UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-Q
(Mark
One)
|
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
|
For the
quarterly period ended June 30,
2010
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
|
For the
transition period from
to
Commission
File Number: 000-51203
Amazon
Goldsands Ltd.
(Exact
name of registrant as specified in its charter)
|
Nevada
|
98-0425310
|
|
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
|
|
Jiron
Caracas 2226, Jesus Maria, Lima, Peru
|
|
(Address
of principal executive offices)
|
|
(51
1) 989 184 706
|
|
(Registrant’s
telephone number, including area code)
|
|
________________________________________________________________
|
|
(Former
name, former address and former fiscal year, if changed since last
report)
|
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
preceding 12 months (or for such shorter period that the issuer was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. ý Yes
¨
No
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). ý Yes
¨
No
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,” “non-accelerated filer,” and “a 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 ý
No
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date:
|
Class
|
Outstanding
at July 28, 2010
|
|
|
Common
Stock, $0.00001 par value
|
36,853,585
|
|
FORM
10-Q
AMAZON
GOLDSANDS LTD.
JUNE
30, 2010
|
Page
|
|
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PART
I – FINANCIAL INFORMATION
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Item
1.
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3
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Item
2.
|
|
4
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Item
3.
|
17
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|
|
Item
4T.
|
17
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PART
II – OTHER INFORMATION
|
||
|
Item
1.
|
18
|
|
|
Item
1A.
|
18
|
|
|
Item
2.
|
18
|
|
|
Item
3.
|
18
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|
|
Item
4.
|
18
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|
|
Item
5.
|
18
|
|
|
Item
6.
|
18
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| 19 | ||
| 20 | ||
| 20 | ||
PART
I - FINANCIAL INFORMATION
Item 1. Financial
Statements
|
Our
unaudited consolidated financial statements included in this Form 10-Q for
the three and six months ended June 30, 2010 are as
follows:
|
|
|
F-1
|
|
|
F-2
|
|
|
F-3
|
|
|
F-4
|
|
|
F-5
|
|
These
unaudited consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
for interim financial information and the SEC instructions to Form
10-Q. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. Operating
results for the interim period ended June 30, 2010 are not necessarily
indicative of the results that can be expected for the full year.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
(Expressed
in U.S. Dollars)
(Unaudited
– Prepared by Management)
|
As
at
30
June
2010
|
As
at
31
December
2009
(Audited)
|
|||||||
| $ | $ | |||||||
|
Assets
|
||||||||
|
Current
|
||||||||
|
Cash
and cash equivalents (Note 2)
|
56,381 | 4,214 | ||||||
|
Mineral property interests
(Note 4)
|
12,012,287 | 7,361,401 | ||||||
|
Property and equipment
(Note 5)
|
14,555 | 17,125 | ||||||
|
Website development cost
(Note 6)
|
4,167 | 10,833 | ||||||
| 12,087,390 | 7,393,573 | |||||||
|
Liabilities
|
||||||||
|
Current
|
||||||||
|
Accounts
payable and accrued liabilities (Note 3)
|
309,657 | 812,895 | ||||||
|
Current
portion of convertible promissory note (Note 8)
|
255,753 | - | ||||||
| 565,410 | 812,895 | |||||||
|
Convertible promissory note
(Note 8)
|
3,250,000 | - | ||||||
|
Due to related parties
(Note 9)
|
110,571 | 109,767 | ||||||
| 3,925,981 | 922,662 | |||||||
|
Stockholders’
equity
|
||||||||
|
Common stock (Note
7)
|
||||||||
|
Authorized
|
||||||||
|
200,000,000
common shares, par value $0.00001 and
|
||||||||
|
200,000,000
blank check preferred shares, par value $0.001
|
||||||||
|
Issued
and outstanding
|
||||||||
|
30
June 2010 – 36,853,585 common shares, par value $0.00001
|
||||||||
|
31
December 2009 – 13,103,585 common shares, par value
$0.00001
|
369 | 131 | ||||||
|
Additional
paid in capital
|
15,834,746 | 12,809,984 | ||||||
|
Deficit,
accumulated during the exploration stage
|
(9,933,706 | ) | (9,714,204 | ) | ||||
| 5,901,409 | 3,095,911 | |||||||
|
Non-controlling interest
(Note 14)
|
2,260,000 | 3,375,000 | ||||||
| 8,161,409 | 6,470,911 | |||||||
| 12,087,390 | 7,393,573 | |||||||
Nature, Basis of Presentation and
Continuance of Operations (Note 1), Commitments (Note 10) and
Subsequent Event (Note
15)
The accompanying notes are an integral part of
these interim consolidated financial statements.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
(Expressed
in U.S. Dollars)
(Unaudited
– Prepared by Management)
|
For
the
period
from
the
date of
inception
on
5
September
1997
to
30
June
2010
|
For
the
three
month
period
ended
30
June
2010
|
For
the
three
month
period
ended
30
June
2009
|
For
the
six
month
period
30
June
2010
|
For
the
six
month
period
ended
30
June
2009
|
||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
|
Expenses
|
||||||||||||||||||||
|
Amortization
– property and equipment
|
35,054 | 1,285 | 2,210 | 2,570 | 4,419 | |||||||||||||||
|
Amortization
– website development costs
|
35,834 | 3,333 | 3,334 | 6,666 | 6,667 | |||||||||||||||
|
Bank
charges and interest (Note 8)
|
16,683 | 6,057 | 284 | 7,086 | 1,195 | |||||||||||||||
|
Consulting
and management fees
|
5,063,518 | 84,450 | 113,842 | 132,226 | 271,547 | |||||||||||||||
|
Investor
communication and promotion
|
632,571 | 6,000 | - | 14,000 | 61,347 | |||||||||||||||
|
Office
and administrative (recovery)
|
116,593 | 184 | (7,290 | ) | 258 | 1,700 | ||||||||||||||
|
Professional
fees
|
620,658 | 22,787 | 72,551 | 44,447 | 102,040 | |||||||||||||||
|
Rent
|
56,416 | - | 4,000 | 2,000 | 6,000 | |||||||||||||||
|
Telephone
|
54,659 | - | - | - | 276 | |||||||||||||||
|
Transfer
agent and filing fees
|
46,271 | 1,819 | 1,383 | 3,981 | 3,083 | |||||||||||||||
|
Travel
and accommodation
|
377,754 | - | - | - | 1,118 | |||||||||||||||
|
Website
maintenance
|
86,000 | - | 7,500 | 20,000 | 15,000 | |||||||||||||||
|
Mineral
property acquisition and exploration expenditures
|
5,235,144 | - | - | - | 136,057 | |||||||||||||||
|
Net
operating loss before other items
|
(12,377,155 | ) | (125,915 | ) | (197,814 | ) | (233,234 | ) | (610,449 | ) | ||||||||||
|
Other
items
|
||||||||||||||||||||
|
Foreign
exchange gain (loss)
|
(17,756 | ) | (1,418 | ) | (1,250 | ) | 3,075 | (1,213 | ) | |||||||||||
|
Forgiveness
of debt
|
39,000 | - | - | - | - | |||||||||||||||
|
Gain
on sale of oil and gas property
|
10,745 | - | - | - | - | |||||||||||||||
|
Interest
income
|
102,561 | - | - | - | - | |||||||||||||||
|
Recovery
of expenses
|
4,982 | - | - | - | - | |||||||||||||||
|
Write-down
of incorporation cost
|
(12,500 | ) | - | - | - | - | ||||||||||||||
|
Write-down
of assets
|
(14,111 | ) | - | - | - | - | ||||||||||||||
|
Net
operating loss and for the period before income taxes
|
(12,264,234 | ) | (127,333 | ) | (199,064 | ) | (230,159 | ) | (611,662 | ) | ||||||||||
|
Future income tax
recovery (Note 13)
|
2,330,528 | - | - | 10,657 | - | |||||||||||||||
|
Net
operating loss and comprehensive loss for the period
|
(9,933,706 | ) | (127,333 | ) | (199,064 | ) | (219,502 | ) | (611,662 | ) | ||||||||||
|
Basic
and diluted loss per common share
|
(0.01 | ) | (0.02 | ) | (0.01 | ) | (0.09 | ) | ||||||||||||
|
Weighted
average number of common shares
used
in per share calculations
|
36,853,585 | 9,814,354 | 26,201,113 | 7,034,042 | ||||||||||||||||
The accompanying notes are an integral part of
these interim consolidated financial statements.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
(Expressed
in U.S. Dollars)
(Unaudited
– Prepared by Management)
|
For
the
period
from
the
date of
inception
on
5
September
1997
to
30 June
2010
|
For
the
three
month
period
ended
30
June
2010
|
For
the
three
month
period
ended
30
June
2009
|
For
the
six
month
period
ended
30
June
2010
|
For
the
six
month
period
ended
30
June
2009
|
||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
|
Cash
flows used in operating activities
|
||||||||||||||||||||
|
Net
loss for the period
|
(9,933,706 | ) | (127,333 | ) | (199,064 | ) | (219,502 | ) | (611,662 | ) | ||||||||||
|
Adjustments
to reconcile loss to net cash used by operating activities
|
||||||||||||||||||||
|
Amortization
(Notes 5 and 6)
|
70,888 | 4,618 | 5,544 | 9,236 | 11,086 | |||||||||||||||
|
Accrued
interest (Note 8)
|
5,753 | 5,753 | - | 5,753 | - | |||||||||||||||
|
Consulting
fees
|
40,200 | - | - | - | - | |||||||||||||||
|
Forgiveness
of debt
|
(24,000 | ) | - | - | - | - | ||||||||||||||
|
Future
income tax recovery
|
(2,330,528 | ) | - | - | (10,657 | ) | - | |||||||||||||
|
Gain
on sale of oil and gas property
|
(10,745 | ) | - | - | - | - | ||||||||||||||
|
Mineral
property acquisition
|
1,816,000 | - | - | - | - | |||||||||||||||
|
Stock
based compensation
|
3,587,000 | - | - | - | - | |||||||||||||||
|
Write-down
of assets
|
3,940 | - | - | - | - | |||||||||||||||
|
Changes
in operating assets and liabilities
|
||||||||||||||||||||
|
Decrease
in taxes recoverable
|
- | - | - | - | 4,394 | |||||||||||||||
|
Decrease
in prepaid expenses and deposits
|
- | - | - | - | 1,962 | |||||||||||||||
|
Increase
(decrease) in accounts payable and accrued liabilities
|
254,631 | 96,887 | 157,331 | (508,467 | ) | 243,424 | ||||||||||||||
|
Increase
in advances from related parties
|
51,869 | 877 | - | 804 | - | |||||||||||||||
| (6,468,698 | ) | (19,198 | ) | (36,189 | ) | (722,833 | ) | (350,796 | ) | |||||||||||
|
Cash
flows from (used in) financing activities
|
||||||||||||||||||||
|
Shares
subscriptions received in advance
|
- | - | (19,000 | ) | - | (613,583 | ) | |||||||||||||
|
Cost
of repurchase of common stock
|
(1,000 | ) | - | - | - | - | ||||||||||||||
|
Proceeds
from issuance of common stock,
net
of share issue costs
|
8,146,915 | - | 18,900 | 1,775,000 | 730,665 | |||||||||||||||
| 8,145,915 | - | (100 | ) | 1,775,000 | 117,082 | |||||||||||||||
|
Cash
flows used in 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 | ) | - | - | - | - | ||||||||||||||
|
Mineral
property exploration
|
(48,609 | ) | - | - | - | - | ||||||||||||||
|
Business
acquisition, net of cash received
|
(1,499,422 | ) | - | - | (1,000,000 | ) | (250,000 | ) | ||||||||||||
|
Purchase
of equipment
|
(53,550 | ) | - | - | - | - | ||||||||||||||
|
Website
development costs
|
(40,000 | ) | - | - | - | - | ||||||||||||||
| (1,620,836 | ) | - | - | (1,000,000 | ) | (250,000 | ) | |||||||||||||
|
Increase
(decrease) in cash and cash equivalents
|
56,381 | (19,198 | ) | (36,289 | ) | 52,167 | (483,714 | ) | ||||||||||||
|
Cash
and cash equivalents, beginning of period
|
- | 75,579 | 45,478 | 4,214 | 492,903 | |||||||||||||||
|
Cash
and cash equivalents, end of period
|
56,381 | 56,381 | 9,189 | 56,381 | 9,189 | |||||||||||||||
Supplemental
Disclosures with Respect of Cash Flows (Note 12)
The accompanying notes are an integral part of
these interim consolidated financial statements.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
(Expressed
in U.S. Dollars)
(Unaudited
– Prepared by Management)
|
Number
of
shares
issued
|
Common
stock
|
Additional
paid-in
capital
|
Deferred
stock-based
compensation
|
Share
subscriptions
received
in
advance
|
Deficit,
accumulated
during
the
exploration
stage
|
Total
stockholders’
equity
(deficiency)
|
||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
|
Balance
at 5 September 1997 (inception)
|
- | - | - | - | - | - | - | |||||||||||||||||||||
|
Common
shares issued for cash ($0.25 per share)
|
4,000 | 1 | 999 | - | - | - | 1,000 | |||||||||||||||||||||
|
Net
loss for the period
|
- | - | - | - | - | (2,522 | ) | (2,522 | ) | |||||||||||||||||||
|
Balance
at 30 September 1997
|
4,000 | 1 | 999 | - | - | (2,522 | ) | (1,522 | ) | |||||||||||||||||||
|
Common
shares issued for acquisition of oil and gas properties ($25 per
share)
|
400 | - | 10,000 | - | - | - | 10,000 | |||||||||||||||||||||
|
Common
shares issued for cash ($0.25 per share)
|
4,000 | 1 | 999 | - | - | - | 1,000 | |||||||||||||||||||||
|
Net
loss for the year
|
- | - | - | - | - | (1,246 | ) | (1,246 | ) | |||||||||||||||||||
|
Balance
at 30 September 1998
|
8,400 | 2 | 11,998 | - | - | (3,768 | ) | 8,232 | ||||||||||||||||||||
|
Common
shares issued for cash ($25 per share)
|
4,000 | 1 | 99,999 | - | - | 100,000 | ||||||||||||||||||||||
|
Common
shares repurchased for cash ($0.25 per share)
|
(4,000 | ) | (1 | ) | (999 | ) | - | - | - | (1,000 | ) | |||||||||||||||||
|
Net
loss for the year
|
- | - | - | - | - | (9,569 | ) | (9,569 | ) | |||||||||||||||||||
|
Balance
at 30 September 1999
|
8,400 | 2 | 110,998 | - | - | (13,337 | ) | 97,663 | ||||||||||||||||||||
|
Net
loss for the year
|
- | - | - | - | - | (34,290 | ) | (34,290 | ) | |||||||||||||||||||
|
Balance
at 30 September 2000
|
8,400 | 2 | 110,998 | - | - | (47,627 | ) | 63,373 | ||||||||||||||||||||
|
Net
loss for the year
|
- | - | - | - | - | (14,296 | ) | (14,296 | ) | |||||||||||||||||||
|
Balance
at 30 September 2001
|
8,400 | 2 | 110,998 | - | - | (61,923 | ) | 49,077 | ||||||||||||||||||||
|
Net
income for the year
|
- | - | - | - | - | 10,954 | 10,954 | |||||||||||||||||||||
|
Balance
at 30 September 2002
|
8,400 | 2 | 110,998 | - | - | (50,969 | ) | 60,031 | ||||||||||||||||||||
|
Net
income for the year
|
- | - | - | - | - | 2,387 | 2,387 | |||||||||||||||||||||
|
Balance
at 30 September 2003
|
8,400 | 2 | 110,998 | - | - | (48,582 | ) | 62,418 | ||||||||||||||||||||
|
Common
shares issued for cash ($1.50 per share) and for services ($6 per
share)
|
8,569 | 1 | 62,699 | - | - | - | 62,700 | |||||||||||||||||||||
|
Donated
capital
|
- | - | 5,000 | - | - | - | 5,000 | |||||||||||||||||||||
|
Net
loss for the year
|
- | - | - | - | - | (64,175 | ) | (64,175 | ) | |||||||||||||||||||
|
Balance
at 30 September 2004
|
16,969 | 3 | 178,697 | - | - | (112,757 | ) | 65,943 | ||||||||||||||||||||
|
Donated
capital
|
- | - | 3,000 | - | - | - | 3,000 | |||||||||||||||||||||
|
Net
loss for the period
|
- | - | - | - | - | (7,750 | ) | (7,750 | ) | |||||||||||||||||||
|
Balance
at 31 December 2004
|
16,969 | 3 | 181,697 | - | - | (120,507 | ) | 61,193 | ||||||||||||||||||||
|
Common
shares repurchased ($0.25 per share)
|
(4,000 | ) | (1 | ) | (999 | ) | - | - | - | (1,000 | ) | |||||||||||||||||
|
Donated
capital
|
- | - | 8,200 | - | - | - | 8,200 | |||||||||||||||||||||
|
Net
loss for the year
|
- | - | - | - | - | (40,652 | ) | (40,652 | ) | |||||||||||||||||||
|
Balance
at 31 December 2005
|
12,969 | 2 | 188,898 | - | - | (161,159 | ) | 27,741 | ||||||||||||||||||||
The accompanying notes are an integral part of
these interim consolidated financial statements.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Interim
Consolidated Statements of Changes in Stockholders’ Equity
(Deficiency)
(Expressed
in U.S. Dollars)
(Unaudited
– Prepared by Management)
|
Number
of
shares
issued
|
Common
stock
|
Additional
paid-in
capital
|
Deferred
stock-based
compensation
|
Share
subscriptions received in advance
|
Deficit,
accumulated during the exploration stage
|
Non-
controlling
interest
|
Total
stockholders’ equity (deficiency)
|
|||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
|
Balance
at 31 December 2005
|
12,969 | 2 | 188,898 | - | - | (161,159 | ) | - | 27,741 | |||||||||||||||||||||||
|
Common
shares issued for cash ($0.125 per share)
|
1,200,000 | 12 | 149,988 | - | - | - | - | 150,000 | ||||||||||||||||||||||||
|
Common
shares cancelled
|
(8,467 | ) | (1 | ) | 1 | - | - | - | - | - | ||||||||||||||||||||||
|
Common
shares issued for purchase of Finmetal OY (deemed at $25.60 per
share)
|
50,000 | 1 | 1,279,999 | - | - | - | - | 1,280,000 | ||||||||||||||||||||||||
|
Common
shares issued as stock-based compensation (deemed at $24.80 per
share)
|
97,500 | 1 | 2,417,999 | (2,321,280 | ) | - | - | - | 96,720 | |||||||||||||||||||||||
|
Common
shares issued for cash ($10 per share)
|
279,950 | 2 | 2,799,498 | - | - | - | - | 2,799,500 | ||||||||||||||||||||||||
|
Share
issue costs
|
- | (254,500 | ) | - | - | - | - | (254,500 | ) | |||||||||||||||||||||||
|
Net
loss for the year
|
- | - | - | - | - | (2,506,896 | ) | - | (2,506,896 | ) | ||||||||||||||||||||||
|
Balance
at 31 December 2006
|
1,631,952 | 17 | 6,581,883 | (2,321,280 | ) | - | (2,668,055 | ) | - | 1,592,565 | ||||||||||||||||||||||
|
Common
shares issued for cash ($25 per unit) (Note 7)
|
121,800 | 1 | 2,944,578 | - | - | - | - | 2,944,579 | ||||||||||||||||||||||||
|
Share
issue costs
|
- | - | (212,450 | ) | - | - | - | - | (212,450 | ) | ||||||||||||||||||||||
|
Warrants
issued (Note 7)
|
- | - | 100,421 | - | - | - | - | 100,421 | ||||||||||||||||||||||||
|
Common
shares issued as stock-based compensation (deemed at $29 per share) (Note
7)
|
46,250 | 1 | 1,341,249 | (1,341,250 | ) | - | - | - | - | |||||||||||||||||||||||
|
Common
shares issued for finder’s fee for mineral interests (deemed at
$26.80) per share (Notes 4, 7 and 12)
|
20,000 | 1 | 535,999 | - | - | - | - | 536,000 | ||||||||||||||||||||||||
|
Stock-based
compensation
|
- | - | 3,023,282 | 2,936,734 | - | - | - | 5,960,016 | ||||||||||||||||||||||||
|
Stock
awards cancelled
|
(97,500 | ) | (1 | ) | 1 | - | - | - | - | - | ||||||||||||||||||||||
|
Net
loss for the year
|
- | - | - | - | - | (9,511,457 | ) | - | (9,511,457 | ) | ||||||||||||||||||||||
|
Balance
at 31 December 2007
|
1,722,502 | 18 | 14,314,963 | (725,796 | ) | - | (12,179,512 | ) | - | 1,409,674 | ||||||||||||||||||||||
|
Stock-based
compensation (Note 7)
|
- | - | - | 725,796 | - | - | - | 725,796 | ||||||||||||||||||||||||
|
Stock
awards cancelled
(Note
7)
|
(31,250 | ) | (1 | ) | 1 | - | - | - | - | - | ||||||||||||||||||||||
|
Stock
options forfeited
(Note
7)
|
- | - | (3,245,532 | ) | - | - | - | - | (3,245,532 | ) | ||||||||||||||||||||||
|
Common
shares issued for business acquisition ($0.25 per share) (Notes 4, 7 and
12)
|
2,500,000 | 25 | 624,975 | - | - | - | - | 625,000 | ||||||||||||||||||||||||
|
Share
subscriptions received in advance
|
- | - | - | - | 613,583 | - | - | 613,583 | ||||||||||||||||||||||||
|
Net
income for the year
|
- | - | - | - | 983,065 | - | 983,065 | |||||||||||||||||||||||||
|
Balance
at 31 December 2008
|
4,191,252 | 42 | 11,694,408 | - | 613,583 | (11,196,447 | ) | - | 1,111,586 | |||||||||||||||||||||||
|
Common
shares issued for cash ($0.15 per unit) (Note 7)
|
5,412,333 | 54 | 811,796 | - | (613,583 | ) | - | - | 198,267 | |||||||||||||||||||||||
|
Share
issue costs
|
- | - | (81,185 | ) | - | - | - | - | (81,185 | ) | ||||||||||||||||||||||
|
Common
shares issued for business acquisition ($0.11 per share) (Notes 4, 7 and
12)
|
3,500,000 | 35 | 384,965 | - | - | - | - | 385,000 | ||||||||||||||||||||||||
|
Business
acquisition
|
- | - | - | - | - | - | 3,375,000 | 3,375,000 | ||||||||||||||||||||||||
|
Net
income for the year
|
- | - | - | - | - | 1,482,243 | - | 1,482,243 | ||||||||||||||||||||||||
|
Balance
at 31 December 2009
|
13,103,585 | 131 | 12,809,984 | - | - | (9,714,204 | ) | 3,375,000 | 6,470,911 | |||||||||||||||||||||||
The accompanying notes are an integral part of
these interim consolidated financial statements.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Interim
Consolidated Statements of Changes in Stockholders’ Equity
(Deficiency)
(Expressed
in U.S. Dollars)
(Unaudited
– Prepared by Management)
|
Number
of shares issued
|
Common
stock
|
Additional
paid-in
capital
|
Deferred
stock-based
compensation
|
Share
subscriptions received in advance
|
Deficit,
accumulated during the exploration stage
|
Non-controlling
interest
|
Total
stockholders’ equity (deficiency)
|
|||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
|
Balance
at 31 December 2009
|
13,103,585 | 131 | 12,809,984 | - | - | (9,714,204 | ) | 3,375,000 | 6,470,911 | |||||||||||||||||||||||
|
Common
shares issued for business acquisition ($0.25 per share) (Notes 4, 7 and
12)
|
5,000,000 | 50 | 1,249,950 | - | - | - | - | 1,250,000 | ||||||||||||||||||||||||
|
Common
shares issued for cash ($0.10 per unit) (Note 7)
|
18,750,000 | 188 | 1,015,720 | - | - | - | - | 1,015,720 | ||||||||||||||||||||||||
|
Warrants
issued (Note 7)
|
- | - | 859,092 | - | - | - | - | 859,092 | ||||||||||||||||||||||||
|
Share
issue costs
|
- | - | (100,000 | ) | - | - | - | - | (100,000 | ) | ||||||||||||||||||||||
|
Business
acquisition
|
- | - | - | - | - | - | (1,115,000 | ) | (1,115,000 | ) | ||||||||||||||||||||||
|
Net
loss for the period
|
- | - | - | - | - | (219,502 | ) | - | (219,502 | ) | ||||||||||||||||||||||
|
Balance
at 30 June 2010
|
36,853,585 | 369 | 15,834,746 | - | - | (9,933,706 | ) | 2,260,000 | 8,161,409 | |||||||||||||||||||||||
The accompanying notes are an integral part of
these interim consolidated financial statements.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
(Expressed
in U.S. Dollars)
(Unaudited
– Prepared by Management)
30
June 2010
1.
Nature,
Basis of Presentation and Continuance of Operations
Amazon
Goldsands Ltd. (the “Company”) was incorporated under the laws of the State of
Nevada, U.S.A. under the name “Gondwana Energy, Ltd.” on 5 September
1997. On 23 January 2007, the Company changed its name to “Finmetal
Mining Ltd.”. On 27 November 2006, the Company completed the
acquisition of 100% of the shares of Finmetal Mining OY (“Finmetal OY”), a
company incorporated under the laws of Finland. During the fiscal
year ended 31 December 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 22 May 2008, the
Company changed its name to “Amazon Goldsands Ltd.” and on 18 September 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 is an exploration stage enterprise, as defined in Accounting Standards
Codification (the “Codification” or “ASC”) 915-10, “Development Stage Entities”.
The Company is devoting all of its present efforts in securing and establishing
a new business, and its planned principle operations have not commenced, and,
accordingly, no revenue has been derived during the organization
period.
The
accompanying interim consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiary, Finmetal OY, a company incorporated
under the laws of Finland, since its date of acquisition on 27 November
2006. The Company also follows ASC 810-10, “Consolidation” and fully
consolidates the assets, liabilities, revenues and expenses of Beardmore
Holdings, Inc. (“Beardmore”), a company incorporated under the law of
Panama. The Company owns a 50% interest in Beardmore. It
recognizes the other owner’s equity under the heading non-controlling interest
(Note 14).
The
interim consolidated financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in the United States of
America (“GAAP”) applicable to exploration stage enterprises, and are expressed
in U.S. dollars. The Company’s fiscal year end is 31
December.
The
Company’s interim consolidated financial statements as at 30 June 2010 and for
the six month period then ended have been prepared on a going concern basis,
which contemplates the realization of assets and the settlement of liabilities
and commitments in the normal course of business. The Company had a
loss of $219,502 for the six month period ended 30 June 2010 (30 June 2009 –
$611,662, cumulative – $9,933,706) and has a working capital deficit of $509,029
at 30 June 2010 (31 December 2009 – $808,681).
Management
cannot provide assurance that the Company will ultimately achieve profitable
operations or become cash flow positive, or raise additional debt and/or equity
capital. Management believes that the Company’s capital resources
should be adequate to continue operating and maintaining its business strategy
during the fiscal year ending 31 December 2010. However, if the
Company is unable to raise additional capital in the near future, due to the
Company’s liquidity problems, management expects that the Company will need to
curtail operations, liquidate assets, seek additional capital on less favorable
terms and/or pursue other remedial measures. These interim
consolidated financial statements do not include any adjustments related to the
recoverability and classification of assets or the amounts and classification of
liabilities that might be necessary should the Company be unable to continue as
a going concern.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes
to Interim Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited
– Prepared by Management)
30 June 2010
2.
Significant
Accounting Policies
The
following is a summary of significant accounting policies used in the
preparation of these interim consolidated financial statements.
Principles
of consolidation
All
inter-company balances and transactions have been eliminated in these interim
consolidated financial statements.
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 30 June 2010, the
Company has cash and cash equivalents in the amount of $56,381 (31 December 2009
– $4,214).
Website
and software development costs
The
Company recognizes the costs incurred in the development of the Company’s
website in accordance with ASC 350-50, “Website Development
Costs”. 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.
Property
and equipment
Furniture,
computer equipment, office equipment and computer software are carried at cost
and are amortized over their estimated useful lives at rates as
follows:
|
Furniture,
computer and office equipment
|
30 | % | ||
|
Computer
software
|
100 | % |
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.
Segments
of an enterprise and related information
ASC 280,
“Segment Reporting” establishes guidance for the
way that public companies report information about operating segments in annual
financial statements and requires reporting of selected information about
operating segments in interim financial statements issued to the
public. It also establishes standards for disclosures regarding
products and services, geographic areas and major customers. ASC 280
defines operating segments as components of a company about which separate
financial information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in assessing
performance. The Company has evaluated this Codification and does not
believe it is applicable at this time.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Interim Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited
– Prepared by Management)
30
June 2010
Mineral property costs
Mineral
property acquisition costs are initially capitalized as tangible assets when
purchased. At the end of each fiscal quarter end, the Company
assesses the carrying costs for impairment. If proven and probable
reserves are established for a property and it has been determined that a
mineral property can be economically developed, costs will be amortized using
the units-of-production method over the estimated life of the probable
reserve.
Mineral
property exploration costs are expensed as incurred.
Estimated
future removal and site restoration costs, when determinable are provided over
the life of proven reserves on a units-of-production basis. Costs,
which include production equipment removal and environmental remediation, are
estimated each period by management based on current regulations, actual
expenses incurred, and technology and industry standards. Any charge
is included in exploration expense or the provision for depletion and
depreciation during the period and the actual restoration expenditures are
charged to the accumulated provision amounts as incurred.
As of the
date of these interim consolidated financial statements, the Company has not
established any proven or probable reserves on its mineral properties and
incurred only acquisition and exploration costs.
Although
the Company has taken steps to verify title to mineral properties in which it
has an interest, according to the usual industry standards for the stage of
exploration of such properties, these procedures do not guarantee the Company’s
title. Such properties may be subject to prior agreements or
transfers and title may be affected by undetected defects.
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.
Foreign
currency translation
The
Company’s functional and reporting currency is U.S. dollars. The
interim consolidated financial statements of the Company are translated to U.S.
dollars in accordance with ASC 830, “Foreign Currency
Matters.” Monetary assets and liabilities denominated in
foreign currencies are translated using the exchange rate prevailing at the
balance sheet date. Gains and losses arising on translation or
settlement of foreign currency denominated transactions or balances are included
in the determination of income. The Company has not, to the date of
these interim consolidated financial statements, entered into derivative
instruments to offset the impact of foreign currency fluctuations.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Interim Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited
– Prepared by Management)
30
June 2010
Comprehensive
loss
ASC 220,
“Comprehensive Income”,
establishes standards for the reporting and display of comprehensive loss and
its components in the financial statements. As at 30 June 2010, the
Company has no items that represent a comprehensive loss and, therefore, has not
included a schedule of comprehensive loss in the interim consolidated financial
statements.
Stock-based
compensation
Effective
1 January 2006, the Company adopted the provisions of ASC 718, “Compensation – Stock
Compensation”, which establishes accounting for equity instruments
exchanged for employee services. Under the
provisions of ASC 718, stock-based compensation cost is measured at the grant
date, based on the calculated fair value of the award, and is recognized as an
expense over the employees’ requisite service period (generally the vesting
period of the equity grant). The Company adopted ASC 718 using the modified
prospective method, which requires the Company to record compensation expense
over the vesting period for all awards granted after the date of adoption, and
for the unvested portion of previously granted awards that remain outstanding at
the date of adoption. Accordingly, the financial statements for the
periods prior to 1 January 2006 have not been restated to reflect the fair value
method of expensing share-based compensation. Adoption of ASC 718 does not
change the way the Company accounts for share-based payments to non-employees,
with guidance provided by ASC 505-50, “Equity-Based Payments to
Non-Employees”.
Basic
and diluted net income (loss) per share
The
Company computes net income (loss) per share in accordance with ASC 260, “Earnings per
Share”. ASC 260 requires presentation of both basic and
diluted earnings per share (“EPS”) on the face of the income
statement. Basic EPS is computed by dividing net income (loss)
available to common shareholders (numerator) by the weighted average number of
shares outstanding (denominator) during the period. Diluted EPS gives
effect to all dilutive potential common shares outstanding during the period
using the treasury stock method and convertible preferred stock using the
if-converted method. In computing diluted EPS, the average stock
price for the period is used in determining the number of shares assumed to be
purchased from the exercise of stock options or warrants. Diluted EPS
excluded all dilutive potential shares if their effect is
anti-dilutive.
Income
taxes
Deferred
income taxes are reported for timing differences between items of income or
expense reported in the financial statements and those reported for income tax
purposes in accordance with ASC 740, “Income Taxes”, which requires
the use of the asset/liability method of accounting for income
taxes. Deferred income taxes and tax benefits are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases, and for tax losses and credit
carry-forwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. The Company provides for deferred taxes for the estimated
future tax effects attributable to temporary differences and carry-forwards when
realization is more likely than not.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Interim Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited
– Prepared by Management)
30
June 2010
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 ASC 360-10-35-15, “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.
Asset
retirement obligations
The
Company has adopted ASC 410, “Assets Retirement and Environmental
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.
ASC 410 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 30 June 2010, the Company does not have any asset retirement
obligations.
Convertible
debt
The
Company has adopted the Financial Accounting Standards Board (“FASB”) issued new
guidance for accounting for convertible debt instruments that may be settled in
cash. The new guidance, which is now part of ASC 470-20, “Debt with Conversion and Other
Options”, requires the liability and equity components to be separately
accounted for in a manner that will reflect the entity’s nonconvertible debt
borrowing rate. The Company will allocate a portion of the proceeds
received from the issuance of convertible notes between a liability and equity
component by determining the fair value of the liability component using the
Company’s nonconvertible debt borrowing rate. The difference between
the proceeds of the notes and the fair value of the liability component will be
recorded as a discount on the debt with a corresponding offset to paid-in
capital. The resulting discount will be accreted by recording
additional non-cash interest expense over the expected life of the convertible
notes using the effective interest rate method. The new guidance was
to be applied retrospectively to all periods presented upon those fiscal
years. The adoption of this guidance did not have a material impact
on the Company’s consolidated financial statements.
Use
of estimates
The
preparation of financial statements in conformity with GAAP 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.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Interim Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited
– Prepared by Management)
30
June 2010
Financial
instruments
The
carrying value of cash and cash equivalents and accounts payable approximates
their fair value because of the short maturity of these
instruments. The Company’s operations are in Canada and virtually all
of its assets and liabilities are giving rise to significant exposure to market
risks from changes in foreign currency rates. The Company’s financial
risk is the risk that arises from fluctuations in foreign exchange rates and the
degree of volatility of these rates. Currently, the Company does not
use derivative instruments to reduce its exposure to foreign currency
risk.
Comparative
figures
Certain
comparative figures have been adjusted to conform to the current period’s
presentation.
Changes
in accounting policies
In June
2009, the FASB issued the Statement of Financial Accounting Standard (“SFAS”)
No. 167, “Amendments to FASB
Interpretation No. 46(R)”. SFAS No. 167, which amends ASC 810-10, “Consolidation”, prescribes a
qualitative model for identifying whether a company has a controlling financial
interest in a variable interest entity (“VIE”) and eliminates the quantitative
model. The new model identifies two primary characteristics of a
controlling financial interest: (1) provides a company with the power to direct
significant activities of the VIE, and (2) obligates a company to absorb losses
of and/or provides rights to receive benefits from the VIE. SFAS No.
167 requires a company to reassess on an ongoing basis whether it holds a
controlling financial interest in a VIE. A company that holds a
controlling financial interest is deemed to be the primary beneficiary of the
VIE and is required to consolidate the VIE. SFAS No. 167, which is
referenced in ASC 105-10-65, has not yet been adopted into the Codification and
remains authoritative. SFAS No. 167 is effective 1 January
2010. The adoption of SFAS No. 167 did not have a material impact on
the Company’s interim consolidated financial statements.
In June
2009, the FASB issued SFAS No. 166, “Accounting for Transfer of
Financial Assets – an amendment of FASB Statement”. SFAS No.
166 removes the concept of a qualifying special-purpose entity from ASC 860-10,
“Transfers and
Servicing”, and removes the exception from applying ASC 810-10, “Consolidation”. This
statement also clarifies the requirements for isolation and limitations on
portions of financial assets that are eligible for sale
accounting. SFAS No. 166, which is referenced in ASC 105-10-65, has
not yet been adopted into the Codification and remains
authoritative. This statement is effective 1 January
2010. The adoption of SFAS No. 166 did not have a material impact on
the Company’s interim consolidated financial statements.
In August
2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-05, “Fair Value Measurement and
Disclosure (Topic 820) – Measuring Liabilities at Fair Value”, which
provides valuation techniques to measure fair value in circumstances in which a
quoted price in an active market for the identical liability is not
available. The guidance provided in this update is effective 1
January 2010. The adoption of this guidance did not have a material
impact on the Company’s interim consolidated financial statements.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Interim Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited
– Prepared by Management)
30
June 2010
On 1
January 2010, the Company adopted ASU No. 2010-02, “Accounting and Reporting for
Decreases in Ownership of a Subsidiary – a Scope
Clarification”. ASU No. 2010-02 addresses implementation
issues related to the changes in ownership provisions in the
Consolidation—Overall Subtopic (Subtopic 810-10) of the FASB ASC, originally
issued as SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements”. Subtopic 810-10 establishes the
accounting and reporting guidance for noncontrolling interests and changes in
ownership interests of a subsidiary. An entity is required to
deconsolidate a subsidiary when the entity ceases to have a controlling
financial interest in the subsidiary. Upon deconsolidation of a
subsidiary, an entity recognizes a gain or loss on the transaction and measures
any retained investment in the subsidiary at fair value. The gain or
loss includes any gain or loss associated with the difference between the fair
value of the retained investment in the subsidiary and its carrying amount at
the date the subsidiary is deconsolidated. In contrast, an entity is
required to account for a decrease in ownership interest of a subsidiary that
does not result in a change of control of the subsidiary as an equity
transaction. The adoption of ASU No. 2010-02 did not have a material
impact on the Company’s interim consolidated financial statements.
On 1
January 2010, the Company adopted ASU No. 2010-01, “Equity (ASC Topic 505): Accounting
for Distributions to Shareholders with Components of Stock and Cash”,
which clarifies that the stock portion of a distribution to shareholders that
allow them to elect to receive cash or stock with a potential limitation on the
total amount of cash that all shareholders can elect to receive in the aggregate
is considered a share issuance that is reflected prospectively in earnings per
share and is not considered a stock dividend for purposes of ASC Topic 505 and
ASC Topic 260. The adoption of the ASU No. 2010-01 did not have a material
impact on the Company’s interim consolidated financial statements.
Recent
accounting pronouncements
In
February 2010, the FASB issued ASU No. 2010-11, “Derivatives and Hedging (Topic
815): Scope Exception Related to Embedded Credit Derivatives”. ASU No.
2010-11 clarifies the type of embedded credit derivative that is exempt from
embedded derivative bifurcation requirements. Specifically, only one form of
embedded credit derivative qualifies for the exemption – one that is related
only to the subordination of one financial instrument to another. As a result,
entities that have contracts containing an embedded credit derivative feature in
a form other than such subordination may need to separately account for the
embedded credit derivative feature. The amendments in ASU No. 2010-11 are
effective for each reporting entity at the beginning of its first fiscal quarter
beginning after 15 June 2010. Early adoption is permitted at the beginning of
each entity’s first fiscal quarter beginning after 5 March 2010. The adoption of
ASC No. 2010-11 is not expected to have a material impact on the Company’s
interim consolidated financial statements.
In
February 2010, the FASB issued ASC No. 2010-09, “Amendments to Certain Recognition
and Disclosure Requirements”, which eliminates the requirement for
Securities and Exchange Commission (“SEC”) filers to disclose the date through
which an entity has evaluated subsequent events. ASC No. 2010-09 is
effective for its fiscal quarter beginning after 15 December 2010. The
adoption of ASC No. 2010-06 is not expected to have a material impact on the
Company’s interim consolidated financial statements.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Interim Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited
– Prepared by Management)
30
June 2010
In
January 2010, the FASB issued ASC No. 2010-06, “Fair Value Measurement and
Disclosures (Topic 820): Improving Disclosure and Fair Value
Measurements”, which requires that purchases, sales, issuances, and
settlements for Level 3 measurements be disclosed. ASC No. 2010-06 is
effective for its fiscal quarter beginning after 15 December 2010. The
adoption of ASC No. 2010-06 is not expected to have a material impact on the
Company’s interim consolidated financial statements.
3.
Accounts
Payable and Accrued Liabilities
Included
in accounts payable and accrued liabilities as at 30 June 2010 are amounts due
to a director and a former officer of the Company of $28,105 (31 December 2009 –
$42,224). The amounts are non-interest bearing, unsecured and due on
demand.
Included
in accounts payable and accrued liabilities as at 30 June 2010 is an amount due
to a Company with directors and officers in common with the Company of $Nil (31
December 2009 – $88,435). The amount is non-interest bearing,
unsecured and due on demand.
Included
in accounts payable and accrued liabilities as at 30 June 2010 is an advance
received from a former officer of the Company of $Nil (31 December 2009 –
$28,084). The amount is non-interest bearing, unsecured and has no
fixed terms of repayment.
4.
Mineral
Property Interests
The
Temasek Properties
Effective
18 September 2008 (the “Effective Date”), the Company entered into a Mineral
Right Option Agreement with Temasek Investments Inc. (“Temasek”), a company
incorporated under the laws of Panama (the “Temasek
Agreement”).
Pursuant
to the Temasek 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”). The Mineral Rights are owned by Rio
Santiago Minerales S.A.C. (“Rio Santiago”). 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 (Note 14).
The
Company may exercise the initial 25% option to acquire a 25% interest in the
Mineral Rights after fulfilling the following conditions:
|
·
|
Pay
$250,000 (paid) to Temasek on the date the Agreement is
executed;
|
|
·
|
Issue
2,500,000 common shares (issued) of the Company to Temasek within five
business days from the Effective Date (Notes 7 and 12);
and
|
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes
to Interim Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited
– Prepared by Management)
30 June 2010
|
·
|
Pay
an additional $250,000 (paid) to Temasek within ninety days of the
Effective Date.
|
The
Company entered into an amending agreement dated 12 May 2009 with Temasek
related to the Temasek Properties, further amended pursuant to an agreement
dated 3 February 2010 (the “Second Amending Temasek
Agreement”). Under the Second Amending Temasek Agreement, the Company
may now exercise the second 25% option resulting in the acquisition of a 50%
interest in the Mineral Rights by fulfilling the following conditions as set out
in the Second Amending Temasek Agreement within thirty days from the Effective
Date:
|
·
|
Exercise
and complete the initial 25% option
(completed);
|
|
·
|
Issue
3,500,000 additional common shares of the Company to Temasek (issued)
(Notes 7 and 11); and
|
|
·
|
Pay
an additional $750,000 to Temasek by 5 March 2010
(paid).
|
The
Company entered into an amending agreement dated 25 June 2010 (the “Amendment
Effective Date”) with Temasek related to the Temasek Properties (the “Third
Amending Temasek Agreement”). Under the Third Amending Temasek
Agreement, the Company may now exercise the third and fourth 25% options
resulting in the acquisition of a 100% interest in the Mineral Rights by
fulfilling the following conditions as set out in the Third Amending Temasek
Agreement within ten business days from the Amendment Effective
Date:
|
·
|
Exercise
and complete the initial and second 25% options
(completed);
|
|
·
|
Issue
11,000,000 additional common shares of the Company to Temasek (5,000,000
common shares issued on 9 March 2010) (Notes 7 and
12);
|
|
·
|
Pay
an additional $250,000 to Temasek
(paid);
|
|
·
|
Issue
a convertible note for $250,000 to Temasek (the “$250,000 Convertible
Note”) (issued). The $250,000 Convertible Note has a term of
ninety days and will accrue interest at a rate of 12% per
annum. Both principal and interest under the $250,000
Convertible Note are payable upon maturity (Notes 8 and 12);
and
|
|
·
|
Issue
a convertible note for $3,250,000 to Temasek (the “$3,250,000 Convertible
Note”) (issued). The $3,250,000 Convertible Note has a term of
three years and will accrue interest at a rate of 12% per annum. Interest
will be payable annually and the principal is payable upon maturity (Notes
8 and 12).
|
Any
principal and interest due under either of the Convertible Notes is convertible,
at the option of Temasek, into
units at a fixed conversion price of $0.25 per unit. Each unit
consists of one common share of the Company and one share purchase
warrant. Each whole warrant entitles the holder to purchase one
additional common share of the Company at an exercise price of $0.50 per share
(Note 8).
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Interim Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited
– Prepared by Management)
30
June 2010
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 days of the acquisition of a 100% interest in the Mineral Rights, Temasek
will only be entitled to an annual 1% 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 from the Effective Date,
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 returns royalty.
Temasek
became a significant shareholder of the Company through the issuance of the
6,000,000 common shares on exercise of the option to acquire the initial and
second 25% interests in the Mineral Rights and an additional 5,000,000 common
shares on exercise of the partial payment toward the exercise of the option to
acquire the third 25% interest (Note 7).
The
Company is subject to certain outstanding and future commitments related to the
Temasek Agreement. The Company is in the process of renegotiating the terms of
the Temasek Agreement (Note 10).
5.
Property
and Equipment
|
Net
Book Value
|
||||||||||||||||
|
Cost
|
Accumulated
amortization
|
30
June
2010
|
31
December
2009
(Audited)
|
|||||||||||||
| $ | $ | $ | $ | |||||||||||||
|
Furniture,
computer and office equipment
|
38,505 | 23,950 | 14,555 | 17,125 | ||||||||||||
|
Computer
software
|
8,928 | 8,928 | - | - | ||||||||||||
| 47,433 | 32,878 | 14,555 | 17,125 | |||||||||||||
During
the six month period ended 30 June 2010, total additions to property and
equipment were $Nil (30 June 2009 – $Nil).
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Interim Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited
– Prepared by Management)
30
June 2010
6. Website
Development Cost
|
Net
Book Value
|
||||||||||||||||
|
Cost
|
Accumulated
amortization
|
30
June
2010
|
31
December 2009
(Audited)
|
|||||||||||||
| $ | $ | $ | $ | |||||||||||||
|
Website
development
|
40,000 | 35,833 | 4,167 | 10,833 | ||||||||||||
During
the six month period ended 30 June 2010, total additions to website development
were $Nil (30 June 2009 – $Nil).
7.
Common
Stock
Authorized
The total
authorized capital consists of
|
·
|
200,000,000
of common shares with par value of
$0.00001
|
|
·
|
200,000,000
of blank check preferred shares with par value of
$0.001
|
Issued
and outstanding
As at 30
June 2010, the total issued and outstanding capital stock is 36,853,585 common
shares with a par value of $0.00001 per share.
On 25
March 2010, the Company issued 18,750,000 units at a price of $0.10 per unit
(the “Units”) for proceeds of $1,775,000, net of share issue costs of
$100,000. Each Unit consists of one share of common stock with par
value $0.00001 and one common stock purchase warrant. Each one common
stock purchase warrant entitles the holder to purchase one common share at a
price of $0.10 commencing six months from the closing date of the offering up to
25 March 2011. As at 30 June 2010, all of the related share purchase
warrants in this series remain outstanding.
On 9
March 2010, the Company issued 5,000,000 common shares valued at $1,250,000
($0.25 per common share) pursuant to the Temasek Agreement (Note
4). The fair value is equal to the market price of the Company’s
stock on the date of the transaction.
During
the year ended 31 December 2009, the Company issued 3,500,000 common shares
valued at a $385,000 ($0.11 per common share) pursuant to the Temasek Agreement
(Note 4). The fair value is equal to the market price of the
Company’s stock on the date of the transaction.
During
the year ended 31 December 2009, the Company issued 140,000 common shares for
total proceeds of $18,900 ($0.15 per common share), net of share issue costs of
$2,100.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Interim Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited
– Prepared by Management)
30
June 2010
During
the year ended 31 December 2009, the Company issued 5,272,333 common shares for
total proceeds of $711,765 ($0.15 per common share), net of share issue costs of
$79,085.
During
the year ended 31 December 2008, a total of 167,500 stock options
expired.
During
the year ended 31 December 2008, the Company issued 2,500,000 common shares
valued at $625,000 ($0.25 per common share) pursuant to the Temasek Agreement
(Note 4). The fair value is equal to the market price of the
Company’s stock on the date of the transaction.
During
the year ended 31 December 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 interim consolidated financial
statements.
During
the year ended 31 December 2007, the Company issued 121,800 units at a price of
$25 per share for proceeds of $2,832,550, net of share issue costs of
$212,450. Each unit consists of one share of common stock with par
value $0.00001 and one-half share purchase warrant. Each full share purchase
warrant entitles the holder to purchase one common share at a price of $35 up to
17 April 2008. During the year ended 31 December 2008, all of the
related share purchase warrants in this series expired.
During
the year ended 31 December 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. During the year ended
31 December 2008, 30,000 restricted shares were cancelled and returned to
treasury. Fifty percent of the remaining 7,500 shares vested during
the year ended 31 December 2008 and the balance have been deemed to have
vested. The related stock-based compensation of $705,365 has been
recorded in the consolidated statement of operations during the year ended
31
December 2008.
During
the year ended 31 December 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 31 December
2007. During the year ended 31 December 2008, 1,250 restricted shares
were cancelled and returned to treasury. Fifty percent of the
remaining shares vested during the year ended 31 December 2008 and the balance
have been deemed to have vested. The related stock-based compensation
of $20,431 has been recorded in the consolidated statement of operations during
the year ended 31 December 2008.
Stock
options
As at 30 June 2010, there are Nil
incentive stock options outstanding (31 December 2009 – Nil).
During
the year ended 31 December 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 17 April
2017 and vesting as to one-quarter of the common shares under the stock option
on 17 April 2007 and one-quarter every six months thereafter in accordance with
the terms and conditions of the Company’s Stock Incentive Plan (the
“Plan”).
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Interim Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited
– Prepared by Management)
30
June 2010
During
the year ended 31 December 2007, the Company adopted 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.
During
the year ended 31 December 2008, all of the related stock options in this series
were forfeited.
The
Company had no option activities during the six month periods ended 30 June and
2010 and 2009.
Warrants
As at 30
June 2010, there are 18,750,000 warrants outstanding (31 December 2009 –
Nil).
On 25
March 2010, as part of the 18,750,000 unit private placement, the Company issued
18,750,000 share purchase warrants. Each share purchase warrant
entitles the holder to purchase one common share at a price of $0.10 commencing
six months from the closing date of the offering and terminating one year from
the closing date of the offering. As at 30 June 2010, all of the
related share purchase warrants in this series remain outstanding.
During
the year ended 31 December 2007, as part of the 121,800 unit private placement,
the Company issued 60,900 share purchase warrants. Each share
purchase warrant entitles the holder to purchase one common share at a price of
$35 up to 17 April 2008. During the year ended 31 December 2008, all
of the related share purchase warrants in this series expired. As at
30 June 2010, none of the related share purchase warrants in this series remain
outstanding.
During
the year ended 31 December 2007, the Company issued 8,358 agent compensation
warrants for services rendered by a private placement agent. Each
warrant entitles the holder to purchase one common share at a price of $35 up to
17 April 2008. During the year ended 31 December 2008, all of the related share
purchase warrants in this series expired. As at 30 June 2010, none of
the related share purchase warrants in this series remain
outstanding.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Interim Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited
– Prepared by Management)
30
June 2010
The
following is a summary of warrant activities during the six month periods ended
30 June 2010 and 2009:
|
Number
of warrants
|
Weighted
average exercise price
|
|||||||
| $ | ||||||||
|
Outstanding
and exercisable at 1 January 2010
|
- | - | ||||||
|
Granted
|
18,750,000 | 0.10 | ||||||
|
Exercised
|
- | - | ||||||
|
Expired
|
- | - | ||||||
|
Outstanding
and exercisable at 30 June 2010
|
18,750,000 | 0.10 | ||||||
|
Weighted
average fair value of warrants granted during the period
|
0.05 | |||||||
|
Outstanding
and exercisable at 1 January 2009
|
- | - | ||||||
|
Granted
|
- | - | ||||||
|
Exercised
|
- | - | ||||||
|
Expired
|
- | - | ||||||
|
Outstanding
and exercisable at 30 June 2009
|
- | - | ||||||
|
Weighted
average fair value of warrants granted during the period
|
- | |||||||
The
weighted average grant date fair value of warrants issued during the six month
period ended 30 June 2010, amounted to $859,092 ($0.05 per warrant) (31 December
2009 - $Nil). The fair value of each warrant granted was determined using the
Black-Scholes warrant pricing model and the following weighted average
assumptions:
|
2010
|
2009
|
|||||||
|
Risk
free interest rate
|
0.44 | % | - | |||||
|
Expected
life
|
1.00
year
|
- | ||||||
|
Annualized
volatility
|
317.72 | % | - | |||||
|
Expected
dividends
|
- | - | ||||||
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Interim Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited
– Prepared by Management)
30
June 2010
8.
Convertible
Promissory Notes
|
30
June
2010
$
|
31
December
2009
(Audited)
$
|
|||||||
|
Issued
on 25 June 2010 to Temasek bearing interest at a rate of 12% per annum on
any unpaid principle balance, unsecured, with principal and interest
amounts due upon maturity on 25 September 2010. Temasek has the
option to convert any portion of the unpaid principal and/or accrued
interest into conversion units (the “Units”) at any time up to 25
September 2010 at $0.25 per Unit where a Unit consists of one common share
of the Company and one share purchase warrant. Each warrant
entitles Temasek to purchase an additional common share of the Company at
an exercise price of $0.50 commencing six months after the date of
issuance until one year from the date of issuance. During the
six month period ended 30 June 2010, the Company accrued interest expense
of $411 (30 June 2009 – $Nil). The balance as at 30 June 2010 consists of
principal and accrued interest of $250,000 (31 December 2009 – $Nil) and
$411 (31 December 2009 – $Nil), respectively (Notes 4 and
12).
|
250,411 | - | ||||||
|
Issued
on 25 June 2010 to Temasek bearing interest at a rate of 12% per annum on
any unpaid principle balance, unsecured, with interest amount payable
annually and principal amount due upon maturity on 25 June
2013. Temasek has the option to convert any portion of the
unpaid principal and/or accrued interest into Units at any time up to 25
June 2013 at $0.25 per Unit where a Unit consists of one common share of
the Company and one share purchase warrant. Each warrant
entitles Temasek to purchase an additional common share of the Company at
an exercise price of $0.50 commencing six months after the date of
issuance until one year from the date of issuance. During the
six month period ended 30 June 2010, the Company accrued interest expense
of $5,342 (30 June 2009 – $Nil). The balance as at 30 June 2010 consists
of principal and accrued interest of $3,250,000 (31 December 2009 – $Nil)
and $5,342 (31 December 2009 – $Nil), respectively (Notes 4 and
12).
|
3,255,342 | - | ||||||
|
Less:
current portion
|
(255,753 | ) | - | |||||
| 3,250,000 | - | |||||||
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Interim Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited
– Prepared by Management)
30
June 2010
9.
Due
to Related Parties and Related Party Transactions
As at 30
June 2010, the amount due to related parties consists of $110,571 (31 December
2009 – $109,767) payable to companies controlled by shareholders and/or
directors of Rio Santiago.
During
the six month period ended 30 June 2010, the Company paid or accrued $Nil (30
June 2009 – $43,647) for consulting and management fees to former officers and
directors of the Company.
During
the six month period ended 30 June 2010, the Company paid or accrued $18,900 (30
June 2009 – $18,900) for financial and accounting services to a current
officer of the Company.
During
the six month period ended 30 June 2010, the Company paid or accrued $Nil (30
June 2009 – $5,820)
for
consulting fees to a current director of the Company.
10.
Commitments
|
a.
|
During
the six month period ended 30 June 2010, the Company entered into a
ten-month contract for consulting services, commencing 1 March 2010, with
a party to provide investor relations services for a monthly payment of
$7,500.
|
|
b.
|
During
the six month period ended 30 June 2010, the Company entered into a
twelve-month contract for consulting services, commencing 1 April 2010,
with a party to provide media services for a monthly payment of
$7,500.
|
|
c.
|
During
the six month period ended 30 June 2010, the Company entered into a
ten-month contract for consulting services, commencing 1 March 2010, with
a party to provide management services for a monthly payment of
$10,000.
|
|
d.
|
The
Company is subject to certain outstanding and future commitments related
to the Temasek Agreement. The Company is in the process of renegotiating
the terms of the Temasek Agreement (Note
4).
|
11.
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, during the
year ended 31 December 2006, the Company’s principal mineral property activities
have been in Finland. During the year ended 31 December 2008, the
Company re-focused its acquisition and exploration of mineral properties
operations to Peru. As at 30 June 2010, the Company does not have any material
assets outside of South America.
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Interim Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited
– Prepared by Management)
30
June 2010
12.
Supplemental
Disclosures with Respect to Cash Flows
|
For
the
period
from
the
date
of
inception
on
5
September
1997
to
30
June
2010
|
For
the
three
month
period ended
30
June
2010
|
For
the
three
month
period ended
30
June
2009
|
For
the
six
month
period
ended
30
June
2010
|
For
the
six
month
period
ended
30
June
2009
|
||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
|
Supplemental
cash flows information
|
||||||||||||||||||||
|
Interest
expense
|
7,659 | 5,753 | - | 5,753 | - | |||||||||||||||
|
Foreign
exchange gain (loss)
|
(17,756 | ) | (1,418 | ) | (1,250 | ) | 3,075 | (1,213 | ) | |||||||||||
|
Supplemental
disclosure of non-cash investing and financing
|
||||||||||||||||||||
|
Common
shares issued for oil and gas property ($25 per share)
|
10,000 | - | - | - | - | |||||||||||||||
|
Common
shares issued for services ($6 per share)
|
50,000 | - | - | - | - | |||||||||||||||
|
Donated
consulting services
|
16,200 | - | - | - | - | |||||||||||||||
|
Common
shares cancelled and returned
|
(2 | ) | - | - | - | - | ||||||||||||||
|
Common
shares issued for equity acquisition
of
Finmetal OY ($25.60 per share)
|
1,280,000 | - | - | - | - | |||||||||||||||
|
Restricted
shares issued ($24.80 per share)
|
2,418,000 | - | - | - | - | |||||||||||||||
|
Common
shares issued for finder’s fee ($10 per unit)
|
254,500 | - | - | - | - | |||||||||||||||
|
Warrants
issued
|
100,421 | - | - | - | - | |||||||||||||||
|
Common
shares issued for finder’s fee for mineral property interests ($26.80 per
share)
|
536,000 | - | - | - | - | |||||||||||||||
|
Common
shares issued for acquisition of mineral rights (deemed at $0.25 per
share)
|
1,875,000 | - | - | 1,250,000 | - | |||||||||||||||
|
Common
shares issued for acquisition of mineral rights (deemed at $0.11 per
share)
|
385,000 | - | - | - | - | |||||||||||||||
During the six month period ended 30 June 2010, the Company accrued interest expense of $5,753 (30 June 2009 – $Nil) related to unpaid amount of the Temasek option payment (Note 4).
During
the six month period ended 30 June 2010, the Company issued 5,000,000 common
shares valued at $1,250,000 pursuant to the Third Amending Temasek Agreement
(Note 4).
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Interim Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited
– Prepared by Management)
30
June 2010
13.
Income
Taxes
The
Company has losses carried forward for income tax purposes to 30 June
2010. The Company has fully reserved for any benefits of these
losses. The deferred tax consequences of temporary differences in
reporting items for financial statement and income tax purposes are recognized,
as appropriate. Realization of the future tax benefits related to the deferred
tax assets is dependent on many factors, including the Company’s ability to
generate taxable income within the net operating loss carry-forward
period. Management has considered these factors in reaching its
conclusion as to the valuation allowance for financial reporting
purposes.
The
provision for refundable federal income tax consists of the
following:
|
For
the six
month
period ended 30 June
2010
|
For
the six
month
period ended 30 June 2009
|
|||||||
| $ | $ | |||||||
|
Refundable
federal tax asset (liability) attributable to:
|
||||||||
|
Current
operations
|
74,634 | 207,965 | ||||||
|
Contributions
to capital by related parties
|
- | - | ||||||
|
Less:
Change in valuation allowance
|
(63,977 | ) | (207,965 | ) | ||||
|
Future
income tax recovery
|
10,657 | - | ||||||
The
composition of the Company’s deferred tax assets as at 30 June 2010 and 31
December 2009 are as follows:
|
As
at
30
June 2010
|
As
at 31
December
2009 (Audited)
|
|||||||
| $ | $ | |||||||
|
Net
income tax operating loss carryforward
|
5,379,690 | 5,305,056 | ||||||
|
Statutory
federal income tax rate
|
26% - 34 | % | 26% - 34 | % | ||||
|
Deferred
tax assets (liabilities)
|
534,621 | 470,644 | ||||||
|
Less:
Valuation allowance
|
(534,621 | ) | (470,644 | ) | ||||
|
Net
deferred tax assets (liabilities)
|
- | - | ||||||
Amazon
Goldsands Ltd.
(An
Exploration Stage Company)
Notes to
Interim Consolidated Financial Statements
(Expressed
in U.S. Dollars)
(Unaudited
– Prepared by Management)
30
June 2010
14.
Interest
in Variable Interest Entity
In
January 2009, the Company acquired the initial 25% interest in Beardmore, the
registered owner of 999 shares of the 1,000 shares of Rio Santiago that are
issued and outstanding. Rio Santiago is the beneficial owner of 100%
interest in certain mineral rights in Peru. The aggregate purchase
price was $1,125,000, in which the Company paid $500,000 in cash and issued
2,500,000 common shares valued at $625,000 (Note 7).
In March
2010, the Company acquired the second 25% interest in Beardmore by issuing
additional 3,500,000 common shares valued at $385,000 (Note 7) and paying
$750,000 in cash.
The
acquisition of Beardmore expands the Company’s business of acquiring and
exploring mineral properties. The Company also has the exclusive
right to purchase the remaining 50% share interest in Beardmore, upon certain
terms and conditions (Note 4).
The
Company follows ASC 810-10 and fully consolidates the assets, liabilities,
revenues and expenses of Beardmore. A valuation of certain assets was
completed and the Company internally determined the fair value of others assets
and liabilities. In determining the fair value of acquired assets,
standard valuation techniques were used including market and income
approach.
15.
Subsequent
Event
There are
no subsequent events from the date of the period ended 30 June 2010 to the date
the interim consolidated financial statements were available to be issued on 19
August 2010.
Item 2. Management’s Discussion and
Analysis of Financial Condition and Results of Operations.
This
Quarterly Report on Form 10-Q 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.
Important factors that may cause the
actual results to differ from the forward-looking statements, projections or
other expectations include, but are not limited to, the following:
· risk that
we will not be able to further amend the option agreement under which we
acquired our fifty percent property interest in certain mining rights in certain
properties in Peru in order to revive certain options we had which have lapsed
as a result of our failure to meet the requirements necessary to exercise these
options;
· risk that
we cannot attract, retain and motivate qualified personnel, particularly
employees, consultants and contractors for our operations in Peru;
· risks and
uncertainties relating to the interpretation of drill results, the geology,
grade and continuity of mineral deposits;
· 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;
· mining
and development risks, including risks related to accidents, equipment
breakdowns, labor disputes or other unanticipated difficulties with or
interruptions in production;
· the
potential for delays in exploration or development activities or the completion
of feasibility studies;
· risks
related to the inherent uncertainty of production and cost estimates and the
potential for unexpected costs and expenses;
· risks
related to commodity price fluctuations;
· the
uncertainty of profitability based upon our history of losses;
· risks
related to failure to obtain adequate financing on a timely basis and on
acceptable terms for our planned exploration and development
projects;
· risks
related to environmental regulation and liability;
· 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;
· risks
related to tax assessments;
· political
and regulatory risks associated with mining development and exploration;
and
· other
risks and uncertainties related to our prospects, properties and business
strategy.
The foregoing list is not an exhaustive
list of the factors that may affect any of our forward-looking statements. These
and other factors should be considered carefully and readers should not place
undue reliance on our forward-looking statements.
As used
in this Quarterly Report, the terms “we,” “us,” “our,” and “Amazon” mean Amazon
Goldsands Ltd. and our subsidiaries unless otherwise indicated.
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 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 northeastern 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 certain mining and mineral rights
underlying properties located in South America.
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.
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 northeastern Peru. As a result of our decision
to not pursue the development of any interests in properties located in Finland,
we dissolved our wholly-owned subsidiary, FinMetal OY, a corporation organized
under the laws of Finland, effective July 17, 2009. A description of
each of the options we exercised to acquire our fifty percent interest in
certain mining and mineral rights underlying properties located in Peru is set
forth below.
The
Peru Property
Our
property interests located in Peru are in the exploration
state. These properties are without known reserves and the proposed
plan of exploration detailed below is exploratory in nature. These
properties are described below.
We
entered into a Mineral Right Option Agreement with Temasek Investments Inc.
(“Temasek”), a company incorporated under the laws of Panama, on September 18,
2008 (the “Effective Date”), as amended and supplemented by Amendment No. 1,
dated May 12, 2009 (“Amendment No. 1”) and Amendment No. 2, dated February 3,
2010 (“Amendment No. 2”) (collectively, the “Option Agreement”), in order to
acquire 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, that would have potentially resulted in
our acquisition of one hundred percent of the Mineral Rights. The
Mineral Rights are currently owned by Rio Santiago Minerales S.A.C. ("Rio
Santiago"). Beardmore Holdings, Inc. ("Beardmore") 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. Our acquisition of each twenty-five percent interest in the
Mineral Rights was structured to occur through the transfer to us of twenty-five
percent of the outstanding shares of Beardmore upon the exercise of each
twenty-five percent option.
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 S.A.C.
|
|
Bianka
2
|
1000
|
01-03878-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Bianka
3
|
900
|
01-03879-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Bianka
4
|
1000
|
01-03883-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Bianka
6
|
1000
|
01-03881-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Bianka
7
|
1000
|
01-03888-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Dalma
1
|
1000
|
01-03859-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Dalma
2
|
1000
|
01-03863-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Dalma
3
|
1000
|
01-03857-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Dalma
4
|
800
|
01-03865-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Dalma
5
|
500
|
01-03866-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Dorotea
1
|
1000
|
01-03909-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Dorotea
2
|
900
|
01-03906-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Dorotea
3
|
1000
|
01-03904-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Dorotea
4
|
800
|
01-03908-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Dorotea
5
|
1000
|
01-03910-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Dorotea
6
|
1000
|
01-03901-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
|
Dorotea
7
|
1000
|
01-03899-08
|
00074599
|
Rio
Santiago Minerales S.A.C.
|
Under the
terms of the Option Agreement, to date, we have acquired an aggregate fifty
percent interest in the Mineral Rights through our acquisition of fifty percent
of the outstanding shares of Beardmore. We exercised the initial
twenty-five percent option, which provided for the acquisition of a twenty-five
percent interest in the Mineral Rights, by paying Temasek a total of $500,000
and issuing 2,500,000 shares of our common stock to Temasek on or about January
12, 2009 in accordance with the terms of the Option Agreement. We
exercised the second twenty-five percent option, which resulted in our
acquisition of an aggregate fifty percent interest in the Mineral Rights, by
paying Temasek a total of $750,000 and issuing 3,500,000 shares of our common
stock to Temasek on or about March 22, 2010 in accordance with the terms of the
Option Agreement.
Under the
terms of the Option Agreement, as amended, we would have been able to exercise
the third, twenty-five percent option, resulting in the acquisition of a
seventy-five percent interest in the Mineral Rights, if we had fulfilled all of
the following conditions:
|
·
|
Complete
the exercise of the second, twenty-five percent option, resulting in the
acquisition of a fifty percent interest in the Mineral Rights (which was
completed on March 22, 2010);
|
|
·
|
Issue
5,000,000 shares of our common stock to Temasek, or whoever persons
Temasek indicates, by March 5, 2010, which date was within 30 days of the
effective date of Amendment No. 2 (which shares were issued on March 9,
2010);
|
|
·
|
Pay
$250,000 to the order and the direction of Temasek by March 5, 2010, which
date was within 30 days of the effective date of Amendment No. 2 (which
payment was made on March 22, 2010);
and
|
|
·
|
Pay
$1,000,000 to the order and the direction of Temasek on or before
March 18, 2010, which date was within eighteen months of the
Effective Date.
|
We would
have been able to exercise the fourth, twenty-five percent option, resulting in
the acquisition of a one hundred percent interest in the Mineral Rights, if we
had fulfilled all of the following conditions prior to March 18, 2010, which
date was within eighteen months of the Effective Date:
|
·
|
Exercise
and complete the initial, second, and third, twenty-five percent
options;
|
|
·
|
Pay
an additional amount $2,500,000 to Temasek;
and
|
|
·
|
Issue
5,500,000 additional shares of common stock to
Temasek.
|
On June
25, 2010 (“Amendment Effective Date”), we entered into an amendment (“Amendment
No. 3”) to the Mineral Rights Option Agreement. Under the terms of
Amendment No. 3, we would have completed the exercise of the third and fourth
twenty-five percent options, resulting in our acquisition of a one-hundred
percent interest in the Mineral Rights, after fulfilling the following
conditions (collectively the “Option Requirements”) within ten business days of
the Amendment Effective Date:
|
·
|
Issuance
to Temasek of a total of 6,000,000 shares of our common stock (in addition
to the 5,000,000 shares previously issued by us to Temasek in March 2010,
for a total share consideration for the purchase of the Mineral Rights of
11,000,000 shares);
|
|
·
|
Payment
to Temasek of US $250,000 (of which such payment was acknowledged by
Temasek to have been made in March
2010);
|
|
·
|
Issuance
of a convertible note for US $250,000 (the “$250,000 Convertible Note”)
payable to the order and the direction of Temasek (which was issued on
June 25, 2010); and
|
|
·
|
Issuance
of a convertible note for US $3,250,000 (the “$3,250,000 Convertible Note”
and, collectively with the $250,000 Convertible Note, the "Convertible
Notes") payable to the order and the direction of Temasek (which was
issued on June 25, 2010).
|
The
$250,000 Convertible Note has a term of ninety days and accrues interest at a
rate of 12% per annum. Both principle and interest under the $250,000
Convertible Note are to be paid upon maturity.
The
$3,250,000 Convertible Note has a term of three years and accrues interest at a
rate of 12% per annum. Interest is payable annually and the principal
is to be paid upon maturity.
Any
interest and principal due under either of the Convertible Notes is convertible
(at Temasek's option) into units which consist of one (1) share of the Company's
common stock and one (1) warrant to purchase one (1) share of the Company's
common stock at an exercise price of $0.50 per share. The conversion price
per unit is fixed at $0.25 per unit.
As of the
date we were required to fulfill the Option Requirements under Amendment No. 3,
we did not issue the 6,000,000 shares of our common stock required to exercise
the third and fourth twenty-five percent options within the time periods set
forth in the Option Agreement. As a result, the options to acquire
the third and fourth twenty-five percent options lapsed as of July 5,
2010. We are considering our options and may seek to enter into
negotiations with Temasek in order to further amend the Option Agreement in
order to revive the third and fourth twenty-five percent
options. There can be no assurance that we will be successful in
amending the Option Agreement or securing the necessary funding to exercise the
third or fourth twenty-five percent options should we be successful in reviving
these options. In the event that we are unable to enter into another
amendment to the Option Agreement, our ownership interest in the Mineral Rights
would be limited to our fifty percent interest, we would be without the ability
to acquire the third and fourth twenty-five percent options to acquire an
aggregate seventy-five and one hundred percent interest in the Mineral Rights,
respectively, and not be entitled to recover the $250,000 previously paid to
Temasek and the 5,000,000 shares of our common stock, $250,000 Convertible Note
and $3,250,000 Convertible Note previously issued to Temasek as partial
consideration for the exercise of the third twenty-five percent
option.
Were we
to complete the 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.
If we are
able to complete the acquisition of a one hundred percent interest in the
Mineral Rights, Temasek will be 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
fail to acquire a one hundred percent interest in the Mineral Rights after
having acquired a fifty percent interest in the Mineral Rights, the Option
Agreement provides that we and Temasek will form a joint venture for the purpose
of placing the Peru Property into commercial production. As of the
filing date of this report, we have not entered into a joint venture with
Temasek. Upon our entry into a joint venture with Temasek, out
responsibilities under the joint venture would include developing a feasible
mining project and all necessary facilities, and Temasek shall retain a carried
free interest in the mining rights. If we enter into a joint venture
with Temasek, but do not develop a feasible mining project within three years of
the Effective Date (or by September 18, 2011), 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.
Planned
Exploration Program
Our plans
are to set up an exploration base in the town of Saramiriza, which is located in
the center of the Manseriche alluvial camp on the western bank of the
Marañón.
Provided
we are successful in securing additional financing, 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 be 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.
Provided
we are successful in securing additional financing and 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. This process has commenced, but cannot
be completed without securing additional financing.
An
Environmental Impact Report will also be required to 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.
Our plans
include collecting by backhoe and excavator a number of bulk samples for
metallurgical testing, and 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
eighteen 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. If we are able to secure sufficient additional
financing, we anticipate that we will commence shortly thereafter the mapping
and geophysics with the initial drilling to follow.
Our
current cash on hand is insufficient to complete any of the activities set forth
in our planned exploration program. We have postponed the
commencement of our exploration and development program until such time that we
are able to secure sufficient financing. Provided we are able to
secure additional financing through private equity offerings, we anticipate that
we will incur the following costs for the next twelve months:
|
Activity
|
USD
000s
|
|
|
MINERAL
PROPERTY COSTS:
|
||
|
Annual
Fee
|
50
|
|
|
Surface
Rights Access
|
15
|
|
|
EXPLORATION
|
||
|
Mapping
|
25
|
|
|
Geophysics
– Seismic
|
50
|
|
|
DRILLING
|
||
|
Churn
Drilling
|
200
|
|
|
TECHNICAL
SERVICES
|
||
|
Consultants
|
90
|
|
|
Personnel
|
100
|
|
|
CAMP
AND FIELD EXPENSES
|
||
|
Camp
|
100
|
|
|
Field
|
75
|
|
|
TRANSPORT
AND LOGISTICS
|
||
|
Air
Transport
|
90
|
|
|
Water
Transport
|
40
|
|
|
Ground
Transport
|
25
|
|
|
EQUIPMENT
& PERMITTING
|
55
|
|
|
COMMUNITY
OUTREACH
|
25
|
|
|
ADMINISTRATION
NEW
BUSINESS
|
75
|
|
|
TOTAL
|
1,015
|
|
We also,
as part of business activities, intend to focus 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 may 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, but that are strategically positioned to offer what we perceive as
exceptional potential at a comparatively minimal expense. In order to
acquire any additional mining properties or exploration projects, we will need
to secure additional financing. We have not made any progress in
indentifying any such properties due to our current financial position and
require additional financing to perform the requisite due diligence and complete
the acquisition of any property interest.
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 deposit, 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.
Results
of Operations
Revenues
We have
not generated any revenues from our operations in either of the past two fiscal
years.
Operating
Expenses
We
reported operating expenses in the amount of $125,915 for the three months ended
June 30, 2010, compared to operating expenses of $197,814 for the three months
ended June 30, 2009. We reported operating expenses in the amount of
$233,234 for the six month period ended June 30, 2010, compared to operating
expenses of $610,449 for the six month period ended June 30,
2009. Operating expenses were significantly lower for the three and
six months ended June 30, 2010, as compared to the three and six months ended
June 30, 2009, as a result of management scaling back our operations due to
limited resources during the reporting period. Scaling back our
operations resulted in decreased professional fees and management and consulting
fees and no expenditures relating to mineral property acquisition or exploration
activities during the reporting period.
We did
not incur any property exploration expenditures during the three or six months
ended June 30, 2010. We did not incur any property exploration
expenditures during the three months ended June 30, 2009 and $136,057 for the
six month ended June 2009.
We
incurred professional fees of $22,787 for the three months ended June 30, 2010,
compared to $72,551 for the three months ended June 30, 2009. We
incurred professional fees of $44,447 for the three months ended June 30, 2010,
compared to $102,040 for the three months ended June 30, 2009.
We
incurred consulting and management fees of $84,450 for the three months ended
June 30, 2010, compared to $113,842 for the three months ended June 30,
2009. We incurred consulting and management fees of $132,226 for the
six month period ended June 30, 2010, compared to $271,547 for the six month
period ended June 30, 2009.
We
anticipate that our expenditures will increase if we are able to secure
sufficient financing to be able to recommence our exploration and development
program.
Other
Items
We
reported foreign exchange loss of $1,418 for the three months ended June 30,
2010, as compared to $1,250 for the three months ended June 30,
2009. We reported foreign exchange gain of $3,075 for the six months
ended June 30, 2010, as compared to a foreign exchange loss of $1,213 for the
six months ended June 30, 2009.
Net
(Income) Loss
We had
net loss of $127,333 for the three months ended June 30, 2010, as compared to a
net loss of $199,064 for the three months ended June 30, 2009. We had
net loss of $219,502 for the six month period ended June 30, 2010, as compared
to a net loss of $611,662 for the six month period ended June 30,
2009. The decrease in our net loss was attributable to decreased
expenses from scaling back of our operations.
Liquidity
and Capital Resources
At June
30, 2010, we had cash and cash equivalents of $56,381, compared to $4,214 at
December 31, 2009, and a working capital deficit of $509,029, compared to
working capital deficit of $808,681 at December 31, 2009. Our
proposed plan of exploration anticipates that we will incur exploration related
expenditures of $1,015,000 over the next twelve months. We anticipate
spending approximately $70,000 in ongoing general and administrative expenses
per month for the next twelve months, for a total anticipated expenditure of
$840,000 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 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 six months ended June 30, 2010 and 2009 used cash of $722,833
and $350,796, respectively, which reflect our recurring operating
losses. A decrease in our accounts payable and accrued liabilities of
$508,467 and losses of $219,502 were the primary reason for our negative
operating cash flow.
Cash
Used in Investing Activities
For the
six month period ended June 30, 2010, we used $1,000,000 in investing
activities, as compared to $250,000 used in investing activities during the six
months ended June 30, 2009.
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 six
months ended June 30, 2010 was $1,775,000, all of which was received as proceeds
from the issuance of shares of our common stock and common stock purchase
warrants. Net cash flows provided by financing activities for the six
months ended June 30, 2009 was $117,082, all of which was also received from
subscriptions for shares of our 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 effects 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 June
30, 2010 of $9,933,706 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.
Significant
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:
Principles
of consolidation
All inter-company balances and
transactions have been eliminated in these interim consolidated financial
statements.
Cash
and cash equivalents
We
consider all highly liquid instruments with a maturity of three months or less
at the time of issuance to be cash equivalents. As at June 30, 2010,
we had cash and cash equivalents in the amount of $56,381 (December 31, 2009 –
$4,214).
Website
and software development costs
We
recognize the costs incurred in the development of our website in accordance
with ASC 350-50, “Website
Development Costs”. 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.
Property
and equipment
Furniture,
computer equipment, office equipment and computer software are carried at cost
and are amortized over their estimated useful lives as follows:
|
Furniture,
computer and office equipment
|
30 | % | ||
|
Computer
software
|
100 | % |
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.
Segments
of an enterprise and related information
ASC 280, “Segment Reporting”
establishes guidance for the way that public companies report
information about operating segments in annual financial statements
and requires reporting of selected information about operating segments in
interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic areas and major customers. ASC 280 defines operating
segments as components of a company about which separate financial information
is available that is evaluated regularly by the chief operating decision maker
in deciding how to allocate resources and in assessing
performance. We have evaluated this Codification and does not believe
it is applicable at this time.
Mineral
property costs
Mineral
property acquisition costs are initially capitalized as tangible assets when
purchased. At the end of each fiscal quarter end, we assess the
carrying costs for impairment. If proven and probable reserves are
established for a property and it has been determined that a mineral property
can be economically developed, costs will be amortized using the
units-of-production method over the estimated life of the probable
reserve.
Mineral
property exploration costs are expensed as incurred.
Estimated
future removal and site restoration costs, when determinable are provided over
the life of proven reserves on a units-of-production basis. Costs,
which include production equipment removal and environmental remediation, are
estimated each period by management based on current regulations, actual
expenses incurred, and technology and industry standards. Any charge
is included in exploration expense or the provision for depletion and
depreciation during the period and the actual restoration expenditures are
charged to the accumulated provision amounts as incurred.
As of the
date of these consolidated financial statements, we have not established any
proven or probable reserves on our mineral properties and incurred only
acquisition and exploration costs.
Although
we have taken steps to verify title to mineral properties in which it has an
interest, according to the usual industry standards for the stage of exploration
of such properties, these procedures do not guarantee
our title. Such properties may be subject to prior
agreements or transfers and title may be affected by undetected
defects.
Environmental
costs
Environmental
expenditures that are 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 our commitments to a plan of action based on the then known
facts.
Comprehensive
loss
ASC 220,
“Comprehensive Income”,
establishes standards for the reporting and display of comprehensive loss and
its components in the financial statements. As at June 30, 2010, we
have no items that represent a comprehensive loss and, therefore, have not
included a schedule of comprehensive loss in the consolidated financial
statements.
Foreign
currency translation
Our
functional and reporting currency is U.S. dollars. The consolidated
financial statements of the Company are translated to U.S. dollars in accordance
with ASC 830, “Foreign
Currency Matters.” Monetary assets and liabilities denominated
in foreign currencies are translated using the exchange rate prevailing at the
balance sheet date. Gains and losses arising on translation or
settlement of foreign currency denominated transactions or balances are included
in the determination of income. We have not, to the date of these
consolidated financial statements, entered into derivative instruments to offset
the impact of foreign currency fluctuations.
Stock-based
compensation
Effective
January 1, 2006, we adopted the provisions of ASC 718, “Compensation – Stock
Compensation”, which establishes accounting for equity instruments
exchanged for employee services. Under the provisions of ASC 718,
stock-based compensation cost is measured at the grant date, based on the
calculated fair value of the award, and is recognized as an expense over the
employees’ requisite service period (generally the vesting period of the equity
grant). We adopted ASC 718 using the modified prospective method,
which requires us to record compensation expense over the vesting period for all
awards granted after the date of adoption, and for the unvested portion of
previously granted awards that remain outstanding at the date of
adoption. Accordingly, financial statements for the periods prior to
January 1, 2006 have not been restated to reflect the fair value method of
expensing share-based compensation. Adoption of ASC 718 does
not change the way we account for share-based payments to non-employees, with
guidance provided by ASC 505-50, “Equity-Based Payments to
Non-Employees”.
Basic
and diluted net income (loss) per share
We
compute net income (loss) per share in accordance with ASC 260, “Earnings per
Share”. ASC 260 requires presentation of both basic and
diluted earnings per share (“EPS”) on the face of the income
statement. Basic EPS is computed by dividing net income (loss)
available to common shareholders (numerator) by the weighted average number of
shares outstanding (denominator) during the period. Diluted EPS gives
effect to all dilutive potential common shares outstanding during the period
using the treasury stock method and convertible preferred stock using the
if-converted method. In computing diluted EPS, the average stock
price for the period is used in determining the number of shares assumed to be
purchased from the exercise of stock options or warrants. Diluted EPS
excluded all dilutive potential shares if their effect is
anti-dilutive.
Income
taxes
Deferred
income taxes are reported for timing differences between items of income or
expense reported in the financial statements and those reported for income tax
purposes in accordance with ASC 740, “Income Taxes”, which requires
the use of the asset/liability method of accounting for income
taxes. Deferred income taxes and tax benefits are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases, and for tax losses and credit
carry-forwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. We provide for deferred taxes for the estimated future tax
effects attributable to temporary differences and carry-forwards when
realization is more likely than not.
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 ASC 360-10-35-15, “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.
Asset
retirement obligations
We have
adopted ASC 410, “Assets
Retirement and Environmental 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. ASC 410 requires us 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 June 30, 2010, we do not have any asset retirement
obligations.
Use
of estimates
The
preparation of financial statements in conformity with GAAP 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
carrying value of cash and cash equivalents and accounts payable approximates
their fair value because of the short maturity of these
instruments. Our operations are in Peru and Canada and virtually all
of its assets and liabilities are giving rise to significant exposure to market
risks from changes in foreign currency rates. Our financial risk is
the risk that arises from fluctuations in foreign exchange rates and the degree
of volatility of these rates. Currently, we do not use derivative
instruments to reduce its exposure to foreign currency risk.
The
Accounting Standards Codification
We have adopted the Financial
Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards
(“SFAS”) No. 168, “The FASB
Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principle – a replacement of FASB Statement No.
162”. The Codification reorganized existing U.S. accounting
and reporting standards issued by the FASB and other related private sector
standard setter into a single source of authoritative accounting principles
arranged by topic. The Codification supersedes all existing U.S.
accounting standards; all other accounting literature not included in the
Codification (other than Securities and Exchange Commission guidance for
publicly-traded companies) is considered non-authoritative. The
adoption of the Codification changed our references to GAAP accounting standards
but did not impact our results of operations, financial position or
liquidity.
Convertible
debt
We have adopted the new guidance for
accounting for convertible debt instruments that may be settled in
cash. The new guidance, which is now part of ASC 470-20, “Debt with Conversion and Other
Options” requires the liability and equity components to be separately
accounted for in a manner that will reflect the entity’s nonconvertible debt
borrowing rate. We will allocate a portion of the proceeds received
from the issuance of convertible notes between a liability and equity component
by determining the fair value of the liability component using our
nonconvertible debt borrowing rate. The difference between the
proceeds of the notes and the fair value of the liability component will be
recorded as a discount on the debt with a corresponding offset to paid-in
capital. The resulting discount will be accreted by recording
additional non-cash interest expense over the expected life of the convertible
notes using the effective interest rate method. The new guidance was
to be applied retrospectively to all periods presented upon those fiscal
years. The adoption of this guidance did not have a material impact
on our interim consolidated financial statements.
Changes
in Accounting Policies
In June
2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation
No. 46(R)”. SFAS No. 167, which amends ASC 810-10, “Consolidation”, prescribes a
qualitative model for identifying whether a company has a controlling financial
interest in a variable interest entity (“VIE”) and eliminates the quantitative
model. The new model identifies two primary characteristics of a
controlling financial interest: (1) provides a company with the power to direct
significant activities of the VIE, and (2) obligates a company to absorb losses
of and/or provides rights to receive benefits from the VIE. SFAS No.
167 requires a company to reassess on an ongoing basis whether it holds a
controlling financial interest in a VIE. A company that holds a
controlling financial interest is deemed to be the primary beneficiary of the
VIE and is required to consolidate the VIE. SFAS No. 167, which is
referenced in ASC 105-10-65, has not yet been adopted into the Codification and
remains authoritative. SFAS No. 167 is effective January 1, 2010. The
adoption of SFAS No. 167 did not have a material impact on our interim
consolidated financial statements.
In June
2009, the FASB issued SFAS No. 166, “Accounting for Transfer of Financial
Assets – an amendment of FASB Statement”. SFAS No. 166 removes
the concept of a qualifying special-purpose entity from ASC 860-10, “Transfers and Servicing”, and
removes the exception from applying ASC 810-10, “Consolidation”. This
statements also clarifies the requirements for isolation and limitations on
portions of financial assets that are eligible for sale
acconting. SFAS No. 166, which is referenced in ASC 105-10-65, has
not yet been adopted into the Codification and remains
authoritative. This statement is effective January 1,
2010. The adoption of SFAS No. 166 did not have a material impact on
our interim consolidated financial statements.
In August
2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-05, “Fair Value Measurement and
Disclosure (Topic 820) – Measuring Liabilities at Fair Value”, which
provides valuation techniques to measure fair value in circumstances in which a
quoted price in an active market for the identical liability is not
available. The guidance provided in this update is effective January
1, 2010. The adoption of this guidance did not have a material impact
on our interim consolidated financial statements.
On
January 1, 2010, we adopted ASU No. 2010-01, “Equity (ASC Topic 505): Accounting
for Distributions to Shareholders with Components of Stock and Cash”,
which clarifies that the stock portion of a distribution to shareholders that
allow them to elect to receive cash or stock with a potential limitation on the
total amount of cash that all shareholders can elect to receive in the aggregate
is considered a share issuance that is reflected prospectively in earnings per
share and is not considered a stock dividend for purposes of ASC Topic 505 and
ASC Topic 260. The adoption of the ASU No. 2010-01 did not have a material
impact on our interim consolidated financial statements.
On
January 1, 2010, we adopted ASU No. 2010-02, “Accounting and Reporting for
Decreases in Ownership of a Subsidiary- a Scope
Clarification”. ASU No. 2010-02 addresses implementation
issues related to the changes in ownership provisions in the
Consolidation—Overall Subtopic (Subtopic 810-10) of the FASB ASC, originally
issued as SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements”. Subtopic 810-10 establishes the
accounting and reporting guidance for noncontrolling interests and changes in
ownership interests of a subsidiary. An entity is required to
deconsolidate a subsidiary when the entity ceases to have a controlling
financial interest in the subsidiary. Upon deconsolidation of a
subsidiary, an entity recognizes a gain or loss on the transaction and measures
any retained investment in the subsidiary at fair value. The gain or
loss includes any gain or loss associated with the difference between the fair
value of the retained investment in the subsidiary and its carrying amount at
the date the subsidiary is deconsolidated. In contrast, an entity is
required to account for a decrease in ownership interest of a subsidiary that
does not result in a change of control of the subsidiary as an equity
transaction. The adoption of ASU No. 2010-02 did not have a material
impact on the our interim consolidated financial statements.
Recent
accounting pronouncements
In February 2010, the FASB issued ASU No. 2010-11, “Derivatives and Hedging
(Topic 815): Scope Exception Related to Embedded Credit Derivatives”. ASU No.
2010-11 clarifies the type of embedded credit derivative that is exempt from
embedded derivative bifurcation requirements. Specifically, only one form of
embedded credit derivative qualifies for the exemption – one that is related
only to the subordination of one financial instrument to another. As a result,
entities that have contracts containing an embedded credit derivative feature in
a form other than such subordination may need to separately account for the
embedded credit derivative feature. The amendments in ASU No. 2010-11 are
effective for each reporting entity at the beginning of its first fiscal quarter
beginning after 15 June 2010. Early adoption is permitted at the beginning of
each entity’s first fiscal quarter beginning after March 5, 2010. The adoption
of ASC No. 2010-11 is not expected to have a material impact our interim
consolidated financial statements.
In February 2010, the FASB
issued ASC No. 2010-09, “Amendments to Certain Recognition
and Disclosure Requirements”, which eliminates the requirement for SEC
filers to disclose the date through which an entity has evaluated subsequent
events. ASC No. 2010-09 is effective for its fiscal quarter beginning
after December 15, 2010. The adoption of ASC No. 2010-06 is not expected
to have a material impact on our consolidated financial statements.
In January 2010, the FASB issued ASC
No. 2010-06, “Fair Value
Measurement and Disclosures (Topic 820): Improving Disclosure and Fair Value
Measurements”, which requires that purchases, sales, issuances, and
settlements for Level 3 measurements be disclosed. ASC No. 2010-06 is
effective for its fiscal quarter beginning after December 15, 2010. The
adoption of ASC No. 2010-06 is not expected to have a material impact on our
consolidated financial statements.
Item 3. Quantitative and
Qualitative Disclosures About Market Risk
Not
Applicable.
Item 4T. Controls and
Procedures.
Evaluation
of Disclosure Controls and Procedures
We
carried out an evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) as of June 30, 2010. This evaluation was
carried out under the supervision and with the participation of our former Chief
Executive Officer and former Chief Financial Officer, Mr. Kenneth
Phillippe. Based upon that evaluation, our former Chief Executive
Officer and former Chief Financial Officer concluded that, as of June 30, 2010,
our disclosure controls and procedures are effective.
Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in our reports filed or
submitted under the Exchange Act are recorded, processed, summarized and
reported, within the time periods specified in the SEC's rules and
forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required
to be disclosed in our reports filed under the Exchange Act is accumulated and
communicated to management, including our Chief Executive Officer and Chief
Financial Officer, to allow timely decisions regarding required
disclosure.
Limitations
on the Effectiveness of Internal Controls
Our
management does not expect that our disclosure controls and procedures or our
internal control over financial reporting will necessarily prevent all fraud and
material error. Our disclosure controls and procedures are designed to provide
reasonable assurance of achieving our objectives and our Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls and
procedures are effective at that reasonable assurance level. Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within our company have been
detected. These inherent limitations include the realities that
judgments in decision-making can be faulty, and that breakdowns can occur
because of simple error or mistake. Additionally, controls can be circumvented
by the individual acts of some persons, by collusion of two or more people, or
by management override of the internal control. The design of any
system of controls also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future
conditions. Over time, control may become inadequate because of
changes in conditions, or the degree of compliance with the policies or
procedures may deteriorate.
Changes
in Internal Control Over Financial Reporting
There
have been no changes in our internal controls over financial reporting during
the quarter ended June 30, 2010 that have materially affected or are reasonably
likely to materially affect such controls.
PART
II – OTHER INFORMATION
Item 1. Legal
Proceedings.
We are
not a party to any pending legal proceeding. We are not aware of any
pending legal proceeding to which any of our officers, directors, or any
beneficial holders of five percent or more of our voting securities are adverse
to us or have a material interest adverse to us.
Item 1A. Risk
Factors.
Not
Applicable.
Item
2. Unregistered
Sales of Equity Securities and Use of Proceeds.
On June 25, 2010, we issued to Temasek
a convertible note for US $250,000 (the “$250,000 Convertible Note”) and
a convertible note for US $3,250,000 (the “$3,250,000 Convertible Note” and,
collectively with the $250,000 Convertible Note, the "Convertible Notes") as
part of the consideration required for the exercise of the third and fourth
twenty-five percent options pursuant to the Mineral Rights Option Agreement,
dated September 18, 2008, which was amended and supplemented by Amendment No. 1,
dated May 12, 2009, Amendment No. 2, dated February 3, 2010, and Amendment No.
3, dated June 25, 2010. The $250,000 Convertible Note has a term of
ninety days and accrues interest at a rate of 12% per annum. Both
principle and interest under the $250,000 Convertible Note are to be paid upon
maturity. The $3,250,000 Convertible Note has a term of three years
and accrues interest at a rate of 12% per annum. Interest is payable
annually and the principal is to be paid upon maturity. Any interest
and principal due under either of the Convertible Notes is convertible (at
Temasek's option) into units which consist of one (1) share of the Company's
common stock and one (1) warrant to purchase one (1) share of the Company's
common stock at an exercise price of $0.50 per share. The conversion price
per unit is fixed at $0.25 per unit. These securities were issued in
a private transaction and issued in reliance on the exemption provided by
Section 4(2) of the Securities Act. We did not engage in any general
solicitation or advertising in relation to the issuance of these Convertible
Notes to Temasek.
Item
3. Defaults
upon Senior Securities.
None.
Item
4. (Removed
and Reserved).
Item
5. Other
Information.
None.
Item
6. Exhibits.
See the
Exhibit Index following the signatures page of this report, which is
incorporated herein by reference.
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
Amazon
Goldsands Ltd.
|
|
|
Date: August
20, 2010
|
By:
/s/ Robert
Van
Tassell
Robert
Van Tassell
Title: Chief
Executive Officer
|
|
Date: August
20, 2010
|
By:
/s/ Tony
Langford
Tony
Langford
Title: Chief
Financial Officer
|
- 19
-
AMAZON
GOLDSANDS LTD.
(the
“Registrant”)
(Commission
File No. 000-51203)
to
Quarterly
Report on Form 10-Q
for
the Quarter Ended June 30, 2010
|
Exhibit
No.
|
Description
|
Incorporated
Herein by
Reference
to
|
Filed
Herewith
|
|
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
3.1 to the Company’s Current Report on Form 8-K filed September 2,
2008
|
|
|
10.1
|
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
|
|
|
10.2
|
Amendment
to Mineral Right Option Agreement between the Company and Temasek
Investments, Inc.
|
Exhibit
10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
May 20, 2009.
|
|
|
10.3
|
Second
Amendment to Mineral Right Option Agreement, dated February
3, 2010
|
Exhibit
10.1 to the Company’s Current Report on Form 8-K filed February 3,
2010
|
|
|
10.4
|
Third
Amendment to Mineral Right Option Agreement, dated June
25, 2010
|
Exhibit
10.3 to the Company’s Current Report on Form 8-K filed June 30,
2010
|
|
|
X
|
|||
|
31.2
|
X
|
||
|
32.1
|
X
|
.
- 20
-