Notes to the
Condensed Consolidated
Financial Statements
June 30, 2013
(Unaudited)
NOTE 1 - ORGANIZATION AND DESCRIPTION
OF BUSINESS
Excelsior Gold Corporation (the
“Company”) was incorporated in the State of Utah on November 21, 2012. The Company is an Exploration Stage Company,
as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915,
Development Stage Entities
. The Company’s principal business is the acquisition and exploration of mineral resources.
The Company has not presently determined whether its properties contain mineral reserves that are economically recoverable.
NOTE 2 - SIGNIFICANT
ACCOUNTING POLICIES
This summary of significant accounting
policies of the Company is presented to assist in understanding the Company’s financial statements. The financial statements
and notes are representations of the Company’s management who are responsible for their integrity and objectivity. These
accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently
applied in the preparation of the financial statements. The following policies are considered to be significant:
a. Accounting Method
The Company recognizes income and
expenses based on the accrual method of accounting. The Company has elected a December 31 year-end.
b. Consolidation Policy
The condensed consolidated financial
statements include the accounts of Helmer Directional Drilling Corp. and Excelsior Gold Corp. All intercompany transactions have
been eliminated in these condensed consolidated financial statements.
c. Cash and Cash Equivalents
Cash equivalents are generally
comprised of certain highly liquid investments with original maturities of less than three months.
d. Use of Estimates in the Preparation
of Financial Statements
The preparation of financial statements
in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.
e. Basic and Fully Diluted Net
Loss per Share of Common Stock
In accordance with Financial Accounting
Standards No. ASC 260, “Earnings per Share,” basic net loss per common share is based on the weighted average number
of shares outstanding during the periods presented. Diluted earnings per share is computed using the weighted average number of
common shares plus dilutive common share equivalents outstanding during the period. There are no common stock equivalents as of
June 30, 2013.
HELMER DIRECTIONAL DRILLING CORP.
Notes to the
Condensed Consolidated
Financial Statements
June 30, 2013
(Unaudited)
NOTE 2 - SIGNIFICANT
ACCOUNTING POLICIES (Continued)
f. Property and Equipment
Property and equipment are stated
at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives
of the assets. When assets are disposed of, the cost and accumulated depreciation (net book value of the assets) are eliminated
and any resultant gain or loss reflected accordingly. Betterments and improvements are capitalized over their estimated useful
lives whereas repairs and maintenance expenditures on the assets are charged to expense as incurred.
g. Mining Assets
The Company has been in the exploration
stage since its formation on November 21, 2012 and has not yet realized any revenues from its planned operations. It is primarily
engaged in the acquisition, exploration and development of mineral properties. Mineral property acquisition costs are capitalized
when management has determined that probable future benefits consisting of a contribution to future cash inflows have been identified
and adequate financial resources are available or are expected to be available as required to meet the terms of property acquisition
and budgeted exploration and development expenditures. Mineral property acquisition costs are expensed as incurred if the criteria
for capitalization are not met. In the event that a mineral property is acquired from an unrelated third party through the issuance
of the Company’s shares, the mineral property will be recorded at the fair value of the respective property or the fair value
of the shares, whichever is more readily determinable.
h. Recent Accounting Pronouncements
We have reviewed accounting pronouncements
issued during the past two years and have adopted any that are applicable to the Company. We have determined that none had a material
impact on our financial position, results of operations, or cash flows for the period ended June 30, 2013.
i. Income Taxes
The Financial Accounting Standards
Board (FASB) has issued FASB ASC 740-10 (Prior authoritative literature: Financial Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109 (FIN 48)). FASB ASC 740-10 clarifies the accounting
for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with prior literature FASB Statement
No. 109, Accounting for Income Taxes. This standard requires a company to determine whether it is more likely than not that
a tax position will be sustained will be sustained upon examination based upon the technical merits of the position. If the
more-likely-than- not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial
statements. As a result of the implementation of this standard, the Company performed a review of its material tax positions
in accordance with recognition and measurement standards established by FASB ASC 740-10.
Deferred taxes are provided on
a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit
carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary
HELMER DIRECTIONAL DRILLING CORP.
Notes to the
Condensed Consolidated
Financial Statements
March 31, 2013
(Unaudited)
NOTE 2 - SIGNIFICANT
ACCOUNTING POLICIES (Continued)
differences are the differences
between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will
not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.
j. Concentrations of Credit Risk
Financial instruments that potentially
subject the Company to concentrations of credit risks consist of cash and cash equivalents. The Company places cash and cash equivalents
at well known quality financial institutions. Cash and cash equivalents at banks are insured by the Federal Deposit Insurance Corporation
for up to $250,000. The Company did not have any cash or cash equivalents in excess of this amount at June 30, 2013.
k. Basis of Financial Statement
Presentation
The accompanying interim unaudited
financial information has been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although
management believes that the disclosures are adequate to make the information presented not misleading. The interim financial statements
should be read in conjunction with the Company's annual financial statements, notes and accounting policies included in the Company's
annual report on form 10 K for the year ended December 31, 2012 as filed with the SEC. In the opinion of management, all adjustments,
consisting only of normal recurring adjustments, (consisting only of normal recurring adjustments and changes in estimates, where
appropriate) are necessary to present fairly the financial position of the Company as of June 30, 2013 and the related operating
results and cash flows for the interim period presented have been made. The results of operations of such interim period are not
necessarily indicative of the results of the full year.
l. Financial Instruments
The Company adopted FASB ASC 820-10-50,
“
Fair Value Measurements.
” This guidance defines fair value, establishes a three-level valuation hierarchy
for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three levels
are defined as follows:
Level 1 inputs
to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 inputs
to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable
for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 inputs
to valuation methodology are unobservable and significant to the fair measurement.
HELMER DIRECTIONAL DRILLING CORP.
Notes to the
Condensed Consolidated
Financial Statements
June 30, 2013
(Unaudited)
NOTE 2
- SIGNIFICANT ACCOUNTING POLICIES (Continued)
The carrying amounts reported in
the balance sheets for the cash and cash equivalents, receivables and current liabilities each qualify as financial instruments
and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and
their expected realization and their current market rate of interest.
NOTE 3 - GOING CONCERN
The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. The Company has an accumulated deficit at June 30, 2013 of $27,652
and has experienced periodic cash flow difficulties, all of which raise substantial doubt regarding the Company’s ability
to continue as a going concern.
To date the Company has funded
its operations through a combination of loans. The Company anticipates another net loss for the year ended December 31, 2013 and
with the expected cash requirements for the coming year, there is substantial doubt as to the Company’s ability to continue
operations.
The Company is attempting to improve
these conditions by way of financial assistance through issuances of additional equity and by generating revenues through sales
of products and services.
NOTE 4 - RELATED PARTY TRANSACTIONS
During the six months ended June
30, 2013 and the year ended December 31, 2012, a shareholder advanced $-0- and $37,200, respectively, to the Company. These amounts
are reflected as unsecured and non-interest bearing advances with no maturity date. As of June 30, 2013 and December 31, 2012,
the balance of these amounts was $115,866. The Company has also recorded accounts payable due to a shareholder of the Company in
the amount of $14,388 as of June 30, 2013.
NOTE 5 - PREFERRED STOCK
On March 14,
2013, the Company authorized the designation of 1,500 shares of Series M Convertible Preferred Stock ("Series M Stock").
The Series M Stock has a par value of $0.001 per share. The Series M Preferred Stock shall be subordinate to and rank junior to
all indebtedness of the Company now or hereafter outstanding. The
Series M Preferred Stock shall not
pay a dividend; provided that no cash dividends or distributions shall be declared or paid or set apart for payment on the Common
Stock unless such cash dividend or distribution is likewise declared, paid or set apart for payment on the Series M Stock.
Holders of the Series M Stock shall vote on an “as converted” basis, together as a single class, with the Common Stock,
on all matters requiring the approval, ratification or consent of holders of Common Stock of the Company.
The Common Stock
into which the Series M Preferred Stock is convertible shall, when issued, have all of the same voting rights as other issued and
outstanding Common Stock of the Company, and none of the rights of the Series M Stock.
HELMER DIRECTIONAL DRILLING CORP.
Notes to the
Condensed Consolidated
Financial Statements
June 30, 2013
(Unaudited)
NOTE 5 - PREFERRED STOCK (Continued)
On
or after the Issuance Date, at such time when the Company amends its Articles of Incorporation to increase the number of authorized
shares of Common Stock to such number that is equal to or greater than seven hundred million (700,000,000), the holder of any
such shares of Series M Stock shall automatically convert (a “Mandatory Conversion”) all of the shares of Series M
Stock held by such person into a number of fully paid and nonassessable shares of Common Stock equal to the product of (i) the
number of shares of Series M Stock; and (ii) the Conversion Multiple of Three Hundred One Thousand Six Hundred Ninety Nine (301,699).
In other words, for every share of Series M Stock held, the holder will receive 301,699 shares of common stock of the Company.
NOTE
6 - SHARE EXCHANGE AGREEMENT
On March 14, 2013 (the “Closing Date”), the Company entered into a share exchange agreement
(the “Exchange Agreement”) by and among the Company, Excelsior Gold Corporation, a Utah corporation (“Excelsior”),
and the shareholders of Excelsior, pursuant to which the Company purchased all of the outstanding common stock of Excelsior in
exchange for 1,000.999 shares of our Series M preferred stock, par value $0.001 per share (the “Series M Preferred Stock”)
(such transaction is sometimes referred to herein as the “Share Exchange”). The Series M Preferred Stock is convertible
into 302,000,000 shares of common stock, conditional upon the amendment of the Company’s Articles of Incorporation to increase
the number of authorized shares to 700,000,000. As a result of the Share Exchange, we are now the holding company of Excelsior
and operating a company in development of mining interests by drilling and proving mineral reserves specifically in our first
two properties located in Washington and Montana. As a condition to the Share Exchange, 155,466,645 shares of our common stock,
par value $0.001 (the “Retired Stock”) then outstanding were cancelled and retired. The Company intends to change
its name to Excelsior Gold Corp.
As of June 30, 2013, the Company
has not amended its articles of incorporation and the preferred shares have not been converted. Due to insufficient authorized
shares, the preferred stock issued in the reorganization has been accounted for as a derivative liability. As part of the recapitalization,
the derivative was valued at the net asset value of Excelsior at December 31, 2012. There are no significant changes in the valuation
between the date of the share exchange (March 14, 2013) and June 30, 2013.
The effect of the Exchange Agreement
is such that effectively a reorganization of the entities has occurred for accounting purposes and is deemed to be a reverse acquisition.
Subsequent to the Closing pursuant to the Acquisition Agreement, Excelsior and its stockholders have effective control of Helmer,
even though Helmer has acquired the Company. For accounting purposes, Excelsior will be deemed to be the accounting acquirer in
the transaction and, consequently, the transaction will be treated as a recapitalization of Excelsior, i.e., a capital transaction
involving the issuance of shares by Helmer for the shares of Excelsior. Accordingly, the combined assets, liabilities and results
of operations of the Excelsior will become the historical financial statements of Helmer at the closing of the Acquisition Agreement,
and Helmer’s assets, liabilities and results of operations have been consolidated with those of Excelsior commencing as of
March 14, 2013, the date of the Closing. No step-
HELMER DIRECTIONAL DRILLING CORP.
Notes to the
Condensed Consolidated
Financial Statements
June 30, 2013
(Unaudited)
NOTE 6 - SHARE EXCHANGE AGREEMENT (Continued)
up in basis or intangible assets
or goodwill will be recorded in this transaction. As this transaction is being accounted for as a reverse acquisition, all direct
costs of the transaction have been expensed as incurred. All professional fees and other costs associated with transaction have
been expensed as incurred. The Company has determined to continue to utilize December 31 as the end of its fiscal year.