NOTE 2 – SUMMARY OF ACCOUNTING POLICIES
Basis of Presentation
financial records are maintained on the accrual basis of accounting
whereby revenues are recognized when earned and expenses are recorded
when incurred, in accordance with generally accepted accounting
principles (“GAAP”) – United States.
Cash and Cash Equivalents
consider all highly liquid investments with an original maturity of
three months or less when purchased to be cash
equivalents. Cash and cash equivalents consist of demand
deposits at commercial banks. We currently have cash deposits
at financial institutions in excess of federally insured limits.
Property and Equipment
property and equipment consists primarily of vehicles, furniture and
equipment, and are recorded at cost. Expenditures related to acquiring
or extending the useful life of our property and equipment are
capitalized. Expenditures for repair and maintenance are charged to
operations as incurred. Depreciation is computed using the straight-line
method over an estimated useful life of 3-20 years.
time to time, the Company makes deposits in anticipation of executing
leases. The deposits are capitalized upon execution of the
Company reviews the recoverability of long-lived assets whenever events
or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable through operations. To determine
if these costs are in excess of their recoverable amount, periodic
evaluation of carrying value of capitalized costs and any related
property and equipment costs are based upon expected future
cash flows and/or estimated salvage value in accordance with
Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC 360”), Property, Plant and Equipment.
We have not incurred any impairment losses and, therefore,
no impairment is reflected in these financial statements.
recognize revenue when persuasive evidence of an arrangement exists,
services have been performed, the sales price is fixed or determinable,
and collectability is probable. We have yet to generate any
Mineral Exploration and Development Costs
exploration expenditures are expensed as incurred. Costs of acquisition and option costs of mineral rights are capitalized upon acquisition.
Mine development costs incurred to develop new ore deposits, to expand the capacity of mines, or to develop mine areas substantially
in advance of current production are also capitalized once proven and probable reserves exist and the property is determined
to be a commercially mineable property. Costs incurred to maintain current production or to maintain assets on a standby
basis are charged to operations. If the Company does not continue with exploration after the completion of the feasibility
study, the mineral rights will be expensed at that time. Costs of abandoned projects are charged to mining costs including
related property and equipment costs. To determine if these costs are in excess of their recoverable amount, periodic evaluation
of carrying value of capitalized costs and any related property and equipment costs are based upon expected future cash flows
and/or estimated salvage value in accordance with ASC 360-10-35-15, Impairment or Disposal of Long-Lived Assets.
Exploration costs were approximately $7,633,000 and $1,292,000 for the years ended August 31, 2012 and 2011, respectively.
Company estimates the fair value of share-based compensation using the
Black-Scholes valuation model, in accordance with the provisions of ASC
718, Stock Compensation and ASC 505, Share-Based Payments
. Key inputs and assumptions used to estimate the fair value
of stock options include the grant price of the award, the expected
option term, volatility of our stock, the risk-free rate, and dividend
yield.Estimates of fair value are not intended to predict actual future
events or the value ultimately realized by the option holders, and
subsequent events are not indicative of the reasonableness of the
original estimates of fair value made by the Company.
Stock Option Plan
September 2008, the Board adopted our 2008 Stock Option Plan (the “2008
Plan”), which was also approved by our shareholders in September
2008. In May 2011, the Board adopted an amendment to our 2008
Plan (the “Amended 2008 Plan”), which was also approved by our
shareholders in August 2011. The Amended 2008 Plan increased the number
of shares available for grant from 2,000,000 to up to 5,000,000 shares
of our common stock for awards to our officers, directors, employees and
consultants. On February 15, 2012, our stockholders approved
an increase of 2,000,000 of shares of common stock available for
issuance under the Amended 2008 Plan. As amended,
the Plan provides for 7,000,000 shares of common stock for all
awards. Other provisions of the Amended 2008 Plan remain the
same as under our 2008 Plan. As of August 31, 2012, a total
of 3,125,000 shares of our common stock remained available for future
grants under the Amended 2008 Plan.
Income taxes are computed using the asset and liability method, in accordance with ASC 740, Income Taxes. Under
the asset and liability method, deferred income tax assets and
liabilities are determined based on the differences between the
financial reporting and tax bases of assets and liabilities, and are
measured using the currently enacted tax rates and laws. A
valuation allowance is provided for the amount of deferred tax assets
that, based on available evidence, are not expected to be realized.
Basic and Diluted Loss Per Share
The Company computes loss per share in accordance with ASC 260, Earnings Per Share,
which requires presentation of both basic and diluted earnings per
share on the face of the Statements of Operations. Basic loss
per share is computed by dividing net loss available to common
shareholders by the weighted average number of outstanding common shares
during the period. Diluted loss per share gives effect to
all dilutive potential common shares outstanding during the period,
including stock options and warrants using the treasury
method. Dilutive loss per share excludes all potential common
shares if their effect is anti-dilutive.
Use of Estimates
preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates. Management believes that these financial
statements include all normal and recurring adjustments necessary for a
fair presentation under Generally Accepted Accounting Principles.
Fair Value Measurements
We account for assets and liabilities measured at fair value in accordance with ASC 820, Fair Value Measurements and Disclosures
. ASC 820 emphasizes that fair value is a market-based
measurement, not an entity-specific measurement. Therefore, a
fair value measurement should be determined based on the assumptions
that market participants would use in pricing the asset or
liability. As a basis for considering market participant
assumptions in fair value measurements, ASC 820 establishes a fair value
hierarchy that distinguishes between market participant assumptions
based on market data obtained from sources independent of the reporting
entity (observable inputs that are classified with Levels 1 and 2 of the
hierarchy) and the reporting entity’s own assumptions about market
participant assumptions (unobservable inputs classified within Level 3
of the hierarchy).The three levels of inputs used to measure fair value
are as follows:
Level 1: Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets.
2: Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly.
3: Inputs that are generally unobservable. These inputs may
be used with internally developed methodologies that result in
management’s best estimate of fair value.
financial instruments consist principally of cash, accounts payable and
accrued liabilities. The carrying amounts of such financial
instruments in the accompanying financial statements approximate their
fair values due to their relatively short-term nature. It is
management’s opinion that the Company is not exposed to any significant
currency or credit risks arising from these financial instruments.
In January 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-06, Fair Value Measurements and Disclosures (Topic 820)-Improving Disclosures about Fair Value Measurements
, which enhances the usefulness of fair value
measurements. The amended guidance requires both the
disaggregation of information in certain existing disclosures, as well
as the inclusion of more robust disclosures about valuation techniques
and inputs to recurring and nonrecurring fair value
measurements. The amended guidance is effective for interim
and annual reporting periods beginning after December 15, 2009, except
for the disaggregation requirement for the reconciliation disclosure of
Level 3 measurements, which is effective for fiscal years beginning
after December 15, 2010 and for interim periods within those
years. The Company adopted ASU 2010-06 effective December 31,
2009, and the adoption did not have a significant impact on our
Recent Accounting Pronouncements
between August 31, 2012 and the date of this filing are not expected to
have a significant impact on our operations, financial position, or
cash flow, nor does the Company expect the adoption of recently issued,
but not yet effective, accounting pronouncements to have a significant
impact on our results of operations, financial position or cash flows.