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One piece of SUBSTANTIAL news that is actually legitimate would be extraordinarily unusual and interesting.
People are getting excited about .0005, which is fairly comical. What would TRULY be exciting is to see this stock rise above 1 full American penny.
THEN we can talk about enthusiasm.
Pretty ugly company.
If anyone has ANY reasons to be optimistic about it's prospects I'd be curious to hear. They seem to be running on less than fumes at this point and how they plan to hold all these events while being in the red and have a company with a market cap of almost nothing is quite a study in incompetence.
Maybe Mark Ryun should have stuck to racing and not trying to do something he clearly can't do with is run a functioning business.
Yeesh. Open to hearing realistic positives if they exist...
Has Kaloyan Gadzhev written anything else since his February 2012 coverage?
What else are people saying about this rise as it seems unsubstantiated. The volume speaks, well volumes.
Something is up, but what?
The volume has been off the charts here, the overall price increase, percentage-wise has been encouraging.
However, all technical analysis aside, I have seen nothing fundamentally to justify the massive regular uptick in volume. Some days it has been off the charts leading almost all pink sheet co's.
No one but chart followers have any rhyme or reason to justify the new interest.
As a shareholder, I'm delighted with the renewed attention but would like to see some substantial infomation to sustain and drive the stock price to new heights.
NOT FRACTIONAL penny heights, which is well and good for traders, but real increases. Like 2, 5, 10 cents a share. $.30, $1.00.
Now then, we're talking.
Wow, this is incredible, 71 million shares traded today PLUS a 250% price uptick.
Ok, I've awoken from my slumber and am sitting in the upright position.
What.Is.Causing.This.Upsurge?
Has news leaked? Could this actually move towards a penny++?
This type of rise will garner massive interest from around the pinksheet world and look for technical write ups flooding around here soon.
Whatever it is, something has woken this stock up! Hopefully, it's something substantive.
Recent Trades - Last 10 of 83
Time ET Ex Price Change Volume
14:03:40 Q 0.0006 0.0004 1,366,600
14:03:31 Q 0.0006 0.0004 400,000
14:03:23 Q 0.0007 0.0005 10,000
14:03:23 Q 0.0006 0.0004 5,000
14:02:23 Q 0.0006 0.0004 500,000
13:58:46 Q 0.0006 0.0004 400,000
13:58:33 Q 0.0006 0.0004 333,400
13:58:18 Q 0.0006 0.0004 1,000,000
13:57:45 Q 0.0006 0.0004 1,155,000
13:57:38 Q 0.0006 0.0004 495,000
Note to Ernest DD Admin: how about removing my one post per day restriction, seriously is that really necessary? yeesh. Let's just discuss the stock here.
I sold everything in this hopeless shell company.
Good luck everyone.
if you want to try and spec your way to a small fortune, there is some tremendous upside in HRTE.
More potential than here, that's for sure. If it moves, it could be tremendous.
Did HERE Enterprises ever make good on this from last March?
http://www.reuters.com/finance/stocks/HRTE.PK/key-developments/article/2104404
I'm swinging away with this company and if it EVER goes to even 1 penny, I think a lot of people would frankly be ecstatic.
This stock is virtually, worthless, so you think I'm going to sell at this point?
I will hold my hundreds of thousands of shares and if God decides to ignite this stock that's what it will, an act of God.
Should that day come and it rises to a penny or above, there will be joyous celebrations and feasting and praising throughout the land as it will be acknowledged by even ErnestDD this is a bonafide miracle.
Happy V-day.
Good points, I'm out. Later Gryo!
Hello Rodinia (RM)http://business.financialpost.com/2012/02/10/rodinia-ceo-william-randall-on-argentina-lithium-project-drilling/
I don't see the point in selling just yet... maybe there will be a new pursuit.
All you have to do is read them and see they're not really saying anything! What more proof do you need?
What will be next, if anything for this POS. Cruce was the one thing you were waiting on Ofspring, now... there is literally a void of information as to what this company is doing, how it is going to sustain itself and what direction it is moving towards.
Brutal.
So, you're saying that Cruce property agreement is dead and GRYO literally has nothing going for them...
I'm assuming the cancellation of the LG agreement is somehow good so that they can focus their limited monies on Cruce?
They've been around since 2006 and other than diluting the shares, have done exactly what?
http://www.sec.gov/Archives/edgar/data/1372954/000112785512000035/gryphon10q123111.htm
NO REVENUES WERE EARNED DURING THE REPORTING PERIOD IN THIS 10Q.
Yeesh. And they diluted this stock even more at 1 cent to get another $123,000.
This stock is extrmely disappointing to say the least.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM 10-Q
x QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended December 31, 2011
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______________________ TO _______________________
Commission File # 000-53371
GRYPHON RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation or organization)
98-0465540
(IRS Employer Identification Number)
1313 East Maple Street, Suite 201-462
Bellingham, Washington 98225
(Address of principal executive offices) (Zip Code)
(360) 685-4238
(Registrant’s telephone no., including area code)
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated file, or a smaller reporting company.
Large accelerated filer o Accelerated filer o
Non-accelerated filer o Smaller reporting company x
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes o No x
The issuer had 117,425,000 shares of common stock issued and outstanding as of February 8, 2012.
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Table of Contents
GRYPHON RESOURCES, INC.
(An Exploration Stage Company)
Table of Contents
Page
PART I. Financial Information
Item 1. Financial Statements.
Balance Sheets at December 31, 2011 (unaudited) and September 30, 2011 (audited) 1
Unaudited Statements of Operations for the three month periods ended December 31, 2011 and December 31, 2010 and the Exploration Stage Period of January 16, 2006 through December 31, 2011 2
Unaudited Statements of Cash Flows for the three month periods ended December 31, 2011 and December 31, 2010 and the Exploration Stage Period of January 16, 2006 through December 31, 2011 3
Unaudited Supplemental Disclosure of Non-cash Investing and Financing Activities for the three month periods ended December 31, 2011 and December 31, 2010 and the Exploration Stage Period of January 16, 2006 through December 31, 2011 4
Notes to Unaudited Financial Statements 5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 15
Item 3. Quantitative and Qualitative Disclosures about Market Risk 22
Item 4. Controls and Procedures 22
PART II. Other Information 24
Item 1. Legal Proceedings 24
Item 1a. Risk Factors 24
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 28
Item 3. Defaults Upon Senior Securities 28
Item 4. [Removed and Reserved] 28
Item 5. Other Information 28
Item 6. Exhibits 29
Signatures 29
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Table of Contents
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (unaudited)
GRYPHON RESOURCES, INC.
(An Exploration Stage Company)
Balance Sheets
December 31,
2011 September 30,
2011
ASSETS
CURRENT ASSETS
Cash $ 8,560 $ 7,073
Prepaid expenses 3,438 10,187
Total current assets 11,998 17,260
Total assets $ 11,998 $ 17,260
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable 1,327 1,269
Shareholder advances (Note 6) 6,500 6,500
Total current liabilities $ 7,827 $ 7,769
Total liabilities $ 7,827 $ 7,769
COMMITMENTS AND CONTINGENCIES
(Notes 2, 3 and 5) — —
STOCKHOLDERS’ EQUITY
Common shares, 400,000,000 shares par value $0.001 authorized, 117,425,000 and 105,025,000 issued and outstanding at December 31, 2011 and September 30, 2011 (Note 7) 117,425 105,025
Paid-in Capital 571,575 459,975
Common shares subscribed but not issued (Note 7) — 106,000
Accumulated deficit in the exploration stage (684,829 ) (661,509 )
Total stockholders’ equity 4,171 9,491
Total liabilities and stockholders’ equity $ 11,998 $ 17,260
The accompanying notes to financial statements are an integral part of these financial statements
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GRYPHON RESOURCES, INC.
(An Exploration Stage Company)
Statements of Operations
Three Months
ended
December 31,
2011 Three Months
ended
December 31,
2010 January 16, 2006
(date of inception)
through
December 31,
2011
EXPENSES:
Exploration expenses 1,000 28,113 153,749
Professional and consultant fees 17,564 20,550 233,233
Administrative expenses 3,561 6,818 57,056
Investor relations 195 13,715 29,023
Mineral properties impairments (Notes 2, 4 and 5) 1,000 40,000 183,498
Total expenses $ 23,320 $ 109,196 $ 656,559
Net loss from operations $ (23,320 ) $ (109,196 ) $ (656,559 )
Other (Expense) Income:
Interest expense — — (13,258 )
Net loss from continuing operations (23,320 ) (109,196 ) (669,817 )
Discontinued Operations:
Net loss from discontinued operations (Note 8) $ — $ — $ (112,932 )
Gain on Sale of Subsidiary (Note 8) $ — $ — $ 97,920
Net (Loss) $ (23,320 ) $ (109,196 ) $ (684,829 )
Less: Net Loss attributable to Non-Controlling Interest related to discontinued operations (Notes 2 and 8) n/a n/a 936
Equals: Net Loss attributable to Gryphon Resources, Inc. (Notes 2 and 8) (23,320 ) (109,196 ) (683,893 )
Loss per common share (Note 2), basic and diluted $ Nil $ Nil
Weighted average shares outstanding , basic and diluted (Notes 2 and 7) 107,457,608 101,854,347
The accompanying notes to financial statements are an integral part of these financial statements
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Table of Contents
GRYPHON RESOURCES, INC.
(An Exploration Stage Company)
Statements of Cash Flows
Three Months
ended
December 31,
2011
Three Months
ended
December 31,
2010 January 16, 2006
(date of inception)
through
December 31,
2011
Cash flows from operating activities:
Net Income (Loss) for period $ (23,320 ) $ (109,196 ) $ (684,829 )
Reconciling adjustments:
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash gain on sale of subsidiary — — (97,920 )
Accrued interest on shareholder loans — — 13,258
Accrued interest related to discontinued operation — — 6,882
Mineral property impairments 1,000 40,000 183,498
Net change in operating assets and liabilities:
Prepaid expenses 6,749 15,463 (3,438 )
Accounts payable 58 7 1,327
Net cash provided (used) by operating activities (15,513 ) (53,726 ) (581,222 )
Cash flows from investing activities:
Purchase of mineral properties — (40,000 ) (138,998 )
Net cash provided by investing activities — (40,000 ) (138,998 )
Cash flows from financing activities:
Common shares issued for cash 17,000 46,260 525,654
Proceeds from common shares subscribed but not issued — 150,000 —
Proceeds from loans related to discontinued operation — — 91,038
Proceeds from shareholder advances — 6,500 112,088
Net cash provided by financing activities 17,000 202,760 728,780
Net increase (decrease) in cash 1,487 109,034 8,560
Cash, beginning of period 7,073 10,252 —
Cash, end of period $ 8,560 $ 119,286 $ 8,560
The accompanying notes to financial statements are an integral part of these financial statements
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Table of Contents
GRYPHON RESOURCES, INC.
(An Exploration Stage Company)
Supplemental Disclosure of Non-cash Investing and Financing Activities
Three Months
ended
December 31,
2011 Three Months
ended
December 31,
2010 January 16, 2006
(inception) through
December 31,
2011
Shares issued for mineral property acquisition $ 1,000 $ — $ 44,500
Conversion of debt into common stock subscribed but not issued $ — $ — $ 118,846
The accompanying notes to financial statements are an integral part of these financial statements
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GRYPHON RESOURCES, INC.
(An Exploration Stage Company)
Notes to Financial Statements
NOTE 1 – Nature of Business and Operations
Gryphon Resources, Inc. is a mineral exploration enterprise which was incorporated in the State of Nevada on January 16, 2006. On April 28, 2008 we incorporated a subsidiary and conducted an exploration project through this subsidiary in Turkey until September 27, 2010, at which time it was sold to an unrelated third party. Activities of this former subsidiary are treated in these financial statements as a discontinued operation. Currently our activities include exploring for lithium; and gold and silver in Arizona, USA. Our fiscal year end is September 30th. (Hereinafter Gryphon Resources, Inc. may herein be referred to: “Gryphon Resources”, “Gryphon”, “We”, “Us”, the “Registrant”, or the “Company”).
Exploration Stage Activities
The Company has been in the exploration stage since January 16, 2006 and has not yet realized any revenues from its operations.
NOTE 2 – Summary of Significant Accounting Policies
This summary of significant accounting policies is presented to assist in understanding Gryphon’s financial statements. The financial statements and notes are representations of the Company’s management, who is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles in the United States of America and have been consistently applied in the preparation of the financial statements, which are stated in U.S. Dollars.
The financial statements reflect the following significant accounting policies:
Exploration Stage Company
The Company is devoting substantially all of its present efforts to establish a new business and none of its planned principal operations have commenced. As an exploration stage enterprise, the Company discloses the deficit accumulated during the exploration stage and the cumulative statements of operations and cash flows from inception to the current balance sheet date.
Exploration Costs and Mineral Property Right Acquisitions
The Company is primarily engaged in the acquisition and exploration of mining properties. Mineral property exploration costs are expensed as incurred. Mineral property acquisition costs are initially capitalized when incurred. The Company assesses the carrying costs for impairment under Accounting Standards 930 Extractive Activities – Mining (AS 930). 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. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs then incurred to develop such property, are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the proven and probable reserves. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.
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GRYPHON RESOURCES, INC.
(An Exploration Stage Company)
Notes to Financial Statements
Non-Controlling Interest
As required by GAAP, the Statement of Operations for the Exploration Stage Period from January 16, 2006 to December 31, 2011 include the allocation to ‘Non-Controlling Interest’ of a proportionate share of the Company’s discontinued operations net losses and related accounts which pertained to the 1% ownership interest in its former subsidiary which was not owned by the Company. This is an historic carryforward due to the extinguishment of any Non-Controlling Interest at the time of the sale of our subsidiary.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.
Earnings or (Loss) per Share
Basic loss per share is calculated by dividing the net loss available to common stockholders by the weighted average number of common shares outstanding for the period. The denominator in this calculation is adjusted to reflect any stock splits or stock dividends.
Diluted loss per share is calculated using the treasury method which requires the calculation of diluted loss per share by assuming that any outstanding stock options with an average market price that exceeds the average exercise prices of the options for the year, are exercised and the assumed proceeds are used to repurchase shares of the Company at the average market price of the common shares for the year. An incremental per share effect is then calculated for each option. The denominator of the diluted loss per share formula is the number common shares outstanding at balance sheet date plus the incremental shares assumed to be issued from treasury for option exercises, less the number of shares assumed to be repurchased, weighted by the period they are assumed to be outstanding. This dilution calculation did not affect current fiscal year results because the Company does not have an Option Plan and has not issued any stock options; nor equity security equivalents such as warrants.
Stock-based Compensation
The Company follows ASC 718-10, Stock Compensation, which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. ASC 718-10 requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized. The Company has not adopted a stock option plan and has not granted any stock options; nor has it made any awards of stock, or stock equivalents.
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GRYPHON RESOURCES, INC.
(An Exploration Stage Company)
Notes to Financial Statements
Estimated Fair Value of Financial Instruments
ASC 820, "Fair Value Measurements", requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three levels that may be used to measure fair value:
Level 1:
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2:
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3:
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company's financial instruments consist principally of cash, accounts payable, and shareholder advances. Pursuant to ASC 820, the fair value of our cash is determined based on "Level 1" inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
It is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.
Income Taxes
The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns using the liability method. Under this method, deferred tax liabilities and assets are determined based on the temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities using enacted rates in effect in the years during which the differences are expected to reverse and upon the possible realization of net operating loss carry-forwards. Additionally, the Company has not recognized any amount for a tax position taken or expected to be taken on its tax return, or for any interest or penalties.
Valuation of Long-Lived Assets
The Company will periodically analyze its long-lived assets for potential impairment, assessing the appropriateness of lives and recoverability of unamortized balances through measurement of undiscounted operation cash flows on a basis consistent with accounting principles generally accepted in the United States of America.
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GRYPHON RESOURCES, INC.
(An Exploration Stage Company)
Notes to Financial Statements
Foreign Currency
The books of the Company are maintained in United States dollars and this is the Company’s functional and reporting currency. Transactions denominated in other than the United States dollar are translated as follows with the related transaction gains and losses being recorded in the Statements of Operations:
(i) Monetary items are recorded at the rate of exchange prevailing as at the balance sheet date;
(ii) Non-Monetary items including equity are recorded at the historical rate of exchange; and
(iii) Revenues and expenses are recorded at the period average in which the transaction occurred
Cash and Cash Equivalents
The Company considers cash and cash equivalents to consist of cash on hand and demand deposits in banks with an initial maturity of 90 days or less.
Risks and Uncertainties
The Company is subject to substantial business risks and uncertainties inherent in starting a new business. There is no assurance the Company will be able to generate sufficient revenues or obtain sufficient funds necessary for launching a new business venture.
Revenue Recognition
Revenue from the sale of precious and/or other metals and co-products will be recognized when the following conditions are met: persuasive evidence of an arrangement exists; delivery has occurred in accordance with the terms of the arrangement; the price is fixed or determinable and collectability is reasonably assured. Revenue for precious metal bullion will be recognized at the time of delivery and transfer of title to counter-parties.
Capital Assets
Capital assets will be recorded at cost. Depreciation will be recorded based on estimated useful lives of assets at time of acquisition. At present the Company has no depreciable assets.
Recent Accounting Pronouncements
Various accounting pronouncements have been issued during 2012 and 2011, none of which are expected to have a material effect on the financial statements of the Company.
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GRYPHON RESOURCES, INC.
(An Exploration Stage Company)
Notes to Financial Statements
NOTE 3 – Basis of Presentation and Going Concern
Generally accepted accounting principles in the United States of America contemplate the continuation of the Company as a going concern. However, the Company had a net loss of $(23,320) for the three month period ended December 31, 2011 and has accumulated net losses of $(684,829) since inception. Additionally the Company has had limited business operations, which raises substantial doubt about its ability to continue as a going concern. The continuation of the Company is dependent on many factors, many of which have a high degree of uncertainty.
During the three month period ended December 31, 2011, we addressed the going concern issue by raising cash of $17,000 through a private placement of our common shares (the share issuance for this private placement also included $106,000 which had been carried on our balance sheet for the year ended September 30, 2011 as Common Shares Subscribed But Not Issued, for a total cash share issuance of $123,000). The Company’s ability to continue as a going concern is contingent upon the successful completion of additional financing arrangements and its ability to successfully fulfill its business plan. Management plans to attempt to raise additional funds to finance the operating and capital requirements of the Company through a combination of equity and debt financings. While the Company is making its best efforts to achieve the above plans, there is no assurance that any such activity will generate funds that will be available for operations. The accompanying financial statements do not include any adjustments that might result from the resolution of these matters.
NOTE 4 – Impairment of Mineral Properties
During the three month period ended December 31, 2011 as fulfillment of one of the payment installments for the Cruce Property, the Company made a share issuance of 100,000 shares which was valued at $0.01 per share for total deemed proceeds of $1,000. At quarter end December 31, 2011, the Company determined this portion of its mineral property acquisition costs should be impaired and recorded an impairment loss of $1,000.
NOTE 5 – Mineral Properties
L.G. Property
As executed on July 19, 2010 and amended on February 27, 2011, the Company entered into an option to purchase certain mineral exploration rights to a property in south-eastern Arizona, USA, named the L.G. Property from two individuals (collectively the “L.G. Vendors”). The Vendors each owned a 50% interest in the mineral exploration rights to the L.G. Property and held the sole right, title and interest to the L.G. Property exploration rights (subject to the rights and title of the State of Arizona), free and clear of all liens and encumbrances. Through the option agreement, as amended (the “L.G. Agreement”), the L.G. Vendors granted an exclusive option to the Company to purchase a 100% undivided right, title and interest in the L.G. Vendors’ rights to the L.G. Property, and the Company acquired an option to purchase L.G. Vendors’ rights to the L.G. Property from the L.G. Vendors, upon the terms and conditions set forth in the L.G. Agreement, as amended.
To exercise the option included in the L.G. Agreement (the “L.G. Option”), the Company must: (i) pay the aggregate sum of $240,000 to the L.G. Vendors; (ii) incur an aggregate of at least $550,000 of exploration expenditures on the L.G. Property; and (iii) issue to the L.G. Vendors an aggregate of 1,000,000 restricted shares of common stock in Gryphon (or any public company created by Gryphon for the purpose of development of the L.G. Property), based on the following schedules:
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GRYPHON RESOURCES, INC.
(An Exploration Stage Company)
Notes to Financial Statements
NOTE 5 – Mineral Properties (continued)
(a) Cash sums on or before the dates described below:
(i) $15,000 upon execution of the L.G. Agreement (such payment which has been made);
(ii) $15,000 on or before August 10, 2010 (such payment which has been made);
(iii) $50,000 on or before March 1, 2011 (such payment which has been made);
(iv) $60,000 on or before March 1, 2012; and
(v) $100,000 on or before March 1, 2013.
(b) Share issuances on or before the dates described below:
(i) 250,000 restricted common shares upon execution of the L.G. Agreement (such payment which has been made and was valued at $12,500);
(ii) 250,000 restricted common shares on or before February 1, 2011 (such payment which has been made and was valued at $25,000);
(iii) 250,000 restricted common shares on or before February 1, 2012; and
(iv) 250,000 restricted common shares on or before February 1, 2013.
(c) The parties also agreed that the Company will incur the following amounts on exploration expenditures on the L.G. Property:
(i) $50,000 within 12 months following the L.G. Execution Date;
(ii) an additional $100,000 on or before 24 months following the L.G. Execution Date;
(iii) $200,000 on or before 36 months following the L.G. Execution Date; and
(iv) $200,000 on or before 48 months following the L.G. Execution Date.
Once the Company has paid the L.G. Option price in full, the Company will have exercised the L.G. Option and have acquired an undivided 100% right, title and interest in and to the L.G. Property, the Company will then be obligated to pay the following additional consideration to the L.G. Vendors:
(a) 1,000,000 restricted shares of Gryphon common stock;
(b) a minimum annual royalty of $150,000 on or before December 31, 2014 and a minimum annual royalty of $150,000 every 12 months for each year that Gryphon holds the L.G. Property;
(c) a 5% (five percent) Gross Production Royalty on lithium minerals actually produced and sold from the L.G. Property; and
(d) a 3-1/2% (three and one-half percent) Net Returns Royalty on all other minerals actually produced and sold from the L.G. Property.
If the Company fails to deliver or spend the consideration comprising the L.G. Option price within the time periods set forth herein, the L.G. Agreement will terminate 30 days after the L.G. Vendors give the Company written notice of such failure (during which time the Company may deliver or spend the consideration overdue, and therefore maintain the L.G. Agreement in good standing). As of the date of these financial statements, the Company had made all cash and shares payments currently due under the terms of L.G. Agreement, but had not expended the entire required amount of its first year work commitment. The L.G. Vendors have not indicated they plan to give the Company any written notice which would cause a termination of the L.G. Agreement.
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GRYPHON RESOURCES, INC.
(An Exploration Stage Company)
Notes to Financial Statements
NOTE 5 – Mineral Properties (continued)
Cruce Property:
As executed on January 21, 2011 and amended on January 25, 2011, the Company entered into an option to purchase certain mineral exploration rights to a property in Arizona, USA, named the Cruce Property from two individuals (collectively the “Cruce Vendors”). The Cruce Vendors each owned a 50% interest in the mineral exploration rights to the Cruce Property and held the sole right, title and interest to the Cruce Property exploration rights (subject to the rights and title of the State of Arizona), free and clear of all liens and encumbrances. Through the option agreement (the “Cruce Agreement”), the Cruce Vendors granted an exclusive option to the Company to purchase a 100% undivided right, title and interest in the Cruce Vendors’ rights to the Cruce Property, and the Company acquired an option to purchase the Cruce Vendors’ rights to the Cruce Property from the Cruce Vendors, upon the terms and conditions set forth in the Cruce Agreement, as amended.
To exercise the option included in the Cruce Agreement (the “Cruce Option”), the Company must: (i) pay the aggregate sum of $265,000 to the Cruce Vendors; (ii) incur an aggregate of at least $335,000 of exploration expenditures on the Cruce Property; and (iii) issue to the Cruce Vendors an aggregate of 2,600,000 restricted shares of common stock in Gryphon (or any public company created by Gryphon for the purpose of development of the Cruce Property), based on the following schedules:
(a) Cash sums on or before the dates described below:
(i) $40,000 upon execution of the Letter of Intent regarding the Cruce Agreement (such payment which has been made);
(ii) $50,000 on or before November 30, 2011 (such payment which has not been made);
(iii) $75,000 on or before November 30, 2012;
(iv) $100,000 on or before November 30, 2013; and
(b) Share issuances on or before the dates described below:
(i) 100,000 shares upon execution of the Cruce Agreement (such issuance which has been made and was valued at $6,000);
(ii) 100,000 shares on or before November 30, 2011 (such issuance which has been made and was valued at $1,000);
(iii) 200,000 shares on or before November 30, 2012; and
(iv) 200,000 shares on or before November 30, 2013.
(c) The parties also agreed that the Company will incur the following amounts on exploration expenditures on the Cruce Property:
(i) $60,000 within 12 months following the Cruce Execution Date;
(ii) an additional $75,000 on or before 24 months following the Cruce Execution Date;
(iii) $100,000 on or before 36 months following the Cruce Execution Date; and
(iv) $100,000 on or before 48 months following the Cruce Execution Date.
Once the Company has paid the Cruce Option price in full, the Company will have exercised the Cruce Option and have acquired an undivided 100% right, title and interest in and to the Cruce Property, the Company will then be obligated to pay the following additional consideration:
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GRYPHON RESOURCES, INC.
(An Exploration Stage Company)
Notes to Financial Statements
(a) 2,000,000 restricted shares of Gryphon common stock;
(b) a minimum annual royalty of $250,000 on or before November 30, 2014 and a minimum annual royalty of $250,000 every 12 months for each year that Gryphon holds the Cruce Property;
(c) a 3% (three percent) Net Returns Royalty on all minerals actually produced and sold from the Cruce Property.
If the Company fails to deliver or spend the consideration comprising the Cruce Option price within the time periods set forth herein, the Cruce Agreement will terminate 30 days after the Cruce Vendors give the Company written notice of such failure (during which time the Company may deliver or spend the consideration overdue, and therefore maintain the Cruce Agreement in good standing). As of the date of these financial statements, the Company had made all shares payments currently due under the terms of Cruce Agreement and had expended the entire required amount of its first year work commitment. The Company met it first scheduled cash installment of $40,000 to the Cruce Vendors, but is currently late on its second scheduled cash installment of $50,000 which was due by November 30, 2011. The Cruce Vendors have not indicated they plan to give the Company any written notice which would cause a termination of the Cruce Agreement.
NOTE 6 – Related Party Transactions & Shareholder Advances
During the year ending December 31, 2011, related party transactions included payment of $28,354 in consulting fees and expense reimbursements to our CEO and an advance from our CEO of $6,500 to the Company. This advance is non-interest bearing and payable on demand.
There were no related party transactions for the three month period ended December 31, 2011.
NOTE 7 – Common shares and Common Shares Subscribed but Unissued
Common Shares
The Company’s common stock is traded on the Pink Sheets Over-The-Counter Market under the symbol: GRYO.
On January 27, 2006, the Company issued 2,500,000 shares of its common stock to its founding President for cash. This transaction was valued at a board approved value of $0.001 per share for total proceeds of $2,500.
During the fiscal year ending September 30, 2006, the Company issued 2,450,000 shares of its common stock in a private offering at $0.02 per share for total proceeds of $49,000.
On June 23, 2008, the Company declared an 18.5 for 1 stock dividend. The Record date and Payment date for this stock dividend were July 3, 2008 and July 7, 2008 respectively. The Company instructed its Transfer Agent to round up to one for any fractional interest which resulted in the calculation of the dividend. This dividend had the effect of increasing the issued and outstanding share capital of the Company from 4,950,000 shares to 96,525,000 shares. All references to stock issued and stock outstanding have been retroactively adjusted as if the stock dividend had taken place on January 16, 2006 (inception).
As recorded in a Form DEF 14C filed May 15, 2009, the Company amended its Articles of Incorporation to increase the authorized number of shares of common stock from 100,000,000 shares to 400,000,000 shares, par value of $0.001 per share.
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GRYPHON RESOURCES, INC.
(An Exploration Stage Company)
Notes to Financial Statements
On July 19, 2010, the Company issued 250,000 shares of its common stock to Vendors of the L.G. Property. This transaction was valued at a board approved value of $0.05 per share for total deemed proceeds of $12,500. These shares are deemed "restricted" securities under the Securities Act and may not be sold or transferred other than pursuant to an effective registration statement under the Securities Act or any exemption from the registration requirements of the Securities Act.
On November 18, 2010, the Company completed a private placement offering of its common stock which raised aggregate proceeds of US$320,000 ($118,846 of this amount was used to settle debt as of September 30, 2011; $154,894 of this amount was received in cash prior to September 30, 2011; $46,260 of this amount was received in cash during the quarter ended December 31, 2010). This offering was comprised of 6,400,000 restricted common shares at $0.05 per share and 6,400,000 restricted common shares were issued. These shares were issued pursuant to Regulation S of the Securities Act of 1933, as amended (“Regulation S”) and the Company did not engage in any general solicitation or advertising regarding this offering.
On January 25, 2011, the Company issued 100,000 shares of its common stock to Vendors of the Cruce Property. This transaction was valued at a board approved value of $0.06 per share for total deemed proceeds of $6,000. These shares are deemed "restricted" securities under the Securities Act and may not be sold or transferred other than pursuant to an effective registration statement under the Securities Act or any exemption from the registration requirements of the Securities Act.
On March 11, 2011, the Company completed a private placement offering of its common stock which raised aggregate cash proceeds of US$150,000. This offering was comprised of 1,500,000 restricted common shares at $0.10 per share and 1,500,000 restricted common shares were issued. These shares were issued pursuant to Regulation S of the Securities Act of 1933, as amended (“Regulation S”) and the Company did not engage in any general solicitation or advertising regarding this offering.
On March 31, 2011, the Company issued 250,000 shares of its common stock as the second shares component installment payment to Vendors of the L.G. Property. This transaction was valued at a board approved value of $0.10 per share for total deemed proceeds of $25,000. These shares are deemed "restricted" securities under the Securities Act and may not be sold or transferred other than pursuant to an effective registration statement under the Securities Act or any exemption from the registration requirements of the Securities Act.
On November 30, 2011, the Company issued 100,000 shares of its common stock as the second shares component installment payment to Vendors of the Cruce Property. This transaction was valued at a board approved value of $0.01 per share for total deemed proceeds of $1,000. These shares are deemed "restricted" securities under the Securities Act and may not be sold or transferred other than pursuant to an effective registration statement under the Securities Act or any exemption from the registration requirements of the Securities Act.
On December 14, 2011 the Company completed a private placement offering of its common stock which raised aggregate cash proceeds of US$123,000. This offering was comprised of 12,300,000 restricted common shares at $0.01 per share and 12,300,000 restricted common shares were issued. These shares were issued pursuant to Regulation S of the Securities Act of 1933, as amended (“Regulation S”) and the Company did not engage in any general solicitation or advertising regarding this offering. The consideration paid for this private placement was comprised of $106,000 which was recorded in the Company's September 30, 2011 year-end Balance Sheet as Shares Subscribed But Not Issued, plus $17,000 cash received during the three month period ended December 31, 2011.
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GRYPHON RESOURCES, INC.
(An Exploration Stage Company)
Notes to Financial Statements
Common Shares Subscribed but Unissued
At year-end Balance Sheet date of September 30, 2011, the Company had a balance of $106,000 related to private placement shares which had been subscribed but were not yet issued. As referenced above, this balance of $106,000 was added to $17,000 cash received during the three month period ended December 31, 2011to complete a private placement of 12,300,000 restricted common shares sold for $0.01 per share, for total consideration of $123,000.
NOTE 8 – Discontinued Operation
On April 28, 2008 we incorporated a Turkish company (the “Former Subsidiary”) as a 99% owned subsidiary. The remaining balance of 1% of the Former Subsidiary's shares were held by our former CEO. On September 27, 2010, we sold our entire interest in the Former Subsidiary to an unrelated third party and ceased all operations in Turkey. The losses and cash flows of the Former Subsidiary have been presented as a discontinued operation in these financial statements. Prior year’s Statements of Operations, Equity and Cash Flows have been adjusted to reflect the effect of this discontinued operation. The sale of the Former Subsidiary also resulted in a non-cash gain of $97,920 due to the assumption of debt by the third party. This has been recorded in these statements as a gain on sale of subsidiary in discontinued operations.
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ITEM 2. MANAGEMENTS’ DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Certain information included herein contains forward-looking statements that involve risks and uncertainties within the meaning of Sections 27A of the Securities Act, as amended; Section 21E of the Securities Exchange Act of 1934. These sections provide that the safe harbor for forward looking statements does not apply to statements made in initial public offerings. The words, such as "may," "would," "could," "anticipate," "estimate," "plans," "potential," "projects," "continuing," "ongoing," "expects," "believe," "intend" and similar expressions and variations thereof are intended to identify forward-looking statements. These statements appear in a number of places in this Form 10-Q and include all statements that are not statements of historical fact regarding intent, belief or current expectations of the Company, our directors or our officers, with respect to, among other things: (i) our liquidity and capital resources; (ii) our financing opportunities and plans; (iii) continued development of business opportunities; (iv) market and other trends affecting our future financial condition; (v) our growth and operating strategy. Investors and prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. The factors that might cause such differences include, among others, the following: (i) we have incurred significant losses since our inception; (ii) any material inability to successfully develop our business plans; (iii) any adverse effect or limitations caused by government regulations; (iv) any adverse effect on our ability to obtain acceptable financing; (v) competitive factors; and (vi) other risks including those identified in our other filings with the Securities and Exchange Commission.
Overview
Gryphon Resources, Inc. (hereinafter Gryphon Resources, Inc. may herein be referred to: “Gryphon Resources”, “Gryphon”, “We”, “Us”, the “Registrant”, or the “Company”) was incorporated in the State of Nevada on January 16, 2006. We are a mineral exploration company and are exploring for gold, silver and copper-porphyry; and lithium on two different properties in Arizona, USA. Our fiscal year end is September 30th. The Company’s common stock is traded in the Pink Sheets Over-The-Counter market under the symbol “GRYO”.
MINERAL PROPERTIES
Summary
At December 31, 2011, the Company’s material property investments comprise: (i) an option to purchase certain mineral exploration rights to a property in south-central Arizona, USA, named the Cruce Property on which the Company is primarily exploring for gold, silver and copper-porphyry, all leases on which are currently in good standing; and (ii) an option to purchase certain mineral exploration rights to a property in south-eastern Arizona, USA, named the L.G. Property on which the Company is primarily exploring for lithium, of which the Company has let lapse approximately 90% of the leases thereunder.
At present, the Company has no mineral property balances which are classified as assets under generally accepted accounting principles.
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Cruce Map
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CRUCE PROPERTY
Cruce Property Area of Interest
The Cruce Property covers 560 acres and is located approximately 40 miles north of Tucson in south-central Arizona. The Cruce Agreement area of interest is composed of all lands within that area in the State of Arizona described as: Section 16, Township 8 South, Range 14 East, G&SR Mer., and three miles extended in each direction from the exterior boundaries of Section 16.
Cruce Property Agreement:
As executed on January 21, 2011 (the "Cruce Execution Date"') and amended on January 25, 2011, the Company entered into an option to purchase certain mineral exploration rights to a property in Arizona, USA, named the Cruce Property from two individuals (collectively the “Cruce Vendors”). The Cruce Vendors each owned a 50% interest in the mineral exploration rights to the Cruce Property and held the sole right, title and interest to the Cruce Property exploration rights (subject to the rights and title of the State of Arizona), free and clear of all liens and encumbrances. Through the option agreement (the “Cruce Agreement”), the Cruce Vendors granted an exclusive option to the Company to purchase a 100% undivided right, title and interest in the Cruce Vendors’ rights to the Cruce Property, and the Company acquired an option to purchase the Cruce Vendors’ rights to the Cruce Property from the Cruce Vendors, upon the terms and conditions set forth in the Cruce Agreement, as amended (incorporated herein by reference as Exhibits 10.3 and 10.4).
To exercise the option included in the Cruce Agreement (the “Cruce Option”), the Company must: (i) pay the aggregate sum of $265,000 to the Cruce Vendors; (ii) incur an aggregate of at least $335,000 of exploration expenditures on the Cruce Property; and (iii) issue to the Cruce Vendors an aggregate of 2,600,000 restricted shares of common stock in Gryphon (or any public company created by Gryphon for the purpose of development of the Cruce Property), based on the following schedules:
(a) Cash sums on or before the dates described below:
(i) $40,000 upon execution of the Letter of Intent regarding the Cruce Agreement (such payment which has been made)
(ii) $50,000 on or before November 30, 2011 (such payment which has not been made);
(iii) $75,000 on or before November 30, 2012;
(iv) $100,000 on or before November 30, 2013; and
(b) Share issuances on or before the dates described below:
(i) 100,000 shares upon execution of the Cruce Agreement (such issuance which has been made and was valued at $6,000);
(ii) 100,000 shares on or before November 30, 2011 (such issuance which has been made and was valued at $1,000);
(iii) 200,000 shares on or before November 30, 2012; and
(iv) 200,000 shares on or before November 30, 2013.
Once the Company has paid the Cruce Option price in full, the Company will have exercised the Cruce Option and have acquired an undivided 100% right, title and interest in and to the Cruce Property, the Company will then be obligated to pay the following additional consideration:
(a) 2,000,000 restricted shares of Gryphon common stock;
(b) a minimum annual royalty of $250,000 on or before November 30, 2014 and a minimum annual royalty of $250,000 every 12 months for each year that Gryphon holds the Cruce Property;
(c) a 3% (three percent) Net Returns Royalty on all minerals actually produced and sold from the Cruce Property.
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The parties also agreed that the Company will incur the following amounts on exploration expenditures on the Cruce Property:
(a) $60,000 within 12 months following the Cruce Execution Date.
(b) an additional $75,000 on or before 24 months following the Cruce Execution Date;
(c) $100,000 on or before 36 months following the Cruce Execution Date; and
(d) $100,000 on or before 48 months following the Cruce Execution Date.
If the Company fails to deliver or spend the consideration comprising the Cruce Option price within the time periods set forth herein, the Cruce Agreement will terminate 30 days after the Cruce Vendors give the Company written notice of such failure (during which time the Company may deliver or spend the consideration overdue, and therefore maintain the Cruce Agreement in good standing). As of the date of these financial statements, the Company had made all shares payments currently due under the terms of Cruce Agreement and had expended the entire required amount of its first year work commitment. The Company met it first scheduled cash installment of $40,000 to the Cruce Vendors, but is currently late on its second scheduled cash installment of $50,000 which was due by November 30, 2011. The Cruce Vendors have not indicated they plan to give the Company any written notice which would cause a termination of the Cruce Agreement.
L.G. PROPERTY
L.G. Property Area of Interest
The L.G. Agreement area of interest is composed of all lands within that area in the State of Arizona described as: T5S, R23 and 24E; T6S, R23, 24 and 25E; T7S, R25 and 26E; R26 and 27E; T9S, R26 and 27E; R10S, R26 and 27E and Sections 15 through 22 and 27 through 35 in T5S, R25E; Sections 6, 7, and 8, 16 through 23, and 25 through 36 in T6S, R26E; Sections 1 through 6 and 10 through 12 in T7S, R23E; Sections 1 through 18 in T7S, R24E; Sections 3 through 9, 16 through 20, and 29 through 33 in T7S, R27E; Sections 1, 2, 11through 14, 24, 25, and 36 in T8S, R25E, G&SR Mer.
During the three month period ended December 31, 2011, the Company did not make United States Bureau of Land Management ('BLM') property maintenance payments covering 10 lease sections on approximately 4091 acres and therefore these leases have lapsed. The Company had also previously let lapse one other BLM lease. These areas cover approximately 90% of the claim areas included in the L.G. Agreement. The Company is currently reviewing whether it will re-stake these claims in the future.
L.G.. Property Agreement
As executed on July 19, 2010 (the "'L.G. Execution Date") and amended on February 27, 2011, the Company entered into an option to purchase certain mineral exploration rights to a property in south-eastern Arizona, USA, named the L.G. Property from two individuals (collectively the “L.G. Vendors”). The Vendors each owned a 50% interest in the mineral exploration rights to the L.G. Property and held the sole right, title and interest to the L.G. Property exploration rights (subject to the rights and title of the State of Arizona), free and clear of all liens and encumbrances. Through the option agreement, as amended (the “L.G. Agreement”), the L.G. Vendors granted an exclusive option to the Company to purchase a 100% undivided right, title and interest in the L.G. Vendors’ rights to the L.G. Property, and the Company acquired an option to purchase L.G. Vendors’ rights to the L.G. Property from the L.G. Vendors, upon the terms and conditions set forth in the L.G. Agreement, as amended (incorporated herein by reference as Exhibits 10.1 and 10.2).
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To exercise the option included in the L.G. Agreement (the “L.G. Option”), the Company must: (i) pay the aggregate sum of $240,000 to the L.G. Vendors; (ii) incur an aggregate of at least $550,000 of exploration expenditures on the L.G. Property; and (iii) issue to the L.G. Vendors an aggregate of 1,000,000 restricted shares of common stock in Gryphon (or any public company created by Gryphon for the purpose of development of the L.G. Property), based on the following schedules:
(a) Cash sums on or before the dates described below:
(i) $15,000 upon execution of the L.G. Agreement (such payment which has been made);
(ii) $15,000 on or before August 10, 2010 (such payment which has been made);
(iii) $50,000 on or before March 1, 2011 (such payment which has been made);
(iv) $60,000 on or before March 1, 2012; and
(v) $100,000 on or before March 1, 2013.
(b) Share issuances on or before the dates described below:
(i) 250,000 restricted common shares upon execution of the L.G. Agreement (such payment which has been made and was valued at $12,500);
(ii) 250,000 restricted common shares on or before February 1, 2011 (such payment which has been made and was valued at $25,000);
(iii) 250,000 restricted common shares on or before February 1, 2012; and
(iv) 250,000 restricted common shares on or before February 1, 2013.
Once the Company has paid the L.G. Option price in full, the Company will have exercised the L.G. Option and have acquired an undivided 100% right, title and interest in and to the L.G. Property, the Company will then be obligated to pay the following additional consideration to the L.G. Vendors:
(a) 1,000,000 restricted shares of Gryphon common stock;
(b) a minimum annual royalty of $150,000 on or before December 31, 2014 and a minimum annual royalty of $150,000 every 12 months for each year that Gryphon holds the L.G. Property;
(c) a 5% (five percent) Gross Production Royalty on lithium minerals actually produced and sold from the L.G. Property; and
(d) a 3-1/2% (three and one-half percent) Net Returns Royalty on all other minerals actually produced and sold from the L.G. Property.
The parties also agreed that the Company will incur the following amounts on exploration expenditures on the L.G. Property:
(i) $50,000 within 12 months following the L.G. Execution Date;
(ii) an additional $100,000 on or before 24 months following the L.G. Execution Date;
(iii) $200,000 on or before 36 months following the L.G. Execution Date; and
(iv) $200,000 on or before 48 months following the L.G. Execution Date.
If the Company fails to deliver or spend the consideration comprising the L.G. Option price within the time periods set forth herein, the L.G. Agreement will terminate 30 days after the L.G. Vendors give the Company written notice of such failure (during which time the Company may deliver or spend the consideration overdue, and therefore maintain the L.G. Agreement in good standing). As of the date of these financial statements, the Company had made all cash and shares payments currently due under the terms of L.G. Agreement, but had not expended the entire required amount of its first year work commitment. The L.G. Vendors have not indicated they plan to give the Company any written notice which would cause a termination of the L.G. Agreement.
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Operational Developments During the Quarter Ended December 31, 2011
Leases expiries:
During the three month period ended December 31, 2011, the Company did not make United States Bureau of Land Management ('BLM') property maintenance payments covering 10 lease sections on approximately 4091 acres of its L.G. Property and therefore these leases have lapsed. The Company had also previously let lapse one other BLM lease on the L.G. Property. These areas cover approximately 90% of the claim areas included in the L.G. Agreement. The Company is currently reviewing whether it will re-stake these claims in the future and is currently re-evaluating its overall exploration programs.
Private Placement initiative:
On December 14, 2011, the Company completed a private placement totalling $123,000. This financing was based on the sale of 12,300,000 restricted common shares priced at US$0.01 per share and included application of $106,000 of funds which had been recorded on our Balance Sheet for the year ended September 30, 2011 as Shares Subscribed But Not Issued.
RESULTS OF OPERATIONS
The following discussion and analysis covers material changes in the financial condition of Gryphon during the three month periods ended December 31, 2011 and December 31, 2010 and the Exploration Stage Period of January 16, 2006 to December 30, 2011 (the “Exploration Stage”).
Revenues
Gryphon did not earn revenues during the periods included in the financial statements in this report.
Expenses
Our operating expenses are classified into five categories:
- Exploration Expenses
- Professional and Consultant Fees
- Administrative Expenses
- Investor Relations
- Mineral Properties Impairments
Exploration Expenses
Exploration expenses for the three month period ended December 31, 2011 totaled $1,000 compared to $28,113 for the three month period ended December 31, 2010. Expenses for the Exploration Stage totaled $153,749. During the current period, these expenses were comprised of geologist fees. The comparative decrease in these expenses is due to our decreased exploration activity due to cash flow considerations. We predict the level of these expenses will decrease or remain at current levels during the balance of fiscal 2012.
Professional and Consultant Fees
Professional & consultant Fees include fees paid to our President and for work performed by accounting, audit and legal professionals. During the three month period ended December 31, 2011 these costs totaled $17,564 and were comprised primarily of costs for our annual fiscal 2011 audit. This compared with $20,550 during the same period ended December 31, 2010. For the Exploration Stage these costs totaled $233,233. We anticipate Professional & Consultant Fees to decrease moderately or remain at current levels during the balance of the 2012 fiscal year. Period over period, these costs decreased due to the reduction of fees paid to our President.
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Administrative Expenses
Administrative expenses were $3,561 for the three month period ended December 31, 2011 compared with $6,818 for the three month period ended December 31, 2010. For the Exploration Stage, administrative expenses totaled $57,056. These expenses are composed of Edgar and XBRL agent filing fees, stock transfer agent fees and general office expenses. The current decrease in period over period expenses is attributable to the general reduction of our business activity. We anticipate Administrative Expenses will remain at current levels during the balance of fiscal 2012.
Investor Relations
Investor relations expenses include costs for press releases, maintenance of the Company’s website and other investor information initiatives. During the three month period ended December 31, 2011, these expenses totaled $195 and were comprised of press release system access fees. For the three month period ended December 31, 2010 the costs totaled $13,715. For the Exploration Stage, Investor Relations expenses totaled $29,023. The current period over period decrease is attributable to our reduced issuance of press releases. We anticipate Investor Relations expenses may increase or remain at current levels during the balance of fiscal 2012.
Mineral Properties Impairments
As required by generally accepted accounting principles, during the three month period ended December 31, 2011 the Company undertook a review of the Company’s exploration projects and determined it should record an impairment charge of $1,000 against the Cruce Property mineral exploration rights. This was based on the valuation of 100,000 shares issued at a price of $0.01 per share for total deemed consideration of $1,000. Comparative Mineral Properties Impairment costs were $40,000 for the three month period ended December 31, 2010 and $183,498 for the Exploration Stage. We anticipate Mineral Properties Impairment costs will increase during the balance of fiscal 2012.
Discontinued Operations
On September 27, 2010, the sale of our former subsidiary resulted in a non-cash gain of $97,920 due to the elimination from the previously consolidated enterprise of the Company of debt the former subsidiary owed to a third party. This non-cash gain is recorded in our Statement of Operations in the Exploration Stage Period along with the accumulated costs of $(112,932) related to the discontinued former subsidiary.
Net (Loss)
We incurred a net loss of $(23,320) for the three month period ended December 31, 2011 compared with a net loss of $(109,196) for the same period ended December 31, 2010. The comparative decrease in these expenses is due to our decreased exploration activity due to cash flow considerations. For the Exploration Stage, accumulated Net Losses totaled $(684,829). These losses translated to $nil per share and $nil per share respectively for the three month periods ended December 31, 2011 versus December 31, 2010.
Liquidity and Capital Resources
Since the date of our incorporation, we have raised cash of $525,654 through private placements of our common shares (including debt conversions); and net cash of $112,088 through advances from shareholders. As of December 31, 2011 we had cash on hand of $8,560 and a prepaid expenses balance of $3,438. We estimate we will need to attempt to raise additional funds during the coming twelve months and will attempt to raise these funds through private placements of our common shares.
Material Events and Uncertainties
Our operating results are difficult to forecast. Our prospects should be evaluated in light of the risks, expenses and difficulties commonly encountered by comparable early stage companies in mineral resource markets. There can be no assurance that we will successfully address such risks, expenses and difficulties and cannot assure you that we will become profitable in the future.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
EXCHANGE RATE FLUCTUATION RISK
Our reporting currency is United States Dollars. Our transactions are primarily conducted in US$ but also include transactions in other currencies. Foreign currency rate fluctuations may have a material impact on the Company’s financial reporting. These fluctuations may have positive or negative impacts on the results of operations of the Company.
We have not entered into derivative contracts either to hedge existing risk or for speculative purposes.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized and reported within the time communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of "disclosure controls and procedures" in Rule 13a-15(e). The Company's disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching the Company's desired disclosure control objectives. In designing periods specified in the SEC's rules and forms, and that such information is accumulated and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The Company's certifying officer has concluded that the Company's disclosure controls and procedures are not effective in reaching that level of assurance.
At the end of the period being reported upon, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and the Company's Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective.
Management's Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Section 13a-15(f) of the Securities Exchange Act of 1934, as amended). Internal control over financial reporting is a process designed by, or under the supervision of, the Company's CFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's financial statements for external reporting purposes in conformity with U.S. generally accepted accounting principles and include those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and disposition of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.
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As of December 31, 2011, management conducted an assessment of the effectiveness of the Company's internal control over financial reporting based on the framework established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the criteria established by COSO management concluded that the Company's internal control over financial reporting was not effective as of December 31, 2011, as a result of the identification of the material weaknesses described below.
A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
Specifically, management identified the following control weaknesses: (1) The Company has not properly segregated duties as one or two individuals initiate, authorize, and complete all transactions. The Company has not implemented measures that would prevent the individuals from overriding the internal control system. The Company does not believe that this control weakness has resulted in deficient financial reporting because the Chief Financial Officer is aware of his responsibilities under the SEC's reporting requirements and personally certifies the financial reports; and (2) The Company has installed accounting software that does not prevent erroneous or unauthorized changes to previous reporting periods and does not provide an adequate audit trail of entries made in the accounting software.
Accordingly, while the Company has identified certain material weaknesses in its system of internal control over financial reporting, it believes that it has taken reasonable steps to ascertain that the financial information contained in this report is in accordance with generally accepted accounting principles. Management has determined that current resources would be appropriately applied elsewhere and when resources permit, they will alleviate material weaknesses through various steps.
Changes in Internal Control over Financial Reporting
During the current three month period ended December 31, 2011 of the Company’s fiscal year ended September 30, 2012, no material changes were made to the Company’s internal control over financial reporting
Remediation Plan
Addition of staff
We have identified that additional staff will be required to properly segment the accounting duties of the Company. However, we do not currently have resources to fulfill this part of our plan and will be addressing this matter once sufficient resources are available.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM 10-Q
x QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended December 31, 2011
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______________________ TO _______________________
Commission File # 000-53371
GRYPHON RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation or organization)
98-0465540
(IRS Employer Identification Number)
1313 East Maple Street, Suite 201-462
Bellingham, Washington 98225
(Address of principal executive offices) (Zip Code)
(360) 685-4238
(Registrant’s telephone no., including area code)
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated file, or a smaller reporting company.
Large accelerated filer o Accelerated filer o
Non-accelerated filer o Smaller reporting company x
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes o No x
The issuer had 117,425,000 shares of common stock issued and outstanding as of February 8, 2012.
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GRYPHON RESOURCES, INC.
(An Exploration Stage Company)
Table of Contents
Page
PART I. Financial Information
Item 1. Financial Statements.
Balance Sheets at December 31, 2011 (unaudited) and September 30, 2011 (audited) 1
Unaudited Statements of Operations for the three month periods ended December 31, 2011 and December 31, 2010 and the Exploration Stage Period of January 16, 2006 through December 31, 2011 2
Unaudited Statements of Cash Flows for the three month periods ended December 31, 2011 and December 31, 2010 and the Exploration Stage Period of January 16, 2006 through December 31, 2011 3
Unaudited Supplemental Disclosure of Non-cash Investing and Financing Activities for the three month periods ended December 31, 2011 and December 31, 2010 and the Exploration Stage Period of January 16, 2006 through December 31, 2011 4
Notes to Unaudited Financial Statements 5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 15
Item 3. Quantitative and Qualitative Disclosures about Market Risk 22
Item 4. Controls and Procedures 22
PART II. Other Information 24
Item 1. Legal Proceedings 24
Item 1a. Risk Factors 24
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 28
Item 3. Defaults Upon Senior Securities 28
Item 4. [Removed and Reserved] 28
Item 5. Other Information 28
Item 6. Exhibits 29
Signatures 29
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PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (unaudited)
GRYPHON RESOURCES, INC.
(An Exploration Stage Company)
Balance Sheets
December 31,
2011 September 30,
2011
ASSETS
CURRENT ASSETS
Cash $ 8,560 $ 7,073
Prepaid expenses 3,438 10,187
Total current assets 11,998 17,260
Total assets $ 11,998 $ 17,260
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable 1,327 1,269
Shareholder advances (Note 6) 6,500 6,500
Total current liabilities $ 7,827 $ 7,769
Total liabilities $ 7,827 $ 7,769
COMMITMENTS AND CONTINGENCIES
(Notes 2, 3 and 5) — —
STOCKHOLDERS’ EQUITY
Common shares, 400,000,000 shares par value $0.001 authorized, 117,425,000 and 105,025,000 issued and outstanding at December 31, 2011 and September 30, 2011 (Note 7) 117,425 105,025
Paid-in Capital 571,575 459,975
Common shares subscribed but not issued (Note 7) — 106,000
Accumulated deficit in the exploration stage (684,829 ) (661,509 )
Total stockholders’ equity 4,171 9,491
Total liabilities and stockholders’ equity $ 11,998 $ 17,260
The accompanying notes to financial statements are an integral part of these financial statements
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GRYPHON RESOURCES, INC.
(An Exploration Stage Company)
Statements of Operations
Three Months
ended
December 31,
2011 Three Months
ended
December 31,
2010 January 16, 2006
(date of inception)
through
December 31,
2011
EXPENSES:
Exploration expenses 1,000 28,113 153,749
Professional and consultant fees 17,564 20,550 233,233
Administrative expenses 3,561 6,818 57,056
Investor relations 195 13,715 29,023
Mineral properties impairments (Notes 2, 4 and 5) 1,000 40,000 183,498
Total expenses $ 23,320 $ 109,196 $ 656,559
Net loss from operations $ (23,320 ) $ (109,196 ) $ (656,559 )
Other (Expense) Income:
Interest expense — — (13,258 )
Net loss from continuing operations (23,320 ) (109,196 ) (669,817 )
Discontinued Operations:
Net loss from discontinued operations (Note 8) $ — $ — $ (112,932 )
Gain on Sale of Subsidiary (Note 8) $ — $ — $ 97,920
Net (Loss) $ (23,320 ) $ (109,196 ) $ (684,829 )
Less: Net Loss attributable to Non-Controlling Interest related to discontinued operations (Notes 2 and 8) n/a n/a 936
Equals: Net Loss attributable to Gryphon Resources, Inc. (Notes 2 and 8) (23,320 ) (109,196 ) (683,893 )
Loss per common share (Note 2), basic and diluted $ Nil $ Nil
Weighted average shares outstanding , basic and diluted (Notes 2 and 7) 107,457,608 101,854,347
The accompanying notes to financial statements are an integral part of these financial statements
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GRYPHON RESOURCES, INC.
(An Exploration Stage Company)
Statements of Cash Flows
Three Months
ended
December 31,
2011
Three Months
ended
December 31,
2010 January 16, 2006
(date of inception)
through
December 31,
2011
Cash flows from operating activities:
Net Income (Loss) for period $ (23,320 ) $ (109,196 ) $ (684,829 )
Reconciling adjustments:
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash gain on sale of subsidiary — — (97,920 )
Accrued interest on shareholder loans — — 13,258
Accrued interest related to discontinued operation — — 6,882
Mineral property impairments 1,000 40,000 183,498
Net change in operating assets and liabilities:
Prepaid expenses 6,749 15,463 (3,438 )
Accounts payable 58 7 1,327
Net cash provided (used) by operating activities (15,513 ) (53,726 ) (581,222 )
Cash flows from investing activities:
Purchase of mineral properties — (40,000 ) (138,998 )
Net cash provided by investing activities — (40,000 ) (138,998 )
Cash flows from financing activities:
Common shares issued for cash 17,000 46,260 525,654
Proceeds from common shares subscribed but not issued — 150,000 —
Proceeds from loans related to discontinued operation — — 91,038
Proceeds from shareholder advances — 6,500 112,088
Net cash provided by financing activities 17,000 202,760 728,780
Net increase (decrease) in cash 1,487 109,034 8,560
Cash, beginning of period 7,073 10,252 —
Cash, end of period $ 8,560 $ 119,286 $ 8,560
The accompanying notes to financial statements are an integral part of these financial statements
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GRYPHON RESOURCES, INC.
(An Exploration Stage Company)
Supplemental Disclosure of Non-cash Investing and Financing Activities
Three Months
ended
December 31,
2011 Three Months
ended
December 31,
2010 January 16, 2006
(inception) through
December 31,
2011
Shares issued for mineral property acquisition $ 1,000 $ — $ 44,500
Conversion of debt into common stock subscribed but not issued $ — $ — $ 118,846
The accompanying notes to financial statements are an integral part of these financial statements
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GRYPHON RESOURCES, INC.
(An Exploration Stage Company)
Notes to Financial Statements
NOTE 1 – Nature of Business and Operations
Gryphon Resources, Inc. is a mineral exploration enterprise which was incorporated in the State of Nevada on January 16, 2006. On April 28, 2008 we incorporated a subsidiary and conducted an exploration project through this subsidiary in Turkey until September 27, 2010, at which time it was sold to an unrelated third party. Activities of this former subsidiary are treated in these financial statements as a discontinued operation. Currently our activities include exploring for lithium; and gold and silver in Arizona, USA. Our fiscal year end is September 30th. (Hereinafter Gryphon Resources, Inc. may herein be referred to: “Gryphon Resources”, “Gryphon”, “We”, “Us”, the “Registrant”, or the “Company”).
Exploration Stage Activities
The Company has been in the exploration stage since January 16, 2006 and has not yet realized any revenues from its operations.
NOTE 2 – Summary of Significant Accounting Policies
This summary of significant accounting policies is presented to assist in understanding Gryphon’s financial statements. The financial statements and notes are representations of the Company’s management, who is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles in the United States of America and have been consistently applied in the preparation of the financial statements, which are stated in U.S. Dollars.
The financial statements reflect the following significant accounting policies:
Exploration Stage Company
The Company is devoting substantially all of its present efforts to establish a new business and none of its planned principal operations have commenced. As an exploration stage enterprise, the Company discloses the deficit accumulated during the exploration stage and the cumulative statements of operations and cash flows from inception to the current balance sheet date.
Exploration Costs and Mineral Property Right Acquisitions
The Company is primarily engaged in the acquisition and exploration of mining properties. Mineral property exploration costs are expensed as incurred. Mineral property acquisition costs are initially capitalized when incurred. The Company assesses the carrying costs for impairment under Accounting Standards 930 Extractive Activities – Mining (AS 930). 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. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs then incurred to develop such property, are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the proven and probable reserves. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.
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GRYPHON RESOURCES, INC.
(An Exploration Stage Company)
Notes to Financial Statements
Non-Controlling Interest
As required by GAAP, the Statement of Operations for the Exploration Stage Period from January 16, 2006 to December 31, 2011 include the allocation to ‘Non-Controlling Interest’ of a proportionate share of the Company’s discontinued operations net losses and related accounts which pertained to the 1% ownership interest in its former subsidiary which was not owned by the Company. This is an historic carryforward due to the extinguishment of any Non-Controlling Interest at the time of the sale of our subsidiary.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.
Earnings or (Loss) per Share
Basic loss per share is calculated by dividing the net loss available to common stockholders by the weighted average number of common shares outstanding for the period. The denominator in this calculation is adjusted to reflect any stock splits or stock dividends.
Diluted loss per share is calculated using the treasury method which requires the calculation of diluted loss per share by assuming that any outstanding stock options with an average market price that exceeds the average exercise prices of the options for the year, are exercised and the assumed proceeds are used to repurchase shares of the Company at the average market price of the common shares for the year. An incremental per share effect is then calculated for each option. The denominator of the diluted loss per share formula is the number common shares outstanding at balance sheet date plus the incremental shares assumed to be issued from treasury for option exercises, less the number of shares assumed to be repurchased, weighted by the period they are assumed to be outstanding. This dilution calculation did not affect current fiscal year results because the Company does not have an Option Plan and has not issued any stock options; nor equity security equivalents such as warrants.
Stock-based Compensation
The Company follows ASC 718-10, Stock Compensation, which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. ASC 718-10 requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized. The Company has not adopted a stock option plan and has not granted any stock options; nor has it made any awards of stock, or stock equivalents.
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GRYPHON RESOURCES, INC.
(An Exploration Stage Company)
Notes to Financial Statements
Estimated Fair Value of Financial Instruments
ASC 820, "Fair Value Measurements", requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three levels that may be used to measure fair value:
Level 1:
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2:
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3:
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company's financial instruments consist principally of cash, accounts payable, and shareholder advances. Pursuant to ASC 820, the fair value of our cash is determined based on "Level 1" inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
It is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.
Income Taxes
The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns using the liability method. Under this method, deferred tax liabilities and assets are determined based on the temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities using enacted rates in effect in the years during which the differences are expected to reverse and upon the possible realization of net operating loss carry-forwards. Additionally, the Company has not recognized any amount for a tax position taken or expected to be taken on its tax return, or for any interest or penalties.
Valuation of Long-Lived Assets
The Company will periodically analyze its long-lived assets for potential impairment, assessing the appropriateness of lives and recoverability of unamortized balances through measurement of undiscounted operation cash flows on a basis consistent with accounting principles generally accepted in the United States of America.
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GRYPHON RESOURCES, INC.
(An Exploration Stage Company)
Notes to Financial Statements
Foreign Currency
The books of the Company are maintained in United States dollars and this is the Company’s functional and reporting currency. Transactions denominated in other than the United States dollar are translated as follows with the related transaction gains and losses being recorded in the Statements of Operations:
(i) Monetary items are recorded at the rate of exchange prevailing as at the balance sheet date;
(ii) Non-Monetary items including equity are recorded at the historical rate of exchange; and
(iii) Revenues and expenses are recorded at the period average in which the transaction occurred
Cash and Cash Equivalents
The Company considers cash and cash equivalents to consist of cash on hand and demand deposits in banks with an initial maturity of 90 days or less.
Risks and Uncertainties
The Company is subject to substantial business risks and uncertainties inherent in starting a new business. There is no assurance the Company will be able to generate sufficient revenues or obtain sufficient funds necessary for launching a new business venture.
Revenue Recognition
Revenue from the sale of precious and/or other metals and co-products will be recognized when the following conditions are met: persuasive evidence of an arrangement exists; delivery has occurred in accordance with the terms of the arrangement; the price is fixed or determinable and collectability is reasonably assured. Revenue for precious metal bullion will be recognized at the time of delivery and transfer of title to counter-parties.
Capital Assets
Capital assets will be recorded at cost. Depreciation will be recorded based on estimated useful lives of assets at time of acquisition. At present the Company has no depreciable assets.
Recent Accounting Pronouncements
Various accounting pronouncements have been issued during 2012 and 2011, none of which are expected to have a material effect on the financial statements of the Company.
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GRYPHON RESOURCES, INC.
(An Exploration Stage Company)
Notes to Financial Statements
NOTE 3 – Basis of Presentation and Going Concern
Generally accepted accounting principles in the United States of America contemplate the continuation of the Company as a going concern. However, the Company had a net loss of $(23,320) for the three month period ended December 31, 2011 and has accumulated net losses of $(684,829) since inception. Additionally the Company has had limited business operations, which raises substantial doubt about its ability to continue as a going concern. The continuation of the Company is dependent on many factors, many of which have a high degree of uncertainty.
During the three month period ended December 31, 2011, we addressed the going concern issue by raising cash of $17,000 through a private placement of our common shares (the share issuance for this private placement also included $106,000 which had been carried on our balance sheet for the year ended September 30, 2011 as Common Shares Subscribed But Not Issued, for a total cash share issuance of $123,000). The Company’s ability to continue as a going concern is contingent upon the successful completion of additional financing arrangements and its ability to successfully fulfill its business plan. Management plans to attempt to raise additional funds to finance the operating and capital requirements of the Company through a combination of equity and debt financings. While the Company is making its best efforts to achieve the above plans, there is no assurance that any such activity will generate funds that will be available for operations. The accompanying financial statements do not include any adjustments that might result from the resolution of these matters.
NOTE 4 – Impairment of Mineral Properties
During the three month period ended December 31, 2011 as fulfillment of one of the payment installments for the Cruce Property, the Company made a share issuance of 100,000 shares which was valued at $0.01 per share for total deemed proceeds of $1,000. At quarter end December 31, 2011, the Company determined this portion of its mineral property acquisition costs should be impaired and recorded an impairment loss of $1,000.
NOTE 5 – Mineral Properties
L.G. Property
As executed on July 19, 2010 and amended on February 27, 2011, the Company entered into an option to purchase certain mineral exploration rights to a property in south-eastern Arizona, USA, named the L.G. Property from two individuals (collectively the “L.G. Vendors”). The Vendors each owned a 50% interest in the mineral exploration rights to the L.G. Property and held the sole right, title and interest to the L.G. Property exploration rights (subject to the rights and title of the State of Arizona), free and clear of all liens and encumbrances. Through the option agreement, as amended (the “L.G. Agreement”), the L.G. Vendors granted an exclusive option to the Company to purchase a 100% undivided right, title and interest in the L.G. Vendors’ rights to the L.G. Property, and the Company acquired an option to purchase L.G. Vendors’ rights to the L.G. Property from the L.G. Vendors, upon the terms and conditions set forth in the L.G. Agreement, as amended.
To exercise the option included in the L.G. Agreement (the “L.G. Option”), the Company must: (i) pay the aggregate sum of $240,000 to the L.G. Vendors; (ii) incur an aggregate of at least $550,000 of exploration expenditures on the L.G. Property; and (iii) issue to the L.G. Vendors an aggregate of 1,000,000 restricted shares of common stock in Gryphon (or any public company created by Gryphon for the purpose of development of the L.G. Property), based on the following schedules:
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GRYPHON RESOURCES, INC.
(An Exploration Stage Company)
Notes to Financial Statements
NOTE 5 – Mineral Properties (continued)
(a) Cash sums on or before the dates described below:
(i) $15,000 upon execution of the L.G. Agreement (such payment which has been made);
(ii) $15,000 on or before August 10, 2010 (such payment which has been made);
(iii) $50,000 on or before March 1, 2011 (such payment which has been made);
(iv) $60,000 on or before March 1, 2012; and
(v) $100,000 on or before March 1, 2013.
(b) Share issuances on or before the dates described below:
(i) 250,000 restricted common shares upon execution of the L.G. Agreement (such payment which has been made and was valued at $12,500);
(ii) 250,000 restricted common shares on or before February 1, 2011 (such payment which has been made and was valued at $25,000);
(iii) 250,000 restricted common shares on or before February 1, 2012; and
(iv) 250,000 restricted common shares on or before February 1, 2013.
(c) The parties also agreed that the Company will incur the following amounts on exploration expenditures on the L.G. Property:
(i) $50,000 within 12 months following the L.G. Execution Date;
(ii) an additional $100,000 on or before 24 months following the L.G. Execution Date;
(iii) $200,000 on or before 36 months following the L.G. Execution Date; and
(iv) $200,000 on or before 48 months following the L.G. Execution Date.
Once the Company has paid the L.G. Option price in full, the Company will have exercised the L.G. Option and have acquired an undivided 100% right, title and interest in and to the L.G. Property, the Company will then be obligated to pay the following additional consideration to the L.G. Vendors:
(a) 1,000,000 restricted shares of Gryphon common stock;
(b) a minimum annual royalty of $150,000 on or before December 31, 2014 and a minimum annual royalty of $150,000 every 12 months for each year that Gryphon holds the L.G. Property;
(c) a 5% (five percent) Gross Production Royalty on lithium minerals actually produced and sold from the L.G. Property; and
(d) a 3-1/2% (three and one-half percent) Net Returns Royalty on all other minerals actually produced and sold from the L.G. Property.
If the Company fails to deliver or spend the consideration comprising the L.G. Option price within the time periods set forth herein, the L.G. Agreement will terminate 30 days after the L.G. Vendors give the Company written notice of such failure (during which time the Company may deliver or spend the consideration overdue, and therefore maintain the L.G. Agreement in good standing). As of the date of these financial statements, the Company had made all cash and shares payments currently due under the terms of L.G. Agreement, but had not expended the entire required amount of its first year work commitment. The L.G. Vendors have not indicated they plan to give the Company any written notice which would cause a termination of the L.G. Agreement.
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GRYPHON RESOURCES, INC.
(An Exploration Stage Company)
Notes to Financial Statements
NOTE 5 – Mineral Properties (continued)
Cruce Property:
As executed on January 21, 2011 and amended on January 25, 2011, the Company entered into an option to purchase certain mineral exploration rights to a property in Arizona, USA, named the Cruce Property from two individuals (collectively the “Cruce Vendors”). The Cruce Vendors each owned a 50% interest in the mineral exploration rights to the Cruce Property and held the sole right, title and interest to the Cruce Property exploration rights (subject to the rights and title of the State of Arizona), free and clear of all liens and encumbrances. Through the option agreement (the “Cruce Agreement”), the Cruce Vendors granted an exclusive option to the Company to purchase a 100% undivided right, title and interest in the Cruce Vendors’ rights to the Cruce Property, and the Company acquired an option to purchase the Cruce Vendors’ rights to the Cruce Property from the Cruce Vendors, upon the terms and conditions set forth in the Cruce Agreement, as amended.
To exercise the option included in the Cruce Agreement (the “Cruce Option”), the Company must: (i) pay the aggregate sum of $265,000 to the Cruce Vendors; (ii) incur an aggregate of at least $335,000 of exploration expenditures on the Cruce Property; and (iii) issue to the Cruce Vendors an aggregate of 2,600,000 restricted shares of common stock in Gryphon (or any public company created by Gryphon for the purpose of development of the Cruce Property), based on the following schedules:
(a) Cash sums on or before the dates described below:
(i) $40,000 upon execution of the Letter of Intent regarding the Cruce Agreement (such payment which has been made);
(ii) $50,000 on or before November 30, 2011 (such payment which has not been made);
(iii) $75,000 on or before November 30, 2012;
(iv) $100,000 on or before November 30, 2013; and
(b) Share issuances on or before the dates described below:
(i) 100,000 shares upon execution of the Cruce Agreement (such issuance which has been made and was valued at $6,000);
(ii) 100,000 shares on or before November 30, 2011 (such issuance which has been made and was valued at $1,000);
(iii) 200,000 shares on or before November 30, 2012; and
(iv) 200,000 shares on or before November 30, 2013.
(c) The parties also agreed that the Company will incur the following amounts on exploration expenditures on the Cruce Property:
(i) $60,000 within 12 months following the Cruce Execution Date;
(ii) an additional $75,000 on or before 24 months following the Cruce Execution Date;
(iii) $100,000 on or before 36 months following the Cruce Execution Date; and
(iv) $100,000 on or before 48 months following the Cruce Execution Date.
Once the Company has paid the Cruce Option price in full, the Company will have exercised the Cruce Option and have acquired an undivided 100% right, title and interest in and to the Cruce Property, the Company will then be obligated to pay the following additional consideration:
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GRYPHON RESOURCES, INC.
(An Exploration Stage Company)
Notes to Financial Statements
(a) 2,000,000 restricted shares of Gryphon common stock;
(b) a minimum annual royalty of $250,000 on or before November 30, 2014 and a minimum annual royalty of $250,000 every 12 months for each year that Gryphon holds the Cruce Property;
(c) a 3% (three percent) Net Returns Royalty on all minerals actually produced and sold from the Cruce Property.
If the Company fails to deliver or spend the consideration comprising the Cruce Option price within the time periods set forth herein, the Cruce Agreement will terminate 30 days after the Cruce Vendors give the Company written notice of such failure (during which time the Company may deliver or spend the consideration overdue, and therefore maintain the Cruce Agreement in good standing). As of the date of these financial statements, the Company had made all shares payments currently due under the terms of Cruce Agreement and had expended the entire required amount of its first year work commitment. The Company met it first scheduled cash installment of $40,000 to the Cruce Vendors, but is currently late on its second scheduled cash installment of $50,000 which was due by November 30, 2011. The Cruce Vendors have not indicated they plan to give the Company any written notice which would cause a termination of the Cruce Agreement.
NOTE 6 – Related Party Transactions & Shareholder Advances
During the year ending December 31, 2011, related party transactions included payment of $28,354 in consulting fees and expense reimbursements to our CEO and an advance from our CEO of $6,500 to the Company. This advance is non-interest bearing and payable on demand.
There were no related party transactions for the three month period ended December 31, 2011.
NOTE 7 – Common shares and Common Shares Subscribed but Unissued
Common Shares
The Company’s common stock is traded on the Pink Sheets Over-The-Counter Market under the symbol: GRYO.
On January 27, 2006, the Company issued 2,500,000 shares of its common stock to its founding President for cash. This transaction was valued at a board approved value of $0.001 per share for total proceeds of $2,500.
During the fiscal year ending September 30, 2006, the Company issued 2,450,000 shares of its common stock in a private offering at $0.02 per share for total proceeds of $49,000.
On June 23, 2008, the Company declared an 18.5 for 1 stock dividend. The Record date and Payment date for this stock dividend were July 3, 2008 and July 7, 2008 respectively. The Company instructed its Transfer Agent to round up to one for any fractional interest which resulted in the calculation of the dividend. This dividend had the effect of increasing the issued and outstanding share capital of the Company from 4,950,000 shares to 96,525,000 shares. All references to stock issued and stock outstanding have been retroactively adjusted as if the stock dividend had taken place on January 16, 2006 (inception).
As recorded in a Form DEF 14C filed May 15, 2009, the Company amended its Articles of Incorporation to increase the authorized number of shares of common stock from 100,000,000 shares to 400,000,000 shares, par value of $0.001 per share.
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GRYPHON RESOURCES, INC.
(An Exploration Stage Company)
Notes to Financial Statements
On July 19, 2010, the Company issued 250,000 shares of its common stock to Vendors of the L.G. Property. This transaction was valued at a board approved value of $0.05 per share for total deemed proceeds of $12,500. These shares are deemed "restricted" securities under the Securities Act and may not be sold or transferred other than pursuant to an effective registration statement under the Securities Act or any exemption from the registration requirements of the Securities Act.
On November 18, 2010, the Company completed a private placement offering of its common stock which raised aggregate proceeds of US$320,000 ($118,846 of this amount was used to settle debt as of September 30, 2011; $154,894 of this amount was received in cash prior to September 30, 2011; $46,260 of this amount was received in cash during the quarter ended December 31, 2010). This offering was comprised of 6,400,000 restricted common shares at $0.05 per share and 6,400,000 restricted common shares were issued. These shares were issued pursuant to Regulation S of the Securities Act of 1933, as amended (“Regulation S”) and the Company did not engage in any general solicitation or advertising regarding this offering.
On January 25, 2011, the Company issued 100,000 shares of its common stock to Vendors of the Cruce Property. This transaction was valued at a board approved value of $0.06 per share for total deemed proceeds of $6,000. These shares are deemed "restricted" securities under the Securities Act and may not be sold or transferred other than pursuant to an effective registration statement under the Securities Act or any exemption from the registration requirements of the Securities Act.
On March 11, 2011, the Company completed a private placement offering of its common stock which raised aggregate cash proceeds of US$150,000. This offering was comprised of 1,500,000 restricted common shares at $0.10 per share and 1,500,000 restricted common shares were issued. These shares were issued pursuant to Regulation S of the Securities Act of 1933, as amended (“Regulation S”) and the Company did not engage in any general solicitation or advertising regarding this offering.
On March 31, 2011, the Company issued 250,000 shares of its common stock as the second shares component installment payment to Vendors of the L.G. Property. This transaction was valued at a board approved value of $0.10 per share for total deemed proceeds of $25,000. These shares are deemed "restricted" securities under the Securities Act and may not be sold or transferred other than pursuant to an effective registration statement under the Securities Act or any exemption from the registration requirements of the Securities Act.
On November 30, 2011, the Company issued 100,000 shares of its common stock as the second shares component installment payment to Vendors of the Cruce Property. This transaction was valued at a board approved value of $0.01 per share for total deemed proceeds of $1,000. These shares are deemed "restricted" securities under the Securities Act and may not be sold or transferred other than pursuant to an effective registration statement under the Securities Act or any exemption from the registration requirements of the Securities Act.
On December 14, 2011 the Company completed a private placement offering of its common stock which raised aggregate cash proceeds of US$123,000. This offering was comprised of 12,300,000 restricted common shares at $0.01 per share and 12,300,000 restricted common shares were issued. These shares were issued pursuant to Regulation S of the Securities Act of 1933, as amended (“Regulation S”) and the Company did not engage in any general solicitation or advertising regarding this offering. The consideration paid for this private placement was comprised of $106,000 which was recorded in the Company's September 30, 2011 year-end Balance Sheet as Shares Subscribed But Not Issued, plus $17,000 cash received during the three month period ended December 31, 2011.
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GRYPHON RESOURCES, INC.
(An Exploration Stage Company)
Notes to Financial Statements
Common Shares Subscribed but Unissued
At year-end Balance Sheet date of September 30, 2011, the Company had a balance of $106,000 related to private placement shares which had been subscribed but were not yet issued. As referenced above, this balance of $106,000 was added to $17,000 cash received during the three month period ended December 31, 2011to complete a private placement of 12,300,000 restricted common shares sold for $0.01 per share, for total consideration of $123,000.
NOTE 8 – Discontinued Operation
On April 28, 2008 we incorporated a Turkish company (the “Former Subsidiary”) as a 99% owned subsidiary. The remaining balance of 1% of the Former Subsidiary's shares were held by our former CEO. On September 27, 2010, we sold our entire interest in the Former Subsidiary to an unrelated third party and ceased all operations in Turkey. The losses and cash flows of the Former Subsidiary have been presented as a discontinued operation in these financial statements. Prior year’s Statements of Operations, Equity and Cash Flows have been adjusted to reflect the effect of this discontinued operation. The sale of the Former Subsidiary also resulted in a non-cash gain of $97,920 due to the assumption of debt by the third party. This has been recorded in these statements as a gain on sale of subsidiary in discontinued operations.
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ITEM 2. MANAGEMENTS’ DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Certain information included herein contains forward-looking statements that involve risks and uncertainties within the meaning of Sections 27A of the Securities Act, as amended; Section 21E of the Securities Exchange Act of 1934. These sections provide that the safe harbor for forward looking statements does not apply to statements made in initial public offerings. The words, such as "may," "would," "could," "anticipate," "estimate," "plans," "potential," "projects," "continuing," "ongoing," "expects," "believe," "intend" and similar expressions and variations thereof are intended to identify forward-looking statements. These statements appear in a number of places in this Form 10-Q and include all statements that are not statements of historical fact regarding intent, belief or current expectations of the Company, our directors or our officers, with respect to, among other things: (i) our liquidity and capital resources; (ii) our financing opportunities and plans; (iii) continued development of business opportunities; (iv) market and other trends affecting our future financial condition; (v) our growth and operating strategy. Investors and prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. The factors that might cause such differences include, among others, the following: (i) we have incurred significant losses since our inception; (ii) any material inability to successfully develop our business plans; (iii) any adverse effect or limitations caused by government regulations; (iv) any adverse effect on our ability to obtain acceptable financing; (v) competitive factors; and (vi) other risks including those identified in our other filings with the Securities and Exchange Commission.
Overview
Gryphon Resources, Inc. (hereinafter Gryphon Resources, Inc. may herein be referred to: “Gryphon Resources”, “Gryphon”, “We”, “Us”, the “Registrant”, or the “Company”) was incorporated in the State of Nevada on January 16, 2006. We are a mineral exploration company and are exploring for gold, silver and copper-porphyry; and lithium on two different properties in Arizona, USA. Our fiscal year end is September 30th. The Company’s common stock is traded in the Pink Sheets Over-The-Counter market under the symbol “GRYO”.
MINERAL PROPERTIES
Summary
At December 31, 2011, the Company’s material property investments comprise: (i) an option to purchase certain mineral exploration rights to a property in south-central Arizona, USA, named the Cruce Property on which the Company is primarily exploring for gold, silver and copper-porphyry, all leases on which are currently in good standing; and (ii) an option to purchase certain mineral exploration rights to a property in south-eastern Arizona, USA, named the L.G. Property on which the Company is primarily exploring for lithium, of which the Company has let lapse approximately 90% of the leases thereunder.
At present, the Company has no mineral property balances which are classified as assets under generally accepted accounting principles.
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Cruce Map
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CRUCE PROPERTY
Cruce Property Area of Interest
The Cruce Property covers 560 acres and is located approximately 40 miles north of Tucson in south-central Arizona. The Cruce Agreement area of interest is composed of all lands within that area in the State of Arizona described as: Section 16, Township 8 South, Range 14 East, G&SR Mer., and three miles extended in each direction from the exterior boundaries of Section 16.
Cruce Property Agreement:
As executed on January 21, 2011 (the "Cruce Execution Date"') and amended on January 25, 2011, the Company entered into an option to purchase certain mineral exploration rights to a property in Arizona, USA, named the Cruce Property from two individuals (collectively the “Cruce Vendors”). The Cruce Vendors each owned a 50% interest in the mineral exploration rights to the Cruce Property and held the sole right, title and interest to the Cruce Property exploration rights (subject to the rights and title of the State of Arizona), free and clear of all liens and encumbrances. Through the option agreement (the “Cruce Agreement”), the Cruce Vendors granted an exclusive option to the Company to purchase a 100% undivided right, title and interest in the Cruce Vendors’ rights to the Cruce Property, and the Company acquired an option to purchase the Cruce Vendors’ rights to the Cruce Property from the Cruce Vendors, upon the terms and conditions set forth in the Cruce Agreement, as amended (incorporated herein by reference as Exhibits 10.3 and 10.4).
To exercise the option included in the Cruce Agreement (the “Cruce Option”), the Company must: (i) pay the aggregate sum of $265,000 to the Cruce Vendors; (ii) incur an aggregate of at least $335,000 of exploration expenditures on the Cruce Property; and (iii) issue to the Cruce Vendors an aggregate of 2,600,000 restricted shares of common stock in Gryphon (or any public company created by Gryphon for the purpose of development of the Cruce Property), based on the following schedules:
(a) Cash sums on or before the dates described below:
(i) $40,000 upon execution of the Letter of Intent regarding the Cruce Agreement (such payment which has been made)
(ii) $50,000 on or before November 30, 2011 (such payment which has not been made);
(iii) $75,000 on or before November 30, 2012;
(iv) $100,000 on or before November 30, 2013; and
(b) Share issuances on or before the dates described below:
(i) 100,000 shares upon execution of the Cruce Agreement (such issuance which has been made and was valued at $6,000);
(ii) 100,000 shares on or before November 30, 2011 (such issuance which has been made and was valued at $1,000);
(iii) 200,000 shares on or before November 30, 2012; and
(iv) 200,000 shares on or before November 30, 2013.
Once the Company has paid the Cruce Option price in full, the Company will have exercised the Cruce Option and have acquired an undivided 100% right, title and interest in and to the Cruce Property, the Company will then be obligated to pay the following additional consideration:
(a) 2,000,000 restricted shares of Gryphon common stock;
(b) a minimum annual royalty of $250,000 on or before November 30, 2014 and a minimum annual royalty of $250,000 every 12 months for each year that Gryphon holds the Cruce Property;
(c) a 3% (three percent) Net Returns Royalty on all minerals actually produced and sold from the Cruce Property.
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The parties also agreed that the Company will incur the following amounts on exploration expenditures on the Cruce Property:
(a) $60,000 within 12 months following the Cruce Execution Date.
(b) an additional $75,000 on or before 24 months following the Cruce Execution Date;
(c) $100,000 on or before 36 months following the Cruce Execution Date; and
(d) $100,000 on or before 48 months following the Cruce Execution Date.
If the Company fails to deliver or spend the consideration comprising the Cruce Option price within the time periods set forth herein, the Cruce Agreement will terminate 30 days after the Cruce Vendors give the Company written notice of such failure (during which time the Company may deliver or spend the consideration overdue, and therefore maintain the Cruce Agreement in good standing). As of the date of these financial statements, the Company had made all shares payments currently due under the terms of Cruce Agreement and had expended the entire required amount of its first year work commitment. The Company met it first scheduled cash installment of $40,000 to the Cruce Vendors, but is currently late on its second scheduled cash installment of $50,000 which was due by November 30, 2011. The Cruce Vendors have not indicated they plan to give the Company any written notice which would cause a termination of the Cruce Agreement.
L.G. PROPERTY
L.G. Property Area of Interest
The L.G. Agreement area of interest is composed of all lands within that area in the State of Arizona described as: T5S, R23 and 24E; T6S, R23, 24 and 25E; T7S, R25 and 26E; R26 and 27E; T9S, R26 and 27E; R10S, R26 and 27E and Sections 15 through 22 and 27 through 35 in T5S, R25E; Sections 6, 7, and 8, 16 through 23, and 25 through 36 in T6S, R26E; Sections 1 through 6 and 10 through 12 in T7S, R23E; Sections 1 through 18 in T7S, R24E; Sections 3 through 9, 16 through 20, and 29 through 33 in T7S, R27E; Sections 1, 2, 11through 14, 24, 25, and 36 in T8S, R25E, G&SR Mer.
During the three month period ended December 31, 2011, the Company did not make United States Bureau of Land Management ('BLM') property maintenance payments covering 10 lease sections on approximately 4091 acres and therefore these leases have lapsed. The Company had also previously let lapse one other BLM lease. These areas cover approximately 90% of the claim areas included in the L.G. Agreement. The Company is currently reviewing whether it will re-stake these claims in the future.
L.G.. Property Agreement
As executed on July 19, 2010 (the "'L.G. Execution Date") and amended on February 27, 2011, the Company entered into an option to purchase certain mineral exploration rights to a property in south-eastern Arizona, USA, named the L.G. Property from two individuals (collectively the “L.G. Vendors”). The Vendors each owned a 50% interest in the mineral exploration rights to the L.G. Property and held the sole right, title and interest to the L.G. Property exploration rights (subject to the rights and title of the State of Arizona), free and clear of all liens and encumbrances. Through the option agreement, as amended (the “L.G. Agreement”), the L.G. Vendors granted an exclusive option to the Company to purchase a 100% undivided right, title and interest in the L.G. Vendors’ rights to the L.G. Property, and the Company acquired an option to purchase L.G. Vendors’ rights to the L.G. Property from the L.G. Vendors, upon the terms and conditions set forth in the L.G. Agreement, as amended (incorporated herein by reference as Exhibits 10.1 and 10.2).
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To exercise the option included in the L.G. Agreement (the “L.G. Option”), the Company must: (i) pay the aggregate sum of $240,000 to the L.G. Vendors; (ii) incur an aggregate of at least $550,000 of exploration expenditures on the L.G. Property; and (iii) issue to the L.G. Vendors an aggregate of 1,000,000 restricted shares of common stock in Gryphon (or any public company created by Gryphon for the purpose of development of the L.G. Property), based on the following schedules:
(a) Cash sums on or before the dates described below:
(i) $15,000 upon execution of the L.G. Agreement (such payment which has been made);
(ii) $15,000 on or before August 10, 2010 (such payment which has been made);
(iii) $50,000 on or before March 1, 2011 (such payment which has been made);
(iv) $60,000 on or before March 1, 2012; and
(v) $100,000 on or before March 1, 2013.
(b) Share issuances on or before the dates described below:
(i) 250,000 restricted common shares upon execution of the L.G. Agreement (such payment which has been made and was valued at $12,500);
(ii) 250,000 restricted common shares on or before February 1, 2011 (such payment which has been made and was valued at $25,000);
(iii) 250,000 restricted common shares on or before February 1, 2012; and
(iv) 250,000 restricted common shares on or before February 1, 2013.
Once the Company has paid the L.G. Option price in full, the Company will have exercised the L.G. Option and have acquired an undivided 100% right, title and interest in and to the L.G. Property, the Company will then be obligated to pay the following additional consideration to the L.G. Vendors:
(a) 1,000,000 restricted shares of Gryphon common stock;
(b) a minimum annual royalty of $150,000 on or before December 31, 2014 and a minimum annual royalty of $150,000 every 12 months for each year that Gryphon holds the L.G. Property;
(c) a 5% (five percent) Gross Production Royalty on lithium minerals actually produced and sold from the L.G. Property; and
(d) a 3-1/2% (three and one-half percent) Net Returns Royalty on all other minerals actually produced and sold from the L.G. Property.
The parties also agreed that the Company will incur the following amounts on exploration expenditures on the L.G. Property:
(i) $50,000 within 12 months following the L.G. Execution Date;
(ii) an additional $100,000 on or before 24 months following the L.G. Execution Date;
(iii) $200,000 on or before 36 months following the L.G. Execution Date; and
(iv) $200,000 on or before 48 months following the L.G. Execution Date.
If the Company fails to deliver or spend the consideration comprising the L.G. Option price within the time periods set forth herein, the L.G. Agreement will terminate 30 days after the L.G. Vendors give the Company written notice of such failure (during which time the Company may deliver or spend the consideration overdue, and therefore maintain the L.G. Agreement in good standing). As of the date of these financial statements, the Company had made all cash and shares payments currently due under the terms of L.G. Agreement, but had not expended the entire required amount of its first year work commitment. The L.G. Vendors have not indicated they plan to give the Company any written notice which would cause a termination of the L.G. Agreement.
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Operational Developments During the Quarter Ended December 31, 2011
Leases expiries:
During the three month period ended December 31, 2011, the Company did not make United States Bureau of Land Management ('BLM') property maintenance payments covering 10 lease sections on approximately 4091 acres of its L.G. Property and therefore these leases have lapsed. The Company had also previously let lapse one other BLM lease on the L.G. Property. These areas cover approximately 90% of the claim areas included in the L.G. Agreement. The Company is currently reviewing whether it will re-stake these claims in the future and is currently re-evaluating its overall exploration programs.
Private Placement initiative:
On December 14, 2011, the Company completed a private placement totalling $123,000. This financing was based on the sale of 12,300,000 restricted common shares priced at US$0.01 per share and included application of $106,000 of funds which had been recorded on our Balance Sheet for the year ended September 30, 2011 as Shares Subscribed But Not Issued.
RESULTS OF OPERATIONS
The following discussion and analysis covers material changes in the financial condition of Gryphon during the three month periods ended December 31, 2011 and December 31, 2010 and the Exploration Stage Period of January 16, 2006 to December 30, 2011 (the “Exploration Stage”).
Revenues
Gryphon did not earn revenues during the periods included in the financial statements in this report.
Expenses
Our operating expenses are classified into five categories:
- Exploration Expenses
- Professional and Consultant Fees
- Administrative Expenses
- Investor Relations
- Mineral Properties Impairments
Exploration Expenses
Exploration expenses for the three month period ended December 31, 2011 totaled $1,000 compared to $28,113 for the three month period ended December 31, 2010. Expenses for the Exploration Stage totaled $153,749. During the current period, these expenses were comprised of geologist fees. The comparative decrease in these expenses is due to our decreased exploration activity due to cash flow considerations. We predict the level of these expenses will decrease or remain at current levels during the balance of fiscal 2012.
Professional and Consultant Fees
Professional & consultant Fees include fees paid to our President and for work performed by accounting, audit and legal professionals. During the three month period ended December 31, 2011 these costs totaled $17,564 and were comprised primarily of costs for our annual fiscal 2011 audit. This compared with $20,550 during the same period ended December 31, 2010. For the Exploration Stage these costs totaled $233,233. We anticipate Professional & Consultant Fees to decrease moderately or remain at current levels during the balance of the 2012 fiscal year. Period over period, these costs decreased due to the reduction of fees paid to our President.
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Administrative Expenses
Administrative expenses were $3,561 for the three month period ended December 31, 2011 compared with $6,818 for the three month period ended December 31, 2010. For the Exploration Stage, administrative expenses totaled $57,056. These expenses are composed of Edgar and XBRL agent filing fees, stock transfer agent fees and general office expenses. The current decrease in period over period expenses is attributable to the general reduction of our business activity. We anticipate Administrative Expenses will remain at current levels during the balance of fiscal 2012.
Investor Relations
Investor relations expenses include costs for press releases, maintenance of the Company’s website and other investor information initiatives. During the three month period ended December 31, 2011, these expenses totaled $195 and were comprised of press release system access fees. For the three month period ended December 31, 2010 the costs totaled $13,715. For the Exploration Stage, Investor Relations expenses totaled $29,023. The current period over period decrease is attributable to our reduced issuance of press releases. We anticipate Investor Relations expenses may increase or remain at current levels during the balance of fiscal 2012.
Mineral Properties Impairments
As required by generally accepted accounting principles, during the three month period ended December 31, 2011 the Company undertook a review of the Company’s exploration projects and determined it should record an impairment charge of $1,000 against the Cruce Property mineral exploration rights. This was based on the valuation of 100,000 shares issued at a price of $0.01 per share for total deemed consideration of $1,000. Comparative Mineral Properties Impairment costs were $40,000 for the three month period ended December 31, 2010 and $183,498 for the Exploration Stage. We anticipate Mineral Properties Impairment costs will increase during the balance of fiscal 2012.
Discontinued Operations
On September 27, 2010, the sale of our former subsidiary resulted in a non-cash gain of $97,920 due to the elimination from the previously consolidated enterprise of the Company of debt the former subsidiary owed to a third party. This non-cash gain is recorded in our Statement of Operations in the Exploration Stage Period along with the accumulated costs of $(112,932) related to the discontinued former subsidiary.
Net (Loss)
We incurred a net loss of $(23,320) for the three month period ended December 31, 2011 compared with a net loss of $(109,196) for the same period ended December 31, 2010. The comparative decrease in these expenses is due to our decreased exploration activity due to cash flow considerations. For the Exploration Stage, accumulated Net Losses totaled $(684,829). These losses translated to $nil per share and $nil per share respectively for the three month periods ended December 31, 2011 versus December 31, 2010.
Liquidity and Capital Resources
Since the date of our incorporation, we have raised cash of $525,654 through private placements of our common shares (including debt conversions); and net cash of $112,088 through advances from shareholders. As of December 31, 2011 we had cash on hand of $8,560 and a prepaid expenses balance of $3,438. We estimate we will need to attempt to raise additional funds during the coming twelve months and will attempt to raise these funds through private placements of our common shares.
Material Events and Uncertainties
Our operating results are difficult to forecast. Our prospects should be evaluated in light of the risks, expenses and difficulties commonly encountered by comparable early stage companies in mineral resource markets. There can be no assurance that we will successfully address such risks, expenses and difficulties and cannot assure you that we will become profitable in the future.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
EXCHANGE RATE FLUCTUATION RISK
Our reporting currency is United States Dollars. Our transactions are primarily conducted in US$ but also include transactions in other currencies. Foreign currency rate fluctuations may have a material impact on the Company’s financial reporting. These fluctuations may have positive or negative impacts on the results of operations of the Company.
We have not entered into derivative contracts either to hedge existing risk or for speculative purposes.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized and reported within the time communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of "disclosure controls and procedures" in Rule 13a-15(e). The Company's disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching the Company's desired disclosure control objectives. In designing periods specified in the SEC's rules and forms, and that such information is accumulated and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The Company's certifying officer has concluded that the Company's disclosure controls and procedures are not effective in reaching that level of assurance.
At the end of the period being reported upon, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and the Company's Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective.
Management's Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Section 13a-15(f) of the Securities Exchange Act of 1934, as amended). Internal control over financial reporting is a process designed by, or under the supervision of, the Company's CFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's financial statements for external reporting purposes in conformity with U.S. generally accepted accounting principles and include those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and disposition of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.
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As of December 31, 2011, management conducted an assessment of the effectiveness of the Company's internal control over financial reporting based on the framework established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the criteria established by COSO management concluded that the Company's internal control over financial reporting was not effective as of December 31, 2011, as a result of the identification of the material weaknesses described below.
A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
Specifically, management identified the following control weaknesses: (1) The Company has not properly segregated duties as one or two individuals initiate, authorize, and complete all transactions. The Company has not implemented measures that would prevent the individuals from overriding the internal control system. The Company does not believe that this control weakness has resulted in deficient financial reporting because the Chief Financial Officer is aware of his responsibilities under the SEC's reporting requirements and personally certifies the financial reports; and (2) The Company has installed accounting software that does not prevent erroneous or unauthorized changes to previous reporting periods and does not provide an adequate audit trail of entries made in the accounting software.
Accordingly, while the Company has identified certain material weaknesses in its system of internal control over financial reporting, it believes that it has taken reasonable steps to ascertain that the financial information contained in this report is in accordance with generally accepted accounting principles. Management has determined that current resources would be appropriately applied elsewhere and when resources permit, they will alleviate material weaknesses through various steps.
Changes in Internal Control over Financial Reporting
During the current three month period ended December 31, 2011 of the Company’s fiscal year ended September 30, 2012, no material changes were made to the Company’s internal control over financial reporting
Remediation Plan
Addition of staff
We have identified that additional staff will be required to properly segment the accounting duties of the Company. However, we do not currently have resources to fulfill this part of our plan and will be addressing this matter once sufficient resources are available.
I've all but resigned any hope in this company, they were putting out fluff PR's for a bit but that only cost them money and did nothing, if anything the vapidity of the non-news actually hurt the stock.
All shareholders are waiting on, all the market is waiting on is something remotely substantive from HRTE.
The US economy is slowly in recovery, growth is gaining traction.
Investment in alternative wind energy will only increase and if HRTE proves to be a legitimate company, they and as a result the shareholders will prosper immensely.
Unless they show some seriousness about what they're doing this stock is an utterly dead tax loss.
at least we know this company is not completely hooked up to life support or is still alive in some capacity.
I honestly don't know currently, almost anything about this company and frankly I'd wager no one on this board knows much more than me on this. If I'm wrong, by all means please share:
How many employees are there?
What exactly are they REALLY doing with this Cruce property?
How much does Gryo have in the coffers?
Who is on their board and what are they being compensated because no one really knows what exactly they do.
When will we get an update of ANY KIND as to their plans with the Cruce property. This started out a lithium play and now could be gold also?
Any answers of any kind...
I don't know how much company HRTE has in the coffers but it's not much. They'll probably dilute this poor thing even further and keep the company alive on fumes to line the pockets of Mark Ryun before they all abandon ship like rats.
Skeptical? hmm, just a bit.
the question is, when on earth will GRYO release ANY news. This has been my single biggest complaint with this company. Where's the news. Where's the update? We need and should demand SOME release of information as to the company's direction and guidance for unit holders and how exactly they are building shareholder value.
Fact is, the market here won't even demand much. Any release that hints at the potential GRYO has will send speculators in here, en masse and have this stock popping in a blink.
GIVE US THAT INFO GRYO.
No volume, so price uptick likely won't stick. But psychologically, this stock is nibbling at the 2cent barrier.
if that breaks, there's many good reasons to see this thing, on the smallest piece of news, breaking through the 4-6 cent region.
Once it does that, there's no telling. We saw it soar to $.12 on nothing of significance.
THere are many things going on behind the scenes with this Lithium play, possible gold interests.
Let me as the board this, when's the last time anyone spoke to Management? I have not had much luck reaching them myself.
I'll be happy with ANY upside, whether we all can load up on bargains now for massive rewards later but soon. I'm not picky.
FYI all, I'm not a premium member, so I can't reply to any inbox msgs.
Let's see a new start at $.02 GRYO.
There are small signs that there is an underlying bullishness with this stock.
Good day, finally for GRYO, could this be the beginning of a speculative turnaround?
CEO, Mark Ryun, LATE FILING for HRTE
what a surprise:
http://ih.advfn.com/p.php?pid=nmona&article=50800106
Great charts. Really lovely. Lots of great lines and moving averages and volume spikes. Now what do they all mean?
The last one you posted, seems to be the only one worth paying close attention to you.
The 4 candle showed "bullish." For this stock, anything that is above $0.00000001 cents per share, i suppose could be perceived as bullish.
Other than a hope and a prayer, I just can't see, barring a shocking revenue-based NR, anything that will push this price up.
Feel free to inform me.
Well TripleSe7enz, we'll see what February brings. Methinks, heaping spoonfuls of nothingness.
Keep it up guys, anything that can encourage this volatile, quirky and quiet stock to burst back to life, I am fully supporting.
We are coming up on year since the last big news so we need something, significant and quickly.
At least they're not filling the net with FLUFF usless NR's. They probably can't even afford to put out any more news, even if they had any. What a joke.
We should have all sold yesterday apparently.
Yeesh. Ugly day.
If it runs into the teens, let alone $0.20, it would have to be on some rocking news.
A little press and this thing can RUN.
Coming up on 2 cents for the first time in what seems like forever.
Could this be the beginning of a run? Could news FINALLY be forthcoming?
The volume is thin but someone is buying on the ask, so that's good.
FINALLY.
Please enlighten me, I'd love to share that optimism but the share prices speaks otherwise.
What have you got?
How dead is this stock?
So dead, no one even posts here anymore.
Big 2012 HRTE!*
*sarcasm doesn't necessarily come through exclamation points and ErnestDD doesn't understand what sarcasm actually means.
It will literally be a miracle if we hear anything positive and the stock pops to life again +$.10, a miracle.
Things are that bad, that you are now unfortunately posting NR's from a different company from almost 5 years ago.
This company seems to have packed up shop and left us holding worthless shares.
I too would like to believe there is something coming down the pipes, but honestly this has proven to be an unparalleled disaster in the pinks, right up there with HRTE.
This company has done nothing to either support it's share price or produce anything that the market could feel remotely good about.
Is it dead? Not yet. It's certainly on a respirator. There was all kinds of talk about it earning revenue and there appears to be nothing much about that, so we sit and watch it dwindle to nada.
5 million shares traded of fractional pennies, big deal.
It's like this stock didn't just approach a cliff, it took a running leap right off of it and is laughing all the way down. This might be the first stock i've ever owned that has a value of zero.
Perhaps for the first time ever, though comically, I agree with ErnestDD. Must be Christmas! lol.
Ugly.
Wonder if literally anything can turn it around....
It literally cannot really go any lower than this. I don't even know how a company can actually function and be allowed to trade even on pink sheets at fractional pennies at a time.
This is truly one of the worst run companies I have ever had the unfortunate experience to speculate on.
Now, it's purely a matter of wathcing and seeing if this company can defy the laws of physics.