UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
Amendment No. 2
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.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 86-1066675
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(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION)
ONE EAST LIBERTY STREET, SIXTH FLOOR, SUITE 9, RENO, NEVADA 89504
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(775) 686-6081
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(ISSUER TELEPHONE NUMBER)
N/A
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(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. 2 is being filed to include financial
statements and information under Item 9.01 and a section entitled "Management's
Discussion and Analysis or Plan of Operation" in Item 2.01 that relates to the
financial statements being provided, to update the beneficial ownership
information under Item 5.01, and to include related party information, including
option re-pricing and new option grants under Item 5.02(c) and (d) and Item
8.01.
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"), 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.
As a result of the Acquisition, the Registrant is a holding company for
Battle Mountain. Through Battle Mountain, the Registrant 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" as used herein
means the Registrant, Battle Mountain Gold Exploration Corp., a Nevada
corporation, and its subsidiary, Battle Mountain Gold Exploration, Inc., also a
Nevada corporation.
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
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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 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
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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
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Pediment has staked 342 unpatented mining claims in Mineral County, Nevada,
which claims we refer to as the "Fletcher Junction Project."
Ground Water Chemistry
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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. Battle Mountain believes that Ground Water Chemistry will provide a
powerful, simple and direct exploration methodology within Nevada's basin and
range.
It is imperative that Battle Mountain obtain approximately $2.6 million of
additional financing to complete the Initial Contribution and conduct its
business operations. Battle Mountain 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 Battle Mountain or that adequate funds will be sufficient for
its operations, whether from the its financial markets, or other arrangements
will be available when needed or on terms satisfactory to Battle Mountain.
Battle Mountain does not have any commitments from its officers, directors or
affiliates or from the Registrant to provide funding. The failure of Battle
Mountain to obtain adequate financing may result in Battle Mountain having to
delay, curtail or scale back its operations.
DESCRIPTION OF PRINCIPAL PRODUCTS AND SERVICES
Battle Mountain currently does not offer any products or services. In the
event that Battle Mountain 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 Battle Mountain 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.
Battle Mountain 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
Battle Mountain 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
Battle Mountain had one (1) full-time employee prior to the Acquisition.
In January 2005, the Registrant's board of directors retroactively ratified the
employee's employment agreement as of January 1, 2004.
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
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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 $449,000. Pursuant to
the Operating Agreement, as amended, Battle Mountain will earn a 50% interest in
Pediment after Pediment spends the remaining $716,000.
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
Battle Mountain is not a party to, and its property is not the subject of,
any pending legal proceedings.
RELATED PARTY TRANSACTIONS
James E. McKay and Mark Kucher have entered into employment agreements with
the Registrant as discussed below under "Item 5.02(c)." Mr. McKay and Mr.
Kucher are directors of Battle Mountain.
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.
PLAN OF OPERATION
Battle Mountain can satisfy its current cash requirements until July 1,
2005, when a payment of $385,000 becomes due to Pediment. It is imperative that
Battle Mountain obtain $2,600,000 of additional financing during the next twelve
(12) months to fully implement its business plan and earn 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. Battle Mountain 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.
Battle Mountain 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
Battle Mountain or that adequate funds will be sufficient for Battle Mountain's
operations, whether from Battle Mountain's financial markets, or other
arrangements will be available when needed or on terms satisfactory to Battle
Mountain. Battle Mountain does not have any commitments from its officers,
directors or affiliates or from the Registrant to provide funding. The failure
of Battle Mountain to obtain adequate financing may result in Battle Mountain
having to delay, curtail, scale back or forgo its operations.
Battle Mountain does not expect to purchase any plant or significant
equipment during the next twelve months. Battle Mountain 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
Battle Mountain was incorporated on January 7, 2004. The Registrant
acquired Battle Mountain on September 9, 2004. The discussion below relates to
the financial information of Battle Mountain as of September 9, 2004, and for
the period from January 7, 2004 to September 9, 2004.
PERIOD FROM JANUARY 7, 2004 (INCEPTION) TO SEPTEMBER 9, 2004
Revenues
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Battle Mountain did not have any revenues during the period from January 7,
2004 to September 9, 2004.
Expenses
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For the period from January 7, 2004 to September 9, 2004, Battle Mountain
had total expenses of $134,125, consisting of professional and consulting of
$100,060, travel and entertainment of $19,720, rent and office of $8,804,
general and administrative expenses of $5,495, and depreciation expense of $46.
Battle Mountain had a loss of $47,500. The unrealized loss was the result
of a decrease in the value of securities held for resale.
Net Loss and Net Loss Per Share
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Net loss was $181,625 (or basic and diluted loss per common share of $0.02)
for the period from January 7, 2004 to September 9, 2004.
LIQUIDITY AND CAPITAL RESOURCES
Total current assets were $105,311 as of September 9, 2004, consisting of
short-term investments in marketable securities of $66,500, loan and notes
receivable of $28,511, cash of $10,005 and other current assets of $295.
The loan and notes receivable of $28,500 represents payments made by Battle
Mountain on behalf of the Registrant on a consulting agreement with an officer/
director of the Registrant at a rate of $7,500 per month.
Total current liabilities were $134,414 as of September 9, 2004,
consisting of notes payable to related party of $129,414, and accounts payable
and accrued liabilities of $5,000. The notes payable to related party of
$129,414 represents loans by shareholders of Battle Mountain. These loans are
in the form of non-interest bearing, unsecured advances.
As of September 9, 2004, Battle Mountain had a working capital deficit of
$29,103.
Net cash used in operating activities was $129,374 for the period from
January 7, 2004 to September 9, 2004, consisting of net loss of $181,625 and an
increase in other current assets of $295 that were offset by an adjustment for
unrealized loss in investments of $47,500, an increase in accounts payable of
$5,000 and an adjustment for depreciation of $46.
Net cash used in investing activities was $470,035 for the period from
January 7, 2004 to September 9, 2004, consisting of cash paid for investment in
Joint Venture of $325,000, short-term investments of $114,000, notes receivable
of $28,500 and property, plant and equipment of $2,524.
Net cash provided by financing activities was $606,414 for the period from
January 7, 2004 to September 9, 2004, consisting of proceeds from the sale of
stock of $480,000 and proceeds from notes payable to a related party of
$129,414.
Battle Mountain can satisfy its current cash requirements until July 1,
2005, when a payment of $385,000 becomes due to Pediment. It is imperative
that Battle Mountain obtain $2,600,000 of additional financing during the next
twelve (12) months to fully implement its business plan and earn a 70% interest
in Pediment. Battle Mountain 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 its operating expenses. Battle Mountain 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 Battle Mountain or that
adequate funds will be sufficient for Battle Mountain's operations, whether from
Battle Mountain's financial markets, or other arrangements will be available
when needed or on terms satisfactory to Battle Mountain. Battle Mountain does
not have any commitments from its officers, directors or affiliates or from the
Registrant to provide funding. The failure of Battle Mountain to obtain
adequate financing may result in Battle Mountain having to delay, curtail, scale
back or forgo its operations.
RISK FACTORS
Risks Relating to Our Business
WE NEED $2,600,000 OF ADDITIONAL CAPITAL.
- -------------------------------------------------
It is imperative that the Company obtain $2,600,000 of additional financing
during the next twelve (12) months to fully implement its 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
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OF PEDIMENT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND RESULTS OF
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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.
IN THE PAST, WE HAVE CHANGED THE TERMS OF VARIOUS AGREEMENTS AFTER THEY HAVE
- --------------------------------------------------------------------------------
BEEN FINALIZED AND DISCLOSED TO THE PUBLIC WHICH POSES A RISK TO OUR DISCLOSURE
- --------------------------------------------------------------------------------
CONTROLS AND PROCEDURES AND OUR ABILITY TO TIMELY FILE ACCURATE INFORMATION IN
- --------------------------------------------------------------------------------
OUR PERIODIC AND OTHER REPORTS WITH THE SEC.
- --------------------------------------------
We have changed the terms of various agreements including, but not
limited to subscription agreements, option agreements and other material
agreements. For example, we sold 450,000 shares at $1.00 per share to four
individual investors in November 2004. In February 2005, we changed the terms of
this sale to 900,000 shares at $0.50 per share. We are in the process of making
further amendments to the terms of this sale. We granted options with an
exercise price of $0.99 per share and subsequently re-priced the options to
$0.40 per share. We amended the terms of the Operating Agreement of Pediment to
allow us to obtain an accelerated vested 50% interest in the Hot Pots Project
and the Fletcher Junction Project. We are considering additional amendments to
the Amended Operating Agreement. Future changes such as the ones mentioned here
pose a risk to our disclosure controls and procedures and our ability to timely
file accurate information in our periodic reports and other reports with the
SEC which may have a material adverse effect on the Company and may also result
in disclosed information becoming inaccurate.
THE REGISTRANT'S AUDITORS HAVE EXPRESSED AN OPINION THAT THERE IS SUBSTANTIAL
- -----------------------------------------------------------------------------
DOUBT ABOUT ITS 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 the Registrant's ability to continue as a going concern based on its
history of operating losses since Inception, its lack of operating revenues and
its dependence on adequate financing. The Registrant's financial statements do
not include any adjustments that might result from the outcome of that
uncertainty. The Registrant closed a reverse merger transaction with Battle
Mountain on September 9, 2004. Battle Mountain's auditors, Chisholm, Bierwolf
and Nilson, LLC did not express such an opinion in their report on Battle
Mountain's financial statements as of September 9, 2004. We note, however,
that Battle Mountain is itself in the exploration stage, has agreed to
contribute $2,085,000 toward the Initial Contribution in Pediment during the
next twelve (12) months, and will need to raise the entire amount in equity
or debt financing to complete the Initial Contribution. It is highly likely
that an audit report of the Registrant issued after the Acquisition will
include an expression of an opinion that there is substantial doubt about the
Registrant's ability to continue as a going concern. If the Registrant is
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
Registrant and the Registrant's President pursuant to a three-year employment
agreement. Mr. McKay also serves as the Registrant's Chief Executive Officer,
Secretary and Treasurer. Mr. McKay and the Registrant may voluntarily terminate
the employment agreement at any time. Mark Kucher serves as a director of the
Registrant and the Registrant's Chief Financial Officer pursuant to an
employment agreement. Mr. Kucher and the Registrant 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 ARE THE BENEFICIAL
- --------------------------------------------------------------------------------
OWNERS OF AN AGGREGATE OF 47.0% OF THE REGISTRANT'S 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
the Registrant's 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
IN THE PAST, WE HAVE NOT BEEN CURRENT IN FILING OUR PERIODIC REPORTS WITH THE
- --------------------------------------------------------------------------------
SEC WHICH HAS RESULTED IN US RECEIVING A FIFTH LETTER "E" ON OUR TRADING SYMBOL
- --------------------------------------------------------------------------------
SYMBOL ON AT LEAST TWO PRIOR OCCASIONS.
- ---------------------------------------
We have not been current in our filings with the SEC, and, as a result, we
have received a fifth letter "E" on our trading symbol on at least two prior
occasions. There can be no assurance that we will file our reports with the SEC
in a timely manner. If we continue to be late in our filings we will most likely
receive an "E" on our trading symbol which may result in our common stock being
de-listed from the over-the-counter Bulletin Board (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.
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:
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 $47,500 from trading
securities during the period from January 7, 2004 to September 9, 2004.
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 period from January 7, 2004 to September 9, 2004.
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 and
additional issuances, the following individuals exercise control over the
Registrant:
Shares of Common Stock Beneficially Owned (1)
Name No. of Shares Percentage
- ---- -------------- ----------
Mark Kucher 9,350,000 (2) 22.4%
James E. McKay 5,500,000 (3) 13.2%
Wade A. Hodges 2,400,000 (4) 5.8%
Kenneth Tullar 2,300,000 (5) 5.6%
- -------------- -------------- -----------
<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 April 12, 2005, there were 41,030,000 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.
Also includes options to purchase an aggregate of 800,000 shares at $0.40 per
share that will vest in their entirety on April 15, 2005.
(3) Includes options to purchase an aggregate of 800,000 shares at $0.40 per
share that will vest in their entirety on April 15, 2005.
(4) Includes an option to purchase 300,000 shares at $0.40 per share that will
vest in its entirety on April 15, 2005.
(5) Includes an option to purchase 200,000 shares at $0.40 per share that will
vest in its entirety on April 15, 2005.
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 Company's President since June
2004. Mr. McKay began formally serving as the Company's, Chief Executive
Officer, Secretary and Treasurer in September 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 an employment agreement
with the Registrant pursuant to which Mr. McKay serves as the Registrant's
President. Pursuant to the employment 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
employment agreement at will, provided, however, that if the Registrant's
terminates the employment 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. In April 2005, the Registrant's board of directors amended
the terms of Mr. McKay's option to vest in its entirety on April 15, 2005, at an
amended exercise price of $0.40 per share.
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 provided 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. In April 2005, the
Registrant's board of directors amended the terms of Mr. Kucher's option to vest
in its entirety on April 15, 2005, at an amended exercise price of $0.40 per
share.
(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 an employment agreement with the Registrant
as discussed above under Item 5.02(c). In addition, the Registrant's board of
directors approved the grant of an option to each of its directors, which
includes Mr. McKay, to purchase 300,000 shares of the Registrant's common stock
with an exercise price of $0.40 per share and a vesting date of April 15, 2005,
for their services as members of the board of directors.
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. In April 2005, the Registrant's
board of directors approved the grant of an option to each of its directors,
which includes Mr. Hodges, to purchase 300,000 shares of the Registrant's common
stock with an exercise price of $0.40 per share and a vesting date of April 15,
2005, for their services as members of the board of directors.
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.
Related Party Transactions
Kenneth Tullar, the beneficial owner of 5.8% of the Company's common stock,
owns a twenty percent (20%) membership interest in NGXS. Mr. Tullar provides
geological services to Pediment. 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 Pediment as of September
30, 2004. In April 2005, the Registrant's board of directors approved the grant
of an option to Mr. Tullar to purchase 200,000 shares of the Registrant's common
stock with an exercise price of $0.40 per share and a vesting date of April 15,
2005.
Amended Options and New Options
In September 2004, the Registrant granted James E. McKay, its President,
Chief Executive Officer, Secretary and Treasurer, an option to purchase 500,000
shares of its common stock at an exercise price of $0.99 per share with a
vesting date of May 31, 2005. In December 2004, the Registrant granted to Mark
Kucher, its Principal Financial Officer, an option to purchase 500,000 shares
of its common stock at an exercise price of $0.99 per share with a vesting date
of May 31, 2005. In April 2005, the Registrant amended the terms of these grants
to provide for an amended exercise price of $0.40 per share and a vesting date
of April 15, 2005. In April 2005, the Registrant's board of directors approved
the grant to each of its directors of 300,000 shares (or an aggregate of
1,500,000 shares) with an exercise price of $0.40 per share and a vesting date
of April 15, 2005.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(a) Audited Financial Statements of Battle Mountain Gold Exploration, Inc.
Chisholm
Bierwolf & 533 West 2600 South, Suite 250
Nilson, LLC Bountiful, Utah 84010
Phone: (801) 292-8756
Certified Public Accountants Fax: (801) 292-8809
Independent Auditors' Report
----------------------------
To the Board of Directors and Stockholder's
Battle Mountain Gold Exploration, Inc.
We have audited the accompanying balance sheet of Battle Mountain Gold
Exploration, Inc., as of September 9, 2004, and the related statement of
operations, stockholders' equity, and cash flows for the period January 7, 2004
(Inception) through September 9, 2004. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Battle Mountain Gold
Exploration, Inc., as of September 9, 2004, and the results of its operations
and cash flows for the period January 7, 2004 (Inception) through September 9,
2004 in conformity with generally accepted accounting principles in the United
States of America.
/s/ Chisholm, Bierwolf & Nilson, LLC
Chisholm, Bierwolf & Nilson, LLC
Bountiful, Utah 84010
March 23, 2005
A Member of the AICPA, UACPA and Registered with the PCAOB
----------------------------------------------------------
BATTLE MOUNTAIN GOLD EXPLORATION, INC.
(An Exploration Stage Company)
BALANCE SHEET
SEPTEMBER 9,
2004
----------
A S S E T S
CURRENT ASSETS
--------------
Cash $ 10,005
Marketable Securities 66,500
Loans and Notes Receivable 28,511
Other Current Assets 295
----------
TOTAL CURRENT ASSETS 105,311
FIXED ASSETS
------------
Property, Plant and Equipment, net of accumulated depreciation 2,478
----------
TOTAL FIXED ASSETS 2,478
OTHER ASSETS
------------
Investment in Mining Properties 325,000
----------
TOTAL OTHER ASSETS 325,000
----------
TOTAL ASSETS $ 432,789
==========
L I A B I L I T I E S
---------------------
CURRENT LIABILITIES
-------------------
Accounts Payable and accrued liabilities $ 5,000
Note Payable-Related Parties 129,414
----------
TOTAL CURRENT LIABILITIES 134,414
----------
TOTAL LIABILITIES 134,414
S T O C K H O L D E R S ' E Q U I T Y
-------------------------------------
PREFERRRED STOCK -
10,000,000 authorized shares, par value $.001
zero shares issued and outstanding
COMMON STOCK 11,640
200,000,000 authorized shares, par value $.001
11,640,000 shares issued and outstanding
Additional Paid-in-Capital 468,360
Deficit accumulated during the exploration stage (181,625)
----------
TOTAL STOCKHOLDERS' EQUITY 298,375
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 432,789
==========
The accompanying notes are an integral part of these financial
statements.
BATTLE MOUNTAIN GOLD EXPLORATION, INC.
(An Exploration Stage Company)
STATEMENT OF OPERATIONS
ACCUMULATED
JANUARY 7, 2004
(INCEPTION) THROUGH
SEPTEMBER 9,
2004
-------------------
REVENUES $ -
- -------- -------------------
EXPENSES
- --------
Depreciation Expense 46
Professional & Consulting 100,060
Travel & Entertainment 19,720
Rent & Office 8,804
General & Administrative Expenses 5,495
-------------------
TOTAL EXPENSES 134,125
-------------------
OTHER INCOME (EXPENSE)
Unrealized Gains ( Loss) (47,500)
-------------------
TOTAL OTHER INCOME (EXPENSE) (47,500)
-------------------
INCOME (LOSS) BEFORE TAX
Tax Expense -
-------------------
NET INCOME ( LOSS ) $ (181,625)
-------------------
-------------------
BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.02)
===================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES ===================
USED IN PER SHARE CALCULATIONS 9,301,138
===================
The accompanying notes are an integral part of these financial
statements.
BATTLE MOUNTAIN GOLD EXPLORATION, INC.
(An Exploration Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
FROM INCEPTION ON JANUARY 7,2004 THROUGH SEPTEMBER 9,2004
---------------------------------------------------------
DEFICIT
ACCUMULATED TOTAL
DURING STOCKHOLDERS'
COMMON STOCK ADDITIONAL EXPLORATION EQUITY
SHARES AMOUNT PAID-IN-CAPITAL STAGE (DEFICIT)
----------------------------------------------------------------------
STOCK ISSUED FOR CASH AT $.0174
PER SHARE: 7,000,000 $ 7,000 $115,000 $ 122,000
STOCK ISSUED FOR CASH AT $.077
PER SHARE: 4,640,000 4,640 353,360 358,000
NET LOSS FROM INCEPTION ON
JANUARY 7,2004 THROUGH
SEPTEMBER 9,2004 : (181,625) (181,625)
=======================================================================
BALANCES-SEPTEMBER 9,2004 11,640,000 $ 11,640 $468,360 $(181,625) $298,375
=======================================================================
The accompanying notes are an integral part of these financial statements.
BATTLE MOUNTAIN GOLD EXPLORATION, INC.
(An Exploration Stage Company)
STATEMENT OF CASH FLOWS
ACCUMULATED
JANUARY 7, 2004
(INCEPTION)
THROUGH
SEPTEMBER, 9
2004
---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
-------------------------------------
Net (Loss) for the Period $ (181,625)
Adjustments to Reconcile Net Loss to Net Cash
Depreciation 46
Unrealized Loss on Investments 47,500
Changes in operating assets and liabilities:
(Increase) Decrease in Other Current Assets (295)
Increase (Decrease ) in Accounts Payable 5,000
NET CASH PROVIDED ( USED ) BY OPERATING ACTIVITIES (129,374)
---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
-------------------------------------
Cash paid for Short Term Investmemts (114,000)
Cash paid for Notes Receivable (28,511)
Cash paid for Investment in Joint Venture (325,000)
Cash paid for Property, Plant and Equipment (2,524)
NET CASH USED IN INVESTING ACTIVITIES (470,035)
---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
-------------------------------------
Proceeds from Notes Payable - Related Party 129,414
Proceeds from Sale of Stocks 480,000
NET CASH PROVIDED FROM FINANCING ACTIVITIES 609,414
---------------
Net Increase ( Decrease ) in Cash & Cash Equivalents 10,005
---------------
Cash & Cash Equivalents Balance, Begin Period -
---------------
CASH & CASH EQUIVALENTS BALANCE, END PERIOD $ 10,005
===============
SUPPLEMENTAL CASHFLOW INFORMATION
CASH PAID FOR: Interest $ -
===============
Income Taxes $ -
===============
The accompanying notes are an integral part of these financial
statements.
BATTLE MOUNTAIN GOLD EXPLORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 9, 2004
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
ORGANIZATION
- ------------
Battle Mountain Gold Exploration, Inc. ("the company") was incorporated under
the laws of the State of Nevada on January 7,2004 for the purpose to promote and
carry on any lawful business for which a corporation may be incorporated under
the laws of the State of Nevada. The company has been in the exploration stage
since its formation and has not yet realized any revenues from its planned
operations. It is primarily engaged in the acquisition and exploration of mining
properties. Upon location of a commercial mineable reserve, the company expects
to sell, lease or actively prepare the site for mineable extraction and enter a
development stage.
ACCOUNTING METHOD
- -----------------
The company's financial statements are prepared using the accrual method of
accounting. Expenses are recognized when incurred. Fixed assets are stated at
cost. Depreciation and amortization are calculated using the straight-line
method and accelerated methods for income tax purposes. A total of $46 has been
recorded for depreciation in the financial statements for the period ended
September 9, 2004.
MINERAL PROPERTY OPTION PAYMENTS AND EXPLORATION COSTS
- ------------------------------------------------------
The company expenses all costs related to the maintenance and exploration of
mineral claims in which it has secured exploration rights prior to establishment
of proven and probable reserves. To date, the company has not established the
commercial feasibility of its exploration prospects, therefore, all costs are
being expensed.
USE OF ESTIMATES
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses for the reporting period. Actual
results could differ from these estimates.
BATTLE MOUNTAIN GOLD EXPLORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 9, 2004
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CON'T)
- -----------------------------------------------------------
INCOME TAXES
- ------------
The company has adopted Statement of Financial Accounting Standards No. 109 -
"Accounting for Income Taxes" (SFAS 109). This standard requires the use of an
asset and liability approach for financial accounting, and reporting on income
taxes. If it is more likely than not that some portion or all of a deferred tax
asset will not be realized, a valuation allowance is recognized.
CASH AND CASH EQUIVALENTS
- -------------------------
The company considers all highly liquid debt instruments with a maturity of
three months or less at the time of purchase to be cash equivalents. Cash and
cash equivalents consist of checking accounts and money market funds.
EARNINGS PER COMMON SHARE
- -------------------------
The company adopted Financial Accounting Standards SFAS No. 128, "Earnings Per
Share," which simplifies the computation of earnings per share requiring the
restatement of all prior periods.
Basic earnings per share are computed on the basis of the weighted average
number of common shares outstanding during each year.
Diluted earnings per share are computed on the basis of the weighted average
number of common shares and dilutive securities outstanding. Potentially
issuable common shares related to warrants and options are excluded from the
calculation of fully diluted loss per share because their inclusion would be
anti-dilutive.
RECENT ACCOUNTING PRONOUNCEMENTS
- --------------------------------
In January 2003, the Emerging Issues Task Force ("EITF") issued EITF Issue No.
00-21, ACCOUNTING FOR REVENUE ARRANGEMENTS WITH MULTIPLE DELIVERABLES. This
consensus addresses certain aspects of accounting by a vendor for arrangements
under which it will perform multiple revenue-generating activities,
specifically, how to determine whether an arrangement involving multiple
deliverables contains more than one unit of accounting. EITF Issue No. 00-21 is
effective for revenue arrangements entered into in fiscal periods beginning
after June 15, 2003, or entities may elect to report the change in accounting as
a
BATTLE MOUNTAIN GOLD EXPLORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 9, 2004
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CON'T)
- -----------------------------------------------------------
RECENT ACCOUNTING PRONOUNCEMENTS (CON'T)
- -------------------------------------------
cumulative-effect adjustment. The adoption of EITF Issue No. 00-21 did not have
a material impact on the company's financial statements.
In April 2003, the FASB issued SFAS No. 149, AMENDMENT OF STATEMENT 133 ON
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, which amends and clarifies
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities under SFAS No. 133.
SFAS No. 149 is effective for contracts entered into or modified after June 30,
2003 and for hedging relationships designated after June 30, 2003. The adoption
of SFAS No. 149 will not have an impact on the company's financial statements.
In May 2003, the FASB issued SFAS No. 150, ACCOUNTING FOR CERTAIN FINANCIAL
INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY. SFAS No. 150
changes the accounting guidance for certain financial instruments that, under
previous guidance, could be classified as equity or "mezzanine" equity by now
requiring those instruments to be reported as liabilities. SFAS No. 150 also
requires disclosure relating to the terms of those instruments and settlement
alternatives. SFAS No. 150 is generally effective for all financial instruments
entered into or modified after May 31, 2003, and is otherwise effective at the
beginning of the first interim period beginning after June 15, 2003. The
adoption of SFAS No. 150 did not have an impact on company's financial
statements.
In December 2004, the FASB issued SFAS No. 153, EXCHANGES OF NONMONETARY ASSETS.
The guidance in APB Opinion No. 29, ACCOUNTING FOR NONMONETARY TRANSACTIONS, is
based on the principle that exchanges of non-monetary assets should be measured
based on the fair value of the assets exchanged. This Statement amends Opinion
29 to eliminate the exception for non-monetary exchanges of similar productive
assets and replaces it with a general exception for exchanges of non-monetary
assets that do not have commercial substance. A non-monetary exchange has
commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. The adoption of SFAS No. 153
did not have an impact on the company's financial statements.
In December 2004, the FASB issued SFAS No. 123, SUMMARY OF STATEMENT NO. 123
(REVISED 2004). This Statement is a revision of FASB Statement No. 123,
ACCOUNTING FOR STOCK-BASED COMPENSATION. This Statement supersedes APB Opinion
No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and its related implementation
guidance. This Statement establishes standards for the accounting for
transactions in which an entity exchanges its
BATTLE MOUNTAIN GOLD EXPLORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 9, 2004
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CON'T)
- -----------------------------------------------------------
RECENT ACCOUNTING PRONOUNCEMENTS (CON'T)
- -------------------------------------------
equity instruments for goods or services. It also addresses transactions in
which an entity incurs liabilities in exchange for goods or services that are
based on the fair value of the entity's equity instruments or that may be
settled by the issuance of those equity instruments. This Statement focuses
primarily on accounting for transactions in which an entity obtains employee
services in share-based payment transactions. This Statement does not change
the accounting guidance for share-based payment transactions with parties other
than employees provided in Statement 123 as originally issued and EITF Issue No.
96-18, ACCOUNTING FOR EQUITY INSTRUMENTS THAT ARE ISSUED TO OTHER THAN EMPLOYEES
FOR ACQUIRING, OR IN CONJUNCTION WITH SELLING, GOODS OR SERVICES. The company
is currently evaluating the provisions of SFAS 123(R) and the impact that it
will have on future share based employee compensation programs.
NOTE 2 - MARKETABLE SECURITIES
- ------------------------------
Pursuant to 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 classification of those
securities and the related accounting policies are as follows:
Trading securities: 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.
Available-for-sale-securities: 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.
Dividends on marketable equity securities are recognized in income when
declared. Realized gains and losses are determined on the basis of the actual
cost of the securities sold.
BATTLE MOUNTAIN GOLD EXPLORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 9, 2004
NOTE 2- MARKETABLE SECURITIES (CON'T)
- -------------------------------------
Marketable securities consist of a listed common stock with a fair market value
based on specific identification of $66,500 as of
September 9, 2004. Unrealized losses as of September 9, 2004 were $47,500.
NOTE 3 - RELATED PARTY TRANSACTIONS
- -----------------------------------
As of September 9, 2004 shareholders loaned $129,414. These loans are non
interest bearing, unsecured advances.
The company paid advances on behalf of Battle Mountain Gold Exploration, Corp.
("Battle Mountain") on a consulting agreement with an officer/director of Battle
Mountain at rate of $7,500 per month. As of September 9, 2004 these advances
were $28,511.
NOTE 4-PROPERTY, PLANT AND EQUIPMENT
- ------------------------------------
Property, plant and equipment consist of the following:
ACCUMULATED
USEFUL DEPRECIATION DEPRECIATION NET BOOK
COST LIFE EXPENSE EXPENSE VALUE
- --------------------------------------------------------------------------------
Equipment 382 3yrs 10 10 372
Furniture 2,142 5yrs 36 36 2,106
TOTAL 2,524 46 46 2,478
----- -- -- -----
NOTE5- NET EARNINGS (LOSS) PER SHARE OF COMMON STOCK
- ----------------------------------------------------
The computation of earning (loss) per share of common stock is based on the
weighted average number of shares outstanding at the date of the financial
statements and consists of the following:
BATTLE MOUNTAIN GOLD EXPLORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 9, 2004
NOTE5- NET EARNINGS (LOSS) PER SHARE OF COMMON STOCK (CON'T)
- ------------------------------------------------------------
For the Period Ended
September 9, 2004
================
Basic Loss per share:
Loss (numerator) $ (181,625)
Shares (denominator) 11,640,000
================
Per Share Amount $ (0.02)
================
Fully Diluted Earnings per share:
Loss (numerator) $ (181,625)
Shares (denominator) 11,640,000
================
Per Share Amount $ (0.02)
================
NOTE6- MINERAL PROPERTY INTEREST
- --------------------------------
During the period ended September 9, 2004 the company entered into a joint
venture agreement with Nevada Gold Exploration Solutions ("NGXS") to form
Pediment Gold LLC ("Pediment") to engage in gold exploration in Nevada using a
proprietary water chemistry database developed by NGXS. As of the period ended
September 9, 2004, the company paid an aggregate of $325,000 as a non-refundable
first installment towards acquiring a 70% interest into Pediment as part of an
agreed initial contribution of $3,250,000 (the "Initial Contribution").
As of September 9, 2004, in order to earn an interest in Pediment, the company
was required to make the following additional payments:
- $840,000 which was completed in January 2005, and upon its
expenditure, will give the company an interest of 50%
- $385,000 due on July 1, 2005, which, upon its expenditure, will give
the company a 55% interest.
- $385,000 due on November 1, 2005, which, upon its expenditure, will
give the company a 60% interest.
- $1,315,000 due on April 1, 2006, which, upon its expenditure, will
give the company a 70% interest.
The company will earn the interests as set forth above after Pediment expends
the amount paid by the company on operating costs.
BATTLE MOUNTAIN GOLD EXPLORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 9, 2004
NOTE7 -FEDERAL INCOME TAX
- -------------------------
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 theutilization 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 ($181,625) 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 expire in the year 2024. This loss is
presented as follows:
Current tax Asset value Net Operating
Loss Carry-forward at Current Prevailing
Adjusted Federal Tax Rate of 34%: $ 61,753
Evaluation Allowance (61,753)
--------
Net Tax Asset $ -
========
Current Income Tax Expense $ -
Deferred Income Tax Benefit -
NOTE8- SUBSEQUENT EVENTS
- ------------------------
The company was acquired by Battle Mountain in a transaction accounted for as a
"reverse merger" whereby the company's issued and outstanding common stock of
11,640,000 was exchanged for 11,640,000 newly issued treasury shares pursuant to
an Exchange Agreement that required the approval of at least eighty (80%)
percent of the company's shareholders. This acquisition went into effect as of
September 9, 2004
Also in connection with the Exchange Agreement, six (6) of the company's
shareholders entered into stock purchase agreements with two (2) of Battle
Mountain's former directors to purchase an aggregate of 11,000,000 additional
common shares of Battle Mountain. Going forward the transaction will be
considered to be a reverse acquisition of Battle Mountain and a recapitalization
of the company
In September 2004, Pediment, the company's joint venture with NGXS, entered into
a ten-year mining lease (the "Mining Lease") with a rancher covering
approximately 2,225 acres of land in Humboldt County, Nevada. Pediment made an
initial payment of $25,000 when it entered into the mining lease. Retention of
the Mining Lease is predicated on annual
BATTLE MOUNTAIN GOLD EXPLORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 9, 2004
NOTE8- SUBSEQUENT EVENTS (CON'T)
- --------------------------------
payments of $15,000 per year for three years, and $20,000 per year thereafter.
In addition, Pediment is required to pay the rancher a royalty of 3% of Net
Smelter Returns from production, if any, from the land covered by the Mining
Lease.
In October 2004, Pediment 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 as follows:
- $50,000 during the period October 21, 2004 through October 21, 2005;
- $250,000 during the period October 21, 2005 through October 21, 2006;
and
- $700,000 during the period October 21, 2006 through October 21, 2007.
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.
In January 2005, the company paid an aggregate of $840,000 to Pediment. It had
previously paid an accumulated total of $325,000 to Pediment. The company will
earn a 50% interest in Pediment after Pediment expends $840,000 during the land
acquisition stage. In February 2005, the company and NGXS amended the operating
agreement regarding Pediment which resolved a dispute between them that had
resulted in a Notice of Default from NGXS to the company and claims by NGXS
which suggested that the company was in breach of the operating agreement
regarding Pediment. The amended operating agreement provides, among other
things, that two of eleven areas identified by Pediment will become the sole
site specific project obligations between the company and NGXS under Pediment.
The land covered by the Mining Lease and the land covered by the Letter
Agreement are within one of these areas. Pediment has staked 342 unpatented
mining claims in Mineral County, Nevada within the second area. Upon expenditure
of the land acquisition costs for the two areas, Battle Mountain will own an
accelerated vested 50% interest in each of the areas for which the land
acquisition costs are spent. The company will continue to earn its interest in
Pediment based on the company's scheduled payments and Pediment's subsequent
expenditure of the Initial
BATTLE MOUNTAIN GOLD EXPLORATION, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 9, 2004
NOTE8- SUBSEQUENT EVENTS (CON'T
- -------------------------------
Contribution. Costs incurred relative to either of the two areas will apply
toward the company'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 of the two
areas will only apply toward the company's earn-in of an interest in Pediment.
The amended operating agreement also provides for the establishment of a savings
account for the company and specific controls regarding such savings account and
Pediment's bank account. The 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 members of NGXS, one of which is a director of the company, will be billed
directly to Pediment at a flat rate of $8,000 per month per person plus actual
expenses.
Exploration drilling began and continues on one of the mineral property
interests as of March 21, 2005.
On January 12,2005 the directors of Battle Mountain retroactively ratified a
consulting agreement between the company and an officer/director that calls for
a payment of services at a rate of $7,500 per month commencing from January 1,
2004 but not payable until the company is fully vested into Pediment. In
addition, the officer/director will be granted 500,000 stock options exercisable
at the rate of 100% of the shares upon completion of one (1) year of service
whereby the option will be fully vested. The company and the officer/director
may terminate the agreement at any time. If termination takes place prior to the
one year anniversary, the options will be accelerated so that they are vested
effectively on the date of termination.
(b) Pro Forma Financial Information
BATTLE MOUNTAIN GOLD EXPLORATION, CORP.
(An Exploration Stage Company)
PRO FORMA STATEMENT
SEPTEMBER 9,2004
Battle Mountain Gold Exploration, Corp.
Pro Forma Consolidated Balance Sheet
Battle Battle
Mountain Gold Mountain Gold
Exploration,Corp. Exploration,Inc. Pro Forma
at September 9, at September 9, Pro Forma at September 9,
2004 2004 Adjustments 2004
- --------------------------------------------------------------------------------------------------
Assets
Current assets:
Cash $ -0- $10,005 $ -0- $10,005
Short Term Investments ( Mkt.Sec.) -0- 66,500 -0- 66,500
Loans & Notes Receivable -0- 28,511 (28,511) {a} -0-
Other Current Assets -0- 295 -0- 295
- --------------------------------------------------------------------------------------------------
Total Current Assets: -0- 105,311 -0- 76,800
Property Plant & Equipment-net -0- 2,478 -0- 2,478
- --------------------------------------------------------------------------------------------------
Other Assets:
Investment In Mining Properties -0- 325,000 -0- 325,000
- --------------------------------------------------------------------------------------------------
Total Assets: $ -0- $432,789 $(28,511) $404,278
- --------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $10,098 $ 5,000 $ -0- $15,098
Notes payable - Related Parties 18,083 129,414 -0- 147,497
Loans Payable 28,511 -0- (28,511) {a} -0-
- --------------------------------------------------------------------------------------------------
Total Liabilities 56,692 134,414 (28,511) $162,595
Stockholders' equity (deficit):
Share capital:
Common shares 26,870 11,640 -0- {b} 38,510
Additional paid-in capital 28,230 468,360 (111,792) {b) 384,798
Retained Earnings (111,792) (181,625) 111,792 {b) 181,625)
- --------------------------------------------------------------------------------------------------
Total Stockholders' equity (56,692) 298,375 -0- 241,683
- --------------------------------------------------------------------------------------------------
Total Liab. & Stockholders' equity $ -0- $432,789 $(28,511) $404,278
- --------------------------------------------------------------------------------------------------
See accompanying notes to pro forma consolidated financial statements.
BATTLE MOUNTAIN GOLD EXPLORATION, CORP.
(An Exploration Stage Company)
PRO FORMA STATEMENT
SEPTEMBER 9,2004
Battle Mountain Gold Exploration, Corp.
Pro Forma Consolidated Statements of Operations
Battle Mountain Battle Mountain Pro Forma
Gold Exploration, Corp. Gold Exploration, Inc. Cumulative Loss
Cumulative Loss Cumulative Loss During Exploration
From Inception to From Inception to From Inception to
September 9, September 9, Pro Forma September 9,
2004 2004 Adjustments 2004
-----------------------------------------------------------------------------------------------------
Revenue:
$ -0- $ -0- $ -0- $ -0-
Expenses:
Depreciation Expense $ -0- $ 46 $ -0- $ 46
Professional & Consulting 84,217 100,060 -0- 184,277
Travel & Entertainment -0- 19,720 -0- 19,720
Rent & Office 6,557 8,804 -0- 15,361
General & Admin. Expenses 21,018 5,495 -0- 26,513
- ------------------------------------------------------------------------------------------------------
Total Expenses $ 111,792 $134,125 $ -0- $245,917
Unrealized Gains (Loss) -0- (47,500) -0- (47,500)
- ------------------------------------------------------------------------------------------------------
Income ( Loss ) Before Tax $(111,792) $(181,625) $ -0- $(293,417)
- ------------------------------------------------------------------------------------------------------
Income taxes $ -0- $ -0- $ -0- $ -0-
- ------------------------------------------------------------------------------------------------------
Loss for the period $(111,792) $(181,625) $ -0- $(293,417)
- ------------------------------------------------------------------------------------------------------
Loss per share $ (0.004) $ (0.02) $ -0- $ (0.01)
- ------------------------------------------------------------------------------------------------------
See accompanying notes to pro forma consolidated financial statements.
Adjusting Entries:
{a} Debit - Loans Payables $ 28,511
Credit - Loans & Notes Receivable $ 28,511
To eliminate inter-company
transactions.
{b} Debit- Common Stock ( Private Co.) $ 11,640
Credit - Common Stock ( Public Co.) $ 11,640
Debit - Add'l.Pd-In-Capital( Private Co.) 111,792
Credit - Retained Earnings ( Public Co.) 111,792
To record reverse merger
acquisition and re-issuance
of 11,640,000 of common shares
at $.001.
BATTLE MOUNTAIN GOLD EXPLORATION, CORP.
(An Exploration Stage Company)
PRO FORMA STATEMENT
SEPTEMBER 9,2004.
Battle Mountain Gold Exploration, Corp.
Notes to Pro Forma Consolidated Financial Statements
As at September 9, 2004
1. TERMS OF ACQUISITION AND BASIS OF PRESENTATION:
The accompanying pro forma consolidated financial statements have been prepared
for inclusion in a Current Report on Form 8K describing the acquisition on
September 9, 2004 of Battle Mountain Gold Exploration, Inc. ("Battle Mountain")
by Battle Mountain Gold Exploration, Corp.(" the Company ") and the resulting
change of the Company (the "Acquisition"). The pro forma consolidated financial
statements of the Company give effect to the Acquisition under which the
shareholders of Battle Mountain exchanged 11,640,000 shares of common stock (or
100%)of the outstanding shares for an aggregate of 11,640,000 newly issued
treasury shares of the Company. Immediately after the issuance of shares to the
former Battle Mountain shareholders, there were 38,510,000 shares of the
Company's common stock issued and outstanding
The pro forma consolidated financial statements include:
(a) A pro forma consolidated balance sheet prepared from the un-audited balance
sheet of the Company as of September 9, 2004 and the audited balance sheet of
Battle Mountain as of September 9, 2004 and gives effect to the assumptions
described in note 3. The pro forma consolidated balance sheet assumes the
Acquisition occurred on September 9, 2004.
(b) A pro forma consolidated statement of loss prepared from the un-audited
statement of operations of the Company from inception to the period ended
September 9, 2004 and the audited statement of operations of Battle Mountain
from inception January 7,2004 to the period ended September 9, 2004 and gives
effect to the assumptions described in note 3.
The pro forma consolidated financial statements are not necessarily indicative
of the results of operations during exploration stage that would have resulted
if the transactions described above had occurred at the dates indicated or of
the future operating results of the Company during the exploration stage
subsequent to the completion of the Acquisition.
The pro forma consolidated financial statements should be read in conjunction
with the audited and unaudited financial statements of the Company and Battle
Mountain contained elsewhere in this Current Report on Form 8K.
2. SIGNIFICANT ACCOUNTING PRINCIPLES:
The pro forma consolidated financial statements have been compiled using the
significant accounting policies as set out in the un-audited and audited
consolidated financial statements of Battle Mountain Corp. contained elsewhere
in this Current Report on Form 8K.
BATTLE MOUNTAIN GOLD EXPLORATION, CORP.
(An Exploration Stage Company)
PRO FORMA STATEMENT
SEPTEMBER 9,2004
Battle Mountain Gold Exploration, Corp.
Notes to Pro Forma Consolidated Financial Statements, page 2
As at September 9, 2004
3. PRO FORMA ASSUMPTIONS:
The pro forma consolidated financial statements are based on the following
assumptions:
- - The Company has acquired 11,640,000 shares or 100% of the outstanding
shares of Battle Mountain in exchange for 11,640,000 newly issued treasury
stock of the Company to the former shareholders of Battle Mountain. In the
process the Company has inherited current assets of $76,800, net fixed
assets of $2,478 and the investment of joint venture in miming properties
of $325,000. Also the Company has assumed the current liability of
$162,595.
- - Battle Mountain will remain as a wholly-owned subsidiary of the Company and
the Company will continue in the business of mineral exploration.
(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 herein
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 herein 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 herein 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 herein by reference.
(5) Filed as Exhibit 10.7 to the Company's Form 10-QSB filed with the
Commission on March 30, 2005, and incorporated herein by reference.
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.
April 14, 2005
/s/ James E. McKay
- -------------------
James E. McKay
Chief Executive Officer