We use the U.S. dollar
as our reporting currency. All references in this Annual Report to “dollars” or “$” are expressed in U.S.
dollars, unless otherwise indicated. See also “Item 3. Key Information” for more detailed currency and conversion
information. Our consolidated financial statements which form part of this Report are presented in U.S. dollars and are prepared
in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).
PART I
FINANCIAL INFORMATION AND ACCOUNTING PRINCIPLES
The consolidated financial
statements and summaries of financial information contained in this document are reported in U.S. dollars (“$”) unless
otherwise stated. All such consolidated financial statements have been prepared in accordance with United States generally accepted
accounting principles.
The consolidated financial
statements of the Company for the year ended December 31, 2015 and 2014 have been audited by Anton & Chia LLP, 3501 Jamboree
Rd., Newport Beach, CA 92660.
ITEM 1. Identity of Directors, Senior
Management and Advisers
Not Required.
ITEM 2. Offer Statistics and Expected
Timetable
Not Required.
ITEM 3. Key Information
A. Selected Financial Data
The following tables set
forth the data of our fiscal years ended December 31, 2009 to December 31, 2015. We derived all figures from our financial statements
as prepared by our management, approved by our audit committee and audited by our independent auditor. This information should
be read in conjunction with our financial statements included in this annual report.
Our financial statements
included in this Report have been prepared in accordance with accounting principles generally accepted (“GAAP”) in
the United States (“US”). All amounts are expressed in United States dollars.
SUMMARY OF FINANCIAL INFORMATION IN THE
COMPANY'S FINANCIAL STATEMENTS
|
|
2009
(1)
$
|
2010
(1)
$
|
2011
(1)
$
|
2012
(1)
$
|
2013
(1)
$
|
2014
(1)
$
|
2015
(1)
$
|
|
OPERATING
DATA:
|
|
|
|
|
|
|
|
|
Revenue
|
—
|
—
|
—
|
—
|
—
|
—
|
|
|
Gross
Profit
|
—
|
—
|
—
|
—
|
—
|
—
|
|
|
Net
Income (Loss)
|
(1,574,304)
|
(1,447,030)
|
(580,330)
|
(368,707)
|
(441,973)
|
(808,710)
|
(716,943)
|
|
Earnings
(Loss) Per Share
|
(0.03)
|
(0.02)
|
(0.01)
|
(0.00)
|
(0.00)
|
(0.00)
|
(0.00)
|
|
|
|
|
|
|
|
|
|
|
BALANCE
SHEET DATA:
|
|
|
|
|
|
|
|
|
Cash
|
1,525
|
779
|
379,014
|
578
|
43,560
|
3,363
|
164,808
|
|
Total
Assets
|
62,604
|
24,433
|
402,825
|
15,713
|
60,552
|
13,689
|
168,899
|
|
Total
Liabilities
|
414,045
|
281,100
|
221,897
|
192,017
|
380,587
|
304,714
|
438,685
|
|
Shareholders’
Equity (Deficit)
|
(351,441)
|
(256,667)
|
180,928
|
(176,304)
|
(320,035)
|
(291,025)
|
(269,786)
|
|
|
(1)
|
As
of December 31 of the respective fiscal year.
|
B. Capitalization and Indebtedness
Not required.
C.
Reasons for the Offer and Use of Proceeds
Not required.
D. Risk Factors
This Report contains
forward-looking statements which relate to future events or our future performance, including our future financial performance.
In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”,
“plans”, “anticipates”, “believes”, “estimates”, “predicts”, or “potential”
or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks enumerated in this section entitled “Risk Factors”, that
may cause our Company’s or our industry’s actual results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking
statements.
While these forward-looking
statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the
direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections,
assumptions or other future performance suggested in this Report. Except as required by applicable law, including the securities
laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual
results.
An investment in our
common stock involves a number of very significant risks. You should carefully consider the following risks and uncertainties
in addition to other information in this Report in evaluating our Company and our business before purchasing shares of our Company’s
common stock. Our business, operating results and financial condition could be seriously harmed due to any of the following risks.
The risks described below are not the only ones facing our Company. Additional risks not presently known to us may also impair
our business operations. You could lose all or part of your investment due to any of these risks.
Risks Associated With Mining
Our mining properties are in the exploration
stage. There is no assurance that our properties contain any mineral resources in commercially exploitable quantities. If we do
not discover any mineral resource in a commercially exploitable quantity, our business will fail and investors may lose all of
their investment in our Company.
Despite our acquisition
of mineral claims and rights, we have not established that any of them contain any commercially exploitable mineral reserves,
nor can there be any assurance that we will ever find commercially exploitable mineral reserves. The probability of an individual
prospect ever having a commercially exploitable mineral reserve is extremely remote; in all probability our mineral resource claims
do not contain any reserves and any funds that we spend on exploration will probably be lost. The search for valuable minerals
as a business is extremely risky. We can provide investors with no assurance that any exploration on our properties will establish
that commercially exploitable reserves of minerals exist on our mining claims. Additional potential problems that may prevent
us from discovering any reserves of minerals on our properties include, but are not limited to, unanticipated problems relating
to exploration and additional costs and expenses that may exceed current estimates. Most of these factors are beyond our control,
and any of them could increase costs and make extraction of any identified mineral resource unprofitable.
If we are unable to establish
the presence of commercially exploitable reserves of minerals on our properties, our ability to fund future exploration activities
will be impeded, we will not be able to operate profitably and investors may lose all of their investment in our Company.
We face intense competition in the mineral
exploration and exploitation industry and we compete with our competitors for financing, for new mineral resource properties and
for qualified managerial and technical employees.
Our competition includes
large established mining companies with substantial capabilities and with greater financial and technical resources than those
available to us. As a result of this competition, we may have to compete for financing and be unable to acquire financing on terms
we consider acceptable. This competition could adversely affect our ability to acquire suitable prospects for exploration in the
future. We may also have to compete with the other mining companies in the recruitment and retention of qualified managerial and
technical employees. If we are unable to successfully compete for financing or for qualified employees, our exploration programs
may be slowed down or suspended. If we are unable to successfully compete for the acquisition of suitable prospects for exploration
in the future, there can be no assurance that we will acquire any interest in additional mineral resource properties. The occurrence
of any of these things may cause us to cease operations as a company.
Because of the inherent dangers involved
in mineral exploration and exploitation, there is a risk that we may incur liability or damages as we conduct our business.
The search for valuable
minerals involves numerous hazards that may subject us to liability including pollution, cave-ins and other hazards against which
we cannot insure or against which we may elect not to insure. At the present time we have no coverage to insure against these
hazards. The payment of such liabilities may have a material adverse effect on our financial position.
Title to our resource properties may
be challenged by third parties which could result in the loss of substantial amounts of money and resources and could cause our
interests in our properties to expire or be forfeit.
We have investigated the
status of our titles to our mineral resource properties and we are satisfied that the title to these properties is properly registered
in the name of our Company, but we cannot guarantee that the rights to explore our claims will not be revoked or altered to our
detriment. The ownership and validity of mining claims and concessions are often uncertain and may be contested. Should such a
challenge to the boundaries or registration of ownership arise, the resolution of disputes or the process of clarifying the accuracy
of our mining license registration could take substantial time and money. Further, the preservation of our title to our mineral
claims requires that we continue to expend money or work the claims. If we fail to expend the necessary amount of money or if
we fail to work our mineral claims, then our title to our mineral claims could expire or be forfeited.
Mineral prices are subject to dramatic and unpredictable
fluctuations.
The market price of precious
metals and other minerals is volatile and has fluctuated widely, particularly in recent years. The prices of various metals are
affected by numerous factors beyond our control, including international economic and political trends, expectations of inflation,
currency exchange fluctuations, interest rates and global or regional consumption patterns, speculative activities and increased
production due to improved mining and production methods. The supply of and demand for metals are affected by various factors,
including political events, economic conditions and production casts in major mineral producing regions. Variations in the market
prices of metals may have an impact on our ability to raise funding to continue exploration of our claims. In addition, any significant
fluctuations in metal prices will impact our decision to accelerate or reduce our exploration activities. If the price of precious
metals and other minerals should drop significantly, the cost of mineral extraction may be higher than is economically feasible.
The marketability of minerals is also affected by numerous other factors beyond our control, including government regulations
relating to royalties, allowable production and importing and exporting of minerals, the effect of which cannot be accurately
predicted.
Mineral operations are subject to government regulations
which could have the effect of reducing or preventing us from exploiting any possible mineral reserves on our claims.
Exploration activities
are subject to national and local laws and regulations governing prospects, taxes, labor standards, occupational health, land
use, environmental protection, mine safety and others which may in the future have a substantial adverse impact on our Company’s
prospects. In order to comply with applicable laws, we may be required to make capital expenditures until a particular problem
is remedied. Existing and possible future environmental legislation, regulation and action could cause additional expense, capital
expenditure, restriction and delay in the activities of our Company, the extent of which cannot be reasonably predicted. If we
violate any applicable law or regulation, we could be forced to stop work and we could be fined. If we are forced to suspend our
activities or if we are required to pay a large fine for a violation of these applicable laws and regulations, our business could
be adversely affected.
Our operations may be subject to environmental
regulations which may result in the imposition of fines and penalties.
Our operations may be
subject to environmental regulations promulgated by government agencies from time to time. Environmental legislation provides
for restrictions and prohibitions on spills, releases or emissions of various substances produced in association with certain
mining industry operations, such as seepage from tailings disposal areas, which would result in environmental pollution. A breach
of such legislation may result in the imposition of fines and penalties. Environmental legislation is evolving in a manner which
means stricter standards, and enforcement; fines and penalties for non-compliance are more stringent. Environmental assessments
of proposed projects carry a heightened degree of responsibility for companies and directors, officers and employees. The cost
of compliance with changes in governmental regulations has a potential to reduce the profitability of operations.
Risks Related To Our Company
The fact that we have not generated
any operating revenues for the last ten years raises substantial doubt about our ability to continue as a going concern.
We have not generated
any operating revenues for the last ten years and we will, in all likelihood, continue to incur operating expenses without revenues
until our mining claims are fully developed and in commercial production. As a result, we need to generate significant revenues
from our operations or obtain financing. We cannot assure that we will be able to successfully explore and develop our mining
claims or assure that viable reserves exist on the claims for extraction. These circumstances raise substantial doubt about our
ability to continue as a going concern. It is unlikely that we will generate any funds internally until we discover commercially
viable quantities of precious metals and other minerals. If we are unable to generate revenue from our business in the next twelve
months, we may be forced to delay, scale back, or eliminate our exploration activities. If any of these actions were to become
necessary, we may not be able to continue to explore our properties or operate our business and if either of those events happen,
then there is a substantial risk our business would fail.
We have a limited operating history on which to base an evaluation
of our business and prospects.
As of the date of this
Report, we have not yet located any mineral reserve. As a result, we have never had any revenues from our operations. In addition,
we have no operating history related to the acquisition and exploration of our mineral properties. We have no way to evaluate
the likelihood of whether our mineral claims contain any mineral reserve or, if they do that we will be able to build or operate
a mine successfully. We anticipate that we will continue to incur operating costs without realizing any revenues during the period
when we are exploring our claims. We expect to continue to incur significant losses into the foreseeable future. We recognize
that if we are unable to generate significant revenues from mining operations and any dispositions of our claims, we will not
be able to earn profits or continue operations. At this stage of our operation in this industry, we also expect to face the risks,
uncertainties, expenses and difficulties frequently encountered by companies at the start up stage of their business development.
We cannot be sure that we will be successful in addressing these risks and uncertainties and our failure to do so could have a
material adverse effect on our financial condition. There is no history upon which to base any assumption as to the likelihood
that we will prove successful and we can provide investors with no assurance that we will generate any operating revenues or ever
achieve profitable operations.
We have not generated any revenue from
our business and we may need to raise additional funds in the near future. If we are not able to obtain future financing when
required, we might be forced to discontinue our business.
Because we have not generated
any revenue from our business and we cannot anticipate when we will be able to generate revenue from our business, we will need
to raise additional funds for the further exploration and future development of our mining claims and to respond to unanticipated
requirements or expenses. During the year ended December 31, 2015, we received $472,120 in financing. However, if our expenses
exceed these funds, we will need to secure additional financing for further exploration and development of our projects or to
fulfill our obligations under any applicable agreements. Although we have been successful in the past in obtaining financing,
there can be no assurance that we will be able to obtain adequate financing in the future or that the terms of such financing
will be favorable. Failure to obtain such additional financing could result in a delay or indefinite postponement of further exploration
and development of our projects with the possible loss of such properties.
Canada Business Corporations Act provides
for the indemnification of our officers and directors against all costs, charges and expenses incurred by them in respect of any
civil, criminal, administrative, investigative or other proceeding.
The Canada Business Corporations
Act contains provisions limiting the liability of our officers and directors for their acts and failures to act and for any loss,
damage or expense incurred by our Company which shall happen in the execution of their duties of such officers or directors, unless
the officers or directors did not act honestly and in good faith with a view to the best interests of our Company. Such limitations
on liability may reduce the likelihood of derivative litigation against our officers and directors and may discourage or deter
our shareholders from suing our officers and directors based upon breaches of their duties to our Company, though such an action,
if successful, might otherwise benefit our Company and our shareholders.
Risks Relating to our Securities
Investors’ interests in our Company
will be diluted and investors may suffer dilution in their net book value per share if we issue additional shares or raise funds
through the sale of equity securities.
We are currently without
a source of revenue and will most likely be required to issue additional shares to finance our operations and, depending on the
outcome of our exploration programs, may issue additional shares to finance additional exploration programs of any or all of our
projects or to acquire additional properties. If we are required to issue additional shares to raise financing, your interests
in our Company will be diluted and you may suffer dilution in your net book value per share depending on the price at which such
securities are sold. Further, if we issue any share purchase warrants or share purchase options, and they are exercised, there
will be a reduction in the proportionate ownership and voting power of all other shareholders. The dilution may result in a decline
in the market price of our common shares.
Investors’ interests in our Company
will be diluted and investors will suffer dilution in their net book value per share if we issue employee/director/consultant
options.
We may in the future grant
to some or all of our directors, officers, insiders, and key employees, options to purchase our common shares as non-cash incentives
to those persons. Such options may be granted at exercise prices equal to market prices, or at such other price as may be permitted
under the policies of any stock exchange upon which our securities are traded (currently, our common shares are listed for trading
on the OTCPK), when the public market is depressed. The issuance of additional shares will cause our existing shareholders to
experience dilution of their ownership interests.
We do not plan to pay any Dividends
in the foreseeable future.
The Company has never
paid a dividend and it is unlikely that the Company will declare or pay a dividend until warranted based on the factors outlined
below. The declaration, amount and date of distribution of any dividends in the future will be decided by the Board of Directors
from time-to-time, based upon, and subject to, the Company’s earnings, financial requirements and other conditions prevailing
at the time.
In the event that key employees leave
the Company, the Company would be harmed since we are heavily dependent upon them for all aspects of our activities.
The Company is heavily
dependent on our officers and directors, key employees and contractors, the loss of whom could have, in the short-term, a negative
impact on our ability to conduct our activities and could cause a decline in profitability of our properties or additional costs
from a delay in development or exploration of properties. The Company has consulting agreements with key employees and contractors,
and an employment agreement with our President.
We face exposure to fluctuations in
the price of our common stock due to the very limited cash resources we have.
The Company has very limited
resources to pay its professionals. If we are unable to pay professionals in order to perform various professional services for
the Company, it may be difficult, if not impossible, for the Company to maintain its reporting status under the Exchange Act.
If the Company felt that it was likely that it would not be able to maintain its reporting status, it would make a disclosure
by filing a Form 6-K with the SEC. In any case, if the Company was not able to maintain its reporting status, it would become
“delisted” and this would potentially cause an investor or an existing shareholder to lose all or part of his investment.
The Company does not anticipate any
contingency upon which it would voluntarily cease filing reports with the SEC, even though it may cease to be required to do so.
It is in the compelling
interest of the Company to report its affairs annually and currently, as the case may be, generally to provide accessible public
information to interested parties, and also specifically to maintain its qualification for the OTCPK, if and when the Company’s
intended application for submission is effective.
The success of the Company will depend
on the developments of an active trading market.
While the Company's common
shares are included on Over the Counter Markets (OTCPK), there can be no assurance that an active trading market for the common
shares will develop. In the absence of such a market, investors may be unable to readily liquidate their investment in the common
shares. The market for equity securities in general has been volatile and the trading price of the common shares could be subject
to wide fluctuations in response to general market trends, changes in general conditions in the economy, the financial markets
and other factors that may be unrelated to the Company's performance.
Low-Priced Stocks are subject to greater
Disclosure Requirements.
The Securities and Exchange
Commission adopted rules (“Penny Stock Rules”) that regulate broker-dealer practices in connection with transactions
in penny stocks. The common shares of the Company fall within the Commission's definition of a penny stock. Penny stocks generally
are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges
or quoted on the NASDAQ system, provided that current prices and volume information with respect to transactions in such securities
is provided by the exchange or system). The Penny Stock Rules require a broker-dealer, prior to effecting a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document prepared by the Securities and Exchange
Commission that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer
also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer
and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the
customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information must be given
to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or
with the customer's confirmation. In addition, the Penny Stock Rules require that prior to a transaction in a penny stock not
otherwise exempt from such rules, the broker-dealer must receive the purchaser's written agreement to the transaction. These disclosure
requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that is subject
to the Penny Stock Rules. At any time when the Company's common stock is subject to the Penny Stock Rules, shareholders may find
it more difficult to sell their shares.
ITEM 4. Information on the Company
A. History and Development of the Company
The Company was incorporated
as a federal company pursuant to the laws of Canada under the
Canada Business Corporations Act
(the “Act”)
on October 30, 1997, under the name 3430502 Canada Ltd. In December 1997, the Company changed its name to Four Crown Foods Inc.
At the time, the Company was involved in the food and beverage retail business. Then in June, 2000, the Company changed its name
to Universal Domains Incorporated and operated in the domain registration business upon the acquisition of the license rights
to a domain registration agreement for the “.cc” internet registration domain.
In November 2003, the
Company ceased all operations and in September, 2004, the Company changed its name to Pure Capital Incorporated. From that time
until November 1, 2006, the Company’s goals were to continue to reduce the liabilities of the Company in an effort to obtain
additional financing and explore the possibilities of starting a new operating business, and/or merge with or become acquired
by another company or entity.
On November 27, 2006,
the Company acquired full rights and title to certain mining and exploration claims located in the State of Arizona along with
other equipment and properties from Redhawk Exploration & Development, Inc., a Texas corporation.
Then on February 6, 2007,
the Company changed its name to Tombstone Exploration Corporation to reflect its current operations in the mining and exploration
industry. Since that time we have been operating in the mineral resource business and the primary focus of operations has been
to generate revenue from the production of silver and gold, as well as additional base minerals such as copper, lead and zinc.
The goal is to produce metals and minerals at or below standard industry costs. The historical nature of mining activities of
our present holdings and the acceptance of governmental agencies will enable easier startup here than in non-mining oriented locations.
Following identification
of suitable areas during our drilling programs, which we anticipate will continue in the future, the Company may initiate mineral
extraction if sufficient funding and permitting are secured. These efforts will provide an operating financial base from which
to expand. Continuing geological research, testing and drilling is planned based on the initial geological report. This will assist
in the identification of key target areas, as well as establish reserve categories.
Discussions with precious
metal processing and consulting companies to assist in the design of the overall operation of our mining claims have been initiated.
Relationships have already been established with refineries, assay companies and engineering firms supporting worldwide mineral
processing operations.
The Stardust Mine, Yuma County Arizona,
Eagletail Mining District
The Company holds the
mineral rights to approximately 400 acres of BLM lode claims which includes the Stardust Mine in Yuma County Arizona, the Eagletail
Mining District. Exploration work has begun on the property starting in October 1, 2015. The Stardust Mine is a disseminated Gold
Property.
The Stardust claims are
mineralized with Gold, Silver, Copper, and Molybdenum, early records show a resource of approximately 2 – 3 million tons
with average values of: Gold 0.2 oz, Silver 1.0 oz, Copper 0.9% and Molybdenum assays nearing 1.0 oz. Current exploration expects
to considerably expand this estimate.
This property lies along
the northern flanks of the Gila Bend Mountains, which are underlain by Precambrian schist and granitic rocks of probable Cretaceous
age, uncomformably overlying and intruding the older rocks are Tertiary volcanic rocks.
The geology of the Stardust
claims is dominated by three types or phases of granitic rocks. The age of the intrusive rocks is probably Cretaceous, but they
could be Precambrian or mid-Tertiary; we currently believe they are most likely to be Cretaceous. Ninety-five percent of the mapped
area is encompassed by granitic rocks. The other five percent is divided evenly between Precambrian chlorite schist and mid-Tertiary
andesite dikes.
The granitics are subdivided
into three units. They may all be related to the same magma or be of different ages or a combination of the two. All three are
easily identifiable in the field bases on their megascopic characteristics. The first and most abundant unit is leucocratic granite.
It is white in color, fine to medium-grained, and does not contain mafic minerals. The presence of chlorite is almost ubiquitous
in the leuco-granite, and occurs mainly along fracture surfaces. Chlorite is probably an alteration product associated with fracturing
and/or mineralization. The second granitic unit is quartz monzonite. It forms the main portion of South Hill (see Plate 1). It
is equigranular and contains hornblende and biotite. Narrow (1-3) silicified and brecciated zones are hosted by this unit; and
are commonly anomalous in gold. The third unit is also quartz monzonite in composition, but contains anhedral pink feldspars which
distinguish it from the other two units. Alteration and mineralization are completely lacking in this unit.
Chlorite schist crops
out at three localities which average about 50-75 feet in width and 300 feet in length. The schist unit is a roof pendant and
probably continues at depth for only a few hundred feet. The age of the chlorite schist is probably Precambrian, based on its
resemblance to other Precambrian schist units in western Arizona. Mineralization does occur within the schist, generally near
andesite dikes.
The andesite dikes crop
out as narrow (5-10 feet), sinuous bodies and crosscut the leucogranite and chlorite schist. Intrusion of the dikes is tentatively
dated as Oligocene to early-Miocene. In the north-central position of the mapped area, the andesite seems to “blossom”
into a stock-like body with minimum dimensions of 100 feet by 400 feet; see section B-B’, Plate 3 for configuration. Strike
direction of the dikes varies from east-west to N70 degrees West and dips average 70 degrees to the North. Alteration of the andesite
consists of silicification, brecciation, and iron-oxides; however, some andesite is devoid of alteration, especially in the eastern
portion of mapped area.
Due to the paucity of
outcrop on the property, structures were difficult to define. In a broad sense, the entire mapped area has been intensely fractured
along an east-west structure, this fracturing is at least a ½ mile in length and 300-500 feet in width. The zone could
be much wider, but colluvium to the north covers any extension.
Gold and silver mineralization
with copper occurs along an east-west trend and is spatially related to an andesite dike. The dike is variably silicified and
iron-stained. Silicification consists of silica replacement and drusy quart crystals in open-space veins. Hematite staining and
vein fillings are commonly associated with gold.
On November 25, 2015,
Zonge International completed ground geophysics across the 400 Acre claim block owned by Tombstone in the Eagletail Mining District,
Yuma County, Arizona. Zonge has been well respected for geophysical data acquisition in the minerals industry since 1970.
They are an industry leader in methods such as IP (induced polarization) and CSEM/AMT, as well as SP, seismic, and gravity/magnetic
data acquisition.
Zonge has performed a
ground magnetic survey across the claim block to determine the extent of the Stardust Fault. Previous reports state that
the two shafts on the property were sunk along a high angled structure which trends E-NE across the area of outcrop. This
structure is thought to be the ‘feeder’ for the Gold Silver mineralization in the project area. Several reports
reference ‘free milling gold’ from drifts along this fault. Abundant dump material contains anomalous gold and
silver values as well as visible copper oxides. Due to the extensive surface disturbance in this area, performing a ground
magnetic survey will give a better understanding of the subsurface character of the fault. This method details changes in
density in the subsurface and is used to define faults, fractures, and changes in rock types. As a result, this geophysical
data will be used to better define the Phase I scope of work, which will involve detailed surface mapping, rock/soil sampling,
and delineation of drill targets.
During the 2nd quarter
of 2016 Tombstone’s geological crew has identified surface high grade gold results during detailed mapping and sampling of a
mineralized trend in the 100% owned claim block in Yuma County, AZ in the Eagletail Mining District. Highlights include a sample
returning 7.04 g/t gold with multiple other samples above 1 g/t gold of the 70 samples sent for assay.
The encouraging results
from the rock sampling program over the Stardust project indicate the presence of a high angle detachment related precious metals
vein system. The mineralization present at the Stardust project appears to be located within detachment related veins
& locally intensively chloritic and hematitic host rocks. The vein system has been sampled over a strike of approximately
3,200 feet (975 meters). These veins appear to be a feeder system of an extensive partially eroded low angle fault system over
the Stardust.
The results of the latest
tranche of rock samples combined with field observations, and existing data, appear to fit the USGS detachment fault model of
USGS Bulletin 2004 by Long, K.R.: Preliminary Descriptive Deposit Model for Detachment-Fault-Related Mineralization. Other productive
detachment fault related precious and base metal systems occur through the Basin and Range areas of Southern California, Western
Arizona, and Southern Nevada. An example in Arizona includes the Copperstone Mine, previously mined by Cypress which produced
one half million ounces of gold by open pit methods from 1987-1993. Copperstone is currently being evaluated for additional resources.
Quartz veins present in
outcrop, subcrop, float, & in historical mining dumps showcase multi ppm gold values up to 7.04 ppm (sample SDR0048 - 50gram
Fire Assay) and silver values up to 22.6 ppm (sample SDR0052). Eight out of 70 rock samples returned assays above
1ppm. In addition to these strong precious metal values found in samples, additional observations at Stardust include:
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•
|
The
presence of chalcedonic quartz veins.
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•
|
Crushed
veins & and multi-phase cemented - banded silica veins, & silicification.
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•
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Abundant
drusy textures (boiling level and vapor phase)
|
Footwall host rocks are a metasediment matrix
with strong hematite & intensive chloritic alteration + copper oxides.
The State of Main Mine and others as well as Section 16 of
the Tombstone Mining District Copper Exploration, Cochise Count, Tombstone Arizona
The Company holds the
mineral rights to approximately 640 acres in the historical western Tombstone silver mining district. Our property area lies within
the historic Tombstone Mining District Cochise County, Arizona. The town of Tombstone, Arizona is approximately 70 miles (miles,
110 kilometers (km)) southeast of Tucson and 24 miles (40 km) northwest of Bisbee, Arizona. The San Pedro River lies about 2 miles
(3 km) west of the property’s westernmost boundary.
The Tombstone mining district
is one of 12 mining districts in Cochise County, Arizona. Copper, lead, zinc, silver, and gold were the principal metals produced
from the different mines in the County. Management has structured and positioned the Company to capitalize on today's increasing
demand and prices for precious metals and base metals such as copper, lead and zinc.
The Tombstone property
is composed of three non-contiguous parcels totaling approximately 640 acres. The parcels consist of 8 patented lode claims totaling
145.6 acres (58.9 ha), and 1 Arizona State Land Department (ASLD) exploration permits totaling 495 acres. The Company owns
the mineral rights to the patented claims; the surface rights are owned by various individuals. The Arizona state trust lands
exploration permits grant the Company the exclusive exploration rights for up to 5 years from the date the exploration applications
were filed. Surface and mineral rights are variously owned by the U.S. federal government, the State of Arizona, and individual
persons.
In addition to continuing
to explore our current mineral rights, we will seek out and attempt to acquire new properties.
B. Business Overview
This business generally
consists of three stages: exploration, development and production. We are a mineral resource company in the exploration stage
because we have not yet found mineral resources in commercially exploitable quantities, and are engaged in exploring land in an
effort to discover them. Mineral resource companies that have located a mineral resource in commercially exploitable quantities
and are preparing to extract that resource are in the development stage, while those engaged in the extraction of a known mineral
resource are in the production stage.
Mineral resource exploration
can consist of several stages. The earliest stage usually consists of the identification of a potential prospect through either
the discovery of a mineralized showing on that property or as the result of a property being in proximity to another property
on which exploitable resources have been identified, whether or not they are or have in the past been extracted.
After the identification
of a property as a potential prospect, the next stage would usually be the acquisition of a right to explore the area for mineral
resources. This can consist of the outright acquisition of the land or the acquisition of specific, but limited, rights to the
land (e.g., a license, lease or concession). After acquisition, exploration would probably begin with a surface examination by
a prospector or professional geologist with the aim of identifying areas of potential mineralization, followed by detailed geological
sampling and mapping of this showing with possible geophysical and geochemical grid surveys to establish whether a known trend
of mineralization continues underground, possibly trenching in these covered areas to allow sampling of the underlying rock. Exploration
also commonly includes systematic regularly spaced drilling in order to determine the extent and grade of the mineralized system
at depth and over a given area, as well as gaining underground access by ramping or shafting in order to obtain bulk samples that
would allow one to determine the ability to recover various commodities from the rock. If minerals are found, exploration might
culminate in a feasibility study to ascertain if the mining of the minerals would be economic. A feasibility study is a study
that reaches a conclusion with respect to the economics of bringing a mineral resource to the production stage.
Operations
The Company has conducted
several drilling programs on the Tombstone property, as described in greater detail below. The company is in the process of finalizing
a drill program for the Stardust Mine on the Yuma county property for 2016
2007 Drilling Program
In
early March 2007, we commenced our reverse circulation (RC) drill program. On or about March 21, 2007, we completed the first
reverse circulation drill hole (RT-1) to a depth of 500 feet and intercepted silver/gold mineralization when it hit its target
at the Tombstone property.
The
2007 Drill Program consisted of distinct drill sites that were designed to intercept extensions of the State of Maine mine, Merrimac
zone, Bonanza-Solstice mines and the Ace-in-the-Hole-Black Horse mine sub-parallel trends. These zones are north-easterly trending.
Core holes were HQ size and were drilled using triple tube core technology to assure that the most complete core recovery was
achieved. Drill hole spacing was approximately 100 meters between drill hole sites. The four mineralized zones were tested over
strike lengths ranging from 200 meters to 500 meters. All available historical data indicates that there were no historical mining
activities conducted below the water level in the areas covered by the 2007 Drill Program.
Following
the 2007 Drill Program, in January 2008, the Company received assay results for 115 samples taken from its Tombstone Project property
within T20S R22E Sections 16 and 17. It was determined that more detailed sampling would be required to further assess the Santa
Ana Mine workings.
2008 Drill
Program – Phase 1
On
or about April 1, 2008, the Company began to conduct geological mapping and sampling that, combined with historical data, provided
the basis for the 2008 core drilling program.
On
May 29, 2008, the Company engaged Layne Christensen Company (NASDAQ: LAYN) of Mission Woods, Kansas to conduct its 2008 drilling
program, which commenced on June 17, 2008 and continued through September 2008.
On
October 9, 2008, the Company announced the completion of its 2008 Drill Program which consisted of 2,593 feet of core drilling
at its silver project in Tombstone. Six diamond drill holes (DDH) were drilled, TEMC 101,102,103,104,105 and 106, to test the
extension of the mineralization zones of the Bonanza and Santa Ana structures, both of which possess historical data from within
the mining district. Both structures exhibit open ends at the south and north, as well down dip.
Holes
were drilled as HQ diameter and using triple-tube technology, yielding a recovery over 90% in most instances. RQD is estimated
at 45%, average.
Five
out of the six DD holes intersected the projected targets at different levels at the south, central and north of the structures,
while DDH TEMC 101 provided a great deal of information regarding the Bonanza structure which seems to be bent in an opposite
direction in depth. This particular piece of information has been physically confirmed in the Bonanza mine workings where the
structure becoming sub-vertical at 200 feet approximately, and then switches the dip to east, rather than dipping west as observed
at the upper sectors of the shafts.
The
2008 Drill Program revealed a new mineralized structural corridor between the State of Maine and Merrimac veins at the southern
portion of the property. The corridor extends for over one mile, and locally exhibits 80-100' width with some feldspar porphyry
dikes in between.
The
results of this Phase 1 drill program have resulted in identifying a mineral zone that the Company’s management believes
is a significant precious metals and base metals discovery. The Company intends to carry out an aggressive exploration and comprehensive
drilling program.
Following
the completion of the Phase 1 Drill Program in 2008, the Company received
assay results from rock chip samples on its Tombstone
properties. Outcrop samples taken from horizontal projections of mineralized structures away from historical mine workings indicate
continuity of silver, gold, lead, zinc, copper and manganese minerals along these structural corridors through the property package.
Samples from two structures were collected and taken to Copper States Analytical Lab in Prescott, Arizona for gold, silver, lead,
zinc, copper and manganese assays.
2008 Technical
Report
In May 2008, we filed
our initial Technical Report regarding the Tombstone property. SRK Consulting (“SRK”) of Tucson, Arizona completed
the Technical Report. SRK is an independent, international consulting group, employing leading specialists in environmental science
and mineral engineering. Its seamless integration of services, and global base, has made the company a significant international
practice in due diligence, feasibility studies and confidential internal reviews. SRK's global experience and reputation for excellence
is widely recognized among the major financial institutions and are repeatedly called upon to advise on and evaluate projects
for all types of market transactions. Formed in 1974, SRK employs more than 600 professionals internationally in 31 permanent
offices on 6 continents.
SRK made the following
recommendations:
An extended program of
vertical and inclined core drilling was recommended for the Tombstone Property. Drilling would be aimed at determining mineralization
grades and fissure vein characteristics such as horizontal and vertical extent, relationships to other veins, widths and depths
below the water table. It would also provide geotechnical information, samples for bulk density measurements, and samples for
preliminary metallurgical testing. It is difficult to say how many drill holes would be indicated. A program is suggested that
would include a minimum of five 1000-foot core holes along existing mineralized structural zones to define depth potential below
the water table. A program of twenty 500-ft drill holes (RC) can be used to explore along strike of mapped extensions to known
structures.
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|
1.
|
Conduct additional inclined and
vertical drilling for the following purposes:
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•
|
Evaluate
the width of structural targets such as dikes, fissures, and veins;
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•
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Confirm
silver mineralization across the targets;
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•
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Evaluate
potential mineralization below the water table in the target areas;
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•
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Provide
fresh samples for mineralogical and metallurgical testing; and,
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•
|
Conduct
in-
fill and/or extension drilling where necessary.
|
Any additional drilling should be
by the core drilling methods with HQ size core. The drilling should include some oriented drillcore, targeting the northeast-trending
fissures, to intercept the greatest possible thickness and depth of mineralized rock. Additional drilling should be directed toward
evaluating mineralization below the water table.
The recommended drilling will provide
additional structural and assay information to allow for possible delineation of mineralized zones, and will provide additional
geotechnical information. Closer spaced drillhole definition of higher grade and thicker mineralization should be the goal.
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2.
|
Conduct down-hole surveys
to measure drill-hole deviation, particularly for drill holes in excess of 100 m.
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3.
|
Devise a suitable numerical drill
log that will allow inclusion of detailed lithology, alteration and mineralization information,
in numeric form, in addition to assay data, to allow for digital drill logs.
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4.
|
Convert historical hard copy drill
logs to digital format logs.
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2009/2010 Drill Program - Phase II
In February 2009, the
Company extracted six additional samples from the Tombstone property which were sent to Copper State Analytical for assay for
gold, silver, manganese, copper, lead and zinc. Three of the samples were taken from the State of Maine Mine and three from Randolph
Mine, both located on the Tombstone property. The Company suspended the 2009 Drill Program due to general economic factors leading
to difficulty in obtaining the requisite financing to fund the program.
In April 2010, the Company
resumed the 2009 Drill Program, with the two targets drilled and both having intersected mineralized zones. The Company utilized
a portable x-ray diffraction (XRF) machine to get on-site reading of metal levels in the drill cuttings. The results helped the
exploration team manage the drilling program. Tombstone's property is underlain by Uncle Sam porphyry and units of the Bisbee
Group. Mineralized fissures strike consistently northeast, and many of the fissures exhibit consistent orientation for hundreds
of feet along strike. Many fissures have parallel orientations, forming fissure sets. The main mines in this area occur along
these northeast-striking fissures. The State of Maine mine occurs in fissures that cut both Bisbee sediments and Uncle Sam porphyry.
These structural mineralized fissures are the primary focus of the current exploration program.
As of June 30, 2010, 4,080
feet of drilling had been completed. Also during this period, additional geologist investigation was undertaken to further assess
the potential for porphyry copper exploration targets on the Tombstone property. The Company has been in contact with geophysical
contractors to develop a plan, budget and timeline for this phase of the project. Planning is ongoing and work may include geochemical
surveys as well.
The Company has not conducted
further drilling on the Tombstone Property since June 2010.
2010 Report on a Helicopter-Borne Z-Axis
Tipper Electromagnetic (ZTEM) and Aero Magnetic Geophysical Survey
From June 29, 2010 to
July 4, 2010, Geotech Ltd. carried out a helicopter-borne geophysical survey for the Company over the Tombstone project area.
Principal geophysical sensors included a Z-Axis Tipper electromagnetic (ZTEM) system, and a caesium magnetometer. Ancillary equipment
included a GPS navigation system and a radar altimeter. ZTEM was selected for its ability to achieve unparalleled resolution and
depth of investigation. The system is well suited to imaging buried porphyry deposits and is capable of gathering data over 6,000
feet (1.25 miles) below ground surface.
The airborne ZTEM survey
covered over 200 line miles and most of the Tombstone Mining District. A total of 373.5 line kilometers of geophysical data were
acquired during the survey. In a ZTEM survey, a single vertical-dipole air-core receiver coil is flown over the survey area in
a grid pattern, similar to regional airborne EM surveys. Two orthogonal, air-core horizontal axis coils are placed close to the
survey site to measure the horizontal EM reference fields. Data from the three coils are used to obtain the Z/X and Z/Y Tipper
(Vozoff, 1972) components at six frequencies in the 30 to 720 Hz band. The ZTEM was used to map geology using resistivity contrasts
and magnetometer data were also collected to help map geology using magnetic susceptibility contrasts.
The crew was based in
Tombstone, Arizona for the acquisition phase of the survey. Survey flying started on June 29, 2010 and was completed on July 4,
2010. Data quality control and quality assurance, and preliminary data processing were carried out on a daily basis during the
acquisition phase of the project. Final reporting, data presentation and archiving were completed from the Aurora office of Geotech
Ltd. in October, 2010. A quality control step consisted of re-examining all data in order to validate the preliminary data processing
and to allow for final adjustments to the data. Attitude corrections were re-evaluated, and re-applied, on component by component,
flight by flight, and frequency by frequency bases. Any remaining line to line system noise was removed by applying a mild additional
levelling correction.
As a result of the survey,
Geotech identified a number of conductive structures across the property that resemble known porphyry deposits and reported that
the magnetic results also contained worthwhile information in support of exploration targets of interest. Based on the geophysical
results obtained, Geotech recommended a more detailed interpretation of the available geophysical data, including Versatile Time-Domain
Electromagnetic survey (VTEM), in conjunction with the geology, prior to ground follow up and drill testing.
In November 2010, upon
review of the ZTEM data, at least four to five porphyry targets were identified on the Company's Tombstone property, and there
is still a very large land position to review. Of the targets that have been identified so far, two have precious metal (gold
and silver) occurrences as "halos" around the properties, which are significant characteristics of porphyry systems.
One identified structure has been compared by Geotech to the Mount Milligan deposits that were sold and have total measured and
indicated resources of 417.1 million tons grading 0.21% copper, 0.41 g/t gold for 1,934 million pounds copper and 5.5 million
ounces gold. Three of the identified targets have coincident magnetic and resistivity high which are very promising geophysical
signatures. One target is adjacent to a porphyry system that was drilled by a major international mining company. As of the date
of this Report, the Company is continuing to work with the geophysical data acquired from the ZTEM survey of the Tombstone Project.
2012 Technical Report
In January 2012, SRK completed
a Technical Report on the Tombstone property.
SRK made the following
conclusions in the Report:
The Tombstone property
represents a beginning exploration project with a limited amount of historical and current data. The data are insufficient to
take the property to resource classification by current industry standards at this time.
The historic silver deposits
in the central mining district are well documented through various reports in the literature and several master- and doctoral-level
theses. Although west of the largest historical ore deposits, the Tombstone West Area property nonetheless represents an opportunity
to target a resource by current methodologies of mapping, drilling, and geophysical surveys that may be successfully extracted
with present-day mining techniques. In light of silver commodity price increases in recent years, the recent emphasis on potential
porphyry copper and gold targets in the Tombstone area, and recent gold and copper commodity prices, the Tombstone Project warrants
a current evaluation.
SRK made the following
recommendations in the Report:
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☐
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Compile and analyze all available district-wide data and use that analysis to define and prioritize future targets.
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☐
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Convert historical and current drill logs to digital format logs, re-logging holes that have incomplete logs.
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☐
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Digitize all geochemical data.
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☐
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Use industry-standard software for mapping and record-keeping.
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☐
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Conduct surface geophysical surveys over targets identified by the ZTEM airborne survey.
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☐
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Compile all data in a GIS database, and analyze coincident anomalies to define drill targets.
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☐
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Define a drill program and budget.
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Summary of Exploration Activities
|
SUMMARY
OF EXPLORATION HISTORY AND FUTURE EXPLORATION PLANS FOR TOMBSTONE PROPERTY
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Year
|
Expenditures
/ Budget
|
Source
of Funding
|
Exploration
Activities
|
Persons
Conducting Exploration and Qualifications
|
|
2007
|
$1.4
million
|
Private
Placement Agreement with Eurogas, Inc. and other private investors
|
Geological
prospecting
R/C Drilling Program
Completed 5000 feet of R/C
drilling
|
Dennis
Dalton
Chief Geologist
Mr. Dalton received a B.S.
in Geology from the University of California Long Beach and a M.S. in Mining Engineering from McKay School of Mines at
the University of Nevada. Dating back to 1976, Mr. Dalton has widespread experience in mining geology. Mr. Dalton was
an environmental engineer prior.
|
|
2008
|
$1.2
million
|
Private
Placement with Haywood Securities, Cannacord Capital and other private investors
|
Geological
prospecting
Assaying and evaluation of
information
Core Drill Program
Completed 5000 feet of core
drilling
|
Francisco
P. Montecinos
Former VP of Exploration
Francisco has worked as an
exploration geologist for over 40 years in some 20 countries. Of these, the last 25 years has been spent throughout North
and Central America as project manager and regional exploration manager for a number of multi-national mining companies.
He has degrees from and has also completed studies at numerous universities including Harvard, University of Chile, California-Berkeley
and Colorado School of Mines.
|
|
2009
|
$500,000
|
Private
Placements with private investors
|
Mapping
of historical zones
Reviewing core samples from
prior years
Reviewing historical data
and drillings from prior years
|
Lane
A. Griffin
Mr. Griffin has more than
30 years experience as a geological consultant exploring for precious metals and uranium. He spent 4 years in the
Army as an officer in the Corps of Engineers. He is currently the President of Diversified Development Company,
the operator of the Lone Jack Gold Mine in Bellingham, Washington. He received a B.S. in Geology from Washington
State University as well as a B.A. in Zoology and D.D.S. from the University of Washington.
|
|
2010
|
$500,000
|
Private
Placement Agreement with Eurogas, Inc. and other private investors
|
Mapping
of historical zones
Reviewing core samples from
prior years
Reviewing historical data
and drillings from prior years
ZTem Geophysical Program conducted
and completed by Geotech Inc.
|
Steve
Radvak, P.E.
Mr. Radvak, P.E., P.Eng.,
has a B.A.Sc. in Mining and Mineral Processing Engineering from the University of British Columbia. He is a Director and
the Vice President of Exploration of the Company. He has been the President, Chief Executive Officer, and Director of
Compliance Management Inc., an environmental service company, since its inception in 1998. Mr. Radvak is also a managing
member of RM Fencing, LLC (“RM Fencing”), a company that offers professional installation of fences, gates
and other products throughout Arizona. Mr. Radvak has extensive experience in managing mineral exploration projects in
the United States, Canada, Africa and Europe and will be a valuable asset to the Company.
|
|
2011
|
$700,000
|
Private
Placement Agreements with private investors.
|
Began
exploration activities in April 2011 and continued such activities until December 2011
including:
Geophysical and gravity survey
Review of core samples from
prior years
Review of historical data
and drillings from prior years
Review and follow-up of ZTEM
Geophysical Program conducted and completed by Geotech Inc.
Execute core drilling program
Update SRK Technical Report
|
Various
Professional Engineers and Geologists from the State of Arizona
|
|
2012/13
|
$2,000,000
|
Private
Placement Agreements with private investors.
|
Continue
review of geophysical data and ZTEM Report.
Compile and analyze
all available district-wide data and use that analysis to define and prioritize future targets.
Convert historical and
current drill logs to digital format logs, re-logging holes that have incomplete logs.
Digitize all geochemical
data.
Use industry-standard software
for mapping and record-keeping.
Conduct surface geophysical
surveys over targets identified by the ZTEM airborne survey.
Compile all data in a GIS
database, and analyze coincident anomalies to define drill
Define a drill program and
budget.
|
Steve
Radvak, P.E. (see qualifications above)
Various Professional Engineers
and Geologists from the State of Arizona
|
|
2014/15
|
$2,000,000
(1)(3)
|
Private
Placement Agreement with Eurogas AG, Asher Enterprises, and other private investors (2)
|
Continue
review of geophysical data and ZTEM Report.
Compile and analyze all available
district-wide data and use that analysis to define and prioritize future targets.
Convert historical and current
drill logs to digital format logs, re-logging holes that have incomplete logs.
Digitize all geochemical data.
Use industry-standard software
for mapping and record-keeping.
Zonge International conducted
surface geophysical surveys over targets.
Compile all data in a GIS
database, and analyze coincident anomalies to define drill
Define a drill program and
budget.
|
Steve
Radvak, P.E. (see qualifications above)
Various Professional Engineers
and Geologists from the State of Arizona
|
|
2016
|
$1,425,000
(1)(3)
|
Private
Placement/
Private Investors
|
Staking
of Mining Claims at Stardust Mine
Geophysical Mapping &
Sampling
Additional Sampling and Trenching
of
properties
Drilling
Assays
|
Professional
Geologists sampling of Stardust
Various Professional Engineers
and Geologists from the State of Arizona
|
|
|
(1)
|
Our
budget for 2016-2017 consists of the following expenses for a total of $1,425,000:
|
|
|
•
|
Direct
Drilling Expense: $625,000;
|
|
|
•
|
Road
Building and Reclamation: $50,000;
|
|
|
•
|
Updated
Geological Report and property mapping: $75,000;
|
|
|
•
|
Additional
Sampling and Trenching: $60,000;
|
|
|
•
|
Management,
Office and Employee Expenses: $300,000;
|
|
|
•
|
Office,
Travel, Misc. Expenses: $100,000;
|
|
|
•
|
Professional
Service Expenses: Legal, Accounting, Audits: $100,000;
|
|
|
•
|
BLM
Cl
aims and Permit Expenses: $80,000
|
|
|
(2)
|
On
December 10, 2013, the Company announced a Strategic Corporate and Financing Investment
that includes the acquisition of a 26% interest in EuroGas AG of Zurich, Switzerland,
an international Natural Resources Holding Company with European assets in industrial
minerals, oil and gas interests as well as base metal and precious metal assets located
in the USA. Under the Strategic Corporate and Financing Investment in EuroGas AG, the
Company will also receive from EuroGas Inc., a US company, a committed financing in the
amount of $5 million USD for extensive drilling of the Tombstone property. On January
14, 2014, the Company announced the receipt of an entitlement of a 20% direct interest
in EuroGas Inc.’s potential award from its pending damage lawsuit against the Slovak
Republic. This is in addition to the 26% direct interest in EuroGas AG.
|
|
|
(3)
|
We
raised $472,120 as of December 31, 2015 to cover the operating expenses of the Company
and require an additional $952,880 for our proposed 2016 activities.
|
Revenues
To date we have not generated
any revenues from the Tombstone Property.
Principal Market
We do not currently have
any market, as we have not yet identified any mineral resource on the Tombstone Property that is of a commercially exploitable
quantity. If we succeed in identifying a mineral resource in commercially exploitable quantities, our principal markets should
consist of metal refineries and base metal traders and dealers.
Seasonality of our Business
Our mineral exploration
activities are not subject to extreme seasonal variation since the Tombstone Property is located in Arizona. Field work, however,
is best carried out in temperatures averaging 10 to 15 degrees Celsius. Our other operations, such as metallurgical review and
analysis of geochemical survey results, can be carried out all year round.
Local Resources
Tombstone, Arizona is
the nearest town to the Tombstone Project. Services at Tombstone are marginally adequate to support the requirements of a mining
exploration and development project, but other nearby towns ( Wilcox, Benson, Bisbee, and Sierra Vista) have services such as
drilling contractors, equipment rental and services, engineering services, and a labor force that are more able to support our
drilling program. Sierra Vista is about 18 miles from the project area. The nearest large city, Tucson—located 70 miles
northwest of Tombstone along Interstate 10—has a population of more than 526,116 (2013 U.S. Census Bureau estimate) and
has company, service, and contractor resources that may not be available locally. Other cities at a greater distance (Phoenix,
Arizona; Las Cruces and Albuquerque, New Mexico) also are able to provide services to support exploration and mining in the area.
Surface water is scarce
and groundwater supplies are somewhat limited. Walnut Gulch to the north is an ephemeral stream, as is the San Pedro River to
the west. In 1882 a pipeline was constructed to bring drinking water to Tombstone from the Huachuca Mountains, 27 miles to the
west. The town has municipal wells that supply the needs of the town population. Ranchers in outlying areas obtain domestic and
stock water from private wells. Water supplies for development and mining would come from groundwater sources in the area. Arizona
Department of Water Resources (ADWR) well records for the area indicate the water table is generally shallow, 200 to 400 feet
below ground surface.
Telephone and electric
power are available to the area, providing service to local ranchers and small service companies located outside of the town.
Telephone service is provided by Qwest. Internet and television services also are available locally. Electric power is supplied
through Sulphur Springs Valley Electric Cooperative, with 440V, three-phase lines nearby. One-ten and 220 power lines cross the
property. Postal services are available by post office boxes and ground delivery. UPS, DHL, and Federal Express also are available
locally.
Gas and diesel stations
are 2 miles from the property, and major fuel supply stations are 15 miles away in Sierra Vista. El Paso Gas has a gas line that
crosses the northeast corner of Sec. 7, T20S-R22E. Section 7 is held by Arizona State Exploration Permit 08-111864. The Southern
Pacific railroad line parallels the San Pedro River.
Patents and Licenses; Industrial, Commercial
and Financial Contracts; and New Manufacturing Processes
In conducting our business
operations, we are not dependent on any patented or licensed processes, technology, industrial, commercial or financial contract
or new manufacturing processes.
Competitive Conditions
We compete with other
mining companies, some of which have greater financial resources and technical facilities, for the acquisition of mineral interests,
as well as for the recruitment and retention of qualified employees.
The mineral property exploration
business, in general, is intensely competitive and there is not any assurance that even if commercial quantities of ore are discovered,
a ready market will exist for sale of the same. Numerous factors beyond our control may affect the marketability of any substances
discovered. These factors include market fluctuations; the proximity and capacity of natural resource markets and processing equipment;
and government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting
of mineral and environmental protection. The exact effect of these factors cannot be accurately predicted, but the combination
of these factors may make it difficult for us to receive an adequate return on investment.
We compete with many companies
possessing greater financial resources and technical facilities for the acquisition of mineral concessions, claims, leases and
other mineral interests as well as for the recruitment and retention of qualified employees. Low metal prices and an instable
market, even among competition, leads us to assume that we will not face any difficulties retaining geologists or other consultants
compared to our competition.
Competition in the usual
context, and as experienced by manufacturers of automobiles, durable goods, clothing, electronics, and the providers of most services
simply is not a factor in the minerals market. The demand for minerals always exceeds supply, and historically prices have consistently
risen. The only major factor for competition is the cost of production.
Although competition over
cost of production exists, there is little competition in the marketplace for the Company’s products. The market absorbs
all precious metals and most base metals produced at prevailing prices. Larger producers can hedge future production to enable
easier management of expected revenue in times of price fluctuation, whereas junior companies usually sell at market prices. In
today’s market larger producers have pulled back from hedging.
The primary competition
in the precious metals market is for talent in the workforce. As prices have risen many new companies have started operations
or are in the midst of exploration and proving of reserves. It is in this area that competition exists for experienced geologists,
project managers, and mining executives. In many areas there also is a shortage of mining labor.
The Company believes it
can overcome this competition due to its location in a historical mining area, year-round working conditions and nearness to major
population centers of Tucson and Phoenix, Arizona. Additionally, experienced mining professionals have assisted in developing
the corporation and have many contacts in the industry.
Environmental Regulations
Mineral property exploration
in Arizona is governed by the State of Arizona Office of Mine Inspector as well as Title 30 of the Code of Federal Regulations,
both seek to regulate and promote the development of safe and environmentally conscious mining operations. To date, our compliance
with these regulations has had no material effect on our operations, capital, earnings, or competitive position, and the cost
of such compliance has not been material. We are unable to assess or predict at this time what effect additional regulations or
legislation could have on our activities.
Governmental Regulations
Mining operations are
subject to a wide range of government regulations such as restrictions on production, price controls, tax increases, expropriation
of property, environmental protection, protection of agricultural territory or changes in conditions under which minerals may
be marketed. Mining operations may also be affected by claims of native peoples, any of which could have the effect of reducing
or preventing us from exploiting any of our properties. We will be required to comply with all regulations, rules and directives
of governmental authorities and agencies applicable to the exploration of minerals in the State of Arizona and in the United States
generally. Our mineral claims entitle our Company to continue exploration activities on our properties, subject to our compliance
with various United States federal and state laws governing land use, the protection of the environment and related matters.
To maintain state mineral
exploration permits in good standing, the permit holder must renew each permit annually (up to four times, for 5 years total)
for a fee of $500.00 per application for renewal. A maximum of 640 acres or one whole section is allowed per application. Additionally,
an initial rental fee of $2.00 per acre is due within thirty days upon notification of the intent to issue the permit. The $2.00
rental fee is for the first and second year of the permit. However, although the rent is prepaid for the second year, the permit
must still be renewed for that year. Rental fees for years three thru five are $10.00 per acre per year and due annually when the
permit is renewed. A bond (typically in the amount of $3,000 for a single permit or a blanket bond of $15,000 for five or more
permits held by an individual or company) is also due within thirty days upon notification of the intent to issue the permit.
Bond amounts may be increased during the life of the permit as determined by the Arizona State Land Department (“ASLD”)
upon review of the proposed exploration activities as detailed in the Exploration Plan of Operation that must be submitted and
approved by the ASLD prior to the startup of any exploration activities.
The state lands are covered
by Arizona State Mineral Exploration Permits, which are administered by the ASLD. Permits to conduct drilling in Arizona are administered
by the Arizona Department of Water Resources (ADWR). Permits to conduct exploration drilling on BLM lands require either a Notice
of Intent or a Plan of Operations, depending upon the amount of new surface disturbance that is planned. A Notice of Intent is
for planned surface activities that anticipate less than 5.0 acres of surface disturbance, and usually can be obtained within
a 30 to 60 day time period. A Plan of Operations will be required if there is greater than 5.0 acres of new surface disturbance
involved with the planned exploration work. A Plan of Operations can take several months to be approved, depending on the nature
of the intended work, the level of reclamation bonding required, the need for archeological surveys, and other factors as may
be determined by the BLM. No other permits are required for exploration drilling.
The Company has a Notice
of Intent – Mineral Exploration Drilling AZA33591 to conduct drilling on BLM claims in Secs. 9 and 10, T20S-R22E. The permitted
drilling was partially completed in 2007 with the drilling of holes TEM 1, TEM 2, and TEM 3. The Company also has received conditional
approval, upon completion of archaeological and cultural resource surveys, to drill in Sec. 16, T20SR22E under Arizona State Exploration
Permit 08-111868.
Quality Control Procedures (QA/QC)
Bagged and sealed sample
splits from the RC drill holes are transported to a secure storage shed at the office site by Company employees. The dry samples
are further reduced by crushing them to 3/4 inch-minus with a “chipmunk” jaw crusher and splitting the crushed sample
with a riffle splitter. The crusher and the splitter are then both cleaned with a brush and compressed air after preparation of
each sample. The sample splits for the laboratory are reduced to approximately 10 lbs or less prior to submission to the laboratory.
The prepared samples are bagged, labeled, and sealed and taken to the analytical laboratory, Mountains States R&D International,
Inc. (MSRDI), an Arizona certified assay laboratory, in Vail, Arizona for analyses by fire assay (gold and silver) and by atomic
absorption (AA) (all other analyses). The splits that are not shipped for assay are reduced to approximately 1 lb to be retained
for reference at the project site and they are stored in a secure steel shipping storage container.
Laboratory rejects are
discarded during the process of reducing sample splits to approximately 1 lb samples for retention. The retained sample splits
are derived from the original samples and kept in storage while another split is sent for analysis. The pulps are retained and
stored in a locked onsite office building.
Samples collected from
other locations in the project area (surface outcrops, mine dumps, trenches, and underground workings) are collected, bagged,
labeled, sealed, logged, and transported. The samples are prepared for storage or for shipment to the analytical laboratory in
the following manner: Dry samples are reduced by first crushing them to 3/4 inch-minus with a “chipmunk” jaw crusher
and then splitting the crushed sample using a riffle splitter. The crusher and splitter are then both cleaned with a brush and
compressed air after preparation of each sample. Wet samples are dried and then processed in the same manner. The prepared samples
are bagged, labeled, and sealed and taken to MSRDI for analysis. The splits that are not shipped for assay are retained for reference
at the project site in a secure storage container.
All sampling and sample
preparation of coarse crushed (3/4 inch-minus) are conducted by the Company’s employees. Sample pulp preparation is conducted
at MSRDI. All samples are shipped to MSRDI. All gold and silver analyses are obtained by fire assay. All other analyses (Cu, Pb,
and Zn) are obtained by atomic absorption (AA) with standard digestion.
Samples collected from
surface sites, trenches, underground workings, and the 2007 drilling program (prior to November 2007) did not include blanks,
duplicates, reference standards, or other industry standard QA/QC procedures.
Quality control procedures
began at the Tombstone Project approximately November 2007. Ten samples collected underground from the Santa Ana mine (NE¼
NE¼ Sec. 16, T20S-R22E) on October 30, 2007 were submitted to the laboratory (MSRDI) with blanks and reference standards.
The reference samples were obtained from Minerals Exploration and Environmental Chemistry, Reno, Nevada. Blanks were prepared
by crushing and bagging cinder blocks. Results received for these samples are used to assess the accuracy of the MSRDI analyses.
Check samples on the order of 5 to 10 percent of the number of samples were sent to ALS Chemex, Reno, Nevada and from there were
forwarded to their laboratory in Canada for analysis. The pulps that were returned from the primary laboratory were used as the
check-sample materials.
Samples are stored at
the Company office site in a secure storage container or in the Company laboratory, which is locked during nonworking hours.
As of the date of our
Technical Report, April 18, 2008, SRK concluded that the sampling procedures were acceptable and within industry standards with
the exception of initial sample preparation by the Company. Coarse crushed sample preparation onsite by the property owner is
not common industry standard practice unless logistics and distance from the labs are a major factor. It may be acceptable going
forward, if the newly implemented QA/QC procedures incorporate sufficient checks to demonstrate that the initial sample preparation
imparts no contamination or bias.
C. Organizational Structure
We have one wholly owned
subsidiary, Tombstone Exploration and Mining Corporation, a Nevada corporation (“TEMC”) that is qualified to do business
in the State of Arizona. All of our operations are conducted through TEMC.
D. Property, Plants and Equipment
Our principal executive office is located at
6529 E. Friess Drive, Scottsdale, AZ 85254. Additionally, we share this space with our wholly owned subsidiary, TEMC. We believe
that this existing space is adequate for our current needs. Should we require additional space, we believe that such space can
be secured on commercially reasonable terms.
The Company has the mineral
rights to approximately 640 acres of historical mining land in areas around Tombstone, Arizona. The Tombstone Project is located
on patented mining claims, unpatented mining claims and state lands administered by the ASLD.
Our Properties
|
SUMMARY
OF THE COMPANY’S MINING CLAIMS
|
|
Number / Type
of Claims
|
Ownership
/ Interest in Property
|
Duration
of Interest
|
Location
|
Acreage
|
Agreements
/ Royalties
|
Annual
Fees / Maintenance / Permits
|
|
8 Patented Lode Claims
|
Undivided
100 percent mineral interest in the claims as both the record mineral owner and the assessed
mineral owner
No surface rights
|
Claims are valid as long as
the Company continues to hold title.
|
Private Land
|
145.58 acres
|
1.5%
net smelter revenue royalty, payable upon production.
|
None
|
|
1 State of Arizona Mineral
Exploration Permits
|
Exclusive
right to explore for and develop minerals on the lands.
State of Arizona is the record
surface and mineral owner of land.
Company is the record permittee
of the state lands.
|
These permits are valid and
each must be renewed every three years.
|
Arizona state lands
|
495
acres
|
State mineral exploration permits,
if converted to mining leases, will have royalties assigned to them by the State of Arizona.
|
Must be
renewed each year, for up to 5 years, for a fee of $500.00 / permit. Additionally, an initial rental fee of $2.00 / acre is
due within 30 days upon notification of the intent to issue the permit, for the 1st and 2nd year. Rental fees for
the 3rd thru 5th years are $10.00/acre/year and due annually when the permit is renewed. A bond (typically $3,000 for a single
permit or a blanket bond of $15,000 for 5 or more permits) is due within 30 days upon notification of the intent to issue
the permit.
|
|
20 Unpatented Lode Claims
|
Fully
controlled by the Company.
Company has the right to enter
for exploration purposes.
No surface rights.
|
These
claims are valid and each must be renewed each year.
|
U.S. federal lands administered
by U.S. Bureau of Land Management (BLM).
|
400 acres
|
No royalty agreements on federal
mining claims.
|
Annual
maintenance fees for the claims, as follows: $196/ claim annual maintenance fee to the BLM, in lieu of annual assessment
work.
|
|
THE
COMPANY’S PATENTED MINING CLAIMS
|
|
CLAIM
NAME
|
MINERAL
SURVEY NO.
|
CLAIM
ACREAGE
|
|
Maine
|
M.S. #
579
|
18.33
|
|
Merrimac
|
M.S. #
175
|
20.61
|
|
Clipper
|
M.S. #
273
|
13.41
|
|
Triple
X
|
M.S. #
577
|
15.27
|
|
Brother
Jonathan
|
M.S. #
578
|
17.28
|
|
Lowell
|
M.S. #
797
|
20.59
|
|
May
|
M.S. #
317
|
19.43
|
|
Red Top
|
M.S. #
190
|
20.66
|
|
TOTAL
ACREAGE OF PATENTED MINING CLAIMS:
|
145.58
|
Industry of Interest
The precious metals and
base metals industry produces over $100B in metal production per year. The industry is essentially two sectors: the major producers
and the junior exploration and mining companies.
The major producers such
as Freeport McMoran, Rio Tinto, and BHP Billiton produce the majority of precious and base metals from large scale, geologically
scattered operations. Property expansion by the majors typically comes from joint venture, consolidation or acquisition with junior
exploration and mining companies. This occurs usually because a junior finds it difficult to initiate full scale operations due
to the significant front end development costs. The majors can absorb and develop the newly discovered fields with little impact
to overhead operations and can fund direct operations through forward sale of metals.
Juniors typically spend
the majority of their money locating new potential areas, proving up a portion of reserves through geological studies, analyses
and drilling, and then initialing small scale operations. During that period most successful juniors draw the attention of and
team up in some way with a major producer.
Cost of operations/production
is the driver in the industry. All product produced, particularly in the precious metals industry, is absorbed by the market.
Demand exceeds supply. The most profitable companies have the lowest per ounce/pound cost of production. The highest return to
investors, however, comes from junior companies, when successful, where per share prices are lower until a viable project is proven.
Risk, though, is often higher with junior companies, unless and until they locate and acquire viable projects and adequate funding.
The prime customers for
the precious metals sector of the industry are the refiners such as Englehart, Johnson Maffey, etc. These companies serve as the
distributor of product between the producers and the consumers. The majority of precious metals produced are utilized by the industrial
and electronics industry, the automotive industry, the jewelry industry and the investment community.
As metal prices have risen,
so too has the interest in new areas for exploration and eventual production. The past two decades have seen a significant expansion
of interest into Central and South America, as well as developing third world countries. Today’s price levels combined with
the political uncertainties of many foreign projects, and the inability for year-round operations in portions of Alaska and northern
Canada, have produced a resurgence of junior companies in the mainland United States. However, many juniors target only one or
two categories of metals. This model of operation limits their chance of success for production or buyout.
The keys to success for
today’s junior exploration and mining companies are four: 1. Property holdings and potential; 2. location; 3. metal diversity;
and 4. cost of development and operation.
The Tombstone Property
Most of the historic mines
in the Tombstone Mining District were polymetallic, with the principal ores produced being silver from bonanza grade deposits.
However, anomalous copper, lead, zinc, manganese, and gold have been identified, and some of these metals have been produced from
different mines in Cochise County (i.e., copper from Bisbee, lead from the Charleston Mining District, and silver and manganese
from the Tombstone Mining District).
The principal exploration
concept pursued by the Company since 2010 is for low-grade, large tonnage porphyry copper mineralization, largely buried beneath
basin fill. The concept is based upon the regional geology that includes the Tombstone caldera complex with related intrusives
and complex fault systems; porphyry copper mineralization intersected at depths greater than 3,000 ft by Asarco and other major
mining companies that drilled the area in the 1970s, 1980s, and 1990s; and geochemically anomalous values and zoning patterns
of Cu, Ag, Pb, and Zn ratios in rock chip samples from mine dumps in the western part of the district that broadly coincide with
the Lowell and Guilbert (1970) porphyry copper model.
Silver mineralization
also is an exploration target, in particular in the western area of the Company’s landholdings. The silver exploration concept
is seeking to tie together the northeast-striking mineralized fissures into silver deposits that are projected to connect historic
deposits and prospects along strike and to extend the depths of mineralization to perhaps hundreds of feet beneath the water table;
the exploration potential below the water table was minimally explored and/or mined in the past. The horizontal and vertical extensions
of the fissure veins are expected to be more definable by current exploration methods and would be amenable to underground or
open pit mining methods.
Gold exploration is a
concept based upon historic geochemical and geophysical exploration, shallow drilling, and reported gold grades in the Stardust
area from the 1900s intermittently through the 1990s.
Stratigraphy
Rocks in the Tombstone
area range from Precambrian to Quaternary in age. The oldest rock is fine- grained, grayish Precambrian Pinal schist, intruded
by Precambrian granitic and porphyritic rocks, and unconformably overlain by a thick sequence of Paleozoic sedimentary rocks that
change from mainly limestone to mainly sandstone and shale. The uppermost unit, the Naco limestone is an erosion surface unconformably
overlain by the Mesozoic Bisbee group, a series of conglomerate, sandstone, quartzite, shale, and limestone with two or three
lenses of soft, bluish-gray limestone.
The deposition of the
Mesozoic sedimentary rocks was followed by a period of deformation and igneous activity. Late Cretaceous time was marked by eruptive
and intrusive activity associated with the Tombstone volcanic center that probably formed within a continental-margin arc. The
Tombstone volcanic center erupted the Uncle Sam Tuff at 73.5 +/- 2.8 Ma, and an irregularly shaped caldera formed as a consequence
of collapse into the evacuated magma chamber. These event were accompanied by emplacement of the Schieffelin granodiorite, diorite
stocks and plugs, and andesite dikes. Silver mineralization is directly associated with the folding, faulting, igneous intrusions,
and fissuring of this period: north-south (dike) fissures, faults, anticlines and rolls, and—in the western area in particular—with
the north-south trending dikes and cross-cutting northeast-trending fissures. Most of the silver deposits are associated with
at least two structural features, often at their intersection. Rocks of the Tombstone volcanic center postdate Laramide thrust
faulting and are little deformed.
The Basin and Range province
was formed during the Cenozoic Era when east-west crustal extension resulted in vertical movement on generally north-south trending
faults. Extension gave rise to the emplacement of extensive granitic stocks and batholiths with associated volcanic activity.
Locally steep tilting and minor normal faulting occurred during Basin and Range block faulting.
Bromeyerite is the main
supergene silver mineral; the main hypogene silver-bearing minerals are hessite, tetrahedrite, and galena. Base metal mineralization,
often oxidized, occurs in fault and fracture zones in Laramide volcanics and the Uncle Sam tuff. The most common base minerals
are sphalerite, galena, and chalcopyrite. Chalcopyrite is widespread, most commonly as exsolution blebs in sphalerite. Manganese
mineralization is widespread throughout the Tombstone district and has occurred in various amounts with most of the oxidized silver-lead
mineralization. The manganiferous mineralization exists as replacements in limestone.
Development Strategy & Plan of Operations
for the Next Twelve Months
The Company’s development
strategy is to focus on the fundamental keys to success for a junior exploration and mining concern. These keys were identified
in the Industry discussion.
Property holdings and potential.
Plan: Continue
geological analyses including mapping, and identification of drill targets. Focus on these targets for drilling, sampling and
identifying potential reserves. Expand target areas as drilling progresses and studies expand knowledge of properties.
Plan: The Company’s
Tombstone property is located in a known metal and mineral area with easy access, historical production, mining friendly community
and ease of permitting puts the Company in a position for success. The Company will continue to identify areas on the properties
for mill site operation, improve off-road access and work closely with the community at large to offer employment opportunities.
The Company will also interface with the state level in Arizona to establish itself as a significant contributor to the state
economy.
Plan: A significant
number of metals and minerals have already been identified on the Tombstone property including silver and gold. The Company, with
the help of consulting organizations, will further explore the range of metals and minerals, and the ability to extract/produce
product for market. In the non precious metals areas, the Company will likely seek joint venture partners who will add to the
success and financial returns for our shareholders.
|
|
3.
|
Cost
of development and operation
|
Plan: The Company
may establish a small production operation, subject to permitting, financing and sufficient resources, to begin silver and gold
production with material from existing known sites. As drill targets identify key areas for drilling, the operation will be expanded
to two large scale mill sites. The Company firmly believes from the sampling and historical production in the area, that a low
cost / high profit operation will be developed.
ITEM 4A. Unresolved Staff Comments
Not required.
ITEM 5. Operating and Financial Review and Prospects
The following discussion
and analysis of our financial condition and results of operations for the fiscal years ended December 31, 2015 and 2014 should
be read in conjunction with our financial statements and related notes included in this Report. Our financial statements included
in this Report were prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”).
A. Operating Results
Our results of operations
have been, and may continue to be, affected by many factors of a global nature, including economic and market conditions, the
availability of capital, the level and volatility of prices and interest rates, currency values, commodities prices and other
market indices, technological changes, the availability of credit, inflation and legislative and regulatory developments. Factors
of a local nature, which include the political, social, financial and economic stability, the availability of capital, technology,
workers, engineers and management, geological factors and weather conditions, also affect our results of operations. See “Key
Information – Risk Factors”. As a result of the economic and competitive factors discussed above, our results of operations
may vary significantly from period to period.
Year Ended December 31, 2015 Compared to Year Ended December
31, 2014
For the years ended December
31, 2015 and 2014, we did not receive any revenue from various mining claims and properties.
During the year ended
December 31, 2015, we had a net loss of $716,943 and a loss per share of $0.00 per share compared to a net loss of $808,710 and
a loss per share of $0.00 per share for the year ended December 31, 2014. The net loss for the year ended December 31, 2015 was
attributed to $53,686 of general and administrative expenses, $135,000 of management and directors fees, $77,495 of professional
fees, $70,849 of consulting service fees, $10,987 of mineral property exploration costs, offset by a gain/loss on forgiveness
of debt of $0. Furthermore, the Company recorded a $0 gain/loss on conversion of debt, $202,193 loss on the fair value of the
derivative liabilities and accretion and interest expense of $166,733. The Company’s net loss decreased compared to the
prior year as the Company incurred less consulting fees, professional fees, and accretion expense offset by an increase in the
loss on fair value of derivative liabilities.
B. Liquidity and Capital Resources
Since our incorporation,
we have financed our operations almost exclusively through the sale of our common shares to investors and issuance of convertible
notes payable. As we are now focusing on mining exploration with no producing resource properties, we do not generate operating
income or cash flow from our business operations. Until a significant body of ore is found, our working capital requirements are
not significant, and we expect to continue to finance operations through the sale of equity in fiscal 2016. There is no guarantee
that we will be successful in arranging financing on acceptable terms.
To a significant extent,
our ability to raise capital is affected by trends and uncertainties beyond our control. These include the market prices for base
and precious metals and results from our exploration programs. Our ability to attain our business objectives may be significantly
impaired if prices for metals such as gold and uranium fall or if results from our intended exploration programs on our properties
are unsuccessful.
At
December 31, 2015, we had cash on hand of $164,808 compared with $3,363 as at December 31, 2014. Liabilities consisted of accounts
payable and accrued liabilities totaling $44,865 (2014 - $10,648), amounts due to related parties of $4,408 (2014 - $3,950), convertible
debt of $97,092 (2014 - $53,055) and fair value of derivative liability of $292,320 (2014 - $237,061). The overall increase in
liabilities is due to the increase in accounts payable and accrued liabilities due to operating expenditures during the year,
the issuance of new convertible debentures during the year, and an increase in the derivative liability recorded on the balance
of the convertible debentures as at December 31, 2015
,
offset by discounts recorded against the current convertible debentures issued during the year.
Application of Critical Accounting Policies
The preparation of financial
statements in conformity with applicable generally accepted accounting principles requires our management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
Our management routinely
makes judgments and estimates about the effects of matters that are inherently uncertain. As the number of variables and assumptions
affecting the probable future resolution of the uncertainties increase, these judgments become even more subjective and complex.
Our significant accounting policies are disclosed in the Notes to our financial statements included in this Report.
C. Research and Development, Patents
and Licenses, etc.
We do not currently, and
did not previously, have research and development policies in place. Over the past five fiscal years, we have not expended any
material amounts on research or development.
D. Trend Information
Our business is the exploration
for and development of mineral deposits. The market price of precious metals and other minerals is volatile and has fluctuated
widely, particularly in recent years. The prices of various metals are affected by numerous factors beyond our control, including
international economic and political trends, expectations of inflation, currency exchange fluctuations, interest rates and global
or regional consumption patterns, speculative activities and increased production due to improved mining and production methods.
The commodity price of precious metals has a direct impact on our revenue prospects and our ability to raise capital. Although
there is no assurance that this trend will continue, management is optimistic that the current price level will continue for the
foreseeable future.
E. Off-Balance Sheet Arrangements
We do not have any off-balance
sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes
in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resource that
is material to investors.
F. Tabular Disclosure of Contractual
Obligations
We do not have any contractual
obligations and commitments as of December 31, 2015 that will require significant cash outlays in the future.
G. Safe Harbor.
Forward Looking Statements
This annual report contains
forward-looking statements that reflect our current expectations and views of future events. These forward-looking statements
can be identified by words or phrases such as “shall,” “may,” “will,” “expect,”
“should,” “anticipate,” “aim,” “estimate,” “intend,” “plan,”
“believe,” “is/are likely to” or other similar expressions. These forward looking statements include,
among other things, statements relating to our goals and strategies, our competitive strengths, our expectations and targets for
our results of operations, our business prospects and our expansion strategy. Those statements appear in a number of places and
include statements regarding our intent, belief or current expectations with respect to:
|
|
•
|
our direction and future operation;
|
|
|
|
|
|
|
•
|
the implementation of our principal operating strategies, including our potential participation in acquisition, divestiture or joint venture transactions or other investment opportunities;
|
|
|
|
|
|
|
•
|
the implementation of our financing strategy and capital expenditure plans;
|
|
|
|
|
|
|
•
|
the exploration of mineral reserves and development of mining facilities;
|
|
|
|
|
|
|
•
|
trends in commodity prices and demand for commodities;
|
|
|
|
|
|
|
•
|
the future impact of competition and regulation;
|
|
|
|
|
|
|
•
|
the payment of dividends or interest on shareholders' equity;
|
|
|
|
|
|
|
•
|
industry trends, including the direction of prices and expected levels of supply and demand; and
|
|
|
|
|
|
|
•
|
other factors or trends affecting our financial condition or results of operations.
|
We have based these forward
looking statements largely on current expectations and projections about future events and financial trends that we believe may
affect our financial condition, results of operations, business strategy and financial needs. Although we believe that we have
a reasonable basis for each forward looking statement contained in this annual report, we caution shareholders that these statements
are based on our projections of the future that are subject to known and unknown risks and uncertainties and other factors that
may cause our actual results to differ materially from those in the forward looking statements.
The forward looking statements
included in the annual report are subject to risks, uncertainties and assumptions about our company. Our actual results of operations
may differ materially from the forward looking statements as a result of risk factors described under “Risk Factors”
and elsewhere in this annual report. These risks are not exhaustive. It is not possible for our management to predict all risk
factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors,
may cause our actual results to differ materially from those contained in any forward looking statement. An investor in our Company
should not rely upon forward looking statements as predictions of future events. Unless required by law, we undertake no obligation
to update or revise any forward looking statements to reflect new information or future events or otherwise.
ITEM 6. Directors, Senior Management and Employees
A. Directors and Senior Management
The following table sets forth the names, business
experience and function/areas of expertise of each of our directors and officers as of the date of this report:
|
Name,
Office Held,
Age
|
Area
of Experience and Functions in Our Company
|
|
Alan
M. Brown
CEO, CFO,
Director
& President
Age 49
|
As
President, Chief Executive Officer, Chief Financial Officer, and a Director, Mr. Brown is responsible for the development
of our strategic direction and the management and supervision of our overall business.
|
|
Daniel
A. Cistone
(1)
Director
Age 68
|
Independent
director of the Company,
|
|
Robert
M. Hughes
(2)
Director
Age 63
|
Independent
director of the Company.
|
|
|
(1)
|
Mr.
Cistone was appointed as a member of the Board of Directors on January 7, 2016.
|
|
|
(2)
|
Mr.
Hughes was appointed as a member of the Board of Directors on February 1, 2016.
|
Alan M. Brown
- Mr. Brown has invested many years in the development and success of the Company.
Mr.
Brown is to be accredited with steering the Company to being the Key man involved with the staking and starting the exploration
program on the Stardust Gold Projects as well as maintaining the key land position in the Tombstone Mining District
and is now focused on developing their huge resource potential
. His extensive background
in financial accounting is credited for the success of the Company. Mr. Brown is very experienced in corporate mergers & acquisitions,
real estate acquisitions and real estate development. Prior to working for the Company, Mr. Brown was the controller of a real
estate development company involving multi-million dollar projects. Mr. Brown spent many years with a chartered accounting firm
on Vancouver Island preparing year end reports and tax planning for a range of companies. Mr. Brown has a great understanding
of the Tombstone Mining District area and geography.
Mr. Cistone-
Mr. Cistone is
currently the President of Daniel A. Cistone Consulting LLC and sits as a Director on several corporate and local boards Including
Can-Do National Tape, Zenith Adhesive Components (Ireland), Upper Southampton Pension Advisory Board and the Catholic Foundation
of Greater Philadelphia Development Committee. While his background is in finance his expertise includes acquisitions and startups
both domestically and abroad as well as the management of those companies and their properties. Previously he spent 40 years with
M&C Specialties Co. a global fabrication company as CFO and COO and was the Liaison Officer when it was acquired by Illinois
Tool Works. Mr. Cistone is a founding director for Affinity Insurance Company, a Cayman based captive, and served on their Board
for 15 years. HMr. Cistone received his BSBA in Accounting from Villanova University, Villanova, PA.
Mr. Hughes
- Mr. Hughes is the founder
and Chief Executive Officer of Hughes Relocation Services Inc., a company engaged in local and interstate transportation of private
residences and office and industrial establishments as agents for United Van Lines and Mayflower Transit. From 2005-2013,
Mr. Hughes was a franchise owner of PODS, the second largest PODS franchise servicing New Jersey, Delaware and Eastern Pennsylvania.
He currently also serves as a Director on several corporate and local boards in his community, including the Tristate Household
Goods Tariff Bureau and the Central Bucks Chamber of Commerce. Mr. Hughes received a Bachelor Degree from Lasalle University
in 1974 and a Masters Degree from George Washington University in 1976.
Additional Information
There are no familial
relationships between our officers and directors.
The above listed officers
and directors were not selected as directors or members of senior management pursuant to any arrangement or understanding with
major shareholders, customers, suppliers or others.
B. Compensation
During the fiscal year
ended December 31, 2015, the aggregate remuneration paid to directors in their capacity as directors of our Company was $Nil.
Management fees totaling $135,000 was paid to directors and officers.
Executive Compensation
The following table provides
a summary of compensation paid by us during the fiscal years ended December 31, 2015 and 2014 to our executive officers who received
a salary:
|
SUMMARY COMPENSATION TABLE
|
|
Name and Principal
Position
|
Year
|
Annual Compensation
|
Long Term Compensation
|
All other
Compensation
|
|
Salary
|
Bonus
|
Other
Annual
Compen-sation
|
Securities
Under
Options/
SARs
Granted
|
Shares or units
subject to
resale
restrictions
|
|
Alan
M. Brown
(1)
President, CEO, CFO and Director
|
2015
|
$135,000
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
|
2014
|
$120,000
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
|
Steve
Radvak
(2)
Vice President of Exploration
and Director
|
2015
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
|
2014
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
|
Barry
N. Klein
(3)
Director
|
2015
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
|
2014
|
NIL
|
NIL
|
$12,500
|
$15,000
|
NIL
|
NIL
|
|
Anthony
C. Schnur
(4)
Director
|
2015
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
|
2014
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
|
Daniel
A. Cistone
Director
|
2015
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
|
2014
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
|
Robert
M. Hughe
s
Director
|
2015
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
|
2014
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
NIL
|
(1)
On November 15, 2013, the Company
entered into an Employment Agreement (the “Agreement”) with Alan Brown, which amends and supersedes the January 1,
2009 Employment Agreement between the Company and Mr. Brown. Pursuant to the Agreement, Mr. Brown shall continue to be employed
as President, Chief Executive Officer and Chief Financial Officer of the Company and to continue to perform any and all duties
relevant to such positions. The initial term of the Agreement is for five (5) years (the “Term”) which shall continue
thereafter until terminated. In exchange for his services, Mr. Brown shall receive a base salary of $10,000 per month during the
first two (2) years of the Term and $15,000 per month for the remaining three (3) years of the Term and each additional year after
the Term until the Agreement is terminated. Under the Agreement, Mr. Brown may also receive additional compensation of five million
(5,000,000) shares of the Company’s common stock per year during the Term and thereafter until the Agreement is terminated.
A true and correct copy of the Agreement was filed as Exhibit 4.04 to the Company’s Form 20-F for Fiscal year ended December
31, 2013 as filed with the commission on May 16, 2014, and is incorporated herein by reference.
(2)
Mr. Radvak resigned from his positions as Vice
President of Exploration and a member of the board of directors on August 13, 2015.
(3)
Mr. Klein resigned from his position as a member
of the Board of Directors on June 1, 2015.
(4)
Mr. Schnur was appointed as a member of the Board
of Directors on August 1, 2015. Mr. Schnur is no longer a director of the Company as the board elected to forego the renewal of
his agreement to provide services as of August 2016.
(5)
Mr. Cistone was appointed as a member of the Board
of Directors on January 7, 2016.
(6)
Mr. Hughes was appointed as a member of the Board
of Directors on February 1, 2016.
C. Board Practices
All
of the directors of the Company are elected annually by the shareholders and hold office until the next annual meeting of shareholders
or until their successors are duly elected and qualified, unless they sooner resign or cease to be directors in accordance with
our Certificate of Incorporation and Bylaws. Our incumbent directors continue their service, in their current capacity, until
they either resign or are removed and until their successors are elected. The Company's last annual regular general meeting was
held on September 6, 2001, at which time Alan Brown was elected as a Director. Mr. Brown has continued in his office as Director
since his election in 2001. Director vacancies may be filled by a majority of the remaining directors or by a sole remaining director.
On January 28, 2010, Steven Radvak was elected to serve as a member of the Board of Directors by the sole remaining director,
Alan Brown. Mr. Radvak resigned from all positions on August 13, 2015. On May 18, 2011, Laird Cagan was elected as a Director
to the Company. On December 31, 2012, Laird Cagan resigned as a Director of the Company. On August 22, 2014, Mr. Barry Klein was
appointed to serve as a member of the Board of Director and served until June 1, 2015 when he resigned. On August 1, 2015 Mr.
Schnur was appointed as a member of the Board of Directors. On January 7, 2016, Mr. Cistone was appointed as a member of the Board
of Directors February 1, 2016 on January 7, 2016, Mr. Hughes was appointed as a member of the Board of Directors. On August 1,
2016, the Company elected not to renew Mr. Schnur’s agreement to provide services and he was terminated as a director of
the company.
Members of the Board of
Directors are elected by the holders of the Company's shares to represent the interests of all shareholders. The Board of Directors
meets periodically to review significant developments affecting the Company and to act on matters requiring Board approval. Although
the Board of Directors delegates many matters to others, it reserves certain powers and functions to itself. The only standing
committee of the Board of Directors of the Company is the Audit Committee. The Audit Committee of the Company's Board of Directors
currently consists of Alan Brown. This committee is directed to review the scope, cost and results of the independent audit of
the Company's books and records, the results of the annual audit with management and the adequacy of the Company's accounting,
financial and operating controls; to recommend annually to the Board of Directors the selection of the independent auditors; to
consider proposals made by the Company's independent auditors for consulting work; and to report to the Board of Directors, when
so requested, on any accounting or financial matters. The Company does not have an Executive Committee.
The Company's executive
officers are appointed by and serve at the pleasure of the Board of Directors.
D. Employees
As of December 31, 2015,
we had 1 employee, Alan Brown. The Company engages various consultants as independent contractors to assist the Company with its
drilling programs. The Company has no relationship with any labor/trade unions.
E. Share Ownership
There
were 289,170,251 common shares issued and outstanding as of September 8, 2016. Of the shares issued and outstanding, our
directors and officers owned the following common shares:
|
Name and Position
|
Number
of Common Shares
Beneficially Owned as of
September 8, 2016
(1)
|
Percentage
|
|
Alan
M. Brown
President, CEO, CFO and Director
|
9,679,885
(2)
|
3.35%
|
|
Daniel
A. Cistone
Director
|
5,000,000
|
1.73%
|
|
Robert
Hughes
Director
|
5,000,000
|
1.73%
|
|
Aggregate
owned by Officers and Directors
|
19,679,885
|
6.81
|
|
Former
Officers/Directors
Steve Radvak
Former Vice President of Exploration
and Director
|
0
|
0.00%
|
|
Barry
Klein
Former Director
|
0
|
0.00%
|
|
Anthony
C. Schnur
Former Director
|
0
|
0.00%
|
(1)
The voting
rights attached to the common shares owned by our officers and directors do not differ from those voting rights attached to shares
owned by people who are not officers or directors of our Company.
(2)
The beneficial ownership of
Alan Brown includes shares directly held by Mr. Brown and 22,051 common shares owned by his wife.
ITEM 7. Major Shareholders and Related Party Transactions
A. Major Shareholders
As of September 8, 2016, there are no beneficial
owners of more than five (5%) of our common shares.
B. Related Party Transactions
As at December 31, 2015,
the Company owed $4,408 (2014 - $3,950) to the President of the Company for management fees and financing of day-to-day operations.
The amounts owing are unsecured, non-interest bearing, and due on demand. During the year ended December 31, 2015, the Company
incurred $135,000 (2014 - $120,000) to the President of the Company for management fees.
C. Interests of Experts and Counsel
Not required.
ITEM 8. FINANCIAL INFORMATION
A. Financial Statements And Other Financial
Information
The Company's financial
statements, included as an exhibit to this Report, are incorporated into this Report by reference.
Legal Proceedings
On
August 21, 2014, the Company filed a lawsuit in the United States District Court for the District of Utah against EuroGas Utah,
EuroGas, A.G., a Swiss stock corporation (“EuroGas Swiss”), ZB Capital, A,G., a Swiss corporation and Riata Minerals,
Inc.,
et al.
(collectively, the “Defendants”) for breaches of various agreements, including the Stock-for-Stock
Exchange Agreement dated December 10, 2013 and Defendants financing commitment to the Company. The Company engaged in settlement
negotiations to resolve the matter. In November 2014, the lawsuit against EuroGas Swiss was dismissed as a result of the parties’
agreement to certain terms for EuroGas, Inc. to continue with its financing commitment. Subsequently, in March 2015, the Company
refiled the lawsuit as a result of non-performance by the defendants. The lawsuit is currently pending.
Other than the foregoing,
we know of no material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material
proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered
or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
Dividends
The Company has not and
does not currently intend to pay any dividends on any of its shares. The Company intends to follow a policy of retained earnings
to finance the growth of the business. Any future determination to pay dividends will be at the discretion of the Board of Directors
of the basis of earnings, financial requirements and other relevant factors.
B. Significant Changes
Except as otherwise disclosed
in this annual report or in the reports filed on Form 6-K filed to date, no significant changes have occurred since December 31,
2015.
ITEM 9. The Offer and Listing
The following table lists
the high and low closing sale prices for the Company's common stock for the periods indicated as reported by the Over the Counter
Markets:
|
YEAR/PERIOD
|
HIGH
|
LOW
|
|
Q1 2012
|
.055
|
.027
|
|
Q2 2012
|
.05
|
.023
|
|
Q3 2012
|
.04
|
.023
|
|
Q4 2012
|
.03
|
.017
|
|
Q1 2013
|
.04
|
.011
|
|
Q2 2013
|
.09
|
.01
|
|
Q3 2013
|
.05
|
.01
|
|
Q4 2013
|
.05
|
.021
|
|
Q1 2014
|
.07
|
.027
|
|
Q2 2014
|
.06
|
.027
|
|
Q3 2014
|
.056
|
.018
|
|
Q4 2014
|
.035
|
.014
|
|
Q1 2015
|
.0193
|
.0086
|
|
Q2 2015
|
.035
|
.002
|
|
Q3 2015
|
.024
|
.0102
|
|
Q4 2015
|
.020
|
.0055
|
The shares of the Company commenced trading
on the Over the Counter Bulletin Board on July 14, 1999.
Markets
The Company's common shares are listed for
trading on the Over the Counter Markets (PK).
ITEM 10. Additional Information
A. Share Capital
Not Applicable.
B. Articles of Incorporation &
By-Laws
Directors
A director who is, in
any way, directly or indirectly interested in a proposed contract or transaction, shall disclose the nature and extent of his
interest at a meeting of the directors in accordance with the provisions of the Canada Business Corporations Act (“CBCA”).
A director shall not vote in respect of any contract or transaction with our Company in which he is interested, and any such proposed
contract or transaction shall be referred to the Board of Directors or shareholders for approval even if such contract or transaction
is one that the ordinary course of the Company's business would not require approval by the Board of Directors or shareholders.
|
(1)
|
Subject to the provisions
of any unanimous shareholder agreement, the remuneration of the directors may from time to time be determined by the directors
themselves, and such remuneration may be in addition to any reimbursement for travel and other expenses.
|
|
|
|
|
(2)
|
The directors may, at their discretion
and subject to the provisions of any unanimous shareholder agreement or By-Laws or the CBCA, authorize the Company to borrow
any sum of money or incur indebtedness for the purpose of the Company and may raise or secure the repayment of such sum of
money in such manner and upon such terms and conditions as the directors think fit.
|
|
|
|
|
(3)
|
There are no provisions with respect to
the retirement of a director or the non-retirement of a director under an age requirement.
|
|
|
|
|
(4)
|
A director is not required to hold a share
in the capital of our Company as qualification for his office.
|
With respect to the above
noted matters, there are generally no significant differences between Canadian and U.S. law.
Objects and Purposes of the Company
Our Certificate of Incorporation places no
restrictions upon our objects and purposes.
Rights, Preference and Restrictions
Common Shares
All of the authorized
common shares of the Company, once issued, rank equally as to dividends, voting powers, and participation in assets. Holders of
common shares are entitled to one vote for each common share held of record on all matters to be acted upon by the shareholders.
Holders of common shares are entitled to receive such dividends as may be declared from time to time by the board of directors,
in its discretion, out of funds legally available therefore. The Company's By-Laws do not provide for cumulative voting.
Upon liquidation, dissolution
or winding up of the Company, holders of common shares are entitled to receive pro rata our assets, if any, remaining after payments
of all debts and liabilities. No common shares have been issued subject to call or assessment. There are no pre-emptive or conversion
rights and no provisions for redemption or purchase for cancellation, surrender, or sinking or purchase funds. There are no restrictions
on the repurchase or redemption of common shares by our Company while there is any arrearage in the payment of dividends or sinking
fund installments.
With respect to the rights,
preferences and restrictions attaching to the Company's common shares, there are generally no significant differences between
Canadian and United States law as the board of directors, or the applicable corporate statute, will determine the rights, preferences
and restrictions attaching to each class of a Company's shares.
Changes to Common Shares
Provisions as to the modification,
amendment or variation of the rights attaching to the common shares are contained in the CBCA. The CBCA requires approval by a
special resolution (i.e. approved by at least two-thirds of the votes cast at a meeting of the shareholders of our Company or
consented to in writing by each of our shareholders) of our Company's shareholders in order to effect any of the following changes:
|
(1)
|
change
any maximum number of shares that the Company is authorized to issue;
|
|
|
|
|
(2)
|
create
new classes of shares;
|
|
|
|
|
(3)
|
reduce
or increase its stated capital, if its stated capital is set out in the articles;
|
|
|
|
|
(4)
|
change
the designation of all or any of its shares and add, change or remove any rights, privileges, restrictions and conditions, including
rights to accrued dividends, in respect of all or any of its shares, whether issued or unissued;
|
|
|
|
|
(5)
|
change
the shares of any class or series, whether issued or unissued, into a different number of shares of the same class or series or
into the same or a different number of shares of other classes or series;
|
|
|
|
|
(6)
|
divide
a class of shares, whether issued or unissued, into series and fix the number of shares in each series and the rights, privileges,
restrictions and conditions thereof;
|
|
|
|
|
(7)
|
authorize
the directors to divide any class of unissued shares into series and fix the number of shares in each series and the rights, privileges,
restrictions and conditions thereof;
|
|
|
|
|
(8)
|
authorize
the directors to change the rights, privileges, restrictions and conditions attached to unissued shares of any series;
|
|
|
|
|
(9)
|
revoke, diminish or enlarge any
authority conferred under paragraphs (7) and (8); and,
|
|
|
|
|
(10)
|
add, change or remove restrictions
on the issue, transfer or ownership of shares.
|
Generally, there are no
significant differences between Canadian and United States law with respect to changing the rights of shareholders as most state
corporation statutes require shareholder approval (usually a majority) for any such changes that affect the rights of shareholders.
Annual General Meetings and Extraordinary
General Meetings
Annual General Meetings
(an “AGM”) must be held once every fiscal year, within 15 months of the previous AGM. If the Company fails to hold
an AGM, the Supreme Court of British Columbia may, on the application of a director or shareholder of the Company, call or direct
an AGM. Under the CBCA, we must give our shareholders written notice of an AGM not less than 21 days before the AGM is to be held.
Our directors may, whenever
they think fit, convene an Extraordinary General Meeting (an “EGM”).
An AGM or EGM may also
be requisitioned by one or more shareholders of our Company so long as such shareholders own not less than 5% of the issued and
outstanding shares at the date such shareholders requisition an EGM. After receiving such requisition, our directors must within
21 days call the meeting.
All shareholders entitled
to attend and vote at an AGM or an EGM will be admitted to the meeting.
Most state corporation
statutes require a public company to hold an annual meeting for the election of directors and for the consideration of other appropriate
matters. The state statutes also include general provisions relating to shareholder voting and meetings. Apart from the timing
of when an AGM must be held and the percentage of shareholders required to call a AGM or EGM, there are generally no material
differences between Canadian and United States law respecting AGMs and EGMs.
Rights to Own Securities
There are no limitations
on the rights of non-resident or foreign shareholders to hold or exercise voting rights.
Except as provided in
the Investment Canada Act, there are no limitations under the applicable laws of Canada or by the Company's charter or other constituent
documents of the Company on the right of foreigners to hold or vote common shares or other securities of the Company.
The Investment Canada
Act will prohibit implementation, or if necessary, require divestiture of an investment deemed “reviewable” under
the Investment Canada Act by an investor that is not a “Canadian” as defined in the Investment Canada Act (a “non-Canadian”),
unless after review the Minister responsible for the Investment Canada Act (“the Minister”) is satisfied that the
“reviewable” investment is likely to be of net benefit to Canada. An investment in our common shares by a non-Canadian
would be reviewable under the Investment Canada Act if it was an investment to acquire control of our Company and the value of
our assets was $5 million or more. A non-Canadian would be deemed to acquire control of our Company for the purposes of the Investment
Canada Act if the non-Canadian acquired a majority of our outstanding common shares (or less than a majority but controlled our
Company in fact through the ownership of one-third or more of our outstanding common shares) unless it could be established that,
on the acquisition, our Company was not controlled in fact by the acquirer through the ownership of such common shares. Certain
transactions in relation to our common shares would be exempt from review under the Investment Canada Act, including, among others,
the following:
|
(1)
|
acquisition of common shares by a person in the ordinary course
of that person's business as a trader or dealer in securities;
|
|
|
|
|
(2)
|
acquisition of control of our Company
in connection with the realization of security granted for a loan or other financial assistance and not for any purpose
related to the provisions of the Investment Canada Act; and
|
|
|
|
|
(3)
|
acquisition of control of our Company by reason of an amalgamation,
merger, consolidation or corporate reorganization following which the ultimate direct or indirect control of our Company,
through the ownership of voting interests, remains unchanged.
|
The Investment Canada
Act was amended with the World Trade Organization Agreement to provide for special review thresholds for “WTO Investors”
of countries belonging to the World Trade Organization, among others, nationals and permanent residents (including “WTO
Investor controlled entities” as defined in the Investment Canada Act). Under the Investment Canada Act, as amended, an
investment in our common shares by WTO Investors would be reviewable only if it was an investment to acquire control of our Company
and the value of our assets was equal to or greater than a specified amount (the “Review Threshold”), which published
by the Minister after its determination for any particular year. The Review Threshold for Private sector WTO investments as of
2015 is $600 million in enterprise value. Beginning April 24, 2017, the review threshold will be $800 million in enterprise value.
Change in Control
There are no provisions
in the Company's By-Laws that would have the effect of delaying, deferring or preventing a change in control of our Company, and
that would operate only with respect to a merger, acquisition or corporate restructuring involving the Company.
The CBCA does not contain
any provisions that would have the effect of delaying, deferring or preventing a change of control of the Company. Generally,
there are no significant differences between Canadian and United States law in this regard, as many state corporation statutes
also do not contain such provisions and only empower a company's board of directors to adopt such provisions.
Ownership Threshold
There are no provisions
in our Certificate of Incorporation or Bylaws or in the CBCA governing the threshold above which shareholder ownership must be
disclosed. The Securities Act (British Columbia) requires that the Company disclose, in its annual general meeting proxy statement,
holders who beneficially own more than 10% of the Company's issued and outstanding shares. Most state corporation statutes do
not contain provisions governing the threshold above which shareholder ownership must be disclosed. United States federal securities
laws require a company to disclose, in its Annual Report on Form 20-F, holders who own more than 5% of a company's issued and
outstanding shares.
Changes in the Capital of our Company
There are no conditions
imposed by our By-Laws which are more stringent than those required by the CBCA.
C. Material Contracts
With the exception of
the contracts listed below, or those described elsewhere in this Form 20-F or in the Company’s Form 6-K filings, we have
not entered into any material contracts during the last twenty-four months other than those in the ordinary course of business.
On November 15, 2013,
the Company entered into an Employment Agreement (the “Agreement”) with Alan Brown, which amends and supersedes the
January 1, 2009 Employment Agreement between the Company and Mr. Brown. Pursuant to the Agreement, Mr. Brown shall continue to
be employed as President, Chief Executive Officer and Chief Financial Officer of the Company and to continue to perform any and
all duties relevant to such positions. The initial term of the Agreement is for five (5) years (the “Term”) which
shall continue thereafter until terminated. In exchange for his services, Mr. Brown shall receive a base salary of $10,000 per
month during the first two (2) years of the Term and $15,000 per month for the remaining three (3) years of the Term and each additional
year after the Term until the Agreement is terminated. Under the Agreement, Mr. Brown may also receive additional compensation
of five million (5,000,000) shares of the Company’s common stock per year during the Term and thereafter until the Agreement
is terminated. A true and correct copy of the Agreement was filed as Exhibit 4.04 to the Company’s Form 20-F for Fiscal
year ended December 31, 2013 as filed with the commission on May 16, 2014, and is incorporated herein by reference.
On December 10, 2013,
the Company entered into a Stock-for-Stock Exchange Agreement (the “Agreement”) with EuroGas, Inc., a Utah corporation
(“EuroGas Utah”), and EuroGas AG, a Swiss stock corporation (“EuroGas Swiss”). Pursuant to the Agreement,
EuroGas Utah shall exchange two hundred forty million (240,000,000) shares of EuroGas Swiss’ common stock representing approximately
twenty six percent (26%) of EuroGas Swiss’ total issued and outstanding shares of common stock, in exchange for three hundred
forty eight million (348,000,000) shares of Tombstone’s common stock. Additionally, EuroGas Utah shall finance Tombstone’s
exploration efforts in the USA in the amount of five million dollars ($5,000,000) over a nine (9) month period. The Agreement
was filed as Exhibit 4.1 to our Current Report on Form 6-K with the SEC on December 16, 2013 and is incorporated herein by reference.
On January 13, 2014, the
Company entered into a First Amendment to the Stock-for-Stock Exchange Agreement (the “Amendment”) with EuroGas Utah
and EuroGas Swiss, which is retroactively made effective as of December 10, 2013, the date of the original Agreement. Pursuant
to the Amendment, EuroGas Utah shall exchange two hundred forty million (240,000,000) shares of EuroGas Swiss’ common stock
representing approximately twenty six percent (26%) of EuroGas Swiss’ total issued and outstanding shares of common stock,
in exchange for three hundred forty eight million (348,000,000) shares of Tombstone’s common stock. Additionally,
EuroGas Utah shall finance Tombstone’s exploration efforts in the USA in the amount of five million dollars ($5,000,000)
over a nine (9) month period. Further, EuroGas Utah shall grant to the Company twenty percent (20%) of any award granted to EuroGas
Utah or EuroGas Swiss relating to that certain lawsuit filed by EuroGas Swiss and EuroGas Utah against the Slovak Republic. A
true and correct copy of the First Amendment was filed with the SEC as Exhibit 4.06 to our Annual Report on May 16, 2014 and is
incorporated herein by reference.
On May 13, 2014, the Company
entered into a Second Amendment to the Stock-for-Stock Exchange Agreement (the “Second Amendment”) with EuroGas, Inc.
and EuroGas AG, which is retroactively made effective as of December 10, 2013, the date of the original Agreement. Pursuant
to the Second Amendment, the Company shall receive $100,000 from EuroGas, Inc. in exchange for the issuance of 69,000,000 common
shares of the Company. The 69,000,000 common shares of the Company were issued on May 13, 2014. Additionally, pursuant
to the Second Amendment, on or before June 13, 2014, the Company shall receive $400,000 and 240,000,000 common shares of EuroGas
AG from EuroGas, Inc. in exchange for 279,000,000 common shares of the Company. EuroGas, Inc. shall make further payments
to the Company of $500,000 on or before August 30, 2014, and a final payment of $4,000,000 on or before October 31, 2014. Further,
EuroGas, Inc. shall grant to the Company twenty percent (20%) of any award granted to EuroGas, Inc. or EuroGas AG relating to
that certain lawsuit filed by EuroGas AG and EuroGas, Inc. against the Slovak Republic. A true and correct copy of the Second
Amendment was filed with the SEC as Exhibit 4.01 to our Current Report on Form 6-K on May 30, 2014 and is incorporated herein
by reference.
On August 21, 2014, the
Company filed a lawsuit against EuroGas, Inc., EuroGas AG and ZB Capital, AG as well as an injunction against these parties, their
agents, or anyone associated from redeeming the share certificate and trading, selling, transferring or pledging the common shares
issued. As a result of the lawsuit, on November 19, 2014, the parties entered into an Extension Agreement whereby the Company
would dismiss the lawsuit and release the share certificate to ZB Capital AG within ten days of the Effective Date and EuroGas,
Inc. and EuroGas AG would remit a single payment of $400,000 to the Company on or before January 2, 2015. The parties also agreed
to revise the payment date for the remaining $4,500,000 financing to a date on or before 120 for the Effective Date of the agreement
and that all other terms and conditions of the original agreement and the amendments would remain the same. On signing the agreement
the Company recorded a receivable for the $400,000 amount owing and a corresponding gain on settlement of debt. As the Company
has yet to receive the $400,000 pursuant to the Extension Agreement, the Company recorded an allowance against the receivable
as well as a corresponding loss on settlement of debt as at December 31, 2014. Subsequent to year end the Company refiled its
lawsuit against EuroGas, Inc., EuroGas AG, and ZB Capital AG, which is currently pending.
D. Exchange Controls
Except as discussed in
Item E below, the Company is not aware of any Canadian federal or provincial laws, decrees, or regulations that restrict the export
or import of capital, including foreign exchange controls, or that affect the remittance of dividends, interest or other payments
to non-Canadian holders of common shares. The Company is not aware of any limitations on the right of non-Canadian owners to hold
or vote common shares imposed by Canadian federal or provincial law or by the Company.
The
Investment Canada
Act
(the “Act”) governs acquisitions of Canadian business by a non-Canadian person or entity. The Act provides,
among other things, for a review of an investment in the event of acquisition of control in certain Canadian businesses in the
following circumstances:
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(1)
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if the investor is a non-Canadian and is not a resident of a
World Trade Organization (“WTO”) country, any direct acquisition having an asset value exceeding $5,000,000 and
any indirect acquisition having an asset value exceeding $50,000,000;
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(2)
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if the investor is a non-Canadian and is a resident of a WTO
member, any direct acquisition having an asset value exceeding $344,000,000, unless the business is involved in uranium production,
financial services, transportation services or a cultural business.
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An indirect acquisition
of control by an investor who is a resident of a WTO country is not reviewable unless the value of the assets of the business
located in Canada represents more than 50% of the asset value of the transaction, or the business is involved in uranium production,
financial services, transportation services or a cultural business. The United States has been a member of the WTO since January
1, 1995.
The Act provides that
a non-Canadian investor can hold up to 1/3 of the issued and outstanding capital of a Canadian corporation without being deemed
a “control person”, and that a non-Canadian investor holding greater than 1/3 but less than 2 of the issued and outstanding
capital of a Canadian corporation is deemed to be a control person subject to a reputable presumption to the contrary (i.e. providing
evidence of another control person or control group holding a greater number of shares).
The Act requires notification
where a non-Canadian acquires control, directly or indirectly, of a Canadian business with assets under the thresholds for reviewable
transaction. The notification process consists of filing a notification within 30 days following the implementation of an investment.
E. Taxation
Canadian Federal Income Taxation
We consider that the following
summary fairly describes the principal Canadian federal income tax consequences applicable to a holder of our common shares who
at all material times deals at arm’s length with our Company, who holds all common shares as capital property, who is resident
in the United States, who is not a resident of Canada and who does not use or hold, and is not deemed to use or hold, his common
shares of our Company in connection with carrying on a business in Canada (a “non-resident holder”). It is assumed
that the common shares will at all material times be listed on a stock exchange that is prescribed for purposes of the
Income
Tax Act
(Canada) (the “ITA”) and regulations thereunder. Investors should be aware that the Canadian federal income
tax consequences applicable to holders of our common shares will change if, for any reason, we cease to be listed on a prescribed
stock exchange. Accordingly, holders and prospective holders of our common shares should consult with their own tax advisors with
respect to the income tax consequences of them purchasing, owing and disposing of our common shares should we cease to be listed
on a prescribed stock exchange.
This summary is based
upon the current provisions of the ITA, the regulations thereunder, the Canada-United States Tax Convention as amended by the
Protocols thereto (the “Treaty”) as at the date of this Report and the currently publicly announced administrative
and assessing policies of the Canada Customs and Revenue Agency (the “CCRA”). This summary does not take into account
Canadian provincial income tax consequences. This description is not exhaustive of all possible Canadian federal income tax consequences
and does not take into account or anticipate any changes in law, whether by legislative, governmental or judicial action. This
summary does, however, take into account all specific proposals to amend the ITA and regulations thereunder, publicly announced
by the Government of Canada to the date hereof.
This summary does
not address potential tax effects relevant to our Company or those tax considerations that depend upon circumstances specific
to each investor. Accordingly, holders and prospective holders of our common shares should consult with their own tax advisors
with respect to the income tax consequences to them of purchasing, owning and disposing of common shares in our Company.
Dividends
The ITA provides that
dividends and other distributions deemed to be dividends paid or deemed to be paid by a Canadian resident corporation (such as
our Company) to a non-resident of Canada shall be subject to a non-resident withholding tax equal to 25% of the gross amount of
the dividend of deemed dividend. Provisions in the ITA relating to dividend and deemed dividend payments to and gains realized
by non-residents of Canada, who are residents of the United States, are subject to the Treaty. The Treaty may reduce the withholding
tax rate on dividends as discussed below.
Article X of the Treaty
as amended by the US-Canada Protocol ratified on November 9, 1995 provides a 5% withholding tax on gross dividends or deemed dividends
paid to a United States corporation which beneficially owns at least 10% of the voting stock of the company paying the dividend.
In cases where dividends or deemed dividends are paid to a United States resident (other than a corporation) or a United States
corporation which beneficially owns less than 10% of the voting stock of a company, a withholding tax of 15% is imposed on the
gross amount of the dividend or deemed dividend paid. We would be required to withhold any such tax from the dividend and remit
the tax directly to CCRA for the account of the investor.
The reduction in withholding tax from 25%,
pursuant to the Treaty, will not be available:
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(a)
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if the shares in respect of which the dividends are
paid formed part of the business property or were otherwise effectively connected with a permanent establishment or fixed base
that the holder has or had in Canada within the 12 months preceding the disposition, or
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(b)
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the holder is a U.S. LLC which is not subject to tax
in the U.S.
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The Treaty generally exempts
from Canadian income tax dividends paid to a religious, scientific, literary, educational or charitable organization or to an
organization exclusively administering a pension, retirement or employee benefit fund or plan, if the organization is resident
in the U.S. and is exempt from income tax under the laws of the U.S.
Capital Gains
A non-resident holder is not subject to tax
under the ITA in respect of a capital gain realized upon the disposition of one of our shares unless the share represents “taxable
Canadian property” to the holder thereof. Our common shares will be considered taxable Canadian property to a non-resident
holder only if:
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(a)
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the non-resident holder;
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(b)
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persons with whom the non-resident holder did not deal at arm’s length; or
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(c)
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the non-resident holder and persons with whom he did not deal at arm’s length,
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owned not less than 25%
of the issued shares of any class or series of our Company at any time during the five year period preceding the disposition.
In the case of a non-resident holder to whom shares of our Company represent taxable Canadian property and who is resident in
the United States, no Canadian taxes will generally be payable on a capital gain realized on such shares by reason of the Treaty
unless:
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(a)
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the value of such shares is derived principally from real property
(including resource property) situated in Canada,
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(b)
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the holder was resident in Canada
for 120 months during any period of 20 consecutive years preceding, and at any time during the 10 years immediately preceding,
the disposition and the shares were owned by him when he ceased to be a resident of Canada,
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(c)
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they formed part of the business property or were otherwise
effectively connected with a permanent establishment or fixed base that the holder has or bad in Canada within the 12 months
preceding the disposition, or
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(d)
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the holder is a U.S. LLC which is not subject to tax in the
U.S.
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If subject to Canadian
tax on such a disposition, the taxpayer’s capital gain (or capital loss) from a disposition is the amount by which the taxpayer’s
proceeds of disposition exceed (or are exceeded by) the aggregate of the taxpayer’s adjusted cost base of the shares and
reasonable expenses of disposition. For Canadian income tax purposes, the “taxable capital gain” is equal to one-half
of the capital gain.
United States Federal Income Taxation
The following is a discussion
of the material United States Federal income tax consequences, under current law, applicable to a U.S. Holder (as defined below)
of our common shares who holds such shares as capital assets. This discussion does not address all potentially relevant Federal
income tax matters and it does not address consequences peculiar to persons subject to special provisions of Federal income tax
law, such as those described below as excluded from the definition of a U.S. Holder. In addition, this discussion does not cover
any state, local, or foreign tax consequences. (See “Canadian Federal Income Tax Consequences” above.)
The following discussion
is based on the Internal Revenue Code (the “Code”), Treasury Regulations, published Internal Revenue Service (“IRS”)
rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which
could be materially and adversely changed, possibly on a retroactive basis, at any time. In addition, this discussion does not
consider the potential effects, both adverse and beneficial, of any recently proposed legislation which, if enacted, could be
applied, possibly on a retroactive basis, at any time.
The discussion below
does not address potential tax effects relevant to our Company or those tax considerations that depend upon circumstances specific
to each investor. In addition, this discussion does not address the tax consequences that may be relevant to particular investors
subject to special treatment under certain U.S. Federal income tax laws, such as, dealers in securities, tax-exempt entities,
banks, insurance companies and non-U.S. Holders. Purchasers of the common stock should therefore satisfy themselves as to the
overall tax consequences of their ownership of the common stock, including the State, local and foreign tax consequences thereof
(which are not reviewed herein), and should consult their own tax advisors with respect to their particular circumstances.
U.S. Holders
As used herein, a “U.S.
Holder” includes a beneficial holder of common shares of our Company who is a citizen or resident of the United States,
a corporation or partnership created or organized in or under the laws of the United States or of any political subdivision thereof,
any trust if a US court is able to exercise primary supervision over the administration of the trust and one or more US persons
have the authority to control all substantial decisions of the trust, any entity created or organized in the United States which
is taxable as a corporation for U.S. tax purposes and any other person or entity whose ownership of common shares of our Company
is effectively connected with the conduct of a trade or business in the United States. A U.S. Holder does not include persons
subject to special provisions of Federal income tax law, such as tax-exempt organizations, qualified retirement plans, financial
institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, non-resident
alien individuals or foreign corporations whose ownership of our common shares is not effectively connected with the conduct of
a trade or business in the United States and shareholders who acquired their shares through the exercise of employee stock options
or otherwise as compensation.
Dividend Distribution on Shares of our
Company
U.S. Holders receiving
dividend distributions (including constructive dividends) with respect to the common shares of our Company are required to include
in gross income for United States Federal income tax purposes the gross amount of such distributions to the extent that we have
current or accumulated earnings and profits, without reduction for any Canadian income tax withheld from such distributions. Such
Canadian tax withheld may be deducted or may be credited against actual tax payable, subject to certain limitations and other
complex rules, against the U.S. Holder’s United States Federal taxable income. See “Foreign Tax Credit” below.
To the extent that distributions exceed our current or accumulated earnings and profits, they will be treated first as a return
of capital to the extent of the shareholder’s basis in the common shares of our Company and thereafter as gain from the
sale or exchange of the common shares of our Company. Preferential tax rates for net long term capital gains may be applicable
to a U.S. Holder which is an individual, estate or trust.
In general, dividends
paid on our common shares will not be eligible for the dividends received deduction provided to corporations receiving dividends
from certain United States corporations.
Foreign Tax Credit
A U.S. Holder who pays
(or who has had withheld from distributions) Canadian income tax with respect to the ownership of our common shares may be entitled,
at the election of the U.S. Holder, to either a deduction or a tax credit for such foreign tax paid or withheld. This election
is made on a year-by-year basis and generally applies to all foreign income taxes paid by (or withheld from) the U.S. Holder during
that year. There are significant and complex limitations which apply to the credit, among which is the general limitation that
the credit cannot exceed the proportionate share of the U.S. Holder’s United States income tax liability that the U.S. Holder’s
foreign source income bears to his or its world-wide taxable income. In determining the application of this limitation, the various
items of income and deduction must be classified into foreign and domestic sources. Complex rules govern income such as “passive
income”, “high withholding tax interest”, “financial services income”, “shipping income”
and certain other classifications of income. A U.S. Holder who is treated as a domestic U.S. corporation owning 10% or more of
our voting stock is also entitled to a deemed paid foreign tax credit in certain circumstances for the underlying foreign tax
of our Company related to dividends received or Subpart F income received from us. (See the discussion below of Controlled Foreign
Corporations). The availability of the foreign tax credit and the application of the limitations on the foreign tax credit are
fact specific and holders and prospective holders of our common shares should consult their own tax advisors regarding their individual
circumstances.
Disposition of Common Shares
If a “U.S. Holder”
is holding shares as a capital asset, a gain or loss realized on a sale of our common shares will generally be a capital gain
or loss, and will be long-term if the shareholder has a holding period of more than one year. However, gains realized upon sale
of our common shares may, under certain circumstances, be treated as ordinary income, if we were determined to be a “collapsible
corporation” within the meaning of Code Section 341 based on the facts in existence on the date of the sale (See below for
definition of “collapsible corporation”). The amount of gain or loss recognized by a selling U.S. Holder will be measured
by the difference between (i) the amount realized on the sale and (ii) his tax basis in our common shares. Capital losses are
deductible only to the extent of capital gains. However, in the case of taxpayers other than corporations (U.S.) $3,000 ($1,500
for married individuals filing separately) of capital losses are deductible against ordinary income annually. Losses in excess
of this limit can be carried forward to later years to reduce capital gains or ordinary income until the balance of these losses
is used up. In the case of individuals and other non-corporate taxpayers, capital losses that are not currently deductible may
be carried forward to other years. In the case of corporations, capital losses that are not currently deductible are carried back
to each of the three years preceding the loss year and forward to each of the five years succeeding the loss year.
A “collapsible corporation”
is a corporation that is formed or availed principally to manufacture, construct, produce, or purchase prescribed types of property
that the corporation holds for less than three years and that generally would produce ordinary income on its disposition, with
a view to the stockholders selling or exchanging their stock and thus realizing gain before the corporation realizes two thirds
of the taxable income to be derived from prescribed property. Prescribed property includes: stock in trade and inventory; property
held primarily for sale to customers in the ordinary course of business; unrealized receivables or fees, consisting of rights
to payment for noncapital assets delivered or to be delivered, or services rendered or to be rendered to the extent not previously
included in income, but excluding receivables from selling property that is not prescribed; and property gain on the sale of which
is subject to the capital gain/ordinary loss rule. Generally, a shareholder who owns directly or indirectly 5 percent or less
of the outstanding stock of the corporation may treat gain on the sale of his shares as capital gain.
Other Considerations for U.S. Holders
In the following circumstances,
the above sections of this discussion may not describe the United States Federal income tax consequences resulting from the holding
and disposition of common shares of the Company. Our management is of the opinion that there is little, if not, any likelihood
that we will be deemed a “Foreign Personal Holding Company”, a “Foreign Investment Company” or a “Controlled
Foreign Corporation” (each as defined below) under current and anticipated conditions.
Foreign Personal Holding Company
If at any time during
a taxable year more than 50% of the total combined voting power or the total value of our outstanding shares is owned, actually
or constructively, by five or fewer individuals who are citizens or residents of the United States and 60% or more of our gross
income for such year was derived from certain passive sources (e.g., from dividends received from its subsidiaries), we would
be treated as a “foreign personal holding company.” In that event, U.S. Holders that hold common shares in our capital
would be required to include in income for such year their allocable portion of our passive income which would have been treated
as a dividend had that passive income actually been distributed.
Foreign Investment Company
If 50% or more of the
combined voting power or total value of our outstanding shares are held, actually or constructively, by citizens or residents
of the United States, United States domestic partnerships or corporations, or estates or trusts other than foreign estates or
trusts (as defined by the Code Section 7701(a)(31)), and we are found to be engaged primarily in the business of investing, reinvesting,
or trading in securities, commodities, or any interest therein, it is possible that we might be treated as a “foreign investment
company” as defined in Section 1246 of the Code, causing all or part of any gain realized by a U.S. Holder selling or exchanging
our common shares to be treated as ordinary income rather than capital gains.
Controlled Foreign Corporation Status
If more than 50% of the
voting power of all classes of stock or the total value of the stock of our Company is owned, directly or indirectly, by U.S.
Holders, each of whom own after applying rules of attribution 10% or more of the total combined voting power of all classes of
stock of our Company, we would be treated as a “controlled foreign corporation” or “CFC” under Subpart
F of the Code. This classification would bring into effect many complex results including the required inclusion by such 10% U.S.
Holders in income of their pro rata shares of “Subpart F income” (as defined by the Code) of our Company and our earnings
invested in “U.S. property” (as defined by Section 956 of the Code). In addition, under Section 1248 of the Code if
we are considered a CFC at any time during the five year period ending with the sale or exchange of its stock, gain from the sale
or exchange of common shares of our Company by such a 10% U.S. Holder of our common stock at any time during the five year period
ending with the sale or exchange is treated as ordinary dividend income to the extent of our earnings and profits attributable
to the stock sold or exchanged. Because of the complexity of Subpart F, and because we may never be a CFC, a more detailed review
of these rules is beyond of the scope of this discussion.
ALL PROSPECTIVE INVESTORS ARE ADVISED TO
CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF PURCHASING THE COMMON SHARES OF OUR COMPANY.
F. Dividends and Paying Agents
Not required.
G. Statement By Experts
The financial statements
of our Company as of December 31, 2015 and 2014 included in this report has been audited by Anton & Chia LLP, as stated in
the reports appearing in this filing and have been so included in reliance upon the reports of such firm given upon their authority
as experts in accounting and auditing.
H. Documents on Display
We are subject to the informational
requirements of the
Securities Exchange Act of 1934
, as amended, and, as such, we file reports and other information with
the SEC. You may read and copy any of our reports and other information at, and obtain copies upon payment of prescribed fees
from, the Public Reference Room maintained by the SEC located at 100 F Street, N.E., Washington, DC 20549. You can also access
these reports and other filings electronically on the SEC’s web site, www.sec.gov. The public may obtain information on
the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
We will provide without
charge to each person, including any beneficial owner, on the written or oral request of such person, a copy of any or all documents
referred to above which have been or may be incorporated by reference in this report (not including exhibits to such incorporated
information that are not specifically incorporated by reference into such information). Requests for such copies should be directed
to us in writing at our address.
I. Subsidiary Information
We conduct all operations
through our wholly owned subsidiary, Tombstone Exploration and Mining Corporation, a Nevada corporation.
Item 11. Quantitative and Qualitative
Disclosures About Market Risk
Our Tombstone property
is located within the United States, currently at the exploration stage and our operations are limited to exploring this property.
Therefore, our market risks are minimal. We may, however, have future property exploration requirements due in currencies other
than United States dollars. As a Canadian company, our cash balances are kept in Canadian funds, and then converted to United
States funds for accounting purposes. Therefore, we may become exposed to some interest rate risks. We consider the amount of
risk to be manageable and do not currently, nor will we likely in the foreseeable future, conduct hedging to reduce our market
risks.
Furthermore, changes in
the regulatory environment in the U.S. may affect the costs of operating, mineral exploration and other factors having a material
impact upon the business. The Company works diligently and in good faith to meet or exceed all applicable permitting requirements,
reclamation obligations, and other regulations, but is subject to the authoritative changes.
Item 12. Description of Securities
Other Than Equity Securities
Not Applicable.
Notes to
the Consolidated Financial Statements
(expressed
in U.S. dollars)
(audited)
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1.
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Nature
of Operations and Continuance of Business
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Tombstone
Exploration Corporation (the “Company”) was incorporated under the Canada Business Corporations Act on October 30
,
1997 as 3430502 Canada Ltd. On December 4, 1997, the Company changed its name to Four Crown Foods Inc., with its principal operations
focused on the food and beverage retail business. In April 2000, upon acquisition of the license rights to a domain registration,
the Company discontinued its operations in the food and beverage retail industry and formally changed its name to Universal Domains
Incorporated on June 5, 2000. In 2001, the Company withdrew from the domain registration business and acquired 100% of the issued
and outstanding common shares of VCL Communications Corp. (“VCL”), a teleconferencing services company that targeted
clients throughout North America. In November 2003, given the Company’s liabilities and the lack of profitability, the Company
ceased all operations.
On
September 20, 2004, the Company focused its operations on the exploration, development, production, and acquisition of crude oil
and natural gas properties, changing its name to Pure Capital Incorporated. On November 1, 2006, the Company commenced negotiations
to acquire several mining and mineral right claims which was closed on December 4, 2006 where the Company acquired 100% of the
mineral claims located in Tombstone, Arizona in exchange for $100,000 and the issuance of 8,000,000 common shares of the Company.
Effectively, on February 6, 2007, the Company changed its name to Tombstone Exploration Corporation to better reflect the Company’s
current business objective and strategies.
These
consolidated financial statements have been prepared on a going concern basis, which implies that the Company will continue to
realize its assets and discharge its liabilities in the normal course of business. The Company has generated no revenues to date
and has never paid any dividends and is unlikely to pay dividends or generate significant earnings in the immediate or foreseeable
future. As at December 31, 2015, the Company did not record any revenues, had a working capital deficit of $273,575 and
an accumulated deficit of $24,899,638. The continuation of the Company as a going concern is dependent upon the continued financial
support from its shareholders, the ability to raise equity or debt financing, and the attainment of profitable operations from
the Company's future business. These factors raise substantial doubt regarding the Company’s ability to continue as a going
concern. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded
asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
The
Company’s plan of action over the next twelve months is to raise capital financing to conduct exploration and drilling on
its mineral property claims held in Tombstone, Arizona as well as exploring for new mineral property claims in the United States.
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2.
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Summary
of Significant Accounting Policies
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a)
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Basis
of Presentation and Principles of Consolidation
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These
consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted
in the United States, and are expressed in US dollars. The consolidated financial statements include the accounts of the Company
and its subsidiary, Tombstone Mining and Exploration Corporation. All inter-company accounts and transactions have been eliminated.
The Company’s fiscal year-end is December 31.
The
preparation of these consolidated financial statements in conformity with generally accepted accounting principles in the United
States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues
and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the useful life
and recoverability of long lived assets, fair value of stock-based compensation, valuation of convertible debentures and derivative
liabilities, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts,
historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses
that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely
from the Company’s estimates. To the extent there are material differences between the estimates and the actual results,
future results of operations will be affected.
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c)
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Cash
and Cash Equivalents
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The
Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cas
h
equivalents. As at December 31, 2015 and 2014, the Company had no cash equivalents.
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d)
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Property
and Equipment
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Property
and equipment are recorded at the lower of cost or net book value, and are amortized based on the following rates:
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Equipment
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5
years straight-line
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e)
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Impairment
of Long-Lived Assets
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In
accordance with ASC 360,
Property Plant and Equipment
, management tests long-lived assets to be held and used for recoverability
whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.
Mineral
property acquisition and exploration costs are expensed as incurred. When it has been determined that a mineral property can be
economically developed as a result of establishing proven and probable reserves, the costs incurred to develop such property are
capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserve.
If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.
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g)
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Stock-Based
Compensation
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The
Company records stock-based compensation in accordance with ASC 505,
Equity
, and
ASC 718,
Share-Based Payments
, using the fair value method. All transactions in
which goods or services are the consideration received for the issuance of equity instruments
are accounted for based on the fair value of the consideration received or the fair value
of the equity instrument issued, whichever is more reliably measurable. Equity instruments
issued to employees and the cost of the services received as consideration are measured
and recognized based on the fair value of the equity instruments issued.
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The
Company recognizes revenue in accordance with ASC 605,
Revenue Recognition.
Revenue is recognized only when the price is
fixed or determinable, persuasive evidence of an arrangement exists, the product is shipped, and collectability is reasonably
assured.
Potential
benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted
ASC 740,
Accounting for Income Taxes,
as of its inception. Pursuant to ASC 740, the Company is required to compute tax
asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized
in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating
losses carried forward in future years.
ASC
220,
Comprehensive Income,
establishes standards for the reporting and display of comprehensive loss and its components
in the financial statements. As at December 31, 2015 and 2014, the Company has no items that represent comprehensive loss and,
therefore, has not included a schedule of comprehensive loss in the financial statements.
From
time to time, the Company may issue equity instruments that may contain an embedded derivative instrument which may result in
a derivative liability. A derivative liability exists on the date the equity instrument is issued when there is a contingent exercise
provision. The derivative liability is recorded at its fair value calculated by using an option pricing model such as a multi-nominal
lattice model or Black-Scholes model. The fair value of the derivative liability is then calculated on each balance sheet date
with the corresponding gains and losses recorded in the consolidated statement of operations.
|
|
l)
|
Basic
and Diluted Net Income (Loss) Per Share
|
The
Company computes net income (loss) per share in accordance with ASC 260,
Earning 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 excludes all dilutive potential shares if their effect is anti-dilutive. At December 31, 2015, the Company had 23,869,458
(2014 – 14,574,456) potentially dilutive shares from outstanding share purchase warrants.
Pursuant
to ASC 820,
Fair Value Measurements and Disclosures
and ASC 825,
Financial Instruments
, an entity is required to
maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 and 825 establishes
a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value.
A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is
significant to the fair value measurement. ASC 820 and 825 prioritizes the inputs into three levels that may be used to measure
fair value:
Level
1
Level
1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level
2
Level
2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability
such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in
markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant
inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level
3
Level
3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to
the measurement of the fair value of the assets or liabilities.
The
Company’s financial instruments consist principally of cash, accounts payable and accrued liabilities, amounts due to related
parties, and convertible debentures. Pursuant to ASC 820 and 825, the fair value of our cash and cash equivalents is determined
based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. We believe that
the recorded values of all of our other financial instruments approximate their current fair values because of their nature and
respective maturity dates or durations.
The
Company’s operations are in Canada, which results in exposure to market risks from changes in foreign currency rates. The
financial risk is the risk to the Company’s operations that arise 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.
The
following table presents assets and liabilities that are measured and recognized at fair value as of December 31, 2015 and 2014
on a recurring basis:
December
31, 2014
|
Description
|
|
Level 1
$
|
|
Level 2
$
|
|
Level 3
$
|
|
Total Gains and (Losses)
$
|
|
Derivative liability
|
|
|
—
|
|
|
|
(237,061
|
)
|
|
|
—
|
|
|
|
(82,138
|
)
|
|
Total
|
|
|
—
|
|
|
|
(237,061
|
)
|
|
|
—
|
|
|
|
(82,138
|
)
|
December
31, 2015
|
Description
|
|
Level 1
$
|
|
Level 2
$
|
|
Level 3
$
|
|
Total Gains and (Losses)
$
|
|
Derivative liability
|
|
|
—
|
|
|
|
(292,320
|
)
|
|
|
—
|
|
|
|
(202,193
|
)
|
|
Total
|
|
|
—
|
|
|
|
(292,320
|
)
|
|
|
—
|
|
|
|
(202,193
|
)
|
|
|
n)
|
Foreign
Currency Translation
|
The
Company’s functional and reporting currency is the United States dollar. Monetary assets and liabilities denominated in
foreign currencies are translated in accordance with ASC 830
Foreign Currency Translation Matters,
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. Foreign currency transactions are primarily undertaken in Canadian dollars.
The Company has not, to the date of these financials statements, entered into derivative instruments to offset the impact of foreign
currency fluctuations.
|
|
o)
|
Recent
Accounting Pronouncements
|
The
Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact
on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting
pronouncements that have been issued that might have a material impact on its financial position or results of operations.
3. Property
and Equipment
|
|
|
|
|
Net Book Value
|
|
|
Cost
$
|
Accumulated Amortization
$
|
|
December 31,
2015
$
|
December 31,
2014
$
|
|
|
|
|
|
|
|
|
Equipment
|
47,861
|
45,599
|
|
2,262
|
5,885
|
During
the year ended December 31, 2015, $3,623 (2014 - $4,029) of depreciation expense had been recorded.
4.
Convertible Debentures
|
|
a)
|
In
August 2013, the Company issued a convertible debenture to a non-related party for $32,500.
Under the terms of the note, the amount owing is unsecured, bears interest at 8% per
annum, and matures on May 5, 2014. The note is convertible into shares of common stock
180 days after the date of issuance (January 28, 2014) at a conversion rate of 58% of
the average of the three lowest bid prices of the Company’s common stock for the
ten trading days ending one trading day prior to the date of the conversion notice is
sent by the holder of the Company. The Company incurred financing costs of $2,500 in
connection with the financing, which was deferred and is being amortized over the term
of the debt. During the year ended December 31, 2015, the Company amortized $nil (2014
- $1,103) of the deferred financing costs.
|
|
|
|
|
|
|
|
Due
to this provision, the embedded conversion option qualifies for derivative accounting
under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative
liability resulted in a discount to the note payable of $32,500. The carrying value of
the convertible note will be accreted over the term of the convertible note up to the
value of $32,500. During the year ended December 31, 2014, the Company issued 1,306,199
shares of common stock for the conversion of $32,500 of the note and $1,300 of accrued
interest. During the year ended December 31, 2015, $nil (2014 - $14,445) of accretion
expense had been recorded and the note has been fully converted.
|
|
|
b)
|
In
October 2013, the Company issued a convertible debenture to a non-related party for $32,500.
Under the terms of the note, the amount owing is unsecured, bears interest at 8% per
annum, and matures on July 5, 2014. The note is convertible into shares of common stock
180 days after the date of issuance (March 30, 2014) at a conversion rate of 58% of the
average of the three lowest bid prices of the Company’s common stock for the ten
trading days ending one trading day prior to the date of the conversion notice is sent
by the holder of the Company. The Company incurred financing costs of $2,500 in connection
with the financing, which was deferred and is being amortized over the term of the debt.
During the year ended December 31, 2015, the Company amortized $nil (2014 - $1,664) of
the deferred financing costs.
|
|
|
|
|
|
|
|
Due to this provision, the embedded
conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”.
The fair value of the derivative liability resulted in a discount to the note payable of $32,500.
The carrying value of the convertible note will be accreted over the term of the convertible note
up to the value of $32,500. During the year ended December 31, 2014, the Company issued 1,687,097
shares of common stock for the conversion of $32,500 of the note and $1,300 of accrued interest.
During the year ended December 31, 2015, $nil (2014 - $21,667) of accretion expense had been recorded
and the note has been fully converted.
|
|
|
c)
|
In
October 2013, the Company issued a convertible debenture to a non-related party for $32,500.
Under the terms of the note, the amount owing is unsecured, bears interest at 8% per
annum, and matures on August 4, 2014. The note is convertible into shares of common stock
180 days after the date of issuance (April 29, 2014) at a conversion rate of 58% of the
average of the three lowest bid prices of the Company’s common stock for the ten
trading days ending one trading day prior to the date of the conversion notice is sent
by the holder of the Company. The Company incurred financing costs of $2,500 in connection
with the financing, which was deferred and is being amortized over the term of the debt.
During the year ended December 31, 2015, the Company amortized $nil (2014 - $1,939) of
the deferred financing costs.
|
|
|
|
|
|
|
|
Due to this provision, the embedded
conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”.
The fair value of the derivative liability resulted in a full discount to the note payable of $32,500.
The carrying value of the convertible note will be accreted over the term of the convertible note
up to the value of $32,500. During the year ended December 31, 2014, the Company issued 1,442,781
shares of common stock for the conversion of $32,500 of the note and $1,300 of accrued interest.
During the year ended December 31, 2015, $nil (2014 - $25,278) of accretion expense had been recorded
and the note has been fully converted.
|
|
|
d)
|
In
December 2013, the Company issued a convertible debenture to a non-related party for
$32,500. Under the terms of the note, the amount owing is unsecured, bears interest at
8% per annum, and matures on September 19, 2014. The note is convertible into shares
of common stock 180 days after the date of issuance (June 15, 2014) at a conversion rate
of 58% of the average of the three lowest bid prices of the Company’s common stock
for the ten trading days ending one trading day prior to the date of the conversion notice
is sent by the holder of the Company. The Company incurred financing costs of $2,500
in connection with the financing, which was deferred and is being amortized over the
term of the debt. During the year ended December 31, 2015, the Company amortized $nil
(2014 - $2,372) of the deferred financing costs.
|
|
|
|
|
|
|
|
Due to this
provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives
and Hedging”. The fair value of the derivative liability resulted in a discount to the note
payable of $32,500. The carrying value of the convertible note will be accreted over the term of
the convertible note up to the value of $32,500. During the year ended December 31, 2014, the Company
issued 1,383,394 shares of common stock for the conversion of $32,500 of the note and $1,300 of
accrued interest. During the year ended December 31, 2015, $nil (2014 - $30,694) of accretion expense
had been recorded and the note has been fully converted.
|
|
|
e)
|
In
January 2014, the Company issued a convertible debenture to a non-related party for $37,500.
Under the terms of the note, the amount owing is unsecured, bears interest at 8% per
annum, and matures on October 14, 2014. The note is convertible into shares of common
stock 180 days after the date of issuance (July 9, 2014) at a conversion rate of 58%
of the average of the three lowest bid prices of the Company’s common stock for
the ten trading days ending one trading day prior to the date of the conversion notice
is sent by the holder of the Company. The Company incurred financing costs of $2,500
in connection with the financing, which was deferred and is being amortized over the
term of the debt. During the year ended December 31, 2015, the Company amortized $nil
(2014 - $2,500) of the deferred financing costs.
|
|
|
|
|
|
|
|
Due to this provision, the embedded
conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and Hedging”.
The fair value of the derivative liability resulted in a full discount to the note payable of $37,500.
The carrying value of the convertible note will be accreted over the term of the convertible note
up to the value of $37,500. During the year ended December 31, 2014, the Company issued 1,906,938
shares of common stock for the conversion of $37,500 of the note and $1,500 of accrued interest.
During the year ended December 31, 2015, $nil (2014 - $37,500) of accretion expense had been recorded
and the note has been fully converted.
|
|
|
f)
|
In
March 2014, the Company issued a convertible debenture to a non-related party for $32,500.
Under the terms of the note, the amount owing is unsecured, bears interest at 8% per
annum, and matures on December 26, 2014. The note is convertible into shares of common
stock 180 days after the date of issuance (September 15, 2014) at a conversion rate of
58% of the average of the three lowest bid prices of the Company’s common stock
for the ten trading days ending one trading day prior to the date of the conversion notice
is sent by the holder of the Company. The Company incurred financing costs of $2,500
in connection with the financing, which was deferred and is being amortized over the
term of the debt. During the year ended December 31, 2015, the Company amortized $nil
(2014 - $2,500) of the deferred financing costs.
|
|
|
|
Due
to this provision, the embedded conversion option qualifies for derivative accounting
under ASC 815-15 “Derivatives and Hedging”. The fair value of the derivative
liability resulted in a full discount to the note payable of $32,500. The carrying value
of the convertible note will be accreted over the term of the convertible note up to
the value of $32,500. During the year ended December 31, 2014, the Company issued 3,318,215
shares of common stock for the conversion of $32,500 of the note and $1,700 of accrued
interest. During the year ended December 31, 2015, $nil (2014 - $32,500) of accretion
expense had been recorded and the note has been fully converted.
|
|
|
g)
|
In
May 2014, the Company issued a convertible debenture to a non-related party for $42,500.
Under the terms of the note, the amount owing is unsecured, bears interest at 8% per
annum, and matures on February 16, 2015. The note is convertible into shares of common
stock 180 days after the date of issuance (November 10, 2014) at a conversion rate of
58% of the average of the three lowest bid prices of the Company’s common stock
for the ten trading days ending one trading day prior to the date of the conversion notice
is sent by the holder of the Company. The Company incurred financing costs of $2,500
in connection with the financing, which was deferred and is being amortized over the
term of the debt. During the year ended December 31, 2015, the Company amortized $423
(2014 - $2,077) of the deferred financing costs.
|
Due
to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and
Hedging”. The fair value of the derivative liability resulted in a full discount to the note payable of $42,500. The carrying
value of the convertible note will be accreted over the term of the convertible note up to the value of $42,500. During the year
ended December 31, 2014, the Company issued 3,980,077 shares of common stock for the conversion of $42,500 of the note and $1,300
of accrued interest. During the year ended December 31, 2015, $nil (2014 - $42,500) of accretion expense had been recorded and
the note has been fully converted.
|
|
h)
|
In
June 2014, the Company issued a convertible debenture to a non-related party for $68,000.
Under the terms of the note, the amount owing is unsecured, bears interest at 8% per
annum, and matures on March 18, 2015. The note is convertible into shares of common stock
180 days after the date of issuance (December 13, 2014) at a conversion rate of 58% of
the average of the three lowest bid prices of the Company’s common stock for the
ten trading days ending one trading day prior to the date of the conversion notice is
sent by the holder of the Company. The Company incurred financing costs of $3,000 in
connection with the financing, which was deferred and is being amortized over the term
of the debt. During the year ended December 31, 2015, the Company amortized $840 (2014
- $2,160) of the deferred financing costs.
|
Due
to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and
Hedging”. The fair value of the derivative liability resulted in a full discount to the note payable of $68,000. The carrying
value of the convertible note will be accreted over the term of the convertible note up to the value of $68,000. During the year
ended December 31, 2014, the Company issued 3,402,974 shares of common stock for the conversion of $30,000 of the note. During
the year ended December 31, 2015, the Company issued 5,735,211 shares of common stock for the conversion of $38,000 of the note
and $2,720 of accrued interest. During the year ended December 31, 2015, $17,000 (2014 - $51,000) of accretion expense had been
recorded.
|
|
i)
|
In
July 2014, the Company issued a convertible debenture to a non-related party for $42,500.
Under the terms of the note, the amount owing is unsecured, bears interest at 8% per
annum, and matures on April 11, 2015. The note is convertible into shares of common stock
180 days after the date of issuance (January 5, 2015) at a conversion rate of 58% of
the average of the three lowest bid prices of the Company’s common stock for the
ten trading days ending one trading day prior to the date of the conversion notice is
sent by the holder of the Company. The Company incurred financing costs of $2,500 in
connection with the financing, which was deferred and is being amortized over the term
of the debt. During the year ended December 31, 2015, the Company amortized $915 (2014
- $1,585) of the deferred financing costs.
|
Due
to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and
Hedging”. The fair value of the derivative liability resulted in a full discount to the note payable of $42,500. The carrying
value of the convertible note will be accreted over the term of the convertible note up to the value of $42,500. During the year
ended December 31, 2015, the Company issued 6,075,118 shares of common stock for the conversion of $42,500 of the note and $1,700
of accrued interest. During the year ended December 31, 2015, $18,889 (2014 - $23,611) of accretion expense had been recorded.
|
|
j)
|
In
October 2014, the Company issued a convertible debenture to a non-related party for $38,000.
Under the terms of the note, the amount owing is unsecured, bears interest at 8% per
annum, and matures on July 28, 2015. The note is convertible into shares of common stock
180 days after the date of issuance (April 22, 2015) at a conversion rate of 58% of the
average of the three lowest bid prices of the Company’s common stock for the ten
trading days ending one trading day prior to the date of the conversion notice is sent
by the holder of the Company. The Company incurred financing costs of $3,000 in connection
with the financing, which was deferred and is being amortized over the term of the debt.
During the year ended December 31, 2015, the Company amortized $2,264 (2014 - $736) of
the deferred financing costs.
|
Due
to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and
Hedging”. The fair value of the derivative liability resulted in a full discount to the note payable of $38,000. The carrying
value of the convertible note will be accreted over the term of the convertible note up to the value of $38,000. During the year
ended December 31, 2015, the Company repaid $13,780 of the note with cash and issued 4,947,683 shares of common stock for the
conversion of $28,830 of the note and $1,520 of accrued interest. During the year ended December 31, 2015, the Company defaulted
on the loan and recorded an additional $4,610 to interest expense as a result. During the year ended December 31, 2015, $29,556
(2014 - $8,444) of accretion expense had been recorded.
|
|
k)
|
In
January 2015, the Company issued a $43,000 convertible debenture to a non-related party,
in exchange for proceeds of $41,500, net of an original issuance discount of $1,500.
Under the terms of the note, the amount owing is unsecured, bears interest of at 10% per
annum, and matures on January 5, 2016. The note is convertible into shares of common
stock immediately at a conversion rate of 58% of the average of the three lowest bid
prices of the Company’s common stock for the ten trading days ending one trading
day prior to the date of the conversion notice is sent by the holder of the Company.
The Company incurred financing costs of $1,500 in connection with the financing, which
was deferred and is being amortized over the term of the debt. During the year ended
December 31, 2015, the Company amortized $1,484 (2014 - $nil) of the deferred financing
costs.
|
Due
to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and
Hedging”. The fair value of the derivative liability resulted in a full discount to the note payable of $40,000. The carrying
value of the convertible note will be accreted over the term of the convertible note up to the value of $43,000. During the year
ended December 31, 2015, the Company issued 7,186,111 shares of common stock for the conversion of $43,000 of the note and $2,704
of accrued interest. During the year ended December 31, 2015, $40,000 (2014 - $nil) of accretion expense had been recorded.
|
|
l)
|
In
July 2015, the Company issued a $46,000 convertible debenture to a non-related party,
in exchange for proceeds of $42,500, net of an original issuance discount of $3,500.
Under the terms of the note, the amount owing is unsecured, bears interest at 10% per
annum, and matures on July 7, 2016. The note is convertible into shares of common stock
immediately at a conversion rate of 58% of the lowest bid price of the Company’s
common stock for the ten trading days ending one trading day prior to the date of the
conversion notice is sent by the holder of the Company. The Company incurred financing
costs of $1,500 in connection with the financing, which was deferred and is being amortized
over the term of the debt. During the year ended December 31, 2015, the Company amortized
$730 (2014 - $nil) of the deferred financing costs.
|
Due
to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and
Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $6,265. The carrying
value of the convertible note will be accreted over the term of the convertible note up to the value of $46,000. During the year
ended December 31, 2015, $3,133 (2014 - $nil) of accretion expense had been recorded.
|
|
m)
|
In
August 2015, the Company issued a convertible debenture to a non-related party for up
to $250,000, with an original issuance discount of 10% which will be deferred and accreted
over the term of the debenture. Under the terms of the note, the amount owing is unsecured,
bears one-time interest at 12%, and matures two years from the date the proceeds were
received. The note is convertible into shares of common stock immediately at a conversion
rate of the lesser of $0.0131 or 60% of average of the three lowest bid prices of the
Company’s common stock for the twenty trading days ending one trading day prior
to the date of the conversion notice is sent by the holder of the Company.
|
In
August 2015, the Company received proceeds under the first tranche of this convertible note of $55,556 consisting of proceeds
of $50,000 net of an original issuance discount of $5,556.
Due
to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and
Hedging”. The fair value of the derivative liability resulted in a full discount to the note payable of $55,556. The carrying
value of the convertible note will be accreted over the term of the convertible note up to the value of $55,556. During the year
ended December 31, 2015, $23,148 (2014 - $nil) of accretion expense had been recorded.
In
December 2015, the Company received proceeds under the second tranche of this convertible note of $27,778 consisting of proceeds
of $25,000 net of an original issuance discount of $2,778.
Due
to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and
Hedging”. The fair value of the derivative liability resulted in a full discount to the note payable of $27,778. The carrying
value of the convertible note will be accreted over the term of the convertible note up to the value of $27,778. During the year
ended December 31, 2015, $1,157 (2014 - $nil) of accretion expense had been recorded.
|
|
n)
|
In
September 2015, the Company issued a $33,500 convertible debenture to a non-related party,
in exchange for $31,000, net of an original issuance discount of $2,500. Under the terms
of the note, the amount owing is unsecured, bears interest at 10% per annum, and matures
on September 28, 2016. The note is convertible into shares of common stock immediately
at a conversion rate of 58% of average of the two lowest bid prices of the Company’s
common stock for the ten trading days ending one trading day prior to the date of the
conversion notice is sent by the holder of the Company. The Company incurred financing
costs of $1,000 in connection with the financing, which was deferred and is being amortized
over the term of the debt. During the year ended December 31, 2015, the Company amortized
$260 (2014 - $nil) of the deferred financing costs.
|
Due
to this provision, the embedded conversion option qualifies for derivative accounting under ASC 815-15 “Derivatives and
Hedging”. The fair value of the derivative liability resulted in a discount to the note payable of $4,775. The carrying
value of the convertible note will be accreted over the term of the convertible note up to the value of $33,500. During the year
ended December 31, 2015, $1,194 (2014 - $nil) of accretion expense had been recorded.
5.
Derivative Liability
The
Company records the fair value of the reset provision of its exercise price of share purchase warrants in accordance with ASC
815,
Derivatives and Hedging
. The fair value of the derivative liability is revalued on each balance sheet date with corresponding
gains and losses recorded in the consolidated statement of operations.
During
the year ended December 31, 2011, the Company issued warrants with an exercise price of $0.10 per share until July 14, 2014, and
the reset provision allows for the exercise price to be reset to a value equal to a future issuance of common shares, stock options,
warrants, or other equity instrument if the issuance or exercise price is less than $0.10 per share. The Company uses a Black-Scholes
model to fair value the derivative liability associated with the reset provision. As the warrants expired unexercised on July
14, 2014, the Company removed the derivative liability and recognized a gain of $127,451. During the year ended December 31, 2015,
the Company recorded a gain on fair value of derivatives of $nil (2014 –$127,451).
During
the year ended December 31, 2015, the Company issued convertible debentures with a variable exercise price based on future market
rates. The Company uses a multi-nominal lattice model to fair value the derivative liability associated with the variable exercise
price. As at December 31, 2015, the Company recorded a derivative liability of $292,320 (2014 - $237,061). During the year ended
December 31, 2015, the Company recorded a loss on fair value of derivatives of $202,193 (2014 – $209,589).
During
the year ended December 31, 2014, the Company utilized an expected volatility which ranged from 194% to 316%, risk-free rate which
ranged from 0.01% to 0.15%, expected divided yield of 0%, and expected life which ranged from 0.2 to 0.77 years to calculate the
total derivative liability of $237,061.
During
the year ended December 31, 2015, the Company utilized an expected volatility which ranged from 182% to 304%, risk-free rate which
ranged from 0.01% to 1.06%, expected divided yield of 0%, and expected life which ranged from 0.08 to 2.0 years to calculate the
total derivative liability of $292,320.
A
summary of the activity of the derivative liability is shown below:
|
|
|
$
|
|
Balance at December 31, 2013
|
|
|
286,679
|
|
|
Derivative loss due to new issuances
|
|
|
122,265
|
|
|
Debt discount
|
|
|
261,000
|
|
|
Reclass to share capital
|
|
|
(355,825
|
)
|
|
Derivative due to mark to market adjustment
|
|
|
(77,058
|
)
|
|
Balance at December 31, 2014
|
|
|
237,061
|
|
|
Derivative loss due to new issuances
|
|
|
91,358
|
|
|
Debt discount
|
|
|
137,374
|
|
|
Reclass to share capital
|
|
|
(282,806
|
)
|
|
Derivative due to mark to market adjustment
|
|
|
109,333
|
|
|
Balance at December 31, 2015
|
|
|
292,320
|
|
6. Common
Shares
Year
Ended December 31, 2015
|
|
a)
|
On
February 2, 2015, the Company issued 10,000,000 common shares at $0.01 per share for
total cash proceeds of $100,000.
|
|
|
b)
|
On
February 2, 2015, the Company issued 500,000 common shares for services provided with
a fair value of $5,900. The fair value of the shares was determined by using the end
of day trading price of the Company’s common shares on the date of the agreement.
|
|
|
c)
|
On
March 20, 2015, the Company issued 5,000,000 common shares at $0.01 per share for total
cash proceeds of $50,000.
|
|
|
d)
|
During
the year ended December 31, 2015, the Company issued an aggregate of 23,944,123 common
shares upon the conversion of $442,282 of convertible notes payable and accrued interest.
|
Year
Ended December 31, 2014
|
|
e)
|
On
May 19, 2014, the Company issued 69,000,000 common shares for proceeds of $100,000 pursuant
to the December 13, 2013 shares exchange agreement with Eurogas, Inc., as amended on
January 13 and May 13, 2014.
|
|
|
f)
|
During
the year ended December 31, 2014, the Company issued an aggregate of 2,000,000 common
shares for services provided. The fair value of the shares issued of $88,190 was determined
by using the end of day trading price of the Company’s common shares on the dates
of the agreements.
|
|
|
g)
|
During
the year ended December 31, 2014, the Company issued an aggregate of 18,427,675 common
shares upon the conversion of $683,856 of convertible notes payable and accrued interest.
|
7. Common
Stock Subscribed
|
|
a)
|
On
August 31, 2011, the Company received proceeds of $50,000 for the issuance of common
shares. The details of the subscription were to be agreed upon at a later date and have
not be yet been finalized.
|
|
|
b)
|
On
December 21, 2015, the Company received proceeds of $50,000 for the issuance of 5,000,000
common shares at $0.01 per share. The common shares were issued on January 11, 2016.
Refer to Note 12(a).
|
|
|
c)
|
On
December 28, 2015, the Company received proceeds of $100,000 for the issuance of 10,000,000
common shares at $0.01 per share. The common shares were issued on January 11, 2016.
Refer to Note 12(a). In connection with this financing, the Company incurred share issuance
costs of $10,000.
|
8.
Contingencies
On
December 13, 2013, the Company entered into a share exchange agreement (the “Agreement”) with EuroGas, Inc., a company
incorporated in the state of Utah, and EuroGas AG, a company incorporated in Switzerland. Under the terms of the Agreement, the
Company would acquire 240,000,000 common shares of EuroGas AG, representing approximately 26% of the issued and outstanding common
shares, and pay $5,000,000 within 9 months of the closing date of the Agreement, in exchange for the issuance of 348,000,000 common
shares of the Company. The transaction would result the shareholders of EuroGas Inc. and EuroGas AG holding more than 50%
of the issued and outstanding common shares of the Company.
On
January 13, 2014, the Company amended the terms of the December 13, 2013 agreement to include proceeds of 20% of any settlement
liability EuroGas Inc. and EuroGas AG receives in its current litigation against the Slovak Republic.
On
May 13, 2014, the Company amended the terms of the December 13, 2013 agreement whereby the Company would receive $100,000 (received)
in exchange for the issuance of 69,000,000 common shares (issued) of the Company and the remaining 279,000,000 common shares of
the Company to be issued by June 13, 2014 in exchange for 240,000,000 common shares of EuroGas AG and $400,000, with further payments
to the Company of $500,000 on or before August 30, 2014, and the final payment of $4,000,000 on or before October 31, 2014.
On
August 21, 2014, the Company filed a lawsuit against EuroGas, Inc., EuroGas AG and ZB Capital, AG as well as an injunction against
these parties, their agents, or anyone associated from redeeming the share certificate and trading, selling, transferring or pledging
the common shares issued.
On
November 19, 2014, the parties entered into an Extension Agreement whereby the Company would dismiss the lawsuit and release the
share certificate to ZB Capital AG within ten days of the Effective Date and EuroGas, Inc. and EuroGas AG would remit a single
payment of $400,000 to the Company on or before January 2, 2015. The parties also agreed to revise the payment date for the remaining
$4,500,000 financing to a date on or before 120 days from the Effective Date of the agreement and that all other terms and conditions
of the original agreement and the amendments would remain the same. On signing the agreement the Company recorded a receivable
for the $400,000 amount owing and a corresponding gain on settlement of debt.
On
March 27, 2015, the Company refiled its lawsuit against EuroGas, Inc., EuroGas AG, and ZB Capital AG.
As
at December 31, 2015, the Company had not received the $400,000 owing from EuroGas, Inc. and recorded an allowance to offset the
amount receivable along with a corresponding loss on settlement of debt.
9.
Share Purchase Warrants
|
|
|
The
following table summarizes the continuity schedule for share purchase warrants:
|
|
|
|
|
Exercise Price
|
|
|
|
Number of Warrants
|
$
|
|
Balance
– December 31, 2013
|
16,000,000
|
0.10
|
|
Expired
|
(16,000,000)
|
0.10
|
|
Balance
– December 31, 2014 and 2015
|
—
|
—
|
10.
Related Party Transactions
As
at December 31, 2015, the Company owed $4,408 (2014 - $3,950) to the President of the Company for management fees incurred and
financing of day-to-day operations. The amounts owing are unsecured, non-interest bearing, and due on demand. During the year
ended December 31, 2015, the Company incurred $135,000 (2014 - $120,000) to the President of the Company for management fees.
11. Income
Taxes
The
Company has $9,803,800 of net operating losses to carry forward to offset taxable income in future years which expire through
fiscal 2035. For the years ended December 31, 2015 and 2014, the valuation allowance established against the deferred tax assets
increased by $124,292 and $151,267, respectively.
The
components of the net deferred tax asset at December 31, 2015 and 2014, the statutory tax rate, the effective tax rate and the
amount of the valuation allowance are indicated below:
|
|
|
|
2015
$
|
|
|
|
2014
$
|
|
|
|
|
|
|
|
|
|
|
|
Loss Before Taxes
|
|
|
(716,943
|
)
|
|
|
(808,710
|
)
|
|
Statutory rate
|
|
|
34
|
%
|
|
|
34
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Computed expected tax recovery
|
|
|
(243,761
|
)
|
|
|
(274,961
|
)
|
|
Non-deductible expenses
|
|
|
119,469
|
|
|
|
123,694
|
|
|
Change in valuation allowance
|
|
|
124,292
|
|
|
|
151,267
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
2015
$
|
|
|
|
2014
$
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax asset
|
|
|
|
|
|
|
|
|
|
Cumulative net operating losses
|
|
|
3,352,372
|
|
|
|
3,228,080
|
|
|
Less valuation allowance
|
|
|
(3,352,372
|
)
|
|
|
(3,228,080
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
|
—
|
|
|
|
—
|
|
The
following table lists the fiscal year in which the loss was incurred and the expiration date of the operating:
|
|
|
|
|
Expiration
|
|
|
|
Net
|
|
Date of
|
|
|
|
Loss
|
|
Operating
|
|
|
Period Incurred
|
|
$
|
|
Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2006
|
|
|
|
159,600
|
|
|
|
2026
|
|
|
|
December 31, 2007
|
|
|
|
2,310,000
|
|
|
|
2027
|
|
|
|
December 31, 2008
|
|
|
|
2,638,800
|
|
|
|
2028
|
|
|
|
December 31, 2009
|
|
|
|
1,665,000
|
|
|
|
2029
|
|
|
|
December 31, 2010
|
|
|
|
944,400
|
|
|
|
2030
|
|
|
|
December 31, 2011
|
|
|
|
631,600
|
|
|
|
2031
|
|
|
|
December 31, 2012
|
|
|
|
391,900
|
|
|
|
2032
|
|
|
|
December 31, 2013
|
|
|
|
252,000
|
|
|
|
2033
|
|
|
|
December 31, 2014
|
|
|
|
444,900
|
|
|
|
2034
|
|
|
|
December 31, 2015
|
|
|
|
365,600
|
|
|
|
2035
|
|
|
|
|
|
|
|
9,803,800
|
|
|
|
|
|
12. Restatement
The
Company has restated its consolidated financial statements for the years ended December 31, 2014 and 2013 to reflect the accretion
of the discount and interest on the convertible debentures and derivative liabilities. This restatement resulted in an increase
to net loss of $96,623 with no change in net loss per share.
The
impact of the restatement as at December 31, 2014, and for the year ended December 31, 2014 is summarized below:
Consolidated
Balance Sheet
|
|
|
As at December 31, 2014
|
|
|
|
As Reported
$
|
|
Adjustment
$
|
|
As Restated
$
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debentures, net of unamortized discount
|
|
|
16,098
|
|
|
|
36,957
|
|
|
|
53,055
|
|
|
Total liabilities
|
|
|
267,757
|
|
|
|
36,957
|
|
|
|
304,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
18,734,351
|
|
|
|
141,477
|
|
|
|
18,875,828
|
|
|
Accumulated deficit
|
|
|
(24,004,261
|
)
|
|
|
(178,434
|
)
|
|
|
(24,182,695
|
)
|
|
Total stockholders’ deficit
|
|
|
(254,068
|
)
|
|
|
(36,957
|
)
|
|
|
(291,025
|
)
|
|
Total liabilities and stockholders’ deficit
|
|
|
13,689
|
|
|
|
—
|
|
|
|
13,689
|
|
Consolidated
Statement of Operations
|
|
|
Year Ended December 31, 2014
|
|
|
|
As Reported
$
|
|
Adjustment
$
|
|
As Restated
$
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on conversion of debt
|
|
|
(7,130
|
)
|
|
|
7,130
|
|
|
|
—
|
|
|
Loss on change in fair value of derivative liabilities
|
|
|
(45,207
|
)
|
|
|
(36,931
|
)
|
|
|
(82,138
|
)
|
|
Accretion and interest expense
|
|
|
(242,259
|
)
|
|
|
(66,822
|
)
|
|
|
(309,081
|
)
|
|
Total other income (expense)
|
|
|
(294,596
|
)
|
|
|
(96,623
|
)
|
|
|
(391,219
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(712,087
|
)
|
|
|
(96,623
|
)
|
|
|
(808,710
|
)
|
Consolidated
Statements of Stockholders' Deficit
|
|
|
As at December 31, 2014
|
|
|
|
As Reported
$
|
|
Adjustment
$
|
|
As Restated
$
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
18,734,351
|
|
|
|
141,477
|
|
|
|
18,875,828
|
|
|
Accumulated deficit
|
|
|
(24,004,261
|
)
|
|
|
(178,434
|
)
|
|
|
(24,182,695
|
)
|
|
Total
|
|
|
(254,068
|
)
|
|
|
(36,957
|
)
|
|
|
(291,025
|
)
|
Consolidated
Statement of Cash Flows
|
|
|
Year Ended December 31, 2014
|
|
|
|
As Reported
$
|
|
Adjustment
$
|
|
As Restated
$
|
|
|
|
|
|
|
|
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(712,087
|
)
|
|
|
(96,623
|
)
|
|
|
(808,710
|
)
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion expense
|
|
|
229,717
|
|
|
|
57,922
|
|
|
|
287,639
|
|
|
Gain (loss) on conversion of debt
|
|
|
7,130
|
|
|
|
(7,130
|
)
|
|
|
—
|
|
|
Loss on change in fair value of derivative liabilities
|
|
|
45,207
|
|
|
|
36,931
|
|
|
|
82,138
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred financing costs
|
|
|
2,637
|
|
|
|
24,899
|
|
|
|
27,536
|
|
|
Accounts payable and accrued liabilities
|
|
|
5,684
|
|
|
|
1
|
|
|
|
5,685
|
|
|
Net cash used in operating activities
|
|
|
(394,493
|
)
|
|
|
16,000
|
|
|
|
(378,493
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of convertible debt
|
|
|
261,000
|
|
|
|
(16,000
|
)
|
|
|
245,000
|
|
|
Net cash provided by financing activities
|
|
|
354,296
|
|
|
|
(16,000
|
)
|
|
|
338,296
|
|
13. Subsequent
Events
|
|
a)
|
On
January 11, 2016, the Company issued 15,000,000 common shares at $0.01 per share for
total cash proceeds of $150,000, which was recorded as common stock subscribed as at
December 31, 2015.
|
|
|
b)
|
On
January 15, 2016, the Company issued 2,068,965 common shares upon the conversion of $12,000
of convertible notes payable.
|
|
|
c)
|
On
February 4, 2016, the Company entered into a subscription agreement for the issuance
of 5,000,000 common shares at $0.01 per share for gross proceeds of $50,000.
|
|
|
d)
|
On
February 12, 2016, the Company issued 1,000,000 common shares upon the conversion of
$5,300 of convertible notes payable.
|
|
|
e)
|
On
February 19, 2016, the Company issued 2,298,850 common shares upon the conversion of
$12,000 of convertible notes payable.
|
|
|
f)
|
On
February 25, 2016, the Company issued 1,100,000 common shares upon the conversion of
$5,544 of convertible notes payable.
|
|
|
g)
|
On
March 2, 2016, the Company issued 2,686,968 common shares upon the conversion of $12,000
of convertible notes payable.
|
|
|
h)
|
On
March 3, 2016, the Company issued 1,400,000 common shares upon the conversion of $6,636
of convertible notes payable.
|
|
|
i)
|
On
March 10, 2016, the Company issued 1,800,000 common shares upon the conversion of $8,316
of convertible notes payable.
|
|
|
j)
|
On
April 5, 2016, the Company issued 2,500,000 common shares upon the conversion of $10,650
of convertible notes payable.
|
|
|
k)
|
On
April 26, 2016, the Company issued 3,029,556 common shares upon the conversion of $10,000
of convertible notes payable and $2,300 of accrued interest.
|
F-19