Notes to the Financial Statements
NOTE 1 - ORGANIZATION AND BASIS
OF PRESENTATION
Amarok Resources, Inc. (“Amarok”
or the “Company”) was incorporated in the state of Nevada on October 23, 2008 under the name Ukragro Corporation. The
Company’s principal activity is the exploration and development of mineral properties for future commercial development and
production.
On January 29, 2010, the Company
filed an amendment to its articles of incorporation changing its name to Amarok Resources, Inc. In the same amendment, the Company
changed its authorized capital to 175,000,000 shares of common stock at a restated par value of $0.001. Effective February 23,
2010, the Company authorized a 60:1 stock split.
Effective February 1, 2010, the Company
entered the exploratory stage as defined under the provisions of Accounting Codification Standard 915-10.
On September 26, 2013, the Company’s
Board of Directors, having received the written consent of shareholders holding a majority of the Company’s outstanding shares
of common stock, approved an amendment to the Company’s Articles of Incorporation to change the Company’s name from
Amarok Resources, Inc. to 3DX Industries, Inc. and increased the number of shares authorized to 185,000,000 of which 175,000,000
have been designated common shares and 10,000,000 have been designated preferred shares. Also on September 26, 2013, the Company
authorized a 50:1 reverse stock split. The accompanying financial statements have been restated to reflect the change in capital
and stock split as if they occurred at the Company’s inception.
Going Concern
The Company has incurred net losses
since inception, and as of October 31, 2013 had a combined accumulated deficit of $5,059,178 and negative working capital of $461,761.
These conditions raise substantial doubt as to the Company's ability to continue as a going concern. These financial statements
do not include any adjustments that might result from the outcome of this uncertainty. These financial statements do not include
any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities
that might be necessary should the Company be unable to continue as a going concern.
Management recognizes that the Company
must generate additional funds to enable it to continue operating. Management intends to raise additional financing through debt
and or equity financing and by other means that it deems necessary, with the goal of moving forward and sustaining a prolonged
growth in its strategy phases. However, no assurance can be given that the Company will be successful in raising additional capital.
Further, even if the company raises additional capital, there can be no assurance that the Company will achieve profitability or
positive cash flow. If management is unable to raise additional capital and expected significant revenues do not result in positive
cash flow, the Company will not be able to meet its obligations and may have to cease operations
NOTE 2 - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis of Presentation
The Company follows accounting principles
generally accepted in the United States of America. In the opinion of management, all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have
been reflected herein.
Cash and Cash Equivalents
The Company considers all highly
liquid debt instruments and other short-term investments with a maturity date of three months or less, when purchased, to be cash
equivalents.
Mining Costs
Costs incurred to purchase, lease
or otherwise acquire property are capitalized when incurred. General exploration costs and costs to maintain rights and leases
are expensed as incurred. Management periodically reviews the recoverability of the capitalized mineral properties. Management
takes into consideration various information including, but not limited to, historical production records taken from previous mining
operations, results of exploration activities conducted to date, estimated future prices and reports and opinions of outside consultants.
When it is determined that a project or property will be abandoned or its carrying value has been impaired, a provision is made
for any expected loss on the project or property.
Use of Estimates
The preparation of financial statements
in conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates.
Fair Value of Financial Instruments
Pursuant to ASC No. 820,
“Fair
Value Measurements and Disclosures
,
”
the Company is required to estimate the fair value of all financial instruments
included on its balance sheets as of October 31, 2013 and October 31, 2012. The Company’s financial instruments consist of
accounts payables and a short-term note payable. The Company considers the carrying value of such amounts in the financial statements
to approximate their fair value.
Loss Per Share of Common
Stock
The Company follows Accounting Standard
Codification Topic No. 260,
Earnings Per Share
(“ASC No. 260”) that requires the reporting of both basic and
diluted earnings (loss) per share. Basic earnings (loss) per share is computed by dividing net income (loss) available to common
stockholders by the weighted average number of common shares outstanding for the period. The calculation of diluted earnings (loss)
per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised
or converted into common stock. In accordance with ASC No. 260, any anti-dilutive effects on net earnings (loss) per share are
excluded. The Company had no potential common shares outstanding at October 31, 2013. Potential common shares at October 31, 2012
that have been excluded from the computation of diluted net loss per share include common stock warrants exercisable into 60,000
shares of common stock, common stock options exercisable into 15,000 shares of common stock, and an option to convert approximately
$174 in fees due Santeo Financial Corporation at October 31, 2013 into 173,762 common shares.
Convertible Debt Instruments
If the conversion features of conventional
debt instruments provides for a rate of conversion that is below market value at issuance, this feature is characterized as a beneficial
conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount pursuant to ASC Topic 470-20 “Debt
with Conversion and Other Options.” In those circumstances, the convertible debt is recorded net of the discount related
to the BCF, and the Company amortizes the discount to operations over the life of the debt using the effective interest method.
Issuances Involving Non-cash
Consideration
All issuances of the Company’s
stock for non-cash consideration have been assigned a dollar amount equaling the market value of the shares issued on the date
the shares were issued for such services. The non-cash consideration received pertains to consulting services.
Stock-Based Compensation
The Company accounts for stock-based
compensation under Accounting Standard Codification Topic 505-50,
Equity-Based Payments to Non-Employees
. This topic defines
a fair-value-based method of accounting for stock-based compensation. In accordance with the Topic, the cost of stock-based compensation
is measured at the grant date based on the value of the award and is recognized over the vesting period. The value of the stock-based
award is determined using Binomial or Black-Scholes option-pricing models, whereby compensation cost is the excess of the fair
value of the award as determined by the pricing model at the grant date or other measurement date over the amount that must be
paid to acquire the stock. The resulting amount is charged to expense on the straight-line basis over the period in which the Company
expects to receive the benefit, which is generally the vesting period.
Reclassification
Certain reclassifications have been
made to conform the 2012 amounts to 2013 classifications for comparative purposes.
Recent Accounting Pronouncements
The
Company’s management has evaluated all recent accounting p
ronouncements
since the last
audit through the issuance date of these financial statements. In the Company’s opinion, none of the recent accounting p
ronouncements
will have a material effect on the financial statements.
NOTE 3 – MINING CLAIMS
McNeil Claims, Canada
On March 24,
2011 the Company signed an agreement with Warrior Ventures, Inc. (“Warrior”), a private company, to acquire 100%
of the McNeil Gold Property. The McNeil property is located within the Abitibi Greenstone belt, approximately 30 miles
southeast of Timmins, Ontario, Canada and approximately 35 miles west of Kirkland Lake, Ontario, Canada. The purchase price
of the property was in exchange for Warrior receiving 28,000 shares of the Company’s restricted common stock along with
an option to purchase 28,000 of the Company common shares of the Company at a price of $1.00 per common share until October
1, 2011. Any options remaining unexercised as of September 1, 2011 may be exercised at a price of $1.25 per common share
until March 31, 2012, after which the option to purchase any shares of Amarok automatically terminates. The Company initially
valued the 28,000 shares at $784,000 based upon the trading price of the common shares on the date of issuance. The Company
valued the 28,000 options at $98,724 using a binomial option model with a trading price of $0.56 per share, risk-free
interest rate of 0.26%, and volatility of 93.221%. The total of $882,724 was capitalized as mining properties. At October 31,
2011, the Company recognized an impairment of $322,000 on the reduction in the fair value of mining claim based upon the
agreed upon price of $0.33 per share pursuant to the underlying purchase agreement. The $0.33 per share was based upon the
trading price of the Company’s common share on the March 23, 2011. Through October 31, 2013, the Company has incurred
additional acquisition costs totaling $91,606. The capitalized costs of the McNeil claim as of October 31, 2013 amounted to
$652,330.
On October 8, 2013,
the Company entered into an agreement with Trio Gold Corp. (“Trio”) to assign 100% of its claims in the McNeil property,
subject to a 5% net smelter royalty, to Trio once Trio has incurred exploration and administrative costs totaling $5,000,000(CND)
based upon the following schedule:
On or before
December 31, 2015 $500,000
On or before
December 31, 2017 $2,000,000
On or before
December 31, 2019 $2,500,000
Trio
is a company incorporated in the Province of Alberta, Canada. Trio’s current President is the father of one of the Company’s
former executive officers, who resigned as of September 17, 2013.
Nighthawk Claims, Canada
The Company had staked 35 claims on
property adjacent to the McNeil known as the Night Hawk Property. The acquisition cost associated with this claims totaled $37,380.
The Company did not have sufficient funds to pay the fees required to renew the 35 claims and on October 8, 2013 it assigned its
total interest in these claims to Trio in exchange for a 5% royalty on the net smelter returns generated from these claims. The
Company granted Trio the option to purchase each 1% royalty interest for $2,000,000(CND). The Company did not report any gain
or loss on this transaction and valued the 5% net royalty interest at the property’s current acquisition cost of $37,380.
Rodeo Creek Project, Nevada
On February 22, 2010, the Company
entered into an agreement with Carlin Gold Resources, Inc., (“Carlin”) in which Carlin assigned the Company all of
its rights, title, and interest in an exploration agreement between it and Trio. The assigned exploration agreement was dated January
28, 2010. In consideration for the assignment of the interest in the exploration agreement, the Company paid Carlin $1 and issued
2,000 shares of its common stock, valued at $168,000 based upon the trading price of the shares on the date of issuance. The value
of these shares has been charged to operations and included in exploration costs.
Trio has leased and has an option
to purchase a 100% interest in 29 unpatented lode mining claims located in Nevada within the Carlin Gold Trend (the “Claims”).
The Claims are subject to a 1.5% net smelter return (“NSR”).
Under the terms of the original agreement,
the Company earns a 75% undivided interest in the Property during an earn-in period commencing in January 2010 and completing in
December 2012 (the “earn-in period”). Upon completion of the earn-in period, a joint venture (the “Joint Venture”)
is to be formed with the same 75% / 25% interest the parties held during the earn-in period. The Joint Venture shall remain in
effect for twenty-five years or
as long as the claims are being actively mined or developed,
whichever is longer. After the termination of the Joint Venture, the Claims shall revert back to Trio.
On March 23, 2012, the Company and
Trio entered into an agreement that modified certain terms of the original agreement (“modified agreement”). During
the earn-in-period, the Company is to provide $5,500,000 in funding to cover operational costs. Under the original agreement, $1,500,000
was to be funded during the 2010 budget year, $2,000,000 was to be funded during the 2011 budget year and $2,000,000 was to be
funded during the 2012 budget year. The modified agreement eliminates the annual funding requirements and extends the due date
of the $5,500,000 funding to December 31, 2013.
Under the original agreement, the
Company was required to pay a minimum annual royalty during the earn-in period to Trio of which $75,000 was paid upon signing of
the agreement, $100,000 was paid on April 1, 2011 and $150,000 was to be paid on April 1, 2012. Under the terms of the March 23,
2012 modified agreement, the minimum royalty payments have been incorporated into the $5,500,000 funding requirement and the final
$150,000 minimum royalty payment becomes due on April 1, 2013. In consideration for modifying the terms of the original agreement
and extending the due date, the Company issued Trio 2,788 shares of its common shares valued at $11,152, which was charged to operations
and included in exploratory costs.
Once the Company has provided $5,500,000
in funding for the project, the Company and Trio shall fund the operational costs jointly, with the Company providing 75% of the
funds and Trio providing 25% of the funds. Through July 31, 2012, the Company funded a total of $2,350,000 in the property’s
operational costs as defined under the modified agreement. The funds paid have been charged to operations and included in exploratory
costs.
In addition, within three months
of the assignment, the Company is required to issue Trio 144,240 shares of its common stock. Upon expenditure of a minimum of $2,000,000
on the claims, Trio shall receive an additional 1,442 shares of the Company’s common stock. Upon expending a minimum of $4,000,000
on the claims, Trio shall receive an additional 1,442 shares of the Company’s common stock. Upon expenditure of $5,500,000
on the claims, Trio shall receive a final 1,442 shares of the Company’s common stock All shares issued shall be restricted
common shares and will be stamped with the applicable hold period. On February 22, 2010, the Company issued 2,884 shares of its
common stock to Trio valued at $242,323, based upon the restated trading price of the shares on the date of issuance. On October
25, 2011, the Company issued 1,442 shares of its common stock to Trio valued at $5,769, based upon the trading price of the shares
on the date of issuance. On March 23, 2012, the Company issued 2,788 shares of its common stock to Trio valued at $11,152, based
upon the restated trading price of the shares on the date of issuance. The values of the shares have been charged to operations
and included in exploration costs.
On February 13, 2013, the Company
entered into an agreement with Trio to modify the terms of the above indicated final minimum royalty payment of $150,000, which
was due on April 1, 2013. In exchange for paying $15,000 upon the signing of the agreement and $5,000 on August 1, 2013, the due
date of the remaining $130,000 is extended to October 1, 2013, with the date when the full $5,500,000 must be spent on the Rodeo
Claims is extended to December 31, 2014. Of the $20,000 that is due, $15,000 was paid on February 20, 2013 and $5,000 was paid
on March 15, 2013. The $20,000 was charged to exploratory costs.
The Company failed to pay the required
$130,000 that was due on October 1, 2013 and is in default under the agreement. Management is currently in discussions with Trio.
The sole officer, director, and shareholder
of Carlin is a business associate of one of the Company’s former officer and director.
Cueva Blanca Gold Property
On April 16, 2010, the Company entered
into an agreement with St. Elias Mines Ltd. (“St. Elias”) in which Amarok is given an option to earn a 60% interest,
subject to a 1.5% net smelter royalty (“NSR”) in the Cueva Blanca gold property (1,200 hectares) in Northern Peru,
which is wholly owned by St. Elias
.
Under the terms of the letter agreement, it is possible for the Company to acquire
a 60% interest in the Property
(subject to a 1.5% NSR) in consideration of:
(a) making cash payments of $200,000
to St. Elias over a two-year period;
(b) issuing 100,000 common shares
in the capital of Amarok to St. Elias; and
(c) incurring at least $1,500,000
in exploration expenditures on the property over a three-year period.
In addition, the Company shall have
the right to purchase one-half of the 1.5% NSR from St. Elias for the sum of $1,500,000, thereby reducing the NSR payable to from
1.5% to 0.75%.
The Company’s first payment
of $10,000 was paid on June 24, 2010. On April 27, 2011, the agreement between St. Elias and Amarok was formally terminated by
St. Elias. As of January 31, 2012, the Company has paid a total of $27,603 in fees towards property maintenance costs on the Cueva
Blanca property. The Company is currently considering its option following St. Elias’ termination of the agreement.
Mining properties at October 31,
2013 consist of the following:
Beginning balance - November 1, 2012
|
$
|
689,710
|
Acquisition related costs
|
|
-
|
Ending balance - October 31, 2013
|
$
|
689,710
|
NOTE 4 - RELATED PARTY TRANSACTIONS
As discussed in Note 3, on February
22, 2010 the Company entered into an agreement with Carlin in which Carlin assigned the Company all of its rights, title, and
interest in an exploration agreement between it and Trio. Trio is a company incorporated in the Province of Alberta, Canada. Trio’s
current President is the father of former officer and director of the Company. Further, the sole officer, director, and shareholder
of Carlin is a business associate of the same former officer and director.
In January 2010, an agreement went
into effect whereby the Company is paying Santeo Financial Corp (“Santeo”), a company affiliated with the same former
officer and director for consulting services of $15,000 a month on a month-to-month basis.
On January
15, 2013, the Company granted Santeo the option to convert up to 25% of all accrued compensation due it at that date into shares
of the Company’s common stock at a conversion price of $0.001 per share, and to convert the remaining 75% of accrued compensation
due it at that date into shares of the Company’s common stock at a conversion price of $0.01 per share. At January 15, 2013,
the amount of accrued compensation due Santeo was $175,000. Pursuant to ASC Topic 470-20, “Debt with Conversion and Other
Options,” the accrued compensation was recorded net of a discount that includes the debt’s beneficial conversion
feature of $148,077. Since the accrued compensation is immediately convertible into common stock, discounts arising from beneficial
conversion features are directly charged to expense pursuant to ACS 470-20-35. The beneficial conversion features were calculated
using trading prices ranging from $0.01 to $0.001
per share. During the year ended October 31, 2013, discounts amounting to $148,077 were charged to operations and included in
management fees on the statement of operations. The agreement can be cancelled by either party.
Effective December 18, 2013, the
terms of the above indicated option grant were modified limiting the number of conversion shares Santeo can receive and hold at
any point in time to no more than 9.99% of the Company’s common stock then outstanding.
Total consulting fees charged to
operations for the year ended October 31, 2013 and 2012 were $328,077 (including stock based compensation of $148,077) and $180,000,
respectively. Accrued compensation due Santeo at October 31, 2013 amounted to $310,000, of which $175,000 is reflected on the accompanying
balance sheet in accrued compensation – related party, convertible. The remaining balance of $135,000 due Santeo is reflected
on the accompanying balance sheet and is included in other payables – related parties.
On September 9, 2013, the Company
borrowed $30,000 from a relative of a shareholder. The loan is evidenced by an unsecured promissory note. The loan is assessed
interest at an annual rate of 5% per annum with principal and accrued interest fully due and payable on May 1, 2014. Accrued interest
charged to operations for the year ended October 31, 2013 and 2012 amounted to $86 and $0, respectively.
NOTE 5 – NOTE PAYABLE –
UNRELATED PARTY
On January 9, 2013, the Company entered
into an agreement to borrow a total of $46,300 from an unrelated third party of which $26,300 was received in January 2013 and
$20,000 was received in February 2013. The loans are evidenced by an unsecured promissory note. The $46,300 and interest of $2,500
was fully due and payable on July 1, 2013. As the outstanding principal and accrued interest were not paid on July 1, 2013, the
principal and accrued interest is assessed interest at an annual rate of 8% per annum payable quarterly, with the outstanding principal
and accrued interest balance fully due and payable on July 1, 2014. In addition, the unrelated third party advanced an additional
$2,500 on June 21, 2013. The $2,500 is assessed interest at an annual rate of 8% per annum payable quarterly, with the outstanding
principal and accrued interest fully due and payable on July 1, 2014. Accrued interest charged to operations for the year ended
October 31, 2013 and 2012 amounted to $3,872 and $0, respectively.
NOTE 6 – STOCKHOLDERS’
EQUITY
For the year ended October
31, 2013 and 2012
On September 26, 2013, the Company
increased the number of shares authorized to 185,000,000 of which 175,000,000 have been designated common shares and 10,000,000
have been designated preferred shares. Also on September 26, 2013, the Company authorized a 50:1 reverse stock split. The Company
did not enter into any further equity transactions during the year end October 31, 2013.
In February 2012, the Company issued
10,000 shares of its common stock pursuant to the terms of the agreement it has with David Gibson, former director of exploration.
The shares were valued at $40,000.
As discussed in Note 3, the Company
issued 2,788 shares of its common stock to Trio Gold Corp in March 2012 pursuant to the amended exploratory agreement. The shares
were valued at $11,152.
Warrants
The following is a schedule of warrants
outstanding as of October 31, 2013:
|
Warrants Outstanding
|
|
Weighted Average Exercise Price
|
|
Weighted Average Remaining Life
|
|
|
|
|
|
|
|
|
Balance, October 31, 2011
|
60,000
|
|
$ 37.50
|
|
1.98 Years
|
|
|
|
|
|
|
|
|
Warrants granted
|
--
|
|
--
|
|
--
|
|
Warrants exercised
|
--
|
|
--
|
|
--
|
|
Warrants expired
|
--
|
|
--
|
|
--
|
|
|
|
|
|
|
|
|
Balance, October 31, 2012
|
60,000
|
|
$ 37.50
|
|
.98 Years
|
|
Warrants granted
|
--
|
|
--
|
|
--
|
|
Warrants exercised
|
--
|
|
--
|
|
--
|
|
Warrants expired
|
(60,000)
|
|
$ (37.50)
|
|
--
|
|
|
|
|
|
|
|
|
Balance, October 31, 2013
|
--
|
|
--
|
|
--
|
|
Options
The following is a schedule
of options outstanding as of October 31, 2013:
|
Warrants Outstanding
|
|
Weighted Average Exercise Price
|
|
Weighted Average Remaining Life
|
|
|
|
|
|
|
|
|
Balance, October 31, 2011
|
48,000
|
|
$ 46.61
|
|
0.84 Years
|
|
|
|
|
|
|
|
|
Options granted
|
--
|
|
--
|
|
--
|
|
Warrants exercised
|
--
|
|
--
|
|
--
|
|
Warrants expired
|
(33,000)
|
|
$ (54.55)
|
|
--
|
|
|
|
|
|
|
|
|
Balance, October 31, 2012
|
15,000
|
|
$ 29.17
|
|
0.65 Years
|
|
Options granted
|
--
|
|
--
|
|
--
|
|
Warrants exercised
|
--
|
|
--
|
|
--
|
|
Warrants expired
|
(15,000)
|
|
$ (29.17)
|
|
--
|
|
|
|
|
|
|
|
|
Balance, October 31, 2013
|
--
|
|
$ --
|
|
--
|
|
NOTE 7 - INCOME TAXES
Deferred income tax assets and
liabilities are computed annually for differences between financial statement and tax bases of assets and liabilities that will
result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets
to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change
during the period in deferred tax assets and liabilities.
The effective tax rate on the
net loss before income taxes differs from the U.S. statutory rate as follows:
|
|
|
|
October 31,
|
|
|
|
|
2013
|
|
2012
|
Current expense - Benefit
|
|
|
|
|
|
Federal
|
$
|
-
|
$
|
-
|
|
State
|
|
-
|
|
-
|
|
|
Total current expense (benefit)
|
|
-
|
|
-
|
Deferred Benefit
|
|
|
|
|
|
Federal
|
$
|
-
|
$
|
-
|
|
State
|
|
-
|
|
-
|
|
|
Total deferred benefit
|
|
-
|
|
-
|
U.S statutory rate
|
|
34.00%
|
$
|
34.00%
|
Less valuation allowance
|
|
-34.00%
|
|
-34.00%
|
|
|
Effective tax rate
|
|
0.00%
|
|
0.00%
|
The significant components of deferred tax assets and liabilities are as follows:
|
Deferred tax assets
|
|
|
|
|
|
Stock based compensation
|
$
|
131,435
|
$
|
81,089
|
|
Net operating losses
|
|
1,294,544
|
|
1,193,160
|
|
|
1,425,979
|
|
1,274,249
|
Less valuation allowance
|
|
(1,425,979)
|
|
(1,274,249)
|
|
|
Deferred tax asset - net valuation allowance
|
$
|
-
|
$
|
-
|
The net change in the valuation
allowance for 2013 was $(151,730).
The Company has a net operating
loss carryover of approximately $3,807,000 available to offset future income for income tax reporting purposes, which will expire
in various years through 2033, if not previously utilized. However, the Company’s ability to use the carryover net operating
loss may be substantially limited or eliminated pursuant to Internal Revenue Code Section 382.
We adopted the provisions of
ASC 740-10-50, formerly FIN 48, “Accounting for Uncertainty in Income Taxes.” We had no material unrecognized income
tax assets or liabilities for the year ended October 31, 2012 or for the year ended October 31, 2013.
Our policy
regarding income tax interest and penalties is to expense those items as general and administrative expense but to identify them
for tax purposes. During the year ended October 31, 2013 and 2012, there were no income tax, or related interest and penalty items
in the income statement, or liability on the balance sheet. We file income tax returns in the U.S. federal jurisdiction and various
state jurisdictions. We are no longer subject to U.S. federal or state income tax examination by tax authorities for years before
2008. We are not currently involved in any income tax examinations.
Company management policy regarding income
tax interest and penalties is to expense those items as general and administrative expense but to identify them for tax purposes.
During the year ended October 31, 2013 and 2012, there were no income tax, or related interest and penalty items in the income
statement, or liability on the balance sheet. The company files income tax returns in the U.S. federal jurisdiction and various
state jurisdictions. The Company is no longer subject to U.S. federal or state income tax examination by tax authorities for years
before 2008. The Company is not currently involved in any income tax examinations.
NOTE 8 –SUBSEQUENT EVENTS
On November 5, 2013, a current note
holder advanced the Company $150,000. The loan is evidenced by an unsecured promissory note and is assessed interest at an
annual rate of 5%. Principal and accrued interest is fully due and payable on December 31, 2015. In the event of a default,
the overdue balance will be assessed interest at a rate of 12% per annum. After December 31, 2014, the holder has the right
to convert some or all of the outstanding principal and accrued interest into shares of the Company’s common stock at a
conversion price of $0.10 per share.
Effective November 23, 2013, the Company entered
into an employment agreement with its President and Chief Executive Officer, Roger Janssen. Under the terms of the agreement, Mr.
Janssen will receive a base salary of $15,000 a month over the three year term of the agreement. At the sole discretion of the
board of directors, Mr. Janssen may be granted performance bonuses and may also participate in any incentive plans that the Company
may establish. In addition, Mr. Janssen received 30,000,000 shares of the Company’s restricted common stock as a signing
bonus. The shares were valued at $8,700,000 based upon the trading price of the shares on the date of grant.
The Company is diversifying its
operations to include 3-D printing and on December 18, 2013, the Company entered into an equipment purchase agreement with
President and Chief Executive Officer, Roger Janssen, to purchase equipment to be used in the 3-D printing operation. The
purchase included 13 CNC machines, 1 composite 3-D printer, 2 mills, lathes,
tooling, software, and other miscellaneous equipment. The purchase price is $500,000, which is evidenced by a promissory note
fully due and payable on December 15, 2018. The note is assessed interest at an annual rate of 1.64% payable on a quarterly
basis. Mr. Janssen has the option to convert the outstanding principal and any accrued interest into shares of the
Company’s common stock at a conversion price of $0.50 per share.
In December of 2013 the company purchased its
first 3D Metal Printing System, the M-Flex 3D Metal Printer for $750,000. Terms of the purchase required the company to pay in
three installments, the first being $75,000 upon initial signing of the purchase order, which was paid; half the balance to be
paid on or before June 1, 2014 and the remaining balance due on or before September 1, 2014.
End of Notes to Financials