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 May 31, 2007
------------
|_| 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 incorporation or (IRS Employer Identification
organization) No.)
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999 Canada Place - Suite 404
Vancouver, British Columbia V6C 3EZ
(Address of principal executive offices)
604-676-5244
(Issuer's telephone number)
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(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: 26,177,916 shares of $0.001 par value
common stock outstanding as of May 31, 2007.
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
FINANCIAL STATEMENTS
May 31, 2007
(Unaudited)
BALANCE SHEETS
STATEMENTS OF OPERATIONS
STATEMENTS OF CASH FLOWS
NOTES TO THE FINANCIAL STATEMENTS
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
BALANCE SHEETS
May 31, November 30,
2007 2006
---- ----
ASSETS (Unaudited) (Audited)
------
Current assets
Cash $ 12,292 $ 18,091
Prepaid expenses - 5,878
----------------- -----------------
12,292 23,969
Equipment, net 739 869
----------------- -----------------
$ 13,031 $ 24,838
================= =================
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
Current liabilities
Accounts payable and accrued liabilities $ 154,964 $ 100,096
Due to related parties - Note 4 300,303 132,938
----------------- -----------------
455,267 233,034
----------------- -----------------
Commitments and contingencies - Notes 1 and 2
STOCKHOLDERS' DEFICIT
---------------------
Common stock, $0.001 par value - Note 3
200,000,000 shares authorized
26,123,502 shares issued (November 30, 2006 - 25,998,502) 26,123 25,998
Additional paid-in capital 4,254,294 4,239,419
Stock subscriptions receivable (6,600) (6,600)
Obligation to issue shares 5,000 -
Deficit accumulated during the exploration stage (4,721,053) (4,467,013)
----------------- -----------------
(442,236) (208,196)
------------------ ------------------
$ 13,031 $ 24,838
================= =================
SEE ACCOMPANYING NOTES
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
December 9, 1999
(Date of
Three months ended Six months ended Inception) to
May 31 May 31, May 31,
2007 2006 2007 2006 2007
---- ---- ---- ---- ----
Expenses
General and administrative $ 101,295 $ 1,836,873 $ 183,343 $ 2,569,544 $ 2,302, 278
- Notes 4
Mineral property costs
- Note 2 67,721 2,660 70,697 15,310 2,418,775
------------ -------------- ------------- ----------------- --------------------
Net loss $ (169,016) $ (1,839,533) $ (254,040) $ (2,584,854) $ (4,721,053)
============ ============== ============= ================= ====================
Basic and diluted net loss per share $ (0.01) $ (0.07) $ (0.01) $ (0.11)
============ ============= ============= ================
Weighted average number of shares
outstanding 26,123,502 23,363,466 26,025,059 22,893,156
============ ============== ============= =================
SEE ACCOMPANYING NOTES
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
December 9, 1999
Six months Six months (date of
ended ended inception) to
May 31, May 31, May 31,
2007 2006 2007
---- ---- ----
Cash Flows From Operating Activities
Net loss $ (254,040) $ (2,584,854) $ (4,721,053)
Add items not affecting cash:
Amortization 130 186 1,074
Interest on loans from related parties 4,030 - 6,133
Capital contributions - - 29,250
Common shares issued for services - 2,052,867 462,880
Common shares issued for mineral property - 10,000 2,216,250
Provision for unrecoverable advances - 193,617 193,617
Changes in non-cash working capital balances
related to operations
Prepaid expenses 5,878 5,000 -
Accounts payable and accrued liabilities 54,868 6,746 178,668
----------------- ----------------- -----------------
Cash Flows Used In Operations (189,134) (316,440) (1,633,181)
------------------ ----------------- ------------------
Cash Flows From Investing Activities
Advances - (165,000) (193,617)
Acquisition of equipment - - ( 1,813)
----------------- ----------------- -----------------
Cash Flows Used In Investing Activities - (165,000) (195,430)
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Cash Flows From Financing Activities
Due to related parties 163,335 97,356 450,041
Stock subscription received 5,000 - 5,000
Common stock issued, net 15,000 375,000 1,385,862
----------------- ----------------- -----------------
Cash Flows Provided By Financing Activities 183,335 472,356 1,840,903
----------------- ----------------- -----------------
Increase (decrease) in cash (5,799) (9,084) 12,292
Cash, beginning 18,091 20,447 -
----------------- ----------------- -----------------
Cash, ending $ 12,292 $ 11,363 $ 12,292
================= ================= =================
Supplemental Disclosure of Cash Flow
Information
Cash paid for:
Interest $ - $ - $ -
================= ================= =================
Income taxes $ - $ - $ -
================= ================= =================
SEE ACCOMPANYING NOTES
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
May 31, 2007
(Unaudited)
Note 1 Nature of Continued Operations and Basis of Presentation
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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, 2006 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 six months ended May 31,
2007 are not necessarily indicative of the results that may be
expected for the year ending November 30, 2007.
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 $442,975 at May 31,
2007 and has incurred losses since inception of $4,721,053 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.
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
May 31, 2007
(Unaudited)
Note 2 Mineral Properties
-------------------
a) 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 May 31, 2007, the title of this property has not been
recorded in the name of the Company.
b) 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 (paid);
- September 15, 2006 - $12,500 (paid);
- November 15, 2006 - $12,500 (paid);
- $12,500 (not paid) 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 (not
paid);
Although the Company made only $7,674 in cash payments to
May 31, 2007, in accordance with the Agreement, BC Ltd has
not served the Company notice of default of the term of
the agreement;
3. The Company must issue 500,000 common shares in four
equal tranches of 125,000 each on or before the 15th of
October in each of 2006, 2007, 2008 and 2009. During the
year ended November 30, 2006, the Company issued 375,000
shares; and
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
May 31, 2007
(Unaudited)
Note 2 Mineral Properties - (cont'd)
-----------------------------
c) Rock Creek Claims, British Columbia, Canada - (cont'd)
-------------------------------------------
4. The Company must incur exploration expenses of $1,000,000
over a period of five years from the date of the
Agreement. At May 31, 2007, the Company has not incurred
any exploration expenses in terms of the Agreement.
BC Ltd has a 56% interest in mineral claims located in the
Rock Creek area of British Columbia, Canada.
Although the Company made only $7,674 in cash payments by May
31, 2007, BC Ltd has not served the Company notice of default
of the terms of the Agreement
Note 3 Capital Stock
-------------
During the six months ended May 31, 2007, the Company issued
125,000 common shares pursuant to a private placement for cash
proceeds of $15,000.
During the six months ended May 31, 2007, the Company received
$5,000 for the purchase of 45,454 of its common shares. At May
31, 2007 these shares had not been issued.
To May 31, 2007, the Company has not granted any stock options
or warrants.
Note 4 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:
Six months ended
May 31,
2007 2006
---- ----
General and administrative:
Consulting fees $ - $ 2,054,349
Management fees 120,000 150,000
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$ 120,000 $ 2,204,349
=============== =============
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 May 31, 2007 are due to
directors of the Company in respect to unpaid management fees
and cash advances amounted to $300,303 (November 30, 2006 -
$132,938).These amounts are unsecured and are repayable on
demand. The amounts due for unpaid management fees are not
interest bearing while the amounts due for cash advances bear
interest at a rate of 10%.
BROOKMOUNT EXPLORATIONS INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
May 31, 2007
(Unaudited)
Note 5 Litigation
----------
On December 11, 2006 the Supreme Court of British Columbia
ordered a former director to pay the Company a sum of
$173,700 plus interest accrued $5,341, making together the sum
of $179,041.
On February 12, 2007, the United States District Court issued
a notice of dismissal with respect to the legal action against
the Company brought forward by a former director. The legal
action against the Company was dismissed in its entirety.
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 Rock Creek and
Mercedes properties will cost $250,000 and $480,000 respectively.
In addition, we anticipate spending $25,000 on professional fees, $120,000 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
$995,000. 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 (paid);
(b) September 15, 2006 $12,500 (paid);
(c) November 15, 2006 $12,500; (paid)
(d) $12,500 (not paid) 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;
Although the Company made only $7,674 in cash payments to May 31, 2007,
in accordance with the Agreement, BC Ltd has not served the Company
notice of default of the term of the agreement;
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
(issued), 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 722161 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.
Results of Operations for Three Month Period Ended February 28, 2007
We incurred operating expenses in the amount of $169,016 for the three month
period ended May 31, 2007, as compared to $1,839,533 for the comparative period
in 2006.
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
As of May 31, 2007, we had cash on hand of $12,292 and total assets of $13,031.
Our liabilities at the same date totaled $455,267 and consisted of accounts
payable and accrued liabilities of $154,964 and $300,303 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.
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. On February 12,
2007, the United States District Court issued a notice of dismissal with respect
to this legal action in its entirety.
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.
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
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: July 23, 2007
/s/ Zaf Sungur
---------------------------
Zaf Sungur
COO, Secretary, Treasurer,
Director
(Principal Accounting Officer)
Dated: July 23, 2007