 | Second Quarter Report for the Period Ending December 31, 2006 |
| | |
| Management Discussion and Analysis | February 22, 2007 |
This discussion and analysis of the consolidated operating results and financial condition of the Company for the six months ended December 31, 2006 and 2005 should be read in conjunction with the Consolidated Financial Statements and the related Notes for the six months then ended. All dollar amounts are in Canadian dollars unless otherwise stated.
White Knight is an exploration company active in finding and generating new mineral prospects. After performing cursory geologic work, the Company may seek a third party to further explore the project or develop it on its own behalf. The Company’s operations have been based in Nevada since 1993.
White Knight has been exploring for Carlin-type gold deposits in Nevada since 1993. The Company has focused its efforts in north central Nevada because management believes the probability of a world-class gold discovery is greater here than in any other geographic region in the world. Industry experience has repeatedly shown that new large and profitable gold deposits are most likely to be discovered in areas where large gold deposits are known to exist. This exploration philosophy has been re-affirmed by the Cortez Joint Venture with its current world-class discovery, Cortez Hills.
On February 13, 2007, the Company received a formal offer to purchase all of the issued shares of the Company from U.S. Gold Corporation and a wholly-owned subsidiary of U.S. Gold Corporation (collectively, “U.S. Gold”) whereby the shareholders of the Company would receive 0.35 shares of US Gold for each outstanding share of White Knight with closing to take place by March 23, 2007. After commissioning a Fairness Opinion from Genuity Capital Markets, the Company’s board of directors has since approved a Directors’ Circular in which it recommends that shareholders accept the offer and tender their White Knight shares to the U.S. Gold offer. A copy of the U.S. Gold offer and the Directors’ Circular is available on the Company’s profile on www.sedar.com.
During the quarter, the Company has been continuing to follow its own exploration plan whereby targets are being generated on a number of its 100% owned properties. During the 2006 exploration season, significant drill production difficulties were encountered by the Company. Drill availability is at an all time low and in an effort to alleviate this obstacle, the Company is in the process of building its own drill rig. It is anticipated that this rig will be available for use in March 2007. Exploration activities in northeastern Nevada continue to gain momentum, being fueled by a gold price of over US$600 per ounce. Although drill availability is a bottleneck for the industry at this point, history has shown that where there is demand, that demand is usually serviced. It appears that the exploration industry in Nevada is relying more and more on core drilling in a region that was almost exclusively serviced by reverse circulation drilling in the past.
The Company currently owns eighteen properties (over 69,000 acres), sixteen of which are located within the Cortez Trend. These properties are summarized as follows:
Property |
Location |
Trend | White
Knight
Ownership | Optioned
to Third
Party |
Acres |
Square
Miles |
| Benmark | Eureka County | Cortez | 100% | | 1,616 | 2.53 |
| Celt | Eureka County | Cortez | 100% | | 12,569 | 19.64 |
| Cottonwood | Eureka County | Cortez | 100% | | 2,323 | 3.63 |
| Fye Canyon | Eureka County | Cortez | 100% | 51% | 6,320 | 9.88 |
| Goldstone | Eureka County | Cortez | 100% | | 1,191 | 1.86 |
| Gold Bar Horst | Eureka County | Cortez | 100% | | 3,652 | 5.71 |
Property |
Location |
Trend | White
Knight
Ownership | Optioned
to Third
Party |
Acres |
Square
Miles |
| Gold Pick | Eureka County | Cortez | 100% | | 601 | 0.94 |
| Hunter | Eureka County | Cortez | 100% | | 1,116 | 1.74 |
| Ian | Eureka County | Cortez | 100% | | 1,101 | 1.72 |
| Knolls | Humboldt County | Cortez | 100% | | 3,637 | 5.68 |
| McClusky Pass | Eureka County | Cortez | 100% | | 5,009 | 7.83 |
| New Pass | Churchill County | Austin-Lovelock | 100% | 50% | 2,232 | 3.49 |
| Pat Canyon | Eureka County | Cortez | 100% | | 3,582 | 5.60 |
| Patty | Eureka County | Cortez | 30% | | 10,008 | 15.64 |
| Slaven Canyon | Lander County | Cortez | 100% | | 6,599 | 10.31 |
| South Cabin Creek | Eureka County | Cortez | 100% | | 1,735 | 2.71 |
| Squaw Creek | Elko County | Carlin | 100% | 50% | 3,040 | 4.75 |
| Tonkin Summit | Eureka County | Cortez | 100% | | 3,826 | 5.98 |
| Miscellaneous | Eureka County | Cortez | 100% | | 1,756 | 2.74 |
| Total | | | | | 71,913 | 112.38 |
This review of selected properties has been prepared by John M. Leask, P.Eng., Chairman and President of the Company, and a Qualified Person (“QP”) as defined by National Instrument 43-101 (Standards of Disclosure for Mineral Projects).
Celt Property
In October 2006, the Company’s joint venture partner, Teck Cominco American Incorporated (“Teck Cominco”) commenced a 6-10 hole, 8,000 foot reverse circulation (“RC”) drill program on the Celt property which is located in north central Nevada. During the 2005 field season, Teck Cominco completed gravity and IP surveys on the property which defined a 7 kilometre-long geophysical feature interpreted as the faulted western edge of a lower-plate horst block. Lower-plate carbonate host rocks were encountered in six of eight RC holes drilled in 2005, with anomalous gold values encountered. Management now believes that the several kilometre-long gold soil/rock anomaly located along the west Roberts Mountains range front may be related to a gold system focused along horst bounding structures extending to the west of the 2005 drilling. The 2006 drilling campaign is designed to test this model. The Company is currently awaiting final results from Teck Cominco.
The Celt property comprises 608 unpatented claims (12,569 acres) located along the western edge of the Roberts Mountains, immediately northeast of the Gold Bar Mine in Eureka County, Nevada. In October 2004, the Company entered into a Financing and Acquisition Agreement with Teck Cominco whereby it was granted the option to earn an initial 51% interest in the property by incurring exploration expenditures, and making cash payments in annual increments prior to December 31, 2008. In December 2006, Teck Cominco terminated the Financing and Acquisition Agreement and returned the property to the Company.
Cottonwood Property
During October 2006, the Company commenced a four to eight hole, 5,000 to 10,000 ft drill campaign on its 100% owned Cottonwood project located in the Cortez Trend. This project covers a major window-bounding fault (Wall Fault) which places upper-plate rocks in direct contact with lower-plate Devonian limestones. The geologic similarities between the Wall Fault and the major ore forming Post Fault of the Carlin Trend are numerous. The 2006 effort will focus north of the 2005 drilling along the Wall Fault and the subparallel Wall Anticline, in the Pot Canyon
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and French Trail deposit areas where significant gold mineralization has been drilled and remains open for expansion.
Fye Canyon Property
Subsequent to the period end, Teck Cominco American Incorporated (“Teck Cominco”) requested and received permission from the Company to amend their exploration expenditure commitment under the Financing and Acquisition Agreement dated October 20, 2004. In consideration of the Company granting an extension from December 31, 2006 to March 31, 2007, Teck Cominco will guarantee the US$1,250,000 aggregate expenditure commitment now due by March 31, 2007. Teck Cominco has an option to earn an initial 51% interest in the property by incurring exploration expenditures, and making cash payments in annual increments prior to December 31, 2008.
Gold Bar Horst Property
The Company has completed the Phase I drilling program at its wholly owned Gold Bar Horst property located in the Cortez Trend, Nevada. The drill program tested a “blind” gravel-covered pediment target and was designed to establish depth to lower-plate bedrock previously interpreted by a gravity geophysical survey performed by the Company in 2005. In addition, the program was to test geophysically interpreted horst-bounding structures which may be related to the former producing Gold Bar Mine located within 2,000 feet of the northern claim boundary of the Gold Bar Horst South claim block. Of the proposed 9 drill holes, 6 were drilled but only 4 were completed to the target depth. Technical difficulties, including equipment failure and caving overburden, prevented the completion of the remaining two holes. Lower-plate limestones were encountered as shallow as 390 feet. Anomalous arsenic and trace gold were encountered in all three of the holes for which assays have been received. The Company now interprets that favourable host lithologies are explorable at reasonable depths over an area measuring 3,500 ft x 7,000 ft on the southern Gold Bar horst property. Alteration and gold-arsenic anomalies encountered in the 2006 drilling indicate that the gold-mineralizing system continues southward from Gold Bar. Management is currently evaluating the 2006 drill data with emphasis on generating targets for further drilling.
Hunter Property
Subsequent to the Gold Bar Horst drilling, the Company moved the drill to its wholly owned Hunter property, also located in the Cortez Trend. The Company drilled three shallow (160-400 ft deep) reverse-circulation holes to test depth to bedrock in the pediment area west of the Hunter mineralized zone. All three holes encountered shallow bedrock. Two of the holes intersected anomalous gold values over thicknesses of 15 feet and 115 feet.
Patty Property (formerly Indian Ranch)
During September 2006, the Company’s joint venture partner, Barrick Gold Corporation, commenced drilling on the Patty project, formerly named Indian Ranch. The planned program comprises 1,850 metres (6,000 feet) of reverse circulation drilling in 3 to 4 holes. Results from recent drilling provide the incentive for this drill program. Drill hole data from drilling executed between November 2005 and January 2006 show that a thick zone of gold mineralization is hosted within the Roberts Mountains Formation. Structural trends crossing this host will be tested with this drill program. Previously released drill hole PIR05-10 reported an intercept of 9.1 metres grading 1.58 g/t gold within a broad zone of low grade gold mineralization in the Roberts Mountains unit. Several holes angled off the same drill pad also intersected significant gold at what is interpreted to be the same host sequence. Highlights of the program occurred in drill hole PIR05-12 which was drilled at an angle of 700 and an azimuth of 3500 from PIR05-10 and returned the following intervals: 676 ppb Au (0.023 oz/ton) from 1370 feet to 1460 feet (90 feet) including 15 feet grading 1,820 ppb Au (0.057 oz/ton) from 1380 feet to 1395 feet Drill holes PIR05-11, PIR05-13, PIR05-14 and PIR05-15 were all drilled off the drill pad set-up for PIR05-10 and were lost above the target section. Drill hole PIR05-16 also intersected anomalous gold in what is projected as a down faulted block to the south of PIR05-10. The assay interval from 2,620 feet to 2,720 feet returned 219 ppb gold over 100 feet with a high of 500 ppb gold over 5 feet.
New Pass Property
The Company’s joint venture partner, Bonaventure Enterprises Inc. (“Bonaventure”), has reported assay results for the first 5 drill holes of its planned 30-hole Phase 2 drilling program. A total of 2,300 feet of reverse circulation drilling has been conducted. Phase 2 drilling is testing additional potential to the north, east and west of the current resource and the large gap between the northern and southern parts of the resource. It is notable that 4 of the 5 holes drilled have 85 to 115 feet aggregate thicknesses of +0.01 oz/ton gold. Complete drilling results using 10 feet of 0.010 oz/ton gold as a cut off are shown in the table below.
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| New Pass – Phase 2 Drilling Program |
SECTION
(Feet) |
HOLE # |
Azimuth
(Degrees) |
Dip
(Degrees) | Total
Depth
(Feet) |
From
(Feet) |
To
(Feet) |
Interval
(Feet) |
Gold Values
(oz/ton) |
Silver Values
(oz/ton) |
| 3300N | NP-0605 | 70 | -45 | 600 | 275 | 360 | 85 | 0.038 | 0.10 |
3400N
| NP-0604 | 70 | -45 | 200 | 45 | 55 | 10 | 0.026 | 0.04 |
NP-0607
| 70
| -45
| 650
| 355 | 379 | 15 | 0.013 | 0.02 |
| 530 | 605 | 75 | 0.029 | 0.99 |
3500N
| NP-0601
| 70
| -45
| 400
| 60 | 115 | 55 | 0.012 | 0.06 |
| 255 | 275 | 20 | 0.016 | <0.01 |
| 295 | 315 | 20 | 0.024 | 0.05 |
| 320 | 340 | 20 | 0.013 | 0.07 |
| NP-0602 | 70 | -90 | 450 | 110 | 120 | 10 | 0.013 | 0.05 |
| | | | | | 180 | 190 | 10 | 0.016 | 0.12 |
|
|
|
|
| 295 | 330 | 35 | 0.016 | 0.04 |
| 365 | 385 | 20 | 0.017 | 0.09 |
| 395 | 415 | 20 | 0.012 | 0.30 |
Note: Intervals are true thickness, except -90o holes which are 85% true thickness, gold and silver values are in troy ounces per short ton (oz/ton)
Drill holes NP-0601 and 0602 were drilled at the northern end of the drill grid, 200 to 300 feet west of NP-0502, which contained +0.01 oz/ton gold values in the volcanic tuff above the main limestone-hosted mineralized zone. Both holes had gold intercepts in the volcanics as well as the limestone below. More holes are planned further north, where thicker tuff units occur. Drill hole NP-0604 was drilled 200 feet east of the resource and NP-0605 was drilled 200 feet west of the nearest hole on the west side of the resource. Finally, drill hole NP-0607 was drilled 500 feet west of the resource to test the down-dip extension of the resource. As shown above, drill hole NP-0607 intersected two zones including 75 feet averaging 0.029 oz/ton gold. Additional drilling is planned to the north and south. Converted to metric values, drill hole NP-0607 intersected 0.99 grams gold, 33.9 grams silver per metric ton (tonne) over 22.9 meters. Drill hole NP-0605 intersected 1.30 grams gold per tonne over 25.9 meters.
Drilling has been suspended due to winter conditions and is expected to resume as weather permits. The limited drilling to date has been highly successful in demonstrating the exploration potential for the project. A sizable drill campaign is warranted for a project of this quality. Bonaventure has an option to earn an initial 50% interest in the property from the Company by incurring exploration expenditures, issuing shares and making option payments over a 4-year period. During the period, the Company filed a 43-101 report on the New Pass Property which can viewed at www.sedar.com.
Slaven Canyon Property
The Slaven Canyon property consists of 6,587 acres located in the northern Shoshone Range, Lander County, Nevada, approximately 14 miles southeast of Battle Mountain. During 2005 this project was drilled with two exploration objectives: 1) to establish the existence of, and depth to, lower-plate limestone host rocks, and 2) to establish a better understanding of the structural controls for the upper-plate hosted mineralization. Drill hole SL21, drilled to a final depth of 2583 ft, encountered several thrust fault sequences. Deep in the hole, a 100 ft-thick, highly sheared micritic limestone was encountered, which was interpreted to be a piece of lower-plate, based on lithology. Diamond drill hole SL25 was completed 3 months later and reached a total depth of 3088 ft. This hole was drilled through the known upper-plate resource and confirmed the grade and disseminated nature of gold mineralization, intersecting 50 ft @ 0.092 opt Au including 5 ft @ 0.380 opt Au. The hole also drilled the same thrusted and repeated sequences observed in DDH SL21. However, the hole, which included some limestone interbeds similar to the limestone drilled in Hole 21, remained in upper-plate rocks to the total depth drilled. The shallow drilling at Slaven (less than 1000 ft) established strong exploration potential for a structurally controlled deposit of significant size in upper-plate host rocks, principally in quartzites which have yielded strong gold values both in drill holes and in surface samples (e.g. 25 ft @ 0.122 opt Au in a roadcut).
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Squaw Creek Property
The Company’s joint venture partner, Bonaventure, has completed its first phase of drilling at the Company’s Squaw Creek property located in Nevada. A total of three deep angle reverse circulation (RC) and core holes were completed totaling 4,802 feet. The drilling successfully found the bounding fault of a large horst block defined by geophysics, and also drilled a thick section of brittle rocks, favorable hosts for Hollister style high-grade veins. Drill hole SC0602, drilled due east at a 45 degree angle to a total depth of 1,380 feet, intersected 540 feet of gravel on the down-dropped side of a major fault before entering Tertiary age tuffaceous rocks and then a fault at 780 feet. The bounding fault, inferred to dip westerly, is filled with an andesite dike (20 feet thick) and a few very thin (up to 2 inches) low-temperature quartz veinlets. The footwall of the fault is Ordovician quartzite and lesser chert, argillite and shale. Seven other structures occur deeper in the hole and are thought to be related to the same faulting event. All of the structures contain anomalous gold as shown in the table below. The highest 5 foot assay of 1.5 g/t gold occurs in the deepest structure (1,315-1,320 feet) and indicates gold values may be improving with depth. Drill hole SC0601, drilled 1,500 feet east of 0602 in a due west direction at a 45 degree angle, had a total depth of 2,102 feet. After penetrating 60 feet of gravel, the hole intersected Tertiary age tuff and then Ordovician age rocks at 460 feet. Although it penetrated a thick section of brittle rocks which are good hosts for veining, the hole contains only minor structure. Several weakly anomalous gold values are associated with this weak fracturing and the highest gold number in the hole is again the deepest intercept, from 1,640 to 1,645 feet, assaying 0.22 g/t gold. Drilled far to the east of the horst structure drilled in 0602, this hole was drilled semi-parallel to the dip of the main fault zone. Located 3,300 feet south and 70 feet east of SC0602, drill hole SC0603, drilled due west at a 45 degree angle to a total depth of 1,320 feet, intersected 20 feet of gravel before entering Tertiary age tuffaceous rocks. Between 790 and 960 feet Ordovician meta-basalt, thought to be an un-rooted landslide block within the tuffs, was intersected. Tuffaceous rocks occur from 960 feet to total depth. A single fault zone from 985 to 1000 feet contains anomalous gold with the highest value being 995 to 1000 feet which assayed 2.19 g/t gold. Projecting the horst bounding fault intersected in 0602, this hole was drilled west of the structure and into the hanging wall of the fault. Assay results for all three drill holes are presented below with only intercepts of 10 or more feet and + 0.10 g/t included.
| SQUAW CREEK SUMMARY DRILLING RESULTS PHASE 1 PROGRAM |
HOLE #
| Azimuth
Degrees
| Dip
Degrees
| Total Depth
Feet
| From
Feet
| To
Feet
| Interval
Feet
| Gold Values
G/T
|
SC0601
| 270
| -45
| 2102
| 590.0
965.0
1055.0
1100.0
1180.0 | 600.0
975.0
1075.0
1110.0
1190.0 | 10.0
10.0
20.0
10.0
10.0 | 0.13
0.14
0.15
0.12
0.17 |
SC0602
| 90
| -45
| 1380
| 780.0
835.0
875.0
930.0
1090.0
1110.0
1210.0
1285.0
1315.0 | 805.0
865.0
900.0
945.0
1100.0
1165.0
1220.0
1295.0
1325.0 | 25.0
30.0
25.0
15.0
10.0
55.0
10.0
10.0
10.0 | 0.43
0.33
0.17
0.13
0.16
0.44
0.16
0.32
0.80 |
| SC0603 | 270 | -45 | 1320 | 985.0 | 1000.0 | 15.0 | 1.13 |
Phase 2 drilling at Squaw Creek, planned for the summer of 2007, will continue to test the major north-south trending, west dipping fault system. A test deeper below SC0602 as well as additional holes to the north and south along trend are planned. All holes will be drilled from west to east in order to drill perpendicular to structure. Bonaventure has an option to earn an initial 50% interest in the property by incurring exploration expenditures, issuing shares and making option payments over a 4-year period.
| OPERATIONS AND FINANCIAL CONDITION |
Summary of Quarterly Results
The following is a summary of certain selected unaudited financial information for the most recent eight fiscal quarters.
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| | | Unaudited | |
| | | (Fiscal Quarters of the Fiscal | |
| | | Year ended June 30, 2007) | |
| All in $1,000’s | | | | | | | | | |
| except Loss per Share | | First Quarter | | | Second Quarter | | | | |
| Working capital | $ | 12,582 | | $ | 12,116 | | | | |
| Loss | $ | 180 | | $ | 191 | | | | |
| Loss per share | $ | (0.003 | ) | $ | (0.003 | ) | | | |
| Loss per share (fully diluted) | $ | (0.003 | ) | $ | (0.003 | ) | | | |
| | | | | | | | | | |
| Total assets | $ | 21,225 | | $ | 21,015 | | | | |
| Total liabilities | $ | 439 | | $ | 352 | | | | |
| | | | | | | | | | |
| Deficit | $ | 16,062 | | $ | 16,252 | | | | |
| | | Unaudited | |
| | | (Fiscal Quarters of the Fiscal | |
| | | Year ended June 30, 2006) | |
| All in $1,000’s | | | | | | | | | | | | |
| except Loss per Share | | First Quarter | | | Second Quarter | | | Third Quarter | | | Fourth Quarter | |
| Working capital | $ | 16,253 | | $ | 14,778 | | $ | 14,183 | | $ | 13,239 | |
| Loss | | 302 | | | 179 | | | 2,421 | | | 405 | |
| Loss per share | | 0.005 | | | 0.003 | | | 0.041 | | | 0.007 | |
| Loss per share (fully diluted) | | 0.005 | | | 0.003 | | | 0.041 | | | 0.007 | |
| | | | | | | | | | | | | |
| Total assets | | 21,790 | | | 21,814 | | | 21,415 | | | 21,502 | |
| Total liabilities | | 309 | | | 444 | | | 147 | | | 599 | |
| | | | | | | | | | | | | |
| Retained deficit | | 12,876 | | | 13,055 | | | 15,476 | | | 15,881 | |
| | | Unaudited | |
| | | (Fiscal Quarter of the Fiscal | |
| | | Year ended June 30, 2005) | |
| All in $1,000’s | | | | | | | | | |
| except Loss per Share | | Third Quarter | | | Fourth Quarter | | | | |
| Working capital | $ | 11,545 | | $ | 11,216 | | | | |
| Loss | $ | 284 | | $ | 230 | | | | |
| Loss per share | $ | 0.005 | | $ | 0.004 | | | | |
| Loss per share (fully diluted) | $ | 0.005 | | $ | 0.004 | | | | |
| | | | | | | | | | |
| Total assets | $ | 15,716 | | $ | 15,697 | | | | |
| Total liabilities | $ | 85 | | $ | 180 | | | | |
| | | | | | | | | | |
| Deficit | $ | 12,344 | | $ | 12,574 | | | | |
Results of Operations
For the three months ended December 31
The Company’s loss for the quarter ended December 31, 2006 totaled $191,018, a loss of $0.003 per share, as compared to a loss of $179,424 ($0.003 loss per share) for the quarter ended December 31, 2005. Write-off of preliminary exploration costs of $22,509 (total write-off for the three months ended December 31, 2005 was $21,348) coupled with a stock-based compensation charge of $30,425 ($35,245 of stock-based compensation costs for the three months ended December 31, 2005) and general & administrative expenses contributed to the current quarter’s net loss.
General and administrative expenses for the quarter ended December 31, 2006 totaled $245,617, excluding the stock-based compensation expense (December 31, 2005 - $309,081). Other expenses which affect the loss fluctuate from quarter to quarter and consist of unrealized loss or recovery on temporary investments, interest income and gain or loss on foreign exchange, which do not occur on a regular basis.
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The Company’s cash and temporary investments decreased by $550,529 during the quarter ended December 31, 2006, from $12,674,180 as at September 30, 2006 to $12,123,651 as at December 31, 2006. Cash resources used in operations totaled $162,229. Investing activities, excluding the transfer of temporary investments into cash of $1,992,976, used cash of $395,618 including $209,573 in acquisition of mineral property costs and deferred exploration costs.
The Company’s activities continued to be focused on exploration in the Cortez Trend, Nevada.
Liquidity
The Company’s working capital as at December 31, 2006 was $12,116,671 as compared to $14,777,689 as at December 31, 2005. Cash and temporary investments decreased by $2,974,741 from $15,098,392 as at December 31, 2005 to $12,123,651 as at December 31, 2006. Cash used by operating activities during the six month period ended December 31, 2006 was $298,390 (2005 - $313,559).
Cash provided by investing activities during the six month period ended December 31, 2006 was $851,010 in comparison to $6,138,230 cash used in 2005. The Company recorded a net recovery of $10,461 in mineral property interests and expended and initially capitalized $699,924 in deferred exploration costs during the year to date ended December 31, 2006, all in Nevada. For the similar period ended December 31, 2005, the comparative amounts were expenditures of $294,891 and $1,538,936 respectively. The Company also invested cash of $409,903 in equipment during the year to date ended December 31, 2006 (2005 - $174,914). During the six month period ended December 31, 2006, the Company disposed of temporary investments in the amount of $1,980,421 (2005 - - $4,092,159 of temporary investments were acquired).
Cash provided by financing activities during the year to date ended December 31, 2006 was $37,500 compared to $6,272,284 for the similar period ended December 31, 2005.
At the date of these consolidated financial statements, the Company has not been able to identify a known body of commercial grade ore on any of its mineral property interests. The ability of the Company to realize the costs it has incurred to date on these mineral property interests is dependent upon the Company being able to lever its property interests and cash, by way of exploration activities and option/joint ventures, into assets of greater value.
Capital Resources
The Company’s authorized capital consists of an unlimited number of common shares without par value. At December 31, 2006, the Company had 59,434,972 issued and outstanding common shares (December 31, 2005 – 59,194,972), and at January 31, 2007 the Company had 59,434,972 issued and outstanding shares.
The Company adopted a formal written stock option plan (“Stock Option Plan”) dated November 4, 2002 which was subsequently amended on November 6, 2003 and October 3, 2006. Under this plan, the Company may grant options for up to 7,072,935 common shares to directors, employees and consultants at exercise prices to be determined by the market value on the date of grant. Vesting of options is made at the discretion of the Board of Directors at the time the options are granted with the exception of options granted in relation to investor relations. Options granted to consultants engaged in investor relations activities must vest no earlier than as to one-quarter upon the grant date and as to a further one-quarter after each of the following three four-month periods. The options can be granted for a maximum term of 5 years. The most recent Amended Stock Option Plan was approved by the TSX Venture Exchange (the “Exchange”) on January 25, 2007.
During the period ended December 31, 2006, 50,000 stock options at $0.75 were exercised for cash proceeds of $37,500 and 125,000 stock options at $1.91 expired. As at December 31, 2006 the Company had 4,945,000 stock options outstanding at exercise prices ranging from $0.23 per share to $1.91 per share with expiry dates ranging from January 23, 2008 to January 10, 2011. Subsequent to December 31, 2006, no stock options were granted, exercised or cancelled. If exercised, the remaining 4,945,000 stock options would increase the Company’s available cash by $4,824,860.
During the period, 1,500,000 warrants at $2.50 expired. At December 31, 2006 the Company had no warrants outstanding.
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Related Party Transactions
The Company entered into the following transactions with related parties as follows:
During the period ended December 31, 2006, the Company paid or accrued management fees in the amount of $132,000 (2005 - $132,000) to companies controlled by directors.
During the period ended December 31, 2006, the Company paid or accrued administrative consulting fees in the amount of $71,410 (2005 - $56,058) to directors and officers of the Company and a company controlled by a director.
During the period ended December 31, 2006, the Company paid consulting fees in the amount of $66,579 (2005 - $61,240) to directors and officers of the Company and companies controlled by directors. Of that amount, $54,262 (2005 - $57,006) is included or written off to deferred exploration costs.
Amounts payable to related parties at December 31, 2006 aggregated $81,642 (June 30, 2006 - $118,002). The fair value for amounts due to related parties is not determinable since there are no stated terms of repayment.
Amounts payable to related parties have no specific terms of repayment, are unsecured, and have no interest rate. The amounts charged to the Company for the services provided have been determined by negotiation among the parties and are covered by signed agreements. These transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.
Proposed Transactions
In January 2007, U.S. Gold Corporation filed an amended S-4 Registration Statement with respect to an anticipated take-over of the Company.
The Company constantly seeks business opportunities to advance its business and to increase shareholder value. It is the policy of the Company to disclose material transactions in accordance with the requirements of the regulatory authorities and when in the best interests of the Company to do so.
Risks and Uncertainties
The Company’s financial success will be dependent upon its ability to develop profitable operations and to continue to raise adequate financing. Management is actively targeting sources of additional financing through alliances with financial, exploration and mining entities, or other business and financial transactions which would assure continuation of the Company’s operations and exploration programs. In order for the Company to meet its liabilities as they come due and to continue its operations, the Company is solely dependent upon its ability to generate such financing. There can be no assurance that the Company will be able to continue to raise funds in which case the Company may be unable to meet its obligations.
Disclosure Controls and Procedures
The Company’s management, with the participation of the Company’s Chief Executive Officer, John M. Leask, and Chief Financial Officer, Megan Cameron-Jones, evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by the required filings.
Based upon the evaluation described above, the Chief Executive Officer and the Chief Financial Officer concluded that as of the end of the period covered by the required filings, the Company’s disclosure controls and procedures were effective in timely alerting them to the material information relating to the Company (or its consolidated subsidiaries) required to be included in reports that the Company files.
Forward Looking Statements
All statements in this report that do not directly and exclusively relate to historical facts, constitute forward-looking statements. These statements represent the Company’s intentions, plans, expectations and beliefs, and are subject to risks, uncertainties, and other factors of which many are beyond the control of the Company. These factors could cause actual results to differ materially from such forward-looking statements. The Company disclaims any intention or obligation to update or revise any forward-looking statements, as a result of new information, future events or otherwise.
8
| JOHN M. LEASK, P.Eng | GORDON P. LEASK, P.Eng. |
| Chairman, President & CEO | Director |
| Vancouver, BC, Canada | Vancouver, BC, Canada |
| | |
| BRIAN D. EDGAR | MEGAN M. CAMERON-JONES |
| Director | Director, Secretary & CFO |
| Vancouver, BC, Canada | Vancouver, BC, Canada |
| | |
| ROBERT G. CUFFNEY | KAREEN McKINNON |
| Vice-President, Exploration | Vice-President, Corporate Development |
| Reno, Nevada, USA | Vancouver, BC, Canada |
| | |
| | |
| HEAD OFFICE | NEVADA OFFICE |
| Suite 922, 510 West Hastings Street | Suite 140, 121 Woodland Avenue |
| Vancouver, BC, Canada | Reno, Nevada, USA |
| V6B 1L8 | 89523 |
| | |
| Tel: (604) 681-4462 | Tel: (775) 787-3444 |
| Fax: (604) 681-0180 | Fax: (775) 787-3447 |
| E-mail: info@whiteknightres.com | |
| Website: www.whiteknightres.com | |
| | |
| | |
| LEGAL COUNSEL | TRANSFER AGENT |
| Axium Law Corporation | Pacific Corporate Trust Company |
| Vancouver, BC, Canada | Vancouver, BC Canada |
| | |
| | |
| REGISTERED OFFICE | AUDITOR |
| Suite 3350 | Davidson & Company |
| 1055 Dunsmuir Street | Chartered Accountants |
| Vancouver, BC, Canada V7X 1L2 | Vancouver, BC, Canada |
| | |
| | |
| CAPITALIZATION | FINANCIAL INSTITUTION |
| Authorized: | Bank of Montreal |
| Unlimited common shares | Vancouver, BC, Canada |
| Issued as at February 15, 2007: 59,434,972 | |
STOCK EXCHANGE
Listed: TSX Venture Exchange
Symbol: WKR-V
