Safe
Harbor Statement
This
report on Form 10-Q contains certain forward-looking statements. All statements
other than statements of historical fact are “forward-looking statements” for
purposes of these provisions, including any projections of earnings, revenues,
or other financial items; any statements of the plans, strategies, and
objectives of management for future operation; any statements concerning
proposed new products, services, or developments; any statements regarding
future economic conditions or performance; statements of belief; and any
statement of assumptions underlying any of the foregoing. Such forward-looking
statements are subject to inherent risks and uncertainties, and actual results
could differ materially from those anticipated by the forward-looking
statements.
These
forward-looking statements involve significant risks and uncertainties,
including, but not limited to, the following: competition, promotional costs,
and risk of declining revenues. Our actual results could differ materially from
those anticipated in such forward-looking statements as a result of a number of
factors. These forward-looking statements are made as of the date of this
filing, and we assume no obligation to update such forward-looking statements.
The following discusses our financial condition and results of operations based
upon our consolidated financial statements which have been prepared in
conformity with accounting principles generally accepted in the United States.
It should be read in conjunction with our financial statements and the notes
thereto included elsewhere herein.
Item
1. Financial Statements
The
unaudited interim consolidated financial statements of Nilam Resources, Inc.
(the “Company”, “Nilam”, “we”, “our”, “us”) follow. All currency references in
this report are in U.S. dollars unless otherwise noted.
The
accompanying Condensed Consolidated Financial Statements of Nilam Resources,
Inc. should be read in conjunction with the Company's Annual Report on Form 10-K
for the year ended April 30, 2009. Significant accounting policies disclosed
therein have not changed except as noted below.
Nilam
Resources
(A
Development Stage Company)
Unaudited
(Express
in U.S. Dollars)
October
31, 2009
|
Unaudited
Consolidated Balance Sheets
|
2
|
|
Unaudited
Consolidated Statements of Operations
|
3
|
|
Unaudited
Consolidated Statement of Stockholders Equity
(Deficit)
|
4
|
|
Unaudited
Consolidated Statements of Cash Flows
|
5
|
|
Unaudited
Notes to the Consolidated Financial Statements
|
6
|
NILAM
RESOURCES INC.
(AN
EXPLORATION STAGE COMPANY)
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
October
31, 2009
(Stated in US
Dollars)
(AN
EXPLORATION STAGE COMPANY)
CONTENTS
|
PAGE
|
1
|
INTERIM
CONSOLIDATED BALANCE SHEETS AS OF OCTOBER 31, 2009 AND APRIL 30,
2009.
|
|
|
|
|
|
PAGE
|
2
|
INTERIM
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED
OCTOBER 31, 2009 AND 2008, AND FOR THE PERIOD FROM JULY 11, 2005
(INCEPTION) TO OCTOBER 31, 2009.
|
|
|
|
|
|
PAGE
|
3
|
INTERIM
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT FOR THE PERIOD
FROM JULY 11, 2005 (INCEPTION) TO OCTOBER 31, 2009.
|
|
|
|
|
|
PAGE
|
4
|
INTERIM
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED OCTOBER 31,
2009 AND 2008, AND FOR THE PERIOD FROM JULY 11, 2005 (INCEPTION) TO
OCTOBER 31, 2009.
|
|
|
|
|
|
PAGES
|
5 –
12
|
NOTES
TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
|
NILAM
RESOURCES INC.
(AN
EXPLORATION STAGE COMPANY)
INTERIM
CONSOLIDATED BALANCE SHEET
(Unaudited)
(STATED
IN U.S. DOLLARS)
|
|
|
October
31, 2009
|
|
|
April
30, 2009
(Audited)
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
Cash
|
|
$
|
30
|
|
|
$
|
79
|
|
|
|
|
|
30
|
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
Mineral
properties (Note 3)
|
|
|
300,000
|
|
|
|
300,000
|
|
|
TOTAL ASSETS
|
|
$
|
300,030
|
|
|
$
|
300,079
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
576,698
|
|
|
$
|
400,189
|
|
|
Convertible
debenture (Note 7)
|
|
|
10,187
|
|
|
|
-
|
|
|
Due
to related parties (Note 6)
|
|
|
15,158
|
|
|
|
14,705
|
|
|
Notes
payable – related parties (Note 4)
|
|
|
10,338
|
|
|
|
60,338
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
612,381
|
|
|
|
475,232
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
DEFICIT
|
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.001 par value, 1,000,000 shares authorized, none issued
and outstanding
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock, $0.001 par value, 345,000,000 shares authorized, 33,160,779 shares
and 21,160,779 shares issued and outstanding, respectively (Note
5)
|
|
|
33,161
|
|
|
|
21,161
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
paid in capital (Note 5)
|
|
|
759,805
|
|
|
|
707,677
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
deficit during exploration stage
|
|
|
(1,105,317
|
)
|
|
|
(903,991
|
)
|
|
Total
stockholders’ deficit
|
|
|
(312,351
|
)
|
|
|
(175,153
|
)
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’
DEFICIT
|
|
$
|
300,030
|
|
|
$
|
300,079
|
|
Nature of
Operations (Note 1)
Approved
on Behalf of the Board:
/s/ Len De Melt
,
Director
See
accompanying notes to financial statements.
(AN
EXPLORATION STAGE COMPANY)
INTERIM
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(STATED
IN U.S. DOLLARS)
|
|
|
For
the Three Months Ended October 31, 2009
|
|
|
For
the Three Months Ended October 31, 2008
|
|
|
For
the Six Months Ended October 31, 2009
|
|
|
For
the Six Months Ended October 31, 2008
|
|
|
For
the Period From July 11, 2005 (Inception) to October 31,
2009
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounting
and auditing fees
|
|
$
|
1,600
|
|
|
$
|
14,822
|
|
|
$
|
4,300
|
|
|
$
|
27,264
|
|
|
$
|
97,005
|
|
|
Consulting
fees
|
|
|
30,000
|
|
|
|
-
|
|
|
|
60,000
|
|
|
|
-
|
|
|
|
239,000
|
|
|
Exploration
costs and expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
10,453
|
|
|
|
3,397
|
|
|
|
59,555
|
|
|
General
and administrative
|
|
|
2,088
|
|
|
|
2,728
|
|
|
|
4,177
|
|
|
|
5,890
|
|
|
|
36,753
|
|
|
Insurance
|
|
|
-
|
|
|
|
6,750
|
|
|
|
-
|
|
|
|
13,500
|
|
|
|
27,000
|
|
|
Investor
relation
|
|
|
-
|
|
|
|
15,758
|
|
|
|
-
|
|
|
|
16,341
|
|
|
|
55,393
|
|
|
Listing
and filing fees
|
|
|
935
|
|
|
|
2,463
|
|
|
|
1,010
|
|
|
|
3,338
|
|
|
|
12,638
|
|
|
Legal
fees
|
|
|
800
|
|
|
|
30,722
|
|
|
|
2,200
|
|
|
|
47,853
|
|
|
|
109,658
|
|
|
Management
fees
|
|
|
60,000
|
|
|
|
75,000
|
|
|
|
120,000
|
|
|
|
75,000
|
|
|
|
330,000
|
|
|
Stock-based
compensation (Note 6)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,828
|
|
|
|
100,977
|
|
|
Travel
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,437
|
|
|
Wages
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,630
|
|
|
Impairment
of mineral property
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
8,000
|
|
|
Total
Operating Expenses
|
|
|
95,423
|
|
|
|
148,243
|
|
|
|
202,140
|
|
|
|
194,411
|
|
|
|
1,107,046
|
|
|
LOSS
FROM OPERATIONS
|
|
|
(95,423
|
)
|
|
|
(148,243
|
)
|
|
|
(202,140
|
)
|
|
|
(194,411
|
)
|
|
|
(1,107,046
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME
(EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency transaction gain
|
|
|
814
|
|
|
|
|
|
|
|
814
|
|
|
|
-
|
|
|
|
1,722
|
|
|
Interest
income
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Other (Expense)/Income
|
|
|
814
|
|
|
|
|
|
|
|
814
|
|
|
|
-
|
|
|
|
1,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS AND COMPREHENSIVE LOSS
|
|
$
|
(94,609
|
)
|
|
$
|
(148,243
|
)
|
|
$
|
(201,326
|
)
|
|
$
|
(194,411
|
)
|
|
$
|
(1,105,317
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and Diluted Loss per Common Share
|
|
$
|
(0.00
|
)
|
|
$
|
(0.13
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.17
|
)
|
|
$
|
(0.25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding during the period – basic and
diluted
|
|
|
33,160,779
|
|
|
|
1,160,779
|
|
|
|
30,486,866
|
|
|
|
1,160,779
|
|
|
|
4,473,211
|
|
See
accompanying notes to financial statements.
(AN
EXPLORATION STAGE COMPANY)
INTERIM
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
FOR
THE PERIOD FROM JULY 11, 2005 (INCEPTION) TO OCTOBER 31, 2009
(STATED
IN U.S. DOLLARS)
|
|
|
|
|
|
Common
Stock
|
|
|
Additional
Paid-In
Capital
|
|
|
Accumulated
Deficit
During
Exploration
Stage
|
|
|
Total
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
(As
restated-
Note
2)
|
|
|
(As
restated-
Note
2)
|
|
|
(As
restated-
Note
2)
|
|
|
Common
stock issued to founders for cash ($0.01 per share)
|
|
|
-
|
|
|
$
|
-
|
|
|
|
600,000
|
|
|
$
|
600
|
|
|
$
|
5,400
|
|
|
$
|
-
|
|
|
$
|
6,000
|
|
|
Common
stock issued for cash ($0.10 per share)
|
|
|
-
|
|
|
|
-
|
|
|
|
550,000
|
|
|
|
550
|
|
|
|
54,450
|
|
|
|
-
|
|
|
|
55,000
|
|
|
Net
loss for the period from October 11, 2005 (inception) to April 30,
2006
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(10,193
|
)
|
|
|
(10,193
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
APRIL 30, 2006
|
|
|
-
|
|
|
|
-
|
|
|
|
1,150,000
|
|
|
|
1,150
|
|
|
|
59,850
|
|
|
|
(10,193
|
)
|
|
|
50,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In-kind
contribution of stock to officer
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30,000
|
|
|
|
-
|
|
|
|
30,000
|
|
|
Net
loss for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(68,479
|
)
|
|
|
(68,479
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
APRIL 30, 2007
|
|
|
-
|
|
|
|
-
|
|
|
|
1,150,000
|
|
|
|
1,150
|
|
|
|
89,850
|
|
|
|
(78,672
|
)
|
|
|
12,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In-kind
contribution of property
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,000
|
|
|
|
-
|
|
|
|
5,000
|
|
|
In-kind
contribution of expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,950
|
|
|
|
-
|
|
|
|
5,950
|
|
|
Stock-base
compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
100,977
|
|
|
|
-
|
|
|
|
100,977
|
|
|
Common
stock issued for cash ($25 per share)
|
|
|
-
|
|
|
|
-
|
|
|
|
10,779
|
|
|
|
11
|
|
|
|
269,426
|
|
|
|
-
|
|
|
|
269,437
|
|
|
Net
loss for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(342,242
|
)
|
|
|
(342,242
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
APRIL 30, 2008
|
|
|
-
|
|
|
|
-
|
|
|
|
1,160,779
|
|
|
|
1,161
|
|
|
|
471,203
|
|
|
|
(420,914
|
)
|
|
|
51,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued on property acquisition
|
|
|
-
|
|
|
|
-
|
|
|
|
20,000,000
|
|
|
|
20,000
|
|
|
|
180,000
|
|
|
|
-
|
|
|
|
200,000
|
|
|
In-kind
contribution of expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
56,474
|
|
|
|
-
|
|
|
|
56,474
|
|
|
Net
loss for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(483,077
|
)
|
|
|
(483,077
|
)
|
|
BALANCE,
APRIL 30, 2009
|
|
|
-
|
|
|
|
-
|
|
|
|
21,160,779
|
|
|
|
21,161
|
|
|
|
707,677
|
|
|
|
(903,991
|
)
|
|
|
(175,153
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In-kind
contribution of expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,128
|
|
|
|
-
|
|
|
|
4,128
|
|
|
Debt
settlement
|
|
|
-
|
|
|
|
-
|
|
|
|
12,000,000
|
|
|
|
12,000
|
|
|
|
48,000
|
|
|
|
-
|
|
|
|
60,000
|
|
|
Net
loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(201,326
|
)
|
|
|
(201,326
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
OCTOBER 31, 2009
|
|
|
-
|
|
|
$
|
-
|
|
|
|
33,160,779
|
|
|
$
|
33,161
|
|
|
$
|
759,805
|
|
|
$
|
(1,105,317
|
)
|
|
$
|
(312,351
|
)
|
See
accompanying notes to financial statements.
(AN
EXPLORATION STAGE COMPANY)
INTERIM
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(STATED
IN U.S. DOLLARS)
|
|
|
For
the Six Months Ended
October
31, 2009
|
|
|
For
the Six Months Ended
October
31, 2008
|
|
|
For
the Period From
July
11, 2005
(Inception)
to
October
31, 2009
|
|
|
CASH
FLOWS USED IN OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the period
|
|
$
|
(201,326
|
)
|
|
$
|
(194,411
|
)
|
|
$
|
(1,105,317
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
exchange gain
|
|
|
(813
|
)
|
|
|
|
|
|
|
(813
|
)
|
|
Impairment
of mineral properties
|
|
|
-
|
|
|
|
-
|
|
|
|
5,000
|
|
|
In-kind
contribution of expenses
|
|
|
4,128
|
|
|
|
51,469
|
|
|
|
66,553
|
|
|
In-kind
contribution of shares
|
|
|
-
|
|
|
|
-
|
|
|
|
30,000
|
|
|
Stock-based
compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
100,977
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid
|
|
|
-
|
|
|
|
16,157
|
|
|
|
-
|
|
|
Accounts
receivable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Accounts
payable and accrued expenses
|
|
|
176,509
|
|
|
|
25,711
|
|
|
|
576,699
|
|
|
Due
to related parties
|
|
|
10,453
|
|
|
|
76,051
|
|
|
|
25,157
|
|
|
Net
Cash Used In Operating Activities
|
|
|
(11,049
|
)
|
|
|
(
25,023
|
)
|
|
|
(301,744
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS USED IN INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of mineral rights
|
|
|
-
|
|
|
|
-
|
|
|
|
(50,000
|
)
|
|
Net
Cash Used In Investing Activities
|
|
|
-
|
|
|
|
-
|
|
|
|
(50,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common shares
|
|
|
-
|
|
|
|
-
|
|
|
|
330,436
|
|
|
Notes
payable – related parties
|
|
|
-
|
|
|
|
11,779
|
|
|
|
10,338
|
|
|
Proceeds
from convertible debenture
|
|
|
11,000
|
|
|
|
-
|
|
|
|
11,000
|
|
|
Net
Cash Provided By Financing Activities
|
|
|
11,000
|
|
|
|
11,779
|
|
|
|
351,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH
|
|
|
(49
|
)
|
|
|
(13,244
|
)
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AT BEGINNING OF PERIOD
|
|
|
79
|
|
|
|
13,329
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AT END OF PERIOD
|
|
$
|
30
|
|
|
$
|
85
|
|
|
$
|
30
|
|
See
accompanying notes to financial statements.
(AN
EXPLORATION STAGE COMPANY)
NOTES
TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
AS OF OCTOBER 31,
2009
NOTE
1. NATURE OF OPERATIONS
These
consolidated financial statements inclusive of the accounts of the Nilam
Resources Inc. and its Peruvian subsidiary Nilam Resources Peru SAC. Nilam
Resources Inc. (an exploration stage company) (the “Company”) was incorporated
under the laws of the State of Nevada on July 11, 2005. The Company is a natural
resource exploration company with the objective of acquiring, exploring and if
warranted and feasible, developing natural resource
properties. On November 23, 2007, the Company incorporated
Nilam Resources Peru SAC, in Peru, as a wholly-owned subsidiary. The
purpose of the new subsidiary is to hold the Company’s Peruvian properties and
to carry on such business in Peru as is necessary to maintain, explore and
develop the Company’s properties. Nilam Resources Peru SAC. holds the
Company’s rights in respect of the Llippa and Linderos
properties. The continuation of the Company is in the exploration
stage of its mineral property development and to date has not yet established
any proven mineral reserves on its existing properties. The continued
operations of the Company and the recoverability of the carrying value of its
assets are ultimately dependent upon the ability of the Company to achieve
profitable operations.
These
financial statements have been prepared on a going concern basis, which implies
the Company will continue to realize its assets and discharge its liabilities in
the normal course of business. Management cannot provide assurance that the
Company will ultimately achieve profitable operations or become cash flow
positive, or raise additional debt and/or equity capital. If the
Company is unable to raise additional capital in the near future, due to the
Company’s liquidity problems, management expects that the Company will need to
liquidate assets, seek additional capital on less favorable terms and/or pursue
other remedial measures. These financial statements do not include
any adjustments related to the recoverability and classification of assets or
the amounts and classification of liabilities that might be necessary should the
Company be unable to continue as a going concern.
NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) Basis of
Presentation
These
unaudited consolidated financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information. These financial statements are condensed and
do not include all disclosures required for annual financial statements. The
organization and business of the Company, accounting policies followed by the
Company and other information are contained in the notes to the Company’s
audited consolidated financial statements filed as part of the Company’s April
30, 2009 Annual Report on Form 10-K. This quarterly report should be read in
conjunction with the annual report.
In the
opinion of the Company’s management, these consolidated financial statements
reflect all adjustments necessary to present fairly the Company’s consolidated
financial position at October 31, 2009, and the consolidated results of
operations and the consolidated statements of cash flows for the six months
ended October 31, 2009 and 2008. The results of operations for the three and six
months ended October 31, 2009 are not necessarily indicative of the results to
be expected for the entire fiscal year.
(B) Basis of
Consolidation
The
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiary, Nilam Resources Peru SAC. Intercompany accounts and
transactions have been eliminated in consolidation.
(C) Use of
Estimates
The
preparation of financial statements in conformity with United States generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities at the
date of the financial statements and revenues and expenses during the period
reported. By their nature, these estimates are subject to measurement
uncertainty and the effect on the financial statements of changes in such
estimates in future periods could be significant. Significant areas requiring
management’s estimates and assumptions are determining the fair value of
transactions involving common stock, valuation and impairment losses on mineral
property acquisitions and valuation of stock-based compensation.
(D) Cash and Cash
Equivalents
For
purposes of the cash flow statements, the Company considers all highly liquid
investments with original maturities of three months or less at the time of
purchase to be cash equivalents.
(E) Mineral
Properties
The
Company is primarily engaged in the acquisition, exploration and development of
mineral properties. Mineral property acquisition costs are initially capitalized
when incurred using the guidance in EITF 04-02, “
Whether Mineral Rights Are Tangible
or Intangible Assets
”. The Company assesses the carrying costs
for impairment under SFAS 144, “
Accounting for Impairment or
Disposal of Long Lived Assets”
. The Emerging Issues Task Force issued
EITF 04-3,
Mining Assets:
Impairment and Business Combinations
requires mining companies to
consider cash flows related to the economic value of mining assets (including
mineral properties and rights) beyond those assets’ proven and probable
reserves, as well as anticipated market price fluctuations, when testing the
mining assets for impairment in accordance with SFAS 144.
(F) Loss Per
Share
Basic and
diluted net loss per common share is computed based upon the weighted average
common shares outstanding as defined by Financial Accounting Standards No. 128,
“Earnings Per Share.” Basic loss per share includes no dilution and it’s
computed by dividing loss attributable to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted
earnings per share reflect the potential dilution of securities that could share
in the earnings (loss) of the Company. The common shares potentially
issuable on conversion of outstanding warrants were not included in the
calculation of weighted average number of shares outstanding because the effect
would be anti-dilutive.
(G) Income
Taxes
The
Company accounts for income taxes under the Statement of Financial Accounting
Standards No. 109, “Accounting for Income Taxes” (“Statement
109”). Under Statement 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. Under Statement 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
(H) Foreign Currency
Translation
The
financial statements are presented in United States dollars. In
accordance with SFAS No. 52, “Foreign Currency Translation”, foreign denominated
monetary assets and liabilities are translated to their United States dollar
equivalents using foreign exchange rates which prevailed at the balance sheet
date. Revenue and expenses are translated at average rates of
exchange during the year. Related translation adjustments are
reported as a separate component of stockholders’ equity, whereas gains or
losses resulting from foreign currency transactions are included in results of
operations.
(I) Business
Segments
The
Company operates in one industry segment within two geographical areas, Canada
and Peru. The mineral properties are held solely in the Peru
segment.
(J) Hierarchy of Generally
Accepted Accounting Principles
In May
2008, the FASB issued Statement No. 162, The Hierarchy of Generally Accepted
Accounting Principles (“SFAS 162”). FAS 162 identifies the sources of accounting
principles and the framework for selecting the principles to be used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with GAAP. SFAS 162 directs the GAAP hierarchy to the
entity, not the independent auditors, as the entity is responsible for selecting
accounting principles for financial statements that are presented in conformity
with GAAP. SFAS 162 is effective 60 days following the SEC’s approval of the
Public Company Accounting Oversight Board amendments to remove the GAAP
hierarchy from the auditing standards. SFAS 162 did not have a material impact
on our financial statements.
(K) Accounting for Financial
Guarantee Insurance Contracts
In May
2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee
Insurance Contracts-an interpretation of FASB Statement No. 60.” Diversity
exists in practice in accounting for financial guarantee insurance contracts by
insurance enterprises under FASB Statement No. 60, “Accounting and Reporting by
Insurance Enterprises.” This results in inconsistencies in the recognition and
measurement of claim liabilities. This statement requires that an insurance
enterprise recognize a claim liability prior to an event of default (insured
event) when there is evidence that credit deterioration has occurred in an
insured financial obligation. This statement requires expanded disclosures about
financial guarantee insurance contracts. The accounting and disclosure
requirements of the statement will improve the quality of information provided
to users of financial statements. SFAS No. 163 is effective for financial
statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years. The company adopted SFAS No. 163 and
it did not have a material impact on the Company’s financial
position.
(L) Subsequent
Events
In May
2009, the FASB issued SFAS No. 165, "Subsequent Events," which establishes
general standards for accounting for and disclosures of events that occur after
the balance sheet date but before the financial statements are issued or are
available to be issued. The pronouncement requires the disclosure of the date
through which an entity has evaluated subsequent events and the basis for that
date, whether that date represents the date the financial statements were issued
or were available to be issued. SFAS 165 is effective with interim and annual
financial periods ending after June 15, 2009. The Company adopted SFAS 141R
on August 1, 2009. This standard did not have a material impact on the Company’s
financial statements.
(M) Recent Accounting
Pronouncements
In June
2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial
Assets—an amendment of FASB Statement” (“SFAS 166”). SFAS No. 166 is
intended to establish standards of financial reporting for the transfer of
assets and transferred assets to improve the relevance, representational
faithfulness, and comparability. SFAS 166 was established to clarify
derecognition of assets under FASB Statement No. 140, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of
Liabilities. SFAS No. 166 is effective for financial statements
issued for fiscal years and interim periods beginning after November 15, 2009.
The company does not expect a material impact on the financial statements
.
In May
2008, the FASB issued FSP No. APB 14-1, “Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement)” (“FSP 14-1”). FSP 14-1 applies to convertible debt instruments
that, by their stated terms, may be settled in cash (or other assets) upon
conversion, including partial cash settlement, unless the embedded conversion
option is required to be separately accounted for as a derivative under FASB
Statement No. 133. Convertible debt instruments within the scope of FSP 14-1 are
not addressed by the existing APB 14. FSP 14-1 would require that the liability
and equity components of convertible debt instruments within the scope of FSP
14-1 be separately accounted for in a manner that reflects the entity’s
nonconvertible debt borrowing rate. This will require an allocation of the
convertible debt proceeds between the liability component and the embedded
conversion option (i.e., the equity component). The difference between the
principal amount of the debt and the amount of the proceeds allocated to the
liability component would be reported as a debt discount and subsequently
amortized to earnings over the instrument’s expected life using the effective
interest method. FSP APB 14-1 is effective for the Company’s fiscal year
beginning July 1, 2009 and will be applied retrospectively to all periods
presented. The Company does not expect to have a material impact on the
financial statements.
In
June 2009, the FASB issued SFAS No. 167, “Amendments to FASB
Interpretation No. 46(R)” (“SFAS No. 167”). SFAS No. 167
eliminates the exception to consolidate a qualifying special-purpose entity,
changes the approach to determining the primary beneficiary of a variable
interest entity and requires companies to more frequently re-assess whether they
must consolidate variable interest entities. Under the new guidance, the
primary beneficiary of a variable interest entity is identified qualitatively as
the enterprise that has both (a) the power to direct the activities of a
variable interest entity that most significantly impact the entity’s economic
performance, and (b) the obligation to absorb losses of the entity that
could potentially be significant to the variable interest entity or the right to
receive benefits from the entity that could potentially be significant to the
variable interest entity. SFAS No. 167 becomes effective for the
Company’s fiscal 2011 year-end and interim reporting periods thereafter.
The Company does not expect SFAS No. 167 to have a material impact on its
financial statements.
In July
2009, the FASB issued SFAS No. 168, "FASB Accounting Standards Codification"
("SFAS 168"), as the single source of authoritative nongovernmental U.S.
generally accepted accounting principles (GAAP). The Codification is effective
for interim and annual periods ending after September 15, 2009. All existing
accounting standards are superseded as described in SFAS 168. All other
accounting literature not included in the Codification is non-authoritative.
Management is currently evaluating the impact of the adoption of SFAS 168 but
does not expect the adoption of SFAS 168 to impact the Company's results of
operations, financial position or cash flows.
(N) Concentration of Credit
Risk
Cash
includes deposits at a Canadian financial institution in US currency which is
not covered by either the US FDIC limits or the Canadian CDI limits and
therefore the entire cash balance of $30 is uninsured. The Company has placed
its cash in a high credit quality financial institution.
(O) Fair Value of Financial
Instruments
SFAS No.
157 “Fair Value Measurements” requires an entity to maximize the use of
observable inputs and minimize the use of unobservable inputs when measuring
fair value. SFAS No. 157 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. SFAS No. 157 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,
amounts due to related parties, notes payable, and convertible debenture.
Pursuant to SFAS No. 157, the fair value of the Company’s cash equivalents is
determined based on “Level 1” inputs, which consist of quoted prices in active
markets for identical assets. The Company believes that the recorded values of
all of its other financial instruments approximate their current fair values
because of their nature and respective maturity dates or durations.
(P) Comprehensive
Income
SFAS No.
130,
“Reporting Comprehensive
Income”
establishes standards for the reporting and display of
comprehensive income and its components in the financial statements. As at
October 31, 2009, no element of comprehensive income or loss was
noted.
NOTE
3. MINERAL PROPERTIES
The
Company is in its early stages of exploration and unable to allocate any
economic values beyond the proven and probable reserves. In the absence of
proven and probable reserves, acquisition costs to date are considered to be
impaired and accordingly, have been written off.
Lucky Strike
Property
Pursuant
to a mineral property purchase and sale agreement dated March 1, 2006, the
Company acquired a 100% interest in the mineral rights at the Lucky Strike
Property located in the Similkameen Mining Davison, British Columbia, Canada for
a purchase price of $3,000. During the year ending April 30, 2006,
the company was unable to allocate any economic values beyond the proven and
probable reserves. In addition, the Company has no intention of pursuing the
development of these properties. Therefore, the property is
considered to be impaired and accordingly, has been written off.
Llippa
Property
On
December 10, 2007, the Company, through its wholly owed Peruvian subsidiary,
entered into an agreement with MRC 1 Exploraciones EIRL of Peru, to purchase the
Llippa Project, Peru, for $100,000. Llippa is a mineral claim consisting of
two major mining concessions, the Prospera mine and La Prospera
XXI.
El Baron
Property
On
December 10, 2007, the Company, through its wholly owed Peruvian subsidiary,
acquired the El Baron (a.k.a “El Varon”) mineral claim from a director of the
Company, who transferred the claim to the Company for no
consideration. El Varon project consists of the Tati and San Marino
No.2 mining concessions, Peru. The value of $5,000 was assigned to
the property based on actual staking costs incurred by the director (Note 5).
During the year ending April 30, 2008, the company was unable to allocate any
economic values beyond the proven and probable reserves. In addition, the
Company has no intention of pursuing the development of these
properties. Therefore, the property is considered to be impaired and
accordingly, has been written off.
Linderos
property
On
February 10, 2009, the Company, through its wholly owed Peruvian subsidiary,
acquired the right, title and interest in and to Linderos mining concessions,
Peru. In consideration for the property, the Company issued 20,000,000 of it
common shares (Note 5). The property is a subject to a 1% net smelter
royalty.
NOTE
4. NOTES PAYABLE – RELATED PARTY
On August
28, 2007, the Company issued a promissory note in the amount of $10,000 to a
related party. This promissory note is unsecured, bears no interest
and is due on demand.
On
November 6, 2007, a shareholder loaned the Company $338 to establish a bank
account in Peru. There are no terms of repayment and the amount is non-interest
bearing.
On
November 20, 2007, the Company issued a promissory note in the amount of $50,000
to a related party for their interest in the Llippa property. The
value of the transfer occurred at fair value. This promissory note is unsecured,
bears no interest and is due on demand. On June 10, 2009, this promissory note
was settled with common shares of the Company (Note 5).
NOTE
5. STOCKHOLDERS’ DEFICIT
On
February 28, 2006, the Company issued 600,000 shares of common stock to its
founders for cash of $6,000 ($0.01 per share).
On April
28, 2006, the Company issued 550,000 shares of common stock for cash of $55,000
($0.10 per share).
On
February 26, 2007, the Board of Directors approved a 5 for 1 forward stock split
for all shareholders of the Company as of March 5, 2007. All share and per share
amounts have been retroactively restated to reflect this stock
split.
During
fiscal 2007, a former officer and director gave the President and Chief
Financial Officer 30,000 shares each of the Company’s common stock. The shares
were valued for financial statements purpose at a recent price of $0.5 per share
or $30,000.
On
November 2, 2007, 600,000 restricted shares were transferred from two outgoing
Directors to two incoming Directors split evenly between the two incoming
Directors. No compensation expense was recognized as the transfer of shares was
not intended to compensate the incoming Directors for services to the
Company.
On
December 3, 2007, the Company sold 6,810 units for cash of $170,208 ($25 per
unit). Each unit consists of one share of common stock and one
warrant to purchase one share of common stock at $30 per share exercisable for
two years. Of the 6,810 units, 4,303 units were issued to a
Director.
On
January 16, 2008, the Company sold 3,969 units for cash of $99,229 ($25 per
unit). Each unit consists of one share of common stock and one
warrant to purchase one share of common stock at $30 per share exercisable for
two years. Of the 3,969 units, 394 units were issued to a
Director.
During
fiscal 2008, a benefit of $100,997 was assigned to 4,697 units issued to the
Directors of the Company.
During
fiscal 2008, the Company calculated the fair value of a Director’s fee of
$5,950; and staking right contribution from another Director in the amount of
$5,000, which are all reflected as an in-kind contribution of
expenses.
During
fiscal 2009, the Company calculated imputed interest of $4,224; fair value of a
Director’s fee of $6,000; and expenses paid by a former director and offices of
the Company in the amount of $46,250, which are all reflected as an in-kind
contribution of expenses.
On
October 10, 2008, the Board of Directors approved a 1 for 50 reverse stock split
for all shareholders of the Company as of as of August 22, 2008. All share and
per share amounts have been retroactively restated to reflect this stock
split.
On
February 10, 2009, the Company issued 20,000,000 shares of common stock on the
acquisition of Linderos property.
On June
10, 2009, the Company converted $60,000 of its debt into 12,000,000 common
shares at a price of $0.005 per share (Note 4 and 6).
During
the six months ended October 31, 2009, the Company calculated imputed interest
of $1,128 and fair value of a Director’s fee of $3,000, which are all reflected
as an in-kind contribution of expenses.
Share Purchase
Warrants
|
|
|
Number
|
|
|
Weighted Average
|
|
|
|
|
of Warrants
|
|
|
Exercise
Price
|
|
|
Balance,
April 30, 2008, April 30, 2009, and October 31, 2009
|
|
|
10,777
|
|
|
$
|
30
|
|
As at
October 31, 2009, the Company has the following warrants
outstanding:
|
Shares
|
|
|
Exercise
Price
|
|
Expiry
Date
|
|
|
6,810
|
|
|
$
|
30
|
|
December
3, 2009
|
|
|
3,969
|
|
|
$
|
30
|
|
January
16, 2010
|
|
|
10,777
|
|
|
|
|
|
|
NOTE
6. RELATED PARTY TRANSACTIONS
On August
28, 2007, the Company issued a promissory note in the amount of $10,000 to a
related party. This promissory note is unsecured, bears no interest
and is due on demand (Note 4).
On
November 20, 2007, the Company issued a promissory note in the amount of $50,000
to a related party (Note 4). This promissory note is unsecured, bears no
interest and is due on demand. On June 10, 2009, this note was settled with
common shares of the Company (Note 5).
On
December 2007 and January 2008, a total of 4,697 units (Note 5) were sold to the
Directors of the Company in connection with the private placement. The
benefit of $100,997 was assigned to those units, computed by taking the
difference between the market price per unit and the selling price per unit and
multiplying it by number of shares issued to Directors.
During
the fiscal 2008, the officer loaned the Company $338. This loan is unsecured,
bears no interest and is due on demand (Note 4).
During
the six months ended October 31, 2009, the Company calculated imputed interest
of $1,128 on the related parties’ notes.
During
the six months ended October 31, 2009, the officer of the Company incurred
$10,453 for the expenses paid on behalf of the Company of which $10,000 was
settled with the common shares of the Company (Note 5). As of October 31, 2009,
$12,667 was owed to this officer.
As of
October 31, 2009, $2,491 was owed to the former officer of the Company for the
expenses paid on behalf of the Company in fiscal 2009.
During
the six months ended October 31, 2009, the Company accrued $60,000 of management
fees to the officer of the Company. As of October 31, 2009, $150,000 was owed to
these officers included in accounts payable.
NOTE
7. CONVERTIBLE DEBENTURES
On August
10, 2009, the Company issued a 5% convertible debenture with a principal amount
of $10,187 which is due and payable on August 10, 2010. Interest is due at the
maturity date payable at the option of the Company in cash or shares. The
principal and accrued interest on the debenture may be converted at any time
into shares of the Company’s common stock at a price of $0.05 per share, at the
option of the holder.
NOTE 8.
COMPARATIVE FIGURES
Certain
of the comparative figures have been classified to conform to the presentation
adopted in the current period.
Item
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Critical
Accounting Policies - Mineral Interest
The
Company is primarily engaged in the acquisition, exploration and development of
mineral properties. Mineral property acquisition costs are initially capitalized
when incurred using the guidance in EITF 04-02, “
Whether Mineral Rights Are Tangible
or Intangible Assets
”. The Company assesses the carrying costs
for impairment under SFAS 144, “
Accounting for Impairment or
Disposal of Long Lived Assets”
. The Emerging Issues Task Force issued
EITF 04-3,
Mining Assets:
Impairment and Business Combinations
requires mining companies to
consider cash flows related to the economic value of mining assets (including
mineral properties and rights) beyond those assets’ proven and probable
reserves, as well as anticipated market price fluctuations, when testing the
mining assets for impairment in accordance with SFAS 144.
Pursuant
to SFAS No. 144, the recoverability of the acquisition costs associated with the
purchase of mineral rights presumes to be insupportable prior to determining the
existence of a commercially minable deposit and have to be
expensed.
Going
Concern
Item
3. QUALITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
We are a
smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are
not required to provide information under this item.
Item
4. Controls and Procedures Over Financial Reporting
Conclusions of Management Regarding
Effectiveness of Disclosure Controls and Procedures.
Our
management, which includes our president and sole director, who are also the
principal financial officers of the Company, have further evaluated the
effectiveness of our disclosure controls and procedures pursuant to Exchange Act
Rule 15d-15(e) as of the end of the period covered by this report. Based on that
evaluation, the management has concluded that there was a material weakness
affecting our internal control over financial reporting and, as a result
management concluded that our disclosure controls and procedures were not
effective as of October 31, 2009.
Management’s Report on Internal
Control over Financial Reporting.
The
Company’s management is responsible for establishing and maintaining adequate
internal control over financial reporting for the company. The Company’s
internal control over financial reporting is a process to provide reasonable
assurance regarding the reliability of our financial reporting for external
purposes in accordance with accounting principles generally accepted in the
United States of America. Internal control over financial reporting includes
maintaining records that in reasonable detail accurately and fairly reflect our
transactions; providing reasonable assurance that transactions are recorded as
necessary for preparation of our financial statements; providing reasonable
assurance that receipts and expenditures of company assets are made in
accordance with management authorization; and providing reasonable assurance
that unauthorized acquisition, use or disposition of company assets that could
have a material effect on our financial statements would be prevented or
detected on a timely basis. Because of its inherent limitations, internal
control over financial reporting is not intended to provide absolute assurance
that a misstatement of our financial statements would be prevented or
detected.
The
management conducted an assessment of the effectiveness of the Company’s
internal control over financial reporting as of October 31, 2009 based on the
criteria for effective internal control over financial reporting established in
“Internal Control — Integrated Framework,” issued by the Committee of
Sponsoring Organizations (COSO) of the Treadway Commission. In its
evaluation, Management evaluated whether the Company had sufficient
“preventive controls”
which
are controls that have the objective of preventing the occurrence of errors or
fraud that could result in a misstatement of the financial statements, and
“detective controls”
which
have the objective of detecting errors or fraud that has already occurred that
could result in a misstatement of the financial statements. In
its evaluation, Management considered whether there were sufficient internal
controls over financial reporting, in the context of the Company’s control
environment, financial risk assessment, internal control activities, monitoring,
and communication to determine whether sufficient controls are present and
functioning effectively. Based upon this assessment, we determined
that there was a material weakness affecting our internal control over financial
reporting and, as a result of that weakness, our internal control over financial
reporting was not effective as of October 31, 2009. The material
weakness which has been disclosed to, and reviewed with, our independent
auditor.
Management’s
Remediation Initiatives
The
Company recognizes the importance of implementing and maintaining disclosure
controls and procedures and internal controls over financial reporting and is
working to implement an effective system of controls.
Management is currently
evaluating avenues for mitigating our internal controls weaknesses, but
mitigating controls that are practical and cost effective based on the size,
structure, and future existence of our organization. Since the
Company has not engaged in any substantive operations since the loss of the
right to purchase the Pativilca Mineral Property in Peru, or generated any
significant revenues, the Company is limited in its options for remediation
efforts. Management, within the confines of its budgetary resources, will engage
its outside accounting firm to assist with an assessment of the Company’s
internal controls over financial reporting on an on-going basis.
Because
of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that misstatements due to error or fraud will not
occur or that all control issues and instances of fraud, if any, within the
Company have been detected. These inherent limitations include the
realities that judgments in decision making can be faulty and that breakdowns
can occur because of simple error or mistake. The design of any system of
controls is based in part on certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed in achieving
its stated goals under all potential future conditions. Projections of any
evaluation of controls effectiveness to future periods are subject to risks.
This annual report does not include an attestation report of the Company’s
registered public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by the Company’s
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the company to provide only management’s
report in this annual report.
Changes
in internal control over financial reporting
Except as
noted above, there have been no changes during the quarter ended October 31,
2009 in the Company’s internal controls over financial reporting that have
materially affected, or are reasonably likely to materially affect, internal
controls over financial reporting.
Inherent
Limitations on Effectiveness of Controls
The
Company’s management does not expect that our Disclosure Controls or our
internal control over financial reporting will prevent or detect all error and
all fraud. A control system, no matter how well designed and operated, can
provide only reasonable, not absolute, assurance that the control system’s
objectives will be met. The design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Further, because of the inherent limitations
in all control systems, no evaluation of controls can provide absolute assurance
that misstatements due to error or fraud will not occur or that all control
issues and instances of fraud, if any, within the Company have been detected.
These inherent limitations include the realities that judgments in decision
making can be faulty and that breakdowns can occur because of simple error or
mistake. Controls can also be circumvented by the individual acts of some
persons, by collusion of two or more people, or management override of the
controls. The design of any system of controls is based in part on certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions. Projections of any evaluation of controls effectiveness to
future periods are subject to risks. Over time, controls may become inadequate
because of changes in conditions or deterioration in the degree of compliance
with policies or procedures.
PART
II - OTHER INFORMATION
Item
1. LEGAL PROCEEDINGS
As of
October 31, 2009, the end of the quarterly period covered by this report, the
Company was subject to one legal claim discussed below that has not been fully
resolved and that has arisen in the ordinary course of business. In the opinion
of management, the Company does not have a potential liability related to any
current legal proceeding and claim that would individually or in the aggregate
have a material adverse effect on its financial condition or operating results.
However, the results of legal proceedings cannot be predicted with certainty.
Should the Company fail to prevail in this legal matter against the Plaintiff,
the operating results of a particular reporting period would not be materially
adversely affected.
Stephen A. Zrenda, JR., P.C.
v. Nilam Resources, Inc.
Plaintiff
filed an action on October, 16, 2009 in the DISTRICT COURT OF OKLAHOMA COUNTY
STATE OF OKLAHOMA alleging there is an amount due of $24,803.50. The
Plaintiff seeks the amount due plus the cost of litigation. The
Company filed an answer denying the total amount due because the plaintiff did
not provide a detailed invoice of the fees due. In addition, the
Company asserts the Plaintiff has overcharged the company by the amount due, and
the Company had to hire another firm to resolve the discrepancies made by the
Plaintiff. At this time, both the Plaintiff and the Company are in
talks to settle this case. No court dates have been scheduled at this
time.
Item
1A. RISK FACTORS
Inherent
Risks in Our Business and the Mining Industry
The
search for valuable minerals as a business involves substantial
risks. The likelihood of our success and success in the mining
industry must be considered in light of the substantial risks, problems,
expenses, difficulties, complications and delays encountered in connection with
the exploration of the mineral properties that the Company plans to undertake.
These potential problems include, but are not limited to, the inherent
speculative nature of exploration of mining properties, numerous hazards
including pollution, cave-ins and other hazards against which we cannot, or may
elect not to, insure, burdensome government regulations and other legal
uncertainties, market fluctuations relating to the minerals and metals which we
seek to exploit, other unanticipated problems relating to exploration, and
additional costs and expenses that may exceed current estimates.
Compliance
with Government Regulation
The
Company will be required to comply with all regulations, rules and directives of
governmental authorities and agencies applicable to the exploration of minerals
in Peru.
The
Company will have to sustain the cost of reclamation and environmental mediation
for all exploration and development work undertaken. The amount of these costs
is not known at this time as we do not know the extent of the exploration
program that will be undertaken beyond completion of the currently planned work
programs. Because there is presently no information on the size,
tenor, or quality of any resource or reserves at this time, it is impossible to
assess the impact of any capital expenditures on earnings or our competitive
position in the event a potentially economic deposit is discovered.
If the
Company enters into production, the cost of complying with permit and regulatory
environment laws will be greater than in the exploration phases because the
impact on the project area is greater. Permits and regulations will be
required.
|
|
-
|
Water
discharge will have to meet water standards;
|
|
|
|
|
|
|
-
|
Dust
generation may have to be minimal or otherwise
re-mediated;
|
|
|
|
|
|
|
-
|
Dumping
of material on the surface may have to be re-contoured and
re-vegetated;
|
|
|
|
|
|
|
-
|
An
assessment of all material to be left on the surface will need to be
environmentally benign;
|
|
|
|
|
|
|
-
|
Ground
water will have to be monitored for any potential
contaminants;
|
|
|
-
|
The
socio-economic impact of the project will have to be evaluated and if
deemed negative, will have to be re-mediated;
and
|
|
|
|
|
|
|
-
|
There
will likely have to be an impact report of the work on the local fauna and
flora.
|
Item
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
On August
10 2009, the Company issued a 5% convertible debenture with a principal amount
of $10,187 that is due and payable on August 10, 2010. The interest
and principal is due at maturity at the option of the Company in either cash or
shares. The convertible debenture may be converted into the Company’s
common stock at a price of $0.05 per share, at the option of the
holder.
Item
3. DEFAULTS UPON SENIOR SECURITIES
None.
Item
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
None.
Item
5. OTHER INFORMATION
None.
Item
6. EXHIBITS AND REPORT ON FORM 8-K
|
31.1
|
Certification
of Mr. Len De Melt, Chief Executive Officer and Acting Chief Financial
officer, pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
31.2
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes
Oxley Act of 2002.
|
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on this behalf by the undersigned, thereunto duty
authorized.
|
|
Nilam
Resources, Inc.
|
|
|
|
|
|
|
|
Dated
December 21, 2009
|
By:
|
/s/ Len
De Melt
|
|
|
|
|
Len
De Melt
|
|
|
|
|
Director
and Chief Executive Officer
|
|
|
|
|
|
|