ITEM 1. DESCRIPTION OF BUSINESS
History and Organization
We were incorporated in the State of Nevada on June 28, 2006 and established a fiscal year end of October 31. We do not have any subsidiaries, affiliated companies or joint venture partners.
We are a start-up, pre-exploration stage company engaged in the search for gold and related minerals and have not generated any operating revenues since inception. Our sole mineral property, the Alice Claim, is located in the Northwest Territories (“NWT”), Canada.
Our administrative office is located at 115 Angelene Street, Mississauga, Ontario, Canada, L5G 1X1. Our telephone number is (416) 819-3795.
We have incurred losses since inception and we must raise additional capital to fund our operations. There is no assurance we will be able to raise this capital.
Our sole holding is a 100% interest in the Alice Claim located in NWT, Canada, subject to a 1% net smelter royalty, in favor of the vendor, Mr. Max Braden, on any production of commercial minerals that may be generated from the Alice Claim. Patterson Brooke acquired the Alice Claim for the sum of $1,000 from Mr. Braden, an unrelated third party prospector. Although we are in possession of a signed, registered Transfer of Mineral Claim transferring all right, title and interest in the Alice Claim to us, title remains recorded in the name of Max Braden. That is because we do not wish to incur the cost of acquiring a Prospectors License from the NWT and registering the Company in the NWT, both of which we must do in order to record title to the Alice Claim in our name. There is no cost to us using Mr. Braden’s Prospectors License to hold the Alice Claim.
We own no property other than the Alice Claim.
There is no assurance that a commercially viable mineral deposit, a reserve, exists at our mineral claim or can be shown to exist until sufficient and appropriate exploration is done and a comprehensive evaluation of such work concludes economic and legal feasibility. Such work could take many years of exploration and would require expenditure of very substantial amounts of capital, capital we do not currently have and may never be able to raise.
There is substantial doubt that we can continue as an ongoing business for the next twelve months and we will have to suspend or cease operations within the next twelve months unless we raise sufficient money to cover all our expected expenses; estimated to be $48,395.
The property we intend to explore may not contain any mineral reserves and therefore, any investment in this offering may be lost.
At the present, we have no employees and only two officers and directors, each of whom plan to devote only 4-5 hours per week to our operations.
Patterson is responsible for filing various forms with the United States Securities and Exchange Commission (the “SEC”) such as Form 10-K and Form 10-Q.
The shareholders may read and copy any material filed by Patterson with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, DC, 20549. The shareholders may obtain information on the operations of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information which Patterson has filed electronically with the SEC by assessing the website using the following address: http://www.sec.gov. We have no website at this time.
Planned Business
The following discussion should be read in conjunction with the information contained in the financial statements of Patterson and the notes, which form an integral part of the financial statements, which are attached hereto.
The financial statements mentioned above have been prepared in conformity with accounting principles generally accepted in the United States of America and are stated in United States dollars.
Patterson presently has minimal day-to-day operations; consisting mainly of maintaining the Alice claim in good standing and preparing the reports filed with the SEC as required.
Risk Factors
An investment in our securities involves an exceptionally high degree of risk and is extremely speculative. In addition to the other information regarding Patterson contained in this Form 10-K, you should consider many important factors in determining whether to purchase the shares in our Company. The following risk factors reflect the potential and substantial material risks in being a shareholder of our company.
Risks Associated with our Company:
Our liquidity, and thus our ability to continue to operate depends upon the continuing willingness of our President, who is also our controlling stockholder, to finance the Company’s operations.
We are financing our continuing operations with cash loaned to us by our President. To date our President has loaned us $40,500 in addition to paying $5,566 in invoices paid to Patterson. He has agreed to advance a further when and if required. Without these loan advances we would be forced to go out of business. He agreed to the suspension of payment of his monthly management fee of $1,000 after June 2007 payment. We will have to raise additional funds in the next twelve months to satisfy our cash requirements.
Furthermore, the loan advances made by our President are repayable on demand. Accordingly, if our President were to demand repayment of his loan advances we would not have sufficient funds to satisfy our cash requirements and would be forced to go out of business.
We lack an operating history and have losses which we expect to continue into the future. As a result, we may have to suspend or cease exploration activity or cease operations.
We have not yet conducted any exploration activities. We have not generated any revenues. We have no exploration history upon which you can evaluate the likelihood of our future success or failure. Our net loss from inception to October 31, 2008, the date of this Form 10-K is $106,063. Our ability to achieve profitability and positive cash flow in the future is dependent upon
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our ability to locate a profitable mineral property
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our ability to locate an economic ore reserve
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our ability to generate revenues
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our ability to reduce exploration costs.
Based upon current plans, we expect to incur operating losses in future periods. This will happen because there are expenses associated with the research and exploration of our mineral property. We cannot guarantee we will be successful in generating revenues in the future. Failure to generate revenues may cause us to go out of business.
We have no known ore reserves and we cannot guarantee we will find any gold and/or silver mineralization or, if we find gold and/or silver mineralization, that it may be economically extracted. If we fail to find any gold and/or silver mineralization or if we are unable to find gold and/or silver mineralization that may be economically extracted, we will have to cease operations.
We have no known ore reserves. Even if we find gold and/or silver mineralization we cannot guarantee that any gold and/or silver mineralization will be of sufficient quantity so as to warrant recovery. Additionally, even if we find gold and/or silver mineralization in sufficient quantity to warrant recovery, we cannot guarantee that the ore will be recoverable. Finally, even if any gold and/or silver mineralization is recoverable, we cannot guarantee that this can be done at a profit. Failure to locate gold deposits in economically recoverable quantities will cause us to cease operations.
Because the probability of an individual prospect ever having reserves is extremely remote, in all probability our property does not contain any reserves, and any funds spent on exploration will be lost.
Because the probability of an individual prospect ever having reserves is extremely remote, in all probability our sole property, the Alice Claim, does not contain any reserves, and any funds spent on exploration will be lost. If we cannot raise further funds as a result, we may have to suspend or cease operations entirely.
Because our officer and director does not have technical training or experience in starting and operating an exploration company nor in managing a public company, we will have to hire qualified personnel to fulfill these functions. If we lack funds to retain such personnel, or cannot locate qualified personnel, we may have to suspend or cease exploration activity or cease operations which will result in the loss of your investment.
Because our sole officer and director is inexperienced with exploring for minerals and starting, and operating a mineral exploration company, we will have to hire qualified persons to perform surveying, exploration, and excavation of our property. Our officer and director has no direct training or experience in these areas and as a result may not be fully aware of many of the specific requirements related to working within the industry. His decisions and choices may not take into account standard engineering or managerial approaches, mineral exploration companies commonly use. Consequently our exploration, earnings and ultimate financial success could suffer irreparable harm due to certain of management's lack of experience in this industry. Additionally, our officer and director has no direct training or experience in managing and fulfilling the regulatory reporting obligations of a ‘public company’ like Patterson Brooke. Unless our part time officer is willing to spend more time addressing these matters, we will have to hire professionals to undertake these filing requirements for Patterson Brooke and this will increase the overall cost of operations. As a result we may have to suspend or cease exploration activity, or cease operations altogether.
Since we are small and do not have much capital, we must limit our exploration and as a result may not find an ore body. Without an ore body, we cannot generate revenues and you will lose your investment.
The possibility of development of and production from our exploration property depends upon the results of exploration programs and/or feasibility studies and the recommendations of duly qualified professional engineers and geologists. We are small company and do not have much capital. We must limit our exploration activity unless and until we raise additional capital. Any decision to expand our operations on our exploration property will involve the consideration and evaluation of several significant factors beyond our control. These factors include, but are not limited to:
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Market prices for the minerals to be produced;
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Costs of bringing the property into production including exploration preparation of production feasibility studies and construction of production facilities;
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Political climate and/or governmental regulations and controls;
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Ongoing costs of production;
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Availability and cost of financing; and
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Environmental compliance regulations and restraints.
These types of programs require substantial capital. Because we may have to limit our exploration, we may not find an ore body, even though our property may contain mineralized material. Without an ore body, we cannot generate revenues and our shareholders might lose their investment in Patterson.
Because our officer and director has other outside business activities and may not be in a position to devote a majority of his time to our exploration activity, our exploration activity may be sporadic which may result in periodic interruptions or suspensions of exploration.
Our President will be devoting only 15% of his time, approximately 24 hours per month, to our business. As a consequence of the limited devotion of time to the affairs of the Company expected from management, our business may suffer. For example, because our officer and director has other outside business activities and may not be in a position to devote a majority of his time to our exploration activity, our exploration activity may be sporadic or may be periodically interrupted or suspended. Such suspensions or interruptions may cause us to cease operations altogether and go out of business.
We may not have access to all of the supplies and materials we need to begin exploration which could cause us to delay or suspend exploration activity.
We have made no attempt to locate or negotiate with any suppliers of products, equipment or materials. We will attempt to locate products, equipment and materials as and when we begin to undertake exploration activity, expected during the later part of the spring of 2008. Competition and unforeseen limited sources of supplies in the industry could result in occasional spot shortages of equipment and/or supplies we need to conduct our planned exploration work. 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.
We may be unable to meet property maintenance requirements or acquire necessary mining licenses and thereby lose our interest in the Alice Claim.
In order to maintain ownership of in the Alice Claim we must make an annual payment, or expend certain minimum amounts on the exploration of the mineral claim, in the amount of at least $727 ($800Cdn.) by May 24 in each year. Our failure to make such payment or expenditures within the time required will result in the loss of our interest in the Alice Claim. Even if we do make the annual payment in lieu of doing work because we are not able to obtain the necessary licenses to conduct mining operations on the property in a timely fashion, we would realize no benefit from our expenditure to maintain title to the property.
No matter how much money is spent on the Alice Claim, the risk is that we might never identify a commercially viable ore reserve.
Over the coming years, we might expend considerable capital on exploration of the Alice Claim without finding anything of value. It is very likely the Alice Claim does not contain any reserves so any funds spent on exploration will probably be lost. No matter how much money is spent on the Alice Claim, we might never be able to find a commercially viable ore reserve.
Even if our property were found to contain a deposit, since we have not put a mineral deposit into production before, we will have to acquire outside expertise. If we are unable to acquire such expertise we may be unable to put our property into production and you may lose your investment.
We have no experience in placing mineral deposit properties into production, and our ability to do so will be dependent upon using the services of appropriately experienced personnel or entering into agreements with other major resource companies that can provide such expertise. There can be no assurance that we will have available to us the necessary expertise when and if we place a mineral deposit into production.
Mineral exploration and development activities are inherently risky and we may be exposed to environmental liabilities. If such an event were to occur it may result in a loss of our shareholders entire investment.
The business of mineral exploration and extraction involves a high degree of risk. Few properties that are explored are ultimately developed into production. Most exploration projects do not result in the discovery of commercially mineable deposits of ore. The Alice Claim, our sole property, does not have a known body of commercial ore. Should our mineral claim be found to have commercial quantities of ore, we would be subject to additional risks respecting any development and production activities. Unusual or unexpected formations, formation pressures, fires, power outages, labor disruptions, flooding, explosions, cave-ins, landslides and the inability to obtain suitable or adequate machinery, equipment or labor are other risks involved in extraction operations and the conduct of exploration programs. We do not carry liability insurance with respect to our mineral exploration operations and we may become subject to liability for damage to life and property, environmental damage, cave-ins or hazards. There are also physical risks to the exploration personnel working in the rugged terrain of the Northwest Territories, often in poor climatic conditions. Previous mining exploration activities may have caused environmental damage to the Alice Claim. It may be difficult or impossible to assess the extent to which such damage was caused by us or by the activities of previous operators, in which case, any indemnities and exemptions from liability may be ineffective.
Even with positive results during exploration, the Alice Claim might never be put into commercial production due to inadequate tonnage, low metal prices or high extraction costs.
We might be successful, during future exploration programs, in identifying a source of minerals of good grade but not in the quantity, the tonnage, required to make commercial production feasible. If the cost of extracting any minerals that might be found on the Alice Claim is in excess of the selling price of such minerals, we would not be able to develop the claim. Accordingly even if ore reserves were found on the Alice Claim, without sufficient tonnage we would still not be able to economically extract the minerals from the claim in which case we would have to abandon the Alice Claim and seek another mineral property to develop, or cease operations altogether.
Title to the Alice Claim is registered in the name of another person. Failure of the Company to obtain good title to the claim will result in our having to cease operations.
Title to the property we intend to explore is not held in our name. Title to the Alice Claim is recorded in the name of Max Braden, an unrelated prospector. In the event Max Braden was to grant a third party a deed of ownership, which was subsequently registered prior to our deed, that third party would obtain good title and we would have nothing. Similarly, if Max Braden were to grant an option to a third party, that party would be able to enter the claims, carry out certain work commitments and earn right and title to the claims and we would have little recourse against such third party even though we would be harmed, would not own any property and would have to cease operations. Although we would have recourse against Max Braden in the situations described, there is a question as to whether that recourse would have specific value.
Risks Associated with our Share Capital:
Our officers and directors own a substantial amount of our common stock and will have substantial influence over our operations.
Our director and officer currently owns 75,000,000 shares of common stock representing approximately 84.8% of our outstanding shares. With our Form S-1 becoming effective our director had registered and had qualified for resale 7,500,000 of his shares. Assuming that such he sells his 7,500,000 shares, he will still own 67,500,000 shares of common stock representing approximately 76.3% of our outstanding shares. As a result, he will have substantial influence over our operations and can effect certain corporate transaction without further shareholder approval. This concentration of ownership may also have the effect of delaying or preventing a change in control.
We anticipate the need to sell additional treasury share in the future meaning that there will be a dilution to our existing shareholders resulting in their percentage ownership in the Company being reduced accordingly.
We may seek additional funds through the sale of our common stock. This will result in a dilution effect to our shareholders whereby their percentage ownership interest in the Company is reduced. The magnitude of this dilution effect will be determined by the number of shares we will have to issue in the future to obtain the funds required.
FINRA sales practice requirements may limit a stockholder's ability to buy and sell our stock.
The 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, the FINRA believes that there is a high probability that speculative low priced securities will not be suitable for some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may have the effect of reducing the level of trading activity and liquidity of our common stock. Further, many brokers charge higher transactional fees for penny stock transactions. As a result, fewer broker-dealers may be willing to make a market in our common stock, reducing a stockholder's ability to resell shares of our common stock.
Foreign Currency and Exchange Rates
Our mineral property is located in Northwest Territories of Canada and costs expressed in the geological report on our mineral property are expressed in Canadian Dollars. For purposes of consistency and to express United States Dollars throughout this Form 10K-SB, Canadian Dollars have been converted into United States currency at the rate of US $0.85 being approximately equal to Cdn $1.00 or Cdn. $0.85 being approximately equal US $1.00 as at the balance sheet. During the year the conversion was taken at the date of the transaction which varied monthly.
ITEM 2.
ITEM 2. DESCRIPTION OF PROPERTY
General
We were incorporated in the State of Nevada on June 28, 2006. We are a pre-exploration stage corporation. We have only undertaken a limited exploration program on our mineral claims during the summer and fall of this year. Our claim is known as the Alice Claim located in Northwest Territories, Canada. There is no assurance that mineralized material with any commercial value exits on our property.
We do not have any ore body and have not generated any revenues from our operations.
We maintain our statutory registered agent's office at 2470 St. Rose Parkway, Suite 304, Henderson, Nevada, 89075 and our business office is located at 115 Angelene Street, Mississauga, Ontario, Canada, L5G 1X1. Our telephone number is (416) 819-3795.
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We have no plans to change our business activities or to combine with another business, and are not aware of any events or circumstances that might cause our plans to change.
Business Development Since Inception
We raised $3,000 in initial seed capital on October 17, 2006 in order to identify and acquire a mineral property that we consider holds the potential to contain gold and/or silver mineralization.
In October 2006 we purchased the Alice Claim, situated in NWT, Canada, for $1,000 from Mr. Max Braden, an independent unrelated prospector of Yellowknife, NWT.
On October 31, 2006 Patterson Brooke closed a private placement pursuant to Regulation S of the Securities Act of 1933, whereby 538,000 common shares were sold at the price of $0.05 per share to raise $26,900.
In October 2006 we engaged Glen MacDonald, P. Geol., to conduct a review and analysis of the Alice Claim and the previous exploration work undertaken on the property and to recommend a mineral exploration program for the Alice Claim.
We are the beneficial owner of a 100% interest in the Alice Claim, our sole mineral property, subject to a royalty interest retained by the vendor, as detailed below. We intend to undertake exploration work on the Alice Claim. We are presently in the pre-exploration stage and there is no assurance that mineralized material with any commercial value exits on our property. We do not have any ore body and have not generated any revenues from our operations. Our planned exploration work is exploratory in nature.
On March 14, 2007 we formalized, in the form of a Loan Agreement, an arrangement with our President whereby he has advanced $20,000 in cash to the Company to date, and will advance a further $20,000 when Patterson requires it during the first part of 2008 in order to provide the Company with additional working capital. This loan does not bear interest and has no fixed terms of repayment although repayment may be demanded by the President. To date our President has advanced $46,066.
By an agreement dated March 22, 2006 our President (who is also our controlling stockholder) agreed to suspension of payment of his monthly management fee, in the amount of $1,000, from and after the June 2007 payment. Taken together, the loan advance and suspension of payment of management fee, are expected to ensure the Company will have sufficient funds to satisfy its cash requirements to October 31, 2009. Even though our President has completed his financial commitment to us, he is willing to continue to fund the Company until such time as a private or public offering can be undertaken. In other words, in spite of the loan from our President and the suspension of the payment of his management fees, we will have to raise additional funds within the next twelve months in order to satisfy our cash requirements.
DESCRIPTION OF THE PROPERTY
We are the beneficial owner of a 100% interest in the Alice Claim, located in NWT, Canada. Our interest in the Alice Claim is subject to a 1% net smelter return royalty in favor of the person from whom we acquired the claim, Mr. Max Braden. The royalty interest retained by Mr. Braden entitles him to receive 1% of any net revenue that might be paid to us by the purchaser of minerals produced form the Alice Claim. We do not have any ore body and have not generated any revenues from our operations.
Although we are in possession of a signed, registerable Transfer of Mineral Claim transferring all right, title and interest in the claim to us subject to the aforementioned 1% net smelter royalty, title remains recorded in the name of Max Braden. That is because the Government of Canada requires that mineral claims in the NWT be held in the (i) the name of a resident of the NWT, or (ii) by a company either incorporated in Canada or registered with the NWT ‘s Registrar of Corporations. At the present time, we do not wish to incur the costs associated with registering in the NWT. In addition, a Prospectors’ License, another prerequisite to our being able to register tile to the Alice Claim, entails additional expense, whereas there is no cost to us using Max Braden’s Prospectors License to hold the Alice Claim.
Beneficial ownership of the Alice Claim confers the rights to the minerals on the Alice Claim. We do not own the land itself since it is held in the name of the “Crown”, i.e. the Government of Canada.
The Alice Claim covers an area of approximately 200 acres. The current expiry date for the Alice Claim is May 24, 2008. To keep the property in good standing, such that the claim does not expire on the date indicated above we must (i) undertake exploration work to a value of not less than $357 ($420 CDN) on the Alice Claim before May 24, 2008, or (ii) in lieu of undertaking exploration work we may pay cash of approximately $357 ($420 CDN) to the Government of Canada. This is an annual obligation. Failure to do either, each year, will result in the Alice Claim reverting to the Government of Canada.
Particulars of the Alice Claim, our sole mineral property, together with issues we face in conducting exploration work on the property, follow.
Location and Access
The Alice Claim is located approximately 112 kilometers east of Yellowknife, NWT a town of approximately 20,000 and the capital of the NWT where all services necessary to the mining industry are available. The city is serviced by scheduled air services from Edmonton, Alberta and is linked to Alberta by all-weather highway. The Alice Claim is currently accessed by float or ski-equipped aircraft from Yellowknife. A winter road could easily link the property to the all-weather Ingraham Trial, a distance of about 48 kilometers.
The Alice property is located near the northern extremity of the northern interior climatic region and is characterized by a cold, fry sub-arctic climate. Mean January and July temperatures are below -30 C and from 10 to 15 respectively. The mean annual precipitation is approximately 200mm or less.
Topography of the region is subdued, with elevations ranging from 300 to 365 m. Lakes and low-lying swampy areas are common and comprise some 20% of the land surface. The major regional drainage is the Beaulieu River, which traverses the eastern part of the region from north to south and empties into Great Slave Lake east of Drybones Bay.
The Alice Claim is located well south of the tree line and is within the region of discontinuous permafrost. Vegetation consists of white and black spruce, white birch and locally abundant poplar, jack-pine and tamarack. The area is generally “swampy”. Access on the property for ground geophysical surveying and subsequent drilling of magnetic anomalies would be best accomplished from December to May when the lakes and swamps are frozen. Work such as prospecting, sampling and geological surveying must be carried out during the summer months. Drilling could also be carried out during the summer months as well.
No electrical power is required at this stage of exploration. Any electrical power that might be required in the foreseeable future could be supplied by gas powered portable generators.
Property Geology
The Alice Claim is underlain by volcanics of the Yellowknife group, consisting of greenstone flows. These greenstones are fine to coarse grained and the flows vary in thickness up to 175 feet separated in places by tuffs and often on the western side by prominent flow breccia horizons. The lavas take the form of massive, pillowed, schistose, ropey and foliated flows, though distinction is often difficult as pillows have mostly been obscured.
The tuffs that are contained in the flows vary in thickness up to 50 feet, and where sheared form sericite schist, whilst chlorite schist forms from the greenstones. The sericitc schist commonly weathers rusty brown due to the presence of pyrite and in some cases gold is associated with mineralization. A number of cherty bands and/or acid and/or acid dykes up to six feet thick occur on the property and often mineralization is associated with them. They may be rusty brown and have quartz veins nearby. These mineralized veins are to a large degree concentrated in a central zone running north/south through the property and the Alice zone, although associated with sheared tuff, lies within this larger area.
Acid and intermediate tuffs occur on the western edge of the greenstone whilst on the eastern side the pyroclastic zone is of agglomerate often containing large bombs. Dykes and masses of intrusive diorite and gabbro are present though in some less exposed areas these may be confused with large grained or altered flows.
The Alice shear is considered to contain the most promising gold mineralization on the property. This zone lies on the north side of a small lake known as Gold Lake and is exposed in outcrop and trenches for about 900 feet. The shear follows a band of chert-like inter-flow tuff that varies in thickness from a few inches to 6.5 feet. The shear zone ranges in width from 1 foot to approximately 20 feet. The rocks within the zone are sericite and chlorite schist, and scattered veinlets and lenses of quartz. The average width of the well-mineralized section of the zone is from 2 to 3 feet and it has a length of about 500 feet. Gold occurs sporadically in the heavily pyritized part of the zone.
Previous Exploration
The area was first prospected in the summer of 1938. Gold was found in July of that year and claims were staked on the more promising showings.
The property was acquired by Sunset Yellowknife Mines in 1945 and in the spring and summer of that year, this company did extensive trenching and diamond drilling on the two zones. A total of 1907 feet of diamond drilling was done on the Alice shear north of Gold lake.
Operations then ceased out but were resumed in February of 1946 and continued through to November of that year. A camp erected, and in the fall of 1946 a two-compartment vertical shaft was sunk to a depth of 23 feet on the Alice shear zone. In March of 1947, a small mining plant was moved to the property and during the following summer the shaft in the Alice zone was deepened to 145 feet. Drifts were opened on the 125-foot level and extended about 100 feet north and south from the shaft before the property closed on September 10th, 1947. No work was done by the company after September, 1947.
Early in 1966, the claims were optioned by Giant Yellowknife Mines Ltd. who carried out a geological mapping, geological surveying and short hole diamond drill program on new untested zones. The option was allowed to lapse. No work has been done on the property since that time.
Proposed Exploration Work - Plan of Operation
Mr. Glen C. Macdonald, P. Geol., authored the "Geological Report on the Alice Claim” dated November, 2006 (the “Macdonald Report”), in which he recommended an exploration program to evaluate the potential of the claim. Mr. Macdonald is a registered Professional Geologist in good standing in the Association of Professional Engineers and Geoscientists of British Columbia and the Association of Professional Engineers of Alberta. He is a graduate of the University of British Columbia, Vancouver, B.C. with a Bachelor of Economics (1971) and Geology (1973). Mr. Macdonald has practiced his profession as a geologist continuously since 1973. He visited the area covered by our claim in 2005.
We must conduct exploration to determine what minerals exist on our property and whether they can be economically extracted and profitably processed. We plan to proceed with exploration of the Alice Claim by completing the work recommended in the Macdonald Report, in order to begin determining the potential for discovering commercially exploitable deposits of gold on our claim.
We have not discovered any ores or reserves on the Alice Claim, our sole mineral property. Our planned work is exploratory in nature.
The Macdonald Report concludes:
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the Alice Claim covers an occurrence of high-grade gold mineralization in volcanic rocks of the Yellowknife supergroup;
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early exploration of vein systems by trenching, drilling and underground development may have over looked the presence of fine-grained gold carried in pyrite sulphide within the volcanic units themselves;
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geophysical surveys have identified conductive anomalies which should be further explored; and
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detailed geological mapping, with trenching and sampling should be conducted in the vicinity of the conductors to determine if drilling is warranted.
The Macdonald Report recommends the following work be undertaken and anticipates the cost as follows:
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Geological mapping
$ 10,000
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Trenching and sampling
7,500
Total
$ 17,500
The Alice Claim, being located in a northerly latitude, and is subject to long, cold winters with snowfall accumulations. No exploration work was done in 2008 due to a lack of funds on hand. With the weather situation in the winter of 2008 our planned work cannot be undertaken until the late spring of 2009.
Thus, even if the results of our planned exploration work proves encouraging, there is no assurance we will be able to raise the capital necessary to conduct further exploration work on the Alice Claim. Furthermore, even if funding is available, additional work will only be undertaken if the results of our planned work is successful in identifying target zones of gold mineralization deemed worthy, by our geologist, of drilling to determine if a gold deposit may exist. Should our initial work prove unsuccessful in identifying such drill targets, the Company will likely abandon the Alice Claim and we may have to go out of business.
There are no permanent facilities, plants, buildings or equipment on the Alice Claim.
Competitive Factors
The mining industry is highly fragmented. We are competing with many other exploration companies looking for gold and silver. We are among the smallest exploration companies in existence and are an infinitely small participant in the mining business which is the cornerstone of the founding and early stage development of the mining industry. While we generally compete with other exploration companies, there is no competition for the exploration or removal of minerals from our claims. Readily available markets exist for the sale of gold and silver. Therefore, we will likely be able to sell any gold or silver that we are able to recover, in the event commercial quantities are discovered on the Alice Claims. There is no ore body on the Alice Claims.
Regulations
Governing Laws
The mining industry in Canada operates under both federal and provincial or territorial legislation governing the exploration, development, production and decommissioning of mines. Such legislation relates to such matters as the method of acquisition and ownership of mining rights, labor, health and safety standards, royalties, mining and income taxes, exports, reclamation and
rehabilitation of mines, and other matters. The mining industry in Canada is also subject to legislation at both the federal and provincial or territorial levels concerning the protection of the environment. Legislation imposes high standards on the mining industry to reduce or eliminate the effects of waste generated by extraction and processing operations and subsequently deposited on the ground or emitted into the air or water. The design of mines and mills, and the conduct of extraction and processing operations, are subject to regulatory restrictions. The exploration, construction, development and operation of a mine, mill or refinery require compliance with environmental legislation and regulatory reviews, and the obtaining of land use and other permits, water licenses and similar authorizations from various governmental agencies. Legislation is in place for lands under federal jurisdiction or located in certain provinces and territories that provide for the preparation of costly environmental impact assessment reports prior to the commencement of any mining operations. These reports require a detailed technical and scientific assessment as well as a prediction of the impact on the environment of proposed mine exploration and development.
Failure to comply with the requirements of environmental legislation may result in regulatory or court orders being issued that could result in the cessation, curtailment or modification of operations or that could require the installation of additional facilities or equipment to protect the environment. Violators may be required to compensate those suffering loss or damage by reason of mining activities and the violators, including our officers and directors, may be fined or, in some cases, imprisoned if convicted of an offense under such legislation. Provincial and territorial mining legislation establishes requirements for the decommissioning, reclamation and rehabilitation of mining properties that are closed. Closure requirements relate to the protection and restoration of the environment and the protection of public safety. Some former mining properties must be managed for a long time following closure in order to fulfill regulatory closure requirements. The cost of closure of existing and former mining properties and, in particular, the cost of long-term management of open or closed mining properties can be substantial.
Mineral exploration is subject to the Canadian Mineral Tenure Act Regulation. This act sets forth rules for: locating claims, posting claims, working claims and reporting work performed. We will be required to obtain permits from the NWT Ministry of the Environment before we commence mining operations at the Alice Claim.
With respect to the legislation, rules and regulations referred to above, we believe that we are
currently in compliance in all material respects with applicable legislation, rules and regulations.
The Company does not foresee having to expend material amounts in order to comply with environmental laws during the exploration phase of its operations. The Company is obligated to restore surface disturbances created by exploration. These restoration efforts typically involve the back filing of trenches, pits, or other excavations created for purposes of exploration.
Underground exploration, which the Company contemplates in the future, will require additional cost related to the storage of excavated material. Until the Company knows the amount of material it will have to store, it cannot estimate this cost. There will be material costs of environmental compliance if the Company develops a mine in the future. However, the Company cannot reasonably estimate that environmental compliance cost at this time.
It is not possible to estimate the cost of meeting the rules and regulations for a mining operation at this time. Those costs will only be determined when a mine plan and the required studies are completed to apply for a mining permit.
Government Permitting
Our proposed mineral exploration program is subject to the Canadian Mineral Tenure Act Regulation. This act sets forth rules for locating claims, posting claims, working claims and reporting work performed. The Company is committed to complying with all governmental and environmental regulations. We are obliged to adhere to environmental regulations promulgated by the Government of Canada. It is reasonable to expect that compliance with environmental regulations will increase our costs. Such compliance may include feasibility studies on the surface impact of our future exploration operations; costs associated with minimizing surface impact; water treatment and protection; reclamation activities, including rehabilitation of various sites; on-going efforts at alleviating the mining impact of wildlife; and permits or bonds as may be required to ensure our compliance with applicable regulations. It is possible that these costs and delays associated with such compliance could become so prohibitive that we may decide to not proceed with exploration on the Alice Claim.
The Company cannot predict the extent to which future legislation and regulation could cause additional expense, capital expenditures, restrictions, and delays in the development of the Company's Canadian properties, including those with respect to mining claims. The Company's activities are not only subject to extensive federal and territorial regulations controlling the mining of and exploration for mineral properties, but also the possible effects of such activities upon the environment. For example we will be obligated to take steps to ensure that any streams draining the property do not become contaminated as a result of our activities on the property. We are not aware of any environmental problems on the property as of the date of this prospectus.
Employees
Initially, we intend to use the services of subcontractors for manual labor exploration work on our claim and an engineer or geologist to manage the exploration program. At present, we have no employees as such although each of our officers and directors devotes a portion of his time to the affairs of the Company. None of our officers and directors has an employment agreement with us. We presently do not have pension, health, annuity, insurance, profit sharing or similar benefit plans; however, we may adopt such plans in the future. There are presently no personal benefits available to any employee.
As indicated above we will hire subcontractors on an as needed basis. We have not entered into negotiations or contracts with any of potential subcontractors. We do not intend to initiate negotiations or hire anyone until we are nearing the time of commencement of our planned exploration activities.
Subcontractors
We will be using for our exploration activities subcontractors for manual labor and will continue to do so during the exploration work schedule in the spring of 2009.
Employees and Employment Agreements
At present, we have no full-time employees. Our officer and director will devote time to our operation. Our director does not have employment agreements with us. We presently do not have pension, health, annuity, insurance, stock options, profit sharing or similar benefit plans; however, we may adopt plans in the future. There are presently no personal benefits available to our officer and director. Our officer and director will handle our administrative duties but because of his inexperience with exploration, he will hire qualified persons to perform the surveying, geology, engineering, exploration, and excavating of the property. As of this date, we have not looked for or talked to any geologists or engineers who will perform work for us in the future.
Investment Policies
The Company does not have an investment policy at this time. Any excess funds it has on hand will be deposited in interest bearing notes such as term deposits or short term money instruments. There are no restrictions on what the director is able to invest or additional funds held by the Company. Presently the Company does not have any excess funds to invest.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
There are no legal proceedings to which Patterson is a party or to which its property is subject, nor to the best of management’s knowledge are any material legal proceedings contemplated.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
During the current year, no matters were brought before the securities holders for voted thereon other than the 25 to 1 forward stock split completed in January 2008 and the increase in authorized share capital from 200,000,000 common shares with a par value of $0.001 per share to 600,000,000 common shares with a par value of $0.001 per share.
ITEM 5.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
To date we have not held an Annual General Meeting of our Stockholders but do intend to do so within the near future. We are a public trading company recently quoted on the OTC Bulletin Board.
ITEM 6.
ITEM 6. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This section of our Form 10-K includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this prospectus. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.
We are a start-up, pre-exploration stage company. We have a limited operating history and have not yet generated or realized any revenues from our activities. We have yet to undertake any exploration activity on our sole property, the Alice Claim. As our property is in the early stage of exploration and there is no reasonable likelihood that revenue can be derived from the property in the foreseeable future.
Our auditors have issued a going concern opinion. This means that our auditors believe there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay for our operations. This is because we have not generated any revenues and no revenues are anticipated until we begin removing and selling minerals, if ever. Accordingly, we must raise cash from sources other than the sale of minerals found on the Alice Claim.
We must raise additional cash to implement further exploration work on the Alice Claim and stay in business.
Since our business activity is related solely to the exploration and evaluation of the Alice Claim, it is the opinion of our sole director and officer that the most meaningful financial information relates primarily to current liquidity and solvency. As at October 31, 2008, we had working capital deficit of $60,163 which includes $46,066 owed to our President. We will have to search for other sources of cash in order to eliminate the working capital deficit situation. Our director have not yet address this situation but will have to do so early in 2009.
Our future financial success will be dependent on the success of the exploration work on the Alice Claim. Such exploration may take years to complete and future cash flows, if any, are impossible to predict at this time. The realization value from any mineralization which may be discovered by us is largely dependent on factors beyond our control such as the market value of metals produced, mining regulations in Canada and foreign exchange rates.
Liquidity and Capital Resources
Since inception to the date of this Form 10-K we have raised capital through (i) private placements of common stock aggregating $29,900, and (ii) non interest bearing demand loan from our President (who is also our controlling stockholder), in the amount of $46,066 which includes certain expenses paid by him directly. As mentioned above, even with the additional future advances from our director we will have to seek more funds in order to eliminate our working capital deficit.
As of October 31, 2008 our total assets were $2,256 and our total liabilities were $62,419 including $46,066 to our President.
Our capital commitments for the next twelve months consist of administrative expenses together with expenses associated with the completion of our planned exploration program are estimated as follows:
Since our initial share issuances, the Company has been unable to raise cash from any source other than loan advances from our President and controlling stockholder. Our total requirements for cash over the next twelve months is summarized below:
Cash requirements over the next twelve months as determined above
$ 34,298
Add: Accounts payable to third parties
16,353
50,651
Deduct: Cash on hand as at October 31, 2008
(2,256)
Estimated cash requirements for the next twelve months
$ 48,395
We have no plant or significant equipment to sell, nor are we going to buy any plant or significant equipment during the next twelve months. We will not buy any equipment until we have located a body of ore and we have determined it is economical to extract the ore from the land.
We may attempt to interest other companies to undertake exploration work on the Alice Claim through joint venture arrangement or even the sale of part of the Alice Claim. Neither of these avenues has been pursued as of the date of this Form 10-K.
Our engineer has recommended an exploration program for the Alice Claim. However, even if the results of this work suggest further exploration work is warranted, we do not presently have the requisite funds and so will be unable to complete anything beyond the exploration work recommended in the MacDonald Report until we raise more money or find a joint venture partner to complete the exploration work. If we cannot find a joint venture partner and do not raise more money, we will be unable to complete any work beyond the exploration program recommended by our engineer. If we are unable to finance additional exploration activities, we do not know what we will do and we do not have any plans to do anything else.
We do not intend to hire any employees at this time. All of the work on the Alice Claim will be conducted by unaffiliated independent contractors that we will hire. The independent contractors will be responsible for supervision, surveying, exploration, and excavation. We may engage a geologist to assist in evaluating the information derived from the exploration and excavation including advising us on the economic feasibility of removing any mineralized material we may discover.
Limited Operating History; Need for Additional Capital
There is no historical financial information about us upon which to base an evaluation of our performance as an exploration corporation. We are a pre-exploration stage company and have not generated any revenues from our exploration activities. Further, we have not generated any revenues since our formation on June 28, 2006. We cannot guarantee we will be successful in our exploration activities. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, possible delays in the exploration of our properties, and possible cost overruns due to price and cost increases in services.
To become profitable and competitive, we must invest into the exploration of our property before we start production of any minerals we may find. We must obtain equity or debt financing to provide the capital required to fully implement our phased exploration program. We have no assurance that financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to commence, continue, develop or expand our exploration activities. Even if available, equity financing could result in additional dilution to existing shareholders.
Results of Operations - Twelve Months ended October 31, 2008.
For the period from June 28, 2006 (date of inception) to October 31, 2008, we had a net loss of $106,063. This represents a net loss of $0.001 per share for the period based on a weighted average number of shares outstanding of 88,450,000. We have not generated any revenue from operations since inception. Our loss to date represents various expenses incurred with organizing the company, undertaking audits, exploration expenses, paying management fees, general office expenses, consulting and legal fees for preparation of the Form SB-2, rent and edgarizing charges which can be broken down as follows:
Our Planned Exploration Program
We must conduct exploration to determine what amounts of minerals exist on the Alice Claim and if such minerals can be economically extracted and profitably processed.
Our planned exploration program is designed to efficiently explore and evaluate our property.
Our anticipated exploration costs on the Alice Claim during the later spring of 2009 are approximately $17,500. This figure represents the anticipated cost to us of completing work recommended in the MacDonald Report. Should the results of this work be sufficiently encouraging to justify our undertaking additional work, in order to undertake any such additional exploration work, we will have to raise additional investment capital as our remaining available capital is fully committed to ongoing administrative expenses of the Company. We will have to raise additional funds within the next twelve months in order to satisfy our ongoing cash requirements and finance any further work on the Alice Claim.
Balance Sheet
Total cash and cash equivalents, as at October 31, 2008 was $2,256. Our working capital deficiency as at October 31, 2008 was $60,163.
The working capital deficiency is due to a lack of cash to offset the amount owed to both third party creditors, being $16,353 and our President, being $46,006.
Total shareholders’ deficiency as at October 31, 2008 is $60,163. Total shares outstanding, as at October 31, 2008, was 88,450,000.
Trends
We are in the pre-explorations stage, have not generated any revenue and have no prospects of generating any revenue in the foreseeable future. We are unaware of any known trends, events or uncertainties that have had, or are reasonably likely to have, a material impact on our business or income, either in the long term of short term, other than as described in the ‘Risk Factors’ section noted above.
Critical Accounting Policies
Our discussion and analysis of its financial condition and results of operations, including the discussion on liquidity and capital resources, are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, management re-evaluates its estimates and judgments.
The going concern basis of presentation assumes we will continue in operation throughout the next fiscal year and into the foreseeable future and will be able to realize our assets and discharge our liabilities and commitments in the normal course of business. Certain conditions currently exist which raise substantial doubt upon the validity of this assumption. The financial statements do not include any adjustments that might result from the outcome of the uncertainty.
Our intended exploration activities are dependent upon our ability to obtain third party financing in the form of debt and equity and ultimately to generate future profitable exploration activity or income from its investments. As of the date of this Form 10-K we have not generated revenues, and have experienced negative cash flow from minimal exploration activities. We may look to secure additional funds through future debt or equity financings. Such financings may not be available or may not be available on reasonable terms.
ITEM 7.
ITEM 7. FINANCIAL STATEMENTS
The financial statements of Patterson are included following the signature page to this Form 10-K.
ITEM 8.
ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
During the fiscal year ended October 31, 2008 and through the subsequent period to, to the best of Patterson's knowledge, there have been no disagreements with Madsen & Associates, CPA's Inc. on any matters of accounting principles or practices, financial statement disclosure, or audit scope procedures, which disagreement if not resolved to the satisfaction of Madsen & Associates, CPA's Inc. would have caused them to make a reference in connection with its report on the financial statements for the year.
ITEM 8A - CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
As required by Sarbanes-Oxley (“SOX”) Section 404 A, Patterson has considered certain internal control procedures which are as follows:
Under the supervision of the Patterson’s Chief Executive Officer and Chief Financial Officer, Gordon Brooke, Patterson has set up internal control mechanisms to ensure objectives are achieved. These internal control procedures are to ensure and encourage efficiency, compliance with laws and regulations, sound information, and seek to eliminate fraud and abuse.
Such internal control procedures assist in placing reliability on financial reporting and the preparation of Patterson’s financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
Basically internal control procedures are put into place to help Patterson achieve its goals or to assist in reducing the risks which will stop Patterson from achieving its goals. It helps Patterson manage the risk of success and reduce abuses which will stop Patterson from achieving its goals. Control procedures are at all levels of Patterson’s management in order to ensure risk is reduced. This is done through the system of approvals, authorizations, verification, reconciliation, securing Patterson’s assets and having segregation of duties.
As at October 31, 2008, the management of Patterson assessed the effectiveness of Patterson’s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control - Integrated Framework issued by the Committee Sponsoring Organizations of the Treadway Commission (“COSO) and SEC guidance on conducting such assessments. Management concluded, during the year ended October 31, 2008, internal control procedures were not effective to detect the inappropriate application of US GAAP rules. Management realized there were deficiencies in the design of operations of the Patterson’s internal control that adversely affected Patterson’s internal controls which management considers to be material weaknesses.
Management has determined from its review of internal control procedures as they relate to COSO and the SEC that the following weaknesses have been identified:
● With the registration of David Moore, Patterson has only one director who is also serving as all the officers of Patterson. Therefore, there is no segregation of duties nor any other director or officer to check on the transactions initiated by Gordon Brooke. This does not adhere to good internal control procedures.
● At this period in the development of Patterson it does not have a procedure manual detailing responsibilities and good internal control procedures. This does not meet the requirements of the SEC or good internal control procedures.
● There are no effective controls instituted over financial statement disclosure and the reporting processes.
Management feels the weaknesses identified above have not had any affect on the financial results of Patterson. Management will have to address the lack of a second director within the immediate future.
Patterson and management will endeavor to correct the above noted weaknesses in internal control once it has adequate funds to do so. By appointing another director, who will also serve on the Audit Committee, will greatly improve the overall performance of Patterson. By having a written policy manual outlining the duties of each of the officers and staff of Patterson will facilitate better internal control procedures.
Management will continue to monitor and evaluate the effectiveness of Patterson’s internal controls and procedures and its internal control over financial reporting on an ongoing basis and are committed to taking further action and implementing enhancements or improvements, as necessary and as funds allow.
(b) Changes in Internal Controls
There were no significant changes in Patterson’s internal controls or in other factors that could significantly affect Patterson’s disclosure controls and procedures subsequent to the Evaluation Date, nor any significant deficiencies or material weaknesses in such disclosure controls and procedures requiring corrective actions.
PART
ITEM 9.
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT
Our Director serves until his successor is elected and qualified. Our officers is elected by the Board of Directors, when David Moore was a director, to a term of one (1) year and serves until his successor is duly elected and qualified, or until he is removed from office. The Board of Directors comprises one person; our president - Gordon Brooke.
The name, address, age and position of our officer and director is set forth below:
(1)
B. Gordon Brooke was appointed a director on June 28, 2006 and President and Principal Executive Officer on July 7, 2006. On June 30, 2008 he was appointed Chief Financial Officer, Chief Accounting Officer and Secretary Treasurer to fill the vacancy left with the resignation of David Moore.
Background of B. Gordon Brooke
B. GORDON BROOKE our President, Chief Executive Officer and a Director of the Company is qualified as a Chartered Accountant with over 40 years of experience. He has not practiced as a Chartered Accountant since leaving Deloitte Haskins & Sells in 1972, preferring to function as an independent financial consultant. In that capacity Mr. Brooke has held a variety of positions from assistant to the CFO of multi-national companies (where his duties included preparation of monthly and annual financial reporting packages for all subsidiaries including corporate tax returns, preparation of all required audit working papers and complete audit files for all subsidiaries, responsibilities for internal control systems for all operating subsidiaries) to developing business and financial plans, providing financial statement preparation, tax filings and general accounting services to a wide range of business including investment companies, manufacturing companies and steel fabricators. Since 2001 Mr. Brooke has confined his practice to providing financial consulting services to Snack Crafters Inc., a Toronto, Ontario based manufacturer of cereal bars, baked goods and other ‘snack foods’ sold to a number of major Canadian retailers. His responsibilities include preparation of business plans, servicing as an interim accountant providing accounting services, preparation of financial statements on a non-audit basis, corporate tax returns and assisting the company in its reorganization and restructuring. Mr. Brooke serves as Chief Financial Officer, Chief Accounting Officer and a director of Standard Capital Corporation (“Standard”), a company also involved in the mineral exploration business. Mr. Brooke became a director of Standard, as well as its Chief Accounting Officer, on February 20, 2004. He was appointed Standard’s Chief Financial Officer on June 25, 2005. See “Conflict of Interest” page 24.
Our President and sole director does not work full time for our company. B. Gordon Brooke spends approximately 24 hours a month on administrative and accounting matters. With recent work on the private placement of our common stock, this Registration Statement, preparation of documentation for our listing on the OTCBB, coordinating the increase in the authorized share capital and forward split of our shares.
Board of Directors Audit Committee
Below is a description of the Audit Committee of the Board of Directors. The Charter of the Audit Committee of the Board of Directors sets forth the responsibilities of the Audit Committee. The primary function of the Audit Committee is to oversee and monitor the Company’s accounting and reporting processes and the audits of the Company’s financial statements.
Our audit committee is comprised of only B. Gordon Brooke our President and Chairman of the audit committee with the resignation and subsequent death of David Moore. By virtue of his designation as a Chartered Accountant, as well as his extensive work experience as a financial consultant, Mr. Brooke can be considered an “audit committee financial expert” as defined in Item 401 of Regulation S-B.
Apart from the Audit Committee, the Company has no other Board committees but with the appointment of new directors in the future the Company hopes to adhere to the requirements of Committees.
Conflicts of Interest
Apart from B. Gordon Brooke, who is a director and officer of Standard Capital Corporation, a company involved in the mineral exploration business and registered under the Securities and Exchange Act of 1934, none of our officers and directors is a director or officer of any other company involved in the mining industry. However there can be no assurance such involvement will not occur in the future. Such present and potential future, involvement could create a conflict of interest.
To ensure that potential conflicts of interest are avoided or declared to Patterson Brooke and its shareholders and to comply with the requirements of the Sarbanes Oxley Act of 2002, the Board of Directors adopted, on October 31, 2006, a Code of Business Conduct and Ethics. Patterson Brooke’s Code of Business Conduct and Ethics embodies our commitment to such ethical principles and sets forth the responsibilities of Patterson Brooke and its officers and directors to its shareholders, employees, customers, lenders and other stakeholders. Our Code of Business Conduct and Ethics addresses general business ethical principles and other relevant issues.
Significant Employees
We have no paid employees as such. Gordon Brooke fulfill many functions that would otherwise require Patterson Brooke to hire employees or outside consultants.
We will have to engage the services of certain consultants to assist in the exploration of the Alice Claim. In particular we will engage a professional geologist on a consulting basis, together with any assistant(s) such geologist will responsible for hiring and supervising, to conduct our planned exploration work for the Alice Claim. These individuals will be responsible for the completion of the geological work on our claim and, therefore, will be an integral part of our operations although they will not be considered employees either on a full time or part time basis. This is because our exploration programs will not last more than a few weeks and once completed these individuals will no longer be required. We have not identified any individual who would work as a consultant for us.
Family Relationships
Our President and our former Chief Financial Officer and Secretary Treasurer were unrelated.
Involvement in Certain Legal Proceedings
To the knowledge of the Company, during the past five years, our director or executive officer:
(1)
has filed a petition under the federal bankruptcy laws or any state insolvency law, nor had a receiver, fiscal agent or similar officer appointed by the court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filings;
(2)
was convicted in a criminal proceeding or named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);
(3)
was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting, the following activities:
(i) acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, associated person of any of the foregoing, or as an investment advisor, underwriter, broker or dealer in securities, or as an affiliate person, director or employee of any investment company, or engaging in or continuing any conduct or practice in connection with such activity;
(ii) engaging in any type of business practice; or
(iii) engaging in any activities in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodities laws;
(4)
was the subject of any order, judgment, or decree, not subsequently reversed, suspended, or vacated, of any federal or state authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described above under this Item, or to be associated with persons engaged in any such activities;
(5)
was found by a court of competent jurisdiction in a civil action or by the SEC to have violated any federal or state securities law, and the judgment in such civil action or finding by the SEC has not been subsequently reversed, suspended, or vacated.
(6)
was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated.
Compliance with Section 16 (a) of the Exchange Act
Patterson knows of no director, officer, beneficial owner of more than ten percent of any class of equity securities of Patterson registered pursuant to Section 12 (“Reporting Person”) that failed to file any reports required to be furnished pursuant to Section 16(a). Other than those disclosed below, Patterson knows of no Reporting Person that failed to file the required reports during the most recent fiscal year.
As at October 31, 2008, B. Gordon Brooke has not filed any reports required pursuant to Section 16 (a).
ITEM 10.
ITEM 10. EXECUTIVE COMPENSATION
Cash Compensation
Executive compensation paid since inception to and including October 1, 2008 is set forth in the following summary:
Summary Compensation Table
Long Term Compensation
Annual Compensation Awards Payouts
Compensation of Directors and Officers
We have no standard arrangement to compensate directors for their services in their capacity as directors. Directors are not paid for meetings attended. All travel and lodging expenses associated with corporate matters are reimbursed by us, if and when incurred.
Our President has received monthly, commencing November 1, 2006, the sum of $1,300 made up of a management fee of $1,000 and, a rent allowance of $ 300 (for providing an office for the Company). However, because our Company has limited working capital, by an agreement between the Company and our President dated March 22, 2007, Mr. Brooke agreed to the suspension of the payment of his monthly management fee after June 2007. Thereafter Mr. Brooke will not be paid his management fee, including any arrears of the fees that may have accumulated while payment thereof was suspended, unless and until the Principal Financial Officer of the Company determines the Company has sufficient cash to defray all of the Company’s other budgeted expenses for a period of at least six months from the date of such determination. For accounting purpose the Company has given recognition to a management fee for the year inclusive by charging expenses and crediting Capital in Excess of Par Value for $1,000 per month resulting in a total charge for the period being $12,000.
There are currently no other directors or officers.
Bonuses and Deferred Compensation
None
Compensation Pursuant to Plans
None
Pension Table
None
Other Compensation
None
Termination of Employment
There are no compensatory plans or arrangements, including payments to be received from Patterson, with respect to any person named in Cash Consideration set out above which would in any way result in payments to any such person because of his resignation, retirement, or other termination of such person’s employment with Patterson or its subsidiaries, or any change in control of Patterson, or a change in the person’s responsibilities following a change in control of Patterson.
Indemnification
Nevada Revised Statutes 78.037 provides that Articles of Incorporation can contain provisions which eliminate or limit the personal liability of our officers and directors and even stockholders for damages for breach of fiduciary duty, but a corporation cannot eliminate or limit a director’s or officer’s liability for acts or failure to act which are based on intentional misconduct, fraud, or a willful violation of law. Our Articles of Incorporation provides that a director or officer is not personally liable to us or our shareholders for damages for any breach of fiduciary duty as a director or officer, except for liability for (i) acts or omissions which involve intentional misconduct, fraud or a knowing violation of law, or (ii) the payment of distribution in violation of Nevada Revised Statures, 78.300.
Additionally, our By-laws provide that we will indemnify our officers and directors to the fullest extent permitted by the Nevada Revised Statutes, provided the officer or director acts in good faith and in a manner which he or she reasonably believes to be in or not opposed to Patterson Brooke’s best interest, and with respect to any criminal matter, had no reasonable cause to believe that his or her conduct was unlawful. Our By-laws also provide that, to the fullest extent permitted by Section 78.751 of the Nevada Revised Statutes, we will pay the expenses of our officers and directors incurred in defending a civil or criminal action, suit or proceeding, as they are incurred and in advance of the final disposition of the matter, upon receipt of an undertaking acceptable to the Board of Directors for the repayment of such advances if it is ultimately determined by a court of competent jurisdiction that the officer or director is not entitled to be indemnified.
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, the Securities Exchange Act of 1934 or the Rules and Regulations of the Securities and Exchange Commission thereunder may be permitted under said indemnification provisions of the law, or otherwise, Patterson Brooke has been advised that, in the opinion of the Securities and Exchange Commission, any such indemnification is against public policy and is, therefore, unenforceable.
ITEM 11.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as at October 31, 2008, the total number of shares owned beneficially by each of our directors, officers and key employees, individually and as a group, and the present owners of 5% or more of our total outstanding shares. The shareholder listed below has direct ownership of his/her shares and possesses sole voting and dispositive power with respect to the shares.
(1)
Unless otherwise noted, the security ownership disclosed in this table is of record and beneficial.
(2)
Under Rule 13-d of the Exchange Act, shares not outstanding but subject to options, warrants, rights, conversion privileges pursuant to which such shares may be acquired in the next 60 days are deemed to be outstanding for the purpose of computing the percentage of outstanding shares owned by the person having such rights, but are not deemed outstanding for the purpose of computing the percentage for such other persons. None of our officers or directors has options, warrants, rights or conversion privileges outstanding.
Future Sales by Existing Shareholders
As of October 31, 2008, there are a total of 88,450,000 shares of our common stock issued and outstanding. Under the effective Form SB-2, Patterson qualified for trading 20,950,000 restricted shares, being 23.68 % of our issued shares leaving 67,500,000 shares being 76.32% of our shares, as ‘restricted shares’ under Rule 144 are held by B. Gordon Brooke.
Under Rule 144, restricted shares can be publicly sold, subject to volume restrictions and restrictions on the manner of sale, commencing one year after their acquisition.
Patterson Brooke does not have any securities that are convertible into common stock.
Description of Securities
Our authorized capital consists of 600,000,000 shares of common stock, par value $0.001 per share, of which 88,450,000 shares are presently issued and outstanding.
The holders of our common stock are entitled to receive dividends as may be declared by our Director; are entitled to share ratably in all of our assets available for distribution upon winding up of the affairs our Company; and are entitled to one non-cumulative vote per share on all matters on which shareholders may vote at all Meetings of the shareholders.
The shareholders are not entitled to preference as to dividends or interest; preemptive rights to purchase in new issues of shares; preference upon liquidation; or any other special rights or preferences.
Non-Cumulative Voting.
The holders of our shares of common stock do not have cumulative voting rights, which means that the holders of more than 50% of such outstanding shares, voting for the election of Directors, can elect all of the Directors to be elected, if they so choose. In such event, the holders of the remaining shares will not be able to elect any of our Directors.
Dividend Policy
As of the date of this prospectus we have not paid any cash dividends to stockholders. The declaration of any future cash dividends will be at the discretion of our Director and will depend on our earnings, if any, capital requirements and financial position, general economic conditions and other pertinent conditions. It is our present intention not to pay any cash dividends in the near future.
Transfer Agent
We have engaged the services of Empire Stock Transfer Inc., 2470 St. Rose Parkway, Suite 304, Henderson, Nevada, USA, 89075, to act as transfer and registrar.
Holders
Including its two officers and directors, Patterson Brooke has 45 shareholders as at the date of this Form 10-K.
CERTAIN TRANSACTIONS
There have been no transactions, or proposed transactions, which have materially affected or will materially affect us in which any director, executive officer, or beneficial holder of more than 10% of the outstanding common stock, or any of their respective relatives, spouses, associates or affiliates has had or will have any direct or material indirect interest, except as follows:
On October 17, 2006 Patterson Brooke issued to (i) our President, Principal Executive Officer and Director, B. Gordon Brooke, 2,000,000 shares at the price of $0.001 per share for total consideration of $2,000; and (ii) our Principal Financial Officer, Secretary-Treasurer and a director, David Moore, 1,000,000 shares at the price of $0.001 per share for total consideration of $1,000. .
The shares issued to Messrs. Brooke and Moore were in consideration of their agreeing to take the initiative in developing and implementing the business plan of the Company, including, among other things, providing the initial seed capital to allow the Company to engage a professional geologist to assist in identifying a mineral prospect considered worthy of exploration, identifying investors and arranging for the initial private placement to enable the Company to implement its business plan.
With the resignation and subsequent death of David Moore, Gordon Brooke acquired the shares originally purchased by David Moore.
As at October 31, 2006, B. Gordon Brooke had received no money from the Company. Starting November 1st, 2006 Mr. Brooke began receiving a monthly management fee of $1,000 plus $300 monthly for providing office space for the Company. The management fee payments were terminated as at the end of June 2007.
ITEM 12.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Others
Except as indicated below, there were no material transactions, or series of similar transactions, since inception of Patterson and during its current fiscal period, or any currently proposed transactions, or series of similar transactions, to which Patterson was or is to be a party, in which the amount involved exceeds $60,000, and in which any director or executive officer, or any security holder who is known by Patterson to own of record or beneficially more than 5% of any class of Patterson’s common stock, or any member of the immediate family of any of the foregoing persons, has an interest.
Indebtedness of Management
There were no material transactions, or series of similar transactions, since the beginning of Patterson’s last fiscal year, or any currently proposed transactions, or series of similar transactions, to which Patterson was or is to be a part, in which the amount involved exceeded $60,000 and in which any director or executive officer, or any security holder who is known to Patterson to own of record or beneficially more than 5% of the common shares of Patterson’s capital stock, or any member of the immediate family of any of the foregoing persons, has an interest.
Transactions with Promoters
Patterson does not have promoters and has no transactions with any promoters.
PART IV
ITEM 13.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) (1) Financial Statements.
The following financial statements are included in this report:
(a) (2) Financial Statement Schedules
The following financial statement schedules are included as part of this report:
None.
(a) (3) Exhibits
The following exhibits are included as part of this report by reference:
(b) Reports on Form 8-K
Resignation of David Moore filed on July 1, 2008.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
(1) Audit Fees
The aggregate fees billed by the independent accountants for the last two fiscal years for professional services for the audit of Patterson’s annual financial statements and the review included in Patterson’s Form 10-Q and services that are normally provided by the accountants in connection with statutory and regulatory filings or engagements for those fiscal years were $8,000.
(2) Audit-Related Fees
The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountants that are reasonably related to the performance of the audit or review of Patterson’s financial statements and are not reported under Item 9 (e)(1) of Schedule 14A was NIL.
(3) Tax Fees
The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountants for tax compliance, tax advise, and tax planning was NIL.
(4) All Other Fees
During the last two fiscal years there were no other fees charged by the principal accountants other than those disclosed in (1) and (3) above.
(5) Audit Committee’s Pre-approval Policies
At the present time, there are not sufficient directors, officers and employees involved with Patterson to make any pre-approval policies meaningful. Once Patterson has elected more directors and appointed directors and non-directors to the Audit Committee it will have meetings and function in a meaningful manner.
(6) Audit hours incurred
The principal accountants did not spend greater than 50 percent of the hours spent on the accounting by Patterson’s internal accountant.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
PATTERSON BROOKE RESOURCES, INC.
(Registrant)
By: B. GORDON BROOKE
B. Gordon Brooke
Chief Executive Officer,
President and Director
December 30, 2008
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in capacities and on the dates indicated.
By: B. GORDON BROOKE
B. Gordon Brooke
Chief Executive Officer,
President and Director
December 30, 2008
MADSEN & ASSOCIATES, CPA’s INC.
East Vine Street, #3
Certified Public Accountants and Business Consultants Board
Murray, Utah, 84107
Telephone: 801-268-2632
Fax: 801-262-3978
Board of Directors
Patterson Brooke Resources Inc.
Mississauga, Ontario, Canada
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have audited the accompanying balance sheets of Patterson Brooke Resources Inc. (pre-exploration stage company) at October 31, 2008 and 2007, and the statement of operations, stockholders' equity, and cash flows for the years ended October 31, 2008 and 2007 and for the period June 28, 2006 (date of inception) to October 31, 2008. These financial statements are the responsibility of the Company's 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 audit to obtain reasonable assurance about whether the 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 purposes of expressing an opinion on the effectiveness for the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosure in the financial statements. An audit also includes 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 provides 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 Patterson Brooke Resources Inc. October 31, 2008 and 2007, and the results of operations, and cash flows for the years ended October 31, 2008 and 2007 and the period June 28, 2006 (date of inception) to October 31, 2008, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company will need additional working capital to service its debt and for its planned activity, which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are described in the notes to the financial statements. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Murray, Utah /s/ “Madsen & Associates, CPA’s Inc.”
December 5, 2008
PATTERSON BROOKE RESOURCES INC.
(A Pre-exploration Stage Company)
Balance Sheets
The accompanying notes are an integral part of these financial statements.
PATTERSON BROOKE RESOURCES INC.
(A Pre-exploration Stage Company)
Statement of Operations
For the years ended October 31, 2008 and 2007 and for the period from June 28, 2006 (date of inception) to October 31, 2008
The accompanying notes are an integral part of these financial statements.
PATTERSON BROOKE RESOURCES INC.
(Pre-Exploration Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
Period June 28, 2006 (date of inception) to October 31, 2008
The accompanying notes are an integral part of these financial statements
PATTERSON BROOKE RESOURCES INC.
(A Pre-exploration Stage Company)
Statement of Cash Flows
For the years ended October 31, 2008 and 2007 and for the period from June 28, 2006 (date of inception) to October 31, 2008
The accompanying notes are an integral part of these financial statements.
PATTERSON BROOKE RESOURCES INC.
(Pre-Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
October 31, 2008
1. ORGANIZATION
The Company was incorporated under the laws of the State of Nevada on June 28, 2006 with the authorized common stock of 200,000,000 shares at $0.001 par value. On February 14, 2008, the shareholders approved the increase of the authorized share capital from 200,000,000 shares at $0.001 par value to 600,000,000 shares at $0.001 par value.
The Company was organized for the purpose of acquiring and developing mineral properties. At the report date mineral claims, with unknown reserves, had been acquired. The Company has not established the existence of a commercially minable ore deposit and therefore is considered to be in the pre-exploration stage (see note 3).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Methods
The Company recognizes income and expenses based on the accrual method of accounting.
Dividend Policy
The Company has not yet adopted a policy regarding payment of dividends.
Income Taxes
The Company utilizes the liability method of accounting for income taxes. Under the liability method deferred tax assets and liabilities are determined based on differences between financial reporting and the tax bases of the assets and liabilities and are measured using the enacted tax rates and laws that will be in effect, when the differences are expected to be reversed. An allowance against deferred tax assets is recorded, when it is more likely than not, that such tax benefits will not be realized.
On October 31, 2008, the Company had a net operating loss carry forward of $106,063. The tax benefit of approximately $31,800 from the loss carry forward has been fully offset by a valuation reserve because the use of the future tax benefit is doubtful since the Company has no operations. The loss carry forward will expire starting in 2027 through 2029.
Statement of Cash Flows
For the purposes of the statement of cash flows, the Company considers all highly liquid investments with a maturity of three months or less to be cash equivalents.
Basic and Diluted Net Income (loss) Per Share
Basic net income (loss) per share amounts are computed based on the weighted average number of shares actually outstanding. Diluted net income (loss) per share amounts are computed using the weighted average number of common and common equivalent shares outstanding as if shares had been issued on the exercise of any common share rights unless the exercise becomes antidilutive and then only the basic per share amounts are shown in the report.
PATTERSON BROOKE RESOURCES INC.
(Pre-Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
October 31, 2008
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Unproven Mineral Claim Costs
Costs of acquisition, exploration, carrying and retaining unproven properties are expensed as incurred.
Revenue Recognition
Revenue is recognized on the sale and transfer of goods or completion of service.
Advertising and Market Development
The company expenses advertising and market development costs as incurred.
Financial and Concentrations Risk
The Company does not have any concentration or related financial credit risk.
Environmental Requirements
At the report date environmental requirements related to the mineral claim acquired are unknown and therefore an estimate of any future cost cannot be made.
Estimates and Assumptions
Management uses estimates and assumptions in preparing financial statements in accordance with accounting principles accepted in the United States of America. Those estimates and assumptions affect the reported amounts of the assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were assumed in preparing these financial statements.
Financial Instruments
The carrying amounts of financial instruments, including cash and accounts payable, areconsidered by management to be their estimated fair value due to their short termmaturities.
Recent Accounting Pronouncements
The Company does not expect that the adoption of other recent account pronouncements will have a material impact of its financial statements.
PATTERSON BROOKE RESOURCES INC.
(Pre-Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
October 31, 2008
3. ACQUISITION OF MINING CLAIMS
The Company acquired one 4 unit metric claim known as the Alice claim located 70 miles east of Yellowknife, North West Territories. The claim is located on the east side of Sunset Lake, a widened part of the Beaulieu River and comprises approximately 200 acres. The claim expiry date is May 24, 2009 but the Company has a grace period of 90 days in which to either pay cash in lieu of doing assessment work or actually do the work on the claim. The amount to be incurred is $357 which will maintain the claim in good standing for a further year.
The claim has a 1% net smelter royalty associated with it payable to the vendor of the claim which will only be a factor when and if the claim is ever put into commercial production.
The claim has not been proven to have commercially recoverable reserves and therefore the acquisition and exploration costs have been expensed.
4. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES
As at October 31, 2008, officers-directors had acquired 85% of the common capital stock issued, and have made no interest, demand loans of $46,066 and have made contributions to capital of $16,000 in the form of expenses paid for the Company.
5.
CAPITAL STOCK
The Company has completed one Regulation S offering of 75,000,000 post split shares of its capital stock for a total consideration of $3,000. In addition, the Company has completed an Offering Memorandum whereby 13,450,000 post split common shares were subscribed for $26,900.
On January 16, 2008, the shareholders of the Company approved a 25 to 1 forward stock split which became effective on February 14, 2008, resulting in an increase of the outstanding shares of common stock from 3,538,000 to 88,450,000. The 88,450,000 post split common shares are shown as split from the date of inception.
6.
GOING CONCERN
The Company will need additional working capital to service its debt and to develop the mineral claims acquired, which raises substantial doubt about its ability to continue as a going concern. Continuation of the Company as a going concern is dependent upon obtaining additional working capital and the management of the Company has developed a strategy, which it believes will accomplish this objective through additional equity funding, and long term financing, which will enable the Company to operate for the coming year.