UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2012
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number 000-52392
GOLD CREST MINES, INC.
(Exact name of registrant as specified in its charter)
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Nevada |
82-0290112 |
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(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification Number) |
724 E. Metler Lane, Spokane, WA 99218
(Address of principal executive offices)
Registrant's telephone number, including area code: (509) 893-0171
SECURITIES RESGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT: None
SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT: Common Stock, $0.001 par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No x
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant ’ s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this form 10-K or any amendment to this Form 10-K. Yes ¨ No x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “ large accelerated filer, ” “ accelerated filer, ” and “ smaller reporting company ” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer |
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(Do not check if a smaller reporting company) |
Smaller reporting company |
x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant on June 30, 2012, the last business day of the registrant’s most recently completed second fiscal quarter, based on the last reported trading price of the registrant’s common stock on the Over the Counter Bulletin Board was $2,589,368.
At March 17, 2013, 89,305,828 shares of the registrant’s common stock were outstanding.
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GOLD CREST MINES, INC.
ANNUAL REORT ON FORM 10-K
For the Fiscal Year Ended December 31, 2012
TABLE OF CONTENTS
MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
CONSOLIDATED FINANCIAL STATEMENTS
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
PRINCIPAL ACCOUNTANT FEES AND SERVICES
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
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PART I
ITEM 1.
BUSINESS
This annual report on Form 10-K, includes forward-looking statements. Our forward-looking statements include our current expectations and projections about future results, performance, results of litigation, prospects and opportunities. We have tried to identify these forward-looking statements by using words such as “may,” “will,” “expect,” “anticipate,” “believe,” “intend,” “feel,” “plan,” “estimate,” “project,” “forecast” and similar expressions. These forward-looking statements are based on information currently available to us and are expressed in good faith and believed to have a reasonable basis. However, our forward-looking statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements.
Given these risks and uncertainties, readers are cautioned not to place undue reliance on our forward-looking statements. All subsequent written and oral forward-looking statements attributable to Gold Crest Mines, Inc. (“GCMN” or “the Company”) or to persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Except as required by federal securities laws, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
The safe harbors of forward-looking statements provided by Section 21E of the Exchange Act are unavailable to issuers of penny stock. As we issued securities at a price below $5.00 per share, our shares are considered penny stock and such safe harbors set forth under Section 21E are unavailable to us.
BUSINESS DEVELOPMENT
Silver Crest Mines, Inc., the Company’s predecessor, was incorporated under the laws of the State of Idaho in 1968. The Company was organized to develop mineral properties located in the State of Idaho. The Company’s initial and subsequent efforts in the acquisition, exploration and development of potentially viable and commercial properties were unsuccessful. The Company has a history of losses and no revenues from operations. The Company’s capital needs have historically been met by the issuance of securities either through private placements, the issuance of shares for debt or the joint venture or lease of mineral properties. In June 2003, the Company merged into its wholly-owned subsidiary, Silver Crest Resources, Inc., for the purpose of changing the Company’s state of domicile to Nevada.
The Company was thereafter dormant until the completion of the share exchange effective August 1, 2006 with Niagara Mining & Development Company, Inc. (“Niagara”), an Idaho corporation formed on January 11, 2005, and its wholly-owned subsidiary, Kisa Gold Mining, Inc. (“Kisa”), an Alaskan corporation formed on July 28, 2006. Under the terms of the share exchange, the Company acquired all of the issued and outstanding shares of Niagara in exchange for 37,500,000 shares of the Company’s common stock. At the time of the share exchange, Niagara was in the process of completing the acquisition and staking of mining claims in Alaska and Idaho. On June 20, 2008, 100% of the issued and outstanding shares of Kisa were transferred from Niagara to the Company.
The following table shows the wholly owned subsidiaries of Gold Crest Mines, Inc. All exploration activity takes place in our wholly owned subsidiary Kisa Gold Mining, Inc.
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SUBSIDIARIES OF GOLD CREST MINES, INC. |
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Name of Subsidiary |
State of Incorporation |
Ownership Interest |
Principal Activity |
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Kisa Gold Mining, Inc. |
Alaska |
100% |
Mining exploration |
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Niagara Mining & Development Company, Inc. |
Idaho |
100% |
Not active |
In October 2007, our common stock began trading on the NASDAQ Electronic Bulletin Board (OTCBB) under the symbol “GCMN”. Prior to October 2007 our common stock was traded on the over the counter market in the pink sheets under the symbol “GCMN.”
Any bankruptcy, receivership or similar proceedings
There have been no bankruptcy, receivership or similar proceedings.
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BUSINESS OF THE COMPANY
General Description of the Business
We are in the business of exploration, development, and if warranted the mining of properties containing valuable mineral deposits. The focus of our exploration programs is directed at precious metals, primarily gold. We continue to identify, investigate and acquire potential properties for future exploration and development when warranted.
Alaska Properties
In southwest Alaska, after the staking of two new claims, the Company’s wholly owned subsidiary Kisa controls or has interests in five consolidated claim blocks consisting of 274 State of Alaska mining claims covering 42,280 acres. four of the claim blocks making up 35,240 acres comprise the Company’s Southwest Kuskokwim Project and the remaining claim group consisting of 7,040 acres is the Company’s Buckstock Project. Previous workers located and prospected several significant precious metal showings in this remote, highly prospective portion of the Kuskokwim Mineral Belt nearly 20 years ago. The showings show many similarities in mineralization style, alteration and general geologic characteristics to Nova Gold Resources and Barrick’s Donlin Creek project and other major Kuskokwim Mineral Belt gold deposits.
In Alaska, the lands are held under and are subject to the State’s mining laws and regulations.
Competitive Business Conditions
There is aggressive competition within the minerals industry to discover and acquire properties considered to have commercial potential. The Company competes for the opportunity to participate in promising exploration projects with other entities, many of which have greater resources than the Company. In addition, the Company competes with others in efforts to obtain financing to explore and develop mineral properties.
Regulation
The Company’s activities in the United States are subject to various federal, state, and local laws and regulations governing prospecting, development, production, labor standards, occupational health and mine safety, control of toxic substances, and other matters involving environmental protection and taxation. It is possible that future changes in these laws or regulations could have a significant impact on the Company’s business, causing those activities to be economically reevaluated at that time.
Estimate of the Amount Spent on Exploration for the Last Two Years
During the years ended December 31, 2012 and 2011, The Company did not directly spend any money on exploration activities. Currently all expenses are being incurred by our joint venture partner as part of their earn-in process. See “Note 4. Mineral Properties – North Fork OptionMaster Earn-in Agreement ” to our consolidated financial statements for further details.
Employees
The Company’s total number of employees is 2, which includes the CFO and the CEO / President, the CEO and President titles are held by the same individual. The CFO and CEO / President work part time. We intend to utilize the services of consultants and contractors to provide additional services to the Company as needed.
Company Website
In October of 2012 after the Company was unable to pay the dues for the domain name of www.goldcrestminesinc.com due to financial constraints. As a result the Company’s domain name was lost and was then purchased by a third party. Any further references to the website www.goldcrestminesinc.com cannot be relied upon for information on our Company. Until notified otherwise, the Company does not intend to have a presence on the World Wide Web.
Reports to Security Holders
We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the Exchange Act), and therefore file periodic reports and other information with the Securities and Exchange Commission (SEC). These reports may be obtained by visiting the Public Reference Room of the SEC at 100 F Street, NE, Washington, D.C. 20549, or by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet web site at www.sec.gov that contains reports, proxy information statements and other information regarding issuers that file electronically.
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Our filings under the Exchange Act (including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to these reports) can be obtained at no cost, by telephone at (509) 893-0171, by mail at: Gold Crest Mines, Inc., 724 East Metler Lane, Spokane, Washington 99218, attention: Investor Relations. These reports are available as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC.
ITEM 1A.
RISK FACTORS
As a smaller reporting company, we have elected not to provide the disclosure required by this item.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
As a smaller reporting company, we have elected not to provide the disclosure required by this item.
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ITEM 2.
PROPERTIES
ALASKA PROPERTIES
![[GCMN10K2012APR1613002.GIF]](https://content.edgar-online.com/edgar_conv_img/2013/04/16/0001052918-13-000145_GCMN10K2012APR1613002.GIF)
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SOUTHWEST KUSKOKWIM PROJECT
Summary
The Company’s wholly owned subsidiary Kisa, after the staking of two new claims, controls or has interests in four consolidated claim blocks consisting of 230 State of Alaska mining claims covering 35,240 acres which comprise the Company’s Southwest Kuskokwim Project. The claims consist of exploration properties in southwest Alaska approximately 90 miles east of the village of Bethel in the consolidated claim groups known as the AKO, Luna, Kisa and Gold Lake within the Kuskokwim Mineral Belt. Our claim groups of Gold Creek, Little Swift and GO were consolidated into the AKO claim group after the GO claims connected the claim groups. The two Gosson Valley claim groups were dropped in 2012. Previous workers located and prospected several significant precious metal showings in this remote, highly prospective portion of the Kuskokwim Mineral Belt nearly 20 years ago. The showings show many similarities in mineralization style, alteration and general geologic characteristics to Nova Gold Resources and Barrick’s Donlin Creek project and other major Kuskokwim Mineral Belt gold deposits.
On March 28, 2011 Kisa executed a Master Earn-In agreement (“the Agreement”) with North Fork LLC, (“North Fork”) an Alaska limited liability company.
This agreement calls for North Fork to explore for gold deposits on Kisa’s claim blocks in the Southwest Kuskokwim Project area and the Buckstock project area (“Projects”).
The following is a breakdown of the proposed earn-in terms:
1.
The initial interest at the time North Fork exercises its option to earn into the “Projects” will be as follows:
a.
Gold Crest Mines, Inc. – 100%
b.
North Fork – 0%
2.
North Fork can acquire a 51% interest in one or more “Projects” by making an aggregate of $3,000,000 of Exploration Expenditures on or for the benefit of the claims on or before October 31, 2013.
3.
If North Fork withdraws from the Joint Venture prior to earning a 51% interest in the “Projects”, it will have no further interest in the “Projects”.
4.
North Fork can earn an additional 24% interest in the “Projects”, taking its total interest to 75% by the expenditure of an additional $3,000,000 by October 31, 2016.
5.
North Fork can earn a total interest of 90% in any of the “Projects” claim blocks by the completion of a Bankable Feasibility Study.
6.
Gold Crest Mines, Inc. will retain a free carried 10% interest in the “Projects” up to a Decision to Mine at which point it can elect to contribute at 10% or dilute to a 2% Net Smelter Royalty.
7.
North Fork is obliged to keep the Projects in “good standing”.
8.
North Fork will be the sole manager of the “Projects” and will make all decisions in regards to the exploration programs.
See “Note 4. Mineral Properties – North Fork Option Master Earn-in Agreement ” to our consolidated financial statements for further details.
Location and Access
The Southwest Kuskokwim Project area is situated in a mountainous, high relief area located approximately 100 miles east of Bethel, Alaska and approximately 120 miles southwest of Donlin Creek and 40 miles west of the Shotgun Deposit. The project area lies along the boundary between the Bristol Bay, Kuskokwim and Bethel Recording Districts in southwest Alaska on State of Alaska lands. Bethel is the nearest community with full, year-round services. Commercial barge service from Anchorage is available from late May through early October at Bethel.
The effective work season in the project area is from July through September. The lakes in the immediate area typically remain frozen and snow covers ridges and upper slopes until late June or early July. Currently, personnel and equipment access to the area is limited to float planes capable of landing on lakes, via helicopter or via small fixed wing aircraft equipped with tundra tires.
The nearest areas to the prospects that are closed to mineral entry include Wood – Tikchik State Park located to the east of the Gold Lake and Kisa claim groups. Areas to the west and south are property of the Federal government and include the Yukon Flats National Wildlife and Togiak National Wildlife Refuges respectively. There currently are no unusual social, political or environmental encumbrances to exploration, development or production on the prospects. There are currently no roads or power available to the properties. Should attempts to develop one or more of the prospects occur, there is no guarantee that controversy will not arise as a result of any proposed development.
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Geologic Setting and Deposit Types
The properties are situated in the Kuskokwim Mineral Belt in the southern portion of the Aniak-Tuluksak and southeastern portion of the Bethel Mining Districts. Historically the Kuskokwim Mineral Belt has been a major placer and lode gold producer as well as the major source of mercury in Alaska since the turn of the twentieth century. Recent regional- to deposit-scale investigations by industry, academic institutions and government workers have helped better define the mineral deposit types and geologic controls in the Mineral Belt. This work has been spurred on by the discovery of major gold deposits throughout the northern and central portion of the belt, including the largest known deposit in the belt, the Donlin Creek deposit located approximately 120 miles to the northeast.
Rock sequences exposed in the Kuskokwim region consist of fault-bounded blocks consisting of Jurassic- to Tertiary-age assemblages of sedimentary, volcanic and intrusive rocks. These rocks were subsequently deformed, weakly metamorphosed and intruded by middle Cretaceous to Tertiary plutons, and associated dikes and sills, often in swarms along structural corridors. Glacial and modern flood plain deposits typically fill the broad glacially-carved valleys.
Previous Work by the Company
The Company’s past exploration efforts on the project include:
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Completion of 2,100 square miles of high resolution airborne geophysical surveys over the project area and south of the Donlin Creek gold deposit in 2006 and 2007;
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Completion of 17-line miles of induced polarization/resistivity surveys, 120-line miles of ground magnetics, collection of over 300 stream sediments and 250 rock samples and three soil grids on anomalies in the seven claim block area in 2006 and 2007;
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Completion of over 3,100 feet of drilling at the Kisa Breccia target in the Kisa claim group with encouraging results in 2007;
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Acquisition of two historic district-scale industry reconnaissance data sets and development of a proprietary steam sediment database that includes over 3,000 conventional silt and pan concentrate stream sediment samples. These samples define district-scale anomalies along distinct trends identified by the airborne geophysics and cover an area beginning at Kisa and extending 100 miles to northeast to the southern reaches of the Donlin Creek deposit;
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Entry into a Joint Venture with Newmont Mining Corporation on the AKO and Luna prospects on May 8, 2008 which later terminated on December 12, 2008. While they were the Company’s Joint Venture partner they completed systematic rock and soil sampling on the Luna and AKO claim groups.
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Entry into a Joint Venture with Cougar Gold LLC, who later transferred their interest to TintinaGold Resources Inc. (TintinaGold) who was the operator of the Golden Lynx, LLC on the Kisa, Gold Lake, Little Swift, Gossan Valley and Gold Creek prospects. The work performed by Cougar Gold while they were the Company’s Joint Venture partner included the completion of over 3,200 feet of drilling on the Gossan Ridge prospect, Gold Lake claim group with encouraging results, the completion of a soil grid on the Gold Lake and Kisa prospects extending areas of anomalous gold mineralization and the staking of additional mining claims over the Kisa, Gold Lake, Gold Creek, Gossan Valley and Little Swift prospect areas.
·
On March 28, 2011 the Company executed a Master Earn-In agreement with North Fork to explore for gold deposits on Kisa’s claim blocks. Work completed by North Fork over the 2010, 2011 and 2012 seasons comprised the following;
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Rock chip and soil sampling, as well as mapping at Luna
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Rock chip and stream sediment sampling at AKO
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Re-assay of drill core from Kisa
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Pegging of joiner claims at AKO, to combine the AKO, Little Swift and Gold Creek claims
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Rock chip, soil and stream sediment sampling at Chilly
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Rock chip sampling at Gossan Valley
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Work on compiling data for a National Instrument 43-101.
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The following is work that is proposed by North Fork for the 2013 exploration season;
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Complete detailed geophysical surveys at Luna and Chilly
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Grid soil geochemistry at Luna
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Diamond drilling under high grade mineralization at Luna and also testing the parallel structures
o
Mapping and prospecting on claim blocks such as Kisa, Gold Lake and AKO
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Southwest Kuskokwim Project Descriptions
All the claims held under the Southwest Kuskokwim Project area are currently part of a Master Earn-in Agreement with North Fork. The agreement was finalized and executed on March 28, 2011.
AKO Prospect
The AKO claim group is located in the southwestern Kuskokwim mountains approximately 9 miles southwest of the Kisa Prospect. The Company controls approximately 11,680 acres on 73 state mining claims. In 2011, two joiner claims were staked to combine the Little Swift and Gold Creek Prospects into the AKO claim to form one larger contiguous claim group. The AKO prospects were first discovered 20 years ago during a regional reconnaissance program. Follow-up included limited rock-chip sampling and field examination of several linear to ovoid iron-oxide stained ridgeline and valley-wall color anomalies within and along the faulted, western margin of the Crooked Mountain Pluton. These color anomalies are found at the headwaters of streams with strong gold and multi-element anomalies in stream sediments and pan concentrates and they are aligned along a pronounced, linear topographic feature that stretches for several miles. These prospects have never been drilled.
The Company’s exploration in the area includes compilation of historic data, completion of fixed-wing aeromagnetic and electromagnetic surveys, aerial reconnaissance mapping, stream sediment sampling and preliminary prospecting on several of the color anomalies identified to date. Stream-sediment samples from below the area of the known color anomalies and gold showings contain highly anomalous gold, arsenic, antimony, molybdenum and bismuth. Pan concentrates from streams draining these areas also contain visible gold. Follow-up work in 2007 has identified a number of targets on the property for further follow-up and possibly drill testing.
On May 8, 2008, the Company signed three separate joint venture agreements with Newmont North America Exploration Limited, a subsidiary of Newmont Mining Corporation (”Newmont”). During the joint venture Newmont completed a systematic reconnaissance type soil and rock chip sampling program over the AKO claim group which resulted in the delineation of two contiguous large gold anomalies on the claim group, The largest anomaly is centered over a distinctive aeromagnetic anomaly thought to represent a separate intrusive phase of the Crooked Mountain Pluton, consists of soils and rocks containing gold values greater than 0.02 ppm. This anomaly is over 13,500 feet long and 2,400 feet wide and is associated with multiple sets of sheeted quartz-sulfide vein systems. A similar and contiguous anomaly is situated adjacent to the main anomaly and has a slightly different trend and consists of soils and rock samples defining an anomalous area over 20,000 feet long and 2,700 feet wide. Neither of these anomalies has been drill tested. However on December 12, 2008, the Company received from Newmont a letter that notified of its intent to terminate the three venture agreements effective immediately.
In 2010, work performed by our current joint venture partner, North Fork consisted of re-sampling of the main soil and rock chip anomalies as confirmation of previous work. In addition, two joiner claims were pegged to connect AKO with the adjacent Little Swift and Gold Creek claim blocks. In the future, assessment work will be combined for the larger AKO claim block. During 2011, North Fork revisited the area with an independent geo and re-sampled some of the higher grade rock chips from the previous year. All work performed in 2012 was focused on compiling data for a National Instrument 43-101.
The Little Swift claims consisting of 2,240 acres of the AKO group and were staked to prospect a distinctively linear, contact zone between the Crooked Mountain quartz monzonite pluton and the cupola of hornfelsed sedimentary rocks. The prospect sites are staked over six large linear to ovoid iron-oxide stained ridgeline and valley wall color anomalies along the contact zone. Previous workers collected highly anomalous stream silt samples from below the area of the color anomalies.
The Gold Creek claims consisting of 1,920 acres of the AKO group were staked to prospect several iron-oxide stained color anomalies developed within the cupola of hornfelsed sedimentary rocks associated with the eastern margin of Crooked Mountain quartz monzonite pluton. The prospect sites are staked over four large ovoid-valley wall color anomalies that appear to be stratiform in character. Previous workers collected highly anomalous stream-sediment samples from below the area of the color anomalies. In 2008, Cougar Gold LLC, an affiliate of Electrum USA Ltd., operator of the Golden Lynx LLC at the time, completed sampling and mapping of the Gold Creek prospects. Mapping located a series of large quartz monzonite to diorite dikes in the headwaters of the streams reporting anomalous gold and pathfinder elements. Large color anomalies noted previously were examined and found to be associated with extensive fracture controlled sulfide development. The most intense sulfide development and fracturing were found to be stratigraphically controlled and associated with distinctive chert and black siltite sections. Weak gold and pathfinder anomalies are associated with these fracture zones. Much of the prospect area is covered with glacial alluvium and talus potentially masking potential mineralized areas within the claim group. Luna Prospect
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The Luna claim group is located in the southern Kuskokwim mountains of southwestern Alaska approximately 100 miles to the southeast of Bethel and 6 miles west of the Kisa prospect. The project area is accessed by helicopter or by small aircraft capable of landing on a tundra dirt strip. The Company staked the property in mid-2007, which consists of 50 state mining claims covering approximately 8,000 acres.
The Luna prospect was discovered during follow-up of an airborne geophysical anomaly identified from proprietary surveys completed in the fall of 2006 and spring of 2007. A regional-scale structural zone was interpreted from the airborne geophysical data. Follow-up exploration involving IP, resistivity and ground magnetic surveys, systematic stream-sediment and rock-chip sampling and geologic mapping led to the discovery.
Follow-up exploration involving IP, resistivity and ground magnetic surveys, systematic stream-sediment and rock-chip sampling and geologic mapping led to the discovery. Over 16 line-miles of IP-resistivity and 40 line-miles of ground magnetics were completed in 2007. The geophysical surveys define a 4.8 miles long by 1.4 miles wide IP and resistivity anomaly coinciding with a ground and aerial magnetic anomaly. Several conductors identified from the airborne electromagnetic surveys correspond with zones of semi-massive sulfide replacement mineralization located on the ground.
A total of 41 stream-sediment samples collected from streams draining the prospect area outline a distinct 10 square mile gold, arsenic, and antimony anomaly. A total of 40 of 72 rock chip samples collected from the prospect area contain anomalous gold. Gold is associated with anomalous arsenic, antimony, bismuth, molybdenum, silver, copper, lead and zinc.
Mineralization is hosted in calcareous siltstones, cherts and tuffaceous sedimentary rocks as well as in porphyritic intrusive rocks. Gold has been found in a broad area that exhibits pervasive fracturing and clay alteration. The prospective area contains ubiquitous disseminated, vein and stockwork sulfide accumulations. Intrusive rocks occur as dikes, sills and small stocks and compositionally include diorites and granodiorites as well as rhyolites. Several zones of stratiform sulfide replacement mineralization with cherty silica alteration containing up to 70% sulfides, primarily fine-grained pyrite, arsenopyrite and stibnite and to a lesser extent chalcopyrite and sphalerite have been located within the claim group.
The presence of widespread base and precious metals anomalies in stream sediments and rocks along this newly located structural zone and the association of these anomalies with intrusive rocks and reactive sedimentary rocks opens up a wide range of opportunities for future discoveries.
On May 8, 2008, the Company signed three separate joint venture agreements with Newmont North America Exploration Limited, a subsidiary of Newmont Mining Corporation (”Newmont”). During the joint venture Newmont conducted rock sampling and mapping on the project in 2008 and confirmed previous sampling results produced by the Company. However on December 12, 2008, the Company received from Newmont a letter that notified of its intent to terminate the three venture agreements effective immediately.
In 2010, work performed by our current joint venture partner, North Fork consisted of rock chip sampling and prospecting. The project area is predominantly covered by a blanket of till, meaning outcrop is limited to where streams incise into the till layer and expose the underlying bedrock. During 2011, North Fork continued with rock chip sampling and prospecting, as well as completed a number of soil sampling traverses in an attempt to define drill targets for testing during 2012. Work performed in 2012 was focused mainly on compiling data for a National Instrument 43-101 and permitting for exploration drilling programs.
Kisa Prospect
The Kisa claim group is made up of 38 state mining claims covering approximately 5,840 acres. The mining claims encompass a narrow, linear, northeast trending ridge held up with hornfelsed Jurassic- to Cretaceous-age sedimentary rocks intruded by rhyolite to gabbroic dikes and sills. Several northwest-trending spurs off the main ridge appear to be related to crosscutting dikes of a different age and composition. Geochemical analyses suggest associations similar to those known from other gold deposits within the Kuskokwim Mineral Belt including the producing Fort Knox Mine and advanced exploration projects at Donlin Creek to the north and Shotgun Hills to the east.
During 2007, the Company completed over 3,100 feet of core drilling with encouraging results on one of the main targets of the Kisa claim group, known as the Kisa Breccia Target . A poorly exposed, extensively silica-carbonate-sulfide altered breccia body is located along a ridge crest and steep, north-facing valley walls. The breccia is composed of a mixture of altered sedimentary and igneous clasts, many of which exhibit multiple generations of veining and brecciation. The breccia body is exposed over an area approximately 1000 feet wide x
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1600 feet long and roughly 800 feet high. Systematic rock chip samples from outcropping exposures of this breccia average 1.25 parts per million (0.036 troy ounces per short ton) gold. The Company completed six core holes into the target during the 2007 drilling campaign. All six holes cut broad zones of intensely altered igneous breccia containing low grade gold mineralization including narrower higher grade intervals. Hole K07-04 cut 678 feet averaging 0.3 parts per million gold; hole K07-05 cut 378 feet averaging 0.7 parts per million (0.02 ounces per ton) gold, including an intercept of 144 feet averaging 1.3 parts per million (0.038 ounces per ton) and hole K07-06 cut 485 feet averaging 0.4 parts per million (0.012 ounces per ton) gold.
The Golden Dike Target includes the rocks exposed on and under a prominent northeast trending ridgeline running through the center of the Kisa claim group. The ridge contains numerous silica-carbonate-sulfide altered felsic rhyolite dikes and sills exposed over an area 900 feet wide x 9800 feet long with at least 650 feet of exposed vertical extent. Float mapping, aerial photographic linears, airborne geophysical data and soil sampling suggest the dike swarm may extend in both directions under talus covered slopes and into the adjacent valleys. Sedimentary rocks are heavily iron oxide stained and fractured in the hornfelsed zones adjacent to and along the dike and sill margins and contain various oxidation products after sulfides. The dikes are often bleached, silicified and typically contain disseminated to stockwork sulfide veining. The large spatial extent and intense alteration of this dike swarm and the heavily iron-stained host rocks suggest the presence of a mineralized system at the surface and underlying the ridge. The length-weighted average grade sampled from the dike swarm averaged greater than 0.1 parts per million of gold. Similar dikes swarms and alteration zones are associated with the mineralized zones in the Donlin Creek deposit.
Work in 2007 included detailed rock chip and soil sampling, ground and airborne geophysics and geologic mapping. This work has now expanded the target area to a zone approximately 850 feet to 1,500 feet wide x 15,000 feet long with at least 525 feet and locally up to 1,150 feet of exposed vertical extent. Additional soil and rock chip sampling and geologic mapping were completed during the 2008 field season and expanded the areas of known gold mineralization considerably.
The Pirate’s Pick Target is located in the northern portion of the Kisa claim group and consists of a large northwest-trending quartz-carbonate-sulfide veined fault zone. The intensely stockwork-veined fault is intermittently exposed over the crest and flanks of a small ridge in an area roughly 650 feet wide by 1150 feet long with several hundreds of feet of exposed vertical extent. The fault occurs along the northern end of the ridge hosting the dike-sill complex and field evidence suggests the fault may offset and displace the dike swarm. The length-weighted average grade of 18 rock chip samples collected from this zone is 1.95 parts per million (0.057 ounces per ton) gold.
Additional targets occur along the projections of the dike swarm and fault systems into the adjacent talus covered slopes and glacial drift filled valleys, but will require additional work prior to definition of drill targets. Several small rubble crop and/or outcrop showings along the valley edge to the northwest of the main ridge contain anomalous pathfinder element suites and gold values. These showings correspond with a marked airborne magnetic geophysical anomaly identical to that over the main ridge to the southeast and make an intriguing target.
In 2010, work performed by our current joint venture partner, North Fork consisted of re-sampling of the drill core from the previous holes, in storage in Bethel, Alaska. A total of 26 samples were selected from intervals where anomalous Au had been reported. All work performed in 2012 related to compiling data for a National Instrument 43-101.
Gold Lake Prospect
The Gold Lake claim group is made up of 69 state mining claims covering approximately 9,720 acres approximately 8 miles west of the Kisa Prospect. The claims cover a broad, bright red, iron oxide stained, northwest trending ridge several miles long and nearly a mile wide adjacent to Gold Lake. The claim group contains at least two generations of crosscutting igneous dikes and sills similar to the Kisa showing and drill targets have been defined at several prospects within the claim package.
The Gossan Ridge Target consists of a series of banded quartz-sulfide veins associated with a dike-sill swarm that runs along the crest and flanks of rust-colored ridgeline exhibiting heavily iron oxide-staining reflecting weathering and oxidation of widespread disseminated sulfides in the rocks exposed along the ridge. The vein system has an exposed strike length of over 1600 feet and exposed widths up to 150 feet and the alteration zone and lower grade old mineralization is up to 350 feet wide and 4900 feet long with up to 650 feet of exposed vertical extent. Samples from the vein system consistently carry highly anomalous gold and pathfinder elements. The vein system appears to be associated with a series of porphyritic dikes that have produced pervasive and intense hydrothermal alteration of the host sedimentary rocks. The dikes and sills typically contain lower grade
11
gold mineralization, but their widespread presence and intense alteration associated with the igneous rocks throughout the complex suggest the presence of a larger, potentially mineralized igneous body at depth.
During 2007, additional rock and soil sampling was completed and the previously outlined soil anomaly was extended to more than 1 kilometer along strike. Over 51 line-miles of ground magnetics were completed and located a distinctive circular magnetic anomaly adjacent to, and overlapping with the main soil and rock chip anomaly. The magnetic feature extends beneath a glacial drift-filled valley and underlies another prominent alteration zone on the adjacent ridge slopes. Prospecting this feature in 2007 confirmed the presence of quartz-arsenopyrite-stibnite veins and fracture-controlled sulfides potentially indicative of cupola-related mineralization above a buried intrusion. A single 3-mile long, induced polarization and resistivity survey line was run adjacent to the main showing and generated a good IP response over the circular ground magnetics feature. A large area of anomalous gold and intense alteration and the numerous dikes suggests the Gold Lake prospect may overlie a larger potentially mineralized intrusive hosted system at depth.
During 2008, four drill holes were completed totaling 3,227.5 feet and cut thick intervals of moderately to strongly altered and weakly gold mineralized sediments and intrusives. All the holes bottomed in hornfels indicating proximity to a larger intrusive body at depth which is still untested by drilling. Geologic mapping and soil and rock sampling were completed along favorable trends. Detailed sampling and structural analysis indicates the main mineralized zone, exposed on steep nearly inaccessible cliffs, was not completely tested by the 2008 drilling, in part due to difficulties in establishing a stable drill platform on the steep slopes. Detailed continuous rock chip sampling across the mineralized zone exposed on the cliffs outlined a zone approximately 30 meters true thickness averaging 1 part per million (0.029 ounces per ton)
The Golden Alder Target consists of a linear fault zone exposed along the bottom and valley walls of a small drainage over a strike length of approximately 600 meters. Soils collected over covered areas on the valley walls and adjacent uplands suggests the zone may be as wide as 200 meters. A pronounced circular airborne geophysical anomaly underlies a portion of the fault system and its projection into an alluvium covered area and may represent a leakage halo emanating from a potentially mineralized intrusion at depth over 1.5 parts per million (0.044 ounces per ton) gold. During 2008, additional soil and rock sampling surveys were completed with encouraging results. All work performed in 2012 related to compiling data for a National Instrument 43-101.
BUCKSTOCK PROJECT
All the claims held under the Buckstock Project area are currently part of a Master Earn-in Agreement with North Fork. The agreement was finalized and executed on March 28, 2011.
Summary
In southwest Alaska, the Company’s wholly owned subsidiary Kisa controls another claim block known as the Company’s Buckstock Project. The claims are called the Chilly group and consist of 44 State of Alaska mining claims covering approximately 7,040 acres. The claims are situated approximately 50 miles southwest of Donlin Creek and 45 miles northeast of Kisa’s Southwest Kuskokwim Project area. Kisa initiated an active and aggressive exploration program in the region as part of a regional program approach expanding on the Company’s results in the Project area. These prospects have been identified through multiple sources including a review and compilation of data from published federal, state and academic manuscripts, published and unpublished geochemical data and corporate proprietary data sets.
Over 1,600 stream sediment, heavy mineral concentrate and rock samples cover the area and the claim groups are staked in areas determined to be prospective as potential source areas for the placer occurrences identified from the company’s proprietary geochemical database. Each of these prospects falls within much larger, poorly defined regional-scale geochemical anomalies that represent district-scale exploration plays.
The project area is underlain by sedimentary and volcanic rocks of the Triassic and Cretaceous Gemuk Group; sedimentary rocks of the Cretaceous Kuskokwim Group; and Late Cretaceous and early Tertiary mafic to felsic volcanic rocks, small granitic intrusions, and granite porphyry dikes and sills. Locally there are small accumulations of Quaternary age olivine basalt. The project area lies within a structurally complex flexure zone within a series of crustal-scale wrench faults.
Deformation associated with these faults and splays appears to be at least locally important in the location of both igneous rocks and mineralized showings. Both high level epithermal and deeper-level shallow intrusive and subvolcanic alteration and mineralization systems are present in the project. Initial field follow-up in late 2007 was encouraging with gold showings identified in bedrock on several claim groups.
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Chilly Prospect
This prospect consists of a semicircular, 25-square mile multi-element stream geochemical anomaly draining a large Late Cretaceous to Early Tertiary, zoned, quartz monzonitic intrusive complex. Highly anomalous arsenic in stream silts outlines this intrusive complex at the regional scale. Placer gold has been found around the flanks of the complex coincident with highly anomalous stream silts containing pathfinder elements. Seven rock chip samples collected from outcrops in the headwaters of the anomalous streams contain anomalous gold.
On May 8, 2008, the Company signed three separate joint venture agreements with Newmont North America Exploration Limited, a subsidiary of Newmont Mining Corporation (”Newmont”). During the joint venture Newmont completed a systematic rock and soil sampling program on the claims in the summer of 2008 and delineated a large gold in soils anomaly on the claim group. However on December 12, 2008, the Company received from Newmont a letter that notified of its intent to terminate the three venture agreements effective immediately.
In 2010, work performed by our current joint venture partner, North Fork consisted of re-sampling of the main soil anomaly and also completed stream sediment sampling surrounding the claim block. During 2011, North Fork planned to complete a detailed helimag survey over the claim block, but this was postponed after several attempts to complete the survey were curtailed by bad weather. Work performed in 2012 was focused mainly on compiling data for a National Instrument 43-101 and preliminary data processing of control tie-lines for the helimag survey.
ITEM 3.
LEGAL PROCEEDINGS
We are not a party to any legal proceedings and are not aware of any such proceedings known to be contemplated.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5.
MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
In October 2007, our common stock began quotation on the OTC Electronic Bulletin Board (OTCBB) under the symbol “GCMN”. Prior to October 2007 our common stock was quoted on the over the counter market in the Pink Sheets.
The following table sets forth for our common stock, the high and low closing bid quotations per share, taken from the internet, for our common stock for each quarter for the periods indicated. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
|
Year |
Quarter |
High Closing |
Low Closing |
|
2011 |
First Quarter |
$0.03 |
$0.01 |
|
|
Second Quarter |
$0.02 |
$0.01 |
|
|
Third Quarter |
$0.02 |
$0.01 |
|
|
Fourth Quarter |
$0.03 |
$0.01 |
|
2012 |
First Quarter |
$0.04 |
$0.02 |
|
|
Second Quarter |
$0.04 |
$0.02 |
|
|
Third Quarter |
$0.05 |
$0.02 |
|
|
Fourth Quarter |
$0.04 |
$0.01 |
Shareholders
As of February 26, 2013, there were approximately 736 shareholders of record of the Company’s common stock as furnished to the Company by its transfer agent and does not account for shares owned through clearing houses.
Dividend Policy
The Company has never paid any dividends and does not anticipate the payment of dividends in the foreseeable future.
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Transfer Agent
The transfer agent for the Company’s Common Stock is Columbia Stock Transfer Company, 601 E. Seltice Way, Suite 202, Post Falls, Idaho 83854.
Securities Authorized for Issuance under Equity Compensation Plans
In June 2007, the Board of Directors adopted the 2007 Gold Crest Stock Plan (the “Plan”) which was approved by shareholders in December 2007. The purposes of the Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to employees, directors and consultants and to promote the success of the Company’s business.
The maximum number of shares available for issuance pursuant to the Plan adopted by the Company is currently set at 12,000,000 shares of which 4,000,000 may be granted as Incentive Stock Options to employees. As of December 31, 2012, the remaining number of shares available for issuance under the 2007 Stock Plan was 11,450,000.
During the years ended December 31, 2012 and 2011, the Company did not issue any new options under the 2007 Stock Plan. During the year ended December 31, 2012, the Company had 5,280,000 stock options expire with exercise prices ranging from $0.28 to $0.53. These options had been granted between June 19, 2007 and September 12, 2007 to members of the board of directors, employees and to consultants of the Company.
The following table summarizes our equity compensation plan information as of December 31, 2012. Information is included for equity compensation plans not approved by our security holders.
|
|
|
Number of securities
|
|
Weighted average
|
|
Number of securities
|
|
|||||||
|
Equity compensation plans not approved by security holders |
|
|
- |
|
|
|
$ |
- |
|
|
|
n/a |
|
|
|
Equity compensation plans approved by security holders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 Stock Plan |
|
|
- |
|
|
|
$ |
- |
|
|
|
11,450,000 |
(1) |
|
|
Total |
|
|
- |
|
|
|
$ |
- |
|
|
|
11,450,000 |
|
|
(1) The aggregate number of shares of common stock that may be issued pursuant to awards granted under the 2007 Stock Plan will not exceed 12,000,000. Previously there had been 550,000 shares of fully-vested common stock issued under the 2007 stock plan to three directors and one employee leaving 11,450,000 available at December 31, 2012.
Unregistered Sales of Equity Securities
There were no unregistered sales of equity securities for the year ended December 31, 2012.
ITEM 6.
SELECTED FINANCIAL DATA
As a smaller reporting company, we have elected not to provide the disclosure required by this item.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion contains various statements regarding our current strategies, financial position, results of operations, cash flows, operating and financial trends and uncertainties, as well as certain forward-looking statements regarding our future expectations. When used in this discussion, words such as "anticipate," "believe," "estimate," "expect," "could," "may," "will," "should," "plan," "predict," "potential," and similar expressions are intended to identify such forward-looking statements. Our forward- looking statements are based on our current expectations and are subject to numerous risks and uncertainties. As such, our actual future results, performance or achievements may differ materially from the results expressed in, or implied by, our forward-looking statements. Please refer to our "Risk Factors" elsewhere in this Annual Report on Form 10-K for the fiscal year ended December 31, 2012. We assume no future obligation to update our forward-looking statements or to provide periodic updates or guidance.
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Overview and Plan of Operation
As discussed in “Note 3. Going Concern” to our consolidated financial statements, the Company has had no revenues and incurred an accumulated deficit of $9,602,076 through December 31, 2012. Another factor is that the Company has a negative current ratio of 0.02: 1 at December 31, 2012. The current ratio is a measurement of the degree to which current assets cover current liabilities (current assets/ current liabilities). A high ratio indicates a good probability the enterprise can retire current debts. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management intends to seek additional capital from new equity securities offerings and joint venture agreements that will provide funds needed to increase liquidity, fund internal growth and fully implement its business plan.
We are in the business of exploration, development, and if warranted the mining of properties containing valuable mineral deposits. We are traded on the over the counter market in the United States and, as is typical with such companies, losses are incurred in the stages of exploration and development, which typically need to be funded through equity or debt financing.
In southwest Alaska, the Company’s wholly owned subsidiary Kisa controls or has interests in nine claim blocks consisting of 274 State of Alaska mining claims covering 42,280 acres.
On March 28, 2011 the Company, through its wholly owned subsidiary, Kisa, executed a Master Earn-In agreement (“the Agreement”) with North Fork LLC, (“North Fork”) an Alaska limited liability company. This agreement calls for North Fork to explore for gold deposits on Kisa’s claim blocks in the Southwest Kuskokwim Project area and Buckstock Project area (“Projects”). The Projects consist of the Company’s exploration properties mentioned above. See “Note 4. Mineral Properties – North Fork Option Master Earn-in Agreement ” to our consolidated financial statements for further details.
On September 7, 2011, the Company executed a non-binding letter of intent (“LOI”) to enter into a business combination transaction with Gold Crown, Inc (“Gold Crown”). On October 17, 2011, in connection with the proposed business combination, affiliates of Gold Crown made a non-refundable $117,659 advance to the Company. The funds were used to settle outstanding accounts payable, engage professionals to conduct due diligence, and initiate procedures and actions with a view toward entering into a definitive business combination agreement. Since discussions with the principals of Gold Crown have terminated, the $117,659 in advances from Gold Crown under the original LOI have been recognized in the statement of operations and is therefore no longer a liability.
On June 5, 2012, the Company, through its wholly owned subsidiary, Kisa signed a Terms Sheet with Afranex Gold Limited (“Afranex”), a company related to our joint venture partners North Fork, which sets out the terms on which Afranex agrees to acquire 100% of the shares in Kisa. On February 13, 2013 an amendment was signed changing certain terms, most notably, changing the initial acquisition of only 80% of the shares of Kisa with an option to acquire the remaining 20% at any time up to June 30, 2015 for additional consideration. See “Note 4. Mineral Properties – Afranex Term Sheet ” to our consolidated financial statements for further details.
On July 26, 2012, the Company signed a Loan Facility Agreement (“Loan”) with Afranex for $15,000, and amendment on October 26, 2012 for an additional $10,000 all received before December 31, 2012. On February 13, 2013 another amendment was signed increasing the loan amount from $25,000 to $80,000. Per the date of this filing, the Company has received a total of $65,000 leaving another $15,000 still available to withdraw. See “Note 4. Mineral Properties – Afranex Afranex Loan Facility Agreement ” to our consolidated financial statements for further details.
Comparison of the Years Ended December 31, 2012 and December 31, 2011:
Results of Operations
The following tables set forth certain information regarding the components of our Consolidated Statements of Operations for the year ended December 31, 2012 compared with the year ended December 31, 2011. These tables are provided to assist in assessing differences in our overall performance:
15
|
|
|
|
The Year Ended |
|
|
|
|
||
|
|
|
|
December 31, |
|
December 31, |
|
|
|
|
|
|
|
|
2012 |
|
2011 |
|
$ Change |
|
% Change |
|
REVENUES |
$ |
- |
$ |
- |
$ |
- |
|
- |
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
Legal and accounting expenses |
|
35,995 |
|
54,435 |
|
(18,440) |
|
-33.9% |
|
|
Directors' fees |
|
- |
|
2,000 |
|
(2,000) |
|
- |
|
|
General and administrative |
|
60,833 |
|
64,122 |
|
(3,289) |
|
-5.1% |
|
|
TOTAL OPERATING EXPENSES |
|
96,828 |
|
120,557 |
|
(23,729) |
|
-19.7% |
|
LOSS FROM OPERATIONS |
|
(96,828) |
|
(120,557) |
|
23,729 |
|
-19.7% |
|
|
|
Interest income |
|
- |
|
- |
|
- |
|
- |
|
|
Gain realized from advances from Gold |
|
|
|
|
|
|
|
|
|
|
Crown (Note 5) |
|
117,659 |
|
- |
|
117,659 |
|
- |
|
|
Interest expense |
|
- |
|
- |
|
- |
|
- |
|
|
Gain on settlement of accounts payable |
|
- |
|
49,519 |
|
(49,519) |
|
- |
|
|
TOTAL OTHER INCOME (EXPENSE) |
|
117,659 |
|
49,519 |
|
68,140 |
|
137.6% |
|
INCOME (LOSS) BEFORE TAXES |
$ |
20,831 |
$ |
(71,038) |
$ |
91,869 |
|
-129.3% |
|
Overview of Operating Results
Operating Expenses
The decrease of $23,729 in operating expenses during the year ended December 31, 2012 compared to the year ended December 31, 2011 was primarily due to approximately $25,000 in legal expenses for the year ended 2011 versus zero in 2012 and approximately $5,000 less in payroll expenses for the year ended 2012 than in the year ended 2011. These savings were offset slightly due to approximately $7,000 higher audit and accounting fees for the year ended 2012 compared to the year ended 2011 due to the due diligence associated with a possible business combination transaction with Gold Crown, Inc. in early 2012.
Legal and Accounting Expenses
Legal and accounting expenses were $54,435 for the year ended December 31, 2011 versus $35,995 for the year ended December 31, 2012 for a decrease of $18,440. The decrease in 2012 was primarily due to an extra $25,000 paid in 2011 to a legal firm performing due diligence in connection with the proposed business combination with Gold Crown. These savings were offset slightly due to approximately $7,000 higher audit and accounting fees for the year ended 2012 compared to the year ended 2011 on account of due diligence associated with the proposed business combination transaction with Gold Crown. See “Note 5. Advances from Gold Crown” to our consolidated financial statements for further details.
Directors Fees
The decrease of $2,000 in director’s fees during the year ended December 31, 2012 compared to the year ended December 31, 2011 was due to the fact that the Company issued 100,000 shares of common stock to one newly appointed director valued at $2,000 in April of 2011 versus zero in 2012.
General and Administrative
General and Administrative expenses were $64,122 for the year ended December 31, 2011 versus $60,833 for the year ended December 31, 2012 for a decrease of $3,289. The primary reason for the decrease was due to approximately $5,000 more in employee fees for the year ended December 31, 2011 which were a result of increased time involved with the proposed business combination with Gold Crown.
Gain realized from advances from Gold Crown
The increase of $117,659 during the year ended December 31, 2012 compared to the year ended December 31, 2011 is due to the discussions with the principals of Gold Crown terminating, resulting in the $117,659 in advances from Gold Crown under the original LOI (September 7, 2011) being recognized in the statement of operations and therefore no longer a contingent liability. See “Note 5. Advances from Gold Crown” to our consolidated financial statements for further details.
16
Gain on Settlement of Accounts Payable
On September 6, 2011, the Company executed a non-binding letter of intent to enter into a business combination transaction with Gold Crown. On October 17, 2011, in connection with the proposed business combination, affiliates of Gold Crown made a non-refundable $117,659 advance to the Company. A portion of the contributed funds were used to settle outstanding accounts payable for miscellaneous past services that totaled $63,019, including a related party payable for $36,000, for a settlement amount of only $13,500 resulting in a gain on the settlement of accounts payable in the amount of $49,519 in 2011 versus zero in 2012.
Overview of Financial Position
At December 31, 2012, Gold Crest had cash of $1,552 and total current liabilities of $99,292. During the year ended December 31, 2012, the Company signed a Loan and amendments thereto with Afranex and received advances in the amount of approximately $25,000. In 2013 the Company increased the potential advance to $80,000 and as of the date of this filing have received a total of $40,000 in additional funds on top of the $25,000 received in 2012. See “Note 4. Mineral Properties – Afranex Loan Facility Agreement ” to our consolidated financial statements for further details.
See “ Afranex Terms sheet ” above for further details.
The Company received the entire proceeds of the Loans in the third and fourth quarters and recorded the funds as a current liability.
Liquidity and Capital Resources
We have limited capital resources and thus have had to rely upon the sale of equity securities for the cash required for exploration and development purposes, for acquisitions and to fund our administration. Since we do not expect to generate any revenues in the near future, we must continue to rely upon the sale of our equity securities to raise capital. There can be no assurance that financing, whether debt or equity, will always be available to us in the amount required at any particular time or for any period or, if available, that it can be obtained on terms satisfactory to us.
Our cash balance at December 31, 2012 was $1,552 versus $24,167 at December 31, 2011. This decrease is primarily due to the fact that during the year ended December 31, 2012, in connection with the advance from Afranex of $25,000 was less than the amount of money spent on our daily operations.
Future Outlook
Based on the current market environment and our low share price it is not likely we will be able to raise enough money through a private placement of our common stock to fully implement our business plan.
We continue to proceed with our joint venture partner, North Fork, who continues to expend funds under the master earn-in agreement and just completed another season of exploration in the Company’s Southwest Kuskokwim Project area.
We are currently also working towards an agreement with Afranex for them to acquire up to 100% of the shares in Kisa which will bring in capital related to the transaction, of which we are currently receiving advances on. See “Note 4. Mineral Properties – Afranex Term Sheet and Afranex Loan Facility Agreement ” to our consolidated financial statements for further details.
Changes in Accounting Policies
We did not change our accounting policies during fiscal 2012 or 2011.
Off-Balance Sheet Arrangements
During the years ended December 31, 2012 and 2011, the Company did not have any off-balance sheet arrangements.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we have elected not to provide the disclosure required by this item.
17
ITEM 8.
CONSOLIDATED FINANCIAL STATEMENTS
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
Report of Independent Registered Public Accounting Firm |
|
19 |
|
|
Financial Statements: |
|
|
|
|
|
|
|
|
|
Consolidated Balance Sheets as of December 31, 2012 and December 31, 2011 |
|
20 |
|
|
Consolidated Statements of Operations for the years ended December 31, 2012, December 31, 2011 and for the period from inception, January 11, 2005 to December 31, 2012 |
|
21 |
|
|
Consolidated Statement of Stockholders’ Equity (Deficit) for the years ended December 31, 2012, 2011, 2010, 2009, 2008 and 2007, and from inception, January 11, 2005 to December 31, 2012 |
|
22 |
|
|
Consolidated Statements of Cash Flows for the years ended December 31, 2012, December 31, 2011 and for the period from inception January 11, 2005 to December 31, 2012 |
|
23 |
|
|
Notes to the Consolidated Financial Statements |
|
24 |
|
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![[GCMN10K2012APR1613003.JPG]](https://content.edgar-online.com/edgar_conv_img/2013/04/16/0001052918-13-000145_GCMN10K2012APR1613003.JPG)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
Gold Crest Mines, Inc.
We have audited the accompanying consolidated balance sheets of Gold Crest Mines, Inc. (An Exploration Stage Company) (“the Company”) as of December 31, 2012 and 2011, and the related consolidated statements of operations, changes in stockholders’ equity (deficit), and cash flows for the years then ended and for the period from inception (January 11, 2005) to December 31, 2012. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Gold Crest Mines, Inc. as of December 31, 2012 and 2011, and the results of its operations and its cash flows for the years then ended and for the period from inception (January 11, 2005) to December 31, 2012, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has no revenue, an accumulated deficit, and a negative current ratio that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ DeCoria, Maichel & Teague P.S.
DeCoria, Maichel & Teague P.S.
Spokane, Washington
April 08, 2013
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20
21
22
23
24
25
Gold Crest Mines, Inc.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
NOTE 1. Organization and Description of Business
Gold Crest Mines, Inc. and its subsidiaries (“Gold Crest” and “the Company”) is a Nevada corporation originally incorporated on August 20, 1968, as Silver Crest Mines, Inc., an Idaho corporation.
On August 1, 2006, Gold Crest acquired 100% of the issued and outstanding shares of Niagara Mining and Development Co., (“Niagara”), an Idaho corporation formed on January 11, 2005, and its wholly-owned subsidiary, Kisa Gold Mining, Inc. (“Kisa”), an Alaskan corporation formed on July 28, 2006. Gold Crest’s sole asset on the merger date was cash of $7,456, which was accounted for as being acquired by Niagara in exchange for 14,600,100 common shares of Niagara. Niagara’s sole asset on the merger date was cash of $150,000 and its wholly owned subsidiary, Kisa. Neither company had liabilities on the date of the merger. This transaction has been treated as a reverse merger, effectively as if Niagara had issued shares for consideration equal to the net monetary assets of Gold Crest. Under reverse acquisition accounting, the consolidated financial statements of the entity are considered a continuation of the financial statements of Niagara, the accounting acquirer. On June 20, 2008, 100% of the issued and outstanding shares of Kisa were transferred from Niagara to the Company.
The Company is in the business of exploration, development, and if warranted the mining of properties containing valuable mineral deposits. The focus of the Company’s exploration programs is directed at precious metals, primarily gold.
NOTE 2. Summary of Significant Accounting Policies
This summary of significant accounting policies is presented to assist in understanding the financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.
Consolidation of Subsidiaries
The consolidated financial statements include the Company’s accounts and the accounts of wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
Highly liquid short-term investments with a remaining maturity when purchased of three months or less are classified as cash equivalents. The Company deposits its cash and cash equivalents in high quality financial institutions.
Use of Estimates
In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the amounts reported in those statements and accompanying notes. Examples of areas requiring the use of estimates include the recoverability of mineral property and investments accounted for on the cost basis, assumptions used in determining the fair value of stock-based compensation and the expected economic lives and rates for depreciation. Actual results could differ from those estimates.
Exploration Stage Enterprise
The Company's financial statements are prepared pursuant to the accounting principles for development stage enterprises as it devotes substantially all of its efforts to acquiring and exploring mining interests that will eventually provide sufficient net profits to sustain the Company’s existence. Until such interests are engaged in major commercial production, the Company will continue to prepare its financial statements and related disclosures in accordance with entities in the development stage. Mining companies subject to development stage financial statement presentation are required to label their financial statements as an “Exploration Stage Company,” pursuant to guidance provided by SEC Guide 7 for Mining Companies.
26
Gold Crest Mines, Inc.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
Mine Exploration and Development Costs
All exploration costs are expensed as incurred. Mine development costs are capitalized after proven and probable reserves have been identified. Amortization is calculated using the units-of-production method over the expected life of the operation based on the estimated recoverable mineral ounces.
Mineral Properties
Significant payments related to the acquisition of mineral properties, mineral rights, and mineral leases are capitalized. If a commercially mineable ore body is discovered, such costs are amortized when production begins using the units-of-production method based on proven and probable reserves. If no commercially mineable ore body is discovered, or such rights are otherwise determined to have no value, such costs are expensed in the period in which it is determined the property has no future economic value.
Property Evaluations
Management of the Company periodically reviews the net carrying value of its properties on a property-by-property basis. These reviews consider the net realizable value of each property to determine whether a permanent impairment in value has occurred and the need for any asset write-down. An impairment loss will be recognized when the estimated future cash flows (undiscounted and without interest) expected to result from the use of an asset are less than the carrying amount of the asset. Measurement of an impairment loss will be based on the estimated fair value of the asset if the asset is expected to be held and used.
Although management will make its best estimate of the factors that affect net realizable value based on current conditions, it is reasonably possible that changes could occur in the near term which could adversely affect management's estimate of net cash flows expected to be generated from its assets, and necessitate asset impairment write-downs.
Fair Values of Financial Instruments
The carrying amounts of financial instruments including cash and cash equivalents approximated their fair values as of December 31, 2012 and 2011.
Fair Value Accounting
Accounting guidance has established a hierarchy of assets that are measured at fair value on a recurring basis. The three levels included in the hierarchy are:
·
Level 1: quoted prices in active markets for identical assets or liabilities
·
Level 2: significant other observable inputs
·
Level 3: significant unobservable inputs
At December 31, 2012 and 2011, the Company has no assets or liabilities that are recorded at fair value on a recurring basis.
Share-Based Compensation
The Company accounts for share-based compensation by measuring the cost of services received in exchange for an award of an equity instrument based on the grant-date fair value of the award. Compensation cost is recognized when the event occurs. The Black-Scholes option-pricing model is used to estimate the fair value of options granted. For stock awards that do not vest immediately, the Company recognizes the compensation expense ratably over the requisite service period of the individual grants, which generally equals the vesting period.
27
Gold Crest Mines, Inc.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
Basic and Diluted Net Loss Per Share
Net income (loss) per share was computed by dividing the net loss by the weighted average number of common shares outstanding during the period. The weighted average number of shares was calculated by taking the number of shares outstanding and weighting them by the amount of time that they were outstanding. Diluted net income (loss) per share for the Company is the same as basic net income (loss) per share, as the inclusion of common stock equivalents would be anti-dilutive. At December 31, 2012 the Company had no remaining common stock equivalents. At December 31, 2011, the common stock equivalents consisted of 5,280,000 options exercisable at prices ranging from $0.28 to $0.53 per share.
Income Taxes
The Company accounts for income taxes using the liability method. Under this method, deferred income tax liabilities or assets at the end of each period are determined using the tax rate expected to be in effect when the taxes will be actually paid or recovered. A valuation allowance is recorded to reduce the deferred tax assets, if there is uncertainty regarding their realization.
Property, Plant and Equipment
Property, plant and equipment are carried at cost and depreciated using the straight line method over five to seven years. Maintenance and repairs are charged to operations as incurred. Betterments of a major nature are capitalized. When assets are retired or sold, the costs and related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is reflected in operations.
Reclamation and Remediation Costs (Asset Retirement Obligations)
The Company had no operating properties at December 31, 2012 and 2011, but the Company’s mineral properties will be subject to standards for mine reclamation that have been established by various governmental agencies. For these non-operating properties, the Company accrues costs associated with environmental remediation obligations when it is probable that such costs will be incurred and they are reasonably estimable. Costs of future expenditures for environmental remediation are not discounted to their present value. Such costs are based on management's current estimate of amounts that are expected to be incurred when the remediation work is performed within current laws and regulations.
It is reasonably possible that due to uncertainties associated with defining the nature and extent of environmental contamination, application of laws and regulations by regulatory authorities, and changes in remediation technology, the ultimate cost of remediation and reclamation could change in the future. The Company continually reviews its accrued liabilities for such remediation and reclamation costs as evidence becomes available indicating that its remediation and reclamation liability has changed.
For operating properties the Company will recognize the fair value of a liability for an asset retirement obligation in the period in which it is incurred, if a reasonable estimate of fair value can be made. The associated asset retirement costs will be capitalized as part of the carrying amount of the associated long-lived assets and depreciated over the lives of the assets on a units-of-production basis. Reclamation costs will be accreted over the life of the related assets and are adjusted for changes resulting from the passage of time and changes to either the timing or amount of the original present value estimate on the underlying obligation.
NOTE 3. Going Concern
As shown in the accompanying financial statements, the Company has had no revenues and incurred an accumulated deficit of $9,602,076 through December 31, 2012. Another factor is that the Company has a negative current ratio of 0.02: 1 at December 31, 2012. The current ratio is a measurement of the degree to which current assets cover current liabilities (current assets/ current liabilities). A high ratio indicates a good probability the enterprise can retire current debts. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management intends to seek additional capital from new equity securities offerings and joint venture agreements that will provide funds needed to increase liquidity, fund internal growth and fully implement its business plan.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
28
Gold Crest Mines, Inc.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
Should the Company be unable to raise capital through future private placements, its business, and, as a result, its financial position, results of operations and cash flow will likely be materially adversely impacted. As such, substantial doubt as to the Company’s ability to continue as a going concern remains as of the date of these financial statements.
The Company believes it will only need an estimated $150,000 to $200,000 to continue operations through the next twelve months. The timing and amount of capital requirements will depend on a number of factors, including the Company’s ability to successfully maintain a joint venture on our Alaska properties and the Company’s future personnel requirements.
NOTE 4. Mineral Properties
In Alaska, the Company’s wholly owned subsidiary Kisa controls or has interests in five claim blocks consisting of 274 State of Alaska mining claims covering 42,280 acres. Four of the claim blocks making up 35,240 acres comprise the Company’s Southwest Kuskokwim Project and the remaining claim group consisting of 7,040 acres is the Company’s Buckstock Project. The Southwest Kuskokwim claim blocks are located in southwest Alaska approximately 90 miles east of the village of Bethel on State of Alaska-owned lands. The Buckstock claim group is located approximately 30-80 miles south of the Donlin Creek deposit and north of the Company’s Southwest Kuskokwim claim groups.
The following is a summary of the Company’s mineral properties in Alaska:
|
Alaska Mineral Properties |
|
Number of Claims |
|
Acres |
|
Carrying Value at December 31, 2012 |
|
Carrying Value at December 31, 2011 |
|
Southwest Kuskokwim Project |
|
|
|
|
|
|
|
|
|
AKO |
|
73 |
|
11,680 |
|
$ 2,543 |
|
$ 2,543 |
|
Luna |
|
50 |
|
8,000 |
|
- |
|
- |
|
Kisa |
|
38 |
|
5,840 |
|
3,314 |
|
3,314 |
|
Gold Lake |
|
69 |
|
9,720 |
|
5,516 |
|
5,516 |
|
TOTAL Southwest Kuskokwim Project |
|
230 |
|
35,240 |
|
$ 11,373 |
|
$ 11,373 |
|
|
|
|
|
|
|
|
|
|
|
Buckstock Project |
|
|
|
|
|
|
|
|
|
Chilly |
|
44 |
|
7,040 |
|
- |
|
- |
|
TOTAL Buckstock Project |
|
44 |
|
7,040 |
|
$ - |
|
$ - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OVERALL TOTAL |
|
274 |
|
42,280 |
|
$ 11,373 |
|
$ 11,373 |
In Alaska, the lands are held under and are subject to the State’s mining laws and regulations. The Company is required to perform certain work commitments and pay annual assessments to the State of Alaska to hold these claims in good standing. The annual work commitment and annual fees were fulfilled and all necessary fees and filings have been made for the season ending September 30, 2012. The commitments and annual assessments for 2013 will be due no later than November 30, 2012. See “Note 11. Commitments and Contingencies”.
North Fork Option Master Earn-in Agreement
On January 27, 2010, the Company, through its wholly owned subsidiary, Kisa signed an option agreement with North Fork Resources Pty Ltd (“North Fork”) which grants North Fork an exclusive option to purchase and/or earn an interest in the Company’s Southwest Kuskokwim Project area (“The Projects”).
Under the terms of the option, North Fork made a payment to the Company in the amount of $20,000 which was received on February 16, 2010 which was recorded as a deposit on option agreement, for the exclusive right to explore the claims up until October 31, 2010. On August 18, 2010, the Company amended the option agreement to include an additional claim group known as our Chilly claims, which became part of The Projects. As consideration for this new claim group, North Fork made an additional payment to the Company of $10,000 on August 24, 2010 which was also recorded as a deposit on option agreement. On October 18, 2010 North Fork formally notified the Company of their intent to exercise the option over the Alaska properties.
29
Gold Crest Mines, Inc.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
The total of the two payments of $30,000 received from North Fork was recognized as income during the year ended December 31, 2010.
On March 28, 2011 the Master Earn-In agreement (“the Agreement”) with North Fork was executed which maintained the same terms as the originals terms.
The following is a breakdown of the proposed earn-in terms, as amended:
1.
The initial interest at the time North Fork exercises its option to earn into The Projects will be as follows:
a.
Gold Crest Mines, Inc. – 100%
b.
North Fork – 0%
2.
North Fork can earn a 51% interest in The Projects by the expenditure of $3,000,000 on The Projects by October 31, 2013.
3.
If North Fork withdraws from the Joint Venture prior to earning a 51% interest in The Projects, it will have no further interest in The Projects.
4.
North Fork can earn an additional 24% interest in The Projects, taking its total interest to 75% by the expenditure of an additional $3,000,000 by October 31, 2016.
5.
North Fork can earn a total interest of 90% in any of The Projects claim blocks by the completion of a Bankable Feasibility Study.
6.
Gold Crest Mines, Inc. will retain a free carried 10% interest in The Projects up to a Decision to Mine at which point it can elect to contribute at 10% or dilute to a 2% Net Smelter Royalty.
7.
North Fork is obliged to keep The Projects in good standing.
8.
North Fork is the sole manager of The Projects and will make all decisions in regards to the exploration programs.
Afranex Terms Sheet
On June 5, 2012, and later amended on August 28, 2012 and again on February 13, 2013, the Company signed a Terms Sheet with Afranex Gold Limited (“Afranex”), a company related to the Company’s joint venture partner North Fork Resources Pty Ltd. On February 26, 2013 the Company signed a new version of the Terms Sheet that fully replaced the previous versions and which sets out the terms on which Afranex agrees to acquire 80% of the shares in Kisa. Kisa’s only assets include the Company’s Southwest Kuskokwim Project and the Buckstock Project areas which consist of exploration properties in southwest Alaska comprised of 42,280 acres of State of Alaska-owned lands.
The following is a breakdown of the main details of the Terms Sheet, which incorporates the final amendments to the terms sheet:
1.
Consideration:
a.
Afranex agrees to pay Gold Crest the sum of $100,000 (of which $25,000 was advanced to Gold Crest from Afranex as of December 31, 2012 and a total of $50,000 as of the date of this filing), and
b.
10,000,000 fully paid ordinary shares in the capital of Afranex at an issue price of $0.20 per share, or that number of shares depending on the way Afanex decides to become an ASX-listed company. (Consideration Shares).
c.
2,500,000 unlisted options to be issued fully paid, ordinary shares in Afanex, exercisable at $0.25 per option and expiring four years from the date of grant.
2.
Completion of the Acquisition is conditional on the satisfaction (or waiver by the parties) of the certain conditions precedent such as due diligence by Afranex on Kisa, the approval of the board of Afranex as well as the approval of the shareholders of Gold Crest among other conditions. If these conditions are not satisfied or waived by June 30, 2013, this term sheet agreement will expire.
3.
Settlement of the Acquisition will occur on that date which is five business days of satisfaction (or waiver) of the conditions precedent. At settlement Afranex will settle the consideration discussed above and Gold Crest will deliver the share certificates in respect of the Kisa Shares. An agreement that an incorporated joint venture is created between Afranex or Parent and Kisa on the terms and conditions of the joint venture.
4.
Afranex may, by written notice to Gold Crest at any time up to June 30, 2015, elect to acquire all (and not part) of Gold Crest’s remaining fully paid, ordinary Kisa shares in return for the issue of $500,000 worth of Afranex fully paid, ordinary shares if by IPO, or parent shares if Backdoor Listing (Option Shares).
30
Gold Crest Mines, Inc.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
5.
Notwithstanding the fact that this Terms Sheet is legally binding on the Parties, Afranex and Gold Crest agree to enter into a formal share sale and purchase agreement to more fully document the terms of the Acquisition (to be prepared by Afranex’s solicitors) which shall be on terms acceptable to Kisa and Afranex (acting reasonably) and which shall be consistent with the terms set out in this Terms Sheet.
On March 26, the Company signed a letter of variation to the February 26, 2013 terms sheet, which agreed that if Afanex gives written notice before settlement that it wishes to acquire 100% of the issued shares of Kisa at settlement, that the Consideration Shares will be increased to 12,500,000 and the Consideration Options will be increased to 3,125,000. If this were to happen, there would be no incorporated joint venture established.
Afranex Loan Facility Agreement
On July 26, 2012, the Company signed a Loan Facility Agreement (“Loan”) in the amount of $15,000 with Afranex which entitled the Company to make individual draw downs in $5,000 increments of the Loan until the Loan has been exhausted to provide the Company with immediate working capital requirements. On October 26, 2012, the Company signed a first deed of variation to the Loan which increased the Loan amount from $15,000 to $25,000.
Per the terms of the original Loan, the Company agrees to repay the loan in full within six (6) months, extended to January 31, 2013 per the first variation to the Loan, or agrees that the funds will be deducted from the $100,000 cash payment that forms part of the agreed consideration to purchase the Company’s wholly owned subsidiary, Kisa Gold Mining, Inc. See “ Afranex Terms sheet ” above for further details.
The Company received the entire proceeds of the Loans in the third and fourth quarters and recorded the funds as a current liability.
On February 13, 2013, the Company signed a second deed of variation to the Loan which increased the Loan amount from $25,000 to $80,000. The due date was also extended out to June 30, 2013. As of the date of this filing, the Company has now received a total of $65,000 of the available $80,000 and has recorded the funds as a current liability.
NOTE 5. Advances from Gold Crown
On September 7, 2011, the Company executed a non-binding letter of intent (“LOI”) to enter into a business combination transaction with Gold Crown, Inc (“Gold Crown”). On October 17, 2011, in connection with the proposed business combination, affiliates of Gold Crown made a non-refundable $117,659 advance to the Company. The funds were used for the following:
·
to settle outstanding accounts payable for past services that totaled $63,019 for a settlement amount of only $13,500 resulting in a gain on the settlement of accounts payable in the amount of $49,519
·
engage professionals to conduct due diligence, and
·
initiate procedures and actions with a view toward entering into a definitive business combination agreement.
The Company recorded the advances as a current liability in 2011 as management believed that while no explicit agreement existed requiring the Company to return the advances if a business combination did not take place, there may be an implied obligation for the Company to perform certain actions and activities in connection with the ultimate determination of whether or not a business combination will take place.
The LOI had a sixty (60) day no shop clause from the date of the LOI. The LOI also indicated that within sixty (60) days of the signing of the LOI, the Company and Gold Crown would negotiate and execute a definitive Exchange agreement and related documents and certificates which would have incorporated in more complete detail, the terms from the original LOI. Subsequently, the sixty (60) days passed without entering into a more definitive Exchange agreement. The Company is no longer obligated to the LOI and is free to pursue other options that would benefit the Company.
At this time, the Company has terminated any further discussions with the principals of Gold Crown, but has left open the very remote possibility that Gold Crown would present the following items for renewed discussions:
·
audited financial statements by a PCAOB qualified audit firm
·
complete updated mine engineering and geological reports on Gold Crown’s properties
31
Gold Crest Mines, Inc.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
·
verify that adequate financing is in place
·
verify that a qualified slate of officers and directors have been retained
·
prepare a professional five year projection with verifiable numbers in regard to future production amounts, revenue costs, expenses, annual tonnage of ore to be mined and milled, etc.
If the Gold Crown personnel supplied the aforementioned documents, the board of directors of Gold Crest may then review and evaluate such a proposal. However, Gold Crest is actively pursuing other potential merger candidates. Since discussions with the principals of Gold Crown have terminated, the $117,659 in advances from Gold Crown under the original LOI have been recognized in the statement of operations in 2012 and is therefore no longer a liability.
NOTE 6. Common Stock and Common Stock Warrants
Common Stock
The Company is authorized to issue 500,000,000 shares of its common stock. All shares of common stock are equal to each other with respect to voting, liquidation, dividend, and other rights. Owners of shares are entitled to one vote for each share owned at any Shareholders’ meeting. The common stock of the Company does not have cumulative voting rights, which means that the holders of more than fifty percent (50%) of the shares voting in an election of directors may elect all of the directors if they choose to do so.
There were no issuances of common stock during the year ended December 31, 2012.
During the year ended December 31, 2011, the Company had the following issuances of common stock:
On February 22, 2011 the Company began a private placement offering up to a maximum of 2,500,000 shares at $0.01 per share for a maximum of $25,000 in proceeds. The private placement closed on June 30, 2011 and at such time the Company issued 900,000 shares raising a total of $9,000. The shares were being offered and sold by officers and directors of the Company who received no remuneration for the sale of the shares.
On April 22, 2011 the Company issued 100,000 shares of common stock to a newly appointed director valued at $2,000.
Common Stock Warrants
There was no warrant activity during 2012 and no warrants were outstanding at December 31, 2012 or 2011.
NOTE 7. Preferred Stock
The Company is authorized to issue 10,000,000 shares of Preferred Stock. The Preferred Stock is entitled to preference over the common stock with respect to the distribution of assets of the Company in the event of liquidation, dissolution, or winding-up of the Company, whether voluntarily or involuntarily, or in the event of any other distribution of assets of the Company among its shareholders for the purpose of winding-up its affairs. The authorized but un-issued shares of Preferred Stock may be divided into and issued in designated series from time to time by one or more resolutions adopted by the Board of Directors. The Directors in their sole discretion have the power to determine the preferences, limitations, and relative rights of each series of Preferred Stock within the limits set forth in the Nevada Business Corporation Act. At December 31, 2012, no preferred stock has been issued.
NOTE 8. Stock Based Compensation
Stock Based Compensation Plans
In June 2007, the Board of Directors adopted the 2007 Gold Crest Stock Plan (the “Plan”) which was approved by shareholders in December 2007. The purposes of the Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to employees, directors and consultants and to promote the success of the Company’s business.
The maximum number of shares available for issuance pursuant to the Plan adopted by the Company is currently set at 12,000,000 shares of which 4,000,000 may be granted as Incentive Stock Options to employees. As of December 31, 2012, the remaining number of shares available for issuance under the 2007 Stock Plan was 11,450,000.
32
Gold Crest Mines, Inc.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
Stock Options
During the years ended December 31, 2012 and 2011, the Company did not issue any new options under the 2007 Stock Plan. During the year ended December 31, 2012, the Company had 5,280,000 stock options expire with exercise prices ranging from $0.28 to $0.53. These options had been granted between June 19, 2007 and September 12, 2007 to members of the board of directors, employees and to consultants of the Company.
The following is a summary of stock option activity from January 1, 2011 to December 31, 2012:
|
|
|
Number of Shares Under Options |
|
Weighted Average Exercise Price |
|
Outstanding January 1, 2011 |
|
5,280,000 |
|
$ 0.52 |
|
Granted |
|
— |
|
— |
|
Exercised |
|
— |
|
— |
|
Outstanding and exercisable at December 31, 2011 |
|
5,280,000 |
|
$ 0.52 |
|
Outstanding January 1, 2012 |
|
5,280,000 |
|
$ 0.52 |
|
Granted |
|
— |
|
— |
|
Exercised |
|
— |
|
— |
|
Forfeited |
|
— |
|
— |
|
Expired |
|
(5,280,000) |
|
0.52 |
|
Options outstanding and exercisable at December 31, 2012 |
|
0 |
|
$ — |
NOTE 9. Income Taxes
The Company did not recognize a provision (benefit) for income taxes for the years ended December 31, 2012 and 2011.
At December 31, 2012 and 2011, the Company had deferred tax assets principally arising from the net operating loss carry forwards for income tax purposes multiplied by an expected rate of 34%. As management of the Company cannot determine that it is more likely than not that the Company will realize the benefit of the deferred tax assets, a valuation allowance equal to the deferred tax asset has be established at December 31, 2012 and December 31, 2011. The significant components of the deferred tax asset at December 31, 2012 and 2011 were as follows:
|
|
|
December 31,
|
|
December 31,
|
|
|
||
|
Deferred tax asset |
|
|
|
|
|
|
|
|
|
Net operating loss carry forward |
|
$ |
1,942,000 |
|
$ |
1,843,000 |
|
|
|
Exploration costs and other |
|
|
726,000 |
|
|
832,000 |
|
|
|
Stock based compensation |
|
|
397,000 |
|
|
397,000 |
|
|
|
|
|
|
3,065,000 |
|
|
3,072,000 |
|
|
|
Deferred tax asset valuation allowance |
|
|
(3,065,000 |
) |
|
(3,072,000 |
) |
|
|
Net deferred tax asset |
|
$ |
— |
|
$ |
— |
|
|
At December 31, 2012 and 2011 the Company had net operating loss carry forwards of approximately $5,712,000 and $5,421,000 respectively, which expire in the years 2023 through 2032.
The income tax benefit shown in the consolidated financial statements for the years ended December 31, 2012 and 2011 differs from the federal statutory rate as follows:
|
|
|
December 31,
|
|
December 31,
|
|
||
|
(Provisions) Benefit at federal statutory rate |
|
$ |
(7,000 |
) |
$ |
24,000 |
|
|
Change in valuation allowance |
|
|
7,000 |
|
|
(24,000 |
) |
|
Total provision |
|
$ |
0 |
|
$ |
0 |
|
The Company has analyzed its filing positions in all jurisdictions where it is required to file income tax returns and found no positions that would require a liability for unrecognized income tax benefits to be recognized.
33
Gold Crest Mines, Inc.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
We have determined that we are subject to examination of our income tax filings in the United States and state jurisdictions for the 2010 through 2012 tax years. In the event that the Company is assessed penalties and or interest, penalties will be charged to other operating expense and interest will be charged to interest expense.
NOTE 10. Related Party Transactions
There were no related party transactions during the year ended December 31, 2012.
During the year ended December 31, 2011, the following related party transaction occurred:
On June 1, 2007, the Company entered into a twenty-one month consulting agreement with Janice Duval, the wife of Frank Duval, who, up until November 3, 2009, was a greater than 5% shareholder, for professional services to be rendered to the Company. The agreement was for $3,000 per month for twenty-one months ending February 2009. At December 31, 2010 the total outstanding payable due Mrs. Duval was $36,000. In connection with the advance from Gold Crown Inc. (See note 6) an agreement was reached with Mrs. Duval to settle the $36,000 outstanding balance due her for $10,000.
NOTE 11. Commitments and Contingencies
Alaska Mineral Property Rent and Assessment Work Commitments
In Alaska, land holdings consist of state mining claims and prospecting sites totaling 42,280 acres of land. Annual rental payments in the amount of $65,835 for these claims are due by November 30, 2013. If these rental payments are not paid by the due date, the claims will be considered abandoned. The annual rental payments that were due on November 30, 2012 were paid in full by the Company’s joint venture partner.
The Alaska Department of Natural Resources, Division of Mining, Land & Water requires that upon the prospecting, and the discovery of a locatable mineral and the staking of mineral location, annual labor must be performed on the location each labor year in further development of the locatable mineral so that it can be mined. The labor year for the claims begins on September 1 and ends the following September 1. The Company or its joint venture partner, if applicable, will be required to perform qualified labor in the amount of $1,057,500 by September 1, 2013 with the possibility, depending on any qualified carry-over amounts that can be applied to the labor year ending September 1, 2013 on certain claim groups, will need to be performed by the September 1, 2013 deadline. If these labor requirements are not met by the due date, the claims will be considered abandoned. The annual work commitments and annual fees were fulfilled and all necessary fees and filings were made by the Company’s joint venture partner for the season ending September 30, 2012. The commitments and annual assessments for 2013 will be due no later than November 30, 2013.
NOTE 12. Subsequent Events
Issuance of Common Shares
On March 4, 2013 the Company issued 100,000 shares of common stock to a director valued at $1,800.
34
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
An evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures as required by Exchange Act Rules 13a-15(e) and 15d-15(e) as of the end of the period covered by this report. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures, including controls and procedures designed to ensure that information required to be disclosed by us is accumulated and communicated to our management (including our CEO and CFO), were effective as of December 31, 2012, in ensuring them in a timely manner that material information required to be disclosed in this report has been properly recorded, processed, summarized and reported.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of our company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.
The Company’s management, including the Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud that could occur. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
Management assessed our internal control over financial reporting as of December 31, 2012, the end of our fiscal year. Management based its assessment on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on our assessment, management has concluded that our internal control over financial reporting was effective, as of the end of the fiscal year, for a company of our size, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
35
Changes in internal controls over financial reporting
There have been no changes in the Company’s internal control over financial reporting during the quarter ended December 31, 2012 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9B.
OTHER INFORMATION
None
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table provides the names, positions and ages of our directors and officers:
Name
Age
Position
Terrence J. Dunne (1)
64
Chief Executive Officer, President and Director
Robert O’Brien (1)
78
Director
Daniel R. McKinney Sr.
63
Director
Gordon F. Lee
62
Director
Matthew J. Colbert
44
Chief Financial Officer, Secretary/Treasurer and Director
_____________________
(1)
Member of the Audit Committee
We have no knowledge of any arrangements, including any pledge by any person of our securities, the operation of which may at a subsequent date result in a change in our control. We are not, to the best of our knowledge, directly or indirectly owned or controlled by another corporation or foreign government.
Terrence J. Dunne. Mr. Dunne was appointed as President of the Company on December 16, 2009. More recently, Mr. Dunne was appointed as Chief Executive Officer of the Company. Mr. Dunne has served as a director of the Company since 2006 and up until December 16, 2009 he had also served as the Company’s Secretary/Treasurer. For more than the past ten years Mr. Dunne has operated Terrence J. Dunne & Associates, a sole proprietorship which provides bookkeeping, income tax return preparation and business consulting services for small businesses. Mr. Dunne is a business consultant, primarily focused on business acquisitions and corporate reorganizations. Mr. Dunne received a degree in Business Administration from Gonzaga University in 1970. He received his Masters Degree in Business Administration in 1975 from Gonzaga University. In addition, he received a Masters Degree in Taxation from Gonzaga University in 1984. Mr. Dunne is a former adjunct professor in the School of Business Administration of Gonzaga University, teaching courses in corporate mergers, acquisitions and reorganizations. Mr. Dunne currently serves as a director of Cardinal Energy Group which trades on the OTCBB. Mr. Dunne also serves as a director of a privately held company called Blue Arch Resources. Mr. Dunne is the principal financial officer and a director of Spectrum DNA, Inc., a “shell” company that trades on the OTC “Pink Sheets”.
Robert O’Brien. Mr. O’Brien has served as a director of the Company since 2004. Mr. O’Brien has over 45 years experience with private and publicly held companies. He has served as an Owner, CEO, Officer, Director, and Accredited Investor in various categories including: Direct Management, Public and Investor Relations, Corporate Relations and Reverse Mergers and Acquisitions. Since July 1996, Mr. O'Brien has owned and operated Spokane Quotation Bureau, LLC, a company that tracks and publishes stock quotations for selected over-the-counter stock trades. Mr. O’Brien graduated from Gonzaga University with a BA degree in Economics.
Daniel R. McKinney, Sr. Mr. McKinney joined Gold Crest Mines, Inc. as a Director in April of 2008. Mr. McKinney has been a real estate broker for approximately 30 years. He is a principal and developer of commercial and residential real estate projects in Washington, Idaho and Arizona. Since 1989 he has owned and operated a disability management consulting firm and has worked as a senior consultant specializing in negotiated settlements and forensic testimony on disability related court cases. He received a Bachelor of Arts degree in Psychology from Eastern Washington University in 1973 and a Master of Education Degree from Whitworth University in 1977. Mr. McKinney is a past director and officer of Silver Crest Resources, Inc. and a past director and officer of Hanover Gold/Rock Energy Resources.
36
Gordon F. Lee. Mr. Lee has over 35 years of experience in various management capacities for public companies, which includes merger and acquisition consulting and capital raises. He has special expertise with public companies in the natural resource industries, with most recent experience in various coal mining projects in Montana, Wyoming, Utah, and Alabama.
Matthew J. Colbert. Mr. Colbert has served as the Chief Financial Officer of the Company since December 2007. Mr. Colbert was appointed as Secretary/Treasurer of the Company on December 16, 2009 and on April 22, 2011 he was appointed as a director of the Company. Mr. Colbert has over fourteen years of experience in public and corporate accounting. He has a Bachelor of Science degree in Accounting from the University of Idaho and is licensed as a Certified Public Accountant in the State of Washington. Before being appointed CFO, Mr. Colbert had been the Controller of the Company since August 2007. Mr. Colbert currently serves as the CFO of Josephine Mining Corp., a TSX.V listed mining company. Mr. Colbert also served as Chief Financial Officer and President of Lifestream Technologies, Inc., a publicly traded company. Mr. Colbert also served on Lifestream’s Board of Directors. Earlier in his career, Mr. Colbert served as a Business Assurance Associate in the audit department of PricewaterhouseCoopers, LLP, an international accounting and consulting firm.
Audit Committee
As of December 31, 2012 Terrence Dunne and Robert O’Brien now comprise the Company’s Audit Committee. The Audit Committee approves the selection of the Company’s independent certified public accountants to audit the annual financial statements and review the quarterly financial statements, discusses with the auditors and approves in advance the scope of the audit and reviews, reviews management’s administration of the system of internal controls, and reviews the Company’s procedures relating to business ethics. The Board of Directors has determined that Terrence Dunne meets the SEC definition of an “audit committee financial expert”.
Nominating and Corporate Governance Committee
The entire board of directors comprise the Company’s Nominating and Corporate Governance Committee. Mr. McKinney and Mr. O’Brien are independent members of that Committee. The Corporate Governance and Nominating Committee is responsible for developing the Company’s approach to corporate governance issues and compliance with governance rules. The Corporate Governance and Nominating Committee is also mandated to plan for the succession of the Company, including recommending director candidates, review of board procedures, size and organization, and monitoring of senior management with respect to governance issues. The committee is responsible for the development and implementation of corporate communications to ensure the integrity of the Company’s internal control and management information systems. The purview of the Corporate Governance and Nominating Committee also includes the administration of the board’s relationship with the management of the Company, monitoring the quality and effectiveness of the Company’s corporate governance system and ensuring the effectiveness and integrity of the Company’s communication and reporting to shareholders and the public generally.
Compensation Committee
The entire board of directors comprises the Company’s Compensation Committee. Mr. McKinney and Mr. O’Brien are independent members of that Committee. The Compensation Committee is responsible for setting the compensation for the officers and the other agents and employees of the corporation. The Committee may delegate the authority to set the compensation of the officers, agents, and employees to the President. No officer may be prevented from receiving compensation as an officer solely because the officer is also a director of the corporation. The Committee shall fix the amount or salary to be paid to each director for service as a director or for attendance at each meeting of the Board. Salary or payment for service as a director shall not preclude a director from serving the corporation in any other capacity or from receiving compensation for service in that other capacity.
Legal Proceedings
No Director, or person nominated to become a Director or Executive Officer, has been involved in any legal action involving the Company during the past five years.
Family Relationships
There are no family relationships between any director, executive officer, or person nominated or chosen by the Company to become a director or executive officer.
37
Section 16(a) Beneficial Ownership Reporting Compliance
Under section 16(a) of the Securities Exchange Act of 1934, as amended, and regulations thereunder, the Company’s Directors, Executive Officers and beneficial owners of greater than 10% of our equity securities are required to file reports of their own ownership and changes in ownership with the Securities and Exchange Commission.
Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during the fiscal year ended December 31, 2012, all filing requirements applicable to its officers, directors and greater than 10% beneficial owners were complied with, except for two form 4’s that were not filed in a timely manner for the following Officers; Terrance J. Dunne (one filing disclosing one transaction) and Matt Colbert (one filing disclosing one transaction).
We have adopted a Code of Conduct and Ethics for our Directors, Officers and employees. A copy of our Code of Conduct and Ethics can be obtained at no cost, by telephone at (509) 893-0171, by mail at: Gold Crest Mines, Inc., 724 East Metler Lane, Spokane, Washington 99218, attention: Investor Relations. We believe our Code of Conduct and Ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code.
ITEM 11.
Summary Compensation Table
The following table sets forth, for the years ended December 31, 2012 and 2011, compensation paid to our Chief Executive Officer, Chief Financial Officer and President (collectively, the “Named Executive Officers”).
SUMMARY COMPENSATION TABLE
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2012 and 2011
|
Name and Principal Position |
|
Year |
|
Salary ($) |
|
Stock Awards ($) |
|
Option Awards ($) |
|
Total ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Terrence J. Dunne (1) |
|
2012 |
|
$ 24,000 |
|
— |
|
— |
|
$ 24,000 |
|
Chief Executive Officer and President |
|
2011 |
|
$ 28,400 |
|
— |
|
— |
|
$ 28,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Matthew J. Colbert (2) |
|
2012 |
|
$ 24,000 |
|
— |
|
— |
|
$ 24,000 |
|
Chief Financial Officer |
|
2011 |
|
$ 24,000 |
|
$ 2,000 |
|
— |
|
$ 26,000 |
|
|
|
|
|
|
|
|
|
|
|
|
_______
(1)
Mr. Dunne was appointed President on December 16, 2009 and Chief Executive Officer on November 30, 2012.
(2)
Mr. Colbert went from a full-time to a part-time employee beginning on September 16, 2008.
Outstanding Equity Awards at Fiscal Year-End
There were no unexercised options, stock that has not vested or equity incentive plan awards for each of the Named Executive Officers at December 31, 2012, and as such, a table has not been presented.
Employment Agreements
There are no employment agreements that were in effect between us and each of the Named Executive Officers during the last fiscal year.
Director Compensation
There was no director compensation for the year ended December 31, 2012.
38
ITEM 12.
S ECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of February 26, 2013 regarding the ownership of our Common Stock by:
s
each person who is known by us to own more than 5% of our shares of common stock;
s
each of our named executive officers and directors; and
s
all of our executive officers and directors as a group.
The number of shares beneficially owned and the percentage of shares beneficially owned are based on 89,205,828 shares of common stock outstanding as of February 26, 2013.
For the purposes of the information provided below, beneficial ownership is determined in accordance with the rules of the SEC, and for each person includes shares that person has the right to acquire within 60 days following February 26, 2013 subject to options, warrants or similar instruments.
|
Name and Address of Beneficial Owner |
Amount and Nature of Beneficial Owner |
Percent of Class |
|
Robert W. O’Brien 1511 S. Riegel Ct., Spokane, WA 99212 |
3,223,935 |
3.61% |
|
Terrence J. Dunne 1224 W. Riverside Ave., Apt 1006 Spokane, WA 99201 |
7,972,585 |
8.94% |
|
Daniel R. McKinney Sr. 607 S. Government Way, Spokane, WA 99224 |
1,400,000 |
1.57% |
|
Matthew J. Colbert 724 E. Metler Lane, Spokane, WA 99218 |
100,000 |
0.11% |
|
Gordon F. Lee 724 E. Metler Lane, Spokane, WA 99218 |
0 |
0.00% |
|
Total of all executive officers and directors (5 individuals) |
12,696,520 |
14.23% |
|
|
|
|
|
Cougar Gold LLC (1) 1700 Lincoln St., Ste 2600, Denver, CO 80203 |
5,666,667 |
6.35% |
|
Tony Alford (2) 7040 Interlaken Dr., Kernersville, NC 27284 |
6,751,440 |
7.57% |
__________________________________________________
(1)
Cougar Gold LLC is a 5% or greater shareholder. The shares were verified by the schedule 13G filed with the Securities and Exchange Commission on June 16, 2008 and a shareholder of record report dated February 26, 2013 obtained from Columbia Stock Transfer Company.
(5)
Mr. Alford is not an Officer or Director of the Company but is a 5% or greater shareholder. The shares were verified by a shareholder of record report dated February 26, 2013 obtained from Columbia Stock Transfer Company.
There are no arrangements known to the Company, the operation of which may at a subsequent time result in the change of control of the Company.
Securities Authorized for Issuance under Equity Compensation Plans
In June 2007, the Board of Directors adopted the 2007 Gold Crest Stock Plan (the “Plan”) which was approved by shareholders in December 2007. The purposes of the Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to employees, directors and consultants and to promote the success of the Company’s business.
The maximum number of shares available for issuance pursuant to the Plan adopted by the Company is currently set at 12,000,000 shares of which 4,000,000 may be granted as Incentive Stock Options to employees. As of December 31, 2012, the remaining number of shares available for issuance under the 2007 Stock Plan was 11,450,000.
39
During the years ended December 31, 2012 and 2011, the Company did not issue any new options under the 2007 Stock Plan. During the year ended December 31, 2012, the Company had 5,280,000 stock options expire with exercise prices ranging from $0.28 to $0.53. These options had been granted between June 19, 2007 and September 12, 2007 to members of the board of directors, employees and to consultants of the Company.
The following table summarizes our equity compensation plan information as of December 31, 2012. Information is included for equity compensation plans not approved by our security holders.
|
|
|
Number of securities
|
|
Weighted average
|
|
Number of securities
|
|
|||||||
|
Equity compensation plans not approved by security holders |
|
|
- |
|
|
|
$ |
- |
|
|
|
n/a |
|
|
|
Equity compensation plans approved by security holders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 Stock Plan |
|
|
- |
|
|
|
$ |
- |
|
|
|
11,450,000 |
(1) |
|
|
Total |
|
|
- |
|
|
|
$ |
- |
|
|
|
11,450,000 |
|
|
(1) The aggregate number of shares of common stock that may be issued pursuant to awards granted under the 2007 Stock Plan will not exceed 12,000,000. Previously there had been 550,000 shares of fully-vested common stock issued under the 2007 stock plan to three directors and one employee leaving 11,450,000 available at December 31, 2012.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
During the years ended December 31, 2012 and 2011, and through the date of this report, the following related transactions occurred:
During the year ended December 31, 2012 there were no related transactions.
During the year ended December 31, 2011, the following related transactions occurred:
On June 1, 2007, the Company entered into a twenty-one month consulting agreement with Janice Duval, the wife of Frank Duval, who, up until November 3, 2009, was a greater than 5% shareholder, for professional services to be rendered to the Company. The agreement was for $3,000 per month for twenty-one months ending February 2009. At December 31, 2010 the total outstanding payable was $36,000. In October of 2011, a settlement agreement was reached with Janice Duval whereas it was agreed to by both parties to settle the $36,000 outstanding balance for a one-time settlement payment in the amount of $10,000. The $10,000 settlement was made on October 19 th resulting in a gain of $26,000 on the settlement of debt.
Director Independence
Directors Robert W. O’Brien and Daniel R. McKinney are independent members of the board of directors as defined by NASDAQ Marketplace Rule 4200(a)(15).
In determining the matter of independence, Messrs O’Brien and McKinney had no transactions, relationships or arrangements with the Company within the last three years. Mr. McKinney had shares granted to him as directors’ fees, and both Mr. O’Brien and Mr. McKinney had investment participation in the Company’s private placements on the same terms as all other investors in that offering.
“Independent director” means a person other than an executive officer or employee of the Company or any other individual having a relationship which, in the opinion of the issuer’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
In determining the matter of director independence, the following independence criteria were utilized:
40
(1)
a director who is, or at any time during the past three years was, employed by the company or by any parent or subsidiary of the company;
(2)
a director who accepted or who has a Family Member who accepted any compensation from the company in excess of $60,000 during any period of twelve consecutive months within the three years preceding the determination of independence, other than the following:
(i)
compensation for board or board committee service;
(ii)
compensation paid to a Family Member who is an employee (other than an executive officer) of the company ; or
(iii)
benefits under a tax-qualified retirement plan, or non-discretionary compensation
(3)
Other relationships include:
(i)
a director who is a Family Member of an individual who is, or at any time during the past three years was, employed by the Company as an executive officer, or a director who is, or has a family member who is, a partner in, or a controlling shareholder or an executive officer of, any organization to which the Company made, or from which the Company received, payments for property or services in the current or any of the past three fiscal years that exceed 5% of the recipient's consolidated gross revenues for that year, or $200,000, whichever is more, other than (a) payments arising solely from investments in the company's securities; or(b) payments under non-discretionary charitable contribution matching programs.
(ii)
a director of the Company who is, or has a Family Member who is, employed as an executive officer of another entity where at any time during the past three years any of the executive officers of the Company serve on the compensation committee of such other entity; or
(iii)
a director who is, or has a Family Member who is, a current partner of the Company's outside auditor, or was a partner or employee of the Company's outside auditor who worked on the company's audit at any time during any of the past three years.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The aggregate fees billed for professional services rendered by the Company’s independent registered public accounting firm for the audit of the Company’s annual consolidated financial statements for the fiscal years ended December 31, 2012 and 2011 and reviews of the consolidated financial statements included in the Company’s Forms 10-Q were $36,000 and $26,500, respectively.
There were no fees billed in the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of the Company’s financial statements except as set forth in the preceding paragraph.
The Company incurred nil and $2,500 for professional services for tax compliance, tax advice and tax planning rendered by the Company’s principal accountant for tax compliance, tax advice and tax planning for fiscal 2012 and 2011, respectively.
The Company incurred no fees from the principal accountant during the last two fiscal years for products and services other than as set forth above.
Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent Auditors
The Audit Committee meets prior to the filing of any Form 10-Q or 10-K to approve those filings. In addition, the Company’s audit committee pre-approves all services provided to the Company by DeCoria, Maichel & Teague P.S. or any other professional services firm that are related to the preparation of the Company’s financial statements.
41
PART IV
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
|
Exhibit Number |
Description of Document |
|
3.1 |
Articles of Incorporation for Silver Crest Mines, Inc. 9/11/1968. Filed as Exhibit 3.1 with the Company’s 10-SB12G on January 8, 2007. |
|
3.2 |
Articles of Merger of Domestic Corporations into Silver Crest Mines, Inc. 12/20/1982. Filed as Exhibit 3.2 with the Company’s 10-SB12G on January 8, 2007. |
|
3.3 |
Articles of Incorporation of Silver Crest Resources, Inc. 1/28/2003. Filed as Exhibit 3.3 with the Company’s 10-SB12G on January 8, 2007. |
|
3.4 |
Articles of Merger between Silver Crest Mines, Inc. into Silver Crest Resources, Inc. as filed in Nevada on 6/11/2003. Filed as Exhibit 3.4 with the Company’s 10-SB12G on January 8, 2007. |
|
3.5 |
Articles of Merger between Silver Crest Mines, Inc. into Silver Crest Resources, Inc. as filed in Idaho on 6/11/2003. Filed as Exhibit 3.5 with the Company’s 10-SB12G on January 8, 2007. |
|
3.6 |
Articles of Exchange of Niagara Mining and Development Company, Inc., and Silver Crest Resources, Inc. as filed in Nevada on 8/4/2006. Filed as Exhibit 3.6 with the Company’s 10-SB12G on January 8, 2007. |
|
3.7 |
Articles of Exchange of Niagara Mining and Development Company, Inc., and Silver Crest Resources, Inc. as filed in Idaho on 8/4/2006. Filed as Exhibit 3.7 with the Company’s 10-SB12G on January 8, 2007. |
|
3.8 |
Certificate of Amendment to Articles of Incorporation for a Nevada Corporation 8/14/2006. Filed as Exhibit 3.8 with the Company’s 10-SB12G on January 8, 2007. |
|
3.9 |
Articles of Incorporation for Kisa Gold Mining, Inc. 7/28/2006. Filed as Exhibit 3.9 with the Company’s 10-SB12G on January 8, 2007. |
|
3.10 |
Articles of Incorporation for Niagara Mining and Development Company, Inc. 1/11/2005. Filed as Exhibit 3.10 with the Company’s 10-SB12G on January 8, 2007. |
|
3.11 |
Amended Bylaws adopted September 12, 2007. Filed as Exhibit 3.11 with the Company’s 10-KSB on March 26, 2008. |
|
10.1 |
Employment Contract of Thomas H. Parker. Filed as Exhibit 10a with the Company’s 10-SB12G/A on August 6, 2007. Filed as Exhibit 3.11 with the Company’s 10-KSB on March 26, 2008. |
|
10.2 |
Employment Contract of Chris Dail. Filed as Exhibit 10 with the Company’s 10-SB12G on January 8, 2007. |
|
10.3 |
AKO Venture Agreement dated May 5, 2008, between Kisa Gold Mining, Inc. and Newmont North America Exploration Limited, a Delaware Corporation. Filed as Exhibit 10.7 with the Company’s 10-Q on August 11, 2008. |
|
10.4 |
Luna Venture Agreement dated May 5, 2008, between Kisa Gold Mining, Inc. and Newmont North America Exploration Limited, a Delaware Corporation. Filed as Exhibit 10.8 with the Company’s 10-Q on August 11, 2008. |
|
10.5 |
Chilly Venture Agreement dated May 5, 2008, between Kisa Gold Mining, Inc. and Newmont North America Exploration Limited, a Delaware Corporation. Filed as Exhibit 10.9 with the Company’s 10-Q on August 11, 2008. |
|
10.6 |
Option and Royalty Sales Agreement between Gold Crest Mines, Inc. and the heirs of the Estate of J.J. Oberbillig. Filed as Exhibit 10.3 with the Company’s 10-KSB on March 26, 2008. |
|
10.7 |
Option and Real Property Sales Agreement between Gold Crest Mines, Inc. and JJO, LLC, an Idaho limited liability company and personal representative of the Estate of J.J. Oberbillig. Filed as Exhibit 10.4 with the Company’s 10-KSB on March 26, 2008. |
|
10.8 |
Mining Lease and Option to Purchase Agreement dated March 31, 2008, between Gold Crest Mines, Inc. and Bradley Mining Company, a California Corporation. Filed as Exhibit 10.5 with the Company’s 10-Q on August 11, 2008. |
|
10.9 |
Golden Lynx, LLC, Limited Liability Company Agreement dated April 18, 2008, between Kisa Gold Mining, Inc. and Cougar Gold LLC. Filed as Exhibit 10.6 with the Company’s 10-Q on August 11, 2008. |
|
10.10 |
Purchase Agreement dated March 13, 2009, between Gold Crest Mines, Inc. and Frank Duval. Filed as Exhibit 10.9 with the Company’s 10-K on March 25, 2009. |
|
10.11 |
Master Earn-In Agreement dated March 28, 2011, between Kisa Gold Mining, Inc. and North Fork LLC. Filed as exhibit 10.1 with the Company’s 10-Q on May 18, 2011. |
|
10.12 |
Terms Sheet and Loan Agreement and amendments thereto between Kisa Gold Mining, Inc. and Afranex Gold Limited. Filed herewith |
|
14 |
Code of Conduct and Ethics of Gold Crest Mines, Inc. adopted March 3, 2008. Filed as Exhibit 14.1 with the Company’s 8-K on March 3, 2008. |
|
21 |
Subsidiaries of the Issuer. Filed herewith |
|
99 |
Gold Crest Mines, Inc., 2007 Stock Plan. Filed as Exhibit 99 with the Company’s 10-SB12G/A on August 6, 2007. |
|
31.1 |
Certification of CEO pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act. Filed herewith. |
|
31.2 |
Certification of CFO pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act. Filed herewith |
|
32.1 |
Certification of CEO pursuant to 18 U.S.C. Section 1350. Filed herewith |
|
32.2 |
Certification of CFO pursuant to 18 U.S.C. Section 1350. Filed herewith |
|
101.INS (1) |
XBRL Instance Document |
|
101.SCH (1) |
XBRL Taxonomy Extension Schema Document |
|
101.CAL (1) |
XBRL Taxonomy Extension Calculation Linkbase Document |
|
101.DEF (1) |
XBRL Taxonomy Extension Definition Linkbase Document |
|
101.LAB (1) |
XBRL Taxonomy Extension Label Linkbase Document |
|
101.PRE (1) |
XBRL Taxonomy Extension Presentation Linkbase Document |
(1)
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Act of 1934 and otherwise are not subject to liability.
42
SIGNATURES
In accordance with the requirements of the Section 13 or 15(d) of the Exchange Act, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized in Spokane, Washington on April 16, 2013.
GOLD CREST MINES, INC.
By: /s/ Terrence J. Dunne
Terrence J. Dunne
Chief Executive Officer
(Principal Executive Officer)
In accordance with the requirements of the Section 13 or 15(d) of the Exchange Act, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities on April 16, 2013.
|
/s/ TERRENCE J. DUNNE |
|
|
|
Chief Executive Officer, President and Director |
|
Terrence J. Dunne |
|
|
||
|
(Principal Executive Officer) |
||||
|
/s/ MATTHEW J. COLBERT |
|
|
|
Chief Financial Officer, Secretary/Treasurer and Director |
|
Matthew J. Colbert |
|
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(Principal Financial and Accounting Officer) |
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/s/ ROBERT W. O’BRIEN |
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Director |
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Robert W. O’Brien |
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