Golden River Resources Corporation
A Delaware Corporation
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Level 8, 580 St Kilda Road, Melbourne
Victoria 3004, Australia
PO Box 6315, St Kilda Road Central
Melbourne, Victoria 8008, Australia
Telephone: +61 3 8532 2860
Facsimile: +61 3 8532 2805
Email: investor@goldenriverresources.com
September 17, 2007
VIA EDGAR
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Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Attn: Jill Davis, Esq.
Mail Stop 7010
Re: Golden River Resources Corporation
Form 10-KSB for the Fiscal Year Ended June 30, 2006
Filed September 28, 2006
Form 10-QSB for the Quarterly Period Ended December 31, 2006
Filed February 14, 2007
Response letter dated June 26, 2007
File No. 000-16097
Ladies and Gentlemen:
On behalf of Golden River Resources Corporation, a Delaware corporation ("GRR"
or the "Company"), we have set forth below the Company's proposed responses to
the Staff's comment letter dated June 26, 2007 with respect to the Company's
Annual Report on Form 10-KSB for the fiscal year ended June 30, 2006 (the "Form
10-KSB") and its Quarterly Report on Form 10-KSB for the fiscal quarter ended
December 31, 2006 (the "Form 10-QSB"). The Staff's comments have been reproduced
(in bold) below and are immediately followed by the Company's responses thereto.
Form 10-KSB for the Fiscal Year Ended June 30, 2006
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General
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l. In your response to comments seven and twelve from our letter dated April
10, 2007 you explain that you will revise your financial statements and
related disclosures for the items considered in those comments. Please
ensure such amended and restated financial statements include consideration
of the items addressed in this letter. Please contact us to discuss.
In accordance with a telephone conversation among the undersigned, Brian
Brodrick Esq. of Phillips Nizer, LLP and Mark Wojciechowski of the SEC
staff on Thursday, June 28, 2007, the Company confirms that it will not
file amendments to its Form 10-KSB and Form 10-QSB until the Staff advises
the Company that it is satisfied with the Company's proposed responses to
all of the Staff's comments.
The Company also requests that the Staff consider permitting the Company to
revise its filings on a prospective basis rather than having to amend and
restate previously filed documents. In this regard the Company does not
believe that the proposed accounting changes would be material to investors
as the Company is engaged in mineral exploration activities, has not yet
generated revenues from operations and has had net losses in all of the
accounting periods covered by the Form 10-KSB and the Form 10-QSB. Also,
since the Company has a June 30, fiscal year, the Company's fiscal 2007
Form 10-KSB, which will contain all of the requested changes, will be filed
by September 30, 2007.
Notes to Consolidated Financial Statements, page F-7 Note 6
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Affiliate Transactions,...page F-11
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2. We note your response to our prior comment numbers two, three and four from
our letter dated April 10, 2007. Please contact us to discuss.
As we indicated in our telephone conversation with Mr. Wojciechowski on
June 28, 2007, the shares that were issued to Fast Knight in May 2006 (in
repayment of the loans to Wilzed) were restricted securities that were
issued in a private placement transaction pursuant to Section 4(2) under
the Act and which cannot be publicly sold absent registration or compliance
with an exemption from registration. Similarly, the shares that were issued
in June 2006 to an unrelated third party in a private placement transaction
under Section 4(2) of the Act, at the same price as the Fast Knight shares,
were also restricted securities. The shares sold to the third party
included registration rights, but the shares issued to Fast Knight did not
include any formal registration rights and have not been registered to date
(although the Company intends to seek to register the Fast Knight shares in
the future). In light of the restricted nature of the shares issued to Fast
Knight in repayment of the Wilzed debt, the Company believes that the price
paid by an unrelated third party for similarly restricted shares is a
better indicia of the value of such shares than the nominal market prices
for freely trading shares at the time of such issuance.
Note 10 Issue of Options under Stock Option Plan, page F-14
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3. Your response to comment eight from our letter dated April 10, 2007
explains that your assumption regarding volatility was determined by use of
a natural logarithm of the opening/closing prices for the three months
prior to the date the stockholders approved the option plan. Please tell us
why you believe the use of a natural logarithm over a period of three
months is a reasonable period of time over which to calculate volatility.
Please refer to paragraph 31 of Appendix A of SFAS 123(R) and Section D of
SAB Topic 14 for guidance.
The Company notes paragraph 31 of Appendix A of SFAS 123(R) and Section D
of SAB Topic 14.
The above text would indicate that the volatility should be calculated by
using the historical share price of a company that is equal to the life of
the options. There is further discussion that a company should disregard
unusual market price events, etc.
The Company changed its business in mid 2002 to that of a mineral
exploration company. At the time of the issue of the options, the first
field season had only just been completed and that field season had run
from June to August 2004.
The Company respectively submits that it was therefore correct in
disregarding all market price information prior to June 2002. The market
price data used by the Company was for the three months prior to November
2004. Given that the first field season had only just been completed as
outlined in the previous paragraph, the Company believed that it was the
most appropriate basis for the volatility calculation.
The Company also notes the discussion in the references to using share
market data from similar companies or alternatively the relevant NASDAQ
Indexes.
The relevant NASDAQ Index for the Company is the NASDAQ Industrial Index
and this is made up of numerous companies in a number of industries
including mineral exploration and a significant number of the companies
have operating revenues, operating profits and substantial assets. The
Company believes it bears no resemblance to the Company and therefore
should not be a basis for volatility of the Company.
The Company has undertaken research on volatility rates of companies with
the same SIC code during 2004 when the Company issued these options and
notes the research discloses few companies have employee options on issue
(and several of these companies do not disclose the inputs of the Black
Scholes calculation) and many companies are foreign issuers and do not
appear to disclose this type of information. Of the companies that do
disclose the volatility, the volatility ranges from 36% to 297%.
Although the Company believes that a 20% volatility rate at the date of
issue is appropriate, if we re-calculated the total value of the options
using a volatility of 90% (which was the volatility calculated by an
independent valuer in November 2006 when valuing options at the same time),
this would equate to a total charge of US$721,335 compared to a value of
US$438,200 using a 20% volatility.
The Company is an exploration company and has no revenue stream. It has
accumulated losses to date of approximately A$33,880,000 (US$27,375,040
using March 31, 2007 exchange rate) and the Company's view is that
investment decisions of potential and existing investors are based on the
Company's exploration potential. The additional charge to the Income
Statement over the vesting period of the options, if a volatility of 90%
had been used, would have been US$283,125 which represents less than 1.03%
of total accumulated deficit and less than 4.69% of accumulated deficit
during the exploration stage. For the reasons set out above, it is the
Company's view that even if a higher volatility rate were appropriate, the
additional expense would not be material.
Form 10-QSB for the Quarterly Period Ended December 31. 2006
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Notes to Consolidated Financial Statements, page 8
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Note 6 Issue of Options under Stock Option Plan, page 9
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4. Comment 1.0 from our letter dated April 10, 2007 advised that if
applicable, please revise to provide the disclosures required by paragraph
22 of SFAS 154 regarding a change in accounting estimate. It appears from
your response to comment 10 that such a change in accounting estimate
occurred. As such, we reissue prior comment 10.
We will make the disclosures requested on a prospective basis. Please note
that the value of the options calculated using both the previous basis of
calculation being the Black Scholes method and the new basis of calculation
being the Binomial method result in the same value per option.
5. In your response to comment 11 from our letter dated April 10, 2007, you
explain that the fair value share price used in the calculation of fair
value for the options issued was based on the price of shares issued in a
private placement to Fast Knight Nominees Pty Ltd... Please refer to
paragraph 22 of SFAS 123(R) and SAB Topic: 14 and contact us to discuss.
Further to our telephone conversation on June 28, 2007, we confirm that RAB
Capital is an unrelated third party (refer reply in Question 2 above).
The Company notes paragraph 22 of SFAS 123(R) and SAB Topic 14. In terms of
paragraph 22 of SFAS 123(R), the Company advises that (i) it does not have
any options with an observable market price and (ii) it used an
option-pricing model to value the options.
The Company notes paragraph A7 of SFAS 123(R) which contains a definition
of fair value from FASB Concepts Statement No. 7 Using Cash Flow
Information and Present Value in Accounting Measurements, as follows:
"The amount at which that asset (or liability) could be bought (or
incurred) in a current transaction between willing parties, that is, other
than in a forced or liquidation sale."
The Company notes that SFAS 123(R) and SAB Topic 14 suggest that the fair
value share price to be used is the observable market prices....in active
markets. The Company, in its response dated May 10, 2007 respectively
submitted that the observable market price was not a true indication of the
fair value of the share price as the volume for the month of October 2006,
being the calendar month prior to the issue of the options, was 5,000
shares. The volume of trading for the quarter ended September 2006 was
232,331 shares (0.8% of the 26 million issued and outstanding shares on
issue) and the high and low prices for that quarter were $0.27 and $0.20
respectively. This supports our position that the observable market price
is not a true reflection of the fair value share price.
As per our earlier reply, based on the explanations above, it is our view
that the fair value share price of US$0.166 used in the Binomial
calculation which was based on the issue price to RAB Capital, an unrelated
third party, is the best estimate of the fair value share price.
If our assessment was incorrect and we had used a market price of US$0.288
as an input into the Binomial model, the total amount to be amortized over
the vesting period's amounts to A$1,345,636 (US$1,014,475) compared to the
amount of A$696,974 (US$525,450) if using our fair value market price of
US$0.166. It is the Company's view that this is not material given the
Company is in the mineral exploration business, has no revenue and has
incurred losses of over A$7.5 million.
Management's Discussion and Analysis or Plan of Operation, page 11
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Results of Operations, page 11
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6. In response to comment 13 from our letter dated April 10, 2007, you propose
to include a line item between "Revenue" and "Interest" called "Other
Income" to ensure readers are aware that interest is not earned from
operating activities. The inclusion of your proposed line item does not
remove the amount of interest from the determination of income (loss) from
operations. Please revise to present the amount of interest earned below
the computation of income (loss) from operations.
We will amend the disclosures as requested prospectively.
Engineering Comments
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Form 10 - KSB for the Fiscal Year Ended June 30, 2006
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7. Your response to comment 16 addresses many of our concerns, however the
Slave Craton Properties consists of several claim groups containing many
separate mineral properties. Each property has several mineralized areas
with various different mineral zones. Your company has located many
prospects within each of these mineral zones amongst your properties.
Please briefly review and if necessary, clarify your property/prospect
organizational relationships within your narrative to insure your
mineralized or significant prospects can be properly located.
We propose to revise the description of the Slave Craton properties on
page 5 of the Form 10-KSB to clarify the property/prospect relationships
within this description by inserting the following paragraph at the
beginning of this section:
"The exploration properties of Tahera that the Company has access to are
grouped into two main areas, the High Lake Volcanic Belt and the Contwoyto
Formation, both of which are located in the Mackenzie District of Nunavut.
The exploration properties in the High Lake Volcanic Belt consist of the
Hood River mineral properties and Inuit Owned Land ("IOL") concessions
located in the northwest section of the Slave Structural Province. The land
holdings include four mining properties totaling 10,330 acres, and the Hood
River CO-20-00-03R IOL concession which encompasses 15,454 acres. High
grade gold prospects are found within a 9 by 7 kilometer block in the
west-central portion of the High Lake belt. Four main mineralized areas
occur; the North Fold Nose, Penthouse, Crown and Blackridge prospects.
The exploration properties in the Contwoyto Formation consist of the CO-08
IOL Concession which is located on the east side of Contwoyto Lake. The
original CO-08 Concession Agreement totaled 65,250 acres. Mineralization
specific to the properties includes a number of significant iron formation
hosted gold prospects including the R43-R45, the 4-2 grid, the Ox, and the
5-5 grid prospects."
We also intend to include some further maps that will also assist in
explaining the project areas.
On behalf of the Company we hereby acknowledge the following:
o the Company is responsible for the adequacy and accuracy of the disclosure
in the filing;
o staff comments or changes to disclosure in response to staff comments do
not foreclose the Commission from taking any action with respect to the
filing; and
o the Company may not assert staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities laws
of the United States.
If you have any questions concerning the responses, please do not hesitate to
call me at 011-61-3-8532-2866.
Yours faithfully
/s/ Peter Lee
PETER LEE
Director, CFO & Secretary