UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K/A-1
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): May 8, 2009
AFFINITY
GOLD CORP.
(Exact
name of registrant as specified in charter)
Commission
File Number 333-142890
Nevada
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26-4152475
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(State
or other jurisdiction
of
incorporation)
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(I.R.S.
Employer
Identification
No.)
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7950
Main Street, Suite 217
Maple
Grove, MN 55369
(Address
of principal executive offices, including Zip Code)
Registrant’s
telephone number, including area code: 763-424-4754
Not
Applicable
(Former
name or former address, if changed since last report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
¨
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Written communications pursuant
to Rule 425 under the Securities Act (17 CFR
230.425)
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¨
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Soliciting material pursuant to
Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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¨
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Pre-commencement communications
pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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¨
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Pre-commencement communications
pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item 2.01.
COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
On May 8,
2009, Affinity Gold Corp. (the “
Company
”) entered into a share
exchange agreement (the “
Share
Exchange Agreement
”) with AMR Project Peru, S.A.C.(“
AMR
”), a Peruvian corporation,
and all the shareholders of AMR, whereby the Company has agreed to acquire
99.99% of the issued and outstanding shares in the capital of AMR in exchange
for the issuance of 12,000,000 shares of common stock of the Company in
aggregate to the shareholders of AMR on a pro rata basis in accordance with each
AMR shareholders’ percentage of ownership in AMR.
AMR is
the owner of the mining concession title named “AMR Project” covering 500
hectares and the mining concession certificate as evidenced by Certificate No.
7996-2006-INACC-UADA granted to AMR by the Republic of Peru, National Institute
of Concessions and Mining Cadastre on December 11, 2006 (the “
Mining Concession Rights
”),
which Mining Concession Rights are located in the Inambari River Basin on the
flat plains region at an altitude greater than 1500’ and accessible by land and
air, in the District of Ayapata, Province of Carabaya, Department of Puno,
Peru.
Since the
closing of the Share Exchange Agreement was to occur by August 11, 2009, in
accordance with Extension Agreement #3, dated July 28, 2009, whereby the closing
date was extended to August 11, 2009, we entered into a fourth extension
agreement (“
Extension Agreement
#4
”) between the parties to the Share Exchange Agreement to provide up to
August 25, 2009 to close the Share Exchange Agreement. Extension Agreement
#4 is attached hereto as Exhibit 10.2, and which is incorporated herein by
reference.
On August
14, 2009, the Share Exchange Agreement closed and as a result, AMR became a
99.99% owned subsidiary of the Company, and the Company is a holding company for
the business of AMR which is engaged in mineral exploration concentrating on
gold exploration in Peru and Latin America.
Mr.
Antonio Rotundo, who is the President, CEO, CFO and a director of the Company is
also a major shareholder of AMR along with his father, Mario Rotundo, who is the
other major shareholder of AMR.
The
foregoing description of the Share Exchange Agreement does not purport to be
complete and is qualified in its entirety by reference to the Share Exchange
Agreement, which is attached hereto as Exhibit 10.1, and which is incorporated
herein by reference.
Concurrently
with the closing of the Share Exchange Agreement, by a letter agreement entered
into on May 8, 2009 (the “
Letter Agreement
”), between
the Company and Antonio Rotundo, the Company’s President, CEO, CFO and director,
Antonio Rotundo cancelled 26,500,000 shares of the 27,800,000 shares of common
stock of the Company registered in his name. Therefore, Antonio Rotundo now only
has 9,988,000 shares of common stock of the Company registered in his name,
which includes the 8,688,000 shares of common stock of the Company that were
issued to Antonio Rotundo as a result of the closing of the Share Exchange
Agreement.
The
foregoing description of the Letter Agreement does not purport to be complete
and is qualified in its entirety by reference to the Letter Agreement, which was
attached to the Form 8-K as Exhibit 10.2 filed on May 13, 2009, and which is
incorporated herein by reference.
The table
below illustrates the corporate structure of the Company as a result of the
completion of the Share Exchange Agreement:
The words
the “
Company
”, “
we
”, “
our
”, and “
Affinity
” are used herein to
refer to Affinity Gold Corp. and our subsidiary, AMR.
Cautionary
Statement Regarding Forward-Looking Statements
This Form
8-K/A-1 that we are filing with the SEC contain statements that are considered
forward-looking statements. Forward-looking statements give the Company’s
current expectations, plans, objectives, assumptions or forecasts of future
events. All statements other than statements of current or historical fact
contained in this Form 8-K/A-1, including statements regarding the Company’s
future financial position, business strategy, budgets, projected costs and plans
and objectives of management for future operations, are forward-looking
statements. In some cases, you can identify forward-looking statements by
terminology such as “anticipate,” “estimate,” “plans,” “potential,” “projects,”
“ongoing,” “expects,” “management believes,” “we believe,” “we intend,” and
similar expressions. These statements are based on the Company’s current plans
and are subject to risks and uncertainties, and as such the Company’s actual
future activities and results of operations may be materially different from
those set forth in the forward looking statements. Any or all of the
forward-looking statements in this current report may turn out to be inaccurate
and as such, you should not place undue reliance on these forward-looking
statements. The Company has based these forward-looking statements largely on
its current expectations and projections about future events and financial
trends that it believes may affect its financial condition, results of
operations, business strategy and financial needs. The forward-looking
statements can be affected by inaccurate assumptions or by known or unknown
risks, uncertainties and assumptions due to a number of factors,
including:
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·
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dependence
on key personnel;
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the
operation of our business; and
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·
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general
economic conditions in the United States and Latin
America.
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These
forward-looking statements speak only as of the date on which they are made, and
except to the extent required by federal securities laws, we undertake no
obligation to update any forward-looking statements to reflect events or
circumstances after the date on which the statement is made or to reflect the
occurrence of unanticipated events. In addition, we cannot assess the impact of
each factor on our business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statements. All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the cautionary statements contained in
this current report.
Corporate
History
We were
incorporated as “Syncfeed Inc.” in the State of Nevada on March 27, 2007.
Effective February 10, 2009, with the State of Nevada, we completed a merger
with our wholly-owned subsidiary, Affinity Gold Corp. As a result, we changed
our name from “Syncfeed Inc.” to “Affinity Gold Corp.” to better reflect the
intended direction and business of our Company.
Also
effective February 10, 2009, with the State of Nevada, we effected a thirty (30)
for one (1) forward stock split of our authorized, issued and outstanding common
stock (the “Common Stock”). As a result, our authorized capital increased from
90,000,000 shares of Common Stock with a par value of $0.001 to 2,700,000,000
shares of Common Stock with a par value of $0.001. Our issued and outstanding
share capital increased from 2,150,000 shares of Common Stock to 64,500,000
shares of Common Stock.
The name
change and forward stock split took effect on the market at the open of business
on February 13, 2009.
On July
23, 2009, we amended our Articles of Incorporation by reducing our authorized
capital of 2,700,000,000 shares of common stock with a par value of $0.001 per
share and 10,000,000 shares of preferred stock with a par value of $0.001 per
share to 250,000,000 shares of common stock with a par value of $0.001 per share
and 10,000,000 shares of preferred stock with a par value of $0.001 per share.
Our issued and outstanding shares were not affected as a result of the decrease
in our authorized shares of common stock.
We were
previously engaged in the business of developing, manufacturing, and selling
commercial feed for commercially raised and harvested Chinese Mitten-handed
Crabs. Following a change in control of our Company on January 9, 2009, and
subsequent merger with our subsidiary Affinity Gold Corp. and forward stock
split effective February 10, 2009, we changed our focus to mineral exploration
concentrating on gold exploration in Peru and Latin America.
AMR Project Peru
S.A.C.
AMR
Project Peru S.A.C. was incorporated pursuant to the laws of Peru on October 7,
2005. Mr. Mario Rotundo is the General Manager of AMR and Mr. Antonio Rotundo is
the Subordinated General Manager of AMR. AMR is engaged in the business of
mineral exploration concentrating on gold exploration in Peru and Latin
America.
Business
of the Company
The
business of the Company will be conducted through its subsidiary,
AMR.
We are a
development stage exploration corporation. A development stage exploration
corporation is one engaged in the search for mineral deposits or reserves which
are not in either the development or production stage. We intend to focus our
exploration activities on mineral properties in Peru and other regions, which
may result in the acquisition of other entities that own certain mineral rights
or licenses.
There is
no assurance that commercially viable mineral deposits will be found on the AMR
Project or any other properties we acquire.
Our
overall strategy is to target the exploration and acquisition of small and
medium sized mining concessions that allow for economically viable development
and production with minimal net environmental impact when employing industry
best practices. In addition to direct acquisitions, we plan to compliment our
growth through strategic joint ventures and partnerships where and when
appropriate.
We are
targeting small and medium-sized mining concessions for the following
reasons:
1.
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the
projects become revenue-producing within a relatively short period of
time;
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2.
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overall
startup costs are less of a burden;
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3.
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once
started, these projects can quickly self-fund future
development;
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4.
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environmental
impacts can be managed and minimized;
and
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5.
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community
relations and support tend to be easier to build and
maintain.
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Our
exploration target is to find mineral bodies containing gold. Our success
depends upon finding mineralized material. This will require a determination by
a geological consultant as to whether any of our current mineral properties or
subsequently acquired mineral properties contains reserves. Mineralized material
is a mineralized body, which has been delineated by appropriate spaced drilling
or underground sampling to support sufficient tonnage and average grade of
minerals to justify removal.
We intend
to continue to identify strategic acquisitions of additional concession rights
within the area of the AMR Project to ensure progress towards achieving future
growth objectives.
Principal
Products
At this
time we do not have any product for sale as we are in the beginning stages of
our exploration of the AMR Project and the possible acquisition of other
potential properties.
Competition
In
identifying and acquiring mineral resource properties, we compete with many
companies possessing greater financial resources and technical facilities.
Competition could adversely affect our ability to acquire suitable prospects for
exploration in the future.
Licenses
Any
development and exploration activities in Peru require permits from various
government authorities, and are subject to federal, state and local laws and
regulations governing prospecting, development, production, exports, taxes,
labor standards, occupational health and safety, mine safety and other matters.
Such laws and regulations are subject to change, can become more stringent and
compliance can therefore become more costly.
We cannot
guarantee that we will be able to maintain or obtain all necessary licenses and
permits that may be required to explore and develop any mineral properties
acquired, commence construction, or commence operation of mining
facilities.
Environmental
Laws
Environmental
legislation will affect nearly all aspects of our intended operations.
Compliance with environmental legislation can require significant expenditures
and failure to comply with environmental legislation may result in the
imposition of fines and penalties, clean up costs arising out of contaminated
properties, damages and the loss of important permits.
Environmental
laws and regulations are evolving in all jurisdictions. We are not able to
determine the specific impact that future changes in environmental laws and
regulations may have on our intended operations and activities, and its
resulting financial position; however, we anticipate that capital expenditures
and operating expenses may increase in the future as a result of the
implementation of new and increasingly stringent environmental regulation.
Further changes in environmental laws, new information on existing environmental
conditions or other events, including legal proceedings based upon such
conditions or an inability to obtain necessary permits could require increased
financial reserves or compliance expenditures or otherwise have a material
adverse effect on us.
Employees
At
present, we have no full-time employees. Mr. Antonio Rotundo, our President,
CEO, CFO and a director of the Company, will devote 100% of his time or 40 hours
per week to our operations. Mr. Corey J. Sandberg, our current Secretary,
Treasurer and a director of Company, will devote 100% of his time or 40 hours
per week to our operations.
Transfer
Agent
We have
engaged Nevada Agency and Trust Company as our stock transfer agent. Nevada
Agency and Trust Company is located at 50 West Liberty Street, Reno, Nevada
89501.
Available
Information
The
Company’s website is
www.affinitygold.com
,
where information about the Company may be reviewed and obtained. In addition,
the Company’s filings with the Securities and Exchange Commission (“SEC”) may be
accessed at the internet address of the SEC, which is
http://www.sec.gov
.
Also, the public may read and copy any materials that the Company files with at
the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580 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.
Properties
We
maintain our corporate offices at 7950 Main Street, Suite #217, Maple Grove,
Minnesota 55369. In addition, the corporate offices for our subsidiary AMR is
located at Av. Arenales 335, Cercado, Lima, Peru.
The AMR Project
Overview
In late
2005, AMR successfully negotiated and signed an agreement allowing exploration
and development activities to commence on 500 hectares of previously unexplored
land located in Puno, Peru. After making the necessary submissions to the
Peruvian Energy and Mining Sector National Institute of Concessions and Mining
Cadastre in 2007, AMR initiated the first exploration ever done on this
property. Based on initial site assessments, geologic sampling, testing and
assay lab results obtained to date, all indications are that the property
contains high levels of coarse and fine gold mineralization. However, a
geological report in accordance with Industry Guide 7 or Canadian securities
National Instrument 43-101 has not been completed in order to determine if the
mineralization is economically viable for development and
production.
History
Prior to
AMR’s acquisition of mining concession rights for the property there had not
been geological sampling performed to measure for the viability of mining
development and production. Since acquisition of the mining rights, AMR has
performed due diligence on the property including an initial geological study
performed by Dr. Estanislao de la Cruz C., a Geological Engineer and Professor
at University of Lima, Peru. The initial findings contained in Dr. de la Cruz’
report, which include site assessments, geologic sampling, multi-element testing
and assay lab results, all indicate a strong presence of gold mineralization.
The foregoing description of Dr. Estanislao de la Cruz C.’s report does not
purport to be complete and is qualified in its entirety by a translated copy of
the geological report which was attached as Exhibit 10.2 to the Form 8-K dated
March 2, 2009, and filed on March 11, 2009, which is incorporated herein by
reference.
Geology and
Mineralization
The
deposits of gold-bearing gravels in the Inambari system are the result of the
deposit of detritus from the geologic layer of the east branch of the Eastern
Andes, and they come from the highest parts of these mountains. Because of its
flow volume, the Inambari River is considered among the most important rivers of
the Peruvian jungle. Recent geological studies performed at the end of the
nineteenth and twentieth centuries by the Corps of Mining Engineers of Peru, now
named the Institute of Mining Engineers of Peru, demonstrate the presence of
precious ores with gold near the top of the list.
Sampling
Method
Employing
a method known as the “Points” method, there were a total of 44 test wells dug
from which samples were drawn. The wells dug measured 2m x 2m x 3m. It was in
this manner in which results obtained yielded average grades of 2.1g/m
3
. Actual
grades ranged from 0.1g/m
3
to
12.0g/m
3
. It
should be noted the lab’s results indicated an array of precious metals
including platinum, titanium, chromium and tungsten. Mineralization estimates
have not been amply substantiated. We anticipate with additional funding that we
will be able to conduct more thorough sampling and testing in order to prepare a
formal geological report on the AMR project to substantiate AMR’s
findings.
Accessibility and
Infrastructure
The
property is located in the Inambari River Basin on the flat plains region at an
altitude greater than 1500’ and accessible by land and air. By land, the
property is accessible in an 8 hour drive from Cuzco, Urcos, Quincemil and San
Lorenzo; or a 10 hour trek from Juliaca, Azangaro and San Gaban. The property is
also accessible by helicopter with only a 1 hour flight from Lima.
Material
Contracts
On
January 11, 2006, AMR and Mr. Nestor Enrique Borda entered into a Private
Contract for Mining Operation, whereby Mr. Borda provided AMR with authorization
and consent to carry out the most extensive mining activity within the land
owned by Mr. Borda for exploration and exploitation of natural resources (gold)
in the sub-soil and on the surface in exchange for AMR providing Mr. Borda with
6% of the gross gold production extracted from the said land subject to the
requested mining concession being obtained. A copy of the Private Contract for
Mining Operation is attached hereto as Exhibit 10.3.
Risk
Factors
An
investment in the Company has a high degree of risk. Before you invest you
should carefully consider the risks and uncertainties described below and the
other information in this current report. If any of the following risks actually
occur, our business, operating results and financial condition could be harmed
and the value of our stock could go down.
Risks Related To Our
Company
We
have a going concern opinion from our auditors, indicating the possibility that
we may not be able to continue to operate.
The
Company has incurred net losses of $3,793,713 from March 27, 2007 (inception) to
June 30, 2009. We anticipate generating losses for the next 12 months.
Therefore, we may be unable to continue operations in the future as a going
concern. No adjustment has been made in the accompanying financial statements to
the amounts and classification of assets and liabilities which could result
should we be unable to continue as a going concern. If we cannot continue as a
viable entity, our shareholders may lose some or all of their investment in the
Company.
We
are a development stage company and may never be able to execute our business
plan.
We were
incorporated on March 27, 2007. We currently have no products, customers or
revenues. Although we have begun initial planning for the development of a
mineral exploration company, we may not be able to execute our business plan
unless and until we are successful in raising funds in the near future. In
addition, our independent auditors included an explanatory paragraph in their
report on our audited financial statements for the fiscal year ended March 31,
2009 regarding concerns about our ability to continue as a going concern. As a
result, we may not be able to obtain additional necessary funding.
There can
be no assurance that we will ever achieve any revenues or profitability. The
revenue and income potential of our proposed business and operations is
unproven, and the lack of operating history makes it difficult to evaluate the
future prospects of our business.
Our
business plan may be unsuccessful.
The
success of our business plan is dependent on our ability to discover a mineral
reserve on one or more properties covered by exploration licenses, however,
there can be no assurance that we will be able to develop any potential property
into a producing mine and extract those resources. Therefore, the lack of
operating history makes it difficult to validate our business plan.
We
have no operating history and have maintained losses since inception, which we
expect to continue in the future.
We
incurred net losses of $3,793,713 for the period from March 27, 2007 (inception)
to June 30, 2009, and expect to incur more operating losses over the next 12
months and in future periods. These losses will occur because we do not yet have
any revenues to offset the expenses associated with the development and
exploration for gold. We cannot guarantee that we will ever be successful in
generating revenues in the future. We recognize that if we are unable to
generate revenues, we may 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 we can provide investors with no assurance 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.
There
can be no assurance that we will be capable of raising the additional funding
that we need to carry out our development and exploration
objectives.
The
further development and exploration of our mineral properties depends upon our
ability to obtain financing through capital markets, or other means. There is no
assurance that we will be successful in obtaining financing as and when needed.
Unfavorable market conditions may make it difficult or impossible for us to
obtain debt financing or equity financing on acceptable terms or at all. Failure
to obtain additional financing on a timely basis may cause us to postpone our
development plans, forfeit rights in some or all of our properties or reduce or
terminate some or all of our operations.
Our
executive officers and directors have significant voting power and may take
actions that may be different than actions sought by our other
shareholders.
Our
officers and directors own approximately 33.2% of the outstanding shares of our
common stock. Therefore, such shareholders will be able to exercise significant
influence over all matters requiring shareholder approval. This influence over
our affairs might be adverse to the interest of our other stockholders. In
addition, this concentration of ownership could delay or prevent a change in
control and might have an adverse effect on the market price of our common
stock.
Since
our officers can work or consult for other companies, their other activities
could slow down our operations.
Our
officers and directors are not required to work exclusively for us. Therefore,
it is possible that their pursuit of other activities may slow our operations
and reduce our financial results because of the slow down in operations. It is
expected that our officers will devote 40 hours per week to our operations on an
ongoing basis.
We
do not have experience in placing properties into production.
We have
no experience in placing mineral properties into production, and our ability to
do so will be dependent upon using the services of appropriately experienced
personnel or entering into agreements with other major resource companies that
can provide such expertise. There can be no assurance that we will have
available to us the necessary expertise to take a mineral deposit into
production.
We
may be unable to enforce our legal rights in certain circumstances.
In the
event of a dispute arising at or in respect of our foreign operations, we may be
subject to the exclusive jurisdiction of foreign courts or may not be successful
in subjecting foreign persons to the jurisdiction of courts in the United States
or other jurisdictions. We may also be hindered or prevented from enforcing our
rights with respect to a governmental entity or instrumentality because of the
doctrine of sovereign immunity.
We
depend on our key personnel, the loss of whom would adversely affect our
operations. If we fail to attract and retain the talent required for our
business, our business will be materially harmed.
We are a
small company with no full-time employees as of June 30, 2009, and we depend to
a great extent on the principal member of our management. If we lose the
services of our officers, it could significantly impede the achievement of our
objectives. We do not currently have any key man life insurance policies. We
have not entered into employment agreements with our officers. In addition,
recruiting and retaining qualified exploration personnel will be critical to our
success. We may not be able to retain existing personnel or attract and retain
qualified staff in the future. If we fail to hire and retain personnel in key
positions, we may be unable to achieve our exploration objectives in a timely
manner.
Some
of our directors and officers are outside the United States, with the result
that it may be difficult for investors to enforce within the United States any
judgments obtained against us or any of our directors or officers.
Some of
our directors and officers are nationals and/or residents of countries other
than the United States, and all or a substantial portion of such persons' assets
are located outside the United States. As a result, it may be difficult for
investors to effect service of process on some of our directors or officers, or
enforce within the United States any judgments obtained against us or our
officers or directors, including judgments predicated upon the civil liability
provisions of the securities laws of the United States or any state thereof.
Consequently, you may be effectively prevented from pursuing remedies under U.S.
federal securities laws against some of them.
Management
is inexperienced in running a U.S. public company.
We are
managed by a management team that is relatively unfamiliar with the capital
market and the processes by which a U.S. public company should be managed and
operated. Management is currently making efforts to familiarize itself with the
relevant laws, rules and regulations and market practice, but there can be no
assurance that it can master the relevant knowledge and skills and set up the
required systems in time to prevent mistakes and to meet shareholder and market
expectations.
Standards
for compliance with Section 404 of the Sarbanes-Oxley Act are uncertain, and if
we fail to comply in a timely manner, our business could be harmed and our stock
price could decline.
Rules
adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act require an
annual assessment of a public company’s internal control over financial
reporting, and attestation of this assessment by the public company’s
independent registered public accountants. We believe that the annual assessment
of our internal controls requirement will first apply to our annual report for
the 2009 fiscal year and the attestation requirement of management’s assessment
by our independent registered public accountants will first apply to our annual
report for the 2010 fiscal year. The standards that must be met for management
to assess the internal control over financial reporting are new and complex, and
require significant documentation, testing and possible remediation to meet the
detailed standards. We may encounter problems or delays in completing activities
necessary to make an assessment of our internal control over financial
reporting. In addition, the attestation process by our independent registered
public accountants is new and we may encounter problems or delays in completing
the implementation of any requested improvements and receiving an attestation of
our assessment by our independent registered public accountants. If we cannot
assess our internal control over financial reporting as effective, or our
independent registered public accountants are unable to provide an unqualified
attestation report on such assessment, investor confidence and share value may
be negatively impacted.
Compliance
with changing regulation of corporate governance and public disclosure will
result in additional expenses and pose challenges for our management
team.
Changing
laws, regulations and standards relating to corporate governance and public
disclosure, including the Sarbanes-Oxley Act and SEC regulations, have created
uncertainty for public companies and significantly increased the costs and risks
associated with accessing the public markets and public reporting. Our
management team, which has no prior experience operating a U.S. public company,
will need to devote significant time and financial resources to comply with both
existing and evolving standards for public companies, which will lead to
increased general and administrative expenses and a diversion of management time
and attention from revenue generating activities to compliance
activities.
Failure
to comply with the U.S. Foreign Corrupt Practices Act could subject us to
penalties and other adverse consequences.
We are
subject to the U.S. Foreign Corrupt Practices Act, which generally prohibits
U.S. companies from engaging in bribery or other prohibited payments to foreign
officials for the purpose of obtaining or retaining business. In addition, we
are required to maintain records that accurately and fairly represent our
transactions and have an adequate system of internal accounting controls.
Peruvian companies and some other foreign companies, including some that may
compete with us, are not subject to these prohibitions, and therefore may have a
competitive advantage over us. Corruption, extortion, bribery, pay-offs, theft
and other fraudulent practices occur from time-to-time in Peru, and our
executive officers and employees have not been subject to the U.S. Foreign
Corrupt Practices Act prior to the change of control of the Company which
occurred in January and February of 2009. We can make no assurance that our
employees or other agents will not engage in such conduct for which we might be
held responsible. If our employees or other agents are found to have engaged in
such practices, we could suffer severe penalties and other consequences that may
have a material adverse effect on our business, financial condition and results
of operations.
Risks Associated With Our
Common Stock
Trades
on the OTC Bulletin Board may be volatile and sporadic; the market price of our
Common Stock could be depressed and therefore difficult for our shareholders to
resell their shares.
Our
Common Stock is quoted on the OTC Bulletin Board. Trading of stock on the OTC
Bulletin Board is often thin and characterized by wide fluctuations in trading
prices due to many factors that may not correlate with our operations or
business prospects. This volatility could depress the market price of our common
stock for reasons unrelated to operating performance. Moreover, the OTC Bulletin
Board is not a stock exchange and trading of securities on the OTC Bulletin
Board is often more sporadic than the trading of securities on a quotation
system like Nasdaq or a stock exchange like the New York Stock Exchange.
Accordingly, our shareholders may have difficulty reselling some or all of their
shares.
Our
stock is a penny stock. Trading of our shares may be restricted by the SEC’s
penny stock regulations and FINRA’s sales practice requirements, which may limit
a shareholder’s ability to buy and sell our shares.
The
Securities and Exchange Commission has defined “penny stock” under Rule 3a51-1
and as such our stock is penny stock. Our securities are covered by the penny
stock rules, Rule 15g-9, which imposes additional sales practice requirements,
including disclosure requirements, on broker-dealers who sell to persons other
than established customers and “accredited investors”. The disclosure
requirements may have the effect of reducing the level of trading activity in
the secondary market for stock that is subject to the penny stock rules. The
penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in, and limit the marketability of, our common stock.
In
addition, the Financial Industry Regulatory Authority has adopted rules that
require a broker/dealer, when recommending an investment to a customer, to have
reasonable grounds for believing that the investment is suitable for that
customer. Prior to recommending speculative low priced securities to their
non-institutional customers, broker/dealers must make reasonable efforts to
obtain information about the customer’s financial status, tax status, investment
objectives and other information. Interpretations of these rules suggest
that there is a high probability that speculative low-priced securities will not
be suitable for some customers. The Financial Industry Regulatory
Authority requirements make it more difficult for broker/dealers to recommend
that their customers buy our common stock, which may limit your ability to buy
and sell our stock.
Because
we do not intend to pay any cash dividends on our shares of common stock, our
stockholders will not be able to receive a return on their shares unless they
sell them.
We intend
to retain any future earnings to finance the development and expansion of our
business. We do not anticipate paying any cash dividends on our common stock in
the foreseeable future. Unless we pay dividends, our stockholders
will not be able to receive a return on their shares unless they sell
them.
Risks Associated With
Mining
No
assurances are given regarding the existence of any mineral resource on any
potential mineral property or mineral license that we may be able to acquire
that is in commercially exploitable quantities. Funds expended on any
exploration will be lost until such time as we may be able to earn revenues from
operations, if any. If we do not discover any mineral resource in
commercially exploitable quantities, our business may fail.
A
reserve, in the context of a mining reserve, is defined by the Securities and
Exchange Commission in its Industry Guide 7 as that part of a mineral deposit
which could be economically and legally extracted or produced at the time of the
reserve determination. The probability of an individual prospect ever
having a “reserve” that meets the requirements of the Securities and Exchange
Commission’s Industry Guide 7 is extremely remote; in all probability any
potential mineral resource property that we may be able to acquire does not
contain any “reserve” and any funds that we spend on exploration will probably
be lost.
Even if
we do eventually discover a mineral reserve on one or more potential mineral
properties or licenses that we may be able to acquire, there can be no assurance
that we will be able to develop these properties or licenses into producing
mines and extract those resources. Both mineral exploration and
development involve a high degree of risk and few properties which are explored
are ultimately developed into producing mines.
The
commercial viability of an established mineral deposit will depend on a number
of factors including, by way of example, the size, grade and other attributes of
the mineral deposit, the proximity of the resource to infrastructure such as a
processing facility, roads and a point for shipping, government regulation and
market prices. Most of these factors will be beyond our control, and
any of them could increase costs and make extraction of any identified mineral
resource unprofitable.
Mineral
operations are subject to applicable law and government
regulation. Discovery of a mineral resource in a commercially
exploitable quantity is subject to these laws and regulations and could restrict
or prohibit the exploitation of that mineral resource. Failure to
exploit any mineral resource that we might discover may cause our business to
fail.
Mineral
exploration and extraction procedures require permits from various foreign
governmental authorities and are governed by laws and regulations, including
those with respect to prospecting, mine development, mineral production,
transport, export, taxation, labor standards, occupational health, waste
disposal, toxic substances, land use, environmental protection, mine safety and
other matters. We cannot assure that we may be able to obtain or
maintain any permits required for exploration on any potential mineral property
or license that we may be able to acquire or for the construction and operation
of a mine on such properties at economically viable costs. Failure to
obtain and maintain permits or failure to construct and operate a mine may cause
our business to fail.
Establishing
the existence of a mineral resource on any potential mineral property or license
in commercially exploitable quantities and subsequently developing a potential
property or license into a producing mine will require additional
capital. Failure to raise this additional capital may prevent us from
acquiring a potential mineral property or license, and most likely will prevent
us from being able to exploit any mineral resource and may cause our business to
fail.
Discovery
of mineral resources in commercially exploitable quantities on any potential
mineral property or license that we may be able to acquire will require us to
expend substantial sums of money to establish the extent of the resource,
develop processes to extract it and develop extraction and processing facilities
and infrastructure. Although substantial benefits may be derived from
the discovery of a major deposit, we cannot assure that such a resource will be
significant to justify commercial operations, nor can we assure that we will be
able to raise the funds required for timely development. Failure to
raise the necessary capital or complete the necessary facilities and
infrastructure may cause our business to fail.
Mineral
prices are subject to dramatic and unpredictable fluctuations.
Revenues,
if any, are expected to be derived from either the sale of a licensed mineral
resource property if we are able to acquire such a property or from the
extraction and sale of any mineral resources from such a
property. Commodity prices have fluctuated widely in recent years and
are affected by numerous factors beyond our control, including international,
economic and political trends, expectations of inflation, currency exchange
fluctuations, interest rates, global or regional consumptive patterns,
speculative activities and increased production due to new extraction
developments and improved extraction and production methods. The
effect of these factors on the price of mineral resources and therefore the
economic viability of any potential mineral property that we may be able to
acquire and exploration projects cannot be accurately predicted.
The
mining industry is highly competitive and we cannot assure of successful future
mineral claim acquisitions. Failure to acquire properties for mineral
resource exploration may require us to cease operations.
The
mineral exploration, development, and production industry is largely
desegregated. While we compete with other exploration companies in
the effort to locate and acquire mineral resource properties, we may not compete
with them for the removal or sales of mineral products from any potential
mineral property or license that we may be able to acquire if we should
eventually discover the presence of them in quantities sufficient to make
production economically feasible. Markets exist worldwide for the
sale of mineral products and we will likely be able to sell any mineral products
that we identify and produce.
In
identifying and acquiring mineral resource properties, we compete with many
companies possessing greater financial resources and technical
facilities. Competition could adversely affect our ability to acquire
suitable prospects for exploration in the future. Accordingly, we
cannot assure that we will acquire any interest in mineral resource properties
that might yield reserves or result in commercial mining
operations.
Mineral
exploration and development is subject to extraordinary operating
risks. We currently do not insure against these risks. As
a result of an uninsured event our liability may exceed our resources, which
would adversely impact on the Company.
Experience,
knowledge and careful evaluation may not be able to overcome the many risks
associated with exploration, development and production. Our
operations are always subject to inherent hazards and risks in the exploration
for mineral resources. Discovery of a mineral resource in
commercially exploitable quantities, could subject our operations to all of the
inherent hazards and risks associated with the development and production of
resources, including liability for pollution, cave-ins or similar hazards
against which we cannot or may not elect to insure. Such events may
result in work stoppages and damage to property, including damage to the
environment. It is not always possible to obtain insurance against
all such risks and we may decide not to insure against certain risks as a result
of high premiums or other reasons. The incurrence of an event that is
not fully covered, or covered at all, by insurance, could have a material
adverse effect on our financial conditions, results of operations and cash flows
and could lead to a decline in the value of our
securities. Currently, we do not maintain adequate insurance coverage
against operating hazards. Payment for any liability that arises from such
occurrences may have a material adverse effect on the Company.
There
can be no assurance that our interest in our exploration property is free from
defects.
We have
investigated our rights to explore and exploit our property and, to the best of
our knowledge, those rights are in good standing but no assurance can be given
that such rights will not be revoked, or significantly altered, to our
detriment. There can also be no assurance that our rights will not be
challenged or impugned by third parties.
An
increase in industry demand may create a shortage of mining
equipment.
Any
increase in growth of global mining and mineral exploration activities may
create a demand for mining equipment and related services that may outpace
supply. As a result, future operations could be adversely affected if
the Company encounters difficulties obtaining access to equipment and services
on a timely basis. In the event that the Company is unable to secure
required mining equipment and services on a timely basis, exploration and
development activities, production, productivity and costs could be negatively
affected.
Risks Related To Doing
Business In Peru
There
is uncertainty as to the termination and renewal of our mining
concessions.
Under the
laws of Peru, mineral resources belong to the state and government concessions
are required in Peru to explore for or exploit mineral reserves. In
Peru, our mineral rights derive from concessions from the Peruvian Ministry of
Energy and Mines for our exploration, exploitation, extraction and/or production
operations.
Mining
concessions in Peru may be terminated if the obligations of the concessionaire
are not satisfied. In Peru, we are obligated to pay certain fees for our
mining concession. Any termination or unfavorable modification of the
terms of one or more of our concessions, or failure to obtain renewals of such
concessions subject to renewal or extensions, could have a material adverse
effect on our financial condition and prospects.
Peruvian
economic and political conditions may have an adverse impact on our
business.
Our
operations are conducted in Peru. Accordingly, our business,
financial condition or results of operations could be affected by changes in
economic or other policies of the Peruvian government or other political,
regulatory or economic developments in Peru. During the past several
decades, Peru has had a history of political instability that has included
military coups and a succession of regimes with differing policies and
programs. Past governments have frequently intervened in the nation’s
economy and social structure. Among other actions, past governments
have imposed controls on prices, exchange rates and local and foreign investment
as well as limitations on imports, have restricted the ability of companies to
dismiss employees, have expropriated private sector assets (including mining
companies) and have prohibited the remittance of profits to foreign
investors.
There is
a risk of terrorism in Peru relating to
Sendero Luminoso
and the
Movimiento Revolucionario
Tupac Amaru
, which were particularly active in the 1980s and early
1990s. To a much lesser degree terrorist incidents have continued in some
rural areas of the country.
Because
we have significant operations in Peru, we cannot provide any assurance that
political developments and economic conditions in Peru and/or terrorist activity
will not have a material adverse effect on market conditions, prices of our
securities, our ability to obtain financing, and our results of operations and
financial condition.
Peruvian
inflation reduced economic growth and fluctuations in the nuevo sol exchange
rate may adversely affect our financial condition and results of
operations.
Over the
past several decades, Peru has experienced periods of high inflation, slow or
negative economic growth and substantial currency devaluation. The
inflation rate in Peru, as measured by the
Indice de Precios al
Consumidor
(Consumer Price Index) and published by the
Instituto Nacional de Estadistica e
Informatica
, (National Institute of Statistics and Informatics), has
fallen from a high of 7,649.7% in 1990 to 6.7% in 2008. The Peruvian
currency has been devalued numerous times during the last 20 years. The
devaluation rate has decreased from a high of 4,019.3% in 1990 to 4.8% in
2008. Our operating expenses are partly denominated in U.S. dollars.
If inflation in Peru were to increase without a corresponding devaluation of the
nuevo sol relative to the U.S. dollar, our financial position and results of
operations, and the market price of our common stock, could be affected.
Although the Peruvian government’s economic policy reduced inflation and the
Peruvian economy has experienced a significant growth in recent years, we cannot
assure you that inflation will not increase from its current level or that such
growth will continue in the future at similar rates or at all.
Among the
economic circumstances that could lead to a devaluation of the nuevo sol is the
decline of Peruvian foreign reserves to inadequate levels. Peru’s foreign
reserves at December 31, 2008, were $31.2 billion as compared to $27.7
billion and $17.3 billion at December 31, 2007 and 2006,
respectively. We cannot assure that Peru will be able to maintain adequate
foreign reserves to meet its foreign currency denominated obligations or that
Peru will not devalue its currency should its foreign reserves
decline.
Developments
in other emerging market countries and in the United States may adversely affect
the prices of our common stock.
The
market value of securities of companies with significant operations in Peru is,
to varying degrees, affected by economic and market conditions in other emerging
market countries. Although economic conditions in such countries may
differ significantly from economic conditions in Peru, investors’ reactions to
developments in any of these other countries may have an adverse effect on the
market value or trading price of the securities of issuers that have significant
operations in Peru.
We cannot
assure you that the market value or trading prices of our common stock will not
be adversely affected by events in the United States or elsewhere, including in
emerging market countries.
Environmental,
health and safety laws and other regulations may increase our costs of doing
business, restrict our operations or result in operational delays.
Our
exploration and any potential mining, milling, smelting and refining activities
are subject to a number of Peruvian laws and regulations, including
environmental laws and regulations, as well as certain industry technical
standards. Additional matters subject to regulation include, but are not
limited to, concession fees, transportation, production, water use and
discharge, power use and generation, use and storage of explosives, surface
rights, housing and other facilities for workers, reclamation, taxation, labor
standards, mine safety and occupational health.
Environmental
regulations in Peru have become increasingly stringent over the last decade and
we expect that we will be required to dedicate more time and money to compliance
and remediation activities. We expect additional laws and regulations will
be enacted over time with respect to environmental matters. Recently,
Peruvian environmental laws have been enacted imposing closure and remediation
obligations on the mining industry. We believe our operations are in
compliance with all environmental laws and regulations within the areas we
operate.
The
development of more stringent environmental protection programs in Peru could
impose constraints and additional costs on our operations and require us to make
significant capital expenditures in the future. We cannot assure you that
future legislative, regulatory or trade developments will not have an adverse
effect on our business, properties, results of operations, financial condition
or prospects.
Movements
in foreign currency exchange rates could negatively affect our operating
results.
A portion
of our costs are denominated in U.S. dollars; however, some of our costs
are denominated in Canadian dollars and Peruvian nuevos sol. As a
result, we will be generally less profitable when the U.S. dollar weakens
in relation to these foreign currencies.
From time
to time, we may implement currency hedges intended to reduce our exposure to
changes in foreign currency exchange rates. However, our hedging strategies may
not be successful, and any of our unhedged foreign exchange will continue to be
subject to market fluctuations.
Financial
Statements
Attached
to this Form 8-K/A-1 are the audited financial statements for the fiscal years
ended December 31, 2008, and December 31, 2007 for AMR Project Peru S.A.C. and
the unaudited financial statements for the six month period ended June 30, 2009,
of AMR Project Peru S.A.C. (collectively, the “
Financial
Statements
”). The Financial Statements are presented in US$
and have been prepared in accordance with Peruvian generally accepted accounting
principles, which comply with International Financial Reporting Standards, and
have been reconciled to US GAAP.
Management’s
Discussion and Analysis
As a
result of the share exchange transaction consummated on August 14, 2009,
Affinity Gold Corp. became a holding company conducting operations through one
direct operating subsidiary, AMR Project Peru S.A.C., a company operating in
Peru.
The
following discussion provided by AMR’s management, is based on the results of
operations for the years ended December 31, 2008, and December 31, 2007, and the
sixe month period ended June 30, 2009, and should be read in conjunction with
the Financial Statements and the notes thereto included elsewhere
herein.
The
discussion and analysis of AMR’s financial condition and results of operations
are based upon the Financial Statements, which have been prepared in accordance
with International Financial Reporting Standards and have been reconciled in
accordance with accounting principles generally accepted in the United
States. The preparation of these financial statements required AMR to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses. On an on-going basis, AMR
evaluates these estimates, including those related to cost reimbursement income,
bad debts, impairment, contingencies and litigation. AMR bases its
estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. There can be no
assurance that actual results will not differ from those estimates.
Overview
AMR
Project Peru S.A.C. was incorporated pursuant to the laws of Peru on October 7,
2005. As a result of the closing of the Share Exchange Agreement, the
Company is the 99.99% owner of AMR. Mr. Mario Rotundo is the General
Manager of AMR and Mr. Antonio Rotundo is the Subordinated General Manager of
AMR. AMR is engaged in the business of mineral exploration
concentrating on gold exploration in Peru and Latin America.
Liquidity and Capital
Resources
The
operations of AMR are located in Peru, and its accounting records are maintained
in Peruvian Nuevo Soles (S/.). The functional currency is the Nuevo
Soles. For financial reporting purposes, the financial information
presented has been converted to US$ unless specifically stated
otherwise.
As at
June 30, 2009, AMR had accumulated deficit of $541,766.
AMR had
cash and cash equivalents of $6,048 as of June 30, 2009 (compared to $33 as at
December 31, 2008 and $34,342 as at December 31, 2007). AMR’s working
capital deficiency as of June 30, 2009 was $740,646 (compared to working capital
deficiency of $572,178 as at December 31, 2008 and $228,699 as at December 31,
2007). The increase in working capital deficit was a result of
increased operating losses and acquisition of assets, including machinery and
equipment.
AMR has
received third party loans of $717,219 as of December 31, 2008 and $273,315 as
of December 31, 2007. In addition, AMR received a loan from the
Company effective January 21, 2009 of up to US$400,000. As of June
30, 2009, the loan amount from the Company to AMR was US$382,000, which funds
are now an inter-corporate debt due to the closing of the Share Exchange
Agreement. These loans do not accrue any interest.
Results of
Operations
As of
June 30, 2009, AMR’s total assets were $472,917 compared to $408,300 as of
December 31, 2008 and $222,254 as of December 31, 2007. AMR’s total
liabilities were $965,457 as of June 30, 2009 compared to 721,893 as of December
31, 2008 and $273,934 as of December 31, 2007. AMR had cash resources
of $6,048 as of June 30, 2009 compared to $33 as of December 31, 2008 and
$34,342 as of December 31, 2007.
Net Loss.
AMR’s
net loss for the six month period ended June 30, 2009 is
$178,948. AMR’s net loss for the fiscal year ended December 31, 2008
is $340,655 compared to $48,851 for the fiscal year ended December 31,
2007. The principal components of AMR’s losses for the six month
period ended June 30, 2009, included prospecting expenses of $179,458 and
administrative expenses of $9,445. This condition raises substantial
doubt about AMR’s ability to continue as a going concern. AMR’s
continuation as a going concern is dependent on its ability to meet its
obligations, to obtain additional financing as may be required and ultimately to
attain profitability. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Net Operating Losses
.
For the
six months ended June 30, 2009, AMR had an operating loss of $188,903 compared
to an operating loss of $191,728 for the fiscal year ended December 31, 2008 and
$61,762 for the fiscal year ended December 31, 2007.
Revenues.
AMR has
not generated any revenues to date from its operations.
Off-Balance Sheet
Arrangements
AMR does
not have any off-balance sheet arrangements that have or are reasonably likely
to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to
investors.
Security
Ownership of Certain Beneficial Owners and Management
The
following table sets forth information as of August 14, 2009 (the “
Determination Date
”), with
respect to the Company’s directors, Named Executive Officers, and each person
who is known by the Company to own beneficially, more than five percent (5%) of
the Company’s common stock, and with respect to shares owned beneficially by all
of the Company’s directors and executive officers as a group. Common
stock not outstanding but deemed beneficially owned by virtue of the right of an
individual to acquire shares within 60 days is treated as outstanding only when
determining the amount and percentage of common stock owned by such
individual. Except as noted, each person or entity has sole voting
and sole investment power with respect to the shares shown.
As of the
Determination Date, there are 51,106,195 (post forward stock split) shares of
common stock issued and outstanding.
Name
and Address of Beneficial Owner
|
|
Position
|
|
Amount
and Nature of Beneficial Ownership
|
|
Percent
of
Common
Stock
(1)
|
|
Antonio
Rotundo
|
|
President,
CEO, CFO, and director (former Secretary and Treasurer )
|
|
10,988,000
(2)
Direct
|
|
|
21.1
|
%
|
Corey
J. Sandberg
|
|
Secretary,
Treasurer and director
|
|
1,600,000
(3)
Direct
|
|
|
3.1
|
%
|
Paul
F. Antoniazzi
|
|
Director
|
|
600,000
(4)
Direct
|
|
|
1.2
|
%
|
Johnny
Lian Tian Yong
|
|
Director
|
|
6,000,000
Direct
|
|
|
11.7
|
%
|
Directors
and Officers as a group (4 persons)
|
|
|
|
19,188,000
(5)
|
|
|
36
|
%
|
Notes:
(1) Beneficial
ownership of Common Stock has been determined for this purpose in accordance
with Rule 13d-3 under the Exchange Act, under which a person is deemed to be the
beneficial owner of securities if such person has or shares voting power or
investment power with respect to such securities, has the right to acquire
beneficial ownership within 60 days or acquires such securities with the purpose
or effect of changing or influencing the control of the Company.
(2) This
figure includes 9,988,000 shares held directly by Antonio Rotundo and 1,000,000
stock options which have already vested.
(3) This
figure includes 1,000,000 shares held directly by Corey Sandberg and 600,000
stock options which have already vested.
(4) This
figure includes nil shares held directly by Paul Antoniazzi and 600,000 stock
options which have already vested.
(5) This
figure includes 34,800,000 shares owned directly by directors and executive
officers as well as 2,200,000 stock options with have already
vested.
Directors
and Officers
The
following table sets forth certain information regarding the members of our
Board of Directors, executive officers and our significant employees as of June
30, 2009:
Name
|
|
Age
|
|
Positions
and Offices Held
|
Antonio
Rotundo
(1)
|
|
44
|
|
President,
CEO, CFO, and director (former Secretary and Treasurer
)
|
Corey
J. Sandberg
(2)
|
|
35
|
|
Secretary,
Treasurer and director
|
Paul
F. Antoniazzi
(3)
|
|
62
|
|
Director
|
Johnny
Lian Tian Yong
(4)
|
|
43
|
|
Director
|
Notes:
(1)
|
Mr.
Antonio Rotundo was appointed the President, CEO, CFO, Secretary,
Treasurer and a director of our Company on January 8, 2009. Mr.
Rotundo resigned as our Secretary and Treasurer on February 3,
2009.
|
(2)
|
Mr.
Corey J. Sandberg was appointed as a director of our Company on January
29, 2009, and was appointed as our Secretary and Treasurer on February 3,
2009.
|
(3)
|
Mr.
Paul F. Antoniazzi was appointed as a director of our Company on January
29, 2009.
|
(4)
|
Mr.
Johnny Lian Tian Yong was appointed as a director of our Company on March
4, 2009.
|
Family
Relationships
There are
no family relationships between any of the Company’s directors or executive
officers. However, Mario Rotundo is the General Manager of AMR, who
is the father of Antonio Rotundo, who is our President, CEO, CFO and a director
of our Company as well as the Subordinated General Manager of AMR.
Business
Experience
Mr. Antonio Rotundo
(age 44)
is our President, CEO, CFO and a director of Company and was formerly our
Secretary and Treasurer. Mr. Rotundo is a mining professional with
over 10 years of diverse mining, operations and financial
experience. From 2005 to present, Mr. Antonio Rotundo has been the
general manager of AMR Project Peru S.A.C. in Lima, Peru, a mining company
focusing on gold exploration in Peru. Mr. Rotundo is in charge of the
day to day operations of AMR and is also closely involved in the purchasing of
equipment, negotiating land contracts and mining concessions, supervising
environmental studies, setting up camps and mining operations and all related
financial functions of AMR. From 2004 to 2005, Mr. Rotundo was the
operation and logistics manager for American Mining in Guyana where he was
responsible for managing the operations of a diamond mine, ordering equipment
and supplies, developing and managing relationships with customers and
suppliers, developing, implementing and managing new accounting and financial
system and staff and payroll. Mr. Rotundo was also an officer and
director of Ram Gold & Exploration Inc. (Pink Sheets: RMGX) from March,
2008, to June, 2008, however, Mr. Rotundo resigned from all positions on June
27, 2008. Mr. Rotundo is not an officer or director of any other
reporting issuer at this time.
Mr. Corey J. Sandberg
(age 35)
is our Secretary, Treasurer and a director of our Company. Mr.
Sandberg has just under fifteen years of professional experience in both
corporate and small business environments. From 2006, to present, Mr.
Sandberg has been an independent consultant where he has lead business startups,
organizational management and operational improvement initiatives, both
strategic and tactical, for small public and private companies. Prior
to becoming an independent consultant in 2006, Mr. Sandberg spent just under
seven years at American Express Financial Advisors, a subsidiary of American
Express, (later spun-off to become Ameriprise Financial, Inc.). While
at American Express, Mr. Sandberg held both management and leadership positions
in predominantly entrepreneurial environments receiving recognition for
challenging the status quo, taking risks and successfully implementing new ideas
that helped with cost savings and revenue generation. During the last
few years before leaving American Express in late 2005, Mr. Sandberg served in
Project Manager and Vendor Relationship Manager positions. In
addition, Mr. Sandberg held the FINRA Series 63, 7 and 24 Securities Licenses as
a requirement for the positions he held.
Mr. Sandberg is a
graduate of the University of Minnesota, Twin Cities with a Bachelor of Arts
degree in Japanese Language & Culture. Mr. Sandberg is not an
officer or director of any other reporting issuer at this time.
Mr. Paul F. Antoniazzi
(age
62) is a director of our Company. Mr. Antoniazzi has been active in
the mining industry since 1983. Since 2002, Mr. Antoniazzi has worked
as an independent contractor as the President of Antoniazzi Consulting Ltd.
specializing in environmental and mining projects including: contaminated soils
clean up; asbestos clean up; surface drill projects; and mine
decommissioning. Mr. Antoniazzi is currently on the board of
directors of three Canadian listed mining companies: Opawica Explorations Inc.
(TSX: OPW) (since December 2, 1996); International Kirkland Minerals Inc.
(IKI-TSXV) (since November 19, 1997); and RT Minerals Corp. (C.RTM:CNSX) (since
March 9, 2007).
Johnny Lian Tian Yong
(age 43)
is a director of our Company. Mr. Lian is currently the Chairman of
JAS Singapore Group of Companies, a Singapore corporation, that has subsidiary
and affiliate businesses spanning more than 13 countries covering medical and
hospitality services, finance and investments, logistics, human resources and
professional development, green technologies and information technology
services. Mr. Lian has been the Chairman of JAS Singapore Group of
Companies since October 1992. From October 2000 to present, Mr. Lian has been a
director of JAS Medical Screening Centre Pte., Ltd., a Singapore corporation,
which provides health services for the needy and medical screening for Chinese
immigrants, foreign workers and foreign students coming into
Singapore. From June, 1996, to present, Mr. Lian has been a director
of JAS Employment Agency Pte., Ltd., a Singapore corporation, which facilitates
the influx of foreign workers and immigrants applying for work and residence in
Singapore. From June, 2004, to present, Mr. Lian has been a director of JAS
Plastic Industries Pte., Ltd., a Singapore corporation, which is involved in
recycling waste plastics from corporations around the world into useful
products. From September, 2005, to present, Mr. Lian has been a
director of JAS Marketing Pte., Ltd., a Singapore corporation, which provides
business consulting concentrating on establishing trading ties with other
companies, cooperation and consensus with fellow partners in the industry and
identifying market threats and opportunities. From June, 2003, to present, Mr.
Lian has been a director of JAS Technology Pte., Ltd., a Singapore corporation,
which is in the business of remote video surveillance for world-wide locations
through Wi-Fi and GPRS, as well as providing spare marine hardware for
commercial and pleasure users of the sea. From January, 2007, to
present, Mr. Lian has been a director of JASTROL Pte., Ltd., a Singapore
corporation, which functions as a gold bullion broker, dealer and also as a
goldsmith in Singapore. From August 6, 2009 to present, Mr. Lian has
been the President CEO and chairman of TechMedia Advertising, Inc. (OTCBB: TECM)
and from August 14, to present, Mr. Lian has been a director of TechMedia
Advertising, Inc.
Managers of AMR Project Peru
S.A.C.
Mario
Rotundo is the General Manager of AMR and Antonio Rotundo is the Subordinated
General Manager.
Other
Directorships
Name
of Director
|
|
Reporting
Issuer
|
Paul
Antoniazzi
|
|
Opawica
Explorations Inc.
International
Kirkland Minerals Inc.
RT
Minerals Corp.
|
Johnny
Lian Tian Yong
|
|
TechMedia
Advertising, Inc.
|
Involvement in Certain Legal
Proceedings
We are
not aware of any material legal proceedings that have occurred within the past
five years concerning any director, director nominee, or control person which
involved a criminal conviction, a pending criminal proceeding, a pending or
concluded administrative or civil proceeding limiting one’s participation in the
securities or banking industries, or a finding of securities or commodities law
violations.
Executive
Compensation
In this
item, “Named Executive Officer” means:
(i)
|
all
individuals serving as the Company’s principal executive officer or acting
in a similar capacity during the last completed fiscal year (“PEO”),
regardless of compensation
level;
|
(ii)
|
the
Company’s two most highly compensated executive officers other than the
PEO who were serving as executive officers at the end of the last
completed fiscal year and whose total compensation exceeds $100,000;
and
|
(iii)
|
up
to two additional individuals for whom disclosure would have been provided
pursuant to paragraph (ii) but for the fact that the individual was not
serving as an executive officer of the Company at the end of the last
completed fiscal year.
|
Summary Compensation
Table
The
following table contains disclosure of all plan and non-plan compensation
awarded to, earned by, or paid to the Company’s Named Executive Officers for all
services rendered in all capacities to the Company and its subsidiaries during
the Company’s fiscal years completed March 31, 2009, and 2008:
Name
and
principal
position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
awards
($)
|
|
Option
awards
($)
|
|
Non-equity
incentive
plan
compensation
($)
|
|
Nonqualified
deferred
compensation
earnings
($)
|
|
All
other
compensation
($)
|
|
Total
($)
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
|
Antonio Rotundo
(1)
President,
CEO, CFO & Director
|
|
2009
|
|
Nil
|
|
Nil
|
|
Nil
|
|
$
|
520,000
|
|
Nil
|
|
Nil
|
|
Nil
|
|
$
|
520,000
|
|
Yin Cheng Kong
(2)
Former
President, CEO, CFO, Secretary, Treasurer & director
|
|
2009
2008
|
|
Nil
Nil
|
|
Nil
Nil
|
|
Nil
Nil
|
|
Nil
Nil
|
|
Nil
Nil
|
|
Nil
Nil
|
|
Nil
Nil
|
|
Nil
Nil
|
|
Notes:
(1)
|
Mr.
Antonio Rotundo was appointed the President, CEO, CFO, Secretary,
Treasurer and a director of our Company on January 8, 2009. Mr.
Rotundo resigned as our Secretary and Treasurer on February 3,
2009.
|
(2)
|
Mr.
Yin Cheng Kong resigned as our President, CEO, CFO, Secretary and
Treasurer on January 8, 2009 and resigned as a director of our Company on
January 9, 2009.
|
The
Company has not entered into employment contracts with its executive officers
and compensation, if any, will be determined at the discretion of our board of
directors.
The
Company does not have any standard arrangement for compensation of its directors
for any services provided as a director, including services for committee
participation or for special assignments.
Management of
AMR
The
following table contains disclosure of all plan and non-plan compensation
awarded to, earned by, or paid to AMR’ s management for all services rendered in
all capacities to AMR during the fiscal years completed Dec. 31, 2008, 2007 and
2006:
Name
and principal position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
awards
($)
|
|
Option
awards
($)
|
|
Non-equity
incentive
plan
compensation
($)
|
|
Nonqualified
deferred
compensation
earnings
($)
|
|
All
other
compensation
($)
|
|
Total
($)
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
Antonio
Rotundo,
Sub-ordinated
General Manager
|
|
|
2008
2007
2006
|
|
Nil
Nil
Nil
|
|
Nil
Nil
Nil
|
|
Nil
Nil
Nil
|
|
Nil
Nil
Nil
|
|
Nil
Nil
Nil
|
|
Nil
Nil
Nil
|
|
Nil
Nil
Nil
|
|
Nil
Nil
Nil
|
Mario
,Rotundo
General
Manager
|
|
|
2008
2007
2006
|
|
Nil
Nil
Nil
|
|
Nil
Nil
Nil
|
|
Nil
Nil
Nil
|
|
Nil
Nil
Nil
|
|
Nil
Nil
Nil
|
|
Nil
Nil
Nil
|
|
Nil
Nil
Nil
|
|
Nil
Nil
Nil
|
Outstanding Equity Awards at
Fiscal Year-End
The
following table contains disclosure concerning unexercised options; stock that
has not vested; and equity incentive plan awards for each Named Executive
Officer outstanding as of the end of the Company’s fiscal year ended March 31,
2009:
|
|
Option
awards
|
|
Stock
awards
|
Name
|
|
Number
of
securities
underlying
unexercised
options
(#)
exercisable
|
|
|
Number
of
securities
underlying
unexercised
options
(#)
unexercisable
|
|
|
Equity
incentive
plan
awards:
Number
of
securities
underlying
unexercised
unearned
options
(#)
|
|
|
Option
exercise
price
($)
|
|
Option
expiration
date
|
|
Number
of
shares
or
units
of
stock
that
have
not
vested
(#)
|
|
Market
value
of
shares
of
units
of
stock
that
have
not
vested
($)
|
|
Equity
incentive
plan
awards:
Number
of
unearned
shares,
units
or
other
rights
that
have
not
vested
(#)
|
|
Equity
incentive
plan
awards:
Market
or
payout
value
of
unearned
shares,
units
or
other
rights
that
have
not
vested
($)
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
Antonio Rotundo
(1)
President,
CEO, CFO & Director
|
|
|
600,000
|
|
|
|
400,000
|
|
|
|
400,000
|
|
|
$
|
0.60
|
|
Feb.
11, 2014
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
Yin Cheng Kong
(2)
Former
President, CEO, CFO, Secretary, Treasurer & director
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
Notes:
(1)
|
Mr.
Antonio Rotundo was appointed the President, CEO, CFO, Secretary,
Treasurer and a director of our Company on January 8, 2009. Mr.
Rotundo resigned as our Secretary and Treasurer on February 3,
2009.
|
(2)
|
Mr.
Yin Cheng Kong resigned as our President, CEO, CFO, Secretary and
Treasurer on January 8, 2009 and resigned as a director of our Company on
January 9, 2009.
|
Retirement Benefits and
Change of Control
Under the
stock option agreements with each of Messrs. Antonio Rotundo, Corey Sandberg and
Paul Antoniazzi, if there is a formal offer for the purchase of the issued and
outstanding shares of the Company, then all of the stock options shall vest
immediately.
Directors
Compensation
The
following table discloses the compensation of the directors of the Company for
the Company’s fiscal year ended March 31, 2009 (unless already disclosed
above):
Name
|
|
Fees
earned or
paid in
cash
($)
|
|
Stock
awards
($)
|
|
Option
awards
($)
|
|
Non-equity
incentive plan
compensation
($)
|
|
Nonqualified
deferred
compensation
earning
($)
|
|
All other
compensation
($)
|
|
Total
($)
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
Antonio Rotundo
(1)
|
|
See
Above.
|
|
See
Above.
|
|
See
Above.
|
|
See
Above.
|
|
See
Above.
|
|
See
Above.
|
|
See
Above.
|
|
Corey J.
Sandberg
(2)
|
|
Nil
|
|
Nil
|
|
$
|
312,000
|
|
Nil
|
|
Nil
|
|
Nil
|
|
$
|
312,000
|
|
Paul F.
Antoniazzi
(3)
|
|
Nil
|
|
Nil
|
|
$
|
312,000
|
|
Nil
|
|
Nil
|
|
Nil
|
|
$
|
312,000
|
|
Johnny Lian Tian
Yong
(4)
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Yin Cheng Kong
(5)
|
|
See
Above.
|
|
See
Above.
|
|
See
Above.
|
|
See
Above.
|
|
See
Above.
|
|
See
Above.
|
|
See
Above.
|
|
Wang Zhao
(6)
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Notes:
(1)
|
Mr.
Antonio Rotundo was appointed the President, CEO, CFO, Secretary,
Treasurer and a director of our Company on January 8, 2009. Mr.
Rotundo resigned as our Secretary and Treasurer on February 3,
2009.
|
(2)
|
Mr.
Corey J. Sandberg was appointed as a director of our Company on January
29, 2009, and was appointed as our Secretary and Treasurer on February 3,
2009.
|
(3)
|
Mr.
Paul F. Antoniazzi was appointed as a director of our Company on January
29, 2009.
|
(4)
|
Mr.
Johnny Lian Tian Yong was appointed as a director of our Company on March
4, 2009.
|
(5)
|
Ms.
Yin Cheng Kong resigned as our President, CEO, CFO, Secretary and
Treasurer on January 8, 2009 and resigned as a director of our Company on
January 9, 2009.
|
(6)
|
Mr.
Wang Zhao resigned as a director of our Company on January 9,
2009.
|
Narrative Disclosure to the
Director Compensation Table
On
February 11, 2009, the Board of Directors adopted a stock option and incentive
plan and granted in aggregate 2,200,000 stock options to the following current
directors: Antonio Rotundo – 1,000,000; Corey Sandberg – 600,000; and
Paul Antoniazzi – 600,000. The stock options have an exercise price
of $0.60 per share and an expiry date of five years from the date of
grant. The stock options have vesting provisions of 50% on the date
of grant and 10% on the last day of each month thereafter.
Other
than the issuance of stock options pursuant to our Stock Option Plan, we do not
pay any compensation to our directors at this time. However, we
reserve the right to compensate our directors in the future with cash, stock,
options, or some combination of the foregoing. See “
Market Price of and Dividends on the
Company’s Common Equity and Related Stockholder Matters - Securities Authorized
for Issuance Under Equity Compensation Plans
” for details of the
Company’s Stock Option Plan.
Certain
Relationships and Related Transactions
There are
no transactions, since the beginning of the Company’s fiscal year ended March
31, 2009, or any currently proposed transaction, in which the Company was or is
to be a participant and the amount involved exceeds $120,000 or one percent of
the average of the Company’s total assets at year end for the last two fiscal
years, and in which any related person had or will have a direct or indirect
material interest except as follows:
Mr.
Antonio Rotundo, our President, CEO, CFO and a director of the Company was also
a major shareholder and is the subordinate general manager of
AMR. Mr. Mario Rotundo, Mr. Antonio Rotundo’s father, is a major
shareholder of AMR and the general manager of AMR. Mr. Antonio
Rotundo owns 112,432 shares of AMR representing 72.4% of the issued and
outstanding shares of AMR and 27,800,000 shares of our common stock representing
42.4% of the issued and outstanding shares of the Company just prior to the
closing of the Share Exchange Agreement. Subsequent to the closing of
the Share Exchange Agreement, Mr. Antonio Rotundo only held 9,988,000 shares of
our common stock representing 19.5% of the issued and outstanding
shares of the Company. Mr. Mario Rotundo owns 42,818 shares of AMR
representing 27.6% of the issued and outstanding number of shares of
AMR. Accordingly, Mr. Antonio Rotundo had a material interest in the
Share Exchange Agreement. The approximate dollar value of the amount
involved in the Share Exchange Agreement based on the market price of $5.25 as
at August 14, 2009, which may not be an accurate assessment of the fair value,
is US$63,000,000 and the approximate dollar value of Mr. Antonio Rotundo’s
interest in the Share Exchange Agreement is US$45,612,000.
In
addition, effective January 21, 2009, we entered into a loan agreement with AMR
whereby we agreed to loan up to $400,000 to AMR to be used to purchase equipment
and supplies to conduct exploration and for other related expenses on the mining
concession named “AMR Project”. The loan is non-interest bearing and
was due on April 30, 2010. However, since AMR is now our subsidiary,
the loan has becomes an inter-corporate loan. As of June 30, 2009 the
amount of the loan was $382,000.
Legal
Proceedings
We are
not a party to any pending legal proceeding. We are not aware of any
pending legal proceeding to which any of our officers, directors, or any
beneficial holders of 5% or more of our voting securities are adverse to us or
have a material interest adverse to us.
Market
Price of and Dividends on the Company’s Common Equity and Related Stockholder
Matters
Market
Information
Our
common stock is traded on the Over-the-Counter Bulletin Board (“OTCBB”) under
the symbol “AFYG”. Our common stock commenced trading under this
symbol on February 13, 2009, and previously traded under the symbol “SYFD” from
the initial listing date until February 13, 2009, without any trading or
volume.
The
following historical quotations obtained from online sources reflects the high
and low bids for our common stock based on inter-dealer prices, without retail
mark-up, mark-down or commission and may not necessarily represent actual
transactions:
Quarter Ended
|
|
High ($)
|
|
|
Low ($)
|
|
June
30, 2009
|
|
|
5.25
|
|
|
|
3.20
|
|
March
31, 2009
|
|
|
3.80
|
|
|
|
2.95
|
|
December
31, 2008
|
|
|
N/A
|
|
|
|
N/A
|
|
September
30, 2008
|
|
|
N/A
|
|
|
|
N/A
|
|
June
30, 2008
|
|
|
N/A
|
|
|
|
N/A
|
|
March
31, 2008
|
|
|
N/A
|
|
|
|
N/A
|
|
December
31, 2007
|
|
|
N/A
|
|
|
|
N/A
|
|
September
30, 2007
|
|
|
N/A
|
|
|
|
N/A
|
|
June
30, 2007
|
|
|
N/A
|
|
|
|
N/A
|
|
March
31, 2007
|
|
|
N/A
|
|
|
|
N/A
|
|
As of
August 14, 2009, our common stock closed at a price of $5.25.
Holders
As of
August 14, 2009, there are 51,106,195 shares of our common stock issued and
outstanding held by 48 shareholders of record.
Dividend
Policy
We have
never paid any cash dividends and have no plans to do so in the foreseeable
future. Our future dividend policy will be determined by our Board of
Directors and will depend upon a number of factors, including our financial
condition and performance, our cash needs and expansion plans, income tax
consequences and the restrictions that applicable laws and other arrangements
then impose.
Securities Authorized for
Issuance Under Equity Compensation Plans
The
following table sets forth information as of the end of the fiscal year ended
March 31, 2009, with respect to compensation plans (including individual
compensation arrangements) under which equity securities of the Company are
authorized for issuance, aggregated as follows: (i) all compensation plans
previously approved by security holders; and (ii) all compensation plans not
previously approved by security holders.
Plan category
|
|
Number of securities
to be issued upon
exercise of
outstanding
options,
warrants
and rights
|
|
|
Weighted-average
exercise price of
outstanding
options,
warrants and
rights
|
|
|
Number of securities
remaining available
for future
issuance under equity
compensation plans (excluding
securities reflected in
column
(a))
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
Equity
compensation plans approved by security holders
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Equity
compensation plans not approved by security holders
(1)
|
|
|
2,200,000
|
|
|
$
|
0.60
|
|
|
|
2,800,000
|
|
Total
|
|
|
2,200,000
|
|
|
|
|
|
|
|
2,800,000
|
|
Notes:
(1) The
Company’s Board of Directors adopted a stock option plan on February 11,
2009. See below for details of this plan.
On
February 11, 2009, our Board of Directors unanimously approved and adopted a
stock option and incentive plan (the “
Stock Option
Plan
”). The purpose of the Stock Option Plan is to advance our
interests and our shareholders’ interests by affording our key personnel an
opportunity for investment in the Company and the incentive advantages inherent
in stock ownership in the Company. Pursuant to the provisions of the
Stock Option Plan, stock options, stock awards, cash awards or other incentives
(the “
Stock Options and
Incentives
”) will be granted only to our key personnel, generally defined
as a person designated by the Board of Directors upon whose judgment, initiative
and efforts we may rely including any director, officer, employee, consultant or
advisor of the Company.
The Stock
Option Plan is to be administered by our Board of Directors, which shall
determine:
(i)
|
the
persons to be granted Stock Options and
Incentives;
|
(ii)
|
the
fair market value of our shares;
|
(iii)
|
the
exercise price per share of options to be
granted;
|
(iv)
|
the
number of shares to be represented by each option or incentive
award;
|
(v)
|
the
time or times at which options and incentive awards shall be
granted;
|
(vi)
|
the
interpretation of the Stock Option
Plan;
|
(vii)
|
whether
to prescribe, amend and rescind rules and regulations relating to the
Stock Option Plan;
|
(viii)
|
the
term and provisions or each option and incentive award granted (which need
not be identical) and, with the consent of the grantee thereof, modify or
amend such option or incentive
award;
|
(ix)
|
whether
to accelerate or defer (with the consent of the grantee) of the exercise
date of any option or incentive
award;
|
(x)
|
the
person to execute on our behalf any instrument required to effectuate the
grant of an option or incentive award previously granted by the
Board;
|
(xi)
|
whether
to accept or reject the election made by a grantee pursuant to Section 7.5
of the Stock Option Plan; and
|
(xii)
|
all
other determinations deemed necessary or advisable for the administration
of the Stock Option Plan.
|
The Stock
Option Plan provides authorization to the Board of Directors to grant Stock
Options and Incentives to a total number of shares of our Common Stock, not to
exceed five million (5,000,000) shares of our Common Stock as at the date of
adoption by the Board of Directors of the Stock Option Plan.
In the
event an optionee who is a director, officer, employee (employee also
encompasses consultants and advisors where such is appropriate or where such is
intended by the Board or by a particular grant under the Stock Option Plan)
(each an “
Employee
”) of
the Company has his employment terminated by us, except if such termination is
voluntary or occurs due to retirement with the consent of the Board or due to
death or disability, then the option, to the extent not exercised, shall
terminate on the date on which the Employee’s employment by the Company is
terminated. If an Employee’s termination is voluntary or occurs due
to retirement with the consent of the Board, then the Employee may after the
date such Employee ceases to be an Employee of the Company, exercise his option
at any time within three (3) months after the date he ceases to be an Employee
of the Company, but only to the extent that he was entitled to exercise it on
the date of such termination. To the extent that the Employee was not
entitled to exercise the Option at the date of such termination, or if he does
not exercise such option (which he was entitled to exercise) within the time
specified herein, the option shall terminate. In no event may the
period of exercise in the case of incentive options extend more than three (3)
months beyond termination of employment.
In the
event an Employee is unable to continue his employment with us as a result of
his permanent and total disability (as defined in Section 22(e)(3) of the
Internal Revenue Code), he may exercise his option at any time within six (6)
months from the date of termination, but only to the extent he was entitled to
exercise it at the date of such termination. To the extent that he
was not entitled to exercise the option at the date of termination, or if he
does not exercise such option (which he was entitled to exercise) within the
time specified herein, the option shall terminate. In no event may
the period of exercise in the case of an incentive option extend more than six
(6) months beyond the date the Employee is unable to continue employment due to
such disability.
In the
event an optionee dies during the term of the option and is at the time of his
death an Employee who shall have been in continuous status as an Employee since
the date of grant of the option, the option may be exercised at any time within
six (6) months following the date of death by the optionee’s estate or by a
person who acquired the right to exercise the option by bequest or inheritance,
but only to the extent that an optionee was entitled to exercise the option on
the date of death, or if the optionee’s estate, or person who acquired the right
to exercise the option by bequest or inheritance, does not exercise such option
(which he was entitled to exercise) within the time specified herein, the option
shall terminate. In no event may the period of exercise in the case
of an incentive option extend more than six (6) months beyond the date of the
Employee’s death.
Except to
the extent otherwise expressly provided in an award, the right to acquire shares
or other assets under the Stock Option Plan may not be assigned, encumbered or
otherwise transferred by an optionee and any attempt by an optionee to do so
will be null and void. However Stock Options and Incentives granted
under this Stock Option Plan may be transferred by an optionee by will or the
laws of descent and distribution or pursuant to a qualified domestic relations
order as defined by the Internal Revenue Code or Title I of the Employee
Retirement Income Security Act, as amended, or the rules
thereunder. Unless assigned in accordance with the terms of an award,
options and other awards granted under this Stock Option Plan may not be
exercised during an optionee’s lifetime except by the optionee or, in the event
of the optionee’s legal incapacity, by his guardian or legal representative
acting in a fiduciary capacity on behalf of the optionee under state law and
court supervision.
Recent
Sales of Unregistered Securities
On March
5, 2009, we issued 760,815 shares of our common stock to 11 individuals due to
the closing of our private placement at $0.40 per share for total gross proceeds
of $304,326. We believe that two of the issuances are exempt from
registration under Regulation D Rule 506 and/or Section 4(2) of the Securities
Act. We believe that the remaining issuances are exempt from
registration under Regulation S promulgated under the Securities Act as the
securities were issued to the individuals through offshore transactions which
were negotiated and consummated outside of the United States.
On April
30, 2009, we issued 285,060 shares of our common stock to 2 individuals due to
the closing of our private placement at $0.50 per share for total gross proceeds
of $142,530. We believe that the two issuances are exempt from
registration under Regulation S promulgated under the Securities Act as the
securities were issued to the individuals through offshore transactions which
were negotiated and consummated outside of the United States.
On August
10, 2009, we issued 60,320 shares of our common stock to one individual due to
the closing of our private placement at $0.75 per share for total gross proceeds
of $45,240. We believe that the issuance was exempt from registration
under Regulation S promulgated under the Securities Act as the securities were
issued to the individual through an offshore transaction which was negotiated
and consummated outside of the United States.
On June
23, 2009, we received gross proceeds of $100,000 from one investor for the
subscription of 100,000 (post forward stock split) shares of our common stock at
a price of $1.00 per share. When issued, we believe that the
issuances will be exempt from registration under Regulation S promulgated under
the Securities Act as the securities were will be issued to the individual
through an offshore transaction which was negotiated and consummated outside of
the United States.
In
connection with the closing of the Share Exchange Agreement, we issued
12,000,000 shares of common stock, par value $0.001 per share, to the holders of
common stock of AMR in exchange for the Company receiving 99.99% of the issued
and outstanding shares in the capital of AMR. No underwriters were
involved in the acquisition described herein. We believe that the
issuances are exempt from registration under Regulation S promulgated under the
Securities Act as the securities were issued to the individuals through an
offshore transaction which was negotiated and consummated outside of the United
States.
Description
of Company’s Securities
Our
authorized capital stock consists of 250,000,000 shares of common stock, with a
par value of $0.001 per share, and 10,000,000 shares of preferred stock, with a
par value of $0.001 per share. As of August 14, 2009, there were 51,106,195
shares of our common stock issued and outstanding. Our shares are held by
forty-eight (48) stockholders of record. We have not issued any shares of
preferred stock.
Common
Stock
Our
common stock is entitled to one vote per share on all matters submitted to a
vote of the stockholders, including the election of directors. Except as
otherwise required by law or provided in any resolution adopted by our board of
directors with respect to any series of preferred stock, the holders of our
common stock will possess all voting power. Generally, all matters to be voted
on by stockholders must be approved by a majority (or, in the case of election
of directors, by a plurality) of the votes entitled to be cast by all shares of
our common stock that are present in person or represented by proxy, subject to
any voting rights granted to holders of any preferred stock. Holders of our
common stock representing fifty percent (50%) of our capital stock issued,
outstanding and entitled to vote, represented in person or by proxy, are
necessary to constitute a quorum at any meeting of our stockholders. A vote by
the holders of a majority of our outstanding shares is required to effectuate
certain fundamental corporate changes such as liquidation, merger or an
amendment to our Articles of Incorporation. Our Articles of Incorporation do not
provide for cumulative voting in the election of directors.
Subject
to any preferential rights of any outstanding series of preferred stock created
by our board of directors from time to time, the holders of shares of our common
stock will be entitled to such cash dividends as may be declared from time to
time by our board of directors from funds available therefore.
Subject
to any preferential rights of any outstanding series of preferred stock created
from time to time by our board of directors, upon liquidation, dissolution or
winding up, the holders of shares of our common stock will be entitled to
receive pro rata all assets available for distribution to such
holders.
In the
event of any merger or consolidation with or into another company in connection
with which shares of our common stock are converted into or exchangeable for
shares of stock, other securities or property (including cash), all holders of
our common stock will be entitled to receive the same kind and amount of shares
of stock and other securities and property (including cash). Holders of our
common stock have no pre-emptive rights, no conversion rights and there are no
redemption provisions applicable to our common stock.
Preferred
Stock
Our board
of directors is authorized by our articles of incorporation to divide the
authorized shares of our preferred stock into one or more series, each of which
must be so designated as to distinguish the shares of each series of preferred
stock from the shares of all other series and classes. Our board of directors is
authorized, within any limitations prescribed by law and our articles of
incorporation, to fix and determine the designations, rights, qualifications,
preferences, limitations and terms of the shares of any series of preferred
stock including, but not limited to, the following:
1.
|
The
number of shares constituting that series and the distinctive designation
of that series, which may be by distinguishing number, letter or
title;
|
2.
|
The
dividend rate on the shares of that series, whether dividends will be
cumulative, and if so, from which date(s), and the relative rights of
priority, if any, of payment of dividends on shares of that
series;
|
3.
|
Whether
that series will have voting rights, in addition to the voting rights
provided by law, and, if so, the terms of such voting
rights;
|
4.
|
Whether
that series will have conversion privileges, and, if so, the terms and
conditions of such conversion, including provision for adjustment of the
conversion rate in such events as the Board of Directors
determines;
|
5.
|
Whether
or not the shares of that series will be redeemable, and, if so, the terms
and conditions of such redemption, including the date or date upon or
after which they are redeemable, and the amount per share payable in case
of redemption, which amount may vary under different conditions and at
different redemption dates;
|
6.
|
Whether
that series will have a sinking fund for the redemption or purchase of
shares of that series, and, if so, the terms and amount of such sinking
fund;
|
7.
|
The
rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the corporation, and
the relative rights of priority, if any, of payment of shares of that
series;
|
8.
|
Any
other relative rights, preferences and limitations of that
series.
|
Share Purchase
Warrants
We have
not issued and do not have outstanding any warrants to purchase shares of our
common stock.
Indemnification
of Directors and Officers
Our
officers and directors are indemnified as provided by the Nevada Revised
Statutes and our bylaws.
Under the
governing Nevada statutes, director immunity from liability to a company or its
shareholders for monetary liabilities applies automatically unless it is
specifically limited by a company’s articles of incorporation. Our
articles of incorporation do not contain any limiting language regarding
director immunity from liability. Excepted from this immunity
are:
1.
|
a
willful failure to deal fairly with the company or its shareholders in
connection with a matter in which the director has a material conflict of
interest;
|
2.
|
a
violation of criminal law (unless the director had reasonable cause to
believe that his or her conduct was lawful or no reasonable cause to
believe that his or her conduct was
unlawful);
|
3.
|
a
transaction from which the director derived an improper personal profit;
and
|
Our
bylaws provide that we will indemnify our directors and officers to the fullest
extent not prohibited by Nevada law; provided, however, that we may modify the
extent of such indemnification by individual contracts with our directors and
officers; and, provided, further, that we shall not be required to indemnify any
director or officer in connection with any proceeding (or part thereof)
initiated by such person unless:
1.
|
such
indemnification is expressly required to be made by
law;
|
2.
|
the
proceeding was authorized by our board of
directors;
|
3.
|
such
indemnification is provided by us, in our sole discretion, pursuant to the
powers vested us under Nevada law;
or
|
4.
|
such
indemnification is required to be made pursuant to the
bylaws.
|
Our
bylaws provide that we will advance to any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he is or was a director or officer of the Company, or is
or was serving at the request of the Company as a director or executive officer
of another company, partnership, joint venture, trust or other enterprise, prior
to the final disposition of the proceeding, promptly following request therefor,
all expenses incurred by any director or officer in connection with such
proceeding upon receipt of an undertaking by or on behalf of such person to
repay said amounts if it should be determined ultimately that such person is not
entitled to be indemnified under our bylaws or otherwise.
Our
bylaws provide that no advance shall be made by us to an officer of the Company,
except by reason of the fact that such officer is or was a director of the
Company in which event this paragraph shall not apply, in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, if a
determination is reasonably and promptly made: (a) by the board of directors by
a majority vote of a quorum consisting of directors who were not parties to the
proceeding, or (b) if such quorum is not obtainable, or, even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, that the facts known to the decision-making party at the time
such determination is made demonstrate clearly and convincingly that such person
acted in bad faith or in a manner that such person did not believe to be in or
not opposed to the best interests of the Company.
Item
3.02. UNREGISTERED SALES OF EQUITY SECURITIES
The
information set forth above under “
Item 2.01 Completion of Acquisition
or Disposition of Assets
” is incorporated herein by
reference.
Item
5.06. CHANGE IN SHELL COMPANY STATUS
As a
result of the closing of the Share Exchange Agreement, the Company hereby
declares that it is no longer a “shell company”. The information set
forth above under “
Item 2.01
Completion of Acquisition or Disposition of Assets
” is incorporated
herein by reference.
Item
8.01. OTHER EVENTS
Pursuant
to Form 8-K, General Instructions F, registrant hereby incorporates by reference
the press release attached hereto as Exhibit 99.1.
Item 9.01.
FINANCIAL STATEMENTS AND EXHIBITS
Financial
Statements
The
following financial statements are included in this Form 8-K/A-1.
Audited Financial Statements
of AMR as at December 31, 2008 and 2007 – prepared in accordance with
International Financial Reporting Standards and reconciled to US
GAAP
Report of
Independent Registered Public Accounting Firm
Balance
Sheet as at December 31, 2007
Profit
and Loss Statement for the year ended December 31, 2007
Statement
of Changes in Shareholders’ Equity for the year ended December 31,
2007
Cash Flow
Statement for the year ended December 31, 2007
Balance
Sheet as at December 31, 2008
Profit
and Loss Statement for the year ended December 31, 2008
Statement
of Changes in Shareholders’ Equity for the year ended December 31,
2008
Cash Flow
Statement for the year ended December 31, 2008
Notes to
the Financial Statements
Unaudited Financial
Statements of AMR as at June 30, 2009 – prepared in accordance with
International Financial Reporting Standards and reconciled to US
GAAP
Report of
Independent Registered Public Accounting Firm
Balance
Sheet as at June 30, 2009
Profit
and Loss Statement for the six month period ended June 30, 2009
Statement
of Changes in Shareholders’ Equity for the six month period ended June 30,
2009
Cash
Flows Statement for the six month period ended June 30, 2009
Notes to
the Financial Statements
Unaudited Pro Forma Combined
Financial Information
Introduction
to Unaudited Pro Forma Combined Financial Information
Pro Forma
Combined Balance Sheets as at March 31, 2009 and December 31, 2008
Pro Forma
Combined Statements of Operations for the years ended March 31, 2009 and
December 31, 2008
Pro Forma
Combined Balance Sheets as of June 30, 2009
Pro Forma
Combined Statements of Operations for the three and six months ended June 30,
2009
Notes to
the Pro Forma Adjustments
AMR PROJECT PERU S.A.C.
FINANCIAL
STATEMENTS AND AUDITED RECONCILIATION OF INTERNATIONAL FINANCIAL REPORTING
STANDARD - IFRS AND UNITED STATES OF AMERICA GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES - US GAAP TO DECEMBER 31, 2008 AND DECEMBER 31, 2007
AMR
PROJECT PERU S.A.C.
FINANCIAL
STATEMENTS AND AUDITED RECONCILIATION OF INTERNATIONAL FINANCIAL REPORTING
STANDARD - IFRS AND UNITED STATES OF AMERICA GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES - US GAAP TO DECEMBER 31, 2008 AND DECEMBER 31, 2007
CONTENT
Opinion
of independent auditors
|
3
|
|
|
Financial
statements and reconciliation of AMR Project Peru S.A.C. to December 31,
2008 and 2007 Audited Reconciliation as IFRS and US GAAP
|
6
|
|
|
Notes
to the financial statements
|
14
|
OPINION
OF THE INDEPENDENT AUDITORS
August
20, 2009
To the
shareholders of
AMR
Project - S.A.C Peru.
We have
audited the attached financial statements of the Company AMR Project - Peru
S.A.C. (a company in a pre-operating stage, hereinafter, the Company) to
December 31, 2008 and 2007, which include the balance sheets and the statements
of profit and loss, changes in shareholders’ equity and cash flow for the years
then ended, as well as the summary of significant accounting policies and other
explanatory notes.
Management's
responsibility for the financial statements
Management
is responsible for the preparation and reasonable presentation of these
financial statements in accordance with generally accepted auditing standards in
Peru. This responsibility includes: designing, implementing and maintaining the
internal control relevant to the preparation and reasonable presentation of the
financial statements so that they are free of material misstatements, whether as
a result of fraud or error; selecting and applying appropriate accounting
policies; and make reasonable accounting estimates according to the
circumstances.
Auditor's
responsibility
Our
responsibility consists of expressing an opinion on these statements based on
the audit that we conducted. Our audit was performed in accordance with audit
standards generally accepted in Peru. Such standards require that we fulfill
ethical requirements and plan and carry out our work with the purpose of
obtaining a reasonable assurance that the financial statements do not present
material misstatements.
An audit
includes the execution of procedures to obtain audit evidence on the balances
and disclosures in the financial statements. The procedures selected depend on
the auditor’s judgment, which includes evaluation of the risk that the financial
statements contain material misstatements, whether as a result of fraud or
error. In carrying out this risk evaluation the auditor takes into consideration
the Company’s internal control pertinent to the preparation and reasonable
presentation of the financial statements in order to design audit procedures in
accordance with the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal control. An audit also
includes evaluation of whether the accounting principles applied are suitable
and whether the estimates accounting made by management are reasonable, as well
as an evaluation of the overall presentation of the financial
statements.
August
20, 2009
To the
shareholders of
AMR
Project - S.A.C Peru.
We
believe that the audit that we have conducted constitutes a reasonable basis for
our opinion.
Opinion
In our
opinion, these financial statements present fairly, in all material aspects, the
financial condition of
AMR
Project - Peru S.A.C.
to 31, December 2008 and 2007, the results of its
operations and its cash flow for the years ending on that dates, in accordance
with generally accepted accounting principles in Peru.
Emphasis
in five situations
Our
attention was drawn to the description of AMR Project Peru S.A.C.’s activities
in Notes 6 and 7 to the accompanying financial statements to December 31, 2008
as concentrating mainly on the mining process known as "prospecting". In
addition, there is a tax credit fund of US$ 37,702 for taxes recoverable, and,
machinery and equipment for a net book value of approximately US$ 224,277 that,
according to estimates by Management will be recovered through future AMR
Project Peru S.A.C. operations.
The
accompanying financial statements for the years 2008 and 2007 have been
prepared assuming that AMR Project Peru S.A.C. will continue under the
going concern accounting principle. As described in Note 1 to the
financial statements, the Company has accumulated losses of US$ 362,820
and US$ 76,184 that have significantly reduced its shareholders’ equity,
with a shortfall of US$ 313,593 and US$ 51,679, respectively in its
working capital. The financial statements do not include any adjustment if
the Company could not continue as a going
concern.
|
The
8 of May of the 2009, AMR Project Peru S.A.C was sold to the American
company Affinity Gold Corp., as to date it has not been possible to
culminate the sale due to pending contractual clauses that remain to be
solved
|
In
accordance with your instructions dated Friday August 14, 2009, we have review
the conciliation and identified the nature and the accounting record of the
transactions consigned in the accounting accounts, as International Financial
Reporting Standard - IFRS versus United States of America Generally Accepted
Accounting Principles - US GAAP, which were elaborate by Management, of the
attached financial statements of AMR Project Peru S.A.C. to December 31, 2008
and 2007, which include the balance sheet and the statements of profit and loss,
changes in shareholders equity and cash flow for the years then ended. Based on
the work described above, in our opinion the reconciliation presented in the
attached financial statement of AMR Project Peru S.A.C. to December 31, 2008 and
2007, present fairly the conciliation in accordance with IFRS and US GAAP in all
material aspects.
August
20, 2009
To the
shareholders of
AMR
Project - S.A.C Peru.
The
U.S. dollar amounts are presented solely for the convenience of the reader
and in our opinion have been translated in a consistent manner in
accordance with the basis described in Notes 2 and 3n), This translation
should not be construed as representing that the Nuevo Sol amounts
actually represent or have been, or could be, converted into U.S.
dollars.
|
Signed
by:
|
(Partner)
|
Cesar
M. Urbano Ventocilla
|
|
Certified
Public Accountant
|
|
Registration
N° 9800
|
|
AMR
PROJECT PERU S.A.C.
Audited
- Reconciliation Financial Information
Prepared
by Management
BALANCE
SHEET
|
|
As
of December 31, 2007
|
|
|
|
IFRS
|
|
|
Adjustments
|
|
|
US
GAAP
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
|
Cash
and banks
|
|
|
34,342
|
|
|
|
-
|
|
|
|
34,342
|
|
Other
accounts receivable
|
|
|
470
|
|
|
|
-
|
|
|
|
470
|
|
Taxes
and prepaid expenses
|
|
|
10,424
|
|
|
|
-
|
|
|
|
10,424
|
|
Total
current assets
|
|
|
45,235
|
|
|
|
-
|
|
|
|
45,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MACHINERY
AND EQUIPMENT, NET
|
|
|
177,019
|
|
|
|
-
|
|
|
|
177,019
|
|
|
|
|
222,254
|
|
|
|
-
|
|
|
|
222,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
accounts payable
|
|
|
|
|
|
|
|
|
|
|
|
|
Third-Party
Loans
|
|
|
273,315
|
|
|
|
-
|
|
|
|
273,315
|
|
Other
accounts payable
|
|
|
619
|
|
|
|
-
|
|
|
|
619
|
|
Total
current liabilities
|
|
|
273,934
|
|
|
|
-
|
|
|
|
273,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
24,505
|
|
|
|
-
|
|
|
|
24,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
results during development stage
|
|
|
(74,099
|
)
|
|
|
-
|
|
|
|
(74,099
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
adjustment from foreign currency
|
|
|
(2,085
|
)
|
|
|
-
|
|
|
|
(2,085
|
)
|
|
|
|
(51,679
|
)
|
|
|
-
|
|
|
|
(51,679
|
)
|
|
|
|
222,254
|
|
|
|
-
|
|
|
|
222,254
|
|
The
accompanying notes are part of the financial statements.
AMR
PROJECT PERU S.A.C.
Audited
- Reconciliation Financial Information
Prepared
by Management
PROFIT
AND LOSS STATEMENT
|
|
|
|
|
|
|
|
Cumulative
|
|
|
For
the year ended
|
|
|
|
|
|
|
|
|
|
December
31,
|
|
|
December
31, 2007
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
IFRS
|
|
|
Adjustments
|
|
|
US
GAAP
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Administrative
expense
|
|
|
(2,418
|
)
|
|
|
(22,830
|
)
|
|
|
(42,344
|
)
|
|
|
(17,096
|
)
|
|
|
-
|
|
|
|
(17,096
|
)
|
Prospecting
expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
(44,666
|
)
|
|
|
(44,666
|
)
|
|
|
-
|
|
|
|
(44,666
|
)
|
Operating
loss
|
|
|
(2,418
|
)
|
|
|
(22,830
|
)
|
|
|
(87,010
|
)
|
|
|
(61,762
|
)
|
|
|
-
|
|
|
|
(61,762
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income and (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange
difference, net
|
|
|
-
|
|
|
|
-
|
|
|
|
20,991
|
|
|
|
20,991
|
|
|
|
-
|
|
|
|
20,991
|
|
Miscellaneous
expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
(8,080
|
)
|
|
|
(8,080
|
)
|
|
|
-
|
|
|
|
(8,080
|
)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,911
|
|
|
|
12,911
|
|
|
|
-
|
|
|
|
12,911
|
|
Net
loss before income tax
|
|
|
(2,418
|
)
|
|
|
(22,830
|
)
|
|
|
(74,099
|
)
|
|
|
(48,851
|
)
|
|
|
-
|
|
|
|
(48,851
|
)
|
Current
income tax
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net
loss
|
|
|
(2,418
|
)
|
|
|
(22,830
|
)
|
|
|
(74,099
|
)
|
|
|
(48,851
|
)
|
|
|
-
|
|
|
|
(48,851
|
)
|
The
accompanying notes are part of the financial statements.
AMR
PROJECT PERU S.A.C.
Audited
- Reconciliation Financial Information
For
the year ended Dec 31, 2007
Prepared
by Management
STATEMENTS
OF CHANGES IN SHAREHOLDERS EQUITY
|
|
IFRS
|
|
|
|
|
|
|
|
|
|
|
|
|
Acumulated
results
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
|
|
|
Turing
development
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
Stage
|
|
|
Total
|
|
|
Adjusments
|
|
|
US
GAAP
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inception,
October 2005
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Increase
in capital
|
|
|
24,505
|
|
|
|
-
|
|
|
|
24,505
|
|
|
|
-
|
|
|
|
24,505
|
|
Net
loss
|
|
|
-
|
|
|
|
(2,418
|
)
|
|
|
(2,418
|
)
|
|
|
-
|
|
|
|
(2,756
|
)
|
Equity
Adjustment from Foreign currency
|
|
|
-
|
|
|
|
(338
|
)
|
|
|
(338
|
)
|
|
|
-
|
|
|
|
(338
|
)
|
Balance
to December 31, 2005
|
|
|
24,505
|
|
|
|
(2,756
|
)
|
|
|
21,749
|
|
|
|
-
|
|
|
|
21,749
|
|
Net
loss
|
|
|
-
|
|
|
|
(22,830
|
)
|
|
|
(22,830
|
)
|
|
|
-
|
|
|
|
(22,830
|
)
|
Equity
Adjustment from Foreign currency
|
|
|
-
|
|
|
|
1,106
|
|
|
|
1,106
|
|
|
|
-
|
|
|
|
1,106
|
|
Balance
to December 31, 2006
|
|
|
24,505
|
|
|
|
(24,480
|
)
|
|
|
25
|
|
|
|
-
|
|
|
|
25
|
|
Net
loss
|
|
|
-
|
|
|
|
(48,851
|
)
|
|
|
(48,851
|
)
|
|
|
-
|
|
|
|
(48,851
|
)
|
Equity
Adjustment from Foreign currency
|
|
|
-
|
|
|
|
(2,853
|
)
|
|
|
(2,853
|
)
|
|
|
-
|
|
|
|
(2,853
|
)
|
Balance
to December 31, 2007
|
|
|
24,505
|
|
|
|
(76,184
|
)
|
|
|
(51,679
|
)
|
|
|
-
|
|
|
|
(51,679
|
)
|
The
accompanying notes are part of the financial statements.
AMR
PROJECT PERU S.A.C.
Audited
- Reconciliation Financial Information
Preparated
by Management
CASH
FLOW STATEMENT
|
|
Cumulative
|
|
|
For
the year ended
|
|
|
|
December
31,
|
|
|
December,
31 2007
|
|
|
|
2007
|
|
|
IFRS
|
|
|
Adjustments
|
|
|
US
GAAP
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment
of compensation and professional fees
|
|
|
(4,263
|
)
|
|
|
(2,833
|
)
|
|
|
-
|
|
|
|
(2,833
|
)
|
Payment
of taxes
|
|
|
(503
|
)
|
|
|
(471
|
)
|
|
|
-
|
|
|
|
(471
|
)
|
Other
cash payments related to the activity
|
|
|
(53,285
|
)
|
|
|
(27,877
|
)
|
|
|
-
|
|
|
|
(27,877
|
)
|
Net
cash provided by operating activities
|
|
|
(58,051
|
)
|
|
|
(31,181
|
)
|
|
|
-
|
|
|
|
(31,181
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTMENT
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of fixed assets
|
|
|
(39,974
|
)
|
|
|
(5,084
|
)
|
|
|
-
|
|
|
|
(5,084
|
)
|
Net
cash applied to investment activities
|
|
|
(39,974
|
)
|
|
|
(5,084
|
)
|
|
|
-
|
|
|
|
(5,084
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
received
|
|
|
107,862
|
|
|
|
70,327
|
|
|
|
-
|
|
|
|
70,327
|
|
Capital
contributions
|
|
|
24,505
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net
cash provided by financing activities
|
|
|
132,367
|
|
|
|
70,327
|
|
|
|
-
|
|
|
|
70,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
decrease in cash
|
|
|
34,342
|
|
|
|
34,063
|
|
|
|
-
|
|
|
|
34,063
|
|
Cash
at the beginning of the year
|
|
|
-
|
|
|
|
279
|
|
|
|
-
|
|
|
|
279
|
|
Cash
at the end of the year
|
|
|
34,342
|
|
|
|
34,342
|
|
|
|
-
|
|
|
|
34,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION
OF THE NET RESULT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WITH
THE NET CASH APPLIED TO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(74,099
|
)
|
|
|
(48,851
|
)
|
|
|
-
|
|
|
|
(48,851
|
)
|
Depreciation
and other provisions
|
|
|
28,875
|
|
|
|
25,307
|
|
|
|
-
|
|
|
|
25,307
|
|
Adjustment
from Foreign Currency
|
|
|
(2,085
|
)
|
|
|
(2,853
|
)
|
|
|
-
|
|
|
|
(2,853
|
)
|
Net
changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase)
in other accounts receivable
|
|
|
(61,468
|
)
|
|
|
(5,001
|
)
|
|
|
-
|
|
|
|
(5,001
|
)
|
Increase
in other accounts payable
|
|
|
50,726
|
|
|
|
217
|
|
|
|
-
|
|
|
|
217
|
|
|
|
|
(58,051
|
)
|
|
|
(31,181
|
)
|
|
|
-
|
|
|
|
(31,181
|
)
|
The
accompanying notes are part of the financial statements.
AMR
PROJECT PERU S.A.C.
Audited
- Reconciliation Financial Information
Prepared
by Management
BALANCE
SHEET
|
|
As
of December 31, 2008
|
|
|
|
IFRS
|
|
|
Adjustments
|
|
|
US
GAAP
|
|
|
|
US$
|
|
|
S/.
|
|
|
US$
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Cash
and banks
|
|
|
33
|
|
|
|
-
|
|
|
|
33
|
|
Other
accounts receivable
|
|
|
44,997
|
|
|
|
-
|
|
|
|
44,997
|
|
Inventory
|
|
|
56.696
|
|
|
|
-
|
|
|
|
56,696
|
|
Taxes
and prepaid expenses
|
|
|
47,989
|
|
|
|
-
|
|
|
|
47,989
|
|
Total
current assets
|
|
|
149,715
|
|
|
|
-
|
|
|
|
149,715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DEFERRED
INCOME TAX
|
|
|
34,312
|
|
|
|
-
|
|
|
|
34,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MACHINERY
AND EQUIPMENT, NET
|
|
|
224,273
|
|
|
|
-
|
|
|
|
224,273
|
|
|
|
|
408,300
|
|
|
|
-
|
|
|
|
408,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
accounts payable
|
|
|
|
|
|
|
|
|
|
|
|
|
Third-Party
Loans
|
|
|
717,219
|
|
|
|
-
|
|
|
|
717,219
|
|
Other
accounts payable
|
|
|
4,664
|
|
|
|
-
|
|
|
|
4,664
|
|
Total
current liabilities
|
|
|
721,893
|
|
|
|
-
|
|
|
|
721,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
49,227
|
|
|
|
-
|
|
|
|
49,227
|
|
Accumulated
results during development stage
|
|
|
(362,820
|
)
|
|
|
-
|
|
|
|
(362,820
|
)
|
Equity
adjustment from foreign currency
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
(313,593
|
)
|
|
|
-
|
|
|
|
(313,593
|
)
|
|
|
|
408,300
|
|
|
|
-
|
|
|
|
408,300
|
|
The
accompanying notes are part of the financial statements.
AMR
PROJECT PERU S.A.C.
Audited
- Reconciliation Financial Information
Prepared
by Management
PROFIT
AND LOSS STATEMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the year ended
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
|
|
|
December
31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
IFRS
|
|
|
Adjustments
|
|
|
US
GAAP
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Administrative
expense
|
|
|
(2,418
|
)
|
|
|
(22,830
|
)
|
|
|
(17,096
|
)
|
|
|
(52,198
|
)
|
|
|
(9,854
|
)
|
|
|
-
|
|
|
|
(9,854
|
)
|
Implementation
expenses of casino,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Machine
spots and restaurant
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(98,047
|
)
|
|
|
(98,047
|
)
|
|
|
-
|
|
|
|
(98,047
|
)
|
Prospecting
expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
(44,666
|
)
|
|
|
(226,540
|
)
|
|
|
(181,874
|
)
|
|
|
-
|
|
|
|
(181,874
|
)
|
Operating
loss
|
|
|
(2,418
|
)
|
|
|
(22,830
|
)
|
|
|
(61,762
|
)
|
|
|
(376,785
|
)
|
|
|
(289,775
|
)
|
|
|
-
|
|
|
|
(191,728
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income and (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange
difference, net
|
|
|
-
|
|
|
|
-
|
|
|
|
20,991
|
|
|
|
(28,504
|
)
|
|
|
(49,495
|
)
|
|
|
-
|
|
|
|
(49,495
|
)
|
Miscellaneous
incomes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
28,030
|
|
|
|
28,030
|
|
|
|
-
|
|
|
|
28,030
|
|
Miscellaneous
expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
(8,080
|
)
|
|
|
(37,495
|
)
|
|
|
(29,415
|
)
|
|
|
-
|
|
|
|
(29,415
|
)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,911
|
|
|
|
(37,969
|
)
|
|
|
(50,880
|
)
|
|
|
-
|
|
|
|
(50,880
|
)
|
Net
loss before income tax
|
|
|
(2,418
|
)
|
|
|
(22,830
|
)
|
|
|
(48,851
|
)
|
|
|
(414,754
|
)
|
|
|
(340,655
|
)
|
|
|
-
|
|
|
|
(340,655
|
)
|
Current
income tax
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net
loss
|
|
|
(2,418
|
)
|
|
|
(22,830
|
)
|
|
|
(48,851
|
)
|
|
|
(414,754
|
)
|
|
|
(340,655
|
)
|
|
|
-
|
|
|
|
(340,655
|
)
|
The
accompanying notes are part of the financial statements.
AMR
PROJECT PERU S.A.C.
Audited
- Reconciliation Financial Information
For
the year ended Dec 31, 2008
Prepared
by Management
STATEMENTS
OF CHANGES IN SHAREHOLDERS EQUITY
|
|
IFRS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acumulated
results
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
|
|
|
during
development
|
|
|
|
|
|
Adjust-
|
|
|
|
|
|
|
Capital
|
|
|
stage
|
|
|
Total
|
|
|
ments
|
|
|
US
GAAP
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inception,
October 2005
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Increase
in capital
|
|
|
24,505
|
|
|
|
-
|
|
|
|
24,505
|
|
|
|
-
|
|
|
|
24,505
|
|
Net
loss
|
|
|
-
|
|
|
|
(2,418
|
)
|
|
|
(2,418
|
)
|
|
|
-
|
|
|
|
(2,756
|
)
|
Equity
Adjustment from Foreign currency
|
|
|
-
|
|
|
|
(338
|
)
|
|
|
(338
|
)
|
|
|
-
|
|
|
|
(338
|
)
|
Balance
to December 31, 2005
|
|
|
24,505
|
|
|
|
(2,756
|
)
|
|
|
21,749
|
|
|
|
-
|
|
|
|
21,749
|
|
Net
loss
|
|
|
-
|
|
|
|
(22,830
|
)
|
|
|
(22,830
|
)
|
|
|
-
|
|
|
|
(22,830
|
)
|
Equity
Adjustment from Foreign currency
|
|
|
-
|
|
|
|
1,106
|
|
|
|
1,106
|
|
|
|
-
|
|
|
|
1,106
|
|
Balance
to December 31, 2006
|
|
|
24,505
|
|
|
|
(24,480
|
)
|
|
|
25
|
|
|
|
-
|
|
|
|
25
|
|
Net
loss
|
|
|
-
|
|
|
|
(48,851
|
)
|
|
|
(48,851
|
)
|
|
|
-
|
|
|
|
(48,851
|
)
|
Equity
Adjustment from Foreign currency
|
|
|
-
|
|
|
|
(2,853
|
)
|
|
|
(2,853
|
)
|
|
|
-
|
|
|
|
(2,853
|
)
|
Balance
to December 31, 2007
|
|
|
24,505
|
|
|
|
(76,184
|
)
|
|
|
(51,679
|
)
|
|
|
-
|
|
|
|
(51,679
|
)
|
Increase
in capital
|
|
|
24,722
|
|
|
|
|
|
|
|
24,722
|
|
|
|
-
|
|
|
|
24,722
|
|
Net
loss
|
|
|
-
|
|
|
|
(340,655
|
)
|
|
|
(340,655
|
)
|
|
|
-
|
|
|
|
(340,655
|
)
|
Equity
Adjustment from Foreign currency
|
|
|
-
|
|
|
|
54,019
|
|
|
|
54,019
|
|
|
|
-
|
|
|
|
54,019
|
|
Balance
to December 31, 2008
|
|
|
49,227
|
|
|
|
(362,820
|
)
|
|
|
(313,593
|
)
|
|
|
-
|
|
|
|
(313,593
|
)
|
The
accompanying notes are part of the financial statements.
AMR
PROJECT PERU S.A.C.
Audited
- Reconciliation Financial Information
Prepared
by Management
CASH
FLOW STATEMENT
|
|
Cumulative
|
|
|
For the year ended
|
|
|
|
|
|
|
December 31,
|
|
|
December 31, 2008
|
|
|
|
|
|
|
2008
|
|
|
IFRS
|
|
|
Adjustment
|
|
|
US GAAP
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Received
from customers
|
|
|
11,271
|
|
|
|
11,271
|
|
|
|
-
|
|
|
|
11,271
|
|
Other
cash receipts related to the activity
|
|
|
27,787
|
|
|
|
27,787
|
|
|
|
-
|
|
|
|
27,787
|
|
Payment
to suppliers
|
|
|
(386,539
|
)
|
|
|
(386,539
|
)
|
|
|
-
|
|
|
|
(386,539
|
)
|
Payment
of compensation and professional fees
|
|
|
(26,674
|
)
|
|
|
(22,411
|
)
|
|
|
-
|
|
|
|
(22,411
|
)
|
Payment
of taxes
|
|
|
(13,862
|
)
|
|
|
(13,359
|
)
|
|
|
-
|
|
|
|
(13,359
|
)
|
Other
cash payments related to the activity
|
|
|
(79,518
|
)
|
|
|
(26,231
|
)
|
|
|
-
|
|
|
|
(26,231
|
)
|
Net
cash provided by operating activities
|
|
|
(467,535
|
)
|
|
|
(409,483
|
)
|
|
|
-
|
|
|
|
(409,483
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTMENT
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of fixed assets
|
|
|
(140,647
|
)
|
|
|
(86,051
|
)
|
|
|
-
|
|
|
|
(86,051
|
)
|
Capital
contributions
|
|
|
(140,647
|
)
|
|
|
(86,051
|
)
|
|
|
-
|
|
|
|
(86,051
|
)
|
Net
cash applied to investment activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
received
|
|
|
558,988
|
|
|
|
461,225
|
|
|
|
-
|
|
|
|
461,225
|
|
Capital
contributions
|
|
|
49,227
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net
cash provided by financing activities
|
|
|
608,215
|
|
|
|
461,225
|
|
|
|
-
|
|
|
|
461,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
decrease in cash
|
|
|
33
|
|
|
|
(34,309
|
)
|
|
|
-
|
|
|
|
(34,309
|
)
|
Cash
at the beginning of the year
|
|
|
-
|
|
|
|
34,342
|
|
|
|
-
|
|
|
|
34,342
|
|
Cash
at the end of the year
|
|
|
33
|
|
|
|
33
|
|
|
|
-
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION
OF THE NET RESULT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WITH
THE NET CASH APPLIED TO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(414,754
|
)
|
|
|
(340,655
|
)
|
|
|
-
|
|
|
|
(340,655
|
)
|
Depreciation
and other provisions
|
|
|
73,002
|
|
|
|
44,127
|
|
|
|
-
|
|
|
|
44,127
|
|
Deferred
income tax
|
|
|
(35,986
|
)
|
|
|
(35,986
|
)
|
|
|
-
|
|
|
|
(35,986
|
)
|
Adjusment
from foreign currency
|
|
|
51,934
|
|
|
|
54,019
|
|
|
|
-
|
|
|
|
54,019
|
|
Net
changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
(Increase)
other accounts receivable
|
|
|
(108,189
|
)
|
|
|
(46,721
|
)
|
|
|
-
|
|
|
|
(46,721
|
)
|
(Increase)
of inventory
|
|
|
(59,461
|
)
|
|
|
(59,461
|
)
|
|
|
-
|
|
|
|
(59,461
|
)
|
(Increase)
in taxes and prepaid expenses
|
|
|
(39,906
|
)
|
|
|
(39,906
|
)
|
|
|
-
|
|
|
|
(39,906
|
)
|
Increase
in other accounts payable
|
|
|
65,825
|
|
|
|
15,100
|
|
|
|
-
|
|
|
|
15,100
|
|
|
|
|
(467,535
|
)
|
|
|
(409,483
|
)
|
|
|
-
|
|
|
|
(409,483
|
)
|
The
accompanying notes are part of the financial statements.
AMR
PROJECT - PERU S.A.C.
NOTES
TO THE FINANCIAL STATEMENTS TO DECEMBER 31, 2008
AND
DECEMBER 31, 2007
AMR Project - Peru S.A.C.
(hereinafter, the Company), was legally established in the city of Lima
on October 7, 2005.The Company’s legal domicile, where it also has its
administrative offices, is Av. Arenales N° 335, in Lima’s Cercado
district.
According
to its by-laws, the Company pursues mining activity, mostly the search for gold
in the department of Puno. The Company has subscribed a lease
agreement with an individual for 2,000 hectares, located in the sector known as
Limacpampa, district of San Gabán, province of Carabaya, department of Puno,
with the following features:
|
·
|
Signed
January 11, 2006.
|
|
·
|
6%
of gross production will be given to the
owner.
|
|
·
|
Consent
is granted to the Company to commence the proceedings for a mining
concession.
|
|
·
|
The
mining concession rights may not be transferred to any other individual or
legal entity.
|
|
·
|
All
the expenses incurred obtaining the mining concession will be the
Company’s responsibility.
|
On
October 25, 2006, the National Mining Concessions and Registration Institute’s
Energy and Mine Sector issued Resolution N° 4631-2006-INACC/J, by which it
granted the Company a mining concession for a 500-hectares expanse of the land
leased as indicated above. This mining concession right is renewable annually.
This concession was registered with the National Mining Concessions and
Registration Institute’s Document Administration and Archive Unit on December
11, 2006.
The
Peruvian Ministry of Energy and Mines issued "Acknowledgement of Small Mining
Producer N° 976-2007" on July 12, 2007 (Law Nº 27651 for Formalization and
Promotion of Small Mining and Artisanal Mining of January 24, 2001). The present
Law seeks to introduce a legal framework in mining law that allows suitable
regulation of the mining activities developed by small mining and artisanal
mining producers, proposing the formalization, promotion and development of the
same. Below are detailed the principal benefits of this Law:
|
·
|
The
combination of physical, chemical and physical-chemical processes used by
artisanal mining producers to extract or concentrate the valuable parts of
mineral ore, and to purify, smelt or refine metals are not included within
the scope of the present Law. Doing so requires solely an application
accompanied by technical information and an Environmental Impact Study
signed by a professional competent in this area. The corresponding
authorization will be issued by the Executive Mining
Board.
|
|
·
|
Production
may not be lower than the local-currency equivalent of US $ 100.00 per
year and hectare granted as to metallic substances, and the local-currency
equivalent of US $ 50.00 per year and hectare granted as to nonmetallic
substances. In the case of small mining producers, production may not be
lower than the local-currency equivalent of US $ 50.00 per year and
hectare granted, regardless of the substance. In the case of artisanal
mining producers, production may not be lower than the local-currency
equivalent of US $ 25.00 per year and hectare granted, regardless of the
substance.
|
|
·
|
For
small mining producers, the Right to Use is US $ 1.00 or its
local-currency equivalent per year and hectare requested or granted. For
artisanal mining producers the Right to f Use is of US $ 0.50 or its
local-currency equivalent per year and hectare requested or
granted.
|
To date,
mining activity is in the mining process stage known as "Prospecting", in which
the first geophysical and metallurgical studies of the mine are being conducted,
as well as the location of the camp, plants and other mining areas.
In
October 2008, the Company expanded its business to include the marketing and
operation of gaming rooms (Casino), slot machines and restaurant services. With
respect to this activity, during the year 2008 goods (such as furniture, sound,
lights, decorations, carpets and other) have been acquired and the premises
rented has been remodeled into a casino, slot machines and
restaurant.
In
another area, as of December 31, 2008 and 2007 the Company had received
financing of US$ 717,229 and US$ 273,315, respectively, from a group of foreign
investors.
As of
December 31, 2008 and 2007, the Company has accumulated losses by US$ 362,818
and US$ 76,184, respectively, which has significantly reduced its shareholders’
equity. Article 220 of the General Corporations Law provides that when a
financial entity has losses that reduce its share capital by more than fifty
percent, and a period has passed without overcoming this situation, the Company
is required to reduce its capital or to make new contributions in order overcome
this situation. To date, the Company has been receiving money from foreign
investors since the year 2006. The financial statements have been prepared
assuming that the Company will continue under the going concern accounting
principle, and do not include any adjustment if the Company could not continue
as a going concern.
The
global financial crisis became more acute in the last quarter of 2008. It had
its origins in the mortgage-loan crisis in the United States, which caused the
bankruptcy of numerous investment banking entities in that country;
simultaneously severely affecting the global financial sector. The principal
effect of the present financial crisis is noted in the liquidity of markets,
recession, steep growth in unemployment rates, the devaluation of the
investments and increases in credit risk, among other things. It is estimated
that, at the beginning of the last year, the present financial crisis has sunk
the global economy into its worse crisis since the time of the Great Depression.
For the Company, the leading effect of the current global financial condition
lies mainly in the declines in metals prices, the risk of a contraction in the
demand for gold and that foreign investors suspend the flow of funds until the
recession ends.
In
carrying out its activities, at the end of 2008 the Company had a total of 5
employees (1 in 2007).
Pursuant
to the General Corporations Law, the financial statements must be approved by
the shareholders as a sign of conformity. The financial statements to December
31, 2008 and 2007 have not been approved by the Company’s general stockholders'
meetings.
Currently
the company is in development stage due to the activities planning of the
principals operations have begun, but there has been no significant
incomes.
Financial
statements expressed in U.S. dollars, which are part of this report, are result
of the application on the historical financial statements the methodology to
convert the balance of transactions at year-end in foreign currency translation
as the Standard International Accounting Standards - IAS 21 Effects of
fluctuations in exchange rates, and alternatively Statement of Financial
Accounting Standard SFAS N° 52. This methodology, which aims to restate
financial statements to show the impact of foreign currency on our currency,
relative to a fiscal year, considers the following guidelines.
|
a.
|
The
translation process requires initially quantify the functional currency,
that is the case for Nuevo Sol.
|
|
b.
|
The
translation has been made on the basic financial statements, balance
sheet, profit and loss statement, statement of changes in shareholders
equity and cash flows statement, based on the historical translation and
non-monetary items, reflected in the statement of changes in shareholders
equity, the effect of the conversion of all transaction for the period
subject to review.
|
|
c.
|
The
balance of non-monetary items, and income and expenses, in foreign
currency are translated at exchange rate of the transaction
date.
|
|
d.
|
As
of December 31, 2008 balances of assets and liabilities in Nuevos Soles
have been expressed in U.S. dollars at exchange rate of S/. 3.013(S/.
3.140 December 31, 2007) for US$ 1,
respectively.
|
3.
|
PRINCIPAL
ACCOUNTING PRINCIPLES AND PRACTICES
|
The
significant accounting policies applied by the Company in the preparation and
presentation of its financial statements are detailed below.
|
a)
|
The
financial statements of the Company have been prepared in accordance with
generally accepted accounting principles in Peru. Generally accepted
accounting principles in Peru include the International Financial
Reporting Standards (IFRS) approved by the National Accounting Board
through resolutions issued by the local Accounting Standards Board. IFRS
include the Financial Reporting Standards, International Accounting
Standards (IAS) and the pronouncements from the Standards Interpretations
Committee and the International Financial Reporting Standards
Interpretations Committee (SIC and IFRIC,
respectively).
|
Preparation
of the financial statements in accordance with IFRS requires the use of certain
critical accounting estimates. It also requires that Management exercise its
judgment in the process of applying the Company’s accounting policies. The areas
that involve a greater degree of judgment or complexity or areas in which
assumptions and estimates are material to the financial statements are described
in Note 2-b).
Modifications
to standards and interpretations (IFRIC) in effect in Peru starting from 2008
and 2009.
The local
Accounting Standards Board through its Resolution No. 040-2008-EF/94 of March
14, 2008 approved the application of the following:
|
1.
|
The
following IFRIC are of mandatory application in Peru starting from
2009:
|
IFRIC 1:
"Changes in Existing Decommissioning, Restoration and Similar
Liabilities".
IFRIC 2:
"Members' Shares in Co-operative Entities and Similar Instruments",
IFRIC 4:
"Determining Whether an Arrangement Contains a Lease",
IFRIC
5: "Rights to Interests Arising from Decommissioning, Restoration and
Environmental Rehabilitation Funds",
IFRIC 6:
"Liabilities Arising from Participating in a Specific Market - Waste Electrical
and Electronic Equipment",
IFRIC
7: "Applying the Restatement Approach under IAS 29 Financial Reporting in
Hyperinflationary Economies",
IFRIC 8:
"Scope of IFRS 2",
IFRIC 9:
"Reassessment of Embedded Derivatives",
IFRIC 10:
"Interim Financial Reporting and Impairment",
IFRIC 11:
"IFRS 2: Group and Treasury Share Transactions",
IFRIC 12:
"Service Concession Arrangements".
The
Company believes that these new interpretations are not applicable to the
formulation of the financial statements to December 31, 2008.
The
following standards are of mandatory application in Peru starting from
2009:
|
2.
|
IAS
32. "Financial Instruments: Presentation"( Revised in 2006). This standard
has been revised to align its requirements to those of IFRS 7, which are
described below.
|
|
3.
|
IFRS
7, "Financial Instruments: Disclosures" This standard requires that the
entity provides information that allows the users of its financial
statements to assess the relevance of financial instruments on its
financial condition and its performance. This standard demands that
management’s analysis of the potential effects of each type of financial
risk that affects the entity be disclosed. The standard distinguishes
financial risk as credit risk, liquidity risk, and market risk. The
standard demands the qualitative and quantitative presentation of
information on its financial instruments, presented in the same was as
analyzed by management in its duty of managing risks by implementing
minimum exposure requirements.
|
|
4.
|
IFRS
8, "Operating Segments". IFRS 8 replaces IAS 14, "Segment Reporting" and
aligns the information by segments with the reporting requirements of SFAS
131, "Disclosures about Segments of an Enterprise and Related
Information". The new standard requires a management focus under which the
information by segments is presented on the same basis as that used for
purposes of internal reporting.
|
|
-
IFRIC 13, "Customer Loyalty Programs", which is not applicable to the
Company.
|
The
Company believes that these new standards will not have a material impact on the
formulation of its financial statements. However, the information that is
disclosed will be more extensive in the future.
Standards,
modifications and interpretations of standards issued in effective
internationally for periods beginning on or after January 1, 2009 and those
pending approval by the National Accounting Office.
|
5.
|
IFRS
1 (Revised), "First-time Adoption of International Financial Reporting
Standards"
|
|
6.
|
IFRS
2 (Revised), "Share-based Payment"
|
|
7.
|
IFRS
3 (Revised), "Business
Combinations"
|
|
8.
|
IFRS
5 (Revised), "Non-current Assets Held for Sale and Discontinued
Operations"
|
|
9.
|
IAS
1 (Revised), "Presentation of financial
statements"
|
|
10.
|
IAS
16 (Revised), "Property, plant and
equipment"
|
|
11.
|
IAS
19 (Revised), "Employee Benefits"
|
|
12.
|
IAS
20 (Revised), "Accounting for Government Grants and Disclosure of
Government Assistance"
|
|
13.
|
IAS
23 (Revised), "Borrowing Costs"
|
|
14.
|
IAS
27 (Revised), "Consolidated and Separate Financial
Statements"
|
|
15.
|
IAS
28 (Revised), "Investments in
associates"
|
|
16.
|
IAS
29 (Revised), "Financial Reporting in Hyperinflationary
Economies"
|
|
17.
|
IAS
31 (Revised), "Interests In Joint
Ventures"
|
|
18.
|
IAS
32 (Revised), "Financial instruments:
presentation"
|
|
19.
|
IAS
36 (Revised), "Impairment of
Assets"
|
|
20.
|
IAS
1 (Revised), "Intangibles"
|
|
21.
|
IAS
39 (Revised), "Financial Instruments: Recognition and
Measurement"
|
|
22.
|
IAS
40 (Revised), "Investment Property"
|
|
23.
|
IAS
41 (Revised), "Agriculture"
|
|
24.
|
IFRIC
15, "Agreements for the Construction of Real
Estate"
|
|
25.
|
IFRIC
16, "Hedges of a Net Investment in a Foreign
Operation"
|
There
were also several minor revisions to IFRS 7, "Financial Instruments: Disclosure,
IAS 8, "Accounting Policies, Changes in Accounting Estimates and Errors", IAS
10, "Events After the Reporting Period", IAS 18, "Income" and IAS 34, "Interim
Financial Reporting".
These
standards will be adopted by the Company as approved in Peru by the National
Accounting Office. To date the Company's management is analyzing the impact that
the standards not yet approved by the CNC will have on its operations once they
are approved for use in Peru.
|
b)
|
Estimates
and critical accounting criteria.
-
|
Estimates
and critical accounting criteria are continuously evaluated the Management based
on historical experience and other factors, including the expectation of future
events occurring that is considered reasonable according to the
circumstances.
The
Company makes estimates and assumptions with respect to the future. By
definition, the resulting accounting estimates are not very often equal to the
respective actual results. The estimates and assumptions that have a risk of
causing adjustments to the balances of assets and liabilities are presented
below:
Depreciation
The
Company makes estimates of the useful life of its fixed assets that allow it to
make provisions for the wear of such assets, which are recognized as expenses
for the year. If these estimates and assumptions, which are based on
management's best judgment as of the date of the financial statements, are
susceptible to change as a result of changes in the premises upon which they
were based, the balances of the financial statements are revised on the date on
which the change in the estimates and assumptions took place, for which reason
the definitive results could differ materially from those estimated to date,
under different assumptions and conditions.
Provisions
Provisions
are recognized only when the Company has a present legal or assumed obligation
as a result of past events, it is probable that an outlay of resources would be
required to satisfy the obligation and it is possible to estimate the amount
reliably. When the Company believes that a provision is reimbursable, the
reimbursement is recognized separately as an asset only if this reimbursement is
virtually certain.
Taxes
Determination
of the tax obligations and expenses requires interpretation of the applicable
tax law. The Company consults tax professionals prior to making any decision on
tax matters. Even though Management believes that its estimates are prudent and
appropriate, differences in interpretation may arise with the tax administration
that could affect the charges for taxes in the future.
c)
|
Trans
actions in foreign
currency. -
|
|
·
|
Functional
currency and presentation currency.
-
|
The items
included in the Company’ financial statements are stated in the currency of the
principal economic environment in which the entity operates, that is to say, its
functional currency. The Company has defined the New sol as its functional and
reporting currency for its financial statements.
|
·
|
Transactions
and balances in foreign
currency.-
|
Transactions
in foreign currency are considered as those taking place in a currency different
from the functional currency. Transactions in foreign currency are initially
posted in functional currency using the exchange rates in effect on the dates of
the transactions. Monetary assets and liabilities denominated in foreign
currency are subsequently translated to the functional currency using the
exchange rate in effect on the date of the balance sheet. Any gain or and loss
from exchange difference resulting from the liquidation of these transactions
and translating the monetary assets and liabilities into foreign currency at the
exchange rates for the date of the balance sheet are recognized in the
Gain from exchange difference,
net
heading in the profit and loss statement.
d)
|
Financial
instruments. -
|
Financial
instruments correspond to contracts that give rise, simultaneously, to a
financial asset in one entity and a financial liability or an equity instrument
in another entity. In the case of the Company, its financial instruments
correspond to primary instruments such as other accounts receivable and loans
from shareholders.
Financial
instruments are classified as liabilities or equity depending on the substance
in the contractual agreement that gave rise to them. Any interest, dividends,
gains and losses generated by a financial instrument classified as a liability
is posted as expense or income in the profit and loss statement. Payments to the
registered holders of equity financial instruments are posted directly to
shareholders’ equity. Financial instruments are offset when the Company has a
legal
right to
offset them and Management has the intention to satisfy them on a net basis or
execute upon the assets and cancel the liabilities simultaneously.
Fair
value is the amount at which assets can be exchanged between a duly informed
buyer and vendor, or an obligation can be satisfied between a debtor and a
creditor with sufficient information, under the terms of an arm’s-length
transaction.
e)
|
Other
accounts receivable. -
|
Other
accounts receivable are posted at the nominal value of the documentation that
originated the transaction. When the value of an account receivable is impaired,
the Company reduces its book value to its recoverable amount.
Inventory
is posted at
acquisition cost and consists of disbursements related to the facilities and
adaptation of the building leased for its use as a casino, slot machines and
restaurant. These disbursements are posted because Management is analyzing the
possibility of spinning off this business in the short term.
g)
|
Machinery
and equipment. -
|
Machinery
and equipment is
presented at acquisition cost, net of accumulated depreciation. The initial cost
of machinery and equipment includes its purchase price and any cost directly
attributable to placing it and leaving it in operating and use
condition.
Subsequent
costs attributable to fixed assets are capitalized only when it is probable that
future economic benefits associated with the assets will be generated for the
Company and the cost of these assets can be measured reasonably; otherwise the
production cost or expense as corresponds is imputed. Operating expenses and
repairs are charged to expenses in the period in which they are
incurred.
Assets in
a construction stage are capitalized as a separate component. Upon culmination,
the cost of these assets is transferred to its definitive category. Works in
progress are not depreciated.
The
depreciation of other fixed assets is calculated by the straight-line method to
allocate their cost less their residual value during their estimated useful
lives, as follows:
|
|
Years
|
|
Machinery
and equipment
|
|
5
and 10
|
|
Vehicles
|
|
|
5
|
|
Miscellaneous
equipment
|
|
|
10
|
|
Any gain
or loss from the sale of assets corresponds to the difference between the income
from the transaction and the book value of the assets; these are included in the
profit and loss statement.
Loans are
recognized at their fair value, net of the costs directly attributable to the
transaction and are classified as short-term obligations. Any difference between
fair value (net of transaction costs) and realizable value is recognized in the
profit and loss statement.
i)
|
Contingent
liabilities and assets. -
|
Contingent
liabilities are not recognized in the financial statements; they are disclosed
in notes to the financial statements unless the possibility of their occurrence
is remote. Contingent assets are not recognized in the financial statements, but
are disclosed if their realization is probable.
Provisions
are recognized when
the Company has a present legal or assumed obligation as a result of past
events, it is probable that an outlay of resources would be required to satisfy
the obligation and it is possible to estimate the amount reliably. No provisions
are recognized for future operating losses.
When
there are several similar obligations, the probability of that an outlay of
resources will be required for its payment is determined considering
the class of obligation as a whole. A provision is recognized even though the
probability of an outlay of resources with respect to any specific item included
in the same class of obligations is very small.
k)
|
Recognition
of expenses. -
|
The
Company is in the mining process stage known as "Prospecting", in which all
disbursements are considered expenses, except fixed assets, since it is not
known whether or not the Mine will be operable and profitable.
In
addition, expenses have been incurred to operate as a casino, slot machines and
restaurant that to date are not operating; it is in the pre-operating
stage.
l)
|
Gains
and losses from exchange differences.
-
|
Gains and
losses from exchange differences originating from the satisfaction of monetary
items denominated in foreign currency or of the adjustment of such items due to
changes in the exchange rate after their initial posting are recognized as
financial income and expense, respectively, in the period in which they
arise.
m)
|
Deferred
income tax. -
|
A
deferred income tax liability is recognized for all the timing differences
between the book value of assets and liabilities and their tax basis, without
considering the time at which it is estimated that the timing differences that
gave rise to them will be reversed. A deferred income tax asset is recognized
for all the timing differences between the book value of assets and liabilities
and their tax basis, to the extent to which it is probable that, in the future,
the Company will have sufficient taxable income against which it will be able to
apply the timing differences that reverse within the term established, if
necessary. Liabilities and assets are measured at the income tax rate that is
expected to be applied to taxable income in the year in which the liability is
eliminated or the assets realized, using the income tax rate.
n)
|
Tra
slation of Foreign
Currency –
|
All
elements of financial statements shall be translated as follow:
|
·
|
For
assets and liabilities, the exchange rate at the balance sheet date shall
be used.
|
|
·
|
For
Corporate capital, the historical exchange
rate.
|
|
·
|
For
revenues, expenses, gains and losses, the average exchange rate for the
period.
|
4.
|
OTHER
ACCOUNTS RECEIVABLE
|
As of
December 31, 2008 and 2007, other accounts receivable of US$ 47,191 and US$ 470
corresponds to the security for leasing the premises for the casino, slot
machines and restaurant business, and for the administrative offices,
respectively.
Inventory
of US$ 56,696 corresponds to facilities used to convert the leased premises into
a casino, slot machines and restaurant. During the year 2008, US$ 27,787 of the
inventory was sold for a related company.
6.
|
TAXES
AND PREPAID EXPENSES
|
This
heading to the December 31, this includes:
|
|
2008
|
|
|
2007
|
|
|
|
US$.
|
|
|
US$.
|
|
|
|
|
|
|
|
|
General
Sales Tax
|
|
|
37,702
|
|
|
|
9,380
|
|
Advances
to be rendered
|
|
|
9,291
|
|
|
|
-
|
|
Prepaid
expenses
|
|
|
996
|
|
|
|
1,044
|
|
|
|
|
47,989
|
|
|
|
10,424
|
|
7.
|
MACHINERY
AND EQUIPMENT, NET
|
The
movement in this heading during the year 2008 was the following:
|
|
Opening
|
|
|
|
|
|
Closing
|
|
|
|
Balance
|
|
|
Additions
|
|
|
Balance
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
Cost:
|
|
|
|
|
|
|
|
|
|
Machinery
and equipment
|
|
|
201,809
|
|
|
|
77,572
|
|
|
|
279,381
|
|
Vehicles
|
|
|
12,001
|
|
|
|
3,423
|
|
|
|
15,424
|
|
Miscellaneous
equipment
|
|
|
-
|
|
|
|
5,056
|
|
|
|
5,056
|
|
|
|
|
213,810
|
|
|
|
86,051
|
|
|
|
299,861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Machinery
and equipment
|
|
|
31,990
|
|
|
|
36,148
|
|
|
|
68,138
|
|
Vehicles
|
|
|
4,801
|
|
|
|
2,463
|
|
|
|
7,264
|
|
Miscellaneous
equipment
|
|
|
-
|
|
|
|
186
|
|
|
|
186
|
|
|
|
|
36,791
|
|
|
|
38,797
|
|
|
|
75,588
|
|
Net
cost
|
|
|
117,019
|
|
|
|
|
|
|
|
224,273
|
|
As of
December 31, 2008 and 2007, the fixed assets are not insured.
As of
December 31, 2008 and 2007, third-party loans of US$ 717,229 and US$ 273,315
correspond to a foreign investor and do not accrue any interest. These loans
have been used in the operating expenses for the mine and preparation of the
leased premises to convert it into a casino, slot machines and restaurant. They
have also been used in the acquisition of all of the Company’s fixed
assets.
As of
December 31, 2008 and 2007, the Company’s is represented by 156,250 and 82,875
common shares, respectively, with a S/.1.00 par value each, which are issued and
fully paid.
The
number of shareholders and the structure of participation is presented according
to the following would drive to December 31, 2008:
Individual
Participation in
|
|
Number
of
|
|
|
Total
percentage
|
|
capital
|
|
shareholders
|
|
|
Participation
|
|
|
|
|
|
|
%
|
|
From
0.01 to 10
|
|
|
1
|
|
|
|
0.01
|
|
From
30 to 40
|
|
|
1
|
|
|
|
27.58
|
|
From
70 to 80
|
|
|
1
|
|
|
|
72.41
|
|
Total
|
|
|
3
|
|
|
|
100.00
|
|
b)
Accumulated results. -
This
corresponds to the amount that is accumulated for each period as a result of the
Company’s business operations.
|
a)
|
The
Company's management has determined the taxable basis under the general
income tax regime in accordance with the tax law in effect, which demands
adding and deducting those items that such legislation recognizes as
taxable and non-taxable, respectively, to and from
results.
|
The
income tax rate corresponding to the years 2008 and 2007 has been fixed at 30%.
The taxable basis has been determined as follows:
|
|
2008
|
|
|
2007
|
|
|
|
S/.
|
|
|
S/.
|
|
|
|
|
|
|
|
|
Loss
before income tax:
|
|
|
(1,011,063
|
)
|
|
|
(154,809
|
)
|
Plus:
|
|
|
|
|
|
|
|
|
Non-deductible
expenses
|
|
|
980,604
|
|
|
|
150,276
|
|
Taxable
basis before income tax
|
|
|
(30,459
|
)
|
|
|
(4,533
|
)
|
|
|
|
|
|
|
|
|
|
Current
income tax @ 30%
|
|
|
-
|
|
|
|
-
|
|
|
b)
|
Deferred
income tax is determined as
follows:
|
|
|
2008
|
|
|
2007
|
|
|
|
S/.
|
|
|
S/.
|
|
|
|
|
|
|
|
|
Loss
before income tax:
|
|
|
(1,011,063
|
)
|
|
|
(154,809
|
)
|
Plus:
|
|
|
|
|
|
|
|
|
Non-deductible
permanent expenses
|
|
|
623,622
|
|
|
|
148,122
|
|
Less:
|
|
|
|
|
|
|
|
|
Non-deductible
temporary expenses
|
|
|
356,982
|
|
|
|
2,154
|
|
Taxable
basis for the income tax
|
|
|
(30,459
|
)
|
|
|
(4,533
|
)
|
|
|
|
|
|
|
|
|
|
Income
tax @ 30% (temporary)
|
|
|
107,741
|
|
|
|
-
|
|
Current
income tax
|
|
|
-
|
|
|
|
-
|
|
Deferred
income tax (US$ 34,312)
|
|
|
107,741
|
|
|
|
-
|
|
|
c)
|
Corporations
not domiciled in Peru and individuals must pay an additional 4.1 percent
tax of on dividends received.
|
|
d)
|
Article
8 of Legislative Decree Nª 970 extended exemptions under the Income Tax
Law until December 31, 2008, including exemption from this tax as to
capital gains resulting from the disposition of securities listed in the
Securities Market Public Registry through centralized trading exchanges.
Law Nº 29308 extended the exemption of capital gains from income tax until
January 1, 2010.
|
For
purposes of determining the Income tax and General Sales Tax, the transfer
prices for transactions carried out with related entities and entities domiciled
in territories with little or no taxation must be supported by documentation and
information on the valuation methods used and the criteria considered for their
determination.
Starting
with the 2004 period, it is established that the substantiation of transfer
prices will not be required only for those transactions between related entities
that individually ay their income tax in the country and must present a sworn
annual information return on these transactions.
Superintendent’s
Resolution Nº 008-2007–SUNAT made an exception with respect to transactions that
taxpayers domiciled in this country carry out with their related domiciled
entities. For the 2008 period, according to Superintendent’s Resolution Nº
087-2008–SUNAT, the presentation of a technical study on transfer prices is
again required.
Based on
analysis of the Company’s operations, Management and its legal advisers believe
that no material contingencies will arise for the Company as of December 31,
2008 and 2007 as a result of applying these standards.
The tax
authority has the power to review and, as applicable, to correct the income tax
calculated by the Company in the four years following presentation of the sworn
tax returns. The sworn Income Tax and General Sales Tax returns for the years
2004 and 2008 are pending audit by the tax authority. Due to the possible
interpretations that the tax authority might give to the law in effect, it is
not possible to determine as of this date whether any tax audit carried out
would or would not result in liabilities for the Company, for which reason any
greater tax or surcharge that could result from tax audits would be applied to
results for the period in which such is determined
In
management's opinion, any additional tax payments possible would not be material
to the financial statements to December 31, 2008 and 2007.
11.
|
ADMINISTRATIVE
EXPENSE
|
Administrative
expense for the years ending December 31 includes:
|
|
2008
|
|
|
2007
|
|
|
|
Corriente
|
|
|
Acumulado
|
|
|
Corriente
|
|
|
Acumulado
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel
charges
|
|
|
1,521
|
|
|
|
8,058
|
|
|
|
3,636
|
|
|
|
9,006
|
|
Postage
and telephone
|
|
|
492
|
|
|
|
2,598
|
|
|
|
980
|
|
|
|
2,428
|
|
Real
estate taxes
|
|
|
379
|
|
|
|
2,010
|
|
|
|
1,183
|
|
|
|
2,931
|
|
Maintenance
|
|
|
-
|
|
|
|
-
|
|
|
|
388
|
|
|
|
962
|
|
Depreciation
|
|
|
875
|
|
|
|
4,637
|
|
|
|
2,392
|
|
|
|
5,922
|
|
Bank
charges
|
|
|
-
|
|
|
|
-
|
|
|
|
1,265
|
|
|
|
3,132
|
|
Light
and water
|
|
|
416
|
|
|
|
2,206
|
|
|
|
316
|
|
|
|
783
|
|
Professional
fees
|
|
|
727
|
|
|
|
3,851
|
|
|
|
426
|
|
|
|
1,055
|
|
Miscellaneous
expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
641
|
|
|
|
1,587
|
|
Leasing
|
|
|
5,035
|
|
|
|
28,838
|
|
|
|
5,869
|
|
|
|
14,538
|
|
|
|
|
9,445
|
|
|
|
52,198
|
|
|
|
17,096
|
|
|
|
42,344
|
|
12.
|
EXPENSES
FOR THE CASINO, SLOT MACHINES AND
RESTAURANT
|
Expenses
for the casino, slot machines and restaurants for the years ending December 31
includes:
|
|
2008
|
|
|
2007
|
|
|
|
Corriente
|
|
|
Acumulado
|
|
|
Corriente
|
|
|
Acumulado
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Postage
and telephone
|
|
|
685
|
|
|
|
685
|
|
|
|
-
|
|
|
|
-
|
|
Real
estate taxes
|
|
|
11,373
|
|
|
|
11,373
|
|
|
|
-
|
|
|
|
-
|
|
Light
and water
|
|
|
5,492
|
|
|
|
5,492
|
|
|
|
-
|
|
|
|
-
|
|
Professional
fees
|
|
|
2,342
|
|
|
|
2,342
|
|
|
|
-
|
|
|
|
-
|
|
Insurance
|
|
|
1,205
|
|
|
|
1,205
|
|
|
|
-
|
|
|
|
-
|
|
Leasing
|
|
|
76,950
|
|
|
|
76,950
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
98,047
|
|
|
|
98,047
|
|
|
|
-
|
|
|
|
-
|
|
Prospecting
expense for the years ending December 31 includes:
|
|
2008
|
|
|
2007
|
|
|
|
Corriente
|
|
|
Acumulado
|
|
|
Corriente
|
|
|
Acumulado
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel
charges
|
|
|
50,213
|
|
|
|
62,544
|
|
|
|
3,636
|
|
|
|
3,636
|
|
Postage
and telephone
|
|
|
3,298
|
|
|
|
4,108
|
|
|
|
1,961
|
|
|
|
1,961
|
|
Maintenance
|
|
|
3,524
|
|
|
|
4,390
|
|
|
|
1,942
|
|
|
|
1,942
|
|
Depreciation
|
|
|
41,980
|
|
|
|
52,289
|
|
|
|
21,518
|
|
|
|
21,518
|
|
Travel
and transport
|
|
|
11,946
|
|
|
|
14,880
|
|
|
|
1,827
|
|
|
|
1,827
|
|
Meals
for mine personnel
|
|
|
5,320
|
|
|
|
6,626
|
|
|
|
1,230
|
|
|
|
1,230
|
|
Hotels
and care
|
|
|
13,002
|
|
|
|
16,195
|
|
|
|
1,544
|
|
|
|
1,544
|
|
Professional
fees
|
|
|
4,232
|
|
|
|
5,272
|
|
|
|
426
|
|
|
|
426
|
|
Miscellaneous
hardware and supplies
|
|
|
49,108
|
|
|
|
61,168
|
|
|
|
6,422
|
|
|
|
6,422
|
|
Insurance
|
|
|
865
|
|
|
|
1,078
|
|
|
|
.
|
|
|
|
-
|
|
Miscellaneous
expenses
|
|
|
9,755
|
|
|
|
12,152
|
|
|
|
4,160
|
|
|
|
4,160
|
|
Sale
of ore samples
|
|
|
(11,370
|
)
|
|
|
(14,162
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
181,874
|
|
|
|
226,540
|
|
|
|
44,666
|
|
|
|
44,666
|
|
14.
|
CONCENTRATION
OF RISKS
|
The
Company’s activities expose it to a variety of financial risks, which include
the effects of changes in foreign currency exchange rates, interest rates,
credit and liquidity. Risk management will be carried out by the Company's
management.
The most
important aspects for management of these risks are:
Exchange
rate risk.-
The
Company is exposed to the risk of fluctuations in the exchange rats for foreign
currency that arise from its exposure to the United States dollar. The Company
presents a liability position in United States dollars. However, Management has
decided not to use derivative products for hedging because it believes that any
future fluctuations in the exchange rate between the New sol and the United
States dollar would not adversely affect company's financial
condition.
Interest-rate
risk.-
The
Company’s operating income and cash flows are not affected by changes in market
interest rates since is has no loan operations and the loans from investors do
not accrue interest.
Credit
risk:
The
Company does not have significant credits concentration risks since it is in the
prospecting stage and has not generated any sales.
Liquidity
risk:
Management
of liquidity risk implies maintaining sufficient cash and cash equivalents, as
well as the availability of financing through an adequate number of committed
credit sources and the capacity to settle transactions. The Company has and
depends on a foreign investor that, to date administers sufficient liquidity for
the operating expenses of the mine and the casino, slot machines and
restaurant.
According
to legal standards promulgated in recent years, companies in several sectors are
obliged to gradually develop Environmental Management Plan programs. Management
believes that no disasters or polluting agents have taken place as a consequence
of its activities, for which reason no liabilities have been entered, or
reserves established for such cases.
In
September 2007 The Company filed a draft Geologic Study for Drilling of Alluvial
Gold with the Regional Ministry of Energy and Mines- Puno Energy and Mines
Department called "AMR Mine Project" for its mining concession, conducted by
Estanislao Engineer de la Cruz C. (EAP 17026).
On March
19, 2008, the Company filed a Semi-detailed Environmental Impact Study for
Mining Operation and Refining Activities for the AMR Project concession with the
Regional Ministry of Energy and Mines- Puno Energy and Mines Department. On May
5, 2008, Report N° 052-2008/DREM-PUNO/DMMA-IBC was issued by the Puno Regional
Government Energy and Mines Department approving this Environmental Impact
Study, Directorial Resolution N°008-2008-DREM-PUNO/D was issued and the public
was informed of the approval of this Environmental Impact Study (Note
15).
The
Company is registered as a "Small Mining Producer". This designation allows it
to present a "Semi-detailed Environmental Impact Study" (Note 1) that emphasizes
the following:
Corporate
information. - This Plan must include the Company’ policies in matters of
environmental policy, forest replacement, handling and conservation of waters
and soil, and archaeological recovery
Environmental
Management Plan. - It must provide a description of all the mitigation measures
that will be executed to have the impacts caused within acceptable levels, for
which it must consider the following:
|
·
|
Criteria
for selection of areas for clearing and
minerals.
|
|
·
|
Criterion
for selection of the area through which the dump trucks will
pass.
|
|
·
|
Programming
of activities to avoid critical periods for
fauna.
|
|
·
|
Facilities
for the treatment of industrial
effluents.
|
|
·
|
Program
for handling the soil removed and the clearing
remainders.
|
|
·
|
Program
for industrial waste.
|
|
·
|
Program
for domestic waste.
|
|
·
|
Program
to control dust, and
|
|
·
|
Other
additional criteria and programs
more
|
Monitoring
plan. - Based on the of Environmental Management Plan, the potential impacts
generated by the Project in the following aspects must be prevented, mitigated
and compensated:
|
·
|
Program
for monitoring air quality and
emissions.
|
|
·
|
Program
for monitoring noise, and
|
|
·
|
Program
of water monitoring, including liquid effluents and underground and
surface water bodies.
|
Social
Management Plan. - Presentation of a description of the social programs that
will be implemented to mitigate or increase the impacts of the project among the
population, including activities for mitigation and improvement, consultation
processes, support for community initiatives and monitoring.
These
criteria and programs will be developed and filed with the Regional Ministry of
Energy and Mines- Puno Energy and Mines Department when the mine enters the
mining phase known as "Exploration".
UNAUDITED
PRO FORMA COMBINED FINANCIAL INFORMATION.
On August
14, 2009, Affinity Gold Corp. completed its acquisition of AMR Project Peru
S.A.C. The following unaudited pro forma combined balance sheets and
income statements are based on historical financial statements of the companies.
The unaudited pro forma combined financial statements are provided for
information purposes only. The pro forma financial statements are not
necessarily indicative of what the financial position or results of operations
actually would have been had the acquisition been completed at the dates
indicated below. In addition, the unaudited pro forma combined financial
statements do not purport to project the future financial position or operating
results of the combined company. The unaudited pro forma combined
financial information has been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission. For pro forma
purposes:
•
|
The
unaudited Pro Forma Combined Balance Sheets as of March 31, 2009 and
December 31, 2008 combines the historical balance sheets of the companies
as of the years ended March 31, 2009 and December 31, 2008, giving effect
to the acquisitions/mergers as if they had occurred at the beginning of
the most recent year ended.
|
•
|
The
unaudited Pro Forma Combined Statements of Operations for the years ended
March 31, 2009 and December 31, 2008 combines the historical income
statements of the companies for the indicated period, giving effect to the
acquisitions/mergers as if they had at the beginning of the most recent
year ended.
|
•
|
The
unaudited Pro Forma Combined Balance Sheets as of June 30, 2009 combines
the historical balance sheets of the companies as of the June 30, 2009,
giving effect to the acquisitions/mergers as if they had occurred at the
beginning of the most recent year ended.
|
•
|
The
unaudited Pro Forma Combined Statements of Operations for the six and
three months ended June 30, 2009 combines the historical income statements
of the companies for the indicated period, giving effect to the
acquisitions/mergers as if they had at the beginning of the most recent
period ended.
|
These
unaudited pro forma combined financial statements and accompanying notes should
be read in conjunction with the separate audited financial statements of
Affinity Gold Corp. and AMR Project Peru S.A.C. as of and for the years ended
March 31, 2009 and December 31, 2008.
AFFINITY
GOLD CORP.
TABLE
OF CONTENTS
Pro
Forma Combined Balance Sheets as of March 31, 2009 and December 31,
2008
|
|
2
|
|
|
|
Pro
Forma Combined Statements of Operations for the years ended March 31, 2009
and December 31, 2008
|
|
3
|
|
|
|
Pro
Forma Combined Balance Sheets as of June 30, 2009
|
|
4
|
|
|
|
Pro
Forma Combined Statements of Operations for the three and six months ended
June 30, 2009
|
|
5
|
|
|
|
Notes
to the Pro Forma Adjustments
|
|
6
|
AFFINITY
GOLD CORP.
PRO
FORMA COMBINED BALANCE SHEETS
MARCH
31, 2009 AND DECEMBER 31, 2008
|
|
Affinity Gold
Corp. March
31, 2009
|
|
|
AMR
Project
Peru S.A.C.
December
31,
2008
|
|
|
Pro Forma
Adjustments
|
|
|
Total
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
28,444
|
|
|
$
|
33
|
|
|
|
|
|
$
|
28,477
|
|
Other
accounts receivable
|
|
|
0
|
|
|
|
44,997
|
|
|
|
|
|
|
44,997
|
|
Inventory
|
|
|
0
|
|
|
|
56,696
|
|
|
|
|
|
|
56,696
|
|
Prepaid
expenses and taxes
|
|
|
0
|
|
|
|
47,989
|
|
|
|
|
|
|
47,989
|
|
Note
receivable – related party
|
|
|
236,000
|
|
|
|
0
|
|
|
|
(236,000
|
)
a
|
|
|
0
|
|
Total
Current Assets
|
|
|
264,444
|
|
|
|
149,715
|
|
|
|
|
|
|
|
178,159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
Income Tax
|
|
|
0
|
|
|
|
34,312
|
|
|
|
|
|
|
|
34,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and Equipment, Net
|
|
|
0
|
|
|
|
224,273
|
|
|
|
|
|
|
|
224,273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
264,444
|
|
|
$
|
408,300
|
|
|
|
|
|
|
$
|
436,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
0
|
|
|
$
|
4,664
|
|
|
|
|
|
|
$
|
4,664
|
|
Accrued
expenses
|
|
|
21,489
|
|
|
|
0
|
|
|
|
|
|
|
|
21,489
|
|
Credit
card payable
|
|
|
1,590
|
|
|
|
0
|
|
|
|
|
|
|
|
1,590
|
|
Third-party
loans
|
|
|
0
|
|
|
|
717,219
|
|
|
|
(236,000
|
)
a
|
|
|
481,219
|
|
Total
Current Liabilities
|
|
|
23,079
|
|
|
|
721,893
|
|
|
|
|
|
|
|
508,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
23,079
|
|
|
|
721,893
|
|
|
|
|
|
|
|
508,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
65,261
|
|
|
|
49,227
|
|
|
|
(49,227
|
)
b
|
|
|
65,261
|
|
Paid
in capital
|
|
|
1,426,065
|
|
|
|
0
|
|
|
|
(313,593
|
)
b
|
|
|
1,112,472
|
|
Accumulated
deficit
|
|
|
(1,249,961
|
)
|
|
|
(362,820
|
)
|
|
|
362,820
|
b
|
|
|
(1,249,961
|
)
|
TOTAL
STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
241,365
|
|
|
|
(313,593
|
)
|
|
|
|
|
|
|
(72,228
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
$
|
264,444
|
|
|
$
|
408,300
|
|
|
|
|
|
|
$
|
436,734
|
|
See
accompanying notes to the Pro Forma adjustments.
AFFINITY
GOLD CORP.
PRO
FORMA COMBINED STATEMENTS OF OPERATIONS
YEARS
ENDED MARCH 31, 2009 AND DECEMBER 31, 2008
|
|
Affinity Gold
Corp. Year
ended
March
31,
2009
|
|
|
AMR
Project
Peru S.A.C.
Year ended
December
31,
2008
|
|
Pro Forma
Adjustments
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
REVENUES
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS
OF GOODS SOLD
|
|
|
0
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
0
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
1,212,464
|
|
|
|
289,775
|
|
|
|
|
1,502,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
LOSS
|
|
|
(1,212,464
|
)
|
|
|
(289,775
|
)
|
|
|
|
(1,502,239
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE)
|
|
|
12,594
|
|
|
|
(50,880
|
)
|
|
|
|
(38,286
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS BEFORE PROVISION FOR INCOME TAXES
|
|
|
(1,199,870
|
)
|
|
|
(340,665
|
)
|
|
|
|
(1,540,525
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROVISION
FOR INCOME TAXES
|
|
|
0
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(1,199,870
|
)
|
|
$
|
(340,665
|
)
|
|
|
$
|
(1,540,525
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF SHARES OUTSTANDING
|
|
|
64,617,853
|
|
|
|
|
|
|
|
|
64,617,853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS PER SHARE
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
$
|
(0.02
|
)
|
See
accompanying notes to the Pro Forma adjustments.
AFFINITY
GOLD CORP.
PRO
FORMA COMBINED BALANCE SHEETS
JUNE
30, 2009
|
|
Affinity Gold
Corp. June
30,
2009
|
|
|
AMR
Project
Peru S.A.C.
June 30,
2009
|
|
|
Pro Forma
Adjustments
|
|
|
Total
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
87,181
|
|
|
$
|
6,048
|
|
|
|
|
|
$
|
93,229
|
|
Other
accounts receivable
|
|
|
0
|
|
|
|
45,012
|
|
|
|
|
|
|
45,012
|
|
Inventory
|
|
|
0
|
|
|
|
59,086
|
|
|
|
|
|
|
59,086
|
|
Prepaid
expenses and taxes
|
|
|
0
|
|
|
|
114,665
|
|
|
|
|
|
|
114,665
|
|
Deposits
|
|
|
2,500
|
|
|
|
0
|
|
|
|
|
|
|
2,500
|
|
Note
receivable – related party
|
|
|
382,000
|
|
|
|
0
|
|
|
|
(382,000
|
)
a
|
|
|
0
|
|
Total
Current Assets
|
|
|
471,681
|
|
|
|
224,811
|
|
|
|
|
|
|
|
314,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
Income Tax
|
|
|
0
|
|
|
|
35,759
|
|
|
|
|
|
|
|
35,759
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and Equipment, Net
|
|
|
1,350
|
|
|
|
212,348
|
|
|
|
|
|
|
|
212,698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
473,031
|
|
|
$
|
472,918
|
|
|
|
|
|
|
$
|
563,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
0
|
|
|
$
|
4,602
|
|
|
|
|
|
|
$
|
4,602
|
|
Accrued
expenses
|
|
|
6,052
|
|
|
|
0
|
|
|
|
|
|
|
|
6,052
|
|
Credit
card payable
|
|
|
13,079
|
|
|
|
0
|
|
|
|
|
|
|
|
13,079
|
|
Third-party
loans
|
|
|
0
|
|
|
|
960,855
|
|
|
|
(382,000
|
)
a
|
|
|
578,855
|
|
Total
Current Liabilities
|
|
|
19,131
|
|
|
|
965,457
|
|
|
|
|
|
|
|
602,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
19,131
|
|
|
|
965,457
|
|
|
|
|
|
|
|
602,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
65,546
|
|
|
|
48,893
|
|
|
|
(48,893
|
)
b
|
|
|
65,546
|
|
Paid
in capital
|
|
|
4,182,067
|
|
|
|
0
|
|
|
|
(492,539
|
)
b
|
|
|
3,689,528
|
|
Accumulated
deficit
|
|
|
(3,793,713
|
)
|
|
|
(541,432
|
)
|
|
|
541,432
|
b
|
|
|
(3,793,713
|
)
|
TOTAL
STOCKHOLDERS’ DEFICIT
|
|
|
453,900
|
|
|
|
(492,539
|
)
|
|
|
|
|
|
|
(38,639
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
$
|
473,031
|
|
|
$
|
472,918
|
|
|
|
|
|
|
$
|
563,949
|
|
See
accompanying notes to the Pro Forma adjustments.
AFFINITY
GOLD CORP.
PRO
FORMA COMBINED STATEMENTS OF OPERATIONS
THREE
AND SIX MONTHS ENDED JUNE 30, 2009
|
|
Affinity Gold
Corp.
Three
months
ended June
30, 2009
|
|
|
AMR
Project
Peru S.A.C.
Six months
ended June
30, 2009
|
|
Pro Forma
Adjustments
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
REVENUES
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS
OF GOODS SOLD
|
|
|
0
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
0
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
2,543,759
|
|
|
|
188,903
|
|
|
|
|
2,732,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
LOSS
|
|
|
(2,543,759
|
)
|
|
|
(188,903
|
)
|
|
|
|
(2,732,662
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE)
|
|
|
7
|
|
|
|
9,955
|
|
|
|
|
9,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS BEFORE PROVISION FOR INCOME TAXES
|
|
|
(2,543,752
|
)
|
|
|
(178,948
|
)
|
|
|
|
(2,722,700
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROVISION
FOR INCOME TAXES
|
|
|
0
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(2,543,752
|
)
|
|
$
|
(178,948
|
)
|
|
|
$
|
(2,722,700
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF SHARES OUTSTANDING
|
|
|
65,451,899
|
|
|
|
|
|
|
|
|
65,451,899
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS PER SHARE
|
|
$
|
(0.04
|
)
|
|
|
|
|
|
|
$
|
(0.04
|
)
|
See
accompanying notes to the Pro Forma adjustments.
AFFINITY
GOLD CORP.
NOTES
TO THE PRO FORMA ADJUSTMENTS (unaudited)
(a)
Elimination of
intercompany note between Affinity Gold Corp. and AMR Project Peru
S.A.C.
(b)
Elimination of AMR Project
Peru S.A.C. equity due to acquisition by Affinity Gold Corp.
AMR
PROJECT PERU S.A.C.
RECONCILIATION
OF INTERNATIONAL FINANCIAL REPORTING STANDARD - IFRS AND UNITED STATES OF
AMERICA GENERALLY ACCEPTED ACCOUNTING PRINCIPLES - US GAAP FROM JANUARY 1 TO
JUNE 30, 2009
AMR
PROJECT PERU S.A.C.
RECONCILIATION
OF INTERNATIONAL FINANCIAL REPORTING STANDARD - IFRS AND UNITED STATES OF
AMERICA GENERALLY ACCEPTED ACCOUNTING PRINCIPLES - US GAAP FROM JANUARY 1 TO
JUNE 30, 2009
CONTENT
Report
of independent auditors
|
1
|
|
|
Schedule
of reconciliation as IFRS and US GAAP
|
2
|
|
|
Notes
to the schedule of reconciliation as IFRS and US GAAP
|
6
|
REPORT
OF INDEPENDENT AUDITORS
We have
audited the reconciliation schedule of International Financial Reporting
Standard - IFRS and United States of America Generally Accepted Accounting
Principles – US GAAP from January 1 to June 30, 2009.
Management's
responsibility for the Schedule de Reconciliation
Management
is responsible for the preparation and reasonable presentation of reconciliation
schedule of International Financial Reporting Standard - IFRS and United States
of America Generally Accepted Accounting Principles – US GAAP.
Auditor's
responsibility
Our
responsibility consists of expressing an opinion on these schedule based on the
audit that we conducted. Our audit was performed in accordance with audit
standards generally. Such standards require that we fulfill ethical requirements
and plan and carry out our work with the purpose of obtaining a reasonable
assurance that the schedule does not present material
misstatements.
An audit
includes the execution of procedures to obtain audit evidence on the balances
and disclosures in the schedule. The procedures selected depend on the auditor’s
judgment, which includes evaluation of the risk that the schedule contains
material misstatements, whether as a result of fraud or error. An audit also
includes evaluation of whether the accounting principles applied are suitable
and whether the estimates accounting made by management are reasonable, as well
as an evaluation of the overall presentation of the schedule
attached.
We
believe that the audit that we have conducted constitutes a reasonable basis for
our opinion.
Opinion
In our opinion, the schedule attached
reconciliation schedule of International Financial Reporting Standard - IFRS and
United States of America Generally Accepted Accounting Principles – US
GAAP
from January 1 to June 30, 2009 present
fairly, in all material aspects, the items conciliatory in that period between
the two accounting models.
Signed
by:
|
(Partner)
|
Cesar
M. Urbano Ventocilla
|
Certified
Public Accountant
|
Registration
N° 9800
|
AMR
PROJECT PERU S.A.C.
Schedule
- Reconciliation IFRS and US GAAP
Prepared
by Management
BALANCE
SHEET
|
|
As of June 30, 2009
|
|
|
|
IFRS
|
|
|
Adjustments
|
|
|
US GAAP
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
|
Cash
and banks
|
|
|
6,048
|
|
|
|
-
|
|
|
|
6,048
|
|
Other
accounts receivable
|
|
|
45,012
|
|
|
|
-
|
|
|
|
45,012
|
|
Inventory
|
|
|
59,086
|
|
|
|
-
|
|
|
|
59,086
|
|
Taxes
and prepaid expenses
|
|
|
114,665
|
|
|
|
-
|
|
|
|
114,665
|
|
Total
current assets
|
|
|
224,811
|
|
|
|
-
|
|
|
|
224,811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DEFERRED
INCOME TAX
|
|
|
35,759
|
|
|
|
-
|
|
|
|
35,759
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MACHINERY
AND EQUIPMENT, NET
|
|
|
212,348
|
|
|
|
-
|
|
|
|
212,348
|
|
|
|
|
472,917
|
|
|
|
-
|
|
|
|
472,917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
accounts payable
|
|
|
|
|
|
|
|
|
|
|
|
|
Third-Party
Loans
|
|
|
960,855
|
|
|
|
-
|
|
|
|
960,855
|
|
Other
accounts payable
|
|
|
4,602
|
|
|
|
-
|
|
|
|
4,602
|
|
Total
current liabilities
|
|
|
965,457
|
|
|
|
-
|
|
|
|
965,457
|
|
NET
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
48,893
|
|
|
|
-
|
|
|
|
48,893
|
|
Cumulated
results during development stage
|
|
|
(541,766
|
)
|
|
|
-
|
|
|
|
(541,766
|
)
|
Cumulated
results
|
|
|
334
|
|
|
|
|
|
|
|
334
|
|
|
|
|
(492,539
|
)
|
|
|
-
|
|
|
|
(492,539
|
)
|
|
|
|
472,918
|
|
|
|
-
|
|
|
|
472,918
|
|
The
accompanying notes are part of the schedule of reconciliation.
AMR
PROJECT PERU S.A.C.
Schedule
- Reconciliation IFRS and US GAAP
Prepared
by Management
PROFIT
AND LOSS STATEMENT
|
|
For
the period of three
|
|
|
For
the period of six
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
months
ended June 30,
|
|
|
months
ended June 30,
|
|
|
Cumulative
|
|
|
For
the period from January 1
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
to
June 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NIIF
|
|
|
Ajustes
|
|
|
US
GAAP
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Administrative
expense
|
|
|
(3,792
|
)
|
|
|
-
|
|
|
|
(9,445
|
)
|
|
|
-
|
|
|
|
(62,529
|
)
|
|
|
(9,445
|
)
|
|
|
-
|
|
|
|
(9,445
|
)
|
Implementation
expenses of casino, machine slots and restaurant
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(98,047
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Prospecting
expenses
|
|
|
(72,053
|
)
|
|
|
|
|
|
|
(179,458
|
)
|
|
|
|
|
|
|
(405,997
|
)
|
|
|
(179,458
|
)
|
|
|
-
|
|
|
|
(179,458
|
)
|
Operating
loss
|
|
|
(75,845
|
)
|
|
|
-
|
|
|
|
(188,903
|
)
|
|
|
-
|
|
|
|
(566,573
|
)
|
|
|
(188,903
|
)
|
|
|
-
|
|
|
|
(188,903
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income and (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange
difference, net
|
|
|
3,238
|
|
|
|
-
|
|
|
|
(2,466
|
)
|
|
|
-
|
|
|
|
(30,970
|
)
|
|
|
(2,466
|
)
|
|
|
-
|
|
|
|
(2,466
|
)
|
Miscellaneous
incomes
|
|
|
28,161
|
|
|
|
-
|
|
|
|
33,836
|
|
|
|
-
|
|
|
|
61,866
|
|
|
|
33,836
|
|
|
|
-
|
|
|
|
33,836
|
|
Miscellaneous
expenses
|
|
|
(297
|
)
|
|
|
-
|
|
|
|
(488
|
)
|
|
|
-
|
|
|
|
(37,983
|
)
|
|
|
(488
|
)
|
|
|
-
|
|
|
|
(488
|
)
|
Conversion
result
|
|
|
9,091
|
|
|
|
-
|
|
|
|
(8,761
|
)
|
|
|
-
|
|
|
|
31,894
|
|
|
|
(20,927
|
)
|
|
|
-
|
|
|
|
(20,927
|
)
|
|
|
|
40,193
|
|
|
|
-
|
|
|
|
22,121
|
|
|
|
-
|
|
|
|
24,807
|
|
|
|
9.955
|
|
|
|
-
|
|
|
|
9,955
|
|
Net
loss before income tax
|
|
|
(35,652
|
)
|
|
|
-
|
|
|
|
(166,782
|
)
|
|
|
-
|
|
|
|
(541,766
|
)
|
|
|
(178,948
|
)
|
|
|
-
|
|
|
|
(178,948
|
)
|
Current
income tax
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Deferred
income tax
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net
loss
|
|
|
(35,652
|
)
|
|
|
-
|
|
|
|
(166,782
|
)
|
|
|
-
|
|
|
|
(541,766
|
)
|
|
|
(178,948
|
)
|
|
|
-
|
|
|
|
(178,948
|
)
|
The
accompanying notes are part of the schedule of reconciliation.
AMR
PROJET PERU S.A.C.
Schedule
– Reconciliation IFRS and US GAAP
For
the period ended June 30, 2009
Prepared
by Management
STATEMENTS
OF CHANGES IN SHAREHOLDERS EQUITY
|
|
IFRS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated results
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
|
|
|
Acumulated
|
|
|
during development
|
|
|
|
|
|
|
|
|
|
|
|
|
capital
|
|
|
results
|
|
|
stage
|
|
|
Total
|
|
|
Adjustments
|
|
|
US
GAAP
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inception,
octubre 2005
|
|
|
-
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Increase
in capital
|
|
|
24,505
|
|
|
|
-
|
|
|
|
-
|
|
|
|
24,505
|
|
|
|
-
|
|
|
|
24,505
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,418
|
)
|
|
|
(2,418
|
)
|
|
|
-
|
|
|
|
(2,418
|
)
|
Equity
adjustment from Foreign Currency
|
|
|
-
|
|
|
|
-
|
|
|
|
(338
|
)
|
|
|
(338
|
)
|
|
|
-
|
|
|
|
(338
|
)
|
Balance
to December 31,2005
|
|
|
24,505
|
|
|
|
-
|
|
|
|
(2,756
|
)
|
|
|
21,749
|
|
|
|
-
|
|
|
|
21,749
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
(22,830
|
)
|
|
|
(22,830
|
)
|
|
|
-
|
|
|
|
(22,830
|
)
|
Equity
adjustment from Foreign Currency
|
|
|
-
|
|
|
|
-
|
|
|
|
1,106
|
|
|
|
1,106
|
|
|
|
-
|
|
|
|
1,106
|
|
Balance
to December 31,2006
|
|
|
24,505
|
|
|
|
-
|
|
|
|
(24,480
|
)
|
|
|
25
|
|
|
|
-
|
|
|
|
25
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
(48,851
|
)
|
|
|
(48,851
|
)
|
|
|
-
|
|
|
|
(48,851
|
)
|
Equity
adjustment from Foreign Currency
|
|
|
-
|
|
|
|
|
|
|
|
(2,853
|
)
|
|
|
(2,853
|
)
|
|
|
-
|
|
|
|
(2,853
|
)
|
Balance
to December 31,2007
|
|
|
24,505
|
|
|
|
-
|
|
|
|
(76,184
|
)
|
|
|
(51,679
|
)
|
|
|
-
|
|
|
|
(51,679
|
)
|
Increase
in capital
|
|
|
24,722
|
|
|
|
-
|
|
|
|
-
|
|
|
|
24,722
|
|
|
|
-
|
|
|
|
24,722
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
(340,655
|
)
|
|
|
(340,655
|
)
|
|
|
-
|
|
|
|
(340,655
|
)
|
Equity
adjustment from Foreign Currency
|
|
|
-
|
|
|
|
-
|
|
|
|
54,019
|
|
|
|
54,019
|
|
|
|
-
|
|
|
|
54,019
|
|
Balance
to December 31,2008
|
|
|
49,227
|
|
|
|
-
|
|
|
|
(362,820
|
)
|
|
|
(313,593
|
)
|
|
|
-
|
|
|
|
(313,593
|
)
|
Decrease
in capital
|
|
|
(334
|
)
|
|
|
334
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
(158,021
|
)
|
|
|
(158,021
|
)
|
|
|
-
|
|
|
|
(158,021
|
)
|
Equity
adjustment from Foreign Currency
|
|
|
-
|
|
|
|
-
|
|
|
|
(20,927
|
)
|
|
|
(20,927
|
)
|
|
|
-
|
|
|
|
(20,927
|
)
|
Balance
to June 30,2009
|
|
|
48,893
|
|
|
|
334
|
|
|
|
(541,768
|
)
|
|
|
(492,541
|
)
|
|
|
-
|
|
|
|
(492,541
|
)
|
The
accompanying notes are part of the schedule of reconciliation.
AMR
PROJECT PERU S.A.C.
Schedule
- Reconciliation IFRS and US GAAP
Preparated
by Management
CASH
FLOW STATEMENT
|
|
For
the period of six
|
|
|
For
the period of six
|
|
|
Cumulative
|
|
|
From
January
|
|
|
|
|
|
|
months
ended June 30,
|
|
|
months
ended June 30,
|
|
|
June,
30
|
|
|
1
to June 30,
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IFRS
|
|
|
Adjust
ment
|
|
|
US
GAAP
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Received
from customers
|
|
|
37,369
|
|
|
|
-
|
|
|
|
37,369
|
|
|
|
-
|
|
|
|
48,640
|
|
|
|
37,369
|
|
|
|
-
|
|
|
|
37,369
|
|
Payment
to suppliers
|
|
|
(115,938
|
)
|
|
|
-
|
|
|
|
(224,153
|
)
|
|
|
-
|
|
|
|
(595,069
|
)
|
|
|
(236,319
|
)
|
|
|
-
|
|
|
|
(236,319
|
)
|
Payment
of compensation and professional fees
|
|
|
(17,660
|
)
|
|
|
-
|
|
|
|
(17,660
|
)
|
|
|
-
|
|
|
|
(44,335
|
)
|
|
|
(17,660
|
)
|
|
|
-
|
|
|
|
(17,660
|
)
|
Payment
of taxes
|
|
|
(302
|
)
|
|
|
-
|
|
|
|
(302
|
)
|
|
|
-
|
|
|
|
(14,164
|
)
|
|
|
(302
|
)
|
|
|
-
|
|
|
|
(302
|
)
|
Other
cash payments related to the activity
|
|
|
(2,553
|
)
|
|
|
-
|
|
|
|
(4,171
|
)
|
|
|
-
|
|
|
|
(83,688
|
)
|
|
|
(4,171
|
)
|
|
|
-
|
|
|
|
(4,171
|
)
|
Net
cash applied to operating activities
|
|
|
(99,084
|
)
|
|
|
-
|
|
|
|
(208,918
|
)
|
|
|
-
|
|
|
|
(688,616
|
)
|
|
|
(221,084
|
)
|
|
|
-
|
|
|
|
(221,084
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTMENT
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of fixed assets
|
|
|
(1,132
|
)
|
|
|
-
|
|
|
|
(1,132
|
)
|
|
|
-
|
|
|
|
(141,780
|
)
|
|
|
(1,132
|
)
|
|
|
-
|
|
|
|
(1,132
|
)
|
Capital
contributions
|
|
|
(1,132
|
)
|
|
|
-
|
|
|
|
(1,132
|
)
|
|
|
-
|
|
|
|
(141,780
|
)
|
|
|
(1,132
|
)
|
|
|
-
|
|
|
|
(1,132
|
)
|
Net
cash applied to investment activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
100,632
|
|
|
|
-
|
|
|
|
216,065
|
|
|
|
-
|
|
|
|
787,216
|
|
|
|
228,231
|
|
|
|
-
|
|
|
|
228,231
|
|
Loans
received
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
49,227
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net
cash provided by financing activities
|
|
|
100,632
|
|
|
|
-
|
|
|
|
216,065
|
|
|
|
-
|
|
|
|
836,443
|
|
|
|
228,231
|
|
|
|
-
|
|
|
|
228,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
decrease in cash
|
|
|
415
|
|
|
|
-
|
|
|
|
6,015
|
|
|
|
-
|
|
|
|
6,048
|
|
|
|
6,015
|
|
|
|
-
|
|
|
|
6,015
|
|
Cash
at the beginning of the year
|
|
|
5,633
|
|
|
|
-
|
|
|
|
33
|
|
|
|
-
|
|
|
|
-
|
|
|
|
33
|
|
|
|
-
|
|
|
|
33
|
|
Cash
at the end of the year
|
|
|
6,048
|
|
|
|
-
|
|
|
|
6,048
|
|
|
|
-
|
|
|
|
6,048
|
|
|
|
6,048
|
|
|
|
-
|
|
|
|
6,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION
OF THE NET RESULT
WITH
THE NET CASH APPLIED TO
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(44,743
|
)
|
|
|
-
|
|
|
|
(158,021
|
)
|
|
|
-
|
|
|
|
(541,765
|
)
|
|
|
(158,021
|
)
|
|
|
-
|
|
|
|
(158,021
|
)
|
Depreciation
and other provisions
|
|
|
(2,740
|
)
|
|
|
-
|
|
|
|
22,511
|
|
|
|
-
|
|
|
|
95,513
|
|
|
|
22,511
|
|
|
|
-
|
|
|
|
22,511
|
|
Others
|
|
|
456
|
|
|
|
-
|
|
|
|
456
|
|
|
|
-
|
|
|
|
456
|
|
|
|
456
|
|
|
|
-
|
|
|
|
456
|
|
Deferred
income tax
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(35,986
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Adjustments
from foreign currency
|
|
|
9,091
|
|
|
|
-
|
|
|
|
(8,761
|
)
|
|
|
-
|
|
|
|
|
|
|
|
(20,927
|
)
|
|
|
-
|
|
|
|
(20,927
|
)
|
Net
changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
accounts receivable
|
|
|
1,882
|
|
|
|
-
|
|
|
|
1,882
|
|
|
|
-
|
|
|
|
(106,307
|
)
|
|
|
1,882
|
|
|
|
-
|
|
|
|
1,882
|
|
Inventory
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(59,461
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Taxes
and prepaid expenses
|
|
|
(64,653
|
)
|
|
|
-
|
|
|
|
(66,729
|
)
|
|
|
-
|
|
|
|
(106,635
|
)
|
|
|
(66,729
|
)
|
|
|
-
|
|
|
|
(66,729
|
)
|
Other
accounts payable
|
|
|
1,623
|
|
|
|
-
|
|
|
|
(257
|
)
|
|
|
-
|
|
|
|
65,568
|
|
|
|
(257
|
)
|
|
|
-
|
|
|
|
(257
|
)
|
|
|
|
(99,084
|
)
|
|
|
-
|
|
|
|
(208,918
|
)
|
|
|
-
|
|
|
|
(688,615
|
)
|
|
|
(221,084
|
)
|
|
|
-
|
|
|
|
(221,084
|
)
|
The
accompanying notes are part of the schedule of reconciliation.
AMR
PROJECT - PERU S.A.C.
NOTES
TO THE SCHEDULE OF RECONCILIATION AS IFRS AND US GAAP FROM JANUARY 1 TO JUNE 30,
2009
AMR Project - Peru S.A.C.
(hereinafter, the Company), was legally established in the city of Lima
on October 7, 2005.The Company’s legal domicile, where it also has its
administrative offices, is Av. Arenales N° 335, in Lima’s Cercado district.
According to its by-laws, the Company pursues mining activity, mostly the search
for gold in the department of Puno.
The
Company has subscribed a lease agreement with an individual for 2,000 hectares,
located in the sector known as Limacpampa, district of San Gabán, province of
Carabaya, department of Puno, with the following features:
|
·
|
Signed
January 11, 2006.
|
|
|
6%
of gross production will be given to the
owner.
|
|
|
Consent
is granted to the Company to commence the proceedings for a mining
concession.
|
|
|
The
mining concession rights may not be transferred to any other individual or
legal entity.
|
|
|
All
the expenses incurred obtaining the mining concession will be the
Company’s responsibility.
|
On
October 25, 2006, the National Mining Concessions and Registration Institute’s
Energy and Mine Sector issued Resolution N° 4631-2006-INACC/J, by which it
granted the Company a mining concession for a 500-hectares expanse of the land
leased as indicated above. This mining concession right is renewable annually.
This concession was registered with the National Mining Concessions and
Registration Institute’s Document Administration and Archive Unit on December
11, 2006.
The
Peruvian Ministry of Energy and Mines issued "Acknowledgement of Small Mining
Producer N° 976-2007" on July 12, 2007 (Law Nº 27651 for Formalization and
Promotion of Small Mining and Artisanal Mining of January 24, 2001). The present
Law seeks to introduce a legal framework in mining law that allows suitable
regulation of the mining activities developed by small mining and artisanal
mining producers, proposing the formalization, promotion and development of the
same. Below are detailed the principal benefits of this Law:
|
·
|
The
combination of physical, chemical and physical-chemical processes used by
artisanal mining producers to extract or concentrate the valuable parts of
mineral ore, and to purify, smelt or refine metals are not included within
the scope of the present Law. Doing so requires solely an application
accompanied by technical information and an Environmental Impact Study
signed by a professional competent in this area. The corresponding
authorization will be issued by the Executive Mining
Board.
|
|
|
Production
may not be lower than the local-currency equivalent of US $ 100.00 per
year and hectare granted as to metallic substances, and the local-currency
equivalent of US $ 50.00 per year and hectare granted as to nonmetallic
substances. In the case of small mining producers, production may not be
lower than the local-currency equivalent of US $ 50.00 per year and
hectare granted, regardless of the substance. In the case of artisanal
mining producers, production may not be lower than the local-currency
equivalent of US $ 25.00 per year and hectare granted, regardless of the
substance.
|
|
·
|
For
small mining producers, the Right to Use is US $ 1.00 or its
local-currency equivalent per year and hectare requested or granted. For
artisanal mining producers the Right to f Use is of US $ 0.50 or its
local-currency equivalent per year and hectare requested or
granted.
|
To date,
mining activity is in the mining process stage known as "Prospecting", in which
the first geophysical and metallurgical studies of the mine are being conducted,
as well as the location of the camp, plants and other mining areas.
In
October 2008, the Company expanded its business to include the marketing and
operation of gaming rooms (Casino), slot machines and restaurant services. With
respect to this activity, during the year 2008 goods (such as furniture, sound,
lights, decorations, carpets and other) have been acquired and the premises
rented has been remodeled into a casino, slot machines and
restaurant.
In
another area, as of June 30, 2009 the Company had received financing of US$
960,865, from a group of foreign investors.
As of
December 31, 2008 and 2007, the Company has accumulated losses by US$ 362,818
and US$ 76,184,, respectively, which has significantly reduced its shareholders’
equity. Article 220 of the General Corporations Law provides that when a
financial entity has losses that reduce its share capital by more than fifty
percent, and a period has passed without overcoming this situation, the Company
is required to reduce its capital or to make new contributions in order overcome
this situation. To date, the Company has been receiving money from foreign
investors since the year 2006. The financial statements have been prepared
assuming that the Company will continue under the going concern accounting
principle, and do not include any adjustment if the Company could not continue
as a going concern.
The
global financial crisis became more acute in the last quarter of 2008. It had
its origins in the mortgage-loan crisis in the United States, which caused the
bankruptcy of numerous investment banking entities in that country;
simultaneously severely affecting the global financial sector. The principal
effect of the present financial crisis is noted in the liquidity of markets,
recession, steep growth in unemployment rates, the devaluation of the
investments and increases in credit risk, among other things. It is estimated
that, at the beginning of the last year, the present financial crisis has sunk
the global economy into its worse crisis since the time of the Great Depression.
For the Company, the leading effect of the current global financial condition
lies mainly in the declines in metals prices, the risk of a contraction in the
demand for gold and that foreign investors suspend the flow of funds until the
recession ends.
In
carrying out its activities, at the end of 2008 the Company had a total of 5
employees (1 in 2007).
Pursuant
to the General Corporations Law, the financial statements must be approved by
the shareholders as a sign of conformity. The financial statements to December
31, 2008 and 2007 have not been approved by the Company’s general stockholders'
meetings.
Since
2009, mining activity is at "Exploration" stage, in which geological surveys are
being made more precise and analysis of geochemical samples, and has been
determined that there is sufficient quantity of ore to be extracted with
benefits for the Company. At June 30, 2009, these exploration expenses amounting
to approximately US$ 179,458 have been recorded in the results because
management has no yet a technical study to support and determine the future
economic benefits for the Company.
Currently
the company is in development stage due to the activities planning of the
principals operations have begun, but there have been no significant
incomes.
Financial
statements expressed in U.S. dollars, which are part of this report, are result
of the application on the historical financial statements the methodology to
convert the balance of transactions at year-end in foreign currency translation
as the Standard International Accounting Standards - IAS 21 Effects of
fluctuations in exchange rates, and alternatively Statement of Financial
Accounting Standard SFAS N° 52. This methodology, which aims to restate
financial statements to show the impact of foreign currency on our currency,
relative to a fiscal year, considers the following guidelines.
|
a.
|
The
translation process requires initially quantify the functional currency,
that is the case for Nuevo Sol.
|
|
b.
|
The
translation has been made on the basic financial statements, balance
sheet, profit and loss statement, statement of changes in shareholders
equity and cash flows statement, based on the historical translation and
non-monetary items, reflected in the statement of changes in shareholders
equity, the effect of the conversion of all transaction for the period
subject to review.
|
|
c.
|
The
balance of non-monetary items, and income and expenses, in foreign
currency are translated at exchange rate of the transaction
date.
|
|
d.
|
As
of June 30, 2009 balances of assets and liabilities in Nuevos Soles have
been expressed in U.S. dollars at exchange rate of S/. 3.013 (S/. 2.968
June 30, 2008) for US$ 1,
respectively.
|
3.
|
PRINCIPAL
ACCOUNTING PRINCIPLES AND PRACTICES
|
The
significant accounting policies applied by the Company in the preparation and
presentation of its financial statements are detailed below.
|
a)
|
Base
of presentation. -
|
The
financial statements of the Company have been prepared in accordance with
generally accepted accounting principles in Peru. Generally accepted accounting
principles in Peru include the International Financial Reporting Standards
(IFRS) approved by the National Accounting Board through resolutions issued by
the local Accounting Standards Board. IFRS include the Financial Reporting
Standards, International Accounting Standards (IAS) and the pronouncements from
the Standards Interpretations Committee and the International Financial
Reporting Standards Interpretations Committee (SIC and IFRIC,
respectively).
Preparation
of the financial statements in accordance with IFRS requires the use of certain
critical accounting estimates. It also requires that Management exercise its
judgment in the process of applying the Company’s accounting policies. The areas
that involve a greater degree of judgment or complexity or areas in which
assumptions and estimates are material to the financial statements are described
in Note 3-b).
Modifications
to standards and interpretations (IFRIC) in effect in Peru starting from 2008
and 2009.
The local
Accounting Standards Board through its Resolution No. 040-2008-EF/94 of March
14, 2008 approved the application of the following:
|
1.
|
The
following IFRIC are of mandatory application in Peru starting from
2009:
|
IFRIC 1:
"Changes in Existing Decommissioning, Restoration and Similar
Liabilities".
IFRIC 2:
"Members' Shares in Co-operative Entities and Similar Instruments",
IFRIC 4:
"Determining Whether an Arrangement Contains a Lease",
IFRIC
5:"Rights to Interests Arising from Decommissioning, Restoration and
Environmental Rehabilitation Funds",
|
IFRIC 6:"Liabilities
Arising from Participating in a Specific Market - Waste Electrical and
Electronic Equipment",
|
|
IFRIC 7:"Applying
the Restatement Approach under IAS 29 Financial Reporting in
Hyperinflationary Economies",
|
|
IFRIC
8: "Scope of IFRS 2",
|
|
IFRIC
9: "Reassessment of Embedded
Derivatives",
|
|
IFRIC
10: "Interim Financial Reporting and
Impairment",
|
|
IFRIC
11: "IFRS 2: Group and Treasury Share
Transactions",
|
|
IFRIC
12: "Service Concession
Arrangements".
|
The
Company believes that these new interpretations are not applicable to the
formulation of the financial statements to June, 30 2009.
The
following standards are of mandatory application in Peru starting from
2009:
|
2.
|
IAS
32. "Financial Instruments: Presentation"( Revised in 2006). This standard
has been revised to align its requirements to those of IFRS 7, which are
described below.
|
|
3.
|
IFRS
7, "Financial Instruments: Disclosures" This standard requires that the
entity provides information that allows the users of its financial
statements to assess the relevance of financial instruments on its
financial condition and its performance. This standard demands that
management’s analysis of the potential effects of each type of financial
risk that affects the entity be disclosed. The standard distinguishes
financial risk as credit risk, liquidity risk, and market risk. The
standard demands the qualitative and quantitative presentation of
information on its financial instruments, presented in the same was as
analyzed by management in its duty of managing risks by implementing
minimum exposure requirements.
|
|
4.
|
IFRS
8, "Operating Segments". IFRS 8 replaces IAS 14, "Segment Reporting" and
aligns the information by segments with the reporting requirements of SFAS
131, "Disclosures about Segments of an Enterprise and Related
Information". The new standard requires a management focus under which the
information by segments is presented on the same basis as that used for
purposes of internal reporting.
|
|
-
IFRIC 13, "Customer Loyalty Programs", which is not applicable to the
Company.
|
The
Company believes that these new standards will not have a material impact on the
formulation of its financial statements. However, the information that is
disclosed will be more extensive in the future.
Standards,
modifications and interpretations of standards issued in effective
internationally for periods beginning on or after January 1, 2009 and those
pending approval by the National Accounting Office.
|
5.
|
IFRS
1 (Revised), "First-time Adoption of International Financial Reporting
Standards"
|
|
6.
|
IFRS
2 (Revised), "Share-based Payment"
|
|
7.
|
IFRS
3 (Revised), "Business
Combinations"
|
|
8.
|
IFRS
5 (Revised), "Non-current Assets Held for Sale and Discontinued
Operations"
|
|
9.
|
IAS
1 (Revised), "Presentation of financial
statements"
|
|
10.
|
IAS
16 (Revised), "Property, plant and
equipment"
|
|
11.
|
IAS
19 (Revised), "Employee Benefits"
|
|
12.
|
IAS
20 (Revised), "Accounting for Government Grants and Disclosure of
Government Assistance"
|
|
13.
|
IAS
23 (Revised), "Borrowing Costs"
|
|
14.
|
IAS
27 (Revised), "Consolidated and Separate Financial
Statements"
|
|
15.
|
IAS
28 (Revised), "Investments in
associates"
|
|
16.
|
IAS
29 (Revised), "Financial Reporting in Hyperinflationary
Economies"
|
|
17.
|
IAS
31 (Revised), "Interests In Joint
Ventures"
|
|
18.
|
IAS
32 (Revised), "Financial instruments:
presentation"
|
|
19.
|
IAS
36 (Revised), "Impairment of
Assets"
|
|
20.
|
IAS
1 (Revised), "Intangibles"
|
|
21.
|
IAS
39 (Revised), "Financial Instruments: Recognition and
Measurement"
|
|
22.
|
IAS
40 (Revised), "Investment Property"
|
|
23.
|
IAS
41 (Revised), "Agriculture"
|
|
24.
|
IFRIC
15, "Agreements for the Construction of Real
Estate"
|
|
25.
|
IFRIC
16, "Hedges of a Net Investment in a Foreign
Operation"
|
There
were also several minor revisions to IFRS 7, "Financial Instruments: Disclosure,
IAS 8, "Accounting Policies, Changes in Accounting Estimates and Errors", IAS
10, "Events After the Reporting Period", IAS 18, "Income" and IAS 34, "Interim
Financial Reporting".
These
standards will be adopted by the Company as approved in Peru by the National
Accounting Office. To date the Company's management is analyzing the impact that
the standards not yet approved by the CNC will have on its operations once they
are approved for use in Peru.
Currently
the company is in development stage due to the activities planning of the
principals operations have begun, but there has been no significant
incomes.
|
b)
|
Estimates
and critical accounting criteria.
-
|
Estimates
and critical accounting criteria are continuously evaluated the Management based
on historical experience and other factors, including the expectation of future
events occurring that is considered reasonable according to the
circumstances.
The
Company makes estimates and assumptions with respect to the future. By
definition, the resulting accounting estimates are not very often equal to the
respective actual results. The estimates and assumptions that have a risk of
causing adjustments to the balances of assets and liabilities are presented
below:
Depreciation
The
Company makes estimates of the useful life of its fixed assets that allow it to
make provisions for the wear of such assets, which are recognized as expenses
for the year. If these estimates and assumptions, which are based on
management's best judgment as of the date of the financial statements, are
susceptible to change as a result of changes in the premises upon which they
were based, the balances of the financial statements are revised on the date on
which the change in the estimates and assumptions took place, for which reason
the definitive results could differ materially from those estimated to date,
under different assumptions and conditions.
Provisions
Provisions are
recognized only when the Company has a present legal or assumed obligation as a
result of past events, it is probable that an outlay of resources would be
required to satisfy the obligation and it is possible to estimate the amount
reliably. When the Company believes that a provision is reimbursable, the
reimbursement is recognized separately as an asset only if this reimbursement is
virtually certain.
Taxes
Determination
of the tax obligations and expenses requires interpretation of the applicable
tax law. The Company consults tax professionals prior to making any decision on
tax matters. Even though Management believes that its estimates are prudent and
appropriate, differences in interpretation may arise with the tax administration
that could affect the charges for taxes in the future.
|
c)
|
Transactions
in foreign currency. -
|
|
·
|
Functional
currency and presentation currency.
-
|
The items
included in the Company’ financial statements are stated in the currency of the
principal economic environment in which the entity operates, that is to say, its
functional currency. The Company has defined the New sol as its functional and
reporting currency for its financial statements.
|
·
|
Transactions
and balances in foreign currency.-
|
Transactions
in foreign currency are considered as those taking place in a currency different
from the functional currency. Transactions in foreign currency are initially
posted in functional currency using the exchange rates in effect on the dates of
the transactions. Monetary assets and liabilities denominated in foreign
currency are subsequently translated to the functional currency using the
exchange rate in effect on the date of the balance sheet. Any gain or and loss
from exchange difference resulting from the liquidation of these transactions
and translating the monetary assets and liabilities into foreign currency at the
exchange rates for the date of the balance sheet are recognized in the
Gain from exchange difference,
net
heading in the profit and loss statement.
|
d)
|
Financial
instruments. -
|
Financial
instruments correspond to contracts that give rise, simultaneously, to a
financial asset in one entity and a financial liability or an equity instrument
in another entity. In the case of the Company, its financial instruments
correspond to primary instruments such as other accounts receivable and loans
from shareholders.
Financial
instruments are classified as liabilities or equity depending on the substance
in the contractual agreement that gave rise to them. Any interest, dividends,
gains and losses generated by a financial instrument classified as a liability
is posted as expense or income in the profit and loss statement. Payments to the
registered holders of equity financial instruments are posted directly to
shareholders’ equity. Financial instruments are offset when the Company has a
legal
right to
offset them and Management has the intention to satisfy them on a net basis or
execute upon the assets and cancel the liabilities simultaneously.
Fair
value is the amount at which assets can be exchanged between a duly informed
buyer and vendor, or an obligation can be satisfied between a debtor and a
creditor with sufficient information, under the terms of an arm’s-length
transaction.
|
e)
|
Other
accounts receivable. -
|
Other
accounts receivable are posted at the nominal value of the documentation that
originated the transaction. When the value of an account receivable is impaired,
the Company reduces its book value to its recoverable amount.
Inventory
is posted at
acquisition cost and consists of disbursements related to the facilities and
adaptation of the building leased for its use as a casino, slot machines and
restaurant. These disbursements are posted because Management is analyzing the
possibility of spinning off this business in the short term.
|
g)
|
Machinery
and equipment. -
|
Machinery
and equipment is
presented at acquisition cost, net of accumulated depreciation. The initial cost
of machinery and equipment includes its purchase price and any cost directly
attributable to placing it and leaving it in operating and use
condition.
Subsequent
costs attributable to fixed assets are capitalized only when it is probable that
future economic benefits associated with the assets will be generated for the
Company and the cost of these assets can be measured reasonably; otherwise the
production cost or expense as corresponds is imputed. Operating expenses and
repairs are charged to expenses in the period in which they are
incurred.
Assets in
a construction stage are capitalized as a separate component. Upon culmination,
the cost of these assets is transferred to its definitive category. Works in
progress are not depreciated.
The
depreciation of other fixed assets is calculated by the straight-line method to
allocate their cost less their residual value during their estimated useful
lives, as follows:
|
|
Years
|
|
Machinery
and equipment
|
|
5
and 10
|
|
Vehicles
|
|
|
5
|
|
Miscellaneous
equipment
|
|
|
10
|
|
Any gain
or loss from the sale of assets corresponds to the difference between the income
from the transaction and the book value of the assets; these are included in the
profit and loss statement.
Loans are
recognized at their fair value, net of the costs directly attributable to the
transaction and are classified as short-term obligations. Any difference between
fair value (net of transaction costs) and realizable value is recognized in the
profit and loss statement.
|
i)
|
Contingent
liabilities and assets. -
|
Contingent
liabilities are not recognized in the financial statements; they are disclosed
in notes to the financial statements unless the possibility of their occurrence
is remote. Contingent assets are not recognized in the financial statements, but
are disclosed if their realization is probable.
Provisions
are recognized when
the Company has a present legal or assumed obligation as a result of past
events, it is probable that an outlay of resources would be required to satisfy
the obligation and it is possible to estimate the amount reliably. No provisions
are recognized for future operating losses.
When
there are several similar obligations, the probability of that an outlay of
resources will be required for its payment is determined considering
the class of obligation as a whole. A provision is recognized even though the
probability of an outlay of resources with respect to any specific item included
in the same class of obligations is very small.
|
k)
|
Recognition
of expenses. -
|
The
Company is in the mining process stage known as "Prospecting", in which all
disbursements are considered expenses, except fixed assets, since it is not
known whether or not the Mine will be operable and profitable.
In
addition, expenses have been incurred to operate as a casino, slot machines and
restaurant that to date are not operating; it is in the pre-operating
stage.
|
l)
|
Gains
and losses from exchange differences.
-
|
Gains and
losses from exchange differences originating from the satisfaction of monetary
items denominated in foreign currency or of the adjustment of such items due to
changes in the exchange rate after their initial posting are recognized as
financial income and expense, respectively, in the period in which they
arise.
|
m)
|
Deferred
income tax. -
|
A
deferred income tax liability is recognized for all the timing differences
between the book value of assets and liabilities and their tax basis, without
considering the time at which it is estimated that the timing differences that
gave rise to them will be reversed. A deferred income tax asset is recognized
for all the timing differences between the book value of assets and liabilities
and their tax basis, to the extent to which it is probable that, in the future,
the Company will have sufficient taxable income against which it will be able to
apply the timing differences that reverse within the term established, if
necessary. Liabilities and assets are measured at the income tax rate that is
expected to be applied to taxable income in the year in which the liability is
eliminated or the assets realized, using the income tax rate.
|
n)
|
Tran
slation of Foreign
Currency –
|
All elements
of financial statements shall be translated as follow:
|
·
|
For
assets and liabilities, the exchange rate at the balance sheet date shall
be used.
|
|
·
|
For
Corporate capital, the historical exchange
rate.
|
|
·
|
For
revenues, expenses, gains and losses, the average exchange rate for the
period.
|
4.
|
OTHER
ACCOUNTS RECEIVABLE
|
As of
June 30, 2009, other accounts receivable of US$ 45,012 corresponds to
the security for leasing the premises for the casino, slot machines and
restaurant business, and for the administrative offices,
respectively.
Inventory
of US$ 59,086 corresponds to facilities used to convert the leased premises into
a casino, slot machines and restaurant. During the year 2008, US$ 27,611 of the
inventory was sold for a related company.
6.
|
TAXES
AND PREPAID EXPENSES
|
This
heading to the June 30, this includes:
|
|
2009
|
|
|
2008
|
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
General
Sales Tax
|
|
|
44,751
|
|
|
|
|
|
Advances
to be rendered
|
|
|
69,134
|
|
|
|
|
|
Prepaid
expenses
|
|
|
780
|
|
|
|
|
|
|
|
|
114,665
|
|
|
|
|
|
7.
|
MACHINERY
AND EQUIPMENT, NET
|
The
movement in this heading during the period from January 1, to June 30, 2009 was
the following:
|
|
Opening
|
|
|
|
|
|
Closing
|
|
|
|
Balance
|
|
|
Additions
|
|
|
Balance
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
Cost:
|
|
|
|
|
|
|
|
|
|
Machinery
and equipment
|
|
|
291,157
|
|
|
|
-
|
|
|
|
291,157
|
|
Vehicles
|
|
|
16,074
|
|
|
|
-
|
|
|
|
16,074
|
|
Miscellaneous
equipment
|
|
|
5,269
|
|
|
|
1,133
|
|
|
|
6,402
|
|
|
|
|
312,500
|
|
|
|
1,133
|
|
|
|
313,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Machinery
and equipment
|
|
|
71,011
|
|
|
|
20,293
|
|
|
|
91,304
|
|
Vehicles
|
|
|
7,570
|
|
|
|
2,163
|
|
|
|
9,733
|
|
Miscellaneous
equipment
|
|
|
193
|
|
|
|
55
|
|
|
|
248
|
|
|
|
|
78,774
|
|
|
|
22,511
|
|
|
|
101,285
|
|
Net
cost
|
|
|
233,726
|
|
|
|
|
|
|
|
212,348
|
|
As of
June 30, 2009, the fixed assets are not insured.
As of
June 30, 2009, third-party loans of US$ 717,229 correspond to a foreign investor
and do not accrue any interest. These loans have been used in the operating
expenses for the mine and preparation of the leased premises to convert it into
a casino, slot machines and restaurant. They have also been used in the
acquisition of all of the Company’s fixed assets.
a)
Corporate Capital. -
As of
June 30, 2009, the Company’s is represented by 155,250 common shares,
respectively, with a S/.1.00 par value each, which are issued and fully
paid.
The
number of shareholders and the structure of participation is presented according
to the following would drive to June 30, 2009:
Individual Participation in
|
|
Number of
|
|
|
Total percentage
|
|
capital
|
|
shareholders
|
|
|
Participation
|
|
|
|
|
|
|
%
|
|
From
0.01 to 10
|
|
|
1
|
|
|
|
0.01
|
|
From
30 to 40
|
|
|
1
|
|
|
|
27.58
|
|
From
70 to 80
|
|
|
1
|
|
|
|
72.41
|
|
Total
|
|
|
3
|
|
|
|
100.00
|
|
b)
Accumulated results. -
This
corresponds to the amount that is accumulated for each period as a result of the
Company’s business operations.
|
a)
|
The
Company's management has determined the taxable basis under the general
income tax regime in accordance with the tax law in effect, which demands
adding and deducting those items that such legislation recognizes as
taxable and non-taxable, respectively, to and from
results.
|
The
income tax rate corresponding to the years 2008 and 2007 has been fixed at 30%.
The taxable basis has been determined as follows:
|
|
2008
|
|
|
2007
|
|
|
|
S/.
|
|
|
S/.
|
|
|
|
|
|
|
|
|
|
|
Loss
before income tax:
|
|
|
(1,011,063
|
)
|
|
|
(154,809
|
)
|
Plus:
|
|
|
|
|
|
|
|
|
Non-deductible
expenses
|
|
|
980,604
|
|
|
|
150,276
|
|
Taxable
basis before income tax
|
|
|
(30,459
|
)
|
|
|
(4,533
|
)
|
|
|
|
|
|
|
|
|
|
Current
income tax @ 30%
|
|
|
-
|
|
|
|
-
|
|
|
b)
|
Deferred
income tax is determined as
follows:
|
|
|
2008
|
|
|
2007
|
|
|
|
S/.
|
|
|
S/.
|
|
|
|
|
|
|
|
|
|
|
Loss
before income tax:
|
|
|
(1,011,063
|
)
|
|
|
(154,809
|
)
|
Plus:
|
|
|
|
|
|
|
|
|
Non-deductible
permanent expenses
|
|
|
623,622
|
|
|
|
148,122
|
|
Less:
|
|
|
|
|
|
|
|
|
Non-deductible
temporary expenses
|
|
|
356,982
|
|
|
|
2,154
|
|
Taxable
basis for the income tax
|
|
|
(30,459
|
)
|
|
|
(4,533
|
)
|
|
|
|
|
|
|
|
|
|
Income
tax @ 30% (temporary)
|
|
|
107,741
|
|
|
|
-
|
|
Current
income tax
|
|
|
-
|
|
|
|
-
|
|
Deferred
income tax (US$ 35,759)
|
|
|
107,741
|
|
|
|
-
|
|
|
c)
|
Corporations
not domiciled in Peru and individuals must pay an additional 4.1 percent
tax of on dividends received.
|
|
d)
|
Article
8 of Legislative Decree Nª 970 extended exemptions under the Income Tax
Law until December 31, 2008, including exemption from this tax as to
capital gains resulting from the disposition of securities listed in the
Securities Market Public Registry through centralized trading exchanges.
Law Nº 29308 extended the exemption of capital gains from income tax until
January 1, 2010.
|
For
purposes of determining the Income tax and General Sales Tax, the transfer
prices for transactions carried out with related entities and entities domiciled
in territories with little or no taxation must be supported by documentation and
information on the valuation methods used and the criteria considered for their
determination.
Starting
with the 2004 period, it is established that the substantiation of transfer
prices will not be required only for those transactions between related entities
that individually ay their income tax in the country and must present a sworn
annual information return on these transactions.
Superintendent’s
Resolution Nº 008-2007–SUNAT made an exception with respect to transactions that
taxpayers domiciled in this country carry out with their related domiciled
entities. For the 2008 period, according to Superintendent’s Resolution Nº
087-2008–SUNAT, the presentation of a technical study on transfer prices is
again required.
Based on
analysis of the Company’s operations, Management and its legal advisers believe
that no material contingencies will arise for the Company as of December 31,
2008 and 2007 as a result of applying these standards.
The tax
authority has the power to review and, as applicable, to correct the income tax
calculated by the Company in the four years following presentation of the sworn
tax returns. The sworn Income Tax and General Sales Tax returns for the years
2004 and 2008 are pending audit by the tax authority. Due to the possible
interpretations that the tax authority might give to the law in effect, it is
not possible to determine as of this date whether any tax audit carried out
would or would not result in liabilities for the Company, for which reason any
greater tax or surcharge that could result from tax audits would be applied to
results for the period in which such is determined
In
management's opinion, any additional tax payments possible would not be material
to the financial statements to December 31, 2008 and 2007.
11.
|
ADMINISTRATIVE
EXPENSE
|
Administrative
expense for the period from January 1 to June 30 includes:
|
|
2009
|
|
|
2008
|
|
|
|
Corriente
|
|
|
Acumulado
|
|
|
Corriente
|
|
|
Acumulado
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel
charges
|
|
|
1,458
|
|
|
|
9,653
|
|
|
|
|
|
|
|
|
|
Postage
and telephone
|
|
|
472
|
|
|
|
3,112
|
|
|
|
|
|
|
|
|
|
Real
estate taxes
|
|
|
363
|
|
|
|
2,408
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
839
|
|
|
|
5,555
|
|
|
|
|
|
|
|
|
|
Light
and water
|
|
|
399
|
|
|
|
2,643
|
|
|
|
|
|
|
|
|
|
Professional
fees
|
|
|
697
|
|
|
|
4,613
|
|
|
|
|
|
|
|
|
|
Leasing
|
|
|
5,218
|
|
|
|
34,546
|
|
|
|
|
|
|
|
|
|
|
|
|
9,445
|
|
|
|
62,529
|
|
|
|
|
|
|
|
|
|
12.
|
EXPENSES
FOR THE CASINO, SLOT MACHINES AND
RESTAURANT
|
Expenses
for the casino, slot machines and restaurants for the period from January 1 to
June includes:
|
|
2009
|
|
|
2008
|
|
|
|
Corriente
|
|
|
Acumulado
|
|
|
Corriente
|
|
|
Acumulado
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Postage
and telephone
|
|
|
-
|
|
|
|
685
|
|
|
|
-
|
|
|
|
-
|
|
Real
estate taxes
|
|
|
-
|
|
|
|
11,373
|
|
|
|
-
|
|
|
|
-
|
|
Light
and water
|
|
|
-
|
|
|
|
5,492
|
|
|
|
-
|
|
|
|
-
|
|
Professional
fees
|
|
|
-
|
|
|
|
2,342
|
|
|
|
-
|
|
|
|
-
|
|
Insurance
|
|
|
-
|
|
|
|
1,205
|
|
|
|
-
|
|
|
|
-
|
|
Leasing
|
|
|
-
|
|
|
|
76,950
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
98,047
|
|
|
|
-
|
|
|
|
-
|
|
Prospecting
expense for the period from January 1 to June 30, includes:
|
|
2009
|
|
|
2008
|
|
|
|
Corriente
|
|
|
Acumulado
|
|
|
Corriente
|
|
|
Acumulado
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel
charges
|
|
|
56,334
|
|
|
|
109,370
|
|
|
|
|
|
|
|
|
|
Postage
and telephone
|
|
|
3,700
|
|
|
|
7,184
|
|
|
|
|
|
|
|
|
|
Maintenance
|
|
|
3,954
|
|
|
|
7,677
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
21,636
|
|
|
|
95,730
|
|
|
|
|
|
|
|
|
|
Travel
and transport
|
|
|
13,401
|
|
|
|
26,021
|
|
|
|
|
|
|
|
|
|
Meals
for mine personnel
|
|
|
5,969
|
|
|
|
11,587
|
|
|
|
|
|
|
|
|
|
Hotels
and care
|
|
|
14,587
|
|
|
|
28,320
|
|
|
|
|
|
|
|
|
|
Professional
fees
|
|
|
4,748
|
|
|
|
9,219
|
|
|
|
|
|
|
|
|
|
Miscellaneous
hardware and supplies
|
|
|
55,094
|
|
|
|
106,964
|
|
|
|
|
|
|
|
|
|
Insurance
|
|
|
1,845
|
|
|
|
7,440
|
|
|
|
|
|
|
|
|
|
Miscellaneous
expenses
|
|
|
10,945
|
|
|
|
21,250
|
|
|
|
|
|
|
|
|
|
Sale
of ore samples
|
|
|
(12,756
|
)
|
|
|
(24,765
|
)
|
|
|
|
|
|
|
|
|
|
|
|
179,458
|
|
|
|
405,997
|
|
|
|
|
|
|
|
|
|
14.
|
CONCENTRATION
OF RISKS
|
The
Company’s activities expose it to a variety of financial risks, which include
the effects of changes in foreign currency exchange rates, interest rates,
credit and liquidity. Risk management will be carried out by the Company's
management.
The most
important aspects for management of these risks are:
Exchange
rate risk.-
The
Company is exposed to the risk of fluctuations in the exchange rats for foreign
currency that arise from its exposure to the United States dollar. The Company
presents a liability position in United States dollars. However, Management has
decided not to use derivative products for hedging because it believes that any
future fluctuations in the exchange rate between the New sol and the United
States dollar would not adversely affect company's financial
condition.
Interest-rate
risk.-
The
Company’s operating income and cash flows are not affected by changes in market
interest rates since is has no loan operations and the loans from investors do
not accrue interest.
Credit
risk:
The
Company does not have significant credits concentration risks since it is in the
prospecting stage and has not generated any sales.
Liquidity
risk:
Management
of liquidity risk implies maintaining sufficient cash and cash equivalents, as
well as the availability of financing through an adequate number of committed
credit sources and the capacity to settle transactions. The Company has and
depends on a foreign investor that, to date administers sufficient liquidity for
the operating expenses of the mine and the casino, slot machines and
restaurant.
According
to legal standards promulgated in recent years, companies in several sectors are
obliged to gradually develop Environmental Management Plan programs. Management
believes that no disasters or polluting agents have taken place as a consequence
of its activities, for which reason no liabilities have been entered, or
reserves established for such cases.
In
September 2007 The Company filed a draft Geologic Study for Drilling of Alluvial
Gold with the Regional Ministry of Energy and Mines- Puno Energy and Mines
Department called "AMR Mine Project" for its mining concession, conducted by
Estanislao Engineer de la Cruz C. (EAP 17026).
On March
19, 2008, the Company filed a Semi-detailed Environmental Impact Study for
Mining Operation and Refining Activities for the AMR Project concession with the
Regional Ministry of Energy and Mines- Puno Energy and Mines Department. On May
5, 2008, Report N° 052-2008/DREM-PUNO/DMMA-IBC was issued by the Puno Regional
Government Energy and Mines Department approving this Environmental Impact
Study, Directorial Resolution N°008-2008-DREM-PUNO/D was issued and the public
was informed of the approval of this Environmental Impact Study (Note
15).
The
Company is registered as a "Small Mining Producer". This designation allows it
to present a "Semi-detailed Environmental Impact Study" (Note 1) that emphasizes
the following:
Corporate
information. - This Plan must include the Company’ policies in matters of
environmental policy, forest replacement, handling and conservation of waters
and soil, and archaeological recovery
Environmental
Management Plan. - It must provide a description of all the mitigation measures
that will be executed to have the impacts caused within acceptable levels, for
which it must consider the following:
|
·
|
Criteria
for selection of areas for clearing and
minerals.
|
|
·
|
Criterion
for selection of the area through which the dump trucks will
pass.
|
|
·
|
Programming
of activities to avoid critical periods for
fauna.
|
|
·
|
Facilities
for the treatment of industrial
effluents.
|
|
·
|
Program
for handling the soil removed and the clearing
remainders.
|
|
·
|
Program
for industrial waste.
|
|
·
|
Program
for domestic waste.
|
|
·
|
Program
to control dust, and
|
|
·
|
Other
additional criteria and programs
more
|
Monitoring
plan. - Based on the of Environmental Management Plan, the potential impacts
generated by the Project in the following aspects must be prevented, mitigated
and compensated:
|
·
|
Program
for monitoring air quality and
emissions.
|
|
·
|
Program
for monitoring noise, and
|
|
·
|
Program
of water monitoring, including liquid effluents and underground and
surface water bodies.
|
Social
Management Plan. - Presentation of a description of the social programs that
will be implemented to mitigate or increase the impacts of the project among the
population, including activities for mitigation and improvement, consultation
processes, support for community initiatives and monitoring.
These
criteria and programs will be developed and filed with the Regional Ministry of
Energy and Mines- Puno Energy and Mines Department when the mine enters the
mining phase known as "Exploration".
16.
|
RECONCILIATION
OF IFRS AND US GAAP
|
The
Company is in pre operation stage. The principles and practices applied in
preparing the financial statements of the Company at 30 June 2009 subject to the
reconciliation of IFRS and US GAAP have not revealed significant differences
that we believe are required to be exposed in the attached schedule neither in
the accompanying notes.
On August
10, 2009, the Company sold its business related AMR Nova all the inventories
were acquired for the modification of the local rented and converted into a
casino, slot machines and restaurant, amounting to US$ 59,086. With this sale,
the company left the business of casino, slot machines and
restaurant.
Exhibits
Exhibit No.
|
|
Description of Exhibit
|
|
|
|
2.1
|
|
Share
Exchange Agreement between Affinity Gold Corp., AMR Project Peru S.A.C.
and all the shareholders of AMR Project Peru S.A.C., dated May 8,
2009.
|
|
|
|
3.1
|
|
Articles
of Exchange filed with the Nevada Secretary of State on April 17,
2009.
|
|
|
|
10.1*
|
|
Letter
Agreement, dated May 8, 2009, among Affinity Gold Corp. and Antonio
Rotundo.
|
|
|
|
10.2
|
|
Extension
Agreement #4, dated August 11, 2009, among Affinity Gold Corp., AMR
Project Peru S.A.C., Antonio Rotundo and Mario Rotundo.
|
|
|
|
10.3
|
|
Private
Contract for Mining Operation, dated January 11, 2006, among AMR Project
Peru S.A.C. and Nestor Enrique Borda.
|
|
|
|
23.1
|
|
Consent
of Urbano Ventocilla & Asociados, Auditores & Consultantores,
dated August 20, 2009.
|
|
|
|
99.1
|
|
News
release dated August 14,
2009.
|
99.2
|
|
Mining
Concession Rights held by AMR Project Peru S.A.C.
|
|
|
|
99.3
|
|
Legal
Opinion from Grimaldo Abogados, dated August 14, 2009 with respect to
ownership of AMR Project Peru
S.A.C.
|
* Previously
filed on Form 8-K on May 13, 2009 and incorporated herein by
reference.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
|
AFFINITY
GOLD
CORP.
|
|
|
|
|
By:
|
|
|
Name:
|
Corey
Sandberg
|
|
Title:
|
Secretary
& Director
|
Affinity Gold (CE) (USOTC:AFYG)
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