Marvion Inc. 10-Q/A

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management’s Discussion and Analysis contains various “forward looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding future events or the future financial performance of the Company that involve risks and uncertainties. Certain statements included in this Form 10-Q, including, without limitation, statements related to anticipated cash flow sources and uses, and words including but not limited to “anticipates”, “believes”, “plans”, “expects”, “future” and similar statements or expressions, identify forward looking statements. Any forward-looking statements herein are subject to certain risks and uncertainties in the Company’s business, including but not limited to, reliance on key customers and competition in its markets, market demand, product performance, technological developments, maintenance of relationships with key suppliers, difficulties of hiring or retaining key personnel and any changes in current accounting rules, all of which may be beyond the control of the Company. The Company adopted at management’s discretion, the most conservative recognition of revenue based on the most astringent guidelines of the SEC in terms of recognition of revenue. Management will elect additional changes to revenue recognition to comply with the most conservative SEC recognition on a forward going accrual basis as the model is replicated with other similar markets (i.e. SBDC). The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth therein. Forward-looking statements involve risks, uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Factors and risks that could affect our results and achievements and cause them to materially differ from those contained in the forward-looking statements include those identified in the section titled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended June 30, 2012, as well as other factors that we are currently unable to identify or quantify, but that may exist in the future. In addition, the foregoing factors may affect generally our business, results of operations and financial position. Forward-looking statements speak only as of the date the statement was made. We do not undertake and specifically decline any obligation to update any forward-looking statements. Overview We are an exploration stage company and that there is no assurance that a commercially viable mineral deposit exist on any of our properties and that furtherexploration will be required. It is our objective to identify mineral prospect properties of merit, conduct preliminary exploration work, and if results are positive, to process mineral resourcesthrough in a market where we believe capital is transitioning to the safety of gold. Our management contends that this business model is timely in a world of financialand currency instability with escalating mineral demand. Our areas of exploration are in geopolitically stable North American areas. We have acquired 3 sets of mineral properties in the state of Arizona. The first is federal mining claims on BLM land totaling 458 acres. The second is 130.76 acres ofpatented land we lease for an initial term of two years with an option to buy from Judgetown LLC. The lease agreement with Judgetown was effective on October 15,2012. The third property is referred to as the Hull land and is approximately 20 acres of patented land which we have purchased with funds borrowed from FreedomBoat. 22 TABLE OF CONTENTS The Judgetown lease, with an effective date of October 15, 2012, was executed on or before September 30, 2012 between our company and Judgetown LLC, anArizona Limited Liability Company located in Arizona (“Lessor”). The leased premises consist of 130.76 acres in the county of Yavapai, Arizona in the Date CreekMountain range. The lease is exclusive to the Company and our successors and assigns all of Lessors’ interest in and to all mining rights and minerals (hereafter the"Mineral Substance") beneath the surface of, within, or that may be produced from the premises. The lease granted the following to us for a period of two yearsunless terminated pursuant to the lease; Mining and Access Rights, Cross Mining, Commingling, Deposit of Waste Materials, Treatment and Water Rights. Thelease amount, as amended, is $300,000 for the period commencing on January 15, 2013. An option to purchase the land was also granted for a price of $1,500,000 lesslease payments. The lease with an option to purchase was amended on February 1, 2013 solely to reflect a new owner who had replaced an original owner of thelessor. Our leased lands consist of 38 lode claims covering 600 acres of patented, private property claims and BLM claims in the Date Creek Mountains, Arizona consistingof both alluvial and mineralized quartz deposits, as well as the presence of certain rare earth elements. A Preliminary Geological Survey as well as subsequenttesting and assays of the leased claims were prepared by Auric Resources International, Inc. of Wickenburg, Arizona. Shareholders can access the report and testresults at our website: www.bonanzagoldfields.com (such website and its contents are not to be incorporated by reference to this report). Highlights from the report include: ● The large land package with widespread areas of anomalous gold values; ● Although some preliminary testing has been done on portions of the property, the majority of the land package has virgin placer gravels and large quartzveins that have never been explored or tested. The geologic setting of the property is favorable for the concentration of placer gold in the local gravels thatoccur in drainage channels and elevated benches and for lode gold that occurs within the early Proterozoic granitic rocks as auriferous quartz fissure veinswith locally abundant sulfides and iron oxides. ● Auriferous quartz and quartz-sulfide veins occur on the leased claims. These veins ranged up to several feet in width and have strike lengths ranging fromhundreds to thousands of feet. ● Prior to commencing the survey, extensive samplings were analyzed locally at multiple depths demonstrating the potential for high grade gold findingsthroughout the property. Modern access for heavy equipment is already in place through our privately constructed roads, and rail is localized. Uniquefeatures appear ubiquitous throughout the immediate area, including greenstone dike extensions, placer gravel deposits, and vestiges of numerous prehistoricwaterfalls. Additionally, lode gold possibilities exist due to the extensions of schist and mineralized quartz veins in the immediate area of theCongress Mine. Our management believes the alluvial deposits originate from two ancient rivers that flowed in opposing directions during separategeological periods. ● Our most recent gold assays occurred during the month of July 2012 and were surface level rock chip assays on the Company's Bureau of LandManagement (BLM) claims located near the Piedmont Mine area. ● The assays were completed based on the geological teams' recommendation to study the Piedmont Mine. Bonanza's geological team staked out andacquired the Piedmont in December 2011 as part of the planned leased claims expansion. The assays were completed at a third party globally recognizedassayer. *Assays reported in grams and ounces per ton **Conversion based on 31.1 grams = 1 troy ounce of gold Rare Earth Metal Tests: We expanded our geological footprint with the acquisition of the Piedmont Mine, gold and silver mine in operation until 1940. The Piedmont Mine has been deemedby the our geological team a strategic addition to leased claims. The acquisition expands the geological footprint to 38 lode mining claims covering over 600 acres ofcontiguous property. 23 TABLE OF CONTENTS There are gold-bearing quartz fissure veins that closely follow “greenstone” (andesite or diabase) dikes that occur along east-west and northwest-southeast trendingstructures in early Proterozoic granitic rocks. The veins range from a few inches to several feet in width, with up to several hundred feet and unknown depth. Themineralogy of the veins consists of auriferous quartz with silver and varying amounts of sulfides, primarily pyrite with smaller amounts of galena, chalcopyrite, andsphalerite, and locally molybdenite. Hematite is locally prevalent as masses and relic structures formed from oxidation of the pyrite. The highest grade gold isgenerally associated with the highest concentrations of pyrite. There has been significant work completed on the property. First the roads have been improved to be completely usable for all types of equipment such as loaders,dump truck, back hoes, all types of cars, and even larger scale trucks. ● Table 1: Surface area rock chip samples on our BLM land claims in the Piedmont Mine area TARANTULA Au (Fire) Au (Fire 2) Au (Fire 2) Control # ppb Grams/per ton Ounces/per ton 681 >3000 20.2 0.65 682 >3000 45.5 1.46 683 52 n/a n/a 684 47 n/a n/a 685 13 n/a n/a ● We also tested for the most prevalent and critical rare earth metals (REM) in the Arizona geographic region, which are Cerium, Lanthanum, Scandium,Yttrium. The tests proved positive for all four rare earth elements. The Company is now planning future tests for the other 13 critical rare earth elements andfor estimates of concentration. The plan is to test for the remaining 13 metals in Canadian testing facilities where more advanced analysis can be performed. ● Major Rare Earth Metals Uses (listed by metal): Cerium is used in auto catalysts, petroleum refining, and in metal alloys. Lanthanum is used in hybrid engines and metal alloys. Scandium is used in sportsequipment, the firearms industry and dental applications. Yttrium is used in red color, fluorescent lamps, ceramics, and as an agent in metal alloys withapplications to superconductors and medical devices. Second, a water retention pond holding just under 1 million gallons of water and currently between 700,000 – 800,000 gallons. Third, a gold processing plant has beeninstalled which is specifically a Goldfield International Yukon 25 plant and finishing table. Fourth, enhancement to the plant such as a new sluice system and astaging area for placer material processing. All of this was done on the Hull land which is patented property. Fifth, a slime pond was created along with asophisticated water retention system connected between the plant and the large retention pond. Sixth, fencing around the pond for safety purposes. Seventh, anadditional water well to the well already on the land. This all occurred between October 2012 and December 2012 and was financed by investors.The Goldfield International Yukon 25 plant was purchased new in October 2012 along with the finishing table. The plant is therefore considered by us to be in verygood condition. There have been no subsurface improvements since we have been pursuing placer material since setting up the plant.The infrastructure has been newly established with competent personnel and functional equipment. Additionally, we have a tool shed needed for maintenance.As of December 31, 2012 we ran approximately 700 tons of placer material and ran an additional 600 tons of more placer material through our production plant thisfiscal quarter. Currently the plant is suspended temporarily until we secure additional financing to mine hard rock as opposed to the placer. We have been trenchingand testing several locations on the Judgetown LLC land as well as the Hull land. We have sent out this placer material as well as some rock chip samples of loadmaterial to obtain a multi-element analysis from an accredited third party assayer. Total cost to date is $3,116,907 and future costs are being assessed currently but thus far if we implement an operation that would include load material and the BLMproperties we feel that up to an additional $3 million may be needed. We have two wells (one of which is solar powered) that have the capacity to pump a total 12 gallons per minute which is adequate for our present operations. Ourpower supply comes from 2 generators which are on the property. 24 TABLE OF CONTENTS We have not completed a Canadian 43101 report or an American equivalent and do not know what our proven reserves are, but we are in the process of doing aninternal resource estimate based on the placer material run to date and the assays we have completed and are in the process of completing on our load material. Thiswill include our rock chip analysis that can be used to estimate load material and is being conducted by our internal geologist and we are using an accredited externalassayer in Prescott, Arizona named Copper State Labs. Description of work completed on the property and its present condition. There has been significant work completed on the property. First the roads have been improved to be completely usable for all types of equipment such as loaders, dump truck, back hoes, all types of cars, and even larger scale trucks. Second, a water retention pond holding just under 1 million gallons of water and currently between 700,000 – 800,000 gallons. Third, a gold processing plant has been installed which is specifically a Goldfield International Yukon 25 plant and finishing table. Fourth, enhancement to the plant such as a new sluice system and a staging area for placer material processing. All of this was done on the Hull land which is patented property. Fifth, a slime pond was created along with a sophisticated water retention system connected between the plant and the large retention pond. Sixth, fencing around the pond for safety purposes. Seventh, an additional water well to the well already on the land. This all occurred between October 2012 and December 2012 and was financed by investors. The details as to modernization and physical condition of the plant and equipment, including subsurface improvements and equipment. The Goldfield International Yukon 25 plant was purchased new in October 2012 along with the finishing table. The plant is therefore considered by us to be in very good condition. There have been no subsurface improvements since we have been pursuing placer material since setting up the plant. Description of equipment, infrastructure, and other facilities. The infrastructure has been newly established with competent personnel and functional equipment. Additionally, we have a tool shed needed for maintenance. We have two wells (one of which is solar powered) that have the capacity to pump a total 12 gallons per minute which is adequate for our present operations. Our power supply comes from 2 generators which are on the property. Description of our sampling procedures. Our geologist Arne Stenseth collects and maintains custody of the samples. The rock chip samples are collected as representative samples of the outcrop or vein. The rock chips are bagged and labeled. The labeled bags are sent to either Copper State Analytical Lab in Prescott, AZ or to Skyline Assayers & Laboratories in Tucson, AZ. The labs perform multi-element analyses by ICP, and gold and silver are determined by fire assay. Concentrates collected from the finishing table are also collected by Mr. Stenseth, who maintains custody of the samples. The concentrates are bagged and labeled and sent to the same laboratories as above for the same analyses. On April 4, 2013, we announced that three hand-collected samples from an 1,800 foot strike of an exposed quartz vein within our patents were assayed at 0.08 ounceper ton (oz/ton), 0.192 oz/ton, and 0.62 oz/ton. A single sample collected from a second quartz vein on our leased, patented property assayed at 2.73 oz/ton. A fifthsample collected from a pit on a separate leased our patented property assayed at 0.007 oz/ton. All assays were performed by Copper State Analytical Lab in Prescott,Arizona, an independent registered assayer. Arne Stenseth of Bonanza Goldfields Corp. has provided all geological analysis to the Company. Although some preliminary testing has been done on portions of the property, the majority of the land package has virgin placer gravels and large quartz veins thathave never been explored or tested. Additional exploration (mapping, sampling, bulk-sampling geophysics, drilling, etc.) must be conducted in order to determine theareal extent, volumes, grades, and values of auriferous quartz veins and gravels within the expanded claim block. The large land package with widespread areas ofanomalous gold values; proximity to the Congress Mine; large iron oxide rich quartz veins which exhibit mineralogic and structural similarities to the Congress,Niagra, Queen of the Hills, Golden Wave and other mineralized, economic vein systems in the area; and the presence of placer gold in widespread gravels indicatesthat the Tarantula Property may host a large, potentially economic gold deposit and undoubtedly represents an excellent exploration target with potential for bothplacer and lode gold production from auriferous placers and veins. 25 TABLE OF CONTENTS There was some surface disturbance before we acquired the property. There are a few existing adits and test pits, and a network of roads built by the previous ownerwho was selling boulders to housing developments. There is no known contamination of the area. The mining activity a appears to be limited to small adits and testpits. Remediation of the site will be an ongoing process. Excavations will first be filled with the oversize material which has been separated by grizzly from the bankrun feed materials from each excavation. Finally, the upper 6” - 12” of soil, which has been stored during initial site preparation, will be placed on top of the oversizematerials in order to enhance revegetation of the area. Care will be taken to prevent erosion on slopes, and where necessary runoff will be diverted by water bars andterracing. All improved access roads will be graded to natural contour and water bars will be utilized to prevent erosion. Since some of the area of operations is near anatural drainage, efforts will be taken to ensure the natural flow is restored upon completion of the operation. A breakdown of the exploration timetable and budget, including estimated amounts that will be required for each exploration activity, such as geophysics,geochemistry, surface sampling, drilling, etc. for each prospect are as follows: The timetable will depend on the availability of financing. The exploration plan would begin with a surface sampling program estimated to take 3 weeks and to costapproximately $35,000 to complete. Multi-element analyses will be performed on each sample and the geochemical analyses along with the local geology and thevisible outcrops of mineralized quartz would be used to determine the best drill targets. The analyses and interpretation of the data will take an estimated 6 weeks tocomplete at a cost of $25,000. Assuming a cost of $50 per foot of core drilling, 8 drill targets, and an average depth of 500 feet, the drilling program will costapproximately $200,000. Our first phase is to set up the plant and then run placer material and test the results (including rock chip samples) to obtain an internal resource estimate on ourpatented properties. Also, we plan to obtain all necessary licenses to operate on the BLM land. Our second phase would be to move as much placer volume throughour plant as possible if the placer levels are economical and to expand that plant to have significantly more operating volume. Third, we plan to secure financing for aload operation to add to our placer capacity. If placer material is not economical and load tests to be more economical then we plan to move to load given financing is available. Tonaquint is currently our main planned funding source. We will seek other sources of funding if our relationship with Tonaquint terminates. We plan to utilize our internal Geochemist Arne Stenseth a graduate of the Montana College of Mineral Science and Technology with an American Chemical Societyaccredited Bachelor of Science Degree (1994) in Chemistry. He is a member in good standing of the Geochemistry Division of the American Chemical Society(ACSGEOC), the International Association of GeoChemistry (IAGC), the Geochemical Society, and the Association of Applied Geochemists (AAG). He is a Founderand Managing Member of Gruvedrift Enterprises, LLC, a mineral exploration company, and is currently working as a geochemist for our company. Arne Stensethcollects and maintains custody of the samples. The rock chip samples are collected as representative samples of the outcrop or vein. The rock chips are bagged andlabeled. The labeled bags are sent to either Copper State Analytical Lab in Prescott, AZ or to Skyline Assayers & Laboratories in Tucson, AZ. The labs performmulti-element analyses by ICP, and gold and silver are determined by fire assay. Concentrates collected from the finishing table are also collected by Arne Stenseth,who maintains custody of the samples. The concentrates are bagged and labeled and sent to the same laboratories as above for the same analyses. RESULTS OF OPERATIONS Three monthsEnded September 30, 2012Compared to Three monthsEnded September 30, 2011 We are an exploration stage company acquiring mineral properties or claims located in the State of Arizona, USA. The recoverability of amounts from the properties or claims will be dependent upon the discovery of economically recoverable reserves, confirmation of our interest in the underlying properties and/or claims, our ability to obtain necessary financing to satisfy the expenditure requirements under the property and/or claim agreements and to complete the development of the properties and/or claims, and upon future profitable production or proceeds for the sale thereof. For the three months ended September 30, 2012, we generated no revenue. Our future revenue plan is uncertain and is dependent on our ability to effectively mine our products, generate sales, and obtain contract mining opportunities. There are no assurances of our ability to begin to mine our claim. The expenditures formining are cost intensive so it is critical for us to raise sufficient capital to implement our business plan.We incurred losses of $484,467for the three months endedSeptember 30, 2012, compared to $125,367 for the three months ended September 30, 2011. Our operating expenses for exploration activities for the three months ended September 30, 2012 and 2011 were $20,684and $27,701, respectively. The costs associated with exploration activities included trenching, testing, hauling, and labor costs associated with the exploration of our gold mines claims. Our general and administrative expenses for the three months ended September 30, 2012 and 2011were $439,841and $65,182, respectively.The increase was primarily related to the issuance of options to our COOthat was valued at $99,261, issuance of common stock to our CEO valued at $200,000, issuance of common stock to other professionalsand our director of $60,000, and other professional fees of $59,000. 26 TABLE OF CONTENTS Our interest expense for the three months ended September 30, 2012 and 2011 was $23,942 and $32,484, respectively. The decrease is primarily attributable to the decrease in debt outstanding. Liquidity and Capital Resources Our cash used in operating activities for the three months ended September 30, 2012 was $82,065compared to $160,962for the three months ended September 30, 2011. The decrease in cash used in operations was primarily attributable toreduced payments made to vendors and related parties during the three months ended September 30, 2012. Our cash provided by financing activities for the three months ended September 30, 2012 was $140,000, compared to $140,000 for the three months ended September 30, 2011.Cash provided by financing activities mainly included proceeds from the sale of common stock. We have $816,032 in Notes Payable of that $294,699 are due upon demand and we have not received any demand for payments on these notes. Further, we have a note for $50,000 that is in default and we are negotiating either a full payment of the note or conversion of debt for common stock of the Company. We are in default on our note to Freedom Boat, LLC for $250,000 which is secured by 10,000,000 shares of common stock of the Company. We have preliminarily agreed with Freedom Boat to create another 1 year interest only payment structure with the balance due at the end of the 12 month term and which is convertible to stock. To date, we havesucceeded in securing capital as needed, but there is no guarantee this will continue. We believe we will have to rely on public and private equity and debt financings to fund our liquidity requirements over the intermediate term. We may be unable to obtain any additional financings on terms favorable to us, or obtain additional funding at all. If adequate funds are not available on acceptable terms, and if cash and cash equivalents together with any income generated from operations fall short of our liquidity requirements, we may be unable to sustain operations. Continued negative cash flows create substantial doubt regarding our ability to fully implement our business plan and could render us unable to expand our operations or take advantage of acquisition opportunities, any of which may have a material adverse effect on our business. If we raise additional funds through the issuance of equity securities, our stockholders may experience dilution of their ownership interest, and the newly issued securities may have rights superior to those of our common stock. If we raise additional funds by issuing debt, we may be subject to limitations on our operations, including limitations on the payments of dividends We are in need of approximately $65,000 per month in order to meet our operating expenses. If we have insufficient revenue, we will be able to borrow the funds fromTonaquint pursuant to the agreements in place. On October 1, 2012, we entered into a Secured Convertible Promissory Note and Warrant Purchase Agreement with Tonaquint, Inc., a Utah corporation("Tonaquint"), whereby the Company issued (i) a Secured Convertible Promissory Note of the Company in the principal amount of $1,660,000 and (ii) a warrant topurchase 158,953,080 shares of the Company’s common stock. The warrant has an exercise price of $0.075 per share and can be exercised at any time within five yearsafter October 1, 2012. Tonaquint has the right to convert, subject to restrictions described in the promissory note, all or a portion of the outstanding amount of thepromissory note that is eligible for conversion into shares of our common stock. The conversion price of the promissory note is $0.05 per share.The Secured Convertible Promissory Note is due on April 1, 2015 and the interest rate of 8% payable monthly. The promissory note, if prepaid, has a penalty of 135%prepayment obligation. The total amount to be funded is $1,500,000, representing the principal amount of $1,660,000 less an original issuance discount of $150,000and the payment of $10,000 to cover Tonaquint’s fees. The shares of common stock underlying the Secured Convertible Promissory Note and Warrant were to beregistered by a registration statement pursuant to the terms and conditions of a registration rights agreement. The registration statement has been withdrawn withTonaquint’s consent. Tonaquint's ability to fund our company is evidenced by three Buyer Mortgage Notes, in the principal amount of $50,000, $150,000, and$400,000. The Buyer Mortgage Notes are secured by certain real property owned by Tonaquint located in Cook County, Illinois. Tonaquint’s obligation to fund ourcompany is further evidenced by a promissory note in the amount of $750,000. 27 TABLE OF CONTENTS Pursuant to the purchase agreement, we reserved 75,000,000 shares of common stock. We agreed not to enter into any equity line of credit or financing arrangementor other transaction that involves issuing securities that are convertible into common stock (including without limitation selling convertible debt, warrants orconvertible preferred stock), or otherwise issue common stock (a) with conversion, exercise or similar mechanics or reset provisions that vary according to the marketprice of the common stock without a floor at or higher than $0.01 or (b)at a fixed price which is lower than $0.01, without the prior written consent of Tonaquint. Weagreed not to declare or make any dividend or other distributions of our assets There are no set dates or requirements for the Company to draw down on the Secured Convertible Promissory Note. Off-balance sheet arrangements We have no off-balance sheet arrangements including arrangements that would affect the liquidity, capital resources, market risk support and credit risk support or other benefits. Additional Information Bonanza files reports and other materials with the Securities and Exchange Commission. These documents may be inspected and copied at the Securities and Exchange Commission, Judiciary Plaza, 100 F Street, N.E., Room 1580,Washington, D.C. 20549. You can obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. You can also get copies of documents that the Company files with the Commission through the Commission’s Internet site at www.sec.gov . ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We do not hold any derivative instruments and do not engage in any hedging activities. Most of our activity is the development and mining of our mining claim.