UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549


FORM 20-F/A

(Amendment No. 1)
 
 o

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934ORx

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For fiscal year ended December 31, 2012ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934ORo

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Date of event requiring this shell company report:
 
 For the transition period from ____ to ______
  Commission file number: 000-30780
  MAX RESOURCE CORP.
 
 (Exact name of Registrant as specified in its charter)
 
 Province of Alberta, Canada
 (Jurisdiction of incorporation or organization)
 
 2300 – 1066 West Hastings Street, Vancouver, British Columbia V6E 3X2 Canada
 (Address of principal executive offices)
 
 Stuart Rogers, President and CEO
 Max Resource Corp.
 2300 – 1066 West Hastings Street
 Vancouver, British Columbia V6E 3X2 Canada
 Tel: (604) 689-1749
 Facsimile: (604) 648-8665
 (Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
 
 Securities registered pursuant to Section 12(b) of the Act:None
 (Title of Class)
 
 Securities registered pursuant to Section 12(g) of the Act:  Common Shares, no par value
 (Title of Class)
 
 Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
 
 
 (Title of Class)
 Indicate the number of outstanding shares of each of the Registrant’s classes of capital or common stock as of the close of the period covered by the annual report:  24,505,985 commonshares as at December 31, 2012
 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes oNo x
 
 If this report is an annual or transition report, indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes oNo x
 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes xNo o
 
 Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every  Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes oNo  x
 
 Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.  (Check one)
 Large accelerated filer  o                                                                Accelerated filer  o                                           Non-accelerated filer  x
 Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
  U.S. GAAP o
International Reporting Standards as issued by the International Accounting Standards Board  x
Other o
 
 
 If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:
 
 Item 17  o                                Item 18 x
 If this is an annual report, indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes oNo x







EXPLANATORY NOTE
 
 Max Resource Corp. (“we”, “our”, “us”, the “Company” and “MAX”) is filing this Amendment No. 1 on Form 20-F/A (this “Amendment”) to our Annual Report on Form 20-F for the fiscal year ended December 31, 2012 (the “Original Filing”), filed with the Securities and Exchange Commission (the “SEC”) on April 29, 2013. We are filing this Amendment for the sole purpose of modifying the independent auditor’s report to state that the consolidated financial statements for the year ended December 31, 2012 and 2011 were prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and  to update the Certifications. Except for the matters described above, this Amendment does not modify or update our disclosures in the Original Filing filed with the SEC.
 
 
 
 SIGNATURES
 
 The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.
 
 MAX RESOURCE CORP.
 
 Dated:  June 18, 2013
 
 
 /s/  Stuart Rogers
 _________________________________________________
 By:  Stuart Rogers, Chief Executive Officer
 
 
 /s/ Christopher Cherry
 _________________________________________________
 By:  Christopher Cherry, Chief Financial Officer





































Consolidated Financial Statements




Year Ended December 31, 2012









Expressed in Canadian Dollars
















INDEPENDENT AUDITOR’S REPORT







To the Shareholders of Max Resource Corp.:
 
 We have audited the accompanying consolidated financial statements of Max Resource Corp. which comprise the consolidated statements of financial position as at December 31, 2012 and 2011, and the consolidated statements of comprehensive loss, changes in equity and cash flow for the years ended December 31, 2012 and 2011, and a summary of significant accounting policies and other explanatory information.
 
 Management's Responsibility for the Financial Statements
 Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
 
 Auditor’s Responsibility
 Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
 
 An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the  consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
 
 We believe that the audit evidence that we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.
 
 Opinion
 In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Max Resource Corp.as at December 31, 2012 and 2011, and its financial performance and its cash flows for the years ended December 31, 2012 and 2011 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
 
 Emphasis of Matter
 Without modifying our opinion, we draw attention to Note 1 in the consolidated financial statements which describe matters and conditions that indicate the existence of a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from this uncertainty.


“DMCL”





DALE MATHESON CARR-HILTON LABONTE LLP


CHARTERED ACCOUNTANTS


Vancouver, Canada


March 8, 2013










Max Resource Corp.
 Consolidated statements of financial position
 (Expressed in Canadian dollars)


Note


December 31,

2012


December 31,

2011ASSETSCurrent assetsCash and cash equivalents


3


$
510,288


$
1,131,358Receivables and prepaids


4



8,040



14,910Taxes recoverable






21,657



10,106Marketable securities


5



-



71,500539,985



1,227,874Non-current assetsEquipment


6



1,103



1,578Reclamation deposits


7



53,297



68,183Exploration and evaluation assets


7



2,614,452



3,721,2072,668,852



3,790,968TOTAL ASSETS





$
3,208,837


$
5,018,842LIABILITIESCurrent liabilitiesTrade payables and accrued liabilities


8


$
41,633


$
127,109SHAREHOLDERS’ EQUITYShare capital


10



13,754,038



13,754,038Share purchase warrant reserve


11



288,562



288,562Share-based payment reserve


11



1,997,335



1,881,765Deficit






(12,872,731
)


(11,032,632
)3,167,204



4,891,733TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY





$
3,208,837


$
5,018,842







See accompanying notes to the consolidated financial statements




1


Max Resource Corp.


Consolidated statements of comprehensive loss
 (Expressed in Canadian dollars)





Years endedNote


December 31

2012


December 31,

2011ExpensesAmortization




$
475


$
676Consulting


12



83,227



77,587Consulting – stock based compensation


10



115,570



509,357Foreign exchange gain






(2,369
)


-Management fees


12



120,000



121,253Office and miscellaneous






39,114



51,918Professional fees






92,233



100,231Transfer agent, filing fees and shareholder relations






193,417



238,008Travel and promotion






28,088



20,944(669,755
)


(1,119,974
)Other itemsWrite-off of exploration and evaluation assets


7



(1,177,622
)


-Impairment of marketable securities


5



-



(11,000
)Interest income






11,805



15,828Realized gain (loss) on sale of marketable securities


5



(4,527
)


2,500(1,170,344
)


7,328Loss for the year






(1,840,099
)


(1,112,646
)Other comprehensive lossReversal of prior year unrealized gain on marketable securities


5



-



(84,000
)Total loss and comprehensive loss for the year





$
(1,840,099
)

$
(1,196,646
)Loss per share – basic and diluted


10


$
(0.08
)

$
(0.05
)





See accompanying notes to the consolidated financial statements
 2
 Max Resource Corp.


Consolidated statement of changes in equity
 (Expressed in Canadian dollars)


Share capital


ReservesNote


Number of 
shares


Amount


Share 
purchase 
warrant 
reserve


Share-based payment 
reserve


Investment revaluation 
reserve


Deficit


TotalBalance at January 1, 2011





21,699,230


$
13,003,168


$
288,562


$
1,458,599


$
84,000


$
(9,919,986
)

$
4,914,343Comprehensive loss:Loss for the year





-



-



-



-



-



(1,112,646
)


(1,112,646
)Other comprehensive loss


5



-



-



-



-



(84,000
)


-



(84,000
)Total comprehensive loss for the year






-



-



-



-



(84,000
)


(1,112,646
)


(1,196,646
)Transactions with owners, in their capacity as owners,

and other transfers:Shares issued for cash – private placement


10



2,016,755



564,691



-



-



-



-



564,691Share issue costs


10



-



(35,512
)


-



-



-



-



(35,512
)Shares issued for cash – option exercise






790,000



135,500



-



-



-



-



135,500Reallocation of share-based payment eserves on exercise

of stock options






-



86,191



-



(86,191
)


-



-



-Stock-based compensation


10



-



-



-



509,357



-



-



509,357Total transactions with owners, in their capacity as owners, and other transfers






2,806,755



750,870



-



423,166



-



-



1,174,036Balance at December 31, 2011






24,505,985



13,754,038



288,562



1,881,765



-



(11,032,632
)


4,891,733Comprehensive loss:Loss and comprehensive loss for the year






-



-



-



-



-



(1,840,099
)


(1,840,099
)Transactions with owners, in their capacity as owners, and other transfers:Stock-based compensation


10



-



-



-



115,570



-



-



115,570Balance at December 31, 2012






24,505,985


$
13,754,038


$
288,562


$
1,997,335


$
-


$
(12,872,731
)

$
3,167,204







See accompanying notes to the consolidated financial statements 3
 Max Resource Corp.


Consolidated statements of cash flows
 (Expressed in Canadian dollars





Years endedDecember 31,

2012


December 31,

2011Operating activitiesLoss for the year

$
(1,840,099
)

$
(1,112,646
)Adjustments for:Amortization


475



676Write-off of exploration and evaluation assets


1,177,622



-Loss on sale of marketable securities


4,527



(2,500
)Impairment of available for sale investment


-



11,000Stock-based compensation


115,570



509,357Changes in non-cash working capital items:Decrease (increase) in receivables and prepaids


6,870



(3,772
)Decrease (increase) in taxes  recoverable


(11,551
)


5,181Increase (decrease) in trade payables and accrued liabilities


(90,276
)


97,335Net cash flows used in operating activities


(636,862
)


(495,369
)Investing activitiesExpenditures on exploration and evaluation assets


(737,582
)


(1,128,959
)Exploration and evaluation asset recoveries


671,515



-Recovery of reclamation bonds


21,293



-Additions to reclamation bonds


(6,407
)


(6,200
)Proceeds from sale of marketable securities


66,973



10,000Net cash flows provided by (used in) investing activities


15,793



(1,125,159
)Financing activitiesProceeds on issuance of common shares


-



700,191Share issuance costs


-



(35,512
)Net cash flows provided by financing activities


-



664,679Decrease in cash and cash equivalents


(621,070
)


(955,849
)Cash and cash equivalents, beginning


1,131,358



2,087,207Cash and cash equivalents, ending

$
510,288


$
1,131,358










See accompanying notes to the consolidated financial statements 4


Max Resource Corp.
 Notes to the Consolidated Financial Statements
 (Expressed in Canadian dollars)
 For the years ended December 31, 2012 and 2011






1.
Nature and continuance of operations





Max Resource Corp. (the “Company”) was incorporated on April 25, 1994, under the laws of the province of Alberta, Canada, and its principal activity is the acquisition and exploration of mineral properties in Canada and the United States. The Company’s shares are traded on the TSX Venture Exchange (“TSX-V”) under the symbol “MXR”.




The head office, principal address records office and registered office of the Company are located at #2300 – 1066 West Hastings Street, Vancouver, British Columbia, Canada, V6E 3X2.




These consolidated financial statements have been prepared on the assumption that the Company will continue as a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations. Different bases of measurement may be appropriate if the Company is not expected to continue operations for the foreseeable future. As at December 31, 2012, the Company had not advanced its properties to commercial production and is not able to finance day to day activities through operations. The Company’s continuation as a going concern is dependent upon the successful results from its mineral property exploration activities, recover the carrying value of its assets, and its ability to attain profitable operations and generate funds therefrom and/or raise equity capital or borrowings sufficient to meet current and future obligations. These uncertainties cast a significant doubt on the ability of the Company to continue operations as a going concern. Management intends to finance operating costs over the next twelve months with funds on hand.




2.
Significant accounting policies and basis of preparation




The financial statements were authorized for issue on March 8, 2013 by the directors of the Company.




Statement of compliance with International Financial Reporting Standards




The consolidated financial statements of the Company comply with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).




Basis of preparation




The consolidated financial statements of the Company have been prepared on an accrual basis and are based on historical costs, modified where applicable. The consolidated financial statements are presented in Canadian dollars unless otherwise noted.




Consolidation




The consolidated financial statements include the accounts of the Company and its controlled entities.  Details of controlled entities are as follows:




Percentage owned*Country of

incorporation
December 31,

2012
December 31,

2011Max Resource, Inc.
USA
100%
100%


*Percentage of voting power is in proportion to ownership.




Inter-company balances and transactions, including unrealized income and expenses arising from inter-company transactions, are eliminated on consolidation.






5


Max Resource Corp.
 Notes to the Consolidated Financial Statements
 (Expressed in Canadian dollars)
 For the years ended December 31, 2012 and 2011





2.
Significant accounting policies and basis of preparation (cont'd)


Significant estimates and assumptions




The preparation of financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of expenses during the reporting period. Estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, actual outcomes can differ significantly from these estimates.




Areas requiring a significant degree of estimation relate to the determination of the recoverability of the carrying value of exploration and evaluation assets, fair value measurements for financial instruments and stock-based compensation and other equity-based payments, the recognition and valuation of provisions for restoration and environmental liabilities, and the recoverability and measurement of deferred tax assets and liabilities.  Actual results may differ from those estimates and judgments.




Significant judgments




The preparation of financial statements in accordance with IFRS requires management to make judgments, apart from those involving estimates, in applying accounting policies.  The most significant judgments applying to the Company’s financial statements include:




–
The assessment of the Company’s ability to continue as a going concern and whether there are events or conditions that may give rise to significant uncertainty;


–
the classification and allocation of expenditures as exploration and evaluation expenditures or operating expenses; and


the classification of financial instruments.





Foreign currency translation




The functional currency of each entity is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Canadian dollars which is the parent company and United States subsidiary’s functional and presentation currency.




Transactions and balances:




Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the period-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.




Exchange differences arising on the translation of monetary items or on settlement of monetary items are recognized in profit or loss in the statement of comprehensive loss in the period in which they arise, except where deferred in equity as a qualifying cash flow or net investment hedge.





6


Max Resource Corp.
 Notes to the Consolidated Financial Statements
 (Expressed in Canadian dollars)
 For the years ended December 31, 2012 and 2011


2.
Significant accounting policies and basis of preparation (cont'd)


Foreign currency translation (cont’d)




Exchange differences arising on the translation of non-monetary items are recognized in other comprehensive income in the statement of comprehensive income to the extent that gains and losses arising on those non-monetary items are also recognized in other comprehensive income. Where the non-monetary gain or loss is recognized in profit or loss, the exchange component is also recognized in profit or loss.




Exploration and evaluation expenditures


Costs incurred before the Company has obtained the legal rights to explore an area are expensed as incurred.




Exploration and evaluation expenditures include the costs of acquiring licenses and rights, costs associated with exploration and evaluation activity, and the fair value (at acquisition date) of exploration and evaluation assets acquired in a business combination. Exploration and evaluation expenditures are capitalized.  Option payments are considered acquisition costs provided that the Company has the intention of exercising the underlying option.




Property option agreements are exercisable entirely at the option of the optionee.  Therefore, option payments (or recoveries) are recorded when payment is made (or received) and are not accrued.




Government tax credits received are recorded as a reduction to the cumulative costs incurred and capitalized on the related property.




Exploration and evaluation assets are assessed for impairment if (i) sufficient data exists to determine technical feasibility and commercial viability, and (ii) facts and circumstances suggest that the carrying amount exceeds the recoverable amount.




Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified to mining property and development assets within property, plant and equipment.




Recoverability of the carrying amount of any exploration and evaluation assets is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest.




Farm outs




The Company does not record any expenditure made by the farmee on its account. It also does not recognize any gain or loss on its exploration and evaluation farm out arrangements but reallocates any costs previously capitalized in relation to the whole interest as relating to the partial interest retained and any consideration received directly from the farmee is credited against costs previously capitalized.  A gain is only recognized when credited proceeds exceed carrying value.







7


Max Resource Corp.
 Notes to the Consolidated Financial Statements
 (Expressed in Canadian dollars)
 For the years ended December 31, 2012 and 2011





2.
Significant accounting policies and basis of preparation (cont'd)





Share-based payments




The Company operates an employee stock option plan. Share-based payments to employees are measured at the fair value of the instruments issued and amortized over the vesting periods. Share-based payments to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The corresponding amount is recorded to the share-based payment reserve.  The fair value of options is determined at the grant date using a Black–Scholes pricing model. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognized for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest.




Loss per share




Basic loss per share is calculated by dividing the loss attributable to common shareholders by the weighted average number of common shares outstanding in the period. For all periods presented, the loss attributable to common shareholders equals the reported loss attributable to owners of the Company. Diluted loss per share is calculated by the treasury stock method. Under the treasury stock method, the weighted average number of common shares outstanding for the calculation of diluted loss per share assumes that the proceeds to be received on the exercise of dilutive share options and warrants are used to repurchase common shares at the average market price during the period.




Financial instruments




The Company classifies its financial instruments in the following categories: at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale and financial liabilities. The classification depends on the purpose for which the financial instruments were acquired. The Company determines the classification of its financial instruments at initial recognition.





Financial assets are classified at fair value through profit or loss when they are either held for trading for the purpose of short-term profit taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with changes in carrying value being included in profit or loss.




Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortized cost. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets.




Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the Company’s intention to hold these investments to maturity. They are subsequently measured at amortized cost. Held-to-maturity investments are included in non-current assets, except for those which are expected to mature within 12 months after the end of the reporting period.





8


Max Resource Corp.
 Notes to the Consolidated Financial Statements
 (Expressed in Canadian dollars)
 For the years ended December 31, 2012 and 2011


2.
Significant accounting policies and basis of preparation (cont'd)


Financial instruments (cont’d)




Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or are not suitable to be classified as financial assets at fair value through profit or loss, loans and receivables or held-to-maturity investments and are subsequently measured at fair value. These are included in current assets. Unrealized gains and losses are recognized in other comprehensive income, except for impairment losses and foreign exchange gains and losses on monetary financial assets.




Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortized cost.


Regular purchases and sales of financial assets are recognized on the trade-date – the date on which the group commits to purchase the asset.




Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership.




At each reporting date, the Company assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a significant and prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen.




The Company does not have any derivative financial assets and liabilities.




Impairment of assets




The carrying amount of the Company’s assets (which include equipment and exploration and evaluation assets) is reviewed at each reporting date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized whenever the carrying amount of an asset or its cash generating unit exceeds its estimated recoverable amount. Impairment losses are recognized in the statement of income and comprehensive income.




The recoverable amount of assets is the greater of an asset’s fair value less cost to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs.




An impairment loss is only reversed if there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount, however, not to an amount higher than the carrying amount that would have been determined had no impairment loss been recognized in previous years.




Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment.





9


Max Resource Corp.
 Notes to the Consolidated Financial Statements
 (Expressed in Canadian dollars)
 For the years ended December 31, 2012 and 2011





2.
Significant accounting policies and basis of preparation (cont'd)





Cash and cash equivalents


Cash and cash equivalents include cash on hand, deposits held with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts.




Income taxes




Current income tax:




Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date, in the countries where the Company operates and generates taxable income.




Current income tax relating to items recognized directly in other comprehensive income or equity is recognized in other comprehensive income or equity and not in profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.




Deferred income tax:




Deferred income tax is provided using the balance sheet method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.




The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and recognized only to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized.




Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.




Deferred income tax assets and deferred income tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.




Restoration and environmental obligations




The Company recognizes liabilities for statutory, contractual, constructive or legal obligations associated with the retirement of long-term assets, when those obligations result from the acquisition, construction, development or normal operation of the assets. The net present value of future restoration cost estimates arising from the decommissioning of plant and other site preparation work is capitalized to exploration and evaluation assets along with a corresponding increase in the restoration provision in the period incurred. Discount rates using a pre-tax rate that reflect the time value of money are used to calculate the net present value. The restoration asset will be depreciated on the same basis as other mining assets.







10


Max Resource Corp.
 Notes to the Consolidated Financial Statements
 (Expressed in Canadian dollars)
 For the years ended December 31, 2012 and 2011


2.
Significant accounting policies and basis of preparation (cont'd)





Restoration and environmental obligations (cont’d)




The Company’s estimates of restoration costs could change as a result of changes in regulatory requirements. These changes are recorded directly to mining assets with a corresponding entry to the restoration provision. The Company’s estimates are reviewed annually for changes in regulatory requirements, discount rates, effects of inflation and changes in estimates. Changes in the net present value, excluding changes in the Company’s estimates of reclamation costs, are charged to profit or loss for the period.




The net present value of restoration costs arising from subsequent site damage that is incurred on an ongoing basis during production are charged to profit or loss in the period incurred.




The costs of restoration projects that were included in the provision are recorded against the provision as incurred. The costs to prevent and control environmental impacts at specific properties are capitalized in accordance with the Company’s accounting policy for exploration and evaluation assets.




Equipment




Equipment is stated at historical cost less accumulated amortization and accumulated impairment losses.




Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of significant replaced parts are derecognized. All other repairs and maintenance costs are charged to the statement of loss  and comprehensive loss during the financial period in which they are incurred.




Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized in profit or loss.




Amortization is calculated on a straight-line method to write off the cost of the assets to their residual values over their estimated useful lives. The amortization rates applicable to each category is as follows:


Class                                                           Amortization rate


Equipment                                                           30%








11


Max Resource Corp.
 Notes to the Consolidated Financial Statements
 (Expressed in Canadian dollars)
 For the years ended December 31, 2012 and 2011




2.
Significant accounting policies and basis of preparation (cont'd)





Accounting standards issued by not yet effective




New standard IFRS 9 “Financial Instruments”




This new standard is a partial replacement of IAS 39 “Financial Instruments: Recognition and Measurement”. IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets.




The new standard also requires a single impairment method to be used, replacing the multiple impairment methods in IAS 39. IFRS 9 is effective for annual periods beginning on or after January 1, 2015.




New standard IFRS 10 “Consolidated Financial Statements”




This new standard will replace IAS 27 “Consolidated and Separate Financial Statements”, and SIC-12 “Consolidation – Special Purpose Entities”. Concurrent with IFRS 10, the IASB issued IFRS 11 “Joint Ventures”; IFRS 12 “Disclosures of Involvement with Other Entities”; IAS 27 “Separate Financial Statements”, which has been amended for the issuance of IFRS 10 but retains the current guidance for separate financial statements; and IAS 28 “Investments in Associates and Joint Ventures”, which has been amended for conforming changes based on the issuance of IFRS 10 and IFRS 11.




IFRS 10 uses control as the single basis for consolidation, irrespective of the nature of the investee, eliminating the risks and rewards approach included in SIC-12, and requires continuous assessment of control over an investee. The above consolidation standards are effective for annual periods beginning on or after January 1, 2013.




New standard IFRS 11 “Joint Arrangements”




This new standard requires a venturer to classify its interest in a joint arrangement as a joint venture or joint operation.  Joint ventures will be accounted for using the equity method of accounting whereas for a joint operation the venture will recognize its share of the assets, liabilities, revenue and expenses of the joint operation. Under existing IFRS, entities have the choice to proportionately consolidate or equity account for interests in joint ventures. IFRS 11 supersedes lAS 31, Interests in Joint Ventures, and SIC-13, Jointly Controlled Entities-Non-monetary Contributions by Venturers.




New standard IFRS 12 “Disclosure of Interests in Other Entities”




This new standard establishes disclosure requirements for interests in other entities, such as joint arrangements, associates, special purpose vehicles and off balance sheet vehicles. The standard carries forward existing disclosures and also introduces significant additional disclosure requirements that address the nature of, and risks associated with, an entity's interests in other entities.




New standard IFRS 13 “Fair value measurement”




This new standard replaces the fair value measurement guidance currently included in various other IFRS standards with a single definition of fair value and extensive application guidance.  IFRS 13 provides guidance on how to measure fair value and does not introduce new requirements for when fair value is required or permitted.  It also establishes disclosure requirements to provide users of the financial statements with more information about fair value measurements.  IFRS 13 is effective for annual periods beginning on or after January 1, 2013.




12


Max Resource Corp.
 Notes to the Consolidated Financial Statements
 (Expressed in Canadian dollars)
 For the years ended December 31, 2012 and 2011




2.
Significant accounting policies and basis of preparation (cont'd)


Accounting standards issued by not yet effective(cont’d)




New interpretation IFRIC 20 “Stripping Costs in the Production Phase of a Surface Mine”




This new IFRIC clarifies when production stripping should lead to the recognition of an asset and how that asset should be measured, both initially and in subsequent periods. IFRIC 20 is effective for annual periods beginning on or after January 1, 2013.




Amendments to IAS 32 “Financial Instruments: Presentation”




These amendments address inconsistencies when applying the offsetting requirements, and is effective for annual periods beginning on or after January 1, 2014.




Financial statement presentation




In June 2011, the IASB and the Financial Accounting Standards Board (“FASB”) issued amendments to standards to align the presentation requirements for other comprehensive income (“OCI”).  The IASB issued amendments to IAS 1 “Presentation of Financial Statements” to require companies preparing financial statements under IFRS to group items within OCI that may be reclassified to the profit or loss. The amendments also reaffirm existing requirements that items in OCI and profit or loss should be presented as either a single statement or two consecutive statements.  The amendments are effective for fiscal years beginning on or after July 1, 2012.




The Company has not early adopted these standards and is currently assessing the impact that these standards will have on its consolidated financial statements.




Other accounting standards or amendments to existing accounting standards that have been issued but have future effective dates are either not applicable or are not expected to have a significant impact on the Company’s financial statements.




3.
Cash and cash equivalents





The components of cash and cash equivalents are as follows:




December 31, 2012


December 31,2011Cash at bank

$
96,757


$
231,358Guaranteed investment certificates


413,531



900,000$
510,288


$
1,131,358








4.
Receivables and prepaids





The components of receivables and prepaids are as follows:




December 31, 2012


December 31, 2011Accrued interest receivable

$
3,817


$
6,932Prepaid expenses


4,223



7,978$
8,040


$
14,910







13


Max Resource Corp.
 Notes to the Consolidated Financial Statements
 (Expressed in Canadian dollars)
 For the years ended December 31, 2012 and 2011





5.
Marketable securities


During the year ended December 31, 2010, the Company received an option payment, consisting of 600,000 shares with a market value of $90,000 from Kokanee Placer Ltd. (“Kokanee”), a publically traded British Columbia company. The Company records these available for sale shares at fair value.  During the year ended December 31, 2011, the Company sold 50,000 of these common shares for proceeds of $10,000 resulting in a gain of $2,500. At December 31, 2011, the Company held 550,000 common shares of Kokanee with a fair market value of $71,500 and reversed a previously unrealized gain of $84,000 which was recorded as other comprehensive loss, as well as an impairment of $11,000.




During the year ended December 31, 2012, the Company sold its remaining 550,000 shares of Kokanee for proceeds of $66,973 resulting in a loss of $4,527.




6
Equipment


Cost:At December 31, 2011 and December 31, 2012

$
5,148Depreciation:At December 31, 2010


2,894Charge for the year


676At December 31, 2011


3,570Charge for the year


475At December 31, 2012


4,045Net book value:At December 31, 2011

$
1,578At December 31, 2012

$
1,103







14


Max Resource Corp.
 Notes to the Consolidated Financial Statements
 (Expressed in Canadian dollars)
 For the years ended December 31, 2012 and 2011





7.
Exploration and evaluation assets





Balance

December 31, 2010


Additions


Recoveries received


Balance

December 31, 2011


Additions


Write-offs


Recoveries received


Balance

December 31,

2012Acquisition costs:C de Baca,  NM

$
206,472


$
19,319


$
-


$
225,791


$
10,210


$
(236,001
)

$
-


$
-Diamond Peak, NV


35,729



9,625



-



45,354



5,371



-



(3,417
)


47,308Ravin, NV


194,588



10,010



-



204,598



-



(201,038
)


(3,560
)


-East Manhattan, NV


204,970



35,803



-



240,773



31,642



-



(3,773
)


268,642Howell, BC


37,500



-



-



37,500



-



-



(37,500
)


-Crowsnest, BC


8,817



-



-



8,817



-



-



(8,817
)


-Table Top, NV


70,720



11,624



-



82,344



1,523



-



(4,129
)


79,738Majuba Hill, NV


-



54,526



-



54,526



244,996



-



(1,330
)


298,192758,796



140,907



-



899,703



293,742



(437,039
)


(62,526
)


693,880Exploration costs:C de Baca,  NM


235,596



-



-



235,596



-



(235,596
)


-



-Diamond Peak, NV


58,092



2,371



-



60,463



1,823



-



-



62,286Ravin, NV


504,987



-



-



504,987



-



(504,987
)


-



-East Manhattan, NV


101,854



6,327



-



108,181



2,387



-



-



110,568Howell, BC


437,801



-



-



437,801



-



-



(437,801
)


-Crowsnest, BC


171,372



-



(184
)


171,188



-



-



(171,188
)


-Table Top, NV


323,750



150,820



-



474,570



592



-



-



475,162Majuba Hill, NV


-



828,718



-



828,718



443,838



-



-



1,272,5561,833,452



988,236



(184
)


2,821,504



448,640



(740,583
)


(608,989
)


1,920,572$
2,592,248


$
1,129,143


$
(184
)

$
3,721,207


$
742,382



(1,177,622
)

$
(671,515
)

$
2,614,452







15


Max Resource Corp.
 Notes to the Consolidated Financial Statements
 (Expressed in Canadian dollars)
 For the years ended December 31, 2012 and 2011





7.
Exploration and evaluation assets(cont’d)





C de Baca, New Mexico, United States




On September 22, 2005, the Company entered into an agreement to acquire a total of 108 claims (the “Dat Claims”) in Socorro County, New Mexico, pursuant to an agreement with Applied Geologic Services, Inc. of Denver, Colorado. Consideration for the acquisition of the Claims was US$10,000 cash payment (paid), with annual payments of US$10,000 until the commencement of production. After commencement of production, a royalty of 2% of gross revenues is payable until such time as a total of US$500,000 (including the initial cash payment and annual payments) has been paid.




At December 31, 2012, the Bureau of Land Management (“BLM”) of New Mexico holds $Nil in reclamation bonds (December 31, 2011 - $16,272) from the Company to guarantee reclamation of the environment on the property. This reclamation bond was refunded to the Company during the year ended December 31, 2012.




During the year ended December 31, 2011 and 2012, the Company did not incur exploration costs on the C de Baca project.  During the year ended December 31, 2012, management elected not to continue with the development of C de Baca and consequently all related costs were written off to operations.




Diamond Peak, Nevada, United States




On May 9, 2006, the Company entered into an Option Agreement, as amended June 30, 2010, to acquire a 100% interest in the claims in Eureka County, Nevada, the “Diamond Peak Property”, from The Wendt Family Trust. The Wendt Family Trust is controlled by Clancy J. Wendt, the Vice President of Exploration for the Company. The terms of the Option Agreement require the issuance to the Wendt Family Trust of 100,000 escrowed shares (issued) of the Company with a fair value of $40,000 at date of issue and the following rental payments:


Date
Payment AmountUpon execution of the Agreement
$ 25,000 (U.S.) (paid)May 9, 2007
35,000 (U.S.) (paid)May 9, 2008
45,000 (U.S.) (paid)May 9, 2009
50,000 (U.S.) (paid)June 30, 2010 (on execution of amending agreement)
25,000 (U.S.) (paid)May 9, 2011 (as amended)
35,000 (U.S.) (deferred until further notice)May 9, 2012 (as amended)
45,000 (U.S.) (deferred until further notice)Each anniversary thereafter for 4 years (as amended)
50,000 (U.S.)


The Company may purchase the property for US$300,000. If the option to purchase the property is exercised during the term of the rental payments, no further property rental payments will be due. The Diamond Peak property will be subject to a 3% Net Smelter Royalty (“NSR”). Upon full exercise of the option, the Company will own 100% of the property.




On May 15, 2006, the Company entered into a mineral property Option Agreement with Kokanee whereby it granted Kokanee the right to acquire up to a 51% interest in the Diamond Peak Property in consideration of certain cash payments totaling US$470,000, the issuance of 600,000 common shares of Kokanee and incurring mineral exploration commitments of $1,000,000.




16


Max Resource Corp.
 Notes to the Consolidated Financial Statements
 (Expressed in Canadian dollars)
 For the years ended December 31, 2012 and 2011





7.
Exploration and evaluation assets(cont’d)





Diamond Peak, Nevada, United States(cont’d)





In June 2010, Kokanee advised the Company that they would not make the annual option payment of US$50,000 then due and would be abandoning their option on the property.




During the year ended December 31, 2011, the Company incurred $1,794 of drilling and assaying fees and $577 of field expenses on the Diamond Peak project. During the year ended December 31, 2012, the Company incurred $1,823 for geological consulting on the Diamond Peak project and received a refund on state property fees in the amount of $3,417.




At December 31, 2012, the BLM holds a $15,361 reclamation bond (December 31, 2011 - $14,500) from the Company to guarantee reclamation of the property.




Ravin Claims, Nevada, United States




On September 10, 2007, as amended November 9, 2010, the Company entered into an option agreement with Energex LLC (“Energex”), a Nevada corporation, for the acquisition of a 100% interest in the Ravin property, consisting of mineral claims located in Lander County, Nevada. Energex is wholly-owned by Clancy J. Wendt, the Vice President of Exploration for the Company.




The terms, as amended, of the option agreement with Energex require the payment of $4,996 (US$5,000) on execution of the agreement (paid), $26,722 (US$25,000) by September 10, 2008 (paid), $38,700 (US$35,000) by September 10, 2009 (paid), $10,650 (US$10,000) by September 10, 2010 (paid) and $10,010 (US$10,000) by September 10, 2011 (paid),  with an additional US$10,000 on each anniversary thereafter, subject to increase to US$50,000 upon certain triggering events. The Ravin Property is subject to a 3% NSR royalty. Upon full exercise of the option, the Company will own 100% of the project. In addition, the Company has paid filing fees of $106,185, which have been included in acquisition costs.




During the year ended December 31, 2011 and 2012, the Company did not incur exploration costs on the Ravin claims. During the year ended December 31, 2012, the Company received a refund on state property fees in the amount of $3,560. During the year ended December 31, 2012, the Company elected not to proceed with the Ravin Claims option agreement and consequently all related costs were written-off to operations.




At December 31, 2012, the BLM holds a $3,025 reclamation bond (December 31, 2011 - $8,046) from the Company to guarantee reclamation of the environment on the property. The Company received a partial refund of $5,021 of the reclamation bond during the year ended December 31, 2012.




East Manhattan, Nevada, United States




On November 11, 2007, as amended December 4, 2008 and December 21, 2010, the Company entered into an option agreement with MSM Resource LLC (“MSM”), a Nevada corporation, for the acquisition of a 100% interest in the East Manhattan Wash mineral claims located in Nye County, Nevada.




The terms of the option agreement with MSM call for the payment of $27,874 (US$28,000) on execution of the agreement (paid), $25,029 (US$20,000) by December 4, 2008 (paid), $26,603 (US$25,000) by. December 4, 2009 (paid), $40,560 (US$40,000) by December 4, 2010 (paid), US$50,000 by December 4, 2011 and US$100,000 by December 12, 2012, subject to securing a drill permit, which has been applied for but not yet been received.   During the year ended December 31, 2012, the Company paid $19,788 (US$20,000) while waiting to receive the drill permit for the property.





17


Max Resource Corp.
 Notes to the Consolidated Financial Statements
 (Expressed in Canadian dollars)
 For the years ended December 31, 2012 and 2011






7.
Exploration and evaluation assets(cont’d)


East Manhattan, Nevada, United States(cont’d)




In addition, the Company must make exploration expenditures totaling US$700,000 on the claims including the following minimum expenditures (subject to receipt of drill permits and securing a drill rig, which to the date of these financial statements has not been received):




(i)
on or before the second anniversary, US$50,000 (completed);


(ii)
on or before the fourth anniversary, a further US$150,000 (deferred until drill permit received);


(iii)
on or before the fifth anniversary, a further US$200,000(deferred until drill permit received); and


(iv)
on or before the sixth anniversary, a further US$300,000.





The East Manhattan Property is subject to a 3% NSR royalty. Upon full exercise of the option, the Company will own 100% of the project.




During the year ended December 31, 2011, the Company incurred $6,045 of geological consulting and $282 of field expenses on the East Manhattan project. During the year ended December 31, 2012, the Company incurred geological consulting of $2,387 and received a refund of state property fees of $3,773 on the East Manhattan project.




Howell and Crowsnest, British Columbia, Canada




On June 9, 2008, the Company entered into an option agreement with Eastfield Resources Ltd. (“Eastfield”), whereby the Company could acquire a 60% interest in the Howell Gold Project in Southeast British Columbia. On July 23 2009, the Company agreed with Eastfield to amend the Howell property agreement to allow the Company to earn a 60% interest in either the Howell or the Crowsnest projects over a four year period by making cash payments totaling $60,000 to Eastfield ($10,000 paid on signing of the amended agreement), issuing 50,000 shares (issued) and by completing aggregate exploration expenditures on both properties of $400,000 by the second anniversary date (June 30, 2011 - completed).




In February 2010, the Government of British Columbia announced a halt to all ongoing mineral exploration work and mine development in the Flathead Valley in southeastern British Columbia where the Howell and Crowsnest properties are located. The Company was contacted by the Ministry of Energy, Mines and Petroleum Resources and discussions were initiated with respect to compensation. During the year ended December 31, 2012, the Company was reimbursed for all its expenditures on the Howell and Crowsnest properties in the total amount of $655,306.




Table Top, Nevada, United States




On August 31, 2009, the Company entered into an option agreement with Energex to acquire a 100% interest in the Table Top claims in Humboldt County Nevada.




The terms of the Option Agreement with Energex require the payment of $5,400 (US$5,000) upon execution of the Agreement (paid), US$25,000 on the first anniversary of the Agreement (deferred indefinitely), US$35,000 on the second anniversary of the Agreement (deferred indefinitely) and US$50,000 on each anniversary thereafter for a term of ten years, subject to renewal. The Company may buy the property at any time for US$300,000, at which point the annual payments will cease.




The Table Top property is subject to a 3% NSR royalty.  Upon full exercise of the option agreement, the Company will own 100% of the project.




18


Max Resource Corp.
 Notes to the Consolidated Financial Statements
 (Expressed in Canadian dollars)
 For the years ended December 31, 2012 and 2011





7.
Exploration and evaluation assets(cont’d)





Table Top, Nevada, United States (cont’d)




During the year ended December 31, 2011, $27,139 of geological consulting, drilling and assaying fees of $109,682 and field expenses of $13,999 were incurred on the property.  During the year ended December 31, 2012, $592 of geological consulting was incurred on the Table Top property. The Company received a refund on state property fees in the amount of $4,129.




At December 31, 2012, the BLM holds a $19,127 reclamation bond (December 31, 2011 - $19,127) from the Company to guarantee reclamation of the environment on the property.




Majuba Hill, Nevada, United States




On March 4, 2011, the Company entered into an option agreement (“Agreement”) to acquire up to a 75% interest in the Majuba Hill property in Pershing County, Nevada from Claremont Nevada Mines LLC., (“Claremont”) of Nevada. The terms of the Agreement with Claremont allow the Company to earn an initial 60% interest in the property over six years by spending US$6,500,000 on exploration of the property, as follows:




-
incurring US$500,000 in exploration work by March 4, 2012 (completed);


-
incurring a further US $750,000 in exploration work by March 4, 2013 (completed);


-
incurring a further US $1,000,000 in exploration work by March 4, 2014;


-
incurring a further US $1,250,000 in exploration work by March 4, 2015;


-
incurring a further US $1,500,000 in exploration work by March 4, 2016; and


-
incurring a further US $1,500,000 in exploration work by March 4, 2017.




The Company can increase its interest in the property to 75% by spending a further US $3,500,000 on exploration over a subsequent two year period.  The Majuba Hill property will be subject to a 3% NSR payable to the vendor, 1.5% of which may be purchased at any time for US$1,500,000.




On December 3, 2012 the Company entered into a Mining Lease and Option to Purchase Agreement (the “Lease Agreement”) with Claremont and JR Exploration LLC of Utah whereby the Company can acquire a 100% interest in the Majuba Hill property by the payment to Claremont of US$1,000,000 over a four year period, with US$200,000 having been paid on signing and US$200,000 payable each year on the anniversary of the Lease Agreement.  This new Lease Agreement replaced the previous Agreement with Claremont.  Under the terms of this new Lease Agreement, there will be no annual work commitments and the NSR will be reduced from 3% to 1%.




On April 9, 2012, the Company entered into a mineral lease with New Nevada Resources LLC (“NNR”) for 560 acres of mineral rights immediately adjacent of its Majuba Hill project in Nevada. The mineral lease with NNR is for a term of 20 years and calls for annual lease payments of $15 per acre in the first year increasing incrementally to $30 per acre in year four and subsequent years. NNR has the right to retain a 15% working interest or it can convert it to a net smelter return of 0.5%  on base metals and 1% on precious metals in addition to retaining an overriding NSR of 1.75% on base metals and 3% on precious metals.




During the year ended December 31, 2011, the Company paid $19,560 (US$20,000) in lease payments on the Majuba Hill property. The Company incurred $34,966 for staking additional claims on the Majuba Hill property.  During the year ended December 31, 2012, the Company paid $244,996 (US$228,400) in lease payments on the Majuba Hill property and received a refund in state property fees in the amount of $1,330.







19


Max Resource Corp.
 Notes to the Consolidated Financial Statements
 (Expressed in Canadian dollars)
 For the years ended December 31, 2012 and 2011


7.
Exploration and evaluation assets(cont’d)


Majuba Hill, Nevada, United States(cont’d)




During the year ended December 31, 2011, the Company incurred $213,081 for geological consulting, $481,603 for drilling and $134,034 for field expenses on the Majuba Hill project. During the year ended December 31, 2012, the Company incurred $181,781 for geological consulting, $204,469 for drilling and $57,588 for field expenses on the Majuba Hill project.




At December 31, 2012, the BLM holds a $ 15,784 reclamation bond (December 31, 2011 - $10,238) from the Company to guarantee reclamation of the environment on the property.




8.
Trade payables and accrued liabilities





The components of trade payables and accrued liabilities are as follows:




December 31, 2012


December 31,2011Trade payables

$
5,633


$
67,283Amounts due to related parties (Note 12)


20,000



39,826Accrued liabilities


16,000



20,000$
41,633


$
127,109






9.
Deferred tax assets and liabilities


A reconciliation of the expected income tax recovery to the actual income tax recovery is as follows:




Year ended 
December 31, 
2012


Year ended 
December 31, 
2011Net loss

$
(1,840,099
)

$
(1,112,646
)Statutory tax rate


25
%


26.5
%Expected income tax recovery at the statutory tax rate

$
(460,025
)

$
(294,851
)Non-deductible items


26,144



152,807Other items


-



(13,394
)Difference in tax rates in foreign jurisdiction


(125,139
)


(38,942
)Effect of change in tax rates


-



33,430Temporary differences not recognized


559,021



160,950Income tax recovery

$
-


$
-





The Company has the following tax effected deductible temporary differences for which no deferred tax asset has been recognized:





December 31, 
2012


December 31,

2011Non-capital loss carry-forwards

$
2,854,871


$
2,359,142Exploration and evaluation assets


260,820



(186,917
)Share issuance costs


5,327



7,102Equipment


978



(305
)Other


-



1,180$
3,001,259


$
2,442,238





20


Max Resource Corp.
 Notes to the Consolidated Financial Statements
 (Expressed in Canadian dollars)
 For the years ended December 31, 2012 and 2011





9.
Deferred tax assets and liabilities (cont'd)


The tax pools relating to these deductible temporary differences expire as follows:





Canadian

non-capital

losses


Canadian

resource 
pools


Canadian 
share issue 
costs


United States 
tax

losses


United States equipment 
and resource 
pools2013

$
-


$
-


$
7,102


$
-


$
-2014


149,223



-



7,102



-



-2015


161,439



-



7,102



4,080



-2026


383,173



-



-



-



-2027


518,148



-



-



174,949



-2028


607,835



-



-



274,214



-2029


720,438



-



-



3,153,918



-2030


607,390



-



-



160,383



-2031


783,671



-



-



167,777



-2032


475,711



-



-



1,076,576



-No or various expiries


-



1,044,230



-



-



2,255,027$
4,407,028


$
1,044,230


$
21,307


$
5,008,897


$
2,255,027







10.
Share capital


Authorized share capital




Unlimited number of common shares without par value.




Issued share capital




At December 31, 2012, there were 24,505,985 issued and fully paid common shares (December 31, 2011– 24,505,985).




Private placements




On April, 2011, the Company completed a non-brokered private placement of 2,016,755 units at a price of $0.28 per unit for gross proceeds of $564,691. Each unit is comprised of one common share and one warrant, with each warrant entitling the holder to purchase an additional common share at an exercise price of $0.38 per share until April 4, 2013. Cash finder’s fees of $35,512 were paid with respect to a portion of this placement.




Basic and diluted loss per share




The calculation of basic and diluted loss per share for the year ended December 31, 2012 was based on the loss attributable to common shareholders of $1,840,099 (2011 - $1,196,646) and the weighted average number of common shares outstanding of 24,505,985 (2011 – 23,423,021).  Diluted loss per share did not include the effect of 3,280,000 outstanding stock options and 2,016,755 outstanding warrants as they are anti-dilutive.


21


Max Resource Corp.
 Notes to the Consolidated Financial Statements
 (Expressed in Canadian dollars)
 For the years ended December 31, 2012 and 2011


10.
Share capital (cont'd)


Stock options
  The Company has adopted an incentive stock option plan, which provides that the Board of Directors of the Company may from time to time, in its discretion, and in accordance with the Exchange requirements, grant to directors, officers, employees and technical consultants to the Company, non-transferable stock options to purchase common shares, provided that the number of common shares reserved for issuance will not exceed 20% of the Company’s issued and outstanding common shares to a maximum of 4,309,846. Such options will be exercisable for a period of up to 5 years from the date of grant. Options granted typically vest on the grant date.


The changes in options during the year ended December 31, 2012 and 2011 are as follows:




Year ended

December 31, 2012


Year ended

December 31, 2011Number of 
options


Weighted

average 
exercise 
price


Number of 
options


Weighted 
average 
exercise 
priceOptions outstanding, beginning of year


3,040,000


$
0.28



2,525,000


$
0.30Options granted


675,000



0.25



3,405,000



0.28Options exercised


-



-



(790,000
)


0.17Options expired


(335,000
)


0.36



(2,100,000
)


0.35Options cancelled


(100,000
)


0.24



-



-Options outstanding, end of year


3,280,000


$
0.26



3,040,000


$
0.28Options exercisable, end of year


3,280,000


$
0.26



2,680,000


$
0.28





Details of options outstanding as at December 31, 2012 are as follows:




Exercise price


Number of options

outstanding

Expiry Date$
0.35



600,000

March 14, 20130.24



480,000

October 26, 20130.24



1,525,000

August 17, 20140.25



675,000

February 22, 20153,280,000





The weighted average remaining contractual life of stock options outstanding at December 31, 2012 is 1.35 years.




On March 14, 2011, the Company granted stock options to consultants to purchase 1,300,000 common shares at a price of $0.35 per share to March 14, 2013. These options vested immediately. The total fair value of $261,401 was estimated using the Black-Scholes option pricing model assuming an expected life of 2 years, a risk-free interest rate of 1.72% and an expected volatility of 111%.




On August 17, 2011, the Company granted stock options to consultants to purchase 1,625,000 common shares at a price of $0.24 per share to August 17, 2014.  These options vested immediately. The total fair value of $226,022 was estimated using the Black-Scholes option pricing model assuming an expected life of 3 years, a risk-free interest rate of 1.27% and an expected volatility of 114%.


22


Max Resource Corp.
 Notes to the Consolidated Financial Statements
 (Expressed in Canadian dollars)
 For the years ended December 31, 2012 and 2011


10.
Share capital(cont’d)





On October 26, 2011, the Company granted stock options to consultants to purchase 480,000 common shares at a price of $0.24 per share to October 26, 2013.  These options vest over a one year period. The total fair value of $57,667 was estimated using the Black-Scholes option pricing model assuming an expected life of 2 years, a risk-free interest rate of 1.08% and an expected volatility of 102%. The granting of these options resulted in a stock based compensation expense of $21,934 being recorded during fiscal 2011 and $5,930 being recorded during fiscal 2012.




On February 22, 2012, the Company granted stock options to directors and officers to purchase 675,000 common shares at a price of $0.25 per share to February 22, 2015. These options vested immediately. The total fair value of $109,640 was estimated using the Black-Scholes option pricing model assuming an expected life of 3 years, a risk-free interest rate of 1.22% and an expected volatility of 106%.




Warrants




As at December 31, 2012, the Company had 2,016,755 warrants exercisable at $0.38 until April 4, 2013.




The changes in warrants during the period are as follows:




Year Ended

December 31, 2012


Year Ended

December 31, 2011Number of warrants


Weighted 
average 
exercise 
price


Number of warrants


Weighted 
average 
exercise

priceWarrants outstanding, beginning of year


2,016,755


$
0.38



-


$
-Warrants issued


-



-



2,016,755



0.38Warrants outstanding, end of year


2,016,755


$
0.38



2,016,755


$
0.38




11.
Reserves


Share based payment reserve




The stock option reserve records items recognized as stock-based compensation expense until such time that the stock options are exercised, at which time the corresponding amount will be transferred to share capital.




Share purchase warrant reserve




The warrant reserve records items recognized as stock-based compensation expense until such time that the warrants are exercised, at which time the corresponding amount will be transferred to share capital.




Investment revaluation reserve




The investment revaluation reserve records unrealized gains and losses arising on available-for-sale financial assets, except for impairment losses and foreign exchange gains and losses.





23


Max Resource Corp.
 Notes to the Consolidated Financial Statements
 (Expressed in Canadian dollars)
 For the years ended December 31, 2012 and 2011




12.
Related party transactions


Related party balances




The following amounts due to related parties are included in trade payables and accrued liabilities (Note 8):




December 31, 
2012


December 31,

2011Companies controlled by directors of the Company

$
10,000


$
-Directors of the Company


10,000



39,826$
20,000


$
39,826





These amounts are unsecured, non-interest bearing and have no fixed terms of repayment.




Key management personnel compensation




Years endedDecember 31,

2012


December 31,

2011Short-term employee benefits:Management fees

$
120,000


$
120,000Geological consulting


120,000



120,000Professional fees


42,000



42,000Share-based payments to officers and directors


109,640



487,423$
391,640


$
$769,423





Refer to Note 7.




13.
Financial risk and capital management





The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board of Directors approves and monitors the risk management processes. The type of risk exposure and the way in which such exposure is managed is provided as follows:




Credit risk





Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company’s primary exposure to credit risk is on its cash held in bank accounts. The majority of cash is deposited with major banks in Canada. As most of the Company’s cash is held by two banks there is a concentration of credit risk. This risk is managed by using major banks that are high credit quality financial institutions as determined by rating agencies. The Company’s secondary exposure to risk is on its taxes recoverable. This risk is considered to be minimal.




Liquidity risk




Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company has a planning and budgeting process in place to help determine the funds required to support the Company’s normal operating requirements on an ongoing basis. The Company ensures that there are sufficient funds to meet its short-term business requirements, taking into account its anticipated cash flows from operations and its holdings of cash and cash equivalents.




24


Max Resource Corp.
 Notes to the Consolidated Financial Statements
 (Expressed in Canadian dollars)
 For the years ended December 31, 2012 and 2011




13.
Financial risk and capital management (cont'd)


Historically, the Company's primary source of funding has been the issuance of equity securities for cash, primarily through private placements. The Company’s access to equity financing is dependent upon market conditions and market risks. There can be no assurance of continued access to significant equity funding.




Foreign exchange risk




Foreign currency risk is the risk that the fair values of future cash flows of a financial instrument will fluctuate because they are denominated in currencies that differ from the respective functional currency. The Company is exposed to currency risk as it incurs expenditures that are denominated in United States dollar while its functional currency is the Canadian dollar. The Company does not hedge its exposure to fluctuations in foreign exchange rates. The majority of cash is held in Canadian dollars.




The following is a summary of Canadian dollar equivalent financial assets and liabilities that are denominated in United States dollars:




December 31, 
2012


December 31,

2011Cash and cash equivalents

$
62,180


$
22,197Accounts payable


(10,000
)


(101,594
)$
52,180


$
(79,397
)





Based on the above net exposures, as at December 31, 2012 a 10% change in the United States dollar to Canadian dollar exchange rate could impact the Company’s net loss by $5,200.




Interest rate risk




Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk on certain of its cash equivalents as some instruments have original maturities of three months or less and are therefore exposed to interest rate fluctuations on renewal. A 1% change in market interest rates would have an impact on the Company’s net loss of $4,100.




Capital Management




The Company's policy is to maintain a strong capital base so as to maintain investor and creditor confidence and to sustain future development of the business. The capital structure of the Company consists of working capital and share capital.  There were no changes in the Company's approach to capital management during the year. The Company is not subject to any externally imposed capital requirements.





25


Max Resource Corp.
 Notes to the Consolidated Financial Statements
 (Expressed in Canadian dollars)
 For the years ended December 31, 2012 and 2011





13.
Financial risk and capital management (cont'd)


Classification of financial instruments




Financial assets included in the statement of financial position are as follows:


December 31, 
2012


December 31,

2011Cash and cash equivalents

$
510,288


$
1,131,358Loans and receivables:Receivables and prepaids


8,040



14,910Taxes recoverable


21,658



10,106Reclamation deposits


53,297



68,183Available-for-sale financial instruments:Marketable securities


-



71,500$
593,283


$
1,285,951





Financial liabilities included in the statement of financial position are as follows:


December 31,

2012


December 31, 
2011Non-derivative financial liabilities:Trade payables

$
5,633


$
67,287Amounts due to related parties


20,000



39,826$
25,633


$
107,109





Fair value




The fair value of the Company’s financial assets and liabilities approximates the carrying amount.




Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are:




·
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;


·
Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and


·
Level 3 – Inputs that are not based on observable market data.





The following is an analysis of the Company’s financial assets measured at fair value as at December 31, 2012 and December 31, 2011:




As at December 31, 2012Level 1


Level 2


Level 3Cash and cash equivalents

$
510,288


$
-


$
-






As at December 31, 2011Level 1


Level 2


Level 3Cash and cash equivalents

$
1,131,358


$
-


$
-Marketable securities


71,500



-



-$
1,202,858


$
-


$
-







26


Max Resource Corp.
 Notes to the Consolidated Financial Statements
 (Expressed in Canadian dollars)
 For the years ended December 31, 2012 and 2011


14.
Segmented information


Operating segments




The Company operates in a single reportable operating segment – the acquisition, exploration and development of mineral properties.




Geographic segments




The following non-current assets are located in the following countries:




As at December 31, 2012Canada


United States


TotalEquipment

$
-


$
1,103


$
1,103Reclamation bond


-



53,297



53,297Exploration and evaluation assets


-



2,614,452



2,614,452$
-


$
2,668,852


$
2,668,852






As at December 31, 2011Canada


United States


TotalEquipment

$
-


$
1,578


$
1,578Reclamation bond


-



68,183



68,183Exploration and evaluation assets


655,306



3,065,901



3,721,207$
655,306


$
3,135,663-


$
3,790,969




15.
Non-cash transactions





During the year ended December 31, 2012, the Company incurred the following non-cash transactions that are not reflected in the statement of cash flows:




Years endedDecember 31,

2012


December 31,

2011Reclassification from share-based payment reserve to capital stock on exercise of stock options

$
-


$
86,191Accrued deferred exploration costs for exploration and evaluation assets

$
4,800


$
-






27