September 20, 2011

Del Toro Silver Corp. Files SEC form 10-Q, Full Quarterly Report available on EDGAR

Form 10-Q for DEL TORO SILVER CORP.

20-Sep-2011

Quarterly Report

 
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our consolidated unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "US$" refer to United States dollars and all references to "common stock" refer to the common shares in our capital stock.

As used in this quarterly report, the terms "we", "us", "our" and "our company" mean Del Toro Silver Corp., unless otherwise indicated.

General Overview

Our company was incorporated on January 9, 2006 as Candev Resource Exploration, Inc. under the laws of the State of Nevada and extra-provincially registered under the laws of the Province of British Columbia on August 15, 2006. Effective July 28, 2009, our company completed a merger with our wholly owned subsidiary, Del Toro Silver Corp., a Nevada corporation which was incorporated on July 7, 2009 solely to change our company's name to Del Toro Silver Corp.

Current Business

We are presently an exploration stage company focused on conducting exploration activities on our Dos Naciones property in Mexico and exercising our option under an option agreement with Yale Resources Ltd. dated July 7, 2009, as amended June 25, 2010 and October 21, 2010. The Dos Naciones property is located approximately 140 km north northeast of the city of Hermosillo, in north-central Sonora, Mexico and is approximately 75 km southwest of the important Cananea mining district. The Dos Naciones property is comprised of one mineral concession that covers approximately 2,391 hectares.

Our company received a technical report dated March 25, 2009 from our consulting geologist David J. Pawliuk respecting the Dos Naciones property. Pursuant to the report, Mr. Pawliuk recommended a three phase exploration program on the Dos Naciones property to explore potential mineralization on the property. The report found that Dos Naciones property hosts different styles of significant metallic mineralization and that economic concentrations of silver and lead occur in quartz veins at both the Josefina and the Dos Naciones occurrence areas within the property.

 


We intend to conduct a three phase exploration program on the Dos Naciones property at an aggregate estimated cost of $450,000 subject to receiving additional financing. The first phase of our exploration program commenced in July, 2010. The first phase consists of detailed geological mapping, sampling, hand trenching and prospecting. In July, 2010, our operator on the Dos Naciones property engaged geological consultants to conduct mapping and sampling on the property.

We have submitted 38 samples from the July/August 2010 work program to an assay lab to confirm the sampling results. In October, 2010, fieldwork completed by us was successful in identifying multiple new exposures of veins as well as a historic working that was previously unknown. The Josefina target now consists of a series of at least six sub-parallel veins with the core of the silver/lead system having been traced along surface for approximately 600 meters along strike and over 250 meters wide. Highlights from the 38 samples submitted are channel chip samples from the interior of the Josefina working returning 129g/t Ag with 5.23% Pb over 1.0 meters and 105g/t Ag with 4.21% Pb over 0.50 meters.

In December, 2010 we completed an ASTER (Satellite Imaging) study on the Dos Naciones property and surrounding mines, and continued our field work consisting of detailed geological mapping, sampling and prospecting towards identifying drill targets. A follow up field program in the area was commenced in January, 2011 to expand the mapping and sampling of the surrounding areas based on the ASTER report study. Based on the results of our past field program we intend to commence a drill program in October, 2011 on the La Espanola target to obtain further information on mineralization occurrences on the area. Our company decided to delay the drill program to October, 2011 due to the unavailability of drilling companies for the program.

We have completed Phase I and have commenced Phase II of exploration on our Dos Naciones property. Once we complete each phase of exploration, we will make a decision as to whether or not we proceed with each successive phase based upon the analysis of the results of that program. Our management will make these decisions based upon the recommendations of the independent geologist who oversees the program and records the results.

Plan of Operation

Our plan of operation is to conduct exploration activities on our Dos Naciones property, exercise the option under the option agreement with Yale and subsequently enter into a joint venture agreement with Yale.

We intend to conduct a three phase exploration program on the Dos Naciones property at an aggregate estimated cost of $450,000. The first phase of our exploration program was completed during the quarter ended October 31, 2010. The first phase consisted of detailed geological mapping, sampling, hand trenching and prospecting. In July, 2010 our company's operator on the Dos Nactiones property engaged geological consultants to conduct mapping and sampling on the property. Our company commenced the second phase of its exploration program in September, 2011. If the results of the second phase of our exploration program warrant the continuation into the third phase of the program, we intend to conduct the third phase of the program consisting of further diamond drilling of identified IP anomalies from Phase II at an estimated cost of $174,000. A detailed breakdown of the proposed budget and work exploration program is as follows:

 

Estimated Dos Naciones Work Program Costs

Phase One
Detailed geological mapping, stripping and trenching           Cost
1 Geologist for 50 days @ $300 per day:                     $ 15,000
3 Field Assistants for 50 days @ $100 per day:              $ 15,000
Food and accommodation @ $30 per man-day:                   $  6,000
Field supplies:                                             $  1,000
Vehicle rental, fuel and maintenance:                       $  5,000
Analytical costs: 300 samples @ $30 per sample:             $  9,000
        Total geological mapping, stripping and trenching:  $ 51,000
Report preparation
For reporting on all of the above work, including drafting: $  2,500

 


 

                         Subtotal Phase One                           $    53,500

Phase Two

IP surveying in area of aeromagnetic low
15 days of surveying along cut grid lines with pickets at 25 m        $    30,000
intervals (slope distance)at an all-inclusive cost
Diamond drilling to test mineralized vein structures at Josefina
500 meters at an all-inclusive (drilled, logged, split, sampled,      $    90,000
water haul) cost of $180 per meter:
Diamond drilling to test mineralized vein structures at Dos Naciones
300 meters at an all-inclusive (drilled, logged, split, sampled,      $    54,000
water haul) cost of $180 per meter:

                         Subtotal Phase Two                           $   174,000

 

Phase Three

Phase Three is contingent on IP anomalies from Phase Two work being determined
to be favourable for testing with diamond drill holes.

Diamond drilling in area of IP chargeability anomalies

1,000 meters at an all-inclusive (drilled, logged, split, sampled, water haul)

cost of $180 per meter:    $  180,000
Subtotal Phase Three       $  180,000
Contingency 10%            $   42,500
TOTAL THREE PHASE PROGRAM: $  450,000

Our plan of operation is to carry out exploration work on our Dos Naciones property in order to ascertain whether it possesses commercially exploitable quantities of gold, silver, and other metals. We intend to primarily explore for gold, silver, and copper but if we discover that our mineral property holds potential for other minerals that our management determines are worth exploring further, then we intend to explore for those other minerals. We will not be able to determine whether or not the Dos Naciones property contains a commercially exploitable mineral deposit, or reserve, until appropriate exploratory work is done and an economic evaluation based on that work indicates economic viability.

Mineral property exploration is typically conducted in phases. Each subsequent phase of exploration work is recommended by a geologist based on the results from the most recent phase of exploration. Once we complete each phase of exploration, we will make a decision as to whether or not we proceed with each successive phase based upon the analysis of the results of that program. Our management will make these decisions based upon the recommendations of the independent geologist who oversees the program and records the results.

 


Anticipated Cash Requirements

We anticipate that we will incur the following expenses over the next twelve
months:

                            Expense Item                                  Cost

Expenditures on the Dos Naciones Property in accordance with the
terms of our Option Agreement with Yale Resources Ltd.                $   150,000
Ongoing professional expenses associated with our company being a
reporting issuer under the Securities Exchange Act of 1934            $    60,000
General and administrative expenses                                   $    25,000
                                Total                                 $   235,000

As of July 31, 2011 we had cash of $8,536. Effective December 3, 2010, we issued 2,000,000 units at a price of $0.10 per unit for gross proceeds of $200,000. Each unit consisted of one share of common stock and one share purchase warrant entitling the warrant holder to purchase an additional share of common stock at a price of $0.25 per share for a period of two years from closing.

On March 11, 2011, we issued 165,517 shares of our common stock to Asher Enterprises, Inc. ("Asher") pursuant to our 8% convertible note (the "Note") with Asher dated August 25, 2010 in the amount of $55,000. Asher provided us with a notice to convert $12,000 of the principal amount of the Note.

On June 3, 2011 $15,000 of the Note was converted into shares at a rate of $0.0493 per share for a total of 304,260 shares. As result of the June 3, 2011 conversion, the face value of the convertible debt has been decreased to $28,000 as at July 31, 2011.

Based on the above estimate of $235,000 for our expenses for the next twelve months we do not have enough funds to proceed with our plan of operation over the next twelve months. We plan to rely on the equity financing in order to raise any additional funds necessary to pursue our plan of operation and to fund our working capital deficit in order to enable us to pay our accounts payable and accrued liabilities. We currently do not have any arrangements in place for the completion of any equity financings and there is no assurance that we will be successful in completing any equity financings.

 

Results of Operations

The following summary of our results of operations should be read in conjunction
with our unaudited financial statements for the three and nine month periods
ended July 31, 2011 which are included herein.

Our operating results for the three and nine month periods ended July 31, 2011
and 2010 are summarized as follows:

                      Three Months Ended          Nine Months Ended
                           July 31,                   July 31,
                       2011         2010         2011          2010
Revenue            $      Nil   $      Nil   $       Nil   $       Nil
Operating Expenses     33,902   $   79,199       113,045       117,749
Other Expenses          2,694   $      Nil        49,555           Nil
Net Loss           $  (36,596 ) $  (79,199 ) $  (162,600 ) $  (117,749 )

Revenues

We have not earned any revenues to date. We do not anticipate earning revenues from our planned mineral operations until such time as we enter into commercial production of the Doc Naciones property, or other mineral properties we may acquire from time to time, and of which there are no assurances.

 


Expenses

Our expenses for the three and nine month periods ended July 31, 2011 and 2010
are outlined in the table below:

                                         Three Months Ended           Nine Months Ended
                                              July 31,                    July 31,
                                        2011           2010          2011          2010
Amortization                        $       134    $       175   $       402   $       527
Consulting                                  Nil            Nil        15,999           Nil
Foreign exchange loss (gain)              4,445           (497 )       2,797           466
General and administrative                6,429          2,176        23,192         9,925
Mineral property expenses                 9,000         75,500        20,001        87,803
Professional fees                        13,894          1,845        50,654        19,028
Accretion on discount of                  1,279            Nil        43,489           Nil
convertible debt
Interest expense                          1,415            Nil         6,066           Nil
Total                               $    36,596    $    79,199   $   162,600       117,749

General and Administrative

The $4,253 increase in our general and administrative expenses for the three month period ended July 31, 2011 compared to July 31, 2010 was primarily due to increases in transfer agent fees relating to issuances of common shares.

The $13,267 increase in our general and administrative expenses for the nine month period ended July 31, 2011 compared to July 31, 2010 was primarily due to increases of transfer agent fees relating to issuances of common share and shareholder communications.

Interest Expenses

Our interest expenses increased by $6,066 during the six month period ended July 31, 2011 primarily due to accretion on the convertible debt.

Professional Fees

Professional fees include our accounting and auditing expenses incurred in connection with the preparation and audit of our financial statements and professional fees that we pay to our legal counsel. Our professional fees increased by $12,049 during the three month period ended July 31, 2011 primarily due to due diligence work surrounding issuances of common shares. Our professional fees increased by $31,626 during the six month period ended July 31, 2011 primarily due to Increased costs in our audit and legal work. Professional fees are expected to increase during fiscal 2011 due to our ongoing reporting obligations of the Securities Exchange Act of 1934.

Consulting Expenses

Our consulting expenses increased by $15,999 during the nine month period ended July 31, 2011 primarily due to increased management and consulting expenses during the quarter.

 

Liquidity And Capital Resources

Working Capital

                                                          Percentage
                          As at         As at October     Increase /
                      July 31, 2011       31, 2010        (Decrease)
Current Assets      $        29,389   $        91,118        (67.75% )
Current Liabilities $        92,570   $       130,012        (28.80% )
Working Capital     $       (63,181 ) $       (38,894 )       34.44%

 


 

Cash Flows
                              Nine Month Period      Nine Month Period      Percentage
                                    Ended                  Ended            Increase /
                                July 31, 2011          July 31, 2010        (Decrease)
Cash provided by (used in)  $          (138,926 )  $            (7,243 )         94.79%
Operating Activities
Cash provided by Financing  $            64,655    $             6,691           89.67%
Activities
Net Increase (Decrease) in  $           (74,271 )  $              (552 )         99.26%
Cash

We anticipate that we will incur approximately $235,000 for operating expenses, including professional, legal and accounting expenses associated with our reporting requirements under the Exchange Act during the next twelve months. As of July 31, 2011 we had cash of $8,536, accordingly, we will need to obtain additional financing in order to complete our business plan.

Cash Used In Operating Activities

We used cash in operating activities in the amount of $138,926 during the nine period ended July 31, 2011 and $7,243 during the nine month period ended July 31, 2010. Cash used in operating activities was funded by cash from financing activities, and increase was due to receipt of $89,450 from the issuance of common shares.

Cash From Investing Activities

We generated cash of $Nil in investing activities during the nine month periods ended July 31, 2011 and 2010.

Cash from Financing Activities

We generated cash of $64,655 from financing activities during the nine month period ended July 31, 2011 compared to cash of $6,691 generated from financing activities during the nine month period ended July 31, 2010. The increase was due to proceeds of $89,450 from issuance of common shares less payment of $22,028 for share issuance costs.

Disclosure of Outstanding Share Data

As at the date of this quarterly report, we had 13,004,912 shares of common stock issued and outstanding, and 2,000,000 warrants outstanding, exercisable at a price of $0.25 per share until December 3, 2012.

We have 500,000 options to acquire additional shares of common stock at a price of $0.10 per share. We do not have shares of any other class issued and outstanding as at the date of this report.

Going Concern

The financial statements accompanying this report have been prepared on a going concern basis, which implies that our company will continue to realize its assets and discharge its liabilities and commitments in the normal course of business. Our company has not generated revenues since inception and has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of our company as a going concern is dependent upon the continued financial support from our shareholders, the ability of our company to obtain necessary equity financing to achieve our operating objectives, and the attainment of profitable operations. As at July 31, 2011, our company has accumulated losses of $990,806 since inception. We do not have sufficient working capital to enable us to carry out our stated plan of operation for the next twelve months.

Due to the uncertainty of our ability to meet our current operating expenses and the capital expenses noted above in their report on the financial statements for the year ended October 31, 2010, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.

 


The continuation of our business is dependent upon us raising additional financial support. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

Future Financings

We anticipate continuing to rely on equity sales of our shares of common stock in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing stockholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned activities.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

Risks and Uncertainties

Risks Associated with Mining

All of our properties are in the exploration stage. There is no assurance that we can establish the existence of any mineral resource on any of our properties in commercially exploitable quantities. Until we can do so, we cannot earn any revenues from operations and if we do not do so we will lose all of the funds that we expend on exploration. If we do not discover any mineral resource in a commercially exploitable quantity, our business could fail.

Despite exploration work on our mineral properties, we have not established that any of them contain any mineral reserve, nor can there be any assurance that we will be able to do so. If we do not, our business could fail.

A mineral reserve is defined by the Securities and Exchange Commission in its Industry Guide 7 (which can be viewed over the Internet at http://www.sec.gov/divisions/corpfin/forms/industry.htm#secguide7) as that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. The probability of an individual prospect ever having a "reserve" that meets the requirements of the Securities and Exchange Commission's Industry Guide 7 is extremely remote; in all probability our mineral resource property does not contain any 'reserve' and any funds that we spend on exploration will probably be lost.

Even if we do eventually discover a mineral reserve on one or more of our properties, there can be no assurance that we will be able to develop our properties into producing mines and extract those resources. Both mineral exploration and development involve a high degree of risk and few properties which are explored are ultimately developed into producing mines.

The commercial viability of an established mineral deposit will depend on a number of factors including, by way of example, the size, grade and other attributes of the mineral deposit, the proximity of the resource to infrastructure such as a smelter, roads and a point for shipping, government regulation and market prices. Most of these factors will be beyond our control, and any of them could increase costs and make extraction of any identified mineral resource unprofitable.

Mineral operations are subject to applicable law and government regulation. Even if we discover a mineral resource in a commercially exploitable quantity, these laws and regulations could restrict or prohibit the exploitation of that mineral resource. If we cannot exploit any mineral resource that we might discover on our properties, our business may fail.

 


Both mineral exploration and extraction require permits from various foreign, federal, state, provincial and local governmental authorities and are governed by laws and regulations, including those with respect to prospecting, mine development, mineral production, transport, export, taxation, labour standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. There can be no assurance that we will be able to obtain or maintain any of the permits required for the continued exploration of our mineral properties or for the construction and operation of a mine on our properties at economically viable costs. If we cannot accomplish these objectives, our business could fail.

We believe that we are in compliance with all material laws and regulations that currently apply to our activities but there can be no assurance that we can continue to remain in compliance. Current laws and regulations could be amended and we might not be able to comply with them, as amended. Further, there can be no assurance that we will be able to obtain or maintain all permits necessary for our future operations, or that we will be able to obtain them on reasonable terms. To the extent such approvals are required and are not obtained, we may be delayed or prohibited from proceeding with planned exploration or development of our mineral properties.

If we establish the existence of a mineral resource on any of our properties in a commercially exploitable quantity, we will require additional capital in order to develop the property into a producing mine. If we cannot raise this additional capital, we will not be able to exploit the resource, and our business could fail.

If we do discover mineral resources in commercially exploitable quantities on any of our properties, we will be required to expend substantial sums of money to establish the extent of the resource, develop processes to extract it and develop extraction and processing facilities and infrastructure. Although we may derive substantial benefits from the discovery of a major deposit, there can be no assurance that such a resource will be large enough to justify commercial operations, nor can there be any assurance that we will be able to raise the funds required for development on a timely basis. If we cannot raise the . . .

 

 


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