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Item 3. Legal Proceedings

2013-10-15 compared with 2012-09-28 · 76 added, 5 removed, 55 unchanged (60% of the section changed)

3 unchanged sentences

In October 2011, on the eve of the completion of the audit and the current filing of our Annual Report on Form 10-K management learned that the prior CEO/CFO failed to have entity level controls, lacked segregation of duties, among many other internal control deficiencies.

The Company believes that the prior CEO/CFO concealed these matters from the professional advisors until those advisors requested David Janney for additional documentation in which Mr.

The Company believes that the prior CEO/CFO concealed these matters from the professional advisors until those advisors requested of David Janney additional documentation in which Mr.

Janney acknowledged the following to new management and independent legal counsel:

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Management disputes this agreement with Amazon Holdings, LLC.

Timeline of Events:

a) David Janney was hired in of November 2010 as CEO.

David Janney hired an attorney John Thomas from Utah to represent the Company.

b) Janney and Thomas began to convert debt held by Venture Capital Inc.

who is a note holder of the Company in January and February of 2011.

c) Thomas wrote 7 opinion letters for Bonanza Goldfields Corporation converting this debt from Bonanza debt holder, Venture Capital Inc.

and issuing shares to the following:

Tucker Financial Inc.

(36 million shares),

Vanilla Sky (7 million shares),

Stock Loan Solutions LLC (12 million shares),

Euroline Cleaning (7 million shares),

Envest International (7 million shares),

Scott Geisler (17 million shares)

The total number of shares issued to this group was 86,000,000 common shares.

This all occurred between December 2010 to June 2011.

The Company believes that the 86,000,000 shares of our common stock were improperly issued.

The Company did not receive any consideration for the improper sale of the shares and is attempting to contact the recipients of the subject shares and will pursue all legal remedies available to correct this issue including but not limited to bringing an action in federal court to cancel the shares and for damages sustained by the Company.

Bonanza as part of their annual audit which began in August 2011 (working with their auditors) began requesting confirmations for these debt conversions.

The due date for the audit was October 15, 2011, which was an extended due date.

Bonanza became aware that there was a problem on October 12, 2011 due to an email from a Bonanza debt holder named Venture Capital Inc.

in which they stated to the Company’s consulting accountant and auditor that they never assigned debt or received any money from a debt conversion.

Janney resigned October 24, 2011 and Scott Geisler became CEO October 26, 2011.

Bonanza hired an outside attorney to try to stop the stock issuance and sent a demand letter to Transfer Online, the transfer agent, in November 2011.

At that time the Company was advised that all the stock had already been issued and Rule 144 legends removed based on a legal opinion from John Thomas and could not be reversed.

On or about October 12, 2011, prior to becoming CEO and Principal Accounting Officer, Geisler was informed of the fraud.

The Company has treated the shares as issued for accounting purposes.

We continue to try to rectify the situation by attempting to rescind any shares that we can.

The Company believes that the exemptions under Rule 144 do not apply because proper due diligence appears to not have been performed by the issuing opinion attorney.

The stock was issued under a premise of conversion of debt that was two years or older and since there was no debt conversion (based on the email from Venture Capital Inc) there wasn’t proper polling of the debt.

We do not believe that a rescission liability would be appropriate because the shares had already been traded in the market, except for the 17 million shares Mr.

Geisler received with whom we are currently in discussion to resolve.

Also, the Company would have treated the shares as a rescission liability if the legal opinions on the stock issuance had not occurred.

The Company is currently treating the former CEO Scott Geisler’s shares as stock payable until a resolution is obtained.

On February 26, 2012, the Company entered into a settlement agreement with David Janney (our former CEO/CFO) for his actions outlined above related to wrongfully issued common stock of the Company, among many other things.

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Janney agreed to return to the Company all of the Company’s property in his possession or in the possession of his family or agents including without limitation Bonanza's files and all documentation (and all copies thereof) dealing with the finances, operations and activities of the Company, its clients, employees or suppliers.

The Company recorded a loss of $59,000 on this settlement in the quarter ended December 31, 2011 as a recognized subsequent event.

Management is in the process of assessing these agreements and settlement with David Janney and learned that the title of the Midas Claim that the Company purchased from David Janney’s company, Global Minerals, Inc.

never transferred to the Company.

Since the title was never transferred, the transaction is being investigated and the Company is determining the validity of the David Janney settlement agreement.

The Company recorded a loss of $59,000 on this settlement during the year ended June 30, 2012.

During the year ended June 30, 2012, the Company learned that the title of the Midas Placer Claim which the Company purchased from Global Minerals, Inc., a company controlled by Mr.

David Janney, was never transferred to the Company.

On February 19, 2013, David Janney surrendered 3,670,000 common shares of the 6,170,000 common shares he held in the Company.

David Janney was allowed to retain 2,500,000 as part of a settlement in litigation with the Company.

The Company reduced the par value of the 3,670,000 shares against additional paid-in capital.

In the settlement agreement dated February 19, 2013, David Janney also agreed to forfeit his right to receive the second 2,500,000 common shares mentioned in the settlement agreement dated February 26, 2012.

The Company recorded a gain on the settlement of litigation for the year ended June 30, 2013 of $29,500 and eliminated the corresponding disputed payable previously recorded .

On October 30, 2012, management learned that former President and CEO, Mr.

Scott Geisler, filed suit against the Company on September 20, 2012, in the Circuit Court of the Sixth Judicial District in the State of Florida.

The Company has not yet been served with the summons and complaint or filed an answer.

We believe the matter has been dismissed for failure to proceed on behalf of the Plaintiff.

Geisler asserts that the Company is in default with respect to payments under a Settlement and Mutual Release Agreement entered into upon his resignation as an officer and director of the Company and effective June 8, 2012, Mr.

Geisler claims monetary damages "in excess of $15,000", attorneys' fees, court costs and seeks the issuance of 7,500,000 shares of common stock that is provided for under the Settlement and Mutual Release Agreement.

We have engaged legal counsel to represent the Company in this dispute and counsel has identified defenses to the claims and setoffs.

We are optimistic that a settlement of the dispute will be reached in the near future without having a materially adverse effect on our financial condition or results of operations.

On July 27, 2012 the Company placed in escrow 7,500,000 common shares to Scott Geisler in accordance with his waiver and settlement agreement with the Company, and is pending an internal investigation.

The shares were valued at $221,250 and expensed as compensation to Mr.

Also, the Company has a permanent hold of 12,500,000 common shares issued to Scott Geisler in accordance with the Company internal investigation that discovered that Mr.

Geisler received these shares without authorization and these shares were part of the fraudulent shares issued by prior management.

On June 1, 2008, the Company entered into a purchase agreement with Gold Exploration LLC to purchase BRB placer claim #1, BLM serial number 384903 and BRB place claim #2 serial number 384904 from Gold Exploration LLC in the amount of $99,000 on June 1, 2008.

The Company paid $15,000 in cash and issued a note for $84,000 with an interest rate of 12% for the remaining balance.

Pursuant to the purchase agreement, $7,000 should be paid each 90 days until the full principal balance plus accrued interest is paid off.

As of June 30, 2013 and 2012, principal and interest payable to Gold Exploration LLC for this note is $71,670 and $65,346, respectively.

This agreement required that Gold Exploration LLC perfect the transfer and send the documents to the Company.

The transfer was never made and a review of the BLM lists of claims disclosed that Gold Exploration LLC never owned the claims that they attempted to sell to the Company.

On August 27, 2013, The Company has demanded the cancellation of the note agreement and remittance of $15,000.

On July 29, 2010, the Company entered into a promissory note with Gold Exploration LLC for $107,000 for the purchase of the Midas Gold Project unpatented place claims.

In that note agreement, Gold Exploration LLC received 8,300,000 common shares valued at $83,000 (or $0.01 per share) based upon the closing price of the Company’s stock on the date the agreement was executed, to partially repay $10,000 of principal on the promissory note held by Gold Exploration LLC initially issued to Global Mineral Resources Corporation.

This payment of common stock reduced the outstanding balance of the note held by Gold Exploration LLC to $97,000.

The Company recognized a loss on debt conversion of $73,000.

During fiscal year 2012, the note holder called the balance of the note and demanded payment although the agreement states the note is not due until 2015.

The note holder indicated that the note was in default because the Company failed to maintain the Midas Placer Mining Claim, collateral which secured the note.

Pursuant to the note agreement, the note should accrue interest at 12% when due or declared due.

The note is classified as a current liability on the balance sheets.

As of June 30, 2013 and 2012, principal and interest payable to Gold Exploration LLC related to this note is $120,280 and $108,640, respectively.

This agreement required that Gold Exploration LLC perfect the transfer and send the documents to the Company.

The transfer was never made and a review of the BLM lists of claims disclosed that Gold Exploration LLC never owned the claims that they attempted to sell to the Company.

On June 2, 2011, Gold Exploration LLC requested to remove the Section 144 restrictive legends without a proper legal opinion and the legends were removed at the direction of David Janney.

On August 27, 2013, the Company demanded the cancellation of the promissory note and the return of the 8,300,000 common shares.

The Company has not received any response from Gold Exploration LLC.

MINE SAFETY DISCLOSURES

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 3. Legal Proceedings