Attached files
file | filename |
---|---|
EX-10.0 - EXHIBIT 10.0 - NORTH BAY RESOURCES INC | ex1002092010.htm |
EX-3.2 - EXHIBIT 3.2 - NORTH BAY RESOURCES INC | ex322092010.htm |
EX-3.3 - EXHIBIT 3.3 - NORTH BAY RESOURCES INC | ex332092010.htm |
EX-10.1 - EXHIBIT 10.1 - NORTH BAY RESOURCES INC | ex1012092010.htm |
EX-23.1 - EXHIBIT 23.1 - NORTH BAY RESOURCES INC | ex23102102010.htm |
EX-14 - EXHIBIT 14 - NORTH BAY RESOURCES INC | ex1402092010.htm |
EX-5.1 - EXHIBIT 5.1 - NORTH BAY RESOURCES INC | ex5102092010.htm |
EX-10.2 - EXHIBIT 10.2 - NORTH BAY RESOURCES INC | ex1032092010.htm |
EX-10.3 - EXHIBIT 10.3 - NORTH BAY RESOURCES INC | ex1042092010.htm |
EX-3.1 - EXHIBIT 3.1 - NORTH BAY RESOURCES INC | ex312092010.htm |
As
filed with the Securities and Exchange Commission on February 11,
2010
Registration
No. _________
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
———————————
FORM
S-1
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
———————————
NORTH
BAY RESOURCES INC.
(Exact
name of registrant as specified in its charter)
Delaware
|
1000
|
83-0402389
|
||
(State
or other jurisdiction of
incorporation
or organization)
|
(Primary
Standard Industrial Classification Code Number)
|
(I.R.S.
Employer
Identification
No.)
|
PO
Box 162, Skippack, Pennsylvania 19474
(215)
661-1100
(Address,
including zip code, and telephone number, including area code, of registrant's
principal executive offices)
———————————
Perry
Leopold, Chief Executive Officer
2120
Bethel Road
Landale,
Pennsylvania 19446
(215)
661-1100
(Name,
address, including zip code, and telephone number, including area code, of agent
for service)
—————————
Approximate date of commencement of
proposed sale to the public: As soon as practicable after this
registration statement becomes effective.
———————————
Approximate Date of Commencement of
Proposed Sale to the Public: from time to time after the effective
date of this Registration Statement as determined by market conditions and other
factors.
If any of
the securities being registered on this form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. ¨
If this
form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. ¨
If this
form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
If this
form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
If
delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
Large
accelerated filer
|
Accelerated
filer
|
|||||
Non-accelerated
filer
|
(Do
not check if a smaller reporting company)
|
Smaller
reporting company
|
x
|
CALCULATION
OF REGISTRATION FEE
Title
of Class of Securities
to
be Registered(1)
|
Amount
to
be
Registered
|
Proposed
Maximum
Offering
Price Per Share
|
Proposed
Maximum
Aggregate
Offering Price
|
Amount
of
Registration
Fee
|
|
Common
stock, $0.001 par value
|
16,782,624(1)
|
$0.029
|
$486,696
|
$34.70
|
|
Total
|
16,782,624
|
$0.029
|
$486,696
|
$34.70
|
(1) These
shares are being registered pursuant to a Securities Purchase Agreement dated as
of October 7, 2009 between North Bay Resources Inc. and Tangiers Investors,
LP.
The
registrant hereby amends this registration statement on such date or dates as
may be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
THE
INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT
SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL
THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN
ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT
TO COMPLETION
DATED
FEBRUARY 10, 2010
PROSPECTUS
NORTH
BAY RESOURCES INC.
16,782,624
Shares of Common Stock
This
prospectus (the “Prospectus”) relates to the resale of 16,782,624 shares of our
common stock, par value of $0.001, by certain individuals and entities who
beneficially own shares of our common stock. We are not selling any
shares of our common stock in this offering and therefore we will not receive
any proceeds from this offering. However, the Company will receive proceeds from
the sale of our common stock under the Securities Purchase Agreement which
was entered into between the Company and Tangiers Investors, LP, (“Tangiers”),
the selling stockholder. We agreed to allow Tangiers to retain 10% of the
proceeds raised under the Securities Purchase Agreement, which is more fully
described below.
The
shares of our common stock are currently traded on the Pink Sheets and not on
the Over-the-Counter-Bulletin Board, however, the Company plans to register its
stock for issuance on the Over-the-Counter-Bulletin Board. Once the
Company’s stock is registered for trading on the Over-the-Counter-Bulletin Board
the stock will be offered for sale by the selling stockholder at prices
established on the Over-the-Counter Bulletin Board during the term of this
offering. The stock prices may be different than prevailing market prices or at
privately negotiated prices. Our common stock is quoted on the Pink Sheets under
the symbol “NBRI.PK.” Once our common stock is quoted on the
Over-the-Counter-Bulletin Board the prices will fluctuate based on the demand
for the shares of our common stock.
On
October 7, 2009, we entered into a Securities Purchase Agreement with Tangiers.
Pursuant to the Securities Purchase Agreement, the Company may, at its
discretion, periodically sell to Tangiers shares of its common stock for a total
purchase price of up to $5,000,000. For each share of common stock purchased
under the Securities Purchase Agreement, Tangiers will pay us 90% of
the lowest volume weighted average price of the Company's common stock as quoted
by Bloomberg, LP on the Over-the-Counter Bulletin Board or other principal
market on which the Company's common stock is traded for the five days
immediately following the notice date. The price paid by Tangiers for the
Company's stock shall be determined as of the date of each individual request
for an advance under the Securities Purchase Agreement. Tangiers’
obligation to purchase shares of the Company's common stock under the Securities
Purchase Agreement is subject to certain conditions, including the Company
obtaining an effective registration statement for shares of the Company's common
stock sold under the Securities Purchase Agreement and is limited to $100,000
per ten consecutive trading days after the advance notice is provided to
Tangiers. The Securities Purchase Agreement shall terminate and Tangiers shall
have no further obligation to make advances under the Securities Purchase
Agreement at the earlier of the passing of 18 months after the date that the
Securities and Exchange Commission declares the Company’s registration statement
effective or the Company receives advances from Tangiers equal to
$5,000,000. Upon the execution of the Securities Purchase Agreement, Tangiers
received a one-time commitment fee equal to $85,000 of the Company's common
stock divided by the lowest volume weighted average price of the Company's
common stock during the 10 business days immediately following the date of the
Securities Purchase Agreement, as quoted by Bloomberg, LP.
Our
common stock is currently trading at $0.029 per share, which means our
shares will be issued to Tangiers at $0.026 per share. Therefore we will need to
register 191,570,881 shares of our common stock in order to obtain the full
$5,000,000 available to us under the Securities Purchase Agreement. We are only
able to register 16,782,624 on this registration statement. The total amount of
16,782,624 shares of our common stock will be issued to Tangiers in order to
obtain the funds available to us under the Securities Purchase Agreement.
We will be required to file another registration statement if we intend to
obtain the full amount of funds available to us under the Securities Purchase
Agreement. If we issue to Tangiers all 16,782,624 shares of our common stock we
will only be able to receive approximately $436,696 in net proceeds after
deducting expenses related to filing this registration statement. This
registration statement must be declared effective prior to us being able to
issue those additional shares to Tangiers so that we may obtain cash advances
under the Securities Purchase Agreement.
Tangiers,
a selling stockholder under this registration statement, intends to sell up to
6,589,147 shares of our common stock, which were previously issued as a
commitment fee under the Securities Purchase Agreement, and shares of our
common stock which will be issued to Tangiers so that we may receive financing
pursuant to the Securities Purchase Agreement. As of February
4, 2010, the shares of common stock to be issued in order to receive
advances under the Securities Purchase Agreement upon issuance would equal
approximately 30% of our outstanding common stock.
With the
exception of Tangiers, who is an “underwriter” within the meaning of the
Securities Act of 1933, no other underwriter or person has been engaged to
facilitate the sale of shares of our common stock in this offering. This
offering will terminate twenty-four months after the accompanying registration
statement is declared effective by the Securities and Exchange Commission. None
of the proceeds from the sale of our common stock by the selling stockholders
will be placed in escrow, trust or any similar account.
INVESTING
IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE “RISK FACTORS” BEGINNING ON
PAGE 3 TO READ ABOUT FACTORS YOU SHOULD CONSIDER BEFORE BUYING SHARES OF OUR
COMMON STOCK.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OF
ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE
INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT
SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL
THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN
ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
The date
of this Prospectus is February __, 2010
TABLE
OF CONTENTS
i
GENERAL
As
used in this Prospectus, references to “the Company,” “North Bay” “we”, “our,”
“ours” and “us” refer to North Bay Resources Inc., unless otherwise indicated.
In addition, any references to our “financial statements” are to our financial
statements except as the context otherwise requires.
This
summary highlights selected information contained elsewhere in this
prospectus. This summary does not contain all the information that you
should consider before investing in the common stock. You should carefully
read the entire Prospectus, including “Risk Factors”, “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” and the Financial
Statements, before making an investment decision.
The
Company was incorporated in the State of Delaware on June 18, 2004 under the
name Ultimate Jukebox, Inc. On September 4, 2004, Ultimate Jukebox,
Inc. merged with NetMusic Corporation, and subsequently changed the Company name
to NetMusic Entertainment Corporation. On March 10, 2006, the Company
ceased digital media distribution operations, began operations as a natural
resources company, and changed the Company name to Enterayon, Inc. On
January 15, 2008, the Company merged with and assumed the name of its
wholly-owned subsidiary, North Bay Resources Inc. As a result of the
merger, Enterayon, Inc. was effectively dissolved, leaving North Bay Resources
Inc. as the remaining company.
We seek
to acquire, develop, and exploit natural resource properties with extensive
reserves of precious metals, including gold, silver, platinum, and palladium, as
well as base metals, including copper, zinc, lead and molybdenum. The Company’s
business plan is based on the Generative Business Model, which is designed to
leverage our mining properties and mineral claims into near-term revenue streams
even during the earliest stages of exploration and development. This
is accomplished by entering into sales, joint-venture, and/or option contracts
with other mining companies, for which the Company generates revenue through
payments in cash, stock, and other consideration. The Company also
plans on generating revenue through mining once commercial operations begin on
any of its properties.
Our
headquarters are located at 2120 Bethel Road, Lansdale, PA 19446, with a mailing
address of PO Box 162, Skippack, PA 19474. Our website is located at
www.northbayresources.com. Our telephone number is (215) 661-1100.
Going
Concern
Our
financial statements have been prepared on a going concern basis, which implies
the Company will continue to realize its assets and discharge its liabilities in
the normal course of business. The Company has generated modest revenues since
inception and has never paid any dividends and is unlikely to pay dividends. The
continuation of the Company as a going concern is dependent upon the continued
financial support from its shareholders, the ability of the Company to obtain
necessary equity financing to continue operations and to determine the
existence, discovery and successful exploration of economically recoverable
reserves in its resource properties, confirmation of the Company’s interests in
the underlying properties, and the attainment of profitable operations. The
Company has had very little operating history to date. These financial
statements do not include any adjustments to the recoverability and
classification of recorded asset amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern.
These factors raise substantial doubt regarding the ability of the Company to
continue as a going concern.
We have
experienced recurring net losses from operations, which losses have caused an
accumulated deficit of approximately $9.85 million as of September 30, 2009. In
addition, we have a working capital deficit of approximately $532,000 as of
September 30, 2009. We had net losses of $328,478 and $1.4 million for the years
ended December 31, 2008 and 2007, respectively. These factors, among
others, raise substantial doubt about our ability to continue as a going
concern. If we are unable to generate profits and are unable to continue to
obtain financing to meet our working capital requirements, we may have to
curtail our business sharply or cease operations altogether. Our continuation as
a going concern is dependent upon our ability to generate sufficient cash flow
to meet our obligations on a timely basis to retain our current financing, to
obtain additional financing, and, ultimately, to attain profitability. Should
any of these events not occur, we will be adversely affected and we may have to
cease operations.
The
ongoing execution of our business plan is expected to result in operating losses
over the next twelve months. Management believes it has enough cash to maintain
its operations for the next twelve months. There are no assurances that we will
be successful in achieving our goals of increasing revenues and reaching
profitability.
In view
of these conditions, our ability to continue as a going concern is dependent
upon our ability to meet our financing requirements, and to ultimately achieve
profitable operations. Management believes that its current and future plans
provide an opportunity to continue as a going concern. The accompanying
financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts and
classification of liabilities that may be necessary in the event we cannot
continue as a going concern.
1
In the
table below, we provide you with summary financial data for our company. This
information is derived from our financial statements included elsewhere in this
prospectus. Historical results are not necessarily indicative of the results
that may be expected for any future period. When you read this historical
selected financial data, it is important that you read it along with the
historical financial statements and related notes and “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” included
elsewhere in this prospectus.
Nine-
Months Ended September 30, 2009
|
Year
Ended December 31, 2008
|
Year
Ended December 31, 2007
|
|||||||||||
Statement
of Operations Data
|
|
||||||||||||
|
Revenue
|
$
|
--
|
$
|
--
|
$
|
--
|
||||||
|
Cost
of Services
|
--
|
--
|
--
|
|||||||||
|
Gross
Profit
|
--
|
--
|
--
|
|||||||||
|
Net
Loss
|
$
|
(614,072
|
)
|
$
|
(328,478
|
)
|
$
|
(1,490,871
|
)
|
|||
|
Basic
and Diluted
|
$
|
(0.02
|
)
|
$
|
(0.02
|
)
|
$
|
(0.26
|
)
|
|||
|
|
||||||||||||
Balance
Sheet Data
|
|
||||||||||||
|
Total
Current Assets
|
$
|
70,392
|
$
|
137,186
|
$
|
23
|
||||||
|
Current
Liabilities
|
602,310
|
570,289
|
377,428
|
|||||||||
|
Total
Stockholders’ Deficit
|
(531,918
|
)
|
(433,103
|
)
|
(377,405
|
)
|
||||||
|
Total
Liabilities and Stockholder’s Deficit
|
$
|
70,392
|
$
|
137,186
|
$
|
23
|
Securities Being
Offered
|
Up
to 16,782,624 shares of common
stock in North Bay Resources Inc.
|
|
Initial
Offering Price
|
The
selling shareholders will sell our shares at prices established on the
Over-the-Counter Bulletin Board during the term of this offering, at
prices different than prevailing market prices or at privately negotiated
prices.
|
|
Terms
of the Offering
|
The
selling shareholders will determine the terms relative to the sale of the
common stock offered in this Prospectus.
|
|
Termination
of the Offering
|
The
offering will conclude when all of the 16,782,624 shares of common
stock have been sold or at a time when the Company, in its sole
discretion, decides to terminate the registration of the shares. The
Company may decide to terminate the registration if it is no longer
necessary due to the operation of the resale provisions of Rule 144
promulgated under the Securities Act of 1933. We may also terminate the
offering at our sole discretion and with no given reason
whatsoever.
Tangiers,
as an underwriter, cannot avail itself of the provisions of Rule 144 in
order to resell the shares of common stock issued to it under the
Securities Purchase Agreement.
|
|
Risk
Factors
|
The
securities offered hereby involve a high degree of risk and should not be
purchased by investors who cannot afford the loss of their entire
investment. See “Risk Factors.”
|
|
Common
Stock Issued Before Offering
|
70,186,434
shares of our common stock are issued and outstanding as of the date of
this prospectus.
|
|
Common
Stock Issued After Offering
(1)
|
86,969,058 shares
of common stock.
|
|
Use
of Proceeds
|
We
will not receive any proceeds from the sale of the common stock by the
selling shareholders.
|
|
(1)
|
Assumes
the issuance to Tangiers of all shares being registered under the
Securities Purchase Agreement.
|
2
RISK
FACTORS
The
shares of our common stock being offered for resale by the selling security
holder are highly speculative in nature, involve a high degree of risk and
should be purchased only by persons who can afford to lose the entire amount
invested in the common stock. Before purchasing any of the shares of common
stock, you should carefully consider the following factors relating to our
business and prospects. The risks and uncertainties described below are not
exclusive. Additional risks and uncertainties not presently known or that the
Company currently deems immaterial may also impair operations. If any of the
following risks actually occurs, our business, financial condition or operating
results could be materially adversely affected. As one of our
stockholders, you will be subject to the risks inherent in our
business. In such case, the trading price of our common stock could
decline and you may lose all or part of your
investment As of the date of this filing, our management
is aware of the following material risks:
Risks
related to our Securities Purchase Agreement
Existing
stockholders will experience significant dilution from our sale of shares under
the Securities Purchase Agreement.
The sale
of shares pursuant to the Securities Purchase Agreement will have a dilutive
impact on our stockholders. As a result, the market price of our common stock
could decline significantly as we sell shares pursuant to the Securities
Purchase Agreement. In addition, for any particular advance, we will need to
issue a greater number of shares of common stock under the Securities Purchase
Agreement as our stock price declines. If our stock price is lower, then our
existing stockholders would experience greater dilution.
The
investor under the Securities Purchase Agreement will pay less than the
then-prevailing market price of our common stock.
The
common stock to be issued under the Securities Purchase Agreement will be issued
at 90% of the lowest daily volume weighted average price of our common stock
during the five consecutive trading days immediately following the date we send
an advance notice. These discounted sales could also cause the price
of our common stock to decline.
The
sale of our stock under the Securities Purchase Agreement could encourage short
sales by third parties, which could contribute to the further decline of our
stock price.
The
significant downward pressure on the price of our common stock caused by the
sale of material amounts of common stock under the Securities Purchase Agreement
could encourage short sales by third parties. Such an event could place further
downward pressure on the price of our common stock.
We
may be limited in the amount we can raise under the Securities Purchase
Agreement because of concerns about selling more shares into the market than the
market can absorb without a significant price adjustment.
The
Company intends to exert its best efforts to avoid a significant downward
pressure on the price of its common stock by refraining from placing more shares
into the market than the market can absorb. This potential adverse impact on the
stock price may limit our willingness to use the Securities Purchase Agreement.
Until there is a greater trading volume, it seems unlikely that we will be able
to access the maximum amount we can draw without an adverse impact on the stock
price
We
may not be able to access sufficient funds under the Securities Purchase
Agreement when needed.
Our
common stock is currently trading at $0.029 per share, which means our
shares will be issued to Tangiers at $0.026 per share. Therefore we will need to
register 191,570,881 shares of our common stock in order to obtain the full
$5,000,000 available to us under the Securities Purchase Agreement. We are only
able to register 16,782,624 on this registration statement. The total amount of
16,782,624 shares of our common stock will be issued to Tangiers in order to
obtain the funds available to us under the Securities Purchase Agreement.
We will be required to file another registration statement if we intend to
obtain the full amount of funds available to us under the Securities Purchase
Agreement. If we issue to Tangiers all 16,782,624 shares of our common stock we
will only be able to receive approximately $436,696 in net proceeds after
deducting expenses related to filing this registration statement. This
registration statement must be declared effective prior to us being able to
issue those additional shares to Tangiers so that we may obtain cash advances
under the Securities Purchase Agreement.
Our
ability to raise funds under the Securities Purchase Agreement is also limited
by a number of factors, including the fact that the maximum advance amount
during any 10 trading day period is capped at $100,000, as well as the fact that
we are not permitted to submit any request for an advance within 10 trading days
of a prior request. Also, the Company may only draw an amount equal to the
average daily trading volume in dollar amount during the 10 trading days
preceding the advance date. As such, although sufficient funds are made
available to the Company under the Securities Purchase Agreement, such funds may
not be readily available when needed by the Company.
We
will not be able to use the Securities Purchase Agreement if the shares to be
issued in connection with an advance would result in Tangiers owning more than
9.9% of our outstanding common stock.
Under the
terms of the Securities Purchase Agreement, we may not request advances if the
shares to be issued in connection with such advances would result in Tangiers
and its affiliates owning more than 9.9% of our outstanding common stock. We are
permitted under the terms of the Securities Purchase Agreement to make limited
draws on the Securities Purchase Agreement so long as Tangiers’ beneficial
ownership of our common stock remains lower than 9.9%. A possibility exists that
Tangiers and its affiliates may own more than 9.9% of our outstanding common
stock (whether through open market purchases, retention of shares issued under
the Securities Purchase Agreement, or otherwise) at a time when we would
otherwise plan to obtain an advance under the Securities Purchase
Agreement. As such, by operation of the provisions of the Securities
Purchase Agreement, the Company may be prohibited from procuring additional
funding when necessary due to these provisions discussed above.
3
The
Securities Purchase Agreement will restrict our ability to engage in alternative
financings.
The
structure of transactions under the Securities Purchase Agreement will result in
the Company being deemed to be involved in a near continuous indirect primary
public offering of our securities. As long as we are deemed to be engaged in a
public offering, our ability to engage in a private placement will be limited
because of integration concerns which therefore limits our ability to obtain
additional funding if necessary.
Risks
Related To Our Business
We
have been the subject of a going concern opinion by our independent auditors who
have raised substantial doubt as to our ability to continue as a going
concern
Our
audited financial statements have been prepared on a going concern basis, which
implies the Company will continue to realize its assets and discharge its
liabilities in the normal course of business. The Company has generated modest
revenues since inception and has never paid any dividends and is unlikely to pay
dividends. The continuation of the Company as a going concern is dependent upon
the continued financial support from its shareholders, the ability of the
Company to obtain necessary equity financing to continue operations and to
determine the existence, discovery and successful exploration of economically
recoverable reserves in its resource properties, confirmation of the Company’s
interests in the underlying properties, and the attainment of profitable
operations. The Company has had very little operating history to date. These
financial statements do not include any adjustments to the recoverability and
classification of recorded asset amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern.
These factors raise substantial doubt regarding the ability of the Company to
continue as a going concern.
We have
experienced recurring net losses from operations, which losses have caused an
accumulated deficit of approximately $9.85 million as of September 30, 2009. In
addition, we have a working capital deficit of approximately $532,000 as of
September 30, 2009. We had net losses of $328,478 and $1.5 million for the years
ended December 31, 2008 and 2007, respectively. These factors, among
others, raise substantial doubt about our ability to continue as a going
concern. If we are unable to generate profits and are unable to continue to
obtain financing to meet our working capital requirements, we may have to
curtail our business sharply or cease operations altogether. Our continuation as
a going concern is dependent upon our ability to generate sufficient cash flow
to meet our obligations on a timely basis to retain our current financing, to
obtain additional financing, and, ultimately, to attain profitability. Should
any of these events not occur, we will be adversely affected and we may have to
cease operations.
The
ongoing execution of our business plan is expected to result in operating losses
over the next twelve months. Management believes it has enough cash to maintain
its operations for the next twelve months. There are no assurances that we will
be successful in achieving our goals of increasing revenues and reaching
profitability.
In view
of these conditions, our ability to continue as a going concern is dependent
upon our ability to meet its financing requirements, and to ultimately achieve
profitable operations. Management believes that its current and future plans
provide an opportunity to continue as a going concern. The accompanying
financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts and
classification of liabilities that may be necessary in the event we cannot
continue as a going concern.
We
may not be able to engage in joint-ventures, which could have a significant
negative impact on our financial condition
We
believe that the key to our success is to increase our revenues and available
cash through joint-venture opportunities. We may not have the resources required
to promote our properties and attract viable joint-venture partners. If we are
unable to secure additional joint-venture partners for our mining properties, we
will not be able to generate enough revenue to achieve and maintain
profitability or to continue our operations.
Because
of our dependence on a limited number of potential partners, our failure to
attract new partners for our mining properties could impair our ability to
continue successful operations. The absence of a significant partnership base
may impair our ability to attract new partners. Our failure to develop and
sustain long-term relationships with joint-venture partners would impair our
ability to continue development of our properties. Once
secured, the failure of a joint-venture partner to obtain sufficient financing
to meet their commitments to us may cause the joint-venture to fail, and our
business prospects may suffer.
We may
not be able to increase our revenue or effectively operate our business. To the
extent we are unable to achieve revenue growth, we may continue to incur losses.
We may not be successful or make progress in the growth and operation of our
business. Our current and future expense levels are based on operating plans and
estimates of future revenues and are subject to increase as strategies are
implemented. Even if our revenues grow, we may be unable to adjust spending in a
timely manner to compensate for any unexpected revenue shortfall.
4
Accordingly,
any significant shortfall in revenues would likely have an immediate material
adverse effect on our business, operating results and financial condition.
Further, if we substantially increase our operating expenses and such expenses
are not subsequently followed by increased revenues, our operating performance
and results would be adversely affected and, if sustained, could have a material
adverse effect on our business. To the extent we implement cost reduction
efforts to align our costs with revenue, our revenue could be adversely
affected.
We may face many of the challenges that a
developing company in the mining industry typically encounters which may impede
or prevent successful implementation of our business plan.
These
challenges include, but are not limited to:
·
|
Evaluation
and staking of new prospects;
|
·
|
Maintaining
claims in good standing;
|
·
|
Engaging
and retaining the services of qualified geological, engineering and mining
personnel and consultants;
|
·
|
Establishing
and maintaining budgets, and implementing appropriate financial
controls;
|
·
|
Identifying
and securing joint-venture
partners;
|
·
|
Establishing
initial exploration plans for mining
prospects;
|
·
|
Obtaining
and verifying independent studies to validate mineralization levels on our
prospects; and
|
·
|
Ensuring
the necessary exploratory and operational permits are filed on a timely
basis, the necessary permits are maintained and approved by governmental
authorities and jurisdictions, and adhering to all regulatory
requirements.
|
The
failure to address one or more of these above factors may impair our ability to
carry out our business plan. In that event, an investment in the Company
would be substantially impaired.
Our
business plan is dependent on continually finding new mining prospects with
sufficient mineralization, grade and consistency without which it may not be
practical to pursue the business plan, and investors will lose their
investment.
Our
business model depends on locating new prospects with commercially sufficient
amounts of precious and other metal mineralization. Until feasibility
studies are completed, permits issued, and actual extraction and processing
begins, we will not know if our prospects are commercially viable. Even if
initial reports about mineralization in a particular prospect are positive,
subsequent activities may determine that the prospect is not commercially
viable. Thus, at any stage in the exploration and development process, we
may determine there is no business reason to continue, and at that time, our
financial resources may not enable us to continue exploratory operations and
will cause us to terminate our current business plan.
Our metals exploration efforts are
highly speculative in nature and may be unsuccessful.
Metals
exploration is highly speculative in nature, involves many risks and frequently
is unsuccessful. Once mineralization is discovered, it may take a number of
years from the initial phases of drilling before production is possible, during
which time the economic feasibility of production may change. Substantial
expenditures are required to establish proven and probable ore reserves through
drilling, to determine metallurgical processes to extract the metals from the
ore and, in the case of new properties, to construct mining and processing
facilities. As a result of the foregoing uncertainties, no assurance can be
given that our exploration programs will result in the expansion or replacement
of current production with new proven and probable ore reserves.
Development
projects have no operating history upon which to base estimates of proven and
probable ore reserves and estimates of future cash operating costs. Such
estimates are, to a large extent, based upon the interpretation of geologic data
obtained from drill holes and other sampling techniques, and feasibility studies
which derive estimates of cash operating costs based upon anticipated tonnage
and grades of ore to be mined and processed, the configuration of the ore body,
expected recovery rates of the mineral from the ore, comparable facility and
equipment operating costs, anticipated climatic conditions and other factors. As
a result, it is possible that actual cash operating costs and economic returns
based upon development of proven and probable ore reserves may differ
significantly from those originally estimated. Moreover, significant decreases
in actual over expected prices may mean reserves, once found, will be
uneconomical to produce. It is not unusual in new mining operations to
experience unexpected problems during the start-up phase.
Other
risk factors include changes in regulations, environmental concerns or
restrictions, legacy rights accorded to local First Nations communities,
technical issues relating to exploration, development, and extraction, such as
rock falls, subsidence, flooding and weather conditions, and labor
issues. Any of these factors individually or together could delay or
halt implementation of the business plan or raise costs to levels that may make
it unprofitable or impractical to pursue our business objectives.
Regulatory
compliance is complex and the failure to meet all the various requirements could
result in loss of a claim, fines or other limitations on our business
plan.
5
At the
present time, all of our mining claims are in Canada, where we are subject to
regulation by numerous federal and provincial governmental authorities, but most
importantly, by the British Columbia Ministry of Energy, Mines, and Petroleum
Resources (MEMPR). At some point in the near future we may also
acquire mining properties in the United States, and would then be subject to
regulation by the Federal Environmental Protection Agency, the Federal
Department of the Interior, the Bureau of Land Management, the Forestry Service,
as well as other comparable state agencies. The acquisition of a
prospect in Mexico, or any other country, will be subject to similar regulatory
agencies requirements by various agencies in each country. In all
cases, the failure or delay in making required filings and obtaining regulatory
approvals or licenses will adversely affect our ability to carry out our
business plan. The failure to obtain and comply with any regulations or
licenses may result in fines or other penalties, and even the loss of our rights
over a prospect. We expect compliance with these regulations to be a substantial
expense in terms of time and cost. Therefore, compliance with or the failure to
comply with applicable regulation will affect our ability to succeed in our
business plan and ultimately to generate revenues and profits.
Competition
may develop which could hinder our ability to locate, stake and explore new
mining claims, or to attract new joint-venture partners.
As metal
prices continue to increase and demand grows, we expect new companies to form
and compete with the already numerous junior and developed mining, exploration
and production companies in existence. Some of these companies may be
more efficient in locating new claims, which could impede our business
plan. As well, some of these companies may be better funded, or more
successful in attracting joint-venture partners, and thereby diminish our
ability to execute our business plan.
We
could fail to attract or retain key personnel, which could be detrimental to our
operations.
Our
success largely depends on the efforts and abilities of our Chief Executive
Officer, Perry Leopold. The loss of his services could materially harm our
business because of the cost and time necessary to find his successor. Such a
loss would also divert management’s attention away from operational issues. We
do not presently maintain key-man life insurance policies on our Chief Executive
Officer. To the extent that we are smaller than our competitors and have fewer
resources, we may not be able to attract sufficient number and quality of
staff.
New
development activities require substantial capital expenditures.
New
development activities, if done independently and without benefit of a
joint-venture partner, require substantial capital expenditures for the
extraction, production and processing stages and for machinery, equipment and
experienced personnel. There can be no assurance that the Company will generate
sufficient cash flow and/or that it will have access to sufficient external
sources of funds in the form of outside investment or loans to continue
development activities at the same or higher levels than in the
past.
A
single stockholder has the ability to control our business
direction.
Because
one of our stockholders, namely our Chief Executive Officer who is also the
Chairman of the Board of Directors, beneficially owns 80% of the voting shares
of stock in the Company, he is likely to be in a position to control the
election of our board of directors and the selection of officers, management and
consultants. Therefore, investors will be entirely dependent on his
judgment in implementing the business plan of the Company.
Trading
of our stock may be restricted by the Securities and Exchange Commission’s penny
stock regulations, which may limit a stockholder’s ability to buy and sell our
stock.
The
Securities and Exchange Commission has adopted regulations which generally
define “penny stock” to be any equity security that has a market price (as
defined) less than $5.00 per share or an exercise price of less than $5.00 per
share, subject to certain exceptions. Our securities are covered by the penny
stock rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
“accredited investors”. The term “accredited investor” refers generally to
institutions with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document in a form prepared by the Securities and
Exchange Commission, which provides information about penny stocks and the
nature and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer’s account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customer’s confirmation. In addition, the penny stock
rules require that prior to a transaction in a penny stock not otherwise exempt
from these rules, the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchaser’s written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of our common stock.
6
This
prospectus and the documents incorporated by reference in this prospectus
contain certain forward-looking statements (as such term is defined in Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934), and are based on the beliefs of our management as well as
assumptions made by and information currently available to our management.
Statements that are not based on historical facts, which can be identified by
the use of such words as “likely,” “will,” “suggests,” “target,” “may,” “would,”
“could,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,”
“predict,” and similar expressions and their variants, are forward-looking. Such
statements reflect our judgment as of the date of this prospectus and they
involve many risks and uncertainties, including those described under the
captions “Risk Factors” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations.” These risks and uncertainties could cause
actual results to differ materially from those predicted in any forward-looking
statements. Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Moreover, neither we nor any
other person assumes responsibility for the accuracy and completeness of these
forward-looking statements. We undertake no obligation to update forward-looking
statements.
THE
OFFERING
This
offering relates to the sale of our common stock by selling stockholders, who
intend to sell up to 16,782,624 shares of our common stock which are subject to
issuance under the Securities Purchase Agreement, dated October 7,
2009. Pursuant to the Securities Purchase Agreement, the Company may,
at its discretion, periodically sell to Tangiers shares of its common stock for
a total purchase price of up to $5,000,000. For each share of common stock
purchased under the Securities Purchase Agreement, Tangiers will pay us 90% of
the lowest volume weighted average price of the Company's common stock as quoted
by Bloomberg, LP on the Over-the-Counter Bulletin Board or other principal
market on which the Company's common stock is traded for the five days
immediately following the notice date. The price paid by Tangiers for the
Company's stock shall be determined as of the date of each individual request
for an advance under the Securities Purchase Agreement. Tangiers’
obligation to purchase shares of the Company's common stock under the Securities
Purchase Agreement is subject to certain conditions, including the Company
obtaining an effective registration statement for shares of the Company's common
stock sold under the Securities Purchase Agreement and is limited to $100,000
per ten consecutive trading days after the advance notice is provided to
Tangiers. The Securities Purchase Agreement shall terminate and Tangiers shall
have no further obligation to make advances under the Securities Purchase
Agreement at the earlier of the passing of 18 months after the date that the
Securities and Exchange Commission declares the Company’s registration statement
effective or the Company receives advances from Tangiers equal to
$5,000,000. Upon the execution of the Securities Purchase Agreement, Tangiers
received a one-time commitment fee equal to $85,000 of the Company's common
stock divided by the lowest volume weighted average price of the Company's
common stock during the 10 business days immediately following the date of the
Securities Purchase Agreement, as quoted by Bloomberg, LP.
The
commitment amount of the Securities Purchase Agreement is $5,000,000. After
estimated fees and offering costs, we will receive net proceeds of approximately
$4,950,000 provided we are able to continue to maintain a sufficient number of
shares authorized for issuance under the Securities Purchase Agreement and are
able to register those shares for issuance to Tangiers. We will be required to
file another registration statement if we intend to obtain the full amount of
funds available to us under the Securities Purchase Agreement.
Our
common stock is currently trading at $0.029 per share, which means our
shares will be issued to Tangiers at $0.026 per share. Therefore we will need to
register 191,570,881 shares of our common stock in order to obtain the full
$5,000,000 available to us under the Securities Purchase Agreement. We are only
able to register 16,782,624 on this registration statement. The total amount of
16,782,624 shares of our common stock will be issued to Tangiers in order to
obtain the funds available to us under the Securities Purchase Agreement.
We will be required to file another registration statement if we intend to
obtain the full amount of funds available to us under the Securities Purchase
Agreement. If we issue to Tangiers all
7
16,782,624
shares of our common stock we will only be able to receive approximately
$436,696 in net proceeds after deducting expenses related to filing this
registration statement. This registration statement must be declared effective
prior to us being able to issue those additional shares to Tangiers so that we
may obtain cash advances under the Securities Purchase Agreement.
Tangiers
intends to sell any shares purchased under the Securities Purchase Agreement at
the then prevailing market price. Tangiers may sell shares of our common stock
that are subject to a particular advance before it actually receives those
shares. These sales of our common stock in the public market could lower the
market price of our common stock. In the event that the market price of our
common stock decreases, we would not be able to draw down the remaining balance
available under the Securities Purchase Agreement with the number of shares
being registered in the accompanying registration statement.
Under the
terms of the Securities Purchase Agreement, Tangiers is prohibited from engaging
in short sales of our stock. Short selling is the act of borrowing a security
from a broker and selling it, with the understanding that it must later be
bought back (hopefully at a lower price) and returned to the broker. Short
selling is a technique used by investors who try to profit from the falling
price of a stock. Among other things, this Prospectus relates to the shares of
our common stock to be issued under the Securities Purchase Agreement. There are
substantial risks to investors as a result of the issuance of shares of our
common stock under the Securities Purchase Agreement. These risks include
dilution of our shareholders, significant declines in our stock price and our
inability to draw sufficient funds when needed.
There is
an inverse relationship between our stock price and the number of shares to be
issued under the Securities Purchase Agreement. That is, as our stock price
declines, we would be required to issue a greater number of shares under the
Securities Purchase Agreement for a given advance.
This
Prospectus relates to shares of our common stock that may be offered and sold
from time to time by the selling stockholders. There will be no proceeds to us
from the sale of shares of our common stock in this offering. The selling
stockholders will receive all such proceeds.
However,
we will receive proceeds from the sale of shares of our common stock to Tangiers
under the Securities Purchase Agreement. Tangiers will purchase our shares of
common stock under the Securities Purchase Agreement at a 10% discount to the
current market price. The purchase price of the shares purchased under the
Securities Purchase Agreement will be equal to 90% of the volume weighted
average price of our common stock on the Over-the-Counter Bulletin Board for the
five (5) consecutive trading days immediately following the notice
date.
Pursuant
to the Securities Purchase Agreement, we cannot draw more than $100,000 every 10
trading days.
For
illustrative purposes only, we have set forth below our intended use of proceeds
for the range of net proceeds indicated below to be received under the
Securities Purchase Agreement. The table assumes estimated offering expenses of
$50,000. The figures below are estimates only, and may be changed due to various
factors, including the timing of the receipt of the proceeds.
Gross
proceeds:
|
$
|
486,696
|
$
|
2,000,000
|
$
|
3,000,000
|
$
|
5,000,000
|
|||||||
Net
proceeds:
|
$
|
436,696
|
$
|
1,950,000
|
$
|
2,950,000
|
$
|
4,950,000
|
|||||||
Number
of shares that would have to be issued under the Securities Purchase
Agreement at an assumed offering price equal to $0.0261 (which is 90% of
an assumed market price of $0.029)
|
16,782,624
|
76,923,077
|
115,384,615
|
191,570,881
|
|||||||||||
USE
OF PROCEEDS
|
|||||||||||||||
General
Working Capital
|
$
|
436,696
|
$
|
1,950,000
|
$
|
2,950,000
|
$
|
4,950,000
|
|||||||
Total
|
$
|
436,696
|
$
|
1,950,000
|
$
|
2,950,000
|
$
|
4,950,000
|
The
Securities Purchase Agreement allows us to use our proceeds for general
corporate purposes. We have chosen to pursue the Securities Purchase Agreement
funding because it will make a large amount of cash available to us with the
advantage of allowing us to decide when, and how much, we will draw from this
financing. We will be in control of the draw down amounts and hope to be able to
draw down from the Securities Purchase Agreement whenever the Company deems that
such funds are needed. Our objective will be to draw down on the Securities
Purchase Agreement funding during periods of positive results for us and during
stages when our stock price is rising, in order to control and minimize, as much
as possible, the potential dilution for our current and future stockholders. It
may not be possible for us to always meet our objective; therefore, we will
continue to identify alternative sources of financing, as we always have,
including additional private placements of our stock.
8
DETERMINATION
OF OFFERING PRICE
The
shares of our common stock will be offered for sale by the selling stockholders
at prices established on the Over-the-Counter Bulletin Board during the term of
this offering, at prices different than prevailing market prices or at privately
negotiated prices.
The
issuance of the 16,782,624 shares pursuant to the Securities Purchase Agreement
will have a dilutive impact on our stockholders. For any particular advance, we
will need to issue a greater number of shares of common stock under the
Securities Purchase Agreement which would expose our existing stockholders to
greater dilution.
The
following table presents information regarding the selling shareholders. A
description of our relationship to the selling shareholders and how the selling
shareholders acquired the shares to be sold in this offering is detailed in the
information immediately following this table.
Selling
Stockholder
|
Shares
Beneficially
Owned before
Offering(3)
|
Percentage of
Outstanding
Shares
Beneficially
Owned before
Offering(1)
|
Shares that
Could Be
Issued to Draw
Down Under
the Securities
Purchase
Agreement
|
Shares that
May Be
Acquired
Under the
Securities
Purchase
Agreement(4)
|
Percentage of
Outstanding
Shares Being
Registered to
Be Acquired
Under the
Securities
Purchase
Agreement
|
Shares to Be
Sold in the
Offering
|
Percentage of
Outstanding
Shares
Beneficially
Owned after
Offering(2)
|
|||||||||||
Tangiers
|
6,589,147
|
9.4%
|
|
16,782,624
|
()
|
191,570,881
|
30%
|
16,782,624
|
38%
|
|||||||||
Total
|
6,589,147
|
9.4%
|
|
16,782,624
|
191,570,881
|
30%
|
16,782,624
|
38%
|
———————
(1)
|
Applicable
percentage of ownership is based on 70,186,434 shares of our common stock
outstanding as of February 4, 2010. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission and
generally includes voting or investment power with respect to securities.
Shares of common stock are deemed to be beneficially owned by the person
holding such securities for the purpose of computing the percentage of
ownership of such person, but are not treated as outstanding for the
purpose of computing the percentage ownership of any other person. Note
that affiliates are subject to Rule 144 and Insider trading regulations –
percentage computation is for form purposes
only.
|
(2)
|
Applicable
percentage of ownership is based on an assumed 70,186,434 shares of our
common stock outstanding after the offering due to the possible issuance
of shares of common stock to Tangiers under the Securities Purchase
Agreement.
|
(3)
|
Consists
of shares of our common stock that Tangiers received as a commitment fee
under the Securities Purchase
Agreement.
|
(4)
|
Represents
the number of shares of our common stock that would be issued to Tangiers
at an assumed
|
9
|
market
price of $0.026 to draw down the entire $5 million available under the
Securities Purchase Agreement.
|
Shares
Acquired In Financing Transactions with North Bay
Tangiers.
Tangiers, LP is the investor under the Securities Purchase Agreement. All
investment decisions of, and control of, Tangiers, LP are held by Robert Papiri
and Edward Liceaga, its managing partners. Tangiers Capital, LLC makes the
investment decisions on behalf of and controls Tangiers, LP. Tangiers acquired
all shares being registered in this offering in a financing transaction with us.
This transaction is explained below:
Securities
Purchase Agreement. On October 7, 2009, we entered into a Securities
Purchase Agreement with Tangiers, LP. Pursuant to the Securities Purchase
Agreement, the Company may, at its discretion, periodically sell to Tangiers
shares of its common stock for a total purchase price of up to $5,000,000. For
each share of common stock purchased under the Securities Purchase Agreement,
Tangiers will pay us 90% of the lowest volume weighted average price
of the Company's common stock as quoted by Bloomberg, LP on the Over-the-Counter
Bulletin Board or other principal market on which the Company's common stock is
traded for the five days immediately following the notice date. The price paid
by Tangiers for the Company's stock shall be determined as of the date of each
individual request for an advance under the Securities Purchase Agreement.
Tangiers’ obligation to purchase shares of the Company's common stock under the
Securities Purchase Agreement is subject to certain conditions, including the
Company obtaining an effective registration statement for shares of the
Company's common stock sold under the Securities Purchase Agreement and is
limited to $100,000 per ten consecutive trading days after the advance notice is
provided to Tangiers. The Securities Purchase Agreement shall terminate and
Tangiers shall have no further obligation to make advances under the Securities
Purchase Agreement at the earlier of the passing of 18 months after the date
that the Securities and Exchange Commission declares the Company’s registration
statement effective or the Company receives advances from Tangiers equal
to $5,000,000. Upon the execution of the Securities Purchase
Agreement, Tangiers received a one-time commitment fee equal to $85,000 of the
Company's common stock divided by the lowest volume weighted average price of
the Company's common stock during the 10 business days immediately following the
date of the Securities Purchase Agreement, as quoted by Bloomberg,
LP.
Tangiers,
a selling stockholder under this registration statement, intends to sell up to
6,589,147 shares of our common stock, which were previously issued as a
commitment fee under the Securities Purchase Agreement, and shares of our
common stock which will be issued to Tangiers so that we may receive financing
pursuant to the Securities Purchase Agreement. As of February
4, 2010, the shares of common stock to be issued in order to receive
advances under the Securities Purchase Agreement upon issuance would equal
approximately 30% of our outstanding common stock.
There are
certain risks related to sales by Tangiers, including:
|
·
|
The
outstanding shares will be issued based on a discount to the market rate.
As a result, the lower the stock price is around the time Tangiers is
issued shares, the greater chance that Tangiers gets more shares. This
could result in substantial dilution to the interests of other holders of
common stock.
|
|
·
|
To
the extent Tangiers sells our common stock, our common stock price may
decrease due to the additional shares in the market. This could allow
Tangiers to sell greater amounts of common stock, the sales of which would
further depress the stock price.
|
|
·
|
The
significant downward pressure on the price of our common stock as Tangiers
sells material amounts of our common stock could encourage short sales by
Tangiers or others. This could place further downward pressure on the
price of our common stock.
|
The
selling stockholders have advised us that the sale or distribution of our common
stock owned by the selling stockholders may be sold or transferred directly to
purchasers by the selling stockholders as principals or through one or more
underwriters, brokers, dealers or agents from time to time in one or more
transactions (which may involve crosses or block transactions) (i) on the
over-the-counter market or in any other market on which the price of our shares
of common stock are quoted or (ii) in transactions otherwise than on the
over-the-counter market. Any of such transactions may be effected at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, at varying prices determined at the time of sale or at negotiated
or fixed prices, in each case as determined by the selling stockholders or by
agreement between the selling stockholders and underwriters, brokers, dealers or
agents, or purchasers. If the selling stockholders effect such transactions by
selling their shares of common stock to or through underwriters, brokers,
dealers or agents, such underwriters, brokers, dealers or agents may receive
compensation in the form of discounts, concessions or commissions from the
selling stockholders or commissions from purchasers of common stock for whom
they may act as agent (which discounts, concessions or commissions as to
particular underwriters, brokers, dealers or agents may be in excess of those
customary in the types of transactions involved).
10
Tangiers
is an “underwriter” within the meaning of the Securities Act of 1933 in
connection with the sale of common stock under the Securities Purchase
Agreement. Tangiers will pay us 90% of, or a 10% discount to, the volume
weighted average price of our common stock on the Over-the-Counter Bulletin
Board or other principal trading market on which our common stock is traded for
the five (5) consecutive trading days immediately following the advance date. In
addition, Tangiers received 6,589,147 shares of our common stock, which were
previously issued as a commitment fee under the Securities Purchase Agreement.
Tangiers’ obligations under the Securities Purchase Agreement are not
transferable.
The
commitment amount of the Securities Purchase Agreement is $5,000,000. After
estimated fees and offering costs, we may receive net proceeds of approximately
$4,950,000. We will need to register approximately 191,570,881 shares of our
common stock in order to obtain the total amount of the funds available to us
under the Securities Purchase Agreement. We are only able to register 16,782,624
shares of our common stock under this registration statement which will be
issued to Tangiers in order to obtain the funds available to us under the
Securities Purchase Agreement. This means that we will be required to file
another registration statement if we intend to obtain the full amount of funds
available to us under the Securities Purchase Agreement. If we issue to Tangiers
all 16,782,624 shares of our common stock we will register, we will only be able
to receive approximately $436,696 in net proceeds after paying expenses related
to this registration statement of approximately $50,000.
The
dollar amount of the equity line was based on a number of considerations which
include (i) the Company’s capital requirements; (ii) the Company’s then share
price and then number of shares outstanding; and (iii) Tangiers’ ability to
purchase shares in an amount required to provide capital to the
Company.
Under the
Securities Purchase Agreement, Tangiers contractually agrees not to engage in
any short sales of our stock and to our knowledge Tangiers has not engaged in
any short sales or any other hedging activities related to our
stock.
Tangiers
was formed as a Delaware limited partnership. Tangiers is a domestic hedge fund
in the business of investing in and financing public companies. Tangiers does
not intend to make a market in our stock or to otherwise engage in stabilizing
or other transactions intended to help support the stock price. Prospective
investors should take these factors into consideration before purchasing our
common stock.
Under the
securities laws of certain states, the shares of our common stock may be sold in
such states only through registered or licensed brokers or dealers. The selling
stockholders are advised to ensure that any underwriters, brokers, dealers or
agents effecting transactions on behalf of the selling stockholders are
registered to sell securities in all fifty states. In addition, in certain
states the shares of our common stock may not be sold unless the shares have
been registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with.
We will
pay all of the expenses incident to the registration, offering and sale of the
shares of our common stock to the public hereunder other than commissions, fees
and discounts of underwriters, brokers, dealers and agents. If any of these
other expenses exists, we expect the selling stockholders to pay these expenses.
We have agreed to indemnify Tangiers and its controlling persons against certain
liabilities, including liabilities under the Securities Act. We estimate that
the expenses of the offering to be borne by us will be approximately $50,000.
The offering expenses are estimated as follows: a SEC registration fee of
approximately $35 accounting fees of $29,000 and legal fees of $20,000. We will
not receive any proceeds from the sale of any of the shares of our common stock
by the selling stockholders. However, we will receive proceeds from the sale of
our common stock under the Securities Purchase Agreement.
11
The
selling stockholders are subject to applicable provisions of the Securities
Exchange Act of 1934, as amended, and its regulations, including Regulation M.
Under Regulation M, the selling stockholders or their agents may not bid for,
purchase, or attempt to induce any person to bid for or purchase, shares of our
common stock while such selling stockholders are distributing shares covered by
this prospectus. Pursuant to the requirements of Regulation S-K and as stated in
Part II of this Registration Statement, the Company must file a post-effective
amendment to the accompanying Registration Statement once informed of a material
change from the information set forth with respect to the Plan of
Distribution.
OTC
Bulletin Board Considerations
The OTC
Bulletin Board is separate and distinct from the NASDAQ stock market. NASDAQ has
no business relationship with issuers of securities quoted on the OTC Bulletin
Board. The SEC’s order handling rules, which apply to NASDAQ-listed securities,
do not apply to securities quoted on the OTC Bulletin Board.
Although
the NASDAQ stock market has rigorous listing standards to ensure the high
quality of its issuers, and can delist issuers for not meeting those standards,
the OTC Bulletin Board has no listing standards. Rather, it is the market maker
who chooses to quote a security on the system, files the application, and is
obligated to comply with keeping information about the issuer in its files. The
FINRA cannot deny an application by a market maker to quote the stock of a
company. The only requirement for inclusion in the OTC Bulletin Board is that
the issuer be current in its reporting requirements with the SEC.
Investors
must contact a broker-dealer to trade OTC Bulletin Board securities. Investors
do not have direct access to the bulletin board service. For bulletin board
securities, there only has to be one market maker.
Bulletin
board transactions are conducted almost entirely manually. Because there are no
automated systems for negotiating trades on the bulletin board, they are
conducted via telephone. In times of heavy market volume, the limitations of
this process may result in a significant increase in the time it takes to
execute investor orders. Therefore, when investors place market orders – an
order to buy or sell a specific number of shares at the current market price –
it is possible for the price of a stock to go up or down significantly during
the lapse of time between placing a market order and getting
execution.
Because
bulletin board stocks are usually not followed by analysts, there may be lower
trading volume than for NASDAQ-listed securities.
LEGAL
PROCEEDINGS
The
Company is not a party to any litigation.
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The
following table sets forth the names and positions of our executive officers and
directors. Our directors are elected at our annual meeting of stockholders and
serve for one year or until successors are elected. Our Board of Directors
elects our officers, and their terms of office are at the discretion of the
Board, except to the extent governed by an employment contract.
Our
directors, executive officers and other significant employees, their ages and
positions are as follows:
Name
|
Age
|
Position
with the Company
|
|||
Perry
Leopold
|
59
|
Chairman
and Chief Executive Officer
|
|||
Fred
Michini
|
66
|
Director
|
|||
12
Perry Leopold. Mr.
Leopold has served as Chairman and CEO of the Company since February 2006. Prior
to joining the Company he led a number of successful enterprises over the past
25 years in a diverse number of fields, ranging from the arts and technology to
finance and natural resources. In February 2006, Mr. Leopold was engaged as CEO
to engineer the Company's total corporate restructuring and lead its
re-emergence as the natural resources company formerly known as Enterayon, Inc.
Mr. Leopold subsequently designed the Company's business model and incorporated
state-of-the-art technology to assist in cost-efficient acquisition targeting,
which has resulted in over 50 acquisitions of high-quality mining properties
throughout British Columbia. Educated at the University of Pennsylvania, Mr.
Leopold is also the founder and current President of Speebo Inc., a privately
owned exploration and development company. In addition, he is currently serving
as President of Circular Logic, Inc., a registered Commodity Trading Advisor
(CTA) and Commodity Pool Operator (CPO) firm specializing in commodity trading
system development. Mr. Leopold is also the owner of The PAN Network, a private
company he founded as a sole-proprietorship in 1981, and which has since been in
continuous operation to the present day.
Fred Michini. Mr. Michini has
served as an independent Director of the Company since August
2007. He is a tax, financial, management accounting and litigation
support specialist, and has extensive previous experience serving as the Chief
Financial Officer of a variety of public and private companies, including
Speebo, Inc., a private mineral exploration company currently controlled by
North Bay’s Chief Executive Officer, Perry Leopold. Mr. Michini is also a
Certified Public Accountant, has been Partner and Managing Partner of two
regional accounting firms, has served as an auditor for the U.S. General
Accounting Office, and is a former Board Member of the Central Montgomery County
Chamber of Commerce. Mr. Michini earned his B.S. from LaSalle University and his
MBA from Temple University. Mr. Michini has been employed as a CPA
and Real Estate Tax Consultant by AJ Michini Associates since 1973 and by AJ
Michini MBA CPA since 1984. In addition, Mr. Michini serves as Acting
CFO for Artimplant USA, a subsidiary of the Swedish public company Artimplant
AB, a position he has held since 2005.
Involvement
In Certain Legal Proceedings
None of
our officers, directors, promoters or control persons have been involved in the
past five years in any of the following:
(1) any
bankruptcy petition filed by or against any business of which such person was a
general partner or executive officer either at the time of the bankruptcy or
within two years prior to that time;
(2) any
conviction in a criminal proceeding or being subject to a pending criminal
proceeding (excluding traffic violations and other minor offenses);
(3) Being
subject to any order, judgment or decree, not subsequently reversed, suspended
or vacated, or any court of competent jurisdiction, permanently or temporarily
enjoining, barring, suspending or otherwise limiting his involvement in any type
of business, securities or banking activities; or
(4) Being
found by a court of competent jurisdiction (in a civil action), the Commission
or the Commodity Futures Trading Commission to have violated a federal or state
securities or commodities law, and the judgment has not been reversed,
suspended, or vacated.
Committees;
Audit Committee Financial Expert.
Our board
has an audit committee made up solely of Fred Michini.
Our board
of directors has determined that the Company has one audit committee financial
expert, Mr. Michini. On October 16, 2009, the board adopted its written
audit committee charter.
Code
of Ethics
We
adopted a Code of Ethics on October 16, 2009 that applies to all of our
directors, officers and employees, including our principal executive officer,
principal financial officer and principal accounting officer. The Code of Ethics
is attached as Exhibit 14 to this registration statement.
13
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information, as of February 4, 2010, with
respect to the beneficial ownership of the Company’s outstanding Common Stock by
(i) any holder of more than five (5%) percent; (ii) each of the Company’s
executive officers and directors; and (iii) the Company’s directors and
executive officers as a group. Except as otherwise indicated, each of the
stockholders listed below has sole voting and investment power over the shares
beneficially owned.
Title Of Class
|
Name
And Address Of Beneficial Owner (1)
|
Amount And
Nature
Of
Beneficial
Ownership
(2)
|
Approximate
Percent
of
Class (%)
|
|||||||||
Common
|
|
Perry
Leopold
|
|
13,379,362
|
|
19.06
|
%
|
|||||
Common
|
Fred
Michini
|
1,051,000
|
1.5
|
%
|
||||||||
Common
|
All
executive officers and directors as a group (2 persons)
|
14,430,362
|
20.56
|
%
|
———————
(1)
|
Except as noted above, the
address for the above identified officers and directors of the Company is
c/o North Bay Resources Inc., 2120 Bethel Road, Lansdale PA
19446.
|
(2)
|
Beneficial
Ownership is determined in accordance with the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. Shares of common stock subject to options,
warrants, or convertible debt currently exercisable or convertible, or
exercisable or convertible within 60 days of February 4, 2010 are deemed
outstanding for computing the percentage of the person holding such
option or warrant. Percentages are based on a total of 70,186,434 shares
of common stock outstanding on February 4, 2010 and shares issuable upon
the exercise of options, warrants exercisable, and debt convertible on or
within 60 days of February 4, 2010, as described above. The inclusion in
the aforementioned table of those shares, however, does not constitute an
admission that the named shareholder is a direct or indirect beneficial
owner of those shares. Unless otherwise indicated, to our knowledge based
upon information produced by the persons and entities named in the table,
each person or entity named in the table has sole voting power and
investment power, or shares voting and/or investment power with his or her
spouse, with respect to all shares of capital stock listed as owned by
that person or entity.
|
General
The
following description of our capital stock and the provisions of our Articles of
Incorporation and By-Laws, each as amended, is only a summary.
Our
Articles of Incorporation authorize the issuance of 250,000,000 shares of common
stock, $0.001 par value per share. As of February 4, 2010, there were
70,186,434 outstanding shares of common stock. We are authorized to issue
10,000,000 shares of preferred stock. As of February 4, 2010, there were
4,100,100 shares of preferred stock outstanding. Set forth below is a
description of certain provisions relating to our capital stock.
Common
Stock
Each
outstanding share of common stock has one vote on all matters requiring a vote
of the stockholders. There is no right to cumulative voting; thus, the holder of
fifty percent or more of the shares outstanding can, if they choose to do so,
elect all of the directors. In the event of a voluntary or involuntary
liquidation, all stockholders are entitled to a pro rata distribution after
payment of liabilities and after provision has been made for each class of
stock, if any, having preference over the common stock. The holders of the
common stock have no preemptive rights with respect to future offerings of
shares of common stock. Holders of common stock are entitled to dividends if, as
and when declared by the Board out of the funds legally available therefore.
It is our present intention to retain earnings, if any, for use in our
business. The payment of dividends on the common stock is, therefore,
unlikely in the foreseeable future.
On
February 7, 2008, we declared a reverse stock split at a ratio of 1 for
10.
Preferred
Stock
14
We have
10,000,000 authorized shares of preferred stock with a par value of $0.001 per
share, issuable in such series and bearing such voting, dividend, conversion,
liquidation and other rights and preferences as the Board of Directors may
determine. As of February 4, 2010, 4,100,100 shares of our preferred stock
are outstanding.
Our
preferred stock is divided among the following:
4,000,000
Series A Preferred Shares. Each outstanding share of the Series A
Preferred Stock has 10 votes per share, and may be converted to shares of common
at a ratio of 5 to 1.
100,000
Series G Preferred Shares. Each outstanding share of the Series G Preferred
Stock has no votes per share, and may be converted to 1/100 of an ounce of gold
two years following the date of issuance,
or shares
of common at a ratio of 20 to 1.
100
Series I Preferred Shares. Each outstanding share of the Series I Preferred
Stock represents its proportionate share of eighty per cent (80%) of all votes
entitled to be voted and which is allocated to
the
outstanding shares of Series I Preferred Stock. These shares are not convertible
into common stock or any commodities.
We
currently intend to retain any earnings for use in our business, and therefore
do not anticipate paying cash dividends in the foreseeable future.
Anti-Takeover
Effects Of Provisions Of The Articles Of Incorporation of Authorized And
Unissued Stock
The
authorized but unissued shares of our common stock are available for future
issuance without our stockholders’ approval. These additional shares may
be utilized for a variety of corporate purposes including but not limited to
future public or direct offerings to raise additional capital, corporate
acquisitions and employee incentive plans. The issuance of such shares may
also be used to deter a potential takeover of the Company that may otherwise be
beneficial to stockholders by diluting the shares held by a potential suitor or
issuing shares to a stockholder that will vote in accordance with the Company’s
Board of Directors’ desires. A takeover may be beneficial to stockholders
because, among other reasons, a potential suitor may offer stockholders a
premium for their shares of stock compared to the then-existing market
price.
The
existence of authorized but unissued and unreserved shares of preferred stock
may enable the Board of Directors to issue shares to persons friendly to current
management which would render more difficult or discourage an attempt to obtain
control of the Company by means of a proxy contest, tender offer, merger or
otherwise, and thereby protect the continuity of our management.
INTERESTS
OF NAMED EXPERTS AND COUNSEL
No expert
or counsel named in this prospectus as having prepared or certified any part of
this prospectus or having given an opinion upon the validity of the securities
being registered or upon other legal matters in connection with the registration
or offering of the common stock was employed on a contingency basis or had, or
is to receive, in connection with the offering, a substantial interest, directly
or indirectly, in the registrant or any of its parents or
subsidiaries.
DISCLOSURE
OF SEC POSITION OF INDEMNIFICATION FOR SECURITIES
ACT
LIABILITIES
Our
Articles of Incorporation include an indemnification provision under which we
have agreed to indemnify our directors and officers from and against certain
claims arising from or related to future acts or omissions as a director or
officer of the Company. Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to our directors, officers and
controlling persons pursuant to the foregoing provisions, or otherwise, we have
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. If a claim for indemnification against such
liabilities (other than the payment by us of expenses incurred or paid by a
director, officer or controlling person of North Bay Resources Inc. in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered) we will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by us is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
15
EXPERTS
The
audited financial statements included in this prospectus and elsewhere in the
registration statement for the fiscal years ended December 31, 2008 and
December 31, 2007 have been audited by M&K CPAS, PLLC. The reports of
M&K CPAS, PLLC are included in this prospectus in reliance upon the
authority of this firm as experts in accounting and auditing.
VALIDITY
OF SECURITIES
The
opinion regarding validity of the shares offered herein has been provided by the
law offices of Christopher K. Davies, Esq. and has been filed with the
Registration Statement.
Business of the
Issuer
North Bay
Resources Inc., a Delaware corporation, engages in the acquisition, management,
development, and mining of precious metals and other mineral properties. By
combining state-of-the-art technology with traditional acquisition targeting,
the Company’s mission is to build a portfolio of viable mining prospects
throughout the world and develop them through our subsidiaries and joint-venture
partners to their full economic potential. We seek to acquire, develop, and
exploit natural resource properties with extensive reserves of precious metals,
including gold, silver, platinum, and palladium, as well as base metals,
including copper, zinc, lead, molybdenum, etc. We intend to develop
our properties both independently and through joint-venture
partners.
The
Company was incorporated in the State of Delaware on June 18, 2004 under the
name Ultimate Jukebox, Inc. On September 4, 2004, Ultimate Jukebox,
Inc. merged with NetMusic Corporation, and subsequently changed the Company name
to NetMusic Entertainment Corporation. On March 10, 2006, the Company
ceased digital media distribution operations, began operations as a natural
resources company, and changed the Company name to Enterayon, Inc. On
January 15, 2008, the Company merged with and assumed the name of its
wholly-owned subsidiary, North Bay Resources Inc. As a result of the
merger, Enterayon, Inc. was effectively dissolved, leaving North Bay Resources
Inc. as the remaining company.
We
currently generate revenue from claim sales and joint-venture
agreements. When we sell a claim, we capture near-term revenue, but
forego any possibility of a future revenue stream. When we enter into
a joint-venture, we receive near-term revenue as well as a commitment for future
revenue, but since the joint-venture partner has the option to withdraw at any
time, we can not project revenue from a joint-venture into the
future. However, should a joint-venture partner withdraw, we still
retain control of the asset, and can therefore enter into another joint-venture
with another partner, develop the property ourselves, or else elect to sell the
claims.
Going
Concern
Our
financial statements have been prepared on a going concern basis, which implies
the Company will continue to realize its assets and discharge its liabilities in
the normal course of business. The Company has generated modest revenues since
inception and has never paid any dividends and is unlikely to pay dividends. The
continuation of the Company as a going concern is dependent upon the continued
financial support from its shareholders, the ability of the Company to obtain
necessary equity financing to continue operations and to determine the
existence, discovery and successful exploration of economically recoverable
reserves in its resource properties, confirmation of the Company’s interests in
the underlying properties, and the attainment of profitable operations. The
Company has had very little operating history to date. These financial
statements do not include any adjustments to the recoverability and
classification of recorded asset amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern.
These factors raise substantial doubt regarding the ability of the Company to
continue as a going concern.
16
We have
experienced recurring net losses from operations, which losses have caused an
accumulated deficit of approximately $9.85 million as of September 30, 2009. In
addition, we have a working capital deficit of approximately $532,000 as of
September 30, 2009. We had net losses of approximately $328,478 and $1.5 million
for the years ended December 31, 2008 and 2007, respectively. These
factors, among others, raise substantial doubt about our ability to continue as
a going concern. If we are unable to generate profits and are unable to continue
to obtain financing to meet our working capital requirements, we may have to
curtail our business sharply or cease operations altogether. Our continuation as
a going concern is dependent upon our ability to generate sufficient cash flow
to meet our obligations on a timely basis to retain our current financing, to
obtain additional financing, and, ultimately, to attain profitability. Should
any of these events not occur, we will be adversely affected and we may have to
cease operations.
The
ongoing execution of our business plan is expected to result in operating losses
over the next twelve months. Management believes it has enough cash to maintain
its operations for the next twelve months. There are no assurances that we will
be successful in achieving its goals of increasing revenues and reaching
profitability.
In view
of these conditions, our ability to continue as a going concern is dependent
upon our ability to meet its financing requirements, and to ultimately achieve
profitable operations. Management believes that its current and future plans
provide an opportunity to continue as a going concern. The accompanying
financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts and
classification of liabilities that may be necessary in the event we cannot
continue as a going concern.
Generative
Business Model
The
Company’s business plan is based on the Generative Business Model, which we
believe is designed to generate a steady stream of revenue before any property
is ever developed into a commercial mining operation.
The
Generative Business Model comprises the following steps:
1.
|
Targeting
and acquiring properties with good historical
assays.
|
2.
|
Identifying
potential partners for the development of each of the Company’s properties
and entering into joint-venture or option agreements. In most
cases, the partner is another mining company whose shares trade on a
public exchange.
|
3.
|
The
initial agreement usually comprises a small non-refundable cash payment in
advance and a significant number of shares in the stock of the partner or
acquiring company. Cash and shares increase in staged payments
on the anniversary date of the agreement. In the case of an
option agreement, the Company will retain a Net Smelter Royalty with a
buyout provision should the property be the site of a major discovery
and/or developed into a commercially-operating mine. In the
case of a joint-venture, we retain a percentage of ownership, typically
50%, in the event the partner satisfies all the terms of the contract to
completion.
|
4.
|
The
partner or acquiring company also must commit to a specific work program
over a period of several years to develop the property, often involving a
commitment of several million
dollars.
|
17
5.
|
We
believe these work programs enable us to maintain our properties for
little or no cost, as the annual maintenance fees due to the government
are offset by the amount of money spent on property exploration and
development paid for by our partners. Any surplus of
expenditures beyond what is due to maintain the properties can then be
applied as “portable assessment credits” towards the maintenance of other
Company properties that are not yet producing revenue but which have good
prospects of doing so in the
future.
|
6.
|
If
at anytime the partner defaults on the work agreement or does not make
staged cash or stock payments by the anniversary date, the property then
reverts back to us, which then leaves us free to find another
partner and begin the process all over
again.
|
Properties
Below is
a discussion of the properties (or mining/mineral rights) currently owned by the
Company. All properties have been expensed at the acquisition date due to their
classification as exploration stage properties.
The Fawn Property is situated
on the Nechako Plateau of central British Columbia, approximately 120 kilometres
southwest of Vanderhoof and 180 kilometres west of Quesnel. The
property covers 1,005 acres, and includes the Buck claims 6 kilometres to the
east.
On the
namesake Fawn claim (MINFILE 093F 043), four subparallel, easterly-trending
VLF-EM conductors have been defined along strike lengths of 700 to 2200 metres,
with each remaining open along strike in at least one direction. Each of the
four VLF conductors is accompanied by silver-zinc-lead-arsenic soil
geochemistry. The key area of interest is known as the Giver Zone,
where assays up to 12.9 grams (0.42 ounces) per tonne gold and 637 grams (20.48
ounces) per tonne silver have been documented.
Immediately
east of the Fawn and included as part of the property, the Buck claims (MINFILE
093F 050) cover a 3,000 metre long zinc-arsenic-lead soil geochemical anomaly
overlying Naglico Formation rocks, and referred to as the Rutt Zone. Stratabound
sphalerite-pyrrhotite mineralization, grading up to 4.69% zinc, is present in
felsic ash tuffs. A primary area of interest immediately south of the
Rutt Zone is known as the Christmas Cake showing, where a 45 centimetre chip
sample has assayed 542 grams (17.42 ounces) per tonne silver, 7.38% zinc, and
2.25% lead.
The Fawn
Property is currently under a joint-venture agreement with Silver Quest
Resources Ltd (TSX-V: SQI) (“Silver Quest”). Silver Quest may acquire
a 75% interest in the Fawn property by making aggregate cash payments of
$100,000, issuing 150,000 shares, and incurring $1,500,000 in exploration
expenditures over four years. Of the aggregate payments and commitments due,
$25,000 in cash and 50,000 shares are due upon receipt of regulatory acceptance
by the TSX Venture Exchange (now effective), and $250,000 in exploration
expenditures must be expended in the first 12 months. Upon completion
of all of the terms of the agreement whereby Silver Quest acquires a 75%
interest, a 75/25 joint-venture will be formed. If subsequent to the
formation of the joint-venture the interest of either party is reduced by
dilution to less than 10%, such party's interest will automatically be converted
to a 2% net smelter return royalty (NSR). The other party may then purchase one
half of the NSR at any time up to 90 days following the commencement of
commercial production for $1,500,000.
Coronation Gold is located
near Memphis Creek, 6 kilometres northeast of Slocan in southeastern British
Columbia. The property covers 309 acres over several reverted crown
grants and includes four other past-producing mines; the Colorado, the V&M,
the Senator, and the Homestake mines, in addition to the
Coronation. Primary mineralization is gold, silver, zinc, and
lead. The highest combined historical (post-production) assays are
16.8 grams (0.54 ounces) per tonne gold, 6000 grams (192 ounces) per tonne
silver, 10.9% zinc, and 1.2% lead. Past-production at the
Coronation has been documented to be as much as 13,000 grams (418 ounces) per
tonne silver and 20% lead, while past-production at the Homestake mine averaged
23.3 grams (0.75 ounces) per tonne gold, 2611 grams (83.95 ounces) per tonne
silver, 1.33% lead and 1.52% zinc.
18
The
Coronation is currently under a joint-venture agreement with Lincoln Resources
Inc. (“Lincoln”), a private Nevada corporation. The agreement calls
for Lincoln to commit up to $1.5 million CDN over three years for exploration
expenses, developmental drilling, and surface ore recovery, with a minimum
expenditure of $250,000 during the first year. Upon completion of the
work program and fulfillment of all the terms of the agreement, North Bay and
Lincoln will each own 50% of the Coronation Gold Property, and will equally
share any and all net revenue, including any near-term profits generated from
surface ore recovery operations. It is expected that a portion of any
profits will be re-invested in ongoing development work on the Coronation’s
underground resources. In addition, North Bay has received an initial
cash payment of $12,500 CDN from Lincoln, less a $2,500 CDN finders fee paid to
an independent third party.
Bouleau Creek Gold (MINFILE
082LSW069) is a road-accessible property covering 2,510 acres and located 26
kilometres west of Vernon, British Columbia. The Southern zone of the
property below Bouleau Creek features gold and silver mineralization over an
area of approximately 1,000 by 600 metres. Assays documented in
Assessment Report 21877 are reported to yield up to 34 grams (1.09 ounces) per
tonne gold and 286 grams (9.19 ounces) per tonne silver. The Northern
Zone above Bouleau Creek includes the Siwash prospect (MINFILE 082LSW046), which
extends over an area of gold and silver mineralization measuring 3,000 by 750
metres. Assays in the Northern Zone are documented in Assessment
Report 20226 to yield up to 5.55 grams per tonne gold and 16.6 grams per tonne
silver.
A Letter
of Intent for a joint-venture on Bouleasu Creek has been signed with Natco
Mining Corporation, a private mining company based in Ontario, Canada, but no
formal agreement has yet been signed.
Fraser River Platinum Property
is located 3 kilometres northwest of Lytton in an area known as the Van Winkle
Bar. The property consists of 5 claim units covering 475 hectares (1,176 acres)
on both sides of the Van Winkle Bar, and traversing 8.6 kilometres along the
Fraser River. Platinum and iridium are known to occur in the black
sands of Van Winkle Bar. The source rocks are believed to be
Carboniferous-Jurassic Cache Creek Complex volcanic and sedimentary rocks to the
north, where the Company has also staked claims. According to BC Open
File 1986-7, the sands of the Van Winkle Bar have assayed up to 5681.1 grams
(182.67 ounces) per tonne platinum.
On
February 19, 2009, the Company announced that gold had been discovered by the
Company’s then-current joint-venture partner on the Fraser River
project. This occurred during the first phase of test excavations 400
metres northwest of the Van Winkle Bar along an old river channel situated 75
metres higher than the existing Fraser River channel. Prior to this there were
no substantive indications of gold mineralization in the Fraser River
deposit.
Initial
reports from the site indicated that the first two test pits revealed visible
gold in the black sands within two feet of the surface. The general matrix of
the bench placer is described as having fine gold and platinum disbursed
throughout the deposit, but at low concentrations. However, pay streaks within
the general deposit are distributed in bands throughout the orebody, and are
much more concentrated, especially closer to the original erosion channel. The
orebody has been termed a "low velocity deposit," and a textbook example for
carrying pay streaks at several depths and not just near the erosion
channel.
On April
2, 2009, the Company announced that the initial assay results show that samples
of concentrate contained an average of 520 grams per tonne gold, for an
effective yield of 0.26 grams of gold per yard of in-place background placer
material.
On June
12, 2009, the Company announced that its joint-venture partner in the Fraser
River Platinum Property has unexpectedly withdrawn from the project due to an
unforeseen conflict of interest with an independent 3rd party unrelated to North
Bay. As a result, North Bay has regained 100% ownership of the Fraser
River Platinum property, and is presently seeking a new joint-venture partner to
continue development of the property.
The Willa Property is a
gold-copper-silver deposit located in the Slocan Valley near the village of
Silverton in southeastern British Columbia, approximately 2 kilometres east of
Slocan Lake. It has had approximately $16 million dollars (CDN) spent to develop
it to its present status, which includes an extensive underground network of
workings to access the mineralization.
19
The Willa
Property’s total mineral resource estimate within the measured, indicated, and
inferred categories, as specified by National Instrument 43-101 and based on a
1.5-gram gold per tonne cutoff, is reported as 3,989,494 tonnes grading 3.23
grams gold, 7.16 grams silver, and 0.53% copper. This equates to a
total resource of 414,343 ounces of gold, 918,482 ounces of silver, and
46,602,077 pounds of copper. These estimates are based upon a
database including data from 556 core holes totaling 50,890 metres, 2,570 metres
of underground workings and 17,150 laboratory analyses for gold, silver, and
copper.
The Tulameen Platinum Project
is located along the Tulameen River in the Cascade Mountains of southwestern
British Columbia, approximately 150 kilometres northeast of
Vancouver.
During
the late 1800’s, the Tulameen District was the most important producer of
platinum in North America. Platinum was recovered with the placer gold from the
Tulameen River and her tributaries, including Granite, Cedar, Slate, Britton and
Lawless Creeks. The platinum occurred as a fine, hard, silver-white lustrous
metal with a high specific gravity in the sluice boxes and gold pans, along with
the gold and heavy concentrations of black sands (magnetite and chromitite). In
some areas there was more platinum than gold in the concentrates, and platinum
nuggets up to 0.5 ounces were reportedly found.
According
to BC Assessment Report 17170, the Company’s “D” prospect has assayed up to 6.7
grams per tonne platinum, and has three primary zones of
mineralization. One area known as the South Zone assayed
approximately 1.4 grams per tonne platinum on opposite ends of the zone, with
the zone length extending approximately 1000 meters (0.62 miles). The
Ridge Zone has assayed up to 1.45 grams per tonne platinum over a strike length
of 150 meters and a width of 50 meters. The Creek Zone has assayed up
to 4.4 grams per tonne platinum, extends along 600 meters (0.37 miles), and is
60 meters wide.
BC
Assessment Report 27009 details extensive analysis of the Tulameen Platinum
Project in 2001, and records significant platinum mineralization in several
locations. In one area above the north bank of the Tulameen River known as
Grasshopper Mountain and adjacent to the Company’s “D” claim, five zones of
narrow discontinuous mineralization were sampled which returned values up to 15
grams per tonne platinum across a 1.8 meter channel sample
width. Three more areas contained discontinuous bands of chromitite
segregations with high platinum values over significant widths. A
channel sample returned an assay of 7.78 grams per tonne platinum over 3.5
meters including 10.17 grams per tonne platinum across 2.0 meters in
chromitiferous dunite. Assay results for chromium were very high, ranging from
8.67% to 24.97% chromium. The best sample in one zone ran 15 grams
per tonne platinum, 5.55% chromium and 0.03 grams per tonne palladium, while
another returned significant platinum values of up to 30.89 grams per tonne over
3.05 meters. In addition, sampling of two historic quarries obtained
values ranging from 8 to 64 grams (2.06 ounces) per tonne platinum.
The Tor Property is north of the
Tulameen River and approximately 23 kilometres due east of Grasshopper Mountain,
and consists of 3 claim units covering 483 hectares (1,194
acres). As reported in a 1991 survey documented in BC MINFILE
Number 092HNE170, drilling at Tor resulted in a core sample that assayed 16.5
grams per tonne gold and 11.0 grams per tonne platinum over 6.1
metres. A second section of core yielded 16.7 grams per tonne gold,
2.93 grams per tonne platinum, 2.50 grams per tonne palladium and 1.75 grams per
tonne rhodium over 12.2 metres.
The Rainbow Creek Property is
a placer claim located approximately 60 kilometres south of the town of
Mackenzie in the Omineca mining district. This property consists of 2
claim units covering 74 hectares (182 acres), and reportedly contains gold,
platinum, and iridium. While no assays have been recorded to date,
research shows that a 1986 study (Open File 1986-7, “Occurrence and Distribution
of Platinum-Group Elements In British Columbia” compiled by V.J. Rublee for the
BC Ministry of Energy and Mines, p. 70) reports that in 1931 the economic value
of the platinum and iridium at Rainbow Creek was $96 per tonne, and that the
ratio of platinum to gold averaged 1:2. It should be noted that in
1931, the average market price of platinum and iridium was $32 and $114 per
ounce, respectively.
20
The Silver Cup Ridge Property
is located on Fays Peak, on Silver Cup Ridge, approximately 70 kilometres
southeast of Revelstoke in southeastern British Columbia. The property consists
of 5 contiguous claim units covering 636 hectares (1,572 acres). It
features five separate prospects, three of which are notable; the Fays Peak
Copper, Skyline, and Golden Crown claims.
The Fays
Peak Copper claim is on the southwest footwall side of a major fault that runs
down the axis of Silver Cup Ridge. The mineralization has been traced down the
mountain into the basin at the head of Ottawa Creek and it is exposed in a 15.24
metres-long prospecting adit at 2130 metres elevation. A sample from the adit is
reported to have assayed 4.46 grams per tonne gold, 171.4 grams per tonne silver
and % copper.
The
Skyline area is adjacent to the Fays Peak Copper claim. The main
Skyline vein is an irregular quartz vein, between 0.05 and 1.22 metres wide, and
contains pyrite with a little galena. The mineralization has assayed up to 27.43
grams per tonne gold, 877.7 grams per tonne silver and 18% lead.
The
Golden Crown prospect is on Stobart Creek, which flows to the southwest into
Trout Lake. It is on the southwest slope of a spur from Silver Cup mountain
between 1,830 and 2,000 metres elevation. The Golden Crown vein
is a massive body of highly crystalline quartz, sparingly mineralized with
pyrite. Previously reported assays have ranged up to 24.0 grams per tonne gold,
2,105 grams per tonne silver and 68.5% lead.
The Pinnacle Gold Property is
located near the headwaters of Pilldolla Creek, approximately 125 kilometres
northwest of Vancouver. The property consists of 3 claim units
covering 426.7 hectares (1,054 acres).
The
highest values obtained to date from various grab samples have assayed 20.3
grams (0.65 ounces) per tonne gold, 548.4 grams (17.63 ounces) per tonne silver,
10.25% lead, and 2.15% copper. The mineralized area occurs within a
one kilometre wide roof pendant of Gambier interbedded sediments and volcanics
bounded to the west and east by Coast Complex intrusive. The Britannia Mine,
which produced over 52 million tonnes of ore while in operation, and occurrences
such as the Mt. Diadem prospect are located in similar Gambier Group rocks.
Mineralization at the Lower Adit Zone consists of pods and lenses of massive
sphalerite, chalcopyrite, pyrrhotite, galena and arsenopyrite developed within
steeply dipping shears. At the Upper Adit Zone, three en echelon, stratabound
stringer sulphide zones up to 30 metres wide occur on the surface
(Source: BC Assessment Report 23233).
The Silver Leaf Property is
located near Speculator Creek, 8 kilometres east-northeast of Slocan in
southeastern British Columbia, and consists of 8 claim units covering
approximately 1,000 hectares (2,471 acres).
The
property includes the Silver Leaf, Riverside, Slocan Prince, and Hampton mines.
Previous mining operations at the Silver Leaf mine produced an average of 598
grams (19.2 ounces) per tonne silver. The Riverside produced an average of 1,534
grams (49 ounces) per tonne silver, and has assayed up to 3,000 grams (96
ounces) per tonne silver. Past production from the Slocan Prince and Hampton
mines has averaged 10,000 grams (321 ounces) and 16,817 grams (540 ounces) per
tonne silver, respectively. A more recently discovered vein documented in
Assessment Report 23054 reports assays as high as 657.46 ounces per tonne
silver. The Silver Leaf Property also includes the rights to the
surface ore dump from the nearby Arlington mine. According to BC MINFILE
082FNW152, this surface ore represents proven reserves of 43,114 tonnes at 15.68
ounces per tonne silver, which equates to 676,238 ounces of silver.
The Gold Hill Project is
located due west of Salmo, British Columbia, and consists of 9 contiguous claim
units covering approximately 2,616 hectares (6,464 acres). The property includes
the Gold Hill mine, and the area surrounding the Silver Dollar-Lucky Boy mines.
The Gold Hill mine’s past production averaged over 29.47 grams per tonne gold
and 54.11 grams per tonne silver, while production figures from the Silver
Dollar and the Lucky Boy workings averaged 9.39 grams per tonne gold and 335
grams (10.78 ounces) per tonne silver. More recent exploration has identified
and outlined a potential strike length extension of over 2,600 metres, with
reported assays from underground workings grading as high as 57.81 grams (1.85
ounces) per tonne gold and 3,790 grams (121 ounces) per tonne silver (Assessment
Report 18766).
21
The Lardeau Creek Property is
located near the head of Lardeau Creek approximately 10 kilometres east of Trout
Lake, British Columbia. The property is situated within the former Trout Lake
Mining Division, a well known Kootenay Silver Camp, and is approximately 4
kilometres north of the Company's Silver Cup Ridge property.
Geologically,
the claims are located within Paleozoic and Mesozoic aged rnetasediments and
metavolcanics which form a complex, arcuate fold belt known as the Kootenay Arc.
This belt extends from Northern Washington to North of Revelstoke, B.C. and
hosts most of the important lead-zinc deposits in southeastern B.C.
As
documented in BC Assessment Report 14561, local prospectors have reported two
potentially significant types of mineralization on the property. These include
an ultramafic unit which in places hosts platinum mineralization, and a NW
striking shear zone which hosts galena, sphalerite and pyrite as well as
tetrahedrite, with quartz and sulfide contents of up to 75%.
Laboratory
analysis of collected chip samples have assayed up to 1.25 ounces per ton gold,
235 ounces per ton silver, 0.12% nickel, 0.32% copper, 5.96% zinc, and 62.82%
lead. Two ultramafic horizons (possible host for platinum mineralization) were
also located and traced for 600 metres each along strike.
The Rachel Property is located
approximately 17 kilometres northwest of Salmo, British Columbia, and consists
of 3 contiguous claim units covering 358 hectares (885 acres).
Previous
exploration of the property as documented in Assessment Report 19021 has
revealed a possible extension of the vein strike length of over 1,100 metres and
assays of up to 7.36 ounces per tonne gold and 21.32 ounces per tonne silver,
with two notable and more recent samples documented in Assessment Report 24507
that assayed 24,523.50 grams (788.54 ounces) per tonne gold and 5,706 grams
(183.47 ounces) per tonne silver, respectively.
The Monte Cristo and Chilco
Properties (the Monte Cristo Property) are located in a wide section of
the Lillooet River Valley, approximately 31 kilometers northwest of the north
end of Harrison Lake, and comprise three contiguous staked claims composed of 14
units that cover approximately 312 hectares (769 acres).
The
mineralization of the property consists of precious metal bearing sands that
cover a 400 to 800 meter wide section of the Lillooet River valley. These
post-Pleistocene sands contain gold and platinum in submicron sized particles.
As recorded by the BC Ministry of Mines MINFILE No 092GNE013 and 092GNE019, the
sands are estimated to contain inferred reserves of 22.7 million tonnes down to
a depth of 30 meters, and that a 1.4 kilogram sample of sand, taken at least a
meter below surface, assayed 2.47 grams per tonne gold, 4.80 grams per tonne
silver, 2.77 grams per tonne platinum, and 2.71 grams per tonne
palladium.
While
further assessment remains to be completed, the most recent Assessment Report
estimates potential resources to be as much as 50 million tons. As reported in
BC Ministry of Mines Assessment Report 2589, "An estimated 25 million tons of
alluvial sand underlie the property to a depth of 100 feet from the surface, and
although depth of the sands is unknown at this point, indications are that this
figure can be increased substantially". The report goes on to say that
"precious metal values persist
to a depth of 100 feet and, in fact, values increase with increasing
depth". Another section of the same report postulates that probable
reserves are 50 million tons.
The Connie Hill Property is
located on Vancouver Island, approximately 15 kilometres northwest of Courtenay
in southwestern British Columbia, and consists of 17 claim units covering 1,502
hectares (3,712 acres). The property extends from Constitution Hill and Wolf
Lake southwest towards Mount Washington, and encompasses several zones of
mineralization for 5 kilometres along Murex Creek, including the Lupus, Ideal,
Murex, and the southern portion of the Domineer deposits at Mount
Washington.
22
The Lupus
zone is on Constitution Hill, adjacent to Wolf Lake, and has assayed up to 2.7
ounces per tonne gold and 5.7 ounces per tonne silver.
The Murex
zone is on the northeast slope of Mount Washington, and represents an area of
mineralization covering approximately 700 by 700 metres. It has been previously
tested by a number of diamond-drill holes, with a 4 metre section of core
assaying 4.08% copper, 32.91 grams per tonne silver and 6.31 grams per tonne
gold.
The Ideal
claims are situated midway between the Lupus and Murex zones, along Murex Creek.
According to BC Assessment Report 19081, prospecting activities on the Ideal
claims have resulted in chip samples assaying as high as 4.35 ounces per tonne
gold and 2.7 ounces per tonne silver.
The
Domineer epithermal deposits are due west of the Murex zone, and 400 metres
south of the Mount Washington Copper open pit mine. It has a defined strike
length of 1.5 kilometres and an average width of 61 metres. According to BC
Assessment Report 18472, drill indicated reserves on the Mount Washington
(Domineer) property stand at 606,600 tons grading 0.197 ounces per tonne gold
and 0.94 ounces per tonne silver. It includes the underground portion, with a
cut-off of 0.1 ounces per tonne gold, and the open pitable reserves, with a cut
off of 0.05 ounces per tonne gold.
The Argo Gold Property is
located 10 kilometres west of the south end of Tatlayako Lake, approximately 168
miles northwest of Vancouver. It covers 1,292 acres, and includes ten reverted
crown grants.
The
mineralized area of economic interest covers several square kilometres
immediately south of Ottarasko Creek. The strike length is estimated as being at
least 3 kilometres long, and is up to 300 metres in width. The target prospects
are known as the Langara, the Standard, and the Argo.
On the
Langara prospect, government records contained in MINFILE 092N 036 show that the
typical average assay of chip samples taken across the widths of veins and adit
zones is 6 grams per tonne gold and 70 grams per tonne silver. BC Assessment
Report 16959 also documents that one quartz vein grab sample assayed 26.75 grams
per tonne gold and 39.5 grams per tonne silver. Another grab sample documented
in the same report assayed 2.52%copper, 3.13% zinc and 0.33% lead, although high
values of these base metals are reported to be very sporadic.
On the
Standard prospect, the mineralization is described in government records as
“massive”, with assays of up to 19.2 grams per tonne gold and 20.6 grams per
tonne silver (MINFILE 092N 037).
Typical
samples from the namesake Argo prospect averaged 8 grams per tonne gold, 34
grams per tonne silver, and up to 0.43% copper (MINFILE 092N 038; Assessment
Reports 16959, 17980).
The North Star Silver Property
is situated in the historic Slocan Silver mining camp, and is located 1.5
kilometres east of Slocan Lake and approximately 4 kilomtres south of the
village of Silverton. It covers almost 1,850 acres, and encompasses 3
past-producing mines; the Metallic, Noonday, and Buster.
The
Metallic mine (MINFILE 082FNW066) is located on the north side of Hasty Creek.
The ground surrounding the Metallic consists of the former Metallic claim group,
composed of the Metallic, Midnight, Mary Florence and North Star claims.
Government records document that past-production yielded an average of 2101
grams per tonne silver, 0.40 grams per tonne gold, 11% lead and 9.9 %
zinc.
The
nearby Noonday mine (MINFILE 082FNW068) is situated on reverted crown grants
west of Hasty Creek, where past-production yielded an average of 2,655 grams per
tonne silver, 0.16 grams per tonne gold, 18% lead, 2.4% zinc. The Buster mine
(MINFILE 082FNW188) is located one mile north of the Noonday, and has yielded an
average of 1,182 grams per tonne silver, 15.5 grams per tonne gold, 8.65% zinc
and 7.5% lead.
23
The Loughborough Gold Property
is located on the east side of Loughborough Inlet, approximately 140 miles
northwest of Vancouver. It consists of 3 contiguous claim units covering 349
hectares (862 acres).
According
to BC Assessment Report 14908, there are six or more vein systems reported on
the property. Past-production from the Loughborough vein assayed an average of
0.88 ounces per tonne gold and 3.51 ounces per tonne silver. Subsequent
exploration and sampling of the vein assayed up to 0.46 ounces per tonne gold
and 2.30 ounces per tonne silver. Air photographs of the area indicate the
presence of multiple very prominent northeasterly and northwesterly trending
lineaments. However, the only shear vein system tested to-date by underground
development is the Loughborough.
The
property is also situated less than 5 miles from the historic Doratha-Morton
mine, where two samples documented in Assessment Report 22515 and MINFILE 092K
023 assayed 1,560 grams (50.16 ounces) per tonne gold and 11,290 grams (363.02
ounces) per tonne gold, respectively.
The Lynx Gold Property covers
2,200 acres and is located approximately 75 miles southeast of Vernon, British
Columbia. The property consists of the Kismet, Mountain View, Iron Ball,
Snowdrop and Dewdrop claims.
The known
gold-bearing veins are fissure type, and have been observed to also contain
molybdenite. According to BC MINFILE 082LSE055 and BC Assessment Report 10530,
bulldozer trenching was conducted in 1980, and in 1981 a $216,000 drill program
completed 8 diamond drillholes totalling 1,608 metres. A chip sample from the
face of the Kismet vein assayed 35.65 grams (1.15 ounces) per tonne gold and
2.06 grams per tonne silver. On the Dewdrop, west of the Iron Ball, opencuts
have uncovered north-striking quartz fissure veins containing similar minerals
in granite. Several cuts to the east of the Kismet tunnel have uncovered other
fissure veins in the granite.
BC
Assessment Report 10530 also documents that a new vein was discovered near drill
hole H-7-81 hosting gold, pyrite and molybdenum. This vein assayed 5.83 grams
per tonne gold and 55.19 grams per tonne silver from a selected surface grab
sample. In a drill intersection the vein assayed 3.77 grams per tonne gold over
0.6 metres. The best intersection was from hole H-4-81, about 80 metres
north-northeast of the Kismet adit. The sample assayed 28.52 grams (0.92 ounces)
per tonne gold, 13.4 grams per tonne silver and 0.01% copper across 1.07 metres.
This hole probably intersected the extension of the Kismet vein. The report
concludes that the property shows potential for economic lengths and widths of
gold mineralization in a favorable geological environment, and that the gold
bearing veins warranted further diamond drill testing.
Cherry Gold is a
road-accessible property that covers 1,788 acres located 9 kilometres east of
Cherryville, British Columbia and 50 kilomtres east of Vernon, British Columbia.
The property is within the Monashee Gold Camp, and was previously known as the
Hilton Claim Group.
The
primary target area is known as the Bulldozer Trench. According to MINFILE
082LSE063, there are 2 mineralized shear zones in the Bulldozer Trench; the
Cherry and the Hilton shears. BC Assessment Report 11892 documents that samples
from this area have assayed up to 158 grams (5.08 ounces) per tonne gold and
1,251 grams (40.22 ounces) per tonne silver. Samples of the Cherry shear where
no quartz veining is present assayed up to 20 grams per tonne gold, 1.05% lead
and 76 grams per tonne silver over 90 metres. These samples are confirmed in
Assessment Report 18706, which concludes that the property “has good potential
for hosting an economic gold deposit”. As well, both of these mineralized shear
zones are open along strike and down dip.
A second
target zone has been identified near the northwestern border of the property,
and which is within 250 metres of the past-producing True Blue mine. As
documented in MINFILE 082LSE035, assays from the True Blue were reportedly as
high as 100,000 grams (3,215 ounces) per tonne silver.
Lancers Mountain Gold is
located approximately 160 miles northwest of Vancouver, and is characterized by
gold, silver, lead, zinc, copper, and molybdenum mineralization over 998
acres. As documented in MINFILE 092N 051, there are at least four
major gossanous zones with an average size measuring 50 by 50
metres. On the northeast flank of Lancers Mountain a select
grab sample from a trench cut in a silicified felsic dyke assayed 35,513 grams
(1,141 ounces) per tonne silver, 56.6 grams (1.81 ounces) per tonne gold, 1.2%
zinc and 0.39% lead.
24
The
property also includes the Hannah prospect (MINFILE 092N 028). The
Hannah is a showing of gold, silver, copper and molybdenum mineralization in
altered intrusive rocks located 8 kilometres southeast of Lancers
Mountain. Assay results from 64 channel and chip samples revealed
that gold and molybdenum were more significant than copper and
silver. The average assay for gold was 1 gram per tonne (maximum
11.3), and for molybdenum was 0.087% (maximum 1.25%).
Another
important area is the Discovery zone where a shear zone in the quartz monzonite
stock is intruded by felsic to intermediate porphyritic dykes. The zone has been
explored by diamond drilling and trenching; with one 1 metre section in a trench
assaying 18 grams per tonne gold, 44 grams per tonne silver and 3.26%
copper.
Elsewhere
on the property in the Conductor "F" zone, the sheared contact between a
feldspar porphyry dyke and silicified monzonite is marked by strong sulphide
mineralization. A select grab sample from here assayed 126 grams (4.05 ounces)
per tonne gold and over 1% copper, and a 2 metre channel sample averaged 85
grams (2.73 ounces) per tonne gold, 51 grams per tonne silver, and over 1%
copper (Assessment Report 18202).
Despite
some very high though sporadic geochemical results, most exploration efforts
thus far in the area have not yet defined significant widths of economic
mineralization, although the potential at depth is not discounted. It
should be noted that the property is characterized by rugged terrain and harsh
weather conditions that have severely limited exploration to
date. The Company believes that despite its lack of infrastructure,
the remarkably high assays such as 4.05 ounces per tonne gold in the Conductor
zone and 1,141 ounces per tonne silver on Lancers Mountain make the property an
attractive exploration target and a suitable joint-venture prospect of
merit.
Pine River Vanadium covers
1,810 acres and is located in the Pine River Valley, approximately 700
kilometres northeast of Vancouver and about 600 kilometres northwest of
Edmonton, Alberta. While its location is remote, the property has
excellent infrastructure with regard to both transportation and
energy. A paved highway passes through and alongside the claims,
which also runs parallel with the Pine River. The B.C. Railway
crosses on the opposite side of the valley as does the Peace River Power
transmission line. Natural gas and oil pipelines also follow the highway through
the valley.
Sampling
documented in MINFILE 093O 009 and Assessment Report 20372 has thus far defined
a vanadium-bearing zone with a length of 200 metres and an estimated true width
of 100 metres. Over 40 samples were assayed, with yields ranging in value from
0.219 to 0.47% vanadium, and up to 0.83% vanadium pentoxide
(V2O5). The deposit is estimated to contain at least several million
tonnes, though these estimates are very preliminary and based on an examination
of a very small portion of the overall property.
Research
by the Company thus far indicates that North Bay now holds the only property in
British Columbia where vanadium is the primary resource. Besides its
traditional uses, such as in the manufacture of high-strength and super-light
steel alloys, vanadium has in recent years seen ever-increasing demand for use
in the next generation of high-capacity batteries that can be charged and
recharged indefinitely. Hybrid cars, as well as large-scale wind and solar
energy installations, all benefit from vanadium batteries to make these
technologies more efficient, cost-effective, and
environmentally-friendly. Its use in alternative energy is one of the
reasons that Discover Magazine recently called vanadium “the element that could
change the world”.
New Eskay Creek consists of
3,688 acres directly adjacent to and within one mile of the main portal of
Barrick’s famed Eskay Creek Mine. It is located in northwestern
British Columbia, approximately 70 kilometres north of Stewart and 900
kilometres northwest of Vancouver. Given its close proximity to Barrick’s Eskay
Creek Mine, the area has excellent infrastructure. Road access is
provided by the Eskay Creek Mine Road, which extends from the Stewart-Cassiar
Highway at Bob Quinn Lake and traverses through the western portion of the
Company’s claims before it reaches the Eskay Creek Mine.
25
Prior to
its closure in 2008, Barrick's Eskay Creek Mine was Canada's highest-grade gold
mine and the world's fifth largest silver producer, with production well in
excess of 3 million ounces of gold and 160 million ounces of
silver. The average grade of the resource was 48.4 grams (1.56
ounces) per tonne gold and 2,221 grams (71.4 ounces) per tonne
silver. The Eskay Creek deposit was also estimated to contain
approximately 3.2 % lead, 5.2 % zinc, and 0.7 % copper.
According
to British Columbia government records documented in BC MINFILE 104B 008, the
major geological structure at Eskay Creek “is interpreted to be an asymmetric
anticline which plunges gently to the northeast. The anticline is broken by a
series of high-angle faults. Major faults strike north-northeast; minor ones
north-northwest. Several northerly to northeasterly trending lineaments also
traverse the property.” Considering that the Company’s claims abut
the length of the entire northern boundary of the Barrick leasehold, the
northerly and northeastern directional indications of the orebody strike length
make it clear that the Company has successfully secured a position of
considerable strategic importance relative to the Eskay Creek
deposit.
Truax Gold (MINFILE 092JNE060)
is a road-accessible property located near Gold Bridge and Bralorne, British
Columbia, approximately 150 miles north of Vancouver. It extends over
4,437 contiguous acres from Mt. Truax westward to within 3 miles of the historic
Bralorne and Pioneer mines.
According
to BC Assessment Report 27094 filed in January 2003, numerous mineral
occurrences are documented on the property, with sampling near Mt. Truax
yielding assay results averaging 3.5 grams per tonne gold, 1,730 grams (55.62
ounces) per tonne silver, 1.41% antimony, and 7.31% lead. The same report also
documents that previous exploration is known to have yielded assays as high as
4.46 ounces of gold per tonne.
The
Company notes that the nearby Bralorne and Pioneer deposits have collectively
produced over 4.1 million ounces of gold, making this the largest gold producing
camp in British Columbia.
Litigation
None.
Employees
We have
one full-time employee and one part-time employee. We believe we have good
relations with all of our employees and do not have any unionized
workers.
Competition
As metal
prices continue to increase and demand grows, we expect new companies to form
and compete with the already numerous junior and developed mining, exploration
and production companies in existence. Some of these companies may be
more efficient in locating new claims, which could impede our business
plan. As well, some of these companies may be better funded, or more
successful in attracting joint-venture partners, and thereby diminish our
ability to execute our business plan.
Material
Agreements
The
Company presently has two joint-ventures under contract.
The Fawn
Property is currently under a joint-venture agreement with Silver Quest
Resources Ltd (TSX-V: SQI) (“Silver Quest”). Silver Quest may acquire
a 75% interest in the Fawn property by making aggregate cash payments of
$100,000, issuing 150,000 shares, and incurring $1,500,000 in exploration
expenditures over four years. Of the aggregate payments and commitments due,
$25,000 in cash and 50,000 shares are due upon receipt of regulatory acceptance
by the TSX Venture Exchange (now effective), and $250,000 in exploration
expenditures must be expended in the first 12 months. Upon completion
of all of the terms of the agreement whereby Silver Quest acquires a 75%
interest, a 75/25 joint-venture will be formed. If subsequent to the
formation of the joint-venture the interest of either party is reduced by
dilution to less than 10%, such party's interest will automatically be converted
to a 2% net smelter return royalty (NSR). The other party may then purchase one
half of the NSR at any time up to 90 days following the commencement of
commercial production for $1,500,000.
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The
Coronation Gold Property is currently under a joint-venture agreement with
Lincoln Resources Inc. (“Lincoln”), a private Nevada corporation. The
agreement calls for Lincoln to commit up to $1.5 million CDN over three years
for exploration expenses, developmental drilling, and surface ore recovery, with
a minimum expenditure of $250,000 during the first year. Upon
completion of the work program and fulfillment of all the terms of the
agreement, North Bay and Lincoln will each own 50% of the Coronation Gold
Property, and will equally share any and all net revenue, including any
near-term profits generated from surface ore recovery operations. It
is expected that a portion of any profits will be re-invested in ongoing
development work on the Coronation’s underground resources. In
addition, North Bay has received an initial cash payment of $12,500 CDN from
Lincoln, less a $2,500 CDN finders fee paid to an independent third
party.
Government
Regulation
At the
present time, all of our mining claims are in Canada, where we are subject to
regulation by numerous federal and provincial governmental authorities, but most
importantly, by the British Columbia Ministry of Energy, Mines, and Petroleum
Resources (MEMPR). At some point in the near future we may also
acquire mining properties in the United States, and would then be subject to
regulation by the Federal Environmental Protection Agency, the Federal
Department of the Interior, the Bureau of Land Management, the Forestry Service,
as well as other comparable state agencies. The acquisition of a
prospect in Mexico, or any other country, will be subject to similar regulatory
agencies requirements by various agencies in each country. In all
cases, the failure or delay in making required filings and obtaining regulatory
approvals or licenses will adversely affect our ability to carry out our
business plan. The failure to obtain and comply with any regulations or
licenses may result in fines or other penalties, and even the loss of our rights
over a prospect. We expect compliance with these regulations to be a substantial
expense in terms of time and cost. Therefore, compliance with or the failure to
comply with applicable regulation will affect our ability to succeed in our
business plan and ultimately to generate revenues and profits.
Reports
to Security Holders
After we
become subject to the informational requirements of the Securities Exchange Act
of 1934, we will file annual, quarterly and other reports and information with
the Securities and Exchange Commission. You may read and copy these reports,
statements, or other information we file at the SEC's public reference room at
450 Fifth Street, N.W., Washington D.C. 20549. Our filings will also
be available to the public from commercial document retrieval services and the
Internet worldwide website maintained by the U.S. Securities and Exchange
Commission at www.sec.gov.
NOTE
REGARDING FORWARD-LOOKING STATEMENTS
Certain
matters discussed herein are forward-looking statements. Such forward-looking
statements contained in this prospectus which is a part of our registration
statement involve risks and uncertainties, including statements as
to:
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our future operating
results;
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our business
prospects;
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our contractual arrangements
and relationships with third
parties;
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the dependence of our future
success on the general
economy;
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our possible financings;
and
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the adequacy of our cash
resources and working
capital.
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These
forward-looking statements can generally be identified as such because the
context of the statement will include words such as we “believe,”
“anticipate,” “expect,” “estimate” or words of similar meaning. Similarly,
statements that describe our future plans, objectives or goals are also
forward-looking statements. Such forward-looking statements are subject to
certain risks and uncertainties which are described in close proximity to
such statements and which could cause actual results to differ materially
from those anticipated as of the date of this prospectus. Shareholders,
potential investors and other readers are urged to consider these factors
in evaluating the forward-looking statements and are cautioned not to
place undue reliance on such forward-looking statements. The
forward-looking statements included herein are only made as of the date of
this prospectus, and we undertake no obligation to publicly update such
forward-looking statements to reflect subsequent events or
circumstances.
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AND
RESULTS OF OPERATIONS
You
should read the following discussion of our financial condition and results of
operations in conjunction with the financial statements and the notes thereto,
included elsewhere in this prospectus. The following discussion
contains forward-looking statements that reflect our plans, estimates and
beliefs. Our actual results could differ materially from those
discussed in the forward-looking statements. Factors that could cause
or contribute to those differences include those discussed below and elsewhere
in this prospectus, particularly in the “Risk Factors” section.
Overview
We seek
to acquire, develop, and exploit natural resource properties with extensive
reserves of precious metals, including gold, silver, platinum, and palladium, as
well as base metals, including copper, zinc, lead and molybdenum. The Company’s
business plan is based on the Generative Business Model, which is designed to
leverage our mining properties and mineral claims into near-term revenue streams
even during the earliest stages of exploration and development. This
is accomplished by entering into sales, joint-venture, and/or option contracts
with other mining companies, for which the Company generates revenue through
payments in cash, stock, and other consideration.
We began
operations as a prospective mining company in March 2006, and we are engaged in
the acquisition, development, and management of natural
resources. The Company’s mission is to build a portfolio of viable
mining prospects throughout the world and developing them through subsidiaries
and joint-venture partners to their full economic potential. North Bay's
business plan is based on the Generative Business Model, which is designed to
leverage its properties into near-term revenue streams even during the earliest
stages of exploration and development. This provides shareholders with multiple
opportunities to profit from discoveries while preserving capital and minimizing
the risk involved in exploration and development.
As of
February 4, 2010, we have joint-ventures underway on our (a) Fawn property in
central British Columbia with Silver Quest Resources Ltd, and (b) our Coronation
Gold property in southeastern British Columbia. Two joint-ventures
consummated in December 2008 have since been terminated, as has one other in
2009. As of December 31, 2008, revenue from joint-venture agreements
totaled $110,535, and revenue from claim sales totaled $45,777. As
per GAAP, this revenue has been classified as “Other
Income”. Top-line revenue is reserved for when we begin actual mining
operations and begin generating revenue from mine production.
We
currently do not control any properties with active mining operations, and while
we are presently seeking to acquire operating properties, there is no guarantee
that said negotiations will be successful.
As of
February 4, 2010, we own the mineral rights to over 150 mining claims in British
Columbia, which encompasses an aggregate holding of over 60,000
acres. As per GAAP, expenditures to acquire and maintain our
properties have been expensed, and will continue to be expensed until such time
as we begin mining operations at one or more of our properties.
28
We
currently generate revenue from claim sales and joint-venture
agreements. When we sell a claim, we capture near-term revenue, but
forego any possibility of a future revenue stream. When we enter into
a joint-venture, we receive near-term revenue as well as a commitment for future
revenue, but since the joint-venture partner has the option to withdraw at any
time, we can not project revenue from a joint-venture into the
future. However, should a joint-venture partner withdraw, we still
retain control of the asset, and can therefore enter into another joint-venture
with another partner, develop the property ourselves, or else elect to sell the
claims.
We expect
to generate near-term revenue growth through claim sales and joint-venture
activities. We believe that our management’s proven track record of
identifying and acquiring mineral properties of merit and securing joint-venture
agreements with other companies will provide for continued revenue growth for
the foreseeable future. However, there is no assurance that the
Company can successfully secure new joint-venture partnerships on terms that are
satisfactory to the Company.
We expect
to generate long-term revenue through the acquisition of an operating mine, and
by the development of our properties, either independently or through
joint-venture partners, into operating mines. There is no assurance
that these efforts will be successful, or that the projects will be economically
viable.
Going
Concern
Our
financial statements have been prepared on a going concern basis, which implies
the Company will continue to realize its assets and discharge its liabilities in
the normal course of business. The Company has generated modest revenues since
inception and has never paid any dividends and is unlikely to pay dividends. The
continuation of the Company as a going concern is dependent upon the continued
financial support from its shareholders, the ability of the Company to obtain
necessary equity financing to continue operations and to determine the
existence, discovery and successful exploration of economically recoverable
reserves in its resource properties, confirmation of the Company’s interests in
the underlying properties, and the attainment of profitable operations. The
Company has had very little operating history to date. These financial
statements do not include any adjustments to the recoverability and
classification of recorded asset amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern.
These factors raise substantial doubt regarding the ability of the Company to
continue as a going concern.
We have
experienced recurring net losses from operations, which losses have caused an
accumulated deficit of approximately $9.85 million as of September 30, 2009. In
addition, we have a working capital deficit of approximately $532,000 as of
September 30, 2009. We had net losses of approximately $328,478 and $1.5 million
for the years ended December 31, 2008 and 2007, respectively. These
factors, among others, raise substantial doubt about our ability to continue as
a going concern. If we are unable to generate profits and are unable to continue
to obtain financing to meet our working capital requirements, we may have to
curtail our business sharply or cease operations altogether. Our continuation as
a going concern is dependent upon our ability to generate sufficient cash flow
to meet our obligations on a timely basis to retain our current financing, to
obtain additional financing, and, ultimately, to attain profitability. Should
any of these events not occur, we will be adversely affected and we may have to
cease operations.
The
ongoing execution of our business plan is expected to result in operating losses
over the next twelve months. Management believes it has enough cash to maintain
its operations for the next twelve months. There are no assurances that we will
be successful in achieving its goals of increasing revenues and reaching
profitability.
In view
of these conditions, our ability to continue as a going concern is dependent
upon our ability to meet its financing requirements, and to ultimately achieve
profitable operations. Management believes that its current and future plans
provide an opportunity to continue as a going concern. The accompanying
financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts and
classification of liabilities that may be necessary in the event we cannot
continue as a going concern.
29
Summary
of Significant Accounting Policies
Revenue
Recognition
The
company has recognized no mining revenue to date. In the future mining revenue
will be recognized according to the policy described below.
Revenue
is recognized when the following conditions are met:
(a) persuasive
evidence of an arrangement to purchase exists;
(b) the
price is determinable;
(c) the
product has been delivered; and
(d)
collection of the sales price is reasonably assured.
Under the
terms of concentrate sales contracts with third-party smelters, final prices for
the gold, silver, zinc, copper and lead in the concentrate are set based on the
prevailing spot market metal prices on a specified future date based on the date
that the concentrate is delivered to the smelter. The Company records revenues
under these contracts based on forward prices at the time of delivery, which is
when transfer of legal title to concentrate passes to the third-party smelters.
The terms of the contracts result in differences between the recorded estimated
price at delivery and the final settlement price. These differences are adjusted
through revenue at each subsequent financial statement date.
Mineral
Property Costs
The
Company has been in the exploration stage since it entered the Mining Sector on
March 10, 2006 and has not yet realized any revenues from mining
operations. Mineral property acquisition, exploration and development
costs are expensed as incurred until such time as economic reserves are
quantified. To date the Company has not established any proven or probable
reserves on its mineral properties that are compliant with National Instrument
43-101. Many properties do have historical reserve estimates, but
these are not NI 43-101 compliant and can not be used at the present time to
establish asset values. The Company has adopted the provisions of the
FASB standard on asset retirement obligations which establishes standards for
the initial measurement and subsequent accounting for obligations associated
with the sale, abandonment, or other disposal of long-lived tangible assets
arising from the acquisition, construction or development and for normal
operations of such assets. As of December 31, 2008 and 2007, the
Company had no developed properties; therefore an accrual related to asset
retirement obligations was not necessary.
Fair
Value of Financial Instruments
The
Company adopted the Financial Accounting Standards Board’s standard related to
fair value at inception. The standard defines fair value, establishes a
framework for measuring fair value and expands disclosure of fair value
measurements. The standard applies under other accounting pronouncements that
require or permit fair value measurements and, accordingly, does not require any
new fair value measurements. The standard clarifies that fair value is an exit
price, representing the amount that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants.
As such, fair value is a market-based measurement that should be determined
based on assumptions that market participants would use in pricing an asset or
liability. As a basis for considering such assumptions, the standard established
a three-tier fair value hierarchy, which prioritizes the inputs used in
measuring fair value as follows.
Level
1. Observable inputs such as quoted prices in active
markets;
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Level
2. Inputs, other than the quoted prices in active markets, that are
observable either directly or indirectly;
and
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30
Level
3. Unobservable inputs in which there is little or no market data, which
require the reporting entity to develop its own
assumptions.
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Results
of Operations for the Nine Months Ended September 30, 2009 Compared to Results
of Operations for the Nine Months Ended September 30, 2008
Gains from Other
Income. For the nine months ended September 30, 2009 and
September 30, 2008, the Company’s other income related to mineral
claim sales and joint-ventures was $8,851 and $49,710, respectively. The Company
has spent $11,668 and $29,877 in mineral property costs during each respective
period in order to generate cash flows, consisting primarily of claim
registration and maintenance fees.
Operating
Expenses. For the nine months ended September 30, 2009 and
September 30, 2008, the Company had operating expenses of $576,316 and $197,129,
respectively. The increase in operating expenses for the nine months ended
September 30, 2009, was mainly due to accrued expenses in the form of deferred
compensation and restricted stock-based bonuses.
Net Loss. For the nine months ended September 30, 2009, and September 30, 2008, we had net losses of $614,072 and $151,352. The increase in net losses that we incurred during the nine months ended September 30, 2009 was due to accrued expenses in the form of deferred compensation and restricted stock-based bonuses.
Results
of Operations for the Year Ended December 31, 2008 Compared to Results of
Operations for the Year Ended December 31, 2007
Gains from Other
Income. For the years ended December 31, 2008 and December 31, 2007, the
Company’s other income from mineral claim sales and joint-ventures was $156,312
and $45,834, respectively. The Company spent $18,120 and $97,609 in 2008 and
2007 on mineral property costs in order to generate cashflows, consisting
primarily of claim registration and maintenance fees.
Operating
Expenses. For the year ended December 31, 2008, the Company
had operating expenses of $484,790, which included general and administrative
expenses of $409,122. Operating expenses for the year ended December
31, 2007 were $1,412,962, which included general and administrative expenses of
$1,310,993. Our decrease in operating expenses was mainly from
the valuation of a restricted stock award to our Chief Executive Officer in 2007
that was not repeated in 2008.
Net
Loss. For the year ended December 31, 2008, we had a net loss
of $328,478. Our net loss for the year ended December 31, 2007 was $1,490,871
and was incurred primarily from a one-time accounting charge resulting from
a restricted stock award to our Chief Executive Officer. Our decrease in
operating expenses for the year ended December 31, 2008 was due to an increase
in other income and a decrease in stock issuances.
Liquidity
and Capital Resources
The
ability of the Company to continue as a going concern is dependent on the
Company’s ability to raise additional capital and implement its business plan.
Since its inception, the Company has been funded by its founders, Board members,
employees and persons related to or acquainted with these. To remedy the current
deficiency in our liquidity position, we will raise funds through additional
equity offerings, strategic agreements with partner companies, and debt. We
currently have no external sources of liquidity and internal sources (revenue
from sales) are very limited.
As of
September 30, 2009, total current assets were $70,392, which consisted of
$51,794 of cash, $4,937 of investments and $13,660 of accounts
receivable.
As of December 31, 2008, total current assets were $137,186,
which consisted of
$3,471 of cash and $133,715 of investments.
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As of
September 30, 2009, total current liabilities were $602,310, which consisted
entirely of deferred compensation.
As of
December 31, 2008 and 2007, our total current liabilities were $570,289 and
$377,428, respectively, and consisted entirely of deferred
compensation. Excluding accrued expenses for deferred compensation,
the Company has no short-term or long-term debt.
We had a
working capital deficit of $531,918 as of September 30, 2009, and a working
capital deficit of $433,103 at December 31, 2008.
During the nine months ended September
30, 2009, operating activities used cash of $124,676 as compared to the nine months ended
September 30, 2008 where we used cash of $6,705 in operating activities. The increase
in cash used by operating activities for the nine months ended September 30,
2009 was due primarily to a decrease in other income.
Cash
flows from financing activities represented the Company’s principal source of
cash for the nine month period ended September 30, 2009. Cash flows from
financing activities during the nine month period ended September 30, 2009, and
September 30, 2008, were $173,000 and $11,891, respectively, and consisted
primarily of proceeds from the issuance of stock.
As of December 31, 2008, total current
assets were $137,186 which consisted of $3,471 of cash and
$133,715 from investments. As of
December 31, 2007, total current assets were $23 which consisted of $23 of cash and
$0 from investments.
As of
December 31, 2008, total current liabilities were $570,289, which consisted
entirely of deferred compensation. This is an increase from the
previous year ended December 31, 2007, when our current liabilities were
$377,428 and also consisted entirely of deferred compensation.
We had
negative net working capital of $433,103 as of December 31, 2008, compared to
negative net working capital of $377,405 as of December 31, 2007.
During
the year ended December 31, 2008, operating activities used cash of $16,552 as
compared to the year ended December 31, 2007, where we used cash of $130,635 in
operating activities. The cash used by operating activities for the year ended
December 31, 2008 was due primarily to compensation expense. The cash used in
operating activities for the year ended December 31, 2007 was also primarily
related to compensation expense.
We had a
net increase in cash of $3,448 for the year ended December 31, 2008. Cash flows
from financing activities represented the Company’s principal source of cash for
the twelve month period ended December 31, 2008. Cash flows from financing
activities during the year ended December 31, 2008 were $20,000, consisting of
proceeds in the amount of $10,000 from the issuance of stock and $10,000 of
proceeds distributed to the Company by a related party. During the fiscal year
ended December 31, 2007, we received $62,000 from financing activities from
borrowings and $70,623 from contributions from a related party.
During
the twelve months ended December 31, 2007, a non-convertible note payable from a
third party totaling $50,000 with a 20% interest rate, maturing thirty days from
the note date, was converted into 1,250,000 shares of common stock. During the
same period, a non-convertible note payable from a third party totaling $12,000
with a 10% interest rate, maturing one year from the note date, was converted
into 100,000 shares of common stock. The aggregate shares were valued
according to the closing market price on their respective conversion dates at
$121,500. The total loss on all conversions was $49,500 for the year
ended December 31, 2007, and zero for the year ended December 31,
2008.
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Recent
Financings
On
October 7, 2009, we entered into a Securities Purchase Agreement with Tangiers.
Pursuant to the Securities Purchase Agreement, the Company may, at its
discretion, periodically sell to Tangiers shares of its common stock for a total
purchase price of up to $5,000,000. For each share of common stock purchased
under the Securities Purchase Agreement, Tangiers will pay us 90% of
the lowest volume weighted average price of the Company's common stock as quoted
by Bloomberg, LP on the Over-the-Counter Bulletin Board or other principal
market on which the Company's common stock is traded for the five days
immediately following the notice date. The price paid by Tangiers for the
Company's stock shall be determined as of the date of each individual request
for an advance under the Securities Purchase Agreement. Tangiers’
obligation to purchase shares of the Company's common stock under the Securities
Purchase Agreement is subject to certain conditions, including the Company
obtaining an effective registration statement for shares of the Company's common
stock sold under the Securities Purchase Agreement and is limited to $100,000
per ten consecutive trading days after the advance notice is provided to
Tangiers. The Securities Purchase Agreement shall terminate and Tangiers shall
have no further obligation to make advances under the Securities Purchase
Agreement at the earlier of the passing of 18 months after the date that the
Securities and Exchange Commission declares the Company’s registration statement
effective or the Company receives advances from Tangiers equal to
$5,000,000. Upon the execution of the Securities Purchase Agreement, Tangiers
received a one-time commitment fee equal to $85,000 of the Company's common
stock divided by the lowest volume weighted average price of the Company's
common stock during the 10 business days immediately following the date of the
Securities Purchase Agreement, as quoted by Bloomberg, LP.
During
2009, the Company issued an aggregate of 21,800,000 shares of common stock in
Rule 504 private placements. The consideration received was
$173,000.
Subsequent
to December 31, 2009, the Company issued 5,000,000 shares of common stock in a
Rule 504 private placement. The consideration received was
$50,000.
Off-Balance
Sheet Arrangements
We do not
have any off-balance sheet arrangements.
Recent
Accounting Pronouncements
In April
2008, the FASB issued ASC 350-10, “Determination of the Useful Life of
Intangible Assets.” ASC 350-10 amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of
a recognized intangible asset under ASC 350-10, “Goodwill and Other Intangible
Assets.” ASC No. 350-10 is effective for fiscal years beginning after December
15, 2008. The adoption of this ASC did not have a material impact on our
financial statements.
In April
2009, the FASB issued ASC 805-10, “Accounting for Assets Acquired and
Liabilities assumed in a Business Combination That Arise from Contingencies — an
amendment of FASB Statement No. 141 (Revised December 2007), Business
Combinations”. ASC 805-10 addresses application issues raised by preparers,
auditors and members of the legal profession on initial recognition and
measurement, subsequent measurement and accounting and disclosure of assets and
liabilities arising from contingencies in a business combination. ASC 805-10 is
effective for assets or liabilities arising from contingencies in business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008. ASC
805-10 will have an impact on our accounting for any future acquisitions and its
financial statements.
In May
2009, the FASB issued SFAS No. 165, “Subsequent Events”, which is included in
ASC Topic 855, Subsequent Events. ASC Topic 855 established principles and
requirements for evaluating and reporting subsequent events and distinguishes
which subsequent events should be recognized in the financial statements versus
which subsequent events should be disclosed in the financial statements. ASC
Topic 855 also requires disclosure of the date through which subsequent events
are evaluated by management. ASC Topic 855 was effective for interim periods
ending after June 15, 2009 and applies prospectively.
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Because
ASC Topic 855 impacts the disclosure requirements, and not the accounting
treatment for subsequent events, the adoption of ASC Topic 855 did not impact
our results of operations or financial condition.
Effective
July 1, 2009, we adopted the Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) 105-10, Generally Accepted Accounting
Principles – Overall (“ASC 105-10”). ASC 105-10 establishes the FASB
Accounting Standards Codification (the “Codification”) as the source of
authoritative accounting principles recognized by the FASB to be applied by
nongovernmental entities in the preparation of financial statements in
conformity with U.S. GAAP. Rules and interpretive releases of the SEC under
authority of federal securities laws are also sources of authoritative U.S. GAAP
for SEC registrants. All guidance contained in the Codification carries an equal
level of authority. The Codification superseded all existing non-SEC accounting
and reporting standards. All other non-grandfathered, non-SEC accounting
literature not included in the Codification is non-authoritative. The FASB will
not issue new standards in the form of Statements, FASB Staff Positions or
Emerging Issues Task Force Abstracts. Instead, it will issue Accounting
Standards Updates (“ASUs”). The FASB will not consider ASUs as authoritative in
their own right. ASUs will serve only to update the Codification, provide
background information about the guidance and provide the bases for conclusions
on the change(s) in the Codification. References made to FASB guidance
throughout these financials have been updated for the Codification.
In
August 2009, the FASB issued ASU No. 2009-05, Measuring Liabilities at
Fair Value, which provides additional guidance on how companies should measure
liabilities at fair value under ASC 820. The ASU clarifies that the quoted price
for an identical liability should be used. However, if such information is not
available, an entity may use the quoted price of an identical liability when
traded as an asset, quoted prices for similar liabilities or similar liabilities
traded as assets, or another valuation technique (such as the market or income
approach). The ASU also indicates that the fair value of a liability is not
adjusted to reflect the impact of contractual restrictions that prevent its
transfer and indicates circumstances in which quoted prices for an identical
liability or quoted price for an identical liability traded as an asset may be
considered level 1 fair value measurements. This ASU is effective
October 1, 2009. We are currently evaluating the impact of this standard,
but would not expect it to have a material impact on the our results of
operations or financial condition.
In
October 2009, the FASB issued ASU No. 2009-13, Multiple-Deliverable
Revenue Arrangements – a consensus of the FASB Emerging Issues Task Force, that
provides amendments to the criteria for separating consideration in
multiple-deliverable arrangements. As a result of these amendments,
multiple-deliverable revenue arrangements will be separated in more
circumstances than under existing U.S. GAAP. The ASU does this by establishing a
selling price hierarchy for determining the selling price of a deliverable. The
selling price used for each deliverable will be based on vendor-specific
objective evidence if available, third-party evidence if vendor-specific
objective evidence is not available, or estimated selling price if neither
vendor-specific objective evidence nor third-party evidence is available. A
vendor will be required to determine its best estimate of selling price in a
manner that is consistent with that used to determine the price to sell the
deliverable on a standalone basis. This ASU also eliminates the residual method
of allocation and will require that arrangement consideration be allocated at
the inception of the arrangement to all deliverables using the relative selling
price method, which allocates any discount in the overall arrangement
proportionally to each deliverable based on its relative selling price. Expanded
disclosures of qualitative and quantitative information regarding application of
the multiple-deliverable revenue arrangement guidance are also required under
the ASU. The ASU does not apply to arrangements for which industry specific
allocation and measurement guidance exists, such as long-term construction
contracts and software transactions. ASU No. 2009-13 is effective beginning
January 1, 2011. We are currently evaluating the impact of this standard on
our results of operations and financial condition.
DESCRIPTION
OF PROPERTY
Our principal
offices are located at 2120 Bethel Road, Lansdale PA 19446. The property is a
suite containing approximately 600 square feet on a 5.5-acre complex owned by
the Company’s Chief Executive Officer. The property is provided by way of a
management agreement with The PAN Network, which bundles the office space along
with other general administrative services, including the services of our Chief
Executive Officer, with a commitment of $18,000 per month. The term
of the agreement is one year, and automatically renews annually on January 1
each year unless otherwise terminated by either party. Any fees
unpaid automatically accrue to deferred compensation. The PAN Network
maintains fire and casualty insurance on the property in an amount deemed
adequate by management. We believe our current location is adequate for our
current business and will serve our near term needs for office
space.
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Subsequent
to December 31, 2008, the Board of Directors approved and the Company executed a
management agreement with The PAN Network, a private business management and
consulting company wholly-owned by the Company’s Chief Executive
Officer. The agreement is in consideration of $18,000 per month, and
calls for PAN to provide (a) Office and board room space, including reception,
utilities, landline phone/fax, computers, copiers, projectors, and miscellaneous
services; (b) Financial Services, including Accounting, Corporate Filing and
Bookkeeping; (c) Project and Administrative Services; (d) Resource Targeting,
Acquisition, Development and Management Services; (e) Marketing Services,
Communications, Marketing Materials Management, and Writing Services; (f)
Strategic Planning, Milestone Management and Critical Path Analysis; and (g)
Online Services, including Web Site Hosting, Web Site Design, Web Site
Maintenance, and Email Services. The agreement includes Mr.
Leopold’s base salary of $15,000 per month, which will accrue entirely to
deferred compensation during any period in which the commitment remains
unpaid. The term of the agreement is one year, and automatically
renews annually on January 1 each year unless otherwise terminated by either
party.
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our
Common Stock is traded on the Pink Sheets, under the symbol NBRI.PK. The most
recent price for our common stock as of February 4, 2010 was
$0.029.
The
following table sets forth, for the periods indicated, the high and low bid
prices of the Company's Common Stock traded on the Pink Sheets for the three
quarters ended September 30, 2009 and the fiscal years ended December 2008 and
December 31, 2007. The quotations are split-adjusted and reflect inter-dealer
prices, without retail mark-up, mark-down or commission, and may not represent
actual transactions.
Fiscal
Year 2009
|
High
|
Low
|
||||||
First
Quarter
|
$
|
0.04
|
$
|
0.008
|
||||
Second
Quarter
|
0.03
|
0.009
|
||||||
Third
Quarter
|
0.04
|
0.01
|
||||||
Fourth
Quarter
|
$
|
0.074
|
0.012
|
Common
Stock
|
||||||||
Fiscal
Year 2008
|
High
|
Low
|
||||||
First
Quarter
|
$
|
0.20
|
$
|
0.03
|
||||
Second
Quarter
|
0.13
|
0.01
|
||||||
Third
Quarter
|
$
|
0.11
|
0.01
|
|||||
Fourth
Quarter
|
0.10
|
0.003
|
||||||
Common
Stock
|
||||||||
Fiscal
Year 2007
|
High
|
Low
|
||||||
First
Quarter
|
$
|
0.30
|
$
|
0.05
|
||||
Second
Quarter
|
$
|
0.25
|
$
|
0.07
|
||||
Third
Quarter
|
$
|
0.20
|
$
|
0.07
|
||||
Fourth
Quarter
|
$
|
0.14
|
$
|
0.01
|
||||
Holders. As of
February 4, 2010, our common stock was held by approximately 1,418 shareholders
of record. Our transfer agent is Colonial Stock Transfer Co., Inc., 66 Exchange
Place, Salt Lake City, UT 84111, phone number (801) 355-5740. The
transfer agent is responsible for all record-keeping and administrative
functions in connection with the common shares of stock.
Dividends. We have
never declared or paid a cash dividend. There are no restrictions on the common
stock or otherwise that limit our ability to pay cash dividends if declared by
the Board of Directors. We do not anticipate declaring or paying any cash
dividends in the foreseeable future.
35
EXECUTIVE
COMPENSATION
The
Company accrued or paid compensation to the Chief Executive Officer for services
rendered to the Company in all capacities during the fiscal years shown in the
Summary Compensation Table below. Deferred compensation accrued in 2008 and 2007
was $192,861 and $166,236, respectively.
Overview
The
following is a discussion of our program for compensating our named executive
officers and directors. Currently, we do not have a compensation committee, and
as such, our board of directors is responsible for determining the compensation
of our named executive officers.
Compensation Program
Objectives and Philosophy
The
primary goals of our policy of executive compensation are to attract and retain
the most talented and dedicated executives possible, to assure that our
executives are compensated effectively in a manner consistent with our strategy
and competitive practice and to align executive compensation with the
achievement of our short- and long-term business objectives.
The board
of directors considers a variety of factors in determining compensation of
executives, including their particular background and circumstances, such as
their training and prior relevant work experience, their success in attracting
and retaining savvy and technically proficient managers and employees,
increasing our revenues, broadening our product line offerings, managing our
costs and otherwise helping to lead our Company through a period of rapid
growth.
In the
near future, we expect that our board of directors will form a compensation
committee charged with the oversight of executive compensation plans, policies
and programs of our Company and with the full authority to determine and approve
the compensation of our chief executive officer and make recommendations with
respect to the compensation of our other executive officers. We expect that our
compensation committee will continue to follow the general approach to executive
compensation that we have followed to date, rewarding superior individual and
Company performance with commensurate cash compensation.
Elements of
Compensation
Our
compensation program for the named executive officers consists primarily of base
salary and a non-qualified deferred compensation plan. There is no retirement
plan, long-term incentive plan or other such plans, although Mr. Leopold’s
agreement has a bonus plan, subject to the Board’s discretion. The Company is a
exploration stage company with limited revenue. As such, we have not yet
obtained a consistent revenue stream with which to fund employee salaries and
bonus plans. The base salary we provide is intended to equitably compensate the
named executive officers based upon their level of responsibility, complexity
and importance of role, leadership and growth potential, and
experience.
Base
Salary
We have
deferred salary compensation for our executive officers. Our named
executive officers receive base salaries commensurate with their roles and
responsibilities. Base salaries and subsequent adjustments, if any, are reviewed
and approved by our board of directors annually, based on an informal review of
relevant market data and each executive’s performance for the prior year, as
well as each executive’s experience, expertise and position. The base salaries
paid to our named executive officers in 2008 are reflected in the Summary
Compensation Table below.
36
Stock-Based
Awards
The
Company has adopted an unfunded Non-Qualified Deferred Compensation Plan to
compensate our Chief Executive Officer. Under this Plan, the Company
is not required to reserve funds for compensation, and is only obligated to pay
compensation when and if funds are available. Any amounts due but
unpaid automatically accrue to deferred compensation. The Plan has the option to
be renewed annually at the discretion of the Company. While unfunded and
non-recourse, for compliance with GAAP this is disclosed as an accrued expense
on the balance sheet. As of December 31, 2008 and 2007, the
outstanding balance of the Plan is $570,289 and $377,428,
respectively.
In 2007
and 2008, our Chief Executive Officer was awarded restricted stock bonuses for
deferring accrued salary, the value of which was based on the market closing
price on the day of issuance, as follows:
Date
|
Type
of Stock
|
Number
of
Shares
|
Value
|
|
2/12/2007
|
Preferred
(I)
|
100
|
$
101,000
|
|
2/9/2007
|
Common
|
250,000
|
$ 31,250
|
|
12/21/2007
|
Common
|
10,000,000
|
$ 900,000
|
|
12/16/2008
|
Common
|
2,500,000
|
$ 50,000
|
|
Employment
Agreements
Subsequent
to December 31, 2008, the Board of Directors approved and the Company executed a
management agreement with The PAN Network (“PAN”), a private business management
and consulting company wholly-owned by the Company’s Chief Executive
Officer. The agreement is in consideration of $18,000 per month, and
calls for PAN to provide (a) Office and board room space, including reception,
utilities, landline phone/fax, computers, copiers, projectors, and miscellaneous
services; (b) Financial Services, including Accounting, Corporate Filing and
Bookkeeping; (c) Project and Administrative Services; (d) Resource Targeting,
Acquisition, Development and Management Services; (e) Marketing Services,
Communications, Marketing Materials Management, and Writing Services; (f)
Strategic Planning, Milestone Management and Critical Path Analysis; and (g)
Online Services, including Web Site Hosting, Web Site Design, Web Site
Maintenance, and Email Services. The agreement includes Mr. Leopold’s salary of
$15,000 per month, which will accrue entirely to deferred compensation during
any period in which the commitment remains unpaid. The term of the
agreement is one year, and automatically renews annually on January 1 each year
unless otherwise terminated by either party.
Retirement
Benefits
Currently,
we do not provide any Company sponsored retirement benefits to any employee,
including the named executive officers.
Perquisites
Historically,
we have not provided our named executive officers with any perquisites and other
personal benefits. We do not view perquisites as a significant element of our
compensation structure, but do believe that perquisites can be useful in
attracting, motivating and retaining the executive talent for which we compete.
It is expected that our historical practices regarding perquisites will continue
and will be subject to periodic review by our board of directors.
The
following table sets forth the compensation paid to our chief executive officer
for each of our last two completed fiscal years. No other officer received
compensation greater than $100,000 for either fiscal year
Summary
Compensation Table
Name
and Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards ($) (1)
|
All
Other
Compensation
($)
|
Total
($)
|
|||||||||||
P
Perry Leopold
|
2009
|
$180,000
|
$0
|
$253,785
|
$0
|
$433,785
|
|||||||||||
Pr
Chairman and
C
Chief Executive
O
Officer
|
2008
|
$180,000
|
$0
|
$50,000
|
$0
|
$230,000
|
|||||||||||
|
2007
|
$180,000
|
$0
|
$1,032,250
|
$0
|
$1,212,250
|
|||||||||||
2006
|
$120,000
|
$0
|
-
|
||||||||||||||
(1)
|
The
values shown in this column represent the dollar amount recognized for
financial statement reporting purposes with respect to the 2008, 2007 and
2006 fiscal years for the fair value of stock awards granted in such
periods in accordance with SFAS 123(R). Pursuant to SEC rules, the amounts
shown exclude the impact of estimated forfeitures related to service-based
vesting conditions. The amount recognized for these awards was calculated
using the Black Scholes pricing model, and reflect grants from our
Plan.
|
37
The
following table sets forth information with respect to the outstanding equity
awards of our principal executive officers and principal financial officers
during 2008, and each person who served as an executive officer of North Bay
Resources as of December 31, 2008:
2008
Grants of Plan Based Awards
Name
|
Grant
Date
|
All
Other
Stock
Awards
(#
of
Shares)
|
Closing
Market Price of
Awards
on the Date of Grant
|
Grant
Date
Fair
Value of
Stock
Awards
($)
|
|||||||
Perry
Leopold
|
12/16/2008
|
2,500,000
|
$ | 0.02 | $ | $50,000 | |||||
Chairman
and Chief Executive Officer
|
Outstanding
Equity Awards at December 31, 2008
The
following table sets forth certain information regarding outstanding equity
awards granted to our named executive officers for 2007 and 2008 that remain
outstanding as of December 31, 2008. All of the options in this table are
exercisable at any time.
Option
awards
|
Stock
Awards
|
|||||||||||||||||||||
Name
|
Number
of securities underlying unexercised options(#)
exercisable
|
Number
of securities underlying unexercised options(#)
unexercisable
|
Option
exercise price ($)
|
Option
expiration date
|
Number of Shares of stock that have not vested
(#)
|
Market
Value of Shares of stock that have not vested ($)
|
||||||||||||||||
Perry
Leopold
|
2008
|
0
|
0
|
0.00
|
12/31/09
|
0
|
0
|
COMPENSATION
OF DIRECTORS
Director
Compensation for Year Ended December 31, 2008
The
following table sets forth with respect to the named director, compensation
information inclusive of equity awards and payments made in the year ended
December 31, 2008.
Name
|
Fees
Earned
Cash
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Nonqualified
Deferred
Compensation
Earnings
($)
|
All
Other
Compensation
($)
|
Total
($)
|
(a)
|
(b) |
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
Perry
Leopold
|
-- |
$50,000
(1)
|
--
|
--
|
192,861
|
--
|
$242,861
|
Fred
Michini
|
-- |
$20,000
(1)
|
--
|
--
|
--
|
--
|
$20,000
|
———————
(1)
|
These
stock awards were awarded in his capacity as a
director.
|
Compensation
Committee Interlocks and Insider Participation
We did
not have a compensation committee during the year ended December 31, 2008.
During the fiscal year ended December 31, 2008, none of our executive
officers served on the board of directors of any entities whose directors or
officers serve on our board of directors.
38
(AN EXPLORATION STAGE
COMPANY)
INDEX
TO FINANCIAL STATEMENTS
Page | ||
North Bay Resources Inc. Financial Statements (unaudited): | ||
Balance Sheets as of September 30, 2009 and December 31, 2008 | 40 | |
Statement of Operations for the Three and Nine Months Ended September 30, 2009 and 2008, and Inception (June 18, 2004) through September 30, 2009 | 41 | |
Statement of Cash Flows for the Three and Nine Months Ended September 30, 2009 and 2008, and Inception (June 18, 2004) through September 30, 2009 | 42 | |
Notes to Financial
Statements
|
43 - 47 | |
North Bay Resources Inc. Audited Financial Statements: | ||
Report of Independent Registered Public Accounting Firm | 48 | |
Balance Sheets as of December 31, 2008 and 2007 | 49 | |
Statements of Operations for the years ended December 31, 2008 and 2007, and Inception (June 18, 2004) through December 31, 2008 | 50 | |
Statement of Changes in Stockholder's Deficit from Inception (June 18, 2004) through December 31, 2008 | 51-53 | |
Statements of Cash flows for the years ended December 31, 2008 and 2007, and Inception (June 18, 2004) through December 31, 2008 | 54 | |
Notes to Financial Statements | 55-64 | |
39
NORTH
BAY RESOURCES INC.
(AN
EXPLORATION STAGE COMPANY)
BALANCE
SHEETS
AS
OF SEPTEMBER 30, 2009 & DECEMBER 31, 2008
Sept.
30, 2009
(unaudited)
|
Dec.
31, 2008
(audited)
|
|||||||
ASSETS
|
||||||||
Current
Assets
|
||||||||
Cash
|
$ | 51,795 | $ | 3,471 | ||||
Investments
|
4,937 | 133,715 | ||||||
Accounts
Receivable
|
13,660 | - | ||||||
Total
Current Assets
|
70,392 | 137,186 | ||||||
TOTAL
ASSETS
|
$ | 70,392 | $ | 137,186 | ||||
LIABILITIES
& STOCKHOLDERS’
DEFICIT
|
||||||||
Liabilities | ||||||||
Current
Liabilities
|
||||||||
Deferred
Compensation
|
$ | 602,310 | $ | 570,289 | ||||
Total
Current Liabilities
|
602,310 | 570,289 | ||||||
Total
Liabilities
|
602,310 | 570,289 | ||||||
Stockholders’
Deficit
|
||||||||
Preferred
stock, Series I, $0.001 par value, 100 shares authorized, 100 shares
issued and outstanding at September 30, 2009, and December 31, 2008,
respectively
|
- | - | ||||||
Convertible
Preferred stock, Series A, $0.001 par value, 8,000,000 shares authorized,
4,000,000 and nil shares issued and outstanding at September 30, 2009, and
December 31, 2008, respectively
|
4,000 | - | ||||||
Convertible
Preferred stock, Series G, $0.001 par value, 1,500,000 shares
authorized,100,000 and nil shares issued and outstanding at September 30,
2009, and December 31, 2008, respectively
|
100 | - | ||||||
Common
stock, $0.001 par value, 250,000,000 shares authorized, 58,597,287 and
24,297,287 shares issued and outstanding at September 30, 2009, and
December 31, 2008, respectively
|
58,597 | 24,297 | ||||||
Additional
Paid-In Capital
|
9,361,524 | 8,755,889 | ||||||
Deficit
Accumulated During Exploration Stage
|
(9,850,141 | ) | (9,236,069 | ) | ||||
Accumulated
Other Comprehensive Income /(Loss)
|
(105,998 | ) | 22,780 | |||||
Total
Stockholders’ Deficit
|
(531,918 | ) | (433,103 | ) | ||||
TOTAL
LIABILITIES & STOCKHOLDERS’ DEFICIT
|
$ | 70,392 | $ | 137,186 | ||||
The
accompanying notes are an integral part of these financial
statements
40
NORTH
BAY RESOURCES INC.
(AN
EXPLORATION STAGE COMPANY)
STATEMENTS
OF OPERATIONS
FOR
THE THREE AND NINE-MONTH PERIODS ENDING
SEPTEMBER
30, 2009 & 2008 (Unaudited) & THE PERIOD FROM JUNE 18, 2004
(INCEPTION)
THROUGH
SEPTEMBER 30, 2009 (Unaudited)
3
months
|
3
months
|
9
months
|
9
months
|
Inception
(June 18,
|
||||||||||||||||
ended
|
ended
|
ended
|
ended
|
2004)
through
|
||||||||||||||||
September
|
September
|
September
|
September
|
September
|
||||||||||||||||
30, 2009 | 30, 2008 | 30, 2009 | 30, 2008 | 30, 2009 | ||||||||||||||||
Revenues
|
||||||||||||||||||||
Retail
Sales
|
$ | - | $ | - | $ | - | $ | - | $ | 40,567 | ||||||||||
Cost
of Revenue
|
- | - | - | - | 49,070 | |||||||||||||||
Gross
Profit (Loss)
|
- | - | - | - | (8,503 | ) | ||||||||||||||
Operating
Expenses
|
||||||||||||||||||||
Commissions
& Consulting Fees
|
12,250 | - | 52,425 | - | 259,659 | |||||||||||||||
General
& Administrative Costs
|
341,224 | 97,777 | 477,034 | 176,445 | 8,843,524 | |||||||||||||||
Mining
Property Costs
|
11,668 | 6,456 | 29,877 | 15,684 | 745,469 | |||||||||||||||
Professional
Services
|
13,980 | - | 16,980 | 5,000 | 33,633 | |||||||||||||||
Total
Operating Expenses
|
379,122 | 104,233 | 576,316 | 197,129 | 9,882,285 | |||||||||||||||
Net
Operating Loss
|
(379,122 | ) | (104,233 | ) | (576,316 | ) | (197,129 | ) | (9,890,788 | ) | ||||||||||
Other
Income (Expenses)
|
||||||||||||||||||||
Gain
on Mineral Claim Sales & JVs
|
8,851 | - | 49,710 | 45,777 | 251,856 | |||||||||||||||
Interest
Income
|
34 | - | 34 | - | 34 | |||||||||||||||
Interest
Expense
|
- | - | - | - | (74,243 | ) | ||||||||||||||
Loss
on Conversion of Debt or Accrued Salary
|
(75,000 | ) | - | (87,500 | ) | - | (137,000 | ) | ||||||||||||
Total
Other Income (Expenses)
|
(66,115 | ) | - | (37,756 | ) | 45,777 | 40,647 | |||||||||||||
Net
Loss
|
(445,237 | ) | (104,233 | ) | (614,072 | ) | (151,352 | ) | (9,850,141 | ) | ||||||||||
Other
Comprehensive Income
|
||||||||||||||||||||
Unrealized
Loss on Available For Sale Securities
|
(119,890.00 | ) | - | (128,778.00 | ) | - | (105,998.00 | ) | ||||||||||||
Total
Comprehensive Loss
|
$ | (565,127 | ) | $ | (104,233 | ) | $ | (742,850 | ) | $ | (151,352 | ) | $ | (9,956,139 | ) | |||||
Weighted
Average Shares Outstanding
|
52,034,787 | 16,522,261 | 37,647,287 | 16,522,261 | ||||||||||||||||
(Basic
and Diluted)
|
||||||||||||||||||||
Basic
and Diluted Net Loss per Share
|
$ | (0.01 | ) | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.01 | ) |
The
accompanying notes are an integral part of these financial
statements
41
NORTH
BAY RESOURCES INC.
(AN
EXPLORATION STAGE COMPANY)
STATEMENTS
OF CASH FLOWS
FOR
THE NINE-MONTH PERIODS ENDING
SEPTEMBER
30, 2009 AND 2008 (Unaudited) & THE PERIOD FROM JUNE 18, 2004
(INCEPTION)
THROUGH
SEPTEMBER 30, 2009 (Unaudited)
Inception
(June 18, 2004)
|
||||||
9
months ended
|
9
months ended
|
through
|
||||
30-Sep-09
|
30-Sep-08
|
30-Sep-09
|
||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||
Net
Loss
|
$ (614,072)
|
$ (151,352)
|
$ (9,850,141)
|
|||
Adjustments
to reconcile Net Loss
|
||||||
to
net cash used by operations:
|
||||||
Gain
on sale of claims, non-cash
|
-
|
-
|
(110,935)
|
|||
Preferred
Stock issued to related party for services
|
253,785
|
-
|
253,785
|
|||
Common
Stock issued for services
|
29,750
|
-
|
5,130,417
|
|||
Preferred
Stock issued for services
|
-
|
-
|
101,000
|
|||
Common
Stock issued as interest on loan
|
-
|
-
|
1,500
|
|||
Loss
on Conversion of debt and accrued salaries
|
87,500
|
-
|
1,311,952
|
|||
Bad
debt expense
|
19,149
|
-
|
19,149
|
|||
Interest
on Beneficial Conversion Feature
|
-
|
-
|
62,000
|
|||
Changes
in operating assets and liabilities:
|
|
|||||
Accounts
Receivable
|
(32,809)
|
-
|
(32,809)
|
|||
Accrued
Expenses
|
132,021
|
144,647
|
1,915,058
|
|||
Net
cash used in Operating Activities
|
(124,676)
|
(6,705)
|
(1,199,024)
|
|||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||
Cash
provided by Investing Activities
|
-
|
-
|
-
|
|||
Net
cash provided by Investing Activities
|
-
|
-
|
-
|
|||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||
Proceeds
from sale of stock
|
173,000
|
-
|
705,700
|
|||
Contribution
from investor
|
-
|
10,000
|
244,994
|
|||
Shares
re-purchased and retired
|
-
|
-
|
(2,000)
|
|||
Borrowings
on debt
|
-
|
1,891
|
302,125
|
|||
Net
cash provided by Financing Activities
|
173,000
|
11,891
|
1,250,819
|
|||
Net
cash increase for period
|
48,324
|
5,186
|
51,795
|
|||
Cash
at beginning of period
|
3,471
|
23
|
-
|
|||
Cash
at end of period
|
$ 51,795
|
$ 5,209
|
$ 51,795
|
|||
Supplementary
Cash Flow Information:
|
||||||
Cash
Paid for Interest
|
-
|
-
|
-
|
|||
Cash
Paid for Taxes
|
-
|
-
|
-
|
|||
Non-Cash
Investing & Financing Activities:
|
||||||
Common
Stock Issued for Preferred Shares
|
-
|
-
|
2,400
|
|||
Common
Stock Issued for Conversion of debt and
accrued salary
|
100,000
|
-
|
2,559,825
|
|||
Unrealized
Loss on Available for Sale Securities
|
(128,778)
|
-
|
(105,998)
|
The
accompanying notes are an integral part of these financial
statements
42
NORTH
BAY RESOURCES INC.
(AN
EXPLORATION STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
FOR
THE NINE-MONTH PERIODS ENDING
SEPTEMBER
30, 2009 AND 2008
NOTE
1 GENERAL ORGANIZATION AND BUSINESS
The
Company was incorporated in the State of Delaware on June 18, 2004 under the
name Ultimate Jukebox, Inc. On September 4, 2004, Ultimate Jukebox,
Inc. merged with NetMusic Corporation, and subsequently changed the Company name
to NetMusic Entertainment Corporation. On March 10, 2006, the Company
ceased digital media distribution operations, began operations as a natural
resources company, and changed the Company name to Enterayon, Inc. On
January 15, 2008, the Company merged with and assumed the name of its
wholly-owned subsidiary, North Bay Resources Inc. As a result of the
merger, Enterayon, Inc. was effectively dissolved, leaving North Bay Resources
Inc. as the remaining company.
The
Company’s business plan is based on the Generative Business Model, which is
designed to leverage our mining properties and mineral claims into near-term
revenue streams even during the earliest stages of exploration and development.
This is accomplished by entering into sales, joint-venture, and/or option
contracts with other mining companies, for which the Company generates revenue
through payments in cash, stock, and other consideration.
The
Generative Business Model is our short term plan to leverage properties until
funding is adequate to implement our long term plan. The Company’s long term
plan is to locate and extract gold and silver from current exploration stage
properties. This will be done through utilizing joint-ventures and other funding
that is available to develop properties until they reach the production
stage. Once in the production stage, the Company plans on extracting gold,
silver, and other profitable by-products, and selling them to smelters. The
Company has not currently begun this stage of the business
plan.
NOTE
2 GOING CONCERN
These
financial statements have been prepared on a going concern basis, which implies
the Company will continue to realize its assets and discharge its liabilities in
the normal course of business. The Company has generated modest revenues since
inception and has never paid any dividends and is unlikely to pay dividends. The
company has accumulated losses since inception equal to $9,850,141 as of
September 30, 2009. The continuation of the Company as a going concern is
dependent upon the continued financial support from its shareholders, the
ability of the Company to obtain necessary equity financing to continue
operations and to determine the existence, discovery and successful exploration
of economically recoverable reserves in its resource properties, confirmation of
the Company’s interests in the underlying properties, and the attainment of
profitable operations. The Company has had very little operating history to
date. These financial statements do not include any adjustments to the
recoverability and classification of recorded asset amounts and classification
of liabilities that might be necessary should the Company be unable to continue
as a going concern. These factors raise substantial doubt regarding the ability
of the Company to continue as a going concern.
NOTE
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Cash
and Cash Equivalents
The
Company considers all highly liquid debt instruments and other short-term
investments with a maturity of three months or less, when purchased, to be cash
equivalents. There were no cash equivalents at September 30, 2009 and December
31, 2008. The Company maintains cash and cash equivalent balances at one
financial institution that is insured by the Federal Deposit Insurance
Corporation up to $250,000.
43
Revenue
Recognition
The
company has recognized no mining revenue to date. In the future mining revenue
will be recognized according to the policy described below.
Revenue
is recognized when the following conditions are met:
(a) persuasive
evidence of an arrangement to purchase exists;
(b) the
price is determinable;
(c) the
product has been delivered; and
(d)
collection of the sales price is reasonably assured.
Under the
terms of concentrate sales contracts with third-party smelters, final prices for
the gold, silver, zinc, copper and lead in the concentrate are set based on the
prevailing spot market metal prices on a specified future date based on the date
that the concentrate is delivered to the smelter. The Company records revenues
under these contracts based on forward prices at the time of delivery, which is
when transfer of legal title to concentrate passes to the third-party smelters.
The terms of the contracts result in differences between the recorded estimated
price at delivery and the final settlement price. These differences are adjusted
through revenue at each subsequent financial statement date.
Mineral
Property Costs
The
Company has been in the exploration stage since it entered the Mining Sector on
March 10, 2006 and has not yet realized any revenues from mining
operations. Mineral property acquisition, exploration and development
costs are expensed as incurred until such time as economic reserves are
quantified. To date the Company has not established any proven or probable
reserves on its mineral properties that are compliant with National Instrument
43-101. Many properties do have historical reserve estimates, but
these are not NI 43-101 compliant and cannot be used at the present time to
establish asset values. The Company has adopted the provisions of the
FASB standard related to asset retirement obligations which establishes
standards for the initial measurement and subsequent accounting for obligations
associated with the sale, abandonment, or other disposal of long-lived tangible
assets arising from the acquisition, construction or development and for normal
operations of such assets. As of September 30, 2009 and December 31,
2008, the Company had no developed properties, therefore an accrual related to
asset retirement obligations was not necessary.
Other
Income
Income
from mineral claim sales, joint-ventures, and option agreements are recognized
when persuasive evidence of an arrangement exists, the fee is fixed or
determinable, collectability is reasonably assured, and the underlying event
resulting in the revenue has occurred. In circumstances when these criteria are
not met, recognition is deferred until resolution occurs.
Fair
Value of Financial Instruments
The
Company adopted the FASB standard related to fair value measurement at
inception. The standard defines fair value, establishes a framework for
measuring fair value and expands disclosure of fair value measurements. The
standard applies under other accounting pronouncements that require or permit
fair value measurements and, accordingly, does not require any new fair value
measurements. The standard clarifies that fair value is an exit price,
representing the amount that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants. As
such, fair value is a market-based measurement that should be determined based
on assumptions that market participants would use in pricing an asset or
liability. As a basis for considering such assumptions, the standard established
a three-tier fair value hierarchy, which prioritizes the inputs used in
measuring fair value as follows.
Level
1. Observable inputs such as quoted prices in active
markets;
|
Level
2. Inputs, other than the quoted prices in active markets, that are
observable either directly or indirectly;
and
|
Level
3. Unobservable inputs in which there is little or no market data, which
require the reporting entity to develop its own
assumptions.
|
44
The
following table presents assets that are measured and recognized at fair value
as of September 30, 2009, and December 31, 2008, on a recurring
basis:
Total
|
||||||||||||||||
Unrealized
|
||||||||||||||||
Description
|
Level
1
|
Level
2
|
Level
3
|
Loss
|
||||||||||||
Available
For Sale Securities
|
$
|
4,937
|
$
|
-
|
$
|
-
|
$
128,778
|
|||||||||
Totals
|
$
|
4,937
|
$
|
-
|
$
|
-
|
$
128,778
|
Total
|
||||||||||||||||
Unrealized
|
||||||||||||||||
Description
|
Level
1
|
Level
2
|
Level
3
|
Gains
|
||||||||||||
Available
For Sale Securities
|
$
|
133,715
|
$
|
-
|
$
|
-
|
$ 22,780
|
|||||||||
Totals
|
$
|
133,715
|
$
|
-
|
$
|
-
|
$ 22,780
|
Recently
Issued Accounting Standards
In April
2008, the FASB issued ASC 350-10, “Determination of the Useful Life of
Intangible Assets.” ASC 350-10 amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of
a recognized intangible asset under ASC 350-10, “Goodwill and Other Intangible
Assets.” ASC No. 350-10 is effective for fiscal years beginning after December
15, 2008. The adoption of this ASC did not have a material impact on our
financial statements.
In April
2009, the FASB issued ASC 805-10, “Accounting for Assets Acquired and
Liabilities assumed in a Business Combination That Arise from Contingencies — an
amendment of FASB Statement No. 141 (Revised December 2007), Business
Combinations”. ASC 805-10 addresses application issues raised by preparers,
auditors and members of the legal profession on initial recognition and
measurement, subsequent measurement and accounting and disclosure of assets and
liabilities arising from contingencies in a business combination. ASC 805-10 is
effective for assets or liabilities arising from contingencies in business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008. ASC
805-10 will have an impact on our accounting for any future acquisitions and its
financial statements.
In May
2009, the FASB issued SFAS No. 165, “Subsequent Events”, which is included in
ASC Topic 855, Subsequent Events. ASC Topic 855 established principles and
requirements for evaluating and reporting subsequent events and distinguishes
which subsequent events should be recognized in the financial statements versus
which subsequent events should be disclosed in the financial statements. ASC
Topic 855 also requires disclosure of the date through which subsequent events
are evaluated by management. ASC Topic 855 was effective for interim periods
ending after June 15, 2009 and applies prospectively. Because ASC Topic 855
impacts the disclosure requirements, and not the accounting treatment for
subsequent events, the adoption of ASC Topic 855 did not impact our results of
operations or financial condition.
Effective
July 1, 2009, we adopted the Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) 105-10, Generally Accepted Accounting
Principles – Overall (“ASC 105-10”). ASC 105-10 establishes the FASB
Accounting Standards Codification (the “Codification”) as the source of
authoritative accounting principles recognized by the FASB to be applied by
nongovernmental entities in the preparation of financial statements in
conformity with U.S. GAAP. Rules and interpretive releases of the SEC under
authority of federal securities laws are also sources of authoritative U.S. GAAP
for SEC registrants. All guidance contained in the Codification carries an equal
level of authority. The Codification superseded all existing non-SEC accounting
and reporting standards. All other non-grandfathered, non-SEC accounting
literature not included in the Codification is non-authoritative. The FASB will
not issue new standards in the form of Statements, FASB Staff Positions or
Emerging Issues Task Force Abstracts. Instead, it will issue Accounting
Standards Updates (“ASUs”). The FASB will not consider ASUs as authoritative
in their own right. ASUs will serve only to update the Codification, provide
background information about the guidance and provide the bases for conclusions
on the change(s) in the Codification. References made to FASB guidance
throughout these financials have been updated for the
Codification.
45
In
August 2009, the FASB issued ASU No. 2009-05, Measuring Liabilities at
Fair Value, which provides additional guidance on how companies should measure
liabilities at fair value under ASC 820. The ASU clarifies that the quoted price
for an identical liability should be used. However, if such information is not
available, an entity may use the quoted price of an identical liability when
traded as an asset, quoted prices for similar liabilities or similar liabilities
traded as assets, or another valuation technique (such as the market or income
approach). The ASU also indicates that the fair value of a liability is not
adjusted to reflect the impact of contractual restrictions that prevent its
transfer and indicates circumstances in which quoted prices for an identical
liability or quoted price for an identical liability traded as an asset may be
considered level 1 fair value measurements. This ASU is effective
October 1, 2009. We are currently evaluating the impact of this standard,
but would not expect it to have a material impact on our results of operations
or financial condition.
In
October 2009, the FASB issued ASU No. 2009-13, Multiple-Deliverable
Revenue Arrangements – a consensus of the FASB Emerging Issues Task Force, that
provides amendments to the criteria for separating consideration in
multiple-deliverable arrangements. As a result of these amendments,
multiple-deliverable revenue arrangements will be separated in more
circumstances than under existing U.S. GAAP. The ASU does this by establishing a
selling price hierarchy for determining the selling price of a deliverable. The
selling price used for each deliverable will be based on vendor-specific
objective evidence if available, third-party evidence if vendor-specific
objective evidence is not available, or estimated selling price if neither
vendor-specific objective evidence nor third-party evidence is available. A
vendor will be required to determine its best estimate of selling price in a
manner that is consistent with that used to determine the price to sell the
deliverable on a standalone basis. This ASU also eliminates the residual method
of allocation and will require that arrangement consideration be allocated at
the inception of the arrangement to all deliverables using the relative selling
price method, which allocates any discount in the overall arrangement
proportionally to each deliverable based on its relative selling price. Expanded
disclosures of qualitative and quantitative information regarding application of
the multiple-deliverable revenue arrangement guidance are also required under
the ASU. The ASU does not apply to arrangements for which industry specific
allocation and measurement guidance exists, such as long-term construction
contracts and software transactions. ASU No. 2009-13 is effective beginning
January 1, 2011. We are currently evaluating the impact of this standard on
our results of operations and financial condition.
NOTE
4 AVAILABLE FOR SALE SECURITIES
As of
September 30, 2009, the value of the Company’s holdings in Hidalgo Mining
International Inc. stock (HMIT) was $4,937. The original value of the shares
received was $110,935 according to the closing price of the shares as of the
date they were received in 2008. From the time of purchase to December 31, 2008,
there was an unrealized gain on the shares of $22,780. During the nine months
ended September 30, 2009, the Company had an unrealized loss on these securities
of $128,778. These shares were considered available for sale due to the
Company’s ability and intent to hold the investments for an indefinite amount of
time. The Company did not consider the impairment on these shares to be other
than temporary based on the short holding period the shares had been impaired
for, and the ability of the Company to hold the shares until a potential
recovery in the stock price could occur. The temporary nature of the impairment
will be re-evaluated at all filing dates, and the securities will continue to be
marked to the market price on the balance sheet date.
NOTE
5 DEFERRED COMPENSATION/NQDC & CONVERSION OF DEFERRED
COMPENSATION
The
Company has adopted an unfunded Non-Qualified Deferred Compensation plan to
compensate our Chief Executive Officer. While unfunded and
non-recourse, for compliance with GAAP this is disclosed as an accrued expense
on the balance sheet. During the nine months ended September 30,
2009, this amount was reduced by $100,000 and converted to equity (see Note 7).
The Company recognized a loss on the conversion equal to $87,500, which
represents the difference between the market value of the stock issued of
$187,500, and the salary converted. The shares were valued according to the
closing market price of the Company’s stock on the date of conversion. As of
December 31, 2008, and September 30, 2009, the remaining outstanding balance of
the NQDC plan is $570,289 and $602,310 respectively.
NOTE
6 RELATED PARTY TRANSACTIONS
46
On August
11, 2009, the Board of Directors approved and the Company executed a management
agreement with The PAN Network (“PAN”), a private business management and
consulting company wholly-owned by the Company’s Chief Executive
Officer. The agreement is in consideration of $18,000 per month, and
calls for PAN to provide (a) office and board room space, including reception,
utilities, landline phone/fax, computers, copiers, projectors, and miscellaneous
services; (b) financial services, including accounting, corporate filing and
bookkeeping; (c) project and administrative services; (d) resource targeting,
acquisition, development and management services; (e) marketing services,
communications, marketing materials management, and writing services; (f)
strategic planning, milestone management and critical path analysis; and (g)
online services, including web site hosting, web site design, web site
maintenance, and email services. The agreement includes Mr.
Leopold’s salary of $15,000 per month, which will accrue entirely to deferred
compensation during any period in which the commitment remains
unpaid. The agreement automatically renews annually on January 1 each
year, unless otherwise terminated by either party.
NOTE
7 STOCKHOLDERS’ EQUITY
During
2009, the Company issued 4,000,000 shares of Series A Preferred stock, and
100,000 shares of Series G Preferred stock to our Chief Executive Officer as a
bonus for services rendered. Each share of Series A Preferred has 10
votes, and is convertible to 5 shares of common. Each share of Series
G Preferred has no votes, and is convertible to 1/100 of an ounce of gold, or 20
shares of common, at the shareholder’s option. The conversion value
of the Series A shares according to market price on the date of issuance was
$231,785. The conversion value of the Series G shares according to market price
on the date of issuance was $22,000. Series A shares were valued according to
the value of the common stock the shares were convertible into on the issuance
date, plus the value assigned to the additional voting rights assigned to the
Series A shares. The value assigned to the voting rights was derived from a
model generated by a valuation expert that specializes in valuing equity
instruments with no quoted markets. The Series G shares were valued according to
the value of the common stock the shares were convertible into on the issuance
date.
During
2009, the Company issued an aggregate of 21,800,000 shares of common stock in
private placements. The consideration received was $173,000.
During
2009, the Company issued an aggregate of 10,000,000 shares of common stock to a
private investor to reduce the balance due of deferred compensation to the Chief
Executive Officer by $100,000. The deferred compensation was assigned by the
Chief Executive Officer to the private investor in lieu of cash, and the
assigned liability was immediately converted to equity by the investor. The
value of the shares issued according to the market price on the date of issuance
was $187,500. The difference between the value of the deferred compensation and
the value of the shares issued was recorded as a loss on
conversion.
During
2009, the Company issued an aggregate of 2,500,000 shares of restricted Rule 144
common stock for services rendered. The shares were valued at $29,750,
based on the market price on the date of issuance.
NOTE
8 SUBSEQUENT EVENTS
Subsequent
to the end of the quarter, the Company received notification from Hidalgo Mining
International Inc. ("Hidalgo") stating that Hidalgo is "unable to continue with
any of its planned efforts on the North Bay Joint Venture projects due to
capital needs which cannot be met at this time." As a result, North Bay has
elected to exercise its contractual rights to terminate both the Silver Leaf and
the Gold Hill Project JV agreements, and will thereby regain its full 100%
undivided ownership of both properties. In accordance with the FASB
standard related to subsequent events, $19,149 previously classified as accounts
receivable related to the Hidalgo joint venture has been written off as a bad
debt as of September 30, 2009.
Subsequent
to the end of the quarter, the Company agreed to terms on an earn-in joint
venture with Silver Quest Resources Ltd ("Silver Quest") on North Bay's Fawn
gold-silver property in central British Columbia, Canada. Upon TSX Venture
Exchange acceptance of the terms of the agreement, Silver Quest may acquire an
initial 75% interest in the Fawn Property by making aggregate cash payments of
$100,000, issuing a total of 150,000 shares, and incurring an aggregate of
$1,500,000 in exploration expenditures over four years.
Subsequent
to the end of the quarter, the Company secured $5 Million in financing under an
equity line of credit with Tangiers Investors, LP ("Tangiers") to fund the
Company's operations and prospective mining acquisitions. North Bay has entered
into a Securities Purchase Agreement with Tangiers that provides North Bay the
right, but not the obligation, to draw down on the equity line of credit by
selling to Tangiers shares of the Company's common stock for a total purchase
price of up to $5 Million. Tangiers will pay the Company 90% of the lowest
volume weighted average price of the Company's common stock during the pricing
period as quoted by Bloomberg, LP on the Over-the-Counter Bulletin Board
("OTCBB"). Tangiers' obligation to purchase shares of the Company's common stock
under the Securities Purchase Agreement is subject to certain conditions,
including the Company obtaining an effective registration statement for shares
of the Company's common stock sold under the Securities Purchase Agreement and
is limited to $100,000 per 10 consecutive trading days after the advance notice
is provided to Tangiers. Upon signing the Securities Purchase
Agreement, the Company has agreed to issue Tangiers $85,000 in restricted stock
as a one-time commitment fee. To meet this obligation, the Company
has reserved 6,589,147 shares of restricted common stock for issuance during the
quarter ended March 31, 2010. These shares were issued on January 20,
2010.
Subsequent
to December 31, 2009, the Company issued 5,000,000 shares of common stock in a
Rule 504 private placement. The consideration received was
$50,000.
The
Company evaluated all subsequent events through the date the financial
statements were issued on February 8, 2010.
47
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors
North Bay
Resources Inc.
(An
Exploration Stage Company)
We have
audited the accompanying balance sheets of North Bay Resources Inc. (an
exploration stage company) as of December 31, 2008 and 2007, and the related
statements of operations, changes in stockholders' equity, and cash flows for
the years then ended, and for the period from June 18, 2004 (inception) through
December 31, 2008. 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 audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, 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 North Bay Resources Inc. as of
December 31, 2008 and 2007, and the results of its operations, changes in
stockholders' equity and cash flows for the periods described in conformity with
accounting principles generally accepted in the United States of
America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company has very little operations to date, which raises
substantial doubt about its ability to continue as a going concern. Management's
plans regarding those matters also are described in Note 2. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/
M&K CPAS, PLLC
www.mkacpas.com
Houston,
Texas
February
8, 2010
48
NORTH
BAY RESOURCES INC.
(AN
EXPLORATION STAGE COMPANY)
BALANCE
SHEETS
AS
OF DECEMBER 31, 2008 AND 2007
Dec.
31, 2008
|
Dec.
31, 2007
|
|||||||
ASSETS
|
||||||||
Current
Assets
|
||||||||
Cash
|
$ | 3,471 | $ | 23 | ||||
Investments
|
133,715 | - | ||||||
Total
Current Assets
|
137,186 | 23 | ||||||
TOTAL
ASSETS
|
$ | 137,186 | $ | 23 | ||||
LIABILITIES
& STOCKHOLDERS’
DEFICIT
|
||||||||
Liabilities | ||||||||
Current
Liabilities
|
||||||||
Deferred
Compensation
|
$ | 570,289 | $ | 377,428 | ||||
Total
Current Liabilities
|
570,289 | 377,428 | ||||||
Total
Liabilities
|
570,289 | 377,428 | ||||||
Stockholders’
Deficit
|
||||||||
Preferred
stock, Series I, $0.001 par value, 100 shares authorized, 100 shares
issued and outstanding at December 31, 2008 and December 31, 2007,
respectively
|
- | - | ||||||
Convertible
Preferred stock, Series A, $0.001 par value, 8,000,000 shares authorized,
no shares issued and outstanding at December 31, 2008 and December 31,
2007, respectively
|
- | - | ||||||
Common
stock, $0.001 par value, 250,000,000 shares authorized, 24,297,287 and
16,522,261 shares issued and outstanding at December 31, 2008 and December
31, 2007, respectively
|
24,297 | 16,522 | ||||||
Additional
Paid-In Capital
|
8,755,889 | 8,513,664 | ||||||
Deficit
Accumulated During Exploration Stage
|
(9,236,069 | ) | (8,907,591 | ) | ||||
Accumulated
Other Comprehensive Income
|
22,780 | - | ||||||
Total
Stockholders’ Deficit
|
(433,103 | ) | (377,405 | ) | ||||
TOTAL
LIABILITIES & STOCKHOLDERS’ DEFICIT
|
$ | 137,186 | $ | 23 | ||||
The
accompanying notes are an integral part of these financial
statements
49
NORTH
BAY RESOURCES INC.
(AN
EXPLORATION STAGE COMPANY)
STATEMENTS
OF OPERATIONS
FOR
THE YEARS ENDED
DECEMBER
31, 2008 AND DECEMBER 31, 2007
AND
THE PERIOD FROM
JUNE
18, 2004 (INCEPTION) THROUGH DECEMBER 31, 2008
Year
ended
|
Year
ended
|
Since
inception
|
||||||||||
December
31,
|
December
31,
|
(Jun
18, 2004
|
||||||||||
2008
|
2007
|
-
Dec 31, 2008)
|
||||||||||
Revenues
|
||||||||||||
Retail
Sales (revenue prior to change to mining company in 2006)
|
$ | - | $ | - | $ | 40,567 | ||||||
Cost of Revenue
|
49,070 | |||||||||||
Gross Profit (Loss)
|
- | - | (8,503 | ) | ||||||||
Operating
Expenses
|
||||||||||||
Commissions & Consulting Fees
|
51,548 | - | 207,234 | |||||||||
General & Administrative Costs
|
409,122 | 1,310,993 | 8,366,490 | |||||||||
Mining Property Costs
|
18,120 | 97,609 | 715,592 | |||||||||
Professional Services
|
6,000 | 4,360 | 16,653 | |||||||||
Total
Operating Expenses
|
484,790 | 1,412,962 | 9,305,969 | |||||||||
Net
Operating Loss
|
(484,790 | ) | (1,412,962 | ) | (9,314,472 | ) | ||||||
Other
Income (Expenses)
|
||||||||||||
Gain on Mineral Claim Sales
|
156,312 | 45,834 | 202,146 | |||||||||
Interest Expense
|
- | (74,243 | ) | (74,243 | ) | |||||||
Loss on Conversion of Debt
|
- | (49,500 | ) | (49,500 | ) | |||||||
Total
Other Income (Expenses)
|
156,312 | (77,909 | ) | 78,403 | ||||||||
Net
Loss
|
$ | (328,478 | ) | $ | (1,490,871 | ) | $ | (9,236,069 | ) | |||
Other
Comprehensive Income
|
||||||||||||
Unrealized Gain on Available For Sale Securities
|
22,780 | - | 22,780 | |||||||||
Total
Comprehensive Loss
|
$ | (305,698 | ) | $ | (1,490,871 | ) | $ | (9,213,289 | ) | |||
WEIGHTED
AVERAGE NUMBER SHARES OUTSTANDING (Basic and Diluted)
|
17,143,177 | 5,846,083 | ||||||||||
Basic
and Diluted Net Loss per Share
|
$ | (0.02) | $ | (0.26) |
The accompanying notes are an integral part of these financial statements
50
NORTH
BAY RESOURCES INC.
(AN
EXPLORATION STAGE COMPANY)
STATEMENTS
OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR
THE PERIOD
JUNE
18, 2004 (INCEPTION) THROUGH DECEMBER 31, 2008
Preferred
Stock
|
Common
Stock
|
|
||||||||
Series
A
Shares
|
Series
I Shares
|
Amount
|
Shares
|
Amount
|
Additional
Paid-In
Capital
|
Accumulated
Deficit
|
Accumulated
OCI
|
Total
Stockholders’
Equity
(Deficit)
|
||
Inception
6/18/2004
|
-
|
-
|
$ -
|
-
|
$ -
|
$ -
|
$
-
|
$ -
|
$ -
|
|
Founder's
Shares issued
|
1,200,000
|
-
|
1,200
|
320,000
|
320
|
(1,520)
|
-
|
-
|
-
|
|
Shares
issued for merger
|
1,200,000
|
-
|
1,200
|
320,000
|
320
|
(1,520)
|
-
|
-
|
-
|
|
Common
Stock issued for cash
|
-
|
-
|
-
|
200,000
|
200
|
4,800
|
-
|
-
|
5,000
|
|
Net
loss for year
|
-
|
-
|
-
|
-
|
-
|
-
|
(95,587)
|
-
|
(95,587)
|
|
Balance
at 12/31/2004
|
2,400,000
|
-
|
$ 2,400
|
840,000
|
$
840
|
$ 1,760
|
$
(95,587)
|
$ -
|
$ (90,587)
|
|
Common
Stock issued to convert debt
|
-
|
-
|
-
|
12,127
|
12
|
180,213
|
-
|
-
|
180,225
|
|
Common
Stock issued for services
|
-
|
-
|
-
|
121,491
|
121
|
2,586,046
|
-
|
-
|
2,586,167
|
|
Common
Stock issued for cash
|
-
|
-
|
-
|
102,643
|
103
|
517,597
|
-
|
-
|
517,700
|
|
Net
loss for year
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,816,896)
|
-
|
(1,816,896)
|
|
Balance
at 12/31/2005
|
2,400,000
|
-
|
$ 2,400
|
1,076,261
|
$ 1,076
|
$ 3,285,616
|
$
(1,912,483)
|
$ -
|
$ 1,376,609
|
The
accompanying notes are an integral part of these financial
statements
51
Preferred
Stock
|
Common
Stock
|
|
||||||||
Series
A
Shares
|
Series
I
Shares
|
Amount
|
Shares
|
Amount
|
Additional
Paid-In
Capital
|
Accumulated
Deficit
|
Accumulated
OCI
|
Total
Stockholders’
Equity
(Deficit)
|
Common
Stock issued to convert debt
|
-
|
-
|
-
|
1,202,000
|
1,202
|
2,206,398
|
-
|
-
|
2,207,600
|
|
Common
Stock issued for services
|
-
|
-
|
-
|
1,309,000
|
1,309
|
1,543,191
|
-
|
-
|
1,544,500
|
|
Expenses
paid
by
shareholder
|
-
|
-
|
-
|
-
|
-
|
164,371
|
-
|
-
|
164,371
|
|
Net
loss for year
|
-
|
-
|
-
|
-
|
-
|
-
|
(5,504,237)
|
-
|
(5,504,237)
|
|
Balance
at 12/31/2006
|
2,400,000
|
-
|
$ 2,400
|
3,587,261
|
$ 3,587
|
$ 7,199,576
|
$ (7,416,720)
|
$ -
|
$ (211,157)
|
|
Beneficial
Conversion Features on notes payable
|
-
|
-
|
-
|
-
|
-
|
62,000
|
-
|
-
|
62,000
|
|
Common
Stock issued to convert debt
|
-
|
-
|
-
|
1,350,000
|
1,350
|
120,150
|
-
|
-
|
121,500
|
|
Common
Stock issued for services
|
-
|
-
|
-
|
10,575,000
|
10,575
|
959,425
|
-
|
-
|
970,000
|
|
Common
Stock issued as interest on loan
|
-
|
-
|
-
|
10,000
|
10
|
1,490
|
-
|
-
|
1,500
|
|
Preferred
Shares issued for services
|
-
|
100
|
-
|
-
|
-
|
101,000
|
-
|
-
|
101,000
|
|
Common
Stock issued for conversion of preferred shares
|
(2,400,000)
|
-
|
(2,400)
|
1,200,000
|
1,200
|
1,200
|
-
|
-
|
-
|
The
accompanying notes are an integral part of these financial
statements
52
Preferred
Stock
|
Common
Stock
|
|
||||||||
Series
A
Shares
|
Series
I
Shares
|
Amount
|
Shares
|
Amount
|
Additional
Paid-In
Capital
|
Accumulated
Deficit
|
Accumulated
OCI
|
Total
Stockholders’
Equity
(Deficit)
|
Shares
bought back and retired
|
-
|
-
|
-
|
(200,000)
|
(200)
|
(1,800)
|
-
|
-
|
(2,000)
|
|
Expenses
paid by shareholder
|
-
|
-
|
-
|
-
|
-
|
70,623
|
-
|
-
|
70,623
|
|
Net
loss for year
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,490,871)
|
-
|
(1,490,871)
|
|
Balance
at 12/31/2007
|
-
|
100
|
$ -
|
16,522,261
|
$ 16,522
|
$ 8,513,664
|
$ (8,907,591)
|
-
|
$ (377,405)
|
|
Rounding
of shares due to stock split
|
-
|
-
|
-
|
26
|
-
|
-
|
-
|
-
|
-
|
|
Common
Stock issued for services
|
-
|
-
|
-
|
5,500,000
|
5,500
|
224,500
|
-
|
-
|
230,000
|
|
Common
Stock issued for cash
|
-
|
-
|
-
|
2,275,000
|
2,275
|
7,725
|
-
|
-
|
10,000
|
|
Contribution
from investor
|
-
|
-
|
-
|
-
|
-
|
10,000
|
-
|
-
|
10,000
|
|
Mark
to market AFS Securities
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
22,780
|
22,780
|
|
Net
loss for year
|
-
|
-
|
-
|
-
|
-
|
-
|
(328,478)
|
-
|
(328,478)
|
|
Balance
at 12/31/2008
|
-
|
100
|
$ -
|
24,297,287
|
$ 24,297
|
$ 8,755,889
|
$ (9,236,069)
|
$ 22,780
|
$ (433,103)
|
|
The
accompanying notes are an integral part of these financial
statements
53
NORTH
BAY RESOURCES INC.
(AN
EXPLORATION STAGE COMPANY)
STATEMENTS
OF CASH FLOWS
FOR
THE YEARS ENDED
DECEMBER
31, 2008 AND DECEMBER 31, 2007
AND
THE PERIOD FROM
JUNE
18, 2004 (INCEPTION) THROUGH DECEMBER 31, 2008
Year
ended
|
Year
ended
|
Since
inception
|
||||||||||
December
31, 2008
|
December
31, 2007
|
(Jun
18, 2004
-
Dec 31, 2008)
|
||||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||||||
Net
Loss
|
$ | (328,478 | ) | $ | (1,490,871 | ) | $ | (9,236,069 | ) | |||
Adjustments
to reconcile Net Loss
|
||||||||||||
to
net cash provided by operations:
|
||||||||||||
Gain
on sale of claims, non-cash
|
(110,935 | ) | - | (110,935 | ) | |||||||
Common
Stock issued for services
|
230,000 | 970,000 | 5,100,667 | |||||||||
Preferred
Stock issued for services
|
- | 101,000 | 101,000 | |||||||||
Loss
on Conversion of Debt and Accrued Salary
|
- | 49,500 | 1,224,452 | |||||||||
Shares
issued as interest on loan
|
- | 1,500 | 1,500 | |||||||||
Interest
on Beneficial Conversion Feature
|
- | 62,000 | 62,000 | |||||||||
Changes
in operating assets and liabilities:
|
||||||||||||
Accrued
Expenses
|
192,861 | 176,236 | 1,783,037 | |||||||||
Net
cash used in Operating Activities
|
(16,552 | ) | (130,635 | ) | (1,074,348 | ) | ||||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||
Cash
Provided by Investing Activities
|
- | - | - | |||||||||
Net
Cash Provided by Investing Activities
|
- | - | - | |||||||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||
Proceeds
from sale of stock
|
10,000 | - | 532,700 | |||||||||
Contributions
from related party
|
10,000 | 70,623 | 244,994 | |||||||||
Shares
re-purchased and retired
|
- | (2,000 | ) | (2,000 | ) | |||||||
Borrowings
on debt
|
- | 62,000 | 302,125 | |||||||||
Net
cash provided by Financing Activities
|
20,000 | 130,623 | 1,077,819 | |||||||||
Net
cash increase/(decrease) for period
|
3,448 | (12 | ) | 3,471 | ||||||||
Cash
at beginning of period
|
23 | 35 | - | |||||||||
Cash
at end of period
|
3,471 | 23 | 3,471 | |||||||||
Supplementary
Cash Flow Information:
|
||||||||||||
Cash
Paid for Interest
|
- | - | - | |||||||||
Cash
Paid for Taxes
|
- | - | - | |||||||||
Non-Cash
Investing & Financing Activities:
|
||||||||||||
Common
Stock Issued For Conversion of Preferred Shares
|
$ | - | $ | 2,400 | $ | 2,400 | ||||||
Common
Stock Issued For Conversion of Debt and Accrued Salary
|
$ | - | $ | 72,000 | $ | 2,459,825 | ||||||
Unrealized Gain on Available For Sale Securities | $ | 22,780 | $ | - | $ | 22,780 |
The
accompanying notes are an integral part of these financial
statements
54
NORTH
BAY RESOURCES INC.
(AN
EXPLORATION STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008
AND
DECEMBER 31, 2007
NOTE
1 GENERAL
ORGANIZATION AND BUSINESS
The
Company was incorporated in the State of Delaware on June 18, 2004 under the
name Ultimate Jukebox, Inc. On September 4, 2004, Ultimate Jukebox,
Inc. merged with NetMusic Corporation, and subsequently changed the Company name
to NetMusic Entertainment Corporation. On March 10, 2006, the Company
ceased digital media distribution operations, began operations as a natural
resources company, and changed the Company name to Enterayon, Inc. On
January 15, 2008, the Company merged with and assumed the name of its
wholly-owned subsidiary, North Bay Resources Inc. As a result of the
merger, Enterayon, Inc. was effectively dissolved, leaving North Bay Resources
Inc. as the remaining company.
The
Company’s business plan is based on the Generative Business Model, which is
designed to leverage our mining properties and mineral claims into near-term
revenue streams even during the earliest stages of exploration and development.
This is accomplished by entering into sales, joint-venture, and/or option
contracts with other mining companies, for which the Company generates revenue
through payments in cash, stock, and other consideration.
The
Generative Business Model is our short term plan to leverage properties until
funding is adequate to implement our long term plan. The Company’s long term
plan is to locate and extract gold and silver from current exploration stage
properties. This will be done through utilizing joint-ventures and other funding
that is available to develop properties until they reach the production
stage. Once in the production stage, the Company plans on extracting gold,
silver, and other profitable by-products, and selling them to smelters. The
Company has not currently begun this stage of the business
plan.
NOTE
2 GOING
CONCERN
These
financial statements have been prepared on a going concern basis, which implies
the Company will continue to realize its assets and discharge its liabilities in
the normal course of business. The Company has generated modest revenues since
inception and has never paid any dividends and is unlikely to pay dividends. The
company has accumulated losses since inception equal to $9,236,069 as of
December 31, 2008. The continuation of the Company as a going concern is
dependent upon the continued financial support from its shareholders, the
ability of the Company to obtain necessary equity financing to continue
operations and to determine the existence, discovery and successful exploration
of economically recoverable reserves in its resource properties, confirmation of
the Company’s interests in the underlying properties, and the attainment of
profitable operations. The Company has had very little operating history to
date. These financial statements do not include any adjustments to the
recoverability and classification of recorded asset amounts and classification
of liabilities that might be necessary should the Company be unable to continue
as a going concern. These factors raise substantial doubt regarding the ability
of the Company to continue as a going concern.
NOTE
3 SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Cash
and Cash Equivalents
The
Company considers all highly liquid debt instruments and other short-term
investments with a maturity of three months or less, when purchased, to be cash
equivalents. There were no cash equivalents at December 31, 2008 and 2007. The
Company maintains cash and cash equivalent balances at one financial institution
that is insured by the Federal Deposit Insurance Corporation up to
$250,000.
Marketable
Securities
The
Company accounts for its marketable securities, which are available for sale,
according to the applicable FASB standard. The original cost of the marketable
securities approximated fair market value as of the date the securities were
acquired. Unrealized gains or losses from the time the securities were acquired
through the balance sheet date of
55
NORTH
BAY RESOURCES INC.
(AN
EXPLORATION STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008
AND
DECEMBER 31, 2007
NOTE
3 SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
December
31, 2008 were recorded as other comprehensive income. The available for sale
securities balance as of December 31, 2008 approximates fair market value of the
securities as of the balance sheet date in accordance with the
standard.
Revenue
Recognition
The
company has recognized no mining revenue to date. In the future mining revenue
will be recognized according to the policy described below.
Revenue
is recognized when the following conditions are met:
(a) persuasive
evidence of an arrangement to purchase exists;
(b) the
price is determinable;
(c) the
product has been delivered; and
(d)
collection of the sales price is reasonably assured.
Under the
terms of concentrate sales contracts with third-party smelters, final prices for
the gold, silver, zinc, copper and lead in the concentrate are set based on the
prevailing spot market metal prices on a specified future date based on the date
that the concentrate is delivered to the smelter. The Company records revenues
under these contracts based on forward prices at the time of delivery, which is
when transfer of legal title to concentrate passes to the third-party smelters.
The terms of the contracts result in differences between the recorded estimated
price at delivery and the final settlement price. These differences are adjusted
through revenue at
each subsequent financial statement date.
Mineral
Property Costs
The
Company has been in the exploration stage since it entered the Mining Sector on
March 10, 2006 and has not yet realized any revenues from mining operations.
Mineral property acquisition, exploration and development costs are expensed as
incurred until such time as economic reserves are quantified. To date the
Company has not established any proven or probable reserves on its mineral
properties that are compliant with National Instrument 43-101. Many
properties do have historical reserve estimates, but these are not NI 43-101
compliant and can not be used at the present time to establish asset
values. The Company has adopted the provisions of the FASB standard
related to accounting for asset retirement obligations, which establishes
standards for the initial measurement and subsequent accounting for obligations
associated with the sale, abandonment, or other disposal of long-lived tangible
assets arising from the acquisition, construction or development and for normal
operations of such assets. As of December 31, 2008 and 2007, the
Company had no developed properties, therefore an accrual related to asset
retirement obligations was not necessary.
Income
Taxes
The
Company utilizes the liability method of accounting for income taxes. Under the
liability method, deferred tax assets and liabilities are determined based on
the differences between the financial reporting basis and the tax basis of the
assets and liabilities, and are measured using enacted tax rates that will be in
effect when the differences are expected to reverse.
The
Company adopted the provisions of the FASB interpretation related to accounting
for uncertainty in income taxes, which seeks to reduce the diversity in practice
associated with the accounting and reporting for uncertainty in income tax
positions. The Company believes it does not have any uncertain tax
positions taken or expected to be taken in its income tax returns.
Fair
Value of Financial Instruments
The
Company adopted the FASB standard related to fair value measurement at
inception. The standard defines fair value, establishes a framework for
measuring fair value and expands disclosure of fair value measurements. The
standard applies under other accounting pronouncements that require or permit
fair value measurements and, accordingly, does not require any new fair value
measurements. The standard clarifies that fair value is an exit price,
representing the amount that would be received to sell an asset or paid to
transfer a liability in an orderly transaction
56
NORTH
BAY RESOURCES INC.
(AN
EXPLORATION STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008
AND
DECEMBER 31, 2007
NOTE
3 SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
between
market participants. As such, fair value is a market-based measurement that
should be determined based on assumptions that market participants would use in
pricing an asset or liability. As a basis for considering such assumptions, The
standard established a three-tier fair value hierarchy, which prioritizes the
inputs used in measuring fair value as follows.
Level
1. Observable inputs such as quoted prices in active
markets;
|
Level
2. Inputs, other than the quoted prices in active markets, that are
observable either directly or indirectly;
and
|
Level
3. Unobservable inputs in which there is little or no market data, which
require the reporting entity to develop its own
assumptions.
|
The
following table presents assets that are measured and recognized at fair value
as of December 31, 2008 and the year then ended on a recurring
basis:
Total
|
||||||||||||||||
Unrealized
|
||||||||||||||||
Description
|
Level
1
|
Level
2
|
Level
3
|
Gains
|
||||||||||||
Available
For Sale Securities
|
$
|
133,715
|
$
|
-
|
$
|
-
|
$ 22,780
|
|||||||||
Totals
|
$
|
133,715
|
$
|
-
|
$
|
-
|
$ 22,780
|
The
following table presents assets that are measured and recognized at fair value
as of December 31, 2007 and the year then ended on a recurring
basis:
Total
|
|||||||||||||||||||
Unrealized
|
|||||||||||||||||||
Description
|
Level
1
|
Level
2
|
Level
3
|
Gains
|
|||||||||||||||
Available
For Sale Securities
|
$
|
-
|
$
|
|
-
|
$
|
-
|
$
|
-
|
||||||||||
Totals
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|||||||||||
57
NORTH
BAY RESOURCES INC.
(AN
EXPLORATION STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008
AND
DECEMBER 31, 2007
NOTE
3 SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income/Loss
Per Share of Common Stock
Basic net
loss per common share is computed using the weighted average number of common
shares outstanding. Diluted earnings per share includes additional dilution from
common stock equivalents, such as stock issuable pursuant to the exercise of
stock options and warrants. Common stock equivalents are not included in the
computation of diluted earnings per share when the Company reports a loss
because to do so would be anti-dilutive for the periods presented. As
of December 31, 2008 and 2007, there were no options or warrants
outstanding.
The
following is a reconciliation of the computation for basic and diluted
EPS:
Dec
31, 2008
|
Dec
31, 2007
|
|
Net
Loss
|
($328,478)
|
($1,490,871)
|
Weighted-average
common shares Outstanding (Basic)
|
17,143,177
|
5,846,183
|
Weighted-average
common stock Equivalents
|
-
|
-
|
Weighted-average
common shares Outstanding (Diluted)
|
17,143,177
|
5,846,083
|
Basic
and Diluted Net loss per Share
|
($0.02)
|
($0.26)
|
Recently
Issued Accounting Standards
In April
2008, the FASB issued ASC 350-10, “Determination of the Useful Life of
Intangible Assets.” ASC 350-10 amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of
a recognized intangible asset under ASC 350-10, “Goodwill and Other Intangible
Assets.” ASC No. 350-10 is effective for fiscal years beginning after December
15, 2008. The adoption of this ASC did not have a material impact on our
financial statements.
In April
2009, the FASB issued ASC 805-10, “Accounting for Assets Acquired and
Liabilities assumed in a Business Combination That Arise from Contingencies — an
amendment of FASB Statement No. 141 (Revised December 2007), Business
Combinations”. ASC 805-10 addresses application issues raised by preparers,
auditors and members of the legal profession on initial recognition and
measurement, subsequent measurement and accounting and disclosure of assets and
liabilities arising from contingencies in a business combination. ASC 805-10 is
effective for assets or liabilities arising from contingencies in business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008. ASC
805-10 will have an impact on our accounting for any future acquisitions and its
financial statements.
In May
2009, the FASB issued SFAS No. 165, “Subsequent Events”, which is included in
ASC Topic 855, Subsequent Events. ASC Topic 855 established principles and
requirements for evaluating and reporting subsequent events and distinguishes
which subsequent events should be recognized in the financial statements versus
which subsequent events should be disclosed in the financial statements. ASC
Topic 855 also requires disclosure of the date through which subsequent events
are evaluated by management. ASC Topic 855 was effective for interim periods
ending after June 15, 2009 and applies prospectively. Because ASC Topic 855
impacts the disclosure requirements, and not the accounting treatment for
subsequent events, the adoption of ASC Topic 855 did not impact our results of
operations or financial condition.
Effective
July 1, 2009, we adopted the Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) 105-10, Generally Accepted Accounting
Principles – Overall (“ASC 105-10”). ASC 105-10 establishes the FASB
Accounting Standards Codification (the “Codification”) as the source of
authoritative accounting principles recognized by the FASB to be applied by
nongovernmental entities in the preparation of financial statements in
conformity with U.S. GAAP. Rules and interpretive releases of the SEC under
authority of federal securities laws are also sources of
58
NORTH
BAY RESOURCES INC.
(AN
EXPLORATION STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008
AND
DECEMBER 31, 2007
NOTE
3 SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
authoritative
U.S. GAAP for SEC registrants. All guidance contained in the Codification
carries an equal level of authority. The Codification superseded all existing
non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC
accounting literature not included in the Codification is non-authoritative. The
FASB will not issue new standards in the form of Statements, FASB Staff
Positions or Emerging Issues Task Force Abstracts. Instead, it will issue
Accounting Standards Updates (“ASUs”). The FASB will not consider ASUs as
authoritative in their own right. ASUs will serve only to update the
Codification, provide background information about the guidance and provide the
bases for conclusions on the change(s) in the Codification. References made to
FASB guidance throughout these financials have been updated for the
Codification.
In
August 2009, the FASB issued ASU No. 2009-05, Measuring Liabilities at
Fair Value, which provides additional guidance on how companies should measure
liabilities at fair value under ASC 820. The ASU clarifies that the quoted price
for an identical liability should be used. However, if such information is not
available, an entity may use the quoted price of an identical liability when
traded as an asset, quoted prices for similar liabilities or similar liabilities
traded as assets, or another valuation technique (such as the market or income
approach). The ASU also indicates that the fair value of a liability is not
adjusted to reflect the impact of contractual restrictions that prevent its
transfer and indicates circumstances in which quoted prices for an identical
liability or quoted price for an identical liability traded as an asset may be
considered level 1 fair value measurements. This ASU is effective
October 1, 2009. We are currently evaluating the impact of this standard,
but would not expect it to have a material impact on the our results of
operations or financial condition.
In
October 2009, the FASB issued ASU No. 2009-13, Multiple-Deliverable
Revenue Arrangements – a consensus of the FASB Emerging Issues Task Force, that
provides amendments to the criteria for separating consideration in
multiple-deliverable arrangements. As a result of these amendments,
multiple-deliverable revenue arrangements will be separated in more
circumstances than under existing U.S. GAAP. The ASU does this by establishing a
selling price hierarchy for determining the selling price of a deliverable. The
selling price used for each deliverable will be based on vendor-specific
objective evidence if available, third-party evidence if vendor-specific
objective evidence is not available, or estimated selling price if neither
vendor-specific objective evidence nor third-party evidence is available. A
vendor will be required to determine its best estimate of selling price in a
manner that is consistent with that used to determine the price to sell the
deliverable on a standalone basis. This ASU also eliminates the residual method
of allocation and will require that arrangement consideration be allocated at
the inception of the arrangement to all deliverables using the relative selling
price method, which allocates any discount in the overall arrangement
proportionally to each deliverable based on its relative selling price. Expanded
disclosures of qualitative and quantitative information regarding application of
the multiple-deliverable revenue arrangement guidance are also required under
the ASU. The ASU does not apply to arrangements for which industry specific
allocation and measurement guidance exists, such as long-term construction
contracts and software transactions. ASU No. 2009-13 is effective beginning
January 1, 2011. We are currently evaluating the impact of this standard on
our results of operations and financial condition.
NOTE
4 STOCK
BASED COMPENSATION
Beginning
January 1, 2006, the Company adopted the FASB standard related to stock based
compensation. The standard requires all share-based payments to employees (which
includes non-employee Directors), including employee stock options, warrants and
restricted stock, be measured at the fair value of the award and expensed over
the requisite service period (generally the vesting period). The fair value of
common stock options or warrants granted to employees is estimated at the date
of grant using the Black-Scholes option pricing model by using the historical
volatility of comparable public companies. The calculation also takes into
account the common stock fair market value at the grant date, the exercise
price, the expected life of the common stock option or warrant, the dividend
yield and the risk-free interest rate.
The
Company from time to time may issue stock options, warrants and restricted stock
to acquire goods or services from third parties. Restricted stock, options or
warrants issued to other than employees or directors are recorded on the basis
of their fair value, which is measured as of the date required by Emerging
Issues Task Force issuance related to accounting for equity instruments issued
to non-employees. 96-18. In accordance with issuance, the options or warrants
are valued using the Black-Scholes option pricing model on the basis of the
market price of the underlying equity instrument on the “valuation date,” which
for options and warrants related to contracts that have substantial
disincentives to non-performance, is the date of the contract, and for all
other
59
NORTH
BAY RESOURCES INC.
(AN
EXPLORATION STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008
AND
DECEMBER 31, 2007
NOTE
4 STOCK
BASED COMPENSATION (CONTINUED)
contracts
is the vesting date. Expense related to the options and warrants is recognized
on a straight-line basis over the shorter of the period over which services are
to be received or the vesting period. As of December 31, 2008
and 2007, no options or warrants have been issued, and none are
outstanding.
NOTE
5 COMMITMENTS AND
CONTINGENCIES:
As of
December 31, 2008 and 2007, the Company does not have any outside commitments,
and is not currently leasing any office space. Office space is
provided as part of a management agreement with The PAN Network, a private
business management and consulting company wholly-owned by the Company’s Chief
Executive Officer (see Note 11 - Related Party Transactions). The
agreement is renewable annually at the discretion of both parties. As a result
there are no future payments for our lease beyond the current year
contract.
The
Company is not and has never been involved in any litigation of any nature, and
the Company is not aware of any pending or threatened litigation.
NOTE
6 CONVERSION
OF NOTES PAYABLE
During
the twelve months ended December 31, 2007, a non-convertible note payable from a
third party totaling $50,000 with a 20% interest rate, maturing thirty days from
the note date, was converted into 1,250,000 shares of common stock. During the
same period, a non-convertible note payable from a third party totaling $12,000
with a 10% interest rate, maturing one year from the note date, was converted
into 100,000 shares of common stock. The aggregate shares were valued
according to the closing market price on their respective conversion dates at
$121,500. The total loss on all conversions was $49,500 for the year
ended December 31, 2007, and zero for the year ended December 31,
2008.
NOTE
7 STOCK
SPLITS
On
February 18, 2005, the Company effected a 4 for 1 forward stock split of our
common shares. On March 12, 2006, and on February 7, 2008, the
Company effected 1 for 10 reverse stock splits. All information
presented herein has been retrospectively adjusted to reflect these stock splits
as they took place as of the earliest period presented.
NOTE
8 BENEFICIAL
CONVERSION FEATURE
From time
to time, the Company may issue convertible notes that may have conversion prices
that create an embedded beneficial conversion feature pursuant to the Emerging
Issues Task Force issuance on beneficial conversion features. A beneficial
conversion feature exists on the date a convertible note is issued when the fair
value of the underlying common stock to which the note is convertible into is in
excess of the remaining unallocated proceeds of the note after first considering
the allocation of a portion of the note proceeds to the fair value of any
attached equity instruments, if any related equity instruments were granted with
the debt. In accordance with the EITF issuance, the intrinsic value of the
beneficial conversion feature is recorded as a debt discount with a
corresponding amount to additional paid in capital. The debt discount is
amortized to interest expense over the life of the note using the effective
interest method. During the years ended December 31, 2008 and
2007, beneficial conversion features related to convertible notes payable
totaling $0 and $62,000 were recorded. The entire discount was expensed in the
year ended December 31, 2007 due to the conversion of the note prior to year
end.
NOTE
9 INCOME
TAXES
As
of December 31, 2008 and 2007, the Company had net operating loss carry-forwards
totaling approximately $1,209,490 and $1,194,000 that begin to expire in
2025. The carry-forward losses and the related deferred tax benefit
are significantly limited by the provisions of Internal Revenue Code Section
382. The Company’s taxable losses, as
determined by an independent tax advisor, created a deferred tax benefit of
approximately $423,322, and $418,000, at December 31, 2008 and 2007,
respectively. Due to the Company determining that it will not likely realize the
deferred tax asset, a full valuation allowance has been taken to reduce the
deferred tax asset to zero as of December 31, 2007, and 2008,
respectively.
60
NORTH
BAY RESOURCES INC.
(AN
EXPLORATION STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008
AND
DECEMBER 31, 2007
NOTE
9 INCOME
TAXES (CONTINUED)
In 2008
and 2007, the primary difference between financial statement reporting and
taxable income (loss) was expenses not deductible for tax purposes including
non-cash share based payments issued for services of $230,000 and $1,071,000,
respectively. In 2007, the Company had a temporary difference between financial
and tax income due to the expensing of exploration stage properties for
financial reporting and capitalizing the properties for tax reporting. This
difference resulted in temporary differences of $0 and $70,388 for December 31,
2008, and 2007, respectively. However, no tax benefit has been reported in the
December 31, 2008 or 2007 financial statements because utilization of the
carry-forward is not more likely than not.
The
deferred tax assets as of December 31, 2008 and 2007 are as
follows:
2008
|
2007
|
||
Deferred
Tax Asset:
|
|||
Net
Operating Loss Carryforwards
|
$ 1,193,637
|
$ 906,154
|
|
Current
Year Net Operating Loss
|
98,478
|
287,483
|
|
Total
Operating Loss Carryforward
|
1,292,115
|
1,193,637
|
|
Enacted
future tax rate
|
35%
|
35%
|
|
Deferred
Tax Asset for NOL
|
452,240
|
417,773
|
|
Deferred
Tax Asset for temporary differences
between
book and tax income
|
|||
-
|
24,636
|
||
Gross
Deferred Tax Asset
|
452,240
|
442,409
|
|
Valuation
Allowance
|
(452,240)
|
(442,409)
|
|
Net
Deferred Tax Asset
|
-
|
-
|
NOTE
10 DEFERRED
COMPENSATION/NQDC
The
Company has adopted an unfunded Non-Qualified Deferred Compensation (NQDC) plan
to compensate our Chief Executive Officer. Under this plan, the
Company is not required to reserve funds for compensation, and is only obligated
to pay compensation when and if funds are available. Any amounts due
but unpaid automatically accrue to deferred compensation. The plan has the
option to be renewed annually at the discretion of the Company. While unfunded
and non-recourse, for compliance with GAAP this is disclosed as an accrued
expense on the balance sheet. As of December 31, 2008 and 2007, the
outstanding balance of the NQDC plan is $570,289 and $377,428,
respectively.
In 2007
and 2008, our Chief Executive Officer was awarded restricted stock bonuses for
deferring accrued salary, the value of which was based on the market closing
price on the day of issuance, as follows:
Date
|
Type
of Stock
|
Number
of
Shares
|
Value
|
|
2/12/2007
|
Preferred
(I)
|
100
|
$ 101,000
|
|
2/9/2007
|
Common
|
250,000
|
$
31,250
|
|
12/21/2007
|
Common
|
10,000,000
|
$
900,000
|
|
12/16/2008
|
Common
|
2,500,000
|
$
50,000
|
61
NORTH
BAY RESOURCES INC.
(AN
EXPLORATION STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008
AND
DECEMBER 31, 2007
NOTE
11 RELATED
PARTY TRANSACTIONS
Subsequent
to December 31, 2008, the Board of Directors approved and the Company executed a
management agreement with The PAN Network (“PAN”), a private business management
and consulting company wholly-owned by the Company’s Chief Executive
Officer. The agreement is in consideration of $18,000 per month, and
calls for PAN to provide (a) office and board room space, including reception,
utilities, landline phone/fax, computers, copiers, projectors, and miscellaneous
services; (b) financial services, including accounting, corporate filing and
bookkeeping; (c) project and administrative services; (d) resource targeting,
acquisition, development and management services; (e) marketing services,
communications, marketing materials management, and writing services; (f)
strategic planning, milestone management and critical path analysis; and (g)
online services, including web site hosting, web site design, web site
maintenance, and email services. The agreement includes Mr.
Leopold’s salary of $15,000 per month, which will accrue entirely to deferred
compensation during any period in which the commitment remains
unpaid. The term of the agreement is one year, and automatically
renews annually on January 1 each year unless otherwise terminated by either
party.
NOTE
12 INVESTMENTS
In 2008,
the Company was to receive $100,000 in joint-venture payments from Hidalgo
Mining International Inc. (OTC: HMIT) pursuant to joint-venture agreements on
the Company's Silver Leaf and Gold Hill Project properties. The
Company elected to accept payment in shares of HMIT stock and received a total
of 9,875,213 shares. The shares were valued at $110,935 according to
the closing price of the stock on the date the shares were received. A gain of
$10,935 related to the value of the stock over the original agreement was
recorded due to the transaction. As of December 31, 2008, the market
value of these shares was $133,715. The shares were classified as available for
sale, therefore the unrealized gain of $22,780 was recognized in other
comprehensive income. Subsequent to December 31, 2008, the
joint-ventures with Hidalgo have been terminated, and by agreement the Company
has retained its shares of HMIT.
NOTE
13 SHARE
ISSUANCES SINCE JUNE 18, 2004 (INCEPTION)
In 2004,
the Company issued an aggregate of 320,000 shares of common stock and 1,200,000
shares of preferred stock as Founders shares to the Company Founders. The
preferred stock was convertible to common stock at a rate of one common share
per two preferred shares. The shares were valued at their par value which was
equal to $1,520.
In 2004,
the Company issued an aggregate of 320,000 shares of common stock and 1,200,000
shares of preferred stock to the Company Officers and Directors upon the merger
of Ultimate Jukebox, Inc. and NetMusic Corp. The preferred stock was convertible
to common stock at a rate of one common share per two preferred shares. The
shares were valued at their par value which was equal to $1,520.
Prior to
2007, the Company issued an aggregate of 1,430,491 shares of common stock for
services rendered. The shares were valued at $4,130,667, based on the
market price on the date of issuance.
Prior to
2007, the Company issued an aggregate of 1,214,127 shares of common stock to
convert debt to equity. The shares were valued at $2,387,825, based on the
market price on the date of issuance.
Prior to
2007, the Company issued an aggregate of 302,643 shares of common stock in
private placements. The consideration received was $522,700.
In the
years ended December 31, 2007, and 2008, the Company issued an aggregate of
10,575,000 and 5,500,000 shares respectively of common stock for services
rendered. The shares were valued at $970,000 and $230,000 respectively,
based on the market price on the date of issuance.
During
2007, the Company issued an aggregate of 1,350,000 shares of common stock to
convert debt to equity. The shares were valued at $121,500, based on the
market price on the date of issuance.
During
2007, the Company issued 100 shares of Series I Preferred stock for services
rendered. The shares are not convertible to common shares and carry an eighty
percent voting right. The shares were valued at $101,000, based on a valuation
performed by an independent valuation expert.
62
NORTH
BAY RESOURCES INC.
(AN
EXPLORATION STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008
AND
DECEMBER 31, 2007
NOTE
13 SHARE
ISSUANCES SINCE JUNE 18, 2004 (INCEPTION) (CONTINUED)
During
2007, the Company converted 2,400,000 shares of Convertible Series A preferred
stock to 1,200,000 shares of common stock. The shares were convertible at a
ratio of one share of common stock per two shares of preferred
stock.
During
2008, the Company issued 2,275,000 shares of common stock in a private
placement. The consideration received was $10,000.
NOTE
14 SUBSEQUENT
EVENTS
Subsequent
to December 31, 2008, the Company issued 4,000,000 shares of Series A Preferred
stock, and 100,000 shares of Series G Preferred stock to our Chief Executive
Officer as a bonus for services rendered. Each share of Series A
Preferred is convertible to 5 shares of common. Each share of Series
G Preferred is convertible to 1/100 of an ounce of gold, or 20 shares of common,
at the shareholder’s option. The conversion value of the shares was
$253,785 as of the date of issuance on August 11, 2009.
Subsequent
to December 31, 2008, the Company issued an aggregate of 21,800,000 shares of
common stock in private placements. The consideration received was
$173,000.
Subsequent
to December 31, 2008, the Company issued an aggregate of 10,000,000 shares of
common stock to a private investor to reduce the balance due of deferred
compensation to the Chief Executive Officer by $100,000. The deferred
compensation was assigned by the Chief Executive Officer to the private investor
in lieu of cash, and the assigned liability was immediately converted to equity
by the investor. The value of the shares issued according to the market price on
the date of issuance was $187,500. The difference between the value of the
deferred compensation and the value of the shares issued was recorded as a loss
on conversion.
Subsequent
to December 31, 2008, the Company issued an aggregate of 2,500,000 shares of
restricted Rule 144 common stock for services rendered. The shares were
valued at $29,750, based on the market price on the date of
issuance.
Subsequent
to December 31, 2009, the Company issued 5,000,000 shares of common stock in a
Rule 504 private placement. The consideration received was
$50,000.
Subsequent
to December 31, 2009, the Company issued 6,589,147 shares of restricted common
stock to Tangiers Investors, LP as a one-time commitment fee of $85,000 in
compliance with the October 7, 2009 agreement with Tangiers.
Subsequent
to December 31, 2008, the Company announced that it has received notification
from Hidalgo Mining International Inc. ("Hidalgo") stating that Hidalgo is
"unable to continue with any of its planned efforts on the North Bay Joint
Venture projects due to capital needs which cannot be met at this time." As a
result, North Bay has elected to exercise its contractual rights to terminate
both the Silver Leaf and the Gold Hill Project JV agreements, and will thereby
regain its full 100% undivided ownership of both properties.
Subsequent
to December 31, 2008, the Company agreed to terms on an earn-in joint venture
with Silver Quest Resources Ltd ("Silver Quest") on North Bay's Fawn gold-silver
property in central British Columbia, Canada. Upon TSX Venture Exchange
acceptance of the terms of the agreement, Silver Quest may acquire an initial
75% interest in the Fawn Property by making aggregate cash payments of $100,000,
issuing a total of 150,000 shares, and incurring an aggregate of $1,500,000 in
exploration expenditures over four years.
Subsequent
to the December 31, 2008, the Company secured $5 Million in financing under an
equity line of credit with Tangiers Investors, LP ("Tangiers") to fund the
Company's operations and prospective mining acquisitions. North Bay has entered
into a Securities Purchase Agreement with Tangiers that provides North Bay the
right, but not the obligation, to draw down on the equity line of credit by
selling to Tangiers shares of the Company's common stock for a total purchase
price of up to $5 Million. Tangiers will pay the Company 90% of the lowest
volume weighted average price of the Company's common stock during the pricing
period as quoted by Bloomberg, LP on the Over-the-Counter Bulletin Board
("OTCBB"). Tangiers' obligation to purchase shares of the Company's common stock
under the Securities Purchase Agreement is subject to certain conditions,
including the Company obtaining an effective registration statement for shares
of the Company's common stock sold under the Securities Purchase Agreement and
is limited to $100,000 per 10 consecutive trading days after the advance notice
is provided to Tangiers. Upon signing the Securities
Purchase
63
NORTH
BAY RESOURCES INC.
(AN
EXPLORATION STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2008
AND
DECEMBER 31, 2007
NOTE
14 SUBSEQUENT EVENTS
(CONTINUED)
Agreement,
the Company has agreed to issue Tangiers $85,000 in restricted stock as a
one-time commitment fee. To meet this obligation, the Company has
reserved 6,589,147 shares of restricted common stock for issuance during the
quarter ended March 31, 2010.
The
company evaluated all subsequent events through the date the financial
statements were issued on February 8, 2010
64
PART
II
Item 13.
|
Other
Expenses of Issuance and
Distribution
|
The
estimated expenses of this offering in connection with the issuance and
distribution of the securities being registered, all of which are to be paid by
the Registrant, are as follows:
Registration
Fee
|
$
|
$35
|
||
Legal
Fees and Expenses
|
$
|
20,000
|
||
Accounting
Fees and Expenses
|
$
|
29,000
|
||
Total
|
$
|
49,035
|
Item 14.
|
Indemnification
of Directors and Officers
|
Our
Articles of Incorporation include an indemnification provision under which we
have agreed to indemnify our directors and officers from and against certain
claims arising from or related to future acts or omissions as a director or
officer of the Company. Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing, or otherwise, we
have been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable.
Item 15.
|
Recent
Sales of Unregistered Securities
|
During
the past three years the Company has had the following unregistered sales of its
securities:
2009
During
2009, the Company issued 4,000,000 shares of Series A Preferred stock, and
100,000 shares of Series G Preferred stock to our Chief Executive Officer as a
bonus for services rendered. Each share of Series A Preferred is
convertible to 5 shares of common. Each share of Series G Preferred
is convertible to 1/100 of an ounce of gold, or 20 shares of common, at the
shareholder’s option. The conversion value of
the shares was $242,000 as of the date of issuance on August 11,
2009.
During
2009, the Company issued an aggregate of 21,800,000 shares of common stock in
private placements. The consideration received was $173,000.
During
2009, the Company issued an aggregate of 10,000,000 shares of common stock to a
private investor to reduce the balance due of deferred compensation to the Chief
Executive Officer by $100,000. The deferred compensation was assigned by the
Chief Executive Officer to the private investor in lieu of cash, and the
assigned liability was immediately converted to equity by the investor. The
value of the shares issued according to the market price on the date of issuance
was $187,500. The difference between the value of the deferred compensation and
the value of the shares issued was recorded as a loss on
conversion.
During
2009, the Company issued an aggregate of 2,500,000 shares of restricted Rule 144
common stock for services rendered. The shares were valued at $25,000, based on
the market price on the date of issuance.
On
October 7, 2009, we entered into a Securities Purchase Agreement with Tangiers.
Pursuant to the Securities Purchase Agreement, the Company may, at its
discretion, periodically sell to Tangiers shares of its common stock for a total
purchase price of up to $5,000,000. For each share of common stock purchased
under the Securities Purchase Agreement, Tangiers will pay us 90% of
the lowest volume weighted average price of the Company's common stock as quoted
by Bloomberg, LP on the Over-the-Counter Bulletin Board or other principal
market on which the Company's common stock is traded for the five days
immediately following the notice date. The price paid by Tangiers for the
Company's stock shall be determined as of the date of each individual request
for an advance under the Securities Purchase Agreement. Tangiers’
obligation to purchase shares of the Company's common stock under the Securities
Purchase Agreement is subject to certain conditions, including the Company
obtaining an effective registration statement for shares of the Company's common
stock sold under the Securities Purchase Agreement and is limited to $100,000
per ten consecutive trading days after the advance notice is provided to
Tangiers. The Securities Purchase Agreement shall terminate and Tangiers shall
have no further obligation to make advances under the Securities Purchase
Agreement at the earlier of the passing of 18 months after the date that the
Securities and Exchange Commission declares the Company’s registration statement
effective or the Company receives advances from Tangiers equal to
$5,000,000. Upon the execution of the Securities Purchase Agreement, Tangiers
received a one-time commitment fee equal to $85,000 of the Company's common
stock divided by the lowest volume weighted average price of the Company's
common stock during the 10 business days immediately following the date of the
Securities Purchase Agreement, as quoted by Bloomberg, LP.
65
During
2008, the Company issued 2,275,000 shares of common stock in a private
placement. The consideration received was $10,000.
In the
years ended December 31, 2007, and 2008, Company issued an aggregate of
10,575,000 and 5,500,000 shares of common stock, respectively for services
rendered. The shares were valued at $970,000 and $230,000 respectively,
based on the market price on the date of issuance.
During
2007, the Company issued an aggregate of 1,350,000 shares of common stock to
convert debt to equity. The shares were valued at $121,500, based on the
market price on the date of issuance.
During
2007, the Company issued 100 shares of Series I Preferred stock for services
rendered. The shares were valued at $101,000, based on the value
assigned by an independent valuation expert.
During
2007, the Company converted 2,400,000 shares of Convertible Series A preferred
stock to 1,200,000 shares of common stock. The shares were convertible at a
ratio of one share of common stock per two shares of preferred
stock.
Prior to
2007, the Company issued an aggregate of 1,430,491 shares of common stock for
services rendered. The shares were valued at $4,130,667, based on the
market price on the date of issuance.
Prior to
2007, the Company issued an aggregate of 1,214,127 shares of common stock to
convert debt to equity. The shares were valued at $2,387,825, based on the
market price on the date of issuance.
Prior to
2007, the Company issued an aggregate of 302,643 shares of common stock in
private placements. The consideration received was $522,700.
In
instances described above where we issued securities in reliance upon Regulation
D, we relied upon Rule 504 of Regulation D of the Securities Act. Those
stockholders who received the securities in such instances made representations
that (a) the stockholder is acquiring the securities for his, her or its own
account for investment and not for the account of any other person and not with
a view to or for distribution, assignment or resale in connection with any
distribution within the meaning of the Securities Act, (b) the stockholder
agrees not to sell or otherwise transfer the purchased shares unless they are
registered under the Securities Act and any applicable state securities laws, or
an exemption or exemptions from such registration are available, (c) the
stockholder has knowledge and experience in financial and business matters such
that he, she or it is capable of evaluating the merits and risks of an
investment in us, (d) the stockholder had access to all of our documents,
records, and books pertaining to the investment and was provided the opportunity
to ask questions and receive answers regarding the terms and conditions of the
offering and to obtain any additional information which we possessed or were
able to acquire without unreasonable effort and expense, and (e) the stockholder
has no need for the liquidity in its investment in us and could afford the
complete loss of such investment. Management made the determination that the
investors in instances where we relied on Regulation D are accredited investors
(as defined in Regulation D) based upon management’s inquiry into their
sophistication and net worth. In addition, there was no general solicitation or
advertising for securities issued in reliance upon Regulation D.
In
instances described above where we indicate that we relied upon Section 4(2) of
the Securities Act in issuing securities, our reliance was based upon the
following factors: (a) the issuance of the securities was an isolated private
transaction by us which did not involve a public offering; (b) there were only a
limited number of offerees; (c) there were no subsequent or contemporaneous
public offerings of the securities by us; (d) the securities were not broken
down into smaller denominations; and (e) the negotiations for the sale of the
stock took place directly between the offeree and us.
Item 17. Undertakings
(A) The
undersigned Registrant hereby undertakes:
(1) To
file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i)
|
To
include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
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|
(ii)
|
To
reflect in the prospectus any facts or events arising after the effective
date of the Registration Statement (or the most recent post-effective
amendment of the Registration Statement) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement;
and
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66
|
(iii)
|
To
include any material information with respect to the plan of distribution
not previously disclosed in the Registration Statement or any material
change to such information in the Registration
Statement.
|
(2) That,
for the purpose of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
(4) For
the purpose of determining liability under the Securities Act of 1933 to any
purchaser, if the registrant is subject to Rule 430C, each prospectus filed
pursuant to Rule 424(b) as part of a registration statement relating to an
offering, other than registration statements relying on Rule 430B or other
than prospectuses filed in reliance on Rule 430A, shall be deemed to be
part of and included in the registration statement as of the date it is first
used after effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the registration statement
or made in a document incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the registration statement
will, as to the purchaser with a time of contract of sale prior to such first
use, supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement or made in
any such document immediately prior to such date of first use.
(B)
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described under
Item 14 above or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
Item 16.
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Exhibits
|
EXHIBIT
|
DESCRIPTION
|
|
3
(i)
|
Articles
of Incorporation
|
|
3(ii)
|
Bylaws
|
|
3
(iii)
|
Merger
and Name Change Certification
|
|
5.1
|
Opinion
re Legality
|
|
10.0
|
Tangiers
Securities Purchase Agreement dated October 7, 2009
|
|
10.1
|
Tangiers
Securities Registration Rights Agreement dated October 6,
2009
|
|
10.2
|
Fawn
Property/Silver Quest Resources Ltd. Joint Venture
Agreement
|
|
10.3
|
Coronation
Gold Property/Lincoln Resources, Inc. Joint Venture
Agreement
|
|
14
|
Code
of Ethics
|
|
23.1
|
Consent
of Auditor
|
|
23.2
|
Consent
of Attorney (filed as Exhibit 5.1
above)
|
67
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized on the 10th day
of February 2010.
NORTH
BAY RESOURCES INC.
|
|||
Date:
February 10, 2010
|
By:
|
/s/ Perry
Leopold
|
|
Perry
Leopold
|
|||
Chief
Executive Officer, Principal Executive Officer,
Principal
Financial Officer, Principal Accounting Officer
and
Chairman of the Board
|
|||
POWER
OF ATTORNEY
Each
director and/or officer of the registrant whose signature appears below hereby
appoints Perry Leopold as his attorney-in-fact to sign in his name and behalf,
in any and all capacities stated below, and to file with the Securities and
Exchange Commission, any and all amendments, including post-effective
amendments, to this Registration Statement (and to any registration statement
filed pursuant to Rule 462 under the Securities Act of 1933).
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
stated:
Signature
|
Title
|
Date
|
||
/s/
Perry Leopold
|
Chairman
of the Board and Principal Executive Officer and Principal Financial
Officer, Principal Accounting Officer
|
February
10, 2010
|
||
Perry
Leopold
|
||||
/s/
Fred Michini
|
Director
|
February
10, 2010
|
||
Fred
Michini
|
||||
68