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SAGD > SEC Filings for SAGD > Form 10-K on 15-Oct-2013All Recent SEC Filings

Show all filings for SOUTH AMERICAN GOLD CORP.

Form 10-K for SOUTH AMERICAN GOLD CORP.


15-Oct-2013

Annual Report


ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the sections entitled "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements" appearing elsewhere in this Annual Report on Form 10-K.

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Overview

Our current focus is the acquisition, exploration, and potential development of mining properties in Colombia.

In connection with our consideration of entering into the Agreement described above, which resulted in our acquisition of the 25% Stake in Kata with an option to acquire the remaining 75% of the outstanding capital stock of Kata, we conducted a legal, financial and business review of the financial condition, assets, liabilities and business of Kata

We currently do not have any interest, directly or indirectly, in mining properties located in Colombia and our acquisition of an interest in the Mining Concession described herein was subject to certain conditions and contingencies. Our operations and field work to date have been undertaken in order to gather data for the purpose of placing us in a better position to develop and execute a plan for exploration and development of the property underlying the IKE-10421X concession application described herein, which we also refer to as the "Santacruz Gold Project", and guide us to other potential acquisitions in the Narino province.

As a part of our business plan, we intend to seek out and acquire interests in other mineral exploration properties which, in the opinion of our management, offer attractive mineral exploration opportunities. We have during the fiscal year ending June 30, 2012 acquired mineral property interests in Arizona, Nevada and Montana; we have also begun due diligence activities with the objective of additional properties in the United States and Southeastern Europe. In the fiscal year ending June 30, 2013 we continued exploration of properties including sampling, geologic mapping and beginning to review bonding requirements for forecast exploration activities. We actively reviewed several projects presented to us. We also signed a Memorandum of Understanding in regards to a Montana property interest which as of the end of our fiscal year June 30, 2013 had not been finalized.

We are an exploration stage mining company and while our objective is to develop profitable mining operations, currently we produce no cash flow from operations. Junior exploration stage mining companies generally seek to acquire mineral properties and mineral property interests, to explore, develop or joint-venture. Value is added through exploration and discovery of the potential for commercial mineralization on properties, and by joint venturing, selling or leasing properties. Companies at our stage generally use equity or equity-type financing, with pure debt financing generally only available from producing operations or upon completion of a bankable feasibility study. We have relied in the last hear on convertible debt financing which can be highly dilutive to shareholders, in absence of other funding availability.

Our business plan is highly contingent on our ability to secure financing under acceptable terms which is not assured.

For the Years Ended June 30, 2013 and 2012

Revenues

We have not generated any revenues from operations since our inception. We do not anticipate earning revenues until such time that we are able, if at all, to locate a commercially exploitable mineral deposit and either enter into commercial production or sell any mineral properties we may acquire.

Operating Expenses

We incurred operating expenses in the amount of $278,870 for the year ended June 30, 2013, as compared to operating expenses of $461,772 for the year ended June 30, 2012. The decrease in our operating expenses for the year ended June 30, 2013, as compared to the year ended June 30, 2012, relates to a decrease in operations and exploration costs incurred as we operated in areas of lower cost. Expenses for management fees, legal and accounting services, professional fees and other general and administrative expense also decreased with the reduced activities in Colombia after December 2011, and management taking over more functions from outside consultants.

We incurred exploration costs of $45,503 during the year ended June 30, 2013, as compared to $188,833 for the year ended June 30, 2012. The decrease resulted primarily from more exploration efforts conducted in the USA and less in Colombia, a location of high-cost exploration expense.

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We reported general and administrative fees of $204,179 for the year ended June 30, 2013, compared to $266,485 for the year ended June 30, 2012.The decrease in general and administrative expenses are primarily attributable to reduced operations in Colombia, and officers of the company performing more administrative work in-house.

Other Items

We reported other expense of $208,861 for the year ended June 30, 2013, as compared to other income of $2,823 in the year ended June 30, 2012. Other income For the year ended June 30,2012 was attributable to interest received on bank deposits, for the year ended June 30,2013 $229,263 was recorded for interest expense, offset by a gain on derivative liability of $28,402.

Net Loss

As a result of the above, for the year ended June 30, 2013, we reported a net loss of $479,731, as compared to a net loss of $458,949 for the year ended June 30, 2012. The increase in our net loss was primarily attributable to decreased operating expenses incurred during the reporting period, which is described above, offset by higher interest expense.

Basic and Diluted Loss per Share

As a result of the above, the basic and diluted loss per common share was $0.00 for the year ended June 30, 2013 and $0.00 for the year ended June 30, 2012.

Liquidity and Capital Resources

At June 30, 2013, we had cash of $118 (June 30, 2012 - $87) and a working capital deficit of $446,986 (June 30, 2012 $261,895).

We anticipate spending approximately $10,000 in general and administrative expenses per month for the next twelve months, for a total anticipated general and administrative expenditures $120,000 over the next twelve months. These anticipated expenditures are closely related to the level of activities we have contemplated in our business plan. The general and administrative expenses for the year will consist primarily of professional fees for the audit and legal work relating to our regulatory filings throughout the year, as well as transfer agent fees, general management and office expenses. General support activities, additional organizational supervision of subsidiaries in the process of acquisition or contemplated to be acquired, and general management costs contribute to the forecast in general and administrative expenditures. We currently forecast ongoing exploration activities at $240,000 for the upcoming 12 months exclusive of any projected drilling programs. We are forecasting subject to capital availability and timing of regulatory approvals required to explore in any area targeted for advancement to status of a development project, a budget of approximately $500,000 to 1 million over the next 18 months.

Our current cash on hand is insufficient to be able to fully implement our business plan as planned. Based on our current cash position, we are presently unable to engage in any exploration activities as planned. Accordingly, we must obtain additional financing in order to maintain operations. We believe that convertible debt financing will partially contribute to funding the company. We anticipate that additional funding would need to be in the form of equity financing from the sale of additional shares of our common stock. We anticipate seeking additional funding in the form of equity financing from the sale of our common stock, but cannot provide any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our exploration program or maintain operations for any period of time. In the absence of such financing, we will not be able to commence our exploration program and may be forced to cease operations, liquidate assets, seek additional capital on less favorable terms and/or pursue other remedial measures.

We may consider entering into a joint venture arrangement to provide the required funding to explore the properties underlying the mineral property interests we intend to acquire. We have not undertaken any efforts to locate a joint venture participant. Even if we determine to pursue a joint venture participant, there is no assurance that any third party would enter into a joint venture agreement with us in order to fund exploration of the properties underlying the mineral property interests we intend to acquire. If we enter into a joint venture arrangement, we would likely have to assign a percentage of our interest in our any mineral property interests we may acquire to the joint venture participant. The company will also seek to reduce, settle or extend accounts payable to reduce overall liabilities.

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Net cash used in operating activities for the year ended June 30, 2013 was $163,554, as compared to net cash used in operating activities of $442,775 for the year ended June 30, 2012. Our net loss of $479,731 for the year ended June 30, 2013 was the primary reason for our negative operating cash flow, which was offset by an increase in accounts payable of $98,575.

Net cash used for investing activities for the year ended June 30, 2013 was $1,250, as compared to net cash provided in investing activities of $349,657 for the year ended June 30, 2012. Net cash provided from investing activities resulted from the recovery of deposits made in connection with the Kata transaction.

Net cash provided by financing activities for the year ended June 30, 2013 was $167,500, as compared to net cash provided by financing activities of $-0- for the year ended June 30, 2012. Net cash provided by financing activities for the year ended June 30, 2013 related to proceeds from issuing convertible notes to a third party.

Off Balance Sheet Arrangements

We do not have any off-balance sheet debt nor did we have any transactions, arrangements, obligations (including contingent obligations) or other relationships with any unconsolidated entities or other persons that may have material current or future effects on financial conditions, changes in the financial conditions, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenue or expenses.

Going Concern

We have incurred net losses for the period from inception on March 25, 2005 to June 30, 2012 of $4,793,302 and have no source of revenue. The continuity of our future operations is dependent on our ability to obtain financing and upon future acquisition, exploration and development of profitable operations from our mineral properties. These conditions raise substantial doubt about our ability to continue as a going concern.

Critical Accounting Policies

In December 2001, the SEC requested that all registrants list their most "critical accounting polices" in the Management Discussion and Analysis. The SEC indicated that a "critical accounting policy" is one which is both important to the portrayal of a company's financial condition and results, and requires management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We believe the following critical accounting estimates affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:

The Company implementing its business plan routinely acquires mineral properties and mineral property interests, and expends funds evaluating and exploring such properties and property interests. We must periodically test accumulated costs related to acquisition for impairment. Should a property become a development project, similar impairment tests must be conducted, and an estimate of rehabilitation costs is required.

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