UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
____________________________________________________
FORM
10-KSB
(Mark
One)
x
|
ANNUAL
REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
The Fiscal Year Ended December 31, 2007
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
FOR THE
TRANSITION PERIOD FROM ______ TO ________
Commission
File No. 333-143215
SUSTUT
EXPLORATION, INC.
|
(Exact
name of issuer as specified in its charter)
|
|
|
Delaware
|
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer
Identification No.)
|
|
|
1420
5th
Avenue #220
Seattle,
Washington
|
98101
|
(Address
of principal executive offices)
|
(Zip
Code)
|
|
|
Registrant’s
telephone number, including area code: (206)
274-5321
|
|
|
Securities
registered under Section 12(b) of the Exchange Act:
|
None.
|
|
|
Securities
registered under Section 12(g) of the Exchange Act:
|
Common stock, par
value $0.001 per share.
|
|
(Title
of class)
|
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding twelve months (or such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yesx Noo
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained herein, and will not 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 T No £
State
issuer’s revenues for its most recent fiscal year: $0.
State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of March
14, 2008: $1,211,800.
Number of
the issuer’s Common Stock outstanding as of March 14, 2008:
16,059,000
Documents
incorporated by reference: None.
Transitional
Small Business Disclosure Format (Check One): Yeso Nox
|
|
1 |
|
|
1 |
|
|
2 |
|
|
2
|
|
|
2 |
|
|
3
|
|
|
F- |
|
|
6 |
|
|
6 |
|
|
6
|
|
|
7 |
|
|
7 |
|
|
8 |
|
|
8 |
|
|
8 |
|
|
|
PART
I
We are a
Delaware corporation formed on April 11, 2006 to search for available properties
in north central British Columbia. In May 2006, we entered into an agreement
which was negotiated at arms length with Richard Simpson to acquire a 100%
interest in the WILLOW claim. The claim is located in the Omineca Mining
Division, NTS map sheet 94D/10E. The property is 4.5 km east of the Sustut River
in British Columbia. The property can be acquired from Simpson by paying a total
of $75,000 in two option payments. The property is subject to annual advance
Royalty payments of $20,000 commencing January 17, 2010. After we have earned
our 100% interest in the WILLOW claim, the property will be subject to a 1½% Net
Smelter Return (“NSR”) of which 1 ½% can be purchased for $1,000,000 within 12
months of the commencement of commercial production.
We are an
exploration stage company engaged in the acquisition and exploration of mineral
properties. We own a 100% interest in a mineral claim that we refer to as the
WILLOW mineral claim. Further exploration of this mineral claim is required
before a final determination as to their viability can be made. Although there
is evidence of exploratory work on the claim conducted by prior owners, reliable
records of this work are limited. Our plan of operations is to carry out
exploration work on this claim in order to ascertain whether it possess
commercially exploitable quantities of copper. We will not be able to determine
whether or not our mineral claim contain a commercially exploitable mineral
deposit, or reserve, until appropriate exploratory work is done and an economic
evaluation based on that work concludes economic viability.
Once we
receive the results of our first exploration program, our board of directors in
consultation with our consulting geologist will assess whether to proceed with
further exploration. Our initial program will cost approximately $30,000 and the
report of our consulting geologist should be available in December 2007. In the
event that a follow-up exploration program is undertaken, the costs are expected
to be approximately $85,000 and the geologist’s report should be available by
fall of 2007. The existence of commercially exploitable mineral deposits in the
WILLOW mineral claim is unknown at the present time and we will not be able to
ascertain such information until we receive and evaluate the results of our
exploration program. If we are unable to delineate commercial quantities of
copper on the WILLOW claim we may have to cease operations on the WILLOW claim.
We would seek out other properties with mineral potential to carry out
exploration programs to replace the WILLOW claim.
We
currently use approximately 400 square feet of leased office space at 1420
5th
Avenue #220 Seattle, Washington 98101. We lease such space from the Regus Group
for $237.00 month which covers the use of the telephone, office equipment and
furniture.
Mineral
Property Agreement
On May 5,
2006, we entered into an agreement with Richard Simpson to acquire a 100%
interest in the WILLOW claim. Sustut Exploration, Inc. WILLOW mineral claim is
situated approximately 25km east of Johansen Lake in the Province of British
Columbia. The property can be acquired from Mr. Simpson by paying him
option payments totaling $75,000. After we have earned our 100% interest in the
WILLOW claim, the property will be subject to a 2½% Net Smelter Return (“NSR”)
of which 1 1/2% can be purchased for $1,000,000.
Property
Option Payments
We are
required to pay Mr. Simpson two Option Payments to keep our Agreement in good
standing. The payments are outlined in the table that follows:
Option
Payments
|
|
|
|
Payment
|
Amount
|
Status/Date
Due
|
Initial
|
$
55,000
|
Paid
|
Final
|
$
20,000
|
May
15, 2008
|
Total
|
$
75,000
|
|
Net
Smelter Royalty
Net
Smelter Returns means the Gross Value of all Minerals, less the following costs,
charges and expenses actually paid by the Grantee with respect to the treatment
of such Minerals:
|
1.
|
Charges
for treatment in the smelting and refining processes (including handling,
processing, interest and provisional settlement fees, sampling, assaying
and representation costs; penalties and other processor
deductions);
|
|
2.
|
Actual
costs of transportation (including freight, insurance, security,
transaction taxes, handling, port, demurrage, delay and forwarding
expenses incurred by reason of or in the course of such transportation) of
Minerals concentrates or dore metal from the Property to the place of
treatment, including any costs incurred by Grantee for transportation of
such Minerals concentrates and dore metal from the Property to the place
of sale;
|
|
3.
|
Actual
sales and brokerage costs on Minerals for which the Net Smelter Returns
royalty is payable; and
|
|
4.
|
Sales
and use taxes applicable under local, Province and federal law assessed on
the sale of the Minerals on which the Net Smelter Returns Royalty is
payable (other than taxes based upon
income).
|
Location
and Land Status
The
WILLOW mineral claim consists of a mineral claim within the Omineca Mining
Division of British Columbia.
Name
|
Record
Number
|
Units
|
WILLOW
|
530309
|
183.83
|
The
WILLOW group total area is 447.70 hectares. The claim is in good standing until
January 17, 2008 and has not been legally surveyed.
We are
still pursuing this plan but to date we have not been able to raise additional
funds through either debt or equity offerings. Without this additional cash we
have been unable to pursue our plan of operations and commence generating
revenue. We believe that we may not be able to raise the necessary funds to
continue to pursue our business operations. As a result of the foregoing, we
have recently begun to explore our options regarding the development of a new
business plan and direction. We are currently engaged in discussions with a
company regarding the possibility of a reverse triangular merger (the “Merger”)
involving our company. At this stage, no definitive terms have been agreed to,
and neither party is currently bound to proceed with the
Merger.
To the
best of our knowledge, there are no known or pending litigation proceedings
against us..
None.
PART
II
Market
Information
Our
common stock has traded on the OTC Bulletin Board system under the symbol “STUX”
since October 26, 2007. There is a limited trading market for our Common Stock.
The following table sets forth the range of high and low bid quotations for each
quarter within the last fiscal year. These quotations as reported by the OTCBB
reflect inter-dealer prices without retail mark-up, mark-down, or commissions
and may not necessarily represent actual transactions.
|
2007
|
|
High
|
Low
|
October
26, 2007 to current
|
$0.20
|
$0.20
|
The
source of these high and low prices was the Quotemedia.com. These quotations
reflect inter-dealer prices, without retail mark-up, markdown or commissions and
may not represent actual transactions. The high and low prices listed have been
rounded up to the next highest two decimal places.
The
market price of our common stock is subject to significant fluctuations in
response to variations in our quarterly operating results, general trends in the
market, and other factors, over many of which we have little or no control. In
addition, broad market fluctuations, as well as general economic, business and
political conditions, may adversely affect the market for our common stock,
regardless of our actual or projected performance.
Holders
As of
March 14, 2008 in accordance with our transfer agent records, we had 57 record
holders of our Common Stock.
Dividends
To date,
we have not declared or paid any dividends on our common stock. We currently do
not anticipate paying any cash dividends in the foreseeable future on our common
stock, when issued pursuant to this offering. Although we intend to retain our
earnings, if any, to finance the exploration and growth of our business, our
Board of Directors will have the discretion to declare and pay dividends in the
future.
Payment
of dividends in the future will depend upon our earnings, capital requirements,
and other factors, which our Board of Directors may deem relevant.
Recent Sales of Unregistered
Securities
Sustut
Exploration, Inc. was incorporated in the State of Delaware on April 11, 2006
and 10,000,000 shares were issued to Terry Hughes for founders shares. These
shares of our common stock qualified for exemption under Section 4(2) of the
Securities Act of 1933 since the issuance shares by us did not involve a public
offering.
In April
2006, we completed a Regulation D, Rule 506 Offering in which we issued a total
of 6,000,000 shares of our common stock to a total of 12 investors, at a price
per share of $.01 for an aggregate offering price of $60,000. Each investor
received a copy of our private placement memorandum and completed a
questionnaire to confirm that they were either “accredited” or “sophisticated”
investors.
The
following discussion contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 relating to future events or our future performance. Actual
results may materially differ from those projected in the forward-looking
statements as a result of certain risks and uncertainties set forth in this
prospectus. Although management believes that the assumptions made and
expectations reflected in the forward-looking statements are reasonable, there
is no assurance that the underlying assumptions will, in fact, prove to be
correct or that actual results will not be different from expectations expressed
in this report.
Plan
of Operation
Our plan
of operations over the next twelve months is to raise additional capital to
complete the planned exploration program. The following is an exploration budget
that is outlined in the summary geology report that was prepared for the company
by George Nicholson, P.Geo.
Item
Description
|
Cost
Estimate
|
Helicopter
support (6 hrs x $1,000/hr)
|
$6,000
|
Labor
(2 tech. x 7 days @ $350/day)
|
$4,900
|
Sample
Analyses (100 soil + 50 rock @ $30/sample)
|
$4,500
|
Room
and board
|
$2,000
|
Mob./Demob.
+ truck + fuel
|
$3,000
|
Report
and drafting
|
$5,000
|
10%
contingency
|
$2,500
|
Total
|
$27,900
|
|
ROUNDED
= $30,000
|
At
present, we do not have sufficient cash on hand to complete the filing of this
prospectus and meeting our exploration, general and administration expenses and
we must raise more capital by May 15, 2008 to carry out further exploration
programs to maintain our interest in the WILLOW claim. If we are unable to raise
sufficient capital to meet our obligations we could lose our interest in the
properties or a portion thereof.
We plan
to raise a minimum of $30,000 to continue minimum exploration of our properties
during the next 12 months through a private placement of debt, convertible
securities, or common equity. If we are successful in raising the necessary
capital, we may have to significantly dilute the current shareholders. We plan
to initially offer the debt or equity to our current shareholders and
management. If we are not successful in raising the required capital, we will
offer our debt or equity to new investors. At present, we have no specific plans
regarding a debt or equity offering, but intend to actively commence raising the
required capital during the fall of 2007. As an alternative to raising capital
through the selling of debt or equity, we will attempt to negotiate a joint
venture with an industry partner. If the company is required to enter into a
joint venture, we could end up with a minority interest in our properties. We
have not contacted another party in the industry regarding a joint venture.
There is no assurance we will raise the necessary capital, therefore there is a
significant risk that the company may have to abandon or reduce the size of our
property.
We are
still pursuing this plan but to date we have not been able to raise additional
funds through either debt or equity offerings. Without this additional cash we
have been unable to pursue our plan of operations and commence generating
revenue. We believe that we may not be able to raise the necessary funds to
continue to pursue our business operations. As a result of the foregoing, we
have recently begun to explore our options regarding the development of a new
business plan and direction. We are currently engaged in discussions with a
company regarding the possibility of a reverse triangular merger (the “Merger”)
involving our company. At this stage, no definitive terms have been agreed to,
and neither party is currently bound to proceed with the
Merger.
Critical Accounting
Policies
Revenue and Cost
Recognition
The
Company uses the accrual basis of accounting for financial statement
reporting. Revenues and expenses are recognized in accordance with
Generally Accepted Accounting Principles for the industry. Certain
period expenses are recorded when obligations are incurred.
Use of Estimates
The
preparation of the financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities, and disclosure of
contingent liabilities at the date of the financial statements and the reported
amount of revenues and expenses during the reporting period. Actual results
could differ from those results.
Accounts Receivable,
deposits, Accounts Payable and accrued Expenses
Accounts
receivable have historically been immaterial and therefore no allowance for
doubtful accounts has been established. Normal operating refundable
Company deposits are listed as Other Assets. Accounts payable and
accrued expenses consist of trade payables created from the normal course of
business.
Non-mining Property and
Equipment
Property
and equipment purchased by the Company are recorded at cost. Depreciation is
computed by the straight-line method based upon the estimated useful lives of
the respective assets. Expenditures for repairs and maintenance are
charged to expense as incurred as are any items purchased which are below the
Company’s capitalization threshold of $1,000.
For
assets sold or otherwise disposed of, the cost and related accumulated
depreciation are removed from accounts, and any related gain or loss is
reflected in income for the period.
Income
Taxes
The
Company accounts for income taxes using the liability method which requires
recognition of deferred tax liabilities and assets for the expected future tax
consequences of event that have been included in the financial statements or tax
returns. Deferred tax assets and liabilities are determined based on the
difference between the financial statements and tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. The Company's management determines if a
valuation allowance is necessary to reduce any tax benefits when the available
benefits are more likely than not to expire before they can be
used.
Stock Based Compensation
The Financial Accounting
Standards Board issued Statement of Financial Accounting Standards
No. 123(R), “Accounting for Stock-Based Compensation,” (SFAS
123(R)). SFAS 123(R) requires that companies recognize
compensation expense for grants of stock, stock options,
and other equity instruments based on fair value. The
Company has adopted SFAS 123(R) in accounting for
stock-based compensation.
Cash and Cash Equivalents,
and Credit Risk
For
purposes of reporting cash flows, the Company considers all cash accounts with
maturities of 90 days or less and which are not subject to withdrawal
restrictions or penalties, as cash and cash equivalents in the accompanying
balance sheet.The portion of deposits in a financial institution that insures
its deposits with the FDIC up to $100,000 per depositor in excess of such
insured amounts are not subject to insurance and represent a credit risk to the
Company.
Foreign Currency Translation
and Transactions
The
Company’s functional currency is the US dollar. No material
translations or transactions have occurred. Upon the occurrence of
such material transactions or the need for translation adjustments, the Company
will adopt Financial Accounting Standard No. 52 and other methods in conformity
with Generally Accepted Accounting Principles.
Earnings Per
Share
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting
Standards No. 128 (SFAS 128), "Earnings Per Share". SFAS
128 replaces the presentation of primary earnings per share with a
presentation
of basic earnings per share based
upon the weighted average number of common
shares for the period.
Recent Accounting
Pronouncements
In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. The
objective of SFAS 157 is to increase consistency and comparability in fair value
measurements and to expand disclosures about fair value
measurements. SFAS 157 defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles, and
expands disclosures about fair value measurements. SFAS 157 applies under other
accounting pronouncements that require or permit fair value measurements and
does not require any new fair value measurements. The provisions of SFAS No. 157
are effective for fair value measurements made in fiscal years beginning after
November 15, 2007. The adoption of this statement is not expected to
have a material effect on the Company's future reported financial position or
results of operations.
In
February 2007, the Financial Accounting Standards Board (FASB) issued SFAS No.
159, “The Fair Value Option
for Financial Assets and Financial Liabilities – Including an Amendment of FASB
Statement No. 115”. This statement permits entities to choose
to measure many financial instruments and certain other items at fair value.
Most of the provisions of SFAS No. 159 apply only to entities that elect the
fair value option. However, the amendment to SFAS No. 115 “Accounting for Certain Investments
in Debt and Equity Securities” applies to all entities with
available-for-sale and trading securities. SFAS No. 159 is effective as of the
beginning of an entity’s first fiscal year that begins after November 15, 2007.
Early adoption is permitted as of the beginning of a fiscal year that begins on
or before November 15, 2007, provided the entity also elects to apply the
provision of SFAS No. 157, “Fair Value Measurements”. The
adoption of this statement is not expected to have a material effect on the
Company's financial statements.
In
December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No.
160, “Noncontrolling Interests
in Consolidated Financial Statements – an amendment of ARB No.
51”. This statement improves the relevance, comparability, and
transparency of the financial information that a reporting entity provides in
its consolidated financial statements by establishing accounting and reporting
standards that require; the ownership interests in subsidiaries held by parties
other than the parent and the amount of consolidated net income attributable to
the parent and to the noncontrolling interest be clearly identified and
presented on the face of the consolidated statement of income, changes in a
parent’s ownership interest while the parent retains its controlling financial
interest in its subsidiary be accounted for consistently, when a subsidiary is
deconsolidated, any retained noncontrolling equity investment in the former
subsidiary be initially measured at fair value, entities provide sufficient
disclosures that clearly identify and distinguish between the interests of the
parent and the interests of the noncontrolling owners. SFAS No. 160
affects those entities that have an outstanding noncontrolling interest in one
or more subsidiaries or that deconsolidate a subsidiary. SFAS No. 160
is effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. Early adoption is prohibited. The
adoption of this statement is not expected to have a material effect on the
Company's financial statements.
Off-Balance Sheet
Arrangements
We do not
have any off-balance sheet arrangements, financings, or other relationships with
unconsolidated entities or other persons, also known as “special purpose
entities” (SPEs).
Item 7. Financial
Statements.
The
financial statements and related notes are included as part of this Annual
Report as indexed in the appendix on page F-1 through F-11.
None.
Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed by us in the reports that we
file or submit under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by us in the reports that we file under the
Exchange Act is accumulated and communicated to our management, including our
principal executive and financial officers, as appropriate to allow timely
decisions regarding required disclosure.
Evaluation of Disclosure and
Controls and Procedures. As of the end of the period covered
by this Annual Report, we conducted an evaluation, under the supervision and
with the participation of our chief executive officer and principal financial
officer, of our disclosure controls and procedures (as defined in Rules
13a-15(e) of the Exchange Act). Based on this evaluation, our Chief
Executive Officer and principal financial officer concluded that our disclosure
controls and procedures are effective to ensure that information required to be
disclosed by us in reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms.
Changes in Internal Controls over
Financial Reporting. There was no change in our internal
controls, which are included within disclosure controls and procedures, during
our most recently completed fiscal year end that has materially affected, or is
reasonably likely to materially affect, our internal controls.
None.
PART
III
Our
executive officers and directors and their ages as of March 14, 2008 is as
follows:
|
|
|
Terry
Hughes
|
##
|
President,
Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer,
Director
|
Set forth
below is a brief description of the background and business experience of our
executive officers and directors for the past five years.
Terry Hughes has been a
resident of Port Moody for the past 35 years. His work experience began in the
lumber mills of Port Moody. Following in his photographer father’s footsteps
Terry grew his photography business and is well known in the Vancouver, British
Columbia area as an excellent photographer and businessman. Terry donates his
time doing photography for many local charities including the Burn Fund and
Crossroads Hospice.
As a
child Terry was fascinated with the “mineral rights” his mother inherited which
involved into an interest in prospecting and geology. Terry has prospected and
claimed many known mineral rich areas of British Columbia and has worked along
side geologists and industry professionals in the field.
None of
our Officers and/or Directors have filed any bankruptcy petition, been convicted
of or been the subject of any criminal proceedings or the subject of any order,
judgment or decree involving the violation of any state or federal securities
laws within the past five (5) years.
Term
of Office
Our
directors are appointed for a one-year term to hold office until the next annual
general meeting of our stockholders or until removed from office in accordance
with our bylaws. Our officers are appointed by our board of directors and hold
office until removed by the board.
Current
Issues and Future Management Expectations
No board
audit committee has been formed as of the filing of this Annual
Report.
Compliance
With Section 16(A) Of The Exchange Act.
Section
16(a) of the Exchange Act requires the Company’s officers and directors, and
persons who beneficially own more than 10% of a registered class of the
Company’s equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and are required to
furnish copies to the Company. To the best of the Company’s knowledge, any
reports required to be filed were timely filed in fiscal year ended December 31,
2007.
Code
of Ethics
The
Company has adopted a Code of Ethics applicable to its Chief Executive Officer
and Chief Financial Officer. This Code of Ethics is filed herewith as an
exhibit.
The table
below summarizes all compensation awarded to, earned by, or paid to our
executive officers by any person for all services rendered in all capacities to
us from the date of our inception until the fiscal year ended January 31,
2007.
Name
and Principal Position
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terry
Hughes, Chief Executive Officer, Chief Financial Officer, Secretary,
Treasure, and Director
|
2007
|
|
$
|
0
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
42,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Option Grants
None.
(1)
|
Mr. Hughes
received 10,000,000 founders’ shares for services rendered to us. He will
not receive such compensation in the
future.
|
We do not
have written employment agreements with Terry Hughes. In the future, we will
determine on an annual basis how much compensation our officer and director will
receive
The
following table sets forth, as of March 14, 2008, certain information with
respect to the beneficial ownership of the common stock by (1) each person known
by us to beneficially own more than 5% of our outstanding shares, (2) each of
our Directors, (3) each Named Executive Officer and (4) all of our executive
officer and Director as a group. Except as otherwise indicated, each person
listed below has sole voting and investment power with respect to the shares of
common stock set forth opposite such person’s name.
Name
And Address Of
Beneficial
Owner (1)
|
Amount
And Nature Of
Beneficial
Ownership
|
Percent
Of Outstanding
Shares
|
|
|
|
5%
Stockholders, Director And Named Executive Officer
|
|
|
|
|
|
Terry
Hughes
Address
|
10,000,000
|
62.3%
|
|
|
|
Officers
And Directors
As
A Group (1 In Number)
|
10,000,000
|
62.3%
|
(1) Under
the rules of the SEC, a person is deemed to be the beneficial owner of a
security if such person has or shares the power to vote or direct the voting of
such security or the power to dispose or direct the disposition of such
security. A person is also deemed to be a beneficial owner of any securities if
that person has the right to acquire beneficial ownership within 60 days of the
date hereof. Unless otherwise indicated by footnote, the named entities or
individuals have sole voting and investment power with respect to the shares of
common stock beneficially owned.
(2) This
table is based upon information obtained from our stock records. Unless
otherwise indicated in the footnotes to the above table and subject to community
property laws where applicable, we believe that each shareholder named in the
above table has sole or shared voting and investment power with respect to the
shares indicated as beneficially owned.
Stock Option
Grants
We have
not granted any stock options to our executive officer since our
incorporation.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Our sole
officer, director and founder, Terry Hughes is deemed to be our promoter. Sustut
Exploration, Inc. was incorporated in the State of Delaware on April 11, 2006
and 10,000,000 shares were issued to Terry Hughes as founder’s shares for
services rendered as our President. Other than the share issuance set forth
herein there has been no other transactions with our promoter.
Exhibit
No.
|
Identification
of Exhibit
|
3.1
|
Articles
of Incorporation*
|
3.2
|
Bylaws
*
|
14
|
Code
of Ethics
|
31.1
|
Certification
of Terry Hughes, Chief Executive Officer, and Chief Financial Officer of
Sustut Exploration, Inc., pursuant to 18 U.S.C. §1350, as
adopted pursuant to §302 of the Sarbanes-Oxley Act of
2002.
|
32.1
|
Certification
of Terry Hughes, Chief Executive Officer and Chief Financial Officer of
Sustut Exploration, Inc., pursuant to 18 U.S.C. §1350, as
adopted pursuant to §906 of the Sarbanes-Oxley Act of
2002.
|
*
Incorporated by reference to Form SB-2, filed on May 24, 2007 (File
No. 333-143215)
Audit
Fees
For our
fiscal year ended December 31, 2007 and 2006, we were billed approximately
$1,500 and $1,500, respectively, for professional services rendered for the
audit and reviews of our financial statements.
Tax Fees
For our
fiscal year ended December 31, 2007 and 2006, we were not billed for
professional services rendered for tax compliance, tax advice, and tax
planning.
All Other
Fees
The
Company did not incur any other fees related to services rendered by our
principal accountant for the fiscal year ended December 31, 2007 and
2006.
Audit Related
Fees
For our
fiscal year ended December 31, 2007 and 2006, we were not billed for
professional services rendered for audit related fees.
Pre-approval
Policy
Our Board
of Directors has adopted a procedure for pre-approval of all fees charged by the
our independent auditors. Under the procedure, the Board approves the engagement
letter with respect to audit, tax and review services. Other fees are subject to
pre-approval by the Board, or, in the period between meetings, by a designated
member of Board. Any such approval by the designated member is disclosed to the
entire Board at the next meeting. The audit and tax fees paid to the auditors
with respect to fiscal year 2007 were pre-approved by the entire Board of
Directors.
SIGNATURES
In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this Annual Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated:
March 14, 2008
By /s/ Terry
Hughes
Terry
Hughes,
President,
Chief
Executive Officer,
Chief
Financial Officer,
Principal
Accounting Officer
In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Terry Hughes
|
|
President,
|
|
March
14, 2008
|
Terry
Hughes
|
|
Chief
Executive Officer,
Chief
Financial Officer, Principal Accounting Officer
|
|
|
|
|
|
|
|
SUSTUT
EXPLORATION, INC.
(an
exploration stage company)
AS
OF DECEMBER 31, 2007
SUSTUT
EXPLORATION, INC.
(an
exploration stage company)
INDEPENDENT
AUDIORS REPORT
|
F-1
|
|
|
BALANCE
SHEET
|
F-2
|
|
|
STATEMENT
OF OPERATIONS
|
F-3
|
|
|
STATEMENT
OF STOCKHOLDERS’ EQUITY
|
F-4
|
|
|
STATEMENT
OF CASH FLOWS
|
F-5
|
|
|
FINANCIAL
STATEMENT FOOTNOTES
|
F-6
|
Report
of Independent Registered Public Accounting Firm
We have audited the
accompanying balance sheets of Sustut Exploration, Inc. as of December 31,
2007 and 2006 and the related statements of operations, stockholders’equity, and
cash flows from inception (April 11, 2006) through December 31, 2007. These
financial statements are the responsibility of company’s management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in
accordance with standards of The Public Company Accounting Oversight Board
(United States). 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 includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statements
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the
financial statements referred to above present fairly, in all material respects,
the financial position of Sustut Exploration, Inc. as of December 31, 2007 and
2006 the results of its operations and its cash flows from inception (April 11,
2006) through December 31, 2007 in conformity with U.S. Generally Accepted
Accounting Principles.
/s/ Gately &
Associates, L.L.C.
Gately &
Associates, L.L.C.
Altamonte
Springs, FL
January 30,
2008
SUSTUT
EXPLORATION, INC.
|
|
(an
exploration stage company)
|
|
BALANCE
SHEET
|
|
As
of December 31, 2007 and 2006
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
12/31/2007
|
|
|
12/31/2006
|
|
|
|
|
|
|
|
|
Cash
|
|
$ |
10,157 |
|
|
$ |
4,893 |
|
|
|
|
|
|
|
|
|
|
Total
Current Assets
|
|
|
10,157 |
|
|
|
4,893 |
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$ |
10,157 |
|
|
$ |
4,893 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued
Expenses
|
|
$ |
5,250 |
|
|
$ |
2,500 |
|
Payable
agreement for claim rights
|
|
|
20,000 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Total
Current Liabilities
|
|
|
25,250 |
|
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
LONG-TERM
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable
agreement for claim rights
|
|
|
- |
|
|
|
20,000 |
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
25,250 |
|
|
|
22,500 |
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock, $.001 par value
|
|
|
|
|
|
|
|
|
Authorized:
200,000,000
|
|
|
|
|
|
|
|
|
Issued:
16,059,000 and 16,000,000, respectively
|
|
|
16,059 |
|
|
|
16,000 |
|
Additional paid
in capital
|
|
|
71,641 |
|
|
|
54,000 |
|
Accumulated
deficit during development stage
|
|
|
(102,793 |
) |
|
|
(87,607 |
) |
|
|
|
|
|
|
|
|
|
Total
Stockholders' Equity
|
|
|
(15,093 |
) |
|
|
(17,607 |
) |
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND EQUITY
|
|
$ |
10,157 |
|
|
$ |
4,893 |
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements
SUSTUT
EXPLORATION, INC.
|
|
(an
exploration stage company)
|
|
STATEMENT
OF OPERATIONS
|
|
For
the twelve months ended December 31, 2007 and 265 days ended December 31,
2006, and
|
|
From
inception (April 11, 2006) through December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FROM
|
|
|
|
12/31/07
|
|
|
12/31/06
|
|
|
INCEPTION
|
|
|
|
|
|
|
|
|
|
|
|
REVENUE
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST
OF SERVICES
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT OR (LOSS)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GENERAL
AND ADMINISTRATIVE EXPENSES
|
|
|
15,186 |
|
|
|
12,607 |
|
|
|
27,793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GENERAL
EXPLORATION
|
|
|
- |
|
|
|
75,000 |
|
|
|
75,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
INCOME
|
|
|
(15,186 |
) |
|
|
(87,607 |
) |
|
|
(102,793 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
ACCUMULATED
DEFICIT, BEGINNING
|
|
|
(87,607 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ACCUMULATED
DEFICIT, ENDING
|
|
$ |
(102,793 |
) |
|
$ |
(87,607 |
) |
|
$ |
(102,793 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) per share, basic
|
|
$ |
(0.00 |
) |
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares
|
|
|
16,050,307 |
|
|
|
15,826,415 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements
SUSTUT
EXPLORATION, INC.
|
|
(an
exploration stage company)
|
|
STATEMENT
OF STOCKHOLDERS' EQUITY
|
|
As
of December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADDITIONAL
|
|
|
|
|
|
|
|
|
|
COMMON
|
|
|
PAR
|
|
|
PAID
IN
|
|
|
ACCUM.
|
|
|
TOTAL
|
|
|
|
STOCK
|
|
|
VALUE
|
|
|
CAPITAL
|
|
|
DEFICIT
|
|
|
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April
11, 2006 at $0.001 per share
|
|
|
10,000,000 |
|
|
$ |
10,000 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
10,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April
16, 2006 at $0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
per
share on private placement
|
|
|
6,000,000 |
|
|
|
6,000 |
|
|
|
54,000 |
|
|
|
- |
|
|
|
60,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(87,607 |
) |
|
|
(87,607 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2006
|
|
|
16,000,000 |
|
|
$ |
16,000 |
|
|
$ |
54,000 |
|
|
$ |
(87,607 |
) |
|
$ |
(17,607 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for cash
|
|
|
59,000 |
|
|
|
59 |
|
|
|
17,641 |
|
|
|
|
|
|
|
17,700 |
|
February
21, 2007 at $0.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
per
share on private placement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation
of common stock
|
|
|
(1,000 |
) |
|
|
(1 |
) |
|
|
(299 |
) |
|
|
|
|
|
|
(300 |
) |
issued
for cash March 21, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at
$.30 per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock issued for cash
|
|
|
1,000 |
|
|
|
1 |
|
|
|
299 |
|
|
|
|
|
|
|
300 |
|
July
4, 2007 at $0.30 per
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
share
on private placement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,186 |
) |
|
|
(15,186 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2007
|
|
|
16,059,000 |
|
|
$ |
16,059 |
|
|
$ |
71,641 |
|
|
$ |
(102,793 |
) |
|
$ |
(15,093 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements
STATEMENTS OF CASH
FLOWS
|
|
For the twelve months ended
December 31, 2007 and 265 days ended December 31, 2006,
and
|
|
From inception (April 11, 2006)
through December 31, 2007
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
12/31/2007
|
|
|
12/31/2006
|
|
|
FROM
INCEPTION
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$ |
(15,186 |
)
|
|
$ |
(87,607 |
)
|
|
$ |
(102,793 |
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to
reconcile net income to net cash
|
|
|
|
|
|
|
|
|
|
|
|
|
provided
by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued in
the form of compensation
|
|
|
- |
|
|
|
10,000 |
|
|
|
10,000 |
|
Increase
(Decrease) in Accrued Expenses
|
|
|
2,750 |
|
|
|
2,500 |
|
|
|
5,250 |
|
Increase
(Decrease) in claims payable
|
|
|
- |
|
|
|
20,000 |
|
|
|
20,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
adjustments to net income
|
|
|
2,750 |
|
|
|
32,500 |
|
|
|
35,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash
provided by (used in) operating activities
|
|
|
(12,436 |
)
|
|
|
-55,107 |
|
|
|
(67,543 |
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
None
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows
provided by (used in) investing activities
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from
stock issuance
|
|
|
17,700 |
|
|
|
60,000 |
|
|
|
77,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash
provided by (used in) financing activities
|
|
|
17,700 |
|
|
|
60,000 |
|
|
|
77,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
RECONCILIATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase
(decrease) in cash
|
|
|
5,264 |
|
|
|
4,893 |
|
|
|
10,157 |
|
Cash -
beginning balance
|
|
|
4,893 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH BALANCE END OF
PERIOD
|
|
$ |
10,157 |
|
|
$ |
4,893 |
|
|
$ |
10,157 |
|
|
|
The
accompanying notes are an integral part of these financial
statements
SUSTUT
EXPLORATION, INC.
(an
exploration stage company)
NOTES
TO THE FINANCIAL STATEMENTS
NOTE 1 - OPERATIONS AND BASIS OF PRESENTATION
Sustut
Exploration, Inc. (the Company), an exploration stage company, was incorporated
on April 11, 2006 in the State of Delaware. The Company is an
exploration stage mineral company. On May 5, 2006 the Company became
actively engaged in acquiring mineral properties and raising
capital. The Company did not have any significant exploration
operations or activities from inception; accordingly, the Company is deemed to
be in the development stage.
The
Company’s fiscal year end is December 31.
On May 5,
2006, the Company acquired one mineral claim located near Smithers, British
Columbia, Canada. The property consists of one mineral claim and is
contiguous hard rock mineral.
The
Company's financial statements have been presented on the basis
that it is a going concern, which contemplates
the realization of the mineral
properties and other assets and the
satisfaction of liabilities in the normal
course of business. The Company has incurred losses
from inception to September 30, 2007. The Company has not realized
economic production
from its mineral properties as of September
30, 2007. These factors raise
substantial doubt about the Company's ability
to continue as a going concern.
Management continues to actively seek additional
sources of capital to fund
current and future operations. There is no
assurance that the Company will be
successful in continuing to raise additional capital,
establishing probable or
proven reserves, or determining if the
mineral properties can be mined economically. These financial statements do not
include any adjustments that might
result from the outcome of these uncertainties.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue and Cost
Recognition
The
Company uses the accrual basis of accounting for financial statement
reporting. Revenues and expenses are recognized in accordance with
Generally Accepted Accounting Principles for the industry. Certain
period expenses are recorded when obligations are incurred.
Use of
Estimates
The
preparation of the financial statements in conformity with general accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities, and disclosure of
contingent liabilities at the date of the financial statements, and the reported
amount of revenues and expenses during the reporting period. Actual results
could differ from those results.
SUSTUT
EXPLORATION, INC.
(an
exploration stage company)
NOTES
TO THE FINANCIAL STATEMENTS
Accounts Receivable,
deposits, Accounts Payable and accrued Expenses
Accounts
receivable have historically been immaterial and therefore no allowance for
doubtful accounts has been established. Normal operating refundable
Company deposits are listed as Other Assets. Accounts payable and
accrued expenses consist of trade payables created from the normal course of
business.
Non-mining Property and
Equipment
Property
and equipment purchased by the Company are recorded at cost. Depreciation is
computed by the straight-line method based upon the estimated useful lives of
the respective assets. Expenditures for repairs and maintenance are
charged to expense as incurred as are any items purchased which are below the
Company’s capitalization threshold of $1,000.
For
assets sold or otherwise disposed of, the cost and related accumulated
depreciation are removed from accounts, and any related gain or loss is
reflected in income for the period.
Income Taxes
The
Company accounts for income taxes using the liability method which requires
recognition of deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Deffered tax assets and liabilities are determined based on the
difference between the financial statements and tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. The Company's management determines if a
valuation allowance is necessary to reduce any tax benefits when the available
benefits are more likely than not to expire before they can be
used.
Stock Based Compensation
The
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 123(R), "Accounting for Stock-Based Compensation." (SFAS 123 (R)).
SFAS 123(R) requires that companies recognize compensation expense for grant of
stock, stock options, and other equity instruments based on fair value. The
Company has adopted SFAS 123(R) in accounting for stock-based
compensation.
Cash and Cash Equivalents,
and Credit Risk
For purposes of
reporting cash flows, the Company considers all cash accounts with maturities of
90 days or less and which are not subject to withdrawel restrictions or
penalties, as cash and cash equivalents in the accompanying balance
sheet.
SUSTUT
EXPLORATION, INC.
(an
exploration stage company)
NOTES
TO THE FINANCIAL STATEMENTS
The
portion of deposits in a financial institution that insures its deposits with
the FDIC up to $100,000 per depositor in excess of such insured amounts are not
subject to insurance and represent a credit risk to the Company.
Foreign Currency Translation
and Transactions
The
Company’s functional currency is the US dollar. No material
translations or transactions have occurred. Upon the occurrence of
such material transactions or the need for translation adjustments, the Company
will adopt Financial Accounting Standard No. 52 and other methods in conformity
with Generally Accepted Accounting Principles.
Earnings Per Share
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting
Standards No. 128 (SFAS 128), "Earnings Per Share". SFAS
128 replaces the presentation of primary earnings per share with a
presentation
of basic earnings per share based
upon the weighted average number of common
shares for the period.
NOTE 3 - AFFILIATES AND RELATED PARTIES
Significant
relationships with (1) companies affiliated through common ownership
and/or management, and (2) other related parties are as follows:
The
Company has ownership of the Don 1-2 claims which were placed in trust with the
Company’s President.
The
Company has stock-based compensation with directors of the Company as disclosed
in Footnote No. 7.
NOTE 4 - MINERAL PROPERTIES
The Company's net investment
in mineral properties include one claim as described in footnote number 1 have
all costs related to the claim have be expended in accordance with Generally
Accepted Accounting Principles for the industry . Currently the
Company does not have proven reserves by a geological study and will begin to
capitalize amortizable property once reserves have been proven.
SUSTUT
EXPLORATION, INC.
(an
exploration stage company)
NOTES
TO THE FINANCIAL STATEMENTS
NOTE 5
- - INCOME TAXES
The income tax payable
that was accrued for the year ended December 31, 2007 was offset by the
Company’s net operating loss carry-forward therefore the provisions for income
tax in the income statement is $0. For the twelve months ended
December 31, 2007 the Company had an operating loss of $15,186, which is a loss
that can be carried forward to offset future income for a period of 20 years.
The Company has net operating loss carry-forwards that were derived solely from
operating losses. These amounts can be carried forward to be used to offset
future income for tax purposes for a period of 20 years for each year’s loss.
The accounting for these losses derives a deferred tax asset for the twelve
months ended December 31, 2007 of 20,559.
No provision was made for
federal income tax since the Company has significant net operating losses. From
inception through December 31, 2007, the Company incurred net operating losses
for tax purposes of approximately $102,793. The net operating loss carry
forwards may be used to reduce taxable income through the years 2026 to 2027.
The availability of the Company’s net operating loss carry-forwards are subject
to limitation if there is a 50% or more positive change in the ownership of the
Company’s stock. The provision for income taxes consists of the federal and
state minimum tax imposed on corporations.
Deferred income taxes
reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial statement purposes and the
amounts used for income tax purposes. Significant components of the Company's
deferred tax liabilities and assets as of December 31, 2007 are as
follows:
Deferred
tax assets:
|
|
|
|
Federal
net operating loss
|
|
$
|
15,419
|
|
State
net operating loss
|
|
|
5,140
|
|
|
|
|
|
|
Total
deferred tax assets
|
|
|
20,559
|
|
Less
valuation allowance
|
|
|
(20,559
|
)
|
|
|
|
|
|
|
|
$
|
--
|
|
The Company has provided a
100% valuation allowance on the deferred tax assets at December 31, 2007 to
reduce such asset to zero, since there is no assurance that the Company will
generate future taxable income to utilize such asset. Management will review
this valuation allowance requirement periodically and make adjustments as
warranted.
SUSTUT
EXPLORATION, INC.
(an
exploration stage company)
NOTES
TO THE FINANCIAL STATEMENTS
The
reconciliation of the effective income tax rate to the federal statutory rate
for the periods ended December 31, 2007 and December 31, 2006 is as
follows:
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Federal
income tax rate
|
|
|
(15.0
|
%)
|
|
(15.0
|
%)
|
State
tax, net of federal benefit
|
|
|
(5.0
|
%)
|
|
(5.0
|
%)
|
Increase
in valuation allowance
|
|
|
20.0
|
%
|
|
20.0
|
%
|
|
|
|
|
|
|
|
|
Effective
income tax rate
|
|
|
0.0
|
%
|
|
0.0
|
%
|
NOTE
6 – CLAIM
AGREEMENT
On May 5,
2006, the Company entered into an agreement with Richard Simpson of Vancouver,
BC to acquire one rock mineral claim covering 445.70 hectares. The
agreement called for a 100% interest in the claims subject to a 2.5% Net Smelter
Royalty (NSR) for a total of $25,000. 1.5% of the NSR can be acquired
for $1.0 million within 12 months from commencement of commercial
production. Advance royalties of $20,000 shall be paid annually
commencing January 17, 2010. The purchase of the claim
required payment of $55,000 on May 15, 2006 and a further $20,000 on or before
May 15, 2008
NOTE 7
- - SHAREHOLDERS' EQUITY
Common
Stock
The
Company has authorized two hundred million (200,000,000) shares of common stock
with a par value of $.001.
Upon
incorporation the Company issued 10,000,000 common shares to directors of the
Company as compensation in the amount of $10,000, or $0.001 per
share.
During
April 2006 the Company undertook a Section 4(2) registration under the
Securities Act of 1933 to raise $60,000 in the issuance of 6,000,000 shares of
common stock for the purpose of acquisition and exploration of mining
properties. The Company’s management considers this offering to be
exempt under the Securities Act of 1933.
During
February 2007, the Company undertook a Section 4(2) registration under the
Securities Act of 1933 to raise $17,700 in the issuance of 59,000 shares of
common stock at $.30 per share. The Company’s management considers this offering
to be exempt under the Securities Act of 1933.
SUSTUT
EXPLORATION, INC.
(an
exploration stage company)
NOTES
TO THE FINANCIAL STATEMENTS
During
March 2007, the Company cancelled the issuance of 1,000 shares of common stock
at $.30 per share.
During
July 2007, the Company reissued 1,000 shares of common stock at $0.30 per share
that were cancelled during March 2007.
NOTE 8
- - COMMITMENTS AND CONTINGENCIES
The
Company’s claim will revert back to the seller within no less than a 10 day
period if the Company fails to make the advance royalty payments per the sales
contract commencing 5 years from the date of the agreement.
Management
is not aware of any contingent matters that could have a material adverse effect
on the Company’s financial condition, results of operations, or
liquidity.
NOTE 9
- - LITIGATION, CLAIMS AND
ASSESSMENTS
From time
to time in the normal course of business the Company will be involved in
litigation. The Company’s management has determined any asserted or
unasserted claims to be immaterial to the financial
statements.
F-11