UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

for the quarterly period ended June 30, 2012

  

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD ________TO ________

 

Commission File Number: 000-52689

 

SHAMIKA 2 GOLD, INC.

(formerly known as Aultra Gold, Inc.)

 (Exact name of small business issuer as specified in its charter)

 

Nevada 98-0448154
(State or other jurisdiction of incorporation or (IRS Employer Identification No.)
organization)  

1350 Avenue of the Americas

New York, New York 10019

 (Address of principal executive offices)

 (Registrant's telephone number, including area code (212) 541-6222

 

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for 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 þ No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x   No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer o   Accelerated filer o  
Non-accelerated filer o   Smaller Reporting Company þ  

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o   No þ

 

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of August 3, 2012, the Issuer had 656,930,840 shares of common stock, par value $0.00001 per share, issued and outstanding.

 

1
 

 

 TABLE OF CONTENTS

 

 

PART I. FINANCIAL INFORMATION    
    Page
     ITEM 1. Condensed Consolidated Financial Statements (unaudited) 3
  Condensed Consolidated Balance Sheets as of June 30, 2012 (unaudited) and December 31, 2011. F-2
  Condensed Consolidated Statements of Operations for the three months and six months ended June 30, 2012 and 2011, and for the period from inception (January 13, 2010) through June 30, 2012 (unaudited) F-3
  Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2012 and 2011, and for the period from inception (January 13, 2010) through June 30, 2012 (unaudited) F-4
  Notes to Condensed  Consolidated Financial Statements (unaudited) F-5-F-13
     
     ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 4
     
     ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 6
     
 ITEM 4. Controls and Procedures 7
     
PART II. OTHER INFORMATION  
     
     ITEM 1 Legal Proceedings 9
     
     ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 9
     
     ITEM 3. Defaults Upon Senior Securities 10
     
     ITEM 4. Mine Safety Disclosures 10
     
     ITEM 5. Other Information 10
     
     ITEM 6 Exhibits 10
     
  Signatures 11

 

 

 

 

2
 

 

 

 

PART I - FINANCIAL INFORMATION

 

 

ITEM 1. FINANCIAL STATEMENTS.

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Item 310(b) of Regulation S-B, and, therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders' equity in conformity with generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the six months ended June 30, 2012 are not necessarily indicative of the results that can be expected for the year ending December 31, 2012.

 

As used in this Quarterly Report on Form 10-Q (the “Quarterly Report”), the terms "we", "us", "our", and the “Company” mean Shamika 2 Gold. Inc., unless otherwise indicated. All dollar amounts in this Quarterly Report are in U.S. dollars unless otherwise stated.

 

 

 

3
 

 

 

Shamika 2 Gold, Inc.

An Exploration Stage Company

Condensed Consolidated Balance Sheets

(unaudited)

         
   June 30, 2012   December 31, 2011 
ASSETS          
Current Assets          
Cash  $5,510   $- 
Deferred financing costs   2,767    2,167 
Total Current Assets   8,277    2,167 
Long-term Assets          
Mineral property   350,000    350,000 
Total Assets  $358,277   $352,167 
           
 LIABILITIES AND STOCKHOLDERS’ DEFICIT          
Current Liabilities          
   Accounts payable  $234,890   $256,760 
Accounts payable related party (note 5)   65,488    33,625 
Convertible notes payable, net of debt discount of $60,530 and $33,326, respectively   128,015    100,457 
   Accrued interest   7,081    4,811 
Total Current Liabilities   435,474    395,653 
           
Commitments and Contingencies          
Stockholders’ Deficit          
Series A, Convertible Preferred stock, $0.00001 par value, 10,000,000 and 0 shares authorized: 50,000  and 0 shares issued and outstanding, respectively   1    - 
Common stock, $0.00001 par value, 2,000,000,000 shares authorized: 371,675,203 and 175,161,371 shares issued and outstanding, respectively (note 6)   3,716    1,751 
Additional paid-in capital   3,265,151    3,154,792 
Deficit accumulated during exploration stage   (3,346,065)   (3,200,029)
           
Total Stockholders’ Deficit   (77,197)   (43,486)
           
Total Liabilities and Stockholders’ Deficit  $358,277   $352,167 
           

 

See Notes to Condensed Consolidated Financial Statements

 

F-2
 

 

 Shamika 2 Gold Inc.

 

An Exploration Stage Company

Condensed Consolidated Statements of Operations

(unaudited)

 

 

   For the three   For the three   For the six   For the six   From 
   months ended   months ended   months ended   months ended   inception 
   June 30, 2012   June 30, 2011   June 30, 2012   June 30, 2011   January 13, 
                   2010 through 
                   June 30, 2012 
REVENUE  $-   $-   $-   $-   $- 
Operational Expenses                         
Consulting fees   1    1,753,250    1    1,753,250    1,753,251 
Legal & professional fees   34,199    85,221    36,670    120,098    286,302 
Investor relations   1,842    18,594    3,486    18,594    52,626 
Management fee – related party (note 5)   30,250    278,310    52,500    468,811    516,170 
Exploration costs   -    25,700    -    25,700    8,550 
Other operational expenses   7,856    6,361    9,592    15,838    57,496 
Operating loss   74,148    2,167,436    102,249    2,402,291    2,674,395 
Other expenses                         
Interest expense   9,209    120,210    43,787    192,780    433,221 
Organization expense   -    -    -    -    86,750 
Net loss from continuing operations   83,357    2,287,646    146,036    2,595,071    3,194,366 
(Gain) Loss from discontinued operations   -    (3,497)   -    22,503    151,699 
(Note 3)                         
Net loss  $83,357   $2,284,149   $146,036   $2,617,574   $3,346,065 
Loss per share from continuing                         
operations –                         
basic and diluted  $-   $0.04   $-   $0.05      
Loss per share from discontinued                         
operations –                         
basic and diluted  $-   $-   $-    -      
Loss per share  $-   $0.04   $-   $0.05      
Weighted Average Number of Shares                         
Outstanding   301,481,507    56,665,591    296,482,065    53,675,854      
                          

 

See Notes to Condensed Consolidated Financial Statements

 

 

F-3
 

 

 

 Shamika 2 Gold Inc.

 

An Exploration Stage Company

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

   For the six months ended June 30, 2012   For the six months ended June 30, 2011   From
inception January 13, 2010 through June 30, 2012
 
             
Operating activities               
Net loss  $(146,036)  $(2,617,574)  $(3,346,065)
                
Adjustments to reconcile net loss to cash used by operating activities:               
Amortization of financing costs   2,400    34,642    45,050 
Amortization of debt discount   39,116    150,368    352,925 
Loss from discontinued operations   -    22,503    151,699 
Shares issued for services   1    1,822,500    1,829,901 
Changes in:               
Prepaid expenses   -    (30,333)   - 
Accrued interest   2,270    10,546    12,252 
Accounts payable and accrued liabilities   (21,870)   60,970    234,890 
Accounts payable - related party   31,863    81,809    144,487 
                
Net cash used in operating activities of continuing operations   (92,256)   (464,569)   (574,861)
Net cash used in operating activities of discontinued operations   -    (26,000)   (51,700)
Net cash used in operating activities  $(92,256)  $(490,569)  $(626,561)
                
Financing activities               
Deferred financing costs   (3,000)   (34,931)   (30,317)
Proceeds from sale of common stock under subscription agreement   -    175,000    302,622 
Repayments of convertible notes   -    -    (102,500)
Proceeds from convertible notes   100,766    350,500    462,266 
Net cash provided by financing activities  $97,766   $490,569   $632,071 
                
Total change in cash for period   5,510    -    5,510 
Cash at beginning of period   -    -    - 
Cash at end of period  $5,510   $-   $5,510 
                
Non-cash Investing Activities               
Shares issued to acquire mineral property  $-   $350,000   $350,000 
Mining permits acquired in exchange for notes payable  $-   $-   $500,002 
                
Non-cash Financing Activities               
Shares issued for satisfaction of note payable and accrued interest  $46,004   $78,500   $252,221 
Common stock issued. Proceeds received by related party for reduction  of related party payable  $-   $-   $100,000 
Payment on note payable in exchange for related party payable  $-   $-   $(41,000)
Payments on related payable in exchange for proceeds from convertible note  $-   $-   $78,500 

 

 

See Notes to Condensed Consolidated Financial Statements

 

 

F-4
 

 

Shamika 2 Gold, Inc.

 

An Exploration Stage Company

Notes to Condensed Consolidated Financial Statements

June 30, 2012

(unaudited)

 

1.  Nature of Operations

 

a)Description of Business

 

Shamika 2 Gold, Inc. is engaged in the business of acquiring and exploring gold and mineral properties with the objective of identifying gold and mineralized deposits economically worthy of continued production and/or subsequent development, mining or sale.

 

b)Going Concern

 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern.  The Company’s financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business.

 

As shown in the accompanying financial statements, the Company has $5,510 cash on hand, current liabilities of $435,474, no immediate borrowing capacity, and has incurred a net loss of $146,036 for the six months ended June 30, 2012.  These factors result in substantial doubt about the ability to continue as a going concern. The future of the Company is dependent upon its ability to obtain additional financing and upon future profitable operations from the development of acquisitions.  Management has plans to seek additional capital through a private placement and public offering of its common stock.  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.  The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

2. Significant Accounting Policies

 

a)  Basis of Accounting

 

These consolidated financial statements are prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and include our accounts and the accounts of our majority-owned controlled subsidiary. As the Company has not generated any revenues from is principal intended activity of mining operations, the Company is considered to be in the exploration stage. The Company currently operates in one reportable segment. Summarized below are those policies considered particularly significant to the Company.

 

b)  Use of Estimates

 

The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of any contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues earned and expenses incurred during the period. Actual results could differ from those estimates. Evaluation of the potential impairment of mining properties is an estimate that is particularly sensitive to judgments and market conditions.

 

 

F-5
 

 

 

Shamika 2 Gold, Inc.

 

An Exploration Stage Company

Notes to Condensed Consolidated Financial Statements

June 30, 2012

(unaudited)

 

2. Significant Accounting Policies – continued

 

c)  Financial Instruments and Financial Risk

 

The Company’s financial instruments consists of cash, prepaid expenses, accounts payable and accrued liabilities, the fair values of which approximate their carrying amounts due to the short-term nature of these instruments. The fair value of the Company’s debt instruments are calculated based upon the availability of debt instruments with similar terms, rates, privileges and credit quality.

 

d)  Cash and Concentrations

 

Financial instruments, which could potentially subject the Company to credit risk, consist primarily of cash and accounts payable.

 

From inception to September 30, 2011, cash was managed for the Company by a related party, Shamika Resources, Inc. During the second quarter of 2012, the Company opened its own bank account. Cash balances at June 30, 2012 are held in this cash account.

 

The Company’s operations are all related to the minerals and mining industry. A reduction in mineral prices, political unrest in the countries in which the Company operates or other disturbances in the minerals market could have an adverse effect on the Company’s operations.

 

e)  Environmental Costs

 

Environmental expenditures that relate to current operations are charged to operations or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are charged to operations. Liabilities are recorded when environmental assessments and/or remedial efforts are probable, and the cost can be reasonably estimated. Generally, the timing of these accruals coincides with the earlier of completion of a feasibility study or the Company’s commitments to plan of action based on the then known facts. Management has determined that no liability exists pertaining to environmental expenditures as of June 30, 2012.

 

f)  Per Share Data

 

Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the year. Diluted loss per share is computed by dividing net loss by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to warrants and convertible notes.

 

The Company has excluded all common equivalent shares outstanding for warrants and convertible notes from the calculation of diluted net loss per share because all such securities are anti-dilutive for the periods presented. As of June 30, 2012, 458,337 warrants had been issued which represent potential shares which may be issued resulting from the provisions of convertible notes and approximately 914,472,878 common shares that may be issued upon the conversion of convertible notes.

 

F-6
 

 

 

Shamika 2 Gold, Inc.

 

An Exploration Stage Company

Notes to Condensed Consolidated Financial Statements

June 30, 2012

(unaudited)

 

2. Significant Accounting Policies (continued)

 

g)  Income Taxes

 

The Company accounts for income taxes under ASC 740, Income Taxes. Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. ASC 740 also requires that uncertain tax positions are evaluated in a two-step process, whereby (1) it is determined whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the largest amount of tax benefit that is greater than fifty percent likely of being realized upon ultimate settlement with the related tax authority would be recognized.

 

h)  Revenue Recognition

 

The Company plans to recognize revenue from the sale of product when an agreement of sale exists, product delivery has occurred, title has transferred to the customer and collection is reasonably assured. The price to be received is based upon terms of a sales contract. The Company has not generated revenue activity for the periods presented in the consolidated financial statements.

 

i)  Stock Based Compensation

 

The Company has adopted ASC 718, Stock Compensation, which requires the Company to measure the compensation cost of stock options and other stock-based awards to employees and directors at fair value at the grant date and recognize compensation expense over the requisite service period for awards expected to vest.

 

The Company may periodically issue stock for payment of certain professional fees and these stock issuances are expensed based on the market value of the stock on the date granted. The Company expenses these professional fees at the time of stock issuance as the stock issuance date approximates the date the services are performed.

 

j) Asset Retirement Obligation

 

 The Company follows ASC 410-20, which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated retirement costs. The standard applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and normal use of the asset.

 

ASC 410-20 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount is depreciated over the life of the asset. The liability is accreted at the end of each period through charges to operating expense. If the obligation is settled for other than the carrying amount of the liability, the Company will recognize a gain or loss on settlement. The Company has no mining projects in production as of June 30, 2012, and the asset retirement obligations are usually created as part of the production process. Accordingly, at June 30, 2012, the Company had no asset retirement obligations.

 

F-7
 

 

Shamika 2 Gold, Inc.

 An Exploration Stage Company

Notes to Condensed Consolidated Financial Statements

June 30, 2012

(unaudited)

 

2. Significant Accounting Policies (continued)

 

k)  Mineral Properties, Mineral Claim Payments and Exploration Expenses

 

The Company expenses all costs related to the maintenance and exploration of the unproven mineral properties to which it has secured exploration rights. If and when proven and probable reserves are determined for a property and a feasibility study is completed, then subsequent development costs of the property are capitalized. Once capitalized, such costs will be amortized using the units-of-production method over the estimated life of the probable reserves.

 

The Company assesses the carrying costs for impairment under ASC 930 Extractive Activities – Mining (ASC 930) annually. An impairment is recognized when the sum of the expected undiscounted future cash flows is less than the carrying amount of the mineral property. Impairment losses, if any, are measured as the excess of the carrying amount of the mineral property over its estimated fair value. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.

 

l)  Convertible Instruments

 

The Company reviews the terms of convertible debt and equity instruments to determine whether there are conversion features or embedded derivative instruments including embedded conversion options that are required to be bifurcated and accounted for separately as a derivative financial instrument. In circumstances where the convertible instrument contains more than one embedded derivative instrument, including conversion options that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single compound instrument. Also, in connection with the sale of convertible debt and equity instruments, the Company may issue free standing warrants that may, depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity. When convertible debt or equity instruments contain embedded derivative instruments that are to be bifurcated and accounted for separately, the total proceeds allocated to the convertible host instruments are first allocated to the fair value of all the bifurcated derivative instruments. The remaining proceeds, if any, are then allocated to the convertible instruments themselves, usually resulting in those instruments being recorded at a discount from their face amount. When the Company issues debt securities, which bear interest at rates that are lower than market rates, the Company recognizes a discount, which is offset against the carrying value of the debt. Such discount from the face value of the debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to income.

 

In addition, certain conversion features are recognized as beneficial conversion features to the extent the conversion price as defined in the convertible note is less than the closing stock price on the issuance of the convertible notes.

 

Fees incurred in the placement of the convertible notes are deferred and recognized over the life of the debt agreement as an adjustment to interest expense using the interest method.

 

 

F-8
 

  

Shamika 2 Gold, Inc.

 

An Exploration Stage Company

Notes to Condensed Consolidated Financial Statements

June 30, 2012

(unaudited)

 

2. Significant Accounting Policies (continued)

 

m) Recent Accounting Pronouncements

 

Fair Value Measurements and Disclosures ASC 820, Improving Disclosures about Fair Value Measurements: In January 2010, the Financial Accounting Standards Board (FASB) issued accounting guidance intended to improve disclosures related to fair value measurements. This guidance requires significant transfers in and out of Level 1 and Level 2 fair value measurements to be disclosed separately along with the reasons for the transfers. Additionally, in the reconciliation for the fair value measurements using significant unobservable inputs (Level 3), information about purchases, sales, issuances and settlements must be presented separately (cannot net as one number). This guidance also provides clarification for existing disclosures on (i) level of disaggregation and (ii) inputs and valuation techniques. In addition, this guidance includes conforming amendments for employers’ disclosure of postretirement benefit plan assets. The Company adopted January 1, 2011 and the adoption of ASC 820 did not have a material impact on the Company’s consolidated results of operations or financial position.

 

In May 2011, the FASB issued an Accounting Standards Update on fair value measurements that clarifies the application of existing guidance and disclosure requirements, changes certain fair value measurement principles, and requires additional disclosures about fair value measurements. The adoption of this guidance did not have a material impact on its financial statements.

 

n)Reclassifications

 

Certain amounts for the three and six months ended June 30, 2011 have been reclassified to conform to the current operating format.

 

3.  Discontinued Operations

 

Congo

 

During the fourth quarter of 2010, the Company decided to abandon its efforts on the Congo property. The Company incurred a gain on disposal of $3,497 during the three months ended June 30, 2011 and a net loss of $22,503 relating to this discontinued operation during the six months ended June 30, 2011.

 

Cambodia

 

In the fourth quarter of 2011, due to the inability of the Company to raise the required financing needed to obtain the permits and further the Cambodia project, the Share Exchange Agreement was nullified and the project was discontinued.

 

As of June 30, 2012 and December 31, 2011 there were no assets or liabilities of discontinued operations.

 

F-9
 

 

 

Shamika 2 Gold, Inc.

 

An Exploration Stage Company

Notes to Condensed Consolidated Financial Statements

June 30, 2012

(unaudited)

 

 

 

3.  Discontinued Operations (continued)

 

The following table shows the results of operations of the disposal subsidiaries for the three and six month periods ended June 30, 2012 and 2011: 

 

                 
   For the three months ended June 30, 2012   For the three months ended June 30, 2011   For the six months ended June 30, 2012   For the six months ended June 30, 2011 
Revenues  $-   $-   $-   $- 
                     
Permits & licenses   -    -    -    20,000 
                     
Other administrative costs   -    -    -    6,000 
                     
Gain on disposal   -    (3,497)        (3,497)
                     
Net (gain) loss  $-   $(3,497)  $-   $22,503 

 

 No tax benefits were recorded on results of discontinued operations as realization of such does not meet recognition criteria.

 

4.Mining Projects

 

Montclerg-Quebec – this project was acquired in 2011 in exchange for the issuance of $350,000 worth of common shares of the Company. The initial value was calculated as the number of shares issued multiplied by the market value on the issue date and was based on the preliminary information about the claims and the underlying mineral deposits and as a result the acquisition cost was capitalized. The Company plans to perform additional exploration to prove reserves, but as no proven and probable reserves have been documented to date, no further costs have been capitalized to date. As of June 30, 2012, the Company has not incurred the additional costs to further explore the property and has not experienced any indicators of impairment. 

 

 

F-10
 

 

Shamika 2 Gold, Inc.

 

 An Exploration Stage Company

Notes to Condensed Consolidated Financial Statements

June 30, 2012

(unaudited)

 

 

5.Related Party Balances and Transactions

 

From inception to September 30, 2011, the Company operated under a management agreement with a related party Shamika Resources, Inc., which is controlled by the Company’s former CEO, Robert Vivian. The Company had no employees or office expenses as such were provided by consultants through the management agreement with Shamika Resources, Inc. The agreement with Shamika Resources, Inc. was informal. For the six months ended June 30, 2011, the Company incurred management fees expense of $468,811 under the agreement with Shamika Resources, Inc. As of June 30, 2012 and December 31, 2011, there were no outstanding amounts due to Shamika Resources Inc.

 

Beginning October 1, 2011, the Company is operating under an informal consulting agreement with Henry Riedl, the Company’s current CEO. During the six months ending June 30, 2012, the Company incurred expense of $52,500 under the consulting agreement with Henry Riedl. As of June 30, 2012 and December 31, 2011, $65,488 and $33,625, respectively, is recorded as accounts payable-related party under the agreement with Mr. Riedl.

 

Related party payables are recorded at cost, are non-interest bearing, unsecured and have no specific terms for repayment.

 

6.  Share Capital

 

From January 3, 2012 to January 9, 2012 Asher Enterprises converted a portion of Convertible Note (Asher #4), face value $13,200, into Common stock. The conversion resulted in the Company issuing 60,419,397 Common shares.

 

From January 3, 2012 to January 6, 2012 Coventry Enterprises converted a portion of a Convertible Note, face value $15,656, into Common stock. The conversion resulted in the Company issuing 61,423,285 Common shares.

 

On May 10, 2012, the Company issued an aggregate of 50,000 shares of the Company’s Series A Convertible Preferred Stock in consideration for past unpaid services and valuable contributions of certain officers and directors. The Series A Preferred Stock convert at the rate of 10 shares of Common Stock for each share of Series A Preferred Stock converted. Each holder of Series A Preferred Stock shall be entitled to vote on all matters to which shareholders of the Corporation are entitled to vote and shall be entitled to 10,000 votes for each share of Series A Preferred Stock held. The fair value of the convertible preferred stock issuance was determined to be approximately $600. 

 

On June 20, 2012, the Company filed a Certificate of Amendment to its Articles of Incorporation increasing the number of authorized shares of the Company’s capital stock which the Company is authorized to issue from 310,000,000 shares, consisting of 300,000,000 shares of common stock, par value $0.00001 (the “Common Stock”) and 10,000,000 shares of preferred stock, par value $0.00001 per share (the “Preferred Stock”) to 2,010,000,000 consisting of (a) 2,000,000,000 shares of Common Stock and (b) 10,000,000 shares of Preferred Stock (the “Amendment”).

 

From June 21, 2012 to June 28, 2012 Coventry Enterprises converted a portion of a Convertible Note, face value $11,448, into Common stock. The conversion resulted in the Company issuing 45,585,436 Common shares.

 

From June 21, 2012 to June 28, 2012 Asher Enterprises converted a portion of Convertible Note (Asher #4), face value $5,700, into Common stock. The conversion resulted in the Company issuing 29,085,714 Common shares.

 

 

F-11
 

 

 

Shamika 2 Gold, Inc.

 

An Exploration Stage Company

Notes to Condensed Consolidated Financial Statements

June 30, 2012

(unaudited)

 

6.  Share Capital (continued)

 

Summary of Warrants Outstanding

 

   Warrants
Outstanding
   Weighted
Average
Exercise Price
   Aggregate
Intrinsic
Value
 
 
Outstanding December 31, 2011
   458,337    .46    - 
Issued   -    -    - 
Exercised   -    -    - 
Forfeited   -    -    - 
Outstanding June 30, 2012   458,337    .46    - 

  

7.Convertible Notes

 

The remaining average contractual life of warrants outstanding is 1.48 years. All warrants are exercisable as of June 30, 2012 and December 31, 2011. 

 

The Company had convertible promissory notes outstanding at June 30, 2012 and December 31, 2011 as follows:

 

   Notes Outstanding as of 
   June 30, 2012   December 31, 2011 
         
Asher Enterprises #4  $15,500   $34,400 
Asher Enterprises #5   50,000    50,000 
Asher Enterprises #6   8,500    8,500 
Asher Enterprises #7   22,500    - 
Asher Enterprises #8   55,000    - 
Coventry   16,552    40,883 
9134-2402 Quebec Inc.   20,493    - 
           
    188,545    133,783 
Less Debt Discount   60,530    33,326 
   $128,015   $100,457 

 

The Company has issued various convertible notes. The notes bear interest at the rate of 0% to 8% per annum and mature between January 2012 and April 2013. The Company has the option to repay the note at a premium or to pay all outstanding principal and interest at maturity.  If not repaid prior to or upon maturity, the notes will automatically convert into common shares. Under the convertibility terms of the convertible promissory notes, the principal, plus accrued interest can be converted at any time or upon maturity, at the option of the holder, either in whole, or in part, into fully paid common shares of the Company.  The notes contain a beneficial conversion feature which allows the holders of the notes to convert the notes into common shares of the Company at a price less than fair market value at date of conversion.   This amount is recorded as a discount to the principal amount of the notes and is amortized to interest expense utilizing the straight-line method over the term of the related note as the results are not materially different from those which would result from the interest method.  As of June 30, 2012 and December 31, 2011

 

 

F-12
 

  

Shamika 2 Gold, Inc.

 

An Exploration Stage Company

Notes to Condensed Consolidated Financial Statements

June 30, 2012

(unaudited)

 

  

7.Convertible Notes  (continued)

 

$60,530 and $33,326, respectively, remained in unamortized discount associated with the beneficial conversion feature.   During the six months ended June 30, 2012, the Company recognized interest expense on the notes of $43,787 which was comprised of $2,271 in contractual interest, $39,116 in amortization of the debt discount and $2,400 in amortization of financing costs. During the six months ended June 30, 2011, the Company recognized interest expense on the notes of $192,780 which was comprised of $27,772 in contractual interest, $147,868 in amortization of the debt discount and $17,140 in amortization of financing costs.

 

In April 2012, the Company received $20,493 in convertible note proceeds from 9134-2402 Quebec Inc. The note bears interest at 8% and is due in 9 months. The note is convertible at a 50% discount to market value, with a minimum conversion price of $0.01 per share if not repaid in full prior to maturity. If not repaid in full at maturity or converted into shares, the note will continue to accrue interest at 8% until it is repaid or converted.

 

On May 1, 2012 the Company issued a Secured Convertible Note in the amount of $22,500 to Asher Enterprises Inc. due January 30, 2013 and bearing interest at the rate of 8% per annum.  The note is convertible into common shares of the Company at any time from May 1, 2012 and ending on the complete satisfaction of the Note.  The conversion price shall equal the Variable Conversion Price defined as 58% multiplied by the Market Price defined as the average of the lowest 3 Trading Prices on the OTCBB during the 10 day trading period ending one day prior to the date of Conversion Notice.  In the event of default, the Note is immediately payable.  The minimum amount due in default is 150% x (outstanding principal + unpaid interest).

 

On June 21, 2012 the Company issued a Secured Convertible Note in the amount of $55,000 to Asher Enterprises Inc. due March 22, 2013 and bearing interest at the rate of 8% per annum.  The note is convertible into common shares of the Company at any time from June 21, 2012 and ending on the complete satisfaction of the Note.  The conversion price shall equal the Variable Conversion Price defined as 55% multiplied by the Market Price defined as the average of the lowest 3 Trading Prices on the OTCBB during the 10 day trading period ending one day prior to the date of Conversion Notice.  In the event of default, the Note is immediately payable.  The minimum amount due in default is 150% x (outstanding principal + unpaid interest).

  

8.Commitments and Contingencies

 

From time to time, we are involved in claims and suits that arise in the ordinary course of our business. Although management currently believes that resolving any such claims against us will not have a material adverse impact on our business, financial position or results of operations, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future.

  

9.Subsequent events

 

From July 2, 2012 to July 17, 2012 Coventry Enterprises converted a portion of a Convertible Note, face value $13,349, into Common stock. The conversion resulted in the Company issuing 96,406,429 Common shares.

 

From July 2, 2012 to July 23, 2012 Asher Enterprises converted a portion of Convertible Note (Asher #4), face value $15,500 and interest of $2,000, into Common stock. The conversion resulted in the Company issuing 160,277,779 Common shares. As of July 23, 2012 Note #4 has been repaid in full.

 

On July 25, 2012 Asher Enterprises converted a portion of Convertible Note (Asher #5), face value $4,000, into Common stock. The conversion resulted in the Company issuing 28,571,429 Common shares.

 

On July 10, 2012, the Board of Directors of the Company approved a resolution to change the name of the Company to RKO Resources Inc.

 

F-13
 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion should be read in conjunction with our Financial Statements and Notes thereto included herein beginning on page F-1.

 

References in this Quarterly Report on Form 10-Q (the “Quarterly Report”) to “we”, “us,” “our,” “the Company,” “Shamika” mean Shamika 2 Gold, Inc. and our subsidiaries, unless the context otherwise requires. Forward-looking statements discuss matters that are not historical facts and can be identified by the use of words such as “believes,” “expects,” “anticipates,” “intends,” “estimates,” “projects,” “can,” “could,” “may,” “will,” “would” or similar expressions.

 

Although these forward-looking statements reflect the good faith judgment of our management, such statements can only be based upon facts and factors currently known to us. Forward-looking statements are inherently subject to risks and uncertainties, many of which are beyond our control. As a result, our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth below under the caption “Risk Factors.” For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You should not unduly rely on these forward-looking statements, which speak only as of the date on which they were made. They give our expectations regarding the future but are not guarantees. We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law.

 

General Overview of Business

 

Shamika 2 Gold, Inc. is engaged in the business of acquiring and exploring mining properties principally located in Quebec, Canada, with the objective of identifying gold and mineralized deposits economically worthy of continued production and/or subsequent development, mining or sale.

 

Results of Operations

 

Three and Six Months Ended June 30, 2012 Compared to Three and Six Months Ended June 30, 2011

 

The Company had no revenue during the three and six-month periods of 2012 and 2011, and has had no revenue from operations since its inception. We have only commenced the exploration stage of our business and can provide no assurance that we will discover economic mineralization on properties, or if such minerals are discovered, that we will entire into commercial production. We do not anticipate earning revenues for the foreseeable future.

 

The operating loss for the three and six months ended June 30, 2012 was $74,148 and $102,249, respectively, as compared to $2,167,436 and $2,402,291 for the three and six month period ended June 30, 2011, respectively. The decrease in operating loss is primarily due to lower management fees, consulting fees and legal and professional fees. The Company was reorganized in 2012 resulting in much lower overhead.  Staff has been reduced to one person and overhead expenses have been reduced to a bare minimum.  Also, the Management agreement with Shamika Resources was terminated in September 2011 resulting in no management fees to Shamika Resources, Inc. for the three and six months ended June 30, 2012.  In the first quarter of 2011, the Company incurred costs of initial setup resulting in higher than usual professional fees.

 

Other expenses for the three and six months ended June 30, 2012 and 2011 consist of interest expense. Interest expense for the three and six months ended June 30, 2012 was $9,209 and $43,787, respectively, as compared to $120,210 and $192,780 for the three and six months ended June 30, 2011, respectively. The decrease is due to the reduction in notes payable due to conversions, and the reduction of amortization of debt discount and deferred financing fees as notes have approached maturity.

 

4
 

 

There was no loss from discontinued operations for the three and six months ended June 30, 2012. During the fourth quarter of 2010, the Company decided to abandon its efforts on the Congo property. The Company realized a gain on disposal of $3,497 relating to this discontinued operation during the three months ended June 30, 2011. The loss from discontinued operations for the six months ended June 30, 2011 was $22,503.

 

Net loss for the three and six months ended June 30, 2012 was $83,357 and $146,036, respectively, as compared to net loss of $2,284,149 and $2,617,574 for the three and six months ended June 30, 2011, respectively.

 

Critical Accounting Policies and Estimates

 

In the first six months of 2012, there were no significant changes to our critical accounting policies and estimates from those disclosed in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K for the year ended December 31, 2011.

 

Employees

 

As of June 30, 2012, the Company had no full time employees as operations are provided for through a management contract with a related party. The Company anticipates that it will be conducting most of its business through agreements with consultants and third parties.

 

Description of S2G’s Properties

 

Description of Montclerg

 

This project is situated on lands close to the town of St-Augustin de Woburn in an area known as the Eastern Townships, which is approximately 200 kilometres east of Montreal, Canada. The property consists of 23 mineral claims having an area of 17.5 square kilometres. Our business plan calls for the completion of a 43-101 report and a program of further exploration to determine if proven and probable reserves exist on the property.

 

This property has no known reserves and the proposed program is exploratory in nature. There are no current detailed plans to conduct exploration on the property.

 

Mineralization:

 

Montclerg Property

 

This project is situated on lands close to the town of St-Augustin de Woburn in an area known as the Eastern Townships, which is approximately 200 kilometres east of Montreal. The property consists of 23 mineral claims having an area of 17.5 square kilometres. There are no infrastructures nor sources of power present on the property.

 

Preliminary surveys have found traces of gold on the property and it is recommended that we undertake additional investigation to localise and determine the extent of the source. Property brooks Arnold Morin is located about 200 km east of Montreal and 35 km south of Lake Township Megantic in Woburn, about 15 km south of the village of St-Augustin de Woburn (maps 1: 50 000 sheets 21 th / 21 th and 2 / 7). Canada border - the U.S. is located near the eastern boundaries of the property. The property covers a total area of approximately 1750 hectares divided into a block of 41 contiguous lots. Property is situated in the southern Quebec Appalachians, either in the region of the Megantic. Property sector includes, among other things, the massive Lake Chains and granite Devinien Lake to spiders. The formation of the Arnold River, part of the Chain Lakes massif, is regarded as a scale of Grenville. The rock formation is stuck in a thrust fault against the mixing unit Cambro-Ordovician. It consists of a mixture of meta-crystalline gray sandstone, more or less dark grained ranging from fine to medium. We also find granitic gneisses and quartzo-feldspathic granulites (Cheve, 1978). The thickness of this formation may reach several kilometres in the southern part of Quebec.1

 

An inspection of the Morin placer occurred on November 3 and 4, 2010. Two pannings were done in favourable places for gold deposition. Two gold nuggets were found in the second panning. The SM analysis suggests that the gold is coming from a regolith. This hypothesis is possible since the river valley is perpendicular to the main glacial flow in a similar way as Gilbert River and Mining brook, where gold-bearing placers are known. The valley is of SW-NE orientation. It is this orientation (perpendicular to the main glacial flow) that preserved the pre-Johnville sediments at Mining brook and at Gilbert River.

 

5
 

 

 

Description of the Net Smelter Royalty Agreement in the Montclerg property:

 

"Net Smelter Returns" shall mean gross revenues received from the sale by the Owner of all ore mined from the Property and from the sale by the Owner of concentrate, ore, metal and products derived from ore mined from the Properties, after deduction of the following:

 

·all smelting and refining costs, sampling, assaying and treatment charges and penalties including but not limited to metal losses, penalties for impurities and charges for refining, selling and handling by the smelter, refinery or other purchaser (including price participation charges by smelters and/or refiners); and
·costs of handling, transporting, securing and insuring such material from the Properties or from a concentrator, whether situated on or off the Properties, to a smelter, refinery or other place of treatment, and in the case of gold or silver concentrates or doré, security costs; and
·sales and other taxes based upon sales or production, but not income taxes pursuant to federal, provincial or territorial tax legislation; and
·marketing costs, including sales commissions, incurred in selling ore mined from the Properties and from concentrate, dolt, metal and products derived from ore mined from the Properties.

 

Exploration program:

 

The Montclerg property is a “grass roots”. We plan to spend $500,000 on test drilling and in preparing a 43-101 report.

 

_______________________

1 Prospect Report, Projet Ruisseau-Morin, par Bertrand Brassard, Géologue, M. Sc., January 1994

 

Liquidity and Capital Resources

 

At June 30, 2012, our cash was $5,510 and we had current liabilities of $435,474.  Since our inception on January 13, 2010, to the end of the period ended June 30, 2012, we have incurred losses of $3,346,065. We attribute our net loss to having no revenues to offset our operating expenses.

 

We have no cash flow from operations and have insufficient cash to meet our current liabilities nor our operational requirements for the next 12 months. In addition we will also be required to raise additional working capital to fund the exploration and development plans as discussed above.

 

We have no assurance that future financings will be available to us on acceptable terms. If financing is not available to us on acceptable terms, we may be unable to continue our operations. Should our costs and expenses prove to be greater than we currently anticipate, or should we change our current Plan of Mining Operations in a manner that will increase or accelerate our anticipated costs and expenses, such as through the acquisition of new properties, the depletion of our working capital would be accelerated. To the extent that it becomes necessary to raise additional cash in the future as our current cash and working capital resources are depleted, we will seek to raise it through the public or private sale of debt or equity securities, the procurement of advances on contracts or funding from joint-venture or strategic partners, debt financing or term loans, or a combination of the foregoing. We also may seek to satisfy indebtedness without any cash outlay through the private issuance of debt or equity securities.

 

We have no assurance that future financings will be available to us on acceptable terms. If financing is not available to us on acceptable terms, we may be unable to continue our operations.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable for smaller reporting companies.

 

6
 

 

 

ITEM 4. CONTROLS AND PROCEDURES.

 

(a)   Evaluation of Disclosure Controls and Procedures

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. This rule defines internal control over financial reporting as a process designed by, or under the supervision of Company management to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP.

 

Based on this evaluation, our chief executive officer and principal accounting officer concluded that, as of the end of the fiscal period ending June 30, 2012 our disclosure controls and procedures were not effective to ensure that the information required to be disclosed in reports we submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that such information was accumulated and communicated to our chief executive officer and principal accounting officer in a manner that allowed for timely decisions regarding required disclosure.

 

Management does not expect that our Disclosure Controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.

 

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

(b) – Management’s Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company's CEO and CFO and effected by the company's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that: pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and 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.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

 

7
 

 

As of June 30, 2012, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.

 

Identified Weaknesses

 

The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board was the lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures.

 

·We lack sufficient trained personnel with experience in accounting and financial reporting functions due to the size of our Company and our lack of financial resources to pay such personnel; and

 

·We do not have a sufficient number of employees to adequately segregate accounting duties to provide for sufficient internal controls.

 

Management also believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

 

The Company does not have an adequate segregation of duties due to a limited number of employees among whom duties can be allocated.  In particular there is not a segregation of access to cash and the ability to authorize and record transactions.

 

Management's Remediation Initiatives

 

In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated a plan to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management.

 

Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Board.  While we are actively seeking outside members, including candidates with accounting experience, we cannot provide any assurance that we will be successful. Given the size of our company, lack of revenues and current lack of financing to continue with our business, it is unlikely that anyone will agree to join our Board until general economic conditions and our own business prospects improve significantly.

 

8
 

 

Changes in Internal Control Over Financial Reporting.

 

During the fiscal period ended June 30, 2012, there were no changes in our internal controls over financial reporting that we believe could materially affect, or is reasonably likely to materially affect, our internal controls over financial reporting.

 

This Quarterly Report does not include an attestation report of the Company’s registered accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the company’s registered public accounting firm pursuant to temporary rules of the SEC.

 

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

From time to time, we are involved in claims and suits that arise in the ordinary course of our business. Although management currently believes that resolving any such claims against us will not have a material adverse impact on our business, financial position or results of operations, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future. Except as disclosed herein, we are not aware of any material, existing or pending legal proceedings nor are we involved as a plaintiff in any material proceeding or pending litigation.

 

The Company was named as a defendant in a civil suit commenced in the Vancouver Supreme Court, British Columbia, Canada in an action entitled Al Kassab v. Dutch Gold Resources, Inc., Shamika 2 Gold, Inc., et. al.. The Plaintiff alleges that he was entitled to receive 400,000 shares of the Company’s common stock from the Company and the other named defendants. Dutch Gold Resources, Inc. is indemnifying the Company in the action.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

From June 21, 2012 to June 28, 2012, Asher Enterprises converted a portion of Convertible Note (Asher #4), face value $5,700.00, into Common stock. The conversion resulted in the Company issuing 29,085,714 shares of Common Stock.

 

From June 21, 2012 to June 28, 2012, Coventry Enterprises converted a portion of a Convertible Note, face value $11,448, into shares of the Company’s Common Stock. The conversion resulted in the Company issuing 45,585,436 shares of Common Stock.

 

From July 2, 2012 to July 17, 2012 Coventry Enterprises converted a portion of a Convertible Note, face value $13,349, into Common stock. The conversion resulted in the Company issuing 96,406,429 Common shares.

 

From July 2, 2012 to July 23, 2012 Asher Enterprises converted a portion of Convertible Note (Asher #4), face value $15,500 and interest of $2,000, into Common stock. The conversion resulted in the Company issuing 160,277,779 Common shares. As of July 23, 2012 Note #4 has been repaid in full.

 

On July 25, 2012 Asher Enterprises converted a portion of Convertible Note (Asher #5), face value $4,000, into Common stock. The conversion resulted in the Company issuing 28,571,429 Common shares.

 

Except as noted above, the sales of the securities identified above were made pursuant to privately negotiated transactions that did not involve a public offering of securities and, accordingly, we believe that these transactions were exempt from the registration requirements of the Securities Act pursuant to Section 4(2) thereof and rules promulgated there under. Each of the above-referenced investors in our stock represented to us in connection with their investment that they were “accredited investors” (as defined by Rule 501 under the Securities Act) and were acquiring the shares for investment and not distribution, that they could bear the risks of the investment and could hold the securities for an indefinite period of time. The investors received written disclosures that the securities had not been registered under the Securities Act and that any resale must be made pursuant to a registration or an available exemption from such registration. All of the foregoing securities are deemed restricted securities for purposes of the Securities Act.

 

9
 

 

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and this Item is included in Exhibit 95 to this quarterly report on Form 10-Q. There are no current mine safety violations for the Company.

 

 

ITEM 5. OTHER EVENTS

 

On May 10, 2012, the Company issued an aggregate of 50,000 shares of the Company’s Series A Convertible Preferred Stock (the “Series A Preferred Stock”) in consideration for past unpaid services and valuable contributions of certain officers and directors of the Company as follows:  5,000 to Terence Ortslan, 22,500 to Henry Riedl and 22,500 to Kim Koffel.  The Series A Preferred Stock convert at the rate of 10 shares of Common Stock for each share of Series A Preferred Stock converted.

 

On June 20, 2012, the Company filed a Certificate of Amendment to its Articles of Incorporation increasing the number of authorized shares of the Company’s capital stock which the Company is authorized to issue from 310,000,000 shares, consisting of 300,000,000 shares of common stock, par value $0.00001 (the “Common Stock”) and 10,000,000 shares of preferred stock, par value $0.00001 per share (the “Preferred Stock”) to 2,010,000,000 consisting of (a) 2,000,000,000 shares of Common Stock and (b) 10,000,000 shares of Preferred Stock (the “Amendment”).

 

On July 10, 2012, the Board of Directors of the Company approved a resolution to change the name of the Company to RKO Resources Inc.

 

ITEM 6. EXHIBITS.

 

Exhibit

Number

  Description of Exhibits
31.1   Certification of Chief Executive Officer and Chief Financial Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
     
32.1   Certification of Chief Executive Officer and Chief Financial Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *

 

10
 

 

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.

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.

 

       
Date: August 3, 2012   /s/ Henry Riedl  
    Name:  Henry Riedl  
    Title:  President and Chief Executive Officer and Interim Financial Officer  
    (Principal Executive and Accounting Officer)  

 

 

    /s/ Kim Koffel  
    Name:  Kim Koffel  
    Title:  Director  
       

 

 

 

11