Item 1. Financial Statements.
Ironwood Gold Corp
(An Exploration Stage Company)
Condensed Financial Statements
(Unaudited)
28 February 2014
The accompanying notes are an integral part of these condensed
financial statements.
Ironwood Gold Corp
|
(An Exploration Stage Company)
|
Condensed Balance
Sheets
|
|
|
28-Feb-14
|
|
|
|
|
|
|
(Unaudited)
|
|
|
31-Aug-13
|
|
|
|
$
|
|
|
$
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
-
|
|
|
-
|
|
Prepaid expenses
|
|
-
|
|
|
-
|
|
Total Current Assets
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
Deposits
|
|
-
|
|
|
-
|
|
Mineral properties
|
|
-
|
|
|
-
|
|
Total Assets
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Accounts payable and accrued expenses (including accounts
|
|
|
|
|
|
|
payable to related parties of $246,516 and
$166,523,
|
|
|
|
|
|
|
respectively)
|
|
884,297
|
|
|
772,557
|
|
Accrued interest
|
|
218,311
|
|
|
152,303
|
|
Convertible promissory notes, net of discounts of $111,258
and
|
|
|
|
|
|
|
$135,835, respectively
|
|
758,163
|
|
|
667,672
|
|
Derivative liability
|
|
254,211
|
|
|
296,875
|
|
Total Current Liabilities
|
|
2,114,982
|
|
|
1,889,407
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
2,114,982
|
|
|
1,889,407
|
|
|
|
|
|
|
|
|
Stockholders Deficiency
|
|
|
|
|
|
|
Common stoc
k
Authorized: 250,000,000 common
shares, par value $0.001
Issued and outstanding:
28 February 2013 34,989,184 common shares
31 August 2013 31,819,336 common shares
|
|
34,989
|
|
|
31,819
|
|
Capital in excess of par value
|
|
4,452,801
|
|
|
4,364,929
|
|
Subscriptions received
|
|
60,000
|
|
|
60,000
|
|
Deficit accumulated during exploration
stage
|
|
(6,662,772
|
)
|
|
(6,346,155
|
)
|
Total Stockholders Deficiency
|
|
(2,114,982
|
)
|
|
(1,889,407
|
)
|
Total Liabilities and Stockholders
Deficiency
|
|
-
|
|
|
-
|
|
The accompanying notes are an integral part of these condensed
financial statements.
2
Ironwood Gold Corp
|
(An Exploration Stage Company)
|
Condensed Statements of Operations
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
from the date of
|
|
|
|
For the three
|
|
|
For the three
|
|
|
For the six
|
|
|
For the six
|
|
|
inception on 18
|
|
|
|
months ended
|
|
|
months ended
|
|
|
months ended
|
|
|
months ended
|
|
|
January 2007 to
|
|
|
|
28-Feb-14
|
|
|
28-Feb-13
|
|
|
28-Feb-14
|
|
|
28-Feb-13
|
|
|
28-Feb-14
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
938,717
|
|
General and administrative
|
|
123,204
|
|
|
188,213
|
|
|
235,039
|
|
|
463,622
|
|
|
4,095,232
|
|
Impairment loss on mineral
property
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,690,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Operating Expenses
|
|
123,204
|
|
|
188,213
|
|
|
235,039
|
|
|
463,622
|
|
|
6,724,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (income) expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forgiveness of debt
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(587,030
|
)
|
Interest expense
|
|
50,239
|
|
|
134,286
|
|
|
120,990
|
|
|
405,571
|
|
|
2,786,434
|
|
Gain on debt extinguishment
|
|
-
|
|
|
(16,237
|
)
|
|
-
|
|
|
(16,237
|
)
|
|
(32,871
|
)
|
Loss (gain) on derivative
liabilities
|
|
12,980
|
|
|
565,155
|
|
|
(39,412
|
)
|
|
539,877
|
|
|
(2,228,070
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other (income)
expense
|
|
63,219
|
|
|
683,204
|
|
|
81,578
|
|
|
929,211
|
|
|
(61,537
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
(186,423
|
)
|
|
(871,417
|
)
|
|
(316,617
|
)
|
|
(1,392,833
|
)
|
|
(6,662,772
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per
common share
|
|
(0.005
|
)
|
|
(0.10
|
)
|
|
(0.010
|
)
|
|
(0.16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares
-
Basic and diluted
|
|
34,989,184
|
|
|
8,949,960
|
|
|
31,819,336
|
|
|
8,775,927
|
|
|
|
|
The accompanying notes are an integral part of these condensed
financial statements.
3
Ironwood Gold Corp
|
(An Exploration Stage Company)
|
Condensed Statements of Cash Flows
|
(Unaudited)
|
|
|
|
|
|
|
|
|
For the period
|
|
|
|
|
|
|
|
|
|
from the date
of
|
|
|
|
For six months
|
|
|
For six months
|
|
|
inception on
|
|
|
|
ended
|
|
|
ended
|
|
|
18 January 2007
to
|
|
|
|
28-Feb-14
|
|
|
28-Feb-13
|
|
|
28-Feb-14
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Cash flows used in operating activities
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
(316,617
|
)
|
|
(1,392,833
|
)
|
|
(6,662,772
|
)
|
Adjustments to reconcile
net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
Amortization of debt discount and
interest expense
|
|
59,597
|
|
|
347,310
|
|
|
2,513,166
|
|
Stock issued for services
|
|
-
|
|
|
235,000
|
|
|
1,424,820
|
|
Vesting of stock options
|
|
57,612
|
|
|
57,612
|
|
|
532,916
|
|
Impairment loss on mineral property acquisition costs
|
|
-
|
|
|
-
|
|
|
1,690,360
|
|
Forgiveness of debt other income
|
|
-
|
|
|
-
|
|
|
(587,030
|
)
|
(Gain) loss on derivative liability
|
|
(39,412
|
)
|
|
539,877
|
|
|
(2,228,070
|
)
|
(Gain) loss on debt extinguishment
|
|
-
|
|
|
(16,237
|
)
|
|
(32,871
|
)
|
Contributions to capital by related party
|
|
-
|
|
|
-
|
|
|
68,300
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Due to related parties
|
|
-
|
|
|
-
|
|
|
34,166
|
|
Prepaid expenses and deposits
|
|
-
|
|
|
(102,222
|
)
|
|
(50,000
|
)
|
Increase in accounts payable and accrued expenses
|
|
166,487
|
|
|
146,493
|
|
|
1,201,710
|
|
Net cash flows (used in) operating
activities
|
|
(72,333
|
)
|
|
(185,000
|
)
|
|
(2,095,305
|
)
|
Cash flows used in investing activities
|
|
|
|
|
|
|
|
|
|
Acquisition of mineral property interest
|
|
-
|
|
|
-
|
|
|
(220,785
|
)
|
Net cash flows (used in) investing activities
|
|
-
|
|
|
-
|
|
|
(220,785
|
)
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
Payment on note payable for mineral property
|
|
-
|
|
|
-
|
|
|
(5,000
|
)
|
Advances from Director
|
|
-
|
|
|
-
|
|
|
61,875
|
|
Payments to Director
|
|
-
|
|
|
-
|
|
|
(61,875
|
)
|
Advances from shareholder
|
|
-
|
|
|
-
|
|
|
100,000
|
|
Payments to shareholder
|
|
-
|
|
|
-
|
|
|
(100,000
|
)
|
Proceeds from convertible promissory note
|
|
72,333
|
|
|
185,000
|
|
|
942,040
|
|
Common shares issued for debt conversion
|
|
-
|
|
|
-
|
|
|
-
|
|
Common shares issued for cash
|
|
-
|
|
|
-
|
|
|
1,319,050
|
|
Subscriptions received
|
|
-
|
|
|
-
|
|
|
60,000
|
|
Net cash flows provided by financing
activities
|
|
72,333
|
|
|
185,000
|
|
|
2,316,090
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash
equivalents
|
|
-
|
|
|
-
|
|
|
-
|
|
Cash and cash equivalents, beginning of period
|
|
-
|
|
|
-
|
|
|
-
|
|
Cash and cash equivalents, end of
period
|
|
-
|
|
|
-
|
|
|
-
|
|
The accompanying notes are an integral part of these condensed
financial statements.
4
Ironwood Gold Corp
|
(An Exploration Stage Company)
|
Notes to Condensed Financial Statements
|
28 February
2014
|
1.
|
Nature and Continuance of Operations
|
|
|
|
The Company, Ironwood Gold Corp. (formerly Suraj
Ventures, Inc.), was incorporated under the laws of the State of Nevada on
18 January 2007, with the authorized common stock of 25,000,000 shares at
$0.001 par value. The Company was organized for the purpose of acquiring
and developing mineral properties. On 6 October 2009, the Company formed a
wholly-owned subsidiary in the State of Nevada named Ironwood Gold Corp.
On 8 October 2009, the Company merged with its wholly-owned subsidiary,
Ironwood Gold Corp. and the name of the merged entity was change to
Ironwood Gold Corp.
|
|
|
|
The Company is an exploration stage company. The Company
is devoting all of its present efforts in securing and establishing a new
business, and its planned principal operations have not commenced, and,
accordingly, no revenue has been derived during the exploration
stage.
|
|
|
|
The financial statements of the Company have been
prepared in accordance with accounting principles generally accepted in
the United States of America (GAAP) applicable to exploration stage
enterprises. In the opinion of management, all adjustments considered
necessary for a fair presentation of the results of operations and
financial position have been included and all such adjustments are of a
normal recurring nature. The Companys fiscal year end is 31
August.
|
|
|
|
The interim financial statements for the three and six
months ended 28 February 2014 and 28 February 2013 are unaudited. These
financial statements are prepared in accordance with requirements for
unaudited interim periods, and consequently do not include all disclosures
required to be in conformity with accounting principles generally accepted
in the United States of America. The results of operations for the interim
periods are not necessarily indicative of the results for the full year.
In the opinion of management, all adjustments considered necessary for a
fair presentation of the results of operations and financial position have
been included and all such adjustments are of a normal recurring nature.
These interim financial statements should be read in conjunction with the
financial statements included in our Annual Report on Form 10-K for the
year ended 31 August 2013 filed with the SEC.
|
|
|
|
Going Concern
|
|
|
|
These financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
settlement of liabilities and commitments in the normal course of
business. The Company had a net loss for the six months ended 28 February
2014, of $316,617 (six months ended 28 February 2013 net loss of
$1,392,833), cumulative net loss of $6,662,772 and had a working capital
deficit of $2,114,982 as of 28 February 2014 (31 August 2013 -
$1,889,407), which raises substantial doubt about its ability to continue
as a going concern.
|
|
|
|
Management cannot provide assurance that the Company will
ultimately achieve profitable operations or become cash flow positive, or
raise additional debt and/or equity capital. Management believes that the
Company will be able to raise additional capital, through debt and equity
financing, to continue operating and maintaining its business strategy
during the fiscal year ending 31 August 2014. However, if the Company is
unable to raise additional capital in the near future, due to the
Companys liquidity problems, management expects that the Company will
need to curtail operations, liquidate assets, seek additional capital on
less favourable terms and/or pursue other remedial measures. These
financial statements do not include any adjustments related to the
recoverability and classification of assets or the amounts and
classification of liabilities that might be necessary should the Company
be unable to continue as a going concern.
|
5
Ironwood Gold Corp
|
(An Exploration Stage Company)
|
Notes to Condensed Financial Statements
|
28 February
2014
|
2.
|
Significant Accounting Policies
|
|
|
|
The following is a summary of significant accounting
policies used in the preparation of these financial statements.
|
|
|
|
Basis of presentation
|
|
|
|
The accounting and reporting policies of the Company
conform to accounting principles generally accepted in the United States
of America applicable to exploration stage enterprises (GAAP).
|
|
|
|
Cash and cash equivalents
|
|
|
|
Cash and cash equivalents include highly liquid
investments with original maturities of three months or less.
|
|
|
|
Financial instruments
|
|
|
|
The Companys financial instruments consist of cash and
cash equivalents, accounts payable and accrued expenses and amounts due to
related parties. Unless otherwise noted, it is managements opinion that
the Company is not exposed to significant interest or credit risks rising
from these financial instruments. The fair values of these financial
instruments approximate their carrying values, unless otherwise
noted.
|
|
|
|
Mineral property costs
|
|
|
|
The Company has been in the exploration and development
stage since its formation on 18 January 2007 and has not yet realized any
revenues from its planned operations. It is primarily engaged in the
acquisition and exploration of mining properties.
|
|
|
|
Mineral property acquisition costs are initially
capitalized as tangible assets when purchased. If proven and probable
reserves are established for a property and it has been determined that a
mineral property can be economically developed, costs will be amortized
using the units-of-production method over the estimated life of the
probable reserve.
|
|
|
|
Mineral property exploration costs are expensed as
incurred.
|
|
|
|
Estimated future removal and site restoration costs, when
determinable are provided over the life of proven reserves on a
units-of-production basis. Costs, which include production equipment
removal and environmental remediation, are estimated each period by
management based on current regulations, actual expenses incurred, and
technology and industry standards. Any charge is included in exploration
expense or the provision for depletion and depreciation during the period
and the actual restoration expenditures are charged to the accumulated
provision amounts as incurred.
|
|
|
|
As of the date of these financial statements, the Company
has not established any proven or probable reserves on its mineral
properties and incurred only acquisition and exploration costs.
|
|
|
|
Although the Company has taken steps to verify title to
mineral properties in which it has an interest, according to the usual industry
standards for the stage of exploration of such properties, these procedures do
not guarantee the Companys title. Such properties may be subject to prior
agreements or transfers and title may be affected by undetected defects.
|
6
Ironwood Gold Corp
|
(An Exploration Stage Company)
|
Notes to Condensed Financial Statements
|
28 February
2014
|
Reclamation costs
The Companys policy for recording
reclamation costs is to record a liability for the estimated costs to reclaim
mined land by recording charges to production costs for each tonne of ore mined
over the life of the mine. The amount charged is based on managements
estimation of reclamation costs to be incurred. The accrued liability is reduced
as reclamation expenditures are made. Certain reclamation work is performed
concurrently with mining and these expenditures are charged to operations at
that time. To date the Company has not incurred any reclamation costs.
Long-lived assets
The carrying values of long-lived
assets, including the carrying values of mineral property costs, are reviewed on
a regular basis for the existence of facts or circumstance that may suggest
impairment. The Company recognizes impairment when the sum of the expected
undiscounted future cash flows is less than the carrying amount of the asset.
Impairment losses, if any, are measured as the excess of the carrying amount of
the asset over its estimated fair value.
Income taxes
Deferred income taxes are reported for
timing differences between items of income or expense reported in the financial
statements and those reported for income tax purposes. Deferred income taxes and
tax benefits are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases, and for tax loss and credit
carry-forwards. 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. The Company
provides for deferred taxes for the estimated future tax effects attributable to
temporary differences and carry-forwards when realization is more likely than
not.
Basic and diluted net loss per share
The Company presents both basic and
diluted earnings per share (EPS) on the face of the income statement. Basic
EPS is computed by dividing net loss available to common shareholders
(numerator) by the weighted average number of shares outstanding (denominator)
during the period. Diluted EPS gives effect to all potentially dilutive common
shares outstanding during the period using the treasury stock method and
convertible preferred stock using the if-converted method. In computing diluted
EPS, the average stock price for the period is used in determining the number of
shares assumed to be purchased from the exercise of stock options or warrants.
Diluted EPS excludes all potentially dilutive shares if their effect is
anti-dilutive. As of 28 February 2014, 100,887,787 such potentially dilutive
shares were excluded from the calculation of diluted weighted-average shares
outstanding.
Foreign currency translation
The Companys functional and reporting
currency is in U.S. dollars. Monetary assets and liabilities denominated in
foreign currencies are translated using the exchange rate prevailing at the
balance sheet date. Gains and losses arising on translation or
settlement of foreign currency denominated transactions or balances are
included in the determination of income. The Company has not, to the date
of these financial statements, entered into derivative instruments to
offset the impact of foreign currency fluctuations.
7
Ironwood Gold Corp
|
(An Exploration Stage Company)
|
Notes to Condensed Financial Statements
|
28 February
2014
|
|
Use of estimates
|
|
|
|
The preparation of financial statements in conformity
with GAAP requires management to make estimates and assumptions that
affect the amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenditures during the reporting period.
Actual results could differ from these estimates.
|
|
|
|
Recent Accounting Pronouncements
|
|
|
|
The Company does not expect the adoption of any recent
accounting pronouncements to have a material impact on its financial
statements.
|
|
|
3.
|
Related Party Transactions
|
|
|
|
During the six months ended 28 February 2014, the Company
accrued management fees to its CEO of $60,000. Included in accounts
payable at 28 February 2014, is $246,516 due to the Companys CEO for
management fees, travel expenses and payments made on behalf of the
Company (31 August 2013 - $166,523).
|
|
|
4.
|
Convertible Promissory Notes
|
|
|
|
On August 16, 2011, the Company borrowed $550,000 in the
form of a convertible note payable, with a maturity date of November 16,
2012, and an annual interest rate of 10% (default interest rate of 16%).
The note is convertible at the holders option at $0.40 per share. The
note is secured by all of the assets of the Company. In conjunction with
this note payable, the Company issued 1,375,000 warrants to purchase
common shares of the Companys common stock, and issued 220,000 shares of
common stock. The Company determined the notes qualified for derivative
liability treatment under ASC 815 (see Note 5). Accordingly, the Company
recorded amounts based on their relative fair values (debt - $351,409;
warrants - $173,670; and common stock - $24,921). The fair value of the
warrants was determined using the Black- Scholes model and included the
following assumptions: risk free rate of 0.95% and annual volatility of
241%. The warrants have an exercise price of $0.60 and have a contractual
life of 5 years from the date of issuance. The value of the discounts
created by the warrants and beneficial conversion feature was $173,670 and
$209,729, respectively. The discount related to the beneficial conversion
feature will be amortized to interest expense over the life of the debt
and the discount for the warrants will be amortized to interest expense
over the contractual life of the warrants.
|
|
|
|
On April 20, 2012, the Company restructured this debt by
receiving $100,000 in cash, issuing 4,625,000 additional warrants with an
exercise price of $.08, and reducing the conversion price on the debt to
$0.08. The Company accounted for this debt restructure as an
extinguishment of debt, replaced by new debt, due to a substantial
modification of terms. As a result, the Company recorded a gain on debt restructure of
$10,761. Additionally, the Company recorded new discounts for the beneficial
conversion feature and additional warrants of $338,050 and $311,950. These
discounts will be amortized to interest expense over the life of the debt (for
the beneficial conversion feature) and over the contractual life of the warrants
(for the warrants).
|
8
Ironwood Gold Corp
|
(An Exploration Stage Company)
|
Notes to Condensed Financial Statements
|
28 February
2014
|
On February 1, 2013, the Company
restructured this debt by receiving $100,000 in cash, issuing 2,000,000
additional warrants with an exercise price of $.08, and reducing the conversion
price on the debt to $0.05. The Company accounted for this debt restructure as
an extinguishment of debt, replaced by new debt, due to a substantial
modification of terms. As a result, the Company recorded a gain on debt
restructure of $16,237. Additionally, the Company recorded new discounts for the
beneficial conversion feature and additional warrants of $274,991 and $131,780.
These discounts will be amortized to interest expense over the life of the debt
(for the beneficial conversion feature) and over the contractual life of the
warrants (for the warrants).
On 11 February 2013, the note holder
elected to convert $50,000 of principal and $10,947 of accrued interest on the
convertible note payable into stock subscriptions to receive 1,218,944 shares of
the Companys common stock. As a result of the conversion, the Company
recognized $51,945 of derivative liability to additional paid-in capital, and
recognized $17,696 of the unamortized debt discount to interest expense.
As of April 15, 2013, the Company was
in default on this loan. Accordingly, the Company recognized the remaining
discount on debt (related to the beneficial conversion feature) to interest
expense, in the amount of $232,597, on that date. The discount related to the
warrants will continue to be amortized over the contractual life of the
warrants.
On 26 December 2013, the Company
formalized $39,000 in advances with allonge #3 to include them as part of the
loan agreement.
On 19 February 2014, the Company
formalized $30,520 in advance with allonge #4 to include them as part of the
loan agreement.
For the six months ended 28 February
2014, the Company had recorded related amortization on debt discounts of $37,356
leaving an unamortized balance of debt discounts of $110,015, and an ending
derivative liability balance of $30,214. Accrued interest expense on this note
totaled $199,790 at 28 February 2014. Total interest expense recorded for this
note totaled $56,754 for the six months ended 28 February 2014.
On 10 September 2012, the Company
borrowed $56,000 in the form of a convertible note payable, with a maturity date
of 12 June 2013, and an annual interest rate of 8% (default interest rate of
22%). The note is convertible at the holders option, during the period
beginning 180 days following the date of the note and ending on the later of (i)
the maturity date and (ii) the date of payment of the default amount, at a
variable conversion price equal to the average of the lowest two trading prices
for the common stock during the 20 trading day period ending on the latest complete trading day prior to the
conversion date and discounted by 45%. The note is secured by all of the assets
of the Company. The Company determined the note qualified for derivative
liability treatment under ASC 815 (See Note 5).
9
Ironwood Gold Corp
|
(An Exploration Stage Company)
|
Notes to Condensed Financial Statements
|
28 February
2014
|
On 19 November 2012, the Company
borrowed $29,000 in the form of a convertible note payable, with a maturity date
of 21 August 2013, and an annual interest rate of 8% (default interest rate of
22%). The note is convertible at the holders option, during the period
beginning 180 days following the date of the note and ending on the later of (i)
the maturity date and (ii) the date of payment of the default amount, at a
variable conversion price equal to the average of the lowest two trading prices
for the common stock during the 20 trading day period ending on the latest
complete trading day prior to the conversion date and discounted by 45%. The
note is secured by all of the assets of the Company. The Company determined the
note qualified for derivative liability treatment under ASC 815 (See Note
5).
On 7 March 2013, the Company borrowed
$32,500 in the form of a convertible note payable, with a maturity date of 11
December 2013, and an annual interest rate of 8% (default interest rate of 22%).
The note is convertible at the holders option, during the period beginning 180
days following the date of the note and ending on the later of (i) the maturity
date and (ii) the date of payment of the default amount, at a variable
conversion price equal to the lowest trading price for the common stock during
the 60 trading day period ending on the latest complete trading day prior to the
conversion date and discounted by 55%. The note is secured by all of the assets
of the Company. The Company determined the notes qualified for derivative
liability treatment under ASC 815 (See Note 5).
On 21 March 2013 and 8 May 2013, the
note holder elected to convert $7,900 and $8,300 of principal on the convertible
note payable into stock subscriptions to receive 441,341 and 1,509,091 shares of
the Companys common stock. As a result of the conversions, the Company
recognized $20,929 of derivative liability to additional paid-in capital, and
recognized $4,452 of the unamortized debt discount to interest expense.
On 16 July 2013, the Company borrowed
$7,000 in the form of a convertible note payable, with a maturity date of 18
April 2014, and an annual interest rate of 8% (default interest rate of 22%).
The note is convertible at the holders option, during the period beginning 180
days following the date of the note and ending on the later of (i) the maturity
date and (ii) the date of payment of the default amount, at a variable
conversion price equal to the lowest trading price for the common stock during
the 60 trading day period ending on the latest complete trading day prior to the
conversion date and discounted by 55%. The note is secured by all of the assets
of the Company. The Company determined the notes qualified for derivative
liability treatment under ASC 815 (See Note 5).
On December 16, 2013 and January 8,
2014 the Company issued 1,584,848 and 1,585,000 common shares, respectively,
upon the conversion of $5,230 and $3,170 of convertible notes, respectively.
10
Ironwood Gold Corp
|
(An Exploration Stage Company)
|
Notes to Condensed Financial Statements
|
28 February
2014
|
|
For the 10 September 2012, 19 November 2012, 7 March
2013, and 16 July 2013 notes, the Company recorded debt discount
amortization of $55,008 and coupon interest expense of $65,982 during the
six months ended 28 February 2014, leaving ending balances on 28 February
2014 of face value of debt of $99,900, debt discount of $1,243, and
derivative liabilities of $208,201.
|
|
|
5.
|
Derivative Liability
|
|
|
|
Effective July 31, 2009, the Company adopted ASC 815-40
which defines determining whether an instrument (or embedded feature) is
solely indexed to an entitys own stock. The Company borrowed $550,000 on
August 16, 2011. This note is convertible at the holders option at $.40
per share. Additionally, the Company issued 1,375,000 warrants to purchase
shares of the Companys common stock at an exercise price of $.60,
expiring 5 years from the date of issuance.
|
|
|
|
The conversion price of the debt and the exercise price
of the warrants are subject to a reset provision in the event the
Company subsequently issues common stock at a price lower than the
effective conversion price of the conversion option or warrant exercise
price. If these provisions are triggered, the conversion price of the debt
and exercise price of the warrants will be reduced. As a result, the
conversion option and warrants are not considered to be solely indexed to
the Companys own stock and are not afforded equity treatment.
|
|
|
|
The fair values of the conversion option of the debt and
warrants, at August 31, 2011, were $209,729 and $271,817, respectively,
and have been recognized as derivative liabilities on the dates of
issuance with all future changes in the fair value of these derivatives
being recognized in earnings in the Companys statement of operations
under the caption Other income (expense) Gain (loss) on derivative
liability until such time as the debt is converted or the warrants are
exercised or expire.
|
|
|
|
Due to the debt restructure on April 20, 2012, the
Company recorded gains on these derivative liabilities in the amount of
$104,410 and $136,225 for the conversion option and warrants,
respectively. Also, new derivative liabilities were recorded in the
amounts of $766,995 and $599,816 for the conversion option and warrants,
respectively.
|
|
|
|
Due to its requirement to re-measure the derivative
liabilities associated with this note, for the six month period ending 28
February 2014, the Company recorded a gain on derivative liability of
$43,491.
|
|
|
|
The Company borrowed $56,000 on 10 September 2012,
$29,000 on 19 November 2012, $32,500 on 7 March 2013, and $7,000 on 16
July 2013. These notes are convertible at the holders option based on the
conditions and pricing formula detailed in Note 4.
|
|
|
|
The conversion price of the debt is subject to a reset
provision in the event the Company subsequently issues common stock at a
price lower than the effective conversion price of the conversion option.
If this provision is triggered, the conversion price of the debt will be
reduced. As a result, the conversion option is not considered to be solely
indexed to the Companys own stock and is not afforded equity
treatment.
|
|
|
|
The fair values of the conversion options of the debt at
issuance were $450,107 and were recognized as derivative liabilities on the date of
issuance with all future changes in the fair value of this derivative
being recognized in earnings in the Companys statement of operations
under the caption Other income (expense) Gain (loss) on derivative
liability until such time as the debt is converted.
|
11
Ironwood Gold Corp
|
(An Exploration Stage Company)
|
Notes to Condensed Financial Statements
|
28 February
2014
|
|
Due to its requirement to re-measure the derivative
liabilities associated with these notes, for the six month period ending
28 February 2014, the Company recorded a net loss on derivative liability
of $4,079.
|
|
|
6.
|
Capital Stock
|
|
|
|
Authorized
|
|
|
|
The total authorized capital is 250,000,000 common shares
with a par value of $0.001 per common share.
|
|
|
|
Issued and outstanding
|
|
|
|
On 22 February 2012, the Company issued 500,000 common
shares under an Amendment to the Falcon agreement. The transaction was
valued at $60,000 being the trading price of the Companys shares on 22
February 2012, $0.12 per share, multiplied by the number of shares issued
500,000.
|
|
|
|
On 14 September 2012, Ironwood Gold Corp., a Nevada
corporation (the "Company"), entered into a Restricted Stock Award
Agreement (the "Agreement") with a Company officer and a Company director.
Pursuant to the Agreement, the officer will receive two million
(2,000,000) shares of Company common stock and the director will receive
two hundred and fifty thousand (250,000) shares of Company common stock.
The transaction was valued at $135,000 being the trading price of the
Companys shares on 14 September 2012, $0.06 per share (post share split),
multiplied by the number of shares to be issued, 2,250,000
shares.
|
|
|
|
On 1 March 2013, Ironwood Gold Corp., a Nevada
corporation (the "Company"), entered into a Restricted Stock Award
Agreement (the "Agreement") with a Company officer and a Company director.
Pursuant to the Agreement, the officer will receive four million
(4,000,000) shares of Company common stock and the director will receive
four hundred thousand (400,000) shares of Company common stock. The
transaction was valued at $294,800 being the trading price of the
Companys shares on 1 March 2013, $0.067 per share (post share split),
multiplied by the number of shares to be issued, 4,400,000
shares.
|
|
|
|
During the year ended 31 August 2013, the Company issued
an additional 2,000,000 shares of common stock at $0.05 per share for
services valued at $100,000, 5,000,000 shares of common stock at $0.067
per share for services valued at $335,000, and 4,000,000 shares of common
stock at $0.035 per share for services valued at $140,000. The Company
also issued 1,218,944 shares of common stock at $0.05 per share in
conversion of $60,947 of principal and accrued interest of notes payable,
441,341 shares of common stock at $0.018 per share in conversion of $7,900
of notes payable, 1,509,091 shares of common stock at $0.017 per share in
conversion of $8,300 of notes payable, and 300,000 shares of common stock
at $0.067 per share in conversion of $16,373 of accounts payable and
recognized a loss on debt extinguishment of
$20,100.
|
12
Ironwood Gold Corp
|
(An Exploration Stage Company)
|
Notes to Condensed Financial Statements
|
28 February
2014
|
On January 22, 2013, the Company issued
4,000,000 shares of its common stock for deposits on mining property rights.
These shares were valued at $200,000, based on the closing quoted value of the
Companys stock on that date.
On December 16, 2013 and January 8,
2014 the Company issued 1,584,848 and 1,585,000 common shares, respectively,
upon the conversion of $5,230 and $3,170 of convertible notes, respectively.
Subscriptions received
On November 24, 2010, the Company
received $60,000 as partial payment on the private placement of 60,000 Units for
gross proceeds of $60,000, of a private placement of 1,000,000 Units offered at
$1.00 per unit (post share split) of the Companys securities. Each Unit
consists of 1 share of common stock, par value $0.001 per share and 1 warrant
exercisable to purchase 1 share of common stock of the Company at an exercise
price of $1.40 per share for a period of 24 months.
Stock Options
The Company has a stock option plan
whereby the Board of Directors is authorized to grant options to a rolling
ceiling of 10% of the issued and outstanding common shares of the Company.
Options to purchase common shares have
been granted to directors at exercise prices determined by reference to the
market value on the date of the grant. The terms of the option and the option
price are fixed by the directors at the time of grant subject to price
restrictions imposed by the TSX Venture Exchange. Stock options awarded have a
maximum term of ten years.
On 20 April 2010, the Company granted
an aggregate of 312,500 incentive options to various directors and officers of
the Company. The options vest evenly, at the end of each calendar quarter, over
five years beginning on 30 June 30 2010. The weighted average exercise price of
the options is $0.31 each and they are exercisable until 20 April 2020.
The weighted average grant-date fair
value for these options was $1,800,400. During the year ended 31 August 2011,
212,500 options were forfeited. On 30 November 2013, 100,000 options were
outstanding of which 70,000 were vested. Due to the fact that the options were
out of the money, the aggregate intrinsic value of options outstanding and
exercisable at 30 November 2013 was $Nil.
On 25 September 2013, the Company
issued an option to an individual to purchase 100,000 shares of the Companys
common stock at an exercise price of $.01. This option vests evenly over 20
quarters, subject to the holders continued service with the Company, and has a
term of 10 years. The calculated fair value of the options of $1,190 will be
amortized over the vesting period.
Stock-based compensation expense
Options granted to directors and
officers of the Company are accounted for using the Black-Scholes option pricing
model and recoded as the options vest. The exercise price of the options is
$0.31 each and they are exercisable until April 20, 2020.
13
Ironwood Gold Corp
|
(An Exploration Stage Company)
|
Notes to Condensed Financial Statements
|
28 February
2014
|
The Company uses historical data to
estimate option exercises and employee termination in the option pricing model.
The expected term of options granted is derived from the output of the option
pricing model and represents the period of time that options granted are
expected to be outstanding. The expected volatilities are based on the
historical volatility of the Company's traded stock and other factors. The
following table shows the assumptions used and weighted average fair value for
grants in the year ended 31 August 2010 and six months ended 28 February 2014.
Expected annual dividend rate
|
0.00%
|
Weighted average exercise price
|
$6.00
|
Risk-free interest rate
|
3.23%
|
Average expected life (years)
|
10
|
Expected volatility of common stock
|
100%
|
Forfeiture rate
|
0.00%
|
Weighted average fair value of option
grants
|
$5.45
|
The Company recorded share-based
compensation expense only for those options that are expected to vest. The
estimated fair value of the stock options is amortized over the vesting period
of the respective stock option grants.
Warrants
As at 28 February 2014 and 31 August
2013, the following share purchase warrants/options were outstanding and
exercisable:
Expiry Date
|
Exercise Price
|
28-Feb-14
|
31-Aug-13
|
20-Apr-20
|
$0.31
|
100,000
|
100,000
|
16-Aug- 16
|
$0.08
|
6,000,000
|
6,000,000
|
1-Feb-21
|
$0.05
|
2,000,000
|
2,000,000
|
7-Mar-16
|
$0.25
|
1,300,000
|
1,300,000
|
25-Sep-23
|
$0.01
|
100,000
|
-
|
|
|
9,500,000
|
9,400,000
|
14
Ironwood Gold Corp
|
(An Exploration Stage Company)
|
Notes to Condensed Financial Statements
|
28 February
2014
|
Share purchase warrant transactions and
the number of share purchase warrants outstanding and exercisable are summarized
as follows:
|
|
|
28-Feb-14
|
|
|
31-Aug-13
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
Number of
|
|
|
Average
|
|
|
Number of
|
|
|
Average
|
|
|
|
|
Warrants/Options
|
|
|
Exercise
|
|
|
Warrants/Options
|
|
|
Exercise
|
|
|
|
|
|
|
|
Price
|
|
|
|
|
|
Price
|
|
|
Outstanding at beginning of period
|
|
9,400,000
|
|
$
|
0.13
|
|
|
6,540,000
|
|
$
|
0.17
|
|
|
Issued
|
|
100,000
|
|
|
0.01
|
|
|
9,300,000
|
|
$
|
0.10
|
|
|
Exercised
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Extinguished
|
|
-
|
|
|
-
|
|
|
(6,000,000
|
)
|
$
|
0.08
|
|
|
Expired
|
|
-
|
|
|
-
|
|
|
(440,000
|
)
|
$
|
1.40
|
|
|
Outstanding at end of period
|
|
9,500,000
|
|
$
|
0.13
|
|
|
9,400,000
|
|
$
|
0.13
|
|
7.
|
Supplemental Disclosures with Respect to Cash
Flows
|
|
|
|
For
the period
from the date of
inception on 18
January 2007 to
28 February
2014
|
|
|
For the six
months ended
28
February
2014
|
|
|
For the six
months ended
28
February
2013
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid during the period for interest
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Cash paid during the period for income taxes
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Supplemental disclosures of noncash investing and
financing activities:
|
|
|
|
Since the Companys inception, related parties have
contributed $68,300 to capital in the form of management fees, rent, and
telephone expenses.
|
|
|
|
The Company converted principal and accrued interest on convertible notes
payable through the issuance of 3,169,848 shares of common stock at a
value of $33,430.
|
|
|
8.
|
Commitments and Contingencies
|
|
|
|
The Company has outstanding and future commitments under
mineral property agreements.
|
15
Ironwood Gold Corp
|
(An Exploration Stage Company)
|
Notes to Condensed Financial Statements
|
28 February
2014
|
9.
Subsequent Events
On March 21, 2014, Ironwood Gold Corp. (Parent) entered into a Share Exchange
Agreement (the Share Exchange Agreement) with The Wildemess Way Adventure Resort, Inc. (the Subsidiary or the Company) and the Companys
shareholders pursuant to which the Parent purchased (the Acquisition)100% of
the issued and outstanding capital stock (Company Shares) of the Company from
its shareholders. The purchase price for the Shares set forth therein is
3,600,000,000 shares of the Parents restricted Common Stock.
The Acquisition was consummated (the Closing) on March 21,
2014, in a transaction exempt from registration under Section 4(2) of the
Securities Act of 1933, as amended. In connection therewith, Isaac Onn, (who was
appointed as CEO on March 17, 2014 as a result of Behzad Shayanfar's March 12,
2014 resignation as an officer of Parent) resigned as an officer of Parent, and
Andrew McKinnon was appointed as the Companys Chief Executive Officer and Chief
Financial Officer and as a Director and Chairman of the Board.
Subsequent to closing of the Acquisition, the Company shall
remain a wholly owned subsidiary of the Parent. For accounting purposes, the
Company is deemed the accounting acquirer.
The total outstanding common shares of the Parent subsequent to
the closing of the Acquisition are as follows:
Existing Parent Shareholders
|
|
78,947,593
|
|
|
|
|
|
Shares acquired by Company Shareholders (1)
|
|
3,600,000,000
|
|
|
|
|
|
Total Shares after consummation of the
Acquisition
|
|
3,678,947,593
|
|
(1) Shares outstanding of the Parent just prior to the close
consisted of 99,957,201 shares of which no shares were issued for investor
relations services. As the Parent is only currently authorized to issue
250,000,000 shares of its common stock, at closing, the sole shareholder of the
Company, Andrew McKinnon, was only issued 150,000,000 shares, and the balance of
3,450,000,000 shares will be issued to Mr. McKinnon or his designees upon the
availability of those shares authorized through a reverse split of only the
issued and outstanding shares of common stock of the Parent, which will be
effected as soon as practicable.
16
Ironwood Gold Corp
|
(An Exploration Stage Company)
|
Notes to Condensed Financial Statements
|
28 February
2014
|
On March 21, 2014, the Company entered into a securities
purchase agreement (the Securities Purchase Agreement) with accredited
investors (the Investors), pursuant to which the Company agreed to issue and
sell secured convertible promissory notes (the Notes) in the aggregate
principal amount of $1,000,000 (the Private Placement). The Notes will be secured
by a senior security interest in all of the assets of the Company and its
subsidiaries. The Notes will be convertible into common stock of the Company at
an exercise price of $0.18 per share, subject to adjustment in the event of
stock splits, stock dividends, or in the event of certain subsequent issuances
by the Company of common stock or securities convertible into common stock at a
lower price. The Notes will mature two years from the date of issuance. The
Notes bear interest at the rate of 8% per annum due and payable in cash on each
March 31, June 30, September 30 and December 31 commencing on the second such
date after the date of closing and upon maturity. If an event of default has not
occurred, the Company may elect to make any interest payments in shares of its
common stock at a discount of 10% to the VWAP (volume weighted average price)
for the Companys common stock for the ten final trading days directly preceding such quarterly interest payment date. In the event
(i) the Company is prohibited from issuing shares issuable upon conversion of a
note, (ii) upon the occurrence of any other event of default, that continues
beyond any applicable cure period, (iii) a change in control occurs, or (iv)
upon the liquidation, dissolution or winding up of the Company or any
subsidiary, then at the noteholders option, the Company must pay to each
noteholder, a sum of money determined by multiplying up to the outstanding
principal amount of the note designated by each such noteholder by, at the
noteholders election, the greater of (x) 115%, or (y) a fraction the numerator
of which is the highest closing price of the Companys common stock for the
thirty days preceding the date demand is made by the noteholder and the
denominator of which is the lowest applicable conversion price during such
thirty (30) day period, plus accrued but unpaid interest and any other amounts
due. Pursuant to the Private Placement, the Company also agreed to issue to the
Investors warrants (collectively, the Warrants) to purchase common stock in an
amount equal to the principal amount of each Note divided by $0.18. The Warrants
will have a six-year term, may be exercised on a cashless basis (commencing
twelve months after the closing date of the Private Placement only if the common
stock underlying the Warrants is not included for public resale in an effective
registration statement), and have an exercise price of $0.22, subject to
adjustment in the event of stock splits, stock dividends, or in the event of
certain subsequent issuances of the Company of common stock or securities
convertible into common stock at a lower price. The Notes may not be converted,
and the Warrants may not be exercised, to the extent such conversion or exercise
would cause the holder, together with its affiliates, to beneficially own a
number of shares of common stock which would exceed 9.99% of the Companys then
outstanding shares of common stock following such conversion or exercise.
Pursuant to the Subscription Agreement, the Investors shall have demand and
piggyback registration rights. The Companys obligations under the Notes are
guaranteed by the Company and secured by a second mortgage on the real estate
owned by the Company in British Columbia, Canada. The closing of the Private
Placement is subject to certain conditions including the closing of the Exchange
Agreement and the filing of this Current Report on Form 8-K.
17
Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations.
The following discussion should be read in conjunction with
our financial statements and notes thereto included elsewhere in this quarterly
report. Forward-looking statements are statements not based on historical
information and which relate to future operations, strategies, financial
results, or other developments. Forward-looking statements are based upon
estimates, forecasts, and assumptions that are inherently subject to significant
business, economic, and competitive uncertainties and contingencies, many of
which are beyond our control and many of which, with respect to future business
decisions, are subject to change. These uncertainties and contingencies can
affect actual results and could cause actual results to differ materially from
those expressed in any forward-looking statements made by us, or on our behalf.
We disclaim any obligation to update forward-looking statements.
Overview
Ironwood Gold Corp. was incorporated on January 18, 2007 under
the laws of the State of Nevada under the name Suraj Ventures, Inc. for the
purpose of acquiring, exploring and developing mineral properties. On October
27, 2009, we changed our name to Ironwood Gold Corp. On October 27, 2009, we
effected a 50-for-1 forward stock split. Effective October 28, 2011, we
completed a 1-for-20 reverse stock split of both our authorized and issued and
outstanding shares of our common stock. As a result of the reverse split, our
authorized share capital increased to 25,000,000 shares of common stock, with
the same par value of $0.001. On April 9, 2013, the Company filed a certificate
of amendment to its Articles of Incorporation to increase the total number of
authorized shares of common stock to 250,000,000.
We are a mineral exploration stage company building a portfolio
of exploration properties containing known deposits of gold. We have targeted
several prospective locations in Nevada, where approximately 80% of all gold in
America is produced today. We intend to explore for undiscovered deposits on
these properties and to acquire and explore new properties, all with the view to
enhancing the value of such properties.
On January 25, 2011, we entered into a lease agreement with The
Falcon Group Claims (Falcon) for the development of a gold-silver mining
project known as the Falcon Mine Property (the Falcon Property) located in the
northern end of the Carlin Trend gold belt in Nevada (the Lease). The Lease
includes an earn-in joint venture agreement option, to be negotiated by the
parties, for further development of the Falcon Property. Such joint venture
option was exercisable anytime on or before February 28, 2013, unless such
option period is extended pursuant to the terms and conditions of the Lease. The
Company is currently in default on this agreement. The Falcon Property consists
of six patented claims and between 60-100 newly staked claims that join the
patented claims on which the mine is situated. In accordance with the Lease, we
are obligated to make certain expenditures on the Falcon Property, including
drilling a minimum of four (4) drill holes for the purpose of obtaining soil
samples and conducting field survey work on the Falcon Property. In September
2011, we announced that Snowden Mining Industry Consultants Inc. (Snowden) has
commenced the 2011 field exploration program on the Falcon Property. On February
21, 2012, we announced that based on the results from surface mapping, sampling
and a geophysical program, Snowden has identified a number of significant
mineralization targets that are recommended as warranting a follow up
exploration drilling program. As such, we have announced plans to proceed with
an 18-hole, 6000 meter drilling program after receiving Snowdens favorable
assessment.
The Lease called for cash payments of $225,000 by September 1,
2012, issuance of 75,000 shares of common stock by January 28, 2011, issuance of
another 75,000 shares of common stock by November 30, 2011, and a minimum of 8
drill holes by February 28, 2013, with 4 holes completed by November 30, 2011.
As of February 29, 2012, we had paid $75,000, and had issued the initial 75,000
shares of our common stock to Falcon.
On February 22, 2012, we entered into Amendment No. 1 to the
Lease (Amendment No. 1) with Falcon. In consideration for Falcons agreement
to extend the due dates of the cash payments and share issuances due to Falcon
in November 2011 to April 6, 2012, we paid Falcon $10,000 and agreed to issue to
Falcon 500,000 shares of common stock. As of February 28, 2013, we have paid
$75,000 under the original Lease and $5,000 under Amendment No. 1, and we have
issued 75,000 shares of common stock under the original Lease and 500,000 shares
of common stock under Amendment No. 1. Subsequently, Falcon has agreed to
further extend the due dates for an undetermined period.
On February 5, 2013, we entered into a non-binding Letter of
Intent (the LOI) with Canadian Mining Company Inc. (CMC). The LOI provides
us with the right to acquire 100% of CMCs Raquel 3 and 3B mining concessions
(the Option) in the Alamos Mining district of Sonora, Mexico (the San
Bernardo Project). The Option was granted by CMC through its wholly-owned
Mexican subsidiary Canmin Mexico S.A. de C.V. The aggregate consideration to be
paid for the Option is $1,650,000, payable as follows: (i) CDN $50,000 due
diligence cash deposit, which we have paid, and 2,000,000 shares of our common
stock upon entry into definitive transaction documents; (ii) exploration
expenditures of $700,000 within two years of the date of the LOI, including
contractors fees, consultants fees, legal fees, property taxes and assessment
filings, to earn a 50% interest in CMCs San Bernardo Project (the First Option
Period); (iii) additional exploration expenditures of $500,000 within two years
of the First Option Period to earn an additional 25% interest in CMCs San
Bernardo Project (the Second Option Period); and (iv) a $400,000 cash payment
or equivalent in shares of our common stock to earn the remaining 25% interest
in CMCs San Bernardo Project within two years of the Second Option Period,
subject to a 2% net smelter return (NSR) in favor of CMC. Any of the foregoing
Option Periods can be extended for an additional one year period through our
payment of $50,000 to CMC for each extension.
18
The proposed transaction underlying the LOI is conditioned
upon, among other factors, our completion, in our sole discretion, of due
diligence and receipt of results of investigations on the Raquel 3 and 3B mining
concessions and the San Bernardo Project, due diligence on CMC, the execution of
a definitive joint venture agreement and definitive transaction documents
containing representations and warranties by CMC regarding the San Bernardo
Project, and our securing financing to fund acquisition of 100% of the Option.
In accordance with the LOI, the parties have agreed to a binding exclusivity
period from the date of the LOI through a period of three months following the
date we provide CMC with written notice that we have completed our due diligence
within which CMC will not enter into any negotiations or enter into any
agreement with any other party regarding the San Bernardo Project.
On February 5, 2013, we entered into a non-binding Letter of
Intent (the LOI) with Canadian Mining Company Inc. (CMC). The LOI provides
us with the right to acquire 100% of CMCs 101 unpatented mining claims and one
state exploration permit (the Option) in the state of Arizona, USA (the
Bullard Pass Project). The Option was granted by CMC through its wholly-owned
US subsidiary Canadian Mining Company of Arizona. The aggregate consideration to
be paid for the Option is $1,650,000, payable as follows: (i) 2,000,000 shares
of our common stock upon entry into definitive transaction documents; (ii)
exploration expenditures of $750,000 within two years of the date of the LOI,
including contractors fees, consultants fees, legal fees, property taxes and
assessment filings, to earn a 50% interest in CMCs Bullard Pass Project (the
First Option Period); (iii) additional exploration expenditures of $150,000
and 400,000 shares of common stock within two years of the First Option Period
to earn an additional 10% interest in CMCs Bullard Pass Project (the Second
Option Period); and (iv) a $750,000 cash payment or equivalent in shares of our
common stock to earn the remaining 40% interest in CMCs Bullard Pass Project
within two years of the Second Option Period, subject to a 2% net smelter return
(NSR) in favor of CMC. Any of the foregoing Option Periods can be extended for
an additional one year period through our payment of $50,000 to CMC for each
extension.
The proposed transaction underlying the LOI is conditioned
upon, among other factors, our completion, in our sole discretion, of due
diligence and receipt of results of investigations on the 101 unpatented mining
claims and one state exploration permit and the Bullard Pass Project, due
diligence on CMC, the execution of a definitive joint venture agreement and
definitive transaction documents containing representations and warranties by
CMC regarding the Bullard Pass Project, and our securing financing to fund
acquisition of 100% of the Option. In accordance with the LOI, the parties have
agreed to a binding exclusivity period from the date of the LOI through a period
of three months following the date we provide CMC with written notice that we
have completed our due diligence within which CMC will not enter into any
negotiations or enter into any agreement with any other party regarding the
Bullard Pass Project.
On September 25, 2013, Ironwood Gold Corp., a Nevada
corporation (the Company), entered into a Non- Qualified Stock Option
Agreement (the Agreement) with Solomon Mayer, in connection with his service
as a director of the Company. Pursuant to the Agreement, Mr. Mayer was granted
an option to purchase one hundred thousand (100,000) shares of Company common
stock for a purchase price of $0.01 per option share. Subject to Mr. Mayers
continued service with the Company, the option will vest and become exercisable
in twenty (20) equal quarterly installments beginning on October 1, 2013 and
ending on July 1, 2018, when the option will be 100% vested and exercisable. The
material terms and conditions of Mr. Mayers appointment as a director are more
fully reported and detailed under Item 5.02 and incorporated herein by
reference.
On September 25, 2013, the Company delivered a letter (the
Termination Letter) to Canadian Mining Company Inc. (CMC) pursuant to which
the Company elected to terminate (i) its First Option under items 3.7, 3.8(a)
and 3.8(b) of the Option and Joint Venture Agreement between the Company, CMC
and Canmin Mexico S.A. de C.V., dated January 21, 2013 (the San Bernardo
Project Agreement); and (ii) its First Option under items 3.6, 3.7(a) and
3.7(b) of the Option and Joint Venture Agreement between the Company, CMC and
Canadian Mining of Arizona (the Bullard Pass Agreement). There are no material
relationships between the Company or its affiliates and any of the other parties
to the San Bernardo Project Agreement or the Bullard Pass Agreement, and no
early termination penalties were incurred by the Company in connection with the
Termination Letter.
On March 21, 2014,
Ironwood Gold Corp
. (Parent) entered into a Share Exchange
Agreement (the Share Exchange Agreement) with The Wildemess Way Adventure Resort, Inc. (the Subsidiary or the Company) and the Companys
shareholders pursuant to which the Parent purchased (the Acquisition)100% of
the issued and outstanding capital stock (Company Shares) of the Company from
its shareholders. The purchase price for the Shares set forth therein is
3,600,000,000 shares of the Parents restricted Common Stock.
The parties arrived at the purchase price through arms length
third party negotiation.
The Acquisition was consummated (the Closing) on March 21,
2014, in a transaction exempt from registration under Section 4(2) of the
Securities Act of 1933, as amended. In connection therewith, Isaac Onn, (who was
appointed as CEO on March 17, 2014 as a result of Behzad Shayanfar's March 12,
2014 resignation as an officer of Parent) resigned as an officer of Parent, and
Andrew McKinnon was appointed as the Companys Chief Executive Officer and Chief
Financial Officer and as a Director and Chairman of the Board.
Subsequent to closing of the Acquisition, the Company shall
remain a wholly owned subsidiary of the Parent. For accounting purposes, the
Company is deemed the accounting acquirer.
The total outstanding common shares of the Parent subsequent to
the closing of the Acquisition are as follows:
19
Existing Parent Shareholders
|
|
78,947,593
|
|
|
|
|
|
Shares acquired by Company Shareholders (1)
|
|
3,600,000,000
|
|
|
|
|
|
Total Shares after consummation of the
Acquisition
|
|
3,678,947,593
|
|
(1) Shares outstanding of the Parent just prior to the close
consisted of 99,957,201 shares of which no shares were issued for investor
relations services. As the Parent is only currently authorized to issue
250,000,000 shares of its common stock, at closing, the sole shareholder of the
Company, Andrew McKinnon, was only issued 150,000,000 shares, and the balance of
3,450,000,000 shares will be issued to Mr. McKinnon or his designees upon the
availability of those shares authorized through a reverse split of only the
issued and outstanding shares of common stock of the Parent, which will be
effected as soon as practicable.
On March 21, 2014, the Company entered into a securities
purchase agreement (the Securities Purchase Agreement) with accredited
investors (the Investors), pursuant to which the Company agreed to issue and
sell secured convertible promissory notes (the Notes) in the aggregate
principal amount of $1,000,000 (the Private Placement). The Notes will be secured
by a senior security interest in all of the assets of the Company and its
subsidiaries. The Notes will be convertible into common stock of the Company at
an exercise price of $0.18 per share, subject to adjustment in the event of
stock splits, stock dividends, or in the event of certain subsequent issuances
by the Company of common stock or securities convertible into common stock at a
lower price. The Notes will mature two years from the date of issuance. The
Notes bear interest at the rate of 8% per annum due and payable in cash on each
March 31, June 30, September 30 and December 31 commencing on the second such
date after the date of closing and upon maturity. If an event of default has not
occurred, the Company may elect to make any interest payments in shares of its
common stock at a discount of 10% to the VWAP (volume weighted average price)
for the Companys common stock for the ten final trading days directly preceding
such quarterly interest payment date. In the event (i) the Company is prohibited
from issuing shares issuable upon conversion of a note, (ii) upon the occurrence
of any other event of default, that continues beyond any applicable cure period,
(iii) a change in control occurs, or (iv) upon the liquidation, dissolution or
winding up of the Company or any subsidiary, then at the noteholders option,
the Company must pay to each noteholder, a sum of money determined by
multiplying up to the outstanding principal amount of the note designated by
each such noteholder by, at the noteholders election, the greater of (x) 115%,
or (y) a fraction the numerator of which is the highest closing price of the
Companys common stock for the thirty days preceding the date demand is made by
the noteholder and the denominator of which is the lowest applicable conversion
price during such thirty (30) day period, plus accrued but unpaid interest and
any other amounts due. Pursuant to the Private Placement, the Company also
agreed to issue to the Investors warrants (collectively, the Warrants) to
purchase common stock in an amount equal to the principal amount of each Note
divided by $0.18. The Warrants will have a six-year term, may be exercised on a
cashless basis (commencing twelve months after the closing date of the Private
Placement only if the common stock underlying the Warrants is not included for
public resale in an effective registration statement), and have an exercise
price of $0.22, subject to adjustment in the event of stock splits, stock
dividends, or in the event of certain subsequent issuances of the Company of
common stock or securities convertible into common stock at a lower price. The
Notes may not be converted, and the Warrants may not be exercised, to the extent
such conversion or exercise would cause the holder, together with its
affiliates, to beneficially own a number of shares of common stock which would
exceed 9.99% of the Companys then outstanding shares of common stock following
such conversion or exercise. Pursuant to the Subscription Agreement, the
Investors shall have demand and piggyback registration rights. The Companys
obligations under the Notes are guaranteed by the Company and secured by a
second mortgage on the real estate owned by the Company in British Columbia,
Canada. The closing of the Private Placement is subject to certain conditions
including the closing of the Exchange Agreement and the filing of this Current
Report on Form 8-K.
In connection with the foregoing, the Company relied upon the
exemption from securities registration afforded by Rule 506 of Regulation D as
promulgated by the United States Securities and Exchange Commission under the
Securities Act of 1933, as amended (the Securities Act) and/or Section 4(2) of
the Securities Act. No advertising or general solicitation was employed in
offering the securities. The offerings and sales were made to a limited number
of persons, all of whom were accredited investors, and transfer was restricted
by the Company in accordance with the requirements of the Securities Act of
1933.
20
Critical Accounting Policies
The preparation of financial statements in conformity with
United States generally accepted accounting principles (GAAP) requires
management of our company to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting periods.
The discussion and analysis of our financial condition and
results of operations are based upon our financial statements, which have been
prepared in accordance with GAAP. We believe certain critical accounting
policies affect our more significant judgments and estimates used in the
preparation of our financial statements. A description of our critical
accounting policies is set forth in our Annual Report on Form 10-K for the year
ended August 31, 2013. As of, and for the three and six months ended February 28, 2014,
there have been no material changes or updates to our critical accounting
policies.
Results of Operations
The following discussion of the financial condition, results of
operations, cash flows, and changes in our financial position should be read in
conjunction with our audited consolidated financial statements and notes
included in our Annual Report on Form 10-K for the fiscal year ended August 31,
2013, filed on December 13, 2013.
Comparison of three month periods ended February 28, 2014
and February 28, 2013
During the three month periods ended February 28, 2014 and
February 28, 2013, we earned no revenues.
For the three month periods ended February 28, 2014 and
February 28, 2013, we incurred a net loss of $186,423 and $871,417,
respectively. This decrease for the three month period ended February 28, 2014
is primarily attributed to a decrease in interest expense and stock based
compensation and an increase in gains on derivative liabilities.
Comparison of six month periods ended February 28, 2014
and February 28, 2013
During the six month periods ended February 28, 2014 and
February 28, 2013, we earned no revenues.
For the six month periods ended February 28, 2014 and
February 28, 2013, we incurred a net loss of $316,617 and $1,392,833,
respectively. This decrease for the six month period ended February 28, 2014
is primarily attributed to a decrease in interest expense and stock based
compensation and an increase in gains on derivative liabilities.
Period from inception, January 18, 2007 to February 28,
2014
Since inception, we have an accumulated deficit during the
exploration stage of $6,662,772. We expect to continue to incur losses as a
result of expenditures for general and administrative activities while we remain
in the exploration stage.
Liquidity and Capital Resources
As of February 28, 2014, we had $0 in cash and cash equivalents
and a working capital deficiency of $2,114,982, including $1,102,608 in accounts
payable and accrued expenses.
For the six months ended February 28, 2014, we used net cash
of $72,333 in operations and used net cash of $0 in investing activities. For
the six months ended February 28, 2014, we had $72,333 in net cash flow
provided by financing activities, representing $72,333 from the issuance of
convertible promissory notes.
We expect to continue to incur operating losses in the near
future as we initiate mining exploration operations at our property through the
remainder of 2014. We have funded our operations primarily through sales of our
common stock and debt offerings, including most recently the issuance of a
$550,000 secured convertible promissory note to Alpha Capital Anstalt (Alpha)
in August 2011 (as further described below), and convertible notes to Asher
Enterprises, Inc. in the amount $56,000, $29,000, $32,500 and $7,000 in
September and November, 2012, and March and July 2013, respectively.
On August 16, 2011, we entered into a Subscription Agreement
with Alpha in connection with the private offering and issuance of (i) a
$550,000 secured convertible promissory note (the Note), such Note
convertible, at the option of Alpha, into shares of our common stock, par value
$0.001, at a conversion price of $0.40 per share (post stock split); (ii) a
warrant to purchase up to 1,375,000 shares of common stock (post stock split) at
an exercise price of $0.60 per share (post stock split) (the Warrant), such
Warrant expiring five (5) years from the date of issuance, and (iii) 220,000
shares of common stock (post stock split). The Note is senior to any and all of
our indebtedness and is secured substantially by all of our assets in accordance
with the terms and conditions of the Security Agreement with Alpha dated August
16, 2011. The Note carries an interest rate of 10% per annum (increases to 16%
in the event of default), is payable quarterly, and matures fifteen (15) months
from the date of issuance.
21
On April 20, 2012, we entered into an Amendment Agreement (the
Amendment) with Alpha to the Note, previously disclosed in our Current Report
on Form 8-K filed on August 18, 2011. In connection therewith, effective April
20, 2012 we also agreed to an Allonge to the Note (the Allonge) pursuant to
which an additional $100,000 was issued to us under the Note. In accordance with
the Amendment and the Allonge, (i) the original principal amount under the Note
has increased from $550,000 to $650,000; (ii) the conversion price under the
Note has been reduced from $0.40 per share to $0.08 per share; (iii) the number
of warrants to purchase shares of our common stock issuable to Alpha has
increased from 1,375,000 to 6,000,000; and (iv) the exercise price of the
warrants has been reduced from $0.60 per share to $0.08 per share. The
expiration date of the Warrants remains unchanged at August 16, 2016.
On February 1, 2013, the Company agreed to another Allonge to
the Note (Allonge No. 2) pursuant to which an additional $100,000 was issued
to the Company under the Note, thus increasing the principal amount as stated on
the face of the Note to $750,000. No other changes to the terms and conditions
of the Note have been made. Proceeds from Allonge No. 2 are expected to be used
for general working capital and also to fund portions of the Companys
obligations under a letter of intent with Canadian Mining Company, Inc. as
disclosed on our Current Report on Form 8-K filed on February 7, 2013. On
February 1, 2013, the Company also issued a another warrant to Alpha to purchase
up to 2,000,000 shares of Company common stock at an exercise price of $0.05 per
share (the Second Warrant). The Second Warrant expires eight (8) years after
the date of issuance.
On 11 February 2013, the note holder elected to convert $50,000
of principal and $10,947 of accrued interest on the convertible note payable
into stock subscriptions to receive 1,218,944 shares of the Companys common
stock.
On September 10, 2012, the Company borrowed $56,000 in the form
of a convertible note payable, with a maturity date of three months from the
date of issuance, and an annual interest rate of 8%. The note is convertible at
the holders option, during the period beginning 180 days following the date of
the note and ending on the later of (i) the maturity date and (ii) the date of
payment of the default amount, at a variable conversion price equal to the
average of the lowest two trading prices for the common stock during the 20
trading day period ending on the latest complete trading day prior to the
conversion date and discounted by 45%. The note was issued in reliance upon Rule
506 of Regulation D of the Securities Act of 1933, as amended, and comparable
exemptions for sales to accredited investors under state securities laws.
On November 19, 2012, the Company borrowed $29,000 in the form
of a convertible note payable, with a maturity date of three months from the
date of issuance, and an annual interest rate of 8%. The note is convertible at
the holders option, during the period beginning 180 days following the date of
the note and ending on the later of (i) the maturity date and (ii) the date of
payment of the default amount, at a variable conversion price equal to the
average of the lowest two trading prices for the common stock during the 20
trading day period ending on the latest complete trading day prior to the
conversion date and discounted by 45%. The note was issued in reliance upon Rule
506 of Regulation D of the Securities Act of 1933, as amended, and comparable
exemptions for sales to accredited investors under state securities laws.
On March 7, 2013, the Company borrowed $32,500 in the form of a
convertible note payable, with a maturity date of three months from the date of
issuance, and an annual interest rate of 8%. The note is convertible at the
holders option, during the period beginning 180 days following the date of the
note and ending on the later of (i) the maturity date and (ii) the date of
payment of the default amount, at a variable conversion price equal to the
lowest trading price for the common stock during the 60 trading day period
ending on the latest complete trading day prior to the conversion date and
discounted by 55%. In addition, the Company issued a warrant to purchase
1,300,000 shares of common stock at an exercise price of $0.25 per share
exercisable anytime within 3 years. The note and warrant were issued in reliance
upon Rule 506 of Regulation D of the Securities Act of 1933, as amended, and
comparable exemptions for sales to accredited investors under state securities
laws.
On 21 March 2013 and 8 May 2013, the note holder elected to
convert $7,900 and $8,300 of principal on the convertible note payable into
stock subscriptions to receive 441,341 and 1,509,091 shares of the Companys
common stock.
On 16 July 2013, the Company borrowed $7,000 in the form of a
convertible note payable, with a maturity date of 18 April 2014, and an annual
interest rate of 8% (default interest rate of 22%). The note is convertible at
the holders option, during the period beginning 180 days following the date of
the note and ending on the later of (i) the maturity date and (ii) the date of
payment of the default amount, at a variable conversion price equal to the
lowest trading price for the common stock during the 60 trading day period
ending on the latest complete trading day prior to the conversion date and
discounted by 55%. The note is secured by all of the assets of the Company. The
note and warrant were issued in reliance upon Rule 506 of Regulation D of the
Securities Act of 1933, as amended, and comparable exemptions for sales to
accredited investors under state securities laws.
See above for the financing which occurred at the time of the
March 2014 merger.
22
Our current cash requirements are significant due to planned
exploration and development of current projects, and we anticipate generating
losses. In order to execute on our business strategy, including the exploration
and development of our current mining properties, we will require additional
working capital, commensurate with the operational needs of our planned drilling
projects and obligations. Accordingly, we expect to continue to use debt and
equity financing to fund operations for the next twelve months, as we look to
expand our asset base and fund exploration and development of our properties.
There are no assurances that we will be able to raise the required working
capital on terms favorable, or that such working capital will be available on
any terms when needed. Any failure to secure additional financing may force us
to cease our operations.
We cannot be sure that our future working capital or cash flows
will be sufficient to meet our debt obligations and commitments. Any
insufficiency and failure by us to renegotiate such existing debt obligations
and commitments would have a negative impact on our business and financial
condition, and may result in legal claims by our creditors. Our ability to make
scheduled payments on our debt as they become due will depend on our future
performance and our ability to implement our business strategy successfully.
Failure to pay our interest expense or make our principal payments would result
in a default. A default, if not waived, could result in acceleration of our
indebtedness, in which case the debt would become immediately due and payable.
If this occurs, we may be forced to sell or liquidate assets, obtain additional
equity capital or refinance or restructure all or a portion of our outstanding
debt on terms that may be less favorable to us. In the event that we are unable
to do so, we may be left without sufficient liquidity and we may not be able to
repay our debt and the lenders may be able to foreclose on our assets or force
us into bankruptcy proceedings or involuntary receivership.
Off-Balance Sheet Transactions
There are no off-balance sheet transactions.