ITEM 1. Business.
As used in this annual report, references to “Sanborn”, “Universal Tech”, “Universal Tech Corp.”, the “Company”, “we”, “our” or “us” refer to Sanborn Resources, Ltd., unless the context otherwise indicates. On October 10, 2013, James Davidson, our Chief Executive Officer and director, and Adam Wasserman, our Chief Financial Officer resigned. Concurrently with such resignations, Kristian Andresen was elected to serve as the sole officer and director of the Company.
Corporate History
Sanborn Resources, Ltd. (formerly Universal Tech Corp.) was incorporated under the laws of the State of Delaware on May 17, 2011. We are a development stage company that has generated only $102,500 of in revenues to date, which related to discontinued operations.
On March 4, 2013, we filed an Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to, among other things, (1) effect a one hundred for one (100:1) forward split of our common stock, (2) change the name of the Company to “Sanborn Resources, Ltd.” from “Universal Tech Corp.” and (iii) change our authorized stock to one billion (1,000,000,000) shares of common stock, par value $0.0001 per share, and twenty million (20,000,000) shares of preferred stock, par value $0.0001 per share. In May of 2013, we cancelled 199,750,000 shares of our common stock owned by James Davidson.
Rae Wallace
On April 17, 2013, Inti Holdings Limited, a corporation incorporated pursuant to the laws of the Cayman Islands (“Inti Holdings”), and a newly formed wholly owned subsidiary of the Company, purchased, effective April 3, 2013, 100% of the outstanding capital stock of Rae Wallace Peru S.A.C., a corporation formed under the laws of Peru (“Rae Wallace”), pursuant to the terms of a Share Purchase Agreement by and among Inti Holdings, Rae Wallace and Rae-Wallace Mining Company and George Cole, the sole shareholders of Rae Wallace (the “Rae Wallace Shareholders”, and the agreement, the “Share Purchase Agreement”). In consideration for the acquisition of Rae Wallace, Inti Holdings paid the Rae Wallace Shareholders an aggregate purchase price of $700,000. Rae Wallace is the owner of certain properties and mineral rights located in Peru. Certain of these properties are subject to third party royalty payments from the sale or disposition of all minerals produced by such covered properties. Following the acquisition, we intended to focus our efforts on mining and minerals in Peru.
Effective December 30, 2013, we entered into a Stock Purchase Agreement, as filed with the SEC on January 13, 2014, in which, in exchange for the consideration as detailed below, we transferred all of our shareholdings of our holly owned subsidiary Inti Holdings Limited, a corporation formed under the laws of the Cayman Islands (“Inti”) to Tuscan Capital, Ltd., a corporation formed under the laws of the Cayman Islands (“Tuscan”).
Pursuant to the Agreement, as partial consideration for the Corporation’s transfer of all of the issued and outstanding shares of common stock of Inti, Tuscan consented to the assignment and assumption of all obligations and amounts due pursuant to three promissory notes in which the Corporation borrowed a total of $150,000 USD. All of the note holders have signed consents to such assignments to Tuscan, and therefore, the Corporation is no longer indebted for such amounts due thereunder. Additionally, as consideration of the transfer of all of the issued and outstanding shares of common stock of Inti to Tuscan, Tuscan has released and cancelled three promissory notes in which Tuscan had loaned the Corporation a total of $915,000 USD.
As reported with the Securities and Exchange Commission in a Current Report on Form 8-K on April 23, 2013, Inti, a wholly owned subsidiary of the Corporation, through a Share Purchase Agreement, purchased 100% of the outstanding capital stock of Rae Wallace Peru S.A.C., a corporation formed under the laws of Peru (“Rae Wallace”). Rae Wallace is the owner of certain properties and mineral rights located in Peru. Certain of these properties are subject to third party royalty payments from the sale or disposition of all minerals produced by such covered properties.
Our Business
From the period from inception (May 17, 2011) through October 3, 2012, we focused on investing in the international art market through purchasing and reselling artwork. On October 3, 2012, in connection with a change in management, we commenced evaluating several opportunities in mining and minerals in Brazil and elsewhere.
To date, we have had preliminary confidential discussions with several businesses concerning possible opportunities. However, there exist no agreements, arrangements or understandings as to any new opportunities or businesses as of the date of this annual report.
Employees
We do not have any employees. Our sole officer and director Kristian Andresen, works for us as an independent contractor.
ITEM 1A.
ITEM 1A. RISK FACTORS.
We qualify as a smaller reporting company, as defined by Rule 229.10(f)(1), and are not required to provide the information required by this Item.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
ITEM 2. PROPERTIES.
For the period from Inception (May 17, 2011) through October 3, 2012, we were located at 1608 S. Ashland Ave #70547, Chicago, Illinois 60608-2013. This office space was provided to us by a former officer and director at no cost. As of October 3, 2012, we use an office space located at 777 South Flagler Drive, Suite 800-West Tower, West Palm Beach, Florida 33401. We pay a monthly rent of $355. We believe that these facilities are adequate to meet our current needs.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
We are not presently a party to any material legal proceedings nor are we aware of any such threatened or pending litigation.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Our common stock was originally approved for quotation on the OTC Bulletin Board on May 10, 2012 under the trading symbol UTCC. In connection with our forward split, in March 2013, we filed an Issuer Company-Related Action Notification Form with the Financial Industry Regulatory Authority (“FINRA”). The forward split is scheduled to take effect in late March or April, 2013. Upon approval of the forward split, FINRA will issue us a new ticker symbol for trading purposes.
There is currently no market for our shares. We cannot give you any assurance that the shares will ever have a market or that if a market for our shares ever develops, that you will be able to sell your shares. In addition, even if a public market for our shares develops, there is no assurance that a secondary public market will be sustained.
In the past, we have not declared or paid cash dividends on our common stock, and we do not intend to pay any cash dividends on our common stock. Rather, we intend to retain future earnings (if any) to fund the operation and expansion of our business and for general corporate purposes. Subject to legal and contractual limits, our board of directors will make any decision as to whether to pay dividends in the future.
Record Holders
As of March 25, 2014, we had outstanding 42,674,381 shares of common stock, which were held by 18 stockholders of record.
Securities Authorized for Issuance Under Equity Compensation Plans
As of December 31, 2013, none of our equity securities were authorized to be issued under any compensation plans.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
Not applicable.
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Our Business and Recent Events
We were formed as a corporation pursuant to the laws of the State of Delaware on May 17, 2011. We have historically conducted our business to leverage the burgeoning interest in art investment by tailoring the sales process through a direct sales approach. On October 3, 2012, our former officers and directors resigned and James Davidson was appointed as our sole director and Chief Executive Officer effective upon the resignations. As a result of Mr. Davidson’s appointment, we are evaluating several opportunities in mining and minerals in Brazil and elsewhere. However, there exist no agreements, arrangements or understandings as to any new opportunities or businesses as of the date of this report.
On March 4, 2013, we filed an Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to, among other things, (1) effect a one hundred for one (100:1) forward split of our common stock, (2) change our name to Sanborn Resources, Ltd. and (iii) change the authorized stock to one billion (1,000,000,000) shares of common stock and twenty million (20,000,000) shares of preferred stock. All share and per share values for all periods presented in the accompanying financial statements are retroactively restated for the effect of the forward split.
Additional Equity Raises
As of December 31, 2013, we had approximately $17,094 in cash. As a result, we are investigating alternative business opportunities, which may include a merger with another company.
On October 10, 2012, we received working capital financing in the form of a $50,000 loan. The loan is due on demand and bears 16% annual interest.
On January 16, 2013 and February 27, 2013, the Company issued notes payable in the aggregate amount of $100,000. The notes bore interest at 16% per annum and were due on demand. The note was used for working capital purposes.
On April 10, 2013, we issued a note payable amounting to $775,000. The note bears interest at 8% per annum and is due after thirteen months, unless extended by the holder. This note may be accelerated upon the sale of any equity or equity-linked securities in the minimum amount of $1,000,000 net proceeds to the Company. The proceeds of this note were used for the acquisition of Rae Wallace and working capital purposes.
Between June 13, 2013 and July 13, 2013, the Company issued notes payable aggregating to $140,000. The notes bore interest at 16% per annum and were payable on demand. The Company had the right at any time to pay all or portion of the principal amount without notice or penalty. The notes were used for working capital purposes.
On December 30, 2013, in connection with the Stock Purchase Agreement (see Note 1), Tuscan consented to the assignment and assumption of all obligations and amounts (including accrued interest) due pursuant to three promissory notes issued on October 10, 2012, January 16, 2013 and February 27, 2013 with a total amount of $150,000. All of the note holders have signed consents to such assignments to Tuscan, and therefore, the Company is no longer indebted for such amounts due thereunder. Additionally, as consideration of the transfer of all of the issued and outstanding shares of common stock of Inti Holdings to Tuscan, Tuscan has released and cancelled three promissory notes in which Tuscan had loaned the Company a total of $915,000. As a result, promissory notes in an aggregate amount of $1,065,000 have been cancelled and the Company has satisfied its obligations under these notes. Consequently, on December 30, 2013, Inti Holdings is no longer a subsidiary of the Company and no longer holds any ownership interest in Rae Wallace. The Company intends to discontinue its efforts on mining and mineral business.
Critical Accounting Policies and Estimates
While our significant accounting policies are more fully described in Note 1 to our financial statements for the years ended December 31, 2013 and 2012, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating this management discussion and analysis.
Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. 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. We continually evaluate our estimates, including those related to bad debts, recovery of long-lived assets, income taxes, and the valuation of equity transactions. We base our estimates on historical experience and on various other assumptions that we believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Any future changes to these estimates and assumptions could cause a material change to our reported amounts of revenues, expenses, assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the financial statements.
Development Stage Company
We are presented as a development stage company. Activities during the development stage include organizing the business and raising capital. We are a development stage company with insignificant revenues and no profits. The company has not commenced significant operations and, in accordance with Accounting Standards Codification (“ASC”) Topic 915 “Development Stage Entities”, is considered a development stage company.
Revenue Recognition
We recognize revenues when delivery of goods or completion of services has occurred provided there is persuasive evidence of an agreement, acceptance has been approved by its customers, the fee is fixed or determinable based on the completion of stated terms and conditions, and collection of any related receivable is probable.
Results of Operations
For the year ended December 31, 2013 and for the year ended December 31, 2012, we had revenues of $0 and $0, respectively. Cost of sales was $0 and $0 for the year ended December 31, 2013 and 2012, respectively. The historical revenues and cost of sales were reclassified to discontinued operations due to the disposition of the subsidiary and the change in business.
Operating Expenses were $287,553 for the year ended December 31, 2013, as compared to $160,778 for the year ended December 31, 2012. The increase in expenses was mainly a result of an increase in professional, consulting fees and travel expenses.
For the year ended December 31, 2013 and for the year ended December 31, 2012, we incurred a net loss of continuing operations $363,683 and $162,443, respectively.
For the year ended December 31, 2013 and for the year ended December 31, 2012, we incurred a loss from discontinued operations $124,166 and gain from discontinued operations $26,690, respectively.
Liquidity and Capital Resources
As of December 31, 2013, our current assets were $17,094 and our current liabilities were $20,539, resulting in working capital deficit of $3,445. We have been funding our operations through the issuance of notes payable and through the sale of our common stock for operating capital purposes.
Operating Activities
For the year ended December 31, 2013, net cash flows used in operating activities was $361,301 and was primarily attributable to our gain from sale of discontinued operations of $463,622, depreciation and amortization of $21,926, shares issued for services of $39,380 and offset mainly by changes in accounts payable and accrued expenses of $50,998.
For the year ended December 31, 2012, net cash flows used in operating activities was $130,629 and was primarily attributable to our net loss of $135,753, offset by total changes in assets and liabilities of $5,124 due to an increase in deferred offering cost of $19,500, and decrease in accounts payable and accrued liabilities of $14,376.
Investing Activities
Net cash flows used in investing activities were $700,000 for the year ended December 31, 2013. We used $700,000 of cash related to the acquisition of Rae Wallace.
Financing Activities
Net cash flows provided by financing activities were $1,076,049 for the year ended December 31, 2013. We received net proceeds from issuance of notes payable and loans of $1,063,093, received net proceeds from issuance of notes payable - related party of $12,956.
We anticipate that depending on market conditions and our plan of operations, we may incur operating losses in the foreseeable future. Therefore, our auditors have raised substantial doubt about our ability to continue as a going concern in their audit opinion for the years ended December 31, 2013 and 2012. We estimate that based on current plans and assumptions, that our available cash is insufficient to satisfy our cash requirements for the next 12 months. We presently have no other alternative source of working capital. We may not have sufficient working capital to provide working capital necessary for our ongoing operations and obligations for the next 12 months. As of December 31, 2013, we had $17,094 available in cash.
Contractual Obligations
We do not have any contractual obligations.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements
Reports of Independent Registered Public Accounting Firm
and
Balance Sheets as of December 31, 2013 and 2012
Statements of Operations for the Years Ended December 31, 2013 and 2012 and Period from Inception (May 17, 2011) to December 31, 2013
Statements of Changes in Stockholders’ (Deficit) for the Period from Inception
(May 17, 2011) to December 31, 2013
Statements of Cash Flows for the Years Ended December 31, 2013 and 2012 and Period from Inception (May 17, 2011) to December 31, 2013
Notes to Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Sanborn Resources, Ltd.
West Palm Beach, Florida
We have audited the accompanying balance sheets of Sanborn Resources, Ltd., (formerly Universal Tech Corp.), (a Delaware corporation in the development stage) as of December 31, 2013 and the related statements of operations, stockholders’ equity, and cash flows for the year ended December 31, 2013 and for the period from Inception (May 17, 2011) to December 31, 2013. 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 standards of the Public Company Accounting Oversight Board (United States of America). 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 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 includes examining, on a test basis, evidence supporting the amounts and disclosures 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 Sanborn Resources, Ltd. (formerly Universal Tech Corp.). as of December 31, 2013 and the results of its operations and its cash flows for the year ended December 31, 2013 and for the period from Inception (May 17, 2011) to December 31, 2013 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 2 to the financial statements, the Company is in the development stage, and has not established any source of revenue to cover its operating costs. As such, it has incurred net loss of $24,227 for the year ended December 31, 2013 and accumulated deficit of $160,171 as of December 31, 2013. Further, as of December 31, 2013, the cash resources of the Company were insufficient to meet its planned business objectives. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plan regarding these matters is also described in Note 2 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Respectfully submitted,
/s/ L.L. Bradford, CPA
L.L. Bradford, CPA
Las Vegas, Nevada
March 26, 2014
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Sanborn Resources, Ltd.
West Palm Beach, Florida
We have audited the accompanying balance sheets of Sanborn Resources, Ltd., (formerly Universal Tech Corp.), (a Delaware corporation in the development stage) as of December 31, 2012 and the related statements of operations, stockholders’ equity, and cash flows for the year ended December 31, 2012, and for the period from Inception (May 17, 2011) to December 31, 2012. 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 standards of the Public Company Accounting Oversight Board (United States of America). 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 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 includes examining, on a test basis, evidence supporting the amounts and disclosures 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 Sanborn Resources, Ltd. (formerly Universal Tech Corp.). as of December 31, 2012 and the results of its operations and its cash flows for the year ended December 31, 2012 and for the period from Inception (May 17, 2011) to December 31, 2012 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 2 to the financial statements, the Company is in the development stage, and has not established any source of revenue to cover its operating costs. As such, it has incurred net loss of $135,753 for the year ended December 31, 2012 and accumulated deficit of $135,944 as of December 31, 2012. Further, as of December 31, 2012, the cash resources of the Company were insufficient to meet its planned business objectives. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plan regarding these matters is also described in Note 2 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Respectfully submitted,
/s/ Weinberg & Baer LLC
Weinberg & Baer LLC
Baltimore, Maryland
March 14, 2013
The accompanying notes are an integral part of the consolidated financial statements
SANBORN RESOURCES, LTD.
(Formerly known as Universal Tech Corp.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Sanborn Resources, Ltd., formerly Universal Tech Corp. (the “Company”), was incorporated under the laws of the State of Delaware on May 17, 2011. The Company’s business was in the field of direct marketing and sale of art.
On March 4, 2013, the Company filed an Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to, among other things, (1) effect a one hundred for one (100:1) forward split of the Company’s common stock, (2) change the name of the Company to Sanborn Resources, Ltd. and (iii) change the authorized stock to one billion (1,000,000,000) shares of common stock and twenty million (20,000,000) shares of preferred stock. All share and per share values for all periods presented in the accompanying financial statements are retroactively restated for the effect of the forward split.
On April 17, 2013 and effective on April 3, 2013, Inti Holdings Limited (“Inti Holdings”), a corporation incorporated on January 8, 2013 pursuant to the laws of the Cayman Islands (“Inti Holdings”), and a newly formed wholly owned subsidiary of the Company, purchased 100% of the outstanding capital stock of Rae Wallace Peru S.A.C., a corporation formed under the laws of Peru (“Rae Wallace”), pursuant to the terms of a Share Purchase Agreement by and among Inti Holdings, Rae Wallace and Rae-Wallace Mining Company and George Cole, the sole shareholders of Rae Wallace (the “Rae Wallace Shareholders, and the agreement, the “Share Purchase Agreement”). In consideration for the acquisition of Rae Wallace, Inti Holdings paid the Rae Wallace Shareholders an aggregate purchase price of $700,000. Rae Wallace is the owner of certain properties and mineral rights located in Peru. Certain of these properties are subject to third party royalty payments from the sale or disposition of all minerals produced by such covered properties. Following the acquisition, the Company discontinued its marketing and sale of art business and had intended to focus its efforts on mining and minerals in Peru.
Effective December 30, 2013, the Company entered into a Stock Purchase Agreement (the “Agreement”) whereby the Company transferred all of its shareholdings of its wholly owned subsidiary, Inti Holdings, to Tuscan Capital, Ltd., a corporation formed under the laws of the Cayman Islands (“Tuscan”). Pursuant to the Agreement, as partial consideration for the Company’s transfer of all of the issued and outstanding shares of common stock of Inti Holdings, Tuscan consented to the assignment and assumption of all obligations and amounts due pursuant to three promissory notes in which the Company borrowed a total of $150,000. All of the note holders have signed consents to such assignments to Tuscan, and therefore, the Company is no longer indebted for such amounts due thereunder. Additionally, as consideration of the transfer of all of the issued and outstanding shares of common stock of Inti Holdings to Tuscan, Tuscan has released and cancelled three promissory notes in which Tuscan had loaned the Company a total of $915,000. As a result, promissory notes in an aggregate amount of $1,065,000 have been cancelled and the Company has satisfied its obligations under these notes. Consequently, on December 30, 2013, Inti Holdings is no longer a subsidiary of the Company and no longer holds any ownership interest in Rae Wallace. The Company intends to discontinue its efforts on mining and mineral business.
Basis of Presentation
The financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).
SANBORN RESOURCES, LTD.
(Formerly known as Universal Tech Corp.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Use of Estimates and Assumptions
The preparation of the financial statements in conformity with accounting principles generally accepted in 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 reporting period. Actual results could differ from those estimates.
Development Stage Company
The Company is presented as a development stage company. Activities during the development stage include organizing the business and raising capital. The Company is a development stage company with insignificant revenues and no profits. The Company has not commenced significant operations and, in accordance with Accounting Standards Codification (“ASC”) Topic 915 “Development Stage Entities”, is considered a development stage company.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when acquired to be cash equivalents. The Company places its cash with a high credit quality financial institution. The Company’ account at this institution is insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000. At December 31, 2013 and 2012, the Company has not reached bank balances exceeding the FDIC insurance limit on interest bearing accounts. To reduce its risk associated with the failure of such financial institution, the Company evaluates at least annually the rating of the financial institution in which it holds deposits.
Fair Value of Financial Instruments and Fair Value Measurements
The Company adopted FASB ASC 820, “Fair Value Measurements and Disclosures”, for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing US GAAP that require the use of fair value measurements which establishes a framework for measuring fair value and expands disclosure about such fair value measurements.
ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:
SANBORN RESOURCES, LTD.
(Formerly known as Universal Tech Corp.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair Value of Financial Instruments and Fair Value Measurements (continued)
The carrying amounts reported in the balance sheet for accounts payable and accrued expenses approximate their estimated fair market value based on the short-term maturity of these instruments. The Company did not identify any other assets or liabilities that are required to be presented on the balance sheets at fair value in accordance with the accounting guidance.
In addition, FASB ASC 825-10-25 “Fair Value Option” was effective for January 1, 2008. ASC 825-10-25 expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value.
Mineral property acquisition and exploration costs
Costs of lease, exploration, carrying and retaining unproven mineral lease properties are expensed as incurred and has been included in the loss from discontinued operations as a result of the sale of Inti Holdings (see Note 1). The Company expenses all mineral exploration costs as incurred as it is still in the exploration stage. If the Company identifies proven and probable reserves in its investigation of its properties and upon development of a plan for operating a mine, it would capitalize future costs until production is established. When a property reaches the production stage, the related capitalized costs are amortized using the units-of-production method over the estimated life of the proven and probable reserves. If in the future the Company has capitalized mineral properties, these properties will be periodically assessed for impairment. The Company has not established the commercial feasibility of any exploration prospects; therefore, all costs are being expensed. ASC 930-805, “Extractive Activities-Mining: Business Combinations”, states that mineral rights consist of the legal right to explore, extract, and retain at least a portion of the benefits from mineral deposits. Mining assets include mineral rights. Acquired mineral rights are considered tangible assets under ASC 805. ASC 805 requires that mineral rights be recognized at fair value as of the acquisition date. As a result, the direct costs to acquire mineral rights are initially capitalized as tangible assets. Mineral rights include costs associated with acquiring patented and unpatented mining claims.
Impairment of long-lived assets
The Company accounts for the impairment or disposal of long-lived assets according to the ASC 360 “Property, Plant and Equipment”. The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of long-lived assets, including mineral rights, may not be recoverable. Long-lived assets in the exploration stage are monitored for impairment based on factors such as the Company's continued right to explore the area, exploration reports, assays, technical reports, drill results and the Company's continued plans to fund exploration programs on the property, and whether sufficient work has been performed to indicate that the carrying amount of the mineral property cost carried forward as an asset will not be fully recovered. The tests for long-lived assets in the exploration stage would be monitored for impairment based on factors such as current market value of the long-lived assets and results of exploration, future asset utilization, business climate, mineral prices and future undiscounted cash flows expected to result from the use of the related assets. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated future net undiscounted cash flows expected to be generated by the asset. When necessary, impaired assets are written down to estimated fair value based on the best information available. Estimated fair value is generally based on either appraised value or measured by discounting estimated future cash flows. Considerable management judgment is necessary to estimate discounted future cash flows. Accordingly, actual results could vary significantly from such estimates. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The Company did not record any impairment charges of its long-lived assets for the years ended December 31, 2013 and 2012.
SANBORN RESOURCES, LTD.
(Formerly known as Universal Tech Corp.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Foreign currency translation
The Company’s reporting currency is the U.S. dollar. The functional currency of the parent company is the U.S. dollar and the functional currency of the Company’s former subsidiary, Rae Wallace, is Peruvian Nuevo Sol (“PEN”), the official currency of Peru. Capital accounts of Rae Wallace are translated into United States dollars from PEN at their historical exchange rates when the capital transactions occurred. Assets and liabilities were translated at the exchange rates as of the balance sheet dates. Income and expenditures were translated at the average exchange rates for the period from acquisition date to December 30, 2013, the date of disposal of Rae Wallace (see Note 1). On December 30, 2013, the Company ceased its operations in Peru. During the year ended December 31, 2013, the Company recognized realized foreign currency translation loss of $58,155 related to the Company’s former subsidiary, Rae Wallace, as reflected in the accompanying statement of operations.
A summary of the conversion rates for the periods presented is as follows:
Stock-based compensation
Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.
Pursuant to ASC Topic 505-50, for share-based payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the non-employee’s service period.
Basic and Diluted Net Loss per Share
Net loss per common share is calculated in accordance with ASC Topic 260: Earnings Per Share. Basic loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. The computation of diluted net loss per share does not include dilutive common stock equivalents in the weighted average shares outstanding as they would be anti-dilutive. There were no dilutive financial instruments issued or outstanding for the years ended December 31, 2013 and 2012.
SANBORN RESOURCES, LTD.
(Formerly known as Universal Tech Corp.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income Taxes
The Company accounts for income taxes pursuant to the provision of ASC 740-10, “Accounting for Income Taxes” which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.
The Company follows the provision of the ASC 740-10 related to Accounting for Uncertain Income Tax Position. When tax returns are filed, it is highly certain that some positions taken would be situated upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is most likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions.
Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.
The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.
The Company has adopted ASC 740-10-25 Definition of Settlement, which provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion and examination by a taxing authority without being legally extinguished. For tax position considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely that not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. The federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they were filed.
Recent Accounting Pronouncements
Accounting standards which were not effective until after December 31, 2013 are not expected to have a material impact on the Company’s financial position or results of operations.
SANBORN RESOURCES, LTD.
(Formerly known as Universal Tech Corp.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
NOTE 2 - GOING CONCERN
The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has a stockholders’ deficit and accumulated deficit of $3,445 and $160,171, respectively, as of December 31, 2013, negative cash flows from operating activities and net loss of $361,301 and $24,227, respectively, for the year ended December 31, 2013. The Company anticipates further losses in the development of its business raising substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. The Company’s ability to raise additional capital through the future issuances of common stock is unknown. The obtainment of additional financing, the successful development of the Company’s contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.
NOTE 3 - NOTE RECEIVABLE
In January 2013, the Company was issued a note receivable of $10,000 by Rae Wallace (see Note 1). The note was non-interest bearing. The borrower had the option of paying the principal sum to the Company in advance in full or in part at any time without premium or penalty. The principal was due on demand, which demand may be made by the Company at any time after March 1, 2013. In April 2013, contemporaneously with the closing of the acquisition of Rae Wallace, the Company collected the $10,000 note receivable.
NOTE 4 - ACQUISITION
On April 17, 2013 and effective April 3, 2013, through the Company’s wholly owned subsidiary, Inti Holdings, purchased 100% of the outstanding capital stock of Rae Wallace, pursuant to the terms of a Share Purchase Agreement by and among Inti Holdings, Rae Wallace and Rae-Wallace Mining Company and George Cole, the sole shareholders of Rae Wallace (see Note 1). In consideration for the acquisition of Rae Wallace, Inti Holdings paid the Rae Wallace Shareholders an aggregate purchase price of $700,000. The Share Purchase Agreement is being accounted for as an acquisition of assets rather than a business pursuant to Financial Accounting Standards Board Accounting Standards Codification 805-50-30 “Business Combinations”.
The Company believes that Rae Wallace does not constitute a business. Rae Wallace has inputs (mineral rights) and does not have any processes and outputs. Rae Wallace does not have ongoing exploration and operational processes to explore, evaluate, develop and extract minerals. In addition, Rae Wallace has no employees working on exploration and development of the mineral properties. There are no environmental and production permits. As a result, the Company concluded that Rae Wallace does not constitute a business.
Accordingly, assets acquired through a transaction that is not a business combination shall be measured based on the cash consideration paid plus either the fair value of the non-cash consideration given or the fair value of the assets acquired, whichever is more clearly evident.
The purchase price paid by the Company was allocated to assets acquired and liabilities assumed on the records of the Company as follows:
SANBORN RESOURCES, LTD.
(Formerly known as Universal Tech Corp.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
NOTE 4 - ACQUISITION
NOTE 5 - DISCONTINUED OPERATIONS
Following the acquisition pursuant to the Share Purchase Agreement (see Note 4), the Company decided to discontinue its marketing and sale of art business. Additionally, on December 30, 2013 following the sale of the Company’s former subsidiary, Inti Holdings (see Note 1), the Company intends to discontinue its efforts on mining and mineral business. Prior periods have been restated in the Company’s consolidated financial statements and related footnotes to conform to this presentation.
The following table indicates selected financial data of the Company’s discontinued operations of its mining and mineral business in 2013 and marketing and sale of art business in 2012.
For the year ended December 31, 2013, the Company recorded a gain from the sale of its subsidiary, Inti Holdings, as follows:
SANBORN RESOURCES, LTD.
(Formerly known as Universal Tech Corp.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
NOTE 6 - LOANS AND NOTES PAYABLE
Loans Payable
Between October 2013 and December 2013, the Company received gross proceeds from loans in the aggregate amount of $48,093 from an unrelated party. The loans were non-interest bearing and were due on demand. The loans were used for working capital purposes. In December 2013, the Company issued 1,202,325 shares of its common stock in connection with the conversion of these loans amounting to $48,093. The Company valued these common shares at the fair value based on quoted market price on the date of grant of $0.04 per common share.
Notes Payable
On October 10, 2012, the Company issued a note payable amounting to $50,000. The note bore interest at 16% per annum and was due on demand. The note was used for working capital purposes.
On January 16, 2013 and February 27, 2013, the Company issued notes payable in the aggregate amount of $100,000. The notes bore interest at 16% per annum and were due on demand. The note was used for working capital purposes.
On April 10, 2013, the Company issued a note payable amounting to $775,000. The note bore interest at 8% per annum and was due after thirteen months, unless extended by the holder. This note may be accelerated upon the sale of any equity or equity-linked securities in the minimum amount of $1,000,000 net proceeds to the Company. The proceeds of this note were used for the acquisition of Rae Wallace and working capital purposes.
Between June 13, 2013 and July 13, 2013, the Company issued notes payable aggregating to $140,000. The notes bore interest at 16% per annum and were payable on demand. The Company had the right at any time to pay all or portion of the principal amount without notice or penalty. The notes were used for working capital purposes.
On December 30, 2013, in connection with the Stock Purchase Agreement (see Note 1), Tuscan consented to the assignment and assumption of all obligations and amounts (including accrued interest) due pursuant to three promissory notes issued on October 10, 2012, January 16, 2013 and February 27, 2013 with a total amount of $150,000. All of the note holders have signed consents to such assignments to Tuscan, and therefore, the Company is no longer indebted for such amounts due thereunder. Additionally, as consideration of the transfer of all of the issued and outstanding shares of common stock of Inti Holdings to Tuscan, Tuscan has released and cancelled three promissory notes (including accrued interest) in which Tuscan had loaned the Company a total of $915,000 issued on April 10, 2013, June 13, 2013 and July 13, 2013.
At December 31, 2013 and 2012, notes payable amounted to $0 and $50,000, respectively, and accrued interest payable, which is included in accounts payable and accrued expenses amounted to $0 and $1,666 respectively.
NOTE 7 - STOCKHOLDERS’ DEFICIT
On May 18, 2011, the Company sold 150,000,000 shares of common stock to a former director of the Company for gross proceeds of $22,500, at a price of $0.00015 per share.
On May 23, 2011, the Company sold 50,000,000 post-split shares of common stock to the former secretary of the Company for gross proceeds of $7,500, at a price of $0.00015 per share.
SANBORN RESOURCES, LTD.
(Formerly known as Universal Tech Corp.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
NOTE 7 - STOCKHOLDERS’ DEFICIT (continued)
The Company has commenced a capital formation activity by filing a Registration Statement on Form S-1 to the SEC to register and sell in a self-directed offering 120,000,000 shares of newly issued common stock at an offering price of $0.001 per share for proceeds of up to $120,000. On March 16, 2012, the Company sold 40,000,000 shares of common stock pursuant to the Registration Statement on Form S-1 for gross proceeds of $40,000. The Company paid offering costs of $19,500 related to this sale of the Company’s common stock and were charged against additional paid in capital.
In May 2013, the Company cancelled 199,750,000 shares of common stock owned by the Company’s Chief Executive Officer. In connection with the return of the 199,750,000 shares of common stock, the Company valued the cancelled shares at par value of $0.0001 per share and recorded it against paid in capital.
In October 2013, the Company issued 333,333 shares of its common stock to the former Chief Executive Officer for services rendered. The Company valued these common shares at the fair value based on quoted market price on the date of grant of $0.045 per common share. In connection with the issuance of these common shares, the Company recorded stock-based compensation of $15,000 during the year ended December 31, 2013.
In October 2013, the Company issued 111,111 shares of its common stock to a consultant for administrative services rendered. The Company valued these common shares at the fair value based on quoted market price on the date of grant of $0.045 per common share. In connection with the issuance of these common shares, the Company recorded stock based professional fees of $4,999 during the year ended December 31, 2013.
In December 2013, the Company issued 484,512 shares of its common stock to a consultant for accrued legal fees. The Company valued these common shares at the fair value based on quoted market price on the date of grant of $0.04 per common share. In connection with the issuance of these common shares, the Company reduced accrued expenses of $19,380.
In December 2013, the Company issued 1,202,325 shares of its common stock in connection with the conversion of loans amounting to $48,093. The Company valued these common shares at the fair value based on quoted market price on the date of grant of $0.04 per common share.
NOTE 8 - INCOME TAXES
The Company has incurred aggregate net operating losses of approximately $24,227 for income tax purposes for the year ended December 31, 2013. The net operating loss carries forward for United States income taxes, which may be available to reduce future years’ taxable income. These carry forwards will expire, if not utilized, through 2033. Management believes that the realization of the benefits from these losses appears not more than likely due to the Company’s limited operating history and continuing losses for United States income tax purposes. Accordingly, the Company has provided a 100% valuation allowance on the deferred tax asset to reduce the asset to zero. Management will review this valuation allowance periodically and make adjustments as warranted.
SANBORN RESOURCES, LTD.
(FORMERLY UNIVERSAL TECH CORP.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
NOTE 8 - INCOME TAXES (continued)
The Company’s income tax expense (benefit) differs from the “expected” tax expense for Federal income tax purposes computed by applying a Federal corporate tax rate of 34% to loss before income taxes as follows:
The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities at December 31, 2013 and 2012 are as follows:
The valuation allowance at December 31, 2013 was $23,012. The decrease during 2013 was $29,932. The Company has identified its federal income tax return as its major tax jurisdiction. The fiscal 2012 and 2013 years are still open for examination.
NOTE 9 - RELATED PARTY TRANSACTIONS
On May 18, 2011, the Company sold 150,000,000 shares of common stock to a former director of the Company for gross proceeds of $22,500, at a price of $0.00015 per share.
On May 23, 2011, the Company sold 50,000,000 shares of common stock to the former secretary of the Company for gross proceeds of $7,500, at a price of $0.00015 per share.
On October 3, 2012, the former director of the Company contributed capital for operating expenses amounting to $18,753. The Company recorded such contributed capital to additional paid in capital.
NOTE 10 - SUBSEQUENT EVENTS
In January 2014, the Company issued 200,000 shares of its common stock to a consultant for legal services rendered in January 2014. The Company valued these common shares at the fair value based on quoted market price on the date of grant of $0.04 per common share. In connection with the issuance of these common shares, the Company recorded legal fees of $8,000.
In January 2014, the Company issued 93,100 shares of its common stock in connection with the conversion of loans amounting to $3,724. The Company valued these common shares at the fair value based on quoted market price on the date of grant of $0.04 per common share.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We conducted an evaluation of the effectiveness of our “disclosure controls and procedures” (“Disclosure Controls”), as defined by Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of December 31, 2013, the end of the period covered by this Annual Report on Form 10-K. The Disclosure Controls evaluation was done under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, due to our limited internal audit function, our Disclosure Controls were not effective as of December 31, 2013, such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act. Our management is also required to assess and report on the effectiveness of our internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”). Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2013. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. During our assessment of the effectiveness of internal control over financial reporting as of December 31, 2013, management identified significant deficiency related to (i) our internal audit functions and (ii) a lack of segregation of duties within accounting functions. Therefore, our internal controls over financial reporting were not effective as of December 31, 2013.
Management has determined that our internal audit function is significantly deficient due to insufficient qualified resources to perform internal audit functions.
Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, we will implement procedures to assure that the initiation of transactions, the custody of assets and the recording of transactions will be performed by separate individuals.
We believe that the foregoing steps will remediate the significant deficiency identified above, and we will continue to monitor the effectiveness of these steps and make any changes that our management deems appropriate. Due to the nature of this significant deficiency in our internal control over financial reporting, there is more than a remote likelihood that misstatements which could be material to our annual or interim financial statements could occur that would not be prevented or detected.
A material weakness (within the meaning of PCAOB Auditing Standard No. 5) is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the company’s financial reporting.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
Changes in Internal Control Over Financial Reporting
During the quarter ended December 31, 2013, there were no changes in our internal controls that have materially affected or are reasonably likely to have materially affected our internal control over financial reporting.
Our management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent 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. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.
ITEM 9B.
ITEM 9B. OTHER INFORMATION.
Not applicable.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The following table sets forth information regarding our executive officers and the members of our board of directors. All directors hold office for one-year terms until the election and qualification of their successors. Officers are elected by the board of directors and serve at the discretion of the board.
Kristian Andresen. Mr. Andresen has been our Secretary and Director since July 18, 2011. From that date to October 25, 2013, Mr. Andresen was our CEO, CFO and President. Prior to joining us, Mr. Andresen was an officer and director of Respect Your Universe, Inc. from 2008 to 2012. Mr. Andresen currently serves as officer and director of Sanborn Resources Ltd, an SEC reporting company.
James Davidson, Chief Executive Officer and Director. Mr. Davidson has served as our Chief Executive Officer and director since October 3, 2012. He has principally been a private investor for more than the past five years. Mr. Davidson has served as President, Chief Executive Officer, Chief Financial Officer, Treasurer, Secretary and Director of California Gold Corp. (CLGC.OB) since 2007. Mr. Davidson has also served as a director of TurkPower Corporation (TURK.QB) since 2011. Additionally, Mr. Davidson is Vice-President and Secretary of NMX Holdings, a private media holding company, as well as Chairman and a director of Ouro do Brasil Holdings Ltd., a privately owned mining venture, and director of Core Values Mining and Exploration, Ltd., a private mining company. Mr. Davidson was chosen to be a director of the Company based on his mining industry and financial experience.
Adam Wasserman, Chief Financial Officer. Mr. Wasserman has served as our Chief Financial Officer since November 16, 2012. Mr. Wasserman has served as the chief executive officer for CFO Oncall, Inc. and CFO Oncall Asia, Inc. (collectively “CFO Oncall”), where he owns 80% and 60% of such businesses, respectively, since February 1999. CFO Oncall provides chief financial officer services to various companies where he is an integral member of executive management responsible for financial and accounting matters. He has a strong background in SEC filings, financial reporting, budgeting and planning, mergers and acquisitions, auditing, accounting, automated systems, banking relations and internal controls and has served companies domestically and internationally. Mr. Wasserman currently serves as the chief financial officer of Oriental Dragon Corp. since June 2010, Apps Genius Corp since January 2010, and Pershing Gold Corporation since September 2010. Mr. Wasserman also served as chief financial officer for other companies all under the terms of the consulting agreement with CFO Oncall. From 1991 to 1999, he was Senior Audit Manager at American Express Tax and Business Services, in Fort Lauderdale, Florida and from 1986 to 1991, he was employed by Deloitte & Touche, LLP. Mr. Wasserman holds a Bachelor of Science in Accounting from the State University of New York at Albany. He is a member of The American Institute of Certified Public Accountants, is a director, treasurer and an executive board member of Gold Coast Venture Capital Association and is a director and audit committee member of CD International Enterprises, Inc. (Pink: CDII) since January 2010.
Avinoam Cohen, Former President, Former Chief Executive Officer, Former Treasurer and Former Director. Mr. Cohen served as our President, Chief Executive Officer, Treasurer and Director from 2011 through the date of his resignation from all positions with the Company on October 3, 2012. Mr. Cohen has been involved in the art market since 2006. From 2006-2011, he was the Director of the Basha Art Gallery in Jerusalem, Israel. Since 2010, he has also been the CEO of New Vision Gallery in New York City. From 2005-2006 Mr. Cohen worked in a management position as a Director at Feed Pro R&D, Dimona, Israel. From 2001-2004, Mr. Cohen was the director of business development for P.M.C. Investment Group in Jerusalem, Israel, which invests in technology companies. Mr. Cohen was chosen to be a director of the Company based on his knowledge of the art market.
Anna Irena De Vincenz, Former Secretary and Former Director. Ms. De Vincenz served as our Secretary and Director from 2011 through the date of her resignation from all positions with the Company on October 3, 2012. Ms. De Vincenz holds a Ph.D in Archeology from the Department of Near Eastern Languages, Civilizations and Archeology of the Istituto Universitario Orientalo, Naples, Italy. Since 2004 Ms. De Vincens has been a Senior Fellow at the Albright Institute in Jerusalem, Israel. In 1984, Ms. De Vincenz received a PhD degree from the "Instituto per L'Art e Il Restauro" in Florence, Italy and did her internship in restoration at the Restoration Atelier of the Kurpfalzisches Museum in Heidelberg, Germany. Since 2008 she has been working as a curator at Basha Art Gallery. Ms. De Vincenz was chosen to be a director of the Company based on her knowledge of the art market.
Board Committees
Audit Committee. We intend to establish an audit committee of the board of directors once we have satisfied the other initial listing standards for listing our common stock on the NYSE MKT or another national exchange. The audit committee will consist of independent directors, of which at least one director will qualify as a qualified financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. The audit committee’s duties will be to recommend to our board of directors the engagement of independent auditors to audit our financial statements and to review our accounting and auditing principles. The audit committee will review the scope, timing and fees for the annual audit and the results of audit examinations performed by the internal auditors and independent public accountants, including their recommendations to improve the system of accounting and internal controls. The audit committee will at all times be composed exclusively of directors who are, in the opinion of our board of directors, free from any relationship that would interfere with the exercise of independent judgment as a committee member and who possess an understanding of financial statements and generally accepted accounting principles.
Compensation Committee. We intend to establish a compensation committee of the board of directors once we have satisfied the other initial listing standards for listing our common stock on the NYSE MKT or another national exchange. The compensation committee will review and approve our salary and benefits policies, including compensation of executive officers. The compensation committee will also administer our stock option plans and recommend and approve grants of stock options under such plans.
Code of Ethics
We have not yet adopted a Code of Ethics although we expect to as we develop our infrastructure and business.
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended December 31, 2013, all executive officer compensation was determined by our board of directors.
Section 16(a) Beneficial Ownership Reporting Compliance
We have no equity securities registered under Section 12 of the Exchange Act, and accordingly, our officers, directors and principal shareholders are not required to file reports under Section 16(a) of the Exchange Act.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
2013 and 2012 Summary Compensation Table
The following table summarizes, for the period from Inception (May 17, 2011) to December 31, 2011 and the fiscal yeara ended December 31, 2013 and 2012, the annual and long-term compensation paid to (1) each person who served as our principal executive officer during fiscal 2013 and 2012 and (2) our two most highly compensated executive officers as of December 31, 2013 and 2012 with compensation during fiscal 2013 and 2012 of $100,000 or more (the “Named Executive Officers”).
(1)
On November 3, 2013, Mr. Davidson and Mr. Cohen resigned.
(2)
On November 3, 2013, Mr. Andreson was appointed.
Agreements with Executive Officers
None.
2013 Outstanding Equity Awards at Fiscal Year End
None.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table sets forth information with respect to the beneficial ownership of our common stock as of March 25, 2014 by:
·
each person known by us to beneficially own more than 5.0% of our common stock;
·
each of our directors;
·
each of the named executive officers; and
·
all of our directors and executive officers as a group.
The percentages of common stock beneficially owned are reported on the basis of regulations of the Securities and Exchange Commission governing the determination of beneficial ownership of securities. Under the rules of the Securities and Exchange Commission, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or to direct the voting of the security, or investment power, which includes the power to dispose of or to direct the disposition of the security. Except as indicated in the footnotes to this table, each beneficial owner named in the table below has sole voting and sole investment power with respect to all shares beneficially owned and each person’s address is c/o Sanborn Resources, Ltd., 777 South Flagler Drive, Suite 800 - West Tower, West Palm Beach, FL 33401. As of March 25, 2014, we had 42,674,381 shares outstanding.
(1)
Shares of common stock beneficially owned and the respective percentages of beneficial ownership of common stock assumes the exercise of all options, warrants and other securities convertible into common stock beneficially owned by such person or entity currently exercisable or exercisable within 60 days of March 25, 2014. Shares issuable pursuant to the exercise of stock options and warrants exercisable within 60 days are deemed outstanding and held by the holder of such options or warrants for computing the percentage of outstanding common stock beneficially owned by such person, but are not deemed outstanding for computing the percentage of outstanding common stock beneficially owned by any other person.
ITEM 13.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
On May 18, 2011, the Company issued 150,000,000 post-split (1,500,000 pre-split) shares of common stock to Mr. Avinoam Cohen, a director of the Company, for a $22,500 subscription receivable. Payment was received in 2011.
On May 23, 2011, the Company issued 50,000,000 post-split (500,000 pre-split) shares of common stock to Ms. Anna Irena De Vincenz, a director of the Company, for a $7,500 subscription receivable. Payment was received in 2011.
On October 3, 2012, a former director of the Company contributed capital in the amount of $18,753 for our operating expenses.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit Fees
The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of our financial statements and review of financial statements included in our quarterly Reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:
(1)
Audit fees consisted primarily of fees for the audit of our annual financial statements and reviews of the financial statements included in our quarterly reports.
(2)
Audit-related fees consisted primarily of fees for assurance and related services reasonably related to the audit and review services described under footnote 1 above and fees for reimbursement of out-of-pocket expenses.
(3)
Tax fees consisted primarily of fees for tax compliance, tax advice, and tax planning services.
Pre-Approval Policies and Procedures. All audit and non-audit services for the fiscal years ended December 31, 2012 and 2013 were pre-approved by the board of directors.
PART IV
ITEM 15.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
Exhibit No.
Description
3.1
Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 to the registration statement on Form S-1 filed with the Securities and Exchange Commission on October 7, 2011)
3.2
Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 to the current report on Form 8-K filed with the Securities and Exchange Commission on March 8, 2013)
3.3
Bylaws (Incorporated by reference to Exhibit 3.2 to the registration statement on Form S-1 filed with the Securities and Exchange Commission on October 7, 2011)
3.4
Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.2 to the current report on Form 8-K filed with the Securities and Exchange Commission on March 8, 2013)
10.1
Form of Note issued on October 10, 2012 (Incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed with the Securities and Exchange Commission on October 24, 2012
10.2
Form of Note issued on February 26, 2013 (Incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed with the Securities and Exchange Commission on March 8, 2013)
10.3
Form of Indemnification Agreement (Incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed with the Securities and Exchange Commission on November 20, 2012)
10.4
Share Purchase Agreement (Incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed with the Securities and Exchange Commission on April 23, 2013)
10.5
Asset Purchase Agreement (Incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed with the Securities and Exchange Commission on January 13, 2014)
21.1*
List of Subsidiaries
31.1*
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101**
The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) Balance Sheets, (ii) Statements of Operations, (iii) Statements of Changes in Stockholders’ Equity (Deficit), (iv) Statements of Cash Flows and (v) the Notes to Consolidated Financial Statements.
*Filed herewith.
** Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
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.
SANBORN RESOURCES LTD.
Date: March 25, 2014
By:
/s/ Kristian Andresen
Name: Kristian Andresen
Title: Chief Executive Officer, Chief Financial Officer, President, Secretary, Treasurer and Director
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and the dates indicated.
Signature
Title
Date
/s/ Kristian Andresen
Chief Executive Officer and Director (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
March 25, 2014
Kristian Andresen
INDEX TO EXHIBITS
* Filed herewith.
** Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.