UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
For the transition period from to
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Commission file number 000-50399
BATTLE MOUNTAIN GOLD EXPLORATION CORP.
----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
NEVADA 86-1066675
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
One East Liberty Street, 6th Floor, Suite 9 Reno, Nevada 89504
--------------------------------------------------------------
(Address of principal executive offices)
(775) 686-6081
--------------
(Registrant's telephone number)
N/A
---
(Former name and address)
Check whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
As of May 03, 2005, the issuer had 41,130,000 shares of common stock
outstanding, all of which have been issued.
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
BATTLE MOUNTAIN GOLD EXPLORATION CORPORATION
(A COMPANY IN THE EXPLORATION STAGE)
CONDENSED BALANCE SHEETS
MARCH 31,
2005
-----------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 223,697
Trading securities, net 25,200
-----------
Total current assets 248,897
FIXED ASSETS (NET OF ACCUMULATED DEPRECIATION OF $233) 2,291
Other Assets:
Investment in mining property 1,055,794
Deposit 295
-----------
Total other assets 1,056,089
Total assets $1,307,277
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 18,400
Related party payables 122,268
-----------
Total current liabilities 140,668
Commitments and contingencies -
Stockholders' equity:
Preferred stock: 10,000,000 shares authorized ($0.001
par value) none issued -
Common stock, ($0.001 par value): 41,030
Authorized shares - 100,000,000
Issued and outstanding shares - 41,030,000 at
March 31, 2005
Additional paid-in capital 1,617,278
Deficit accumulated during the exploration stage (491,699)
Total stockholders' equity 1,166,609
-----------
Total liabilities and stockholders' equity $1,307,277
===========
See accompanying notes.
BATTLE MOUNTAIN GOLD EXPLORATION CORPORATION
(A COMPANY IN THE EXPLORATION STAGE)
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
---------------------------------------
MARCH 31, MARCH 31, INCEPTION TO
2005 2004 DATE
------------ ----------- ------------
REVENUE $ - $ - $ -
EXPENSES:
Depreciation (47) - (233)
Professional and consulting (112,859) (57,560) (315,502)
Travel and entertainment (8,150) (2,244) (35,922)
Rent and office (2,645) (962) (20,298)
General and administrative (38,195) (313) (70,881)
------------ ----------- ------------
Total operating expenses (161,896) (61,079) (442,836)
------------ ----------- ------------
Loss from operations (161,896) (61,079) (442,836)
OTHER INCOME (EXPENSE):
Interest Expense - - (448)
Unrealized loss (10,600) - (34,800)
Loss on sale of investments - - (13,796)
Other income - - 181
------------ ----------- ------------
Total other expense (10,600) - (48,863)
------------ ----------- ------------
Loss before income taxes (172,496) (61,079) (491,699)
Provision for income taxes - - -
Net loss $ (172,496) $ (61,079) $ (491,699)
=========== ============ ===========
Loss per share: basic and
diluted $ (0.01) $ (0.01) $ (0.02)
=========== ============ ===========
Weighted average shares basic
and diluted 40,830,000 7,000,000 23,679,333
=========== ============ ===========
See accompanying notes.
BATTLE MOUNTAIN GOLD EXPLORATION CORPORATION
(A COMPANY IN EXPLORATION STAGE)
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
--------------------------------------------
MARCH 31, MARCH 31, INCEPTION TO
2005 2004 DATE
------------ ----------- ------------
OPERATING ACTIVITIES:
Net loss $ (172,496) $ (61,079) $ (491,699)
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation 47 - 233
Unrealized loss on investments 10,600 - 34,800
Loss on sale of investments - - 13,796
Increase in deposits - (295) (295)
Increase in accounts payable 6,645 - 18,400
------------ ----------- ------------
Net cash used in operating activities (155,204) (61,374) (474,765)
INVESTING ACTIVITIES:
Purchases of fixed assets - - (2,523)
Purchase of short term investments - - (114,000)
Proceeds from sale of short term
investments - - 40,203
Investment in mining properties (630,794) (25,000) (1,055,794)
------------ ----------- ------------
Net cash used in investing activities (630,794) (25,000) (1,132,114)
FINANCING ACTIVITIES:
Proceeds from issuance of related party
notes - 33,327 125,696
Principal payments on related party
notes payable (153,428) - (153,428)
Proceeds from short term notes - - 150,000
Proceeds from issuance of common stock 460,000 340,000 1,708,308
------------ ----------- ------------
Net cash provided by financing
activities 306,572 373,327 1,830,576
------------ ----------- ------------
Net increase (decrease) in cash and
cash equivalents (479,426) 286,953 223,697
Cash and cash equivalents at beginning
of period 703,123 - -
------------ ----------- ------------
Cash and cash equivalents at end of
period $ 223,697 $ 286,953 $ 223,697
============ =========== ============
SUPPLEMENTAL INFORMATION
- ------------------------
During the three months ended March 31, 2005 and 2004, the Company paid $0
interest.
The Company paid no income taxes during the three months ended March 31, 2005
and 2004.
See accompanying notes.
1. BASIS OF PRESENTATION
-----------------------
The accompanying unaudited interim financial statements of Battle Mountain Gold
Exploration Corporation (the "Company") have been prepared by the Company in
accordance with generally accepted accounting principles in the United States of
America, pursuant to the Securities and Exchange Commission rules and
regulations. In management's opinion, all adjustments necessary for a fair
presentation of the results for the interim periods have been reflected in the
interim financial statements. The results of operations for any interim period
are not necessarily indicative of the results for a full year. All adjustments
to the financial statements are of a normal recurring nature.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. Such disclosures are those that would
substantially duplicate information contained in the most recent audited
financial statements of the Company, such as significant accounting policies.
Management presumes that users of the interim statements have read or have
access to the audited financial statements and notes thereto included in the
Company's most recent annual report on Form 10-KSB.
Battle Mountain Exploration Corporation was incorporated under the laws of the
State of Nevada on January 7, 2004. On September 9, 2004 the Company acquired
11,640,000 shares (100%) of the issued and outstanding common stock of Battle
Mountain Gold Exploration, Inc., a Nevada corporation, ("Battle Mountain" in
exchange for 11,640,000 newly issued treasury shares of the Company's common
stock. In connection with the Exchange Agreement, certain Battle Mountain
shareholders entered into a stock purchase agreement with two of the Company's
former directors to purchase an aggregate of 11,000,000 additional common shares
of the Company. The transaction was considered to be a reverse acquisition and a
recapitalization of the Company. Therefore, the accounting history presented is
that of Battle Mountain Exploration Corporation. Further, the comparative
financial information has been restated to reflect the quarterly activity
consistent with the Company changing its fiscal year end from July 31 to
December 31 during fiscal 2004.
2. MARKETABLE SECURITIES
----------------------
Pursuant to Statement of Financial Accounting Standards (SFAS) 115 "Accounting
for Certain Investments in Debt and Equity Securities" management determines the
appropriate classification of investment securities at the time they are
acquired and evaluates the appropriateness of such classification at each
balance sheet date.
The marketable securities, currently classified as trading securities, consist
of a listed common stock with a fair market value of $25,200 as of March 31,
2005. The unrealized loss related to the security was $10,600 as of March 31,
2005.
3. MINERAL PROPERTY INTEREST
---------------------------
In October 2004, Pediment Gold LLC ("Pediment"), the Company's joint venture
with Nevada Gold Exploration Solutions, L.L.C., a Nevada limited liability
company ("NGXS"), entered into a binding letter agreement (the "Letter
Agreement") with Placer Dome U.S. Inc. ("Placer Dome") for exploration and
development on unpatented mining claims located in north-central Nevada during a
three-year period beginning on October 21,2004 (the "Earn-In Period"). Pursuant
to the Letter Agreement, Pediment has a right to earn a 70% interest in the
mining claims after Pediment incurs an aggregate of $1 million in work
expenditures on the mining claims during the Earn-In Period.
After Pediment earns a 70% interest in the mining claims, it may be obligated to
enter into a joint venture agreement with Placer Dome. Pediment's interest in
the mining claims will be subject to Placer Dome's right to earn an additional
40% interest upon the payment of $3 million to Pediment or to convert its
interest into an interest in 5% of net returns.
As of March 31, 2005, the Company paid an aggregate of $1,055,794, of which
$325,000 is non-refundable, towards acquiring a 70% interest in Pediment as part
of an agreed initial contribution amount of $3,250,000.
4. RELATED PARTY TRANSACTIONS
----------------------------
As of March 31, 2005 the Company had outstanding operating payables due to
officers and directors in the amount of $122,268.
The Company entered into an employment agreement with an officer/director of the
Company at a rate of $7,500 per month.
5. CAPITAL STOCK
--------------
In January 2005, 920,000 common shares of Company stock were issued at $0.50 per
share for cash of $460,000.
6. INCOME TAXES
-------------
The Company has adopted FASB 109 to account for income taxes. The Company
currently has no issues that create timing differences that would mandate
deferred tax expense. Net operating losses would create possible tax assets in
future years. Due to the uncertainty as to the utilization of net operating loss
carry-forwards an evaluation allowance has been made to the extent of any tax
benefit that net operating losses may generate.
The Company has incurred a loss of $491,699 as of March 31, 2005 that can be
carried forward to offset future earnings if conditions of the Internal Revenue
Code are met. This net operating loss carry-forward will begin to expire in the
year 2024. As of March 31, 2005, due to management's doubt the loss carry
forward can utilitized prior to expiration, the entire future tax benefit has
been offset by a valuation allowance.
7. SUBSEQUENT EVENTS
------------------
In April 2005, we amended the terms of the options granted to Mr. McKay and Mr.
Kucher to provide for an exercise price of $0.40 per share, a vesting date of
April 15, 2005, and a termination date of April 15, 2010. In addition, we
approved the grant of options to each of our directors, which includes Mr. McKay
and Mr. Kucher, to purchase 300,000 shares of common stock with an exercise
price of $0.40 per share, a vesting date of April 15, 2005, and a termination
date of April 14, 2010.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THIS REPORT CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE COMPANY'S ACTUAL RESULTS COULD
DIFFER MATERIALLY FROM THOSE SET FORTH ON THE FORWARD LOOKING STATEMENTS AS A
RESULT OF THE RISKS SET FORTH IN THE COMPANY'S FILINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION, GENERAL ECONOMIC CONDITIONS, AND CHANGES IN THE ASSUMPTIONS
USED IN MAKING SUCH FORWARD LOOKING STATEMENTS.
OVERVIEW
The Company was originally incorporated in Nevada as Hudson Ventures, Inc.
on November 30, 2001. The Company has been in the exploration stage since its
formation and has not yet realized any revenues from its planned operations.
In April 2004, the Company completed a 10 to 1 forward stock split (the
"Stock Split"). The effects of the forward stock split have been retroactively
reflected in this report unless otherwise stated.
Prior to the Acquisition (discussed below), the Company either terminated
or allowed its option agreements to expire on certain properties located in the
Yukon Territories in Canada.
On September 9, 2004, the Company completed a reverse merger transaction
with Battle Mountain Gold Exploration, Inc. ("Battle Mountain") and the Battle
Mountain shareholders. The transaction is referred to herein as the "Exchange"
or the "Acquisition." Pursuant to the Acquisition, the Company acquired
11,640,000 shares of common stock (or 100%) of Battle Mountain in exchange for
an aggregate of 11,640,000 newly issued treasury shares of the Company's common
stock.
The Company is a holding company for Battle Mountain. Through Battle
Mountain, the Company will continue to be engaged in the business of minerals
exploration, but with an emphasis on gold exploration in the State of Nevada.
Except as expressly indicated or unless the context otherwise requires, the
"Company," "we," "our," or "us" means Battle Mountain Gold Exploration Corp., a
Nevada corporation, and its subsidiary.
In connection with the Exchange, James E. McKay, Ken Tullar and Wade A.
Hodges executed stock purchase agreements to purchase 3,700,000, 1,900,000 and
1,900,000 shares, respectively, or an aggregate of 7,500,000 shares, of the
Company's common stock from Nikoloas Bekropoulos, a former Director of the
Company. Additionally Bug River Trading Corp. ("Bug River"), Mark Kucher and
Paul Taufen executed stock purchase agreements to purchase 2,000,000, 1,000,000
and 500,000 shares, respectively, or an aggregate of 3,500,000, shares of the
Company's common stock from Dana Neill Upton, the Company's former President,
Secretary, Treasurer and Director. Mark Kucher is our Chief Financial Officer
and is also the beneficial owner of the shares purchased by Bug River.
Battle Mountain was incorporated in the State of Nevada on January 7, 2004.
Battle Mountain is a mineral exploration company. Battle Mountain's exploration
efforts are primarily focused on gold in the State of Nevada.
Battle Mountain's Joint Venture with NGXS to Form Pediment
-------------------------------------------------------------------
Prior to the Company acquiring Battle Mountain, on June 8, 2004, Battle
Mountain entered into a joint venture that includes a Members Agreement and an
Operating Agreement (the "Joint Venture") with Nevada Gold Exploration
Solutions, L.L.C., a Nevada limited liability company ("NGXS"), to explore the
Nevada great basin physiographic area using a proprietary water chemistry
database developed by NGXS. The Operating Agreement was amended on February 24,
2005, as discussed below under the heading "Subsequent Events." Certain terms of
such amendment that are applicable to this heading "Battle Mountain's Joint
Venture with NGXS to Form Pediment" are incorporated herein. Pursuant to the
agreements, Battle Mountain agreed to fund an aggregate of $3,250,000 (the
"Initial Contribution") for an exploration program (the "Exploration Program")
in connection with an opportunity to earn up to a 70% interest in Pediment Gold
LLC, a newly created Nevada limited liability company ("Pediment") engaged in
gold exploration in the Nevada great basin physiographical area using a
proprietary water chemistry database developed by NGXS. Kenneth Tullar, the
President and a 20% owner of NGXS, is also the beneficial owner of 5.1% of the
Company's common stock. Wade A. Hodges, a 40% owner of NGXS, is also a Director
of the Company and the beneficial owner of 5.1% of the Company's common stock.
As discussed below under the heading "Related Party Transactions" in "Item 5.
Other Information," Mr. Tullar and Mr. Hodges each receive a flat rate of $8,000
per month per person from Pediment for services that they provide to Pediment as
well as reimbursement of their actual expenses, and for each day that they work
in the field, a per diem of $125 per day.
On August 15, 2004, Battle Mountain and NGXS amended the timing of the
payments toward the Initial Contribution. As of September 30, 2004, Battle
Mountain had paid an accumulated total of $325,000 toward the Initial
Contribution. The $325,000 is a non-refundable deposit (the "Deposit"). In
January 2005, Battle Mountain paid an aggregate of $630,794 of additional
payments toward the Initial Contribution. Battle Mountain has not yet earned an
interest in Pediment. Under the Operating Agreement, as amended, Battle Mountain
will earn a 50% interest in Pediment after Pediment expends the Deposit and the
$630,794 (or an aggregate of $1,055,794). The remainder of the Initial
Contribution, as amended, is payable as follows: 1) $385,000 due on July 1,
2005, the expenditure of which will give Battle Mountain a 55% interest in
Pediment; 2) $385,000 due on November 1, 2005, the expenditure of which will
give Battle Mountain a 60% interest in Pediment; and 3) $1,315,000 due on April
1, 2006, the expenditure of which will give Battle Mountain a 70% interest in
Pediment. In determining whether Battle Mountain has funded the Exploration
Program and earned an interest in Pediment, the following costs will be
included: property acquisition costs, rentals royalties and other payments
necessary to acquire and maintain title to property; salaries, wages, employee
benefits and taxes thereon; materials, equipment and supplies; reasonable
transportation; contract services and utilities; insurance premiums; damages or
losses in excess of insurance proceeds; legal and regulatory costs and expenses;
the cost of annual audits; taxes; overhead; costs of reasonably anticipated
environmental compliance; and any other reasonable direct expenditures for the
necessary and proper conduct of operations (collectively, the "Expenditures").
Battle Mountain needs to raise capital to complete the Initial Contribution.
NGXS will be the manager of Pediment until Battle Mountain completes the
Initial Contribution, at which time Battle Mountain will have the right to
appoint the manager. If Battle Mountain completes the Initial Contribution,
Battle Mountain will own 70%, and NGXS will own 30%, of Pediment. NGXS'
participation will be on a carried basis. NGXS will not be required to fund the
ongoing costs of additional exploration. If Battle Mountain does not complete
the Initial Contribution, any interest in Pediment that Battle Mountain may earn
will be diluted based on total expenditures made on properties by third parties
and NGXS. If Battle Mountain's interest is diluted to 25% or less, Battle
Mountain's interest will be converted to a 1.25% net smelter royalty from the
production of minerals from the properties owned by Pediment.
Pursuant to an amendment to the Operating Agreement in February 2005, the
Hot Pots and Fletcher Junction project areas will become the sole site specific
project obligations between the Company and NGXS under Pediment. Battle Mountain
received an accelerated vested 50% interest in both the Hot Pots Project and the
Fletcher Junction Project (discussed below). Battle Mountain will continue to
earn its interest in Pediment based on Battle Mountain's scheduled payment, and
Pediment's subsequent expenditure, of the Initial Contribution as set forth
above. Costs incurred relative to either the Hot Pots Project or the Fletcher
Junction Project will apply toward Battle Mountain's earn-in of an interest in
Pediment and the specific project for which costs are made. Costs incurred that
do not relate to either the Hot Pots Project or the Fletcher Junction Project
will only apply toward Battle Mountain's earn-in of an interest in Pediment.
Once Battle Mountain has completed the Initial Contribution, the Company will
have the option to earn an additional 10% interest in the Hot Pots Project or
the Fletcher Junction Project by funding $750,000 of additional work per
property.
Pediment's Lease with Tomera Ranches
-----------------------------------------
On September 16, 2004, Julian Tomera Ranches, Inc., Battle Mountain
Division ("Tomera Ranches") entered into a ten-year mining lease (the "Tomera
Lease") with Pediment covering approximately 2,225 acres of land in Humboldt
County, Nevada. The Tomera Lease is part of the Hot Pots Project. Retention of
the Tomera Lease is predicated on an initial payment of $25,000 (which Pediment
paid in September 2004), and subsequent annual payments of $15,000 per year for
three years, and $20,000 per year thereafter. In addition, Pediment is required
to pay Tomera Ranches a royalty of 3% of Net Smelter Returns from production, if
any, from the land covered by the Tomera Lease.
Subsequent Events
------------------
Pediment's Letter Agreement with Placer Dome
--------------------------------------------------
On October 20, Pediment entered into a binding letter agreement (the
"Letter Agreement") with Placer Dome U.S. Inc. ("Placer Dome") for exploration
and development during the three-year period beginning on October 21, 2004 (the
"Earn-In Period") on unpatented mining claims owned by Placer Dome and located
in Humboldt County, Nevada (the "Placer Dome Claims"). The Placer Dome Claims
are part of the Hot Pots Project and the land on which they are located is
adjacent to the land covered by the Tomera Lease. Pursuant to the Letter
Agreement, Pediment has the right to earn a 70% interest in, and to enter into a
joint venture agreement covering, the Placer Dome Claims. Retention of the
Letter Agreement is predicated on an initial payment of $3,000 (which Pediment
paid in October 2004), and an obligation to incur an aggregate of $1 million of
work expenditures on the Placer Dome Claims during the Earn-In Period as
follows: 1) $50,000 during the period from October 21, 2004 through October 21,
2005; 2) $250,000 during the period from October 21, 2005 through October 21,
2006; and 3) $700,000 during the period from October 21, 2006 through October
21, 2007. Pediment may acquire an undivided 70% interest in the Placer Dome
Claims after incurring the full amount of the work expenditures. If Pediment
acquires such interest, Pediment may be obligated to enter into a joint venture
agreement with Placer Dome covering future activities on the Placer Dome Claims.
Pediment's interest in the Placer Dome Claims will be subject to Placer Dome's
right to earn an additional 40% interest upon the payment of $3 million to
Pediment or to convert its 30% interest into an interest in 5% of net returns.
In order to retain the Letter Agreement, Pediment must pay all federal claim
maintenance fees (or perform sufficient assessment work) required to maintain
the Placer Dome Claims, and timely make all filings and recordings required in
connection therewith (collectively "Annual Maintenance"). During the Earn-In
Period, Pediment is also responsible for timely payment of all taxes levied or
assessed upon or against the Placer Dome Claims and any facilities or
improvements located thereon. Pediment may, at any time in its sole discretion,
terminate the Letter Agreement in its entirety or with respect to any portion of
the Placer Dome Claims. If Pediment terminates the Letter Agreement, Pediment
will have no further obligations other than those related to indemnifying Placer
Dome against losses related to misrepresentation of Pediment or any exploration,
development or related work conducted by Pediment on the Placer Dome Claims,
reclaiming the surface of the Placer Dome Claims, and performing remediation
work as to the subsurface of the Placer Dome Claims. If such termination occurs
prior to June 1, 2005, or after June 1 of any other year, Pediment will also be
obligated to perform Annual Maintenance for the assessment year beginning on
September 1 of the year of termination.
Amended Operating Agreement of Pediment
-------------------------------------------
On February 24, 2005, the Company and NGXS amended the operating agreement
regarding Pediment (the "Amended Operating Agreement"). Except for changes made
in the Amended Operating Agreement, Members continue on and the Operating
Agreement remains effective for all other terms and conditions. NGXS
acknowledged that the Company, by agreeing to the terms of the Amended Operating
Agreement cured a default under the Operating Agreement that was set forth in a
notice of default dated February 11, 2005 (the "Notice of Default"). By
returning approximately $704,000 to Pediment and disbursing those funds pursuant
to the Authority for Expenditure Procedure as provided in the Amended Operating
Agreement, the Company cured a claim of breach that was set forth in a letter
dated February 17, 2005 (the "Notice of Breach"). The Company disclosed the
facts and circumstances concerning the Notice of Default and the Notice of
Breach in a Form 8-K filed with the Commission on February 18, 2005. Pursuant to
the Amended Operating Agreement, The Hot Pots Project and the Fletcher Junction
Project became the sole site specific project obligations between the Company
and NGXS under Pediment. Battle Mountain received an accelerated vested 50%
interest in both the Hot Pots Project and the Fletcher Junction Project. Under
the Amended Operating Agreement, the Company is required, on an individual
property basis, to spend $500,000 on the technical evaluation of each property
(assuming the project moves through the Discovery Drilling Stage) within twelve
months of commencement of the first drilling program to earn a 70% interest in
the project and become Operator, with NGXS being carried for a 30% interest,
subject to permitting and drill rig availability. The $500,000 to be spent on
each property reflects deductions for expenditures of approximately $310,000
made to the date of the Amended Operating Agreement for the Field Examination
Stage. Costs spent on each property during the Land Acquisition Stage, all
expenditures of the $500,000 on each property, discussed above, and third-party
farm out budgets will count towards the Company's earn-in in the specific
project for which the costs are being spent and in Pediment. The amended
operating agreement also provides for the establishment of a savings account for
Battle Mountain and specific controls regarding such savings account and
Pediment's bank account, which controls establish the instances in which funds
may be transferred into, out of and between the accounts. NGXS agreed to forgo a
3% fee for management of Pediment. All of Pediment's activities that are
conducted by Kenneth N. Tullar or Wade A. Hodges will be billed directly to
Pediment at a flat rate of $8,000 per month per person plus actual expenses. The
Company disclosed these and other material terms of the Amended Operating
Agreement in a Form 8-K filed with the Commission on February 28, 2005.
Pediment has staked 342 unpatented mining claims in Mineral County, Nevada,
which claims we refer to as the "Fletcher Junction Project."
Exploration drilling began on the Hot Pots Project on March 21, 2005 and
was
completed on April 15, 2005. Analytical testing of water and rock samples have
not been completed.
PLAN OF OPERATION
The Company can satisfy its cash requirements for the next ten (3) months.
It is imperative that the Company obtain $1,285,000 of additional financing to
conduct its business operations during the next twelve months, and an additional
$1,315,000 that will become due to Pediment in April 2006 for the Exploration
Program (or an aggregate of $2,600,000) to fully implement its business plan.
The Company has raised approximately $1,815,000 for its gold exploration
activities which it has used for payments toward the Initial Contribution in
Pediment and for expenses. During the next twelve months, the Company, through
Battle Mountain, is obligated to contribute $2,085,000 to Pediment for the
Exploration Program to retain its right to earn up to a 70% interest in
Pediment. Pediment in turn is required, during the next twelve months, to spend
at least $50,000 on the Placer Dome Claims (pursuant to its agreement with
Placer Dome) to retain its right to earn up to a 70% interest in the Placer Dome
Claims and $15,000 on the Tomera Lease (pursuant to its agreement with Tomera
Ranches) to retain its rights in the Tomera Lease. The Company is taking steps
to raise equity capital or to borrow additional funds. There can be no assurance
that any new capital will be available to the Company or that adequate funds
will be sufficient for Company operations, whether from the Company's financial
markets, or other arrangements will be available when needed or on terms
satisfactory to the Company. The Company does not have any commitments from its
officers, directors or affiliates to provide funding. The failure of the Company
to obtain adequate financing may result in the Company having to delay, curtail,
scale back or forgo its operations.
The Company does not expect to purchase any plant or significant equipment
during the next twelve months. The Company will heavily rely on contract labor
to conduct its operations and does not expect a significant change in the number
of employees during the next twelve months.
RESULTS OF OPERATIONS
The Company acquired Battle Mountain in September 2004. The Acquisition is
being accounted for as a reverse merger and recapitalization whereby Battle
Mountain, the operating company which was incorporated on January 7, 2004, and
has a December 31 fiscal year end, is the continuing entity for all accounting
purposes.
THREE MONTHS ENDED MARCH 31, 2005
Revenues
- --------
The Company did not have any revenues during the three months ended March
31, 2005.
Expenses
- --------
For the three months ended March 31,2005, the Company had total expenses of
$161,896, consisting of professional and consulting of $112,859, travel and
entertainment of $8,150, rent and office of $2,645, general and administrative
expenses of $38,195, and depreciation expense of $47.
The Company had an unrealized loss of $10,600 for the three months ended
March 31, 2005. The unrealized loss was the result of a decrease in the value of
the Company's securities held for resale.
Net Loss and Net Loss Per Share
- -------------------------------
Net loss was $172,496 (or basic and diluted loss per common share of $0.01)
for the three months ended March 31, 2005.
PERIOD FROM JANUARY 7, 2004 (INCEPTION) THROUGH MARCH 31, 2005
Revenues
- --------
The Company had no revenues during the period from Inception through
March 31, 2005.
Expenses
- --------
During the period from Inception through March 31, 2005, the Company had
total expenses of $491,699, consisting of professional and consulting of
$315,502, travel and entertainment of $35,922, rent and office of $20,298,
general and administrative expenses of $70,881, and depreciation expense of
$233.
The Company had interest expense of $448 and an unrealized loss of $34,800
during the period from Inception through March 31, 2005. The unrealized loss was
the result of a decrease in the value of the Company's securities held for
resale.
Net Loss and Net Loss Per Share
- -------------------------------
Net loss was $491,699 for the period from Inception through March 31, 2005.
LIQUIDITY AND CAPITAL RESOURCES
Total current assets were $248,897 as of March 31, 2005, consisting of
short-term investments of $25,200, and cash of $223,697.
Total current liabilities were $140,668 as of March 31, 2005, consisting of
related party payables of $122,268, and accounts payable of $18,400. Of the
payables to related parties, $112,500 is accrued base compensation for Mark
Kucher.
Net cash used in operating activities was $155,204 for the three months
ended March 31, 2005, consisting of net loss of $172,496 that was offset by an
increase in unrealized loss on investments of $10,600, and an increase in
accounts payable of $6,645 and an adjustment for depreciation expense of $47.
Net cash used in investing activities was $630,794 for the three months
ended March 31, 2005, for investment in mining properties.
Net cash provided by financing activities was $306,572 for the three months
ended March 31, 2005, due to proceeds from issuance of common stock of $460,000
offset by principal payments of $153,428 on related party payables.
It is imperative that the Company raise $2,600,000 million of additional
capital to continue its operations during the next twelve months, and to
fully Implement its business plan.
In addition, we accrue salary of $7,500 per month for Mark Kucher, our
Chief Financial Officer, payable at such time as the Company is fully vested in
Pediment, which the Company expects to occur no earlier than April 1, 2006. In
September 2004, the Company completed a reverse merger transaction with Battle
Mountain and the Battle Mountain shareholders. Pursuant to the Acquisition,
Battle Mountain became a wholly-owned subsidiary of the Company and the Battle
Mountain shareholders took control over the Company. Prior to the Acquisition,
Battle Mountain entered into the Joint Venture pursuant to which Battle Mountain
is to make a $3,250,000 million dollar Initial Contribution to Pediment for an
Exploration Program by April 2006. Battle Mountain has paid an aggregate of
$1,055,794 toward the Initial Contribution. Battle Mountain will earn a 50%
interest in Pediment after Pediment spends $630,794 of the payments already made
by Battle Mountain. However, pursuant to the Amended Operating Agreement, Battle
Mountain received an accelerated vested 50% interest in the Hot Pots Project and
the Fletcher Junction Project, which became the sole site specific project
obligations between the Company and NGXS under Pediment. The Company is
required, on an individual property basis, to spend $500,000 on the technical
evaluation of the Hot Pots Project and the Fletcher Junction Project (assuming
the project moves through the Discovery Drilling Stage) within twelve months of
commencement of the first drilling program to earn a 70% interest in each
project and become Operator. Costs spent on each property during the Land
Acquisition Stage, all expenditures of the $500,000 on each property, discussed
above, and third-party farm out budgets will count towards the Company's earn-in
in the specific project for which the costs are being spent and in Pediment.
Costs incurred that do not relate to either the Hot Pots Project or the Fletcher
Junction Project will only apply toward an earn-in of an interest in Pediment.
The Company has raised approximately $1,815,000 which it has used to make
payments toward the Initial Contribution in Pediment and for expenses. At this
time, the Company has not secured or identified any sources of financing. The
Company cannot make any assurance that financing will be available on terms
favorable to the Company, or at all. The Company has no commitments from
officers, directors or affiliates to provide funding. There can be no assurance
that any new capital will be available to the Company or that adequate funds
will be sufficient for Company operations, whether from the Company's financial
markets or private sources, or that other arrangements will be available when
needed or on terms satisfactory to the Company. If adequate funds are not
available to the Company on acceptable terms, the Company may have to delay,
curtail, scale back or forgo its business operations.
RISK FACTORS
Risks Relating to Our Business
- ------------------------------
WE NEED $2,600,000 MILLION OF ADDITIONAL CAPITAL.
- -------------------------------------------------
It is imperative that we raise $2,600,000 million of additional capital to
fully implement our business plan. The Company acquired Battle Mountain which
has agreed to make an Initial Contribution for an exploration Program by April
2006. Battle Mountain has paid $1,055,794 toward the Initial Contribution. In
addition, we accrue salary of $7,500 per month for Mark Kucher, our Chief
Financial Officer, payable at such time as the Company is fully vested in
Pediment, which the Company expects to occur no earlier than April 1, 2006.
There can be no assurance that additional capital will be available to the
Company, or that, if available, it will be on terms satisfactory to the
Company's management. Any additional financing may involve dilution to the
Company's then-existing shareholders. At this time, no other additional
financing has been secured or identified. The Company has no commitments from
officers, directors or affiliates to provide funding. The failure of the Company
to obtain additional capital on terms satisfactory to the Company's management,
or at all, may cause the Company to delay, curtail, scale back or forgo its
operations.
FUTURE DISPUTES BETWEEN THE COMPANY AND NGXS REGARDING THE OPERATING AGREEMENT
- ------------------------------------------------------------------------------
OF PEDIMENT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND RESULTS OF
- -------------------------------------------------------------------------------
OPERATION.
- ----------
In February 2005, we received a Notice of Default from NGXS regarding the
Operating Agreement of Pediment after we proposed that Pediment acquire an
interest in two (2), rather than all eleven (11), land areas that Pediment
identified for land acquisition, and that Pediment begin an initial drilling
program only on the two (2) areas. We had paid an aggregate of $1,055,794 toward
the Initial Contribution in Pediment. In February 2005, we withdrew a
substantial amount of the funds from Pediment's account. Following the
withdrawal, we received a letter from NGXS stating that NGXS was of the opinion
that withdrawal was a breach of the Operating Agreement or a resignation by us
and requesting the immediate return of the withdrawn money. The Company and NGXS
have amended the Operating Agreement. We have returned the funds to Pediment's
account pursuant to the Amended Operating Agreement and have otherwise cured the
Notice of Default and letter of breach. Our agreement with NGXS regarding
Pediment may be subject to future disputes that we may not be able to resolve.
If we have future disputes with NGXS regarding Pediment, the Hot Pots Project or
the Fletcher Junction Project, we may not be able to earn more than our 50%
interest in the Hot Pots Project, our 50% interest in the Fletcher Junction
Project, or any interest in Pediment, each of which could have a material
adverse effect on our business and results of operation.
FROM TIME TO TIME THE COMPANY INVESTS IN TRADING SECURITIES, THE VALUE OF WHICH
- -------------------------------------------------------------------------------
IS SUBJECT TO SIGNIFICANT FLUCTUATIONS.
- ---------------------------------------
From time to time the Company invests in trading securities, the value of
which is subject to significant fluctuations. Our trading securities are stated
at fair value and realized and unrealized gains and losses are included in
income. We had unrealized loss of $10,600 from trading securities during the
three months ended March 31, 2005. If there are significant fluctuations in the
value of our short-term investments, it would have a direct effect on our
results of operations. If we sell our short-term investments when they have lost
significant value, it will have a material adverse effect on our business and
results of operations.
OUR AUDITORS HAVE EXPRESSED AN OPINION THAT THERE IS SUBSTANTIAL DOUBT ABOUT OUR
- --------------------------------------------------------------------------------
ABILITY TO CONTINUE AS A GOING CONCERN.
- ---------------------------------------
In its report dated April 18, 2005, Chisholm, Bierwolf & Nilson, LLC,
Certified Public Accountants expressed an opinion that there is substantial
doubt about our ability to continue as a going concern based on our history of
operating losses since Inception, our lack of operating revenues and our
dependence on adequate financing. Our financial statements do not include any
adjustments that might result from the outcome of that uncertainty. We closed a
reverse merger transaction with Battle Mountain on September 9, 2004; however,
Battle Mountain is itself in the exploration stage and in need of additional
capital. The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. The consolidated financial
statements do not include any adjustments that might result from our inability
to continue as a going concern. Our continuation as a going concern is dependent
upon future events, including obtaining $2,415,000 of financing (discussed
above) to fully implement our business plan. If we are unable to continue as a
going concern, you will lose your entire investment.
WE HEAVILY DEPEND ON JAMES E. MCKAY AND MARK KUCHER.
- ----------------------------------------------------
The success of the Company depends upon the personal efforts and abilities
of James E. McKay and Mark Kucher. Mr. McKay serves as a director of the Company
and the Company's President pursuant to a three-year employment agreement. Mr.
McKay also serves as the Company's Chief Executive Officer, Secretary and
Treasurer. Mr. McKay and the Company may voluntarily terminate the employment
agreement at any time. Mark Kucher serves as a director of the Company and the
Company's Chief Financial Officer pursuant to an employment agreement. Mr.
Kucher and the Company may voluntarily terminate the employment agreement at any
time. The loss of Mr. McKay or Mr. Kucher could have a material adverse effect
on our business, results of operations or financial condition. In addition, the
absence of Mr. McKay or Mr. Kucher will force us to seek a replacement who may
have less experience or who may not understand our business as well, or we may
not be able to find a suitable replacement.
WE ARE ENGAGED IN A BUSINESS THAT IS INHERENTLY SPECULATIVE AND RISKY.
- ----------------------------------------------------------------------
Mineral exploration and mining is subject to risks related to a substantial
or extended decline in prices of mineral commodities, property acquisition
complexities, and restrictive and/or changing political, social and/or
environmental laws and regulations. Even if we can implement our business plan
and initiate exploration and development activities, there can be no assurance
that we will find commercial quantities of minerals, or if we are able to find
such minerals, that we can remove them in a profitable manner. Because of the
inherently speculative and risky nature of the business in which we are engaged,
our Company could fail to find commercial quantities of minerals or perform
poorly, and as a result you could lose your entire investment.
JAMES E. MCKAY, MARK KUCHER, WADE A HODGES AND KENNETH TULLAR CAN VOTE AN
- -------------------------------------------------------------------------
AGGREGATE OF 47.0% OF OUR COMMON STOCK AND CAN EXERCISE CONTROL OVER CORPORATE
- ------------------------------------------------------------------------------
DECISIONS.
- ----------
James E. McKay, Mark Kucher, Wade A Hodges and Kenneth Tullar beneficially
own an aggregate of approximately 47.0% of the issued and outstanding shares of
our common stock. Accordingly, they will exercise significant influence in
determining the outcome of all corporate transactions or other matters,
including the election of directors, mergers, consolidations, the sale of all or
substantially all of our assets, and also the power to prevent or cause a change
in control. The interests of Messrs. McKay, Kucher, Hodges and Tullar may differ
from the interests of the other stockholders and thus result in corporate
decisions that are adverse to other shareholders.
Risks Relating to Our Common Stock
- ----------------------------------
THE MARKET PRICE OF OUR COMMON STOCK HISTORICALLY HAS BEEN VOLATILE.
- --------------------------------------------------------------------
The market price of our common stock historically has fluctuated
significantly based on, but not limited to, such factors as: general stock
market trends, announcements of developments related to our business, actual or
anticipated variations in our operating results, our inability to generate
revenues, and conditions and trends in the mineral exploration, development and
production industry.
Our common stock is traded on the over-the-counter Bulletin Board. In
recent years the stock market in general has experienced extreme price
fluctuations that have often been unrelated to the operating performance of the
affected companies. Similarly, the market price of our common stock may
fluctuate significantly based upon factors unrelated or disproportionate to our
operating performance. These market fluctuations, as well as general economic,
political and market conditions, such as recessions or interest rates may
adversely affect the market price of our common stock.
WE HAVE NOT CREATED A MARKET TO SUSTAIN THE SIGNIFICANT AMOUNT OF SHARES IN OUR
- -------------------------------------------------------------------------------
PUBLIC FLOAT.
- -------------
We have approximately 15,870,000 shares of common stock in our public
float; however, we have not created a market for our common stock. We may not
have adequate time to create such a market prior to the time our shareholders
resell their shares. If our shareholders resell their shares before we can
create a market, it may exert downward pressure on the price of our common
stock.
OUR COMMON STOCK IS SUBJECT TO THE"PENNY STOCK" RULES OF THE SECURITIES AND
- -----------------------------------------------------------------------------
EXCHANGE COMMISSION WHICH LIMITS THE TRADING MARKET IN OUR COMMON STOCK, MAKES
- ------------------------------------------------------------------------------
TRANSACTIONS IN OUR COMMON STOCK CUMBERSOME AND MAY REDUCE THE VALUE OF AN
- --------------------------------------------------------------------------
INVESTMENT IN OUR COMMON STOCK.
- -------------------------------
Our common stock is considered a "penny stock" as defined in Rule 3a51-1
promulgated by the Securities and Exchange Commission (the "Commission" or the
"SEC") under the Exchange Act. In general, a security which is not quoted on
NASDAQ or has a market price of less than $5 per share where the issuer does not
have in excess of $2,000,000 in net tangible assets is considered a penny stock.
The Commission's Rule 15g-9 regarding penny stocks impose additional sales
practice requirements on broker-dealers who sell such securities to persons
other than established customers and accredited investors (generally persons
with net worth in excess of $1,000,000 or an annual income exceeding $200,000 or
$300,000 jointly with their spouse). For transactions covered by the rules, the
broker-dealer must make a special suitability determination for the purchaser
and receive the purchaser's written agreement to the transaction prior to the
sale. Thus, the rules affect the ability of broker-dealers to sell our common
stock should they wish to do so because of the adverse effect that the rules
have upon liquidity of penny stocks. Unless the transaction is exempt under the
rules, under the Securities Enforcement Remedies and Penny Stock Reform Act of
1990, broker-dealers effecting customer transactions in penny stocks are
required to provide their customers with (i) a risk disclosure document; (ii)
disclosure of current bid and ask quotations if any; (iii) disclosure of the
compensation of the broker-dealer and its sales personnel in the transaction;
and (iv) monthly account statements showing the market value of each penny stock
held in the customer's account. As a result of the penny stock rules the market
liquidity for our common stock may be adversely affected by limiting the ability
of broker-dealers to sell our common stock and the ability of purchasers to
resell our common stock.
In addition, various state securities laws impose restrictions on
transferring "penny stocks" and as a result, investors in our common stock may
have their ability to sell their shares of the common stock impaired.
THE COMPANY HAS NOT PAID ANY CASH DIVIDENDS.
- --------------------------------------------
The Company has paid no cash dividends on its common stock to date and it
is not anticipated that any cash dividends will be paid to holders of the
Company's common stock in the foreseeable future. While the Company's dividend
policy will be based on the operating results and capital needs of the business,
it is anticipated that any earnings will be retained to finance the future
expansion of the Company.
CRITICAL ACCOUNTING ESTIMATES
Our discussion and analysis of our financial condition and results of
operations is based upon our financial statements, which have been prepared in
accordance with accounting principals generally accepted in the United States.
The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues (if
any) and expenses, and related disclosure of any contingent assets and
liabilities. On an on-going basis, we evaluate our estimates. We base our
estimates on various assumptions that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.
We believe the following critical accounting policy affects our more
significant judgments and estimates used in the preparation of our financial
statements:
Going Concern
- -------------
We have been in the exploration stage since our formation and have not yet
realized any revenues from our planned operations. The accompanying financial
statements have been prepared assuming we will continue as a going concern. As
shown in the accompanying financial statements, we have incurred a net loss of
$541,699 for the period from Inception through March, 31, 2005 and have had no
sales. These conditions among others create an uncertainty as to our ability to
continue as a going concern, particularly in the event that we cannot obtain
$2,600,000 million of additional financing to fully implement our business plan
and to continue with our current operations. Our future is dependent upon our
ability to obtain financing and upon future profitable operations from the
development of mineral properties. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded
assets, or the amounts of and classification of liabilities that might be
necessary in the event we cannot continue in existence.
Marketable Securities
- ---------------------
We determine the appropriate classification of investment securities at the
time they are acquired and evaluate the appropriateness of such classification
at each balance sheet date. Trading securities are held for resale in
anticipation of short-term (generally 90 days or less) fluctuations in market
prices. Trading securities, consisting primarily of actively traded equity
securities, are stated at fair value. Realized and unrealized gains and losses
are included in income. We had unrealized loss of $10,600 from trading
securities during the three months ended March 31, 2005. Available-for-sale
securities consist of marketable equity securities not classified as trading
securities. Available-for-sale securities are stated at fair value, and
unrealized holding gains and losses, net of the related deferred tax effect, are
reported as a separate component of stockholders' equity. We did not have any
holding gains or losses from available-for-sale securities during the three
months ended March 31, 2005.
ITEM 3. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. Our Chief Executive
Officer and Chief Financial Officer, after evaluating the effectiveness of the
Company's "disclosure controls and procedures" (as defined in the Securities
Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period
covered by this quarterly report (the "Evaluation Date"), have concluded that as
of the Evaluation Date, our disclosure controls and procedures were not
adequately designed to ensure that material information required to be disclosed
by the Company in the reports that it files or submits under the Exchange Act of
1934 is recorded, processed, summarized and reported, within the time periods
specified in the Commission's rules and forms. Our board of directors is
implementing a written policy whereby our management will be required to
disclose to our outside counsel and auditors each material contract and each
issuance of our common stock or other securities.
(b) Changes in internal control over financial reporting. There were no
significant changes in our internal control over financial reporting during our
most recent fiscal quarter that materially affected, or were reasonably likely
to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to, and its property is not the subject of, any
pending legal proceeding.
ITEM 2. CHANGES IN SECURITIES
In February 2005, we amended the terms of a sale of stock that we made in
November 2004. In November 2004, we sold an aggregate of 450,000 shares of
common stock to four (4) individual investors for an aggregate of $450,000 (or
$1.00 per share). In February 2005, we changed the terms of the sale to provide
for 900,000 shares for an aggregate of $450,004 (or approximately $0.50 per
share). In April 2005, we agreed to accept $100,000 less of an investment from
one of the investors. As a result of these changes in the original terms of the
sale, we received $350,004 for an aggregate of 700,000 shares. The spouse of
Mark Kucher, the Company's Chief Financial Officer and a Director of the
Company, purchased 40,000 of these shares.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
Related Party Transactions
- --------------------------
The Company has entered into a consulting agreement with James E. McKay,
pursuant to which Mr. McKay serves as the Company's President. Mr. McKay
receives a base salary of $7,500 per month, three (3) weeks of paid vacation,
and an option to purchase 500,000 shares of the Company's common stock at an
exercise price of $0.99 per share that vests in its entirety on May 31, 2005.
Wade A. Hodges, a Director of the Company, owns a forty percent (40%)
membership interest in NGXS. As contemplated by the Joint Venture, Battle
Mountain and NGXS formed Pediment to explore the Nevada great basin
physiographic area using a proprietary water chemistry database developed by
NGXS. Mr. Hodges provides geological services to the Joint Venture. He currently
receives a flat rate of $8,000 per month from Pediment for services that he
provides to Pediment as well as reimbursement of his actual expenses, and for
each day that he works in the field, a per diem of $125 per day. The Company and
NGXS came to the current terms regarding Mr. Hodges's payment as part of the
Amended Operating Agreement entered into in February 2005. During the period
covered by this report, Mr. Hodges was receiving $400 per day and the $125 per
diem. Mr. Hodges received an aggregate of $42,500 for services that he provided
to the Joint Venture during the period covered by this report.
Kenneth Tullar, the beneficial owner of 5.2% of the Company's common stock,
owns a twenty percent (20%) membership interest in NGXS. Mr. Tullar provides
geological services to the Joint Venture. He currently receives a flat rate of
$8,000 per month from Pediment for services that he provides to Pediment as well
as reimbursement of his actual expenses, and for each day that he works in the
field, a per diem of $125 per day. The Company and NGXS came to the current
terms regarding Mr. Tullar's payment as part of the Amended Operating Agreement
entered into in February 2004. During the period covered by this report, Mr.
Tullar was receiving $400 per day and the $125 per diem. Mr. Tullar received an
aggregate of $47,200 for services that he provided to the Joint Venture during
the period covered by this report. In April the Company's Board of Directors
granted Mr. Tullar an option to purchase 200,000 shares the Company's common
stock at an exercise price of $0.40 per share that vested in its entirety on
April 15, 2005.
The Company entered into an employment agreement with Mark Kucher pursuant
to which Mr. Kucher serves as the Company's Chief Financial Officer and as a
Director of the Company. The terms of the agreement provide that it is
retroactively effective on January 1, 2004. Mr. Kucher receives a base salary of
$7,500 per month, effective retroactively from January 2004 that is not payable
until the Company is fully vested in Pediment. Mr. Kucher has the option to
receive his salary in shares, at market value, at any time. Mr. Kucher also
receives three (3) weeks of paid vacation. The agreement provides for the grant
of an option to Mr. Kucher to purchase 500,000 shares of the Company's common
stock that vests one year after commencement of Mr. Kucher's employment with the
Company, provided that if the Company terminates Mr. Kucher's employment prior
to such time, the option will automatically vest in its entirety on the date of
termination. On December 15, 2004, in satisfaction of the obligation to grant an
option to Mr. Kucher, the Company's Board of Directors granted Mark Kucher an
option to purchase 500,000 shares of the Company's common stock at an exercise
price of $0.40 per share, which option vests in its entirety on April 15, 2005.
provided that if the Company terminates Mr. Kucher's employment prior to May 31,
2005, the option will automatically vest in its entirety on the date of
termination. Although Mr. Kucher's employment commenced on January 1, 2004,
under the terms of the employment agreement, Mr. Kucher agreed to receive the
option with the later vesting date of May 31, 2005.
In December 2004, the Company granted options to James E. McKay and Mark D.
Kucher pursuant to their employment agreements to purchase 500,000 shares of the
Company's common stock with an exercise price of $0.99 per share and a vesting
date of May 31, 2005. Mr. McKay serves as the Company's President pursuant to
his employment agreement. Mr. Kucher serves as the Company's Chief Executive
Officer and Chairman of the Company's board of directors pursuant to his
employment agreement. In April 2005, the Company's board of directors amended
the terms of their options to vest in their entirety on April 15, 2005, at an
amended exercise price of $0.40 per share. The Company claims an exemption from
registration afforded by Section 4(2) of the Act since the foregoing grants did
not involve a public offering, the recipients had access to information that
would be included in a registration statement, took the shares for investment
and not resale and the Company took appropriate measures to restrict transfer.
In April 2005, the Company's board of directors approved the grant of
options to each of its directors to purchase 300,000 shares (or an aggregate of
1,500,000 shares) of the Company's common stock with an exercise price of $0.40
per share and a vesting date of April 15, 2005.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Exhibit No. Description
31.1* Certificate of the Chief Executive Officer pursuant
Section 302 of the Sarbanes-Oxley Act of 2002
31.2* Certificate of the Chief Financial Officer pursuant
Section 302 of the Sarbanes-Oxley Act of 2002
32.1* Certificate of the Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
32.2* Certificate of the Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
* Filed Herein.
b) Reports on Form 8-K
The Company filed 6 reports on Form 8-K during the quarter for which this
report is filed:
1. Form 8-K filed on January 7, 2005
2. Form 8-K/A Amend. #1 (to 8-K filed on Oct. 20, 2004), filed
on January 10, 2005
3. Form 8-K filed on January 26, 2005
4. Form 8-K filed on February 11, 2005
5. Form 8-K filed on February 24, 2005
6. Form 8-K/A Amend. #1 (to 8-K filed on Sep. 9, 2004), filed
on March 29, 2005
Subsequent to the close of the quarter for which this report is filed,
the Company filed two additional reports on Form 8-K:
1. Form 8-K/A Amend. #2 (to 8-K filed on Sep. 9, 2004), filed
on April 13, 2005
2. Form 8-K/A Amend. #3 (to 8-K filed on Sep. 9, 2004), filed
on April 22, 2005
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
BATTLE MOUNTAIN GOLD EXPLORATION CORP.
DATE: May 11, 2005 By: /s/ James E. McKay
-------------------
James E. McKay,
Chief Executive Officer