ITEM 1. DESCRIPTION OF BUSINESS .
OVERVIEW
We are a development stage mineral exploration company. We do not currently have any mineral properties under development, although we have entered into two agreements with Coastal Uranium Holdings Ltd. to acquire its rights and options to acquire an undivided 50% right, title and interest in certain mineral claims in the Athabasca region.
CORPORATE HISTORY AND DEVELOPMENT
We were incorporated in the State of Nevada on August 25, 2003 as Mongolian Explorations Ltd., an exploration company focused on the exploration of potentially viable mineral deposits in Mongolia, East Asia.
On April 19, 2006, due to deteriorating political conditions in Mongolia, we opted to exercise our termination rights with respect to our mineral leases and we ceased our exploration operations. We immediately began searching for other business opportunities.
By certificate of amendment filed May 17, 2006, we changed our name from Mongolian Explorations Ltd. to Knewtrino, Inc.
On May 24, 2006, we entered into a certain acquisition agreement with Instant Wirefree, Inc. (“Wirefree”), whereby we acquired one hundred percent (100%) of the issued and outstanding common stock of Wirefree in exchange for eighteen million seven hundred thousand (18,700,000) of our common shares and a lump sum payment in the amount of twenty-seven thousand five hundred dollars ($27,500). At the time of the acquisition Wirefree had no current operations, revenues or assets, other than certain technology.
Since that time, we had appointed an interim chief executive officer, Jenifer Osterwalder, who saw us through our transition out of the mineral exploration business and now are under the leadership of a new chief executive officer, Vladimir Fedyunin, and we were in the process of developing a business around cell phone enabled wireless applications. Toward that end, we acquired the intellectual property of wireless technology start-up Instant Wirefree as described above. Unfortunately, we were not able to make the transition to the ultra-competitive field of cell phone wireless applications. In June, 2007, we made the decision to abandon this line of business and to no longer pursue commercialization of any product in the wireless space. Instead, we have returned to our original, core focus of mining, where the company has its roots, however, we wish to find a more politically stable and less dangerous environment to mine in than Mongolia. Toward that end, our Chief Executive Officer is currently involved in exploring mining opportunities which may have a good fit. In September, 2007, we changed our name to Vanguard Minerals Corporation to reflect our renewed commitment to our traditional core business of mineral exploration. In November 2007, the Company entered into an agreement with Coastal Uranium Holdings Ltd. to acquire its right and option to acquire an undivided 50% right, title and interest in certain mineral claims in the Athabasca region. The option was acquired through payment of $ 57,585 in cash as well as 2,000,000 common shares of the Company. On April 6, 2008, we entered into another agreement with Coastal Uranium Holdings Ltd., whereby we acquired a 50% undivided right, title and interest to the mineral claim numbered S-110476 in the Athabasca region of Canada in exchange for $250,000 CAD ($248,508 USD) and 4,000,000 common shares of Vanguard Minerals corporation. In addition, we have agreed to take on the financial responsibility of Coastal to fund development of the mineral property that is the subject of claim S-110476.
In February 2009, our President, Chief Executive Officer, Principal Financial and Accounting Officer and Sole Director, Vladimir Fedyunin resigned from being a director, President and Chief Executive Officer but remains as Principal Financial and Accounting Officer. James Price was appointed as sole director, President and Chief Executive Officer. Mr. Price is attempting to secure the financing needed to fully develop the Company's mining properties and also to diversify the Company's interests outside of mining.
Our principal executive offices are located at 402 West Broadway, Suite 2800, San Diego, CA 92101. Our phone number is (858)525-5695.
PRINCIPAL PRODUCTS AND SERVICES
We are a development stage mineral exploration company currently engaged in the process of evaluating mineral exploration opportunities and exploring ways to diversify ourselves outside of mining.
PRINCIPAL MARKETS
We intend to compete in the market for mineral exploration and exploitation of mineral resources. We have not yet determined any other fields we may compete in.
ADVERTISING AND MARKETING
We do not currently market or advertise any products or services, however, we anticipate that we may have to market any mineral products and resources discovered in the course of our mineral exploration activities. We have not yet determined what other fields, outside of mineral exploration, we may compete in.
COMPETITION
The mineral exploration field is filled with substantial, well-financed, multi-national competitors, although as we have not defined the specific area of mineral exploration in which we would compete, it is difficult for us to indicate the names of the specific competitors in that area. We have not yet determined what other fields, outside of mineral exploration, we may compete in.
SIGNIFICANT CUSTOMERS
As of the date of this annual report on Form 10-K for the fiscal year ended December 31, 2009, we are not and do not anticipate becoming dependent upon any single or group of major customers.
INTELLECTUAL PROPERTY
Overview
We intend to rely for our business on a combination of pending trademarks and trade secrets in order to protect our intellectual property.
We cannot be certain that the precautions we will take to safeguard pending trademarks and trade secrets will provide meaningful protection from unauthorized use. If we must pursue litigation in the future to enforce or otherwise protect our intellectual property rights, or to determine the validity and scope of the proprietary rights of others, we may not prevail and will likely have to make substantial expenditures and divert valuable resources in the process. Moreover, we may not have adequate remedies if our intellectual property is appropriated or our trade secrets are disclosed.
Trademarks
We do not currently have any trademarks in registration.
Trade Secrets
Whenever we deem it important for purposes of maintaining competitive advantages, we require parties with whom we share, or who otherwise are likely to become privy to, our trade secrets or other confidential information to execute and deliver to us confidentiality and/or non-disclosure agreements. Among others, this may include employees, consultants and other advisors, each of whom we may require to execute such an agreement upon commencement of their employment, consulting or advisory relationships. These agreements generally provide that all confidential information developed or made known to the individual by us during the course of the individual’s relationship with us is to be kept confidential and not to be disclosed to third parties except under specific circumstances.
As of the date of this annual report on Form 10-K for the fiscal year ended December 31, 2009, we have not executed confidentiality and/or non-disclosure agreements with any of our key employees, consultants or advisors.
EMPLOYEES
For the fiscal year ended December 31, 2009, we had 1 full-time employee and 1 part time employee. We intend to expand our staff over the next twelve months, including additional hires as we identify mineral exploration opportunities and opportunities outside of mineral exploration.
We are not subject to any collective bargaining agreements and believe that our relationships with our employees are good.
ITEM 1A.
ITEM 1A. RISK FACTORS.
Our business entails a significant degree of risk and uncertainty, and an investment in our securities should be considered highly speculative. What follows is a general description of the material risks and uncertainties, which may adversely affect our business, our financial condition, including liquidity and profitability, and our results of operations, ultimately affecting the value of an investment in shares of our common stock. In addition to other information contained in this annual report on Form 10-K, you should carefully consider the following cautionary statements and risk factors.
GENERAL BUSINESS RISKS
We are a development stage company and based on our historical operating losses and negative cash flows from operating activities there is uncertainty as to our ability to continue as a going concern.
We have a history of operating losses and negative cash flows from operating activities. In the event that we are unable to achieve or sustain profitability or are otherwise unable to secure external financing, we may not be able to meet our obligations as they come due, raising substantial doubts as to our ability to continue as a going concern. Any such inability to continue as a going concern may result in our security holders losing their entire investment. Our financial statements, which have been prepared in accordance with generally accepted accounting principles, contemplate that we will continue as a going concern and do not contain any adjustments that might result if we were unable to continue as a going concern. Changes in our operating plans, our existing and anticipated working capital needs, the acceleration or modification of our expansion plans, lower than anticipated revenues, increased expenses, potential acquisitions or other events will all affect our ability to continue as a going concern.
Our liquidity and capital resources are very limited.
Our ability to fund working capital and anticipated capital expenditures will depend on our future performance, which is subject to general economic conditions, our customers, actions of our competitors and other factors that are beyond our control. Our ability to fund operating activities is also dependent upon (i) the extent and availability of bank and other credit facilities, (ii) our ability to access external sources of financing, and (iii) our ability to effectively manage our expenses in relation to revenues. There can be no assurance that our operations and access to external sources of financing will continue to provide resources sufficient to satisfy our liabilities arising in the ordinary course of business.
Our accumulated deficit makes it more difficult to borrow funds.
As of the fiscal year ended December 31, 2009, and as a result of historical operating losses from prior operations and losses accumulated during our development stage, our working capital deficit was $193,630. Lenders generally regard an accumulated deficit or a very low working capital surplus as a negative factor in assessing creditworthiness, and for this reason, the extent of our accumulated deficit coupled with our historical operating losses will negatively impact our ability to borrow funds if and when required. Any inability to borrow funds, or a reduction in favorability of terms upon which we are able to borrow funds, including the amount available to us, the applicable interest rate and the collateralization required, may affect our ability to meet our obligations as they come due, and adversely affect on our business, financial condition, and results of operations, raising substantial doubts as to our ability to continue as a going concern.
From inception, we have historically generated minimal revenues while sustaining considerable operating losses and we anticipate incurring continued operating losses and negative cash flows in the foreseeable future resulting in uncertainty of future profitability and limitation on our operations.
From inception, we have generated minimal revenues and experienced negative cash flows from operating losses. We anticipate continuing to incur such operating losses and negative cash flows in the foreseeable future, and to accumulate increasing deficits as we increase our expenditures for (i) development of our mining properties, (ii) identification of other mining properties, (iii) sale or other exploitation of mineral resources on developed properties, and (iv) general business enhancements. Any increases in our operating expenses will require us to achieve significant revenue before we can attain profitability. In the event that we are unable to achieve profitability or raise sufficient funding to cover our losses we may not be able to meet our obligations as they come due, raising substantial doubts as to our ability to continue as a going concern.
RISKS ASSOCIATED WITH OUR BUSINESS AND INDUSTRY
We face serious competition in our business segment from new market entrants as well as a number of established companies with greater resources and existing customer bases.
The market for mineral exploration rapidly evolves and is intensely competitive as established companies and new market entrants are regularly discovering new deposits and developing new methods to exploit mineral properties. Competition in our market segment is based primarily upon:
·
Capital resources;
·
Geological and industry expertise;
·
Relationships with refiners and consumers of mineral resources; and
·
Successful strategies to cope with environmental regulation and to minimize the environmental impacts of exploration;
To remain competitive in our market segment we will rely heavily upon superior mineral property selection, hiring the most qualified exploration team and receiving the best consultative advice on environmental strategies. However, we may not be able to effectively compete in this intensely competitive market. Mineral exploration is capital intensive and right now we do not have the financial resources to compete. Even if we acquire the financial resources, we may not be able to attract the talent necessary to exploit our mineral resources effectively. Moreover, we believe that as commodity prices continue to rise and industrial expansion in India and China fuel increased worldwide demand for mineral resources, competition will increase, additional companies will enter the field and established entrants will expand their exploration and exploitation activities.
If our mineral claims infringe on the rights of others, are clouded by previous transfers or our activities cause environmental damage, lawsuits may be brought requiring us to pay large legal expenses and judgments, lose some or all of our exploration rights and have to curtail our activities or undertake costly environmental remediation efforts
We are not aware of any circumstances under which our mineral claims infringe on the rights of others or are clouded. Infringement claims, however, could arise at any time, whether or not meritorious, and could result in time consuming and costly litigation or require us to enter into net mineral royalty or other agreements. If we are found to have infringed the property rights of others, we could be required to pay damages or even cease our exploration activities. If we are found to have caused environmental damage, we may be forced to pay large damages, engineer costly remediation solutions or cease or activities. Any of these outcomes, individually or collectively, would negatively affect on our business, financial condition and results of operations.
We face substantial competition in attracting and retaining qualified senior management and highly skilled key personnel and may be unable to develop and grow our business if we cannot attract and retain as necessary, or if we were to lose our existing, senior management and key personnel.
As a development stage company, our success, to a large extent, depends upon our ability to attract, hire and retain highly qualified and knowledgeable senior management and key personnel who possess the skills and experience necessary to satisfy our business and client service needs. Our ability to attract and retain such senior management and key personnel will depend on numerous factors, including our ability to offer salaries, benefits and professional growth opportunities that are comparable with and competitive to those offered by more established companies. We may be required to invest significant time and resources in attracting and retaining, as necessary, additional senior management and highly skilled key personnel, and many of the companies with which we will compete for any such individuals have greater financial and other resources, affording them the ability to undertake more extensive and aggressive hiring campaigns, than we can. Furthermore, an important component to the overall compensation offered to our senior management and key personnel may be equity. If our stock prices do not appreciate over time, it may be difficult for us to attract and retain senior management and highly skilled key personnel. Moreover, should we lose any members of our senior management or key personnel, we may be unable to prevent the unauthorized disclosure or use of our trade secrets, including our technical knowledge, practices, procedures or client. The normal running of our operations may be interrupted, and our financial condition and results of operations negatively affected, as a result of any inability on our part to attract or retain the services of qualified and experienced senior management and highly skilled key personnel, any member of our existing senior management or key personnel leaving and a suitable replacement not being found, or should any of our former senior management or key personnel disclose our trade secrets.
RISKS ASSOCIATED WITH AN INVESTMENT IN OUR COMMON STOCK
Unless an active trading market develops for our securities, you may not be able to sell your shares.
Although, we are a reporting company and our common shares are listed on the OTC Bulletin Board (owned and operated by the Nasdaq Stock Market, Inc.) under the symbol “VNGM”, there is not currently an active trading market for our common stock and an active trading market may never develop or, if it does develop, may not be maintained. Failure to develop or maintain an active trading market will have a generally negative effect on the price of our common stock, and you may be unable to sell your common stock or any attempted sale of such common stock may have the effect of lowering the market price and therefore your investment could be a partial or complete loss.
Since our common stock is thinly traded it is more susceptible to extreme rises or declines in price, and you may not be able to sell your shares at or above the price paid.
Since our common stock is thinly traded its trading price is likely to be highly volatile and could be subject to extreme fluctuations in response to various factors, many of which are beyond our control, including:
·
the trading volume of our shares;
·
the number of securities analysts, market-makers and brokers following our common stock;
·
changes in, or failure to achieve, financial estimates by securities analysts;
·
new products introduced or announced by us or our competitors;
·
announcements of technological innovations by us or our competitors;
·
actual or anticipated variations in quarterly operating results;
·
conditions or trends in our business industries;
·
announcements by us of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
·
additions or departures of key personnel;
·
sales of our common stock; and
·
general stock market price and volume fluctuations of publicly-traded, and particularly microcap, companies.
You may have difficulty reselling shares of our common stock, either at or above the price you paid, or even at fair market value. The stock markets often experience significant price and volume changes that are not related to the operating performance of individual companies, and because our common stock is thinly traded it is particularly susceptible to such changes. These broad market changes may cause the market price of our common stock to decline regardless of how well we perform as a company. In addition, securities class action litigation has often been initiated following periods of volatility in the market price of a company’s securities. A securities class action suit against us could result in substantial legal fees, potential liabilities and the diversion of management’s attention and resources from our business. Moreover, and as noted below, our shares are currently traded on the OTC Bulletin Board and, further, are subject to the penny stock regulations. Price fluctuations in such shares are particularly volatile and subject to manipulation by market-makers, short-sellers and option traders.
Trading in our common stock on the OTC Bulletin Board may be limited thereby making it more difficult for you to resell any shares you may own.
Our common stock trades on the OTC Bulletin Board (owned and operated by the Nasdaq Stock Market, Inc.). The OTC Bulletin Board is not an exchange and, because trading of securities on the OTC Bulletin Board is often more sporadic than the trading of securities listed on a national exchange or on the Nasdaq National Market, you may have difficulty reselling any of the shares of our common stock that you may own.
Our common stock is subject to the “penny stock” regulations, which are likely to make it more difficult to sell.
Our common stock is considered a “penny stock,” which generally is a stock trading under $5.00 and not registered on a national securities exchange or quoted on the Nasdaq National Market. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. These rules generally have the result of reducing trading in such stocks, restricting the pool of potential investors for such stocks, and making it more difficult for investors to sell their shares once acquired. Prior to a transaction in a penny stock, a broker-dealer is required to:
·
deliver to a prospective investor a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market;
·
provide the prospective investor with current bid and ask quotations for the penny stock;
·
explain to the prospective investor the compensation of the broker-dealer and its salesperson in the transaction;
·
provide investors monthly account statements showing the market value of each penny stock held in the their account; and
·
make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction.
These requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that is subject to the penny stock rules. Since our common stock is subject to the penny stock rules, investors in our common stock may find it more difficult to sell their shares.
We do not intend to pay any common stock dividends in the foreseeable future.
We have never declared or paid a dividend on our common stock and, because we have very limited resources and a substantial accumulated deficit, we do not anticipate declaring or paying any dividends on our common stock in the foreseeable future. Rather, we intend to retain earnings, if any, for the continued operation and expansion of our business. It is unlikely, therefore, that the holders of our common stock will have an opportunity to profit from anything other than potential appreciation in the value of our common shares held by them. If you require dividend income, you should not rely on an investment in our common stock.
Future issuances of our common stock may depress our stock price and dilute your interest.
We may issue additional shares of our common stock in future financings or grant stock options to our employees, officers, directors and consultants under our stock incentive plan. Any such issuances could have the affect of depressing the market price of our common stock and, in any case, would dilute the percentage ownership interests in our company by our shareholders. In addition, we could issue serial preferred stock having rights, preferences and privileges senior to those of our common stock, including the right to receive dividends and/or preferences upon liquidation, dissolution or winding-up in excess of, or prior to, the rights of the holders of our common stock. This could depress the value of our common stock and could reduce or eliminate amounts that would otherwise have been available to pay dividends on our common stock (which are unlikely in any case) or to make distributions on liquidation.
Further issuances related to our 2008 receipt of financing proceeds may cause massive dilution
In April, 2008, the Company received $224,400 in cash proceeds from a shareholder toward the purchase of shares. The shares have not yet been issued. Based on the share price at the time the Company received the funds, the Company has reserved 492,336 shares for issuance related to this transaction. Because these shares were not issued, there can be no assurance that this reserve is adequate or that substantial dilution may not take place when the Company finally closes this share subscription matter which it anticipates doing this month.
ITEM 2.
ITEM 2. DESCRIPTION OF PROPERTY.
Our principal executive offices are located at 402 West Broadway, Suite 2800, San Diego, CA 92101. Our telephone number is (858)525-5695. We are hosted in the offices of our chief executive officer, James Price, free of charge and without a lease.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
As of the date of this annual report on Form 10-K for the fiscal year ended December 31, 2009, there were no pending material legal proceedings to which we were a party and we are not aware that any were contemplated. There can be no assurance, however, that we will not be made a party to litigation in the future. Any finding of liability imposed against us is likely to have an adverse effect on our business, our financial condition, including liquidity and profitability, and our results of operations.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Our common stock is quoted on the OTC Bulletin Board, a service provided by the Nasdaq Stock Market Inc., under the symbol “VNGM.”
The following table sets forth the high and low bid prices for our common stock as reported each quarterly period within the last two fiscal years on the OTC Bulletin Board, and as obtained from investopedia.com. The high and low prices reflect inter-dealer prices, without retail mark-up, markdown or commission and may not necessarily represent actual transactions.
*
Our common shares began trading on the OTC Bulletin Board on May, 25, 2006; thus, prior historical price information regarding shares of our common stock is unavailable.
STOCKHOLDERS
As of March 31, 2010, there were approximately 48 holders of record of our common shares.
DIVIDENDS
From our inception we have never declared or paid any cash dividends on shares of our common stock and we do not anticipate declaring or paying any cash dividends in the foreseeable future. The decision to declare any future cash dividends will depend upon our results of operations, financial condition, current and anticipated cash needs, contractual restrictions, restrictions imposed by applicable law and other factors that our board of directors deem relevant. Although it is our intention to utilize all available funds for the development of our business, no restrictions are in place that would limit our ability to pay dividends. The payment of any future cash dividends will be at the sole discretion of our board of directors.
RECENT SALES OF UNREGISTERED SECURITIES
On May 24, 2006, we issued eighteen million seven hundred thousand (18,700,000) of our common shares to the shareholders of Wirefree in connection with a certain acquisition agreement.
In May 2006, we issued 47,550,000 shares of common stock in settlement of promissory notes outstanding in the amount of $213, 260.
During the period of May through July 2006, we issued 420,000 shares of common stock as part of a private placement for $ 420,000 and 200,000 common stock purchase warrants at $1.50 per share without additional consideration. The common stock purchase warrants expired unexercised on May 31, 2007.
In November 2007, the Company issued 196,333 shares of the common stock of the company pursuant to a private placement for $ 58,900. The company at the same time issued 196,333 stock purchase warrants with an exercise price of $ .40 per share. All of the warrants are exercisable immediately through November 16, 2009, were issued without additional consideration and as at December 31, 2007 were outstanding.
In November 2007, the Company entered into an agreement with Coastal Uranium Holdings Ltd. to acquire its right and option to acquire an undivided 50% right, title and interest in certain mineral claims in the Athabasca region. The option was acquired through payment of $ 57,585 in cash as well as 2,000,000 common shares of the Company. As of December 31, 2007, the shares had not been issued.
On April 6, 2008, we entered into another agreement with Coastal Uranium Holdings Ltd., whereby we acquired a 50% undivided right, title and interest to the mineral claim numbered S-110476 in the Athabasca region of Canada in exchange for $250,000 CAD ($248,508 USD) and 4,000,000 common shares of Vanguard Minerals corporation. In addition, we have agreed to take on the financial responsibility of Coastal to fund development of the mineral property that is the subject of claim S-110476.
During the year ended December 31, 2008 the Company issued 2,333,333 shares of the common stock of the company pursuant to a private placement for $70,000.
In April, 2008, the Company received $224,400 in cash proceeds from a shareholder toward the purchase of shares. The shares have not yet been issued. Based on the share price at the time the Company received the funds, the Company has reserved 492,336 shares for issuance related to this transaction. Because these shares were not issued, there can be no assurance that this reserve is adequate or that substantial dilution may not take place when the Company finally closes this share subscription matter which it anticipates doing this month.
There were no shares issued during the year ending December 31, 2009.
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion and analysis of our financial condition, results of operations and liquidity should be read in conjunction with our financial statements for the fiscal years ended December 31, 2009 and 2008 and the related notes appearing elsewhere in this annual report. Our financial statements have been prepared in accordance with generally accepted accounting principles, contemplate that we will continue as a going concern, and do not contain any adjustments that might result if we were unable to continue as a going concern, however, our independent registered public accounting firms have added explanatory paragraphs in Note 6 and Note 1 respectively of each of our financial statements for the fiscal years ended December 31, 2009 and 2008, respectively, raising substantial doubt as to our ability to continue as a going concern.
CRITICAL ACCOUNTING POLICIES
Our critical accounting policies, including the assumptions and judgments underlying those policies, are more fully described in the notes to our financial statements. We have consistently applied these policies in all material respects. Investors are cautioned, however, that these policies are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially. Set forth below are the accounting policies that we believe most critical to an understanding of our financial condition, results of operations and liquidity.
Accounting Basis
These financial statements are prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles of the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. The more significant areas requiring the use of estimates include asset impairment, stock-based compensation, and future income tax amounts. Management bases its estimates on historical experience and on other assumptions considered to be reasonable under the circumstances. However, actual results may differ from the estimates.
Mineral Properties
Costs of exploration, carrying and retaining unproven mineral lease properties are expensed as occurred. Mineral property acquisition costs are capitalized including licenses and lease payments. Although the Company has taken steps to verify title to mineral properties in which it has an interest, these procedures do not guarantee the Company’s title. Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects.
Impairment losses are recorded on mineral properties used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount.
All mineral properties held at December 31, 2009 and 2008 have been fully impaired.
Loss Per Share
Net income (loss) per common share is computed based on the weighted average number of common shares outstanding and common stock equivalents, if not anti-dilutive. The Company has not issued any potentially dilutive common shares.
Basic loss per share is calculated using the weighted average number of common shares outstanding and the treasury stock method is used to calculate diluted earnings per share. For the years presented, this calculation proved to be anti-dilutive.
.
Dividends
The Company has not adopted any policy regarding payment of dividends. No dividends have been paid during the period shown.
Revenue Recognition
The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured
Income Taxes
The Company provides for income taxes using an asset and liability approach. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect currently. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. No provision for income taxes is included in the statement due to its immaterial amount, net of the allowance account, based on the likelihood of the Company to utilize the loss carry-forward.
Stock-Based Compensation
The Company did not issue any stock-based payments to its employees in 2009 or 2008. The Company uses the modified prospective method of accounting for stock-based compensation. Under this transition method, stock compensation expense includes compensation expense for all stock-based compensation awards granted on or after January 1, 2006, based on the estimated grant-date fair value.
Recent Accounting Pronouncements
In May 2009, the FASB issued SFAS 165 (ASC 855-10) entitled “Subsequent Events”. Companies are now required to disclose the date through which subsequent events have been evaluated by management. Public entities (as defined) must conduct the evaluation as of the date the financial statements are issued, and provide disclosure that such date was used for this evaluation. SFAS 165 (ASC 855-10) provides that financial statements are considered “issued” when they are widely distributed for general use and reliance in a form and format that complies with GAAP. SFAS 165 (ASC 855-10) is effective for interim and annual periods ending after June 15, 2009 and must be applied prospectively. The adoption of SFAS 165 (ASC 855-10) during the year ended November 30, 2009 did not have a significant effect on the Company’s financial statements as of that date. In connection with the preparation of the accompanying financial statements as of November 30, 2009, management evaluated subsequent events through the date that such financial statements were issued (filed with the SEC).
In June 2009, the FASB issued SFAS 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles. (“SFAS 168” or ASC 105-10) SFAS 168 (ASC 105-10) establishes the Codification as the sole source of authoritative accounting principles recognized by the FASB to be applied by all nongovernmental entities in the preparation of financial statements in conformity with GAAP. SFAS 168 (ASC 105-10) was prospectively effective for financial statements issued for fiscal years ending on or after September 15, 2009 and interim periods within those fiscal years. The adoption of SFAS 168 (ASC 105-10) on July 1, 2009 did not impact the Company’s results of operations or financial condition. The Codification did not change GAAP, however, it did change the way GAAP is organized and presented.
As a result, these changes impact how companies reference GAAP in their financial statements and in their significant accounting policies. The Company implemented the Codification in this Report by providing references to the Codification topics alongside references to the corresponding standards.
With the exception of the pronouncements noted above, no other accounting standards or interpretations issued or recently adopted are expected to have a material impact on the Company’s financial position, operations or cash flows.
Foreign currency transactions
The business of the Company from Canada involves incurring a substantial number of operational transactions in Canada for which it transacts payments in Canadian currency through a bank account maintained for that purpose. Included in such transactions are payments for salaries, rent, consulting and many other expenses. At the time of payment, each Canadian disbursement is translated into the U. S. dollar equivalent amount and an exchange gain or loss on currency is recorded at that time. As of December 31, 2009, the Canadian bank account balance, which was the only account balance maintained in foreign currency at that date was converted into a U. S. dollar equivalent amount.
OVERVIEW
We are a development stage mineral exploration company. We currently possess certain rights to mineral claims in the Athabasca region of Canada. We anticipate that we will substantially increase development of this property sometime within the 2010 fiscal year if we are able to secure financing to pay for the necessary geological surveys. If we cannot obtain financing to complete development of the properties, we will endeavor to find a development partner or buyer for our mineral properties and will attempt to diversify our operations into as yet unidentified fields.
PLAN OF OPERATION
We anticipate beginning development of the Athabasca mineral property sometime within 2010 or, if funding is unsuccessful, finding a partner or buyer. The specific drilling and exploration program for this property has not yet been developed, but we intend to develop this program and to execute on the program throughout the next twelve months. We also intend to continue evaluating other mineral properties for development, although there can be no assurance that we will locate any such properties on terms and conditions that would be acceptable to us. Our plans are completely dependent on obtaining additional financing. As we have no indication currently that we can obtain such financing, we are not certain as to when our plans will actually be implemented.
LIQUIDITY AND CAPITAL RESOURCES
As of the fiscal year ended December 31, 2009 we had $108 of cash on hand.
Our net loss decreased $2,631,830 from $2,690,830 for the fiscal year ended December 31, 2008 to $59,000 for the fiscal year ended December 31, 2009, and our working capital deficit increased $59,000 from a deficit of $134,630 for the fiscal year ended December 31, 2008 to a deficit of $193,630 for the fiscal year ended December 31, 2009. This increase in net loss is primarily attributable to charges we have taken for mineral property costs represented by the common shares we have issued for our mineral property rights.
Net cash used in operating activities decreased $281,234, from $302,570 for the fiscal year ended December 31, 2008 to $21,336 for the fiscal year ended December 31, 2009. This decrease was primarily the result of lower cash expenditures related to the acquisition or mineral property rights.
Net cash provided by financing activities decreased $276,663, from $294,400 for the fiscal year ended December 31, 2008 to $17,737 for the fiscal year ended December 31, 2009. Net cash provided by financing activities was attributable to an advance by an officer in 2009.
We do not believe that our current financial resources are sufficient to meet our working capital needs over the next twelve months and, accordingly, we will need to secure additional external financing to continue our operations. We may seek to raise additional capital though private equity or debt financings and shareholder loans. As of the date of this annual report on Form 10-K for the fiscal year ended December 31, 2009, we have obtained no verbal commitments regarding further investments in our company; and, there can be no assurance that we will be able to secure additional external financing, or, if we are able to secure such external financing, that it will be on terms favorable, or even acceptable, to us. If necessary, we may explore strategic alternatives, including a merger, asset sale, joint venture or other comparable transactions. Any inability to achieve or sustain profitability or otherwise secure external financing or locate a strategic partner would have a material adverse effect on our business, financial condition, and results of operations, raising substantial doubts as to our ability to continue as a going concern, and we may ultimately be forced to seek protection from creditors under the bankruptcy laws or cease operations.
Our short-term prospects are challenging considering our lack of financial resources. In the absence of additional financing, sales of our products or services, or locating a strategic partner willing to finance our further development, our short-term and long-term prospects for growth are minimal over and above incremental sales of our existing products and services.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS.
VANGUARD MINERALS CORPORATION
(AN EXPLORATION STAGE COMPANY)
DECEMBER 31, 2009
Silberstein Ungar, PLLC CPAs and Business Advisors
Phone (248) 203-0080
Fax (248) 281-0940
Telegraph Road, Suite 2175
Bingham Farms, MI 48025-4586
www.sucpas.com
Report of Independent Registered Public Accounting Firm
To the Board of Directors of
Vanguard Minerals Corporation
San Diego, California
We have audited the accompanying balance sheets of Vanguard Minerals Corporation (the “Company”) as of
December 31, 2009 and 2008, and the related statements of operations, stockholders’ equity (deficit), and cash flows for the periods then ended and for the period from August 25, 2003 (inception) through December 31, 2009. 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 audits. We did not audit the financial statements for the period August 25, 2003 (Inception) through December 31, 2007. Those statements were audited by other auditors whose report has been furnished to us, and our opinion on the statements of operations, stockholders’ equity (deficit), and cash flows for the period August 25, 2003 (Inception) through December 31, 2007, insofar as it relates to the amounts for prior periods through December 31, 2007 is based solely on the report of the other auditors.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Vanguard Minerals Corporation as of December 31, 2009 and 2008 and the results of its operations and its cash flows for the periods then ended and the period from August 25, 2003 (inception) through December 31, 2009 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. As discussed in Note 6 to the financial statements, the Company has limited working capital, has not yet received revenue from sales of products or services, and has incurred losses from operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans with regard to these matters are described in Note 6. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
As discussed in Note 7 to the financial statements, errors resulting in an overstatement of expenses were discovered by management in 2008. Accordingly, adjustments have been made to the December 31, 2008 financial statements to correct the errors.
/s/ Silberstein Ungar, PLLC
Bingham Farms, Michigan
April 14,
VANGUARD MINERALS CORPORATION
(AN EXPLORATION STAGE COMPANY)
BALANCE SHEETS
AS OF DECEMBER 31, 2009 AND 2008
The accompanying notes are an integral part of these financial statements.
VANGUARD MINERALS CORPORATION
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED DECEMBER 31, 2009 AND 2008
PERIOD FROM AUGUST 25, 2003 (INCEPTION) TO DECEMBER 31, 2009
The accompanying notes are an integral part of these financial statements.
VANGUARD MINERALS CORPORATION
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) (RESTATED)
AS OF DECEMBER 31, 2009
The accompanying notes are an integral part of these financial statements.
VANGUARD MINERALS CORPORATION
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED DECEMBER 31, 2009 AND 2008
PERIOD FROM AUGUST 25, 2003 (INCEPTION) TO DECEMBER 31, 2009
The accompanying notes are an integral part of these financial statements.
VANGUARD MINERALS CORPORATION
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009
NOTE 1 - NATURE OF OPERATIONS
The Company was incorporated in the State of Nevada, United States of America on August 25, 2003. The Company’s fiscal year end is December 31.
The Company entered into a mineral license option agreement to explore and mine two properties in Mongolia. On April 19, 2006, the Company terminated the option agreements it previously held.
On May 2, 2006, the Company changed its name to Knewtrino, Inc. On May 24, 2006, the Company entered into an agreement to acquire certain technology owned by Instant Wirefree, Inc. by acquiring 100% of the common shares of Instant Wirefree, Inc. in exchange for cash in the amount of $ 27,500 and 18,700,000 common shares of the Company. During the year, the Company changed its business focus and as a result will no longer be developing the Instant Wirefree technology. As a result, the Company has recognized an impairment of $ 46,200 in the value of the technology asset.
On August 10, 2007, the Company changed its name to Vanguard Minerals Corporation.
In November 2007, the Company entered into an agreement with Coastal Uranium Holdings Ltd. to acquire its right and option to an undivided 50% right, title and interest in certain mineral claims in the Athabasca region of Canada for $58,300 (Cdn) plus 2,000,000 shares of the common stock of Vanguard. In addition, Vanguard agreed to take on the financial responsibility of Coastal Uranium Holdings Ltd. to fund development of the mineral property.
In April 2008, Vanguard entered into a second agreement with Coastal Uranium Holdings Ltd. to acquire its 50% interest in mining claim S- 110476 in the Athabasca region of Canada for $ 250,000 (Cdn) plus 4,000,000 shares of the common stock of Vanguard. In addition, Vanguard agreed to take on the financial responsibility of Coastal Uranium Holdings Ltd. to fund development of the mineral property.
The Company has not generated any revenues to date from its mineral exploration efforts, and in accordance with SFAS #7 (ASC 915-10) is considered to be an Exploration Stage Company.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Basis
These financial statements are prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles of the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. The more significant areas requiring the use of estimates include asset impairment, stock-based compensation, and future income tax amounts. Management bases its estimates on historical experience and on other assumptions considered to be reasonable under the circumstances. However, actual results may differ from the estimates.
VANGUARD MINERALS CORPORATION
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Mineral Properties
Costs of exploration, carrying and retaining unproven mineral lease properties are expensed as occurred. Mineral property acquisition costs are capitalized including licenses and lease payments. Although the Company has taken steps to verify title to mineral properties in which it has an interest, these procedures do not guarantee the Company’s title. Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects.
Impairment losses are recorded on mineral properties used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount.
All mineral properties held at December 31, 2009 and 2008 have been fully impaired.
Loss Per Share
Net income (loss) per common share is computed based on the weighted average number of common shares outstanding and common stock equivalents, if not anti-dilutive. The Company has not issued any potentially dilutive common shares.
Basic loss per share is calculated using the weighted average number of common shares outstanding and the treasury stock method is used to calculate diluted earnings per share. For the years presented, this calculation proved to be anti-dilutive.
Dividends
The Company has not adopted any policy regarding payment of dividends. No dividends have been paid during the period shown.
Revenue Recognition
The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured
Income Taxes
The Company provides for income taxes using an asset and liability approach. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect currently. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. No provision for income taxes is included in the statement due to its immaterial amount, net of the allowance account, based on the likelihood of the Company to utilize the loss carry-forward.
Stock-Based Compensation
The Company did not issue any stock-based payments to its employees in 2009 or 2008. The Company uses the modified prospective method of accounting for stock-based compensation. Under this transition method, stock compensation expense includes compensation expense for all stock-based compensation awards granted on or after January 1, 2006, based on the estimated grant-date fair value.
VANGUARD MINERALS CORPORATION
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Pronouncements
In May 2009, the FASB issued SFAS 165 (ASC 855-10) entitled “Subsequent Events”. Companies are now required to disclose the date through which subsequent events have been evaluated by management. Public entities (as defined) must conduct the evaluation as of the date the financial statements are issued, and provide disclosure that such date was used for this evaluation. SFAS 165 (ASC 855-10) provides that financial statements are considered “issued” when they are widely distributed for general use and reliance in a form and format that complies with GAAP. SFAS 165 (ASC 855-10) is effective for interim and annual periods ending after June 15, 2009 and must be applied prospectively. The adoption of SFAS 165 (ASC 855-10) during the year ended November 30, 2009 did not have a significant effect on the Company’s financial statements as of that date. In connection with the preparation of the accompanying financial statements as of November 30, 2009, management evaluated subsequent events through the date that such financial statements were issued (filed with the SEC).
In June 2009, the FASB issued SFAS 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles. (“SFAS 168” or ASC 105-10) SFAS 168 (ASC 105-10) establishes the Codification as the sole source of authoritative accounting principles recognized by the FASB to be applied by all nongovernmental entities in the preparation of financial statements in conformity with GAAP. SFAS 168 (ASC 105-10) was prospectively effective for financial statements issued for fiscal years ending on or after September 15, 2009 and interim periods within those fiscal years. The adoption of SFAS 168 (ASC 105-10) on July 1, 2009 did not impact the Company’s results of operations or financial condition. The Codification did not change GAAP, however, it did change the way GAAP is organized and presented.
As a result, these changes impact how companies reference GAAP in their financial statements and in their significant accounting policies. The Company implemented the Codification in this Report by providing references to the Codification topics alongside references to the corresponding standards.
With the exception of the pronouncements noted above, no other accounting standards or interpretations issued or recently adopted are expected to have a material impact on the Company’s financial position, operations or cash flows.
Foreign currency transactions
The business of the Company from Canada involves incurring a substantial number of operational transactions in Canada for which it transacts payments in Canadian currency through a bank account maintained for that purpose. Included in such transactions are payments for salaries, rent, consulting and many other expenses. At the time of payment, each Canadian disbursement is translated into the U. S. dollar equivalent amount and an exchange gain or loss on currency is recorded at that time. As of December 31, 2009, the Canadian bank account balance, which was the only account balance maintained in foreign currency at that date was converted into a U. S. dollar equivalent amount.
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company has a balance owing of $17,737 to a related party. The loan is unsecured and bears no interest. There are no specific terms of repayment with this loan.
VANGUARD MINERALS CORPORATION
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009
NOTE 4 - STOCKHOLDERS’ EQUITY
On November 15, 2007, the Company issued 2,000,000 shares of common stock in connection with the acquisition of a 50% interest in two mineral claims.
On April 6, 2008, the Company issued 4,000,000 shares of common stock in connection with the acquisition of a third mineral claim.
During the year ended December 31, 2008, the Company issued 2,333,333 shares of common stock for $70,000 in connection with a private placement.
During the year ended December 31, 2008, the Company issued 492,336 shares of common stock for $224,400 in connection with a private placement.
NOTE 5 - INCOME TAXES
The provision for Federal income tax consists of the following:
The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur net operating loss carry forwards may be limited as to use in future years.
NOTE 6 - GOING CONCERN
The Company's financial statements are prepared using the accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has not begun to generate revenues, and has incurred a significant operating loss as of December 31, 2009.
The Company is dependent upon its ability to secure equity and/or debt financing and there are no assurances that the Company will be successful. Without sufficient financing, or the achievement of profitable operations, it would be unlikely for the Company to continue as a going concern.
VANGUARD MINERALS CORPORATION
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009
NOTE 7 - CORRECTION OF ERRORS AND RESTATEMENTS
The Company has restated its balance sheet and statement of operations at December 31, 2008 to correct errors in its accounting. Property and equipment were disposed of with a net book value of $8,824. Correspondingly, depreciation expense was reduced by $7,089. In addition, accrued liabilities in the amount of $15,913 were reversed. Also, an expense paid in 2008 in the amount of $59,004 related to a prior period. The net effect of these adjustments was to increase the December 31, 2007 accumulated deficit by $59,004 and reduce the net loss for the year by $66,092.
The December 31, 2008 balance sheet has been restated to correct the property and equipment, accounts payable and accrued expenses, and stockholders’equity (deficit).
The December 31, 2008 statement of operations has been restated to reflect the changes in expenses.
The following are the before and after balances as restated:
NOTE 8 - SUBSEQUENT EVENTS
The Company has analyzed its operations subsequent to December 31, 2009 through the date these financial statements were filed with the Securities and Exchange Commission.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AN ACCOUNTING FINANCIAL DISCLOSURE.
There were no previously unreported events under this Item 9 during the fiscal year ended December 31, 2009. We would, however, like to note that we have previously provided disclosure on form 8K that on August 27, 2009 the Public Company Accounting Oversight Board (“PCAOB”) revoked the registration of Moore and Associates, Chartered (“Moore”) because of violations by Moore of PCAOB rules and auditing standards in auditing financial statements, violations of PCAOB rules and quality control standards, violations of Section 10 B and Rule 10(b) 5 thereunder of the Securities Exchange Act of 1934 and non-cooperation with a PCAOB investigation. Moore, under advice of counsel, has declined to provide us with a letter to the Securities and Exchange Commission stating whether it agrees with the statements in this amended 8-K. Moore was the Company's previous independent auditor. On August 9, 2009 the Company engaged Seale and Beers, CPAs as its independent auditors but dismissed Seale and Beers, CPAs on September 22, 2009 and appointed Maddox Ungar Silberstein PLLC, now Silberstein Ungar PLLC as its independent auditors.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15 under the Exchange Act, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2009. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Principal Financial and Accounting Officer, as well as outside consultants. In assessing the effectiveness of our internal control over financial reporting we utilized the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission as published in "Internal Control over Financial Reporting - Guidance for Smaller Public Companies." Based on that evaluation, our Chief Executive Officer and Principal Financial and Accounting Officer found material weaknesses in our disclosure controls and procedures and therefore concluded that our disclosure controls and procedures as of the end of the period covered by this report were ineffective.
The determination of ineffective internal control is based upon the lack of separation of duties. Our entire management is comprised of one individual. It is impossible to create a system of checks and balances with oversight in this circumstance. It is management’s intention to bring additional people into the management team. Once there are more members of management, responsibilities can be divided and oversight roles created. Although the Company does not currently have sufficient financial resources to hire additional management, the Company hopes to have such resources, make such hires and create segregation of duties and proper oversight within 12 months, but currently financing is not available. The Company estimates the annual costs of such remediation efforts in the form of additional management will be $150,000 per year.
We understand that remediation of disclosure controls is a continuing work in progress due to the issuance of new standards and promulgations. However, remediation of the material weaknesses described above is among our highest priorities. Our management will periodically assess the progress and sufficiency of our ongoing initiatives and make adjustments as and when necessary. As of the date of this report, our management believes that our efforts will remediate the material weaknesses in internal control over financial reporting as described above.
Notwithstanding these material weaknesses which are described below, our management performed additional analyses, reconciliations and other post-closing procedures and has concluded that the Company’s consolidated financial statements for the periods covered by and included in this Annual Report on Form 10-K are fairly stated in all material respects in accordance with generally accepted accounting principles in the U.S. for each of the periods presented herein.
Inherent Limitations Over Internal Controls
The Company's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company's internal control over financial reporting includes those policies and procedures that:
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company's assets;
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Company's receipts and expenditures are being made only in accordance with authorizations of the Company's management and directors; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.
Management does not expect that the Company's internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the (i) effectiveness and efficiency of operations, (ii) reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and (iii) compliance with applicable laws and regulations. Our internal controls framework is based on the criteria set forth in the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Management, consisting of our Chief Executive Officer and Principal Accounting and Financial Officer, is responsible for establishing and maintaining adequate internal control over the Company's financial reporting.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2009, utilizing the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission as published in "Internal Control over Financial Reporting - Guidance for Smaller Public Companies." Based on the assessment by management, we determined that our internal control over financial reporting was ineffective as of December 31, 2008.
Changes in Internal Control of Financial Reporting
During the fiscal year ended there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to affect, our internal control over financial reporting.
ITEM 9B.
ITEM 9B. OTHER INFORMATION.
None.
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The following table sets forth our directors and executive officers and their ages as of the fiscal year ended December 31, 2009:
*Mr. Fedyunin resigned as President, Chief Executive Officer and Sole Director as of February 2, 2010
James Price- President, Chief Executive Officer and Sole Director
Mr. Price has served as our President and Chief Executive Officer since February 2, 2010. Since May of 1992, Mr. Price has functioned as President and Chief Executive Officer of San Diego based Aero Financial, Inc., which he founded, to provide essential support and organizational services to private and public companies. Mr. Price received his bachelor’s degree from Eastern Washington University and served for 3 years in the US Army. Upon his honorable discharge, Mr. Price served as a stock broker and office Principal for 10 years at various brokerage firms, including Gant, Cohig and Associates, AG Edwards and Sons and Global Financial, prior to founding Aero Financial. Mr. Price sits on the Board of Directors for the San Diego area YMCA and is the Chairman of the Board for the I AM Foundation.
Vladimir Fedyunin - Principal Financial Office and Principal Accounting Officer
Vladimir Fedyunin has served as our Chief Executive Officer, Principal Financial Officer, Principal Accounting Officer, President, and Director since December 29, 2006. Mr. Fedyunin resigned as President, Chief Executive Officer and Sole Director as of February 2, 2010 but remains our Principal Financial and Accounting Officer.
In addition, from January 2006 Mr. Fedyunin has served as President of Navigator Consulting Group, a corporate and management consultancy. Previously, he also served as Vice-President of Navigator Consulting Group, from November 1999 to January 2004. From January 2004 through January 2006 Mr. Fedyunin served as President of Inter Currency Exchange Corporation, a foreign exchange brokerage firm. From February 1993 through October 1998, he served as Executive Director of FOX, Ltd., and, from January 1992 through February 1993, as a Marketing General Manager for Trade House, Inc., both firms located in Zhitomir, Ukraine. Mr. Fedyunin holds a Certificate in Business Administration from Kiev Polytechnic Institute, and a Masters of Science in Commercial and Investment Banking from Moscow State University of Economics, Statistics and Informatics.
FAMILY RELATIONSHIPS
There are no family relationships, by blood or marriage, among any of our directors or executive officers.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
During the past five years, none of our directors, executive officers and control persons have been involved in any of the following events:
·
any bankruptcy petition filed by or against any business of which such person was an executive officer either at the time of the bankruptcy or within two years prior to that time;
·
any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
·
being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and
·
being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
BOARD OF DIRECTORS COMMITTEES
As of the date of this annual report on Form 10-K for the fiscal year ended December 31, 2009, we have no standing committees and our entire board of directors serves as our audit, compensation and nominating committees. We believe that our board of directors are capable of adequately analyzing and evaluating our financial statements and understanding our internal controls over financial reporting, and that retaining an independent director who would qualify as an audit committee financial expert would be overly cost prohibitive and unwarranted given our limited resources and operations.
As of the date of this annual report on Form 10-K for the fiscal year ended December 31, 2009, there have been no material changes to the procedures by which our security holders may recommend nominees to our board of directors.
CODE OF ETHICS
We have adopted a code of business conduct and ethics applicable to each of our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer. A copy of our code of business conduct and ethics is available, without charge, to any person who so requests a copy, in writing, at: Vanguard Minerals Corporation, 402 West Broadway, Suite 2800, San Diego, CA 92101.
COMPLIANCE WITH SECTION 16(A)
Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than ten percent of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities of ours. Officers, directors and greater than ten percent stockholders are required by the SEC’s regulations to furnish us with copies of all Section 16(a) forms they filed.
The following table sets for the compliance reporting under Section 16(a) during the last fiscal year.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth the total compensation awarded to, earned by, or paid to our Chief Executive Officer during each of the last three completed fiscal years. No other individuals are employed by us or have earned a total annual salary and bonus in excess of $100,000 during any of the last three completed fiscal years.
SUMMARY COMPENSATION TABLE
*
Ivan Bebek resigned as our Chief Executive Officer, Principal Financial Officer, Principal Accounting Officer, President, and a director on May 24, 2006.
**
Jenifer Osterwalder served as our Chief Executive Officer, Principal Financial Officer, Principal Accounting Officer, President, and a director from May 24, 2006, until her resignation on December 29, 2006.
***
Vladimir Fedyunin was appointed our Chief Executive Officer, Principal Financial Officer, Principal Accounting Officer, President, and a director on December 29, 2006. Mr. Fedyunin resigned as President, CEO and a director on February 2, 2010.
EMPLOYMENT AGREEMENTS
As of the date of this annual report on Form 10-K for the fiscal year ended December 31, 2009, we have no employment agreements in place with any of our other executive officers, directors or employees.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
There were no unexercised options, stock that had not vested, or equity incentive plan awards outstanding for our Chief Executive Officer as of the end of the fiscal year ended December 31, 2009.
COMPENSATION OF DIRECTORS
Pursuant to authority granted under our Article II, Section 2.16 of our bylaws, directors are entitled to such compensation as our board of directors shall from time to time determine. For the fiscal year ended December 31, 2009, we did not provide any director compensation.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
As of the date of this annual report on Form 10-K for the fiscal year ended December 31, 2009, we have not adopted an equity compensation plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial ownership of our common stock as of December 31, 2009. The information in these tables provides ownership information for:
·
each person known by us to be the beneficial owner of more than a 5% of our common stock
·
each of our directors and executive officers; and
·
all of our directors and executive officers as a group.
Beneficial ownership has been determined in accordance with the rules and regulations of the SEC and includes voting or investment power with respect to our common stock and those rights to acquire additional shares within sixty days. Unless otherwise indicated, the persons named in the table below have sole voting and investment power with respect to the number of shares of common stock indicated as beneficially owned by them, except to the extent such power may be shared with a spouse. Common stock beneficially owned and percentage ownership are based on 80,549,666 shares of common stock currently outstanding. The address of each person listed is care of Vanguard Minerals Corporation, 402 West Broadway, San Diego, CA 92101.
(1)
Consists of 6,000,000 shares of common stock directly owned.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.
Included in accounts payable and accrued liabilities listed on our financial statements is $ 17,737 owed to an officer of the Company, Vladimir Fedyunin.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The following table sets forth the aggregate amount of various professional fees billed by our principal accountants with respect to our last two fiscal years:
All audit fees are approved by our board of directors. Moore & Associates, Chartered (“Moore”) were our principal accountants for the fiscal year ended December 31, 2008 and until August 9, 2009. Seale and Beers, CPAs were our independent accountants from August 9, 2009 until September 22, 2009. Maddox Ungar Silberstein, PLLC have been our independent auditors since September 22, 2009 and are now known as Silberstein Ungar PLLC. We were billed $8,000 by Silberstein and Ungar and $1,500 by Seale and Beers and nothing by Moore in 2009.
Audit Fees
Audit fees billed for professional services rendered by Moore & Associates , during the fiscal year ended December 31, 2009 and the twelve months ended December 31, 2008, respectively, for the audit of our annual consolidated financial statements, review of the consolidated financial statements included in our quarterly reports on Form 10-Q, and any services provided in connection with statutory and regulatory filings or engagements for those years ended, totaled approximately $0 and $8,000, respectively.
Audit fees billed for professional services rendered by Seale and Beers, CPAs , during the fiscal year ended December 31, 2009 and the twelve months ended December 31, 2008, respectively, for the audit of our annual consolidated financial statements, review of the consolidated financial statements included in our quarterly reports on Form 10-Q, and any services provided in connection with statutory and regulatory filings or engagements for those years ended, totaled approximately $1,500 and $0, respectively.
Audit fees billed for professional services rendered by Silberstein Ungar PLLC , during the fiscal year ended December 31, 2009 and the twelve months ended December 31, 2008, respectively, for the audit of our annual consolidated financial statements, review of the consolidated financial statements included in our quarterly reports on Form 10-Q, and any services provided in connection with statutory and regulatory filings or engagements for those years ended, totaled approximately $8,000 and $0, respectively
Audit-Related Fees
Audit-related fees billed by Moore & Associates during the fiscal year ended December 31, 2008 and December 31, 2009, respectively, for assurance and related services and totaled approximately $0 and $0, respectively.
Audit-related fees billed by Seale and Beers, CPAs during the fiscal year ended December 31, 2008 and December 31, 2009, respectively, for assurance and related services and totaled approximately $0 and $0, respectively.
Audit-related fees billed by Silberstein Ungar PLLC during the fiscal year ended December 31, 2008 and December 31, 2009, respectively, for assurance and related services and totaled approximately $0 and $0, respectively.
Tax Fees
Tax fees billed by Moore & Associates during the fiscal year ended December 31, 2009 and the twelve months ended December 31, 2008, respectively, for tax compliance, tax advice and tax planning services totaled approximately $0 and $0, respectively.
Tax fees billed by Seale and Beers, CPAs during the fiscal year ended December 31, 2009 and the twelve months ended December 31, 2008, respectively, for tax compliance, tax advice and tax planning services totaled approximately $0 and $0, respectively.
Tax fees billed by Silberstein Ungar PLLC during the fiscal year ended December 31, 2009 and the twelve months ended December 31, 2008, respectively, for tax compliance, tax advice and tax planning services totaled approximately $0 and $0, respectively.
All Other Fees
There were no fees billed by Moore & Associates during the fiscal year ended December 31, 2009 and the twelve months ended December 31, 2008, for services rendered other than the amounts set forth above.
There were no fees billed by Seale and Beers, CPAs during the fiscal year ended December 31, 2009 and the twelve months ended December 31, 2008, for services rendered other than the amounts set forth above.
There were no fees billed by Silberstein and Ungar, PLLC during the fiscal year ended December 31, 2009 and the twelve months ended December 31, 2008, for services rendered other than the amounts set forth above.
ITEM 15.
ITEM 15. EXHIBITS.
No.
Description of Exhibit
2.1
Assigment Agreement between Vanguard Minerals Corporation and Coastal Uranium Holdings Ltd. dated November 15, 2007, incorporated by reference to the registrants report on Form 10KSB filed on April 2, 2008.
2.2
Assigment Agreement between Vanguard Minerals Corporation and Coastal Uranium Holdings Ltd. dated April 8, 2007, incorporated by reference to the registrants report on Form 10-Q filed on May 15, 2008.
3(i)(1)
Articles of Incorporation of Vanguard Minerals Corporation dated August 25, 2003, incorporated by reference to Exhibit 3.1 on Form SB-2 filed February 13, 2004.
3(i)(2)
Certificate of Amendment to Articles of Incorporation of Vanguard Minerals Corporation as described in definitive Schedule 14C filed August 24, 2007.
3(ii)
By-laws of Vanguard Minerals Corporation dated August 26, 2003, incorporated by reference to Exhibit 3.2 on Form SB-2 filed February 13, 2004.
14.1
Code of Ethics, incorporated by reference to Exhibit 14.1 on Form 10-K filed March 30, 2006.
31.1
Certification of Vanguard Minerals Corporation Chief Executive Officer, James Price, required by Rule 13a-14(a) or Rule 15d-14(a), dated April 15, 2010.
31.2
Certification of Vanguard Minerals Corporation Chief Financial Officer, Vladimir Fedyunin, required by Rule 13a-14(a) or Rule 15d-14(a), dated April 15, 2010.
32.1
Certification of Vanguard Minerals Corporation Chief Executive Officer, James Price, required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350), dated April 15, 2010.
32.2
Certification of Vanguard Minerals Corporation Chief Financial Officer, Vladimir Fedyunin, required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350), dated April 15, 2010.
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.
By:
/s/ James Price
James Price
President, CEO and Director