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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
[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
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
666 Burrard Street, Suite 600 V6C 2X8
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Vancouver BC, Canada (Postal Zip Code)
(Address of principal executive offices)
Issuer's telephone number, including area code: (604) 676-5244
Securities registered pursuant to section 12(b) of the Act:
Title of each share Name of each exchange on which registered
None None
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 [ ]
iii
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
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.)
$3,909,900.30 as at December 1, 2006
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
26,066,002 shares of common stock as at December 1, 2006
i
EXPLANATORY NOTE
This Amendment No. 2 to the Annual Report on Form 10-KSB/A responds to certain
comments of the Staff of the Securities and Exchange Commission in connection
with its review of the Brookmount Explorations, Inc.'s (the "Company") Annual
Report on Form 10-KSB and 10KSB/A for the fiscal year ended November 30, 2005,
which the Company's management has determined are necessary in order to comply
with its reporting obligations under the Securities Exchange Act of 1934. This
amendment corrects several typographical errors in the previous reports,
supplements the disclosure regarding the Company's controls and procedures,
supplements the disclosure concerning the Company's transaction with Jemma
Resources, contains a revision to the audit report of our prior auditor, and
updates the certifications of the executive officers. In addition, certain
detail regarding subsequent events is also disclosed in this filing. All other
information included in the original on Form 10-KSB, as filed on February 28,
2006, and the 10-KSB/A, as filed on March 7, 2006, remains unchanged.
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TABLE OF CONTENTS
Page
PART 1 1
ITEM 1. DESCRIPTION OF BUSINESS..............................................1
ITEM 2. DESCRIPTION OF PROPERTY..............................................8
ITEM 3. LEGAL PROCEEDINGS...................................................12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS...............12
PART II......................................................................13
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTER.............13
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION...........13
ITEM 7. FINANCIAL STATEMENTS...............................................F-1
PART III.....................................................................20
ITEM 9: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS........20
ITEM 10. EXECUTIVE COMPENSATION.............................................21
ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.....21
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.....................22
PART IV......................................................................23
ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES.............................23
SIGNATURES...................................................................24
iii
PART 1
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 World Trade Centre - 999
Canado Place, Suite 404, Vancouver, B.C., Canada, V6C 3E2 (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.
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.
1
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)
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 1 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.
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.
2
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.
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:
o 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
3
o 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.
o 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 completed a private placement of the Company's
restricted common stock to assist in the financing of 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.
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.
4
Employees
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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.
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
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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.
5
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.
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.
6
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.
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 AND OFFICERS OWN 44% OF OUR OUTSTANDING COMMON
STOCK, THEY COULD MAKE AND CONTROL CORPORATE DECISIONS THAT MAY BE
DISADVANTAGEOUS TO OTHER MINORITY SHAREHOLDERS.
As of the date of this filing, our directors own approximately 44% 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.
7
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.
Forward-Looking Statements
--------------------------
This Form 10-KSB/A 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.
1986-1987: Resources Macamic Inc. ("Macamic")
8
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:
o 2,900,000 shares to the vendor, Mr. Flueck; and
o 1,050,000 shares to each of the other two directors of the Company.
Title to the Mercedes 100 property
----------------------------------
9
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.
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.
10
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.
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:
o 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
o 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.
11
o 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.
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, 2005.
12
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.
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.
13
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.
Subsequent Events
Subsequent to November 30, 2005, the Company issued 641,026 shares of
common stock pursuant a private placement for total proceeds of $400,000. As
described in further detail below, our former Chairman removed $150,000 of that
raise for non-corporate purposes without approval.
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.
Effective April 5, 2006, Victor Stilwell, Vice President & Director,
resigned both positions with the Company. Under the terms of his separation
agreement dated of the same date, Mr. Stilwell is entitled to keep 1,000,000 of
the 1,650,000 of shares granted to him in connection with his employment. In
addition, the Company granted Mr. Stilwell a warrant for 250,000 shares,
exercisable at $0.31 for a term of one year.
Effective April 26, 2006, David Jacob Dadon was removed as a director
and as Chairman of the Board of Brookmount Explorations (the "Company") for
cause. Mr. Dadon withdrew $150,000 from the Company's bank account. Mr. Dadon
was not an authorized signatory on the Company's bank account and had not been
granted any such authority to withdraw the funds by the Company's Board of
Directors. Upon completion of an investigation, the Company determined that Mr.
Dadon had not used the funds for corporate purposes. The Company had worked for
several weeks to have Mr. Dadon return the money to the Company on a voluntary
basis. To date, the money has not been returned.
14
The Company is currently working with its bank to see that the money is
returned as it believes the bank is responsible since Mr. Dadon was not a
signatory to the account and did not otherwise have authority to have the funds
removed from the account.
Separately, the Company has reported the incident to the appropriate
authorities.
On December 19, 2005, we filed an 8-K announcing that David Dadon had
been elected as our chairman and a director. The 8-K also announced that Jay
Jeffery Shapiro, represented by Mr. Dadon to us as a close colleague and friend,
had been appointed to serve as our Chief Financial Officer. Mr. Dadon had
arranged for a conference call prior to Mr. Shapiro's appointment to introduce
someone whose resume we were provided and we were led to believe was Mr. Shapiro
ostensibly in order to provide us with an opportunity to interview him prior to
his appointment.
On May 9, 2006, we learned that the person represented to us to be Jay
Jeffery Shapiro was not, in fact, Mr. Shapiro. On May 9, 2006, the individual we
now know to be the true Mr. Shapiro contacted us to inform us that he had no
knowledge of Brookmount, had not been asked to serve as our Chief Financial
Officer by Mr. Dadon, had not been the person interviewed by our Chief Operating
Officer, and had in fact previously informed Mr. Dadon in writing that he no
longer wished to be associated with Mr. Dadon in any venture and that Mr. Dadon
was no longer to use his resume in connection with any of his activities.
On May 11, 2006, we filed an 8-K to, among other reasons, assure that
all Brookmount shareholders are made aware that individual we now know to be Jay
Jeffery Shapiro whose biography was contained in our original annual report on
Form 10-KSB and Form 10-KSB/A, never played any role in our company or in any of
our disclosures.
Effective May 9, 2006, we appointed Zaf Sungur to serve as our Chief
Financial Officer.
15
F-18
ITEM 7. FINANCIAL STATEMENTS
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
FINANCIAL STATEMENTS
NOVEMBER 30, 2005 and 2004
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
BALANCE SHEETS
STATEMENTS OF OPERATIONS
STATEMENTS OF CASH FLOWS
STATEMENT OF STOCKHOLDERS' EQUITY
NOTES TO THE FINANCIAL STATEMENTS
F-1
[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]
1. 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
30, 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, based on our audit and the report of another auditor, these
financial statements present fairly, in all material respects, the financial
position of the Company, as of November 30, 2005, and 2004, and the results of
its operations, cash flows and changes in stockholders' equity for the years
then ended and for the period from inception on December 9 , 1999 to November
30, 2005, in conformity with generally accepted accounting principles used in
the United States of America. In rendering this opinion, we have relied on the
opinion of the Company's prior auditors, Amisano Hanson, as to the financial
position of the Company, as of November 30, 2004, which opinion is attached
hereto.
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
June 14, 2006
F-2
A PARTNERSHIP OF INCORPORATED AMISANO HANSON
PROFESSIONALS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders,
Brookmount Explorations Inc.
We have audited the accompanying balance sheet of Brookmount Explorations Inc.
(A Pre-exploration Stage Company) as of November 30, 2004 and the related
statements of operations, cash flows and stockholders' equity (deficiency) for
the year ended November 30, 2004 and the period from December 9, 1999 (Date of
Incorporation) to November 30, 2004. 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 audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States of America). Those standards
require that we plan and perform an 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, the financial statements referred to above, present fairly, in
all material respects, the financial position of Brookmount Explorations Inc. as
of November 30, 2004 and the results of its operations and its cash flows for
the year ended November 30, 2004 and the period from December 9, 1999 (Date of
Incorporation) to November 30, 2004, in conformity with accounting principles
generally accepted in the United States of America.
The accompanying financial statements referred to above have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
1 to the financial statements, the Company is in the pre-exploration stage, has
no established source of revenue and is dependent on its ability to raise
capital from shareholders or other sources to sustain operations. These factors,
along with other matters as set forth in Note 1, raise substantial doubt that
the Company will be able to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Vancouver, Canada "Amisano Hanson"
January 31, 2005 Chartered Accountants
750 West Pender Street, Suite 604 Telephone: 604-689-0188
Vancouver Canada Facsimile: 604-689-9773
V6C 2T7 E-MAIL: amishan@telus.net
F-3
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
F-4
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 10,000,151
================ ================
SEE ACCOMPANYING NOTES
F-5
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
F-6
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
------ --------- ------- ---------- ----- -----
Balance, as at December 9, 1999 - $ - $ - $ - $ - $ -
------------ ----------- ---------- ------------- ------------ ------------
Capital stock issued for cash - at $0.001 3,500,000 3,500 - - - 3,500
- 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
F-7
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
F-8
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.
F-9
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
November 30, 2005, 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 advances, accounts payable and accrued
liabilities and amounts due to related parties 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
F-10
Note 2 Summary of Significant Accounting Policies - (cont'd)
------------------------------------------
earlier of completion of a feasibility study or the Company's
commitments to plan of action based on the then known facts.
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 November 30, 2005, the Company has not granted any stock
options.
F-11
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.
F-12
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
F-13
Note 2 Summary of Significant Accounting Policies - (cont'd)
------------------------------------------
Recent Accounting Pronouncements - (cont'd)
--------------------------------
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 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
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.
F-14
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
$47,779. The claims are in good standing until November 14,
2006.
F-15
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 as
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.
F-16
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 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.
F-17
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 Events
-----------------
Subsequent to November 30, 2005, the Company issued 641,026 shares
of common stock pursuant a private placement for total proceeds of
$400,000.
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.
F-18
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
The Principal Executive Officer and Principal Financial Officer conducted an
evaluation of the effectiveness of the design and operation of the Company's
disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end
of the period covered by this report. Based on that evaluation, the Principal
Executive Officer and Principal Financial Officer concluded that the Company's
disclosure controls and procedures were effective as of the end of the period
covered by this report. There were no significant changes in internal control
over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act)
that occurred during the fourth quarter of 2005 that have materially affected,
or are reasonably likely to materially affect, the Company's internal control
over financial reporting.
19
PART III
ITEM 9: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Served As Director
Name Age Position with Registrant or Officer Since
---- --- ------------------------ ----------------
President, Director,
Peter Flueck 56 Chairman of the Board March 21, 2003
Chief Operating Officer,
Zaf Sungur 52 Secretary, CFO, Director April 15, 2003
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.
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.
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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.
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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.
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PART IV
Exhibits
3.1 Charter and By-Laws*
10.1 Mineral Property Purchase Agreement (previously filed with the
Company's Form 10-KSB on February 28, 2006).
10.2 Binding Letter of Agreement Between Jemma Resources Corp. and
Brookmount Explorations, Inc.
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 Fiscal year ended
November 30, 2005 November 30, 2004
--------------------------------------------------------------------------------
Audit fees $12,500 $8,934
--------------------------------------------------------------------------------
Audit-related fees $0 $6,189
--------------------------------------------------------------------------------
Tax fees Nil Nil
--------------------------------------------------------------------------------
All other fees Nil 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.
The Company does not have an audit committee. Our board of directors
approves all costs associated with our outside auditors. The Board'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 Board'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 Board may also pre-approve particular services
on a case-by-case basis. Our Board approved all services that our independent
accountants provided to us during the past two fiscal years.
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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: December 8, 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: December 8, 2006
By: /s/ Zaf Sungur
------------------------------
COO, Secretary, Treasurer, Principal
Accounting Officer and Director
Date: December 8, 2006
24