Add
AURM to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| AURM > SEC Filings for AURM > Form 10-Q on 12-Jun-2012 | All Recent SEC Filings |
12-Jun-2012
Quarterly Report
General
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Financial Statements and accompanying notes and the other financial information appearing elsewhere in this report. This report contains numerous forward-looking statements relating to our business. Such forward-looking statements are identified by the use of words such as believes, intends, expects, hopes, may, should, plan, projected, contemplates, anticipates or similar words. Actual operating schedules, results of operations and other projections and estimates could differ materially from those projected in the forward-looking statements.
Overview
Aurum, Inc. is an exploration stage company and was incorporated in Florida on September 29, 2008, to develop and market financial software. In July 2009, Golden Target Pty Ltd, an Australian corporation ("Golden") acquired a 96% interest in Aurum from Daniel McKelvey and certain other stockholders. Mr. McKelvey resigned as Sole Director and Officer of Aurum, Joseph Gutnick was appointed President, Chief Executive Officer and a Director and Peter Lee was appointed Chief Financial Officer and Secretary. In March 2011, the Company appointed Simon Lee as Chief Financial Officer. Peter Lee resigned as Chief Financial Officer but has agreed to remain as Secretary. Commencing August 2009, the Company decided to focus on mineral exploration for gold and copper in the Lao Peoples Democratic Republic. The Company's planned operations have not commenced and are considered to be in the exploration stage. On January 20, 2010, the Company re-incorporated in the State of Delaware through a merger involving Liquid Financial Engines, Inc. and Aurum, Inc., with Aurum being the surviving entity.
In December 2010, the Company executed a Management and Shareholders Agreement with Argonaut Overseas Investments Ltd ("AOI"), an indirectly wholly owned Subsidiary of Argonaut Resources N.L., in respect to Argonaut's 70% held, 55,105 acre Century Concession in Laos.
The agreement appoints Aurum as the manager of the Century Thrust Joint Venture Agreement ("Joint Venture"), which currently exists between Argonaut and two other parties, and gives the Company the right to earn 72.86% of AOI's interest in the Joint Venture which is equivalent to a 51% beneficial interest in the Century Concession. In order to acquire this interest, Aurum may, spend US$6.5 million on exploration within five years.
On February 10, 2011, the Company entered into a Deed of Agreement with the shareholders of the Lao Inter Mining Options Ltd ("LIMO") which grants Aurum an option to purchase LIMO's 20% interest in the Joint Venture. This Agreement, in conjunction with the Management and Shareholders Agreement with AOI, enables Aurum to acquire, at its option, a 71% beneficial interest in the Century Concession. In August 2011, the Company made the last option payment of $135,000. The Company had 60 days from the date of the last option payment to exercise the option to purchase 20% of the Joint Venture for $1.35 million, inclusive of the previously paid option fees of $405,000. On October 24, 2011, the Company executed a Deed of Variation of Call Option, extending the exercise date of the Option to April 24, 2012, for consideration of $55,000 for each month extended. This extension has allowed the completion of a drilling program to enable adequate assessment of the concession area before the decision to exercise the option is taken. The Company has not exercised the option to purchase 20% of the Joint Venture.
We have incurred net losses since our inception and may continue to incur substantial and increasing losses for the next several years. Since inception (September 2008), we have incurred accumulated losses of approximately $8,000,000 which was funded primarily by the sale of equity securities and advances from affiliates.
RESULTS OF OPERATIONS
Three Months Ended April 30, 2012 vs. Three Months Ended April 30, 2011.
Costs and expenses increased from $794,847 in the three months ended April 30, 2011 to $1,269,562 in the three months ended April 30, 2012. The increase in costs and expenses is a net result of:
a) a increase in legal, accounting and professional expense from $8,641 for the three months ended April 30, 2011 to $9,217 for the three months ended April 30, 2012, primarily due to a small increase in accounting fees.
b) a decrease in administrative expenses from $78,941 in the three months ended April 30, 2011 to $67,663 in the three months ended April 30, 2012, is primarily as a result of a decrease in overseas travel and accommodation from $24,436 to $10,800 offset by an increase in the cost of insurance of $6,948 of which there was no cost for the three months ended 30 April, 2011.
c) a decrease in stock based compensation from $248,800 in the three months ended April 30, 2011 to $120,714 in the three months ended April 30, 2012. In December 2010 and May 2011, the Company issued options over shares of Common Stock to employees under the 2010 Equity Incentive Plan. The decrease is due to options being fully vested in prior periods. See note 8 to the financial statements included in Item 1.
d) an increase in exploration expenditure expense from $458,465 for the three months ended April 30, 2011 to $1,071,968 for the three months ended April 30, 2012. The primary reason for the increase is due to the option fees of $425,000 being fully expensed and written off as a result of the LIMO Deed expiry. (See note 14 to the financial statements included in Item 1). The exploration costs also include salaries for our staff and contract field staff, accommodations, Laos office costs, field work expenditure and reviewing data on exploration targets in Laos. In relation to our Century Thrust Joint Venture, work commenced in November 2011 on field work including drilling, assaying, camp costs and contractors.
As a result of the foregoing, the loss from operations increased from $794,847 for the three months ended April 30, 2011 to $1,269,562 for the three months ended April 30, 2012.
The Company recorded a foreign currency exchange gain of $53,812 for the three months ended April 30, 2012 compared to a foreign currency exchange loss of $191,358 for the three months ended April 30, 2011, primarily due to revaluation of the advance from affiliate which is denominated in Australian dollars.
The Company recorded a decrease in interest income from $29 for the three months ended April 30, 2011 to $2 for the three months ended April 30, 2012.
The net loss was $1,215,747 for the three months ended April 30, 2012 compared to a net loss of $986,177 for the three months ended April 30, 2011.
Six Months Ended April 30, 2012 vs. Six Months Ended April 30, 2011.
Costs and expenses increased from $1,875,726 in the six months ended April 30, 2011 to $2,271,759 in the six months ended April 30, 2012. The increase in costs and expenses is a net result of:
a) a decrease in legal, accounting and professional expense from $38,320 for the six months ended April 30, 2011 to $26,827 for the six months ended April 30, 2012, primarily as a result of a decrease in legal fees. In the six months ended April 30, 2011 the Company incurred legal fees for the establishment of the Century Thrust Joint Venture agreement and associated compliance requirements which were not necessary for the six months ended April 30, 2012.
b) an increase in administrative expenses from $115,639 in the six months ended April 30, 2011 to $192,689 in the six months ended April 30, 2012, primarily as a result of the following: an increase in filing costs to the SEC from $9,322 to $15,706; the cost of insurance of $10,296 of which there was no cost for the six months ended April 30, 2011; increase in overseas travel and accommodation from $24,436 for the six months ended April 30, 2011 to $52,174 for the six months ended April 30, 2012; and increase in direct costs charged to the Company which increased from $99,273 to $167,904 due to the increased activities by management in relation to our Century Thrust Joint Venture.
c) a decrease in stock based compensation from $1,035,780 in the six months ended April 30, 2011 to $401,919 in the six months ended April 30, 2012. In December 2010 and May 2011, the Company issued options over shares of Common Stock to employees under the 2010 Equity Incentive Plan. The decrease is due to options being fully vested in prior periods. See note 8 to the financial statements included in Item 1.
d) an increase in exploration expenditure expense from $685,987 for the six months ended April 30, 2011 to $1,650,324 for the six months ended April 30, 2012. The primary reason for the increase is due to the option fees of $425,000 being fully expensed as a result of the LIMO Deed expiry. (See note 14 to the financial statements included in Item 1).The exploration costs also include salaries for both our staff and contract field staff, accommodations, Laos office costs, field work expenditure and reviewing data on exploration targets in Laos. In relation to our Century Thrust Joint Venture, work commenced in November 2011 on field work including drilling, assaying, camp costs and contractors.
As a result of the foregoing, the loss from operations increased from $1,875,726 for the six months ended April 30, 2011 to $2,271,759 for the six months ended April 30, 2012.
The Company recorded a foreign currency exchange gain of $68,060 for the six months ended April 30, 2012 compared to a foreign currency exchange loss of $204,251 for the six months ended April 30, 2011, primarily due to revaluation of the advance from affiliate which is denominated in Australian dollars.
The Company recorded a decrease in interest income from $46 for the six months ended April 30, 2011 to $3 for the six months ended April 30, 2012.
The net loss was $2,203,696 for the six months ended April 30, 2012 compared to a net loss of $2,079,931 for the six months ended April 30, 2011.
Liquidity and Capital Resources
For the six months ended April 30, 2012, net cash used in operating activities was $1,453,152 consisting primarily of the net loss from operations of $2,203,696, which was offset by a non-cash cost charge relating to employee options issued for stock based compensation of $401,919. Net cash used in investing activities was $nil; and net cash provided by financing activities was $1,457,143 being advances from affiliates.
As of April 30, 2012 the Company has short term obligations of $135,210 comprising accounts payable and accruals.
The Company has $10,308 in cash at April 30, 2012.
The Company may fund up to $6.5 million in exploration expenditure, of which $2.35 million has already been funded, in order to acquire a 51% beneficial interest in the Century Thrust Joint Venture ("Joint Venture"). The Company has entered into a Deed of Agreement which grants the Company an option to purchase 20% of LIMO's interest in the Joint Venture. The Company made the final option fee payment of $135,000 in August 2011 after LIMO completed certain conditions detailed in the agreement. The Company had 60 days from the date of the last option payment to exercise the option to purchase 20% of the Joint Venture for $1.35 million, inclusive of the option fees of $405,000. On October 24, 2011, the Company executed a Deed of Variation of Call Option extending the exercise date of Option to April 24, 2012, for a consideration of $55,000 for each month extended. The Company has not exercised the option to purchase 20% of the Joint Venture.
As of December 31, 2011, the Company had completed its initial drilling program on the Century Thrust Joint Venture tenements and is currently compiling assay results. Depending upon available capital resources, the Company may conduct additional exploration drilling programs during 2012 on the Joint Venture.
The Company's ability to continue operations through 2012, including the ability to purchase any interest in the Joint Venture, is dependent upon future funding from affiliated entities, capital raisings, or its ability to commence revenue producing operations and positive cash flows, of which there can be no assurance.
The Company continues to search for additional sources of capital, as and when needed; however, there can be no assurance funding will be successfully obtained. Even if it is obtained, there is no assurance that it will not be secured on terms that are highly dilutive to existing shareholders.
Information Concerning Forward Looking Statements
This report and other reports, as well as other written and oral statements made or released by us, may contain forward looking statements. Forward looking statements are statements that describe, or that are based on, our current expectations, estimates, projections and beliefs. Forward looking statements are based on assumptions made by us, and on information currently available to us. Forward-looking statements describe our expectations today of what we believe is most likely to occur or may be reasonably achievable in the future, but such statements do not predict or assure any future occurrence and may turn out to be wrong. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. The words "believe," "anticipate," "intend," "expect," "estimate," "project", "predict", "hope", "should", "may", and "will", other words and expressions that have similar meanings, and variations of such words and expressions, among others, usually are intended to help identify forward-looking statements.
Forward-looking statements are subject to both known and unknown risks and uncertainties and can be affected by inaccurate assumptions we might make. Risks, uncertainties and inaccurate assumptions could cause actual results to differ materially from historical results or those currently anticipated. Consequently, no forward-looking statement can be guaranteed. The potential risks and uncertainties that could affect forward looking statements include, but are not limited to:
? The risk factors set forth in Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2011,
? The risks and hazards inherent in the mineral exploration business (including environmental hazards, industrial accidents, weather or geologically related conditions),
? The uncertainties inherent in our exploratory activities, including risks relating to permitting and regulatory delays,
? The political, governmental and regulatory risks affecting mineral exploration activities in foreign countries,
? The effects of environmental and other governmental regulations, and
? Uncertainty as to whether financing will be available to enable further exploration and development.
? Movements in foreign exchange rates,
? Performance of information systems,
? Ability of the Company to hire, train and retain qualified employees,
? Our ability to enter into key exploration agreements and the performance of contract counterparties.
In addition, other risks, uncertainties, assumptions, and factors that could affect the Company's results and prospects are described in this Quarterly Report on Form 10-Q and in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2011, including under the heading "Risk Factors" and elsewhere herein and therein and may further be described in the Company's prior and future filings with the Securities and Exchange Commission and other written and oral statements made or released by the Company.
We caution you not to place undue reliance on any forward-looking statements, which speak only as of the date of this document. The information contained in this report is current only as of its date, and we assume no obligation to update any forward-looking statements.
|
|