UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
Amendment No. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: (DATE OF EARLIEST EVENT REPORTED): SEPTEMBER 9, 2004
COMMISSION FILE NO.: 000-50399
BATTLE MOUNTAIN GOLD EXPLORATION CORP.
------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 86-1066675
--------------------------------- ------------------------------
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION)
ONE EAST LIBERTY STREET, SIXTH FLOOR, SUITE 9, RENO, NEVADA 89504
----------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(775) 686-6081
---------------------------
(ISSUER TELEPHONE NUMBER)
N/A
---------------------------
(FORMER NAME AND ADDRESS)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act(17 CFR 240.13e-4(c))
This Form 8-K/A, Amendment No. 1 is being filed to include disclosure under
Item 5.03 regarding a change of fiscal year end and to update certain
information in Item 2.01 under the headings "Business Development," "Description
of Property," and "Risk Factors," and the disclosures in Item 3.02, Item 5.01
regarding ownership percentages, Item 5.02 regarding an employment agreement
with an executive officer and payments to a director, and the Exhibit Table in
Item 9.01.
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On September 9, 2004, Battle Mountain Gold Exploration Corp., formerly
Hudson Ventures, Inc., a Nevada corporation Inc. (the "Registrant"),
entered into an Exchange Agreement (the "Agreement") with Battle Mountain Gold
Exploration, Inc. ("Battle Mountain" or the "Company"), and the former Battle
Mountain shareholders. Pursuant to the Agreement, the Registrant 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 Registrant's
common stock. The transaction is referred to as the "Exchange" or the
"Acquisition." Immediately after the issuance of shares to the former Battle
Mountain shareholders, there were 38,510,000 shares of the Registrant's common
stock issued and outstanding.
ITEM 2.01 COMPLETION OF ACQUISITION OF DISPOSITION OF ASSETS.
On September 9, 2004, the Registrant acquired 100% of the issued and
outstanding shares of Battle Mountain pursuant to the Agreement. All of the
shareholders of Battle Mountain approved the transaction. Each Battle Mountain
shareholder received one (1) share of Registrant's common stock for each share
of Battle Mountain common stock for an aggregate of 11,640,000 shares of the
Registrant's common stock. As a result of the Agreement, Battle Mountain became
a wholly owned subsidiary of the Registrant. Along with the execution of the
Agreement, 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 Registrant's common stock from
Nikoloas Brekropoulos, a former Director of the Registrant. 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 Registrant's common
stock from Dana Neill Upton, the Registrant's former President, Secretary,
Treasurer and Director.
BUSINESS DEVELOPMENT
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
-------------------------------------------------------------------
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. 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 The Registrant's common stock.
Wade A. Hodges, a 40% owner of NGXS, is also a Director of the Registrant and
the beneficial owner of 5.1% of the Registrant's common stock. 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 $840,000 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
$840,000 (or an aggregate of $1,165,000). 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.
On February 24, 2005, Battle Mountain 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 Battle Mountain, 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, Battle Mountain cured a claim of breach that was set forth
in a letter dated February 17, 2005 (the "Notice of Breach"). The Registrant
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 Battle Mountain and NGXS under Pediment. Battle Mountain received an
accelerated vested 50% interest in both the Hot Pots Project and the Fletcher
Junction Project. 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. Under the Amended
Operating Agreement, Battle Mountain 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 Battle Mountain'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 Battle Mountain's earn-in of an interest in Pediment. Once Battle
Mountain has completed the Initial Contribution, Battle Mountain 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.
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.
Battle Mountain disclosed these and other material terms of the Amended
Operating Agreement in a Form 8-K filed with the Commission on February 28,
2005.
THE HOT POTS PROJECT
--------------------
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.
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.
THE FLETCHER JUNCTION PROJECT
-----------------------------
Pediment has staked 342 unpatented mining claims in Mineral County, Nevada,
which claims we refer to as the "Fletcher Junction Project."
Ground Water Chemistry
------------------------
Battle Mountain's primary gold exploration efforts will be driven by the
application of a hydro-geochemical testing program to evaluate ground water
chemistry that can identify the presence of gold and associated minerals and
elements in gravel-covered pediment locations, most of which have not been
tested. Testing in this manner can measure the presence of gold and its
associated minerals down to the parts per trillion. This testing will be
conducted as part of the Program initially targeting Nevada's gravel-covered
pediments.
As ground water interacts with rock, it picks up a "scent" of the rocks the
water passes through. If the ground water encounters gold ore or geochemically
altered rocks associated with gold, distinctive water chemical signatures
result. These "signatures" form plumes considerably larger than the gold
deposits themselves, and present a down-slope deposit "footprint" that indicates
mineralization is nearby. Once recognized, this water chemistry "scent" can be
used to back track to the source gold deposit, especially when the deposit is
hidden by gravels and not exposed at the surface. Ground Water Chemistry can
provide a direct indication of the presence of a gravel-covered, gold-bearing
system. The Company believes that Ground Water Chemistry will provide a
powerful, simple and direct exploration methodology within Nevada's basin and
range.
It is imperative that the Company obtain approximately $2.415 million of
additional financing to complete the Initial Contribution and conduct its
business operations. 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 or scale back its operations.
DESCRIPTION OF PRINCIPAL PRODUCTS AND SERVICES
The Company currently does not offer any products or services. In the event
that the Company discovers economic deposits of gold or other minerals, it
intends to either sell the deposits or, depending on the specific
characteristics of each discovery, conduct its own mining operations to extract
the gold or other minerals for future sale.
COMPETITIVE BUSINESS CONDITIONS
The mineral exploration industry is intensely competitive in all its
phases. Worldwide, the competitive business environment for minerals exploration
is variable and dependent upon geographic location, political and regulatory
environments, technology applications, and the specific mineral commodity being
sought.
COPYRIGHTS, PATENTS, TRADEMARKS & LICENSES
NGXS granted the Company a limited, exclusive license to use the Database,
NGXS' proprietary data reduction and orientation processes for its GIS database
for the state of Nevada, and NGXS' proprietary water sampling protocol. The
Company does not otherwise own, or hold any licenses to, any copyrights,
patents, trademarks or other types of intellectual property.
NEED FOR GOVERNMENTAL APPROVAL AND THE EFFECTS OF REGULATIONS
In some jurisdictions, government regulations require permits and, in some
cases, reclamation bonding. The details of such permits and the size of the
bonds are related to the location of the property and size of the anticipated
exploration-related surface disturbance. The effect of these regulations on the
Company will include the cost of obtaining permits, posting reclamation bonds
(if required), and completing environmental restoration work if a property is to
be abandoned.
RESEARCH AND DEVELOPMENT SINCE JANUARY 7, 2004 (INCEPTION)
Since January 7, 2004 ("Inception"), Battle Mountain has conducted mineral
exploration activities using a newly developed high-technology hydro-geochemical
exploration program in Nevada.
COSTS AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS
The costs and effects of compliance with environmental laws vary in
different jurisdictions and countries. In general, Battle Mountain will have to
obtain permits prior to construction of vehicle access trails and drill sites.
In addition, Battle Mountain will be required to perform environmental
reclamation of these disturbances if the property is to be abandoned.
EMPLOYEES
The Company has two (2) full-time employees, both of whom are employed on a
full-time basis.
DESCRIPTION OF PROPERTY
Battle Mountain currently has a one-year lease for approximately 165 square
feet of office space in Reno, Nevada that expires April 30, 2005. Battle
Mountain pays $960 per month for the office space consisting of monthly base
rent of $850 and a monthly charge for telephones and DSL Internet service of
$110.
Mining Operation Disclosure
- ---------------------------
Battle Mountain is an exploration stage company in search of mineral
deposits primarily in Nevada and has no proven or probable reserves. Battle
Mountain has earned an accelerated vested 50% interest in the Hot Pots Project
and the Fletcher Junction Project. Pursuant to the Joint Venture, Battle
Mountain has an opportunity to earn up to a 70% interest in Pediment. Battle
Mountain has paid $1,165,000 towards the Initial Contribution in Pediment, but
will not own an interest in Pediment until Pediment spends such funds. As of the
filing of this report, Pediment has spent approximately $429,000. Pursuant to
the Operating Agreement, as amended, Battle Mountain will earn a 50% interest in
Pediment after Pediment spends the remaining $736,000.
The Hot Pots Project and the Fletcher Junction Project are both in the
exploration stage as they are without known reserves and the proposed program is
exploratory in nature. The work to date has included surface field examination
and surface and subsurface (from water wells) water sampling. The Program
includes soil sampling and geophysical surveys. Exploration drilling began on
the Hot Pots Project on March 21, 2005. There has not been, and there are no,
plant, equipment or surface disturbances on the Fletcher Junction Project. The
exploration planning and current exploration efforts are based on the earlier
identification of anomalous mineral concentrations in the subsurface ground
water. There are no reports concerning the two properties.
The Hot Pots Project consists of two adjacent properties held by Pediment
under the Tomera Lease and the Letter Agreement, discussed above. The Hot Pots
Project is located in Humboldt County, in north-central Nevada. The properties
are accessible by dirt roads. Neither the property owner, the Registrant, nor
Pediment is aware of any history of previous mining operations or exploration
activities on the property covered by the Tomera Lease. While there has been
some limited exploration drilling, there is no history of previous mining
operations on the property covered by the Letter Agreement. The Tomera Ranch
property is an active, operating cattle ranch. The property covered by the
Letter Agreement is unimproved, natural range land. The entire area is overlain
by geologically recent gravels, believed to be several hundred feet thick.
Pediment is presently negotiating for two additional properties, both of which
are adjacent to the Hot Pots Project.
The Fletcher Junction Project consists of 342 unpatented mining claims in
Mineral County, west-central Nevada. The area is accessible by improved, county
maintained dirt road. Field observation indicates there has been no recent or
historical mining operations in the area. Neither the Registrant, nor Pediment
is aware of any history of previous exploration activity. The area is natural,
unimproved open range and hilly land. The area is overlain by geologically
recent gravels and volcanic basalt flows.
LEGAL PROCEEDINGS
The Company is not a party to, and its property is not the subject of, any
pending legal proceedings.
RELATED PARTY TRANSACTIONS
James E. McKay has entered into a consulting agreement with the Registrant
as discussed below under "Item 5.02(c)."
RISK FACTORS
Risks Relating to Our Business
WE NEED $2,415,000 MILLION OF ADDITIONAL CAPITAL.
- -------------------------------------------------
It is imperative that we raise $2,415,000 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 $1,165,000 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 $1,165,000 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. As of September 30, 2004, most of our current assets consisted of
short-term investments which represents our investment in trading securities. We
had unrealized loss of $48,640 from trading securities during the three months
ended September 30, 2004. 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 November 4, 2004, Morgan & Company, Chartered
Accountants ("Morgan") 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 42.3% 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 42.3% 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 Related to Our Common Stock
WE ARE NOT CURRENT IN OUR FILINGS OF OUR PERIODIC REPORTS TO THE SEC WHICH HAS
- ------------------------------------------------------------------------------
RESULTED IN US RECEIVING A FIFTH LETTER "E" ON OUR TRADING SYMBOL AND MAY RESULT
- --------------------------------------------------------------------------------
IN OUR COMMON STOCK BEING DE-LISTED FROM TRADING ON THE OTCBB.
- --------------------------------------------------------------
We are not current in our filings with the SEC, and, as a result, we have
received a fifth letter "E" on our trading symbol which is now listed on the
over-the-counter Bulletin Board (the "OTCBB") as "BMGXE". We have until April
21, 2005, to become current or else our common stock will be de-listed from
trading on the OTCBB. There can be no assurance that our common stock will
continue to be listed on the OTCBB. If our common stock is de-listed from the
OTCBB, we anticipate that it will be traded on the Pink Sheets which is
generally considered to be a less liquid market than the OTCBB. In the event
that our common stock is de-listed from the OTCBB, it is likely that our common
stock will have less liquidity than it has, and will trade at a lesser value
than it does, on the OTCBB.
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 gold exploration, development and
production industry.
Our common stock is traded on the over-the-counter Bulletin Board (the
"OTCBB"). In recent years the stock market in general has experienced extreme
price fluctuations that have oftentimes have 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,
interest rates or international currency fluctuations 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 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 Commission under the Exchange Act of 1934 (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 (none of which conditions the Company meets)
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.
ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES
In December 2004, the Registrant issued an aggregate of 11,640,000 shares
of common stock in a transaction that was not registered under the Securities
Act of 1933 (the "Securities Act") to the former Battle Mountain shareholders
pursuant to the Exchange whereby Battle Mountain became a wholly-owned
subsidiary of the Registrant on September 9, 2004. The Registrant claims the
exemption from registration afforded by Rule 506 of Regulation D under the
Securities Act.
ITEM 5.01 CHANGES IN CONTROL OF REGISTRANT.
On September 9, 2004, the Battle Mountain shareholders entered into the
Agreement with the Registrant, whereby each Battle Mountain shareholder received
one (1) share of Registrant's common stock for each share of Battle Mountain
common stock for an aggregate of 11,640,000 shares of the Registrant's common
stock. Along with the execution of the Agreement, 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 Registrant's common stock from Nikoloas Bekropoulos a former
Director of the Registrant. Additionally 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 Registrant's
common stock from Dana Neill Upton, the Registrant's former President,
Secretary, Treasurer and Director. Following the execution of the Agreement and
the stock purchase agreements, the Battle Mountain shareholders owned 22,640,000
shares of the Registrant's common stock. As a result of these transactions, the
following individuals exercise control over the Registrant:
Shares of Common Stock Beneficially Owned (1)
Name No. of Shares Percentage
- ---- -------------- ----------
James E. McKay 4,700,000 11.4%
Mark Kucher 8,550,000 (2) 20.7%
Wade A. Hodges 2,100,000 5.1%
Kenneth Tullar 2,100,000 5.1%
- -------------- -------------- -----------
<FN>
(1) The number of shares of common stock owned are those "beneficially owned" as
determined under the rules of the Securities and Exchange Commission, including
any shares of common stock as to which a person has sole or shared voting or
investment power and any shares of common stock which the person has the right
to acquire within sixty (60) days through the exercise of any option, warrant or
right. As of March 29, 2005, there were 41,230,000 shares of common stock
outstanding.
(2) Includes 3,160,000, 1,000,000, 1,000,000 and 40,000 shares of common stock
owned by Bug River, British Swiss Investment Corp. ("British Swiss"), Warrior
Resources Corp. ("Warrior"), and Mr. Kucher's spouse, respectively. Mark Kucher
is a director and shareholder of Bug River, British Swiss, and Warrior.
ITEM 5.02 DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF
DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS.
(b) On September 9, 2004, Nikoloas Bekropoulos and Philip Stanley Taneda
resigned as Directors of the Registrant. On that same date, Mark Kucher resigned
as the Chief Executive Officer and President of the Registrant.
(c) On September 9, 2004, the Registrant's Board of Directors, via
unanimous written consent, appointed James E. McKay as the Registrant's Chief
Executive Officer and President. Mr. Kucher will continue to serve as Principal
Financial Officer. Mr. Kucher has served in this capacity since his appointment
as an officer of the Registrant in April 2004.
JAMES E. MCKAY, age 58, has served as the Registrant's President, Chief
Executive Officer, Secretary and Treasurer since June 2004. From July 1992 to
May 2004, Mr. McKay was a manager and Director of Miramar Mining Corporation's,
American Eagle Resources and managed the Golden Eagle Mine in Storey Co. in
Nevada. During the same period, Mr. McKay served as a director of Aurex, a
Canadian-Chilean partnership involved in acquisitions and the ownership and
management of an underground copper-gold mine in Chile. From February 1989 to
July 1993, Mr. McKay was a self-employed Consultant. Mr. McKay has over thirty
(30) years of foreign and North American exploration and operational experience.
His experience has included corporate directorships and exploration, operations
and reclamation management. In 1979, following six years as a field exploration
geologist in Africa, Colombia, Mexico, and North America, he was designated the
on-site manager of Homestake Mining Corporation's McLaughlin exploration
project, from its inception through the announcement of the discovery of the 3
million ounces gold deposit. Mr. McKay holds a Masters in Business
Administration and a Bachelor of Science degree in Geological Engineering both
from the University of Nevada.
Effective June 1, 2004, James E. McKay entered into a consulting agreement
with the Registrant pursuant to which Mr. McKay serves as the Registrant's
President. Mr. McKay began assisting Mark Kucher as the Registrant's President,
Chief Executive Officer, Secretary and Treasurer in June 2004. Mr. McKay began
formally serving in these capacities in September 2004. Pursuant to the
consulting agreement, Mr. McKay receives a base salary of $7,500 per month,
three (3) weeks of paid vacation, and an option, which was approved by our board
of directors, 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.
Mr. McKay and the Registrant may terminate the consulting agreement at will,
provided, however, that if the Registrant's terminates the consulting agreement
for any reason, or if Mr. McKay and the Registrant mutually decide to terminate
the agreement at any time before the third anniversary date of the agreement,
the Registrant will pay Mr. McKay a severance at his then current salary through
the third anniversary date upon such termination. If the Registrant terminates
Mr. McKay's employment prior to May 31, 2005, the option will automatically vest
in its entirety on the date of such termination.
The Registrant 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 Registrant. 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 Registrant 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 Registrant's common
stock that vests one year after commencement of Mr. Kucher's employment with the
Registrant, 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 Registrant's Board of Directors granted Mark
Kucher an option to purchase 500,000 shares of the Registrant's common stock at
an exercise price of $0.99 per share, which option vests in its entirety on May
31, 2005, provided that if the Registrant 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.
(d) On September 9, 2004, the Registrant's Board of Directors appointed
James E. McKay and Wade A. Hodges as Directors.
James E. McKay has entered into a consulting agreement with the Registrant
as discussed above under Item 5.02(c).
Wade A. Hodges, a Director of the Registrant, 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. Battle Mountain
and NGXS came to the current terms regarding Mr. Hodges's payment as part of the
Amended Operating Agreement entered into in February 2005. Prior to the Amended
Operating Agreement, 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 as of September 30, 2004.
Messrs. McKay and Hodges have not been named to any committees of the
Registrant's Board of Directors, and any committees of the Registrant's Board of
Directors to which Messrs. McKay and Hodges may be named have not been
determined, as of the filing of this report.
ITEM 5.03 AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN
FISCAL YEAR
Effective September 9, 2004, the Registrant changed its fiscal year end to
December 31, which is consistent with that of Battle Mountain, the accounting
acquirer in the Acquisition which is being treated as a reverse merger.
ITEM 8.01 OTHER EVENTS
On September 9, 2004, Mark Kucher also resigned as the Registrant's
Secretary and Treasurer. On that same day, the Registrant's Board of Directors
appointed James E McKay as Secretary and Treasurer.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Battle Mountain Gold Exploration, Inc. to be
provided.
(b) Pro Forma Financial Information To Be provided
(c) Exhibits:
Exhibit No. Description
2.1(1) Exchange Agreement
10.1(1) Exploration Agreement with Nevada Gold Exploration
Solutions, LLC, including Members' Agreement and
Operating Agreement regarding Pediment Gold, LLC
10.2(1) Amended Initial Contribution Schedule
10.3(1) Employment Agreement with James E. McKay
10.4(2) Short Form of Exploration and Development Agreement
of Pediment Gold, LLC
10.5(3) Employment Agreement with Mark Kucher
10.6(4) Amendment to Operating Agreement of Pediment Gold LLC
10.7(5) Mining Lease Agreement with Tomera Ranches, Inc.
(1) Filed as Exhibits 2.1, 10.1, 10.2 and 10.3, respectively, to the
Company's Form 8-K filed with the Commission on November 19, 2004, and
incorporated by reference.
(2) Filed as Exhibit 10.1 to the Company's Form 8-K filed with the
Commission on January 6, 2005, and incorporated by reference.
(3) Filed as Exhibit 10.5 to the Company's Form 10-QSB filed with the
Commission on January 24, 2005, and incorporated by reference.
(4) Filed as Exhibit 10.2 to the Company's Form 8-K filed with the
Commission on February 28, 2005, and incorporated by reference.
(5) To be filed as Exhibit 10.7 to the Company's Form 10-QSB to be filed
with the Commission shortly after this Form 8-K/A.
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Battle Mountain Gold Exploration Corp.
March 30, 2005
/s/ James E. McKay
- -------------------
James E. McKay
Chief Executive Officer