UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ý ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2014

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ___________ to __________.

Commission file number:   000-51203

First Colombia Gold Corp.
(Exact name of registrant as specified in its charter)
 
Nevada
 
98-0425310
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
     
Paseo de Bernardez #59 FRACC, Lomas de Bernadez,Guadalupe 98610, Zacatecas,Mexico
(Address of principal executive offices) (Zip Code)
Registrant’s telephone, including area code: 1-888-224-6561
 
Securities registered under Section 12(b) of the Exchange Act: None.
 
Securities registered under Section 12(g) of the Exchange Act:
 
Common Stock, $0.00001 par value
 
Not Applicable
(Title of class)
 
(Name of each exchange on which registered)
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

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

Large accelerated filer  ¨                                                               Accelerated filer ¨
Non-accelerated filer    ¨                                                               Smaller reporting company ý
(Do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
 
Class
 
Outstanding at March 31, 2015
     
Common Stock, $0.00001 par value
 
2,647,819,214

 
Documents Incorporated by Reference: None.
 
 
 

 

Table of Contents



FORM 10-K
FIRST COLOMBIA GOLD CORP.
DECEMBER 31, 2014

Table of Contents
 
 
 
Page
   
PART I
 
   
Item 1.              Business.
4
Item 1A.           Risk Factors.
7
Item 1B.            Unresolved Staff Comments.
17
Item 2.               Properties.
17
Item 3.               Legal Proceedings.
30
Item 4.              Mine Safety Disclosures.
30
   
PART II

Item 5.              Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
31
Item 6.              Selected Financial Data.
33
Item 7.              Management’s Discussion and Analysis of Financial Condition and Results of Operations.
33
Item 7A.          Quantitative and Qualitative Disclosures About Market Risk.
38
Item 8.              Financial Statements and Supplementary Data.
38
Item 9.             Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.
38
Item 9A.          Controls and Procedures.
38
   
PART III

Item 10.           Directors, Executive Officers and Corporate Governance.
39
Item 11.           Executive Compensation.
41
Item 12.           Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
44
Item 13.           Certain Relationships and Related Transactions, and Director Independence.
44
Item 14.           Principal Accounting Fees and Services.
46
   
PART IV

Item 15.            Exhibits, Financial Statement Schedules.
47
 
 
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Table of Contents
 
Cautionary Note Regarding Forward Looking Statements
 
This annual report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “may,” “should,” “could,” “will,” “plan,” “future,” “continue, ” and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. These forward-looking statements are based largely on our expectations or forecasts of future events, can be affected by inaccurate assumptions, and are subject to various business risks and known and unknown uncertainties, a number of which are beyond our control. Therefore, actual results could differ materially from the forward-looking statements contained in this document, and readers are cautioned not to place undue reliance on such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. A wide variety of factor could cause or contribute to such differences and could adversely impact revenues, profitability, cash flows and capital needs. There can be no assurance that the forward-looking statements contained in this document will, in fact, transpire or prove to be accurate. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors” that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by any forward-looking statements.

Important factors that may cause the actual results to differ from the forward-looking statements, projections or other expectations include, but are not limited to, the following:

risk that we will not be able to remediate identified material weaknesses in our internal control over financial reporting and disclosure controls and procedures;
 
risk that we fail to meet the requirements of the agreements under which we acquired our options to acquire mineral property interests, including any cash payments to the optionor or any exploration obligations that we have regarding these properties, which could result in the loss of our right to exercise these options to acquire certain mining and mineral rights underlying these properties;

risk that we will be unable to secure additional financing in the near future in order to commence and sustain our planned exploration work and be forced to cease our exploration and development program;
 
risk that we cannot attract, retain and motivate qualified personnel, particularly employees, consultants and contractors for our operations;

risks and uncertainties relating to the interpretation of drill results, the geology, grade and continuity of mineral deposits;
 
results of initial feasibility, pre-feasibility and feasibility studies, and the possibility that future exploration, development or mining results will not be consistent with our expectations;

mining and development risks, including risks related to accidents, equipment breakdowns, labor disputes or other unanticipated difficulties with or interruptions in production;
 
the potential for delays in exploration or development activities or the completion of feasibility studies;

risks related to the inherent uncertainty of production and cost estimates and the potential for unexpected costs and expenses;
 
risks related to commodity price fluctuations;

 
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Table of Contents

the uncertainty of profitability based upon our history of losses;
 
risks related to failure to obtain adequate financing on a timely basis and on acceptable terms for our planned exploration and development projects;

risks related to environmental regulation and liability;
 
risks that the amounts reserved or allocated for environmental compliance, reclamation, post-closure control measures, monitoring and on-going maintenance may not be sufficient to cover such costs;

risks related to tax assessments;
 
political and regulatory risks associated with mining development and exploration; and

other risks and uncertainties related to our prospects, properties and business strategy.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. Except as required by law, we do not undertake to update or revise any of the forward-looking statements to conform these statements to actual results, whether as a result of new information, future events or otherwise.

As used in this annual report, “First Colombia,” the “Company,” “we,” “us,” or “our” refer to First Colombia Gold Corp., unless otherwise indicated.

If you are not familiar with the mineral exploration terms used in this report, please refer to the definitions of these terms under the caption “Glossary” at the end of Item 15 of this report.
 
PART I
ITEM 1. Business.

Corporate History

We were incorporated in the State of Nevada under the name Gondwana Energy, Ltd. on September 5, 1997, and previously operated under the name Finmetal Mining Ltd. and Amazon Goldsands Ltd. Our operations have historically focused on the acquisition and development of mineral property interests in varying locations, including Finland and Peru. The current focus of our business and operations is on the development of our mineral and oil property interests on properties located in the western United States and we are evaluating mineral and oil property interests and seeking opportunities in other geographical areas.

We no longer have any interest in any properties located in northeastern Peru. For reasons which include our inability to secure sufficient financing to be able to cure our default on notes we used to finance our acquisition of the property interests in Peru, we reached an agreement to relinquish our entire interest in the property interests in Peru in exchange for the cancellation of such notes and related outstanding obligations.

In 2011, we reviewed potential properties for acquisition in Colombia, and expanded our focus to North America which resulted in our acquiring certain mineral property interests in Montana and Idaho in late 2011. Company personnel and consultants are planning our exploration plans, conducting site visits, and reviewing several projects for potential acquisition, and in 2012 we added to our mineral property position through the acquisition of the Skip claims in Montana. We also in 2011 entered into agreements to acquire mineral property interest in the South Idaho Silver and Boulder Hill projects, conducting active due diligence and acquisition work in Croatia, and in 2013 signed a memorandum of understanding on the Nile Mine project in Montana.

In 2014 the Company elected to operate through both a Mining and through an Energy division.

The Company announced a Letter of Intent for a Purchase and Sale Agreement which was entered into on July 15, 2014, and subsequently amended on August 27, 2014. This resulted in the Company acquiring various personal property including transportation and drilling equipment, land and buildings, and other assets including interests in oil wells and leases. The Company has established a divisional office in Albany, Kentucky for its energy division in September 2014. The Company’s current activities are primarily focused on initiating and expanding oil production.
 
 
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The Company is in a process of reviewing its mining division strategy and business plan to re-focus on projects with a shorter time frame for development or securing joint-venture partners.

The Company has hired several operations personnel and is expecting more significant production to begin in the fourth quarter of the current fiscal year. The Company’s short term objective is to reach a target monthly production of 1,000 to 2,500 barrels of oil per month, which is subject to working capital availability and the risk factors described herein.

Mining Division

Description of our Mineral Property Interests

South Idaho Silver Project

On December 7, 2011 (the “Effective Date”), we entered into an Assignment and Assumption Agreement (“Assignment Agreement”) with a private corporation. (“Castle Creek”), an Idaho corporation, and a private individual (‘Ebisch”). Castle Creek and Ebisch are parties to an Option to Purchase and Royalty Agreement dated July 15, 2011 (the “Option Agreement”), for Castle Creek’s option to acquire an undivided 100% of the right, title and interest of Ebisch in and to the PB 7, 9, 11, 12, 23, 25, 27, and 29 lode mining claims (IMC #’s, respectively, 196852, 196854, 196856, 196857, 196866, 196867, 196868, and 196869), situated in Owyhee County, Idaho,. Pursuant to the terms of the Assignment Agreement, Castle Creek transferred and assigned us all of its right, title and interest, in, to and under the Option Agreement and we assumed the assignment of the Option Agreement agreeing to be bound, the same extent as Castle Creek, to the terms and conditions of the Option Agreement.
   
During 2013, the Company recorded a provision for write-down of mineral property interests of in the amount of $36,650 related to the South Idaho Property.

The Company has elected in 2014 to let this agreement lapse, and to use utilize the database of exploration information developed to target through re-staking a  more favorable land position, or to enter into a new agreement with the Ebisch group.

Boulder Hill Project

Purchase and Sale Agreement of Unpatented Mining Claims
 
On December 16, 2011, we entered into a Purchase and Sale Agreement (“Purchase Agreement”) with Boulder Hill Mines Inc., an Idaho corporation (“Boulder Hill”) relating to the purchase from Boulder Hill of three unpatented mining claims situated in Lincoln County, Montana (the “Boulder Hill Claims”). As consideration for the Boulder Hill Claims, we issued Boulder Hill 1,000 (500,000 pre-reverse )restricted shares of our common stock, are obligated to pay Boulder Hill $25,000 in cash within twelve (12) months of the Effective Date, which is December 16, 2012, and $25,000 in cash within twenty-four (24) months of the Effective Date, which is December 16, 2013.
 
We received a waiver of the $25,000 cash payment requirement, such payment was due in May 2013, and the Company was unable to make this payment, The Company elected to not continue under the former agreement, nor to explore further in the area after September 30, 2014..
 
The Purchase Agreement included customary representations and warranties. Under the terms of the Purchase Agreement, Boulder Hill has agreed to indemnify us from claims resulting from any breach or inaccuracy of any representation or warranty made by Boulder Hill in the Purchase Agreement. The Company has been unable to make the required payments, and currently is not planning on re-staking clams in the area in 2014.
 
Assignment and Assumption of Lease Agreement
 
On December 16, 2011 (the “Effective Date”), we entered into an Assignment and Assumption Agreement (“Boulder Hill Assignment Agreement”) with Boulder Hill, and a private individual (“Ebisch”). Boulder Hill and Ebisch are parties to an Option to Purchase and Royalty Agreement dated July 15, 2008, as amended on August 1, 2011 (the “ Boulder Hill Option Agreement”) which granted to Boulder Hill an option to acquire an undivided 100% of the right, title and interest of Ebisch in and to that certain Montana State Metal ferrous Gold Lease M-1974-06 dated August 21,2006 he entered into with the State of Montana (the “Montana Gold Lease”) under which Ebisch was granted the exclusive right to prospect, explore, develop and mine for gold, silver and other minerals on property situated in Lincoln County, Montana. The Montana Gold Lease is for a ten (10) year term and is subject to the 5% net smelter return due to the State of Montana. Pursuant to the terms of the Boulder Hill Assignment Agreement, Boulder Hill transferred and assigned us all of its right, title and interest, in, to and under the Option Agreement and we assumed the assignment of the Boulder Hill Option Agreement agreeing to be bound, the same extent as Boulder Hill, to the terms and conditions of the Boulder Hill Option Agreement. As consideration for the Boulder Hill Assignment Agreement, we issued Boulder Hill 1,000 (500,000 pre reverse) restricted shares of our common stock and are obligated to pay Boulder Hill $25,000 in cash within twelve (12) months of the Effective Date, which is December 16, 2012, waived until May 2013, and $25,000 in cash within twenty-four (24) months of the Effective Date, which is December 16, 2013.
 
 
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The Boulder Hill Option Agreement provided for certain cash payments, some of which were met, however the Company has elected to let the agreement lapse.

 
  Nile Mine Project 

Memorandum of Understanding to Earn-Interest in the Nile Mine Project

On May 1, 2013, the Company with GMRV, a branch of 4uX, LLC, a private Montana company (“GMRV”) entered into a Memorandum of Understanding (“MOU”) to enter into a Definitive Agreement within 180 days for the Company to earn a fifty percent interest in the Nile Mine project. The Company has not entered into a final and definitive agreement at this time.  In May 2014 GMRV waived 2013 cash payments in exchange for an agreed upon payments by June and September 30 of 2014, respectively, and provided additional time for preparation and implementation of a definitive agreement.  The Company made a payment of the $5,000 due by June 2014 in the form of cash and restricted common shares. The Company is discussing modification and further extensions of the MOU and/or entering into a final definitive agreement, but did not make the required payments as of September 30, 2014. The Memorandum of Understanding therefore is in default.

Land Status

The project is owned/controlled by GMRV and private interests. The Company signed a Memorandum of Understanding (“MOU”) on the project effective May 1, 2013 containing the following terms and conditions for the Company to earn a 50% interest in the project, subsequently amended in May 2014:

Paying within 180 days of the signing of this MOU $2,500 which will be payable in cash or the issuance of restricted shares of the Company at the market bid price, or the equivalent in restricted preferred shares of the Company, subject to an subscription agreement signed by GMRV acceptable to the Company. The Company has agreed to an initial work commitment of $5,000 in 2013, and upon mutual agreement of an exploration plan for 2014, an increased work commitment of at least $10,000 for 2014.As described above this understanding has been extended eliminating cash payments during the extension period and instead the Company may make cash payments or in restricted common stock. The Company during the quarter met the $5,000 commitment through the issuance of restricted stock and prior cash payments.
 
 
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The Company agreed that work commitment will include the consulting services that will be provided by GMRV. The parties in good faith agree to enter into a definitive agreement with duration of 10 years, with a work commitment for this period of $250,000 and annual minimum advance royalty payments of $5,000 per year in cash, common shares, or preferred shares, at First Colombia’s option, for First Colombia to earn a 50% interest in the project. Should a mutually agreed upon definitive agreement not be agreed on and implemented within the effective date of this agreement, the payment referred to above shall be non-refundable. As above this requirement is temporarily waived.

On the effective Date: May 1, 2013, The Company was responsible for all property maintenance fees, estimated not to exceed $500 annually at the current BLM Maintenance Fee rate.
 
The foregoing description of the MOU does not purport to be complete and is qualified in its entirety by reference to the MOU, previously filed on the Form 8-K and is incorporated herein by reference.

Description of Property

Location

The project is located in Marysville Mining District in the Marysville area, and is comprised of the Nile Mine and nearby Springer II Placer mining claim, comprising approximately fifty-five acres.  The Nile Mine Project consists of two unpatented lode claims covering the over 1,000 feet of the unpatented section of Nile and South Nile Veins and the Nile Cross-Cut located in Section 4, T11N, R6W.  The Springer_II Placer consists of one unpatented placer claim covering three tailing ponds and nearly 0.3 miles of old dredge piles in Section 32, T12N, R6W. The mill tailings are from the Empire Mill located further up the drainage.
 
 
 
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History

The placer property contains evidence of production from a former gold-silver mill. Prior sampling identified about 13,000 cubic yards of mill tailings containing gold, silver, and copper values. The Company has not verified prior sampling results. The lead-silver-gold mine reported intermittent production from 1890's through 1940's.
 
Regional Geology

The Company is currently reviewing regional and project geology.

Project Infrastructure, Access and Power

There is evidence and historical information that indicates some level of production from the Nile Mine but the Company hasn’t completed a thorough review of this data.

Reserves

There are no established reserves on the project.

Permitting

In Montana an Exploration License or POO (Plan of Operation) may be required depending on the extent of planned surface disturbance or water discharge form exploration and development activities, and such permits can typically require bonding.

Exploration Plans

We have been in discussions with GMRV for an initial exploration plan involving surface sampling, road building and other rehabilitation work to improve underground access, and possible bulk sampling. We estimate this plan would cost between $5,000 to $25,000, and provided funding is available, we plan to embark on this plan in the period between January and June 2015... During the quarter surface samples were taken of the property and are awaiting assay. The Company incurred $5,000 related to the implementation of the MOU agreement, in the period ending September 30, 2014. The Company however is in default to the original MOU, thus would need to negotiate a revised agreement to proceed for which there is no assurance a revision could be negotiate under terms the company considers acceptable.
 
Skip Claims

Land Status

The Skip unpatented mining claims comprise approximately forty acres and are considered a potential silver prospect.

Reserves

There are no established reserves on the property.
 
 
  Exploration History

The Company has no documented information on prior exploration history. The Company has noticed evidence of trenching on the property.

Exploration Plans

The Company’s next step would be to prepare basic mapping, geologic mapping and taking surface samples. The Company believes that seeking a joint-venture partner would be the preferable approach to advancing the project.

Other Exploration Areas

Our strategy is to advance projects we own, lease or option, and seek joint-venture partners where possible, and to acquire additional projects in different geographical areas though our concentration currently is in Montana and Idaho. There is no assurance this will result in additional projects for the Company, or if they do the Company will meet regulatory and financial requirements to acquire any projects identified.

We are also considering further geographic locations for exploration projects including Mexico and Europe. This activity consists primarily of reviewing historical data to determine potential areas of interest, to be followed by a determination for requirements and potential for acquiring mineral property interest. These activities may not lead to future acquisitions absent future financing under terms deemed acceptable to, if any such financing is available, and determining properties that management believes are properties of merit to add to our portfolio of mineral interests. The Company has retained consulting assistance in south Eastern Europe, and we forecast consulting expenditures of $5,000 to $15,000 in the upcoming six months...
 
 
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 Please find attached certain mining terms that may not be familiar.

Glossary of Certain Mining Terms

Andesite
A gray, fine-grained volcanic rock, chiefly plagioclase and feldspar
Argentite
A valuable silver ore, Ag2S, with a lead-gray color and metallic luster that is often tarnished a dull black
Arsenic
A very poisonous metallic element that has three allotropic forms
Arsenopyrite
A silvery-gray mineral consisting of an arsenide and sulfide of iron
Basalt
An extrusive volcanic rock composed primarily of plagioclase, pyroxene and some olivine
brecciated tuffs
Rocks in which angular fragments are surrounded by a mass of fine grained minerals
Chalcopyrite
A sulphide mineral of copper and iron the most important ore mineral of copper
Cretaceous
Geologic period and system from circa 145.5 ± 4 to 65.5 ± 0.3 million years ago
Diorite
An intrusive igneous rock composed chiefly of sodic plagioclase, hornblende, biotite or pyroxene
Electrum
An alloy of silver and gold
Eocene
the second epoch of the Tertiary Period
Epithermal
Pertaining to mineral veins and ore deposits formed from warm waters at shallow depth
Fault
A break in the Earth’s crust caused by tectonic forces which have moved the rock on one side with respect to the other.
Galena
Lead sulphide, the most common ore mineral of lead
Granodiorite
a phaneritic igneous rock with greater than 20% quartz
Hornfels
A fine-grained metamorphic rock composed of quartz, feldspar, mica, and other minerals
Humus
organic component of soil, formed by the decomposition of leaves and other plant material by soil microorganisms
Igneous
Formed by the solidification
kaolin-chlorite
A fine soft white clay, used for making porcelain and china, as a filler in paper and textiles, and in medicinal absorbents
Metamorphism
The process by which the form and structure of rocks is changed by heat and pressure
Miocene
the fourth epoch of the Tertiary period.
montmorillonite
An aluminum-rich clay mineral of the smectite group, containing sodium and magnesium
paragenesis
A set of minerals that were formed together, esp. in a rock, or with a specified mineral
Piedrancha
A fault line in Colombia
Reserves
That part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination
Sericite
a fine grained mica, either muscovite, illite, or paragonite
Shale
Sedimentary rock formed by the consolidation of mud or silt
Sphalerite
A zinc sulphide metal; the most common ore mineral of zinc
Tertiary
Stones deposited during the Tertiary period lasting from about 65 million to 1.6 million years ago
Zinc
a silvery-white metal that is a constituent of brass and is used for coating (galvanizing)

Mine safety issues: As we have no operating mines or mines under development at present we have no disclosures related to mine safety issues.
Energy Division
 
The Company during the quarter appointed a CEO and Director with experience in the energy sector, and began due diligence on acquiring oil assets in Kentucky with an objective of building assets and cash flow in this sector providing suitable acquisitions are both identified and feasible for the Company to acquire. On July 15, 2014 a Purchase and Sales Agreement was signed, subsequently amended on August 27, 2014, to acquire certain oil interests including equipment, land and buildings (further described below).

The Company’s strategy is to build assets and cash flow through acquiring undervalued energy assets and build value through:

·  
Building economies of scale in exploration , development , production and distribution
·  
Adding reserves and increasing production by providing capital for exploration, equipment and well enhancement
·  
Conducting exploration on properties and oil interests acquired which prior owners were unable to do due to financial or other constraints
·  
Seek to be vertically integrated by building our own oil field services capability for drilling, maintenance and development wherever this is more cost effective
 
The Company expects this business plan to implement our strategy will result in a business model providing three revenue streams:

·  
A revenue, profit or royalty interest in certain oil wells and leases
·  
As a contractor providing oil well services ranging from drilling to operating to maintaining
·  
Exploring and producing from wells and leases we own outright, which are subject to third-party royalties or working interests
 
 
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General Oil and Gas Industry Overview

Our energy division is principally focused on “upstream” activities which include (a) acquiring mineral rights (b)
exploring for oil (c) drilling wells and installing production equipment (d)lifting the oil to surface (e) storing and preparing for transport.

Oil prices are volatile depending on various factors: competing energy sources (coal, natural gas, nuclear, solar, wind, hydroelectric, and others); political turmoil in areas of significant production or reserves; general economic trends, and other actors.

The Company in the third quarter acquired interests in oil wells in Kentucky from a private company. The Company efforts are focused on maintaining production, expanding production and targeted drilling in areas the Company believes are most prospective for new or increased production. We acquired at the same time land, building, and oil field service equipment to support this effort, and hired a local general manger with long experience in the oil industry and Kentucky in particular. We received our first revenue payment during the quarter, and in accordance with our business plan are focused on increasing revenue and cash flow from the oil interests acquired.

Competition
 
The oil and gas industry is highly competitive. Our competitors and potential competitors include major oil companies and independent producers of varying sizes which are engaged in the acquisition of producing properties and the exploration and development of prospects. Most of our competitors have greater financial, personnel and other resources than we do and therefore have greater leverage in acquiring prospects, hiring personnel and marketing oil and gas.
 
Government Regulations
 
The production and sale of oil and gas is subject to regulation by state, federal and local authorities. In most areas there are statutory provisions regulating the production of oil and natural gas under which administrative agencies may set allowable rates of production and promulgate rules in connection with the operation and production of such wells, ascertain and determine the reasonable market demand of oil and gas, and adjust allowable rates with respect thereto.
 
The sale of liquid hydrocarbons was subject to federal regulation under the Energy Policy and Conservation Act of 1975 which amended various acts, including the Emergency Petroleum Allocation Act of 1973. These regulations and controls included mandatory restrictions upon the prices at which most domestic and crude oil and various petroleum products could be sold. All price controls and restrictions on the sale of crude oil at the wellhead have been withdrawn. It is possible, however, that such controls may be re-imposed in the future but when, if ever, such re-imposition might occur and the effect thereof is unknown.
 
The sale of certain categories of natural gas in interstate commerce is subject to regulation under the Natural Gas Act and the Natural Gas Policy Act of 1978 (“NGPA”). Under the NGPA, a comprehensive set of statutory ceiling prices applies to all first sales of natural gas unless the gas specifically exempt from regulation (i.e., unless the gas is deregulated). Administration and enforcement of the NGPA ceiling prices are delegated to the Federal Energy Regulatory Commission (“FERC”). In June 1986 the FERC issued Order No. 451, which in general is designed to provide a higher NGPA ceiling price for certain vintages of old gas. It is possible, though unlikely, that we may in the future acquire significant amounts of natural gas subject to NGPA price regulations and/or FERC Order No. 451.
 
Our operations are subject to extensive and continually changing regulation because of legislation affecting the oil and natural gas industry is under constant review for amendment and expansion. Many departments and agencies, both federal and state, are authorized by statute to issue and have issued rules and regulations binding on the oil and natural gas industry and its individual participants. The failure to comply with such rules and regulations can result in large penalties. The regulatory burden on this industry increases our cost of doing business and, therefore, affects our profitability. However, we do not believe that we are affected in a significantly different way by these regulations than our competitors are affected.
 
Transportation and Production
 
Transportation and Sale of Oil and Natural Gas . We can make sales of oil, natural gas and condensate at market prices which are not subject to price controls at this time. The price that we receive from the sale of these products is affected by our ability to transport and the cost of transporting these products to market. Under applicable laws, FERC regulates:
 
● the construction of natural gas pipeline facilities, and
● the rates for transportation of these products in interstate commerce.
 
Our possible future sales of natural gas are affected by the availability, terms and cost of pipeline transportation. The price and terms for access to pipeline transportation remain subject to extensive federal and state regulation. Several major regulatory changes have been implemented by Congress and FERC from 1985 to the present. These changes affect the economics of natural gas production, transportation and sales. In addition, FERC is continually proposing and implementing new rules and regulations affecting these segments of the natural gas industry that remain subject to FERC’s jurisdiction. The most notable of these are natural gas transmission companies.
 
 
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FERC’s more recent proposals may affect the availability of interruptible transportation service on interstate pipelines. These initiatives may also affect the intrastate transportation of gas in some cases. The stated purpose of many of these regulatory changes is to promote competition among the various sectors of the natural gas industry. These initiatives generally reflect more light-handed regulation of the natural gas industry. The ultimate impact of the complex rules and regulations issued by FERC since 1985 cannot be predicted. In addition, some aspects of these regulatory developments have not become final but are still pending judicial and FERC final decisions. We cannot predict what further action FERC will take on these matters. However, we do not believe that any action taken will affect us much differently than it will affect other natural gas producers, gatherers and marketers with which we might compete.
 
Effective as of January 1, 1995, FERC implemented regulations establishing an indexing system for transportation rates for oil. These regulations could increase the cost of transporting oil to the purchaser. We do not believe that these regulations will affect us any differently than other oil producers and marketers with which we compete.
 
Regulation of Drilling and Production . Our proposed drilling and production operations are subject to regulation under a wide range of state and federal statutes, rules, orders and regulations. Among other matters, these statutes and regulations govern:
 
 
the amounts and types of substances and materials that may be released into the environment,
 
 
the discharge and disposition of waste materials,
 
 
the reclamation and abandonment of wells and facility sites, and
 
 
the remediation of contaminated sites,
 
and require:
 
 
permits for drilling operations,
 
 
drilling bonds, and
 
 
reports concerning operations.
 
Environmental Regulations
 
General . Our operations are affected by the various state, local and federal environmental laws and regulations, including the:
 
 
Clean Air Act,
 
 
Oil Pollution Act of 1990,
 
 
Federal Water Pollution Control Act,
 
 
Resource Conservation and Recovery Act (“RCRA”),
 
 
Toxic Substances Control Act, and
 
 
Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”).
 
 These laws and regulations govern the discharge of materials into the environment or the disposal of waste materials, or otherwise relate to the protection of the environment. In particular, the following activities are subject to stringent environmental regulations:
 
 
drilling,
 
 
development and production operations,
 
 
activities in connection with storage and transportation of oil and other liquid hydrocarbons, and
 
 
use of facilities for treating, processing or otherwise handling hydrocarbons and wastes.
 
 
10

 
 
Violations are subject to reporting requirements, civil penalties and criminal sanctions. As with the industry generally, compliance with existing regulations increases our overall cost of business. The increased costs cannot be easily determined. Such areas affected include:
 
 
unit production expenses primarily related to the control and limitation of air emissions and the disposal of produced water,
 
 
capital costs to drill exploration and development wells resulting from expenses primarily related to the management and disposal of drilling fluids and other oil and natural gas exploration wastes, and
 
 
capital costs to construct, maintain and upgrade equipment and facilities and remediate, plug and abandon inactive well sites and pits.
 
Environmental regulations historically have been subject to frequent change by regulatory authorities. Therefore, we are unable to predict the ongoing cost of compliance with these laws and regulations or the future impact of such regulations on our operations. However, we do not believe that changes to these regulations will have a significant negative effect on our operations.
 
A discharge of hydrocarbons or hazardous substances into the environment could subject us to substantial expense, including both the cost to comply with applicable regulations pertaining to the cleanup of releases of hazardous substances into the environment and claims by neighboring landowners and other third parties for personal injury and property damage. We do not maintain insurance for protection against certain types of environmental liabilities.
 
The Clean Air Act requires or will require most industrial operations in the United States to incur capital expenditures in order to meet air emission control standards developed by the EPA and state environmental agencies. Although no assurances can be given, we believe the Clean Air Act requirements will not have a material adverse effect on our financial condition or results of operations.
 
RCRA is the principal federal statute governing the treatment, storage and disposal of hazardous wastes. RCRA imposes stringent operating requirements, and liability for failure to meet such requirements, on a person who is either:
 
 
a “generator” or “transporter” of hazardous waste, or
 
 
an “owner” or “operator” of a hazardous waste treatment, storage or disposal facility.
 
At present, RCRA includes a statutory exemption that allows oil and natural gas exploration and production wastes to be classified as non-hazardous waste. As a result, we will not be subject to many of RCRA’s requirements because our operations will probably generate minimal quantities of hazardous wastes.
 
CERCLA, also known as “Superfund,” imposes liability, without regard to fault or the legality of the original act, on certain classes of persons that contributed to the release of a “hazardous substance” into the environment. These persons include:
 
 
the “owner” or “operator” of the site where hazardous substances have been released, and
 
 
companies that disposed or arranged for the disposal of the hazardous substances found at the site.
 
CERCLA also authorizes the EPA and, in some instances, third parties to act in response to threats to the public health or the environment and to seek to recover from the responsible classes of persons the costs they incur. In the course of our ordinary operations, we could generate waste that may fall within CERCLA’s definition of a “hazardous substance.” As a result, we may be liable under CERCLA or under analogous state laws for all or part of the costs required to clean up sites at which such wastes have been disposed.
 
Under such law we could be required to:
 
 
remove or remediate previously disposed wastes, including wastes disposed of or released by prior owners or operators,
 
 
clean up contaminated property, including contaminated groundwater, or
 
 
perform remedial plugging operations to prevent future contamination.
 
We could also be subject to other damage claims by governmental authorities or third parties related to such contamination.
 
 
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Market for oil and gas production
 
The market for oil and gas production is regulated by both the state and federal governments. The overall market is mature and with the exception of gas, all producers in a producing region will receive the same price. The major oil companies will purchase all crude oil offered for sale at posted field prices. There are price adjustments for quality differences from the Benchmark. Benchmark is Saudi Arabian light crude oil employed as the standard on which OPEC price changes have been based. Quality variances from Benchmark crude results in lower prices being paid for the variant oil. Oil sales are normally contracted with a purchaser or gatherer as it is known in the industry who will pick up the oil at the well site. In some instances there may be deductions for transportation from the well head to the sales point. At this time the majority of crude oil purchasers do not charge transportation fees unless the well is outside their service area. The service area is a geographical area in which the purchaser of crude oil will not charge a fee for picking upon the oil. The purchaser or oil gatherer as it is called within the oil industry, will usually handle all check disbursements to both the working interest and royalty owners. Royalty owners and overriding royalty owners often receive a percentage of gross oil production for the particular lease and are not obligated in any manner whatsoever to pay for the costs of operating the lease.

Kentucky Oil and Gas Region

In 2011 the Kentucky Geological survey reported 24,364 oil wells in production in Kentucky which produced 790 million barrels of oil form 61 counties. The leading production zones are in Cambrian to Pennsylvanian rocks from more than 1,500 pools; oil is produced from Missippian limestones and sandstone in Eastern and Western Kentucky. Our plan is to acquire properties and oil interests where we believe that are underexplored, or wells that we believe that modern enhanced recovery techniques could initiate or improve oil production.
 
  Oil Leases and Wells

The Company acquired during the quarter ending September 30, 2014 ownership interests of certain oil wells, leases and working interests in the counties of Cumberland (KY), Monroe (KY), Overton (TN) and Clinton (KY). This totaled reportedly 113 wells, (our 8k filing is incorporated by reference and an exhibit to this report). We currently have interests in 96 wells with a gross acreage of 4,302 acres.
 
Reserves
 
             As of the end of the 2014 fiscal year, the Company had no proven reserves.
 
             As of December 31, 2014 the Company has not completed reserve studies on oil and gas assets acquired in the quarter. The prior operator has reported reserves existing on certain of the wells for which the Company will review as part of its plan to conduct new reserve studies.
 
Production, Production Prices and Production Costs
 
             Sales of oil during the quarter ending September 30, 2014 amounted to $1,738.99, for 232.31 barrels at an average price of $87.58 per barrel and at an average production cost per barrel of $116.25. All of our oil production has occurred in the United States.  The Company had no sales of oil and gas prior to the current quarter.
 
The Company owns a net retained interest (“NRI”) and net working interest (“NWI”) in 87 oil wells and oil leases, generally ranging from an NRI of 7.8% to 19.5%. This percentage interest is based on initial documentation received as part of the purchase of this interest. Revenue from this interest in the quarter was $1,738.99. The oil and gas operations in which the Company has this interest produced were reported to be 232.31 barrels of oil for a gross revenue of $2,230.46, with revenue costs reported at $26,514.45, for the quarter ended September 30, 2014. 
 
Past and Present Development Activities
 
             We did not drill any exploratory or development wells in the quarter ending September 30, 2014, but have started mobilization of resources for a drilling plan, subject to financing, of over 40 wells in the final quarter of the current fiscal year. It is estimated than an additional $200,000 in working capital will be required expand our current drilling plans.  During the 2013 fiscal year we did not drill any exploratory wells in the United States. We did not drill any development wells during the 2013 fiscal year.
 
               Delivery Commitments
 
             As of December 31, 2014, we had no delivery commitments for oil or natural gas under existing contracts or agreements.
 
As of December 31, 2014, we had no delivery commitments for oil or natural gas under existing contracts or agreements.
 
Properties, Wells, Operations, Acreage and Current Activities
 
             The following table sets forth our interest in wells and acreage as of December 31, 2014.
 
 
Number of Productive Wells (1)
Developed Acreage (4)
Undeveloped Acreage
 
Gross (2)
Net (3)
Gross (2)
Net (3)
Gross (2)
Net (3)
             
Oil
45
2.66
2610.27
154.15
 1801.24
106.68
             
Gas
0
0
0
0
0
0
 
 
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(1)
A well which has both oil and gas completions is classified as an oil well.
(2)
A gross well or acre is a well or acre in which we own an interest.
(3)
A net well or acre is deemed to exist when the sum of fractional ownership interests in wells or acres equals 1.
(4)
Developed acreage is acreage assignable to productive wells.
         
 
During the year ending December 31, 2014, 46 wells were being worked on for a return to production.

Interest in Net Revenues of Oil Wells and Leases

The Company acquired a 19.5% interest in the net revenue interest of a private Company during the quarter ending September 30, 2014. The interest is in 35 leases, containing at present 92 wells. The net interest acquired ranges from 2.0475 to 16.72125% according to the records provided, and is currently being reviewed.

The following table sets forth our interest (of this category) in wells and acreage as of December 31, 2014.



 
 
Number of Productive Wells (1)
Developed Acreage (4)
Undeveloped Acreage
             
             
Oil
            62
 
           2610.27
 
           1801.24
 
             
Gas
            0
 
         0
 
          0
 

(1)
A well which has both oil and gas completions is classified as an oil well.
(2)
A gross well or acre is a well or acre in which we own an interest.
(3)
A net well or acre is deemed to exist when the sum of fractional ownership interests in wells or acres equals 1.
(4)
Developed acreage is acreage assignable to productive wells.

During the year ending December 31, 2014 the operator of these leases and wells reported that 62 wells were being worked on for a return to production, i.e. those with a working interest, out of a total 24 wells being prepared for a return to production.
   
  Oil Field Services and Transportation

The Company in the quarter acquired transportation and oil field service equipment, office furniture and equipment, land and buildings located in Kentucky, and the Company established an operating division in Albany, Kentucky. The Company reported the assets acquired in our 8k filings.

The Company plans to utilize these assets to explore, develop and produce form its own interests in leases and oil wells, and to provide contracting services to local oil field companies including the operator of certain leases and wells in which the company has a revenue interest in as described above. The Company may bill for the use of its equipment or personnel at a fixed fee or at cost plus percentage basis. We expect that up to $150,000 in working capital may be required for providing such services in the fourth quarter of 2014.

The Company expects initial revenue to occur in the fourth quarter, and the equipment acquired can also be used in its internal operations thus reducing reliance and cost on outside contractors.

Results of Operations for the Twelve Months Ended December 31, 2014 and 2013

Revenues

First Colombia Gold had not generated any revenues from operations since our inception through August 2014, however, September due to our recent acquisition of oil interests we received revenue of $2,230.46.  In total, we received $22,726 in revenue through December 31, 2014 as a result of our oil acquisition. We had zero revenue in the year ended December 31, 2013,
 
 
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Operating Expenses

We reported operating expenses in the amount of $56,064,409 for the twelve months ending December 31, 2014, an increase of $55,791,099.  Of that number, $32,212 was depreciation and amortization and $433,229 was operating expenses related to the oil acquisition.  The remaining $55,598,968 was stock compensation related to numerous issuances in conjunction compensation and services booked at a variety of market prices throughout the year ending December 31, 2014. For the year ending December 31, 2013 we had operating expenses of $273,310, which included $182,299 in general and administrative expenses and $41,600 in mining exploration and an impairment charge of $36,650. The majority of the increasing expenses in 2014 was the result of $53,997,637 in stock issued compensation.

Other Income/Expense

The Company recorded net other income of $1,252,681 an increase of $2,104,290 which was mostly the result of gain on derivative liabilities of $3,503,865 for the twelve months ended December 31, 2014. We recorded interest expense of $1,795,289 for the 2014 fiscal year. The derivative ability is premeasured quarterly. For the year ended December 31, 2013 we recorded $851,609 in other expenses including interest expense of $456,156.

Net Income (Loss)

As a result of the above mentioned items, for the twelve months ended December 31, 2014, we reported a net loss of $54,811,728 for the year ending December 31, 2014.and a net loss for the year ended December 31, 2013 of $1,124,919 which was an increase of $53,686,809 for the factors cited above,

Liquidity and Capital Resources

At December 31, 2014, we had cash and cash equivalents of $33,833, compared to $0 at December 31, 2013.  

Our present capital resources are insufficient to commence and sustain all planned acquisition, development and exploration activity. The company elected to re-focus its mining division on exploration in its existing areas of focus to determine acquisitions of more advanced properties, and retain its Skip claims for initial exploration. We estimate that for the next twelve months our mining division will require up to $100,000 in working capital for these plans. For our energy division we estimate that our oil field services division will require up to $200,000 in working capital, and our oil and gas operations require a minimum of $200,000 up to $400,000 for our activities which are geared to steadily establishing and increasing production from existing wells.
 
In addition to any expenditures related to any exploration activity, our business plan provides for spending of approximately $20,000 in ongoing general and administrative expenses per month for the next twelve months, for a total anticipated expenditure for general and administrative expenses of $240,000 over the next twelve months. The general and administrative expenses for the year will consist primarily of professional fees for the audit and legal work relating to our regulatory filings throughout the year, as well as transfer agent fees and general office expenses. Management compensation is forecast at approximately $144,000 for the next 12 months.

We have only recently generated our first revenue and while we are planning to increase our revenue quarterly there is no assurance we will be successful in doing so, or that any such revenue would be sufficient to meet our working capital needs.
 
Accordingly, we must obtain additional financing in order to continue our plan of operations during and beyond the next twelve months, which would include being able to sustain any exploration, development and production activity. We believe that traditional debt financing may not be an alternative for funding additional phases of exploration, development or production activities in the current lending environment, but over time if we are successful in our business plan revenue increases may improve our borrowing capability. We anticipate that additional funding will be in the form of equity financing from the sale of our common stock and the issuance of convertible notes. We cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our implement our current business plan, or any acquisition of additional property interests. Any issuance of common stock would dilute the interests of our existing stockholders. In the absence of such financing, we will not be able to pursue our business plan and may not be able to maintain our property interests in good standing. If we are unable to raise additional capital in the near future, we will experience liquidity problems and we would need to curtail operations, liquidate assets, seek additional capital on less favorable terms and/or pursue other remedial measures.

We may consider entering into a joint venture arrangement to provide the required funding to explore and develop the properties underlying our interests. We have not undertaken any efforts to locate a joint venture participant. Even if we determine to pursue a joint venture participant, there is no assurance that any third party would enter into a joint venture agreement with us in order to fund exploration of the properties underlying our mineral property interests. If we enter into a joint venture arrangement, we would likely have to assign a percentage of our interest in property interests to the joint venture participant.

The company has been dependent on convertible note financing which can be highly dilutive to existing shareholders, and there is no assurance the company can continue to receive such financing.

Cash Used in Operating Activities
 
 
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Operating cash flows for the period ending December 31, 2014 were a negative $56,064,409. The increase in negative cash flow from operations is due to increases in debt discount amortization, origination interest, and stock issued for services, offset by gain on derivative liabilities.
  
Cash Used in Investing Activities

For the year ended December 31, 2014, we used $0 in investing activities, as compared to $4,150 used in investing activities during the twelve months ended December 31, 2013.The Company during the nine month period ending September 30, 2014 acquired oil and gas interests for $261,000, in a non-cash transaction, and certain real property (building, land, transportation equipment, office equipment) for $261,000, in a non-cash transaction.

Cash from Financing Activities
 
We have financed our operations primarily by using existing capital reserves, notes payable and through private placements of our stock. Net cash flows provided by financing activities for the nine months ended September 30, 2014 was $852,700. Net cash flows provided by financing activities for the nine months ended September 30, 2013 was $60,000, which consisted entirely of proceeds of convertible notes issued to a private party in 2013.

Commitments

Cash Payments and Exploration Expenditures

Our plans to make cash payments for expenses and liabilities, and incur exploration and development expenditures in connection with our mining and energy divisions are described above in Part II of this Annual Report on Form 10-K. We are required to make certain payments as required by regulation for permitting and remediation efforts that at present cannot be quantified for future quarters. We describe in Part II of this Annual Report on Form 10-K the expenditures forecast for the fourth quarter, which include expenditures required to maintain the assets acquired.
 

Off Balance Sheet Arrangements

We do not have any off-balance sheet debt nor did we have any transactions, arrangements, obligations (including contingent obligations) or other relationships with any unconsolidated entities or other persons that may have material current or future effects on financial conditions, changes in the financial conditions, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenue or expenses.

Going Concern

The continuity of our future operations is dependent on our ability to obtain financing and upon future acquisition, exploration and development of profitable operations from our mineral properties. These conditions raise substantial doubt about our ability to continue as a going concern.

Critical Accounting Policies

Our interim consolidated financial statements have been prepared in conformity with GAAP. For a full discussion of our accounting policies as required by GAAP, refer to our Annual Report on Form 10-K for the year ended December 31, 2014. We consider certain accounting policies to be critical to an understanding of our consolidated financial statements because their application requires significant judgment and reliance on estimations of matters that are inherently uncertain. The specific risks related to these critical accounting policies are unchanged at the date of this report and are described in detail in our Annual Report on Form 10-K.

The Company during the quarter began a second operating division which will operate in the energy field, the Company expects additional critical accounting policies in relation to oil and gas production will be in place during the fourth quarter of the current fiscal year. The Company has adopted “full cost” accounting for its oil and gas activities as further described in notes to our financial statements, which include cost ceiling test analysis and a revision to our asset retirement obligation calculations.

  Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not Applicable.
 
  Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures
 
 
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Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2014.  In making this assessment, management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The COSO framework summarizes each of the components of a company’s internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring. In management’s assessment of the effectiveness of internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) as required by Exchange Act Rule 13a-15(c), our management concluded as of the end of the fiscal period covered by this Yearly Report on Form 10-K that our internal control over financial reporting has not been effective. The company intends, prior to the next fiscal year as the company's finances improve, to hire additional accounting staff and implement additional controls.
 
As defined by Auditing Standard No. 5, “An Audit of Internal Control Over Financial Reporting that is Integrated with an Audit of Financial Statements and Related Independence Rule and Conforming Amendments,” established by the Public Company Accounting Oversight Board ("PCAOB"), a material weakness is a deficiency or combination of deficiencies that results more than a remote likelihood that a material misstatement of annual or interim financial statements will not be prevented or detected. In connection with the assessment described above, management identified the following control deficiencies that represent material weaknesses as of December 31, 2014:
 
i)  
Lack of segregation of duties.  At this time, our resources and size prevent us from being able to employ sufficient resources to enable us to have adequate segregation of duties within our internal control system.  Management will periodically reevaluate this situation.
 
ii)  
Lack of an independent audit committee. Although the Board of Directors serves an audit committee it is not comprised solely of independent directors. We may establish an audit committee comprised solely of independent directors when we have sufficient capital resources and working capital to attract qualified independent directors and to maintain such a committee.
 
iii)  
Insufficient number of independent directors. At the present time, our Board of Directors does not consist of a majority of independent directors, a factor that is counter to corporate governance practices as set forth by the rules of various stock exchanges.
 
Our management determined that these deficiencies constituted material weaknesses.  Due to a lack of financial resources, we are not able to, and do not intend to, immediately take any action to remediate these material weaknesses. We will not be able to do so until we acquire sufficient financing to do so.  We will implement further controls as circumstances, cash flow, and working capital permit.  Notwithstanding the assessment that our ICFR was not effective and that there were material weaknesses as identified in this report, we believe that our financial statements fairly present our financial position, results of operations and cash flows for the years covered thereby in all material respects.
 
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure.
 
Limitations on the Effectiveness of Internal Controls

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving our objectives and our Chief Executive Officer concluded that our disclosure controls and procedures are effective at that reasonable assurance level. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal controls over financial reporting during the year ended December 31, 2014 that have materially affected or are reasonably likely to materially affect such controls.

Subsidiaries

During 2010, we acquired a fifty percent interest in the issued and outstanding stock of Beardmore Holdings, Inc. (“Beardmore”), a corporation incorporated under the laws of Panama. Beardmore indirectly owns the mineral rights to certain properties located in Peru held by its subsidiary, Rio Santiago Minerales S.A.C. On September 21, 2011, we entered into a Settlement and Mutual Release Agreement, which resulted in us relinquishing our fifty percent interest in the outstanding capital stock of Beardmore and as a result, we no longer have any ownership interest in any subsidiary entities.
 
 
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ITEM 1A. Risk Factors.

You should carefully consider the following risk factors in evaluating our business and us. The factors listed below represent certain important factors that we believe could cause our business results to differ. These factors are not intended to represent a complete list of the general or specific risks that may affect us. It should be recognized that other risks may be significant, presently or in the future, and the risks set forth below may affect us to a greater extent than indicated. If any of the following risks occur, our business, financial condition or results of operations could be materially and adversely affected. You should also consider the other information included in this Annual Report and subsequent quarterly reports filed with the SEC.

Risk Factors

Risks Associated With Our Business

Our accountants have raised substantial doubt with respect to our ability to continue as a going concern.

As noted in our consolidated financial statements, we have incurred an accumulated net loss of $75,024,417 for the period from inception on September 5, 1997 to December 31, 2014 and have presently no source of revenue. At December 31, 2013, we had a working capital deficit of $963,352. As of December 31, 2013, we had cash and cash equivalents in the amount of $-0-. We will have to raise additional funds to meet our currently budgeted operating requirements for the next twelve months.

The audit report of Scrudato & Co., PA for the year ended December 31, 2014 contained a paragraph that emphasizes the substantial doubt as to our continuance as a going concern. This is a significant risk that we may not be able to generate or raise enough capital to remain operational for an indefinite period of time.

The audit report of Sadler Gibb and Associates for the year ended December 31, 2013 contained a paragraph that emphasizes the substantial doubt as to our continuance as a going concern. This is a significant risk that we may not be able to generate or raise enough capital to remain operational for an indefinite period of time.

In preparing our consolidated financial statements for the year ended December 31, 2014, our management identified material weaknesses in our internal control over financial reporting and our failure to remediate these material weaknesses could result in material misstatements in our consolidated financial statements and the loss of investor confidence in our reported financial information. Such weakness has neither been cured nor resolved during the year ended December 31, 2014.

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. Our management identified material weaknesses in our internal control over financial reporting as of December 31, 2014. Such weakness was not cured or resolved during the year ended December 31, 2014. A material weakness is defined as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. The material weaknesses identified by management as of December 31, 2014   were attributable to the size of the Company and the fact that we have only one financial expert on our management team and no audit committee. Although management believes that the material weakness set forth above has not had an effect on our financial statements, there can be no assurance that this will continue to be the case going forward.

If remedial measures are not taken or are insufficient to address this material weaknesses, or if additional material weaknesses or significant deficiencies in our internal control over our financial reporting are discovered or occur in the future, our consolidated financial statements may contain material misstatements and we could be required to restate our financial results. Any future restatement of consolidated financial statements could place a significant strain on our internal resources and harm our operating results. Further, any additional or un-remedied material weakness may preclude us from meeting our reporting obligations on a timely basis and cause investors to lose confidence in our reported financial information.

We may own options to acquire certain mining and mineral rights underlying certain properties and if we fail to perform the obligations necessary to exercise these options, we will lose our options and cease operations.

We have held and/or are re-negotiating renewals of options to acquire certain mining and mineral rights underlying properties located in Owyhee County, Idaho and Lincoln County, Montana, subject to certain conditions, and have a pending memorandum of understanding on the Nile Mine project. If we fail to meet the requirements of the agreement under which we acquired such options, including any cash payments to the option nor or any exploration obligations that we have regarding these properties, we may lose our right to exercise the options to acquire certain mining and mineral rights underlying these properties. If we do not fulfill these conditions, then our ability to commence or continue operations could be materially limited. Accordingly, any adverse circumstances that affect the areas covered by these options and our rights thereto would affect us and your entire investment in shares of our common stock. If any of these situations were to arise, we would need to consider alternatives, both in terms of our prospective operations and for the financing of our activities. Management cannot provide assurance that we will ultimately achieve profitable operations or become cash-flow positive, or raise additional debt and/or equity capital. If we are unable to raise additional capital in the near future, we will experience liquidity problems and management expects that we will need to curtail operations, liquidate assets, seek additional capital on less favorable terms and/or pursue other remedial measures, including ceasing operations. Our existing agreements are in default and while we hope to re-negotiate, we may not be successful.
 
 
17

 

We have a history of losses that we expect to continue into the future.

We have not yet located any mineral reserve and we have never had any revenues from our operations. In addition, we have a history of losses that we expect to continue into the future. We have acquired and taken steps to engage in the exploration and development of mineral property interest located in Owyhee County, Idaho, Lincoln County, Montana and eastern Washington. Our business plan and exploration efforts as to our existing mineral property interest are in its early stages and faces numerous regulatory, practical, legal and other obstacles. At this early stage of our operation, we also expect to face the risks, uncertainties, expenses and difficulties frequently encountered by companies at the start-up stage of their business development. We cannot be sure that we will be successful in addressing these risks and uncertainties, and our failure to do so could have a materially adverse effect on our financial condition.

No assurance can be given that we will be able to successfully complete the purchase of mining rights to any properties, including the ones for which we currently hold options. Our ability to achieve and maintain profitability and positive cash flow over time will be dependent upon, among other things, our ability to (i) identify and acquire gold mining properties or interests therein that ultimately have probable or proven gold reserves, (ii) sell such gold mining properties or interests to strategic partners or third parties or commence mining of gold, (iii) produce and sell gold at profitable margins, and (iv) raise the necessary capital to operate during this possible extended period of time. At this stage in our development, it cannot be predicted how much financing will be required to accomplish these objectives.

We have unsecured convertible notes that came due in 2014 and will continue to come due in 2015 and we have limited resources to pay these notes on the maturity date.

Over the last several years, we have been funding our operations through the sale of both equity and debt securities. We have $473,148 worth of convertible notes outstanding at December 31, 2014(net of unamortized discount).

If the note holder decides not to convert these notes to common stock, we will have an obligation on the maturity date of each note to pay the note holder all accrued interest and principal on such note. In such case, we would have to find sources of cash to re-pay the note holder and there can be no assurance such resources will be available.

We will need to raise funds through financings in the future, which would dilute the ownership of our existing stockholders and possibly subordinate certain of their rights to the rights of new investors or creditors.

We expect to seek additional funds in debt or equity financings if they are available to us on terms we believe reasonable to provide for working capital, carry out exploration programs or to make acquisitions. Any sales of additional equity or convertible debt securities would result in dilution of the equity interests of our existing stockholders, which could be substantial. Additionally, if we issue shares of preferred stock or convertible debt to raise funds, the holders of those securities might be entitled to various preferential rights over the holders of our common stock, including repayment of their investment. Such additional debt, if authorized, would create rights and preferences that would be senior to, or otherwise adversely affect, the rights and the value of our common stock and would have to be repaid from future cash flow.

If we fail to raise additional capital to fund our business growth and project exploration, our business could fail.
We have to raise significant amounts of capital to meet our anticipated needs for working capital and other cash requirements for the near term to explore our mining properties. We will attempt to raise such capital through the sale of common stock or debt instruments. However, there is no assurance that we will be successful in raising or borrowing sufficient additional capital and we have no arrangements for future financing and there can be no assurance that additional financing will be available to us. If adequate funds are not available or are not available on acceptable terms, our ability to fund our exploration projects, take advantage of potential acquisition opportunities, possibly develop or enhance its properties in the future or respond to competitive pressures would be significantly limited. Such limitation could have a material adverse effect on our business and financial condition and cause our business to fail.

We have no known reserves and we may not find any mineral resources or, if we find mineral resources, the deposits may be uneconomic or production from those deposits may not be profitable.

We have not established that any of the properties for which we hold options or mining claims contain adequate amounts of gold or other mineral reserves to make mining any of the properties economically feasible to recover that gold or other mineral reserves, or to make a profit in doing so. If we do not, our business will fail. If we cannot find economic mineral resources or if it is not economic to recover the mineral resources, we will have to cease operations.
  
We may not have access to all of the supplies and materials we need to begin exploration that could cause us to delay or suspend operations.
 
 
18

 

Competition and unforeseen limited sources of supplies in the industry could result in occasional spot shortages of supplies, such as explosives, and certain equipment, such as bulldozers and excavators, that we might need to conduct exploration. We have not attempted to locate or negotiate with any suppliers of products, equipment or materials. We will attempt to locate products, equipment and materials. If we cannot find the products and equipment we need, we will have to suspend our exploration plans until we do find the products and equipment we need.

Our success is dependent upon a limited number of people and we may not be able to attract and retain qualified personnel necessary for the implementation of our business strategy.

The ability to identify, negotiate and consummate transactions that will benefit us is dependent upon the efforts of our management team. The loss of the services of any member of our management could have a material adverse effect on not only the Company’s operational status, but also its financial health.

Our future success depends largely upon the continued service of board members, executive officers and other key personnel. Our success also depends on our ability to continue to attract, retain and motivate qualified personnel, particularly employees, consultants and contractors for our operations. Personnel do represent a significant asset, and the competition for such personnel is intense in the gold exploration industry. We may have particular difficulty attracting and retaining key personnel in the initial phases of our operations.

Our officers and directors do not devote full time to our operations.

Our officers do not devote their full time to our operations. Until such time that we can afford executive compensation commensurate `

Gold, Silver and mineral exploration is highly speculative in nature, involves substantial expenditures and is frequently non-productive.

Success in gold or other mineral exploration is dependent upon a number of factors including, but not limited to, quality of management, quality and availability of geological data and the expertise to interpret it, availability of trained miners and equipment and availability of exploration capital. The exploration process can be long and costly. Due to these and other factors, the probability of our identifying individual prospects having commercially significant reserves cannot be predicted. It is likely that many of the projects considered will not contain any commercially viable reserves. Consequently, substantial funds may be spent on project evaluation which may identify only a few, if any, projects having commercial development potential. In addition, if commercially viable reserves are identified, significant amounts of capital will be required to mine and process such reserves.

If we establish the existence of a mineral reserve on any of our properties, we will require additional capital in order to develop the property into a producing mine. If we cannot raise this additional capital, we will not be able to exploit the reserve and our business could fail.

If we do discover a mineral reserve on any of our properties, we will be required to expend substantial sums of money to establish the extent of the reserve, develop processes to extract it and develop extraction and processing facilities and infrastructure. Although we may derive substantial benefits from the discovery of a reserve, there can be no assurance that it will be large enough to justify commercial operations, nor can there be any assurance that we will be able to raise the funds required for development on a timely basis. If we cannot raise the necessary capital or complete the necessary facilities and infrastructure, our business may fail.
 
  Because we presently do not carry title insurance and do not plan to secure any in the future, we are vulnerable to loss of title.

We do not maintain insurance against title. Title on mineral properties and mining rights involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyance history characteristic of many mining properties. Disputes over land ownership are common, especially in the context of resource developments. We cannot give any assurance that title to such properties will not be challenged or impugned and cannot be certain that we will have or acquire valid title to these mining properties. The possibility also exists that title to existing properties or future prospective properties may be lost due to an omission in the claim of title. As a result, any claims against us may result in liabilities we will not be able to afford, resulting in the failure of our business.

Because we are subject to various governmental regulations and environmental risks, we may incur substantial costs to remain in compliance.

Our activities are subject to regulations regarding environmental matters, the abstraction of water, and the discharge of mining wastes and materials. Any significant mining operations will have some environmental impact, including land and habitat impact, arising from the use of land for mining and related activities, and certain impact on water resources near the project sites, resulting from water use, rock disposal and drainage run-off. No assurance can be given that such environmental issues will not cause our operations in the future to fail.
 
 
19

 

We could be required to remedy any negative environmental impact. The costs of such remediation could cause us to fail. Future environmental laws and regulations could impose increased capital or operating costs on us and could restrict the development or operation of any gold mines.

We have, and will in the future, engage consultants to assist us with respect to our operations. We are beginning to address the various regulatory and governmental agencies, and the rules and regulations of such agencies, in connection with our mineral property interests. No assurances can be given that we will be successful in our efforts. Further, in order for us to operate and grow our business, we need to continually conform to all applicable laws, rules and regulations. It is possible that the legal and regulatory environment pertaining to the exploration and development of gold mining properties will change. Uncertainty and new regulations and rules could dramatically increase our cost of doing business, or prevent us from conducting its business; both situations could cause us to fail.

Mineral exploration and development is subject to extraordinary operating risks. We do not currently insure against these risks. In the event of a cave-in or similar occurrence, our liabilities may exceed our resources, which could cause our business to fail.

Mineral exploration, development and production, involves many risks which even a combination of experience, knowledge and careful evaluation may not be able to overcome. Our operations will be subject to all the hazards and risks inherent in the exploration, development and production of resources, including liability for pollution, cave-ins or similar hazards against which we cannot insure or against which we may elect not to insure. Any such event could result in work stoppages and damage to property, including damage to the environment. We do not currently maintain any insurance coverage against these operating hazards. The payment of any liabilities that arise from any such occurrence could cause us to fail.

Mineral prices are subject to dramatic and unpredictable fluctuations.

We expect to derive revenues, if any, from the extraction and sale of precious and base metals such as gold and silver. The price of those commodities has fluctuated widely in recent years, and is affected by numerous factors beyond our control including international, economic and political trends, expectations of inflation, currency exchange fluctuations, interest rates, global or regional consumptive patterns, speculative activities and increased production due to new extraction developments and improved extraction and production methods. The effect of these factors on the price of base and precious metals, and, therefore, the economic viability of any of our exploration projects, cannot accurately be predicted.
 
The mining industry is highly competitive and there is no assurance that we will continue to be successful in acquiring property interests. If we cannot continue to acquire interests in properties to explore for mineral resources, we may be required to reduce or cease operations.

The mineral exploration, development, and production industry is largely unintegrated. We compete with other exploration companies looking for mineral resource properties. While we compete with other exploration companies in the effort to locate and license mineral resource properties, we will not compete with them for the removal or sales of mineral products from our properties if we should eventually discover the presence of them in quantities sufficient to make production economically feasible. Readily available markets exist worldwide for the sale of gold and other mineral products. Therefore, we will likely be able to sell any mineral products that we identify and produce.

We compete with many companies possessing greater financial resources and technical facilities. This competition could adversely affect our ability to acquire suitable prospects for exploration in the future as well as our ability to recruit and retain qualified personnel. Accordingly, there can be no assurance that we will acquire any interest in additional mineral resource properties that might yield reserves or result in commercial mining operations.

Legislation has previously been proposed that would significantly affect the mining industry.

Periodically, members of the U.S. Congress have introduced bills which would supplant or alter the provisions of the U.S. General Mining Law of 1872, which governs the unpatented claims that we control. One such amendment has become law and has imposed a moratorium on patenting of mining claims, which reduced the security of title provided by unpatented claims. Other bills have proposed, among other things, to make permanent the patent moratorium, to impose a federal royalty on production from unpatented mining claims and to declare certain lands as unsuitable for mining. If additional legislation is enacted, it could substantially increase the cost of holding unpatented mining claims by requiring payment of royalties, and could significantly impair our ability to develop mineral estimates on unpatented mining claims. Although it is impossible to predict at this time what royalties may be imposed in the future, the imposition of such royalties could adversely affect the potential for development of such mining claims. Passage of such legislation could adversely affect our business

We are subject to environmental laws, regulations and permits that may subject us to material costs, liabilities and obligations.

We are subject to environmental laws, regulations and permits in the various jurisdictions in which we operate, including those relating to, among other things, the removal and extraction of natural resources, the emission and discharge of materials into the environment, including greenhouse gas emissions, plant and wildlife protection, remediation of soil and groundwater contamination, reclamation and closure of properties, including tailings and waste impoundments, groundwater quality and availability, and the handling, storage, transport and disposal of wastes and hazardous materials. Pursuant to such requirements we may be subject to inspections or reviews by governmental authorities.
 
 
20

 
 
Failure to comply with these environmental requirements may expose us to litigation, fines or other sanctions, including the revocation of permits and suspension of operations. We expect we may incur in the future significant capital and other compliance costs related to such requirements. These laws, regulations and permits, and the enforcement and interpretation thereof, change frequently and generally have become more stringent over time.

We could be liable for any environmental contamination at or from our or our predecessors’ currently or formerly owned or operated properties or third-party waste disposal sites. Certain environmental laws impose strict joint and several liabilities for releases of hazardous substances at such properties or sites, without regard to fault or the legality of the original conduct. Accordingly, we may be held responsible for more than our share of the contamination or other damages, up to and including the entire amount of such damages. In addition to potentially significant investigation and remediation costs, such matters can give rise to claims from governmental authorities and other third parties, including for orders, inspections, fines or penalties, natural resource damages, personal injury, property damage, toxic torts and other damages.

Our costs, liabilities and obligations relating to environmental matters could have a material adverse effect on our financial performance, financial position and results of operations
 
  We are required to obtain, maintain and renew environmental, construction and mining permits, which is often a costly and time-consuming process.

Mining companies, including ours, need many environmental, construction and mining permits, each of which can be time-consuming and costly to obtain, maintain and renew. In connection with our current and future operations, we must obtain and maintain a number of permits that impose strict conditions, requirements and obligations, including those relating to various environmental and health and safety matters. To obtain, maintain and renew certain permits, we may in the future be required to conduct environmental studies, and make associated presentations to governmental authorities, pertaining to the potential impact of our current and future operations upon the environment and to take steps to avoid or mitigate those impacts. Permit terms and conditions can impose restrictions on how we conduct our operations and limit our flexibility in developing our mineral properties. Many o permits are subject to renewal from time to time, and renewed permits may contain more restrictive conditions than our existing permits, including those governing impacts on the environment. In addition, we may be required to obtain new permits, and the grant of such permits may be subject to an expansive governmental review of our operations. Alternatively, we may not be successful in obtaining such permits, which could prevent us from commencing or expanding operations or otherwise adversely affect our business. Renewal of existing permits or obtaining new permits may be more difficult if we are not able to comply with our existing permits. Applications for permits, permit area expansions, and permit renewals can also be subject to challenge by interested parties, which can delay or prevent receipt of needed permits. In addition, the permitting process can vary by jurisdiction in terms of its complexity and likely outcomes. The applicable laws and regulations, and the related judicial interpretations and enforcement policies, change frequently, which can make it difficult for us to obtain and renew permits and to comply with applicable requirements. Accordingly, permits required for our operations may not be issued, maintained or renewed in a timely fashion or at all, may be issued or renewed upon conditions that restrict our ability to conduct our operations economically, or may be subsequently revoked. Any such failure to obtain, maintain or renew permits, or other permitting delays or conditions, including in connection with any environmental impact analyses, could have a material adverse effect on our business, results of operations and financial condition.

Risks Relating to our Common Stock

Trading on the OTC pink sheets may be volatile and sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell their shares.

We have convertible notes outstanding that may be converted, at a discount, into shares of our common stock thus increasing the number of shares issued and outstanding we have and having a potential negative effect on our stock price.

We have never paid dividends and have no plans to in the future.

Holders of shares of our common stock are entitled to receive such dividends as may be declared by our board of directors. To date, we have paid no cash dividends on our shares of common stock and we do not expect to pay cash dividends on our common stock in the foreseeable future. We intend to retain future earnings, if any, to provide funds for operation of our business. Therefore, any return investors in our common stock will have to be in the form of appreciation, if any, in the market value of their shares of common stock.

We have additional securities available for issuance, which, if issued, could adversely affect the rights of the holders of our common stock.

Our Articles of Incorporation authorize the issuance of 850,000,000 shares of our common stock and 200,000,000 shares of blank check preferred stock. The common stock or blank check preferred stock can be issued by our board of directors, without stockholder approval. Any future issuances of our common stock would further dilute the percentage ownership of our common stock held by public shareholders. The Company has filed a certificate of designation for 50,000,000 of the blank check preferred shares previously authorized to be designated as Preferred A shares, described above, which are redeemable at $01 per share, and convertible to two common shares,; The company has filed a certificate of designation for 33,181,818 shares of the blank check preferred shares previously authorized to be designated as Preferred B shares, described above, and convertible to one common shares,;
 
 
21

 

On January 31, 2013, the a majority of the Company’s stockholders approved an increase in the authorized common stock from 200,000,000 shares of common stock to 850,000,000 shares of common stock. Then again in August of 2014, a majority of the shareholders approved increasing the authorized common stock to 5,000,000,000 shares. Again, in November of 2014, a majority of the shareholders approved increasing the authorized common stock to 10,000,000,000 shares.

If we issue shares of blank check preferred stock with superior rights than our common stock, it could result in the decrease in the value of our common stock and delay or prevent a change in control by outside third parties.

Our board of directors is authorized to issue up to 116,818,182 shares of blank check preferred stock. Our board of directors has the power to establish the dividend rates, liquidation preferences, voting rights, redemption and conversion terms and privileges with respect to any series of blank check preferred stock. The issuance of any shares of blank check preferred stock having rights superior to those of the common stock may result in a decrease in the value or market price of the common stock. Holders of blank check preferred stock may have the right to receive dividends, certain preferences in liquidation and conversion rights. The issuance of blank check preferred stock could, under certain circumstances, have the effect of delaying, deferring or preventing a change in control of us without further vote or action by the shareholders and may adversely affect the voting and other rights of the holders of common stock.
 
 The following describes Preferred A and Preferred B stock authorized from the blank check stock previously designated, thus reducing the amount of blank check  stock that may be issued in the future.

On November 14, 2012, the Company approved the terms of Preferred A stock which included a convertibility feature by which each share of Preferred A stock was convertible to two shares of common stock, and carried voting rights as if converted. In January 2013, the Company issued 47,568,500 shares of the Preferred A stock. The Company filed a Certificate of designation for the Preferred A stock with the Secretary of State of Nevada, and on February 13, 2013 filed a definitive 14C statement, with an effective date of March 25, 2013.
 
The Board of Directors Company approved the terms of Preferred B stock which included a convertibility feature by which each share of Preferred B stock was convertible to one share of common stock, and carried voting rights of sixty percent of the total voting rights of the company.  On January 20, 2014, the Company issued 2,000,000 shares of the Preferred B stock. The Company filed a Certificate of designation for the Preferred B stock with the Secretary of State of Nevada, and on December 13, 2013.

Because the SEC imposes additional sales practice requirements on brokers who deal in our shares that are penny stocks, some brokers may be unwilling to trade them. This means that you may have difficulty in reselling your shares and may cause the price of the shares to decline.

Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in, and limit the marketability of, our common stock.
 
In addition to the “penny stock” rules promulgated by the Securities and Exchange Commission, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative, low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock.
 
Our stock price is likely to be highly volatile because of several factors, including a limited public float.
 
 
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The market price of our common stock is likely to be highly volatile because there has been a relatively thin trading market for our stock, which causes trades of small blocks of stock to have a significant impact on our stock price. You may not be able to resell shares of our common stock following periods of volatility because of the market’s adverse reaction to volatility.

Other factors that could cause such volatility may include, among other things:

·
actual or anticipated fluctuations in our operating results;
 
·
the absence of securities analysts covering us and distributing research and recommendations about us;

·
we expect our actual operating results to continue to fluctuate;
 
·
we may have a low trading volume for a number of reasons, including that a large amount of our stock is closely held;

·
overall stock market fluctuations;
 
·
economic conditions generally and in the mining industries in particular;

·
announcements concerning our business or those of our competitors or vendors;
 
·
our ability to raise capital when we require it, and to raise such capital on favorable terms;

·
conditions or trends in the industry;

·
litigation;
 
·
changes in market valuations of other similar companies;

·
announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships or joint ventures;
 
·
future sales of common stock;

·
actions initiated by the SEC or other regulatory bodies;

·
departure of key personnel or failure to hire key personnel; and
 
·
general market conditions.
 
·
* convertible note holders have the right to convert the notes to common shares at a discount which could have the effect of depressing the stock price

Any of these factors could have a significant and adverse impact on the market price of our common stock. In addition, the stock market in general has at times experienced extreme volatility and rapid decline that has often been unrelated or disproportionate to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock, regardless of our actual operating performance.

ITEM 1B. Unresolved Staff Comments.

None.

ITEM 2. Properties.

Description of our Mineral Property Interests

South Idaho Silver Project

On December 7, 2011 (the “Effective Date”), we entered into a Assignment and Assumption Agreement (“Assignment Agreement”) with Castle Creek Silver, Inc. (“Castle Creek”), a Idaho corporation, and Robert Ebisch (‘Ebisch”). Castle Creek and Ebisch are parties to an Option to Purchase and Royalty Agreement dated July 15, 2011 (the “Option Agreement”), for Castle Creek’s option to acquire an undivided 100% of the right, title and interest of Ebisch in and to the PB 7, 9, 11, 12, 23, 25, 27, and 29 lode mining claims (IMC #’s, respectively, 196852, 196854, 196856, 196857, 196866, 196867, 196868, and 196869), situated in Owyhee County, Idaho, (hereinafter together with any
 
 
23

 
form of successor or substitute mineral tenure called the “South Idaho Silver Project”). Pursuant to the terms of the Assignment Agreement, Castle Creek transferred and assigned us all of its right, title and interest, in, to and under the Option Agreement and we assumed the assignment of the Option Agreement agreeing to be bound, the same extent as Castle Creek, to the terms and conditions of the Option Agreement. As consideration for the Assignment Agreement, we issued Castle Creek 1,000,000 restricted shares of our common stock and are obligated to pay Castle Creek $50,000 in cash within twelve (12) months of the Effective Date, which is December 7, 2012, and Castle Creek will be entitled to a 1% net smelter return (“NSR”) from any ore produced from the South Idaho Silver Project. At any time from the Effective Date, we have the right to acquire the 1% NSR payable to Castle Creek for $250,000.

We received a waiver on the payments of $2,500 to Castle Creek, making it due on March 31, 2013.

The Assignment Agreement includes customary representations and warranties. Under the terms of the Assignment Agreement, Castle Creek and Ebisch have agreed to indemnify us from claims resulting from any breach or inaccuracy of any representation or warranty made by Castle Creek or Ebisch in the Assignment Agreement and for any breaches of any representations, warranties, obligations, terms or covenants of either Castle Creek or Ebisch under or pursuant to the Option Agreement.

The Option Agreement and assignment of Castle Creek’s right, title and interest, in, to and under the Option Agreement provide that we will have exercised the option to acquire an undivided 100% of Ebisch’s right, title and interest in and to the South Idaho Silver Project after incurring an aggregate of $210,000 in exploration expenditures, paying Ebisch an aggregate of $80,000 plus five per cent (5%) of any joint-venture and buyout payments (hereafter referred to as “JV&BP”) and paying filing fees over the term of the Option Agreement. The Option Agreement provides that the cash payments payable to Ebisch shall be made according to the following schedule:

·
$2,500 on or before January 31, 2012 plus five per cent (5%) of any JV&BP;(paid)
·
$2,500 on or before September 15, 2012 plus five per cent (5%) of any JV&BP;(waived until March 31,2013and by June 30,2013);(paid)
·
$5,000 on or before September 15, 2013 plus five per cent (5%) of any JV&BP; plus as per the waiver an additional $1,500;(unpaid)
·
$10,000 on or before September 15, 2014 plus five per cent (5%) of any JV&BP;
·
$15,000 on or before September 15, 2015 plus five per cent (5%) of any JV&BP;
·
$20,000 on or before September 15, 2016 plus five per cent (5%) of any JV&BP; and
    ·
$25,000 on or before September 15, 2017 plus five per cent (5%) of any JV&BP.
 
The Company (see below) has elected subsequent to September 30,2014, to either re-negotiate the agreement under similar terms outlined above and below,  or to utilize the database of exploration information developed to target through re-staking and leasing from the Ebisch party  a more favorable geological land position.
 
The Option Agreement provides that the exploration expenditures of an aggregate of not less than $210,000 on the Property shall be incurred as follows:

·
on or before April 15, 2012, incur not less than an aggregate of $10,000 in exploration expenditures;(in aggregate $10,000incurred)
 
·
on or before September 15, 2012, incur not less than an aggregate of $20,000 in exploration expenditures;(waived until June 20,2013)(in aggregate $30,620 incurred within the time frame)

·
on or before September 15, 2013, incur not less than an aggregate of $100,000 in exploration expenditures; and( not  incurred)

on or before September 15, 2014, incur not less than an aggregate of $210,000 in exploration expenditures.
 
In addition to the foregoing cash payments, exploration expenditures and filing fees, we will be responsible for the following, in order to maintain our interest in the South Idaho Silver Project:

make advance royalty payments to Ebisch, commencing on September 15, 2015 and continuing on the 15th day of September each and every year thereafter for so long as we or our assigns retains an interest in the South Idaho Silver Project, of $25,000 per year; and
 
incur a minimum of $100,000 of annual exploration expenditures on the South Idaho Silver Project on or before September 15th each and every year after September 15, 2015, which could be offset by exploration expenditures in excess of $100,000 in any prior annual period.
 
On 7 December 2012, the Company entered into an agreement with Castle Creek to waive certain required cash payment and/or exploration expenditure related to the South Idaho Property until renegotiation after 31 March 2013 and before 30 June 2013, provided that a cash payment of $1,200 is paid prior to 31 March 2013 (paid).
 
 
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On 31 May 2013, the Company entered into an agreement with Castle Creek to waive certain required cash payment and/or exploration expenditure related to the South Idaho Property until 15 July 2013, provided that a cash payment of $3,500 is paid prior to 15 July 2013 (unpaid). Further, the Company may secure a waiver at any time during the year ended 31 December 2013 for the requirements that become due in 2014 in exchange for cash payment of or issuance of common shares valued at $50,000 (Note 10).
 
The Company has elected to not continue this agreement under current financial terms, and use its database developed to guide exploration efforts to re-stake the mining claims to a more geologically advantageous location, and as described above look to considering negotiating a similar agreement with the Ebisch interests with less short term cash requirements,  or re-target our area of operations in the district.

Description of South Idaho Silver Project

In connection with our consideration of entering into the Assignment Agreement, we conducted a diligence review of the South Idaho Silver Project. The description of property contained herein is the product of our due diligence of the South Idaho Silver Project underlying the Option Agreement.
 
 
Property Description and Location

The general location of the South Idaho Silver Project is identified on the map below:
 
 
Location, Area, and Type of Mineral Tenure

The South Idaho Silver Project lies about 49 miles south of Boise, Idaho on the flanks of the Snake River Plain, a vast graben-like physiographic region. The South Idaho Silver Project lies in Sections 14 and 15, Township 6 South, Range 1 West, Boise Meridian, Owyhee County, Idaho. Mineral rights are held by eight federal unpatented lode mining clams. These cover approximately 160 acres (65 hectares).
 
 
25

 
PROPERTY CORNER COORDINATES- UTM NAD 27 CONUS
 
NORTHING
 
EASTING
     
4750115
 
545650
4750115
 
546100
4749755
 
546100
4749755
 
547000
4749215
 
547000
4749215
 
546550
4749125
 
546550
4749125
 
546370
4749575
 
546370
4749575
 
545650

The eight unpatented mining claims are numbered PB 7 (IMC # 196852), PB 9 (IMC # 196854), PB 11 (IMC # 196856), PB 12 (IMC # 196857), PB 23 (IMC # 196866), PB 25 (IMC # 196867), PB 27 (IMC # 196868), and PB 29 (IMC # 196869).

Our ability to explore and mine the South Idaho Silver Project depends on the validity of title to the South Idaho Silver Project. The South Idaho Silver Project consists of unpatented mining claims. Maintenance of rights to unpatented mining claims contain certain requirements including sufficiency of mineral discovery, proper posting and marking of boundaries, failure to meet statutory guidelines, assessment work and possible conflicts with other claims. We have not obtained a title opinion nor title insurance on the underlying unpatented claims at this exploration stage.

Accessibility, Climate, Local resources, Infrastructure, Physiography

Topography, Elevation, and Vegetation

The South Idaho Silver Project is a steeply-incised drainage that drops about two hundred meters from the peneplain that lies to the immediate north. The elevation of the South Idaho Silver Project is about 3,937 feet above mean sea level. Vegetation consists primarily of sagebrush and short grasses.

Accessibility
The South Idaho Silver Project is readily accessed from Nampa, Idaho, which lies on Federal Interstate Highway 84. Nampa is the nearest large town that has services necessary for mineral exploration and mining. From Nampa, paved State Highway 78 is followed about 43 miles to the south to the Oreana turnoff. From there, about 3 miles of paved road and 6 miles of dirt road lead to the property. Unimproved tracks provide access to the claim group. Road access to the south side of the South Idaho Silver Project is limited. Mechanized work there may require construction of a temporary creek crossing, although one unimproved road crosses the South Idaho Silver Project at a ford.

  Climate
The climate is semi-arid with roughly 5.9 inches per year precipitation. Summer temperatures may rise to 104 degrees Fahrenheit while winter temperatures may fall to as low as 14 degrees Fahrenheit. The South Idaho Silver Project is commonly subject to strong winds. The South Idaho Silver Project can be accessed year-round because of the mild climate, good road access, and low elevation of about 3,937 feet above mean sea level.

Water Rights, Power, and Mining Personnel
The status of water rights at the South Idaho Silver Project is uncertain. The amount of water in the vicinity of the South Idaho Silver Project is adequate for exploratory drilling, but probably not for mineral processing. The nearest power lines are about 6 miles. Mining personnel are not available locally.

The most important natural feature on the South Idaho Silver Project is a perennial stream called castle creek. During the summer, it has estimated that it flows at a minimum rate of several hundred gallons per minute. A temporary water withdrawal permit from the State of Idaho would be required for drill water. If such a permit would be granted, water might be pumped to any drill site, with a substantial cost savings on water truck rental and driver wages. There is no assurance such a permit would be granted, and if granted requirements to such a permit would be cost-effective.

Tailings Storage Areas, Waste Disposal Areas, and Plant Sites

We have not identified private land adjacent to the South Idaho Silver Project or within close proximity that could be used for potential storage areas, waste disposal or processing sites. There is public land in the vicinity, but it is unknown whether permits would be granted for such uses.

Previous Exploration History

There is no verifiable information that the South Idaho Silver Project was a producing property in the past. Prior site visits indicate that up to one hundred meters of historic underground workings exist on the South Idaho Silver Project. These may have been completed approximately 100 years ago. It is unknown the state of repair of these workings and the extent of accessibility. No mineralized material or reserves have been identified or quantified on the South Idaho Silver Project. No known production has come from the South Idaho Silver Project.
 
 
26

 

In 2008, two private individuals located various mining claims in the area including those described herein and leased to a private exploration company, Castle Creek, which retained a professional geologist whose site visits and data review, are the primary source of the historical information described herein.

Geological Setting and Local Geology

The South Idaho Silver Project lies upon the margins of the Snake River Plain, a vast graben-like, Cenozoic Age structure that covers a large part of southern Idaho. Regionally, several mineral districts lie along the margin of the Snake River Plain.

The geology consists primarily of a Late Cretaceous Age granodiorite which hosts veins and breccia bodies that contain gold, silver, lead, zinc, copper sulfide mineralization. The granodiorite and breccias are covered locally by Tertiary Age, post-mineral basalts. The breccia bodies are the primary target on the South Idaho Silver Project. What are believed to be high-grade veins are of secondary interest.

Property Geology

Granite is widespread and covered locally by post-mineral basalts. Faulting consists primarily of extensional block-faulting. The granite commonly contains large xenoliths of schist. Locally, the granite has undergone argillic and silicic alteration. Veins and breccias of interest on the Property are granite-hosted. A detailed geologic map has not yet been completed on the South Idaho Silver Project.

  Potential Deposit Type

Two potential deposit types are of interest at the South Idaho Silver Project. The first of these is the hydrothermal breccias that are found in several areas. The extent of this type of mineralization is uncertain. The second potential deposit type is high-grade quartz/sulfide veins that may be genetically associated to the breccias. An exploration program has been planned to identify steeply-dipping pipe-like bodies of quartz/sulfide mineralization. Both types of mineralization are probably of epithermal origin. Little data on the potential deposit types is available because the South Idaho Silver Project is in such an early stage of contemporary exploration.

Mineralization

Rock samples taken primarily from a sulfide-rich, siliceous hydrothermal breccia and associated rocks on the south side of the Property in 2008 by the prior owner give indication of the presence of gold and silver mineralization within a hydrothermal breccia. The breccia is hosted by altered granodiorite. The breccia contains locally massive pyrite, galena, sphalerite, arsenopyrite, chalcopyrite within a siliceous, sulfide-bearing matrix. Clasts within the breccia consist of dark grey rhyolite with semi-massive sulfides, massive pyrite with base metal sulfides and massive arsenopyrite, and light-grey quartz. Besides gold and silver, the mineralization contains anomalous arsenic, copper, lead, and zinc mineralization.

The geologic control on this breccia mineralization is uncertain. The breccia lies in the vicinity of the intersection of two topographic lineaments which control the orientation of the Property. The length, width, depth, and continuity of both the breccia mineralization and sporadic vein mineralization are uncertain.

Metallurgical

No metallurgical testing has been conducted.
Reserves

There are no established probable or proven reserves on the South Idaho Silver Project.
 
Exploration

Only a limited amount of work has been completed on the South Idaho Silver Project. This work has been confined primarily to rock sampling at historic prospects. The rock samples taken were grab samples indicating mineralization that are not representative of any specific length or width of mineralization. They do not reflect the average grade of mineralization on any of the mineralized zones sampled. The rock sampling completed thus far has shown primarily that mineralization of interest is found in several areas of the South Idaho Silver Project. The geologic and geochemical surveys completed on the South Idaho Silver Project have been done a professional geologist.

We are not aware of any drilling that has been completed on the South Idaho Silver Project.

Exploration Plan
 
 
27

 

Our primary exploration plan in this under-explored area is to discover and focus on areas of known gold/silver breccias mineralization; emphasizing exploration near the approximate intersection of northerly and easterly-trending topographic linears.

The above strategies would greatly limit the areas to be investigated by geophysics and possible subsequent drilling, which is anticipated to result in cost savings. However, all prospects in the area should have at least a cursory examination.

 Comprehensive underground mapping and sampling of accessible historic mine workings is recommended. This will help determine the extent and average grade of mineralization on the property. Geophysics may also be necessary to enhance target definition. An Induced Polarization(IP) /Resistivity survey is recommended to delineate sub-surface sulfide mineral distribution. Gold/Silver mineralization found thus far often correlates positively with sulfide content.

On the eight-claim South Idaho Silver Project, several areas of structural intersections should be evaluated using electrical geophysical methods. These should be followed-up by drilling to test for any depth extension of the mineralization. An itemized budget for this work is shown below:

   
Proposed Budget
 
       
Geologist
 
$
45,000
 
Geotech
 
$
20,000
 
Geophysics
 
$
25,000
 
Field Expenses
 
$
10,000
 
Lease Payments
 
$
25,000
 
Bond
 
$
10,000
 
Site Prep/Reclamation
 
$
10,000
 
Water Truck
 
$
18,000
 
Assays
 
$
25,000
 
Drilling (1,200 meters @ $135/meter)
 
$
162,000
 
         
TOTAL
 
$
350,000
 
 
This work plan may be accomplished in a two-phase plan with the initial budget of $210,000 required meet work requirements required in the Option Agreement, for the period from 2012 to 2014. While the Company has determined it will re-stake the mining claims in a more geologically advantageous area, the forecast budget remains the same as the same tasks are required, and the Company will consider working under the past agreement with the Ebisch interests provided either cash is available, or short term cash requirements are modified.

Our current cash on hand is insufficient to complete any of the planned exploration activities and the full implementation of any planned exploration program is dependent on our ability to secure sufficient financing. We can provide no assurance that we will secure sufficient financing. In the absence of such financing, we will not be able to pursue our planned exploration program and may not be able to maintain the option to acquire the South Idaho Silver Project or underlying mining claims in good standing. If we do not fulfill the terms of the Assignment Agreement or Option Agreement, then our ability to commence or continue operations could be materially limited. We also may be forced to abandon the South Idaho Silver Project. If we are unable to raise additional capital within the next twelve months, we will experience liquidity problems and management expects that we will need to curtail operations, liquidate assets, seek additional capital on less favorable terms and/or pursue other remedial measures. We may consider entering into a joint venture arrangement to provide the required funding to explore the South Idaho Silver Project. We have not undertaken efforts to locate a joint venture participant and there is no assurance that any third party would enter into a joint venture agreement with us in order to fund exploration of the South Idaho Silver Project. If we were to enter into a joint venture arrangement, we would likely have to assign a percentage of our interest in South Idaho Silver Project to the joint venture participant.
 
In 2012 we completed our review and compilation of historical documents, and have revise dour exploration plan note above to two different phases splitting up the forecast drilling program.  In 2013 our efforts focused on reviewing the required permits and land position of  our claims, and it was determined that the Company should re-stake the claims to claim a more advantageous claim position.

Boulder Hill Project

Purchase and Sale Agreement of Unpatented Mining Claims
 
 
28

 

On December 16, 2011, we entered into a Purchase and Sale Agreement (“Purchase Agreement”) with Boulder Hill Mines Inc., an Idaho corporation (“Boulder Hill”) relating to the purchase from Boulder Hill of three unpatented mining claims situated in Lincoln County, Montana (the “Boulder Hill Claims”). As consideration for the Boulder Hill Claims, we issued Boulder Hill 500,000 restricted shares of our common stock, are obligated to pay Boulder Hill $25,000 in cash within twelve (12) months of the Effective Date, which is December 16, 2012, and $25,000 in cash within twenty-four (24) months of the Effective Date, which is December 16, 2013. Boulder Hill sold, transferred and conveyed the Claims to us by executing and delivering quitclaim deeds to us.

We received a waiver of the $25,000 cash payment requirement, such payment is now due in May 2013.

The Purchase Agreement includes customary representations and warranties. Under the terms of the Purchase Agreement, Boulder Hill has agreed to indemnify us from claims resulting from any breach or inaccuracy of any representation or warranty made by Boulder Hill in the Purchase Agreement.

Assignment and Assumption of Lease Agreement

On December 16, 2011 (the “Effective Date”), we entered into an Assignment and Assumption Agreement (“Boulder Hill Assignment Agreement”) with Boulder Hill, and Jim Ebisch (“Ebisch”). Boulder Hill and Ebisch are parties to an Option to Purchase and Royalty Agreement dated July 15, 2008, as amended on August 1, 2011 (the “ Boulder Hill Option Agreement”) which granted to Boulder Hill an option to acquire an undivided 100% of the right, title and interest of Ebisch in and to that certain Montana State Metal ferrous Gold Lease M-1974-06 dated August 21,2006 he entered into with the State of Montana (the “Montana Gold Lease”) under which Ebisch was granted the exclusive right to prospect, explore, develop and mine for gold, silver and other minerals on property situated in Lincoln County, Montana. The Montana Gold Lease is for a ten (10) year term and is subject to the 5% net smelter return due to the State of Montana. Pursuant to the terms of the Boulder Hill Assignment Agreement, Boulder Hill transferred and assigned us all of its right, title and interest, in, to and under the Option Agreement and we assumed the assignment of the Boulder Hill Option Agreement agreeing to be bound, the same extent as Boulder Hill, to the terms and conditions of the Boulder Hill Option Agreement. As consideration for the Boulder Hill Assignment Agreement, we issued Boulder Hill 500,000 restricted shares of our common stock and are obligated to pay Boulder Hill $25,000 in cash within twelve (12) months of the Effective Date, which is December 16, 2012,waived until May 2013, and $25,000 in cash within twenty-four (24) months of the Effective Date, which is December 16, 2013.

The Boulder Hill Assignment Agreement includes customary representations and warranties. Under the terms of the Boulder Hill Assignment Agreement, Boulder Hill and Ebisch have agreed to indemnify us from claims resulting from any breach or inaccuracy of any representation or warranty made by Boulder Hill or Ebisch in the Boulder Hill Assignment Agreement and for any breaches of any representations, warranties, obligations, terms or covenants of either Boulder Hill or Ebisch under or pursuant to the Boulder Hill Option Agreement.

The Boulder Hill Option Agreement and assignment of Boulder Hill’s right, title and interest, in, to and under the Boulder Hill Option Agreement provide that we will have exercised the option to acquire an undivided 100% of Ebisch’s right, title and interest in and to the Montana Gold Lease after incurring an aggregate of $210,000 in exploration expenditures, paying Ebisch an aggregate of $80,000 plus five per cent (5%) of any joint-venture and buyout payments (hereafter referred to as ”JV&BP”) and paying filing fees over the term of the Boulder Hill Option Agreement. Our responsibility for the foregoing exploration expenditures and cash payments is inclusive of exploration expenditures incurred by Boulder Hill to the present and payments previously made by Boulder Hill to Ebisch under the terms of the Boulder Hill Option Agreement.

 The Boulder Hill Option Agreement provides that the cash payments payable to Ebisch shall be made according to the following schedule:

·
$20,000 on or before October 14, 2012 plus five per cent (5%) of any joint-venture and buyout payments (hereafter referred to as “JV&BP”), of which an initial payment of $3,000 is to be made on or before October 30, 2011 ($3,000 paid, with the balance of $17,000 waived until May 2013);

·
$15,000 on or before July 15, 2013 plus five per cent (5%) of any JV&BP; (unpaid)

·
$20,000 on or before July 15, 2014 plus five per cent (5%) of any JV&BP; and

·
$25,000 on or before July 15, 2015 plus five per cent (5%) of any JV&BP.

The Option Agreement provides that the exploration expenditures of an aggregate of not less than $210,000 on the property underlying the Montana Gold Lease shall be incurred as follows:

·
on or before August 1, 2012, incur not less than an aggregate of $49,000 in exploration expenditures(this requirement has been waived until  May 2013- and was not met); and

·
on or before August 1, 2013, incur not less than an aggregate of $210,000 in exploration expenditures (not incurred)
 
 
 
29

 
 
In addition to the foregoing cash payments and exploration expenditures, we will be responsible for paying filing fees over the term of the Boulder Hill Option Agreement and the following in order to maintain Ebisch’s interest in the Montana Gold Lease:

In addition to the foregoing cash payments and exploration expenditures, we will be responsible for paying filing fees over the term of the Boulder Hill Option Agreement and the following in order to maintain Ebisch’s interest in the Montana Gold Lease:

·
make advance royalty payments to Ebisch, commencing on July 15, 2015 and continuing on the 15th day of July each and every year thereafter for so long as the Company or its assigns retains its interest in the in order to maintain Ebisch’s interest in the Montana Gold Lease, of $25,000 per year; and

·
incur a minimum of $100,000 of annual exploration expenditures on the property underlying the in order to maintain Ebisch’s interest in the Montana Gold Lease on or before July 15th each and every year after July 15, 2011, which could be offset by exploration expenditures in excess of $100,000 in any prior annual period.

Description of Boulder Hill Project

In connection with our consideration of entering into the foregoing agreements, we conducted a diligence review. The Claims and the property that is subject to the Montana Gold Lease are being referred to by us as the “Boulder Hill Project.” The description of the property underlying the Boulder Hill Project that is contained herein is the product of the Company’s due diligence review.
 
Location
 
The general location of the Boulder Hill is identified on the map below:
 
 
 
30

 
 
The Boulder Hill Project consists of approximately 60 acres comprised of three unpatented mining claims (the “Claims”) and an option to acquire certain rights under a contiguous lease with the State of Montana (Montana State Metalliferrous Gold Lease M-1974-06, the “Montana Gold Lease”) of approximately 114 acres located in Lincoln County, Montana. The property underlying the Claims and Montana Gold Lease lie in Township 29 North, Range 27 West, Montana Principal Meridian.

Land Status

Mineral rights on federal unpatented lode mining claims can be held indefinitely as long as the annual claim maintenance payments are current. At the present time, all of the required annual claim maintenance payments for the Claims have been made. The initial term on the Montana Gold Lease is for a ten-year period commencing on August 21, 2006, which may be renewable. The total area consisting of the Boulder Hill Project consists of approximately 174 acres. The total annual property maintenance costs due the state and federal government for the Boulder Hill Project is currently about $800/year.

History

The Boulder Hill Project contains several historic prospect pits and adits, which we believe were excavated in the late 19th century or early 20th century. Bright white quartz veins with low gold contents attracted early prospectors to the Boulder Hill Project area. In 1995, during a regional reconnaissance conducted by Jim Ebisch, these original mine workings were sampled. Quartz vein samples from these historic workings were found in 1995 to contain low-grade gold; however, one prospect pit further down the hill, also originally sampled at the same time, contained altered, siliceous metasediments that have a far different appearance than that of the bright white quartz veins. These metasediments, poorly exposed in the prospect pit, were found to contain gold grades much higher than that of the bright white quartz veins that attracted historic attention. We have not independently verified this information and can provide no assurance that any of our exploration work will result in similar results.

 
Regional Geology

The Boulder Hill Project is located within an area that includes the Belt Basin of the northwestern United States. Mineralization is hosted by the Precambrian Age Prichard Formation. The Boulder Hill Project lies near the crest of the Wolf Creek Anticline. The rocks exposed in that area are thought to belong to the G Member of the Prichard Formation. The Boulder Hill Project also lies immediately south of the Wolf Creek Fault, an important regional structure.

Boulder Hill Project Geology

Structurally the Boulder Hill Project is on the downthrown side of the Wolf Creek fault, and the project is considered by us as a stratiform sulfide target within the Middle Prichard Formation in Lincoln County, Montana

Our exploration plan at the Boulder Hill Project is designed to target what are believed to be Stratabound gold occurrences. Poorly-exposed gold mineralization found during the aforementioned reconnaissance exploration at the Boulder Hill Project within a prospect trench in 1995 is in contrast to the bright white quartz veins that were of historic interest. The rocks containing the gold mineralization found in 1995 consisted of silicified, sericitized, and pyritic to locally gossanous metasediments. We have not independently verified this historical information and can provide no assurance that any of our exploration work will result in similar results.

Project Infrastructure, Access and Power

The Boulder Hill Project is located in an area of low-lying hills, away from residential areas. A paved road, a power line, and a railway line passes within one mile of the subject area. An improved gravel road passes by northwestern portion of the property. Skid trails lead to the area where the gold mineralization was found during the 1995 exploration and a subsequent follow-up site visit in 2008 by Mr. Ebisch. There are no accessible tunnels or shafts on the subject area. The source of water for proposed drilling is currently uncertain, which may require initially hauling of water for drilling purposes.

Reserves

There are no established probable or proven reserves on the property underlying the Boulder Hill Project. Our due diligence activities have been limited, and to a great extent, have relied upon information provided to us by third parties. We have not established and cannot provide any assurance that any of the properties underlying the Boulder Hill Project contain adequate, if any, amounts of gold or other mineral reserves to make mining economically feasible to recover those gold or other mineral reserves, or to make a profit in doing so.

Proposed Exploration Plan

Several phases of exploration work will be necessary to move forward this project. Each successive phase of work is contingent upon the results of previous phases. The first phase will require geological mapping and sampling. Concurrent with this work, excavation of trenches on the underlying property will be necessary to expose and sample mineralization of interest. Geophysics may also be done on the property if the mineralization found by trenching has characteristics that lend to detection by geophysical methods. The total cost of this work is estimated to be $49,500.
 
 
31

 

The second phase of work will involve limited drilling, consisting of 3-5 diamond drill holes. These will test for near-surface strata bound gold. The total cost of this work is estimated to be $214,500.
 
The third phase of work will involve the drilling of one-two deep drill holes, each with an estimated depth of 1,500 feet. These will test for deep strata bound gold close to the Wolf Creek Fault. The total cost of this work is estimated to be $338,000.
 
Our current cash on hand is insufficient to complete any of the activities set forth in our planned exploration program. We have postponed the commencement of any exploration and development program until such time that we are able to secure sufficient financing, however we continued review of historical records for revising the below plan in 2013. We can provide no assurance that we will be successful in securing sufficient financing. Provided we are able to secure sufficient financing, we anticipate that we will incur the following costs for the next twelve months:

Proposed Exploration Budget
Stage 1 (Trenching and Geophysics)
 
Permitting and Bonding
 
$
6,500
 
Trench rehabilitation, new trenching, surveying and sampling
 
$
9,500
 
Supervision, geologic mapping and reporting
 
$
10,000
 
Analyses (100 samples @ $40 each)
 
$
4,000
 
Geophysics & Reclamation
 
$
15,000
 
Administration & overhead @ 10%
 
$
4,500
 
Subtotal
 
$
49,500
 

Stage 2 (Shallow Drilling)
 
Permitting and Bonding
 
$
10,000
 
Surface diamond drilling 3-5 holes @ 400 ft depth average @ $70/ft
 
$
140,000
 
Site Preparation & Reclamation
 
$
10,000
 
Supervision, core logging, sampling and reporting
 
$
25,000
 
Analyses (100 samples @ $50 each)
 
$
5,000
 
Core Handling/Storage
 
$
5,000
 
Administration & overhead @ 10%
 
$
19,500
 
         
Subtotal
 
$
214,500
 

Stage 3 (Deep Drilling)
 
Permitting and Bonding
 
$
5,000
 
Surface diamond drilling 2 holes @ 1,500 feet each @$90/foot
 
$
270,000
 
Site Preparation & Reclamation
 
$
3,000
 
Supervision, core logging, sampling, and reporting
 
$
20,000
 
Analyses (100 samples @$50/each)
 
$
5,000
 
Core Handling/Storage
 
$
5,000
 
Administration & overhead @ 10%
 
$
30,800
 
         
Subtotal
 
$
338,800
 
         
Grand Total
 
$
602,800
 
 
This exploration plan may change or be terminated depending on the results from each stage of exploration. We project that permitting activities will be prepared after the initial 2013 site visits. The Company is re-evaluating the proposed budget in light of its decision to not pursue the State Lease further , but to focus on unpatented mining claims in the area, which the Company believes may reduce the above exploration budget by ten percent, however the Company will if financially abel to seek tore-instate the prior agreement with the Ebisch interests.

The Peru Property and Settlement and Mutual Release Agreement
 
 
32

 

We entered into a Mineral Right Option Agreement with Temasek on September 18, 2008, as amended and supplemented by Amendment No. 1 dated May 12, 2009 (“Amendment No. 1”), Amendment No. 2 dated February 3, 2010 (“Amendment No. 2”), and Amendment No. 3 dated June 25, 2010 (“Amendment No. 3”) (collectively, the “ Temasek Option Agreement”). Pursuant to the Temasek Option Agreement, we acquired from Temasek a fifty percent equity interest in Beardmore Holdings, Inc. (“Beardmore”) and had the option to acquire the remaining fifty percent equity interest in Beardmore from Temasek, which would have resulted in our ownership of one hundred percent of Beardmore’s equity. Beardmore indirectly holds, through its subsidiary Rio Santiago Minerales S.A.C., certain mineral rights (the “Mineral Rights”) underlying properties located in Peru.

Under the terms of Amendment No. 3, we would have increased our ownership interest in the Mineral Rights from fifty percent to one-hundred percent resulting in its acquisition of all of the outstanding capital stock of Beardmore, if we had fulfilled the following conditions (collectively the “Temasek Option Requirements”) within ten business days following the effective date of Amendment No. 3:

·
Completion of the exercise of options resulting in our acquisition of a fifty percent interest in the Mineral Rights through our acquisition of fifty percent of the outstanding capital stock of Beardmore;
·
Issuance to Temasek of a total of 11,000,000 shares of our common stock (of which 5,000,000 shares were previously issued to Temasek);
·
Payment to Temasek of US $250,000 (which such payment was acknowledged by Temasek to have been made in March 2010);
·
Issuance of a convertible note for US $250,000 (the “$250,000 Convertible Note”) payable to the order and the direction of Temasek (which was issued on June 25, 2010); and
·
Issuance of a convertible note for US $3,250,000 (the “$3,250,000 Convertible Note” and, collectively with the $250,000 Convertible Note, the “Convertible Notes”) payable to the order and the direction of Temasek (which was issued on June 25, 2010).
 
The $250,000 Convertible Note had a term of ninety days and accrued interest at a rate of 12% per annum. We failed to pay the principle and interest under the $250,000 Convertible Note upon maturity, which caused us to default on the $250,000 Convertible Note.

The $3,250,000 Convertible Note had a term of three years and accrued interest at a rate of 12% per annum. Interest was payable annually and the principal was to be paid upon maturity.

As of the date we were required to fulfill the Temasek Option Requirements under Amendment No. 3, we did not issue the 6,000,000 shares of our common stock to Temasek and defaulted on the $250,000 Convertible Note resulting from our failure to pay the principal plus interest on such note on its maturity date. This also resulted in the options to acquire the remaining fifty percent interest in the Mineral Rights (which would have resulted in our acquisition of a one hundred percent interest in the Mineral Rights) having lapsed as of July 5, 2010.

On September 21, 2011, we entered into a Settlement and Mutual Release Agreement (“Settlement Agreement”) with Temasek, which resulted in our relinquishment and transfer to Temasek of our fifty percent interest in the outstanding capital stock of Beardmore in exchange for Temasek releasing us from all of our outstanding obligations under the terms of the Temasek Option Agreement. By execution of the Settlement Agreement, we no longer held any interest, directly or indirectly, in the Mineral Rights.

Under the terms of the Settlement Agreement, the $250,000 Convertible Note and the $3,250,000 Convertible Note were cancelled and we are no longer obligated to issue Temasek 6,000,000 shares of our common stock in exchange for our relinquishment and transfer to Temasek of our fifty percent interest in the outstanding capital stock of Beardmore. We are not entitled to recover any consideration previously paid to Temasek or any mineral property exploration expenditures incurred in connection with the exploration and development of the properties underlying the Mineral Rights. The Settlement Agreement included a mutual release of all claims arising out of or relating to the Option Agreement.

Skip Silver Prospect

The Company has staked two unpatented mining claims covering approximately forty acres in Montana in the vicinity of the Baltimore Silver Mine project. The property has no established reserves nor any history of production. The Company has not completed an initial geologic mapping nor a review of historical data on the project. The claims staked are part of ongoing work conducted in 2012 to identify potential mineral prospects for acquisition.

Location and Access

The property is approximately five miles from Boudler, Montana. Access is by unimproved county road.
 
Geology

The geology of the area is dominated by the monzonites of the Butte Batholith intruding into the older Elkhorn volcanics, consisting of green-gray welded tuffs and schists. East-westerly striking pyrite-galena bearing quartz veins have been deposited along or near to fault or shear zones in the area with some sericitic alteration. We do not know currently to what extent whether regional fault or shear zones extend onto this prospect.
 
 
33

 

Climate

The climate is temperate, and the elevation is estimated at 6,000 feet.

Metallurgy

There are no metallurgical testing results available to the Company.

Reserves

There no established reserves on the property.

Prior Production History

There is no recorded prior production history.

Exploration Plans

The Company intends to follow-up on 2012 site visits and initial surveying conducted for filing the claims by preparing advanced geologic maps, soil sampling, and further review of regional and local geology. The Company intends to actively seek joint-venture partners for the project. We estimate 2014 exploration to begin in May 2014, and our estimated costs for exploration in 2014 range from $5,000 to $25,000 depending n financial resources available.

Nile Mine Project

Memorandum of Understanding to Earn-Interest in the Nile Mine Project

On May 1, 2013, First Colombia Gold Corp. (the “Company”) with GMRV, a branch of 4uX, LLC, a private Montana company (“GMRV”) entered into a Memorandum of Understanding (“MOU”) to enter into a Definitive Agreement within 180 days for the Company to earn a fifty percent interest in the Nile Mine project. The Company has not entered into a final and definitive agreement at this time. The description of the project may be found and hereby incorporated by reference in our 8k filing of May 1, 2013

The Company has not finalized a definitive agreement  and is in negotiation to establish a definitive agreement on the project.

ITEM 3. Legal Proceedings.

None.

ITEM 4. Mine Safety Disclosures.
 
Not Applicable.
 
 
 
PART II
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.


Holders of Common Stock

As of December 31, 2014, we had approximately one hundred nine (109) holders of record of our common stock. Several other shareholders hold shares in street name. Several other shareholders hold shares in street name; we estimate that there are approximately 1,200 shareholders in this category.
 
 
Dividend Policy

To date, we have not declared or paid cash dividends on our shares of common stock. The holders of our common stock will be entitled to non-cumulative dividends on the shares of common stock, when and as declared by our board of directors, in its discretion. We intend to retain all future earnings, if any, for our business and do not anticipate paying cash dividends in the foreseeable future.
 
 
34

 
Any future determination to pay cash dividends will be at the discretion of our board of directors and will be dependent upon our financial condition, results of operations, capital requirements, general business conditions and such other factors as our board of directors may deem relevant.

Securities Authorized for Issuance under Equity Compensation Plans

Our board of directors adopted the 2007 Stock Incentive Plan (the “Stock Incentive Plan”) in April 2007. The number of shares of common stock issuable under the Stock Incentive Plan was reduced from 10,000,000 shares to 500,000 shares resulting from the one share-for-twenty shares reverse stock split of our Common Stock (“reverse split”) which became effective at the close of business on June 6, 2008. As of December 31, 2011, there were no outstanding awards granted under the Stock Incentive Plan. After an adjustment to give effect to the reverse split, 500,000 shares remain available under the Stock Incentive Plan for future equity grants as of December 31, 2013.

The Stock Incentive Plan authorizes us to grant awards in the form of shares of common stock, including unrestricted shares of common stock; options to purchase shares of common stock; stock appreciation rights or similar rights with a fixed or variable price related to the fair market value of the shares of common stock and with an exercise or conversion privilege related to the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions; any other security with the value derived from the value of the shares of common stock, such as restricted stock and restricted stock units; deferred stock units; dividend equivalent rights; or any combination of the foregoing.

The Stock Incentive Plan allows for the grant of incentive stock options, non-qualified stock options and restricted stock awards. The exercise price of any option shall be determined at the time the option is granted by the board of directors. However, the exercise price may generally not be less than 100 percent of the fair market value of the shares of common stock on the date of the grant. Each option expires on the date determined by the board of directors, but not later than ten years after the grant date. The board of directors may determine in its discretion whether any option shall be subject to vesting and the terms and conditions of any such vesting. The Stock Incentive Plan also provides for the immediate vesting of options, as well as authorizes the board of directors, or any committee thereof, to cancel outstanding options or to make adjustments to the transfer restrictions on those options in the event of certain changes in corporate control of the company. Awards, including options, made under the Stock Incentive Plan are not assignable and also subject to any restrictions and conditions imposed by the board of directors, or any committee thereof.
 
The following table sets forth certain information regarding the Stock Incentive Plan as of December 31, 2014:
Plan category
 
Number of securities
to be issued upon
exercise of outstanding
options, warrants
and rights
(a)
 
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
 
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
(c)
             
Equity compensation plans approved
by stockholders
 
-
 
-
 
-
Equity compensation plans not approved
by stockholders 1
 
-
 
-
 
500,000
Total
 
-
 
-
 
500,000
______________
1
The Stock Incentive Plan was approved by our board of directors in April 2007 and 500,000 shares remain available for future awards under the Stock Incentive Plan as of December 31, 2014.

Recent Issuances of Unregistered Securities

Other than as described below, there were no issuances of securities without registration under the Securities Act of 1933 during the reporting period which were not previously included in a Quarterly Report on Form 10-Q or Current Report on Form 8-K.
 
On July 25, 2014, the Company entered in convertible note agreement with a private and accredited investor, Anubis Capital, in the amount of $149,500, unsecured, with principal and interest amounts due and payable upon maturity on July 25, 2015 (the “Anubis Note #1”). After six months, the note holder has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Company’s stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .03% to .08%; Dividend rate of 0%; and, historical volatility rates ranging from 875.95% to 887.82%.
 
 
35

 

On August 20, 2014, the Company entered in convertible note agreement with a private and accredited investor, LDM Limited, in the amount of $222,150, unsecured, with principal and interest amounts due and payable upon maturity on August 20, 2015 (the “LDM #1”). After six months, the note holder has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Company’s stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .03% to .08%; Dividend rate of 0%; and, historical volatility rates ranging from 875.95% to 887.82%.

On August 24, 2014, the Company entered in convertible note agreement with a private and accredited investor, Fire Hole Capital, in the amount of $100,000, unsecured, with principal and interest amounts due and payable upon maturity on August 24, 2015 (the “FHC #1”). After six months, the note holder has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Company’s stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .03% to .08%; Dividend rate of 0%; and, historical volatility rates ranging from 875.95% to 887.82%.


On August 26, 2014, the Company entered in convertible note agreement with a private and accredited investor, LG Capital, in the amount of $105,000, unsecured, with principal and interest amounts due and payable upon maturity on August 26, 2015 (the “LG Note #1”). After six months, the note holder has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Company’s stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .03% to .08%; Dividend rate of 0%; and, historical volatility rates ranging from 875.95% to 887.82%.

On August 29, 2014, the Company entered in convertible note agreement with a private and accredited investor, Union Capital, in the amount of $100,000, unsecured, with principal and interest amounts due and payable upon maturity on August 29, 2015 (the “Union Note #1”). After six months, the note holder has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Company’s stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .03% to .08%; Dividend rate of 0%; and, historical volatility rates ranging from 875.95% to 887.82%.

On September 3, 2014, the Company entered in convertible note agreement with a private and accredited investor, JSJ Capital, in the amount of $100,000, unsecured, with principal and interest amounts due and payable upon maturity on September 3, 2015 (the “JSJ Note #1”). After six months, the note holder has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Company’s stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .03% to .08%; Dividend rate of 0%; and, historical volatility rates ranging from 875.95% to 887.82%.

On September 15, 2014, the Company entered in convertible note agreement with a private and accredited investor, Adar Bays, in the amount of $50,000, unsecured, with principal and interest amounts due and payable upon maturity on September 15, 2015 (the “Adar Bays Note #1”). After six months, the note holder has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Company’s stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .03% to .08%; Dividend rate of 0%; and, historical volatility rates ranging from 875.95% to 887.82%.

On October 14, 2014, the Company entered in convertible note agreement with a private and accredited investor, Vista Capital, in the amount of $25,000, unsecured, with principal and interest amounts due and payable upon maturity on October 15, 2015 (the “Vista Note #1”). After six months, the note holder has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Company’s stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .03% to .08%; Dividend rate of 0%; and, historical volatility rates ranging from 875.95% to 887.82%.

On October 16, 2014, the Company entered in convertible note agreement with a private and accredited investor, Auctus Private Equity, in the amount of $70,000, unsecured, with principal and interest amounts due and payable upon maturity on October 16, 2015 (the “Auctus Note #1”). After six months, the note holder has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Company’s stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .03% to .08%; Dividend rate of 0%; and, historical volatility rates ranging from 875.95% to 887.82%.

 
36

 
On October 22, 2014, the Company entered in convertible note agreement with a private and accredited investor, JMJ Capital, in the amount of $50,000, unsecured, with principal and interest amounts due and payable upon maturity on October 22, 2015 (the “JMJ #1”). After six months, the note holder has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Company’s stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .03% to .08%; Dividend rate of 0%; and, historical volatility rates ranging from 875.95% to 887.82%.

On October 27, 2014, the Company entered in convertible note agreement with a private and accredited investor, Iconic Capital, in the amount of $50,000, unsecured, with principal and interest amounts due and payable upon maturity on October 27, 2015 (the “ICONIC #1”). After six months, the note holder has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Company’s stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .03% to .08%; Dividend rate of 0%; and, historical volatility rates ranging from 875.95% to 887.82%.
 
On October 27, 2014, the Company entered in convertible note agreement with a private and accredited investor, Eastmore Capital, in the amount of $93,500, unsecured, with principal and interest amounts due and payable upon maturity on October 27, 2015 (the “EASTMORE #1”). After six months, the note holder has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Company’s stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .03% to .08%; Dividend rate of 0%; and, historical volatility rates ranging from 875.95% to 887.82%.

On November 6, 2014, the Company entered in convertible note agreement with a private and accredited investor, Coventry Capital, in the amount of $50,000, unsecured, with principal and interest amounts due and payable upon maturity on November 6, 2015 (the “COVENTRY #1”). After six months, the note holder has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Company’s stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .03% to .08%; Dividend rate of 0%; and, historical volatility rates ranging from 875.95% to 887.82%.

On November 10, 2014, the Company entered in convertible note agreement with a private and accredited investor, JSJ Capital, in the amount of $50,000, unsecured, with principal and interest amounts due and payable upon maturity on November 10, 2015 (the “JSJ #2”). After six months, the note holder has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Company’s stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .03% to .08%; Dividend rate of 0%; and, historical volatility rates ranging from 875.95% to 887.82%.

On November 18, 2014, the Company entered in convertible note agreement with a private and accredited investor, Chicago Venture Group, in the amount of $50,000, unsecured, with principal and interest amounts due and payable upon maturity on November 18, 2015 (the “CVG #1”). After six months, the note holder has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Company’s stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .03% to .08%; Dividend rate of 0%; and, historical volatility rates ranging from 875.95% to 887.82%.

On November 19, 2014, the Company entered in convertible note agreement with a private and accredited investor, Iconic Capital, in the amount of $100,000, unsecured, with principal and interest amounts due and payable upon maturity on November 19, 2015 (the “ICONIC #2”). After six months, the note holder has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Company’s stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .03% to .08%; Dividend rate of 0%; and, historical volatility rates ranging from 875.95% to 887.82%.

On December 4, 2014, the Company entered in convertible note agreement with a private and accredited investor, Sojourn Investments, in the amount of $15,000, unsecured, with principal and interest amounts due and payable upon maturity on December 4, 2015 (the “SOJOURN #1”). After six months, the note holder has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Company’s stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .03% to .08%; Dividend rate of 0%; and, historical volatility rates ranging from 875.95% to 887.82%.

 
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On December 16, 2014, the Company entered in convertible note agreement with a private and accredited investor, Union Capital, in the amount of $100,000, unsecured, with principal and interest amounts due and payable upon maturity on December 16, 2015 (the “UNION #2”). After six months, the note holder has the option to convert any portion of the unpaid principal balance into the Company’s common shares at any time. The Company has determined that the conversion feature in this note is not indexed to the Company’s stock, and is considered to be a derivative that requires bifurcation. The Company calculated the fair value of this conversion feature using the Black-Scholes model and the following assumptions: Risk-free interest rates ranging from .03% to .08%; Dividend rate of 0%; and, historical volatility rates ranging from 875.95% to 887.82%.

The Company issued this Note convertible into shares of the Company’s restricted common stock, in a transaction pursuant to exemptions from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). The investors of these notes were “accredited investor,” as such term is defined in Rule 501(a) of Regulation D of the Securities Act. The Transactions were made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act and Rule 506 of Regulation D of the Securities Act. The sale of the Notes did not involve a public offering and was made without general solicitation or general advertising. Neither the Notes nor the underlying shares of Common Stock issuable upon the conversion of the Notes have been registered under the Securities Act and neither may be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

There were no other issuances of unregistered securities in the calendar year ended December 31, 2014.

ITEM 6. Selected Financial Data.

Not applicable.

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” appearing elsewhere in this Annual Report on Form 10-K.
 
Off Balance Sheet Arrangements

We do not have any off-balance sheet debt nor did we have any transactions, arrangements, obligations (including contingent obligations) or other relationships with any unconsolidated entities or other persons that may have material current or future effects on financial conditions, changes in the financial conditions, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenue or expenses.

Going Concern

We have incurred accumulated net losses for the period from inception on September 5, 1997 to December 31, 2014 and have little revenue. The continuity of our future operations is dependent on our ability to obtain financing and upon future acquisition, exploration and development of profitable operations from our mineral properties. These conditions raise substantial doubt about our ability to continue as a going concern.

Critical Accounting Policies

In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We believe the following critical accounting estimates affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:

Mineral property costs

Mineral property acquisition costs are initially capitalized as tangible assets when purchased. At the end of each fiscal quarter end, we assess the carrying costs for impairment. If proven and probable reserves are established for a property and it has been determined that a mineral property can be economically developed, costs will be amortized using the units-of-production method over the estimated life of the probable reserve.

Mineral property exploration costs are expensed as incurred.

Estimated future removal and site restoration costs, when determinable are provided over the life of proven reserves on a units-of-production basis. Costs, which include production equipment removal and environmental remediation, are estimated each period by management based on current regulations, actual expenses incurred, and technology and industry standards. Any charge is included in exploration expense or the provision for depletion and depreciation during the period and the actual restoration expenditures are charged to the accumulated provision amounts as incurred.
 
 
38

 

As of the date of these consolidated financial statements, we have not established any proven or probable reserves on our mineral properties and incurred only acquisition and exploration costs.

Although we have taken steps to verify title to mineral properties in which it has an interest, according to the usual industry standards for the stage of exploration of such properties, these procedures do not guarantee the Company’s title. Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects.

Convertible debt

The Company has adopted ASC 470-20, “Debt with Conversion and Other Options” and applies this guidance retrospectively to all periods presented upon those fiscal years. The Company records a beneficial conversion feature related to the issuance of convertible debts that have conversion features at fixed or adjustable rates. The beneficial conversion feature for the convertible instruments is recognized and measured by allocating a portion of the proceeds as an increase in additional paid-in capital and as a reduction to the carrying amount of the convertible instrument equal to the intrinsic value of the conversion features. The beneficial conversion feature will be accreted by recording additional non-cash interest expense over the expected life of the convertible notes.

As of January 1, 2013, it was determined that the conversion features in the convertible debt were derivative liabilities. Accordingly, we have separately measured and accounted for these derivative liabilities, in accordance with ASC 815-15 for both December 31, 2013 and 2014.

Recent Accounting Pronouncements
 
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk.

Not applicable.

ITEM 8. Financial Statements and Supplementary Data.

The financial statements are listed in Part IV Item 15 of this Annual Report on Form 10-K and are incorporated by reference in this Item 8.

ITEM 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.

The audit report of Sadler Gibb and Associates on the consolidated financial statements of the Company for the year ended December 31, 2013 did not contain an adverse opinion or disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles, except that the audit reports on the consolidated financial statements of the Company for the fiscal year ended December 31, 2013contained an uncertainty about the Company’s ability to continue as a going concern.

Sadler Gibb and Associates formerly the independent registered public accountant for First Colombia Gold, Inc. (“the Company”) resigned as the Company’s independent registered public accountant during 2014, there were no accounting issues cited.
ITEM 9A. Controls and Procedures.
 
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Based on their evaluation as of December 31, 2014,and as of December 31,2014, the end of the period covered by this Annual Report on Form 10-K, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective at a reasonable assurance level to ensure that the information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, including this Annual Report, were recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and was accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. The conclusion of our management was based on the material weaknesses described below is Management’s Report on Internal Control over Financial reporting.
 
Management’s Report on Internal Control over Financial Reporting
 
 
39

 

Our management (primarly our Chief Executive and Chief Financial Officers) is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
 
·
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
·
Provide reasonable assurance that the 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
·
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.
 
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

 
In connection with the filing of our Annual Report on Form 10-K, our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2014. In making this assessment, our management used the criteria set forth by Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework . Based on our assessment using those criteria, management believes that, as of December 31, 2014, our internal control over financial reporting is not effective based on those criteria because of the material weaknesses discussed below. This assessment was based on the size of our company and the fact that we have only one financial expert on our management team, no independent audit committee and no person on our board of directors that qualifies as an “audit committee financial expert”. Although management believes that the material weakness set forth above has not had an effect on our financial statements, there can be no assurance that this will continue to be the case going forward.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal controls over financial reporting during the year ended December 31, 2014, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
 
PART III

ITEM 10. Directors, Executive Officers and Corporate Governance.

The following information sets forth the names of our current director and executive officers, their ages and their present positions.
Name
 
Age
 
Position
 
Served
Since
             
Jason Castenir
 
34
 
Chief Executive Officer, Director
 
2014
Clarence Parks
 
41
 
President
 
2014
Dr. Robert Gates
 
78
 
Director
 
2014
 
Our Directors are elected annually and hold office until the next annual meeting of our stockholders or until their successors are elected and qualified. Officers are elected annually and serve at the discretion of the Board of Directors. Board vacancies are filled by a majority vote of the Board.
 
  Family Relationships

There are no family relationships between or among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers.

Audit Committee

We do not have a separately-designated standing audit committee. The Board of Directors performs the functions of an audit committee, but no written charter governs the actions of the Board when performing the functions of that would generally be performed by an audit committee. The Board approves the selection of our independent accountants and meets and interacts with the independent accountants to discuss issues related to financial reporting. In addition, the Board reviews the scope and results of the audit with the independent accountants, reviews with management and the independent accountants our annual operating results, considers the adequacy of our internal accounting procedures and considers other auditing and accounting matters including fees to be paid to the independent auditor and the performance of the independent auditor.
 
 
40

 
 
Audit Committee Financial Expert

Our Board of Directors examined the Commission’s definition of “audit committee financial expert” and concluded that we do not currently have a person that qualifies as such an expert. Currently, there are only two directors serving on our Board, and we are not in a position at this time to attract, retain and compensate additional directors in order to acquire a director who qualifies as an “audit committee financial expert,” but we intend to retain an additional director who will qualify as such an expert, as soon as reasonably practicable.

Selection Criteria for Directors

Our board of directors does not maintain a nominating committee. As a result, no written charter governs the director nomination process. The size of the company and the size of the board, at this time, do not require a separate nominating committee.

When evaluating director nominees, our directors consider the following factors:

·
The appropriate size of our board of directors;
 
·
Our needs with respect to the particular talents and experience of our directors;

·
The knowledge, skills and experience of nominees, including experience in finance, administration or public service, in light of prevailing business conditions and the knowledge, skills and experience already possessed by other members of the board;

·
Experience in political affairs;
 
·
Experience with accounting rules and practices; and

·
The desire to balance the benefit of continuity with the periodic injection of the fresh perspective provided by new board members.
 
 
Our goal is to assemble a board that brings together a variety of perspectives and skills derived from high quality business and professional experience. In doing so, the board will also consider candidates with appropriate non-business backgrounds.

Other than the foregoing, there are no stated minimum criteria for director nominees, although the board may also consider such other factors as it may deem are in our best interests. If any member of the board of directors does not wish to continue in service, the board then identifies the desired skills and experience of a new nominee in light of the criteria above. Current members of the board of directors are polled for suggestions as to individuals meeting the criteria described above. Our board of directors will also consider candidates for board membership suggested by our stockholders. It is the policy for our board of directors to consider recommendations for candidates to the board of directors from any stockholder of record in accordance with our bylaws. A director candidate recommended by our stockholders will be considered in the same manner as a nominee recommended by a board member, management or other sources. In addition, a stockholder may nominate a person directly for election to the board of directors at an annual meeting of stockholders, provided the stockholder meets the requirements set forth in our bylaws.
 
While the board does not have a formal diversity policy, it is our and the board’s policy to identify potential candidates without regard to any candidate’s race, color, disability, gender, national origin, religion or creed, and we seek to ensure the fair representation of shareholder interests on the board through the criteria set forth above. The board believes that the use of the general criteria set forth above, along with non-discriminatory policies, will best result in a board that shows diversity in many respects.
 
   
Section 16(a) Beneficial Ownership Reporting

Section 16(a) of the Securities Act of 1934, as amended, requires our executive officers and directors, and persons who own more than ten percent (10%) of our common stock, to file with the Securities and Exchange Commission reports of ownership of, and transactions in, our securities and to provide us with copies of those filings. To our knowledge, based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during the year ended December 31, 2012, all filing requirements applicable to our officers, directors and greater than ten percent beneficial owners were complied with, with the following exceptions:

Code of Ethics and Conduct

Our Board of Directors has adopted a Code of Ethics and Conduct that is applicable to all of our employees, officers and directors. Our Code of Ethics and Conduct is intended to ensure that our employees act in accordance with the highest ethical standards.
 
 
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ITEM 11. Executive Compensation.

The following table presents information concerning the total compensation of the Company’s Chief Executive Officer, Chief Financial Officer and the other most highly compensated officers whose total salary and bonus awards exceeded $100,000 during the last fiscal year (the “Named Executive Officers”) for services rendered to the Company in all capacities for the years ended December 31, 2014, 2013  and 2012:

Summary Compensation Table 2014, 2013 and 2012
 
Name (a)
Year
Salary
($)
Bonus ($)
Stock
Awards
($)
Option
Awards
($)(1)
All Other
Compensation
($) (2)
Total
($)
               
Jason Castenir (CEO-CFO)
2014
0
0
26,265,000
0
0
26,265,000
Dr. Robert Gates (Former CEO)
2014
63,000
0
4,379,000
0
0
4,442,000
Clarence Parks (Former CFO)
2014
0
0
22,000,000
0
0
22,000,000
Pierro Sutti-Keyser, Former CEO (3)
2012
2013
0
0
0
0
10,000
12,640
10,000
12,640
Gilberto Zapata,  Former CFO (4)
2012
2013
0
0
0
0
4,750
6,500
4,750
6,500
Norman Bracht
Former CEO (5)
2011
-
-
-
-
13,500
13,500
Tony Langford
Former CEO, CFO, Secretary & Treasurer (6)
2011
-
-
-
4,881
42,548
47,429
___________
(1)
The amounts in the table reflect the grant date fair value of options awards to the named executive officer in accordance with Accounting Standards Codification Topic 718. The ultimate values of the options awards to the executives generally will depend on the future market price of our common stock, which cannot be forecasted with reasonable accuracy. The actual value, if any that an optionee will realize upon exercise of an option will depend on the excess of the market value of the common stock over the exercise price on the date the option is exercised. See the “Outstanding Equity Awards at Fiscal Year-End” table below for information regarding all outstanding awards.
(2)
The amounts listed under the Column entitled “All Other Compensation” in the “Summary Compensation Table” related to the accrual of consulting fees during the period reported.
(3)
Mr. Sutti-Keyser was appointed Chief Executive Officer in February 2012. Mr. Sutti-Keyser received no cash compensation in 2011.
(4)
Mr. Zapata was appointed the Chief Financial Officer in February 2012.
(4)
Mr. Bracht served as our Chief Executive Officer from October 22, 2010 until his death on September 22, 2011.
(5)
Mr. Langford was appointed as our Chief Financial Officer, Secretary, and Treasurer on July 24, 2010 and was appointed as our Chief Executive Officer on October 10, 2011. Mr. Langford resigned from each of these positions on February 24, 2012.
 
Stock Option Plan

In 2007, our Board adopted the 2007 Stock Incentive Plan (the “Stock Incentive Plan”). The Stock Incentive Plan authorizes us to reserve shares for future grants under it, of which 500,000 shares remain available for issuance.

The Stock Incentive Plan authorizes us to grant (i) to the key employees incentive stock options to purchase shares of common stock and non-qualified stock options to purchase shares of common stock and restricted stock awards, and (ii) to non-employee directors and consultants’ non-qualified stock options and restricted stock. The Plan Administrator will administer the Plan by making recommendations to the board or determinations regarding the persons to whom options or restricted stock should be granted and the amount, terms, conditions and restrictions of the awards.

Incentive stock options granted under the Stock Incentive Plan must have an exercise price at least equal to 100% of the fair market value of the common stock as of the date of grant. Incentive stock options granted to any person who owns, immediately after the grant, stock possessing more than 10% of the combined voting power of all classes of our stock, or of any parent or subsidiary corporation, must have an exercise price at least equal to 110% of the fair market value of the common stock on the date of grant. Non-statutory stock options may have exercise prices as determined by the Plan Administrator.

The Plan Administrator is also authorized to grant restricted stock awards under the Stock Incentive Plan. A restricted stock award is a grant of shares of the common stock that is subject to restrictions on transferability, risk of forfeiture and other restrictions and that may be forfeited in the event of certain terminations of employment or service prior to the end of a restricted period specified by the Plan Administrator.

 
42

 
 
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth, as of December 31, 2014, the number and percentage of outstanding shares of common stock beneficially owned by (a) each person known by us to beneficially own more than five percent of such stock, (b) each director of the Company, (c) each named officer of the Company, and (d) all our directors and executive officers as a group. We have no other class of capital stock outstanding.
 
Name
Number of
Shares of Common
Number of
Shares of Preferred (1)(4)
Total Number of
Voting Shares
       
Officers & Directors :
     
Jason Castenir, Chief Executive Officer & Director
150,000,000
0
150,000,000
Clarence Parks, President & Director
100,000,000
0
100,000,000
Dr. Robert Gates, Director
110,000,000
0
110,000,000
5% or Greater:
     
       
       
TOTAL
360,000,000
0
360,000,000
 
ITEM 13. Certain Relationships and Related Transactions, and Director Independence.

Except as set forth below, none of our directors or executive officers, nor any proposed nominee for election as a director, nor any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to all of our outstanding shares, nor any members of the immediate family (including spouse, parents, children, siblings, and in-laws) of any of the foregoing persons has any material interest, direct or indirect, in any transaction since the beginning of our last fiscal year on January 1, 2011 or in any presently proposed transaction which, in either case, has or will materially affect us.
Settlement and Mutual Release Agreement

We entered into a Mineral Right Option Agreement with Temasek on September 18, 2008, as amended and supplemented by Amendment No. 1 dated May 12, 2009 (“Amendment No. 1”), Amendment No. 2 dated February 3, 2010 (“Amendment No. 2”), and Amendment No. 3 dated June 25, 2010 (“Amendment No. 3”) (collectively, the “Option Agreement”). Pursuant to the Option Agreement, we acquired from Temasek a fifty percent equity interest in Beardmore Holdings, Inc. (“Beardmore”) and had the option to acquire the remaining fifty percent equity interest in Beardmore from Temasek, which would have resulted in our ownership of one hundred percent of Beardmore’s equity. Beardmore indirectly holds, through its subsidiary Rio Santiago Minerales S.A.C., certain mineral rights (the “Mineral Rights”) underlying properties located in Peru.
  
Under the terms of Amendment No. 3, we would have increased our ownership interest in the Mineral Rights from fifty percent to one-hundred percent resulting in its acquisition of all of the outstanding capital stock of Beardmore, if we had fulfilled the following conditions (collectively the “Option Requirements”) within ten business days following the effective date of Amendment No. 3:

·
Completion of the exercise of options resulting in our acquisition of a fifty percent interest in the Mineral Rights through our acquisition of fifty percent of the outstanding capital stock of Beardmore;
·
Issuance to Temasek of a total of 11,000,000 shares of our common stock (of which 5,000,000 were previously issued to Temasek);
·
Payment to Temasek of US $250,000 (which such payment was acknowledged by Temasek to have been made in March 2010);
·
Issuance of a convertible note for US $250,000 (the “$250,000 Convertible Note”) payable to the order and the direction of Temasek (which was issued on June 25, 2010); and
·
Issuance of a convertible note for US $3,250,000 (the “$3,250,000 Convertible Note” and, collectively with the $250,000 Convertible Note, the “Convertible Notes”) payable to the order and the direction of Temasek (which was issued on June 25, 2010).
 
The $250,000 Convertible Note had a term of ninety days and accrued interest at a rate of 12% per annum. We failed to pay the principle and interest under the $250,000 Convertible Note upon maturity, which caused us to default on the $250,000 Convertible Note.

The $3,250,000 Convertible Note had a term of three years and accrued interest at a rate of 12% per annum. Interest was payable annually and the principal was to be paid upon maturity.
 
 
43

 

As of the date we were required to fulfill the Option Requirements under Amendment No. 3, we did not issue the 6,000,000 shares of our common stock to Temasek and defaulted on the $250,000 Convertible Note resulting from our failure to pay the principal plus interest on such note on its maturity date. This also resulted in the options to acquire the remaining fifty percent interest in the Mineral Rights (which would have resulted in our acquisition of a one hundred percent interest in the Mineral Rights) having lapsed as of July 5, 2010.

On September 21, 2011, we entered into a Settlement and Mutual Release Agreement (“Settlement Agreement”) with Temasek, which resulted in our relinquishment and transfer to Temasek of our fifty percent interest in the outstanding capital stock of Beardmore in exchange for Temasek releasing us from all of our outstanding obligations under the terms of the Option Agreement. By execution of the Settlement Agreement, we no longer held any interest, directly or indirectly, in the Mineral Rights.

Under the terms of the Settlement Agreement, the $250,000 Convertible Note and the $3,250,000 Convertible Note were cancelled and we are no longer obligated to issue Temasek 6,000,000 shares of our common stock in exchange for our relinquishment and transfer to Temasek of our fifty percent interest in the outstanding capital stock of Beardmore. We are not entitled to recover any consideration previously paid to Temasek or any mineral property exploration expenditures incurred in connection with the exploration and development of the properties underlying the Mineral Rights. The Settlement Agreement included a mutual release of all claims arising out of or relating to the Option Agreement.

Included in accounts payable and accrued liabilities as at 31 December 2013and 2012 are amounts due to related parties of $38,346 and $28,843, respectively.. These amounts are non-interest bearing, unsecured and have no fixed terms of repayment.

During the year ended 31 December 2013, the Company paid or accrued $35,390 (2012 – $25,750) for management fees to officers and directors of the Company.

During the year ended 31 December 2013 the Company settled $23,200 in liabilities accrued to officers and directors through the issuance of Preferred A convertible stock.

During the year our officers loan working capital funds to the Company and repaid those funds as cash became available.

During the year we paid Robert Gates and his own firm MBC Services, Inc. management fees of $64,000.

During the year the board approved stock compensation to Robert Gates of 110,000,000 shares of common stock valued at $4,377,900 which was the fair market value on the date the compensation was authorized.

During the year the board approved stock compensation to Clarence Parks of 100,000,000 shares of common stock valued at $21,999,000 which was the fair market value on the date the compensation was authorized.

During the year the board approved stock compensation to Jason Castenir of 150,000,000 shares of common stock valued at $26,263,500 which was the fair market value on the date the compensation was authorized.

Options Issued to Officers & Directors

There were no options issued during the year ended December 31, 2014.

Preferred Shares Issued to Officers & Directors

There were no Preferred Shares Issued during the year ended December 31, 2014.

ITEM 14. Principal Accounting Fees and Services.

The following table is a summary of the fees billed to us for professional services for the fiscal year ended December 31, 2014 and December 31, 2013:
 
   
Fiscal
2014 Fees
   
Fiscal
2013 Fees
 
Fee Category
           
Audit Fees
 
$
25,275
   
$
29,824
 
Audit-Related Fees
 
$
     
$
0
 
Tax Fees
   
-
     
-
 
All Other Fees
   
-
     
-
 
                 
Total Fees
 
$
25,275
   
$
29,824
 
 
 
44

 
Audit Fees.   Consists of fees billed for professional services rendered for the audit of our consolidated financial statements and review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by our independent registered public accounting firms in connection with statutory and regulatory filings or engagements.


Audit-Related Fees.   Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit Fees.” These services include accounting consultations in connection with acquisitions and consultations concerning financial accounting and reporting standards.
 
During fiscal 2014 or 2013, our independent registered public accounting firms did not bill us for any Tax Fees or Other Fees.
 
Our practice is to consider and approve in advance all proposed audit and non-audit services to be provided by our independent registered public accounting firm.


 
PART IV
ITEM 15. Exhibits, Financial Statement Schedules.

The following is a complete list of exhibits filed as part of this Form 10K. Exhibit number corresponds to the numbers in the Exhibit table of Item 601 of Regulation S-K.

Exhibit
Number
 
Description
     
31.1*
 
Certifications Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
32.1*
 
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 
45

 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and Stockholders of
First Colombia Gold Corp
 
 
We have audited the accompanying balance sheet of First Colombia Gold Corp. as of December 31, 2014 and the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for the year then ended. These financial statements are the responsibility of the Company management. Our responsibility is to express an opinion on these financial statements based on our audit.
 
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of First Colombia Gold Corp at December 31, 2014, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
 
The accompanying consolidated financial statements have been prepared assuming that the company will continue as a going concern.  As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations and negative cash flows from operations the past three years.  These factors raise substantial doubt about its ability to continue as a going concern.  Management’s plans in regard to these matters are also described in Note 2.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
/s/ Scrudato & Co., PA
 
Califon, New Jersey
June 23, 2015
 
F - 1

 
 
 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors
First Colombia Gold Corp.

We have audited the accompanying consolidated balance sheet of First Colombia Gold Corp. (the Company) as of December 31, 2013 and the related consolidated statements of operations, stockholders’ deficit and cash flows for the year then ended.  These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. The consolidated financial statements as of December 31, 2012 and for the period from September 5, 1997 (date of inception) through December 31, 2012, were audited by other auditors, whose report dated March 26, 2013, expressed an unqualified opinion on those statements

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion the consolidated financial statements referred to above present fairly, in all material respects, the financial position of First Colombia Gold Corp. as of December 31, 2013, and the results of their operations and cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the Company will need additional working capital to accomplish its intended purpose and to service its debt, which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 

/s/ Sadler, Gibb & Associates, LLC                                    
     Sadler, Gibb & Associates, LLC
 
Salt Lake City, UT
April 18, 2014
 
 
F - 2

 
 
FIRST COLOMBIA GOLD CORP.
(An Exploration Stage Company)
Consolidated Balance Sheets
             
   
As at
   
As at
 
   
31 December
   
31 December
 
   
2014
   
2013
 
             
Assets
           
Current Assets
           
 Cash
 
$       33,833
   
S           0
 
Prepaid expenses
   
0
     
1,145
 
Other receivable
   
0
     
16,500
 
Total current assets
   
33,833
     
17,645
 
                 
Mineral property interests
   
-
     
-
 
Property and Equipment Net of Depreciation
   
493,901
     
4,113
 
                 
Total Assets
 
$
527,734
   
$
21,758
 
                 
Liabilities and Stockholders' Deficit
               
Current Liabilities
               
Accounts payable and accrued liabilities
 
$
289,438
   
$
230,855
 
Accounts payable, related parties
   
29,550
     
38,346
 
Convertible notes payable, net of discounts of $1,038,502and $38,697
   
473,148
     
39,798
 
Derivative liabilities
   
544.392
     
671,998
 
Total Current Liabilities
   
1,336,528
     
980,997
 
                 
Notes payable
   
264,100
     
241,100
 
     
125,221
     
0
 
     
389,321 
     
241,100
 
                 
Total Liabilities
   
1,725,849
     
1,222,097
 
                 
Stockholders' Deficit
               
Preferred Stock
               
              Blank Check Preferred Stock, authorized 116,818,182 shares, 0 issued and
           
   outstanding
   
 -
     
 -
 
Series A Convertible Preferred Stock, par value $.001, authorized
               
   50,000,000, 46,818,000 and 47,568,500 shares issued and outstanding, respectively
   
46,819
     
47,569
 
Series B Convertible Preferred Stock, par value $0, authorized
               
   33,181,818, 0 issued and outstanding
   
-
     
-
 
Common Stock
               
                Par value $.00001, authorized 850,000,000, and 398,707,651 and 1,158,028
           
   shares issued and outstanding at December 31, 2014 and 2013, respectively
   
3,987
     
12
 
Additional paid-in capital
   
73,775,496
     
18,964,769
 
Deficit accumulated during the exploration stage
   
(75,024,417
)
   
(20,212,689
)
                 
Total Stockholders' Deficit
   
1,198,115
     
(1,200,339
)
                 
Total liabilities and stockholders' equity deficit
 
$
727,734
   
$
21,758
 
                 
                 
The accompanying notes are an integral part of these consolidated financial statements
         
 
 
F - 3

 
 
FIRST COLOMBIA GOLD CORP.
(An Exploration Stage Company)
Consolidated Statement of Operations
               
               
               
               
   
For the
   
For the
   
   
year ended
   
year ended
   
   
31 December
   
31 December
   
   
2014
   
2013
   
               
Revenues
 
$      22,726
   
$           0
   
               
Expenses
             
Depreciation
   
32,212
     
1,761
   
General and administrative
   
55,598,968
     
183,299
   
Impairment loss on mineral properties
   
0
     
36,650
   
Mineral property exploration expenditures
   
433,229
     
51,600
   
Total Operating Expense
   
56,064,409
     
273,310
   
                   
Loss from operations
   
(56,064,409
)
   
(273,310
)
 
                   
Other Items
                 
Gain on extinguishment of debt
   
17,253
     
50,730
   
Gain on sale of oil and gas property
   
-
     
-
   
Interest income
   
-
     
-
   
Recovery of expenses
   
-
     
-
   
Interest expense
   
(1,795,289
)
   
(456,156
)
 
Gain(Loss) on derivative liabilities
   
3,503,865
     
(446,183
 
Write-down of incorporation cost
   
-
     
-
   
Write-down of assets
   
-
     
-
   
Total Other Items
   
1,252,681
     
(851,609
)
 
                   
Net loss before income taxes
   
(54,811,728
)
   
(1,124,919
)
 
                   
Future income tax recovery
   
-
     
-
   
                   
Net loss from continuing operations
   
(54,811,728
)
   
(1,124,919
)
 
                   
Discontinued operations of Beardmore Holdings, Inc.
   
-
     
-
   
                   
Net loss
   
(54,811,728
)
   
(1,124,919
)
 
                   
Loss per common share - basic and diluted
                 
Continuing operations
 
$
(0.00
)
 
$
(0.00
)
 
                   
Weighted average shares outstanding of common - basic and diluted
   
175,176,735
     
539,393
   
                   
                   
 
 
F - 4

 
 
FIRST COLOMBIA GOLD CORP.
(An Exploration Stage Company)
Consolidated Statement of Cash Flows
             
             
             
             
   
For the
   
For the
 
   
year ended
   
year ended
 
   
31 December
   
31 December
 
   
2014
   
2013
 
             
Cash Flows Used in Operating Activities:
       
 Net Income (Loss)
   
$ (54,811,728
)
   
$(1,124,919
)
   Adjustments:
               
 Depreciation
   
32,212
     
1,761
 
 Debt discount amortization and origination interest
   
444,387
     
444,387
 
 Loss on derivative liabilities
   
(127,606
)
   
446,183
 
 Stock issued as compensation
   
53,997,637
     
-
 
 Gain on  extinguishment of debt
           
(50,730
 
 Future income tax recovery
   
-
     
-
 
 Accured interest
   
-
     
-
 
 Gain on sale of oil and gas property
   
-
     
-
 
 Mineral property acquisition
               
 Stock-based compensation (recovery)
   
-
     
-
 
 Write-down and impairment loss on mineral properties
           
36,650
 
Impairment loss on mineral properties
         
 Changes in operating assets and liabilities
   
-
     
-
 
 Other Receivable & Prepaid Expenses
   
16,500
     
9,855
)
 Asset retirement obligation
   
125,221
     
0
 
 Increase (decrease) in accounts payable and accrued liabilities
   
49,786
     
134,968
 
                 
 Net Cash used in Continuing Operating Activities
   
(717,978
)
   
(101,845
)
                 
 Net cash used in discontinued operations
   
-
     
-
 
                 
 Net Cash used in  Operating Activities
   
(101,845
)
   
(101,845
)
                 
Net Cash Used In Investing Activities
         
 Advances to related parties
   
1,145
     
0
 
 Purchase of mineral property interests
           
(4,150
 
 Proceeds from sale of oil and gas property
   
-
     
-
 
 Oil and gas property acquisitions
   
-
     
-
 
 Oil and gas exploration
   
-
     
-
 
 Purchase of equipment
   
-
     
-
 
 Website development costs
   
-
     
-
 
                 
 Net Cash Provided by Used In Investing Activities
   
1,145
     
(4,150
 
                 
                 
Cash Flows From Financing Activities:
         
 Proceeds from notes payable
   
1,635,650
     
105,995
 
 Payments of notes payable
   
(1,097,603
 )
   
-
 
 Warrants exercised
   
-
     
-
 
 Proceeds from common stock, net of share issue costs
   
213,354
     
-
 
                 
 Net Cash Provided by Financing Activities
   
751,401
     
105,995
 
                 
Net cash used in discontinued operations
         
                 
                 
 Net (Decrease) in Cash
   
34,568
     
-
 
                 
 Cash at Beginning of Period
   
-
     
-
 
                 
 Cash at End of Period
 
 $
34,568
   
 $
-
 
             
-
 
Supplemental disclosure of cash flow information :
 
                 
                 
  Stock issued for acquisition
   
522,000 
     
 
   
           
Preferred shares exchanged for common stock
   
15
         
   
   
           
   
  Common shares issued upon conversion of promissory notes
   
51,651
     
141,030
 
  Notes payable issued for settlement of accounts payable
   
21,250
     
241,200
 
  Preferred A shares issued for settlement of accounts payable
           
104,651
 
 
 
F - 5

 
 
FIRST COLOMBIA GOLD CORP.
 
 (Exploration Stage Company)
Consolidated Statements of Changes in Stockholders’ Deficit
                                                               
 
Number of shares
Preferred Stock
 
Preferred
stock
   
Number of shares
Common Stock
   
Common
stock
   
Preferred
stock
   
Additional
paid-in
capital
   
Deferred stock-based
compensation
   
Share
subscriptions
received in
advance
   
Deficit
accumulated
during the exploration
stage
   
Non-
controlling
interest
   
 
Total stockholders' equity
(deficiency)
 
                                                               
Balance at 31 December 2012
     
-
     
167,373
     
2
     
-
   
$
18,555,644
     
-
     
-
     
(19,087,770
)
   
-
     
(532,124
)
                                                                                   
 Preferred stock issued for
                                                                                 
     accounts payable
      47,568,500
   
47,569