UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant |X|
Filed by a party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by
Rule14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Section 240.14a -11(c) or Section
240.14a -12
YUKON GOLD CORPORATION, INC.
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(Name of Registrant as Specified In Its Charter)
--------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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number, or the Form or Schedule and the date of its filing.
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(4) Date Filed:
YUKON GOLD CORPORATION, INC.
55 York Street, Suite 401
Toronto, Ontario M5J 1R7
Canada
NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD AT THE ROYAL YORK HOTEL AT 100 FRONT STREET WEST, TORONTO, ONTARIO
M5J 1E3 at 10:30 AM ON JANUARY 19, 2007
December 5, 2006
Dear Shareholder:
You are invited to the Annual and Special Meeting of the Shareholders of
Yukon Gold Corporation, Inc. (the "Company"). The Company will hold its Annual
and Special Meeting at the Royal York Hotel at 100 Front Street West, Toronto,
Ontario at 10:30 AM Eastern Standard Time on January 19, 2007 for the following
purposes:
1. To elect six directors to serve until the next Annual Meeting of
Shareholders or until their respective successors are elected or
appointed;
2. To ratify the appointment of Schwartz Levitsky Feldman, LLP as the
independent auditors of the Company for the financial year ending
April 30, 2007;
3. To approve the establishment of a new 2006 Stock Option Plan;
4. To approve a resolution extending the expiry dates of certain
outstanding stock options of the Company; and
5. To transact such other business as may properly come before the
Meeting, or any adjournment or postponement thereof.
The Board of Directors has fixed December 8, 2006, as the Record Date for
determining the shareholders entitled to receive notice of, and to vote at, the
Annual and Special Meeting or any adjournment or postponement thereof. Only
shareholders of record at the close of business on that date will be entitled to
notice of, and to vote at, the Meeting.
All shareholders are invited to attend the Annual and Special Meeting in person.
However, even if you expect to be present at the meeting, you are requested to
mark, sign, date and return the enclosed proxy card as promptly as possible in
the envelope provided to ensure your representation. All proxies must be
received by the Company not less than forty-eight (48) hours, excluding
Saturdays, Sundays, and holidays, prior to the time of the Meeting in order to
be counted. Shareholders of record attending the Annual and Special Meeting may
vote in person even if they have previously voted by proxy.
We have enclosed the Company's Proxy Statement and Information Circular in
connection with the Annual and Special Meeting. If you have any questions
concerning this Proxy Statement and Information Circular or need help in voting
your shares, please contact:
Paul A. Gorman
Chief Executive Officer
Yukon Gold Corporation, Inc.
55 York Street, Suite 401
Toronto, Ontario M5J 1R7
(800) 295-0671 (ext. 12)
e-mail: info@yukongoldcorp.com
Copies of the Company's periodic reports are available at the website
maintained by the Securities and Exchange Commission at
www.sec.gov/edgar/searchedgar/companysearch.html and at the website maintained
by the Ontario Securities Commission at www.SEDAR.com. The Company's financial
statements for the quarter ended July 31, 2006 (unaudited) and the year ended
April 30, 2006 (audited) are included as part of this Proxy Statement and
Information Circular.
Dated this 5th day of December, 2006.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Paul A. Gorman
Chief Executive Officer and Director
YUKON GOLD CORPORATION, INC.
PROXY STATEMENT AND INFORMATION CIRCULAR
ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 19, 2007
GENERAL
The enclosed proxy is solicited by the board of directors of Yukon Gold
Corporation, Inc. corporation (the "Company" or "Yukon Gold"), for use at the
Annual and Special Meeting of Shareholders (the "Meeting") of the Company to be
held at the Royal York Hotel at 100 Front Street West, Toronto, Ontario at 10:30
AM Eastern Standard Time on January 19, 2007, and at any adjournment or
postponement thereof.
Our executive offices are located at 55 York Street, Suite 401, Toronto, Ontario
M5J 1R7. This Proxy Statement and the accompanying proxy card are being mailed
to our shareholders on or about December __, 2006.
The cost of solicitation will be borne by the Company. The solicitation will be
made primarily by mail. Proxies may also be solicited personally or by telephone
by certain of the Company's directors, officers and regular employees, who will
not receive additional compensation therefore. In addition, the Company will
reimburse brokerage firms, custodians, nominees and fiduciaries for their
expenses in forwarding solicitation materials to beneficial owners. The total
cost of proxy solicitation, including legal fees and expenses incurred in
connection with the preparation of this Proxy Statement and Information
Circular, is estimated to be $20,000.
APPOINTMENT OF PROXYHOLDER
The persons named as proxyholder in the accompanying form of proxy were
designated by the management of the Company ("Management Proxyholder"). A
shareholder desiring to appoint some other person ("Alternate Proxyholder") to
represent him at the Meeting may do so by inserting such other person's name in
the space indicated or by completing another proper form of proxy. A person
appointed as proxyholder need not be a shareholder of the Company. All completed
proxy forms must be deposited with Yukon Gold not less than forty-eight (48)
hours, excluding Saturdays, Sundays, and holidays, before the time of the
Meeting or any adjournment of it unless the chairman of the Meeting elects to
exercise his discretion to accept proxies received subsequently.
EXERCISE OF DISCRETION BY PROXYHOLDER
The proxyholder will vote for or against or withhold from voting the shares, as
directed by a shareholder on the proxy, on any ballot that may be called for. In
the absence of any such direction, the Management Proxyholder will vote in favor
of matters described in the proxy.
The enclosed form of proxy confers discretionary authority upon the proxyholder
with respect to amendments or variations to matters identified in the attached
Notice of Meeting and other matters which may properly come before the Meeting.
At present, Management of the Company knows of no such amendments, variations or
other matters.
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PROXY VOTING
Registered Shareholders
If you are a registered shareholder, you may wish to vote by proxy whether or
not you attend the Meeting in person. If you submit a proxy, you must complete,
date and sign the Proxy, and then return it to the Transfer Agent, Equity
Transfer & Trust Company, by mail or by hand delivery at 200 University Avenue,
Suite 400, Toronto, Ontario M5H 4H1 not less than 48 hours (excluding Saturdays,
Sundays and holidays) before the Meeting or the adjournment thereof at which the
Proxy is to be used.
Beneficial Shareholders
The following information is of significance to shareholders who do not hold
Shares in their own name. Beneficial Shareholders should note that the only
proxies that can be recognized and acted upon at the Meeting are those deposited
by registered shareholders (those whose names appear in the records of the
Company as the registered holders of Shares).
Intermediaries are required to seek voting instructions from Beneficial
Shareholders in advance of shareholders' meetings. Every intermediary has its
own mailing procedures and provides its own return instructions to clients.
If you are a Beneficial Shareholder:
You should carefully follow the instructions of your broker or intermediary in
order to ensure that your shares are voted at the Meeting.
The form of proxy supplied to you by your broker will be similar to the Proxy
provided to registered shareholders by the Company. However, its purpose is
limited to instructing the intermediary on how to vote on your behalf. Most
brokers now delegate responsibility for obtaining instructions from clients to
ADP Investor Communication Services ("ADP") in the United States and in Canada.
ADP mails a voting instruction form in lieu of a Proxy provided by the Company.
The voting instruction form will name the same persons as the Company's Proxy to
represent you at the Meeting. You have the right to appoint a person (who need
not be a beneficial shareholder of the Company), other than the persons
designated in the voting instruction form, to represent you at the Meeting. To
exercise this right, you should insert the name of the desired representative in
the blank space provided in the voting instruction form. The completed voting
instruction form must then be returned to ADP by mail or facsimile or given to
ADP by phone or over the internet, in accordance with ADP's instructions. ADP
then tabulates the results of all instructions received and provides appropriate
instructions respecting the voting of Shares to be represented at the Meeting.
If you receive a voting instruction form from ADP, you cannot use it to vote
Shares directly at the Meeting - the voting instruction form must be completed
and returned to ADP, in accordance with its instructions, well in advance of the
Meeting in order to have the Shares voted.
Although as a Beneficial Shareholder you may not be recognized directly at the
Meeting for the purposes of voting Shares registered in the name of your broker,
you, or a person designated by you, may attend the Meeting as proxyholder for
your broker and vote your Shares in that capacity. If you wish to attend the
Meeting and indirectly vote your Shares as proxyholder for your broker, or have
a person designated by you do so, you should enter your own name, or the name of
the person you wish to designate, in the blank space on the voting instruction
form provided to you and return the same to your broker in accordance with the
instructions provided by such broker, well in advance of the Meeting.
Alternatively, you can request in writing that your broker send you a legal
proxy which would enable you, or a person designated by you, to attend at the
Meeting and vote your Shares.
IF YOU DO NOT GIVE INSTRUCTIONS TO YOUR BROKER OR OTHER NOMINEE, YOUR SHARES
MAY NOT BE VOTED OR THEY MAY BE VOTED WITHOUT YOUR DIRECTION.
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Only holders of record as of the close of business on the Record Date will be
entitled to vote at the Meeting. If you were a stockholder of record on the
Record Date, you will retain your voting rights for the Meeting even if you sell
shares after the Record Date. Accordingly, it is important that you vote the
shares you owned on the Record Date or grant a proxy to vote such shares, even
if you sell some or all of your shares after the Record Date.
REVOCATION OF PROXIES
In addition to revocation in any other manner permitted by law, a registered
shareholder who has given a proxy may revoke it by:
a) Executing a proxy bearing a later date or by executing a valid
notice of revocation, either of the foregoing to be executed by the
registered shareholder or the registered shareholder's authorized
attorney in writing or, if the shareholder is a corporation, under
its corporate seal by an officer or attorney duly authorized, ( and
by delivering the proxy bearing a later date to the Company at any
time up to and including the last business day that precedes the day
of the Meeting or, if the Meeting is adjourned, the last business
day that precedes any reconvening thereof, or to the chairman of the
Meeting on the day of the Meeting or any reconvening thereof, or in
any other manner provided by law, or
(b) Personally attending the meeting and voting the registered
shareholders' shares. A revocation of a proxy will not affect a
matter on which a vote is taken before the revocation.
VOTING PROCEDURE
A majority of the shares entitled to vote, represented in person or by proxy,
shall constitute a quorum at a meeting of shareholders. Any number of
shareholders, even if less than a quorum may adjourn the meeting without further
notice until a quorum is obtained. Broker non-votes occur when a person holding
shares through a bank or brokerage account does not provide instructions as to
how his or her shares should be voted and the broker does not exercise
discretion to vote those shares on a particular matter. Abstentions and broker
non-votes will be included in determining the presence of a quorum at the
Meeting. However, an abstention or broker non-vote will not have any effect on
the outcome for the election of directors.
Shares for which proxy cards are properly executed and returned will be voted at
the Meeting in accordance with the directions noted thereon or, in the absence
of directions, will be voted "FOR" the election of each of the nominees to the
board of directors named on the following page, "FOR" the resolution to ratify
the appointment of Schwartz Levitsky Feldman LLP as independent auditors of the
Company for the financial year ending April 30, 2007, "FOR" the approval of the
2006 Stock Option Plan and "FOR" the approval of the extension of certain stock
options held by Directors and Officers of the Company. It is not expected that
any matters other than those referred to in this Proxy Statement will be brought
before the Meeting. If, however, other matters are properly presented, the
persons named as proxies will vote in accordance with their discretion with
respect to such matters.
PROPOSAL 1
ELECTION OF DIRECTORS
The board of directors proposes that the following six nominees be elected as
directors at the Meeting, each of whom will hold office until the expiration of
their term or until his or her successor shall have been duly appointed or
elected and qualified: Paul A. Gorman, J.L. Guerra, Jr., Howard S. Barth,
Kenneth J. Hill, Chester (Chet) Idziszek and Robert E. Van Tassell.
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Unless otherwise instructed, it is the intention of the persons named as proxies
on the accompanying proxy card to vote shares represented by properly executed
proxies for the election of such nominees. Although the board of directors
anticipates that the six nominees will be available to serve as directors of
Yukon Gold, if any of them should be unwilling or unable to serve, it is
intended that the proxies will be voted for the election of such substitute
nominee or nominees as may be designated by the board of directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH NOMINEE.
The following table sets out the names of the nominees; their positions and
offices in the Company; principal occupations; and the period of time that they
have been directors of the Company.
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Name, and Current Director Since Background and Information
Position with the Company
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J.L. Guerra, Jr., November 2, 2005 Mr. Guerra has over twenty years of experience
Director, Chairman of the operating his own companies in the real estate
Board brokerage, acquisition and development business in San
Antonio, Texas. 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.
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Paul A. Gorman, Director, October 24, 2006 Mr. Gorman became the Company's Chief Executive Officer
Chief Executive Officer on October 24, 2006. Prior to that, he was the
Company's Vice President, Corporate Development. Mr.
Gorman joined Yukon Gold in October of 2004. Prior to
joining Yukon Gold, Mr. Gorman was the President and
managing partner of Vantage Point Capital, a Merchant
Bank and Corporate Relations Firm. Prior to that Mr.
Gorman worked with companies to assist them in
developing well-defined marketing programs. Mr.
Gorman is 35 years old.
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Howard S. Barth, May 11, 2005 Mr. Barth is an independent accountant with his own
Director practice which he started in 1984 and subsequently
expanded. 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 a
former President and CEO of Yukon Gold. Mr. Barth is
53 years old.
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Name, and Current Director Since Background and Information
Position with the Company
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Robert E. Van Tassell, May 30, 2005 Robert E. "Dutch" Van Tassell began his mining career
Director with Giant Yellowknife Mines in 1956. He retired as a
mining executive in 1998 after a long and illustrious
career in the industry. Mr. Van Tassell is 71 years
old. He is also a director of Colombia Goldfields
Ltd., Lexam Explorations Inc., Plato Gold Corp., Red
Lake Resources and Rupert Resources Ltd.
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Chester (Chet) Idziszek, November 17, 2005 Mr. Idziszek has been active in the mining industry
Director since 1971. He holds a Masters degree in Applied
Science from McGill University. He has worked as a
manager and senior geologist for several international
mining companies since 1971. Mr. Idziszek was
President of Adrian Resource Ltd. until April of 2004.
Mr. Idziszek is 58 years old.
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Kenneth J. Hill, December 15, 2004 Mr. Hill came to Yukon Gold with over forty years of
P. Eng. experience in the mining industry. Mr. Hill is a
Director, Vice-President registered professional engineer and graduated with a
Mining Operations 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., ("Promin") a Canadian company that provides
independent consulting and project management services
to the global minerals industry. Prior to
establishing ProMin, 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.
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PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Schwartz Levitsky Feldman LLP, served as the Company's independent auditors for
the fiscal year ending April 30, 2006, and has been appointed by the board of
directors to continue as Yukon Gold's independent auditor for the fiscal year
ending April 30, 2007, and until the next annual meeting of shareholders.
The Company paid to Schwartz Levitsky Feldman, LLP audit and audit related fees
of approximately $23,775 in 2006 and $15,009 in 2005.
The Company did not pay Schwartz Levitsky Feldman, LLP for tax services in 2006
and paid $945 to Schwartz Levitsky Feldman, LLP for tax services in 2005.
Although the appointment of Schwartz Levitsky Feldman, LLP is not required to be
submitted to a vote of the shareholders, the Board of Directors believes it
appropriate as a matter of policy to request that the shareholders ratify the
appointment of the independent public accountant for the fiscal year ending
April 30, 2007. In the event a majority of the votes cast at the meeting are not
voted in favor of ratification, the adverse vote will be considered as a
direction to the board of directors of Yukon Gold to select other auditors for
the fiscal year ending April 30, 2007.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE APPOINTMENT
OF SCHWARTZ LEVITSKY FELDMAN LLP AS YUKON GOLD'S INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING APRIL 30, 2007.
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PROPOSAL 3
APPROVAL OF 2006 STOCK OPTION PLAN
Shareholders of the Company are asked to approve a resolution (the "Stock Option
Plan Resolution"), adopting a proposed new stock option plan of the Company (the
"2006 Stock Option Plan"). Approval of the 2006 Stock Option Plan will enable
the Company to issue incentive stock options pursuant to a plan that is
compatible with Toronto Stock Exchange (the "TSX") requirements and Canadian tax
laws and regulations. The Board has reserved two (2) million shares of common
stock for issuance pursuant to the 2006 Stock Option Plan.
OVERVIEW OF STOCK OPTION PLAN
The Company's current stock option plan was initially approved in October of
2003 (the "2003 Stock Option Plan"). In November of 2006, the Board of Directors
of the Company, subject to approval by the shareholders of the Company, voted to
adopt the 2006 Stock Option Plan. The Directors of the Company resolved that the
2003 Stock Option Plan will continue to be in effect; however, no new options
will be issued thereunder after the 2006 Stock Option Plan receives the approval
of the shareholders of the Company.
Up to 5,000,000 common shares ("Shares") of the Company are reserved for
issuance under the 2003 Stock Option Plan, of which options to acquire an
aggregate of 3,618,000 Shares have been granted as of the date of this Proxy
Statement. Of the 3,618,000 Shares under option, 850,000 options have been
rescinded and 34,000 options have been exercised since the date of grant. The
directors of the Company have resolved, subject to approval by the shareholders
of the Company, to extend the expiry dates of an aggregate of 2,064,00 of the
currently outstanding options (see "Proposal 4: Extension of Term of Outstanding
Stock Options"). The remaining outstanding options will expire on December 15,
2006 (650,000) and April 15, 2008 (20,000). A copy of the 2003 Stock Option Plan
is attached as Exhibit "A" to this Proxy Statement.
The purpose of the 2006 Stock Option Plan is to develop and increase the
interest of certain Eligible Participants (as defined below) in the growth and
development of the Company by providing them with the opportunity to acquire a
proprietary interest in the Company through the grant of options ("Stock
Options") to acquire Shares.
Under the 2006 Stock Option Plan, Stock Options shall be granted to Eligible
Participants or to any registered savings plan established for the sole benefit
of an Eligible Participant or any company which, during the currency of an
option, is wholly-owned by an Eligible Participant. The term "Eligible
Participant" includes directors, senior officers and employees of the Company or
an Affiliated Entity (as defined below) and any person engaged to provide
services under a written contract for an initial, renewable or extended period
of twelve months or more (a "Consultant"), other than services provided in
relation to a distribution of securities, who spends or will spend a significant
amount of time on the business and affairs of the Company and who is
knowledgeable about the business and affairs of the Company. An "Affiliated
Entity" means a person or company that is controlled by the Company.
The 2006 Stock Option Plan will be administered by the board of directors of the
Company or, in the board of directors' discretion, by a committee appointed by
the board of directors for that purpose.
Subject to the provisions of the 2006 Stock Option Plan, the aggregate number of
Shares which may be issued under the 2006 Stock Option Plan shall not exceed
2,000,000 Shares ("Total Shares") representing approximately 10.63% of the
currently issued and outstanding Shares. Any Stock Option granted under the 2006
Stock Option Plan which has been exercised shall again be available for
subsequent grant under the 2006 Stock Option Plan, effectively resulting in a
re-loading of the number of Shares available for grant under the 2006 Stock
Option Plan. Any Shares subject to an option granted under the 2006 Stock Option
Plan which for any reason is surrendered, cancelled or terminated or expires
without having been exercised shall again be available for subsequent grant
under the 2006 Stock Option Plan.
Under the 2006 Stock Option Plan, at no time shall: (i) the number of Shares
reserved for issuance pursuant to Stock Options granted to any one optionee
exceed 10% of the Total Shares; (ii) the number of Shares, together with all
security based compensation arrangements of the Company in effect, reserved for
issuance pursuant to Stock Options granted to any "insiders" (as that term is
defined under the Securities Act (Ontario)) exceed 10% of the total number of
issued and outstanding Shares. In addition, the number of Shares issued to
insiders pursuant to the exercise of Stock Options, within any one year period,
together with all security based compensation arrangements of the Company in
effect, shall not exceed 10% of the total number of issued and outstanding
Shares.
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The purchase price (the "Price") per Share under each Stock Option shall be
determined by the board of directors or a committee, as applicable. The Price
shall not be lower than the closing market price on the TSX, or another stock
exchange where the majority of the trading volume and value of the Shares
occurs, on the trading day immediately preceding the date of grant, or if not so
traded, the average between the closing bid and asked prices thereof as reported
for the trading day immediately preceding the date of the grant; provided that
if the Shares have not traded on the TSX or another stock exchange for an
extended period of time, the "market price" will be the fair market value of the
shares at the time of grant, as determined by the board of directors or
committee. The board of directors or committee may determine that the Price may
escalate at a specified rate dependent upon the date on which an option may be
exercised by the Eligible Participant.
Options shall not be granted for a term exceeding ten years (or such shorter or
longer period as is permitted by the TSX) (the "Option Period"). Options may be
exercised by an Eligible Participant in whole at any time, or in part from time
to time, during the Option Period, subject to the provisions of the 2006 Stock
Option Plan. Options granted under the 2006 Stock Option Plan may be assigned or
otherwise transferred by a participant pursuant to a will, or by the laws of
descent and distribution, or as otherwise permitted under the 2006 Stock Option
Plan. Options granted under the 2006 Stock Option Plan may vest at the
discretion of the board of directors of the Company or committee, as applicable.
The directors of the Company or committee, as applicable, may from time to time
amend the 2006 Stock Option Plan, without further approval of the shareholders
of the Company, subject to pre-clearance with the TSX and compliance with the
rules of the TSX and any other regulatory authority having jurisdiction over the
securities of the Company, to the extent that such amendments relate to:
(a) altering, extending or accelerating the terms of vesting application
to any Stock Options;
(b) altering the terms and conditions of vesting applicable to any Stock
Options;
(c) extending the term of Stock Options held by a person other than a
person who, at the time of the extension, is an insider of the
Company, provided that the term does not extend beyond ten years
from the date of grant;
(d) reducing the exercise price of Stock Options held by a person other
than a person who, at the time of the reduction, is an insider of
the Company, provided that the exercise price is not less than the
market price at the time of grant;
(e) accelerating the expiry date in respect of Stock Options;
(f) determining the adjustment provisions in accordance with the Stock
Option Plan;
(g) amending the definitions contained within the Plan;
(h) amending or modifying the mechanics of exercise of the Stock
Options; or
(i) amendments of a "housekeeping" nature.
The directors of the Company or committee, as applicable, may terminate the 2006
Stock Option Plan subject to pre-clearance with the TSX and compliance with the
rules of the TSX and any other regulatory authority having jurisdiction over the
securities of the Company.
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In the event of the death of a participant prior to an option's expiry date, the
option may be exercised by the legal representatives of such participant at any
time up to and including the date which is the first anniversary of the date of
death of such participant or the expiry date of such option, whichever is the
earlier, after which the option shall in all respects cease and terminate. In
the event a participant is discharged as an employee or senior officer of the
Company or an Affiliated Entity by reason of a wilful and substantial breach of
such participant's employment duties, all options granted to such participant
under the 2006 Stock Option Plan which are then outstanding (whether vested or
unvested) shall cease and terminate in accordance with the provisions of the
2006 Stock Option Plan. In the event of a termination of employment or
engagement of a participant (including the expiry of an agreement or engagement
between the Company and a Consultant) other than in the event of death, such
participant may exercise each option then held by such participant under the
2006 Stock Option Plan at any time up to and including the 90th day (or such
later date as the board of directors or committee in its sole discretion may
determine) following the effective date upon which the participant ceases to be
an Eligible Participant or the expiry date of such option, whichever is earlier,
after which the option shall in all respects cease and terminate.
REQUIRED APPROVAL
The 2006 Stock Option Plan is subject to approval by the shareholders of the
Company. In order to become effective, the Stock Option Plan Resolution must be
approved by at least a majority of the votes cast by shareholders of the Company
at the Meeting. As a consequence, a separate vote will be held on the Stock
Option Plan Resolution, as follows:
"BE IT RESOLVED THAT:
(a) The 2006 Stock Option Plan attached as Exhibit "B" to the December, 2006
Proxy Statement of the Company is hereby adopted.
(b) Any officer or director of the Company is hereby authorized to execute all
documents and to do all acts and things necessary or advisable to give
effect to this resolution, the execution of any such document or the doing
of any such act or thing being conclusive evidence of such determination."
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" APPROVING AND
ADOPTING THE 2006 STOCK OPTION PLAN.
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PROPOSAL 4
EXTENSION OF TERM OF OUTSTANDING STOCK OPTIONS
The Board of Directors of the Company has approved the extension of the expiry
date of certain of the outstanding options granted to each of the option holders
given below ("Option Holders"), subject to approval by the Company's
shareholders and the TSX. The board of directors of the Company, subject to
requisite approvals, intends to extend the expiry dates of an aggregate of
2,064,000 options granted to Option Holders to the expiry dates noted below and
may also extend any or all of the other options identified in the following
table one or more times for such periods as the board of directors of the
Company deems appropriate, provided that the latest expiry date shall not extend
beyond 10 years from the original date of grant as set out in the following
table.
- -----------------------------------------------------------------------------------------------------------------
Number of Exercise Price
Name of Option Outstanding of Options Current Expiry New Expiry
Holder Options Held Date of Grant (US$) Date Date
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Ken Hill 250,000 12/15/2004 $0.75 12/15/2006 12/15/2009
----------------------------------------------------------------------------------
150,000 1/20/2006 $0.85 1/20/2008 1/20/2011
- -----------------------------------------------------------------------------------------------------------------
Howard Barth 240,000 6/28/2005 $0.55 6/28/2007 6/28/2010
- -----------------------------------------------------------------------------------------------------------------
Robert Van Tassell 250,000 6/28/2005 $0.55 6/28/2007 6/28/2010
- -----------------------------------------------------------------------------------------------------------------
Chet Idziszek 250,000 12/13/2005 $1.19 12/13/2007 12/13/2010
- -----------------------------------------------------------------------------------------------------------------
JL Guerra, Jr. 250,000 12/13/2005 $1.19 12/13/2007 12/13/2010
- -----------------------------------------------------------------------------------------------------------------
Rakesh Malhotra 250,000 12/13/2005 $1.19 12/13/2007 12/13/2010
- -----------------------------------------------------------------------------------------------------------------
Paul Gorman 48,000 1/05/2005 $0.75 1/05/2007 1/05/2010
----------------------------------------------------------------------------------
200,000 12/13/2005 $1.19 12/13/2007 12/13/2010
- -----------------------------------------------------------------------------------------------------------------
Lisa Rose 76,000 12/13/2005 $1.19 12/13/2007 12/13/2010
- -----------------------------------------------------------------------------------------------------------------
Kathy Chapman 88,000 12/13/2005 $1.19 12/13/2007 12/13/2010
- -----------------------------------------------------------------------------------------------------------------
Kathy Chapman 12,000 1/05/2005 $0.75 1/05/2007 1/5/2010
- -----------------------------------------------------------------------------------------------------------------
The TSX has approved the extension of the expiry date of such options to the
expiry dates indicated in the foregoing table subject to the condition that the
extensions be approved by a majority of votes cast at the Meeting, excluding the
votes attached to shares beneficially owned by insiders benefiting from such
extension of expiry dates and such insiders' "associates" (as that term is
defined under the Securities Act (Ontario)).
REQUIRED APPROVAL
The extensions to the expiry dates are subject to approval by the shareholders
of the Company. In order to become effective, the extensions to the expiry dates
must be approved by at least a majority of the votes cast by shareholders of the
Company at the Meeting.
As a consequence, a separate vote will be held on the following resolution for
approval of the extension of the expiry dates of the options held by the Option
Holders, on which vote the shares owned by each of the insiders and such
insiders' associates will be withheld from voting:
"BE IT RESOLVED THAT:
(a) The extension of the expiry dates of the outstanding stock options
held by each of the Option Holders as adopted from time to time by
the Board of Directors of the Company be and the same is hereby
ratified, confirmed and approved.
- 10 -
(b) Any officer or director of the Company is hereby authorized to
execute all documents and to do all acts and things necessary or
advisable to give effect to this resolution, the execution of any
such document or the doing of any such act or thing being conclusive
evidence of such determination."
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" EXTENDING THE
EXPIRY DATES OF THE LISTED OUTSTANDING STOCK OPTIONS
- 11 -
VOTING SECURITIES AND PRINCIPAL HOLDERS OF VOTING SECURITIES
On December 8, 2006 (the "Record Date") there were 18,819,204 shares of our
common stock (the "Common Stock"), issued and outstanding, each share carrying
the right to one vote. Only shareholders of record at the close of business on
the Record Date will be entitled to vote in person or by proxy at the Meeting or
any adjournment thereof.
To the knowledge of the directors and executive officers of the Company, the
beneficial owners or persons exercising control of 5% or more of the outstanding
voting rights are:
-----------------------------------------------------------------------
Name and Address Number of Shares of Percentage of Class
Of Beneficial Owner Common Stock Held
-----------------------------------------------------------------------
1,763,354 9.37% of Yukon Gold
J L. Guerra, Jr. Common Shares
1611 Greystone Ridge
San Antonio, TX
USA 78258
-----------------------------------------------------------------------
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Except as disclosed herein, no Person has any material interest, direct or
indirect, by way of beneficial ownership of securities or otherwise, in matters
to be acted upon at the Meeting. For the purpose of this paragraph, "Person"
shall include each person: (a) who has been a director, senior officer or
insider of the Company at any time since the commencement of the Company's last
fiscal year; (b) who is a proposed nominee for election as a director of the
Company; or (c) who is an associate or affiliate of a person included in
subparagraphs (a) or (b).
- 12 -
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of December 4, 2006 by:
- --------------------------------------------------------------------------------
Name and Address Number of Shares of Percentage of Class
Of Beneficial Owner Common Stock Held
- --------------------------------------------------------------------------------
Paul A. Gorman 114,900 0.61% of Yukon Gold
1308 Roundwood Cres. Common Shares
Oakville, ON L6M 4A2
- --------------------------------------------------------------------------------
Kenneth J. 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
- --------------------------------------------------------------------------------
Robert E. Van Tassell 0 0% of Yukon Gold
421 Riverside Drive N.W. Common Shares
High River
Alberta, Canada T1V 1T5
- --------------------------------------------------------------------------------
Lisa Rose 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. 1,763,354 9.37% of Yukon Gold
1611 Greystone Ridge Common Shares
San Antonio, TX
USA 78258
- --------------------------------------------------------------------------------
Howard Barth 5,500 0.03% of Yukon Gold
16 Sycamore Drive Common Shares
Thornhill, Ontario L3T 5V4
- --------------------------------------------------------------------------------
TOTAL 1,883,754 10.01%
- --------------------------------------------------------------------------------
As a group Management and the Directors own 10.01% of the issued and outstanding
shares of Yukon Gold.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's directors, executive officers and persons who own more than 10% of a
registered class of Yukon Gold's securities to file with the SEC initial reports
of ownership and reports of changes in ownership of Common Stock and other
equity securities of Sense. Directors, executive officers and greater than 10%
shareholders are required by SEC regulation to furnish Yukon Gold with copies of
all Section 16(a) reports they file.
- 13 -
DIRECTORS AND EXECUTIVE OFFICERS
The following table contains information regarding the members and nominees of
the board of directors and the Executive of Yukon Gold as of the Record Date:
- --------------------------------------------------------------------------------
Name Age Position Position Held Since
- --------------------------------------------------------------------------------
J.L. Guerra, Jr. 50 Director, November 2, 2005,
Chairman of the Board July 11, 2006
- --------------------------------------------------------------------------------
Paul A. Gorman 35 Director October 24, 2006
CEO October 24, 2006
- --------------------------------------------------------------------------------
Howard S. Barth 53 Director May 11, 2005
- --------------------------------------------------------------------------------
Kenneth Hill 66 Director December 15, 2004
- --------------------------------------------------------------------------------
Chet Idziszek 58 Director November 17, 2005
- --------------------------------------------------------------------------------
Robert E. Van Tassell 71 Director May 30, 2005
- --------------------------------------------------------------------------------
Rakesh Malhotra 49 Chief Financial Officer November 2, 2005
- --------------------------------------------------------------------------------
Lisa Rose 32 Secretary September 7, 2005
- --------------------------------------------------------------------------------
All of the officers identified above serve at the discretion of the board of
directors and have consented to act as directors of the Company.
RELATIONSHIPS AMONG DIRECTORS OR EXECUTIVE OFFICERS
There are no family relationships among any of the existing directors or
executive officers of Yukon Gold.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the fiscal year ended April 30, 2006, the board of directors held eight
directors' meeting. All other matters which required board approval were
consented to in writing by all of the Company's directors.
Identification of the Audit Committee
The members of the Audit Committee have been appointed by the Board of
Directors. The Audit Committee is governed by a charter that was approved and
adopted by the Board of Directors. The Audit Committee will be comprised of at
least two (2) independent directors. During fiscal year 2006 there were four
meetings held by the Audit Committee.
- 14 -
As of the Record Date, the Audit Committee consists of three Directors. They are
Robert Van Tassell, J.L. Guerra, Jr. and Chet Idziszek. Mr. Guerra, Mr. Van
Tassell and Mr. Idziszek are independent directors who hold stock and/or stock
options in the Company but are not otherwise compensated by the Company.
Pursuant to its charter, the audit committee reviews our quarterly and annual
financials statements and meets with our independent auditors at least annually
to review financial results for the year, as reported in Yukon Gold's financial
statements. The audit committee also recommends to the Board the independent
auditors to be retained; reviews the engagement of the independent auditors,
including the scope, extent and procedures of the audit and the compensation to
be paid therefore; assists and interacts with the independent auditors in order
that they may carry out their duties in the most efficient and cost effective
manner; and reviews and approves all professional services provided to the
Company by the independent auditors and considers the possible effect of such
services on the independence of the auditors.
Pursuant to its charter, the Audit Committee will make such examinations, as are
necessary to monitor the corporate financial reporting and the external audits
of Yukon Gold Corporation, Inc. and its subsidiaries (the "Company"), to provide
to the Board of Directors the results of its examinations and recommendations
derived their work to outline to the Board improvements made, or to be made, in
internal accounting controls, to nominate independent auditors, and to provide
to the Board such additional information and materials as it may deem necessary
to make the Board aware of significant financial matters that require Board
attention. In addition, the Audit Committee will undertake those specific duties
and responsibilities as the Board of Directors from time to time prescribe.
Compensation Committee
The Compensation Committee consists of J.L. Guerra, Jr., Ken Hill, and Robert
Van Tassell. The Compensation Committee was created on October 24, 2006. To date
they have had one meeting. The Compensation Committee is responsible for
reviewing and establishing the compensation paid to officers and employees of
the Company.
Other Committees
Yukon Gold currently does not have any other committees.
- 15 -
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
- -------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
-----------------------------------------------------------------------------------
Awards Payout
-----------------------------------
Securities All
Year Restricted Underlying Other
Name and Other Annual Stock Options/SAR LTIP Compen-
Principal April Salary Bonus Compensation Award(s) Granted Payouts sation
Position 30, ($) ($) ($) ($) (#) ($) ($)
- -------------------------------------------------------------------------------------------------------------
Paul A. Gorman 2006 Nil Nil 34,440 Nil 200,000 Nil Nil
CEO as of 2005 Nil Nil Nil Nil Nil Nil Nil
October 24, 2004 Nil Nil Nil Nil Nil Nil Nil
2006 (1)
- -------------------------------------------------------------------------------------------------------------
Kenneth Hill 2006 Nil Nil 14,755 Nil 150,000 Nil Nil
Former 2005 Nil Nil Nil Nil 250,000 Nil Nil
President 2004 Nil Nil Nil Nil Nil Nil Nil
and CEO (2)
- -------------------------------------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------------------------------------
Lisa Rose 2006 25,858 Nil Nil Nil 76,000 Nil Nil
Corporate 2005 Nil Nil Nil Nil Nil Nil Nil
Secretary (4) 2004 Nil Nil Nil Nil Nil Nil Nil
- -------------------------------------------------------------------------------------------------------------
(1) Mr. Gorman became an officer of the Company on November 7, 2005. The Company
paid $34,440 to a corporation controlled by Paul Gorman in the fiscal year ended
April 30, 2006. The Company expects to pay similar or increased compensation to
Mr. Gorman in the current fiscal year in recognition of his expanded duties and
responsibilities as CEO.
(2) Mr. Hill was formerly the President and CEO of the Company beginning in
January of 2006. He resigned as President and CEO as of June 29, 2006 and became
Vice President, Mining Operations of the Company. The Company paid $14,755
(CDN$17,500) in consulting fees to a corporation controlled by Mr. Hill during
the fiscal year ended April 30, 2006. The Company expects to pay similar
compensation to Mr. Hill in the current fiscal year.
- 16 -
(3) Mr. Malhotra became the Chief Financial Officer of the Company on November
17, 2005. The Company paid $15,107 to Mr. Malhotra in the fiscal year ended
April 30, 2006. The Company expects to pay similar compensation to Mr. Malhotra
in the current fiscal year.
(4) Mrs. Rose became Corporate Secretary of the Company on September 7, 2005.
She was formerly Lisa Lacroix prior to her marriage on September 16, 2006.
- 17 -
Stock options granted to the named executive officers during the fiscal year
ended April 30, 2006 are provided in the table below:
- ----------------------------------------------------------------------------------------------------------
Market Value
of Securities
Securities % of Total Underlying
Under Options/SARs Options/SARs
Options/SARs Granted to Exercise or on the Date of
Granted Employees in Base Price Grant Expiration
Name (#) Fiscal year (1) ($/Security) ($/Security) Date
- ----------------------------------------------------------------------------------------------------------
Paul A. Gorman
CEO 200,000 11.2% $ 1.19 $ 1.19 December 13,
2007
- ----------------------------------------------------------------------------------------------------------
Kenneth Hill,
Vice President 150,000 8.4% $ 0.85 $ 0.85 January 20,
Mining Operations 2008
- ----------------------------------------------------------------------------------------------------------
Rakesh Malhotra
CFO 250,000 14% $ 1.19 $ 1.19 December 13,
2007
- ----------------------------------------------------------------------------------------------------------
Lisa Rose
Corporate Secretary 76,000 4.3% $ 1.19 $ 1.19 December 13,
2007
- ----------------------------------------------------------------------------------------------------------
(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.
During the fiscal year ended April 30, 2006 there has been no re-pricing of
stock options held by any executive officer or director of the Company.
- 18 -
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
Paul A. Gorman 0
CEO N/A 248,000
Kenneth Hill
Vice President 0 N/A 400,000
Mining Operations
Rakesh Malhotra 0 N/A 250,000
CFO
Lisa Rose 0 N/A 100,000
Corporate Secretary
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 2003 Stock Option
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. Currently, the Company has in effect the 2003 Stock Option Plan. If
Proposal #3 herein is approved by the shareholders, the Company will adopt the
2006 Stock Option Plan. No further options would be issued pursuant to the 2003
Stock Option Plan. All options issued in the future would be issued pursuant to
the 2006 Stock Option Plan. All current stock options disclosed in this Proxy
Statement and Information Circular were issued pursuant to the 2003 Stock Option
Plan. During the year ended April 30, 2006 certain directors were granted
options as shown below. 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.
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 granted 250,000 stock options at an exercise price of
$1.19 and valid until December 13, 2007.
TERMINATION OF EMPLOYMENT, CHANGE IN RESPONSIBILITIES AND EMPLOYMENT CONTRACTS
Reorganization of Officers and Directors
On October 24, 2006, Paul A. Gorman became the Chief Executive Officer of the
Company following the resignation by Howard Barth as Chief Executive Officer and
President. Prior to becoming the Company's Chief Executive Officer, Mr. Gorman
was the Company's Vice President - Corporate Development (as of November 7,
2005). There were no disagreements between the Company and Mr. Barth with
respect to the Company's operations, policies or practices. Mr. Barth is a
director of the Company.
- 19 -
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. Hill became Vice
President - Mining Operations of the Company and remained as a Director. There
were no disagreements between the Company and Mr. Hill with respect to the
Company's operations, policies or practices. Mr. Hill, who had been a Director
beginning as of December of 2004, was appointed 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.
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 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 Rose (formerly Lisa Lacroix) was appointed to the
position of Corporate Secretary.
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.
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. Howard Barth was appointed to fill the vacancy on the Board left by
the departure of Mr. Kelley on May 11, 2005.
Of our six directors, three directors are independent directors. They are J.L.
Guerra, Jr. (Chairman), Chester (Chet) Idziszek and Robert Van Tassell. Mr.
Gorman and Mr. Hill are officers of the Company.
None of the officers of the Company have employment agreements with the Company.
Mr. Malhotra and Mr. Gorman are each compensated as consultants through their
wholly owned companies. Their compensation is disclosed in "EXECUTIVE
COMPENSATION."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with management and others
Year ended April 30, 2006
In the fiscal year ended April 30, 2006, the Company paid $14,755 in consulting
fees to a corporation controlled by Kenneth Hill, a director of the Company. The
Company paid $34,440 to a corporation controlled by Paul Gorman in the fiscal
year ended April 30, 2006. The Company expects to pay similar or increased
compensation to Mr. Gorman in the current fiscal year in recognition of his
expanded duties and responsibilities as CEO. In the fiscal year ended April 30,
2006, the Company paid $15,107 to Rakesh Malhotra, the Company's Chief Financial
Officer.
J.L. Guerra, Jr., a director of the Company, subscribed for 490,909 common
share units at $0.55 per unit; and
- 20 -
W. Warren Holmes, a former director of the Company, subscribed for 149,867
common share units at $0.55 per unit.
OTHER MATTERS
Yukon Gold knows of no other matters that are likely to be brought before the
Meeting. If, however, other matters not presently known or determined properly
come before the Meeting, the persons named as proxies in the enclosed proxy card
or their substitutes will vote such proxy in accordance with their discretion
with respect to such matters.
PROPOSALS OF SHAREHOLDERS
All proposals by stockholders of the Company which are intended to be presented
at the Company's next Annual Meeting of Stockholders to be held in 2008 must be
received by the Company for inclusion in the Company's proxy statement and proxy
relating to that meeting no later than September 15, 2007. Any stockholder who
desires to bring a proposal at the Company's 2008 Annual Meeting of Stockholders
without including such proposal in the Company's proxy statement must deliver
written notice thereof to the Secretary of the Company (addressed to Yukon Gold
Corporation, Inc, 55 York Street, Suite 401, Toronto, Ontario M5J 1R7, Canada)
during the period from September 15, 2007 to October 15, 2007. However, if the
Company's 2007 Annual Meeting of Stockholders is held earlier than January 19,
2008 or later than February 1, 2008, such written notice must be delivered to
the Secretary of the Company during the period from 90 days before the date of
the 2008 Annual Meeting of Stockholders to the later of 60 days prior to the
date of the 2008 Annual Meeting of Stockholders or 10 days following the public
announcement of the date of the 2008 Annual Meeting of Stockholders.
Proposals which shareholders wish to be considered for inclusion in the Proxy
Statement and proxy card for the 2008 Annual Meeting of Shareholders must comply
with the requirements of Rule 14a-8 under the Securities Exchange Act of 1934,
as amended, and Delaware corporate law.
ANNUAL REPORT
A copy of Yukon Gold's Annual Report for the year ended April 30, 2006 (audited)
and Quarterly Report for the quarter ended July 31, 2006 (unaudited) accompany
this proxy statement.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Paul A. Gorman
CEO and Director
- 21 -
INDEX TO FINANCIAL STATEMENTS
TABLE OF CONTENTS
Page No.
INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Interim Consolidated Balance Sheets as of July 31, 2006
and April 30, 2006 1-2
Interim Consolidated Statements of Operations for the three months
ended July 31, 2006 and July 31, 2005 3
Interim Consolidated Statements of Cash Flows for the three months
ended July 31, 2006 and July 31, 2005 4
Interim Consolidated Statements of Changes in Stockholders' Equity
for the three months ended July 31, 2006 and the year
ended April 30, 2006 5
Condensed Notes to Interim Consolidated Financial Statements 6-12
YEAR-END CONSOLIDATED FINANCIAL STATEMENTS (AUDITED)
Report of Independent Registered Public Accounting Firm 13
Consolidated Balance Sheets as at April 30, 2006 and
April 30, 2005 14-15
Consolidated Statements of Operations for the years ended
April 30, 2006 and April 30, 2005 16
Consolidated Statements of Cash Flows for the years ended
April 30, 2006 and April 30, 2005 18
Consolidated Statements of Changes in Stockholders' Equity
for the years ended April 30, 2006 and April 30, 2005 20
Notes to Year-End Consolidated Financial Statements
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS ENDED JULY 31, 2006 AND JULY 31, 2005
(UNAUDITED)
(Amounts expressed in US Dollars)
YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE COMPANY)
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2006
(Amounts expressed in US Dollars)
(Unaudited)
TABLE OF CONTENTS
Page No
-------
Interim Consolidated Balance Sheets as of July 31, 2006 and
April 30, 2006 1-2
Interim Consolidated Statements of Operations for the three months
ended July 31, 2006 and July 31, 2005 3
Interim Consolidated Statements of Cash Flows for the three months
ended July 31, 2006 and July 31, 2005 4
Interim Consolidated Statements of Changes in Stockholders' Equity
for the three months ended July 31, 2006 and the year ended
April 30, 2006 5
Condensed Notes to Interim Consolidated Financial Statements 6-12
YUKON GOLD CORPORATION, INC.
(An Exploration Stage Company)
Interim Consolidated Balance Sheets
As at July 31, 2006 and April 30, 2006
(Amounts expressed in US Dollars)
(Unaudited)
July 31, April 30,
2006 2006
$ $
--------- ---------
ASSETS
CURRENT ASSETS
Cash and cash equivalents 889,565 2,412,126
Prepaid expenses and other 1,057,687 77,977
Exploration tax credit receivable 153,145 153,145
--------- ---------
2,100,397 2,643,248
RESTRICTED CASH (Note 6) -- 118,275
RESTRICTED DEPOSIT (Note 7) 17,889 17,889
PROPERTY, PLANT AND EQUIPMENT 59,263 63,141
--------- ---------
2,177,549 2,842,553
========= =========
See condensed notes to the Interim consolidated financial statements.
APPROVED ON BEHALF OF THE BOARD
/s/ Howard Barth
- -------------------------------
Howard Barth, Director
/s/ Jose L. Guerra
- -------------------------------
Jose L. Guerra, Jr., Director
1
YUKON GOLD CORPORATION, INC.
(An Exploration Stage Company)
Interim Consolidated Balance Sheets
As at July 31, 2006 and April 30, 2006
(Amounts expressed in US Dollars)
(Unaudited)
July 31, April 30,
2006 2006
$ $
---------- -----------
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities 362,943 232,282
Other Liability 3,750 3,750
Current Portion of:
Obligation under Capital Leases 2,772 2,792
---------- -----------
Total Current Liabilities 369,465 238,824
Long-Term Portion of:
Obligation under Capital Lease 11,086 11,864
---------- -----------
TOTAL LIABILITIES 380,551 250,688
---------- -----------
STOCKHOLDERS' EQUITY
CAPITAL STOCK 1,703 1,637
ADDITIONAL PAID-IN CAPITAL 5,979,231 5,301,502
SUBSCRIPTION FOR WARRANTS (Note 5) 525,680 525,680
ACCUMULATED OTHER COMPREHENSIVE LOSS (49,097) (5,162)
DEFICIT, ACCUMULATED DURING THE EXPLORATION STAGE (4,660,519) (3,231,792)
---------- -----------
1,796,998 2,591,865
---------- -----------
2,177,549 2,842,553
========== ===========
See condensed notes to the interim consolidated financial statements.
2
YUKON GOLD CORPORATION, INC.
(An Exploration Stage Company)
Interim Consolidated Statements of Operations
For the three months ended July 31, 2006 and July 31, 2005
(Amounts expressed in US Dollars)
(Unaudited)
For the For the
quarter quarter
Cumulative ended ended
since July 31, July 31,
inception 2006 2005
$ $ $
---------- ---------- ----------
REVENUE -- -- --
--------- ---------- ----------
OPERATING EXPENSES
Stock-based compensation 310,569 85,323 95,840
General and administration 1,865,037 468,359 92,050
Project expenses 2,781,351 871,887 2,594
Exploration Tax Credit (284,703) -- --
Amortization 8,361 3,158 243
Loss on sale/disposal of capital assets 5,904 -- --
--------- ---------- ---------
TOTAL OPERATING EXPENSES 4,686,519 1,428,727 190,727
--------- ---------- ---------
LOSS BEFORE INCOME TAXES (4,686,519) (1,428,727) (190,727)
Income taxes recovery 26,000 -- --
--------- ---------- ---------
NET LOSS 4,660,519) (1,428,727) (190,727)
========= ========== =========
Loss per share - basic and diluted (0.08) (0.02)
========== =========
Weighted average common shares outstanding 16,656,627 9,025,045
========== =========
See condensed notes to the interim consolidated financial statements.
3
YUKON GOLD CORPORATION, INC.
(An Exploration Stage Company)
Interim Consolidated Statements of Cash Flows
For the three months ended July 31, 2006 and July 31, 2005
(Amounts expressed in US Dollars)
(Unaudited)
For the For the
quarter quarter
Cumulative ended ended
since July 31, July 31,
inception 2006 2005
$ $ $
---------- ---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the year (4,660,519) (1,428,727) (190,727)
Items not requiring an outlay of cash:
Amortization 8,361 3,158 243
Loss on sale/disposal of capital assets 5,904 -- --
Shares issued for property payment 368,087 53,845 --
Common shares issued for
Settlement of severance liability to ex-officer 113,130 113,130
Stock-based compensation 310,569 85,323 95,840
Issue of shares for professional services 130,500 -- --
Issue of units against settlement of debts 20,077 -- --
Decrease (Increase) in prepaid expenses and deposits (1,056,530) (979,710) 98,371
Increase in exploration tax credit receivable (153,145) -- --
Increase (Decrease) in accounts payable and accrued
liabilities 362,453 130,661 (16,825)
Decrease in restricted cash -- 118,275
Increase in restricted deposit (17,889)
Increase in other liabilities 3,750 -- --
---------- ---------- --------
NET CASH USED IN OPERATING ACTIVITIES (4,565,252) (1,904,045) (13,098)
---------- ---------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (74,597) -- --
---------- ---------- --------
NET CASH USED IN INVESTING ACTIVITIES (74,597) -- --
---------- ---------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments from a shareholder 1,180 -- --
Proceeds from exercise of warrants 20,772 -- --
Proceeds (Repayments) from demand promissory notes 200,000 -- (47,676)
Proceeds from Convertible promissory notes converted 200,500 -- --
Proceeds from exercise of stock options 5,500 -- --
Proceeds from subscription of warrants 525,680 -- --
Proceeds from issuance of units /shares 4,604,736 425,497 --
Proceeds from capital lease obligation 14,656 -- --
---------- ---------- --------
NET CASH PROVIDED/(USED) BY FINANCING ACTIVITIES 5,573,024 425,497 (47,676)
---------- ---------- --------
EFFECT OF FOREIGN CURRENCY EXCHANGE
RATE CHANGES (43,610) (44,013) (1,429)
---------- ---------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS FOR THE YEAR 889,565 (1,522,561) (62,203)
Cash and cash equivalents, beginning of year -- 2,412,126 79,256
---------- ---------- --------
CASH AND CASH EQUIVALENTS, END OF 889,565 889,565 17,053
QUARTER
========== ========== ========
INCOME TAXES PAID -- --
========== ========
INTEREST PAID -- 3,032
========== ========
See condensed notes to the interim consolidated financial statements.
4
YUKON GOLD CORPORATION, INC.
(An Exploration Stage Company)
Interim Consolidated Financial Statements of Changes in Stockholders' Equity
From Inception to July 31, 2006
(Amounts expressed in US Dollars)
(Unaudited)
Deficit,
accumulated Accumulated
Number of Common Additional Subscription during the Other
Common Shares Paid-in for exploration Comprehensive Comprehensive
Shares amount Capital warrants stage Income (loss) Income (loss)
$ $ $ $ $
--------- ----------- ---------- ------------ ----------- ------------- -------------
Issuance of Common shares 2,833,377 154,063 -- -- -- -- --
Issuance of warrants -- -- 1,142 -- -- -- --
Foreign currency translation -- -- -- -- 604 604
Net loss for the year -- -- -- (124,783) (124,783) --
--------- -------- ------- -------- ---------- -------- -------
Balance as of April 30, 2003 2,833,377 154,063 1,142 (124,783) (124,179) 604
========
Issuance of Common shares 1,435,410 256,657 -- -- -- --
Issuance of warrants -- -- 2,855 -- -- --
Shares repurchased (240,855) (5,778) -- -- -- --
Recapitalization pursuant to
reverse acquisition 2,737,576 (404,265) 404,265 -- -- --
Issuance of Common shares 1,750,000 175 174,825 -- -- --
Issuance of Common shares
for property payment 300,000 30 114,212 -- -- --
Foreign currency translation -- -- -- -- (12,796) (12,796)
Net loss for the year -- -- -- (442,906) (442,906) --
--------- -------- ------- -------- ---------- -------- -------
Balance as of April 30, 2004 8,815,508 882 697,299 (567,689) (455,702) (12,192)
========
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 -- -- -- -- 9,717 9,717
Net loss for the year -- -- -- (808,146) (808,146) --
--------- -------- ------- -------- ---------- -------- -------
Balance as of April 30, 2005 9,025,045 903 854,430 -- (1,375,835) (798,429) (2,475)
========
5
YUKON GOLD CORPORATION, INC.
(An Exploration Stage Company)
Interim Consolidated Financial Statements of Changes in Stockholders' Equity
From Inception to July 31, 2006
(Amounts expressed in US Dollars)
(Unaudited)
Deficit,
accumulated Accumulated
Number of Common Additional Subscription during the Other
Common Shares Paid-in for exploration Comprehensive Comprehensive
Shares amount Capital warrants stage Income (loss) Income (loss)
$ $ $ $ $
--------- ------ ---------- ------------ ----------- ------------- -------------
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
6
YUKON GOLD CORPORATION, INC.
(An Exploration Stage Company)
Consolidated Statements of Changes in Stockholders' Equity
From Inception to July 31, 2006
(Amounts expressed in US Dollars)
Deficit,
accumulated
Number of Common Additional Subscription during the Other Accumulated
Common Shares Paid-in for exploration Comprehensive Comprehensive
Shares amount Capital warrants stage Income (loss) Income (loss)
$ $ $ $ $ $
---------- ------ ---------- ------------ ------------ ------------- -------------
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 -- -- -- (2,687) (2,687)
Net loss for the year -- -- (1,855,957) (1,855,957) --
---------- ----- --------- ------- ---------- ---------- ------
Balance as of April 30, 2006 16,366,728 1,637 5,301,502 525,680 (3,231,792) (1,858,644) (5,162)
==========
Exercise of warrants 10,000 1 8,986
Exercise of warrants 45,045 5 40,445
Exercise of warrants 16,000 2 14,278
Common shares issued for
Settlement of severance
liability to ex-officer 141,599 14 113,116
Exercise of warrants 43,667 4 39,364
Exercise of warrants 17,971 2 15,937
Exercise of warrants 43,667 4 38,891
Exercise of warrants 16,000 2 14,251
Exercise of warrants 158,090 16 141,616
Issuance of Common shares
for property payment 43,166 4 53,841
Exercise of warrants 64,120 6 57,863
Exercise of warrants 61,171 6 53,818
Stock based compensation-
Directors and officers 85,323
Foreign currency translation (43,935) (43,935)
Net loss for the quarter (1,428,727) (1,428,727)
---------- ----- --------- ------- ---------- ---------- -------
17,027,224 1,703 5,979,231 525,680 (4,660,519) (1,472,662) (49,097)
---------- ----- --------- ------- ---------- ---------- -------
See condensed notes to the interim consolidated financial statements.
7
YUKON GOLD CORPORATION, INC.
(An Exploration Stage Company)
Condensed Notes to Interim Consolidated Financial Statements
July 31, 2006
(Amounts expressed in US Dollars)
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements do not
include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of all recurring accruals)
considered necessary for fair presentation have been included. Operating
results for the interim period are not necessarily indicative of the
results that may be expected for the year ended April 30, 2007. Interim
financial statements should be read in conjunction with the company's
annual audited financial statements.
The interim consolidated financial statements include the accounts of
Yukon Gold Corporation, Inc. (the "Company") and its wholly owned
subsidiary Yukon Gold Corp. ("YGC"). All material inter-company accounts
and transactions have been eliminated.
2. 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 ended April 30, 2006 which is expected to help the company meet its
commitments and current requirements for project expenses and general and
administrative expenses. The Company has also raised another $400,000 in
the subsequent period (refer to note 12 (b)) 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.
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.
8
YUKON GOLD CORPORATION, INC.
(An Exploration Stage Company)
Condensed Notes to Interim Consolidated Financial Statements
July 31, 2006
(Amounts expressed in US Dollars)
(Unaudited)
4. 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.
5. 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.
9
YUKON GOLD CORPORATION, INC.
(An Exploration Stage Company)
Condensed Notes to Interim Consolidated Financial Statements
July 31, 2006
(Amounts expressed in US Dollars)
(Unaudited)
6. 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 July 31, 2006 and
April 30, 2006, unexpended flow-through funds were $ Nil and $ 118,275
(CDN $132,230) respectively.
7. 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.
8. 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.
9. STOCK BASED COMPENSATION
In December 2004, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 123 (Revised 2004),
"Share-Based Payment" (SFAS 123 (R)). SFAS 123 (R) requires companies to
recognize compensation cost for employee services received in exchange for
an award of equity instruments based on the grant-date fair value of the
award. The Company adopted the provisions of SFAS 123 (R) on May 1, 2006
using the "modified prospective" application method of adoption which
requires the Company to record compensation cost related to unvested stock
awards as of April 30, 2006 by recognizing the unamortized grant date fair
value of these awards over the remaining service periods of those awards
with no change in historical reported earnings. As a result of using this
method, the consolidated financial statements for the year ended April 30,
2006 were not restated for the impact of stock-based compensation expense.
Awards granted after April 30, 2006 are valued at fair value in accordance
with the provisions of SFAS 123 (R) and recognized on a straight line
basis over the service periods of each award.
Had expense for the Company's stock- based compensation plans been
determined based on the grant-date fair value for 2005, consistent with
the provisions of SFAS 123 (R), the Company's reported and proforma net
loss and net loss per share for the three months ended July 31, 2005 would
be as follows:
Three Months Ended
July 31, 2005
------------------
Net Loss-as reported $(190,727)
Add: Stock-based compensation as expensed $ 95,840
Proforma stock-based compensation expense-as
If grant date fair value had been applied to all
Stock -based payment awards $ (95,840)
---------
Net loss-proforma for stock based compensation expense $(190,727)
---------
Net loss per share-basic, as reported $ (0.02)
Net loss per share-basic, proforma for stock- based
Compensation expense $ (0.02)
10
YUKON GOLD CORPORATION, INC.
(An Exploration Stage Company)
Condensed Notes to Interim Consolidated Financial Statements
July 31, 2006
(Amounts expressed in US Dollars)
(Unaudited)
9. STOCK BASED COMPENSATION-Cont'd
As of July 31, 2006 there was $472,122 of unrecognized expense related to
non-vested stock-based compensation arrangements granted. The financial
statements for the three months ended July 31, 2006 recognize compensation
cost for the portion of outstanding awards which have vested during the
period. The stock-based compensation expense for the quarter ended July
31, 2006 was $ 85,323.
No options were granted during the three months ended July 31, 2006 under
the Company's stock-option plan.
10. ISSUANCE OF COMMON SHARES AND WARRANTS
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
$8,987 (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
$40,450 (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
$14,280 (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 $113,130 (CDN$128,855) was converted to 141,599 common
shares at $0.80 (CDN$0.91).
On June 22, 2006 the Company issued 43,667 common shares for the exercise
of 43,667 warrants at $0.90 (CDN$1.00) from a warrant holder in consideration of
$39,368 (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
$15,939 (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
$38,895 (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
$14,253 (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 $141,632 (CDN$158,090).
On July 7, 2006 the Company issued 43,166 common shares in settlement of a
property payment on the Mount Hinton property. The shares represent $53,845
(CDN$60,000) payment and were valued $1.25 (CDN$1.39) each.
On July 7, 2006 the Company issued 64,120 common shares for the exercise
of 64,120 warrants at $0.90 (CDN$1.00) from a warrant holder in consideration of
$57,869 (CDN$64,120).
On July 17, 2006 the Company issued 61,171 common shares for the exercise
of 61,171 warrants at $0.88 (CDN$1.00) from a warrant holder in consideration of
$53,824 (CDN$61,171).
11
YUKON GOLD CORPORATION, INC.
(An Exploration Stage Company)
Condensed Notes to Interim Consolidated Financial Statements
July 31, 2006
(Amounts expressed in US Dollars)
(Unaudited)
11. 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.
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 $134,512 (CDN$150,000) Paid
On July 7, 2007 $132,556 (CDN$150,000)
On July 7, 2008 $132,556 (CDN$150,000)
TOTAL $721,865 (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 $ 662,778 (CDN$ 750,000) *
*Subsequently amended
Jan. 1/07 to Dec. 31/07 $ 883,704 (CDN$1,000,000)
Jan. 1/08 to Dec. 31/08 $1,104,631 (CDN$1,250,000)
Jan. 1/09 to Dec. 31/09 $1,325,557 (CDN$1,500,000)
TOTAL $4,547,761 (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 expenditure scheduled
to be incurred by December 31, 2006. The agreement to defer such Work program
expenditures was due to the mechanical break-down of drilling equipment and the
unavailability of replacement drilling equipment at the Mount Hinton site. As a
result, the Company is now allowed to defer the expenditure of approximately
$309,000 to $353,000 (CDN $ 350,000 to CDN $400,000) until December 31, 2007.
All other Property Payments and Work Program expenditures due have been made and
incurred.
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 $1,325,557 (CDN$1,500,000)
50% interest upon Work Program expenditures of $2,209,261 (CDN$2,500,000)
75% interest upon Work Program expenditures of $4,547,761 (CDN$5,225,000)
12
YUKON GOLD CORPORATION, INC.
(An Exploration Stage Company)
Condensed Notes to Interim Consolidated Financial Statements
July 31, 2006
(Amounts expressed in US Dollars)
(Unaudited)
11. COMMITMENTS AND CONTINGENCIES-Cont'd
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 $4,547,761
(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 $4,418,522
(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.
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) $88,370 (CDN$100,000) cash and an additional
133,334 common shares of the Company on or before December 12, 2006;
(ii) $88,370 (CDN$100,000) cash on or before December 12, 2007; and
(iii) $176,741 (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 $883,704
(CDN$1,000,000) in cash and/or common shares of the Company, or some
combination thereof to be determined.
13
YUKON GOLD CORPORATION, INC.
(An Exploration Stage Company)
Condensed Notes to Interim Consolidated Financial Statements
July 31, 2006
(Amounts expressed in US Dollars)
(Unaudited)
11. COMMITMENTS AND CONTINGENCIES-Cont'd
c) The company on June 21, 2006 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 11equal 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. The Company accrued consulting expenses of $210,663 for
the quarter ended July 31, 2006 relating to the contractual
commitment to issue 54,860 shares each to the three consultants. No
shares were however issued as of July 31, 2006 but issued only
subsequently (refer to subsequent event note 12)
d) 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. The Company has not yet issued any shares or warrants as of
the end of the quarter.
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.
12. SUBSEQUENT EVENTS
a. Amendment to Work Program expenditures relating to Mount Hinton
Property Mining Claims:
By letter agreement dated August 17, 2006, the Hinton Syndicate
agreed to allow the Company to defer a portion of the Work Program
expenditure scheduled to be incurred by December 31, 2006. The
agreement to defer such Work program expenditures was due to the
mechanical break-down of drilling equipment and the unavailability
of replacement drilling equipment at the Mount Hinton site. As a
result, the Company is now allowed to defer the expenditure of
approximately $309,000 to $353,000 (CDN $ 350,000 to CDN $400,000)
until December 31, 2007. All other Property Payments and Work
Program expenditures due have been made and incurred.
b. Subsequent issue of common shares and warrants:
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 $2.00 per share in the remaining twelve months of the term.
Closing of this placement requires approval from the Toronto Stock
Exchange. Conditional approval was given by the Toronto Stock
Exchange on August 29, 2006.
On August 11, 2006 the company issued 817,980 restrictive shares to
consultants in accordance with 11 (c) as above. Except 223,980
common shares which were in total earned by these consultants, the
balance of 594,000 common shares are held in escrow to be released
to each consultant in 10 monthly installments of 19,800 common
shares commencing September 1, 2006.
On September 7, 2006 the Company issued 24,000 shares to an officer
upon exercising 24,000 vested stock options at US$.075 for a total
of US$18,000.00.
14
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)
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
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)
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)
=======
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 Accumulated
Number of Common Additional Subscription during the Other
Common Shares Paid-in for exploration Comprehensive Comprehensive
Shares amount Capital warrants stage Income (loss) Income (loss)
--------- ------ ---------- ------------ ----------- ------------- -------------
$ $ $ $ $ $
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
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
EXHIBIT A
["OLD STOCK OPTION PLAN"]
YUKON GOLD CORPORATION, INC.
Yukon Gold Corporation, Inc., a Delaware corporation (the Company), hereby
establishes and adopts the following 2003 Stock Option Plan (the Plan).
RECITALS
WHEREAS, the Company desires to encourage high levels of performance by
those individuals who are key to the success of the Company and its subsidiaries
and affiliates, to attract and retain individuals who are highly motivated and
who will contribute to the success of the Company and to encourage such
individuals to remain as managers, officers, directors, employees, consultants
and/or advisors of the Company and its subsidiaries and affiliates by increasing
their proprietary interest in the Company's growth and success.
WHEREAS, to attain these ends, the Company has formulated the Plan
embodied herein to authorize the granting of stock options ("Options") to those
individuals whose judgement, initiative and efforts are, have been or are
expected to be responsible for the success of the Company.
NOW, THEREFORE, the Company hereby constitutes, establishes and adopts the
following Plan and agrees to the following provisions:
ARTICLE 1.
PURPOSE OF THE PLAN
1.1. Purpose. The purpose of the Plan is to assist the Company and its
subsidiaries and affiliates in attracting and retaining selected individuals to
serve as directors, officers, consultants, advisors and employees of the Company
who will contribute to the Company's success, and to achieve long-term
objectives that will inure to the benefit of all stockholders of the Company
through the additional incentive inherent in the ownership of the Company's
shares of common stock, par value $0.0001 per share ("Shares"). 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 nonqualified 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 Securities
Exchange Act of 1934, as amended (the "Exchange Act").
ARTICLE 2.
SHARES SUBJECT TO OPTIONS
2.1. Number of Shares. Subject to the adjustment provisions of Section
5.10 hereof, the aggregate number of Shares which may be issued under Options
under the Plan shall not exceed 5,000,000. No Options of purchase fractional
Shares shall be granted and no fractional shares shall be issued under the Plan.
For purposes of this Section 2.1, the Shares that shall be counted toward such
limitation shall include all Shares issued or issuable pursuant to Options that
have been or may be exercised.
2.2. Shares Subject to Terminated Options. The Shares covered by any
unexercised portions of terminated Options granted under Article 4 and Shares
subject to any Options that are otherwise surrendered by the Participant without
receiving any payment or other benefit with respect thereto may again be subject
to new nonqualified Options under the Plan (but not "incentive stock options").
In the event the purchase price of an Option is paid in whole or in part through
the delivery of Shares, the number of Shares issuable in connection with the
exercise of the Option shall not again be available for the grant of Options
under the Plan.
29
2.3. Character of Shares. Shares delivered under the Plan may be
authorized and previously unissued Shares acquired by the Company, or both.
ARTICLE 3.
ELIGIBILITY AND ADMINISTRATION
3.1. Options to Employees, Directors and Others.
(a) Participants who receive (I) Options under Article 4 hereof
("Optionees") shall consist of such officers, key employees, consultants,
advisors and directors of the Company or any of its subsidiaries or affiliates
as the Committee (hereinafter defined) shall select from time to time, provided,
however, that an Option that is intended to qualify as an "incentive stock
option" may be granted only to an individual that is an employee of the Company
or any of its subsidiaries. The Committee's designation of an Optionee in any
year shall not require the Committee to designate such person to receive Options
or grants in any other year. The designation of an Optionee to receive Options
under one portion of the Plan shall not require the Committee to include such
Optionee under other portions of the Plan.
(b) No Option that is intended to qualify as an "incentive stock option"
may be granted to any employee who, at the time of such grant, owns, directly or
indirectly (within the meaning of sections 422(b)(6) and 424(d) of the Code),
shares of stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any of its subsidiaries
or affiliates, unless at the time of such grant, (i) the option price is fixed
at no less than 110% of the Fair Market Value (as defined below) of the Shares
subject to such Option, determined on the date of the grant, and (ii) the
exercise of such Option is prohibited by its terms after the expiration of five
years from the date such Option is granted.
3.2 Administration.
(a) The Plan shall be administered by the Board of Directors of the
Company (the "Board") or, if so determined by the Board, by a committee
appointed by the Board (the Board or such committee administering the Plan
hereinafter referred to as the "Committee"). The Board may remove from, add
members to, or fill vacancies on the Committee.
Any grant of Options to a member of the Committee who is not also an
employee shall be on terms consistent with grants made to other members of the
Board who are not members of the Committee and who are not employees, except
where such grant is awarded or ratified by the Board.
(b) The Committee is authorized, subject to the provisions of the Plan, to
establish such rules and regulations as it may deem appropriate for the conduct
of meetings and proper administration of the Plan.
(c) Subject to the provisions of the Plan, the Committee shall have
authority, in its sole discretion, to grant Options under the Plan, to interpret
the provisions of the Plan and, subject to the requirements of applicable law,
including (if applicable) Rule 16b-3 of the Exchange Act, to prescribe, amend,
and rescind rules and regulations relating to the Plan or any Options thereunder
as it may deem necessary or advisable. All decisions made by the Committee
pursuant to the provisions of the Plan shall be final, conclusive and binding on
all persons, including the Company, its stockholders, directors and employees,
and other Plan participants.
3.3. Stockholders Agreement. As a condition to the grant or exercise of
any Option, the Committee may require the Optionee to enter into a stockholders
agreement or other agreement with the Company under such terms and conditions as
may reasonably be required by the Company.
ARTICLE 4.
OPTIONS
4.1. Grant of Options. The Committee, in its sole discretion, shall
determine, within the limitations of the Plan, those officers, key employees,
consultants, advisors and directors of the Company or any of its subsidiaries or
affiliates to whom Options are to be granted under the Plan, the number of
Shares that may be purchased under each such Option and the option price, and
shall designate such Options at the time of the grant as either "incentive stock
options" or "nonqualified stock options"; provided, however, that Options
granted to employees of an affiliate (that is not also a subsidiary) or to
non-employees of the Company may only be "nonqualified stock options."
30
4.2. Stock Option Certificates; etc. All Options granted pursuant to
Article 4 (a) shall be authorized by the Committee and (b) shall be evidenced in
writing by stock option certificates ("Stock Option Certificates") in such form
and containing such terms and conditions as the Committee shall determine that
are not inconsistent with the provisions of the Plan, and, with respect to any
Stock Option Certificate granting Options that are intended to qualify as
"incentive stock options," are not inconsistent with Section 422 of the Code.
The granting of an Option pursuant to the Plan shall impose no obligation on the
recipient to exercise such Option. Any individual who is granted an Option
pursuant to this Article 4 may hold more than one Option granted pursuant to
such Article at the same time and may hold both "incentive stock options" and
"nonqualified stock options" at the same time. To the extent that any Option
does not qualify as an "incentive stock option" (whether because of its
provisions, the time or manner of its exercise or otherwise) such Option or the
portion thereof which does not so qualify shall constitute a separate
"nonqualified stock option."
4.3. Option Price. Subject to Section 3.1(b), the option exercise price
per each Share purchasable under any "incentive stock option" granted pursuant
to this Article 4, shall not be less than 100% of the Fair Market Value (as
hereinafter defined) of such Share on the date of the grant of such Option. The
option price per each Share purchasable under any "nonqualified stock option"
granted pursuant to this Article 4 shall be such amount as the Committee shall
determine at the time of the grant of such Option.
4.4. Other Provisions. Options granted pursuant to this Article 4 shall be
made in accordance with the terms and provisions of Article 5 hereof and any
other applicable terms and provisions of the Plan.
ARTICLE 5.
GENERALLY APPLICABLE PROVISIONS
5.1. Option Period. Subject to Section 3.1(b), the period for which an
Option is exercisable shall not exceed ten years from the date such Option is
granted. After the Option is granted, the option period may no be reduced,
subject to expiration in accordance with its terms.
5.2. Fair Market Value. If the shares are listed or admitted to trading on
a securities exchange registered under the Exchange Act, unless otherwise
required by any applicable provision of the Code, the "Fair Market Value" of a
Share as of a specified date shall mean the per Share closing price of the
Shares for the day immediately preceding the date as of which the Fair Market
Value is being determined (or if there was no reported closing price on such
date, on the last preceding date on which the closing price was reported)
reported on the principal securities exchange on which the Shares are listed or
admitted to trading. If the Shares are not listed or admitted to trading on any
such exchange but are listed as a national market security on the Nasdaq Stock
Market, Inc. ("NASDAQ"), traded in the over-the-counter market or listed or
traded on any similar system then in use, the Fair Market Value of a Share shall
be the last sales price for the day immediately preceding the date as of which
the Fair Market Value is being determined (or if there was no reported sale on
such date, on the last preceding date on which any reported sale occurred)
reported on such system. If the Shares are not listed or admitted to trading on
any such exchange, are not listed as national market security on NASDAQ and are
not traded in the over-the-counter market or listed or traded on any similar
system then in use, but are quoted on NASDAQ or any similar system then in use,
the Fair Market Value of a Share shall be the average of the closing high bid
and low asked quotations on such system for the Shares on the date in question.
If the Shares are not publicly traded, Fair Market Value shall be determined by
the Committee in its sole discretion and good faith using appropriate criteria.
An Option shall be considered granted on the date the Committee acts to grant
the Option or such later date as the Committee shall specify.
5.3 Exercise of Options. Vested Options granted under the Plan shall be
exercised by the Optionee thereof (or by his executors, administrators, guardian
or legal representative, as provided in Sections 5.6 and 5.7 hereof) as to all
or part of the Shares covered thereby, by the giving of written notice of
exercise to the Company, specifying the number of Shares to be purchased,
accompanied by payment of the full purchase price for the Shares being
purchased. Full payment of such purchase price shall be made at the time of
exercise and shall be made (i) in cash or by certified check or bank check or
wire transfer of immediately available funds, (ii) with the consent of the
Committee, by delivery of a promissory note in favor of the Company upon such
terms and conditions as determined by the Committee, (iii) with the consent of
the Committee, by tendering previously acquired Shares (valued at its Fair
Market Value, as determined by the Committee as of the date of tender) that have
been owned for a period of at least six months (or such other period to avoid
accounting charges against the Company's earnings), (iv) if Shares are traded on
a national securities exchange, NASDAQ or quoted on a national quotation system
sponsored by the National Association of Securities Dealers, Inc. and the
Committee authorizes this method of exercise, through the delivery of
irrevocable instructions to a broker approved by the Committee to deliver
promptly to the Company an amount equal to the purchase price, or (v) with the
consent of the Committee, any combination of (i), (ii), (iii) and (iv). Such
notice of exercise, accompanied by such payment, shall be delivered to the
Company at its principal business office or such other office as the Committee
may from time to time direct, and shall be in such form, containing such further
provisions consistent with the provisions of the Plan, as the Committee may from
time to time prescribe. In no event may any Option granted hereunder be
exercised for a fraction of a Share. The Company shall affect the transfer of
Shares purchased pursuant to an Option as soon as practicable, and, within a
reasonable time thereafter, such transfer shall be evidenced on the books of the
Company. No person exercising an Option shall have any of the rights of a holder
of Shares subject to an Option until certificates for such Shares shall have
been issued following the exercise of such Option. No adjustment shall be made
for cash dividends or other rights for which the record date is prior to the
date of such issuance.
31
5.4. Non-Transferability of Options. Except as provided in Section 5.8, no
Option shall be assignable or transferable by the Optionee, other than by will
or the laws of descent and distribution, and may be exercised during the life of
the Optionee only by the Optionee or his guardian or legal representative.
5.5. Termination of Employment. Unless the Committee otherwise determines,
in the event of the termination of employment with the Company of an Optionee
who is an employee or the separation from service with the Company of an
Optionee who is an advisor, consultant or non-employee director of the Company
for any reason (other than death or disability), any Option(s) granted to such
Optionee under this Plan and not previously exercised or expired shall be deemed
canceled and terminated on the day of such termination or separation.
Notwith-standing the foregoing, in the event of the termination of employment or
separation from service with the Company of an Optionee for any reason other
than death or disability, under conditions satisfactory to the Company, the
Committee may, in its sole discretion, allow any Options granted to such
Optionee under the Plan and not previously exercised or expired, to the extent
vested on the date of such termination, to be exercisable for a period of time
to be specified by the Committee, provided, however, that in no instance may the
term of the Option, as so extended, exceed the maximum term established pursuant
to Section 5.1 above.
5.6. Death. In the event an Optionee dies while employed by the Company or
any of its subsidiaries or affiliates or while serving as a director of the
Company or any of its subsidiaries or affiliates, as the case may be, any
Option(s) granted to him not previously expired or exercised shall, to the
extent exercisable on the date of death, be exercisable by the estate of such
Optionee or by any person who acquired such Option by bequest or inheritance, at
any time within one year after the death of the Optionee, provided, however,
that in no instance may the term of the Option, as so extended, exceed the
maximum term established pursuant to Section 3.1(b)(ii) or 5.1 above.
5.7. Disability. In the event of the termination of employment with the
Company of an Optionee, or the separation from service with the Company of an
Optionee who is a director of the Company, due to total disability, the
Optionee, or his guardian or legal representative, shall have the unqualified
right to exercise any Option that has not expired or been previously exercised
and that the Optionee was eligible to exercise as of the first date of total
disability (as determined by the Committee), at any time within one year after
such termination or separation, provided, however, that in no instance may the
term of the Option, as so extended, exceed the maximum term established pursuant
to Section 3.1(b)(ii) or 5.1 above. The term "total disability" shall for
purposes of this Plan, be defined in the same manner as such term is defined in
Section 22(e)(3) of the Code.
5.8. Other Provisions. Notwithstanding anything in this Plan to the
contrary, if the Board determines that the Plan cannot, or that an Option need
not, satisfy the requirements of Rule 16b-3 of the Exchange Act (such that
grants of Options are not exempt from Section 16(b) of the Exchange Act), then
the Committee shall have the authority to waive or modify those provisions of
the Plan which are intended to satisfy such Rule 16b-3 requirements.
Notwithstanding Section 5.4 of this Plan to the contrary, only with the express
written consent of the Committee, which consent may be given or withheld for any
or no reason in the Committee's sole discretion, an Optionee who has been
granted "nonqualified stock options" can transfer any or all of such options to
any one or more of the following persons: (i) the spouse, parent, issue, spouse
of issue, or issue of spouse ("issue" shall include all descendants whether
natural or adopted) of such Optionee; or (ii) a trust for the benefit of those
persons described in clause (i) above or for the benefit of such Optionee, or
for the benefit of any such persons and such Optionee; or (iii) any entity in
which the Optionee or its transferee is a beneficial owner; provided, however,
that such trans-feree shall be bound by all of the terms and conditions of this
Plan and shall execute an agreement satisfactory to the Company evidencing such
obligation; and provided further, however, that such Optionee shall remain bound
by the terms and conditions of this Plan.
32
5.9. Terms of Grant. Notwithstanding anything in Section 5.5, 5.6 or 5.7
to the contrary, the Committee may grant an Option under such terms and
conditions as may be provided in the Share Option Certificate given to the
Optionee, provided, however, that in no instance may the term of the Option, as
so granted, exceed the maximum term established pursuant to Section 5.1 above.
5.10. Adjustments. In the event that the Committee shall determine that
any dividend or other distribution (whether in the form of cash, Shares, other
securities, or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities, the issuance of warrants
or other rights to purchase Shares or other securities, or other similar
corporate transaction or event affects the Shares with respect to which Options
have been or may be issued under the Plan, such that an adjustment is determined
in good faith by the Committee to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan, then the Committee shall, in such manner as the Committee may
deem equitable, adjust any or all of (i) the number and type of Shares that
thereafter may be made the subject of Options, (ii) the number and type of
Shares subject to outstanding Options, and (iii) the grant or exercise price
with respect to any Option, or, if deemed appropriate, make provision for a cash
payment to the holder of any outstanding Option; provided, in each case, that
with respect to "incentive stock options," no such adjustment shall be
authorized to the extent that such adjustment would cause such options to
violate section 422(b) of the Code or any successor provision; and provided
further, that the number of Shares subject to any Option denominated in Shares
shall always be a whole number. In the event of any reorganization, merger,
consolidation, split-up, spin-off, or other business combination involving the
Company (each such event, a "Reorganization"), a majority of the Board may cause
any Option outstanding as of the effective date of the Reorganization to be
cancelled in consideration of a cash payment or alternate Option made to the
holder of such cancelled Option equal in value to the Fair Market Value of such
cancelled Option. The determination of such fair market value shall be made by
the Board, in its sole discretion.
5.11. Amendment and Modification of the Plan. The Board may, from time to
time, alter, amend, suspend or terminate the Plan as it shall deem advisable,
subject to any requirement for stockholder approval imposed by applicable law or
any rule of any stock exchange or quotation system on which Shares are listed or
quoted; provided that the Board may not amend the Plan in any manner that would
result in noncompliance with Rule 16b-3 of the Exchange Act (if applicable) or
any applicable law, except as otherwise provided in Sections 3.2 or 5.8 hereof;
and further provided that the Board may not, without the approval of the
Company's stockholders, amend the Plan to increase the number of Shares that may
be the subject of Options under the Plan (except for adjustments pursuant to
Section 5.10 hereof). In addition, no amendments to, or termination of, the Plan
shall in any way impair the rights of an Optionee under any Option previously
granted without such Optionee's consent.
ARTICLE 6.
MISCELLANEOUS
6.1. Tax Withholding. The Company shall have the right to make all
payments or distributions made pursuant to the Plan to an Optionee (or permitted
transferee) net of any applicable federal, state and local taxes required to be
withheld or paid as a result of the grant of any Option, exercise of an Option
or any other event occurring pursuant to this Plan. The Company shall have the
right to withhold from such Optionee (or permitted transferee) such withholding
taxes as may be required by law, or to otherwise require the Optionee (or
permitted transferee) to pay such withholding taxes. If the Optionee (or
permitted transferee) shall fail to make such tax payments as are required, the
Company or its subsidiaries or affiliates shall, to the extent permitted by law,
have the right to deduct any such taxes from any payment of any kind otherwise
due to such Optionee (or permitted transferee) or to take such other action as
may be necessary to satisfy such withholding obligations. In satisfaction of the
requirement to pay withholding taxes, the Optionee (or permitted transferee) may
make a written election, which may be accepted or rejected in the discretion of
the Committee, to have withheld a portion of the Shares then issuable to the
Optionee (or permitted transferee) pursuant to the Plan, having an aggregate
Fair Market Value equal to the withholding taxes.
33
6.2. Right of Discharge Reserved. Nothing in the Plan nor the grant of an
Option hereunder shall confer upon any employee, director or other individual
the right to continue in the employment or service of the Company or any
subsidiary or affiliate of the Company or affect any right that the Company or
any subsidiary or affiliate of the Company may have to terminate the employment
or service of (or to demote or to exclude from future Options under the Plan)
any such employee, director or other individual at any time for any reason.
Except as specifically provided by the Committee, the Company shall not be
liable for the loss of existing or potential profit with respect to an Option in
the event of termination of an employment or other relationship even if the
termination is in violation of an obligation of the Company or any subsidiary or
affiliate of the Company to the Optionee.
6.3. Nature of Payments. All Options granted pursuant to the Plan are in
consideration of services performed or to be performed for the Company or any
subsidiary or affiliate of the Company. Except to the extent required under
applicable law, any income or gain realized pursuant to Options under the Plan
shall not constitute compensation for purposes of any of the employee benefit
plans of the Company or any subsidiary or affiliate of the Company except as may
be determined by the Committee or by the Board or by the directors of the
applicable subsidiary or affiliate of the Company.
6.4. Severability. If any provision of the Plan shall be held unlawful or
otherwise invalid or unenforceable in whole or in part, such unlawfulness,
invalidity or unenforceability shall not affect any other provision of the Plan
or part thereof, each of which shall remain in full force and effect. If the
making of any payment or the provision of any other benefit required under the
Plan shall be held unlawful or otherwise invalid or unenforceable, such
unlawfulness, invalidity or unenforceability shall not prevent any other payment
or benefit from being made or provided under the Plan, and if the making of any
payment in full or the provision of any other benefit required under the Plan in
full would be unlawful or otherwise invalid or unenforceable, then such
unlawfulness, invalidity or unenforceability shall not prevent such payment or
benefit from being made or provided in part, to the extent that it would not be
unlawful, invalid or unenforceable, and the maximum payment or benefit that
would not be unlawful, invalid or unenforceable shall be made or provided under
the Plan.
6.5. Gender and Number. In order to shorten and to improve the
understand-ability of the Plan document by eliminating the repeated usage of
such phrases as "his or her," any masculine terminology herein shall also
include the feminine, and the definition of any term herein in the singular
shall also include the plural except when otherwise indicated by the context.
6.6. Governing Law. The Plan and all determinations made and actions taken
thereunder, to the extent not otherwise governed by the Code of the laws of the
United States, shall be governed by the laws of the State of New York and
construed accordingly.
6.7. Effective Date of Plan; Termination of Plan. The Plan shall be
effective on the date of approval of the Plan by the Board. Notwithstanding the
foregoing, no Option intended to qualify as an "incentive stock option" shall be
granted hereunder unless and until the Plan shall be approved by the holders of
a majority of the Shares entitled to vote thereon within 12 months after the
date of adoption of the Plan by the Board. In the event that such shareholder
approval is not obtained, each Option granted under the Plan that is intended to
qualify as an "incentive stock option" shall, notwithstanding any of the
preceding provisions of the Plan, automatically be deemed a "nonqualified stock
option." Options may be granted under the Plan at any time and from time to time
on or prior to December 31, 2010, on which date the Plan will expire except as
to Options then outstanding under the Plan. Such outstanding Options shall
remain in effect until they have been exercised or terminated, or have expired.
6.8. Captions. The captions in this Plan are for convenience of reference
only, and are not intended to narrow, limit or affect the substance or
interpretation of the provisions contained herein.
Adopted this 28th day of October, 2003.
34
EXHIBIT B
YUKON GOLD CORPORATION, INC.
2006 Stock Option Plan
The board of directors of Yukon Gold Corporation, Inc. (the "Corporation")
wishes to establish a stock option plan (the "Plan") governing the issuance of
stock options (the "Stock Options") to directors, officers and employees of the
Corporation or Affiliated Entities (as hereinafter defined) of the Corporation
and persons or corporations who provide services to the Corporation or its
Affiliated Entities on an on-going basis, or have provided or are expected to
provide a service or services of considerable value to the Corporation or its
Affiliated Entities. The Corporation is a Delaware corporation. This 2006 Stock
Option Plan complies with Canadian tax law, while the Corporation's 2003 Stock
Option Plan enables the Corporation to issue stock options that are qualified
under the United States Internal Revenue Code. This 2006 Stock Option Plan is
governed by the laws of Ontario, Canada. However, in the event that anything
contained herein directly conflicts with the laws of Delaware so as to make a
provision of this 2006 Stock Option Plan invalid, the Corporation shall give
effect to such provision (as well as all other provisions of this Plan) to full
extent possible without violating Delaware law.
The terms and conditions of the Plan for issuance of Stock Options are as
follows:
1. Purposes
The principal purposes of the Plan are:
(a) to retain and attract qualified directors, officers, employees and
service providers which the Corporation and its Affiliated Entities
require;
(b) to promote a proprietary interest in the Corporation and its
Affiliated Entities;
(c) to provide an incentive element in compensation; and
(d) to promote the profitability of the Corporation and its Affiliated
Entities.
2. Reservation of Shares
Unless otherwise approved by the Toronto Stock Exchange (or such other exchange
on which the common shares in the capital of the Corporation ("Common Shares")
may be listed from time to time) (hereinafter referred to as the "Exchange") and
the shareholders of the Corporation, the number of Common Shares reserved for
issuance upon the exercise of Stock Options granted pursuant to the Plan and
Common Shares reserved for issuance pursuant to any other security based
compensation arrangements (as defined in the rules of the Exchange) shall not at
any time exceed o Common Shares ("Total Common Shares").
Any option granted under the Plan which has been exercised shall again be
available for subsequent grant under the Plan, effectively resulting in a
re-loading of the number of Common Shares available for subsequent grant under
the Plan. Any Common Shares subject to an option which for any reason is
surrendered, cancelled or terminated or expires without having been exercised
shall again be available for subsequent grant under the Plan. No fractional
Common Shares shall be issued, and the board of directors of the Corporation
("Board of Directors") may determine the manner in which fractional share value
shall be treated.
3. Eligibility
Options shall be granted only to Eligible Persons, any registered savings plan
established for the sole benefit of such Eligible Person or any company which,
during the currency of an option, is wholly-owned by an Eligible Person.
35
The term "Eligible Person" means:
(a) an officer or director of the Corporation or an Affiliated Entity
(as hereinafter defined);
(b) either:
(i) an individual who is considered an employee of the Corporation
or any Affiliated Entity for the purposes of applicable tax
legislation,
(ii) an individual who works full-time for the Corporation or any
Affiliated Entity providing services normally provided by an
employee and who is subject to the same control and direction
by the Corporation or any Affiliated Entity over the details
and methods of work as an employee of the Corporation or any
Affiliated Entity, but for whom income tax deductions are not
made at sources,
any such individual, an "Employee";
(c) an individual (or a company wholly-owned by individuals), other than
an Employee, officer or director of the Corporation or any
Affiliated Entity, who:
(i) provides services to the Corporation or an Affiliated Entity,
other than services provided in relation to a distribution of
securities;
(ii) provides the services under a written contract with the
Corporation or an Affiliated Entity for an initial, renewable
or extended period of twelve months or more;
(iii) spends or will spend a significant amount of time and
attention on the business and affairs of the Corporation or an
Affiliated Entity; and
(iv) has a relationship with the Corporation or an Affiliated
Entity that enables the individual to be knowledgeable about
the business and affairs of the Corporation.
For the purposes of the foregoing, an "Affiliated Entity" means a person
or company controlled by the Corporation.
For the purposes of the Plan, the terms "associates", "person", "company",
"insider", "controlled" and "officer" shall have the meanings ascribed
thereto in the Securities Act (Ontario) from time to time.
Subject to the foregoing, the Board of Directors or Committee, as
applicable, shall have full and final authority to determine the Eligible
Persons who are to be granted options under the Plan and the number of
Common Shares subject to each option.
4. Granting of Stock Options
The Board of Directors may from time to time grant Stock Options to Eligible
Persons. At the time a Stock Option is granted, the Board of Directors shall
determine the number of Common Shares of the Corporation that may be purchased
under the Stock Option, the date when the Stock Option is to become effective
and, subject to the other provisions of this Plan, all other terms and
conditions of the Stock Option. All grants of Stock Options shall be subject to
the following terms and conditions:
(a) an Eligible Person may hold more than one Stock Option at any time;
and
(b) there may not be: (i) issued to insiders of the Corporation within a
one-year period; and (ii) issuable to insiders of the Corporation at
any time, a number of Common Shares exceeding 10% of the outstanding
issue.
36
The term "outstanding issue" means the number of Common Shares outstanding
immediately prior to the share issuance in question, excluding Common Shares
issued pursuant to share compensation arrangements over the preceding one year
period. Any Stock Options granted to a corporation referred to in Section 3
hereof shall be included in the calculation of the Stock Options held by an
Eligible Person and insider or insiders of the Corporation.
5. Exercise Price
The exercise price of each Stock Option shall be determined in the discretion of
the Board of Directors at the time of the granting of the Stock Option, provided
that the exercise price shall not be lower than the Market Price. "Market Price"
shall mean the most recent closing price of the Common Shares on the Exchange on
the last trading day prior to the date the Stock Option is granted for which
there was a closing price on such Exchange; provided that in the event the
Common Shares are not listed on any exchange, the Market Price shall be such
price as is determined by the Board of Directors, in good faith.
6. Term and Exercise Periods
All Stock Options shall be for a term and exercisable from time to time as
determined in the discretion of the Board of Directors at the time of the
granting of the Stock Options, provided that, except in the case of a Blackout
Period, no Stock Option shall have a term exceeding ten years (or such shorter
or longer period as is permitted by the Exchange), and by way of example,
without limiting the generality of the foregoing, the Board of Directors may
determine:
(a) that a Stock Option is exercisable only during the term of
employment of or provision of services by the Eligible Person
receiving it or during such term and for a limited period of time
after termination of employment or cessation of services, as
applicable, other than as described under subsection 6(g) hereof;
(b) that a Stock Option can be exercisable for a period of time or for
its remaining term after the death, disability or incapacity of an
Eligible Person;
(c) that only a portion of a Stock Option is exercisable in a specified
period;
(d) that the unexercised portion of a Stock Option is "cumulative" so
that any portion of a Stock Option exercisable (but not exercised)
in a specified period may be exercised in subsequent periods until
the Stock Option terminates;
(e) that a Stock Option may provide for early exercise and/or
termination or other adjustment in the event of a death of an
Eligible Person;
(f) that if the Eligible Person ceases to be a director, officer or
employee of the Corporation or any of its Affiliated Entities or a
Consultant to the Corporation or any of its Affiliated Entities for
any reason whatsoever other than as described under subsection 6(g)
and 6(h) hereof, the Person may, but only within ninety (90) days
after the Eligible Person's ceasing to be a director, officer,
employee or Consultant or prior to the expiration date in respect of
the Stock Option, whichever is earlier, exercise any Stock Option
held by the Eligible Person, but only to the extent that the
Eligible Person was entitled to exercise the Stock Option at the
date of such cessation;
(g) in the event of the discharge of an optionee as an Employee or
officer of the Corporation or an Affiliated Entity by reason of a
wilful and substantial breach of such optionee's employment duties,
all options granted to such optionee under the Plan which are then
outstanding (whether vested or unvested) shall in all respects
forthwith cease and terminate and be of no further force or effect
whatsoever as to such of the Optioned Shares in respect of which
such option had not previously been exercised upon notice of such
discharge being given by the Corporation or the Affiliated Entity to
such optionee; or
(h) that in the event of the death or disability of the Eligible Person,
the Stock Option will continue to be exercisable by the legal
representative of the Eligible Person as to such of the vested
shares of which such Stock Option has not previously been exercised
pursuant to its terms for a period of up to one year following such
death or disability, provided that the Stock Option shall not in any
case be exercisable on or after the expiration date in respect of
such Stock Option or in respect of Stock Options which are not
exercisable as at the date of death,
37
and other appropriate terms in other circumstances, such as if the Corporation
shall resolve to sell all or substantially all of its assets, to liquidate or
dissolve, or to merge, amalgamate, consolidate or be absorbed with or into any
other corporation, if a take-over bid is made for Common Shares of the
Corporation, or if any change of control of the Corporation occurs, subject to
the provisions of Section 10 with respect to Offers (as hereinafter defined).
Except if not permitted by the Exchange, if any options may not be exercised due
to any Black-Out Period (as defined below) at any time within the three business
day period prior to the normal expiry date of such Stock Options (the
"Restricted Options"), the expiry date of all Restricted Options shall be
extended for a period of 10 business days following the end of the Black-Out
Period (or such longer period as permitted by the Exchange and approved by the
Board of Directors). "Black-Out Period" means the period of time when, pursuant
to any policies of the Corporation, any securities of the Corporation may not be
traded by certain persons as designated by the Corporation, including any holder
of a Stock Option.
7. Assignability
Stock Options shall not be assignable or transferable by an Eligible Person,
except for a limited right of assignment, subject to compliance with applicable
securities laws, to (i) an Eligible Person; a spouse of an Eligible Person; a
trustee, custodian, or administrator acting on behalf of, or for the benefit of,
an Eligible Person or a spouse thereof; a holding entity of an Eligible Person
or a spouse thereof; an RRSP or RRIF for the benefit of an Eligible Person or a
spouse thereof; and (ii) allow the exercise of Stock Options by an Eligible
Person's legal representative in the event of death or incapacity, subject to
the terms upon which the Stock Option is granted.
8. Payment of Exercise Price
Except as provided in Section 9, all Common Shares issued pursuant to the
exercise of a Stock Option ("Optioned Shares") shall be paid for in full in
Canadian funds at the time of exercise of the Stock Option and prior to the
issue of the shares. All Common Shares of the Corporation issued in accordance
with the foregoing shall be issued as fully paid and non-assessable Common
Shares.
9. Surrender of Stock Options in Lieu of Exercise
Where the Common Shares are listed and posted for trading on the Exchange (or
otherwise as provided in any agreement governing the grant of Stock Options),
the Board of Directors may from time to time in its sole discretion, permit
Stock Options to be surrendered, unexercised to the Corporation in consideration
of the receipt by the holder of such Stock Options of an amount (the "Settlement
Amount") equal to the excess, if any, of the aggregate fair market value of the
shares (based on the Market Price where the Common Shares are listed on an
Exchange) of the Common Shares on the Exchange on the trading day immediately
preceding the Surrender Date (as herein defined) able to be purchased pursuant
to the vested and exercisable portion of such Stock Options on the date of
surrender (the "Surrender Date"), over the aggregate Exercise Price for those
Common Shares pursuant to those Stock Options. The Settlement Amount is payable
in cash, Common Shares or a combination thereof, as the Board of Directors may
from time to time in its discretion determine. The Corporation will withhold
from the Settlement Amount such amounts as may be required to be withheld
according to law. For greater certainty, those Common Shares underlying the
unexercised Stock Options that are the subject of retirement in consideration
for a Settlement Amount, shall not be deemed to be included in the definition of
Total Common Shares for which Stock Options may be granted under the Plan.
10. Change of Control
If a bona fide offer (an "Offer") for Common Shares is made to the shareholders
of the Corporation which, if options granted under the Plan were exercised would
include optionees and which offer, if accepted in who or in part, would result
in the offeror exercising control of the Corporation within the meaning of
subsection 1(3) of the Securities Act (Ontario) (as amended from time to time)
then, notwithstanding Section 15 but subject to the other provisions hereof.
38
(a) Board of Directors Consent - The Board of Directors or Committee may
give its express consent to the exercise of any options granted
under the Plan, which were outstanding at the time of the Offer but
are not then vested, in the manner hereinafter provided.
(b) Notice of Right to Exercise - If the Board of Directors or Committee
has so consented to the exercise of any options outstanding at the
time of the Offer, the Corporation shall immediately notify each
optionee currently holding an option under the Plan of the Offer
with full particulars thereof, together with a notice stating that,
in order to permit the optionee to participate in the Offer, the
optionee may, during the period that the Offer is open for
acceptance (or if not such period is specified, a period of 30 days
following the date of such notice) exercise all or any portion of
any such options held by the optionee.
(c) Exercise and Deemed Exercise - In the event that the optionee so
exercises any such option, such exercise shall be in accordance with
Section 16; provided that, if necessary in order to permit the
optionee to participate in the Offer, such options shall be deemed
to have been exercised and the issuance of Optioned Shares shall be
deemed to have occurred, effective as of the first business day
prior to the date on which the Offer was made.
(d) Completed Offer - If, upon the expiry of the applicable period
referred to in subsection 10(b), the Offer is completed and:
(i) the optionee has not exercised the entire or any portion of
such option, then, for greater certainty, any options not
exercised shall continue to be valid and existing under the
Plan in accordance with the terms of their grant; or
(ii) the optionee has exercised the entire or any portion of such
option but has not tender the Optioned Shares in the Offer,
then, as and from the expiry of such period, the Corporation
may require the optionee to sell to the Corporation such
Optioned Shares for a purchase price per Share equal to the
Price.
(e) Reinstatement of Optioned Shares - If:
(i) the Offer is not completed (within the time period specified
therein, if applicable); or
(ii) all of the Optioned Shares tendered by the optionee pursuant
to the Offer are not taken up and paid for by the offeror in
respect thereof,
then the Optioned Shares or, in the case of clause (ii) above, the
portion thereof that are not taken up and paid for by such offeror
shall be returned by the optionee to the Corporation and reinstated
as authorized but unissued Common Shares, and the terms of the
options set forth herein shall again apply to such options or the
remaining portion thereof, as the case may be.
(f) Refund of Option Price - If any Optioned Shares are returned to the
Corporation pursuant to subsection 10(e), the Corporation shall
refund the applicable Price to the optionee in respect of such
Optioned Shares.
(g) Limited Right to Sell - In no event shall the optionee be entitled
to sell the Optioned Shares other than pursuant to the Offer except
as provided in subsection 10(d)(ii) hereof.
11. Adjustment in Certain Circumstances
In the event:
(a) of any change in the Common Shares of the Corporation through
subdivision, consolidation, reclassification, amalgamation, merger
or otherwise; or
39
(b) of any stock dividend to holders of Common Shares of the Corporation
(other than such stock dividends issued at the option of
shareholders of the Corporation in lieu of substantially equivalent
cash dividends); or
(c) that any rights are granted to all or substantially all of the
holders of Common Shares to purchase Common Shares of the
Corporation at prices substantially below fair market value; or
(d) that as a result of any recapitalization, merger, consolidation or
otherwise the Common Shares of the Corporation are converted into or
exchangeable for any other shares;
then in any such case the Board of Directors may make such adjustment in the
Plan and in the Stock Options granted under the Plan as the Board of Directors
may in its sole discretion deem appropriate to prevent substantial dilution or
enlargement of the rights granted to, or available for, holders of Stock
Options, and such adjustments may be included in the Stock Options.
12. Expenses
All expenses in connection with the Plan shall be borne by the Corporation.
13. Compliance with Laws
The Corporation shall not be obliged to issue any shares upon exercise of Stock
Options if the issue would violate any law or regulation or any rule or policy
of any governmental authority or stock exchange. The Corporation shall not be
required to issue, register or qualify for resale any shares issuable upon
exercise of Stock Options pursuant to the provisions of a prospectus or similar
document, provided that the Corporation shall notify the Exchange and any other
appropriate regulatory bodies in Canada of the existence of the Plan and the
issuance and exercise of Stock Options.
14. Disinterested Shareholder Approval
Disinterested shareholder approval shall be obtained by the Corporation prior to
any reduction in the Exercise Price of a Stock Option or any extension of the
term of a Stock Option if the Eligible Person holding such Stock Option is an
insider of the Corporation.
15. Form of Stock Option Agreement
All Stock Options shall be issued by the Corporation in a form which meets the
general requirements and conditions set forth in this Plan and the requirements
of the Exchange.
16. Exercise of Option
Subject to the provisions of the Plan and the particular option agreement, an
option may be exercised from time to time by delivering to the Corporation at
its registered office a written notice of exercise specifying the number of
Optioned Shares with respect to which the option is being exercised and
accompanied by payment in cash or certified cheque for the full amount of the
applicable Price.
Upon receipt of a certificate of an authorized officer directing the issue of
Common Shares purchased under the Plan, the transfer agent is authorized and
directed to issue and countersign share certificates for the Optioned Shares in
the name of such optionee or the optionee's legal personal representative or as
may be directed in writing by the optionee's legal personal representatives.
17. Vesting Restrictions
Options granted under the Plan may vest at the discretion of the Board of
Directors or Committee, as applicable.
40
18. Amendments and Termination of Plan
The Corporation retains the right to amend from time to time or to terminate the
terms and conditions of the Plan by resolution of the Board of Directors. Any
amendments shall be subject to the prior consent of any applicable regulatory
bodies, including the Exchange. Any amendment to the Plan shall take effect only
with respect to Stock Options granted after the effective date of such
amendment, provided that it may apply to any outstanding Stock Options with the
mutual consent of the Corporation and the Eligible Persons to whom such Stock
Options have been granted. The Board of Directors shall have the power and
authority to approve amendments relating to the Plan or to Stock Options,
without further approval of the Shareholders, to the extent that such amendments
relate to:
(a) altering, extending or accelerating the terms of vesting application
to any Stock Options;
(b) altering the terms and conditions of vesting applicable to any Stock
Options;
(c) extending the term of Stock Options held by a person other than a
person who, at the time of the extension, is an insider of the
Corporation, provided that the term does not extend beyond ten years
from the date of grant;
(d) accelerating the expiry date in respect of Stock Options;
(e) determining the adjustment provisions pursuant to Section 12 hereof;
(f) amending the definitions contained within the Plan;
(g) amending or modifying the mechanics of exercise of the Stock
Options; or
(h) amendments of a "housekeeping" nature.
19. Administration
The Plan shall be administered by the Board of Directors. The Board of Directors
shall have full and final discretion to interpret the provisions of the Plan and
to prescribe, amend, rescind and waive rules and regulations to govern the
administration and operation of the Plan. All decisions and interpretations made
by the Board of Directors shall be binding and conclusive upon the Corporation
and on all persons eligible to participate in the Plan, subject to shareholder
approval if required by the Exchange.
20. Delegation of Administration of the Plan
Subject any legislation governing the Corporation (including Delaware law and
the laws of the Province of Ontario), the Board of Directors may delegate to one
or more directors of the Corporation, on such terms as it considers appropriate,
all or any part of the powers, duties and functions relating to the granting of
Stock Options and the administration of the Plan.
21. Miscellaneous
(a) No Rights as Shareholder - Nothing contained in the Plan nor in any
option granted hereunder shall be deemed to give any optionee any
interest or title in or to any Common Shares or any rights as a
shareholder of the Corporation or any other legal or equitable right
against the Corporation whatsoever other than as set forth in the
Plan or pursuant to the exercise of any option.
(b) Employment - Nothing contained in the Plan shall confer upon any
optionee any right with respect to employment or continued
employment or the right to continue to serve as a member of the
Board of Directors or a Consultant as the case may be, or interfere
in any way with the right of the Corporation to terminate such
employment at any time. Participation in the Plan by an Eligible
Person is entirely voluntary.
(c) Record Keeping - The Corporation shall maintain a register in which
shall be recorded all pertinent information with respect to the
granting, amendment and/or exercise of options.
41
(d) Income Taxes - As a condition of and prior to participation in the
Plan, an Eligible Person shall authorize the Corporation in written
form to withhold from any remuneration otherwise payable to such
Eligible Person any amounts required by any taxing authority to be
withheld for taxes of any kind as a consequence of such
participation in the Plan or the issuance of the Optioned Shares
hereunder.
(e) No Representation or Warranty - The Corporation makes no
representation or warranty as to the future market value of any
Optioned Shares issued in accordance with the provision of the Plan.
22. Governing Law
This Plan shall be governed by and construed in accordance with the laws in
force in the Province of Ontario.
23. Stock Exchange
To the extent applicable, the issuance of any shares of the Corporation pursuant
to Stock Options issued pursuant to this Plan is subject to approval of the Plan
by the Exchange, and the Plan shall be subject to the ongoing requirements of
such exchange.
24. Effective Date
This Plan shall become effective as of and from, and the effective date of the
Plan shall be upon receipt of approval of the Board of Directors and any other
regulatory approvals required.
42
YUKON GOLD CORPORATION, INC.
PROXY FOR ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 19, 2007
The undersigned, revoking prior proxies, hereby appoints Paul A. Gorman and Lisa
Rose, or failing either of them, _______________ Proxies with several powers of
substitution, to vote all of the shares of stock of Yukon Gold Corporation, Inc.
("Yukon Gold") owned by the undersigned and entitled to vote at the Annual and
Special Meeting of Shareholders of Yukon Gold to be held at the Royal York Hotel
at 100 Front Street West, Toronto, Ontario, Canada, at 10:30 a.m. (Eastern
Standard Time) on Friday, January 19, 2007, or at any postponement or
adjournment thereof, upon the following matters as described in the Notice of
Meeting and accompanying Proxy Statement, which have been received by the
undersigned.
When properly executed, this proxy will be voted in the manner directed herein
by the undersigned shareholder. If no direction is given on these proposals,
this proxy card will be voted "FOR" Item 1, "FOR" Item 2, "FOR" Item 3, "FOR"
Item 4 and will be voted in accordance with the proxy's best judgment as to any
other matters.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" ALL OF THE PROPOSALS, AS MORE FULLY
DESCRIBED IN THE PROXY STATEMENT.
Please sign this proxy exactly as your name or names appears hereon. Joint
owners should each sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.
________________________________________________
Signature
________________________________________________
Signature of joint owner, if any
Date: __________________________________________
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK. Example |X|
ITEM 1 To Elect Board Members: To withhold authority to vote for any
individual nominee(s) mark the "for All Except and write the nominee
number(s) on the line provided
1. J.L. Guerra, Jr. 2. Howard S. Barth 3. Chester (Chet) Idziszek
4. Robert E. Van Tassell 5. Kenneth J. Hill 6. Paul A. Gorman
|_| |_| |_|
FOR ALL WITHHOLD FOR ALL
ALL EXCEPT ___________________
ITEM 2 To approve Schwartz Levitsky Feldman, LLP as the independent
auditors of the Company for the financial year ending December 31,
2007
|_| |_| |_|
FOR AGAINST ABSTAIN
ITEM 3 To approve adoption of the 2006 Stock Option Plan
|_| |_| |_|
FOR AGAINST ABSTAIN
ITEM 4 To approve a resolution extending the expiry dates of certain
outstanding stock options of the Company
|_| |_| |_|
FOR AGAINST ABSTAIN
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PLEASE VOTE, SIGN AND DATE THIS PROXY AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
Notes:
1. Shareholders may vote at the Meeting either in person or by proxy. A proxy
should be dated and signed by the shareholder or by the shareholder's
attorney authorized in writing. If not dated, this proxy shall be deemed
to bear the date on which it was mailed by the management of the Company.
2. You have the right to appoint a person other than as designated herein to
represent you at the Meeting either by striking out the names of the
persons designated above and inserting such person's name in the blank
space provided or by completing another proper form of proxy and, in
either case, delivering the completed proxy to Equity Transfer & Trust
Company in the envelope provided.
3. The common shares represented by this proxy will be voted in accordance
with the instructions of the shareholder on any ballot that may be called
for. In the absence of direction, this proxy will be voted for each of the
matters referred to herein.
4. A completed proxy must be delivered to Equity Transfer & Trust Company,
200 University Avenue, Suite 400, Toronto, Ontario M5H 4H1 not less than
forty-eight (48) hours, excluding Saturdays, Sundays, and holidays, prior
to the time of the meeting or the time of any adjournment or postponement
thereof.
44