Attached files
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EX-5.1 - UNIVERSAL GOLD MINING CORP. | v205347_ex5-1.htm |
EX-21.1 - UNIVERSAL GOLD MINING CORP. | v205347_ex21-1.htm |
EX-23.1 - UNIVERSAL GOLD MINING CORP. | v205347_ex23-1.htm |
As
filed with the Securities and Exchange Commission on December 15,
2010
Registration
No. 333-170493
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
AMENDMENT
NO. 1 TO
FORM
S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
UNIVERSAL
GOLD MINING CORP.
(Exact
name of registrant as specified in its charter)
Nevada
|
1041
|
20-3061907
|
(State
or other jurisdiction of
incorporation
or organization)
|
(Primary
Standard Industrial
Classification
Code Number)
|
(I.R.S.
Employer
Identification
No.)
|
Bentall
Four Centre
Suite
3474 – 1055 Dunsmuir Street
Vancouver,
British Columbia V7X 1K8
(604)
608-0223
(Address,
including zip code, and telephone number, including area code,
of
registrant’s principal executive offices)
Andrew
Neale
Bentall
Four Centre
Suite
3474 – 1055 Dunsmuir Street
Vancouver,
British Columbia V7X 1K8
(604)
608-0223
(Name,
address, including zip code, and
telephone
number, including area code, of agent for service)
Copy
to:
Scott
Rapfogel, Esq.
Gottbetter
& Partners, LLP
488
Madison Avenue, 12th Floor
New
York, NY 10022
(212)
400-6900
Approximate
date of commencement of proposed sale to the public: From time to time after the effective
date of this registration statement.
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. þ
If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please 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. ¨
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.
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
Non-accelerated
filer ¨
|
Smaller
reporting company þ
|
(Do
not check if a smaller reporting company)
|
Title of Each Class of Securities to be Registered
|
Amount to be
Registered(1)
|
Proposed
Maximum
Offering
Price
Per Shares(2)
|
Proposed
Maximum
Aggregate
Offering Price
|
Amount of
Registration
Fee(3)
|
||||||||||
Common stock, par value $0.001 per
share
|
42,870,750 shares
|
$
|
0.68
|
$
|
29,152,110
|
$
|
2,079
|
(1)
|
Consists
of 42,887,500 issued and outstanding shares of our common
stock. This registration statement shall also cover any
additional shares of our common stock that shall become issuable by reason
of any stock dividend, stock split, recapitalization or other similar
transaction effected without the receipt of consideration that results in
an increase in the number of the outstanding shares of our common
stock.
|
(2)
|
Estimated
solely for the purpose of calculating the registration fee pursuant to
Rule 457(c) under the Securities Act of 1933, as amended, based on the
last sale price of the registrant’s common stock as reported by the OTC
Bulletin Board on November 4, 2010. The shares offered hereunder may be
sold by the selling stockholders from time to time in the open market,
through privately negotiated transactions or a combination of these
methods, at market prices prevailing at the time of sale or at negotiated
prices.
|
(3)
|
Previously
paid.
|
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,
as amended, or until the registration statement shall become effective on such
date as the Securities and Exchange Commission, acting pursuant to said Section
8(a), may determine.
UNIVERSAL
GOLD MINING CORP.
Prospectus
42,870,750
Shares
Common
Stock
This
prospectus relates to the sale of up to 42,870,750 issued and outstanding shares
of our common stock, par value $0.001 per share, by the selling stockholders of
Universal Gold Mining Corp., a Nevada corporation, listed in this
prospectus. The shares offered by this prospectus may be sold by the
selling stockholders from time to time in the open market, through privately
negotiated transactions or a combination of these methods, at market prices
prevailing at the time of sale or at negotiated prices.
We are
registering the offer and sale of the common stock to satisfy registration
rights we have granted to the selling stockholders. The distribution
of the shares by the selling stockholders is not subject to any underwriting
agreement. We will not receive any proceeds from the sale of the
shares by the selling stockholders. We will bear all expenses of
registration incurred in connection with this offering, but all selling and
other expenses incurred by the selling stockholders will be borne by
them.
Our
common stock is traded on OTC Markets under the symbol “UGDM”. On December
9, 2010, the last reported sale price for our common stock was $0.57 per
share.
Investing
in our common stock involves a high degree of risk. Before making any
investment in our securities, you should read and carefully consider risks
described in the “Risk Factors” section beginning on page 5 of this
prospectus.
You
should rely only on the information contained in this prospectus or any
prospectus supplement or amendment thereto. We have not authorized anyone to
provide you with different information. This prospectus may only be used where
it is legal to sell these securities. The information in this prospectus is only
accurate on the date of this prospectus, regardless of the time of any sale of
securities.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a
criminal offense.
This
prospectus is dated December __, 2010.
Page
|
||
SUMMARY
|
2
|
|
THE
OFFERING
|
4
|
|
NOTE
REGARDING FORWARD-LOOKING STATEMENTS
|
5
|
|
RISK
FACTORS
|
5
|
|
SELLING
STOCKHOLDERS
|
19
|
|
USE
OF PROCEEDS
|
22
|
|
DETERMINATION
OF OFFERING PRICE
|
22
|
|
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
|
22
|
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
|
||
RESULTS
OF OPERATIONS
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23
|
|
DESCRIPTION
OF BUSINESS
|
27
|
|
LEGAL
PROCEEDINGS
|
36
|
|
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
|
36
|
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
38
|
|
EXECUTIVE
COMPENSATION
|
40
|
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
|
43
|
|
PLAN
OF DISTRIBUTION
|
44
|
|
DESCRIPTION
OF SECURITIES
|
46
|
|
LEGAL
MATTERS
|
49
|
|
EXPERTS
|
50
|
|
WHERE
YOU CAN FIND MORE INFORMATION
|
50
|
|
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
|
50
|
|
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
|
F-1
|
SUMMARY
The
following summary highlights information contained elsewhere in this
prospectus. Potential investors should read the entire prospectus
carefully, including the more detailed information regarding our business
provided below in the “Description of Business” section, the risks of purchasing
our common stock discussed under the “Risk Factors” section, and our
consolidated financial statements and the accompanying notes to the consolidated
financial statements.
Unless
the context indicates otherwise, all references in this registration statement
to “Universal Gold” “the Company,” “we,” “us” and “our” refer to
Universal Gold Mining Corp. and its subsidiaries.
Overview
We are
an exploration stage company engaged in the acquisition and exploration of gold
properties. We have not yet achieved any operating revenues and have principally
relied on sales of our equity securities to fund our operations. Through an
April 23, 2010 Option Agreement, we have the right to acquire up to a 50%
interest in a 164 hectare gold prospect located near Manizales, Colombia. (See
“Business Development” below). Through a November 30, 2010 Option
Agreement, we have the right to acquire all of the issued shares in RNC (Hemco)
Limited, a Belize corporation, and all minority interests in certain
subsidiaries of RNC (Hemco) Limited not owned by RNC (Hemco) Limited including
Hemco Nicaragua S.A., a private Nicaraguan company which operates the Bonanza
gold and silver mine located in Nicaragua, Central America (See “Business
Development” below).
We were
incorporated under the name Rite Time Mining, Inc. in the State of Nevada on May
3, 2006 to engage in the acquisition, exploration and development of mineral
deposits and reserves. We were unsuccessful in this area and subsequently
determined to engage in the business of operating an independent, minor league
baseball league. In connection therewith, on April 14, 2008, we
changed our name to Federal Sports & Entertainment, Inc. and increased our
authorized capital stock to an aggregate of 310,000,000 shares consisting of
300,000,000 shares of common stock and 10,000,000 shares of preferred stock with
preferences and rights to be determined by our Board of
Directors. Additionally, our Board of Directors approved a forward
stock split in the form of a dividend with a record date of April 25, 2008 and
effective on May 6, 2008, as a result of which each share of our common stock
then issued and outstanding converted into two shares of our common
stock. All share amounts in this prospectus have been retroactively
restated for such stock split. On March 22, 2010, our Board of
Directors approved a 20 for 1 forward stock split in the form of a
dividend. The record date for the stock dividend was April 19, 2010,
and the payment date and the ex-dividend date were May 7, 2010 and May 10, 2010,
respectively. All share amounts in this prospectus have been retroactively
restated for this stock split as well. We subsequently determined to shift our
focus to the acquisition, exploration and development of gold mining deposits
and reserves and, in connection therewith, on April 9, 2010 we changed our name
to Universal Gold Mining Corp.
Business
Developments
As part
of the execution of our business strategy discussed above, we have taken the
following steps:
|
·
|
We
entered into an April 23, 2010 Option Agreement which gives us the right
to acquire up to a 50% interest in a Colombian gold prospect (see
“Description of Business – Toldafria
Prospect”);
|
|
·
|
We
entered into a November 30, 2010 Option Agreement which gives us the right
to acquire RNC (Hemco) Limited and all minority interests in certain
subsidiaries of RNC (Hemco) Limited including Hemco Nicaragua S.A., the
operator of the Bonanza gold and silver
mine.
|
|
·
|
We
entered into a June 29, 2010 Put and Call Option Agreement, as amended by
an August 24, 2010 Deed of Variation, which gave us the right to acquire
shares in Kolar Gold Plc, an English company formed to engage in gold
exploration and mining activities in India. On November 12, 2010 we
exercised the Put Option and required the counterparty to the Put and Call
Option Agreement to purchase our entire right and interest in a related
note and warrants and return the £680,000 we paid for them. (See
“Description of Business – Kolar
Gold”);
|
|
·
|
We
raised $3,950,000 in a private placement that was completed on July 8,
2010, $2,300,000 of which was used to make the initial payment due under
our April 23, 2010 Option Agreement and approximately $1,028,000 which was
used to acquire a convertible loan note issued pursuant to the June 29,
2010 Put and Call Option Agreement;
|
2
|
·
|
We
raised an additional $1,275,000 in a private placement that was completed
on November 2, 2010, some of which proceeds were used to fund our expenses
in investigating potential acquisition
candidates;
|
|
·
|
We
recruited our Board of Directors, which is now comprised of four members.
Our Board members consist of a group of diversified professionals which
include an engineer, a mining industry executive and finance, public
company, and capital market
experts;
|
|
·
|
We
are evaluating ways to optimize our business structure in each
jurisdiction where we intend to conduct our business and have established
our headquarters in Vancouver, British Columbia;
and
|
|
·
|
We
are continuing to evaluate additional gold opportunities, although we have
not yet finalized decisions to pursue any particular
opportunities.
|
Capital
Needs
As
further discussed below under “Management’s Discussion and Analysis of Financial
Condition and Results of Operations – Liquidity and Capital Resources,” in July
2010 we completed an offering of shares of our common stock in which we raised
an aggregate of $3,950,000 of gross proceeds and in November 2010 we completed
another offering of shares of common stock in which we raised an aggregate of
$1,275,000 in gross proceeds. We will need to obtain additional capital to meet
our financial commitments under our April 23, 2010 and November 30, 2010 Option
Agreements and to continue to execute our business plan, build our operations
and become profitable.
This
prospectus relates to the public offering, which is not being underwritten, of
up to 42,870,750 outstanding shares of our common stock by the selling
stockholders listed in this prospectus. The shares offered by this
prospectus may be sold by the selling stockholders from time to time in the open
market, through negotiated transactions or otherwise at market prices prevailing
at the time of sale or at negotiated prices. We will receive none of
the proceeds from the sale of the shares by the selling
stockholders. We will bear all expenses of registration incurred in
connection with this offering, but all selling and other expenses incurred by
the selling stockholders will be borne by them.
The
number of shares being offered by this prospectus represents approximately 46%
of our outstanding shares of common stock as of December 9,
2010.
The
following tables summarizes historical financial data regarding our business and
should be read together with the information in the section titled “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and
our consolidated financial statements and the related notes included in this
prospectus.
Year Ended
November 30,
|
Nine Months Ended
|
|||||||||||||||
2009
|
2008
|
September 30,
2010
|
August 31,
2009(1)
|
|||||||||||||
(unaudited)
|
(unaudited)
|
|||||||||||||||
Statement of Operations
Data
|
||||||||||||||||
Revenues
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||||
Loss
from Operations
|
$
|
65,598
|
$
|
97,440
|
$
|
1,112,675
|
$
|
49,993
|
||||||||
Net
loss
|
$
|
65,598
|
$
|
97,440
|
$
|
1,064,522
|
$
|
49,993
|
||||||||
Basic
and diluted loss per share
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
$
|
(0.00
|
)
|
3
Year Ended
November 30,
|
Nine Months Ended
|
|||||||||||||||
2009
|
2008
|
September 30,
2010
|
August 31,
2009(1)
|
|||||||||||||
(unaudited)
|
(unaudited)
|
|||||||||||||||
Statement of Cash Flows
Data
|
||||||||||||||||
Net
cash used in operating activities
|
$
|
53,406
|
$
|
45,498
|
$
|
443,248
|
$
|
38,326
|
||||||||
Net
cash used in investing activities
|
$
|
—
|
$
|
338,838
|
$
|
3,331,234
|
$
|
—
|
||||||||
Net
cash provided by financing activities
|
$
|
43,406
|
$
|
362,837
|
$
|
4,625,023
|
$
|
38,326
|
||||||||
Cash
and cash equivalents, end of period
|
$
|
—
|
$
|
—
|
$
|
853,968
|
$
|
—
|
At November 30,
|
At September 30,
|
At August 31,
|
||||||||||||||
2009
|
2008
|
2010
|
2009
|
|||||||||||||
(unaudited)
|
(unaudited)
|
|||||||||||||||
Balance
Sheet Data
|
||||||||||||||||
Total
current assets
|
$
|
502,500
|
$
|
132,153
|
$
|
1,998,543
|
$ |
500,000
|
||||||||
Total
assets
|
$
|
502,500
|
$
|
500,000
|
$
|
4,302,246
|
$ |
500,000
|
||||||||
Total
current liabilities
|
$
|
603,939
|
$
|
535,841
|
$
|
120,449
|
$ |
585,834
|
||||||||
Total
liabilities
|
$
|
603,939
|
$
|
535,841
|
$
|
120,449
|
$ |
585,834
|
||||||||
Total
shareholders’ equity (deficit)
|
$
|
(101,439
|
)
|
$
|
(35,841
|
)
|
$
|
4,181,797
|
$ |
(85,834
|
)
|
(1)
|
The
Company changed its fiscal year end from November to December in May 2010,
but elected not to provide summary information as at September 30, 2009,
and for the nine month period ended September 30, 2009 herein because it
would not be materially different from the summary information provided as
at August 31, 2009 and for the nine month period ended August 31, 2009 as
the difference in activity was not
significant.
|
THE
OFFERING
Common
stock currently outstanding
|
93,012,500
shares (1)
|
|
Common
stock offered by the Company
|
None
|
|
Common
stock offered by the selling stockholders
|
42,870,750
shares (2)
|
|
Use
of proceeds
|
We
will not receive any of the proceeds from the sales of our common stock by
the selling stockholders.
|
|
OTC
Markets symbol
|
UGDM
|
|
Risk
Factors
|
You
should carefully consider the information set forth in this prospectus
and, in particular, the specific factors set forth in the “Risk Factors”
section beginning on page 6 of this prospectus before deciding
whether or not to invest in shares of our common
stock.
|
(1) As
of December 9, 2010.
(2) Consists
of 42,870,750 issued and outstanding shares of common stock.
4
Various
statements in this prospectus, including those that express a belief,
expectation or intention, as well as those that are not statements of historical
fact, are forward-looking statements. The forward-looking statements may include
projections and estimates concerning the timing and success of specific
projects, revenues, income and capital spending. We generally identify
forward-looking statements with the words “believe,” “intend,” “expect,” “seek,”
“may,” “should,” “anticipate,” “could,” “estimate,” “plan,” “predict,” “project”
or their negatives, and other similar expressions. All statements we make
relating to our estimated and projected earnings, margins, costs, expenditures,
cash flows, growth rates, financial results and project developments and
acquisitions or to our expectations regarding future industry or economic trends
are forward-looking statements.
These
forward-looking statements are subject to risks and uncertainties that may
change at any time, and, therefore, our actual results may differ materially
from those that we expected. The forward-looking statements contained in this
prospectus are largely based on our expectations, which reflect many estimates
and assumptions made by our management. These estimates and assumptions reflect
our best judgment based on currently known market conditions and other factors.
Although we believe such estimates and assumptions are reasonable, we caution
that it is very difficult to predict the impact of known factors and it is
impossible for us to anticipate all factors that could affect our actual
results. In addition, management’s assumptions about future events may prove to
be inaccurate. Management cautions all readers that the forward-looking
statements contained in this prospectus are not guarantees of future
performance, and we cannot assure any reader that such statements will be
realized or the forward looking events and circumstances will occur. Actual
results may differ materially from those anticipated or implied in the
forward-looking statements due to the factors listed in the “Risk Factors”
section and elsewhere in this prospectus. All forward-looking statements are
based upon information available to us on the date of this prospectus. We
undertake no obligation to update or revise any forward-looking statements as a
result of new information, future events or otherwise, except as otherwise
required by law. These cautionary statements qualify all forward-looking
statements attributable to us, or persons acting on our behalf.
An
investment in shares of our common stock is highly speculative and involves a
high degree of risk. We face a variety of risks that may affect our
operations or financial results and many of those risks are driven by factors
that we cannot control or predict. Before investing in our common
stock you should carefully consider the following risks, together with the
financial and other information contained in this prospectus. If any
of the following risks actually occurs, our business, prospects, financial
condition and results of operations could be materially adversely
affected. In that case, the trading price of our common stock would
likely decline and you may lose all or a part of your
investment. Only those investors who can bear the risk of loss of
their entire investment should participate in this offering.
RISKS
RELATED TO OUR BUSINESS AND FINANCIAL CONDITION
We
are an exploration stage company with no material operating history for you to
evaluate our business. We may never attain profitability.
We are
an exploration stage gold mining company and have not yet begun any gold mining
operations. We have previously been a shell company with no material operating
history and no assets other than cash and we have only recently begun to
redirect our business focus towards the gold mining industry in Colombia and
Nicaragua. As an early stage gold mining and exploration company with
no material operating history, it is difficult for potential investors to
evaluate our business. Our proposed operations are therefore subject to all of
the risks inherent in light of the expenses, difficulties, complications and
delays frequently encountered in connection with the formation of any new
business, as well as those risks that are specific to the gold mining industry
and to that industry in Colombia and Nicaragua, in
particular. Investors should evaluate us in light of the delays,
expenses, problems and uncertainties frequently encountered by companies
implementing new business plans. We may never overcome these
obstacles.
Our
auditors have indicated that our inability to generate revenues raises
substantial doubt as to our ability to continue as a going concern.
Our
audited financial statements for the year ended November 30, 2009 were prepared
on a going concern basis in accordance with United States generally accepted
accounting principles. The going concern basis of presentation assumes that we
will continue in operation for the foreseeable future and will be able to
realize our assets and discharge our liabilities and commitments in the normal
course of business. However, our auditors have indicated that our lack of
revenues and accumulated losses raise substantial doubt as to our ability to
continue as a going concern. The notes included in the financial statements we
filed, with respect to the quarter ended September 30, 2010, similarly indicated
that our September 30, 2010 financial statements were prepared on a going
concern basis. We have accumulated a deficit during the exploration stage of
$1,246,721 as of September 30, 2010. In the absence of additional financing or
significant revenues and profits, we may have to cease operations. We cannot
guarantee that we will be able to obtain sufficient additional funds when
needed, or that such funds, if available, will be obtainable on terms
satisfactory to us.
5
We
may be unable to obtain additional capital that we will require to implement our
business plan, which could restrict our ability to grow.
Our
current capital and our other existing financial resources may not be sufficient
to enable us to execute our business plan. We may not have funds
sufficient for any future investments we might want to
undertake. Currently, we are not generating any revenues. We will
require additional capital to continue to operate our business beyond the
initial phase, and to develop and expand our proposed exploration and
development programs. We may be unable to obtain the additional capital
required. Furthermore, inability to obtain capital may damage our reputation and
credibility with industry participants in the event we cannot close previously
announced transactions.
We
require $5,700,000 to complete our purchase of interests in the Toldafria
Prospect (see “Description of Business – Toldafria Prospect”) and $64,750,000 to
complete our purchase of RNC (Hemco) Limited and subsidiaries (See “Description
of Business – Hemco”).
Because
we are an exploration stage company with limited resources, we may not be able
to compete in the capital markets with much larger, established companies that
have ready access to large sums of capital.
Future
acquisitions and future exploration, development, mining and marketing
activities, as well as our administrative requirements (such as salaries,
insurance expenses and general overhead expenses, as well as legal compliance
costs and accounting expenses) will require a substantial amount of additional
capital and cash flow.
We will
require such additional capital in the near term and we plan to pursue sources
of such capital through various financing transactions or arrangements,
including joint venturing of projects, debt financing, equity financing or other
means. We may not be successful in locating suitable financing transactions in
the time period required or at all, and we may not obtain the capital we require
by other means. If we do succeed in raising additional capital, the capital
received may not be sufficient to fund our operations going forward without
obtaining further, additional capital financing. Furthermore, future financings
are likely to be dilutive to our stockholders, as we will most likely issue
additional shares of our common stock or other equity to investors in future
financing transactions. In addition, debt and other mezzanine financing may
involve a pledge of assets and may be senior to interests of equity
holders.
Our
ability to obtain needed financing may be impaired by such factors as conditions
in the capital markets (both generally and in the gold mining industry in
particular), our status as a new enterprise without a demonstrated operating
history, the location of our prospective gold properties and prices of gold on
the commodities markets (which will impact the amount of asset-based financing
available to us) and/or the loss of key management. Further, if gold prices on
the commodities markets decrease, then our potential revenues will likely
decrease, and such decreased future revenues may increase our requirements for
capital. Some of the contractual arrangements governing our operations may
require us to maintain minimum capital, and we may lose our contract rights
(including exploration, development and production rights) if we do not have the
required minimum capital. If the amount of capital we are able to raise from
financing activities, together with any future revenues from operations, is not
sufficient to satisfy our capital needs (even to the extent that we reduce our
operations), we may be required to curtail or cease our operations.
We
may be unable to obtain exploration rights that we need to build our business,
and our financial condition and results of operations may
deteriorate.
Our
business plan focuses on international gold exploration and production
opportunities in South America and Central America, initially in Colombia and
Nicaragua. In the event that our initial projects do not proceed successfully or
we do not succeed in negotiating any other exploration and production
opportunities, our future prospects will likely be substantially limited, and
our financial condition and results of operations may
deteriorate.
Our
business is speculative and dependent upon the implementation of our business
plan and our ability to enter into agreements with third parties for the rights
to exploit potential gold reserves on terms that will be commercially viable for
us.
6
Inaccuracies
in projecting operating costs could hinder exploration activity.
Capital
and operating cost estimates made in respect of our exploration and mining
projects may not prove accurate. Capital and operating costs are estimated based
on the interpretation of geological data, feasibility studies, anticipated
climatic conditions and other factors. Any of the following events, among the
other events and uncertainties described in this registration statement, could
affect the ultimate accuracy of such estimates; unanticipated changes in grade
and tonnage of mineralized material to be mined and processed; incorrect data on
which engineering assumptions are made; delays in construction schedules;
unanticipated transportation costs; the accuracy of major equipment and
construction cost estimates; labor negotiations; changes in government
regulation (including regulations regarding prices, cost of consumables,
royalties, duties, taxes, permitting and restrictions or production quotas on
exportation of minerals) and title claims. Failure to accurately
project such expenses could adversely affect our ability to continue
operations.
Fluctuation
in the price of gold could adversely affect our business.
Changes
in the market price of gold, which in the past has fluctuated widely, will
affect the profitability of our operations and our financial
condition. Our profitability and viability will depend on the market
price of gold. The market price of gold is set in the world market
and is affected by numerous industry factors beyond our control, including the
demand for gold, expectations with respect to the rate of inflation, interest
rates, currency exchange rates, the demand for jewelry containing gold,
production levels, inventories, costs of substitutes, changes in global or
regional investment or consumption patterns, and sales by central banks and
other holders, speculators and producers of gold in response to any of the above
factors, and global and regional political and economic factors. A
decline in the market price of gold below our anticipated production costs for
any sustained period would have a material adverse impact on our profit, cash
flow and results of operations from anticipated future operations. A
decline in the market price of gold may also require us to write-down mineral
reserves which would have a material adverse effect on the value of our common
stock.
Adverse
land title claims may affect our ability to operate.
The
acquisition of title to mineral properties is a very detailed and time-consuming
process. Title to, and the area of, mineral concessions may be
disputed. Although we will take reasonable measures to ensure proper
title to our properties, it is possible that title defects may be raised by
third parties. When a title transfer (or deemed transfer) takes
place, our title may be challenged or impaired. Third parties may
have valid claims underlying portions of our interests, including government
licensing requirements or regulations, prior unregistered liens, agreements,
transfers or claims, and title may be affected by, among other things,
undetected defects. In addition, we may be unable to operate our
properties as permitted or to enforce our rights with respect to our
properties.
We
will be subject to certain mining risks, which may adversely affect our capital
resources.
Mining
operations generally involve a high degree of risk. Our operations
will be subject to all of the hazards and risks normally encountered in the
exploration, development and production of gold, including: unusual and
unexpected geologic formations; seismic activity; rock bursts; cave-ins;
flooding and other conditions involved in the drilling and removal of material,
any of which could result in damage to, or destruction of, mines and other
producing facilities; damage to life or property; environmental damage and
possible legal liability. Although adequate precautions to minimize
risk will be taken, mining operations are subject to hazards such as equipment
failure, failure of containment vessels and contamination of the environment by
chemicals used in processing ore such as cyanide or the failure to retain dams
around tailings disposal areas which may result in environmental pollution and
consequent liability. The exploration for and development of mineral deposits
involves significant risks which even a combination of careful evaluation,
experience and knowledge may not eliminate. Whether a mineral deposit
will be commercially viable depends on a number of factors, some of which are:
the particular attributes of the deposit, such as size, grade and proximity to
infrastructure; gold prices, which are highly cyclical; and government
regulations, including regulations relating to prices, taxes, royalties, land
tenure, land use, importing and exporting of minerals and environmental
protection. The exact effect of these factors cannot be accurately
predicted, but the combination of these factors may result in our not receiving
an adequate return on invested capital.
7
Our
initial operations are expected to be conducted in Colombia and Nicaragua and,
if so, will be subject to Colombian and Nicaraguan laws and regulations. Any
variation from current regulations or a change in political climate could
adversely affect our ability to conduct our business.
Our
initial projects and operations will be subject to Colombian and Nicaraguan laws
and regulations. Investors should assess the political risks of
investing in foreign countries and, more particularly, in Colombia and
Nicaragua. Variations from the current regulatory, economic and
political climate in Colombia and Nicaragua could have an adverse effect on our
affairs.
Licenses
to operate and conduct exploration activities may not be issued or
renewed.
For us to
carry out mining activities, exploitation licenses must be obtained and kept
current. There is no guarantee that required exploitation licenses
will be obtained or extended or that new exploitation licenses will be
granted. In addition, such exploitation licenses could be changed and
any application to renew any existing licenses may not be
approved. We may be required to contribute to the cost of providing
the required infrastructure to facilitate the development of our
properties. We also will have to obtain and comply with permits and
licenses which may contain specific conditions concerning operating procedures,
water use, waste disposal, spills, environmental studies, abandonment and
restoration plans and financial assurances. Our failure to comply
with such regulations may adversely impact our ability to conduct exploration
operations.
Gold
prices can fluctuate on a material and frequent basis due to numerous factors
beyond our control. Our ability to generate profits from operations
could be materially and adversely affected by such fluctuating
prices.
The
profitability of any gold mining operations in which we have or will have an
interest will be significantly affected by changes in the market price of
gold. Gold prices fluctuate on a daily basis. During the
six months ended August 31, 2010, the spot price for gold on the London Exchange
has fluctuated between $1,090 and $1,261 per ounce. Gold prices are
affected by numerous factors beyond our control, including:
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industrial
and commercial demand for gold,
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the
level of interest rates,
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the
rate of inflation,
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central
bank sales,
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world
supply of gold and
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stability
of exchange rates.
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Each of
these factors can cause significant fluctuations in gold prices. Such external
factors are in turn influenced by changes in international investment patterns
and monetary systems and political developments. The current
significant instability in the financial markets heightens these
fluctuations. The price of gold has historically fluctuated widely
and, depending on the price of gold, revenues from mining operations may not be
sufficient to offset the costs of such operations.
Our
initial investment interests are expected to be in Colombia and Nicaragua. Risks
of doing business in a foreign country could adversely affect our results of
operations and financial condition.
We face
risks normally associated with any conduct of business in a foreign country with
respect to our operations, including various levels of political and economic
risk. The occurrence of one or more of these events could have a
material adverse impact on our efforts or operations which, in turn, could have
a material adverse impact on our cash flows, earnings, results of operations and
financial condition. These risks include the following:
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labor
disputes,
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invalidity
of governmental orders,
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uncertain
or unpredictable political, legal and economic
environments,
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war
and civil disturbances,
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changes
in laws or policies,
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8
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military
repression,
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terrorism,
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regional
instability,
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taxation,
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delays
in obtaining or the inability to obtain necessary governmental
permits,
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governmental
seizure of land or mining claims,
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limitations
on ownership,
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limitations
on the repatriation of earnings,
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increased
financial costs,
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import
and export regulations, including restrictions on the export of gold,
and
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foreign
exchange controls.
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If
we do not enter into forward sales, commodity, derivatives or hedging
arrangements with respect to our future gold production, if any, we will be
exposed to the impact of any significant decrease in the gold
price.
As a
general rule, we expect to sell our gold at the prevailing market price if we do
not enter into forward sales, commodity, derivative or hedging arrangements to
establish a price in advance for the sale of future gold production, if any, in
the future. As a result, we may realize the benefit of any short-term increase
in the gold price, but will not be protected against decreases in the gold
price, and if the gold price decreases significantly, our revenues may be
materially adversely affected.
Compliance
with environmental regulations could adversely affect our exploration and future
production activities.
With
respect to environmental regulation, future environmental legislation could
require:
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stricter
standards and enforcement,
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increased
fines and penalties for
non-compliance,
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more
stringent environmental assessments of proposed projects,
and
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a
heightened degree of responsibility for companies and their officers,
directors and employees.
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There can
be no assurance that future changes to environmental legislation and related
regulations, if any, will not adversely affect our operations. We could be held
liable for environmental hazards that exist on the properties in which we hold
interests, whether caused by previous or existing owners or operators of the
properties. Any such liability could adversely affect our business and financial
condition.
Calculation
of reserves and gold recovery dedicated to future production is not exact, might
not be accurate and might not accurately reflect the economic viability of our
properties.
Reserve
estimates may not be accurate. There is a degree of uncertainty
attributable to the calculation of reserves, resources and corresponding grades
being dedicated to future production. Until reserves or resources are
actually mined and processed, the quantity of reserves or resources and grades
must be considered as estimates only. In addition, the quantity of reserves or
resources may vary depending on gold prices. Any material change in
the quantity of reserves, resource grade or stripping ratio may affect the
economic viability of our properties. In addition, there can be no assurance
that mineral recoveries in small scale laboratory tests will be duplicated in
large tests under on-site conditions or during production.
9
Our
ability to maintain long-term profitability will depend on our ability to find,
explore and develop properties. Our ability to acquire such
properties could be hindered by competition. If we are unable to acquire,
develop and economically mine properties, we most likely will not be able to be
profitable on a long-term basis.
Gold is a
non-renewable resource and gold mines continue to deplete their reserves while
in operation. They eventually become depleted of ore or become
uneconomical to sustain mining operations. The acquisition of gold
properties and their exploration and development are subject to intense
competition. Companies with greater financial resources and larger
staffs for exploration and development may be in a better position than us to
compete for such mineral properties. If we are unable to find,
develop and economically mine properties, we most likely will not be able to be
profitable on a long-term basis.
Our
ability on a going forward basis to discover viable and economic mineral
reserves is subject to numerous factors, most of which are beyond our control
and are not predictable. If we are unable to discover such reserves, we most
likely will not be able to be profitable on a long-term basis.
Exploration
for gold is speculative in nature, involves many risks and is frequently
unsuccessful. Few properties that are explored are ultimately
developed into commercially producing mines. As noted above, our
long-term profitability will be, in part, directly related to the cost and
success of exploration programs. Any gold exploration program entails
risks relating to:
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the
location of economic ore bodies,
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development
of appropriate metallurgical
processes,
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receipt
of necessary governmental approvals,
and
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construction
of mining and processing facilities at any site chosen for
mining.
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The
commercial viability of a mineral deposit is dependent on a number of factors
including:
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the
price of gold,
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the
particular attributes of the deposit, such as
its
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size,
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grade,
and
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proximity
to infrastructure,
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financing
costs,
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taxation,
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royalties,
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land
use,
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water
use,
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power
use,
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importing
and exporting gold, and
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environmental
protection.
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The
effect of these factors cannot be accurately predicted.
10
Our
lack of diversification will increase the risk of an investment in our common
stock.
Our
business will focus on the gold mining and exploration industry in a limited
number of properties, initially in Colombia and Nicaragua, with the intention of
expanding elsewhere in South America and Central America. Larger companies have
the ability to manage their risk by diversification. However, we will lack
diversification, in terms of both the nature and geographic scope of our
business. As a result, factors affecting our industry or the regions in which we
operate will likely impact us more acutely than if our business were more
diversified.
Strategic
relationships upon which we may rely are subject to change, which may diminish
our ability to conduct our operations.
Our ability
to successfully bid on and acquire properties, to discover reserves, to
participate in gold mining opportunities and to identify and enter into
commercial arrangements with customers will depend on developing and maintaining
close working relationships with industry participants, on our ability to select
and evaluate suitable properties and on our ability to consummate transactions
in a highly competitive environment. These realities are subject to change and
may impair our ability to grow.
To
develop our business, we will endeavor to use the business relationships of our
executive officers and our board of directors to enter into strategic
relationships, which may take the form of joint ventures with private parties or
with local government bodies, or contractual arrangements with other gold mining
and exploration companies, including those that supply equipment and other
resources that we will use in our business. We may not be able to establish
these strategic relationships, or if established, we may not be able to maintain
them. In addition, the dynamics of our relationships with strategic partners may
require us to incur expenses or undertake activities we would not otherwise be
inclined to in order to fulfill our obligations to these partners or maintain
our relationships. If our strategic relationships are not established or
maintained, our business prospects may be limited, which could diminish our
ability to conduct our operations.
Competition
in obtaining rights to explore and mine gold reserves and to market our
production may impair our business.
The
gold mining and exploration industry is extremely competitive. Present levels of
competition for gold resources in South America and Central America, and
particularly in Colombia, are high. Significant amounts of capital
are being raised world-wide and directed towards the South American and Central
American markets and more and more companies are pursuing the same
opportunities. Other gold exploration and mining companies with
greater resources than ours will compete with us by bidding for exploration and
production licenses and other properties and services we will need to operate
our business in the countries in which we expect to
operate. Additionally, other companies engaged in our line of
business may compete with us from time to time in obtaining capital from
investors. Competitors include larger, foreign owned companies, which, in
particular, may have access to greater financial resources than us, may be more
successful in the recruitment and retention of qualified employees and may
conduct their own exploration and mining operations, which may give them a
competitive advantage. In addition, actual or potential competitors may be
strengthened through the acquisition of additional assets and
interests. Because of some or all of these factors, we may not be
able to compete.
We
may be unable to meet our capital requirements in the future, causing us to
curtail future growth plans or cut back existing operations.
We will
need additional capital in the future, which may not be available to us on
reasonable terms or at all. The raising of additional capital may dilute our
stockholders’ interests. We may need to raise additional funds through public or
private debt or equity financings in order to meet various objectives, including
but not limited to:
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complying
with funding obligations under our existing projects and contractual
commitments;
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pursuing
growth opportunities, including more rapid
expansion;
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acquiring
complementary businesses;
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making
capital improvements to improve our
infrastructure;
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hiring
qualified management and key
employees;
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11
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responding
to competitive pressures;
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complying
with licensing, registration and other requirements;
and
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maintaining
compliance with applicable laws.
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Any
additional capital raised through the sale of equity may dilute stockholders’
ownership percentage in us. This could also result in a decrease in the fair
market value of our equity securities because our assets would be owned by a
larger pool of outstanding equity. The terms of securities we issue in future
capital transactions may be more favorable to our new investors, and may include
preferences, superior voting rights, the issuance of warrants or other
derivative securities, and issuances of incentive awards under equity employee
incentive plans, which may have a further dilutive effect.
Furthermore,
any additional financing we may need may not be available on terms favorable to
us, or at all. If we are unable to obtain required additional financing, we may
be forced to curtail our growth plans or cut back our existing
operations.
We may
incur substantial costs in pursuing future capital financing, including
investment banking fees, legal fees, accounting fees, securities law compliance
fees, printing and distribution expenses and other costs. We may also be
required to recognize non-cash expenses in connection with certain securities we
may issue, such as convertible notes and warrants, which will adversely impact
our financial condition.
We
may not be able to effectively manage our anticipated growth, which may harm our
profitability.
Our
strategy envisions building and expanding our business. If we fail to
effectively manage our anticipated growth, our financial results could be
adversely affected. Growth may place a strain on our management systems and
resources. We must continue to refine and expand our business development
capabilities, our systems and processes and our access to financing sources. As
we grow, we must continue to hire, train, supervise and manage new employees. We
cannot assure you that we will be able to:
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expand
our systems effectively or efficiently or in a timely
manner;
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optimally
allocate our human resources;
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identify
and hire qualified employees or retain valued employees;
or
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incorporate
effectively the components of any business that we may acquire in our
effort to achieve growth.
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If we are
unable to manage our growth and our operations, our financial results could be
adversely affected by inefficiency, which could diminish our
profitability.
Our
business may suffer if we do not attract and retain talented
personnel.
Our
success will depend in large measure on the abilities, expertise, judgment,
discretion, integrity and good faith of our management and other personnel in
conducting our business. We are in the process of building our management team.
Among other positions, we need to hire a permanent Chief Executive Officer and a
permanent Chief Financial Officer with public company experience. The loss of
any of our existing management members or our inability to hire a qualified
Chief Executive Officer and Chief Financial Officer or attract suitably
qualified management and staff could materially adversely impact our business.
We may also experience difficulties in certain jurisdictions in our efforts to
obtain suitably qualified staff and retaining staff who are willing to work in
that jurisdiction. We do not currently carry “key man” life insurance on our key
employees.
Our
success depends on the ability of our management and employees to interpret
market and geological data correctly and to interpret and respond to economic
market and other conditions in order to locate and adopt appropriate investment
opportunities, monitor such investments and ultimately, if required,
successfully divest such investments. Further, our key personnel may not
continue their association or employment with us and we may not be able to find
replacement personnel with comparable skills. We have sought to and will
continue to ensure that management and any key employees are appropriately
compensated; however, their services cannot be guaranteed. If we are unable to
attract and retain key personnel, our business may be adversely
affected.
12
Our
management team does not have extensive experience in U.S. public company
matters, which could impair our ability to comply with U.S. legal and regulatory
requirements.
Our
management team has limited U.S. public company management experience, which
could impair our ability to comply with legal and regulatory requirements in the
U.S., such as the Sarbanes-Oxley Act of 2002 and applicable federal securities
laws, including filing required reports and other information required on a
timely basis. Our management may not be able to implement and affect programs
and policies in an effective and timely manner that adequately respond to
increased legal, regulatory compliance and reporting requirements imposed by
such laws and regulations. Our failure to comply with such laws and regulations
could lead to the imposition of fines and penalties and further result in the
deterioration of our business.
Gold
exploration and mining operations are subject to comprehensive regulation which
may cause substantial delays or require capital outlays in excess of those
anticipated, causing an adverse effect on our company.
Gold
exploration and mining operations are subject to national and local laws
relating to the protection of the environment, including laws regulating removal
of natural resources from the ground and the discharge of materials into the
environment. Gold exploration and mining operations are also subject
to national and local laws and regulations which seek to maintain health and
safety standards by regulating the design and use of mining methods and
equipment. Environmental standards imposed by national or local authorities may
be changed and any such changes may have material adverse effects on our
activities. Moreover, compliance with such laws may cause substantial delays or
require capital outlays in excess of those anticipated, thus causing an adverse
effect on us. Additionally, we may be subject to liability for pollution or
other environmental damages which we may elect not to insure against due to
prohibitive premium costs and other reasons. To date, because we have had no
mining operations, we have not been required to spend any amounts on compliance
with environmental regulations. However, we may be required to expend
substantial sums in the future and this may affect our ability to develop,
expand or maintain our operations.
Any
change to government regulation/administrative practices may have a negative
impact on our ability to operate and profitability.
The
laws, regulations, policies or current administrative practices of any
government body, organization or regulatory agency in Colombia, Nicaragua or any
other jurisdiction where we might conduct our business activities, may be
changed, applied or interpreted in a manner which could fundamentally alter the
ability of our company to carry on our business.
The
actions, policies or regulations, or changes thereto, of any government body or
regulatory agency, or other special interest groups, may have a detrimental
effect on us. Any or all of these situations may have a negative impact on our
ability to operate profitably.
RISKS
RELATED TO OUR INDUSTRY AND REGIONAL FOCUS
Our
exploration for gold reserves is risky and may not be commercially successful,
impairing our ability to generate revenues from our operations.
Gold
exploration involves a high degree of risk. These risks are more acute in the
early stages of exploration. Our expenditures on exploration may not result in
new discoveries of gold reserves in commercially viable
quantities. If exploration costs exceed our estimates, or if our
exploration efforts do not produce results which meet our expectations, our
exploration efforts may not be commercially successful, which could adversely
impact our ability to generate revenues from our operations.
We
may not be able to develop gold reserves on an economically viable
basis.
To the
extent that we succeed in discovering or acquiring gold reserves, we cannot
assure that these reserves will be capable of production levels we project or in
sufficient quantities to be commercially viable. On a long-term basis, our
viability depends on our ability to find or acquire, develop and commercially
produce gold reserves. Our future reserves will depend not only on our ability
to develop then-existing properties, but also on our ability to identify and
acquire additional suitable properties or prospects, to find markets for the
gold we produce and to effectively distribute our production into our
markets.
13
Estimates
of gold reserves that we make may be inaccurate and our future actual revenues
may be lower than our financial projections.
With
respect to any gold properties that we may acquire, we will make estimates of
gold reserves, upon which we will base our financial projections. We will make
these reserve estimates using various assumptions, including assumptions as to
gold prices, exploration and operating expenses, capital expenditures, taxes and
availability of funds. Some of these assumptions are inherently subjective, and
the accuracy of our reserve estimates relies in part on the ability of our
management team, engineers and other advisors to make accurate assumptions.
Economic factors beyond our control, such as interest rates and exchange rates,
will also impact the value of our reserves. The process of estimating gold
reserves is complex, and will require us to use significant decisions and
assumptions in the evaluation of available geological, geophysical, engineering
and economic data for each property. As a result, our reserve estimates will be
inherently imprecise. Actual future production, gold prices, revenues, taxes,
development expenditures, operating expenses and quantities of recoverable gold
reserves may vary substantially from those we estimate. If actual production
results vary substantially from our reserve estimates, this could materially
reduce our revenues and result in the impairment of our gold
interests.
Our
inability to obtain necessary facilities could hamper our
operations.
Gold
exploration and development activities are dependent on the availability of
equipment, transportation, power and technical support in the particular areas
where these activities will be conducted, and our access to these facilities may
be limited. To the extent that we conduct our activities in remote areas, needed
facilities may not be proximate to our operations, which will increase our
expenses. Demand for such limited equipment and other facilities or access
restrictions may affect the availability of such equipment to us and may delay
exploration and development activities. The quality and reliability of necessary
facilities may also be unpredictable and we may be required to make efforts to
standardize our facilities, which may entail unanticipated costs and delays.
Shortages and/or the unavailability of necessary equipment or other facilities
will impair our activities, either by delaying our activities, increasing our
costs or otherwise.
Increases
in our operating expenses will impact our operating results and financial
condition.
Exploration,
development, production, marketing (including distribution costs) and regulatory
compliance costs (including taxes) will substantially impact the net revenues we
derive from the gold that we may produce. These costs are subject to
fluctuations and variation in different locales in which we will operate, and we
may not be able to predict or control these costs. If these costs exceed our
expectations, this may adversely affect our results of operations. In addition,
we may not be able to earn net revenue at our predicted levels, which may impact
our ability to satisfy our obligations.
Penalties
we may incur could impair our business.
Failure
to comply with government regulations could subject us to civil and criminal
penalties, could require us to forfeit property rights, and may affect the value
of our assets. We may also be required to take corrective actions, such as
installing additional equipment or taking other actions,
each of which could require us to make substantial capital expenditures. We
could also be required to indemnify our employees in connection with any
expenses or liabilities that they may incur individually in connection with
regulatory action against them. As a result, our future business prospects could
deteriorate due to regulatory constraints, and our profitability could be
impaired by our obligation to provide such indemnification to our
employees.
Environmental
risks may adversely affect our business.
All
phases of the gold exploration and mining business present environmental risks
and hazards and are subject to environmental regulation pursuant to a variety of
international conventions and federal, provincial and municipal laws and
regulations. Environmental legislation provides for, among other things,
restrictions and prohibitions on emissions of various substances produced in
association with gold exploration and mining operations. The legislation also
requires that facility sites be operated, maintained, abandoned and reclaimed to
the satisfaction of applicable regulatory authorities. Compliance with such
legislation can require significant expenditures and a breach may result in the
imposition of fines and penalties, some of which may be material. Environmental
legislation is evolving in a manner we expect may result in stricter standards
and enforcement, larger fines and liability and potentially increased capital
expenditures and operating costs. The discharge of pollutants into the air, soil
or water may give rise to liabilities to foreign governments and third parties
and may require us to incur costs to remedy such discharge. The application of
environmental laws to our business may cause us to curtail our production or
increase the costs of our production, development or exploration
activities.
14
Managing
local community relations where we and our partners operate could be
problematic.
We or our
operating partners may be required to present our operational plans to local
communities or indigenous populations living in the area of a proposed project
before project activities can be initiated. Additionally, working with local
communities will be an essential part of our work program for the development of
any of our exploration projects in the region. If we or our partners
fail to manage any of these community relationships appropriately, our
operations could be delayed or interrupted and we or our partners could lose
rights to operate in these areas, resulting in a negative impact on our
business, our reputation and, possibly, our share price.
Our
insurance may be inadequate to cover liabilities we may incur.
Our
involvement in the exploration for and development of gold properties may result
in our becoming subject to liability for pollution, property damage, personal
injury or other hazards. Although we will obtain insurance in accordance with
industry standards to address such risks, such insurance has limitations on
liability that may not be sufficient to cover the full extent of such
liabilities. In addition, such risks may not, in all circumstances be insurable
or, in certain circumstances, we may choose not to obtain insurance to protect
against specific risks due to the high premiums associated with such insurance
or for other reasons. The payment of such uninsured liabilities would reduce the
funds available to us. If we suffer a significant event or occurrence that is
not fully insured, or if the insurer of such event is not solvent, we could be
required to divert funds from capital investment or other uses towards covering
our liability for such events.
Civil
liabilities may not be able to be enforced against us.
Substantially
all of our assets and certain of our officers and directors will be located
outside of the United States. As a result of this, it may be
difficult or impossible to enforce judgments awarded by a court in the United
States against our assets or those of our officers and directors.
Our
business is subject to local legal, political and economic factors which are
beyond our control, which could impair our ability to build and expand our
operations or operate profitably.
We
expect to operate our business in Colombia, Nicaragua and other South and
Central American countries. There are risks that economic and
political conditions will change in a manner adverse to our interests. These
risks include, but are not limited to, terrorism, military repression,
interference with private contract rights (such as nationalization), extreme
fluctuations in currency exchange rates, high rates of inflation, exchange
controls and other laws or policies affecting environmental issues (including
land use and water use), workplace safety, foreign investment, foreign trade,
investment or taxation, as well as restrictions imposed on the gold mining
industry, such as on price controls and export controls. Any changes in
investment and tax regulations and policies or a shift in political attitudes in
Colombia, Nicaragua, or other countries in which we intend to operate are beyond
our control and may significantly hamper our ability to build and expand our
operations or operate our business at a profit.
For
instance, changes in laws in the jurisdiction in which we operate or expand into
with the effect of favoring local enterprises, changes in political views
regarding the exploitation of natural resources and economic pressures may make
it more difficult for us to negotiate agreements on favorable terms, obtain
required licenses, comply with regulations or effectively adapt to adverse
economic changes, such as increased taxes, higher costs, inflationary pressure
and currency fluctuations.
Insurgent
and criminal activities in the territories in which we operate, or the
perception that such activities are likely, may disrupt our operations, hamper
our ability to hire and keep qualified personnel and impair our access to
sources of capital.
Colombia
has been the site of South America’s largest and longest political and military
insurgency and has experienced uncontrolled criminal activity relating to drug
trafficking. While the situation has improved dramatically in recent years,
there can be no guarantee that the situation will improve further or that it
will not deteriorate in Colombia or any other countries in which we may
operate. Insurgent or criminal activities (including kidnapping and
terrorism) in any of the countries in which we operate, or the perception that
such activities are likely, may disrupt our operations in that country, hamper
our ability to hire and keep qualified personnel and hinder or shut off our
access to sources of capital. Any such changes are beyond our control
and may adversely affect our business.
15
Local
legal and regulatory systems in which we operate may create uncertainty
regarding our rights and operating activities, which may harm our ability to do
business.
We are a
company organized under the laws of the State of Nevada and are subject to
United States laws and regulations. The jurisdictions in which we intend to
operate our exploration, development and production activities may have
different or less developed legal systems than the United States, which may
result in risks such as:
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·
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effective
legal redress in the courts of such jurisdictions, whether in respect of a
breach of law or regulation, or, in an ownership dispute, being more
difficult to obtain;
|
|
·
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a
higher degree of discretion on the part of governmental
authorities;
|
|
·
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the
lack of judicial or administrative guidance on interpreting applicable
rules and regulations;
|
|
·
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inconsistencies
or conflicts between and within various laws, regulations, decrees, orders
and resolutions; and
|
|
·
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relative
inexperience of the judiciary and courts in such
matters.
|
In
certain jurisdictions, the commitment of local business people, government
officials and agencies and the judicial system to abide by legal requirements
and negotiated agreements may be more uncertain, creating particular concerns
with respect to licenses and agreements for business. These licenses and
agreements may be susceptible to revision or cancellation and legal redress may
be uncertain or delayed. Property right transfers, joint ventures, licenses,
license applications or other legal arrangements pursuant to which we operate
may be adversely affected by the actions of government authorities and the
effectiveness of and enforcement of our rights under such arrangements in these
jurisdictions may be impaired.
Our
business will suffer if we or our strategic partners cannot obtain or maintain
necessary licenses.
Our
operations will require licenses, permits and in some cases renewals of licenses
and permits from various governmental authorities. Our ability to obtain,
sustain or renew such licenses and permits on acceptable terms is subject to
change in regulations and policies and to the discretion of the applicable
governments, among other factors. Our inability to obtain, or our loss of or
denial of extension to any of these licenses or permits could hamper our ability
to produce revenues from our operations.
Foreign
currency exchange rate fluctuations may affect our financial
results.
We expect
to sell our future gold production under agreements that will be denominated in
United States dollars and foreign currencies. Many of the operational and other
expenses we incur will be paid in the local currency of the country where we
perform our operations. As a result, fluctuations in the United States dollar
against the local currencies in jurisdictions where we operate could result in
unanticipated and material fluctuations in our financial results.
We
will rely on technology to conduct our business and our technology could become
ineffective or obsolete.
We will
rely on technology, including geographic analysis techniques and economic
models, to develop reserve estimates and to guide our planned exploration and
development and production activities. We will be required to continually
enhance and update our technology to maintain its efficacy and to avoid
obsolescence. The costs of doing so may be substantial, and may be higher than
the costs that we anticipate for technology maintenance and development. If we
are unable to maintain the efficacy of our technology, our ability to manage our
business and to compete may be impaired. Further, even if we are able to
maintain technical effectiveness, our technology may not be the most efficient
means of reaching our objectives, in which case we may incur higher operating
costs than we would were our technology more efficient.
16
RISKS
RELATED TO OUR SECURITIES
We
do not presently maintain an effective system of disclosure and internal
controls which may affect our ability to accurately report our financial results
or detect fraud. Consequently, investors could lose confidence in our financial
reporting and this may decrease the trading price of our stock.
We
must maintain effective disclosure and internal controls to provide reliable
financial reports and detect fraud. Based on our evaluation of our disclosure
controls, as of September 30, 2010, and our evaluation of internal controls as
of November 30, 2009, we concluded that we do not maintain effective disclosure
controls and procedures and that our internal controls are deficient. This
conclusion was based in large part on our not having an audit committee and
having one individual serving as our sole executive officer which results in our
not having proper segregation of duties. We presently have two individuals
serving as our executive officers. We intend to address this
deficiency in the near future. Failure to implement changes to our controls as
necessary to maintain an effective system of such controls could harm our
operating results and cause investors to lose confidence in our reported
financial information. Any such loss of confidence would have a negative effect
on the trading price of our stock.
There
is not now, and there may not ever be, an active market for our common
stock.
There
currently is a limited public market for our common stock. Further,
although our common stock is currently quoted on OTC Markets, trading of our
common stock may be extremely sporadic. As a result, an investor may
find it difficult to dispose of, or to obtain accurate quotations of the price
of, our common stock. Accordingly, investors must assume they may
have to bear the economic risk of an investment in our common stock for an
indefinite period of time. There can be no assurance that a more
active market for our common stock will develop, or if one should develop, there
is no assurance that it will be sustained. This severely limits the
liquidity of our common stock, and would likely have a material adverse effect
on the market price of our common stock and on our ability to raise additional
capital.
We
cannot assure you that our common stock will become liquid or that it will be
listed on a securities exchange.
Until our
common stock is listed on a national securities exchange such as the New York
Stock Exchange or the Nasdaq National Market, we expect our common stock to
remain eligible for quotation on OTC Markets or on the OTC Bulletin
Board. In those venues, however, an investor may find it difficult to
obtain accurate quotations as to the market value of our common
stock. In addition, if we fail to meet the criteria set forth in SEC
regulations, various requirements would be imposed by law on broker-dealers who
sell our securities to persons other than established customers and accredited
investors. Consequently, such regulations may deter broker-dealers
from recommending or selling our common stock, which may further affect the
liquidity of our common stock. This would also make it more difficult
for us to raise capital.
Our
common stock is subject to the “penny stock” rules of the SEC and the trading
market in our common stock is limited, which makes transactions in our common
stock cumbersome and may reduce the value of an investment in the
stock.
The SEC
has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for
the purposes relevant to us, as any equity security that has a market price of
less than $5.00 per share or with an exercise price of less than $5.00 per
share, subject to certain exceptions. For any transaction involving a penny
stock, unless exempt, the rules require:
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·
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that
a broker or dealer approve a person’s account for transactions in penny
stocks; and
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·
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the
broker or dealer receives from the investor a written agreement to the
transaction, setting forth the identity and quantity of the penny stock to
be purchased.
|
In order
to approve a person’s account for transactions in penny stocks, the broker or
dealer must:
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·
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obtain
financial information and investment experience objectives of the person;
and
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·
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make
a reasonable determination that the transactions in penny stocks are
suitable for that person and the person has sufficient knowledge and
experience in financial matters to be capable of evaluating the risks of
transactions in penny stocks.
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17
The
broker or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prescribed by the SEC relating to the penny stock market,
which, in highlight form sets forth:
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·
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the
basis on which the broker or dealer made the suitability determination;
and
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·
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that
the broker or dealer received a signed, written agreement from the
investor prior to the transaction.
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Generally,
brokers may be less willing to execute transactions in securities subject to the
“penny stock” rules. This may make it more difficult for investors to dispose of
common stock and cause a decline in the market value of stock.
Disclosure
also has to be made about the risks of investing in penny stocks in both public
offerings and in secondary trading and about the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks.
The
price of our common stock may become volatile, which could lead to losses by
investors and costly securities litigation.
The
trading price of our common stock is likely to be highly volatile and could
fluctuate in response to factors such as:
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·
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actual
or anticipated variations in our operating
results;
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·
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announcements
of developments by us, our strategic partners or our
competitors;
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·
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announcements
by us or our competitors of significant acquisitions, strategic
partnerships, joint ventures or capital
commitments;
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·
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adoption
of new accounting standards affecting our
industry;
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·
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additions
or departures of key personnel;
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·
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sales
of our common stock or other securities in the open market;
and
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·
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other
events or factors, many of which are beyond our
control.
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The stock
market is subject to significant price and volume fluctuations. In the past,
following periods of volatility in the market price of a company’s securities,
securities class action litigation has often been initiated against the company.
Litigation initiated against us, whether or not successful, could result in
substantial costs and diversion of our management’s attention and resources,
which could harm our business and financial condition.
We
do not anticipate dividends to be paid on our common stock, and investors may
lose the entire amount of their investment.
Cash
dividends have never been declared or paid on our common stock, and we do not
anticipate such a declaration or payment for the foreseeable future. We expect
to use future earnings, if any, to fund business growth. Therefore, stockholders
will not receive any funds absent a sale of their shares. We cannot assure
stockholders of a positive return on their investment when they sell their
shares, nor can we assure that stockholders will not lose the entire amount of
their investment.
If
securities analysts do not initiate coverage or continue to cover our common
stock or publish unfavorable research or reports about our business, this may
have a negative impact on the market price of our common stock.
The
trading market for our common stock may be affected by, among other things, the
research and reports that securities analysts publish about our business and the
Company. We do not have any control over these analysts. There is no guarantee
that securities analysts will cover our common stock. If securities analysts do
not cover our common stock, the lack of research coverage may adversely affect
its market price. If we are covered by securities analysts, and our stock is the
subject of an unfavorable report, our stock price and trading volume would
likely decline. If one or more of these analysts ceases to cover the Company or
fails to publish regular reports on the Company, we could lose visibility in the
financial markets, which could cause our stock price or trading volume to
decline.
18
You
may experience dilution of your ownership interests because of the future
issuance of additional shares of our common stock.
In the
future, we may issue our authorized but previously unissued equity securities,
resulting in the dilution of the ownership interests of our present stockholders
and the purchasers of our common stock offered hereby. We are
currently authorized to issue an aggregate of 310,000,000 shares of capital
stock consisting of 300,000,000 shares of common stock and 10,000,000 shares of
preferred stock with preferences and rights to be determined by the
our Board of Directors. As of December 9, 2010, there were
93,012,500 shares of our common stock and no shares of our preferred stock
outstanding. As of that date, we also have 8,116,667 stock options
outstanding under our 2008 Equity Incentive Plan. As of that date, there are
1,883,333 shares of our common stock reserved for future issuance under our 2008
Equity Incentive Plan. We may also issue additional shares of our
common stock or other securities that are convertible into or exercisable for
our common stock in connection with hiring or retaining employees, future
acquisitions, future sales of our securities for capital raising purposes, or
for other business purposes. The future issuance of any such
additional shares of our common stock may create downward pressure on the
trading price of our common stock. We will need to raise additional
capital in the near future to meet our working capital needs and there can be no
assurance that we will not be required to issue additional shares, warrants or
other convertible securities in the future in conjunction with these capital
raising efforts, including at a price (or exercise prices) below the price at
which shares of our common stock are currently traded on OTC
Markets.
SELLING
STOCKHOLDERS
This
prospectus covers the resale from time to time by the selling stockholders
identified in the table below of up to 42,870,750 issued and outstanding shares
of our common stock, 39,358,250 of which were sold in a private placement
offering completed on July 8, 2010 under which we sold an aggregate of
39,500,000 shares, at a price of $0.10 per share, for aggregate gross proceeds
of $3,950,000 and 3,187,500 of which were sold in another private placement
offering completed on November 2, 2010 under which we sold an aggregate of
3,187,500 shares, at a price of $0.40 per share, for aggregate gross proceeds of
$1,275,000. The remaining 325,000 shares were issued pursuant to a
Consulting Services Agreement and Advisory Services Agreement dated June 21,
2010 and July 7, 2010, respectively.
Pursuant
to registration rights granted in connection with the completed July and
November 2010 share offerings, we have filed with the Securities and Exchange
Commission a registration statement on Form S-1, of which this prospectus forms
a part, under the Securities Act of 1933, as amended (the “Securities Act”), to
register the resale of the shares of common stock sold in the
offering. The resale of 325,000 shares issued pursuant to the June
21, 2010 Consulting Services Agreement and the July 7, 2010 Advisory Services
Agreement are also included in the registration statement by reason of piggyback
registration rights granted to the share recipients under such
agreements. The selling stockholders identified in the table below
may from time to time offer and sell under this prospectus any or all of the
shares of common stock described under the column “Shares of Common Stock Being
Offered” in the table below.
Certain
selling stockholders may be deemed to be “underwriters” as defined in the
Securities Act. Any profits realized by such selling stockholder may be deemed
to be underwriting commissions.
The
table below has been prepared based upon the information furnished to us by the
selling stockholders. The selling stockholders identified below may have sold,
transferred or otherwise disposed of some or all of their shares since the date
on which the information in the following table is presented in transactions
exempt from or not subject to the registration requirements of the Securities
Act. Information concerning the selling stockholders may change from time to
time and, if necessary, we will amend or supplement this prospectus accordingly.
We cannot give an estimate as to the number of shares of common stock that will
actually be held by the selling stockholders upon termination of this offering
because the selling stockholders may offer some or all of their common stock
under the offering contemplated by this prospectus or acquire additional shares
of common stock. The total number of shares that may be sold hereunder will not
exceed the number of shares offered hereby. Please read the section entitled
“Plan of Distribution” in this prospectus.
19
The
following table sets forth the name of each selling stockholder, the number of
shares of our common stock beneficially owned by such stockholder before this
offering, the number of shares to be offered for such stockholder’s account
and the number and (if one percent or more) the percentage of the class to be
beneficially owned by such stockholder after completion of the offering. The
number of shares owned are those beneficially owned, as determined under the
rules of the Securities and Exchange Commission, and such information is not
necessarily indicative of beneficial ownership for any other purpose. Under such
rules, beneficial ownership includes any shares of our common stock as to which
a person has sole or shared voting power or investment power and any shares of
common stock which the person has the right to acquire within 60 days after the
date of this prospectus through the exercise of any option, warrant or right,
through conversion of any security or pursuant to the automatic termination of a
power of attorney or revocation of a trust, discretionary account or similar
arrangement, and such shares are deemed to be beneficially owned and outstanding
for computing the share ownership and percentage of the person holding such
options, warrants or other rights, but are not deemed outstanding for computing
the percentage of any other person. Beneficial ownership percentages are
calculated based on 93,012,500 shares of our common stock outstanding as of
December 9, 2010.
Unless
otherwise set forth below, based upon the information furnished to us, (a) the
persons and entities named in the table have sole voting and sole investment
power with respect to the shares set forth opposite the selling stockholder’s
name, subject to community property laws, where applicable, (b) no selling
stockholder had any position, office or other material relationship within the
past three years, with us or with any of our predecessors or affiliates, and (c)
no selling stockholder is a broker-dealer or an affiliate of a broker-dealer.
Selling stockholders who are broker-dealers or affiliates of broker-dealers are
indicated by footnote. We have been advised that these broker-dealers and
affiliates of broker-dealers purchased our common stock in the ordinary course
of business, not for resale, and at the time of purchase, did not have any
agreements or understandings, directly or indirectly, with any person to
distribute such common stock.
Selling Stockholder
|
Shares of
Common
Stock
Owned
Before the
Offering
|
Shares of
Common
Stock Being
Offered
|
Shares of
Common
Stock
Owned Upon
Completion
of the
Offering (1)
|
Percentage
of Common
Stock
Outstanding
Upon
Completion
of the
Offering
|
||||||||||||
Ajay
Desai Revocable Trust Dated 4/9/09(1)
|
1,000,000 | 1,000,000 | 0 | 0 | % | |||||||||||
Bluebird
Ventures Limited(2)
|
1,000,000 | 1,000,000 | 0 | 0 | % | |||||||||||
Carter
Management Group LLC(3)§
|
250,000 | 250,000 | 0 | 0 | % | |||||||||||
Gilbert
John Chalk
|
125,000 | 125,000 | 0 | 0 | % | |||||||||||
Chestnut
Ridge Partners, LP(4)
|
3,000,000 | 3,000,000 | 0 | 0 | % | |||||||||||
Paul
Daniel
|
1,000,000 | 1,000,000 | 0 | 0 | % | |||||||||||
John
Paul DeJoria Family Trust(5)
|
10,750,000 | 10,750,000 | 0 | 0 | % | |||||||||||
Frank
Drazka(6)§
|
27,000 | 27,000 | 0 | 0 | % | |||||||||||
Gottbetter
Capital Group, Inc.(7)§
|
100,000 | 100,000 | 0 | 0 | % | |||||||||||
Peter
Howard Crump Hanson
|
500,000 | 500,000 | 0 | 0 | % | |||||||||||
Hare
& Co.(8)
|
2,000,000 | 2,000,000 | 0 | 0 | % | |||||||||||
Andres
Henkler
|
500,000 | 500,000 | 0 | 0 | % | |||||||||||
IIU
Nominees Limited(9)
|
5,000,000 | 5,000,000 | 0 | 0 | % | |||||||||||
John
Lipman(10)§
|
56,250 | 56,250 | 0 | 0 | % | |||||||||||
Mac
& Co.(11)
|
2,500,000 | 2,500,000 | 0 | 0 | % | |||||||||||
Mara
Holdings Limited(17)
|
250,000 | 250,000 | ||||||||||||||
Mifinco
Limited(12)
|
500,000 | 500,000 | 0 | 0 | % | |||||||||||
Musgrave
Investments Limited(13)
|
1,000,000 | 1,000,000 | 0 | 0 | % | |||||||||||
Ocean
Group International SA(14)
|
5,000,000 | 5,000,000 | 0 | 0 | % | |||||||||||
Quotidian
No. 2 Pty Limited(15)
|
500,000 | 500,000 | 0 | 0 | % | |||||||||||
Sardarov
Rachid
|
625,000 | 625,000 | ||||||||||||||
Societe
Generale Private Banking (Suisse) SA(18)
|
62,500 | 62,500 | ||||||||||||||
Edward
A. Sugar§
|
1,000,000 | 1,000,000 | 0 | 0 | % | |||||||||||
Trendex
Invest S.A.
(16)
|
4,000,000 | 4,000,000 | 0 | 0 | % | |||||||||||
Woodbridge
Link Limited(19)
|
1,250,000 | 1,250,000 | ||||||||||||||
Jason
Woollard
|
500,000 | 500,000 | 0 | 0 | % | |||||||||||
Laurent
Zmiro
|
250,000 | 250,000 | 0 | 0 | % | |||||||||||
Corporate Services (TD Waterhouse) Nominees
Ltd.
(20)
|
125,000 | 125,000 | 0 | 0 | % | |||||||||||
Totals
|
42,870,750 | 42,870,750 | 0 | 0 | % |
20
* Less
than 1%
§
Broker-Dealer or Affiliate of a Broker Dealer
(1)
|
Ajay
Desai has the power to vote and dispose of the shares being registered on
behalf of Ajay Desai Revocable Trust Dated
4/9/09.
|
(2)
|
Catherine
Madeleine Jackson has the power to vote and dispose of the shares being
registered on behalf of Bluebird Ventures
Limited.
|
(3)
|
John
Lipman has the power to vote and dispose of the shares being registered on
behalf of Carter Management Group LLC. John Lipman is an employee of
Hudson Securities, Inc., a registered
broker-dealer.
|
(4)
|
Kenneth
Pasternak has the power to vote and dispose of the shares being registered
on behalf of Chestnut Ridge Partners,
LP.
|
(5)
|
John
Paul DeJoria has the power to vote and dispose of the shares being
registered on behalf of John Paul DeJoria Family
Trust.
|
(6)
|
Frank
Drazka is an employee of Hudson Securities, Inc., a registered
broker-dealer.
|
(7)
|
Adam
S. Gottbetter has the power to vote and dispose of the shares being
registered on behalf of Gottbetter Capital Group, Inc. Gottbetter Capital
Group, Inc. is an affiliate of Gottbetter Capital Markets, LLC, a
registered broker-dealer, through common
ownership.
|
(8)
|
Hare
& Co. is the nominee for Grafton Resource Investments Ltd.
(“Grafton”), the beneficial owner of the shares. David James
Hutchins has the power to vote and dispose of the shares being registered
hereunder.
|
(9)
|
John
Gerard Bateson has the power to vote and dispose of the shares being
registered on behalf of IIU Nominees
Limited.
|
(10)
|
John
Lipman is an employee of Hudson Securities, Inc., a registered
broker-dealer.
|
(11)
|
Mac
& Co. is the nominee for Chaitanya Patel, the beneficial owner of the
shares. Chaitanya Patel has the power to vote and dispose of
the shares being registered
hereunder.
|
(12)
|
John
Henry Perkins has the power to vote and dispose of the shares being
registered on behalf of Mifinco
Limited.
|
(13)
|
Peter
Grut has the power to vote and dispose of the shares being registered on
behalf of Musgrave Investments
Limited.
|
(14)
|
Timur
Sardarov has the power to vote and dispose of the shares being registered
on behalf of Ocean Group
International SA.
|
21
(15)
|
Steven
Paddis has the power to vote and dispose of the shares being registered on
behalf of Quotidian No. 2 Pty
Limited.
|
(16)
|
Gaukhar
Ashkenazi has the power to vote and dispose of the shares being registered
on behalf of Trendex Invest S.A.
|
(17)
|
J.
W. E. Lewis has the power to vote and dispose of the shares being
registered on behalf of Mara Holdings
Limited.
|
(18)
|
Serge
Naef and Laurent Bertona have the power to vote and dispose of the shares
being registered on behalf of Societe Generale Private Banking (Suisse)
SA.
|
(19)
|
Gaukhar
Ashkenazi has the power to vote and dispose of the shares being registered
on behalf of Woodbridge Link
Limited.
|
(20)
|
Paul
Daniel has to power to vote and dispose of the shares being registered on
behalf of Corporate Services (TD Waterhouse) Nominees
Ltd.
|
We will
not receive proceeds from sales of common stock made under this
prospectus.
DETERMINATION
OF OFFERING PRICE
There
currently is a limited public market for our common stock. The selling
stockholders will determine at what price they may sell the offered shares, and
such sales may be made at prevailing market prices or at privately negotiated
prices. See “Plan of Distribution” below for more information.
Market
Information and Holders
Since
July 24, 2007, our common stock has been listed for quotation on the
Over-the-Counter Bulletin Board, originally under the symbol
“RTME.OB.” Our symbol changed to “FEDS.OB” on May 8, 2008 in
connection with our name change to Federal Sports & Entertainment, Inc. and
again to “UGDM.OB” effective May 12, 2010, in connection with our name change to
Universal Gold Mining Corp.
The
following table sets forth the high and low closing bid prices for our common
stock for the fiscal quarters indicated as reported on the OTCBB. The quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
may not represent actual transactions. Our Common Stock is thinly
traded and, thus, pricing of our common stock on the OTCBB does not necessarily
represent its fair market value.
Period
|
High(1)
|
Low(1)
|
||||||
Fiscal Year Ending November 30,
2008
|
||||||||
First
Quarter
|
$ | 0.0025 | 0.0025 | |||||
Second
Quarter
|
0.01275 | 0.0025 | ||||||
Third
Quarter
|
0.0075 | 0.0075 | ||||||
Fourth
Quarter
|
0.0075 | 0.0075 | ||||||
Fiscal Year Ending November 30,
2009
|
||||||||
First
Quarter
|
$ | 0.0075 | 0.0075 | |||||
Second
Quarter
|
0.0075 | 0.0025 | ||||||
Third
Quarter
|
0.003025 | 0.003025 | ||||||
Fourth
Quarter
|
0.003025 | 0.003025 | ||||||
Fiscal Year Ending December 31,
2010
|
||||||||
First
Quarter
|
$ | 0.27 | 0.003 | |||||
Second
Quarter
|
0.67 | 0.003 | ||||||
Third
Quarter
|
0.71 | 0.45 | ||||||
Fourth
Quarter*
|
0.82 | 0.50 |
22
*
Through December 9, 2010
(1) All
quotations give retroactive effect to our 2-for-1 forward stock split in the
form of a dividend which was effected on April 25, 2008, and to our 20-for-1
forward stock split in the form of a dividend which was effected on May 12,
2010.
As of
December 9, 2010, there were 93,012,500 shares of our common stock issued and
outstanding and 8,116,667 shares issuable upon exercise of outstanding options
granted under our 2008 Equity Incentive Plan. On December 9, 2010,
there were 65 holders of record of our common stock.
Dividends
We have
never declared any cash dividends with respect to our common
stock. Future payment of dividends is within the discretion of our
Board of Directors and will depend on our earnings, capital requirements,
financial condition and other relevant factors. Other than provisions
of the Nevada Revised Statutes requiring post-dividend solvency according to
certain measures, there are no material restrictions limiting, or that are
likely to limit, our ability to pay dividends on our common
stock. Nonetheless, we presently intend to retain future earnings, if
any, for use in our business and have no present intention to pay cash dividends
on our common stock.
Securities
Authorized for Issuance under Equity Compensation Plans
On
April 15, 2008, our Board of Directors and stockholders adopted our 2008 Equity
Incentive Plan, pursuant to which a total of 10,000,000 shares of our common
stock may be issued pursuant to awards granted thereunder. If an
incentive award granted under the 2008 Equity Incentive Plan expires,
terminates, is unexercised or is forfeited, or if any shares are surrendered to
us in connection with an incentive award, the shares subject to such award and
the surrendered shares will become available for further awards under the 2008
Equity Incentive Plan. As of the date hereof, we have granted options
to purchase an aggregate of 8,116,667 shares of our common stock under the
2008 Equity Incentive Plan and as such, options to purchase an aggregate of
1,883,333 shares of our common stock remain issuable under the 2008 Equity
Incentive Plan.
See
“Executive Compensation” for information regarding individual equity
compensation arrangements received by our executive officers pursuant to their
employment agreements with us.
RESULTS
OF OPERATIONS
The
following discussion and analysis of financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and related notes included elsewhere in this prospectus. This
discussion contains forward-looking statements that involve risks, uncertainties
and assumptions. See “Note Regarding Forward-Looking Statements.” Our actual
results could differ materially from those anticipated in the forward-looking
statements as a result of certain factors discussed in “Risk Factors” and
elsewhere in this prospectus.
Overview
and Going Concern
We are
an international, exploration stage gold mining exploration and production
company focusing our initial operations in Colombia and Nicaragua. We have
achieved no operating revenues to date. We have entered into an April 23, 2010
Option Agreement which gives us the right to acquire up to a 50% interest in a
Colombian gold prospect (see “Description of Business - Toldafria Prospect”) and
a November 30, 2010 Option Agreement which gives us the right to acquire all of
the issued shares in RNC (Hemco) Limited which, through its Hemco Nicaragua S.A.
subsidiary, operates the Bonanza gold and silver mine located in Nicaragua,
Central America (see “Description of Business – Hemco”).
23
In the
course of our development activities, we have sustained losses and expect such
losses to continue unless and until we can achieve net operating
revenues. We expect to finance our operations primarily through our
existing cash and future financings. However, substantial doubt exists about our
ability to continue as a going concern because we will be required to obtain
additional capital in the future to continue our operations and there is no
assurance that we will be able to obtain such capital, through equity or debt
financings, or any combination thereof, or on satisfactory terms or at all.
Additionally, no assurance can be given that any such financing, if obtained,
will be adequate to meet our ultimate capital needs and to support our growth.
If adequate capital cannot be obtained on a timely basis and on satisfactory
terms, our operations would be materially negatively
impacted. Additionally, our independent auditors included an
explanatory paragraph in their report on our consolidated financial statements
included in our Form 10-K for the fiscal year ended November 30, 2009 filed with
the SEC on March 1, 2010 that raises substantial doubt about our ability to
continue as a going concern. Our ability to complete additional
offerings is dependent on the state of the debt and equity markets at the time
of any proposed offering, and such market’s reception of us and the offering
terms. In addition, our ability to complete an offering may be dependent on the
status of our business activities, which cannot be predicted.
Our
audited and unaudited financial statements have been prepared in accordance with
generally accepted accounting principles applicable to a going concern, which
implies we will continue to meet our obligations and continue our operations for
the next twelve months. Realization values may be substantially different from
carrying values as shown, and our consolidated financial statements do not
include any adjustments relating to the recoverability or classification of
recorded asset amounts or the amount and classification of liabilities that
might be necessary if we are unable to continue as a going concern.
Change in Fiscal Year
End
On May
19, 2010, we determined to change our fiscal year end from November 30 to
December 31. As the transition period covers a period of one month, we were not
required to file a transition report. We have chosen to use the
three-month and nine-month periods ended August 31, 2009 for comparative
purposes. Restating the prior fiscal period to the new fiscal period would not
materially affect the comparison, as the difference in activity is not
significant.
Results
of Operations
Revenues
We have
had no revenues since our inception.
Expenses
Three
and Nine Months Ended September 30, 2010 and August 31, 2009
Our
total expenses during the three and nine months ended September 30, 2010
increased to $432,899 and $1,112,675 from $12,319 and $49,993 during the three
and nine months ended August 30, 2009, as a result of accounting and legal fees
associated with a private placement offering of our common stock, stock-based
compensation recognized for our Directors’ stock options granted in June 2010,
non-cash consulting fees, expenses related to our Vancouver office which was
opened during the quarter ended September 30, 2010, payroll costs for personnel
in our Vancouver office, travel costs, and consulting fees. These increases in
expenses were partially offset by a net foreign currency exchange gain and
interest income of $47,804 and $137, respectively, recognized during the quarter
ended September 30, 2010.
Years
Ended November 30, 2009 and 2008
We
incurred total expenses of $65,598 and $97,440 for the years ended November 30,
2009 and 2008, respectively. These expenses consisted of general and
administrative expenses incurred in connection with the day to day maintenance
of our public company status and the related preparation and filing of our
periodic reports. Accounting and legal fees increased from $13,320
for the fiscal year ended November 30, 2008 to $50,142 for the fiscal year ended
November 30, 2009 and office expense decreased from $31,613 to $15,456 over
these same periods. During the 2008 period, we also incurred
director’s fees’ of $45,100, which represents the estimated fair value of common
shares granted to our sole director for services rendered.
24
Net Loss
Three
and Nine Months Ended September 30, 2010 and August 30, 2009
We
incurred net losses for the three and nine months ended September 30, 2010 of
($384,958) and ($1,064,522), compared to net losses for the three and nine
months ended August 30, 2009 of ($12,319) and ($49,993), respectively. The
increase in net losses for the three and nine months ended September 30, 2010
was directly attributable to increased expenses, discussed
above.
Years
Ended November 30, 2009 and 2008
Our net
losses for years ended November 30, 2009 and 2008 were $65,598 and $97,440,
respectively. The decrease in our net loss was primarily attributable to a
decrease in Director’s Fees and Office Expenses which offset an increase in
Legal and Accounting Fees.
Liquidity
and Capital Resources
Our
cash and cash equivalents balances as of September 30, 2010 and December 31,
2009 were $853,968 and $0, respectively.
On May
24, 2010, we completed the initial closing of a private placement offering of
unregistered shares of our common stock, par value $0.001 per share, at $0.10
per share, to foreign and accredited investors. We sold an aggregate of
23,000,000 shares in the initial closing of the offering, resulting in gross
proceeds of $2,300,000. On June 22, 2010 and June 29, 2010, we completed
additional closings of the offering of shares, at $0.10 per share, to additional
investors. We sold an aggregate of 15,000,000 shares in the second and third
closings of the offering, resulting in aggregate additional gross proceeds of
$1,500,000. We incurred closing costs of $42,572 related to the May
and June sales of 38,000,000 shares pursuant to the offering, resulting in net
proceeds during the three months ended June 30, 2010 from the offering of
$3,757,428. On July 8, 2010 we completed the fourth and final closing of the
offering under which we sold an aggregate of 1,500,000 shares at $0.10 per share
resulting in aggregate additional gross proceeds of $150,000. Taken together
with our other closings under the offering, we sold an aggregate of 39,500,000
shares in this offering, resulting in gross proceeds of
$3,950,000.
On
September 20, 2010, we consummated an initial closing of another private
placement offering in which we sold 2,000,000 shares of our common stock for
gross proceeds of $800,000, at an offering price of $0.40 per
share. On October 14, 2010, we completed a second closing of the
offering in which we sold an additional 1,062,500 shares of our common stock for
gross proceeds of $425,000, at an offering price of $0.40 per
share. On November 2, 2010 we completed the final closing of the
offering in which we sold an additional 125,000 shares of our common stock for
gross proceeds of $50,000 at an offer price of $0.40 per
share. Altogether, we sold an aggregate total of 3,187,500 shares of
our common stock in the offering, resulting in aggregate gross proceeds of
$1,275,000. We incurred closing costs of approximately $21,000
related to the September, October and November closings, resulting in net
proceeds from the offering of approximately $1,254,000.
We
used the proceeds from the offerings principally (1) to make the first payment
under our April 23, 2010 Option Agreement, (2) to purchase a Convertible Loan
Note under our June 29, 2010 Put and Call Option Agreement, as amended by an
August 24, 2010 Deed of Variation and (3) to fund our expenses in investigating
potential acquisition candidates, including the October 8, 2010 payment of a
$250,000 non-refundable deposit with respect to the Hemco transaction (see
“Description of Business-Hemco”). We cannot determine how long the
offering proceeds will sustain such investigation activities.
Future
issuances of our equity or debt securities will be required in order for us to
continue to finance our operations, make anticipated future payments pursuant to
the April 23, 2010 and November 30, 2010 Option Agreements and continue as a
going concern. We have not generated any cash flow from operations since
inception and currently have no revenue from operations. As of September 30,
2010, we have incurred cumulative net losses of $1,246,721 since inception and
require capital for our contemplated operational and marketing activities to
take place. Our ability to raise additional capital through the future issuances
of common stock is unknown. The acquisition of additional financing, the
successful development of our contemplated plan of operations, and our
transition, ultimately, to the attainment of profitable operations, are
necessary for us to continue operations. The uncertainty about our ability to
successfully resolve these factors raises substantial doubt about our ability to
continue as a going concern.
25
Off-Balance
Sheet Arrangements
We do not
have any off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to investors.
Critical
Accounting Policies
Our
discussion and analysis of our financial condition and results of operations is
based on our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the U.S. The preparation of these
financial statements requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses. We base our
estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions. We believe the
following critical accounting policies affect our most significant judgments and
estimates used in preparation of our financial statements.
Income
Taxes
We
account for income taxes in accordance with FASB ASC 740 – Income Taxes. A
liability method is used whereby deferred tax assets and liabilities are
determined based on temporary differences between basis used for financial
reporting and income tax reporting purposes. Income taxes are provided based on
tax rates in effect at the time such temporary differences are expected to
reverse. A valuation allowance is provided for certain deferred tax assets if it
is more likely than not that the Company will not realize the tax assets through
future operations.
Stock-Based
Compensation
We
account for the grant of options to employees and the grant of shares to
non-employees pursuant to the provisions of FASB ASC 718, Compensation – Stock
Compensation, which establishes accounting for equity instruments
exchanged for services. We utilize the Black-Scholes option pricing model to
estimate the fair value of employee stock options at the date of grant, which
requires the input of highly subjective assumptions, including expected
volatility and expected life.
Recent
Accounting Pronouncements
In
January 2010, the FASB issued “ASU” 2010-06, Fair Value Measurements and
Disclosures (Topic 820)—Improving Disclosures about Fair Value Measurements.
This ASU requires some new disclosures and clarifies some existing disclosure
requirements about fair value measurement as set forth in Codification Subtopic
820-10.
The
FASB’s objective is to improve these disclosures and thus, increase transparency
in financial reporting. The ASU is effective for interim and annual reporting
periods beginning after December 15, 2009, except for the disclosures about
purchases, sales, issuances, and settlements in the roll forward of activity in
Level 3 fair value measurements. Those disclosures are effective for fiscal
years beginning after December 15, 2010, and for interim periods within those
fiscal years. Early application is permitted. The adoption of this accounting
standard update did not have a material impact on the Company’s condensed
consolidated financial statements.
Other
than the aforementioned pronouncements, recently issued standards are not
expected to have a material impact on the Company’s financial positions or
results of operations.
26
DESCRIPTION
OF BUSINESS
Overview
We are an
exploration stage gold exploration and mining company. We have not achieved any
revenues to date and have not commenced any extraction activities. Unless and
until we do so, we will be dependent on sales of our equity and debt securities
and loans to finance our operations.
Toldafria
Prospect
On June
4, 2010, our wholly-owned subsidiary, Universal Gold Holdings (Cayman) Limited
(“UGH”) made the first payment under an Option Agreement (as amended, the
“Option Agreement”), dated as of April 23, 2010, between Core Values Mining
& Exploration Company, a Cayman Islands corporation, and Core Values Mining
& Exploration Company’s wholly-owned Colombian subsidiary (collectively,
“CVME”) and UGH. The Option Agreement provides us with the right to
acquire, through UGH, up to a 50% interest in a 164 hectare gold prospect
(licence GEWM-12), which is located approximately 10 kilometers south-east of
the city of Manizales in Colombia (the “Toldafria Prospect”). On June
4, 2010, UGH and CVME entered into an Amendment to the Option Agreement which
included a bring-down of representations and warranties made by CVME in the
Option Agreement.
The
Option Agreement provides that we may earn a 25% interest in the Toldafria
Prospect at the end of the first year of the Option Agreement, by paying an
aggregate of $2,300,000 on or prior to June 4, 2010, which we have
done. $2,200,000 of such amount will be spent on exploration and
development activity on the Toldafria Prospect in accordance with budgets
mutually agreed to by a committee (the “Technical Committee”) consisting of one
representative of ours and one of CVME, with a third party to make the deciding
vote in the event of a tie. We may earn an additional 15% interest in
the Toldafria Prospect at the end of the second year by paying an additional
aggregate of $2,650,000 within 30 business days after completion of the first
year. $2,500,000 of such payment may be spent on exploration and
development activity on the Toldafria Prospect as determined by the Technical
Committee. Finally, we may earn a further 10% interest in the
Toldafria Prospect at the end of the third year by paying an additional
aggregate of $3,050,000 within 30 business days after completion of the second
year. $2,800,000 of such payment may be spent on exploration and
development activity on the Toldafria Prospect as determined by the Technical
Committee. No assurance can be given that we will have sufficient capital to
earn the additional interests in the Toldafria prospect.
CVME has
contracted to acquire the Toldafria Prospect from the registered owner thereof
pursuant to a Purchase Agreement to which we are not a party (the “Purchase
Agreement”). In the event that CVME is not ultimately successful in
recording the transfer of the Toldafria Prospect pursuant to the Purchase
Agreement, CVME may not be able to deliver to us any property interests in the
Toldafria Prospect that we earn pursuant to the Option Agreement and we would
lose our investment.
The
Option Agreement provides that CVME shall carry out prospecting, exploration,
development or other work approved by the Technical Committee as the operator on
the Toldafria Prospect, and CVME shall receive payment of $30,000 per month, out
of the funds earmarked for exploration and development activity, for its
administrative and overhead costs in such capacity.
The
Option Agreement provides for certain mechanisms by which CVME may, after the
end of the third year of the Option Agreement, elect to (a) acquire shares of
our common stock in exchange for CVME’s interest in the Toldafria Prospect at
market based valuations, or (b) form a separate joint venture corporation that
will hold both CVME’s and our interest in the Toldafria Prospect, and operate
pursuant to a Shareholders’ Agreement to be entered into at such
time.
Hemco
We
entered into an Option Agreement effective as of November 30, 2010 (the “Hemco
Option Agreement”), with N.C.G.A. Project Acquisition Corp., a Cayman Islands
corporation (“NCGA”), controlled by certain minority shareholders of ours,
whereby we will, at our option, be entitled to acquire, and to
require NCGA to transfer to us, all of the issued shares in RNC (Hemco) Limited
(“Hemco”), and all minority interests in certain subsidiaries of Hemco not owned
by Hemco (collectively, the “Hemco Assets”). The Hemco Assets are to
be acquired by NCGA pursuant to the terms and conditions of a Share Purchase
Agreement, dated as of November 30, 2010 (the “Share Purchase Agreement”), by
and among NCGA, TWL Investments Ltd. (“TWL”), Thomas William Lough (“Lough”),
James Randall Martin (“Martin”) and Sergio Rios Molina (“Rios” and together with
TWL and Martin, the “Sellers”). The Share Purchase Agreement provides
that NCGA will acquire from Sellers all of the issued common shares of RNC
(Management) Limited, which owns 100% of the interest in
Hemco. Conditional upon the sale, Lough and Martin will also transfer
to NCGA for no additional consideration, all of the minority interests not
already owned by Hemco in its Nicaraguan subsidiary, Hemco Nicaragua S.A. Hemco
Nicaragua S.A. is a private Nicaraguan company which operates the Bonanza gold
and silver mine located in Nicaragua, Central America.
27
The
Hemco Option Agreement provides that if we exercise the option, we will be able
to acquire the Hemco Assets from NCGA for $64,750,000, which is equal to the
balance of the $65 million purchase price ($250,000 of which has already paid in
the form of a non-refundable deposit) that NCGA will be required to pay to
Sellers at the closing of the transactions under the Share Purchase
Agreement. Should we exercise the option, we agree in the Hemco
Option Agreement that we will issue or otherwise make available for issuance
1,000,000 shares of our common stock to be held in trust for employees of Hemco,
including Lough, Martin and Rios, and 1,000,000 shares of its common stock for
services of Lough, Martin and Rios pursuant to a management services agreement
to be entered into by an entity designated by them and Hemco or one of its
affiliates (the “Management Services Agreement”), provided that additional
shares may be issued under the Management Services Agreement to Sellers as
described below.
The
consummation of the closing under the Share Purchase Agreement is subject to
NCGA having obtained financing sufficient to fund the balance of the purchase
price and is subject to customary conditions to closing. In the event that the
value of the 1,000,000 shares to be issued under the Management Services
Agreement, based on the price of any at our shares issued under a financing to
fund the balance of the purchase price, is less than $400,000, then Sellers will
be issued such number of additional shares of our common stock so that the
product of the total number of shares to be issued under the Management Services
Agreement and the price in such financing will be at least
$400,000.
Pursuant
to the Share Purchase Agreement, each Seller has agreed to severally indemnify
and defend NCGA and its affiliates, including us, against, and hold harmless
from and against, standard losses as well as any matters related to the business
or assets or liabilities of Sellers or their affiliates, subject to certain
exemptions. NCGA has agreed to indemnify and defend Sellers and their affiliates
against, and hold harmless from, standard losses. Both Sellers and
NCGA have agreed that where a loss relates to a failure of any representation or
warranty in the Share Purchase Agreement, the indemnifying party will not be
liable for losses unless the aggregate losses incurred by the indemnitee exceeds
$500,000, in which case all such losses are indemnifiable from the first
dollar.
The
Share Purchase Agreement includes customary representations, warranties and
covenants. It also includes a covenant whereby Sellers have granted to NCGA (or
with Sellers’ consent, may grant to us or any other affiliates of NCGA), the
right to acquire from Sellers’ affiliate a $2,500,000 loan to Vesubio Mining
S.A. with an annual interest rate of 12% at a purchase price equal to the face
value of the loan plus any accrued and unpaid interest.
Either
the Sellers or NCGA may terminate the Share Purchase Agreement if the closing
does not occur on or before December 31, 2010 or a governmental entity issues an
order or takes action that permanently restrains, enjoins or otherwise prohibits
the acquisition. Additionally, NCGA may terminate the Share Purchase Agreement
if it is unable to obtain financing sufficient to fund the purchase price of the
acquisition.
Under
the Share Purchase Agreement, NCGA may transfer or assign to us without Sellers’
consent any companies to be acquired by NCGA or any of their assets or any of
NCGA’s rights under the Share Purchase Agreement. Under the Hemco
Option Agreement, in addition to the shares in Hemco and other than assets that
NCGA is otherwise obligated under the terms of the Share Purchase Agreement to
transfer to Sellers or their affiliates, NCGA agrees to transfer to UGMC any
other assets of RNC (Management) Limited or its subsidiaries as UGMC may
determine and to assign to UGMC any of NCGA’s rights and obligations under the
Share Purchase as UGMC may request.
28
Kolar
Gold
On
June 29, 2010, UGH entered into a Put and Call Option Agreement (the “Option”)
with Grafton Resource Investments Ltd. (“Grafton”). Pursuant to the
Option, we paid £680,000 (or approximately US$1,028,000) to subscribe for (i) a
Convertible Loan Note (the “Note”) of Kolar Gold Plc (“Kolar”), an
English Company, in the principal amount of £680,000, which was convertible into
“B” ordinary shares of Kolar (the “Kolar Shares”) at a conversion price of £0.25
per share and (ii) 18 month warrants (“Warrants”) to purchase up to 2,720,000
Kolar Shares at an exercise price of £0.30 per share. The Option
provided for Grafton to complete the subscription for the Note as our agent,
which it did.
On
August 24, 2010, we entered into a Deed of Variation to the Option (the
“Amendment”), which altered our rights under the Option. Prior to the Amendment,
the Option provided us with the right (the “Initial Call Option”), exercisable
within the 90 days following Kolar’s issuance of the Note (the “Initial Exercise
Period”), to acquire 7,160,000 Kolar Shares owned by Grafton (the “Existing
Shares”) for consideration consisting of (i) US$6 million in cash and (ii) newly
issued shares of our common stock valued at US$6 million, based on the price we
sold our common stock in our next private placement or, if we did not consummate
a private placement by September 30, 2010, then based on the weighted average
market price of our common stock over a specified period. As revised
by the Amendment, we had the right (the “New Call Option”), exercisable within a
90 day period commencing on August 16, 2010 (the “New Exercise Period”), to
acquire Grafton’s entire shareholding and share interests in Kolar, comprising
the Existing Shares and any additional Kolar Shares that Grafton may subscribe
for or otherwise acquire rights to (the “Additional Kolar Share Rights”) up to a
maximum total of 16,535,000 Kolar Shares (the “Maximum Optioned
Shares”). The exercise price payable by us under the New Call Option
consisted of: (x) 2.11 shares of our common stock for each Kolar
Share purchased under the New Call Option; (y) 18-month warrants having an
exercise price of $0.75 per whole share (the “A Warrants”) to purchase 0.45154
shares of our common stock for each Kolar Share purchased under the New Call
Option; and (z) 18-month warrants having an exercise price of $0.90 per whole
share (the “B Warrants”) to purchase 0.45154 shares of our common stock for each
Kolar Share purchased under the New Call Option.
The
Option also provided us with the right (the “Put Option”), exercisable during
the Old Exercise Period, to require Grafton to purchase our entire right and
interest in the Note and Warrants for an aggregate cash purchase price of
£680,000 (payable in Sterling or US Dollars, at the prevailing spot conversion
rate, at Grafton’s election). The Amendment gives us the right to
exercise this Put Option at any time during the New Exercise
Period.
On
November 12, 2010 we exercised the Put Option and required Grafton to purchase
our entire right and interest in the Note and Warrants and return the £680,000
we paid for them. Grafton paid such amount to us on November 30,
2010.
Grafton
owns 2,000,000 shares (or approximately 2.3%) of our outstanding common
stock. David Cather, a member of our Board of Directors, is a
retained consultant to Grafton. Craig Niven, a member of our Board
Directors, is a Director of and 48% shareholder in Arlington Group Asset
Management Limited (“AGAM”). AGAM is the Investment Manager of the Arlington
Special Situations Fund Limited (“ASSF”). ASSF previously owned US$2,000,000
face amount of Convertible Loan Notes issued by Grafton Resources Investments
Limited. Grafton is also the owner of 7,160,000 (or approximately 15.6% of the
outstanding) Kolar Shares.
Bridge
Note
On
September 9, 2008, we closed the private placement sale to one investor of
$500,000 principal amount of our 0% Secured Convertible Promissory
Notes. We used the $500,000 gross proceeds (net proceeds of $338,838)
from the investor note to provide bridge financing to Diamond Sports &
Entertainment, Inc. (“Diamond Sports”) in exchange for a note from Diamond
Sports, to assist Diamond Sports in meeting its working capital
requirements. Diamond Sports entered into a term sheet with
Gottbetter Capital Group, Inc. dated December 12, 2007, as amended, pursuant to
which it was contemplated that a newly formed, wholly owned subsidiary of ours
would merge with and into Diamond Sports, as a result of which we would acquire
all of the issued and outstanding capital stock of Diamond Sports and Diamond
Sports would become a wholly owned subsidiary of ours. Diamond Sports
is a private family entertainment company engaged in the business of
professional minor league baseball. We subsequently determined not to
proceed with the merger and discontinued discussions with Diamond
Sports. Effective February 3, 2010, we assigned and delivered the
bridge note to the investor in exchange for the investor returning to us the
investor note which we have cancelled. As part of this transaction,
the investor released us from any and all obligations and claims relating to the
investor note. We have no further obligations to John Thomas B.O.F or Diamond
Sports.
29
Private Placement Completed
July 2010
On May
24, 2010, we completed the initial closing of a private placement offering of
shares of our common stock, par value $0.001 per share, at $0.10 per share, to
foreign and accredited investors. We sold an aggregate of 23,000,000 shares in
the initial closing of the offering, resulting in gross proceeds of $2,300,000.
On June 22, 2010, we completed the second closing under the private placement
offering. We sold an aggregate of 14,750,000 shares in the second closing of the
offering, resulting in gross proceeds of $1,475,000. On June 29, 2010 and July
8, 2010, we completed an interim and final closing. We sold an aggregate of
1,750,000 shares in such closings, resulting in gross proceeds of
$175,000. Taken together with the May 24, 2010 and June 22, 2010
closings, we sold an aggregate total of 39,500,000 shares in the offering,
resulting in gross proceeds of $3,950,000. No underwriting discounts
or commissions were paid or are payable in connection with the
offering.
Private Placement Completed
November 2010
On
September 20, 2010, we consummated an initial closing of a private placement
offering in which we sold 2,000,000 shares of our common stock for gross
proceeds of $800,000, at an offering price of $0.40 per share. On
October 14, 2010, we completed a second closing of the offering in which we sold
an additional 1,062,500 shares of our common stock for gross proceeds of
$425,000, at an offering price of $0.40 per share. On November 2,
2010 we completed the final closing of the offering in which we sold an
additional 125,000 shares of our common stock for gross proceeds of
$50,000. Altogether, we sold an aggregate total of 3,187,500 shares
of our common stock in the offering, resulting in aggregate gross proceeds of
$1,275,000. No underwriting discounts or commissions were paid or are
payable in connection with the offering.
Consulting Services
Agreement and Advisory Services Agreement
Pursuant
to a Consulting Services Agreement and an Advisory Services Agreement, each
between us and one of two unrelated firms, and each dated as of June 21, 2010,
on July 7, 2010, we issued an aggregate of 325,000 shares of our common stock to
the counterparties and their designees as consideration for certain professional
services relating to business development and corporate finance.
Gold Mining
Industry
Gold
mining involves the science, technology, and business of the discovery of gold,
in addition to its removal and sale in the marketplace. Gold may be found in
many places, most commonly rock but even sea water; in very small quantities.
More often it is found in greater quantities in veins associated with igneous
rocks, rocks created by heat such as quartzite. Hard rock mining produces most
of the world’s gold. Since the costs can be high in the exploration
and removal of gold from hard rock mines, significant capital is generally
needed to develop the mines. Mining for gold is only worthwhile
financially where there is a significant concentration of it found in
ore.
Before
hard rock mining operations have even begun, companies explore areas where gold
may be found and scientifically analyze the rock. The actual gold originates
deep within the earth in places called pockets. These pockets are filled with
gold, heavy ore, and quartz. If enough gold is discovered in the ore, the
technological process of hard rock mining begins.
The gold
milling process may be broken down into three basic procedures:
|
·
|
Sorting
the ore by size;
|
|
·
|
Crushing
the rock; and
|
|
·
|
Extracting
the gold.
|
30
Colombia
The
election of Alvaro Uribe as president in 2002 marked a turning point for
Colombia Since the 1970’s, Colombia had been plagued by violence due to the
adverse activities of left wing guerilla groups such as FARC and ELN, drug
cartels, and right wing paramilitary forces, which all helped to hinder the
economic and social advancement of the country. The introduction of
Uribe’s Democratic Security policy resulted in a dramatic reduction in murders,
kidnappings, a significant reduction in FARC’s strength, and the demobilization
of right wing paramilitary organizations. Furthermore, Uribe’s economic policies
have helped Colombia regain its economic footing; since 2002, gross domestic
product in Colombia has grown at an annualized rate of approximately 6.6% and
exports and foreign investment have increased by approximately 200% and 400%,
respectively.
Historically,
Colombia had been one of the largest producers of gold globally. However, with
the onset of security issues in the 1970’s, production stagnated, and
exploration activities effectively ceased. Increased security and stronger
commodity prices since 2000 have resu1ted in attracting several foreign mining
companies to set up operations in Colombia, taking advantage of the
underexplored nature of the country, attractive mining laws, and the
government’s pro-business outlook. Consequently, mining is growing in
importance to the overall economy of Colombia. In 2009 an estimated 25% of
exports and 43% of foreign direct investments were mining related.
Mining in
Colombia, particularly for gold, has a long history, dating back to well before
the arrival of the Spanish Conquistadors, as gold was an essential part of the
culture of indigenous tribes, such as the Muisca, Incas, and Aztecs. Gold is
central to folklore as Colombia is the fabled home of El Dorado, the legendary
city of gold, which consumed the attention of explorers during the 16th and
17th
centuries.
Until the
1930’s Colombia was the largest producer of gold. However, with the civil war,
rise of left wing insurgent groups, paramilitary groups and the narcotics trade
in Colombia, the countryside became an increasingly dangerous place to pursue
mining activities. Consequently, prospective areas of the country have had
little exploration work carried out and modern exploration techniques have not
been applied to much of the active mining areas.
Currently,
mining makes up a very small portion of the country’s gross domestic
product. In 2009 it is estimated that mining contributed to 1.6% of
Colombia’s gross domestic product. While a minor part of gross
domestic product, mining investment in Colombia makes up a very large portion of
Foreign Direct Investment as well as exports. In 2009, an estimated US$3.1
billion or 43% of the Foreign Direct Investment into Colombia was geared towards
mining activity; mining exports represented US$8.2 billion or 25% of total
exports from Colombia.
Apart
from the significant improvement in security, and long history of democracy,
Colombia’s Mining Code is viewed as attractive to foreign mining companies.
However, this has been a 20-year process. In 1989, a new mining code sought to
encourage mineral exploration and development by expediting the processing of
claims, improving the security of mineral occupancy and tenure, and providing
financial aid to small scale mines. The mining code of 2001 sought to encourage
exploration and production of mineral resources and limit the government’s rose
in mineral exploration to that of regulation and administration, transferring
the responsibility of production to the private sector. The law also clarified
the provisions for establishing mining contracts.
Under
Colombian Law, an investor (in any industry), can enter into a Legal Stability
Contract with the government for a period of 3 to 20 years, whereby the taxation
and regulatory environment would be fixed for the investor for the duration of
the contract for a nominal fee (1% of the value of the investment in the
project).
Nicaragua
There
are no major gold producers operating in Nicaragua or elsewhere in Central
America because most of the gold deposits in the region do not meet the
multi-million ounce cut-off major producers seek. However, the area is an
attractive target for junior and intermediate companies that specialize in
grassroots exploration or are looking for smaller deposits that can be brought
to production quickly and profitably while gold prices are in an up cycle.
Nicaragua, one of the poorest countries in Central America, is considered one of
the best places to explore because of favorable mining codes.
Central
America is re-emerging as a top destination for gold mining companies. Although
just a quarter of the size of Mexico, its neighbor to the north, the long
isthmus that connects South and North America is dotted with high-grade gold
deposits. Several companies established gold exploration and mining projects
there in the 1990s, but when the gold price collapsed below US$300 per ounce,
many of these operations were suspended. Now a combination of significant
grassroots discoveries, favorable mining codes and gold price resurgence above
US$1,300 per ounce is attracting both explorers and producers back to the
region.
In
general, Nicaragua has a moderately developed infrastructure of
telecommunications, roads, airports and seaports and there is a fairly high
literacy rate among the population with an ample supply of skilled and unskilled
labor.
31
About
20 precious and base-metal projects were at various stages of development in
Nicaragua in 2009. Some were on hold or inactive, but about one-half of them
were active for exploration, resource development and target outline in the
past two years. From 2005 through 2009, the value of the
Nicaraguan GDP increased to about $6.3 billion from about $5.0 billion. The
contribution of mining and quarrying to the GDP was 1.1% in 2005, 1.2% in 2006,
1.2% in 2007, 1.2% in 2008 and 1.1% in 2009. The value contribution of mining
and quarrying to the GDP was $56.8 million in 2005, $69.1 million in 2006, $67.4
million in 2007, $77.9 million in 2008 and $71.4 in 2009. Gold production
increased by 9% in 2009 compared with that of 2008.
Marketing and
Distribution
Gold can
be readily sold on numerous markets throughout the world and it is not difficult
to ascertain its market price at any particular time. Benchmark
prices are generally based on the London gold market quotations. Gold bullion is
held as an asset class for a variety of reasons, including as a store of value
and safeguard against the collapse of paper assets such as stocks, bonds and
other financial instruments that are traded in fiat currencies not exchangeable
into gold (at a fixed rate) under a “gold standard”, hedges against future
inflation and portfolio diversification. Governments, central banks and other
official institutions hold significant quantities of gold as a component of
exchange reserves. Since there are a large number of available gold purchasers,
we do not expect that we will be dependent upon the sale of gold to any one
customer.
The price
of gold is subject to volatile price movements over short periods of time,
especially in the current market environment, and is affected by numerous
industry and macroeconomic factors that are beyond our control. Gold
price volatility remained high in 2009, with the price ranging from $803 to
$1,227 per ounce during the year. The average market price for the
year of $972 per ounce was an all-time high. The market price of gold
has been influenced by low U.S. dollar interest rates, volatility in the credit
and financial markets, investment demand and the monetary policies put in place
by the world’s most prominent central banks. As a result of the
global easing of monetary policy, as well as increases in announced government
spending, particularly in the U.S., we believe that there is a possibility that
both inflation and U.S. dollar depreciation could emerge in the coming
years. Gold is viewed as a hedge against inflation and has
historically been inversely correlated to the U.S. dollar. Therefore,
higher inflation and/or depreciation in the U.S. dollar should be positive for
the price of gold. While gold prices have come down and the U.S.
dollar has strengthened slightly in early 2010, we believe this to be a
short-term movement and expect that the long-term upward trend in prices will
continue.
Business Plan and Strategic
Outlook
We
plan to build a successful gold exploration and production company focused in
select countries in South and Central America. We will concentrate
our efforts initially in Colombia and Nicaragua, where, we believe, good
exploration and production opportunities exist with straightforward gold
contracting terms and conditions. At a later stage, we will turn to
opportunities in other regions if we deem the relevant considerations to merit
our investment. Within the spectrum of the gold business, we plan to focus on a
blend between exploration and production of gold through a variety of
transactions.
An
integral part of our strategy is our focus on continuing to build a competent
and professional management and operations team to enable us to successfully
carry out our business plan. We intend to hire experienced personnel including
technical specialists (e.g., geologists, geophysicists and gold and facilities
engineers, as required by the scope of our operations), administrators and
financial experts and we plan to hire functional specialists in fields such as
environment, industrial protection and community relations, to encompass the
different areas that are critical to our business.
Acquisition
Strategy
We intend
to acquire gold properties (and/or fields) where we believe significant value
exists or where additional value can be created. Our senior management is
primarily interested in developmental properties where some combination of the
following factors exist:
|
(1)
|
Opportunities
for medium to long term production life with clear understandings of
production mechanisms and output
levels;
|
|
(2)
|
Substantial
upside potential; and
|
|
(3)
|
Relatively
low capital investment and production
costs.
|
32
We will
also pursue joint ventures with limited risk.
The
following is a list of some of the factors we take into account when considering
potential investments in any country:
|
·
|
Stable
political regimes:
|
|
Ø
|
Countries
that exhibit a desire to uphold stability and progress in their
legislation, striving towards open markets and a global approach to best
business practices.
|
|
·
|
Clear
fiscal/taxation/royalty terms.
|
|
·
|
Manageable
security in and around production and exploration areas and
facilities.
|
|
·
|
Openness
to foreign direct investment.
|
|
·
|
Favorable
gold exploration and production:
|
|
Ø
|
Where
despite the presence of large multi-national integrated gas companies,
there are open acreage opportunities as well as joint venture
opportunities, as well as producing fields or company acquisition
possibilities, with some access to local
capital.
|
We may
engage in any of the following types of transactions to achieve our strategic
goals:
|
·
|
Exploration
and Production:
|
|
Ø
|
Direct
government concessions in blocks with specific exploration and development
plans.
|
|
·
|
Technical
Evaluation Agreements.
|
|
·
|
Corporate
Transactions:
|
|
Ø
|
Acquisitions
of producing fields;
|
|
Ø
|
Acquisitions
of exploration acreage; and
|
|
Ø
|
Corporate
acquisitions.
|
|
·
|
Joint
Ventures:
|
|
Ø
|
Partnering
with established gold companies will allow us to access certain government
concession rounds, benefit from technical and market expertise from our
potential partners and provide liquidity to our
partners.
|
Role of Our Board of
Directors
Our Board
of Directors will be an essential component of our successful operation and
growth, serving in various support capacities. Because our Board of Directors is
comprised of senior industry executives and experienced capital market
professionals, we believe that our directors have the experience and skills
necessary to effectively assist our management in the execution of our
strategy. We expect that our Board of Directors will be able to
provide an informed view as to the commercial, technical and financial viability
of our business prospects.
Through
the establishment of relevant committees (Audit and Evaluation and Reserves, to
date), the Board of Directors will provide an independent view into all of our
operations, providing feedback and guidance on the quality of the projects we
may invest in. Additionally, our Board of Directors will regularly
confer with senior management to help us ensure that all relevant and required
controls are in place and operating appropriately. Our Board of Directors will
serve as a means of confirming the integrity of senior management’s estimates
with respect to valuations, reserve estimates and other crucial components of
our business.
Aside
from the functions enumerated above, we believe that our Board of Directors will
serve as an integral element of our business development efforts. We expect that
our Board of Directors will provide both invaluable insight and access to their
business relationships in the region, as well as augment the technical,
financial, accounting and other expertise of our management
team.
33
Governmental
Regulation
Colombia
In
Colombia, the sub-soils are generally owned by the state. The state may
authorize private parties to explore and develop mineral deposits under
concession contracts. Until 2001, they could also be developed under Exploration
and Exploitation Contracts executed with specialized agencies of the state.
However, as of 2001, Colombia’s new Mining Code only permits concession
contracts, which are awarded by a single entity and are subject to a standard
set of conditions.
The
concession contract grants to a concessionaire the exclusive right to carry out
the studies, works and installations necessary within the given area to
establish the existence of minerals and to exploit them according to the
principles, rules and criteria of the accepted techniques of geology and mining
engineering. It also covers the right to install and build the equipment,
services and works necessary to efficiently exercise the rights set forth in the
Colombian Mining Code. The concession contract will be agreed on for a term that
the proponent requests, up to a maximum of thirty years. Such term will start
from the date the contract is inscribed at the National Mining
Register.
Nicaragua
In
Nicaragua, surface and underground mineral resources are the property of the
Nicaraguan State. The Nicaraguan State has an inalienable and indefeasible
absolute domain over such mineral resources. As a consequence, the Nicaraguan
State has the right to authorize any third party to carry out activities related
to exploration and exploitation of mineral resources in the country. The
Nicaraguan State grants authorization for mineral exploitation through mining
concessions, permits for craft mining and special licenses for small mining
projects. Under Nicaraguan mining legislation, the Nicaraguan State is required
to ensure the equality of rights and obligations of both national and foreign
investors.
The
mining regulatory framework is generally established on Law No. 387
“Special Law for Exploration and Exploitation of Mines”, published on the
Gazette, Official Dairy no. 151 of August 13, 2008, and its regulation, Decree
No. 119-2001, published on the Gazette no. 4, of January 7,
2001.
The
Ministry of Energy and Mines (“MEM”) is the national entity in charge of
regulating mining activities. MEM is also in charge of granting all
authorization required to participate in the mining industry in Nicaragua and is
entitled to monitor and penalize infractions of the Mining Law.
Authorization
for a natural person or legal entity to perform mining activities in Nicaragua
is provided under a mining concession. The mining concession entitles its holder
to the exclusive rights to explore, develop, mine, extract, export and sell the
mineral commodities found and produced from the concession.
Under
Nicaraguan mining legislation, mining concessions constitute rights in rem to the holder, and are
different from the rights provided by the ownership of the land or surface area
in which the mining concession is located, even though both may be held by the
same person or entity. The rights in rem that originate from
mining concessions are capable of being opposed by a third party, transferable
and transmissible, susceptible to mortgages and generally can be used in most
contracts or acts. However, a mining concession cannot form property or legal
entitlement which can be transferred by way of inheritance.
The
mining concession is considered immovable property and includes “integral” and
“accessory” parts, even if certain parts are located outside the mining
concession perimeter. The mineral deposits located in the perimeter area of the
mining concession are considered an integral part of the mining concession, and
included any work performed in order to use the same. The construction and
installation of permanent objects related to the mineral concession and used in
its operation are considered as accessory parts of the mining concession. The
mining concession can only be divided, transferred or transmitted and leased
totally or partially or merged with other concessions, with the previous consent
of MEM and in compliance with the requirements and regulations established by
MEM.
Under
Nicaraguan mining legislation, the boundary of area to be provided for the
mining concession is set using north, south, east and west boundary of borders,
in accordance with the Universal Transverse Mercator (“UTM”) coordinate system,
used in topographic maps, coinciding with the grids of the UTM coordinate
system. A mining concession has a maximum area of 50,000 hectares and is granted
for a period of 25 years, which may be extended for another equal
period.
34
The
holder of a mining concession is bonded to pay for the validation or surface
right. As well, the holder is bonded to pay a fee for extracting rights and
royalties.
The
Nicaraguan State is entitled to a proportional extraction royalty over the
substances extracted from a mineral concession. The amount of the royalty is
determined by the place of production in the country (extraction or benefit, in
accordance with each situation) and is calculated on an amount after deducting
the transportation costs from the mine to the final destination from the selling
price. The amount of the extraction right and royalty is 3% for
minerals.
Persons
or entities involved in the mining industry are also subject to the payment of
income tax. Under Nicaraguan law, the extraction rights and royalty payment will
be considered as an expense for the calculation of income tax.
Exemptions
and suspensions of customs tax for the importation of materials, machinery,
instruments and utensils are available to the holder of the mining concessions
through the temporary admission regime and other regimes designed for the
promotion of exportations. Also, mining concession holders are entitled to an
exemption from paying taxes on immovable goods that are property of the
concessionaire included inside the perimeter of the concession.
Compliance with
Environmental Laws
Our
mining, exploration and development activities will be subject to various levels
of federal, provincial or state, and local laws and regulations relating to
protection of the environment, including requirements for closure and
reclamation of mining properties. We intend to invest in environmental
management systems aimed at eliminating or mitigating environmental risks as
they are identified. The governance aspects of our systems are intended to be
designed to inform management early enough to respond to risks as they
arise.
We intend
to conduct environmental audits of our business activities on a regular and
scheduled basis, in order to evaluate: compliance with applicable laws and
regulations; permit and license requirements; company policies and management
standards including guidelines and procedures; and adopted codes of
practice.
Environmental Regulation –
Community Relations
Our
activities will be subject to existing laws and regulations governing
environmental quality and pollution control in the foreign countries where we
expect to maintain operations. Our activities with respect to gold exploration
and mining, including the operation and construction of plants and other
facilities for transporting, processing, treating or storing gold and other
products, will be subject to stringent environmental regulation by regional,
provincial and federal authorities. Such regulations relate to, for example,
environmental impact studies, permissible levels of air and water emissions,
control of hazardous wastes, construction of facilities, recycling requirements
and reclamation standards. Risks are inherent in gold development and
production operations, and we can give no assurance that significant costs and
liabilities will not be incurred in connection with environmental compliance
issues. There can be no assurance that all licenses and permits which we may
require to carry out exploration and production activities will be obtainable on
reasonable terms or on a timely basis, or that such laws and regulations would
not have an adverse effect on any project that we may wish to
undertake.
In some
countries in South America, it is usually required for gold exploration and
production companies to present their operational plans to local communities or
indigenous populations living in the area of a proposed project before project
activities can be initiated. Usually, exploration and production companies try
to benefit the community in which they are operating by hiring local, unskilled
labor or contracting locally for services such as workers’ transportation. For
us, working with local communities will be an essential part of our work program
for the development of any of our exploration and production projects in the
region.
Competition
The gold
exploration and mining industry is highly competitive. We face competition from
both local and international companies in matters such as acquiring properties,
contracting for mining equipment and securing trained personnel. Many of these
competitors have financial and technical resources that exceed ours, and we
believe that these companies have a competitive advantage in these areas. Others
are smaller, and we believe our technical and managerial capabilities give us a
competitive advantage over these companies.
35
Employees
We
currently have two employees, our two executive officers.
We intend
to build an experienced leadership team of energy industry veterans with direct
exploration and production experience in the region combined with an efficient
managerial and administrative staff, to enable us to achieve our strategic and
operational goals.
Additionally,
we expect to maintain a highly competitive assembly of experienced and
technically proficient employees, motivating them through a positive, team
oriented work environment.
LEGAL
PROCEEDINGS
From time
to time, we may become involved in various lawsuits and legal proceedings which
arise in the ordinary course of business. However, litigation is subject to
inherent uncertainties, and an adverse result in these or other matters may
arise from time to time that may harm business. We are currently not aware of
any such legal proceedings or claims that we believe will have, individually or
in the aggregate, a material adverse affect on business, financial condition or
operating results.
Executive
Officers and Directors
Below are
the names and certain information regarding our current executive officers and
directors:
Name
|
Age
|
Title
|
Date First Appointed
a Director
|
|||
David
Cather
|
51
|
Interim
Chief Executive Officer, Director
|
June
3, 2010
|
|||
Andrew
Neale
|
52
|
Director
|
June
3, 2010
|
|||
Craig
Niven
|
54
|
Interim
Chief Financial Officer, Assistant
Secretary, Director
|
June
3, 2010
|
|||
Bruce
Stewart
|
45
|
Director
|
June
3,
2010
|
Directors
are elected to serve until the next annual meeting of stockholders and until
their successors are elected and qualified. Our executive officers
are appointed by the Board of Directors and serve at its pleasure.
Certain
biographical information for each of our executive officers and directors is set
forth below.
David Cather has been a member
of our Board of Directors since June 3, 2010 and has served as our Interim Chief
Executive Officer since December 2, 2010. Mr. Cather graduated from
the Royal School of Mines, Imperial College, and has extensive experience in the
development and management of a wide range of resource projects. He
has held senior executive positions at operational and line management levels
with both De Beers and Anglo American. Mr. Cather is a Chartered
Engineer, a member of IoM3, and a Competent Person. He is a director
of Compostela Mining Limited, an exploration company with copper/gold porphyry
assets in the Philippines. Mr. Cather is also a retained consultant
to Grafton Resources Investments, Ltd.
Andrew Neale has been a member
of our Board of Directors since June 3, 2010. Mr. Neale is a mining
industry executive with over 20 years experience in all facets of production,
including operations, engineering management, environmental management and
government relations. He was previously Vice
President-Technical-Services for Freeport McMoran Copper and Gold in both
Indonesia and New Orleans. Andrew has a BSc and MSc in Mineral
Processing Engineering from the University of Alberta.
36
Craig Niven has been a member
of our Board of Directors since June 3, 2010 and has served as our Assistant
Secretary and Interim Chief Financial Officer since November 23, 2010 and
December 2, 2010, respectively. Mr. Niven is Chief Executive, an
Investment Director and a 48% shareholder of Arlington Group Asset Management
Limited (“AGAM”). AGAM is the Investment Manager of the Arlington
Special Situations Fund Limited. He was previously Chief Executive of
Arlington Group Plc (a London Stock Exchange AIM listed investment
company). Prior to that, Mr. Niven acted as investment adviser to a
number of public and private investment vehicles and was Chairman and Founding
Director of Griffin Mining Limited. Until 1995, Mr. Niven was a
Director and Head of Corporate Finance at ANZ Grindlays Bank plc where he was
responsible for origination and execution of cross border transactions in
Europe, Asia and Africa. He is currently a Director of Sportswinbet
Limited. He also has a number of private interests in property,
gaming and media related business. Mr. Niven has a Masters degree in
Economics from St Catharine’s College Cambridge and is a Chartered
Accountant.
Bruce Stewart has been a
member of our Board of Directors since June 3, 2010. Mr. Stewart has
over 15 years experience in global financial markets, with an emphasis on
natural resources. He has worked in Australia, Asia, England and
North America, including working with Jefferies and Co. in New York, where he
was responsible for advising and raising capital for hedge and mutual
funds. In 2007, Mr. Stewart became a board member of BDI Mining, a
diamond producer, where he negotiated a profitable sale of the company to GEM
Diamonds. Concurrently he sat on the board of an emerging copper and
molybdenum producer with projects in China.
Board
Committees
We have
not yet established any committees of our Board of Directors or related
charters. We are not currently subject to listing requirements of any national
securities exchange or inter-dealer quotation system which requires us to have
committees or charters. Our Board of Directors may, in the future,
designate from among its members an executive committee, audit committee,
nominating committee, compensation committee, and one or more other
committees. Our entire Board of Directors performs all functions that
would otherwise be performed by committees.
Audit
Committee Financial Expert
We have
no separate audit committee at this time. The entire Board of
Directors oversees our audits and auditing procedures. Craig Niven, a member of
our Board of Directors, has the qualifications of an audit committee financial
expert.
Director
Independence
We are
not currently subject to listing requirements of any national securities
exchange or inter-dealer quotation system which has requirements that a majority
of the board of directors be “independent” and, as a result, we are not at this
time required to have our Board of Directors comprised of a majority of
“Independent Directors.”
Shareholder
Communications
Currently,
we do not have a policy with regard to the consideration of any director
candidates recommended by security holders. To date, no security
holders have made any such recommendations.
Code
of Ethics
We have
adopted a written code of ethics (the “Code of Ethics”) that applies to our
principal executive officer, principal financial officer, principal accounting
officer or controller, and persons performing similar functions. We believe that
the Code of Ethics is reasonably designed to deter wrongdoing and promote honest
and ethical conduct; provide full, fair, accurate, timely and understandable
disclosure in public reports; comply with applicable laws; ensure prompt
internal reporting of code violations; and provide accountability for adherence
to the code. To request a copy of the Code of Ethics, please make
written request to our President c/o Gottbetter & Partners, LLP, 488 Madison
Avenue, 12th Floor, New York, New York 10022.
Business and Technical
Advisors
We expect
to recruit a number of experienced and highly regarded professionals to provide
advice to us in their areas of specialization or expertise. These advisors will
generally enter into agreements with us to serve for fixed terms. We may grant
these advisors options to purchase share of our common stock as partial payment
for their services. In addition, these advisors may receive cash compensation in
connection with services rendered and will be reimbursed for their reasonable
out-of-pocket expenses.
37
Board
Meetings and Attendance
Our Board
held no meetings during the year ended November 30, 2009 as we had only one
director. Corporation actions were approved by board consent.
The
following table sets forth information with respect to the beneficial ownership
of our common stock known by us as of December 9, 2010 by:
|
·
|
each
person or entity known by us to be the beneficial owner of more than 5% of
our common stock;
|
|
·
|
each
of our directors;
|
|
·
|
each
of our executive officers; and
|
|
·
|
all
of our directors and executive officers as a
group.
|
Except as
otherwise indicated, the persons listed below have sole voting and investment
power with respect to all shares of our common stock owned by them, except to
the extent such power may be shared with a spouse. Information given with
respect to beneficial owners who are not officers or directors of ours is to the
best of our knowledge. However, as we do not have a class of stock
registered under the Exchange Act, beneficial owners of our securities are not
required to file Williams Act or Section 16 reports, which limits our ability to
determine whether a person or entity is a beneficial owner of more than 5% of
our common stock and the extent of any such beneficial owner’s holdings or any
relationships among beneficial owners.
Name and Address of Beneficial Owner(1)
|
Title of Class
|
Amount and
Nature
of
Beneficial
Ownership(2)
|
Percentage
of
Class(3)
|
|||||||
David
Cather
|
Common
Stock, $0.001 par value
|
0 | (4) | * | ||||||
Andrew
Neale
|
Common
Stock, $0.001 par value
|
0 | (4) | * | ||||||
Craig
Niven
|
Common
Stock, $0.001 par value
|
0 | (4) | * | ||||||
Bruce
Stewart
|
Common
Stock, $0.001 par value
|
0 | (4) | * | ||||||
All
directors and executive officers as a group 4 persons)
|
0 | (5) | * | |||||||
John
Paul DeJoria Family Trust
c/o
John Paul Mitchell Systems
9701
Wilshire Blvd., Suite 1205
Beverly
Hills, CA 90212
|
Common
Stock, $0.001 par value
|
10,000,000 | (6) | 10.75 | % | |||||
Fenmore
Consultants Ltd.
P.
O. Box 599
Suite
3, Caribbean Place,
Leeward
Highway,
Providenciales,
Turks and Caicos Islands
|
Common
Stock, $0.001 par value
|
4,000,000 | (6) | 4.30 | % | |||||
Fiordaliso
Ltd.
Suite
340-345 Barkly Wharf
Le
Caudan Waterfront
BP
1070
Port
Louis, Republic of Mauritius
|
Common
Stock, $0.001 par value
|
5,500,000 | (6) | 5.91 | % |
38
Name and Address of Beneficial Owner(1)
|
Title of Class
|
Amount and
Nature
of
Beneficial
Ownership(2)
|
Percentage
of
Class(3)
|
|||||||
IIU
Nominees Limited
IFSC
House
Custom
House Quay
Dublin
1 Ireland
|
Common
Stock, $0.001 par value
|
5,000,000 | (6) | 5.38 | % | |||||
Moonlight
Investments
Suite
340-345 Barkly Wharf
Le
Caudan Waterfront
BP
1070
Port
Louis, Republic of Mauritius
|
Common
Stock, $0.001 par value
|
5,500,000 | (6) | 5.91 | % | |||||
Ocean
Group International SA
Portland
House, Bresseudeu Place
9th
Floor
London,
SW1E 5NP
United
Kingdom
|
Common
Stock, $0.001 par value
|
5,000,000 | (6) | 5.38 | % | |||||
Pacific
International Management Inc.
2nd
Floor, MMG Tower
East
53rd
Street
Marbella
P.O.
Box 0819-09132
Panama
City, Republic of Panama
|
Common
Stock, $0.001 par value
|
4,000,000 | (6) | 4.30 | % | |||||
Saftonico
Investments SA
c/o
“CAMS”
Kornstrasse
9
4950
Huttwil
Switzerland
|
Common
Stock, $0.001 par value
|
6,625,000 | (6) | 7.12 | % |
* Less
than 1%.
(1)
|
Except
as otherwise indicated, the address of each beneficial owners is c/o
Universal Gold Mining Corp., Bentall Four Centre, Suite 3474 - 1055
Dunsmuir Street, Vancouver, British Columbia V7X
1K8.
|
(2)
|
Beneficial
ownership is determined in accordance with the rules of the SEC and
generally includes voting or investment power with respect to securities.
Shares of common stock subject to options or warrants currently
exercisable or convertible, or exercisable or convertible within 60 days
of November 4, 2010 are deemed outstanding for computing the percentage of
the person holding such option or warrant but are not deemed outstanding
for computing the percentage of any other
person.
|
(3)
|
Percentage
based upon 93,012,500 shares of our common stock outstanding as of
December 9, 2010.
|
(4)
|
Does
not include 2,000,000 shares of our common stock issuable upon the
exercise of options granted to our current directors under the 2008 Plan
which are not exercisable within 60
days.
|
(5)
|
Does
not include an aggregate of 8,000,000 shares of our common stock issuable
upon the exercise of options granted to our current directors under the
2008 Plan, which are not exercisable within 60
days.
|
(6)
|
Estimate
of beneficial ownership, based on information available to us. The shares
indicated as beneficially owned may include shares held in street name or
the name of a nominee, and beneficial ownership may have been disposed of
and/or acquired without our
knowledge.
|
39
EXECUTIVE
COMPENSATION
Summary
Compensation Table
Name and
Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive
Plan
Compen-
sation
($)
|
Change
in
Pension
Value
and Non-
qualified
Deferred
Compen-
sation
Earnings
($)
|
All Other
Compensation
($)
|
Total
($)
|
|||||||||||||||||||||||||
David
Rector, Chief
|
2009
|
6,000 | 0 | 0 | 0 | 0 | 0 | 0 | 6,000 | |||||||||||||||||||||||||
Executive
Officer
|
2008
|
1,000 | 0 | 0 | 0 | 0 | 0 | 0 | 1,000 | |||||||||||||||||||||||||
2007
|
0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
We have
not maintained any stock option or other incentive plans other than our
2008 Equity Incentive Plan. (See “Stock Option Plans” below.) We have
no plans in place and have never maintained any plans that provide for the
payment of retirement benefits or benefits that will be paid primarily following
retirement including, but not limited to, tax qualified deferred benefit plans,
supplemental executive retirement plans, tax-qualified deferred contribution
plans and nonqualified deferred contribution plans. No options are issued with
the 2008 Equity Incentive Plan prior to the end of the November 30, 2009 fiscal
year.
From
October 2008 through November 17, 2010 we were paying $500 per month to
David Rector for his services to us as an executive officer pursuant to a month
to month verbal arrangement. Mr. Rector resigned his executive
officer positions on November 17, 2010.
Outstanding
Equity Awards at Fiscal Year-End
The
following table sets forth information regarding stock options held by the named
executive officer at November 30, 2009.
Option Awards
|
||||||||||||||||||||
Name and
Principal Position
|
Number of
securities
underlying
unexercised
options
exercisable
(#)
|
Number of
securities
underlying
unexercised
options
unexercisable
(#)
|
Equity incentive
plan awards:
Number of
securities
underlying
unexercised
unearned options
(#)
|
Option
plan
exercise
price
($)
|
Option
expiration date
|
|||||||||||||||
David
Rector, Chief Executive Officer
|
0 | 0 | 0 | N/A | N/A |
40
Equity Compensation Plan
Information
On
April 15, 2008, our Board of Directors and stockholders adopted our 2008 Equity
Incentive Plan, pursuant to which a total of 40,000,000 shares of our common
stock (adjusted for the 20 to 1 forward stock split in the form of a dividend
that we effected in May 2010) could be issued pursuant to awards granted
thereunder as at November 30, 2009. On June 3, 2010, our Board of
Directors amended the 2008 Equity Incentive Plan to reduce the number of shares
of our common stock available for issuance pursuant to awards granted thereunder
to 10,000,000. If an incentive award granted under the 2008 Equity
Incentive Plan expires, terminates, is unexercised or is forfeited, or if any
shares are surrendered to us in connection with an incentive award, the shares
subject to such award and the surrendered shares will become available for
further awards under the 2008 Equity Incentive Plan. As of the date
hereof, we have outstanding options to purchase an aggregate of 8,116,667 shares
of our common stock under the 2008 Equity Incentive Plan.
The
following table sets forth, as of November 30, 2009, certain information
regarding our 2008 Equity Incentive Plan, which is our only equity compensation
plan. All historical share and per share numbers have been adjusted
to reflect our 2-for-1 forward stock split in the form of a dividend which was
effected on April 25, 2008, and our 20-for-1 forward stock split in the form of
a dividend which was completed on May 12, 2010.
Plan Category
|
Number of
securities to be
issued upon
exercise of
outstanding options,
warrants and rights
(a)
|
Weighted-
average exercise
price of
outstanding
options, warrants
and rights
(b)
|
Number of
securities
remaining
available for
future issuance
under equity
compensation
plans (excluding
securities
reflected in
column (a))
(c)
|
|||||||||
Equity
compensation plans approved by security holders
|
0 | N/A | 40,000,000 | (1) | ||||||||
Equity
compensation plans not approved by security holders
|
0 | N/A | 0 | |||||||||
Total
|
0 | N/A | 40,000,000 | (1) |
|
(1)
|
On
June 3, 2010, subsequent to the end of our November 30, 2009 fiscal year,
we amended our 2008 Equity Incentive Plan to reduce the number of shares
of our common stock issuable pursuant to awards granted thereunder to
10,000,000.
|
|
(2)
|
On
June 3, 2010, subsequent to the end of our November 30, 2009 fiscal year,
we granted an aggregate of 8,350,000 non-statutory options under our 2008
Equity Incentive Plan (See “Stock Options - Grants to Officers and
Directors”). Upon the November 17, 2010 resignation of David Rector as an
officer and director, 233,333 of the 350,000 options granted to Mr. Rector
were cancelled. Mr. Rector has until December 17, 2010 to exercise his
116,667 remaining
options.
|
Employment
Agreements with Executive Officers
During
the year ended November 30, 2009 we did not have a written employment agreement
with our sole executive officer. He was compensated at the rate of $500 per
month under a verbal month to month arrangement.
Compensation
of Directors
We did
not provide any compensation to our directors in their capacities as such during
the fiscal year ended November 30, 2009.
The
following table sets forth information regarding compensation accrued to the
Company’s directors for the year ended November 30, 2009.
41
Director
Compensation
Name
|
Fees
earned
or paid
in cash
($)
|
Stock
awards
($)
|
Option
awards (1)
($)
|
Non-equity
incentive
plan
compen-
sation
($)
|
Nonqualified
deferred
compensation
earnings
($)
|
All other
compen-
sation
($)
|
Total
($)
|
|||||||||||||||||||||
David
Rector
|
N/A | N/A | N/A | N/A | N/A | N/A | N/A |
Stock
Option Plans
Our Board
of Directors and our stockholders adopted the 2008 Equity Incentive Plan on
April 15, 2008. The 2008 Equity Incentive Plan, as amended, reserves
a total of 10,000,000 shares of our common stock for issuance under the
Plan. If an incentive award granted under the 2008 Equity Incentive
Plan expires, terminates, is unexercised or is forfeited, or if any shares are
surrendered to us in connection with an incentive award, the shares subject to
such award and the surrendered shares will become available for further awards
under the 2008 Equity Incentive Plan.
Shares
which may be issued under the 2008 Equity Incentive Plan through the settlement,
assumption or substitution of outstanding awards or obligations to grant future
awards as a condition of acquiring another entity are not expected to reduce the
maximum number of shares available under the Plan. In addition, the
number of shares of our common stock subject to the 2008 Equity Incentive Plan,
any number of shares subject to any numerical limit in the Plan, and the number
of shares and terms of any incentive award are expected to be adjusted in the
event of any change in our outstanding common stock by reason of any stock
dividend, spin-off, split-up, stock split, reverse stock split,
recapitalization, reclassification, merger, consolidation, liquidation, business
combination or exchange of shares or similar transaction.
Administration
It is
expected that the Compensation Committee of the Board of Directors, or the Board
of Directors in the absence of such a committee, will administer the 2008 Equity
Incentive Plan. Subject to the terms of the 2008 Equity Incentive
Plan, the Compensation Committee would have complete authority and discretion to
determine the terms of awards under the 2008 Equity Incentive Plan.
Grants
The 2008
Equity Incentive Plan authorizes the grant of nonqualified stock options,
incentive stock options, restricted stock awards, performance grants and stock
appreciation rights, as described below:
Options
granted under the 2008 Equity Incentive Plan entitle the grantee, upon exercise,
to purchase a specified number of shares from us at a specified exercise price
per share. The exercise price for shares of common stock covered by
an option cannot be less than the fair market value of the common stock on the
date of grant unless agreed to otherwise at the time of the
grant. The compensation committee, or the Board of Directors in the
absence of such a committee, may also grant options with a reload
feature.
Restricted
stock awards may be awarded on terms and conditions established by the
Compensation Committee, which may include the lapse of restrictions on the
achievement of one or more performance goals.
Stock
appreciation rights (“SARs”) entitle the participant, upon exercise of the SAR,
to receive a distribution in an amount equal to the number of shares of common
stock subject to the portion of the SAR exercised multiplied by the difference
between the market price of a share of common stock on the date of exercise of
the SAR and the market price of a share of common stock on the date of grant of
the SAR.
42
Duration, Amendment and
Termination
The Board
of Directors is expected to have the power to amend, suspend or terminate the
2008 Equity Incentive Plan without stockholder approval or ratification at any
time or from time to time. No change may be made that increases the
total number of shares of common stock reserved for issuance pursuant to
incentive awards or reduces the minimum exercise price for options or exchange
of options for other incentive awards, unless such change is authorized by our
stockholders within one year. Unless sooner terminated, the 2008
Equity Incentive Plan would terminate ten years after it is
adopted.
Grants to Officers and
Directors
On June
3, 2010 we authorized the issuance of and granted an aggregate of 8,350,000
non-statutory options under our 2008 Equity Incentive Plan to our directors as
follows:
David
Rector
|
350,000
options
|
Craig
Niven
|
2,000,000
options
|
Bruce
Stewart
|
2,000,000
options
|
Andrew
Neale
|
2,000,000
options
|
David
Cather
|
2,000,000
options
|
Each
option is exercisable for a period of five years commencing three years from the
date of grant, subject to prior vesting, and can be exercised for the purchase
of one share of our common stock, during such exercise period at a price of
$0.20 per share. One third of such options vest on each of the date
of grant, the first anniversary of the date of grant, and the second anniversary
of the date of grant. Upon the November 17, 2010 resignation of David Rector as
an officer and director, 233,333 of the 350,000 options granted to Mr. Rector
were cancelled. Mr. Rector has until December 17, 2010 to exercise his 116,667
remaining options.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Other
than as disclosed below and in this prospectus, there have been no transactions,
or currently proposed transactions, in which we were or are to be a participant
and the amount involved exceeds the lesser of $120,000 or 1% of the average of
our total assets at year end for the last two completed fiscal years and in
which any of our directors, executive officers or beneficial holders of more
than 5% of our outstanding common stock, or any of their respective immediate
family members, has had or will have any direct or material indirect
interest.
During
the period through March 31, 2010, we received $100,618 in advances from a major
shareholder to cover operating expenses. The advance was non-interest
bearing. During the quarter ended June 30, 2010, this payable was
forgiven by the major shareholder and treated as a contribution of
capital.
During
the period through March 31, 2010, we accrued $8,500 to David Rector for
services rendered by him as our sole officer. During the quarter ended June 30,
2010, this payable was paid on our behalf by a major shareholder and treated as
a contribution of capital.
Pursuant
to a Cancellation Agreement, dated May 24, 2010, between us and Linda Farrell,
our majority stockholder at that time, all 150,200,000 shares of our common
stock held by Ms. Farrell were returned to us and cancelled in exchange for
$20,000 cash and reimbursement of legal fees of $1,500. Immediately
prior to the cancellation, Ms. Farrell was the beneficial owner of approximately
67.3% of our outstanding common stock. The cash and legal fee reimbursement were
paid by a major shareholder on our behalf and has been treated as contributed
capital.
On
June 3, 2010, we granted 8,350,000 non-statutory options to our directors
pursuant to our 2008 Equity Incentive Plan. Each option is exercisable for a
period of five years commencing three years from the date of grant, subject to
prior vesting, and can be exercised for the purchase of one share of our common
stock at a price of $0.20 per share. See “Executive Compensation – Equity
Compensation Plan Information.”
43
On April
10, 2008, we issued 90,200,000 fully paid and non-assessable share of our common
stock (adjusted for the 20 to 1 forward stock split in the form of a dividend
that we effected in May 2010) to Linda Farrell, our President and Sole Director,
for services rendered by her to us.
Since
June 2010, we have been paying Andrew Neale, through Domaro Resources, a company
owned by Mr. Neale, CDN$10,000 per month plus 12% Canadian Value Added Tax under
a verbal month to month arrangement under which Mr. Neale provides us with
assistance and support in identifying and evaluating mining exploration and
acquisition opportunities on a global basis.
Since
June 1, 2010, we are paying David Cather $10,000 per month under a verbal month
to month arrangement whereby he provides us with technical and managerial advice
with respect to our resource projects.
In
June 2010, we paid Craig Niven a one-time payment of $25,000 for services
rendered to us by Mr. Niven under a verbal consulting agreement. The
services, which covered the period March 2010 through the date of payment,
consisted of investigation and analysis of potential acquisition
opportunities.
Since
June 2010, Bruce Stewart, a director, has been earning $2,000 per month for
serving as one of our directors.
PLAN
OF DISTRIBUTION
The
selling stockholders may, from time to time, sell any or all of their shares of
our common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. If the shares of common stock are
sold through underwriters, the selling stockholders will be responsible for
underwriting discounts or commissions or agent’s commissions. All selling
stockholders who are broker-dealers are deemed to be underwriters. These sales
may be at fixed prices, at prevailing market prices at the time of the sale, at
varying prices determined at the time of sale or at negotiated prices. The
selling stockholders may use any one or more of the following methods when
selling shares:
|
·
|
any
national securities exchange or quotation service on which the securities
may be listed or quoted at the time of
sale;
|
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;
|
|
·
|
transactions
other than on these exchanges or systems or in the over-the-counter
market;
|
|
·
|
through
the writing of options, whether such options are listed on an options
exchange or otherwise;
|
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
·
|
privately
negotiated transactions;
|
|
·
|
short
sales;
|
|
·
|
broker-dealers
may agree with the selling stockholders to sell a specified number of such
shares at a stipulated price per
share;
|
|
·
|
a
combination of any such methods of sale;
and
|
|
·
|
any
other method permitted pursuant to applicable
law.
|
44
The
selling stockholders may also engage in short sales against the box, puts and
calls and other transactions in our securities or derivatives of our securities
and may sell or deliver shares in connection with these trades.
Broker-dealers
engaged by the selling stockholders may arrange for other broker-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the selling stockholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated. The
selling stockholders do not expect these commissions and discounts to exceed
what is customary in the types of transactions involved. Any profits on the
resale of shares of common stock by a broker-dealer acting as principal might be
deemed to be underwriting discounts or commissions under the Securities Act.
Discounts, concessions, commissions and similar selling expenses, if any,
attributable to the sale of shares will be borne by a selling stockholder. The
selling stockholders may agree to indemnify any agent, dealer or broker-dealer
that participates in transactions involving sales of the shares if liabilities
are imposed on that person under the Securities Act.
In
connection with the sale of the shares of our common stock or otherwise, the
selling stockholders may enter into hedging transactions with broker-dealers,
which may in turn engage in short sales of the shares of common stock in the
course of hedging in positions they assume. The selling stockholders may also
sell shares of common stock short and deliver shares of common stock covered by
this prospectus to close out short positions and to return borrowed shares in
connection with such short sales. The selling stockholders may also loan or
pledge shares of common stock to broker-dealers that in turn may sell such
shares.
The
selling stockholders may from time to time pledge or grant a security interest
in some or all of the shares of our common stock owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured
parties may offer and sell the shares of our common stock from time to time
under this prospectus after we have filed an amendment to this prospectus under
Rule 424(b)(3) or other applicable provision of the Securities Act amending the
list of selling stockholders to include the pledgee, transferee or other
successors in interest as selling stockholders under this
prospectus.
The
selling stockholders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors in
interest will be the selling beneficial owners for purposes of this prospectus
and may sell the shares of common stock from time to time under this prospectus
after we have filed an amendment to this prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act amending the list of selling
stockholders to include the pledgees, transferees or other successors in
interest as selling stockholders under this prospectus. The selling stockholders
also may transfer and donate the shares of common stock in other circumstances
in which case the transferees, donees, pledgees or other successors in interest
will be the selling beneficial owners for purposes of this
prospectus.
The
selling stockholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
paid, or any discounts or concessions allowed to, such broker-dealers or agents
and any profit realized on the resale of the shares purchased by them may be
deemed to be underwriting commissions or discounts under the Securities Act. At
the time a particular offering of the shares of common stock is made, a
prospectus supplement, if required, will be distributed which will set forth the
aggregate amount of shares of common stock being offered and the terms of the
offering, including the name or names of any broker-dealers or agents, any
discounts, commissions and other terms constituting compensation from the
selling stockholders and any discounts, commissions or concessions allowed or
re-allowed or paid to broker-dealers. Under the securities laws of some states,
the shares of common stock may be sold in such states only through registered or
licensed brokers or dealers. In addition, in some states the shares of common
stock may not be sold unless such shares have been registered or qualified for
sale in such state or an exemption from registration or qualification is
available and is complied with. There can be no assurance that any selling
stockholder will sell any or all of the shares of our common stock registered
pursuant to the shelf registration statement, of which this prospectus forms a
part.
Each
selling stockholder has informed us that it does not have any agreement or
understanding, directly or indirectly, with any person to distribute our common
stock. None of the selling stockholders who are affiliates of broker-dealers,
other than the initial purchasers in private transactions, purchased the shares
of common stock outside of the ordinary course of business or, at the time of
the purchase of the common stock, had any agreements, plans or understandings,
directly or indirectly, with any person to distribute the
securities.
45
If we are
notified by any selling stockholder that any material arrangement has been
entered into with a broker-dealer for the sale of shares of common stock, we
will file a post-effective amendment to the registration statement. If the
selling stockholders use this prospectus for any sale of the shares of our
common stock, they will be subject to the prospectus delivery requirements of
the Securities Act.
The
anti-manipulation rules of Regulation M under the Securities Exchange Act of
1934 may apply to sales of our common stock and activities of the selling
stockholders, which may limit the timing of purchases and sales of any of the
shares of common stock by the selling stockholders and any other participating
person. Regulation M may also restrict the ability of any person engaged in the
distribution of the shares of common stock to engage in passive market-making
activities with respect to the shares of common stock. Passive market making
involves transactions in which a market maker acts as both our underwriter and
as a purchaser of our common stock in the secondary market. All of the foregoing
may affect the marketability of the shares of common stock and the ability of
any person or entity to engage in market-making activities with respect to the
shares of common stock.
Once sold
under the registration statement, of which this prospectus forms a part, the
shares of common stock will be freely tradable in the hands of persons other
than our affiliates.
Authorized
Capital Stock
Our
amended and restated Articles of Incorporation provide for the issuance of
310,000,000 shares of capital stock, of which 300,000,000 are shares of common
stock, par value $0.001 per share, and 10,000,000 are blank-check preferred
stock, par value $0.001 per share.
Equity
Securities Issued and Outstanding
As of
December 9, 2010, there were issued and outstanding:
|
·
|
93,012,500
shares of our common stock;
|
|
·
|
0
shares of our preferred stock;
|
|
·
|
Options
to purchase 8,116,667 shares of our common stock, 116,667 of which options
are currently exercisable; and
|
|
·
|
0
warrants to purchase shares of our common
stock.
|
46
Common
Stock
Holders
of our common stock are entitled to one vote for each share held of record on
all matters submitted to a vote of the stockholders and do not have cumulative
voting rights. Accordingly, holders of a majority of the shares of
our common stock entitled to vote in any election of directors may elect all of
the directors standing for election. Apart from preferences that may
be applicable to any holders of preferred stock outstanding at the time, holders
of our common stock are entitled to receive dividends, if any, ratably as may be
declared from time to time by the Board out of funds legally available
therefor. Upon our liquidation, dissolution or winding up, the
holders of our common stock are entitled to receive ratably our net assets
available after the payment of all liabilities and liquidation preferences on
any outstanding preferred stock. Holders of our common stock have no
preemptive, subscription, redemption or conversion rights, and there are no
redemption or sinking fund provisions applicable to our common
stock. The rights, preferences and privileges of holders of our
common stock are subject to, and may be adversely affected by, the rights of the
holders of shares of any series of preferred stock which we may designate and
issue in the future. Each outstanding share of our common stock is
duly authorized, fully paid and non-assessable.
Preferred
Stock
Under the
terms of our Amended and Restated Articles of Incorporation, as amended, our
board of directors has authority, without any vote or action of our
stockholders, to issue up to 10,000,000 shares of “blank check” preferred stock
in one or more series and to fix the relative rights, preferences, privileges
and restrictions, including voting rights, dividend rights, conversion rights,
redemption terms (including sinking fund provisions) and liquidation preferences
and the number of shares constituting a series or the designation of such
series.
The
issuance of such preferred stock could adversely affect the rights of the
holders of common stock and, therefore, reduce the value of the common
stock. It is not possible to state the actual effect of the issuance
of any shares of preferred stock on the rights of holders of the common stock
until the board of directors determines the specific rights of the holders of
the preferred stock; however, these effects may include:
|
·
|
Restricting
dividends on the common stock;
|
|
·
|
Diluting
the voting power of the common
stock;
|
|
·
|
Impairing
the liquidation rights of the common stock;
or
|
|
·
|
Delaying
or preventing a change in control of the Company without further action by
the stockholders.
|
Options
Our Board
of Directors adopted, and our stockholders approved, the 2008 Equity Incentive
Plan on April 15, 2008. The 2008 Equity Incentive Plan, as amended,
reserves a total of 10,000,000 shares of our common stock for issuance pursuant
to awards granted under the 2008 Equity Incentive Plan. If an
incentive award granted under the 2008 Equity Incentive Plan expires,
terminates, is unexercised or is forfeited, or if any shares are surrendered to
us in connection with an incentive award, the shares subject to such award and
the surrendered shares will become available for further awards under the 2008
Equity Incentive Plan.
As of
the date of this prospectus, we had outstanding 8,116,667 nonqualified stock
options under the 2008 Equity Incentive Plan, with an exercise price of $0.20
per share. For all option grants, our Board of Directors set the
exercise price of the options at a price equal to or greater than the fair
market value of our common stock on the date of grant of the
options. 8,000,000 of the outstanding options under the 2008 Equity
Incentive Plan vest in three equal installments on each of June 3, 2010, June 3,
2011 and June 3, 2012 (provided that the holder continues to serve as an officer
or director through such time) and are exercisable, to the extent vested, at any
time from June 3, 2012 until June 2, 2017. 116,667 of the outstanding
options are exercisable through December 17, 2010. See “Executive Compensation –
Equity Compensation Plan Information.”
Warrants
As of the
date hereof, we have no outstanding warrants.
Convertible
Securities
As of the
date hereof, we have no outstanding convertible securities.
47
Forward
Stock Splits
On April
25, 2008, we effected a forward stock split in the form of a dividend, pursuant
to which each share of our common stock then outstanding was converted into two
shares of our common stock. Then, on May 12, 2010, we completed
another forward stock split in the form of a dividend, pursuant to which each
share of our common stock then outstanding was converted into 20 shares of our
common stock.
Registration
Rights
We
have granted registration rights to the investors that purchased an aggregate of
39,500,000 shares in our private placement offering which closed on July 8,
2010, pursuant to a Registration Rights Agreement among us and the investors,
dated as of May 24, 2010. Thereunder, we were required to file a
registration statement relating to the resale of the Shares sold in the offering
on or before September 21, 2010 (the “Registration Filing Date”) and cause such
registration statement to be declared effective within 180 days after its first
filing (the “Registration Effectiveness Date”). We are further required to keep
the registration statement effective until the earlier of two years from the
date the registration statement is declared effective or until all of the shares
sold in the offering may immediately being sold under Rule 144 during any 90 day
period.
In the
event that the SEC should limit the number of shares that may be sold pursuant
to the registration statement, we may remove from the registration statement
such number of shares as specified by the SEC on a pro-rata
basis. Piggyback registration rights apply to any shares that are
removed from the registration statement as the result thereof. If the
registration statement is not filed by the Registration Filing Date, declared
effective by the Registration Effectiveness Date or if another “registration
event,” as such term is defined in the Registration Rights Agreement, occurs,
then we will be required to make payments to each holder of shares, as partial
liquidated damages, a cash sum equal to 1% of the purchase price in the offering
of the shares which are affected by such registration event, for each full
thirty (30) days during which such registration event continues to affect such
shares (which will be pro-rated for any period less than 30
days). Notwithstanding the foregoing, the maximum amount of
liquidated damages that must be paid by us will be an amount equal to 10% of the
purchase price paid in the offering for the shares which are affected by all
registration events in the aggregate. Notwithstanding the foregoing,
we will not be liable for the payment of damages for any delay in registration
of the shares that may be included and sold by the holders thereof in the
registration statement solely as a result of a cut-back comment received by the
SEC. Further, we will not be liable for the payment of damages with
respect to any shares excluded from the registration statement at the request of
the SEC. We were not able to file a registration statement by the
Registration Filing Date and, therefore, are currently obligated to pay
liquidated damages.
We
have granted registration rights to the investors that purchased an aggregate of
3,187,500 shares in our private placement offering which closed on November 2,
2010, pursuant to a Registration Rights Agreement among us and the investors,
dated as of September 20, 2010. Thereunder, we were required to file
a registration statement relating to the resale of the shares sold in the
offering on or before January 15, 2011 (which is 75 days from the final closing
of the offering) (the “Second Registration Filing Date”) and cause such
registration statement to be declared effective within 180 days after its first
filing (the “Second Registration Effectiveness Date”). We are further required
to keep the registration statement effective until the earlier of two years from
the date the registration statement is declared effective or until all of the
shares sold in the offering may immediately being sold under Rule 144 during any
90 day period.
In the
event that the SEC should limit the number of shares that may be sold pursuant
to the registration statement, we may remove from the registration statement
such number of shares as specified by the SEC on a pro-rata
basis. Piggyback registration rights apply to any shares that are
removed from the registration statement as the result
thereof. If the registration statement is not filed by the
Second Registration Filing Date, declared effective by the Second Registration
Effectiveness Date or if another “registration event,” as such term is defined
in the Registration Rights Agreement, occurs, then we will be required to make
payments to each holder of shares, as partial liquidated damages, a cash sum
equal to 1% of the purchase price in the offering of the shares which are
affected by such registration event, for each full thirty (30) days during which
such registration event continues to affect such shares (which will be pro-rated
for any period less than 30 days). Notwithstanding the foregoing, the
maximum amount of liquidated damages that must be paid by us will be an amount
equal to 10% of the purchase price paid in the offering for the shares which are
affected by all registration events in the aggregate. Notwithstanding
the foregoing, we will not be liable for the payment of damages for any delay in
registration of the shares that may be included and sold by the holders thereof
in the registration statement solely as a result of a cut-back comment received
by the SEC. Further, we will not be liable for the payment of damages
with respect to any shares excluded from the registration statement at the
request of the SEC.
48
We have
granted piggyback registration rights to the persons that received an aggregate
of 325,000 shares of our common stock under a Consulting Services Agreement and
under an Advisory Services Agreement, each dated as of June 21,
2010.
Anti-Takeover
Effects of Provisions of Nevada State Law
We may be
or in the future we may become subject to Nevada’s control share
laws. A corporation is subject to Nevada’s control share law if it
has more than 200 stockholders, at least 100 of whom are stockholders of record
and residents of Nevada, and if the corporation does business in Nevada,
including through an affiliated corporation. This control share law
may have the effect of discouraging corporate takeovers. We currently
have 43 stockholders of record.
The
control share law focuses on the acquisition of a “controlling interest,” which
means the ownership of outstanding voting shares that would be sufficient, but
for the operation of the control share law, to enable the acquiring person to
exercise the following proportions of the voting power of the corporation in the
election of directors: (1) one-fifth or more but less than one-third; (2)
one-third or more but less than a majority; or (3) a majority or
more. The ability to exercise this voting power may be direct or
indirect, as well as individual or in association with others.
The
effect of the control share law is that an acquiring person, and those acting in
association with that person, will obtain only such voting rights in the control
shares as are conferred by a resolution of the stockholders of the corporation,
approved at a special or annual meeting of stockholders. The control
share law contemplates that voting rights will be considered only once by the
other stockholders. Thus, there is no authority to take away voting
rights from the control shares of an acquiring person once those rights have
been approved. If the stockholders do not grant voting rights to the
control shares acquired by an acquiring person, those shares do not become
permanent non-voting shares. The acquiring person is free to sell the
shares to others. If the buyer or buyers of those shares themselves
do not acquire a controlling interest, the shares are not governed by the
control share law.
If
control shares are accorded full voting rights and the acquiring person has
acquired control shares with a majority or more of the voting power, any
stockholder of record, other than the acquiring person, who did not vote in
favor of approval of voting rights, is entitled to demand fair value for such
stockholder’s shares.
In
addition to the control share law, Nevada has a business combination law, which
prohibits certain business combinations between Nevada corporations and
“interested stockholders” for three years after the interested stockholder first
becomes an interested stockholder, unless the corporation’s Board of Directors
approves the combination in advance. For purposes of Nevada law, an
interested stockholder is any person who is: (a) the beneficial owner, directly
or indirectly, of 10% or more of the voting power of the outstanding voting
shares of the corporation, or (b) an affiliate or associate of the corporation
and at any time within the previous three years was the beneficial owner,
directly or indirectly, of 10% or more of the voting power of the
then-outstanding shares of the corporation. The definition of
“business combination” contained in the statute is sufficiently broad to cover
virtually any kind of transaction that would allow a potential acquirer to use
the corporation’s assets to finance the acquisition or otherwise to benefit its
own interests rather than the interests of the corporation and its other
stockholders.
The
effect of Nevada’s business combination law is to potentially discourage parties
interested in taking control of our Company from doing so if it cannot obtain
the approval of our Board of Directors.
The
transfer agent for our common stock is Continental Stock Transfer & Trust
Company. The transfer agent’s address is 17 Battery Place, New York,
New York 10004, and its telephone number is (212) 845-3217.
The
validity of the common stock offered hereby will be passed upon for us by
Gottbetter & Partners, LLP, 488 Madison Avenue, 12th Floor, New York, New
York 10022-5718.
49
EXPERTS
The
financial statements for the fiscal years ended November 30, 2009 and 2008,
included in this prospectus and in the registration statement have been audited
by GBH CPAs, PC, an independent registered public accounting firm, to the extent
and for the periods set forth in their report appearing elsewhere herein and in
the registration statement, and are included in reliance upon such report given
upon the authority of said firm as experts in auditing and
accounting.
We file
annual reports, quarterly reports, current reports and other information with
the SEC. You may read or obtain a copy of these reports at the SEC’s
public reference room at 100 F Street, N.E., Room 1580, Washington, D.C.
20549. You may obtain information on the operation of the public
reference room and their copy charges by calling the SEC at
1-800-SEC-0330. The SEC maintains a website that contains
registration statements, reports, proxy information statements and other
information regarding registrants that file electronically with the
SEC. The address of the website is http://www.sec.gov.
We have
filed with the SEC a registration statement on Form S-1 under the Securities Act
to register the shares offered by this prospectus. The term
“registration statement” means the original registration statement and any and
all amendments thereto, including the schedules and exhibits to the original
registration statement or any amendment. This prospectus is part of
that registration statement. This prospectus does not contain all of
the information set forth in the registration statement or the exhibits to the
registration statement. For further information with respect to us
and the shares we are offering pursuant to this prospectus, you should refer to
the registration statement and its exhibits. Statements contained in
this prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete, and you should refer to the copy of
that contract or other documents filed as an exhibit to the registration
statement. You may read or obtain a copy of the registration
statement at the SEC’s public reference facilities and Internet site referred to
above.
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Under the
Nevada Revised Statutes, our directors and officers are not individually liable
to us or our stockholders for any damages as a result of any act or failure to
act in their capacity as an officer or director unless it is proven
that:
|
·
|
His
act or failure to act constituted a breach of his fiduciary duty as a
director or officer; and
|
|
·
|
His
breach of these duties involved intentional misconduct, fraud or a knowing
violation of law.
|
Nevada
law allows corporations to provide broad indemnification to its officers and
directors. At the present time, our Articles of Incorporation and
Bylaws also provide for broad indemnification of our current and former
directors, trustees, officers, employees and other agents.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to our directors, officers and controlling persons, 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.
50
OF
UNIVERSAL
GOLD MINING CORP.
(Formerly
known as Federal Sports & Entertainment, Inc.)
Page
|
||
Report
of Independent Registered Public Accounting Firm
|
F-2
|
|
Balance
Sheets (Audited) as of November 30, 2009 and 2008
|
F-3
|
|
Statements
of Operations (Audited) for the years ended November 30, 2009 and 2008 and
for the period from May 3, 2006 (Inception) through November 30,
2009
|
F-4
|
|
Statements
of Changes in Stockholders’ Equity (Deficit) (Audited) for the period from
May 3, 2006 to November 30, 2009
|
F-5
|
|
Statements
of Cash Flows (Audited) for the years ended November 30, 2009 and 2008 and
for the period from May 3, 2006 (Inception) through November 30,
2009
|
F-6
|
|
Notes
to Financial Statements (Audited)
|
F-7
– F-15
|
|
Consolidated
Balance Sheets (Unaudited) as of September 30, 2010 and December 31,
2009
|
F-16
|
|
Consolidated
Statements of Operations (Unaudited) for the three and nine months ended
September 30, 2010 and August 31, 2009 and for the period from May 3, 2006
(Inception) through September 30, 2010
|
F-17
|
|
Consolidated
Statement of Stockholders’ Equity (Deficit) (Unaudited) for the period
from May 3, 2006 (Inception) through September 30,
2010
|
F-18
|
|
Consolidated
Statements of Cash Flows (Unaudited) for the nine months ended September
30, 2010 and August 31, 2009 and for the period from May 3, 2006
(Inception) through September 30, 2010
|
F-19
|
|
Notes
to Financial Statements (Unaudited)
|
F-20-F-29
|
F-1
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors
Federal
Sports and Entertainment, Inc. (fka Rite Time Mining, Inc.)
(An
Exploration Stage Company)
New
York, New York
We have
audited the accompanying balance sheets of Federal Sports and Entertainment,
Inc. (fka Rite Time Mining, Inc.) (An Exploration Stage Company) as of November
30, 2009 and 2008, and the related statements of operations, stockholders’
equity (deficit) and cash flows for the years ended November 30, 2009, 2008 and
since inception on May 3, 2006 to November 30, 2009. 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. The financial statements for the period from May 3, 2006
(inception) to November 30, 2007 were audited by other auditors and our opinion,
insofar as it relates to cumulative amounts included for such prior periods, is
based solely on the reports of such other auditors.
We
conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audits 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 audits 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 audits provide 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 Federal Sports and Entertainment,
Inc. (fka Rite Time Mining, Inc.) (An Exploration Stage Company) as of
November 30, 2009 and 2008, and the related statements of operations,
stockholders’ equity (deficit) and cash flows for the years ended November 30,
2009 and 2008 and since inception on May 3, 2006 to November 30, 2009, 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 3 to the
financial statements, the Company has suffered recurring losses from operations
and has an accumulated deficit of $179,039, which raises substantial doubt about
its ability to continue as a going concern. Management’s plans
concerning these matters are also described in Note 3. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/
GBH CPAs, PC
|
|
www.gbhcpas.com
|
|
Houston,
Texas
|
|
March
1, 2010
|
F-2
FEDERAL
SPORTS & ENTERTAINMENT, INC. FKA RITE TIME MINING CORP.
(AN
EXPLORATION STAGE COMPANY)
Balance
Sheets
As of
|
As of
|
|||||||
November 30,
|
November 30,
|
|||||||
2009
|
2008
|
|||||||
(Restated)
|
||||||||
ASSETS
|
||||||||
Current
Assets
|
||||||||
Cash
|
$
|
-
|
$
|
-
|
||||
Deferred
Financing Cost
|
3,223
|
132,153
|
||||||
Prepaid
Retainer
|
2,500
|
-
|
||||||
Note
receivable, net of discount of $3,223
|
496,777
|
-
|
||||||
Total
Current Assets
|
502,500
|
132,153
|
||||||
Long
Term Assets
|
||||||||
Note
receivable, net of discount of $132,153
|
-
|
367,847
|
||||||
Total
Long Term Assets
|
-
|
367,847
|
||||||
Fixed
Assets
|
-
|
-
|
||||||
Total
Fixed Assets
|
||||||||
Total
Assets
|
$
|
502,500
|
$
|
500,000
|
||||
LIABILITIES
|
||||||||
Current
Liabilities
|
||||||||
Accounts
Payable
|
14,534
|
6,842
|
||||||
Accounts
Payable - related party
|
7,000
|
-
|
||||||
Advances
from Shareholder
|
82,405
|
28,999
|
||||||
Convertible
Note Payable
|
500,000
|
500,000
|
||||||
Total
Current Liabilities
|
$
|
603,939
|
$
|
535,841
|
||||
Long
term Liabilities
|
-
|
-
|
||||||
Total
Liabilities
|
603,939
|
535,841
|
||||||
STOCKHOLDERS’
EQUITY
|
||||||||
10,000,000 Preferred Shares authorized at $0.001 par value. Zero Preferred Shares Issued and outstanding 300,000,000 | ||||||||
Common
Shares authorized at $0.001 par value
|
-
|
-
|
||||||
10,010,000
and 10,010,000 common shares issued and outstanding as of 11/30/09 and
11/30/08, respectively
|
10,010
|
10,010
|
||||||
Additional
Paid in Capital
|
67,590
|
67,590
|
||||||
Accumulated
Deficit during Exploration Stage
|
(179,039
|
)
|
(113,441
|
)
|
||||
Total
Stockholders Equity
|
(101,439
|
)
|
(35,841
|
)
|
||||
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
|
502,500
|
$
|
500,000
|
The
accompanying notes are an integral
part of
these financial statements.
F-3
FEDERAL
SPORTS & ENTERTAINMENT, INC. FKA RITE TIME MINING CORP.
(AN
EXPLORATION STAGE COMPANY)
Statements
of Operations
From May 3, 2006
|
||||||||||||
(Inception)
Through
|
||||||||||||
Year Ended
|
Year Ended
|
Current period
|
||||||||||
November 30,
|
November 30,
|
ended
|
||||||||||
2009
|
2008
|
November 30, 2009
|
||||||||||
(Restated)
|
||||||||||||
Revenue
|
$
|
-
|
$
|
$
|
-
|
|||||||
Expenses
|
||||||||||||
Accounting
& Legal Fees
|
50,142
|
13,320
|
68,562
|
|||||||||
Bank
Service Charge
|
-
|
25
|
180
|
|||||||||
Incorporation
|
-
|
4,627
|
5,477
|
|||||||||
Director
Fees
|
-
|
45,100
|
45,100
|
|||||||||
Licenses
and Permits
|
-
|
-
|
200
|
|||||||||
Mineral
Expenditures
|
-
|
2,500
|
6,750
|
|||||||||
Office
Expense
|
15,456
|
31,613
|
49,314
|
|||||||||
Professional
Fees
|
-
|
-
|
850
|
|||||||||
Transfer
Agent fees
|
-
|
255
|
1,196
|
|||||||||
Total
Expenses
|
65,598
|
97,440
|
177,629
|
|||||||||
Other
Income (expenses)
|
||||||||||||
Impairment
Loss
|
||||||||||||
(Mineral
Claims)
|
-
|
-
|
1,410
|
|||||||||
Provision
for Income Taxes
|
-
|
-
|
-
|
|||||||||
Interest
Income
|
128,930
|
29,009
|
157,939
|
|||||||||
Interest
Expense
|
(128,930
|
)
|
(29,009
|
)
|
(157,939
|
)
|
||||||
Net
Income (Loss)
|
$
|
(65,598
|
)
|
$
|
(97,440
|
)
|
$
|
(179,039
|
)
|
|||
Basic
& Diluted (Loss) per Share
|
$
|
(0.01
|
)
|
(0.01
|
)
|
|||||||
Weighted
Average Number of Shares – basic and diluted
|
10,010,000
|
8,529,973
|
The
accompanying notes are an integral
part of
these financial statements.
F-4
FEDERAL
SPORTS & ENTERTAINMENT, INC. FKA RITE TIME MINING CORP.
(AN
EXPLORATION STAGE COMPANY)
Statement
of Stockholders Equity
From
Inception May 3, 2006 to November 30, 2009
|
|
|
|
|
|
|
Deficit
|
|
|
|
||||||||||||||||
Accumulated
|
||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
Additional
|
|
|
During
|
|
|
|
|||||||||||
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Paid in
|
|
|
Exploration
|
|
|
Total
|
|
||||||||||||
|
Shares
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stage
|
|
|
Equity
|
|
|||||||
Balance
at Inception on May 3, 2006
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||||||||||
Common
Stock issued to founders at $0.0025 per share, (par value
$.001) on 8/4/06
|
3,000,000
|
$
|
3,000
|
$
|
4,500
|
$
|
7,500
|
|||||||||||||||||||
Net
loss for the period from inception on May 3, 2006
to Nov. 30, 2006
|
$
|
(2,646
|
)
|
$
|
(2,646
|
)
|
||||||||||||||||||||
Balance,
Nov. 30th 2006
|
$
|
-
|
3,000,000
|
$
|
3,000
|
$
|
4,500
|
$
|
(2,646
|
)
|
$
|
4,854
|
||||||||||||||
Common
Stock (par $0.001) issued at $0.01 on 3/29/07
|
1,590,000
|
$
|
1,590
|
$
|
14,310
|
$
|
15,900
|
|||||||||||||||||||
Common
Stock (par $0.001) issued at $0.01 on 4/3/07
|
160,000
|
$
|
160
|
$
|
1,440
|
$
|
1,600
|
|||||||||||||||||||
Common
Stock (par $0.001) issued at $0.01 on 4/4/07
|
400,000
|
$
|
400
|
$
|
3,600
|
$
|
4,000
|
|||||||||||||||||||
Common
Stock (par $0.001) issued at $0.01 on 4/10/07
|
350,000
|
$
|
350
|
$
|
3,150
|
$
|
3,500
|
|||||||||||||||||||
Net
(Loss) for the year ending Nov. 30, 2007
|
$
|
(13,355
|
)
|
$
|
(13,355
|
)
|
||||||||||||||||||||
Balance,
Nov. 30, 2007
|
$
|
-
|
5,500,000
|
5,500
|
27,000
|
(16,001
|
)
|
$
|
16,499
|
|||||||||||||||||
Common
Stock (par $0.001) issued on 4/1/08 to Director for services
rendered
|
4,510,000
|
$
|
4,510
|
$
|
40,590
|
$
|
45,100
|
|||||||||||||||||||
Net
(Loss) for the year ending November 30, 2008
|
$
|
(97,440
|
)
|
$
|
(97,440
|
)
|
||||||||||||||||||||
Balance,
November 30, 2008 (Restated)
|
$
|
-
|
10,010,000
|
$
|
10,010
|
$
|
67,590
|
$
|
(113,441
|
)
|
$
|
(35,841
|
)
|
|||||||||||||
Net
(Loss) for the year ending November 30, 2009
|
$
|
(65,598
|
)
|
$
|
(65,598
|
)
|
||||||||||||||||||||
Balance,
November 30, 2009
|
$
|
-
|
10,010,000
|
$
|
10,010
|
$
|
67,590
|
$
|
(179,039
|
)
|
$
|
(101,439
|
)
|
The
accompanying notes are an integral
part of
these financial statements.
F-5
FEDERAL
SPORTS & ENTERTAINMENT, INC. FKA RITE TIME MINING CORP.
(AN
EXPLORATION STAGE COMPANY)
Statements
of Cash Flows
Year
|
Year
|
From May 3, 2006
|
||||||||||
Ended
|
Ended
|
(Inception) Through
|
||||||||||
November 30, 2009
|
November 30, 2008
|
November 30, 2009
|
||||||||||
(Restated)
|
||||||||||||
Operating Activities
|
||||||||||||
Net
Loss
|
$
|
(65,598
|
)
|
$
|
(97,440
|
)
|
$
|
(179,039
|
)
|
|||
Amortization
of deferred financing cost
|
128,930
|
29,009
|
99,921
|
|||||||||
Stock
based compensation
|
-
|
45,100
|
45,100
|
|||||||||
Accretion
of discount on note receivable
|
(128,930
|
)
|
(29,009
|
)
|
(99,921
|
)
|
||||||
Change
in operating assets and liabilities:
|
||||||||||||
Increase
(decrease) in accounts payable
|
7,692
|
6,842
|
14,534
|
|||||||||
Increase
(decrease) in accounts payable – related party
|
7,000
|
-
|
7,000
|
|||||||||
(Increase)
decrease in accounts receivable/retainer
|
(2,500
|
)
|
-
|
(2,500
|
)
|
|||||||
Net
Cash used in Operating Activities
|
(53,406
|
)
|
(45,498
|
)
|
(114,905
|
)
|
||||||
Investing Activities
|
||||||||||||
Issuance
of note receivable
|
-
|
(338,838
|
)
|
(338,838
|
)
|
|||||||
Net
Cash used in Investing Activities
|
-
|
(338,838
|
)
|
(338,838
|
)
|
|||||||
Net Cash after Operating
and Investing
Activities
|
$
|
-
|
$
|
(384,336
|
)
|
$
|
(453,743
|
)
|
||||
Financing Activities
|
||||||||||||
Proceeds
from issuance of common stock
|
-
|
-
|
32,500
|
|||||||||
Payments
on Loan From Director
|
-
|
(5,000
|
)
|
-
|
||||||||
Advance
from shareholder
|
53,406
|
28,999
|
82,405
|
|||||||||
Borrowings
on debt, net of costs
|
-
|
338,838
|
338,838
|
|||||||||
Net
Cash from Financing Activities
|
53,406
|
362,837
|
453,743
|
|||||||||
Decrease
in Cash
|
-
|
(21,499
|
)
|
-
|
||||||||
Cash
at Beginning of Period
|
-
|
21,499
|
-
|
|||||||||
Cash
at End of Period
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
Supplemental
Disclosure of Cash Flow Information
|
||||||||||||
Cash
paid for:
|
||||||||||||
Interest
Expense
|
$
|
-
|
$
|
-
|
||||||||
Income
Taxes
|
$
|
-
|
$
|
-
|
||||||||
Noncash
investing and financing activity:
|
||||||||||||
Discount
recorded on Note Receivable
|
$
|
-
|
$
|
161,162
|
The
accompanying notes are an integral
part of
these financial statements.
F-6
FEDERAL
SPORTS & ENTERTAINMENT, INC. FKA RITE TIME MINING CORP.
NOTES TO
FINANCIAL STATEMENTS
November
30, 2009
NOTE 1 – ORGANIZATION AND
DESCRIPTION OF BUSINESS
Federal
Sports & Entertainment, Inc. (formerly Rite Time Mining Corp.) (the
“Company”) was incorporated on May 3, 2006 under the laws of the State of
Nevada. The Company was primarily engaged in the acquisition and
exploration of mining properties.
On April
14, 2008, the Company filed Amended and Restated Articles of Incorporation
changing its name from Rite Time Mining, Inc. to Federal Sports &
Entertainment, Inc.
The
Company intended to engage in the acquisition, exploration and development of
mineral deposits and reserves, but has been unsuccessful in this area. The
Company determined that it could not continue with its business operations as
outlined in its original business plan because of a lack of financial results
and resources; therefore, the Company has redirected its focus towards
identifying and pursuing options regarding the development of a new business
plan and direction.
NOTE 2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
Basis of
Presentation
The
financial statements and accompanying notes are prepared in accordance with
accounting principles generally accepted in the United States of
America.
Use of
Estimates
Management
uses estimates and assumptions in preparing these financial statements in
accordance with generally accepted accounting principles. Those estimates and
assumptions affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported revenues and
expenses. Actual results could differ from these estimates.
Reclassifications
Certain
amounts in prior periods have been reclassified to conform to current period
presentation.
Cash and Cash
Equivalents
The
Company considers all highly liquid short-term investments purchased with an
original maturity of three months or less to be cash equivalents. These
investments are carried at cost, which approximates fair value.
F-7
FEDERAL
SPORTS & ENTERTAINMENT, INC. FKA RITE TIME MINING CORP.
(AN
EXPLORATION STAGE COMPANY)
NOTES TO
FINANCIAL STATEMENTS
November
30, 2009
Depreciation, Amortization
and Capitalization
The
Company records depreciation and amortization, when appropriate, using
straight-line method over the estimated useful lives of the assets (five to
seven years). Expenditures for maintenance and repairs are charged to expense as
incurred. Additions, major renewals and replacements that increase the
property’s useful life are capitalized. Property sold or retired,
together with the related accumulated depreciation is removed from the
appropriate accounts and the resultant gain or loss is included in net
income.
Income
Taxes
The
Company accounts for its income taxes in accordance with FASB ASC 740 – Income
Taxes, (formerly Statement of Financial Accounting Standards (FAS) No. 109,
“Accounting for Income Taxes”). A liability method is used whereby deferred tax
assets and liabilities are determined based on temporary differences between
basis used for financial reporting and income tax reporting purposes. Income
taxes are provided based on tax rates in effect at the time such temporary
differences are expected to reverse. A valuation allowance is provided for
certain deferred tax assets if it is more likely than not that the Company will
not realize the tax assets through future operations.
Fair Value of Financial
Instruments
FASB ASC
825 – Financial Instruments (Formerly FAS No. 107, “Disclosures about Fair Value
of Financial Instruments”), requires the Company to disclose, when reasonably
attainable, the fair market values of its assets and liabilities which are
deemed to be financial instruments. The Company’s financial instruments consist
primarily of cash and certain notes receivable and payable. The
Company believes the carrying value of these financial instruments approximates
fair value given their short term nature.
Per Share
Information
Basic net
earnings (loss) per common share are computed by dividing net earnings (loss)
available to common shareholders by the weighted-average number of common shares
outstanding during the period. Diluted net earnings (loss) per common share is
determined using the weighted-average number of common shares outstanding during
the period, adjusted for the dilutive effect of common stock equivalents. In
periods when losses are reported, the weighted-average number of common shares
outstanding excludes common stock equivalents, because their inclusion would be
anti-dilutive. The Company did not have any common stock equivalents
outstanding during 2009 or 2008.
F-8
FEDERAL
SPORTS & ENTERTAINMENT, INC. FKA RITE TIME MINING CORP.
(AN
EXPLORATION STAGE COMPANY)
NOTES TO
FINANCIAL STATEMENTS
November
30, 2009
NOTE 3 – GOING
CONCERN
Future
issuances of the Company’s equity or debt securities will be required in order
for the Company to continue to finance its operations and continue as a going
concern. The Company currently has no revenue from operations. The financial
statements of the Company have been prepared assuming that the Company will
continue as a going concern, which contemplates, among other things, the
realization of assets and the satisfaction of liabilities in the normal course
of business. The Company has incurred cumulative net losses of $179,039 since
its inception and requires capital for its contemplated operational and
marketing activities to take place. The Company’s ability to raise additional
capital through the future issuances of common stock is unknown. The obtainment
of additional financing, the successful development of the Company’s
contemplated plan of operations, and its transition, ultimately, to the
attainment of profitable operations are necessary for the Company to continue
operations. The uncertainty about the Company’s ability to successfully resolve
these factors raises substantial doubt about the Company’s ability to continue
as a going concern. The financial statements of the Company do not include any
adjustments that may result from the outcome of these aforementioned
uncertainties.
NOTE 4 - PROVISION FOR
INCOME TAXES
For the
years ending November 30, 2009 and 2008, and the period from May 3, 2006
(inception) through November 30, 2009, the Company had no significant current or
deferred income tax expense.
At
November 30, 2009, the Company has approximately $61,000 of unrecognized tax
benefits, the large majority of which relates to net operating loss
carryforwards. We have provided a full valuation allowance due to
uncertainty regarding the realizability of these tax assets.
NOTE 5 - COMMITMENTS AND
CONTINGENCIES
Litigation
The
Company is not presently involved in any litigation.
NOTE 6 – CONCENTRATIONS OF
RISKS
Cash
Balances
The
Company maintains its cash in institutions insured by the Federal Deposit
Insurance Corporation (FDIC). This government corporation insured
balances up to $100,000 through October 13, 2008. As of October 14,
2008 all non-interest bearing transaction deposit accounts at an FDIC-insured
institution, including all personal and business checking deposit accounts that
do not earn interest, are fully insured for the entire amount in the deposit
account. This unlimited insurance coverage is temporary and will
remain in effect for participating institutions until December 31,
2009.
F-9
FEDERAL
SPORTS & ENTERTAINMENT, INC. FKA RITE TIME MINING CORP.
(AN
EXPLORATION STAGE COMPANY)
NOTES TO
FINANCIAL STATEMENTS
November
30, 2009
All other
deposit accounts at FDIC-insured institutions are insured up to at least
$250,000 per depositor until December 31, 2013.
NOTE 7 – RECENT ACCOUNTING
PRONOUNCEMENTS
Recently Implemented
Standards
ASC 105,
“ Generally Accepted
Accounting Principles” (ASC 105) (formerly Statement of Financial
Accounting Standards No. 168, “ The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles a
replacement of FASB Statement No. 162 )” reorganized by topic existing
accounting and reporting guidance issued by the Financial Accounting Standards
Board (“FASB”) into a single source of authoritative generally accepted
accounting principles (“GAAP”) to be applied by nongovernmental entities. All
guidance contained in the Accounting Standards Codification (“ASC”) carries an
equal level of authority. Rules and interpretive releases of the Securities and
Exchange Commission (“SEC”) under authority of federal securities laws are also
sources of authoritative GAAP for SEC registrants. Accordingly, all other
accounting literature will be deemed “non-authoritative”. ASC 105 is effective
on a prospective basis for financial statements issued for interim and annual
periods ending after September 15, 2009. The Company has implemented the
guidance included in ASC 105 as of July 1, 2009. The implementation of this
guidance changed the Company’s references to GAAP authoritative guidance but did
not impact the Company’s financial position or results of
operations.
ASC 855,
“ Subsequent Events”
(ASC 855) (formerly Statement of Financial Accounting Standards No. 165, Subsequent Events ) includes
guidance that was issued by the FASB in May 2009, and is consistent with current
auditing standards in defining a subsequent event. Additionally, the guidance
provides for disclosure regarding the existence and timing of a company’s
evaluation of its subsequent events. ASC 855 defines two types of subsequent
events, “recognized” and “non-recognized”. Recognized subsequent events provide
additional evidence about conditions that existed at the date of the balance
sheet and are required to be reflected in the financial statements.
Non-recognized subsequent events provide evidence about conditions that did not
exist at the date of the balance sheet but arose after that date and, therefore;
are not required to be reflected in the financial statements. However, certain
non-recognized subsequent events may require disclosure to prevent the financial
statements from being misleading. This guidance was effective prospectively for
interim or annual financial periods ending after June 15, 2009. The Company
implemented the guidance included in ASC 855 as of April 1, 2009. The effect of
implementing this guidance was not material to the Company’s financial position
or results of operations.
F-10
FEDERAL
SPORTS & ENTERTAINMENT, INC. FKA RITE TIME MINING CORP.
(AN
EXPLORATION STAGE COMPANY)
NOTES TO
FINANCIAL STATEMENTS
November
30, 2009
In
August 2009, the FASB issued Accounting Standards Update No. 2009-05,
“Measuring Liabilities at Fair
Value,” (ASU 2009-05). ASU 2009-05 provides guidance on measuring the
fair value of liabilities and is effective for the first interim or annual
reporting period beginning after its issuance. The Company’s adoption of ASU
2009-05 did not have an effect on its disclosure of the fair value of its
liabilities.
Recently Issued
Standards
Recently
issued standards are not expected to have a material impact on the Company’s
financial positions or results of operations.
NOTE 8 – RELATED PARTY
TRANSACTIONS
Advances from
Shareholder
At
November 30, 2009, the Company had been advanced $82,000 by a shareholder to
cover operating expenses. These advances are noninterest bearing and
payable on demand.
Accounts Payable – Related
Party
At
November 30, 2009, the Company owed $7,000 to its CEO for services rendered to
the Company as its sole officer and director.
NOTE 9 – NOTE
RECEIVABLE
On
September 9, 2008, the Company entered into a Securities Purchase Agreement
(“SPA”) with Diamond Sports & Entertainment, Inc. (“Diamond
Sports”). Under the terms of the SPA, the Company provided net
proceeds of $338,838 in bridge financing to Diamond Sports (“Bridge Financing”)
in connection with a contemplated merger between the Company and Diamond Sports
(the “Merger”), and to assist Diamond Sports in meeting its working capital
requirements. The Bridge Financing is evidenced by an Unsecured Bridge Loan
Promissory Note (Bridge Note) in the amount of $500,000 from Diamond Sports to
the Company (the “Bridge Note”). The Bridge Note is unsecured, has a
term of 15 months from the initial closing of the Bridge Financing (unless
extended by mutual agreement of the parties), and is noninterest
bearing. In the event of a default under the terms of the SPA,
interest accrues at 15%. All obligations under the Bridge Note will
be deemed repaid in full and canceled upon the closing of the
Merger. At maturity, Diamond Sports will be required to remit
$500,000 to the Company.
The
Company recorded the Bridge Note at the initial advance amount and will accrete
the note receivable to the face amount over the note’s term. Interest
income recognized during 2009 and 2008 was $128,930 and $29,009,
respectively. The implicit interest rate is 32%.
See Note
12 for further information regarding the Bridge Note.
F-11
FEDERAL
SPORTS & ENTERTAINMENT, INC. FKA RITE TIME MINING CORP.
(AN
EXPLORATION STAGE COMPANY)
NOTES TO
FINANCIAL STATEMENTS
November
30, 2009
NOTE 10 – NOTE
PAYABLE
On
September 9, 2008, the Company entered into a 0 % Secured Convertible Promissory
Note Agreement with John Thomas Bridge and Opportunity Fund, L.P. (hereafter,
“John Thomas B.O.F.”) Under the terms of the Agreement, the Company
borrowed the principal amount of $500,000, which was to be repaid in full on or
before December 8, 2009, unless the Promissory Note is converted or redeemed
before such date. The Promissory Note is secured by all of the assets of
Diamond Sports and its affiliate, Diamond Concessions, LLC. This security
interest was subordinated to that of a certain bank providing a pre-existing
credit facility to Diamond Sports. Three of the principal
officer/director stockholders of Diamond Sports pledged all of their shares of
capital stock of Diamond Sports to John Thomas B.O.F. as security for the
Company’s obligations under the Promissory
Note. The Promissory Note terms grant John Thomas
B.O.F. the ability to convert any or all of the outstanding note balance into
equity units of the Company, at $1.00 per unit upon the closing of the merger of
the Company with Diamond Sports. Each unit consists of one share of the
Company’s common stock, and one-half purchase warrant. The purchase
warrants have an exercise price of $2.00 per share, and expire five years from
the date of conversion.
Upon
closing of the merger with Diamond Sports and in addition to the option to
convert the Promissory Note into shares of the Company’s stock and warrants,
John Thomas B.O.F. is also entitled to receive 500,000 Bridge Shares and 500,000
Bridge Warrants. The Bridge Warrants will have an exercise price of
$2.00 per share and an exercise period of 5 years.
The
Company paid $161,162 in fees related to the Promissory Note ($146,162 of which
was paid to a shareholder or affiliates of the shareholder), which has been
capitalized as deferred financing costs to be amortized over the term of the
Promissory Note.
See Note
12 for further information regarding this Promissory Note.
NOTE 11 – STOCKHODLERS’
EQUITY
Effective
May 8, 2008, our Board of Directors approved a forward stock split in the form
of a dividend, as a result of which each share of our Common Stock then issued
and outstanding converted into two shares of our Common Stock. All
share and per share amounts have been retroactively restated for all periods
presented to account for this forward stock split.
The
stockholders’ equity section of the Company contains the following classes of
capital stock as of November 30, 2009:
·
|
Preferred stock, $.0.001 par
value: 10,000,000 shares authorized, zero shares issued and
outstanding. Rights and preferences can be determined by the
Company’s Board of Directors,
and
|
F-12
FEDERAL
SPORTS & ENTERTAINMENT, INC. FKA RITE TIME MINING CORP.
(AN
EXPLORATION STAGE COMPANY)
NOTES TO
FINANCIAL STATEMENTS
November
30, 2009
·
|
Common stock, $0.001 par value:
300,000,000 shares authorized and 10,010,000 shares issued and
outstanding.
|
Transactions,
other than employees’ stock issuance, are in accordance with FAS ASC 718 – Stock
Compensation (formerly SFAS No. 123R). Issuances are accounted for based on the
fair value of the consideration received or the fair value of the equity
instruments issued, or whichever is more readily determinable.
On August
4, 2006 the Company issued a total of 3,000,000 shares of common stock to one
director for cash in the amount of $0.0025 per share for a total of
$7,500.
On March
29, 2007 the Company issued a total of 1,590,000 shares of common stock for cash
in the amount of $0 .01 per share for a total of $15,900.
On April
3, 2007 the Company issued a total of 160,000 shares of common stock for cash in
the amount of $0 .01 per share for a total of $1,600.
On April
4, 2007 the Company issued a total of 400,000 shares of common stock for cash in
the amount of $0 .01 per share for a total of $4,000
On April
16, 2007 the Company issued a total of 350,000 shares of common stock for cash
in the amount of $0 .01 per share for a total of $3,500
On April
1, 2008 the Company issued a total of 4,510,000 to one director for services
rendered. The shares were valued at $0.01 per share for a total of
$45,100.
On April
14, 2008 the Company filed Amended and Restated Articles of Incorporation
increasing their authorized capital stock from 75,000,000 shares of common
stock, par value $0.001 to 300,000,000 shares of common stock, par value $0.001
and 10,000,000 shares of preferred stock, par value $0.001.
F-13
FEDERAL
SPORTS & ENTERTAINMENT, INC. FKA RITE TIME MINING CORP.
(AN
EXPLORATION STAGE COMPANY)
NOTES TO
FINANCIAL STATEMENTS
November
30, 2009
2008
Equity Incentive Plan
On April
15, 2008, our Board of Directors and stockholders adopted the 2008 Equity
Incentive Plan (the “2008 Plan”) which reserves a total of 2,000,000 shares of
our Common Stock for issuance under the 2008 Plan. The number of shares of
Company Common Stock available for issuance under the 2008 Plan will be
increased on the first day of each fiscal year beginning with the 2009 fiscal
year, in an amount equal to the least of (i) 1,500,000 shares, (ii) 3% of the
outstanding shares on the last day of the immediately preceding fiscal year, or
(iii) such number of shares determined by the Board. If an
incentive award granted under the 2008 Plan expires, terminates, is unexercised
or is forfeited, or if any shares are surrendered to us in connection with an
incentive award, the shares subject to such award and the surrendered shares
will become available for further awards under the 2008 Plan. We have not
granted any awards under the 2008 Plan.
NOTE 12 – SUBSEQUENT
EVENTS
On
February 3, 2010, as a result of the abandonment of the Company’s planned merger
with Diamond Sports, the Company and John Thomas B.O.F. entered into a
settlement agreement whereby the Bridge Note was assigned by the Company to John
Thomas B.O.F. in full satisfaction of the Promissory Note and the extinguishment
of all obligations thereunder, including the Company’s contingent obligation to
issue Bridge Shares and Bridge Warrants to John Thomas B.O.F. upon the closing
of a merger. The Company has no further obligations to John Thomas
B.O.F.
The
Company evaluated all subsequent events through March 1, 2010, and no other
significant subsequent events requiring disclosure were identified.
NOTE 13 –
RESTATED FINANCIAL STATEMENTS
This
Annual Report on Form 10-K for the year ended November 30, 2009 of Federal
Sports & Entertainment, Inc. (“the Company”) includes the re-audited
financial statements of the Company for the year ended November 30,
2008. On August 27, 2009, the PCAOB revoked the registration of the
Company’s prior auditors Moore & Associates Chartered. The Company was
notified by the SEC that a due to the revocation, a re-audit of the Company’s
financial statements for the year ended November 30, 2008 would be
required.
The
Company has identified material errors in its previously issued financial
statements. These misstatements require that the financial statements
for the fiscal year ended November 30, 2008 be restated.
Below is
a summary of the changes made to the financial statements previously filed for
the period ended November 30, 2008:
F-14
FEDERAL
SPORTS & ENTERTAINMENT, INC. FKA RITE TIME MINING CORP.
(AN
EXPLORATION STAGE COMPANY)
NOTES TO
FINANCIAL STATEMENTS
November
30, 2009
November 30, 2008
|
As Originally
Reported
|
Adjustments
|
As Restated
|
|||||||||
Note Receivable
|
500,000
|
(132,153
|
) [1]
|
367,847
|
||||||||
Other
current assets
|
-
|
132,153
|
[2]
|
132,153
|
||||||||
Accounts
payable
|
(28,999
|
)
|
22,157
|
[4]
[5]
|
(6,843
|
)
|
||||||
Advances
from Shareholder
|
-
|
(28,999
|
) [4]
|
(28,999
|
)
|
|||||||
Convertible
Note payable
|
(500,000
|
)
|
(500,000
|
)
|
||||||||
Preferred
stock
|
-
|
-
|
||||||||||
Common
stock
|
(10,010
|
)
|
(10,010
|
)
|
||||||||
Additional
paid-in capital
|
(22,490
|
)
|
45,100
|
[3]
|
(67,590
|
)
|
||||||
Accumulated
Deficit during development stage
|
61,499
|
51,942
|
[3]
[5]
|
113,441
|
TWELVE MONTHS ENDED
|
||||||||||||
November 30, 2008
|
As Originally
Reported
|
Adjustments
|
As Restated
|
|||||||||
Accounting
and legal fees
|
13,320
|
-
|
13,320
|
|||||||||
Bank
Service Charge
|
25
|
-
|
25
|
|||||||||
Director
Fees
|
-
|
45,100
|
[3]
|
45,100
|
||||||||
Incorporation
|
4,627
|
-
|
4,627
|
|||||||||
Mineral
Expenditures
|
2,500
|
-
|
2,500
|
|||||||||
Office
Expense
|
24,771
|
6,842
|
[5]
|
31,613
|
||||||||
Transfer
Agent Fees
|
255
|
-
|
255
|
|||||||||
Interest
Income
|
-
|
(29,009
|
) [1]
|
(29,009
|
)
|
|||||||
Interest
Expense
|
-
|
29,009
|
[2]
|
29,009
|
||||||||
Provision
for income taxes
|
-
|
|||||||||||
Net
Loss
|
45,498
|
51,942
|
97,440
|
|||||||||
Net
loss per common share
|
$
|
(0.00
|
)
|
$
|
(0.01
|
) [6]
|
$
|
(0.01
|
)
|
|||
Weight
average common shares outstanding
|
8,494,344
|
35,629
|
[6]
|
8,529,973
|
Adjustment
Entry Description for December 31, 2008
[1]
|
To record note receivable at net
amount advanced and related accretion through November 30,
2008.
|
[2]
|
To record deferred financing
costs incurred in connection with the Note Payable and related
amortization.
|
[3]
|
To record issuance of shares to
director at $0.01 per share and related compensation
expense.
|
[4]
|
To reclassify amounts paid on
behalf of the company by a significant
shareholder.
|
[5]
|
To record office expense incurred
during fiscal year 2008.
|
[6]
|
To record the effect on EPS of
adjusted amounts
|
F-15
Universal
Gold Mining Corp. (f/k/a Federal Sports & Entertainment, Inc.)
(An
Exploration Stage Company)
Consolidated
Balance Sheets
(Unaudited)
As of
September 30,
|
As of
December 31,
|
|||||||
|
2010
|
2009
|
||||||
ASSETS
|
||||||||
Current
Assets
|
||||||||
Cash
|
$ | 853,968 | $ | - | ||||
Employee
receivable
|
6,883 | |||||||
Related
party receivable
|
9,192 | - | ||||||
Other
receivables
|
50,858 | - | ||||||
Prepaid
expenses
|
2,562 | 2,500 | ||||||
Note
receivable, net
|
- | 500,000 | ||||||
Convertible
note receivable
|
1,075,080 | - | ||||||
Total
Current Assets
|
1,998,543 | 502,500 | ||||||
Non-Current
Assets
|
||||||||
Property
and equipment, net
|
3,703 | |||||||
Investment
in mining option
|
2,300,000 | - | ||||||
Total
Assets
|
$ | 4,302,246 | $ | 502,500 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
||||||||
Current
Liabilities
|
||||||||
Accounts
payable
|
$ | 88,835 | $ | 17,194 | ||||
Accounts
payable-related party
|
19,764 | 7,500 | ||||||
Accrued
liability
|
11,850 | - | ||||||
Advances
from shareholder
|
- | 82,405 | ||||||
Convertible
note payable
|
- | 500,000 | ||||||
Total
Current Liabilities
|
120,449 | 607,099 | ||||||
Total
Liabilities
|
120,449 | 607,099 | ||||||
Commitments and Contingencies | - | - | ||||||
Stockholders'
Equity (Deficit)
|
||||||||
Preferred
stock, $0.001 par value, 10,000,000 shares authorized;
|
||||||||
0
shares issued and outstanding
|
- | - | ||||||
Common
stock, $0.001 par value, 300,000,000 shares
authorized;
|
||||||||
91,825,000
issued and outstanding as of June 30, 2010 and 200,200,000 shares issued
and outstanding as of December 31, 2009
|
91,825 | 200,200 | ||||||
Additional
paid-in capital
|
5,334,893 | (122,600 | ) | |||||
Other
comprehensive income - Foreign currency translation
adjustment
|
1,800 | - | ||||||
Deficit
accumulated in the exploration stage
|
(1,246,721 | ) | (182,199 | ) | ||||
Total
Stockholders' Equity (Deficit)
|
4,181,797 | (104,599 | ) | |||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
$ | 4,302,246 | $ | 502,500 |
See
notes to unaudited condensed consolidated financial statements
F-16
Universal
Gold Mining Corp. (f/k/a Federal Sports & Entertainment,
Inc.)
(An
Exploration Stage Company)
Consolidated
Statements of Operations
(Unaudited)
Three
Months Ended |
Three
Months Ended |
Nine
Months Ended |
Nine
Months Ended |
From May 3,
2006 (Inception) Through |
||||||||||||||||
|
September 30,
|
August 31,
|
September 30,
|
August 31,
|
September 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
2010
|
||||||||||||||||
Revenues
|
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
Expenses
|
||||||||||||||||||||
General
and administrative
|
432,759 | 12,319 | 1,112,535 | 49,993 | 1,286,574 | |||||||||||||||
Mineral
expenditures
|
- | - | - | - | 6,750 | |||||||||||||||
Depreciation
|
140 | - | 140 | - | 140 | |||||||||||||||
Impairment
loss (mineral claims)
|
- | - | - | - | 1,410 | |||||||||||||||
Total
Expenses, net
|
432,899 | 12,319 | 1,112,675 | 49,993 | 1,294,874 | |||||||||||||||
Other
Income (Expenses)
|
||||||||||||||||||||
Foreign
currency exchange gain
|
47,804 | - | 47,804 | - | 47,804 | |||||||||||||||
Interest
income
|
137 | 32,232 | 349 | 96,696 | 161,511 | |||||||||||||||
Interest
expense
|
- | (32,232 | ) | - | (96,696 | ) | (161,162 | ) | ||||||||||||
Total
Other Income (Expense)
|
47,941 | - | 48,153 | - | 48,153 | |||||||||||||||
Net
Loss
|
$ | (384,958 | ) | $ | (12,319 | ) | $ | (1,064,522 | ) | $ | (49,993 | ) | $ | (1,246,721 | ) | |||||
Basic
and Diluted Loss Per Share
|
$ | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.00 | ) | ||||||||
Weighted
Average Number of Common Shares Outstanding - Basic and
Diluted
|
89,911,957 | 200,200,000 | 147,644,945 | 200,200,000 |
See notes
to unaudited condensed consolidated financial statements
F-17
Universal
Gold Mining Corp. (f/k/a Federal Sports & Entertainment,
Inc.)
(An
Exploration Stage Company)
Consolidated
Statements of Stockholder’s Equity
(Unaudited)
Common Stock
|
|
Deficit
Accumulated |
||||||||||||||||||||||
Shares
|
Amount
|
Additional
Paid-in
Capital |
in the
Development Stage |
Other
Comprehensive Income |
Total Equity
|
|||||||||||||||||||
Balance
at Inception on May 3, 2006
|
- | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||
Common
Stock issued to founders at $0.000125 per share, (par value $0.001)
on 8/4/06
|
60,000,000 | 60,000 | (52,500 | ) | - | - | 7,500 | |||||||||||||||||
Net
loss for the period from inception on May 3, 2006 to November 30,
2006
|
- | - | - | (2,646 | ) | - | (2,646 | ) | ||||||||||||||||
Balance,
November 30, 2006
|
60,000,000 | $ | 60,000 | $ | (52,500 | ) | $ | (2,646 | ) | $ | - | $ | 4,854 | |||||||||||
Common
Stock issued at $0.0005 on 3/29/07
|
31,800,000 | 31,800 | (15,900 | ) | - | - | 15,900 | |||||||||||||||||
Common
Stock issued at $0. 0005 on 4/3/07
|
3,200,000 | 3,200 | (1,600 | ) | - | - | 1,600 | |||||||||||||||||
Common
Stock issued at $0. 0005 on 4/4/07
|
8,000,000 | 8,000 | (4,000 | ) | - | - | 4,000 | |||||||||||||||||
Common
Stock issued at $0.0005 on 4/10/07
|
7,000,000 | 7,000 | (3,500 | ) | - | - | 3,500 | |||||||||||||||||
Net
Loss for the year ending November 30, 2007
|
- | - | - | (13,355 | ) | - | (13,355 | ) | ||||||||||||||||
Balance,
November 30, 2007
|
110,000,000 | $ | 110,000 | $ | (77,500 | ) | $ | (16,001 | ) | $ | - | $ | 16,499 | |||||||||||
Common
Stock issued on 4/1/08 to director for services
rendered
|
90,200,000 | 90,200 | (45,100 | ) | - | - | 45,100 | |||||||||||||||||
Net
Loss for the year ending November 30, 2008
|
- | - | - | (97,440 | ) | - | (97,440 | ) | ||||||||||||||||
Balance,
November 30, 2008 (Restated)
|
200,200,000 | $ | 200,200 | $ | (122,600 | ) | $ | (113,441 | ) | $ | - | $ | (35,841 | ) | ||||||||||
Net
Loss for the year ending November 30, 2009
|
- | - | - | (65,598 | ) | - | (65,598 | ) | ||||||||||||||||
Balance,
November 30, 2009
|
200,200,000 | $ | 200,200 | $ | (122,600 | ) | $ | (179,039 | ) | $ | - | $ | (101,439 | ) | ||||||||||
Net
Loss for the one month ending December 31, 2009
|
- | - | - | (3,160 | ) | - | (3,160 | ) | ||||||||||||||||
Balance,
December 31, 2009
|
200,200,000 | $ | 200,200 | $ | (122,600 | ) | $ | (182,199 | ) | $ | - | $ | (104,599 | ) | ||||||||||
Common
Stock cancellation on 5/24/10
|
(150,200,000 | ) | (150,200 | ) | 128,700 | - | - | (21,500 | ) | |||||||||||||||
Common
Stock issued at $.10 on 5/24/10 through 6/29/10
|
38,000,000 | 38,000 | 3,719,428 | - | - | 3,757,428 | ||||||||||||||||||
Common
Stock issued on 6/21/10 for services rendered
|
100,000 | 100 | 59,900 | - | - | 60,000 | ||||||||||||||||||
Common
Stock issued on 6/21/10 for services rendered
|
225,000 | 225 | 134,775 | - | - | 135,000 | ||||||||||||||||||
Common
Stock issued at $.10 on 7/8/10
|
1,500,000 | 1,500 | 148,500 | - | - | 150,000 | ||||||||||||||||||
Common
Stock issued at $.40 on 9/20/10
|
2,000,000 | 2,000 | 798,000 | - | - | 800,000 | ||||||||||||||||||
Stock-based
compensation
|
- | - | 301,138 | - | - | 301,138 | ||||||||||||||||||
Contributed
capital
|
- | - | 167,052 | - | - | 167,052 | ||||||||||||||||||
Net
Loss for the nine months ended September 30, 2010
|
- | - | - | (1,064,522 | ) | 1,800 | (1,062,722 | ) | ||||||||||||||||
Balance,
September 30, 2010
|
91,825,000 | $ | 91,825 | $ | 5,334,893 | $ | (1,246,721 | ) | $ | 1,800 | $ | 4,181,797 |
See
notes to unaudited condensed consolidated financial statements
F-18
Universal
Gold Mining Corp. (f/k/a Federal Sports & Entertainment, Inc.)
(An
Exploration Stage Company)
Consolidated
Statements of Cash Flows
(Unaudited)
May 3, 2006
|
||||||||||||
Nine Months Ended
|
(Inception) through
|
|||||||||||
September 30,
2010 |
August 31,
2009 |
September 30,
2010 |
||||||||||
Cash
Flows from Operating Activities
|
||||||||||||
Net
loss
|
$ | (1,064,522 | ) | $ | (49,993 | ) | $ | (1,246,721 | ) | |||
Adjustments
to reconcile net loss to net cash
|
||||||||||||
used
in operating activities:
|
||||||||||||
Depreciation
|
140 | - | 140 | |||||||||
Stock-based
compensation
|
496,138 | - | 541,238 | |||||||||
Accretion
of discount on note receivable
|
- | (96,696 | ) | (103,144 | ) | |||||||
Amortization
of deferred financing costs
|
- | 96,696 | 103,144 | |||||||||
Expenses
paid by stockholder
|
14,500 | - | 14,500 | |||||||||
Foreign
currency exchange gain
|
(47,804 | ) | - | (47,804 | ) | |||||||
Changes
in operating assets and liabilities:
|
||||||||||||
Employee
receivable
|
(7,085 | ) | - | (7,085 | ) | |||||||
Related
party receivable
|
(9,192 | ) | - | (9,192 | ) | |||||||
Other Receivable
|
(52,622 | ) | - | (52,622 | ) | |||||||
Prepaid
expenses and other current assets
|
(138 | ) | - | (138 | ) | |||||||
Accounts
payable
|
203,223 | 6,167 | 217,757 | |||||||||
Accounts
payable - related party
|
12,264 | 5,500 | 19,764 | |||||||||
Accrued
expenses
|
11,850 | - | 12,010 | |||||||||
Net
cash used in operating activities
|
(443,248 | ) | (38,326 | ) | (558,153 | ) | ||||||
Cash
Flows from Investing Activities
|
||||||||||||
Issuance
of note receivable
|
- | - | (338,838 | ) | ||||||||
Purchases
of property and equipment
|
(3,958 | ) | - | (3,958 | ) | |||||||
Purchase
of put and call option/convertible note
|
(1,027,276 | ) | - | (1,027,276 | ) | |||||||
Investment
in CVME
|
(2,300,000 | ) | - | (2,300,000 | ) | |||||||
Net
cash used in investing activities
|
(3.331,234 | ) | - | (3,670,072 | ) | |||||||
Cash
Flows from Financing Activities
|
||||||||||||
Advances
from stockholder
|
- | 38,326 | 82,405 | |||||||||
Repayment
of advance from stockholder
|
(82,405 | ) | - | (82,405 | ) | |||||||
Issuance
of common stock, net of offering costs
|
4,707,428 | - | 4,739,928 | |||||||||
Borrowings
on debt, net of costs
|
- | - | 338,838 | |||||||||
Net
cash provided by financing activities
|
4,625,023 | 38,326 | 5,078,766 | |||||||||
Effect
of Exchange Rates on Cash Activities
|
3,427 | 3,427 | ||||||||||
Net
Increase in Cash
|
853,968 | - | 853,968 | |||||||||
Cash
at Beginning of Period
|
- | - | - | |||||||||
Cash
at End of Period
|
$ | 853,968 | $ | - | $ | 853,968 | ||||||
Supplemental Disclosure of Cash Flow
Information
|
||||||||||||
Cash
paid for:
|
||||||||||||
Interest
Expense
|
$ | - | $ | - | ||||||||
Income
Taxes
|
$ | - | $ | - | ||||||||
Non-Cash Investing and Financing
Activities
|
||||||||||||
Assignment
of note receivable for satisfaction of note payable
|
$ | 500,000 | $ | - | $ | 500,000 | ||||||
Discount
on Note receivable
|
$ | - | $ | - | $ | 161,162 | ||||||
Contributed
capital – payables settled by Shareholders
|
$ | 131,052 | $ | - | $ | 145,522 | ||||||
Contributed
capital – shares acquired by Shareholder and cancelled
|
$ | 21,500 | $ | - | $ | 21,500 |
See
notes to unaudited consolidated financial statements
F-19
NOTE 1 – ORGANIZATION AND
DESCRIPTION OF BUSINESS
Universal
Gold Mining Corp. (formerly Federal Sports & Entertainment, Inc., formerly
Rite Time Mining Corp.) (the “Company”) was incorporated on May 3, 2006 under
the laws of the State of Nevada.
On April
14, 2008, the Company filed Amended and Restated Articles of Incorporation
changing its name from Rite Time Mining, Inc. to Federal Sports &
Entertainment, Inc. On April 9, 2010, the Company filed a Certificate of
Amendment to its Articles of Incorporation changing its name from Federal Sports
& Entertainment, Inc. to Universal Gold Mining Corp.
The
Company is an international, exploration stage, gold mining company with initial
focus on mining opportunities in Colombia and India. We have achieved no
operating revenues to date.
NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
Basis of
Presentation
The
accompanying condensed consolidated financial statements have been prepared by
the Company without audit. In the opinion of management, all adjustments (which
consist of only normal recurring adjustments) necessary to present fairly the
financial position, results of operations, and cash flows for all periods
presented herein, have been made.
The
consolidated financial statements and accompanying notes are prepared in
accordance with accounting principles generally accepted in the United States of
America. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted. It
is suggested that these financial statements be read in conjunction with the
financial statements and notes thereto included in the Company’s November 30,
2009 Form 10-K filed with the SEC. The results of operations for the
periods ended September 30, 2010, are not necessarily indicative of the
operating results for the full year.
Change in Year
End
On May
19, 2010, the Company determined to change its fiscal year from November 30 to
December 31. As the transition period covers a period of one month, the Company
was not required to file a transition report, but instead, include information
on (i) the transition period and (ii) the period from March 1, 2010 through and
including March 31, 2010 in the Company’s quarterly report on Form 10-Q for the
quarter ended June 30, 2010. The Company has chosen to use the
three-month and nine-month periods ended August 31, 2009, for comparative
purposes. Restating the prior fiscal period to the new fiscal period would not
materially affect the comparison, as the difference in activity is not
significant.
Principles of
Consolidation
The
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries, Universal Gold Holdings (Cayman) Ltd., (“UGH”), which
was incorporated in the Cayman Islands on April 22, 2010, and UGMC Mining, Inc.,
which was incorporated in British Columbia on September 14, 2010. All
material intercompany accounts and transactions have been
eliminated.
Use of
Estimates
Management
uses estimates and assumptions in preparing these consolidated financial
statements in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities, and the reported revenues
and expenses for the periods presented. Actual results could differ from those
estimates.
F-20
Reclassifications
Certain
amounts in prior periods have been reclassified to conform to current period
presentation.
Property and
Equipment
Property
and equipment are carried at cost, with depreciation provided on a straight-line
basis over their estimated useful lives of 5 years.
Income
Taxes
The
Company accounts for its income taxes in accordance with FASB ASC 740 – Income Taxes, (formerly
Statement of Financial Accounting Standards (FAS) No. 109, "Accounting for
Income Taxes"). A liability method is used whereby deferred tax assets and
liabilities are determined based on temporary differences between basis used for
financial reporting and income tax reporting purposes. Income taxes are provided
based on tax rates in effect at the time such temporary differences are expected
to reverse. A valuation allowance is provided for certain deferred tax assets if
it is more likely than not that the Company will not realize the tax assets
through future operations.
Stock-Based
Compensation
Our
board of directors approved the 2008 Equity Incentive Plan, under which we may
issue stock options. The Company accounts for this plan under the recognition
and measurement principles of ASC 718, Compensation — Stock
Compensation, which requires all share-based payments to employees,
including grants of employee stock options, to be recognized in the income
statement based upon their fair value as of the date of grant.
Foreign
Currency
The
financial statements of foreign subsidiaries are translated into U.S. dollars at
period end exchange rates except for revenues and expenses, which are translated
at average monthly rates. Translation adjustments are reflected as a separate
component of stockholders’ equity and have no current effect on earnings or cash
flows.
Foreign
currency exchange transactions are recorded using the exchange rate at the later
of either the date of settlement or the most recent intervening balance sheet
date. The Company recognized foreign currency exchange gains of $47,804 and $0
during both the three months ended September 30, 2010 and August 30, 2009,
respectively, and the nine months ended September 30, 2010 and August 30, 2009,
primarily attributable to its investment in the Convertible Loan Note more fully
discussed in Note 7 below.
Other Comprehensive
Income
ASC
Topic 220 establishes the rules for the reporting and display of comprehensive
income and its components. The Company’s other comprehensive income
is solely attributable to unrealized gains or losses on foreign currency
translation adjustments.
Concentration of Credit Risk
and Fair Value
Financial
instruments which subject the Company to concentrations of credit risk primarily
include employee and other receivables and the Company’s investment in the
Convertible Loan Note more fully discussed in Note 7 below. The Company performs
credit evaluations prior to advancing funds or granting credit to employees or
other third parties and generally does not require collateral. The Company
maintains reserves for potential losses. As of September 30, 2010, no reserve
was recorded as the Company expects its receivables and the Convertible Loan
Note to be realized.
The
Company believes the fair value of its financial instruments approximates their
carrying value at September 30, 2010 due to their short-term
nature.
F-21
Per Share
Information
Basic
net earnings (loss) per common share are computed by dividing net earnings
(loss) available to common shareholders by the weighted-average number of common
shares outstanding during the period. Diluted net earnings (loss) per common
share is determined using the weighted-average number of common shares
outstanding during the period, adjusted for the dilutive effect of common stock
equivalents. In periods when losses are reported, which is the case for all
periods presented in these consolidated financial statements, the
weighted-average number of common shares outstanding excludes common stock
equivalents, because their inclusion would be anti-dilutive.
NOTE 3 – GOING
CONCERN
In the
course of our development activities, we have sustained losses and expect such
losses to continue unless and until we can achieve net operating
revenues. Future issuances of the Company’s equity or debt securities
will be required in order for the Company to continue to finance its operations
and continue as a going concern. The Company currently has no revenue from
operations and has incurred cumulative net losses of $1,246,721 since its
inception. The financial statements of the Company have been prepared assuming
that the Company will continue as a going concern, which contemplates, among
other things, the realization of assets and the satisfaction of liabilities in
the normal course of business.
We
expect to finance our operations primarily through our existing cash and future
financings. However, there exists substantial doubt about our ability to
continue as a going concern because we will be required to obtain additional
capital in the future to continue our operations and there is no assurance that
we will be able to obtain such capital, through equity or debt financings, or
any combination thereof, whether on satisfactory terms or at all. Additionally,
no assurance can be given that any such financing, if obtained, will be adequate
to meet our ultimate capital needs and to support our growth. If adequate
capital cannot be obtained on a timely basis and on satisfactory terms, our
operations would be materially negatively impacted. Our ability to
complete additional offerings is dependent on the state of the debt and equity
markets at the time of any proposed offering, and such market’s reception of us
and the offering terms. In addition, our ability to complete an offering may be
dependent on the status of our business activities, which cannot be
predicted.
NOTE 4 – RECENT ACCOUNTING
PRONOUNCEMENTS
Recently Implemented
Standards
In
August 2009, the FASB issued Accounting Standards Update No. 2009-05,
“Measuring Liabilities at Fair
Value,” (ASU 2009-05). ASU 2009-05 provides guidance on measuring the
fair value of liabilities and is effective for the first interim or annual
reporting period beginning after its issuance. The Company’s adoption of ASU
2009-05 did not have an effect on its disclosure of the fair value of its
liabilities.
In
January 2010, the FASB issued “ASU” 2010-06, Fair Value Measurements and
Disclosures (Topic 820)—Improving Disclosures about Fair Value
Measurements. This ASU requires some new disclosures and clarifies some
existing disclosure requirements about fair value measurement as set forth in
Codification Subtopic 820-10.
The
FASB’s objective is to improve these disclosures and thus, increase transparency
in financial reporting. The ASU is effective for interim and annual reporting
periods beginning after December 15, 2009, except for the disclosures about
purchases, sales, issuances, and settlements in the roll forward of activity in
Level 3 fair value measurements. Those disclosures are effective for fiscal
years beginning after December 15, 2010, and for interim periods within those
fiscal years. Early application is permitted. The adoption of this accounting
standard update did not have a material impact on the Company’s condensed
consolidated financial statements.
Other
than the aforementioned pronouncements, recently issued standards are not
expected to have a material impact on the Company’s financial positions or
results of operations.
F-22
NOTE 5 – PROVISION FOR
INCOME TAXES
For
all periods presented, the Company had no significant current or deferred income
tax expense. At September 30, 2010, the Company has approximately $250,000 of
unrecognized tax benefits, the large majority of which relate to net operating
loss carry-forwards. We have provided a full valuation allowance due to
uncertainty regarding the realizability of these tax assets.
NOTE 6 – COMMITMENTS AND
CONTINGENCIES
Litigation
The
Company is not presently involved in any litigation.
NOTE 7 – CONVERTIBLE NOTE
RECEIVABLE
On
June 29, 2010, UGH entered into a Convertible Loan Note and a Put and Call
Option Agreement (the “Option”) with Grafton Resource Investments Ltd.
(“Grafton”). Pursuant to the agreements, the Company paid £680,000 (or
approximately US$1,028,000) on June 29, 2010 to subscribe for (i) a Convertible
Loan Note (the “Note”) of Kolar Gold Plc. (“Kolar”), an English
Company, in the principal amount of £680,000, which is convertible into “B”
ordinary shares of Kolar (the “Kolar Shares”) at a conversion price of £0.25 per
share and (ii) 18 month warrants (“Warrants”) to purchase up to 2,720,000 Kolar
Shares at an exercise price of £0.30 per share. The Option provided for Grafton
to complete the subscription for the Note as the Company’s agent, which it did.
Kolar is a private company and has been operating in India for a number of
years. Kolar has an agreement with Geo Mysore Services India Limited
(“GMSI”), an Indian company which has been granted or has applied for gold
exploration licenses covering approximately 13,000 square kilometers in India,
predominantly in the Indian Greenstone belt. Under the terms of Kolar’s
agreement with GMSI, Kolar is to pay £5 million for a 20% equity interest in
GMSI and farm-in to a number of GMSI's gold exploration license
areas.
The
Company ascribed no value to the attached Warrants due to the fact that Kolar is
privately held, and the related strike price is considered to be significantly
“out-of-the-money.” Furthermore, any value ascribed to the Warrants would
not be considered a material amount when examined in relation to the
consolidated financial statements taken as a whole. The Warrants expire on
December 31, 2011.
The
Note is reflected as a current asset on the Company’s consolidated balance sheet
after conversion to USD using the currency exchange rate as of the balance sheet
date. The effect of changes in currency exchange rates is reflected on the
consolidated statement of operations.
The
Note is dated June 17, 2010, matures on December 31, 2010, is non-interest
bearing, and has a default interest rate of 3%. The Note is convertible into
common shares of Kolar: (i) automatically upon completion of the
Fundraising (as defined) by Kolar, provided this occurs within 2 months of Kolar
entering into the MOU with GMSI; ( ii) upon written notice from Kolar if, after
two months from the date of the Kolar/GMSI MOU, the Fundraising is not complete
and GMSI issues Kolar shares of GMSI representing 5% of its total equity for the
funds provided by Kolar to GMSI; or (iii) upon notice by UGH at any time up to
December 31, 2010.
On
August 24, 2010, the Company entered into a Deed of Variation to the Option (the
“Amendment”), which alters the Company’s rights under the Option. Prior to the
Amendment, the Option provided the Company with the right (the “Initial Call
Option”), exercisable within the 90 days following Kolar’s issuance of the Note
(the “Initial Exercise Period”), to acquire 7,160,000 Kolar Shares presently
owned by Grafton (the “Existing Shares”) for consideration consisting of (i)
US$6 million in cash and (ii) newly issued shares of common stock valued at US$6
million, based on the price per share of common stock in the Company’s next
private placement or, if the Company does not consummate a private placement by
September 30, 2010, then based on the weighted average market price of common
stock over a specified period. As revised by the Amendment, the
Company now has the right (the “New Call Option”), exercisable within a 90 day
period commencing on August 16, 2010 (the “New Exercise Period”), to acquire
Grafton’s entire shareholding and share interests in Kolar, comprising the
Existing Shares and any additional Kolar Shares that Grafton may subscribe for
or otherwise acquire rights to (the “Additional Kolar Share Rights”) up to a
maximum total of 16,535,000 Kolar Shares (the “Maximum Optioned
Shares”). The exercise price payable by the Company under the New
Call Option will consist of: (x) 2.11 shares of our common stock for
each Kolar Share purchased under the New Call Option; (y) 18-month warrants
having an exercise price of $0.75 per whole share (the “A Warrants”) to purchase
0.45154 shares of common stock for each Kolar Share purchased under the New Call
Option; and (z) 18-month warrants having an exercise price of $0.90 per whole
share (the “B Warrants”) to purchase 0.45154 shares of common stock for each
Kolar Share purchased under the New Call Option.
F-23
In
order to exercise the New Call Option, the Company must deliver to Grafton
irrevocable notice of such exercise during the New Exercise Period, in which
case Grafton and we will close on the exchange of common stock, A Warrants and B
Warrants for Kolar Shares within 30 days of such exercise (the “Completion
Date”). Furthermore, in order to exercise the New Call Option,
the Company must commit to file a registration statement registering the resale
of the shares of common stock issued or issuable as the exercise price of the
New Call Option or upon exercise of the A Warrants and B Warrants (the
“Registrable Securities”) within 75 days of the Completion Date and to use best
efforts to have such registration statement declared effective within 180 days
after filing. Finally, if the Company exercises the New Call Option,
the Company must undertake to seek a listing of its common stock on AIM, TSX or
another equivalent market within six months.
If
Grafton acquires Kolar Shares in excess of the Maximum Optioned Shares, the
Company has the right to acquire a 90 day call option with respect to such
additional Kolar Shares having an exercise price per Kolar Share the same as
that under the New Call Option, by giving notice thereof to Grafton following
the date the Company exercises the New Call Option and prior to the Completion
Date.
The
Option also provided the Company with the right (the “Put Option”), exercisable
during the Old Exercise Period, to require Grafton to purchase the Company’s
entire right and interest in the Note and Warrants for an aggregate cash
purchase price of £680,000 (payable in Sterling or US Dollars, at the prevailing
spot conversion rate, at Grafton’s election). The Amendment gives the
Company the right to exercise this Put Option at any time on or before November
14, 2010. See Note 14 for discussion of the Company’s exercise of this Put
Option on November 12, 2010.
Grafton
owns 2,000,000 shares (or approximately 2.2%) of the Company’s outstanding
common stock. David Cather, a member of our Board of Directors, is a
retained consultant to Grafton. Craig Niven, a member of our Board
Directors, is a Director of and 48% shareholder in Arlington Group Asset
Management Limited (“AGAM”). AGAM is the Investment Manager of the Arlington
Special Situations Fund Limited (“ASSF”). ASSF owns US$2,000,000 face amount of
Convertible Loan Notes issued by Grafton Resources Investments Limited. Grafton
is also the owner of 7,160,000 (or approximately 15.6% of the outstanding) Kolar
Shares.
NOTE 8 – OTHER
RECEIVABLES
At
September 30, 2010 and December 31, 2009, the Company had an outstanding
receivable from a third party of $50,858 and $0, respectively. This receivable
results from the Company’s advancement of funds to the unrelated party, which
shares office space with the Company, and reimbursement by the unrelated party
of shared office expenses. These receivables are not collateralized, are
interest free, and are due on demand. The Company has not established an
allowance for doubtful accounts as of September 30, 2010, as the Company
considers these receivables to be realizable.
NOTE 9 – RELATED PARTY
TRANSACTIONS
Advances from
Shareholder
At
September 30, 2010 and December 31, 2009, the Company had been advanced $0 and
$82,405, respectively, by a major shareholder to cover operating
expenses. These advances were non-interest bearing. During the nine
months ended September 30, 2010, these amounts were ultimately forgiven by the
major shareholder and treated as a contribution of capital to the
Company. See Note 12.
F-24
Accounts Payable – Related
Party
At
September 30, 2010 and December 31, 2009, the Company owed $1,500 and $7,500,
respectively, to its CEO for services rendered to the Company as its sole
officer and director. Additionally, at September 30, 2010 and December 31, 2009,
the Company owed $18,264 and $0, respectively, to certain members (“Directors”)
of its Board of Directors (“Board”) for director fees and consulting
fees.
During
the nine months ended September 30, 2010, $7,500 of this payable was paid on
behalf of the Company by a major shareholder and treated as a contribution of
capital to the Company. See Note 12.
Employee
receivables
At
September 30, 2010 and December 31, 2009 the Company had outstanding employee
receivables of $6,883 and $0, respectively, related to the Company’s payment of
employee payroll taxes on behalf of certain non-officer
employees.
Related party
receivable
At
September 30, 2010 and December 31, 2009 the Company had outstanding related
party receivables of $9,192, and $0, respectively. The related party receivable
is due from Yellowhead Mining, Inc. (“Yellowhead”). A Director of the Company
serves as Yellowhead’s Chief Operating Officer. Yellowhead shares office space
with the Company, and the receivables are reimbursement of shared office
expenses paid by the Company.
Compensation of officers and
directors and consulting fees
Beginning
October 2008, director fees of $500 per month were earned by the Company’s CEO,
for services performed as an officer and Director. During June 2010, the Company
expanded the size of its Board and elected four addition Directors. Each of the
four new Directors receives fees for services rendered either in the form of
director fees or consulting fees, dependent upon the services being
performed.
Director
fees totaled $9,500 and $12,500 for the three and nine months ended September
30, 2010, respectively, and $1,500 and $7,500 for the three and nine months
ended August 30, 2009, respectively. Consulting fees earned by Directors totaled
$105,188 and $126,824 for the three and nine months ended September 30, 2010,
respectively. No consulting fees were payable to Directors prior to June 2009.
Consulting fees paid to Directors are included in consulting fees on the
consolidated statements of operation.
NOTE 10 – NOTE RECEIVABLE
AND CONVERTIBLE NOTE PAYABLE SETTLEMENT AGREEMENT
On
September 9, 2008, the Company entered into a 0% Secured Convertible Promissory
Note Agreement with John Thomas Bridge and Opportunity Fund, L.P. (hereafter,
"John Thomas B.O.F."). Under the terms of the Agreement, the Company borrowed
the principal amount of $500,000 ($338,838 net of fees), which was to be repaid
in full on or before December 8, 2009, unless the Promissory Note was converted
or redeemed before such date. The Promissory Note was secured by all of the
assets of Diamond Sports and its affiliate, Diamond Concessions, LLC. This
security interest was subordinated to that of a certain bank providing a
pre-existing credit facility to Diamond Sports. Three of the principal
officer/director stockholders of Diamond Sports pledged all of their shares of
capital stock of Diamond Sports to John Thomas B.O.F. as security for the
Company’s obligations under the Promissory Note.
Also on
September 9, 2008, the Company entered into a Securities Purchase Agreement
(“SPA”) with Diamond Sports & Entertainment, Inc. (“Diamond Sports”). Under
the terms of the SPA, the Company provided net proceeds of $338,838 in bridge
financing to Diamond Sports (“Bridge Financing”) in connection with a
contemplated merger between the Company and Diamond Sports (the “Merger”), and
to assist Diamond Sports in meeting its working capital requirements. The Bridge
Financing is evidenced by an Unsecured Bridge Loan Promissory Note (Bridge Note)
in the amount of $500,000 from Diamond Sports to the Company (the “Bridge
Note”).
F-25
On
February 3, 2010, as a result of the abandonment of the Company’s planned merger
with Diamond Sports, the Company and John Thomas B.O.F. entered into a
settlement agreement whereby the Bridge Note was assigned by the Company to John
Thomas B.O.F. in full satisfaction of the Promissory Note and the extinguishment
of all obligations there under, including the Company’s contingent obligation to
issue Bridge Shares and Bridge Warrants to John Thomas B.O.F. upon the closing
of a merger. The Company has no further obligations to John Thomas
B.O.F.
NOTE 11 – INVESTMENT IN
MINING OPTION
On
June 4, 2010, UGH made the first payment under an Option Agreement (as amended,
the “Option Agreement”), dated as of April 23, 2010, among UGH and Core Values
Mining & Exploration Company, a Cayman Islands corporation, and Core Values
Mining & Exploration Company’s wholly-owned Colombian subsidiary
(collectively, “CVME”). The Option Agreement provides the Company with the right
to acquire up to a 50% interest in a 164 hectare gold prospect, which is located
approximately 10 kilometers south-east of the city of Manizales in Colombia (the
“Toldafria Prospect”).
The
Option Agreement provides that the Company may earn a 25% interest in the
Toldafria Prospect at the end of the first year of the Option Agreement, by
paying an aggregate of $2,300,000 on or prior to June 4, 2010, which the Company
has done. The Company may earn an additional 15% interest in the Toldafria
Prospect at the end of the second year by paying an additional aggregate of
$2,650,000 within 30 business days after completion of the first
year. Finally, the Company may earn a further 10% interest in the Toldafria
Prospect at the end of the third year by paying an additional aggregate of
$3,050,000 within 30 business days after completion of the second year, for a
total of $8,000,000 under the Option Agreement.
CVME has
contracted to acquire the Toldafria Prospect from the registered owner pursuant
to a Purchase Agreement to which the Company is not a party (the “Purchase
Agreement”). In the event that CVME is not ultimately successful in recording
the transfer of the Toldafria Prospect pursuant to the Purchase Agreement, CVME
may not be able to deliver to the Company any property interests in the
Toldafria Prospect that the Company would otherwise earn pursuant to the Option
Agreement and the Company would lose its investment.
The
Option Agreement provides that CVME shall carry out prospecting, exploration,
development or other work as the operator on the Toldafria Prospect, and CVME
shall receive payment of $30,000 per month, out of the funds earmarked for
exploration and development activity, for its administrative and overhead costs
in such capacity.
The
Option Agreement provides for certain mechanisms by which CVME may, after the
end of the third year of the Option Agreement, elect to (a) acquire shares of
the Company’s common stock in exchange for CVME’s interest in the Toldafria
Prospect at market based valuations, or (b) form a separate joint venture
corporation that will hold both CVME’s and the Company’s interests in the
Toldafria Prospect, and operate pursuant to a Shareholders’ Agreement to be
entered into at such time.
The
$2,300,000 the Company paid to CVME during June 2010 is included in the
consolidated balance sheet at September 30, 2010 as an Investment in mining
option pending the transfer of the Toldafria Prospect to
CVME.
NOTE 12 –
EQUITY
Stock
Split
On March
22, 2010, the Company’s Board of Directors approved a 20 for 1 forward stock
split (the “Forward Split”) of the Company’s common stock, in the form of a
stock dividend. The record date for the Forward Split was April 19, 2010, the
payment date was May 7, 2010, the ex-dividend date was May 10,
2010. All share and per share information has been retroactively
adjusted to reflect the stock split. The par value of the Company’s
common stock was unchanged by the stock split.
F-26
Cancellation
Agreement
Pursuant
to a Cancellation Agreement, dated May 24, 2010, between the Company and Linda
Farrell, its majority stockholder at that time, all 150,200,000 shares of the
Company’s common stock held by Ms. Farrell were returned to the Company and
cancelled (the “Cancellation”) in exchange for $20,000 cash and reimbursement of
legal fees of $1,500. Immediately prior to the Cancellation, Ms. Farrell
was the beneficial owner of approximately 67.3% of the Company’s outstanding
common stock, accordingly, the Cancellation may be deemed a change in
control. The cash and legal fee reimbursement were paid by a Company
shareholder on the Company’s behalf and have been treated as contributed capital
in the statement of stockholders’ equity.
Capital
Contribution
During
the nine months ended September 30, 2010, the Company’s existing stockholders
paid certain expenses and accounts payable totaling $167,052 on behalf of the
Company. No shares were issued in exchange for this capital
contribution.
Private Placement
Offering
On May
24, 2010, the Company completed the initial closing of a private placement
offering (the “Offering”) of unregistered shares of the Company’s common stock,
par value $0.001 per share (the “Shares”), at $0.10 per share, to foreign and
accredited investors (the “Investors”). The Company sold an aggregate of
23,000,000 Shares in the initial closing of the Offering, resulting in gross
proceeds of $2,300,000. On June 22, 2010 and June 29, 2010, the Company
completed additional closings of the Offering of Shares, at $0.10 per share, to
additional Investors. The Company sold an aggregate of 15,000,000 shares in the
second and third closings of the Offering, resulting in aggregate additional
gross proceeds of $1,500,000.
The
Company incurred closing costs of $42,572 related to the May and June sales of
38,000,000 Shares pursuant to the Company’s Offering, resulting in net proceeds
during May and June 2010 from the Offering of $3,757,428.
On
July 8, 2010, the Company completed a final closing of the Offering. In the
final closing, the Company sold an aggregate of 1,500,000 Shares at $0.10 per
share, resulting in gross proceeds of $150,000.
On
September 20, 2010, we consummated an initial closing of a private placement
offering (the “Additional Offering”) in which we sold 2,000,000 shares of our
common stock for gross proceeds of $800,000, at an offering price of $0.40 per
share.
No
underwriting discounts or commissions were paid or are payable in connection
with the Offering or the Additional Offering.
Shares for
Services
Pursuant
to a Consulting Services Agreement and an Advisory Services Agreement, each
between the Company and one of two firms, and each dated as of June 21,
2010 (collectively, the “Professional Services Agreements”), the Company issued,
during June 2010, an aggregate of 325,000 shares of common stock to the
counterparties and their designees as consideration for certain professional
services previously rendered relating to business development and corporate
finance. The 325,000 shares issued during June 2010 were valued at $195,000, or
$0.60 per share, using the closing price of the Company’s common stock on the
date the agreement was executed. The Company recognized non-cash consulting fees
of $0 and $195,000 during the three and nine month periods ended September 30,
2010 in connection with these issuances.
Registration
Rights
We
have granted registration rights to the investors that purchased an aggregate of
39,500,000 shares in the Offering which closed on July 8, 2010, pursuant to a
Registration Rights Agreement among us and the investors, dated as of May 24,
2010. Thereunder, we are required to file a registration statement relating to
the resale of the Shares sold in the offering on or before September 21, 2010
(the “Registration Filing Date”) and cause such registration statement to be
declared effective within 180 days after its first filing (the “Registration
Effectiveness Date”). We are further required to keep the registration statement
effective until the earlier of two years from the date the registration
statement is declared effective or until all of the shares sold in the offering
may immediately being sold under Rule 144 during any 90 day
period.
F-27
We
also have granted registration rights to the investors purchasing shares of our
common stock in the Additional Offering, pursuant to a Registration Rights
Agreement among us and such investors, dated as of September 20,
2010. Thereunder, we are required to file a registration statement
relating to the resale of the Shares sold in the Offering by December 28, 2010
(which is 75 days from the final closing of the Offering) and to cause such
registration statement to be declared effective within 180 days thereafter (the
“Second Registration Effectiveness Date”).
For
both the Offering and the Additional Offering, in the event that the SEC should
limit the number of shares that may be sold pursuant to the registration
statement, we may remove from the registration statement such number of shares
as specified by the SEC on a pro-rata basis. Piggyback registration rights apply
to any shares that are removed from the registration statement as the result
thereof. If the registration statement is not filed by the Registration Filing
Date (in the case of the Additional Offering, December 28, 2010), declared
effective by the Registration Effectiveness Date (in the case of the Additional
Offering, the Second Registration Effectiveness Date), or if another
“registration event,” as such term is defined in the Registration Rights
Agreements, occurs, then we will be required to make payments to each holder of
shares, as partial liquidated damages, a cash sum equal to 1% of the purchase
price in the offering of the shares which are affected by such registration
event, for each full thirty (30) days during which such registration event
continues to affect such shares (which will be pro-rated for any period less
than 30 days). Notwithstanding the foregoing, the maximum amount of liquidated
damages that must be paid by us will be an amount equal to 10% of the purchase
price paid in the offering for the shares which are affected by all registration
events in the aggregate. Notwithstanding the foregoing, we will not be liable
for the payment of damages for any delay in registration of the shares that may
be included and sold by the holders thereof in the registration statement solely
as a result of a cut-back comment received by the SEC. Further, we will not be
liable for the payment of damages with respect to any shares excluded from the
registration statement at the request of the SEC.
We
were not able to file a registration statement by the Registration Filing Date
as required by the Offering and, therefore, are currently obligated to pay
liquidated damages. The registration statement covering the resale of
the shares sold in the Offering was filed with the SEC on November 9, 2010. As
of September 30, 2010, the Company recorded an accrual for liquidated damages of
$11,850, which is included in accrued liabilities on the consolidated balance
sheet and general and administrative expenses on the statement of operations.
The Company’s obligation for liquidated damages totaled $51,350 as of November
8, 2010.
NOTE 13 – SHARE-BASED
PAYMENTS
On
June 3, 2010, the Company granted 8,350,000 non-statutory options to its
Directors pursuant to the 2008 Equity Incentive Plan (“2008 Equity Plan”). Each
option is exercisable for a period of five years commencing three years from the
date of grant, subject to prior vesting, and can be exercised for the purchase
of one share of our common stock at a price of $0.20 per share.
One
third of such options vest on each of: the date of grant; the first
anniversary of the date of grant; and the second anniversary of the date of
grant.
The
Company recognizes the fair value of share-based payments over the vesting
periods of the awards. Shares issued in connection with stock option grants are
issued out of authorized but unissued common stock and a total of 10,000,000
shares are authorized for issuance under the 2008 Equity Plan. No stock
options were granted prior to June 3, 2010.
Compensation
expense related to options granted totaled $60,228 and $301,138 for the three
and nine months ended September 30, 2010, respectively. As of September 30,
2010, $421,593 of unrecognized compensation expense related to options granted
is expected to be recognized ratably over a remaining weighted-average period of
1.75 years.
For stock
options, the Company determined the fair value of each stock option at the grant
date using the Black-Scholes model, with the following assumptions used for the
June 3, 2010 grants:
F-28
Risk
free interest rate
|
2.17
|
%
|
||
Volatility
factor of the expected market price of the Company’s common
stock
|
146.50
|
%
|
||
Expected
dividend yield percentage
|
0.00
|
%
|
||
Weighted
average expected life
|
5
years
|
Transactions
under the stock option plans are summarized below; there were no transactions
prior to June 3, 2010:
September 30, 2010
|
||||||||
|
No. of
Options
|
Weighted
Average
Price
|
||||||
Shares under option, December 31,
2009
|
-
|
-
|
||||||
Changes
during the period:
|
||||||||
Granted
|
8,350,000
|
$
|
0.20
|
|||||
Exercised
|
-
|
-
|
||||||
Cancelled
|
-
|
-
|
||||||
Shares
under option, September 30, 2010
|
8,350,000
|
$
|
0.20
|
|||||
Exercisable
at end of period
|
0
|
$
|
0.20
|
For
all options outstanding at September 30, 2010, the exercise price is $0.20 and
the remaining contractual lives are 7.75 years. None of the
outstanding options were exercisable at September 30,
2010. Outstanding options had an intrinsic value of $3,507,000 at
September 30, 2010.
NOTE 14 – SUBSEQUENT
EVENT
On
October 8, 2010, the Company made a $250,000 non-refundable deposit with respect
to a potential transaction in Central America. The Company had determined to use
the proceeds from the Additional Offering primarily to fund its expenses in
investigating potential acquisition candidates, and the non-refundable deposit
was one such expense. Such deposit will ultimately either be included in the
cost of the acquisition and capitalized, if the transaction is consummated, or
expensed, if the transaction is not consummated.
On
October 14, 2010, the Company completed a second closing of the offering in
which it sold an additional 1,062,500 shares
of the Company’s common stock for gross proceeds of $425,000, at
an offer price of $0.40 per share.
On
November 2, 2010, the Company completed the final closing of the offering in
which it sold an additional 125,000 shares of the
Company’s common stock for gross proceeds of $50,000, at an offer price of
$0.40 per share.
On
November 12, 2010 the Company exercised the Put Option under its
June 29, 2010 Put and Call Option Agreement with Grafton Resource Investments
Ltd., as amended, on August 24, 2010 by a Deed of Variation to the Put and Call
Option Agreement (as amended, the “Kolar Agreement”). Accordingly, Grafton
Resource Investments Ltd. was required to purchase the Company’s entire
interest in the Notes and Warrants (as such terms are defined in the Kolar
Agreement) which the Company acquired pursuant to the Kolar Agreement and return
the £680,000 the Company paid for them.
In
accordance with ASC 855-10, the Company’s management reviewed all material
events through the issuance date of this report and there are no other material
subsequent events to report.
F-29
42,870,750
Shares of Common Stock
Universal
Gold Mining Corp.
PROSPECTUS
December
__, 2010
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
13. Other Expenses of Issuance and Distribution.
Set forth
below is an estimate (except for registration fees, which are actual) of the
approximate amount of the fees and expenses payable by us in connection with the
issuance and distribution of the shares of our common stock. The
selling stockholders will not responsible for any of the expenses of this
offering.
EXPENSE
|
AMOUNT
|
|||
Registration
fee
|
$ | 2,079 | ||
Legal
fees and expenses
|
$ | 75,000 | ||
Miscellaneous
fees and expenses
|
$ | 10,000 | ||
Total
|
$ | 87,079 |
Item
14. Indemnification of Directors and Officers.
Nevada
Revised Statutes (NRS) Sections 78.7502 and 78.751 provide us with the power to
indemnify any of our directors, officers, employees and agents. The
person entitled to indemnification must have conducted himself in good faith,
and must reasonably believe that his conduct was in, or not opposed to, our best
interests. In a criminal action, the director, officer, employee or
agent must not have had reasonable cause to believe that his conduct was
unlawful.
Under NRS
Section 78.751, advances for expenses may be made by agreement if the director
or officer affirms in writing that he has met the standards for indemnification
and will personally repay the expenses if it is determined that such officer or
director did not meet those standards.
Our
Amended and Restated Articles of Incorporation, as amended, provide a limitation
of liability such that no director or officer shall be personally liable to us
or any of our stockholders for damages for breach of fiduciary duty as an
officer or director or for any act or omission of any such officer or director,
except for liability (i) for acts or omissions which involve intentional
misconduct, fraud, or a knowing violation of the law, or (ii) the payment of
dividends in violation of Section 78.300 of the Nevada Revised
Statutes.
Our Board
of Directors may take such action as it deems necessary to carry out these
indemnification provisions, including adopting, subject to stockholder approval,
an amendment to our Amended and Restated Articles of Incorporation containing an
explicit provision that we shall indemnify and hold harmless each person who was
or is made a party or is threatened to be made a party to or is involved in any
action, suit or proceeding by reason of the fact that he or she, or a person for
whom he or she is the legal representative, is or was an officer or director of
ours or is or was serving at our request as an officer or director of another
corporation or of a partnership, joint venture, trust or other enterprise to the
fullest extent authorized by the Nevada General Corporation Law, adopting
procedures for determining and enforcing indemnification rights and purchasing
insurance policies. Our Board of Directors may also adopt bylaws or resolutions
or authorize the entry into contracts implementing indemnification arrangements
as may be permitted by law.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted for our directors, officers and controlling persons pursuant to the
foregoing provisions, 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 and is, therefore, unenforceable.
Item
15. Recent Sales of Unregistered Securities.
On April
10, 2008, we issued 90,200,000 fully paid and non-assessable shares of Common
Stock (adjusted for the 20 to 1 forward stock split in the form of a dividend
that we effected in May 2010) to Linda Farrell, our then President and sole
Director, for services rendered by her to us. This issuance of shares to Ms.
Farrell was exempt from the registration requirements of the Securities Act of
1933, as amended (the “Securities Act”), pursuant to Section 4(2) of the Act as
a transaction not involving a public offering.
II-1
On May
24, 2010, we completed the initial closing of a private placement offering of
shares of our common stock, par value $0.001 per share, at $0.10 per share, to
foreign and accredited investors in reliance on the exemption from registration
contained in Section 4(2) of the Securities Act and Regulation S and/or
Regulation D promulgated under the Securities Act. We sold an
aggregate of 23,000,000 Shares in the initial closing of the Offering, resulting
in gross proceeds of $2,300,000. No underwriting discounts or commissions were
paid or are payable in connection with the offering.
On June
22, 2010, we completed the second closing of a private placement offering of
shares of our common stock, at $0.10 per share, to foreign and accredited
investors in reliance on the exemption from registration contained in Section
4(2) of the Securities Act and Regulation S and/or Regulation D promulgated
under the Securities Act. We sold an aggregate of 14,750,000 shares
in the second closing of the offering, resulting in gross proceeds of
$1,475,000. No underwriting discounts or commissions were paid or are
payable in connection with the offering.
On June
29, 2010 and July 8, 2010, we completed an interim and final closing of the
private placement offering of shares of our common stock, at $0.10 per share, to
foreign and accredited investors in reliance on the exemption from registration
contained in Section 4(2) of the Securities Act and Regulation S and/or
Regulation D promulgated under the Securities Act. We sold an
aggregate of 1,750,000 shares in these closings, resulting in gross proceeds of
$175,000. Taken together with our May 24, 2010 and June 22, 2010
closings, we sold an aggregate total of 39,500,000 shares in the offering,
resulting in gross proceeds of $3,950,000. No underwriting discounts
or commissions were paid or are payable in connection with the
offering.
Pursuant
to a Consulting Services Agreement and an Advisory Services Agreement, each
between us and one of two unrelated firms, and each dated as of June 21, 2010
(collectively, the “Professional Services Agreements”), on July 7, 2010, we
issued an aggregate of 325,000 shares of our common stock to the counterparties
and their designees as consideration for certain professional services relating
to business development and corporate finance. We issued such shares
in reliance on the exemption from registration contained in Section 4(2) of the
Securities Act and Regulation D promulgated thereunder.
On
September 20, 2010, we consummated an initial closing of a private placement
offering of shares of our common stock, at $0.40 per share, to foreign and
accredited investors in reliance on the exemption from registration contained in
Section 4(2) of the Securities Act and Regulation S and/or Regulation D
promulgated under the Securities Act. We sold an aggregate of
2,000,000 shares in the initial closing of the offering, resulting in gross
proceeds of $800,000. On October 14, 2010, we completed a second
closing of the offering in which we sold an aggregate of 1,062,500 shares of our
common stock for gross proceeds of $425,000. On November 2, 2010 we
completed a final closing of the offering in which we sold an aggregate of
125,000 shares of our Common Stock for gross proceeds of
$50,000. Altogether, we sold an aggregate total of 3,187,500 shares
of our common stock in the offering, resulting in aggregate gross proceeds of
$1,275,000. No underwriting discounts or commissions were paid or are
payable in connection with the offering.
Item
16. Exhibits.
The
following exhibits are filed as part of this Registration
Statement.
In
reviewing the agreements included (or incorporated by reference) as exhibits to
this Registration Statement, please remember that they are included to provide
you with information regarding their terms and are not intended to provide any
other factual or disclosure information about the Company or the other parties
to the agreements. The agreements may contain representations and
warranties by each of the parties to the applicable agreement. These
representations and warranties have been made solely for the benefit of the
parties to the applicable agreement and:
|
·
|
should not in all instances be
treated as categorical statements of fact, but rather as a way of
allocating the risk to one of the parties if those statements prove to be
inaccurate;
|
II-2
|
·
|
have been qualified by
disclosures that were made to the other party in connection with the
negotiation of the applicable agreement, which disclosures are not
necessarily reflected in the
agreement;
|
|
·
|
may apply standards of
materiality in a way that is different from what may be viewed as material
to you or other investors;
and
|
|
·
|
were made only as of the date of
the applicable agreement or such other date or dates as may be specified
in the agreement and are subject to more recent
developments.
|
Accordingly,
these representations and warranties may not describe the actual state of
affairs as of the date they were made or at any other
time. Additional information about the Company may be found elsewhere
in this Registration Statement and the Company’s other public filings, which are
available without charge through the SEC’s website at
http://www.sec.gov.
Exhibit
No.
|
SEC
Report
Reference
No.
|
Description
|
||
2.1
|
2.1
|
Option
Agreement, dated as of November 30, 2010, by and between Universal Gold
Mining Corp. and N.C.G.A Project Acquisition Corp. (1)
|
||
2.2
|
2.2
|
Share
Purchase Agreement, dated as of November 30, 2010, by and among N.C.G.A.
Project Acquisition Corp., TWL Investments Ltd., Thomas William Lough,
James Randall Martin and Sergio Rios Molina (1)
|
||
3.1
|
3.1
|
Amended
and Restated Articles of Incorporation of Registrant as filed with the
Nevada Secretary of State on April 14, 2008 (2)
|
||
3.2
|
3.1
|
Certificate
of Amendment to Amended and Restated Articles of Incorporation of
Registrant as filed with the Nevada Secretary of State on April 9, 2010
(3)
|
||
3.3
|
3.2
|
Bylaws
of the Registrant (4)
|
||
4.1
|
4.1
|
Form
of 0% Secured Convertible Promissory Note (the “Note(s)) of the Registrant
(5)
|
||
4.2
|
4.2
|
Form
of 5-Year Bridge Warrant to Purchase shares of Common Stock of the
Registrant (5)
|
||
4.3
|
4.3
|
Form
of Securities Purchase Agreement by and among Registrant and the Buyer(s)
named therein (5)
|
||
5.1
|
*
|
Opinion
of Gottbetter & Partners, LLP
|
||
10.1
|
10.1
|
Form
of Bridge Loan Agreement by and between the Registrant and Diamond Sports
& Entertainment, Inc. (“DSEI”) dated September 9, 2008 (5)
|
||
10.2
|
10.2
|
Form
of Unsecured Bridge Loan Promissory Note of DSEI in favor of the
Registrant dated September 9, 2008 (5)
|
||
10.3
|
10.3
|
Form
of Security Agreement by and among DSEI, Diamond Concessions, LLC and the
Buyer(s) of the Registrant’s Note(s) dated as of September 9, 2008 (5)
|
II-3
Exhibit
No.
|
SEC
Report
Reference
No.
|
Description
|
||
10.4
|
10.4
|
Form
of Pledge Agreement by and among the Registrant, the Pledgors named
therein, Gottbetter & Partners, LLP and the Buyer(s) named therein
(4)
|
||
10.5
|
10.1
|
2008
Equity Incentive Plan (6)
|
||
10.6
|
10.6
|
Assignment
of Promissory Note and Release dated as of February 3, 2010, by and
between the Registrant and the Buyer of the Registrant’s Note (7)
|
||
10.7
|
10.7
|
Option
Agreement among Core Values Mining & Exploration Company, Core Values
Mining & Exploration Company Sucursal Colombia and the Registrant,
dated as of April 23, 2010 (7)
|
||
10.8
|
10.8
|
Cancellation
Agreement between the Registrant and Linda Farrell, dated May 24, 2010
(7)
|
||
10.9
|
10.9
|
Amendment
Number 1 to 2008 Equity Incentive Plan (7)
|
||
10.10
|
10.10
|
Amendment
to Option Agreement among Core Values Mining & Exploration Company,
Core Values Mining & Exploration Company Sucursal Colombia and the
Registrant, dated as of June 4, 2010 (7)
|
||
10.11
|
10.5
|
Put
and Call Option Agreement dated June 29, 2010 between Grafton Resource
Investments Ltd. and Universal Hold Holdings (Cayman) Ltd.(8)
|
||
10.12
|
10.1
|
Deed
of Variation to Put and Call Option Agreement dated June 29, 2010, dated
August 24, 2010 (9)
|
||
10.13
|
10.1
|
Form
of Subscription Agreement (2010) between the Registrant and each purchaser
of Registrant’s Common Stock at $0.10 per share (10)
|
||
10.14
|
10.2
|
Form
of Registration Rights Agreement between the Registrant and the purchasers
of Common Stock at $0.10 per share dated as of May 24, 2010 (10)
|
||
10.15
|
10.2
|
Form
of Subscription Agreement (2010) between the Registrant and each purchase
of Registrant’s Common Stock at $0.40 per share (11)
|
||
10.16
|
10.3
|
Form
of Registration Rights Agreement between the Registrant and the purchasers
of Common Stock at $0.40 per share dated as of September 20, 2010 (11)
|
||
14.1
|
14.1
|
Code
of Ethics (12)
|
||
21.1
|
*
|
List
of Subsidiaries
|
||
23.1
|
*
|
Letter
of Consent from Independent Registered Public Accounting Firm, GBH CPAs,
PC
|
||
23.2
|
*
|
Letter
of Consent from Gottbetter & Partners, LLP (included in Exhibit
5.1)
|
||
* Filed
herewith.
II-4
(1)
|
Filed
with the Securities and Exchange Commission on December 6, 2010, as an
exhibit, numbered as indicated above, to the Registrant’s Current Report
on Form 8-K dated November 30, 2010, which exhibit is incorporated herein
by reference.
|
(2)
|
Filed
with the Securities and Exchange Commission on April 18, 2008 as an
exhibit, numbered as indicated above, to the Registrant’s Current Report
on Form 8-K dated April 18, 2008, which exhibit is incorporated herein by
reference.
|
(3)
|
Filed
with the Securities and Exchange Commission on April 15, 2010 as an
exhibit, numbered as indicated above, to the Registrant’s Current Report
on Form 8-K dated April 9, 2010, which exhibit is incorporated herein by
reference.
|
(4)
|
Filed
with the Securities and Exchange Commission on February 27, 2007 as an
exhibit, numbered as indicated above, to the Registrant’s Registration
Statement on Form SB-2 (SEC File No. 333-140900), which exhibit is
incorporated herein by
reference.
|
(5)
|
Filed
with the Securities and Exchange Commission on September 15, 2008 as an
exhibit, numbered as indicated above, to the Registrant’s Current Report
on Form 8-K dated September 9, 2008, which exhibit is incorporated herein
by reference.
|
(6)
|
Filed
with the Securities and Exchange Commission on March 2, 2009 as an
exhibit, numbered as indicated above, to the Registrant’s Annual Report on
Form 10-K for the year ended November 30, 2008, which exhibit is
incorporated herein by
reference.
|
(7)
|
Filed
with the Securities and Exchange Commission on June 10, 2010 as an
exhibit, numbered as indicated above, to the Registrant’s Current Report
on Form 8-K dated March 23, 2010, which exhibit is incorporated herein by
reference.
|
(8)
|
Filed
with the Securities and Exchange Commission on August 23, 2010 as an
exhibit, numbered as indicated above, to the Registrant’s Quarterly Report
on Form 10-Q for the quarter ended June 30, 2010, which exhibit is
incorporated herein by
reference.
|
(9)
|
Filed
with the Securities and Exchange Commission on August 26, 2010 as an
exhibit, numbered as indicated above, to the Registrant’s Current Report
on Form 8-K dated August 24, 2010, which exhibit is incorporated herein by
reference.
|
(10)
|
Filed
with the Securities and Exchange Commission on May 27, 2010 as an exhibit,
numbered as indicated above, to the Registrant’s Current Report on Form
8-K dated May 24, 2010, which exhibit is incorporated herein by
reference.
|
(11)
|
Filed
with the Securities and Exchange Commission on November 15, 2010 as an
exhibit, numbered as indicated above, to the Registrant’s Quarterly Report
on Form 10-Q for the quarter ended September 30. 2010, which exhibit is
incorporated herein by
reference.
|
(12)
|
Filed
with the Securities and Exchange Commission on March 3, 2009 as an
exhibit, numbered as indicated above, to the Registrant’s Annual Report
(SEC File No. 333-140900) on Form 10-K for the fiscal year ended November
30, 2008, which exhibit is incorporated herein by
reference.
|
Item
17. Undertakings.
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;
|
|
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 thereof) 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% change in the maximum aggregate offering price
set forth in the “Calculation of Registration Fee” table in the effective
registration statement;
|
II-5
|
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. That,
for the purpose of determining liability under the Securities Act of 1933 to any
purchaser, 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 a 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.
5. That,
for the purpose of determining liability of the registrant under the Securities
Act of 1933 to any purchaser in the initial distribution of the securities: The
undersigned registrant undertakes that in a primary offering of securities of
the undersigned registrant pursuant to this registration statement, regardless
of the underwriting method used to sell the securities to the purchaser, if the
securities are offered or sold to such purchaser by means of any of the
following communications, the undersigned registrant will be a seller to the
purchaser and will be considered to offer or sell such securities to such
purchaser:
|
i.
|
Any
preliminary prospectus or prospectus of the undersigned registrant
relating to the offering required to be filed pursuant to Rule
424;
|
|
ii.
|
Any
free writing prospectus relating to the offering prepared by or on behalf
of the undersigned registrant or used or referred to by the undersigned
registrant;
|
|
iii.
|
The
portion of any other free writing prospectus relating to the offering
containing material information about the undersigned registrant or its
securities provided by or on behalf of the undersigned registrant;
and
|
|
iv.
|
Any
other communication that is an offer in the offering made by the
undersigned registrant to the
purchaser.
|
6. Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the undersigned
Registrant pursuant to the provisions described in Item 15 or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities 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 Securities Act and will be governed by the final
adjudication of such issue.
II-6
SIGNATURES
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 December 15, 2010.
Universal
Gold Mining Corp.
|
||
By:
|
/s/ David Cather
|
|
Name:
|
David
Cather
|
|
Title:
|
Chief
Executive Officer
|
In
accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated:
Signature
|
Title
|
Date
|
||
/s/ David
Cather
|
Chief
Executive Officer, Director
|
December
15, 2010
|
||
David
Cather
|
||||
/s/ Craig Niven
|
Chief
Financial and Accounting Officer, Director
|
December
15, 2010
|
||
Craig
Niven
|
||||
/s/ Bruce Stewart
|
Director
|
December
15, 2010
|
||
Bruce
Stewart
|
II-7
EXHIBIT
INDEX
Exhibit
No.
|
SEC
Report
Reference
No.
|
Description
|
||
2.1
|
2.1
|
Option
Agreement, dated as of November 30, 2010, by and between Universal Gold
Mining Corp. and N.C.G.A Project Acquisition Corp. (1)
|
||
2.2
|
2.2
|
Share
Purchase Agreement, dated as of November 30, 2010, by and among N.C.G.A.
Project Acquisition Corp., TWL Investments Ltd., Thomas William Lough,
James Randall Martin and Sergio Rios Molina (1)
|
||
3.1
|
3.1
|
Amended
and Restated Articles of Incorporation of Registrant as filed with the
Nevada Secretary of State on April 14, 2008 (2)
|
||
3.2
|
3.1
|
Certificate
of Amendment to Amended and Restated Articles of Incorporation of
Registrant as filed with the Nevada Secretary of State on April 9, 2010
(3)
|
||
3.3
|
3.2
|
Bylaws
of the Registrant (4)
|
||
4.1
|
4.1
|
Form
of 0% Secured Convertible Promissory Note (the “Note(s)) of the Registrant
(5)
|
||
4.2
|
4.2
|
Form
of 5-Year Bridge Warrant to Purchase shares of Common Stock of the
Registrant (5)
|
||
4.3
|
4.3
|
Form
of Securities Purchase Agreement by and among Registrant and the Buyer(s)
named therein (5)
|
||
5.1
|
*
|
Opinion
of Gottbetter & Partners, LLP
|
||
10.1
|
10.1
|
Form
of Bridge Loan Agreement by and between the Registrant and Diamond Sports
& Entertainment, Inc. (“DSEI”) dated September 9, 2008 (5)
|
||
10.2
|
10.2
|
Form
of Unsecured Bridge Loan Promissory Note of DSEI in favor of the
Registrant dated September 9, 2008 (5)
|
||
10.3
|
10.3
|
Form
of Security Agreement by and among DSEI, Diamond Concessions, LLC and the
Buyer(s) of the Registrant’s Note(s) dated as of September 9, 2008 (5)
|
||
10.4
|
10.4
|
Form
of Pledge Agreement by and among the Registrant, the Pledgors named
therein, Gottbetter & Partners, LLP and the Buyer(s) named therein
(4)
|
||
10.5
|
10.1
|
2008
Equity Incentive Plan (6)
|
||
10.6
|
10.6
|
Assignment
of Promissory Note and Release dated as of February 3, 2010, by and
between the Registrant and the Buyer of the Registrant’s Note (7)
|
||
10.7
|
10.7
|
Option
Agreement among Core Values Mining & Exploration Company, Core Values
Mining & Exploration Company Sucursal Colombia and the Registrant,
dated as of April 23, 2010 (7)
|
||
10.8
|
10.8
|
Cancellation
Agreement between the Registrant and Linda Farrell, dated May 24, 2010
(7)
|
Exhibit
No.
|
SEC
Report
Reference
No.
|
Description
|
||
10.9
|
10.9
|
Amendment
Number 1 to 2008 Equity Incentive Plan (7)
|
||
10.10
|
10.10
|
Amendment
to Option Agreement among Core Values Mining & Exploration Company,
Core Values Mining & Exploration Company Sucursal Colombia and the
Registrant, dated as of June 4, 2010 (7)
|
||
10.11
|
10.5
|
Put
and Call Option Agreement dated June 29, 2010 between Grafton Resource
Investments Ltd. and Universal Hold Holdings (Cayman) Ltd.(8)
|
||
10.12
|
10.1
|
Deed
of Variation to Put and Call Option Agreement dated June 29, 2010, dated
August 24, 2010 (9)
|
||
10.13
|
10.1
|
Form
of Subscription Agreement (2010) between the Registrant and each purchaser
of Registrant’s Common Stock at $0.10 per share (10)
|
||
10.14
|
10.2
|
Form
of Registration Rights Agreement between the Registrant and the purchasers
of Common Stock at $0.10 per share dated as of May 24, 2010 (10)
|
||
10.15
|
10.2
|
Form
of Subscription Agreement (2010) between the Registrant and each purchase
of Registrant’s Common Stock at $0.40 per share (11)
|
||
10.16
|
10.3
|
Form
of Registration Rights Agreement between the Registrant and the purchasers
of Common Stock at $0.40 per share dated as of September 20, 2010 (11)
|
||
14.1
|
14.1
|
Code
of Ethics (12)
|
||
21.1
|
*
|
List
of Subsidiaries
|
||
23.1
|
*
|
Letter
of Consent from Independent Registered Public Accounting Firm, GBH CPAs,
PC
|
||
23.2
|
*
|
Letter
of Consent from Gottbetter & Partners, LLP (included in Exhibit
5.1)
|
||
* Filed
herewith.
(1)
|
Filed
with the Securities and Exchange Commission on December 6, 2010, as an
exhibit, numbered as indicated above, to the Registrant’s Current Report
on Form 8-K dated November 30, 2010, which exhibit is incorporated herein
by reference.
|
(2)
|
Filed
with the Securities and Exchange Commission on April 18, 2008 as an
exhibit, numbered as indicated above, to the Registrant’s Current Report
on Form 8-K dated April 18, 2008, which exhibit is incorporated herein by
reference.
|
(3)
|
Filed
with the Securities and Exchange Commission on April 15, 2010 as an
exhibit, numbered as indicated above, to the Registrant’s Current Report
on Form 8-K dated April 9, 2010, which exhibit is incorporated herein by
reference.
|
(4)
|
Filed
with the Securities and Exchange Commission on February 27, 2007 as an
exhibit, numbered as indicated above, to the Registrant’s Registration
Statement on Form SB-2 (SEC File No. 333-140900), which exhibit is
incorporated herein by
reference.
|
(5)
|
Filed
with the Securities and Exchange Commission on September 15, 2008 as an
exhibit, numbered as indicated above, to the Registrant’s Current Report
on Form 8-K dated September 9, 2008, which exhibit is incorporated herein
by reference.
|
(6)
|
Filed
with the Securities and Exchange Commission on March 2, 2009 as an
exhibit, numbered as indicated above, to the Registrant’s Annual Report on
Form 10-K for the year ended November 30, 2008, which exhibit is
incorporated herein by
reference.
|
(7)
|
Filed
with the Securities and Exchange Commission on June 10, 2010 as an
exhibit, numbered as indicated above, to the Registrant’s Current Report
on Form 8-K dated March 23, 2010, which exhibit is incorporated herein by
reference.
|
(8)
|
Filed
with the Securities and Exchange Commission on August 23, 2010 as an
exhibit, numbered as indicated above, to the Registrant’s Quarterly Report
on Form 10-Q for the quarter ended June 30, 2010, which exhibit is
incorporated herein by
reference.
|
(9)
|
Filed
with the Securities and Exchange Commission on August 26, 2010 as an
exhibit, numbered as indicated above, to the Registrant’s Current Report
on Form 8-K dated August 24, 2010, which exhibit is incorporated herein by
reference.
|
(10)
|
Filed
with the Securities and Exchange Commission on May 27, 2010 as an exhibit,
numbered as indicated above, to the Registrant’s Current Report on Form
8-K dated May 24, 2010, which exhibit is incorporated herein by
reference.
|
(11)
|
Filed
with the Securities and Exchange Commission on November 15, 2010 as an
exhibit, numbered as indicated above, to the Registrant’s Quarterly Report
on Form 10-Q for the quarter ended September 30. 2010, which exhibit is
incorporated herein by
reference.
|
(12)
|
Filed
with the Securities and Exchange Commission on March 3, 2009 as an
exhibit, numbered as indicated above, to the Registrant’s Annual Report
(SEC File No. 333-140900) on Form 10-K for the fiscal year ended November
30, 2008, which exhibit is incorporated herein by
reference.
|