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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
ACT OF 1934
For the fiscal year ended November 30, 2005
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or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transaction period from to
Commission File number 000-32181
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BROOKMOUNT EXPLORATIONS, INC.
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(Exact name of Company as specified in charter)
Nevada 98-0201259
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State or other jurisdiction of (I.R.S. Employee
Incorporation or Organization I.D. No.)
666 Burrard Street, Suite 600
Vancouver BC, Canada V6C 2X8
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number,
including area code 604-676-5244
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Securities registered pursuant to section 12(b) of the Act:
Title of each share Name of each exchange on which registered
None None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock
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(Title of Class)
Check whether the Issuer (1) filed all reports required to be filed by section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for a shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes [X] No [ ]
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained herein, and will not be contained, to the best
of the registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes [ X ] No [ ]
State issuer's revenues for its most recent fiscal year: Nil
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State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act.)
$3,153,230 as at February 27, 2006
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State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
21,710,711 shares of common stock as at February 27, 2006
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TABLE OF CONTENTS
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Page
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PART I
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ITEM 1. DESCRIPTION OF BUSINESS 4
ITEM 2. DESCRIPTION OF PROPERTY 12
ITEM 3. LEGAL PROCEEDINGS 17
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITIES HOLDERS 17
PART II
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ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 17
ITME 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 17
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 19
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE 36
ITEM 8A. CONTROLS AND PROCEDURES 36
PART III
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ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTOERS AND CONTROL PERSONS 37
ITEM 10. EXECUTIVE COMPENSATION 39
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICAL 39
OWNERS AND MANAGEMENT
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 40
ITEM 13. EXHIBITS AND REPORTS 41
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 41
SIGNATURES 42
PART 1
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ITEM 1. DESCRIPTION OF BUSINESS
HISTORY AND ORGANIZATION
Brookmount Explorations, Inc. (the "Company"), a Nevada Corporation, was
incorporated on December 9, 1999. Since inception, the Company has not been in
bankruptcy, receivership or similar proceedings. It has not had any material
reclassification, merger, consolidation, purchase or sale of a significant
amount of assets not in the ordinary course of business. The Company has no
subsidiaries and no affiliated companies. The Company's shares are quoted on the
NASD over the counter bulletin board (OTCBB) and currently trading under the
symbol "BMXI".
Subsequent to November 30, 2005, the Company's shares were listed on the Berlin
Stock Exchange under the symbol "B6P". The Company also filed an application
with the Frankfurt Stock Exchange.
The Company's executive offices are located at 666 Burrard Street, Suite 600,
Vancouver, B.C., Canada, V6C 2X8 (Telephone: 604-676-5244).
The Company's Articles of Incorporation currently provide that the Company is
authorized to issue 200,000,000 shares of common stock, par value $0.001 per
share. As at November 30, 2005, there were 16,768,685 shares outstanding.
The Company commenced operations as an exploration stage company during the
fiscal year ended November 30, 2005.
The Company owns an interest in five mineral claims located in Quebec which are
known as the Brookmount claims. During the year ended November 30, 2005 the
Company completed a mineral property purchase agreement, as amended, with Mr.
Peter Flueck dated January 24, 2005, and acquired a 100% interest in the
Mercedes 100 mineral property located in Comas District, Concepcion Department,
Junin Province, Peru. Mr. Flueck acts as the Company's president and a director.
Our principal exploration property is the Mercedes 100 Property.
In addition, during the year ended November 30, 2005, the Company acquired a
right to purchase a 100% interest in the Mooseland property located in Halifax
County Nova Scotia pursuant to a binding letter of agreement dated June 14,
2005. In September 2005, the Company had withdrawn its participation in the
Mooseland Property project and forfeited the right to purchase a 100% interest
in the property.
Subsequent to November 30, 2005, Brookmount signed a Letter of Intent to acquire
56% interest in the Rock Creek Property by acquiring 722161 BC Ltd., a private
corporation, the owner of the interest in the Rock Creek Property. The property
located approximately 10 kilometers southeast of Rock Creek, B.C. in the
Greenwood Mining Division.
Brookmount Claims
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The Company presently has the mineral rights to five mineral claims called the
Brookmount claims located in Chazel Township, Abitibi West County, Quebec.
4
The Company retained J.G. Burns & Associates of Timmins, Ontario were retained
to write a geological report on these claims. The claims are in good standing
until November 14, 2006.
No ore body has been discovered on the Brookmount claims. Even with a major
exploration program, there is no assurance an ore body will be discovered.
Presently, the Company does not have sufficient funds to undertake any further
exploration activities unless it obtains funds from its directors and officers
or raises additional capital through the sale of its equity. The directors do
not have any arrangements in this regard.
The Company has no sources of revenue either from the Brookmount claim or any
other asset.
Mercedes 100 Property
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The Mercedes 100 property consists of six mineral claims. We are the beneficial
owner of a 100% interest in the claims. There are no other underlying agreements
or interests in the property.
Specifics of the six mineral claims are as follows:
Claim Area
Claim Name Claim Number (Hectares)
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Mercedes 100 C-08020145X011 450.00
Celeste C-010151600 298.84
Celeste No. 2 C-010151500 218.58
Celeste No. 4 C-010151700 200.00
Nuevo Herraje Cuatro C-010154100 996.96
Nueva Charo C-010051101 446.93
Subsequent to November 30, 2005, Brookmount filed an application to acquire
additional 500 hectares of land at the Mercedes 100 property.
Acquisition and Maintenance of Mineral Rights in Peru
The general mining law of Peru defines and regulates all mining activity, from
sampling and prospecting to commercialization, exploitation and processing.
Mining concessions are granted in defined areas generally ranging from 100 to
1,000 hectares in size. Mining titles are irrevocable and perpetual, as long as
the titleholder maintains payment of government fees. No royalties or other
production-based monetary obligations are imposed on holders of mining
concessions. Instead, a holder of mineral concessions must pay an annual
maintenance fee of $3.00 per hectare for each concession actually acquired or
for a pending application by June 30 of each year. The concession holder must
sustain a minimum level of annual commercial production of greater than $100 per
hectare in gross sales within eight years of the granting of the concession or,
if the concession is not yet in production, the annual rental increases to $4.00
per hectare for the ninth through fourteenth years of the granting of the
concession and to $10.00 per hectare thereafter. The concession will terminate
if the annual fee is not paid for three years in total or for two consecutive
years. The term of the concession is indefinite as long as the property is
maintained by payment of rental fees.
The Peruvian Constitution and the Civil Code protect a mineral title holder with
the same rights as a private property holder. The holder's rights are distinct
and independent from the ownership of the land on which it is located, even when
both belong to the same person. Mining rights are defensible against third
parties, transferable, chargeable and may be the subject of any contract or
transaction.
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Description, Location and Access
The Mercedes 100 property is accessed from Lima by an excellent paved mountain
highway to Concepcion, just 10 kilometers short of the provincial capital of
Huancayo, then by a paved road to Santa Roda de Ocopa. A good all-weather gravel
road connects Ocopa with Satipo, a village in the Amazonas river basin. The
Mercedes Mine camp is 36 kilometers from Santa Rosa.
Although the property is within 12 degrees south of the equator, it lies between
4,300 and 4,500 meters above sea level in an area that is treeless and cold.
There are two main seasons in the region of the property: a dry cool winter with
sunny days and cold nights (to -4(0) Celsius) lasting from May to October, and a
wet, cool summer that lasts from November to April and is characterized for its
intense rains, snow and hail storms and average temperatures of 8(0) Celsius.
A 33 kilovolt power line follows the main gravel road past the Mercedes 100
property. Pomamanta, the nearest village to the property, about five kilometers
to the east, is electrified on a limited basis. The line is 4.5 kilometres from
the property site. Water for mining and drilling is available from streams and
seeps in the hills above the property.
Nearby towns such as Concepcion and Huancayo are modern and offer most
necessities. There is a narrow guage railroad from Lima to Huancayo. This
connects the mining and smelting center of La Oroya, 130 kilometers to the west.
On the property site, there is a large brick building that could be refurnished
to serve as a camp for 20 to 30 people.
Mineralization and Exploration History
In the 1990's, Leader Mining Inc. entered into an option agreement with Mr.
Peter Flueck for a 50% working interest in the property and commissioned MPH
Geological Consulting to assess the property's potential in 1996. Although the
report contained a range of values of zinc, lead, gold and silver mineralization
found on the property, as well as calculations of proven, potential, probable
and possible reserves, we do not have sufficient information that would be
necessary to determine if these figures are accurate or were calculated in
accordance with acceptable mining standards.
Prior to our acquisition of the Mercedes 100 property, approximately $3,000,000
has been spent on the property. Most of these funds were spend on road building,
re-opening underground workings on the property, topographical surveys,
metallurgical tests, several exploitation campaigns and numerous sampling
programs.
Geological Report: Mercedes 100 property
We obtained a geological report on the Mercedes 100 property that was prepared
by Guillermo Salazar, a professional geologist, of Calgary, Alberta. We
commissioned the report in March 2004. The geological report summarizes the
results of previous exploration on the Mercedes 100 property and makes a
recommendation for further exploration work.
In his report, Mr. Salazar recommends further exploration of the Mercedes 100
property that would include the following:
1. Survey of the property's several know showings, adits and trenches. It is
recommended that be done by confirming that the property boundaries are properly
located, that the portals, adits and trenches are re-located with respect to the
property boundaries and to other cultural and topographic features such as
access roads, camps, mine dumps and main rivers.
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2. There is about 200 tonnes of run-of-mine mineral in 50 kilogram sacks stacked
along the road near the property. The sacks are in variable states of
deterioration. They are, however, readily available for shipping if a nearby
mill were to take the material for processing. The cost to us would include the
cost of check assaying, re-sacking and transportation to the mill. Preliminary
sampling of this rock indicates an average of 8.73 ounces per ton silver and
1.34% zinc. Mr. Salazar recommends that this be investigated.
3. A drilling program consisting of sixteen drill holes and totaling 1,810
meters designed to test prospective areas of the claims is recommended.
4. The geological interpretation of the claims needs to be confirmed.
This requires the following:
- a satellite image interpretation map. The primary objective of this would be
to define the trace continuity of the faults and veins recognized on the
property
- a structural airphoto and geological map. The airphotos used for this map
could also be used to produce a ground controlled topographic map without the
errors in the government data packages. The required detail of this
recommendation depends on the results from the survey described in paragraph
one above.
- the results from these studies should be followed up with careful prospecting
of the targets thus defined.
Mr. Salazar proposes the following budget for exploration:
Survey the property's showings, adits and trenches: $7,500
Truck rental (30 days at $100 per day): $3,000
Check assaying of 220 tonnes, re-sacking of material
and identification of potential purchasers: $10,000
Application for drilling permits: $3,000
Drilling of 1,800 meters in 16 holes: $271,500
Permit closure reporting: $3,000
Satellite interpretation of alteration and lineaments: $10,000
Testing of sacked mineralized rock (30 samples at $20 each): $600
Drill core testing (300 samples at $20 each): $6,000
Gridding work: $75,000
Report writing: $15,000
Office and administration: $7,500
Miscellaneous: $40,000
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Total: $449,100
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In January 2006 we have completed a $400,000 private placement of the Company's
restricted common stock to finance our exploration program.
Compliance with Government Regulation
The General Mining Law of Peru is the primary body of law with regards to
environmental regulations. It is administered by the Ministry of Energy and
Mines (the "MEM"). The MEM can require a mining company to prepare an
environmental evaluation, an environmental impact assessment, a program for
environmental management and adjustment and a closure plan. Mining companies are
also subject to annual environmental audits.
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A mining company that has completed its permitted exploration program must
submit an impact study when applying for a new concession, to increase the size
of its existing processing operations by more than 50% or to execute any other
mining project. A company must also set forth its plan for compliance with the
environmental laws and regulations, including its planned mining works,
investments, monitoring systems, waste management control and site restoration.
The plan is considered approved if the MEM does not respond after 60 days of
filing. If the MEM or an "interested party" can show just cause, the plan may be
modified during first year.
A mining company must also submit a closure plan for each component of its
operations. The closure plan must outline the measures that will be taken to
protect the environment over the short, medium and long term from solids,
liquids and gasses generated by the mining works. The General Mining Law of Peru
has in place a system of sanctions or financial penalties that can be levied
against a mining company not in compliance with the environmental regulations.
Brookmount Claims
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The Company presently has the mineral rights to five mineral claims called the
Brookmount claims located in Chazel Township, Abitibi West County, Quebec.
The Company retained J.G. Burns & Associates of Timmins, Ontario to prepare a
geological report on these claims. The claims are in good standing until
November 14, 2006.
No ore body has been discovered on the Brookmount claims. Even with a major
exploration program, there is no assurance an ore body will be discovered.
Presently, the Company does not have sufficient funds to undertake any further
exploration activities unless it obtains funds from its directors and officers
or raises additional capital through the sale of its equity. The directors do
not have any arrangements in this regard.
The Company has no sources of revenue either from the Brookmount claim or any
other asset.
Repeat of above paragraphs
Employees
The Company does not have any full time employees and the directors and officers
devote such time as is required to the affairs of the Company. Once a major
exploration program commences the Company will need the officers to devote more
time to the activities of the Company or it will be required to hire consultants
to undertake the work.
Available Information
The Company's shares are listed on the OTCBB, and, as required, the Company will
hold annual general meetings and distribute certain documents, including
financial statements, to shareholders of record.
Presently, the Company files with the United States Securities and Exchange
Commission (the "SEC") on Forms 10-KSB and 10-QSB.
The public may read and copy any material the Company files with the SEC at the
SEC's Public Reference Room at 100 F Street NE, N.W., Washington, D.C., 20549.
The public may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. The Company is files its periodic reports
electronically and therefore the public can review the Company's filing on the
SEC Internet site that contains reports, proxy, and information statements, and
other information regarding the Company. This information can be obtained by
accessing the SEC website address at http://www.sec.gov.
8
The Company's internet address is www.brookmount.com
Research and Development Expenditures
We did not incur any research and development expenditures during the fiscal
year ended November 30, 2005.
Subsidiaries
We do not have any subsidiaries.
Patents and Trademarks
We do not own, either legally or beneficially, any patents or trademarks.
RISK FACTORS
An investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below and the other information in this
prospectus before investing in our common stock. If any of the following risks
occur, our business, operating results and financial condition could be
seriously harmed. The trading price of our common stock could decline due to any
of these risks, and you may lose all or part of your investment.
THE MINERAL PROPERTIES IN WHICH WE HAVE AN INTEREST, THE BROOKMOUNT CLAIMS AND
THE MERCEDES PROPERTY, HAVE NO RESERVES.
Our sole mineral property assets are the Brookmount claims in Quebec and the
Mercedes property in Peru. As both the Brookmount and the Mercedes properties
are in the exploration stage, they do not generate any cash flow. Accordingly,
we have no means of producing any income. We anticipate incurring losses for the
foreseeable future.
IF WE DO NOT OBTAIN ADDITIONAL FINANCING, OUR BUSINESS WILL FAIL.
Our current operating funds are less than necessary to complete planned
exploration on our mineral properties, and therefore we will need to obtain
additional financing in order to complete our business plan. As of November 30,
2005, we had cash in the amount of $20,447. We currently do not have any
operations and we have no income.
Our business plan calls for significant expenses in connection with the
exploration of the Brookmount claims and the Mercedes property. We do not have
sufficient funds to complete recommended exploration on the properties and
ongoing administrative expenses.
We will also require additional financing if the costs of the exploration of our
properties are greater than anticipated. We will require additional financing to
sustain our business operations if we are not successful in earning revenues
once exploration is complete. We do not currently have any arrangements for
financing and we can provide no assurance to investors that we will be able to
find such financing if required. Obtaining additional financing would be subject
to a number of factors, including the market prices for metals such as gold,
investor acceptance of our properties and general investor sentiment. These
factors may make the timing, amount, terms or conditions of additional financing
unavailable to us.
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The most likely source of future funds presently available to us is through the
sale of equity capital. Any sale of share capital will result in dilution to
existing shareholders. The only other anticipated alternative for the financing
of further exploration would be the offering by us of an interest in our
properties to be earned by another party or parties carrying out further
exploration thereof, which is not presently contemplated.
BECAUSE WE HAVE ONLY RECENTLY COMMENCED BUSINESS OPERATIONS, WE FACE A HIGH RISK
OF BUSINESS FAILURE.
We have not yet commenced exploration on the Mercedes 100 property. Accordingly,
we have no way to evaluate the likelihood that our business will be successful.
To date, we have been involved primarily in organizational activities and the
acquisition of mineral properties. We have not earned any revenues as of the
date of this report. Potential investors should be aware of the difficulties
normally encountered by new mineral exploration companies and the high rate of
failure of such enterprises. The likelihood of success must be considered in
light of the problems, expenses, difficulties, complications and delays
encountered in connection with the exploration of the mineral properties that we
plan to undertake. These potential problems include, but are not limited to,
unanticipated problems relating to exploration, and additional costs and
expenses that may exceed current estimates.
Prior to completion of our exploration stage, we anticipate that we will incur
increased operating expenses without realizing any revenues. We therefore expect
to incur significant losses into the foreseeable future. We recognize that if we
are unable to generate significant revenues from development of the Merecedes
100 property and the production of minerals from the claims, we will not be able
to earn profits or continue operations.
There is no history upon which to base any assumption as to the likelihood that
we will prove successful, and it is doubtful that we will generate any operating
revenues or ever achieve profitable operations. If we are unsuccessful in
addressing these risks, our business will most likely fail.
BECAUSE OF THE SPECULATIVE NATURE OF EXPLORATION OF MINERAL PROPERTIES, THERE IS
A SUBSTANTIAL RISK THAT OUR BUSINESS WILL FAIL.
The search for valuable minerals as a business is extremely risky. We can
provide investors with no assurance that the mineral claims that we have an
interest in contain commercially exploitable reserves of valuable metals.
Exploration for minerals is a speculative venture necessarily involving
substantial risk. The expenditures to be made by us in the exploration of the
optioned mineral properties may not result in the discovery of commercial
quantities of minerals. Problems such as unusual or unexpected formations and
other conditions are involved in mineral exploration and often result in
unsuccessful exploration efforts. In such a case, we would be unable to complete
our business plan.
BECAUSE MANAGEMENT HAS NO TECHNICAL EXPERIENCE IN MINERAL EXPLORATION, OUR
BUSINESS HAS A HIGHER RISK OF FAILURE.
None of our directors has any professional training or technical credentials in
the exploration, development and operation of mines. As a result, we may not be
able to recognize and take advantage of potential acquisition and exploration
opportunities in the sector without the aid of qualified geological consultants.
As well, with no direct training or experience, our management may not be fully
aware of the specific requirements related to working in this industry. Their
decisions and choices may not be well thought out and our operations and
ultimate financial success may suffer irreparable harm as a result.
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BECAUSE OF THE INHERENT DANGERS INVOLVED IN MINERAL EXPLORATION, THERE IS A RISK
THAT WE MAY INCUR LIABILITY OR DAMAGES AS WE CONDUCT OUR BUSINESS.
The search for valuable minerals involves numerous hazards. As a result, we may
become subject to liability for such hazards, including pollution, cave-ins and
other hazards against which we cannot insure or against which we may elect not
to insure. The payment of such Liabilities may have a material adverse effect on
our financial position.
IF WE BECOME SUBJECT TO BURDENSOME GOVERNMENT REGULATION OR OTHER LEGAL
UNCERTAINTIES, OUR BUSINESS WILL BE NEGATIVELY AFFECTED.
There are several governmental regulations that materially restrict mineral
property exploration and development. Under Peruvian mining law, to engage in
certain types of exploration will require work permits. While these current laws
will not affect our current exploration plans, when we proceed with drilling
operations on the Mercedes 100 property, we will incur modest regulatory
compliance costs.
BECAUSE OUR DIRECTORS OWN 53.15% OF OUR OUTSTANDING COMMON STOCK, THEY COULD
MAKE AND CONTROL CORPORATE DECISIONS THAT MAY BE DISADVANTAGEOUS TO OTHER
MINORITY SHAREHOLDERS.
Our directors own approximately 51.15% of the outstanding shares of our common
stock. Accordingly, they will have a significant influence in determining the
outcome of all corporate transactions or other matters, including mergers,
consolidations, and the sale of all or substantially all of our assets. They
will also have the power to prevent or cause a change in control. The interests
of our directors may differ from the interests of the other stockholders and
thus result in corporate decisions that are disadvantageous to other
shareholders.
WE MAY NOT BE ABLE TO OPERATE AS A GOING CONCERN AND OUR BUSINESS MAY FAIL.
The Independent Auditor's Report to our audited financial statements for the
period ended November 30, 2005, indicates that there are a number of factors
that raise substantial doubt about our ability to continue as a going concern.
Such factors identified in the report are that we are in the pre-exploration
stage, we have no established source of revenue and that we are dependent on our
ability to raise capital from shareholders or other sources to sustain
operations.
OUR STOCK PRICE IS SUBJECT TO WIDE FLUCTUATIONS THAT MAY CAUSE STOCKHOLDERS TO
LOSE THEIR INVESTMENTS.
If a market for our common stock develops, we anticipate that the market price
of our common stock will be subject to wide fluctuations in response to several
factors, including:
(1) actual or anticipated variations in our results of operations; (2) our
ability or inability to generate new revenues; (3) increased competition; and
(4) conditions and trends in the mineral exploration industry.
Since our common stock is traded on the NASD over the counter bulletin board,
our stock price may be impacted by factors that are unrelated or
disproportionate to our operating performance. These market fluctuations, as
well as general economic, political and market conditions, such as recessions,
interest rates or international currency fluctuations may adversely affect the
market price of our common stock.
11
Forward-Looking Statements
This Form 10-KSB contains forward-looking statements that involve risks and
uncertainties. We use words such as anticipate, believe, plan, expect, future,
intend and similar expressions to identify such forward-looking statements. You
should not place too much reliance on these forward-looking statements. Our
actual results are likely to differ materially from those anticipated in these
forward-looking statements for many reasons, including the risks faced by us
described in the above "Risk Factors" section and elsewhere in this document.
ITEM 2. DESCRIPTION OF PROPERTY
BROOKMOUNT PROPERTY
The Brookmount property consists of five claims totalling approximately 500
acres, which are located in Chazel Township, Abitibi West County, Quebec. A 100%
interest in these claims were recorded in the name of George Fournier, which he
holds in trust for the Company, on December 20, 1999, and subsequently
registered on February 1, 2000. The claims are in good standing until November
16, 2006.
Location of Brookmount claim
The claims lie in northwestern Quebec some 100 miles North, North East from the
city of Rouyn-Noranda, Quebec. The claims are easily accessible by gravel and
logging roads.
History of the Brookmount mining area
Chazel Township and the general surrounding area have been prospected and
explored since the early 1900s. Gold was originally the main commodity sought,
but interest in base metals increased following the discovery in 1922 of the
Oditan copper-zinc occurrence in the township and in 1925 of the Normetal
copper-zinc-silver-gold deposit. Exploration for copper-nickel and asbestos
deposits was undertaken in the 1970s but since the 1980s the major emphasis once
again shifted to gold.
Past Exploration of the Brookmount claim
Summaries for work conducted on properties now overlain by the Brookmount claim
are as follows.
1973-1975: Dome Explorations (Canada) Limited ("Dome")
Dome's 41 full lot claims in Chazel and Dission Townships included the present
Brookmount property, and were staked to cover several anomalies defined by an
airborne electromagnetic survey contracted by the Quebec government in 1972.
Ground magnetic and horizontal loop electromagnetic (HLEM) surveys conducted in
1973 defined a strong 3/10 mile long HLEM anomaly with a low but precise
magnetic correlation. Hole 60C-1, drilled on the property in 1974 to a depth of
100 yards, tested the anomaly. A 5.3 yard section and mineralized with 10%
pyrite, a rock type often found in the presence of copper and gold
mineralization, assayed 0.08% copper.
An HLEM survey conducted over the remainder of the property in 1975 defined a
strong, long, formational conductor, as well as four shorter anomalies
approximately 220 yards south of the former. Two of the shorter anomalies lie
within the Brookmount claims and are situated about 220 to 275 yards south of
the north boundary. Drill testing was recommended for both conductors but there
are no records to indicate that either was ever drilled.
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1986-1987: Resources Macamic Inc. ("Macamic")
Macamic held a contiguous, irregularly shaped block of 97 claims in Chazel
Township and Dission Township. The present Brookmount claims were included
within their property limits.
The property was acquired as a gold project. Work conducted in 1986 included
induced polarization (IP), HLEM, magnetic and geological surveys. Nine short
lines of IP scattered about the property were surveyed. On one line, which
extended from the north onto the Brookmount property, a well defined anomaly
coincident with an HLEM conductor (Dome survey) was detected. The anomaly was
recommended as a first priority drill target.
Macamic's magnetic and HLEM surveys covered the Brookmount property, and two
HLEM anomalies were defined within it. One anomaly extended for over 880 yards
and showed a weak magnetic correlation and corresponded in form to the Dome
anomaly. It was rated a first priority target. The second anomaly was considered
to be an extension of the first anomaly and was rated a second priority target.
Topography and Infrastructure
Within the general area of the Brookmount claims, the topography is basically
flat with only the occasional low hill. Elevation ranges from 352 yards on the
property to 3/10 mile. Vegetation in the area is mixed boreal forest. Tree
species present on the property are spruce, jackpine balsam, tamarack, cedar,
birch and poplar. Glacial till and glacial-lacustrine clay soils dominate the
area. The area is extensively covered by low, swampy ground.
No infrastructure exists on the property. Infrastructure in the general area
includes
a) an intricate road network;
b) electrical power - the grid extends to Authier Nord, 4.4
miles from the property;
c) railway - the main east/west line of the Canadian National
Railway passes 10.6 miles to the south;
d) numerous base metal and gold mines and mills; and
e) a copper smelter in Rouyn-Noranda.
Most goods and services as well as experienced persons required for both
exploration and mining are readily available in the towns of Macamic, La Sarre
and Rouyn-Noranda and the surrounding area.
Exploration work performed on the Brookmount claim
The Company has not commenced exploration work on the Brookmount claims. The
claims are in good standing until November 14, 2006.
Mercedes 100 Property
By an agreement dated July 3, 2003, and amended on January 24, 2005, the Company
has also entered into an agreement with its president, Peter Flueck, whereby the
Company has agreed to purchase a 100% interest in six mineral concessions
comprising a total of 2,611 hectares located in Ahuigrande Parish, Comas
District, Concepcion Province of the Department of Junin, Peru. In order to
acquire a 100% interest in the Mercedes 100 property, the Company must pay
$22,500 (paid) to Mr. Flueck and issue a total of 5,000,000 shares (issued) of
restricted common stock in our capital as follows:
13
- 2,900,000 shares to the vendor, Mr. Flueck; and
- 1,050,000 shares to each of the other two directors of the Company.
Title to the Mercedes 100 property
The Mercedes 100 property consists of six mineral claims. We are the beneficial
owner of a 100% interest in the claims. There are no other underlying agreements
or interests in the property.
Specifics of the six mineral claims are as follows:
Claim Area
Claim Name Claim Number (Hectares)
---------- ------------ ----------
Mercedes 100 C-08020145X011 450.00
Celeste C-010151600 298.84
Celeste No. 2 C-010151500 218.58
Celeste No. 4 C-010151700 200.00
Nuevo Herraje Cuatro C-010154100 996.96
Nueva Charo C-010051101 446.93
Acquisition and Maintenance of Mineral Rights in Peru
The general mining law of Peru defines and regulates all mining activity, from
sampling and prospecting to commercialization, exploitation and processing.
Mining concessions are granted in defined areas generally ranging from 100 to
1,000 hectares in size. Mining titles are irrevocable and perpetual, as long as
the titleholder maintains payment of government fees. No royalties or other
production-based monetary obligations are imposed on holders of mining
concessions. Instead, a holder of mineral concessions must pay an annual
maintenance fee of $3.00 per hectare for each concession actually acquired or
for a pending application by June 30 of each year. The concession holder must
sustain a minimum level of annual commercial production of greater than $100 per
hectare in gross sales within eight years of the granting of the concession or,
if the concession is not yet in production, the annual rental increases to $4.00
per hectare for the ninth through fourteenth years of the granting of the
concession and to $10.00 per hectare thereafter. The concession will terminate
if the annual fee is not paid for three years in total or for two consecutive
years. The term of the concession is indefinite as long as the property is
maintained by payment of rental fees.
The Peruvian Constitution and the Civil Code protect a mineral title holder with
the same rights as a private property holder. The holder's rights are distinct
and independent from the ownership of the land on which it is located, even when
both belong to the same person. Mining rights are defensible against third
parties, transferable, chargeable and may be the subject of any contract or
transaction.
Description, Location and Access
The Mercedes 100 property is accessed from Lima by an excellent paved mountain
highway to Concepcion, just 10 kilometers short of the provincial capital of
Huancayo, then by a paved road to Santa Roda de Ocopa. A good all-weather gravel
road connects Ocopa with Satipo, a village in the Amazonas river basin. The
Mercedes Mine camp is 36 kilometers from Santa Rosa.
Although the property is within 12 degrees south of the equator, it lies between
4,300 and 4,500 meters above sea level in an area that is treeless and cold.
There are two main seasons in the region of the property: a dry cool winter with
sunny days and cold nights (to -4(0) Celsius) lasting from May to October, and a
wet, cool summer that lasts from November to April and is characterized for its
intense rains, snow and hail storms and average temperatures of 8(0) Celsius.
14
A 33 kilovolt power line follows the main gravel road past the Mercedes 100
property.
Pomamanta, the nearest village to the property, about five kilometers to the
east, is electrified on a limited basis. The line is 4.5 kilometres from the
property site. Water for mining and drilling is available from streams and seeps
in the hills above the property.
Nearby towns such as Concepcion and Huancayo are modern and offer most
necessities. There is a narrow guage railroad from Lima to Huancayo. This
connects the mining and smelting center of La Oroya, 130 kilometers to the west.
On the property site, there is a large brick building that could be refurnished
to serve as a camp for 20 to 30 people.
Mineralization and Exploration History
In the 1990's, Leader Mining Inc. entered into an option agreement with Mr.
Peter Flueck for a 50% working interest in the property and commissioned MPH
Geological Consulting to assess the property's potential in 1996. Although the
report contained a range of values of zinc, lead, gold and silver mineralization
found on the property, as well as calculations of proven, potential, probable
and possible reserves, we do not have sufficient information that would be
necessary to determine if these figures are accurate or were calculated in
accordance with acceptable mining standards.
Prior to our acquisition of the Mercedes 100 property, approximately $3,000,000
has been spent on the property. Most of these funds were spend on road building,
re-opening underground workings on the property, topographical surveys,
metallurgical tests, several exploitation campaigns and numerous sampling
programs.
Geological Report: Mercedes 100 property
We have obtained a geological report on the Mercedes 100 property that was
prepared by Guillermo Salazar, a professional geologist, of Calgary, Alberta. We
commissioned the report in March 2004. The geological report summarizes the
results of previous exploration on the Mercedes 100 property and makes a
recommendation for further exploration work.
In his report, Mr. Salazar recommends further exploration of the Mercedes 100
property that would include the following:
1. Survey of the property's several know showings, adits and trenches. It is
recommended that be done by confirming that the property boundaries are properly
located, that the portals, adits and trenches are re-located with respect to the
property boundaries and to other cultural and topographic features such as
access roads, camps, mine dumps and main rivers.
2. There is about 200 tonnes of run-of-mine mineral in 50 kilogram sacks stacked
along the road near the property. The sacks are in variable states of
deterioration. They are, however, readily available for shipping if a nearby
mill were to take the material for processing. The cost to us would include the
cost of check assaying, re-sacking and transportation to the mill. Preliminary
sampling of this rock indicates an average of 8.73 ounces per ton silver and
1.34% zinc. Mr. Salazar recommends that this be investigated.
15
3. A drilling program consisting of sixteen drill holes and totaling 1,810
meters designed to test prospective areas of the claims is recommended.
4. The geological interpretation of the claims needs to be confirmed.
This requires the following:
- a satellite image interpretation map. The primary objective of this would
be to define the trace continuity of the faults and veins recognized on the
property
- a structural airphoto and geological map. The airphotos used for this map
could also be used to produce a ground controlled topographic map without
the errors in the government data packages. The required detail of this
recommendation depends on the results from the survey described in
paragraph one above.
- the results from these studies should be followed up with careful
prospecting of the targets thus defined.
Mr. Salazar proposes the following budget for exploration:
Survey the property's showings, adits and trenches: $7,500
Truck rental (30 days at $100 per day): $3,000
Check assaying of 220 tonnes, re-sacking of material
and identification of potential purchasers: $10,000
Application for drilling permits: $3,000
Drilling of 1,800 meters in 16 holes: $271,500
Permit closure reporting: $3,000
Satellite interpretation of alteration and lineaments: $10,000
Testing of sacked mineralized rock (30 samples at $20 each): $600
Drill core testing (300 samples at $20 each): $6,000
Gridding work: $75,000
Report writing: $15,000
Office and administration: $7,500
Miscellaneous: $40,000
-------
Total: $449,100
========
Compliance with Government Regulation
The General Mining Law of Peru is the primary body of law with regards to
environmental regulations. It is administered by the Ministry of Energy and
Mines (the "MEM"). The MEM can require a mining company to prepare an
environmental evaluation, an environmental impact assessment, a program for
environmental management and adjustment and a closure plan. Mining companies are
also subject to annual environmental audits.
A mining company that has completed its permitted exploration program must
submit an impact study when applying for a new concession, to increase the size
of its existing processing operations by more than 50% or to execute any other
mining project. A company must also set forth its plan for compliance with the
environmental laws and regulations, including its planned mining works,
investments, monitoring systems, waste management control and site restoration.
The plan is considered approved if the MEM does not respond after 60 days of
filing. If the MEM or an "interested party" can show just cause, the plan may be
modified during first year.
A mining company must also submit a closure plan for each component of its
operations. The closure plan must outline the measures that will be taken to
protect the environment over the short, medium and long term from solids,
liquids and gasses generated by the mining works. The General Mining Law of Peru
has in place a system of sanctions or financial penalties that can be levied
against a mining company not in compliance with the environmental regulations.
All of the above relating to Mercedes is a repeat of info included earlier. Is
this required in both places?
16
ITEM 3. LEGAL PROCEEDINGS
There are no legal proceedings pending or threatened against us.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
No matters were submitted to a vote of shareholders of the Company during the
final quarter of the fiscal year ended November 30, 2004.
PART II
-------
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
As of the date of this report our shares of common stock are trading on the
National Association of Securities Dealers' OTC Bulletin Board (OTCBB) under the
symbol "BMXI" and on the Berlin Stock Exchange under the symbol "B6P".
We have 248 shareholders of record as at the date of this annual report.
Dividends
There are no restrictions in our articles of incorporation or bylaws that
prevent us from declaring dividends. The Nevada Revised Statutes, however, do
prohibit us from declaring dividends where, after giving effect to the
distribution of the dividend:
1. we would not be able to pay our debts as they become due in the usual
course of business; or
2. our total assets would be less than the sum of our total liabilities
plus the amount that would be needed to satisfy the rights of
shareholders who have preferential rights superior to those receiving
the distribution.
We have not declared any dividends, and we do not plan to declare any dividends
in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
OVERVIEW
Our plan of operations for the twelve months following the date of this annual
report is to complete initial exploration program on the Mercedes 100 property.
We anticipate that this program will cost approximately $450,000. In January
2006 we have completed a $400,000 private placement of the Company's restricted
common stock to finance our exploration program.
In addition, we anticipate spending $30,000 on professional fees, $240,000 on
management fees, $60,000 on travel costs, $30,000 on promotional expenses and
$40,000 on other administrative expenses.
17
Total expenditures over the next 12 months are therefore expected to be
$850,000. We will not be able to proceed with either exploration program, or
meet our administrative expense requirements, without additional financing.
We will not be able to complete the initial exploration programs on our mineral
properties without additional financing. We currently do not have a specific
plan of how we will obtain such funding; however, we anticipate that additional
funding will be in the form of equity financing from the sale of our common
stock. We may also seek to obtain short-term loans from our directors, although
no such arrangement has been made. At this time, we cannot provide investors
with any assurance that we will be able to raise sufficient funding from the
sale of our common stock or through a loan from our directors to meet our
obligations over the next twelve months. We do not have any arrangements in
place for any future equity financing.
Results Of Operations For Period Ending November 30, 2005
---------------------------------------------------------
We did not earn any revenues during the period ending November 30, 2005. We do
not anticipate earning revenues until such time as we have entered into
commercial production of the Brookmount claims or the Mercedes property. We are
presently in the pre-exploration stage of our business and we can provide no
assurance that we will discover economic mineralization levels of minerals on
either property, or if such minerals are discovered, that we will enter into
commercial production.
We incurred operating expenses in the amount of $2,510,579 (2004: $322,261) for
the fiscal year ended November 30, 2005. The substantial increase in net loss
was due to the issue of 5,000,000 shares of common stock at a recorded value of
$2,000,000 in connection with the completion of our acquisition of the Mercedes
property.
These shares were issued to our directors and officers in the following amounts:
Peter Flueck 2,900,000
Zaf Sungur 1,050,000
Victor Stillwell 1,050,000
In addition we incurred $196,947 in mineral property costs during the year ended
November 30, 2005. General and administrative expenses for the period ended
November 30, 2005 were comparable to those incurred in the same period in 2004
($313,632 versus $274,482).
We have not attained profitable operations and are dependent upon obtaining
financing to pursue exploration activities. For these reasons our auditors
stated in their report that they have substantial doubt that we will be able to
continue as a going concern.
At November 30, 2005, we had assets of $70,306 consisting of cash on hand of
$20,447 (2004: $51,103), resource property cost advances of $43,617 (2004:
$Nil), prepaid expenses of $5,000 (2004: $3,863), and capital assets of $1,242
(2004: $1,774). At the same date, we had $91,739 (2004: $101,520) in liabilities
consisting of accounts payable and accrued liabilities of $33,223 (2004:
$43,004) and $58,516 (2004: $58,516) due to related parties.
18
ITEM 7. FINANCIAL STATEMENTS
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
FINANCIAL STATEMENTS
NOVEMBER 30, 2005 and 2004
REPORT OF INDEPENDENT REIGISTERED PUBLIC ACCOUNTING FIRM
BALANCE SHEETS
STATEMENTS OF OPERATIONS
STATEMENTS OF CASH FLOWS
STATEMENT OF STOCKHOLDERS' EQUITY
NOTES TO THE FINANCIAL STATEMENTS
19
[DALE MATHESON Partnership of: Robert J Burkart, Inc. James F Carr-Hilton, Ltd.
[CARR-HILTON LABONTE Alvin F Dale, Ltd. Peter J Donaldson, Inc. R.J. LaBonte, Ltd.
------------------- Robert J Matheson, Inc. Fraser G Ross, Ltd.
[CHARTERED ACCOUNTANTS LOGO]
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------
To the Stockholders and Board of Directors of Brookmount Explorations Inc.:
We have audited the accompanying balance sheet of Brookmount Explorations Inc
(An Exploration Stage Company) as of November 30, 2005 and the related
statements of operations, stockholders' equity and cash flows for the year then
ended and the period from inception on December 9, 1999 to November 30, 2005.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit. The financial statements of Brookmount Explorations Inc as at
November 30, 2004 and 2003 and for the years then ended and the period from
inception on December 9, 1999 to November 30, 2004 were audited by other
auditors whose report dated January 31, 2005 included an explanatory paragraph
regarding the Company's ability to continue as a going concern. The financial
statements for the period from December 9, 1999 (date of inception) to November
31, 2004 reflect a net loss of $553,021 of the related cumulative totals. The
other auditors' report has been furnished to us, and our opinion, insofar as it
relates to amounts included for such periods, is based solely on the report of
such auditors.
We conducted our audit in accordance with the Standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company, as of November 30, 2005, and
the results of its operations, cash flows and changes in stockholders' equity
for the year then ended and for the period from December 9, 1999 (date of
inception) to November 30, 2005, in conformity with generally accepted
accounting principles used in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, to date the Company has not generated any revenues from
operations and requires additional funds to meet its obligations and fund the
costs of its operations. These factors raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in this
regard are described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
"Dale Matheson Carr-Hilton LaBonte"
CHARTERED ACCOUNTANTS
Vancouver, Canada
February 10, 2006
20
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
BALANCE SHEETS
November 30, 2005, and 2004
2005 2004
---- ----
ASSETS
Current assets
Cash $ 20,447 $ 51,103
Prepaid expenses 5,000 3,863
Advances - Note 3 43,617 -
-------------------- -----------------
69,064 54,966
Capital assets - Note 4 1,242 1,774
----------------- -----------------
$ 70,306 $ 56,740
================= =================
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities $ 33,223 $ 43,004
Due to related parties - Note 7 58,516 58,516
----------------- -----------------
91,739 101,520
----------------- -----------------
STOCKHOLDERS' DEFICIT
Common stock, $0.001 par value - Note 6
200,000,000 shares authorized
16,768,685 shares issued (2004 - 10,284,848) 16,768 10,285
Additional paid-in capital 3,031,999 498,056
Stock subscriptions receivable (6,600) (100)
Deficit accumulated during the exploration stage (3,063,600) (553,021)
----------------- -----------------
(21,433) (44,780)
------------------ -----------------
$ 70,306 $ 56,740
================= =================
Going Concern - Note 1
Subsequent event - Note 10
SEE ACCOMPANYING NOTES
21
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
STATEMENTS OF OPERATIONS
December 9, 1999
Year Year (Date of
ended ended Inception) to
November 30, November 30, November 30,
2005 2004 2005
---- ---- ----
Expenses
General and administrative - Note 7 $ 313,632 $ 274,482 $ 818,874
Mineral property costs - Note 5 2,196,947 47,779 2,244,726
-------------------------------------------------------------
Net loss for the year $ (2,510,579) $ (322,261) $ (3,063,600)
================= ================= ====================
Basic loss per share $ (0.17) $ (0.03)
================= =================
Weighted average number of shares outstanding
14,880,769 10,100,151
================= =================
SEE ACCOMPANYING NOTES
22
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS
December 9,
1999
(Date of
Year Year Inception)
ended ended to
November 30, November 30, November 30,
2005 2004 2005
---- ---- ----
Cash Flows from Operating Activities
Net loss for the year $ (2,510,579) $ (322,261) $ (3,063,600)
Add items not affecting cash:
Amortization 532 39 571
Capital contributions - - 29,250
Mineral property costs 2,150,000 2,150,000
Changes in non-cash working capital balances
related to operations
Prepaid expenses (1,137) (3,174) (5,000)
Accounts payable and accrued liabilities (9,781) 30,429 33,223
Due to related parties - 7,450 58,516
----------------- ----------------- -----------------
(370,965) (287,517) (797,040)
----------------- ----------------- -----------------
Cash Flows from(used) in Investing Activities
Acquisition advances (43,617) 15,130 (43,617)
Acquisition of capital assets - (1,813) ( 1,813)
----------------- ------------------ -----------------
(43,617) 13,317 (45,430)
Cash Flows from Financing Activities
Capital stock issued 383,926 287,874 862,917
----------------- ----------------- -----------------
Increase (decrease) in cash during the year (30,656) 13,674 20,447
Cash, beginning of the year 51,103 37,429 -
----------------- ----------------- -----------------
Cash, end of the year $ 20,447 $ 51,103 $ 20,447
================= ================= =================
Supplemental Disclosure of Cash Flow
Information
Cash paid for:
Interest $ - $ - $ -
================= ================= =================
Income taxes $ - $ - $ -
================= ================= =================
Non-cash transactions - Note 8
SEE ACCOMPANYING NOTES
23
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
for the period December 9, 1999 (Date of Inception) to
November 30, 2005
Deficit
Accumulated
Additional Stock During the
Common Shares Paid-in Subscriptions Exploration
-------------------------
Number Par Value Capital Receivable Stage Total
------ --------- ------- ---------- ----- -----
Capital stock issued for cash - at $0.001 3,500,000 $ 3,500 $ - $ - $ - $ 3,500
------------- ---------- ------------ ---------- -------------- -------------
Balance, as at November 30, 1999 3,500,000 3,500 - - - 3,500
Capital stock issued for cash - at $0.002 5,750,000 5,750 5,750 - - 11,500
- at $0.20 32,400 32 6,448 - - 6,480
Contributions to capital by officers - - 9,000 - - 9,000
Net loss for the year - - - - (31,327) (31,327)
------------- ---------- ------------ ---------- -------------- -------------
Balance, as at November 30, 2000 9,282,400 9,282 21,198 - (31,327) (847)
Contributions to capital by officers - - 9,000 - - 9,000
Net loss for the year - - - - (17,215) (17,215)
------------- ---------- ------------ ---------- -------------- -------------
Balance, as at November 30, 2001 9,282,400 9,282 30,198 - (48,542) (9,062)
Contributions to capital by officers - - 9,000 - - 9,000
Net loss for the year - - - - (17,811) (17,811)
------------- ---------- ------------ ---------- -------------- -------------
Balance, as at November 30, 2002 9,282,400 9,282 39,198 - (66,353) (17,873)
Capital stock issued for cash - at $0.25 176,500 177 43,948 - - 44,125
- at $0.50 250,000 250 125,262 - - 125,512
Contributions to capital by officers - - 2,250 - - 2,250
Net loss for the year - - - - (164,407) (164,407)
------------- ---------- ------------ ---------- -------------- -------------
Balance, as at November 30, 2003 9,708,900 9,709 210,658 - (230,760) (10,393)
Capital stock issued for cash - at $0.50 575,948 576 287,398 (100) - 287,874
Net loss for the year - - - - (322,261) (322,261)
------------- ---------- ------------ ---------- -------------- -------------
Balance, as at November 30, 2004 10,284,848 10,285 498,056 (100) (553,021) (44,780)
...Cont'd
SEE ACCOMPANYING NOTES
24
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
for the period December 9, 1999 (Date of Inception) to
November 30, 2005
Deficit
Accumulated
Additional Stock During the
Common Shares Paid-in Subscriptions Exploration
------------------------
Number Par Value Capital Receivable Stage Total
------ --------- ------- ---------- ----- -----
Capital stock issued for cash - at $0.21 100,000 100 21,130 - - 21,230
Capital stock issued for cash - at $0.25 200,000 200 46,300 - - 46,500
Capital stock issued for cash - at $0.35 134,100 134 46,867 (6,500) - 40,501
Capital stock issued for cash - at $0.40 62,500 63 24,937 - - 25,000
Capital stock issued for cash - at $0.50 411,190 411 205,184 - - 205,595
Capital stock issued for cash - at $0.56 35,714 35 19,965 - - 20,000
Capital stock issued for cash - at $0.60 10,333 10 6,190 - - 6,200
Capital stock issued for cash - at $0.63 30,000 30 18,870 - - 18,900
Capital stock issued for mineral property - at $0.40 5,000,000 5,000 1,995,000 - - 2,000,000
Capital stock issued for mineral property - at $0.30 500,000 500 149,500 - - 150,000
Net loss for the year - - - - (2,510,579)(2,510,579)
------------- ------------ ---------- ----------- ------------ -----------
Balance, as at November 30, 2005 16,768,685 $ 16,768 $3,031,999 $ (6,600) $ (3,063,600) $ (21,433)
============= ============ ========== =========== ============= ==========
SEE ACCOMPANYING NOTES
25
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
November 30, 2005
Note 1 Nature of Continued Operations and Basis of Presentation
--------------------------------------------------------
The Company is an exploration stage company. The Company was
organized for the purpose of acquiring, exploring and developing
mineral properties. The recoverability of amounts from properties
acquired will be dependant upon discovery of economically
recoverable reserves, confirmation of the Company's interest in
the underlying property, the ability of the Company to obtain
necessary financing to satisfy the expenditure requirements under
the property agreement and to complete the development of the
property and upon future profitable production.
Going Concern
-------------
The financial statements have been prepared on the basis of a
going concern which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The
Company has a working capital deficiency of $22,675 at November
30, 2005 and has incurred losses since inception of $3,063,600 and
further losses are anticipated in the development of its mineral
properties raising substantial doubt as to the Company's ability
to continue as a going concern. The ability of the Company to
continue as a going concern is dependent on raising additional
capital to fund ongoing exploration and development and ultimately
on generating future profitable operations. The Company will
continue to fund operations with advances, other debt sources and
further equity placements.
Note 2 Summary of Significant Accounting Policies
------------------------------------------
Basis of Presentation
---------------------
The financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in the
United States of America and are presented in United States
dollars.
Exploration Stage Company
-------------------------
The Company complies with Financial Accounting Standards Board
Statement No. 7 its characterization of the Company as an
exploration stage enterprise.
26
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
November 30, 2005
Note 2 Summary of Significant Accounting Policies - (cont'd)
------------------------------------------
Mineral Property
----------------
Mineral property acquisition, exploration and development costs
are expensed as incurred until such time as economic reserves are
quantified. To date the Company has not established any proven or
probable reserves on its mineral properties. The Company has
adopted the provisions of SFAS No. 143 "Accounting for Asset
Retirement Obligations" which establishes standards for the
initial measurement and subsequent accounting for obligations
associated with the sale, abandonment, or other disposal of
long-lived tangible assets arising from the acquisition,
construction or development and for normal operations of such
assets. The adoption of this standard has had no effect on the
Company's financial position or results of operations. As at
January 31, 2006, any potential costs relating to the retirement
of the Company's mineral property interest has not yet been
determined.
Use of Estimates and Assumptions
--------------------------------
The preparation of financial statements in conformity with
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 period.
Actual results could differ from those estimates.
Foreign Currency Translation
----------------------------
The financial statements are presented in United States dollars.
In accordance with Statement of Financial Accounting Standards No.
52, "Foreign Currency Translation", foreign denominated monetary
assets and liabilities are translated into 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. Gains or losses
resulting from foreign currency transactions are included in
results of operations.
Fair Value of Financial Instruments
-----------------------------------
The carrying value of cash and accounts payable and accrued
liabilities approximates their fair value because of the short
maturity of these instruments. Unless otherwise noted, it is
management's opinion that the Company is not exposed to
significant interest, currency or credit risks arising from these
financial instruments.
Environmental Costs
-------------------
Environmental expenditures that relate to current operations are
expensed or capitalized as appropriate. Expenditures that relate
to an existing condition caused by past operations, and which do
not contribute to current or future revenue generation, are
expensed. Liabilities are recorded when environmental assessments
and/or remedial efforts are probable, and the cost can be
reasonably estimated. Generally, the timing of these accruals
coincides with the earlier of completion of a feasibility study or
the Company's commitments to plan of action based on the then
known facts.
27
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
November 30, 2005
Note 2 Summary of Significant Accounting Policies - (cont'd)
------------------------------------------
Income Taxes
------------
The Company follows the liability method of accounting for income
taxes. Under this method, deferred income tax assets and
liabilities are recognized for the estimated tax consequences
attributable to differences between the financial statement
carrying values and their respective income tax basis (temporary
differences). The effect on deferred income tax assets and
liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date.
At November 30, 2005 a full deferred tax asset valuation allowance
has been provided and no deferred tax asset benefit has been
recorded.
Basic and Diluted Loss Per Share
--------------------------------
Basic earnings (loss) per share includes no dilution and is
computed by dividing income (loss) available to common
stockholders by the weighted average number of common shares
outstanding for the period. Dilutive earnings (loss) per share
reflect the potential dilution of securities that could share in
the earnings of the Company. Because the Company does not have any
potentially dilutive securities, the accompanying presentation is
only of basic loss per share.
Stock-based Compensation
------------------------
In December 2002, the Financial Accounting Standards Board
("FASB") issued Financial Accounting Standard No. 148, "Accounting
for Stock-Based Compensation - Transition and Disclosure" ("SFAS
No. 148"), an amendment of Financial Accounting Standard No. 123
"Accounting for Stock-Based Compensation" ("SFAS No. 123"). The
purpose of SFAS No. 148 is to: (1) provide alternative methods of
transition for an entity that voluntarily changes to the fair
value based method of accounting for stock-based employee
compensation, (2) amend the disclosure provisions to require
prominent disclosure about the effects on reported net income of
an entity's accounting policy decisions with respect to
stock-based employee compensation, and (3) to require disclosure
of those effects in interim financial information.
The Company has elected to account for stock-based employee
compensation arrangements in accordance with the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees", ("APB No. 25") and comply with the
disclosure provisions of SFAS No. 123 as amended by SFAS No. 148
as described above. In addition, in accordance with SFAS No. 123
the Company will apply the fair value method using the
Black-Scholes option-pricing model in accounting for options
granted to consultants. Under APB No. 25, compensation expense for
employees is recognized based on the difference, if any, on the
date of grant between the estimated fair value of the Company's
stock and the amount an employee must pay to acquire the stock.
Compensation expense is recognized immediately for past services
and pro-rata for future services over the option-vesting period.
To January 31, 2006, the Company has not granted any stock
options.
28
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
November 30, 2005
Note 2 Summary of Significant Accounting Policies - (cont'd)
------------------------------------------
Stock-based Compensation - (cont'd)
-----------------------------------
The Company accounts for equity instruments issued in exchange for
the receipt of goods or services from other than employees in
accordance with SFAS No. 123 and the conclusions reached by the
Emerging Issues Task Force ("EITF") in Issue No. 96-18. Costs are
measured at the estimated fair market value of the consideration
received or the estimated fair value of the equity instruments
issued, whichever is more reliably measurable. The value of equity
instruments issued for consideration other than employee services
is determined on the earliest of a performance commitment or
completion of performance by the provider of goods or services as
defined by EITF 96-18.
The Company has also adopted the provisions of the Financial
Accounting Standards Board Interpretation No. 44, Accounting for
Certain Transactions Involving Stock Compensation - An
Interpretation of APB Opinion No. 25 ("FIN 44"), which provides
guidance as to certain applications of APB 25. FIN 44 is generally
effective July 1, 2000 with the exception of certain events
occurring after December 15, 1998.
To November 30, 2005, the Company has not issued any stock options
and accordingly no stock based compensation expense has been
recognized.
Recent Accounting Pronouncements
--------------------------------
In December 2004, the FASB issued SFAS No. 153, "Exchanges of
Non-monetary Assets - An Amendment of APB Opinion No. 29". The
guidance in APB Opinion No. 29, "Accounting for Non-monetary
Transactions", is based on the principle that exchanges of
non-monetary assets should be measured based on the fair value of
the assets exchanged. The guidance in that Opinion, however,
included certain exceptions to that principle. SFAS No. 153 amends
Opinion No. 29 to eliminate the exception for non-monetary
exchanges of similar productive assets and replaces it with a
general exception for exchanges of non-monetary assets that do not
have commercial substance. A non-monetary exchange has commercial
substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. The provisions
of SFAS No. 153 are effective for non-monetary asset exchanges
occurring in fiscal periods beginning after June 15, 2005. Early
application is permitted and companies must apply the standard
prospectively. The adoption of this standard is not expected to
have a material effect on the Company's results of operations or
financial position.
29
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
November 30, 2005
Note 2 Summary of Significant Accounting Policies - (cont'd)
------------------------------------------
Recent Accounting Pronouncements - (cont'd)
-------------------------------------------
In December 2004, the FASB issued SFAS No. 123R, "Share Based
Payment". SFAS 123R is a revision of SFAS No. 123 "Accounting for
Stock-Based Compensation", and supersedes APB Opinion No. 25,
"Accounting for Stock Issued to Employees" and its related
implementation guidance. SFAS 123R establishes standards for the
accounting for transactions in which an entity exchanges its
equity instruments for goods or services. It also addresses
transactions in which an entity incurs liabilities in exchange for
goods or services that are based on the fair value of the entity's
equity instruments or that may be settled by the issuance of those
equity instruments. SFAS 123R focuses primarily on accounting for
transactions in which an entity obtains employee services in
share-based payment transactions. SFAS 123R does not change the
accounting guidance for share-based payment transactions with
parties other than employees provided in SFAS 123 as originally
issued and EITF Issue No. 96-18, "Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring,
or in Conjunction with Selling, Goods or Services". SFAS 123R does
not address the accounting for employee share ownership plans,
which are subject to AICPA Statement of Position 93-6, "Employers'
Accounting for Employee Stock Ownership Plans". SFAS 123R requires
a public entity to measure the cost of employee services received
in exchange for an award of equity instruments based on the
grant-date fair value of the award (with limited exceptions). That
cost will be recognized over the period during which an employee
is required to provide service in exchange for the award - the
requisite service period (usually the vesting period). SFAS 123R
requires that the compensation cost relating to share-based
payment transactions be recognized in financial statements. That
cost will be measured based on the fair value of the equity or
liability instruments issued. The scope of SFAS 123R includes a
wide range of share-based compensation arrangements including
share options, restricted share plans, performance-based awards,
share appreciation rights, and employee share purchase plans.
Public entities (other than those filing as small business
issuers) will be required to apply SFAS 123R as of the first
interim or annual reporting period that begins after June 15,
2005. Public entities that file as small business issuers will be
required to apply SFAS 123R in the first interim or annual
reporting period that begins after December 15, 2005. Management
is currently evaluating the impact, which the adoption of this
standard will have on the Company's results of operations or
financial position.
The interpretations in Staff Accounting Bulletin ("SAB") No. 107
express views of the staff regarding the interaction between
Statement of Financial Accounting Standards Statement No. 123
(revised 2004), Share-Based Payment ("Statement 123R" or the
"Statement") and certain Securities and Exchange Commission
("SEC") rules and regulations and provide the staff's views
regarding the valuation of share-based payment arrangements for
public companies. In particular, this SAB provides guidance
related to share-based payment transactions with nonemployees, the
transition from nonpublic to public entity status, valuation
methods (including assumptions such as expected volatility and
expected term), the accounting for certain redeemable financial
instruments issued under share-based payment arrangements, the
classification of compensation expense, non-GAAP financial
measures, first-time adoption of Statement 123R in an interim
period, capitalization of compensation cost related to share-based
payment arrangements, the accounting for income tax effects of
share-based payment arrangements upon adoption of Statement 123R,
the modification of employee share options prior to adoption of
30
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
November 30, 2005
Statement 123R and disclosures in Management's Discussion and
Analysis ("MD & A") subsequent to adoption of Statement 123R.
Management is currently evaluating the impact, which the adoption
of this standard will have on the Company's results of operations
or financial position
Note 2 Summary of Significant Accounting Policies - (cont'd)
------------------------------------------
Recent Accounting Pronouncements - (cont'd)
In May 2005, the FASB issued SFAS 154, "Accounting Changes and
Error Corrections". This Statement replaces APB Opinion No. 20,
"Accounting Changes", and SFAS No. 3, "Reporting Accounting
Changes in Interim Financial Statements", and changes the
requirements for the accounting for and reporting of a change in
accounting principle. This Statement applies to all voluntary
changes in accounting principle. The Company believes this
Statement will have no impact on the financial statements of the
Company.
In March 2005, the FASB issued FASB Interpretation No. 47,
"Accounting for Conditional Asset Retirement Obligations, an
interpretation of FASB Statement No. 143" (FIN 47). Asset
retirement obligations (AROs) are legal obligations associated
with the retirement of long-lived assets that result from the
acquisition, construction, development and/or normal operation of
a long-lived asset, except for certain obligations of lessees. FIN
47 clarifies that liabilities associated with asset retirement
obligations whose timing or settlement method are conditional on
future events should be recorded at fair value as soon as fair
value is reasonably estimable. FIN 47 also provides guidance on
the information required to reasonably estimate the fair value of
the liability. FIN 47 is intended to result in more consistent
recognition of liabilities relating to AROs among companies, more
information about expected future cash outflows associated with
those obligations stemming from the retirement of the asset(s) and
more information about investments in long-lived assets because
additional asset retirement costs will be recognized by increasing
the carrying amounts of the assets identified to be retired. FIN
47 is effective for fiscal years ending after December 15, 2005.
Management is currently evaluating the impact, which the adoption
of this standard will have on the Company's financial statements.
In November 2005, FASB issued FSP FAS 115-1 and FAS 124-1, "The
Meaning of Other-Than-Temporary Impairment and Its Application to
Certain Investments" ("FSP FAS 115-1"), which provides guidance on
determining when investments in certain debt and equity securities
are considered impaired, whether that impairment is
other-than-temporary, and on measuring such impairment loss. FSP
FAS 115-1 also includes accounting considerations subsequent to
the recognition of an other-than temporary impairment and requires
certain disclosures about unrealized losses that have not been
recognized as other-than-temporary impairments. FSP FAS 115-1 is
required to be applied to reporting periods beginning after
December 15, 2005. The Company is required to adopt FSP FAS 115-1
in the second quarter of fiscal 2006. Management does not expect
the adoption of this statement will have a material impact on our
results of operations or financial condition. Management is
currently evaluating the impact, which the adoption of this
standard will have on the Company's financial statements.
31
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
November 30, 2005
Note 3 Advances
----------
On May 13, 2005, the Company signed a "Letter of Agreement" with a
private corporation Jemma Resources Corp. ("Jemma") to acquire
100% of the outstanding capital stock of Jemma. Significant terms
contained in the Letter of Agreement were the appointment of two
of Jemma's directors to the Company's board of directors, Jemma
completing a debt financing of $15 million, and the Company's
right to elect not to proceed with the transaction thereby
resulting in all advances made to Jemma by the Company being
refundable, and the replacement of the Letter of Agreement with a
binding contract. The purchase price consists of 3,000,000 shares
of common stock of the Company, 3,000,000 share purchase warrants
at $1.50 per warrant exercisable within 24 months from the date of
the agreement and approximately CDN$75,000 in refundable advances
to secure an extension for the option to purchase a mineral
property and for operating costs. During May 2005 two directors of
Jemma were appointed to the Company's board of directors. During
the year ended November 30, 2005, the Company advanced $43,617
(CDN $54,400) pursuant to the Letter of Agreement. At November 30,
2005 the Letter of Agreement had not been replaced by a binding
contract and Jemma had not raised the debt financing as
contemplated in the Letter of Agreement. Accordingly the Company's
management decided not to proceed with this transaction. The
decision was as a result of the Company's due diligence and
Jemma's inability to raise the agreed financing. As a result, the
advances totaling $43,617 became refundable pursuant to the terms
of the Letter of Agreement. Although the Company has not yet
received the funds from Jemma, management believes these funds are
recoverable because Jemma has expressed its intention to repay the
Company.
Note 4 Capital Assets
--------------
November 30,
November 30, 2005 2004
------------------------------------------------- ------------------
Accumulated
Cost Amortization Net Net
Computer equipment $ 1,813 $ 571 $ 1,242 $ 1,774
============ =============== =============== ==============
Note 5 Mineral Properties
a) Brookmount Claims, Abitibi West County, Quebec, Canada
------------------------------------------------------
During 2003 the Company acquired five mineral claims located in
the Chazel Township, in the Province of Quebec for $48,079. The
claims are in good standing until November 14, 2006.
32
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
November 30, 2005
Note 5 Mineral Properties (continued)
------------------------------
b) Mercedes Property, Junin, Peru
------------------------------
Pursuant to a property acquisition agreement dated July 3,
2003 and amended on January 24, 2005, the Company acquired a
100% interest in 2,611 hectares located in Central Peru from a
director of the Company (the "Vendor") for consideration of
$22,500 (paid) and the issuance of 5,000,000 common shares
valued at $0.40 per share (issued). The property is held in
trust by the Vendor for the Company. Upon request from the
Company the title will be recorded in the name of the Company.
At November 30, 2005 the title of this property has not been
recorded in the name of the Company.
c) Mooseland Property, Nova Scotia, Canada
---------------------------------------
Pursuant to a binding letter of agreement dated June 14, 2005,
the Company acquired a right to purchase a 100% interest in
the Mooseland property located in Halifax County Nova Scotia
for consideration of:
(1) $250,000 payable by July 1, 2005 (not paid),
(2) $750,000 payable by September 30, 2005 (not paid);
(3) 500,000 restricted common shares of the Company. The
Company issued the common stock pursuant to the agreement on
August 12, 2005 and recorded the fair value of the shares on
the date of issue at $0.30 per share, or $150,000 as a mineral
property expense in the statement of operations during the
year ended November 30, 2005.; and (4) a 1.5% Net Smelter
Royalty.
In September 2005, the Company had withdrawn its participation
in the Mooseland Property project and forfeited the right to
purchase a 100 % interest in the property. The decision was a
result of the Company's due diligence and Jemma's inability to
raise the agreed financing. As a result, the advances made on
the acquisition, totaling $43,617, became refundable (See note
3) and the Company has no further obligation for any payments
pursuant to the terms of the Letter of Agreement.
Note 6 Capital Stock
-------------
During the year ended November 30, 2005 the Company issued 983,837
(2004:$575,948) common shares for cash proceeds of $383,926
(2004:$287,874). During the year ended November 30, 2005, the
Company issued 5,000,000 common shares valued at $0.40 per share
pursuant to the Mercedes Property acquisition agreement and issued
500,000 common shares valued at $0.30 per share pursuant to the
Mooseland Property letter of agreement (See note 5). To November
30, 2005 the Company has not granted any stock options or
warrants.
33
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
November 30, 2005
Note 7 Related Party Transactions
--------------------------
The Company paid the following amounts to directors of the
Company, a former director and/or companies with directors or
officers in common:
2005 2004
---- ----
General and administrative:
Management fees $ 173,500 $ 152,000
=============== =============
The management fees were measured by the exchange amount which is
the amount agreed upon by the transacting parties.
Amounts due to related parties at November 30, 2005 are due to
directors of the Company in respect to unpaid management fees and
advances. These amounts are unsecured, non-interest bearing and
have no specific terms for repayment.
During the year ended November 30, 2005 the Company purchased a
mineral property from one of the Company's directors (See note
5(b)).
Subsequent to November 30, 2005 the Company issued 4,291,000
shares of its common stock to a director (See note 10).
Note 8 Non-cash Transactions
---------------------
Investing and financing activities that do not have a direct
impact on current cash flows are excluded from the statement of
cash flows. During the year ended November 30, 2005, the Company
issued 5,000,000 common shares valued at $0.40 per share pursuant
to the Mercedes Property acquisition agreement and issued 500,000
common shares valued at $0.30 per share pursuant to the Mooseland
Property letter of agreement (See note 5b and 5c). These
transactions were excluded from the statement of cash flows for
the year ended November 30, 2005 and for the period December 9,
1999 (Date of Inception) to November 30, 2005.
34
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
November 30, 2005
Note 9 Income taxes
------------
The significant components of the Company's deferred tax assets
are as follows:
2005 2004
---- ----
Deferred tax assets
Non-capital loss carryforwards $ 1,041,624 $ 188,027
Valuation allowance for deferred tax assets (1,041,624) (188,027)
-------------- --------------
$ - $ -
============== ==============
The amount taken into income as deferred tax assets must reflect
that portion of the income tax loss carryforwards which is more
likely than not to be realized from future operations. The Company
has provided an allowance of 100% against all available income tax
loss carryforwards, regardless of their time of expiry, as it is
more likely than not that all of the deferred tax assets will not
be realized. No provision for income taxes has been provided in
these financial statements due to the net loss. At November 30,
2005, the Company has net operating loss carryforwards, which
expire commencing in 2019 totalling approximately $3,064,000
(2004: $553,000).
Note 10 Subsequent event
----------------
Subsequent to November 30, 2005, the Company issued 641,026 shares
of common stock pursuant a private placement for total proceeds of
$250,000.
On December 14, 2005 the Company issued 4,291,000 shares of common
stock to the its newly appointed chairman for business and
consulting services that will be provided over the next year. At
the date of issue the common stock had a market value of
$1,737,855. In addition the Company is paying a monthly management
fee of $10,000 to its new chairman.
On February 2, 2006 the Company entered into a letter of intent to
acquire an option to purchase 100% of the issued share capital of
722161 B.C. Ltd ("BC Ltd"). BC Ltd has a 56% interest in mineral
claims located in the Rock Creek area of British Columbia, Canada.
In consideration for signing the letter of intent the Company
issued 10,000 of its shares of common stock to the owner of BC
Ltd. Upon replacing the letter of intent with a formal agreement
the Company will issue an additional 20,000 shares of its common
stock to the owner of BC Ltd. To earn the option the Company would
be required to make cash payments of $250,000 over a period of
four years and incur exploration expenses of $1,000,000 over a
period of five years from the date of the formal agreement.
35
ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING FINANCIAL
DISCLOSURE
We have no changes in and disagreement with our accountants on accounting
financial disclosure
ITEM 8A: CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls
We evaluated the effectiveness of our disclosure controls and procedures as of
the end of the 2005 fiscal year. This evaluation was conducted with the
participation of our chief executive officer and our principal accounting
officer.
Disclosure controls are controls and other procedures that are designed to
ensure that information that we are required to disclosed in the reports we file
pursuant to the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported.
Limitations on the Effective of Controls
Our management does not expect that our disclosure controls or our internal
controls over financial reporting will prevent all error and fraud. A control
system, no matter how well conceived and operated, can provide only reasonable,
but no absolute, assurance that the objectives of a control system are met.
Further, any control system reflects limitations on resources, and the benefits
of a control system must be considered relative to its costs. These limitations
also include the realities that judgments in decision-making can be faulty and
that breakdowns can occur because of simple error or mistake. Additionally,
controls can be circumvented by the individual acts of some persons, by
collusion of two or more people or by management override of a control. A design
of a control system is also based upon certain assumptions about potential
future conditions; over time, controls may become inadequate because of changes
in conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and may not be detected.
Conclusions
Based upon their evaluation of our controls, the chief executive officer and
principal accounting officer have concluded that, subject to the limitations
noted above, the disclosure controls are effective providing reasonable
assurance that material information relating to us is made known to management
on a timely basis during the period when our reports are being prepared. There
were no changes in our internal controls that occurred during the quarter
covered by this report that have materially affected, or are reasonably likely
to materially affect our internal controls.
36
PART III
ITEM 9: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Name Age Position with Registrant Served as a Director
or Officer Since
Peter Flueck 56 President and Director March 21, 2003
Zaf Sungur 52 Chief Operating Officer April 15, 2003
Secretary, Treasurer and
Director
Victor Stilwell 54 Vice-President and Director March 21, 2003
David Jacob Dadon 54 Director, Chairman of the December 8, 2005
Board of Directors
Jay Jeffrey Shapiro 60 Chief Financial Officer December 16, 2005
The following describes the business experience of the Company's directors and
executive officers, including other directorships held in reporting companies:
Each director of the Company serves for a term of one year and until his
successor is elected at the Company's annual shareholders' meeting and is
qualified, subject to removal by the Company's shareholders. Each officer
serves, at the pleasure of the board of directors, for a term of one year and
until his successor is elected at the annual general meeting of the board of
directors and is qualified.
Set forth below is certain biographical information regarding each of the
Company's executive officers and directors.
Peter Flueck
Mr. Flueck brings to the Company a wealth of experience, not only in the
resource sector, but with extensive experience in Peru as well. He is presently
the President and sole shareholder of Grand Combe Developments Ltd., a Canadian
development company based in Edmonton, Alberta. He has recently been the
President of several mining companies based in Peru, including Blower
Investments A.V.V., Condor Resources A.V.V. Aruba, the Recursos Mineros El
Dorado and the Minera El Serrano, Peru.
He was also involved in the acquisition of several key mining properties in Peru
and headed up a series of negotiations with mining concerns there in order to
raise investor capital and to initiate the development of the Mercedes property
in Peru. Prior to his involvement within the mining industry, Mr. Flueck was
Vice President of Western Timber Export Ltd., an Alberta-based company
specializing in harvesting, sawmill production, pipeline contracting, production
sales and contract bidding. He has been a successful, self-employed cattle
rancher.
Zaf Sungur
Mr. Sungur has over twenty years experience in real estate development,
planning, project management and marketing. Prior to joining the Company, he has
been working as a business consultant to clients, streamlining their businesses
to achieve increased efficiencies. For a ten-year period prior to that, he was
the President of Pan Pacific Investments, which specialized in all aspects of
real estate development, project management and business consulting. Mr. Sungur
was also President of Sunmark International marketing, a company based in
Vancouver, British Columbia that marketed a range of Asian consumer products. He
created a network of over 50 sales representatives to cover the United States,
the United Kingdom, Holland, Germany, Italy and France, and initiated a system
of offshore manufacturing to dramatically reduce costs. Mr. Sungur holds a
Business Degree (Bachelor of Commerce), has extensive experience in North
American, Asian and European business negotiations and is fluent in English and
Turkish. He will be responsible for the operations of the Company as it proceeds
with its mining projects in Peru and Quebec.
37
Vic Stilwell
Mr. Stillwell is the principal of a major sales agency based in Calgary,
Alberta, which for the past twenty-five years has focused on representing such
companies as Hitachi, Panasonic, Magic Chef appliances and Flexsteel Furniture.
His company has grown successfully through the years due to its focus on high
quality products and after-sales service.
He has also been a key figure in the development of commercial and residential
real estate projects in La Paz, Mexico, planning several major projects and
providing serviced lots to potential residents and commercial concerns.
David Jacob Dadon
Mr.Dadon specializes in matters attendant to the senior management decision
process including those relating to board representation, on-line management,
corporate planning, financial administration, capital sourcing, business
turnarounds, & mergers/acquisitions. Mr. Dadon's background in the Entertainment
Industry includes, pay-television, cable casting, and feature films. Mr.Dadon
served as Chairman of Giants Entertainment and Bay Shore Media Group
(http://www.bayshoremediagroup.com). Mr. Dadon's corporate experience from 1977
to 2001 was as an entrepreneur as Owner/President/Chairman of various companies
ranging from the clothing to entertainment industries. Mr. Dadon is currently
the Chairman of Giants an entertainment company.
Jay Jeffrey Shapiro
Mr. Shapiro is currently the Chairman and CEO of Sunrise Media Group, Inc., a
company he has founded to develop, produce, and distribute entertainment
content. Mr. Shapiro is a Certified Public Accountant and owns his own
professional corporation. He brings to the Company experience in major public
offerings for NASDAQ and AMEX companies, and as financial advisor in several
workout situations. From February 2001 to April 2002 he was the CEO of Team
Communications Group, Inc. where he was responsible for all worldwide financial,
administrative and operational affairs of the company. Mr. Shapiro's previous
experience includes serving as the Executive Vice President-Finance and
Administration for the Program Entertainment Group and as Partner with Laventhol
& Horwath.
Mr. Shapiro holds an M.S. in Accounting/Finance from Arizona State University
Graduate School of Business Administration, a B.B.A. in Accounting from the
University of Wisconsin and the professional designation of Certified Public
Accountant.
All directors are elected annually by our shareholders and hold office until the
next Annual General Meeting. Each officer holds office at the pleasure of the
board of directors.
38
ITEM 10. EXECUTIVE COMPENSATION
The table below summarizes all compensation awarded to, earned by, or paid to
our executive officers by any person for all services rendered in all capacities
to us for the fiscal year ended November 30, 2005.
Annual Compensation Long Term Compensation
Restricted
Other Annual Stock Options/ LTIP All Other
Name Title Year Salary Bonus Compensation Awarded SARs (#) payouts ($) Compensation
---- ----- ---- ------ ----- ------------ ------- -------- ----------- -----------
Peter Flueck President 2005 $67,000 0 0 0 0 0 0
2004 $48,000 0 0 0 0 0 0
Zaf Sungur
COO, Secretary 2005 $67,000 0 0 0 0 0 0
Treasurer 2004 $48,000 0 0 0 0 0 0
Victor
Stilwell Vice-President 2005 $39,500 0 0 0 0 0 0
2004 $48,000 0 0 0 0 0 0
Section 16(A) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive officers and directors,
and persons who beneficially own more than 10% of our equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission. Officers, directors and greater than 10% shareholders are required
by SEC regulation to furnish us with copies of all Section 16(a) forms they
file. Based on our review of the copies of such forms we received, we believe
that during the fiscal year ended November 30, 2005 all such filing requirements
applicable to our officers and directors were complied with exception that
reports were filed late by the following persons:
Number Transactions Known Failures
Name and Of late Not Timely to file a
Principal position Reports Reported Required Form
------------------ ------- ------------ --------------
Peter Flueck 0 0 0
Zaf Sungur 0 0 0
Victor Stilwell 0 0 0
ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth information regarding the beneficial ownership of
our shares of common stock at November 30, 2005 by (i) each person known by us
to be the beneficial owner of more than 5% of our outstanding shares of common
stock, (ii) each of our directors, (iii) our executive officers, and (iv) by all
of our directors and executive officers as a group. Each person named in the
table, has sole voting and investment power with respect to all shares shown as
beneficially owned by such person and can be contacted at our executive office
address.
39
NAME OF SHARES OF
TITLE OF CLASS BENEFICIAL OWNER COMMON STOCK PERCENT OF CLASS
-------------- ---------------- ------------ ----------------
Common Peter Flueck 4,313,000 19.87%
18912-121 Ave. N.W.
Edmonton, Alberta
T5V 1R3
Common Victor Stillwell 1,570,000 7.23%
16 Douglas Woods Park S.E.
Calgary, Alberta
T2Z 2K6
Common Zaf Sungur 1,265,000 5.83%
2005 - 837 W. Hastings
Vancouver, B.C.
V6C 1B6
DIRECTORS AND 7,148,000 32.93%
OFFICERS AS A
GROUP CONSISTING
OF THREE PEOPLE
The percent of class is based on 16,768,685 shares of common stock issued and
outstanding as of November 30, 2005.
ITEM 12.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ended November 30, 2005, we paid or accrued management
fees to each of the following individuals as follows:
- Peter Flueck, our president - $67,000;
- Zaf Sungur, our COO, secretary and treasurer - $67,000;
- Victor Stilwell, our vice-president - $39,500.
During the fiscal year 2003, the Company entered into an agreement with its
president, Peter Flueck, whereby the Company has agreed to purchase a 100%
interest in six mineral concessions comprising a total of 2,550 hectares located
in Ahuigrande Parish, Comas District, Concepcion Province of the Department of
Junin, Peru. Pursuant to the agreement, as amended, the Company must issue
5,000,000 shares of common stock (issued) to the directors of the Company and
pay $22,500 (paid) to Peter Flueck.
Otherwise, none of our directors or officers, nor any proposed nominee for
election as a director, nor any person who beneficially owns, directly or
indirectly, shares carrying more than 10% of the voting rights attached to all
of our outstanding shares, nor any promoter, nor any relative or spouse of any
of the foregoing persons has any material interest, direct or indirect, in any
transaction since our incorporation or in any presently proposed transaction
which, in either case, has or will materially affect us.
Our management is involved in other business activities and may, in the future
become involved in other business opportunities. If a specific business
opportunity becomes available, such persons may face a conflict in selecting
between our business and their other business interests. In the event that a
conflict of interest arises at a meeting of our directors, a director who has
such a conflict will disclose his interest in a proposed transaction and will
abstain from voting for or against the approval of such transaction.
40
PART IV
Exhibits
--------
3.1 Charter and By-Laws*
10.1 Mineral Property Purchase Agreement
31.1 Certification pursuant to Rule 13a-14(a) under the Securities
Exchange Act of 1934
31.2 Certification pursuant to Rule 13a-14(a) under the Securities
Exchange Act of 1934
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
* Filed as an exhibit to our registration statement on Form
10-KSB dated December 27, 2000
Reports on Form 8-K
-------------------
We did not file any reports on Form 8-K during the last quarter of 2005.
ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES
Our current principal accountants, Dale Matheson Carr-Hilton Labonte, Chartered
Accountants billed the following fees for the services indicated.
Fiscal year ended
November 30, 2005
Audit fees $ 12,500
Audit-related fees $ 0
Tax fees Nil
All other fees Nil
Audit fees consist of fees related to professional services rendered in
connection with the audit of our annual financial statements, the review of the
financial statements included in each of our quarterly reports on Form 10-QSB.
Our audit committee's policy is to pre-approve all audit and permissible
non-audit services performed by the independent accountants. These services may
include audit services, audit-related services, tax services and other services.
Under our audit committee's policy, pre-approval is generally provided for
particular services or categories of services, including planned services,
project based services and routine consultations. In addition, the audit
committee may also pre-approve particular services on a case-by-case basis. Our
audit committee approved all services that our independent accountants provided
to us in the past two fiscal years.
The Company does not have an audit committee. Is this statement true/relevant?
41
SIGNATURES
Pursuant to the requirements of Section 13 and 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Brookmount Explorations Inc.
By /s/ Peter Flueck
-------------------------
Peter Flueck
President, CEO & Director
Date: February 28, 2006
In accordance with the Securities Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
By /s/ Peter Flueck
----------------
Peter Flueck
President, CEO & Director
Date: February 28, 2006
By /s/ Zaf Sungur
---------------
COO, Secretary, Treasurer, Principal
Accounting Officer and Director
Date: February 28, 2006
By /s/ Victor Stilwell
-------------------
Vice-President and Director
Date: February 28, 2006
42