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| SLGX > SEC Filings for SLGX > Form 10-Q on 13-Jul-2012 | All Recent SEC Filings |
13-Jul-2012
Quarterly Report
Forward Looking Information
This section includes a number of forward- looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this prospectus. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.
Business Environment
The disruptions in the credit and financial markets and the current economic situation in Europe have had a significant material adverse impact on a number of financial institutions and have limited access to capital and credit for many companies. While 2011 seemingly was a turnaround period for stock markets, and a muted positive improvement in consumer optimism and general business conditions, the global economy, still appears to be somewhat tepid, and it is still difficult for many junior resource companies to obtain financing. These market conditions could continue to make it difficult for us to obtain, or increase our cost of obtaining, capital and financing for our operations. Our access to additional capital on the equity markets also may not be available on terms acceptable to us or at all.
We are a start-up, pre-exploration-stage company, and have not yet generated or realized any revenues from our business operations. We must raise additional capital in order to continue to implement our plan and stay in business. Sillenger has acquired a 100% interest in three mineral claims located in the Atlin Mining Division, British Columbia, Canada, in consideration for CDN$379 (the "Bulkley mineral claims"). On May 15, 2009 the Company abandoned the mineral titles and re-staked them in order to reduce exploration costs. The Company's rights to these claims expired in June 2011.
On May 26, 2010, Sillenger introduced its proprietary Claims Licensing Program ("CLP") which is designed to help governments to provide a fast-track process for issuing the necessary documentation to resource companies. The system helps reduce risk to exploration companies and helps market a country as an attractive investment destination.
On June 1, 2010, Sillenger, through its business partnership with FCMI Global Inc. ("FCMI"), whereby FCMI assigned trademarks, intellectual properties, contracts and agreements to Sillenger in exchange for 5% (percent) of Sillenger's annual net income per Sillenger's audited financial statements, entered into a contract with the government of the Republic of Equatorial Guinea to conduct an airborne geophysical survey of certain specific areas of Equatorial Guinea. The survey was to provide the Ministry of Mines, Industry and Energy of Equatorial Guinea a geological database of the region highlighting the locations where there may be the presence of mineral, hydrocarbon or groundwater deposits, and a preliminary identification of subsurface structures which may present exploration potential, and to identify the likeliest exploration targets within those deposits. In exchange, Sillenger was granted the mineral and hydrocarbon rights to 15% of the claim blocks in the entire area surveyed, as chosen by Sillenger, as well as a preferential right to any other claims that Sillenger desires. The business partnership with FCMI entailed fully reimbursing FCMI for expenses it incurred in negotiating trademarks, intellectual properties, contracts and agreements that were assigned to Sillenger.
On June 11, 2010, Sillenger retained Fugro Airborne Surveys, a subsidiary of Fugro Group, to conduct the airborne geophysical survey of the Rio Muni region of Equatorial Guinea. The survey would have helped to reveal the locations of potential deposits, and provide a detailed reading of the subsurface structures.
In October 2010, the Company entered into negotiations to finance the cost of this survey. As part of these negotiations, Sillenger fully assigned its commitment with Fugro Airborne Surveys to a third party. On April 28, 2011, Sillenger executed an agreement with Ivory Resources Inc. ("Ivory"), Brilliant Resources Inc. (formerly Brilliant Mining Corp.) ("Brilliant") and others, whereby Sillenger agreed to accept and receive 7,407,407 units of Brilliant ("Unit") [with a 4 month escrow] in exchange for Ivory acquiring from Sillenger the agreement with the government of the Republic of Equatorial Guinea, which included certain preferential rights to request mining and/or oil concessions. Each Unit consists of one common share of Brilliant and one Common Share purchase warrant. Each Warrant will entitle the holder thereof to acquire one Common Share of Brilliant upon the payment of $0.45 per Warrant at any time until 24 months following the date of issuance. As part of the agreement, amounts payable to FCMI were forgiven. On July 12, 2011, the Company closed its transaction with Ivory, Brilliant and others.
The transaction fits into Sillenger's business model as the Brilliant Units represent Sillenger's carried interest in the Equatorial Guinea project, and comprise a tangible asset with a value of over $2,000,000 CDN. If the Brilliant shares perform well, the Units have the potential for significant value add for Sillenger's shareholders. The Brilliant transaction also serves as an endorsement of Sillenger's business plan, and enables Sillenger to replicate a proven concept for the next countries with which the Company is pursuing partnerships.
On September 16, 2011, Sillenger entered into an agreement with First African Exploration Corp. ("First African"), whereby First African will serve as the Company's exclusive representative for obtaining, negotiating and performing contracts with countries in Africa and the Middle East, in connection with mining, hydrocarbons, water, and other natural resource projects. A former non-executive director of the Company is also a shareholder of First African. The compensation payable under this agreement is dependent on and contingent upon the Company obtaining financing and entering into a contract with a target country, and the Company receiving financing for the performance of the contract.
On November 25, 2011, Sillenger entered into an agreement with the Republic of Benin ("Benin Agreement"). Pursuant to the terms of the Benin Agreement, Sillenger will conduct an airborne geophysical survey of the landmass of Benin and the offshore territory in the Gulf of Guinea. The purpose of the survey is to compile a geophysical information database of Benin's mining, hydrocarbon and water deposits, and analyze such data to identify the likeliest exploration targets within those deposits for potential mining and exploration opportunities. The government is particularly interested in the potential size of some of their base metal deposits, which can often be determined when utilizing some of these technologies. The term of the Benin Agreement is two (2) years from the date of the Benin Agreement, which can be extended by agreement of the parties.
Under the Benin Agreement, Sillenger will be granted certain exclusive preferential rights with respect to fifteen percent (15%) of the surface area of the Airborne Survey, but also has first right of refusal on all unclaimed resource concessions for the duration of the contract period. The Benin Agreement requires Benin to provide the required permits, licenses, etc. to conduct the survey and to pursue any mining and or exploration opportunities.
Looking at the year ahead, management believes, Brilliant transaction and the Benin Agreement serves as an endorsement of Sillenger's business plan, and enables Sillenger to replicate a proven concept.
Sillenger will need to seek additional funding to continue pursuing it's business plan. The Company is therefore in the process of exploring potential sources of financing for the Benin Agreement.
Subsequent Event
On June 5, 2012, the Company engaged the services First African to assist in securing the project financing for the Company's Airborne Geophysical Survey project in Benin. The engagement specifies that Sillenger will pay a yet to be determined fee to First Africa upon successful closing of the financing.
Financial Condition and Liquidity
REVENUE - Sillenger has not generated revenue from its business operations and does not expect to generate any revenue in the near future.
COMMON STOCK -As of the date of May 31, 2012 and July 13, 2012, Sillenger has 89,381,000 common shares issued and outstanding.
LIQUIDITY - At May 31, 2012, Sillenger had assets of $29,336 consisting mostly of prepaid expenses ($88,337 - February 29, 2012, consisting of cash, prepaid expenses and advances). Sillenger has $1,337,261 in liabilities consisting of accounts payable and accrued liabilities and advances payable ($1,299,308 - February 29, 2012, consisting of accounts payable and accrued liabilities).
Sillenger' internal sources of liquidity will be loans that may be available to Sillenger from management and other sources. Although Sillenger has no written arrangements with any of directors and officers, Sillenger expects that the directors and officers will provide Sillenger with internal sources of liquidity, if it is required.
There are no assurances that Sillenger will be able to achieve further sales of its common stock or any other form of additional financing. If Sillenger is unable to achieve the financing necessary to continue its plan of operations, then Sillenger will not be able to continue its exploration programs and its business will fail.
Results of Operation
For the quarters ended May 31, 2012 and May 31, 2011, and the period from February 14, 2007 (inception) to May 31, 2012:
Expenses
SUMMARY - Total expenses were $185,434 for the quarter ended May 31, 2012 ($168,436 - May 31, 2011). Expenses have increased as compared to the quarter ended May 31, 2011 by $16,998. A total of $5,144,542 in expenses has been incurred by Sillenger since inception on February14, 2007 through to May 31, 2012. The costs can be subdivided into the following categories.
1. General and administrative: These primarily consist of salaries, office supplies and telecommunication expenses. $39,275 of administrative expenses were incurred for the quarter as compared to $18,156 for the quarter ended May 31, 2011 while a total of $1,303,369 was incurred in the period from inception on February 14, 2007 to May 31, 2012.
2. Travel: $84,217 of travel expenses were incurred for the quarter as compared to $1,885 for the quarter ended May 31, 2011 while a total of $751,522 was incurred in the period from inception on February 14, 2007 to May 31, 2012.
3. Business development: $969 of business development expenses were incurred for the quarter as compared to $0 for the quarter ended May 31, 2011 while a total of $977,928 was incurred in the period from inception on February 14, 2007 to May 31, 2012.
4. Professional fees: These primarily consist of legal, accounting and audit fees. $60,563 of professional fees were incurred for the quarter as compared to $140,481 for the quarter ended May 31, 2011 while a total of $1,039,172 was incurred in the period from inception on February 14, 2007 to May 31, 2012.
Sillenger continues to carefully control its expenses and overall costs as it transforms into a natural resource development company. In addition to Mr. Gillespie and Dr. Juhas (a consultant), Sillenger has 3 other consultants.
Plan of Operations
Our business plan up until April 2010 was to proceed with the exploration of the Bulkley claims to determine whether there are commercially exploitable reserves of base and precious metals. Beginning in May 2010, we have concentrated our focus on pursuing opportunities in African countries.
We will also need to seek additional funding to pursue the new ventures in Africa identified by our new President and Chief Executive Officer Mr. John Gillespie. We anticipate that additional funding will be in the form of equity financing from the sale of our common stock. However, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund new projects identified in Africa. We believe that debt financing may or may not be an alternative for funding any potential projects in Africa or elsewhere. The risky nature of these enterprises and lack of tangible assets places debt financing beyond the credit-worthiness required by most banks or typical investors of corporate debt until such time as an economically viable mine or project can be demonstrated. We do not have any arrangements in place for any future equity financing.
Based on the nature of our business, we anticipate incurring operating losses in the foreseeable future. We base this expectation, in part, on the fact that very few mineral claims in the exploration stage ultimately develop into producing, profitable mines. Our future financial results are also uncertain due to a number of factors, some of which are outside our control. These factors include, but are not limited to:
• our ability to raise additional funding;
• the market price for mineral resources;
• the results of our proposed exploration programs on mineral properties
acquired; and
• our ability to find joint venture partners for the development of our property
interests
Due to our lack of operating history and present inability to generate revenues, our auditors have stated their opinion that there currently exists substantial doubt about our ability to continue as a going concern.
Off-balance sheet arrangements
As of May 31, 2012, Sillenger had no off-balance sheet arrangements.
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