SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
x QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended December 31, 2012
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______________________ TO _______________________
Commission File # 000-54854
DANE EXPLORATION INC.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification Number)
3577 - 349 West Georgia Street
Vancouver, British Columbia, Canada V6B 3Y4
(Address of principal executive offices) (Zip Code)
Tel. (866) 676-7678
(Registrant’s telephone no., including area code)
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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. Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated file, or a smaller reporting company.
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes o No x
The issuer had 53,600,000 shares of common stock issued and outstanding as of January 30, 2013.
(An Exploration Stage Company)
Table of Contents
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (unaudited)
(An Exploration Stage Company)
Condensed Balance Sheets
The accompanying notes to financial statements are an integral part of these condensed financial statements
(An Exploration Stage Company)
Condensed Statements of Operations
The accompanying notes to financial statements are an integral part of these condensed financial statements
(An Exploration Stage Company)
Condensed Statements of Cash Flows
The accompanying notes to financial statements are an integral part of these condensed financial statements
(An Exploration Stage Company)
Notes to Condensed Financial Statements
Note 1 – Basis of Presentation
The unaudited financial statements included herein have been prepared by Dane Exploration Inc. (the “Company”) in accordance with accounting principles generally accepted in the United States for interim financial information. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted as allowed by such rules and regulations, and the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited financial statements of the Company as of December 31, 2012 have been prepared without audit pursuant to the rules and regulations of the Securities Exchange Commission.
It is suggested that these financial statements be read in conjunction with the September 30, 2012 audited financial statements and the accompanying notes included in the Company’s Form 10-K filed with the Securities and Exchange Commission. The results of operations for the interim periods are not necessarily indicative of the results for the full year. In management’s opinion all adjustments necessary for a fair presentation of the Company’s financial statements are of a normal recurring nature and are reflected in the interim periods included.
Amounts shown for September 30, 2012 are based upon the audited financial statements of that date.
Note 2 – Summary of Significant Accounting Policies
This summary of significant accounting policies is presented to assist in understanding Dane Resources Inc.’s financial statements. The financial statements and notes are representations of the Company’s management, who are responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles in the United States of America and have been consistently applied in the preparation of the financial statements, which are stated in U.S. Dollars.
The financial statements reflect the following significant accounting policies:
Exploration Stage Company
The Company is an exploration stage company. The Company is devoting substantially all of its present efforts to establish a new business and none of its planned principal operations have commenced. As an exploration stage enterprise, the Company discloses the deficit accumulated during the exploration stage and the cumulative statements of operations and cash flows from inception to the current balance sheet date.
DANE EXPLORATION INC.
(An Exploration Stage Company)
Notes to Financial Statements
Exploration Costs and Mineral Property Right Acquisitions
The Company is primarily engaged in the acquisition and exploration of mining properties. Mineral property exploration costs are expensed as incurred. Mineral property acquisition costs are initially capitalized when incurred. The Company assesses the carrying costs for impairment under Accounting Standards 930 Extractive Activities – Mining (AS 930). An impairment is recognized when the sum of the expected undiscounted future cash flows is less than the carrying amount of the mineral property. Impairment losses, if any, are measured as the excess of the carrying amount of the mineral property over its estimated fair value. No impairment losses were recorded during the three month periods ending December 31, 2012 or 2011, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.
Earnings or (Loss) per Share
Basic loss per share is calculated by dividing the net loss available to common stockholders by the weighted average number of common shares outstanding for the period. The denominator in this calculation is adjusted to reflect any stock splits or stock dividends. Diluted loss per share is calculated using the treasury method which requires the calculation of diluted loss per share by assuming that any outstanding stock options with an average market price that exceeds the average exercise prices of the options for the year, are exercised and the assumed proceeds are used to repurchase shares of the Company at the average market price of the common shares for the year. An incremental per share effect is then calculated for each option. The denominator of the diluted loss per share formula is the number common shares outstanding at balance sheet date plus the incremental shares assumed to be issued from treasury for option exercises, less the number of shares assumed to be repurchased, weighted by the period they are assumed to be outstanding. This dilution calculation did not affect current fiscal year results because the Company does not have an Option Plan and has not issued any stock options; nor equity securities equivalents such as warrants.
The Company follows ASC 718-10, Stock Compensation, which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. ASC 718-10 requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized. The Company has not adopted a stock option plan and has not granted any stock options; nor has it made any awards of stock, or stock equivalents.
DANE EXPLORATION INC.
(An Exploration Stage Company)
Notes to Financial Statements
Estimated Fair Value of Financial Instruments
ASC 820, "Fair Value Measurements", requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three levels that may be used to measure fair value:
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company's financial instruments consist principally of cash, accounts payable, and shareholder advances. Pursuant to ASC 820, the fair value of our cash is determined based on "Level 1" inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
It is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.
The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns using the liability method. Under this method, deferred tax liabilities and assets are determined based on the temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities using enacted rates in effect in the years during which the differences are expected to reverse and upon the possible realization of net operating loss carry-forwards. Additionally, the Company has not recognized any amount for a tax position taken or expected to be taken on its tax return, or for any interest or penalties.
DANE EXPLORATION INC.
(An Exploration Stage Company)
Notes to Financial Statements
Valuation of Long-Lived Assets
The Company will periodically analyze its long-lived assets for potential impairment, assessing the appropriateness of lives and recoverability of unamortized balances through measurement of undiscounted operation cash flows on a basis consistent with accounting principles generally accepted in the United States of America.
The Company expenses the cost of start-up activities, including organizational costs, as those costs are incurred.
The books of the Company are maintained in United States dollars and this is the Company’s functional and reporting currency. Transactions denominated in other than the United States dollar are translated as follows with the related transaction gains and losses being recorded in the Statements of Operations:
During the three month period ended December 30, 2012, the Company was not involved in any transactions which required translation of foreign currencies.
Cash and Cash Equivalents
The Company considers cash and cash equivalents to consist of cash on hand and demand deposits in banks with an initial maturity of 90 days or less.
Risks and Uncertainties
The Company is subject to substantial business risks and uncertainties inherent in starting a new business. There is no assurance that the Company will be able to generate sufficient revenues or obtain sufficient funds necessary for launching a new business venture.
Recent Accounting Pronouncements
Various accounting pronouncements have been issued during 2012 and 2011, none of which are expected to have a material effect on the financial statements of the Company.
DANE EXPLORATION INC.
(An Exploration Stage Company)
Notes to Financial Statements
Note 3 – Going Concern
Generally accepted accounting principles in the United States of America contemplate the continuation of the Company as a going concern. However, the Company had a net loss for the three month period ended December 31, 2012 of $13,677; has accumulated losses of $90,259 since inception on March 3, 2010; and has limited business operations, which raises substantial doubt about the Company’s ability to continue as a going concern. During the three months ended December 30, 2012, we addressed this going concern issue by raising cash of $34,500 through a public offering of our common shares which were registered with the Securities and Exchange Commission through filing of a Form S-1 which became effective September 27, 2012. The continuation of the Company is dependent upon the success of further offerings of shares to the public and continuing financial support of stockholders of the Company and management. As of December 31, 2012, we projected the Company would need additional cash resources to operate during the upcoming 12 months and the Company intends to attempt to acquire additional operating capital through its ongoing public offering of shares. However, there is no assurance that any equity or debt offerings will successfully raise sufficient funds to assure the eventual profitability of the Company. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
Note 4 – Related Party Transactions & Shareholder Advances
During the three month period ended December 31, 2012, the Company repaid our president $7,705 owed to him for advances he had made to the Company. These shareholder advances had been non-interest bearing and were payable on demand. This repayment extinguishes all shareholder advances owed by the Company.
Note 5 – Commitments and Contingencies
In order to maintain its mineral claim tenure titles in good standing it is necessary for the Company or its agent to perform and record physical or other acceptable work with a prescribed value per hectare per year during each yearly period mandated by the British Columbia Mineral Titles Branch (each such period covering July 1st to June 30th of the following year). If acceptable work is not performed, the Company must pay the equivalent sum as cash in lieu of work at double the work assessment rate. Failure to do work or pay the cash in lieu will result in forfeiture of title.
The Judy 1 claim Tenure 735182 and the McDame Mountain claim Tenure 821402 each now have an expiry date of December 19, 2013. During the twelve month period ended September 30, 2012, new claim tenure dates were established through the filing of a work report with the Government of British Columbia Mineral Titles Branch and through fees in lieu of exploration work performed.
Based on the December 19, 2013 claims extension, further work expenditures must be performed as follows to maintain the claims: $nil fiscal year 2013; $6,194 for fiscal year 2014; $9,419 for fiscal year 2015; $11,052 for fiscal year 2016; $12,559 for fiscal year 2017 and for each subsequent fiscal year. Alternatively, if payments in lieu of work performed are used to maintain the claims, these costs translate to $nil for fiscal year 2013; $12,387 for fiscal year 2014; $18,839 for fiscal year 2015; $22,104 for fiscal year 2016; $25,118 for fiscal year 2017 and for each subsequent fiscal year.
DANE EXPLORATION INC.
(An Exploration Stage Company)
Notes to Financial Statements
Note 6 – Common Stock
On March 18, 2012, the Company issued a total of 1,825,000 common shares related to its first public offering of shares. These shares were sold to non-related parties at a price of $0.02 per share for total consideration of $36,500 as part of an offering of 25,000,000 common shares which the Company registered with the Securities and Exchange Commission ('SEC') through filing of a Form S-1 which was deemed effective by the SEC on September 19, 2011 and which expired on March 18, 2012.
On September 27, 2012, the Company issued 50,000 common shares to a non-related party at a price of $0.02 per share for total consideration of $1,000 as part of its second public offering of common shares which includes 25,000,000 common shares the Company registered with the SEC through filing of a Form S-1 which was deemed effective by the SEC on September 27, 2012.
On November 19, 2012, the Company issued another 1,725,000 common shares which had been sold to non-related parties at a price of $0.02 per share for total consideration of $34,500 as part of its ongoing second public offering of common shares.
ITEM 2. MANAGEMENTS’ DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Certain information included herein contains forward-looking statements that involve risks and uncertainties within the meaning of Sections 27A of the Securities Act, as amended; Section 21E of the Securities Exchange Act of 1934. These sections provide that the safe harbor for forward looking statements does not apply to statements made in initial public offerings. The words, such as "may," "would," "could," "anticipate," "estimate," "plans," "potential," "projects," "continuing," "ongoing," "expects," "believe," "intend" and similar expressions and variations thereof are intended to identify forward-looking statements. These statements appear in a number of places in this Form 10-Q and include all statements that are not statements of historical fact regarding intent, belief or current expectations of the Company, our directors or our officers, with respect to, among other things: (i) our liquidity and capital resources; (ii) our financing opportunities and plans; (iii) continued development of business opportunities; (iv) market and other trends affecting our future financial condition; (v) our growth and operating strategy. Investors and prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. The factors that might cause such differences include, among others, the following: (i) we have incurred significant losses since our inception; (ii) any material inability to successfully develop our business plans; (iii) any adverse effect or limitations caused by government regulations; (iv) any adverse effect on our ability to obtain acceptable financing; (v) competitive factors; and (vi) other risks including those identified in our other filings with the Securities and Exchange Commission.
Dane Exploration Inc. was incorporated on March 3, 2010, in the state of Nevada and initiated business operations as a mineral exploration company at that time. Since inception the Company has not been involved in any bankruptcy, receivership or similar proceedings, nor has it been involved in any reclassification, consolidation, or merger arrangements. The financial statements included in this Form 10-Q have been prepared by the Company in accordance with accounting principles generally accepted in the United States and our fiscal year end is September 30th. Dane has been in the exploration stage since its formation and has not yet realized any revenues from its planned operations. The Company was formed for the purposes of acquiring exploration and development stage mineral properties and Dane has begun implementation of its strategic plans through the purchase of mineral exploration claims in Northwest British Columbia, Canada.(Hereinafter Dane Exploration Inc. may herein be referred to: “Dane Exploration”, “Dane”, “We”, “Us”, the “Registrant”, or the “Company”). The Company’s common stock is not yet traded publicly. It is our intention to have Dane's common stock quoted on the OTC Bulletin Board (OTCBB) market. Currently, there is no trading symbol assigned and there can be no assurance that we will ever be granted a trading symbol on the OTCBB or any other quotation system or exchange.
During the three months ended December 31, 2012, we have been successful in raising a further $34,500 through a second public offering of our common shares. The shares issued in relation to this offering have been registered with the Securities and Exchange Commission ('SEC') through the filing of a Form S-1 which was deemed effective on September 27, 2012. The funds raised to date from this second ongoing public offering totals $35,500.
Summer 2012 Exploration Work
During the 2012 summer exploration season, we undertook due diligence work to prepare our exploration program and engaged a geological services firm to provide a geophysical assessment of our claims. This survey employed aerial photography and was produced with Geosoft, ArcGIS, AutoCAD, and MicroDEM computer software packages, images developed from digital elevation models, and using a light source at variable elevations and orientations, with reference to physical features, including streams, mountain ranges, and mapped fault systems. Assessment of data provided in this report is underway.
Exploration properties description and location
Summary Description and Location
The Judy Claims are located 2 km (1.5 miles) northeast of Cassiar, British Columbia, Canada and lie at high elevation on McDame Mountain. The area has a long history of mineral exploration. The geological setting is a structurally complex area of Sylvester allochthon and Cassiar batholith granitic intrusions and appears favorable for the discovery of epithermal gold and silver deposits. The tenures comprise an area of 627.96 hectares (1,551.68 acres) (see figures 4 and 5) and are road accessible at elevations from approximately 1,100 meters (3,600 feet) to more than 1,500 meters (5,000 feet). (Please see Glossary of Certain Technical Terms on page 21 for definitions of geological terms used herein).
On July 22, 2010, the Company purchased the Judy 1 claim tenure 735182 and the McDame Mountain claim tenure 821402 (collectively the ‘Judy Claims’) located in Northwest British Columbia, Canada from an independent prospector. The Judy Claims are presently registered to the independent prospector and are held in trust for Dane Exploration Inc.
The Judy Claims are located at high elevation in a dissected plateau terrane and for practical purposes are best accessed by 4 wheel drive vehicle or an all terrain vehicle. Highway 37, the old paved Stewart-Cassiar highway which was used to truck asbestos to the Pacific Ocean Port at Stewart, B.C. passes along the southern claim boundary of the Judy Claims. At this juncture an old mining road climbs McDame Mountain to the centre of the Judy Claims block. Over 90% of the claim block is above tree line. The claims can be easily worked by driving to the property and staying at either the village of Cassiar or at Jade City on Highway 37. A local labor force is available at the native village of Good Hope Lake 20 kilometers (12.5 miles) north along Highway 37 from the claim access road.
Climate and Vegetation
The Cassiar Mountains receive moderate precipitation but the bordering areas, Stikine Plateau to the west and Dease Plateau and Liard Plain to the east are relatively dry. Average annual precipitation over a 12-year period at Watson Lake in the Liard Plain, as reported by the Meteorological Division of the Canadian Department of Transport in 1954, was 16.75 inches. Of which 7.70 inches fell as snow (77 inches of snow). In the Cassiar Mountains the average annual precipitation averages approximately between 20 and 30 inches per year. June, July and August, are the warmest and wettest months during which unsettled weather is experienced and showers are frequent. In early August of 2009 temperatures of 85 degrees Fahrenheit (‘F’) were recorded on eight successive days. The average daily maximum temperature during the summer months, however, is generally between 50º and 70º F.
January and February are the coldest months and temperatures may fall below -60º F. Snowfall is light in Dease River valley west of the Horseranch Range and horses have wintered successfully without cut hay for many years near the north end of the range. The months of June, July, August and September are most suitable for prospecting although snow may hamper work in the mountains until the middle of June and after mid-September. Much of the area is below timber-line, about 4,500 feet above sea-level. White spruce and cottonwood are the largest trees and grow mainly in the moist but well-drained stream valleys. Gravel and sand terraces flanking the main streams support a growth of lodgepole pine, trembling aspen, and some birch. Black spruce and larch are abundant in poorly drained areas. Larch is particularly abundant in the valleys of Red, Deadwood and lower Dease Rivers. Dwarf birch, willow, balsam fir, slide alder, and juniper are locally abundant near timber-line. Willow grows along most of the stream courses. Willow, Labrador tea, sedges cotton grass, and peat moss are common in swamps and bogs. Grassy slopes and meadows are found in many parts of the area and the tree-line is commonly at about 1500 metres (5000 feet).
Figure 1 - Map of Canada
Figure 2 - Satellite of View of Claim Area
Figure 3 - Map of British Columbia
Figure 4a - Map of British Columbia showing Judy Claims
Figure 4b - Map of British Columbia Detailing Judy Claims Tenures
The Cassiar Mountains occupy the southwest and southern parts of the McDame map sheet National Topographic Series (NTS) 104 P. This is a rugged region exhibiting many features typical of alpine glaciations and having a maximum relief of about 4,000 feet. The principle rivers flow through the mountains in deep, relatively broad, U-shaped valleys. All streams belong to the Arctic drainage system and flow into Liard River or its tributaries. Structural trends in underlying rocks appear to be a major control for valleys of the southeasterly flowing part of Red River, Wadin Creek, and streams east of Solitary Lake. Elsewhere stream directions and structural trends in underlying bedrock are apparently not related.
Geology of Claims
The ground covered by the Judy claim group appears from maps in H. Gabrielse Memoir 319 to be underlain by Devonian Sylvester Group rocks that are in contact with Cassiar intrusives. The Judy Claims were located by map-staking following the British Columbia Mineral Titles Online process by Mr. S.G. Diakow. They are situated northeast of the Cassiar Batholith. and are located in Ancestral North America terrain in the northwesterly continuation of the Cassiar intrusives. In the vicinity of the Judy Claims there is a Cornucopia occurrence located on Quartzrock Creek about 9 kilometers east of Cassiar. This area is within the Sylvester allochthon, which is composed of Devonian-Triassic volcanic, sedimentary and ultramafic rocks, and these same rocks underlay the Judy Claims. The allochthon is locally bounded by the Cassiar batholilth to the west and overlies Paleozoic platformal rocks to the east.
Mineral Potential of the Judy 1 and McDame Mountain Claim Area
Mr. Diakow has been on the claim properties and reports that the properties have not previously been drilled; and that numerous quartz veins can be observed. These veins have not been sampled and therefore little is known about mineralization associated with the veins.
Within the Cassiar–area, stratified, consolidated rocks of marine origin range in age from Proterozoic to Mississippian. The assemblage has been folded and faulted, and intruded by Mesozoic granitic rocks. The Intermontane Belt at this latitude is composed of predominantly Mesozoic arc volcanic and arc-derived sedimentary rocks some Tertiary sediments and basalts occur locally.
The Cassiar mining district is geologically varied and complex (Figure 5). It is bordered to the west by a series of small mountain ranges raised plateau’s and large fjord like lakes including some that are over a hundred miles in length. The plateaus are dominated by Mesozoic strata of mixed volcanic and volcanogenic formations. The central sector is a more mature terrain underlain by Devonian and Mississippian meta sediments of the Sylvester Group whereas the Intermontane Belt at this latitude is composed of predominantly Mesozoic arc volcanic and arc-derived sedimentary rocks. Sylvester Group sedimentary rocks of oceanic origin are intruded by the Cassiar Batholith. These intrusive rocks are made up of Quartz monzonite, granodiorite, granite, pegmatites, aplite and porphyritic granite.
The district is structurally complex, with numerous northwesterly-striking fault complexes, some of which are of crustal scale and profound and can be traced far from the area of concern in this report, others are splays that create imbrications or slivers of the various formations.
Several contrasting geological terrains are present in the Cassiar (Liard) mining district. Each has the potential to host important mineral deposits. Gold quartz veins are found where granitic intrusions are in contact with Meta sediments but are mainly significant as probable sources of placer gold. Other possible deposits include molybdenum, asbestos magnesium, and massive sulphide copper–zinc deposits.
The strong fault zones and related structures offer opportunities to locate mineral deposits associated with hydrothermal systems that may have exploited the fractures and other weaknesses.
Figure 5 - GEOLOGY OF JUDY CLAIMS
LEGEND FOR GEOLOGY MAP
JURASSIC AND/OR CRETACEOUS
Cassiar Intrusions: Quartz monzonite, granodiorite; granite, pegmatite, aplite, porphyritic granite
DEVONIAN AND MISSISSIPPIAN
Sylvester Group: greenstone, chert-quartz arenite, chert, argillite, slate, quartzite, greywacke, limestone, conglomerate.
ORDOVICIAN, SILURIAN AND DEVONIAN
Sandpile Group: dolomite, cherty dolomite, dolomite breccias, sandy dolomite, dolomitic sandstone, sandstone, quartzite.
Limestone, dolomite, slate, argillite; sandy limestone, red and green slate, shale, limestone.
(Source: geology by L.L. Price, 1949 and H. Gabrielse, 1950 – 1954)
Gabrielse. H., (1964, McDame Map Area, Cassiar District, British Columbia (104P), Geol. Surv. Canada, Memoir 319, 60 p.
Bostock, H. S., (1948), Physiography of the Canadian Cordillera, with special reference to the area north of the fifty-fifth parallel, Geol. Surv. Canada. Memoir 247, 101 p.
Christie. R. L., (1957), Bennett, Cassiar District, British Columbia, Geol. Surv. Canada preliminary series map 19-1957.
Howell, William A.: Bridge, David J., (1995), Assessment Report on Diamond Drilling Performed by International Taurus Resources Inc. on the Cornucopia Claim Group, Liard Mining District. Assessment Report 24222. submitted to Ministry of Energy and Mines
1987 British Columbia Department of Mines Assessment Reports, Assessment Report on Diamond Drilling Performed by International Taurus Resources Inc. on the Cornucopia Claim Group, Liard Mining District. Assessment Report 16777 submitted to Ministry of Energy and Mines.
Overview of Regulatory, Economic and Environmental Issues
Canadian jurisdictions allow a mineral explorer to claim a portion of available Crown lands as its exclusive area for exploration by depositing posts or other visible markers to indicate a claimed area. The process of posting the area is known as staking.
All Canadian lands and minerals which have not been granted to private persons are owned by either the federal or provincial governments in the name of Her Majesty. Un-granted minerals are commonly known as Crown minerals. Ownership rights to Crown minerals are vested by the Canadian Constitution in the province where the minerals are located. In the case of the company's property, that is the Province of British Columbia. In the nineteenth century the practice of reserving the minerals from fee simple Crown grants was established. Legislation now ensures
that minerals are reserved from Crown land dispositions. The result is that the Crown is the largest mineral owner in Canada, both as the fee simple owner of Crown lands and through mineral reservations in Crown grants. Most privately held mineral titles are acquired directly from the Crown. The company's property is one such acquisition. Accordingly, fee simple title to the company's property resides with the Crown.
Underground metal mines generally involve higher grade ore bodies. Less tonnage is mined underground, and generally the higher grade ore is processed in a mill or other refining facility. This process results in the accumulation of waste by-products from the washing of the ground ore. Mills require associated tailings ponds to capture waste by-products and treat water used in the milling process.
Capital costs for mine, mill and tailings pond construction can easily run into the hundreds of millions of dollars. These costs are factored into the profitability of a mining operation. Metal mining is sensitive to both cost considerations and to the value of the metal produced. Metals prices are set on a world-wide market and are not controlled by the operators of the mine. Changes in currency values or exchange rates can also impact metals prices. Thus changes in metals prices or operating costs can have a huge impact on the economic viability of a mining operation.
Environmental protection and remediation is an increasingly important part of mineral economics. Estimated future costs of reclamation or restoration of mined land are based principally on legal and regulatory requirements. Reclamation of affected areas after mining operations may cost millions of dollars. Often governmental permitting agencies are requiring multi-million dollar bonds from mining companies prior to granting permits, to insure that reclamation takes place. All environmental mitigation tends to decrease profitability of the mining operation, but these expenses are recognized as a cost of doing business by modern mining and exploration companies.
Mining and exploration activities are subject to various laws and regulations governing the protection of the environment. These laws and regulations are continually changing and are generally becoming more restrictive. We conduct our operations so as to protect the public health and environment and our operations are presently in compliance with applicable laws and regulations in all material respects. We expect in the future to make expenditures to comply with such laws and regulations, but cannot predict the full amount of such future expenditures.
Every mining activity has an environmental impact. In order for a proposed mining project to be granted the required governmental permits, mining companies are required to present proposed plans for mitigating this impact. In the British Columbia, where our properties are located, no mine can operate without obtaining a number of permits. These permits address the social, economic, and environmental impacts of the operation and include numerous opportunities for public involvement and comment.
Compliance with Government Regulation
We will be required to comply with all regulations, rules and directives of governmental authorities and agencies applicable to the exploration of minerals in Canada generally, and in British Columbia specifically.
We will have to sustain the cost of reclamation and environmental mediation for all exploration and development work undertaken. The amount of these costs is not known at this time as we do not know the extent of the exploration program that will be undertaken beyond completion of the currently planned work programs. Because there is presently no information on the size, tenor, or quality of any resource or reserve at this time, it is impossible to assess the impact of any capital expenditures on earnings or our competitive position in the event a potentially economic deposit is discovered.
If we enter into production, the cost of complying with permit and regulatory environment laws will be greater than in the exploration phases because the impact on the project area is greater. Permits and regulations will control all aspects of any production program if the project continues to that stage because of the potential impact on the environment.
Examples of regulatory requirements include:
Glossary of Certain Technical Terms
Many of the following terms and definitions have been taken from Glossary of Geology, Fourth Edition, Julia A. Jackson, editor, American Geological Institute, Alexandria, Virginia, 1997 and are used in the technical descriptions in this registration statement.
The following table below sets forth the use of proceeds assuming the sale of 10%, 25%, 50%, 75% and 100% from a second public offering of common shares, which is now underway:
The above figures represent only estimated costs and potential investors must be aware that there is no guarantee
or assurance that the Company will be successful in raising any of the estimated proceeds
Exploration Plan Timetable
Our exploration plan timetable is contingent on the funds we are able to raise from our second public offering of our common shares. At present, we project the following timetable:
Overview of Our Mineral Exploration Business
Mineral exploration is essentially a research activity that does not produce a product. Successful exploration often results in increased project value that can be realized through the optioning or selling of the claimed site to larger companies. As such, we intend to acquire properties which we believe have potential to host economic concentrations of minerals. These acquisitions have and may take the form of mining claims on provincial land, or leasing claims, or private property owned by others. An “unpatented” mining claim is an interest that can be acquired to the mineral rights on open lands of the provincially owned public domain. Claims are staked in accordance with the rules and regulations pursuant to laws of British Columbia established by the Ministry of Energy, Mines and Petroleum Resources.
We plan to perform basic geological work to identify specific drill or trenching targets on the properties, and then collect subsurface samples by drilling or trenching to confirm the presence of mineralization (the presence of economic minerals in a specific area or geological formation). We may enter into joint venture agreements with other companies to fund further exploration work. We may include in our plans properties that may have been previously identified by third parties, including prior owners such as exploration companies, as mineral prospects with potential for economic mineralization. Often these properties have been sampled, mapped and sometimes drilled, usually with indefinite results. Accordingly, such acquired projects may either have some prior exploration history or may have strong similarity to a recognized geologic ore deposit model. Our current geographic focus is on northern British Columbia. The focus of our activity will be to acquire properties that we believe to be undervalued; including those that we believe to hold previously unrecognized mineral potential.
The Judy 1 and McDame Mountain claim properties have not yet been visited by our President and Sole Director. This fact potentially compromises the Company's assessment of the potential value of the claims and the Company's ability to properly assess all factors which may impact our exploration plans.
Market, Customers and Distribution Methods
Large and well capitalized markets are readily available for all metals and precious metals throughout the world. A very sophisticated futures market for the pricing and delivery of future production also exists. The price for metals is affected by a number of global factors, including economic strength and resultant demand for metals for production, fluctuating supplies, mining activities and production by others in the industry, and new and or reduced uses for subject metals. The mining industry is highly speculative and of a very high risk nature. As such, mining activities involve a high degree of risk, which even a combination of experience, knowledge and careful evaluation may not be able to overcome. Few mining projects actually become operating mines.
The mining industry is subject to a number of factors, including intense industry competition, high susceptibility to economic conditions (such as price of metal, foreign currency exchange rates, and capital and operating costs), and political conditions (which could affect such things as import and export regulations, foreign ownership restrictions). Furthermore, the mining activities are subject to all hazards incidental to mineral exploration, development and production, as well as risk of damage from earthquakes, any of which could result in work stoppages, damage to or loss of property and equipment and possible environmental damage. Hazards such as unusual or unexpected geological formations and other conditions are also involved in mineral exploration and development.
Mineral Exploration Industry and Licensing
The mineral exploration industry is highly competitive. We are a new exploration stage company and have a weak competitive position in the industry. We compete with junior and senior mineral exploration companies, independent producers and institutional and individual investors who are actively seeking to acquire mineral exploration properties throughout the world together with the equipment, labor and materials required to operate on those properties. Competition for the acquisition of mineral exploration interests is intense with many mineral exploration leases or concessions available in a competitive bidding process in which we may lack the technological information or expertise available to other bidders.
Many of the mineral exploration companies with which we compete for financing and for the acquisition of mineral exploration properties have greater financial and technical resources than those available to us. Accordingly, these competitors may be able to spend greater amounts on acquiring mineral exploration interests of merit or on exploring or developing their mineral exploration properties. This advantage could enable our competitors to acquire mineral exploration properties of greater quality and interest to prospective investors who may choose to finance their additional exploration and development. Such competition could adversely impact our ability to attain the financing necessary for us to acquire further mineral exploration interests or explore and develop our current or future mineral exploration properties.
We also compete with other junior mineral exploration companies for financing from a limited number of
investors that are prepared to invest in such companies.
The presence of competing junior mineral exploration companies may impact our ability to raise additional capital in order to fund our acquisition or exploration programs if investors perceive that investments in our competitors are more attractive based on the merit of their mineral exploration properties or the price of the investment opportunity. In addition, we compete with both junior and senior mineral exploration companies for available resources, including, but not limited to, professional geologists, land specialists, engineers, camp staff, helicopters, float planes, mineral exploration supplies and drill rigs.
General competitive conditions may be substantially affected by various forms of exploration and mining legislation and/or regulation introduced from time to time by the government of the Province of British Columbia, the government of Canada and the governments of other countries, as well as factors beyond our control, including international political conditions, overall levels of supply and demand for mineral exploration.
The British Columbia Ministry of Energy, Mines and Petroleum Resources ('BC Mines') is responsible for exploration permitting and the Canadian Federal Government becomes involved at a later stage when the project is further developed and meets standards which requires Federal environmental permit approvals. Phase Two of our proposed exploration program will require approval of an application to BC Mines which is expected to take approximately six weeks. During this six week period BC Mines will also refer the permit application to aboriginal stakeholders, which in this case is the Dease River Band, for a period of 15 days.
In the face of competition, we may not be successful in acquiring, exploring or developing profitable precious or base metal properties or interests, and we cannot give any assurance that suitable precious or base metal properties or interests will be available for our acquisition, exploration or development. Despite this, we hope to compete successfully in the mineral exploration industry by:
RESULTS OF OPERATIONS
The following discussion and analysis covers material changes in the financial condition of Dane during the three month periods ended December 31, 2012; December 31, 2011; and for the period March 3, 2010 (date of inception) to December 31, 2012 (the 'Exploration Stage').
A summary is as follows:
Dane did not earn revenues during the periods included in the financial statements in this report.
Our operating expenses are classified into four categories:
- Exploration costs
- Professional fees
- General and administrative expenses
- Impairment of mineral properties
Exploration costs are comprised of all exploration related expenses for development of our mineral claims. Exploration costs for the three month periods ended December 31, 2012 and December 31, 2011 were $nil compared to $nil, respectively. Expenses for the exploration stage totaled $8,999. The comparative change between the three and six month periods ended December 31, 2012 versus total expenses incurred during the exploration stage was due to the high elevation mining season being closed during these three and six month periods. We predict that the level of these costs will increase substantially during the current fiscal year.
Professional and consultant fees are comprised of fees for work performed by audit, legal and accounting professionals. For the three month periods ended December 31, 2012 and December 31, 2011 professional and consultant fees were $12,000 compared to $703, respectively. The comparative period over period change was due to costs related to our filing of a Form S-1. Professional fees for the exploration stage totaled $56,046. We anticipate professional and consultant fees will decrease during the balance of fiscal 2013.
General and administrative expenses
General and administrative expenses are comprised of fees paid to file our reports to the SEC's EDGAR system; transfer agent fees; filing fees paid to the Nevada Secretary of State; and office expenses. General and administrative expenses for the three month periods ended December 31, 2012 and December 31, 2011 were $1,677 compared to $428, respectively. The comparative period over period change was due to due to costs related to our filing of a Form S-1 General and administration expenses for the Exploration Stage totaled $17,714. We anticipate general and administrative Expenses will remain at current levels during the balance of the current fiscal year.
Impairment of mineral properties
As of September 30, 2010, the Company determined its investment in mineral properties was impaired and recorded a related impairment loss. Mineral properties impairment charges were $nil and $nil respectively for the three months ended December 31, 2012 versus December 31, 2011. Mineral property impairment charges totaled $7,500 for the Exploration Stage. The comparative change between the three and six month periods ended December 31, 2012 versus total impairment charges recorded during the exploration stage was no new mineral properties being acquired during the current period.
We incurred a net loss of $13,677 for the three month period ended December 31, 2012 compared with a net loss of $1,131 for the three month period ended December 31, 2012. For the Exploration Stage, our accumulated net loss totaled $90,259.
Liquidity and Capital Resources
Our financial position as at December 31, 2012 and September 30, 2012 was as follows:
Net Working Capital
As of December 31, 2012 we had cash on hand of $5,755 and a prepaid expenses balance of $986. Our net working capital increased from a working capital deficit of $14,082 at September 30, 2012 to a positive working capital balance of $6,741 at December 31, 2012 as a result of our funds raised during our ongoing second public offering of shares. Since the date of our incorporation, we have raised $97,000 through sales of our common shares. We estimate we will need to raise additional funds during the coming twelve months and project we will be able to raise these funds through our ongoing public offering.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
EXCHANGE RATE FLUCTUATION RISK
Our reporting currency is United States Dollars. Our transactions are primarily conducted in US$ but may also include transactions in Canadian Dollars and other currencies. Foreign currency rate fluctuations may have a material impact on the Company’s financial reporting. These fluctuations may have positive or negative impacts on the results of operations of the Company.
We have not entered into derivative contracts either to hedge existing risk or for speculative purposes.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized and reported within the time communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of "disclosure controls and procedures" in Rule 13a-15(e). The Company's disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching the Company's desired disclosure control objectives. In designing periods specified in the SEC's rules and forms, and that such information is accumulated and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The Company's certifying officer has concluded that the Company's disclosure controls and procedures are not effective in reaching that level of assurance.
At the end of the period being reported upon, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and the Company's Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective.
Changes in Internal Control over Financial Reporting
During the three months ended December 31, 2012, no material changes were made to the Company’s internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There is no litigation pending or threatened by or against us.
ITEM 1A. RISK FACTORS
The following risk factors should be considered in connection with an evaluation of the business of our business:
Risks Associated With Mining:
Mineral exploration and development activities are speculative in nature.
Resource exploration and development is a speculative business, characterized by a number of significant risks including, among other things, unprofitable efforts resulting not only from the failure to discover mineral deposits but from finding mineral deposits which, though present, are insufficient in quantity and quality to return a profit from production. The marketability of minerals acquired or discovered by our company may be affected by numerous factors which are beyond our control and which cannot be accurately predicted, such as market fluctuations, the proximity and capacity of milling facilities, mineral markets and processing equipment and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals and environmental protection, the combination of which factors may result in our company not receiving an adequate return of investment capital.
Substantial expenditures are required to establish ore reserves through drilling, to develop metallurgical processes to extract the metal from the ore and, in the case of new properties, to develop the mining and processing facilities and infrastructure at any site chosen for mining. We cannot predict whether minerals will be discovered in sufficient quantities and grades to justify commercial operations or that funds required for development can be obtained on a timely basis. Estimates of reserves, mineral deposits and production costs can also be affected by such factors as environmental permitting regulations and requirements, weather, environmental factors, unforeseen technical difficulties, unusual or unexpected geological formations and work interruptions. In addition, the grade of ore ultimately mined may differ from that indicated by drilling results.
Short term factors relating to reserves, such as the need for orderly development of ore bodies or the processing of new or different grades, may also have an adverse effect on mining operations and on the results of operations. Material changes in ore reserves, grades, stripping ratios or recovery rates may affect the economic viability of any project.
All of our properties are in the exploration stage and therefore highly speculative in nature. We may not be able to establish the existence of any mineral resource on any of our properties in commercially exploitable quantities. Until we can do so, we cannot earn any revenues from operations and if we do not do so we will lose all of the funds that we expend on exploration. If we do not discover any mineral resource in a commercially exploitable quantity, our business could fail.
We have not established that any of our mineral properties contain any mineral reserve, nor can there be any assurance that we will be able to do so. If we do not, our business could fail. A mineral reserve is defined by the Securities and Exchange Commission in its Industry Guide 7, which can be viewed at www.sec.gov/divisions/corpfin/forms/industry.htm#secguide7 as that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. The probability of an individual prospect ever having a 'reserve' that meets the requirements of the Securities and Exchange Commission's
Industry Guide 7 is extremely remote; in all probability our mineral resource property does not contain any 'reserve' and any funds that we spend on exploration will probably be lost. Even if we do eventually discover a mineral reserve on one or more of our properties, there can be no assurance that we will be able to develop our properties into producing mines and extract those resources. Both mineral exploration and development involve a high degree of risk and few properties which are explored are ultimately developed into producing mines. The commercial viability of an established mineral deposit will depend on a number of factors including, by way of example, the size, grade and other attributes of the mineral deposit, the proximity of the resource to infrastructure such as a smelter, roads and a point for shipping, government regulation and market prices. Most of these factors will be beyond our control, and any of them could increase costs and make extraction of any identified mineral resource unprofitable.
Mineral operations are subject to applicable law and government regulation which may block our ability to explore or develop our claims. Even if we discover a mineral resource in a commercially exploitable quantity, these laws and regulations could restrict or prohibit the exploitation of that mineral resource. If we cannot exploit any mineral resource that we might discover on our properties, our business may fail.
Both mineral exploration and extraction require permits from various foreign, federal, state, provincial and local governmental authorities and are governed by laws and regulations, including those with respect to prospecting, mine development, mineral production, transport, export, taxation, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. There can be no assurance that we will be able to obtain or maintain any of the permits required for the continued exploration of our mineral properties or for the construction and operation of a mine on our properties at economically viable costs. If we cannot accomplish these objectives, our business could fail.
We are in compliance with all material laws and regulations that currently apply to our activities but current laws and regulations could be amended and we might not be able to comply with them, as amended. Further, we may not be able to obtain or maintain all permits necessary for our future operations, or obtain them on reasonable terms. To the extent such approvals are required and are not obtained, we may be delayed or prohibited from proceeding with planned exploration or development of our mineral properties.
If we establish the existence of a mineral resource on any of our properties in a commercially exploitable quantity, we will require additional capital in order to develop the property into a producing mine. If we cannot raise this additional capital, we will not be able to exploit the resource, and our business could fail.
If we do discover mineral resources in commercially exploitable quantities on any of our properties, we will be required to expend substantial sums of money to establish the extent of the resource, develop processes to extract it and develop extraction and processing facilities and infrastructure. If we were to discover a major mineral deposit, there can be no assurance that such a resource will be large enough to justify commercial operations, nor can there be any assurance that we will be able to raise the funds required for development on a timely basis. If we cannot raise the necessary capital or complete the necessary facilities and infrastructure, our business may fail.
Mineral exploration and development is subject to extraordinary operating risks. We do not currently insure against these risks. In the event of a cave-in or similar occurrence, our liability may exceed our resources, which would have an adverse impact on our company.
Mineral exploration, development and production involves many risks which even a combination of experience, knowledge and careful evaluation may not be able to overcome. Our operations will be subject to all the hazards and risks inherent in the exploration for mineral resources and, if we discover a mineral resource in commercially exploitable quantity, our operations could be subject to all of the hazards and risks inherent in the
development and production of resources, including liability for pollution, cave-ins or similar hazards against which we cannot insure or against which we may elect not to insure. Any such event could result in work stoppages and damage to property, including damage to the environment. We do not currently maintain any insurance coverage against these operating hazards. The payment of any liabilities that arise from any such occurrence would have a material adverse impact on our company.
Mineral prices are subject to dramatic and unpredictable fluctuations.
We expect to derive revenues, if any, either from the sale of our mineral resource properties or from the extraction and sale of precious metals such as gold, silver and base metals such as copper. The price of those commodities has fluctuated widely in recent years, and is affected by numerous factors beyond our control, including international, economic and political trends, expectations of inflation, currency exchange fluctuations, interest rates, global or regional consumptive patterns, speculative activities and increased production due to new extraction developments and improved extraction and production methods. The effect of these factors on the price of precious and base metals, and therefore the economic viability of any of our exploration properties and projects, cannot accurately be predicted.
The mining industry is highly competitive and, in addition to risks directly related to our current exploration plans, there is no assurance that we will continue to be successful in acquiring mineral claims or to exploit any minerals we may discover. If we cannot continue to acquire properties to explore for mineral resources, we may be required to reduce or cease operations.
The mineral exploration, development, and production industry is largely un-integrated. We compete with other exploration companies who are either exploring existing mineral resource properties or seeking to locate and acquire mineral resource properties. However, we may need to compete with different competitors for the removal or sales of mineral products from our properties if we should eventually discover the presence of minerals in quantities sufficient to make production economically feasible.
Readily available markets exist worldwide for the sale of mineral products. Therefore, we will likely be able to sell any mineral products that we identify and produce. However, in identifying and acquiring mineral resource properties, we compete with many companies possessing greater financial resources and technical facilities. This competition could adversely affect our ability to acquire suitable prospects for exploration in the future. Accordingly, there can be no assurance that we will acquire any interest in additional mineral resource properties that might yield reserves or result in commercial mining operations.
Supplies needed for exploration may not always be available. If we are unable to secure exploration supplies we may have to delay our anticipated business operations.
Competition and unforeseen limited sources of supplies needed for our proposed exploration work could result in occasional spot shortages of supplies of certain products, equipment or materials. There is no guarantee we will be able to obtain certain products, equipment and/or materials as and when needed, without interruption, or on favorable terms. Such delays could affect our anticipated business operations and increase our expenses.
Risks Related To Our Company:
We have a limited operating history on which to base an evaluation of our business and prospects.
We have been in the business of exploring mineral resource properties since March 3, 2010 and we have not yet located any mineral reserves. As a result, we have never had any revenues from our operations. In addition, our operating history has been restricted to the acquisition of our mineral properties and this does not provide a meaningful basis for an evaluation of our prospects if we ever determine that we have a mineral reserve and commence the construction and operation of a mine. We have no way to evaluate the likelihood of whether our mineral properties contain any mineral reserve or,
if they do that we will be able to build or operate a mine successfully. We anticipate that we will continue to incur operating costs without realizing any revenues during the period when we are exploring our properties. We therefore expect to continue to incur significant losses into the foreseeable future. We recognize that if we are unable to generate significant revenues from mining operations and any dispositions of our properties, we will not be able to earn profits or continue operations. At this early stage of our operation, we also expect to face the risks, uncertainties, expenses and difficulties frequently encountered by companies at the start up stage of their business development. We cannot be sure that we will be successful in addressing these risks and uncertainties and our failure to do so could have a materially adverse effect on our financial condition. There is no history upon which to base any assumption as to the likelihood that we will prove successful and we can provide investors with no assurance that we will generate any operating revenues or ever achieve profitable operations.
There is a risk that we have not properly evaluated the potential benefit of our claims because our President and Sole Director has not personally visited the Judy 1 and McDame Mountain Properties.
The Judy 1 and McDame Mountain claim properties have not yet been visited by our President and Sole Director. This fact potentially compromises the Company's assessment of the potential value of the claims and the Company's ability to properly assess all factors which may impact our exploration plans
There is a risk that our assessment of the potential benefit of our property claims and our plans for exploration may be faulty because we have based these on a report provided to us by the vendor of the property claims.
We have not yet performed any exploration work on our property claims and have based a large part of our assessment of the Judy 1 and McDame Mountains claims on a report provided to us by the vendor of the claims. We have also based our exploration plans largely on the recommendations included in this report. If this report is false, incorrect, misstated, or analysis in the report has been over-valued by Dane, this could have a material adverse effect on our ability to raise funds and the survival of the Company.
Our property claims are presently held in trust for us by an unrelated third party which may put us at risk if there were a dispute with this third party, or if there were malfeasance on the part of this third party.
Canadian jurisdictions allow a mineral explorer to claim a portion of available Crown lands as its exclusive area for exploration by depositing posts or other visible markers to indicate a claimed area. The claims we have purchased were staked by a third party and these claims are presently recorded in the name of the third party and held in trust by him for the Company. Under British Columbia, law title to British Columbia mining claims can only be held by British Columbia residents. In the case of corporations, title must be held by a British Columbia corporation. Since we are an American corporation, we can never directly possess legal mining claim to the land. In order to comply with the law we will have to incorporate a British Columbia wholly owned subsidiary-corporation. We plan to incorporate such a wholly-owned subsidiary in British Columbia and expect at that time the third party will transfer all claim rights he holds in trust for us to that subsidiary. However, if the third party were to transfer title to another person and that deed were to be recorded in their name before we were to have the claims recorded in the name of our planned subsidiary, that other person would have superior title and we would have no title to the claims we have purchased. If this were to occur, we would have to cease or suspend operations on those claims and sue the third party for the loss of our investment. The loss of our claims and the cost of a lawsuit regarding a breach of fiduciary duty by the third party would have a material adverse effect on the financial condition of our company.
Our mineral claims have an expiration date and we must make minimum mandatory exploration expenditures in order to maintain our mineral claims.
In order to maintain its mineral claim tenure titles in good standing it is necessary for the Company or its agent to perform and record physical or other acceptable work with a prescribed value per hectare per year during each yearly period mandated by the British Columbia Mineral Titles Branch (each such period covering July 1st to June 30th of the following year).
Based on the December 19, 2013 claims extension, further work expenditures must be performed as follows to maintain the claims: $nil fiscal year 2013; $6,194 for fiscal year 2014; $9,419 for fiscal year 2015; $11,052 for fiscal year 2016; $12,559 for fiscal year 2017 and for each subsequent fiscal year. Alternatively, if payments in lieu of work performed are used to maintain the claims, these costs translate to $nil for fiscal year 2013; $12,387 for fiscal year 2014; $18,839 for fiscal year 2015; $22,104 for fiscal year 2016; $25,118 for fiscal year 2017 and for each subsequent fiscal year. Failure to do work or pay the cash in lieu will result in forfeiture of title and would have a material adverse effect on the financial condition of our company.
Our activities will be subject to environmental and other industry regulations which could have an adverse effect on our financial condition.
Our company's activities are subject to environmental regulations promulgated by government agencies from time to time. Environmental legislation generally provides for restrictions and prohibitions on spills, releases or emissions of various substances produced in association with certain mining industry operations, such as seepage from tailing disposal areas, which would result in environmental pollution. A breach of such legislation may result in imposition of fines and penalties. In addition, certain types of operations require the submission and approval of environmental impact assessments. Environmental legislation is evolving in a manner which means stricter standards and enforcement, fines and penalties for non-compliance are more stringent. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and directors, officers and employees. The cost of compliance with changes in governmental regulations could have an adverse effect on the financial condition of our company.
The operations of our company include exploration; and may include development activities and commencement of production on our properties, which requires permits from various federal, state, provincial and local governmental authorities and such operations are and will be governed by laws and regulations governing prospecting, development, mining, production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. Companies engaged in the development and operation of mines and related facilities generally experience increased costs and delays in production and other schedules as a result of the need to comply with applicable laws, regulations and permits.
Failure to comply with applicable laws, regulations, and permitting requirements may result in enforcement actions, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining operations may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations and, in particular, environmental laws.
The fact that we have not earned any operating revenues since our incorporation raises substantial doubt about our ability to continue to explore our mineral properties as a going concern.
We have not generated any revenue from operations since our incorporation and we anticipate that we will continue to incur operating expenses without revenues unless and until we are able to identify a mineral resource in a commercially exploitable quantity on one or more of our mineral properties and we build and operate a mine. At December 31, 2012, we had cash in the amount of $5,755; a prepaid expense balance of $986; and working capital of $6,741. We incurred a net loss of $13,677 for the three month period ended December 31, 2012 and have incurred losses since inception of $90,259. If we are not successful in selling a substantial number of common shares included in our second public offering, we will not have sufficient financial resources to fund our exploration program and will have only limited funds to cover our administrative expenses. In this event, we will need to find other sources of capital and may become insolvent and fail if we are unsuccessful in these efforts and any investment made into our company will be lost in its entirety.
Because we do not know of a lender who would provide funds for us to explore and develop our mineral properties, we expect it will probably be difficult or impossible to raise debt financing from traditional lending sources. To date we have raised our operating capital from sales of founder shares to, and receipt of shareholder advances from, our President, but there can be no assurance that we will continue to be able to do so because our President has limited financial resources. If we cannot raise the money that we need to continue exploration of our mineral properties, we may be forced to delay, scale back, or eliminate our exploration activities. If any of these were to occur, our business will fail.
These circumstances have lead our independent registered public accounting firm to comment about our company’s ability to continue as a going concern in their audit opinion, which was filed with our September 30, 2012 Form 10-K. Management's primary funding strategy is to raise additional capital through a public offering of its capital stock. These conditions raise substantial doubt about our company’s ability to continue as a going concern. Our financial statements do not include any adjustments relating to the recoverability and potential classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event our company cannot continue in existence.
We currently rely solely on our President & CEO for management of our operations and the loss of this key individual could have an adverse effect on the Company.
Our success depends to a certain degree upon our President & CEO and sole director. This individual is a significant factor in the our growth and success. The loss of the service of current management and board and any future additional members of management and the board could have a material adverse effect on our company. In particular, the success of our company is highly dependent upon the efforts of our either our current President & CEO, the loss of whose services would have a material adverse effect on the success and development of our company. Additionally, we do not anticipate having key man insurance in place in respect of our sole director and senior officer in the foreseeable future.
We require substantial funds merely to determine whether commercial precious metal deposits exist on our properties and this creates a significant risk that we will fail.
Any potential development and production of our exploration properties depends upon the results of exploration programs and/or feasibility studies and the recommendations of duly qualified engineers and geologists. Such programs require substantial additional funds. Any decision to further expand our operations on these exploration properties entails significant risks and is anticipated to involve consideration and evaluation of several significant factors including, but not limited to:
Third parties may challenge our rights to our mineral properties or the agreements that permit us to explore our properties may expire if we fail to timely renew them and pay the required fees.
In connection with the acquisition of our mineral properties, we sometimes conduct only limited reviews of title and related matters, and obtain certain representations regarding ownership. These limited reviews do not necessarily preclude third parties from challenging our title and, furthermore, our title may be defective. Consequently, there can be no assurance that we hold good and marketable title to all of our mining concessions and mining claims. If any of our concessions or claims were challenged, we could incur significant costs and lose valuable time in defending such a challenge. These costs or an adverse ruling with regards to any challenge of our titles could have a material adverse affect on our financial position or results of operations. There can be no assurance that any such disputes or challenges will be resolved in our favor.
We are not aware of challenges to the location or area of any of our mining claims. There is, however, no guarantee that title to the claims will not be challenged or impinged in the future.
Our management has no formal geological or engineering training and limited experience in mineral activities and consequently our activities, earnings and ultimate financial success could be irreparably harmed.
Our management has no formal geological or engineering training and limited experience with exploring for, starting, and operating a mine. With no direct training and limited experience in these areas, management may not be fully aware of many of the specific requirements related to working within the industry. Management's decisions and choices may not take into account standard engineering or managerial approaches mineral exploration companies commonly use. Consequently, our activities, earnings and ultimate financial success could suffer irreparable harm due to management's lack of experience in the industry.
Our success is dependent on current management, who may be unable to devote sufficient time to the development of our business; this potential limitation could cause the business to fail.
Dane is heavily dependent on our sole officer and director. If something were to happen to him, it would greatly delay its daily operations until further industry contacts could be established. Furthermore, there is no assurance that suitable people could be found to replace this individual. In that instance, Dane may be unable to further its business plan.
Because title to the property is currently held in the name of another person, if that person transfers the property to someone other than us, we will cease activities.
Title to the properties upon which we intend to conduct exploration activities is not currently held in our name. Title to the property is recorded in the name of a third party who presently holds the property in trust for the Company for exploration upon the property. If the owner transfers the property to another third person, the other third person will obtain good title and we will have nothing. If this should occur, we will subsequently not own any property and we will have to cease all exploration activities.
As our business assets and our director and officer are located in Canada; investors may be limited in their ability to enforce US civil actions against our assets or our director and officer. You may not be able to receive compensation for damages to the value of your investment caused by wrongful actions by our director.
Our business assets are located in Canada and our sole director and officer is a resident of Canada. Consequently, it may be difficult for United States investors to affect service of process within the United States upon our assets or our sole director and officer, or to realize in the United States upon judgments of United States courts predicated upon civil liabilities under U.S. Federal Securities Laws. A judgment of a U.S. court predicated solely upon such civil liabilities may not be enforceable in Canada by a Canadian court if the U.S. court in which the judgment was obtained did not have jurisdiction, as determined by the Canadian court, in the matter. There is substantial doubt whether an original action could be brought successfully in Canada against any of our assets or our sole director and officer predicated solely upon such civil liabilities. You may not be able to recover damages as compensation for a decline in your investment.
Risks Associated With Our Planned Second Public Offering of Common Stock:
Irrespective of the increased ownership of Dane which may result from successful sales of shares from our planned second public offering of common shares, our CEO and Sole Director will in all cases retain voting control of the Company due to his majority ownership position and this may negatively impact the interests of other shareholders.
If the maximum number of shares being offered in our planned second public share offering are successfully sold to investors, our sole director and officer's ownership share of Dane will decrease to only 65% of total common shares of the Company which are issued and outstanding. This fact provides our sole director and officer with effective continuing voting control of our Company and this may negatively impact other investors if our sole director and officer does not act in their interests, or administer the Company effectively, because other shareholders will not be able to successfully vote to remove our sole director and officer from his positions with the Company.
While Dane expects to apply for quotation on the OTC Bulletin Board, we may not be approved, and even if approved, we may not be approved for trading on the OTC Bulletin Board; therefore shareholders may not have a market to sell their shares, either in the near term or in the long term, or both.
We can provide no assurance to investors that our common stock will be traded on any exchange or electronic quotation service. We expect to be listed on the OTC Bulletin Board (‘OTCBB’) service of the Financial Industry Regulatory Authority (‘FINRA’), but we may not be approved to trade on that facility and we may not meet the requirements for listing on the OTCBB. If we do not meet the requirements of the OTCBB, our stock may then be traded solely on the Pink Sheets trading facility (‘Pink Sheets’) and the market for resale of our shares might decrease, if not be eliminated.
Our stock price is expected to fluctuate when we become publicly traded, which could result in substantial losses for investors.
The market price for our common stock will vary from the second public offering price of our common shares after trading commences. This could result in substantial losses for investors. Market price fluctuations may occur in response to a number of factors, some of which are beyond our control. Significant among these are that because we arbitrarily set the selling price of the securities being offered at $0.02 per share, once a market develops for our securities, fluctuations may result if we did not accurately set this price.
No public market for our common stock currently exists and an active trading market may not develop or be sustained following our public offering of common shares.
There is currently no public market for our common stock. We cannot be certain that an active trading market for our common stock will develop or be sustained following our public offering of common shares. Further, we cannot be certain that the market price of our common stock will not decline below the second public offering price. The second public offering price was determined by us based upon several factors and may not be indicative of future market prices for our common stock.
Trading on the OTCBB and/or Pink Sheets may be volatile and sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell their shares.
Trading in stock quoted on the OTCBB and/or Pink Sheets is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance. Moreover, neither the OTCBB nor the Pink Sheets are stock exchanges, and trading of securities on the OTCBB and/or Pink Sheets is often more sporadic than the trading of securities listed on a quotation system like NASDAQ, or a stock exchange like Amex. Accordingly, shareholders may have difficulty reselling any of their shares.
Shareholders may experience dilution of ownership.
Since inception, we have experienced negative cash flow from operations and expect to experience significant negative cash flow from operations for the foreseeable future. We expect to require working capital to fund our operations. We cannot be certain that additional financing will be available on favorable terms when required, or at all. If we are unable to raise sufficient capital, or are unable to repay the debt, then we may cease operations, become insolvent, declare bankruptcy or be otherwise wound up, all of which may result in the loss of all or substantially all of the investment capital of the shareholders. We are authorized to issue up to 250,000,000 common shares. We have the authority to issue more of the shares, and to determine the rights, preferences and privileges of such shares, without the consent of any of the shareholders. If we raise additional funds through the issuance of equity, equity-related or debt securities, the securities may have rights, preferences or privileges senior to those of the rights of the Common Stock and those stockholders may experience additional dilution. Purchasers of shares will experience immediate and substantial dilution in the net tangible book value per share of their investment in the shares.
Our stock is a penny stock. Trading of our stock may be restricted by the SEC’s penny stock regulations and FINRA’s sales practice requirements, which may limit a stockholder’s ability to buy and sell our stock.
Our stock is a penny stock. The Securities and Exchange Commission (‘SEC’) has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in, and limit the marketability of, our common stock.
In addition to the “penny stock” rules promulgated by the SEC, the Financial Industry Regulatory Authority ('FINRA') has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA’s requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock.
Because we have only one officer and director who is responsible for our managerial and organizational structure, in the future, there may not be effective disclosure and accounting controls to comply with applicable laws and regulations which could result in fines, penalties and assessments against the Company.
We currently have only one officer and director. As such, he is solely responsible for our managerial and organizational structure which will include preparation of disclosure and accounting controls under the Sarbanes-Oxley Act of 2002. When these controls are implemented, he will be responsible for the administration of the controls. Should he not have sufficient experience, he may be incapable of creating and implementing the controls which may cause the Company to be subject to sanctions and fines by the Securities Exchange.
Dane has limited financial resources at present, and proceeds from its offering of common shares may not be used to fully develop its business.
Dane has limited financial resources at present. As of December 31, 2012 we had cash on hand of $5,755 plus a prepaid expense balance of $986. If we are unable to implement our business plan, we may be required to divert certain proceeds from the sale of Dane's stock to general administrative functions. If Dane is required to divert some or all of proceeds from the sale of stock to areas that do not advance the business plan, this could adversely affect its ability to continue by restricting the Company's ability to: explore for minerals; become quoted on the OTCBB; advertise and promote the Company; travel to develop new business and customer relationships; and retain and/or compensate geologists and other professional advisors.
We are unable to predict and articulate all trends, risks and uncertainties which may negatively impact our business and/or your investment.
We have sought to identify what we believe to be the most significant risks to our business, but we cannot predict whether, or to what extent, any of such risks may be realized nor can we guarantee that we have identified all possible risks that might arise. Investors should carefully consider all risk factors before making an investment decision with respect to our common stock, including those which may not be noted in the above risk factors descriptions.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company has no senior securities outstanding.
ITEM 4. MINE SAFETY DISCLOSURES
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS
(1) Filed as an exhibit to a registration statement on Form S-1 filed February 25, 2011 and incorporated herein by reference.
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DANE EXPLORATION INC.
/s/ David Christie
President & CEO, CFO, PAO,
Secretary and Treasurer,
Director, and Board Chair
Dated: January 30, 2013