UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended August 31, 2006
---------------
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period ____________ to ____________
Commission File Number 000-32181
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BROOKMOUNT EXPLORATIONS INC.
(Exact name of small business issuer as specified in its charter)
------------------------------------ -------------------------------------------
Nevada 98-0201259
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
------------------------------------ -------------------------------------------
999 Canada Place - Suite 404
Vancouver, British Columbia V6C 3EZ
----------------------------------------
(Address of principal executive offices)
604-676-5244
---------------------------
(Issuer's telephone number)
-------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (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 |_|
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes |X| No |_|
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date: 29,334,502 shares of $0.001 par value
common stock outstanding as of October 10, 2006.
-1-
Item 1. Financial Statements.
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
INTERIM FINANCIAL STATEMENTS
AUGUST 31, 2006
(Unaudited)
BALANCE SHEETS
INTERIM STATEMENTS OF OPERATIONS
INTERIM STATEMENTS OF CASH FLOWS
STATEMENT OF STOCKHOLDERS' EQUITY
NOTES TO THE INTERIM FINANCIAL STATEMENTS
-2-
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
BALANCE SHEETS
August 31, November 30,
2006 2005
---- ----
ASSETS (Unaudited) (Audited)
------
Current assets
Cash $ 34,632 $ 20,447
Prepaid expenses - 5,000
Advances - Note 2 - 43,617
----------------------------------------
34,632 69,064
Capital assets - Note 3 962 1,242
----------------- -----------------
$ 35,594 $ 70,306
================= =================
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities $ 87,314 $ 33,223
Due to related parties - Note 6 82,063 58,516
----------------- -----------------
169,377 91,739
----------------- -----------------
STOCKHOLDERS' DEFICIT
Common stock, $0.001 par value - Note 5
200,000,000 shares authorized
30,104,502 shares issued (2005 - 16,768,685) 30,104 16,768
Additional paid-in capital 5,678,154 3,031,999
Stock subscriptions receivable (6,600) (6,600)
Deficit accumulated during the exploration stage (5,835,441) (3,063,600)
----------------- -----------------
(133,783) (21,433)
------------------ ------------------
$ 35,594 $ 70,306
================= =================
Going Concern - Note 1
Commitments - Note 4
Litigation - Note 8
SEE ACCOMPANYING NOTES
-3-
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
INTERIM STATEMENTS OF OPERATIONS
(Unaudited)
December 9, 1999
(Date of
Three months ended Nine months ended Inception) to
August 31 August 31, August 31,
2006 2005 2006 2005 2006
---- ---- ---- ---- ----
Expenses
General and administrative $ 156,987 $ 68,397 $ 2,726,531 $ 253,281 $ 3,545,405
- Notes 2, 5 and 6
Mineral property costs
- Notes 4, and 5 30,000 167,352 45,310 2,195,947 2,290,036
----------------- ----------------- ----------------- ----------------- ------------
Net loss $ (186,987) $ (235,749) $ (2,771,841) $ (2,449,228) $ (5,835,441)
================= ================= ================= ================= =============
Basic and diluted loss per share $ (0.00) $ (0.00) $ (0.11) $ (0.17)
================ ================ ================ ================
Weighted average number of shares
outstanding 28,478,664 16,005,883 24,768,582 14,278,912
================= ================= ================= =================
SEE ACCOMPANYING NOTES
-4-
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
INTERIM STATEMENTS OF CASH FLOWS
(Unaudited)
December 9,
1999
(Date of
Inception)
Nine months ended to
August 31, August 31,
2006 2005 2006
---- ---- ----
Cash Flows from Operating Activities
Net loss $ (2,771,841) $ (2,449,228) $ (5,835,441)
Add items not affecting cash:
Depreciation 279 399 850
Capital contributions - - 29,250
Capital stock issued for services 2,052,866 - 2,052,866
Capital stock issued for mineral property 10,000 2,150,000 2,160,000
Provision for irrecoverable advances 193,617 - 193,617
Changes in non-cash working capital balances
related to operations
Prepaid expenses 5,000 (1,137) -
Accounts payable and accrued liabilities 54,091 (11,312) 87,314
----------------- ------------------ -----------------
Net cash used in operations ( 455,988) (311,278) (1,311,542)
----------------- ----------------- -----------------
Cash Flows from Investing Activities
Advances (150,000) (42,428) (193,617)
Acquisition of capital assets - - ( 1,813)
----------------- ----------------- -----------------
Net cash used in investing activities (150,000) (42,428) (195,430)
------------------ ------------------ ------------------
Cash Flows from Financing Activities
Due to related parties 179,420 - 82,063
Capital stock issued, net 440,753 322,695 1,459,541
----------------- ----------------- -----------------
Net cash generated by financing activities 620,173 322,695 1,541,604
----------------- ----------------- -----------------
Increase (decrease) in cash 14,185 (31,011) 34,632
Cash, beginning 20,447 51,103 -
----------------- ----------------- -----------------
Cash, ending $ 34,632 $ 20,092 $ 34,632
================= ================= =================
Supplemental Disclosure of Cash Flow
Information
Cash paid for:
Interest $ - $ - $ -
================= ================= =================
Income taxes $ - $ - $ -
================= ================= =================
Non-cash transactions - Note 7
SEE ACCOMPANYING NOTES
-5-
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
for the period December 9, 1999 (Date of Inception) to August 31, 2006
Deficit
Accumulated
Additional Stock During the
Common Shares Paid-in Subscriptions Exploration
-----------------------
Number Par Value Capital Receivable Stage Total
------ --------- ------- ---------- ----- -----
Balance, as at December 9, 1999 - $ - $ - $ - $ - $ -
Capital stock issued for cash - at $0.001 3,500,000 3,500 - - - 3,500
Capital stock issued for cash - at $0.002 5,750,000 5,750 5,750 - - 11,500
- at $0.20 32,400 32 6,448 - - 6,480
Contributions to capital by officers - - 9,000 - - 9,000
Net loss - - - - (31,327) (31,327)
--------------- ---------- --------- ------------ -------------- ------------
Balance, as at November 30, 2000 9,282,400 9,282 21,198 - (31,327) (847)
Contributions to capital by officers - - 9,000 - - 9,000
Net loss - - - - (17,215) (17,215)
--------------- ---------- --------- ------------ -------------- ------------
Balance, as at November 30, 2001 9,282,400 9,282 30,198 - (48,542) (9,062)
Contributions to capital by officers - - 9,000 - - 9,000
Net loss - - - - (17,811) (17,811)
--------------- ---------- --------- ------------ -------------- ------------
Balance, as at November 30, 2002 9,282,400 9,282 39,198 - (66,353) (17,873)
Capital stock issued for cash - at $0.25 176,500 177 43,948 - - 44,125
- at $0.50 250,000 250 125,262 - - 125,512
Contributions to capital by officers - - 2,250 - - 2,250
Net loss - - - - (164,407) (164,407)
--------------- ---------- --------- ------------ -------------- ------------
Balance, as at November 30, 2003 9,708,900 9,709 210,658 - (230,760) (10,393)
Capital stock issued for cash - at $0.50 575,948 576 287,398 (100) - 287,874
Net loss - - - - (322,261) (322,261)
--------------- ---------- --------- ------------ -------------- ------------
Balance, as at November 30, 2004 10,284,848 10,285 498,056 (100) (553,021) (44,780)
...Cont'd
SEE ACCOMPANYING NOTES
6
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
for the period December 9, 1999 (Date of Inception) to August 31, 2006
Deficit
Accumulated
Additional Stock During the
Common Shares Paid-in Subscriptions Exploration
-----------------------
Number Par Value Capital Receivable Stage Total
------ --------- ------- ---------- ----- -----
Capital stock issued for cash - at $0.21 100,000 100 21,130 - - 21,230
Capital stock issued for cash - at $0.25 200,000 200 46,300 - - 46,500
Capital stock issued for cash - at $0.35 134,100 134 46,867 (6,500) - 40,501
Capital stock issued for cash - at $0.40 62,500 63 24,937 - - 25,000
Capital stock issued for cash - at $0.50 411,190 411 205,184 - - 205,595
Capital stock issued for cash - at $0.56 35,714 35 19,965 - - 20,000
Capital stock issued for cash - at $0.60 10,333 10 6,190 - - 6,200
Capital stock issued for cash - at $0.63 30,000 30 18,870 - - 18,900
Capital stock issued for mineral
property - at $0.40 5,000,000 5,000 1,995,000 - - 2,000,000
Capital stock issued for mineral
property - at $0.30 500,000 500 149,500 - - 150,000
Net loss - - - - (2,510,579) (2,510,579)
--------------- ---------- --------- ------------ -------------- -------------
Balance, as at November 30, 2005 16,768,685 16,768 3,031,999 (6,600) (3,063,600) (21,433)
Capital stock issued for cash - at $0.09 770,000 770 64,983 - - 65,753
- at $0.40 759,975 760 274,240 - - 275,000
- at $0.60 163,001 163 99,837 - - 100,000
Capital stock issued for
mineral property - at $0.75 100,000 100 9,900 - - 10,000
Capital stock issued for services 7,921,000 7,921 2,021,242 - - 2,029,163
Capital stock issued for debt 3,621,841 3,622 175,953 - - 179,575
Net loss - - - - (2,771,841) (2,771,841)
--------------- ---------- --------- ------------ -------------- -------------
Balance, as at August 31, 2006 (Unaudited) 30,104,502 $ 30,104 $5,678,154 $ (6,600) $ (5,835,441)$ (133,783)
=============== ========= ========== ============= ============== ==============
SEE ACCOMPANYING NOTES
-7-
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
August 31, 2006
(Unaudited)
Note 1 Nature of Continued Operations and Basis of Presentation
The Company is an exploration stage company. The Company was
organized for the purpose of acquiring, exploring and developing
mineral properties. The recoverability of amounts from properties
acquired will be dependant upon discovery of economically
recoverable reserves, confirmation of the Company's interest in
the underlying property, the ability of the Company to obtain
necessary financing to satisfy the expenditure requirements under
the property agreement and to complete the development of the
property and upon future profitable production.
Going Concern
The financial statements have been prepared on the basis of a
going concern which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The
Company has a working capital deficiency of $52,682 at August 31,
2006 and has incurred losses since inception of $5,835,441 and
further losses are anticipated in the development of its mineral
properties raising substantial doubt as to the Company's ability
to continue as a going concern. The ability of the Company to
continue as a going concern is dependent on raising additional
capital to fund ongoing exploration and development and ultimately
on generating future profitable operations. The Company will
continue to fund operations with advances, other debt sources and
further equity placements.
Unaudited Interim Financial Statements
The accompanying unaudited interim financial statements have been
prepared in accordance with United States generally accepted
accounting principles for interim financial information and with
the instructions to Form 10-QSB of Regulation S-B. They do not
include all information and footnotes required by United States
generally accepted accounting principles for complete financial
statements. However, except as disclosed herein, there has been no
material changes in the information disclosed in the notes to the
financial statements for the year ended November 30, 2005 included
in the Company's Annual Report on Form 10-KSB filed with the
Securities and Exchange Commission. The interim unaudited
financial statements should be read in conjunction with those
financial statements included in the Form 10-KSB. In the opinion
of Management, all adjustments considered necessary for a fair
presentation, consisting solely of normal recurring adjustments,
have been made. Operating results for the nine months ended August
31, 2006 are not necessarily indicative of the results that may be
expected for the year ending November 30, 2006.
-8-
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
August 31, 2006
(Unaudited)
Note 2 Advances
On May 13, 2005, the Company signed a "Letter of Agreement" with a
private corporation Jemma Resources Corp. ("Jemma") to acquire
100% of the outstanding capital stock of Jemma. Significant terms
contained in the Letter of Agreement were the appointment of two
of Jemma's directors to the Company's board of directors, Jemma
completing a debt financing of $15 million, and the Company's
right to elect not to proceed with the transaction thereby
resulting in all advances made to Jemma by the Company being
refundable, and the replacement of the Letter of Agreement with a
binding contract. The purchase price consisted of 3,000,000 shares
of common stock of the Company, 3,000,000 share purchase warrants
at $1.50 per warrant exercisable within 24 months from the date of
the agreement and approximately CDN$75,000 in refundable advances
to secure an extension for the option to purchase a mineral
property and for operating costs. During May 2005 two directors of
Jemma were appointed to the Company's board of directors. During
the year ended November 30, 2005, the Company advanced $43,617
(CDN $54,400) pursuant to the Letter of Agreement. At November 30,
2005 the Letter of Agreement had not been replaced by a binding
contract and Jemma had not raised the debt financing as
contemplated in the Letter of Agreement. Accordingly the Company's
management decided not to proceed with this transaction. The
decision was as a result of the Company's due diligence and
Jemma's inability to raise the agreed financing. As a result, the
advances totaling $43,617 became refundable pursuant to the terms
of the Letter of Agreement. As of August 31, 2006, the Company has
not received the funds from Jemma. Due to delays in collecting
this advance the Company provided fully against the $43,617 during
the period ending August 31, 2006.
During the period ending August 31, 2006 $150,000 was withdrawn
from the Company's bank account by a former director of the
Company. The former director was not an authorized signatory on
the Company's bank account and had not been granted any such
authority to withdraw the funds by the Company's Board of
Directors. Upon completion of an investigation, the Company
determined that the former director had not used the funds for
corporate purposes. The Company has worked for several months to
have this director return the money to the Company on a voluntary
basis. To date, the money has not been returned. The Company has
also demanded from the bank that the money be returned as it
believes the bank is responsible since the director was not a
signatory to the account and did not otherwise have authority to
have the funds removed from the account. The Company has commenced
legal proceedings against the former director in an effort to
recover the $150,000. Due to the uncertainty of collection the
Company provided fully against the $150,000 during the period
ending August 31, 2006 (See note 8).
Note 3 Capital Assets
November 30,
August 31, 2006 2005
------------------------------------------------- ------------------
Accumulated
Cost Depreciation Net Net
Computer equipment $ 1,813 $ 851 $ 962 $ 1,242
============ =============== =============== ==============
-9-
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
August 31, 2006
(Unaudited)
Note 4 Mineral Properties
a) Brookmount Claims, Abitibi West County, Quebec, Canada
During 2003 the Company acquired five mineral claims located in the Chazel
Township, in the Province of Quebec for $47,779. The claims are in good standing
until November 14, 2006.
b) Mercedes Property, Junin, Peru
Pursuant to a property acquisition agreement dated July 3, 2003 and amended on
January 24, 2005, the Company acquired a 100% interest in 2,611 hectares located
in Central Peru from a director of the Company (the "Vendor") for consideration
of $22,500 (paid) and the issuance of 5,000,000 common shares valued at $0.40
per share (issued). The property is held in trust by the Vendor for the Company.
Upon request from the Company the title will be recorded in the name of the
Company. At August 31, 2006 the title of this property has not been recorded in
the name of the Company.
c) Rock Creek Claims, British Columbia, Canada
On May 25, 2006 the Company entered into an Option Agreement (the "Agreement")
to acquire an option to purchase 100% of the issued share capital of 722161 B.C.
Ltd ("BC Ltd") on the following terms:
1. The Company must issue 100,000 common shares upon execution of the
Agreement (issued);
2. The Company must make cash payments totalling CAD$250,000 as follows:
- August 15, 2006 - $10,000 (Not paid);
- September 15, 2006 - $12,500 (Not paid);
- November 15, 2006 - $12,500;
- $12,500 on or before January 15, 2007, and installment payments
of $12,500 quarterly thereafter on or before the 15th days of
April, July October and January of each year until the total of
$250,000 has been paid or satisfied;
3. The Company must issue 500,000 common shares in four equal tranches of
125,000 each on or before the 15th days of October in each of 2006, 2007,
2008 and 2009;
4. The Company must incur exploration expenses of $1,000,000 over a period of
five years from the date of the Agreement.
BC Ltd has a 56% interest in mineral claims located in the Rock Creek area of
British Columbia, Canada.
Due to the preliminary stage of exploration activities on the Company's
properties, to date, all mineral property acquisition cost have been impaired.
-10-
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
August 31, 2006
(Unaudited)
Note 5 Capital Stock
During the nine months ended August 31, 2006, the Company issued:
- 100,000 shares of common stock pursuant the proposed acquisition of a
mineral property (See note 4c);
- 4,291,000 shares of common stock with a fair value of $1,390,284 to a
director for business and consulting (See note 2, 6 and 8).
- 3,630,000 shares of common stock with a fair value of $638,880 to its
directors for the services provided to date;
- 158,016 shares of common stock with a fair value of $23,702 pursuant to a
debt settlement agreement;
- 3,463,825 shares of common stock with a fair value of $155,873 pursuant to
a debt settlement agreement; and
- 1,692,976 shares of common stock pursuant a private placement for cash
proceeds of $440,753.
To August 31, 2006, the Company has not granted any stock
options or warrants.
Note 6 Related Party Transactions
The Company paid or incurred the following amounts to directors of
the Company, a former director and/or companies with directors or
officers in common:
Nine months ended
August 31,
2006 2005
---- ----
General and administrative:
Consulting fees $ 2,054,349 $ -
Management fees 210,000 140,500
--------------- -------------
$ 2,264,349 $ 140,500
=============== =============
The consulting and management fees were measured at the exchange
amount which is the amount agreed upon by the transacting parties.
Amounts due to related parties at August 31, 2006 are due to
directors of the Company in respect to unpaid management fees and
cash advances amounted to $82,063 (November 30, 2005-$58,516).
These amounts are unsecured. The amounts due for unpaid management
fees have no specific terms for repayment while the amounts due
for cash advances are due on December 31, 2006. The amounts due
for unpaid management fees are non-interest bearing while the
amounts due for cash advances bear interest at a rate of 10% per
annum.
-11-
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
August 31, 2006
(Unaudited)
Note 6 Related Party Transactions (Continued)
During the nine months ended August 31, 2006, the Company issued
4,291,000 shares of its common stock with a fair value of
$1,390,284 to a director for services to be rendered during the
2006 fiscal year. Initially this amount was deferred and expensed
over the duration of the 2006 fiscal year. On April 26, 2006 the
services of this director were terminated (See Notes 2, 6 and 8).
During the period ended May 31, 2006 the Company expensed the
deferred amount of $1,039,495 as no further services will be
rendered by this director. The Company is currently evaluating its
legal options to cancel these shares, in full or in part.
During the nine months ended August 31, 2006, the Company issued
3,630,000 shares of its common stock with a fair value of $638,880
to its directors for the services provided.
During the nine months ended August 31, 2006, the Company issued
3,463,825 shares of its common stock with a fair value of $155,874
to directors pursuant to debt settlement agreements.
Note 7 Non-cash Transactions
Investing and financing activities that do not have a direct
impact on current cash flows are excluded from the statement of
cash flows. During the nine months ended August 31, 2006, the
Company issued:
a) 100,000 common shares valued at $0.10 per share pursuant to the
Agreement with BC Ltd;
b) 4,291,000 shares of common stock with a fair value of $1,390,284
to a former director for business and consulting services to be
provided.
c) 3,630,000 shares of common stock with a fair value of $638,880 to
its directors for the services provided to date;
d) 158,016 shares of common stock with a fair value of $23,703
pursuant to a debt settlement agreement; and
e) 3,463,825 shares of common stock with a fair value of $155,873
pursuant to a debt settlement agreement.
These transactions were excluded from the statement of cash flows
for the period ended August 31, 2006, and for the period December
9, 1999 (Date of Inception) to August 31, 2006.
-12-
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
August 31, 2006
(Unaudited)
Note 8 Litigation
On June 29, 2006 a former director of the Company commenced legal
action against the Company and its directors (See notes 2 and 6).
The former director is claiming damages in excess of $5,000,000
for alleged breach of contract, libel, fraud, intentional deceit,
wrongful conduct and emotional distress. The Company and directors
deny, all of these claims, believe they are without merit and
plans to vigorously defend themselves against all of these claims.
(See notes 2 and 6).
-13-
Item 2. Management's Discussion and Analysis or Plan of Operation
FORWARD LOOKING STATEMENTS
This quarterly report contains forward-looking statements that involve risks and
uncertainties. We use words such as "anticipate," "believe," "plan," "expect,"
"future," "intend" and similar expressions to identify such forward-looking
statements. You should not place too much reliance on these forward-looking
statements. Our actual results are likely to differ materially from those
anticipated in these forward-looking statements for many reasons, including the
risks faced by us described in the Risk Factors section of our annual report on
Form 10KSB and 10KSB/A and elsewhere in this quarterly report.
Plan of Operations
Our plan of operations for the twelve months following the date of this
quarterly report is to complete initial exploration programs on the Brookmount
and Mercedes properties . We anticipate that the programs on the Brookmount and
Mercedes properties will cost $25,000 and $480,000 respectively.
In addition, we anticipate spending $25,000 on professional fees, $132,000 on
salaries and wages, $30,000 on travel costs, $50,000 on promotional expenses and
$40,000 on other administrative expenses in the next 12 months.
Total expenditures over the next 12 months are therefore expected to be
$782,000. We will not be able to proceed with either exploration program, or
meet our administrative expense requirements, without additional financing.
On May 25, 2006, the Company entered into an Option Agreement (the "Agreement")
to acquire an option to purchase 100% of the issued share capital of 722161 B.C.
Ltd ("BC Ltd") on the following terms:
1. The Company must issue 100,000 common shares upon execution of the
Agreement (issued);
2. The Company must make cash payments totaling CAD$250,000 as follows:
(a) August 15, 2006 $10,000 (not paid);
(b) September 15, 2006 $12.500 (not paid);
(c) November 15, 2006 $12,500;
(d) $12,500 on or before January 15, 2007, and installment payments of
$12,500 quarterly thereafter on or before the 15th day of April, July,
October and January of each year until the total of $250,000 has been
paid or satisfied;
3. The Company must issue 500,000 common shares in four equal tranches of
125,000 each on or before the 15th day of October in each of 2006, 2007,
2008 and 2009;
4. The Company must incur exploration expenses of $1,000,000 over a period of
five years from the date of the Agreement.
BC Ltd has a 56% interest in mineral claims located in the Rock Creek area of
British Columbia, Canada.
We will not be able to complete the initial exploration programs on our mineral
properties without additional financing. We currently do not have a specific
plan of how we will obtain such funding; however, we anticipate that additional
funding will be in the form of equity financing from the sale of our common
stock. We may also seek to obtain short-term loans from our directors, although
no such arrangement has been made. At this time, we cannot provide investors
with any assurance that we will be able to raise sufficient funding from the
sale of our common stock or through a loan from our directors to meet our
obligations over the next twelve months. We do not have any arrangements in
place for any future equity or equity financing.
-14-
Results of Operations for Three and Nine Month Periods Ended August 31, 2006
We incurred operating expenses in the amount of $186,987 and $2,771,841 for the
three and nine month periods, respectively, ended August 31, 2006, as compared
to $235,749 and $2,449,228, respectively for the comparative periods in 2005.
The substantial increase in operating expenses and consequent net loss for the
nine months ended August 31, 2006, compared to the nine months ended August 31,
2005, was due to the issuances of shares of stock to a former director during
the first quarter of 2006 and to all directors (including the former director)
in the second quarter of 2006 for services to be rendered. The decrease in
operating expenses for the three month period ended August 31, 2006 compared to
the same period in 2005 can be attributed to the decrease in mineral property
costs for the latter period.
Under instruction from the property vendor, 5,000,000 shares were issued to our
directors and officers in the following amounts during the first quarter of
2005:
Peter Flueck (property vendor) 2,900,000
Zaf Sungur 1,050,000
Victor Stillwell 1,050,000
General and administrative expenses for the three and nine month periods ended
August 31, 2006, increased $88,590 and $2,473,250 respectively from the prior
comparative periods from $68,397 and $253,281 to $156,987 and $2,726,531 for the
same periods respectively in 2006. The increase was attributable to the
aforementioned stock grants to certain directors and a former director.
At quarter end on August 31, 2006, we had cash on hand of $34,632 and total
assets of $35,594. Our liabilities at the same date totaled $169,277 and
consisted of accounts payable and accrued liabilities of $87,314 and $82,063 due
to related parties.
Effective April 26, 2006, David Jacob Dadon was removed as a director and as
Chairman of the Board of the Company for cause. Mr. Dadon withdrew $150,000 from
the Company's bank account. Mr. Dadon was not an authorized signatory on the
Company's bank account and had not been granted any such authority to withdraw
the funds by the Company's Board of Directors. Upon completion of an
investigation, the Company determined that Mr. Dadon had not used the funds for
corporate purposes. The Company had worked for several weeks to have Mr. Dadon
return the money to the Company on a voluntary basis. To date, the money has not
been returned. The Company has reported the incident to the proper authorities
in Canada and the United States.
Effective May 5, 2006, Mr. Dadon responded to his removal as a director for
cause, which response was filed with a Form 8-K, dated May 11, 2006. We replied
to Mr. Dadon's letter in that same filing by noting that "[t]the Company has
endeavored to work with Mr. Dadon for several months to determine why the money
was removed from its account and to see that the money is replaced. The
assertions and accusations contained in Mr. Dadon's letter are outrageous and as
such are impossible to respond to. The Company steadfastly stands by its
assertions and the actions that it has taken."
On December 19, 2005, we filed an 8-K announcing that, among other things, Jay
Jeffery Shapiro, represented by Mr. Dadon to us as a close colleague and friend,
had been appointed to serve as our Chief Financial Officer. Mr. Dadon had
arranged for a conference call prior to Mr. Shapiro's appointment to introduce
someone whose resume we were provided with, and whom we were led to believe was
Mr. Shapiro, ostensibly in order to provide us with an opportunity to interview
him prior to his appointment. On May 9, 2006, we learned that the person
represented to us to be Jay Jeffery Shapiro was not, in fact, Mr. Shapiro. On
May 9, 2006, the individual we now know to be the true Mr. Shapiro contacted us
to inform us that he had no knowledge of Brookmount, had not been asked to serve
as our Chief Financial Officer by Mr. Dadon, had not been the person interviewed
by our Chief Operating Officer, and had in fact previously informed Mr. Dadon in
writing that he no longer wished to be associated with Mr. Dadon in any venture
and that Mr. Dadon was no longer to use his resume in connection with any of his
activities. As a result, on May 11, 2006 we filed a current report on Form 8-K
to, among other reasons, assure that all Brookmount shareholders are made aware
that individual we now know to be Jay Jeffery Shapiro and whose biography was
contained in our annual report on Form 10-KSB and Form 10-KSB/A, never played
any role in our company or in any of our disclosures.
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Effective May 9, 2006, we appointed Zaf Sungur to serve as our Chief Financial
Officer.
On June 29, 2006, a former director of the Company commenced legal action
against the Company and its directors. The former director is claiming damages
in excess of $5,000,000 for alleged breach of contract, libel, fraud,
intentional deceit, wrongful conduct and emotional distress. The Company and
directors deny all of these claims, believe they are without merit, and plan to
vigorously defend themselves against all of these claims. In addition, the
Company is exploring claims of its own against the former director.
Item 3. Controls and Procedures
The Principal Executive Officer and Principal Financial Officer conducted an
evaluation of the effectiveness of the design and operation of the Company's
disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end
of the period covered by this report. Based on that evaluation, the Principal
Executive Officer and Principal Financial Officer concluded that the Company's
disclosure controls and procedures were effective as of the end of the period
covered by this report. There were no significant changes in internal control
over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act)
that occurred during the second quarter of 2006 that have materially affected,
or are reasonably likely to materially affect, the Company's internal control
over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On June 29, 2006, a former director of the Company commenced legal action
against the Company and its directors. The former director is claiming damages
in excess of $5,000,000 for alleged breach of contract, libel, fraud,
intentional deceit, wrongful conduct and emotional distress. The Company denies
all of these claims, believes they are without merit, and plans to vigorously
defend itself against all of these claims. In addition, the Company is exploring
claims of its own against the former director.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the nine-month period ended August 31, 2006, the Company issued the
following shares of common stock:
o 100,000 shares valued at $0.10 per share pursuant to the Agreement with
B.C. Ltd;
o 4,291,000 shares at $0.32 per share to a then-director;
o 3,630,000 shares at $0.18 per share to its directors for services provided
to date;
o 158,016 shares at $0.15 per share pursuant to a debt settlement agreement;
and
o 3,463,825 shares at $0.45 per share to its directors.
o 1,692,976 shares pursuant to a private placement for cash proceeds of
$440,753.
All of the shares were issued in reliance upon the exemption from registration
provided by Section 4(2) of the Securities Act of 1933 and Regulation D
promulgated thereunder.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
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Item 5. Other Information.
None.
Item 6. Exhibits.
31.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
-18-
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Brookmount Explorations Inc.
/s/ Peter Flueck
---------------------------
Peter Flueck
President, Chief Executive
Officer and Director
(Principal Executive Officer)
Date: October 16, 2006
/s/ Zaf Sungur
---------------------------
Zaf Sungur
COO, Secretary, Treasurer,
Director
(Principal Accounting Officer)
Dated: October 16, 2006
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