TMCnet News
AMERICAN CORDILLERA MINING CORP - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION(Edgar Glimpses Via Acquire Media NewsEdge) THE FOLLOWING PLAN OF OPERATIONS SECTION SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL STATEMENTS AND THE NOTES THERETO INCLUDED IN THIS QUARTERLY REPORT ON FORM 10-Q. ALL STATEMENTS IN THIS QUARTERLY REPORT RELATED TO OUR CHANGING FINANCIAL OPERATIONS AND EXPECTED FUTURE OPERATIONAL PLANS CONSTITUTE FORWARD-LOOKING STATEMENTS. THE ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE ANTICIPATED OR EXPRESSED IN SUCH STATEMENTS. FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE. This discussion and analysis of our financial condition and results of operations are based on our financial statements that have been prepared under accounting principles generally accepted in the United States of America. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could materially differ from those estimates. We have disclosed all significant accounting policies in Note 2 to the financial statements included in this Form 10-Q. Corporate Background American Cordillera Mining Corporation or AMCOR, was incorporated on July 23, 1996, under the laws of the State of Nevada for the purpose of acquiring, importing, marketing, and selling valuable antiquity and art items of Asian origin. Since we changed business directions into a mining company, our mining exploration stage from inception on March 30, 2012 to May 31, 2014, has generated minimal revenue from our mining exploration business, while incurring a net loss of approximately $224,125. Because we were unable to develop our original Asian art and antiquities business into a financially viable business, the Board of Directors decided to redirect our business and to acquire mineral properties, leases on mineral properties and mining claims from Northern Adventures, Inc., a private Nevada corporation. On December 28, 2012, AMCOR, AMCOR Exploration, Inc., a wholly owned subsidiary of American Cordillera Mining Corporation, Northern Adventures, LLC, and Northern Adventures, Inc. entered into an Asset Purchase Agreement to assign all right, title, and interest of specific NAI owned assets to AMCOR Exploration, with NAI shareholders, on a post acquisition basis, will hold a controlling 80.5% interest in American Cordillera Mining Corporation The Asset Purchase Agreement was executed on December 28, 2012 by issuing restricted common stock as consideration to Northern Adventures, Inc. and the exchange of certain promissory notes from Northern Adventures LLC detailed in the Asset Purchase Agreement. Under the terms of the Asset Purchase Agreement, AMCOR exchanged loans to NALLC in the amount of $382,500 including additional accrued interest of $30,564 and issued NAI 71,500,000 shares of restricted common stock as a total consideration for the assets acquired. With the issuance of the 71,500,000 shares to NAI for transferring to its shareholders as a dividend, they own the controlling interest in AMCOR. The Asset Purchase Agreement related to the acquisition of: 1) all right, title and interest in five existing mineral leases consisting of 154 unpatented claims and 3 patented claims; 2) ownership of 83 unpatented mining claims; and 3) the transfer of all right, title and interest to an Option to Purchase Mineral Leases agreement relating to ten mineral leases granted by the State of Washington covering 4,664 acres of land and 27 unpatented mining claims. On December 6, 2012, the Option to Purchase Mineral Leases was amended between all the parties to the option agreement, Hydro Imaging, Inc., NAI and AMCOR. The amended option agreement speaks to the possibility of a large company entering into an agreement with HydroImaging, Inc., the owner of the prospecting rights and future leases; and the claims, in which case AMCOR would still exercise the existing option pursuant to the same terms and conditions, the only material difference being that it would then acquire all right, title and interest in the agreement between HydroImaging and the unrelated third party company, as compared to acquiring the prospecting rights and future leases directly. HydroImaging, Inc. is owned by David Boleneus, one of our directors. At December 28, 2012 a total of $41,078 of interest had accrued on the convertible promissory notes with an aggregate principal amount of $486,000. All of these convertible promissory notes and the accrued interest on each note were converted to shares of restricted common stock at $0.05 per share, as of December 28, 2012. Plan of Operations AMCOR intends to conduct exploration for gold, silver and base metal deposits and mineral targets in; 1) the Coeur d'Alene Mining District of northern Idaho; 2) in the Quartz Creek Mining District of western Montana; 3) in the Connor Creek Mining District of eastern Oregon; 4) in the Kootenai ARC district in Idaho; 5) the Judith-Moccasin Mining District in central Montana; and 6) the Toroda Creek, Wauconda and Republic Mining Districts in northern Washington. Our strategy is to explore for gold, silver and base metal deposits primarily in the Coeur d'Alene Mining District, a world class mining district and other known districts, by forming - 33 - -------------------------------------------------------------------------------- joint ventures with other companies who will potentially earn their interest in the property by contributing cash. Revival of operations in old districts can be easily justified on the basis of increases in prices of metals in the last decade. Several important corporate priorities set by AMCOR management are expressed by the choice of these abandoned mines, exploration projects, and prospects. There are certain priorities that may contribute to the strategic advantages to AMCOR's operations, as well as advantages in efficiencies, economy, and cost savings. These priorities are: (1) the properties be valuable for gold or silver for the purpose of leveraging future returns from the current prices of these metals; additional metal values also known to be present in several of these properties would represent added value; (2) emphasize work in select mining districts in order to leverage operational experiences, similar geology and knowledge bases peculiar within a district; (3) assemble operations within hauling distance to operating custom mills in view of establishing future toll milling agreements; and (4) operate in areas within reasonable commute distance to AMCOR's base of operations. The emphasis for locating of projects in known mining districts is important because other mining prospects within the same districts are also available from time to time for evaluation and/or acquisition. We structure our operations in such a way as to keep our capital expenditures and administrative expenses to a minimum. Overhead and staff will be kept to a minimum and the majority of operational duties will be outsourced to consultants and independent contractors. We currently have no employees, but we expect to eventually hire three to five employees, commensurate with the development of our business and the availability of additional capital from the future sale of common stock, of which there is no assurance. We believe that most operational responsibilities can be handled by the officers and directors, and through the working partnership of other consultants. Two of our officers may draw salaries in the future, Frank H. Blair, our President and CEO, and Dwight Weigelt, CPA, our Secretary, Treasurer and Chief Financial Officer. Our other officers and directors may be retained on an as needed basis and will be paid an hourly rate of to be determined by the Board and reimbursed any out of pocket expenses. We anticipate that any additional funding that we require will be in the form of equity financing from the sale of our restricted Common Stock. However, there is no assurance that we will be able to raise sufficient funding from the sale of our restricted Common Stock. The risky nature of this enterprise and lack of tangible assets places debt financing beyond the credit-worthiness required by most banks or typical investors of corporate debt until such time as an economically viable mine can be demonstrated. We do not have any arrangements in place for any future equity financing. If we are unable to secure additional funding, we will cease or suspend operations. We have no plans, arrangements or contingencies in place in the event that we cease operations. We will focus our future business on evolving into a growth-orientated, newly reorganized, early stage, and independent mineral and precious metal exploration company engaged in the acquisition, exploration, exploitation and development of mineral and precious metal properties; focusing our activities in the western United States. Through the recent acquisitions from NAI, AMCOR owns all, right, title and interest in 83 unpatented mining claims which make up four properties; 2) has the option to acquire certain mineral leases from the state of Washington covering 4,664 acres and 27 unpatented mining claims in Okanogan County; and 3) all right, title and interest in five existing mineral leases. Our material financial obligations for the future will include our public reporting expenses, transfer agent fees, bank fees, lease payments due on mineral properties and other recurring fees, combined with any additional operating expense related to our new business. During the next twelve months we plan to engage in additional joint ventures and attempt to seek financing opportunities to commence a growth plan that will include the acquisition of additional mineral exploration properties as well as the possibility of selling additional equity in the form of common stock. To accelerate the development program we will attempt to engage in other joint venture programs that will take responsibility, both financially and in labor, of the capital costs of early exploration. This economic strategy may allow us to utilize our own financial assets toward the exploration on our own properties and mineral leases. Our future financial results will depend primarily on: (i) the ability to discover commercial quantities of precious or base metal on properties which we own or lease: (ii) the ability to continue to source and screen potential projects; (iii) the market price for precious metals; and (iv) the ability to fully implement our exploration and development programs on our nine projects, which is dependent on the availability of capital resources. There can be no assurance that we will be successful in any of these respects or that the prices of metals will be at a level allowing for profitable production, in the event we are able to define a commercial ore body, of which there is no assurance. Transatlantic Mining Corp. (formerly Archean Star) Agreement On February 5, 2013, we entered into a definitive Option and Joint Venture Agreement with Transatlantic Mining Corp. ("TMC") pertaining to 20 unpatented claims known as the Monitor property, leased by AMCOR pursuant to a Mining Lease with Northern Adventures, LLC. On June 27, 2012, Northern Adventures, LLC originally entered into the Mining Lease with Northern Adventures, Inc., and AMCOR assumed the rights in that Mining Lease from Northern Adventures, Inc. pursuant to the Asset Purchase Agreement - 34 - -------------------------------------------------------------------------------- dated December 28, 2013. As part of the transaction, AMCOR received 500,000 shares of TMC common stock and was to receive an additional 500,000 shares of TMC common stock on the second and third anniversaries of the agreement, subject to TMC going forward with the agreement after year one. (See Note 6) TMC assumed the obligations of the underlying lease agreement and paid an up-front fee of $7,500 to AMCOR in addition to $5,000 already received by AMCOR indirectly from TMC. Under the terms of the agreement TMC can earn up to 80% ownership interest in the property lease by expending $2,100,000 over a three year period, with a minimum expenditure of $700,000 in year one of the agreement. AMCOR's interest shall be a Carried Interest until such time as a Bankable Feasibility Study has been produced or a Decision to Mine has been made. A Carried Interest means that AMCOR is not required to contribute any capital or pay any costs related to exploration or development of the property until such time as the joint venture is formed. A Bankable Feasibility Study is an independently audited document that analyses all technical and financial risks before the construction of mine including: capital costs, grades, permits, taxation, cash flow, strip ratio, politics, water, power, labor, revenues, royalties, metallurgy, milling and transport. As of September 30, 2013, TMC completed a multi-phase surface exploration program which consisted of mapping, rock chip and soil sampling, and location of an additional 85 unpatented mining claims owned by Northern Adventures LLC, but the costs related to the acquisition of these additional mining claims was paid for by TMC, but deemed to be part of the agreement pursuant to the standard area of influence. The initial surface work was undertaken to delineate the mineralized structures and veins that were known to exist on the Richmond and Monitor properties. Initial work was completed related to opening the Adair adit, which was a haulage way that was driven in the 1920's. Access was gained back to a point approximately 3,200 feet from the portal. Additional work will be required to be completed to gain complete access to the balance of the haulage way, which estimated from historical maps to continue for another 2,000 feet or more. Applications have been made to the United States Forest Service to receive permits to undertake a rehabilitation of the Adair portal and to drill up to 12 surface diamond drill holes in the spring of 2014. TMC agreed to issue 500,000 shares of its restricted common stock to AMCOR on, or before, February 5, 2014, per the joint venture option agreement's second year requirements related to the Monitor mine, but these shares were not issued until March 12, 2014. As of May 31, 2014, only $593,274 had been expended by TMC on the Monitor-Richmond property. The Company has carried forward the $106,726 deficiency to year two, making the required expenditure for year two to be $806,726. Kinross Agreement On April 5, 2013 we exercised an option to acquire three mineral leases located in Okanogan County, Washington, pursuant to an Option to Purchase Mineral Leases between Hydro Imaging, Inc. and Northern Adventures, Inc. (NAI) entered into on June 25, 2012 and amended on December 7, 2012, which option was transferred to us on December 28, 2012 by NAI pursuant to an Asset Purchase Agreement. The original option was granted by HydroImaging, Inc (Hydro), a private company owned solely by David Boleneus, currently a member of our board of directors, to NAI on June 25, 2012. Under the terms of the original option, Hydro granted the right to acquire ten leases granted by the Department of Natural Resources for the State of Washington totaling 4,583.76 acres and 27 unpatented mining claims located in the Toroda Creek-Wauconda Mining district in Okanogan country in the State of Washington for the payment of an exercise price of $10,000. An amendment to the Option to Purchase Mineral Leases on December 7, 2012 provided Hydro the authority to enter into a Mining Lease and Assignment agreement with Kinross Gold USA, Inc. (Kinross), as an alternative to transferring the ten leases and subject to Hydro executing an agreement with Kinross. As an alternative to acquiring the ten leases and pursuant to the amendment, AMCOR was also granted an option to acquire all right, title and interest in any agreement reached between Kinross and Hydro. On February 28, 2013, Hydro concluded a Mining Lease and Assignment agreement with Kinross transferring seven of the ten mineral leases totaling 2,934.56 acres and a lease on 27 unpatented mining claims located in Okanogan County, Washington. The seven state leases were transferred from Hydro to Kinross and approved by the State of Washington on March 27, 2013. Pursuant to the terms of the Kinross agreement, Kinross will assume all of the underlying obligations, annual rental expenses, and work requirements related to the seven leases and 27 unpatented mining claims. The remaining three state mining leases totaling 1,649.2 acres will be transferred from Hydro to AMCOR, subject to approval from the Department of Natural Resources for the State of Washington. Under the terms of the Mining Lease and Assignment agreement, Kinross will pay AMCOR production royalties as follows: a 1% net smelter return royalty on all minerals extracted from the area covered by the 7 leases and a 2.5% net smelter return royalty on all minerals extracted from the area covered by the 27 unpatented mining claims. The amount of royalties to be paid (both production royalties and advance royalty payments) are capped at $3 million per lease. Kinross will also pay advance royalty payments in the aggregate amount of $1 million as follows: $15,000 payable within 7 days of February 28, 2013, the effective date, $15,000 payable within 15 days of the effective date, $40,000 payable on February 28, 2014, $50,000 payable on February 28, 2015, and thereafter the annual advance royalty payment is to increase by 5% per year up to a maximum annual payment of $100,000. Kinross satisfied the initial two $15,000 payments as well as the first year payment of $40,000. The obligation to pay the advance royalty payment shall cease once an aggregate of $1 million has been paid. Advance minimum royalty payments shall be creditable against the production royalties. The production royalty payments for Minerals produced from the state leases shall be capped at $3,000,000 for each of the seven leases, including any advanced royalty payments to be offset. Kinross also undertakes to make such payments and undertake such other actions necessary to maintain the seven state mining leases and the unpatented claims in effect and good standing. - 35 - --------------------------------------------------------------------------------Bayhorse Silver Inc. Agreement On December 4, 2013, AMCOR signed an Option and Joint Venture Agreement with Bayhorse Silver Inc. ("BSI"), a Canadian mineral exploration company, whereby BSI can acquire an option to earn an 80% interest in the Bayhorse Silver Mine ("Bayhorse") in east-central Oregon State. The terms of the Agreement called for a payment of US$20,000 from BSI to AMCOR subsequent to the execution of the agreement and that payment was received in December 2013. To earn the 80% interest the BSI is required to conduct a minimum of US$100,000 per year on exploration expenditures on the property on, or before, each of the first two anniversaries of the Agreement, US$300,000 on or before the third anniversary of the Agreement and expend US$500,000 on or before the fourth and fifth anniversaries of the Agreement. In addition, BSI issued 500,000 shares of its restricted common stock to AMCOR, per the agreement, on December 16, 2013. An additional 500,000 restricted shares of BSI shall be issued to AMCOR on the third anniversary of the Agreement and 500,000 restricted shares on the fifth anniversary of the Agreement. BSI will assume the obligations of the underlying lease agreement with Northern Adventures, Inc. On December 16, 2013, Bayhorse Silver Inc. issued 500,000 shares of BSI common stock (Stock Symbol: BSI.V) to the Company, which was valued at CAD50,000 based on CAD0.10 per share on the date of issuance (CAD1 approximates $1) and recorded as return of investment in mineral rights. On December 24, 2013 and December 27, 2013 BSI paid the Company two payment of $10,000 each, or $20,000 in aggregate, which was recorded as return of investment in mineral rights. On February 12, 2014, Bayhorse Silver Inc. issued 125,000 shares of its subsidiary, Silcom Systems Inc. (Silcom), restricted common stock to the Company for no consideration. The issuance was dividend shares from their subsidiary, Silcom, given to shareholders of Bayhorse Silver Inc. There is no market for the shares currently. Royalty Obligations and Work Requirement with Mining Leases of Bayhorse, Vienna, Quartz Creek, and Trout Creek: The four leases including the Bayhorse, Vienna, Quartz Creek, and Trout Creek required first anniversary payments by the Company of $10,000 each and second anniversary payment by the Company of $20,000 each to the lessees, but no payments have been made. The first anniversary royalty payment was deferred until December 31, 2014 or payable within ten business days after the Company secures funding in excess of $500,000. The second anniversary royalty payment was deferred until December 31, 2014 or payable within ten business days after the Company secures funding in excess of $500,000. The first and second year work requirement for the Vienna, Quartz Creek, and Trout Creek leases have also been deferred, allowed to be accomplished at the earliest possible time, weather permitting. The first and second year work requirement for the Bayhorse lease has been fulfilled. The Box Group and McKinley-McNally Properties The 15 unpatented mining claims located in Stevens County, Washington referred to as the Box Group were reduced to six claims in 2014. The 15 unpatented mining claims located in Stevens County, Washington referred to as the McKinley-McNally Property, were reduced to six claims in 2014. Results of Operations Since AMCOR became a mining company and entered exploration stage on March 30, 2012 (inception), it has earned minimal revenue of $70,000 and has incurred a deficit accumulated during the exploration stage of $224,125 through May 31, 2014. Results of operations for the six months ended May 31, 2014, compared to the five months ended May 31, 2013 are as follows: Revenue We generated no revenue from sale of metal bearing concentrate for the six months ended May 31, 2014, or the five months ended May 31, 2013.. We earned $40,000 in royalty revenue for the six months ended May 31, 2014, and $30,000 for the five months ended May 31, 2013. The cost of revenue was $7,522 for the six months ended May 31, 2014 in comparison with $14,283 for the five months ended May 31, 2013. Operating Expenses - 36 - -------------------------------------------------------------------------------- For the six months ended May 31, 2014, we incurred $28,875 in professional fees and $4,893 in general and administrative expenses in comparison with the five months ended May 31, 2013 where we incurred $98,570 in professional fees and $2,950 in general and administrative expenses. The decrease in professional fees was attributable to the previous cost associated with the acquisition of mineral assets and change of business direction. The increase in general and administrative expenses was attributable mainly to increase in rent expense. We expect operating expenses for our 2014 fiscal year to remain comparable in comparison with that for our 2013 transition period. Net cash used in operating activities for the six months ended May 31, 2014 was $29,411 which includes net loss of $2,948, offset by a decrease in prepaid expenses of $5,000, a decrease in accounts payable of $23,122, and an accrued expense of $1,659. Net cash provided by investing activities for the six months ended May 31, 2014 was $20,000 which includes cash provided by return of investment in mineral rights of $20,000. Net cash provided by financing activities for the six months ended May 31, 2014 was $12,800 which includes cash proceeds from related party notes payable of $20,000, proceeds from notes payable of $300, and offset by cash used in repayments of related party notes payable of $7,500. Liquidity and Capital Resources With respect to long term liquidity (periods in excess of one year), we are unable to reasonably project or otherwise make assumptions concerning future cash flows or amounts of funds that may be available to us. Although lease royalty agreements are in place, those can be cancelled at any time by the other party. With additional funding to carry on and support operations, management anticipates that our operating expenses would increase in the long-term as a result of an increase in sales and marketing activities, as well as general and administrative costs. Long-term liquidity is directly dependent upon either the future success of our business or our ability to identify and acquire a favorable business opportunity through merger or acquisition. Without reasonable funding in the near future, we would attempt to enter into one or more business transactions that could involve a merger or sale of our company and/or the sale of some or all of its assets to protect our shareholders' interest and investments. No binding merger or acquisition agreements have been entered into at this time. Our cash in the bank at May 31, 2014 was $3,527. We do not have any available lines of credit. Since inception we have financed our operations from private placements of equity securities, royalty revenue, and loans. On May 31, 2014, we had $15,500 due for convertible notes payable, 20,000 due for related party convertible notes payable, $12,500 due for related party notes payable, and $2,800 due for notes payable. We intend to pay these notes from private placements of equity securities and royalty revenue, but if we are unable to raise additional capital or receive further loans on an as needed basis, we will have to curtail or cease our operations. Our recent cash burn rate in our operations over the six months ended May 31, 2014, has been approximately $500 per month. We expect that that cash burn rate to increase substantially over the next quarter due to increased professional fees and general and administrative fees related to a private placement offering to be launched in July 2014. Given this recent rate of use of cash in our operations, we do not have sufficient capital to carry on operations past August 2014. Our long term capital requirements and the adequacy of our available funds will depend on many factors, including the reporting company costs, public relations fees, and operating expenses, among others. If we are unable to raise additional capital to repay loans, generate sufficient revenue, or receive further loans on an as needed basis, we will have to curtail or cease our operations. We believe that we could experience negative operating cash flow for the foreseeable future. At May 31, 2014, we had outstanding liabilities of $109,474 of which $50,800 was due to convertible and non-convertible notes payable. If our outstanding non-convertible loans are not repaid before December 31, 2014 and our convertible debt is not converted to equity before December 31, 2014, and we cannot repay this debt on the maturity date, we will be required to ask for extensions from the lenders or engage in another equity offering to provide capital to repay the debt. If the lenders do not convert their debt to equity and we cannot raise further capital through and equity offering, there is a high probability that the company would become insolvent and could potentially go out of business. Our existing cash position is not sufficient to support our operations. Accordingly, we continue to examine a range of possible funding sources, including additional strategic alliances, additional equity or debt private placements, the sale of existing assets, as well as the possibility of entering into one or more business transactions that could involve a merger or sale of our company and/or the sale of some or all of its assets. We do not currently have any contractual restrictions on our ability to incur debt. Any such indebtedness could contain covenants that would restrict our operations. There can be no assurance that additional financing will be available on terms favorable to us, or at all. If equity or convertible debt securities are issued, the percentage ownership of our stockholders will be reduced, stockholders may experience additional dilution and such securities may have rights, preferences or privileges senior to those of our common stock. This effect is attributed to the fact that while additional shares of common stock are issued from our treasury, our earnings at that particular moment remain consistent and, therefore, the earnings per share decreases. If we are unsuccessful in these efforts, we will be required to curtail our ongoing operations. If we were unable to sufficiently curtail our - 37 - -------------------------------------------------------------------------------- costs in such a situation, we might be forced to seek protection of the courts through reorganization, bankruptcy or insolvency proceeding, or cease operations completely. Going Concern Our independent auditors have included an explanatory paragraph in their report on the audits of our consolidated financial statements for the transition period ended November 30, 2013, which express substantial doubt about our ability to continue as a going concern. As discussed in Note 3 to the consolidated financial statements included in our 2013 Annual Report on Form 10-K, we have suffered recurring losses from operations since inception and have a deficit accumulated during the exploration stage that raises substantial doubt about our ability to continue as a going concern. Critical Accounting Policies and Estimates Please see Note 2 of the financial statements. Subsequent Events None ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not required ITEM 4. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures In connection with the preparation of this quarterly report on Form 10-Q, an evaluation was carried out by our management, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (Exchange Act)). Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures. Based on its evaluation, and in light of the previously-identified material weaknesses in internal control over financial reporting, as of November 30, 2013, described in the 2013 Annual Report on Form 10-K, our Chief Executive Officer and Chief Financial Officer concluded that, as of May 31, 2014, our disclosure controls and procedures were not effective. Changes in Internal Control Over Financial Reporting There has been no change in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. There has been no progress towards remediating our previously disclosed material weakness due to the lack of funding. - 38 - -------------------------------------------------------------------------------- |