AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
SEPTEMBER 9, 2004
AMENDMENT NO. 4
TO
REGISTRATION NO. 333-113546
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
YUKON GOLD CORPORATION, INC.
(name of small business issuer in its charter)
DELAWARE 1000 98-0413063
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
Of incorporation or organization) Classification Code Number) Identification No.)
YUKON GOLD CORPORATION, INC.
347 Bay Street
Suite 408
Toronto, Ontario M5H 2R7
Telephone: 416-865-9930
Facsimile: 416-865-1250
(Name, address, including zip code, and
telephone number, including
area code, of agent for service)
Copies of communications to:
Jonathan H. Gardner
Kavinoky & Cook, LLP
120 Delaware Avenue
Buffalo, New York 14202
Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this Registration Statement. If any of the securities
being registered on this Form are to be offered on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act of 1933, check the following box.
[X]
If this Form is filed to register additional securities pursuant to Rule 462(b)
under the Securities Act, please check the following box and list the Securities
Act Registration Statement number of the earlier effective Registration
Statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE:
Title Of Each Class Of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities To Be Registered registered offering price per aggregate offering Registration Fee
share (1) price (1)
Common Stock, 4,469,483 $0.50 $2,234,742 $207.00
Par Value $0.0001 per Share
(1) The offering price has been estimated solely for the purpose of calculating
the registration fee pursuant to Rule 457(C). Our common stock is not traded on
any national exchange. The offering price shown above was determined by the
Company.
(ii)
CROSS REFERENCE SHEET SHOWING THE LOCATION IN PROSPECTUS OF INFORMATION REQUIRED
BY ITEMS OF FORM SB-2
PART I INFORMATION REQUIRED IN PROSPECTUS SECTION
1. Front of Registration Statement Front of Registration
and Outside Front Cover of Statement and outside
Prospectus front cover of Prospectus
2. Inside Front and Outside Back Inside Front Cover Page
Cover Pages of Prospectus of Prospectus and
Outside Front cover
Page of Prospectus
3. Summary Information and Risk Factors Prospectus Summary;
Risks Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Prospectus Summary;
Determination of Offering Price
6. Dilution Risk Factors; Dilution
7. Selling Security Holders Selling Shareholders and
and Plan of Distribution Plan of Distribution
8. Plan of Distribution Selling Shareholders and
Plan of Distribution
9. Legal Proceedings Legal Proceedings
10. Directors, Executive Officers, Directors, Executive Officers,
Promoters and Control Persons Promoters, Control Persons;
Executive Compensation
11. Security Ownership of Certain Security Ownership of Certain
Beneficial Owners and Management Beneficial Owners and Management
PART I INFORMATION REQUIRED IN PROSPECTUS SECTION
12. Description of Securities Description of Securities
13. Interest of Named Experts and Counsel Legal Matters; Experts
14. Disclosure of Commission Position Disclosure of Commission
on Indemnification
Position on Indemnification for
Securities Act Liabilities
15. Organization Within Last Five Years Organization Within the Last
Five Years; History
16. Description of Business Description of Business
17. Management's Discussion and Management's Discussion
and Analysis or Plan of Operation and Analysis of Financial
Condition or Plan
of Operation
18. Description of Property Description of Business;
The Mount Hinton Property
19. Certain Relationships and Related Certain Relationships
Transactions and Related Transactions
20. Market for Common Stock and Prospectus Summary;
Related Stockholder Matters Market for Common Equity and
Related Stockholders Matters
21. Executive Compensation Executive Compensation
22. Financial Statements Financials Statements
23. Changes in and Disagreements Change in Auditors
with Accountants on Accounting
and Financial Disclosure
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration Statement shall
become effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
PROSPECTUS
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION,
The information in this prospectus is not complete and may be changed. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
YUKON GOLD CORPORATION, INC.
4,469,483 SHARES OF COMMON STOCK
The selling shareholders named in this prospectus are offering all of the shares
of common stock of Yukon Gold Corporation, Inc., a Delaware corporation, offered
through this prospectus. We will not receive any of the proceeds of the shares
sold by the selling shareholders. No public market currently exists for the
common stock. We will pay all of the expenses of registering these securities.
Selling shareholders will sell at a fixed price of $0.50 per share until our
common stock is quoted on the OTC Bulletin Board. Thereafter, the selling
shareholders will sell their common stock at prevailing market rates or
privately negotiated prices.
BEFORE BUYING THE SHARES OF COMMON STOCK, CAREFULLY READ THIS PROSPECTUS,
ESPECIALLY THE RISK FACTORS BEGINNING ON PAGE 6 OF THIS PROSPECTUS. THE PURCHASE
OF OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The information in this prospectus is not complete and may be changed. The
selling shareholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
The date of this prospectus is September __, 2004.
TABLE OF CONTENTS
PAGE
Prospectus Summary ......................................................
Summary Financial Data...................................................
Risk Factors.............................................................
Determination of Offering Price..........................................
Dilution.................................................................
Description of Business..................................................
The Mount Hinton Property................................................
Gold Price Volatility....................................................
Fiscal Year..............................................................
Transfer Agent...........................................................
Employees................................................................
Stock Option Plan........................................................
Competition..............................................................
History..................................................................
Management's Discussion and Analysis or Plan of Operation ...............
Market for Common Equity and Related Stockholder Matters.................
Directors, Executive Officers, Promoters, Control Persons................
Executive Compensation...................................................
Security Ownership of Certain Beneficial Owners and Management...........
Certain Relationships and Related Transactions...........................
Organization Within the Last Five Years..................................
Description of Securities................................................
Use of Proceeds..........................................................
Determination of Offering Price..........................................
Selling Shareholders and Plan of Distribution............................
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Legal Proceedings........................................................
Legal Matters............................................................
Experts..................................................................
Change In Auditors.......................................................
Disclosure of Commission Position on Indemnification for Securities
Act Liabilities.............
How To Get More Information..............................................
Glossary.................................................................
Index to Financial Statements
Financial Statements of Yukon Gold Corp. for the Six Months Ended
October 31, 2003 (unaudited) and For the Period Ended April 30, 2003 F-1
Audited Consolidated Financial Statements of Yukon Gold Corporation,
Inc. for the Year Ended April 30, 2004 and for the Year Ended
April 30, 2003 F-2
Until ______________, 2004, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealer's obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
-3-
PROSPECTUS SUMMARY
HISTORY AND BUSINESS. Our name is Yukon Gold Corporation, Inc. and we sometimes
refer to ourselves in this prospectus as "Yukon Gold" or as "we," "our," or
"us." We are an exploration stage mining company. Our objective is to exploit
our interest in the mineral claims in the Yukon Territory, Canada which we hold
through our wholly owned subsidiary named "Yukon Gold Corp." Our wholly-owned
subsidiary is referred to in this prospectus as "YGC." We were incorporated in
the state of Delaware on May 31, 2000. Our executive offices are at 347 Bay
Street, Suite 408, Toronto, Ontario Canada M5H 2R7. Our telephone number is
416-865-9930 and our fax number is 416-865-1250. We also have a field office in
Mayo, Yukon Territory. Our wholly owned subsidiary, YGC, was incorporated on May
16, 2002 in the Province of Ontario, Canada and is licensed to do business is
the Yukon Territory. All of our business activities are undertaken through YGC.
CURRENCY. References to dollars are to United States dollars (US$) unless
otherwise indicated as being Canadian dollars (CDN$). As of March 31, 2004, the
currency exchange rate was approximately US$1.00 equals CDN$1.3113, as published
by Bloomberg at www.Bloomberg.com. As many of our expenses are in Canadian
dollars the amounts have been expressed in Canadian dollars followed by the US
equivalent based on the above conversion rate for amounts to be paid in the
future. Where the US dollar amounts for items already paid or received are
expressed in the financial statements or our accounting records and the
conversion rate was calculated at the time of payment or receipt, the actual US
dollar number has been expressed in the prospectus.
DESCRIPTION OF BUSINESS. We are an exploration stage mining company. Our wholly
owned Canadian subsidiary, YGC, holds an option from the Hinton Syndicate with
whom we have an agreement to acquire a 75% interest in the 186 mineral claims
covering approximately 9,300 acres in the Mayo Mining District of the Yukon
Territory, Canada. To earn the 75% interest we are required to make option
payments of CDN$600,000 or US$456,000 and incur exploration expenses of
CDN$5,000,000 or US$3,800,000 over a five-year period that commenced on July 7,
2002. Our agreement with the Hinton Syndicate requires us to meet two kinds of
milestones: (i) target dates for raising capital and (ii) target dates for
incurring exploration expenditures. Required option payments have been paid up
to July 7, 2005 and required exploration expenses have been incurred that were
due before July 7, 2004. Further exploration expenses of CDN$325,000 or
US$247,000 are required prior to July 7, 2005. Of that amount, we have funded
CDN$310,000 or US $235,600. We have adequate funds to cover the balance of the
commitment prior to December 31, 2004 and the work is under way. For full
details of the option payment and exploration expenses, see DESCRIPTION OF
BUSINESS - Agreement with Hinton Syndicate. Once we have earned the 75% interest
we have a further option to purchase the remaining 25% interest for
CDN$5,000,000 or US$3,800,000. The Hinton Syndicate is entitled to a 2% net
smelter return royalty, which increases to 3% if we buy their 25% interest. Two
of our directors, J. Malcolm Slack and Richard Ewing, are members of the Hinton
Syndicate.
The claims are located adjacent to the Keno Hill Mining Camp, which is located
approximately six miles southeast of Keno City and about 37 miles northeast of
the village of Mayo in the Yukon Territory of Canada. The Keno Hill Mining Camp
was operated by United Keno Hill Mines Ltd. ("UKHM"), and operated continuously
from 1913 to 1989. During much of that time, our claims were held by UKHM which
conducted limited exploration work with some success in the mid 1960's and again
in the mid 1980's. Their work is described in this prospectus in the section
entitled, THE MOUNT HINTON PROPERTY. In 2002 we conducted a program to further
evaluate a potential ore reserve on the property. We employed Archer Cathro &
Associates (1981) Ltd., a local geology firm, in 2003 to continue the
exploration and provide a comprehensive report on the claims. We plan to carry
out further exploration in 2004, to further define the potential of an ore
reserve on the claims.
We sometimes refer to our claims collectively in this prospectus as the "Mount
Hinton Property." Our claims are registered in the Mining Recorders Office in
the Mayo Mining District of the Yukon Territory and give us the right to explore
and mine minerals from the property covered by the claims. The primary
exploration target is a 1,000 foot wide and two-mile long mineralized zone
containing a series of veins and faults. A "fault" is a fracture or fracture
zone in rock along which there has been displacement of the two sides relative
to each other and parallel to the fracture. This zone containing veins and
faults crosses the top of twin peaked Mount Hinton which has elevations of
approximately 6,500 ft. above sea level. Our ability to conduct surface
exploration at this latitude and elevation is limited to the period each year
from late May to late October. Our plan in 2004 is to continue the exploration
of the mineralization zone and the identified quartz veins to target the
location for a "collar" or "portal" for underground exploration. The "collar" or
"portal" is the entrance of an underground work site. If the results are
successful, we will commence underground exploration. Once we are able to work
underground, work can be carried out at the site year round.
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SECURITIES BEING OFFERED. We have 8,815,508 common shares issued and outstanding
as of April 1, 2004. The selling shareholders listed in this prospectus are
offering up to 4,469,483 shares of our common stock. We will not receive any of
the proceeds of the shares sold by the selling shareholders. Currently, there is
no market for the shares of our stock and it is possible that no market will
develop. We intend to include our shares for quotation on the "over-the-counter"
("OTC") Bulletin Board maintained by the National Association of Securities
Dealers, Inc., at which time the shares may be sold at prevailing market prices
or privately negotiated prices. Prior to inclusion for quotation on the OTC
Bulletin Board, selling shareholders will sell, if at all, at a fixed price of
$0.50 per share. This price per share does not necessarily bear any relationship
to our book value, asset value or past operating results, nor is it an
indication of the expected trading price of our shares. We cannot assure you
that we will be successful in obtaining any listing. There is no minimum number
of shares that must be sold in this offering.
RISK FACTORS. You should read the "RISK FACTORS" section as well as the other
cautionary statements throughout this prospectus so that you understand the
risks associated with an investment in our securities. Any investment in our
common stock should be considered a high-risk investment because of the nature
of mineral exploration. Only investors who can afford to lose their entire
investment should invest in these securities.
USE OF PROCEEDS. The selling shareholders are selling shares of common stock
covered by this prospectus for their own account. We will not receive any of the
proceeds from the sale of these shares by the selling shareholders. We are
paying all of the expenses relating to the registration of the selling
shareholders' shares, but we will not pay any commissions or expenses of the
actual sale of the shares.
DEFINED TERMS. A number of technical and industry terms, as well as other
defined terms used in this prospectus, are defined in the GLOSSARY at the end of
this prospectus. Generally, we have provided a definition of each such defined
term in the first instance that it is used in this prospectus and again in the
GLOSSARY.
-5-
SUMMARY FINANCIAL DATA
The following summary financial data should be read in conjunction with
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS and the audited CONSOLIDATED FINANCIAL STATEMENTS OF YUKON GOLD for
the year ended April 30, 2004 and the audited year ended April 30, 2003 and the
notes thereto included elsewhere in this Prospectus.
Consolidated Balance As at As at
Sheet Data April 30, 2004 April 30, 2003
Cash $ 134,925 $20,756
Total Assets $ 148,986 $38,180
Liabilities $ 30,686 $ 7,154
Total Stockholders' Equity $ 118,300 $31,026
Consolidated Statement of For the For the
Operations Data year ended year ended
April 30, 2004 April 30, 2003
Revenue $ Nil $ Nil
Net Loss $ (442,906) $(124,783)
RISK FACTORS
1. WE DO NOT HAVE AN OPERATING BUSINESS
Yukon Gold has rights in certain mineral claims located in the Yukon
Territories, Canada. To date we have done limited exploration of the property
covered by our mineral claims. We do not have a mine or a mining business of any
kind. There is no assurance that we will develop an operating business in the
future.
2. WE HAVE NO SOURCE OF OPERATING REVENUE AND EXPECT TO INCUR SIGNIFICANT
EXPENSES BEFORE ESTABLISHING AN OPERATING COMPANY, IF WE ARE ABLE TO ESTABLISH
AN OPERATING COMPANY AT ALL.
Currently, we have no source of revenue. We have no operating history upon which
an evaluation of our future success or failure can be made. Our ability to
achieve and maintain profitability and positive cash flow is dependent upon:
- further exploration of the property covered by our mineral claims
and the results of that exploration;
-6-
- our ability to raise the capital necessary to conduct this
exploration and preserve our interest in the mineral claims; and
- our ability to establish a mining operation, if there are
economically viable mineral deposits covered by our mineral claims,
and then operate this mine in a profitable manner.
Because we have no operating revenue, we expect to incur operating losses in
future periods as we continue to expend funds to explore the Mount Hinton
Property. Failure to raise the necessary capital to continue exploration will
cause us to go out of business and you could loose all of your investment.
3. WE HAVE NO KNOWN GOLD OR OTHER MINERAL RESERVES AND WE CANNOT ASSURE YOU THAT
WE WILL FIND SUCH RESERVES.
We have not identified any gold or other commercial mineral reserves on the
property covered by our mineral claims and we cannot guarantee that we will ever
find any. If we do not find commercially viable mineral reserves we will
probably be unable to continue doing business. If this were to occur you could
lose part or all of your investment.
4. IF WE DEVELOP A GOLD OR OTHER MINERAL RESERVE, THERE IS NO GUARANTEE THAT
PRODUCTION WILL BE PROFITABLE.
Even if we find a gold or other commercial minerals reserve, there is no
assurance that we will be able to mine them or that a mining operation would be
profitable. If we do not find gold or other commercial minerals you could loose
part or all of your investment.
5. WE WILL NEED ADDITIONAL FINANCING FOR EXPLORATION TO DETERMINE IF THERE IS
GOLD OR OTHER COMMERCIAL MINERALS ON OUR CLAIMS.
Our viability as an operating business will depend on our ability to raise
additional capital. We have no commitments from others to provide additional
funds to us, except as described herein. If we are unable to raise additional
capital or secure financing, we will be unable to continue and you could lose
your entire investment.
6. WE MUST MAKE REGULAR ONGOING INVESTMENTS IN ORDER TO MAINTAIN OUR MINERAL
CLAIMS.
We have an option agreement with a private syndicate, known as the Hinton
Syndicate, to acquire an interest in the mineral claims described in this
prospectus. Our agreement with the Hinton Syndicate requires us to make regular
ongoing investments totaling CDN$5.6 or US$4.256 million in order to earn a 75%
interesting the claims and we must invest CDN$1,500,000 or US$1,140,000 plus
option payments to earn any interest at all. If we fail to make these
investments, we will not earn an interest in the mineral claims. This could
result in the loss of all or part of your investment. See DESCRIPTION OF
BUSINESS - Agreement With Hinton Syndicate.
-7-
]
7. WEATHER INTERRUPTIONS IN THE YUKON TERRITORY MAY DELAY OUR PROPOSED
EXPLORATION OPERATIONS.
Weather factors will significantly affect our exploration efforts. We can only
work above ground at the Mount Hinton Property from late May until early October
of each year, depending upon how early snowfall occurs. Once we are able to work
underground, we plan to conduct our exploration year round, however, it is
possible that snow or rain could cause roads leading to our claims to be
impassible. This could delay work on the project, increase our costs and limit
our ability to meet the requirements of the agreement with the Hinton Syndicate,
which would adversely affect the value of your investment and our ability to
continue in business.
8. WE ARE HIGHLY DEPENDENT UPON OUR OFFICERS AND DIRECTORS AND WE HAVE NO
DEFINITIVE AGREEMENTS WITH THEM. BECAUSE OF THEIR INVOLVEMENT IN OTHER SIMILAR
BUSINESSES WHICH MAY BE COMPETITORS, THEY MAY HAVE A CONFLICT OF INTEREST.
None of our officers or directors work for us on a full-time basis. There are no
proposals or definitive arrangements to compensate our officers and directors or
to engage them on a full-time basis. They each rely on other business activities
to support themselves. Three of our directors are officers or directors of other
companies in similar exploration businesses. Another director, through his
company, performs general contracting work for other companies in the mineral
exploration business in the Yukon Territory. Such business activities may be
considered a conflict of interest because these individuals must continually
make decisions on how much of their time they will allocate to our business as
against their other business projects, which may be competitive, or where they
will allocate new business opportunities. Also, we have no key man life
insurance policy on any of these individuals. The loss of one or more of these
officers or directors could adversely affect our ability to carry on business
and could reduce the value of your investment.
9. WE COULD ENCOUNTER REGULATORY AND PERMITTING DELAYS.
We could face delays in obtaining permits to operate on the property covered by
the claims. Such delays, could jeopardize financing , if any is available, in
which case we would have to delay or abandon work on the Mount Hinton Property.
This could result in the loss of all or part of your investment.
-8-
10. THE NUMBER OF UNREGISTERED AND FREELY TRADABLE SHARE OF OUR COMMON STOCK
COULD DEPRESS THE TRADING PRICE OF OUR COMMON STOCK.
The outstanding shares of common stock covered by this prospectus represent
approximately 49.50% of the 8,815,508 common shares outstanding as of the date
of this prospectus. Of the shares not covered by this prospectus, 275,076 shares
may be re-sold by their respective holders at any time without registration
under the Securities Act of 1933 and the remaining 4,070,949 will be eligible to
be sold after they have been held for one year. Consequently, a large number of
shares could become available for sale if a trading market develops and this
could cause the trading price of our shares to decline, thereby adversely
affecting the value of your investment.
11. GOING CONCERN QUALIFICATION
Our auditors have included a "going concern" qualification in their report to
the effect that we are an exploration stage company and have no established
sources of revenue. In the event that we are unable to raise additional capital
and locate ore reserves, as to which there can be no assurance, we may not be
able to continue our operations. In addition, the existence of the "going
concern" qualification in our auditor's report may make it more difficult for us
to obtain additional financing. If we are unable to obtain additional financing,
you may lose all or part of your investment.
12. THERE IS NO MARKET FOR OUR SECURITIES AT THIS TIME AND THERE ARE PENNY STOCK
SECURITIES LAW CONSIDERATIONS THAT COULD LIMIT YOUR ABILITY TO SELL YOUR SHARES.
Our common stock does not have a public market. We do not know if a public
market for our common stock will exist in the future. Our common stock is
considered a "penny stock" and the sale of our stock by you will be subject to
our having a market maker for our common stock and the "penny stock rules" of
the Securities and Exchange Commission. The penny stock rules require
broker-dealers to take steps before making any penny stock trades in customer
accounts. As a result, any market that develops for our shares could be illiquid
and there could be delays in the trading of our stock which would negatively
affect your ability to sell your shares and could negatively affect the trading
price of your shares.
13. COMPANY'S CONTINGENT LIABILITY FOR POSSIBLE VIOLATION OF REGISTRATION
REQUIREMENTS OF SECURITIES ACT.
Subsequent to the filing with the Securities and Exchange Commission of the
registration statement of which this Prospectus is a part, Yukon Gold borrowed
from a single accredited investor $56,250.00 subject to a promissory note which
permitted the holder of the note to convert the note into shares of common stock
and warrants of the Company at a future date and which also permitted Yukon Gold
to convert the note into shares of common stock and warrants at a futures date.
Yukon Gold believed that this transaction was exempt from registration under
Section 5 of the Securities Act of 1933 (the "Act") by reason of the provisions
of Section 4(2) of the Act and Regulation D, Rule 506 thereunder. It is possible
- - but not conceded by Yukon Gold - that such exemptions from registration were
not available to Yukon Gold because of the public nature of the registration
statement.
Should no exemption from Section 5 registration have been available for such
transaction, Yukon Gold could be held liable under Section 12(1) of the Act to
the note holder for the purchase price of the note, with interest thereon, less
any income received thereon, upon the tender of the note to the Company, or for
damages if the note holder no longer owns the note. Such an action would have to
be brought in a court within one year after the purchase of the note. To the
extent that any such actions should be filed and successfully litigated, Yukon
Gold's operations, plans and ability to finance business operations would be
adversely affected.
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DETERMINATION OF OFFERING PRICE
We arbitrarily determined the price of the stock in this offering. The offering
price is not an indication of, and is not based upon, any measure of the value
of our common stock. The offering price bears no relationship to our book value,
assets or earnings, or any other recognized criteria of value. The offering
price should not be regarded as an indicator of the future market price of the
securities.
DILUTION
We will likely be required to issue more common stock from treasury in order to
raise additional capital. Currently, 399,731 shares may be issued to holders of
warrants that are exercisable at any time prior to September 30, 2004. We also
have 100,000 warrants outstanding that can be exercised on or before May 15,
2005. In addition, we issued a promissory note on May 14, 2004, which contains
an equity conversion feature that would entitle the holder of the note to
convert the note into 75,000 shares of common stock and 37,500 warrants to
purchase common stock at an exercise price of US$ 1.25 per share. The conversion
right does not become effective prior to the later of: (i) the one-year
anniversary of the note or (ii) such time as Yukon Gold has registered a portion
of its shares under the Securities Act of 1933 and is a reporting company under
the Securities Exchange Act of 1934. If common stock is issued to raise
additional capital or from the exercise of warrants it will result in the
dilution of the existing shareholders.
DESCRIPTION OF BUSINESS
We are an exploration stage company. Our objective is to exploit our interest in
the mineral claims located in the Mayo Mining District of the Yukon Territory,
Canada, which we hold through our wholly owned subsidiary, YGC. All of our
exploration activities are undertaken through YGC. There is no assurance that
commercially viable mineral deposits exist on any of our mineral claims and
further exploration will be required before a final evaluation as to economic
and legal feasibility is determined.
AGREEMENT WITH HINTON SYNDICATE
Our mineral claims are held by our wholly-owned subsidiary, YGC, subject to the
terms of an agreement with the Hinton Syndicate (the "Hinton Syndicate
Agreement"), a private syndicate consisting of four individuals. Two of our
directors, J. Malcolm Slack and Richard Ewing, are members of the Hinton
Syndicate, owning 16% and 51% respectively of the Hinton Syndicate. Pursuant to
the Hinton Syndicate Agreement, YGC must make scheduled cash payments and
perform certain work commitments to earn up to a 75% interest in the mineral
claims, subject to a 2% net smelter return royalty in favor of the Hinton
Syndicate, as further described below.
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The scheduled payments are as follows:
Property Option Payments
Due Date Date Paid
July 7, 2002 July 7, 2002 (Cash) CDN$25,000 US$ 16,246
July 7, 2003 Jan. 23, 2004 (Cash) CDN$75,000 US$ 57,683
(payment date was extended to May 2004)
July 7, 2004 Jan. 31, 2004 CDN$150,000 US$114,242
(payment made through
issuance of shares and warrants)
July 7, 2005 Not Paid CDN$150,000 US$114,000
July 7, 2006 Not Paid CDN$200,000 US$150,000
Total CDN$600,000 US$452,171
====================================
Work Program (Exploration Expenses)
Between July 7, 2002 and July 6, 2003 CDN$ 150,000 US$ 114,000
These expenses were incurred prior to
July 6, 2003
Between July 7, 2003 and July 6, 2004 CDN$ 250,000 US$ 190,000
These expenses were incurred prior to
December 31, 2003
Between July 7, 2004 and July 6, 2005 CDN$ 325,000 US$ 247,000
(CND$310,000 incurred to date; CND $ 15,000
remains to be incurred.)
Between July 7, 2005 and July 6, 2006 CDN$1,500,000 US$1,140,000
Not incurred.
Between July 7, 2006 and July 6, 2007 CDN$2,775,000 US$2,109,000
Not incurred.
Total CDN$5,000,000 US$3,800,000
====================================
In some cases, payments made to service providers include amounts advanced to
cover the cost of future work. These advances are not loans.
-11-
As described above, the Hinton Syndicate Agreement requires us to invest up to
CDN$5.6 or US$4,256,000 million in order to obtain a 75% interest in the mineral
claims that are the subject of the agreement. We must spend a total of CDN$1.5
million or US$1,140,000 (plus option payments, as described above) in order to
obtain a 25% interest in the mineral claims. We must spend a total of CDN$2.5
million or US$1,900,000 on exploration in order to obtain a 50% interest in the
mineral claims. Upon spending a total of CDN$5.0 million or US$3,800,000 on
exploration (plus option payments of CDN$600,000 or US$456,000), we will hold a
75% interest in the mineral claims. If we reach an ownership interest of 50% but
fail to reach the next threshold of 75%, our interest will automatically drop to
45% and the Hinton Syndicate will be entitled to seek alternative sources of
funding. Our maximum exploration expense of CDN$5.0 million or US$3,800,000
(plus option payments of CDN$600,000 or US$456,000) must be made by July 7, 2007
pursuant to our agreement with the Hinton Syndicate. All of the option payments
due to be made to the Hinton Syndicate through the date hereof have been made
through payments of cash or issuance of common shares and warrants of Yukon
Gold. The Hinton Syndicate Agreement permits us to satisfy option payments to be
made to the Hinton Syndicate by issuing stock, at the discretion of the Hinton
Syndicate. All of the exploration expenses scheduled to be funded as provided in
the Hinton Syndicate Agreement through the date hereof have been funded.
The Hinton Syndicate Agreement contemplates that upon the earlier of: (i)
discovery of economically minable mineral reserves or (ii) investment of CDN$5.6
million or US$4,256,000 by us, our relationship with the Hinton Syndicate will
become a joint venture for the further development of the property. Under the
terms of the Hinton Syndicate Agreement, we would control the joint venture.
Once the 75% interest is earned, as described above, we have a further option to
acquire the remaining 25% interest in the mineral claims for a further payment
of CDN$5,000,000 or US$3,800,000.
The Hinton Syndicate Agreement provides that the Hinton Syndicate receive a 2%
"net smelter returns royalty." In the event that we exercise our option to
buy-out the remaining 25% interest of the Hinton Syndicate (which is only
possible if we have reached a 75% interest, as described above) then the net
smelter return royalty would become 3% and the Hinton Syndicate would retain
this royalty interest only. The "net smelter return royalty" is a percentage of
the gross revenue received from the sale of the ore produced from our mine less
certain permitted expenses.
The Hinton Syndicate Agreement entitles the Hinton Syndicate to appoint one
member of YGC's board of directors.
The Hinton Syndicate Agreement pertains to an "area of interest" which includes
the area within ten kilometers of the outermost boundaries of the 186 mineral
claims, which constitute our mineral properties. Either party may stake claims
outside the 186 mineral claims, but each must notify the other party if such new
claims are within the "area of interest." The non-staking party may then elect
to have the new claims included within the Hinton Syndicate Agreement.
The Hinton Syndicate Agreements provides both parties (YGC and Hinton Syndicate)
with rights of first refusal in the event that either party desires to sell or
transfer its interest.
Under the Hinton Syndicate Agreement, the Hinton Syndicate is responsible for
any environmental liability claims arising from the status of the property prior
to the effective date of the Hinton Syndicate Agreement.
-12-
Under the terms of the Hinton Syndicate agreement three of the syndicate members
are entitled to bid on work we propose to carry out and if their price is
competitive are entitled to do the work. There is no requirement in the Hinton
Syndicate Agreement that these parties perform development work. One of these
syndicate members is Richard Ewing, a director of our company. Details of the
amounts paid to Mr. Ewing and his company are set out in the section titled,
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
REGULATIONS GOVERNING MINING IN CANADA
The mining industry in Canada operates under both federal and provincial or
territorial legislation governing the exploration, development, production and
decommissioning of mines. Such legislation relates to such matters as the method
of acquisition and ownership of mining rights, labor, health and safety
standards, royalties, mining and income taxes, exports, reclamation and
rehabilitation of mines, and other matters. The mining industry in Canada is
also subject to legislation at both the federal and provincial or territorial
levels concerning the protection of the environment. Legislation imposes high
standards on the mining industry to reduce or eliminate the effects of waste
generated by extraction and processing operations and subsequently deposited on
the ground or emitted into the air or water. The design of mines and mills, and
the conduct of extraction and processing operations, are subject to regulatory
restrictions. The exploration, construction, development and operation of a
mine, mill or refinery require compliance with environmental legislation and
regulatory reviews, and the obtaining of land use and other permits, water
licenses and similar authorizations from various governmental agencies.
Legislation is in place for lands under federal jurisdiction or located in
certain provinces and territories that provides for the preparation of costly
environmental impact assessment reports prior to the commencement of any mining
operations. These reports require a detailed technical and scientific assessment
as well as a prediction of the impact on the environment of proposed mine
exploration and development.
Failure to comply with the requirements of environmental legislation may result
in regulatory or court orders being issued that could result in the cessation,
curtailment or modification of operations or that could require the installation
of additional facilities or equipment to protect the environment. Violators may
be required to compensate those suffering loss or damage by reason of mining
activities and the violators, including our officers and directors, may be fined
or, in some cases, imprisoned if convicted of an offense under such legislation.
Provincial and territorial mining legislation establishes requirements for the
decommissioning, reclamation and rehabilitation of mining properties that are
closed. Closure requirements relate to the protection and restoration of the
environment and the protection of public safety. Some former mining properties
must be managed for a long time following closure in order to fulfill regulatory
closure requirements. The cost of closure of existing and former mining
properties and, in particular, the cost of long-term management of open or
closed mining properties can be substantial.
Mineral exploration is subject to the Canadian Mineral Tenure Act Regulation.
This act sets forth rules for: locating claims, posting claims, working claims
and reporting work performed. We will be required to obtain permits from the
Yukon Territory Ministry of the Environment before we commence mining operations
at the Mount Hinton Property.
-13-
With respect to the legislation, rules and regulations referred to above, we
believe that we, and the Mount Hinton Property itself, are currently in
compliance in all material respects with applicable legislation, rules and
regulations.
The Company does not foresee having to expend material amounts in order to
comply with environmental laws during the exploration phase of its operations.
The Company is obligated to restore surface disturbances created by exploration.
These restoration efforts typically involve the back filing of trenches, pits,
or other excavations created for purposes of exploration.
Underground exploration, which the Company contemplates in the future, will
require additional cost related to the storage of excavated material. Until the
Company knows the amount of material it will have to store, it cannot estimate
this cost. There will be material costs of environmental compliance if the
Company develops a mine in the future. However, the Company cannot reasonably
estimate that environmental compliance cost at this time.
We have carried out all reclamation work, required by applicable regulations,
where our exploration disturbed the surface of the ground and to the best of our
knowledge we are in full compliance with all rules and regulations. The cost of
compliance with all rules and regulations during the exploration stage of the
project is not expected to exceed CDN $10,000 or US $7,400 per year.
It is not possible to estimate the cost of meeting the rules and regulations for
a mining operation at this time. Those costs will only be determined when a mine
plan and the required studies are completed to apply for a mining permit.
GOVERNMENT REQUIREMENTS FOR MAINTENANCE OF CLAIMS
The Yukon Territorial Government has granted our interest in the 186 mineral
claims described in this prospectus. To maintain the claims in good standing, we
must expend not less than CDN$100 per year per claim for exploration and
development work and file assessment reports with the Mayo Mining District
Mining Recorder demonstrating such expenditure. As of the date of this
prospectus, we have undertaken enough work on 166 of the mineral claims to keep
them in good standing until November 1, 2012. The remaining 20 claims expire on
September 9, 2004 unless further work in done or we pay CND$100 per claim. We
plan to file several years' additional assessment work on these claims in 2004.
GOVERNMENT PERMITTING
The Company is committed to complying and, to its knowledge, is in compliance
with all governmental and environmental regulations. Permits from a variety of
regulatory authorities are required for many aspects of mine operation and
reclamation. Our exploration work is subject to the Mining Land Use Regulations
of the Yukon Quartz Mining Act. This Act requires us to obtain permits prior to
performing significant exploration programs. We are currently conducting
exploration under Class III Permit LQ00106, which is valid until August 7, 2008
and the work being carried out in 2004 can be conducted under this permit. No
other permits are required at this time.
-14-
The Company cannot predict the extent to which future legislation and regulation
could cause additional expense, capital expenditures, restrictions, and delays
in the development of the Company's Canadian properties, including those with
respect to mining claims. The Company's activities are not only subject to
extensive federal, and territorial regulations controlling the mining of and
exploration for mineral properties, but also the possible effects of such
activities upon the environment. Streams draining the property make their way to
the Mayo River which contains wildlife. We will be obligated to take steps to
ensure that such streams draining the property do not become contaminated as a
result of our activities on the property. We are not aware of any environmental
problems on the property as of the date of this prospectus. We have commenced
the required baseline studies of drainage courses originating on our property in
anticipation of underground development.
THE MOUNT HINTON PROPERTY
Please note that the Glossary at the end of this Prospectus contains definitions
for the geological and other specialized terms used in this section and, where
feasible, these definitions have been incorporated in the text of this section.
PROPERTY LOCATION AND DESCRIPTION
The Mount Hinton Property consists of 186 contiguous, unsurveyed mineral claims
located in central Yukon Territory, immediately southeast of Keno City at
latitude 62o 52'N and longitude 135o 07'W. The claims were staked under the
Yukon Quartz Mining Act and are registered in the Mayo Mining District in the
name of our wholly owned subsidiary, Yukon Gold Corp ("YGC"). A full Yukon
mineral claim is 51.7 acres in size and, because of the complex staking history,
many of the Mount Hinton claims are not full size and the property covers an
aggregate area of about 9,300 acres.
Placer mining claims (rights to mine metals and minerals from alluvial material
above the bedrock) held by third parties in upper Thunder Gulch may compromise
our surface rights on our claims identified as Hinton II - 1, 2, 4 and 6, which
comprise approximately 2% of our total claims. As of the date of this
prospectus, no effort has been made to acquire these surface rights.
The property has no known environmental liabilities and we have completed all
required reclamation of all surface disturbances to date and will continue to as
further exploration takes place.
ACCESS, INFRASTRUCTURE, LOCAL RESOURCES
The Mount Hinton Property lies about 6 miles southeast of Keno City, a largely
abandoned mining town, 37 miles northeast of the Village of Mayo and 233 miles
north of Whitehorse, the territorial capital of the Yukon Territories in Canada.
Mayo is accessible from Whitehorse by a chip sealed highway and an all season
gravel road links Keno City with Mayo. To view a map of the location of the
Mount Hinton Property, please look at the map field as Exhibit 99.2 to Yukon
Gold's registration statement on file with the SEC.
-15-
[MAP OF YUKON TERRITORY]
[OBJECT OMITTED]
The Mount Hinton Property encompasses the east-west lying twin peaks of Mount
Hinton with a saddle between the two peaks and a steep cliff face on the north
side that falls off into McNeil Gulch. Mount Hinton is the headwaters of a
number of drainage systems including Duncan Creek, Thunder Creek, McNeil Creek,
Granite Creek and Keystone Creek. Elevations range from 3,900 feet along stream
valley floors to over 6,500 feet at the peak of Mount Hinton. The main area of
exploration interest lies along the north-facing wall of the cliff at the
headwaters of McNeil Gulch.
The Mount Hinton Property is served by six miles of good four-wheel drive road
that extends from Keno City to an exploration camp located at the west end of
the claim group in the Duncan Creek Valley. A rough four-mile long four-wheel
drive road accesses the north side of the property via Thunder Gulch. Five miles
of four-wheel drive road were constructed in 2003 to connect the north and south
peaks of Mount Hinton with both the Duncan Creek and Thunder Gulch roads. A
rough bulldozer trail along Keystone and Granite Creeks links the south part of
the property to a government maintained road at the west end of Mayo Lake. The
south and east parts of the property are best accessed by helicopter at present.
The Mount Hinton Property is relatively well served by local infrastructure.
Mayo is the local supply and services center and a number of residents in the
area have surface and underground mining skills. An under utilized hydroelectric
facility is located near Mayo and transmission lines extend to Keno City.
The lower parts of the property are normally explorable from late May until
early October although underground exploration could proceed year round. Higher
elevations on the claim block are snow free from late June to late September.
-16-
PROPERTY HISTORY
The exploration history of the Mount Hinton Property was compiled by our
consultant, Archer, Cathro & Associates (1981) Ltd. ("Archer Cathro"), from the
Yukon Geological Survey, Minfile database, and other historical reports written
by various authors between 1968 and 2003
Sporadic prospecting, both for gold and silver, was carried out with the
earliest recorded work dating back to the early 1920's including both surface
and underground exploration. No shipments of ore have been reported.
United Keno Hill Mines (UKHM) controlled all or substantially all of the Mount
Hinton Property claims beginning in 1964 and continuing through 2002. Commencing
in 1964 and continuing through to 1971, UKHM carried out prospecting,
geochemical sampling, geological mapping, hand trenching, stripping, sinking of
an exploration shaft, and bulldozer trenching resulting in the discovery of over
40 veins that carried varying grades of gold and silver. Each vein discovered
was assigned a number as discovered, however, our work to date indicates that
some vein numbers may be the extension of other veins with different numbers.
DEFINITION OF TERMS
o Prospecting - The visual inspection of surface exposure of the
mineral deposits on the property.
o Geochemical Sampling - The collection of soil, silt, vegetation or
rock samples for analysis as a guide to the presence of areas of
anomalous mineral of metal content in bedrock.
o Geological mapping - In mineral exploration, the collection of
geological data such as the description and orientation of various
types of bedrock.
o Hand Trenching/ Bulldozer Trenching - Removing the loose surface
material to expose a vein.
o Stripping - Removal of material over an extended portion of a vein.
o Exploration Shaft - a shaft sunk to carry out underground
exploration.
In 1980 UKHM drilled 74 holes on the number 5 vein with limited success due to
the frozen overburden. In 1984 an underground exploration program was
undertaken, again with limited success due to a delayed start and weather
conditions. At that time, 322 feet of drift and crosscut were completed on the
number 19 vein.
-17-
DEFINITION OF TERMS
o Overburden - Loose soil, sand, gravel, broken rock, etc. that lies
above the bedrock.
o Drift - A horizontal opening in or near a mineralized body and
parallel to the long dimension of the vein or mineralized body.
o Drifting - The act of excavating a drift.
o Crosscut - An underground passage excavated across an ore body to
test its width and value.
Further exploration work on the number 1 vein was carried out by two other
exploration companies in 1981 and 1987. No other exploration work was carried
out on the property until 2002.
UKHM ceased operations in 1989. The Hinton Property claim remained in their
control or controlled by various predecessors until 1998 when some of the claims
were allowed to lapse.
The Hinton Syndicate, a private group, staked claims peripheral to the main area
of interest at Mount Hinton in 1998 and optioned them to our subsidiary, Yukon
Gold Corp. ("YGC") in 2002. Later in 2002 UKHM claims covering the core area of
interest on Mount Hinton were allowed to lapse and YGC restaked the open ground.
YGC completed additional staking in August of 2003 and the property now consists
of 186 full and fractional claims covering a total area of about 9,300 acres.
All the significant UKHM discoveries in the area have now been consolidated into
the present land holding.
Between August and October of 2002, YGC carried out a preliminary evaluation of
the Mount Hinton Property with prospecting, limited hand trenching and
re-sampling of old workings as well as excavator trenching and road building.
In August and September of 2003 an excavator trenching program supervised by our
consultants, Archer Cathro, was carried out on the ridge trending north from the
north peak of Mount Hinton to test this area for the possible westerly extension
of the McNeil Gulch veins. Excavator trenching was also performed on the 5 Vein
and a total of 5 miles of new road was constructed to enable vehicle access to
previously inaccessible parts of the property. In addition, the Duncan Creek and
Thunder Gulch access roads were upgraded to all weather four-wheel drive status.
Upon completion of the program, reclamation was carried out as required by the
Land Use Permit and all equipment was demobilized.
GEOLOGICAL SETTING
The Mount Hinton Property lies in the southeast part of the Keno Hill mining
camp, part of the 350 mile long Tombstone Gold Belt. Between 1913 and 1989, over
6,000 tons of silver, 32,000 tons of lead and 19,000 tons of zinc were extracted
from the extensive and numerous vein faults in the Keno Hill area.
-18-
DEPOSIT TYPES
The geological setting and style of mineralization defined to date on the Mount
Hinton Property are the same as those for the vein faults that supplied
silver-lead zinc ore to a number of successful underground and surface mines in
the Keno Hill mining camp.
Two types of vein mineralization are represented in the district, as quartz
lenses in zones within northeast trending faults in which considerable amounts
of gold and silver were introduced. This is the most common type of precious
metal mineralization on the Mount Hinton Property.
The second type of vein mineralization in the Keno Hill mining camp is a later
stage of iron, manganese, sulphur, antimony, lead, zinc, silver and cadmium
enrichment hosted by siderite rather than quartz. This style of vein fault is
responsible for the bulk of the historical silver-lead-zinc production from the
Keno Hill area. The 1 Vein is the only showing of this type that has been
discovered to date at the Mount Hinton Property.
The most favorable host rocks for vein formation are thick bedded quartzites and
greenstones. The principal economic lodes are located in three structural
settings:
o at the junction of two or more vein faults,
o at the junction of a fault and subsidiary fracture, and
o in massive quartzites and greenstones at or near where the vein
faults pass into thin bedded quartzite.
DEFINITION OF TERMS
o Vein Faults - A term used in the Keno Hill mining camp to describe
quartz vein material and associated fault gouge that are contained
within a fault zone.
o Quartz Lenses - A glassy silicate and common rock forming mineral
(SiO2)
o Siderite - A light or dark brown mineral of the calcite group
(FeCO3).
o Quartzite - A metamorphosed sandstone or rock composed of quartz
grains so completely cemented with secondary silica that the rock
breaks across or through the grains rather than around them.
o Greenstones - A general term applied to any compact dark green,
altered or metamorphosed mafic igneous rock (e.g. gabbro or
diorite).
o Fracture - A general term for any break in a rock, whether or not it
causes displacement.
-19-
MINERALIZATION
Descriptions of mineralization on the Mount Hinton Property are based primarily
on data generated through sporadic exploration conducted by UKHM between 1965
and 1984. This work and the results obtained are summarized in a series of
reports filed for claim assessment credit with the Mayo District Mining Recorder
and are available for public view. All assays and analytical data resulting from
the early work are historical in nature. No rigorous or systematic metallurgical
testing has been carried out on the Mount Hinton gold-silver mineralization and
no resource estimates have been made to date. All creeks draining the property
contain anomalous placer gold concentrations to some degree. Duncan Creek and
Thunder Gulch, in particular, have supported long term placer mining operations.
DEFINITION OF TERMS
o Assay - To analyse the proportions of metals in a specimen of rock
or other geological material. Results of a test of the proportions
of metals in a specimen of rock or other geological material.
o Metallurgical Testing - A general term for a number of mechanical or
chemical processes that are employed to test the amenability of
separating metals from their ores.
o Placer Gold - Gold occurring in more or less coarse grains or flakes
and obtainable by washing the sand, gravel, etc. in which it is
found. Also called alluvial gold.
o Placer Mining - The extraction and concentration of heavy metals or
minerals (usually gold) from alluvial deposits by various methods,
generally using running water.
VEIN DESCRIPTION
Reports on previous work and reported by our consultants Archer Cathro describe
as many as 50 relatively well mineralized gold and silver veins or discrete
mineralized vein float trains (A general term for the downslope distribution of
float below a mineralized zone) have been discovered to date on the Mount Hinton
Property. They are identified by a number that reflects their order of
discovery.
UKHM discovered the majority of these veins during work carried out in the mid
1960's and mid 1980's.
The headwall of McNeil Gulch that forms an east-west trending cliff face of
Mount Hinton contains most of the important vein occurrences discovered to date
on the Mount Hinton property. Gold bearing vein faults are confined to a 1,000
foot wide, two-mile long belt that coincides with the trend of the cliff face.
The following is a description of four of the veins that were sampled in this
area of the cliff face.
The 19 VEIN was exposed for 80 feet and channel samples at 2 foot intervals
returned an average value of 0.19 oz/ton gold and 2.0 oz/ton silver over
an average width of about 5.6 feet. The host structure has been traced
through mapping, hand trenching and air photo analysis for a distance of
1200 feet.
-20-
The 21 VEIN was exposed for a total length of 72 feet and channel sampled at
two-foot intervals. Weighted average grade was 1.24 oz/ton gold and 19.3
oz/ton silver over an average width of 3.4 feet.
The 24 VEIN was channel sampled at 2 foot intervals, yielding an average assay
of 0.51 oz/ton gold and 45.1 oz/ton silver over a 1.6 foot average width
and an 80 foot length.
The 42 VEIN returned an average grade of 0.68 oz/ton gold and 6.9 oz/ton for a
6 to 8 inch average width over a 40 foot distance from channel samples
spaced at five-foot intervals.
EXPLORATION
This section describes methodology and the generalized results of exploration on
the Mount Hinton Property for the period from 1965 to 2003. Earlier work had
apparently been performed but no documentation is available, although anecdotal
references to early work are contained in UKHM files. Work performed in 2002 and
2003 was carried out by Junior Mine Services Ltd. and Archer, Cathro &
Associates (1981) Limited, respectively, on behalf of YGC. Exploration is
described in assessment reports submitted to the Mayo District Mining Recorder
and are available for public viewing.
PROSPECTING AND TRENCHING
The primary exploration tool employed by UKHM from 1965 to 1968 was prospecting
for mineralized float in overburden. This work was carried out during the course
of geological mapping by exploration geologists. Mineralized float was evaluated
by small hand pits or foxholes (a small pit excavated in overburden by hand to
expose bedrock) at first and, when a bedrock source was located, the vein was
exposed along strike (the course or bearing of the outcrop of an inclined bed,
vein or fault plane on a level surface; the direction of a horizontal line
perpendicular to the dip) as far as it was feasible. In the case where a vein
crossed alternating overburden filled gullies and ridges on the steep cliff
face, the gullies were ignored and the tops of the ridges were trenched.
Explosives were needed to penetrate permafrost and areas with very coarse
overburden. Because of limited bedrock exposure on the valley floors and walls,
attention was focused on the steepest slopes. Early discoveries of gold rich
float and bedrock showings in the headwall of McNeil Gulch further limited the
scope of the exploration program elsewhere on the property.
UNDERGROUND EXPLORATION
A 120 foot adit (a horizontal or nearly horizontal passage driven from the
surface for the purpose of the exploration or mining of a mineralized zone or
ore body) in the cliff face of McNeil Gulch was driven in 1941 but little public
record of this work remains. In 1968 an inclined prospect shaft was sunk to a
depth of 25 feet on the 21 Vein.
-21-
An aditwas driven on the 19 Vein in early July 1984. An attempt to drift on the
21 Vein was carried out at the same time but work was curtailed on October 7
after an avalanche of heavy snow. A total of 162.5 feet of drift and 159.4 feet
of crosscut were excavated on the 19 Vein. Neither the adit nor the crosscuts
intersected well mineralized vein material.
EXCAVATOR TRENCHING
An excavator trenching program was started in 2002 and completed in 2003 to
explore the northwest extension of the main vein trend along a northerly
trending ridge that forms the north side of the north peak of Mount Hinton as
well as testing the 5 Vein on the west side of the south peak of Mount Hinton.
Numerous quartz veins and strong vein faults with an orientation similar to the
well mineralised structures in the headwall of McNeil Gulch were exposed and
sampled in the trenching on the north ridge. Although they are for the most part
only weakly mineralised with gold and silver at this location, the veins exhibit
good continuity and width.
The 5 Vein is by far the strongest structure found to date in the Mount Hinton
area. Excavator and bulldozer trenching in 2003 tested the 5 Vein at 80 to 130
foot intervals over a 560 foot distance down the west flank of the south peak of
Mount Hinton. Only low grade mineralization was encountered.
The 2002 and 2003 trenching programs were only partially successful at exposing
quartz veins in the two target areas because the veins occur in low areas, which
at the high elevations of Mount Hinton are mantled with an almost impenetrable
blanket of ice-cemented overburden and soil. In addition, the highest priority
target areas in the headwall area of McNeill Gulch are too steep to employ the
use of heavy equipment and other methods will have to be employed to perform an
effective evaluation of the economic potential of this part of the property.
GEOCHEMICAL SURVEYS
(See "geochemical sampling" definition)
UKHM carried out systematic soil sampling over much of the Mount Hinton Property
in 1965, 1966 and 1968. Samples were generally taken at 100 foot intervals on
lines spaced 300 feet apart. The Mount Hinton veins commonly contain lead
minerals although significant gold mineralization has also been discovered in
the absence of appreciable lead minerals.
YGC carried out orientation geochemical sampling in 2003 along newly constructed
bulldozer trails in the western part of the Mount Hinton property. A total of 98
soil samples were collected at 164 foot intervals along the road cuts
Twelve significant soil geochemical anomalies were described by our consultants,
Archer Cathro, that warrant further follow up.
-22-
GEOPHYSICAL SURVEYS
A VLF-EM (an abbreviation for the very low frequency-electromagnetic geophysical
survey technique) geophysical survey (in mineral exploration, the collection of
seismic, gravitational, electrical, radiometric, density or magnetic data to aid
in the evaluation of the mineral potential of a particular area) was carried out
over the 1 Vein area in 1986. Eight anomalous features were identified. Three of
these correspond closely to areas of interest. The first is the south-east trend
of the 1 Vein established by UKHM hand trenching in the 1960's and further
explored by others in 1986 and 1987. The second corresponds with the north-east
trending lead geochemical anomaly that possibly represents the vein fault source
of the silver rich float found in 1965. A third parallels the second anomalous
trend about 650 ft to the south-east where the 1986 soil geochemical survey
returned high silver and lead response.
PERCUSSION DRILLING (drilling method by which the drill bit falls by force or is
driven by force into the bedrock)
A total of 5,839 feet of air track percussion drilling was carried out in 1980
on the 5 Vein. Holes were drilled to the north across the projected trace of the
5 Vein at dips varying from vertical to -70o. Air track drilling for collection
of overburden and shallow bedrock samples was the standard exploration technique
utilized by UKHM in the Keno Hill camp. Sampling was routinely carried out at 5
foot or 10 foot intervals from material carried up to surface by compressed air.
The program was apparently not as successful on the 5 Vein as elsewhere in the
Keno Hill mining camp because the machine was not powerful enough to drive
through the deep, frozen overburden that was encountered. Of the 74 holes, 24
intersected vein material.
DIAMOND DRILLING (the act or process of drilling boreholes using bits inset with
diamonds as the rock cutting tool. The bits are rotated by various types and
sizes of mechanisms motivated by electric, compressed air or internal combustion
engines or motors.)
Two short diamond drill holes in 1987 tested the 1 Vein. The first hole was lost
at 180 feet due to caving ground. It was recollared (the start or beginning of a
drill hole or the mouth of an underground working entrance) at the same location
and completed to a 266 foot depth. Both holes were drilled to the north at -50o.
No significant mineralization was intersected.
FURTHER EXPLORATION
Further exploration on the property will be subject to our ability to raise
sufficient capital to carry out the work. The Mount Hinton Property, however,
has received very little modern exploration and the full economic potential
remains largely untested. Historical work carried out in the 1960's was
principally prospecting with follow up hand trenching, effectively limiting
discovery to areas of relatively light overburden cover that occupy only about
10% of the claim group.
-23-
Historical exploration at Mount Hinton was limited in effect by logistical and
technical problems as well as a relatively narrow scope based on contemporary
knowledge about gold-silver deposit geology and metallurgy. The setting, style
and grade of gold and silver mineralization discovered to date on the property
are very encouraging and an aggressive program of further work is fully
warranted.
The best exploration targets appear, on the basis of present knowledge, to be in
the north facing cliff wall of McNeil Gulch where a large number of relatively
high grade quartz veins are present. Unfortunately, the extremely rugged local
topography limits testing by surface diamond drilling to relatively long holes
collared on the opposite side of the ridge. The first phase of additional work
will therefore focus on improving the exploration database across the property
as well as laying a geological, geochemical, and geophysical foundation for a
second phase of underground exploration that will enable an evaluation of the
McNeil Gulch veins by close spaced underground diamond drilling. We plan to have
a qualified mining consultant perform a thorough review of the first phase
surface exploration and geotechnical data before underground exploration is
carried out.
Exploration for new precious metal occurrences will be guided by relatively
close spaced soil sampling in areas that remain untested by historical
geochemical surveys. In addition, previously defined lead soil geochemical
anomalies will be resampled on a detailed basis to provide definitive targets
for follow up.
Because the mineralised vein faults often contain conductive graphitic zones in
addition to vein quartz, geophysical methods will be useful in tracing the host
structures beneath overburden cover. Orientation surveys incorporating a number
of geophysical techniques will be carried out on the advice of a qualified
geophysical consultant. If this test work is successful, systematic geophysical
exploration will be carried out over target areas that are identified by
prospecting and geochemical surveys, especially where overburden cover is
extensive.
Two small bulk samples of near surface gold mineralization collected in 1967
underwent preliminary metallurgical testing but the results were inconclusive.
Sample material provided from drill core will be more representative than
material collected from surface trenches and preliminary testing on composites
of drill core coarse rejects will be carried out under the direction of a
qualified metallurgical consultant as a part of the first phase work. If
warranted, a larger bulk sample will be collected from underground exposures of
vein material during the second phase of the program.
We will require a significant amount of capital to complete a full evaluation of
the Mount Hinton Property. If we are not successful in raising the required
capital we may not be successful in carrying out sufficient exploration to
evaluate the potential of an economic ore body and we may not earn the 75%
interest or any interest in the Mount Hinton Property.
-24-
CLAIM HOLDINGS
CLAIM NAME AND # GRANT NO. EXPIRY DATE REGISTERED OWNER % OWNED NTS #'S
R Hinton 1 - 2 YC00401 - YC00402 2011/11/01 Yukon Gold Corp 100.00 105M14 F
R Hinton 3 - 30 YC00403 - YC00430 2011/11/01 Yukon Gold Corp 100.00 105M14
R Hinton 31 - 32 YC00431 - YC00432 2007/11/01 Yukon Gold Corp 100.00 105M14 F
R Hinton 33 - 34 YC00433 - YC00434 2007/11/01 Yukon Gold Corp 100.00 105M14
R Hinton 35 YC01091 2011/11/01 Yukon Gold Corp 100.00 105M14 P
R Hinton II 1 - 11 YC01126 - YC01136 2011/11/01 Yukon Gold Corp 100.00 105M14
R Hinton II 12 YC01137 2010/11/01 Yukon Gold Corp 100.00 105M14
R Hinton II 13 - 22 YC01138 - YC01147 2011/11/01 Yukon Gold Corp 100.00 105M14
R Hinton II 23 YC01148 2010/11/01 Yukon Gold Corp 100.00 105M14
R Hinton II 24 - 26 YC01149 - YC01151 2011/11/01 Yukon Gold Corp 100.00 105M14
R Hinton III 1 - 7 YC01152 - YC01158 2008/11/01 Yukon Gold Corp 100.00 105M14
R Hinton III 8 YC01159 2007/11/01 Yukon Gold Corp 100.00 105M14
R Hinton III 9 - 14 YC01160 - YC01165 2008/11/01 Yukon Gold Corp 100.00 105M14
R Hinton IV 1 YC01424 2009/11/01 Yukon Gold Corp 100.00 105M14
R Hinton IV 2 - 6 YC01425 - YC01429 2008/11/01 Yukon Gold Corp 100.00 105M14
R Hinton V 1 - 4 YC01417 - YC01420 2008/11/01 Yukon Gold Corp 100.00 105M14
R Hinton V 5 YC01421 2008/11/01 Yukon Gold Corp 100.00 105M14 P
R Hinton V 6 YC01422 2008/11/01 Yukon Gold Corp 100.00 105M14
R Hinton V 7 YC01423 2007/11/01 Yukon Gold Corp 100.00 105M14
R Key 1 - 10 YC10609 - YC10618 2012/11/01 Yukon Gold Corp 100.00 105M14
R Key 11 - 12 YC10619 - YC10620 2011/11/01 Yukon Gold Corp 100.00 105M14
R Key 13 YC10621 2012/11/01 Yukon Gold Corp 100.00 105M14
R Key 14 YC10622 2011/11/01 Yukon Gold Corp 100.00 105M14
R Key 15 YC10623 2012/11/01 Yukon Gold Corp 100.00 105M14
R Key 16 YC10624 2009/11/01 Yukon Gold Corp 100.00 105M14
R Key 17 YC10625 2012/11/01 Yukon Gold Corp 100.00 105M14
R Key 18 YC10626 2009/11/01 Yukon Gold Corp 100.00 105M14
R Key 27 - 28 YC10627 - YC10628 2009/11/01 Yukon Gold Corp 100.00 105M14
R Key 29 YC10629 2010/11/01 Yukon Gold Corp 100.00 105M14
R Key 30 YC10630 2009/11/01 Yukon Gold Corp 100.00 105M14
R Key 31 - 34 YC10631 - YC10634 2012/11/01 Yukon Gold Corp 100.00 105M14
R Key 35 - 42 YC10635 - YC10642 2009/11/01 Yukon Gold Corp 100.00 105M14
R Key 43 YC10643 2011/11/01 Yukon Gold Corp 100.00 105M14
R Key 44 YC10644 2012/11/01 Yukon Gold Corp 100.00 105M14
R Key 45 YC10645 2011/11/01 Yukon Gold Corp 100.00 105M14
R Key 46 YC10646 2012/11/01 Yukon Gold Corp 100.00 105M14
R Key 47 YC10647 2011/11/01 Yukon Gold Corp 100.00 105M14
R Key 48 YC10648 2012/11/01 Yukon Gold Corp 100.00 105M14
R Key 49 - 50 YC10649 - YC10650 2011/11/01 Yukon Gold Corp 100.00 105M14
R Key 57 - 62 YC10651 - YC10656 2011/11/01 Yukon Gold Corp 100.00 105M14
R Key 63 - 82 YC10657 - YC10676 2012/11/01 Yukon Gold Corp 100.00 105M14
R Key 89 YC10677 2011/11/01 Yukon Gold Corp 100.00 105M14
R Key 90 - 92 YC10678 - YC10680 2012/11/01 Yukon Gold Corp 100.00 105M14
R Key 100 - 101 YC10693 - YC10694 2012/11/01 Yukon Gold Corp 100.00 105M14 F
R Key 102 - 103 YC10695 - YC10696 2012/11/01 Yukon Gold Corp 100.00 105M14
R Key 104 YC10697 2012/11/01 Yukon Gold Corp 100.00 105M14 F
Moon 1 YC10957 2004/09/09 Yukon Gold Corp 100.00 105M14 F
Moon 2 - 12 YC10958 - YC10968 2004/09/09 Yukon Gold Corp 100.00 105M14
Red 1 - 9 YC10948 - YC10956 2004/09/09 Yukon Gold Corp 100.00 105M14
-25-
CRITERIA(S) USED FOR SEARCH:
CLAIM STATUS: ACTIVE & PENDING OWNER(S): YUKON GOLD CORP REGULATION TYPE: QUARTZ
Total claims selected: 186
Left column indicator legend: Right column indicator legend:
R - Indicates the claim is on one
or more pending renewal(s). L - Indicates the Quartz Lease. D - Indicates Placer Discovery
P - Indicates the claim is pending. F - Indicates Full Quartz C - Indicates Placer Codiscovery
fraction (25+ acres)
P - Indicates Partial Quartz B - Indicates Placer Fraction
fraction (<25 acres)
*These records were obtained from the Yukon Territory Mining Recorder records.
GOLD PRICE VOLATILITY
The volatility of the market price of gold is illustrated by the following table
which sets forth for the periods indicated the high and low of the London PM
(afternoon) fix of the price of gold in U.S. dollars per ounce (rounded to the
nearest dollar), as published by Kitco Precious Metals Company of Canada at
www.Kitco.com. Gold Prices Per Ounce (US$)
Year High Low
---- ---- ---
1998 $ 313 $ 273
1999 $ 325 $ 252
2000 $ 312 $ 263
2001 $ 293 $ 255
2002 $ 349 $ 277
2003 $ 412 $ 321
On March 31, 2004, the London PM gold price fix was US$423.70 per ounce.
FISCAL YEAR
Our fiscal year end is April 30.
TRANSFER AGENT
Our Transfer Agent and Registrar for the Common Stock is Olde Monmouth Stock
Transfer Co. Inc., Atlantic Highlands, New Jersey.
EMPLOYEES
We have no full-time employees. We rely primarily upon consultants to accomplish
our exploration activities. We are not subject to a union labor contract or
collective bargaining agreement. Management services are provided by our
executive officers on an "as-needed" basis. We have no employment agreement with
any of our managers and we carry no key-man life insurance.
-26-
STOCK OPTION PLAN
On October 28, 2003, we adopted the 2003 Stock Option Plan (the "Plan") under
which our officers, directors, consultants, advisors and employees may receive
stock options. The aggregate number of shares of common stock that may be issued
under the plan is 5,000,000. The purpose of the Plan is to assist us in
attracting and retaining selected individuals to serve as directors, officers,
consultants, advisors, and employees of Yukon Gold and YGC who contribute to our
success, and to achieve long-term objectives that will inure to the benefit of
all shareholders through the additional incentive inherent in the ownership of
our common stock. Options granted under the plan will be either "incentive stock
options", intended to qualify as such under the provisions of section 422 of the
Internal Revenue Code of 1986, as from time to time amended (the "Code") or
"unqualified stock options". For the purposes of the Plan, the term "subsidiary"
shall mean "Subsidiary Corporation," as such term is defined in section 424(f)
of the Code, and "affiliate" shall have the meaning set forth in Rule 12b-2 of
the Exchange Act.
The Plan will be administered by the Board of Directors who will set the terms
under which options are granted. No options have been granted under the Plan as
of the date of this prospectus.
COMPETITION
There is aggressive competition within the industry to discover and acquire
properties considered to have commercial potential. We compete for the
opportunity to participate in promising exploration projects with other
entities, many of which have greater resources than we do. In addition, we
compete with others in efforts to obtain financing to explore and develop
mineral properties.
HISTORY
We were incorporated in the State of Delaware on May 31, 2000 under the name,
"Realdarts International, Inc." The company was formed to effect a plan of
merger with a Florida corporation which was, at the time, negotiating to acquire
marketing rights to an electronic scoreboard system for the game of darts. On
August 4, 2000, we changed our name to "Optima 2000, Inc." and on August 29,
2000 we again changed our name to "Optima International, Inc." On September 27,
2000 we changed the name again to "Optima Global Corporation." On February 2,
2001, we merged with the Florida corporation that was pursuing the rights to the
electronic scoreboard and we were the surviving corporation. In connection with
that merger, we issued shares of our common stock to the shareholders of the
Florida Corporation on a one-for-one basis. We terminated the plan to acquire
the rights to the electronic scoreboard system after determining that there was
an insufficient market for this product and that financing could not be
obtained. On November 27, 2002, we again changed our name to "Take 4, Inc." with
no specific business plan.
On October 29, 2003 we changed our name to "Yukon Gold Corporation, Inc." and on
November 1, 2003 we acquired 3,000,000 shares of YGC, which as of the date of
this prospectus, represent all of the outstanding shares of YGC.
On November 10, 2003 we completed two (2) private placements raising CDN$100,000
or US$75,838 and US $175,000.
-27-
On November 14, 2003, Stafford Kelley, J. Malcolm Slack, Peter Slack, Richard
Ewing, and Warren Holmes were appointed to the Board of Directors and J. Paul
Hines, the former President and Director, resigned.
On November 17, 2003 we accepted the assignment from YGC of ten Subscription
Agreements from 10 subscribers for the purchase of common stock of YGC. By
accepting the assignment of these Subscription Agreements, we agreed to issue
1,027,932 shares of our common stock and 399,731 warrants for the purchase of
our common stock in consideration of CDN$448,464.50 or US$340,106.55 and
US$50,000.00. Each such warrant entitles the holder to purchase one common share
of Yukon Gold for CDN$1.00 or US$0.76 on or before September 30, 2004.
On January 23, 2004 we issued 300,000 common shares and 100,000 warrants to the
members of the Hinton Syndicate for CDN$150,000 or US$114,242.19 in lieu of the
cash "option payment" due on July 7, 2004 under the Hinton Syndicate Agreement.
Each warrant entitles the holder to purchase one common share for CDN$1.00 or
US$0.76 on or before May 15, 2005.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
PLAN OF OPERATIONS
We require additional capital to implement our exploration program at the Mount
Hinton Property. We will try to raise money to complete our obligation under the
Hinton Syndicate option agreement, either through a public offering or private
placements of our securities or through loans (or both).
Our plan of operations for the next twelve months is to continue exploration
activities at the Mount Hinton Property. We are required to spend CND$325,000
prior to July 7, 2005 in carrying out further exploration on the Mount Hinton
Property. 95% of this obligation has been funded and work is underway. The
option payments to the Hinton Syndicate are paid through July 7, 2005. Please
see the section headed "DESCRIPTION OF BUSINESS - Agreement with Hinton
Syndicate" for full details of our obligations to earn an interest in the
mineral claims.. We plan to undertake additional exploration beyond that
required in the Hinton Syndicate Agreement and we intend to borrow money from
certain accredited investors in order to finance these activities. This
borrowing will carry an option to convert to equity at a future time, but not
sooner than the effectiveness of this Registration Statement. If we are
successful in raising sufficient capital we hope to carry out most or all of the
work described under Further Exploration in the MOUNT HINTON PROPERTY section of
this prospectus in the next twelve months. We are current in all of our
obligations under Hinton Syndicate Option Agreement.
At present we have sufficient cash on hand to complete the filing of this
prospectus and meet our exploration, general and administration expenses for the
next twelve months, however we must raise more capital by May 15, 2005 to carry
out further exploration programs to maintain our interest in the Mount Hinton
property.. We must have the amount of exploration expenses required under the
Hinton Syndicate Agreement for 2005 in hand by May 15, 2005. If we are unable to
raise sufficient capital to meet our obligation under the Hinton Syndicate
Agreement we could loose our interest in the property or a portion thereof.
-28-
The following is a list of the exploration expenses incurred prior to March 31,
2004:
EXPENSE ITEM COST PER ITEM
- ------------ -------------
ACCOMMODATION $7,363.44
ASSAYING $5,484.39
ASSESSMENT FILING $4,455.00
CLAIM STAKING $20,326.00
DRAFTING & PERMITTING $859.06
EQUIPMENT RENTAL $33,956.04
FIELD CAMP $8,150.00
FIELD OFFICE $975.24
FIELD SUPPLIES $5,553.02
FIELD WAGES $95,922.26
GEOGRAPHICAL REPORTS $23,710.54
INSURANCE $10,761.00
MEALS $2,937.71
MOB & DEMOB $2,500.00
PERMITTING $100.00
PROJECT ADMINISTRATION $10,100.00
PROPERTY PAYMENTS $250,000.00
REPORTS $9,275.00
ROAD BUILDING $81,900.00
SUPERVISION $3,871.17
TRAVEL $5,654.00
TRENCHING $39,200.00
TOTAL CDN $623,053.87
US$ $464,099.72
We expect to contract all work on the Mount Hinton Property to independent
contractors in the foreseeable future until we have discovered a commercial ore
body or abandoned the property. We have no permanent employees. We anticipate
that we will require substantial financing in order to proceed with our plan of
exploration for an economic ore body. We presently do not have any commitments
in place to finance this exploration and there is no assurance that the
necessary financing will be obtained. If we are unable to secure new financing,
then we will not be able to carry out the required exploration and may not be
able to maintain our interest in the Mount Hinton Property.
There are several non-operating mines in the area as well as proven ore
deposits. Over the next twelve months we hope to negotiate joint ventures or
other agreements that would enable the development of a new milling facility (or
acquisition of an existing milling facility) in the area to service several
deposits in cooperation with other interested parties. No specific arrangement
is in place and there can be no assurance that they will develop.
-29-
CASH REQUIREMENTS
Yukon Gold borrowed $56,250 from an individual lender on May 13, 2004. Yukon
Gold issued to this lender a promissory note which permitted the holder of the
note to convert the note into shares of common stock and warrants of the Company
at a future date and which also permitted Yukon Gold to convert the note into
shares of common stock and warrants at a futures date. Yukon Gold believed that
this transaction was exempt from registration under Section 5 of the Securities
Act of 1933 (the "Act") by reason of the provisions of Section 4(2) of the Act
and Regulation D, Rule 506 thereunder. It is possible - but not conceded by
Yukon Gold - that such exemptions from registration were not available because
of the public nature of the registration statement. See "RISK FACTORS -
Company's Contingent Liability for Possible Violation of Registration
Requirements of Securities Act." Yukon Gold does not concede that no exemption
from registration was available, but the contingency exists that the lender
could seek - and might prevail in seeking - rescission of his loan and a return
of the loan amount plus interest thereon, less any income received thereon, and
attorney fees. If the note holder no longer owns the note, the note holder could
seek damages from Yukon Gold.
If such a demand for rescission is made, Yukon Gold estimates that it will have
to raise additional funds in the next twelve months to satisfy its cash
requirements to fulfill its obligations under the Hinton Syndicate Agreement.
Yukon Gold has made no effort to identify a possible source of such additional
capital and can give no assurance that it could be raised should it be required.
Should a demand for rescission be made by the note holder of the promissory
note, Yukon Gold would simultaneously oppose such a demand for rescission, seek
to raise additional capital to cover the contingency that rescissions might have
to be made, but continue to use its cash assets to pursue its business
objectives, as outlined herein.
DISCLOSURE CONTROLS AND PROCEDURES
In connection with our compliance with securities laws and rules, our
Secretary/Treasurer evaluated our disclosure controls and procedures on January
2, 2004. He has concluded that our disclosure controls and procedures are
effective. There have been no significant changes in our internal controls or in
other factors that could significantly affect these controls subsequent to the
date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of the date of this prospectus, there are 8,815,508 shares of common stock
outstanding, held by 578 shareholders of record. There is no public trading
market for our common stock. We have no outstanding options or convertible
securities. We have 499,731 warrants outstanding, 399,731 of which expire on
September 30, 2004 and 100,000 of which expire on May 15, 2005. Each warrant
entitles the holder to purchase one common share of Yukon Gold for a purchase
price of CDN$1.00 or US$0.76. In addition, we issued a promissory note on May
14, 2004, which contains an equity conversion feature that would entitle the
holder of the note to convert the note into 75,000 shares of common stock and
37,500 warrants to purchase common stock at an exercise price of US$ 1.25 per
share. The conversion right does not become effective prior to the later of (i)
the one-year anniversary of the note or (ii) such time as Yukon Gold has
registered a portion of its shares under the Securities Act of 1933 and is a
reporting company under the Securities Exchange Act of 1934. We are registering
4,469,483 shares of our common stock in this prospectus, which will be available
for sale when this prospectus becomes effective. We have outstanding 275,076
shares of common stock, not covered by this prospectus that could be sold by the
respective holders of such shares at any time pursuant to Rule 144 under the
Securities Act of 1933. In addition, we have outstanding 4,070,949 shares of
common stock that have been held by their respective holders for less than one
year and are considered "restricted" stock under Rule 144 and which cannot be
freely re-sold by their holders as of the date of this prospectus but which may
be freely re-sold at a future date. Of that amount 2,953,500 shares of common
stock is held by officers and directors of Yukon Gold and may be re-sold in the
future subject to the volume restrictions imposed by Rule 144 upon affiliates of
issuers. Other than the shares covered by this prospectus, we have not agreed to
register any of our securities under the Securities Act for sale by
shareholders. To date we have not paid any dividends on our common stock and we
do not expect to declare or pay any dividends on our common stock in the
foreseeable future. Payment of any dividends will depend upon our future
earnings, if any, our financial condition, and other factors deemed relevant by
the Board of Directors.
-30-
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS
BOARD OF DIRECTORS
The following individuals have agreed to sit on the Board of Directors of Yukon
Gold and were installed as directors on November 14, 2003. Each director will
serve until the next meeting of shareholders or until replaced. Each
individual's background is of material importance to Yukon Gold.
Warren Holmes Chairman of the Board of Directors and CEO
Stafford Kelley Director and Secretary/Treasurer
Peter Slack Director and President
Malcolm Slack Director
Richard Ewing Director
WARREN HOLMES, DIRECTOR, CHAIRMAN AND CEO
AGE: 62
Mr. Warren Holmes was born (l942), and raised in South Porcupine, Ontario,
Canada, the heart of the famous Porcupine Gold Mining Area.
He studied Mining Engineering at Queen's University, Kingston, Ontario and spent
summer vacations working as a miner in the mines of Red Lake, Manitouwadge, and
the Porcupine. Upon graduation in l964 he joined Noranda as an Engineer in
Training and worked through a series of engineering, supervising and management
roles to become General Superintendent of Mines for Pamour Porcupine in l973.
-31-
In l975, with Noranda's support, he returned to university and graduated from
the University of Western Ontario, London, Ontario in l977 with an MBA. He
continued working with Noranda and became Vice President & General Manager of
Pamour Porcupine Mines Limited in l984. He left Pamour and the Noranda Group in
l986 to join Falconbridge Limited as Manager of Mines in Sudbury. After working
through the senior management roles of Falconbridge - Sudbury, and Falconbridge
Kidd Creek, Warren was appointed Vice President - Canadian Nickel Operations,
and in l999 Senior Vice President - Canadian Mining Operations. Warren retired
from Falconbridge in July 2002 and joined the Boards of a number of junior
mining companies.
During his career Warren has been Chairman of the Ontario Mining Association,
The Canadian Industrial Program for Energy Conservation, MIRARCO - a research
and development arm of Laurentian University and the Timmins Economic
Development Corporation. He has been Vice Chair of The Mining Association of
Canada and on the Boards of numerous community, provincial and national
organizations.
Mr. Holmes is CEO, president and a director of Nuinsco Resources Limited and a
director of Inmet Mining Limited, Wallbridge Mining Limited and Jaguar Nickel
Limited. All of these companies are publicly held companies whose shares are
traded on Canadian exchanges and they are in the business of mining and
exploration. He is currently President of The Canadian Institute of Mining,
Metallurgy and Petroleum; Co-Chair of The Ontario Government's Mining Cluster
Initiative. Nuinsco Resources Limited is in the mineral exploration and
development business in North America. Mr. Holmes devotes the majority of his
time to Nuinsco and provides Yukon Gold with his expertise and time as needed.
From 1986 to July 2002 Mr. Holmes was employed by Falconbridge, and from March
1999 to July 2002 and was Senior Vice President of Canadian Mining Operations
for Falconbridge Limited. He took early retirement in July 2002 from
Falconbridge Limited and became President and CEO of Nuinsco Resources Ltd. and
is a member of their Board of Directors. He occupies these positions to the
present date. These companies are in the mining and exploration business. He has
been an officer and director of YGC since its inception in 2002 and an officer
and director of Yukon Gold since November 14, 2002.
STAFFORD KELLEY, DIRECTOR AND SECRETARY/TREASURER
AGE: 72
Mr. Kelley has been operating businesses he controlled since 1948. He was
actively involved in real estate and construction business up until 1980 and was
responsible for the development and financing of numerous major projects in the
Burlington and Oakville area as well as other parts of Ontario and in Florida.
Mr. Kelley spent a portion of his time during the 1960's and 1970's in sales and
management, training and public speaking.
In 1975, Mr. Kelley first became involved with publicly held companies that were
in the business of exploring for gold. He has been an officer and director of
several public companies and has participated in obtaining financing for these
companies.
-32-
In 1985, Mr. Kelley was responsible for the acquisition of an operating gold
mine in Gunnison, Colorado. During this time Mr. Kelley also was responsible for
the operation of a placer gold mine in Ely Nevada. In 1988, Mr. Kelley also
participated in the development of a gold mine in Smither, British Columbia and
a coalmine in Logan West Virginia. He has managed numerous exploration projects
in the United States and Canada.
In 1993, Mr. Kelley founded and is President of Medallion Capital Corp., which
specializes in taking companies public in Canada and the U.S. Medallion provides
consulting services covering securities and exchange reporting, financing, human
resources, mergers and acquisitions, public disclosure and investor relations.
The company is licensed under the Ontario Securities Commission and has been
involved in numerous financings for the companies it sponsors. Since its
inception in 1993 and continuing to the present date the operation of Medallion
Capital Corp. has been his principal occupation. He has been an officer and
director of YGC since its inception in 2002 and an officer and director of Yukon
Gold since November 14, 2002.
PETER SLACK, DIRECTOR AND PRESIDENT
AGE: 38
Mr. Peter Slack has over 20 years experience in the gold mining and exploration
industry. Mr. Slack began his career in 1984 as a director of JMS Mine
Contracting where he was involved in prospecting and open pit mine contracting
up until 1988. After graduating from Western University in 1988 with A B.E.Sc in
mechanical engineering he then went on as a junior engineer with Dynatec
Engineering Ltd. where he was involved in the engineering and design work for
the Craig Shaft sinking project for Falconbridge among many other specialized
hoisting and surface plant engineering projects for major mining companies. Mr.
Slack then began an engineering software design company (PJS Enterprises) and
consulted as business and engineering systems specialist. Some of the clients
include Inco, Breakwater Resources and Blackhawk Mining. He also developed
several specialized engineering software packages that were sold and distributed
to most of the major engineering firms across North America. In 1994 up to
present time Mr. Slack was director and president of Junior Mine Services Ltd.,
a family owned and operated company, and specialized in public company fund
raising and mine development. During this time Mr. Slack worked on fund raising
and development projects for Deak Resources Corporation, Nuinsco Resources Ltd.,
and BYG Natural Resources specifically on gold projects.
Mr. Slack also had past roles as Director and Vice President Engineering for
Omni Resources, Director of Conquest Yellowknife Resources Limited, Chief
Engineer and Director of Remote Droid Systems who developed specialized remote
control systems for large industrial and underground mining equipment. More
recently Mr. Slack was Director of IT for Concord Elevator and developed several
proprietary integrated product configuration software systems as well as
implemented a fully integrated MRPII system. Currently Mr. Slack is C.O.O and
Director of Agricultural Mineral Prospectors Inc., Director of GoldWright
Exploration Limited, President and Director of Junior Mine Services Ltd., and
Director of Yukon Gold Corporation. Mr. Slack also continues to develop
engineering and business software systems and is also an active music composer
and producer.
-33-
During the past 5 years Peter Slack has held the following positions:
- -Director, Agricultural Mineral Prospectors Inc., June 2001 -
Present, an agricultural mineral, mining and exploration company
selling products to organic farmers
- C.O.O & Vice-President, Agricultural Mineral Prospectors Inc., Aug
2003 - Present
- Director Information Services, Concord Elevator Inc., July 2000-Aug
2003, a manufacturer, installer and service provider in the elevator
business
- Manager Information Technology, Touchspeed Technologies, April 2000
- July 2000, an information technology company with its own
proprietary software
- Manager Technology Development, Concord Elevator Inc. Jan 1998 -
April 2000
- President Junior Mine Services Ltd. 1994 - Present, an exploration
and mine development consulting and contracting company
- Director, Junior Mine Services Ltd. 1984 - Present
- Director, Goldwright Exploration Limited 1998 - Present, a mineral
exploration company
- Sole Proprietor, P.J.S. Engineering and Technical Services 1990 -
Present, a consulting company
He has been an officer and director of YGC since its inception in 2002 and an
officer and director of Yukon Gold since November 14, 2002. Malcolm Slack, a
Director of Yukon Gold, is Peter Slack's father.
MALCOLM SLACK, DIRECTOR
AGE: 69
Malcolm Slack was born October 16, 1934 in Timmons Ontario. This is one of the
most prolific mining districts Canada.
He graduated from the Haileybury School of Mines in 1955 and continued his
education during his working career at Western Ontario University. He completed
a B.A. in Economics in 1963 and a M.B.A., in 1970.
Prior to graduating from the Haileybury School of Mines he worked for Hollinger
Consolidated Gold Mines Ltd, Mc Intyre Porcupine Mines Ltd, Canadian Johns
Manville Ltd, Bell & White Assay Labs and the Iron Ore Company of Canada.
From 1955 to 1960 he was employed by Rio Algom Mines Ltd, as Mine Engineer, Mine
Supervisor and Chief Industrial Engineer in development of large underground
mines.
-34-
He served as Production Superintendent at Steep Rock Iron Mines Ltd from 1963
until 1968 and was a Consulting Engineer while attending university to obtain
his M.B.A.
Following his graduation in 1970 he spent 10 years with Noranda Mines Ltd in
positions of:
V.P. of Development
V.P. of Mining
GM of Mining
VP & COO of subsidiaries
Pamour Porcupine Mines Ltd.
Noranda Mining
Orchan Mines Ltd
Mining Corporation of Canada Ltd
In 1980 Mr. Slack moved on to assist in the formation of the Lac Minerals
becoming Senior VP, Director and COO of the Lac Mining Group.
In 1982 he formed Junior Mine Services Ltd (JMS) with his sons, who are also
miners, providing financing, management and engineering services for new and
existing projects with economic or operating problems. JMS has been responsible
for bringing numerous mines to production and assisting in raising capital for a
number of junior mining companies. Mr. Slack turned his interest in this company
over to his children.
For the past five years, Malcolm Slack has been involved in the research and
development of agrominerals certified for the use by organic farmers to replace
chemical fertilizers not allowed in an organic product regime. This work has
been carried out by a new family enterprise called Agricultural Mineral
Prospector's Inc., an exploration and mining company. He has been an officer and
director of YGC since its inception in 2002 and an officer and director of Yukon
Gold since November 14, 2002.
Peter Slack, a Director of Yukon Gold, is Malcolm Slack's son.
RICHARD EWING, DIRECTOR
AGE: 47
Mr. Ewing was born and raised in Mayo, Yukon Territory, Canada. Following his
graduation from JV Clarke High School, he went directly into his family's
sawmill business known as Ewing Transport. Mr. Ewing took over the family
business in 1983, producing timber for the United Keno Hill Mine. He later
expanded the business into the general construction business.
Mr. Ewing is also the President of Ewing Transport Ltd., which was incorporated
in 1983. The company builds major public infrastructure facilities including
sewer and water facilities, roads, transmission lines and airstrips. The company
also maintains these facilities pursuant to contracts with Canadian governmental
entities.
In 1998, Mr. Ewing formed Silver Trail Contracting, a joint venture between
Ewing Transport Ltd. and Nacho Nyak Dun First Nation Development Corporation.
This company is active in the construction business for projects sponsored by
the First Nations Indian Band.
-35-
Mr. Ewing has served as a member of the Town Counsel of Mayo and as Deputy
Mayor.
Mr. Ewing coordinated a Heavy Equipment training course for Selkirk First Nation
and Nacho Nyak Dun First Nation. Yukon College and Yukon Territorial Government
- - Advanced Education worked closely with Mr. Ewing to ensure the education
program was a success. Ewing Transport Ltd. provided on-the job training to the
participants while completing two substantial contracts in the region for both
First Nations.
Mr. Ewing's principal occupation is President of Ewing Transport Ltd., the
position he has held since its inception in 1983 to the present date. Ewing
Transport Ltd. provides services to the mining industry as well as other
construction activities. He has been an officer and director of YGC since its
inception in 2002 and an officer and director of Yukon Gold since November 14,
2002.
EXECUTIVE COMPENSATION
Except for services provided by entities owned by some of our Officers and
Directors as more particularly set out in CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS no officer or director has received any other remuneration from us,
directly or indirectly, since our inception. Although we have no compensation
plan in existence, it is possible that we will adopt such a plan in the future
to pay or accrue compensation to our officers and directors for services related
to the operation of our business. Although we have no retirement, incentive,
defined benefit, actuarial, pension or profit-sharing programs for the benefit
of directors, officers or other employees, it is possible that we will adopt
such a plan in the future. Although we have no employment contract or
compensatory plan or arrangement with any of our directors, it is possible that
we will adopt such a plan in the future. We have a Stock Option Plan described
herein under that heading.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
We have 8,815,508 shares of common stock issued and outstanding. Consequently,
for purposes of describing shareholder voting rights, we have included in the
table below the number of common shares of Yukon Gold Corporation, Inc. (Yukon
Gold) held by the officers and directors of Yukon Gold. The last column of the
table below reflects the voting rights of each officer and/or director as a
percentage of the total voting shares (common shares of Yukon Gold).
-36-
- ---------------------------------------------------------------------------------------------------
NAME AND ADDRESS NUMBER OF SHARES OF PERCENTAGE OF CLASS HELD
OF BENEFICIAL OWNER (3) COMMON STOCK
- ---------------------------------------------------------------------------------------------------
Warren Holmes
371 Hart St. 750,000 8.5% of Yukon Gold
Timmon, Ontario P4N 6W9 Common Shares
Stafford Kelley
146 Trelawn Ave. 750,000 8.5% of Yukon Gold
Oakville, Ontario L6J 4R2 Common Shares
Peter Slack
5954 Winston Churchill Blvd. 150,000 1.7% of Yukon Gold
R.R. #1 Common Shares
Alton, Ontario L0N 1A0
Malcolm Slack
5920 Winston Churchill Blvd. (1) 768,000 8.7% of Yukon Gold
R.R. #1 Common Shares
Erin, Ontario N0B 1T0
Richard Ewing
Box 111 535,500 6.1% of Yukon Gold
Mayo, Yukon M0B 1M0 Common Shares
TOTAL 2,953,500 33.5%
As a group Management and the Directors own 33.5% of the issued and outstanding
shares of Yukon Gold.
Note (1): Malcolm Slack's wife and children, excluding Peter Slack, own 600,000
common shares of Yukon Gold. Mr. Slack owns 168,000 shares directly.
-37-
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Medallion Capital Corp., an Ontario, Canada Corporation is wholly owned by its
President, Stafford Kelley, who is also Secretary and Treasurer of Yukon Gold.
Medallion Capital Corp. and Stafford Kelley are registered with the Ontario
Securities Commission as a Limited Market Dealer. A Limited Market Dealer is
licensed to carry out trades in Securities that are exempt from registration
under the Ontario Securities Act or act as the underwriter in an initial public
offering.
Medallion Capital Corp. has provided office space, accounting services and other
administrative services to Yukon Gold and it's wholly owned subsidiary, YGC, and
was employed to raise capital for YGC.
Medallion Capital Corp. entered into a Consulting Services Agreement with Yukon
Gold on November 1, 2003. Under the terms of this agreement Medallion is
responsible to:
(a) prepare all necessary documents and other information required in
connection with registration and listing of the shares;
(b) complete a due diligence and valuation review of Yukon Gold in
connection with the registration of shares;
(c) advise Yukon Gold regarding financial planning and corporate
development;
(d) prepare or cause to be prepared a Business Plan and public relations
materials for Yukon Gold;
(e) prepare agreements for financing and other contracts and obtain the
company's legal counsel's approval of such agreements or contracts
prior to execution; and
(f) Carry out management and corporate record keeping functions.
-38-
Medallion Capital Corp. has invoiced the following amounts for these services
during the calander periods set out below:
BY YUKON GOLD CORP.
COMMISSIONS COMMISSIONS
YEAR EXPENSES (CDN) EXPENSES (US) (CDN) (US)
2002 18,071.10 12,607.16 17,771.51 12,398.15
2003 32,407.16 23,927.32 33,657.92 24,850.80
2004 TO APR 30/04 3,195.40 2,436.82 00 00
TOTALS 53,673.66 38,971.30 51,429.43 37,248.95
BY YUKON GOLD CORPORATION, INC.
YEAR EXPENSES (CDN) EXPENSES (US)
2003 20,121.87 14,856.67
2004TO APR 30/04 49,671.12 37,879.30
TOTALS 69,792.99 52,735.96
S. K. Kelley & Associates Inc. (SKK&A) is wholly owned by Stafford Kelley,
Secretary/Treasurer of Yukon Gold. SKK&A was paid a fee of CDN$5,000 or US$3,800
for loaning Yukon Gold CDN$100,000 or US$75,838, there was no interest or other
compensation. The money was advanced on November 1, 2003 and repaid in full on
November 19, 2003.
On June 28, 2004 Yukon Gold borrowed from Stafford Kelley and J.L. Guerra, Jr.
CND$100,000 and US$100,000, respectively, in order to meet certain milestone
obligations under the Hinton Syndicate Agreement. Mr. Kelley and Mr. Guerra each
will be compensated in the amount of CND$5,000 and US$5,000, respectively, as
the sole consideration for these loans and in lieu of the payment of any other
interest. These promissory notes are unsecured demand notes.
Peter Slack President and Director of Yukon Gold is a 40% owner of Junior Mines
Services with the balance of that company owned by his brother and sister.
In February 2003 YGC paid Junior Mines Services CDN$9,924.25 or US$6,449.34 for
preparations of drawings and a report on the 2002 exploration program on the
Mount Hinton Property.
Richard Ewing a Director of Yukon Gold is the President and sole owner of Ewing
Transport Ltd. YGC employed Ewing Transport Ltd. to provide equipment and
personnel to carry out road building, staking claims and other services related
to the exploration carried out in 2002 and 2003 on the Mount Hinton Property.
His company was paid CDN$37,285.63 or US$24,230.33 in 2002 and CDN$137,250.65 or
US$100,468.96 in 2003.
In July 2002 YGC entered into an option agreement to acquire an interest in the
Mount Hinton property from the Hinton Syndicate. Two of our directors, J.
Malcolm Slack and Richard Ewing are members of the Syndicate controlling 16% and
51% respectively of the syndicate. For full details of the agreement see
Description of Business, Agreement with Hinton Syndicate.
-39-
Malcolm Slack, a Director of Yukon Gold, received CDN$12,000, or US$9,139.37
plus 48,000 common shares of Yukon Gold and 16,000 warrants for shares of Yukon
Gold in consideration for his interest in the option payments made to the Hinton
Syndicate. The common shares were valued at CDN$0.4966 or US$0.3774 per share
and the Warrants at CDN$0.01 or US$0.0076 per warrant.
Mr. Ewing received CDN$38,250.00 or US$29,131.76, plus 153,000 common shares of
Yukon Gold and 51,000 warrants for shares of Yukon Gold in consideration for his
interest in the option payments made to the Hinton Syndicate. The common shares
were valued at CDN$0.4966 or US$0.3774 per share and the Warrants at CDN$0.01 or
US$0.0076 per warrant.
ORGANIZATION WITHIN THE LAST FIVE YEARS
We were incorporated in the State of Delaware on May 31, 2000 under the name,
"Realdarts International, Inc." The company was formed to effect a plan of
merger with a Florida corporation which was, at the time, negotiating to acquire
marketing rights to an electronic scoreboard system for the game of darts. On
August 4, 2000, we changed our name to "Optima 2000, Inc." and on August 29,
2000 we again changed our name to "Optima International, Inc." On September 27,
2000 we changed the name again to "Optima Global Corporation." On February 2,
2001, we merged with the Florida corporation that was pursuing the rights to the
electronic scoreboard and we were the surviving corporation. In connection with
that merger, we issued shares of our common stock to the shareholders of the
Florida Corporation on a one-for-one basis. We terminated the plan to acquire
the rights to the electronic scoreboard system after determining that there was
an insufficient market for this product and that financing could not be
obtained. On November 27, 2002, we again changed our name to "Take 4, Inc." with
no specific business plan.
On October 29, 2003 we changed our name to "Yukon Gold Corporation, Inc." and on
November 1, 2003 we acquired 3,000,000 shares of YGC, which as of the date of
this prospectus, represent all of the outstanding shares of YGC.
On November 10, 2003 we completed two (2) private placements raising CDN$100,000
(or US$75,838) and US $175,000.
On November 14, 2003, Stafford Kelley, J. Malcolm Slack, Peter Slack, Richard
Ewing, and Warren Holmes were appointed to the Board of Directors and J. Paul
Hines, the former President and Director, resigned.
On November 17, 2003 we accepted the assignment from YGC of ten Subscription
Agreements from ten individuals for the purchase of common stock of YGC. By
accepting the assignment of these Subscription Agreements, we agreed to issue
1,027,932 shares of our common stock and 399,731 warrants for the purchase of
our common stock in consideration of CDN$448,464.50 (or US$340,106.55) and
US$50,000.00. Each such warrant entitles the holder to purchase one common share
of Yukon Gold for CDN$1.00 or US$0.76 on or before September 30, 2004. Upon
acceptance of the assignment, YGC cancelled the shares recorded on its books for
the subscribers, leaving Yukon Gold as the sole shareholder.
-40-
In 2002 the Subscription Agreements representing a subscription price of
CDN$1.00 or US$0.76 per Unit, each Unit consisted of two common shares of the
Corporation (each a "Common Share") and one warrant of the Corporation (a
"Warrant"). The two Common Shares represent CDN$0.99 or US$0.75 of the per Unit
subscription price and each Warrant represents CDN$0.01 orUS$0.0076 of the per
Unit subscription price.
In 2003 the Subscription Agreements representing a subscription price of
CDN$1.50 or US$1.14 per Unit, each Unit consisted of three common shares of the
Corporation ("Common Share") and one warrant of the Corporation (a "Warrant").
The three Common Shares represent CDN$1.49 or US$1.13 of the per Unit
subscription price and each Warrant represents CDN$0.01 or US$0.0076 of the per
Unit subscription price.
On January 23, 2004 we issued 300,000 common shares and 100,000 warrants to the
members of the Hinton Syndicate for CDN$150,000 or US$114,242.19 in lieu of the
cash "option payment" due on July 7, 2004 under the Hinton Syndicate Agreement.
Each warrant entitles the holder to purchase one common share for CDN$1.00 or
US$0.76 on or before May 15, 2005.
In addition, on May 14, 2004, Yukon Gold borrowed US$56,250 from a single
accredited investor in the United States. Yukon Gold issued a promissory note to
the lender that provided that the promissory note could be converted into common
shares of the Company at US$0.745 per share and warrants to acquire common
shares at $0.01 per warrant. Each such warrant has an exercise price of $1.25
per share. The conversion right does not become effective prior to the later of
(i) the one-year anniversary of the note or (ii) such time as Yukon Gold has
registered a portion of its shares under the Securities Act of 1933 and is a
reporting company under the Securities Exchange Act of 1934. In addition, Yukon
Gold could require conversion of the promissory note into shares of common stock
and warrants. Because the promissory note was issued subsequent to the filing
with the Securities and Exchange Commission of this registration statement, it
is possible - but not conceded by Yukon Gold - that this transaction was not
exempt from registration under Section 5 of the Securities Act of 1933 (the
"Act") because of the public nature of the registration statement. Yukon Gold
believes the transaction to be exempt by reason of the provisions of Section
4(2) of the Act and Regulation D, Rule 506 thereunder. Should no exemption from
Section 5 registration have been available for such transaction, Yukon Gold
could be held liable under Section 12(1) of the Act to the note holder for the
purchase price of the note, with interest thereon, less any income received
thereon, upon the tender of the note to the Company, or for damages if the note
holder no longer owns the note. Such an action would have to be brought in a
court within one year after the purchase of the note. To the extent that any
such actions should be filed and successfully litigated, Yukon Gold's
operations, plans and ability to finance business operations would be adversely
affected.
-41-
DESCRIPTION OF SECURITIES
The following description is a summary of the material terms of our common
stock. This summary is subject to and qualified in its entirety by our Articles
of Incorporation as amended, our Bylaws and by the applicable provisions of the
State of Delaware law. Our authorized capital stock consists of 50,000,000
shares of Common Stock having a par value of $0.0001 per share. There is no
cumulative voting for the election of directors. There are no preemptive rights
to purchase shares. The holders of shares of common stock are entitled to
dividends, out of funds legally available therefore, when and as declared by the
Board of Directors. The Board of Directors has never declared a dividend and
does not anticipate declaring a dividend in the future. Each outstanding share
of common stock entitles the holder thereof to one vote per share on all matters
presented to the shareholders for a vote. In the event of liquidation,
dissolution or winding up of our affairs, holders are entitled to receive,
ratably, our net assets available to shareholders after payment of all
creditors. All of our issued and outstanding shares of common stock are duly
authorized, validly issued, fully paid, and non-assessable. To the extent that
our unissued shares of common stock are subsequently issued, the relative
interests of existing shareholders will be diluted.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares of common
stock offered hereunder by the selling shareholders. We will not pay any
commissions or any of the expenses of the selling shareholders related to the
sale of these shares.
DETERMINATION OF OFFERING PRICE
The selling shareholders will sell their shares at US$0.50 per share until our
securities are quoted on the OTC Bulletin Board or other specified market and
thereafter at prevailing market prices or at privately negotiated prices. This
price was chosen arbitrarily and should not be considered an estimation of
value.
SELLING SHAREHOLDERS AND PLAN OF DISTRIBUTION
The registration statement, of which this prospectus forms a part, relates to
our registration, for the account of the selling shareholders, of an aggregate
of 4,469,483 shares of common stock. We will not receive any of the proceeds
from the sale of these shares but we will bare the cost of this registration.
Selling shareholders will sell at a fixed price of $0.50 per share until our
common stock is quoted on the OTC Bulletin Board. Thereafter, the selling
shareholders will sell their common stock at prevailing market rates or
privately negotiated prices. The sale of the selling shareholders' shares by the
selling shareholders may be effected from time to time in transactions, which
may include block transactions by or for the account of the selling
shareholders, in the over-the-counter market or in negotiated transactions, or
through the writing of options on the selling shareholders' shares, a
combination of these methods of sale, or otherwise. Sales may be made at market
prices prevailing at the time of sale, or at negotiated prices. We are not aware
of any underwriting arrangements that have been entered into by the selling
shareholders. We will file a post-effective amendment to our registration
statement with the SEC if any selling shareholder enters into an agreement to
sell shares through broker-dealers acting as principals after the date of this
prospectus.
-42-
The selling shareholders, during the time each is engaged in distributing shares
covered by this prospectus, must comply with the requirements of Regulation M
under the Exchange Act. Generally, under those rules and regulations they may
not: (i) engage in any stabilization activity in connection with our securities,
and (ii) bid for or purchase any of our securities or attempt to induce any
person to purchase any of our securities other than as permitted under the
Exchange Act.
The selling shareholders and broker-dealers, if any, acting in connection with
these sales might be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act. Any commission they receive and any profit upon the
resale of the securities might be deemed to be underwriting discounts and
commissions under the Securities Act.
As of the date of this prospectus our securities have not been cleared for
purchase or sale in any of the states in the United States. Generally, our
securities may not be purchased or sold in any state unless they have been
registered or qualified for sale in such state or unless our securities, or the
purchase or sale of our securities, qualifies for an exemption from registration
in such state and we have met the requirements for such exemption. Following
effectiveness of this Registration Statement, we will endeavor to register or
otherwise qualify our securities in the states. Anyone desiring to purchase or
sell our securities must consult with their broker in advance to determine
whether such purchase or sale may be effected in their state.
Rules 15g-1 through 15g-9 promulgated under the Securities Exchange Act of 1934,
as amended, impose sales practice and disclosure requirements on NASD
broker-dealers who make a market in "a penny stock". A penny stock generally
includes any non-NASDAQ equity security that has a market price of less than
$5.00 per share. Our shares may be quoted on the OTC Bulletin Board, and the
price of our shares may fall within a range which would cause our shares to be
considered a "penny stock." The additional sales practice and disclosure
requirements imposed upon broker-dealers handling "penny stocks" may discourage
broker-dealers from effecting transactions in our shares, which could severely
limit the market liquidity of the shares and impede the sale of our shares in
the market.
Under the "penny stock" regulations, a broker-dealer selling "penny stocks" to
anyone other than an established customer or "accredited investor" (generally,
an individual with net worth in excess of $1,000,000 or an annual income
exceeding $200,000, or $300,000 together with his or her spouse) must make a
special suitability determination for the purchaser and must receive the
purchaser's written consent to the transaction prior to purchase, unless the
broker-dealer or the transaction is otherwise exempt.
In addition, the "penny stock" regulations require the broker-dealer to deliver,
prior to any transaction involving a "penny stock", a disclosure schedule
prepared by the Commission relating to the "penny stock" market, unless the
broker-dealer or the transaction is otherwise exempt. A broker-dealer is also
required to disclose commissions payable to the broker-dealer and the registered
representative and current quotations for the securities. Finally, a
broker-dealer is required to send monthly statements disclosing recent price
information with respect to the "penny stock" held in a customer's account and
information with respect to the limited market in "penny stocks."
All of the foregoing may affect the marketability of the securities.
-43-
Sales of any shares of common stock by the selling shareholders may depress the
price of the common stock in any market that may develop for the common stock.
At the time a particular offer of the shares is made by or on behalf of a
selling stockholder, to the extent required, a prospectus supplement will be
distributed which will set forth the number of shares being offered and the
terms of the offering, including the name or names of any underwriters, dealers,
or agents, the purchase price paid by any underwriter for shares purchased from
the selling stockholder and any discounts commissions, or concessions allowed or
re-allowed or paid to dealers, and the proposed selling price to the public.
Under the Securities Exchange Act of 1934, as amended, and its regulations, any
person engaged in the distribution of shares of common stock offered by this
prospectus may not simultaneously engage in market-making activities with
respect to the common stock during the applicable "cooling off" period prior to
the commencement of this distribution. In addition, and without limiting the
foregoing, the selling shareholders will be subject to applicable provisions of
the Exchange Act and its rules and regulations, including without limitation
Regulation M promulgated under the Exchange Act, in connection with transactions
in the shares, which provisions may limit the timing of purchases and sales of
shares of common stock by the selling shareholders.
The following table sets forth information known to us regarding ownership of
our common stock by each of the selling shareholders as of the date hereof and
as adjusted to reflect the sale of shares offered by this prospectus. None of
the selling shareholders has had any position with, held any office of, or had
any other material relationship with us during the past three years.
We believe, based on information supplied by the following persons, that the
persons named in this table have sole voting and investment power with respect
to all shares of common stock which they beneficially own. The last two columns
in this table assumes the sale of all of our shares offered in this prospectus.
However, we do not know whether the selling shareholders will sell all or less
than all of their shares. We will not receive any of the proceeds from the sale
of these shares. We estimate the cost of registering these shares at US$90,202
and we will bare the all the cost of this registration. The Selling Shareholders
will bear all costs related to the sale of their shares.
-44-
SELLING SHAREHOLDERS
NUMBER SHARES OWNED
LAST NAME FIRST NAME RELATIONSHIP WITH ISSUER OF SHARES AFTER OFFERING
Brocker Robert T. None 400,000 0
Chapman Kathy None 420,500 0
Cook Warren & Julie None 30,586 0
Deckard Kenneth None 20,850 0
Englemeier Duane None 40,678 0
Fulks Ray None 10,000 0
Guerra J.L. None 174,775 0
Gusler Melanie Ann None 157,070 0
Harris Mary Lucy None 420,000 0
Hope Kenneth None 27,240 0
Joranamo Trust* None 400,000 0
Knox Bruce A. None 101,784 0
Kruse Daniel J. None 400,000 0
Lacroix Lisa None 362,000 0
Lush Robert G. None 420,000 0
Mitton III Arthur G. None 10,500 0
Pittman III B.F. None 100,750 0
Reaume Bill None 420,000 0
Reaume Jason None 420,000 0
Yantis J. Mike None 132,750 0
======= =
TOTAL 4,469,483 0
--------- -
* The Joranamo Trust is controlled by Herminia Guerra for the benefit
of her grandchildren."
LEGAL PROCEEDINGS
We are not a party to any pending legal proceeding or litigation and none of our
property is the subject of a pending legal proceeding.
LEGAL MATTERS
The validity of the issuance of the common stock offered in this prospectus has
been passed upon by Kavinoky & Cook, LLP, Buffalo, New York.
EXPERTS
The financial statements of YGC for the six-month period ended October 31, 2003,
were reviewed by Schwartz Levitsky Feldman LLP and the financial statements for
the period from the date of inception (May 31, 2000) through April 30, 2003 were
audited by Schwartz Levitsky Feldman LLP, independent auditors, as set forth in
their report thereon appearing in this prospectus, and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing. The audited consolidated financial statements of Yukon Gold for
the year ended April 30, 2004 were audited by Schwartz Levitsky Feldman LLP, and
the consolidated financial statements for the year ended April 30, 2003 were
audited by Schwartz Levitsky Feldman LLP, independent auditors as set forth in
their report thereon appearing in this prospectus. Reports regarding the mineral
properties at the Mount Hinton site have been prepared for us by Junior Mine
Services, Inc. and by Archer, Cathro & Associates (1981) Limited and much of the
information about the Mount Hinton Property contained in this prospectus has
been obtained from those reports with their consent.
-45-
CHANGE IN AUDITORS
As of As of November 20, 2003, the board of Yukon Gold unanimously approved the
replacement of Rotenberg & Co., LLP with Schwartz Levitsky Feldman LLP. Yukon
Gold's principal independent auditors are Schwartz Levitsky Feldman LLP.
Prior to the consummation of the Share Purchase Agreement, when our company was
known as "TAKE-4, Inc." Rotenberg & Co., LLP acted as our independent auditors.
Following the consummation of the Share Purchase Agreement with YGC, Yukon Gold
chose to replace Rotenberg & Co., LLP with Schwartz Levitsky Feldman LLP because
Schwartz Levitsky Feldman LLP has experience and expertise with respect to the
Canadian mining industry and the requirements of U.S. GAAP and has acted as the
independent auditor for other publicly held companies that file reports with the
SEC. In addition, Schwartz Levitsky Feldman LLP has audited the financial
statements of our subsidiary, YGC.
In connection with the audits of our company for the six-month period ended
October 31, 2003 and for the years ended April 30, 2003 and 2002, and for the
period from the date of inception (May 31, 2000) through October 31, 2003, and
since that time through the date of this prospectus, there were, and are, no
disagreements with Rotenberg & Co., LLP on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedures,
which disagreements if not resolved to their satisfaction would have caused them
to make reference in connection with their opinion of the subject matter of the
disagreement.
The audit reports of Rotenberg & Co., LLP on the financial statements of Yukon
Gold (then known as TAKE-4, Inc.) as of and for the years ended April 30, 2003
and 2002, did not contain any adverse opinion or disclosure of opinion, nor were
they qualified or modified as to uncertainty, audit scope, or accounting
principles except for a "going concern" qualification.
During Yukon Gold's two most recent fiscal years ended April 30, 2004, Yukon
Gold has not consulted with Schwartz Levitsky Feldman LLP regarding any of the
matters specified in Item 304(a)(2) of Reg. S-B.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
The Delaware Business Corporation Act and our by-laws, provide that we shall
indemnify our officers and directors and hold harmless each person who was, is
or is threatened to be made a party to or is otherwise involved in any
threatened proceedings by reason of the fact that he or she is or was our
director or officer, against losses, claims, damages, liabilities and expenses
actually and reasonably incurred or suffered in connection with such proceeding.
However, the statutory indemnity does not apply to: (a) acts or omissions of the
director finally adjudged to be intentional misconduct or a knowing violation of
law; (b) unlawful distributions; or (c) any transaction with respect to which it
was finally adjudged that such director personally received a benefit in money,
property, or services to which the director was not legally entitled. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to our directors, officers and controlling persons pursuant to the
forgoing provisions or otherwise, we have been advised that, in the opinion of
the Securities and Exchange Commission, such indemnification is against public
policy as expressed in that Act and is, therefore, unenforceable
-46-
HOW TO GET MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form SB-2 under the Securities Act with respect to the securities
offered by this prospectus. This prospectus, which forms a part of the
registration statement, does not contain all the information set forth in the
registration statement, as permitted by the rules and regulations of the
Commission. For further information with respect to us and the securities
offered by this prospectus, reference is made to the registration statement. The
material terms of all exhibits have been expressed in this prospectus.
Statements contained in this prospectus as to the contents of any contract or
other document that we have filed as an exhibit to the registration statement
are qualified in their entirety by reference to the exhibits for a complete
statement of their terms and conditions. The registration statement and other
information may be read and copied at the Commission's Public Reference Room at
450 Fifth Street N.W., Washington, D.C. 20549. The public may obtain information
on the operation of the Public Reference Room by calling the Commission at
1-800-SEC-0330. The Commission maintains a web site at http://www.sec.gov that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the Commission and you can reach
us at skelley@medallioncap.com. Stafford Kelley acts as the Information Officer
for the Company and can be reached at 416-865-9930.
Upon effectiveness of the registration statement, we will be subject to the
reporting and other requirements of the Exchange Act and we intend to furnish
our stockholders annual reports containing financial statements audited by our
independent auditors and to make available quarterly reports containing
unaudited financial statements for each of the first three quarters of each
year.
We intend to apply for the listing of our common stock on the OTC Bulletin
Board. After our listing is effective, you may obtain certain information about
us on Nasdaq's Bulletin Board web site.
-47-
GLOSSARY
In this prospectus, we use certain capitalized and abbreviated terms, as well as
technical terms, which are defined below.
ADIT A horizontal or nearly horizontal passage driven
from the surface for the purpose of the exploration
or mining of a mineralized zone or ore body.
AIR PHOTO
ANALYSIS Use of aerial photography to determine or estimate
geological features.
ALLUVIAL MATERIAL Eroded material such as soil, sand, granite and
other materials above the bedrock.
ANOMALY Pertaining to the data set resulting from
geochemical or geophysical surveys; a deviation from
uniformity or regularity.
ASSAY To analyse the proportions of metals in a specimen
of rock or other geological material. Results of a
test of the proportions of metals in a specimen of
rock or other geological material.
BEDDING The arrangement of a sedimentary or metamorphic rock
in beds or layers of varying thickness and
character.
BEDROCK A general term for the rock, usually solid, that
underlies soil or other unconsolidated superficial
material.
BREAK A general term used in mining geology for any
discontinuity in the rock, such as a fault or
fracture.
BULLDOZER TRENCHING A method of exposing bedrock by use of a bulldozer.
CHANNEL SAMPLE A sample composed of pieces of vein or mineral
deposit that have been cut out of a small trench or
channel, usually about one inch deep and 4 inches
wide.
CIRQUE A deep, steep walled, flat or gently floored, half
bowl like recess, variously described as crescent
shaped or semicircular in plan, typically situated
high on the north side of a mountain and commonly at
the head of a glacial valley, and produced by the
erosive activity of mountain glaciers.
COARSE REJECT Pertaining to assay and geochemical analytical
procedures where a rock sample is initially crushed
before a subsample is separated for further
analysis. The coarse reject may be retained for a
check assay or for additional analysis.
COLLAR The start or beginning of a drill hole or the mouth
of an underground working entrance.
CROSSCUT N. An underground passage excavated across an ore body
to test its width and value.
-48-
DIAMOND DRILLING The act or process of drilling boreholes using bits
inset with diamonds as the rock cutting tool. The
bits are rotated by various types and sizes of
mechanisms motivated by electric, compressed air or
internal combustion engines or motors.
DIP The angle at which a bed, stratum, vein or other
structure is inclined from the horizontal, measured
perpendicular to the strike and in the vertical
plane.
DRILL CORE A cylindrical or columnar piece of solid rock,
usually 1 to 6 inches (2.5 cm to 40 cm) in diameter
and less than 10 feet (3 m) in length, taken as a
sample of an underground formation by a cylindrical
drill bit, and brought to the surface for
examination or analysis.
DRIFT n. A horizontal opening in or near a mineralized
body and parallel to the long dimension of the vein
or mineralized body. v. The act of excavating a
drift.
ECONOMIC The portion of a mineralized body that can be
profitably exploited.
EXCAVATOR TRENCHING A method of exposing bedrock by use of a hydraulic
excavator.
FAULT A fracture or fracture zone in rock along which
there has been displacement of the two sides
relative to each other and parallel to the fracture.
FLOAT A general term for loose fragments of rock;
especially on a hillside below an outcropping
mineralized zone.
FLOAT TRAIN A general term for the downslope distribution of
float below a mineralized zone.
FOXHOLE A small pit excavated in overburden by hand to
expose bedrock.
FRACTURE A general term for any break in a rock, whether or
not it causes displacement.
GEOCHEMICAL
SAMPLING The collection of soil, silt, vegetation or rock
samples for analysis as a guide to the presence of
areas of anomalous mineral of metal content in
bedrock.
GEOLOGICAL
MAPPING In mineral exploration, the collection of geological
data such as the description and orientation of
various types of bedrock.
GEOPHYSICAL SURVEY In mineral exploration, the collection of seismic,
gravitational, electrical, radiometric, density or
magnetic data to aid in the evaluation of the
mineral potential of a particular area.
GRAPHITIC Containing graphite.
-49-
GREENSTONE A general term applied to any compact dark green,
altered or metamorphosed mafic igneous rock (e.g.
gabbro or diorite).
G/T Abbreviation for gram per tonne; equivalent to one
part per million (ppm).
HAND TRENCHING A method of exposing bedrock by hand excavation.
HEADWALL A steep slope at the head of a valley, especially
the rock cliff at the back of a cirque.
HYDROTHERMAL Of or pertaining to hot water, to the action of hot
water, or to the products of this action, such as a
mineral deposit precipitated from a hot aqueous
solution, with or without demonstrable association
with igneous processes.
IGNEOUS Said of a rock or mineral that solidified from
molten or partly molten material; also applied to
processes leading to, or resulting from the
formation of such rocks.
METALLURGICAL TEST A general term for a number of mechanical or
chemical processes that are employed to test the
amenability of separating metals from their ores.
MINERALIZATION The process or processes by which a mineral or
minerals are introduced into a rock, resulting in an
enriched deposit; or the result of these processes.
MINERALIZED Rock that has undergone the process of
mineralization.
MINING CAMP A term loosely applied to an area of relatively
abundant mines that have some relationship to each
other in terms of the type of deposit or the variety
of ore produced.
NET SMELTER
RETURN ROYALTY A general term for a residual benefit that is a
percentage of the value for which a smelter will
reimburse the provider of ore to the smelter, after
deduction for various smelting fees and penalties
and, often after cost of transportation has been
deducted.
ORE The naturally occurring material from which a
mineral or minerals of economic value can be
extracted profitably or to satisfy social or
political objectives.
OUTCROP The part of a rock formation that appears at the
surface of the ground.
OVERBURDEN Loose soil, sand, gravel, broken rock, etc. that
lies above the bedrock.
OZ/TON Abbreviation for troy ounce per ton.
PERCUSSION DRILL Drilling method by which the drill bit falls by
force or is driven by force into the bedrock.
-50-
PERMAFROST A permanently frozen layer of soil or subsoil, or
even bedrock, which occurs to variable depths below
the Earth's surface in arctic or subarctic regions.
PLACER GOLD Gold occurring in more or less coarse grains or
flakes and obtainable by washing the sand, gravel,
etc. in which it is found. Also called alluvial
gold.
PLACER MINING The extraction and concentration of heavy metals or
minerals (usually gold) from alluvial deposits by
various methods, generally using running water.
PPB Abbreviation for part per billion.
PPM Abbreviation for part per million.
PROSPECTING Pertaining to the search for outcrops or surface
exposures of mineral deposits, primarily by
nonmechanical methods.
QUARTZ A glassy silicate and common rock forming mineral
(SiO2).
QUARTZ DIORITE A group of plutonic rocks having the composition of
diorite but with appreciable quartz and feldspar,
i.e. between 5 and 20%.
QUARTZ GABBRO A group of plutonic rocks having the composition of
gabbro but with appreciable quartz.
QUARTZITE A metamorphosed sandstone or rock composed of quartz
grains so completely cemented with secondary silica
that the rock breaks across or through the grains
rather than around them.
RESERVE That part of a mineral deposit which could be
economically and legally extracted or produced at
the time of the reserve determination.
RESOURCE Pertaining to the quantity or bulk of mineralized
material without reference to the economic viability
of its extraction (see reserve).
SADDLE A low point along the crestline of a ridge.
SEDIMENT Fragmental material that originates from weathering
of rocks and that is transported by air, water, ice
or other natural agents, and that forms in layers on
the Earth's surface at ordinary temperatures in a
loose, unconsolidated form; e.g. silt, sand, gravel,
etc.
SEDIMENTARY ROCK A rock resulting from the consolidation of loose
sediment.
-51-
SHAFT An approximately vertical mine working of limited
area compared with its depth.
SIDERITE A light or dark brown mineral of the calcite group
(FeCO3).
SOIL SAMPLING (see geochemical sampling).
STRATA Beds or layers of rock.
STRIKE The course or bearing of the outcrop of an inclined
bed, vein or fault plane on a level surface; the
direction of a horizontal line perpendicular to the
dip.
TRACE Pertaining to assay values; as used in this report,
this term refers to gold grades of less than 0.01
oz/ton (0.3 g/t).
UNDERGROUND
EXPLORATION The process of excavating underground workings and
drilling from these excavations to establish the
continuity, thickness and grade of a mineral
deposit.
VEIN An epigenetic mineral filling of a fault or other
fracture in a host rock, in tabular or sheetlike
form, often as a precipitate from a hydrothermal
fluid.
VEIN FAULT A term used in the Keno Hill mining camp to describe
quartz vein material and associated fault gouge that
are contained within a fault zone.
VLF-EM An abbreviation for the Very Low
Frequency-Electromagnetic geophysical survey
technique.
WEIGHTED AVERAGE Value calculated from a number of samples, each of
which has been "weighted" by a factor of the
individual sample width.
WORKING A general term for any type of excavation carried
out during the course of mining or mining
exploration.
-52-
INDEX TO FINANCIAL STATEMENTS
YUKON GOLD CORP.
(An Ontario. Canada Corporation)
Financial Statements of Yukon Gold Corp. for the Six Months Ended October 31,
2003 (Unaudited) and For the Period Ended April 30, 2003
Report of Independent Auditor
Balance Sheets For The Six-Month Period Ended October 31, 2003 and For
The Period Ended April 30, 2003
Statements of Operations For The Six-Month Period Ended October 31,
2003 and For The Period Ended April 30, 2003
Statements of Cash Flows For The Six-Month Period Ended October 31,
2003 and For The Period Ended April 30, 2003
Statements of Changes in Stockholders' Equity (Deficit) For The
Six-Month Period Ended October 31, 2003 and For The Period Ended April
30, 2003
Notes to Financial Statements
YUKON GOLD CORPORATION, INC.
(A Delaware Corporation)
Audited Consolidated Financial Statements for the Year ended April 30,
2004 and for the Year Ended April 30, 2003
Report of Independent Auditor
Consolidated Balance Sheets for the Year Ended April 30, 2004 and for
the Year Ended April 30, 2003
Consolidated Statements of Operations for the Year Ended April 30,
2004 and for the Year Ended April 30, 2003
Consolidated Statements of Cash Flows for the Year Ended April 30,
2004 and for the Year Ended April 30, 2003
Consolidated Statements of Changes in Stockholders' Equity for the
Year Ended April 30, 2004 and for the Year Ended April 30, 2003
Notes to Consolidated Financial Statements
YUKON GOLD CORP.
(AN EXPLORATION STAGE ENTERPRISE)
FINANCIAL STATEMENTS
SIX MONTHS ENDED OCTOBER 31, 2003
(UNAUDITED)
PERIOD ENDED APRIL 30, 2003
TOGETHER WITH REPORT OF INDEPENDENT AUDITORS
(AMOUNTS EXPRESSED IN US DOLLARS)
TABLE OF CONTENTS
Report of Registered Public Accounting Firm 1
Balance Sheets as of October 31, 2003 and April 30, 2003 2 - 3
Statements of Operations for the periods ended October 31, 2003 and
April 30, 2003 4
Statements of Cash Flows for the periods ended October 31, 2003 and
April 30, 2003 5 - 6
Statements of Changes in Stockholders' Equity (Deficiency) for the
periods ended October 31, 2003 and April 30, 2003 7
Notes to Financial Statements 8 - 16
SCHWARTZ LEVITSKY FELDMAN LLP
CHARTERED ACCOUNTANTS
TORONTO, MONTREAL, OTTAWA
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
Yukon Gold Corp.
(An Exploration Stage Enterprise)
We have audited the accompanying balance sheet of Yukon Gold Corp. (incorporated
in Ontario, Canada) as at April 30, 2003 and the related statement of
operations, cash flows and stockholders' equity for the period from May 16, 2002
(date of incorporation) to April 30, 2003. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Yukon Gold Corp. as at April
30, 2003 and the results of its operations and its cash flows for the period
from May 16, 2002 (date of incorporation) to April 30, 2003 in accordance with
generally accepted accounting principles in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company is in the Exploration stage and has no
established source of revenues. These conditions raise substantial doubt about
its ability to continue as a going concern. Management's plan regarding these
matters are also described in the notes to the financial statements. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Since the accompanying financial statements have not been prepared in accordance
with generally accepted accounting principles and standards in Canada, they may
not satisfy the reporting requirements of Canadian statutes and regulations.
Toronto, Ontario /s/ Schwartz Levitsky Feldman llp
December 9, 2003 Chartered Accountants
1167 Caledonia Road
Toronto, Ontario M6A 2X1
Tel: 416 785 5353
Fax: 416 785 5663
F-1
YUKON GOLD CORP.
(AN EXPLORATION STAGE ENTERPRISE)
BALANCE SHEETS
AS AT OCTOBER 31, 2003 AND APRIL 30, 2003
(AMOUNTS EXPRESSED IN US DOLLARS)
October 31, April 30,
2003 2003
----------- ----------
$ $
(Unaudited)
(note 1)
ASSETS
CURRENT ASSETS
Cash and cash equivalents 30,305 20,756
Prepaid expenses and deposits 12,326 3,401
----------- ----------
42,631 24,157
PROPERTY, PLANT AND EQUIPMENT (note 5) 6,413 6,555
LOAN RECEIVABLE FROM A SHAREHOLDER (note 6) -- 7,468
----------- ----------
49,044 38,180
=========== ==========
The accompanying notes are an integral part of these financial statements.
APPROVED ON BEHALF OF THE BOARD
/s/ Warren Holmes, Director
/s/ Stafford Kelley, Director
F-2
YUKON GOLD CORP.
(AN EXPLORATION STAGE ENTERPRISE)
BALANCE SHEETS
AS AT OCTOBER 31, 2003 AND APRIL 30, 2003
(AMOUNTS EXPRESSED IN US DOLLARS)
October 31, April 30,
2003 2003
----------- ----------
$ $
(Unaudited)
(note 1)
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities (note 7) 32,794 7,154
Loan payable (note 8) 20,000 --
----------- ----------
52,794 7,154
----------- ----------
COMMITMENTS AND CONTINGENCIES (note 11)
SHAREHOLDERS' EQUITY (DEFICIENCY)
CAPITAL STOCK (note 9) 303,909 154,063
ADDITIONAL PAID-IN CAPITAL 2,175 1,142
ACCUMULATED OTHER COMPREHENSIVE INCOME 3,039 604
DEFICIT, ACCUMULATED DURING THE EXPLORATION
STAGE (312,873) (124,783)
----------- ----------
(3,750) 31,026
----------- ----------
49,044 38,180
=========== ==========
The accompanying notes are an integral part of these financial statements.
F-3
YUKON GOLD CORP.
(AN EXPLORATION STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED OCTOBER 31, 2003 AND APRIL 30, 2003
(AMOUNTS EXPRESSED IN US DOLLARS)
For the
period from
For the May 16,
Cumulative 6 months 2002 (date of
since ended incorporation)
inception October 31, to April 30,
2003 2003
----------- ---------- -------------
$ $ $
(Unaudited) (Unaudited)
(note 1) (note 1)
REVENUE -- -- --
----------- ---------- -------------
OPERATING EXPENSES
General and administration 45,702 22,389 23,313
Project expenses 265,805 165,013 100,792
Amortization 1,366 688 678
TOTAL OPERATING EXPENSES 312,873 188,090 124,783
LOSS BEFORE INCOME TAXES (312,873) (188,090) (124,783)
Income taxes (note 10) -- -- --
----------- ---------- -------------
NET LOSS (312,873) (188,090) (124,783)
=========== ========== =============
The accompanying notes are an integral part of these financial statements.
F-4
YUKON GOLD CORP.
(AN EXPLORATION STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
FOR THE PERIOD ENDED OCTOBER 31, 2003 AND APRIL 30, 2003
(AMOUNTS EXPRESSED IN US DOLLARS)
For the
period from
For the May 16,
Cumulative 6 months 2002 (date of
since ended incorporation)
inception October 31, to April 30,
2003 2003
----------- ---------- -------------
$ $ $
(Unaudited) (Unaudited)
(note 1) (note 1)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period (312,873) (188,090) (124,783)
Items not requiring an outlay of cash:
Amortization 1,366 688 678
Increase in prepaid
expenses and deposits (11,498) (8,330) (3,168)
Increase in accounts
payable and accrued liabilities 30,811 24,147 6,664
----------- ---------- -------------
NET CASH USED IN OPERATING ACTIVITIES (292,194) (171,585) (120,609)
----------- ---------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (6,784) -- (6,784)
----------- ---------- -------------
NET CASH USED IN INVESTING ACTIVITIES (6,784) -- (6,784)
----------- ---------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loan 20,000 20,000 --
(Advances to) repayments from
a shareholder 879 7,836 (6,957)
Proceeds from issuance of Common shares 309,687 155,624 154,063
Proceeds from sales of warrants 2,175 1,033 1,142
Repurchase of shares (5,778) (5,778) --
----------- ---------- -------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 326,963 178,715 148,248
=========== ========== =============
The accompanying notes are an integral part of these financial statements.
F-5
YUKON GOLD CORP.
(AN EXPLORATION STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
FOR THE PERIOD ENDED OCTOBER 31, 2003 AND APRIL 30, 2003
(AMOUNTS EXPRESSED IN US DOLLARS)
For the
period from
For the May 16,
Cumulative 6 months 2002 (date of
since ended incorporation)
inception October 31, to April 30,
2003 2003
----------- ---------- -------------
$ $ $
(Unaudited) (Unaudited)
(note 1) (note 1)
EFFECT OF FOREIGN CURRENCY EXCHANGE
RATE CHANGES 2,320 2,419 (99)
----------- ---------- -------------
NET INCREASE IN CASH AND
CASH EQUIVALENTS FOR THE PERIOD 30,305 9,549 20,756
Cash and cash equivalents,
beginning of period -- 20,756 --
----------- ---------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD
30,305 30,305 20,756
=========== ========== =============
INCOME TAXES PAID -- -- --
=========== ========== =============
INTEREST PAID -- -- --
=========== ========== =============
The accompanying notes are an integral part of these financial statements
F-6
YUKON GOLD CORP.
(AN EXPLORATION STAGE ENTERPRISE)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD ENDED OCTOBER 31, 2003 AND APRIL 30, 2003
(AMOUNTS EXPRESSED IN US DOLLARS)
Deficit,
accumulated Accumulated
Number of Common Additional during the other
Common shares paid-in Exploration Comprehensive Comprehensive
shares amount capital stage Income (loss) Income
------------- ----------- ---------- ----------- ----------- -----------
$ $ $ $ $
Issuance of Common shares 2,833,377 154,063 -- -- -- --
Issuance of warrants -- -- 1,142 -- -- --
Foreign currency translation -- -- -- -- 604 604
Net loss for the period -- -- -- (124,783) (124,783) --
------------- ----------- ---------- ----------- ----------- -----------
Balance as of April 30, 2003 2,833,377 154,063 1,142 (124,783) (124,179) 604
===========
Issuance of Common shares 1,173,408 155,624 -- -- -- --
Issuance of warrants -- -- 1,033 -- -- --
Foreign currency translation -- -- -- -- 2,435 2,435
Net loss for the period -- -- -- (188,090) (188,090) --
Shares repurchased (240,855) (5,778) -- -- -- --
------------- ----------- ---------- ----------- ----------- -----------
Balance as of October 31, 2003 3,765,930 303,909 2,175 (312,873) (185,655) 3,039
============= =========== ========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements
F-7
YUKON GOLD CORP.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2003 AND APRIL 30, 2003
(AMOUNTS EXPRESSED IN US DOLLARS)
1. BASIS OF PRESENTATION
The financial statements for the six months ended October 31, 2003 are
unaudited. The interim results are not necessarily indicative of the
results for any future period. In the opinion of management, the data in
the financial statements reflects all adjustments necessary for a fair
presentation of the results of the interim period disclosed. All
adjustments are of a normal and recurring nature.
2. NATURE OF OPERATIONS AND GOING CONCERN
Yukon Gold Corp. (the "Company") was incorporated in Canada on May 16,
2002. The Company is engaged in the gold mining business in the Yukon
Territory, Canada.
The Company is in its Exploration stage and has not yet earned any
revenues. Consequently, the Company has incurred losses since its
incorporation in 2002. The Company has funded its operations to date
through the issuance of shares.
The Company plans to continue its efforts to acquire equity partners, to
make private placements, and to seek funding for its projects; however
there is no assurance that such efforts will be successful. The financial
statements do not include any adjustments that might result from the
outcome of these uncertainties.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Use of estimates
These financial statements have been prepared in accordance with
generally accepted accounting principles in the United Stated of
America. Because a precise determination of assets and liabilities,
and correspondingly revenues and expenses, depends on future events,
the preparation of financial statements for any period necessarily
involves the use of estimates and assumption. Actual amounts may
differ from these estimates. These financial statements have, in
management's opinion, been properly prepared within reasonable limits
of materiality and within the framework of the accounting policies
summarized below.
b) Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand. The carrying amounts
approximate fair values because of the short maturity of those
instruments.
c) Other Financial Instruments
The carrying amount of the Company's accounts receivable and payable
approximates fair value because of the short maturity of these
instruments.
The accompanying notes are an integral part of these financial statements
F-8
YUKON GOLD CORP.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2003 AND APRIL 30, 2003
(AMOUNTS EXPRESSED IN US DOLLARS)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
d) Long-term Financial Instruments
The fair value of each of the Company's long-term financial assets and
debt instruments is based on the amount of future cash flows
associated with each instrument discounted using an estimate of what
the Company's current borrowing rate for similar instruments of
comparable maturity would be.
e) Property, plant and equipment
Property, plant and equipment are recorded at cost less accumulated
amortization. Amortization is provided using the following annual rate
and method:
Computer equipment 20% declining balance method
f) Foreign Currency Translation
The Company is a foreign private company and maintains its books and
records in Canadian dollars (the functional currency). The financial
statements are converted to US dollars as the Company has elected to
report in US dollars. The translation method used is the current rate
method which is the method mandated by SFAS No. 52 where the
functional currency is the foreign currency. Under the current rate
method all assets and liabilities are translated at the current rate,
stockholders' equity accounts are translated at historical rates and
revenues and expenses are translated at average rates for the year.
Due to the fact that items in the financial statements are being
translated at different rates according to their nature, a translation
adjustment is created. This translation adjustment has been included
in accumulated other comprehensive income.
g) Income taxes
The Company accounts for income taxes under the provisions of SFAS No.
109, which requires recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Deferred income
taxes are provided using the liability method. Under the liability
method, deferred income taxes are recognized for all significant
temporary differences between the tax and financial statement bases of
assets and liabilities.
Current income tax expense (recovery) is the amount of income taxes
expected to be payable (recoverable) for the current period. A
deferred tax asset and/or liability is computed for both the expected
future impact of differences between the financial statement and tax
bases of assets and liabilities and for the expected future tax
benefit to be derived from tax losses. Valuation allowances are
established when necessary to reduce deferred tax asset to the amount
expected to be "more likely than not" realized in future returns. Tax
law and rate changes are reflected in income in the period such
changes are enacted.
The accompanying notes are an integral part of these financial statements
F-9
YUKON GOLD CORP.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2003 AND APRIL 30, 2003
(AMOUNTS EXPRESSED IN US DOLLARS)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
h) Revenue recognition
The Company's revenue recognition policies will follow common practice
in the mining industry. Revenue is recognized when gold and silver in
the form of dore (a combination of gold and silver) or concentrate is
produced at mines whose product has a high gold content and for which
the additional costs of refining and marketing are minimal. The only
condition for recognition of revenue in this instance is the
production of the gold dore or concentrate. In order to get the
product to the dore stage the gold-bearing ore must be mined,
transported to a mill or heap leaching pad where the ore is ground
and/or crushed. The ground and/or crushed ore is then chemically
treated to extract the gold into a solution. This solution is then
subjected to various processes to precipitate a gold-bearing material
that can be melted and poured into a mold.
i) Comprehensive income
The Company has adopted SFAS No. 130 Reporting Comprehensive Income.
This standard requires companies to disclose comprehensive income in
their financial statements. In addition to items included in net
income, comprehensive income includes items currently charged or
credited directly to stockholders' equity, such as foreign currency
translation adjustments.
j) Long-Lived assets
The Company has adopted the provisions of SFAS No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of, which has been superseded by SFAS No. 144 [note 3(m)].
SFAS No. 144 requires that long-lived assets to be held and used by an
entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Management used its best estimate of the undiscounted
cash flows to evaluate the carrying amount and have determined that no
impairment has occurred.
k) Exploration and Evaluation Expenditures
All exploration and pre-Exploration evaluation expenditures are expensed as
incurred.
The accompanying notes are an integral part of these financial statements
F-10
YUKON GOLD CORP.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2003 AND APRIL 30, 2003
(AMOUNTS EXPRESSED IN US DOLLARS)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
l) Stock Based Compensation
The Company has adopted SFAS No. 123, Accounting for Stock-Based
Compensation, as amended by SFAS No. 148 which introduced the use of a
fair value-based method of accounting for stock-based compensation. It
encourages, but does not require, companies to recognize compensation
expenses for stock-based compensation to employees based on the new
fair value accounting rules. The Company chose to continue to account
for stock-based compensation using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees", and related interpretations.
Accordingly, compensation cost for stock options is measured as the
excess, if any, of the quoted market price of the Company's stock at
the measurement date over the amount an employee must pay to acquire
the stock.
m) Recent Pronouncements
SFAS No. 141 - Business Combinations and SFAS No. 142 - Goodwill and
Other Intangible Assets. SFAS No. 141 requires that companies use only
the purchase method for acquisitions occurring after June 30, 2001.
SFAS No. 142 required that goodwill and intangible assets acquired
after June 30, 2001 should no longer be amortized but reviewed
annually for impairment.
SFAS No. 143 - Accounting for Asset Retirement Obligations - this
standard requires that entities record the fair value of a liability
for an asset retirement obligation in the period in which it is
incurred. This standard is effective for fiscal years beginning after
June 15, 2001.
SFAS No. 144 - Accounting for the Impairment or Disposal of Long-Lived
Assets. This standard supercedes SFAS No. 121 - Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of. This standard requires that businesses recognize
impairment when the financial statement carrying amount of long-lived
asset or asset group exceeds its fair value and is not recoverable.
The provisions of this statement are effective for financial
statements issued for fiscal years beginning after December 15, 2001.
SFAS No. 145 - Rescission of FASB Statements No. 4, 44 and 64,
Amendment of FASB Statement No. 13, and Technical Corrections. SFAS
145 updates, clarifies and simplifies existing accounting
pronouncements. SFAS 145 rescinds Statement No. 4, which required all
gains and losses from extinguishment of debt to be aggregated and, if
material, classified as extraordinary items, net of related income tax
effect. As a result, the criteria in APB Opinion No. 30 will now be
used to classify those gains and losses because Statement No. 4 has
been rescinded. Statement No. 44 was issued to establish accounting
requirements for the effects of transition to provisions of the Motor
Carrier Act of 1980. Because the transition has been completed,
Statement No. 44 is no longer necessary.
The accompanying notes are an integral part of these financial statements
F-11
YUKON GOLD CORP.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2003 AND APRIL 30, 2003
(AMOUNTS EXPRESSED IN US DOLLARS)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
m) Recent Pronouncements (cont'd)
SFAS No. 146 - Accounting for Cost Associated with Exit or Disposal
Activities. SFAS 146 requires companies to recognize costs associated
with exit or disposal activities when they are incurred rather than at
the date of a commitment to an exit or disposal plan. Previous
accounting guidance was provided by Emerging Issues Task Force
("EITF") Issue No. 94-3. SFAS 146 replaces EITF94-3. The Statement is
to be applied prospectively to exit or disposal activities initiated
after December 31, 2002.
SFAS No.147 - Acquisition of certain Financial Institutions, an
amendment of SFAS 72 and 144 and SFAS interpretation number 9 issued
October 2002 and relates to acquisitions of financial institutions.
SFAS No. 148 - Accounting for Stock Based Compensation-Transition and
Disclosure, an amendment of SFAS 123 issued December 2002 and permits
two additional transition methods for entities that adopt the fair
value based method of accounting for stock based employee compensation
to avoid the ramp-up effect arising from prospective application. This
statement also improves the prominence and clarity of the pro-forma
disclosures required by SFAS 123.
SFAS No. 149 - Amendment of SFAS 133 on derivative instruments and
hedging activities. This statement amends and clarifies financial
accounting and reporting for derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for hedging
activities under SFAS 133, accounting for derivative instruments and
hedging activities.
SFAS No. 150 - Accounting for certain financial instruments with
characteristics of both liabilities and equity. This statement
establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities
and equity.
The Company believes that the above standards would not have a
material impact on its financial position, results of operations or
cash flows.
The accompanying notes are an integral part of these financial statements.
F-12
YUKON GOLD CORP.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2003 AND APRIL 30, 2003
(AMOUNTS EXPRESSED IN US DOLLARS)
4. COMPREHENSIVE INCOME (LOSS)
The components of comprehensive loss are as follows:
For the
period from
For the May 16,
6 months 2002 (date of
period ended incorporation)
October 31, to April 30,
2003 2003
------------ -------------
$ $
(Unaudited)
(note 1)
Net loss (188,090) (124,783)
Other comprehensive income (loss)
foreign currency translation 2,435 604
------------ -------------
Comprehensive loss (185,655) (124,179)
============ =============
The foreign currency translation adjustments are not currently adjusted for
income taxes as the Company is located in Canada and the adjustments relate
to the translation of the financial statements from Canadian dollars into
United States dollars, which are done as disclosed in note 3(f).
5. PROPERTY, PLANT AND EQUIPMENT
October 31, April 30,
2003 2003
------------ -------------
$ $
(Unaudited)
(note 1)
Computer equipment 7,779 7,233
------------ -------------
Cost 7,779 7,233
------------ -------------
Less: Accumulated amortization
Computer equipment 1,366 678
------------ -------------
Net 6,413 6,555
============ =============
The accompanying notes are an integral part of these financial statements.
F-13
YUKON GOLD CORP.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2003 AND APRIL 30, 2003
(AMOUNTS EXPRESSED IN US DOLLARS)
6. LOAN RECEIVABLE FROM A SHAREHOLDER
The loan is non-interest bearing and unsecured. It was repaid in October
2003.
7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
October 31, April 30,
2003 2003
------------ -------------
$ $
(Unaudited)
(note 1)
Accounts payable and accrued liabilities are comprised of the following:
Trade payables 17,621 178
Accrued liabilities 15,173 6,976
------------ -------------
32,794 7,154
============ =============
8. LOAN PAYABLE
The loan is non-interest bearing and unsecured. The amount will be repaid
by the issuance of 200,000 Common shares in November 2003.
9. CAPITAL STOCK
a) Authorized
Unlimited number of Common shares
Issued
October 31, April 30,
2003 2003
------------ -------------
$ $
(Unaudited)
(note 1)
3,765,930 Common shares
(2,833,377 in April) 303,909 154,063
============ =============
The accompanying notes are an integral part of these financial statements.
F-14
YUKON GOLD CORP.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2003 AND APRIL 30, 2003
(AMOUNTS EXPRESSED IN US DOLLARS)
9. CAPITAL STOCK (cont'd)
b) Changes to Issued Share Capital
i. During the period from May 10, 2002 to August 19, 2002 the
company issued 2,490,855 Common shares for total consideration of
$52,389.
ii. During the period from August 19, 2002 to April 30, 2003, the
company issued 342,522 Common shares and 171,261 warrants for
total consideration of $102,816.
iii. For the period from May 1, 2003 to October 31, 2003, the company
issued 1,173,408 Common shares and 141,136 warrants for total
consideration of $156,657.
iv. On July 2, 2003, the company repurchased 240,855 Common shares
for total consideration of $5,778.
c) Warrants Issued
During the period, 312,397 warrants were issued by the company. Each
warrant entitles its holders to purchase one common shares at an
exercise price of $1.00 per share. The warrants expires on September
30, 2004.
The warrants do not confer upon the holders any rights or interest as
a shareholder of the company.
10. INCOME TAXES
The Company has incurred non-capital losses since inception which can be
applied against future taxable income and which commence expiring in 2010.
The utilization of these losses is uncertain and therefore the company has
not recorded a deferred tax asset.
11. COMMITMENTS AND CONTINGENCIES
On July 7, 2002, the Company acquired a group of mining claims in the Mount
Hinton area of the Yukon Territory from the Hinton Syndicate, a claim group
controlled by three individual third parties (the "Hinton Syndicate"). The
agreement contains several specific conditions, which are summarized below:
- The Company has to provide for yearly-shared property payments and
work program expenses amounting to $4,246,928 over a period of five
years. In return, the Company will earn interest in the mining claims
at a rate of 25% after work program expenditures of $1,137,570, 50%
after $1,895,950 and 75% after $3,791,900. The company has incurred
$303,352 in work program expenditures to-date and is required to incur
$246,473 prior to July 7, 2005, $1,137,570 between July 7, 2005 and
July 7, 2006, and $2,085,545 between July 7, 2006 and July 7, 2007.
The accompanying notes are an integral part of these financial statements.
F-15
YUKON GOLD CORP.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2003 AND APRIL 30, 2003
(AMOUNTS EXPRESSED IN US DOLLARS)
11. COMMITMENTS AND CONTINGENCIES (cont'd)
- The company has made the first three (3) property payments totaling
$189,595 and is required to pay $113,757 on July 7, 2005 and $151,676
on July 7, 2006. The property payments, work program expenses, and
earned interest can be accelerated.
- The Company can cancel the agreement at any time and be left with the
interest earned to date in the mining claims. If the agreement is
terminated when 50% is earned, the earned interest will be reduced to
45% so as to return control and financing flexibility to the Hinton
Syndicate.
- After the Company has earned an initial 25% in interest, it can decide
to postpone future expenditures if market conditions are difficult.
- After the company has earned its 75% interest, the agreement provides
for a joint venture to be set up for future financing to be shared
with the Hinton Syndicate.
- The Hinton Syndicate is entitled to a 2% NSR royalty.
- Each member of the Hinton Syndicate is entitled to receive their share
of the annual property payments in shares of the Company at a 10%
discount to the market.
12. SUBSEQUENT EVENTS
i) On November 1, 2003, 3,000,000 of the company's issued share capital
were acquired for total consideration of $75,018 by Yukon Gold
Corporation Inc. (A company incorporated under the Laws of the State
of Delaware).
ii) On November 1, 2003, the company and ten (10) of it's subscribers
entered into an agreement with Yukon Gold Corporation, Inc. (a company
incorporated under the Law of the State of Delaware) to assign the ten
(10) subscriptions to the Delaware corporation who agreed to issue
1,027,932 shares and 399,731 warrants to the subscribers. As the
company had booked but not issued 896,931 of these Common shares and
356,064 warrants it cancelled these shares and warrants and agreed to
treat the proceeds of $340,106 as a loan due to the Delaware
Corporation. The transaction was completed on November 17, 2003
The accompanying notes are an integral part of these financial statements.
F-16
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2004 AND APRIL 30, 2003
TOGETHER WITH REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(AMOUNTS EXPRESSED IN US DOLLARS)
TABLE OF CONTENTS
PAGE NO
Report of Independent Registered Public Accounting Firm 1
Consolidated Balance Sheets as of April 30, 2004 and April 30, 2003 2-3
Consolidated Statements of Operations for the years ended April 30, 2004
and April 30, 2003 4
Consolidated Statements of Cash Flows for the years ended April 30, 2004
and April 30, 2003 5
Consolidated Statements of Changes in Stockholders' Equity for
the years ended April 30, 2004 and April 30, 2003 6
Notes to Consolidated Financial Statements 7-17
SCHWARTZ LEVITSKY FELDMAN LLP
CHARTERED ACCOUNTANTS
TORONTO, MONTREAL, OTTAWA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Yukon Gold Corporation, Inc.
(An Exploration Stage Company)
We have audited the accompanying consolidated balance sheets of Yukon Gold
Corporation, Inc. as at April 30, 2004 and 2003 and the related consolidated
statements of operations, cash flows and stockholders' equity for the years
ended April 30, 2004 and 2003. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Yukon Gold
Corporation, Inc. as at April 30, 2004 and 2003 and the results of its
operations and its cash flows for the years ended April 30, 2004 and 2003 in
conformity with United States generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company is an exploration stage mining
company and has no established source of revenues. These conditions raise
substantial doubt about its ability to continue as a going concern. Management's
plan regarding these matters are also described in the notes to the consolidated
financial statements. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/"SCHWARTZ LEVITSKY FELDMAN LLP"
Toronto, Ontario, Canada
July 20, 2004 Chartered Accountants
1167 Caledonia Road
Toronto, Ontario M6A 2X1
Tel: 416 785 5353
Fax: 416 785 5663
F-1
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
AS AT APRIL 30, 2004 AND APRIL 30, 2003
(AMOUNTS EXPRESSED IN US DOLLARS)
April 30, April 30,
2004 2003
------------ -------------
$ $
ASSETS
CURRENT ASSETS
Cash and cash equivalents 134,925 20,756
Prepaid expenses and other 8,583 3,401
143,508 24,157
LOAN RECEIVABLE FROM A SHAREHOLDER (note 6) - 7,468
PROPERTY, PLANT AND EQUIPMENT (note 7) 5,478 6,555
148,986 38,180
The accompanying notes are an integral part of these
consolidated financial statements.
F-2
APPROVED ON BEHALF OF THE BOARD
/s/Warren Holmes
- --------------------------
Warren Holmes, Director
/s/ Stafford Kelley
- -------------------------
Stafford Kelley, Director
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
AS AT APRIL 30, 2004 AND APRIL 30, 2003
(AMOUNTS EXPRESSED IN US DOLLARS)
April 30, April 30,
2004 2003
------------ -------------
$ $
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued
liabilities (note 8) 30,686 7,154
SHAREHOLDERS' EQUITY
CAPITAL STOCK (note 9) 882 154,063
ADDITIONAL PAID-IN CAPITAL 697,299 1,142
ACCUMULATED OTHER COMPREHENSIVE
INCOME (LOSS) (12,192) 604
DEFICIT, ACCUMULATED DURING THE
EXPLORATION STAGE (567,689) (124,783)
118,300 31,026
148,986 38,180
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED APRIL 30, 2004 AND APRIL 30, 2003
(AMOUNTS EXPRESSED IN US DOLLARS)
For the For the
year year
Cumulative ended ended
since April 30, April 30,
inception 2004 2003
---------- --------- ---------
$ $ $
REVENUE -- -- --
OPERATING EXPENSES
General and administration 146,046 122,733 23,313
Project expenses 443,805 343,013 100,792
Exploration Tax Credit (24,239) (24,239)
Amortization 2,077 1,399 678
TOTAL OPERATING EXPENSES 567,689 442,906 124,783
LOSS BEFORE INCOME TAXES (567,689) (442,906) (124,783)
Income taxes -- -- --
NET LOSS (567,689) (442,906) (124,783)
Earnings per share - basic and diluted (0.07) (0.03)
Weighted average common shares outstanding 6,346,942 4,027,132
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED APRIL 30, 2004 AND APRIL 30, 2003
(AMOUNTS EXPRESSED IN US DOLLARS)
For the For the
year year
Cumulative ended ended
since April 30, April 30,
inception 2004 2003
---------- --------- ---------
$ $ $
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the year (567,689) (442,906) (124,783)
Items not requiring an outlay of cash:
Amortization 2,077 1,399 678
Shares issued for property payment 114,242 114,242 --
Increase in prepaid expenses and deposits (8,200) (5,032) (3,168)
Increase in accounts payable and accrued
liabilities 30,196 23,532 6,664
NET CASH USED IN OPERATING ACTIVITIES (429,374) (308,765) (120,609)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (6,784) -- (6,784)
NET CASH USED IN INVESTING ACTIVITIES (6,784) -- (6,784)
CASH FLOWS FROM FINANCING ACTIVITIES
(Advances to) repayments from a shareholder 1,180 8,137 (6,957)
Proceeds from issuance of shares 583,939 428,734 155,205
NET CASH PROVIDED BY FINANCING ACTIVITIES 585,119 436,871 148,248
EFFECT OF FOREIGN CURRENCY EXCHANGE
RATE CHANGES (14,036) (13,937) (99)
NET INCREASE IN CASH AND CASH
EQUIVALENTS FOR THE YEAR 134,925 114,169 20,756
Cash and cash equivalents, beginning of year -- 20,756 --
CASH AND CASH EQUIVALENTS, END OF YEAR 134,925 134,925 20,756
INCOME TAXES PAID -- --
INTEREST PAID -- --
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED APRIL 30, 2004 AND APRIL 30, 2003
(AMOUNTS EXPRESSED IN US DOLLARS)
Deficit,
accumulated Accumulated
Number of Common Additional during the Other
Common Shares Paid-in exploration Comprehensive Comprehensive
Shares amount Capital stage Income (loss) Income (loss)
-------------- ------------- ------------- ------------- ------------------ ---------------
$ $ $ $ $
Issuance of Common shares 2,833,377 154,063 - - - -
Issuance of warrants - - 1,142 - - -
Foreign currency translation - - - - 604 604
Net loss for the year - - - (124,783) (124,783) -
Balance as of April 30, 2003 2,833,377 154,063 1,142 (124,783) (124,179) 604
Issuance of Common shares 1,435,410 256,657 - - - -
Issuance of warrants - - 2,855 - - -
Shares repurchased (240,855) (5,778) - - - -
Recapitalization pursuant to
reverse acquisition 2,737,576 (404,265) 404,265 - - -
Issuance of Common shares 1,750,000 175 174,825 - - -
Issuance of Common shares
for property payment 300,000 30 114,212 - - -
Foreign currency translation - - - - (12,796) (12,796)
Net loss for the year - - - (442,906) (442,906) -
Balance as of April 30, 2004 8,815,508 882 697,299 (567,689) (455,702) (12,192)
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2004 AND APRIL 30, 2003
(AMOUNTS EXPRESSED IN US DOLLARS)
2. BASIS OF PRESENTATION
The audited consolidated financial statements include the accounts of Yukon
Gold Corporation, Inc. (the "Company") and its wholly owned subsidiary
Yukon Gold Corp. ("YGC"). All material inter-company accounts and
transactions have been eliminated.
2. NATURE OF OPERATIONS AND GOING CONCERN
The Company was incorporated under the laws of the state of Delaware on May
31, 2000 as Realdarts International, Inc. On August 3, 2000, the Articles
of Incorporation were amended to change the name to Optima 2000, Inc. On
August 8, 2000 the name was changed again to Optima International, Inc. and
again on the same date to Optima Global Corporation. On February 5, 2001,
the Company entered into a merger with Optima Global Corp. (a Florida
Corporation) whereby the corporation issued one share of its stock for each
share held by the stockholders of the Florida Corporation. On November 20,
2002, the Company changed its name to Take 4, Inc. and then on October 29,
2003 the Company became Yukon Gold Corporation, Inc.
The Company is an exploration stage mining company. The Company has funded
its operations to date through the issuance of shares.
The Company's future success is dependent upon its ability to raise
sufficient capital in order to continue to explore for an ore reserve on
its mining claims. There is no guarantee that such capital will be
available on acceptable terms, if at all.
3. REVERSE ACQUISITION
On November 17, 2003, the Company concluded a series of transactions
whereby it acquired 100 % of the common shares of YGC. In consideration for
this acquisition, the Company issued 4,027,932 Common shares to the former
shareholders of YGC, which represented 59.5 % of the outstanding common
shares of the Company on that date.
The accompanying notes are an integral part of these
consolidated financial statements.
F-7
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2004 AND APRIL 30, 2003
(AMOUNTS EXPRESSED IN US DOLLARS)
3. REVERSE ACQUISITION (cont'd)
Notwithstanding that the Company became the legal acquirer of YGC; this
transaction has been accounted for in these financial statements as a
reverse merger equivalent to the issuance of stock by YGC for the net
monetary assets of the Company accompanied by a recapitalization.
The comparative consolidated financial statements of the Company are those
of YGC and the merger and recapitalization was reported as a line item in
the Statements of Changes in Stockholders' Equity.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Use of Estimates
These consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in the United
States of America. Because a precise determination of assets and
liabilities, and correspondingly revenues and expenses, depends on
future events, the preparation of consolidated financial statements
for any period necessarily involves the use of estimates and
assumption. Actual amounts may differ from these estimates. These
consolidated financial statements have, in management's opinion, been
properly prepared within reasonable limits of materiality and within
the framework of the accounting policies summarized below.
b) Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand. The carrying amounts
approximate fair values because of the short maturity of those
instruments.
c) Other Financial Instruments
The carrying amount of the Company's accounts receivable and payable
approximates fair value because of the short maturity of these
instruments.
e) Long-term Financial Instruments
The fair value of each of the Company's long-term financial assets and
debt instruments is based on the amount of future cash flows
associated with each instrument discounted using an estimate of what
the Company's current borrowing rate for similar instruments of
comparable maturity would be.
The accompanying notes are an integral part of these
consolidated financial statements.
F-8
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2004 AND APRIL 30, 2003
(AMOUNTS EXPRESSED IN US DOLLARS)
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
e) Property, plant and equipment
Property, plant and equipment are recorded at cost less accumulated
amortization. Amortization is provided using the following annual rate
and method:
Computer equipment 20% declining balance method
f) Foreign Currency Translation
The Company's operating subsidiary is a foreign private company and
maintains its books and records in Canadian dollars (the functional
currency). The subsidiary's financial statements are converted to US
dollars as the Company has elected to report in US dollars. The
translation method used is the current rate method, which is the
method mandated by SFAS No. 52 where the functional currency is the
foreign currency. Under the current rate method all assets and
liabilities are translated at the current rate, stockholders' equity
accounts are translated at historical rates and revenues and expenses
are translated at average rates for the year.
Due to the fact that items in the financial statements are being
translated at different rates according to their nature, a translation
adjustment is created. This translation adjustment has been included
in Accumulated Other Comprehensive Income (Loss).
g) Income taxes
The Company accounts for income taxes under the provisions of SFAS No.
109, which requires recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Deferred income
taxes are provided using the liability method. Under the liability
method, deferred income taxes are recognized for all significant
temporary differences between the tax and financial statement bases of
assets and liabilities.
Current income tax expense (recovery) is the amount of income taxes
expected to be payable (recoverable) for the current period. A
deferred tax asset and/or liability is computed for both the expected
future impact of differences between the financial statement and tax
bases of assets and liabilities and for the expected future tax
benefit to be derived from tax losses. Valuation allowances are
established when necessary to reduce deferred tax asset to the amount
expected to be "more likely than not" realized in future tax returns.
Tax law and rate changes are reflected in income in the period such
changes are enacted.
The accompanying notes are an integral part of these
consolidated financial statements.
F-9
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2004 AND APRIL 30, 2003
(AMOUNTS EXPRESSED IN US DOLLARS)
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
h) Revenue Recognition
The Company's revenue recognition policies will follow common practice
in the mining industry. Revenue is recognized when precious metals in
the form of dore (a combination of gold and silver) or concentrate is
produced at mines whose product has a high precious metal content and
for which the additional costs of refining and marketing are minimal.
The only condition for recognition of revenue in this instance is the
production of the gold dore or concentrate. In order to get the ore to
a concentrate stage the precious metal ore must be mined and
transported to a mill where it is crushed and ground. The ground
product is then processed by gravity separation and/or flotation to
produce a concentrate. Chemical treatment is used to extract the
precious metals from the concentrate or on a leaching pad into a
solution. This solution is then subjected to various processes to
precipitate the precious metals back to a solid state that can be
melted down and poured into a mould to produce a dore bar.
i) Comprehensive Income
The Company has adopted SFAS No. 130 Reporting Comprehensive Income.
This standard requires companies to disclose comprehensive income in
their consolidated financial statements. In addition to items included
in net income, comprehensive income includes items currently charged
or credited directly to stockholders' equity, such as foreign currency
translation adjustments.
j) Long-Lived Assets
The Company has adopted the provisions of SFAS No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of, which has been superseded by SFAS No. 144 [note 3(m)].
SFAS No. 144 requires that long-lived assets to be held and used by an
entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Management will use its best estimate of the undiscounted
cash flows to evaluate the carrying amount and will determine that no
impairment has occurred.
l) Exploration and Evaluation Expenditures
All exploration and pre-development evaluation expenditures are expensed as
incurred.
The accompanying notes are an integral part of these
consolidated financial statements.
F-10
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2004 AND APRIL 30, 2003
(AMOUNTS EXPRESSED IN US DOLLARS)
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
l) Stock Based Compensation
The Company has adopted SFAS No. 123, Accounting for Stock-Based
Compensation, as amended by SFAS No. 148 which introduced the use of a
fair value-based method of accounting for stock-based compensation. It
encourages, but does not require, companies to recognize compensation
expenses for stock-based compensation to employees based on the new
fair value accounting rules. The Company chose to continue to account
for stock-based compensation using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees", and related interpretations.
Accordingly, compensation cost for stock options is measured as the
excess, if any, of the quoted market price of the Company's stock at
the measurement date over the amount an employee must pay to acquire
the stock.
m) Recent Pronouncements
SFAS No. 141 - Business Combinations and SFAS No. 142 - Goodwill and
Other Intangible Assets. SFAS No. 141 requires that companies use only
the purchase method for acquisitions occurring after June 30, 2001.
SFAS No. 142 required that goodwill and intangible assets acquired
after June 30, 2001 should no longer be amortized but reviewed
annually for impairment.
SFAS No. 143 - Accounting for Asset Retirement Obligations - this
standard requires that entities record the fair value of a liability
for an asset retirement obligation in the period in which it is
incurred. This standard is effective for fiscal years beginning after
June 15, 2001.
SFAS No. 144 - Accounting for the Impairment or Disposal of Long-Lived
Assets. This standard supersedes SFAS No. 121 - Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of. This standard requires that businesses recognize
impairment when the financial statement carrying amount of long-lived
asset or asset group exceeds its fair value and is not recoverable.
The provisions of this statement are effective for financial
statements issued for fiscal years beginning after December 15, 2001.
SFAS No. 145 - Rescission of FASB Statements No. 4, 44 and 64,
Amendment of FASB Statement No. 13, and Technical Corrections. SFAS
145 updates, clarifies and simplifies existing accounting
pronouncements. SFAS 145 rescinds Statement No. 4, which required all
gains and losses from extinguishment of debt to be aggregated and, if
material, classified as extraordinary items, net of related income tax
effect. As a result, the criteria in APB Opinion No. 30 will now be
used to classify those gains and losses because Statement No. 4 has
been rescinded. Statement No. 44 was issued to establish accounting
requirements for the effects of transition to provisions of the Motor
Carrier Act of 1980. Because the transition has been completed,
Statement No. 44 is no longer necessary.
The accompanying notes are an integral part of these
consolidated financial statements.
F-11
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2004 AND APRIL 30, 2003
(AMOUNTS EXPRESSED IN US DOLLARS)
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
m) Recent Pronouncements (cont'd)
SFAS No. 146 - Accounting for Cost Associated with Exit or Disposal
Activities. SFAS 146 requires companies to recognize costs associated
with exit or disposal activities when they are incurred rather than at
the date of a commitment to an exit or disposal plan. Previous
accounting guidance was provided by Emerging Issues Task Force
("EITF") Issue No. 94-3. SFAS 146 replaces EITF94-3. The Statement is
to be applied prospectively to exit or disposal activities initiated
after December 31, 2002.
SFAS No.147 - Acquisition of Certain Financial Institutions, an
amendment of SFAS 72 and 144 and SFAS interpretation number 9 issued
October 2002 and relates to acquisitions of financial institutions.
SFAS No. 148 - Accounting for Stock Based Compensation-Transition and
Disclosure, an amendment of SFAS 123 issued December 2002 and permits
two additional transition methods for entities that adopt the fair
value based method of accounting for stock based employee compensation
to avoid the ramp-up effect arising from prospective application. This
statement also improves the prominence and clarity of the pro-forma
disclosures required by SFAS 123.
SFAS No. 149 - Amendment of SFAS 133 on derivative instruments and
hedging activities. This statement amends and clarifies financial
accounting and reporting for derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for hedging
activities under SFAS 133, accounting for derivative instruments and
hedging activities.
SFAS No. 150 - Accounting for Certain Financial Instruments with
characteristics of both liabilities and equity. This statement
establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities
and equity.
The Company has adopted all of the above standards and they do not
have a material impact on its financial position, results of
operations or cash flows.
The accompanying notes are an integral part of these
consolidated financial statements.
F-12
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2004 AND APRIL 30, 2003
(AMOUNTS EXPRESSED IN US DOLLARS)
5. COMPREHENSIVE INCOME (LOSS)
The components of comprehensive loss are as follows:
For the year For the year
ended ended
April 30, April 30,
2004 2003
------------ ------------
$ $
Net loss (442,906) (124,783)
Other comprehensive income (loss)
Foreign currency translation (12,796) 604
------------ ------------
Comprehensive loss (455,702) (124,179)
The foreign currency translation adjustments are not currently adjusted for
income taxes as the Company's operating subsidiary is located in Canada and
the adjustments relate to the translation of the financial statements from
Canadian dollars into United States dollars, which are done as disclosed in
note 4 (f).
6. LOAN RECEIVABLE FROM A SHAREHOLDER
The loan is non-interest bearing and unsecured. It was repaid during the
period.
7. PROPERTY, PLANT AND EQUIPMENT
April 30, April 30,
2004 2003
---------- ------------
$ $
Computer equipment 7,608 7,233
Cost 7,608 7,233
Less: Accumulated amortization
Computer equipment 2,130 678
Net 5,478 6,555
The accompanying notes are an integral part of these
consolidated financial statements.
F-13
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2004 AND APRIL 30, 2003
(AMOUNTS EXPRESSED IN US DOLLARS)
8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
April 30, April 30,
2004 2003
------------ ------------
$ $
Accounts payable and accrued liabilities are comprised of the following:
Trade payables 23,686 178
Accrued liabilities 7,000 6,976
------------ ------------
30,686 7,154
------------ ------------
9. CAPITAL STOCK
a) Authorized
50,000,000 of Common shares, $0.0001 par value
b) Issued
8,815,508 Common shares
c) Changes to Issued Share Capital
Transactions prior to reverse acquisition
i) During the year ended April 30, 2003, the Company issued
2,833,377 Common shares for total consideration of $154,063.
ii) During the period from May 1, 2003 to the date of the reverse
acquisition the Company issued 1,435,410 Common shares for total
consideration of $256,657.
iii) On July 2, 2003, the Company repurchased 240,855 Common shares
for total consideration of $5,778.
The accompanying notes are an integral part of these
consolidated financial statements.
F-14
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2004 AND APRIL 30, 2003
(AMOUNTS EXPRESSED IN US DOLLARS)
9. CAPITAL STOCK (cont'd)
c) Changes to Issued Share Capital (cont'd)
Transactions pursuant to reverse acquisition
iv) During the period from November 1, 2003 to November 17, 2003, the
Company underwent a reverse acquisition as described in note 3.
Transactions subsequent to reverse acquisition
v) On November 10, 2003, the Company issued 1,750,000 common shares
for total consideration of $175,000.
vi) On January 23, 2004, the Company issued 300,000 Common shares for
property payments in the amount of $114,242 which was expensed in
the consolidated statements of operations.
d) Warrants Issued
As of April 30, 2004, 499,731 warrants have been issued by the
Company. Each warrant entitles its holder to purchase one common share
at an exercise price of $1.00 per share. The warrants expire on
September 30, 2004.
The warrants do not confer upon the holders any rights or interest as a
shareholder of the Company.
10. COMMITMENTS AND CONTINGENCIES
On July 7, 2002, YGC acquired a group of mining claims in the Mount Hinton
area of the Yukon Territory in Canada from the Hinton Syndicate, a claim
group controlled by four individuals, 2 of which are directors of the
Company. The agreement contains several specific conditions, which are
summarized below:
- The Company has to provide for yearly-shared property payments and
work program expenses amounting to $4,256,000 over a period of five
years. In return, the Company will earn interest in the mining claims
at a rate of 25% after work program expenditures of $1,140,000, 50%
after $1,900,000 and 75% after $3,800,000. The Company has incurred
$304,000 in work program expenditures as required to July 7, 2004 and
is required to incur $247,000 prior to July 7, 2005, $1,140,000
between July 7, 2005 and July 7, 2006 and $2,109,000 between July 7,
2006 and July 7, 2007.
The accompanying notes are an integral part of these
consolidated financial statements.
F-15
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2004 AND APRIL 30, 2003
(AMOUNTS EXPRESSED IN US DOLLARS)
10. COMMITMENTS AND CONTINGENCIES (cont'd)
- The Company has made the first three (3) property payments totaling
$190,000 and is required to pay $114,000 on July 7, 2005 and $152,000
on July 7, 2006. The property payments, work program expenses and
earned interest can be accelerated.
- The Company can cancel the agreement at any time and be left with the
interest earned to date in the mining claims. If the agreement is
terminated when 50% is earned, the earned interest will be reduced to
45% so as to return control and financing flexibility to the Hinton
Syndicate.
- After the Company has earned an initial 25% in interest, it can decide
to postpone future expenditures if market conditions are difficult.
- After the Company has earned its 75% interest, the agreement provides
for a joint venture to be set up for future financing to be shared
with the Hinton Syndicate. The Company will also have a further option
to acquire the remaining 25% interest by buying-out the Hinton
Syndicate for $3,800,000.
- The Hinton Syndicate is entitled to a 2% Net Smelter Returns ("NSR")
royalty. In the event that the Company exercises its option to buy-out
the remaining interest of the Hinton Syndicate, the NSR will become 3%
and the Hinton Syndicate will retain the royalty interest only.
- Each member of the Hinton Syndicate is entitled to receive their share
of the annual property payments in common shares of the Company at a
10% discount to the market.
- If the Company fails to make the required property payment and incur
at least $1,140,000 (CDN$1,500,000) in program expenses, it may not
earn any interest in the claims. The Company will be required to raise
additional funds to meet these obligations.
11. RELATED PARTY TRANSACTIONS
During the year ending April 30, 2004 the Company and it's subsidiary were
invoiced by Medallion Capital Corp. a total of $78,035 (CDN$104,832) for
fees which include office rental, equipment rental, bookkeeping services,
secretarial services, out of pocket expenses and consulting services in the
preparation of the registration statement and other corporate documents.
The Company continues to pay $7,444 (CDN$10,000) per month for these
facilities and services. Medallion Capital Corp. is 100% owned by Stafford
Kelley, an officer and director of the Company.
12. SUBSEQUENT EVENTS
a) Subsequent to April 30, 2004 the Company issued a convertible
promissory note on May 14, 2004 to one accredited investor for
$56,250. The note bears interest at 2% per annum. The note is
convertible at the later of one year or the effective date of the
registration statement filed with the Securities and Exchange
Commission. The note is convertible at the option of the investor or
the Company into 75,000 shares of common stock and 37,500 warrants.
Each warrant entitles the holder to purchase one share of common stock
for $1.25 per share on or before December 31, 2005.
The accompanying notes are an integral part of these
consolidated financial statements.
F-16
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2004 AND APRIL 30, 2003
(AMOUNTS EXPRESSED IN US DOLLARS)
12. SUBSEQUENT EVENTS (cont'd)
b) On June 25, 2004 the Company issued a promissory note to a
shareholder, J. L. Guerra Jr., for $100,000. The note is non-interest
bearing and due on demand. The Company agreed to pay a financing fee
of $5,000.
c) On June 28, 2004 the Company issued a promissory note to a
shareholder, Stafford Kelley, for $72,881 (CDN$100,000). The note is
non-interest bearing and due on demand. The Company agreed to pay a
financing fee of $3,722 (CDN$5,000).
The accompanying notes are an integral part of these
consolidated financial statements.
F-17
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS
Our by-laws indemnify each person (including the heirs, executors,
administrators, or estate of such person) who is or was a director or officer of
Yukon Gold to the fullest extent permitted or authorized by current or future
legislation or judicial or administrative decision against all fines,
liabilities, costs and expenses, including attorney's fees, arising out of his
or her status as a director, officer, agent, employee or representative. The
foregoing right of indemnification shall not be exclusive of other rights to
which those seeking an indemnification may be entitled. Yukon Gold may maintain
insurance, at its expense, to protect itself and all officers and directors
against fines, liabilities, costs and expenses, whether or not Yukon Gold would
have the legal power to indemnify them directly against such liability.
Costs, charges, and expenses (including attorney's fees) incurred by a person
referred to above in defending a civil or criminal proceeding shall be paid by
Yukon Gold in advance of the final disposition thereof upon receipt of any
undertaking to repay all amounts advanced if it is ultimately determined that
the person is not entitled to be indemnified by Yukon Gold and upon satisfaction
of other conditions required by current or future legislation.
If this indemnification or any portion of it is invalidated on any ground by a
court of competent jurisdiction, Yukon Gold nevertheless indemnifies each person
described above to the fullest extent permitted by all portions of this
indemnification that have not been invalidated and to the fullest extent
permitted by law.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of Yukon
Gold pursuant to the foregoing provisions, or otherwise, be advised that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is therefore unenforceable.
EXHIBITS INDEX
The following exhibits are filed as part of this registration statement.
Exhibit No. Description
3.1 Certificate of Incorporation (previously filed)
3.2 By Laws (previously filed)
3.3 Certificate of Incorporation (previously filed)
3.4 Certificate of Amendment of the Certificate of Incorporation of the
Company dated August 3, 2000, filed on August 4, 2000 with the
Delaware Secretary of State, which changed the name of the Company
to "Optima 2000, Inc." (previously filed)
3.5 Certificate of Amendment of the Certificate of Incorporation of the
Company dated August 28, 2000, filed on August 29, 2000, which
changed the name of the Company to "Optima International, Inc."
(previously filed)
-53-
3.6 Certificate of Amendment of the Certificate of Incorporation of the
Company dated August 28,2000, filed with the Delaware Secretary of
State on September 27, 2000, which changed the name of the Company
to "Optima Global Corporation" (previously filed)
3.7 Certificate of Merger dated February 2, 2001 and filed with the
Delaware Secretary of State on February 5, 2001, in which the
Company is the surviving corporation (previously filed)
3.8 Certificate of Amendment of the Certificate of Incorporation of the
Company dated November 20, 2002, filed with the Delaware Secretary
of State on November 27, 2002, changing the name of the Company to
"Take-4, Inc." (previously filed)
3.9 Certificate of Amendment of the Certificate of Incorporation of the
Company dated October 27, 2003, filed with the Delaware Secretary of
State on October 29, 2003, changing the name of the Company to
"Yukon Gold Corporation, Inc." (previously filed)
4.1 Instrument Defining Rights of Holders [pages from the By-Laws of
Yukon Gold] (previously filed)
5.1 Legal Opinion dated March 11, 2004 of Kavinoky & Cook, LLP
(previously filed)
5.2 Legal Opinion dated May 20, 2004 of Kavinoky & Cook, LLP (previously
filed)
5.3 Legal Opinion dated July 7, 2004 of Kavinoky & Cook, LLP (previously
filed)
10.1 Share Purchase Agreement re: 3,000,000 Shares of Yukon Gold Corp.
(previously filed)
10.2 Assignment of Subscription Agreements (previously filed)
10.3 Consulting Services Agreement (previously filed)
10.4 Stock Option Plan (previously filed)
10.5 Hinton Syndicate Agreement (previously filed)
10.6 Hinton Syndicate Agreement with conformed signatures (previously
filed)
10.7 Form of Warrant issued to David J. Rittmueller (previously filed)
10.8 Loan and Subscription Agreement with David J. Rittmueller
(previously filed)
10.9 Loan Agreement and Promissory Note issued to Stafford Kelley
(previously filed)
10.10 Loan Agreement and Promissory Note issued to J.L. Guerra, Jr.
(previously filed)
10.11 List of Subsidiaries (previously filed)
23.1 Consent of Rotenberg & Co. LLP dated February 24, 2004 (previously
filed)
23.2 Consent of Rotenberg & Co. LLP dated May 13, 2004 (previously filed)
23.3 Consent of Schwartz Levitsky Feldman llp dated March 10, 2004
(previously filed)
23.4 Consent of Schwartz Levitsky Feldman llp dated May 18, 2004
(previously filed)
23.5 Consent of Archer, Cathro & Associates (1981) Ltd. dated February
27, 2004 (previously filed)
23.6 Consent of Archer, Cathro & Associates (1981) Ltd. to the reference
of their firm as "experts" dated May 14, 2004 (previously filed)
23.7 Consent of Junior Mine Services Ltd. to the reference of their firm
as "experts" dated May 14, 2004 (previously filed)
23.8 Letter Re: Change of Auditors from Rotenberg & Co. LLP (previously
filed)
23.9 Consent of Schwartz Levitsky Feldman llp dated June 29, 2004
(previously filed)
23.10 Revised Consulting Services Agreement (previously filed)
23.11 Consent of Schwartz Levitsky Feldman llp dated July 23, 2004
(previously filed)
23.12 Consent of Schwartz Levitsky Feldman llp dated September 7, 2004
99.2 Map of the Location of the Mount Hinton Property (previously filed)
-54-
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth expenses, incurred or expected to be incurred by
Yukon Gold in connect with the registration of the securities being offered by
the selling shareholders. Items marked with an asterisk (*) represent estimated
expenses. We have agreed to pay all the costs and expenses of this registration.
Selling security holders will not pay any part of these expenses.
SEC Registration Fee $ 202.00
Legal Fees and Expenses* $ 60,000.00*
Accounting Fees and Expenses* $ 15,000.00*
Printing $ 10,000.00*
Miscellaneous* $ 5,000.00
--------------
TOTAL* $ 90,202.00
RECENT SALE OF UNREGISTERED SECURITIES
Prior to November 10, 2003, Yukon Gold had not issued any securities for three
(3) years. On November 10, 2003 we issued 3,000,000 common shares to eleven (11)
Canadian citizens for CDN$100,000 (US $76,000). None of these subscribers were
US citizens or were acting on behalf of any US citizens and all of the shares
issued in the private placement came to rest in Canada. All offers and sales
were made as part of an "offshore transaction" as that term is defined in Item
902(h) and were exempt from registration under the Securities Act of 1933
pursuant to Rule 903, Category 3, of Regulation S promulgated under the
Securities Act of 1933. There were no directed selling efforts in the U.S. The
subscribers were as follows.
NO. OF SHARES
-------------
Peter Slack 5954 Winston Churchill Blvd. Alton ON L0N 1A0 150,000
John Slack Box 100 Hillsborough ON N0B 1Z0 150,000
Kathleen Young RR #1, 5918 10th Line Erin ON N0B 1T0 150,000
Carol Slack 5920 Winston Churchill Blvd. RR #1 Erin ON N0B 1T0 150,000
Wendy Slack 510 - 4550 47th Street SW Calgary AB T3E 6W5 150,000
J Malcolm Slack 5920 Winston Churchill Blvd. RR #1 Erin ON N0B 1T0 120,000
Richard Ewing Box 111 Mayo YT M0B 1M0 382,500
Robert Wagner Site 1, Box 7 Keno City YT Y0B 1J0 127,500
James B. Smith 2726 Mara Drive Coquitlam BC V3C 5R9 120,000
Stafford Kelley 146 Trelawn Ave. Oakville ON L6J 4R2 750,000
Warren Holmes c/o: Nuinsco Resources Tortonto ON M9B 6J7 750,000
110 - 940 The East Mall
On November 10, 2003 we accepted subscriptions from nine U.S. residents for
1,750,000 common shares at US $0.10 per share for a total of US $175,000. The
Company relied upon Rule 504 in connection with the November 10, 2003 offering
of shares to U.S. persons. The total amount offered and sold in the November 10,
2003 offering was under $1 million and there was no subsequent trading in the
shares. All investors in that offering represented to the Company in their
respective subscription agreements that they were purchasing the securities for
their own account and for investment purposes. The offering was made to nine
persons and there was no advertisement or public promotion of the offering. All
of these shares are covered by this registration statement. The Subscribers were
as follows:
-55-
NO. OF SHARES
-------------
J.L. Guerra 11202 Disco Drive San Antonio TX 129,730
Duane Englemeier 1739 Royal Crescent San Antonio TX 27,200
Bruce A. Knox 18742 Calle Cierra San Antonio TX 68,000
J. Mike Yantis PO Box 17045 San Antonio TX 100,000
B. F. Pittman III 309 Parkhill San Antonio TX 68,000
Joranamo Trust 11202 Disco Drive San Antonio TX 400,000
Daniel J. Kruse 26 Inwood Point San Antonio TX 400,000
Robert T. Brocker 1931 Flaming Oak New Braunfels TX 400,000
Melanie Ann Gusler 515 Thorain San Antonio TX 157,070
On November 17, 2003 we closed upon into an Assignment Agreement dated November
1, 2003 with YGC, our wholly owned subsidiary, pursuant to which YGC assigned to
Yukon Gold ten subscription agreements for shares and warrants of YGC. YGC
entered into such subscription agreements pursuant to an exemption from
registration pursuant to Rule 504 of Regulation D because the total dollar value
of these subscriptions was US$390,883 and was offered to a total of ten
investors in a private offering. No shares of YGC were issued to subscribers
prior to the assignment. Prior to the assignment, each subscriber was informed
orally by an officer of Yukon Gold and YGC that YGC would become the wholly
owned operating subsidiary of Yukon Gold and that the business of YGC would
become the business of Yukon Gold. Each of the ten subscribers consented to the
assignment. As a result of such assignment, the ten subscription agreements
became subscriptions for shares and warrants of Yukon Gold. On November 17, 2004
our Board of Directors authorized the issue of 1,027,932 common shares to the
holders of the subscription agreements and authorized the transfer agent to
record these shares as issued to such holders. The Board of Directors also
authorized the issuance of 399,731 warrants to such holders. Each warrant
entitles the holder to purchase one (1) share of the common stock of Yukon Gold
at CDN $1.00 or US$0.76 on or before September 30, 2004. The proceeds from these
subscriptions was of CDN$448,464.50 (or US$344,973)plus US$50,000.00 for a total
of US$-390,883.02. The Assignment of YGC's subscription agreements to Yukon Gold
was exempt from registration pursuant to Rule 504 of Regulation D because it
fell below the $1 million limit for offerings made in reliance upon such
exemption and because the subscription agreements assigned to Yukon Gold
contained representations of each subscriber that the shares and warrants were
being purchased for their own account and for investment purposes. In addition,
each subscriber covenanted not to re-sell the shares except pursuant to an
exemption from registration under the Securities Act of 1933. There was no
advertisement or public promotion in connection with this transaction. The
Subscribers are as follows:
-56-
SHARES WARRANTS
J.L. Guerra 11202 Disco Drive San Antonio TX 180,180 90,090
Arthur G. Mitton III 794 Eames Way Marshfield MA 42,000 14,000
Kenneth Deckard 26607 Harmony Hills San Antonio TX 83,400 27,800
Kenneth Hope 10202 Penhaven San Antonio TX 108,960 36,320
Duane Englemeier 1739 Royal Crescent San Antonio TX 53,913 17,971
Bruce A. Knox 18742 Calle Cierra San Antonio TX 135,135 45,045
J. Mike Yantis PO Box 17045 San Antonio TX 131,001 43,667
B. F. Pittman III 309 Parkhill San Antonio TX 131,001 43,667
Ray Fulks National Bank of Daingerfield Daingerfiled TX 40,000 20,000
107 Webb St. Box W
Warren & Julie Cook 27930 Elm Grove San Antonio TX 122,342 61,171
On January 23, 2004 Yukon Gold issued 300,000 common shares and 100,000 warrants
to the four (4) members of the Hinton Syndicate the original claim owners. Each
warrant entitles the holder to purchase one (1) common share at CDN $1.00 on or
before May 15, 2005. The issue price was CDN $150,000 or US$114,000 and the
shares and warrants were issued in lieu of a cash option payment of CND$150,000
due on July 7, 2004 to the Hinton Syndicate. These shares and warrants were
issued as option payments under the Hinton Syndicate Agreement in lieu of cash
and as permitted under the Hinton Syndicate Agreement. All of the members of the
Hinton Syndicate were shareholders of Yukon Gold. We relied on the exemption in
Rule 504 of Regulation D of the Securities Act.
On May 14, 2004, Yukon Gold borrowed US$56,250 from a single accredited investor
in the United States. Yukon Gold issued a promissory note to the lender that
provided that the promissory note could be converted into common shares of the
Company at US$0.745 per share and warrants to acquire common shares at $0.01 per
warrant. Each such warrant has an exercise price of $1.25 per share. The
conversion right does not become effective prior to the later of (i) the
one-year anniversary of the note or (ii) such time as Yukon Gold has registered
a portion of its shares under the Securities Act of 1933 and is a reporting
company under the Securities Exchange Act of 1934. In addition, Yukon Gold could
require conversion of the promissory note into shares of common stock and
warrants. Because the promissory note was issued subsequent to the filing with
the Securities and Exchange Commission of this registration statement, it is
possible - but not conceded by Yukon Gold - that this transaction was not exempt
from registration under Section 5 of the Securities Act of 1933 (the "Act")
because of the public nature of the registration statement. Yukon Gold believes
the transaction to be exempt by reason of the provisions of Section 4(2) of the
Act and Regulation D, Rule 506 thereunder. Should no exemption from Section 5
registration have been available for such transaction, Yukon Gold could be held
liable under Section 12(1) of the Act to the note holder for the purchase price
of the note, with interest thereon, less any income received thereon, upon the
tender of the note to the Company, or for damages if the note holder no longer
owns the note. Such an action would have to be brought in a court within one
year after the purchase of the note. To the extent that any such actions should
be filed and successfully litigated, Yukon Gold's operations, plans and ability
to finance business operations would be adversely affected.
-57-
UNDERTAKINGS
The undersigned Registrant hereby undertakes:
To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the Securities Act of
1933;
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement;
(iii) Include any additional or changed material information on the plan of
distribution; and
(iv) Remove from registration any of the securities that remain unsold at the
end of the offering.
That, for determining liability under the Securities Act, the Registrant shall
treat each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to be the
initial bona fide offering.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities, (other
than the payment by the Registrant of expenses incurred and paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding), is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
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SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Toronto, Canada on September 7, 2004.
YUKON GOLD CORPORATION, INC.
By: /s/ Stafford Kelley
Name: Stafford Kelley
Title: Director & Secretary Treasurer
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
SIGNATURE TITLE DATE
/s/ Warren Holmes Chairman of the Board and Chief September 7, 2004
Warren Holmes Executive Officer
/s/ Stafford Kelley Secretary/Treasurer and Director; September 7, 2004
Stafford Kelley Principal Accounting Officer
/s/ Peter Slack President and Director September 7, 2004
Peter Slack
/s/ Malcolm Slack Director September 7, 2004
Malcolm Slack
/s/ Richard Ewing Director September 8, 2004
Richard Ewing
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