crystal form.
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Mineral
Reserve -
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That
part of a mineral deposit which could be economically and legally
extracted or produced at the time of the reserve
determination.
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Miocene
-
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A
geological epoch of the Neogene period and extends from about 23.03 to
5.33 million years before the present
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Moraine
-
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Any
glacially formed accumulation of unconsolidated glacial debris (soil and
rock) which can occur in currently glaciated and formerly glaciated
regions, such as those areas acted upon by a past ice
age.
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Pliocene
-
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A
period in the geologic timescale that extends from 5.332 million to 1.806
million years before present.
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Reverse
circulation drilling (Becker)
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Heavy
duty percussive drill used for drilling in alluvial and glacial
terrains.
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Scout
drilling
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Used
to find and delineate targets for more defined
drilling.
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Sedimentary
features
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Features
that were part of the sediments when they were
deposited
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Tertiary
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A
geologic period 65 million to 1.8 million years ago
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Tills
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Areas
of unstratified soil deposited by a glacier; consisting of sand and clay
and gravel and boulders mixed together within a matrix of a fine powdery
material.
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zone
of deposition
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The
area at the end of a glacier or river where deposits of sediment
occur.
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You
should carefully consider the following risk factors in evaluating our business
and us. The factors listed below represent certain important factors
that we believe could cause our business results to differ. These
factors are not intended to represent a complete list of the general or specific
risks that may affect us. It should be recognized that other risks
may be significant, presently or in the future, and the risks set forth below
may affect us to a greater extent than indicated. If any of the
following risks occur, our business, financial condition or results of
operations could be materially and adversely affected. You should
also consider the other information included in this Annual Report and
subsequent quarterly reports filed with the SEC.
Risk
Factors
Risks
Associated With Our Business
Our accountants have raised
substantial doubt with respect to our ability to continue as a going
concern.
As noted in our financial statements,
we have incurred a net loss of $11,196,447 for the period from inception on
September 5, 1997 to December 31, 2008 and have presently no source of
revenue. At December 31, 2008, we had working capital of
$186,455. As of December 31, 2008, we had cash and cash equivalents
in the amount of US $492,903. We will have to raise additional funds
to meet our currently budgeted operating requirements for the next twelve
months.
The audit report of I Vellmer Inc.,
Chartered Accountants for the fiscal year ended December 31, 2008 and 2007
contained a paragraph that emphasizes the substantial doubt as to our
continuance as a going concern. This is a significant risk that we
may not be able to generate or raise enough capital to remain operational for an
indefinite period of time.
We
own the options to acquire the mining and mineral rights underlying certain
properties and if we fail to perform the obligations necessary to exercise these
options, we will lose our options and cease operations.
We hold
options to acquire the mineral and mining rights underlying properties located
in Peru, subject to certain conditions. If we fail to meet the
requirements of the agreement under which we acquired such options, including
any payments or any exploration obligations that we have regarding these
properties, we may lose our right to exercise the options to acquire the mineral
and mining rights underlying these properties located in
Peru. If
we do not
fulfill these conditions, then our ability to commence or continue operations
could be materially limited. Accordingly, any adverse circumstances that
affect the areas covered by these options and our rights thereto would affect us
and your entire investment in shares of our common stock. If any of
these situations were to arise, we would need to consider alternatives, both in
terms of our prospective operations and for the financing of our
activities. Management cannot provide assurance that we will
ultimately achieve profitable operations or become cash-flow positive, or raise
additional debt and/or equity capital. If we are unable to raise
additional capital in the near future, we will experience liquidity problems and
management expects that we will need to curtail operations, liquidate assets,
seek additional capital on less favorable terms and/or pursue other remedial
measures.
We
have a limited operating history and have incurred losses that we expect to
continue into the future.
We have not yet located any mineral
reserves and we have never earned any revenues from our operations. In addition,
we have a very limited operating history upon which an evaluation of our future
success or failure can be made. We have only recently taken steps to
implement our business plan to engage in the acquisition of mineral and mining
rights to exploration and development properties in Peru, and it is too early to
determine whether such steps will prove successful. Our business plan
is in its early stages and faces numerous regulatory, practical, legal and other
obstacles. At this early stage of our operation, we also expect to
face the risks, uncertainties, expenses and difficulties frequently encountered
by companies at the start-up stage of their business development. We cannot be
sure that we will be successful in addressing these risks and uncertainties, and
our failure to do so could have a materially adverse effect on our financial
condition.
No assurances can be given that we will
be able to successfully complete the purchase of mineral and mining rights to
any properties, including the ones for which we currently hold
options. Our ability to achieve and maintain profitability and
positive cash flow over time will be dependent upon, among other things, our
ability to (i) identify and acquire properties or interests therein that
ultimately have probable or proven mineral reserves, (ii) sell such mining
properties or interests to strategic partners or third parties or commence the
production of a mineral deposit, (iii) produce and sell minerals at profitable
margins and (iv) raise the necessary capital to operate during this possible
extended period of time. At this stage in our development, it cannot
be predicted how much financing will be required to accomplish these
objectives.
We have no known reserves and we may
not find any mineral resources or, if we find mineral resources, the deposits
may be uneconomic or production from those deposits may not be
profitable.
Our due diligence activities have been
limited, and to a great extent, have relied upon information provided to us by
third parties. We have not established that any of the properties for which we
hold options contain adequate amounts of gold or other mineral reserves to make
mining any of the properties economically feasible to recover that gold or other
mineral reserves, or to make a profit in doing so. If we do not, our business
will fail. If we cannot find economic mineral resources or if it is not economic
to recover the mineral resources, we will have to cease operations.
We
may not have access to all of the supplies and materials we need to begin
exploration that could cause us to delay or suspend operations.
Competition and unforeseen limited
sources of supplies in the industry could result in occasional spot shortages of
supplies, such as explosives, and certain equipment, such as bulldozers and
excavators, that we might need to conduct exploration. We have not attempted to
locate or negotiate with any suppliers of products, equipment or materials. We
will attempt to locate products, equipment and materials. If we cannot find the
products and equipment we need, we will have to suspend our exploration plans
until we do find the products and equipment we need.
We
do not have enough capital to complete our exploration and consequently may have
to cease or suspend our operations unless we are able to raise additional
financing.
We presently do not have sufficient
capital to exercise our options to acquire the mineral and mining rights
underlying property located in Peru. Although management believes
that sources of financing are available to complete the acquisition of these
property interests, no assurances can be given that these financing sources will
ultimately be sufficient. Other forms of financing, if available, may
be on terms that are unfavorable to our shareholders.
As we cannot assure a lender that we
will be able to successfully explore and develop our mineral properties, we will
probably find it difficult to raise debt financing from traditional lending
sources. We have traditionally raised our operating capital from sales of equity
and debt securities, but there can be no assurance that we will continue to be
able to do so. If we cannot raise the money that we need to continue exploration
of our mineral properties, we may be forced to delay, scale back, or eliminate
our exploration activities. If any of these were to occur, there is a
substantial risk that our business would fail.
Our
success is dependent upon a limited number of people.
The ability to identify, negotiate and
consummate transactions that will benefit us is dependent upon the efforts of
our management team. The loss of the services of any member of our
management could have a material adverse effect on us.
Our
business will be harmed if we are unable to manage growth.
Our business may experience periods of
rapid growth that will place significant demands on our managerial, operational
and financial resources. In order to manage this possible growth, we
must continue to improve and expand our management, operational and financial
systems and controls. We will need to expand, train and manage our
employee base. We must carefully manage our mining exploration
activities. No assurances can be given that we will be able to timely
and effectively meet such demands.
We
may not be able to attract and retain qualified personnel necessary for the
implementation of our business strategy and mineral exploration
programs.
Our future success depends largely upon
the continued service of members of our board of directors, executive officers
and other key personnel. Our success also depends on our ability to
continue to attract, retain and motivate qualified personnel, particularly
employees, consultants and contractors for our operations in
Peru. Personnel represent a significant asset, and the competition
for such personnel is intense in the mineral exploration industry. We
may have particular difficulty attracting and retaining key personnel in the
initial phases of our operations, particularly in Peru.
Our
officers and directors may have conflicts of interest and do not devote full
time to our operations.
Our officers and directors may have
conflicts of interest in that they are and may become affiliated with other
mining companies. In addition, our officers do not devote full time
to our operations. Until such time that we can afford executive
compensation commensurate with that being paid in the marketplace, our officers
will not devote their full time and attention to our operations. No
assurances can be given as to when we will be financially able to engage our
officers on a full-time basis.
Because
most of our officers and directors are located outside of the United States, you
may have no effective recourse against us or our management for misconduct and
may not be able to enforce judgment and civil liabilities against our officers,
directors, experts and agents.
Most of our directors and officers are
nationals and/or residents of countries other than the United States, and all or
a substantial portion of such persons’ assets are located outside the United
States. As a result, it may be difficult for investors to enforce within the
United States any judgments obtained against our officers or directors,
including judgments predicated upon the civil liability provisions of the
securities laws of the United States or any state thereof.
Risks
Associated With Mining
There
is no assurance that we can establish the existence of any mineral resource on
any of our property interests in commercially exploitable quantities. Until we
can do so, we cannot earn any revenues from operations and if we do not do so we
will lose all of the funds that we expend on exploration. If we do not discover
any mineral resource in a commercially exploitable quantity, our business will
fail.
We have not established that any of our
properties contain any commercially exploitable mineral reserve, nor can there
be any assurance that we will be able to do so. If we do not, our business will
fail. A mineral reserve is defined by the Securities and Exchange
Commission in its Industry Guide 7 (which can be viewed over the Internet at
http://www.sec.gov/divisions/corpfin/forms/industry.htm#secguide7)
as that part of a mineral deposit which could be economically and legally
extracted or produced at the time of the reserve determination. The probability
of an individual prospect ever having a “reserve” that meets the requirements of
the Securities and Exchange Commission’s Industry Guide 7 is extremely remote;
in all probability our mineral resource property does not contain any ‘reserve’
and any funds that we spend on exploration will probably be lost.
Even if we do eventually discover a
mineral reserve on one or more of our properties, there can be no assurance that
we will be able to develop our properties into producing mines and extract those
resources. Both mineral exploration and development involve a high degree of
risk and few properties that are explored are ultimately developed into
producing mines. If we do discover mineral resources in commercially
exploitable quantities on any of our properties, we will be required to expend
substantial sums of money to establish the extent of the resource, develop
processes to extract it and develop extraction and processing facilities and
infrastructure.
The commercial viability of an
established mineral deposit will depend on a number of factors including, by way
of example, the size, grade and other attributes of the mineral deposit, the
proximity of the resource to infrastructure such as a smelter, roads and a point
for shipping, government regulation and market prices. Most of these factors
will be beyond our control, and any of them could increase costs and make
extraction of any identified mineral resource unprofitable.
Mineral
operations are subject to applicable law and government regulation. Even if we
discover a mineral resource in a commercially exploitable quantity, these laws
and regulations could restrict or prohibit the exploitation of that mineral
resource. If we cannot exploit any mineral resource that we might
discover on our properties, our business may fail.
Both mineral exploration and extraction
require permits from various foreign, federal, state, provincial and local
governmental authorities and are governed by laws and regulations, including
those with respect to prospecting, mine development, mineral production,
transport, export, taxation, labor standards, occupational health, waste
disposal, toxic substances, land use, environmental protection, mine safety and
other matters. There can be no assurance that we will be able to obtain or
maintain any of the permits required for the continued exploration of our
mineral properties or for the construction and operation of a mine on our
properties at economically viable costs. If we cannot accomplish these
objectives, our business could fail.
We believe that we are in compliance
with all material laws and regulations that currently apply to our activities
but there can be no assurance that we can continue to do so. Current laws and
regulations could be amended and we might not be able to comply with them, as
amended. Further, there can be no assurance that we will be able to obtain or
maintain all permits necessary for our future operations, or that we will be
able to obtain them on reasonable terms. To the extent such approvals are
required and are not obtained, we may be delayed or prohibited from proceeding
with planned exploration or development of our mineral properties.
Because
our property interest and exploration activities in Peru are subject to
political, economic and other uncertainties, situations may arise that could
have a significantly adverse material impact on us.
Our activities in Peru are subject to
political, economic and other uncertainties, including the risk of
expropriation, nationalization, renegotiation or nullification of existing
contracts, mining licenses and permits or other agreements, changes in laws or
taxation policies, currency exchange restrictions, changing political conditions
and international monetary fluctuations. Future government actions
concerning the economy, taxation, or the operation and regulation of nationally
important facilities such as mines could have a significant effect on our plans
and on our ability to operate. No assurances can be given that our
plans and operations will not be adversely affected by future developments in
Peru.
Because
we presently do not carry title insurance and do not plan to secure any in the
future, we are vulnerable to loss of title.
We do not maintain insurance against
title on any of our properties. Title on mineral properties and mining rights
involves certain inherent risks due to the difficulties of determining the
validity of certain claims as well as the potential for problems arising from
the frequently ambiguous conveyance history characteristic of many mining
properties. Disputes over land ownership are common, especially in the context
of resource developments. We cannot give any assurance that title to such
properties will not be challenged or impugned and cannot be certain that we will
have or acquire valid title to the mining and mineral rights on such properties.
The possibility also exists that title to existing properties or future
prospective properties may be lost due to an omission in the claim of title. As
a result, any claims against us may result in liabilities we will not be able to
afford, resulting in the failure of our business.
Because
we are subject to various governmental regulations and environmental risks, we
may incur substantial costs to remain in compliance.
Our activities in Peru are subject to
federal and local laws and regulations regarding environmental matters, the
abstraction of water, and the discharge of mining wastes and materials. Any
significant mining operations will have some environmental impact, including
land and habitat impact, arising from the use of land for mining and related
activities, and certain impact on water resources near the project sites,
resulting from water use, rock disposal and drainage run-off. No
assurances can be given that such environmental issues will not cause our
operations in the future to fail.
The federal and/or local government in
Peru could require us to remedy any negative environmental impact. The costs of
such remediation could cause us to fail. Future environmental laws
and regulations could impose increased capital or operating costs on us and
could restrict the development or operation of any mines.
We have, and will in the future, engage
consultants to assist us with respect to our operations in Peru. We
are beginning to address the various regulatory and governmental agencies, and
the rules and regulations of such agencies, in connection with the options for
the properties in Peru. No assurances can be given that we will be
successful in our efforts. Further, in order for us to operate and
grow our business in Peru, we need to continually conform to the laws, rules and
regulations of such country and local jurisdiction. It is possible
that the legal and regulatory environment pertaining to the exploration and
development of mining properties will change. Uncertainty and new
regulations and rules could dramatically increase our cost of doing business, or
prevent us from conducting its business; both situations could cause us to
fail.
Mineral
exploration and development is subject to extraordinary operating risks. We do
not currently insure against these risks. In the event of a cave-in or similar
occurrence, our liabilities may exceed our resources, which could cause our
business to fail.
Mineral exploration, development and
production involves many risks which even a combination of experience, knowledge
and careful evaluation may not be able to overcome. Our operations will be
subject to all the hazards and risks inherent in the exploration, development
and production of resources, including liability for pollution, cave-ins or
similar hazards against which we cannot insure or against which we may elect not
to insure. Any such event could result in work stoppages and damage to property,
including damage to the environment. We do not currently maintain any insurance
coverage against these operating hazards. The payment of any liabilities that
arise from any such occurrence could cause us to fail.
Mineral
prices are subject to dramatic and unpredictable fluctuations.
We expect to derive revenues, if any,
from the extraction and sale of precious and base metals such as gold and
silver. The price of those commodities has fluctuated widely in recent years,
and is affected by numerous factors beyond our control including international,
economic and political trends, expectations of inflation, currency exchange
fluctuations, interest rates, global or regional consumptive patterns,
speculative activities and increased production due to new extraction
developments and improved extraction and production methods. The effect of these
factors on the price of base and precious metals, and, therefore, the economic
viability of any of our exploration projects, cannot accurately be
predicted.
The
mining industry is highly competitive and there is no assurance that we will
continue to be successful in acquiring property interests. If we cannot continue
to acquire interests in properties to explore for mineral resources, we may be
required to reduce or cease operations.
The mineral exploration, development,
and production industry is largely unintegrated. We compete with other
exploration companies looking for mineral resource properties. While we compete
with other exploration companies in the effort to locate and license mineral
resource properties, we will not compete with them for the removal or sales of
mineral products from our properties if we should eventually discover the
presence of them in quantities sufficient to make production economically
feasible. Readily available markets exist worldwide for the sale of gold and
other mineral products. Therefore, we will likely be able to sell any gold or
mineral products that we identify and produce.
We compete with many companies
possessing greater financial resources and technical facilities. This
competition could adversely affect our ability to acquire suitable prospects for
exploration in the future as well as our ability to recruit and retain qualified
personnel. Accordingly, there can be no assurance that we will acquire any
interest in additional mineral resource properties that might yield reserves or
result in commercial mining operations.
Risks
Relating to our Common Stock
Trading on the over-the-counter
bulletin board may be volatile and sporadic, which could depress the market
price of our common stock and make it difficult for our shareholders to resell
their shares.
Our common stock is quoted on the
over-the-counter bulletin board service of the Financial Industry Regulatory
Authority (the “OTCBB”). Trading in stock quoted on the OTCBB is
often thin and characterized by wide fluctuations in trading prices, due to many
factors that may have little to do with our operations or business
prospects. This volatility could depress the market price of our
common stock for reasons unrelated to operating
performance. Moreover, the OTCBB is not a stock exchange, and trading
of securities on the OTCBB is often more sporadic than the trading of securities
listed on a quotation system like Nasdaq or a stock exchange like
Amex. Accordingly, shareholders may have difficulty reselling any of
the shares.
Because
our common stock is quoted and traded on the OTCBB, short selling could increase
the volatility of our stock price.
Short selling occurs when a person sells
shares of stock which the person does not yet own and promises to buy stock in
the future to cover the sale. The general objective of the person
selling the shares short is to make a profit by buying the shares later, at a
lower price, to cover the sale. Significant amounts of short selling,
or the perception that a significant amount of short sales could occur, could
depress the market price of our common stock. In contrast, purchases to cover a
short position may have the effect of preventing or retarding a decline in the
market price of our common stock, and together with the imposition of the
penalty bid, may stabilize, maintain or otherwise affect the market price of our
common stock. As a result, the price of our common stock may be
higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued
at any time. These transactions may be effected on the OTCBB or any
other available markets or exchanges. Such short selling if it were
to occur could impact the value of our stock in an extreme and volatile manner
to the detriment of our shareholders.
We
may experience difficulties in the future in complying with Sarbanes-Oxley
Section 404.
We are
required to evaluate our internal controls under Section 404 of the
Sarbanes-Oxley Act of 2002. Beginning with our annual report on Form
10-K for the fiscal year ending December 31, 2008, we are required to furnish a
report by our management on our internal control over financial
reporting. Such report contains among other matters, an assessment of
the effectiveness of our internal control over financial reporting as of the end
of our fiscal year, including a statement as to whether or not our internal
control over financial reporting is effective.
If we
fail to maintain proper and effective internal controls in future periods, it
could adversely affect our operating results, financial condition and our
ability to run our business effectively and could cause investors to lose
confidence in our financial reporting.
We
have never paid dividends and have no plans to in the future.
Holders
of shares of our common stock are entitled to receive such dividends as may be
declared by our board of directors. To date, we have paid no cash
dividends on our shares of common stock and we do not expect to pay cash
dividends on our common stock in the foreseeable future. We intend to
retain future earnings, if any, to provide funds for operation of our
business. Therefore, any return investors in our common stock will
have to be in the form of appreciation, if any, in the market value of their
shares of common stock.
We
have additional securities available for issuance, which, if issued, could
adversely affect the rights of the holders of our common stock.
Our Articles of Incorporation authorize
the issuance of 200,000,000 shares of our common stock and 200,000,000 shares of
blank check preferred stock. The common stock or blank check
preferred stock can be issued by our board of directors, without stockholder
approval. Any future issuances of our common stock would further
dilute the percentage ownership of our common stock held by public
shareholders.
If
we issue shares of blank check preferred stock with superior rights than our
common stock, it could result in the decrease in the value of our common stock
and delay or prevent a change in control of us.
Our board of directors is authorized to
issue up to 200,000,000 shares of blank check preferred stock. Our board of
directors has the power to establish the dividend rates, liquidation
preferences, voting rights, redemption and conversion terms and privileges with
respect to any series of blank check preferred stock. The issuance of any shares
of blank check preferred stock having rights superior to those of the common
stock may result in a decrease in the value or market price of the common stock.
Holders of blank check preferred stock may have the right to receive dividends,
certain preferences in liquidation and conversion rights. The issuance of blank
check preferred stock could, under certain circumstances, have the effect of
delaying, deferring or preventing a change in control of us without further vote
or action by the shareholders and may adversely affect the voting and other
rights of the holders of common stock.
Because
the SEC imposes additional sales practice requirements on brokers who deal in
our shares that are penny stocks, some brokers may be unwilling to trade them.
This means that you may have difficulty in reselling your shares and may cause
the price of the shares to decline.
Our stock is a penny stock. The
Securities and Exchange Commission has adopted Rule 15g-9 which generally
defines “penny stock” to be any equity security that has a market price (as
defined) less than $5.00 per share or an exercise price of less than $5.00 per
share, subject to certain exceptions. Our securities are covered by the penny
stock rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
“accredited investors”. The term “accredited investor” refers generally to
institutions with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document in a form prepared by the SEC which
provides information about penny stocks and the nature and level of risks in the
penny stock market. The broker-dealer also must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction and monthly account
statements showing the market value of each penny stock held in the customer’s
account. The bid and offer quotations and the broker-dealer and salesperson
compensation information must be given to the customer orally or in writing
prior to effecting the transaction and must be given to the customer in writing
before or with the customer’s confirmation. In addition, the penny stock rules
require that prior to a transaction in a penny stock not otherwise exempt from
these rules, the broker-dealer must make a special written determination that
the penny stock is a suitable investment for the purchaser and receive the
purchaser’s written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in, and limit the marketability of, our common stock.
In addition to the “penny stock” rules
promulgated by the Securities and Exchange Commission, FINRA has adopted rules
that require that in recommending an investment to a customer, a broker-dealer
must have reasonable grounds for believing that the investment is suitable for
that customer. Prior to recommending speculative, low-priced securities to their
non-institutional customers, broker-dealers must make reasonable efforts to
obtain information about the customer’s financial status, tax status, investment
objectives and other information. Under interpretations of these rules, FINRA
believes that there is a high probability that speculative low-priced securities
will not be suitable for at least some customers. The FINRA requirements make it
more difficult for broker-dealers to recommend that their customers buy our
common stock, which may limit your ability to buy and sell our
stock.
Indemnification
of officers and directors.
Our
articles of incorporation and the bylaws contain broad indemnification and
liability limiting provisions regarding our officers, directors and employees,
including the limitation of liability for certain violations of fiduciary
duties. Our shareholders therefore will have only limited recourse
against such individuals.
ITEM 1B. Unresolved Staff
Comments.
None.
ITEM 2. Properties.
Description
of our Mineral Property Interests
Our properties are located in Peru are
in the exploration stage. These properties are without known reserves
and the proposed plan of exploration detailed below is exploratory in
nature. These properties are described below.
Peru
Property
On September 18, 2008 (the "Effective
Date"), we entered into a Mineral Right Option Agreement (the "Temasek Option
Agreement") with Temasek Investments Inc. ("Temasek"), a company incorporated
under the laws of Panama. Pursuant to the Temasek Option Agreement,
we acquired four separate options from Temasek, each providing for the
acquisition of a twenty-five percent interest in certain mineral rights (the
"Mineral Rights") in certain properties in Peru (the “Peru Property”)
potentially resulting in our acquisition of one hundred percent of the Mineral
Rights. The Mineral Rights are owned by Rio Santiago Minerales S.A.C.
("Rio Santiago"). Beardmore Holdings, Inc. ("Beardmore"), a
wholly-owned subsidiary of Temasek, owns 999 shares of the 1,000 shares of Rio
Santiago that are issued and outstanding. Temasek owns the single
remaining share of Rio Santiago. The acquisition of each 25% interest
in the Mineral Rights will occur through the transfer to us of twenty-five
percent of the outstanding shares of Beardmore.
A description of the Mineral Rights
is set forth below:
|
Name
|
Area
(ha)
|
Code
|
Title
Nº
|
Owner
|
|
Bianka
1
|
1000
|
01-03905-08
|
00074599
|
Rio
Santiago Minerales SAC
|
|
Bianka
2
|
1000
|
01-03878-08
|
00074599
|
Rio
Santiago Minerales SAC
|
|
Bianka
3
|
900
|
01-03879-08
|
00074599
|
Rio
Santiago Minerales SAC
|
|
Bianka
4
|
1000
|
01-03883-08
|
00074599
|
Rio
Santiago Minerales SAC
|
|
Bianka
6
|
1000
|
01-03881-08
|
00074599
|
Rio
Santiago Minerales SAC
|
|
Bianka
7
|
1000
|
01-03888-08
|
00074599
|
Rio
Santiago Minerales SAC
|
|
Dalma
1
|
1000
|
01-03859-08
|
00074599
|
Rio
Santiago Minerales SAC
|
|
Dalma
2
|
1000
|
01-03863-08
|
00074599
|
Rio
Santiago Minerales SAC
|
|
Dalma
3
|
1000
|
01-03857-08
|
00074599
|
Rio
Santiago Minerales SAC
|
|
Dalma
4
|
800
|
01-03865-08
|
00074599
|
Rio
Santiago Minerales SAC
|
|
Dalma
5
|
500
|
01-03866-08
|
00074599
|
Rio
Santiago Minerales SAC
|
|
Dorotea
1
|
1000
|
01-03909-08
|
00074599
|
Rio
Santiago Minerales SAC
|
|
Dorotea
2
|
900
|
01-03906-08
|
00074599
|
Rio
Santiago Minerales SAC
|
|
Dorotea
3
|
1000
|
01-03904-08
|
00074599
|
Rio
Santiago Minerales SAC
|
|
Dorotea
4
|
800
|
01-03908-08
|
00074599
|
Rio
Santiago Minerales SAC
|
|
Dorotea
5
|
1000
|
01-03910-08
|
00074599
|
Rio
Santiago Minerales SAC
|
|
Dorotea
6
|
1000
|
01-03901-08
|
00074599
|
Rio
Santiago Minerales SAC
|
|
Dorotea
7
|
1000
|
01-03899-08
|
00074599
|
Rio
Santiago Minerales SAC
|
We exercised the initial option to
acquire a twenty-five percent interest in the Mineral Rights by fulfilling the
following conditions:
|
·
|
Payment
of $250,000 to Temasek on the date the Temasek Option Agreement is
executed;
|
|
·
|
Issuance
of 2,500,000 shares of Common Stock to Temasek within five business days
from the Effective Date; and
|
|
·
|
Payment
of an additional amount of $250,000 to Temasek within ninety days of the
Effective Date.
|
We may exercise the second twenty-five
percent option, resulting in our acquisition of a fifty percent interest in the
Mineral Rights, after fulfilling the following conditions within six months of
the Effective Date:
|
·
|
Payment
of an additional amount of $750,000 to Temasek,
and
|
|
·
|
Issuance
of 3,500,000 additional shares of Common Stock to
Temasek.
|
We may exercise the third twenty-five
percent option, resulting in our acquisition of a seventy-five percent interest
in the Mineral Rights, after fulfilling the following conditions within twelve
months of the Effective Date:
|
·
|
Payment
of an additional amount $1,250,000 to Temasek,
and
|
|
·
|
Issuance
of 4,500,000 additional shares of Common Stock to
Temasek.
|
We may exercise the fourth twenty-five
percent option, resulting in our acquisition of a one hundred percent interest
in the Mineral Rights, after fulfilling the following conditions within eighteen
months of the Effective Date:
|
·
|
Payment
of an additional amount $2,500,000 to Temasek,
and
|
|
·
|
Issuance
of 5,500,000 additional shares of Common Stock to
Temasek.
|
Upon our acquisition of a one hundred
percent interest in the Mineral Rights, Temasek will hold its single share of
Rio Santiago in trust for our sole benefit and hold the share strictly in
accordance with our instructions.
Upon our acquisition of a one hundred
percent interest in the Mineral Rights, Temasek is entitled to an annual 2.5%
net returns royalty. However, if we pay Temasek $2,000,000 within
ninety days of our acquisition of a one hundred percent interest in the Mineral
Rights, Temasek will only be entitled to an annual 1.5% net returns
royalty.
If we exercise the second twenty-five
percent option, resulting in our acquisition of a fifty percent interest in the
Mineral Rights, and fail to acquire a one hundred percent interest in the
Mineral Rights, we and Temasek will form a joint venture in which we will be
wholly responsible for developing a feasible mining project and all necessary
facilities and Temasek shall retain a carried free interest in the mining
rights. If we do not develop a feasible mining project within three
years of the Effective Date, we will be required to pay Temasek an advance
minimum mining royalty of $500,000 per year, which will be deducted from
Temasek's net return royalty.
Location and
Access
The Mineral Rights are located in the
Manseriche and Condercanqui gold camps along the Rio Marañón in northeastern
Peru. These areas lie near the Manseriche gorge which cuts through
the last ridge of hills that marks the interface between the Andean highlands
and the Amazon foreland basin. These camps straddle the boundary of
the Loreto (eastern) and Amazonas (western) departments of northeastern Peru
approximately 350km from the regional center of Iquitos which lies on the Amazon
River.
Both
Iquitos to the east as well as Tarapoto to the south are served with daily
flights from Lima. The project area can be reached from either of these
towns by charter flights while supplies and heavy equipment can be barged in
from either Yurimaguas (on the Rio Huallaga) or Iquitos, or trucked in from
Bagua on a fair weather road to the village of Saramiriza located in the center
of the Manseriche gold camp along the southwestern bank of the Rio
Marañón.
The general location of the Mineral
Rights within Peru is indentified on the map below:
The specific location of the Mineral
Rights is indentified on the map below:
Previous
Exploration History
The first record of gold production from
the Manseriche camp was in the 1940’s, when a German-owned company operated a
dragline on the Rio Marañón river. Since then, Canadian, Brazilian,
Swiss and Peruvian interests have operated various types of equipment on the Rio
Marañón river with various degrees of success.
The most notable operation was that of a
Peruvian company, Monica de Iquitos, who completed approximately 500 drill holes
and established a considerable resource south of the town of
Saramiriza. This work was verified and confirmed by a Russian
government consulting company, Sojuzkarta, which twinned some holes and took
bulk samples by backhoe. Their drill results as well as those from
the collection of bulk samples were used to estimate a grade of 295mg/m3 based
on a finess of 850 for correction to pure gold.
Subsequent studies have indicated that
grades tended to increase with depth, and that much of the gold tends to be
considerably fine in size, indicating the possibility of increased recovery, and
therefore grade, with appropriate recovery techniques, e.g., jigs and bowl
concentrators.
Geology
and Mineralization
The Alegría, Condorcanqui, and
Manseriche gold camps form part of the Marañón-Santiago Alluvial District (see
Marañón-Santiago River Basin Map), one of four major alluvial gold fields in
Peru (the others are, Iquitos, Ucayali, and Madre de Dios-Pando).
Such
large-scale alluvial gold fields tend to form in environments associated with
convergent plate boundaries, particularly at the interface between fold belts
and foreland basins An essential requirement for the development of
such gold deposits is a gold-rich hinterland and a river system that can
transfer gold from the zone of production in the upper reaches of the drainage
basin, along the main trunk of the river system to the zone of deposition,
usually where the river profile flattens-out at the limit between the highlands
and alluvial plains. The Manseriche camp is indeed located exactly at such a
juncture.
The Maranon-Santiago drainage basin
covers an area of some 120,000 km2 and contains a number of gold deposits as
well as some of the largest gold deposits and gold mining operations in the
world, including Newmont’s Yanacocha (40m oz Au), Goldfield’s Cerro Corona
(which currently produce 350 000 oz Au per annum), and Kinross’/ Aurelian’s
Fruta del Norte deposit (14m oz Au).
The age of most of the gold
mineralization in the highlands of the Marañón-Santiago river system is
tertiary, and specifically Miocene. However, Eocene-aged tectonism
resulted in the formation of the eastern foothills of the Andes ,which
effectively formed a barrier directing all erosion from the hinterland towards a
basin on the western side of the Manseriche Gorge. Glacial erosion of
the gold deposits in the hinterland resulted in tills and moraines, which were
subsequently concentrated in glacio-fluvial deposits by melting ice and intense
rains in interglacial periods of which a number have been identified in
Peru. These sediments were retained by the eastern fold belt of
anticlines. The Pajacuse thrust event during the Pliocene then led to
the breaching of the closed basin and the subsequent formation of the Manseriche
Gorge. This released the gold-rich glacio-fluvial sediments to be
reconcentrated and deposited in the Rio Marañón flood plain east of the
Gorge.
All the gold that is eroded form the
primary deposits in this drainage basin has only one exit point, and that is
through the Manseriche gorge. Moreover, it is also at this focus
point that the fast-running waters from the highlands are slowed down to a
languid pace resulting in the deposition of the high-energy sedimentary load and
its golden cargo. It is the sequence of constant erosion,
glacio-fluvial concentration, fluvial transport, collection in an intermediate
(or series of intermediate) basin(s), and final alluvial concentration in the
Rio Marañón flood plain, that provided the mixing and concentration which
accounts for the regular gold values in the sands and gravels as indicated by
all the work carried out to date.
A map below detailing the geology in
the approximately area of the Mineral Rights is set forth below:
Proposed Exploration
Program
An
exploration base is being set up in the town of Saramiriza which is located in
the center of the Manseriche alluvial camp on the western bank of the
Marañón.
We intend to conduct a seismic survey
along selected lines across the Marañón gravels in order to define the
gravel-bedrock contact. This information is needed to plan a drilling
program and to assist with locating drill collar positions. The
selection of seismic lines will made on the basis of interpretation of aerial
photos and satellite images, as well as from reconnaissance-scale mapping of
sedimentary features. Scout drilling utilizing churn drills will be
undertaken on favorable areas, and anomalous zones will be followed up with
reverse circulation drilling (Becker) in order to fully develop resources and
reserves.
Before implementing the drilling plan,
we intend to identify the landowners of the plots on which the mines are
located so as to determine who the legal owners or current occupants are and/or
the kind of tenancy or tenancy claim over the surface of the land, as well as
the location of Native or Creole communities within the project’s area of
influence.
An Environmental Impact Report will
also be drafted so as to obtain the Environmental Impact Declaration from the
Peruvian Mining Authorities, which is an essential requirement for any kind of
exploration in Peru.
We intend to collect bulk samples
collected by backhoe and an excavator will be required for metallurgical testing
to confirm drill results. At the same time, mine development
planning, process design, and other engineering studies will be conducted with a
view to completing a feasibility study within an 18 month
period. Permitting work will be initiated as early in the exploration
and development cycle as possible, so that trial or pilot dredging can be
started as soon as feasibility has been established.
We anticipate that the landowner
studies and environmental report will be completed prior to June 30,
2009. We anticipate that we will commence the mapping and geophysics
in June 2009 with the initial drilling to begin shortly thereafter.
Anticipated
costs for the next twelve months are as follows:
|
Activity
|
USD 000s
|
|||
|
MINERAL
PROPERTY COSTS:
|
||||
|
Annual
Fee
|
50 | |||
|
Surface
Rights Access
|
15 | |||
|
EXPLORATION
|
||||
|
Mapping
|
45 | |||
|
Geophysics
- Seismic
|
130 | |||
|
DRILLING
|
||||
|
Churn
Drilling
|
500 | |||
|
TECHNICAL
SERVICES
|
||||
|
Consultants
|
180 | |||
|
Personnel
|
230 | |||
|
CAMP
AND FIELD EXPENSES
|
||||
|
Camp
|
180 | |||
|
Field
|
150 | |||
|
TRANSPORT
AND LOGISTICS
|
||||
|
Air
Transport
|
180 | |||
|
Water
Transport
|
80 | |||
|
Ground
Transport
|
50 | |||
|
EQUIPMENT
& PERMITTING
|
110 | |||
|
COMMUNITY
OUTREACH
|
50 | |||
|
ADMINISTRATION
|
150 | |||
|
TOTAL
|
2,100 | |||
ITEM 3. Legal
Proceedings.
None.
ITEM 4. Submission
of Matters to a Vote of Security Holders.
No
matters were submitted to a vote of our shareholders during the fourth quarter
of the fiscal year ended December 31, 2008.
PART
II
ITEM 5. Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities.
Market
Prices
Our common stock is currently quoted on
the OTCBB under the symbol “AZNG.” Prior to June 9, 2008 when we
operated under the name Finmetal Mining Ltd., we were quoted on the OTCBB under
the symbol “FNMM.”
The following table sets forth the
range of high and low bid quotations for our common stock for each of the
periods indicated as reported by the OTCBB. These quotations below
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
may not necessarily represent actual transactions.
|
Fiscal Year Ended December 31,
2008
|
||
| Fiscal Quarter Ended: |
High Bid
|
Low Bid
|
|
March
31, 2008
|
$0.199
|
$0.041
|
|
June
30, 2008
|
$0.95
|
$0.045
|
|
September
30, 2008
|
$0.70
|
$0.20
|
|
December
31, 2008
|
$0.55
|
$0.15
|
|
Fiscal Year Ended December 31,
2007
|
||
| Fiscal Quarter Ended: |
High Bid
|
Low Bid
|
|
March
31, 2007
|
$1.75
|
$1.04
|
|
June
30, 2007
|
$1.75
|
$0.35
|
|
September
30, 2007
|
$0.70
|
$0.25
|
|
December
31, 2007
|
$0.40
|
$0.15
|
Holders
of Common Stock
As of
December 31, 2008, we had approximately fifty-four (54) holders of record of our
common stock and several other shareholders hold shares in street
name.
Dividend
Policy
To date,
we have not declared or paid cash dividends on our shares of common
stock. The holders of our common stock will be entitled to
non-cumulative dividends on the shares of common stock, when and as declared by
our board of directors, in its discretion. We intend to retain all
future earnings, if any, for our business and do not anticipate paying cash
dividends in the foreseeable future.
Any
future determination to pay cash dividends will be at the discretion of our
board of directors and will be dependent upon our financial condition, results
of operations, capital requirements, general business conditions and such other
factors as our board of directors may deem relevant.
Securities
Authorized for Issuance under Equity Compensation Plans
Our board of directors adopted the
2007 Stock Incentive Plan (the “Stock Incentive Plan”) in April
2007. The number of shares of common stock issuable under the Stock
Incentive Plan was reduced from 10,000,000 shares to 500,000 shares resulting
from the one share-for-twenty shares reverse stock split of our Common Stock
(“reverse split”) which became effective at the close of business on June 6,
2008. As of December 31, 2008, there were no outstanding awards
granted under the Stock Incentive Plan. After an adjustment to give
effect to the reverse split, 485,000 shares remain available under the Stock
Incentive Plan for future equity grants as of December 31, 2008.
The Stock
Incentive Plan authorizes us to grant awards in the form of shares of common
stock, including unrestricted shares of common stock; options to purchase shares
of common stock; stock appreciation rights or similar rights with a fixed or
variable price related to the fair market value of the shares of common stock
and with an exercise or conversion privilege related to the passage of time, the
occurrence of one or more events, or the satisfaction of performance criteria or
other conditions; any other security with the value derived from the value of
the shares of common stock, such as restricted stock and restricted stock units;
deferred stock units; dividend equivalent rights; or any combination of the
foregoing.
The Stock
Incentive Plan allows for the grant of incentive stock options, non-qualified
stock options and restricted stock awards. The exercise price of any
option shall be determined at the time the option is granted by the board of
directors. However, the exercise price may generally not be less than 100
percent of the fair market value of the shares of common stock on the date of
the grant. Each option expires on the date determined by the board of directors,
but not later than ten years after the grant date. The board of directors may
determine in its discretion whether any option shall be subject to vesting and
the terms and conditions of any such vesting. The Stock Incentive
Plan also provides for the immediate vesting of options, as well as authorizes
the board of directors, or any committee thereof, to cancel outstanding options
or to make adjustments to the transfer restrictions on those options in the
event of certain changes in corporate control of the company. Awards,
including options, made under the Stock Incentive Plan are not assignable and
also subject to any restrictions and conditions imposed by the board of
directors, or any committee thereof.
The
following table sets forth certain information regarding the Stock Incentive
Plan as of December 31, 2008:
|
Plan
category
|
|
Number of securities to
be
issued
upon exercise of
outstanding
options,
warrants
and rights
(a)
|
|
Weighted-average
exercise
price
of outstanding options,
warrants
and rights
(b)
|
|
Number
of securities
remaining available
for
future
issuance under
equity
compensation plans
(excluding
securities
reflected
in column (a))
(c)
|
|
|
Equity
compensation
plans
approved by
stockholders
|
|
-
|
|
-
|
|
-
|
|
|
Equity
compensation
plans
not approved by
stockholders
1
|
|
-
|
|
-
|
|
485,000
|
|
|
Total
|
|
-
|
|
-
|
|
485,000
|
|
1The Stock Incentive Plan was approved by our board of directors
in April 2007 and 485,000 shares remain available for future awards under
the Stock Incentive Plan as of December 31, 2008.
Recent
Issuances of Unregistered Securities
There were no issuances of securities
without registration under the Securities Act of 1933 during the reporting
period which were not previously included in a Quarterly Report on Form 10-Q or
Current Report on Form 8-K.
ITEM 6. Selected Financial
Data.
Not
applicable.
ITEM 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations.
This
Report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. The words “believe,” “expect,” “anticipate,”
“intend,” “estimate,” “may,” “should,” “could,” “will,” “plan,” “future,”
“continue,” and other expressions that are predictions of or indicate future
events and trends and that do not relate to historical matters identify
forward-looking statements. These forward-looking statements are
based largely on our expectations or forecasts of future events, can be affected
by inaccurate assumptions, and are subject to various business risks and known
and unknown uncertainties, a number of which are beyond our
control. Therefore, actual results could differ materially from the
forward-looking statements contained in this document, and readers are cautioned
not to place undue reliance on such forward-looking statements. We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise. A wide variety of factors could cause or contribute to
such differences and could adversely impact revenues, profitability, cash flows
and capital needs. There can be no assurance that the forward-looking
statements contained in this document will, in fact, transpire or prove to be
accurate.
Factors
that could cause or contribute to our actual results differing materially from
those discussed herein or for our stock price to be adversely affected include,
but are not limited to: (i) our short operating history; (ii)
our ability to manage business expansion; (iii) risks and uncertainties relating
to the interpretation of drill results, the geology, grade and continuity of
mineral deposits; (iv) results of initial feasibility, pre-feasibility and
feasibility studies, and the possibility that future exploration, development or
mining results will not be consistent with our expectations; (v) mining and
development risks, including risks related to accidents, equipment breakdowns,
labor disputes or other unanticipated difficulties with or interruptions in
production; (vi) the potential for delays in exploration or development
activities or the completion of feasibility studies; (vii) risks related to the
inherent uncertainty of production and cost estimates and the potential for
unexpected costs and expenses; (viii) risks related to commodity price
fluctuations; (ix) the uncertainty of profitability based upon our history of
losses; (x) risks related to failure to obtain adequate financing on a timely
basis and on acceptable terms for our planned exploration and development
projects; (xi) risks related to environmental regulation and liability; (xii)
risks that the amounts reserved or allocated for environmental compliance,
reclamation, post-closure control measures, monitoring and on-going maintenance
may not be sufficient to cover such costs; (xiii) risks related to tax
assessments; (xiv) political and regulatory risks associated with mining
development and exploration; (xv) other risks and uncertainties related to our
prospects, properties and business strategy; (xvi) potential that shareholders
may lose all or part of their investment if we are unable to compete in our
industry; (xvii) our dependence on key personnel; (xvii) sale of
substantial amounts of our common stock that may have a depressive effect on the
market price of the outstanding shares of our common stock;
(xviii) possible issuance of common stock subject to options and warrants
that may dilute the interest of shareholders; (xix) our ability to comply
with Sarbanes-Oxley Act of 2002 Section 404; (xx) our nonpayment of
dividends and lack of plans to pay dividends in the future; (xxi) future
sale of a substantial number of shares of our common stock that could depress
the trading price of our common stock, lower our value and make it more
difficult for us to raise capital; (xxii) our additional securities
available for issuance, which, if issued, could adversely affect the rights of
the holders of our common stock; (xxiii) our stock price which is likely to
be highly volatile because of several factors, including a
relatively limited public float; and (xxiv) indemnification of
our officers and directors.
Recent Developments for the
Company
Overview
We were incorporated in the state of
Nevada under the name Gondwana Energy, Ltd. on September 5, 1997, and previously
operated under the name Finmetal Mining Ltd. We are an exploration
stage company engaged in the assessment, acquisition and exploration of mineral
properties. We were previously focused on the acquisition and
development of our interests in the mineral rights on properties located in
Finland.
In September 2008, we reorganized our
operations and our current focus is on the acquisition and development of our
interests in the mineral rights on properties located in Peru. We no
longer have any interest in any properties located in Finland and have allowed
our options on these properties to lapse in order to pursue the development of
our interests in the mineral rights on properties located in
Peru. Effective June 6, 2008, we merged with our wholly-owned
subsidiary, Amazon Goldsands Ltd., pursuant to Articles of Merger that we filed
with the Nevada Secretary of State. We decided to change our name to
"Amazon Goldsands Ltd." to better reflect our current focus on the acquisition
and development of the mineral rights on properties located in South
America. We are an exploration-stage company and there is no
assurance that commercially exploitable reserves of gold exists on any of our
property interests. In the event that commercially exploitable
reserves of gold exist on any of our property interests, we cannot guarantee
that we will make a profit. If we cannot acquire or locate gold
deposits, or if it is not economical to recover the gold deposits, our business
and operations will be materially and adversely
affected.
For the Years Ended December
31, 2008 and 2007
Revenues
We have not generated any revenues from
our operations in either of the past two fiscal years.
Operating
Expenses
We reported a credit balance of expenses
in the amount of $964,069 for the year ended December 31, 2008, compared to
expenses of $9,594,099 for the year ended December 31, 2007. The
decrease in reported expenses was attributable to stock-based compensation being
credited back to operations in the amount of $2,048,882 for the year ended
December 31, 2008, as a result of the cancellation of stock options during
the reporting period. The decrease in reported
expenses was also attributable to a decrease in mineral property acquisition and
exploration expenditures. We incurred property acquisition and
exploration expenditures of $380,685, for the year ended December 31, 2008,
compared to $2,583,124 for the year ended December 31, 2007. The
decrease in mineral property acquisition and exploration expenditures is
attributable to management’s decision not to proceed with the exercise of
options to acquire certain mineral property interests located in
Finland.
Other
Items
We reported other income of $18,996 for
the year ended December 31, 2008 and other income of $82,642 for the year ended
December 31, 2007. Other income during the year ended December 31,
2008 consisted of interest income and the expense for the write-down of
assets. Other income for the year ended December 31, 2007 consisted
solely of interest income.
Net
(Income) Loss
We had net income of $983,065 for the
year ended December 31, 2008, as compared to a net loss of $9,511,457 for the
year ended December 31, 2007. This increase was primarily
attributable to stock-based compensation being credited to operations as a
result of the expiration and cancellation of stock options during the reporting
period and not as a result of us generating any revenue from
operations.
Liquidity
and Capital Resources
At December 31, 2008, we had cash and
cash equivalents of $492,903, compared to $1,957,856 at December 31, 2007, and
working capital of $186,455, compared to $1,368,636 at December 31,
2007. Our proposed plan of exploration anticipates that we will incur
exploration related expenditures of $2,100,000 over the next twelve
months. Over the next twelve moths, we will be required to make a payment
of $750,000 if we elect to increase our ownership interest in
the Mineral Rights from a twenty-five percent interest to a fifty percent
interest and a payment of $1,250,000 if we elect to further increase our
interest in the Mineral Rights from a fifty percent interest to a seventy-five
percent interest. We anticipate spending approximately $50,000 in
ongoing general and administrative expenses per month for the next twelve
months, for a total anticipated expenditure of $600,000 over the next twelve
months. The general and administrative expenses for the year will
consist primarily of professional fees for the audit and legal work relating to
our regulatory filings throughout the year, as well as transfer agent fees and
general office expenses. Our current cash on hand is insufficient to
be able to make our planned exploration expenditures and to pay for our general
administrative expenses over the next twelve months. Accordingly, we
must obtain additional financing in order to continue our plan of operations
during and beyond the next twelve months. We believe that debt financing will
not be an alternative for funding additional phases of exploration as we do not
have limited tangible assets to secure any debt financing. We anticipate that
additional funding will be in the form of equity financing from the sale of our
common stock. We are currently seeking additional funding in the form
of equity financing from the sale of our common stock, but cannot provide
investors with any assurance that we will be able to raise sufficient funding
from the sale of our common stock to fund our complete exploration program. In
the absence of such financing, we will not be able to pursue our exploration
program and maintain our mineral property interests in good
standing. If we do not fulfill the terms of any of these option
agreements according to our business plan, then our ability to commence or
continue operations could be materially limited. We also may be
forced to abandon our mineral property interests. If we are
unable to raise additional capital in the near future, we will experience
liquidity problems and management expects that we will need to curtail
operations, liquidate assets, seek additional capital on less favorable terms
and/or pursue other remedial measures.
We may consider entering into a joint
venture arrangement to provide the required funding to explore the properties
underlying our mineral property interests. We have not undertaken any efforts to
locate a joint venture participant. Even if we determine to pursue a joint
venture participant, there is no assurance that any third party would enter into
a joint venture agreement with us in order to fund exploration of the properties
underlying our mineral property interests. If we enter into a joint venture
arrangement, we would likely have to assign a percentage of our interest in our
mineral property interests to the joint venture participant.
Cash
Used in Operating Activities
Operating
activities in the year ended December 31, 2008 and 2007 used cash of $1,790,069
and $2,485,972, respectively, which reflect our recurring operating
losses. General and administrative expenses, including mineral
property acquisition and exploration expenditures, for the year ended December
31, 2008 was the primary reason for our negative operating cash
flow.
Cash
Used in Investing Activities
For the
year ended December 31, 2008, we used $288,467 in investing activities, as
compared to $37,536 used in investing activities during the year ended December
31, 2007. For the year ended December 31, 2008, we expended $8,467
for purchase of equipment. $30,000 for website development costs and
$250,000 for the acquisition of mineral rights.
Cash
from Financing Activities
As we
have had no revenues since inception, we have financed our operations primarily
by using existing capital reserves and through private placements of our
stock. Net cash flows provided by financing activities for the year
ended December 31, 2008 was $613,583, all of which was from received from
subscriptions for shares of our common stock. Net cash flows provided
by financing activities for the year ended December 31, 2007 was $2,832,550, all
of which was from proceeds from the issuance of common stock.
Off
Balance Sheet Arrangements
We do not have any off-balance sheet
debt nor did we have any transactions, arrangements, obligations (including
contingent obligations) or other relationships with any unconsolidated entities
or other persons that may have material current or future effect on financial
conditions, changes in the financial conditions, results of operations,
liquidity, capital expenditures, capital resources, or significant components of
revenue or expenses.
Going
Concern
We have incurred net losses for the
period from inception on September 5, 1997 to December 31, 2008 of $11,196,447
and have no source of revenue. The continuity of our future
operations is dependent on our ability to obtain financing and upon future
acquisition, exploration and development of profitable operations from our
mineral properties. These conditions raise substantial doubt about
our ability to continue as a going concern.
Critical
Accounting Policies
In December 2001, the SEC requested that
all registrants list their most “critical accounting polices” in the Management
Discussion and Analysis. The SEC indicated that a “critical
accounting policy” is one which is both important to the portrayal of a
company’s financial condition and results, and requires management’s most
difficult, subjective or complex judgments, often as a result of the need to
make estimates about the effect of matters that are inherently
uncertain. We believe the following critical accounting estimates
affect our more significant judgments and estimates used in the preparation of
our consolidated financial statements:
Mineral
Claim Payments and Exploration Expenditures
Mineral property exploration costs are
charged to operations as incurred. Mineral property acquisition costs are
initially capitalized when incurred using the guidance in EITF 04-02 “Whether
Mineral Rights are Tangible or Intangible Assets”. We assess the
carrying costs for impairment under SFAS No. 144. The Emerging
Issues Task Force issued EITF 04-3 “Mining Assets: Impairment and Business
Combinations”, which requires mining companies to consider cash flows related to
the economic value of mining assets (including mineral properties and rights)
beyond those assets’ proven and probable reserves, as well as anticipated market
price fluctuations, when testing the mining assets for impairment in accordance
with SFAS 144. We are in our early stages of exploration and unable
to allocate proven and probable reserves to its mineral
property. When it has been determined that a mineral property can be
economically developed as a result of establishing proven and probable reserves,
the costs then incurred to develop such property will be
capitalized. Such costs will be amortized using the
units-of-production method over the estimated life of the probable
reserve. If mineral properties are subsequently abandoned or
impaired, any capitalized costs will be charged to operations.
Environmental
Costs
Environmental expenditures that
related to current operations are charged to operations or capitalized as
appropriate. Expenditures that relate to an existing condition caused
by past operations, and which do not contribute to current or future revenue
generation, are charged to operations. Liabilities are recorded when
environmental assessments and/or remedial efforts are probable, and the cost can
be reasonably estimated. Generally, the timing of these accruals
coincides with the earlier of completion of a feasibility study or the Company’s
commitments to plan of action based on the then known facts.
Stock-Based
Compensation
During the year, we adopted SFAS No.
123(revised), “Share-Based
Payment”, to account for its stock options and similar equity instruments
issued. Accordingly, compensation costs attributable to stock options
or similar equity instruments granted are measured at the fair value at the
grant date, and expensed over the expected vesting
period. Transactions in which goods or services are received from
non-employees in exchange 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 instruments issued, whichever is more reliably
measurable. SFAS 123(revised) requires excess tax benefits be
reported as a financing cash inflow rather than as a reduction of taxes
paid.
Foreign
Currency Translation
Our functional currency is U.S.
dollars. Accordingly, foreign currency balances are translated
into US dollars as follows:
|
·
|
Monetary
assets and liabilities are translated at the year-end exchange
rate.
|
|
·
|
Non-monetary
assets are translated at the rate of exchange in effect at their
acquisition, unless such assets are carried at market or nominal value, in
which case they are translated at the year-end exchange
rate.
|
|
·
|
Revenue
and expense items are translated at the average exchange rate for the
year. Foreign exchange gains and losses in the year are
included in operations.
|
Recent
Accounting Pronouncements
In December 2007, the FASB issued
SFAS No. 141(R), “Business Combinations”. This Statement replaces SFAS No. 141,
Business Combinations. This Statement retains the fundamental requirements in
Statement 141 that the acquisition method of accounting (which Statement 141
called the purchase method) be used for all business combinations and for an
acquirer to be identified for each business combination. This Statement also
establishes principles and requirements for how the acquirer: a) recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, and any non-controlling interest in the acquiree; b)
recognizes and measures the goodwill acquired in the business combination or a
gain from a bargain purchase and c) determines what information to disclose to
enable users of the financial statements to evaluate the nature and financial
effects of the business combination. SFAS No. 141(R) will apply prospectively to
business combinations for which the acquisition date is on or after Company’s
fiscal year beginning November 1, 2009. The adoption of this statement is not
expected to have a material effect on our financial statements.
In December 2007, the FASB issued
SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements”.
This Statement amends ARB 51 to establish accounting and reporting standards for
the non-controlling (minority) interest in a subsidiary and for the
deconsolidation of a subsidiary. It clarifies that a non-controlling interest in
a subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements. SFAS No. 160 is
effective for the Company’s fiscal year beginning November 1, 2009. The adoption
of this statement is not expected to have a material effect on our financial
statements.
In March 2008, the FASB issued SFAS
No. 161, “Disclosures about Derivative Instruments and Hedging Activities-an
amendment of FASB Statement No. 133” (“FAS 161”). FAS 161 changes the disclosure
requirements for derivative instruments and hedging activities. Entities are
required to provide enhanced disclosures about (a) how and why an entity uses
derivative instruments, (b) how derivative instruments and related hedged items
are accounted for under Statement 133 and its related interpretations, and (c)
how derivative instruments and related hedged items affect an entity’s financial
position, financial performance, and cash flows. The guidance in FAS 161 is
effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008, with early application encouraged. This
Statement encourages, but does not require, comparative disclosures for earlier
periods at initial adoption. The adoption of this statement is not
expected to have a material effect on the Company's financial
statements.
In May 2008, the FASB issued SFAS No.
162, “The Hierarchy of Generally Accepted Accounting
Principles”. SFAS No. 162 identifies the sources of accounting
principles and the framework for selecting the principles used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting
principles. This statement shall be effective 60 days following the
SEC’s approval of the Public Company Accounting Oversight Board amendments to AU
Section 411, “the Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles”. We do not expect this adoption will
have a material impact on our financial statements.
In May 2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee
Insurance Contracts – an interpretation of FASB Statement No. 60” (“SFAS
163”). SFAS 163 interprets Statement 60 and amends existing
accounting pronouncements to clarify their application to the financial
guarantee insurance contracts included within the scope of that
statement. SFAS 163 is effective for financial statements issued for
fiscal years beginning after December 15, 2008, and all interim periods within
those fiscal years. We are currently evaluating the impact of SFAS
163 on our financial statements and we do not expect it to have a material
effect.
ITEM 7A. Quantitative and Qualitative Disclosures
About Market Risk.
Not
applicable
ITEM 8. Financial
Statements and Supplementary Data.
The
financial statements are listed in Part IV Item 15 of this Annual
Report on Form 10-K and are incorporated by reference in this
Item 8.
ITEM 9. Changes
In and Disagreements With Accountants on Accounting and Financial
Disclosure.
None.
ITEM 9A. Controls and Procedures.
Conclusion
Regarding the Effectiveness of Disclosure Controls and Procedures
Under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we conducted an
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the
Securities Exchange Act of 1934. Based on their evaluation as of
December 31, 2008, the end of the period covered by this Annual Report on
Form 10-K, our principal executive officer and principal financial officer
concluded that our disclosure controls and procedures were
effective at a reasonable assurance level to ensure that the information
required to be disclosed in reports filed or submitted under the Securities
Exchange Act of 1934, including this Annual Report, were recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and
forms, and was accumulated and communicated to management, including our
principal executive officer and principal financial officer, as appropriate to
allow timely decisions regarding required disclosure.
Management’s
Report on Internal Control Over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting. Our internal control over financial
reporting is designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles and
includes those policies and procedures that:
|
·
|
Pertain
to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of the assets of the
Company;
|
|
·
|
Provide
reasonable assurance that the transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the
Company are being made only in accordance with authorizations of
management and directors of the Company;
and
|
|
·
|
Provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Company’s assets that
could have a material effect on the financial
statements.
|
All
internal control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement
preparation and presentation. Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements. Projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate
because of changes in conditions or that the degree of compliance with the
policies or procedures may deteriorate.
In
connection with the filing of our Annual Report on Form 10-K, our
management assessed the effectiveness of our internal control over financial
reporting as of December 31, 2008. In making this assessment,
our management used the criteria set forth by Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control—Integrated
Framework. Based on our assessment using those criteria,
management believes that, as of December 31, 2008, our internal control
over financial reporting is effective based on those criteria.
This
annual report does not include an attestation report of our Company's registered
public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by our
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit us to provide only management's report in
this annual report.
Changes
in Internal Control Over Financial Reporting
There
have been no changes in our internal controls over financial reporting during
the quarter ended December 31, 2008, that have materially affected, or are
reasonably likely to materially affect, our internal controls over financial
reporting.
ITEM 9B. Other
Information.
None.
PART
III
ITEM 10. Directors,
Executive Officers and Corporate Governance.
The following information sets forth
the names of our current directors and executive officers, their ages and their
present positions.
|
Name
|
Age
|
Position
|
Served
Since
|
|
Hector
Ponte
|
62
|
Chief
Executive Officer, Principal Executive Officer, Director
|
2008
|
|
Robert
Van Tassell
|
72
|
Director
|
2006
|
|
David
Kerr
|
45
|
Director
|
2008
|
|
David
Grant
|
57
|
Director
|
2008
|
|
Carlos
Stocker
|
42
|
Chief
Financial Officer, Principal Accounting Officer, Secretary,
Treasurer
|
2008
|
|
John
Keenan
|
60
|
Vice
President of Exploration
|
2008
|
Hector
Ponte. Mr. Ponte has served as our Chief Executive Officer,
Principal Executive Officer, and as a member of our board of directors since
July 24, 2008. Mr. Ponte has served as director for various
corporations: OreGalore, SA, Stenfield Minera SA, and Ponte Hnos y Cia
SA. He founded OreGalore SA in 2000 and continues to serve as
President of the company. Over the past five years, Mr. Ponte has
served as Commercial Manager for numerous companies: Lonmin PLC (1996-Present),
Latin American Minerals - Hidefield Argentina SA (2005-2007) and Recursos
Maricunga SA (2007-Present). He has also served as an independent
consulting geologist for various local and international clients: Lonmin
Management Services Ltd, Normabec SA, Horwath Consulting - Swedish Geological
AB, Horwath Consulting - Kilborn do Brazil, INTEMIN - National Institute for
Mining Technology, and Estudios y Servicios SRL.
Robert Van
Tassell. Mr. Van Tassell has served on our Board of Directors
since December 2006. Mr. Van Tassell has been involved in the Canadian mining
industry for over fifty years. Before retiring from full-time ventures in 1998,
he spent the prior sixteen years (1982-1998) as Vice President of Exploration
for the precious metals venture Goldcorp Inc., formerly known as Dickenson
Mines. Exploration teams led by Mr. Van Tassell are credited with such
significant discoveries as the Husky Mine, the Minto copper deposit currently
being mined by Sherwood Copper, and more recently, Goldcorp's High Grade Zone.
From 1984 through 1993, Mr. Van Tassell served as a board member of the
Prospectors and Developers Association of Canada (PDAC), including as Chairman
of the PDAC's Program and Environmental Committees. Mr. Van Tassell also served
as a director of the Yukon Chamber of mines for eleven years, two of them as
President. He served four terms on the board of the Northern Resource
Conferences, two of them as Chairman, and has taught introductory and advanced
prospecting courses for the Chamber of Mines. He is a Life Member of the CIM and
a member of the Geological Association of Canada.
David
Kerr. Mr. Kerr was appointed to serve as a member of our board
of directors on October 6, 2008. Mr. Kerr has
approximately 23 years experience working as a
geologist. Mr. Kerr earned a Bachelor of Science degree in
Geological Engineering from Queen's University in Kingston, Ontario
in 1985. Since September 2003, Mr. Kerr has served as
a consulting geologist and President of Accumin Mineral Services Inc., a
geological consulting firm. Since 2000, Mr. Kerr has served as a
geological consultant to Amazonia Mineracao Limitada, a Brazilian exploration
and mining company in which he is also a
stakeholder.
David
Grant. Mr. Grant was appointed to serve as a member of our
board of directors on October 6, 2008. Mr. Grant has over 30
years experience as a professional geologist in the minerals industry.
Mr. Grant earned a Bachelor of Science degree in Geology from the
University of Rhodesia in 1975 and a Master of Science in
Mineral Exploration from Rhodes University in 1980.
Since 1990, Mr. Grant has served as a consulting geologist for
Applied Geology and Mining (Pty) Ltd during which time he has worked on a wide
variety of mineral deposits including placer gold.
Carlos
Stocker. Mr. Stocker has served as our Secretary, Treasurer,
Chief Financial Officer and Principal Accounting Officer since September 18,
2008. Mr. Stocker has significant experience working with
multinational companies in the capacities of chief financial officer, financial
advisor, account analyst, and consultant. Since 2005, Mr. Stocker has served as
managing director of TMF, a global management and accounting outsource firm, and
is responsible for managing TMF’s offices in Argentina and
Uruguay. Between 1994 and 2005, Mr. Stocker worked with KPMG’s
outsourcing department and served as Chief Financial Officer and Controller to
several South American companies in various industries overseeing their
financial operations.
John
Keenan. Mr. Keenan has served as our Vice President of
Exploration since October 3, 2008. Mr. Keenan has approximately 39
years experience working as a geologist. Mr. Keenan obtained a
Bachelor of Science degree in Geology from the University of London in 1969 and
a Master of Science in Mineral exploration from the Imperial College Royal
School of Mines in London in 1971. Since May 2008, Mr. Keenan has
also served as the Papua New Guinea representative for Tasman Goldfields Ltd.
and is responsible for directing its exploration activities. Since
February 2006, Mr. Keenan has served as an Exploration Manager for Buffalo Gold
Ltd. in Papua New Guinea and is responsible for supervising and directing
exploration activities. From August 2003 to January 2006, Mr. Keenan
served as a contract geologist for Triumph Gold Corporation where his
responsibilities included directing exploration programs for properties located
in Venezuela. Between August 2003 and July 2004, Mr. Keenan worked as
an independent geological and geotechnical consultant for various gold
exploration projects in South America and geotechnical investigations in the
Caribbean islands.
Our
Directors are elected annually and hold office until the next annual meeting of
our stockholders or until their successors are elected and
qualified. Officers are elected annually and serve at the discretion of the
Board of Directors. Board vacancies are filled by a majority vote of the
Board. There are no family relationship between any of our directors,
director nominees and executive officers.
Audit
Committee
We do not have a separately-designated
standing audit committee. The entire Board of Directors performs the
functions of an audit committee, but no written charter governs the actions of
the Board when performing the functions of that would generally be performed by
an audit committee. The Board approves the selection of our
independent accountants and meets and interacts with the independent accountants
to discuss issues related to financial reporting. In addition, the
Board reviews the scope and results of the audit with the independent
accountants, reviews with management and the independent accountants our annual
operating results, considers the adequacy of our internal accounting procedures
and considers other auditing and accounting matters including fees to be paid to
the independent auditor and the performance of the independent
auditor.
For the fiscal year ending December 31,
2008, the Board:
|
·
|
Reviewed
and discussed the audited financial statements with management,
and
|
|
·
|
Reviewed
and discussed the written disclosures and the letter from our independent
auditors on the matters relating to the auditor's
independence.
|
Based upon the Board’s review and
discussion of the matters above, the Board authorized inclusion of the audited
financial statements for the year ended December 31, 2008 to be included in the
Annual Report on Form 10-K and filed with the Securities and Exchange
Commission.
Our Board of Directors examined the
Commission's definition of "audit committee financial expert" and concluded that
we do not currently have a person that qualifies as such an expert. Currently,
there are only four directors serving on our Board, and we are not in a position
at this time to attract, retain and compensate additional directors in order to
acquire a director who qualifies as an "audit committee financial expert," but
we intend to retain an additional director who will qualify as such an expert,
as soon as reasonably practicable. While neither of our current directors meets
the qualifications of an "audit committee financial expert," each of our
directors, by virtue of their past employment experience, has knowledge of
financial statements, finance, and accounting. Accordingly, we
believe that our current directors capably fulfill their duties and
responsibilities in the absence of such an expert.
Director
Independence
Our board of directors has determined
that Messrs. Van Tassell, Kerr and Grant are “independent” as such term is
defined by NASDAQ Rule 4200(a)(15).
Section 16(a)
Beneficial Ownership Reporting
Section 16(a) of the Securities
Act of 1934, as amended, requires our executive officers and directors, and
persons who own more than ten percent (10%) of our common stock, to file
with the Securities and Exchange Commission reports of ownership of, and
transactions in, our securities and to provide us with copies of those filings.
To our knowledge, based solely on our review of the copies of such forms
received by us, or written representations from certain reporting persons, we
believe that during the year ended December 31, 2008, all filing
requirements applicable to our officers, directors and greater than ten percent
beneficial owners were complied with, with the following exceptions: Mr. Kerr
and Temasek Investments Inc. each failed to file their initial reports on Form 3
in a timely fashion during fiscal 2008 and Messrs. Hunter and Phillippe each
failed to file a Form 4 in a timely fashion during fiscal year
2008.
Code
of Ethics and Conduct
Our Board of Directors has adopted a
Code of Ethics and Conduct
that is applicable to all of our employees, officers and directors. Our
Code of Ethics and Conduct
is intended to ensure that our employees act in accordance with the
highest ethical standards. The Code of Ethics and Conduct
was filed as an exhibit to our Annual Report on Form 10-KSB for the
fiscal year ended December 31, 2005.
ITEM 11. Executive
Compensation.
The following table presents
information concerning the total compensation of the Company’s Chief Executive
Officer, Chief Financial Officer and the other most highly compensated officers
during the last fiscal year (the “Named Executive Officers”) for services
rendered to the Company in all capacities for the years ended December 31,
2008 and 2007:
|
Name
(a)
|
Year
|
Salary
($)
(1)
|
Bonus
($)
(1)
|
Stock
Awards
($)
(2)
|
Option
Awards
($)
(2)
|
All
Other
Compensation
($)
(3)
|
Total
($)
|
|
Hector
Ponte
CEO
and President
|
2008
2007
|
-
-
|
-
-
|
-
-
|
-
-
|
-
-
|
-
-
|
|
Carlos
Stocker
CFO,
Secretary, Treasurer
|
2008
2007
|
-
-
|
-
-
|
-
-
|
-
-
|
-
-
|
-
-
|
|
John
Keenan
Vice
President of Exploration
|
2008
2007
|
-
-
|
-
-
|
-
-
|
-
-
|
-
-
|
-
-
|
|
Kenneth
Phillippe
Former
CFO, Secretary, Treasurer
(4)
|
2008
2007
|
-
-
|
-
-
|
-
-
|
-
62,500
|
37,830
38,160
|
37,830
100,660
|
|
Robert
Horn
Former
COO (5)
|
2008
2007
|
-
-
|
-
-
|
-
-
|
-
-
|
15,000
60,000
|
15,000
60,000
|
|
Peter
Eliel Lofberg
Former
President (6)
|
2008
2007
|
-
-
|
-
-
|
94,048
50,952
|
-
-
|
112,602
176,176
|
206,650
227,128
|
|
Daniel
Hunter
Former
CEO (7)
|
2008
2007
|
-
-
|
-
-
|
-
-
|
-
312,500
|
126,000
127,200
|
126,000
439,700
|
|
(1)
|
No
executive officers received any salary or bonus during the fiscal years
ended December 31, 2008 or 2007.
|
|
(2)
|
Represents
the expense for stock options, as indicated, recognized by the Company in
accordance with Financial Accounting Standard No. 123(R) (“FAS 123(R)”),
which requires that compensation cost relating to share-based awards be
recognized in the financial statements. The cost is measured
based on the fair value of the awards. The values set forth in
this column represent the dollar amounts recognized in accordance with FAS
123(R), disregarding the estimate of forfeitures for service-based vesting
conditions. The expense recognized by the employer in
accordance with FAS 123(R) may differ from the value that will eventually
be realized by the named executive officers, which will be based on the
market value of the common stock at the time of vesting of restricted
shares or at the time of the exercise of stock options. The
named executive officers will realize value in connection with the stock
options only if and to the extent the price of the common stock exceeds
the exercise price of the stock options at such time as the officers
exercise the stock options. The assumptions used to determine
the FAS 123(R) values are described in Note 2 to the Notes to
the Consolidated Financial Statements of Amazon Goldsands
Ltd. No stock or option awards were granted to named executive
officers in 2008.
|
|
(3)
|
The
amounts listed under the Column entitled “All Other Compensation” in the
“Summary Compensation Table” related to consulting fees paid during
2008.
|
|
(4)
|
Mr.
Phillippe served as our Treasurer, Chief Financial Officer and Secretary
from October 25, 2006 until his resignation on September 18,
2008.
|
|
(5)
|
Mr.
Horn served as our Chief Operating Officer from August 21, 2007 until his
resignation on March 27, 2008.
|
|
(6)
|
Mr.
Lofberg served as our President from November 27, 2006 until his
resignation from this position on May 21,
2008.
|
|
(7)
|
Mr.
Hunter served as our Chief Executive Officer from October 25, 2006 until
his resignation from this position on July 24,
2008.
|
Compensation
Components.
Base
Salary. At this time, we do not compensate our executive officers by the
payment of salaries.
Bonuses. At
this time, we do not compensate our executive officers by the payment of bonus
compensation.
Stock
Options. Stock option awards are determined by the Board
of Directors based on numerous factors, some of which include responsibilities
incumbent with the role of each executive to the Company and tenure with the
Company. We did not grant any stock options to our executive officers
during 2008.
At no
time during the last fiscal year was any outstanding option repriced or
otherwise modified. There was no tandem feature, reload feature, or
tax-reimbursement feature associated with any of the stock options we granted to
our executive officers or otherwise.
Other. At
this time, we have no profit sharing plan in place.
Outstanding
Equity Awards at Fiscal Year-End
|
Option
Awards
|
|||||
|
Name
(a)
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
(b)
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
(c)
|
Equity Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options (#)
(d)
|
Option
Exercise
Price
($)
(e)
|
Option
Expiration
Date
(f)
|
|
Hector
Ponte
CEO
and President
|
-
|
-
|
-
|
-
|
-
|
|
Carlos
Stocker
CFO,
Secretary, Treasurer
|
-
|
-
|
-
|
-
|
-
|
|
John
Keenan
Vice
President of Exploration
|
-
|
-
|
-
|
-
|
-
|
|
Kenneth
Phillippe
Former
CFO, Secretary, Treasurer
|
-
|
-
|
-
|
-
|
-
|
|
Robert
Horn
Former
COO
|
-
|
-
|
-
|
-
|
-
|
|
Peter
Eliel Lofberg
Former
President
|
-
|
-
|
-
|
-
|
-
|
|
Daniel
Hunter
Former
COO
|
-
|
-
|
-
|
-
|
-
|
All share and per share data set forth
below has been adjusted to give effect to the one (1)-for-twenty (20) reverse
stock split of our Common Stock, par value $0.00001 per share, which became
effective at the close of business on June 6, 2008.
Mr. Phillippe served as our
Secretary, Treasurer, Chief Financial Officer and Principal Accounting Officer
from October 25, 2006 until his resignation on September 18, 2008. In
2007, Mr. Phillippe received as part of his compensation as Secretary,
Treasurer, Chief Financial Officer and Principal Accounting Officer a stock
option grant to acquire 2,500 shares of Amazon Goldsands Ltd. common stock at
the exercise price of $20.00 per share. These options were
cancelled. As such, Mr.
Phillippe currently owns no stock
options.
Mr. Lofberg served as our President
from November 27, 2006 until his resignation from this position on May 21,
2008. In 2007, in recognition for his service as President, Mr.
Lofberg received a restricted stock award of 5,000 shares of Amazon
Goldsands Ltd. common stock at a deemed price of $29.00 per
share. This restricted stock award was cancelled on April 17,
2008. As
such, Mr. Lofberg held no outstanding equity awards as of December 31,
2008.
Mr. Hunter served as a member of our
board of directors from September 18, 2006 until his resignation from this
position on July 24, 2008. Mr. Hunter also served as our Chief
Operating Officer from October 25, 2006 until his resignation from this position
on July 24, 2008. In 2007, in recognition for his service as an executive
officer, Mr.. Hunter received a stock option grant to acquire 12,500 shares of
Amazon Goldsands Ltd. common stock at the exercise price of $20.00 per
share. These options were cancelled on December 27,
2007. As
such, Mr. Hunter currently owns no stock options.
Stock
Option Plans
In 2007, our Board adopted the 2007
Stock Incentive Plan (the “Stock Incentive Plan”). The Stock Incentive Plan
authorizes us to reserve shares for future grants under it, of which 485,000
shares remain available for issuance.
The Stock Incentive Plan authorizes
us to grant (i) to the key employees incentive stock options to purchase
shares of common stock and non-qualified stock options to purchase shares of
common stock and restricted stock awards, and (ii) to non-employee
directors and consultants’ non-qualified stock options and restricted stock. The
Plan Administrator will administer the Plan by making recommendations to the
board or determinations regarding the persons to whom options or restricted
stock should be granted and the amount, terms, conditions and restrictions of
the awards.
Incentive stock options granted under
the Stock Incentive Plan must have an exercise price at least equal to 100% of
the fair market value of the common stock as of the date of grant. Incentive
stock options granted to any person who owns, immediately after the grant, stock
possessing more than 10% of the combined voting power of all classes of our
stock, or of any parent or subsidiary corporation, must have an exercise price
at least equal to 110% of the fair market value of the common stock on the date
of grant. Non-statutory stock options may have exercise prices as determined by
the Plan Administrator.
The Plan Administrator is also
authorized to grant restricted stock awards under the Stock Incentive Plan. A
restricted stock award is a grant of shares of the common stock that is subject
to restrictions on transferability, risk of forfeiture and other restrictions
and that may be forfeited in the event of certain terminations of employment or
service prior to the end of a restricted period specified by the Plan
Administrator.
Compensation
of Directors
Set forth below is a summary of the
compensation paid to each person that served as a director that was not an
employee of Amazon Goldsands Ltd. in fiscal 2008. The following table does not
include Mr. Hector Ponte, who is an executive officer, as well as a director, of
Amazon Goldsands Ltd. and who did not receive compensation for service on Amazon
Goldsands Ltd.’s board of directors in 2008. The following table also
does not include Mr. Daniel Hunter, Mr. Peter Eliel Lofberg, and Mr. Robert
Horn, who formerly served as executive officers, as well as directors, of Amazon
Goldsands Ltd. and who did not receive compensation for service on Amazon
Goldsands Ltd.’s board of directors in 2008 through the effective date of their
resignations. The compensation arrangements for Messrs. Ponte,
Hunter, Lofberg, and Horn is discussed under “Executive Compensation” in this
annual report.
Director
Compensation
|
Name
(a)
|
Fees Earned
Or
Paid in
Cash
($)
|
Stock
Awards
($)
|
Option
Awards
($)
(1)(2)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Non-Qualified
Deferred
Compensation
Earnings
($)
|
All
Other
Compensation
($)
(3)
|
Total
($)
|
|
Robert
Van Tassell
|
—
|
94,048
|
—
|
—
|
—
|
11,731
|
105,779
|
|
David
Kerr
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|
David
Grant
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(1)
Each
person that served as a director that was not an employee of Amazon Goldsands
Ltd. had the following equity awards outstanding as of the end of fiscal
2008:
|
Name
|
Option Awards
|
Stock Awards
|
|
Number
of Securities Underlying Unexercised Options
(#)
|
Number
of Shares of Restricted Stock that Have Not
Vested (#)
|
|
|
Robert
Van Tassell
|
0
|
0
|
|
David
Kerr
|
0
|
0
|
|
David
Grant
|
0
|
0
|
(2)
No
options were granted or exercised in 2008.
(3)
The
amounts listed under the Column entitled “All Other Compensation” in the
“Summary Compensation Table” related to consulting fees paid during
2008.
Employment
Contracts; Termination of Employment and Change-in-Control
Arrangements
We do not
have any employment agreements with any of our executive officers.
ITEM 12. Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
The following table sets forth, as of
February 9, 2009, the number and percentage of outstanding shares of common
stock beneficially owned by (a) each person known by us to beneficially own
more than five percent of such stock, (b) each director of the Company,
(c) each named officer of the Company, and (d) all our directors and
executive officers as a group. We have no other class of capital stock
outstanding.
|
Amount
and Nature of Beneficial Ownership
|
|||||
|
Name
and Address of Beneficial Owner(1)
|
Shares
Owned (2)
|
Options
Exercisable
Within
60 Days (3)
|
Percent
of
Class
|
||
|
Directors
and Executive Officers
|
|||||
|
Hector
Ponte
|
0
|
-
|
-
|
||
|
Carlos
Stocker
|
0
|
-
|
-
|
||
|
John
Keenan
|
0
|
-
|
-
|
||
|
Robert
Van Tassell
|
5,000
|
-
|
*
|
||
|
David
Kerr
|
0
|
-
|
-
|
||
|
David
Grant
|
0
|
-
|
-
|
||
|
All
current directors and executive officers as a group (six
persons)
|
5,000
|
-
|
*
|
||
|
More
Than 5% Beneficial Owners
|
|||||
|
Temasek
Investments Inc.
Suite
1-A, #5
Calle
Eusebio A. Morales
El
Cangrejo, Panama City
Panama
|
2,500,000
|
-
|
59.6%
|
||
*
Represents less than 1% of the class.
(1)
Unless otherwise provided, the address of each person is c/o Jiron Caracas 2226,
Jesús María, Lima 11, Perú
(2) Except
as otherwise indicated, all shares shown in the table are owned with sole voting
and investment power.
(3)
This column represents shares not included in “Shares Owned” that may be
acquired by the exercise of options
within 60 days of February 9, 2009.
The above
beneficial ownership information is based on information furnished by the
specified persons and is determined in accordance with Rule 13d-3 under the
Exchange Act, as required for purposes of this annual report; accordingly, it
includes shares of Amazon Goldsands Ltd. common stock that are issuable upon the
exercise of stock options exercisable within 60 days of February 9, 2009. Such
information is not necessarily to be construed as an admission of beneficial
ownership for other purposes.
ITEM 13. Certain
Relationships and Related Transactions, and Director
Independence.
None of our directors or executive
officers, nor any proposed nominee for election as a director, nor any person
who beneficially owns, directly or indirectly, shares carrying more than 5% of
the voting rights attached to all of our outstanding shares, nor any members of
the immediate family (including spouse, parents, children, siblings, and
in-laws) of any of the foregoing persons has any material interest, direct or
indirect, in any transaction since the beginning of our last fiscal year on
January 1, 2008 or in any presently proposed transaction which, in either case,
has or will materially affect us.
ITEM 14. Principal
Accounting Fees and Services.
The following table is a summary of
the fees billed to us by I Vellmer Inc., Chartered Accountants for professional
services for the fiscal years ended December 31, 2008 and December 31,
2007:
|
Fiscal
2008
Fees
|
Fiscal
2007
Fees
|
|||||||
|
Fee
Category
|
||||||||
|
Audit
Fees
|
$ | 46,467 | $ | 34,860 | ||||
|
Audit-Related
Fees
|
- | - | ||||||
|
Tax
Fees
|
- | - | ||||||
|
All
Other Fees
|
- | - | ||||||
|
Total
Fees
|
$ | 46,467 | $ | 34,860 | ||||
Audit
Fees. Consists of fees
billed for professional services rendered for the audit of our consolidated
financial statements and review of the interim consolidated financial statements
included in quarterly reports and services that are normally provided by our
independent registered public accounting firms in connection with statutory and
regulatory filings or engagements.
Audit-Related
Fees. Consists of fees
billed for assurance and related services that are reasonably related to the
performance of the audit or review of our consolidated financial statements and
are not reported under “Audit Fees.” These services include employee benefit
plan audits, accounting consultations in connection with acquisitions, attest
services that are not required by statute or regulation, and consultations
concerning financial accounting and reporting standards.
Tax
Fees. Consists of fees
billed for professional services for tax compliance, tax advice and tax
planning. These services include assistance regarding federal, state and
international tax compliance, tax audit defense, customs and duties, mergers and
acquisitions, and international tax planning.
All Other
Fees. Consists of fees for
products and services other than the services reported above. In fiscal 2008 and
2007, these services included administrative services.
Our practice is to consider and
approve in advance all proposed audit and non-audit services to be provided by
our independent registered public accounting firm.
The audit report of I Vellmer Inc.,
Chartered Accountants on the financial statements of the Company for the year
ended December 31, 2008 did not contain an adverse opinion or disclaimer of
opinion, and was not qualified or modified as to uncertainty, audit scope or
accounting principles, except that the audit reports on the financial statements
of the Company for the fiscal years ended December 31, 2008 and December 31,
2007 contained an uncertainty about the Company’s ability to continue as a going
concern.
During our fiscal years ended
December 31, 2008 and 2007, there were no disagreements with I Vellmer
Inc., Chartered Accountants on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedures, which
disagreements if not resolved to I Vellmer Inc., Chartered Accountants’
satisfaction would have caused it to make reference to the subject matter of
such disagreements in connection with its reports on the financial statements
for such periods.
During our fiscal years ended
December 31, 2008 and 2007, there were no reportable events (as described
in Item 304(a)(1)(v) of Regulation S-K).
PART
IV
ITEM 15. Exhibits,
Financial Statement Schedules.
(a)(1)
|
Index
to Financial Statements
|
Page (s)
|
|||
|
Report
of Independent Registered Public Accounting Firm
|
F-1
|
|||
|
Financial
Statements:
|
||||
|
Consolidated
Balance Sheets - December 31, 2008 and 2007
|
F-2
|
|||
|
Consolidated
Statements of Operations for the Years Ended December 31, 2008 and
2007 and from Inception on September 5, 1997 to December 31,
2008
|
F-3
|
|||
|
Consolidated
Statements of Changes in Stockholders’ Equity from Inception on September
5, 1997 to December 31, 2008
|
F-4
|
|||
|
Consolidated
Statements of Cash Flows for the Years Ended December 31, 2008 and
2007 and from Inception on September 5, 1997 to December 31,
2008
|
F-9
|
|||
|
Notes
to Consolidated Financial Statements
|
F-11
|
|||
(a)(2) Not
Applicable
(a)(3) Exhibits.
See
(b) below
(b) Exhibits.
See the
Exhibit Index following the signature page of this report, which is
incorporated herein by reference.
(c) Financial
Statements Excluded From Annual Report to Shareholders
Not
Applicable
|
I.
Vellmer Inc.
|
|||||
|
Chartered
Accountant*
|
|||||
|
721
– 602 W. Hastings Street
|
|||||
|
Vancouver,
B.C., V6B 1P2
|
|||||
|
Tel:
|
604-687-3773
|
||||
|
Fax:
|
604-687-3778
|
||||
|
E-mail:
|
vellmer@i-vellmer.ca
|
||||
|
*denotes
an incorporated professional
|
|||||
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Stockholders of Amazon Goldsands Ltd.
(Formerly
Finmetal Mining Ltd.)
(An
Exploration Stage Company)
I have
audited the accompanying consolidated balance sheets of Amazon Goldsands Ltd.
(an exploration stage company) as at December 31, 2008 and 2007 and the
consolidated statements of operations, stockholders’ equity and cash flows for
the years ended December 31, 2008 and 2007 and the period cumulative from
inception on September 5, 1997 to December 31, 2008. These
financial statements are the responsibility of the Company’s
management. My responsibility is to express an opinion on these
financial statements based on my audits.
I
conducted my audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that I plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. 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. I believe that my audits provide a reasonable basis for
my opinion.
In my
opinion, these financial statements present fairly, in all material respects,
the financial position of Amazon Goldsands Ltd. as at December 31, 2008 and 2007
and the results of its operations and its cash flows for the years ended
December 31, 2008 and 2007 and the period cumulative from inception on September
5, 1997 to December 31, 2008 in conformity with accounting principles generally
accepted in the United States of America.
The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern. As discussed in Note 1 to the financial
statements, the Company’s business is in the exploration stage and has not
generated any revenue to date. The Company will likely require new
financing, either through issuing shares or debt, to continue in its business of
acquiring, exploring and developing mineral properties. These factors
together raise substantial doubt about its ability to continue as a going
concern. Management’s plans in regards to these matters are also discussed in
Note 1. The financial statements do not include any adjustment that might result
from the outcome of this uncertainty.
/s/
I. Velmer
Inc.
Vancouver,
Canada
March
31,
2009
Chartered Accountants
AMAZON
GOLDSANDS LTD.
(formerly
Finmetal Mining Ltd.)
(An
Exploration Stage Company)
CONSOLIDATED
BALANCE SHEETS
|
December
31,
|
||||||||
|
As
at
|
2008
|
2007
|
||||||
| $ | $ | |||||||
|
ASSETS
|
||||||||
|
Current
|
||||||||
|
Cash
and cash equivalents
|
492,903 | 1,957,856 | ||||||
|
Exploration
program advances
|
- | 87,600 | ||||||
|
Taxes
recoverable
|
4,394 | 19,226 | ||||||
|
Prepaid
expenses and deposit
|
1,962 | 5,723 | ||||||
| 499,259 | 2,070,415 | |||||||
|
Mineral
property interests (Note 4(i))
|
875,000 | - | ||||||
|
Property
and equipment, net of accumulated amortization
|
||||||||
|
(Note
4(ii))
|
25,964 | 35,214 | ||||||
|
Website
development cost, net of accumulated amortization
|
||||||||
|
of
$15,833 (December 31, 2007: $4,167)
|
24,167 | 5,833 | ||||||
|
Total
Assets
|
1,424,390 | 2,111,453 | ||||||
|
LIABILITIES
|
||||||||
|
Current
|
||||||||
|
Accounts
payable and accrued liabilities (Note 5)
|
312,804 | 647,414 | ||||||
|
Amounts
due to related parties (Note 3)
|
- | 54,365 | ||||||
|
Total
Liabilities
|
312,804 | 701,779 | ||||||
|
STOCKHOLDERS’
EQUITY
|
||||||||
|
Common
stock (Note 6)
|
||||||||
|
Authorized:
- 200,000,000
common shares, par value $0.00001
- 200,000,000
blank check preferred shares, par value $0.001
Issued
and outstanding:
- 4,191,252
common shares (December 31, 2007: 1,722,502 common
shares)
|
42 | 17 | ||||||
|
Additional
paid-in capital
|
11,694,408 | 14,314,965 | ||||||
|
Share
subscriptions received (Note 12)
|
613,583 | - | ||||||
|
Deferred
stock based compensation (Note 6)
|
- | (725,796 | ) | |||||
|
(Deficit)
accumulated during the exploration stage
|
(11,196,447 | ) | (12,179,512 | ) | ||||
|
Total
Stockholders’ Equity
|
1,111,586 | 1,409,674 | ||||||
|
Total
Liabilities and Stockholders’ Equity
|
1,424,390 | 2,111,453 | ||||||
NOTE
1 – INCORPORATION, NATURE AND CONTINUANCE OF OPERATIONS
NOTE
9 – COMMITMENTS
NOTE
12 – SUBSEQUENT EVENT
See
accompanying Notes to the Consolidated Financial Statements
AMAZON
GOLDSANDS LTD.
(formerly
Finmetal Mining Ltd.)
(An
Exploration Stage Company)
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
Cumulative
|
|||||||||||||||
|
From
|
|||||||||||||||
|
Inception
on
|
|||||||||||||||
|
September
5,
|
|||||||||||||||
|
Year
ended
|
1997
to
|
||||||||||||||
|
December
31,
|
December
31,
|
||||||||||||||
|
2008
|
2007
|
2008
|
|||||||||||||
|
GENERAL
AND ADMINISTRATIVE EXPENSES
|
|||||||||||||||
|
Amortization
– property and equipment
|
$
|
13,777
|
$
|
9,004
|
$
|
23,645
|
|||||||||
|
Amortization
– website development costs
|
11,667
|
3,334
|
15,834
|
||||||||||||
|
Bank
charges
|
2,838
|
2,246
|
8,081
|
||||||||||||
|
Consulting
and management
fees
(recovery) (Note 6)
|
(2,048,882)
|
6,282,962
|
4,560,576
|
||||||||||||
|
Foreign
exchange (gain) loss
|
(2,412)
|
(1,235)
|
16,346
|
||||||||||||
|
Investor
communication and promotion
|
251,304
|
262,776
|
557,224
|
||||||||||||
|
Office
and administrative
|
47,665
|
43,032
|
122,847
|
||||||||||||
|
Professional
fees
|
211,165
|
161,509
|
436,284
|
||||||||||||
|
Rent
|
18,806
|
15,438
|
42,416
|
||||||||||||
|
Telephone
|
19,257
|
30,598
|
54,383
|
||||||||||||
|
Transfer
agent and filing fees
|
4,984
|
10,778
|
37,242
|
||||||||||||
|
Travel
and accommodation
|
105,077
|
172,533
|
376,636
|
||||||||||||
|
Website
maintenance
|
20,000
|
18,000
|
41,000
|
||||||||||||
|
Mineral
property acquisition and exploration expenditures
|
380,685
|
2,583,124
|
5,043,207
|
||||||||||||
|
(964,069)
|
9,594,099
|
11,335,721
|
|||||||||||||
|
OTHER
INCOME AND (EXPENSES)
|
|||||||||||||||
|
Forgiveness
of debt
|
15,000
|
-
|
39,000
|
||||||||||||
|
Gain
on sale of oil and gas property
|
-
|
-
|
10,745
|
||||||||||||
|
Interest
income
|
9,510
|
82,642
|
102,561
|
||||||||||||
|
Recovery
of expenses
|
-
|
-
|
4,982
|
||||||||||||
|
Write-down
of incorporation cost
|
-
|
-
|
(12,500)
|
||||||||||||
|
Write-down
of assets
|
(5,514)
|
(5,514)
|
|||||||||||||
|
NET
(INCOME) LOSS
|
$
|
(983,065)
|
$
|
9,511,457
|
$
|
11,196,447
|
|||||||||
|
Net
income (loss) per share
|
$
|
0.39
|
$
|
(
5.40)
|
|||||||||||
|
Weighted
average shares outstanding
|
2,537,534
|
1,762,782
|
|||||||||||||
|
See
accompanying Notes to the Consolidated Financial
Statements
|
|||||||||||||||
AMAZON
GOLDSANDS LTD.
(formerly
Finmetal Mining Ltd.)
(An
Exploration Stage Company)
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)
From
Inception (September 5, 1997) to December 31, 2008:
|
Common
Shares
|
Stock
Amount
|
Additional
Paid-in
Capital
|
Deferred
Stock
Based
Compensation
|
Deficit
Accumulated
During
The
Exploration
Stage
|
Total
Stockholders’
Equity
(Deficiency)
|
|||||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||||||
|
Balance,
September 5, 1997
|
- | - | - | - | - | - | ||||||||||||||||||
|
Issuance
of common shares for cash at $0.25 per share on September 28,
1997
|
4,000 | 1 | 999 | - | - | 1,000 | ||||||||||||||||||
|
Net
loss for the period
|
- | - | - | - | (2,522 | ) | (2,522 | ) | ||||||||||||||||
|
Balance,
September 30, 1997
|
4,000 | 1 | 999 | - | (2,522 | ) | (1,522 | ) | ||||||||||||||||
|
Issuance
of common shares on acquisition of oil and gas property in New Zealand at
$25 per share on June 25, 1998
|
400 | - | 10,000 | - | - | 10,000 | ||||||||||||||||||
|
Issuance
of common shares for cash at $0.25 per share on July 8,
1998
|
4,000 | 1 | 999 | - | - | 1,000 | ||||||||||||||||||
|
Net
loss for the year
|
- | - | - | - | (1,246 | ) | (1,246 | ) | ||||||||||||||||
|
Balance,
September 30, 1998
|
8,400 | 2 | 11,998 | - | (3,768 | ) | 8,232 | |||||||||||||||||
|
Issuance
of common shares for cash at $25 per share on November 20,
1998
|
4,000 | 1 | 99,999 | - | - | 100,000 | ||||||||||||||||||
|
Repurchase
of common shares for cash at $0.25 per share on November 28,
1998
|
(4,000 | ) | (1 | ) | (999 | ) | - | - | (1,000 | ) | ||||||||||||||
|
Net
loss for the year
|
- | - | - | - | (9,569 | ) | (9,569 | ) | ||||||||||||||||
|
Balance,
September 30, 1999
|
8,400 | 1 | 110,999 | - | (13,337 | ) | 97,663 | |||||||||||||||||
|
Net
loss for the year
|
- | - | - | - | (34,290 | ) | (34,290 | ) | ||||||||||||||||
|
Balance,
September 30, 2000
|
8,400 | 1 | 110,999 | - | (47,627 | ) | 63,373 | |||||||||||||||||
See
accompanying Notes to the Consolidated Financial Statements
AMAZON
GOLDSANDS LTD.
(formerly
Finmetal Mining Ltd.)
(An
Exploration Stage Company)
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)
From
Inception (September 5, 1997) to December 31, 2008:
|
Common
Shares
|
Stock
Amount
|
Additional
Paid-in
Capital
|
Deferred
Stock
Based
Compensation
|
Deficit
Accumulated
During
The
Exploration
Stage
|
Total
Stockholders’
Equity
(Deficiency)
|
|||||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||||||
|
Balance,
September 30, 2000
(carried
forward)
|
8,400 | 1 | 110,999 | - | (47,627 | ) | 63,373 | |||||||||||||||||
|
Net
loss for the year
|
- | - | - | - | (14,296 | ) | (14,296 | ) | ||||||||||||||||
|
Balance,
September 30, 2001
|
8,400 | 1 | 110,999 | - | (61,923 | ) | 49,077 | |||||||||||||||||
|
Net
income for the year
|
- | - | - | - | 10,954 | 10,954 | ||||||||||||||||||
|
Balance,
September 30, 2002
|
8,400 | 1 | 110,999 | - | (50,969 | ) | 60,031 | |||||||||||||||||
|
Net
income for the year
|
- | - | - | - | 2,387 | 2,387 | ||||||||||||||||||
|
Balance,
September 30, 2003
|
8,400 | 1 | 110,999 | - | (48,582 | ) | 62,418 | |||||||||||||||||
|
Issuance
of common shares for cash at $1.50 per share and services at $6 per share
on April 2, 2004
|
8,569 | 1 | 62,699 | - | - | 62,700 | ||||||||||||||||||
|
Donated
capital
|
- | - | 5,000 | - | - | 5,000 | ||||||||||||||||||
|
Net
loss for the year
|
- | - | - | - | (64,175 | ) | (64,175 | ) | ||||||||||||||||
|
Balance,
September 30, 2004
|
16,969 | 1 | 178,699 | - | (112,757 | ) | 65,943 | |||||||||||||||||
|
Donated
capital
|
- | - | 3,000 | - | - | 3,000 | ||||||||||||||||||
|
Net
loss for the year
|
- | - | - | - | (7,750 | ) | (7,750 | ) | ||||||||||||||||
|
Balance,
December 31, 2004
|
16,969 | 1 | 181,699 | - | (120,507 | ) | 61,193 | |||||||||||||||||
AMAZON
GOLDSANDS LTD.
(formerly
Finmetal Mining Ltd.)
(An
Exploration Stage Company)
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)
From
Inception (September 5, 1997) to December 31, 2008:
|
Common
Shares
|
Stock
Amount
|
Additional
Paid-in
Capital
|
Deferred
Stock
Based
Compensation
|
Deficit
Accumulated
During
The
Exploration
Stage
|
Total
Stockholders’
Equity
(Deficiency)
|
|||||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||||||
|
Balance,
December 31, 2004
(carried
forward)
|
16,969 | 1 | 181,699 | - | (120,507 | ) | 61,193 | |||||||||||||||||
|
Repurchase of common stock for cash at $ 0.25 per
share
on March 3, 2005
|
(4,000 | ) | (1 | ) | (999 | ) | - | - | (1,000 | ) | ||||||||||||||
|
Donated
Capital
|
- | - | 8,200 | - | - | 8,200 | ||||||||||||||||||
|
Net loss for year
|
- | - | - | - | (40,652 | ) | (40,652 | ) | ||||||||||||||||
|
Balance,
December 31, 2005
|
12,969 | 1 | 188,899 | - | (161,159 | ) | 27,741 | |||||||||||||||||
|
Issue
of common stock for cash
at $0.125 per share
on
April 7, 2006
|
1,200,000 | 12 | 149,988 | - | - | 150,000 | ||||||||||||||||||
|
Cancellation
of shares on September 6, 2006
|
(8,467 | ) | (1 | ) | 1 | - | - | - | ||||||||||||||||
|
Issue
of common stock on purchase of Finmetal Mining Oy
at
a deemed value of $25.60 per share on November 27, 2006
|
50,000 | 1 | 1,279,999 | - | - | 1,280,000 | ||||||||||||||||||
|
Stock
grant issued as stock based compensation at a deemed
value
of $24.80 per share on November 30, 2006
|
97,500 | 1 | 2,417,999 | (2,321,280 | ) | - | 96,720 | |||||||||||||||||
|
Issue
of 254,500 common shares for cash at $10 per share and
25,450
common shares as a finder’s fee on December 7, 2006
|
279,950 | 3 | 2,544,997 | - | - | 2,545,000 | ||||||||||||||||||
|
Net
loss for the year
|
- | - | - | - | (2,506,896 | ) | (2,506,896 | ) | ||||||||||||||||
|
Balance,
December 31, 2006
|
1,631,952 | 17 | 6,581,883 | (2,321,280 | ) | (2,668,055 | ) | 1,592,565 | ||||||||||||||||
See
accompanying Notes to the Consolidated Financial Statements
AMAZON
GOLDSANDS LTD.
(formerly
Finmetal Mining Ltd.)
(An
Exploration Stage Company)
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)
From
Inception (September 5, 1997) to December 31, 2008:
|
Common
Shares
|
Stock
Amount
|
Additional
Paid-in
Capital
|
Deferred
Stock
Based
Compensation
|
Deficit
Accumulated
During
The
Exploration
Stage
|
Total
Stockholders’
Equity
(Deficiency)
|
|||||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||||||
|
Balance,
December 31, 2006
(carried
forward)
|
1,631,952 | 17 | 6,581,883 | (2,321,280 | ) | (2,668,055 | ) | 1,592,565 | ||||||||||||||||
|
Issue
of 121,800 common shares for cash at $25 per unit on April 17, 2007, net
of finder’s fees of $312,896
|
121,800 | 1 | 2,732,128 | - | - | 2,732,129 | ||||||||||||||||||
|
Issue
of 8,358 warrants as a finder’s fee on April 17, 2007 pursuant
to an unit offering
|
- | - | 100,421 | - | - | 100,421 | ||||||||||||||||||
|
Stock
grant issued as stock based compensation at a deemed value of $29 per
share on April 17, 2007 (Note 6)
|
46,250 | 1 | 1,341,249 | (1,341,250 | ) | - | - | |||||||||||||||||
|
Issue
of 20,000 common shares as a finder’s fee for mineral interests at a
deemed value of $26.80 on May 4, 2007 (Note 4(i))
|
20,000 | 1 | 535,999 | - | - | 536,000 | ||||||||||||||||||
|
Stock
based compensation on granting of stock options and stock (Note
6)
|
- | - | 3,023,282 | 2,936,734 | - | 5,960,016 | ||||||||||||||||||
|
Cancellation
of stock awards (Note 6)
|
(97,500 | ) | (1 | ) | 1 | - | - | - | ||||||||||||||||
|
Net
loss for the year
|
- | - | - | - | (9,511,457 | ) | (9,511,457 | ) | ||||||||||||||||
|
Balance,
December 31, 2007
|
1,722,502 | 18 | 14,314,964 | (725,796 | ) | (12,179,512 | ) | 1,409,674 | ||||||||||||||||
AMAZON
GOLDSANDS LTD.
(formerly
Finmetal Mining Ltd.)
(An
Exploration Stage Company)
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)
From
Inception (September 5, 1997) to December 31, 2008:
|
Common
Shares
|
Stock
Amount
|
Additional
Paid-in
Capital
|
Deferred
Stock
Based
Compensation
|
Share
subscriptions
received
|
Deficit
Accumulated
During
The
Exploration
Stage
|
Total
Stockholders’
Equity
(Deficiency)
|
||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
|
Balance,
December 31, 2007
(carried
forward)
|
1,722,502 | 18 | 14,314,964 | (725,796 | ) | - | (12,179,512 | ) | 1,409,674 | |||||||||||||||||||
|
Stock
based compensation on stock grants (Note 6)
|
- | - | - | 725,796 | - | 725,796 | ||||||||||||||||||||||
|
Cancellation
of stock awards (Note 6)
|
(31,250 | ) | (1 | ) | 1 | - | - | - | - | |||||||||||||||||||
|
Forfeiture
of stock options (Note 6)
|
- | (3,245,532 | ) | - | - | - | (3,245,532 | ) | ||||||||||||||||||||
|
Issuance
of common shares on acquisition of mineral rights in Peru
at $0.25 per share on September 24, 2008
|
2,500,000 | 25 | 624,975 | - | - | - | 625,000 | |||||||||||||||||||||
|
Share
subscriptions received
|
- | - | - | - | 613,583 | - | 613,583 | |||||||||||||||||||||
|
Net
income for the period
|
- | - | - | - | 983,065 | 983,065 | ||||||||||||||||||||||
|
Balance,
December 31, 2008
|
4,191,252 | 42 | 11,694,408 | - | 613,583 | (11,196,447 | ) | 1,111,586 | ||||||||||||||||||||
See
accompanying Notes to the Consolidated Financial Statements
AMAZON
GOLDSANDS LTD.
(formerly
Finmetal Mining Ltd.)
(An
Exploration Stage Company)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
Cumulative
from
|
||||||||||||
|
Inception
(September
5, 1997)
|
||||||||||||
|
Year
Ended
|
Year Ended
|
To
|
||||||||||
|
December
31,
|
December
31,
|
December
31,
|
||||||||||
|
2008
|
2007
|
2008
|
||||||||||
| $ | $ | $ | ||||||||||
|
OPERATING
ACTIVITIES:
|
||||||||||||
|
Net
income ( loss) from operations
|
983,065 | (9,511,457 | ) | (11,196,447 | ) | |||||||
|
Items
not requiring cash outlay:
|
||||||||||||
|
-
Consulting fees
|
- | - | 40,200 | |||||||||
|
-
Forgiveness of debt
|
- | - | (24,000 | ) | ||||||||
|
-
Gain on sale of oil and gas property
|
- | - | (10,745 | ) | ||||||||
|
-
Stock-based compensation
|
(2,519,736 | ) | 5,960,016 | 3,587,000 | ||||||||
|
-
Amortization of equipment
|
13,777 | 9,004 | 23,645 | |||||||||
|
-
Amortization of website development cost
|
11,667 | 3,334 | 15,834 | |||||||||
|
-
Mineral property acquisition
|
- | 536,000 | 1,816,000 | |||||||||
|
-
Write-down of assets
|
3,940 | - | 3,940 | |||||||||
|
Cash
provided by (used in) changes in operating
|
||||||||||||
|
Assets
and liabilities:
|
||||||||||||
|
- Taxes
recoverable
|
14,832 | (4,981 | ) | (4,394 | ) | |||||||
|
- Exploration
program advances
|
87,600 | (87,600 | ) | - | ||||||||
|
- Prepaid
expenses and deposit
|
3,761 | 58,187 | (1,962 | ) | ||||||||
|
- Accounts
payable and accrued liabilities
|
(334,610 | ) | 590,723 | 312,804 | ||||||||
|
- Advances
from related parties
|
(54,365 | ) | (39,198 | ) | - | |||||||
|
Net
cash used in operating activities
|
(1,790,069 | ) | (2,485,972 | ) | (5,438,125 | ) | ||||||
|
FINANCING
ACTIVITIES:
|
||||||||||||
|
Share
subscriptions received
|
613,583 | - | 613,583 | |||||||||
|
Cost
of repurchase of common stock
|
- | - | (1,000 | ) | ||||||||
|
Proceeds
from issuance of common stock, net
|
- | 2,832,550 | 5,641,250 | |||||||||
|
Net
cash provided by financing activities
|
613,583 | 2,832,550 | 6,253,833 | |||||||||
|
INVESTING
ACTIVITIES:
|
||||||||||||
|
Proceeds
from sale of oil and gas property
|
- | - | 46,200 | |||||||||
|
Oil
and gas property acquisitions
|
- | - | (2,846 | ) | ||||||||
|
Oil
and gas exploration
|
- | - | (22,609 | ) | ||||||||
|
Acquisition
of mineral rights
|
(250,000 | ) | - | (250,000 | ) | |||||||
|
Purchase
of equipment
|
(8,467 | ) | (37,536 | ) | (53,550 | ) | ||||||
|
Website
development costs
|
(30,000 | ) | - | (40,000 | ) | |||||||
|
Net
cash provided used in investing activities
|
(288,467 | ) | (37,536 | ) | (322,805 | ) | ||||||
|
INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
|
(1,464,953 | ) | 309,042 | 492,903 | ||||||||
|
CASH
AND CASH EQUIVALENTS, BEGINNING OF YEAR
|
1,957,856 | 1,648,814 | - | |||||||||
|
CASH
AND CASH EQUIVALENTS, END OF YEAR
|
$ | 492,903 | $ | 1,957,856 | $ | 492,903 | ||||||
See
accompanying Notes to the Consolidated Financial Statement
AMAZON
GOLDSANDS LTD.
(formerly
Finmetal Mining Ltd.)
(An
Exploration Stage Company)
CONSOLIDATED
STATEMENTS OF CASH FLOWS (Continued)
|
Cumulative
from
|
||||||||||||
|
Inception
(September
5, 1997)
|
||||||||||||
|
Year
Ended
|
Year
Ended
|
Through
|
||||||||||
|
December
31,
|
December
31,
|
December
31,
|
||||||||||
|
2008
|
2007
|
2008
|
||||||||||
| $ | $ | $ | ||||||||||
|
SUPPLEMENTAL
CASH FLOWS INFORMATION
|
||||||||||||
|
Interest
expense
|
- | - | 1,906 | |||||||||
|
Foreign
exchange (gain) loss
|
(2,412 | ) | (1,235 | ) | 16,346 | |||||||
|
SUPPLEMENTAL
DISCLOSURE OF NON-CASH INVESTING AND FINANCING
|
||||||||||||
|
Purchase
of oil and gas property for consideration of 400 of the Company’s common
shares at $25
|
- | - | 10,000 | |||||||||
|
Issuance
of 8,476 common shares for services at $6.00 per share on April 2,
2004
|
- | - | 50,000 | |||||||||
|
Donated
consulting services
|
- | - | 16,200 | |||||||||
|
On
September 6, 2006, 8,467 shares were cancelled and returned to the
un-issued share capital of the Company by a former
director
|
- | - | (2 | ) | ||||||||
|
On
November 27, 2006 the Company issued 50,000 shares at a deemed price of
$25.60 per share pursuant to the equity acquisition of 100% of the issued
common shares of FM OY
|
- | - | 1,280,000 | |||||||||
|
On
November 30, 2006 the Company granted 97,500 restricted shares
at a deemed price of $24.80 per share to officers of the
company
|
- | - | 2,418,000 | |||||||||
|
On
December 7, 2006, the Company issued 25,450 units at a deemed value of $10
per unit as a finder’s fee related to the private
placement
|
- | - | 254,500 | |||||||||
|
On
April 17, 2007 the Company issued 8,358 warrants exercisable on or before
April 17, 2008 at an exercise price of $35
|
- | - | 100,421 | |||||||||
|
On
May 4, 2007 the Company issued 20,000 common shares at a deemed price of
$26.80 per share as a finders’ fee pursuant to the acquisition of mineral
property interests
|
- | - | 536,000 | |||||||||
|
On
September 24, 2008 the Company issued 2,500,000 common shares at a deemed
price of $0.25 per share pursuant to the acquisition of mineral
rights
|
625,000 | - | 625,000 | |||||||||
See
accompanying Notes to the Consolidated Financial Statements
AMAZON
GOLDSANDS LTD.
(formerly
Finmetal Mining Ltd.)
(An
Exploration Stage Company)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2008 and 2007
NOTE
1 – INCORPORATION, NATURE AND CONTINUANCE OF OPERATIONS
The Company was incorporated under the laws of the State of Nevada,
U.S.A. as Gondwana Energy, Ltd. (“Gondwana”) on September 5,
1997. The Company changed its name from Gondwana to FinMetal
Mining Ltd. on January 23, 2007. On November 27, 2006, the
Company completed the acquisition of 100% of the shares of Finmetal Mining OY
(“FM OY”), a company incorporated under the laws of Finland. During
the fiscal year ended December 31, 2006 the Company changed its operational
focus from development of oil and gas properties, to acquisition of, exploration
for and development of mineral properties in Finland. On May 22, 2008
the Company changed its name from FinMetal Mining Ltd to Amazon Goldsands Ltd.
and on September 18, 2008, the Company entered into a Mineral Rights Option
Agreement and concurrently re-focused on the acquisition of, exploration for and
development of mineral properties located in Peru. The Company is currently in
the exploration stage.
The Company has incurred a net loss of $(11,196,447) for the period from inception on September 5, 1997 to December 31, 2008 and has no source of revenue. The
continuity of the Company’s future operations is dependent upon its ability to obtain financing and
upon future acquisition, exploration and development of profitable operations
from its mineral properties. These conditions raise substantial doubt about the
Company’s ability to continue as a going concern. The
Company’s management intends to continue relying upon the issuance of equity
securities to finance its operations and exploration and development activities, however there can be no assurance it will be
successful in raising the funds necessary to maintain operations, or that a
self-supporting level of operations will ever be achieved. The likely
outcome of these future events is indeterminable. The financial statements do not include any adjustment to reflect the
possible future effect on the recoverability and classification of the assets or
the amounts and classification of liabilities that may result should the Company
cease to continue as a going concern.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of presentation and consolidation
The
accounts of the Company and its wholly owned subsidiary, Finmetal Mining OY (“FM
OY”), a company incorporated under the laws of Finland, has been consolidated
effective the date of its acquisition on November 27, 2006.
These
financial statements have been prepared in accordance with United States
generally accepted accounting principles (“US GAAP”). All significant
inter-company transactions have been eliminated on consolidation.
AMAZON
GOLDSANDS LTD.
(formerly
Finmetal Mining Ltd.)
(An
Exploration Stage Company)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2008 and 2007
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (cont’d…)
Cash
and Cash Equivalents
The
Company considers all highly liquid instruments with a maturity of three months
or less at the time of issuance to be cash equivalents. As at December 31, 2008,
the Company has cash and cash equivalents in the amount of $478,624 (December
31, 2007: $1,947,912) which are over the federally insured
limit. As at December 31, 2008, the Company has $Nil of cash
equivalents (December 31, 2007: $Nil).
Website
and Software Development Costs
The
Company recognizes the costs incurred in the development of the Company’s
website in accordance with EITF 00-2 “Accounting for Website Development Costs”
and, with the provisions of AICPA Statement of Position No. 98-1, “Accounting
for the Costs of Computer Software Developed or Obtained for Internal
Use”. Accordingly, direct costs incurred during the application stage
of development are capitalized and amortized over the estimated useful life of
three years on a straight line basis. Fees incurred for website
hosting are expensed over the period of the benefit. Costs of
operating a website are expensed as incurred. Amortization expense is
a total of $11,667 for the fiscal year ended December 31, 2008 (2007: $3,334)
and cumulatively $15,834.
Property
and Equipment
Furniture
and office and computer equipment is carried at cost and is amortized over its
estimated useful life at rates of 20 to 30% per year. The property
and equipment is written down to its net realizable value if it is determined
that its carrying value exceeds estimated future benefits to the
Company.
Mineral
Claim Payments and Exploration Expenditures
Mineral
property exploration costs are charged to operations as incurred. Mineral
property acquisition costs are initially capitalized when incurred using the
guidance in EITF 04-02 “Whether Mineral Rights are Tangible or Intangible
Assets”. The Company assesses the carrying costs for impairment under
SFAS No. 144. The Emerging Issues Task Force issued EITF 04-3
“Mining Assets: Impairment and Business Combinations”, which requires mining
companies to consider cash flows related to the economic value of mining assets
(including mineral properties and rights) beyond those assets’ proven and
probable reserves, as well as anticipated market price fluctuations, when
testing the mining assets for impairment in accordance with SFAS
144. The Company is in its early stages of exploration and unable to
allocate proven and probable reserves to its mineral property. When
it has been determined that a mineral property can be economically developed as
a result of establishing proven and probable reserves, the costs then incurred
to develop such property will be capitalized. Such costs will be
amortized using the units-of-production method over the estimated life of the
probable reserve. If mineral properties are subsequently abandoned or
impaired, any capitalized costs will be charged to operations.
AMAZON
GOLDSANDS LTD.
(formerly
Finmetal Mining Ltd.)
(An
Exploration Stage Company)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2008 and 2007
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (cont’d…)
Environmental
Costs
Environmental
expenditures that related to current operations are charged to operations or
capitalized as appropriate. Expenditures that relate to an existing
condition caused by past operations, and which do not contribute to current or
future revenue generation, are charged to operations. Liabilities are
recorded when environmental assessments and/or remedial efforts are probable,
and the cost can be reasonably estimated. Generally, the timing of
these accruals coincides with the earlier of completion of a feasibility study
or the Company’s commitments to plan of action based on the then known
facts.
Comprehensive
Income
In
accordance with SFAS 130, “Reporting Comprehensive Income” (“SFAS 130”),
comprehensive income consists of net income and other gains and losses affecting
stockholder’s equity that are excluded from net income, such as unrealized gains
and losses on investments available for sale, foreign currency translation gains
and losses when the Company has a functional currency other than U.S. dollars,
and minimum pension liability. For the years ended December 31, 2008 and 2007,
the Company’s financial statements include none of the additional elements that
affect comprehensive income. Accordingly, net income and comprehensive income
are identical.
Stock-Based
Compensation
The
Company adopted SFAS No. 123(revised), “Share-Based Payment”, to
account for its stock options and similar equity instruments
issued. Accordingly, compensation costs attributable to stock options
or similar equity instruments granted are measured at the fair value at the
grant date, and expensed over the expected vesting
period. Transactions in which goods or services are received from
non-employees in exchange 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 instruments issued, whichever is more reliably measurable.
SFAS 123(revised) requires excess tax benefits be reported as a financing cash
inflow rather than as a reduction of taxes paid.
Foreign
Currency Translation
The
Company’s functional currency is U.S. dollars. Accordingly,
foreign currency balances are translated into US dollars as
follows:
Monetary
assets and liabilities are translated at the year-end exchange
rate.
Non-monetary
assets are translated at the rate of exchange in effect at their acquisition,
unless such assets are carried at market or nominal value, in which case they
are translated at the year-end exchange rate.
Revenue
and expense items are translated at the average exchange rate for the
year. Foreign
exchange gains and losses in the year are included in operations.
AMAZON
GOLDSANDS LTD.
(formerly
Finmetal Mining Ltd.)
(An
Exploration Stage Company)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2008 and 2007
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (cont’d…)
Basic
Net Income (Loss) per Share
Basic net
income (loss) per share is computed by dividing net income (loss) available to
common stockholders by the weighted average number of common shares outstanding
during the period. Diluted net income (loss) per share on the
potential exercise of the equity-based financial instruments is not presented
where anti-dilutive.
Income
taxes
The
Company accounts for income taxes under an asset and liability approach that
requires the recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been recognized in the Company’s
financial statements or tax returns. In estimating future tax
consequences, all expected future events other than enactment of changes in the
tax laws or rates are considered.
Due to
the uncertainty regarding the Company’s profitability, the future tax benefits
of its losses have been fully reserved for and no net tax benefit has been
recorded in the financial statements.
Assets
retirement obligations
The
Company has adopted SFAS No 143, Accounting for Assets Retirement Obligations,
which requires that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred. SFAS No. 143
requires the Company to record a liability for the present value of the
estimated site restoration costs with corresponding increase to the carrying
amount of the related long-lived assets. The liability will be accreted and the
asset will be depreciated over the life of the related assets. Adjustments for
changes resulting from the passage of time and changes to either the timing or
amount of the original present value estimate underlying the obligation will be
made. As at December 31, 2008 and 2007, the Company does not have any asset
retirement obligations.
Long-lived
assets impairment
Long-term
assets of the Company are reviewed for impairment whenever events or
circumstances indicate that the carrying amount of assets may not be
recoverable, pursuant to guidance established in SFAS No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets.
Management
considers assets to be impaired if the carrying value exceeds the future
projected cash flows from related operations (undiscounted and without interest
charges). If impairment is deemed to exist, the assets will be written down to
fair value. Fair value is generally determined using a discounted cash flow
analysis.
AMAZON
GOLDSANDS LTD.
(formerly
Finmetal Mining Ltd.)
(An
Exploration stage Company)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2008 and 2007
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (cont’d…)
Accounting
for Derivative Instruments and Hedging Activities
The
Financial Accounting Standards Board (“FASB”) issued SFAS No. 133 Accounting for Derivative Instruments and
Hedging Activities. SFAS No. 133 requires companies to recognize all
derivatives contracts as either assets or liabilities in the balance sheet and
to measure them at fair value. If certain conditions are met, a derivative may
be specifically designated as a hedge, the objective of which is to match the
timing of gain or loss recognition on the hedging derivative with the
recognition of (i) the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk or (ii) as a hedging
instrument, the gain or loss is recognized in income in the period of
change.
Historically,
the Company has not entered into derivative contracts either to hedge existing
risks or for speculative purposes.
Use
of Estimates
The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amount of revenues and expenses during the period. Actual results
may differ from those estimates.
Financial
Instruments
The
Company’s financial instruments consist of cash and cash equivalents, accounts
payable and accrued liabilities and amounts due to related parties. The carrying
value of these financial instruments approximates their fair value based on
their liquidity or their short-term nature.
The
Company is not exposed to significant interest, credit or currency risk arising
from these financial instruments due to their short term nature.
Recent
Accounting Pronouncements
In
December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”. This
Statement replaces SFAS No. 141, Business Combinations. This Statement retains
the fundamental requirements in Statement 141 that the acquisition method of
accounting (which Statement 141 called the purchase method) be used for all
business combinations and for an acquirer to be identified for each business
combination. This Statement also establishes principles and requirements for how
the acquirer: a) recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, and any non-controlling
interest in the acquiree; b) recognizes and measures the goodwill acquired in
the business combination or a gain from a bargain purchase and c) determines
what information to disclose to enable users of the financial statements to
evaluate the nature and financial effects of the business combination. SFAS No.
141(R) will apply prospectively to business combinations for which the
acquisition date is on or after Company’s fiscal year beginning November 1,
2009. The adoption of this statement is not expected to have a material effect
on the Company’s financial statements.
AMAZON
GOLDSANDS LTD.
(formerly
Finmetal Mining Ltd.)
(An
Exploration stage Company)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2008 and 2007
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (cont’d…)
Recent Accounting
Pronouncements (cont’d…)
In
December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements”. This Statement amends ARB 51 to establish
accounting and reporting standards for the non-controlling (minority) interest
in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a
non-controlling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements. SFAS No. 160 is effective for the Company’s fiscal year
beginning November 1, 2009. The adoption of this statement is not expected to
have a material effect on the Company’s financial statements.
In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities-an amendment of FASB Statement No. 133” (“FAS 161”). FAS
161 changes the disclosure requirements for derivative instruments and hedging
activities. Entities are required to provide enhanced disclosures about (a) how
and why an entity uses derivative instruments, (b) how derivative instruments
and related hedged items are accounted for under Statement 133 and its related
interpretations, and (c) how derivative instruments and related hedged items
affect an entity’s financial position, financial performance, and cash flows.
The guidance in FAS 161 is effective for financial statements issued for fiscal
years and interim periods beginning after November 15, 2008, with early
application encouraged. This Statement encourages, but does not require,
comparative disclosures for earlier periods at initial adoption. The adoption of
this statement is not expected to have a material effect on the Company’s
financial statements.
In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles”. SFAS No. 162 identifies the sources of
accounting principles and the framework for selecting the principles used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting
principles. This statement shall be effective 60 days following the
SEC’s approval of the Public Company Accounting Oversight Board amendments to AU
Section 411, “the Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles”. We do not expect this adoption will
have a material impact on our financial statements.
In May
2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee
Insurance Contracts – an interpretation of FASB Statement No. 60” (“SFAS
163”). SFAS 163 interprets Statement 60 and amends existing
accounting pronouncements to clarify their application to the financial
guarantee insurance contracts included within the scope of that
statement. SFAS 163 is effective for financial statements issued for
fiscal years beginning after December 15, 2008, and all interim periods within
those fiscal years. The Company is currently evaluating the impact of
SFAS 163 on its financial statements; it does not expect it to have a material
effect.
NOTE
3 –DUE TO RELATED PARTIES
The
amounts due to related parties of $nil as at December 31, 2008 (2007: $54,365),
are due to officers and directors of the Company or companies related to them,
on account of expenses paid
on behalf of the Company and services rendered. They are non-interest
bearing, unsecured and due on demand.
AMAZON
GOLDSANDS LTD.
(formerly
Finmetal Mining Ltd.)
(An
Exploration Stage Company)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2008 and 2007
NOTE
4 – PROPERTY AND EQUIPMENT
(i) Mineral Property:
|
Mineral
property interests
|
Apofas
Properties
|
Magnus
Properties
|
Temasek
Properties
|
Total
|
||||||||||||
| $ | $ | $ | $ | |||||||||||||
|
Balance,
December 31, 2006
|
- | - | - | - | ||||||||||||
|
Acquisition
costs – fiscal 2007
|
738,275 | 551,274 | - | 1,289,549 | ||||||||||||
|
Written-off
to operations – fiscal 2007
|
(738,275 | ) | (551,274 | ) | - | (1,289,549 | ) | |||||||||
|
Balance,
December 31, 2007
|
- | - | - | - | ||||||||||||
|
Acquisition
costs – fiscal 2008
|
- | 15,201 | 875,000 | 890,201 | ||||||||||||
|
Written-off
to operations – fiscal 2008
|
- | (15,201 | ) | - | (15,201 | ) | ||||||||||
|
Balance,
December 31, 2008
|
- | - | 875,000 | 875,000 | ||||||||||||
The
Temasek Properties
Effective
September 18, 2008 the Company entered into a Mineral Right Option Agreement
with Temasek Investments Inc. ("Temasek"), a company incorporated under the laws
of Panama. Pursuant to this Agreement, the Company acquired four
separate options from Temasek, each providing for the acquisition of a 25%
interest in certain mineral rights in Peru potentially resulting in the
acquisition of 100% of the Mineral Rights. The Mineral Rights are
owned by Rio Santiago Minerales S.A.C. ("Rio Santiago"). Beardmore
Holdings, Inc. ("Beardmore"), a wholly-owned subsidiary of Temasek, owns 999
shares of the 1,000 shares of Rio Santiago that are issued and
outstanding. Temasek owns the single remaining share of Rio
Santiago. The acquisition of each 25% interest in the Mineral Rights
will occur through the transfer to the Company of 25% of the outstanding shares
of Beardmore.
The
Company may exercise the initial 25% option to acquire a 25% interest in the
Mineral Rights after fulfilling the following conditions:
|
·
|
paying
$250,000 (paid) to Temasek on the date the Agreement is
executed;
|
|
·
|
issuing
2,500,000 shares (issued) of common stock to Temasek within five (5)
business days from the Effective Date;
and
|
|
·
|
paying
an additional $250,000 to Temasek within ninety (90) days of the Effective
Date (paid subsequent to year-end).
|
The
Company may exercise the second 25% option resulting in the acquisition of a 50%
interest in the Mineral Rights after fulfilling the following conditions within
6 months:
|
·
|
paying
an additional $750,000 to Temasek,
and
|
|
·
|
issuing
3,500,000 additional shares of common stock to
Temasek.
|
The
Company may exercise the third 25% option resulting in the acquisition of a 75%
interest in the Mineral Rights after fulfilling the following conditions within
12 months:
|
·
|
paying
an additional $1,250,000 to Temasek,
and
|
|
·
|
issuing
4,500,000 additional shares of common stock to
Temasek.
|
AMAZON
GOLDSANDS LTD.
(formerly
Finmetal Mining Ltd.)
(An
Exploration Stage Company)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2008
NOTE 4 – PROPERTY AND EQUIPMENT
(cont’d…)
(i) Mineral Property
(cont’d…)
The Temasek Properties
(cont’d…)
The
Company may exercise the fourth 25% option resulting in the acquisition of a
100% interest in the Mineral Rights after fulfilling the following conditions
within 18 months:
|
·
|
paying
an additional $2,500,000 to Temasek,
and
|
|
·
|
issuing
5,500,000 additional shares of our common stock to
Temasek.
|
Upon the
acquisition of a 100% interest in the Mineral Rights, Temasek will hold its
single share of Rio Santiago in trust for the Company’s sole benefit and hold
the share strictly in accordance with the Company’s instructions.
Upon the
Company’s acquisition of a 100% interest in the Mineral Rights, Temasek is
entitled to an annual 2.5% net returns royalty. However, if the
Company pays Temasek $2,000,000 within ninety (90) days of the acquisition of a
100% interest in the Mineral Rights, Temasek will only be entitled to an annual
1.5% net returns royalty.
If the
Company exercises the second 25% option, resulting in the Company’s acquisition
of a 50% interest in the Mineral Rights, and fails to acquire a 100% interest in
the Mineral Rights, the Company and Temasek will form a joint venture in which
the Company will be wholly responsible for developing a feasible mining project
and all necessary facilities and Temasek shall retain a carried free interest in
the mining rights. If the Company does not develop a feasible mining
project within three years , the Company will be responsible to pay Temasek an
advance minimum mining royalty of $500,000 per year, which will be deducted from
Temasek's net return royalty.
Temasek
became a significant shareholder through the issuance of the 2,500,000 common
shares on exercise of the option to acquire the initial 25% interest in the
Mineral Rights.
The
Apofas Properties
Pursuant
to an agreement dated January 22, 2007 the Company had the option to acquire a
100% interest in five mineral concessions, known as the Poronmannikko and
Sarkiahonkangas projects, located in Finland. Under the terms of the agreement,
the company had the right to acquire a 100% interest in two projects by making
cash payments totalling €1,000,000. The initial payment of €150,000 was due on
or before April 1, 2007 (paid), the 2nd payment of €150,000 was due on or before
April 1, 2008 (extended by agreement to April 30, 2008), the 3rd payment of
€300,000 was to be due on or before April 1, 2009 and the final payment of
€400,000 was to be due on or before April 1, 2010. Concurrent with
ratification of the agreement on May 4, 2007, the Company issued 20,000 common
shares as a finder’s fee. The mineral concessions were subject to a 2% gross
proceeds royalty. The agreement was signed with a company, which is
controlled by the Company’s former president. During the fiscal year ended
December 31, 2008 management has determined not to proceed with the option to
acquire these projects.
AMAZON
GOLDSANDS LTD.
(formerly
Finmetal Mining Ltd.)
(An
Exploration Stage Company)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2008 and 2007
NOTE 4 – PROPERTY AND EQUIPMENT
(cont’d…)
(i) Mineral Property
(cont’d…)
The Magnus Properties
Pursuant
to an agreement dated October 6, 2006 with Magnus Minerals Oy, the Company had
the option to acquire a 100% interest in 4 different mineral properties
(Petrovaara, Poskijarvi-Kokka, Rautavaara and Tainiovaara) by paying option
payments for a total of €1,000,000 in cash for each property over a period of 4
years. The option payments were to be paid annually at the beginning
of each year as follows: 1st year
€100,000 (paid), 2nd year
€100,000, 3rd year
€300,000 and 4th year
€500,000 per property for a total of €4,000,000 if all 4 properties are acquired
fully; and by making a work commitment of €1,000,000 on each property of which
25% must be conducted annually. All properties were subject to a 2%
NSR. The 1st year
payments for all 4 properties totaling $523,400 (€400,000) was paid during the
fiscal year ended December 31, 2006. The due date of the second
option payment of €100,000 with respect to the Rautavaara Property was extended
pursuant to an amendment agreement to April 30, 2008 in consideration of a
€10,000 extension payment (paid) and payment of applicable government and
landowner payments according to Finnish law (paid). The due date for
the first year work commitment of €250,000 with respect to the Rautavaara
Property was extended to August 31, 2008 and the first year work commitment of
€250,000 with respect to the Tainiovarra Property was extended to May 31,
2008. During the fiscal year ended December 31, 2008 management has
determined not to proceed with the option to acquire this Property.
On June
11, 2007, the Company entered into an Option Agreement with Magnus Minerals OY,
pursuant to which the Company entered into a joint venture to explore the
“Enonkoski area” in Finland primarily for nickel-copper-platinum group
elements.
Under the
terms of the Option Agreement, the Company had the right to acquire ownership
from Magnus of up to a 51% interest in certain claim reservations, and pending
claims comprising the Property as more particularly set forth in the Option
Agreement.
It was
intended that the Company be the operator of the joint venture and can earn a
51% interest in the Property by fulfilling U.S. $10 million in work commitments
and €3 million in option payments.
In order
to exercise the option, the Company was required to spend U.S. $10 million in
work commitments with minimum expenditures as follows:(a) U.S. $1.8 million by
November 30, 2008; (b) U.S. $2.2 million by November 30, 2009; (c) U.S. $2.8
million by November 30, 2010; and (d) U.S. $3.2 million by November 30,
2011. In addition, the Company was required to make a total of €3
million in option payments to Magnus over four years as follows: (a) €30,000 by
May 22, 2007 (paid); (b) €270,000 upon execution of the Option Agreement (paid);
(c) €600,000 by November 30, 2008, (d) €900,000 by November 30, 2009; and (e)
€1,200,000 by November 30, 2010.
During
the fiscal year ended December 31, 2008, management decided not to exercise the
option with respect to this Property.
AMAZON
GOLDSANDS LTD.
(formerly
Finmetal Mining Ltd.)
(An
Exploration Stage Company)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2008
NOTE 4 – PROPERTY AND EQUIPMENT
(cont’d…)
(i) Mineral Property
(cont’d…)
The Magnus Properties
(cont’d…)
Magnus
Minerals Oy is a company in which the Company’s former president has an
ownership interest.
There are
certain inherent risks relating to the title to the mineral properties and
mining and exploration rights that the Company has an interest in through its
above noted option agreement, as registration of some of the mineral claims with
the Peruvian government has not yet been completed. The Company,
therefore, cannot give any assurance that it will have valid title on its
mineral property interests.
(ii) Property
and Equipment:
|
As
at December 30, 2008:
|
Cost
$
|
Accumulated
Amortization
$
|
Net
book
Value
$
|
|||||||||
|
Furniture,
computer and office equipment
|
38,505 | 14,041 | 24,464 | |||||||||
|
Computer
software
|
8,928 | 7,428 | 1,500 | |||||||||
| 47,433 | 21,469 | 25,964 | ||||||||||
|
As
at December 31, 2007:
|
Cost
$
|
Accumulated
Amortization
$
|
Net
book
Value
$
|
|||||||||
|
Furniture,
computer and office equipment
|
38,291 | 6,041 | 32,250 | |||||||||
|
Computer
software
|
5,928 | 2,964 | 2,964 | |||||||||
| 44,219 | 9,005 | 35,214 | ||||||||||
NOTE
5 – ADVANCES PAYABLE
As at
December 31, 2008 the Company had received an advance from its former CEO in the
amount of $28,084, included in accounts payable and accrued liabilities (2007 -
$nil). The advance is non-interest bearing, has no stated terms of
repayment and is unsecured.
AMAZON
GOLDSANDS LTD.
(formerly
Finmetal Mining Ltd.)
(An
Exploration Stage Company)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2008 and 2007
NOTE
6 – STOCKHOLDERS’ EQUITY
Authorized
share capital
During
the fiscal year ended December 31, 2008, the Company changed its authorized
number of shares to 400,000,000 in aggregate, increased the authorized number of
common shares from 5,000,000 to 200,000,000 and authorized the creation of
200,000,000 blank check preferred shares with a par value of
$0.001.
Common
Stock
On May
22, 2008 the Company completed a one new for twenty old share reverse stock
split. The Company’s share transactions, including the weighted
average number of common shares outstanding calculation for purposes of
determining earnings per share, have been restated retroactively to reflect all
of the above corporate capital transactions in these financial
statements.
On
November 30, 2006 the Company granted 97,500 restricted shares at a deemed price
of $24.80 per share to officers of the company. Fifty percent of
these shares vested on January 1, 2008 and the balance on January 1,
2009. On December 27, 2007 all 97,500 restricted shares were
cancelled and returned to treasury. Related stock based
compensation in the amount of $2,321,780 was charged to operations during the
year ended December 31, 2007. The deemed price was equal to the market price of
the Company’s stock on the date of the transaction.
On April
17, 2007, the Company completed a private placement and issued 121,800 units at
a price of $25 per share for total proceeds of $3,045,000. Each unit
consists of one share of common stock, par value $0.00001, and one-half warrant
with each full warrant enabling the purchase of one share of common stock,
exercisable for twelve months at the exercise price of $35, exercisable on or
before April 17, 2008. The Company also issued a cash finder’s fee of
$212,450 and 8,358 warrants exercisable on or before April 17, 2008 at an
exercise price of $35.
On April
17, 2007 the Company granted 37,500 restricted shares at a deemed price of $29
per share to officers and directors of the Company. The deemed price
is equal to the market price of the Company’s stock on the date of the
transaction. On April 17, 2008, 30,000 restricted shares were cancelled and
returned to treasury. Fifty percent of the remaining 7,500 shares vested on
April 17, 2008 and the balance have since been deemed vested. Related stock
based compensation in the amount of $705,365 was charged to operations during
the year ended December 31, 2008
On April
17, 2007 the Company granted 8,750 restricted shares at a deemed price of $3.60
per share to consultants of the Company. The deemed price is equal to the market
price of the Company’s stock as of December 31, 2007. On April 17,
2008, 1,250 restricted shares were cancelled and returned to
treasury. Fifty percent of the remaining shares vested on April 17,
2008 and the balance have been deemed to have vested. Related stock
based compensation in the amount of $20,431 was charged to operations during the
year ended December 31, 2008 based on a deemed price of $3.60 per
share.
On
September 24, 2008, the Company issued 2,500,000 common shares at a deemed price
of $0.25 per share pursuant to the terms of its mineral property option
agreement with Temasek (see Note 3(i)). The deemed price is equal to the market
price of the Company’s stock on the date of the transaction.
AMAZON
GOLDSANDS LTD.
(formerly
Finmetal Mining Ltd.)
(An
Exploration Stage Company)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2008 and 2007
NOTE 6 – STOCKHOLDERS’ EQUITY
(cont’d…)
Stock Options
(cont’d…)
Stock
Options
On April
17, 2007 the Company granted 167,500 incentive stock options to officers,
directors and consultants of the Company to purchase common stock of the Company
at a price of $25 per common share on or before April 17, 2017 and vesting as to
one-quarter of the common shares under the stock option on April 17, 2007 and
one-quarter every six months thereafter in accordance with the terms and
conditions of the Company’s Stock Incentive Plan. As December 31,
2007 167,500 stock options were outstanding. As at December 31, 2008 all stock
options were forfeited. The Company did not have any stock options,
other than described above, outstanding during the years ended December 31, 2008
and 2007.
During
fiscal 2007, the Company adopted the 2007 Stock Incentive Plan, (the “Plan”)
which provides for the grant of incentive stock options, non-qualified stock
options, stock appreciation rights, restricted stock, performance shares and
performance units, and stock awards to officers, directors or employees of, as
well as advisers and consultants to, the Company.
All stock
options and rights are to vest over a period determined by the Board of
Directors and expire not more than ten years from the date
granted. Pursuant to the Plan, the maximum aggregate number of shares
that may be issued for awards is 500,000 and the maximum aggregate number of
shares that may be issued for incentive stock options is 500,000.
The
weighted average fair value of the 165,000 options granted to officers and
directors in 2007 was estimated at $24.80 per share using the Black-Scholes
option-pricing model, using the following assumptions: risk-free interest rate
of 4.11%, dividend yield of 0%, volatility of 120.85% and expected life of
approximately 5 years. Related stock based compensation in the amount of
$3,241,028 was credited to operations upon the forfeiture of stock
options during the year ended September 30, 2008, and cumulatively $NIL was
charged to operations from April 17, 2007 to December 31, 2008.
The
weighted average fair value of the 2,500 options granted to a consultant in 2007
was estimated at $2.80 per share using the Black-Scholes option-pricing model,
using the following assumptions: risk-free interest rate of 4.11%, dividend
yield of 0%, volatility of 146.97% and expected life of approximately 5 years.
Related stock based compensation in the amount of $4,504 was credited to
operations upon the forfeiture of stock options during the year ended December
31, 2008 (2007: $Nil) and cumulatively $NIL was charged to operations from April
17, 2007 to December 31, 2008.
Although
the assumptions used to record stock compensation expense reflect management’s
best estimates, they involve inherent uncertainties based on market conditions
generally outside of the control of the Company. If other assumptions were used,
stock-based compensation expense could be significantly impacted. As stock
options are exercised, the proceeds received on exercise are credited to
stockholders’ equity.
AMAZON
GOLDSANDS LTD.
(formerly
Finmetal Mining Ltd.)
(An
Exploration Stage Company)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2008 and 2007
NOTE 6 – STOCKHOLDERS’ EQUITY
(cont’d…)
Warrants
On April
17, 2007, as part of the 121,800 unit private placement, the Company issued
60,900 warrants with each warrant enabling the purchase of one share of common
stock, exercisable for twelve months at the exercise price of $35, exercisable
on or before April 17, 2008. 60,900 warrants remained outstanding as at December
31, 2007 and expired during the year ended December 31, 2008. The
Company also issued a finder’s fee of 8,358 warrants in conjunction with this
private placement at a deemed value of $100,421, exercisable on or before April
17, 2008 at an exercise price of $35. 8,358 warrants remained
outstanding as December 31, 2008, all of which expired during the year ended
December 31, 2008. The weighted average fair value of the 8,358 warrants issued
as a finder’s fee was estimated at $12 per share using the Black-Scholes
option-pricing model, using the following assumptions: risk-free interest rate
of 4.15%, dividend yield of 0%, volatility of 120.85% and expected life of
approximately 1 year. The Company did not have any warrants, other than
described above, outstanding during the years ended December 31, 2008 and
2007.
NOTE
7 – RELATED PARTY TRANSACTIONS
Related
party transactions not disclosed elsewhere in these financial statements are as
follows:
During
the fiscal year ended December 31, 2008 the Company:
|
·
|
paid
$291,532 (2007: $321,391) for consulting and management fees and
management salaries to former officers and directors of the
Company
|
|
·
|
paid
$11,731 for consulting fees to a current director (2007 -
$11,086).
|
|
·
|
paid
$32,215 to a company controlled by a current officer and director (2007 -
$nil)
|
|
·
|
paid
$25,486 (2007: $195,695) for consulting fees included in mineral property
acquisition and exploration expenditures, to companies controlled by the
former Vice-President of Exploration and the former
President.
|
These
transactions were in the normal course of operations and were measured at the
exchange amount, which is the amount of consideration established and agreed to
by the related parties.
AMAZON
GOLDSANDS LTD.
(formerly
Finmetal Mining Ltd.)
(An
Exploration Stage Company)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2008 and 2007
NOTE
8 – INCOME TAXES
The
potential benefit of net operating loss carry forwards has not been recognized
in the financial statements since the Company cannot be assured that it is more
likely than not that such benefit will be utilized in future
years. The components of the net deferred tax asset, the statutory
tax rate, the effective rate and the elected amount of the valuation allowance
are as follows:
|
Cumulative
|
||||||||||||
|
from
|
||||||||||||
|
Inception
|
||||||||||||
|
Year
|
Year
|
(September
5,
|
||||||||||
|
Ended
|
Ended
|
1997)
to
|
||||||||||
|
December
31,
|
December
31,
|
December
31,
|
||||||||||
|
2008
|
2007
|
2008
|
||||||||||
|
Statutory
and effective tax rate
|
26% - 34 | % | 26% - 34 | % | ||||||||
| $ | $ | $ | ||||||||||
|
Income taxes recovered at the
|
||||||||||||
|
statutory and effective tax rate
|
(302,605 | ) | 3,192,550 | 3,719,102 | ||||||||
|
Less permanent timing differences:
|
||||||||||||
|
Stock
based compensation
|
856,710 | (2,026,405 | ) | (1,210,080 | ) | |||||||
|
Donated services
|
- | - | (2,430 | ) | ||||||||
|
Benefit of tax losses not recognized
in the year
|
(554,106 | ) | (1,166,145 | ) | (2,506,592 | ) | ||||||
|
Income tax recovery (expense) recognized
in year
|
- | - | - | |||||||||
The
approximate tax effects of each type of temporary difference that gives rise to
deferred tax assets are as follows:
|
December
31,
|
December
31,
|
|||||||
|
2008
|
2007
|
|||||||
| $ | $ | |||||||
|
Net
operating loss carry forwards
(expiring
2017 - 2028)
|
2,506,592 | 1,952,486 | ||||||
|
Less: valuation
allowance
|
(2,506,592 | ) | (1,952,486 | ) | ||||
|
Net
deferred tax assets
|
- | - | ||||||
The
Company has losses carry forwards expiring from 2017 to 2028 of
$4,467,428.
AMAZON
GOLDSANDS LTD.
(formerly
Finmetal Mining Ltd.)
(An
Exploration Stage Company)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2008 and 2007
NOTE
9 – COMMITMENTS
|
·
|
The
Company is committed for one year, commencing October 1, 2008, for monthly
consulting services in the amount of $10,000 to a party to provide
investor relation services.
|
|
·
|
The
Company committed for a one year period commencing November 1, 2008, to a
consulting firm for monthly services in the amount of $2,500, for website
maintenance.
|
|
·
|
The
Company committed for two years, commencing April 1, 2008, for a monthly
consulting services in the amount of $ 5,000 to a party to provide
management services in Europe.
|
|
·
|
The
Company committed for one year, commencing June 1, 2008 for monthly
consulting services in the amount of $ 10,000 to a party to provide
investor relations services.
|
|
·
|
The
Company committed for one year, commencing December 1, 2008, for monthly
consulting services at 10% on all costs incurred relating providing
exploration management and mineral property development services for the
Company’s mineral project in Peru, as well as a one time fee of $US125,000
due within 60 days of execution of the agreement
(paid).
|
NOTE
10 – GEOGRAPHIC AREAS
Prior to
the operations of acquisition and exploration of mineral properties, the
Company’s areas of operations were primarily in Canada. Since the
commencement of acquisition and exploration of mineral properties, in fiscal
2006, the Company’s principal operations have been in Finland. In
fiscal 2008 the Company re-focused its acquisition and exploration of mineral
properties operations to Peru. As at December 31, 2008, the Company does not
have any material assets outside of North America except property and equipment
of $Nil (December 31, 2007: $3,940).
NOTE
11 - RECLASSIFICATIONS
Certain
prior year amounts have been reclassified to conform to the current year
presentation.
NOTE
12 – SUBSEQUENT EVENT
Subsequent
to December 31, 2008, the Company completed a private placement and issued
5,272,333 common shares at a price of $0.15 per common share for total proceeds
of $790,850. $613,583 of the
total share subscription proceeds had been received as at December 31, 2008
(2007 - $nil).
__________
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report on Form 10-K to be signed on
its behalf by the undersigned, thereunto duly authorized, this 14th day of
April, 2009.
AMAZON GOLDSANDS LTD.,
a Nevada corporation
By: /s/ Hector
Ponte
Hector Ponte
President and Chief Executive
Officer
Each
person whose signature appears below authorizes Hector Ponte to execute in the
name of each such person who is then an officer or director of the registrant,
and to file, any amendments to this Annual Report on Form 10-K necessary or
advisable to enable the registrant to comply with the Securities Exchange Act of
1934 and any rules, regulations and requirements of the Securities and Exchange
Commission in respect thereof, which amendments may make such changes in such
Report as such attorney-in-fact may deem appropriate.
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, this
report has been signed below by following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
|
Signature
and Title
|
|
Date
|
|
/s/
Hector
Ponte
|
|
April
14, 2009
|
|
Hector
Ponte, Director and Chief Executive Officer
|
|
|
|
/s/
Robert Van
Tassell
|
|
April
14, 2009
|
|
Robert
Van Tassell, Director
|
|
|
|
/s/
David
Kerr
|
|
April
14, 2009
|
|
David
Kerr, Director
|
|
|
|
/s/
David
Grant
|
|
April
14, 2009
|
|
David
Grant, Director
|
|
|
|
/s/
Carlos
Stocker
|
|
April
14, 2009
|
|
Carlos
Stocker, Chief Financial Officer, Secretary, Treasurer
and
Principal Accounting Officer
|
|
|
AMAZON GOLDSANDS
LTD.
TO
2008 ANNUAL REPORT ON
FORM 10-K
|
Exhibit
Number
|
Description
|
Incorporated by Reference
to:
|
Filed
Herewith
|
|
2.1
|
Articles
of Merger
|
Exhibit
2.1 to the Company’s Current Report on Form 8-K filed May 27,
2008
|
|
|
2.2
|
Agreement
and Plan of Merger
|
Exhibit
2.2 to the Company’s Current Report on Form 8-K filed May 27,
2008
|
|
|
3.1
|
Articles
of Incorporation
|
Exhibit
3.1 to the Company’s Form 10 Registration Statement (SEC File
No. 000-51203)
|
|
|
3.2
|
Certificate
of Amendment to Articles of Incorporation, evidencing name change to
"FinMetal Mining Ltd."
|
Exhibit
3.3 to the Company’s Annual Report on Form 10-KSB for the fiscal year
ended December 31, 2007.
|
|
|
3.3
|
Certificate
of Change Pursuant to NRS 78.209
|
Exhibit
3.1 to the Company’s Current Report on Form 8-K filed May 27,
2008
|
|
|
3.4
|
Amended
and Restated By-laws of the Company
|
Exhibit
10.1 to the Company’s Current Report on Form 8-K filed September 2,
2008
|
|
|
10.1
|
Stock
Purchase Agreement between the Company and Peter Löfberg, dated November
2, 2006, relating to the acquisition of FinMetal OY
|
Exhibit
10.1 to the Company’s Current Report on Form 8-K filed November 30,
2006
|
|
|
10.2
|
Letter
Agreement dated January 22, 2007 between the Company and AB Apofas
OY
|
Exhibit
10.1 to the Company’s Current Report on Form 8-K filed January 26,
2007
|
|
|
10.3
|
Share
Purchase Agreement among the Company, Magnus and the Vendors of Magnus
dated February 6, 2007
|
Exhibit
10.1 to the Company’s Current Report on Form 8-K filed February 12,
2007
|
|
|
10.4
|
Memorandum
of Understanding between the Company and Magnus Minerals OY dated May 15,
2007 with respect to an intended option and joint venture to explore
certain mineral properties in Finland.
|
Exhibit
10.1 to the Company’s Current Report on Form 8-K filed May 25,
2007
|
|
|
10.5
|
Mineral
Property Option and Joint Venture Agreement between the Company and Magnus
Minerals Oy, dated June 11, 2007
|
Exhibit
10.1 to the Company’s Current Report on Form 8-K filed June 13,
2007
|
|
|
10.6
|
Amendment
No. 1 to Option Agreement between Company and Magnus Minerals Oy, dated
December 28, 2007
|
Exhibit
10.1 to the Company’s Current Report on Form 8-K filed January 4,
2008
|
|
|
10.7
|
Mineral
Right Option Agreement between the Company and Temasek Investments
Inc.
|
Exhibit
10.1 to the Company’s Current Report on Form 8-K filed September 22,
2008
|
|
|
10.8
|
2007
Stock Incentive Plan.
|
Exhibit
10.6 to the Company’s Annual Report on Form 10KSB for the Year ending
December 31, 2007.
|
|
Exhibit
Number
|
Description
|
Incorporated by Reference
to:
|
Filed
Herewith
|
|
14.1
|
Code
of Ethics and Code of Conduct.
|
Exhibit
14.1 to the Company’s Annual Report on Form 10KSB for the Year ending
December 31, 2005.
|
|
|
21.1
|
X
|
||
|
24.1
|
X
|
||
|
31.1
|
X
|
||
|
31.2
|
X
|
||
|
32.1
|
X
|
||
|
32.2
|
X
|
- 47
-