**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

Washington, DC  20549

 

**FORM 10-Q**

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2013

[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE

EXCHANGE ACT FOR THE TRANSITION PERIOD FROM

_______________ to _______________

 

Commission File Number  000-53474

 

**STEELE RESOURCES CORPORATION**

(Exact name of small business issuer as specified in its charter)

| NEVADA

 

75-3232682

(State of other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer Identification Number)

 

 

 

2705 Garnet Avenue, Suite 2A

San Diego, CA  

 

95682

(Address of Principal Executive Offices)

 

(Zip Code)

 

 

 

Issuer's telephone number:

 

(225) 246-2181

2705 Garnet Avenue, Suite 2A

San Diego, CA  92109

 (Former address if changed since last report)

Indicate by check mark whether the issuer (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 issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:  Yes [X]  No [   ]

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes [   ]  No [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  (Check one):

Large accelerated filer [   ]

Accelerated filer [   ]

Non-accelerated filer [   ]

Smaller reporting company [   ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes [   ]  No [X]

 

Explanatory Note: Pursuant to Rule 405(a)(2) of Regulation S-T, the registrant is relying upon the applicable 30-day grace period for the initial filing of its first Interactive Data File required to contain detail-tagged footnotes or schedules. The registrant intends to file the required detail-tagged footnotes or schedules by the filing of an amendment to this Quarterly Report on Form 10-Q within the 30-day period.

The number of shares of the issuer’s common stock outstanding as of May 18, 2013 was 81,285,225.

2

INDEX

 

 

PART I - FINANCIAL INFORMATION

4

 

 

ITEM 1. FINANCIAL STATEMENTS

4

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

24

 

 

ITEM 4.  CONTROLS AND PROCEDURES

29

 

 

PART II - OTHER INFORMATION

31

 

 

ITEM 1A. RISK FACTORS

31

 

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES

32

 

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

32

 

 

ITEM 5. OTHER INFORMATION

33

 

 

ITEM 6. EXHIBITS

33

 

 

SIGNATURES

34

3

**PART I - FINANCIAL INFORMATION**

**Item 1.****Interim****Financial Statements and Notes to Interim Financial Statements**

General

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q.  Therefore, they do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders' equity in conformity with generally accepted accounting principles applicable in the United States of America.  There has been no material change in the information disclosed in the notes to the consolidated financial statements included in our Company's annual report on Form 10-K for the year ended December 31, 2012.  In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.  Operating results for the three and three months ended March 31, 2013 are not necessarily indicative of the results that can be expected for the year ending December 31, 2013.

4

**STEELE RESOURCES CORPORATION**

**(An Exploration Stage Company)**

**CONSOLIDATED BALANCE SHEETS**

 

 

 

 

 

 

ASSETS:

 

**March 31,**

 

**December 31,**

 

 

**2013**

 

**2012**

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

   Cash

 

$

-

 

$

-

   Prepaid expenses

 

 

-

 

 

-

      Total current assets

 

 

-

 

 

-

 

 

 

 

 

 

 

Property and equipment, net

 

 

-

 

 

-

 

 

 

 

 

 

 

Other assets

 

 

-

 

 

-

    TOTAL ASSETS

 

$

-

 

$

-

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT:

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

   Accounts payable and accrued liabilities

 

$

238,214

 

$

238,203

   Accrued expenses

 

 

547,291

 

 

485,969

   Derivative liability

 

 

660,285

 

 

93,235

   JV agreement refund payable

 

 

540,000

 

 

540,000

   Note payable - related parties

 

 

235,300

 

 

235,300

   Notes payable

 

 

531,411

 

 

531,411

   Convertible note payable

 

 

349,750

 

 

359,250

      TOTAL LIABILITIES

 

 

3,102,251

 

 

2,483,368

 

 

 

 

 

 

 

CONTINGENCIES AND COMMITMENTS

 

 

-

 

 

-

 

 

 

 

 

 

 

STOCKHOLDERS' DEFICIT:

 

 

 

 

 

 

    Preferred stock, $0.001 par value, 5,000,000 shares authorized;

 

 

 

 

 

 

    0 are issued and outstanding as of

 

 

 

 

 

 

    March 31, 2013 and December 31, 2012, respectively

 

 

-

 

 

-

    Common stock, $0.001 par value, 300,000,000 shares authorized;

 

 

 

 

 

 

    79,285,225 and 72,510,225 issued and outstanding as of 

 

 

 

 

 

 

    March 31, 2013 and December 31, 2012, respectively

 

 

61,091

 

 

54,316

    Additional paid-in capital

 

 

2,650,232

 

 

2,638,007

    Deficit accumulated during exploration stage

 

 

(5,813,574)

 

 

(5,175,691)

      TOTAL STOCKHOLDERS' DEFICIT

 

 

(3,102,251)

 

 

(2,483,368)

 

 

 

 

 

 

 

    TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

 

$

-

 

$

-

The accompanying notes are an integral part of these financial statements.

5

**STEELE RESOURCES CORPORATION**

**(An Exploration Stage Company)**

**STATEMENTS OF OPERATIONS**

 

 

 

 

 

 

**For the Period**

 

**For the Three Months Ended**

 

**from May 27, 2010**

 

**March 31,**

 

**(inception) through**

 

**2013**

 

**2012**

 

**March 31, 2013**

 

 

 

 

 

 

 

 

 

 

 

 

REVENUE

$

-

 

$

-

 

$

531,126

 

 

 

 

 

 

 

 

 

COSTS AND OPERATING EXPENSES:

 

 

 

 

 

 

 

 

    Lease operating expenses

 

-

 

 

-

 

 

342,025

    General and administrative 

 

-

 

 

610,546

 

 

1,992,535

    Exploration expense

 

-

 

 

105,270

 

 

2,336,933

         Total costs and operating expenses

 

-

 

 

715,816

 

 

4,671,493

OPERATING LOSS

 

-

 

 

(715,816)

 

 

(4,140,367)

 

 

 

 

 

 

 

 

 

OTHER EXPENSES:

 

 

 

 

 

 

 

 

    Interest expense

 

637,883

 

 

147,145

 

 

1,673,207

        Total other expense

 

637,883

 

 

147,145

 

 

1,673,207

 

 

 

 

 

 

 

 

 

LOSS BEFORE INCOME TAXES

 

(637,883)

 

 

(862,961)

 

 

(5,813,574)

Provision for income taxes

 

-

 

 

-

 

 

-

NET LOSS 

$

(637,883)

 

$

(862,961)

 

$

(5,813,574)

 

 

 

 

 

 

 

 

 

NET LOSS PER SHARE:

 

 

 

 

 

 

 

 

     Basic and diluted

$

(0.01)

 

$

(0.02)

 

 

 

 

 

 

 

 

 

 

 

 

  Weighted average common shares outstanding,

basic and diluted

 

78,718,558

 

 

46,936,551

 

 

 

The accompanying notes are an integral part of these financial statements.

6

**STEELE RESOURCES CORPORATION**

**(An Exploration Stage Company)**

**STATEMENTS OF CASH FLOWS**

 

 

 

 

 

 

**For the Period**

 

**For the Three Months Ended**

 

**from May 27, 2010**

 

**March 31,**

 

**(inception) through**

 

**2013**

 

**2012**

 

**March 31, 2013**

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

  Net Loss

$

(637,883)

 

$

(862,961)

 

$

(5,813,574)

  Adjustments to reconcile net loss to net cash

 

 

 

 

 

 

 

 

     used in operating activities:

 

 

 

 

 

 

 

 

  Depreciation

 

-

 

 

3,332

 

 

52,118

  Stock-based compensation 

 

-

 

 

11,821

 

 

569,888

  Amortization of debt discount

 

-

 

 

74,742

 

 

763,614

  Fixed assets issued for services

 

-

 

 

-

 

 

7,132

  Stock issued for exploration costs

 

-

 

 

-

 

 

315,000

  Share based compensation

 

-

 

 

340,000

 

 

145,659

  Change in derivative liability

 

576,550

 

 

 

 

 

378,785

  Changes in assets and liabilities:

 

 

 

 

 

 

 

 

    Prepaid expenses and other current assets

 

-

 

 

1,618

 

 

-

    Accounts payable and accrued expenses

 

61,333

 

 

(57,551)

 

 

301,596

    Accrued expenses

 

-

 

 

33,126

 

 

575,221

    Other assets

 

-

 

 

-

 

 

-

          Net cash used in operating activities

 

-

 

 

(455,873)

 

 

(2,704,561)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

    Purchase of fixed assets

 

-

 

 

-

 

 

(37,965)

    Proceeds from disposal of assets

 

-

 

 

-

 

 

8,900

          Net cash used in investing activities

 

-

 

 

-

 

 

(29,065)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 Proceeds from issuance of common stock

 

-

 

 

288,500

 

 

633,500

 Cash acquired in reverse merger

 

-

 

 

-

 

 

19,200

 Proceeds from investor advances

 

-

 

 

-

 

 

103,649

 Cash from joint venture funding

 

-

 

 

-

 

 

540,000

 Cash form project funding partners

 

-

 

 

-

 

 

195,000

 Payments to project funding partners

 

-

 

 

-

 

 

(25,000)

 Cash form project funding partners - related party

 

-

 

 

-

 

 

50,000

 Proceeds from notes payable

 

-

 

 

222,750

 

 

1,592,962

 Repayments on notes payable

 

-

 

 

(125,000)

 

 

(453,000)

 Proceeds from notes payable - related party

 

-

 

 

63,000

 

 

137,148

 Repayments on notes payable - related party

 

-

 

 

-

 

 

(59,833)

          Net cash provided by financing activities

 

-

 

 

449,250

 

 

2,733,626

 

 

 

 

 

 

 

 

 

INCREASE (DECREASE) IN CASH

 

-

 

 

(6,623)

 

 

-

CASH, BEGINNING OF YEAR

 

-

 

 

23,107

 

 

-

CASH, END OF YEAR

$

-

 

$

16,484

 

$

-

 

 

 

 

 

 

 

 

 

**SUPPLEMENTAL CASH FLOW INFORMATION:**

 

 

 

 

 

 

 

 

Interest paid

$

-

 

$

6,036

 

$

9,397

Income taxes paid

$

-

 

$

-

 

$

-

 

 

 

 

 

 

 

 

 

**NONCASH INVESTING AND FINANCING TRANSACTIONS**

 

 

 

 

 

 

 

 

Transfer of property for services

$

-

 

$

-

 

$

7,132

Common stock issued for conversion of debt

$

9,500

 

$

-

 

$

257,006

The accompanying notes are an integral part of these financial statements.

7

**STEELE RESOURCES CORPORATION**

**(AN EXPLORATION STAGE COMPANY) 
**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION**

Business Activity

Steele Resources Corporation (formerly Steele Recording Corporation) (the "Company", "SRC") was incorporated in the state of Nevada on February 12, 2007, at which time it was deemed a “shell company” carrying on minimal operations in the business of producing, acquiring, licensing and distribution of recorded music.   The Company’s corporate charter for Steele Resources, Inc. has been revoked and the Company is in the process of re-incorporating.  

On June 17, 2010 the Company entered into and consummated a Plan and Agreement of Reorganization between the Company and Steele Resources, Inc. and certain stockholders of Steele Resources, Inc. (the “Reorganization”). Pursuant to the Reorganization, the Company acquired all of the issued and outstanding shares of Steele Resources, Inc., a Nevada Corporation (“SRI”). The primary business activity of SRC and its subsidiary consists of mining property acquisition, mineral exploration and development and mining services. 

Although from a legal perspective, SRC acquired Steele Resources, Inc., from an accounting perspective, the transaction is viewed as a recapitalization of SRI accompanied by the equivalent of an issuance of stock by SRI for the net assets of SRC. This is because SRC did not have operations immediately prior to the merger and, following the merger, SRI is the operating company.

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplate continuation of the Company as a going concern.  However, the Company has a working deficit and has generated only $531,126 in revenues since inception.  During the three months ended March 31, 2013, the Company incurred a net loss of $637,883 and as of March 31, 2013 has an accumulated deficit of $5,813,574.  Further, the Company has inadequate working capital to maintain or develop its operations, and is dependent upon funds from private investors and the support of certain stockholders.  These factors raise substantial doubt about the Company’s ability to continue as a going concern.  The financial statements do not include any adjustments that might result from the outcome of these uncertainties.  In this regard, Management is planning to raise any necessary additional funds through loans or additional sales of its common stock.  There is no assurance that the Company will be successful in raising additional capital.

The Company's ability to meet its obligations and continue as a going concern is dependent upon its ability to obtain additional financing, achievement of profitable operations and/or the discovery, exploration, development and sale of mining reserves.  The Company cannot reasonably be expected to earn revenue in the exploration stage of operations.  Although the Company plans to pursue additional financing, there can be no assurance that the Company will be able to secure financing when needed or to obtain such financing on terms satisfactory to the Company, if at all.  Should management fail to raise sufficient financing, the Company may curtail its operations.  

On July 16, 2010, SRC’s wholly owned subsidiary changed its name from Steele Resource, Inc. to Steele Resources, Inc.

8

Effective September 1, 2010, Steele Recording Corporation changed its name to Steele Resources Corporation. 

The unaudited interim consolidated financial statements of the Company included herein have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions for Form 10-Q under Article 8.03 of Regulation S-X. These statements do not include all of the information and notes to the financial statements required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and nine month period ended March 31, 2013, are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal year ended December 31, 2012, included in the Company’s Annual Report on Form 10-K, as filed with Securities and Exchange Commission.

**NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

Basis of Presentation

The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and (iii) the reported amount of net sales and expenses recognized during the periods presented.  Adjustments made with respect to the use of estimates often relate to improved information not previously available.  Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements; accordingly, actual results could differ from these estimates. 

Management evaluates these estimates and assumptions on a regular basis.  Actual results could differ from those estimates.

Exploration Stage Enterprise

The Company's financial statements are prepared pursuant to SEC guidance and Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 915, Development Stage Entities, as it devotes substantially all of its efforts to acquiring and exploring mining interests that will eventually provide sufficient net profits to sustain the Company’s existence.

9

Mineral property rights

All direct costs related to the acquisition of mineral property rights are capitalized. Exploration costs are charged to operations in the period incurred until such time as it has been determined that a property has economically recoverable reserves, at which time subsequent exploration costs and the costs incurred to develop a property are capitalized.  The Company reviews the carrying values of its mineral property rights whenever events or changes in circumstances indicate that their carrying values may exceed their estimated net recoverable amounts.  An impairment loss is recognized when the carrying value of those assets is not recoverable and exceeds its fair value.  As of March 31, 2013, management has determined that there was no impairment loss required.

 

At such time as commercial production may commence, depletion of each mining property will be provided on a unit-of-production basis using estimated proven and probable recoverable reserves as the depletion base.  In cases where there are no proven or probable reserves, depletion will be provided on the straight-line basis over the expected economic life of the mine.

Impairment of Long-Lived Assets

Long-lived assets, such as property, plant, and equipment, and purchased intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Goodwill and other intangible assets are tested for impairment.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. 

Asset Retirement Obligations

The Company had no operating properties at March 31, 2013, but the Company’s mineral properties will be subject to standards for mine reclamation that are established by various governmental agencies.  For these non-operating properties, the Company accrues costs associated with environmental remediation obligations when it is probable that such costs will be incurred and they are reasonably estimable.  Costs of future expenditures for environmental remediation are not discounted to their present value.  Such costs are based on management's current estimate of amounts that are expected to be incurred when the remediation work is performed within current laws and regulations. 

It is reasonably possible that due to uncertainties associated with defining the nature and extent of possible environmental contamination, application of laws and regulations by regulatory authorities, and changes in remediation technology, the ultimate cost of remediation and reclamation could change in the future.  The Company continually reviews its accrued liabilities for such remediation and reclamation costs as evidence becomes available indicating that its remediation and reclamation liability has changed. 

 

The Company recognizes the fair value of a liability for an asset retirement obligation in the period in which it is incurred, if a reasonable estimate of fair value can be made.  The associated asset retirement costs are capitalized as part of the carrying amount of the associated long-lived assets and depreciated over the lives of the assets on a units-of-production basis.  Reclamation costs are accreted over the life of the related assets and are adjusted for changes resulting from the passage of time and changes to either the timing or amount of the original present value estimate on the underlying obligation.  There were no asset retirement obligations as of March 31, 2013 as there are presently no underlying obligations. 

10

Income Taxes

Deferred income taxes are provided based on the provisions of ASC Topic 740, *Income Taxes*, to reflect the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.  Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.  

The Company follows a two-step approach to ultimately recognize and measure uncertain tax positions.  The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not, that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount, which is more than 50% likely of being realized upon ultimate settlement.  The Company considers many factors when evaluating and estimating the Company's tax positions and tax benefits, which may require periodic adjustments.  At March 31, 2013, the Company did not record any liabilities for uncertain tax positions.  The Company’s policy is to include interest and penalties related to unrecognized tax benefits in income tax expense.  

Concentration of Credit Risk

The Company maintains its operating cash balances in banks.  The Federal Depository Insurance Corporation (“FDIC”) insures accounts at each institution up to $250,000. 

Share-Based Compensation

The measurement of the cost of services received in exchange for an award of an equity instrument is based on the grant-date fair value of the award.  Compensation cost is recognized when the event occurs.  The Black-Scholes option-pricing model is used to estimate the fair value of options granted

Basic and Diluted Net Loss Per Common Share

Net loss per common share was computed by dividing the net loss by the weighted average number of common shares outstanding during the period.  The weighted average number of shares was calculated by taking the number of shares outstanding and weighting them by the amount of time that they were outstanding.  Diluted net loss per share for the Company is the same as basic net loss per share, as during period where a net loss is reported, the inclusion of common stock equivalents would be antidilutive.  

At March 31, 2013 common stock equivalents consisted of warrants to purchase 1,650,833. 

Fair Value of Financial Instruments

The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties other than in a forced sale or liquidation.

The carrying amounts of the Company’s financial instruments, including cash, accounts payable and accrued liabilities, accrued interest and related party payable, approximate fair value due to their most maturities.

11

Reclassifications

Certain prior year amounts have been reclassified to conform to the current period presentation for comparative purposes.

Recent Accounting Pronouncements

In July 2012, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No.  2012-2 (ASU 2012-2), Intangibles - Goodwill and Other: Testing Indefinite-Lived Intangible Assets for Impairment. The update is intended to reduce the cost and complexity of performing an impairment test for indefinite-lived intangible assets by simplifying how an entity tests those assets for impairment. The update is also intended to improve the consistency in impairment testing guidance among long-lived asset categories. Previous guidance required an entity to test indefinite-lived intangible assets for impairment by comparing the fair value of the asset with its carrying amount at least on an annual basis. If the carrying amount exceeded its fair value, an entity needed to recognize an impairment loss in the amount of the excess. The amendment to this update allows an entity to first assess the qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. This assessment will determine whether it is necessary to perform quantitative impairment tests. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012 with early adoption permitted for impairment tests performed as of July 27, 2012. The Company believes the adoption of ASU 2012-2 will not have a material impact on its financial statements.

In December 2011, the FASB issued Accounting Standards Update No. 2011-11 (ASU 2011-11), Disclosures about Offsetting Assets and Liabilities,  where entities are required to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. ASU 2011-11 is effective for the Company on July 1, 2013. The Company believes the adoption of ASU 2011-11 will not have a material impact on its financial statements.

**NOTE 3 - MINING PROJECTS**

*Copper Canyon Exploration Project*

On June 21, 2011 SRI entered into a Mineral Lease Agreement with Option to Purchase (the "Copper Lease") with from the Salmon Canyon Copper Company near Salmon, ID to acquire rights to 10 unpatented mining claims known as the Salmon Canyon Exploration project (“the Copper Canyon Project”), which is a historic copper/cobalt mine. The Project currently contains one existing mine portal and extensive historic development. The Salmon Canyon Project is located in the Mineral Hill Mining District near Salmon, Idaho.  On June 6, 2012, SRI and the Salmon Copper Company mutually agreed to terminate the Mineral Lease Agreement with the Option to Purchase the Copper Canyon Project.  With the termination, all right, title and interest of SRI was terminated and SRI was removed from all obligations set forth in the Agreement.

12

*Billali Gold Mine*

On April 20, 2012, SRI entered into a definitive Purchase Agreement (the “Purchase Agreement”) for the acquisition of the Billali Gold and Silver Mine (The “Billali Mine”) from the Billali Gold Mine, LLC (“Seller”) and an advanced stage epithermal silver-gold quartz vein deposit in the Steeple Rock Mining District of New Mexico.  The Purchase Agreement provided for payments to be made over period of two years with transfer of ownership being completed when SRI has satisfied its financial obligations under the Purchase Agreement.  The purchase price for the Billali consists of the issuance of two million shares of common stock of SRC; and initial payment of $100,000; and additional payment of $500,000 within 45 days of the Purchase Agreement being signed; and SRI delivering 600 American Eagle One Ounce Gold Coins on the 12th, 18th and 24th month anniversary of the Purchase Agreement signing, to be delivered to the Seller.  Upon satisfaction of these terms, the Seller will complete the transfer of full right and title of ownership of the Billali Mine to SRI.  The Addition, Seller will be entitled to received a 5% Net Smelter Return on any and all future mining activity at the Billali Mine following the transfer of ownership to SRI.  The initial deposit of $100,000 and the issuance of 2,000,000 shares of common stock were competed on April 20, 2012.  

On June 28, 2012, the Company and Little Gem Life Sciences Capital Management LLC, a Delaware limited liability company (“Little Gem”), entered into a definitive Agreement (the “Agreement”) for the transfer of all rights, title and interest existing under the existing Purchase Agreement, dated April 20, 2012 (the “Purchase Agreement”), entered into between Billali Mine LLC as seller and Steele Resources Inc. as purchaser.  Under the terms of the Agreement, Little Gem assumed all obligations of SRI under the Purchase Agreement including agreeing to pay to Billali Gold Mine LLC, the seller under the Purchase Agreement, the second installment of $500,000 which was paid on July 3, 2012; and, Little Gem agreed to provide additional capital, ion such amount sand upon such terms as Little Gem may in its sole discretion determine, for the development of the Billali Mine.  SRC will retain a 20% economic interest in the Billali Mine with distributions to occur over time in a manner, and with such reserves, as Little Gem in its sole discretion may determine suitable, appropriate and fair according to circumstances then prevailing.  SRC’s economic interest will be burdened whereby SRC will be assess its’ pro rata share of mining development costs and expenses over time.  

On November 30, 2012, SRC and Benison (Little Gem) entered into Contribution and Assignment Agreements between the Company, Benison and Shooting Star Mining Company LLC (“Shooting Star”) whereby the Mining Rights in Billali granted to SRI under the Purchase Agreement, along with all other rights, titles, interests and privileges in and to Billali Mine, were acquired by Shooting Star. In exchange for the Contribution and Assignment Agreements, SRC and Benison received membership interests in Shooting Star equal to 20% and 30% ownership respectively. Shooting Star agreed to assume and perform the obligations of SRI under the Purchase Agreement, including but not limited to: (i) development of the Billali Mine; (ii) payment to Billali Mine LLC of a $150,000 extension fee with respect to the timing of payment of seller financing consisting of the delivery of 1,800 American Eagle gold coins; and (iii)  payment, procurement and delivery of 1,800 American Eagle gold coins in accordance with the Purchase Agreement as modified and revised between Shooting Star and Billali Mine LLC.  Upon payment of these financial obligations under the Purchase Agreement, as modified, Shooting Star will fully acquire the patent to Billali Mine including the Mine, and related Mining Rights.  We do not have significant influence over Shooting Star, and our interest in Shooting Star is presented at its carrying cost of $0.00.  

13

**NOTE 4 - NOTES PAYABLE**

The Company had the following notes payable outstanding as of March 31, 2013 and December 31, 2012:

 

March 31, 2013

 

December 31, 2012

 

 

 

 

 

 

McClelland Family Trust (N-1)

$

45,000

 

$ 

45,000

Dated - January, 2011 (Related Party)

 

 

 

 

 

 

 

 

 

 

 

Lease Purchase Agreement - A & P Lease (N-2)

 

50,000

 

 

50,000

Dated - May, 2011 

 

 

 

 

 

 

 

 

 

 

 

D & D McClelland Note (N-3) 

 

63,000

 

 

63,000

Dated - January 19, 2012 (Related Party)

 

 

 

 

 

 

 

 

 

 

 

Lease Purchase Agreement - A & P  Lease (N-4)

 

50,000

 

 

50,000

Dated - April, 2011

 

 

 

 

 

 

 

 

 

 

 

Benison Note 9 (N-5)

 

61,750

 

 

61,750

Dated - March 20, 2012

 

 

 

 

 

 

 

 

 

 

 

Benison Note 10 (N-6)

 

100,000

 

 

100,000

Dated - April 19, 2012

 

 

 

 

 

 

 

 

 

 

 

Benison Master Secured Note (N-7)

 

37,012

 

 

37,012

Dated - September 28, 2012

 

 

 

 

 

 

 

 

 

 

 

Related Party (N-8)

 

2,300

 

 

2,300

Dated - January 27, 2012 (Related Party)

 

 

 

 

 

 

 

 

 

 

 

Mike Myrick (N-9)  

 

4,000

 

 

4,000

Dated - March 23, 2012

 

 

 

 

 

 

 

 

 

 

 

NPI Notes Payable (N-10) 

 

200,000

 

 

200,000

Dated August 1, 2011 ($125,000 is Related Party)

 

 

 

 

 

 

 

 

 

 

 

S Norderhaug Note (N-11)

 

50,000

 

 

50,000

Dated - June 24, 2010 (Related Party)

 

 

 

 

 

 

 

 

 

 

 

Advances from shareholder (N-12) 

 

103,649

 

 

103,649

Dated August 1, 2011

 

 

 

 

 

 

 

 

 

 

 

Total Notes payable

$

766,711

 

$

766,711

Less: discount applicable 

 

-

 

 

-

Less: current portion of long-term debt

 

766,711

 

 

766,711

Long-term debt

$

-

 

$

-

**N-1**  **McClelland Family Trust**: In January, 2011, the Company issued four promissory notes payable to two related party individuals for a total of $45,000. The notes bear simple interest at an annual rate of 8% per annum and were due May 15, 2011. In conjunction with the Notes, 150,000 shares of Common Stock were issued to the lenders. These shares were valued at $15,050 and recorded as a note discount.  This note is in default.

14

**N-2****A & P Lease Agreement**: In May, 2011, the Company issued a note payable for $50,000 to one of the individuals from which we have the lease purchase agreement for as the A&P Lease, covering the balance of the initial lease payment due. The note bears 12% interest rate and was due May 31, 2011.  The Company is working with the note holders to extend the terms of the repayment until SRC secures adequate working capital.  This note is in default. 

**N-3**  **D & D McClelland Note**:  In January 2012, the Company issued a promissory note to a related party and a relative to a related party for a total of $63,000. The note bears simple interest at an annual rate of 20% per annum and is due July 27, 2012. In conjunction with the Note, 50,000 shares of common stock were issued to the lender. These shares were valued at $5,500 and recorded as a note discount. The lender has the option, at maturity, to convert the note and accrued interest into common at a price of $0.10 per share.  This note is in default. 

**N-4 A & P Lease Note Payable**:  In March, 2012, the Company issued a note payable for $50,000 to one of the individuals from which we have the lease purchase agreement for as the A&P Lease, covering the balance of the 2012 annual lease payment due. The note bears 12% interest rate and was due April 16, 2012.  This note is in default.  

**N-5 Benison Note 9:  **In March, 2012, the Company issued a note payable for $61,750 to one individual. The note was due on June 30, 2012. The note holder has informed the Company that an interest penalty of $10,000 per month will accrue until the note is paid in full.  Warrants to issue 617,500 shares at $0.20 per share were issued in connection with the note.  This note is in default.   

**N-6 Benison Note 10:  **In April, 2012, the Company issued a note payable for $100,000 to one individual. The note was due on June 19, 2012. The note bears interest of 20% and interest will continue to accrue until such time as the Company has funds to repay the note.  This note is in default. 

**N-7 Benson Master Secured Notes:**  In July, 2012, the Company issued a master note for up to $50,000 to one individual. The note is due on July 13, 2013. The note bears interest at 5%. The first draw was recorded on September 28, 2012 for $37,012.  This note is secured by the Company’s interest in Shooting Star.  This note is in default. 

**N-8 Related Party Notes:**  In September, 2011, the Company borrowed $1,300 and $1,500 from two individuals.  The Notes bear no interest and are due upon demand.

**N-9 Mike Myrick:**  In March, 2012, the Company issued a note payable for $4,000 to one individual. The note bears interest at 20% per annum and was due May 31, 2012.  This note is in default. 

**N- 10 NPI Notes:**  In August, 2011, the Company secured a total of $200,000 in project financing from one individual and one related party. The principal and interest of, up to, 100% of the principal, was to be repaid from the processing of stockpiled ore at the Mineral Hill Gold Mine project, subject to the net profit (the "NPI") from the processed stockpile being adequate. In December, 2011, we did not make payments in accordance with the contract and we informed note holders that the NPI from the proceeds from the processed stockpile would not be sufficient to pay the principal and interest and that the Company would seek to repay them out of future mining operations at the Mineral Hill Gold Mine project. Some note holders requested indemnity for our defaulting on the terms of the notes. One of the note holders (a relative of an officer and director) requested to be repaid $25,000 in principal and requested 500,000 shares of common stock, valued at $70,000, in lieu of future interest. The repayment and the shares issued were completed in December, 2011 at March 31, 2013 $125,000 of these notes payable were held by related parties.  This note is in default. 

15

**N-11 S Norderhaug Note:**  In June, 2010, the Company issued a note for $50,000 to one individual with an interest rate of 5%. The note was due December 21, 2011.   This note is in default. 

**N-12 Advances from Shareholders:**  During May to June, 2012, the Company received advances of $103,649.  This advance does not have any terms to for repayment. 

**NOTE 5 - CONVERTIBLE PAYABLES**

The Company had the following notes payable outstanding as of March 31, 2013 and December 31, 2012:

 

March 31, 2013

 

December 31, 2012

 

 

 

 

 

 

Asher Enterprises T8 (C-1)

$

19,500 

 

$ 

29,000 

Dated - January 30, 2012

 

 

 

 

 

 

 

 

 

 

 

Benison Note 7 (C-2)

 

250,000

 

 

250,000

Dated - December 28, 2011

 

 

 

 

 

 

 

 

 

 

 

Benison Note 8 (C-3)

 

54,000

 

 

54,000

Dated - January 27, 2012

 

 

 

 

 

 

 

 

 

 

 

Mike Myrick (C-4)  

 

15,000

 

 

15,000

Dated - May 13, 2011

 

 

 

 

 

 

 

 

 

 

 

Benison IRA (C-5)  

 

10,000

 

 

10,000

Dated - November 7, 2012

 

 

 

 

 

 

 

 

 

 

 

Coventry Note (C6) 

 

1,250

 

 

1,250

Dated - July, 2011

 

 

 

 

 

 

 

 

 

 

 

Total Notes payable

$

349,750

 

$

359,250

Less: discount applicable to NPI notes payable

 

-

 

 

-

Less: current portion of long-term debt

 

(349,750)

 

 

(359,250)

Long-term debt

$

-

 

$

-

**C-1 Asher Enterprises Note T8:**  In January 2012, the Company issued a convertible note for $53,000 to one entity. The note bears interest at 8% per annum and is due November 1, 2012.  The Company converted $33,500 on this note with a balance of $19,500.  The conversion price is 50% of the average of the lowest three closing bid prices in the 10 trading days ending one day before notice of conversion is given. The sale was made to one entity in a private, negotiated transaction without any public solicitation.  This note is in default. 

**C-2 Benison Note 7**: In December, 2011, a convertible note for $250,000 was issued to an individual with an interest rate of 20% that is due June, 29, 2012. The note, plus accrued interest, is convertible into common stock, at the note holder's discretion, at $0.10 per share to be adjusted downward in the case of new issuances which it will convert at $.0008 as of March 31, 2013. The note holder will also receive one warrant for each share of common stock issued upon conversion. The warrants can be converted into common stock at $0.20 per share and are valid for two years from issuance.  This note is in default. 

16

**C-3 Benison Note 8**:  In January 2012, the Company issued a convertible note for $54,000 to one individual. The note bears interest at 8% per annum and is due October 29, 2012. The conversion price is 50% of the average of the lowest three closing bid prices in the 15 trading days ending one day before notice of conversion is given. The sale was made to an individual in a private, negotiated transaction without any public solicitation.  This note is in default.  

**C-4 Mike Myrick Notes:**  In May and June 2011, the Company issued convertible notes for a total $15,000. The notes bear interest at 20% per annum and are due June 13 and July 30, 2011. The conversion price is $0.15. The note holder has extended the due date for the notes until the Company secures adequate financing.  This note is in default.

 **C-5 Benison:**  In November 7, 2012, the Company issued convertible notes for a total $10,000. The note bears interest at 5% per annum and due November 7, 2013. The conversion price is $0.002 to be adjusted downward in the case of new issuances which it will convert at $.0008 as of March 31, 2013.. The note holder has a right to convert the note at the maturity date of the note.   

**C-6 Coventry:  **In July 2011, the Company issued a convertible note for $25,000 to one entity. The note bears interest at 12% per annum and is due July 14, 2012. The conversion price shall be the lower of $0.05 or 65% of the average of the lowest three closing bid prices in the 15 trading days ending one day before notice of conversion is given. The note, plus accrued interest, was repaid in October, 2011 except for a remaining balance of $1,250. The sale was made to one entity in a private, negotiated transaction without any public solicitation.  This note is in default. 

Fair Value Measurements

Assets and liabilities recorded at fair value in the consolidated balance sheet are categorized based upon the level of judgment associated with the inputs used to measure the fair value. Level inputs, as defined by ASC 820-10, are as follows:

Level 1 - quoted in active markets for identical assets or liabilities.

Level 2 - other significant observable inputs for the assets or liabilities through cooboration with market data at the measurement date.

Level 3 - significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date.

The following table summarizes fair value measurements by level at March 31, 2013 and December 31, 2012 for assets and liabilities measured at fair value on a recurring basis:

at March 31, 2013

 

 

 

 

 

Level 1

Level 2

Level 3

Total

Derivative liability

 

 

 

 

Conversion features

 

 

($659,173)

($659,173)

Warrants liability

 

 

(1,112)

(1,112)

Total Derivative liability

 

 

(660,285)

(660,285)

17

at December 31, 2012

 

 

 

 

 

Level 1

Level 2

Level 3

Total

Derivative liability

 

 

 

 

Conversion features

 

 

($92,000)

($92,000)

Warrants liability

 

 

(1,235)

(1,235)

Total Derivative liability

 

 

(93,235)

(93,235)

Derivative liability for conversion features for the year ended March 31, 2013 were valued using the Black-Scholes Option pricing model with the following assumptions: expected life of 0.5 to 1 year, risk free interest rate of 1%, dividend yield of 0, and expected volatility of 0.1%.

The following is a reconciliation of the derivatives liability

Value at May 27, 2010 (Inception)

 

$

0

Issuance of instruments

 

 

52,250

Relief from liability

 

 

0

Value at December 31, 2010

 

$

52,250

Issuance of instruments

 

 

360,916

Relief from liability

 

 

285,163

Value at December 31, 2011

 

$

128,000

Issuance of instruments

 

 

187,000

Relief from liability

 

 

24,000

Change of value

 

 

(197,765)

Value at December 31, 2012

 

$

93,235

Change of value

 

 

576,550

Relief from Liability

 

 

(9,500)

Change in value March 31, 2013

 

$

660,285

For certain of the Company’s financial instruments, including cash, prepaid expenses, accounts payable and accrued expenses the carrying amounts approximate fair value due to their short maturities. The carrying amounts of the Company’s notes payable approximates fair value based on the prevailing interest rates.

**NOTE 6 - RELATED PARTY TRANSACTIONS**

In January, 2011, the Company issued four promissory notes payable to two related party individuals for a total of $45,000. The notes bear simple interest at an annual rate of 8% per annum and were due May 15, 2011. In conjunction with the Notes, 150,000 shares of Common Stock were issued to the lenders. These shares were valued at $15,050 and recorded as a note discount.

In September, 2011, the Company borrowed $2,800 from two individuals.  The Notes bear no interest and are due upon demand.  As of December 31, 2012 the Company owed $2,300.

 

In January 2012, the Company issued a promissory note to a related party and a relative to a related party for a total of $63,000. The note bears simple interest at an annual rate of 20% per annum and is due July 27, 2012. In conjunction with the Note, 50,000 shares of common stock were issued to the lender. These shares were valued at $5,500 and recorded as a note discount. The lender has the option, at maturity, to convert the note and accrued interest into common at a price of $0.10 per share.

In August, 2011, the Company secured a total of $200,000 in project financing from one individual and one related party. The principal and interest of, up to, 100% of the principal, was to be repaid from the 

18

processing of stockpiled ore at the Mineral Hill Gold Mine project, subject to the net profit (the "NPI") from the processed stockpile being adequate. In December, 2011, we did not make payments in accordance with the contract and we informed note holders that the NPI from the proceeds from the processed stockpile would not be sufficient to pay the principal and interest and that the Company would seek to repay them out of future mining operations at the Mineral Hill Gold Mine project. Some note holders requested indemnity for our defaulting on the terms of the notes. One of the note holders (a relative of an officer and director) requested to be repaid $25,000 in principal and requested 500,000 shares of common stock, valued at $70,000, in lieu of future interest. The repayment and the shares issued were completed in December, 2011 at December 31, 2012 $125,000 of these notes payable were held by related parties.

**NOTE 7 - EQUITY**

Common Stock

On March 31, 2013, the Company had 79,285,225 shares issued and outstanding and authorized common shares of 300,000,000.

Preferred Stock

The Company has authorized 5,000,000 shares of preferred stock, at $.001 par value and zero are issued and outstanding as of March 31, 2013.  The Corporation established and designates the rights and preferences of a Series A Convertible Preferred Stock, and reserves 5,000,000 shares of preferred stock against its issuance, such rights, preferences and designations.  
Year ended March 31, 2013

In January, 2013, the Company issued 3,375,000 shares of common stock to Asher Enterprises following the conversion of $2,700 of principal of a convertible note issued in January, 2012.

In February, 2013, the Company issued 3,400,000 shares of common stock to Asher Enterprises following the conversion of $6,800 of principal of a convertible note issued in January, 2012.

Year ended March 31, 2012

In January, 2012, the Company issued 50,000 shares in conjunction with a note payable issued to a related party for a total of $63,000. These shares were valued at $5,500 and recorded as a note discount.

In February, 2012, the Company issued: 1,000,000 shares in consideration for financial consulting services, the value of the shares issued was $120,000; through a private placement of its common stock, the Company issued 125,000 shares for $12,500 to two individuals; and the Board of Directors authorized the issuance of 500,000 shares of common stock to each of its four Board Members as compensation for services in 2010 and 2011, the total value of the shares issued was $220,000.

Through a private placement of its common stock, the Company issued 125,000 shares of common stock to two individuals for $12,500 in February, 2012.

Through a private placement of its common stock, the Company issued 60,000 shares of common stock to one individual for $6,000 in March, 2012.

19

Through a private placement of its common stock, the Company issued 3,000,000 shares to two individuals for $270,000 in March, 2012, net of $30,000 in placement costs.

**NOTE 8 - COMMITMENTS AND CONTINGENCIES**

On August 31, 2011, SRC and Innocent, Inc. negotiated a formal Termination of the Joint Venture Agreement (the “Termination Agreement”) of the Joint Venture Agreement established to fund the development of the Mineral Hill Project. Pursuant to the Termination Agreement SRC acknowledges its obligation to repay $540,000 paid to date by INCT to SRC under the terms of the JV Agreement. The Termination Agreement also allows SRC the option to assume the $540,000 owed to INCT note holders on terms negotiated between SRC and the note holders.

From time to time, the Company is involved in legal matter in the ordinary course of business.  Except for the matter described below, the Company is not aware of any such matters.

SRC was named in an amended complaint filed in District Court, Clark County Nevada, by Phyllis Wynn, individually and as the trustee for the Phyllis Wynn Family Trust.  The Complaint appears to name approximately 81 defendants including Steele Recording Corporation.  The Amended Complaint was filed September 23, 2009.  It alleges 17 causes of actions including breach of contract and fraud against various other defendants and fraudulent conveyance to SRC and its former President and CEO Marlon Steele.  The substance of the Complaint involves a real estate transaction not involving SRC.  We have been informed by Mr. Steele that he does not believe the Plaintiff will prevail as to her claims regarding SRC and has answered with affirmative defenses including but not limited to the defense that the injuries and damages complained of did not occur as the result of any action on the part of SRC but as the sole, direct and proximate result of actions by Plaintiff and third parties not otherwise related to SRC.  The litigation remains in the discovery stages. A former officer of SRC has agreed to indemnify the Company from any eventual costs or loss from this lawsuit.

 

The Company became aware that a shareholder paid $57,000 of tenant improvements in an office that the Company never occupied.  The $57,000 was recorded as an accrued liability in anticipation of occupying the space in December 2010.  Subsequently the Company elected to not occupy the space eliminating the potential obligation to amortize the cost of the improvement over the course of the lease.  We have adjusted the $57,000 to Additional Paid in Capital.  

As of March 9, 2013 the Company did not have enough shares authorized to convert all the debt obligations currently owed.  The Company will need to convert at least 418,437,500 common shares to satisfy the Asher Enterprises conversion and the Benison Convertible notes which would convert at $.0008.  The Company exceeds its authorized shares by 118,437,500 and the Company is assessing the next legal course of action to resolve this matter.

20

**NOTE 9- STOCK-BASED COMPENSATION**

 

Stock Options

 

In February, 2011, the Board of Directors of the Company approved the 2011 Equity Compensation Plan (the "Plan"), the purpose of the Plan is to provide a means by which eligible recipients of stock awards may be given an opportunity to benefit from increases in value of the common stock through the granting of the following stock awards: incentive stock options, non-statutory stock options, stock bonuses and rights to acquire restricted stock. The Company, by means of the Plan, seeks to retain the services of the group of persons eligible to receive stock awards, to secure and retain the services of new members of this group and to provide incentives for such persons to exert maximum efforts for the success of the Company and its affiliates. The Board shall administer the Plan unless and until the Board delegates administration to a Committee. Subject to the provisions relating to adjustments upon changes in stock, the stock that may be issued pursuant to stock awards shall not exceed in the aggregate three million three hundred thirty-three thousand three hundred and thirty-three (3,333,333) shares of Common Stock.

The cost of all employee stock options, as well as other equity-based compensation arrangements, is reflected in the financial statements over the vesting period based on the estimated fair value of the awards.  

A summary of warrant activity for the three months ended March 31, 2013 is presented below:

 

 

 

 

 

Outstanding Options

 

 

 

Shares

Available for

Grant

 

 

Number of

Shares

Granted

 

 

Weighted

Average

Exercise

Price

 

 

Weighted

Average

Remaining

Contractual Life

(years)

 

 

Aggregate

Intrinsic

Value

 

January 1, 2011

 

 

3,333,333

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

-

 

Grants

 

 

 

 

 

 

2,066,669

 

 

 

$0.1204

 

 

 

2.00

 

 

 

 

 

Forfeitures

 

 

 

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

December 31, 2011

 

 

 

 

 

 

2,066,669

 

 

 

 

 

 

 

1.00

 

 

 $

86,750

 

Grants

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Forfeitures

 

 

 

 

 

 

 (1,816,669)

 

 

 

-

 

 

 

 

 

 

 

 

 

December 31, 2012

 

 

3,083,333

 

 

 

250,000

 

 

 

$0.12

 

 

 

0.33

 

 

 

-

 

Exercisable

 

 

 

 

 

 

250,000

 

 

 

$0.12

 

 

 

0.33

 

 

 

 

 

Forfeitures

 

 

 

 

 

 

(250,000)

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2013

 

 

3,333,333

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Company values all warrants using the Black-Scholes option-pricing model.  Critical assumptions for the Black-Scholes option-pricing model include the market value of the stock price at the time of issuance, the risk-free interest rate corresponding to the term of the warrant, the volatility of the Company’s stock price, dividend yield on the common stock, as well as the exercise price and term of the warrant.  The warrants are not subject to any form of vesting schedule and, therefore, are exercisable by the holders anytime at their discretion during the life of the warrant.  No discounts were applied to the valuation determined by the Black-Scholes option-pricing model.

21

**(k)** **Termination of Continuous Service.** (1) In the event an Optionholder’s Continuous Service terminates (other than upon the Optionholder’s death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise it as of the date of termination) but only within such period of time ending on the earlier of (i) the date three (3) months following the termination of the Optionholder’s Continuous Service (or such longer or shorter period specified in the Option Agreement, which shall not be less than thirty (30) days, unless such termination is for cause), or (ii) the expiration of the term of the Option as set forth in the Option Agreement.  If, after termination, the Optionholder does not exercise his or her Option within the time specified in the Option Agreement, the Option shall terminate.”

All employees have been terminated for over 90 days and therefore all options have expired, as a matter of the Equity Compensation Plan.

 

Warrants

During the three months ended March 31, 2013, no awards were granted, in connection with a note payable.

Summary of warrant activity at March 31, 2013 is presented below:

** **

** **

**Number of**

**Shares**

**Granted**

 

**Weighted**

**Average**

**Exercise**

**Price**

 

**Weighted Average**

**Remaining**

**Contractual Life**

**(years)**

 

**Aggregate**

**Intrinsic**

**Value**

 

January 1, 2011

 

 

1,033,334

 

$

0.4839

 

 

4.29

 

$

-

 

Grants

 

 

-

 

 

-

 

 

 

 

 

 

 

Expired

 

 

-

 

 

-

 

 

 

 

 

 

 

December 31, 2011

 

 

1,033,334

 

$

0.4839

 

 

3.29

 

 

234,000

 

Grants

 

 

617,500

 

 

0.0008

 

 

3.00

 

 

-

 

Expired

 

 

 

 

 

-

 

 

 

 

 

 

 

December 31, 2012

 

 

1,650,834

 

$

0.38

 

 

3.38

 

$

-

 

March 31, 2013

 

 

1,650,834

 

$

0.001

 

 

3.00

 

$

-

 

Exercise

Price Range

 

Shares

Outstanding

 

Shares

Exercisable

 

Weighted Contractual Life

Remaining (in Years)

 

Weighted Average

Exercise Price

$0.0008

 

617,500

 

617,500

 

2.00

 

0.0008

$0.4500

 

1,000,000

 

1,000,000

 

3.50

 

$0.4500

$1.5000

 

33,334

 

33,334

 

.58

 

$1.5000

The Company values all warrants using the Black-Scholes option-pricing model.  Critical assumptions for the Black-Scholes option-pricing model include the market value of the stock price at the time of issuance, the risk-free interest rate corresponding to the term of the warrant, the volatility of the Company’s stock price, dividend yield on the common stock, as well as the exercise price and term of the warrant.  The warrants are not subject to any form of vesting schedule and, therefore, are exercisable by the holders anytime at their discretion during the life of the warrant.  No discounts were applied to the valuation determined by the Black-Scholes option-pricing model.

22

The fair value of the options granted during the March 31, 2013 and December 31, 2012 is estimated at $0.00 and $71,000, respectively. The fair value of these options was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:

 

2012

Term

3 years

Risk-free Interest Rate

1%

Volatility

339%

Dividend Yield

0%

**NOTE 10 - SUBSEQUENT EVENTS**

On April 17, 2013 the Company granted 2,000,000 common shares to prior officers of the Company as part of their resignation the value of those shares were $12,000.  

As of May 9, 2013 Asher Enterprises and Jeff Benison have called their notes for certain provision or action by the Company such as a change in control of the Company or late filing of SEC required filings.  The note was called for the Company’s failure to file timely SEC filings.

23

**ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION**

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, any changes in current accounting rules, and future regulatory or legislative actions (including additional taxes, changes in environmental regulation,  and disclosure requirements under the Dodd-Frank Wall Street Reform,  Consumer Protection Act and the Jumpstart our Business Startups Act of 2012),  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 December 31, 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.

Our financial statements have been prepared in accordance with United States generally accepted accounting principles.

**General**

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 further exploration 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 resources through 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 financial and currency instability with escalating mineral demand. 

Steele Resources Corporation (formerly Steele Recording Corporation) (the "Company", "SRC") was incorporated in the state of Nevada on February 12, 2007, at which time it was deemed a “shell company” carrying on minimal operations in the business of producing, acquiring, licensing and distribution of recorded music.   The Company’s corporate charter for Steele Resources, Inc. has been revoked and the Company is in the process of re-incorporating.  

24

On June 17, 2010 the Company entered into and consummated a Plan and Agreement of Reorganization between the Company and Steele Resources, Inc. and certain stockholders of Steele Resources, Inc. (the “Reorganization”). Pursuant to the Reorganization, the Company acquired all of the issued and outstanding shares of Steele Resources, Inc., a Nevada Corporation (“SRI”). The primary business activity of SRC and its subsidiary consists of mining property acquisition, mineral exploration and development and mining services. 

Although from a legal perspective, SRC acquired Steele Resources, Inc., from an accounting perspective, the transaction is viewed as a recapitalization of SRI accompanied by the equivalent of an issuance of stock by SRI for the net assets of SRC. This is because SRC did not have operations immediately prior to the merger and, following the merger, SRI is the operating company.

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplate continuation of the Company as a going concern.  However, the Company has a working deficit and has generated only $531,126 in revenues since inception.  During the three months ended March 31, 2013, the Company incurred a net loss of $637,883 and as of March 31, 2013 has an accumulated deficit of $5,813,574.  Further, the Company has inadequate working capital to maintain or develop its operations, and is dependent upon funds from private investors and the support of certain stockholders.  These factors raise substantial doubt about the Company’s ability to continue as a going concern.  The financial statements do not include any adjustments that might result from the outcome of these uncertainties.  In this regard, Management is planning to raise any necessary additional funds through loans or additional sales of its common stock.  There is no assurance that the Company will be successful in raising additional capital.

The Company's ability to meet its obligations and continue as a going concern is dependent upon its ability to obtain additional financing, achievement of profitable operations and/or the discovery, exploration, development and sale of mining reserves.  The Company cannot reasonably be expected to earn revenue in the exploration stage of operations.  Although the Company plans to pursue additional financing, there can be no assurance that the Company will be able to secure financing when needed or to obtain such financing on terms satisfactory to the Company, if at all.  Should management fail to raise sufficient financing, the Company may curtail its operations.  

On July 16, 2010, SRC’s wholly owned subsidiary changed its name from Steele Resource, Inc. to Steele Resources, Inc.

Effective September 1, 2010, Steele Recording Corporation changed its name 

**Plan of Operation**

SRC is an exploration and mining company which focuses on identifying and developing advanced stage precious metal exploration projects which show potential to achieve full production. The overall business strategy is to identify, develop and operate mineral exploration properties and to provide mine development and operations services to mining properties located initially in the Western United States. The initial business strategy is to service the niche market between speculative exploration and large scale production. This niche market lays between, at one end, relatively small companies which have conducted preliminary mineral exploration on their properties and, at the other end, companies which conduct major mining operations which could generally be defined as properties having multimillion ounce gold mineral reserves. Within this niche market, SRC believes there are a large number of projects in the United States that have excellent potential but do not meet the size requirements for development by the major operators in the mining industry.

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SRC’s business plan is to evaluate properties which have considerable amounts of exploration already completed and potential resources identified yet are not of sufficient size and scope for development by the major mining companies. Based on management’s extensive experience in evaluating geological exploration data and development feasibility, SRC will seek to identify those exploration properties which offer the best potential for producing significant gold and silver reserves and offers favorable conditions for the efficient development of the property to reach a production stage.

Once suitable projects are identified, SRC will conduct exploration drilling, prepare feasibility studies, create mine modeling, and perform on-site construction and advance stage project engineering with the goal of establishing, if warranted, a producing mine project. Exploration services would also include securing necessary permits, environmental compliance and remediation plans.

SRC will provide its mine development services in one of two ways. The first way is for SRC to acquire part or all of the mineral rights to a designated property and perform the services listed above. SRC would fund the property development itself and would own all or a substantial portion of the gold production, if any, which might be realized from that particular property, with a royalty paid to the property owner or the mineral rights assignor. This approach would typically include certain work requirements and expenditure requirements in order to maintain the exploration/mineral rights.

The second approach will be to contract with the property owner or mineral rights holder to provide the services listed above on a contract fee basis which would include a percentage royalty paid to SRC on any gold production which is actually achieved. This approach would have SRC acting in the nature of a general contractor.  SRC would prepare the same type of comprehensive mining development plan as described above and assemble the necessary service providers to carry out the plan. To date, SRC has not contracted to provide services to other mineral rights holders choosing instead to develop its own currently leased properties.

Suitable projects will have the following characteristics:

· properties located near existing mineral zones initially focusing in the USA;

· properties having a considerable amount of exploration completed; and

· properties not of sufficient size for the major mining companies to advance themselves.

**Exploration Projects**

*Billali Gold Mine*

On April 20, 2012, Steele Resources, Inc. ("SRI"), a wholly-owned subsidiary of SRC, and the Billali Gold Mine, LLC ("Seller") entered into a definitive Purchase Agreement (the “Purchase Agreement”) for the acquisition of the Billali Mine and Silver Mine (the "Billali Mine"), an advanced stage epithermal silver-gold quartz vein deposit in the Steeple Rock Mining District of New Mexico. This property consists of approximately 11.6 acres including one patented claim which the Company believes has potential for near term production of silver and gold ore. The Purchase Agreement provides for payments to be made over a period of two years with transfer of ownership being completed when SRI has satisfied its financial obligations under the Purchase Agreement. The purchase price for the Billali consists of the issuance of two million shares (2,000,000) of common stock of SRC; an initial payment of $100,000 upon signing and, an additional payment of $500,000 within 45 days of the Purchase Agreement being signed; and SRI will deliver a total of 1,800 American Eagle One Ounce Gold Coins in three tranches of 600 coins each on the twelfth, eighteenth and twenty-fourth month anniversary of the Purchase Agreement signing. Upon satisfaction of these terms, the Seller will complete the transfer of full right and title of ownership of the Billali Mine to SRI. In addition, Seller will be entitled to receive a five percent (5%) Net 

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Smelter Return on any and all future mining activity at the Billali Mine following the transfer of ownership to SRI. During the two year payment period, SRI will have full rights to develop and manage the property. The Company paid the initial payment of $100,000 and issued the 2,000,000 shares of common stock to the Seller in April, 2012.

The Billali Mine is physically adjacent to the Summit Mine, owned and operated by the Santa Fe Gold Corporation. The Billali Mine is along strike and adjacent to this producing operation.  It was once a part of the original Summit Mine land package evaluated by Biron Bay Resources and the drilling and geology used for the current reserve and resource studies is from the same drill program. The Summit Mine has proved the favorable findings of the original drill program and demonstrated that a viable ore body exists.

According to the December, 2011, 43-101 report for the property, exploration drilling was conducted on the Billali claim and adjacent Summit Mine property by Nova Gold and Biron Bay Resources from 1990 to 1991.  Over 200 diamond core holes were drilled with at least 28 holes on the Billali claim.  Nine holes intersected high grade with six intersecting 3 to 15 foot intervals of gold and silver grading between 1.17 and 23.86 opt Ag and from .10 to .52 opt Au. MPH Consulting, a mining consulting Canadian firm, estimated a historical resource of at least 219,000 tons at 12.8 opt silver and .244 opt gold. This calculation included intercepts from the Norman King structure, however does not include high grade intercepts from the “New Zone” that holes B-91-15 and 16 intersected.  

On June 28, 2012, SRI and Little Gem Life Sciences Capital Management LLC, a Delaware limited liability company (“Little Gem”) of which Jeffrey Benison (an affiliate of SRC) is the Managing Member, entered into a definitive Agreement (the “Little Gem Agreement”) for the transfer of all rights, title and interests existing under the Purchase Agreement entered into between Billali Mine LLC as seller and Steele Resources Inc. as purchaser. Under the terms of the Little Gem Agreement, Little Gem assumed all obligations of SRI under the Purchase Agreement including agreeing to pay to Billali Gold Mine LLC, the seller under the Purchase Agreement, the second installment of $500,000 (which Little Gem paid on July 3, 2012); and, Little Gem agreed to provide additional capital, in such amounts and upon such terms as Little Gem may in its sole discretion determine, for the development of the Billali Mine. SRC will retain a twenty percent (20%) economic interest in the Billali Mine. The aforementioned 20% economic interest in the Billali Mine will vest in SRC as a joint venture “qualified carried interest” in the net operating profits, if any, of Little Gem’s ownership and development of the Billali Mine with distributions to occur over time in a manner, and with such reserves, as Little Gem in its sole discretion may determine suitable, appropriate and fair according to circumstances then prevailing. SRC’s economic interest will be “burdened” whereby SRC will be assessed it’s pro rata share of mining development costs and expenses over time as well as its share of the Gold Coins due Billali Mine, LLC pursuant to the Purchase Agreement. SRC will not be charged for administrative expenses of Little Gem incurred in connection with its non-mining operations.

Pursuant to the Little Gem Agreement, in July, 2012 Little Gem entered into a mine development agreement with White Pine Mining LLC to act as the mining contractor to develop the Billali Mine.

On November 30, 2012, SRC and Benison entered into Contribution and Assignment Agreements between the Company, Benison and Shooting Star Mining Company LLC (“Shooting Star”) whereby the Mining Rights in Billali granted to SRI under the Purchase Agreement, along with all other rights, titles, interests and privileges in and to Billali Mine, were acquired by Shooting Star. In exchange for the Contribution and Assignment Agreements, SRC and Benison received membership interests in Shooting Star equal to 20% and 30% ownership respectively. Shooting Star agreed to assume and perform the obligations of SRI under the Purchase Agreement, including but not limited to: (i) development of the Billali Mine; (ii) payment to Billali Mine LLC of a $150,000 extension fee with respect to the timing of payment of seller financing consisting of the delivery of 1,800 American Eagle gold coins; and (iii)  payment, procurement and delivery of 1,800 American Eagle gold coins in accordance with the Purchase

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Agreement as modified and revised between Shooting Star and Billali Mine LLC.  Upon payment of these financial obligations under the Purchase Agreement, as modified, Shooting Star will fully acquire the patent to Billali Mine including the Mine, and related Mining Rights.

**Factors Affecting Future Operating Results**

We continue to deploy our plan to place the Company on an improved financial footing. In addition to the capital raisings already achieved and the securities placements in 2012, an important element of the plan includes continuing to raise funding as may be required to provide for general business operations. Unless and until we are able to secure required financing on acceptable terms, we will not be in a position to execute our business plan going forward.

**Off-Balance Sheet Arrangements**

During the three months ended March 31, 2013, we did not engage in any off-balance sheet arrangements defined in Item 303(a) (4) of the SEC’s Regulation S-K.

**Results of Operation**

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 March 31, 2013, we generated $0 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 for mining are cost intensive so it is critical for us to raise sufficient capital to implement our business plan. We incurred losses of $637,883 for the three months ended March 31, 2013, compared to $862,961 for the three months ended March 31, 2012. 

***Three months Ended March 31, 2013 Compared to Three months Ended March 31, 2012***

For the three months ended March 31, 2013, we generated $0 revenue. Our future revenue plan is still uncertain as we are in an early testing and exploration phase and are still dependent on our ability to effectively and economically mine gold. We incurred losses of $637,883 and $862,961 for the three months ended March 31, 2013 and 2012, respectively. 

Our operating expenses for exploration activities were $0 and $105,270 for the three months ended March 31, 2013 and 2012, respectively. The costs associated with exploration activities included trenching, testing, hauling, and labor costs associated with the exploration of our gold mine claims. 

Our general and administrative expenses were $0 and $610,546 for the three months ended March 31, 2013 and 2012 respectively. The decrease is primarily related to the lack of operations for the quarter while we were seeking new management.  

Our interest expense was $637,883 and $147,145 for the three months ended March 31, 2013, and 2012 respectively. The increases are primarily attributable to the beneficial conversion features.  

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**Liquidity and Capital Resources**

Our cash used in operating activities for the three months ended March 31, 2013 was $0 compared to $455,873 for the three months ended March 31, 2012. The decrease in cash used in operations was primarily attributable to our mining activities and payments made to the professionals during the three months ended March 31, 2013.

Our cash provided by financing activities for the three months ended March 31, 2013 was $0, compared to $449,250 for the three months ended March 31, 2012. The decrease is mainly due to lack of operations while we were seeking new management.  

We are in need of approximately $25,000 per month in order to meet our operating expenses. If we have insufficient revenue, we will be able to borrow the funds from Tonaquint pursuant to the agreements in place.

**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**

Steele 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 4 - CONTROLS AND PROCEDURES**

(a) Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures were designed to provide reasonable assurance that the controls and procedures would meet their objectives. As required by SEC Rule 13a-15(b), our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective for the three months ended March 31, 2013 mainly due to lack of segregation of duties.

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Management has identified control deficiencies regarding the lack of segregation of duties and the need for a stronger internal control environment. Our management believes that these material weaknesses are due to the small size of our accounting staff. The small size of our accounting staff may prevent adequate controls in the future, such as segregation of duties, due to the high cost of such remediation relative the benefit expected to be derived thereby.

We plan to resolve the segregation of duties issue by naming a CFO or new company officer that will resolve any issues surrounding segregation of duties.

In the interim period, to mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of external legal and accounting professionals. As we grow, we expect to create a new finance and accounting position that will allow for proper segregation of duties consistent with control objectives, and will increase our personnel resources and technical accounting expertise within the accounting function.  As our financing staff grows we will prepare and implement appropriate written policies and checklists which set forth procedures for accounting and financial reporting with respect to the duties within the internal control framework. These current control deficiencies could result in a misstatement of account balances that would result in a reasonable possibility that a material misstatement to our consolidated financial statements may not be prevented or detected on a timely basis. Accordingly, we have determined that these control deficiencies as described above together constitute a material weakness.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable and not absolute assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of certain events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

(b) Changes in Internal Control Over Financial Reporting

During the three months ended March 31, 2013, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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**PART II - OTHER INFORMATION**

**ITEM 1A - RISK FACTORS**

There have been no material changes to the risk factors previously discussed in Item 1A of the Company’s Form 10-K for the year ended December 31, 2012, except as follows:

*We are subject to additional disclosure relating to the Iran Threat Reduction and Syria Human Rights Act of 2012*

As a result of the enactment of the Iran Threat Reduction and Syria Human Rights Act of 2012, our company is subject to additional disclosure requirements in its annual and quarterly Exchange Act reports filed after February 6, 2013.  If our company or its affiliates engaged in specified types of behavior during the period covered by the report, we will be required to disclose those activities.  Please contact Chief Financial Officer of our company immediately if you know or have any reason to believe that any of the activities or types of conduct listed below have been or may have been engaged in at any time during the period from October 1, 2012 up to the date of this report.  Please note that this inquiry relates to the activities or conduct of the Company, any affiliate of the Company, as well as to the conduct of any person who has acted or is acting on behalf of or for the benefit of any of them.  For purposes of this question an “affiliate” is defined as a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with a person. Specified activities requiring disclosure:  (a) activities or transactions relating to Iran’s ability to develop petroleum resources, maintain or expand Iran’s domestic production of refined petroleum products, or import refined petroleum products; (b) activities or transactions contributing to Iran’s ability to acquire or develop weapons of mass destruction or participating in a joint venture with the Government of Iran and certain other persons to mine, produce or transport uranium. (c) activities or transactions by foreign financial institutions (i) facilitating the ability of Iran and related persons to acquire or develop weapons of mass destruction or support terrorism, (ii) facilitating activities of persons subject to financial sanctions under certain United Nations Security Council Resolutions, or (iii) participate in money laundering or facilitate efforts by Iranian financial institutions to carry out activities described in (i) or (ii). (d) activities or transactions by foreign financial institutions or persons owned or controlled by a domestic financial institution, facilitating or providing financial services for certain persons, including Iran’s Revolutionary Guard Corps, whose property is blocked under the International Emergency Economic Powers Act; (e) activities or transactions supporting Iran’s acquisition or use of goods or technologies that are likely to be used to commit human rights abuses against the Iranian people or to restrict, disrupt or monitor the free flow of information; and/or (f) activities or transactions with persons who commit or support terrorism or who are or who support weapons of mass destruction proliferators, or the Government of Iran, any entity owned or controlled directly or indirectly by the Government of Iran, or any person acting or purporting to act on behalf of either of the foregoing, without the specific authorization of a U.S. Government agency.

*An investment in our common stock involves a high degree of risk. You should carefully consider the following information about these risks, together with the other information contained in this Annual Report on Form 10-K, or the Company’s other filings with the Securities and Exchange Commission (the "SEC"). If any of the events anticipated by the risks described below occur, our results of operations and financial condition could be adversely affected which could result in a decline in the market price of our common stock, causing you to lose all or part of your investment.*

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An investment in our common stock involves a high degree of risk. You should carefully consider the following information about these risks, together with the other information contained in this Annual Report on Form 10-K, or the Company’s other filings with the Securities and Exchange Commission (the "SEC"). If any of the events anticipated by the risks described below occur, our results of operations and financial condition could be adversely affected which could result in a decline in the market price of our common stock, causing you to lose all or part of your investment.

*Management lacks technical training and experience with exploring for, starting, and/or operating a mine; and that with no direct training or experience in these areas, management may not be fully aware of many of the specific requirements related to working within this industry. We do however, employ a geochemist who is very familiar with exploration and a subcontractor who has experience operating placer plants.*

 

**ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES**

In January, 2013, the Company issued 3,375,000 shares of common stock to Asher Enterprises following the conversion of $2,700 of principal of a convertible note issued in January, 2012.

In February, 2013, the Company issued 3,400,000 shares of common stock to Asher Enterprises following the conversion of $6,800 of principal of a convertible note issued in January, 2012.

All of the securities issuances described below were issued in transactions pursuant to the private placement exemption provided by Section 4(2) of the Securities Act. All of the transactions were conducted in a private manner with each entity/individual on a negotiated basis without any public solicitation. Each entity/individual purchased the securities with investment intent. The securities are deemed to be “restricted securities” as defined in Rule 144 under the Securities Act and the stock certificates bear a legend limiting the resale thereof.

**ITEM 3 - DEFAULTS UPON SENIOR SECURITIES**

All Convertible Notes are in default as of March 31, 2013.

**ITEM 4. - MINE SAFETY DISCLOSURES**

The planned operation of our mines will be subject to regulation by the Federal Mine Safety and Health Administration (“MSHA”) under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”). MSHA’s activities include the inspection of mines on a regular basis and the issuance of various citations and orders when it believes a violation has occurred under the Mine Act. Following passage of The Mine Improvement and New Emergency Response Act of 2006, MSHA has significantly increased its inspection program and the number of citations and orders charged against mining operations as well as the dollar penalties assessed.

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**ITEM 5. - OTHER INFORMATION**

There is no information with respect to which information is not otherwise called for by this form.

**ITEM 6. - EXHIBITS  AND FINANCIAL STATEMENT SCHEDULES**

**Exhibit No.**

**Description of Exhibit**

 

 

2.1(1)

Plan and Agreement of Reorganization between Steele Recording Corporation and Steele Resources, Inc. Stockholders of Steele Resources, Inc. dated June 17, 2010.

3.1.1(2)

Articles of Incorporation

3.1.2(5)

Amendment to the Articles of Incorporation effective March 10, 2009

3.1.3(5)

Change to the Articles of Incorporation effective July 1, 2010

3.1.4(5)

Amendment to the Articles of Incorporation effective September 1, 2010

3.2(2)

Bylaws

4.1(*)

Convertible Promissory Notes

4.2(*)

Steele Resources Equity Compensation Plan

10.1(5)

Service Agreement dated June 9, 2010 between SRI and Riggs and Allen Mineral Development, LLC

10.2(3)

Assignment of Contract and Fairview Hunter Mineral Lease Agreement

10.3(4)

Drawdown Equity Financing Agreement with Auctus Private Equity Fund, LLC dated January 14, 2011.

10.4(4)

Registration Rights Agreement with Auctus Private Equity Fund, LLC dated January 14, 2011.

10.5(5)

Pony Project Mineral Lease dated February 4, 2011.

10.6(6)

Joint Venture Agreement between Steele Resources Corp. and Innocent, Inc. dated February 20, 2011.

10.7(6)

A&P Project Mineral Lease dated February 22, 2011.

10.8(7)

Copper Canyon Mineral Lease dated April 28, 2011.

10.9(8)

Convertible Promissory Note Asher Enterprises, Inc.

10.10(8)

Billali Gold Mine Purchase Agreement

10.11 (9)

Joint Venture Agreement

10.12 (10)

Contribution and Assumption Agreement

14(5)

Code of Business Conduct and Ethics

21

Subsidiaries of Steele Resources Corporation

31.1(*)

Certification by CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2(*)

Certification by CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1(*)

Certification of CEO and CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(1) Filed as an exhibit to registrant’s Form 8-K filed on June 21, 2010.

(2) Filed as an exhibit to registrant’s SB-2 registration statement filed on June 22, 2007.

(3) Filed as an exhibit to registrant’s Form 8-K filed on December 31, 2010.

(4) Filed as an exhibit to registrant’s Form 8-K filed on January 21, 2011.

(5) Filed as an exhibit to registrant’s Form S-1 registration statement filed on February 10, 2011.

(6) Filed as an exhibit to registrant’s Form 8-K filed on March 28, 2011.

(7) Filed as an exhibit to registrant’s Form 10-K for December 31, 2011.

(8) Filed as an exhibit to registrant’s From 10-Q on May 15, 2012.

(9) Filed as an exhibit to registrant’s From 10-Q on August 20, 2012.

(10) Filed as an exhibit to registrant’s From 8-K on December 10, 2012.

(*) Filed as an exhibit to this Form 10-K.
  
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**SIGNATURES**

 

In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

STEELE RESOURCES CORPORATION

Dated:  May 20, 2013

/s/ Scott Landow

 

Scott Landow

 

Chief Executive Officer

 

 

Dated:  May 20, 2013

/s/ Scott Landow

 

Scott Landow

 

 Chief Financial Officer

34** |
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