Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 10-KSB/A
Amendment
No. 1
For
the fiscal year ended December 31, 2006
o TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For
the transition period from _____________ to _____________
General
Moly, Inc.
(Name
of
small business issuer in its charter)
DELAWARE
|
|
001-32986
|
|
91-0232000
|
(State
or other jurisdiction of
|
|
Commission
|
|
(I.R.S.
Employer
|
incorporation
or organization)
|
|
File
Number
|
|
Identification
No.)
|
1726
Cole Blvd., Suite 115
Lakewood,
CO 80401
Telephone:
(303) 928-8599
(Address
and telephone number of principal executive offices)
SECURITIES
REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE
ACT:
Common
Stock, $0.001 par value
SECURITIES
REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE
ACT:
None
Check
whether the issuer is not required to file reports pursuant to Section 13
or 15(d) of the Exchange Act. o
Check
whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and
(2) has been subject to such filing requirements for at least the past 90
days. YES x NO
o
Check
if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. o
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). YES o NO
x
Revenues
of the registrant for its fiscal year ended December 31, 2006 were
$0.
The
aggregate market value of voting and non-voting common stock held by
non-affiliates of the registrant was $124,021,777 as of March 23,
2007.
The
number of shares outstanding of registrant’s common stock as of March 23,
2007 was 43,974,878
DOCUMENTS
INCORPORATED BY REFERENCE
None.
Transitional
Small Business Disclosure Format (check one): YES o NO
x
TABLE
OF CONTENTS
Page
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PART II
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EXPLANATORY
NOTE
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|
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ITEM
6.
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
|
2
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|
|
|
ITEM
7.
|
FINANCIAL
STATEMENTS
|
6
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|
|
|
ITEM
8.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING
AND FINANCIAL DISCLOSURE
|
34
|
|
|
|
ITEM
8A.
|
CONTROLS
AND PROCEDURES
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34
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ITEM
8B.
|
OTHER
INFORMATION
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37
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PART III
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|
|
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ITEM
13.
|
EXHIBITS
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38
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SIGNATURES
|
40
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EXPLANATORY
NOTE
This
Amendment No. 1 on Form 10-KSB/A amends and restates items identified below
with
respect to the Form 10-KSB for the year ended December 31, 2006, filed by
General Moly, Inc. (formerly “Idaho General Mines, Inc.”) (“we” or the
“Company”) with the Securities and Exchange Commission (the “SEC”) on April 3,
2007 (“Original Filing”). The purpose of this amendment is to restate the
accompanying financial statements at and for the years ended December 31, 2004,
2005 and 2006 for the reasons described in Note 2 to the financial statements
included in Item 7 (Financial Statements) herein. Other than as set forth below,
the items of the Original Filing continue to speak as of the date of the
original filing date thereof, and the disclosure relating to such items is
not
being updated.
This
Form
10-KSB/A amends and restates certain information in Item 6 (Management’s
Discussion and Analysis or Plan of Operation), Item 7 (Financial Statements),
and Item 8A (Controls and Procedures). Except for the foregoing amended and
restated information and the information set forth below under the heading
“Subsequent Event,” this Form 10-KSB/A continues to describe conditions as of
the date of the Original Filing, and the disclosures contained herein have
not
been updated to reflect events, results or developments that have occurred
after
the date of the Original Filing, or to modify or update those disclosures
affected by subsequent events. Among other things, forward-looking statements
made in the Original Filing have not been revised to reflect events, results
or
developments that have occurred or facts that have become known to us after
the
date of the Original Filing, and such forward-looking statements should be
read
in their historical context. This Form 10-KSB/A should be read in conjunction
with the Company’s filings made with the SEC subsequent to the Original Filing,
including any amendments to those filings.
Subsequent
Event
On
October 8, 2007, we reincorporated the Company in the State of Delaware (the
“Reincorporation”) through a merger involving Idaho General Mines, Inc. and
General Moly, Inc., a newly-formed Delaware corporation that was a wholly owned
subsidiary of Idaho General Mines, Inc. The Reincorporation was effected by
merging Idaho General Mines, Inc. with and into General Moly, with General
Moly
being the surviving entity. In connection with the Reincorporation, all of
the
outstanding securities of Idaho General Mines, Inc. were converted into
securities of General Moly on a one-for-one basis. For purposes of the Company’s
reporting status with the Securities and Exchange Commission, General Moly
is
deemed a successor to Idaho General Mines, Inc.
ITEM
6. MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The
following discussion and analysis of our financial condition and plan of
operations should be read in conjunction with our financial statements and
the
notes to those statements included elsewhere in this Annual Report on
Form 10-KSB/A. This discussion contains forward-looking statements that
involve risks and uncertainties. As a result of many factors, such as those
set
forth under “Risk Factors” and elsewhere in this Annual Report, our actual
results may differ materially from those anticipated in these forward-looking
statements.
Overview
We
are in
the business of exploration, development and, if warranted, the mining of
properties containing molybdenum, as well as silver, gold, base metals and
other
specialty metals. We have an interest in properties on which we intend to
conduct mineral exploration. Our principal assets are the Mount Hope Project
(which we hold under lease with MHMI), a large-scale, primary molybdenum deposit
located in Eureka County, Nevada, United States, and the Hall-Tonopah molybdenum
project located in Nye County, Nevada.
We
are
proceeding with the permitting and development of the Mount Hope Project. The
project will include the development of an open pit mine, construction of a
concentrator plant, construction of a roaster plant, and construction of all
related infrastructure to produce TMO, the most widely marketed molybdenum
product. We completed a preliminary mine feasibility study in April 2005.
This study provided a study of the economics and capital cost estimates for
development of the project and developed a preliminary mine plan. Based on
the
results of the feasibility study, we exercised our option to lease in
October 2005 and entered into the Mount Hope Lease with MHMI. Subsequently,
we accomplished a detailed mine feasibility study in December 2005 which
verified existing drill hole data and refined the block model and mine plan.
In
2006, we initiated the baseline studies necessary for development of an EIS.
We
completed a Plan of Operations which was accepted by the Battle Mountain office
of the BLM in September 2006. In December 2006, the BLM selected
Enviroscientists, Inc. of Reno, Nevada, an environmental firm, to complete
the EIS for the Mount Hope project. Various environmental data and study tasks
are ongoing in connection with the permitting process. The current BLM and
contractor schedule demonstrates a Record of Decision in November of 2008.
In January 2007, we selected a contractor to accomplish a bankable
feasibility study for the project. This study is contracted to be complete
by
mid 2007. Based on the current estimated timelines for permitting, construction
and long-lead equipment, we are targeting initial production at Mount Hope
in
2010.
At
the
Hall-Tonopah project, we are currently conducting a comprehensive drilling
and
evaluation program to re-confirm and potentially expand the existing molybdenum
mineralization.
Critical
Accounting Estimates
Estimates
The
process of preparing financial statements in conformity with US GAAP requires
the use of estimates and assumptions regarding certain types of assets,
liabilities, revenues, and expenses. Such estimates primarily relate to
unsettled transactions and events as of the date of the financial statements.
Accordingly, upon settlement, actual results may differ from estimated
amounts.
Provision
for Taxes
Income
taxes are provided based upon the liability method of accounting pursuant to
the
Statement of Financial Accounting Standards No. 109, “Accounting for Income
Taxes” (“SFAS No. 109”). Under this approach, deferred income taxes are
recorded to reflect the tax consequences in future years of differences between
the tax basis of assets and liabilities and their financial reporting amounts
at
each year-end. A valuation allowance is recorded against the deferred tax asset
if management does not believe we have met the “more likely than not” standard
imposed by SFAS No. 109 to allow recognition of such an asset.
Property
and Equipment
The
Company evaluates its long-lived assets for impairment when events or changes
in
circumstances indicate that the related carrying amount may not be recoverable.
If the sum of estimated future net cash flows on an undiscounted basis is less
than the carrying amount of the related asset grouping, an asset impairment
is
considered to exist. The related impairment loss is measured by comparing
estimated future net cash flows on a discounted basis to the carrying amount
of
the asset. Changes in significant assumptions underlying future cash flow
estimates may have a material effect on the Company’s financial position and
results of operations. To date no such impairments have been identified.
Property and equipment are being depreciated over useful lives of three to
seven
years using straight-line depreciation.
Share-Based
Compensation
We
account for stock-based compensation in accordance with SFAS No. 123(R),
Share-Based
Payment.
Under
the fair value recognition provisions of this statement, share-based
compensation cost is measured at the grant date based on the value of the award
and is recognized as expense over the vesting period. Determining the fair
value
of share-based awards at the grant date requires judgment, including estimating
expected dividends. In addition, judgment is also required in estimating the
amount of share-based awards that are expected to be forfeited. If actual
results differ significantly from these estimates, stock-based compensation
expense and our results of operations could be materially impacted.
Results
of Operations
Year
Ended December 31, 2006 Compared to Year Ended December 31,
2005
Our
net
loss for the year ended December 31, 2006 was $12,305,266 as compared to a
net loss of $4,497,447 for the year ended December 31, 2005. The increase
of $7,807,819 is attributable primarily to costs incurred in connection with
exploration activities and our Plan of Operations, Environmental Impact
Statement and bankable feasibility study. We have also incurred higher corporate
and administrative costs in a number of areas consistent with our substantially
increased activity levels. These costs include employee compensation expenses,
expansion or corporate personnel and associated costs, marketing and investor
relations expense, general legal expenses, and accounting and compliance issues
reflecting the greater complexity of our operations.
Exploration
and development expenditures of $6,145,850 were incurred at our Mount Hope
and
Hall Tonopah projects during 2006 and we will see these expenses escalate over
the next year. In 2005 we incurred $2,384,366 in exploration and development
expenditures at the Mount Hope Project as exploration and development activity
proceeded at a very aggressive pace. This is consistent with our stated
objective to complete our Mount Hope Project plans and to focus on the
permitting required to bring the project to commercial production. All of the
expenditures during the 2005 fiscal year were related to this objective and
associated feasibility study costs represent the majority of expenditures at
the
Mount Hope Project.
Year
Ended December 31, 2005 Compared to Year Ended December 31,
2004
Our
net
loss for the year ended December 31, 2005 was $4,497,447 compared to a net
loss of $3,004,791 for the year ended December 31, 2004. The increase of
$1,492,656 is attributable primarily to property exploration and evaluation
activities and the Mount Hope feasibility study. During the second, third and
fourth quarters of 2005 we incurred permitting and associated expenses that
significantly contributed to additional operating expenses. We also incurred
higher corporate and administrative costs in a number of areas consistent with
our substantially increased activity levels. These costs include new hires
and
employee compensation expenses, marketing and investor relations expenses,
general legal expenses, and accounting and compliance issues reflecting the
greater complexity of our operations.
Liquidity
and Capital Resources
We
have
limited capital resources and thus have had to rely upon the sale of equity
securities for the cash required for exploration and development purposes,
for
acquisitions and to fund our administration. Since we do not expect to generate
any revenues in the near future, we must continue to rely upon the sale of
our
equity and debt securities to raise capital. There can be no assurance that
financing, whether debt or equity, will be available to us in the amount
required at any particular time or for any period or, if available, that it
can
be obtained on terms satisfactory to us.
Our
cash
balance as at December 31, 2006 was $17,882,543 compared to $256,773 as of
December 31, 2005. Total assets as at December 31, 2006 were
$27,104,256 compared to $1,242,214 as of December 31, 2005. These increases
were due to receipt of proceeds from to the private placements of our securities
that were completed on January 10, 2006 and February 15, 2006, offset
by the expenditures for purchase of the Hall Tonopah property and the purchase
of the Gale Ranch and water rights. Liabilities as at December 31, 2006
were $1,153,280 compared to $815,753 as of December 31, 2005. This increase
in liabilities reflects our increase in activity over the past
year.
On
April 27, 2005, we concluded a private placement of 2,998,932 units at a
price of $0.75 per unit. Each unit consisted of one share of our common stock
and one warrant to purchase one share of our common stock. Each warrant is
exercisable for 24 months from the date of issuance and carries an exercise
price of $1.00 per share. The gross proceeds of this offering were $2,249,200
and, after payment of sales commissions and finder’s fees, we received net
proceeds of $2,108,150.
On
January 10, 2006, we concluded a private placement of 3,441,936 units at a
price of $1.10 per unit. Each unit consisted of one share of our common stock
and one-half of one warrant to purchase one share of our common stock. Each
whole warrant is exercisable for 24 months from the date of issuance and carries
an exercise price of $1.75 per whole share. The gross proceeds of this offering
were $3,786,129 and, after payment of sales commissions and finder’s fees, we
received net proceeds of $3,620,730.
On
February 15, 2006, we concluded a private placement of 15,000,000 units at
a price of $2.00 per unit. Each unit consisted of one share of our common stock
and a warrant to purchase one-half of a share of our common stock. Each warrant
is exercisable for five years from the date of issuance and carries an exercise
price of $3.75 per whole share. The gross proceeds of this offering were
$30,000,000.00 and, after payment of sales commissions and finder’s fees, we
received net proceeds of $27,875,000. In the aggregate, we issued
15 million shares of common stock and warrants to purchase an additional
8.3 million shares, including warrants issued as compensation to the
placement agent.
In
December 2006, we entered into a five year capital lease for a piece of
office equipment. The principal for this lease is $29,488 and the interest
rate
is 6.36%. In December 2006, we entered into a five year fair value lease
for an additional piece of office equipment. Because this lease exceeds the
75%
of the estimated useful life of the equipment this is treated as a capital
lease
with principal of $14,389 and an interest rate of 3.07%. In December 2006,
we also entered into a note to purchase a 2007 1 ton pickup for $33,571 at
an
interest rate of 0.9% with a term of three years. The table below shows these
obligations over the next five years.
Year
|
|
Lease
Payment
|
|
Interest
on Leases
|
|
Note
Payment
|
|
Note
Interest
|
|
2006
|
|
$
|
834
|
|
$
|
193
|
|
|
—
|
|
|
—
|
|
2007
|
|
|
10,008
|
|
|
2,095
|
|
|
11,350
|
|
|
256
|
|
2008
|
|
|
10,008
|
|
|
1,670
|
|
|
11,350
|
|
|
156
|
|
2009
|
|
|
10,008
|
|
|
1,220
|
|
|
11,350
|
|
|
55
|
|
2010
|
|
|
10,008
|
|
|
744
|
|
|
—
|
|
|
—
|
|
2011
|
|
|
9,174
|
|
|
240
|
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
50,040
|
|
$
|
6,162
|
|
$
|
34,050
|
|
$
|
467
|
|
The
Mount
Hope Lease may be terminated upon the expiration of its 30-year term, earlier
at
our election, or upon our material breach and failure to cure such breach.
If we
terminate the lease, termination is effective 30 days after receipt by MHMI
of
our written notice to terminate the Mount Hope Lease. Set forth below is a
schedule of our contractual obligations for payments under the Mount Hope lease
agreement in order to keep the lease in effect:
Contractual
Obligations for Future Payments under Mount Hope Lease
Date
|
|
Fixed
Payment
|
|
Project
Financing Received
by
Date Indicated
|
|
Project
Financing Not Received
and
Deferral Elected
|
April 19,
2007
|
|
$125,000
|
|
|
|
|
October 19,
2007
|
|
$350,000
|
|
|
|
|
October 19,
2008
|
|
|
|
Greater
of 3% of Construction Capital Cost Estimate or
$2,500,000(1)(3)(4)
|
|
$350,000
|
October 19,
2009
|
|
|
|
Greater
of 3% of Construction Capital Cost Estimate or
$2,500,000(3)
|
|
$350,000
|
October 19,
2010
|
|
|
|
$2,500,000(3)
|
|
Greater
of $2,500,000 or 3% of Construction Capital Cost
Estimate(3)(4)
|
October 19,
2011
|
|
|
|
3%
of Construction Capital Cost Estimate(3)
|
|
Greater
of (a) $2,500,000 or (b), if 3% of Construction Capital Cost Estimate
is greater than $2,500,000, then 50% of the difference between 3%
and
$2,500,000(3)(4)
|
October 19,
2012
|
|
|
|
3%
of Construction Capital Cost Estimate(3)
|
|
Greater
of (a) $2,500,000 or (b), if 3% of Construction Capital Cost Estimate
is greater than $2,500,000, then 50% of the difference between 3%
and
$2,500,000(3)(4)
|
October 19,
2013 and each
year
thereafter(2)
|
|
$500,000(3)
|
|
|
|
|
_____________
(1)
|
If
Project Financing is not received by October 19, 2008, we may elect
to defer this payment and proceed to make the payments under the
column
labeled “Project Financing Not Received and Deferral Elected.” If prior to
making all of the payments under the column “Project Financing Not
Received and Deferral Elected” we obtain project financing, we would be
required to make this payment and to pay $500,000 each year
thereafter.
|
(2)
|
In
addition to the payments above, we are required to pay to MHMI a
production royalty after the commencement of Commercial Production
of the
greater of (i) $.20/lb of molybdenum metal (or the equivalent thereof
if another Product is sold) sold from the property (not to exceed
the
amount of Net Returns we receive for those products) or (ii) 3% of
the Net Returns, subject to certain adjustments as set forth in the
lease.
|
(3)
|
To
be offset from the production royalty described in (3) above. We may
recover the aggregate of these payments by retaining 50% of each
production royalty payment due to
MHMI.
|
(4)
|
“Construction
Capital Cost Estimate” means our projected costs plus 10% to put the Mount
Hope property into commercial production calculated in accordance
with the
Mount Hope Lease. See Part I, Items 1&2 Description of Business
and Properties—description of Mount Hope Project—Royalty, Agreements and
Encumbrances in the Form 10-KSB for the year ended December 31, 2006
for
further information relating to the calculation of these costs and
payments.
|
Changes
in Accounting Policies
We
did
not change our accounting policies during fiscal 2004, 2005, or
2006.
ITEM
7. FINANCIAL
STATEMENTS
GENERAL
MOLY, INC.
(An
Exploration Stage Company)
FINANCIAL
STATEMENTS
December 31,
2006
GENERAL
MOLY, INC.
(An
Exploration Stage Company)
December 31,
2006
CONTENTS
Report
of Independent Registered Public Accounting Firm
|
7
|
|
|
Financial
Statements:
|
|
|
|
Balance
Sheets as of December 31, 2006 and December 31,
2005
|
8
|
|
|
Statements
of Operations for the twelve months ended December 31, 2006,
December 31,
2005
and December 31, 2004 and for the period from inception of
Exploration Stage
until
December 31, 2006
|
9
|
|
|
Statements
of Cash Flows for the twelve months ended December 31, 2006,
December 31,
2005
and December 31, 2004 and for the period from inception of
Exploration Stage
until
December 31, 2006
|
10
|
|
|
Statement
of Stockholders’ Equity as of December 31, 2006, December 31,
2005,
December 31,
2004, December 31, 2003, and December 31, 2002
|
11
|
|
|
Notes
to Financial Statements
|
13
|
Report
of Independent Registered Public Accounting Firm
To
the
Board of Directors and Shareholders of General Moly, Inc:
In
our
opinion, the accompanying balance sheets and
the
related statements of operations, of cash flows and of stockholders equity
present fairly, in all material respects, the financial position of General
Moly, Inc. and its subsidiaries (an exploration stage company) at
December 31, 2006 and 2005, and the results of its operations and of its
cash flows for each of the three years in the period ended December 31,
2006 and, cumulatively, for the period from January 1, 2002 (date
of
inception) to
December 31, 2006 in conformity with accounting principles generally
accepted in the United States of America. 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
conducted our audits of these statements in accordance with the standards of
the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
of
financial statements 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, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
As
discussed in note 2 to the financial statements, the Company restated its 2006,
2005 and 2004 financial
statements.
As
discussed in Note 3, the Company will require substantial additional capital
to
fund operations and to develop, construct and operate
its
planned facilities at its mining sites. There is no assurance that the Company
will be able to obtain the necessary financing on customary terms, or at
all.
PricewaterhouseCoopers
LLP
Denver,
Colorado
November
14, 2007
GENERAL
MOLY, INC.
(AN
EXPLORATION STAGE COMPANY)
BALANCE
SHEETS
(RESTATED
- NOTE 2)
|
|
December 31,
2006
|
|
December 31,
2005
|
|
ASSETS:
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
17,882,543
|
|
$
|
256,773
|
|
Tax
refund receivable
|
|
|
—
|
|
|
29,514
|
|
Employee
advances
|
|
|
—
|
|
|
9,000
|
|
Deposits
|
|
|
146,563
|
|
|
—
|
|
Prepaid
expense
|
|
|
46,223
|
|
|
4,113
|
|
Total
Current Assets
|
|
|
18,075,329
|
|
|
299,400
|
|
PROPERTY
AND EQUIPMENT, net
|
|
|
430,638
|
|
|
53,333
|
|
LAND
AND MINING CLAIMS
|
|
|
8,598,289
|
|
|
889,481
|
|
TOTAL
ASSETS
|
|
$
|
27,104,256
|
|
$
|
1,242,214
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
1,076,474
|
|
$
|
815,753
|
|
Current
portion of long term debt
|
|
|
19,006
|
|
|
—
|
|
Total
Current Liabilities
|
|
|
1,095,480
|
|
|
815,753
|
|
Long
term debt, net of current portion
|
|
|
57,800
|
|
|
—
|
|
Total
Liabilities
|
|
|
1,153,280
|
|
|
815,753
|
|
COMMITMENTS
AND CONTINGENCIES - NOTE 11
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
Preferred
stock, Series A, $0.001 par value; 10,000,000 shares authorized, no
shares issued and outstanding
|
|
|
—
|
|
|
—
|
|
Common
stock, $0.001 par value; 200,000,000 shares authorized, 43,397,540
and
16,486,015 shares issued and outstanding,
respectively
|
|
|
43,398
|
|
|
16,486
|
|
Additional
paid-in capital
|
|
|
46,016,716
|
|
|
8,213,847
|
|
Accumulated
deficit before exploration stage
|
|
|
(212,576
|
) |
|
(212,576
|
) |
Accumulated
deficit during exploration stage
|
|
|
(19,896,562
|
) |
|
(7,591,296
|
) |
Total
Stockholders’ Equity
|
|
|
25,950,976
|
|
|
426,461
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
27,104,256
|
|
$
|
1,242,214
|
|
GENERAL
MOLY, INC.
(AN
EXPLORATION STAGE COMPANY)
STATEMENTS
OF OPERATIONS
(RESTATED
- NOTE 2)
|
|
Years Ended
|
|
|
|
|
|
December 31,
2006
|
|
December 31,
2005
|
|
December 31,
2004
|
|
January 1, 2002
(Inception of
Exploration Stage)
to
December 31,
2006
|
|
REVENUES
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
research, exploration and development
|
|
|
6,145,850
|
|
|
2,384,366
|
|
|
1,821,854
|
|
|
10,352,070
|
|
General
and administrative expense
|
|
|
7,075,504
|
|
|
2,119,610
|
|
|
1,253,994
|
|
|
10,544,874
|
|
TOTAL
OPERATING EXPENSES
|
|
|
13,221,354
|
|
|
4,503,976
|
|
|
3,075,848
|
|
|
20,896,944
|
|
LOSS
FROM OPERATIONS
|
|
|
(13,221,354
|
)
|
|
(4,503,976
|
)
|
|
(3,075,848
|
)
|
|
(20,896,944
|
)
|
OTHER
INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
and dividend income
|
|
|
916,088
|
|
|
6,529
|
|
|
2,048
|
|
|
935,530
|
|
Realized
gain on marketable securities
|
|
|
—
|
|
|
—
|
|
|
9,245
|
|
|
5,089
|
|
Realized
income from timber sales
|
|
|
—
|
|
|
—
|
|
|
59,764
|
|
|
59,764
|
|
TOTAL
OTHER INCOME
|
|
|
916,088
|
|
|
6,529
|
|
|
71,057
|
|
|
1,000,383
|
|
LOSS
BEFORE TAXES
|
|
|
(12,305,266
|
)
|
|
(4,497,447
|
)
|
|
(3,004,791
|
)
|
|
(19,896,561
|
)
|
INCOME
TAXES
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
NET
LOSS
|
|
$
|
(12,305,266
|
)
|
$
|
(4,497,447
|
)
|
$
|
(3,004,791
|
)
|
$
|
(19,896,561
|
)
|
BASIC
AND DILUTED NET LOSS PER
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHARE
OF COMMON STOCK
|
|
$
|
(0.33
|
)
|
$
|
(0.31
|
)
|
$
|
(0.50
|
)
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OUTSTANDING—BASIC
AND DILUTED
|
|
|
37,302,547
|
|
|
14,508,054
|
|
|
5,988,288
|
|
|
|
|
GENERAL
MOLY, INC.
(AN
EXPLORATION STAGE COMPANY)
STATEMENTS
OF CASH FLOWS
(RESTATED
- NOTE 2)
|
|
Year
Ended
December 31,
2006
|
|
Year
Ended
December 31,
2005
|
|
Year
Ended
December 31,
2004
|
|
1-Jan-02
(Inception of
Exploration
Stage) to
December 31,
2006
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(12,305,266
|
)
|
$
|
(4,497,447
|
)
|
$
|
(3,004,791
|
)
|
$
|
(19,896,561
|
)
|
Adjustments
to reconcile net loss to net cash used by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
and expenses paid with common stock
|
|
|
331,023
|
|
|
114,375
|
|
|
396,660
|
|
|
788,558
|
|
Expenses
paid with common stock units
|
|
|
—
|
|
|
28,500
|
|
|
869,010
|
|
|
897,510
|
|
Depreciation
and amortization
|
|
|
57,578
|
|
|
11,215
|
|
|
4,229
|
|
|
73,022
|
|
Gain
on sale of investments
|
|
|
—
|
|
|
—
|
|
|
(9,245
|
)
|
|
(9,245
|
)
|
Unrealized
loss on securities
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,157
|
|
Adjustment
to Equity
|
|
|
(7,684
|
)
|
|
|
|
|
|
|
|
(7,684
|
)
|
Management
and administrative fees paid with common stock options
|
|
|
2,105,021
|
|
|
279,713
|
|
|
833,980
|
|
|
3,310,237
|
|
Decrease
(increase) in employee advances
|
|
|
9,000
|
|
|
(9,000
|
)
|
|
—
|
|
|
—
|
|
Decrease
(increase) in prepaid expenses and deposits
|
|
|
(188,673
|
)
|
|
(33,627
|
)
|
|
—
|
|
|
(222,300
|
)
|
Increase
(decrease) in accounts payable and accrued expenses
|
|
|
260,721
|
|
|
775,950
|
|
|
39,803
|
|
|
1,076,474
|
|
Decrease
(increase) in tax refunds
|
|
|
29,514
|
|
|
—
|
|
|
—
|
|
|
29,514
|
|
Accounts
payable, related party
|
|
|
—
|
|
|
—
|
|
|
(35,000
|
)
|
|
—
|
|
Net
cash used by operating activities
|
|
|
(9,708,766
|
)
|
|
(3,330,321
|
)
|
|
(905,354
|
)
|
|
(13,956,318
|
)
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments
for the purchase of equipment
|
|
|
(320,030
|
)
|
|
(13,662
|
)
|
|
(44,315
|
)
|
|
(378,007
|
)
|
Purchase
of securities
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(136,987
|
)
|
Purchase
of mining property, claims, options
|
|
|
(7,746,856
|
)
|
|
(15,690
|
)
|
|
(24,772
|
)
|
|
(7,787,318
|
)
|
Cash
provided by sale of marketable
securities
|
|
|
—
|
|
|
—
|
|
|
136,756
|
|
|
246,839
|
|
Net
cash provided (used) by investing activities
|
|
|
(8,066,886
|
)
|
|
(29,352
|
)
|
|
67,669
|
|
|
(8,055,473
|
)
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of stock
|
|
|
35,401,422
|
|
|
2,915,948
|
|
|
1,530,750
|
|
|
39,848,121
|
|
Net
cash provided by financing activities:
|
|
|
35,401,422
|
|
|
2,915,948
|
|
|
1,530,750
|
|
|
39,848,121
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
17,625,770
|
|
|
(443,725
|
)
|
|
693,065
|
|
|
17,836,330
|
|
Cash
and cash equivalents, beginning of period
|
|
|
256,773
|
|
|
700,498
|
|
|
7,433
|
|
|
46,213
|
|
Cash
and cash equivalents, end of period
|
|
$
|
17,882,543
|
|
$
|
256,773
|
|
$
|
700,498
|
|
$
|
17,882,543
|
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
taxes paid
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
—
|
|
Interest
paid
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
NON-CASH
INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for equipment
|
|
|
—
|
|
|
10,800
|
|
|
—
|
|
|
10,800
|
|
Common
stock and warrants issued for property
|
|
|
—
|
|
|
—
|
|
|
748,818
|
|
|
748,818
|
|
GENERAL
MOLY, INC.
(AN
EXPLORATION STAGE COMPANY)
STATEMENT
OF STOCKHOLDERS’ EQUITY
(RESTATED
- NOTE 2)
|
|
Shares
|
|
Amount
|
|
Additional
Paid-In Capital
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Accumulated
Deficit
|
|
Total
|
|
Balance,
January 1, 2002
|
|
|
3,140,469
|
|
$
|
3,140
|
|
$
|
441,864
|
|
$
|
(2,368
|
)
|
$
|
(212,576
|
)
|
$
|
230,060
|
|
Issuance
of Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for
directors’ fees
|
|
|
285,000
|
|
|
285
|
|
|
18,240
|
|
|
|
|
|
|
|
|
18,525
|
|
Unrealized
Losses on marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
(6,553
|
)
|
|
|
|
|
(6,553
|
)
|
Net
loss for the year ended December 31, 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20,146
|
)
|
|
(20,146
|
)
|
Balance,
December 31, 2002
|
|
|
3,425,469
|
|
$
|
3,425
|
|
$
|
460,104
|
|
$
|
(8,921
|
)
|
$
|
(232,722
|
)
|
$
|
221,886
|
|
Issuance
of Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for
directors’ fees
|
|
|
80,000
|
|
|
80
|
|
|
7,920
|
|
|
|
|
|
|
|
|
8,000
|
|
Issuance
of Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
purchase
options for management and
administrative
fees
|
|
|
|
|
|
|
|
|
11,500
|
|
|
|
|
|
|
|
|
11,500
|
|
Unrealized
gains on marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
19,928
|
|
|
|
|
|
19,928
|
|
Net
loss for the year ended December 31, 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(68,911
|
)
|
|
(68,911
|
)
|
Balance,
December 31, 2003
|
|
|
3,505,469
|
|
$
|
3,505
|
|
$
|
479,524
|
|
$
|
11,007
|
|
$
|
(301,634
|
)
|
$
|
192,402
|
|
Issuance
of Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for
directors’ fees at $0.50 to 0.62 per share
|
|
|
95,000
|
|
|
95
|
|
|
53,405
|
|
|
—
|
|
|
—
|
|
|
53,500
|
|
for
services and expenses at between
$0.11
and $0.85 per share
|
|
|
617,818
|
|
|
618
|
|
|
342,542
|
|
|
—
|
|
|
—
|
|
|
343,160
|
|
Issuance
of Units of Common Stock and Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for
property at $1.46 per unit
|
|
|
525,000
|
|
|
525
|
|
|
767,043
|
|
|
—
|
|
|
—
|
|
|
767,568
|
|
for
expenses at between $0.40 and $1.44 per unit
|
|
|
875,000
|
|
|
875
|
|
|
868,135
|
|
|
—
|
|
|
—
|
|
|
869,010
|
|
for
cash at between $0.15 and $0.40 per unit
|
|
|
5,610,555
|
|
|
5,611
|
|
|
1,496,539
|
|
|
—
|
|
|
—
|
|
|
1,502,150
|
|
Stock
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
exercised
for cash at $0.11 per share
|
|
|
260,000
|
|
|
260
|
|
|
28,340
|
|
|
—
|
|
|
—
|
|
|
28,600
|
|
granted
at between $0.15 and $0.75 per share
|
|
|
—
|
|
|
—
|
|
|
833,980
|
|
|
—
|
|
|
—
|
|
|
833,980
|
|
Unrealized
Losses on marketable securities
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,007
|
)
|
|
—
|
|
|
(11,007
|
)
|
Net
loss for year ended December 31, 2004
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,004,791
|
)
|
|
(3,004,791
|
)
|
Balances,
December 31, 2004
|
|
|
11,488,842
|
|
|
11,489
|
|
|
4,869,508
|
|
|
—
|
|
|
(3,306,425
|
)
|
|
1,574,572
|
|
Issuance
of Common Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for
administration between $0.95 and $1.25 per share
|
|
|
20,000
|
|
|
20
|
|
|
23,480
|
|
|
—
|
|
|
—
|
|
|
23,500
|
|
GENERAL
MOLY, INC.
(AN
EXPLORATION STAGE COMPANY)
STATEMENT
OF STOCKHOLDERS’ EQUITY (Continued)
(RESTATED
- NOTE 2)
|
|
Shares
|
|
Amount
|
|
Additional
Paid-In Capital
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Accumulated
Deficit
|
|
Total
|
|
exploration
expense at $0.75 per share
|
|
|
30,000
|
|
|
30
|
|
|
28,470
|
|
|
—
|
|
|
—
|
|
|
28,500
|
|
office
furniture at $0.72 and $1.13 per share
|
|
|
15,000
|
|
|
15
|
|
|
10,785
|
|
|
—
|
|
|
—
|
|
|
10,800
|
|
for
services between $0.72 and $1.13 per share
|
|
|
89,611
|
|
|
90
|
|
|
90,785
|
|
|
—
|
|
|
—
|
|
|
90,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Units of Common Stock and Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for
cash between $0.75 and $1.10 per unit
|
|
|
3,853,932
|
|
|
3,854
|
|
|
2,912,094
|
|
|
—
|
|
|
—
|
|
|
2,915,948
|
|
Stock
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
exercised
between $0.165 and $0.70 per share
|
|
|
988,630
|
|
|
988
|
|
|
(988
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
granted
at $0.30 and $0.72 per share
|
|
|
—
|
|
|
—
|
|
|
279,713
|
|
|
—
|
|
|
—
|
|
|
279,713
|
|
Net
loss for the year ended December 31, 2005
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,497,447
|
)
|
|
(4,497,447
|
)
|
Balances,
December 31, 2005
|
|
|
16,486,015
|
|
$
|
16,486
|
|
$
|
8,213,847
|
|
$
|
—
|
|
$
|
(7,803,872
|
)
|
$
|
426,461
|
|
Issuance
of Common Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for
services between $1.10 and $3.66 per share
|
|
|
50,000
|
|
|
50
|
|
|
112,516
|
|
|
—
|
|
|
—
|
|
|
112,566
|
|
Issuance
of Units of Common Stock and Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units
for cash between $1.10 and $2.00 per unit
|
|
|
18,021,936
|
|
|
18,022
|
|
|
33,306,108
|
|
|
—
|
|
|
—
|
|
|
33,324,130
|
|
Units
for finders fee
|
|
|
170,550
|
|
|
171
|
|
|
307,340
|
|
|
—
|
|
|
—
|
|
|
307,511
|
|
Warrants
for finders fee
|
|
|
|
|
|
|
|
|
1,735,214
|
|
|
—
|
|
|
—
|
|
|
1,735,214
|
|
Cost
of offerings including cash costs of $2,282,699
|
|
|
|
|
|
|
|
|
(4,315,426
|
)
|
|
|
|
|
|
|
|
(4,315,426
|
)
|
Stock
Warrants:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued
for services at $1.07 per warrant
|
|
|
|
|
|
|
|
|
79,946
|
|
|
|
|
|
|
|
|
79,946
|
|
Exercised
between $0.40 and $1.00 per share
|
|
|
5,838,055
|
|
|
5,838
|
|
|
4,471,089
|
|
|
—
|
|
|
—
|
|
|
4,476,927
|
|
Cashless
exercise of warrants
|
|
|
1,482,147
|
|
|
1,482
|
|
|
(1,482
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Stock
Options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
exercised
between $0.11 and $0.75 per share
|
|
|
340,000
|
|
|
340
|
|
|
60,330
|
|
|
—
|
|
|
—
|
|
|
60,670
|
|
Cashless
exercise of stock options
|
|
|
1,008,837
|
|
|
1,009
|
|
|
(1,009
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
vested
stock options and warrants at $2.10 to $3.68 per share
|
|
|
—
|
|
|
—
|
|
|
2,048,243
|
|
|
—
|
|
|
—
|
|
|
2,048,243
|
|
Net
loss for the year ended December 31, 2006
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,305,266
|
)
|
|
(12,305,266
|
)
|
Balances,
December 31, 2006
|
|
|
43,397,540
|
|
$
|
43,398
|
|
$
|
46,016,716
|
|
$
|
—
|
|
$
|
(20,109,138
|
)
|
$
|
25,950,976
|
|
NOTE
1—DESCRIPTION OF BUSINESS
General
Moly, Inc. (“the Company” or “GMO”) is a Delaware corporation originally
incorporated as General Mines Corporation on November 23, 1925. In 1966,
the Company amended its articles of incorporation to change its name to Idaho
General Petroleum and Mines Corporation, and amended its articles again in
1967
changing its name to Idaho General Mines, Inc. On October 8, 2007, the
Company reincorporated in the State of Delaware (the “Reincorporation”) through
a merger involving Idaho General Mines, Inc. and General Moly, Inc., a
newly-formed Delaware corporation that was a wholly owned subsidiary of Idaho
General Mines, Inc. The Reincorporation was effected by merging Idaho General
Mines, Inc. with and into General Moly, with General Moly being the surviving
entity. For purposes of the Company’s reporting status with the Securities and
Exchange Commission, General Moly is deemed a successor to Idaho General Mines,
Inc.
The
Company’s historic activities have principally consisted of the exploration for
nonferrous and precious metals in and around Shoshone County, Idaho. The Company
entered a new exploration stage in early January 2002 when it shifted its
focus to minerals exploration. In May 2004, the Company began a search for
substantive mineral properties with a focus on metals such as copper, zinc,
silver, gold and specialty metals. GMO entered into an option to lease the
Mount
Hope molybdenum property located in Nevada in November 2004 and exercised
that option in October 2005 after several phases of feasibility studies and
project design studies which indicated the attractiveness of the project. GMO
similarly optioned the Hall Tonopah molybdenum-copper property, also in Nevada,
in 2005 and exercised that option to purchase the Hall Tonopah property in
March 2006 with the intent of assessing economic feasibility by exploring
and assessing the property’s potential. Accordingly, GMO has assumed the role of
exploring, and as warranted, developing major mineral deposits which are at
a
relatively advanced stage and are worthy of economic consideration.
On
January 30, 2007, the Company completed the acquisition of all of the
issued and outstanding shares of a corporation that owned a royalty interest
in
our Hall-Tonopah Property (see note 4). Upon its acquisition, the
corporation was consolidated as a wholly owned subsidiary of the
Company.
NOTE
2 - RESTATEMENT OF PRIOR YEAR FINANCIAL STATEMENTS
The
Company has corrected its accounting treatment for certain non-cash adjustments
primarily related to the calculation of and recognition of compensation expense
and the valuation of warrants to purchase common shares of the Company under
FASB Statement 123 - Accounting
for Stock-Based Compensation, FASB
Statement 123(R) -Share
Based Payment
and EITF
96-18 - Accounting
for Equity Instruments That Are Issued to Other Than Employees for Acquiring,
or
in Connection with Selling Goods and Services.
The
Company had utilized volatility assumptions which were too low in determining
the value of certain equity instruments issued during the periods and failed
to
attribute value to certain warrants included as consideration in transactions
with third parties. This resulted in the Company valuing equity instruments
granted and/or issued at too low of a value and, accordingly, the amounts
recorded for these non-cash transactions were understated.
Additionally
during the periods, the Company did not account for forfeitures of employee
options which occurred prior to vesting, resulting in an overstatement of
non-cash compensation expense, and allocated stock-related compensation costs
to
the incorrect service periods. Furthermore, in the year ended December 31,
2006, the Company incorrectly allocated a portion of the cash consideration
paid
for water rights to non marketable securities and subsequently impaired such
securities, rather than allocating this portion of the consideration to the
purchase of such water rights.
In
addition, the Company has corrected certain other immaterial errors. At
December 31, 2006, the cumulative effect of all changes was an increase to
the cost of our land and mining claims of $713,000, an increase in property
research, exploration and development expense of $338,000, an increase in
general and administration expense of $190,000, a decrease in realized loss
on
marketable securities of $321,000, and an increase to our net equity of
$589,000.
The
impact of these errors on each of the Company’s previously issued financial
statements, are set forth in the table below (in thousands except per share
amounts).
|
|
As
Originally Reported
|
|
As
Restated
|
|
Impact
of the error Increase (Decrease)
|
|
Income
Statement for the year ended December 31,
2004
|
|
|
|
|
|
|
|
Property
research, exploration and development expenses
|
|
$
|
1,596
|
|
$
|
1,822
|
|
$
|
226
|
|
General
and administrative expenses
|
|
|
812
|
|
|
1,254
|
|
|
442
|
|
Net
loss
|
|
|
2,337
|
|
|
3,005
|
|
|
668
|
|
Basic
and fully diluted loss per share
|
|
|
.39
|
|
|
.50
|
|
|
.11
|
|
Income
Statement for the year ended December 31,
2005
|
|
|
|
|
|
|
|
|
|
|
Property
research, exploration and development expenses
|
|
|
2,397
|
|
|
2,384
|
|
|
(13
|
)
|
General
and administrative expenses
|
|
|
2,128
|
|
|
2,120
|
|
|
(8
|
)
|
Net
loss
|
|
|
4,518
|
|
|
4,498
|
|
|
(20
|
)
|
Basic
and fully diluted loss per share
|
|
|
.31
|
|
|
.31
|
|
|
-
|
|
Income
Statement for the year ended December 31,
2006
|
|
|
|
|
|
|
|
|
|
|
Property
research, exploration and development expenses
|
|
|
6,021
|
|
|
6,146
|
|
|
125
|
|
General
and administrative expenses
|
|
|
7,320
|
|
|
7,076
|
|
|
(244
|
)
|
Realized
loss on marketable securities
|
|
|
321
|
|
|
0
|
|
|
(321
|
)
|
Net
loss
|
|
|
12,745
|
|
|
12,305
|
|
|
(440
|
)
|
Basic
and fully diluted loss per share
|
|
|
.34
|
|
|
.33
|
|
|
(.01
|
)
|
Balance
Sheet at January 1, 2005
|
|
|
|
|
|
|
|
|
|
|
Land
and Mining Claims
|
|
|
481
|
|
|
874
|
|
|
393
|
|
Total
Assets
|
|
|
1,222
|
|
|
1,615
|
|
|
393
|
|
Current
Liabilities
|
|
|
27
|
|
|
40
|
|
|
13
|
|
Additional
Paid in Capital
|
|
|
3,822
|
|
|
4,869
|
|
|
1,047
|
|
Accumulated
Deficit
|
|
|
(2,639
|
)
|
|
(3,307
|
)
|
|
(668
|
)
|
Total
Stockholders’ Equity
|
|
|
1,195
|
|
|
1,575
|
|
|
380
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
Sheet at December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
Land
and Mining Claims
|
|
|
497
|
|
|
889
|
|
|
393
|
|
Total
Assets
|
|
|
850
|
|
|
1,242
|
|
|
393
|
|
Additional
Paid in Capital
|
|
|
7,146
|
|
|
8.214
|
|
|
1,068
|
|
Accumulated
Deficit
|
|
|
(7,157
|
)
|
|
(7,804
|
)
|
|
(648
|
)
|
Total
Stockholders’ Equity
|
|
|
34
|
|
|
427
|
|
|
393
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
Sheet at December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
Land
and Mining Claims
|
|
|
7,885
|
|
|
8,598
|
|
|
713
|
|
Total
Assets
|
|
|
26,391
|
|
|
27,104
|
|
|
713
|
|
Accrued
Liabilities
|
|
|
970
|
|
|
1,095
|
|
|
125
|
|
Additional
Paid in Capital
|
|
|
45,221
|
|
|
46,017
|
|
|
796
|
|
Accumulated
Deficit
|
|
|
(19,902
|
)
|
|
(20,109
|
)
|
|
(207
|
)
|
Total
Stockholders’ Equity
|
|
|
25,362
|
|
|
25,951
|
|
|
589
|
|
NOTE
3-LIQUIDITY AND CAPITAL REQUIREMENTS (AND SUBSEQUENT
EVENT)
On
October 4, 2007, the Company’s Board of Directors approved the development of
the Mount Hope Project as contemplated in the Bankable Feasibility Study. The
development of the Mount Hope Project has an estimated total capital requirement
of approximately $1 billion comprised of initial construction cost in excess
of
$850 million; $50 to $70 million in cash bonding requirements;
$27 million in advance royalty payments; and amounts necessary for
financing costs and working capital. Such capital requirements are based on
management’s estimates based on the Bankable Feasibility Study and other
available information, and are subject to change, which changes could be
material. The Company will also require additional capital to continue the
exploration and evaluation of Hall-Tonopah, as well as continue payment of
ongoing general, administrative and operations costs associated with supporting
its planned operations, the amounts of which are presently unknown.
The
capital will be required through the commencement of Mount Hope production
estimated to be in the second half of 2010. Our ability to develop the project
on time and on budget is dependent on, among other things, our ability to raise
the necessary capital to fund the Mount Hope Project both in sufficient quantity
of capital and at the time such capital is needed. Additionally, if the
estimated costs of the Mount Hope Project are exceeded we will need to raise
additional capital to fund such overruns.
The
Company does not currently have the capital necessary to complete the Mount
Hope
Project and, accordingly, plans to raise the capital on an ongoing basis when
needed. Our current business plan and project time schedule will require the
Company to raise approximately $200 million in capital from now through
December 31, 2008 with $10 to $20 million of such amount required by
December 31, 2007. If the Company is unable to raise sufficient quantities
of capital when needed, it will be necessary to develop alternative plans that
would likely delay the development and completion of the Mount Hope Project.
There is no assurance that we will be able to obtain the necessary financing
for
the Mt. Hope Project on customary terms, or at all.
NOTE
4—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This
summary of significant accounting policies is presented to assist in
understanding the financial statements. The financial statements and notes
are
representations of the Company’s management, which is responsible for their
integrity and objectivity. These accounting policies conform to accounting
principles generally accepted in the United States of America and have been
consistently applied in the preparation of the financial
statements.
Accounting
Method
The
Company’s financial statements are prepared using the accrual basis of
accounting in accordance with accounting principles generally accepted in the
United States of America.
Accounting
Pronouncements—Recent
In
February 2007, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 159. “The Fair Value Option for
Financial Assets and Financial Liabilities Including an amendment of FASB
Statement No. 115” (hereinafter SFAS No. 159”). This statement permits
entities to choose to measure many financial instruments and certain other
items
at fair value. The objective is to improve financial reporting by providing
entities with the opportunity to mitigate volatility in reported earnings caused
by measuring related assets and liabilities differently without having to apply
complex hedge accounting provisions. This Statement is expected to expand the
use of fair value measurement, which is consistent with the Board’s long term
measurement objective for accounting for financial instruments. This statement
is effective as of the beginning of an entity’s first fiscal year that begins
after November 15, 2007, although earlier adoption is permitted. Management
has not determined the effect that adopting this statement would have on the
Company’s financial condition or results of operation.
In
September 2006, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 158, “Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans an amendment of FASB Statement
No. 87,88,106, and 132(R)” (hereinafter SFAS No 158”). This statement
requires an employer to recognize the overfunded or underfunded statues of
a
defined benefit postretirement plan (other than a multiemployer plan) as an
asset or liability in its statement of financial position and to recognize
changes in that funded status in the year in which the changes occur through
comprehensive income of a business entity or changes in unrestricted net assets
of a not for profit organization. This statement also requires an employer
to
measure the funded status of a plan as of the date of its year end statement
of
financial position, with limited exceptions. This adoption of this statement
had
no immediate material effect on the Company’s financial condition or results of
operations.
In
September 2006, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 157, “Fair Value Measurements”
(hereinafter “SFAS No. 157”). This statement defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles (GAAP), and expands disclosure about fair value
measurements. This statement applies under other accounting pronouncements
that
require or permit fair value measurements. This statement does not require
any
new fair value measurements, but for some entities, the application of this
statement may change current practice. The adoption of this statement had not
immediate material effect on the Company’s financial condition or results of
operations.
In
June
2006, the Financial Accounting Standards Board issued FASB Interpretation
No. 48, “Accounting for Uncertainty in Income Taxes an interpretation of
FASB Statement No 109” (hereinafter “FIN 48”), which prescribes a
recognition threshold and measurement attribute for the financial statement
recognition and measurement of tax position taken or expected to be taken in
a
tax return. FIN 48 also provides guidance on de-recognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition. FIN 48 is effective for fiscal years beginning
after December 15, 2006. The Company does not expect the adoption of FIN 48
to have a material impact on its financial reporting, and the Company is
currently evaluating the impact, if any the adoption of FIN 48 will have on
its disclosure requirements.
In
February 2006, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 155, “Accounting for Certain Hybrid
Financial Instruments, an Amendment of FASB Standards No. 133 and 140”
(hereinafter “SFAS No. 155”). This statement established the accounting for
certain derivatives embedded in other instruments. It simplifies accounting
for
certain hybrid financial instruments by permitting fair value remeasurement
for
any hybrid instrument that contains an embedded derivative that otherwise would
require bifurcation under SFAS No. 133 as well as eliminating a restriction
on the passive derivative instruments that a qualifying special-purpose entity
(“SPE”) may hold under SFAS No. 140. This statement allows a public entity
to irrevocably elect to initially and subsequently measure a hybrid instrument
that would be required to be separated into a host contract and derivative
in
its entirety at fair value (with changes in fair value recognized in earnings)
so long as that instrument is not designated as a hedging instrument pursuant
to
the statement. SFAS No. 140 previously prohibited a qualifying
special-purpose entity from holding a derivative financial instrument that
pertains to a beneficial interest other than another derivative financial
instrument. This statement is effective for fiscal years beginning after
September 15, 2006, with early adoption permitted as of the beginning of an
entity’s fiscal year. Management does not expect the adoption of this statement
to have a material impact on its financial position or results of
operations.
In
May 2005, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 154, “Accounting Changes and Error
Corrections,” (hereinafter “SFAS No. 154”) which replaces Accounting
Principles Board Opinion No. 20, “Accounting Changes,” and SFAS No. 3,
“Reporting Accounting Changes in Interim Financial Statements—An Amendment of
APB Opinion No. 28.” SFAS No. 154 provides guidance on accounting for
and reporting changes in accounting principle and error corrections. SFAS
No. 154 requires that changes in accounting principle be applied
retrospectively to prior period financial statements and is effective for fiscal
years beginning after December 15, 2005. Management does not expect the
adoption of this statement to have a material impact on its financial position
or results of operations.
In
March 2005, the Financial Accounting Standards Board issued FASB
Interpretation No. 47 “Accounting for Conditional Asset Retirement
Obligations—an Interpretation of SFAS No. 143,” (hereinafter “FIN
No. 47”). FIN No. 47 provides clarification of the term conditional
asset retirement obligation as used in paragraph A23 of SFAS No. 143,
“Accounting for Asset Retirement Obligations.” SFAS No. 143 applies to
legal obligations associated with the retirement of a tangible long-lived asset,
and states that an entity shall recognize the fair value of a liability for
an
asset retirement obligation in the period in which it is incurred if a
reasonable estimate of fair value can be made. The term conditional asset
retirement obligation refers to a legal obligation to perform an asset
retirement activity in which the timing and/or method of settlement are
conditional on a future event that may or may not be within the control of
the
entity. The obligation to perform the asset retirement activity is unconditional
even though uncertainty exists about the timing and/or method of settlement.
Thus, the timing and/or method of settlement may be conditional on a future
event. Accordingly, an entity is required to recognize a liability for the
fair
value of a conditional asset retirement obligation if the fair value of the
liability can be reasonably estimated. Management does not believe the adoption
of this statement impacts these financial statements. However, recognition
of
asset retirement obligation liabilities may become necessary in the
future.
Cash
and Cash Equivalents
For
the
purposes of the statement of cash flows, the Company considers all highly liquid
investments with original maturities of three months or less to be cash
equivalents.
Investments
The
Company accounts for its investments in debt and equity securities in accordance
with the provisions of Statement of Financial Accounting Standards No. 115,
“Accounting for Certain Investments in Debt and Equity Securities,” and reports
its investments in available for sale securities at their fair value, with
unrealized gains and losses excluded from income or loss and included in other
comprehensive income or loss.
Derivative
Instruments
The
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 133 (hereinafter “SFAS No. 133”), “Accounting for
Derivative Instruments and Hedging Activities,” as amended by SFAS No. 137,
“Accounting for Derivative instruments and Hedging Activities—Deferral of the
Effective Date of FASB No. 133,” and SFAS No. 138, “Accounting for
Certain Derivative Instruments and Certain Hedging Activities,” and SFAS
No. 149, “Amendment of Statement No. 133 on Derivative Instruments and
Hedging Activities,” the last of which is effective June 30, 2003. These
statements establish and clarify accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. They require that an entity
recognize all derivatives as either assets or liabilities in the balance sheet
and measure those instruments at fair value.
If
certain conditions are met, a derivative may be specifically designated as
a
hedge, the objective of which is to match the timing of gain or loss recognition
on the hedging derivative with the recognition of (i) the changes in the
fair value of the hedged asset or liability that are attributable to the hedged
risk or (ii) the earnings effect of the hedged forecasted transaction. For
a derivative not designated as a hedging instrument, the gain or loss is
recognized in income in the period of change.
Historically,
the Company has not entered into derivatives contracts to hedge existing risks
or for speculative purposes.
Estimates
The
process of preparing financial statements in conformity with accounting
principles generally accepted in the United States of America requires the
use
of estimates and assumptions regarding certain types of assets, liabilities,
revenues, and expenses. Such estimates primarily relate to unsettled
transactions and events as of the date of the financial statements. Accordingly,
upon settlement, actual results may differ from estimated amounts.
Exploration
Stage Activities
The
Company has been in the exploration stage since January 2002 and has not
realized any revenue from operations. It will be primarily engaged in minerals
exploration until it enters a development or operations stage.
Fair
Value of Financial Instruments
The
Company’s financial instruments as defined by Statement of Financial Accounting
Standards No. 107, “Disclosures about Fair Value of Financial Instruments,”
include cash, accounts payable and accrued liabilities. All instruments are
accounted for on a historical cost basis, which, due to the short maturity
of
these financial instruments, approximates fair value at December 31, 2006,
2005 and 2004.
Basic
and Diluted Net Loss Per Share
Net
loss
per share was computed by dividing the net loss by the weighted average number
of shares outstanding during the period. The weighted average number of shares
was calculated by taking the number of shares outstanding and weighting them
by
the amount of time that they were outstanding. Diluted net loss per share for
GMO is the same as basic net loss per share, as the inclusion of common stock
equivalents would be antidilutive.
Mineral
Exploration and Development Costs
All
exploration expenditures are expensed as incurred. Significant property
acquisition payments for active exploration properties are capitalized. If
no
minable ore body is discovered, previously capitalized costs are expensed in
the
period the property is abandoned. Expenditures to develop new mines, to define
further mineralization in existing ore bodies, and to expand the capacity of
operating mines, are capitalized and amortized on a units-of-production basis
over proven and probable reserves.
Should
a
property be abandoned, its capitalized costs are charged to operations. The
Company charges to operations the allocable portion of capitalized costs
attributable to properties sold. Capitalized costs are allocated to properties
sold based on the proportion of claims sold to the claims remaining within
the
project area.
Mining
Claims and Land
Costs
of
acquiring and developing mineral properties are capitalized as appropriate
by
project area. Exploration and related costs and costs to maintain mineral rights
and leases are expensed as incurred. When a property reaches the production
stage, the related capitalized costs are amortized using the units-of-production
method on the basis of periodic estimates of ore reserves. Mineral properties
are periodically assessed for impairment of value, and any subsequent losses
are
charged to operations at the time of impairment. If a property is abandoned
or
sold, its capitalized costs are charged to operations.
Provision
for Taxes
Income
taxes are provided based upon the liability method of accounting pursuant to
Statement of Financial Accounting Standards No. 109, “Accounting for Income
Taxes” (hereinafter “SFAS No. 109”). Under this approach, deferred income
taxes are recorded to reflect the tax consequences in future years of
differences between the tax basis of assets and liabilities and their financial
reporting amounts at each year-end. A valuation allowance is recorded against
the deferred tax asset if management does not believe the Company has met the
“more likely than not” standard imposed by SFAS No. 109 to allow
recognition of such an asset.
Property
and Equipment
During
the year ended December 31, 2006 the Company purchased vehicles for
$164,575, field equipment for $10,116, and office and computers and related
equipment for $222,146. The vehicles, equipment and computers will be
depreciated over useful lives of three to seven years using straight line
depreciation. Depreciation expense for the year ended December 31, 2006 is
$57,578.
During
the year ended December 31, 2005, the Company purchased equipment costing
$16,873 and computer equipment for $7,589. The equipment and computer will
be
depreciated over useful lives of three to seven years using a straight-line
depreciation method. Depreciation expense for the year ended December 31,
2005 is $11,215.
Reclamation
and Remediation
Expenditures
for ongoing compliance with environmental regulations that relate to current
operations are expensed or capitalized as appropriate. Expenditures resulting
from the remediation of existing conditions caused by past operations that
do
not contribute to future revenue generations are expensed. Liabilities are
recognized when environmental assessments indicate that remediation efforts
are
probable and the costs can be reasonably estimated.
Estimates
of such liabilities are based upon currently available facts, existing
technology and presently enacted laws and regulations taking into consideration
the likely effects of inflation and other societal and economic factors, and
include estimates of associated legal costs. These amounts also reflect prior
experience in remediating contaminated sites, other companies’ clean-up
experience and data released by The Environmental Protection Agency or other
organizations. Such estimates are by their nature imprecise and can be expected
to be revised over time because of changes in government regulations,
operations, technology and inflation. Recoveries are evaluated separately from
the liability and, when recovery is assured, the Company records and reports
an
asset separately from the associated liability. At December 31, 2006 and
2005 the Company had no accrued liabilities for compliance with environmental
regulations.
NOTE
5—LAND, MINING CLAIMS, PROPERTY, AND EQUIPMENT
During
the year ended December 31, 2006 the Company purchased vehicles for
$164,575, field equipment for $10,116, and office and computers and related
equipment for $222,146. The vehicles, equipment and computers will be
depreciated over useful lives of three to seven years using straight line
depreciation. Depreciation expense for the year ended December 31, 2006 is
$57,578.
During
the year ended December 31, 2005, the Company purchased equipment costing
$16,873 and computer equipment for $7,589. The equipment and computer will
be
depreciated over useful lives of three to seven years using a straight-line
depreciation method. Depreciation expense for the year ended December 31,
2005 is $11,215.
On
November 12, 2004, GMO entered into an option to lease all property and assets
of the Mount Hope Molybdenum Property from Mt. Hope Mines, Inc. Exercise of
the
option in October 2005 allows GMO to proceed for the next 30 years with
permitting, developing and mining the deposit and for so long thereafter as
GMO
maintains an active operation. At December 31, 2004, the Company had paid
$186,044 cash and issued 500,000 shares of common stock with warrants to
purchase 500,000 shares of common stock to Mt. Hope Mines, Inc. for the Mount
Hope option.
Pursuant
to the terms of the lease, the underlying total royalty on production payable
to
Mt. Hope Mines, Inc., less certain deductions, is 3 percent for a molybdenum
price up to $12 per pound, 4 percent for a molybdenum price up to $15 per pound,
and 5 percent for a molybdenum price above $15 per pound. GMO is subject to
certain periodic payments totaling $1,550,000 to be paid as per schedule between
January 2006 and October 2010. GMO has a best efforts obligation, by the third
anniversary of the lease, to pay Mt. Hope Mines, Inc. a recoverable periodic
payment (advance royalty) of 3 percent of the estimated capital cost of the
project. This obligation to pay 3 percent of the construction capital is
subject to certain extension provisions through October 2013. Minimum royalty
payment after the mine commences operations is $0.27 a pound of molybdenum
if
produced or $500,000 per year if the plant is idle. Additionally, GMO is
obligated to pay Exxon Mineral Company a one percent net smelter royalty on
all
production
During
the year ended December 31, 2005 the Company entered into an option
agreement with High Desert Winds LLC (“High Desert”) for High Desert’s
approximately ten square mile property in Nye County, Nevada, including water
rights, mineral and surface rights, buildings and certain equipment (the “Hall
Tonopah Property”). Pursuant to the terms of this agreement, the Company was
granted a nine-month option to purchase the Hall Tonopah Property. The Company
extended the option agreement with High Desert with payments of $75,000 in
June,
2005 and $100,000 in August of 2005. The option to purchase the Hall Tonopah
Property was subsequently extended to March 17, 2006 with an $80,000 payment
paid on January 17, 2006. On March 17, 2006, the Company entered into a
purchase agreement with High Desert whereby it purchased a substantial portion
of the Hall Tonopah Property. At closing, the Company paid High Desert a cash
payment of approximately $4.5 million for the portion of the Hall Tonopah
Property that it purchased and made a deferred payment of $989,789 in November
of 2006 for the purchase of the remaining portion of this property for the
total
purchase price of $5,449,616 including $32,698 in buildings and equipment at
the
Hall Tonopah site. The primary purpose of the Hall Tonopah purchase was to
further the Company’s strategy of exploring and developing potential Molybdenum
properties. The buildings and improvements to the property were valued at
$32,698 based on a previous recent transaction at the property, and the
remaining amount was allocated to the land. At December 31, 2006 and 2005
the Hall Tonopah property was subject to a 12% royalty payable with respect
to
the net revenues generated from molybdenum or copper minerals removed form
the
properties purchased. Subsequent to December 31, 2006, the Company acquired
the entity that possessed this royalty right. See Note 12 Subsequent
Events.
In
April
2006, the Company entered into a letter of intent to purchase certain patented
lode mining claims referred to as the Liberty Claims on property adjacent to
Hall Tonopah property for cash of $75,000 and 150,000 shares of restricted
common stock. The Company has paid the $75,000 cash portion of the purchase
price and will issue the shares of restricted stock upon completion of the
purchase. The $75,000 is currently recorded as a deposit on the Company’s
balance sheet.
In
July
2006, the Company purchased 1,503 acres of deeded land which includes 70,000
acres of BLM grazing rights and certain water rights known as the Gale Ranch
for
$1,869,373. This ranch is located near the Mount Hope mine site. The primary
reason for the purchase of this asset was to acquire the water rights of 1,200
acre feet for use by the Mount Hope operations. The Company paid $54,982 for
the
water rights and the remaining amount was used to purchase the land and the
grazing rights.
In
November 2006, the Company purchased from Atlas Precious Metals, Inc. patented
millsite claims for $32,090, water rights for $363,687 and fee land in Eureka,
Nevada for $26,740 with improvements of $5,350. The primary purpose of this
purchase was to acquire the water rights of 1,448 acre feet for the Mount Hope
operation.
During
the year ended December 31, 2005, the Company purchased acreage at the
Turner Gold project for cash and units of common stock and warrants totaling
$808,030.
The
Company’s mining claims and land purchased prior to 2006 consist in part of (a)
approximately 107 acres of fee simple land in the Pine Creek area of Shoshone
County, Idaho, (b) six patented mining claims known as Chicago-London group,
located near the town of Murray in Shoshone County, Idaho, (c) 265 acres of
private land with 3 unpatented claims in Josephine County, Oregon, known as
the
Turner Gold project.
Capital
assets are recorded at cost. Depreciation is calculated using the straight-line
method over three to 20 years. The following is a summary of property,
equipment, and accumulated depreciation at December 31, 2006
(restated):
|
|
Cost
|
|
Accumulated
Depreciation
|
|
Net
Book
Value
2006
|
|
Net
Book
Value
2005
|
|
Property
and Equipment:
|
|
|
|
|
|
|
|
|
|
Field
Equipment
|
|
$
|
15,544
|
|
$
|
2,019
|
|
$
|
13,525
|
|
$
|
5,338
|
|
Vehicles
|
|
|
185,951
|
|
|
32,330
|
|
|
153,621
|
|
|
13,976
|
|
Office
Furniture
|
|
|
32,327
|
|
|
8,593
|
|
|
23,734
|
|
|
17,357
|
|
Computer
Equipment
|
|
|
211,680
|
|
|
26,193
|
|
|
185,487
|
|
|
16,662
|
|
Leasehold
Improvements
|
|
|
20,110
|
|
|
1,117
|
|
|
18,993
|
|
|
—
|
|
Imp.
to Fee Land in Eureka
|
|
|
5,350
|
|
|
45
|
|
|
5,305
|
|
|
—
|
|
Bldg
& Equip Hall Tonopah
|
|
|
32,698
|
|
|
2,725
|
|
|
29,973
|
|
|
—
|
|
Total
Property and Equipment
|
|
|
503,660
|
|
|
73,022
|
|
|
430,638
|
|
|
53,333
|
|
Land
and Mining Claims:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pine
Creek Land
|
|
|
1,450
|
|
|
—
|
|
|
1,450
|
|
|
1,450
|
|
Chicago-London
Group
|
|
|
80,001
|
|
|
—
|
|
|
80,001
|
|
|
80,001
|
|
Turner
Gold Land
|
|
|
808,030
|
|
|
—
|
|
|
808,030
|
|
|
808,030
|
|
Hall
Tonopah Property
|
|
|
5,416,918
|
|
|
—
|
|
|
5,416,918
|
|
|
—
|
|
Fee
Land Eureka, Nevada
|
|
|
26,740
|
|
|
—
|
|
|
26,740
|
|
|
—
|
|
Atlas
Water Rights & Millsite Claims
|
|
|
395,777
|
|
|
—
|
|
|
395,777
|
|
|
—
|
|
Gale
Ranch & Water Rights
|
|
|
1,869,373
|
|
|
—
|
|
|
1,869,373
|
|
|
|
|
Total
Land and Mining Claims
|
|
|
8,598,289
|
|
|
—
|
|
|
8,598,289
|
|
|
889,481
|
|
Total
Capital Assets
|
|
$
|
9,101,949
|
|
$
|
73,022
|
|
$
|
9,028,927
|
|
$
|
942,814
|
|
Total
depreciation expense for the years ending December 31, 2006 and 2005 is
$57,578 and $11,215
NOTE
6—RELATED PARTY TRANSACTIONS
On
August 16, 2006 the Company entered into an employment agreement effective
August 14, 2006 with Andrew J. Russell, a son of the Company’s former
President and CEO, for services as Senior Manager Permitting and Technical.
Under this agreement, Andrew J. Russell is paid $150,000 per year and was
granted a stock option to purchase 60,000 shares at $2.10 per share at the
closing price of the Company’s stock on August 15, 2006.
At
December 31, 2005 the Company had an employee receivable in the amount of
$9,000 for cash advances to a Company corporate officer for expenses and salary.
This amount was fully repaid during the three months ended March 31,
2006.
The
Company paid professional service fees of $35,319 during the year ended
December 31, 2005, to the Company’s legal counsel, who is a shareholder and
also serves as the Company’s secretary/treasurer.
The
Company paid consultant fees of $49,060 during the year ended December 31,
2004 to the son of the Company president, for services provided.
Additional
related party transactions are included as part of Note 8.
NOTE
7—COMMON STOCK UNITS, COMMON STOCK AND COMMON STOCK
WARRANTS
Year
ended December 31, 2006
During
the year ended December 31, 2006 the Company had two private placements of
Common Stock Units. In the first private placement, the Company sold 3,021,936
common stock units for $1.10 per unit. The Company received cash of $3,324,130
less cash placement agent and finder’s fees of $157,699 and issued 170,550
Common Stock Units for finder’s fees valued at $1.80 per unit for a total value
of $307,511. Each unit consisted of one of share of common stock with warrants
to purchase one-half share of common stock at a price of $1.75 for each whole
share for a period of two years. In the second private placement, the Company
sold 15,000,000 common stock units for $2.00 per unit. Each unit consisted
of
one of share of common stock with warrants to purchase one-half share of common
stock at a price of $3.75 for each whole share for a period of five years.
The
Company received cash of $30,000,000 less cash placement agent and finder’s fees
of $2,125,000 and issued 800,000 warrants to purchase shares of common stock
at
a price of $3.75 for each whole share for a period of five years for finder’s
fees valued at $2.17 per warrant for a total value of $1,725,216.
Also
in
the year ended December 31, 2006, the Company issued 1,482,147 shares of
common stock for the cashless exercise of warrants and 1,008,837 shares of
common stock for the cashless exercise of stock options. Warrants and options
in
the amount of 5,838,055 and 340,000 were exercised for cash in the amount of
$4,476,927 and $60,670 respectively, less combined brokerage fees of $230,684.
The Company issued 50,000 shares of common stock for services valued at
$112,566. The Company issued 75,000 warrants to purchase shares of common stock
at a price of $2.10 for a period of two years in exchange for services valued
at
$1.07 per warrant for a total value of $79,946.
Year
ended December 31, 2005
During
the year ended December 31, 2005 the Company had two private placements of
Common Stock Units. In the first private placement, the Company sold 2,998,932
common stock units for $0.75 per unit. Each unit consisted of one share of
common stock with warrants to purchase one share of common stock at a price
of
$1.00 per share for a period of two years. The Company received cash of
$2,249,200 less cash placement agent and finder’s fees of $143,252. In the
second private placement, the Company sold 420,000 common stock units for $1.10
per unit. Each unit consisted of one of share of common stock with warrants
to
purchase one-half share of common stock at a price of $1.75 for each whole
share
for a period of two years. The Company received cash of $462,000.
Additionally,
during the year ended December 31, 2005, warrants to purchase 435,000
shares of common stock were exercised for cash of $348,000. The Company also
issued 89,611 shares of common stock for services valued at $90,875, issued
20,000 shares of common stock for management valued at $23,500, issued 15,000
shares of common stock for property valued at $10,800, and issued 30,000 shares
of stock for exploration expense at $28,500. Additionally, upon the cashless
exercise of options, the Company issued 988,630 shares of common
stock.
Year
ended December 31, 2004
During
the year ended December 31, 2004 the Company had two private placements of
Common Stock Units. In the first private placement, the Company sold 2,563,333
common stock units for $0.15 per unit. Each unit consisted of one of share
of
common stock with warrants to purchase one share of common stock at a price
of
$0.40 per share for a period of two years. The Company received cash of
$384,500. In the second private placement, the Company sold 3,047,222 common
stock units for $0.36 to $0.40 per unit. Each unit consisted of one of share
of
common stock with warrants to purchase one share of common stock at a price
of
$0.80 for each whole share for a period of two years. The Company received
cash
of $1,205,000 less cash placement agent and finder’s fees of
$87,350.
During
2004, the Company issued 500,000 common stock units in connection with the
Mount
Hope Option (see Note 5). Each unit consisted of one share of common stock
and
warrants to purchase one share of common stock for $0.80 per common share for
a
period of seven years. The Company valued the units at $1.44 for a total value
of $719,010. In connection with the Mount Hope Option the Company issued 375,000
units to an individual as a finder’s fee. Each unit consisted of one share of
common stock and one warrant to purchase one share of common stock for $.80
per
common share for a period of two years. The Company valued the units at $.40
per
unit for a total value of $150,000.
During
2004, the Company issued 525,000 common stock units in connection with the
Turner Gold acquisition (see Note 5). Each unit consisted of one share of common
stock and warrants to purchase one share of common stock for $0.80 per common
share for a period of five years. The Company valued the units at $1.47 per
unit
for a total value of $735,035. In connection with the Turner Gold acquisition
the Company issued 25,000 units to an individual as a finder’s fee. Each unit
consisted of one share of common stock and one warrant to purchase one share
of
common stock for $.80 per common share for a period of two years. The Company
valued the units at $1.30 per unit for a total value of $32,533.
During
2004, the board of directors and shareholders adopted amended and restated
articles of incorporation, which authorized the Company’s issuance of
200,000,000 shares of common stock with a $0.001 par value. Prior to 2004,
the
Company was authorized to issue 25,000,000 shares of common stock with a par
value of $0.10.
The
Company is authorized to issue 200,000,000 shares of common stock. All shares
have equal voting rights, are non-assessable and have one vote per share. Voting
rights are not cumulative and therefore, the holders of more than 50% of the
common stock could, if they choose to do so, elect all of the directors of
the
Company.
NOTE
8—PREFERRED STOCK
On
October 28, 2004, shareholders of the Company authorized 10,000,000 shares
of no par value preferred stock. The authorized but unissued shares of preferred
stock may be issued in designated series from time to time by one or more
resolutions adopted by the board of directors. The directors have the power
to
determine the preferences, limitations and relative rights of each series of
preferred stock.
On
November 16, 2004, the board of directors unanimously consented to amend
the articles of incorporation of the Company. The amendment reclassified
10,000,000 shares of the Company’s no par value preferred stock into 10,000,000
shares of $0.001 par value Series A preferred stock. At December 31,
2005 and 2006, no shares of $0.001 par value Series A preferred stock were
issued or outstanding.
NOTE
9—COMMON STOCK OPTIONS
During
2006, the board of directors and shareholders adopted the Company 2006 Equity
Incentive Plan (the “2006 Plan”). During 2004, the board of directors and
shareholders adopted the Company 2003 Stock Option Plan (the “2003 Plan” and
together with the 2006 Plan, the “Plans”). The purpose of the Plans is to give
the Company greater ability to attract, retain, and motivate its officers and
key employees. The Plans are intended to provide the Company with ability to
provide incentives more directly linked to the success of the Company’s business
and increases in shareholder value.
Under
the
2006 Plan, the board of directors is authorized to grant incentive stock options
(“ISOs”) to employees (pursuant to Internal Revenue Code 422), non-statutory
stock options, restricted stock awards, restricted stock units and stock
appreciation rights. The aggregate number of shares of common stock that may
be
issued pursuant to awards granted under the 2006 Plan will not exceed 3,500,000
plus the number of shares that are ungranted and those that are subject to
reversion under the 2003 Plan. As of December 31, 2006, the maximum number
of shares available for issuance under the 2003 Plan was 360,000 shares. Shares
under the 2003 Plan that become eligible for awards under the 2006 Plan may
not
be granted again under the 2003 Plan.
During
the year ended December 31, 2006, the Company granted 1,665,000
non-qualified stock options outside of the Plans with an exercise price ranging
from $2.25 to $3.68 with vesting at various dates through 2008. These options
were granted to members of the board of directors, officers, and employees
of
the Company. No options or stock grants were made under the 2006 Plan during
the
year ended December 31, 2006. The Company issued 60,000 of ISOs within the
2003 Plan with an exercise price of $2.10 with vesting at various dates through
2008. The fair value of each option is estimated on the issue date using the
Black-Scholes Option Price Calculation. The following assumptions were made
in
estimating the fair value: risk free interest of 5%; volatility of 101%;
dividend rate of 0% and expected life of 2.4 years. The total value of options
awarded during 2006 was calculated at $3,256,952. Expense was recorded of
$2,048,243 for the options which vested in 2006.
During
the year ended December 31, 2005, the Company granted 950,000 incentive
stock options (enabling the option holders to purchase 950,000 shares of common
stock) under the 2003 Plan with an exercise price of $0.72 and vesting at
various dates through 2007 with expirations at various dates through 2012.
These
options were granted to officers and employees. The fair value of each option
is
estimated on the issue date using the Black-Scholes Option Price Calculation.
The following assumptions were made in estimating fair value: risk free interest
of 4%; volatility of 73%; dividend rate of 0%; and expected life of 2 years.
The
total value was calculated at $307,800. Expense was recorded of $279,713 for
the
options that vested in the year 2005.
During
the year ended December 31, 2004, the Company granted 1,485,000
non-qualified stock options outside of the 2003 Plan and 1,910,000 incentive
stock options under the 2003 Plan with exercise prices ranging from $0.15 to
$0.75 and expirations at various dates through 2011. These options were granted
to officers, directors, and other related parties. The fair value of each option
is estimated on the issue date using the Black-Scholes Option Price Calculation.
The following assumptions were made in estimating fair value: risk free interest
rate of 4%; volatility of 165% to 198%; dividend rate of 0%; and expected life
of 2 years. The total value was calculated at $893,354. Expense was recorded
of
$833,980 for the options which vested in 2004.
The
following is a summary of the Company’s stock option plans as of
December 31, 2006:
|
|
Number of
Securities to be
Issued Upon
Exercise of
Outstanding Option
|
|
Weighted Average
Exercise Price of
Outstanding Options
|
|
Number of
Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
|
|
|
|
Equity
compensation plans not approved by security holders
|
|
|
3,110,000
|
|
$
|
1.64
|
|
|
n/a
|
|
|
|
|
Equity
compensation plans approved by security holders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
Plan
|
|
|
—
|
|
|
—
|
|
|
3,500,000
|
|
|
(1
|
)
|
2003
Plan
|
|
|
540,000
|
|
|
0.59
|
|
|
360,000
|
|
|
|
|
Total
|
|
|
3,650,000
|
|
$
|
1.49
|
|
|
3,860,000
|
|
|
|
|
______________________
(1) |
The
aggregate number of shares of common stock that may be issued pursuant
to
awards granted under the 2006 Equity Incentive Plan will not exceed
3,500,000 plus the number of shares that are ungranted and those
that are
subject to reversion under 2003 Stock Plan. Shares under the 2003
Plan
that become eligible for awards under the 2006 Plan may not be
granted
again under the 2003 Plan.
|
The
following is a summary of stock option activity in 2004, 2005 and
2006:
|
|
Number of Shares
Under Options
|
|
Weighted Average
Exercise Price
|
|
Outstanding
January 1, 2004
|
|
|
1,150,000
|
|
$
|
0.11
|
|
Granted
|
|
|
3,395,000
|
|
|
0.37
|
|
Exercised
|
|
|
260,000
|
|
|
0.11
|
|
Forfeited
|
|
|
—
|
|
|
—
|
|
Expired
|
|
|
—
|
|
|
—
|
|
Outstanding
at December 31, 2004
|
|
|
4,285,000
|
|
$
|
0.32
|
|
Options
exercisable at December 31, 2004
|
|
|
3,315,000
|
|
|
|
|
Weighted
average fair value of options granted during 2004
|
|
$
|
0.26
|
|
|
|
|
Outstanding
January 1, 2005
|
|
|
4,285,000
|
|
$
|
0.32
|
|
Granted
|
|
|
950,000
|
|
|
0.72
|
|
Exercised
|
|
|
1,215,000
|
|
|
0.25
|
|
Forfeited
|
|
|
—
|
|
|
|
|
Expired
|
|
|
—
|
|
|
|
|
Outstanding
December 31, 2005
|
|
|
4,020,000
|
|
$
|
0.44
|
|
Exercisable
at December 31, 2005
|
|
|
3,030,000
|
|
|
|
|
Weighted
Average Fair Value Granted During 2005
|
|
$
|
0.32
|
|
|
|
|
Outstanding
January 1, 2006
|
|
|
4,020,000
|
|
$
|
0.44
|
|
Granted
|
|
|
1,725,000
|
|
|
3.02
|
|
Exercised
|
|
|
1,615,000
|
|
|
0.49
|
|
Forfeited
|
|
|
480,000
|
|
|
1.57
|
|
Expired
|
|
|
—
|
|
|
|
|
Outstanding
December 31, 2006
|
|
|
3,650,000
|
|
$
|
1.49
|
|
Exercisable
at December 31, 2006
|
|
|
2,705,000
|
|
|
|
|
Weighted
Average Fair Value Granted During 2006
|
|
$
|
3.10
|
|
|
|
|
Fair
Market Values
|
|
$
|
2.53
|
|
|
|
|
NOTE
10—INCOME TAXES
At
December 31, 2006, 2005 and 2004 the Company had deferred tax assets
principally arising from the net operating loss carry forwards for income tax
purposes multiplied by an expected rate of 34%. As management of the Company
cannot determine that it is more likely than not that the Company will realize
the benefit of the deferred tax assets, a valuation allowance equal to the
deferred tax asset has be established at December 31, 2006,
December 31, 2005, and December 31, 2004. The significant components
of the deferred tax asset at December 31, 2006, 2005 and 2004 were as
follows:
|
|
December 31,
2006
|
|
December 31,
2005
|
|
December 31,
2004
|
|
Net
operating loss carry forward
|
|
$
|
8,425,000
|
|
$
|
3,150,000
|
|
$
|
1,030,000
|
|
Deferred
tax asset
|
|
$
|
2,864,500
|
|
$
|
1,071,000
|
|
$
|
305,200
|
|
Deferred
tax asset valuation allowance
|
|
$
|
(2,864,500
|
)
|
$
|
(1,071,000
|
)
|
$
|
(305,200
|
)
|
Net
deferred tax asset
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
At
December 31, 2006, 2005 and 2004 the Company had a net operating loss carry
forwards of approximately $8,425,000, $3,150,000, and $1,030,000 respectively,
which expire in the years 2022 through 2026. The change in the allowance account
form December 31, 2005 to December 31, 2006 was $1,794,000 and the
change between December 31, 2005 and December 31, 2004 was
$766,000.
NOTE
11—COMMITMENTS AND CONTINGENCIES
In
December 2006, the Company entered into a five year capital leases to for
office equipment. The Company in December 2006 also entered into a note to
purchase a 2007 1 ton pickup for $33,571 at an interest rate of 0.9% and with
a
term of three years. The table below shows these obligations over the next
five
years.
Year
|
|
Lease Payment
|
|
Interest on Leases
|
|
Note Payment
|
|
Note Interest
|
|
2006
|
|
$
|
834
|
|
$
|
193
|
|
|
—
|
|
|
—
|
|
2007
|
|
|
10,008
|
|
|
2,095
|
|
|
11,350
|
|
|
256
|
|
2008
|
|
|
10,008
|
|
|
1,670
|
|
|
11,350
|
|
|
156
|
|
2009
|
|
|
10,008
|
|
|
1,220
|
|
|
11,350
|
|
|
55
|
|
2010
|
|
|
10,008
|
|
|
744
|
|
|
—
|
|
|
—
|
|
2011
|
|
|
9,174
|
|
|
240
|
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
50,040
|
|
$
|
6,163
|
|
$
|
34,050
|
|
$
|
468
|
|
The
Mount
Hope Lease may be terminated upon the expiration of its 30-year term, earlier
at
our election, or upon our material breach and failure to cure such breach.
If we
terminate the lease, termination is effective 30 days after receipt by MHMI
of
our written notice to terminate the Mount Hope Lease. Set forth below is a
schedule of the Company’s contractual obligations for payments under the Mount
Hope lease agreement during the term of the agreement in order to keep the
lease
in effect:
Contractual
Obligations for Future Payments under Mount Hope Lease
Date
|
|
Fixed
Payment
|
|
Project
Financing Received
by
Date Indicated
|
|
Project
Financing Not Received
and
Deferral Elected
|
April 19,
2007
|
|
$125,000
|
|
|
|
|
October 19,
2007
|
|
$350,000
|
|
|
|
|
October 19,
2008
|
|
|
|
Greater
of 3% of Construction Capital Cost Estimate or
$2,500,000(1)(3)(4)
|
|
$350,000
|
October 19,
2009
|
|
|
|
Greater
of 3% of Construction Capital Cost Estimate or
$2,500,000(1)(3)(4)
|
|
$350,000
|
October 19,
2010
|
|
|
|
$2,500,000(3)
|
|
Greater
of $2,500,000 or 3% of Construction Capital Cost
Estimate(3)(4)
|
October 19,
2011
|
|
|
|
3%
of Construction Capital Cost Estimate(3)(4)
|
|
Greater
of (a) $2,500,000 or (b), if 3% of Construction Capital Cost Estimate
is greater than $2,500,000, then 50% of the difference between 3%
and
$2,500,000(3)(4)
|
October 19,
2012
|
|
|
|
3%
of Construction Capital Cost Estimate(3)(4)
|
|
Greater
of (a) $2,500,000 or (b), if 3% of Construction Capital Cost Estimate
is greater than $2,500,000, then 50% of the difference between 3%
and
$2,500,000(3)(4)
|
October 19,
2013 and each year thereafter(3)
|
|
$500,000
|
(3)
|
|
|
|
_____________________
(1) |
If
Project Financing is not received by October 19, 2008, the Company
may elect to defer this payment and proceed to make the payments
under the
column labeled “Project Financing Not Received and Deferral Elected.” If
prior to making all of the payments under the column “Project Financing
Not Received and Deferral Elected” the Company obtains project financing,
the Company would be required to make this payment and to pay $500,000
each year thereafter.
|
(2) |
In
addition to the payments above, the Company is required to pay to
MHMI a
production royalty after the commencement of Commercial Production
of the
greater of (i) $.20/lb of molybdenum metal (or the equivalent thereof
if another Product is sold) sold from the property (not to exceed
the
amount of Net Returns we receive for those products) or (ii) 3% of
the Net Returns, subject to certain adjustments as set forth in the
lease.
|
(3) |
To
be offset from the production royalty described in (3) above. The
Company may recover the aggregate of these payments by retaining
50% of
each production royalty payment due to
MHMI.
|
(4) |
“Construction
Capital Cost Estimate” means the Company’s projected costs plus 10% to put
the Mount Hope property into commercial
production.
|
Environmental
Considerations
The
Company owns and has owned mineral property interests on certain public and
private lands in Shoshone County, Idaho. The Company’s mineral property holdings
include lands contained in mining districts that have been designated as
“Superfund” sites pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act (“CERCLA”). The Company and its properties have
been and are subject to a variety of federal and state regulations governing
land use and environmental matters. The Company believes it has been in
substantial compliance with all such regulations, and is unaware of any pending
action or proceeding action relating to regulatory matters that would affect
the
financial position of the Company. The Company’s management acknowledges,
however, that the possibility exists that the Company may be subject to
environmental liabilities associated with its properties in the future, and
that
the amount and nature of any liabilities the Company may be held responsible
for
is impossible to estimate.
NOTE
12—SUBSEQUENT EVENTS
On
January 30, 2007, the Company purchased 100% of the Stock in Equatorial
Mining North America, Inc. and its two subsidiaries, which owned a 12% net
smelter returns royalty on the Hall-Tonopah property, from Equatorial Mining
Pty. Limited. The consideration paid for the Equatorial acquisition was
$4.85 million with an additional deferred payment of $6 million due
upon commercial operation of the property. The acquisition included the royalty
as well as $1.24 million in cash accounts and the assumption of all
environmental liabilities on the reclaimed site.
On
January 30, 2007 the Company entered into an employment contract with Bruce
Hansen to become the Company’s new CEO. The base salary for Mr. Hansen is
$350,000 per year. In addition, Mr. Hansen received a stock option to
purchase 750,000 shares and 250,000 shares of restricted stock, He will also
receive $1,000,000 in incentive pay if the goals set for Mr. Hansen are
achieved.
On
March 2, 2007, the Company purchased the Florence patented lode mining
claim for $175,000 cash. This claim is adjacent to the Hall Tonopah
property.
On
March 23, 2007, the Company purchased certain patented lode mining claims
referred to as the Liberty Claims on property adjacent to Hall Tonopah property
for cash of $75,000 and 150,000 shares of restricted common stock.
The
Company is engaged in negotiations to purchase additional land and water rights
for its Mount Hope project. On March 8, 2007, we paid $200,000 as earnest
money on one of the expected acquisitions.
ITEM
8. CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not
applicable.
ITEM
8A. CONTROLS
AND PROCEDURES
(a)
Restatement of Financial Statements
As
discussed in Note 2 to the financial statements contained in this Amendment,
management of the Company has amended its Annual Report on Form 10-KSB for
the
year ended December 31, 2006, to restate the Company's annual financial
statements for the years ended December 31, 2006, 2005, and 2004 and its
quarterly consolidated financial statements for each of the quarters in the
year
ended December 31, 2006 and the two quarters in the six months ended June 30,
2007. The Company has corrected its accounting treatment for certain non-cash
adjustments primarily related to the calculation of and recognition of
compensation expense and the valuation of warrants to purchase common shares
of
the Company under FASB Statement 123 - Accounting
for Stock-Based Compensation, FASB
Statement 123(R) -Share
Based Payment
and EITF
96-18 - Accounting
for Equity Instruments That Are Issued to Other Than Employees for Acquiring,
or
in Connection with Selling Goods and Services.
The
Company had utilized volatility assumptions which were too low in determining
the value of certain equity instruments issued during the periods and failed
to
attribute value to certain warrants included as consideration in transactions
with third parties. This resulted in the Company valuing equity instruments
granted and/or issued at too low of a value and, accordingly, the amounts
recorded for these non-cash transactions were understated.
In
addition, the Company has corrected certain other immaterial errors. During
the
periods, the Company did not account for forfeitures of employee options which
occurred prior to vesting, resulting in an overstatement of non-cash
compensation expense, and allocated stock-related compensation costs to the
incorrect service periods. Furthermore, in the year ended December 31, 2006,
the
Company incorrectly allocated a portion of the cash consideration paid for
water
rights to non marketable securities and subsequently impaired such securities,
rather than allocating this portion of the consideration to the purchase of
such
water rights.
At
December 31, 2006, the cumulative effect of all changes was an increase to
the
cost of our land and mining claims of $713,000, an increase in property
research, exploration and development expense of $338,000, an increase in
general and administration expense of $190,000, a decrease in realized loss
on
marketable securities of $ 321,000, and an increase to our net equity of
$589,000.
(b)
Evaluation of disclosure controls and procedures
Management,
including our principal executive officer and principal financial officer,
is
responsible for establishing and maintaining adequate disclosure controls and
procedures for GMO.
Disclosure
controls and procedures mean controls and other procedures of an issuer that
are
designed to ensure that information required to be disclosed by the issuer
in
the reports that it files or submits under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") is recorded, processed, summarized, and
reported, within the time periods specified in the SEC's rules and forms. GMO's
disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by
GMO
in the reports that it files or submits under the Exchange Act is accumulated
and communicated to GMO's management, including GMO's principal executive and
principal financial officers, or other persons performing similar functions,
as
appropriate to allow timely decisions regarding required
disclosure.
As
a
result of the restatement discussed above, in connection with the filing of
this
Annual Report on Form 10-KSB/A management of the Company, under the supervision
and with the participation of the Company's principal executive and financial
officers, has re-evaluated the effectiveness of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange
Act )
as of December 31, 2006. Based upon this re-evaluation, and as a result of
the
material weaknesses as discussed below, the Company's principal executive and
principal financial officers, have concluded that its disclosure controls and
procedures were not effective as of December 31, 2006.
A
material weakness 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 the Company's annual or interim financial
statements will not be prevented or detected on a timely basis. Management
determined that the following control deficiency constituted a material weakness
in internal control over financial reporting at December 31,
2006.
The
Company did not maintain effective controls over the valuation and accuracy
of
stock compensation expense and warrants to purchase common stock. Specifically,
the Company did not maintain effective controls to ensure the accurate
calculation of and recognition of compensation expense and the valuation of
warrants to purchase common shares of the Company in accordance with accounting
principles generally accepted in the United States of America. The
control deficiency resulted in the restatement of the Company's financial
statements for the years ended December 31, 2006, 2005 and 2004, each of the
quarterly periods in 2006 and the first two quarters of 2007, affecting property
research, exploration and development expenses, general and administrative
expenses, land and mining claims, additional paid in capital and accumulated
deficit. Additionally, the control deficiency could result in the misstatement
of the aforementioned accounts that would result in a material misstatement
of
the financial statements that would not be prevented or detected.
(c)
Status of Remediation of Material Weakness as of the Date of Filing
|
1.
|
The
Company has reviewed the factors that existed at December 31, 2004
and the
improvements that have been put in place from December 31, 2004 to
the
present: In the past two years the Company has brought all accounting
processes in-house and hired internal staff with the requisite experience
to match the increasing complexity of the Company and its operations.
During 2006, the Company hired a controller who was responsible for
reviewing the assumptions around, and recording of all new equity
related
transactions during 2006 and through the first 2 quarters of 2007.
|
|
2.
|
During
2006 we acquired a third party stock option software which tracks
equity
instruments and automatically calculates amounts necessary to properly
record compensation for share based
payments.
|
|
3.
|
During
the fourth quarter of 2006, we began a process to enhance our disclosure
controls and procedures and our internal control over financial reporting.
This process included the hiring of outside financial consultants
to help
us evaluate the effectiveness of our controls and procedures as well
as
the retention of a new stock transfer agent. As a result of this
process,
we made changes during the quarter ended December 31, 2006 that have
materially affected, or are reasonably likely to materially affect,
our
internal control over financial reporting. These changes included
improvements to our processes for properly calculating and recording
stock
option and warrant exercises (and related compensation expense) and
to
help ensure that the related tax withholding obligations of the Company
are satisfied.
|
|
4.
|
In
2006 we engaged an outside consulting firm to assist the Company
in
understanding, implementing and reviewing disclosure controls and
procedures. In June 2007 we added a position to devote full time
to
understanding, implementing and reviewing disclosure controls and
procedures, while at the same time continuing to utilize the outside
consulting firm engaged in 2006.
|
|
5.
|
In
December 2006 the Company announced and put into place a program
to
significantly expand the Executive Team of the Company. As a part
of the
team expansion, the Company has hired new officers with substantially
greater knowledge of and experience in internal controls and complex
financial instruments. The CEO and Financial Officers of the Company
have
been hired/appointed to their present positions beginning January
2007 as
follows:
|
|
a. |
Chief Executive Officer - January
2007 |
|
b.
|
Chief
Financial Officer - April 2007
|
|
c.
|
Controller
and Treasurer - June 2007
|
As
part
of the monthly and quarterly closing process, the controller, with the oversight
of the CFO tracks equity instrument transactions during each quarter and reviews
the results of the stock option software for the recording of share based
payments, to ensure such calculations are complete and accurate and that
valuation is in accordance with accounting principals generally accepted in
the
United States.
|
6.
|
A
new board member and chairman of the audit committee with substantial
experience and knowledge in internal controls and complex financial
instruments was appointed in April
2007.
|
In
August
2007, the CEO, the financial officers and the Audit Committee of the Company
elected to undertake an extensive internal review of the financial statements
included in the Form 10-KSB for the year ended December 31, 2006 and the six
months ended June 30, 2007 on Form 10-QSB to, among other things, gain assurance
that prior financial statements issued in connection with the SEC filings were
fairly presented and, if not fairly presented to ensure that adequate steps
were
taken to correct any errors in previously filed financial statements. In
either event the Company desired to enhance and, if needed, remediate the
effectiveness of disclosure controls and procedures if warranted. Such internal
review was completed on November 7, 2007. Upon completion of this review and
in
consideration of the process improvements described above, we believe the
material weaknesses that existed at December 31, 2006 have been remediated
as of
the date of this filing.
The
Company intends to continually review and evaluate the design and effectiveness
of our disclosure controls and procedures as well as our internal control over
financial reporting to improve our controls and procedures over time as the
Company’s business transitions into mining operations and to correct any
deficiencies that we may discover in the future. The Company anticipates that
additional changes to our internal control and procedures will be made as we
takes steps to become compliant with Section 404 of the Sarbanes-Oxley Act
of 2002, which we anticipates will apply for our annual report for the year
ended December 31, 2007.
ITEM
8B. OTHER
INFORMATION
None.
PART
III
ITEM
13. EXHIBITS
Exhibit
Number
|
|
|
|
Description
of Exhibit
|
3.1(9)
|
|
Amended
and Restated Articles of Incorporation adopted November 4, 2004 and
Articles of Amendment to the Amended and Restated Articles of
Incorporation dated November 15, 2004
|
3.2(10)
|
|
Amended
and Restated Bylaws adopted January 30, 2007
|
4.1(9)
|
|
Shareholder
Rights Agreement dated September 22, 2005
|
4.2(2)
|
|
First
Amendment to Shareholders Rights Agreement dated February 14,
2006
|
4.3(11)
|
|
Second
Amendment to Shareholders Rights Agreement dated September 8,
2006
|
4.4(12)
|
|
Third
Amendment to Shareholders Rights Agreement dated November 10,
2006
|
4.5(2)
|
|
Form of
Security Purchase Agreement in connection with the private placement
completed February 15, 2006
|
4.6(2)
|
|
Form of
Common Stock Purchase Warrant in connection with the private placement
completed February 15, 2006
|
4.7(2)
|
|
Form of
Common Stock Warrant Issued Pursuant to Placement Agent Agreement
in
connection with the private placement completed February 15,
2006
|
4.8(4)
|
|
Form of
Subscription Agreement in connection with the private placement completed
January 10, 2006
|
4.9(4)
|
|
Form of
Subscription Agreement for Regulation S Offering in connection with
the
private placement completed January 10, 2006
|
4.10(4)
|
|
Form of
Common Stock Purchase Warrant in connection with the private placement
completed January 10, 2006
|
4.11(4)
|
|
Letter
#1 to Investors regarding Registration Rights dated January 6, 2006
in connection with the private placement completed January 10,
2006
|
4.12(4)
|
|
Letter
#2 to Investors regarding Registration Rights dated January 6, 2006
in connection with the private placement completed January 10,
2006
|
10.1(5)
|
|
Lease
Agreement dated October 17, 2005 between the Company and Mount Hope
Mines, Inc.
|
10.2(6)
|
|
Option
to Lease dated November 12, 2004, between the Company and Mount Hope
Mines, Inc.
|
10.3(6)
|
|
Margaret
Purchase Agreement dated September 28, 2004, between the Company and
Jane Ellen Leigh
|
10.4(9)
|
|
Option
to Purchase Agreement dated February 14, 2005 between the Company and
High Desert Winds, LLC, Addendum to Option to Purchase Agreement
dated
June 15, 2005, Second Addendum to Option to Purchase Agreement dated
January 4, 2006 and Third Addendum to Option to Purchase Agreement
dated March 2006 (Confidential treatment has been requested for
certain portions of this exhibit, and such confidential portions
have been
separately filed with the Securities Exchange
Commission.)
|
10.5(9)
|
|
Asset
Purchase Agreement dated March 17, 2006 between the Company and High
Desert Winds, LLC
|
10.6(7)
|
|
Amended
and Restated Employment Agreement dated January 30, 2007 between the
Company and Robert L. Russell
|
10.7(7)
|
|
Amended
and Restated Employment Agreement dated January 30, 2007 between the
Company and Robert L. Dumont
|
10.8(13)
|
|
Employment
Agreement dated January 30, 2007 between the Company and Bruce D.
Hansen
|
10.9(3)
|
|
2003
Stock Option Plan of the Company
|
10.10(3)
|
|
Form of
Stock Option Agreement under 2003 Stock Option Plan of the
Company
|
10.11(9)
|
|
Modification
to Mount Hope Mines Lease Agreement dated January 26,
2006
|
10.12(8)
|
|
2006
Equity Incentive Plan of the Company
|
10.13(16)
|
|
Form of
Stock Option Grant Notice and Agreement under 2006 Equity Incentive
Plan
of the Company
|
10.14(16)
|
|
Form of
Restricted Stock Agreement under 2006 Equity Incentive Plan of the
Company
|
10.15(14)
|
|
Form of
Non-Employee Option Award Agreement
|
10.16(14)
|
|
Form of
Employee Stock Option Agreement
|
10.17(16)
|
|
Stock
Purchase Agreement dated December 11, 2006 between the Company and
Equatorial Mining Limited
|
14.1(15)
|
|
Code
of Conduct and Ethics of the Company adopted June 30,
2006
|
21.1(16)
|
|
Subsidiaries
of the Company
|
23.1(1)
|
|
Consent
of PricewaterhouseCoopers LLP
|
31.1(1)
|
|
Certification
of CEO pursuant to Rule 13a-14(a)/15d-14(a)
|
31.2(1)
|
|
Certification
of CFO pursuant to Rule 13a-14(a)/15d-14(a)
|
32.1(1)
|
|
Certification
of CEO pursuant to Section 1350
|
32.2(1)
|
|
Certification
of CFO pursuant to
Section 1350
|
__________________
(2)
|
Incorporated
by reference to the Current Report on Form 8-K filed by the
Company on February 17,
2006.
|
(3)
|
Incorporated
by reference to the General Form for Registration of Securities of
Small Business Issuers on Form 10-SB/A filed by the
Company on May 14, 2004.
|
(4)
|
Incorporated
by reference to the Current Report on Form 8-K filed by the
Company on January 17,
2006.
|
(5)
|
Incorporated
by reference to the Current Report on Form 8-K filed by the
Company on January 23,
2006.
|
(6)
|
Incorporated
by reference to the Annual Report on Form 10-KSB filed by the Company
on April 6, 2005.
|
(7)
|
Incorporated
by reference to the Current Report on Form 8-K filed by the Company
on April 25, 2005.
|
(8)
|
Incorporated
by reference to the definitive Schedule 14A filed by the Company
on
November 8, 2006.
|
(9)
|
Incorporated
by reference to the Form 10KSB filed by the Company on March 31,
2006.
|
(10)
|
Incorporated
by reference to the Form 8-K filed by the Company on February 5,
2007.
|
(11)
|
Incorporated
by reference to the Form 8-K filed by the Company on
September 14, 2006.
|
(12)
|
Incorporated
by reference to the Form 8-K filed by the Company on
November 14, 2006.
|
(13)
|
Incorporated
by reference to the Form 8-K filed by the Company on February 5,
2007.
|
(14)
|
Incorporated
by reference to the Form S-8 filed by the Company on January 12,
2007.
|
(15)
|
Incorporated
by reference to the Form 8-K filed by the Company on July 7,
2006.
|
(16)
|
Incorporated
by reference to the Form 10KSB filed by the Company on April 3,
2007.
|
SIGNATURES
In
accordance with the requirements of the Section 13 or 15(d) of the
Exchange Act, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized in Lakewood, Colorado
on
November 15, 2007.
|
GENERAL
MOLY, INC.
|
|
|
|
|
|
|
|
By:
|
/s/
Bruce D. Hansen
|
|
Name:
|
Bruce
D. Hansen
|
|
Title:
|
Chief
Executive Officer
|
|
|
(Principal
Executive Officer)
|