Ameritrust Corp - Quarter Report: 2008 December (Form 10-Q)
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
____________________________
FORM
10-Q
x QUARTERLY REPORT UNDER
SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For
the Quarter Ended December 31, 2008
OR
o TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE
TRANSITION PERIOD FROM _______________________ TO
_______________________
Commission
File # 000-53371
GRYPHON
RESOURCES, INC.
(Exact
name of registrant as specified in its charter)
Nevada
(State or
other jurisdiction of incorporation or organization)
98-0465540
(IRS
Employer Identification Number)
1313
East Maple Street, Suite 201-462
Bellingham,
Washington 98225
(Address
of principal executive offices) (Zip Code)
(360)
685-4238
(Registrant’s
telephone no., including area code)
Indicate
by check mark whether the registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such 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 o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated file, or a smaller reporting
company.
|
Large
accelerated filer
|
o
|
Accelerated
filer
|
o
|
|
|
Non-accelerated
filer
|
o
|
Smaller
reporting company
|
x
|
Indicate
by check mark whether the registrant is a shell company as defined in Rule 12b-2
of the Exchange Act. Yes o No x
The
issuer had 96,525,000 shares of common stock issued and outstanding as of
February 12, 2009.
GRYPHON
RESOURCES, INC. AND SUBSIDIARY
(An
Exploration Stage Company)
|
Page
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QI-09
Three
Month Period Ended December 31, 2008
GRYPHON
RESOURCES, INC. AND SUBSIDIARY
(An
Exploration Stage Company)
|
December
31,
2008
(unaudited)
|
September
30,
2008
(See
Note 1)
|
|||||||
|
ASSETS
|
||||||||
|
CURRENT
ASSETS
|
||||||||
|
Cash
|
$ | 23,893 | $ | 33,895 | ||||
|
Prepaid
expenses
|
4,904 | 3,144 | ||||||
|
Total
current assets
|
28,797 | 37,039 | ||||||
|
Total
assets
|
$ | 28,797 | $ | 37,039 | ||||
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LIABILITIES
AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
||||||||
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CURRENT
LIABILITIES
|
||||||||
|
Accounts
payable
|
$ | 1,689 | $ | 2,646 | ||||
|
Accrued
liabilities
|
- | 500 | ||||||
|
Loans
payable (Note 9)
|
12,531 | 4,608 | ||||||
|
Shareholder
loans (Note 8)
|
103,084 | 101,801 | ||||||
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Total
current liabilities
|
117,304 | 109,555 | ||||||
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Total
liabilities
|
||||||||
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COMMITTMENTS
AND CONTINGENCIES (Notes 1, 4, 7, 8 and 9)
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$ | - | $ | - | ||||
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STOCKHOLDERS’
EQUITY
(DEFICIT)
|
||||||||
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Stockholders’
Equity (Deficit) (Note 4):
|
||||||||
|
Common
shares, 100,000,000 shares with par value $0.001 authorized,
96,525,000 shares issued and outstanding
|
$ | 4,950 | $ | 4,950 | ||||
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Paid-in
Capital
|
46,550 | 46,550 | ||||||
|
Accumulated
deficit in the exploration stage
|
(139,933 | ) | (124,016 | ) | ||||
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Total
Gryphon Resources, Inc. and Subsidiary stockholders’ equity
(deficit)
|
(88,433 | ) | (72,516 | ) | ||||
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Non-Controlling
Interest (Note 4)
|
(74 | ) | - | |||||
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Total
stockholders’ equity (deficit)
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(88,507 | ) | (72,516 | ) | ||||
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Total
liabilities and stockholders’ equity (deficit)
|
$ | 28,797 | $ | 37,039 | ||||
The
accompanying notes to financial statements are an integral part of these
financial statements
1
GRYPHON
RESOURCES, INC. AND SUBSIDIARY
(An
Exploration Stage Company)
(Unaudited)
|
Three
months
ended
December
31,
2008
|
Three
months
ended
December
31,
2007
|
January
16, 2006
(inception)
through
December
31,
2008
|
||||||||||
|
EXPENSES:
|
||||||||||||
|
Exploration
expenses
|
$ | 652 | $ | - | $ | 3,108 | ||||||
|
Salaries
and wages
|
3,271 | - | 8,345 | |||||||||
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Professional
and consultant fees
|
3,000 | 7,400 | 77,447 | |||||||||
|
Administrative
expenses
|
7,523 | 262 | 28,640 | |||||||||
|
Mineral
properties impairment
|
- | - | 18,998 | |||||||||
|
Total
expenses
|
14,446 | 7,662 | 136,538 | |||||||||
|
Net
(loss) from Operations
|
$ | (14,446 | ) | $ | (7,662 | ) | $ | (136,538 | ) | |||
|
Interest
expense
|
(1,395 | ) | (319 | ) | (3,866 | ) | ||||||
|
Foreign
currency translation adjustment
|
(76 | ) | - | 471 | ||||||||
|
Net
Income (Loss)
|
(15,917 | ) | (7,981 | ) | (139,933 | ) | ||||||
|
Plus:
Net Income (Loss) attributable to Non-Controlling Interest (Note
4)
|
(74 | ) | - | (74 | ) | |||||||
|
Net
Income (loss) attributable to Gryphon Resources, Inc. and Subsidiary (Note
4)
|
$ | (15,991 | ) | $ | (7,981 | ) | $ | (140,007 | ) | |||
|
Loss
per common share, basic and diluted attributable to Gryphon Resources,
Inc. and Subsidiary (Note 4)
|
$ | Nil | $ | Nil | ||||||||
|
Weighted
average shares outstanding, basic and diluted
|
96,525,000 | 96,525,000 | ||||||||||
The
accompanying notes to financial statements are an integral part of these
financial statements
2
GRYPHON
RESOURCES, INC. AND SUBSIDIARY
(An
Exploration Stage Company)
(Unaudited)
|
Three
months
ended
December
31,
2008
|
Three
months
ended
December
31,
2007
|
January
16, 2006
(inception)
through
December
31,
2008
|
||||||||||
|
Cash
flows from operating activities:
|
||||||||||||
|
Net
loss for the period
|
$ | (15,991 | ) | $ | (7,981 | ) | $ | (140,007 | ) | |||
|
Reconciling
adjustments:
|
||||||||||||
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||||
|
Accrued
interest on shareholder loans
|
1,283 | 319 | 3,736 | |||||||||
|
Accrued
interest on loans
|
113 | 131 | ||||||||||
|
Property
abandonments
|
— | — | 18,998 | |||||||||
|
Net
change in operating assets and liabilities
|
||||||||||||
|
Prepaid
expenses
|
(1,760 | ) | (43 | ) | (4,904 | ) | ||||||
|
Accounts
payable and accrued liabilities
|
(1,457 | ) | (9,220 | ) | 1,689 | |||||||
|
Net
cash provided (used) by operating activities
|
(17,812 | ) | (16,925 | ) | (120,357 | ) | ||||||
|
Cash
flows from investing activities:
|
||||||||||||
|
Purchase
of mineral properties
|
— | — | (18,998 | ) | ||||||||
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Net
cash provided (used) by investing activities
|
— | — | (18,998 | ) | ||||||||
|
Cash
flows from financing activities:
|
||||||||||||
|
Common
stock issued for cash
|
— | — | 51,500 | |||||||||
|
Loans
|
7,810 | — | 12,400 | |||||||||
|
Shareholder
loans
|
— | 10,420 | 99,348 | |||||||||
|
Net
cash provided by financing activities
|
7,810 | 10,420 | 163,248 | |||||||||
|
Net
increase (decrease) in cash
|
(10,002 | ) | (6,505 | ) | 23,893 | |||||||
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Cash,
beginning of period
|
33,895 | 11,208 | — | |||||||||
|
Cash,
end of period
|
$ | 23,893 | $ | 4,703 | $ | 23,893 | ||||||
The
accompanying notes to financial statements are an integral part of these
financial statements
3
GRYPHON
RESOURCES, INC. AND SUBSIDIARY
(An
Exploration Stage Company)
(Unaudited)
Note
1 – Basis of Presentation
The
consolidated unaudited financial statements included herein have been prepared
by Gryphon Resources, Inc. and its subsidiary (collectively the “Company”) in
accordance with accounting principles generally accepted in the United States
for interim financial information. Certain information and footnote disclosures
normally included in the financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted as
allowed by such rules and regulations, and the Company believes that the
disclosures are adequate to make the information presented not misleading. On
April 28, 2008 the Company incorporated a Turkish company named APM Madencilik
Sanayi Ve Ticaret Limited Sirketi. (“APM”) as a 99% owned subsidiary. The
consolidated unaudited financial statements of the Company as of December 31,
2008 have been prepared without audit pursuant to the rules and regulations of
the Securities Exchange Commission. These financial statements are presented on
a consolidated basis and include all accounts of both the Company and its
subsidiary. The remaining 1% interest in APM is held by our President, who is a
Turkish citizen.
It is
suggested that these financial statements be read in conjunction with the
September 30, 2008 audited financial statements and the accompanying notes
included in the Company’s Form 10-K filed with the Securities and Exchange
Commission. The results of operations for the interim periods are not
necessarily indicative of the results for the full year. In management’s opinion
all adjustments necessary for a fair presentation of the Company’s financial
statements are of a normal recurring nature and are reflected in the interim
periods included.
Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with United States generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Amounts shown for September 30, 2008 are based upon the
audited financial statements of that date.
Note
2 – Summary of Significant Accounting Policies
This
summary of significant accounting policies is presented to assist in
understanding Gryphon Resources Inc.’s financial statements. The financial
statements and notes are representations of the Company’s management, who are
responsible for their integrity and objectivity. These accounting policies
conform to generally accepted accounting principles in the United States of
America and have been consistently applied in the preparation of the financial
statements, which are stated in U.S. Dollars.
The
financial statements reflect the following significant accounting
policies:
Exploration
Stage Company
The
Company is an exploration stage company as defined by SEC Industry Guide 7, and
follows the Financial Accounting Standards Board (“FASB”) Statements of
Financial Accounting Standards (“SFAS”) No. 7, where
applicable. The
4
GRYPHON
RESOURCES, INC. AND SUBSIDIARY
(An
Exploration Stage Company)
Notes
to Consolidated Financial Statements
(Unaudited)
Company
is devoting substantially all of its present efforts to establish a new business
and none of its planned principal operations have commenced. As an
exploration stage enterprise, the Company discloses the deficit accumulated
during the exploration stage and the cumulative statements of operations and
cash flows from inception to the current balance sheet date.
The
Company follows a policy of expensing exploration expenditures until a
production decision in respect of the project and the Company is reasonably
assured that it will receive regulatory approval to permit mining operations,
which may include the receipt of a legally binding project approval
certificate.
Costs of
acquiring mining properties and exploration and development costs are
capitalized upon acquisition. Mine development costs incurred either to develop
new ore deposits, expand the capacity of mines, or to develop mine areas
substantially in advance of current production are also capitalized once proven
and probable reserves exist and the property is a commercially minable property.
Costs incurred to maintain current production or to maintain assets on a standby
basis are charged to operations. Costs of abandoned projects are charged to
operations upon abandonment. The Company evaluates the carrying value of
capitalized mining costs and related property, plant and equipment costs, to
determine if these costs are in excess of their net recoverable amount whenever
events or changes in circumstances indicate that their carrying amounts may not
be recoverable. The periodic evaluation of carrying value of capitalized costs
and any related property, plant and equipment costs are based upon expected
future cash flows and/or estimated salvage value in accordance with Statement of
Financial Accounting Standards (SFAS) No. 144, Accounting for Impairment or
Disposal of Long-lived Assets.
The
Company does not set a predetermined holding period for properties with unproven
deposits, however, properties which have not demonstrated suitable metal
concentrations at the conclusion of each phase of an exploration program are
re-evaluated to determine if future exploration is warranted, whether there has
been any impairment in value and that their carrying values are
appropriate.
If an
area of interest is abandoned or it is determined that its carrying value cannot
be supported by future production or sale, the related costs are charged against
operations in the year of abandonment or determination of value. The
amounts recorded as mineral leases and claims represent costs to date and do not
necessarily reflect present or future values.
The
Company’s exploration activities and proposed mine development are subject to
various laws and regulations governing protection of the environment. These laws
are continually changingand are generally becoming more restrictive. The Company
has made, and expects to make in the future, expenditures to comply with such
laws and regulations.
The
accumulated costs of properties that are developed to the stage of commercial
production will be amortized to operations through unit-of-production
depletion.
Consolidation
of Financial Statements
The
consolidated financial statements include the accounts of the Company and its
99% owned subsidiary APM Madencilik Sanayi Ve Ticaret Limited Sirketi. All
inter-company accounts have been eliminated.
5
GRYPHON
RESOURCES, INC. AND SUBSIDIARY
(An
Exploration Stage Company)
Notes
to Consolidated Financial Statements
(Unaudited)
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the period. Actual results could differ from those
estimates.
Basic
and Diluted Net Loss per Share
Basic net
loss per share is computed in accordance with SFAS No. 128, “Earnings per
Share”. Basic loss per share is calculated by dividing the net loss available to
common stockholders by the weighted average number of common shares outstanding
for the period. Diluted net loss per share is computed by dividing the net loss
available to common stockholders by common stock equivalents. At December 31,
2008, the Company did not have any common stock equivalents
outstanding.
Estimated
Fair Value of Financial Instruments
The carrying value of accounts payable, and other financial instruments
reflected in the financial statements approximates fair value due to
the short-term maturity of the instruments. It is management’s opinion that the
Company is not exposed to significant interest, currency or credit risks arising
from these financial instruments.
Income
Taxes
The
Company has adopted SFAS No. 109, “Accounting for Income Taxes”, which requires
the Company to recognize deferred tax liabilities and assets for the expected
future tax consequences of events that have been recognized in the Company’s
financial statements or tax returns using the liability method. Under this
method, deferred tax liabilities and assets are determined based on the
temporary differences between the financial statement carrying amounts and tax
bases of assets and liabilities using enacted rates in effect in the years
during which the differences are expected to reverse and upon the possible
realization of net operating loss carry-forwards.
Valuation
of Long-Lived Assets
The
Company periodically analyzes its long-lived assets for potential impairment,
assessing the appropriateness of lives and recoverability of un-depreciated
balances through measurement of undiscounted operation cash flows on a basis
consistent with accounting principles generally accepted in the United States of
America.
6
GRYPHON
RESOURCES, INC. AND SUBSIDIARY
(An
Exploration Stage Company)
Notes
to Consolidated Financial Statements
(Unaudited)
Start-up
Costs
The
Company has adopted FASB Statement of Position No. 98-5 ("SOP 98-5"), "Reporting
the Costs of Start-Up Activities." SOP 98-5 requires that all non-governmental
entities expense the cost of start-up activities, including organizational costs
as those costs are incurred.
Foreign
Currency Translation
The
Company’s functional and reporting currency is the United States dollar.
Monetary assets and liabilities denominated in foreign currencies are translated
in accordance with SFAS No. 52
Foreign Currency Translation, using the exchange rate prevailing at the
balance sheet date. Historical cost balances are re-measured using historical
exchange rates. Gains and losses arising on settlement of foreign currency
denominated transactions or balances are included in the determination of
income. Foreign currency transactions are primarily undertaken in
either Canadian dollars or Turkish Lira. The Company has not to the date of
these financial statements, entered into derivative instruments to offset the
impact of foreign currency fluctuations.
Cash
and Cash Equivalents
The
Company considers cash and cash equivalents to consist of cash on hand and
demand deposits in banks with an initial maturity of 90 days or
less.
Reclassifications
Certain
prior period amounts have been reclassified to conform to current year
presentation.
Note 3
– Going Concern
Generally
accepted accounting principles in the United States of America contemplate the
continuation of the Company as a going concern. However, the Company has
accumulated operating losses since its inception and has limited business
operations, which raises substantial doubt about the Company’s ability to
continue as a going concern. The continuation of the Company is dependent upon
the continuing financial support of investors and stockholders of the Company.
As of December 31, 2008 we projected the Company would need additional cash
resources to operate during the upcoming 12 months and would raise this capital
through shareholder loans from our President. The Company intends to attempt to
acquire additional operating capital through private equity offerings to the
public and existing investors to fund its business plan. However, there is no
assurance that equity or debt offerings will be successful in raising sufficient
funds to assure the eventual profitability of the Company. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded assets, or the amounts of and classification of
liabilities that might be necessary in the event the Company cannot continue in
existence.
7
GRYPHON
RESOURCES, INC. AND SUBSIDIARY
(An
Exploration Stage Company)
Notes
to Consolidated Financial Statements
(Unaudited)
Note 4
– Recent Accounting Pronouncements
In
December 2007, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 160 “Noncontrolling Interests in
Consolidated Financial Statements”. This Statement is effective for
fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2008. Earlier adoption is prohibited. The effective date of
this Statement is the same as that of the related Statement 141(R). This
Statement shall be applied prospectively as of the beginning of the fiscal year
in which this Statement is initially applied, except for the presentation and
disclosure requirements. The presentation and disclosure requirements shall be
applied retrospectively for all periods presented. A non-controlling
interest, sometimes called a minority interest, is the portion of equity in a
subsidiary not attributable, directly or indirectly, to a parent. The objective
of this Statement is to improve the relevance, comparability, and transparency
of the financial information that a reporting entity provides in its
consolidated financial statements by establishing accounting and reporting
standards by requiring, among other things, that: (i) The ownership interests in
subsidiaries held by parties other than the parent be clearly identified,
labelled, and presented in the consolidated statement of financial position
within equity, but separate from the parent’s equity; and (ii) the amount of
consolidated net income attributable to the parent and to the non-controlling
interest be clearly identified and presented on the face of the consolidated
statement of income. The Company has adopted this Statement and this
adoption resulted in small changes to the presentation of its balance sheet and
statement of operations.
Management
does not believe that any recently issued, but not yet effective, accounting
standards, if currently adopted, would have a material effect on these financial
statements.
Note 5 – Stock
Dividend
On June
23, 2008, the Company declared an 18.5 for 1 stock dividend. The Record date and
Payment date for this stock dividend were July 3, 2008 and July 7, 2008
respectively. The Company instructed its Transfer Agent to round up to one for
any fractional interest which resulted in the calculation of the dividend. This
dividend had the effect of increasing the issued and outstanding share capital
of the Company from 4,950,000 shares to 96,525,000 shares. All references to
stock issued and stock outstanding have been retroactively adjusted as if
the stock dividend had taken place on January 16, 2006 (inception).
Note 6 - Impairment of
Mineral Properties
During
the period ended June 30, 2008, the Company undertook a review of the Company’s
exploration projects and determined the Company should not proceed with the
exploration of three gold property claims in the Province of Saskatchewan. As a
result, an impairment charge was recorded and the related mineral property
assets were removed from the accounting records of the Company.
8
GRYPHON
RESOURCES, INC. AND SUBSIDIARY
(An
Exploration Stage Company)
Notes
to Consolidated Financial Statements
(Unaudited)
Note 7
– Minority Interest
On April
28, 2008, the Company incorporated a Turkish company named APM Madencilik Sanayi
Ve Ticaret Limited Sirketi (“APM”) as a 99% owned subsidiary. The remaining 1%
interest in APM is held by our President.
Note 8
– Shareholder Loan
As at
December 31, 2008, the Company had one related party shareholder loan
outstanding of $103,084 which included $3,736 of accrued interest. This loan
accrues simple interest at 5% per annum, is uncollateralized, and has no fixed
repayment date.
Note 9
– Loan Payable
As at
December 31, 2008, the Company had an outstanding loan payable of $12,531 which
included $131 of accrued interest. This loan is owed to a private company in
Turkey, accrues interest at 5% per annum, is uncollateralized, and has no fixed
repayment date.
Note 10
- Mineral Properties Rights Acquisition
On April
28, 2008, the Company’s President transferred into the Company’s subsidiary
certain mining license rights in Turkey which have no accounting value at
present. No financial data pertaining to this transaction has been incorporated
into these financial statements.
9
This
quarterly report on Form 10-Q contains "forward-looking statements" relating to
the registrant which represent the registrant's current expectations or beliefs
including, statements concerning registrant’s operations, performance, financial
condition and growth. For this purpose, any statement contained in this
quarterly report on Form 10-Q that are not statements of historical fact are
forward-looking statements. Without limiting the generality of the foregoing,
words such as "may", "anticipation", "intend", "could", "estimate", or
"continue" or the negative or other comparable terminology are intended to
identify forward-looking statements. These statements by their nature involve
substantial risks and uncertainties, such as credit losses, dependence on
management and key personnel and variability of quarterly results, ability of
registrant to continue its growth strategy and competition, certain of which are
beyond the registrant's control. Should one or more of these risks or
uncertainties materialize or should the underlying assumptions prove incorrect,
actual outcomes and results could differ materially from those indicated in the
forward-looking statements.
Overview
Gryphon
Resources, Inc. (“Gryphon”, “We”, or the “Company”) was incorporated in the
State of Nevada on January 16, 2006. On April 28, 2008 we incorporated a Turkish
company named APM Madencilik Sanayi Ve Ticaret Limited Sirketi. (“APM”) as a 99%
owned subsidiary. Our financial statements are presented on a consolidated basis
and include all accounts of both the Company and its subsidiary.
We are a
mineral exploration company and are seeking mineral exploration opportunities in
Turkey.
Since
inception the Company has not been involved in any bankruptcy, receivership or
similar proceedings.
Since
inception the Company has not been involved in any reclassification,
consolidation, or merger arrangements.
The
Company’s common stock is traded in the NASD Over-The-Counter market under the
symbol “GRYO”
Results of Operations for
the Three Month Periods Ended December 31, 2008 and December 31, 2007 and the
period from January 16, 2006 (inception) to December 31, 2008 (the “Exploration
Stage Period”)
Revenues
Since
inception we have earned $nil in revenues.
Operating
Expenses
Our
operating expenses are classified into five categories:
- Exploration
expenses
- Salaries
and wages
- Professional
and consultant fees
- Administrative
expenses
- Mineral
Properties Impairment
10
Exploration
Expenses
Exploration
expenses have been composed of fees for geological services and assays.
Exploration expenses were $659 and $nil for the three month periods ending
December 31, 2008 versus December 31, 2007. For the Exploration Stage Period
exploration expenses totaled $3,115. During upcoming quarters, we project
exploration expenses will increase substantially as we implement our development
plans.
Salaries
and Wages
Salaries
and Wages are composed of wage costs for our CEO, a geological specialist and an
office staff member. Salaries and Wages were $3,304 and $nil for the three
periods ending December 31, 2008 versus December 31, 2007. For the Exploration
Stage Period salaries and wages totaled $8,378. During upcoming quarters, we
project salaries and wages will increase moderately as we implement our
development plans.
Professional
and Consultant Fees
Professional
and consultant fees were $3,000 and $7,400 for the three month periods ending
December 31, 2008 versus December 31, 2007. For the Exploration Stage Period
professional and consultant fees totaled $77,447. During the current period
professional fees were composed of auditor, accounting and legal fees. During
upcoming quarters, we project professional fees will remain at current
levels.
Administrative
Expenses
Administrative
expenses were $7,561 and $262 for the three month periods ended December 31,
2008 versus December 31, 2 007. For the Exploration Stage Period administrative
expenses totaled $28,678. During the current period administrative fees were
primarily composed of office set-up expenses for our subsidiary in Turkey and
filing costs related to our annual financial statements. During upcoming
quarters, we project administration expenses will increase substantially as we
implement our development plans.
Mineral
Properties Impairment
The
mineral property impairment related to the abandonment of three gold property
claims in the Province of Saskatchewan totaling $18,998.
Net
Losses
We
incurred net losses of $(15,991) and $(7,981) for the three month periods ended
December 31, 2008 versus December 31, 2007. For the Exploration Stage Period net
losses totaled $(140,007). For the three month period ended December 31, 2008,
the non-controlling interest share of these losses totaled $(74).
Material Events and
Uncertainties
Our
operating results are difficult to forecast. Our prospects should be
evaluated in light of the risks, expenses and difficulties commonly encountered
by comparable early stage companies in mineral resource markets.
There can
be no assurance that we will successfully address such risks, expenses and
difficulties and cannot assure you that we will become profitable in the
future.
Liquidity and Capital
Resources
Since the
date of our incorporation, we have raised $51,500 though private placements of
our common shares; $99,348 through shareholder loans, and $12,400 via Loans. As
of December 31, 2008 we had cash on hand of $23,893 and a prepaid expense
balance of $4,904. We project we will need to raise additional funds during the
coming twelve months and expect we will receive sufficient shareholder loans
from our President to cover our
11
operating
requirements. However, we also project we will need to attempt to raise
additional equity to provide the funds necessary to explore and develop our
current property and have plans to pursue further sales of common shares to
existing shareholders and the public.
EXCHANGE
RATE FLUCTUATION RISK
Our
reporting currency is United States Dollars. Our transactions are primarily
conducted in US$ but also include transactions in other currencies, notably the
Turkish Lira and Canadian Dollar. Foreign currency rate fluctuations may
have a material impact on the Company’s financial reporting. These
fluctuations may have positive or negative impacts on the results of operations
of the Company.
We have
not entered into derivative contracts either to hedge existing risk or for
speculative purposes.
Evaluation
of Disclosure Controls and Procedures
The
Company maintains disclosure controls and procedures that are designed to ensure
that information required to be disclosed in the Company's Exchange Act reports
is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and communicated to the Company's management, including its Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure based closely on the definition of "disclosure
controls and procedures" in Rule 13a-15(e). The Company's disclosure controls
and procedures are designed to provide a reasonable level of assurance of
reaching the Company's desired disclosure control objectives. In designing and
evaluating the disclosure controls and procedures, management recognized that
any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives,
and management necessarily was required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures. The Company's
certifying officer has concluded that the Company's disclosure controls and
procedures are not effective in reaching that level of assurance.
As of the
end of the period ending December 31, 2008, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and the Company's
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based on the foregoing, our Chief
Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) concluded that our
disclosure controls and procedures were not effective.
Management's
Report on Internal Control over Financial Reporting
Management
of the Company is responsible for establishing and maintaining adequate internal
control over financial reporting (as defined in Section 13a-15(f) of the
Securities Exchange Act of 1934, as amended). Internal control over financial
reporting is a process designed by, or under the supervision of, the Company's
CFO to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of the Company's financial statements for external
reporting purposes in conformity with U.S. generally accepted accounting
principles and include those policies and procedures that (i) pertain to the
maintenance of records that in
12
reasonable
detail accurately and fairly reflect the transactions and disposition of the
assets of the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Company's assets that could have a
material effect on the financial statements.
As of
December 31, 2008, management conducted an assessment of the effectiveness of
the Company's internal control over financial reporting based on the framework
established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Based on the
criteria established by COSO management concluded that the Company's internal
control over financial reporting was not effective as of December 31, 2008, as a
result of the identification of the material weaknesses described
below.
A
material weakness is a deficiency or combination of deficiencies in internal
control over financial reporting, such that there is a reasonable possibility
that a material misstatement of the annual or interim financial statements will
not be prevented or detected on a timely basis.
Specifically,
management identified the following control deficiencies. (1) The Company has
not properly segregated duties as one or two individuals initiate, authorize,
and complete all transactions. The Company has not implemented measures that
would prevent the individuals from overriding the internal control system. The
Company does not believe that this control deficiency has resulted in deficient
financial reporting because the Chief Financial Officer is aware of his
responsibilities under the SEC's reporting requirements and personally certifies
the financial reports. (2) The Company has installed accounting software that
does not prevent erroneous or unauthorized changes to previous reporting periods
and does not provide an adequate audit trail of entries made in the accounting
software.
Accordingly,
while the Company has identified certain material weaknesses in its system of
internal control over financial reporting, it believes that it has taken
reasonable steps to ascertain that the financial information contained in this
report is in accordance with generally accepted accounting principles.
Management has determined that current resources would be appropriately applied
elsewhere and when resources permit, they will alleviate material weaknesses
through various steps.
Changes
in Internal Control over Financial Reporting
During
the first quarter of the Company’s fiscal year ended September 30, 2009, no
material changes were made to the Company’s internal control over financial
reporting.
Remediation
Plan
Addition of
staff
We have
identified that additional staff will be required to properly segment the
accounting duties of the Company. However, we do not currently have resources to
fulfill this part of our plan and will be addressing this matter once sufficient
resources are available.
13
There is
no litigation pending or threatened by or against us.
The
following risk factors should be considered in connection with an evaluation of
our business:
THE
COMPANY'S LIMITED OPERATING HISTORY MAKES IT DIFFICULT FOR YOU TO JUDGE ITS
PROSPECTS.
The
Company has a limited operating history upon which an evaluation of the Company,
its current business and its prospects can be based. You should consider any
purchase of the Company's shares in light of the risks, expenses and problems
frequently encountered by all companies in the early stages of its corporate
development.
LIQUIDITY
AND CAPITAL RESOURCES ARE UNCERTAIN.
For the
three months ended December 31, 2008, the Company had a Net Loss of $(15,991).
The Company may need to raise additional capital by way of an offering of equity
securities, an offering of debt securities, or by obtaining financing through a
bank or other entity. The Company has not established a limit as to the amount
of debt it may incur nor has it adopted a ratio of its equity to debt allowance.
If the Company needs to obtain additional financing, there is no assurance that
financing will be available from any source, that it will be available on terms
acceptable to us, or that any future offering of securities will be successful.
If additional funds are raised through the issuance of equity securities, there
may be a significant dilution in the value of the Company’s outstanding common
stock. The Company could suffer adverse consequences if it is unable to obtain
additional capital which would cast substantial doubt on its ability to continue
its operations and growth.
THE
VALUE AND TRANSFERABILITY OF THE COMPANY'S SHARES MAY BE ADVERSELY IMPACTED BY
THE LIMITED TRADING MARKET FOR ITS SHARES AND THE PENNY STOCK
RULES.
There is
only a limited trading market for the Company's shares. The Company's common
stock is traded in the over-the-counter market and "bid" and "asked" quotations
regularly appear on the OTC Bulletin Board under the symbol "GRYO". There can be
no assurance that the Company's common stock will trade at prices at or above
its present level and an inactive or illiquid trading market may have an adverse
impact on the market price. In addition, holders of the Company's common stock
may experience substantial difficulty in selling their securities as a result of
the "penny stock rules" which restrict the ability of brokers to sell certain
securities of companies whose assets or revenues fall below the thresholds
established by those rules.
14
FUTURE
SALES OF SHARES MAY ADVERSELY IMPACT THE VALUE OF THE COMPANY'S
STOCK.
If
required, the Company may seek to raise additional capital through the sale of
common stock. Future sales of shares by the Company or its stockholders could
cause the market price of its common stock to decline.
MINERAL
EXPLORATION AND DEVELOPMENT ACTIVITIES ARE SPECULATIVE IN NATURE.
Resource
exploration and development is a speculative business, characterized by a number
of significant risks including, among other things, unprofitable efforts
resulting not only from the failure to discover mineral deposits but from
finding mineral deposits which, though present, are insufficient in quantity and
quality to return a profit from production. The marketability of minerals
acquired or discovered by the Company may be affected by numerous factors which
are beyond the control of the Company and which cannot be accurately predicted,
such as market fluctuations, the proximity and capacity of milling facilities,
mineral markets and processing equipment and such other factors as government
regulations, including regulations relating to royalties, allowable production,
importing and exporting of minerals and environmental protection, the
combination of which factors may result in the Company not receiving an adequate
return of investment capital.
Substantial
expenditures are required to establish ore reserves through drilling, to develop
metallurgical processes to extract the metal from the ore and, in the case of
new properties, to develop the mining and processing facilities and
infrastructure at any site chosen for mining. Although substantial benefits may
be derived from the discovery of a major mineralized deposit, no assurance can
be given that minerals will be discovered in sufficient quantities and grades to
justify commercial operations or that funds required for development can be
obtained on a timely basis. Estimates of reserves, mineral deposits and
production costs can also be affected by such factors as environmental
permitting regulations and requirements, weather, environmental factors,
unforeseen technical difficulties, unusual or unexpected geological formations
and work interruptions. In addition, the grade of ore ultimately mined may
differ from that indicated by drilling results. Short term factors relating to
reserves, such as the need for orderly development of ore bodies or the
processing of new or different grades, may also have an adverse effect on mining
operations and on the results of operations. Material changes in ore reserves,
grades, stripping ratios or recovery rates may affect the economic viability of
any project.
THE
COMPANY WILL BE SUBJECT TO OPERATING HAZARDS AND RISKS WHICH MAY ADVERSELY
AFFECT THE COMPANY'S FINANCIAL CONDITION.
Mineral
exploration involves many risks, which even a combination of experience,
knowledge and careful evaluation may not be able to overcome. The Company's
operations will be subject to all the hazards and risks normally incidental to
exploration, development and production of metals, such as unusual or unexpected
formations, cave-ins or pollution, all of which could result in work stoppages,
damage to property and possible environmental damage. The Company does not have
general liability insurance covering its operations and does not presently
intend to obtain liability insurance as to such hazards and liabilities. Payment
of any liabilities as a result could have a materially adverse effect upon the
Company's financial condition
15
THE
COMPANY'S ACTIVITIES WILL BE SUBJECT TO ENVIRONMENTAL AND OTHER INDUSTRY
REGULATIONS WHICH COULD HAVE AN ADVERSE EFFECT ON THE FINANCIAL CONDITION OF THE
COMPANY.
The
Company's activities are subject to environmental regulations promulgated by
government agencies from time to time. Environmental legislation generally
provides for restrictions and prohibitions on spills, releases or emissions of
various substances produced in association with certain mining industry
operations, such as seepage from tailing disposal areas, which would result in
environmental pollution. A breach of such legislation may result in imposition
of fines and penalties. In addition, certain types of operations require the
submission and approval of environmental impact assessments. Environmental
legislation is evolving in a manner which means stricter standards and
enforcement, fines and penalties for non-compliance are more stringent.
Environmental assessments of proposed projects carry a heightened degree of
responsibility for companies and directors, officers and employees. The cost of
compliance with changes in governmental regulations could have an adverse effect
on the financial condition of the Company.
The
operations of the Company include exploration and development activities and
commencement of production on its properties, require permits from various
federal, state, provincial and local governmental authorities and such
operations are and will be governed by laws and regulations governing
prospecting, development, mining, production, exports, taxes, labor standards,
occupational health, waste disposal, toxic substances, land use, environmental
protection, mine safety and other matters. Companies engaged in the development
and operation of mines and related facilities generally experience increased
costs and delays in production and other schedules as a result of the need to
comply with applicable laws, regulations and permits.
Failure
to comply with applicable laws, regulations, and permitting requirements may
result in enforcement actions, including orders issued by regulatory or judicial
authorities causing operations to cease or be curtailed, and may include
corrective measures requiring capital expenditures, installation of additional
equipment, or remedial actions. Parties engaged in mining operations may be
required to compensate those suffering loss or damage by reason of the mining
activities and may have civil or criminal fines or penalties imposed for
violations of applicable laws or regulations and, in particular, environmental
laws.
COMPETITION
MAY HAVE AN IMPACT ON THE COMPANY'S ABILITY TO ACQUIRE ATTRACTIVE PRECIOUS
METALS PROPERTIES, WHICH MAY HAVE AN ADVERSE IMPACT ON THE COMPANY'S
OPERATIONS.
Significant
and increasing competition exists for the limited number of precious metals
acquisition opportunities available. As a result of this competition, some of
which is with large established mining companies with substantial capabilities
and greater financial and technical resources than the Company, the Company may
be unable to acquire attractive precious metals properties on terms it considers
acceptable. Accordingly, there can be no assurance that any exploration program
intended by the Company on properties it intends to acquire will yield any
reserves or result in any commercial mining operation.
DOWNWARD
FLUCTUATIONS IN METAL PRICES MAY SEVERELY REDUCE THE VALUE OF THE
COMPANY.
The
Company has no control over the fluctuations in the prices of the metals for
which it is exploring. A significant decline in such prices would severely
reduce the value of the Company.
16
THE
COMPANY CURRENTLY RELIES ON CERTAIN KEY INDIVIDUALS AND THE LOSS OF ONE OF THESE
CERTAIN KEY INDIVIDUALS COULD HAVE AN ADVERSE EFFECT ON THE
COMPANY.
The
Company's success depends to a certain degree upon certain key members of the
management. These individuals are a significant factor in the Company's growth
and success. The loss of the service of members of the management and advisory
board could have a material adverse effect on the Company. In particular, the
success of the Company is highly dependent upon the efforts of the President
& CEO, CFO, PAO, Treasurer & Secretary, Chair & Director of the
Company, the loss of whose services would have a material adverse effect on the
success and development of the Company.
THE
COMPANY DOES NOT MAINTAIN KEY MAN INSURANCE TO COMPENSATE THE COMPANY FOR THE
LOSS OF CERTAIN KEY INDIVIDUALS.
The
Company does not anticipate having key man insurance in place in respect of its
senior officers or personnel, although the Board has discussed and investigated
the prospect of obtaining key man insurance for our CEO.
WE
ARE AN EXPLORATION STAGE COMPANY, AND THERE IS NO ASSURANCE THAT A COMMERCIALLY
VIABLE DEPOSIT OR "RESERVE" EXISTS ON ANY PROPERTIES FOR WHICH THE COMPANY HAS,
OR MIGHT OBTAIN, AN INTEREST.
The
Company is an exploration stage company and cannot give assurance that a
commercially viable deposit, or “reserve,” exists on any properties for which
the Company currently has (through an option) or may have (through potential
future joint venture agreements or acquisitions) an interest. Therefore,
determination of the existence of a reserve depends on appropriate and
sufficient exploration work and the evaluation of legal, economic, and
environmental factors. If the Company fails to find a commercially viable
deposit on any of its properties, its financial condition and results of
operations will be materially adversely affected.
WE
REQUIRE SUBSTANTIAL FUNDS MERELY TO DETERMINE WHETHER COMMERCIAL PRECIOUS METAL
DEPOSITS EXIST ON OUR PROPERTIES.
Any
potential development and production of the Company’s exploration properties
depends upon the results of exploration programs and/or feasibility studies and
the recommendations of duly qualified engineers and geologists. Such programs
require substantial additional funds. Any decision to further expand the
Company’s operations on these exploration properties is anticipated to involve
consideration and evaluation of several significant factors including, but not
limited to:
|
|
§
|
Costs
of bringing each property into production, including exploration work,
preparation of production feasibility studies, and construction of
production facilities;
|
|
|
§
|
Availability
and costs of financing;
|
|
|
§
|
Ongoing
costs of production;
|
|
|
§
|
Market
prices for the precious metals to be
produced;
|
|
|
§
|
Environmental
compliance regulations and restraints;
and
|
|
|
§
|
Political
climate and/or governmental regulation and
control.
|
17
GENERAL
MINING RISKS
Factors
beyond our control may affect the marketability of any substances discovered
from any resource properties the Company may acquire. Metal prices, in
particular gold and silver prices, have fluctuated widely in recent years.
Government regulations relating to price, royalties, and allowable production
and importing and exporting of precious metals can adversely affect the Company.
There can be no certainty that the Company will be able to obtain all necessary
licenses and permits that may be required to carry out exploration, development
and operations on any projects it may acquire and environmental concerns about
mining in general continue to be a significant challenge for all mining
companies.
The
Company did not make any sales of equity securities during the
quarter.
The
Company has no senior securities outstanding.
During
the quarter ended December 31, 2008, no matters were submitted to a vote of the
Company's security holders, through the solicitation of proxies or
otherwise.
(a)
During the quarter there was no information which would have been required to be
filed via a report on Form 8-K which was not filed as such.
(b)
During the quarter there were no material changes to the procedures by which
security holders may recommend nominees to the registrant’s board of
directors.
EXHIBIT
INDEX
|
Number
|
Exhibit Description
|
|
3.1
|
Articles
of Incorporation*
|
|
3.2
|
Certificate
of Amendment of Articles of Incorporation*
|
|
3.3
|
Bylaws*
|
|
14.1
|
Code
of Ethics*
|
18
*
Filed as an exhibit to our registration statement on Form SB-2
filed February 26, 2006 and incorporated herein by this reference
In
accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GRYPHON
RESOURCES, INC.
/s/ Serdar
Kirmizioglu
Serdar
Kirmizioglu
President
& CEO, CFO
Dated:
February 12, 2009
19