AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
AUGUST 29, 2006
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.
55 York Street
Suite 401
Toronto, ON M5J 1R7
Telephone: 416-865-9790
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
726 Exchange Street; Suite 800
Buffalo, New York 14210
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 Securities Amount to be Proposed Maximum Proposed Maximum Amount of
To Be Registered registered offering price per aggregate offering Registration Fee
share (2) price (2)
Common Stock, 8,993,364 $1.35 $12,141,041 $1,299
Par Value $0.0001 per Share (1)
Total 8,993,364 $1.35 $12,141,041 $1,299
(1) Represents shares of common stock which may be re-sold by the Selling
Shareholders listed in this Registration Statement. See "SELLING SHAREHOLDERS
AND PLAN OF DISTRIBUTION."
(2) The offering price has been estimated solely for the purpose of calculating
the registration fee pursuant to Rule 457(C). The offering price is based on the
average of the last reported bid and ask price for our common stock on the OTC
Bulletin Board on August 29, 2006.
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.
(ii)
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.
8,993,364 SELLING STOCKHOLDERS SHARES OF COMMON STOCK
The Selling Shareholders named in this prospectus are offering 8,993,364 shares
of common stock of Yukon Gold Corporation, Inc. ("Yukon Gold" or the "Company").
The Selling Shareholders may offer to sell the shares of common stock being
offered in this prospectus at fixed prices, at prevailing market prices at the
time of sale, at varying prices or at negotiated prices. Our common stock is
traded on the National Association of Securities Dealers OTC Bulletin Board
under the symbol "YGDC." On August 29, 2006, the closing sale price of our
common stock on the OTC Bulletin Board was $1.35. In addition, our common stock
is traded on the Toronto Stock Exchange (the "TSX") under the symbol "YK" On
August 29, 2006, the closing sale price of our common stock on the TSX was $1.34
(CDN$1.49). We will not receive any of the proceeds of the sale of such shares
by the Selling Shareholders. We will pay all of the costs associated with this
registration statement and prospectus. See "SELLING SHAREHOLDERS AND PLAN OF
DISTRIBUTION."
BEFORE BUYING THE SHARES OF COMMON STOCK, CAREFULLY READ THIS PROSPECTUS,
ESPECIALLY THE RISK FACTORS BEGINNING ON PAGE 5 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 ______________, 2006.
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TABLE OF CONTENTS PAGE
Prospectus Summary ...................................................... 4
Summary Financial Data................................................... 5
Risk Factors............................................................. 5
Determination of Offering Price.......................................... 7
Dilution................................................................. 7
Description of Business.................................................. 7
Government Regulations of Mining in Canada .............................. 10
Gold Price Volatility.................................................... 13
Fiscal Year.............................................................. 13
Transfer Agent........................................................... 13
Employees................................................................ 13
Stock Option Plan........................................................ 13
Competition.............................................................. 15
Management's Discussion and Analysis or Plan of Operation ............... 16
Market for Common Equity and Related Stockholder Matters................. 23
Directors, Executive Officers, Promoters, Control Persons................ 29
Executive Compensation................................................... 33
Security Ownership of Certain Beneficial Owners and Management........... 36
Certain Relationships and Related Transactions........................... 37
Organization Within the Last Five Years.................................. 38
Description of Securities................................................ 39
Use of Proceeds.......................................................... 39
Determination of Offering Price.......................................... 39
Selling Shareholders and Plan of Distribution............................ 39
Legal Proceedings........................................................ 39
Legal Matters............................................................ 45
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Experts.................................................................. 46
Change In Auditors....................................................... 46
Disclosure of Commission Position on Indemnification for Securities Act
Liabilities............................................................. 46
How To Get More Information.............................................. 47
Index to Financial Statements............................................ 49
Audited Consolidated Financial Statements of Yukon Gold Corporation, Inc.
for the Years Ended April 30, 2006 and April 30, 2005.................. 50-85
Until ______________, 2006, 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.
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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
directly and 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 55 York Street, Suite 401, Toronto, Ontario Canada M5J 1R7. Our telephone
number is 416-865-9790 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 in the Yukon Territory. All of our business activities are
undertaken through YGC.
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
securities should be considered a high-risk investment because of the nature of
mineral exploration and development. Only investors who can afford to lose their
entire investment should invest in these securities.
CURRENCY. References to dollars are to United States dollars (US$) unless
otherwise indicated as being Canadian dollars (CDN$). As of April 30, 2006
(year-end) the currency exchange rate was approximately US$1.00 equals CDN$1.12.
As of August 1, 2006, the currency exchange rate was approximately US$1.00
equals CDN$1.13, as published by the Bank of Canada at
www.bank-banque-canada.ca. As many of our expenses are in Canadian dollars, the
amounts at April 30, 2006 (year-end) have been converted to US dollar
equivalents based on the April 30, 2006 conversion rate for amounts to be paid
in the future. Where the US dollar amounts for expenses for the year ended April
30, 2006 are expressed in the financial statements, the twelve month average
conversion rates were used to convert to US dollar equivalents.
EXPENSES OF OFFERING. We are paying all of the expenses relating to the
registration of the selling shareholders' shares and the securities to be sold
to the Subscribing Purchasers. We will not pay any commissions or expenses of
the sale of the shares by the Selling Shareholders.
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SUMMARY FINANCIAL DATA
The following summary financial data should be read in conjunction with
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION and the audited
CONSOLIDATED FINANCIAL STATEMENTS OF YUKON GOLD for the years ended April 30,
2006 and April 30, 2005, including the notes thereto contained elsewhere in this
Prospectus.
April 30, 2006 April 30, 2005
Revenues Nil Nil
Net Loss $ 1,855,957 $ 808,146
Loss per share-basic and diluted $ (0.17) $ (0.09)
Total Assets $ 2,842,553 $ 260,069
Total Liabilities $ 250,688 $ 783,046
Cash dividends declared per share Nil Nil
The total assets for the year ended April 30, 2006 includes cash and cash
equivalents for $2,412,126, restricted cash and restricted deposit for $136,164
and capital assets for $63,141. For the year ended April 30, 2005, total assets
include current assets of $255,291 and capital assets of $4,778. The significant
increase in current assets is due to cash and cash equivalent of $2,412,126 as
at April 30, 2006 as compared to $79,256 for the prior year. The increase in
cash and cash equivalent arose as the Company completed a private placement on
March 28, 2006 for net proceeds of approximately $3 million.
RISK FACTORS
1. WE DO NOT HAVE AN OPERATING BUSINESS
Yukon Gold has rights in certain mineral claims located in the Yukon Territory,
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 do not have sufficient working
capital to complete our exploration programs (including feasibility studies) and
we do not have any commitments to obtain additional financing. Further, we do
not have enough working capital to meet all of our contractual commitments to
acquire our mineral properties. 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 Mount Hinton Property and the results of
that exploration;
- our ability to raise the capital necessary to conduct this
exploration and preserve our interest in these mineral claims; and
- our ability to raise capital to develop the Marg Property, establish
a mining operation, and operate this mine in a profitable manner.
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Because we have no operating revenue, we expect to incur operating losses in
future periods as we continue to expend funds to explore and develop the Mount
Hinton and Marg Properties. Failure to raise the necessary capital to continue
exploration and development could cause us to go out of business.
3. OUR STOCK PRICE WILL BE HEAVILY INFLUENCED BY THE RESULTS OF DRILLING TESTS
THAT ARE BEING CONDUCTED IN THE YUKON TERRITORY IN THE SUMMER OF 2006.
We cannot predict the results of the drilling tests that are being conducted in
the summer of 2006. The results of these tests will heavily influence our
decisions on further exploration at the Marg Property and the Mount Hinton
Property and are likely to affect the trading price of our stock.
4. IF WE DEVELOP OTHER MINERAL RESOURCES, THERE IS NO GUARANTEE THAT PRODUCTION
WILL BE PROFITABLE.
Even if we find other commercial mineral resources, there is no assurance that
we will be able to mine them or that a mining operation would be profitable on
any of our properties. No feasibility studies have been conducted as of the date
of this report.
5. 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 report
as the "Mount Hinton Property". Our agreement with the Hinton Syndicate requires
us to make regular ongoing investments. If we fail to make these investments, we
will not earn an interest in these mineral claims and we may lose all of our
rights in the Mount Hinton Property. The Marg Acquisition Agreement also
requires the Company to make material deferred payments on December 31 of 2006,
2007 and 2008. If we are unable to raise sufficient capital to make these
payments we may lose all of our rights in the Marg Property.
6. WEATHER INTERRUPTIONS IN THE YUKON TERRITORY MAY DELAY OUR PROPOSED
EXPLORATION OPERATIONS.
Weather factors will significantly affect our exploration efforts. Currently, we
can only work above ground at the Mount Hinton and Marg Properties from late May
until early October of each year, depending upon how early snowfall occurs.
7. WE COULD ENCOUNTER REGULATORY AND PERMITTING DELAYS.
We could face delays in obtaining permits to operate on the Mount Hinton and
Marg Properties. Such delays could jeopardize financing, if any is available, in
which case we would have to delay or abandon work on one or both of the
properties.
8. GOING CONCERN QUALIFICATION
The Company has included a "going concern" qualification in the Consolidated
Financial Statements 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/or locate ore resources, as to which in each case 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.
-6-
9. THERE ARE PENNY STOCK SECURITIES LAW CONSIDERATIONS THAT COULD LIMIT YOUR
ABILITY TO SELL YOUR SHARES.
Our common stock is considered a "penny stock" and the sale of our stock by you
will be subject to 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, 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.
10. OUR BUSINESS IS AFFECTED BY CHANGES IN COMMODITY PRICES
Our ability to develop our mineral properties and the future profitability of
the Company is directly related to the market price of certain minerals. The
sharp rise in commodity prices over the past year has resulted in increased
investor interest in mineral exploration companies. The Company has benefited
from this trend, but like other companies in this sector, the Company would be
negatively affected if commodity prices were to fall.
11. OUR BUSINESS IS SUBJECT TO CURRENCY RISKS
The Company conducts some of its business activities in Canadian dollars.
Consequently, the Company is subject to gains or losses due to fluctuations in
Canadian currency relative to the U.S. dollar.
DETERMINATION OF OFFERING PRICE
The offering price has been estimated solely for the purpose of calculating the
registration fee payable to the Securities and Exchange Commission in connection
with this prospectus. The offering price was based on the average of the last
reported bid and ask price for our common stock on the OTC Bulletin Board on
August 29, 2006.
DILUTION
We will likely be required to issue more common stock from treasury in order to
raise additional capital. 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 explore and, if
warranted and feasible, to develop our interest in the mineral claims located:
(i) in the Mayo Mining District of the Yukon Territory, Canada (which we refer
to herein as the "Mount Hinton Property"), which we hold through our wholly
owned subsidiary, YGC and (ii) in the central Yukon Territory of Canada,
approximately 20 miles from the Mount Hinton Property (which we refer to herein
as the "Marg Property"). 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.
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THE MARG PROPERTY
The Marg Property consists of 402 contiguous mineral claims covering
approximately 20,000 acres. Access to the claim group is possible either by
helicopter, based in Mayo, Yukon Territory, Canada, located approximately 80 km
to the southwest or by small aircraft to a small airstrip located near the Marg
deposit. A 50 kilometer winter road from Keno City to the property boundary was
completed in 1997. The camp site and some equipment remain in tact at the site.
The ore body at the site contains a total of 5,527,000 metric tons of a drill
indicated and inferred resource with an average width of 6.0 metres and average
grade of 1.76% copper, 2.46% lead, 4.60% zinc, 59.5 grams silver and 1 gram gold
per tonne. The ore body is contained in four zones with strike lengths from 650
meters to 1,200 meters.
Yukon Gold believes that exploration potential within the Marg Property is good.
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.
In March of 2005, our wholly owned Canadian subsidiary, YGC, acquired from
Medallion Capital Corp. ("Medallion") all of Medallion's rights to purchase and
develop the Marg Property which consists of 402 contiguous mineral claims
covering approximately 20,000 acres located in the central Yukon Territory of
Canada. The price paid by the Company was Medallion's cost to acquire the
interest. Medallion is owned and controlled by a former director of the Company,
Stafford Kelley. The rights acquired by YGC arise under a Property Purchase
Agreement between Medallion and Atna Resources Ltd. ("Atna"), hereinafter
referred to as the "Marg Acquisition Agreement." Under the terms of the Marg
Acquisition Agreement, Medallion paid $119,189 (CDN$150,000 ) in cash and
committed to deliver to Atna 133,333 common shares of Yukon Gold. Pursuant to an
assignment by Medallion, YGC assumed all of the rights and obligations of
Medallion under the Marg Acquisition Agreement, including the obligation to
provide common stock of Yukon Gold. The Company agreed to make subsequent
payments under the Marg Acquisition Agreement of: (i) $43,406 (CDN$50,000) cash
and an additional 133,333 common shares of Yukon Gold on or before December 12,
2005 (paid and issued); (ii) $89,445 (CDN$100,000) cash and an additional
133,334 common shares of Yukon Gold on or before December 12, 2006; (iii)
$89,445 (CDN$100,000) cash on or before December 12, 2007; and (iv) $178,891
(CDN$200,000) in cash and/or common shares of Yukon Gold (or some combination
thereof to be determined) on or before December 12, 2008. Upon the commencement
of commercial production at the Marg Property, if any, the Company will pay to
Atna $894,454 (CDN$1,000,000) in cash and/or common shares of Yukon Gold, or
some combination thereof to be determined.
THE MOUNT HINTON PROPERTY
The Mount Hinton Property consists of 273 mineral claims covering approximately
14,000 acres in the Mayo Mining District of the Yukon Territory, Canada. 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 claims are located adjacent to the Keno
Hill Mining Camp, approximately 6 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. In 2002, we conducted a program to
further evaluate a potential resource on the property. In 2003 and 2004 we
employed Archer Cathro & Associates (1981) Ltd., a Vancouver, British Columbia
geology firm, to continue the exploration and provide a comprehensive report on
the claims. We are conducting further exploration of the site during the summer
of 2006, as further described in Management's Discussion and Analysis or Plan of
Operations herein. Mount Hinton 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 wholly owned Canadian subsidiary, YGC, also holds an option from the Hinton
Syndicate, a private syndicate consisting of four individuals, with whom we have
an agreement to acquire a 75% interest in the 273 mineral claims covering
approximately 14,000 acres in the Mayo Mining District of the Yukon Territory in
Canada.
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. The terms of our agreement with
the Hinton Syndicate (the "Hinton Syndicate Agreement") are outlined below. The
Hinton Syndicate Agreement was entered into in July of 2002 and amended as of
July 7, 2005.
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The schedule of Property Payments and Work Programs and the status of payment
are as follows:
PROPERTY PAYMENTS
-----------------
a. On execution of the July 7, 2002 Agreement $ 19,693 CDN$ 25,000 - Paid
b. On July 7, 2003 $ 59,078 CDN$ 75,000 - Paid
c. On July 7, 2004 $ 118,157 CDN$150,000 - Paid
d. On January 2, 2006 $ 125,313 CDN$150,000 - Paid
e. On July 7, 2006 $ 134,168 CDN$150,000 - Paid
f. On July 7, 2007 $ 134,168 CDN$150,000
g. On July 7, 2008 $ 134,168 CDN$150,000
TOTAL $ 724,745 CDN$850,000
WORK PROGRAM-EXPENDITURES TO BE INCURRED IN THE FOLLOWING PERIODS;
a. July 7/02 to July 6/03 $ 118,157 CDN$ 150,000 - Incurred
b. July 7/03 to July 6/04 $ 196,928 CDN$ 250,000 - Incurred
c. July 7/04 to July 6/05 $ 256,006 CDN$ 325,000 - Incurred
d. July 7/05 to Dec.31/06 $ 670,841 CDN$ 750,000 - Amended*
e. Jan. 1/07 to Dec 31/07 $ 894,454 CDN$1,000,000
f. Jan. 1/08 to Dec 31/08 $ 1,118,068 CDN$1,250,000
g. Jan 1/09 to Dec 31/09 $ 1,341,682 CDN$1,500,000
TOTAL $ 4,596,136 CDN$5,225,000
* By letter agreement dated August 17, 2006, the Hinton Syndicate agreed
to allow the Company to defer a portion of the Work Program expenditures
scheduled to be incurred by December 31, 2006. The agreement to defer such
Work Program expenditures was preceded by the failure of drilling
equipment at the Mount Hinton Site. As a result, the Company is now
allowed to defer the expenditure of approximately $313,000 to $358,000
(CDN$350,000 to CDN$400,000) until December 31, 2007. The company has
withdrawn funds in its dedicated Mount Hinton bank account and will
replace such funds to meet such deferred expenditures by December 31,
2007. All other Property Payments and Work Program expenditures due
through the date of this report have been made and incurred.
Provided that all Property Payments and Work Program expenditures are made as
scheduled, Yukon Gold will have earned the interest shown below at the following
levels of investment:
25% interest upon Work Program expenditures of $ 1,341,682
(CDN$1,500,000); 50% interest upon Work Program expenditures of $
2,236,136 (CDN$2,500,000); and 75% interest upon Work Program expenditures
of $ 4,596,136 (CDN$5,225,000)
In some cases, payments made to service providers include amounts advanced to
cover the cost of future work. These advances are not loans but are considered
"incurred" exploration expenses under the terms of the Hinton Syndicate
Agreement. Section 2.2(a) of the Hinton Syndicate Agreement provides that costs
shall be deemed to have been "incurred" when YGC has contractually obligated
itself to pay for such costs or such costs have been paid, whichever should
first occur."
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The Hinton Syndicate Agreement contemplates that upon the earlier of: (i) a
production decision or (ii) investment of $4,596,136 (CDN$5,225,000) or (iii)
YGC has a minority interest and decides not to spend any more money on the
project, YGC's 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, the party with the majority interest would control
the joint venture. Once a 75% interest is earned by YGC, as described above, YGC
has a further option to acquire the remaining 25% interest in the mineral claims
for a payment of $4,472,272 (CDN$5,000,000).
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
the entire 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 returns 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 recommend for
appointment (but not nominate) one member to the board of directors of the Yukon
Gold.
The Hinton Syndicate members each have the option to receive their share of
property payments in stock of Yukon Gold at a 10% discount to the market. YGC
and Yukon Gold also have the option to pay 40% of any property payment due after
the payment on January 2, 2006 with common stock of Yukon Gold. As of July 7,
2006, Yukon Gold issued to the Hinton Syndicate 43,166 shares of its common
stock, based upon a valuation adopted by the Board of Yukon Gold of $1.39 per
share, as partial payment of the July 7, 2006 Property Payment. On July 7, 2006
the Company issued 43,166 common shares and paid $80,501 (CDN$90,000) in cash in
settlement of the property payment due on July 7, 2006 on the Mount Hinton
Property. The shares represent 40% of the total $134,168 (CDN$150,000) payment
and were valued at $1.24 (CDN$1.39) each.
The Hinton Syndicate Agreement pertains to an "area of interest" which includes
the area within ten kilometers of the outermost boundaries of the 273 mineral
claims, which constitute our mineral properties. Either party to the Hinton
Syndicate Agreement may stake claims outside the 273 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 Agreement provides both parties (YGC and the 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.
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 they are entitled to do the work. There is no requirement in the
Hinton Syndicate Agreement that these parties perform development work.
REGULATIONS GOVERNING MINING IN CANADA
GOVERNING LAW
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.
-10-
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.
With respect to the legislation, rules and regulations referred to above, we
believe that we, and the Mount Hinton Property and the Marg Property, 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.
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 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 a Class III Permit LQ00106, which is valid until August 7,
2008. No other permits are required at this time or for the exploration work
contemplated in the foreseeable future. Further permitting will be required if
we propose to commence a mining operation, but cannot be applied for until ore
reserves calculations and a mine plan are prepared.
-11-
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.
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 $ 416 $ 319
2004 $ 454 $ 375
2005 $ 536 $ 411
2006* $ 725 $ 525
*As of August 1, 2006.
On August 1, 2006, the London PM gold price fix was US$637 per ounce.
FISCAL YEAR
Our fiscal year end is April 30.
TRANSFER AGENT
Our transfer agent is Equity Transfer Services, Inc. with offices at 120
Adelaide Street W. Suite 420, Toronto, Ontario M5H 4C3, phone number
416-361-0930, as transfer agent for our shares of common stock. The transfer
agent is responsible for all record-keeping and administrative functions in
connection with the common shares of stock.
-12-
EMPLOYEES
We have two full-time employees, our President and our Corporate Secretary. We
rely primarily upon consultants for certain services. Our Chief Financial
Officer, our Vice President - Development and our Vice President - Mining
Operations are consultants to the Company and provide services on an "as needed"
basis. We are not subject to a union labor contract or collective bargaining
agreement. We have no employment agreements with any of our employees and we
carry no key-man life insurance.
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 is administered by the Board of Directors.
On May 23, 2005, Yukon Gold filed a registration statement on Form S-8 with the
SEC pursuant to which it registered 3,300,000 shares of common stock reserved
for issuance upon exercise of options granted pursuant to the Plan. On February
10, 2006 the board of directors adopted a policy of not accepting promissory
notes from option holders as payment for the exercise of options.
The following summarizes options outstanding as at April 30:
EXPIRY DATE OPTION PRICE NUMBER OF SHARES
PER SHARE 2006 2005
December 15, 2006 0.75 1,100,000 1,750,000
January 5, 2007 0.75 84,000 84,000
June 28, 2007 0.55 490,000 -
April 15, 2008 0.58 20,000 -
December 13, 2007 1.19 1,026,000 -
December 13, 2007 1.19 88,000 -
January 20, 2008 0.85 150,000 -
----------- -----------
2,958,000 1,834,000
----------- -----------
Weighted average exercise price at end of year 0.89 0.75
----------- -----------
NUMBER OF SHARES
2006 2005
Outstanding, beginning of year 1,834,000 -
Granted 1,784,000 1,834,000
Expired - -
Exercised (10,000) -
Forfeited - -
Cancelled (650,000) -
Outstanding, end of year 2,958,000 1,834,000
Exercisable, end of year 1,269,450 302,176
-13-
Stock options granted to the named executive officers during the fiscal year
ended April 30, 2006 are provided in the table below:
- ------------------------ -------------- ---------------- -----------------------------------------------------
% of Total
Securities Options/SARs -----------------------------------------------------
Under Granted to Exercise or Market Value Expiration
Name Options/SARs Employees in Base Price of Securities Date
Granted Fiscal year (1) ($/Security) Underlying
(#) Options/SARs
on the Date of
Grant
($/Security)
- ------------------------ -------------- ---------------- -------------- ----------------- ------------------
Howard Barth
President and CEO 250,000 N/A (3) $ 0.55 $ 0.55 June 28, 2007
- ------------------------ -------------- ---------------- --------------- ----------------- ------------------
Kenneth Hill
Vice President 150,000 8.4% $ 0.85 $ 0.85 January 20, 2008
Mining Operations
- ------------------------ -------------- ---------------- -------------- ----------------- ------------------
W. Warren Holmes,
Former CEO. Nil N/A N/A N/A N/A
- ------------------------ -------------- ---------------- -------------- ----------------- ------------------
Rakesh Malhotra
CFO 250,000 14% $ 1.19 $ 1.19 December 13, 2007
- ------------------------ -------------- ---------------- -------------- ----------------- ------------------
Rene Galipeau
Former CFO (2) Nil N/A N/A N/A N/A
- ------------------------ -------------- ---------------- -------------- ----------------- ------------------
Lisa Lacroix
Corporate Secretary 76,000 4.3% $ 1.19 $ 1.19 December 13, 2007
- ------------------------ -------------- ---------------- -------------- ----------------- ------------------
Paul Gorman
Vice President 200,000 11.2% $ 1.19 $ 1.19 December 13, 2007
Corporate Development
- ------------------------ -------------- ---------------- -------------- ----------------- ------------------
(1) Based on total number of options granted to directors/officers/consultants
of the Company pursuant to the 2003 Stock Option plan during the fiscal
year ended April 30, 2006.
(2) Due to the resignation of Mr. Galipeau, the Company cancelled 200,000 of
his 250,000 options that had been granted on December 15, 2004.
(3) Mr. Barth's options were issued to him as a director of the Company on
June 28, 2005.
During the fiscal year ended April 30, 2006 there has been no re-pricing of
stock options held by any Named Executive Officer
-14-
The following table provides detailed information regarding options exercised by
the named executive officers during the fiscal year ended April 30, 2006 and
options held by the named executive officers as at April 30, 2006.
Name and Shares Value # of shares under-
Principal acquired on Realized lying options
Position Exercise (#) ($) at year end
Howard Barth
President 10,000 4,500 240,000
Kenneth Hill*
Vice President, Mining 0 N/A 400,000
Operations
W. Warren Holmes 0 N/A 250,000
Former CEO
Rakesh Malhotra 0 N/A 250,000
CFO
Rene Galipeau 0 N/A 50,000
Former CFO
Lisa Lacroix 0 N/A 100,000
Corporate Secretary
Paul Gorman 0 N/A 248,000
Vice President
Corporate Development
* Subsequent to the year ended April 30, 2006, Mr. Kenneth Hill resigned as
President and CEO of the Company. He was replaced by Mr. Howard Barth as
President and CEO. Mr. Hill is staying with the Company as a director and in an
officer's capacity by accepting the position of Vice President-Mining
Operations.
The Company does not have a long term incentive plan, pursuant to which cash or
non-cash compensation intended to serve as an incentive for performance (whereby
performance is measured by reference to financial performance or the price of
the Company's securities), was paid or distributed to any executive officers
during the three most recent completed years.
COMPETITION
There is aggressive competition within the industry to discover and acquire
properties considered to have commercial potential. We compete with other
companies for exploration resources including equipment and drilling teams
available to work in the Yukon Territory. In addition, we compete with others in
efforts to obtain financing to explore and develop mineral properties.
-15-
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
DISCUSSION OF OPERATIONS & FINANCIAL CONDITION
TWELVE MONTHS ENDED APRIL 30, 2006
Yukon Gold has no source of revenue and we continue to operate at a loss. We
expect our operating losses to continue for so long as we remain in an
exploration stage and perhaps thereafter. As at April 30, 2006, we had
accumulated losses of $3,231,792. These losses raise substantial doubt about our
ability to continue as a going concern. Our ability to emerge from the
exploration stage and conduct mining operations is dependent, in large part,
upon our raising additional equity financing.
As described in greater detail below, the Company's major endeavor over the year
has been its effort to raise additional capital to meet its ongoing obligations
under both the Hinton Syndicate Agreement and the Marg Acquisition Agreement and
to pursue its exploration activities.
Having obtained material financing, we implemented exploration programs at both
the Mount Hinton and Marg Properties.
SELECTED ANNUAL INFORMATION
April 30, 2006 April 30, 2005
Revenues Nil Nil
Net Loss $ 1,855,957 $ 808,146
Loss per share-basic and diluted $ (0.17) $ (0.09)
Total Assets $ 2,842,553 $ 260,069
Total Liabilities $ 250,688 $ 783,046
Cash dividends declared per share Nil Nil
The total assets for the year ended April 30, 2006 includes cash and cash
equivalents for $2,412,126, restricted cash and restricted deposit for $136,164
and capital assets for $63,141. For the year ended April 30, 2005, total assets
include current assets of $255,291 and capital assets of $4,778. The significant
increase in current assets is due to cash and cash equivalent of $2,412,126 as
at April 30, 2006 as compared to $79,256 for the prior year. The increase in
cash and cash equivalent arose as the Company completed a brokered private
placement on March 28, 2006 for net proceeds of approximately $3 million.
REVENUES
No revenue was generated by the Company's operations during the years ended
April 30, 2006 and April 30, 2005.
NET LOSS
The Company's expenses are reflected in the Consolidated Statements of
Operations under the category of Operating Expenses. To meet the criteria of
United States generally accepted accounting principles ("GAAP"), all exploration
and general and administrative costs related to projects are charged to
operations in the year incurred.
The significant components of expense that have contributed to the total
operating expense are discussed as follows:
(a) Stock-based Compensation
Included in the operating expenses for the year ended April 30, 2006 is
stock option compensation expense of $225,246 as compared with $nil for the
prior year ended April 30, 2005. Stock-based compensation expense represents
approximately 11% of the total operating expense (net of exploration tax credit)
for the year ended April 30, 2006. These amounts have been calculated in
accordance with generally accepted accounting principles in the United States,
whereby the fair value of the stock options was determined at the time of grant
of stock options to the Company's directors, officers and consultants, and
expensed over the vesting term, in terms of the Black-Scholes option pricing
model.
-16-
(b) General and Administrative Expense
Included in operating expenses for the year ended April 30, 2006 is
general and administrative expense of $859,953, as compared with $390,679 for
the year ended April 30, 2005. General and administrative expense represents
approximately 42% of the total operating expense (net of the exploration tax
credit) for the year ended April 30, 2006 and approximately 42% of the total
operating expense (net of the exploration tax credit) for the year ended April
30, 2005. General and administrative expense increased by $469,274 in the
current year, compared to the prior year. The increase in this expense is mainly
due to the additional costs incurred to list the Company on the Toronto Stock
Exchange, increase in payroll and consulting fees, (including costs of issuance
of 150,000 common shares to Endeavour Holdings Inc., an outside consultant that
were expensed at $130,500) and severance costs of $181,610 expensed during the
year as compensation to a consultant who was a former director.
(c) Project Expense
Included in operating expenses for the year ended April 30, 2006 is
project expenses of $933,326 as compared with $532,333 for the year ended April
30, 2005. Project expense is the most significant expense and it represents
approximately 46% of the total operating expense (net of exploration tax credit)
for the year ended April 30, 2006 and approximately 58% of the total operating
expense (net of exploration tax credit) for the year ended April 30, 2005.
Project expense increased by $400,993 in the current year, as compared to the
prior year. The increase in this expense is mainly due to the additional
expenses incurred by the Company on exploration of both the Mount Hinton
Property claims and its Marg Property in the Yukon Territory of Canada. Only in
March of 2005, the Company acquired the rights to purchase 100% of the Marg
Property. Besides acquisition costs, which were payment of $119,189
(CDN$150,000) and issue of 133,333 common shares valued at $100,000 that were
included in project expense for the prior year ended April 30, 2005, no
exploration expenditures were incurred. During the current year ended April 30,
2006, the Company besides making an additional payment of $43,406 (CDN$50,000)
and issuing 133,333 common shares valued at $100,000 which formed part of
project expenses, also commenced exploration expenditure on the Marg Property.
(d) Exploration Tax Credit
Included as a credit to operating expenses for the year ended April 30,
2006 is an exploration tax credit of $144,414, as compared to $116,050 for the
year ended April 30, 2005. The Company has a claim to the Yukon exploration tax
credit, since it maintains a permanent establishment in the Yukon Territory of
Canada and has incurred eligible mineral exploration expenses as defined by the
federal income tax regulations of Canada. The Company's expectation of receiving
this credit is based on the history of receiving past tax credits. The Company
will be filing tax returns to claim this credit.
EXPLORATION AT MOUNT HINTON
- ---------------------------
While high grade gold-silver veins were discovered and sampled by United Keno
Hill Mines (UKHM) mainly during the period between 1965 and 1968, the Mount
Hinton Property has received very little modern exploration and the full
economic potential remains largely untested. Past efforts to fully evaluate the
vein structures were frustrated by the steep terrain and difficult overburden
conditions.
During the summer of 2006, we are undertaking an exploration program to
delineate the vertical and lateral extent of some of the known vein structures
at the site utilizing a new and improved reverse circulation drill and to carry
out the geochemical surveys, prospecting and trenching that will help identify
additional mineralized targets for future drilling and exploration programs. A
second objective of the summer 2006 exploration program is to determine whether
it would be more effective and feasible to evaluate the deposits by diamond
drilling from an underground adit/ramp and where best to locate this underground
development if feasible.
-17-
The 2006 summer program, which is underway as of mid-July, 2006, has budgeted
expenditures of $670,841 (CDN$750,000) and will focus on several areas on this
large property. The estimated costs of the program will include:
US$ CDN $
o 4400 metres drilling and drill site access and preparation $ 348,800 $ 390,000
o Geological support and management $ 137,700 $ 154,000
o Field support $ 87,700 $ 98,000
o Geochemical and rock analyses $ 96,600 $ 108,000
--------- ---------
$ 670,800 $ 750,000
On May 16, 2006 the Company accepted a proposed work program, budget and cash
call schedule for the Mount Hinton project totaling $717,800 (CDN$802,500) for
the 2006 Work Program. On May 16, 2006 the Company paid $136,404 (CDN$152,500)
to the contractor, on June 15, 2006 the Company paid $223,614 (CDN$250,000) to
the contractor, and on July 15, 2006 the Company paid $223,614 (CDN$250,000) to
the contractor - the first three of the five cash call payments. The fourth
payment of $89,445 (CDN$100,000) is due on August 15, 2006 and the fifth payment
of $44,723 (CDN$50,000) is due on September 15, 2006.
Drilling efforts at the Mount Hinton site were hampered by equipment failures
during July and August of 2006. As of August 17, 2006, the Company terminated
its summer program at the Mount Hinton site. By letter agreement dated August
17, 2006, the Hinton Syndicate agreed to allow the Company to defer a portion of
the Work Program expenditures scheduled to be incurred by December 31, 2006. As
a result, the Company was allowed to defer the expenditure of approximately
$313,000 to $358,000 (CDN$350,000 to CDN$400,000) until December 31, 2007.
The Company plans to resume its drilling program in the summer of 2007.
Depending on the results and success of the 2007 program and Yukon Gold's
ability to raise sufficient funds, a decision will be made in late 2007, as to
which of the following programs are warranted. The options are as follows:
1. Continue drilling to further evaluate the known vein systems as well
as other targets that may have resulted from the 2006 geochemical
surveys and prospecting program, or
2. Develop an underground ramp from which diamond drilling and
underground testing of some of the vein systems can be carried out,
or
3. Convert to a Joint Venture arrangement with the Hinton Syndicate as
provided in the Hinton Syndicate Agreement whereby Yukon Gold would
retain a 25% interest in the property having met the expenditure of
$1,341,682 (CDN$1,500,000) in work programs on the Mount Hinton
Property. Yukon Gold must spend $894,454 (CDN$1,000,000) in 2007
plus the deferred expenditures of approximately $313,000 to $358,000
(CDN $313,000 to CDN$400,000) as referred to above, in order to meet
its work obligation under the Mount Hinton Agreement, unless it
elects to convert to the joint venture arrangement.
Management is currently evaluating the cost and time period involved to acquire
enough data on the vein systems to estimate resources and to study the
feasibility of possible production.
EXPLORATION AT MARG PROPERTY
- ----------------------------
During the summer of 2006, we are undertaking an exploration program at the Marg
Property to extend the currently known resources toward a target of 9 to 10
million tones, which we believe to be the required threshold to proceed with the
next stage of exploration which includes an extensive feasibility study. This
stage is sometimes referred to as the "Feasibility Stage." If a feasibility
study is warranted, we will engage a consultant to determine whether the
resource is economically able to support a mining operation. Currently there is
an estimated 5.5 million tons of indicated and inferred resources outlined on
the property. Some of the budgeted drilling will be used to convert some
resources categorized as "inferred" to resources categorized as "indicated"
resources. So called "indicated" resources are better identified and quantified
based upon industry standards of measurement. A total of $1,565,295
(CDN$1,750,000) has been budgeted to meet these objectives in 2006.
-18-
The program is made up of the following components and budgeted expenditures:
$US $CDN
o 4400 metres of diamond drilling $ 694,097 $ 776,000
o Geological support services $ 271,020 $ 303,000
o Airborne geophysical survey $ 134,168 $ 150,000
o Helicopter support $ 170,840 $ 191,000
o Field support and management $ 295,170 $ 330,000
---------- ----------
$1,565,295 $1,750,000
On May 16, 2006 the Company accepted a proposed work program, budget and cash
call schedule for the Marg Property totaling $1,674,866 (CDN$1,872,500) for the
2006 Work Program. On May 15, 2006 the Company paid $199,016 (CDN$222,500) to
the contractor, on June 1, 2006 the Company paid $536,673 (CDN$600,000) to the
contractor, and on July 20, 2006 the Company paid $357,782 (CDN$400,000) to the
contractor - the first three of the five cash call payments. The fourth payment
of $357,782 (CDN$400,000) is due on August 20, 2006 and the fifth payment of
$223,613 (CDN$250,000) is due on September 20, 2006.
Upon the completion of the summer 2006 exploration program at the Marg Property
we will have determined the near surface lateral extent of the ore zones and, to
a lesser extent, their possible extension to depth. Most of the new resources
would be classified as "inferred" and the next programs will be designed to
confirm those resources into the "indicated" category. If, at this point,
sufficient resources were indicated (9-10 million tonnes at current resource
grades) an underground program would also be fast tracked to confirm the
continuity and grades of the ore zones, evaluate potential mining methods and
collect bulk samples of the ore for metallurgical and environmental testing. A
winter road to mobilize the underground contractor's mining equipment, plant and
camp would be established, we project in early 2007. If warranted, the
underground program would be carried out during the summer of 2007 followed by a
definitive feasibility study to be completed by the end of the first quarter of
2008.
Should the 2006 summer exploration program not succeed in increasing the
resource to 9 to 10 million tonnes along strike, we believe there still exists
good potential to expand the Marg Property resources to depth and down plunge to
the west. Additionally, there are other untested showings identified as the Jane
and Leyla on the Marg Property which have high geochemical responses and warrant
follow-up drilling.
We note that the current high exploration activity in the Yukon Territory and
elsewhere has caused a high demand for mining personnel, including diamond
drillers, which may cause a significant delay in the progress of these programs
and their milestones. To date, the programs at the Marg Property have been
delayed by about one month due to the shortage of drillers.
LIQUIDITY AND CAPITAL RESOURCES
The following table summarizes the Company's cash flows and cash in hand:
April 30, 2006 April 30, 2005
Cash and cash equivalent $ 2,412,126 $ 79,256
Working capital $ 2,404,424 $ (527,755)
Cash used in operating activities $ (1,411,404) $ (820,429)
Cash used in investing activities $ (67,813) $ nil
Cash provided by financing activities $ 3,806,106 $ 756,301
-19-
As at April 30, 2006 the Company had working capital of $2,404,424 as compared
to a deficit of $527,755. During the year the Company raised (net) $3,538,147 by
issuing common share units and common shares for cash. It also raised (net)
$525,680 through the sale of warrants. The Company converted $200,000 of the
demand promissory notes to common stock and repaid the outstanding balance of
demand promissory notes of $298,649. The Company also invested $67,813 (prior
year $nil) in capital assets in the form of computer equipments, furniture and
fixtures and office equipment.
OFF-BALANCE SHEET ARRANGEMENT
The Company has a term deposit of $17,889 (CDN$20,000) with a Canadian financial
institution which earns interest at 2.5% per annum and matures on April 26,
2007. This deposit has been assigned to the financial institution to enable the
financial institution to issue an Irrevocable Letter of Credit to The First
Nation of Na Cho Nyak Dun ("NND") which exercises certain powers over land use
and environment protection within the Yukon Territory of Canada. The Company
required access to move heavy equipment over the land controlled by NND and
therefore posted this security bond so that if the Company fails to comply with
reclamation requirements, then the security bond will be available to NND to
complete the work or may form part of the compensation package.
CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
In addition to the contractual obligations and commitments of the Company to
acquire its mineral properties as described in "Item 2 - Description of the
Property," the following are additional contractual obligations and commitments
as at April 30, 2006.
Obligation under Capital Lease
- ------------------------------
The following is a summary of future minimum lease payments under the capital
lease, together with the balance of the obligation under the lease as of April
30, 2006.
Years ending April 30,
2007 $ 3,199 (CDN$ 3,576)
2008 $ 3,199 (CDN$ 3,576)
2009 $ 3,199 (CDN$ 3,576)
2010 $ 3,199 (CDN$ 3,576)
2011 $ 3,199 (CDN$ 3,576)
2012 $ 758 (CDN$ 847)
------------------------------------------------------------
Total minimum lease payments $ 16,753 (CDN$18,727)
Less: Deferred Interest $ 2,097 (CDN$ 2,344)
------------------------------------------------------------
$ 14,656 (CDN$16,383)
Current Portion $ 2,792 (CDN$ 3,121)
------------------------------------------------------------
Long-Term Portion $ 11,864 (CDN$13,262)
Flow-Through Share Subscription
The Company entered into "flow-through" share subscription agreements during the
year ended April 30, 2006 pursuant to which we committed to incur on or before
December 31, 2006, a total of $198,750 of qualifying Canadian exploration
expenses as described in the Income Tax Act of Canada. The Company has assigned
to the holders of the "flow through" shares tax credits for such exploration
expenses. As of April 30, 2006 an expenditure of $80,475 has been incurred and
$118,275 has been spent. Commencing March 1, 2006 the Company is liable to pay a
tax of approximately 5% per annum, calculated monthly on the unspent portion of
the commitment.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 2005, the FASB issued an interpretation of Statement No. 143,
"Accounting for Asset Retirement Obligations". This interpretation clarifies
that the term "conditional asset retirement obligation" as used in the Statement
No. 143, refers to a legal obligation to perform an asset retirement activity in
which the timing and (or) method of settlement are conditional on a future event
that may or may not be within the control of the entity. The obligation to
perform the asset retirement activity is unconditional even though uncertainty
exists about the timing and (or) method of settlement. Thus, the timing and (or)
method of settlement may be conditional on a future event. Accordingly, an
entity is required to recognize a liability for the fair value of a conditional
asset retirement obligation if the fair value of the liability can be reasonably
estimated.
-20-
The fair value of a liability for the conditional asset retirement obligation
should be recognized when incurred - generally upon acquisition, construction,
or development and (or) through the normal operation of the asset. Uncertainty
about the timing and (or) method of settlement of a conditional asset retirement
obligation should be factored into the measurement of the liability when
sufficient information exist. Statement No. 143 acknowledges that in some cases,
sufficient information may not be available to reasonably estimate the fair
value of an asset retirement obligation. This interpretation also clarifies when
an entity would have sufficient information to reasonable estimate the fair
value of an asset retirement obligation. This interpretation is effective no
later than the end of fiscal years after December 15, 2005. Management does not
expect FASB interpretation to the Statement No. 143 to have an impact to the
Company's consolidated financial position or consolidated results of operations
and cash flows.
In May 2005, the FASB issued Statement No. 154, "Accounting Changes and Error
Corrections", a replacement of APB Opinion 20, "Accounting Changes" and FASB
Statement No. 3, "Reporting Accounting Changes in Interim Financial Statements."
This Statement changes the requirements for the accounting for and reporting of
a change in accounting principle. APB Opinion 20 previously required that most
voluntary changes in accounting principles be recognized by including in net
income of the period of the change the cumulative effect of changing to the new
accounting principle.
FASB Statement No. 154 requires retrospective application to prior periods'
financial statements of changes in accounting principle, unless it is
impracticable to determine either the period specific effects or the cumulative
effect of the change. This statement is effective for accounting changes and
corrections of errors made in fiscal periods that begin after December 15, 2005.
Management does not anticipate this statement will impact the Company's
consolidated financial position or consolidated results of operations and cash
flows.
In February 2006, the FASB issued Statement No. 155, "Accounting for Certain
Hybrid Financial Instruments", an amendment of FASB Statement No.133,
"Accounting for Derivative Instruments and Hedging Activities" and FASB
Statement No. 140, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities." This Statement permits fair value re
measurement for any hybrid financial instrument that contains an embedded
derivative that otherwise would require bifurcation; clarifies which
interest-only strips and principal-only strips are not subject to the
requirements of Statement No. 133, establishes a requirement to evaluate
interests in securitized financial assets to identify interests that are
freestanding derivatives or that are hybrid financial instruments that contain
an embedded derivative requiring bifurcation; clarifies that concentrations of
credit risk in the form of subordination are not embedded derivatives and amends
Statement 140 to eliminate the prohibition on a qualifying special-purpose
entity from holding a derivative financial instrument that pertains to a
beneficial interest other than another derivative financial instrument.
Management does not anticipate this Statement will impact the Company's
consolidated financial position or consolidated results of operations and cash
flows.
In March 2006, the FASB issued Statement No. 156, "Accounting for Servicing of
Financial Assets", an amendment of FASB Statement No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities."
This Statement amends Statement No. 140 with respect to the accounting for
separately recognized servicing assets and servicing liabilities. Management
does not anticipate this Statement will impact the Company's consolidated
financial position or consolidated results of operations and cash flows.
SFAS NO. 123R- In December 2004, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No. 123R,
"Share-Based Payment" ("FAS 123R"), which revised FAS 123 "Accounting for
Stock-Based Compensation". FAS 123R requires measurement and recognition of the
costs of employee services received in exchange for an award of equity
instruments based on the grant-date fair value of the award, recognized over the
period during which an employee is required to provide service in exchange for
such award. Implementation is required as of the first interim or annual
reporting period that begins after December 15, 2005 for public entities that
file as small business issuers. Management intends to comply with this statement
at the scheduled effective date commencing May 1, 2006.
-21-
The Company believes that the above standards would not have a material impact
on its financial position, results of operations or cash flows with the
exception of SFAS NO. 123(Revised). The Company is evaluating the financial
impact of SFAS 123(Revised) which will be implemented in the first quarter
commencing May 1, 2006.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America, requires us to make
estimates and assumptions that affect reported amounts of assets and liabilities
at the date of the financial statements, the reported amount of revenues and
expenses during the reporting period and related disclosure of contingent assets
and liabilities. On an ongoing basis, we evaluate our estimates and judgments,
particularly those related to the determination of the estimated Canadian
exploration tax credit receivable. To the extent actual results differ from
those estimates, our future results of operations may be affected. Besides this
critical accounting policy on use of estimates, we believe the following
critical accounting policy affects the preparation of our consolidated financial
statements.
Acquisition, Exploration and Evaluation Expenditures
- ----------------------------------------------------
The Company is an exploration stage mining company and has not yet realized any
revenue from its operations. It is primarily engaged in the acquisition,
exploration and development of mining properties. Mineral property acquisition
and exploration costs are expensed as incurred. When it has been determined that
a mineral property can be economically developed as a result of establishing
proven and probable reserves, the costs incurred to develop such property, are
capitalized. For the purpose of preparing financial information, all costs
associated with a property that has the potential to add to the Company's proven
and probable reserves are expensed until a final feasibility study demonstrating
the existence of proven and probable reserves is completed. No costs have been
capitalized in the periods covered by these financial statements. Once
capitalized, such costs will be amortized using the units-of-production method
over the estimated life of the probable reserve.
CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures. The Company's management, with the
participation of the principal executive officer and principal financial
officer, respectively, has evaluated the effectiveness of the Company's
disclosure controls and procedures (as such term is defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) as of the end of the June 30, 2006. Based on such evaluation,
the principal executive officer and principal financial officer of the Company,
respectively, have concluded that, as of the year end, the Company's disclosure
controls and procedures are effective.
(b) Internal Control Over Financial Reporting. There have not been any changes
in the Company's internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the year
ended April 30, 2006 that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.
Limitations on the Effectiveness of Controls. We believe that a control system,
no matter how well designed and operated, cannot provide absolute assurance that
the objectives of the control system are met, and no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within a company have been detected. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
-22-
As of April 30, 2006, there are 16,366,728 shares of common stock outstanding,
held by 852 shareholders of record. Of that amount, 9,025,045 common shares were
issued and outstanding as of April 30, 2005.
Private Placements of Securities For the Year Ended April 30, 2006
On March 28, 2006 the Company completed a brokered private placement through the
issuance of 5,331,327 common share units at a price of $0.60 per unit for gross
proceeds of $3,198,799. The Company also completed a private placement through
the issuance of 25,000 so-called "flow-through" shares at a price of $0.75 per
share for gross proceeds of $ 18,750. "Flow through" shares carry certain tax
benefits to shareholders who are Canadian tax payers. The Company must use the
proceeds from the placement of "flow-through" securities for exploration and
development programs in order to enable the holders of "flow-through" shares to
derive the tax benefits in Canada. Each Common share unit consists of one share
and one-half of one common share purchase warrant. Each whole common share
purchase warrant entitles the holder to purchase one common share at $0.90 per
share for a period expiring on March 28, 2008. The placement agent in Canada for
this private placement was Novadan Capital Ltd., based in Toronto, Canada
("Novadan"). Novadan (or its permitted assignees) received a commission in
connection with this private placement consisting of cash equal to 9% of the
proceeds of the private placement in Canada ($289,579.00) and 533,133 broker's
warrants equaling 10% of the number of common share units sold. Each broker
warrant entitles Novadan or its permitted assigns to purchase common shares and
one-half share purchase warrant for $0.60 until March 28, 2008. Each full
warrant is then exercisable for $0.90. In addition, Yukon Gold paid all of
Novadan's expenses related to the private placement, subject to a cap of
$20,000. As part of the agreement with Novadan in connection with this offering,
the Company granted to Novadan a right-of-first refusal to act as underwriter or
best-efforts placement agent in connection with any subsequent public or private
offering by the Company within eighteen months of the closing. In addition,
Yukon Gold entered into a Consulting Agreement with Novadan for ongoing
financial and strategic advice. As compensation under the Consulting Agreement,
Yukon Gold will issue to Novadan 240,000 shares of its common stock, such shares
to be issued in equal installments over the twelve-month period of the
Consulting Agreement. Yukon Gold has agreed to register the re-sale of these
shares at the earliest date that the Company files a registration statement.
On December 30, 2005, Yukon Gold completed a private placement of 200,000
flow-through special warrants to a single investor in Canada for consideration
of $180,000. Each such flow-through special warrant entitles the holder to
acquire one "flow through" common share of the Company for no additional
consideration. So-called "flow through" shares carry certain tax benefit to
Canadian holders. The Company has undertaken to register the re-sale of the
common shares underlying the flow-through special warrants. The flow-through
special warrants become automatically exercisable as of the effective date of a
registration statement covering the resale of the underlying shares in the
United States.
On December 15, 2005, the Company completed the sale of 400,000 special warrants
to a single investor in Canada at a purchase price of $1.01 per special warrant
for total consideration of $404,000. Each special warrant entitles the holder to
purchase one common share of the Company and one additional common share
purchase warrant at no additional cost. The Company has undertaken to register
the re-sale of the common shares underlying the special warrants. The special
warrants become automatically exercised as of the effective date of a
registration statement covering the resale of the underlying shares in the
United States. The terms of the private placement provided that if such a
registration statement covering such re-sale was not effective by June 15, 2006,
the holder of the special warrant would be entitled to receive 1.1 common shares
and 1.1 Special Warrants for each common share and special warrant then held by
such holder in lieu of the holders original interest (an additional 10% issuance
referred to as "penalty interest"). The Company did not file a registration
statement covering the re-sale of such shares and this holder is now entitled to
receive the penalty interest. The Company declined to file a re-sale
registration statement at that time in order to avoid interference with other
capital raising efforts of the Company in the United States. The Company does
intend to register the re-sale of the common shares underlying the Special
Warrants at a future date.
-23-
On December 5, 2005, the Company completed a private placement of 150,000 common
shares and 150,000 warrants to a single accredited investor for consideration of
$151,500. Each common share was priced at $1.00 and each warrant at $0.01. Each
warrant entitles the holder to purchase one common share of the Company at an
exercise price of $1.00 for a period of one year from the date of issuance.
On August 31, 2005, the Company accepted subscriptions from four accredited
investors and one accredited corporation, all residents of Canada, for a total
of 200,000 units priced at $0.55 per unit for a total of $110,000. Each unit
consists of one common share and one-half share purchase warrant. Each common
share was priced at $0.545 and each full warrant at $0.01. Each full-share
purchase warrant entitles the holder to purchase one common share at $1.00 per
share for a period expiring August 31, 2007.
On August 29, 2005, the Company completed the sale of 149,867 units at $0.55 per
unit to a director of the Company for $82,427 (CDN$100,000). Each unit consists
of one common share and one-half share purchase warrant. Each common share was
priced at $0.545 and each full warrant at $0.01. Each full-share purchase
warrant entitles the holder to purchase one common share at $1.00 per share for
a period expiring on August 5, 2007.
On August 26, 2005 the board of directors approved the issuance of 490,909 units
at $0.55 per unit to J.L. Guerra, Jr., then an arms length accredited
shareholder for a total of $270,000. Each unit consists of one common share and
one-half share purchase warrant. Each common share was priced at $0.545 and each
full warrant at $0.01. Each full share purchase warrant entitles the holder to
purchase one common share at $1.00 per share, after one year and seven days
following closing, for a period of two (2) years following such date. The
Company received $20,000 of the subscription price on August 12, 2005 as a loan
to be applied to the subscription price and $100,000 on September 15, 2005 and a
promissory note for $150,000, due on or before October 1, 2005, for the balance
of the subscription price. The promissory note was paid in full by the due date.
Mr. Guerra subsequently became a director of the Company on November 2, 2005 and
then became chairman of the board on July 11, 2006.
Other Sales or Issuances of Unregistered Securities
- ---------------------------------------------------
Year ended April 30, 2005
- -------------------------
On March 1, 2005 the Company issued 133,333 common shares to Atna Resources Ltd.
as property payments in the amount of $100,000 for the Marg Property. On March
2, 2005 the Company issued 76,204 common shares on conversion of a convertible
promissory note.
Year ended April 30, 2006
- -------------------------
On August 5, 2005 the board of directors authorized the issuance of 369,215
common shares and 184,608 share purchase warrants in settlement of a demand
promissory note in the amount of $200,000 plus interest of $3,068.25. Each
common share was priced at $0.545 and each full warrant at $0.01. Each share
purchase warrant entitles the holder to purchase one common share for $1.00 per
share on or before August 5, 2007.
On August 23, 2005 the board of directors approved the issuance of 24,336 units
to an arms length investor and 12,168 units to an officer of the Company at
$0.55 per unit, in settlement of an accounts payable for services, for a total
of $20,077 (CDN$24,398). Each unit consists of one common share and one-half
share purchase warrant. Each common share was priced at $0.545 and each full
warrant at $0.01. Each full share purchase warrant entitles the holder to
purchase one common share at $1.00 per share for a period expiring on August 15,
2007.
On August 25, 2005 the Company entered into a Consulting Agreement with Endeavor
Holdings, Inc. ("Endeavor"), based in New York, New York to assist the Company
in raising capital. Under the terms of this agreement the Company agreed to pay
Endeavor 150,000 common shares at the rate of 25,000 shares per month. Either
party could cancel the agreement upon 30 days notice. The Company issued 150,000
common shares valued at $130,500 to Endeavor.
On October 18 and 24, 2005 the Company issued a total of 59,547 common shares
and 29,167 warrants covering the principal amount of $43,750, plus interest of
$910, on conversion of a convertible promissory note issued on October 6, 2004.
-24-
On October 18, 2005 the Company authorized the issuance of 14,000 common shares
for the exercise of 14,000 warrants from a warrant holder in consideration of
$12,000.
On November 9, 2005, an accredited investor converted a promissory note on its
due date and the Company issued 76,525 common shares and 37,500 warrants
covering the principal amount of $56,250 and interest in the amount of $1,143 in
accordance with the conversion provisions of the notes. The expiry date of the
warrants was extended to 15 months after the conversion date.
On December 6, 2005 the board of directors authorized the issuance of 133,333
common shares valued at $100,000 for property payment to Atna Resources Ltd.,
along with a cash payment of $43,406 (CDN$50,000) as per terms of the Marg
Acquisition Agreement. The common shares along with the cash payment were
delivered to Atna Resources Ltd. on December 12, 2005.
On December 7, 2005 an accredited investor converted promissory notes of the
Company on their due dates and the Company issued 34,306 common shares and
17,001 warrants covering the principal amounts of $25,500 and interest in the
amount of $409 in accordance with the conversion provisions of the notes. The
expiry date of the warrants was extended to 15 months after the conversion date.
On December 7, 2005 the board of directors authorized the issuance of 10,000
common shares to a shareholder upon the exercise of 10,000 warrants in
consideration of $8,772 (CDN$10,000).
On January 11, 2006 an accredited investor converted promissory notes of the
Company on their due dates and the Company issued 101,150 common shares and
50,000 warrants covering the principal amounts of $75,000 and interest in the
amount of $1,533 in accordance with the conversion provisions of the notes. The
expiry date of the warrants was extended to 15 months after the conversion date.
On April 11, 2006, a director of the Company exercised his option to purchase
10,000 common shares at the option price of $0.55 per share. The Company
received payment and issued 10,000 common shares.
Purchase Warrants
- -----------------
The following table summarizes the warrants outstanding as of the year ended
April 30, 2006.
Number of Exercise Expiry Date
Warrants Prices
Granted
Outstanding at April 30, 2004 and average exercise price 499,731 $ 0.79
Granted in year 2004-2005 37,500 $ 1.25 June 30, 2006
--------- --------
Outstanding at April 30, 2005 and average exercise price 537,231 $ 0.82
Granted in year 2005-2006 150,000 $ 1.00 December 5, 2006
Granted in year 2005-2006 32,320 $ 1.00 December 15,2006
Granted in year 2005-2006 259,542 $ 1.00
August 5, 2007
Granted in year 2005-2006 18,252 $ 1.00
August 15, 2007
Granted in year 2005-2006 245,455 $ 1.00
August 22, 2007
Granted in year 2005-2006 100,000 $ 1.00
August 31, 2007
Granted in year 2005-2006 12,500 $ 1.25 January 14, 2007
Granted in year 2005-2006 16,667 $ 1.25
January 25, 2007
Granted in year 2005-2006 37,500 $ 1.25
February 9, 2007
Granted in year 2005-2006 17,001 $ 1.25 March 7, 2007
Granted in year 2005-2006 50,000 $ 1.25 April 11, 2007
Granted in year 2005-2006 2,665,669 $ 0.90 March 28, 2008
Granted in year 2005-2006 533,133 $ 0.60 March 28, 2008
Exercised (24,000) ($ 0.82)
Expired --
Cancelled -- --
--------- --------
Outstanding at April 30, 2006 and average exercise price 4,651,270 $ 0.88
========= ========
-25-
Outstanding Share Data
- ----------------------
As at April 30, 2006, 16,366,728 common shares of the Company were outstanding.
Of the options to purchase common shares issued to the Company's directors,
officers and consultants under the Company's stock option plan, 2,958,000
remained outstanding with exercise prices ranging from $0.55 to $1.19 and expiry
dates ranging from December 15, 2006 to January 20, 2008. If exercised,
2,958,000 common shares of the Company would be issued, generating proceeds of
$2,632,620.
On April 30, 2006, 4,651,270 share purchase warrants were outstanding with
exercise prices ranging from $0.60 to $1.25 and expiring between December 5,
2006 and March 28, 2008. If exercised, 4,651,270 common shares would be issued,
generating proceeds of $4,093,118.
- ------------------------------- -------------------------- ----------------------- ----------------------------------------------
Number of securities to be Weighted-average Number of securities remaining available for
issued upon exercise of exercise price of future issuance under equity compensation
outstanding options, outstanding options, plans (excluding securities reflected in
warrants and rights warrants and rights column (a))
- ------------------------------- -------------------------- ----------------------- ----------------------------------------------
(a) (b) (c)
- ------------------------------- -------------------------- ----------------------- ----------------------------------------------
Equity compensation plans
approved by security holders 7,609,270 $0.88 2,042,000*
- ------------------------------- -------------------------- ----------------------- ----------------------------------------------
Equity compensation plans not N/A N/A N/A
approved by securities holders
- ------------------------------- -------------------------- ----------------------- ----------------------------------------------
7,609,270 $0.88 2,042,000
Total
- ------------------------------- -------------------------- ----------------------- ----------------------------------------------
*On May 23, 2005, the Company filed a registration statement on Form S-8 in
order to register the issuance of 3.3 million shares pursuant to the 2003 Stock
Option Plan.
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.
Subsequent Issue of Common Shares
- ---------------------------------
On May 29, 2006 the Company issued 10,000 common shares for the exercise of
10,000 warrants at $0.89 (CDN$1.00) from a warrant holder in consideration of
$8,945 (CDN$10,000).
On May 29, 2006 the Company issued 45,045 common shares for the exercise of
45,045 warrants at $0.89 (CDN$1.00) from a warrant holder in consideration of
$40,291 (CDN$45,045).
On May 29, 2006 the Company issued 16,000 common shares for the exercise of
16,000 warrants at $0.89 (CDN$1.00) from a warrant holder in consideration of
$14,311 (CDN$16,000).
On May 30, 2006 the Company issued 141,599 common shares for the settlement of
an accrued liability to an ex officer and director. The accrued severance amount
of $118,943 (CDN$128,855) was converted to 141,599 common shares at $0.84
(CDN$0.91).
On June 22, 2006 the Company issued 43,667 common shares for the exercise of
43,667 warrants at $0.89 (CDN$1.00) from a warrant holder in consideration of
$39,058 (CDN$43,667).
On June 28, 2006 the Company issued 17,971 common shares for the exercise of
17,971 warrants at $0.89 (CDN$1.00) from a warrant holder in consideration of
$16,074 (CDN$17,971).
-26-
On June 28, 2006 the Company issued 43,667 common shares for the exercise of
43,667 warrants at $0.89 (CDN$1.00) from a warrant holder in consideration of
$39,058 (CDN$43,667).
On June 28, 2006 the Company issued 16,000 common shares for the exercise of
16,000 warrants at $0.89 (CDN$1.00) from a warrant holder in consideration of
$14,311 (CDN$16,000).
On June 29, 2006 the Company issued 158,090 common shares for the exercise of
158,090 warrants at $0.89 (CDN$1.00) from a warrant holder in consideration of
$141,404 (CDN$158,090).
On July 7, 2006 the Company issued 43,166 common shares and paid $80,501
(CDN$90,000) in cash in settlement of a property payment on the Mount Hinton
Property. The shares represent 40% of the total $134,168 (CDN$150,000) payment
and were valued at $1.24 (CDN$1.39) each.
On July 7, 2006 the Company issued 64,120 common shares for the exercise of
64,120 warrants at $0.89 (CDN$1.00) from a warrant holder in consideration of
$57,352 (CDN$64,120).
On July 17, 2006 the Company issued 61,171 common shares for the exercise of
61,171 warrants at $0.89 (CDN$1.00) from a warrant holder in consideration of
$54,715 (CDN$61,171).
On August 22, 2006, the Company completed a private placement of 400,000 units
where each unit consisted of a common share and a share purchase warrant. The
units were priced at $1.00 per unit for a total of $400,000. The Company will
pay a finders fee equal to 6% of the gross proceeds. The warrants have a
two-year term and are exercisable at $1.50 per share in the first twelve months
of the term and $2.00 per share in the remaining twelve months of the term.
Closing of this placement requires Toronto Stock Exchange approval. Conditional
approval was given by the Toronto Stock Exchange on August 29, 2006.
Our common stock is traded on the Over the Counter Bulletin Board sponsored by
the National Association of Securities Dealers, Inc. under the symbol "YGDC."
The Over the Counter Bulletin Board does not have any quantitative or
qualitative standards such as those required for companies listed on the Nasdaq
Small Cap Market or National Market System. Our high and low sales prices of our
common stock during the fiscal years ended April 30, 2005 and 2006 are as
follows.
The following quotations represent inter-dealer prices, without mark-up,
mark-down or commission and may not represent actual transactions.
FISCAL YEAR 2005 HIGH LOW
- ---------------- ---- ---
First Quarter N/A N/A
Second Quarter N/A N/A
Third Quarter $0.80 $0.10
Fourth Quarter $1.28 $0.60
FISCAL YEAR 2006 HIGH LOW
- ---------------- ---- ---
First Quarter $1.05 $0.42
Second Quarter $1.12 $0.52
Third Quarter $1.45 $0.60
Fourth Quarter $2.25 $0.67
As of April 19, 2006, our stock began trading on the Toronto Stock Exchange
under the symbol "YK." The high and low trading prices for our common stock for
the fiscal year periods indicated below are as follows:
FISCAL YEAR 2006 HIGH LOW
Fourth Quarter US$2.25 (CDN$2.40) US$0.67 (CDN$1.75)
OUR TRANSFER AGENT
Our transfer agent is Equity Transfer Services, Inc. with offices at 120
Adelaide Street W. Suite 420, Toronto, Ontario M5H 4C3. Their phone number is
416-361-0930. The transfer agent is responsible for all record-keeping and
administrative functions in connection with the common shares of stock.
-27-
DIVIDENDS
We have not declared any cash dividends on our common stock. We plan to retain
any future earnings, if any, for exploration programs, administrative expenses
and development of the Company and its assets.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS.
On October 28, 2003 Yukon Gold 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 that may be issued under
the Plan is 5,000,000 shares. The purpose of the Plan is to assist Yukon Gold
and its subsidiaries and affiliates in attracting and retaining qualified
individuals to serve as directors, officers, consultants, advisors, and
employees of our Company who will contribute to our Company's success and to
achieve long-term objectives that will inure to the benefit of all shareholders
of Yukon Gold. 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 amended (the "Code") or "nonqualified stock
options." For 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 Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The Plan is administered
by a Committee of the board of directors who will establish the terms under
which options are granted.
On May 23, 2005, Yukon Gold filed a registration statement on Form S-8 with the
SEC pursuant to which it registered 3,300,000 shares of common stock reserved
for issuance upon exercise of options granted pursuant to the Plan. On February
10, 2006 the board of directors amended the 2003 Stock Option Plan to cease
accepting promissory notes of option holders as payment for the exercise of
options. No other changes were made.
The following summarizes options outstanding as at April 30:
EXPIRY DATE OPTION PRICE NUMBER OF SHARES
PER SHARE 2006 2005
December 15, 2006 0.75 1,100,000 1,750,000
January 5, 2007 0.75 84,000 84,000
June 28, 2007 0.55 490,000 --
April 15, 2008 0.58 20,000 --
December 13, 2007 1.19 1,026,000 --
December 13, 2007 1.19 88,000 --
January 20, 2008 0.85 150,000 --
--------- ---------
2,958,000 1,834,000
--------- ---------
Weighted average exercise price at end of year 0.89 0.75
--------- ---------
NUMBER OF SHARES
2006 2005
Outstanding, beginning of year 1,834,000 --
Granted 1,784,000 1,834,000
Expired -- --
Exercised (10,000) --
Forfeited -- --
Cancelled (650,000) --
Outstanding, end of year 2,958,000 1,834,000
Exercisable, end of year 1,269,450 302,176
-28-
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS
BOARD OF DIRECTORS
The following individuals have agreed to sit on the Board of Directors of Yukon
Gold. Each director will serve until the next meeting of shareholders or until
replaced. Each individual's background is of material importance to Yukon Gold
and is described below.
NAME POSITION DATE OF APPOINTMENT TO THE BOARD
OF DIRECTORS
J.L. Guerra, Jr. Director, Chairman of the Board November 2, 2005
Howard Barth Director, President and CEO May 11, 2005
Kenneth Hill Director, Vice President - Mining December 15, 2004
Operations
Chet Idziszek Director November 17, 2005
Robert E. Van Tassell Director May 30, 2005
MANAGEMENT
Howard Barth President and CEO
Rakesh Malhotra Chief Financial Officer
Kenneth Hill Vice President - Mining Operations
Paul Gorman Vice President - Corporate Development
Lisa Lacroix Corporate Secretary
REORGANIZATION OF OFFICERS AND DIRECTORS
As of June 29, 2006, Ken Hill resigned as President and CEO of the Company and
was replaced by Howard Barth as President and CEO. Mr. Barth is also a director
of the Company. Mr. Hill became Vice President - Mining Operations of the
Company. There were no disagreements between the Company and Mr. Hill with
respect to the Company's operations, policies or practices. Mr. Hill was
appointed to fill a vacancy on the board and to fill the position of President
and CEO as of January 17, 2005 following the resignation of W. Warren Holmes as
CEO and the resignation of Brian Robertson as President.
Mr. Barth joined the board of Company on May 30, 2005. Mr. Barth holds a B.A. in
Geography from York University, in Toronto, Ontario and a Masters Degree in
Business Administration from York University's Schulich School of Business
(1976). Mr. Barth worked for William Eisenberg & Company (now
PriceWaterhouseCoopers), a large Toronto, Ontario accounting firm and holds a
C.A. designation. Mr. Barth also has his own accounting practice which he
started in 1984. In his 25 years of public practice Mr. Barth has had direct
involvement in a number of industries and is familiar with all aspects of
accounting for small to medium sized businesses. His diverse clientele includes
businesses in construction, retail, manufacturing and restaurants. Since 1979
Mr. Barth has been a member of the Canadian Institute of Chartered Accountants
and the Ontario Institute of Chartered Accountants.
-29-
Yukon Gold accepted the resignation of W. Warren Holmes as a director and
Chairman of the board of directors and his resignation as a director and officer
of the Company's wholly owned subsidiary, Yukon Gold Corp., an Ontario
corporation, in each case effective as of July 11, 2006. As of that date, J.L.
Guerra, Jr. became Chairman of the Board of Directors of the Company. There were
no disagreements between the Company and Mr. Holmes with respect to the
Company's operations, policies or practices.
As of November 17, 2005, Rene Galipeau resigned as a director and as the chief
financial officer of the Company. He was appointed to that position as of May
11, 2005. His position as chief financial officer was filled by Rakesh Malhotra.
The vacancy on the board was filled by the appointment of Chet Idziszek. There
were no disagreements between the Company and Mr. Galipeau with respect to the
Company's operations, policies or practices.
As of January 17, 2006, Brian Robertson resigned as a director and President of
the Company. There were no disagreements between the Company and Mr. Robertson
with respect to the Company's operations, policies or practices.
As of November 7, 2005, Paul Gorman was appointed to the position of Vice
President - Corporate Development.
As of November 2, 2005, J.L. Guerra, Jr. was appointed to fill a vacancy on the
board of directors of the Company,
As of September 7, 2005, Lisa Lacroix was appointed to the position of Corporate
Secretary.
As of May 11, 2005, Stafford Kelley resigned as a director and as
Secretary-Treasurer of the Company. There were no disagreements between the
Company and Mr. Kelley with respect to the Company's operations, policies or
practices.
As of May 30, 2005, Richard Ewing resigned as a director of the Company. There
were no disagreements between the Company and Mr. Ewing with respect to the
Company's operations, policies or practices. Robert ("Dutch") Van Tassell was
appointed to fill the vacancy on the board of directors left by Mr. Ewing as of
May 30, 2005.
Of our five directors, three directors are independent directors. The Company
believes its new board members add strength to the management team.
The following is a description of each member of our Board of Directors and our
management.
J.L. GUERRA, JR., DIRECTOR, CHAIRMAN OF THE BOARD
Mr. Guerra has over twenty years of experience operating his own businesses in
the real estate brokerage, acquisition and development business in San Antonio,
Texas. Mr. Guerra has acquired and sold industrial buildings, warehouses, office
buildings and raw land for investors and investment entities. His current
projects include acquisition, planning and development of residential, golf and
resort properties, specifically Canyon Springs in San Antonio, Texas. Mr. Guerra
also has experience with venture capital projects and has raised substantial
capital for numerous projects in mining, hi-tech and other areas. Mr. Guerra
lives in San Antonio, Texas. Mr. Guerra is 50 years old.
HOWARD BARTH, PRESIDENT AND CEO, DIRECTOR
Howard Barth became President and CEO of the Company on June 29, 2006. Mr. Barth
graduated with a B.A. in Geography at York University, in Toronto, Ontario. He
continued his studies at York University through the Schulich School of Business
and graduated with a Masters degree in Business Administration in 1976. Upon
graduation Mr. Barth worked for William Eisenburg & Company (now
PricewaterhouseCoopers), a large Toronto accounting firm and attained his C.A.
designation. After spending the next few years working with different firms in
the Greater Toronto area, Mr. Barth started his own accounting practice in 1984
and subsequently expanded his firm by adding two partners. In his 25 years of
public practice Mr. Barth has had direct involvement in a number of industries
and is familiar with all aspects of accounting for small to medium sized
businesses. His diverse clientele includes businesses in the construction,
retail, manufacturing, and restaurant sectors. Since 1979 Mr. Barth has been a
member of the Canadian Institute of Chartered Accountants and the Ontario
Institute of Chartered Accountants. Mr. Barth is 53 years old.
-30-
ROBERT E. "DUTCH" VAN TASSELL, DIRECTOR
Robert E. "Dutch" Van Tassell was born in 1935 in Digby, Nova Scotia and
graduated with a degree in Geology from Mount Allison University in 1958. Mr.
Van Tassell began his mining career in 1956 as a summer student with Giant
Yellowknife Mines, in the North West Territories of Canada. Mr. Van Tassell
remained with Giant Yellowknife Mines from 1956 to 1962 where he was involved
with mining and exploration geology. In 1962, Mr. Van Tassell was employed with
Denison Mines located in Elliot Lake, Ontario for a short period of time as an
underground geologist. In 1963 he joined United Keno Hill Mines in the Yukon
Territory and was a key participant in the discovery of the Husky Mine in 1967,
which produced over 25 million ounces of silver. In 1969 Mr. Van Tassell set up
a Yukon regional exploration office in Whitehorse which in 1972 discovered the
Minto Copper Deposit, employing helicopter supported two man prospecting crews
in tree covered areas. While in Whitehorse Mr. Van Tassell served as a director
for the Yukon Chamber of Mines for eleven years, two as its president. He also
served four terms on the Northern Resources Conference which is held every three
years and sponsored by the Yukon Chamber of Mines and Whitehorse Chamber of
Commerce, two of these as Chairman. He also served as Chairman of the Whitehorse
branch of the Chamber of Mines and two terms as Councillor of District 6. He
also gave introductory and advanced prospecting courses for the Chamber of
Mines. In 1982 Mr. Van Tassell joined Dickenson Mines in Toronto, Ontario as
Vice President of Exploration. In 1984 he was involved with the discovery of
additional reserves at the then active silver, lead, zinc Silvana Mine at
Sandon, B.C. In 1988 he also played a part in Dickenson's acquisition of the
Wharf Mine in South Dakota. While in Toronto Mr. Van Tassell also served as a
Board member of the Prospector's and Developers Association of Canada (PDAC)
from 1984 to 1993 serving as Chairman on the Program and Environmental
Committee. Mr. Van Tassell is a Life member of the Chamber of Mines, the
Association of Exploration Geochemists and a member of the Geological
Association of Canada. In March, 2000 he was presented with a lifetime
Achievement Award by the PDAC for his contribution to the Mining Industry. Mr.
Van Tassell retired in 1998 to assist with family maters. Mr. Van Tassell is 71
years old. Mr, Van Tassell is also a director of Colombia Goldfields Ltd., Lexam
Explorations Inc., Plato Gold Corp., Red Lake Resources and Rupert Resources
Ltd.
CHET IDZISZEK, DIRECTOR
Mr. Idziszek has been active in the mining industry since 1971. He holds a
Masters of Applied Science degree from McGill University. He has worked as a
manager and senior geologist for several international mining companies since
1971. In 1990, he received the "Mining Man of the Year" award in recognition of
his vital role in the discovery and development of the Eskay Creek Deposits in
Northwestern British Columbia. He also received the prestigious "Prospector of
the Year Award for 1994", again, in recognition of the major role he played in
the discovery and development of the Eskay Creek Deposits, as well as for his
leadership of Adrian Resources Ltd. during its exploration and development of
the Petaquilla copper-gold deposits in Panama. Mr. Idziszek was President of
Adrian Resource Ltd. Until April of 2004. As a Director of Arequipa Resources
Ltd. he helped during the negotiations with Barrick Gold Corp. to maximize the
value received by Arequipa shareholders during the successful take-over bid by
Barrick in 1996. Mr. Idziszek is a member of Society of Economic Geologists,
I.A.G.O.D. the Geological Association of Canada and a Fellow of the Geological
Society, London. Mr. Idziszek is 58 years old.
KEN HILL, DIRECTOR, VICE-PRESIDENT - MINING OPERATIONS
Mr. Hill came to Yukon Gold with over forty years of experience in the mining
industry. Mr. Hill is a registered professional engineer and graduated with a
degree in Geological Engineering from the Michigan Technological University. He
also holds a degree in Mining Technology from the Haileybury School of Mines.
Mr. Hill is the founder of ProMin Consulting Associates Inc., a Canadian company
that provides independent consulting and project management services to the
global minerals industry. Prior to to his involvement with ProMin Consulting
Associates Inc., Mr. Hill held senior positions involving mine design, mine
development and mine operations with Inmet Mining Corp., Northgate Exploration
Ltd., Dome Mines Ltd. (now Placer Dome Inc.) and J.S. Redpath Ltd. Mr. Hill is
66 years old.
-31-
OFFICERS
RAKESH MALHOTRA, CHIEF FINANCIAL OFFICER
Mr. Malhotra is a United States certified public accountant and a Canadian
chartered accountant with considerable finance and accounting experience. Mr.
Malhotra graduated with a Bachelor of Commerce (Honours) from the University of
Delhi (India) and worked for a large accounting firm A.F Ferguson & Co. (Indian
correspondent for KPMG) and obtained his CA designation in India. Having
practised as an accountant for over 10 years in New Delhi, he moved to the
Middle East and worked for 5 years with the highly successful International
Bahwan Group of Companies in a senior finance position. Mr. Malhotra is a CPA
(Illinois) and also holds a Canadian CA designation. He worked as a Chartered
Accountant with a mid-sized Chartered Accounting firm in Toronto doing audits of
Public Companies and has worked for over four years as vice president of finance
for a private group of service companies in Toronto. Mr. Malhotra has more than
20 years of experience in accounting and finance. He has substantial experience
with consolidations, treasury management and financial statement audit. He is
also a certified Masters by Oracle for Oracle Financials (ERP). Mr. Malhotra is
49 years old.
PAUL GORMAN, VICE PRESIDENT, DEVELOPMENT
Mr. Gorman is the Company's Vice President, Development. Mr. Gorman is
principally involved in securing financing for the Company's operations and
exploration. Mr. Gorman also handles investor relations. Prior to joining Yukon
Gold, Mr. Gorman was the President and managing partner of Vantage Point
Capital, a Merchant Bank and Corporate Relations Firm. For the last four years,
Mr. Gorman has been working with companies to assist them in developing
well-defined marketing programs. Mr. Gorman's responsibilities also included
raising capital, as well as promoting the companies to the investment community
and writing strategic plans for business growth. Mr. Gorman is 35 years old.
LISA LACROIX, CORPORATE SECRETARY
Miss Lacroix has spent fourteen years working in a variety of fields ranging
from retail to merchant banking. She attended Etobicoke Collegiate Institute and
her studies focused on Business Administration and Law. Upon graduating in 1992
she began her career working for an accounting firm that specialized in
Off-shore Investing and assisted in conducting seminars on the benefits of such
investments.
In 1997 she began working for the Harten Group, a conglomerate of 11 companies
owned by one family. The companies included a telecommunications firm, a natural
gas provider, a private funding corporation (loans and mortgages),
commercial/residential property management, an art gallery and professional race
horses.
In 1999 Miss Lacroix joined Medallion Capital Corp. Beginning in January of 2005
Yukon Gold employed Lisa as a full time employee. She was appointed Corporate
Secretary on September 7, 2005. Ms. Lacroix is 32 years old.
-32-
EXECUTIVE COMPENSATION
The following table shows the compensation paid during the last three fiscal
years ended April 30, 2006, 2005 and 2004 for the Chief Executive Officer, the
Chief Financial Officer and the next four most highly compensated officers of
the Company.
SUMMARY COMPENSATION TABLE
- ---------------------------------- -------- ------------------------------------ --------------------------------------- -----------
Year Annual Compensation Long-Term Compensation
--------------------------------- ---------------------------------------
Award Payout
Name and Principal Position April 30, Salary Bonus Other Annual ---------------------------------------
($) ($) Compensation Restricted Securities All Other
($) Stock Underlying LTIP Compen-
Award(s) Options/SAR Payouts sation
Granted
($) (#) ($) ($)
- ---------------------------------- -------- --------- --------- ---------------- ------------ --------------- ---------- ----------
Howard Barth N/A N/A N/A N/A N/A N/A N/A N/A
President and CEO as of
June 29, 2006 (1)
- ---------------------------------- -------- --------- --------- ---------------- ------------ --------------- ---------- ----------
2006 Nil Nil 14,755 Nil 150,000 Nil Nil
Kenneth Hill Former President 2005 Nil Nil Nil Nil 250,000 Nil Nil
and CEO (2) 2004 Nil Nil Nil Nil Nil Nil Nil
- ---------------------------------- -------- --------- --------- ---------------- ------------ --------------- ---------- ----------
W. Warren Holmes, 2006 Nil Nil Nil Nil Nil Nil Nil
Former CEO (2) 2005 Nil Nil Nil Nil 250,000 Nil
2004
- ---------------------------------- -------- --------- --------- ---------------- ------------ --------------- ---------- ----------
Rakesh 2006 Nil Nil 15,107 Nil 250,000 Nil Nil
Malhotra 2005 Nil Nil Nil Nil Nil Nil Nil
CFO (3) 2004 Nil Nil Nil Nil Nil Nil Nil
- ---------------------------------- -------- --------- --------- ---------------- ------------ --------------- ---------- ----------
Rene 2006 Nil Nil Nil Nil 250,000 Nil Nil
Galipeau
Former CFO (3) 2005 Nil Nil Nil Nil Nil Nil Nil
2004 Nil Nil Nil Nil Nil Nil Nil
- ---------------------------------- -------- --------- --------- ---------------- ------------ --------------- ---------- ----------
Lisa Lacroix 2006 25,858 Nil Nil Nil 76,000 Nil Nil
Corporate Secretary (4) 2005 Nil Nil Nil Nil Nil Nil Nil
2004 Nil Nil Nil Nil Nil Nil Nil
- ---------------------------------- -------- --------- --------- ---------------- ------------ --------------- ---------- ----------
Paul Gorman 2006 Nil Nil 34,440 Nil 200,000 Nil Nil
Vice President, Corporate 2005 Nil Nil Nil Nil Nil Nil Nil
Development (5) 2004 Nil Nil Nil Nil Nil Nil Nil
- ---------------------------------- -------- --------- --------- ---------------- ------------ --------------- ---------- ----------
(1) Mr. Barth does not have an employment agreement with the Company as of the
date of this Prospectus. He holds 240,000 of the 250,000 stock options
that were issued to him as a director on June 28, 2005.
(2) Mr. Hill became President and CEO of the Company following the resignation
of both, W. Warren Holmes as CEO and Brian Robertson as President, on
January 17, 2005. He resigned as President and CEO as of June 29, 2006 and
became Vice President, Mining Operations of the Company.
(3) Mr. Malhotra became the Chief Financial Officer of the Company following
the resignation of Rene Galipeau on November 17, 2005.
(4) Ms. Lacroix became Corporate Secretary of the Company on September 7,
2005.
(5) Mr. Gorman became an officer of the Company on November 7, 2005.
-33-
The Company does not have a long term incentive plan, pursuant to which cash or
non-cash compensation intended to serve as an incentive for performance (whereby
performance is measured by reference to financial performance or the price of
the Company's securities), was paid or distributed to any executive officers
during the three most recent completed years.
Stock options granted to the named executive officers during the fiscal year
ended April 30, 2006 are provided in the table below:
- -------------------------------------------------------------------------------------------------------------
% of Total
Securities Options/SARs ---------------------------------------------------------
Under Granted to Exercise or Market Value of Expiration
Name Options/SARs Employees in Base Price Securities Underlying Date
Granted Fiscal year (1) ($/Security) Options/SARs on the
(#) Date of Grant
($/Security)
- ---------------------- ----------- --------------- ------------- --------------------- -----------------
Howard Barth
President and CEO 250,000 N/A (3) $ 0.55 $ 0.55 June 28, 2007
- ---------------------- ----------- --------------- ------------- --------------------- -----------------
Kenneth Hill,.
Vice President 150,000 8.4% $ 0.85 $ 0.85 January 20, 2008
Mining Operations
- ---------------------- ----------- --------------- ------------- --------------------- -----------------
W. Warren Holmes,
Former CEO. Nil N/A N/A N/A N/A
- ---------------------- ----------- --------------- ------------- --------------------- -----------------
Rakesh Malhotra
CFO 250,000 14% $ 1.19 $ 1.19 December 13, 2007
- ---------------------- ----------- --------------- ------------- --------------------- -----------------
Rene Galipeau
Former CFO (2) Nil N/A N/A N/A N/A
- ---------------------- ----------- --------------- ------------- --------------------- -----------------
Lisa Lacroix
Corporate Secretary 76,000 4.3% $ 1.19 $ 1.19 December 13, 2007
- ---------------------- ----------- --------------- ------------- --------------------- -----------------
Paul Gorman
Vice President 200,000 11.2% $ 1.19 $ 1.19 December 13, 2007
Corporate Development
- ---------------------- ----------- --------------- ------------- --------------------- -----------------
(1) Based on total number of options granted to
directors/officers/consultants of the Company pursuant to the 2003
Stock Option plan during the fiscal year ended April 30, 2006.
(2) Due to the resignation of Mr. Galipeau, the Company cancelled
200,000 of his 250,000 options that had been granted on December 15,
2004.
(3) Mr. Barth's options were issued to him as a director of the Company
on June 28, 2005.
During the fiscal year ended April 30, 2006 there has been no re-pricing of
stock options held by any Named Executive Officer
-34-
The following table provides detailed information regarding options exercised by
the named executive officers during the fiscal year ended April 30, 2006 and
options held by the named executive officers as at April 30, 2006.
Name and Shares Value # of shares under-
Principal acquired on Realized lying options
Position Exercise(#) ($) at year end
Howard Barth
President and CEO 10,000 $4,500 240,000
Kenneth Hill
Vice President 0 N/A 400,000
Mining Operations
W. Warren Holmes 0 N/A 250,000
Former CEO
Rakesh Malhotra 0 N/A 250,000
CFO
Rene Galipeau 0 N/A 50,000
Former CFO
Lisa Lacroix 0 N/A 100,000
Corporate Secretary
Paul Gorman 0 N/A 248,000
Vice President
Corporate Development
On May 23, 2005, Yukon Gold filed a registration statement on Form S-8 with the
SEC pursuant to which it registered 3,300,000 shares of common stock reserved
for issuance upon exercise of options granted pursuant to the Plan.
d) Compensation of Directors
Directors are not paid any fees in their capacity as directors of the Company.
The directors are entitled to participate in the Corporation's stock option
plan. During the year ended April 30, 2006 certain directors were granted
options as per details as follows:
Mr. Barth was granted 250,000 stock options at an exercise price of $0.55 and
valid until June 28, 2007.
Mr. Van Tassell was granted 250,000 stock options at an exercise price of $0.55
and valid until June 28, 2007.
Mr. Guerra, Jr. was granted 250,000 stock options at an exercise price of $1.19
and valid until December 13, 2007.
Mr. Idziszek was gra nted 250,000 stock options at an exercise price of $1.19
and valid until December 13, 2007.
Other Arrangements
- ------------------
None of the directors of the Company were compensated in their capacity as a
director by the Company and its subsidiary during the fiscal year ended April
30, 2006 pursuant to any other arrangement.
-35-
Indebtedness of Directors and Executive Officers
- ------------------------------------------------
None of the directors or executive officers of the Company was indebted to the
Company or its subsidiary during the fiscal year ended April 30, 2006, including
under any securities purchase or other program.
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).
- -----------------------------------------------------------------------------------------------
NAME AND ADDRESS NUMBER OF SHARES OF PERCENTAGE OF CLASS HELD
OF BENEFICIAL OWNER COMMON STOCK
- -----------------------------------------------------------------------------------------------
W. Warren Holmes (former officer and
director) 899,867 5.50% of Yukon Gold
371 Hart St. Common Shares
Timmons, Ontario P4N 6W9
- -----------------------------------------------------------------------------------------------
Peter Slack (former Officer and Director) 0 0% of Yukon Gold
5954 Winston Churchill Blvd. Common Shares
Alton, Ontario L0N 1A0
- -----------------------------------------------------------------------------------------------
Rene Galipeau (former Officer and Director) 0 0% of Yukon Gold
77 McMurrich Street, Apt. 115 Common Shares
Toronto, ON M5R 3V3
- -----------------------------------------------------------------------------------------------
Kenneth Hill 0 0% of Yukon Gold
2579 Jarvis Street Common Shares
Mississauga, ON L5C 2P9
- -----------------------------------------------------------------------------------------------
Rakesh Malhotra 0 0% of Yukon Gold
5658 Sparkwell Drive Common Shares
Mississauga, Ontario
- -----------------------------------------------------------------------------------------------
Howard Barth 5,500 0.03% of Yukon Gold
16 Sycamore Drive Common Shares
Thornhill, ON L3T 5V4
- -----------------------------------------------------------------------------------------------
Robert E. Van Tassell 0 0% of Yukon Gold
421 Riverside Drive N.W. Common Shares
High River
Alberta, Canada T1V 1T5
- -----------------------------------------------------------------------------------------------
Malcolm Slack (former Director) 768,000 4.69% of Yukon Gold
5920 Winston Churchill Blvd Common Shares
RR1 Erin, Ontario NOB 1T0
- -----------------------------------------------------------------------------------------------
Brian Robertson (former officer) 60,168 0.37% of Yukon Gold
1421 Isabella Street East Common Shares
Thunder Bay, Ontario P7E 5B8
- -----------------------------------------------------------------------------------------------
-36-
- -----------------------------------------------------------------------------------------------
NAME AND ADDRESS NUMBER OF SHARES OF PERCENTAGE OF CLASS HELD
OF BENEFICIAL OWNER COMMON STOCK
- -----------------------------------------------------------------------------------------------
Stafford Kelley (former Director) 694,000 4.24% of Yukon Gold
146 Trelawn Avenue Common Shares
Oakville, Ontario L6J 4R2
- -----------------------------------------------------------------------------------------------
Richard Ewing (former Director) 535,500 3.27% of Yukon Gold
Box 111 Common Shares
Mayo, Yukon Territories Y0B 1M0
- -----------------------------------------------------------------------------------------------
Lisa Lacroix 0 0% of Yukon Gold
4-6780 Formentera Ave. Common Shares
Mississauga, ON L5N 2L1
- -----------------------------------------------------------------------------------------------
Chester (Chet) Idziszek 0 0% of Yukon Gold
C-4, 8211 Old Mine Road, RR #2 Common Shares
Powell River, BC V8A 4Z3
- -----------------------------------------------------------------------------------------------
Jose L. Guerra, Jr. 1,731,104 10.58% of Yukon Gold
1611 Greystone Ridge Common Shares
San Antonio, TX
USA 78258
- -----------------------------------------------------------------------------------------------
Paul Gorman 0 0% of Yukon Gold
1308 Roundwood Cres. Common Shares
Oakville, ON L6M 4A2
- -----------------------------------------------------------------------------------------------
TOTAL 4,694,139 28.68%
- -----------------------------------------------------------------------------------------------
As a group Management and the Directors own 10.61 % of the issued and
outstanding shares of Yukon Gold.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
YEAR ENDED APRIL 30, 2006
- -------------------------
The Company and its subsidiary expensed a total of $14,755 (CDN$17,500) in
consulting fees to a corporation controlled by Kenneth Hill, a director of the
Company. In addition the Company paid a total of $49,547 (CDN$57,170) to a
corporation controlled by Paul Gorman, the Company's Vice President, Corporate
Development and to Rakesh Malhotra, the Company's Chief Financial Officer. The
Company issued 12,168 common share units @$0.55 per unit in settlement of a
prior year accounts payable for the services rendered by Brian Robertson, a
former president of the Company.
The directors participated in private placements during the year as follows:
J.L. Guerra, Jr., a director of the Company, subscribed for 490,909 common
share units at $0.55 per unit; and
W. Warren Holmes, a former director of the Company, subscribed for 149,867
common share units at $0.55 per unit.
-37-
Year ended April 30, 2005
- -------------------------
The Company and its subsidiary expensed a total of $88,526 (CDN$111,875) for
fees which include office rental, equipment rental, bookkeeping services,
secretarial services, out of pocket expenses and consulting services for the
preparation documents and other administrative matters from Medallion Capital
Corp. The Company also expensed $5,702 (CDN$7,050) for interest on the note for
CDN$250,000 to Medallion Capital Corp. The Company expensed $26,332 (CDN$32,500)
for the time devoted by a related individual to the administration of the
Company to S.K. Kelley & Associates Inc. Medallion Capital Corp. and S.K. Kelley
& Associates Inc. are owned by Stafford Kelley, a former officer and director of
the Company. This individual has subsequent to the year end resigned as an
officer and director.
For services rendered by an individual as president of the Company, the Company
expensed the invoice from a related company for $18,382 (CDN$23,326) plus travel
expenses for this individual and another director in the amount of $2,405
(CDN$3,053).
ORGANIZATION WITHIN THE LAST FIVE YEARS
HISTORY
The Company was incorporated in the State of Delaware on May 31, 2000 under the
name, "RealDarts International, Inc." The Company was formed to affect 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 3, 2000, the Company changed its name to "Optima 2000, Inc." On August 8,
2000 it changed its name to "Optima International, Inc." On August 8, 2000 the
Company again changed its name to "Optima Global Corporation." On February 5,
2001, the Company merged with the Florida Corporation that was pursuing the
rights to the electronic scoreboard and the Company was the surviving
corporation. In connection with that merger, the Company issued common stock to
the shareholders of the Florida Corporation on a one-for-one basis. The Company
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 20, 2002, the Company changed
its name to "Take 4, Inc." with no specific business plan.
On October 29, 2003 the Company changed its name to "Yukon Gold Corporation,
Inc.". On November 17, 2003, the Company concluded a series of transactions
whereby it acquired 3,000,000 (100%) common shares of Yukon Gold Corp (herein
referred to as "YGC"), a private Ontario Canada Corporation. registered to carry
on business in the Yukon Territory. In consideration of 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.
On December of 2004 the Company became a reporting issuer with the United States
Securities and Exchange Commission (the "SEC"). The Company's shares began to
trade on the NASDAQ OTC Bulletin Board on January 9, 2005. The Company commenced
trading on the Toronto Stock Exchange on April 24, 2006.
RELATED PARTY TRANSACTIONS
The Company and its subsidiary expensed a total of $14,755 (CDN$17,500) in
consulting fees to a corporation controlled by Kenneth Hill, a director of the
Company. In addition the Company paid a total of $49,547 (CDN$57,170) to a
corporation controlled by Paul Gorman, the Company's Vice President, Corporate
Development and to Rakesh Malhotra, the Company's Chief Financial Officer. The
Company issued 12,168 common share units at $0.55 per unit in settlement of a
prior year accounts payable for the services rendered by Brian Robertson, a
former president of the Company.
The directors participated in private placements during the year as follows:
J.L. Guerra, Jr., a director of the Company, subscribed for 490,909 common
share units at $0.55 per unit; and
W. Warren Holmes, a former director of the Company, subscribed for 149,867
common share units at $0.55 per unit.
-38-
2004-2005
- ---------
The Company and its subsidiary expensed a total of $88,526 (CDN$111,875) for
fees which include office rental, equipment rental, bookkeeping services,
secretarial services, out of pocket expenses and consulting services for the
preparation documents and other administrative matters from Medallion Capital
Corp. The Company also expensed $5,702 (CDN$7,050) for interest on the note for
CDN$250,000 to Medallion Capital Corp. The Company expensed $26,332 (CDN$32,500)
for the time devoted by a related individual to the administration of the
Company to S.K. Kelley & Associates Inc. Medallion Capital Corp. and S.K. Kelley
& Associates Inc. are owned by Stafford Kelley, a former officer and director of
the Company. This individual has subsequent to the year end resigned as an
officer and director.
For services rendered by an individual as president of the Company, the Company
expensed the invoice from a related company for $18,382 (CDN$23,326) plus travel
expenses for this individual and another director in the amount of $2,405
(CDN$3,053).
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 do
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. However, we will pay the cost of registering under the
Securities Exchange Act of 1934 the re-sale of the shares held by the selling
shareholders.
DETERMINATION OF OFFERING PRICE
The offering price has been estimated solely for the purpose of calculating the
registration fee payable to the Securities and Exchange Commission in connection
with this prospectus. The offering price was based on the average of the last
reported bid and ask price for our common stock on the OTC Bulletin Board on
August 29, 2006.
SELLING SHAREHOLDERS AND PLAN OF DISTRIBUTION
The registration statement, of which this prospectus forms a part, relates to
our registration of an aggregate of 8,993,364 shares of common stock for the
account of the Selling Shareholders listed below. We will not receive any of the
proceeds from the sale of these shares.
-39-
SELLING SHAREHOLDERS
------------------------------------------ ---------------- ----------------- --------------
SHAREHOLDER NO. OF SHARES RELATIONSHIP SHARES OWNED
OR OWNED WITH ISSUER AFTER
WARRANT HOLDER OFFERING
------------------------------------------ ---------------- ----------------- --------------
------------------------------------------ ---------------- ----------------- --------------
Hydeman Family Partners, Ltd. 25,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Brad Houston 117,667 None 0
------------------------------------------ ---------------- ----------------- --------------
Douglas D. Lottridge 50,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Exploration Capital Partners 2005 100,000 None 0
Limited Partnership
------------------------------------------ ---------------- ----------------- --------------
R. Edwin Pitts 25,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Robert Q. Houston 34,000 None 0
------------------------------------------ ---------------- ----------------- --------------
V. Michael McGuire 10,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Max Alman 14,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Pam Jeffcoat 20,000 None 0
------------------------------------------ ---------------- ----------------- --------------
FIC Investments USA Corp. 83,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Barney R. Jeffcoats 34,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Sammy Kemp 9,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Ronald Phillips 150,000 None 0
------------------------------------------ ---------------- ----------------- --------------
John Edison 60,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Lakeview Fund LP 666,667 None 0
------------------------------------------ ---------------- ----------------- --------------
Thomas L. Schellenberg 54,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Robert Schellenberg 30,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Elgemod Continental SA 100,000 None 0
------------------------------------------ ---------------- ----------------- --------------
David Burtnik 10,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Michael Lathigee 10,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Robert G. Atkinson 100,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Lamond Investments Ltd. 100,000 None 0
------------------------------------------ ---------------- ----------------- --------------
-40-
------------------------------------------ ---------------- ----------------- --------------
SHAREHOLDER NO. OF SHARES RELATIONSHIP SHARES OWNED
OR OWNED WITH ISSUER AFTER
WARRANT HOLDER OFFERING
------------------------------------------ ---------------- ----------------- --------------
------------------------------------------ ---------------- ----------------- --------------
Eva Jelec 133,333 None 0
------------------------------------------ ---------------- ----------------- --------------
Robert Mendel 16,666 None 0
------------------------------------------ ---------------- ----------------- --------------
Audrey Van Vliet 16,666 None 0
------------------------------------------ ---------------- ----------------- --------------
Rosemarie Blackwood 16,666 None 0
------------------------------------------ ---------------- ----------------- --------------
Dom Tersigni 16,666 None 0
------------------------------------------ ---------------- ----------------- --------------
Dean Middaugh 16,666 None 0
------------------------------------------ ---------------- ----------------- --------------
John Rathwell 166,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Harp Capital Corp. 20,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Kaylin Marshall 20,000 None 0
------------------------------------------ ---------------- ----------------- --------------
767269 Ontario Ltd. 20,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Michael Winiker 20,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Novadan Capital Ltd. 200,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Romeo D'Angela 200,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Richard T. Marion 25,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Peter Meredith 25,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Poulos Technology Consulting Inc. 30,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Hwa Yeon Lee 30,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Ennio D'Angela 300,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Parkwood GP Inc. 325,000 None 0
------------------------------------------ ---------------- ----------------- --------------
EAM Inc. 325,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Bruce McEwen 33,333 None 0
------------------------------------------ ---------------- ----------------- --------------
Kevin McAllister 33,333 None 0
------------------------------------------ ---------------- ----------------- --------------
Vanna Schiralli 35,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Kevin Thistle 35,000 None 0
------------------------------------------ ---------------- ----------------- --------------
WBIC Canada Ltd. 40,000 None 0
------------------------------------------ ---------------- ----------------- --------------
G. Scott Paterson 41,666 None 0
------------------------------------------ ---------------- ----------------- --------------
Tumer S. Bahcheli 42,000 None 0
------------------------------------------ ---------------- ----------------- --------------
-41-
------------------------------------------ ---------------- ----------------- --------------
SHAREHOLDER NO. OF SHARES RELATIONSHIP SHARES OWNED
OR OWNED WITH ISSUER AFTER
WARRANT HOLDER OFFERING
------------------------------------------ ---------------- ----------------- --------------
------------------------------------------ ---------------- ----------------- --------------
Andrew Blackwood 5,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Richard Bullock 50,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Kevin Reid 50,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Paul Millar 50,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Iqbal Kassam 50,000 None 0
------------------------------------------ ---------------- ----------------- --------------
BNAD Construction Inc. 50,000 None 0
------------------------------------------ ---------------- ----------------- --------------
FIC Investments USA Corp. 60,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Brendan Ryan 8,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Bora Albulak 8,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Geron Cowherd 8,333 None 0
------------------------------------------ ---------------- ----------------- --------------
Clayton Blackwood 8,333 None 0
------------------------------------------ ---------------- ----------------- --------------
Marcus New 80,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Mary Hanemaayer 83,333 None 0
------------------------------------------ ---------------- ----------------- --------------
John Hanemaayer 83,333 None 0
------------------------------------------ ---------------- ----------------- --------------
1475468 Ontario Inc. 83,333 None 0
------------------------------------------ ---------------- ----------------- --------------
Joseph Carlomusto 83,333 None 0
------------------------------------------ ---------------- ----------------- --------------
FIC Investment Ltd. 90,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Bunnaton Ltd. 150,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Peony Enterprises Limited 20,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Jack Campars Ltd. 250,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Bank Sal. Oppenheim Jr. & Cie 100,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Northern Precious Metals 200,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Novadan Capital Ltd. 240,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Chasseur Corporation 272,660 None 0
------------------------------------------ ---------------- ----------------- --------------
Rockport Trading Company 272,660 None 0
------------------------------------------ ---------------- ----------------- --------------
FYJIGIM, Inc. 272,660 None 0
------------------------------------------ ---------------- ----------------- --------------
AGF 808,000 None 0
------------------------------------------ ---------------- ----------------- --------------
-42-
------------------------------------------ ---------------- ----------------- --------------
SHAREHOLDER NO. OF SHARES RELATIONSHIP SHARES OWNED
OR OWNED WITH ISSUER AFTER
WARRANT HOLDER OFFERING
------------------------------------------ ---------------- ----------------- --------------
------------------------------------------ ---------------- ----------------- --------------
Warren and Julie Cook 7,333 None 0
------------------------------------------ ---------------- ----------------- --------------
David and Kathy Rittmueller 25,512 None 0
------------------------------------------ ---------------- ----------------- --------------
Warren Cook 26,973 None 0
------------------------------------------ ---------------- ----------------- --------------
Kenneth Hope 34,035 None 0
------------------------------------------ ---------------- ----------------- --------------
David and Kathy Rittmueller 76,204 None 0
------------------------------------------ ---------------- ----------------- --------------
Dubuque Inc. 76,525 None 0
------------------------------------------ ---------------- ----------------- --------------
Susan O'Konski 101,150 None 0
------------------------------------------ ---------------- ----------------- --------------
Arthur Mitton 14,000 None 0
------------------------------------------ ---------------- ----------------- --------------
J. Malcolm Slack 16,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Brian Robertson 16,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Duane Engelmeier 17,971 None 0
------------------------------------------ ---------------- ----------------- --------------
Ray Fulks 20,000 None 0
------------------------------------------ ---------------- ----------------- --------------
B.F. Pittman 43,667 None 0
------------------------------------------ ---------------- ----------------- --------------
J. Mike Yantis 43,667 None 0
------------------------------------------ ---------------- ----------------- --------------
Bruce Knox 45,045 None 0
------------------------------------------ ---------------- ----------------- --------------
Kenneth Deckard 64,120 None 0
------------------------------------------ ---------------- ----------------- --------------
Novadan Capital LP 158,090 None 0
------------------------------------------ ---------------- ----------------- --------------
Richard Ewing (Hinton Syndicate) 22,014 None 0
------------------------------------------ ---------------- ----------------- --------------
James Smith (Hinton Syndicate) 6,907 None 0
------------------------------------------ ---------------- ----------------- --------------
J. Malcolm Slack (Hinton Syndicate) 6,907 None 0
------------------------------------------ ---------------- ----------------- --------------
Robert Wagner (Hinton Syndicate) 7,338 None 0
------------------------------------------ ---------------- ----------------- --------------
David Elliott 25,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Terry Evancio 25,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Lawrence Guichon 25,000 None 0
------------------------------------------ ---------------- ----------------- --------------
David Shepherd 25,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Millerd Holdings Ltd. 100,000 None 0
------------------------------------------ ---------------- ----------------- --------------
Medallion Capital Corp. 141,599 None 0
------------------------------------------ ---------------- ----------------- --------------
The Barclay Limited Partnership 400,000 None 0
------------------------------------------ ---------------- ----------------- --------------
TOTAL 8,993,364
------------------------------------------ ---------------- ----------------- --------------
-43-
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.
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.
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 or the
Toronto Stock Exchange, 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.
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.
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.
-44-
The above 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 except J.
Malcolm Slack and Richard Ewing, both of whom were directors of the Company.
We believe, based on information supplied by the Selling Shareholders and our
own records, that the persons named in the above 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 assume 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.
BLUE SKY RESTRICTIONS ON RESALE
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. 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.
When a selling security holder wants to sell shares of our common stock under
this registration statement, the selling security holders will also need to
comply with state securities laws, also known as "Blue Sky laws," with regard to
secondary sales. All states offer a variety of exemption from registration for
secondary sales. Many states, for example, have an exemption for secondary
trading of securities registered under Section 12(g) of the Securities Exchange
Act of 1934 or for securities of issuers that publish continuous disclosure of
financial and non-financial information in a recognized securities manual, such
as Standard & Poor's. The broker
Any person who purchases shares of our common stock from a selling security
holder under this registration statement who then wants to sell such shares will
also have to comply with Blue Sky laws regarding secondary sales. When the
registration statement of which this prospectus forms a part becomes effective,
and a selling security holder indicates in which state(s) he desires to sell his
shares, the Company will be able to identify whether it will need to register or
will rely on an exemption there from.
EXPENSES OF THE OFFERING
Yukon Gold will pay the entire expenses of the offering which are estimated to
be $32,300. The Selling Shareholders will bear all costs related to the sale of
their shares.
We intend to keep this prospectus effective until the earlier of: (i) the date
on which the shares may be resold by the Selling Shareholders under Rule 144
under the Securities Act of 1933 or (ii) one year from the date of this
prospectus, although we reserve the right to terminate the distribution under
this prospectus prior to that time.
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.
-45-
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 consolidated financial statements of Yukon Gold Corporation, Inc. for the
years ended April 30, 2006 and April 30, 2005 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.
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. Reports regarding the mineral properties at the Marg Property site were
prepared by Peter Holbek, M.Sc., P.Geo. of Viking GeoScience and much of the
information about the Marg Property contained in this prospectus has been
obtained from those reports with their consent.
CHANGE IN AUDITORS
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 had experience with respect to the Canadian mining
industry, the requirements of U.S. GAAP relating to the mining industry and in
addition, Schwartz Levitsky Feldman LLP had audited the financial statements of
our subsidiary, YGC.
Yukon Gold neither had nor has any disagreements with Rotenberg & Co. LLP on any
matter of accounting principles or practice, financial statement disclosure, or
auditing scope or procedures till the date of this prospectus, 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 for all years and periods of audit
,did not contain any adverse 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, 2006, 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 info@yukongoldcorp.com. Paul Gorman acts as the Information Officer for
the Company and can be reached at 416-865-9790.
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.
-47-
INDEX TO FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------
YEARS ENDED APRIL 30, 2006 AND APRIL 30, 2005
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 at April 30, 2006 and April 30, 2005 2-3
Consolidated Statements of Operations for the years ended April 30, 2006
and April 30, 2005 4
Consolidated Statements of Cash Flows for the years ended April 30, 2006
and April 30, 2005 5
Consolidated Statements of Changes in Stockholders' Equity for the years
ended April 30, 2006 and April 30, 2005 6
Notes to Consolidated Financial Statements
-48-
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------
YEARS ENDED APRIL 30, 2006 AND APRIL 30, 2005
TOGETHER WITH REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(AMOUNTS EXPRESSED IN US DOLLARS)
-49-
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------
YEARS ENDED APRIL 30, 2006 AND APRIL 30, 2005
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 at April 30, 2006 and April 30, 2005 2-3
Consolidated Statements of Operations for the years ended April 30, 2006
and April 30, 2005 4
Consolidated Statements of Cash Flows for the years ended April 30, 2006
and April 30, 2005 5
Consolidated Statements of Changes in Stockholders' Equity for the years
ended April 30, 2006 and April 30, 2005 6
Notes to Consolidated Financial Statements 7-28
-50-
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, 2006 and 2005 and the related consolidated
statements of operations, cash flows and stockholders' equity for the years
ended April 30, 2006 and 2005 and for the period from incorporation to April 30,
2006. 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, 2006 and 2005 and the results of its
operations and its cash flows for the years ended April 30, 2006 and 2005 and
for the period from incorporation to April 30, 2006 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.
"SCHWARTZ LEVITSKY FELDMAN LLP"
- -------------------------------
Toronto, Ontario, Canada
July 12, 2006 Chartered Accountants
Except for Note 23(i) which is August 31, 2006
1
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
AS AT APRIL 30, 2006 AND APRIL 30, 2005
(AMOUNTS EXPRESSED IN US DOLLARS)
April 30, April 30,
2006 2005
$ $
ASSETS
CURRENT ASSETS
Cash and cash equivalents 2,412,126 79,256
Prepaid expenses and other (note 6) 77,977 103,832
Exploration tax credit receivable (note 7) 153,145 72,203
--------- -------
2,643,248 255,291
RESTRICTED CASH (Note 15) 118,275 --
RESTRICTED DEPOSIT (Note 16) 17,889 --
PROPERTY, PLANT AND EQUIPMENT (Note 8) 63,141 4,778
--------- -------
2,842,553 260,069
========= =======
The accompanying notes are an integral part of these consolidated financial
statements.
APPROVED ON BEHALF OF THE BOARD
--------------------------------------------
Howard Barth, Director
--------------------------------------------
Jose L. Guerra, Jr., Director
2
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
AS AT APRIL 30, 2006 AND APRIL 30, 2005
(AMOUNTS EXPRESSED IN US DOLLARS)
April 30, April 30,
2006 2005
$ $
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities (Note 9) 232,282 83,897
Other Liability (Note 17) 3,750 --
Convertible promissory notes (Note 12) -- 200,500
Demand promissory notes (Note 13) -- 498,649
Current Portion of:
Obligation under Capital Leases 2,792 --
---------- ----------
Total Current Liabilities 238,824 783,046
Long -Term Portion of:
Obligations under Capital Lease 11,864 --
---------- ----------
TOTAL LIABILITIES 250,688 783,046
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 18)
SHAREHOLDERS' EQUITY (DEFICIENCY)
CAPITAL STOCK (Note 10) 1,637 903
ADDITIONAL PAID-IN CAPITAL 5,301,502 854,430
SUBSCRIPTION FOR WARRANTS (Note 11) 525,680 --
ACCUMULATED OTHER COMPREHENSIVE LOSS (5,162) (2,475)
DEFICIT, ACCUMULATED DURING THE EXPLORATION STAGE (3,231,792) (1,375,835)
---------- ----------
2,591,865 (522,977)
---------- ----------
2,842,553 260,069
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
3
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED APRIL 30, 2006 AND APRIL 30, 2005
(AMOUNTS EXPRESSED IN US DOLLARS)
For the For the
year year
Cumulative ended ended
since April 30, April 30,
inception 2006 2005
$ $ $
REVENUE -- -- --
----------- ----------- -----------
OPERATING EXPENSES
Stock-based compensation 225,246 225,246 --
General and administration 1,396,678 859,953 390,679
Project expenses 1,909,464 933,326 532,333
Exploration Tax Credit (284,703) (144,414) (116,050)
Amortization 5,203 1,942 1,184
Loss on sale/disposal of capital assets 5,904 5,904 --
----------- ----------- -----------
TOTAL OPERATING EXPENSES 3,257,792 1,881,957 808,146
----------- ----------- -----------
LOSS BEFORE INCOME TAXES (3,257,792) (1,881,957) (808,146)
Income taxes recovery 26,000 26,000 --
----------- ----------- -----------
NET LOSS (3,231,792) (1,855,957) (808,146)
=========== =========== ===========
Loss per share - basic and diluted (0.17) (0.09)
=========== ===========
Weighted average common shares outstanding 10,742,784 8,850,318
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
4
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED APRIL 30, 2006 AND APRIL 30, 2005
(AMOUNTS EXPRESSED IN US DOLLARS)
For the For the
year year
Cumulative ended ended
since April 30, April 30,
inception 2006 2005
$ $ $
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the year (3,231,792) (1,855,957) (808,146)
Items not requiring an outlay of cash:
Amortization 5,203 1,942 1,184
Loss on sale/disposal of capital assets 5,904 5,904
Shares issued for property payment 314,242 100,000 100,000
Stock-based compensation 225,246 225,246 --
Issue of shares for professional services 130,500 130,500 --
Issue of units against settlement of debts 20,077 20,077 --
Decrease (Increase) in prepaid expenses and deposits (76,820) 25,855 (94,475)
Decrease (Increase) in exploration tax credit receivable(153,145) (80,942) (72,203)
Increase (Decrease) in accounts payable and accrued
liabilities 231,792 148,385 53,211
Decrease (Increase) in restricted cash and
restricted deposit (136,164) (136,164) --
Increase (Decrease) in other liabilities 3,750 3,750 --
---------- ---------- ----------
NET CASH USED IN OPERATING ACTIVITIES (2,661,207) (1,411,404) (820,429)
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (74,597) (67,813) --
---------- ---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (74,597) (67,813) --
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments from a shareholder 1,180 -- --
Proceeds from Convertible promissory notes 200,500 -- 200,500
Proceeds from (Repayments of) Demand promissory notes 200,000 (298,649) 498,649
Proceeds from exercise of warrants 20,772 20,772 --
Proceeds from issuance of units/shares 4,179,239 3,538,147 57,152
Proceeds from the exercise of stock options 5,500 5,500 --
Proceeds from subscription of warrants 525,680 525,680 --
Proceeds from capital lease obligation 14,656 14,656 --
---------- ---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 5,147,527 3,806,106 756,301
---------- ---------- ----------
EFFECT OF FOREIGN CURRENCY EXCHANGE
RATE CHANGES 403 5,981 8,459
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS FOR THE YEAR 2,412,126 2,332,870 (55,669)
Cash and cash equivalents, beginning of year -- 79,256 134,925
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR 2,412,126 2,412,126 79,256
INCOME TAXES PAID -- --
========== ==========
INTEREST PAID -- --
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
5
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FROM INCEPTION TO APRIL 30, 2006
(AMOUNTS EXPRESSED IN US DOLLARS)
Deficit,
accumulated
Number of Common Additional Subscription during the
Common Shares Paid-in for exploration
Shares amount Capital warrants stage
--------- ------- ---------- ----------- -----------
$ $ $ $
Issuance of Common shares 2,833,377 154,063 -- -- --
Issuance of warrants -- -- 1,142 -- --
Foreign currency translation -- -- -- -- --
Net loss for the year -- -- -- (124,783)
--------- ------- -------- -------- ---------
Balance as of April 30, 2003 2,833,377 154,063 1,142 (124,783)
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 -- -- -- --
Net loss for the year -- -- -- (442,906)
--------- ------- -------- -------- ---------
Balance as of April 30, 2004 8,815,508 882 697,299 (567,689)
Issuance of Common shares
for property payment 133,333 13 99,987 --
Issuance of common shares on
Conversion of Convertible Promissory note 76,204 8 57,144 --
Foreign currency translation -- -- -- --
Net loss for the year -- -- -- (808,146)
--------- ------- -------- -------- ---------
Balance as of April 30, 2005 9,025,045 903 854,430 -- (1,375,835)
Stock based compensation-
Directors and officers 216,416
Stock based compensation-consultants 8,830
Issue of common shares and
Warrants on retirement of
Demand Promissory note 369,215 37 203,031
Units issued to an outside company
for professional services settlement 24,336 2 13,384
Units issued to an officer
for professional services settlement 12,168 1 6,690
Issuance of common shares
for professional services 150,000 15 130,485
Units issued to shareholder 490,909 49 269,951
Units issued to a director 149,867 15 82,412
Units issued to outside subscribers 200,000 20 109,980
Issuance of common shares on
Conversion of Convertible
Promissory notes 59,547 6 44,654
Issuance of common shares on
Exercise of warrants 14,000 2 11,998
Issuance of common shares on
Conversion of Convertible
Promissory notes 76,525 8 57,386
Private placement of shares 150,000 15 151,485
Issuance of Common shares
for property payment 133,333 13 99,987
Issuance of common shares on
Conversion of Convertible
Promissory notes 34,306 4 25,905
Issuance of common shares on
Exercise of warrants 10,000 1 8,771
Accumulated
Other
Comprehensive Comprehensive
Income (loss) Income (loss)
------------- -------------
$ $
Issuance of Common shares -- --
Issuance of warrants -- --
Foreign currency translation 604 604
Net loss for the year (124,783) --
------- ------
Balance as of April 30, 2003 (124,179) 604
=======
Issuance of Common shares --
Issuance of warrants --
Shares repurchased --
Recapitalization pursuant to
reverse acquisition --
Issuance of Common shares --
Issuance of Common shares
for property payment --
Foreign currency translation (12,796) (12,796)
Net loss for the year (442,906) --
------- ------
Balance as of April 30, 2004 (455,702) (12,192)
=======
Issuance of Common shares
for property payment --
Issuance of common shares on
Conversion of Convertible Promissory note --
Foreign currency translation 9,717 9,717
Net loss for the year (808,146) --
------- ------
Balance as of April 30, 2005 (798,429) (2,475)
=======
Stock based compensation-
Directors and officers
Stock based compensation-consultants
Issue of common shares and
Warrants on retirement of
Demand Promissory note
Units issued to an outside company
for professional services settlement
Units issued to an officer
for professional services settlement
Issuance of common shares
for professional services
Units issued to shareholder
Units issued to a director
Units issued to outside subscribers
Issuance of common shares on
Conversion of Convertible
Promissory notes
Issuance of common shares on
Exercise of warrants
Issuance of common shares on
Conversion of Convertible
Promissory notes
Private placement of shares
Issuance of Common shares
for property payment
Issuance of common shares on
Conversion of Convertible
Promissory notes
Issuance of common shares on
Exercise of warrants
6
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FROM INCEPTION TO APRIL 30, 2006
(AMOUNTS EXPRESSED IN US DOLLARS)
Number of Common Additional Subscription
Common Shares Paid-in for
Shares amount Capital warrants
--------- --------- ---------- ------------
Issuance of common shares on
Conversion of Convertible
Promissory notes 101,150 10 76,523
Issue of 400,000 Special Warrants net 371,680
Issue of 200,000 flow through warrants 154,000
Brokered private placement of shares- net 5,331,327 533 2,910,375
Brokered Private placement of flow through
Shares- net 25,000 2 13,310
Exercise of stock options 10,000 1 5,499
Foreign currency translation -- -- --
Net loss for the year -- --
---------- --------- ---------- ------------
Balance as of April 30, 2006 16,366,728 1,637 5,301,502 525,680
========== ======== ========== ============
Deficit,
accumulated Accumulated
during the Other
exploration Comprehensive Comprehensive
stage Income (loss) Income (loss)
----------- ------------- --------------
Issuance of common shares on
Conversion of Convertible
Promissory notes
Issue of 400,000 Special Warrants net
Issue of 200,000 flow through warrants
Brokered private placement of shares- net
Brokered Private placement of flow through
Shares- net
Exercise of stock options
Foreign currency translation (2,687) (2,687)
Net loss for the year (1,855,957) (1,855,957) --
----------- ------------- --------------
Balance as of April 30, 2006 (3,231,792) (1,858,644) (5,162)
=========== ============= ==============
The accompanying notes are an integral part of these consolidated financial
statements.
7
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2006 AND APRIL 30, 2005
(AMOUNTS EXPRESSED IN US DOLLARS)
1. BASIS OF PRESENTATION
The audited consolidated financial statements include the accounts of
Yukon Gold Corporation, Inc. (the "Company") and its wholly owned Canadian
operating subsidiary, Yukon Gold Corp. ("YGC"). All material inter-company
accounts and transactions have been eliminated.
2. GOING CONCERN
The Company has no source for operating revenue and expects to incur
significant expenses before establishing operating revenue. The Company
has a need for equity capital and financing for working capital and
exploration and development of its properties. Because of continuing
operating losses, the Company's continuance as a going concern is
dependent upon its ability to obtain adequate financing and to reach
profitable levels of operation. The Company's future success is dependent
upon its continued ability to raise sufficient capital, not only to
maintain its operating expenses, but to explore for ore reserves and
develop those it has on its mining claims. There is no guarantee that such
capital will continue to be available on acceptable terms, if at all or if
the Company will attain profitable levels of operation.
Management has initiated plans to raise equity funding through the
issuance of common shares including flow-through shares. The Company was
successful in raising funds (net) of approximately $4 million during the
year which is expected to help the Company meet its commitments and
current requirements for project expenses and general and administrative
expenses. In addition, the Company's common shares were approved for
listing and commenced trading on the Toronto Stock exchange. The listing
of Company's stock in both United States and Canada has expanded its
investor base, as the Company continues to explore sources of funding from
both United States and Canada.
These consolidated financial statements have been prepared in accordance
with United States generally acceptable accounting principles applicable
to a going concern. Accordingly, they do not give effect to adjustments
that would be necessary should the Company be unable to continue as a
going concern and therefore be required to realize its assets and
liquidate its liabilities and commitments in other than the normal course
of business and at amounts different from those in the accompanying
consolidated financial statements.
3. NATURE OF OPERATIONS
The Company is an exploration stage mining company and has not yet
realized any revenue from its operations. It is primarily engaged in
acquisition, exploration and development of its two mining properties,
both located in the Yukon Territory in Canada. The Company has not yet
determined whether these properties contain mineral reserves that are
economically recoverable. The business of mining and exploring for
minerals involves a high degree of risk and there can be no assurances
that current exploration programs will result in profitable mining
operations.
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 include cash on hand, amounts due from banks,
and any other highly liquid investments with a maturity of three months or
less. The carrying amounts approximate fair values because of the short
maturity of those instruments.
8
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2006 AND APRIL 30, 2005
(AMOUNTS EXPRESSED IN US DOLLARS)
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONT'D
c) Other Financial Instruments
The carrying amounts of the Company's restricted cash, restricted deposit,
accounts receivable, exploration tax credit receivable and accounts
payable and accrued liabilities approximates fair values because of the
short maturity of these instruments.
Commodity Price Risk: The ability of the Company to develop its properties
and the future profitability of the Company is directly related to the
market price of certain minerals.
Foreign exchange risk: The Company conducts some of its operating
activities in Canadian dollar. The Company is therefore subject to gains
or losses due to fluctuations in Canadian currency relative to the US
dollar.
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 commencing in the month following
acquisition using the following annual rate and method:
Computer equipment 20% declining balance method
Furniture and fixtures 20% declining balance method
Office Equipment 20% declining balance method
f) Operating and Capital Leases
Costs associated with operating leases are expensed as incurred. The cost
of assets acquired via capital leases are capitalized and amortized over
their useful lives. An offsetting liability is established to reflect the
future obligation under capital leases. This liability is reduced by the
future principal payments.
g) 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 for consolidation purposes. 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).
9
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2006 AND APRIL 30, 2005
(AMOUNTS EXPRESSED IN US DOLLARS)
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONT'D
h) 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.
i) Revenue Recognition
The Company's revenue recognition policies are expected to follow common
practice in the mining industry. Revenue is recognized when concentrate or
dore bars, in the case of precious metals, is produced in a mill
processing ore from one or more mines. The only condition for recognition
of revenue in these instances is the production of the dore or
concentrate. In order to get the ore to a concentrate stage the 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. In some circumstances chemical treatment is used to
extract the precious metals from the concentrate 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 (a combination of gold and silver).
j) 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.
k) Long-Lived Assets
In accordance with Financial Accounting Standard Board Statement No. 144,
the Company records impairment of long-lived assets to be held and used or
to be disposed of when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less
than the carrying amount. At April 30, 2006 and 2005, no impairments were
recognized. Amortization expense for the years ended April 30, 2006 and
2005 was $1,942 and $1,184 respectively.
l) Acquisition, Exploration and Evaluation Expenditures
The Company is an exploration stage mining company and has not yet
realized any revenue from its operations. It is primarily engaged in the
acquisition, exploration and development of mining properties. Mineral
property acquisition and exploration costs are expensed as incurred. When
it has been determined that a mineral property can be economically
developed as a result of establishing proven and probable reserves, the
costs incurred to develop such property, are capitalized. For the purpose
of preparing financial information, all costs associated with a property
that has the potential to add to the Company's proven and probable
reserves are expensed until a final feasibility study demonstrating the
existence of proven and probable reserves is completed. No costs have been
capitalized in the periods covered by these financial statements. Once
capitalized, such costs will be amortized using the units-of-production
method over the estimated life of the probable reserve.
10
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2006 AND APRIL 30, 2005
(AMOUNTS EXPRESSED IN US DOLLARS)
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONT'D
m) Stock Based Compensation
On December 16, 2004, the Financial Accounting Standards Board ("FASB")
issued FASB Statement No.123 (revised 2004), "Share-Based Payment" ("SFAS
123(R)"), which is a revision of FASB Statement No.123, Accounting for
Stock-Based Compensation. SFAS 123(R) requires expense for all share-based
payments to employees, including grants of employee stock options, to be
recognized in the income statement based on their fair values. Pro forma
disclosure is no longer an alternative. For the Company, this statement is
effective as of May 1, 2006. The Company anticipates adoption of the
modified prospective method, under which compensation cost is recognized
beginning with the effective date. The modified prospective method
recognizes compensation cost based on the requirements of SFAS 123(R) for
all share-based payments granted after the effective date and, based on
the requirements of SFAS 123, for all awards granted to employees prior to
the effective date that remain unvested on the effective date. The amount
of expense recorded under SFAS 123(R) will depend upon the number of
options granted in the future and their valuation.
Pro-forma information regarding net loss and loss per share is required by
FAS No. 123 (Amended by FAS No.148) - "Accounting for Stock Based
Compensation" and has been determined as if the Company had accounted for
its employee stock options based on fair values at the grant date for
options granted under the Plan.
2006 2006 2005 2005
---- ---- ---- ----
As reported Pro-Forma As reported Pro-Forma
----------- --------- ----------- ---------
Stock-based compensation $ 225,246 $ 225,246 nil nil
Net loss (1,855,957) (1,855,957) (808,146) (808,146)
Basic and diluted EPS (0.17) (0.17) (0.09) (0.09)
The fair value of each option used for purposes of estimating the
pro-forma amounts summarized above is based on the grant date using the
Black-Scholes option pricing model with the assumptions shown in the
following table:
2006
---- June August December January January
28, 2005 16, 2005 13, 2005 17, 2006 20, 2006
-------- -------- -------- -------- --------
Risk free rate 3.0% 3.0% 3.25% 3.25% 3.25%
Volatility factor 60.12% 54.27% 87.72% 93.47% 90.83%
Expected dividends nil nil nil nil nil
2005
----
Risk free rate 3.0%
Volatility factor 0.0%
Expected dividends nil
n) Earnings or Loss per Share
The Company has adopted FAS No. 128, "Earnings per Share", which requires
disclosure on the financial statements of "basic" and "diluted" earnings
(loss) per share. Basic earnings (loss) per share are computed by dividing
net income (loss) by the weighted average number of common shares
outstanding for the year. Diluted earnings (loss) per share is computed by
dividing net income (loss) by the weighted average number of common shares
outstanding plus common stock equivalents (if dilutive) related to stock
options and warrants for each year.
11
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2006 AND APRIL 30, 2005
(AMOUNTS EXPRESSED IN US DOLLARS)
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONT'D
o) Flow-Through Financing
The Company has financed a portion of its exploration activities through
the issue of flow-through shares, which transfer the Canadian tax
deductibility of exploration expenditure to the investor. Proceeds
received from the issuance of such shares are allocated between the
offering of shares and the sale of tax benefits. The allocation is made
based on the difference between the quoted price of the existing shares
and the amount the investor pays for the shares. A liability is recognized
for the difference. Resource expenditure deductions for income tax
purposes related to exploration and development activities funded by
flow-through share arrangements are renounced to investors in accordance
with the income tax legislation in Canada. On such renunciation, a
deferred tax liability is created. The Company recognized the benefit of
tax losses to offset such liability resulting in an income tax recovery.
p) Recent Pronouncements
In March 2005, the FASB issued an interpretation of Statement No.
143,"Accounting for Asset Retirement Obligations". This interpretation
clarifies that the term "conditional asset retirement obligation" as used
in the Statement No. 143, refers to a legal obligation to perform an asset
retirement activity in which the timing and (or) method of settlement are
conditional on a future event that may or may not be within the control of
the entity. The obligation to perform the asset retirement activity is
unconditional even though uncertainty exists about the timing and (or)
method of settlement. Thus, the timing and (or) method of settlement may
be conditional on a future event. Accordingly, an entity is required to
recognize a liability for the fair value of a conditional asset retirement
obligation if the fair value of the liability can be reasonably estimated.
The fair value of a liability for the conditional asset retirement
obligation should be recognized when incurred - generally upon
acquisition, construction, or development and (or) through the normal
operation of the asset. Uncertainty about the timing and (or) method of
settlement of a conditional asset retirement obligation should be factored
into the measurement of the liability when sufficient information exist.
Statement No. 143 acknowledges that in some cases, sufficient information
may not be available to reasonably estimate the fair value of an asset
retirement obligation. This interpretation also clarifies when an entity
would have sufficient information to reasonable estimate the fair value of
an asset retirement obligation. This interpretation is effective no later
than the end of fiscal years after December 15, 2005. Management does not
expect FASB interpretation to the Statement No. 143 to have an impact to
the Company's consolidated financial position or consolidated results of
operations and cash flows.
In May 2005, the FASB issued Statement No. 154, "Accounting Changes and
Error Corrections", a replacement of APB Opinion 20, "Accounting Changes"
and FASB Statement No. 3, "Reporting Accounting Changes in Interim
Financial Statements." This Statement changes the requirements for the
accounting for and reporting of a change in accounting principle. APB
Opinion 20 previously required that most voluntary changes in accounting
principles be recognized by including in net income of the period of the
change the cumulative effect of changing to the new accounting principle.
FASB Statement No. 154 requires retrospective application to prior
periods' financial statements of changes in accounting principle, unless
it is impracticable to determine either the period specific effects or the
cumulative effect of the change. This statement is effective for
accounting changes and corrections of errors made in fiscal periods that
begin after December 15, 2005. Management does not anticipate this
statement will impact the Company's consolidated financial position or
consolidated results of operations and cash flows.
12
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2006 AND APRIL 30, 2005
(AMOUNTS EXPRESSED IN US DOLLARS)
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
p) Recent Pronouncements (cont'd)
In February 2006, the FASB issued Statement No. 155, "Accounting for
Certain Hybrid Financial Instruments", an amendment of FASB Statement
No.133, "Accounting for Derivative Instruments and Hedging Activities" and
FASB Statement No. 140, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." This Statement
permits fair value re measurement for any hybrid financial instrument that
contains an embedded derivative that otherwise would require bifurcation;
clarifies which interest-only strips and principal-only strips are not
subject to the requirements of Statement No. 133, establishes a
requirement to evaluate interests in securitized financial assets to
identify interests that are freestanding derivatives or that are hybrid
financial instruments that contain an embedded derivative requiring
bifurcation; clarifies that concentrations of credit risk in the form of
subordination are not embedded derivatives and amends Statement 140 to
eliminate the prohibition on a qualifying special-purpose entity from
holding a derivative financial instrument that pertains to a beneficial
interest other than another derivative financial instrument. Management
does not anticipate this Statement will impact the Company's consolidated
financial position or consolidated results of operations and cash flows.
In March 2006, the FASB issued Statement No. 156, "Accounting for
Servicing of Financial Assets", an amendment of FASB Statement No. 140,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." This Statement amends Statement No. 140
with respect to the accounting for separately recognized servicing assets
and servicing liabilities. Management does not anticipate this Statement
will impact the Company's consolidated financial position or consolidated
results of operations and cash flows.
SFAS NO. 123R- In December 2004, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No. 123R,
"Share-Based Payment" ("FAS 123R"), which revised FAS 123 "Accounting for
Stock-Based Compensation". FAS 123R requires measurement and recognition
of the costs of employee services received in exchange for an award of
equity instruments based on the grant-date fair value of the award,
recognized over the period during which an employee is required to provide
service in exchange for such award. Implementation is required as of the
first interim or annual reporting period that begins after December 15,
2005 for public entities that file as small business issuers. Management
intends to comply with this statement at the scheduled effective date
commencing May 1, 2006.
The Company believes that the above standards would not have a material
impact on its financial position, results of operations or cash flows with
the exception of SFAS123(Revised). The Company is evaluating the financial
impact of SFAS 123(Revised) which will be implemented in the first quarter
commencing May 1, 2006.
13
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2006 AND APRIL 30, 2005
(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,
2006 2005
$ $
Net loss (1,855,957) (808,146)
Other comprehensive income (loss)
Foreign currency translation (2,687) 9,717
--------- ---------
Comprehensive loss (1,858,644) (798,429)
========= ========
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 (g).
6. PREPAID EXPENSES AND OTHER
Prepaid expenses and other includes a bid deposit of $ Nil (prior year:
$79,460) with PriceWaterhouseCoopers for the United Keno Hill Mines
Limited assets which was refunded when the Company was advised that its
bid was not awarded. Included in prepaid expenses and other is an amount
of $22,492 (prior year: $21,743) being Goods & Services tax receivable
from the Federal Government of Canada. Included in prepaid expenses and
other is a deposit of $44,723 (CDN $50,000) (prior year: $ nil) with a
contractor for start up and demobilization costs for diamond drilling at
drill sites to be selected by the Company.
7. EXPLORATION TAX CREDIT RECEIVABLE
The Company has a claim to the Yukon exploration tax credit, since it
maintains a permanent establishment in the Yukon and has incurred eligible
mineral exploration expenses as defined by the federal income tax
regulations of Canada. The Company's expectation of receiving this credit
of $153,145 (CDN$171,216) is based on the history of receiving past
credits. The Company will be filing tax returns to claim this credit.
8. PROPERTY, PLANT AND EQUIPMENT
April 30, April 30,
2006 2005
$ $
Computer equipment 22,322 7,608
Furniture and fixtures 31,382 --
Capital leases:
Office equipment 15,456 --
------ ------
Cost 69,160 7,608
------ ------
Less: Accumulated amortization
Computer equipment 5,035 2,830
Furniture and fixtures 984 --
Capital leases:
Office equipment -- --
------ ------
6,019 4,778
------ ------
Net 63,141 4,778
====== ======
14
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2006 AND APRIL 30, 2005
(AMOUNTS EXPRESSED IN US DOLLARS)
9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
April 30, April 30,
2006 2005
$ $
Accounts payable and accrued liabilities are comprised
of the following:
Trade payables 41,082 67,285
Accrued liabilities 191,200 16,612
232,282 83,897
10. CAPITAL STOCK
a) Authorized
50,000,000 of Common shares, $0.0001 par value
b) Issued
16,366,728 Common shares (9,025,045 in 2005)
c) Changes to Issued Share Capital
Year ended April 30, 2005
On March 1, 2005 the Company issued 133,333 Common shares for property
payments in the amount of $100,000 which was expensed in the consolidated
statements of operations.
On March 2, 2005 the Company issued 76,204 Common shares on conversion of
convertible promissory note.
Year ended April 30, 2006
On August 5, 2005 the board of directors authorized the issuance of
369,215 common shares and 184,608 share purchase warrants in settlement of
a demand promissory note in the amount of $200,000 plus interest of
$3,068.25. Each common share was priced at $0.545 and each full warrant at
$0.01. Each share purchase warrant entitles the holder to purchase one
common share for $1.00 per share on or before August 5, 2007.
On August 23, 2005 the board of directors approved the issuance of 24,336
Units to an arms length investor and 12,168 Units to an officer of the
Company at $0.55 per Unit, in settlement of an accounts payable for
services, for a total of $20,077 (CDN$24,398). Each Unit consists of one
common share and one half-share purchase warrant. Each common share was
priced at $0.545 and each full warrant at $0.01. Each full-share purchase
warrant entitles the holder to purchase one common share at $1.00 per
share for a period expiring on August 15, 2007.
On August 25, 2005 the Company entered into a Consulting Agreement with
Endeavor Holdings, Inc. (Endeavor) of New York, New York to assist the
Company in raising capital. Under the terms of this agreement the Company
agreed to pay Endeavor 150,000 common shares at the rate of 25,000 shares
per month. Either party could cancel the agreement on 30 days notice. The
Company issued 150,000 common shares valued at $130,500 to Endeavor.
15
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2006 AND APRIL 30, 2005
(AMOUNTS EXPRESSED IN US DOLLARS)
10. CAPITAL STOCK-CONT'D
c) Changes to Issued Share Capital (cont'd)
On August 26, 2005 the board of directors approved the issuance of 490,909
Units at $0.55 per Unit to an arms length accredited shareholder for a
total of $270,000. Each Unit consists of one common share and one
half-share purchase warrant. Each common share was priced at $0.545 and
each full warrant at $0.01. Each full-share purchase warrant entitles the
holder to purchase one common share at $1.00 per share, after one year and
seven days following closing, for a period of two (2) years following the
date that is one year and seven days after the closing. The Company
received $20,000 of the subscription price on August 12, 2005 as a loan to
be applied to the subscription price and $100,000 on September 15, 2005
and a promissory note for $150,000 due on or before October 1, 2005 for
the balance of the subscription price. The Promissory note was paid in
full by the due date. This arms length shareholder subsequently became a
director of the Company on November 2, 2005 and chairman of the Board on
July 11, 2006.
On August 29, 2005, the Company completed the sale of 149,867 Units at
$0.55 per Unit to a director of the Company for $82,427 (CDN$100,000).
Each Unit consists of one common share and one half-share purchase
warrant. Each common share was priced at $0.545 and each full warrant at
$0.01. Each full-share purchase warrant entitles the holder to purchase
one common share at $1.00 per share for a period expiring on August 5,
2007.
On August 31, 2005, the Company accepted subscriptions from four
accredited investors and one accredited corporation, all residents of
Canada, for a total of 200,000 Units priced at $0.55 per Unit for a total
of $110,000. Each Unit consists of one common share and one half-share
purchase warrant. Each common share was priced at $0.545 and each full
warrant at $0.01. Each full-share purchase warrant entitles the holder to
purchase one common share at $1.00 per share for a period expiring August
31, 2007.
On October 18 and 24, 2005 the Company issued a total of 59,547 common
shares and 29,167 warrants covering the principal amount of $43,750 plus
interest of $910 on conversion of convertible promissory note issued on
October 6, 2004. Refer to note 12 (b).
On October 18, 2005 the Company authorized the issuance of 14,000 common
shares for the exercise of 14,000 warrants from a warrant holder in
consideration of $12,000.
On November 9, 2005, the accredited investor converted the promissory
note, referred to in Note 12 (c) on its due date and the Company issued
76,525 common shares and 37,500 warrants covering the principal amount of
$56,250 and interest in the amount of $1,143 in accordance with the
conversion provisions of the notes. The expiry date of the warrants was
extended to 15 months after the conversion date.
On December 5, 2005 the board of directors authorized the issuance of
150,000 common shares and 150,000 share purchase warrants in consideration
of $100,000 cash and a promissory note for $51,500 due January 15, 2006
which was subsequently paid. Each common share was valued at $1.00 and
each warrant at $0.01. Each warrant entitles the warrant holder to
purchase one common share at $1.00 on or before December 4, 2006.
On December 6, 2005 the board of directors authorized the issuance of
133,333 common shares in the amount of $100,000 for a property payment to
Atna Resources Ltd., along with a cash payment of $43,406 (CDN$50,000) as
per terms of the agreement. The common shares along with the cash payment
were delivered to Atna Resources Ltd. on December 12, 2005. This entire
payment of $143,406 was expensed in the consolidated statements of
operations.
On December 7, 2005 the accredited investor converted the promissory
notes, referred to in Note 12 (d) on their due dates and the Company
issued 34,306 common shares and 17,001 warrants covering the principal
amounts of $25,500 and interest in the amount of $409 in accordance with
the conversion provisions of the notes. The expiry date of the warrants
was extended to 15 months after the conversion date.
16
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2006 AND APRIL 30, 2005
(AMOUNTS EXPRESSED IN US DOLLARS)
CAPITAL STOCK-CONT'D
c) Changes to Issued Share Capital (cont'd)
On December 7, 2005 the board of directors authorized the issuance of
10,000 common shares to a shareholder for the exercise of 10,000 warrants
in consideration of $8,772 (CDN $10,000).
On January 11, 2006 the accredited investor converted the promissory
notes, referred to in Note 12 (e) on their due dates and the Company
issued 101,150 common shares and 50,000 warrants covering the principal
amounts of $75,000 and interest in the amount of $1,533 in accordance with
the conversion provisions of the notes. The expiry date of the warrants
was extended to 15 months after the conversion date.
On March 28, 2006 the Company completed a brokered private placement
through the issuance of 5,331,327 common share units at a price of $0.60
per unit for gross proceeds of $3,198,799. The Company also completed the
brokered private placement through the issuance of 25,000 flow-through
shares at a price of $0.75 per share for gross proceeds of $ 18,750. Each
Common share unit consists of one share and one-half of one common share
purchase warrant. Each whole common share purchase warrant entitles the
holder to purchase one common share at $0.90 per share for a period
expiring on March 28, 2008. The agent received $289,579 in commissions as
well as 533,133 broker warrants with a fair value of $347,956. Each
warrant entitles them to purchase one common share and one-half share
purchase warrant for $0.60 until March 28, 2008. Each full warrant is then
exercisable at $0.90.Out of the gross proceeds received from flow-through
shares, an amount of $3,750 was credited to Other Liabilities (Refer to
Note 17).
On April 11, 2006 a director of the Company exercised the stock option to
purchase 10,000 common shares at the option price of $0.55 per share. The
Company received the funds in cash and issued 10,000 common shares.
d) Purchase Warrants
During the year 2004-2005 the following stock warrants were issued:
37,500 stock warrants were issued on March 2, 2005. Each warrant is
exercisable for one common share at $ 1.25 on or before June 30, 2006.
These warrants were issued on conversion of a promissory note as per the
terms of the original note.
During the year 2005-2006 the following stock warrants were issued:
184,608 stock warrants were issued on August 5, 2005. Each warrant is
exercisable for one common share at $1.00 on or before August 5, 2007.
These warrants were issued on settlement of a demand promissory note.
12,168 stock warrants were issued to an arms length investor on August 23,
2005. Each warrant is exercisable for one common share at $1.00 per share
on or before August 15, 2007. These warrants were issued in settlement of
an accounts payable for services.
6,084 stock warrants were issued to an officer on August 23, 2005. Each
warrant is exercisable for one common share at $1.00 per share on or
before August 15, 2007. These warrants were issued in settlement of an
accounts payable for services.
245,455 stock warrants were issued to an arms length accredited
shareholder on August 26, 2005, who subsequently became a director of the
Company and Chairman of the Board. Each warrant is exercisable for one
common share at $1.00 per share on or before August 22, 2008. These
warrants were issued as part of 490,909 common share units. Each common
share unit consists of one share and one-half of one common share purchase
warrant
74,934 stock warrants were issued to a director of the Company on August
29, 2005. Each warrant is exercisable for one common share at $1.00 per
share on or before August 5, 2007. These warrants were issued as part of
149,867 common share units. Each common share unit consists of one share
and one-half of one common share purchase warrant.
100,000 stock warrants were issued to four accredited investors and one
accredited corporation, all residents of Canada on August 31, 2005. Each
warrant is exercisable for one common share at $1.00 per share on or
before August 31, 2007. These warrants were issued as part of 200,000
common share units. Each common share unit consists of one share and
one-half of one common share purchase warrant.
17
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2006 AND APRIL 30, 2005
(AMOUNTS EXPRESSED IN US DOLLARS)
10. CAPITAL STOCK-CON'T
d) Purchase Warrants (cont'd)
12,500 stock warrants were issued on October 14, 2005. Each warrant is
exercisable for one common share at $ 1.25 on or before January 14, 2007.
These warrants were issued on conversion of a promissory note as per the
terms of the original note.
16,667 stock warrants were issued on October 24, 2005. Each warrant is
exercisable for one common share at $ 1.25 on or before January 24, 2007.
These warrants were issued on conversion of a promissory note as per the
terms of the original note.
37,500 stock warrants were issued on November 9, 2005. Each warrant is
exercisable for one common share at $ 1.25 on or before February 9, 2007.
These warrants were issued on conversion of a promissory note as per the
terms of the original note.
150,000 stock warrants were issued on December 5, 2005. Each warrant is
exercisable for one common share at $1.00 on or before December 5, 2006.
These warrants were issued along with the issue of common shares for cash.
17,001 stock warrants were issued on December 7, 2005. Each warrant is
exercisable for one common share at $ 1.25 on or before March 7, 2007.
These warrants were issued on conversion of a promissory note as per the
terms of the original note.
32,320 stock warrants were issued on December 15, 2005. Each warrant is
exercisable for one common share at $1.00 on or before December 15, 2006.
These warrants were issued to the agent for arranging the subscription for
400,000 special warrants.
50,000 stock warrants were issued on January 11, 2006. Each warrant is
exercisable for one common share at $ 1.25 on or before April 11, 2007.
These warrants were issued on conversion of a promissory note as per the
terms of the original note.
2,665,669 stock warrants were issued on March 28, 2006. Each warrant is
exercisable for one common share at $0.90 on or before March 28, 2008.
These warrants were issued as part of 5,331,327 common share units. Each
common share unit consists of one share and one-half of one common share
purchase warrant.
533,133 unit purchase warrants were issued on March 28, 2006. Each unit
purchase warrant is exercisable for one common share and one-half share
purchase warrant for $0.60 on or before March 28, 2008. Each full warrant
is then exercisable at $0.90. These unit purchase warrants were issued to
the agent or their assignees, for arranging the financing for 5,331,327
common shares units.
Number of Exercise Expiry date
Warrants Prices
Granted
Outstanding at April 30, 2004 and average exercise price 499,731 $ 0.79
Granted in year 2004-2005 37,500 $ 1.25 June 30, 2006
--------- -------
Outstanding at April 30, 2005 and average exercise price 537,231 $ 0.82
Granted in year 2005-2006 150,000 $ 1.00 December 5, 2006
Granted in year 2005-2006 32,320 $ 1.00 December 15,2006
Granted in year 2005-2006 259,542 $ 1.00 August 5, 2007
Granted in year 2005-2006 18,252 $ 1.00 August 15, 2007
Granted in year 2005-2006 245,455 $ 1.00 August 22, 2007
Granted in year 2005-2006 100,000 $ 1.00 August 31, 2007
Granted in year 2005-2006 12,500 $ 1.25 January 14, 2007
Granted in year 2005-2006 16,667 $ 1.25 January 25, 2007
Granted in year 2005-2006 37,500 $ 1.25 February 9, 2007
Granted in year 2005-2006 17,001 $ 1.25 March 7, 2007
Granted in year 2005-2006 50,000 $ 1.25 April 11, 2007
Granted in year 2005-2006 2,665,669 $ 0.90 March 28, 2008
Granted in year 2005-2006 533,133 $ 0.60 March 28, 2008
Exercised (24,000) ($0.82)
Expired - -
Cancelled - -
-------- ------
Outstanding at April 30, 2006 and average exercise price 4,651,270 $ 0.88
======= =======
The warrants do not confer upon the holders any rights or interest as a
shareholder of the Company.
18
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2006 AND APRIL 30, 2005
(AMOUNTS EXPRESSED IN US DOLLARS)
11. SUBSCRIPTION FOR WARRANTS
a) On December 15, 2005 the Company completed the sale of 400,000
Special Warrants using the services of an agent at a subscription
price of $1.01 per Warrant to an accredited investor for $404,000.
Each Special warrant entitles its holder to acquire one common share
of the Company and one common share purchase warrant at no
additional cost. Each share purchase warrant entitles the Subscriber
to subscribe for one common share in the capital of the Company at a
price of $1.00 per warrant share for a period of one year following
the closing date.
Special Warrants may not be exercised until the earlier of: (i) the
Qualification Time (as defined below), or (ii) the date which is 181 days
from the Closing Date of the sale of the Special Warrants (the "Expiry
Time"). All special warrants will be automatically exercised without any
further action on the part of the holder at 4:30 p.m. (Toronto Time) on
the earlier of: (i) the fifth business day after the date upon which a
registration statement to be filed by the Corporation under the Securities
Act of 1933 as amended has been declared effective with respect to the
distribution of the Common Shares and Warrants issuable upon exercise of
the Special Warrants (the "Qualification Time") or (ii) the Expiry Time.
If by 4:30 p.m. (Toronto time) on the date which is 180 days from the
closing date such registration statement has not been declared effective,
the holders of the Special Warrants shall thereafter be entitled to
receive, upon the exercise or deemed exercise of the Special Warrants, 1.1
common shares and 1.1 warrants for each Special Warrant then held by such
holder (in lieu of one common share and one warrant otherwise receivable)
at no additional cost.
The agent received $32,320 in commission as well as 32,320 warrants. Each
warrant is exercisable for one common share at $ 1.00 until December 15,
2006 with a fair value of $9,995.
b) On December 30, 2005 the Company completed the sale of 200,000
Flow-Through Special Warrants ("Special Warrants") to National Bank
Trust Inc. for the account of a Canadian accredited investor, for
$180,000 (CDN$205,020). Each Special Warrant entitles the Holder to
acquire one flow-through common share of the Company ("Flow-Through
Shares") at no additional cost.
The term "Flow-Through Shares" is significant for tax purposes in Canada
because it enables the issuer to allocate certain exploration tax credit
to the holders of such shares. As all Canadian Exploration expenses are
incurred by the Company's 100% owned Canadian subsidiary, which conducts
mining explorations in the Yukon Territory of Canada, for Canadian tax
purposes, a similar Flow-Through subscription agreement was executed
between the Company and its 100% Canadian subsidiary. The effective date
of renunciation for Canadian Exploration expenses is December 31, 2005,
which as per Canadian tax regulations requires the Canadian subsidiary to
incur eligible Canadian exploration expenses for the entire subscription
amount of $180,000 (CDN $205,020) on or before December 31, 2006. The
company must renounce such eligible expenses to the Canadian accredited
investors. The Company renounced such eligible expenses to the investors
in March of 2006. These Special Warrants may be exercised at any time but
will automatically be exercised on the earlier of: (i) the Qualification
Time (as defined below), or (ii) the date which is 181 days from the date
of the Special Warrant Certificate (December 30, 2005), or such later date
as may be agreed upon between the Company and holder of the Special
Warrants (the "Expiry Time"). All Special Warrants will be automatically
exercised without any further action by the holder at 4:30 p.m. (Toronto
time) on the earlier of: (i) the fifth business day after the date upon
which a registration statement to be filed by the Company under the
Securities Act of 1933, as amended (the "Securities Act"), has been
declared effective by the Securities and Exchange Commission (the "SEC")
with respect to the distribution of the Flow-Through Shares issuable upon
exercise of the Special Warrants (the "Qualification Time") or (ii) the
Expiry Time.
Proceeds received from such warrants were allocated by the Company between
the offering for shares and the sale of tax benefits. The amount of
$26,000 attributable to the sale of taxable benefits was credited to Other
Liabilities. On renunciation of eligible exploration expenses in March of
2006, this Liability was reversed and included in income under Income tax
recovery.
19
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2006 AND APRIL 30, 2005
(AMOUNTS EXPRESSED IN US DOLLARS)
12. CONVERTIBLE PROMISSORY NOTES
a) On May 14, 2004 the Company issued a convertible promissory note to
one accredited investor for $56,250. The note bears interest at 2%
per annum. The note is convertible at the earlier 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. On September 15, 2004 the board of directors
passed a resolution extending the expiry date of the warrants under
the Convertible Promissory Note to June 30, 2006. On March 3, 2005
the Company issued 76,204 common shares and 37,500 warrants for
conversion of the above Promissory Note in the principal amount of
$56,250 plus interest of $902. These shares were issued at $0.75 per
share and each warrant is exercisable for one common share at $1.25
on or before June 30, 2006.
b) On October 6, 2004 the Company borrowed $43,750 from two accredited
investors and issued convertible promissory notes. The notes bear
interest at 2% per annum. The notes are convertible on their
maturity, which is one year and 7 days from the date of issue at the
option of the holder. The notes if converted are convertible at the
rate of $0.75 for one common share and one half share purchase
warrant. Each full warrant entitles the holder to purchase one share
of common stock for $1.25 per share on or before June 30, 2006. The
two accredited investors converted their promissory notes on October
18 and 24, 2005 and the Company issued a total of 59,547 common
shares and 29,167 warrants covering the principal amount of $43,750
and interest in the amount of $910 in accordance with the conversion
provisions of the notes. The expiry date of the warrants was
extended to 15 months after the conversion date.
c) On November 2, 2004 the Company borrowed $56,250 from one accredited
investor and issued a convertible promissory note. The note bears
interest at 2% per annum. The note is convertible on its maturity,
which is one year and 7 days from the date of issue at the option of
the holder. The note if converted is convertible at the rate of
$0.75 for one common share and one half share purchase warrant. Each
full warrant entitles the holder to purchase one share of common
stock for $1.25 per share on or before June 30, 2006. The expiry
date of the warrants was extended to 15 months after the conversion
date. The investor converted the promissory note on November 9,
2005, and the Company issued a total of 76,525 common shares and
37,500 warrants covering the principal amount of $56,250 and
interest in the amount of $1,143 in accordance with the conversion
provisions of the note.
d) On November 30, 2004 the Company borrowed $25,500 from one
accredited investor and issued two convertible promissory notes in
the amounts of $20,000 and $5,500. The notes bear interest at 2% per
annum. The notes are convertible on their maturity, which is one
year and 7 days from the date of issue at the option of the holder.
The notes if converted are convertible at the rate of $0.75 for one
common share and one half share purchase warrant. Each full warrant
entitles the holder to purchase one share of common stock for $1.25
per share on or before June 30, 2006. The expiry date of the
warrants was extended to 15 months after the conversion date. The
investor converted both these promissory notes on December 7, 2005
and the Company issued an aggregate of 34,306 common shares and
17,001 warrants covering the principal amount of $25,500 and
interest in the amount of $409 in accordance with the conversion
provision of the notes.
e) On January 4, 2005 the Company borrowed $75,000 from an accredited
investor, and issued a convertible promissory note. The note bears
interest at 2% per annum. The note is convertible on its maturity,
which is one year and 7 days from the date of issue at the option of
the holder. The note if converted is convertible at the rate of
$0.75 for one common share and one half share purchase warrant. Each
full warrant entitles the holder to purchase one share of common
stock for $1.25 per share on or before June 30, 2006. The expiry
date of the warrants was extended to 15 months after the conversion
date. The investor converted the promissory note on January 11, 2006
and the Company issued a total of 101,150 common shares and 50,000
warrants covering the principal amount of $75,000 and interest in
the amount of $1,533 in accordance with the conversion provisions of
the notes.
20
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2006 AND APRIL 30, 2005
(AMOUNTS EXPRESSED IN US DOLLARS)
13. DEMAND PROMISSORY NOTES
a. On June 25, 2004 the Company issued an unsecured demand promissory
note to an arms length shareholder for $100,000. The note is
non-interest bearing and due on demand. The Company paid a financing
fee of $5,000. The arms length shareholder subsequently became a
director of the Company on November 2, 2005. The loan was repaid in
full by the Company on April 3, 2006.
b. On March 1, 2005 the Company entered into a Loan Agreement with
Medallion Capital Corp. ("Medallion") under which it promised to pay
Medallion on demand $198,649 (CDN$250,000). The loan bears interest
at 9% per annum payable monthly. The obligation of the Company under
the Loan Agreement was secured by all of its rights in and to the
Marg Acquisition Agreement. The $198,649 (CDN$250,000) principal
amount of the demand note represents the aggregate of $79,460
(CDN$100,000) advanced to the Company on June 28, 2004 by Stafford
Kelley and $119,189 (CDN$150,000) advanced by Medallion to Atna for
the Marg Property. Mr. Kelley's $79,460 (CDN$100,000) loan was
assigned to Medallion and that note has been cancelled. The Company
paid $47,676 (CDN$60,000) of the principal amount of the Loan due
Medallion on June 30, 2005. On September 12, 2005 Medallion released
the Company from the obligation to secure the loan with the rights
under the Marg Acquisition Agreement and the obligation was then
secured with a demand promissory note only. Medallion is controlled
by Stafford Kelley a former officer and director of the Company. Mr.
Kelley earned $4,085 (CDN$5,000) financing fee related to the
transaction and was paid that amount on August 31, 2005. The balance
of the loan outstanding was repaid in full on March 31, 2006.
c. On April 15, 2005 the Company issued an unsecured demand promissory
note to an arms length shareholder for $200,000. This note bears
interest at 5% per annum. This note was repaid with the issuance of
369,215 common shares and 184,608 share purchase warrants.
d. On November 15, 2005 the Company issued an unsecured demand
promissory note to a former officer and director of the Company for
US$21,808 (CDN$26,000). This note bears interest at 9% per annum. On
December 15, 2005 this note was paid in full.
14. STOCK OPTIONS
On February 10, 2006 the Board of Directors amended the 2003 Stock Option
Plan to cease accepting promissory notes from option holders as payment
for the exercise of options. No other changes were made.
Year 2004-2005
On December 15, 2004, The Board of Directors granted stock options
totalling 1,750,000 to its Officers and Directors. These options are for a
term of two (2) years from the date of issue and shall vest at the rate of
1/24 of the total options granted each month. If any of the parties
resigns, is not re-elected or is discharged from the Company during the
term of the Options, any unvested portion of the options shall be
cancelled. The exercise price of the options is US$0.75 per share.
On January 5, 2005, The Board of Directors granted employee stock options
totalling 84,000 to one employee and two consultants. These options shall
be for a term of two (2) years from the date of issue and shall vest at
the rate of 1/12 each month during the first 12 months of the term. The
exercise price is US$0.75 per share.
Year 2005-2006.
On June 28, 2005 the board of directors granted options to its two new
directors to acquire 250,000 shares each, to vest at the rate of 1/24 per
month for a term of two (2) years. The exercise price was set at $0.55 per
share based on the closing share price on July 5, 2005.
On September 26, 2005 the board of directors with agreement with the
Consultant, reduced the number of options granted to the consultant from
75,000 to 20,000. The exercise price was set at $0.58 per share based on
the closing price on August 16, 2005 and the options expire on April 15,
2008.
On December 13, 2005 the board of directors granted options to its two new
directors to acquire 250,000 shares each, to one officer to acquire
250,000 shares, to one officer to acquire 200,000 shares and to one
officer to acquire 76,000 shares. The exercise price for all 1,026,000
options was set at $1.19 per share based on the closing share price on
December 13, 2005. These options vest at the rate of 1/24 per month for a
term of two (2) years.
21
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2006 AND APRIL 30, 2005
(AMOUNTS EXPRESSED IN US DOLLARS)
14. STOCK OPTIONS-CONT'D
On January 17, 2006 the board of directors granted options to a consultant
to acquire 88,000 shares, to vest at the rate of 1/24 per month for a term
of two (2) years. The exercise price was set at $1.19 per share based on
the closing price on December 13, 2005.
On January 20, 2006 the board of directors granted options to an officer
and director to acquire 150,000 shares, to vest at the rate of 1/24 per
month for a term of two (2) years. The exercise price was set at $0.85 per
share based on closing price on January 20 2006.
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. 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. The Company has adopted SFAS123 (Revised)
commencing May 1, 2006.
For this year ended April 30, 2006, the Company has recognized in the
financial statements, stock-based compensation costs as per the following
details. The fair value of each option used for the purpose of estimating
the stock compensation is based on the grant date using the Black-Scholes
option pricing model with the following weighted average assumptions:
June August December January January
28, 2005 16, 2005 13, 2005 17, 2006 20, 2006 Total
-------- -------- -------- -------- --------- ------
Risk free rate 3.0% 3.0% 3.25% 3.25% 3.25%
Volatility factor 60.12% 54.27% 87.72% 93.47% 90.83%
Expected dividends nil nil nil nil nil
Stock-based compensation
cost expensed during the year
ended April 30, 2006 $95,840 $4,260 $112,680 $4,570 $7,896 $225,246
Unexpended Stock based
compensation deferred over
the vesting
period $475,217 $26,954 $55,274 $557,445
Regarding stock options granted on December 13, 2005, January 17, 2006,
and January 20, 2006, the deferred stock-based compensation cost of $
557,445 will be expensed equally over the respective two year vesting
period.
The following table summarizes the options outstanding as at April 30:
EXPIRY DATE OPTION PRICE NUMBER OF SHARES
PER SHARE 2006 2005
December 15, 2006 0.75 1,100,000 1,750,000
January 5, 2007 0.75 84,000 84,000
June 28, 2007 0.55 490,000 --
April 15, 2008 0.58 20,000 --
December 13, 2007 1.19 1,026,000 --
December 13, 2007 1.19 88,000 --
January 20, 2008 0.85 150,000 --
--------- ---------
2,958,000 1,834,000
--------- ---------
Weighted average exercise price at end of year 0.89 0.75
--------- ---------
22
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2006 AND APRIL 30, 2005
(AMOUNTS EXPRESSED IN US DOLLARS)
14. STOCK OPTIONS-CONT'D
NUMBER OF SHARES
2005-2006 2004-2005
Outstanding, beginning of year 1,834,000 --
Granted 1,784,000 1,834,000
Expired -- --
Exercised (10,000) --
Forfeited -- --
Cancelled (650,000) --
Outstanding, end of year 2,958,000 1,834,000
Exercisable, end of year 1,269,450 302,176
15. RESTRICTED CASH
Under Canadian income tax regulations, a company is permitted to issue
flow-through shares whereby the company agrees to incur qualifying
expenditures and renounce the related income tax deductions to the
investors. Notwithstanding that, there is no specific requirement to
segregate the funds. The flow-through funds which are unexpended at the
consolidated balance sheet date are considered to be restricted and are
not considered to be cash or cash equivalents. As of April 30, 2006,
unexpended flow-through funds were $ 118,275 (CDN $132,230).
16. RESTRICTED DEPOSITS
The Company has a term deposit of $17,889 (CDN$20,000) with a Canadian
financial institution which earns interest at 2.5% per annum and matures
on April 26, 2007. This deposit has been assigned to the financial
institution to enable the financial institution to issue an Irrevocable
Letter of Credit to The First Nation of Na Cho Nyak Dun ("NND") which
exercises certain powers over land use and environment protection within
the Yukon Territory of Canada. The Company required access to move heavy
equipment over the land controlled by NND and therefore posted this
security bond so that if the Company fails to comply with reclamation
requirements, then the security bond will be available to NND to complete
the work or may form part of the compensation package.
17. OTHER LIABILITY
On March 28, 2006 the Company completed a brokered private placement
through the issuance of 25,000 flow-through shares at a price of $0.75 per
share for gross proceeds of $18,750. The proceeds raised were allocated
between the offering of shares and the sale of tax benefits. A liability
of $3,750 is recognized for the sale of taxable benefits which will be
reversed and credited to income when the Company renounces resource
expenditure deduction to the investor.
18. COMMITMENTS AND CONTINGENCIES
(a) Mount Hinton Property Mining Claims
On July 7, 2002 Yukon Gold Corp. ("YGC") entered into an option agreement
with the Hinton Syndicate to acquire a 75% interest in the 273 unpatented
mineral claims covering approximately 14,000 acres in the Mayo Mining
District of the Yukon Territory, Canada. This agreement was replaced with
a revised and amended agreement (the "Hinton Option Agreement") dated July
7, 2005 which superseded the original agreement and amendments thereto.
The new agreement is between the Company, its wholly owned subsidiary YGC
and the Hinton Syndicate.
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.
23
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2006 AND APRIL 30, 2005
(AMOUNTS EXPRESSED IN US DOLLARS)
18. COMMITMENTS AND CONTINGENCIES-CONT'D
The schedule of Property Payments and Work Programs are as follows:
PROPERTY PAYMENTS
-----------------
On execution of the July 7, 2002 Agreement $ 19,693 (CDN$ 25,000) Paid
On July 7, 2003 $ 59,078 (CDN$ 75,000) Paid
On July 7, 2004 $ 118,157 (CDN$ 150,000) Paid
On January 2, 2006 $ 125,313 (CDN$ 150,000) Paid
On July 7, 2006 $ 134,168 (CDN$ 150,000) Paid subsequently
On July 7, 2007 $ 134,168 (CDN$ 150,000)
On July 7, 2008 $ 134,168 (CDN$ 150,000)
TOTAL $724,745 (CDN$850,000)
WORK PROGRAM-EXPENDITURES TO BE INCURRED IN THE FOLLOWING PERIODS;
------------------------------------------------------------------
July 7/02 to July 6/03 $ 118,157 (CDN$ 150,000) Incurred
July 7/03 to July 6/04 $ 196,928 (CDN$ 250,000) Incurred
July 7/04 to July 6/05 $ 256,006 (CDN$ 325,000) Incurred
July 7/05 to Dec. 31/06 $ 670,841 (CDN$ 750,000) Incurred subsequently
Jan. 1/07 to Dec. 31/07 $ 894,454 (CDN$ 1,000,000)
Jan. 1/08 to Dec. 31/08 $1,118,068 (CDN$ 1,250,000)
Jan. 1/09 to Dec. 31/09 $1,341,682 (CDN$ 1,500,000)
TOTAL $4,596,136 (CDN$5,225,000)
Provided all Property Payments have been made that are due prior to the
Work Program expenditure levels being attained, YGC shall have earned a:
25% interest upon Work Program expenditures of
$1,341,682 (CDN$1,500,000)
50% interest upon Work Program expenditures of
$2,236,136 (CDN$2,500,000)
75% interest upon Work Program expenditures of
$4,596,136 (CDN$5,225,000)
In some cases, payments made to service providers include amounts advanced
to cover the cost of future work. These advances are not loans but are
considered "incurred" exploration expenses under the terms of the Hinton
Option Agreement. Section 2.2(a) of the Hinton Option Agreement defines
the term, "incurred" as follows: "Costs shall be deemed to have been
"incurred" when YGC has contractually obligated itself to pay for such
costs or such costs have been paid, whichever should first occur."
Consequently, the term, "incurred" includes amounts actually paid and
amounts that YGC has obligated itself to pay. Under the Hinton Option
Agreement there is also a provision that YGC must have raised and have
available the Work Program funds for the period from July 7, 2005 to
December 31, 2006, by May 15 of 2006. This provision was met on May 15,
2006.
The Hinton Option Agreement contemplates that upon the earlier of: (i) a
production decision or (ii) investment of $4,596,136 (CDN$5,225,000) or
(iii) YGC has a minority interest and decides not to spend any more money
on the project, YGC's relationship with the Hinton Syndicate will become a
joint venture for the further development of the property. Under the terms
of the Hinton Option Agreement, the party with the majority interest would
control the joint venture. Once the 75% interest is earned, as described
above, YGC has a further option to acquire the remaining 25% interest in
the mineral claims for a further payment of $4,472,272 (CDN$5,000,000).
The Hinton Option Agreement provides that the Hinton Syndicate receive a
2% "net smelter return royalty." In the event that the Company exercises
its option to buy-out the remaining 25% interest of the Hinton Syndicate
(which is only possible if the Company has 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 the mine less certain permitted
expenses.
24
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2006 AND APRIL 30, 2005
(AMOUNTS EXPRESSED IN US DOLLARS)
18. COMMITMENTS AND CONTINGENCIES-CONT'D
The Hinton Option Agreement entitles the Hinton Syndicate to recommend for
appointment one member to the board of directors of the Company.
The Hinton Option Agreement 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.
The Hinton Syndicate members each have the option to receive their share
of property payments in stock of the Company at a 10% discount to the
market, once the Company has obtained a listing on a Canadian stock
exchange. YGC and the Company have a further option to pay 40% of any
property payment due after the payment on January 2, 2006 with common
stock of the Company. The payment due on July 7, 2006 was made in
accordance with this provision.
b) The Marg Property
In March 2005, the Company acquired rights to purchase 100% of the Marg
Property which consists of 402 contiguous mineral claims covering
approximately 20,000 acres located in the Mayo Mining District of the
Yukon Territory of Canada. Title to the claims is registered in the name
of YGC.
The Company assumed the rights to acquire the Marg Property under a
Property Purchase Agreement ("Agreement") with Atna Resources Ltd.
("Atna"). Under the terms of the Agreement the Company paid $119,189
(CDN$150,000) cash and 133,333 common shares as a down payment. The
Company made payments under the Agreement for $43,406 (CDN$50,000) cash
and an additional 133,333 common shares of the Company on December 12,
2005;
The Company has agreed to make subsequent payments under the Agreement of:
(i) $89,445 (CDN$100,000) cash and an additional 133,334 common shares of
the Company on or before December 12, 2006; (ii) $89,445 (CDN$100,000)
cash on or before December 12, 2007; and (iii) $178,891 (CDN$200,000) in
cash and/or common shares of the Company (or some combination thereof to
be determined) on or before December 12, 2008. Upon the commencement of
commercial production at the Marg Property, the Company will pay to Atna
$894,454 (CDN$1,000,000) in cash and/or common shares of the Company, or
some combination thereof to be determined.
c) The Company entered into flow-through share subscription agreements
during the year ended April 30, 2006 whereby it is committed to
incur on or before December 31, 2006, a total of $198,750
(CDN$226,954) of qualifying Canadian Exploration expenses as
described in the Income Tax Act of Canada. As of April 30, 2006 an
expenditure of $80,475 (CDN$94,724) has been incurred and $118,275
(CDN$132,230) has not yet been spent. Commencing March 1, 2006 the
Company is liable to pay a tax of approximately 5% per annum,
calculated monthly on the unspent portion of the commitment.
d) The Company relocated its corporate office and entered into a five
year lease which was executed on March 27, 2006. The lease commences
July 1, 2006. Minimum lease commitments under the lease were as
follows:
Years ending April 30, Minimum lease commitment
2007 $35,131 (CDN $39,280)
2008 $42,715 (CDN $47,756)
2009 $42,826 (CDN $47,880)
2010 $44,493 (CDN $49,740)
2011 $44,827 (CDN $50,112)
2012 $ 7,471 (CDN $8,353)
25
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2006 AND APRIL 30, 2005
(AMOUNTS EXPRESSED IN US DOLLARS)
18. COMMITMENTS AND CONTINGENCIES-CON'T
e) On March 21, 2006 the Company entered into a consulting agreement
with a consultant (the "Consultant"). As per terms of the agreement,
the Consultant will provide to the Company market and financial
advice and expertise as may be necessary relating to the manner of
offering and pricing of securities. The agreement is for a period of
twelve months commencing the day of trading of the Company's stock
on the Toronto Stock Exchange (April 19, 2006). The Consultant will
be compensated a fee equal to 240,000 restricted common shares of
the Company with a fair value of $196,800 and will receive these
shares on a monthly basis. Each party can cancel the agreement on 30
days notice. The Company has not issued any common shares as yet,
but is accruing the expense on a monthly basis.
19. OBLIGATION UNDER CAPITAL LEASE
The following is a summary of future minimum lease payments under the
capital lease, together with the balance of the obligation under the
lease:
Years ending April 30, 2006 2005
---- ----
2007 $3,199 (CDN$3,576) -
2008 $3,199 (CDN$3,576) -
2009 $3,199 (CDN$3,576) -
2010 $3,199 (CDN$3,576) -
2011 $3,199 (CDN$3,576) -
2012 $ 758 (CDN$847) -
-------------------------------------------------------------------------
Total minimum lease payments $16,753 (CDN$18,727) -
Less: Deferred Interest $2,097 (CDN$2,344) -
-----------------------------------------------------------------------
$14,656 (CDN$16,383) -
Current Portion $2,792 (CDN$3,121) -
-------------------------------------------------------------------------
Long-Term Portion $11,864 (CDN$13,262)
20. LISTING OF COMMON SHARES ON TORONTO STOCK EXCHANGE (TSX)
The common shares of the Company were approved for listing and commenced
trading on the Toronto Stock Exchange (TSX) effective April 19, 2006. The
Company is trading under the symbol "YK". Concurrent with this Canadian
listing on the TSX, the Company's common shares continue to trade in the
United States on the NASDAQ OTC BB Exchange under the symbol "YGDC"
21. RELATED PARTY TRANSACTIONS
2005-2006
---------
The Company and its subsidiary expensed a total of $14,755 (CDN $17,500)
in consulting fees to a Company Director, and $49,547 (CDN $57,170) to two
of it's officers. The Company issued 24,336 common share units @$0.55 per
unit in settlement of prior year accounts payable of $13,385 to a Director
and also issued 12,168 common share units @$0.55 per unit in settlement of
a prior year accounts payable for the services rendered by an individual
as president.
The directors participated in private placements during the year as
follows:
One director subscribed for 490,909 common share units @$0.55 per unit
One director subscribed for 149,867 common share units @$0.55 per unit.
2004-2005
---------
The Company and its subsidiary expensed a total of $88,526 (CDN$111,875)
for fees which include office rental, equipment rental, bookkeeping
services, secretarial services, out of pocket expenses and consulting
services for the preparation documents and other administrative matters
from Medallion Capital Corp. The Company also expensed $5,702 (CDN$7,050)
for interest on the note for CDN$250,000 to Medallion Capital Corp. The
Company expensed $26,332 (CDN$32,500) for the time devoted by a related
individual to the administration of the Company to S.K. Kelley &
Associates Inc. Medallion Capital Corp. and S.K. Kelley & Associates Inc.
are 100% owned by an officer and director of the Company at year end. This
individual has subsequent to the year end resigned as an officer and
director.
For services rendered by an individual as president of the Company, the
Company expensed the invoice from a related company for $18,382
(CDN$23,326) plus travel expenses for this individual and another director
in the amount of $2,405 (CDN$3,053).
26
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2006 AND APRIL 30, 2005
(AMOUNTS EXPRESSED IN US DOLLARS)
22. INCOME TAXES
The Company has certain non-capital losses of approximately $3,021,000
available, which can be applied against future taxable income and which
expires between 2010 and 2026. The Company did not record any deferred tax
asset as the losses are fully offset by a valuation allowance.
23. SUBSEQUENT EVENTS
a) Changes in Directors and Management: The Board of Directors accepted
the resignation of Mr. Warren Holmes as Chairman of the Board and
from Director and Officer positions of both the Company and its
Canadian subsidiary. Jose L. Guerra, Jr. became Chairman of the
Board of Directors of the Company. The Board of Directors also
accepted the resignation of Ken Hill as President and CEO of the
Company and was replaced by Mr. Howard Barth as President and CEO.
Mr. Barth is also a Director of the Company. Mr. Ken Hill is staying
with the Company as a director and in an officer's capacity by
accepting the position of Vice President-Mining Operations.
b) Subsequent issue of common shares: On May 29, 2006 the Company
issued 10,000 common shares for the exercise of 10,000 warrants at
$0.89 (CDN$1.00) from a warrant holder in consideration of $8,945
(CDN$10,000).
On May 29, 2006 the Company issued 45,045 common shares for the exercise
of 45,045 warrants at $0.89 (CDN$1.00) from a warrant holder in
consideration of $40,291 (CDN$45,045).
On May 29,2006 the Company issued 16,000 common shares for the exercise of
16,000 warrants at $0.89 (CDN$1.00) from a warrant holder in consideration
of $14,311 (CDN$16,000).
On May 30, 2006 the Company issued 141,599 common shares for the
settlement of an accrued liability to an ex officer and director. The
accrued severance amount of $118,943 (CDN$128,855) was converted to
141,599 common shares at $0.84 (CDN$0.91).
On June 22, 2006 the Company issued 43,667 common shares for the exercise
of 43,667 warrants at $0.89 (CDN$1.00) from a warrant holder in
consideration of $39,058 (CDN$43,667).
On June 28, 2006 the Company issued 17,971 common shares for the exercise
of 17,971 warrants at $0.89 (CDN$1.00) from a warrant holder in
consideration of $16,074 (CDN$17,971).
On June 28, 2006 the Company issued 43,667 common shares for the exercise
of 43,667 warrants at $0.89 (CDN$1.00) from a warrant holder in
consideration of $39,058 (CDN$43,667).
On June 28, 2006 the Company issued 16,000 common shares for the exercise
of 16,000 warrants at $0.89 (CDN$1.00) from a warrant holder in
consideration of $14,311 (CDN$16,000).
On June 29, 2006 the Company issued 158,090 common shares for the exercise
of 158,090 warrants at $0.89 (CDN$1.00) from a warrant holder in
consideration of $141,404 (CDN$158,090).
On July 7, 2006 the Company issued 43,166 common shares and paid $80,501
(CDN$90,000) in cash in settlement of a property payment on the Mount
Hinton Property. The shares represent 40% of the total $134,168
(CDN$150,000) payment and were valued at $1.24 (CDN$1.39) each.
On July 7, 2006 the Company issued 64,120 common shares for the exercise
of 64,120 warrants at $0.89 (CDN$1.00) from a warrant holder in
consideration of $57,352 (CDN$64,120).
On July 17, 2006 the Company issued 61,171 common shares for the exercise
of 61,171 warrants at $0.89 (CDN$1.00) from a warrant holder in
consideration of $54,715 (CDN$61,171).
27
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2006 AND APRIL 30, 2005
(AMOUNTS EXPRESSED IN US DOLLARS)
23. SUBSEQUENT EVENTS-CONT'D
c) Expiry of warrants:
As of April 30, 2005 there were 537,231 warrants outstanding. From this
list 24,000 were exercised between May 1, 2005 and April 30, 2006 and
475,731were subsequently exercised between May 1, 2006 and July 19, 2006.
The remaining 37,500 warrants expired on June 30, 2006.
d) Additional commitment to issue common shares and warrants:
The Company completed the sale of 400,000 special warrants on December 15,
2005. In the absence of a registration statement being declared effective
within 181 days of the closing, the Company, effective June 15, 2006 was
obligated to issue 4,000 common shares and 4,000 warrants to the
accredited investor at no extra cost as a penalty.
e) Mount Hinton Property Mining Claim Commitments:
The Company is committed to work program expenditures of $670,841 (CDN
$750,000) to be incurred during the period July 7, 2005 to December 31,
2006 as per its option agreement. In accordance with this agreement, the
Company must have raised and have available the work program funds for the
period from July 7, 2005 to December 31, 2006 by May 15 of 2006. To
satisfy this requirement, the Company deposited $670,841 (CDN $750,000)
into a bank account designated as the Mount Hinton Property Account.
f) Commitment to the proposed work program for Mount Hinton Property:
On May 16, 2006 the Company accepted a proposed work program, budget and
cash call schedule for the Mount Hinton project totaling $717,800
(CDN$802,500) for the 2006 Work Program. On May 16, 2006 the Company paid
$136,404 (CDN$152,500), on June 15, 2006 the Company paid $223,614
(CDN$250,000), and on July 15, 2006 the Company paid $223,614
(CDN$250,000) being three of the five cash call payments. The fourth
payment of $89,445 (CDN$100,000) is due on August 15, 2006 and the fifth
payment of $44,723 (CDN$50,000) is due on September 15, 2006.
g) Commitment to the proposed work program for the Marg Property:
On May 16, 2006 the Company accepted a proposed work program, budget and
cash call schedule for the Marg Property totaling $1,674,866
(CDN$1,872,500) for the 2006 Work Program. On May 15, 2006 the Company
paid $199,016 (CDN$222,500), on June 1, 2006 the Company paid $536,673
(CDN$600,000), and on July 20, 2006 the Company paid $357,782
(CDN$400,000) being three of the five cash call payments. The fourth
payment of $357,782 (CDN$400,000) is due on August 20, 2006 and the fifth
payment of $223,613 (CDN$250,000) is due on September 20, 2006.
h) Consulting Agreements
Subsequent to the year end, the Company entered into mutually renewable
one year agreements with three consultants who will each provide the
Company services relating to business promotion and development. These
consultants will assist management in the preparation of financial
offerings and assist in arranging meetings and making presentations to the
brokerage community and institutional investors in both the United States
of America and Canada. Each of these three consultants will be compensated
with the issue of 272,660 shares of restricted common stock, out of which
54,860 shares will be due and payable immediately on signing the
respective agreements and the balance of 217,800 shares will be due and
payable in 11 equal monthly installments of 19,800 shares commencing
August 1, 2006 and ending June 1, 2007. Either party can terminate the
respective agreements with or without cause upon thirty (30) days written
notice to the other party.
i) Private Placement
On August 22, 2006, the Company completed a private placement of 400,000
units where each unit consisted of a common share and a share purchase
warrant. The units were priced at $1.00 per unit for a total of $400,000.
The Company will pay a finders fee equal to 6% of the gross proceeds. The
warrants have a two-year term and are exercisable at $1.50 per share in
the first twelve months of the term and $2.00 per share in the remaining
twelve months of the term. Closing of this placement requires Toronto
Stock Exchange approval. Conditional approval was given by the Toronto
Stock Exchange on August 29, 2006.
28
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.
The Company currently has directors and officers insurance in the amount of $5
million.
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)
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)
II-1
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)
5.4 Legal Opinion dated August 30, 2006 of Kavinoky Cook LLP
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)
10.12 Letter Agreement with Hinton Syndicate dated August 17, 2006
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 (previously filed)
23.13 Consent of Schwartz Levitsky Feldman llp dated October 6, 2004
(previously filed)
23.14 Letter of Hinton Syndicate dated September 24, 2004 regarding
satisfaction of exploration expenses and option payments
(previously filed)
23.15 Consent of Schwartz Levitsky Feldman llp dated November 11,
2004 (previously filed) 23.16 Consent of Schwartz Levitsky
Feldman llp dated August 30, 2006
99.2 Map of the Location of the Mount Hinton Property (previously
filed)
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.
II-2
SEC Registration Fee $ 1,300
Legal Fees and Expenses* $ 15,000
Accounting Fees and Expenses* $ 5,000
Printing $ 10,000
Miscellaneous* $ 1,000
---------
TOTAL* $ 32,300
RECENT SALE OF UNREGISTERED SECURITIES
Private Placements of Securities For the Year Ended April 30, 2006
On March 28, 2006 the Company completed a brokered private placement through the
issuance of 5,331,327 common share units at a price of $0.60 per unit for gross
proceeds of $3,198,799. The Company also completed a private placement through
the issuance of 25,000 so-called "flow-through" shares at a price of $0.75 per
share for gross proceeds of $ 18,750. "Flow through" shares carry certain tax
benefits to shareholders who are Canadian tax payers. The Company must use the
proceeds from the placement of "flow-through" securities for exploration and
development programs in order to enable the holders of "flow-through" shares to
derive the tax benefits in Canada. Each Common share unit consists of one share
and one-half of one common share purchase warrant. Each whole common share
purchase warrant entitles the holder to purchase one common share at $0.90 per
share for a period expiring on March 28, 2008. The placement agent in Canada for
this private placement was Novadan Capital Ltd., based in Toronto, Canada
("Novadan"). Novadan (or its permitted assignees) received a commission in
connection with this private placement consisting of cash equal to 9% of the
proceeds of the private placement in Canada ($289,579.00) and 533,133 broker's
warrants equaling 10% of the number of common share units sold. Each broker
warrant entitles Novadan or its permitted assigns to purchase common shares and
one-half share purchase warrant for $0.60 until March 28, 2008. Each full
warrant is then exercisable for $0.90. In addition, Yukon Gold paid all of
Novadan's expenses related to the private placement, subject to a cap of
$20,000. As part of the agreement with Novadan in connection with this offering,
the Company granted to Novadan a right-of-first refusal to act as underwriter or
best-efforts placement agent in connection with any subsequent public or private
offering by the Company within eighteen months of the closing. In addition,
Yukon Gold entered into a Consulting Agreement with Novadan for ongoing
financial and strategic advice. As compensation under the Consulting Agreement,
Yukon Gold will issue to Novadan 240,000 shares of its common stock, such shares
to be issued in equal installments over the twelve-month period of the
Consulting Agreement. Yukon Gold has agreed to register the re-sale of these
shares at the earliest date that the Company files a registration statement.
On December 30, 2005, Yukon Gold completed a private placement of 200,000
flow-through special warrants to a single investor in Canada for consideration
of $180,000. Each such flow-through special warrant entitles the holder to
acquire one "flow through" common share of the Company for no additional
consideration. So-called "flow through" shares carry certain tax benefit to
Canadian holders. The Company has undertaken to register the re-sale of the
common shares underlying the flow-through special warrants. The flow-through
special warrants become automatically exercisable as of the effective date of a
registration statement covering the resale of the underlying shares in the
United States.
II-3
On December 15, 2005, the Company completed the sale of 400,000 special warrants
to a single investor in Canada at a purchase price of $1.01 per special warrant
for total consideration of $404,000. Each special warrant entitles the holder to
purchase one common share of the Company and one additional common share
purchase warrant at no additional cost. The Company has undertaken to register
the re-sale of the common shares underlying the special warrants. The special
warrants become automatically exercised as of the effective date of a
registration statement covering the resale of the underlying shares in the
United States. The terms of the private placement provided that if such a
registration statement covering such re-sale was not effective by June 15, 2006,
the holder of the special warrant would be entitled to receive 1.1 common shares
and 1.1 Special Warrants for each common share and special warrant then held by
such holder in lieu of the holders original interest (an additional 10% issuance
referred to as "penalty interest"). The Company did not file a registration
statement covering the re-sale of such shares and this holder is now entitled to
receive the penalty interest. The Company declined to file a re-sale
registration statement at that time in order to avoid interference with other
capital raising efforts of the Company in the United States. The Company does
intend to register the re-sale of the common shares underlying the Special
Warrants at a future date.
On December 5, 2005, the Company completed a private placement of 150,000 common
shares and 150,000 warrants to a single accredited investor for consideration of
$151,500. Each common share was priced at $1.00 and each warrant at $0.01. Each
warrant entitles the holder to purchase one common share of the Company at an
exercise price of $1.00 for a period of one year from the date of issuance.
On August 31, 2005, the Company accepted subscriptions from four accredited
investors and one accredited corporation, all residents of Canada, for a total
of 200,000 units priced at $0.55 per unit for a total of $110,000. Each unit
consists of one common share and one-half share purchase warrant. Each common
share was priced at $0.545 and each full warrant at $0.01. Each full-share
purchase warrant entitles the holder to purchase one common share at $1.00 per
share for a period expiring August 31, 2007.
On August 29, 2005, the Company completed the sale of 149,867 units at $0.55 per
unit to a director of the Company for $82,427 (CDN$100,000). Each unit consists
of one common share and one-half share purchase warrant. Each common share was
priced at $0.545 and each full warrant at $0.01. Each full-share purchase
warrant entitles the holder to purchase one common share at $1.00 per share for
a period expiring on August 5, 2007.
On August 26, 2005 the board of directors approved the issuance of 490,909 units
at $0.55 per unit to J.L. Guerra, Jr., then an arms length accredited
shareholder for a total of $270,000. Each unit consists of one common share and
one-half share purchase warrant. Each common share was priced at $0.545 and each
full warrant at $0.01. Each full share purchase warrant entitles the holder to
purchase one common share at $1.00 per share, after one year and seven days
following closing, for a period of two (2) years following such date. The
Company received $20,000 of the subscription price on August 12, 2005 as a loan
to be applied to the subscription price and $100,000 on September 15, 2005 and a
promissory note for $150,000, due on or before October 1, 2005, for the balance
of the subscription price. The promissory note was paid in full by the due date.
Mr. Guerra subsequently became a director of the Company on November 2, 2005 and
then became chairman of the board on July 11, 2006.
Other Sales or Issuances of Unregistered Securities
- ---------------------------------------------------
Year ended April 30, 2005
- -------------------------
On March 1, 2005 the Company issued 133,333 common shares to Atna Resources Ltd.
as property payments in the amount of $100,000 for the Marg Property.
On March 2, 2005 the Company issued 76,204 common shares on conversion of a
convertible promissory note.
II-4
Year ended April 30, 2006
- -------------------------
On August 5, 2005 the board of directors authorized the issuance of 369,215
common shares and 184,608 share purchase warrants in settlement of a demand
promissory note in the amount of $200,000 plus interest of $3,068.25. Each
common share was priced at $0.545 and each full warrant at $0.01. Each share
purchase warrant entitles the holder to purchase one common share for $1.00 per
share on or before August 5, 2007.
On August 23, 2005 the board of directors approved the issuance of 24,336 units
to an arms length investor and 12,168 units to an officer of the Company at
$0.55 per unit, in settlement of an accounts payable for services, for a total
of $20,077 (CDN$24,398). Each unit consists of one common share and one-half
share purchase warrant. Each common share was priced at $0.545 and each full
warrant at $0.01. Each full share purchase warrant entitles the holder to
purchase one common share at $1.00 per share for a period expiring on August 15,
2007.
On August 25, 2005 the Company entered into a Consulting Agreement with Endeavor
Holdings, Inc. ("Endeavor"), based in New York, New York to assist the Company
in raising capital. Under the terms of this agreement the Company agreed to pay
Endeavor 150,000 common shares at the rate of 25,000 shares per month. Either
party could cancel the agreement upon 30 days notice. The Company issued 150,000
common shares valued at $130,500 to Endeavor.
On October 18 and 24, 2005 the Company issued a total of 59,547 common shares
and 29,167 warrants covering the principal amount of $43,750, plus interest of
$910, on conversion of a convertible promissory note issued on October 6, 2004.
On October 18, 2005 the Company authorized the issuance of 14,000 common shares
for the exercise of 14,000 warrants from a warrant holder in consideration of
$12,000.
On November 9, 2005, an accredited investor converted a promissory note on its
due date and the Company issued 76,525 common shares and 37,500 warrants
covering the principal amount of $56,250 and interest in the amount of $1,143 in
accordance with the conversion provisions of the notes. The expiry date of the
warrants was extended to 15 months after the conversion date.
On December 6, 2005 the board of directors authorized the issuance of 133,333
common shares valued at $100,000 for property payment to Atna Resources Ltd.,
along with a cash payment of $43,406 (CDN$50,000) as per terms of the Marg
Acquisition Agreement. The common shares along with the cash payment were
delivered to Atna Resources Ltd. on December 12, 2005.
On December 7, 2005 an accredited investor converted promissory notes of the
Company on their due dates and the Company issued 34,306 common shares and
17,001 warrants covering the principal amounts of $25,500 and interest in the
amount of $409 in accordance with the conversion provisions of the notes. The
expiry date of the warrants was extended to 15 months after the conversion date.
On December 7, 2005 the board of directors authorized the issuance of 10,000
common shares to a shareholder upon the exercise of 10,000 warrants in
consideration of $8,772 (CDN$10,000).
On January 11, 2006 an accredited investor converted promissory notes of the
Company on their due dates and the Company issued 101,150 common shares and
50,000 warrants covering the principal amounts of $75,000 and interest in the
amount of $1,533 in accordance with the conversion provisions of the notes. The
expiry date of the warrants was extended to 15 months after the conversion date.
On April 11, 2006, a director of the Company exercised his option to purchase
10,000 common shares at the option price of $0.55 per share. The Company
received payment and issued 10,000 common shares.
II-5
Subsequent Issue of Common Shares
- ---------------------------------
On May 29, 2006 the Company issued 10,000 common shares for the exercise of
10,000 warrants at $0.89 (CDN$1.00) from a warrant holder in consideration of
$8,945 (CDN$10,000).
On May 29, 2006 the Company issued 45,045 common shares for the exercise of
45,045 warrants at $0.89 (CDN$1.00) from a warrant holder in consideration of
$40,291 (CDN$45,045).
On May 29, 2006 the Company issued 16,000 common shares for the exercise of
16,000 warrants at $0.89 (CDN$1.00) from a warrant holder in consideration of
$14,311 (CDN$16,000).
On May 30, 2006 the Company issued 141,599 common shares for the settlement of
an accrued liability to an ex officer and director. The accrued severance amount
of $118,943 (CDN$128,855) was converted to 141,599 common shares at $0.84
(CDN$0.91).
On June 22, 2006 the Company issued 43,667 common shares for the exercise of
43,667 warrants at $0.89 (CDN$1.00) from a warrant holder in consideration of
$39,058 (CDN$43,667).
On June 28, 2006 the Company issued 17,971 common shares for the exercise of
17,971 warrants at $0.89 (CDN$1.00) from a warrant holder in consideration of
$16,074 (CDN$17,971).
On June 28, 2006 the Company issued 43,667 common shares for the exercise of
43,667 warrants at $0.89 (CDN$1.00) from a warrant holder in consideration of
$39,058 (CDN$43,667).
On June 28, 2006 the Company issued 16,000 common shares for the exercise of
16,000 warrants at $0.89 (CDN$1.00) from a warrant holder in consideration of
$14,311 (CDN$16,000).
On June 29, 2006 the Company issued 158,090 common shares for the exercise of
158,090 warrants at $0.89 (CDN$1.00) from a warrant holder in consideration of
$141,404 (CDN$158,090).
On July 7, 2006 the Company issued 43,166 common shares and paid $80,501
(CDN$90,000) in cash in settlement of a property payment on the Mount Hinton
Property. The shares represent 40% of the total $134,168 (CDN$150,000) payment
and were valued at $1.24 (CDN$1.39) each.
On July 7, 2006 the Company issued 64,120 common shares for the exercise of
64,120 warrants at $0.89 (CDN$1.00) from a warrant holder in consideration of
$57,352 (CDN$64,120).
On July 17, 2006 the Company issued 61,171 common shares for the exercise of
61,171 warrants at $0.89 (CDN$1.00) from a warrant holder in consideration of
$54,715 (CDN$61,171).
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;
II-6
(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.
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 August 29, 2006.
YUKON GOLD CORPORATION, INC.
By: /s/ Howard Barth
-----------------------------------
Name: Howard Barth
Title: Director, President and CEO
II-7
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/ Kenneth Hill Director August 23, 2006
------------
Kenneth Hill
/s/ Howard Barth Director, President and CEO August 23, 2006
------------
Howard Barth
/s/ Chester Idziszek Director August 23, 2006
----------------
Chester Idziszek
/s/ Jose L. Guerra, Jr. Director, Chairman of Board August 23, 2006
-------------------
Jose L. Guerra, Jr.
/s/ Robert E. Van Tassell Director August 23, 2006
---------------------
Robert E. Van Tassell
/s/ Rakesh Malhotra Chief Financial Officer August 24, 2006
---------------
Rakesh Malhotra
II-8