Business Combinations

12 Months Ended

Sep. 30, 2011

Business Combinations

Business Combination Disclosure [Text Block]

NOTE 7 – ACQUISITION OF STACCATO GOLD RESOURCES LTD.:

During the year ended September 30, 2010, the Company completed its acquisition of all of the issued and outstanding common shares of Staccato Gold Resources Ltd. (“Staccato”), by way of a court approved Plan of Arrangement under the Business Corporations Act (British Columbia) in accordance with the terms of an Arrangement Agreement, by and between the Company and Staccato.  The acquisition was also approved by the Timberline stockholders and Staccato’s securityholders.  Staccato was a publicly held Canadian (British Columbia) corporation engaged in the exploration of precious metals properties in Nevada.  Timberline acquired Staccato in order to further the exploration and development of mineral properties owned or leased by Staccato, as well as to increase the working capital of the Company.

This transaction was accounted for as a business combination.  The Company acquired all of the issued and outstanding common shares of Staccato in consideration for the issuance of one share of common stock of the Company for every seven common shares of Staccato and $0.0001 in cash for each common share of Staccato.  In addition, the Company acquired all of the issued and outstanding warrants to purchase common shares of Staccato and options to purchase common shares of Staccato, after giving effect to the exercise and cancellation of certain options immediately prior to closing, in consideration for the issuance by the Company of a warrant to purchase one share of common stock of the Company for every seven Staccato warrants or an option to purchase one share of common stock of the Company for every seven Staccato options, as applicable.  Pre-acquisition Timberline shareholders own approximately 74% of the issued and outstanding common stock of the Company as of the acquisition date and former Staccato shareholders own approximately 26%.  On a fully diluted basis, Timberline was owned 71% by pre-acquisition Timberline shareholders and 29% by former Staccato shareholders as of the acquisition date. 

The purchase price of the transaction was $15,435,199, consisting of the issuance of 14,301,380 shares of Timberline common stock valued at $14,444,394; 6,352,437 warrants to purchase one share of Timberline common stock valued at $889,341; 102,143 options to purchase one share of Timberline common stock valued at $64,429; and cash of $37,035. The Company incurred $214,477 in expenses related to the acquisition, $205,541 of which are included in professional fees expense, $5,800 are included in mineral exploration expenses and $3,136 are included in other general and administrative expenses in the consolidated statement of operations.

Timberline’s common stock issued as consideration was valued based upon the closing price of $1.01 per share of our common stock on the NYSE Amex on June 2, 2010.  The warrants and options that were issued as consideration were valued on that date using the Black-Scholes pricing model, based upon the following principal assumptions:

	Warrants	Options
Risk-free interest rate	0.38%	0.22% - 1.30%
Dividend yield	N/A	N/A
Volatility factor	106.1%	57.7% - 121.6%
Remaining to expiry date – warrants (weighted average)	1.13 years
Expected term - options		0.60 – 2.90 years

The purchase price allocation of the acquisition is summarized as follows:

Purchase price:
Shares issued on acquisition	$	14,444,394
Warrants		889,341
Options		64,429
Cash		37,035
	$	15,435,199
Net assets acquired:
Cash and cash equivalents	$	4,458,068
Other current assets		69,684
Restricted cash		54,258
Mineral rights and equipment, net		12,113,342
Deferred income taxes		(1,260,153)
	$	15,435,199

The consolidated statement of operations of the Company for the years ended September 30, 2011 and 2010 includes expenses incurred by Staccato of $3,023,534 and $1,277,744, respectively, and no revenue since the acquisition date.

The unaudited pro forma financial information below represents the combined results of the Company’s operations as if the Staccato acquisition had occurred at the beginning of the periods presented.  The unaudited pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have occurred if the acquisition had taken place at the beginning of the periods presented, nor is it indicative of future operating results. The amounts presented for the year ended September 30, 2011 represent the actual results for the period.  The unaudited pro forma loss from operations, net loss and net loss per share available to common stockholders, basic and diluted, for the year ended September 30, 2010 includes non-recurring severance and professional expenses incurred by Staccato in the amount of $1,622,248.

		Year ended    September 30,
		2011		2010
Revenues	$	-	$	-
Loss from operations		(7,174,035)		(8,574,910)
Net loss from continuing operations		(6,835,866)		(8,885,751)
Net loss per share from continuing operations available to common stockholders, basic and diluted		(0.12)		(0.16)