ITEM 8. Financial Statements and Supplementary Data
Notes to the Consolidated Financial Statements
For the Years Ended September 30, 2012 and
2011
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1.
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Organization of the Company and Significant Accounting Principles
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USCorp (the “Company”) is a publicly
held corporation formed in May 1989 in the state of Nevada. In April 2002 the Company acquired USMetals, Inc. (“USMetals”),
a Nevada corporation, and its 141 unpatented mining claims known as the Twin Peaks Project in Yavapai County Arizona. The Twin
Peaks Project now consists of 268 unpatented Lode and 8 Placer Claims. In addition, The Company, through its subsidiary Southwest
Resource Development, Inc., owns 200 unpatented Lode and Placer Claims on five properties in the Mesquite Mining District of Imperial
County, California, which the Company collectively refers to as the Picacho Salton Project.
In April 2002 the Company acquired USMetals,
Inc. (“USMetals”), a Nevada corporation, by issuing 24,200,000 shares of common stock. USMetals became a wholly owned
subsidiary of the Company.
On March 22, 2011 the Company through its wholly
owned subsidiary USMetals entered into an Asset Funding/Operation and Shareholders Agreement, and exhibits thereto with Arizona
Gold Corp., a private British Columbia Corporation (“AGC”) and its wholly owned subsidiary, AGC Corp, a private Arizona
company (“AGCAZ”), providing for the sale of 172 Arizona mining claims known as the Twin Peaks Project to AGCAZ in
exchange for 90,200,000 shares or 61.34% of AGC’s common stock. The Twin Peaks Project now consists of 268 Lode and 8 Placer
Claims.
In September 2012 we completed the unwinding
of the Agreement with AGC. The key elements of the unwinding were: AGC Corp, a private Arizona corporation in whose name the Twin
Peaks Project claims are held, became a wholly owned (100%) subsidiary of USMetals, Inc., which is a wholly owned (100%) subsidiary
of USCorp; All of the Twin Peaks Project Claims are 100% under USMetals’ control and therefore under USCorp’s control;
All remaining assets of AGC Corp have been transferred to USMetals, in exchange for shares of USCorp; All AGC Corp shareholders
are now shareholders of USCorp; and Arizona Gold Corp, AGC Corp’s parent, will be dissolved in the future.
The Company has minimal revenues to date and
has defined itself as an “exploration stage” company.
Exploration Stage Company
- the Company
has no operations or revenues since its inception and therefore qualifies for treatment as an Exploration Stage company as per
the accounting guidance. Financial transactions are accounted for as per generally accepted accounted principles. Costs incurred
during the development stage are accumulated in “accumulated deficit- exploration stage” and are reported in the Stockholders’
Deficit section of the balance sheet.
Consolidation-
The
consolidated financial statements incorporate the results, cash flows and net assets of USCorp and the entities controlled by it
(its subsidiaries) after eliminating internal transactions and recognizing any non-controlling interests in those Entities. Control
is achieved where the Group has the power to govern the financial and operating policies of an investee entity so as to obtain
economic benefits from its activities. Where subsidiaries are acquired or disposed of in the year, their results and cash flows
are included from the effective date of acquisition or up to the effective disposal date.
Where a consolidated company
is less than 100% owned by the Group, the non-controlling interest share of the results and net assets are recognized at each reporting
date. The interests of non-controlling shareholders are ordinarily measured at the non-controlling interests’ proportionate
share of the fair value of the acquirer’s identifiable net assets, but may alternatively be initially measured at fair value.
The choice of measurement is made on an acquisition-by-acquisition basis. Subsequent to acquisition, the carrying amount of non-controlling
interests is the amount of those interests at initial recognition plus the non-controlling interests’ share of subsequent
changes in equity. Total comprehensive income is attributed to the non-controlling interests even if this results in the non-controlling
interests having a deficit balance.
Changes in the Group’s
interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amount
of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests
in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of
the consideration paid or received is recognized directly in equity and attributed to equity holders of the parent.
32
Use of Estimates
- The preparation of
the consolidated financial statements in conformity with generally accepted accounting principles requires management to make reasonable
estimates and assumptions that affect the reported amounts of the assets and liabilities and disclosure of contingent assets and
liabilities and the reported amounts of revenues and expenses at the date of the financial statements and for the period they include.
Actual results may differ from these estimates.
Cash-
For the purpose of calculating
changes in cash flows, cash includes all cash balances and highly liquid short-term investments with an original maturity of three
months or less.
Fair Value of Financial Instruments-
The
carrying amounts reflected in the balance sheets for cash, deferred charges, accounts payable and accrued expenses and loans payable
approximate the respective fair values due to the short maturities of these items. The Company does not hold any investments that
are available-for-sale.
Long Lived Assets
- The Company reviews
for the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. An impairment loss would be recognized when estimated future cash flows expected to result from the use
of the asset and its eventual disposition is less than its carrying amount.
Property and Equipment
-
Property
and equipment are stated at cost. Depreciation expense on equipment is computed using the straight-line method over the estimated
useful life of the asset, which is estimated at three years.
Income taxes-
The Company accounts
for income taxes in accordance with generally accepted accounting principles which requires an asset and liability approach to
financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for differences
between the consolidated financial statement and income tax bases of assets and liabilities that will result in taxable income
or deductible expenses in the future based on enacted tax laws and rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets and liabilities
to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period adjusted for the change
during the period in deferred tax assets and liabilities.
The Company follows the accounting requirements
associated with uncertainty in income taxes using the provisions of Financial Accounting Standards Board (FASB) ASC 740,
Income
Taxes
. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely
than not the positions will be sustained upon examination by the tax authorities. It also provides guidance for derecognition,
classification, interest and penalties, accounting in interim periods, disclosure and transition. As of September 30, 2012, the
Company has no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. All tax returns
from tax years 2007 to 2010 are subject to IRS audit.
Mineral Property
Expenditures
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Mineral property acquisition costs are capitalized in accordance with FASB ASC 930-805, “Extractive
Activities-Mining,” when management has determined that probable future benefits consisting of a contribution to future cash
inflows have been identified and adequate financial resources are available or are expected to be available as required to meet
the terms of property acquisition and budgeted exploration and development expenditures. Mineral property acquisition costs are
expensed as incurred if the criteria for capitalization are not met. In the event that mineral property acquisition costs are paid
with Company shares, those shares are recorded at the estimated fair value at the time the shares are due in accordance with the
terms of the property agreements.
Mineral property exploration costs are expensed
as incurred. When it has been determined that a mineral property can be economically developed as a result of establishing proven
and probable reserves and pre-feasibility, the costs incurred to develop such property are capitalized. Estimated future removal
and site restoration costs, when determinable are provided over the life of proven reserves on a units-of-production basis. Costs,
which include production equipment removal and environmental remediation, are estimated each period by management based on current
regulations, actual expenses incurred, and technology and industry standards. Any charge is included in exploration expense or
the provision for depletion and depreciation during the period and the actual restoration expenditures are charged to the accumulated
provision amounts as incurred.
Revenue Recognition
- Mineral sales will
result from undivided interests held by the Company in mineral properties. Sales of minerals will be recognized when delivered
to be picked up by the purchaser. Mineral sales from marketing activities will result from sales by the Company of minerals produced
by the Company (or affiliated entities) and will be recognized when delivered to purchasers. Mining revenues generated from the
Company’s day rate contracts, included in mine services revenue, will be recognized as services are performed or delivered.
33
Earnings per share-
The Company follows
ASC Topic 260 to account for earnings per share. Basic earnings per common share (“EPS”) calculations are determined
by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per
common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common
share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered
in the computation.
Submission of matters to security holders
for vote
During the period of this report the following
matters were submitted to a vote of Security Holders.
A majority the Shareholders of USCorp
unanimously approved the following actions be taken by the Board of Directors:
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The Board of Directors are authorized to re-negotiate the “Gold Bullion Loan”
to gain an extension of time to repay the loan from the lender under terms and conditions acceptable to the Board and to the Investors;
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The Board of Directors are authorized to distribute to the corporation’s shareholders
as a dividend shares in the USMetals, Inc., and Southwest Resource Development, Inc., at a proportionate rate of 1 subsidiary share
for every 10 USCorp shares owned of Common A, Common B, and Series A and B Preferred shares owned (based on conversion of Preferred
shares to Common shares); fractions to be rounded to the next highest full share;
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The Board of Directors are authorized to implement such spinoff(s) and share distributions
under conditions it deems prudent as soon as practical to do so;
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The Board of Directors are authorized to raise funds by selling stock in a manner, for a
price and at a time to be determined by the Board;
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The Board of Directors are authorized to make whatever acquisitions, mergers or joint ventures
it deems necessary or beneficial to further the development of the Company’s mining claims and properties; and
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The prior actions of the Board of Directors during fiscal 2012 are approved
by the Shareholders.
The accompanying consolidated financial statements
have been presented in accordance with generally accepted accounting principles, which assume the continuity of the Company as
a going concern. However, the Company has incurred significant losses since its inception and has no revenues and continues to
rely on the issuance of shares and warrants to raise capital to fund its business operations.
Management’s plans with regard to this
matter are as follows:
* Obtain the necessary approvals and permits
to complete exploration and begin test production on our properties as warranted. An application for drilling on Picacho Salton
Project has been submitted by us to the Bureau of Land Management (“BLM”) and is being reviewed by them. A drilling
plan for the newly-expanded Twin Peaks Project was approved and commenced in November 2011 and was completed in the spring of 2012.
* Receive BLM permit for Picacho Salton Project
in California; Drill the Picacho Salton Project.
* Receive and analyze the Twin Peaks assays
and drill reports and Picacho Salton assays and drill reports;
* Review the results of the drilling programs
on each of the sites when completed. After consideration of the nature of the ore bodies of the properties, Management will make
decisions regarding further development of the properties, including beginning commercial scale operations when exploration is
completed on the Twin Peaks Project and the Picacho Salton Project.
* Continue exploration and ramp up transitioning
to development and production in order to meet ongoing and anticipated demand for gold and silver.
* Continue to augment our mining exploration
team and strategic business relationships with quality and results-oriented people as needed: professionals and consulting firms
to advise management to handle mining operations, acquisitions and development of existing and future mineral resource properties.
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* Continue to recruit strategic business
alliances with consultants, engineers, contractors as well as joint venture partners when appropriate, and set up an information
and communication network that allows the alliance to function effectively to develop the properties.
* Draw up and Submit to the BLM the final Mining
Plan of Operations ("MPO") for the Twin Peaks; Submit the MPO to the BLM;
* Submit the Final MPO on the Picacho Salton
Project to the BLM.
* Begin commercial scale operations on one
or more of the properties as soon as the required permits and approvals have been granted, or be acquired by a major gold mining
company.
* Continue to acquire additional properties and/or
from strategic business relationships with corporations with properties as joint ventures or subsidiaries in order to advance the
company’s growth plans.
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3.
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Property and Equipment
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Property and equipment at September 30, 2012 and
2011 is comprised as follows.
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September 30, 2012
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September 30, 2011
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Office equipment
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$
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4,034
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$
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3,751
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Vehicle
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16,065
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16,065
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Accumulated depreciation
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(6,949
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)
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(2,485
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)
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Property & equipment- net
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$
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13,150
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$
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17,331
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In the year ending 2012 the company purchased
real property from a related party located near the twin peaks claims. The purchase price of the property was $161,000, the company
made a cash payment of $20,000 and signed a $141,000 promissory note. The note bears an annual interest rate of 5% and payments
are due quarterly. The note is secured by the real property obtained in the purchase. The company plans to use the house as a headquarters
for exploration of the claims.
4. Mineral Property
On March 22, 2011 USCorp (“USCorp”
or the “Company”) filed a Current Report on Form 8-K to disclose that its wholly owned subsidiary, USMetals, Inc. (“USMetals”)
entered into an Asset Funding/Operation and Shareholders Agreement, and exhibits thereto (the “Transaction”) with Arizona
Gold Company, a private British Columbia Corporation (“AGC”), Arizona Gold Founders, LLC a private California limited
liability company (“AGF”) and William and Denise DuBarry Hay (collectively, “Hay”) providing for the sale
of USMetals’ 172 Arizona mining claims known as the Twin Peaks Project (the “Twin Peaks Project”) to AGC Corp.,
an Arizona limited liability company, a wholly owned subsidiary of AGC, in exchange for up to 120,000,000 shares or 90.1% of AGC’s
common stock (the “Transaction”). USCorp has taken steps to unwind the Transaction pursuant to an Agreement (the “Agreement”)
dated June 28, 2012, and amended on June 30, 2012, by a First Amendment to the Agreement to provide that the Closing (as defined
in the Agreement) was to take place not later than September 10, 2012 (“Unwinding”).
The Unwinding between the parties was consummated
in several steps including the transfer of all of the Twin Peak Claims to USMetals by transfer of the stock of AGC Corp. to it,
the delivery of certain USCorp stock to the former shareholders of AGC, and the redelivery of certain shares of USCorp shares to
Kaswit and AGF or Hay. A total of 30,800,000 shares valued at $1,540,000 ($0.05 per share) were issued to former shareholders of
AGC Corp and an additional 12,000,000 shares valued at $600,000 ($0.05 per share) remain to be issued. In addition 14,000,000 shares
of USCORP valued at $840,000 were held by “Hay” and per the March 22, 2011 agreement were required to be returned in
exchange for the AGC Corp. shares initially issued to “Hay”. The shares receivable were reassigned to “Hays”
in return for their outstanding shares of AGC Corp. The total value of the investment purchased was determined to be $2,666,907.
This value was assigned to claims that became 100% owned by USMetals (100% owned subsidiary) as part of the transaction. These
claims were analyzed for impairment and the company deemed no impairment necessary as of September 30, 2012.
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5. Gold Bullion Promissory Note
In September 2005, the Company issued a promissory
note to a shareholder and received proceeds of $648,282. The note requires the Company to pay the shareholder 2,507 ounces of Gold
Bullion (.999 pure) and accrued interest of 9% compounded annually. Originally, the promissory note came due in September 2007.
Subsequently, the holder of the note extended the maturity date on an informal ongoing basis. The loan had been in default but
the maturity date was extended to March 31, 2012 in exchange for 1,600,000 shares of common stock. The loan entered default again
until the company negotiated with the lender to extend the maturity date of the loan until December 31, 2012 by the issuance of
2,550,000 share of stock along with the stipulation that cash payments totaling $78,774 be made per an outlined schedule. At this
time the Company has not made the required payments and the loan is considered in default. The Company continues to accrue interest
and to calculate the loan at fair value. Due to the fluctuation of price of Gold a gain or loss on the underlying gold derivative
on the promissory note has been calculated based upon the difference between the fair market value of an ounce of Gold Bullion
on the date the agreement is executed and the current fair market value of Gold Bullion (.999 pure).
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September 30, 2012
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September 30, 2011
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Principal
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$
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635,663
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$
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635,663
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Accrued interest
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1,485,340
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1,115,096
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Life to date loss on unhedged underlying derivative
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2,731,194
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2,312,352
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Carrying value
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$
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4,852,197
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$
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4,063,111
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6. Convertible Debentures
During the fiscal year 2007, the Company issued
convertible debentures with a face value of $1,200,000. The debentures were convertible into common stock at $0.125 per share.
The debentures had an interest rate of 5%. During the fiscal year 2008, the holder of these debentures converted $900,000 of the
debentures to 7,200,000 shares of common stock.
In fiscal year 2008 the Company issued an additional
convertible debenture to the same holder and received proceeds of $200,000. This debenture is exercisable into common stock at
$0.125 per share, and has an interest rate of 4%.
In fiscal year 2009 the Company issued an additional
convertible debenture to the same holder and received proceeds of $200,000. This debenture is exercisable into common stock at
$0.125 per share, and has an interest rate of 4%. The Company issued an additional $56,700 debenture during fiscal year 2009 exercisable
at $0.15 per share and at an interest rate of 5%.
In fiscal year 2011, all of the debentures
had been in default but the maturity dates were extended to March 2012 in exchange for the payment of 800,000 shares of common
stock and $125,000 as payment for $175,000 of the debentures.
In December 2011 the Company paid $25,000 as
agreed to further reduce the convertible debenture balance.
In the second quarter of 2012 the company settled
the remaining debt and related interest through a payment of $46,000 cash and issuing a total of 22,894,100 shares valued at $1,602,587
($0.07 per share). A total of $556,700 in principal and $111,373 in interest were retired.
7. Rights of USCorp Securities
SERIES A CONVERTIBLE PREFERRED STOCK RIGHTS, PREFERENCES
AND ENTITLEMENTS
Designation and Amount:
The shares of Series A Preferred Stock and each have a par value of one-tenth of one cent ($0.001). There are 30,000,000 Series
A Preferred shares authorized and 25,600,000 shares outstanding.
Preferred A Shares are available to Officers and Directors
for purchase at par value per shareholder vote and Board vote. The Corporation may not issue fractional shares of the Series A
Preferred Stock.
Rank: The Series A Preferred Stock, with respect
to rights on liquidation, winding up and dissolution, ranks senior to the Corporation’s Class A and Class B Common Stock,
and to any issued Preferred B Stock.
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Conversion Rights: Each Series A Preferred Share
may be converted into eight (8) shares of the Corporation’s Class A Common Stock.
Voting: The shares of Preferred A stock hold voting
rights of 8 votes for each Preferred A share. The outstanding shares at September 30, 2012 have ability to vote 204,800,000 shares.
SERIES B CONVERTIBLE PREFERRED STOCK RIGHTS, PREFERENCES
AND ENTITLEMENTS
Designation and Amount: The shares of Series B
Preferred Stock have a stated value of ($0.50). There are 50,000,000 Series B Preferred shares authorized and 141,687 shares outstanding.
The Corporation may not issue fractional shares of the Series B Preferred Stock.
Rank: The Series B Preferred Stock with respect
to rights on liquidation, winding up and dissolution, ranks senior to the Corporation’s Common Stock and to any subsequently
issued Preferred Stock, but ranks junior to the Corporations Series A Preferred Stock.
Conversion Rights: Each Series B Preferred Share
may be converted into two (2) shares of the Corporation’s Class A Common Stock.
Voting: The shares of Series B Preferred Stock
hold no voting rights.
CLASS A COMMON STOCK RIGHTS, PREFERENCES AND ENTITLEMENTS
Designation and Amount: The shares of Class A
Common Stock each have a par value of one cent ($0.01). There are 650,000,000 Class A common shares authorized and 324,009,052
shares outstanding. The Corporation may not issue fractional shares of the Class A Common Stock.
Rank: The Class A Common Stock, with respect to
rights on liquidation, winding up and dissolution, ranks senior to the Corporation’s Class B Common Stock, and junior to
any issued Preferred Stock.
Voting: The shares of Class A Common Stock holds
voting rights of 1 vote for each Class A Common share.
CLASS B COMMON STOCK RIGHTS, PREFERENCES
AND ENTITLEMENTS
Designation and Amount: The shares of Class B
Common Stock each have a par value of one-tenth of one cent ($0.001). There are 250,000,000 Class B Common shares authorized and
5,060,500 shares outstanding. The Corporation may not issue fractional shares of the Class B Common Stock.
Rank: The Class B Common Stock, with respect to
rights on liquidation, winding up and dissolution, ranks junior to the Corporation’s Class A Common Stock and to any issued
Preferred Stock
Conversion Rights: Each Class B Common Stock may
not be converted into any other class of stock.
Voting: The shares of Class B Common Stock hold
no voting rights.
If all of the preferred shares were
converted and warrants exercised as of September 30, 2012 the company would have fully diluted shares of:
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Shares
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Convertible to Common
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Series A
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25,600,000
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204,800,000
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Series B
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141,687
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283,374
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Common
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324,009,052
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324,009,052
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Warrants
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2,500,000
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Fully diluted at 9/30/12
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531,592,426
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8. Issuances of Common Stock
STOCKHOLDERS’
EQUITY
The stockholders’ equity of the
Company comprises the following classes of capital stock as of September 30, 2012 and 2011:
Series A Convertible Preferred Stock,
$0.001 par value per share; 30,000,000 shares authorized, 25,600,000 and 5,600,000 shares issued and outstanding at September 30,
2012 and 2011, respectively.
Holders of Series A Convertible Preferred
Stock (“Series A Preferred Stock”) may convert one share of Series A Preferred Stock into eight shares of Common Stock
A.
Series B Convertible Preferred Stock,
$0.50 stated value per share; 50,000,000 shares authorized, 141,687 shares issued and outstanding at September 30, 2012 and 2011,
respectively.
Holders of Series B Convertible Preferred
Stock (“Series B Preferred Stock”) may convert one share of Series B Preferred Stock into two shares of Common Stock
B. Additionally, holders of Series B Preferred Stock are entitled to a 10% cumulative stated dividend.
Common Stock A, par value of $0.01 per
share; 550,000,000 shares authorized, 324,009,052 and 194,966,620 shares issued and outstanding at September 30, 2012 and 2011,
respectively.
Common Stock B, par value of $0.001 per share;
250,000,000 shares authorized, 5,060,500 shares issued and outstanding at September 30, 2012 and 2011, respectively. The Class
B Common shares are non-voting shares that trade on the Frankfurt stock exchange under the symbol U9CB.F. There are 250,000,000
shares authorized and 5,060,500 issued and outstanding. The par value of these shares is $0.001. These shares do not trade in the
United States on any market and the Company has no plans to register these shares for trading in the U.S.
Year Ended September 30, 2011
In October 2010, the Company issued 7,851,333
shares of common stock A for $189,880 in cash proceeds ($0.02 per share).
In October 2010, the Company issued 200,000
shares of common stock A for services rendered to them for an aggregate fair market value of $18,000 based on the quoted market
price of the shares at the time of service ($0.09/share).
In October 2010, 150,000 warrants were
exercised and exchanged for 150,000 shares of common stock A for cash proceeds of $3,000 ($0.02/share).
In November 2010, the Company issued
650,000 shares of common stock A for $20,000 in cash proceeds ($0.03 per share).
In November 2010, 400,000 warrants were
exercised and exchanged for 400,000 shares of common stock A for cash proceeds of $8,000 ($0.02/share).
On November 11, 2010, the Company issued
737,500 shares of common stock A for services rendered to them for an aggregate fair market value of $51,625 based on the quoted
market price of the shares at the time of service ($0.07/share).
On November 29, 2010, the Company issued
25,000 shares of common stock A for services rendered to them for an aggregate fair market value of $1,500 based on the quoted
market price of the shares at the time of service ($0.06/share).
On December 13, 2010, a Series A Preferred
shareholder converted 1,000,000 shares of Series A Preferred Shares into 8,000,000 shares of common stock A.
On January 10, 2011, the Company issued
315,537 shares of common stock A for services rendered to them for an aggregate fair market value of $18,932 based on the quoted
market price of the shares at the time of service ($0.06/share).
On February 2, 2011, the Company issued
60,000 shares of common stock A for services rendered to them for an aggregate fair market value of $3,000 based on the quoted
market price of the shares at the time of service ($0.05/share).
On February 10, 2011, a Series A Preferred
shareholder converted 50,000 shares of Series A Preferred Shares into 400,000 shares of common stock A.
In March 2011, 18,735,000 warrants were
exercised and exchanged for 18,735,000 shares of common stock A for cash proceeds of $911,200 ($0.05/share).
38
On March 15, 2011, the Company issued
2,000,000 warrants for services rendered to them, with each warrant entitling the holder to purchase one additional share of common
stock at a price of $0.10 per share for a period of one year from the date of issue.
The fair value of these warrants was
estimated at the date of issuance, March 15, 2011, using the Black- Scholes Option Pricing Model with the current value of the
stock on the issuance date at $0.05; dividend yield of 0%; risk-free interest rate of .23%; volatility rate of 211%; and expiration
date of March 15, 2012. The value of the 2,000,000 warrants was determined to be $60,000.
On March 24, 2011, the Company issued
318,554 shares of common stock A for services rendered to them for an aggregate fair market value of $15,928 based on the quoted
market price of the shares at the time of service ($0.05/share).
On March 24, 2011, the Company issued
333,332 shares of common stock A for $10,000 in cash proceeds ($0.03 per share).
On March 24, 2011, two shareholders retired
common stock A valued at $840,000 pursuant to the Arizona Gold Corporation Agreement. The Company recorded the retirement as a
common stock receivable with a corresponding increase in the Company’s non-controlling interest.
In April 2011, 3,800,000 warrants were
exercised and exchanged for 3,800,000 shares of common stock A for cash proceeds of $133,500 ($0.035/share).
On April 8, 2011, the Company issued
83,300 shares of common stock A for $2,500 in cash proceeds ($0.03 per share).
In May 2011, the
Company issued 160,000 shares of common stock A for services rendered to them for an aggregate fair market value of $11,200 based
on the quoted market price of the shares at the time of service ($0.07/share).
In May 2011, 2,250,000 warrants were
exercised and exchanged for 2,250,000 shares of common stock A for cash proceeds of $87,500 ($0.04/share).
On May 5, 2011, the Company issued 166,666
shares of common stock A for $5,000 in cash proceeds ($0.03 per share).
On May 12, 2011, 2,000,000 warrants were
exercised and exchanged for 2,000,000 shares of common stock A for services rendered to them for an aggregate fair market value
of $140,000 based on the quoted market price of the shares at the time of service ($0.07/share).
On June 7, 2011, the Company issued 1,600,000
shares of common stock A as consideration for a debt extension with an aggregate fair market value of $96,000 based on the quoted
market price of the shares at the time of the extension ($0.06/share).
On June 21, 2011, the Company issued
800,000 shares of common stock A as consideration for debt with an aggregate fair market value of $64,000 based on the quoted market
price of the shares at the time of settlement ($0.08/share).
On June 30, 2011, 500,000 warrants were
exercised and exchanged for 500,000 shares of common stock A for cash proceeds of $20,000 ($0.04/share).
In July 2011, the Company issued 1,140,000
shares of common stock A for services rendered to them for an aggregate fair market value of $91,200 based on the quoted market
price of the shares at the time of service ($0.08/share).
In July 2011, 2,900,000 warrants were
exercised and exchanged for 2,900,000 shares of common stock A for cash proceeds of $109,500 ($0.04/share).
In August 2011, the Company issued 1,875,000
shares of common stock A for $70,000 in cash proceeds ($0.04 per share).
On August 10, 2011, the Company issued
60,000 shares of common stock A for services rendered to them for an aggregate fair market value of $4,200 based on the quoted
market price of the shares at the time of service ($0.07/share).
On August 30, 2011, 1,000,000 warrants
were exercised and exchanged for 1,000,000 shares of common stock A for cash proceeds of $30,000 ($0.03/share).
On September 30, 2011, 2,500,000 warrants
were exercised and exchanged for 2,500,000 shares of common stock A for cash proceeds of $87,500 ($0.035/share).
39
Year Ended September 30, 2012
In the year ending September 30, 2012, the Company issued 20 million
shares of preferred A stock and received proceeds of $20,000, from related parties, which consisted of members of the Board of
Directors. The preferred A can only be issued to officers and members of the board of directors. The stock carries 8 to 1 conversion
rights, the 25,600,000 preferred A shares outstanding on June 30, 2012 can be converted into 204,800,000 shares of common stock
at the option of the holders.
In October 2011, the Company issued 750,000
shares of common stock A for $16,750 in cash proceeds ($0.02 per share).
In October 2011, 750,000 warrants were
exercised and exchanged for 750,000 shares of common stock A for cash proceeds of $23,750 ($0.03/share).
In November 2011, the Company issued
3,200,000 shares of common stock A for $64,000 in cash proceeds ($0.02 per share).
In November 2011, 6,000,000 warrants
were exercised and exchanged for 6,000,000 shares of common stock A for cash proceeds of $70,000 ($0.01/share).
On November 23, 2011, the Company issued
60,000 shares of common stock A for services rendered to them for an aggregate fair market value of $3,000 based on the quoted
market price of the shares at the time of service ($0.05/share).
In December 2011, the Company issued
630,000 shares of common stock A for $12,600 in cash proceeds ($0.03 per share).
In December, 2011, the Company issued
825,000 shares of common stock A for services rendered to them for an aggregate fair market value of $41,250 based on the quoted
market price of the shares at the time of service ($0.05/share).
On December 13, 2011, the Company recorded
a stock payable of $10,000 for common stock A for cash received ($0.01/share).
On December 16, 2011, 500,000 warrants
were exercised and exchanged for 500,000 shares of common stock A for cash proceeds of $10,000 ($0.02/share).
In January 2012, 11,450,000 warrants
were exercised and exchanged for 11,450,000 shares of common stock A for cash proceeds of $142,500 ($0.01/share).
On January 4, 2012, the Company issued
1,000,000 shares of common stock A to satisfy a stock payable valued at $10,000 ($0.01/share).
In February 2012, 9,150,000 warrants
were exercised and exchanged for 9,150,000 shares of common stock A for cash proceeds of $105,500 ($0.01/share).
On March 12, 2012, the Company issued
22,894,100 shares of common stock A as consideration for debt with an aggregate fair market value of $1,602,587 based on the quoted
market price of the shares at the time of settlement ($0.07/share).
On March 27, 2012, 5,000,000 warrants
were exercised and exchanged for 5,000,000 shares of common stock A for cash proceeds of $25,000 ($0.005/share).
On March 27, 2012, the Company recorded
a $257,000 stock payable for shares of common stock A for warrants exercised valued at $204,984. A reduction of the difference
($52,016) was recorded in additional paid-in capital.
On March 31, 2012, In an effort to raise
necessary capital the company allowed holders of 21,900,000 warrants to exchange their outstanding warrant for the right to purchase
21,900,000 shares of common stock at a discounted rate. The purchase price of stock for this issuance ranged from $0.01 to $0.08
per share. Cash proceeds of $234,696 were received through this issuance. A financing fee of $1,824,968 was recorded for the difference
in the fair market value and the purchase price of the stock to reflect the beneficial value it provided to the warrant holders
who purchased shares at a discount.
On March 31, 2012, the Company recorded
a $9,600 stock payable for shares of common stock A for services rendered.
In April 2012, the Company issued 14,999,999
shares of common stock A to satisfy a stock payable for cash proceeds of $150,000 ($0.01/share).
In April 2012, the Company issued 160,000
shares of common stock A to satisfy a stock payable for services valued at $9,600 ($0.06/share).
In April 2012, 5,000,000 warrants were
exercised and exchanged for 5,000,000 shares of common stock A to a related party for a stock receivable of $5,000 ($0.001/share).
40
In May 2012, the Company issued 10,700,000
shares of common stock A to satisfy a stock payable for cash proceeds of $107,000 ($0.01/share).
In May 2012, 1,833,333 warrants were
exercised and exchanged for 1,833,333 shares of common stock A for cash proceeds of $17,500 ($0.01/share).
In May 2012, the Company issued 1,120,000
shares of common stock A for services rendered to them for an aggregate fair market value of $56,000 based on the quoted market
price of the shares at the time of service ($0.05/share).
On June 15, 2012, 1,000,000 warrants
were exercised and exchanged for 1,000,000 shares of common stock A for cash proceeds of $7,500 ($0.008/share).
On June 28, 2012, the Company recorded
a stock payable of $2,140,000 pursuant to the Arizona Gold Corporation share exchange agreement. As of September 30, 2012, 12,000,000
of common stock A is due to a former shareholder of Arizona Gold Corporation.
On June 28, 2012, pursuant to the Arizona
Gold Corporation (“AGC”) Agreement, common stock A shares due to the Company valued at $840,000 were given in exchange
for AGC stock. The Company reversed the common stock receivable and corresponding non-controlling interest associated with the
transaction recorded on March 24, 2011.
In July 2012, the Company issued 450,000
shares of common stock A for $6,500 in cash proceeds recorded as a stock receivable ($0.01/share).
On July 2, 2012, 135,000 warrants were
exercised and exchanged for 135,000 shares of common stock A for cash proceeds of $6,750 recorded as a stock receivable ($0.05/share).
On August 3, 2012, the Company issued
30,800,000 shares of common stock A to satisfy a stock payable valued at $1,540,000 pursuant to the AGC Agreement.
On August 10, 2012, the Company received
cash proceeds of $5,000 to satisfy an outstanding stock receivable.
In September 2012, the Company issued
635,000 shares of common stock A pursuant to the Company’s 2009 Stock Incentive Plan for an aggregate fair market value of
$17,850 based on the quoted market price of the shares at the time of service ($0.03/share).
9.
Common Stock Options and Warrants
The Company applies ASC 718, “Accounting
for Stock-Based Compensation” to account for its option issues. Accordingly, all options granted are recorded at fair value
using a generally accepted option pricing model at the date of the grant. The fair values generated by option pricing model may
not be indicative of the future values, if any, that may be received by the option holder.
The following is a summary of common stock options
outstanding at September 30, 2012:
|
|
|
|
|
|
Wgtd Avg
|
|
|
Wgtd Years
|
|
|
|
|
Amount
|
|
|
Exercise Price
|
|
|
to Maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2010
|
|
|
101,579,484
|
|
|
$
|
0.03
|
|
|
|
1.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants granted and assumed
|
|
|
41,764,999
|
|
|
|
0.11
|
|
|
|
|
|
|
Warrants exercised
|
|
|
(34,485,000
|
)
|
|
|
0.05
|
|
|
|
|
|
|
Warrants Expired
|
|
|
(27,814,484
|
)
|
|
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2011
|
|
|
81,044,999
|
|
|
$
|
0.10
|
|
|
|
0.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants granted and assumed
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
Warrants exercised
|
|
|
(69,106,665
|
)
|
|
|
0.09
|
|
|
|
|
|
|
Warrants expired
|
|
|
(9,438,334
|
)
|
|
|
0.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2012
|
|
|
2,500,000
|
|
|
$
|
0.24
|
|
|
|
0.34
|
|
All warrants outstanding as of September 30, 2012
are exercisable.
41
10. Net Loss per Share
The Company applies ASC 260, “
Earnings
per Share”
to calculate loss per share. In accordance with ASC 260, basic net loss per share has been computed based
on the weighted average of common shares outstanding during the years, adjusted for the financial instruments outstanding that
are convertible into common stock during the years. The effects of the common stock options and the debentures convertible into
shares of common stock, however, have been excluded from the calculation of loss per share because their inclusion would be anti-dilutive.
Net loss per share is computed as follows:
|
|
|
September 30, 2012
|
|
|
September 30, 2011
|
|
|
|
|
|
|
|
|
|
|
Net loss before cumulative preferred dividend
|
|
$
|
(5,900,016
|
)
|
|
$
|
(3,017,084
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative dividend preferred payable
|
|
|
(60,277
|
)
|
|
|
(53,192
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net loss to common shareholders
|
|
$
|
(5,960,293
|
)
|
|
$
|
(3,070,276
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
|
|
|
260,197,914
|
|
|
|
170,858,735
|
|
11. Related Party Transactions
In the year ending September 30, 2012, the Company issued 20 million
shares of preferred A stock and received proceeds of $20,000, from related parties, which consisted of members of the Board of
Directors. The preferred A can only be issued to officers and members of the board of directors. The stock carries 8 to 1 conversion
rights, the 25,600,000 preferred A shares outstanding on June 30, 2012 can be converted into 204,800,000 shares of common stock
at the option of the holders.
The Company holds consulting agreements with various
company officers and related parties are not considered employees and are paid for services rendered based upon management’s
judgment of the value received. A total of $447,628 and $349,558 was paid to related parties for consulting services in the years
ending September 30, 2011 and 2012, respectively.
An officer of the company and a related party
were considered employees during the years ending September 30, 2012. Total compensation paid to related party employees was of
$150,440 and $117,119 for the years ending 2011 and 2012 respectively. Payroll taxes were not paid on this compensation as such
a payroll tax accrual has been made for $32,296 and $19,867 for 2011 and 2012, respectively.
The company received related party financing
of $43,632 and $6,535 and made payments of $85,582 and $535 on this financing in the years ending 2011 and 2012, respectively.
All related party loans bear no interest and are due on demand.
The company has a policy of reimbursing its
employees for expenses incurred in carrying out duties for the company. Reimbursed expenses of $35,945 and $10,505 were reimbursed
to officers and employees of the company during the year ending 2011 and 2012.
Related parties
were granted 575,000 shares valued at $17,250 ($0.03) in accordance with its 2009 stock incentive plan
for its officers,
directors, and employees. Details of this plan are presented in Note. 12. An additional 1,055,537 shares valued at $76,132 were
issued to related parties in 2011.
Related parties paid cash of $75,000 and $505,000
in exchange for 17,000,000 and 24,850,000 shares in 2011 and 2012, respectively
12. Stock Incentive Plan
The Company provides for a Stock Incentive
Plan for its officers, directors, and employees as fully explained in our Form S-8 filing dated December 29, 2009 and as Exhibit
10.1 to our Form 10-K/A for period ending September 30, 2010 filing date April 22, 2011.
The plan provides for incentive stock options and non-qualified stock options. The Board of Directors will determine the exercise
price of an employee’s option at the date of the grant. The exercise price of an incentive stock option may not be less than
the fair market value of the common stock on the date of the grant, or less than 110% of the fair market value if the participant
owns more than 10% of the outstanding common stock. The Board of Directors will also determine the term of an option at the date
of the grant. The term of an incentive stock option or non-qualified stock option may not exceed ten years from the date of grant,
but any incentive stock option granted to a participant who owns more than 10% of the outstanding common stock will not be exercisable
after the expiration of five years after the date the option is granted. Subject to any further limitations in the applicable agreement,
if a participant’s employment terminates, an incentive stock option will terminate and expire no later than three months
after the date of termination of employment
42
Incentive stock options are also subject to
the further restriction that the aggregate fair market value, determined as of the date of the grant, of the market value of the
common Stock as to which any incentive stock option first becomes exercisable in any calendar year is limited to $100,000 per recipient.
If incentive stock options covering more than $100,000 worth of the common stock first become exercisable in any one calendar year,
the excess will be non-qualified options. For purposes of determining which options, if any, have been granted in excess of the
$100,000 limit, options will be considered to become exercisable in the order granted. The plan also provides for the payment of
professionals with Class A Common Shares of the Company’s stock.
13. Reclassification of Some Mineral Property
Expenditures
Mineral Property Expenditures were formerly
labeled License & claim development expenses in the Consolidated Statements of Operations. With the advent of XBRL tagging
of line items (providing a link to a definition of the item) the definition assigned to this item was incorrectly based on the
term “License” in the label. It stated: “Costs incurred and are directly related to generating license revenue.
Licensing arrangements include, but are not limited to rights to use a patent, copyright, technology, manufacturing process, software
or trademark.” USCorp does not have any licensing arrangements of any kind. In order to accurately reflect that line in our
financials we have changed the label and have assigned the following definition to it: “Exploration expenses, including prospecting
would be included in operating expenses. Exploration costs include costs incurred in identifying areas that may warrant examination
and in examining, drilling and related activities in specific areas that are considered to have prospects of mineralization.”
14. Concentrations of Credit Risk
The Company heavily relies upon the efforts
of the Company’s chief executive officer and majority shareholder for the success of the Company. A withdrawal of the chief
executive’s officer efforts would have a material adverse effect on the Company’s financial condition.
15. Subsequent Events
Extension of the Gold Bullion Loan: The holder
of the Gold Bullion Loan has agreed to extend the loan that was due on March 31, 2012 in exchange for a partial payment of interest
comprised of a combination of cash and stock. As of this writing, the company had not made payments based on the required timeline
and the note is considered to be in default.
16. Restatement
We are restating in its entirety the
financial statements for the year ended September 30, 2011 as originally filed with the Securities and Exchange Commission
on January 13, 2012. We have determined that our previously reported results for the year ended September 30, 2011 contained
significant errors which effected the consolidated balance sheet, statement of operations, statement of cash flows and statement
of stockholders equity. These errors were caused by poor internal controls and an internal staff with limited accounting knowledge.
Several stock issuances were not accounted for correctly in the previously reported statements in addition the loss attributable
to the non-controlling interest of our subsidiary Arizona gold Corp. (“AGC”) was not separated from losses attributable
to the company. We have also made necessary conforming changes in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” resulting from the correction of these errors.
The
following table summarizes the impact of these corrections on our consolidated balance sheet, statement of operations, statement
of cash flows and (loss) per share.
43
|
|
|
As of September 30, 2011
As Previously reported
|
Restatement Adjustments
|
As of September 30, 2011
As Restated
|
|
|
|
|
|
|
|
Total assets
|
|
1,829,340
|
1,196
|
1,830,536
|
|
|
|
|
|
|
|
Total current liabilities
|
|
4,821,079
|
8,669
|
4,829,748
|
|
|
|
|
|
|
|
Shareholders’ equity
|
|
|
|
|
|
Series A preferred stock
|
|
4,304
|
1,296
|
5,600
|
|
Series B preferred stock
|
|
63,498
|
7,346
|
70,844
|
|
Common stock B
|
|
5,060
|
-
|
5,060
|
|
Common stock A
|
|
1,949,667
|
(2)
|
1,949,665
|
|
Subscriptions receivable
|
|
-
|
(840,000)
|
(840,000)
|
|
Additional paid in capital
|
|
15,804,892
|
315,531
|
16,120,423
|
|
Accumulated deficit
|
|
(20,819,160)
|
(178,693)
|
(20,997,853)
|
|
Total shareholders’ deficit
|
|
(2,991,739)
|
(694,522)
|
(3,686,261)
|
|
Non-controlling interest
|
|
-
|
687,049
|
687,049
|
|
Total liabilities and shareholders’ deficit
|
|
(2,991,739)
|
(7,473)
|
(2,999,212)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended September 30, 2011 As Previously reported
|
Restatement Adjustments
|
Year ended September 30,
2011
As Restated
|
|
Consulting
|
|
451,080
|
797,306
|
1,248,386
|
|
General and administrative
|
|
991,835
|
(641,049)
|
350,786
|
|
Mining development
|
|
368,129
|
(196,391)
|
171,738
|
|
Professional fees
|
|
108,930
|
243,388
|
352,318
|
|
Total operating expenses
|
|
1,919,974
|
203,254
|
2,123,228
|
|
|
|
|
|
|
|
Other expenses
|
|
(1,166,800)
|
(32,958)
|
(1,199,758)
|
|
|
|
|
|
|
|
Net Loss
|
|
(3,086,774)
|
(236,212)
|
(3,322,986)
|
|
|
|
|
|
|
|
Less: Net loss attributable to non-controlling interest
|
|
-
|
(152,951)
|
(152,951)
|
|
|
|
|
|
|
|
Net loss attributable to the Company
|
|
(3,086,774)
|
(83,261)
|
(3,170,035)
|
|
|
|
|
|
|
|
Basic (loss) per share
|
|
(0.02)
|
-
|
0.02
|
|
|
|
|
|
|
44
|
|
|
|
|
|
|
Operating activities
|
|
Year ended September 30, 2011 As Previously reported
|
Restatement Adjustments
|
Year ended September 30, 2011 As Restated
|
|
Net (loss) for the period
|
|
(3,086,774)
|
(236,212)
|
(3,322,986)
|
|
|
|
|
|
|
|
Net cash used by operations
|
|
(1,450,287)
|
(225,825)
|
(1,676,112)
|
|
|
|
|
|
|
|
Net Cash used by investing activities
|
|
(29,816)
|
10,000
|
(19,816)
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
2,813,080
|
214,050
|
3,027,130
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
1,332,977
|
(1,775)
|
1,331,202
|
|
|
|
|
|
|
|
Cash balance at beginning of fiscal year
|
|
354,019
|
1,780
|
355,799
|
|
|
|
|
|
|
|
Cash balance at September 30, 2011
|
|
1,686,996
|
5
|
1,687,001
|
45