Attached files
file | filename |
---|---|
EX-32.2 - EXHIBIT 32.1 - AURORA GOLD CORP | ex32_1.htm |
EX-31.1 - EXHIBIT 31.1 - AURORA GOLD CORP | ex31_1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
x
|
ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31,
2008
|
o
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____ TO
____
|
|
Commission
file number
|
0-24393
|
AURORA
GOLD CORPORATION
(Exact
Name of registrant as specified in its charter)
Delaware
|
13-3945947
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
Baarerstrasse
10, 1st
Floor, Zug, Switzerland
|
6300
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant’s
telephone number, including area
code (+41) 7887-96966
Securities
registered under Section 12(b) of the Exchange Act:
None
Securities
registered under Section 12 (g) of the Exchange Act:
Common
stock, par value $0.001 per share
|
Pink
Sheets
|
Title
of each class
|
Name
of each exchange on which
registered
|
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
o Yes
x No
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.
o Yes
x No
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.
x Yes
o
No
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
x Yes
o
No
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
o Yes
x
No
1
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: r
|
Accelerated
Filer: r
|
Non-accelerated
filer: r (Do not check if a smaller
reporting company)
|
Smaller
reporting company: þ
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).
o Yes
x No
State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
sold, or the average bid and asked price of such common equity, as of the last
business day of the registrant’s most recently completed second fiscal
quarter.
$4,817,969
as of June 30, 2008
Indicate
the number of shares outstanding of each of the issuer’s classes of common
equity, as of the latest practicable date: 66,491,855 shares of Common Stock
were outstanding as of January 21, 2010.
2
PART
I
BUSINESS
This
annual report contains statements that plan for or anticipate the future and are
not historical facts. In this Report these forward looking statements are
generally identified by words such as “anticipate,” “plan,” “believe,” “expect,”
“estimate,” and the like. Because forward-looking statements involve future
risks and uncertainties, these are factors that could cause actual results to
differ materially from the estimated results. These risks and uncertainties are
detailed in Item 1. “Description of Business,” Item 2. “Description of
Properties,” Item 7. “Management’s Discussion and Analysis or Plan of
Operation,” Item 8. “Financial Statements” and Item. 13 “Certain Relationships
and Related Transactions and Director Independence”.
The
Private Securities Litigation Reform Act of 1995, which provides a “safe harbor”
for such statements, may not apply to this Report.
Item
1.
|
Description
of Business
|
Business
Development
We were
incorporated under the laws of the State of Delaware on October 10, 1995, under
the name "Chefs Acquisition
Corp." Initially formed for the purpose of engaging in the food
preparation business, we redirected our business efforts in late 1995 following
a change of control, which occurred on October 30, 1995, to the acquisition,
exploration and, if warranted, the development of mineral resource properties.
We changed our name to “Aurora
Gold Corporation” on August 20, 1996 to more fully reflect our resource
exploration business activities.
Our
general business strategy is to acquire mineral properties either directly or
through the acquisition of operating entities. Our continued
operations and the recoverability of mineral property costs is dependent upon
the existence of economically recoverable mineral reserves, confirmation of our
interest in the underlying properties, our ability to obtain necessary financing
to complete the development and upon future profitable production.
Since
1996 we have acquired and disposed of a number of properties. We have not been
successful in any of our exploration efforts to establish reserves on any of the
properties that we owned or in which we have or have had an
interest.
We
currently have interest in four (4) properties none of which contain any
reserves. Please refer to “Description of Properties.” We
have no revenues, have sustained losses since inception, have been issued a
going concern opinion by our auditors and rely upon the sale of our securities
to fund operations. We will not generate revenues even if any of our exploration
programs indicate that a mineral deposit may exist on our properties.
Accordingly, we will be dependent on future financings in order to maintain our
operations and continue our exploration activities.
We have
not been involved in any bankruptcy, receivership or similar
proceedings.
Our
Principal Products and Their Markets
We are a
junior mineral exploration company. Our strategy is to concentrate our
investigations into: (i) existing operations where an infrastructure already
exists; (ii) properties presently being developed and/or in advanced stages of
exploration which have potential for additional discoveries; and (iii)
grass-roots exploration opportunities.
3
We are
currently concentrating our property exploration activities in Brazil and
Canada. We are also examining data relating to the potential acquisition of
other exploration properties in the USA, Latin America and South
America.
Our
properties are in the exploration stage only and are without a known body of
mineral reserves. Development of the properties will follow only if satisfactory
exploration results are obtained. Mineral exploration and development involves a
high degree of risk and few properties that are explored are ultimately
developed into producing mines. There is no assurance that our
mineral exploration and development activities will result in any discoveries of
commercially viable bodies of mineralization. The long-term profitability of our
operations will be, in part, directly related to the cost and success of our
exploration programs, which may be affected by a number of factors. Please refer to “Item 1A Risk
Factors”
Significant
Developments in fiscal 2008 and Subsequent Events
For the
year ended December 31, 2008 we recorded exploration expenses of $77,273
compared to $2,033,875 in fiscal 2007. The following is a breakdown of the
exploration expenses by property: Brazil $74,723 (2007 - $2,031,700) and Canada,
Kumealon property $2,550 (2007 - $2,175).
We
initially had 10 properties under Memorandum of Understanding (“MOU”) or under option of which we
currently have retained three (3) properties, São Domingos, São João and
Comandante Araras in the Tapajos Gold Province, State of Pará,
Brazil.
Between
December 21, 2005 and May 26, 2006 we signed four MOUs covering the Piranhas
(option since relinquished) , Branca de Neve (agreement cancelled),
Bigode (option since relinquished) and Santa Lúcia (agreement cancelled)
properties in the Municipality of Itaituba, Tapajos gold province, State of
Para, Brazil. During the first quarter of 2007 we signed a MOU covering the
Comandante Araras property. The MOUs provide us with a review period, ranging
from two months to six months, to access the mineral potential of the
properties.
Between
January 1, 2006 and March 31, 2006 the Company signed five option agreements
covering the Novo Porto, Ouro Mil, Santa Isabel, São Domingos and São João
mineral exploration licenses located in the Municipality of Itaituba, in the
Tapajos gold province of the State of Para, Brazil. The Company relinquished its
options on the Novo Porto and Ouro Mil properties in 2006 and the Santa Isabel
property in 2007.
Access to
all of the property areas in which we have an interest is by airstrips, rivers
in season and the Trans Garimpeiro Highway. Regional infrastructure
to the property areas is serviced from our offices in the city of Itaituba and
the field office located at the Sao Domingos property.
São
Domingos
The São
Domingos property covers an area of 6.100 hectares and is located approximately
250km south of the regional centre of Itaituba and approximately 40 km north of
our previous Santa Isabel property.
São
João
The São
João property area is located approximately 20km west of our São Domingos
property and covers an area of approximately 5.160 hectares.
4
Santa
Isabel – option since relinquished
The Santa
Isabel Property lies in the southwestern region of the Tapajos Gold Province,
Para State, Brazil and comprises an area of 3.650 hectares.
In March
2007 we decided not to follow up our preliminary exploration program on the
Santa Isabel property and have decided not to exercise our option to acquire the
property.
Novo
Porto - option since relinquished
The Novo
Porto property lies approximately 180km south of Itaituba and covered an area of
approximately 6.600 hectares. Due to changes in the Government land
management the area that encompassed the Nova Porto project and our property
interest was deemed to be in a non active commercial mining zone.
In March
2006 we decided not to follow-up our preliminary exploration program on the Novo
Porto property and have decided not to exercise our option to acquire the
property.
Ouro
Mil - option since relinquished
The Ouro
Mil property is located approximately 20 km south of Santa Isabel property area
and approx 300km South of Itaituba, and covers an area of 9.794
hectares.
In
October 2006 we decided not to follow up our preliminary exploration program on
the Ouro Mil property and have decided not to exercise our option to acquire the
property.
Branca de Neve
- option since
relinquished
The
Branca de Neve property adjoins the Piranhas property and is located
approximately 50 km NE of our São Domingos property, and covers an area of
approximately 2.210 hectares
The
Company has decided not to follow up our preliminary exploration program on the
Branca de Neve property and have decided not to exercise our option to acquire
the property.
Piranhas
– option since relinquished
The
Piranhas property adjoins the South western boundary of our Branca de Neve
property and covers an area of approximately 9.341 hectares.
The
Company has decided not to follow up our preliminary exploration program on the
Piranhas property and have decided not to exercise our option to acquire the
property.
Bigode
- option since relinquished
The 4.150
hectare Bigode property adjoins the southeast portion of the São Domingos
property, and is approximately 30 km north of our Santa Isabel
property. The Company has decided not to follow up our preliminary
exploration program on the Bigode property and have decided not to exercise our
option to acquire the property.
Santa
Lúcia - option since
relinquished
The 1.600
hectare Santa Lúcia property is located 1,270 km SSW of the main regional centre
of Itaituba. The property is located 10 km south west of the
Santa Isabel property.
5
The
Company has decided not to follow up our preliminary exploration program on the
Santa Lucia property and have decided not to exercise our option to acquire the
property.
Comandante
Araras
The 2.750
hectare Comandante Araras property is located 10 km west of the São João
property.
British
Columbia, Canada
The 741
acre Kumealon limestone project is located on the north shore of Kumealon Inlet,
54 kilometres south-southeast of Prince Rupert, British Columbia,
Canada.
Subsequent
Events
In September 2009,
convertible notes payable and related accrued interest aggregating US
$739,151.69 (AUD $850,479.45) were settled through the issuance of
5,000,000 shares of common stock of the
Company.
|
During
the month of September 2009, the Company raised $300,000 through a private
placement of 3,000,000 shares at a price of $0.10 per share. The shares
have not yet been issued. The Company’s agent will be paid a commission of
420,000 shares of common stock of the Company. Proceeds from the private
placement will be used for general working
capital.
|
In
November 2009, the Company signed a letter agreement with Global Minerals
Limited to acquire an initial 70% interest in the Front Range Gold Project
located in Boulder County, Colorado. The Company paid $100,000 on signing the
letter agreement. A further $400,000 is due on signing of the formal agreement
on or before February 28, 2010.
Distribution
Methods of Our Products and Services
We are a
mineral exploration company and are not in the business of distributing any
products or services.
Status
of Any Publicly Announced New Product or Service
We have
no plans for new products or services that we do not already offer.
Competitive
Business Conditions and Our Competitive Position in the Industry and Methods of
Competition
Vast
areas of Brazil have been explored and in some cases staked through mineral
exploration programs. Vast areas also remain unexplored. The cost of
staking and re-staking new mineral claims and the costs of most phase one
exploration programs are relatively modest. Additionally, in many more
prospective areas, extensive literature is readily available with respect to
previous exploration activities. These facts make it possible for a junior
mineral exploration company such as ours to be very competitive with other
similar companies. In effect, we are also competitive with senior companies who
are doing grass roots exploration. In the event our exploration activities
uncover prospective mineral showings, we anticipate being able to attract the
interest of better financed industry partners to assist on a joint venture basis
in more extensive exploration. We are at a competitive disadvantage compared to
established mineral exploration companies when it comes to being able to
complete extensive exploration programs on claims which we hold or may hold in
the future. If we are unable to raise capital to pay for extensive claim
exploration, we will be required to enter into joint ventures with industry
partners which will result in our interest in our claims being substantially
diluted. Currently, we do not have sufficient funds for further
exploration.
6
As long
as management of our company remains committed to building a portfolio of
mineral exploration properties principally through their own efforts, we will be
able to continue operating on modest cash reserves for an extended period of
time. We are one small company in a large competitive industry with many other
junior exploration companies who are evaluating and re-evaluating prospective
mineral properties in Brazil.
Sources
and Availability of Raw Materials and the Names of Principal
Suppliers
As a
mineral exploration company, we do not require sources of raw materials and do
not have principal suppliers in the way which applies to manufacturing
companies. Our raw materials are, in effect, mineral exploration
properties which we may stake or acquire from third parties. Our management team
seeks to assemble a portfolio of quality mineral exploration properties in
Brazil. Initially, we will operate in the field with our president,
Technical director and various consultants on an as needed basis. This
will enable us to assemble a portfolio of properties through grass roots
exploration and staking. We will also acquire new properties through
option agreements where new properties can be acquired on favorable
terms.
Dependence
on One or a Few Major Customers
We are in
the business of mining exploration. We are not selling any product or
service and therefore have no dependence on one or a few major
customers.
Patents,
Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or Labor
Contracts, Including Duration
Our
Company does not own any patents or trademarks. We are not party to any
labor agreements or contracts. Licenses, franchises, concessions and
royalty agreements are not part of our business.
Need
for any government approval of principal products or services
As a
mineral exploration company, we are not in a business which requires extensive
government approvals for principal products or services. The Department
National Production Minerals (DNPM) of Brazil outlines and governs the work that
can be done on mining claims in Brazil.
In the
event mining claims which we acquire in the future prove to host viable ore
bodies, we would likely sell or lease the deposit to a company whose business is
the extraction and treatment of ore. This company would undertake the sale
of metals or concentrates and pay us a net smelter royalty as specified in a
future lease agreement. All responsibility for government approvals
pertaining to mining methods, environmental impacts and reclamation would be the
responsibility of this contractor. All costs to obtain the necessary
government approvals would be factored into technical and viability studies in
advance of a decision being made to proceed with development of an ore
body.
The
mining industry in Brazil is highly regulated. Our president and Technical
director have extensive industry experience and are familiar with government
regulations respecting the initial acquisition and early exploration of mining
claims in Brazil. The Company is required under law to meet government
standards relating to the protection of land and waterways, safe work practices
and road construction. We are unaware of any proposed or probable
government regulations which would have a negative impact on the mining industry
in Brazil. We propose to adhere strictly to the regulatory framework which
governs mining operations in Brazil.
7
Effect
of existing or probable governmental regulations on our business.
Management
is unaware of any existing or probable government regulations which would have a
positive or negative impact on our company's business.
Costs
and effects of compliance with environmental laws (federal, state and
local)
At the
present time, our costs of compliance with environmental laws are minimal.
In the event that claims which we may acquire in the future host a viable
ore body, the costs and affects of compliance with environmental laws will be
incorporated in the exploration plan for these claims. These exploration
plans will be prepared by qualified mining engineers.
Number
of total employees and number of full time employees
As of
January 19, 2009 there were three part time employees.
Item
1A.
|
Risk
Factors
|
We
are an exploration stage company and have incurred substantial losses since
inception.
We have
never earned any revenues. In addition, we have incurred net losses of
$13,691,702 for the period from our inception (October 10, 1995) through
December 31, 2008 and, based upon our current plan of operation, we expect that
we will incur losses for the foreseeable future.
Potential
investors should be aware of the difficulties normally encountered by mineral
exploration companies and the high rate of failure of such companies. We are
subject to all of the risks inherent to an exploration stage business
enterprise, such as limited capital mineralized materials, lack of manpower, and
possible cost overruns associated with our exploration programs. Potential
investors must also weigh the likelihood of success in light of any problems,
complications, and delays that may be encountered with the exploration of our
properties.
Because
we are small and do not have much capital, we must limit our exploration
activity. As such we may not be able to complete an exploration program that is
as thorough as we would like. In that event, an existing ore body may go
undiscovered. Without an ore body, we cannot generate revenues and you will lose
your investment.
Because
we do not have any revenues, we expect to incur operating losses for the
foreseeable future.
Our
independent auditors have added an explanatory paragraph to their audit opinion
issued in connection with the consolidated financial statements for the years
ended December 31, 2008 and 2007 relative to our ability to continue as a going
concern. Our ability to obtain additional funding will determine our ability to
continue as a going concern. Our consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
We have
never generated revenues and we have never been profitable. Prior to completing
exploration on our mineral properties, we anticipate that we will incur
increased operating expenses without realizing any revenues. We therefore expect
to incur significant losses into the foreseeable future. If we are unable to
generate financing to continue the exploration of our properties, we will fail
and you will lose your entire investment.
8
None
of the properties in which we have an interest or the right to earn an interest
have any known reserves.
We
currently have an interest or the right to earn an interest in four properties,
none of which have any reserves. Based on our exploration activities through the
date of this Form 10-K, we do not have sufficient information upon which to
assess the ultimate success of our exploration efforts. If we do not
establish reserves we may be required to curtail or suspend our operations, in
which case the market value of our common stock may decline and you may lose all
or a portion of your investment.
We have
only completed the initial stages of exploration of our properties, and thus
have no way to evaluate whether we will be able to operate our business
successfully. To date, we have been involved primarily in organizational
activities, acquiring interests in properties and in conducting preliminary
exploration of properties. We have not earned any revenues and have not achieved
profitability as of the date of this Form 10-K.
We
are subject to all the risks inherent to mineral exploration, which may have an
adverse affect on our business operations.
Potential
investors should be aware of the difficulties normally encountered by mineral
exploration companies and the high rate of failure of such enterprises. The
likelihood of success must be considered in light of the problems, expenses,
difficulties, complications and delays encountered in connection with the
exploration of the mineral properties that we plan to undertake. These potential
problems include, but are not limited to, unanticipated problems relating to
exploration and additional costs and expenses that may exceed current estimates.
If we are unsuccessful in addressing these risks, our business will likely fail
and you will lose your entire investment.
We are
subject to the numerous risks and hazards inherent to the mining industry and
resource exploration including, without limitation, the following:
|
·
|
interruptions
caused by adverse weather
conditions;
|
|
·
|
unforeseen limited sources
of supplies resulting
in shortages of materials, equipment and
availability of
experienced manpower.
|
The
prices and availability of such equipment, facilities, supplies and manpower may
change and have an adverse effect on our operations, causing us to suspend
operations or cease our activities completely.
It
is possible that our title for the properties in which we have an interest will
be challenged by third parties.
We have
not obtained title insurance for our properties. It is possible that
the title to the properties in which we have our interest will be challenged or
impugned. If such claims are successful, we may lose our interest in such
properties.
Our
failure to compete with our competitors in mineral exploration for financing,
acquiring mining claims, and for qualified managerial and technical employees
will cause our business operations to slow down or be suspended.
Our
competition includes large established mineral exploration companies with
substantial capabilities and with greater financial and technical mineralized
materials than we have. As a result of this competition, we may be unable to
acquire additional attractive mining claims or financing on terms we consider
acceptable. We may also compete with other mineral exploration companies in the
recruitment and retention of qualified managerial and technical employees. If we
are unable to successfully compete for financing or for qualified employees, our
exploration programs may be slowed down or suspended.
9
Compliance
with environmental regulations applicable to our operations may adversely affect
our capital liquidity.
All
phases of our operations in Brazil and Canada, where our properties are located,
will be subject to environmental regulations. Environmental
legislation in Brazil and Canada is evolving in a manner which will require
stricter standards and enforcement, increased fines and penalties for
non-compliance, more stringent environmental assessments of proposed projects
and a heightened degree of responsibility for companies and their officers,
directors and employees. It is possible that future changes in environmental
regulation will adversely affect our operations as compliance will be more
burdensome and costly.
Because
we have not allocated any money for reclamation of any of our mining claims, we
may be subject to fines if the mining claims are not restored to its original
condition upon termination of our activities.
Our
executive officers devote and will continue to devote only a limited amount of
time to our business activities.
Mr.
Pearl, our president and chief executive officer is engaged in other business
activities and devotes only a limited amount of his time (approximately 50%) to
our business. As we expand our activities, a need for full time
management may arise. In such an event, should Mr. Pearl be unwilling
to dedicate more of his time to our business or if we fail to hire additional
personnel, our business and results of operations would suffer a material
adverse effect.
Our
directors may face conflicts of interest in connection with our participation in
certain ventures because they are directors of other mineral mineralized
material companies.
Mr.
Montgomery, who serves as a director, may also be a director of other companies
(including mineralized material exploration companies) and, if those other
companies participate in ventures in which we may participate, our directors may
have a conflict of interest in negotiating and concluding terms respecting the
extent of such participation. It is possible that due to our
directors’ conflicting interests, we may be precluded from participating in
certain projects that we might otherwise have participated in, or we may obtain
less favourable terms on certain projects than we might have obtained if our
directors were not also directors of other participating mineral mineralized
materials companies. In an effort to balance their conflicting
interests, our directors may approve terms equally favourable to all of their
companies as opposed to negotiating terms more favourable to us but adverse to
their other companies. Additionally, it is possible that we may not
be afforded certain opportunities to participate in particular projects because
those projects are assigned to our directors’ other companies for which the
directors may deem the projects to have a greater benefit.
Our
future performance is dependent on our ability to retain key personnel, loss of
which would adversely affect our success and growth.
Our
performance is substantially dependent on performance of our senior
management. In particular, our success depends on the continued
efforts of Mr. Pearl. The loss of his services could have a material adverse
effect on our business, results of operations and financial condition as our
potential future revenues would most likely dramatically decline and our costs
of operations would rise. We do not have employment agreements in
place with any of our officers or our key employees, nor do we have key person
insurance covering our employees.
10
The
value and transferability of our shares may be adversely impacted by the limited
trading market for our shares.
There is
only a limited trading market for our common stock on the Pink Sheets. This may
make it more difficult for you to sell your stock if you so desire.
Our
common stock is a penny stock and because "penny stock” rules will apply, you
may find it difficult to sell the shares of our common stock.
Our
common stock is a “penny stock” as that term is defined under Rule 3a51-1 of the
Securities Exchange Act of 1934. Generally, a "penny stock" is a common stock
that is not listed on a national securities exchange and trades for less than
$5.00 a share. Prices often are not available to buyers and sellers and the
market may be very limited. Penny stocks in start-up companies are among the
riskiest equity investments. Broker-dealers who sell penny stocks must provide
purchasers of these stocks with a standardized risk-disclosure document prepared
by the Securities and Exchange Commission. The document provides information
about penny stocks and the nature and level of risks involved in investing in
the penny stock market. A broker must also give a purchaser, orally or in
writing, bid and offer quotations and information regarding broker and
salesperson compensation, make a written determination that the penny stock is a
suitable investment for the purchaser, and obtain the purchaser's written
agreement to the purchase. Consequently, the rule may affect the ability of
broker-dealers to sell our securities and also may affect the ability of
purchasers of our stock to sell their shares in the secondary
market. It may also cause fewer broker dealers to make a market in
our stock.
Many
brokers choose not to participate in penny stock transactions. Because of the
penny stock rules, there is less trading activity in penny stock and you are
likely to have difficulty selling your shares.
In
addition to the "penny stock" rules promulgated by the Securities and Exchange
Commission, FINRA has adopted rules that require that in recommending an
investment to a customer, a broker-dealer must have reasonable grounds for
believing that the investment is suitable for that customer. Prior to
recommending speculative low-priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information
about the customer's financial status, tax status, investment objectives and
other information. Under interpretations of these rules, FINRA believes that
there is a high probability that speculative low priced securities will not be
suitable for at least some customers. FINRA requirements make it more difficult
for broker-dealers to recommend that their customers buy our common stock, which
may limit your ability to buy and sell our stock and have an adverse effect on
the market for our shares.
Future
sales of shares by us may reduce the value of our stock.
If
required, we will seek to raise additional capital through the sale of our
common stock. Future sales of shares by us could cause the market
price of our common stock to decline and may result in further dilution of the
value of the shares owned by our stockholders.
Item
1B.
|
Unresolved
Staff Comments
|
Not
Applicable.
Item
2.
|
Description
of Properties
|
Office
Premises
We
conduct our activities from our principal and technical office located at
Baarerstrasse 10, 1st
Floor, Zug, 6300, Switzerland. These offices are provided to us on a month to
month basis. We believe that these offices are adequate for our
purposes. We do not own any real property or significant assets.
Management believes that this space will meet our needs for the next 12
months.
11
Mining
Properties
Our
properties are in the preliminary exploration stage and do not contain any known
bodies of ore.
We
conduct exploration activities from our principal and technical office located
at Baarerstrasse 10, 1st
Floor, Zug, 6300, Switzerland. The telephone number is (+41)
7887-96966. We believe that these offices are adequate for our
purposes and operations.
Our
strategy is to concentrate our efforts on: (i) existing operations where an
infrastructure already exists; (ii) properties presently being developed and/or
in advanced stages of exploration which have potential for additional
discoveries; and (iii) grass-roots exploration opportunities.
We are
currently concentrating our property exploration activities in Brazil and
Canada. We are also examining data relating to the potential acquisition of
other exploration properties in Latin America, South America.
Our
properties are in the exploration stage only and are without a known body of
mineral reserves. Development of the properties will follow only if satisfactory
exploration results are obtained. Mineral exploration and development involves a
high degree of risk and few properties that are explored are ultimately
developed into producing mines. There is no assurance that our
mineral exploration and development activities will result in any discoveries of
commercially viable bodies of mineralization. The long-term profitability of our
operations will be, in part, directly related to the cost and success of our
exploration programs, which may be affected by a number of factors. Please refer to “Item 1A. Risk
Factors.”
We
currently have an interest in three (3) projects located in Tapajos gold
province in Para State, Brazil and one property located in British Columbia,
Canada. We have conducted only preliminary exploration activities to
date and may discontinue such activities and dispose of the properties if
further exploration work is not warranted.
12
Figure
1.
|
Brazil,
South America
|
13
Figure
2.
|
Brazil
property maps on geology
|
14
Properties
Between
December 21, 2005 and May 26, 2006 we signed four MOUs covering the Piranhas,
Branca de Neve, Bigode and Santa Lúcia properties in the Municipality of
Itaituba, Tapajos gold province, State of Para, Brazil. During the first quarter
of 2007 we signed a MOU covering the Comandante Araras property. The MOUs
provided us with a review period, ranging from two months to six months, to
access the mineral potential of the properties.
Between
January 1 and March 31, 2006 we signed five option agreements covering the Novo
Porto, Ouro Mil, Santa Isabel, São Domingos and São João mineral exploration
licenses located in the Municipality of Itaituba, in the Tapajos gold province
of the State of Para, Brazil.
Brazil
Memorandum of Understandings, Option
Agreements and Property descriptions:
Piranhas – agreement
cancelled
Location
and access
The
project is located in the mid section of the Tapajos gold province of northern
Brazil, in the state of Para. Access is by light aircraft from the
regional centre of Itaituba, where the company maintains a small administration
centre. Further access is by unsealed roads linking up to the
unsealed Trans Garimpeiro Highway, which links to all national
highways.
Tenure
The
project covers an area of 9.341 hectares and was granted in 1993 and 1996 as
exploration license number 855.892/1996 to 856.289/1996 (Block 1) and 853.597 to
853.638/1993 (Block 2) by the Brazilian National department of Mineral
Production DNPM - Departamento Nacional de Produção Mineral, and expires in
April 2010.
Memorandum
of Understanding
The
Piranhas MOU provided us with a 180 day review period to access the gold
potential of the property. If we decided to proceed with acquiring a 100 percent
interest in the title to the mineral rights then we would have given notice to
the vendors of our intention to acquire title to the mineral rights at least
five days prior to the expiration of the aforementioned period. We would then
have entered into an option agreement with the property vendors for the
Assignment and transfer of the mineral rights.
Option
Agreement
The terms
of the Piranhas option agreement, as specified in the MOU, allowed us to perform
geological surveys and assessment work necessary to ascertain the existence of
possible mineral deposits which may be economically mined and to earn a 100%
interest in the Piranhas project mineral rights via structured cash
payments. The total option agreement payments for the license were
structured as follows:
June
30, 2006
|
–
USD $30,000 (paid)
|
July
21, 2006
|
–
USD $70,000 (paid and cancelled Block 1);
|
July
21, 2007
|
–
USD $120,000 (advanced R$10,000 in September 2007 and subsequently
relinquished option);
|
July
21, 2008
|
–
USD $180,000;
|
July
21, 2009
|
–
USD $1,600,000
|
Total
of USD $2,000,000.
|
15
The
vendor would have a 1.5% Net Smelter Royalty. The option agreement could be
terminated at any time upon written notice to the vendor and we would have been
free of any and all payment commitments yet to be due.
The
option agreement has been cancelled.
Geology
The
property is located within the Parauari Intrusive Suite. Limited
lithological inspection has shown the area to host mineralized quartz
veins. The dominant North and NNW structures are thought to represent
relicts of the original mineralizing event. The property is located
approx 50 km east of the Brazauro mineralized materials Corporation’s
Tocantinzinho property.
Branca
de Neve -
agreement cancelled
Location
and access
The
Branca de Neve project is located in mid section of the Tapajos Gold Province
and is accessed by light aircraft from Itaituba and from unsealed 4WD access
from the adjoining Piranhas property. The Transgarimpeiro highway
passes to the south of the property and provides seasonal heavy vehicle
access.
Tenure
The
project covers an area of 2.210 hectares and was granted in 2006 as exploration
license number 850.118/2006 by the Brazilian National department of Mineral
Production DNPM - Departamento Nacional de Produção Mineral, and expires in
2010. The area covering the property has since been incorporated into the
Brazilian government land management scheme which restricts all mining
activity.
Memorandum
of Understanding
The
Branca de Neve MOU provided us with a review period to access the gold potential
of the property. If we decided to proceed with acquiring a 100 percent interest
in the title to the mineral rights then we would have given notice to the
vendors of our intention to acquire title to the mineral rights at least five
days prior to the expiration of the aforementioned period. We would then have
entered into an option agreement with the property vendor for the assignment and
transfer of the mineral rights.
Option
Agreement
The terms
of the Branca de Neve option agreement, as specified in the MOU, allowed us to
perform geological surveys and assessment work necessary to ascertain the
existence of possible mineral deposits which may be economically mined and to
earn a 100% interest in the Branca de Neve property mineral rights via
structured cash payments. The total option agreement payments for the
license were structured as follows:
16
April
28, 2006
|
–
R$35,0001
(paid) (approximately USD $14,945 at 12/31/2008)
|
October
25, 2006
|
–
R$35,000
(paid) (approximately USD $14,945 at 12/31/2008)
|
April
25, 2007
|
–
R$35,000 (approximately USD $14,945 at 12/31/2008) (paid R$5,000 which is
approximately USD $2,135 at 12/31/2008 and cancelled option
agreement);
|
October
25, 2007
|
–
R$35,000 (approximately USD $14,945 at 12/31/2008);
|
April
25, 2008
|
–
R$35,000 (approximately USD $14,945 at 12/31/2008);
|
October
25, 2008
|
–
R$35,000 (approximately USD $14,945 at 12/31/2008);
|
April
25, 2009
|
–
R$35,000 (approximately USD $14,945 at 12/31/2008);
|
April
25, 2009
|
–
R$500,000 (approximately USD $213,500 at 12/31/2008)
|
Total
of R$745,000 (approximately USD $318,115 at
12/31/2008)
|
The
vendor would have a 0.75% Net Smelter Royalty. The Royalty payment could be
purchased at any time upon written notice to the vendor and payment of
R$500,000. The option agreement could be terminated at any time upon written
notice to the vendor and we would have been free of any and all payment
commitments yet to be due.
The
option agreement has been cancelled.
Geology
Locally
the Branca de Neve property geology is set in the highly prospective Pararui
Granite Intrusive suite and has a series of brittle deformation
events. North South trending regional faults dominate the property
and are considered to be related to the North West trending regional structures
noted in this area of the Tapajos, which extend from the São Domingos
property. We have completed limited soil sampling and rock chip
exploration. We are currently focusing on other projects which have a
higher current ranking.
Bigode
– agreement cancelled
Location
and access
The
Bigode project is located in the mid east of the Tapajos Gold province and
adjoins to the south east with the Company’s primary project at Sao
Domingo. Access is by light aircraft to the small township at Sao
Domingo and then by 4WD 5km to the target area.
Tenure
The
project covers an area of 4.150 hectares and was granted in 1997 as exploration
license number 751.228/1997 to 751.237/1997 and 755.311/1997 to 755.416/1997 by
the Brazilian National department of Mineral Production DNPM - Departamento
Nacional de Produção Mineral, and expires in 2012.
Memorandum
of Understanding
The
Bigode MOU provided us with a 180 day review period to access the gold potential
of the property. We are no longer negotiating with the property vendor to enter
into an option agreement. If we decided to proceed with acquiring a 100 percent
interest in the title to the mineral rights then we would have given notice to
the vendors of our intention to acquire title to the mineral rights at least
five days prior to the expiration of the aforementioned period. We would then
have entered into an option agreement with the property vendors for the
assignment and transfer of the mineral rights.
1
|
“Reals”
is the Brazilian currency. On December 31, 2008 the exchange rate was 1
Real equaled 0.427 US dollar.
|
17
Option
Agreement
The terms
of the Bigode option agreement, as specified in the MOU, allowed us to perform
geological surveys and assessment work necessary to ascertain the existence of
possible mineral deposits which may be economically mined and to earn a 100%
interest in the Bigode property mineral rights via structured cash
payments.
The total
option agreement payments for the license were structured as
follows:
October
30, 2006
|
–
USD $60,000 (paid);
|
October
30, 2007
|
–
USD $40,000 (paid);
|
October
31, 2007
|
–
USD $13,118 (paid);
|
January
30, 2008
|
–
USD $40,000 (paid and cancelled option agreement);
|
October
30, 2008
|
–
USD $90,000;
|
October
30, 2009
|
–
USD $100,000;
|
October
30, 2010
|
–
USD $1,000,000
|
Total
of USD $1,343,118.
|
The
vendor would have a 0.75% Net Smelter Royalty. The Royalty payment could be
purchased at any time upon written notice to the vendor and payment of
USD$500,000. The option agreement could be terminated at any time upon written
notice to the vendor and we would have been free of any and all payment
commitments yet to be due.
The
option agreement has been cancelled.
Geology
The
property is located within the highly prospective Parauari Intrusive Suite,
which is the host of several gold deposits and showings within the Southern
Tapajos. Limited lithological inspection has shown the area is host
to mineralized quartz veins. Similar to the Sao Domingos
property, the dominant North and NNW structures are thought to represent relicts
of the original mineralizing event. Preliminary investigation of the property
area has confirmed the existence of mineralized quartz veins and stockwork
systems within these Intrusive Granite Suites.
We
conducted an initial rock chip sampling program over an area recently being
excavated for free gold in alluvial systems and the weathered granitic
overburden via water canon and sluice. The sample results demonstrate
that the quartz vein systems are highly mineralized and can be traced across the
river valley for at least 200m.
Santa
Lúcia - agreement cancelled
Location
and access
Access to
the property area is by light aircraft direct to the property or by river
utilizing the Surubim River, a tributary of the Tapajos, which connects to the
Amazon and to all major ports and the seaport of Belem. Road access
is by the Trans Garimpeiro Highway via the Trans Amazon highway and ferry river
crossings.
18
Tenure
The
project covers an area of 1.600 hectares and was granted in 1993 as exploration
license number 854.001/1993 to 854.032/1993 by the Brazilian National department
of Mineral Production DNPM - Departamento Nacional de Produção Mineral, and
expires in 2102.
Memorandum
of Understanding
The Santa
Lúcia MOU provided us with a 90 day review period to access the gold potential
of the property. If we decided to proceed with acquiring a 100 percent interest
in the title to the mineral rights then we would have given notice to the
vendors of our intention to acquire title to the mineral rights at least five
days prior to the expiration of the aforementioned period. We would then have
entered into an option agreement with the property vendors for the assignment
and transfer of the mineral rights.
Option
Agreement
The terms
of the Santa Lúcia option agreement, as specified in the MOU, allowed us to
perform geological surveys and assessment work necessary to ascertain the
existence of possible mineral deposits which may be economically mined and to
earn a 100% interest in the Santa Lúcia property mineral rights via structured
cash payments.
The total
option agreement payments for the license were structured as
follows:
September
1, 2006
|
–
USD $20,000 (paid and cancelled option agreement);
|
March
1, 2007
|
–
USD $50,000;
|
March
1, 2008
|
–
USD $60,000;
|
March
1, 2009
|
–
USD $70,000;
|
September
1, 2009
|
–
USD $500,000
|
Total
of USD $700,000.
|
The
vendor would have a 1.5% Net Smelter Royalty. The Royalty payment could be
purchased at any time upon written notice to the vendor and payment in Reals
(Brazilian currency) of the equivalent of USD $1,000,000. The option agreement
could be terminated at any time upon written notice to the vendor and we would
have been free of any and all payment commitments yet to be due.
The
option agreement was cancelled.
Geology
Granites
of the Pararui Intrusive Suite, long known to host significant precious metal
mineralisation, dominate the local geology, with occasional later granitic
stocks of the Maloquinha intrusive suite. Sub vertical mineralized
quartz veins with widths from 20 cm to 60 cm strike between 310 and 330,
mimicking the regional structural trend. Recent samples of these
veins assayed between 17 and 25.9 g/t Gold.
Previous
work on the project is limited to alluvial mining of the tributaries of the
Surubim, and many areas of primary mineralization of pyrite associated with gold
have been uncovered as a result.
The
Surubim River Valley, connecting the Santa Lúcia and Santa Isabel properties,
was the focus of intense alluvial mining with an estimated 200,000 m3 of
alluvial material grading greater than 1g/t, with material near the Santa Isabel
border grading up to 3g/t. These figures are more than triple the
grades generally mined by artisanal methods in the Tapajos, suggesting a
high-grade proximal source.
19
Novo
Porto – agreement cancelled
Location
and access
The Nova
Porto property is located in the north eastern area of the Southern Tapajos Gold
Province. Access to the property area is by light aircraft direct to
the property or by river via tributaries of the Tapajos
River. Further access is available on unsealed seasonal
roads.
Tenure
The
project covered an area of 6.600 hectares. The area covering the
property has since been incorporated into the Brazilian government land
management scheme which restricts all mining activity. We have since
not carried on our commitments to the property.
Option
Agreement
The Novo
Porto option agreement allowed us to perform geological surveys and assessment
work necessary to ascertain the existence of possible mineral deposits which may
be economically mined and to earn a 100% interest in the Novo Porto property
mineral rights via structured cash payments.
The total
option agreement payments for the license were structured as
follows:
December
25, 2005
|
–
USD $2,500 (paid);
|
January
15, 2006
|
–
USD $10,000 (paid);
|
May
30, 2006
|
–
USD $37,500;
|
May
30, 2007
|
–
USD $50,000;
|
May
30, 2008
|
–
USD $75,000;
|
May
30, 2009
|
–
USD $1,850,000
|
Total
of USD $2,025,000.
|
The
agreement was not formally executed until 2006 and the initial payment of $2,500
due December 25, 2005 was not paid until 2006. The option agreement could be
terminated at any time upon written notice to the vendor and we would have been
free of any and all payment commitments yet to be due.
In March
2006 we decided not to follow-up our preliminary exploration program on the Novo
Porto property and have decided not to exercise our option to acquire the
property and the option agreement was cancelled.
Geology
The Novo
Porto property, as noted on the CPRM (Servico Geologico Do Brazil) 1:250,000
geology maps, as a large alluvial area, which has produced gold over an unknown
period. These alluvial workings lie in a NW trending river valley
formed on the faulted contact between the Pararui Intrusive Suite to the west
and the later Maloquinha Intrusive Suite to the west. Else where in
the region the Pararui Intrusive Suite is host to many other gold
deposits.
Ouro
Mil – agreement cancelled
Location
and access
The Ouro
Mil property is located in the south western area of the Southern Tapajos Gold
Province. Access to the property area is by light aircraft direct to
the property or by river via the Surubim River which forms one of the
tributaries of the Tapajos River. Further access is available on
unsealed seasonal roads.
20
Tenure
The
project covers an area of 9.794 hectares and was granted in 1995 and 2006 as
exploration license number 850.011/2006 and 851.867/1995 to 851.921/1995 and
851.252/1995 to 851.265/1995 and 851.273/1995 to 851.276/1995 by the Brazilian
National department of Mineral Production DNPM - Departamento Nacional de
Produção Mineral, and expires in 2012. The area covering the property has since
been incorporated into the Brazilian government land management scheme which
restricts all mining activity. We have since not carried on our
commitments to the property.
Option
Agreement
The Ouro
Mil option agreement allowed us to perform geological surveys and assessment
work necessary to ascertain the existence of possible mineral deposits which may
be economically mined and to earn a 100% interest in the Ouro Mil property
mineral rights via structured cash payments.
The total
option agreement payments for the license were structured as
follows:
January
20, 2006
|
–
USD $30,000 (paid);
|
July
20, 2006
|
–
USD $70,000 (paid R$15,000, approximately USD $8,481 at 12/31/2007 and
terminated option agreement);
|
July
20, 2007
|
–
USD $120,000;
|
July
20, 2008
|
–
USD $180,000;
|
July
20, 2009
|
–
USD $1,500,000
|
Total
of USD $1,900,000.
|
The
vendor would have a 1.5% Net Smelter Royalty. The Royalty payment could be
purchased at any time upon written notice to the vendor and payment in Reals
(Brazilian currency) of the equivalent of USD $1,000,000.The option agreement
could be terminated at any time upon written notice to the vendor and we would
have been free of any and all payment commitments yet to be due.
In
October 2006 we decided not to follow up our preliminary exploration program on
the Ouro Mil property and have decided not to exercise our option to acquire the
property and cancelled the option agreement.
Geology
The Ouro
Mil property is situated within a north west trending part of the Creporizao
Intrusive Suite along an E-NE shear subordinate to the NW trending regional
shear of the area. The western margin of this portion of the
Creporizao Intrusive Suite is in a NW faulted contact with the Pararui Intrusive
Suite, and similarly the eastern margin is in a NW faulted contact with the
Cuiu-Cuiu Complex.
Previous
mining at Ouro Mil property, via water canon and a sluice of surficial oxides,
recovered 600kg of gold. The area is dominated by a quartz vein stock
work system in weathered porphyritic granite. A moderately to
well-developed laterite profile exists and is exposed in previous mining areas
around the property.
21
Santa
Isabel – agreement cancelled
Location
and access
The Santa
Isabel property is located in the mid southern area of the Southern Tapajos gold
province. The Santa Isabel property area is accessed by a private
airstrip, and seasonal boat access via a tributary of the Rio Nova, which
eventually empties into the Tapajos River. Road access is by the
Trans Garimpeiro Highway via the Trans Amazon highway and ferry river
crossings.
Tenure
The
project covers an area of 3.650 hectares and was granted in 1994 and 1997 as
exploration license number 850.624/1994 to 850.666/1994 and 854.717/1997 to
854.738/1997 by the Brazilian National department of Mineral Production DNPM -
Departamento Nacional de Produção Mineral, and expires in 2012.
Option
Agreement
The Santa
Isabel option agreement allowed us to perform geological surveys and assessment
work necessary to ascertain the existence of possible mineral deposits which may
be economically mined and to earn a 100% interest in the Santa Isabel property
mineral rights via structured cash payments.
The total
option agreement payments for the license were structured as
follows:
February
7, 2006
|
–
USD $25,000 (paid);
|
July
21, 2006
|
–
USD $60,000 (paid, Option agreement cancelled)
|
July
21, 2007
|
–
USD $80,000;
|
July
21, 2008
|
–
USD $100,000;
|
July
21, 2009
|
–
USD $1,500,000
|
Total
of USD $1,765,000.
|
The
vendor would have a 1.5% Net Smelter Royalty. The Royalty payment could be
purchased at any time upon written notice to the vendor and payment in Reals
(Brazilian currency) of the equivalent of USD $1,000,000. The option agreement
could be terminated at any time upon written notice to the vendor and we would
have been free of any and all payment commitments yet to be due.
In March
2007 we decided not to follow up our preliminary exploration program on the
Santa Isabel property and have decided not to exercise our option to acquire the
property and the option agreement was cancelled.
Geology
The
property area is located approximately 50 km south of the São Domingos property
area. The principal property area is situated within the Pararui
Intrusive Suite. To the immediate west the Pararui Suite is in
faulted contact with the later Maloquinha Intrusive Suite, and the Maloquinha
Intrusive suite is in faulted contact with the Creporizao Intrusive Suite,
further to the west. The Pararui Suite and the Creporizao Intrusive
Suite play host to the vast majority of hard rock gold deposits and occurrences
within the Tapajos gold Province.
The
property area is dominated by a series of regional N to NNW trending regional
faults, and these orientations are also noted at mine scale as seen in the
mineralized quartz veins within the property area.
22
Historically
the Santa Isabel property focused mining activities on the alluvial deposits
within the many tributaries, and progressed to include saprolite host rock and
out cropping quartz veins.
São
Domingos
Location
and access
The Sao
Domingos property lies in the Tapajos Province of Para State, Brazil. It is
situated approximately 250 km SE of Itaituba, the regional centre, and includes
an area of nearly 8000 ha. Small aircraft service
Itaituba daily and on this occasion flights were sourced via Manaus. Access from
Itaituba to site is by small aircraft or unsealed road of average to poor
quality. The road is subject to seasonal closures and as the visit was at the
end of the ‘wet’ season site access was granted via light aircraft utilizing the
local airstrip.
Tenure
The
project covers an area of 6.100 hectares and was granted in 1995 as exploration
license number 859.587/1995 and 850.990/1995 to 851.019/1995 by the Brazilian
National department of Mineral Production DNPM - Departamento Nacional de
Produção Mineral, and expires in 2012. These licenses were
restructured by adding further applications and reductions of some areas under
option. Currently the Company has tenure over Processo Nos
850.782/2005, 850.119/2006, 850.684/2006, 859.1995/1995. For ease of
reference please see the map below.
23
Option
Agreement
The São
Domingos option agreement allowed us to perform geological surveys and
assessment work necessary to ascertain the existence of possible mineral
deposits which may be economically mined and to earn a 100% interest in the São
Domingos property mineral rights via structured cash payments. The
Company has since returned the portions of the license under the option
agreement and now has 4 license agreements free from further option
payments.
The
total option agreement payments for the license are structured as
follows:
February
7, 2006
|
–
USD $40,500 (paid);
|
July
30, 2006
|
–
USD $67,500 (paid);
|
July
30, 2007
|
–
USD $112,500 (to be paid on transference of license to
us);
|
July
30, 2008
|
–
USD $139,500; (to be paid on transference of license to
us);
|
December
30, 2008
|
–
USD $675,000: (to be paid on transference of license to
us);
|
Total
of USD $1,035,000.
|
The
vendor will have a 2.0% Net Smelter Royalty. The Royalty payment can be
purchased at any time upon written notice to the vendor and payment in Reals of
the equivalent of USD $500,000. The option agreement can be terminated at any
time upon written notice to the vendor and we will be free of any and all
payment commitments yet to be due.
Geology
The
geology of the Sao Domingos property is predominantly composed of
paleo-proterozoic Parauari Granites that play host to a number of gold deposits
in the Tapajos Basin. Typical Granites of the younger Maloquinha Intrusive Suite
have been noticed in the vicinity of Molly Gold Target, and basic rocks
considered to be part of the mesoproterozoic Cachoeira Seca Intrusive Suite
occur around the Esmeril target area.
The São
Domingos property was a previous large alluvial operation, and the property area
covers numerous areas of workings. The Company has outlined four (4) prime
targets, Atacadao, Esmeril, Molly Gold Target and Cachoeira for the São Domingos
drilling project. All targets are located around a series of regional
brittle and ductile structures trending NW, NE and NNW within the Parauari
Intrusive Suite and adjacent to the later Cachoelra (Gabbroic) Intrusive
Suite. The Parauari Intrusive Suite has proven to host the vast
majority of gold deposits elsewhere within the Tapajos Gold
Province. This area has also previously been the focus of large-scale
alluvial workings.
Preliminary
investigation of all four (4) target areas has confirmed the existence of
mineralized quartz veins and stockwork systems within these Intrusive Granite
Suites.
The
Atacadao area is an alluvial system and is the result of gold being shed from
the surrounding granitic topographic highs. These hills are part of
the Pararui Intrusive Suite, and locally contain well-developed mineralized
stock work quartz veins. Numerous production shafts are located on
the flanks of the hills, trending along a major property scale east/west fault
and we are confident of the potential for further mineralisation at depth.
Preliminary investigations proved the local topographic highs to be part of the
Parauari Intrusive Suite with well-developed stock work
quartz. Initial inspection of the quartz veins showed them to be
clearly mineralized and final results of initial sampling confirmed high grades
of gold, up to 42.56g/t Gold with 20g/t silver within the quartz stock
works. Locally, previous shallow, up to 10 meter production shafts
focused on an E-W sub-vertical, project scale brittle structure, which can be
traced for several hundreds of meters, and is thought to link up to the high
grade occurrences at the Molly Gold Target project a distance of approximately 5
km.
24
Esmeril
was the centre of recent mining activity targeting the highly oxidised fraction
of the porphyritic host rock. The stockwork veins, exposed by
previous workers, show boxwork and fresh sulphides and generally associated with
ferruginous staining of both the veins and the enclosing country
rock.
The Molly
Gold Target area was also the centre of a large-scale development of both the
alluvials and oxidised host rocks, using the common water canon and sluice
method. This area is also located on an East - West structure and
further investigations are underway to test if this structure forms part of the
East - West system leading from Atacadao giving a strike potential of several
km. Property scale dominant structures are all generally East
-West.
Within
the project area the main structures strike NE-SW to E-W. Nearly all documented
quartz veins and vein rock zones run parallel to this general tectonic trend
suggesting the mineralisation is frequently related to the fracturing of the
host rocks. Gold, silver, sphalerite, galena, pyrite, chalcopyrite, millerite,
malachite and azurite are common minerals found within the rocks of the project
area.
The Molly
Gold Target lies NNE of Sao Domingos. It consists of a water filled pit that was
created by artisanal miners exploiting an E-W striking qtz vein and adjacent
stockwork system. Water ingress and poor wall stability have beaten local miners
and mining has ceased except for the re-washing of old stockpiles. For this
reason no in-situ samples of vein rocks and alteration envelopes could be taken.
Mineralized rocks of Molly Gold Target are also anomalous in copper and oxidised
specimens show abundant azurite and malachite. Stockpile rock and tailings
samples have yielded gold grades ranging from 2 g/t to 20 g/t.
Diamond
drilling has defined an E-W striking qtz vein over approximately 300m strike
length. It appears that this structure, which is in the order of 0.5 to 1m wide
and hosted within the Parauari Granites, is the core of the mineralized zone at
Molly Gold Target. Around the ‘high grade’ core of qtz veining associated
sulphides and weakly developed stockwork is a ‘low grade’ alteration halo at
Molly Gold Target the degree of mineralization seems to be a direct function of
vein intensity and as the stockwork is poorly developed the associated
mineralization is extremely variable.
São
João – Samba Minerals farm in agreement
In May
2008 the Company signed an agreement with Samba Minerals Limited (“Samba”),
which was subsequently amended in August 2008, whereby Samba can earn up to an
80% participating interest in the São João project by funding exploration
expenditures to completion of a feasibility study on the property. Upon
completion of a feasibility study, the Company will immediately transfer an 80%
participation interest in the property to Samba and enter into a formal joint
venture agreement to govern the development and production of minerals from the
property. Samba can terminate its participation by providing the Company 30 days
notice in writing. Upon withdrawal from its participation, Samba would forfeit
to the Company all of its rights in relation to the project and would be free of
any and all payment commitments yet to be due. Samba will be the manager of the
São João project. A feasibility study has not been completed as of December 31,
2008 and thus no joint venture has been formed as of that date.
Location
and access
The Sao
Joao property is located in the central portion of the Southern Tapajos basin
and is accessed by light aircraft from the regional centre of
Itaituba. Access is also possible by unsealed roads linking up to the
Transgarimpeiro highway and by a purpose cut heavy vehicle access track linking
Sao Joao to the exploration centre at the primary project at Sao
Domingo.
25
Tenure
The
project covers an area of 5.160 hectares and was granted in 1994 and 2005 as
exploration license number 851.533/1994 to 851.592/1994 and 850.091/2005 by
the
Brazilian National department of Mineral Production DNPM - Departamento
Nacional de Produção Mineral, and expires in 2010.
Option
Agreement
The São
João option agreement allows us to perform geological surveys and assessment
work necessary to ascertain the existence of possible mineral deposits which may
be economically mined and to earn a 100% interest in the São João property
mineral rights via structured cash payments.
The total
option agreement payments for the license are structured as
follows:
April
12, 2006
|
–
USD $20,000 (paid);
|
September
12, 2006
|
–
USD $25,000 (paid);
|
September
12, 2007
|
–
USD $60,000 (paid);
|
September
12, 2008
|
–
USD $80,000; (paid by Samba Minerals as part of farm in
agreement)
|
September
12, 2009
|
–
USD $1,250,000
|
Total
of USD $1,435,000.
|
The
vendor will have a 1.5% Net Smelter Royalty. The Royalty payment can be
purchased at any time upon written notice to the vendor and payment in Reals
(Brazilian currency) of the equivalent of USD $1,000,000. The option agreement
can be terminated at any time upon written notice to the vendor and we will be
free of any and all payment commitments yet to be due.
Geology
The prime
targets for the São João property are located around and on the intersection of
regional NW and NNW faults within the Pararui Intrusive Suite and this area has
been the focus of large-scale alluvial workings. The Pararui
Intrusive Suite has proven to host the vast majority of gold deposits elsewhere
within the Tapajos Gold Province. We conducted a rock chip program over an area
currently being excavated for gold in quartz systems via shallow underground
workings. The sample results have demonstrated that the quartz vein
systems are highly mineralized and considered continuous for at least
200m. We are confident that the quartz vein systems are much more
extensive and are currently planning to increase the sample density of rock and
soil sampling over, and adjacent to, the current workings to locate further
mineralized vein systems, and to drill test their depth extensions in the near
future.
Previous
mining activity over a number of years focused on the alluvial deposits within
its many tributaries, and has now progressed to include the saprolite host rock
and out cropping quartz veins.
Comandante
Araras - Samba Minerals farm in agreement
In May
2008 the Company signed an agreement with Samba, which was subsequently amended
in August 2008, whereby Samba can earn up to an 80% participating interest in
the Commandante Araras projects by funding exploration expenditures to
completion of a feasibility study on the property. Upon completion of a
feasibility study, the Company will immediately transfer an 80% participation
interest to Samba and enter into a formal joint venture agreement to govern the
development and production of minerals from the property. Samba can terminate
its participation by providing the Company 30 days notice in writing. Upon
withdrawal from its participation, Samba would forfeit to the Company all of its
rights in relation to the project and would be free of any and all payment
commitments yet to be due. Samba will be the manager of the Commandante Araras
project. A feasibility study has not been completed as of December 31, 2008 and
thus no joint venture has been formed as of that date.
26
Location
and access
The
Comandante Araras property is located in the central portion of the Southern
Tapajos basin and is accessed by light aircraft from the regional centre of
Itaituba. The project adjoins the Sao Joao project to the south
east. Access is also possible by unsealed roads linking up to the
Transgarimpeiro highway and by a purpose cut heavy vehicle access track linking
Sao Joao to the exploration centre at the primary project at Sao
Domingo.
Tenure
The
project covers an area of 2.750 hectares and was granted in 1993 as exploration
license number 853.785/1993 to 853.839/1993 by the Brazilian National department
of Mineral Production DNPM - Departamento Nacional de Produção Mineral, and
expires in 2012.
Memorandum
of Understanding
The
Comandante Araras MOU provided us with a 60 day review period to access the gold
potential of the property. If we decided to proceed with acquiring a 100 percent
interest in the title to the mineral rights then we would have given notice to
the vendors of our intention to acquire title to the mineral rights at least
five days prior to the expiration of the aforementioned period. We would then
have entered into an option agreement with the property vendors for the
assignment and transfer of the mineral rights.
Option
Agreement
The
Comandante Araras option agreement allows us to perform geological surveys and
assessment work necessary to ascertain the existence of possible mineral
deposits which may be economically mined and to earn a 100% interest in the
Comandante Araras property mineral rights via structured cash
payments.
The total
agreement payments for the license are structured as follows:
Option
payments
November
1, 2006
|
–
R$ 20,000 (paid) (approximately USD $8,540 at
12/31/2008);
|
November
15, 2006
|
–
R$ 40,000 (paid) (approximately USD $17,080at
12/31/2008);
|
December
15, 2006
|
–
R$ 40,000 (paid) (approximately USD $17,080 at
12/31/2008);
|
May
18, 2007
|
–
R$ 15,000 (paid) (approximately USD $6,405 at
12/31/2008);
|
May
29, 2007
|
–
R$ 50,000 (paid) (approximately USD $21,350 at
12/31/2008);
|
July
15, 2008
|
–
USD $60,000 (paid by Samba Minerals as part of farm in
agreement)
|
July
15, 2009
|
–
USD $70,000
|
July
15, 2010
|
–
USD $500,000
|
TOTAL
– R$165,000 and USD $630,000
|
The
vendor will have a 1.5% Net Smelter Royalty. The Royalty payment can be
purchased at any time upon written notice to the vendor and payment in Reals
(Brazilian currency) of the equivalent of USD $1,000,000. The option agreement
can be terminated at any time upon written notice to the vendor and we will be
free of any and all payment commitments yet to be due.
27
Geology
The
geology of the Comandante Araras property is dominated by two regional faults in
the Parauari granite that strike North west in the northern half of the property
and South east in the southern part of the property. The project was
selected based on the potential trends of mineralisation striking towards
Comandante Araras from the Sao Joao project. Exploration will focus
on trend noted on Sao Joao during the 2008 exploration season.
British Columbia,
Canada
Kumealon
Location
and access
In
February 1999, we acquired, by staking, a high grade limestone property three
(3) square kilometres (741 acres) located on the north shore of Kumealon Inlet,
54 kilometres south-southeast of Prince Rupert, British Columbia,
Canada.
This
property is highlighted by consistence of purity and whiteness of the limestone
zone outcropping along the southwest shore of Kumealon Lagoon. The zone is
comprised mostly of white, recrystallized, fine to course grained limestone,
striking 150 degrees and can be traced for at least 1200 meters. The zone is
estimated to have an average stratigraphic thickness of 180 meters. Chip samples
taken across the zone averaged 55.06% CaO, 2.11% insolubles and 43.51% ignition
loss. This property has no known reserves.
We have
conducted only preliminary exploration activities on these properties. None of
the foregoing properties contain any known reserves.
Item
3.
|
Legal
Proceedings
|
The
Company is not involved in any legal proceedings at this time.
Item
4.
|
Submission
of Matters to a Vote of Security
Holders
|
There
were no matters submitted to a vote of our security holders either through
solicitation of proxies or otherwise in the fourth quarter of the fiscal year
ended December 31, 2009.
PART
II
Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
Our
Common Stock is quoted on the Pink Sheets. The following table sets forth the
high and low bid prices for the Common Stock for the calendar quarters indicated
as reported by the NASD OTC Bulletin Board for the last two years. These prices
represent quotations between dealers without adjustment for retail mark-up,
markdown or commission and may not represent actual
transactions.
28
First Quarter
|
Second Quarter
|
Third Quarter
|
Fourth Quarter
|
|||||||||||||
2010
– High
|
$ | 0.55 | (1) | |||||||||||||
2010
– Low
|
$ | 0.40 | (1) | |||||||||||||
2009
– High
|
$ | 0.50 | $ | 0.33 | $ | 0.50 | $ | 0.70 | ||||||||
2009
– Low
|
$ | 0.16 | $ | 0.17 | $ | 0.06 | $ | 0.26 | ||||||||
2008
– High
|
$ | 0.51 | $ | 0.26 | $ | 0.12 | $ | 0.50 | ||||||||
2008
– Low
|
$ | 0.21 | $ | 0.05 | $ | 0.04 | $ | 0.04 | ||||||||
2007
– High
|
$ | 0.75 | $ | 0.61 | $ | 0.50 | $ | 0.40 | ||||||||
2007
– Low
|
$ | 0.54 | $ | 0.26 | $ | 0.26 | $ | 0.23 | ||||||||
2006
– High
|
$ | 2.10 | $ | 2.00 | $ | 1.20 | $ | 1.09 | ||||||||
2006
– Low
|
$ | 0.69 | $ | 0.77 | $ | 0.46 | $ | 0.60 | ||||||||
2005
– High
|
$ | 0.23 | $ | 0.12 | $ | 0.83 | $ | 0.73 | ||||||||
2005
– Low
|
$ | 0.09 | $ | 0.06 | $ | 0.06 | $ | 0.47 |
Our stock
is also quoted on the Frankfurt Exchange under the symbols “A4G.FSE,” and
“A4G.ETR” and on the Berlin-Bremen Exchange under the symbol
“A4G.BER”.
(1) The
high and low bid prices for our Common Stock for the First Quarter of 2010 were
for the period January 1, 2010 to January 20, 2010.
|
As
of January 20, 2010, there were 709 holders of record of the Common
Stock.
|
No cash
dividends were paid in 2008 or 2007. No cash dividends have been paid subsequent
to December 31, 2008. The amount and frequency of cash dividends are
significantly influenced by metal prices, operating results and our cash
requirements.
We do not
have securities authorized for issuance under an equity compensation
plan.
No
securities were issued without registration under the Securities Act of 1933, as
amended (the "Act") during the fourth quarter of 2008.
We did
not effect any repurchases of our securities during the fourth quarter of Fiscal
2008.
Item
6.
|
Selected
Financial Data
|
The
Company has not generated any operating revenues to date. Since incorporation it
has been inactive as far as mining activities are concerned. The
Company’s plans, funding requirements, sources and alternatives relating thereto
are presented and discussed in “Item 7 - "Management’s Discussion and analysis
of Financial Condition and Results of Operations".
The
following table sets forth, for the periods and the dates indicated selected
financial data for the Company. This information should be read in
conjunction with the Company's Audited Consolidated Financial Statements and
Notes thereto for the period ended December 31, 2008 and “Item 7 - "Management’s
Discussion and analysis of Financial Condition and Results of Operations”
included elsewhere herein.
29
The
selected financial data provided below are not necessarily indicative of the
future results of operations or financial performance of the
Company. To date the Company has not paid any dividends on the Common
Shares and it does not expect to pay dividends in the foreseeable
future.
The
Financial Statements of the Company have been prepared in accordance with
accounting principles generally accepted in United States ("US
GAAP").
FIVE YEAR COMPARATIVE SUMMARY OF
SELECTED FINANCIAL DATA
(expressed
in U.S. dollars unless otherwise indicated)
|
||||||||||||||||||||
Period
Type
|
12
Months
|
12
Months
|
12
Months
|
12
Months
|
12
Months
|
|||||||||||||||
Fiscal
Year End
|
Dec
31, 2008
|
Dec
31, 2007
|
Dec
31, 2006
|
Dec
31, 2005
|
Dec
31, 2004
|
|||||||||||||||
Current
Assets
|
$ | 47,066 | $ | 27,165 | $ | 320,670 | $ | 197,640 | $ | 1,475 | ||||||||||
Total
Assets
|
136,039 | 161,708 | 423,471 | 198,319 | 5,412 | |||||||||||||||
Current
Liabilities
|
1,139,066 | 1,414,602 | 1,155,673 | 32,588 | 190,296 | |||||||||||||||
Long
term Liabilities
|
552,513 | - | - | - | - | |||||||||||||||
Common
Stock
|
12,168,850 | 11,987,650 | 9,183,355 | 4,618,355 | 3,805,855 | |||||||||||||||
Other
Equity
|
(13,724,390 | ) | (13,240,544 | ) | (9,915,557 | ) | (4,452,624 | ) | (3,990,739 | ) | ||||||||||
Total
Liabilities and Equity
|
136,039 | 161,708 | 423,471 | 198,319 | 5,412 | |||||||||||||||
Other
Expenses
|
520,105 | 3,259,732 | 5,463,855 | 457,271 | 223,763 | |||||||||||||||
Income
(Loss) Pre-tax
|
(520,105 | ) | (3,259,732 | ) | (5,463,855 | ) | (457,271 | ) | (223,763 | ) | ||||||||||
Net
Income (Loss)
|
(520,105 | ) | (3,259,732 | ) | (5,463,855 | ) | (457,271 | ) | (223,763 | ) | ||||||||||
EPS
Basic
|
(0.01 | ) | (0.07 | ) | (0.13 | ) | (0.02 | ) | (0.01 | ) | ||||||||||
EPS
Diluted
|
(0.01 | ) | (0.07 | ) | (0.13 | ) | (0.02 | ) | (0.01 | ) | ||||||||||
Common
Shares Issued and Outstanding
|
58,071,855 | 55,218,522 | 45,468,522 | 36,218,522 | 19,534,431 |
Item
7.
|
Management’s
Discussion and analysis of Financial Condition and results of
Operations
|
(A)
|
General
|
We are a
mineral exploration company engaged in the exploration of base, precious metals
and industrial minerals worldwide. We were incorporated under the
laws of the State of Delaware on October 10, 1995, under the name "Chefs
Acquisition Corp." We conduct our exploration and property acquisition
activities through our head office which is located at is located at
Baarerstrasse 10, 1st
Floor, Zug, 6300 Switzerland. The telephone number is (+41) 7887-96966. Our
Field office for exploration activities in Brazil is located at Estrada Do Bis,
476, Bairro, Bom Jardim, Itaituba, in the Tapajos gold province of the State of
Para, Brazil.
We had no
revenues during fiscal 2008 and 2007. Funds raised in fiscal 2008 and 2007 were
used for exploration of our properties and general
administration.
30
(B)
|
Results
of Operations
|
Year
Ended December 31, 2008 (Fiscal 2008) versus Year Ended December 31, 2007
(Fiscal 2007)
For the
year ended December 31, 2008 we recorded a loss of $520,105 or $0.01 per share,
compared to a loss of $3,259,732 or $0.07 per share in 2007.
General
and administrative expenses – For the year ended December 31, 2008 we recorded
general and administrative expenses of $442,832 (fiscal 2007 - $1,225,857). The
fiscal 2008 amount includes professional fees - accounting $56,898 (fiscal 2007
- $53,509) and legal $79,540 (fiscal 2007 - $180,253). Recent developments in
capital markets have restricted access to debt and equity financing for the
Company. As a result, the Company reduced its 2009 capital spending requirements
in light of the current and anticipated, global economic
environment.
Exploration
expenditures - For the year ended December 31, 2008 we recorded exploration
expenses of $77,273 compared to $2,033,875 in fiscal 2007. The following is a
breakdown of the exploration expenses by property: Brazil $74,723 (2007 -
$2,031,700) and Canada, Kumealon property $2,550 (2007 - $2,175). Recent
developments in capital markets have restricted access to debt and equity
financing for the Company. As a result, the Company reduced its 2009 exploration
spending requirements in light of the current and anticipated, global economic
environment.
Depreciation
expense – For the year ended December 31, 2008 we recorded depreciation expense
of $14,426 compared to $12,326 in fiscal 2007.
(C)
|
Capital
Resources and Liquidity
|
December
31, 2008 versus December 31, 2007:
Recent
developments in capital markets have restricted access to debt and equity
financing for many companies. The Company's exploration properties are in the
exploration stage, have not commenced commercial production and consequently the
Company has no history of earnings or cash flow from its operations. As a
result, the Company is reviewing its 2009/2010 exploration and capital spending
requirements in light of the current and anticipated, global economic
environment.
The
Company currently finances its activities primarily by the private placement of
securities. There is no assurance that equity funding will be accessible to the
Company at the times and in the amounts required to fund the Company’s
activities. There are many conditions beyond the Company’s control which have a
direct bearing on the level of investor interest in the purchase of Company
securities. The Company may also attempt to generate additional working capital
through the operation, development, sale or possible joint venture development
of its properties, however, there is no assurance that any such activity will
generate funds that will be available for operations. Debt financing has not
been used to fund the Company’s property acquisitions and exploration activities
and the Company has no current plans to use debt financing. The Company does not
have “standby” credit facilities, or off-balance sheet arrangements and it does
not use hedges or other financial derivatives. The Company has no agreements or
understandings with any person as to additional financing.
31
At
December 31, 2008, we had cash of $16,511 (2007 - $3,909) and a working capital
deficiency of $1,092,000 (2007 working capital deficiency - $1,387,437). Total
liabilities as of December 31, 2008 were $1,691,579 as compared to $1,414,602 on
December 31, 2007, an increase of $276,977. In September 2009 we
raised $300,000 through a private placement of 3,000,000 shares at a price of
$0.10 per share to offshore investors, all of whom are non-affiliated pursuant
to the exemption from registration requirements of the Securities Act of 1933 as
amended afforded by Regulation S as promulgated by the Act. The shares have not
yet been issued. The Company’s agent will be paid a commission of 420,000 shares
of common stock of the Company. In September 2009, convertible notes payable and
related accrued interest aggregating US $739,151.69 (AUD $850,479.45) were
settled through the issuance of 5,000,000 shares of common stock of the Company.
The shares were issued to a company who resides outside the United States of
America (in accordance with the exemption from registration requirements
afforded by Regulation S as promulgated thereunder).In March 2007 we completed a
private placement to a non-affiliated offshore investor of 500,000 common shares
of the common stock of the Company for net proceeds of $250,000 pursuant to the
exemption from registration requirements of the Securities Act of 1933 as
amended afforded by Regulation S as promulgated by the Act. In December 2008,
2,603,333 shares of the common stock of the Company were issued to settle debts
of $156,200. The shares were issued to individuals and companies who reside
outside the United States of America (in accordance with the exemption from
registration requirements afforded by Regulation S as promulgated thereunder).Of
the 2,603,333 common shares issued, 1,488,533 common shares were issued to a
director in payment of his services valued at $75,108 and expenses valued at
$14,204. In July 2008, the Company issued 250,000 shares of common stock of the
Company valued at $25,000 to a director of the Company’s subsidiary as
consideration for arranging property acquisitions in the Tapajos Gold Province,
State of Pará, Brazil. The shares were issued to an individual who reside
outside the United States of America (in accordance with the exemption from
registration requirements afforded by Regulation S as promulgated thereunder).In
July 2007, 2,000,000 common shares were issued to settle loans of $500,000. The
shares were issued to individuals and companies who reside outside the United
States of America (in accordance with the exemption from registration
requirements afforded by Regulation S as promulgated thereunder).In August 2007,
the Company issued 250,000 common shares at $0.20 per share in payment of
services performed by an individual valued at $50,000. In July 2007, 3,000,000
common shares were issued for cash proceeds of $750,000. The shares
were issued to individuals and companies who reside outside the United States of
America (in accordance with the exemption from registration requirements
afforded by Regulation S as promulgated thereunder). In September 2007 the
Company completed a private placement to non-affiliated offshore investors of
4,000,000 common shares for net cash proceeds of $800,000. The shares
were issued to individuals and companies who reside outside the United States of
America (in accordance with the exemption from registration requirements
afforded by Regulation S as promulgated thereunder).
Our
general business strategy is to acquire mineral properties either directly or
through the acquisition of operating entities. Our consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles in the United States of America and applicable to a going concern
which contemplates the realization of assets and the satisfaction of liabilities
and commitments in the normal course of business. As discussed in note 1 to the
consolidated financial statements, the Company has incurred recurring operating
losses since inception, has not generated any operating revenues to date and
used cash of $649,028 from operating activities in 2008. The Company requires
additional funds to meet its obligations and maintain its
operations. We do not have sufficient working capital to (i) pay our
administrative and general operating expenses through December 31, 2010 and (ii)
to conduct our preliminary exploration programs. Without cash flow from
operations, we may need to obtain additional funds (presumably through equity
offerings and/or debt borrowing) in order, if warranted, to implement additional
exploration programs on our properties. While we may attempt to generate
additional working capital through the operation, development, sale or possible
joint venture development of its properties, there is no assurance that any such
activity will generate funds that will be available for
operations. Failure to obtain such additional financing may result in
a reduction of our interest in certain properties or an actual foreclosure of
its interest. We have no agreements or understandings with any person as to such
additional financing.
Our
exploration properties have not commenced commercial production and we have no
history of earnings or cash flow from its operations. While we may attempt to
generate additional working capital through the operation, development, sale or
possible joint venture development of its property, there is no assurance that
any such activity will generate funds that will be available for
operations.
32
Cash
Flow
Operating
activities: The
Company used cash of $649,028 (used cash in 2007 - $2,998,924) through the year
ended December 31, 2008 and 2007. The following is a breakdown of cash used for
operating activities: Depreciation and amortization of $14,426 (2007 - $12,326),
stock compensation expense on stock option grants $0 (2007 - $454,295), expenses
satisfied with issuance of common stock $25,000 (2007 - $50,000), foreign
exchange loss related to notes payable $169,235 (2007 - $0). Changes in prepaid
expenses and other assets resulted in an increase of $19,190 compared to a
decrease of $21,638 in 2007. There was an increase in accounts payable and
accrued expenses of $20,032 compared to a decrease of $277,451 in
2007.
Investing
Activities: During the year ended December
31, 2008 investing activities consisted of expenditures on the purchase of
assets of $250 (2007 - $21,992) and proceeds from the disposal of assets of
$2,312 (2007 - $0).
Financing
Activities: The Company intends to finance
its activities by raising capital through the equity markets. In fiscal 2008 the
Company received proceeds from two notes payable of $687,260 ($750,000
Australian dollars). At December 31, 2008 the value of the notes payable was
$518,025 ($750,000 Australian dollars). The notes payable are repayable within
24 months from the date of agreement, July 18, 2008; bear interest at 10% per
annum due upon repayment of the principal amount; are secured by the Company’s
Sao Domingos Project, and may be converted at the option of the lender at any
time prior to repayment into fully paid common shares of the Company at a deemed
issue price of $0.30 per Company share. During fiscal 2008 the Company repaid
advances from a related party of $161,441. In fiscal 2007 the Company issued
7,500,000 shares for net cash of $1,800,000, issued 250,000 shares to pay for
services rendered of $50,000 and issued 2,000,000 shares to settle a loans
payable of $500,000. The carrying value of the indebtedness settled approximated
the fair market value of the common shares issued. Additionally during fiscal
2007 the Company received advances from a related party of
$161,441.
Dividends
The
Company has neither declared nor paid any dividends on its Common stock. The
Company intends to retain it’s earnings to finance growth and expand its
operations and does not anticipate paying any dividends on its Common shares in
the foreseeable future.
Asset-Backed
Commercial Paper
The
Company has no asset-backed commercial paper.
Financial
Instruments
Fair
value estimates of financial instruments are made at a specific point in time,
based on relevant information about financial markets and specific financial
instruments. As these estimates are subjective in nature, involving
uncertainties and matters of significant judgment, they cannot be determined
with precision. Changes in assumptions can significantly affect
estimated fair value.
The
carrying value of cash, accounts payable and accrued expenses, accounts payable
and accrued expenses – related parties, advances payable – related party, loans
payable and loan payable - related party approximate their fair value because of
the short-term nature of these instruments. The carrying value of the
convertible notes payable approximate their fair value because interest rates of
long-term convertible notes payable approximate market interest rates.
Management is of the opinion that the Company is not exposed to significant
interest or credit risks arising from these financial
instruments.
33
The
Company operates outside of the United States of America (primarily in Brazil)
and is exposed to foreign currency risk due to the fluctuation between the
currency in which the Company operates in and the U.S. dollar.
Share
Capital
At
January 18, 2010, the Company had:
◦
|
Authorized
share capital of 100,000,000 common shares with par value of $0.001
each.
|
◦
|
66,071,855
common shares were issued and outstanding as at January 18, 2010 (December
31, 2008 – 58,071,855). If the holders were to acquire all 2,300,000
shares issuable upon the exercise of all incentive stock options
outstanding, the Company would receive an additional
$598,000.
|
◦
|
The
two notes payable of $518,025 ($750,000 Australian dollars) at December
31, 2008, if converted, would be convertible into 1,726,750 fully paid
common shares of the Company at a deemed issue price of $0.30 per Company
share.
|
◦
|
2,300,000
stock options outstanding under the Company’s incentive stock option plan.
The stock options are exercisable at of $0.26 per share, with expiry date
of August 6, 2012.
|
OUTLOOK
General
Economic Conditions
Current
problems in credit markets and deteriorating global economic conditions have
lead to a significant weakening of exchange traded commodity prices in recent
months, including precious and base metal prices. Volatility in these markets
has also been unusually high. It is difficult in these conditions to forecast
metal prices and demand trends for products that we would produce if we had
current mining operations. Credit market conditions have also increased the cost
of obtaining capital and limited the availability of funds. Accordingly,
management is reviewing the effects of the current conditions on our
business.
It is
anticipated that for the foreseeable future, the Company will rely on the equity
markets to meet its financing need. The Company will also consider entering into
joint venture arrangements to advance its projects.
Capital
and Exploration Expenditures
We are
reviewing our capital and exploration spending in light of current market
conditions. As a result of our review, the Company may curtail a portion of its
capital and exploration expenditures during 2009/2010.
We are
currently concentrating our exploration activities in Brazil and examining data
relating to the potential acquisition or joint venturing of additional mineral
properties in either the exploration or development stage.
Off-Balance
Sheet Arrangements
During
the year ended December 31, 2008, the Company was not a party to any
off-balance-sheet arrangements that have, or are reasonably likely to have, a
material current or future effect on the results of operations, financial
condition, revenues or expenses, liquidity, capital expenditures or capital
resources of the Company.
34
Market
Risk Disclosures
The
Company has not entered into derivative contracts either to hedge existing risks
or for speculative purposes.
Forward-Looking
Statements
This
annual report contains forward-looking statements as that term is defined in the
Private Securities Litigation Reform Act of 1995. These statements relate
to future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may", "should",
"expects", "plans", "anticipates", "believes", "estimates", "predicts",
"potential" or "continue" or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and
unknown risks, uncertainties and other factors, including the risks in the
section entitled “Risk Factors” that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking
statements.
Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Except as required by applicable law, including the
securities laws of the United States, we do not intend to update any of the
forward-looking statements to conform these statements to actual
results.
Plans
for Next Twelve Months
The
following Plan of Operation contains forward-looking statements that involve
risks and uncertainties, as described below. The Company’s actual results
could differ materially from those anticipated in these forward-looking
statements. The following discussion should be read in conjunction with
the audited consolidated financial statements and notes thereto.
Our
audited consolidated financial statements are stated in United States Dollars
and are prepared in accordance with United States Generally Accepted Accounting
Principles.
During
the next 12 months we intend to raise additional funds through equity offerings
and/or debt borrowing to meet our administrative/general operating expenses and
to conduct work on our exploration properties. There is, of course, no assurance
that we will be able to do so.
Our
exploration properties have not commenced commercial production and we have no
history of earnings or cash flow from its operations. While we may attempt to
generate additional working capital through the operation, development, sale or
possible joint venture development of its property, there is no assurance that
any such activity will generate funds that will be available for
operations.
We intend
to raise additional funds through equity offerings and/or debt borrowing to meet
our administrative/general operating expenses and to conduct work on our
exploration property. There is, of course, no assurance that we will be able to
do so.
We will
concentrate our exploration activities on the Brazilian Tapajos properties and
examine data relating to the potential acquisition or joint venturing of
additional mineral properties in either the exploration or development stage in
Brazil, Canada, the USA and other South American countries. Additional employees
will be hired on a consulting basis as required by the exploration
properties.
35
Our
exploration work program in 2009 and 2010 on the Brazilian Tapajos properties
will entail surface mapping of geology, sampling of soils on a grid basis to
delineate geochemical anomalies, stream sediment sampling, geophysical surveying
and drilling.
We have
set up a field operations centre at the São Domingos property and intend to
continue to focus our exploration activities on anomalies associated with the
São Domingos Property. We selected the São Domingos property based on
its proximity to our other properties, and the logistics currently in
place. Access to São Domingos property is by light aircraft to a
well-maintained strip, by road along the government maintained Trans Garimpeiro
highway, and by boat along the multitude of waterways in the Amazon
Basin.
We will
continue to conduct exploration programs on our properties adjacent to the Sao
Domingos property using the road and river access to the properties from the Sao
Domingos field operations centre. Exploration on the São Domingos property will
involve further mapping of the outcrop geology and soils from shafts of previous
workers in order to confirm lithologies and structural trends noted from
drilling and on government maps.
Exploration
during late 2008 in the Atacadau area of the Sao Domingos project revealed a new
discovery of mineralised material which was named Colibri. During
2009 and 2010 the Company intends to follow up the occurrence with further
trenching and sampling and mapping to ascertain if the occurrence has the
potential to be of commercial size and grade.
Exploration
on the Sao Joao, and the adjoining Comandante Araras properties during early
2007 included trenching and mapping. Sample results of a trench on
the main vein resulted in 80m at 30.94 g/t gold. Recent sampling and mapping has
shown this vein system to be extensive and a series of other veins have been
located and sampled. A geophysics campaign is planned for Sao Joao
over the anomalous trench results. The plans are to determine the
geophysical signature of the known mineralised material and then to broaden the
geophysical survey in an effort to locate areas exhibiting the same
responses. Any areas demonstrating similar geophysical readings will
then be the focus of further trenching and/or drill testing to test strike and
depth continuity.
The
Bigode project has returned significant gold assay results and was also
scheduled for drilling on completion of drill testing at Sao Joao. After further
investigation the company decided that mineralisation was not well enough
established and decided to relinquish the option on the Bigode
project.
During
2009 and 2010 the Company also intends to review several projects that have been
presented to the Company. The projects offered for review are located
within the Tapajos region and could be managed form the Sao Domingo
base.
We are
not planning to do any exploration work on the British Columbia Kumealon
limestone property in 2009.
We are
currently seeking new sources of financing in order to continue our mineral
exploration activities.
(D)
|
Application
of Critical Accounting Policies
|
The
accounting policies and methods we utilize in the preparation of our
consolidated financial statements determine how we report our financial
condition and results of operations and may require our management to make
estimates or rely on assumptions about matters that are inherently uncertain.
Our accounting policies are described in note 2 to our December 31, 2008
consolidated financial statements. Our accounting policies relating to mineral property and exploration
costs and depreciation and amortization of property, plant and equipment
are critical accounting policies that are subject to estimates and assumptions
regarding future activities.
36
Depreciation
is based on the estimated useful lives of the assets and is computed using the
straight-line method. Equipment is recorded at
cost. Depreciation is provided over the following useful
lives: vehicles 10 years and office equipment, furniture and fixtures
2 to 10 years.
Exploration
costs are charged to operations as incurred until such time that proven reserves
are discovered. From that time forward, the Company will capitalize all costs to
the extent that future cash flow from mineral reserves equals or exceeds the
costs deferred. The deferred costs will be amortized over the recoverable
reserves when a property reaches commercial production. As at December 31, 2008
and 2007, the Company did not have proven reserves.
Exploration
activities conducted jointly with others are reflected at the Company's
proportionate interest in such activities.
Costs related to site restoration programs are accrued
over the life of the project. US
GAAP requires us to consider at the end of each accounting period whether or not
there has been an impairment of the capitalized property, plant and equipment.
This assessment is based on whether factors that may indicate the need for a
write-down are present. If we determine there has been an impairment, then we
would be required to write-down the recorded value of its property, plant and
equipment costs which would reduce our earnings and net assets.
(E)
|
Related
Party Transactions
|
During
the fiscal year 2008, consulting fees of $134,558 (2007 – $236,651) were paid to
directors of the Company and its subsidiary. The transactions were recorded at
the exchange amount, being the value established and agreed to by the related
parties.
The
Company had advances payable to a related party at December 31, 2007 due to a
director of the Company’s subsidiary and was non interest bearing and due upon
demand. These advances were repaid in 2008.
The
Company had accounts payable to related parties at December 31, 2007 of $28,444
payable to directors of the Company and its subsidiary for consulting fees and
various expenses incurred on behalf of the Company.
The
Company had a loan payable to a related party of $250,000 at December 31, 2007,
that bears interest at 6% per annum, is due on demand and is unsecured. The
entity to which the loan is payable is no longer a related party at December 31,
2008, and thus the loan is included in loans payable on the consolidated balance
sheet at December 31, 2008.
(F)
|
Off-balance
Sheet Arrangements and Contractual
Obligations
|
We do not
have any off-balance sheet arrangements or contractual obligations that are
likely to have or are reasonably likely to have a material current or future
effect on our financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital
resources that have not been disclosed in our financial statements.
Item
7A.
|
Quantitative
and Qualitative Disclosures About Market
Risk
|
Our
exposure to market risk is confined to our cash equivalents and short-term
investments. We invest in high-quality financial instruments; primarily money
market funds, federal agency notes, and US Treasury obligations, with the
effective duration of the portfolio within one year which we believe are subject
to limited credit risk. We currently do not hedge interest rate exposure. Due to
the short-term nature of our investments, we do not believe that we have any
material exposure to interest rate risk arising from our
investments.
37
Item
8.
|
Financial
Statements and Supplementary Data
|
Our
audited consolidated financial statements are stated in United States dollars
(US$) and are prepared in accordance with United States Generally Accepted
Accounting Principles.
The
following audited consolidated financial statements are filed as part of this
annual report:
Report of
Independent Registered Public Accounting Firm, dated December 9,
2009
Consolidated
Balance Sheets as of December 31, 2008 and 2007
Consolidated
Statements of Operations from October 10, 1995 (commencement of operations) to
December 31, 2008 and for the years ended December 31, 2008 and
2007
Statements
of Stockholders’ Equity (Deficit) for period from October 10, 1995(commencement
of operations) to December 31, 2008
Consolidated
Statements of Cash Flows for period from October 10, 1995(commencement of
operations) to December 31, 2008 and for the years ended December 31, 2008 and
2007
Notes to
the Consolidated Financial Statements
38
AURORA
GOLD CORPORATION
(An
exploration stage enterprise)
Consolidated
Financial Statements
(Expressed
in U.S. Dollars)
December
31, 2008 and 2007
Index
Report of
Independent Registered Public Accounting Firm
Consolidated
Balance Sheets
Consolidated
Statements of Operations
Consolidated
Statements of Stockholders' Equity (Deficiency) and Comprehensive Income
(Loss)
Consolidated
Statements of Cash Flows
Notes to
Consolidated Financial Statements
F-1
CERTIFIED
PUBLIC ACCOUNTANTS
|
TEL 206.382.7777 Ÿ FAX
206.382.7700
|
601
UNION STREET. SUITE 2300
|
www.pscpa.com
|
SEATTLE,
WASHINGTON 98101
|
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Stockholders
Aurora
Gold Corporation
We have
audited the accompanying consolidated balance sheets of Aurora Gold Corporation
(an exploration stage company) and Subsidiary ("the Company") as of
December 31, 2008 and 2007, and the related consolidated statements of
operations, stockholders' equity (deficiency) and comprehensive income (loss),
and cash flows for the years then ended, and for the period from October 10,
1995 (date of inception) to December 31, 2008. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. The
Company has determined that it is not required to have, nor were we engaged to
perform, an audit of its internal control over financial
reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Aurora Gold Corporation (an
exploration stage company) and Subsidiary as of December 31, 2008 and 2007,
and the results of their operations and their cash flows for the years then
ended, and for the period from October 10, 1995 (date of inception) to
December 31, 2008, in conformity with accounting principles generally
accepted in the United States.
The
accompanying consolidated financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 1 to
the consolidated financial statements, the Company has incurred operating losses
since inception, has not been able to generate any operating revenues to date,
and used cash from operations of $649,028 in 2008. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans regarding those matters are also
described in Note 1. The consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
/S/
PETERSON SULLIVAN LLP
December
9, 2009
Seattle,
Washington
F-2
AURORA
GOLD CORPORATION
(An
exploration stage enterprise)
|
||||||||
Consolidated
Balance Sheets
|
||||||||
December
31, 2008 and 2007
|
||||||||
(Expressed
in U.S. Dollars)
|
December
31
|
December
31
|
||||||
|
2008
|
2007
|
||||||
ASSETS
|
||||||||
Current
assets
|
||||||||
Cash
|
$ | 16,511 | $ | 3,909 | ||||
Prepaid expenses and other
assets
|
30,555 | 23,256 | ||||||
Total
current assets
|
47,066 | 27,165 | ||||||
Equipment, net
|
88,973 | 134,543 | ||||||
Total assets
|
$ | 136,039 | $ | 161,708 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIENCY)
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable and accrued expenses
|
$ | 639,066 | $ | 693,233 | ||||
Accounts
payable and accrued expenses - related party
|
- | 59,928 | ||||||
Advances
payable - related party
|
- | 161,441 | ||||||
Loans
payable
|
500,000 | 250,000 | ||||||
Loan payable - related
party
|
- | 250,000 | ||||||
Total
current liabilities
|
1,139,066 | 1,414,602 | ||||||
Convertible
notes payable
|
518,025 | - | ||||||
Accrued interest on convertible notes
payable
|
34,488 | - | ||||||
Total liabilities
|
1,691,579 | 1,414,602 | ||||||
Stockholders'
Equity (Deficiency)
|
||||||||
Common
stock
|
||||||||
Authorized:
|
||||||||
100,000,000
common shares, (December 31, 2007 - 100,000,000) with par value $0.001
each
|
||||||||
Issued
and outstanding:
|
||||||||
58,071,855
(December 31, 2007 - 55,218,522) common shares
|
58,071 | 55,218 | ||||||
Additional
paid-in capital
|
12,110,779 | 11,932,432 | ||||||
Accumulated
deficit during the exploration stage
|
(13,691,702 | ) | (13,171,597 | ) | ||||
Accumulated other comprehensive income
(loss)
|
(32,688 | ) | (68,947 | ) | ||||
Stockholders' equity
(deficiency)
|
(1,555,540 | ) | (1,252,894 | ) | ||||
Total liabilities and stockholders' equity
(deficiency)
|
$ | 136,039 | $ | 161,708 | ||||
The
accompanying notes are an integral part of these consolidated financial
statements
|
F-3
AURORA
GOLD CORPORATION
(An
exploration stage enterprise)
|
||||||||||||
Cumulative
|
||||||||||||
Consolidated
Statements of Operations
|
October
10
|
Year
ended
|
Year
ended
|
|||||||||
(Expressed
in U.S. Dollars)
|
1995
(inception)
|
Ended
|
Ended
|
|||||||||
to
December 31
|
December
31
|
December
31
|
||||||||||
|
2008
|
2008
|
2007
|
|||||||||
Expenses
|
||||||||||||
Administrative
and general
|
$ | 1,266,350 | $ | 152,309 | $ | 210,193 | ||||||
Depreciation
and amortization
|
86,319 | 14,426 | 12,326 | |||||||||
Imputed
interest on loan payable - related party
|
1,560 | - | - | |||||||||
Interest
and bank charges
|
269,688 | 115,501 | 89,673 | |||||||||
Foreign
exchange (gain)loss
|
(171,665 | ) | (171,902 | ) | 237 | |||||||
Professional
fees - accounting and legal
|
1,084,318 | 136,438 | 233,762 | |||||||||
Property
search and negotiation
|
225,198 | - | - | |||||||||
Salaries, management and consulting
fees
|
2,010,008 | 196,060 | 679,666 | |||||||||
|
4,771,776 | 442,832 | 1,225,857 | |||||||||
Exploration
expenses
|
8,711,440 | 77,273 | 2,033,875 | |||||||||
Write-off of mineral property
costs
|
172,981 | - | - | |||||||||
13,656,197 | 520,105 | 3,259,732 | ||||||||||
Other
income (loss)
|
||||||||||||
Gain
on disposition of subsidiary
|
216,474 | - | - | |||||||||
Interest
income
|
22,353 | - | - | |||||||||
Gain
on sale of rights to the Matupa agreement, net of expenses of
$138,065
|
80,237 | - | - | |||||||||
Realized
(loss) on investments
|
(37,971 | ) | - | - | ||||||||
Operating (loss) of Spun-off
operations
|
(316,598 | ) | - | - | ||||||||
(35,505 | ) | - | - | |||||||||
Net (loss) for the period
|
$ | (13,691,702 | ) | $ | (520,105 | ) | $ | (3,259,732 | ) | |||
|
||||||||||||
Earnings
(loss) per share
|
||||||||||||
- basic and diluted
|
$ | (0.01 | ) | $ | (0.07 | ) | ||||||
Weighted
average number of common shares outstanding
|
||||||||||||
- basic and diluted
|
55,325,371 | 49,873,055 | ||||||||||
The
accompanying notes are an integral part of these consolidated financial
statements
|
F-4
AURORA
GOLD CORPORATION
|
||||||||||||||||||||||||||||||||
(An
exploration stage enterprise)
|
||||||||||||||||||||||||||||||||
Consolidated
Statements of Stockholders' Equity (Deficiency) and Comprehensive Income
(loss)
|
||||||||||||||||||||||||||||||||
October
10, 1995 (inception) to December 31, 2008
|
||||||||||||||||||||||||||||||||
(Expressed in U.S. dollars)
|
||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Common Stock
|
Additional
paid-in
|
Compre-
hensive
|
Accumulated
(deficit)
during
exploration
|
Advances
for
Stock
|
Accumulated
other
comprehensive
|
Total
stockholders'
equity
|
||||||||||||||||||||||||||
Shares
|
Amount
|
capital
|
(loss)
|
stage
|
Subscriptions
|
income (loss)
|
(deficiency)
|
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Balance,
December 31, 1994
|
- | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||||
Issuance
of common stock for
|
||||||||||||||||||||||||||||||||
-
settlement of indebtedness
|
11,461,153 | 11,461 | - | - | - | - | 11,461 | |||||||||||||||||||||||||
Net (loss) for the period
|
- | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Total
comprehensive (loss)
|
- | |||||||||||||||||||||||||||||||
Balance
December 31, 1995
|
11,461,153 | 11,461 | - | - | - | - | - | 11,461 | ||||||||||||||||||||||||
Adjustment
for reverse stock split
|
(7,640,766 | ) | (7,641 | ) | - | - | - | - | (7,641 | ) | ||||||||||||||||||||||
Issuance
of common stock for
|
||||||||||||||||||||||||||||||||
-
cash at $0.001 per share
|
5,800,000 | 5,800 | 341,761 | - | - | - | 347,561 | |||||||||||||||||||||||||
-
resource property
|
300,000 | 300 | 2,700 | - | - | - | 3,000 | |||||||||||||||||||||||||
Net (loss) for the period
|
- | - | - | (361,208 | ) | (361,208 | ) | - | (361,208 | ) | ||||||||||||||||||||||
Total
comprehensive (loss)
|
(361,208 | ) | ||||||||||||||||||||||||||||||
Balance
December 31, 1996
|
9,920,387 | 9,920 | 344,461 | (361,208 | ) | - | - | (6,827 | ) | |||||||||||||||||||||||
Issuance
of common stock for
|
||||||||||||||||||||||||||||||||
-
cash in March 1997 at $1.00 per share (less issue costs of
$4,842)
|
750,000 | 750 | 744,408 | - | - | - | - | 745,158 | ||||||||||||||||||||||||
Net (loss) for the period
|
- | - | - | 615,880 | (615,880 | ) | - | - | (615,880 | ) | ||||||||||||||||||||||
Total
comprehensive (loss)
|
615,880 | |||||||||||||||||||||||||||||||
Balance
December 31, 1997
|
10,670,387 | 10,670 | 1,088,869 | (977,088 | ) | - | - | 122,451 | ||||||||||||||||||||||||
Issuance
of common stock for
|
||||||||||||||||||||||||||||||||
-
settlement of indebtedness
|
96,105 | 96 | 68,601 | - | - | - | - | 68,697 | ||||||||||||||||||||||||
-
cash in May 1998 at $1.25 per share
|
200,000 | 200 | 249,800 | - | - | - | - | 250,000 | ||||||||||||||||||||||||
-
cash in November 1998 at $0.75 per share
|
71,667 | 72 | 53,678 | - | - | - | - | 53,750 | ||||||||||||||||||||||||
-
cash in December 1998 at $0.75 per share
|
143,333 | 143 | 107,357 | - | - | - | - | 107,500 |
F-5
Grant
of options to employees and directors
|
- | - | 518,900 | - | - | - | - | 518,900 | ||||||||||||||||||||||||
Grant
of options to consultants
|
- | - | 172,100 | - | - | - | - | 172,100 | ||||||||||||||||||||||||
Net (loss) for the period
|
- | - | - | (1,151,604 | ) | (1,151,604 | ) | - | - | (1,151,604 | ) | |||||||||||||||||||||
Total
comprehensive (loss)
|
(1,151,604 | ) | ||||||||||||||||||||||||||||||
Balance
December 31, 1998
|
11,181,492 | 11,182 | 2,259,304 | (2,128,692 | ) | - | - | 141,794 | ||||||||||||||||||||||||
Issuance
of common stock for
|
||||||||||||||||||||||||||||||||
-
settlement of indebtedness
|
231,286 | 231 | 160,151 | - | - | - | - | 160,382 | ||||||||||||||||||||||||
-
cash in March 1999 at $0.656 per share
|
22,871 | 23 | 14,977 | - | - | - | - | 15,000 | ||||||||||||||||||||||||
-
finder's fee in February 1999 at $0.81 per share
|
25,000 | 25 | 20,287 | - | - | - | - | 20,312 | ||||||||||||||||||||||||
Grant
of options to consultants
|
- | - | 29,500 | - | - | 29,500 | ||||||||||||||||||||||||||
Cash
advanced on stock subscriptions
|
- | - | - | - | - | 425,000 | 425,000 | |||||||||||||||||||||||||
Net (loss) for the period
|
- | - | - | (855,391 | ) | (855,391 | ) | - | - | (855,391 | ) | |||||||||||||||||||||
Total
comprehensive (loss)
|
(855,391 | ) | ||||||||||||||||||||||||||||||
Balance
December 31, 1999
|
11,460,649 | 11,461 | 2,484,219 | (2,984,083 | ) | 425,000 | - | (63,403 | ) | |||||||||||||||||||||||
Issuance
of common stock for
|
||||||||||||||||||||||||||||||||
-
settlement of indebtedness
|
199,000 | 199 | 99,301 | - | - | - | 99,500 | |||||||||||||||||||||||||
-
cash in March 2000 at $0.50 per share
|
350,000 | 350 | 174,650 | - | - | (175,000 | ) | - | - | |||||||||||||||||||||||
-
cash in March 2000 at $0.455 per share
|
550,000 | 550 | 249,450 | - | - | (250,000 | ) | - | - | |||||||||||||||||||||||
Cancellation
of shares in April 2000
|
(90,706 | ) | (91 | ) | (56,600 | ) | - | - | - | - | (56,691 | ) | ||||||||||||||||||||
Exercise
of options in June 2000
|
405,000 | 405 | 3,645 | - | - | - | 4,050 | |||||||||||||||||||||||||
Spin-off
of Aurora Metals (BVI) Limited
|
- | - | 316,498 | - | - | - | - | 316,498 | ||||||||||||||||||||||||
Net (loss) for the period
|
- | - | - | (677,705 | ) | (677,705 | ) | - | - | (677,705 | ) | |||||||||||||||||||||
Total
comprehensive (loss)
|
(677,705 | ) | ||||||||||||||||||||||||||||||
Balance
December 31, 2000
|
12,873,943 | 12,874 | 3,271,163 | (3,661,788 | ) | - | - | (377,751 | ) | |||||||||||||||||||||||
Components
of comprehensive income (loss)
|
||||||||||||||||||||||||||||||||
-
Net income for the period
|
- | - | - | 128,545 | 128,545 | - | - | 128,545 | ||||||||||||||||||||||||
-
Unrealized holding losses on available-for-sale
securities
|
- | - | - | (141,928 | ) | - | - | (141,928 | ) | (141,928 | ) | |||||||||||||||||||||
Total
comprehensive (loss)
|
(13,383 | ) | ||||||||||||||||||||||||||||||
Balance
December 31, 2001
|
12,873,943 | 12,874 | 3,271,163 | (3,533,243 | ) | - | (141,928 | ) | (391,134 | ) | ||||||||||||||||||||||
Issuance
of common stock for
|
||||||||||||||||||||||||||||||||
-
settlement of indebtedness
|
3,708,038 | 3,708 | 351,492 | - | - | - | - | 355,200 | ||||||||||||||||||||||||
Components
of comprehensive income (loss)
|
||||||||||||||||||||||||||||||||
-
Net income for the period
|
- | - | - | (137,329 | ) | (137,329 | ) | - | - | (137,329 | ) |
F-6
-
Unrealized holding losses on available-for-sale
securities
|
- | - | - | 141,928 | - | 141,928 | 141,928 | |||||||||||||||||||||||||
Total
comprehensive (loss)
|
4,599 | |||||||||||||||||||||||||||||||
Balance,
December 31, 2002
|
16,581,981 | 16,582 | 3,622,655 | (3,670,572 | ) | - | (31,335 | ) | ||||||||||||||||||||||||
Issuance
of common stock for
|
||||||||||||||||||||||||||||||||
-
settlement of indebtedness
|
2,752,450 | 2,752 | 114,806 | - | - | - | - | 117,558 | ||||||||||||||||||||||||
-
cash in December 2003 at $0.25 per share
|
100,000 | 100 | 24,900 | - | - | - | - | 25,000 | ||||||||||||||||||||||||
Components
of comprehensive income (loss)
|
||||||||||||||||||||||||||||||||
-
Net income for the period
|
- | - | - | (96,404 | ) | (96,404 | ) | - | - | (96,404 | ) | |||||||||||||||||||||
-
Unrealized holding losses on
available-for-sale securities
|
- | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Total
comprehensive (loss)
|
(96,404 | ) | ||||||||||||||||||||||||||||||
Balance,
December 31, 2003
|
19,434,431 | 19,434 | 3,762,361 | (3,766,976 | ) | - | - | 14,819 | ||||||||||||||||||||||||
Issuance
of common stock for
|
||||||||||||||||||||||||||||||||
-
cash in January 2004 at $0.25 per share, less issuance
costs
|
100,000 | 100 | 22,400 | - | - | - | - | 22,500 | ||||||||||||||||||||||||
Imputed
interest
|
- | - | 1,560 | - | - | - | - | 1,560 | ||||||||||||||||||||||||
Components
of comprehensive income (loss)
|
||||||||||||||||||||||||||||||||
-
Net income for the period
|
- | - | - | (223,763 | ) | (223,763 | ) | - | - | (223,763 | ) | |||||||||||||||||||||
-
Unrealized holding losses on
available-for-sale securities
|
- | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Total
comprehensive (loss)
|
(223,763 | ) | ||||||||||||||||||||||||||||||
Balance,
December 31, 2004
|
19,534,431 | 19,534 | 3,786,321 | (3,990,739 | ) | - | - | (184,884 | ) | |||||||||||||||||||||||
Issuance
of common stock for
|
||||||||||||||||||||||||||||||||
-
cash in July 2005 at $0.05 per share
|
13,000,000 | 13,000 | 637,000 | - | - | - | - | 650,000 | ||||||||||||||||||||||||
-
settlement of indebtedness
|
3,684,091 | 3,684 | 158,816 | - | - | - | - | 162,500 | ||||||||||||||||||||||||
Components
of comprehensive income (loss)
|
||||||||||||||||||||||||||||||||
-
Net (loss) for the period
|
- | - | - | (457,271 | ) | (457,271 | ) | - | - | (457,271 | ) | |||||||||||||||||||||
-
Unrealized holding losses on
available-for-sale securities
|
- | - | - | (4,614 | ) | - | - | (4,614 | ) | (4,614 | ) | |||||||||||||||||||||
Total
comprehensive (loss)
|
(461,885 | ) | ||||||||||||||||||||||||||||||
Balance,
December 31, 2005
|
36,218,522 | 36,218 | 4,582,137 | (4,448,010 | ) | - | (4,614 | ) | 165,731 | |||||||||||||||||||||||
Issuance
of common stock for
|
||||||||||||||||||||||||||||||||
-
cash in February 2006 at $0.50 per share
|
||||||||||||||||||||||||||||||||
less
issuance costs of $110,000
|
8,000,000 | 8,000 | 3,882,000 | - | - | - | - | 3,890,000 | ||||||||||||||||||||||||
-
non cash finder's fee in December 2006 at $0.70 per share
|
250,000 | 250 | 174,750 | - | - | - | - | 175,000 |
F-7
-
cash in December 2006 at $0.50 per share
|
1,000,000 | 1,000 | 499,000 | - | - | - | - | 500,000 | ||||||||||||||||||||||||
Components
of comprehensive income (loss)
|
||||||||||||||||||||||||||||||||
-
Net (loss) for the period
|
- | - | - | (5,463,855 | ) | (5,463,855 | ) | - | - | (5,463,855 | ) | |||||||||||||||||||||
-
Foreign currency translation adjustments
|
- | - | - | (3,692 | ) | - | - | (3,692 | ) | (3,692 | ) | |||||||||||||||||||||
-
Reclassification adjustment for losses on available-for-sale securities
included in net loss
|
- | - | - | 4,614 | - | - | 4,614 | 4,614 | ||||||||||||||||||||||||
Total
comprehensive (loss)
|
$ | (5,462,933 | ) | |||||||||||||||||||||||||||||
Balance,
December 31, 2006
|
45,468,522 | $ | 45,468 | $ | 9,137,887 | $ | (9,911,865 | ) | $ | - | $ | (3,692 | ) | $ | (732,202 | ) | ||||||||||||||||
Issuance
of common stock for
|
||||||||||||||||||||||||||||||||
-
cash in March 2007 at $0.50 per share
|
500,000 | 500 | 249,500 | - | - | - | - | 250,000 | ||||||||||||||||||||||||
-
cash and settlement of debt in July 2007 at $0.25 per
share
|
5,000,000 | 5,000 | 1,245,000 | - | - | - | - | 1,250,000 | ||||||||||||||||||||||||
-
settlement of indebtedness in August 2007 at $0.20 per
|
250,000 | 250 | 49,750 | - | - | - | - | 50,000 | ||||||||||||||||||||||||
-
cash in September 2007 at $0.20 per share
|
4,000,000 | 4,000 | 796,000 | - | - | - | - | 800,000 | ||||||||||||||||||||||||
Stock
option compensation expense
|
- | - | 454,295 | - | - | - | - | 454,295 | ||||||||||||||||||||||||
Components
of comprehensive income (loss)
|
||||||||||||||||||||||||||||||||
-
Net (loss) for the period
|
- | - | - | (3,259,732 | ) | (3,259,732 | ) | - | - | (3,259,732 | ) | |||||||||||||||||||||
- Foreign currency translation
adjustments
|
- | - | - | (65,255 | ) | - | - | (65,255 | ) | (65,255 | ) | |||||||||||||||||||||
Total
comprehensive (loss)
|
$ | (3,324,987 | ) | |||||||||||||||||||||||||||||
Balance,
December 31, 2007
|
55,218,522 | $ | 55,218 | $ | 11,932,432 | $ | (13,171,597 | ) | $ | - | $ | (68,947 | ) | $ | (1,252,894 | ) | ||||||||||||||||
Issuance
of common stock for
|
||||||||||||||||||||||||||||||||
-
non cash finder's fee in July 2008at $0.10 per share
|
250,000 | 250 | 24,750 | - | - | - | - | 25,000 | ||||||||||||||||||||||||
-
settlement of indebtedness in December 2008 at $0.06 per
share
|
2,603,333 | 2,603 | 153,597 | - | - | - | - | 156,200 | ||||||||||||||||||||||||
Components
of comprehensive income (loss)
|
||||||||||||||||||||||||||||||||
-
Net (loss) for the period
|
- | - | - | (520,105 | ) | (520,105 | ) | - | - | (520,105 | ) | |||||||||||||||||||||
- Foreign currency translation
adjustments
|
- | - | - | 36,259 | - | - | 36,259 | 36,259 | ||||||||||||||||||||||||
Total comprehensive (loss)
|
$ | (483,846 | ) | |||||||||||||||||||||||||||||
Balance, December 31, 2008
|
58,071,855 | $ | 58,071 | $ | 12,110,779 | $ | (13,691,702 | ) | $ | - | $ | (32,688 | ) | $ | (1,555,540 | ) | ||||||||||||||||
The
accompanying notes are an integral part of these consolidated financial
statements
|
F-8
AURORA
GOLD CORPORATION
|
Cumulative
|
|||||||||||
(An
exploration stage enterprise)
|
October
10
|
Year
|
Year
|
|||||||||
1995
(inception)
|
Ended
|
Ended
|
||||||||||
Consolidated
Statements of Cash Flows
|
to
December 31
|
December
31
|
December
31
|
|||||||||
(Expressed in U.S. Dollars)
|
2008
|
2008
|
2007
|
|||||||||
Cash
flows from operating activities
|
||||||||||||
Net
loss for the period
|
$ | (13,691,702 | ) | $ | (520,105 | ) | $ | (3,259,732 | ) | |||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||||
-
depreciation and amortization
|
86,319 | 14,426 | 12,326 | |||||||||
-
stock compensation expense on stock option grants
|
1,174,795 | - | 454,295 | |||||||||
-
expenses satisfied with issuance of common stock
|
748,800 | 25,000 | 50,000 | |||||||||
-
expenses satisfied with transfer of marketable securities
|
33,903 | - | - | |||||||||
-
imputed interest on loan payable - related party
|
1,560 | - | - | |||||||||
-
write-off of mineral property costs
|
172,981 | - | - | |||||||||
-
adjustment for spin-off of Aurora Metals (BVI) Limited
|
316,498 | - | - | |||||||||
-
realized loss on investments
|
37,971 | - | - | |||||||||
-
gain on sale of rights to Matupa agreement, net of
expenses
|
(80,237 | ) | - | - | ||||||||
-
foreign exchange gain related to notes payable
|
(169,235 | ) | (169,235 | ) | - | |||||||
Changes
in operating assets and liabilities:
|
||||||||||||
-
(increase) in receivables
|
(206,978 | ) | - | - | ||||||||
-
(increase) decrease in prepaid expenses and other assets
|
(40,131 | ) | (19,190 | ) | 21,638 | |||||||
-
increase (decrease) in accounts payable and
accrued expenses
|
1,188,455 | 20,076 | (277,451 | ) | ||||||||
Net cash used in operating
activities
|
(10,427,001 | ) | (649,028 | ) | (2,998,924 | ) | ||||||
Cash
flows from investing activities
|
||||||||||||
Purchase
of equipment
|
(187,548 | ) | (250 | ) | (21,992 | ) | ||||||
Proceeds
on disposal of equipment
|
16,761 | 2,312 | - | |||||||||
Proceeds
from disposition of marketable securities
|
32,850 | - | - | |||||||||
Acquisition
of mineral property costs
|
(172,981 | ) | - | - | ||||||||
Payment for incorporation
cost
|
(11,511 | ) | - | - | ||||||||
Net cash used in investing
activities
|
(322,429 | ) | 2,062 | (21,992 | ) | |||||||
Cash
flows from financing activities
|
||||||||||||
Proceeds
from common stock, less issuance costs
|
8,842,339 | - | 1,800,000 | |||||||||
Loan
proceeds from related party
|
289,000 | - | 250,000 | |||||||||
Proceeds
from convertible notes and loans
|
1,469,252 | 687,260 | 500,000 | |||||||||
Net proceeds from (payments on) advances payable
-related party
|
- | (161,441 | ) | 161,441 | ||||||||
Net cash provided by financing
activities
|
10,600,591 | 525,819 | 2,711,441 | |||||||||
Effect of exchange rate changes on
cash
|
165,350 | 133,749 | 35,293 | |||||||||
Increase
(decrease) in cash and cash equivalents
|
16,511 | 12,602 | (274,182 | ) | ||||||||
Cash, beginning of year
|
- | 3,909 | 278,091 | |||||||||
Cash, end of year
|
$ | 16,511 | $ | 16,511 | $ | 3,909 | ||||||
The
accompanying notes are an integral part of these consolidated financial
statements
|
F-9
AURORA
GOLD CORPORATION
Notes to
the consolidated financial statements
December
31, 2008 and 2007
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
1.
|
Nature
of Business and Going Concern
|
Aurora
Gold Corporation ("the Company") was formed on October 10, 1995 under the laws
of the State of Delaware and is in the business of location, acquisition,
exploration and, if warranted, development of mineral properties. The
Company’s focus is on the exploration and development of its exploration
properties located in the Tapajos Gold Province, State of Pará, Brazil (see Note
3). The Company has not yet determined whether its properties contain mineral
reserves that may be economically recoverable and has not generated any
operating revenues to date.
These
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles applicable to a going concern which
contemplates the realization of assets and the satisfaction of liabilities and
commitments in the normal course of business. The general business
strategy of the Company is to acquire mineral properties either directly or
through the acquisition of operating entities. The Company has
incurred recurring operating losses since inception, has not generated any
operating revenues to date and used cash of $649,028 from operating activities
in 2008. The Company requires additional funds to meet its obligations and
maintain its operations. These conditions raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
in this regard are to raise equity financing through private or public equity
investment in order to support existing operations and expand its business.
There is no assurance that such additional funds will be available to the
Company when required or on terms acceptable to the Company. These consolidated
financial statements do not include any adjustments that might result from this
uncertainty.
|
2.
|
Significant
Accounting Policies
|
|
(a)
|
Principles
of Accounting
|
These
consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America and
include the accounts of the Company and its wholly-owned subsidiary, Aurora Gold
Mineração Ltda ("Aurora Gold Mineracao"). Collectively, they are referred to
herein as "the Company". Significant inter-company accounts and transactions
have been eliminated. Aurora Gold Mineração was incorporated on October 27,
2005.
|
(b)
|
Accounting
Estimates
|
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates and assumptions.
|
(c)
|
Cash
Equivalents
|
Cash
equivalents comprise certain highly liquid instruments with a maturity of three
months or less when purchased. The Company did not have any cash
equivalents at December 31, 2008 and 2007. No amounts were paid for income taxes
or interest in 2008 or 2007.
F-10
AURORA
GOLD CORPORATION
Notes to
the consolidated financial statements
December
31, 2008 and 2007
|
2.
|
Significant
Accounting Policies (continued)
|
|
(d)
|
Equipment
|
Depreciation
is based on the estimated useful lives of the assets and is computed using the
straight-line method. Equipment is recorded at
cost. Depreciation is provided over the following useful
lives:
Vehicles
|
10
years
|
Office
equipment, furniture and fixtures
|
2
to 10 years
|
|
(e)
|
Mineral
Properties and Exploration Expenses
|
Exploration
costs are charged to operations as incurred until such time that proven reserves
are discovered. From that time forward, the Company will capitalize all costs to
the extent that future cash flow from mineral reserves equals or exceeds the
costs deferred. The deferred costs will be amortized over the recoverable
reserves when a property reaches commercial production. As at December 31, 2008
and 2007, the Company did not have proven reserves.
Exploration
activities conducted jointly with others are reflected at the Company's
proportionate interest in such activities.
Costs related to site restoration programs are accrued
over the life of the project.
|
(f)
|
Share-Based
Payment
|
The
Company accounts for share-based payments under the fair value method of
accounting for stock-based compensation consistent with Statement of Financial
Accounting Standards (“SFAS”) No. 123 (R) (SFAS 123 (R)), Share-based
Payment.
Under the
fair value recognition provisions of this statement, stock-based compensation
cost is measured at the grant date based on the fair value of the award and is
recognized as expense on a straight-line basis over the requisite service
period, which is generally the vesting period.
|
(g)
|
Interest
Expense
|
Interest
expense was approximately $109,660 in 2008 (2007 - $77,477)
respectively.
|
(h)
|
Foreign
Currency Translations and
Transactions
|
The
Company's reporting currency is the U.S. Dollar. Aurora Gold
Mineracao Ltda is a foreign operation and its functional currency is the
Brazilian Real (Real). Certain contractual obligations in these consolidated
financial statements are stated in Brazilian Reals. The Brazilian Real to U.S.
dollar exchange rate at December 31, 2008 was U.S. $0.42700 to 1
Real.
The
Company translates foreign assets and liabilities of its subsidiaries, other
than those denominated in U.S. dollars, at the rate of exchange at the balance
sheet date. Revenues and expenses are translated at the average rate of exchange
throughout the year. Gains or losses from these translations are reported as a
separate component of other comprehensive income (loss) until all or a part of
the investment in the subsidiaries is sold or liquidated. The translation
adjustments do not recognize the effect of income tax because the Company
expects to reinvest the amounts indefinitely in operations.
F-11
AURORA
GOLD CORPORATION
Notes to
the consolidated financial statements
December
31, 2008 and 2007
|
2.
|
Significant
Accounting
Policies (continued)
|
|
(h)
|
Foreign
Currency Translations and Transactions
(continued)
|
Transaction
gains and losses that arise from exchange rate fluctuations on transactions
denominated in a currency other than the local functional currency are included
in foreign exchange (gain) loss in the consolidated statements of
operations.
|
(i)
|
Concentration
of Credit Risk
|
The
Company places its cash with high credit quality financial institutions in
Canada and Brazil. The Company did not have funds deposited in banks beyond the
insured limits as of December 31, 2008 and 2007.
|
(j)
|
Long-Lived
Assets Impairment
|
Long-lived
assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable, in accordance with
SFAS No. 144 (SFAS 144), Accounting for the Impairment or
Disposal of Long-Lived Assets. An impairment loss would be
recognized when the carrying amount of an asset exceeds the estimated
undiscounted future cash flows expected to result from the use of the asset and
its eventual disposition.
The
amount of the impairment loss to be recorded is calculated by the excess of the
asset's carrying value over its fair value. Fair value is generally
determined using a discounted cash flow analysis. The Company has not recognized
any impairment losses through December 31, 2008.
|
(k)
|
Comprehensive
income
|
The
Company has adopted SFAS No. 130 (SFAS 130), Reporting Comprehensive
Income, which establishes standards for reporting and display of
comprehensive income, its components and accumulated balances. The Company is
disclosing this information on its Consolidated Statement of Stockholders’
Equity (Deficiency). Comprehensive income comprises equity except those
resulting from investments by owners and distributions to owners. Accumulated
other comprehensive income consists entirely of foreign currency translation
adjustments at December 31, 2008 and 2007.
|
(l)
|
Fair
Value of Financial Instruments and
Risks
|
Fair
value estimates of financial instruments are made at a specific point in time,
based on relevant information about financial markets and specific financial
instruments. As these estimates are subjective in nature, involving
uncertainties and matters of significant judgment, they cannot be determined
with precision. Changes in assumptions can significantly affect
estimated fair value.
The
carrying value of cash, accounts payable and accrued expenses, accounts payable
and accrued expenses – related parties, advances payable – related party, loans
payable and loan payable - related party approximate their fair value because of
the short-term nature of these instruments. The carrying value of the
convertible notes payable approximate their fair value because interest rates of
long-term convertible notes payable approximate market interest rates.
Management is of the opinion that the Company is not exposed to significant
interest or credit risks arising from these financial instruments.
The
Company operates outside of the United States of America (primarily in Brazil)
and is exposed to foreign currency risk due to the fluctuation between the
currency in which the Company operates in and the U.S. dollar.
F-12
AURORA
GOLD CORPORATION
Notes to
the consolidated financial statements
December
31, 2008 and 2007
|
2.
|
Significant
Accounting
Policies (continued)
|
|
(m)
|
Income
Taxes
|
The
Company has adopted SFAS No. 109 (SFAS 109), Accounting for Income Taxes,
which requires the Company to recognize deferred tax liabilities and assets for
the expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns using the liability
method. Under this method, deferred tax liabilities and assets are
determined based on the differences between the financial statement carry
amounts and tax bases of assets and liabilities using enacted tax rates in
effect in the years in which the differences are expected to
reverse.
In July
2006, the Financial Accounting Standards Board (“FASB”) issued FASB
interpretation No. 48 (“FIN No. 48”). This interpretation clarifies
the accounting for uncertainty in income taxes recognized in a company’s
financial statements in accordance with SFAS No. 109. This
interpretation prescribes a recognition threshold and measurement attribute for
the financial statement recognition and measurement of a tax position taken in a
tax return. It also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition.
FIN No.
48 is effective for fiscal years beginning after December 15,
2006. The adoption of this interpretation did not have a material
impact on the Company’s results of operations or financial
position. As such, the Company has not recorded any liabilities for
uncertain tax positions or any related interest and penalties. The
Company’s tax returns are open to audit for the years ending December 31, 2003
to 2008.
|
(n)
|
Earnings
(Loss) Per Share
|
Earnings
(loss) per share is computed by dividing net income or loss available to common
stockholders by the weighted average number of common shares outstanding during
the year. Diluted loss per share takes into consideration common
shares outstanding (computed under basic earnings per share) and potentially
dilutive securities and is equivalent to basic loss per share for 2008 and 2007
because potentially dilutive securities were anti-dilutive due to the net losses
incurred in each year. Potentially dilutive securities outstanding consist of
2,300,000 stock options in 2008 and 2007 and the convertible notes payable
(convertible into 1,726,750 common shares at December 31, 2008) in
2008.
|
(o)
|
New
Accounting Pronouncements
|
In
December 2007, the Emerging Issues Task Force of the FASB issued EITF Issue
No. 07-1, Accounting for
Collaborative Arrangements (“EITF 07-1”), which is effective for
fiscal years beginning after December 15, 2008. EITF 07-1 provides
income statement classification and related disclosure guidance for participants
in a collaborative arrangement. The Company does not expect the adoption of
EITF 07-1 to have a material impact on its financial results.
In December 2007, the FASB issued
SFAS No. 160, Noncontrolling
Interests in Consolidated Financial Statements — an amendment of Accounting
Research Bulletin No. 51 (“FAS 160”), which amends
Accounting Research Bulletin No. 51 to establish accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. FAS 160 is effective for the Company’s
fiscal year beginning January 1, 2009. The Company does not expect
the adoption of FAS 160 to have a material impact on its financial
results.
F-13
AURORA
GOLD CORPORATION
Notes to
the consolidated financial statements
December
31, 2008 and 2007
|
2.
|
Significant
Accounting
Policies (continued)
|
|
(o)
|
New
Accounting Pronouncements
(continued)
|
In
December 2007, the FASB issued SFAS No. 141R, Business Combinations
(“FAS 141R”), which establishes principles and requirements for recognizing
and measuring identifiable assets and goodwill acquired, liabilities assumed,
and any noncontrolling interest in an acquisition, at their fair value as of the
acquisition date. FAS 141R is effective 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, 2008. This standard will change
the Company’s accounting treatment for business combinations on a prospective
basis.
|
(p)
|
Reclassifications
|
Certain
reclassifications have been made to the 2007 consolidated financial statements
to conform to the current year presentation.
|
3.
|
Mineral
Properties and Exploration Expenses
|
British
Columbia, Canada – Kumealon Property
In
February 1999, the Company acquired, by staking, a 741 acre limestone property
located on the north shore of Kumealon Inlet, southeast of Prince Rupert,
British Columbia, Canada. A finder’s fee of 25,000 shares of common
stock of the Company was issued in connection with these claims.
In fiscal
year 2000, there were no proven mineral reserves discovered and the Company
continuously operated with a working capital deficiency. These
conditions raised substantial doubt regarding the recovering of the capitalized
acquisition cost. Therefore, pursuant to guidance established in SFAS No. 121,
"Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to
be Disposed of", the Company wrote off the capitalized acquisition cost of
$23,630 to operations. The Company's ownership interest in this property is
still in good standing.
Gold
properties in the Municipality of Itaituba, in the Tapajos gold province of the
State of Para, Brazil
Between
December 21, 2005 and May 26, 2006 the Company signed four Memorandum of
Understanding (“MOU”) covering the Piranhas, Branca de Neve, Bigode and Santa
Lúcia properties in the Municipality of Itaituba, Tapajos gold province, State
of Para, Brazil. During the first quarter of 2007, the Company signed an MOU on
the Comandante Araras property.
The MOUs
provide the Company with a review period, ranging from two months to six months,
to access the mineral potential of the properties.
Between
January 1, 2006 and March 31, 2006 the Company signed five option agreements
covering the Novo Porto, Ouro Mil, Santa Isabel, São Domingos and São João
mineral exploration licenses located in the Municipality of Itaituba, in the
Tapajos gold province of the State of Para, Brazil. The Company relinquished its
options on the Porto Novo and Ouro Mil properties in 2006 and the Santa Isabel
property in 2007.
Memorandum of
Understandings:
The
Piranhas MOU provided the Company with a 180 day review period to access the
gold potential of the property. If the Company decided to proceed with acquiring
a 100 percent interest in the title to the mineral rights then the Company would
give notice to the vendors of its intention to acquire title to the mineral
rights at least five days prior to the expiration of the aforementioned period.
The Company would then enter into an option agreement with the property vendors
for the Assignment and transfer of the mineral rights.
The terms
of the Piranhas option agreement, as specified in the MOU, allowed the Company
to perform geological surveys and assessment work necessary to ascertain the
existence of possible mineral deposits which may be economically mined and to
earn a 100% interest in the Piranhas project mineral rights via structured cash
payments. The total option agreement payments for the license were
structured as follows: June 30, 2006 – USD $30,000 (paid); July 21, 2006 – USD
$70,000 (paid and cancelled Block 1); July 21, 2007 – USD $120,000 (advanced
R$10,000 in September 2007 and subsequently relinquished the option); July 21,
2008 – USD $180,000; July 21, 2009 – USD $1,600,000 for a total of USD
$2,000,000. The vendor would have a 1.5% Net Smelter Royalty. The option
agreement could be terminated at any time upon written notice to the vendor and
the Company would be free of any and all payment commitments yet to be
due.
F-14
AURORA
GOLD CORPORATION
Notes to
the consolidated financial statements
December
31, 2008 and 2007
|
3.
|
Mineral
Properties and Exploration Expenses
(continued)
|
Gold
properties in the Municipality of Itaituba, in the Tapajos gold province of the
State of Para, Brazil (continued)
In
December 2007, the Company decided not to follow-up the preliminary exploration
program on the Piranhas property and decided not to exercise the option to
acquire the property and no further payments are due.
The
Branca de Neve MOU provided the Company with a 180 day review period to access
the gold potential of the property. If the Company decided to proceed with
acquiring a 100 percent interest in the title to the mineral rights then the
Company would give notice to the vendors of its intention to acquire title to
the mineral rights at least five days prior to the expiration of the
aforementioned period. The Company would then enter into an option agreement
with the property vendor for the assignment and transfer of the mineral
rights.
The terms
of the Branca de Neve option agreement, as specified in the MOU, allowed the
Company to perform geological surveys and assessment work necessary to ascertain
the existence of possible mineral deposits which may be economically mined and
to earn a 100% interest in the Branca de Neve property mineral rights via
structured cash payments. The total option agreement payments for the
license were structured as follows: April 28,
2006 –
R$35,000 (Reals – Brazilian currency - Paid); October 25, 2006 – R$35,000
(paid); April 25, 2007 – R$35,000 (paid R$5,000) cancelled option agreement and
no further payments are due; October 25, 2007 – R$35,000; April 25, 2008 –
R$35,000; October 25, 2008 – R$35,000; April 25, 2009 – R$35,000; April 25, 2009
– R$500,000 for a total of R$745,000. The vendor would have a 0.75% Net Smelter
Royalty. The Royalty payment could be purchased at any time upon written notice
to the vendor and payment of R$500,000. The option agreement could be terminated
at any time upon written notice to the vendor and the Company would be free of
any and all payment commitments yet to be due.
In 2007,
the Company decided not to follow-up the preliminary exploration program on the
Branca de Neve property and decided not to exercise the option to acquire the
property and no further payments are due.
The
Bigode MOU provides the Company with a 180 day review period to access the gold
potential of the property. If the Company decides to proceed with acquiring a
100 percent interest in the title to the mineral rights then the Company would
give notice to the vendors of its intention to acquire title to the mineral
rights at least five days prior to the expiration of the aforementioned period.
The Company would then enter into an option agreement with the property vendors
for the assignment and transfer of the mineral rights.
The terms
of the Bigode option agreement, as specified in the MOU, allow the Company to
perform geological surveys and assessment work necessary to ascertain the
existence of possible mineral deposits which may be economically mined and to
earn a 100% interest in the Bigode property mineral rights via structured cash
payments. The total option agreement payments for the license are
structured as follows: October 30, 2006 – USD$60,000 (paid); October 30, 2007 –
USD$53,118 (paid); January 30, 2008 – USD$40,000 (paid); October 30, 2008 –
USD$90,000 (not paid - cancelled option agreement and no further payments are
due); October 30, 2009 – USD$100,000; October 30, 2010 –USD$1,000,000 for a
total of USD $1,343,118. The vendor would have a 0.75% Net Smelter Royalty. The
Royalty payment could be purchased at any time upon written notice to the vendor
and payment of USD$500,000. The option agreement could be terminated at any time
upon written notice to the vendor and the Company would be free of any and all
payment commitments yet to be due.
F-15
AURORA
GOLD CORPORATION
Notes to
the consolidated financial statements
December
31, 2008 and 2007
|
3.
|
Mineral
Properties and Exploration Expenses
(continued)
|
Gold
Properties in the Municipality of Itaituba, in the Tapajos gold province of the
State of Para, Brazil (continued)
The Santa
Lúcia MOU provided the Company with a 90 day review period to access the gold
potential of the property. If the Company decided to proceed with acquiring a
100 percent interest in the title to the mineral rights then the Company would
give notice to the vendors of its intention to acquire title to the mineral
rights at least five days prior to the expiration of the aforementioned period.
The Company would then enter into an option agreement with the property vendors
for the assignment and transfer of the mineral rights.
The terms
of the Santa Lúcia option agreement, as specified in the MOU, allowed the
Company to perform geological surveys and assessment work necessary to ascertain
the existence of possible mineral deposits which may be economically mined and
to earn a 100% interest in the Santa Lúcia property mineral rights via
structured cash payments. The total option agreement payments for the
license were structured as follows: September 1, 2006 – USD $20,000 (paid and
cancelled agreement and no further payments are due); March 1, 2007 – USD
$50,000; March 1, 2008 – USD $60,000 (not paid - cancelled option agreement and
no further payments are due); March 1, 2009 – USD $70,000; September 1, 2009 –
USD $500,000 for a total of USD $700,000. The vendor would have a 1.5% Net
Smelter Royalty. The Royalty payment could be purchased at any time upon written
notice to the vendor and payment in Reals (Brazilian currency) of the equivalent
of USD $1,000,000. The option agreement could be terminated at any time upon
written notice to the vendor and the Company would be free of any and all
payment commitments yet to be due.
The
Comandante Araras option agreement allows the Company to perform geological
surveys and assessment work necessary to ascertain the existence of possible
mineral deposits which may be economically mined and to earn a 100% interest in
the Comandante Araras property mineral rights via structured cash
payments. The total option agreement payments for the license are
structured as follows: November 1, 2006 R$20,000 (paid); November 15, 2006 –
R$40,000 (paid); December 15, 2006 R$40,000 (paid); May 18, 2007 - R$15,000
(paid); May 29, 2007 - R$50,000 (paid); July 15, 2008 - USD $60,000 (paid by
Samba Minerals Limited as part of the agreement with them discussed in note 4);
July 15, 2009 - USD $70,000; July 15, 2010 – USD $500,000 for a total of
R$165,000 and USD $630,000. The vendor will have a 1.5% Net Smelter Royalty. The
Royalty payment can be purchased at any time upon written notice to the vendor
and payment in Reals (Brazilian currency) of the equivalent of USD $1,000,000.
The option agreement can be terminated at any time upon written notice to the
vendor and the Company will be free of any and all payment commitments yet to be
due.
Option
Agreements:
The Santa
Isabel option agreement allowed the Company to perform geological surveys and
assessment work necessary to ascertain the existence of possible mineral
deposits which may be economically mined and to earn a 100% interest in the
Santa Isabel property mineral rights via structured cash
payments. The total option agreement payments for the license were
structured as follows: February 7, 2006 – USD $25,000 (paid); July 21, 2006 –
USD $60,000 (paid) and cancelled the option agreement; July 21, 2007 – USD
$80,000; July 21, 2008 – USD $100,000; July 21, 2009 – USD $1,500,000 for a
total of USD $1,765,000. The vendor would have a 1.5% Net Smelter Royalty. The
Royalty payment could be purchased at any time upon written notice to the vendor
and payment in Reals (Brazilian currency) of the equivalent of USD $1,000,000.
The option agreement could be terminated at any time upon written notice to the
vendor and the Company would be free of any and all payment commitments yet to
be due.
The São
Domingos option agreement allows the Company to perform geological surveys and
assessment work necessary to ascertain the existence of possible mineral
deposits which may be economically mined and to earn a 100% interest in the São
Domingos property mineral rights via structured cash payments. The
total option agreement payments for the license are structured as follows:
February 7, 2006 – USD $40,500 (paid); July 30, 2006 – USD $67,500 (paid); July
30, 2007 - USD $112,500 (payment will be made as soon as the Vendor converts the
license into an exploration license and transfers title to Aurora Gold and is
not owed or accrued as a liability until that time); July 30, 2008 – USD
$139,500(payment will be made as soon as the Vendor converts the license into an
exploration license and transfers title to Aurora Gold and is not owed or
accrued as a liability until that time); December 30, 2008 – USD $675,000
(payment will be made as soon as the Vendor converts the license into an
exploration license and transfers title to Aurora Gold and is not owed or
accrued as a liability until that time)for a total of USD $1,035,000. The vendor
will have a 2.0% Net Smelter Royalty. The Royalty payment can be purchased at
any time upon written notice to the vendor and payment in Reals (Brazilian
currency) of the equivalent of USD $500,000.
F-16
AURORA
GOLD CORPORATION
Notes to
the consolidated financial statements
December
31, 2008 and 2007
|
3.
|
Mineral
Properties and Exploration Expenses
(continued)
|
Gold
Properties in the Municipality of Itaituba, in the Tapajos gold province of the
State of Para, Brazil (continued)
The
option agreement can be terminated at any time upon written notice to the vendor
and the Company will be free of any and all payment commitments yet to be
due.
The São
João option agreement allows the Company to perform geological surveys and
assessment work necessary to ascertain the existence of possible mineral
deposits which may be economically mined and to earn a 100% interest in the São
João property mineral rights via structured cash payments. The total
option agreement payments for the license are structured as follows: April 12,
2006 – USD $20,000 (paid); September 12, 2006 – USD $25,000 (paid); September
12, 2007 – USD $60,000 (paid); September 12, 2008 – USD $80,000 (paid by Samba
Minerals Limited as part of the agreement with them discussed in note 4);
September 12, 2009 – USD $1,250,000 for a total of USD $1,435,000. The vendor
will have a 1.5% Net Smelter Royalty. The Royalty payment can be purchased at
any time upon written notice to the vendor and payment in Reals (Brazilian
currency) of the equivalent of USD $1,000,000. The option agreement can be
terminated at any time upon written notice to the vendor and the Company will be
free of any and all payment commitments yet to be due.
|
4.
|
Joint
Venture with Samba Minerals Limited
|
In May
2008 the Company signed an agreement with Samba Minerals Limited (“Samba”),
which was subsequently amended in August 2008, whereby Samba can earn up to a
80% participating interest in the São João and/or the Commandante Araras
projects by funding exploration expenditures on each of the projects to
completion of a feasibility study on each property. The properties are located
in the Municipality of Itaituba, State of Pará, Brazil. Upon completion of a
feasibility study on either property, the Company will immediately transfer a
80% participation interest in the relevant property to Samba and enter into a
formal joint venture agreement to govern the development and production of
minerals from the property. Samba can terminate its participation in either of
the projects by providing the Company 30 days notice in writing. Upon withdrawal
from its participation in either property, Samba would forfeit to the Company
all of its rights in relation to the projects and would be free of any and all
payment commitments yet to be due. Samba will be the manager of the São João and
the Commandante Araras projects. The Company has also granted Samba a right of
first refusal to acquire an interest in, or enter into a joint venture or
farm-in agreement on the Company’s São Domingos and Bigode (since dropped)
projects. The term of the first right of refusal expires on August 1, 2010.
Feasibility studies have not been completed as of December 31, 2008 and thus no
joint venture has been formed as of that date.
F-17
AURORA
GOLD CORPORATION
Notes to
the consolidated financial statements
December
31, 2008 and 2007
|
5.
|
Equipment
|
December 31, 2008
|
December 31, 2007
|
|||||||
Vehicles
|
$ | 64,265 | $ | 85,094 | ||||
Office
equipment
|
52,459 | 65,731 | ||||||
Furniture and fixtures
|
15,742 | 20,845 | ||||||
132,466 | 171,670 | |||||||
Accumulated depreciation
|
(43,493 | ) | (37,127 | ) | ||||
$ | 88,973 | $ | 134,543 |
The
majority of equipment held at December 31, 2008 and 2007 is located in
Brazil.
|
6.
|
Notes
and Loans Payable
|
The
Company has two notes payable of $518,025 ($750,000 Australian dollars) at
December 31, 2008, that are repayable within 24 months from the date of
agreement, July 18, 2008; bear interest at 10% per annum due upon repayment of
the principal amount; are secured by the Company’s Sao Domingos Project, and may
be converted at the option of the lender at any time prior to repayment into
fully paid common shares of the Company at a deemed issue price of $0.30 per
Company share.
The
Company has a loan payable of $250,000 at December 31, 2008 and 2007, that bears
interest at 6% per annum, is due on demand and is unsecured.
The
Company had a loan payable to a related party of $250,000 at December 31, 2007,
that bears interest at 6% per annum, is due on demand and is unsecured. The
entity to which the loan is payable is no longer a related party at December 31,
2008, and thus the loan is included in loans payable on the consolidated balance
sheet at December 31, 2008.
|
7.
|
Stock
Options
|
In 2007,
the Company's Board of Directors approved the 2007 Stock Option Plan (“the
Plan”) to offer an incentive to obtain services of key employees, directors and
consultants of the Company. The Plan provides for the reservation for
awards of an aggregate of 10% of the total shares of Common Stock outstanding
from time to time. No Plan participant may receive stock options exercisable for
more than 2,500,000 shares of Common Stock in any one calendar
year. Under the Plan, the exercise price of an incentive stock option
must be at least equal to 100% of the fair market value of the common stock on
the date of grant (110% of fair market value in the case of options granted to
employees who hold more than 10% of the Company's capital stock on the date of
grant). The term of stock options granted under the Plan is not to
exceed ten years and the stock options vest immediately upon
granting.
On August
6, 2007, the Company issued five-year options to employees and directors to
purchase 2,300,000 common shares. The options are exercisable at any time
from the grant date up to and including the 6th day of August 2012. The
aggregate fair value of these options at the date of grant of $454,295 was
estimated using the Black-Scholes option pricing model and was expensed in full
on the date of grant as the options were immediately vested.
F-18
AURORA
GOLD CORPORATION
Notes to
the consolidated financial statements
December
31, 2008 and 2007
The fair
value of options at the date of grant is determined under the Black-Scholes
option-pricing model. During the year ended December 31, 2007, the
following assumptions were used:
|
7.
|
Stock
Options (continued)
|
Assumptions
|
|
Risk-free
interest rate
|
4.52%
|
Annual
rate of dividends
|
-
|
Historical
volatility
|
144%
|
Expected
life
|
2.5
years
|
The
grant-date fair value of option awards was $0.20 per share during the year ended
December 31, 2007.
The
risk-free interest rate is based on the U.S. Treasury yield curve in effect
at the time of grant. The Company does not anticipate declaring dividends in the
foreseeable future. Volatility is based on historical data. The expected life of
an option was determined based on the average of the contractual life and
vesting period of the options.
The
following is a summary of stock option activity for the years ended December 31,
2008 and 2007, and the status of stock options outstanding at December 31,
2008:
Shares
|
Exercise price
|
Remaining Contractual Life
(yrs)
|
Aggregate
Intrinsic
value
|
|||||||||||||
Outstanding
at January 1, 2007
|
- | $ | - | - | $ | - | ||||||||||
Granted
|
2,300,000 | 0.26 | ||||||||||||||
Outstanding and exercisable at December
31, 2008 and 2007
|
2,300,000 | $ | 0.26 | 3.6 | $ | 436,770 |
The aggregate intrinsic value in the
table above represents the total pretax intrinsic value for all “in-the-money”
options (i.e., the difference between the Company’s closing stock price on the
last trading day of 2008 and the exercise price, multiplied by the number of
shares) that would have been received by the option holders had all option
holders exercised their options on December 31, 2008.
There
were no stock options granted during 2008.
|
8.
|
Related
Party Transactions
|
Related
party transactions not disclosed elsewhere in these consolidated financial
statements:
|
a.
|
During
the fiscal year 2008, consulting fees of $134,558 (2007 – $236,651) were
paid to directors of the Company and its subsidiary. The transactions were
recorded at the exchange amount, being the value established and agreed to
by the related parties.
|
|
b.
|
The
advances payable - related party at December 31, 2007 was due to a
director of the Company’s subsidiary and was non interest bearing and due
upon demand.
|
|
c.
|
Included
in accounts payable - related parties at December 31, 2007 is $28,444
payable to directors of the Company and its subsidiary for consulting fees
and various expenses incurred on behalf of the
Company.
|
F-19
AURORA
GOLD CORPORATION
Notes to
the consolidated financial statements
December
31, 2008 and 2007
|
9.
|
Non-Cash
Investing and Financing Activities
|
In
December 2008, 2,603,333 shares of common stock of the Company were issued to
settle debts of $156,200. Of the 2,603,333 common shares issued, 1,488,533
common shares were issued to a director in payment of his services valued at
$75,108 and expenses valued at $14,204.
In July
2008, the Company issued 250,000 shares of common stock of the Company valued at
$25,000 to a director of the Company’s subsidiary as consideration for arranging
property acquisitions in the Tapajos Gold Province, State of Pará,
Brazil.
In July
2007, 2,000,000 common shares were issued at $0.25 per share to settle loans of
$500,000. In August 2007, the Company issued 250,000 common shares at $0.20 per
share in payment of services performed by an individual valued at
$50,000.
|
10.
|
Income
Taxes
|
|
a.
|
The
Company and its subsidiary operate in several tax jurisdictions, and its
income is subject to various rates of taxation. The Company has net losses
for tax purposes in the United States and Brazil totaling approximately
$5,833,000 and $6,504,000, respectively, which may be applied against
future taxable income. Accordingly, there is no tax expense for
the years ended December 31, 2008 and 2007. The potential tax
benefits arising from these losses have not been recorded in the
consolidated financial statements as a full valuation allowance has been
recorded against them. The Company evaluates its valuation allowance
requirements on an annual basis based on projected future
operations. When circumstances change and this causes a change
in management's judgment about the realizability of deferred tax assets,
the impact of the change on the valuation allowance is reflected in
current operations.
|
The right
to claim the losses in the United States expire as follows:
2011
|
$ | 231,000 | ||
2012
|
564,000 | |||
2018
|
331,000 | |||
2019
|
795,000 | |||
2020
|
550,000 | |||
2022
|
138,000 | |||
2023
|
90,000 | |||
2024
|
222,000 | |||
2025
|
457,000 | |||
2026
|
1,094,000 | |||
2027
|
800,000 | |||
2028
|
561,000 | |||
$ | 5,833,000 |
Tax loss
carryforwards in Brazil have no expiration dates and are available to offset up
to 30% of annual income before tax in any year.
F-20
AURORA
GOLD CORPORATION
Notes to
the consolidated financial statements
December
31, 2008 and 2007
10.
|
Income
Taxes (continued)
|
|
b.
|
The
tax effects of temporary difference that give rise to the Company's net
deferred tax asset are as follows:
|
2008
|
2007
|
|||||||
Tax
loss carryforwards
|
$ | 4,195,000 | $ | 3,960,000 | ||||
Valuation
allowance
|
(4,291,000 | ) | (4,114,000 | ) | ||||
Stock
compensation expense
|
154,000 | 154,000 | ||||||
Foreign exchange gain related to outstanding notes
payable
|
(58,000 | ) | - | |||||
|
$ | - | $ | - |
|
c.
|
The
reconciliation of income tax computed at the federal statutory rate to
income tax expense is as follows:
|
2008
|
2007
|
|||||||
Tax
at statutory rate
|
$ | (177,000 | ) | $ | (1,108,000 | ) | ||
Change
in valuation allowance for deferred tax asset
|
177,000 | 1,108,000 | ||||||
Income
tax expense
|
$ | - | $ | - |
|
11.
|
Subsequent
Events
|
|
a.
|
In September 2009,
convertible notes payable and related accrued interest aggregating US
$739,151.69 (AUD $850,479.45) were settled through the issuance of
5,000,000 shares of common stock of the Company
.
|
|
b.
|
During
the month of September 2009, the Company raised $300,000 through a private
placement of 3,000,000 shares at a price of $0.10 per share. The shares
have not yet been issued. The Company’s agent will be paid a commission of
420,000 shares of common stock of the Company. Proceeds from the private
placement will be used for general working
capital.
|
|
c.
|
In
November 2009, the Company signed a letter agreement with Global Minerals
Limited to acquire an initial 70% interest in the Front Range Gold Project
located in Boulder County, Colorado. The Company paid $100,000 on signing
the letter agreement. A further $400,000 is due on signing of the formal
agreement on or before February 28,
2010.
|
F-21
Item
9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
There
have been no disagreements with our Accountants concerning accounting or
financial disclosure.
ITEM
9A
|
CONTROLS
AND PROCEEDURES
|
Attached
as exhibits to this Annual Report on Form 10-K are certifications of
our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), which
are required pursuant to Rule 13a-14 of the Exchange Act. This “Controls and
Procedures” section of this Annual Report on Form 10-K includes information
concerning the controls and controls evaluation referenced in the
certifications. This section of the Annual Report on Form 10-K should be read in
conjunction with the certifications for a more complete understanding of the
matters presented.
We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our Securities Exchange Act reports is
recorded, processed, summarized and reported within the time periods specified
in the SEC’s rules and forms, and that such information is accumulated and
communicated to our management, including our President and Chief Executive
Officer (Principal Executive Officer) and Chief Financial Officer (Principal
Financial Officer), as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls and procedures,
management recognized that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, as ours are designed to do, and management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.
Evaluation
of disclosure controls and procedures
We
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures as of December 31, 2008. Disclosure controls and
procedures are designed to ensure that information required to be disclosed in
our reports filed under the Exchange Act, is recorded, processed, summarized and
reported within the time periods specified by the SEC. Disclosure controls are
also designed to ensure that such information is accumulated and communicated to
our management, including the CEO and CFO, as appropriate, to allow timely
decisions regarding required disclosure.
Based on
the evaluation, our Chief Executive Officer and Chief Financial
Officer, after evaluating the effectiveness of our “disclosure controls and
procedures” (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), have
concluded that, subject to the inherent limitations noted below, as of December
31, 2008 our disclosure controls and procedures were not effective due to the
existence of several material weaknesses in our internal control over financial
reporting, as discussed below.
Management’s
annual report on internal control over financial reporting
The
Company’s Management is responsible for establishing and maintaining internal
control over financial reporting, as such term is defined in Exchange Act Rule
13a-15(f). Our management evaluated, under the supervision and with the
participation of our Chief Executive Officer and Chief Financial
Officer, the effectiveness of our internal control over financial reporting as
of December 31, 2008.
Based on
its evaluation under the framework in Internal
Control—Integrated Framework, issued by the Committee of Sponsoring
Organizations of the Treadway Commission, our management concluded that our
internal control over financial reporting was not effective as of December 31,
2008, due to the existence of material weaknesses, as described in greater
detail below. A material weakness is a deficiency or a combination of
deficiencies in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of the annual or interim
financial statements will not be prevented or detected on a timely
basis.
39
This
annual report does not include an attestation report of the Company’s
independent registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to attestation by the
Company’s independent registered public accounting firm pursuant to temporary
rules of the SEC that permit the Company to provide only management’s report in
this annual report.
Limitations
on Effectiveness of Controls
Our
management, including our Chief Executive Officer and Chief
Financial Officer, does not expect that our disclosure controls or our
internal control over financial reporting will prevent all errors and all fraud.
A control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met. Further, the design of a control system must reflect the fact that
there are resource constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within the Company have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of a simple
error or mistake. Additional controls can be circumvented by the individual acts
of some persons, by collusion of two or more people, or by management override
of the controls. The design of any system of controls also is based in part upon
certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions; over time, controls may become inadequate
because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and
not be detected.
Material
Weaknesses Identified
In
connection with the preparation of our consolidated financial statements for the
period ended December 31, 2008, certain deficiencies in internal control became
evident to management that represent material weaknesses,
including,
(i)
|
Lack
of a sufficient number of independent directors for our board and audit
committee. We currently only have one independent director on
our board, which is comprised of 2 directors, and on our audit
committee, which is comprised of 2 directors. As a publicly-traded
company, we should strive to have a majority of our board of directors be
independent.
|
(ii)
|
Lack
of an independent financial expert on our audit committee. We
currently do not have an independent audit committee financial expert on
our audit committee as defined by the SEC. Pursuant to Section
407, we are required to disclose whether we have at least one "audit
committee financial expert" on our audit committee in addition to whether
the expert is independent of management. Since we do not have an
independent audit committee financial expert, we have disclosed this fact;
however, it is still the expectation that we obtain a financial expert on
our audit committee.
|
(iii)
|
Insufficient
segregation of duties in our finance and accounting functions due to
limited personnel. During the period ended December 31, 2008,
we had one person on staff at our executive office and two persons at our
Brazil office that performed nearly all aspects of our financial reporting
process, including, but not limited to, access to the underlying
accounting records and systems, the ability to post and record journal
entries and responsibility for the preparation of the financial
statements. This creates certain incompatible duties and a lack
of review over the financial reporting process that would likely result in
a failure to detect errors in spreadsheets, calculations, or assumptions
used to compile the financial statements and related disclosures as filed
with the SEC. These control deficiencies could result in a
material misstatement to our interim or annual consolidated financial
statements that would not be prevented or
detected.
|
40
(iv)
|
There
is a lack of sufficient supervision and review by our corporate management
of the accounting functions performed at the Company’s foreign subsidiary
in Brazil.
|
(v)
|
Insufficient
corporate governance policies. Although we have a code of
ethics which provides broad guidelines for corporate governance, our
corporate governance activities and processes are not always formally
documented. Specifically, decisions made by the board to be
carried out by management should be documented and communicated on a
timely basis to reduce the likelihood of any misunderstandings regarding
key decisions affecting our operations and
management.
|
Plan
for Remediation of Material Weaknesses
We intend
to take appropriate and reasonable steps to make the necessary improvements to
remediate these deficiencies. We intend to consider the results of our
remediation efforts and related testing as part of our year-end 2009 assessment
of the effectiveness of our internal control over financial
reporting.
We have
implemented certain remediation measures and are in the process of designing and
implementing additional remediation measures for the material weaknesses
described in this Annual Report on Form 10-KSB. Such remediation activities
include the following:
|
•
|
We
continue to recruit one or more additional independent board members to
join our board of directors. We continue to recruit at least
one additional financial expert to join as an independent board member and
as an audit committee member.
|
|
•
|
We
are initiating a formal monthly reporting and approval process with our
Brazilian operations to ensure timely provision of information effecting
our quarterly and annual consolidated financial
statements.
|
|
•
|
In
addition to the foregoing remediation efforts, we will continue to update
the documentation of our internal control processes, including formal risk
assessment of our financial reporting
processes.
|
Changes
in Internal Controls over Financial Reporting
There
were no significant changes in the Company’s internal control over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during the quarter ended December 31, 2008 that materially
affected, or are reasonably likely to materially affect, our internal control
over financing reporting.
Item
9B.
|
Other
Information
|
None.
PART
III
Item
10.
|
Directors,
Executive Officers and Corporate
Governance
|
All
directors of our company hold office until the next annual meeting of the
stockholders or until their successors have been elected and qualified.
The officers of our company are appointed by our board of directors and
hold office until their death, resignation or removal from office. Our
directors, executive officers and significant employees, their ages, positions
held, and duration as such, are as follows:
41
Name and Address
|
Age and Position
|
Michael
E Montgomery
100
Lewis Street
Lamington,
Western Australia, 6430 Australia
|
Age
44, Director since 27 April 2007.
|
Lars
M. Pearl
Hofnerstrasse
13
6314
Unterageri, Switzerland
|
Age
47, President, CEO and Director since 27 April
2007.
|
Business
Experience
The
following is a brief account of the education and business experience during at
least the past five years of each director, executive officer and key employee,
indicating the principal occupation during that period, and the name and
principal business of the organization in which such occupation and employment
were carried out.
Our
officers and director will serve until the next annual meeting of the
shareholders or until his death, resignation, retirement, removal, or
disqualification, or until his successors have been elected. Vacancies in
the existing Board of Directors are filled by majority vote of the remaining
directors. Our officer serves at the will of the Board of Directors.
There are no family relationships between any executive officer or
director. No officer or director of our company has, during the past five
years, been named or involved in any bankruptcy proceedings, criminal
proceedings, securities or banking regulatory enforcement action or federal or
state securities or commodities law enforcement proceeding.
Michael Montgomery, 44, has
been the Senior Geologist with Kalgoorlie Consolidated Gold Mines from February
2006 to present; he served as the Senior Mine Geologist with Gold Fields
Australia Ltd. from July 2004 to February 2006; he was a contract Senior
Geologist with Haoma Mining (April to July 2004); he was a senior Mine Geologist
with Mount Gibson Mining (October 2003 to April 2004); he was a senior Mine
Geologist with Consolidated Minerals (May 2001 to October 2004). Mr. Montgomery
was a geological consultant to various resource companies from 1989 to
2001. Mr. Montgomery was appointed to the Board on April 27, 2007 in
order to fill the vacancy created by the resignation of Antonino Cacace as a
director.
Lars Pearl, 47, President,
Director and Chief Executive Officer of Cigma Metals Corporation (2004 to
present); Mr. Pearl has been self employed as a geological consultant from 1993
to 2004. Mr. Pearl has spent over 10 years as a geological consultant
to projects in Australia, Tanzania, Russia, Kazakhstan, Peru, Colombia and
Ecuador. During the last 5 years Mr. Pearl was acting as a consultant
geologist to various companies, including Aurora Gold Corporation in Australia,
Brazil and Tanzania before joining the board of Aurora Gold Corporation in April
2007. Mr. Pearl devotes approximately 50% of his time dealing with
the affairs of Aurora Gold. Mr. Pearl is also a director of Cigma
Metals Corporation that is currently exploring in Kazakhstan.
There are
no family relationships between any of the directors or executive officers. No
director or executive officer has been involved in legal proceedings during the
past five years that are material to an evaluation of the ability or integrity
of any director or executive officer.
42
Involvement
in Certain Legal Proceedings
During
the past five years none of our directors, executive officers, promoters or
control persons has been:
|
(a)
|
the
subject of any bankruptcy petition filed by or against any business of
which such person was a general partner or executive officer either at the
time of the bankruptcy or within two years prior to that
time;
|
|
(b)
|
convicted
in a criminal proceeding or is subject to a pending criminal proceeding
(excluding traffic violations and other minor
offenses);
|
|
(c)
|
subject
to any order, judgment, or decree, not subsequently reversed, suspended or
vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining, barring, suspending or otherwise limiting his
involvement in any type of business, securities or banking activities;
or
|
|
(d)
|
found
by a court of competent jurisdiction (in a civil action), the Commission
or the Commodity Futures Trading Commission to have violated a federal or
state securities or commodities
law.
|
Compliance
with Section 16(a) Beneficial Ownership Reporting Compliance, of the Exchange
Act of 1934
Based on
information provided to the Company, it is believed that all of the Company’s
directors, executive officers and persons who own more than 10% of the Company’s
common stock were in compliance with Section 16(a) of the Exchange Act of 1934
during the last fiscal year. During the year ended December 31, 2008, all of the
Company’s directors, executive officers and Company’s common stock were in
compliance with section 16(a) of the Exchange Act of 1934.
Directors
Our Board
of directors consists of two members. Directors serve for a term of one year and
stand for election at our annual meeting of stockholders. Pursuant to our
Bylaws, any vacancy occurring in the Board of directors, including a vacancy
created by an increase in the number of directors, may be filled by the
stockholders or by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of directors. A director elected to fill
a vacancy shall hold office only until the next election of directors by the
stockholders. If there are no remaining directors, the vacancy shall be filled
by the stockholders.
At a
meeting of stockholders, any director or the entire Board of directors may be
removed, with or without cause, provided the notice of the meeting states that
one of the purposes of the meeting is the removal of the director. A director
may be removed only if the number of votes cast to remove him exceeds the number
of votes cast against removal.
Committees
During
the years ended December 31, 2008 and 2007 and the subsequent period to January
18, 2010 our entire board of directors acted as our Executive, Audit,
Compensation and Benefits and Nominating and Corporate Governance Committees.
Michael Montgomery is the independent member of the committees.
Compensation
of Directors
During
the fiscal year 2008 we paid Consulting Fees of $134,558 (2007 - $236,651) to
directors of the Company and its subsidiary for their services as officers of
the Company (see the Executive Compensation table on page 45. The transactions
were recorded at the exchange amount, being the value established and agreed to
by the related parties.
43
Standard
Arrangements
We do not
pay a fee to our outside, non-officer directors. We reimburse our directors for
reasonable expenses incurred by them in attending meetings of the Board of
Directors. During the years ended December 31, 2008 and 2007, we paid
non-officer directors $0 and $30,582, respectively, in consulting
fees.
Board
and Committee Meetings
The Board
of Directors of the Registrant held no formal meetings during the year ended
December 31, 2008. All proceedings of the Board of Directors were
conducted by resolutions consented to in writing by all the directors and filed
with the minutes of the proceedings of the directors. Such resolutions
consented to in writing by the directors entitled to vote on that resolution at
a meeting of the directors are, according to the Delaware General Corporate Law
and the By-laws of the Registrant, as valid and effective as if they had been
passed at a meeting of the directors duly called and held.
For the
year ended December 31, 2008 our only standing committee of the Board of
Directors was our audit committee.
Audit
Committee
Currently
our audit committee consists of our entire Board of Directors. We
currently do not have nominating, compensation committees or committees
performing similar functions. There has not been any defined policy or
procedure requirements for shareholders to submit recommendations or nomination
for directors.
During
fiscal years 2008/2009, there were informal meetings held by this Committee.
The business of the Audit Committee was conducted by resolutions consented
to in writing by all the members and filed with the minutes of the proceedings
of the Audit Committee.
Audit
Committee Financial Expert
Our board
of directors has determined that it does not have a member of its audit
committee that qualifies as an "audit committee financial expert" as defined in
Item 401(e) of Regulation S-B, and is "independent" as the term is used in Item
7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934, as
amended.
We
believe that the members of our board of directors are collectively capable of
analyzing and evaluating our financial statements and understanding internal
controls and procedures for financial reporting. In addition, we believe
that retaining an independent director who would qualify as an "audit committee
financial expert" would be overly costly and burdensome and is not warranted in
our circumstances given the early stages of our development and the fact that we
have not generated any material revenues to date.
Corporate
Governance Principles / Code of Ethics
Effective
in 2004, our Company's board of directors adopted Corporate Governance
Principles / Code of Business Conduct and Ethics that applies to, among other
persons, all Officers, Directors, Employees and consultants of the company and
its affiliates
Our Code
of Business Conduct and Ethics requires, among other things, that all of our
company's Senior Officers commit to timely, accurate and consistent disclosure
of information; that they maintain confidential information; and that they act
with honesty and integrity.
44
In
addition, our Code of Business Conduct and Ethics emphasizes that all employees,
and particularly Senior Officers, have a responsibility for maintaining
financial integrity within our company, consistent with generally accepted
accounting principles, and federal and state securities laws. Any Senior
Officer, who becomes aware of any incidents involving financial or accounting
manipulation or other irregularities, whether by witnessing the incident or
being told of it, must report it to our company. Any failure to report
such inappropriate or irregular conduct of others is to be treated as a severe
disciplinary matter. It is against our company policy to retaliate against any
individual who reports in good faith the violation or potential violation of our
company's Code of Business Conduct and Ethics by another.
Our Code of Business Conduct and Ethics
was filed with the Securities and Exchange Commission as Exhibit 99.1 on
Form 10-KSB filed on March
25, 2004 (SEC File No. 000-24393-04689262). We will provide a copy of the
Code of Business Conduct and Ethics to any person without charge, upon request.
Requests can be sent to: Aurora Gold Corporation Baarerstrasse 10, 1st Floor, Zug, 6300,
Switzerland.
Item
11.
|
Executive
Compensation
|
The
following table sets forth information concerning the compensation of the named
executive officers for each of the registrant's last two completed fiscal
years:
Annual
Compensation
|
Long-Term
Compensation
|
|||||||||||||||||||||||
Awards
|
Payments
|
|||||||||||||||||||||||
Name
And
Principal
Position (a)
|
Year
(b)
|
Salary
($)
(c)
|
Bonuses
($)
(d)
|
Other
Annual Compen-
sation
($)
(e)
|
Restricted
Stock
Award(s)
($)
(f)
|
Securities
Under-
Lying
Options/
SARs
(#)
(g)
|
LTIP
Payouts
($)
(h)
|
All
other
Compen-
sation
($)
(i)
|
||||||||||||||||
Lars
M. Pearl (1)
|
2008
|
-0- | -0- | 75,108 |
None
|
None
|
None
|
-0- | ||||||||||||||||
President,
CEO and
|
2007
|
-0- | -0- | 80,650 |
None
|
1,000,000 |
None
|
-0- | ||||||||||||||||
Director
|
2006
|
-0- | -0- | -0- |
None
|
None
|
None
|
-0- | ||||||||||||||||
Klaus
P. Eckhof (1)
|
2008
|
-0- | -0- | -0- |
None
|
None
|
None
|
-0- | ||||||||||||||||
President,
CEO and
|
2007
|
-0- | -0- | 13,160 |
None
|
None
|
None
|
-0- | ||||||||||||||||
Director
|
2006
|
-0- | -0- | 22,937 |
None
|
None
|
None
|
-0- | ||||||||||||||||
Hans
Biener
|
2008
|
-0- | -0- | 38,707 |
None
|
None
|
None
|
-0- | ||||||||||||||||
Director
of
|
2007
|
-0- | -0- | 86,810 |
None
|
500,000 |
None
|
-0- | ||||||||||||||||
Subsidiary
|
2006
|
-0- | -0- | 31,586 |
None
|
None
|
None
|
-0- | ||||||||||||||||
Cameron
Richardson (2)
|
2008
|
-0- | -0- | 20,742 |
None
|
None
|
None
|
-0- | ||||||||||||||||
Secretary,
CFO and
|
2007
|
-0- | -0- | 25,449 |
None
|
200,000 |
None
|
-0- | ||||||||||||||||
Director
|
2006
|
-0- | -0- | 13,065 |
None
|
None
|
None
|
-0- |
|
(1)
|
Klaus
Eckhof resigned as President, CEO and Director on April 27, 2007. Lars
Pearl became President, CEO and a Director on April 27,
2007.
|
|
(2)
|
Cameron
Richardson resigned as CFO, Secretary and Director on August 29,
2008.
|
None of
our officers or directors is a party to an employment agreement with
us.
45
Options/SAR
Grants Table
We
awarded no stock purchase options, or any other rights, to any of our directors
or officers during the year ended December 31, 2008.
On August
6, 2007, we awarded 2,300,000 stock purchase options to directors, officers and
employees at $0.26 per share. The term of these options is five years. The
options are exercisable at any time from the grant date up to and including the
6th day
of August 2012. The stock purchase options are fully vested on the date of
grant.
A summary
of the options granted is as follows:
Optionee
|
Number
of Shares Subject to Option
|
Exercise
Price
|
Expiry
Date
|
Thomas
Bartel
|
100,000
|
$0.26
per share
|
August
6, 2012
|
Hans
W. Biener
|
500,000
|
$0.26
per share
|
August
6, 2012
|
Michael
Montgomery
|
500,000
|
$0.26
per share
|
August
6, 2012
|
Lars
Pearl
|
1,000,000
|
$0.26
per share
|
August
6, 2012
|
Cameron
Richardson
|
200,000
|
$0.26
per share
|
August
6, 2012
|
Total:
|
2,300,000
|
Aggregated
Option/SAR Exercises and Fiscal Year-End Option/SAR Value Table
At
December 31, 2007 and 2008 and December 9, 2009 we had 2,300,000 stock purchase
options outstanding.
At no
time during the last completed fiscal year did we, while a reporting company
pursuant to Section 13(a) of 15(d) of the Exchange Act, adjust or amend the
exercise price of the stock options or SARs previously awarded to any of the
named executive officers, whether through amendment, cancellation or replacement
grants, or any other means.
Long-Term
Incentive Plans
There are
no arrangements or plans in which we provide pension, retirement or similar
benefits for directors or executive officers, except that our directors and
executive officers may receive stock options at the discretion of our board of
directors. We do not have any material bonus or profit sharing plans
pursuant to which cash or non-cash compensation is or may be paid to our
directors or executive officers, except that stock options may be granted at the
discretion of our board of directors.
We have
no plans or arrangements in respect of remuneration received or that may be
received by our executive officers to compensate such officers in the event of
termination of employment (as a result of resignation, retirement, change of
control) or a change of responsibilities following a change of control, where
the value of such compensation exceeds $60,000 per executive
officer.
46
Compensation
of Directors
We
reimburse our directors for reasonable travel and other out-of-pocket expenses
incurred in connection with attendance at meetings of our board of directors.
Our board of directors may award special remuneration to any director
undertaking any special services on our behalf other than services ordinarily
required of a director. No director received and/or accrued any
compensation for their services as a director, including committee participation
and/or special assignments. incurred in connection with attending board meetings
in the year ended December 31, 2008.
Employment
Contracts
During
the fiscal year 2008, consulting fees of $134,558 (2007 - $236,651) were paid to
directors of the Company and its subsidiary for their services as officers of
the Company. The transactions were recorded at the exchange amount, being the
value established and agreed to by the related parties.
There are
no arrangements or plans in which we provide pension, retirement or similar
benefits for directors or executive officers. Our directors and executive
officers may receive stock options at the discretion of our board of directors.
We do not have any material bonus or profit sharing plans pursuant to
which cash or non-cash compensation is or may be paid to our directors or
executive officers, except that stock options may be granted at the discretion
of our board of directors.
We have
no plans or arrangements in respect of remuneration received or that may be
received by our executive officers to compensate such officers in the event of
termination of employment (as a result of resignation, retirement, change of
control) or a change of responsibilities following a change of control, where
the value of such compensation exceeds $60,000 per executive
officer.
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
The
following table sets forth certain information regarding the beneficial
ownership of our common stock as of January 20, 2010 by (i) each person who is
known by us to own beneficially more than five percent (5%) of our outstanding
common stock; (ii) each of the our directors and officers; and (iii) all of our
directors and officers as a group. As at December 31, 2008 there were
58,071,855 shares of common stock issued and outstanding.
Name and Address of Beneficial Owner
|
Amount and Nature of Beneficial
Owner
|
Percentage of Class
|
||||||
Officers
and Directors
|
||||||||
Michael
E Montgomery
100
Lewis Street
Lamington,
Western Australia, 6430 Australia
|
500,000 | (1) | * | |||||
Lars
M. Pearl
Hofnerstrasse
13
6314
Unterageri, Switzerland
|
2,688,533 | (2) | 4.20 | % | ||||
Officers
and directors (2 persons)
|
3,188,533 | 5.49 | % |
|
(1)
|
Includes
500,000 stock purchase options awarded on August 6, 2007. The stock
purchase options are exercisable at $0.26 per share and have a term of
five years. The options are exercisable at any time from the grant date up
to and including the 6th
day of August 2012.
|
|
(2)
|
Includes
1,000,000 stock purchase options awarded on August 6, 2007. The stock
purchase options are exercisable at $0.26 per share and have a term of
five years. The options are exercisable at any time from the grant date up
to and including the 6th
day of August 2012.
|
*
|
less
than 1%
|
47
Changes
in Control
There
were no arrangements during the last completed fiscal year or subsequent period
to January 18, 2010 which would result in a change in control. We do not believe
that the offer and sale by us of an aggregate of 12,920,000 shares between
January 1, 2007 and January 18, 2010 have resulted in a change of
control.
No
securities were authorized for issuance under equity compensation
plans.
Item
13.
|
Certain
Relationships and Related Transactions and Director
Independence
|
Certain
Relationships
Our
proposed business raises potential conflicts of interests between certain of our
officers and directors and us. Certain of our directors are directors of other
mineral resource companies and, to the extent that such other companies may
participate in ventures in which we may participate, our directors may have a
conflict of interest in negotiating and concluding terms regarding the extent of
such participation. In the event that such a conflict of interest
arises at a meeting of our directors, a director who has such a conflict will
abstain from voting for or against the approval of such participation or such
terms. In appropriate cases, we will establish a special committee of
independent directors to review a matter in which several directors, or
management, may have a conflict. From time to time, several companies
may participate in the acquisition, exploration and development of natural
resource properties thereby allowing for their participation in larger programs,
involvement in a greater number of programs and reduction of the financial
exposure with respect to any one program. It may also occur that a
particular company will assign all or a portion of its interest in a particular
program to another of these companies due to the financial position of the
company making the assignment.
In
determining whether we will participate in a particular program and the interest
therein to be acquired by it, the directors will primarily consider the
potential benefits to us, the degree of risk to which we may be exposed and its
financial position at that time. Other than as indicated, we have no
other procedures or mechanisms to deal with conflicts of interest. We
are not aware of the existence of any conflict of interest as described
herein.
Director
Independence
Our Company has two members
on its board of directors. We consider a director to be “independent” if
that person serves only as a member of our board of directors and is not
otherwise employed by our company as an employee, officer or consultant.
Mr. Lars Pearl serves as our company’s President, Chief Executive Officer
and Chief Financial Officer. Mr. Michael Montgomery is considered the
independent director.
48
Transactions
with Related Persons
Other
than as disclosed below, during the fiscal year ended December 31, 2008, none of
our current directors, officers or principal shareholders, nor any family member
of the foregoing, nor, to the best of our information and belief, any of our
former directors, senior officers or principal shareholders, nor any family
member of such former directors, officers or principal shareholders, has or had
any material interest, direct or indirect, in any transaction, or in any
proposed transaction which has materially affected or will materially affect
us.
There
have been no transactions or proposed transactions with officers and directors
during the last two years to which we are a party except as
follows:
In
December 2008, 1,488,533 common shares were issued at $0.06 per share to settle
debts of $14,204 and pay $75,108 in consulting fees. The shares were
issued to Lars Pearl, a director who resides outside the United States of
America (in accordance with the exemption from registration requirements
afforded by Regulation S as promulgated thereunder).
In June
2008, 250,000 common shares were issued at $0.10 per share in payment of a
finder’s fee. The shares were issued to Hans Biener, a director of the
subsidiary who resides outside the United States of America (in accordance with
the exemption from registration requirements afforded by Regulation S as
promulgated thereunder).
During
the fiscal year 2008, consulting fees of $134,558 (2007 – $236,651) were paid to
directors of the Company and its subsidiary. The transactions were recorded at
the exchange amount, being the value established and agreed to by the related
parties
Corporate
Governance
The
Board of Directors has determined that to be considered independent, an outside
director may not have a direct or indirect material relationship with the
Company. A material relationship is one which impairs or inhibits --or has the
potential to impair or inhibit--a director's exercise of critical and
disinterested judgment on behalf of the Company and its stockholders. In
determining whether a material relationship exists, the Board consults with the
Company's counsel to ensure that the Board's determinations are consistent with
all relevant securities and other laws, recent relevant cases and regulations
regarding the definition of "independent director," including those set forth in
NASDAQ Marketplace Rule 4200(a)(15)as in effect from time to time. Consistent
with these considerations, the Board affirmatively has determined that as of
December 9, 2009 only Michael Montgomery is an independent
director.
Item
14.
|
Principal
Accountant Fees and Services
|
Audit Fees:
The
aggregate fees billed and expected to be billed for professional services by
Peterson Sullivan LLP for the audit of our annual consolidated financial
statements and review of consolidated financial statements included in our Form
10-Q (17 CFR 249.308b) or services that were normally provided by the accountant
in connection with statutory and regulatory filings or engagements for the 2008
fiscal year are $44,850 (2007 - $47,511).
Audit-Related
Fees:
The
aggregate fees billed to us for assurance and related services by Peterson
Sullivan LLP that are reasonably related to the performance of the audit or
review of our consolidated financial statements and are not reported under audit
fees for fiscal 2008 were $0 (2007 - $0).
49
Tax
Fees:
The
aggregate fees billed to us for professional services by Peterson Sullivan LLP
for tax compliance for fiscal 2008 were $3,500 (2007 - $6,156).
All
Other Fees:
The
aggregate fees billed to us for products and services provided by Peterson
Sullivan LLP, other than reported under Audit Fees, Audit-Related Fees and Tax
Fees for fiscal 2008 were $0 (2007 - $0).
The Audit
Committee pre-approves all services provided by our independent auditors.
All of the above services and fees were reviewed and approved by the Audit
Committee either before or after the respective services were
rendered.
The Audit
Committee has considered the nature and amount of fees billed by Peterson
Sullivan LLP and believes that the provision of services for activities
unrelated to the audit is compatible with maintaining the principal accountant's
independence.
PART
IV
Item 15. Exhibits, and
Financial Statement Schedules
(1)
|
the
following documents are filed as part of this report:
|
|
(a)
|
Financial
Statements: The following audited consolidated financial statements
and report of independent registered public accounting firm are set forth
in Part II, Item 8 of this report:
|
|
Report
of Independent Registered Public Accounting Firm, January 18,
2010
|
||
Consolidated
Balance Sheets as of December 31, 2008 and 2007
|
||
Consolidated
Statements of Operations from October 10, 1995 (commencement of
operations) to December 31, 2008 and for the years ended December 31, 2008
and 2007
|
||
Statements
of Stockholders’ Equity (Deficit) for period from October 10, 1995
(commencement of operations) to December 31, 2008
|
||
Consolidated
Statements of Cash Flows for period from October 10, 1995 (commencement of
operations) to December 31, 2008 and for the years ended December 31, 2008
and 2007
|
||
Notes
to the Consolidated Financial Statements
|
||
(2)
|
Financial
statement schedules: Not Applicable
|
|
(3)
|
Exhibit
Listing
|
|
3.1.1
|
Certificate
of Incorporation incorporated by reference to the registration statement
on Form 10SB filed on June 4, 1998 (SEC File No. 000-24393 98720970).
*
|
|
3.1.2
|
Certificate
of Amendment to the Certificate of Incorporation incorporated by reference
to the registration statement on Form 10SB filed on June 4, 1998 (SEC File
No. 000-24393 98720970). *
|
50
3.1.3
|
Certificate
of Restoration and Renewal of Certificate of Incorporation incorporated by
reference to the registration statement on Form 10SB filed on June 4, 1998
(SEC File No. 000-24393 98720970). *
|
|
3.2.1
|
By-laws
incorporated by reference to the registration statement on Form 10SB filed
on June 4, 1998 (SEC File No. 000-24393 98720970). *
|
|
3.2.2
|
Amended
and Restated By-laws incorporated by reference to the registration
statement on Form 10SB filed on June 4, 1998 (SEC File No. 000-24393
98720970). *
|
|
10.1
|
Consulting
Agreement between Hans W. Biener of SupplyConsult GbR and Aurora Gold
Corporation incorporated by reference to the registration statement on
Form SB filed on December 16, 2005 (SEC File No. 333-130379
051269300). *
|
|
10.2
|
Confidentiality
Agreement between Hans W. Biener of SupplyConsult GbR and Aurora Gold
Corporation incorporated by reference to the registration statement on
Form SB filed on December 16, 2005 (SEC File No. 333-130379 051269300).
*
|
|
10.3
|
Assignment
of Novo Porto and Santa Clara Memorandum of Understanding to Aurora Gold
Corporation incorporated by reference to the registration statement on
Form SB filed on December 16, 2005 (SEC File No. 333-130379
051269300). *
|
|
10.4
|
Novo
Porto Memorandum of Understanding Corporation incorporated by reference to
the registration statement on Form SB filed on December 16, 2005 (SEC File
No. 333-130379 051269300). *
|
|
10.5
|
Declaration
of Translator for translation of Porto Novo Memorandum of Understanding
from Portuguese to English Corporation incorporated by reference to the
registration statement on Form SB filed on December 16, 2005 (SEC File No.
333-130379 051269300). *
|
|
10.6
|
Novo
Porto Option Agreement incorporated by reference to the Form 10-KSB filed
on March 28, 2006 (SEC File No. 000-24393-06715925). *
|
|
10.7
|
Declaration
of Translator for translation of Novo Porto Option Agreement from
Portuguese to English Corporation incorporated by reference to the Form
10-KSB filed on March 28, 2006 (SEC File No. 000-24393-06715925).
*
|
|
10.8
|
Santa
Clara Memorandum of Understanding incorporated by reference to the
registration statement on Form SB filed on December 16, 2005 (SEC File No.
333-130379 051269300). *
|
|
10.9
|
Declaration
of Translator for translation of Santa Clara Memorandum of Understanding
from Portuguese to English Corporation incorporated by reference to the
registration statement on Form SB filed on December 16, 2005 (SEC File No.
333-130379 051269300). *
|
|
10.10
|
Assignment
of Ouro Mil Memorandum of Understanding to Aurora Gold Corporation
incorporated by reference to the registration statement on Form SB filed
on December 16, 2005 (SEC File No. 333-130379 051269300).
*
|
|
10.11
|
Ouro
Mil Memorandum of Understanding Corporation incorporated by reference to
the registration statement on Form SB filed on December 16, 2005 (SEC File
No. 333-130379 051269300). *
|
51
10.12
|
Declaration
of Translator for translation of Ouro Mil Memorandum of Understanding from
Portuguese to English Corporation incorporated by reference to the
registration statement on Form SB filed on December 16, 2005 (SEC File No.
333-130379 051269300). *
|
|
10.13
|
Ouro
Mil Option Agreement incorporated by reference to the Form 10-KSB filed on
March 28, 2006 (SEC File No. 000-24393-06715925). *
|
|
10.14
|
Declaration
of Translator for translation of Ouro Mil Option Agreement from Portuguese
to English incorporated by reference to the Form 10-KSB filed on March 28,
2006 (SEC File No. 000-24393-06715925). *
|
|
10.15
|
Assignment
of Sao Domingos Memorandum of Understanding to Aurora Gold Corporation
incorporated by reference to the registration statement on Form SB filed
on December 16, 2005 (SEC File No. 333-130379 051269300).
*
|
|
10.16
|
Sao
Domingos Memorandum of Understanding Corporation incorporated by reference
to the registration statement on Form SB filed on December 16, 2005 (SEC
File No. 333-30379 051269300). *
|
|
10.17
|
Declaration
of Translator for translation of Sao Domingos Memorandum
of Understanding from Portuguese to English incorporated by
reference to the registration statement on Form SB filed on December 16,
2005 (SEC File No. 333-130379 051269300). *
|
|
10.18
|
São
Domingos Option Agreement incorporated by reference to the Form 10-KSB
filed on March 28, 2006 (SEC File No.
000-24393-06715925). *
|
|
10.19
|
Declaration
of Translator for translation of São Domingos Option Agreement from
Portuguese to English incorporated by reference to the Form 10-KSB filed
on March 28, 2006 (SEC File No. 000-24393-06715925). *
|
|
|
||
10.20
|
Santa
Isabel Option Agreement incorporated by reference to the Form 10-KSB filed
on March 28, 2006 (SEC File No.
000-24393-06715925). *
|
|
|
||
10.21
|
Declaration
of Translator for translation of Santa Isabel Option Agreement from
Portuguese to English incorporated by reference to the Form 10-KSB filed
on March 28, 2006 (SEC File No. 000-24393-06715925). *
|
|
10.22
|
São
João Option Agreement incorporated by reference to the Form 10-KSB filed
on March 28, 2006 (SEC File No.
000-24393-06715925). *
|
|
10.23
|
Declaration
of Translator for translation of São João Option Agreement from Portuguese
to English incorporated by reference to the Form 10-KSB filed on March 28,
2006 (SEC File No. 000-24393-06715925). *
|
|
|
||
10.24
|
Piranhas
Memorandum of Understanding incorporated by reference to the Form 10-KSB
filed on March 28, 2006 (SEC File No.
000-24393-06715925). *
|
|
10.25
|
Declaration
of Translator for translation of Piranhas Memorandum of Understanding from
Portuguese to English incorporated by reference to the Form 10-KSB filed
on March 28, 2006 (SEC File No. 000-24393-06715925). *
|
|
10.26
|
Branca
de Neve Memorandum of Understanding incorporated by reference to the Form
10-QSB filed on July 26, 2006 (SEC File No. 000-24393-06981489).
*
|
52
10.27
|
Declaration
of Translator for translation of Branca de Neve Memorandum of
Understanding from Portuguese to English incorporated by reference to the
Form 10-QSB filed on July 26, 2006 (SEC File No. 000-24393-06981489).
*
|
|
10.28
|
Bigode
Memorandum of Understanding incorporated by reference to the Form 10-QSB
filed on July 26, 2006 (SEC File No. 000-24393-06981489).
*
|
|
10.29
|
Declaration
of Translator for translation of Bigode Memorandum of Understanding from
Portuguese to English incorporated by reference to the Form 10-QSB filed
on July 26, 2006 (SEC File No. 000-24393-06981489). *
|
|
10.30
|
Santa
Lucia Memorandum of Understanding incorporated by reference to the Form
10-QSB filed on July 26, 2006 (SEC File No. 000-24393-06981489).
*
|
|
10.31
|
Declaration
of Translator for translation of Santa Lucia Memorandum of Understanding
from Portuguese to English incorporated by reference to the Form 10-QSB
filed on July 26, 2006 (SEC File No. 000-24393-06981489).
*
|
|
10.34
|
Settlement
Agreement dated as of August 9, 2007 between the Company and Luis Mauricio
incorporated by reference to the Form SB-2 filed on November 13, 2007 (SEC
File No. 333-147341 071238655). *
|
|
10.35
|
Form
of Subscription Agreement between the Selling Stockholders and the Company
incorporated by reference to the Form SB-2 filed on November 13, 2007 (SEC
File No. 333-147341 071238655). *
|
|
10.36
|
Comandante
Araras Memorandum of Understanding.
|
|
10.37
|
2007
Stock Option Plan
|
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
|
||
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
|
||
99.1
|
Corporate
Governance Principles incorporated by reference to the Form 10-KSB filed
on March 25, 2004 (SEC File No. 000-24393-04689262).
*
|
--------
*
Previously Filed
53
SIGNATURES
In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Aurora Gold Corporation
|
|||
Registrant
|
|||
Date:
|
January 20 2010
|
BY:
|
/s/ Lars Pearl
|
Lars
Pearl
|
|||
Director
|
|||
Date:
|
January 20, 2010
|
BY:
|
/s/ Michael Montgomery
|
Michael
Montgomery
|
|||
Director
|
|||
In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the dates indicated.
|
|||
Aurora Gold Corporation
|
|||
Registrant
|
|||
Date:
|
January 20, 2010
|
BY:
|
/s/ Lars Pearl
|
Lars
Pearl
|
|||
President,
Chief Executive Officer, Chief Financial Officer and
Director
|
|||
Date:
|
January 20, 2010
|
BY:
|
/s/ Michael Montgomery
|
Michael
Montgomery
|
|||
Director
|
54