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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
ACT OF 1934
For the fiscal year ended November 30, 2004
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or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transaction period from to
Commission File number 000-32181
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BROOKMOUNT EXPLORATIONS, INC.
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(Exact name of Company as specified in charter)
Nevada 98-0201259
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State or other jurisdiction of (I.R.S. Employee
Incorporation or Organization I.D. No.)
666 Burrard Street, Suite 600
Vancouver BC, Canada V6C 2X8
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number,
including area code 604-676-5244
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Securities registered pursuant to section 12(b) of the Act:
Title of each share Name of each exchange on which registered
None None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock
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(Title of Class)
Check whether the Issuer (1) filed all reports required to be filed by section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for a 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 [ ]
1
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained herein, and will not be contained, to the best
of the registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
State issuer's revenues for its most recent fiscal year: Nil
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State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act.)
$4,226,463 as at February 24, 2005
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
15,284,848 shares of common stock as at February 24, 2005
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2
TABLE OF CONTENTS
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Page
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PART I
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ITEM 1. DESCRIPTION OF BUSINESS 4
ITEM 2. DESCRIPTION OF PROPERTY 12
ITEM 3. LEGAL PROCEEDINGS 17
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITIES HOLDERS 17
PART II
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ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 17
ITME 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 17
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 18
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE 31
ITEM 8A. CONTROLS AND PROCEDURES 31
PART III
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ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTOERS AND CONTROL PERSONS 32
ITEM 10. EXECUTIVE COMPENSATION 34
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICAL 34
OWNERS AND MANAGEMENT
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 35
ITEM 13. EXHIBITS AND REPORTS 35
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 36
SIGNATURES 36
3
PART 1
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ITEM 1. DESCRIPTION OF BUSINESS
HISTORY AND ORGANIZATION
Brookmount Explorations, Inc. (the "Company"), a Nevada Corporation, was
incorporated on December 9, 1999. Since inception, the Company has not been in
bankruptcy, receivership or similar proceedings. It has not had any material
reclassification, merger, consolidation, purchase or sale of a significant
amount of assets not in the ordinary course of business. The Company has no
subsidiaries and no affiliated companies. The Company's shares are quoted on the
NASD over the counter bulletin board (OTCBB) and currently trading under the
symbol "BMXI".
The Company's executive offices are located at 666 Burrard Street, Suite 600,
Vancouver, B.C., Canada, V6C 2X8 (Telephone: 604-676-5244).
The Company's Articles of Incorporation currently provide that the Company is
authorized to issue 200,000,000 shares of common stock, par value $0.001 per
share. As at November 30, 2004 there were 10,284,848 shares outstanding.
The Company intends to commence business operations as a mineral exploration
stage company.
The Company plans to become engaged in the exploration, and if warranted, the
development of mineral properties. Currently, the Company owns an interest in
five mineral claims located in Quebec which are known as the Brookmount claims.
In addition, subsequent to the year-end, the Company completed a mineral
property purchase agreement, as amended, with Mr. Peter Flueck dated January 24,
2005, providing for its acquisition of a 100% interest in the Mercedes 100
mineral property located in Comas District, Concepcion Department, Junin
Province, Peru. Mr. Flueck acts as the Company's president and a director. Our
principal exploration property is the Mercedes 100 Property.
Brookmount Claims
The Company presently has the mineral rights to five mineral claims called the
Brookmount claims located in Chazel Township, Abitibi West County, Quebec.
The Company retained J.G. Burns & Associates of Timmins, Ontario were retained
to write a geological report on these claims. The claims are in good standing
until November 14, 2006.
No ore body has been discovered on the Brookmount claims. Even with a major
exploration program, there is no assurance an ore body will be discovered.
Presently, the Company does not have sufficient funds to undertake any further
exploration activities unless it obtains funds from its directors and officers
or raises additional capital through the sale of its equity. The directors do
not have any arrangements in this regard.
The Company has no sources of revenue either from the Brookmount claim or any
other asset.
4
Mercedes 100 Property
The Mercedes 100 property consists of six mineral claims. We are the beneficial
owner of a 100% interest in the claims. There are no other underlying agreements
or interests in the property.
Specifics of the six mineral claims are as follows:
Claim Area
Claim Name Claim Number (Hectares)
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Mercedes 100 C-08020145X011 450.00
Celeste C-010151600 298.84
Celeste No. 2 C-010151500 218.58
Celeste No. 4 C-010151700 200.00
Nuevo Herraje Cuatro C-010154100 996.96
Nueva Charo C-010051101 446.93
Acquisition and Maintenance of Mineral Rights in Peru
The general mining law of Peru defines and regulates all mining activity, from
sampling and prospecting to commercialization, exploitation and processing.
Mining concessions are granted in defined areas generally ranging from 100 to
1,000 hectares in size. Mining titles are irrevocable and perpetual, as long as
the titleholder maintains payment of government fees. No royalties or other
production-based monetary obligations are imposed on holders of mining
concessions. Instead, a holder of mineral concessions must pay an annual
maintenance fee of $3.00 per hectare for each concession actually acquired or
for a pending application by June 30 of each year. The concession holder must
sustain a minimum level of annual commercial production of greater than $100 per
hectare in gross sales within eight years of the granting of the concession or,
if the concession is not yet in production, the annual rental increases to $4.00
per hectare for the ninth through fourteenth years of the granting of the
concession and to $10.00 per hectare thereafter. The concession will terminate
if the annual fee is not paid for three years in total or for two consecutive
years. The term of the concession is indefinite as long as the property is
maintained by payment of rental fees.
The Peruvian Constitution and the Civil Code protect a mineral title holder with
the same rights as a private property holder. The holder's rights are distinct
and independent from the ownership of the land on which it is located, even when
both belong to the same person. Mining rights are defensible against third
parties, transferable, chargeable and may be the subject of any contract or
transaction.
Description, Location and Access
The Mercedes 100 property is accessed from Lima by an excellent paved mountain
highway to Concepcion, just 10 kilometers short of the provincial capital of
Huancayo, then by a paved road to Santa Roda de Ocopa. A good all-weather gravel
road connects Ocopa with Satipo, a village in the Amazonas river basin. The
Mercedes Mine camp is 36 kilometers from Santa Rosa.
Although the property is within 12 degrees south of the equator, it lies between
4,300 and 4,500 meters above sea level in an area that is treeless and cold.
There are two main seasons in the region of the property: a dry cool winter with
sunny days and cold nights (to -4(0) Celsius) lasting from May to October, and a
wet, cool summer that lasts from November to April and is characterized for its
intense rains, snow and hail storms and average temperatures of 8(0) Celsius.
5
A 33 kilovolt power line follows the main gravel road past the Mercedes 100
property. Pomamanta, the nearest village to the property, about five kilometers
to the east, is electrified on a limited basis. The line is 4.5 kilometres from
the property site. Water for mining and drilling is available from streams and
seeps in the hills above the property.
Nearby towns such as Concepcion and Huancayo are modern and offer most
necessities. There is a narrow guage railroad from Lima to Huancayo. This
connects the mining and smelting center of La Oroya, 130 kilometers to the west.
On the property site, there is a large brick building that could be refurnished
to serve as a camp for 20 to 30 people.
Mineralization and Exploration History
In the 1990's, Leader Mining Inc. entered into an option agreement with Mr.
Peter Flueck for a 50% working interest in the property and commissioned MPH
Geological Consulting to assess the property's potential in 1996. Although the
report contained a range of values of zinc, lead, gold and silver mineralization
found on the property, as well as calculations of proven, potential, probable
and possible reserves, we do not have sufficient information that would be
necessary to determine if these figures are accurate or were calculated in
accordance with acceptable mining standards.
Prior to our acquisition of the Mercedes 100 property, approximately $3,000,000
has been spent on the property. Most of these funds were spend on road building,
re-opening underground workings on the property, topographical surveys,
metallurgical tests, several exploitation campaigns and numerous sampling
programs.
Geological Report: Mercedes 100 property
We have obtained a geological report on the Mercedes 100 property that was
prepared by Guillermo Salazar, a professional geologist, of Calgary, Alberta. We
commissioned the report in March 2004. The geological report summarizes the
results of previous exploration on the Mercedes 100 property and makes a
recommendation for further exploration work.
In his report, Mr. Salazar recommends further exploration of the Mercedes 100
property that would include the following:
1. Survey of the property's several know showings, adits and trenches. It is
recommended that be done by confirming that the property boundaries are properly
located, that the portals, adits and trenches are re-located with respect to the
property boundaries and to other cultural and topographic features such as
access roads, camps, mine dumps and main rivers.
2. There is about 200 tonnes of run-of-mine mineral in 50 kilogram sacks stacked
along the road near the property. The sacks are in variable states of
deterioration. They are, however, readily available for shipping if a nearby
mill were to take the material for processing. The cost to us would include the
cost of check assaying, re-sacking and transportation to the mill. Preliminary
sampling of this rock indicates an average of 8.73 ounces per ton silver and
1.34% zinc. Mr. Salazar recommends that this be investigated.
6
3. A drilling program consisting of sixteen drill holes and totaling 1,810
meters designed to test prospective areas of the claims is recommended.
4. The geological interpretation of the claims needs to be confirmed.
This requires the following:
o a satellite image interpretation map. The primary objective of this would be
to define the trace continuity of the faults and veins recognized on the
property
o a structural airphoto and geological map. The airphotos used for this map
could also be used to produce a ground controlled topographic map without the
errors in the government data packages. The required detail of this
recommendation depends on the results from the survey described in paragraph
one above.
o the results from these studies should be followed up with careful prospecting
of the targets thus defined.
Mr. Salazar proposes the following budget for exploration:
Survey the property's showings, adits and trenches: $7,500
Truck rental (30 days at $100 per day): $3,000
Check assaying of 220 tonnes, re-sacking of material
and identification of potential purchasers: $10,000
Application for drilling permits: $3,000
Drilling of 1,800 meters in 16 holes: $271,500
Permit closure reporting: $3,000
Satellite interpretation of alteration and lineaments: $10,000
Testing of sacked mineralized rock (30 samples at $20 each): $600
Drill core testing (300 samples at $20 each): $6,000
Gridding work: $75,000
Report writing: $15,000
Office and administration: $7,500
Miscellaneous: $40,000
Total: $449,100
Compliance with Government Regulation
The General Mining Law of Peru is the primary body of law with regards to
environmental regulations. It is administered by the Ministry of Energy and
Mines (the "MEM"). The MEM can require a mining company to prepare an
environmental evaluation, an environmental impact assessment, a program for
environmental management and adjustment and a closure plan. Mining companies are
also subject to annual environmental audits.
A mining company that has completed its permitted exploration program must
submit an impact study when applying for a new concession, to increase the size
of its existing processing operations by more than 50% or to execute any other
mining project. A company must also set forth its plan for compliance with the
environmental laws and regulations, including its planned mining works,
investments, monitoring systems, waste management control and site restoration.
The plan is considered approved if the MEM does not respond after 60 days of
filing. If the MEM or an "interested party" can show just cause, the plan may be
modified during first year.
7
A mining company must also submit a closure plan for each component of its
operations. The closure plan must outline the measures that will be taken to
protect the environment over the short, medium and long term from solids,
liquids and gasses generated by the mining works. The General Mining Law of Peru
has in place a system of sanctions or financial penalties that can be levied
against a mining company not in compliance with the environmental regulations.
Brookmount Claims
The Company presently has the mineral rights to five mineral claims called the
Brookmount claims located in Chazel Township, Abitibi West County, Quebec.
The Company retained J.G. Burns & Associates of Timmins, Ontario to prepare a
geological report on these claims. The claims are in good standing until
November 14, 2006.
No ore body has been discovered on the Brookmount claims. Even with a major
exploration program, there is no assurance an ore body will be discovered.
Presently, the Company does not have sufficient funds to undertake any further
exploration activities unless it obtains funds from its directors and officers
or raises additional capital through the sale of its equity. The directors do
not have any arrangements in this regard.
The Company has no sources of revenue either from the Brookmount claim or any
other asset.
Employees
The Company does not have any full time employees and the directors and officers
devote such time as is required to the affairs of the Company. Once a major
exploration program commences the Company will need the officers to devote more
time to the activities of the Company or it will be required to hire consultants
to undertake the work.
Available Information
The Company's shares are listed on the OTCBB, and, as required, the Company will
hold annual general meetings and distribute certain documents, including
financial statements, to shareholders of record.
Presently, the Company files with the United States Securities and Exchange
Commission (the "SEC") on Forms 10-KSB and 10-QSB.
The public may read and copy any material the Company files with the SEC at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C., 20549.
The public may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. The Company is on electronic files and
therefore the public can review the Company's filing on the SEC Internet site
that contains reports, proxy, and information statements, and other information
regarding the Company. This information can be obtained by accessing the SEC
website address at http://www.sec.gov.
The Company's internet address is www.brookmount.com
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8
RISK FACTORS
An investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below and the other information in this
prospectus before investing in our common stock. If any of the following risks
occur, our business, operating results and financial condition could be
seriously harmed. The trading price of our common stock could decline due to any
of these risks, and you may lose all or part of your investment.
THE MINERAL PROPERTIES IN WHICH WE HAVE AN INTEREST, THE BROOKMOUNT CLAIMS AND
THE MERCEDES PROPERTY, HAVE NO RESERVES.
Our sole mineral property assets are the Brookmount claims in Quebec and the
Mercedes property in Peru. As both the Brookmount and the Mercedes properties
are in the exploration stage, they do not generate any cash flow. Accordingly,
we have no means of producing any income. We anticipate incurring losses for the
foreseeable future.
IF WE DO NOT OBTAIN ADDITIONAL FINANCING, OUR BUSINESS WILL FAIL.
Our current operating funds are less than necessary to complete planned
exploration on our mineral properties, and therefore we will need to obtain
additional financing in order to complete our business plan. As of November 30,
2004, we had cash in the amount of $51,103. We currently do not have any
operations and we have no income.
Our business plan calls for significant expenses in connection with the
exploration of the Brookmount claims and the Mercedes property. We do not have
sufficient funds to complete recommended exploration on the properties and
ongoing administrative expenses.
We will also require additional financing if the costs of the exploration of our
properties are greater than anticipated. We will require additional financing to
sustain our business operations if we are not successful in earning revenues
once exploration is complete. We do not currently have any arrangements for
financing and we can provide no assurance to investors that we will be able to
find such financing if required. Obtaining additional financing would be subject
to a number of factors, including the market prices for metals such as gold,
investor acceptance of our properties and general investor sentiment. These
factors may make the timing, amount, terms or conditions of additional financing
unavailable to us.
The most likely source of future funds presently available to us is through the
sale of equity capital. Any sale of share capital will result in dilution to
existing shareholders. The only other anticipated alternative for the financing
of further exploration would be the offering by us of an interest in our
properties to be earned by another party or parties carrying out further
exploration thereof, which is not presently contemplated.
BECAUSE WE HAVE ONLY RECENTLY COMMENCED BUSINESS OPERATIONS, WE FACE A HIGH RISK
OF BUSINESS FAILURE.
We have not yet commenced exploration on the Mercedes 100 property. Accordingly,
we have no way to evaluate the likelihood that our business will be successful.
To date, we have been involved primarily in organizational activities and the
acquisition of mineral properties. We have not earned any revenues as of the
date of this report. Potential investors should be aware of the difficulties
normally encountered by new mineral exploration companies and the high rate of
9
failure of such enterprises. The likelihood of success must be considered in
light of the problems, expenses, difficulties, complications and delays
encountered in connection with the exploration of the mineral properties that we
plan to undertake. These potential problems include, but are not limited to,
unanticipated problems relating to exploration, and additional costs and
expenses that may exceed current estimates.
Prior to completion of our exploration stage, we anticipate that we will incur
increased operating expenses without realizing any revenues. We therefore expect
to incur significant losses into the foreseeable future. We recognize that if we
are unable to generate significant revenues from development of the Merecedes
100 property and the production of minerals from the claims, we will not be able
to earn profits or continue operations.
There is no history upon which to base any assumption as to the likelihood that
we will prove successful, and it is doubtful that we will generate any operating
revenues or ever achieve profitable operations. If we are unsuccessful in
addressing these risks, our business will most likely fail.
BECAUSE OF THE SPECULATIVE NATURE OF EXPLORATION OF MINERAL PROPERTIES, THERE IS
A SUBSTANTIAL RISK THAT OUR BUSINESS WILL FAIL.
The search for valuable minerals as a business is extremely risky. We can
provide investors with no assurance that the mineral claims that we have an
interest in contain commercially exploitable reserves of valuable metals.
Exploration for minerals is a speculative venture necessarily involving
substantial risk. The expenditures to be made by us in the exploration of the
optioned mineral properties may not result in the discovery of commercial
quantities of minerals. Problems such as unusual or unexpected formations and
other conditions are involved in mineral exploration and often result in
unsuccessful exploration efforts. In such a case, we would be unable to complete
our business plan.
BECAUSE MANAGEMENT HAS NO TECHNICAL EXPERIENCE IN MINERAL EXPLORATION, OUR
BUSINESS HAS A HIGHER RISK OF FAILURE.
None of our directors has any professional training or technical credentials in
the exploration, development and operation of mines. As a result, we may not be
able to recognize and take advantage of potential acquisition and exploration
opportunities in the sector without the aid of qualified geological consultants.
As well, with no direct training or experience, our management may not be fully
aware of the specific requirements related to working in this industry. Their
decisions and choices may not be well thought out and our operations and
ultimate financial success may suffer irreparable harm as a result.
BECAUSE OF THE INHERENT DANGERS INVOLVED IN MINERAL EXPLORATION, THERE IS A RISK
THAT WE MAY INCUR LIABILITY OR DAMAGES AS WE CONDUCT OUR BUSINESS.
The search for valuable minerals involves numerous hazards. As a result, we may
become subject to liability for such hazards, including pollution, cave-ins and
other hazards against which we cannot insure or against which we may elect not
to insure. The payment of such Liabilities may have a material adverse effect on
our financial position.
IF WE BECOME SUBJECT TO BURDENSOME GOVERNMENT REGULATION OR OTHER LEGAL
UNCERTAINTIES, OUR BUSINESS WILL BE NEGATIVELY AFFECTED.
There are several governmental regulations that materially restrict mineral
property exploration and development. Under Peruvian mining law, to engage in
certain types of exploration will require work permits. While these current laws
will not affect our current exploration plans, when we proceed with drilling
operations on the Mercedes 100 property, we will incur modest regulatory
compliance costs.
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BECAUSE OUR DIRECTORS OWN 51.5% OF OUR OUTSTANDING COMMON STOCK, THEY COULD MAKE
AND CONTROL CORPORATE DECISIONS THAT MAY BE DISADVANTAGEOUS TO OTHER MINORITY
SHAREHOLDERS.
Our directors own approximately 51.5% of the outstanding shares of our common
stock. Accordingly, they will have a significant influence in determining the
outcome of all corporate transactions or other matters, including mergers,
consolidations, and the sale of all or substantially all of our assets. They
will also have the power to prevent or cause a change in control. The interests
of our directors may differ from the interests of the other stockholders and
thus result in corporate decisions that are disadvantageous to other
shareholders.
WE MAY NOT BE ABLE TO OPERATE AS A GOING CONCERN AND OUR BUSINESS MAY FAIL.
The Independent Auditor's Report to our audited financial statements for the
period ended November 30, 2004, indicates that there are a number of factors
that raise substantial doubt about our ability to continue as a going concern.
Such factors identified in the report are that we are in the pre-exploration
stage, we have no established source of revenue and that we are dependent on our
ability to raise capital from shareholders or other sources to sustain
operations.
OUR STOCK PRICE IS SUBJECT TO WIDE FLUCTUATIONS THAT MAY CAUSE STOCKHOLDERS TO
LOSE THEIR INVESTMENTS.
If a market for our common stock develops, we anticipate that the market price
of our common stock will be subject to wide fluctuations in response to several
factors, including:
(1) actual or anticipated variations in our results of operations; (2) our
ability or inability to generate new revenues; (3) increased competition; and
(4) conditions and trends in the mineral exploration industry.
Since our common stock is traded on the NASD over the counter bulletin board,
our stock price may be impacted by factors that are unrelated or
disproportionate to our operating performance. These market fluctuations, as
well as general economic, political and market conditions, such as recessions,
interest rates or international currency fluctuations may adversely affect the
market price of our common stock.
Forward-Looking Statements
This Form 10-KSB contains forward-looking statements that involve risks and
uncertainties. We use words such as anticipate, believe, plan, expect, future,
intend and similar expressions to identify such forward-looking statements. You
should not place too much reliance on these forward-looking statements. Our
actual results are likely to differ materially from those anticipated in these
forward-looking statements for many reasons, including the risks faced by us
described in the above "Risk Factors" section and elsewhere in this document.
11
ITEM 2. DESCRIPTION OF PROPERTY
BROOKMOUNT PROPERTY
The Brookmount property consists of five claims totalling approximately 500
acres, which are located in Chazel Township, Abitibi West County, Quebec. A 100%
interest in these claims were recorded in the name of George Fournier, which he
holds in trust for the Company, on December 20, 1999, and subsequently
registered on February 1, 2000. The claims are in good standing until November
16, 2006.
Location of Brookmount claim
The claims lie in northwestern Quebec some 100 miles North, North East from the
city of Rouyn-Noranda, Quebec. The claims are easily accessible by gravel and
logging roads.
History of the Brookmount mining area
Chazel Township and the general surrounding area have been prospected and
explored since the early 1900s. Gold was originally the main commodity sought,
but interest in base metals increased following the discovery in 1922 of the
Oditan copper-zinc occurrence in the township and in 1925 of the Normetal
copper-zinc-silver-gold deposit. Exploration for copper-nickel and asbestos
deposits was undertaken in the 1970s but since the 1980s the major emphasis once
again shifted to gold.
Past Exploration of the Brookmount claim
Summaries for work conducted on properties now overlain by the Brookmount claim
are as follows.
1973-1975: Dome Explorations (Canada) Limited ("Dome")
Dome's 41 full lot claims in Chazel and Dission Townships included the present
Brookmount property, and were staked to cover several anomalies defined by an
airborne electromagnetic survey contracted by the Quebec government in 1972.
Ground magnetic and horizontal loop electromagnetic (HLEM) surveys conducted in
1973 defined a strong 3/10 mile long HLEM anomaly with a low but precise
magnetic correlation. Hole 60C-1, drilled on the property in 1974 to a depth of
100 yards, tested the anomaly. A 5.3 yard section and mineralized with 10%
pyrite, a rock type often found in the presence of copper and gold
mineralization, assayed 0.08% copper.
An HLEM survey conducted over the remainder of the property in 1975 defined a
strong, long, formational conductor, as well as four shorter anomalies
approximately 220 yards south of the former. Two of the shorter anomalies lie
within the Brookmount claims and are situated about 220 to 275 yards south of
the north boundary. Drill testing was recommended for both conductors but there
are no records to indicate that either was ever drilled.
1986-1987: Resources Macamic Inc. ("Macamic")
Macamic held a contiguous, irregularly shaped block of 97 claims in Chazel
Township and Dission Township. The present Brookmount claims were included
within their property limits.
The property was acquired as a gold project. Work conducted in 1986 included
induced polarization (IP), HLEM, magnetic and geological surveys. Nine short
lines of IP scattered about the property were surveyed. On one line, which
extended from the north onto the Brookmount property, a well defined anomaly
coincident with an HLEM conductor (Dome survey) was detected. The anomaly was
recommended as a first priority drill target.
12
Macamic's magnetic and HLEM surveys covered the Brookmount property, and two
HLEM anomalies were defined within it. One anomaly extended for over 880 yards
and showed a weak magnetic correlation and corresponded in form to the Dome
anomaly. It was rated a first priority target. The second anomaly was considered
to be an extension of the first anomaly and was rated a second priority target.
Topography and Infrastructure
Within the general area of the Brookmount claims, the topography is basically
flat with only the occasional low hill. Elevation ranges from 352 yards on the
property to 3/10 mile. Vegetation in the area is mixed boreal forest. Tree
species present on the property are spruce, jackpine balsam, tamarack, cedar,
birch and poplar. Glacial till and glacial-lacustrine clay soils dominate the
area. The area is extensively covered by low, swampy ground.
No infrastructure exists on the property. Infrastructure in the general area
includes
a) an intricate road network;
b) electrical power - the grid extends to Authier Nord, 4.4
miles from the property;
c) railway - the main east/west line of the Canadian National
Railway passes 10.6 miles to the south;
d) numerous base metal and gold mines and mills; and
e) a copper smelter in Rouyn-Noranda.
Most goods and services as well as experienced persons required for both
exploration and mining are readily available in the towns of Macamic, La Sarre
and Rouyn-Noranda and the surrounding area.
Exploration work performed on the Brookmount claim
The Company has not commenced exploration work on the Brookmount claims. The
claims are in good standing until November 14, 2006.
Mercedes 100 Property
By an agreement dated July 3, 2003, and amended on January 24, 2005, the Company
has also entered into an agreement with its president, Peter Flueck, whereby the
Company has agreed to purchase a 100% interest in six mineral concessions
comprising a total of 2,611 hectares located in Ahuigrande Parish, Comas
District, Concepcion Province of the Department of Junin, Peru. In order to
acquire a 100% interest in the Mercedes 100 property, the Company must pay
$22,500 (paid) to Mr. Flueck and issue a total of 5,000,000 shares (issued) of
restricted common stock in our capital as follows:
- 2,900,000 shares to the vendor, Mr. Flueck; and
- 1,050,000 shares to each of the other two directors of the Company.
Title to the Mercedes 100 property
The Mercedes 100 property consists of six mineral claims. We are the beneficial
owner of a 100% interest in the claims. There are no other underlying agreements
or interests in the property.
Specifics of the six mineral claims are as follows:
13
Claim Area
Claim Name Claim Number (Hectares)
---------- ------------ ----------
Mercedes 100 C-08020145X011 450.00
Celeste C-010151600 298.84
Celeste No. 2 C-010151500 218.58
Celeste No. 4 C-010151700 200.00
Nuevo Herraje Cuatro C-010154100 996.96
Nueva Charo C-010051101 446.93
Acquisition and Maintenance of Mineral Rights in Peru
The general mining law of Peru defines and regulates all mining activity, from
sampling and prospecting to commercialization, exploitation and processing.
Mining concessions are granted in defined areas generally ranging from 100 to
1,000 hectares in size. Mining titles are irrevocable and perpetual, as long as
the titleholder maintains payment of government fees. No royalties or other
production-based monetary obligations are imposed on holders of mining
concessions. Instead, a holder of mineral concessions must pay an annual
maintenance fee of $3.00 per hectare for each concession actually acquired or
for a pending application by June 30 of each year. The concession holder must
sustain a minimum level of annual commercial production of greater than $100 per
hectare in gross sales within eight years of the granting of the concession or,
if the concession is not yet in production, the annual rental increases to $4.00
per hectare for the ninth through fourteenth years of the granting of the
concession and to $10.00 per hectare thereafter. The concession will terminate
if the annual fee is not paid for three years in total or for two consecutive
years. The term of the concession is indefinite as long as the property is
maintained by payment of rental fees.
The Peruvian Constitution and the Civil Code protect a mineral title holder with
the same rights as a private property holder. The holder's rights are distinct
and independent from the ownership of the land on which it is located, even when
both belong to the same person. Mining rights are defensible against third
parties, transferable, chargeable and may be the subject of any contract or
transaction.
Description, Location and Access
The Mercedes 100 property is accessed from Lima by an excellent paved mountain
highway to Concepcion, just 10 kilometers short of the provincial capital of
Huancayo, then by a paved road to Santa Roda de Ocopa. A good all-weather gravel
road connects Ocopa with Satipo, a village in the Amazonas river basin. The
Mercedes Mine camp is 36 kilometers from Santa Rosa.
Although the property is within 12 degrees south of the equator, it lies between
4,300 and 4,500 meters above sea level in an area that is treeless and cold.
There are two main seasons in the region of the property: a dry cool winter with
sunny days and cold nights (to -4(0) Celsius) lasting from May to October, and a
wet, cool summer that lasts from November to April and is characterized for its
intense rains, snow and hail storms and average temperatures of 8(0) Celsius.
A 33 kilovolt power line follows the main gravel road past the Mercedes 100
property.
Pomamanta, the nearest village to the property, about five kilometers to the
east, is electrified on a limited basis. The line is 4.5 kilometres from the
property site. Water for mining and drilling is available from streams and seeps
in the hills above the property.
14
Nearby towns such as Concepcion and Huancayo are modern and offer most
necessities. There is a narrow guage railroad from Lima to Huancayo. This
connects the mining and smelting center of La Oroya, 130 kilometers to the west.
On the property site, there is a large brick building that could be refurnished
to serve as a camp for 20 to 30 people.
Mineralization and Exploration History
In the 1990's, Leader Mining Inc. entered into an option agreement with Mr.
Peter Flueck for a 50% working interest in the property and commissioned MPH
Geological Consulting to assess the property's potential in 1996. Although the
report contained a range of values of zinc, lead, gold and silver mineralization
found on the property, as well as calculations of proven, potential, probable
and possible reserves, we do not have sufficient information that would be
necessary to determine if these figures are accurate or were calculated in
accordance with acceptable mining standards.
Prior to our acquisition of the Mercedes 100 property, approximately $3,000,000
has been spent on the property. Most of these funds were spend on road building,
re-opening underground workings on the property, topographical surveys,
metallurgical tests, several exploitation campaigns and numerous sampling
programs.
Geological Report: Mercedes 100 property
We have obtained a geological report on the Mercedes 100 property that was
prepared by Guillermo Salazar, a professional geologist, of Calgary, Alberta. We
commissioned the report in March 2004. The geological report summarizes the
results of previous exploration on the Mercedes 100 property and makes a
recommendation for further exploration work.
In his report, Mr. Salazar recommends further exploration of the Mercedes 100
property that would include the following:
1. Survey of the property's several know showings, adits and trenches. It is
recommended that be done by confirming that the property boundaries are properly
located, that the portals, adits and trenches are re-located with respect to the
property boundaries and to other cultural and topographic features such as
access roads, camps, mine dumps and main rivers.
2. There is about 200 tonnes of run-of-mine mineral in 50 kilogram sacks stacked
along the road near the property. The sacks are in variable states of
deterioration. They are, however, readily available for shipping if a nearby
mill were to take the material for processing. The cost to us would include the
cost of check assaying, re-sacking and transportation to the mill. Preliminary
sampling of this rock indicates an average of 8.73 ounces per ton silver and
1.34% zinc. Mr. Salazar recommends that this be investigated.
3. A drilling program consisting of sixteen drill holes and totaling 1,810
meters designed to test prospective areas of the claims is recommended.
4. The geological interpretation of the claims needs to be confirmed.
This requires the following:
15
o a satellite image interpretation map. The primary objective of this would
be to define the trace continuity of the faults and veins recognized on the
property
o a structural airphoto and geological map. The airphotos used for this
map could also be used to produce a ground controlled topographic map
without the errors in the government data packages. The required detail
of this recommendation depends on the results from the survey described
in paragraph one above.
o the results from these studies should be followed up with careful
prospecting of the targets thus defined.
Mr. Salazar proposes the following budget for exploration:
Survey the property's showings, adits and trenches: $7,500
Truck rental (30 days at $100 per day): $3,000
Check assaying of 220 tonnes, re-sacking of material
and identification of potential purchasers: $10,000
Application for drilling permits: $3,000
Drilling of 1,800 meters in 16 holes: $271,500
Permit closure reporting: $3,000
Satellite interpretation of alteration and lineaments: $10,000
Testing of sacked mineralized rock (30 samples at $20 each): $600
Drill core testing (300 samples at $20 each): $6,000
Gridding work: $75,000
Report writing: $15,000
Office and administration: $7,500
Miscellaneous: $40,000
Total: $449,100
Compliance with Government Regulation
The General Mining Law of Peru is the primary body of law with regards to
environmental regulations. It is administered by the Ministry of Energy and
Mines (the "MEM"). The MEM can require a mining company to prepare an
environmental evaluation, an environmental impact assessment, a program for
environmental management and adjustment and a closure plan. Mining companies are
also subject to annual environmental audits.
A mining company that has completed its permitted exploration program must
submit an impact study when applying for a new concession, to increase the size
of its existing processing operations by more than 50% or to execute any other
mining project. A company must also set forth its plan for compliance with the
environmental laws and regulations, including its planned mining works,
investments, monitoring systems, waste management control and site restoration.
The plan is considered approved if the MEM does not respond after 60 days of
filing. If the MEM or an "interested party" can show just cause, the plan may be
modified during first year.
A mining company must also submit a closure plan for each component of its
operations. The closure plan must outline the measures that will be taken to
protect the environment over the short, medium and long term from solids,
liquids and gasses generated by the mining works. The General Mining Law of Peru
has in place a system of sanctions or financial penalties that can be levied
against a mining company not in compliance with the environmental regulations.
16
ITEM 3. LEGAL PROCEEDINGS
There are no legal proceedings pending or threatened against us.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
No matters were submitted to a vote of shareholders of the Company during the
final quarter of the fiscal year ended November 30, 2004.
PART II
-------
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
As of the date of this report our shares of common stock are trading on the
National Association of Securities Dealers' OTC Bulletin Board (OTCBB) under the
symbol "BMXI".
We have shareholders of record as at the date of this annual report.
Dividends
There are no restrictions in our articles of incorporation or bylaws that
prevent us from declaring dividends. The Nevada Revised Statutes, however, do
prohibit us from declaring dividends where, after giving effect to the
distribution of the dividend:
1. we would not be able to pay our debts as they become due in the usual
course of business; or
2. our total assets would be less than the sum of our total liabilities
plus the amount that would be needed to satisfy the rights of
shareholders who have preferential rights superior to those receiving
the distribution.
We have not declared any dividends, and we do not plan to declare any dividends
in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
OVERVIEW
Our plan of operations for the twelve months following the date of this annual
report is to complete initial exploration programs on the Brookmount and
Mercedes properties. We anticipate that these programs will cost $10,000 and
$449,100 respectively.
In addition, we anticipate spending $20,000 on professional fees, $210,000 on
management fees, $40,000 on travel costs, $20,000 on promotional expenses and
$40,000 on other administrative expenses.
Total expenditures over the next 12 months are therefore expected to be
$789,100. We will not be able to proceed with either exploration program, or
meet our administrative expense requirements, without additional financing.
We will not be able to complete the initial exploration programs on our mineral
properties without additional financing. We currently do not have a specific
17
plan of how we will obtain such funding; however, we anticipate that additional
funding will be in the form of equity financing from the sale of our common
stock. We may also seek to obtain short-term loans from our directors, although
no such arrangement has been made. At this time, we cannot provide investors
with any assurance that we will be able to raise sufficient funding from the
sale of our common stock or through a loan from our directors to meet our
obligations over the next twelve months. We do not have any arrangements in
place for any future equity financing.
Results Of Operations For Period Ending November 30, 2004
We did not earn any revenues during the period ending November 30, 2004. We do
not anticipate earning revenues until such time as we have entered into
commercial production of the Brookmount claims or the Mercedes property. We are
presently in the pre-exploration stage of our business and we can provide no
assurance that we will discover economic mineralization levels of minerals on
either property, or if such minerals are discovered, that we will enter into
commercial production.
We incurred operating expenses in the amount of $322,261 for the fiscal year
ended November 30, 2004. These operating expenses included consulting fees of
$31,099 and management fees of $152,000.
Our net loss increased from $164,407 in fiscal 2003 to $322,261 in fiscal 2004
primarily due to a general increase in company activity surrounding our change
of management and the identification, negotiation and execution of an agreement
to acquire an interest in the Mercedes property.
We have not attained profitable operations and are dependent upon obtaining
financing to pursue exploration activities. For these reasons our auditors
stated in their report that they have substantial doubt that we will be able to
continue as a going concern.
At November 30, 2004, we had assets of $56,740 consisting of cash on hand of
$51,103 (2003: $37,429), resource property cost advances of $Nil (2003:
$15,130), prepaid expenses of $3,863 (2003: $689), and capital assets of $1,774
(2003: $Nil). At the same date, we had $101,520 (2003: $63,641) in liabilities
consisting of accounts payable of $43,004 (2003: $12,575) and $58,516 (2003:
$51,066) due to related parties.
ITEM 7. FINANCIAL STATEMENTS
18
BROOKMOUNT EXPLORATIONS INC.
(A Pre-exploration Stage Company)
FINANCIAL STATEMENTS
November 30, 2004 and 2003
(Stated in US Dollars)
----------------------
19
TERRY AMISANO LTD. AMISANO HANSON
KEVIN HANSON, CA CHARTERED ACCOUNTANTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders,
Brookmount Explorations Inc.
We have audited the accompanying balance sheets of Brookmount Explorations Inc.
(A Pre-exploration Stage Company) as of November 30, 2004 and 2003 and the
related statements of operations, cash flows and stockholders' equity
(deficiency) for the years ended November 30, 2004 and 2003 and the period from
December 9, 1999 (Date of Incorporation) to November 30, 2004. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States of America). Those standards require
that we plan and perform an audit to obtain reasonable assurance whether the
financial statements are free of material misstatement. An audit includes
examining on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly, in
all material respects, the financial position of Brookmount Explorations Inc. as
of November 30, 2004 and 2003 and the results of its operations and its cash
flows for the years ended November 30, 2004 and 2003 and the period from
December 9, 1999 (Date of Incorporation) to November 30, 2004, in conformity
with accounting principles generally accepted in the United States of America.
The accompanying financial statements referred to above have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
1 to the financial statements, the Company is in the pre-exploration stage, has
no established source of revenue and is dependent on its ability to raise
capital from shareholders or other sources to sustain operations. These factors,
along with other matters as set forth in Note 1, raise substantial doubt that
the Company will be able to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Vancouver, Canada "AMISANO HANSON"
January 31, 2005 Chartered Accountants
750 West Pender Street, Suite 604 Telephone: 604-689-0188
Vancouver Canada Facsimile: 604-689-9773
V6C 2T7 E-MAIL: amishan@telus.net
20
BROOKMOUNT EXPLORATIONS INC.
(A Pre-exploration Stage Company)
BALANCE SHEETS
November 30, 2004 and 2003
(Stated in US Dollars)
ASSETS 2004 2003
------ ---- ----
Current
Cash $ 51,103 $ 37,429
Prepaid expenses 3,863 689
Mineral property costs advances - 15,130
----------------- -----------------
54,966 53,248
Capital assets - Note 3 1,774 -
----------------- -----------------
$ 56,740 $ 53,248
================= =================
LIABILITIES
Current
Accounts payable and accrued liabilities $ 43,004 $ 12,575
Due to related parties - Note 6 58,516 51,066
----------------- -----------------
101,520 63,641
----------------- -----------------
SHAREHOLDERS' DEFICIENCY
Common stock, $0.001 par value - Notes 4 and 5
200,000,000 shares authorized
10,284,848 shares issued (November 30, 2003 - 9,708,900) 10,285 9,709
Additional paid-in capital 498,056 210,658
Stock subscriptions receivable (100) -
Deficit accumulated during the pre-exploration stage (553,021) (230,760)
----------------- -----------------
(44,780) (10,393)
----------------- -----------------
$ 56,740 $ 53,248
================= =================
Nature and Continuance of Operations - Note 1
Commitments - Notes 4, 5 and 11
Subsequent Events - Notes 4, 5 and 10
SEE ACCOMPANYING NOTES
21
BROOKMOUNT EXPLORATIONS INC.
(A Pre-exploration Stage Company)
STATEMENT OF OPERATIONS
for the years ended November 30, 2004 and 2003
and for the period December 9, 1999 (Date of Incorporation) to November 30, 2004
(Stated in US Dollars)
----------------------
December 9, 1999
(Date of
Years ended Incorporation) to
November 30, November 30,
2004 2003 2004
---- ---- ----
Expenses
General and administrative - Note 6 $ 274,482 $ 164,407 $ 505,242
Mineral property costs 47,779 - 47,779
----------------- ----------------- --------------------
Net loss for the period $ (322,261) $ (164,407) $ (553,021)
================= ================= ====================
Basic and diluted loss per share $ (0.03) $ (0.02)
================ ================
Weighted average number of shares outstanding 10,000,151 9,381,509
================= =================
SEE ACCOMPANYING NOTES
22
BROOKMOUNT EXPLORATIONS INC.
(A Pre-exploration Stage Company)
STATEMENTS OF CASH FLOWS
for the years ended November 30, 2004 and 2003
and for the period December 9, 1999 (Date of Incorporation) to November 30, 2004
(Stated in US Dollars)
----------------------
December 9,
1999
(Date of
Incorporation)
to
November 30,
2004 2003 2004
---- ---- ----
Cash Flows from Operating Activities
Net loss for the period $ (322,261) $ (164,407) $ (553,021)
Add items not affecting cash:
Amortization 39 - 39
Capital contributions - Note 9 - 2,250 29,250
Changes in non-cash working capital balances
related to operations
Prepaid expenses (3,174) (689) (3,863)
Mineral property costs advances 15,130 (15,130) -
Accounts payable and accrued liabilities 30,429 (1,721) 43,004
Due to related parties 7,450 47,486 58,516
----------------- ----------------- -----------------
(272,387) (132,211) (426,075)
----------------- ----------------- -----------------
Cash Flows from Investing Activity
Acquisition of capital assets (1,813) - (1,813)
----------------- ----------------- -----------------
Cash Flows from Financing Activity
Capital stock issued 287,874 169,637 478,991
----------------- ----------------- -----------------
Increase in cash during the period 13,674 37,426 51,103
Cash, beginning of the period 37,429 3 -
----------------- ----------------- -----------------
Cash, end of the period $ 51,103 $ 37,429 $ 51,103
================= ================= =================
Supplemental disclosure of cash flow
information
Cash paid for:
Interest $ - $ - $ -
================= ================= =================
Income taxes $ - $ - $ -
================= ================= =================
Non-cash transactions - Note 9
SEE ACCOMPANYING NOTES
23
BROOKMOUNT EXPLORATIONS INC.
(A Pre-exploration Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
for the period December 9, 1999 (Date of Incorporation) to November 30, 2004
(Stated in US Dollars)
----------------------
Deficit
Accumulated
Additional Stock During the
Common Shares Paid-in Subscriptions Pre-exploration
-----------------------
Number Par Value Capital Receivable Stage Total
------ --------- ------- ---------- ----- -----
Capital stock issued for cash - at $0.001 3,500,000 $ 3,500 $ - $ - $ - $ 3,500
----------- ---------- --------- ------------ ------------- ------------
Balance, as at November 30, 1999 3,500,000 3,500 - - - 3,500
Capital stock issued for cash - at $0.002 5,750,000 5,750 5,750 - - 11,500
- at $0.20 32,400 32 6,448 - - 6,480
Contributions to capital by officers - - 9,000 - - 9,000
Net loss for the year - - - - (31,327) (31,327)
----------- ---------- --------- ------------ ------------- -------------
Balance, as at November 30, 2000 9,282,400 9,282 21,198 - (31,327) (847)
Contributions to capital by officers - - 9,000 - - 9,000
Net loss for the year - - - - (17,215) (17,215)
----------- ---------- --------- ------------ ------------- -------------
Balance, as at November 30, 2001 9,282,400 9,282 30,198 - (48,542) (9,062)
Contributions to capital by officers - - 9,000 - - 9,000
Net loss for the year - - - - (17,811) (17,811)
----------- ---------- --------- ------------ ------------- -------------
Balance, as at November 30, 2002 9,282,400 9,282 39,198 - (66,353) (17,873)
Capital stock issued for cash- at $0.25 176,500 177 43,948 - - 44,125
- at $0.50 250,000 250 125,262 - - 125,512
Contributions to capital by officers - - 2,250 - - 2,250
Net loss for the year - - - - (164,407) (164,407)
------------ --------- --------- ------------ ------------- -------------
Balance, as at November 30, 2003 9,708,900 9,709 210,658 - (230,760) (10,393)
Capital stock issued for cash- at $0.50 575,948 576 287,398 (100) - 287,874
Net loss for the year - - - - (322,261) (322,261)
------------ --------- --------- ------------ ------------- -------------
Balance, as at November 30, 2004 10,284,848 $ 10,285 $ 498,056 $ (100) $ (553,021) $ (44,780)
============ ========= ========= =============== ============= =============
SEE ACCOMPANYING NOTES
24
BROOKMOUNT EXPLORATIONS INC.
(A Pre-exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
November 30, 2004
(Stated in US Dollars)
Note 1 Nature and Continuance of Operations
------------------------------------
The Company is a pre-exploration stage company. The Company was
organized for the purpose of acquiring and developing mineral
properties. The Company has not yet determined whether these
properties contain reserves that are economically recoverable. The
recoverability of amounts from properties acquired will be
dependent upon the discovery of economically recoverable reserves,
confirmation of the Company's interest in the underlying property,
the ability of the Company to obtain necessary financing to
satisfy the expenditure requirements under the property agreement
and to complete the development of the property and upon future
profitable production on proceeds for the sale thereof.
These financial statements have been prepared on a going concern
basis. The Company has a working capital deficiency of $46,554 as
of November 30, 2004, has yet to achieve profitable operations and
has accumulated a deficit of $553,021 since inception. Its ability
to continue as a going concern is dependent upon the ability of
the Company to generate profitable operations in the future and/or
to obtain the necessary financing to meet its obligations and
repay its liabilities arising from normal business operations when
they come due. The outcome of these matters cannot be predicted
with any certainty at this time. These factors raise substantial
doubt that the Company will be able to continue as a going
concern. The Company has historically satisfied its capital needs
primarily by issuing equity securities. Management plans to
continue to provide for its capital needs during the year ended
November 30, 2004 by the issuance of common stock. These financial
statements do not include any adjustments to the amounts and
classification of assets and liabilities that may be necessary
should the Company be unable to continue as a going concern.
The Company was incorporated under the laws of the State of
Nevada, USA on December 9, 1999 and commenced operations at that
time.
Note 2 Summary of Significant Accounting Policies
------------------------------------------
The financial statements of the Company have been prepared in
conformity with accounting principles generally accepted in the
United States of America. Because a precise determination of many
assets and liabilities is dependent upon future events, the
preparation of financial statements for a period necessarily
involves the use of estimates which have been made using careful
judgement. Actual results may vary from these estimates.
The financial statements have, in management's opinion, been
properly prepared within reasonable limits of materiality and
within the framework of the significant accounting policies
summarized below:
25
Brookmount Explorations Inc.
(A Pre-exploration Stage Company)
Notes to the Financial Statements
November 30, 2004
(Stated in US Dollars) - Page 2
--------------------
Note 2 Summary of Significant Accounting Policies - (cont'd)
------------------------------------------
Pre-exploration Stage Company
-----------------------------
The Company is a pre-exploration stage company as defined in
Statement of Financial Accounting Standards ("SFAS") No. 7
"Accounting and Reporting by Development Stage Enterprises". The
Company has devoted substantially all of its efforts to the
business of exploration and development of resource property
interests in Canada and Peru. All losses accumulated since
incorporation have been considered as part of the Company's
pre-exploration stage activities.
Capital Assets and Amortization
-------------------------------
Capital assets consists of computer equipment and is recorded at
cost. Amortization is provided using the straight-line method over
three years, the estimated useful life of the equipment.
Impairment of Long-lived Assets
-------------------------------
Capital assets are reviewed for impairment in accordance with SFAS
No. 144, "Accounting for the Impairment or Disposal of Long-lived
Assets", which was adopted effective January 1, 2002. Under SFAS
No. 144, these assets are tested for recoverability whenever
events or changes in circumstances indicate that their carrying
amounts may not be recoverable. An impairment charge is recognized
for the amount, if any, which the carrying value of the asset
exceeds the fair value.
Mineral Properties
------------------
Costs of mineral property acquisition, exploration, carrying and
retaining unproven mineral properties are expensed as incurred.
Environmental Costs
-------------------
Environmental expenditures that relate to current operations are
expensed or capitalized as appropriate. Expenditures that relate
to an existing condition caused by past operations, which do not
contribute to current or future revenue generation, are expensed.
Liabilities are recorded when environmental assessment and/or
remedial efforts are probable, and the cost can be reasonable
estimated. Generally, the timing of these accruals coincides with
the earlier of completion of a feasibility study or the Company's
commitments to plan of action based on the then known facts.
26
Brookmount Explorations Inc.
(A Pre-exploration Stage Company)
Notes to the Financial Statements
November 30, 2004
(Stated in US Dollars) - Page 3
--------------------
Note 2 Summary of Significant Accounting Policies - (cont'd)
------------------------------------------
Foreign Currency Translation
----------------------------
Foreign currency transactions are translated into US dollars, the
functional and reporting currency, by the use of the exchange rate
in effect at the date of the transaction in accordance with SFAS
No. 52 "Foreign Currency Translation". Assets and liabilities
denominated in foreign currencies are translated into U.S.
dollars, at the rate of exchange prevailing at the time of the
transaction. Foreign currency transactions gains or losses are
included in net loss for the year.
Basic Loss Per Share
--------------------
The Company reports basic loss per share in accordance with SFAS
No. 128 "Earnings per Share". Basic loss per share is computed
using the weighted average number of shares outstanding during the
period.
Income Taxes
------------
The Company uses the asset and liability method of accounting for
income taxes in accordance with SFAS No. 109 "Accounting for
Income Taxes". Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to temporary differences between the financial
statements carrying amounts of existing assets and liabilities and
loss carryforwards and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
Fair Value of Financial Instruments
-----------------------------------
The carrying value of the Company's financial instruments,
consisting of cash, accounts payable and accrued liabilities and
due to related parties approximate their fair value due to the
short-term maturity of such instruments. Unless otherwise noted,
it is management's opinion that the Company is not exposed to
significant interest or credit risks arising from these financial
instruments.
Currency Risk
-------------
The Company incurs expenditures in Canadian and US dollars.
Consequently, some assets and liabilities are exposed to Canadian
dollar foreign currency fluctuations.
At November 30, 2004, cash of $15,806 (2003: $17,516) denominated
in Canadian dollars is included in these financial statements.
27
Brookmount Explorations Inc.
(A Pre-exploration Stage Company)
Notes to the Financial Statements
November 30, 2004
(Stated in US Dollars) - Page 4
--------------------
Note 2 Summary of Significant Accounting Policies - (cont'd)
------------------------------------------
New Accounting Standards
------------------------
Management does not believe that any recently issued, but not yet
effective accounting standards if currently adopted could have a
material effect on the accompanying financial statements.
Note 3 Capital Assets
--------------
2004 2003
-------------- ----------------- ---------------- --------------
Accumulated
Cost Amortization Net Net
---- ------------ --- ---
Computer equipment $ 1,813 $ 39 $ 1,774 $ -
============ =============== =============== ==============
Note 4 Mineral Properties
------------------
a) Abitibi West County, Quebec, Canada
-----------------------------------
The Company acquired five mineral claims located in the Chazel
Township, in the Province of Quebec. The claims are in good
standing until November 14, 2006.
b) Mercedes Property, Junin, Peru
------------------------------
Pursuant to a property acquisition agreement dated for
reference July 3, 2003 and amended on January 24, 2005, the
Company may acquire a 100% interest in 2,611 hectares located
in Central Peru from a director of the Company (the "Vendor")
for consideration of $22,500 (paid subsequent to November 30,
2004) and the issuance of 5,000,000 common shares (issued
subsequent to November 30, 2004). The vendor has directed the
Company to issue 2,100,000 of these common shares to two other
directors of the Company.
Note 5 Capital Stock - Note 4
-------------
Commitments:
-----------
Pursuant to an offering memorandum dated July 23, 2003, the
Company undertook to sell a minimum of 1,000,000 common shares at
$0.50 per share. At November 30, 2004, the Company had sold
825,948 common shares for proceeds of $413,386. This amount has
been included in share capital at November 30, 2004.
Subsequent to November 30, 2004, the Company received $97,300 for
194,600 common shares at $0.50 per share pursuant to this offering
memorandum.
28
Brookmount Explorations Inc.
(A Pre-exploration Stage Company)
Notes to the Financial Statements
November 30, 2004
(Stated in US Dollars) - Page 5
--------------------
Note 6 Related Party Transactions - Note 4
--------------------------
The Company was charged the following amounts by directors of the
Company, a former director and/or companies with directors or
officers in common:
December 9,
1999
(Date of
Incorporation) to
November 30,
2004 2003 2004
---- ---- ----
General and administrative:
Consulting fees $ - $ 3,000 $ 3,000
Management fees 152,000 112,000 276,000
--------------- ------------- -----------------
$ 152,000 $ 115,000 $ 279,000
=============== ============= =================
The charges were measured by the exchange amount which is the
amount agreed upon by the transacting parties.
Amounts due to related parties of $58,516 (2003 - $51,066) are due
to directors of the Company or former directors of the Company in
respect to unpaid management fees and advances. These amounts are
unsecured, non-interest bearing and have no specific terms for
repayment.
Note 7 Deferred Tax Assets
The significant components of the Company's deferred tax assets
are as follows:
2004 2003
---- ----
Deferred tax assets
Non-capital loss carryforwards $ 188,027 $ 78,458
Valuation allowance for deferred tax assets (188,027) (78,458)
-------------- --------------
$ - $ -
============== ==============
The amount taken into income as deferred tax assets must reflect
that portion of the income tax loss carryforwards which is more
likely than not to be realized from future operations. The Company
has provided an allowance of 100% against all available income tax
loss carryforwards, regardless of their time of expiry, as it is
more likely than not that all of the deferred tax assets will not
be realized.
29
Brookmount Explorations Inc.
(A Pre-exploration Stage Company)
Notes to the Financial Statements
November 30, 2004
(Stated in US Dollars) - Page 6
--------------------
Note 8 Income Taxes
------------
No provision for income taxes has been provided in these financial
statements due to the net loss. At November 30, 2004, the Company
has net operating loss carryforwards, which expire commencing in
2019 totalling approximately $553,021.
Note 9 Non-cash Transactions
---------------------
Investing and financing activities that do not have a direct
impact on current cash flows are excluded from the statement of
cash flows. Directors and officers of the Company have provided
certain administrative services at no charge. The fair value of
these services has been credited to additional paid-in capital as
follows:
December 9,
1999
(Date of
Incorporation) to
November 30,
2004 2003 2004
---- ---- ----
Management fees $ - $ 1,500 $ 19,500
Rent - 600 3,600
Telephone - 150 6,150
--------------- --------------- -------------------
$ - $ 2,250 $ 29,250
=============== =============== ===================
These transactions were excluded from the statement of cash flows.
Note 10 Subsequent Events - Notes 4 and 5
-----------------
Subsequent to November 30, 2004, the Company's common stock began
trading on the Over-The-Counter Bulletin Board.
Note 11 Commitment
On October 28, 2004, the Company entered into an office lease
agreement for the head office in Vancouver, Canada. The lease
requires monthly payments of CDN$1,200 per month commencing on
January 1, 2005 and has a term of thirteen months.
30
ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING FINANCIAL
DISCLOSURE
We have no changes in and disagreement with our accountants on accounting
financial disclosure
ITEM 8A: CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls
We evaluated the effectiveness of our disclosure controls and procedures as of
the end of the 2004 fiscal year. This evaluation was conducted with the
participation of our chief executive officer and our principal accounting
officer.
Disclosure controls are controls and other procedures that are designed to
ensure that information that we are required to disclosed in the reports we file
pursuant to the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported.
Limitations on the Effective of Controls
Our management does not expect that our disclosure controls or our internal
controls over financial reporting will prevent all error and fraud. A control
system, no matter how well conceived and operated, can provide only reasonable,
but no absolute, assurance that the objectives of a control system are met.
Further, any control system reflects limitations on resources, and the benefits
of a control system must be considered relative to its costs. These limitations
also include the realities that judgments in decision-making can be faulty and
that breakdowns can occur because of simple error or mistake. Additionally,
controls can be circumvented by the individual acts of some persons, by
collusion of two or more people or by management override of a control. A design
of a control system is also based upon certain assumptions about potential
future conditions; over time, controls may become inadequate because of changes
in conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and may not be detected.
Conclusions
Based upon their evaluation of our controls, the chief executive officer and
principal accounting officer have concluded that, subject to the limitations
noted above, the disclosure controls are effective providing reasonable
assurance that material information relating to us is made known to management
on a timely basis during the period when our reports are being prepared. There
were no changes in our internal controls that occurred during the quarter
covered by this report that have materially affected, or are reasonably likely
to materially affect our internal controls.
31
PART III
ITEM 9: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Name Age Position with Registrant Served as a Director
or Officer Since
Peter Flueck 55 President and Director March 21, 2003
Zaf Sungur 51 Chief Operating Officer April 15, 2003
Secretary, Treasurer and
Director
Victor Stilwell 53 Vice-President and Director March 21, 2003
The following describes the business experience of the Company's directors and
executive officers, including other directorships held in reporting companies:
Each director of the Company serves for a term of one year and until his
successor is elected at the Company's annual shareholders' meeting and is
qualified, subject to removal by the Company's shareholders. Each officer
serves, at the pleasure of the board of directors, for a term of one year and
until his successor is elected at the annual general meeting of the board of
directors and is qualified.
Set forth below is certain biographical information regarding each of the
Company's executive officers and directors.
Peter Flueck
Mr. Flueck brings to the Company a wealth of experience, not only in the
resource sector, but with extensive experience in Peru as well. He is presently
the President and sole shareholder of Grand Combe Developments Ltd., a Canadian
development company based in Edmonton, Alberta. He has recently been the
President of several mining companies based in Peru, including Blower
Investments A.V.V., Condor Resources A.V.V. Aruba, the Recursos Mineros El
Dorado and the Minera El Serrano, Peru.
He was also involved in the acquisition of several key mining properties in Peru
and headed up a series of negotiations with mining concerns there in order to
raise investor capital and to initiate the development of the Mercedes property
in Peru. Prior to his involvement within the mining industry, Mr. Flueck was
Vice President of Western Timber Export Ltd., an Alberta-based company
specializing in harvesting, sawmill production, pipeline contracting, production
sales and contract bidding. He has been a successful, self-employed cattle
rancher.
Zaf Sungur
Mr. Sungur has over twenty years experience in real estate development,
planning, project management and marketing. Prior to joining the Company, he has
been working as a business consultant to clients, streamlining their businesses
to achieve increased efficiencies. For a ten-year period prior to that, he was
32
the President of Pan Pacific Investments, which specialized in all aspects of
real estate development, project management and business consulting. Mr. Sungur
was also President of Sunmark International marketing, a company based in
Vancouver, British Columbia that marketed a range of Asian consumer products. He
created a network of over 50 sales representatives to cover the United States,
the United Kingdom, Holland, Germany, Italy and France, and initiated a system
of offshore manufacturing to dramatically reduce costs. Mr. Sungur holds a
Business Degree (Bachelor of Commerce), has extensive experience in North
American, Asian and European business negotiations and is fluent in English and
Turkish. He will be responsible for the operations of the Company as it proceeds
with its mining projects in Peru and Quebec.
Vic Stilwell
Mr. Stillwell is the principal of a major sales agency based in Calgary,
Alberta, which for the past twenty-five years has focused on representing such
companies as Hitachi, Panasonic, Magic Chef appliances and Flexsteel Furniture.
His company has grown successfully through the years due to its focus on high
quality products and after-sales service.
He has also been a key figure in the development of commercial and residential
real estate projects in La Paz, Mexico, planning several major projects and
providing serviced lots to potential residents and commercial concerns.
Section 16(A) Beneficial Ownership Reporting Compliance
-------------------------------------------------------
Section 16(a) of the Exchange Act requires our executive officers and directors,
and persons who beneficially own more than 10% of our equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission. Officers, directors and greater than 10% shareholders are required
by SEC regulation to furnish us with copies of all Section 16(a) forms they
file. Based on our review of the copies of such forms we received, we believe
that during the fiscal year ended November 30, 2004 all such filing requirements
applicable to our officers and directors were complied with exception that
reports were filed late by the following persons:
Number Transactions Known Failures
Name and Of late Not Timely to file a
Principal position Reports Reported Required Form
------------------ ------- ------------ --------------
Peter Flueck 0 0 1
Zaf Sungur 0 0 1
Victor Stilwell 0 0 1
33
ITEM 10. EXECUTIVE COMPENSATION
The table below summarizes all compensation awarded to, earned by, or paid to
our executive officers by any person for all services rendered in all capacities
to us for the fiscal year ended November 30, 2004.
Annual Compensation Long Term Compensation
------------------- ----------------------
Restricted
Other Annual Stock Options/ LTIP All Other
Name Title Year Salary Bonus Compensation Awarded SARs (#) payouts ($) Compensation
---- ----- ---- ------ ----- ------------ ------- -------- ----------- ------------
Peter President 2004 $48,000 0 0 0 0 0 0
Flueck
Zaf COO, Secretary/ 2004 $48,000 0 0 0 0 0 0
Sungur Treasurer
Victor Vice-President 2004 $48,000 0 0 0 0 0 0
Stilwell
ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth information regarding the beneficial ownership of
our shares of common stock at November 30, 2004 by (i) each person known by us
to be the beneficial owner of more than 5% of our outstanding shares of common
stock, (ii) each of our directors, (iii) our executive officers, and (iv) by all
of our directors and executive officers as a group. Each person named in the
table, has sole voting and investment power with respect to all shares shown as
beneficially owned by such person and can be contacted at our executive office
address.
NAME OF SHARES OF
TITLE OF CLASS BENEFICIAL OWNER COMMON STOCK PERCENT OF CLASS
-------------- ---------------- ------------ ----------------
Common Peter Flueck 4,825,000 31.57%
18912-121 Ave. N.W.
Edmonton, Alberta
T5V 1R3
Common Victor Stillwell 1,680,000 10.99%
16 Douglas Woods Park S.E.
Calgary, Alberta
T2Z 2K6
Common Zaf Sungur 1,365,000 8.93%
2005 - 837 W. Hastings
Vancouver, B.C.
V6C 1B6
DIRECTORS AND 7,870,000 51.49%
OFFICERS AS A
GROUP CONSISTING
OF THREE PEOPLE
34
As of the date of this annual report, we have 15,284,848 shares of common stock
issued and outstanding.
ITEM 12.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ended November 30, 2004, we paid or accrued $48,000 in
management fees to each of the following individuals:
o Peter Flueck, our president;
o Zaf Sungur, our COO,secretary and treasurer; and
o Victor Stilwell, our vice-president.
During the fiscal year 2003, the Company entered into an agreement with its
president, Peter Flueck, whereby the Company has agreed to purchase a 100%
interest in six mineral concessions comprising a total of 2,550 hectares located
in Ahuigrande Parish, Comas District, Concepcion Province of the Department of
Junin, Peru. Pursuant to the agreement, as amended, the Company must issue
5,000,000 shares of common stock (issued subsequent to November 30, 2004) to the
directors of the Company and pay $22,500 (paid subsequent to November 30, 2004)
to Peter Flueck.
Otherwise, none of our directors or officers, nor any proposed nominee for
election as a director, nor any person who beneficially owns, directly or
indirectly, shares carrying more than 10% of the voting rights attached to all
of our outstanding shares, nor any promoter, nor any relative or spouse of any
of the foregoing persons has any material interest, direct or indirect, in any
transaction since our incorporation or in any presently proposed transaction
which, in either case, has or will materially affect us.
Our management is involved in other business activities and may, in the future
become involved in other business opportunities. If a specific business
opportunity becomes available, such persons may face a conflict in selecting
between our business and their other business interests. In the event that a
conflict of interest arises at a meeting of our directors, a director who has
such a conflict will disclose his interest in a proposed transaction and will
abstain from voting for or against the approval of such transaction.
PART IV
Exhibits
--------
3.1 Charter and By-Laws*
10.1 Mineral Property Purchase Agreement
31.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
* Filed as an exhibit to our registration statement on Form
10-KSB dated December 27, 2000
36
Reports on Form 8-K
-------------------
We did not file any reports on Form 8-K during the last quarter of 2004.
ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES
Our current principal accountants, Amisano Hanson, Chartered Accountants billed
the following fees for the services indicated.
Fiscal year ended Fiscal year ended
November 30, 2004 November 30, 2003
Audit fees $8,934 $5,500*
Audit-related fees $6,189 Nil
Tax fees Nil Nil
All other fees Nil Nil
* includes an accrual for audit fees
Audit fees consist of fees related to professional services rendered in
connection with the audit of our annual financial statements, the review of the
financial statements included in each of our quarterly reports on Form 10-QSB.
Our audit committee's policy is to pre-approve all audit and permissible
non-audit services performed by the independent accountants. These services may
include audit services, audit-related services, tax services and other services.
Under our audit committee's policy, pre-approval is generally provided for
particular services or categories of services, including planned services,
project based services and routine consultations. In addition, the audit
committee may also pre-approve particular services on a case-by-case basis. Our
audit committee approved all services that our independent accountants provided
to us in the past two fiscal years.
SIGNATURES
Pursuant to the requirements of Section 13 and 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Brookmount Explorations Inc.
By /s/ Peter Flueck
-------------------------
Peter Flueck
President, CEO & Director
Date: February 25, 2005
In accordance with the Securities Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
36
By /s/ Peter Flueck
----------------
Peter Flueck
President, CEO & Director
Date: February 25, 2005
By /s/ Zaf Sungur
---------------
COO, Secretary, Treasurer, Principal
Accounting Officer and Director
Date: February 25, 2005
By /s/ Victor Stilwell
Vice-President and Director
Date: February 25, 2005