September 12, 2006
MAIL STOP 7010
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Faxed to: 202-772-9368
Ms. April Sifford ------------------------
Branch Chief
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: Battle Mountain Gold Corp. ("Registrant")
Form 10-KSB for Fiscal Year Ended December 31, 2005
Filed March 30, 2006
Form 10-KSB/A for Fiscal Year Ended December 31, 2005
Filed April 10, 2006
Form 10-KSB/A for Fiscal Year Ended December 31, 2005
Filed July 21, 2006
Response letter dated August 7, 2006
File Number 0-50399
Dear Ms. Sifford:
In response to your comment letter of August 7, 2006, and as per the Company's
discussion with Ryan Milne on September 7, 2006, the Company respectfully
submits the following response to comment 5 of your enumerated paragraphs, with
additional responses to your comment letter to follow resolution of comment 5.
FINANCIAL STATEMENTS, PAGE 21
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NOTE 10. STOCK OPTION PLAN, PAGE F-16
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QUESTION 5
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As discussed and agreed to with Ryan Milne on September 7, 2006, we are
providing our response to comment 5 of your letter dated August 7, 2006, prior
to submitting the response to the rest of the outstanding items, and will be
refiling the 2005 10-K and 3/31/06 10-Q upon your response to this submission.
We would appreciate any expediting of your response. Thank you.
Our rationale for responding in detail to comment 5 of your letter, dated August
7, 2006, prior to responding to the remaining questions, is our belief that,
assuming we are able to explain to your satisfaction why we did not need to
record any option-related compensation expense for 2004, then the remaining
questions and resubmission process will be a much simpler and less extensive
process for the Company. We will then be able to promptly reply to all of the
remaining questions, re-file an amended 10-K for 2005, as well as a 10-Q for the
period ended 3/31/06. If we are unable to satisfy the staff's concerns regarding
the option-related compensation expense for 2004, then we will need to spend the
time and expense to not only refile an amended 2005 10-K and 10-Q for the period
ended 3/3/1/06, but also an amended 2004 10-K, as well as the 10-Q's for 2005.
We would prefer to avoid the added expense of re-filing the 2005 10-K twice. We
hope you understand our position on this matter and thank you for your
consideration in advance.
RATIONALE FOR NOT RECORDING COMPENSATION EXPENSE DURING 2004.
Background:
Since the Company's inception, we have adopted the provisions of SFAS 123 and
have not adopted a new accounting policy as it relates to accounting for stock
based compensation in 2005. As disclosed in Note 11 to our 2004 10-KSB, where it
is stated that "The Company, in accordance with the Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation, no
expense was recognized for the period ended December 31, 2004". In
addition, we did not recognize the intrinsic value of the stock options as would
have been required under APB 25, since we had adopted the provisions of SFAS
123.
As disclosed in the 2004 10k in item 8b "other information", the date of the
grant as approved by the Board, and thus the beginning of the vesting period was
December 15th, 2004. "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". This date coincides with the Board's
approval of the 2004-2005 Non Qualified stock option plan.
As disclosed in the 8-k filed on September 9th, 2004, the Company had entered
into an employment agreement with Jim MacKay. As part of the agreement, the
Board approved 500,000 options to be issued at an exercise price of $0.99 cents.
The Board approved the actual granting of the options on December 15th, 2004, in
part so it coincided with the 500,000 options issued to Mark Kucher (i.e. they
wanted both sets of options to be granted at the same time), and at the time of
Mr. Mackay's agreement, the stock was not trading. The shares did not begin
trading until Oct 7th, 2004, so fixing a Grant Date at that time was not
possible. In addition, no Grant Date was specified in Mr. Mackay's agreement, so
it was up to the Board to fix a date. Therefore the board decided to approve the
grant date of December 15th, 2004.
It is the Company's position that even though Mr. Mackay's consulting agreement
was approved in September 2004, the options were not granted until December 15th
2004, since that was the date the Board formally approved as the Grant Date.
Since all of the options granted to our employees in 2004 have a Grant Date of
December 15th, 2004 as disclosed in our 2004 10k, and a vesting Date of May
31st, 2005, and based on a calculation using the parameters as set forth in the
2004 10k, using the Black-Scholes model, the fair value of the options is
approximately $.0983 per option, that would have vested approximately 15 of 165
days for approximately 9% of the $98,300 total expense recognized over the
vesting period or $8,847. In addition, based on other factors such as the fact
the shares were restricted and unregistered, a further discounting of the fair
value of the options was required. Moreover, the shares had only begun to trade
a few months prior to the Grant Date. Based on these considerations, the actual
expense related to the issuance of the options in 2004 was considered to be
immaterial to the financial statements in 2004, and therefore no compensation
expense was recognized.
Finally, based on the modification of our option awards in April 2005, the
Company has essentially recognized the compensation expense of all of the
current and previously issued options, and we do not believe that any benefit
would accrue to shareholders by having us refile our 2004 financial statements
for an expense of less than $9,000.
CLOSING COMMENTS
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In addition, the Registrant hereby acknowledges that:
1. the Registrant is responsible for the adequacy and accuracy of
the disclosure in the filing;
2. 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
3. the Registrant 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 further questions or comments regarding these matters, please do
not hesitate to contact me.
Thank you again for your kind cooperation and assistance.
Very truly yours,
/s/Mark Kucher
Mark Kucher
Chairman and CEO
cc: Michael J. Morrison, Esq.
Chisholm, Bierwolf & Nilson