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EX-31.1 - UNIVERSAL GOLD MINING CORP.v222281_ex31-1.htm
EX-32.1 - UNIVERSAL GOLD MINING CORP.v222281_ex32-1.htm
EX-31.2 - UNIVERSAL GOLD MINING CORP.v222281_ex31-2.htm
EX-32.2 - UNIVERSAL GOLD MINING CORP.v222281_ex32-2.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2011

¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number:  333-140900

UNIVERSAL GOLD MINING CORP.
(Exact name of registrant as specified in its charter)
Nevada
 
20-4856983
(State or other jurisdiction of
incorporation or organization)
 
(IRS Employer Identification No.)

c/o Mr. Craig Niven
18 Pall Mall, 2nd Floor
London, United Kingdom
SW1Y 5LU
(Address of principal executive offices)
(Zip Code)

702-800-7323
  (Registrant’s telephone number, including area code)
 
 
 (Former name, former address and former fiscal year, if changed since last report)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x  No ¨
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes ¨  No ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):
 
 Large accelerated filer   ¨
Accelerated filer   ¨
Non-accelerated filer   ¨
     Smaller reporting company   x
   
(Do not check if a smaller
 Reporting company)
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of May 13, 2011, there were 93,012,500 shares of the issuer’s common stock outstanding.

 
 

 

UNIVERSAL GOLD MINING CORP.
 
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2011
TABLE OF CONTENTS
 
   
PAGE
     
 
PART I - FINANCIAL INFORMATION
 
     
Item 1.
Financial Statements (Unaudited).
3
     
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
18
     
Item 3.
Quantitative and Qualitative Disclosures About Market Risk.
23
     
Item 4
Controls and Procedures.
23
     
 
PART II - OTHER INFORMATION
 
     
Item 1.
Legal Proceedings.
24
     
Item 1A.
Risk Factors.
24
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
24
     
Item 3.
Defaults Upon Senior Securities.
24
     
Item 4.
(Removed and Reserved).
24
     
Item 5.
Other Information.
24
     
Item 6.
Exhibits.
24
     
 
SIGNATURES
28
 
 
2

 
 
PART I – FINANCIAL INFORMATION
 
ITEM 1.             FINANCIAL STATEMENTS
 
 
PAGE
   
Consolidated Balance Sheets (Unaudited) as of March 31, 2011 and December 31, 2010
4
   
Consolidated Statements of Operations (Unaudited) for the three months ended March 31, 2011 and March 31, 2010 and the period from May 3, 2006 (Inception) through March 31, 2011
5
   
Consolidated Statement of Stockholders’ Equity (Deficit) (Unaudited) for the period from May 3, 2006 (Inception) through March 31, 2011
6
   
Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 2011 and March 31, 2010 and the period from May 3, 2006 (Inception) through March 31, 2011
8
   
Notes to Consolidated Financial Statements (Unaudited)
9
 
 
3

 
 
Universal Gold Mining Corp. (f/k/a Federal Sports & Entertainment, Inc.)
(An Exploration Stage Company)
Consolidated Balance Sheets
(Unaudited)
 
   
March 31,
   
December 31,
 
   
2011
   
2010
 
ASSETS
           
             
Current Assets
           
Cash
  $ 299,052     $ 947,153  
Employee receivable
    -       1,084  
Related party receivable
    -       5,258  
GST refund receivable
    21,062       16,328  
Prepaid expenses and other current assets
    4,967       1,866  
        Total Current Assets
    325,081       971,689  
                 
Property and equipment, net
    -       3,613  
Investment in mining option
    2,300,000       2,300,000  
 
               
Total Assets
  $ 2,625,081     $ 3,275,302  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
         
                 
Current Liabilities
               
Accounts payable
  $ 656,001     $ 326,228  
Accounts payable-related party
    60,882       65,183  
Accrued liabilities
    38,138       258,020  
        Total Current Liabilities
    755,021       649,431  
                 
Total Liabilities
    755,021       649,431  
                 
Commitments and contingencies
    -       -  
                 
Stockholders’ Equity
               
Preferred stock, $0.001 par value, 10,000,000 shares authorized; 0 shares issued and outstanding as of March 31, 2011 and December 31, 2010
    -       -  
Common stock, $0.001 par value, 1,500,000,000 shares authorized; 93,012,500 shares issued and outstanding as of March 31, 2011 and December 31, 2010
    93,013       93,013  
Additional paid-in capital
    5,904,877       5,866,408  
Other comprehensive income
    3,713       2,136  
Deficit accumulated in the exploration stage
    (4,131,543 )     (3,335,686 )
       Total Stockholders’ Equity
    1,870,060       2,625,871  
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  $ 2,625,081     $ 3,275,302  

See notes to unaudited consolidated financial statements

 
4

 
 
Universal Gold Mining Corp. (f/k/a Federal Sports & Entertainment, Inc.)
(An Exploration Stage Company)
Consolidated Statements of Operations
(Unaudited)

   
Three Months Ended
   
 May 3, 2006
(Inception)
 Through 
 
   
March 31, 
2011
   
March 31,
2010
   
March 31,
2011
 
Revenues
  $ -     $ -     $ -  
      -       -       -  
Expenses
                       
General and administrative
    795,630       25,953       3,780,147  
Mineral expenditures
    -       -       6,750  
Depreciation
    198       -       538  
Impairment loss (mineral claims and mining option)
    -       -       376,410  
Total Expenses
    795,828       25,953       4,163,845  
                         
Other Income (Expense)
                       
Foreign currency exchange gain (loss)
    (29 )     -       31,637  
Interest income
    -       -       161,827  
Interest expense
    -       -       (161,162 )
Total Other Income (Expense)
    (29 )     -       32,302  
                         
Net Loss
  $ (795,857 )   $ (25,953 )   $ (4,131,543 )
                         
Basic and Diluted Loss Per Common Share
  $ (0.01 )   $ (0.00 )        
                         
Weighted Average Number of Common Shares Outstanding - Basic and Diluted
    93,012,500       200,200,000          
 
See notes to unaudited consolidated financial statements
 
5

 
 
Universal Gold Mining Corp. (f/k/a Federal Sports & Entertainment, Inc.)
(An Exploration Stage Company)
Consolidated Statements of Stockholders’ Equity
(Unaudited)
 
   
Common Stock
   
Additional
Paid-in
   
Deficit
Accumulated
in the
Development
   
Other
Comprehensive
   
Total
Stockholders’
Equity
 
   
Shares
   
Amount
   
Capital
   
Stage
   
Income
   
(Deficit)
 
Balance, May 3, 2006 (Inception)
    -     $ -     $ -     $ -     $ -     $ -  
Common Stock issued at $0.0025 on 8/4/06
    60,000,000       60,000       (52,500 )     -       -       7,500  
Net loss, May 3, 2006 (Inception) through 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 $0.01 on 3/29/07
    31,800,000       31,800       (15,900 )     -       -       15,900  
Common Stock issued at $0.01 on 4/3/07 through 4/10/07
    18,200,000       18,200       (9,100 )     -       -       9,100  
Net loss, year ended 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, year ended November 30, 2008
    -       -       -       (97,440 )     -       (97,440 )
Balance, November 30, 2008
    200,200,000     $ 200,200     $ (122,600 )   $ (113,441 )   $ -     $ (35,841 )
                                                 
Net loss, year ended November 30, 2009
    -       -       -       (65,598 )     -       (65,598 )
Balance, November 30, 2009
    200,200,000     $ 200,200     $ (122,600 )   $ (179,039 )   $ -     $ (101,439 )
                                                 
Net loss, month ended 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 to 6/29/10
    38,000,000       38,000       3,719,428       -       -       3,757,428  
Common Stock issued on 6/21/10 for services rendered
    325,000       325       194,675       -       -       195,000  
Common Stock issued at $0.10 on 7/8/10
    1,500,000       1,500       148,500       -       -       150,000  
Common Stock issued at $0.40 on 9/20/10
    2,000,000       2,000       798,000       -       -       800,000  
Common Stock issued at $0.40 on 10/14/10 through 11/2/10
    1,187,500       1,188       473,812       -       -       475,000  
Stock-based compensation
    -       -       358,841       -       -       358,841  
Contributed capital
    -       -       167,052       -       -       167,052  
Foreign currency translation gain
    -       -       -       -       2,136       2,136  
Net loss, year ended December 31, 2010
    -       -       -       (3,153,487 )     -       (3,153,487 )
Balance, December 31, 2010
    93,012,500     $ 93,013     $ 5,866,408     $ (3,335,686 )   $ 2,136     $ 2,625,871  

See notes to unaudited consolidated financial statements
 
 
6

 
 
Universal Gold Mining Corp. (f/k/a Federal Sports & Entertainment, Inc.)
(An Exploration Stage Company)
Consolidated Statements of Stockholders’ Equity
(Unaudited)
 
   
Common Stock
   
Additional
Paid-in
   
Deficit
Accumulated
in the
Development
   
Other
Comprehensive
   
Total
Stockholders’
Equity
 
   
Shares
   
Amount
   
Capital
   
Stage
   
Income
   
(Deficit)
 
                                     
Stock-based compensation
    -     $ -     $ 38,469     $ -     $ -     $ 38,469  
Foreign currency translation gain
    -       -       -       -       1,577       1,577  
Net loss, three months ended March 31, 2011
    -       -       -       (795,857 )     -       (795,857 )
Balance, March 31, 2011
    93,012,500     $ 93,013     $ 5,904,877     $ (4,131,543 )   $ 3,713     $ 1,870,060  

See notes to unaudited consolidated financial statements
 
 
7

 
 
Universal Gold Mining Corp. (f/k/a Federal Sports & Entertainment, Inc.)
(An Exploration Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)

   
Three Months Ended
   
 May 3, 2006
(Inception)
 
   
March 31, 
2011
   
March 31,
2010
   
Through
March 31, 2011
 
Cash flows from operating activities
                 
Net loss
  $ (795,857 )   $ (25,953 )   $ (4,131,543 )
Adjustments to reconcile net loss to net cash used in
                       
    operating activities:
                       
    Depreciation
    198       -       538  
    Stock-based compensation
    38,469       -       637,410  
        Loss on disposal of fixed assets
    3,518       -       3,518  
        Impairment expense (mineral claims and mining options)
    -       -       376,410  
    Accretion of discount on note receivable
    -       -       (103,144 )
    Amortization of deferred financing costs
    -       -       103,144  
    Expenses paid by stockholder
    -       500       14,500  
    Bad debt expense
    2,803       -       69,170  
    Foreign currency exchange (gain)/loss
    29       -       (31,637 )
     Changes in operating assets and liabilities:
                       
    Employee receivable
    1,069       -       12  
    Related party receivable
    5,185       -       60  
    Other receivable
    (8,064 )     -       (91,577 )
    Prepaid expenses and other current assets
    (3,127 )     2,500       (2,444 )
    Accounts payable
    330,030       3,740       784,536  
    Accounts payable – related party
    (4,123 )     1,000       60,733  
    Accrued liabilities and expenses
    (94,800 )     -       40,786  
Net cash used in operating activities
    (524,670 )     (18,213 )     (2,269,528 )
                         
Cash flows from investing activities
                       
     Issuance of note receivable
    -       -       (338,838 )
     Purchases of property and equipment
    -       -       (4,045 )
     Purchase of put and call option/convertible note
    -       -       (1,027,276 )
     Proceeds from exercise of put option on convertible note
    -       -       1,059,100  
     Cash paid for investment in mining option
    (125,000 )     -       (2,676,410 )
Net cash used in investing activities
    (125,000 )     -       (2,987,469 )
                         
Cash flows from financing activities
                       
Advances from stockholder
    -       18,213       82,405  
Repayment of advance from stockholder
    -       -       (82,405 )
Issuance of common stock, net of offering costs
    -       -       5,214,928  
Borrowings on debt, net of costs
    -       -       338,838  
Net cash provided by financing activities
    -       18,213       5,553,766  
                         
Effect of exchange rates on cash activities
    1,569       -       2,283  
                         
Net (Decrease) Increase in Cash
    (648,101 )     -       299,052  
Cash at Beginning of Period
    947,153       -       -  
Cash at End of Period
  $ 299,052     $ -     $ 299,052  
                         
See notes to unaudited consolidated financial statements
 
 
8

 
 
Universal Gold Mining Corp. (f/k/a Federal Sports & Entertainment, Inc.)
(An Exploration Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)

   
Three Months Ended
   
May 3, 2006
(Inception)
 
   
March 31, 
2011
   
March 31,
2010
   
Through
March 31, 2011
 
Supplemental Disclosures
                 
Cash paid for:
                 
     Interest
  $ -     $ -     $ -  
     Income taxes
    -       -       -  
                         
Non-cash Investing and Financing Activities
                       
     Assignment of note receivable for satisfaction of note payable
    -       500,000       500,000  
                         
     Contributed capital – payables settled by Stockholder
    -       -       145.522  
     Contributed capital – shares acquired by Stockholder and
         cancelled
    -       -       21,500  
 
 
9

 
 
Universal Gold Mining Corp. (f/k/a Federal Sports & Entertainment, Inc.)
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
(Unaudited)

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

Universal Gold Mining Corp. (f/k/a Federal Sports & Entertainment, Inc.) (“we,” “Universal” or 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, Corp. to Federal Sports & Entertainment, Inc. to reflect the Company’s decision to engage in the business of acquiring and operating an independent, minor league baseball league. The Company was unsuccessful in this endeavor.

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. and determined to shift its focus to the acquisition, exploration and development of gold mining deposits.
 
The Company is an international, exploration stage, gold mining company with its efforts initially focused on Colombia and on what it believes to be under-explored countries. The Company is in the exploration stage and has achieved no operating revenues to date.

NOTE 2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying 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 consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s December 31, 2010 Form 10-K filed with the SEC. The results of operations for the period ended March 31, 2011 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.

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. (“UGMC”), which was incorporated in British Columbia on September 14, 2010.  UGMC ceased operations as of February 2011 and is in the process of being dissolved. 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.
 
 
10

 
 
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. The Company maintains its cash in institutions insured by the Federal Deposit Insurance Corporation (FDIC). Beginning December 31, 2010 through December 31, 2012 all noninterest-bearing transaction accounts are fully insured, regardless of the balance of the account, at all FDIC-insured institutions. This unlimited insurance coverage is separate from, and in addition to, the insurance coverage provided to the depositor’s other accounts held by a FDIC-insured institution, which are insured for balances up to $250,000 per depositor until December 31, 2013. At March 31, 2011 and December 31, 2010, the amounts held in the banks exceeded the insured limit of $250,000.  The Company has not incurred losses related to these deposits.

Accounts Receivable and Allowance for Doubtful Accounts
 
The Company’s accounts receivable is composed primarily of receivables from employees, related parties and third parties. The Company performs credit evaluations prior to advancing funds or granting credit to third parties and generally does not require collateral. The Company maintains an allowance for doubtful accounts for amounts in which collection is not assured.

Goods and Services Tax (“GST”) Refund Receivable

The Canadian Government requires Canadian resident companies to collect sales taxes from customers when goods and services are sold in Canada.  These taxes collected can be offset by taxes paid (tax credits) for goods and services purchased in Canada.  Any sale outside of Canada is not taxed for this purpose.  At the end of each quarter, all taxes paid on goods and services purchased are netted against the taxes due on sales of goods and services sold.  Because the Company has more tax credits than taxes collected, as of March 31, 2011 and December 31, 2010 the Company was due a refund of $21,062 and $16,328, respectively.

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. During the three months ended March 31, 2011 and the period from May 3, 2006 (inception) through March 31, 2011, we recognized a loss  of $3,518 on property and equipment held by UGMC, following the closure of UGMC’s offices in Vancouver, British Columbia, which is included in general and administrative expenses on the company’s consolidated statements of operations.

Mineral Exploration and Development Costs

All exploration expenditures are expensed as incurred. Costs of acquisition and option costs of mineral rights are capitalized upon acquisition. Mine development costs incurred to develop new ore deposits, to expand the capacity of mines or to develop mine areas substantially in advance of production are also capitalized once proven and probable reserves exist and the property is determined to be a commercially mineable property. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. If the Company does not continue with exploration after the completion of the feasibility study, the cost of mineral rights will be expensed at that time.  Costs of abandoned projects, including related property and equipment costs, are charged to mining costs. To determine if these costs are in excess of their recoverable amount, periodic evaluation of the carrying value of capitalized costs and any related property and equipment costs are based upon expected future cash flows and/or estimated salvage value.
 
 
11

 
 
Income Taxes

The Company accounts for its income taxes using the liability method, 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 Topic 825 – 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 receivables and payables.  The Company believes the carrying value of these financial instruments approximates fair value given their short-term nature.

Earnings (Losses) Per Share Information

Basic net earnings (loss) per common share are computed by dividing net income (loss) 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. Potentially dilutive securities consist of outstanding option grants to employees and directors, which totaled 4,666,667 at March 31, 2011. There were no dilutive securities outstanding at March 31, 2010.

Stock-Based Compensation

The Company’s Board of Directors approved the 2008 Equity Incentive Plan (the “2008 Plan”), under which the Company 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 consolidated statement of operations based upon their estimated 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 a foreign currency exchange loss of $(29) and $0 during the three months ended March 31, 2011 and 2010, respectively, and a gain of $31,637 for the period from May 3, 2006 (inception) through March 31, 2011.
 
Other Comprehensive Income

The Company’s other comprehensive income is solely attributable to unrealized gains or losses on foreign currency translation adjustments.
 
 
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New Accounting Pronouncements

In December 2010, the FASB issued the FASB ASU 2010-29 “Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations”. ASU 2010-29 specifies that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments in this Update also expand the supplemental pro forma disclosures under Topic 805 to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The amended guidance is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. Early adoption is permitted.

The Company does not expect the adoption of this or other new accounting pronouncements to have a material effect on the Company’s consolidated financial statements.
 
NOTE 3 – GOING CONCERN
 
In the course of the Company’s exploration activities, the Company has sustained losses and expects such losses to continue unless and until the Company 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 $4,131,543 since its inception. The Company’s consolidated financial statements 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.  Realization values may be substantially different from carrying values as shown and the Company’s 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 the Company is unable to continue as a going concern.
 
The Company expects to finance its operations primarily through its existing cash and future financings. However, there exists substantial doubt about the Company’s ability to continue as a going concern because it will be required to obtain additional capital in the future to continue its operations and there is no assurance that the Company 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 the Company’s ultimate capital needs and to support its growth. If adequate capital cannot be obtained on a timely basis and on satisfactory terms, the Company’s operations would be materially negatively impacted. The Company’s 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 the Company and the offering terms. In addition, the Company’s ability to complete an offering may be dependent on the status of the Company’s business activities, which cannot be predicted.

NOTE 4 – INVESTMENT IN MINING OPTION

On June 4, 2010, the Company made the first payment under an Option Agreement (as amended, the “Option Agreement”), dated as of April 23, 2010, among the Company 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 $2,300,000 on or prior to June 4, 2010, which the Company has paid. The Company may earn an additional 15% interest in the Toldafria Prospect at the end of the second year (June 2011), by paying $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 (June 2012), by paying an additional $3,050,000 within 30 business days after completion of the second year, for a total of $8,000,000 under the Option Agreement.
 
 
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CVME has contracted to acquire the Toldafria Prospect from the person believed to be the registered owner thereof pursuant to a purchase agreement to which the Company is not a party (the “Toldafria Purchase Agreement”).  CVME’s success in recording the transfer of the Toldafria Prospect, and therefore the Company’s earning of the interest therein, is contingent upon, among other things, approval of the relevant Colombian government authorities. In the event that CVME is not ultimately successful in meeting its obligations, or recording the transfer of the Toldafria Prospect free of encumbrances, pursuant to the Toldafria Purchase Agreement, CVME may not be able to deliver to the Company any property interests in the Toldafria Prospect that the Company earns pursuant to the Toldafria Option Agreement, as amended, 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 an 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 March  31, 2011 and December 31, 2010 as an “Investment in mining option” pending the transfer of the Toldafria Prospect.

NOTE 5 – OTHER RECEIVABLES

At March 31, 2011 and December 31, 2010, the Company had other receivables of $69,170 and $66,367, respectively, resulting from the Company’s advancement of funds to an unrelated party that shares office space with the Company and for amounts due the Company as reimbursement by the unrelated party for shared office expenses. These receivables are not collateralized, are interest free and are due on demand. The Company established an allowance for doubtful accounts at March 31, 2011 and December 31, 2010 of $69,170 and $66,367, respectively, based upon its assessment that these receivables are uncollectible.  The Company had no other third party receivables outstanding at March 31, 2011 and December 31, 2010.

NOTE 6 – HEMCO OPTION - ACQUISITION COSTS

On November 30, 2010, the Company entered into an agreement, referred to as the “Hemco Option Agreement”, with N.C.G.A. Project Acquisition Corp. (“NCGA”), an entity controlled by certain of the Company’s minority shareholders, whereby the Company would, at its option (the “Hemco Option”), be entitled to acquire, and to require NCGA to transfer to the Company, 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 were 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”), among NCGA and TWL Investments Ltd., Thomas William Lough (“Lough”), James Randall Martin (“Martin”) and Sergio Rios Molina (“Rios” and together with TWL and Martin, “Sellers”).  The Share Purchase Agreement provided that NCGA would 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 would 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. (“HemcoNic”). HemcoNic is a private Nicaraguan company which operates the Bonanza gold and silver mine located in Nicaragua, Central America.

The Hemco Option Agreement provided that if the Company exercised the Hemco Option, it would, among other things, be able to acquire the Hemco Assets from NCGA for $64,750,000, which was equal to the balance of the $65,000,000 purchase price ($250,000 of which had already been paid in the form of a non-refundable deposit) that NCGA would be required to pay to Sellers at the closing of the transactions under the Share Purchase Agreement.   
 
 
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As of December 31, 2010, the Hemco Option Agreement was amended (the “Hemco Option Agreement Amendment”). The Hemco Option Agreement Amendment included, among other things, the Company’s consent to NCGA’s entry into Amendment No. 1, dated as of December 31, 2010, to the Share Purchase Agreement (the “Share Purchase Agreement Amendment”). The Share Purchase Agreement Amendment, among other things: extended from December 31, 2010 to February 15, 2011 the date by which the parties to the Share Purchase Agreement were permitted to terminate such agreement; and included an agreement to pay an additional non-refundable $125,000 upon the execution of the Share Purchase Agreement Amendment and an additional $125,000 upon the closing of the Share Purchase Agreement, as amended.  The non-refundable $125,000 was paid on January 4, 2011.

The Share Purchase Agreement and the transactions contemplated thereunder were terminated because the closing did not occur on or before February 15, 2011 and, accordingly, the Company determined not to exercise the Hemco Option.  The Company determined not to proceed with a private placement of its securities to obtain proceeds that would have been used to acquire the Hemco Assets.  As of March 31, 2011, the Company incurred total costs and impairment expense of $1,656,980, of which $388,413 and $0 costs were incurred during the three months ended March 31, 2011 and 2010, respectively, in connection with the Company’s execution of the Hemco Option Agreement and the Hemco Option Agreement Amendment and its efforts to raise the funding necessary to exercise the Hemco Option.  The costs are included in general and administrative expenses on the Company’s consolidated statements of operations.

NOTE 7 – RELATED PARTY TRANSACTIONS

Accounts Payable – Related Party

At March 31, 2011 and December 31, 2010, the Company owed $60,882 and $65,183, respectively, to certain members of its Board of Directors (“Directors”) for director fees and consulting fees.

Employee receivables

At March 31, 2011 and December 31, 2010, the Company had outstanding employee receivables of $0 and $1,084, respectively, related to the Company’s payment of employee payroll taxes on behalf of certain non-officer employees.

Related party receivable

At March 31, 2011 and December 31, 2010, the Company had outstanding related party receivables of $0 and $5,258, respectively. The related party receivable at December 31, 2010 was due from Yellowhead Mining, Inc. (“Yellowhead”). A former Director of the Company serves as Yellowhead’s Chief Operating Officer. Yellowhead shared office space with the Company, and the receivables are reimbursement of shared office expenses paid by the Company.

Compensation of director’s fees

Director fees totaled $6,000 and $500 for the three months ended March 31, 2011 and 2010, respectively, and $70,100 for the period from May 3, 2006 (inception) through March 31, 2011. Director fees are included in general and administrative expense on the consolidated statements of operations.

NOTE 8 – COMMITMENTS AND CONTINGENCIES

Office Space

As of March 2011, the Company no longer leases offices in Vancouver, British Columbia.
 
 
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Litigation

From time to time, the Company may become involved in lawsuits and legal proceedings that arise in the ordinary course of business. The Company is currently not aware of any such legal proceedings or claims that could have, individually or in the aggregate, a material adverse affect on its business, financial condition, operating results or cash flows.

NOTE 9 – PROVISION FOR INCOME TAXES

No provision for federal income taxes has been recognized for the three months ended March 31, 2011 and 2010 and for the period from May 3, 2006 (inception) through March 31, 2011 as the Company incurred a net operating loss for income tax purposes in each period and has no carryback potential.

Deferred tax assets and liabilities as of March 31, 2011 and December 31, 2010 consisted primarily of deferred tax assets resulting from net operating loss carryforwards of $1,147,800 and $877,209, respectively. We have provided a full valuation allowance due to uncertainty regarding the realizability of these tax assets. The Company’s effective tax rate differs from the statutory rate due to a $278,550 increase in the valuation allowance for the three months ended March 31, 2011.
 
NOTE 10 – STOCK OPTIONS

The Company has an equity incentive plan (the “2008 Plan”) that currently allows for equity awards to employees and directors and, in certain instances, consultants covering up to 10,000,000 shares of common stock. 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.

The Company recognizes the fair value of share-based payments over the vesting periods of the awards. Compensation expense related to options granted totaled $38,469 and $0 for the three months ended March 31, 2011 and 2010, respectively, and $637,410 for the period from May 3, 2006 (inception) through March 31, 2011. Measured but unrecognized stock-based compensation expense at March 31, 2011 was $144,258, which is expected to be recognized as expense over a weighted-average period of 1.25 years.
 
Stock option activity and related information for the three months ended March 31, 2011 is as follows:
 
  
 
Number of
Options
   
Weighted
Average
Exercise
Price
   
Aggregate
Intrinsic 
Value
 
Outstanding at December 31, 2010
    6,666,667     $ 0.20     $ -  
Granted
    -                  
Exercised
    -                  
Forfeited
    2,000,000     $ 0.20          
Outstanding at March 31, 2011
    4,666,667             $ -  
                         
Vested at March 31, 2011
    2,000,000     $ 0.20     $ -  
                         
Exercisable at March 31, 2011
    -                  

Outstanding options had $0 intrinsic value at March 31, 2011 and December 31, 2010, due to the exercise price being greater than the value of the Company’s common stock at March 31, 2011 and December 31, 2010.
 
 
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On February 28, 2011, Andrew Neale resigned from his position as a member of the Company’s Board of Directors and any committees thereof effective as of that date. During 2010, Mr. Neale was granted 2,000,000 options, of which 666,667 options were fully vested as of Mr. Neale’s resignation date. The 1,333,333 unvested options granted to Mr. Neale were forfeited as of Mr. Neale’s termination date. Mr. Neale had until March 30, 2011 to exercise the remaining 666,667 vested options, but did not notify the Company that he wished to do so and such shares then became available for further issuance pursuant to the 2008 Plan.  As of March 31, 2011, 5,333,333 shares remain available for issuance under the 2008 Plan.

NOTE 11 – SUBSEQUENT EVENT

The Company is in the process of dissolving its wholly-owned subsidiary UGMC Mining, Inc., which was incorporated in British Columbia on September 14, 2010.  It expects this subsidiary to be dissolved during 2011.

In accordance with ASC 855-10, the Company’s management reviewed all material events through the issuance date of this quarterly report on Form 10-Q and there are no other material subsequent events to report.
 
 
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ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements. All statements other than statements of historical facts included in this quarterly report including, without limitation, statements in the Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this quarterly report on Form 10-Q, regarding our financial condition, estimated working capital, business strategy, the plans and objectives of our management for future operations and those statements preceded by, followed by or that otherwise include the words “believe,” “expects,” “anticipates,” “intends,” “estimates,” “projects,” “target,” “goal,” “will,” “plans,” “objective,” “should,” or similar expressions or variations on such expressions are forward-looking statements. We can give no assurances that the assumptions upon which the forward-looking statements are based will prove to be correct. Because forward-looking statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from the forward-looking statements.  A description of some of the risks and uncertainties that could cause our actual results to differ materially from those described by the forward-looking statements in this quarterly report on Form 10-Q appears in the section captioned “Risk Factors” in our annual report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2011.

Except as otherwise required by the federal securities laws, we disclaim any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement contained in this quarterly report on Form 10-Q to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Plan of Operation

We are an international, exploration stage gold mining exploration and production company focusing our initial operations in Colombia. We have achieved no operating revenues to date. In April 2010, we entered into the Toldafria Option Agreement, as amended, which gives us the right to acquire up to a 50% interest in a Colombian gold prospect (see “– Toldafria Prospect”). In November 2010, we entered into the Hemco Option Agreement, as amended, which gave 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. In February 2011, we determined not to exercise the option pursuant to the Hemco Option Agreement. (See “Financial Statements—Note 6—Hemco Option”).

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 planned operations would be materially negatively impacted.  Our ability to complete additional financings is dependent on the state of the debt and equity markets at the time of any proposed financing, and such market’s reception of us and the financing terms. In addition, our ability to complete a financing may be dependent on the status of our business activities, which cannot be predicted.
 
 
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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 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 have been retroactively restated for this stock split as well.

The Company conducts its operations through 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. (“UGMC”), which was incorporated in British Columbia on September 14, 2010.  UGMC ceased operations as of February 2011 and is in the process of being dissolved

Change in Fiscal 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. 

Toldafria Prospect

The following summary of the material terms of the Toldafria Option Agreement and the Toldafria Option Agreement Amendment does not purport to be complete and is subject to, and qualified in its entirety by reference to, all the provisions of such agreements. Because the following is only a summary, it does not contain all information that you may find useful.  For more complete information, you should read each of the Toldafria Option Agreement and the Toldafria Option Agreement Amendment, each of which is referenced as an exhibit to this quarterly report on Form 10-Q.

In June 2010, our wholly-owned subsidiary, UGH made the first payment under an Option Agreement (as amended, the “Toldafria Option Agreement”), dated as of April 23, 2010, among 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 Toldafria 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 Toldafria Option Agreement (the “Toldafria Option Agreement Amendment”) which included a bring-down of representations and warranties made by CVME in the Toldafria Option Agreement.

The Toldafria Option Agreement, as amended, provides that UGH may earn a 25% interest in the Toldafria Prospect at the end of the first year of the Toldafria Option Agreement, as amended, by paying an aggregate amount of $2,300,000 on or prior to June 4, 2010, which UGH has paid.  $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.  UGH may earn an additional 15% interest in the Toldafria Prospect at the end of the second year (June 2011), by paying an additional aggregate amount 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, UGH may earn a further 10% interest in the Toldafria Prospect at the end of the third year (June 2012), by paying an additional aggregate amount 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 UGH will have sufficient capital to pay for the additional interests in the Toldafria Prospect.
 
 
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CVME has contracted to acquire the Toldafria Prospect from the person believed to be the registered owner thereof pursuant to a purchase agreement to which we are not a party (the “Toldafria Purchase Agreement”).   CVME’s success in recording the transfer of the Toldafria Prospect, and therefore our earning of the interest therein, is contingent upon, among other things, approval of the relevant Colombian government authorities. In the event that CVME is not ultimately successful in meeting its obligations or recording the transfer of the Toldafria Prospect free of encumbrances pursuant to the Toldafria Purchase Agreement, CVME may not be able to deliver to us any property interests in the Toldafria Prospect that we earn pursuant to the Toldafria Option Agreement and we would lose our investment.

The Toldafria Option Agreement provides that CVME will carry out prospecting, exploration, development or other work approved by the Technical Committee as the operator on the Toldafria Prospect, and CVME will 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 Toldafria Option Agreement provides for certain mechanisms by which CVME may, after the end of the third year of the Toldafria Option Agreement elect to (1) acquire shares of our common stock in exchange for CVME’s interest in the Toldafria Prospect at market based valuations, or (2) 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 Option

The following summary of the material terms of the Hemco Option Agreement, the Share Purchase Agreement, the Hemco Option Agreement Amendment and the Share Purchase Agreement Amendment does not purport to be complete and is subject to, and qualified in its entirety by reference to, all the provisions of such agreements. Because the following is only a summary, it does not contain all information that you may find useful.  For more complete information, you should read each of the Hemco Option Agreement, the Share Purchase Agreement, the Hemco Option Agreement Amendment and the Share Purchase Agreement Amendment, each of which is  referenced as an exhibit to this quarterly report on Form 10-Q.

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”), an entity controlled by certain of our minority shareholders, whereby we would, at our option (the “Hemco 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 were 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”), 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, “Sellers”).  The Share Purchase Agreement provided that NCGA would 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 would 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. (“HemcoNic”). HemcoNic is a private Nicaraguan company which operates the Bonanza gold and silver mine located in Nicaragua, Central America.

The Hemco Option Agreement provided that if we exercised the Hemco Option, we would be able to acquire the Hemco Assets from NCGA for $64,750,000, which is equal to the balance of the $65,000,000 purchase price ($250,000 of which had already been paid in the form of a non-refundable deposit) that NCGA would be required to pay to Sellers at the closing of the transactions under the Share Purchase Agreement.   

As of December 31, 2010, the Hemco Option Agreement was amended (the “Hemco Option Agreement Amendment”). The Hemco Option Agreement Amendment included, among other things, our consent to NCGA’s entry into Amendment No. 1, dated as of December 31, 2010, to the Share Purchase Agreement (the “Share Purchase Agreement Amendment”).

The Share Purchase Agreement Amendment, among other things:
 
 
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·
extended from December 31, 2010 to February 15, 2011 the date by which the parties to the Share Purchase Agreement were permitted to terminate such agreement if the closing of such agreement did not occur on or before such date; and
 
·
included an agreement to pay an additional $125,000 upon the execution of the Share Purchase Agreement Amendment and an additional $125,000 upon the closing of the Share Purchase Agreement, as amended.

The Share Purchase Agreement and the transactions contemplated thereunder were terminated because the closing did not occur on or before February 15, 2011 and, accordingly, we determined not to exercise the Hemco Option and expensed all the associated costs and option payments.

Recent Developments

On January 26, 2011, we held a special meeting of our stockholders for the purpose of approving amendments to UGMC’s Amended and Restated Articles of Incorporation, as amended, to (1) effect a reverse stock split in a ratio ranging from one-for-five to one-for-fifty of all UGMC’s issued and outstanding shares of common stock and to effect a reduction in the number of authorized shares of common stock in an amount ranging from 30% to 75% of the current authorized number, in both cases in a ratio and amount to be determined by our Board of Directors if it determines to proceed with such reverse stock split and (2) include provisions that are primarily protective to UGMC’s stockholders. Our Board of Directors has recently determined that it intends to effectuate such reverse stock split in the future.

On February 16, 2011, the British Columbia Securities Commission (the “BCSC”) issued an order (the “Order”) that trading in our securities cease until we have filed certain documents with the BCSC, such documents to include an independent technical report on our Toldafria property and all documents filed with the SEC, and the executive director of the BCSC makes an order revoking the Order. The BCSC has asserted that we are a reporting issuer under BC Instrument 51-509, “Issuers Quoted in the U.S. Over-the-Counter Markets”, as they allege that our business was directed or administered from British Columbia and our securities are quoted on the OTC Bulletin Board. We believe that the Order will not affect trades of our securities that have no connection to the Province of British Columbia. The company has ceased all operations in Canada as of February 2011 and is in the process of dissolving its wholly owned Subsidiary UGMC Mining, Inc., which was incorporated in British Columbia on September 14, 2010. We are currently seeking legal advice in connection with additional steps to address the Order.

On February 28, 2011, Andrew Neale resigned from his position as member of our Board of Directors and any committees thereof effective as of that date. 

Results of Operations

Three Months Ended March 31, 2011 Compared to Three Months Ended March 31, 2010
  
Revenues
 
We have had no revenues since our inception.
 
Expenses

Total operating expenses increased $769,875, or 2,966%, to $795,828 for the three months ended March 31, 2011, as compared to $25,953 for the three months ended March 31, 2010. This overall increase is primarily due to an increase in general and administrative expenses of $769,677 related to the terminated Hemco transaction (discussed above) which resulted in increased acquisition costs, consulting fees, stock compensation, accounting and legal fees, travel costs, personnel costs and office expenses.  We also incurred higher directors’ fees and other general and administrative costs during the 2011 period due to our increase in business activity.
 
 
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We recognized foreign currency exchange loss of $29 for the three months ended March 31, 2011, compared to $0 for the three months ended March 31, 2010.
 
Net Loss
 
We incurred net losses for the three months ended March 31, 2011 of $795,857, compared to net losses for the three months ended March 31, 2010 of $25,953. The increase in net loss for the three months ended March 31, 2011 was directly attributable to increased expenses as discussed above.

Liquidity and Capital Resources
 
At March 31, 2011 and December 31, 2010, our cash and cash equivalents balance was $299,052 and $947,153, respectively.  During the quarter ended March 31, 2011, cash used in operations totaled $774,659 versus cash used in operations of $18,713 in the equivalent 2010 period.  The increase in cash used in operations was primarily due to costs incurred in the terminated Hemco transaction.  During the quarter ended March 31, 2011, cash used in investing activities totaled $125,000, which represents the additional $125,000 paid in January 2011 upon the execution of the Share Purchase Agreement Amendment.  We did not have any cash from financing activities during the quarter ended March 31, 2011.
 
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 of $5,700,000 pursuant to the Toldafria Option Agreement and to 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 March 31, 2011, we have incurred cumulative net losses of $795,857 since December 31, 2010 and require additional capital for our contemplated operational and acquisition activities to take place. Our ability to raise additional capital through future issuances of our 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.
 
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 consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated 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 consolidated financial statements.

Mineral Exploration and Development Costs

All exploration expenditures are expensed as incurred. Costs of acquisition and option costs of mineral rights are capitalized upon acquisition. Mine development costs incurred to develop new ore deposits, to expand the capacity of mines or to develop mine areas substantially in advance of current production are also capitalized once proven and probable reserves exist and the property is determined to be a commercially mineable property. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. If we do not continue with exploration after the completion of the feasibility study, the cost of mineral rights will be expensed at that time.  Costs of abandoned projects are charged to mining costs, including related property and equipment costs. To determine if these costs are in excess of their recoverable amount, periodic evaluation of the carrying value of capitalized costs and any related property and equipment costs are based upon expected future cash flows and/or estimated salvage value in accordance with ASC 360-10-35-15, Impairment or Disposal of Long-Lived Assets.
 
 
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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
 
The Company has review recently issued accounting standards, none of which are expected to have a material impact on the Company’s financial position or results of operations.
 
ITEM 3. 
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
As a smaller reporting company, as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, we are not required to provide disclosure under this Item 3.
 
ITEM 4. 
CONTROLS AND PROCEDURES
 
Evaluation of Disclosure Controls Procedures
 
Disclosure controls and procedures (as defined in Rules  13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Disclosure and control procedures are also designed to ensure that such information is accumulated and communicated to management, including the interim chief executive officer and interim chief financial officer, to allow timely decisions regarding required disclosures.
 
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of management, including our interim chief executive officer and interim chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. In designing and evaluating the disclosure controls and procedures, management recognizes that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their desired control objectives. Additionally, in evaluating and implementing possible controls and procedures, management is required to apply its reasonable judgment. We also do not have an audit committee.  Based on the evaluation described above, our interim chief executive officer and interim chief financial officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were not effective.
 
As funds become available to us, we expect to implement additional measures to improve disclosure controls and procedures.

Changes in internal controls over financial reporting
 
There was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
 
 
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Officers’ Certifications
 
Appearing as exhibits to this quarterly report on Form 10-Q are “Certifications” of our Chief Executive and Financial Officer. The Certifications are required pursuant to Sections 302 of the Sarbanes-Oxley Act of 2002 (the “Section 302 Certifications”). This section of the quarterly report on Form 10-Q contains information concerning the Controls Evaluation referred to in the Section 302 Certification. This information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.
 
PART II – OTHER INFORMATION
 
ITEM 1. 
LEGAL PROCEEDINGS
 
We may, from time to time, be involved in litigation and claims arising out of our operations in the ordinary course of business.  We are currently not aware of any pending legal proceedings to which we are a party or of which any of our property is the subject, nor are we aware of any such proceedings that are contemplated by any governmental authority.
 
ITEM 1A. 
RISK FACTORS
 
As a smaller reporting company, we are not required to provide disclosure under this Item 1A.
 
ITEM 2. 
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.
 
ITEM 3. 
DEFAULTS UPON SENIOR SECURITIES
 
None.
 
ITEM 4. 
(REMOVED AND RESERVED)
 
ITEM 5. 
OTHER INFORMATION

None.
 
ITEM 6. 
EXHIBITS
 
The agreements included as exhibits to this quarterly report on Form 10-Q 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;

 
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.
 
 
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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 quarterly report on Form 10-Q and the Company’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.
 
The following exhibits are filed as part of (or are furnished with, as indicated below) this quarterly report on Form 10-Q or, where indicated, were heretofore filed and are hereby incorporated by reference.
    
Exhibit
No.
 
Description
2.1*
 
Hemco Option Agreement, dated as of November 30, 2010, between Registrant and N.C.G.A Project Acquisition Corp. (Previously filed on December 6, 2010 as exhibit 2.1 of Universal Gold Mining Corp.’s Current Report on Form 8-K (File No. 333-140900))
     
2.2*
 
Share Purchase Agreement, dated as of November 30, 2010, among N.C.G.A. Project Acquisition Corp., TWL Investments Ltd., Thomas William Lough, James Randall Martin and Sergio Rios Molina (Previously filed on December 6, 2010 as exhibit 2.2 of Universal Gold Mining Corp.’s Current Report on Form 8-K (File No. 333-140900))
     
2.3*
 
Amendment No. 1 to the Hemco Option Agreement, dated as of December 31, 2010, between N.C.G.A. Project Acquisition Corp. and Registrant (Previously filed on January 6, 2011 as exhibit 2.1 of Universal Gold Mining Corp.’s Current Report on Form 8-K (File No. 333-140900))
     
2.4*
 
Amendment No. 1 to the Share Purchase Agreement, dated as of December 31, 2010, among N.C.G.A. Project Acquisition Corp., TWL Investments Ltd., Thomas William Lough, James Randall Martin and Sergio Rios Molina (Previously filed on January 6, 2011 as exhibit 2.2 of Universal Gold Mining Corp.’s Current Report on Form 8-K (File No. 333-140900))
     
3.1*
 
Amended and Restated Articles of Incorporation of Registrant as filed with the Nevada Secretary of State on April 14, 2008 (Previously filed on April 18, 2008 as exhibit 3.1 of Universal Gold Mining Corp.’s Current Report on Form 8-K (File No. 333-140900))
     
3.2*
 
Certificate of Amendment to Amended and Restated Articles of Incorporation of Registrant as filed with the Nevada Secretary of State on April 9, 2010 (Previously filed on April 15, 2010 as exhibit 3.1 of Universal Gold Mining Corp.’s Current Report on Form 8-K (File No. 333-140900))
     
3.3*
 
Certificate of Amendment to Amended and Restated Articles of Incorporation of Registrant as filed with the Nevada Secretary of State on December 29, 2010 (Previously filed on January 3, 2011 as exhibit 3.1 of Universal Gold Mining Corp.’s Current Report on Form 8-K (File No. 333-140900))
     
3.4*
 
Amended and Restated Bylaws of Registrant (Previously filed on March 31, 2011 as exhibit 3.4 of Universal Gold Mining Corp.’s Annual Report on Form 10-K (File No. 333-140900))
     
4.1*
 
Form of 0% Secured Convertible Promissory Note of the Registrant (Previously filed on September 15, 2008 as exhibit 4.1 of Universal Gold Mining Corp.’s Current Report on Form 8-K (File No. 333-140900))
     
4.2*
 
Form of 5-Year Bridge Warrant to Purchase shares of common stock of the Registrant (Previously filed on September 15, 2008 as exhibit 4.2 of Universal Gold Mining Corp.’s Current Report on Form 8-K (File No. 333-140900))
     
4.3*
 
Form of Securities Purchase Agreement by and among Registrant and the Buyer(s) named therein (Previously filed on September 15, 2008 as exhibit 4.3 of Universal Gold Mining Corp.’s Current Report on Form 8-K (File No. 333-140900))
 
 
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10.1*
 
Form of Bridge Loan Agreement by and between the Registrant and Diamond Sports & Entertainment, Inc., dated September 9, 2008 (Previously filed on September 15, 2008 as exhibit 10.1 of Universal Gold Mining Corp.’s Current Report on Form 8-K (File No. 333-140900))
     
10.2*
 
Form of Unsecured Bridge Loan Promissory Note of Diamond Sports & Entertainment, Inc. in favor of the Registrant, dated September 9, 2008  (Previously filed on September 15, 2008 as exhibit 10.2 of Universal Gold Mining Corp.’s Current Report on Form 8-K (File No. 333-140900))
     
10.3*
 
Form of Security Agreement by and among Diamond Sports & Entertainment, Inc., Diamond Concessions, LLC and the Buyer(s) of the Registrant’s Note(s), dated as of September 9, 2008 (Previously filed on September 15, 2008 as exhibit 10.3 of Universal Gold Mining Corp.’s Current Report on Form 8-K (File No. 333-140900))
     
10.4*
 
Form of Pledge Agreement by and among the Registrant, the Pledgors named therein, Gottbetter & Partners, LLP and the Buyer(s) named therein (Previously filed on September 15, 2008 as exhibit 10.4 of Universal Gold Mining Corp.’s Current Report on Form 8-K (File No. 333-140900))
     
10.5*
 
2008 Equity Incentive Plan (Previously filed on March 2, 2009 as exhibit 10.1 of Universal Gold Mining Corp.’s Annual Report on Form 10-K (File No. 333-140900))
     
10.6*
 
Assignment of Promissory Note and Release dated as of February 3, 2010, by and between Registrant and the John Thomas Bridge and Opportunity Fund, LP (Previously filed on June 10, 2010 as exhibit 10.6 of Universal Gold Mining Corp.’s Current Report on Form 8-K (File No. 333-140900))
     
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 (Previously filed on June 10, 2010 as exhibit 10.7 of Universal Gold Mining Corp.’s Current Report on Form 8-K (File No. 333-140900))
     
10.8*
 
Cancellation Agreement between the Registrant and Linda Farrell, dated May 24, 2010 (Previously filed on June 10, 2010 as exhibit 10.8 of Universal Gold Mining Corp.’s Current Report on Form 8-K (File No. 333-140900))
     
10.9*
 
Amendment Number 1 to 2008 Equity Incentive Plan (Previously filed on June 10, 2010 as exhibit 10.9 of Universal Gold Mining Corp.’s Current Report on Form 8-K (File No. 333-140900))
     
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 (Previously filed on June 10, 2010 as exhibit 10.10 of Universal Gold Mining Corp.’s Current Report on Form 8-K (File No. 333-140900))
     
10.11*
 
Put and Call Option Agreement dated June 29, 2010 between Grafton Resource Investments Ltd. and Universal Hold Holdings (Cayman) Ltd. (Previously filed on August 23, 2010 as exhibit 10.5 of Universal Gold Mining Corp.’s Quarterly Report on Form 10-Q (File No. 333-140900))
     
10.12*
 
Deed of Variation to Put and Call Option Agreement dated June 29, 2010, dated August 24, 2010 (Previously filed on August 26, 2010 as exhibit 10.1 of Universal Gold Mining Corp.’s Current Report on Form 8-K (File No. 333-140900))
     
10.13*
 
Form of Subscription Agreement between the Registrant and each purchaser of Registrant’s common stock at $0.10 per share (Previously filed on May 27, 2010 as exhibit 10.1 of Universal Gold Mining Corp.’s Current Report on Form 8-K (File No. 333-140900))
 
 
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10.14*
 
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 (Previously filed on May 27, 2010 as exhibit 10.2 of Universal Gold Mining Corp.’s Current Report on Form 8-K (File No. 333-140900))
     
10.15*
 
Form of Subscription Agreement between the Registrant and each purchaser of Registrant’s common stock at $0.40 per share (Previously filed on November 15, 2010 as exhibit 10.2 of Universal Gold Mining Corp.’s Quarterly Report on Form 10-Q (File No. 333-140900))
     
10.16*
 
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 (Previously filed on November 15, 2010 as exhibit 10.3 of Universal Gold Mining Corp.’s Quarterly Report on Form 10-Q (File No. 333-140900))
     
10.17*
 
Form of Indemnification Agreement (Previously filed on January 28, 2011 as exhibit 10.1 of Universal Gold Mining Corp.’s Current Report on Form 8-K (File No. 333-140900))
     
14.1*
 
Code of Ethics (Previously filed on March 2, 2009 as exhibit 14.1 of Universal Gold Mining Corp.’s Annual Report on Form 10-K (File No. 333-140900))
     
31.1**
 
Rule 13a-14(d) / 15d-14(a) Certification of Chief Executive Officer
     
31.2**
 
Rule 13a-14(d) / 15d-14(a) Certification of Chief Financial Officer
     
32.1**§
 
Rule 1350 Certification of Chief Executive Officer
     
32.2**§
 
Rule 1350 Certification of Chief Financial Officer

Previously filed and incorporated by reference. 
** 
Filed herewith
 
§  This certification is being furnished and shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.
 
 
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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

   
UNIVERSAL GOLD MINING CORP.
     
Dated:  May 16, 2011
By:
/s/ David Cather
   
Name: David Cather
   
Title: Interim Chief Executive Officer
     
Dated:  May 16, 2011
By:
/s/ Craig Niven
   
Name: Craig Niven
   
Title: Interim Chief Financial Officer and Assistant Secretary

 
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