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EX-5.1 - MV Portfolios, Inc.v301598_ex5-1.htm
EX-23.1 - MV Portfolios, Inc.v301598_ex23-1.htm

As filed with the Securities and Exchange Commission on February 10, 2012

 

Registration No.: 333-_________

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 

CALIFORNIA GOLD CORP.

(Exact name of registrant as specified in its charter)

 

Nevada 1000 83-0483725
(State or other jurisdiction of (Primary Standard Industrial) (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)

 

California Gold Corp.

4515 Ocean View Blvd., Suite 305

La Cañada, CA 91011

 

(Address, including zip code, and telephone number, including

area code, of registrant’s principal executive offices)

 

James D. Davidson

California Gold Corp.

4515 Ocean View Blvd., Suite 305

La Cañada, CA 91011

(818) 542-6891

 

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

Copy to:

 

Adam S. Gottbetter, Esq.

Gottbetter & Partners, LLP

488 Madison Avenue, 12th Floor

New York, NY 10022

(212) 400-6900

 

Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this registration statement.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. x

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer, accelerated filerand “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ¨ Accelerated filer ¨
Non-accelerated filer ¨ Smaller reporting company x

 

 
 

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of Securities to be Registered  

Amount to be

Registered(1)(2)

   

Proposed

Maximum

Offering

Price

Per Shares(3)

   

Proposed

Maximum

Aggregate

Offering Price

   

Amount of

Registration Fee

 
Secondary Offering Common stock, par value $0.001 per share     38,739,129 shares     $ 0.064     $ 2,479,304     $ 284.13  
Primary Offering Common stock, par value $0.001 per share     25,000,000 shares     $ 0.064     $ 1,600,000     $ 183.36  
Total                   $ 4,079,304     $ 467.49  

 

(1)Consists of 38,739,129 shares of our common stock issuable upon the exercise of outstanding warrants.  Pursuant to Rule 416 under the Securities Act of 1933, this registration statement also covers any additional securities that may be offered or issued in connection with any stock dividend, stock split, recapitalization or other similar transaction effected without the receipt of consideration that results in an increase in the number of the outstanding shares of our common stock.

 

(2)Includes up to 25,000,000 shares, which may be offered by the Registrant commencing promptly after effectiveness, on a continuous basis, at a price to be determined, and as may be issued upon conversion, redemption, repurchase, exchange or exercise of other securities that may be so offered by the Registrant, including under any applicable anti-dilution provisions.

 

(3)Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended. The price per share and aggregate offering price are based on $0.064, the average of the high and low prices on the OTC Bulletin Board on February 9, 2012. The shares offered hereunder may be sold by the selling stockholders from time to time in the open market, through privately negotiated transactions or a combination of these methods, at market prices prevailing at the time of sale or at negotiated prices.

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

  

 
 

The information in this prospectus is not complete and may be changed. The selling shareholders named in this prospectus may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and the selling shareholders are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

Subject to completion, dated February 10, 2012

 

CALIFORNIA GOLD CORP.

 

Prospectus

 

38,739,129 Shares of Common Stock

Offered by the Selling Shareholders

 

25,000,000 shares of Common Stock

Offered by the Company

 

This prospectus relates to the resale from time to time of up to 38,739,129 shares of our common stock issuable upon the exercise of outstanding warrants by the selling shareholders of California Gold Corp., a Nevada Corporation, listed in this prospectus. The shares offered in this prospectus by the selling shareholders may be sold from time to time in the open market, through privately negotiated transactions or a combination of these methods, at market prices prevailing at the time of sale or at negotiated prices.

 

We are registering the offer and sale of the common stock by the selling shareholders to satisfy registration rights we granted to the selling shareholders. The distribution of the shares by the selling shareholders is not subject to any underwriting agreement.

 

We will not receive any proceeds from the sale of the shares by the selling shareholders. However, we may receive the proceeds from the exercise of the warrants held by the selling stockholders, to the extent the warrants are not exercised on a cashless basis. We will bear all expenses of registration incurred in connection with this offering, but all selling and other expenses incurred by the selling shareholders will be borne by them.

 

In addition, we may offer up to 25,000,000 shares of our common stock in an offering that will be commenced promptly, will be made on a continuous basis and may continue for a period in excess of 30 days from the date of initial effectiveness of the registration statement of which this prospectus is a part. We will provide specific terms of such offering and securities in one or more supplements to this prospectus. The prospectus supplement, and any documents incorporated by reference, may also add, update or change information contained in this prospectus. You should read this prospectus, the applicable prospectus supplement, any documents incorporated by reference and any related free writing prospectus carefully before buying any of the securities being offered by us. We may offer and sell these securities to or through one or more underwriters, dealers and agents, or directly to purchasers, on a continuous or delayed basis.

 

This prospectus provides you with a general description of securities that we may offer and sell from time to time. Each time we sell securities we will provide a prospectus supplement that will contain specific information about the terms of that sale and may add to or update the information in this prospectus. You should read this prospectus and any applicable prospectus supplement carefully before you invest in our securities.

 

Our common stock is traded on the OTC Bulletin Board under the symbol CLGL.OB. On February [__], 2012, the last reported sale price for our common stock was $0. [__] per share.

 

Investing in our common stock involves a high degree of risk. Before making any investment in our securities, you should read and carefully consider risks described in the “Risk Factors section beginning on page __ of this prospectus.

 

You should rely only on the information contained in this prospectus or any prospectus supplement or amendment thereto. We have not authorized anyone to provide you with different information. This prospectus may only be used where it is legal to sell these securities. The information in this prospectus is only accurate on the date of this prospectus, regardless of the time of any sale of securities.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

This prospectus is dated

_______ [__], 2012

 

 
 

TABLE OF CONTENTS

 

  Page
   
SUMMARY 1
THE OFFERING 4
NOTE REGARDING FORWARD-LOOKING STATEMENTS 5
RISK FACTORS 6
SELLING STOCKHOLDERS 19
USE OF PROCEEDS 23
DETERMINATION OF OFFERING PRICE 23
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 23
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 25
DESCRIPTION OF BUSINESS 30
DESCRIPION OF PROPERTY 34
LEGAL PROCEEDINGS 36
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS 37
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 39
EXECUTIVE COMPENSATION 42
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 45
PLAN OF DISTRIBUTION 47
DESCRIPTION OF SECURITIES 52
LEGAL MATTERS 56
EXPERTS 57
WHERE YOU CAN FIND MORE INFORMATION 57
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES 57
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS F-1

  

ABOUT THIS PROSPECTUS

 

This document is called a prospectus and is part of a registration statement that we have filed with the Securities and Exchange Commission (“SEC”) to:

 

·register the resale of certain shares of our common stock by the selling stockholders named herein; and

 

·register our offering of up to 25,000,000 newly issued shares of our common stock in an offering that will be commenced promptly, and will be made on a continuous basis at a price to be determined.

 

This prospectus provides you with a general description of the securities we may offer. When we offer a type or series of securities described in this prospectus, we will provide a prospectus supplement, or information that is incorporated by reference into this prospectus, containing more specific information about the terms of the securities that we are offering. This prospectus, together with applicable prospectus supplements and any information incorporated by reference includes all material information relating to these offerings and securities. We may also add, update or change in the prospectus supplement any of the information contained in this prospectus or in the documents that we have incorporated by reference into this prospectus, including without limitation, a discussion of any risk factors or other special considerations that apply to these offerings or securities or the specific plan of distribution. If there is any inconsistency between the information in this prospectus and a prospectus supplement or information incorporated by reference having a later date, you should rely on the information in that prospectus supplement or incorporated information having a later date. We urge you to read carefully this prospectus and any applicable prospectus supplement, together with the information incorporated herein by reference as described under the heading “Where You Can Find More Information,” before buying any of the securities being offered.

 

i
 

SUMMARY

 

The following summary highlights information contained elsewhere in this prospectus. Potential investors should read the entire prospectus carefully, including the more detailed information regarding our business provided below in the Description of Business section, the risks of purchasing our common stock discussed under the “Risk Factors section and our consolidated financial statements and the accompanying notes to the consolidated financial statements.

 

Unless the context indicates otherwise, all references herein to California Gold,” “the Company,” we, us” and “ourrefer to California Gold Corp. and its subsidiaries.

 

Overview

 

We are an exploration stage mining company whose principal focus is the identification, acquisition and development of rare and precious metals mining properties in the Americas. We are still in the exploration stage and have not generated any revenues from our mining properties.

 

The Mexivada AuroTellurio Project

 

On February 11, 2011, we entered into a property option agreement with Mexivada Mining Corp. (“Mexivada”) to acquire up to an 80% interest in Mexivada’s La Viuda concessions comprising its AuroTellurio tellurium-gold-silver property (the “La Viuda Concessions,” the “AuroTellurio Property” or, the “Property”) south of Moctezuma, Sonora, Mexico. Under the terms of the agreement with Mexivada, we can acquire up to an 80% interest in the AuroTellurio Property by making certain cash payments and share issuances to Mexivada and incurring up to $3,000,000 in cumulative exploration expenditures on the Property over a four year period. We will earn an initial 20% vested interest in the AuroTellurio Property by investing $750,000 in an exploration program and up to an additional 60% interest in the Property, in blocks of 20% each, by investing an additional $750,000 in the exploration program and meeting all of the other required terms of the agreement with Mexivada.

 

On August 4, 2011, we issued to Mexivada 250,000 shares of our restricted common stock and completed our initial cash payment to Mexivada of $30,000.  In exchange, we received from Mexivada four fully executed title deeds, each transferring to us a twenty percent (20%) interest in the La Viuda Concessions.  We will hold these title deeds in escrow until we meet the terms of the agreement with Mexivada for the vesting of each twenty percent (20%) interest.  At that time, the relevant title deed will be released to us from escrow and filed with the Ministry of Mines in Mexico, to evidence our ownership in that specific twenty percent interest in the Property.

 

The La Viuda Concessions cover approximately 18,840 acres (7,624 hectares) south of Moctezuma, Sonora Mexico, and comprise two exploration concessions granted by the Mexican government to a wholly owned subsidiary of Mexivada located in Mexico. These concessions are located less than a mile from the La Bambolla mine where gold-tellurium mineralization was discovered in the early 1900’s.  The La Viuda Concessions surround the La Bambolla mine area to the east and south and cover potentially mineralized areas over extensive, adjoining areas to the east, south and west. Historical data suggest that tellurium-gold mineralization at the La Bambolla mine occurs along a regional structural system extending into the La Viuda Concessions.  

 

We have begun Phase 1 of our exploration program and we are currently conducting mapping, trenching and sampling programs at the AuroTellurio Property.  We have an agreement with the land owner in Moctezuma, where the La Viuda Concessions are located. Our initial exploration activities will be complemented with gravity and magnetic geophysical surveys in preparation for an initial 3,000-meter drilling program that is planned for early 2012. Geologic mapping and sampling on the Property have thus far confirmed that the regional structure hosting the tellurium-gold vein system at La Bambolla extends onto the Property. Our current understanding, based on geological interpretation of the existing data, is that ore-grade tellurium-gold mineralization is highly likely to exist at depth within our La Viuda 1 concession. We are working to further evaluate this potentially mineralized area.

 

1
 

Capital Needs

 

As further discussed below under Management’s Discussion and Analysis of Financial Condition and Results of Operations, in July 2011, we completed the final closing of a private placement (the “2010/2011 Private Placement”), in which we sold an aggregate of 77,478,258 units (the “Units”) of our securities for gross proceeds of $1,936,956, at an offering price of $0.025 per Unit. As a result of the 2010/2011 Private Placement, we have sufficient funds to meet our first year requirements under the AuroTellurio Agreement, including the requirement that we invest $750,000 in the exploration program.  If we determine to proceed with the exploration of the AuroTellurio Property after the first year, we will be required to invest up to an additional $2,250,000 in the exploration program during the following three years. We will also be required to pay Mexivada up to a total of $290,000 in additional cash payments. We do not have this additional capital at this time and we will have to raise these amounts, plus additional amounts for general working capital purposes, in the capital markets. We plan to seek to raise additional capital through additional sales of our equity or debt securities.  There can be no assurance, however, that such financing will be available to us or, if it is available, that it will be available on terms acceptable to us and that it will be sufficient to fund our expected needs.  If we are unable to obtain sufficient financing, we may not be able to continue with our exploration and development plans for the AuroTellurio Property, make additional acquisitions or meet our ongoing operational working capital needs.

 

About This Offering

 

This prospectus relates to the public offering, which is not being underwritten, of up to 38,739,129 shares of our common stock issuable upon the exercise of our outstanding warrants (described under “Selling Stockholders” below) by the selling stockholders listed in this prospectus.  This prospectus shall also cover any additional shares of our common stock that shall become issuable by reason of any stock dividend, stock split, recapitalization or other similar transaction effected without the receipt of consideration that results in an increase in the number of the outstanding shares of our common stock.

 

The shares offered by this prospectus may be sold by the selling stockholders from time to time in the open market, through negotiated transactions or otherwise at market prices prevailing at the time of sale or at negotiated prices.  We will receive none of the proceeds from the sale of the shares by the selling stockholders.  However, we may receive the proceeds from the exercise of the warrants held by the selling stockholders, to the extent the warrants are not exercised on a cashless basis. We will bear all expenses of registration incurred in connection with this offering, but all selling and other expenses incurred by the selling stockholders will be borne by them.

 

The number of shares being offered by the selling stockholders pursuant to this prospectus (including the shares issuable upon exercise of our outstanding warrants) represents approximately 35.4 % of our outstanding shares of common stock as of February 10, 2012.

 

This prospectus also relates to our offering up to 25,000,000 shares of our common stock in an offering that will be commenced promptly, and will be made on a continuous basis at a price to be determined.

 

Company History

 

We were incorporated on April 19, 2004, as Arbutus Resources Inc., under the laws of the state of Nevada. We were organized to be engaged in the acquisition and exploration of mineral properties. We acquired a 100% undivided right, title and interest in and to twenty cells, known collectively as the Green Energy Claims, located 61 km southwest of the City of Williams Lake in South Central British Columbia, Canada. By April 30, 2007, we had not earned any revenues, and, not having sufficient funds to commence exploration on our Green Energy Claims, we determined to seek a joint venture partner or other business option to continue operating as a viable public company.

 

On July 11, 2007, we merged with Cromwell Uranium Holdings, Inc. (“Holdings”), a Uranium exploration mining company. On June 15, 2007, we changed our name to Cromwell Uranium Corp. in anticipation of the merger. Pursuant to the merger, Holdings became our wholly owned subsidiary, we transferred our Green Energy Claims to a newly-formed subsidiary and we sold all of the capital stock of that subsidiary to our former directors. As a result of developments in the public capital markets as well as conditions in the mining industry, among other factors, effective August 8, 2007, we and the principals of Holdings unwound the merger. Since that unwinding, we have been searching for an appropriate business opportunity in the precious metals mining sector.

 

2
 

On March 9, 2009, we changed our name to California Gold Corp. We have a January 31 fiscal year.

 

Summary Financial Information

 

The following tables summarize historical financial data regarding our business and should be read together with the information in the section title “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included in this prospectus.

 

   Year Ended
January 31,
   Nine Months Ended 
   2011   2010   October 31, 2011   October 31, 2010 
           (unaudited)   (unaudited) 
Statement of Operations Data                    
                     
Revenues  $-   $-   $-   $- 
Loss from operations  $(542,208)  $(182,380)  $(990,122)  $(394,377)
Net loss  $(1,615,423)  $(182,521)  $(298,424)  $(463,770)
Net loss per common share – basic and diluted  $(0.03)  $(0.00)  $(0.00)  $(0.01)
                     
Statement of Cash Flows Data                    
                     
Net cash used in operating activities  $(307,575)  $(24,670)  $(581,546)  $(65,884)
Net cash used in investing activities  $(20,000)  $-   $(18,809)  $- 
Net cash provided by financing activities  $1,595,456   $20,930   $396,500   $66,500 
Cash and cash equivalents, end of period  $1,268,254   $373   $1,064,399   $989 

 

   At January 31,         
   2011   2010   At October 31, 2011   At October 31, 2010 
           (unaudited)   (unaudited) 
Balance Sheet Data                    
                     
Total current assets  $1,302,038   $373   $1,089,118   $989 
Total assets  $1,322,038   $373   $1,144,924   $989 
Total current liabilities  $2,387,649   $225,985   $2,215,951   $470,745 
Total liabilities  $2,387,649   $225,985   $2,215,951   $470,745 
Total stockholders’ deficit  $(1,065,611)  $(225,612)  $(1,071,027)  $(469,756)

  

3
 

THE OFFERING

 

Common stock currently outstanding   109,451,260 shares (1)
     
Common stock offered by the Company   Up to 25,000,000 shares
     
Common stock offered by the selling stockholders   38,739,129 shares (2)
     
Use of proceeds   We will not receive any of the proceeds from the sales of our common stock by the selling stockholders. However, we may receive the proceeds from the exercise of the warrants held by the selling stockholders, to the extent the warrants are not exercised on a cashless basis. We anticipate that any net proceeds from our sale of common stock will be used for general corporate purposes and working capital. Such general purposes may be specified in one or more of our prospectus supplements. We may invest the net proceeds temporarily in our discretion until allocated to the use of proceeds specified herein or in a prospectus supplement.
     
OTC Markets symbol   CLGL
     
Risk Factors   You should carefully consider the information set forth in this prospectus and, in particular, the specific factors set forth in the “Risk Factors” section beginning on page 6 of this prospectus before deciding whether or not to invest in shares of our common stock.

 

(1)As of February 10, 2012.
(2)Consists of 38,739,129 shares of common stock issuable upon the exercise of outstanding warrants.

 

4
 

NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Various statements in this prospectus, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements. The forward-looking statements may include projections and estimates concerning the timing and success of specific projects, revenues, income and capital spending. We generally identify forward-looking statements with the words “believe,“intend,” “expect,” “seek,” “may,” “should,” “anticipate, “could,” “estimate, “plan, “predict,” project” or their negatives, and other similar expressions. All statements we make relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates, financial results and project developments and acquisitions or to our expectations regarding future industry or economic trends are forward-looking statements.

 

These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those that we expected. The forward-looking statements contained in this prospectus are largely based on our expectations, which reflect many estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe such estimates and assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors and it is impossible for us to anticipate all factors that could affect our actual results. In addition, management’s assumptions about future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements contained in this prospectus are not guarantees of future performance, and we cannot assure any reader that such statements will be realized or the forward looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to the factors listed in the “Risk Factors” section and elsewhere in this prospectus. All forward-looking statements are based upon information available to us on the date of this prospectus. We undertake no obligation to update or revise any forward-looking statements as a result of new information, future events or otherwise, except as otherwise required by law. These cautionary statements qualify all forward-looking statements attributable to us, or persons acting on our behalf.

 

5
 

RISK FACTORS

 

An investment in shares of our common stock is highly speculative and involves a high degree of risk. We face a variety of risks that may affect our operations or financial results and many of those risks are driven by factors that we cannot control or predict. Before investing in our common stock you should carefully consider the following risks, together with the financial and other information contained in this prospectus. If any of the following risks actually occurs, our business, prospects, financial condition and results of operations could be materially adversely affected. In that case, the trading price of our common stock would likely decline and you may lose all or a part of your investment. Only those investors who can bear the risk of loss of their entire investment should participate in this offering.

 

RISKS RELATED TO OUR BUSINESS AND FINANCIAL CONDITION

 

We are an exploration stage company with no history of operations and no current revenues. Our business plan depends on our ability to explore for and develop mineral reserves and place any such reserves into extraction. Because we have a limited operating history, it is difficult to predict our future performance.

 

Although we were formed in April 2004, we have been and continue to be an exploration stage company. Therefore, we have limited operating and financial history available to help potential investors evaluate our past performance and the risks of investing in us. Moreover, our limited historical financial results may not accurately predict our future performance. Companies in their initial stages of development present substantial business and financial risks and may suffer significant losses. As a result of the risks specific to our new business and those associated with new companies in general, it is possible that we may not be successful in implementing our business strategy.

 

We have generated no revenues to date and do not anticipate generating any revenues for the foreseeable future. Our activities to date have been limited to capital formation, organization, and development of our business. We have yet to generate positive earnings and there can be no assurance that we will ever operate profitably. Our success is significantly dependent on a successful exploration, mining and production program. Our operations will be subject to all the risks inherent in the establishment of a developing enterprise and the uncertainties arising from the absence of a significant operating history. We may be unable to locate exploitable quantities of mineral resources or operate on a profitable basis. We are in the exploration stage and potential investors should be aware of the difficulties normally encountered by enterprises in the exploration stage. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complication, and delays frequently encountered in connection with an exploration stage business, and the competitive and regulatory environment in which we will operate, such as under-capitalization, personnel limitations, and limited revenue sources. If our business plan is not successful, and we are not able to operate profitably, investors may lose some or all of their investment in us.

 

We have not generated any revenues from operations. We have a history of losses and losses are likely to continue in the future.

 

We have not generated any revenues from operations. Our net loss for the fiscal year ended January 31, 2011 and 2010 totaled $1,615,423 and $182,521, respectively.  Our net losses for the nine months ended October 31, 2011 and 2010 were $298,424 and $463,770, respectively. Cumulative losses since inception to October 31, 2011 totaled $3,157,527. We have incurred significant losses in the past and we will likely continue to incur losses in the future unless our exploration program proves successful. Even if our exploration program identifies tellurium, gold, silver or other mineral reserves, there can be no assurance that we will be able to commercially exploit these resources, generate any revenues or generate sufficient revenues to operate profitably.

 

We have no history as a mining company.

 

We have no history of earnings or cash flow from mining operations. If we are able to proceed to production, commercial viability will be affected by factors that are beyond our control such as the particular attributes of the deposit, the fluctuation in metal prices, the cost of construction and operating a mine, prices and refining facilities, the availability of economic sources for energy, government regulations including regulations relating to prices, royalties, restrictions on production, quotas on exploration of minerals, as well as the costs of protection of the environment.

 

6
 

Exploring for rare metals such as tellurium and precious metals such as gold and silver is an inherently speculative business and there is substantial risk that our business could fail.

 

Exploring for rare and precious metals is a business that by its nature is very speculative. There is a strong possibility that we will not discover any tellurium (or gold or silver) which can be mined at a profit. Even if we do discover tellurium or precious metal deposits, the deposits may not be of the quality or size necessary for us to make a profit from actually mining them. Few properties that are explored are ultimately developed into producing mines. Unusual or unexpected geological formations, geological formation pressures, fires, power outages, labor disruptions, flooding, explosions, cave-ins, landslides and the inability to obtain suitable or adequate machinery, equipment or labor are just some of the many risks involved in mineral exploration programs and the subsequent development of rare and precious metal deposits. Because of these and other factors, we can make no assurances that we will be successful in our business.

 

If we fail to make required payments on our mineral properties, we could lose our rights to the properties.

 

We have entered into the AuroTellurio Option Agreement with Mexivada to acquire up to an 80% interest in the La Viuda Concessions. To acquire each 20% block of interest, we need to make certain annual cash payments to Mexivada and invest US $750,000 each year, for four years, in an exploration program for the Property. If we fail to make these payments or investments, we may lose our right to acquire these interests in the Property.

 

We will need to obtain additional financing to fund our exploration program and the acquisition of the remaining 60% interest in the Property.

 

As a result of the closing of our recent private placement (discussed below), we have sufficient funds to finance the first year (US $750,000) of our La Viuda Concessions exploration program under the Mexivada AuroTellurio Option Agreement, which will trigger the vesting in us of the first 20% interest in the Property. We do not have sufficient capital, however, to fund years two through four of our exploration program as it is currently planned (US $750,000 per year), to enable us to acquire up to an additional 60% interest in the Property, or to fund the acquisition and exploration of new properties. We estimate that we will need to raise at least an additional US $4 million to pay for years two through four of our exploration program, as it is currently planned and described in this Report, and our estimated administrative expenses, lease payments and estimated claim maintenance costs.  We may be unable to secure such additional financing on terms acceptable to us, or at all, at times when we need such financing. Our inability to raise additional funds on a timely basis could prevent us from achieving our business objectives and could have a negative impact on our business, financial condition, results of operations and the value of our securities.  If we raise additional funds by issuing additional equity or convertible debt securities, the ownership percentages of existing shareholders will be reduced and the securities that we may issue in the future may have rights, preferences or privileges senior to those of the current holders of our Common Stock. Such securities may also be issued at a discount to the market price of our Common Stock, resulting in possible further dilution to the book value per share of Common Stock. If we raise additional funds by issuing debt, we could be subject to debt covenants that could place limitations on our operations and financial flexibility.

 

We do not own the land over which the La Viuda Concessions are located.

 

Although we are acquiring up to an 80% interest in the La Viuda Concessions from Mexivada, Mexivada does not own the land where the Property is located. We have entered into a surface rights agreement with the local landowner enabling us to begin our exploration program. If we discover meaningful quantities of minerals on the Property, however, we will need to enter into additional agreements with the landowner to enable us to mine such minerals. There can be no assurance that the landowner will agree to such further agreements or, if he does, that they will be on terms economically acceptable to us.

 

7
 

There are no confirmed mineral deposits on the Property from which we may derive any financial benefit.

 

Neither the Company nor any independent geologist has confirmed commercially viable mineable deposits of tellurium, gold, silver of other minerals on the Property and there can be no assurances that there are such deposits on the Property.

 

We are uncertain as to whether our exploration for tellurium or other mineral resources on the Property will lead to meaningful results.

 

Resources are non-renewable and the exploration of new potential resources is crucial to a mining enterprise. Exploration of mineral resources is speculative in nature, so substantial expenses may be incurred from initial exploration to drilling to production. Tellurium is the ninth rarest element on earth and there are very few tellurium mines in operation around the world today. Although tellurium has been found on adjacent concessions and mined in the past to a limited extent, there is no assurance that exploration on the La Viuda Concessions will lead to the discovery of economically feasible quantities of tellurium (or gold or silver) or result in the mining of such elements and the generation of revenues. The exploration of the La Viuda Concessions is currently our only business. If we fail to discover economically viable quantities of tellurium (or gold or silver) on the Property, our current business plan will have failed and we may not be able to continue operations.

 

There is no assurance that we can establish the existence of any mineral reserves on the Property in commercially exploitable quantities.

 

We have not established that the La Viuda Concessions contain any meaningful levels of tellurium or other mineral reserves. A mineral reserve is defined by the SEC in its Industry Guide 7 as that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. There can be no assurance that we will ever establish any mineral reserves.

(See http://www.sec.gov/divisions/corpfin/forms/industry.htm#secguide7.)

 

We will be relying on independent analysis to evaluate the Property and structure and carry out our planned exploration activities.

 

We will rely on independent geologists to engage in field work at the Property, to analyze our prospects, plan and carry out our exploration program, including an exploratory drilling program, and to prepare resource reports on our La Viuda Concessions. While these geologists rely on standards established by various licensing bodies, there can be no assurance that their estimates or results will be accurate. Analyzing drilling results and estimating reserves or targeted drilling sites is not a certainty. Miscalculations and unanticipated drilling results may cause the geologists to alter their estimates. If this should happen, we may have devoted resources to areas where resources could have been better allocated, and as a result, our business could suffer.

 

There is no assurance that we can establish successful mining operations.

 

Even if we do eventually discover a meaningful tellurium or other mineral reserve on the Property, there can be no assurance that we will be able to develop the Property into producing mines and extract those resources. Both mineral exploration and development involve a high degree of risk and few properties which are explored are ultimately developed into producing mines. Furthermore, we cannot be sure that an overall exploration success rate or extraction operations within a particular area will ever come to fruition and, in any event, production rates inevitably decline over time.

 

The commercial viability of an established mineral deposit will depend on a number of factors including, by way of example, the size, grade and other attributes of the mineral deposit, the proximity of the resource to infrastructure such as a smelter, roads and a point for shipping, government regulation and market prices. Most of these factors will be beyond our control, and any of them could increase costs and make extraction of any identified mineral resource unprofitable.

 

8
 

We will require additional capital to develop producing mines if we find commercial quantities of minerals.

 

If we do discover tellurium or other mineral resources in commercially exploitable quantities on the La Viuda Concessions, we will be required to expend substantial sums of money to establish the extent of the resource, develop processes to extract it and develop extraction and processing facilities and infrastructure. Although we may derive substantial benefits from the discovery of a major deposit, there can be no assurance that such a resource will be large enough to justify commercial operations. Nor can there be any assurance that we will be able to raise the funds required for development on a timely basis.

 

We have raised some capital to date, including through the sale of equity securities, but we currently do not have any contracts or firm commitments for additional financing. There can be no assurance that additional financing will be available in amounts or on terms acceptable to us, if at all. An inability to obtain additional capital would restrict our ability to grow and could diminish our ability to continue to conduct our business operations. If we are unable to obtain additional financing, we will likely be required to curtail exploration and development plans and possibly cease operations. Any additional equity financing may involve substantial dilution to then existing shareholders.

 

It is possible investors may lose their entire investment in us.

 

Prospective investors should be aware that if we are not successful in our endeavors, your entire investment in us could become worthless. Even if we are successful, in identifying mineral reserves that can be commercially developed, there can be no assurances that we will generate any revenues and our losses will continue.

 

Mineral operations are subject to applicable law and government regulation which could restrict or prohibit the exploitation of any mineral resource that we might discover.

 

Both mineral exploration and extraction require permits from various Mexican governmental authorities, whether federal, state or local, and are governed by laws and regulations, including those with respect to prospecting, mine development, mineral production, transport, export, taxation, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. There can be no assurance that we will be able to obtain or maintain any of the permits required for the continued exploration of our mineral properties or for the construction and operation of a mine on the Property at economically viable costs.

 

We believe that we are in compliance with all material laws and regulations that currently apply to our activities but there can be no assurance that we can continue to remain in compliance. Current laws and regulations could be amended and we might not be able to comply with them, as amended. Further, there can be no assurance that we will be able to obtain or maintain all permits necessary for our future operations, or that we will be able to obtain them on reasonable terms. To the extent such approvals are required and are not obtained, we may be delayed or prohibited from proceeding with planned exploration or development of our mineral properties.

 

We operate in a regulated industry and changes in regulations or violations of regulations may result in increased costs or sanctions that could reduce our revenues.

 

Our operations will be subject to extensive and complex federal and state laws and regulations in Mexico. If we fail to comply with the laws and regulations that are directly applicable to our business, we could suffer civil and/or criminal penalties or be subject to injunctions or cease and desist orders. While we believe that we are currently compliant with applicable rules and regulations, if there are changes in the future, there can be no assurance that we will be able to comply in the future, or that future compliance will not significantly adversely impact our operations.

 

9
 

Mineral exploration and development is subject to extraordinary operating risks which we do not currently insure against.

 

Mineral exploration, development and production involve many risks which even a combination of experience, knowledge and careful evaluation may not be able to overcome. Our operations will be subject to all the hazards and risks inherent in the exploration for mineral resources and, if we discover a mineral resource in commercially exploitable quantity, our operations could be subject to all of the hazards and risks inherent in the development and production of resources, including liability for pollution, cave-ins or similar hazards against which we cannot insure or against which we may elect not to insure. Any such event could result in work stoppages and damage to property, including damage to the environment. We do not currently maintain any insurance coverage against these operating hazards. The payment of any liabilities that arise from any such occurrence would have a material adverse impact on our Company.

 

Fluctuation in the market price of tellurium and other rare and precious metals may significantly affect the results of our operations.

 

If we are successful in the future in mining commercial quantities of tellurium or other precious metals, the results of our operations will be significantly affected by the market price of such metals, which are subject to substantial price fluctuations. Our earnings will be particularly sensitive to changes in the market price of tellurium, gold, and other metals that we might sell. Market prices can be affected by numerous factors beyond our control, including international, economic and political trends, expectations of inflation, currency exchange fluctuations, interest rates, global or regional consumptive patterns, supply and demand, substitution of new or different products in critical applications, expectations with respect to the level of fossil fuel prices, speculative activities and increased production due to new extraction developments and improved extraction and production methods. The effect of these factors on the price of base and precious metals, and therefore the economic viability of our exploration program, cannot accurately be predicted. If prices should decline below our cash costs of production and remain at such levels for any substantial period, we could determine at a particular point in time in the future that it might not be economically feasible to begin or continue commercial production activities.

 

Because tellurium is rare and its applications highly specific, there are no known hedging tools to utilize to protect us against price fluctuation. As such, our future ability to protect our operations against rare and precious metal price fluctuations is minimal.

 

The mining industry is highly competitive, and we face competition from many established domestic and foreign companies. We may not be able to compete effectively with these companies.

 

The markets in which we operate are highly competitive. The mineral exploration, development, and production industry is largely un-integrated. We compete against numerous well-established national and foreign companies in every aspect of the mineral mining industry. Some of our competitors have longer operating histories and greater technical facilities, and significantly greater recognition in the market and financial and other resources, than we have. We may not compete effectively with other exploration companies in locating and acquiring mineral resource properties, and customers may not buy any or all of the mineral products that we expect to produce. Additionally, we may not be able to compete with competitors located in developing countries such as China, where production costs may be lower.

 

Because of growing demand for rare and precious metals, we may be subject to more competition in the near future.

 

The forecasted growth in demand for rare metals, including tellurium which is used by the solar power industry, is expected to attract more mining companies and metal refiners into this industry and increase competition. Competition could arise from certain manufacturers, including First Solar, who use tellurium in their products and who decide to backwards integrate. We may not be able to compete with these new entrants in the market.

 

10
 

Compliance with environmental and other government regulations could be costly and could negatively impact production.

 

Our operations are subject to numerous federal, state and local laws and regulations in Mexico governing the operation of our business and the discharge of materials into the environment or otherwise relating to environmental protection. These laws and regulations may:

 

·require that we acquire permits before commencing extraction operations;

 

·restrict the substances that can be released into the environment in connection with mining and extraction activities;

 

·limit or prohibit mining activities on protected areas such as wetland or wilderness areas; and

 

·require remedial measures to mitigate pollution from former operations, such as dismantling abandoned production facilities.

 

Under these laws and regulations, we could be liable for personal injury and clean-up costs and other environmental and property damages, as well as administrative, civil and criminal penalties. We do not believe that insurance coverage for environmental damages that occur over time is available at a reasonable cost, and we do not maintain any such insurance. Also, we do not believe that insurance coverage for the full potential liability that could be caused by sudden and accidental environmental damages is available at a reasonable cost. Accordingly, we may be subject to liability or we may be required to cease operations including production (subsequent to any commencement) on the Property in the event of environmental damages.

 

We may have difficulty managing growth in our business.

 

Because of the small size of our business, growth in accordance with our long-term business plans, if achieved, will place a significant strain on our financial, technical, operational and management resources. As we increase our activities with respect to the La Viuda Concessions, there will be additional demands on our financial, technical, operational and management resources. The failure to continue to upgrade our technical, administrative, operating and financial control systems or the occurrence of unexpected expansion difficulties, including the recruitment and retention of required personnel could have a material adverse effect on our business, financial condition and results of operations and our ability to timely execute our business plan.

 

If we are unable to keep our key management personnel, then we are likely to face significant delays at a critical time in our corporate development and our business is likely to be damaged.

 

Our success depends upon the skills, experience and efforts of our management and other key personnel, including our Chief Executive Officer and Chief Operating Officer. As a relatively new company, much of our corporate, scientific and technical knowledge is concentrated in the hands of a few individuals. We do not have employment agreements with our Chief Executive Officer or Chief Operating Officer. Nor do we maintain key-man life insurance on these persons. The loss of the services of one or more of our present management or other key personnel could significantly delay our exploration and development activities as there could be a learning curve of several months or more for any replacement personnel. Furthermore, competition for the type of highly skilled individuals we require is intense and we may not be able to attract and retain new employees or contractors of the caliber needed to achieve our objectives. Failure to replace key personnel could have a material adverse effect on our business, financial condition and operations.

 

Each of our Chief Executive Officer and Chief Operating Officer has other substantial business activities that limit the amount of time that he can devote to managing our business.

 

Our Chief Executive Officer, James D. Davidson, and our Chief Operating Officer, George Duggan, currently serves as officers, and are involved in the running, of other companies. Accordingly, these officers are only able to devote a portion of their time to our activities. This may make it more difficult for our management to respond quickly and completely to challenges and opportunities that we may encounter, may limit our ability to timely consummate strategic relationships and may have an adverse effect on our results of operations.

 

11
 

There may be challenges to our title in our mining properties.

 

While we have conducted our own due diligence relating to Mexivada’s title to the La Viuda Concessions prior to entering into the AuroTellurio Option Agreement, mining properties, in general, may be subject to prior unregistered agreements, transfers or claims and title may be affected by undetected defects. Should any of these conditions occur, we could face significant delays, added costs and the possible loss of any investments or commitment of capital.

 

Difficult conditions in the global capital markets may significantly affect our ability to raise additional capital to continue operations.

 

The ongoing worldwide financial and credit upheaval may continue indefinitely. Because of reduced market liquidity, we may not be able to raise additional capital when we need it. Because the future of our business will depend on our ability to explore and develop the mineral resources on our existing properties and, possibly, the acquisition of one or more additional mineral resource properties for which, most likely, we will need additional capital, we may not be able to complete such development and acquisition projects or develop or acquire revenue producing assets. As a result, we may not be able to generate income and, to conserve capital, we may be forced to curtail our current business activities or cease operations entirely.

 

Being a public company has increased our expenses and administrative workload.

 

As a public company, we must comply with various laws and regulations, including the Sarbanes-Oxley Act of 2002 and related rules of the SEC. Complying with these laws and regulations requires the time and attention of our board of directors and management, and increases our expenses. Among other things, we must:

 

·maintain and evaluate a system of internal controls over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act and the related rules and regulations of the SEC and the Public Company Accounting Oversight Board;

 

·maintain policies relating to disclosure controls and procedures;

 

·prepare and distribute periodic reports in compliance with our obligations under federal securities laws;

 

·institute a more comprehensive compliance function, including with respect to corporate governance; and

 

·involve to a greater degree our outside legal counsel and accountants in the above activities.

 

In addition, being a public company has made it more expensive for us to obtain director and officer liability insurance. In the future, we may be required to accept reduced coverage or incur substantially higher costs to obtain this coverage. These factors could also make it more difficult for us to attract and retain qualified executives and members of our board of directors, particularly directors willing to serve on an audit committee which we expect to establish.

 

12
 

RISKS RELATED TO DOING BUSINESS IN MEXICO

 

Local infrastructure may impact our exploration activities and results of operations.

 

Mining, processing, development and exploration activities depend, to one degree or another, on adequate infrastructure. Reliable roads, bridges and power and water supplies are important determinants that affect capital and operating costs. Unusual or infrequent weather phenomena sabotage or government or other interference in the maintenance or provision of such infrastructure could adversely affect our activities and future profitability.

 

Our material property interests are in Mexico. Risks of doing business in a foreign country could adversely affect our results of operations and financial condition.

 

We face risks normally associated with any conduct of business in a foreign country with respect to our La Viuda Concessions in Sonora, Mexico, including various levels of political and economic risk.  The occurrence of one or more of these events could have a material adverse impact on our efforts or operations which, in turn, could have a material adverse impact on our cash flows, earnings, results of operations and financial condition.  These risks include the following:

 

·labor disputes,

 

·invalidity of governmental orders,

 

·uncertain or unpredictable political, legal and economic environments,

 

·war and civil disturbances,

 

·changes in laws or policies,

 

·taxation,

 

·delays in obtaining or the inability to obtain necessary governmental permits,

 

·governmental seizure of land or mining claims,

 

·limitations on ownership,

 

·limitations on the repatriation of earnings,

 

·increased financial costs,

 

·import and export regulations, including restrictions on the export of tellurium, gold and silver, and

 

·foreign exchange controls.

 

These risks may limit or disrupt our business, restrict the movement of our funds or impair contract rights or result in the taking of property by nationalization or expropriation without fair compensation.

 

We are uncertain as to the termination and renewal of our concessions.

 

Under Mexican law, mineral resources belong to the Mexican state and a concession from the Mexican federal government is required to explore for or exploit mineral reserves. Mexivada’s mineral rights to the Property which we are acquiring from Mexivada derive from concessions granted by the Secretaría de Economía, formerly known as Secretaría de Comercio y Fomento Industrial (the "Secretary of Economy"), through the General Bureau of Mines pursuant to the Ley Minera (the "Mining Law") and regulations thereunder.

        

13
 

Our mining concessions may be terminated if the obligations of the concessionaires under the Mining Law, its regulations and related legal provisions are not satisfied. A concessionaire of a mining concession is obligated, among other things, to explore or exploit the relevant concession, to pay any relevant fees, to comply with all environmental and safety standards, and to provide information to the Secretary of Economy and permit inspections by the Secretary of Economy.

 

Our property interests in Mexico are subject to risks from instability in that country.

 

Our property interests in Mexico may be affected by additional foreign country risks associated with political or economic instability in that country. The risks with respect to Mexico specifically, include, but are not limited to: military repression, extreme fluctuations in currency exchange rates, criminal activity, lack of personal safety or ability to safeguard property, labor instability or militancy, mineral title irregularities and high rates of inflation. The effect of these factors cannot be accurately predicted but may adversely impact our proposed operations in Mexico.

 

 Increasing violence between the Mexican government and drug cartels may result in additional costs of doing business in Mexico.

 

The state of Sonora where the La Viuda Concessions are located has not been adversely affected as a result of increasing violence between the Mexican government and drug cartels. We do not expect this violence to have any impact on our business operations. However, our management remains cognizant that the drug cartels may expand their operations or violence in areas in close proximity to our proposed operations. Should this occur, we may be required to hire security personnel and take other actions to protect our operations and personnel. Presently, we are not budgeting for increased security. However, if drug violence becomes a problem or, any other violence impacts our operations, the costs to protect our personnel and property will adversely impact our operations.

 

We may be adversely affected by the imposition of more stringent environmental regulations in Mexico that would require us to spend additional funds.

 

The mining and processing industries in Mexico are subject to federal and state laws and regulations (including certain industry technical standards) governing protection and remediation of the environment, mining operations, occupational health and safety and other matters. Mexican environmental regulations have become increasingly stringent over the last decade. This trend is likely to continue and may be influenced by the environmental agreement entered into by Mexico, the United States and Canada in connection with the North American Free Trade Agreement (“NAFTA”). Accordingly, although we believe that we will be able to comply with currently applicable environmental, mining and other laws and regulations, there can be no assurance that more stringent enforcement of existing laws and regulations or the adoption of additional laws and regulations would not have an adverse effect on our business, properties, results of operations, financial condition or prospects.

 

RISKS RELATED TO OUR COMMON STOCK

 

There is not now, and there may not ever be, an active market for our common stock.

 

There currently is a limited public market for our common stock. Further, although our common stock is currently quoted on the OTC Markets, trading of our common stock may be extremely sporadic. For example, several days may pass before any shares may be traded. As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations of the price of, our common stock. Accordingly, investors must assume they may have to bear the economic risk of an investment in our common stock for an indefinite period of time. There can be no assurance that a more active market for our common stock will develop, or if one should develop, there is no assurance that it will be sustained. This severely limits the liquidity of our common stock, and would likely have a material adverse effect on the market price of our common stock and on our ability to raise additional capital.

 

14
 

We cannot assure you that our common stock will become liquid or that it will be listed on a securities exchange.

 

Until our common stock is listed on a national securities exchange such as the New York Stock Exchange or the Nasdaq National Market, we expect our common stock to remain eligible for quotation on the OTC Markets, or on another over-the-counter quotation system. In those venues, however, an investor may find it difficult to obtain accurate quotations as to the market value of our common stock. In addition, if we fail to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling our common stock, which may further affect the liquidity of our common stock. This would also make it more difficult for us to raise capital.

 

Our common stock is subject to the “penny stock” rules of the SEC and FINRA’s sales practice requirements, and the trading market in our common stock is limited, which makes transactions in our common stock cumbersome and may reduce the value of an investment in the stock.

 

The SEC has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:

 

·that a broker or dealer approve a person’s account for transactions in penny stocks; and

 

·the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

 

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:

 

·obtain financial information and investment experience objectives of the person; and

 

·make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

 

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form sets forth:

 

·the basis on which the broker or dealer made the suitability determination; and

 

·that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

 

Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of common stock and cause a decline in the market value of stock.

 

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

 

In addition to the “penny stock” rules promulgated by the SEC, the Financial Industry Regulatory Authority (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’s 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.

 

15
 

The price of our common stock may become volatile, which could lead to losses by investors and costly securities litigation.

 

The trading price of our common stock is likely to be highly volatile and could fluctuate in response to factors such as:

 

·actual or anticipated variations in our operating results;

 

·announcements of developments by us, our strategic partners or our competitors;

 

·announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;

 

·adoption of new accounting standards affecting our industry;

 

·additions or departures of key personnel;

 

·sales of our common stock or other securities in the open market; and other events or factors, many of which are beyond our control.

 

The stock market is subject to significant price and volume fluctuations. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been initiated against such company. Litigation initiated against us, whether or not successful, could result in substantial costs and diversion of our management’s attention and resources, which could harm our business and financial condition.

 

Compliance with U.S. securities laws, including the Sarbanes-Oxley Act, will be costly and time-consuming.

 

We are a reporting company under U.S. securities laws and are obliged to comply with the provisions of applicable U.S. laws and regulations, including the Securities Act of 1933, as amended (the “Securities Act”), the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Sarbanes-Oxley Act of 2002 and the related rules of the SEC, and the rules and regulations of the relevant U.S. market, in each case, as amended from time to time. Preparing and filing annual and quarterly reports and other information with the SEC, furnishing audited reports to shareholders and other compliance with these rules and regulations will involve a material increase in regulatory, legal and accounting expenses and the attention of management, and there can be no assurance that we will be able to comply with the applicable regulations in a timely manner, if at all.

 

We do not anticipate dividends to be paid on our common stock, and investors may lose the entire amount of their investment.

 

Cash dividends have never been declared or paid on our common stock, and we do not anticipate such a declaration or payment for the foreseeable future. We expect to use future earnings, if any, to fund business growth. Therefore, shareholders will not receive any funds absent a sale of their shares. We cannot assure shareholders of a positive return on their investment when they sell their shares, nor can we assure that shareholders will not lose the entire amount of their investment.

 

16
 

If securities analysts do not initiate coverage or continue to cover our common stock or publish unfavorable research or reports about our business, this may have a negative impact on the market price of our common stock.

 

The trading market for our common stock may be affected by, among other things, the research and reports that securities analysts publish about our business and the Company. We do not have any control over these analysts. There is no guarantee that securities analysts will cover our common stock. If securities analysts do not cover our common stock, the lack of research coverage may adversely affect its market price. If we are covered by securities analysts, and our stock is the subject of an unfavorable report, our stock price and trading volume would likely decline. If one or more of these analysts ceases to cover the Company or fails to publish regular reports on the Company, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.

 

State Blue Sky registration – potential limitations on resale of the shares.

 

The holders of the shares of our common stock and persons, who desire to purchase the shares in any trading market that might develop in the future, should be aware that there may be significant state law restrictions upon the ability of investors to resell the securities. Accordingly, investors should consider the secondary market for our securities to be a limited one. It is the intention of our management to seek coverage and publication of information regarding the Company in an accepted publication which permits a “manuals exemption.” This manuals exemption permits a security to be sold by shareholders in a particular state without being registered if the company issuing the security has a listing for that security in a securities manual recognized by that state. The listing entry must contain (i) the names of issuers, officers, and directors, (ii) an issuer’s balance sheet, and (iii) a profit and loss statement for either the fiscal year preceding the balance sheet or for the most recent fiscal year of operations. The principal accepted manuals are those published by Standard and Poor’s, and Mergent, Inc. Many states expressly recognize these manuals. A smaller number of states declare that they recognize securities manuals, but do not specify the recognized manuals. Among others, the following states do not have any provisions and, therefore, do not expressly recognize the manuals exemption: Alabama, California, Georgia, Illinois, Kentucky, Louisiana, Montana, South Dakota, Tennessee, Vermont, and Wisconsin.

 

You may experience dilution of your ownership interests because of the future issuance of additional shares of our common stock.

 

In the future, we may issue our authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of our present shareholders and the purchasers of our common stock offered hereby. We are currently authorized to issue an aggregate of 322,000,000 shares of capital stock, par value $0.001 per share, consisting of 300,000,000 shares of common stock and 22,000,000 shares of preferred stock, with the preferences and rights determined by our Board of Directors. As of February 10, 2012, there were 109,451,260 shares of our common stock and 22,000,000 shares of our preferred stock outstanding. As of February 10, 2012, there were 22,000,000 shares our common stock reserved for issuance upon conversion of our Series A Preferred Stock (defined below), 16,000,000 shares of our common stock reserved for issuance under our 2007 Stock Option Plan (the “2007 Plan”), 38,739,129 shares reserved for issuance upon the exercise of warrants issued from December 2010 through July 2011 (the “2010/2011 Warrants”) and 1,190,000 shares reserved for issuance upon the exercise of warrants issued in July 2007 (the “2007 Warrants”).

 

Any future issuance of our equity or equity-backed securities may dilute then-current shareholders’ ownership percentages and could also result in a decrease in the fair market value of our equity securities, because our assets would be owned by a larger pool of outstanding equity. As described above, we may need to raise additional capital through public or private offerings of our common or preferred stock or other securities that are convertible into or exercisable for our common or preferred stock. We may also issue such securities in connection with hiring or retaining employees and consultants (including stock options issued under our equity incentive plans), as payment to providers of goods and services, in connection with future acquisitions or for other business purposes. Our Board of Directors may at any time authorize the issuance of additional common or preferred stock without common shareholder approval, subject only to the total number of authorized common and preferred shares set forth in our certificate of incorporation. The terms of equity securities issued by us in future transactions may be more favorable to new investors, and may include dividend and/or liquidation preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect. Also, the future issuance of any such additional shares of common or preferred stock or other securities may create downward pressure on the trading price of the common stock. There can be no assurance that any such future issuances will not be at a price (or exercise prices) below the price at which shares of the common stock are then traded.

 

17
 

We may obtain additional capital through the issuance of preferred stock, which may limit your rights as a holder of our common stock.

 

Without any shareholder vote or action, our Board of Directors may designate and approve for issuance additional shares of our preferred stock. The terms of any preferred stock may include priority claims to assets and dividends and special voting rights which could limit the rights of the holders of our common stock. The designation and issuance of preferred stock favorable to current management or shareholders could make any possible takeover of the Company or the removal of our management more difficult.

 

Any failure to maintain effective internal control over our financial reporting could materially adversely affect us.

 

Section 404 of the Sarbanes-Oxley Act of 2002 will require us to include in our annual reports on Form 10-K, an assessment by management of the effectiveness of our internal control over financial reporting. While we intend to diligently and thoroughly document, review, test and improve our internal control over financial reporting in order to ensure compliance with Section 404, management may not be able to conclude that our internal control over financial reporting is effective. This could result in a loss of investor confidence in the reliability of our financial statements, which in turn could negatively impact the price of our common stock.

 

In particular, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting, as required by Section 404. Our compliance with Section 404 will require that we incur substantial accounting expense and expend significant management efforts. We currently do not have an internal audit group, and we will need to retain the services of additional accounting and financial staff or consultants with appropriate public company experience and technical accounting knowledge to satisfy the ongoing requirements of Section 404. We intend to review the effectiveness of our internal controls and procedures and make any changes management determines appropriate, including to achieve compliance with Section 404 by the date on which we are required to so comply.

 

Any significant deficiencies in our control systems may affect our ability to comply with SEC reporting requirements and any applicable listing standards or cause our financial statements to contain material misstatements, which could negatively affect the market price and trading liquidity of our common stock and cause investors to lose confidence in our reported financial information, as well as subject us to civil or criminal investigations and penalties.

 

OTHER RISKS

 

We have sought to identify what we believe to be the most significant risks to our business, but we cannot predict whether, or to what extent, any of such risks may be realized nor can we guarantee that we have identified all possible risks that might arise. Investors should carefully consider all of such risk factors before making an investment decision with respect to our common stock.

 

18
 

SELLING SHAREHOLDERS

  

The selling stockholders named in this prospectus are offering all of the 38,739,129 shares of common stock offered through this prospectus.  All of the shares were acquired from us by the selling stockholders in private placement offerings that were exempt from registration pursuant to Section 4(2) and Regulation D as promulgated by the SEC under the Securities Act of 1933.

 

The following table sets forth the name of each selling shareholder, the number of shares of our common stock beneficially owned by such shareholder before this offering, the number of shares to be offered for such shareholder’s account and the number and (if one percent or more) the percentage of the class to be beneficially owned by such shareholder after completion of the offering. The number of shares owned are those beneficially owned, as determined under the rules of the Securities and Exchange Commission, and such information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares of our common stock as to which a person has sole or shared voting power or investment power and any shares of common stock which the person has the right to acquire within 60 days after the date of this prospectus through the exercise of any option, warrant or right, through conversion of any security or pursuant to the automatic termination of a power of attorney or revocation of a trust, discretionary account or similar arrangement, and such shares are deemed to be beneficially owned and outstanding for computing the share ownership and percentage of the person holding such options, warrants or other rights, but are not deemed outstanding for computing the percentage of any other person. Beneficial ownership percentages are calculated based on 109,451,260 shares of common stock outstanding as of February 10, 2012.

 

Unless otherwise set forth below, based upon the information furnished to us, (a) the persons and entities named in the table have sole voting and sole investment power with respect to the shares set forth opposite the selling shareholder’s name, subject to community property laws, where applicable, (b) no selling shareholder had any position, office or other material relationship within the past three years, with us or with any of our predecessors or affiliates, and (c) no selling shareholder is a broker-dealer. Selling shareholders who are affiliates of a broker-dealer are indicated by footnote. We have been advised that these affiliates of broker-dealers purchased our common stock and warrants in the ordinary course of business, not for resale, and at the time of purchase, did not have any agreements or understandings, directly or indirectly, with any person to distribute the related common stock.

 

Selling Stockholder  Shares of
Common
Stock
Beneficially
Owned
Before the
Offering
   Shares of
Common
Stock Being
Offered(a)
   Shares of
Common
Stock
Beneficially
Owned Upon
Completion
of the
Offering(b)
   Percentage
of  Common
Stock
Beneficially
Owned Upon
Completion
of the
Offering(c)
 
                 
321 Gold Ltd (1)   3,500,000    1,000,000    2,500,000    1.7%
Alcone Services SA (2)   1,467,387    489,129    978,258    * 
Nelson Barry Family Trust (3)   1,200,000    400,000    800,000    * 
Baybak Family Partners Ltd (4)   10,944,031    4,000,000    14,804,220    9.9%
Michael and Betsy Brauser TBE (5)   6,000,000    2,000,000    4,000,000    2.7%
Brio Capital L.P. (6)   6,000,000    2,000,000    4,000,000    2.7%
Romualdo Wilson Cancado (7)   1,500,000    500,000    1,000,000    * 
Dharma Fund PCC Limited (8)   6,000,000    2,000,000    4,000,000    2.7%
Dragon Equities Limited (9)   7,500,000    2,500,000    5,000,000    3.4%
E and P Fund Ltd. (10)   6,000,000    2,000,000    4,000,000    2.7%
David Elliot (11)   1,500,000    500,000    1,000,000    * 
Fitel Nominees Limited A/C C054696 (12)   7,950,000    2,650,000    5,300,000    3.6%
General Research GMBH (13)   1,200,000    400,000    800,000    * 
Global Productions Group, Inc. (14)   1,500,000    500,000    1,000,000    * 

 

19
 

 

Selling Stockholder  Shares of
Common
Stock
Beneficially
Owned
Before the
Offering
   Shares of
Common
Stock Being
Offered(a)
   Shares of
Common
Stock
Beneficially
Owned Upon
Completion
of the
Offering(b)
   Percentage
of  Common
Stock
Beneficially
Owned Upon
Completion
of the
Offering(c)
 
                 
Gottbetter & Partners, LLP (15)   10,944,031    4,000,000    14,804,220    9.9%
GRQ Consultants, Inc. 401K (16)   10,944,031    3,000,000    14,804,220    9.9%
Gregory Hall (17)   1,500,000    500,000    1,000,000    * 
Holmes Revocable Trust (18)   3,000,000    1,000,000    2,000,000    1.3%
Lenox Trading Group, LLC (19)   3,000,000    1,000,000    2,000,000    1.3%
Mursi Labs SL (20)   2,400,000    800,000    1,600,000    1.1%
Sam Quinn (21)   3,000,000    1,000,000    2,000,000    1.3%
Richard Redfern (22)   1,500,000    500,000    1,000,000    * 
Sandor Capital Master Fund, L.P. (23)   12,000,000    4,000,000    8,000,000    5.4%
Fuad Sillem (24)   1,500,000    500,000    1,000,000    * 
Triumph Small Cap Fund, Inc. (25)   3,000,000    1,000,000    2,000,000    1.3%
Andrew Williams (26)   1,500,000    500,000    1,000,000    * 
Totals   116,549,480    38,739,129    88,810,351      

 

* Less than 1%

§ Broker-Dealer or Affiliate of a Broker Dealer

 

(a)An aggregate of 38,739,129 of the shares of common stock being offered by the selling stockholders are issuable upon exercise of outstanding warrants.

 

(b)Assumes all of the shares of common stock to be registered on the registration statement of which this prospectus is a part, including all shares of common stock underlying warrants held by the selling stockholders, are sold in the offering and that shares of common stock beneficially owned by such selling stockholder but not being registered by this prospectus are not sold.

 

(c)Percentages are based on the 109,451,260 shares of common stock issued and outstanding as of February 10, 2012. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock subject to options or warrants currently exercisable or convertible, or exercisable or convertible within 60 days of February 10, 2012 are deemed outstanding for computing the percentage of the person holding such option or warrant but are not deemed outstanding for computing the percentage of any other person; provided, however, that the 38,739,129 shares that may be sold in the Offering which are issuable upon exercise of warrants described above are deemed outstanding upon completion of the Offering.

 

(1)Includes 1,000,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days. Robert Moriarty has the power to vote and dispose of the shares being registered on behalf of 321 Gold Ltd.

 

(2)Includes 489,129 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days. Moises Agami has the power to vote and dispose of the shares being registered on behalf of Alcone Services SA.

 

(3)Includes 400,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days. Nelson C. and Jeanie M. Barry have the power to vote and dispose of the shares being registered on behalf of Nelson Barry Family Trust.

 

20
 

 

(4)Includes 4,000,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days. Michael Baybak has the power to vote and dispose of the shares being registered on behalf of Baybak Family Partners, Ltd.

 

(5)Includes 2,000,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days. Michael and Betsy Brauser have the power to vote and dispose of the shares being registered on behalf of Michael and Betsy Brauser TBE.

 

(6)Includes 2,000,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days. Shaye Hirsch has the power to vote and dispose of the shares being registered on behalf of Brio Capital L.P.

 

(7)Includes 500,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

 

(8)Includes 2,000,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days. Jean-Francois Campos has the power to vote and dispose of the shares being registered on behalf of Dharma Fund PCC Limited.

 

(9)Includes 2,500,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days. Fuad Sillam has the power to vote and dispose of the shares being registered on behalf of Dragon Equities Limited.

 

(10)Includes 2,000,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days. Christian Naville and Oliver Couriol have the power to vote and dispose of the shares being registered on behalf of E and P Fund Ltd.

 

(11)Includes 500,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

 

(12)Includes 2,650,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days. D.M. Barrow has the power to vote and dispose of the shares being registered on behalf of Fitel Nominees Limited A/C C054696.

 

(13)Includes 400,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days. Dr. Georg Hochwimmer has the power to vote and dispose of the shares being registered on behalf of General Research GMBH.

 

(14)Includes 500,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days. Anthony Thompson has the power to vote and dispose of the shares being registered on behalf of Global Productions Group, Inc.

 

(15)Includes 4,000,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days. Adam S. Gottbetter has the power to vote and dispose of the shares being registered on behalf of Gottbetter & Partners, LLP.

 

(16)Includes 3,000,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days. Barry Honig has the power to vote and dispose of the shares being registered on behalf of GRQ Consultants, Inc. 401K.

 

(17)Includes 500,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

 

(18)Includes 1,000,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days. Gordon L. Holmes has the power to vote and dispose of the shares being registered on behalf of Holmes Revocable Trust.

 

21
 

 

(19)Includes 1,000,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days. David Greenberg has the power to vote and dispose of the shares being registered on behalf of Lenox Trading Group, LLC.

 

(20)Includes 800,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days. Burta Frias has the power to vote and dispose of the shares being registered on behalf of Mursi Labs SL.

 

(21)Includes 1,000,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

 

(22)Includes 500,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

 

(23)Includes 4,000,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days. John S. Lemak has the power to vote and dispose of the shares being registered on behalf of Sandor Capital Master Fund, L.P.

 

(24)Includes 500,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

 

(25)Includes 1,000,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days. Kenneth Orr has the power to vote and dispose of the shares being registered on behalf of Triumph Small Cap Fund, Inc.

 

(26)Includes 500,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

 

22
 

USE OF PROCEEDS

 

We will not receive proceeds from the sale of common stock by selling shareholders under this prospectus. We could, however, receive proceeds from the selling stockholders if and when they exercise warrants the common stock underlying which is covered by this prospectus. We would use any proceeds received for working capital and general corporate purposes.  The warrant holders may exercise their warrants at any time until their expiration, by cash payment of the exercise price or, for certain warrants and under certain circumstances, by “cashless exercise,” as further described below under “Description of Securities.”  If the warrants are exercised in full, the estimated proceeds from such exercise would be up to $3,389,674 if all of the warrants are exercised through the payment of cash to the Company (19,369,564 warrants exercised at $0.05 per share and 19,369,565 at $0.125 per share).  Because the warrant holders may exercise the warrants in their own discretion, if at all, we cannot plan on specific uses of proceeds beyond application of proceeds to general corporate purposes.  We have agreed to bear the expenses (other than any underwriting discounts or commissions or agent’s commissions) in connection with the registration of the common stock being offered hereby by the selling shareholders, but all selling and other expenses incurred by the selling shareholders will be borne by them.

 

We anticipate that any net proceeds from our sale of common stock will be used for general corporate purposes and working capital. Such general purposes may be specified in one or more of our prospectus supplements. We may invest the net proceeds temporarily in our discretion until allocated to the use of proceeds specified herein or in a prospectus supplement.

 

DETERMINATION OF OFFERING PRICE

 

There currently is a limited public market for our common stock. The selling shareholders will determine at what price they may sell the offered shares, and such sales may be made at prevailing market prices or at privately negotiated prices. See Plan of Distribution for more information.

 

DILUTION

 

The shares of common stock to be sold by the selling stockholders are shares that are currently issued and outstanding.  Accordingly, there will be no dilution to our existing stockholders.

 

MARKET FOR COMMON EQUITYAND RELATED STOCKHOLDER MATTERS

 

Since February 26, 2007, our common stock has been listed for quotation on the OTC Markets, originally under the symbol “ARBU.” In anticipation of the Cromwell Merger in 2007, we changed our name, and our symbol changed to “CWLU.” Subsequent to the Cromwell Merger unwinding, we changed our name again and our symbol then changed to “USUI.” Following our name change in August 2009 to California Gold Corp., our symbol changed to “CLGL.”

 

The following table sets forth the high and low closing bid prices for our common stock for the fiscal quarters indicated as reported on the OTC Markets. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. Our common stock is thinly traded and, thus, pricing of our common stock on the OTC Markets does not necessarily represent its fair market value.

 

Period  High   Low 
         
Fiscal Year Ending January 31, 2011          
First Quarter  $.02   $.02 
Second Quarter   .03    .01 
Third Quarter   .05    .01 
Fourth Quarter   .11    .04 
           
Fiscal Year Ending January 31, 2012          
First Quarter  $.115   $.035 
Second Quarter   .0869    .045 
Third Quarter   .07    .042 
Fourth Quarter   .04    .015 
           
Fiscal Year Ending January 31, 2013          
First Quarter (through February 9, 2012)  $0.064   $0.064 

 

23
 

On February 10, 2012, there were 109,451,260 shares of our common stock outstanding, 22,000,000 shares of our Series A Preferred Stock outstanding, warrants outstanding exercisable for a total of 39,929,129 shares of our common stock and options outstanding exercisable for a total of 11,000,000 shares of our common stock

 

Dividends

 

We have never declared any cash dividends with respect to our common stock. Future payment of dividends is within the discretion of our Board of Directors and will depend on our earnings, capital requirements, financial condition and other relevant factors. Other than provisions of the Nevada Revised Statutes requiring post-dividend solvency according to certain measures, there are no material restrictions limiting, or that are likely to limit, our ability to pay dividends on our common stock. Nonetheless, we presently intend to retain future earnings, if any, for use in our business and have no present intention to pay cash dividends on our common stock.

 

Securities Authorized For Issuance Under Equity Compensation Plans

 

In June 2007, we adopted our 2007 Plan.   The 2007 Plan was approved by our Board of Directors and the holders of a majority of the outstanding shares of our common stock. In December 2010, the number of shares reserved for issuance under the 2007 Plan was increased by the Board from 3,000,000 shares to 16,000,000 shares of common stock, subject to adjustment under certain circumstances. This increase was approved by our then-majority stockholder. If an incentive award granted under the 2007 Plan expires, terminates, is unexercised or is forfeited, or if any shares are surrendered to us in connection with an incentive award, the shares subject to such award and the surrendered shares will become available for further awards under the 2007 Plan.

 

As of the date of this prospectus, we have outstanding 11,000,000 nonqualified stock options under the 2007 Plan, with a weighted average exercise price of $0.09 per share.  For all option grants, our Board of Directors has set (or will set) the exercise price of the options at a price equal to or greater than the fair market value of our common stock on the date of grant of the options.  Of the outstanding options under the 2007 Plan, 3,666,667 have vested.  All of such options vested immediately on the date of grant, having a 10 year term.  Another 7,333,333 outstanding options were included in grants under the 2007 Plan that will have vested in in two equal installments on each of the first and second anniversary of the date of grants. 

 

We have not maintained any other equity compensation plans since our inception.

 

The following table provides information as of June 30, 2011, with respect to the shares of common stock that may be issued under our existing equity compensation plans:

 

Plan Category  Number of securities to
be
issued upon exercise of
outstanding options,
warrants and rights
   Weighted-average
exercise price of
outstanding options,
warrants and rights
   Number of securities
remaining available for
future issuance under equity
compensation plans
(excluding securities reflected
in column (a))
 
   (a)   (b)   (c) 
Equity compensation plans approved by security holders (1)   11,000,000   $0.09    5,000,000 
Equity compensation plans not approved by security holders            
Total   11,000,000   $0.09    5,000,000 

 

Holders

 

On February 10, 2012, we had 109,451,260 shares of our common stock issued and outstanding held by 46 shareholders of record, and 22,000,000 shares of our Series A Preferred Stock held by three (3) shareholders.

 

24
 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis of financial condition and results of operations should be read in conjunction with the financial information included elsewhere in this prospectus, including our audited financial statements for the years ended January 31, 2010 and 2009, our unaudited condensed consolidated financial statements for the nine months ended October 31, 2011 and 2010 and the related notes. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “California Gold,” “us,” “we,” “our,” and similar terms refer to California Gold Corp., a Nevada corporation. This discussion includes forward-looking statements, as that term is defined in the federal securities laws, based upon current expectations that involve risks and uncertainties, such as plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. Words such as “anticipate,” “estimate,” “plan,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions are used to identify forward-looking statements.

 

We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based. See “Note Regarding Forward-Looking Statements.” Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors discussed in “Risk Factors” and elsewhere in this prospectus. Any one or more of these uncertainties, risks and other influences could materially affect our results of operations and whether forward-looking statements made by us ultimately prove to be accurate. Our actual results, performance and achievements could differ materially from those expressed or implied in these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise.

 

OVERVIEW

 

California Gold is an exploration stage mining company whose principal focus is the identification, acquisition, and development of rare and precious metals mining properties in the Americas.

 

Our primary focus is on the exploration and development of the La Viuda Concessions south of Moctezuma, Sonora, Mexico, where, we believe, deposits of tellurium, gold and silver may exist in economically minable quantities. We are still in the exploration stage and have not generated any revenues from our mining properties in Mexico.

 

The Mexivada Property Option Agreement

 

On February 11, 2011, we entered into a property option agreement (the “AuroTellurio Option Agreement”) with Mexivada to acquire up to an 80% interest in Mexivada’s La Viuda and La Viuda-1 concessions comprising its AuroTellurio tellurium-gold-silver property south of Moctezuma, Sonora, Mexico.

 

Under the terms of the AuroTellurio Option Agreement, we will acquire up to an 80% legal and beneficial ownership interest in the AuroTellurio Property by, in addition to making certain cash payments and share issuances to Mexivada (as discussed above), incurring up to $3,000,000 in cumulative exploration expenditures on the Property over a four year period at an investment rate of at least $750,000 per year. We will earn a 20% vested interest in the AuroTellurio Property in the first year of the AuroTellurio Option Agreement by investing $750,000 in an exploration program and up to an additional 60% interest in the Property, in blocks of 20% each, by investing an additional $750,000 in the exploration program in each of the following three years, or sooner, and meeting all of the other required terms of the AuroTellurio Option Agreement. Each 20% interest will vest earlier if each year’s cash and stock payments to Mexivada and $750,000 exploration expenditure investment are completed earlier than scheduled.

 

25
 

First Closing under the AuroTellurio Option Agreement

 

On August 4, 2011, we conducted the first closing (the “First Closing”) under the AuroTellurio Option Agreement.  Prior to the First Closing, we had made cash payments to Mexivada totaling $20,000.  On the date of the First Closing, we paid Mexivada an additional $10,000 in cash and issued to Mexivada 250,000 shares of our restricted common stock.  In exchange, we received from Mexivada four fully executed title deeds, each transferring to us a twenty percent (20%) interest in the La Viuda Concessions comprising the AuroTellurio Property.  We will hold these title deeds in escrow until we meet the terms of the AuroTellurio Option Agreement for the vesting of each twenty percent (20%) interest.  At that time, the relevant title deed will be released to us from escrow and filed with the Ministry of Mines in Mexico, to evidence our ownership in that specific twenty percent interest in the AuroTellurio Property. If we default on our commitments under the AuroTellurio Option Agreement or otherwise determine not to proceed with the acquisition of the AuroTellurio Property, all unvested interests and related title deeds in the AuroTellurio Property will be returned to Mexivada.

 

The La Viuda Concessions

 

The La Viuda Concessions, which cover approximately 18,840 acres (7,624 hectares) south of Moctezuma, Sonora Mexico, comprise two exploration concessions granted by the Mexican government to Compania Minera Mexivada, S.A. de C.V., a wholly owned subsidiary of Mexivada.

 

The La Viuda Concessions comprising the AuroTellurio Property is located less than a mile from the La Bambolla mine where gold-tellurium mineralization was discovered in the early 1900’s.  The AuroTellurio Property surrounds the La Bambolla mine area to the east and south and covers potentially mineralized areas over extensive, adjoining areas to the east, south and west.

 

Historical data suggest that tellurium-gold mineralization at the La Bambolla mine occurs along a regional structural system with an average S 70° E trend where a swarm of relatively narrow, sub-parallel, silica-rich mineralized veins are present.  At La Bambolla, these veins are either vertical, or have steep dips, and range from 0.14 to 2.60 meters in width.  Last year, we acquired certain geological information as well as analytical results of more than 500 underground channel samples taken at La Bambolla in the 1980's.  The average grades in the veins that were sampled, as indicated in the analytical results that we acquired, range from 0.01 to 3.26 % tellurium, and 0.03 to 4.90 oz/ton gold.

 

The AuroTellurio Property Exploration Program

 

On May 16, 2011, we entered into a surface rights agreement with a land owner in Moctezuma, Sonora, Mexico where the La Viuda Concessions are located. In return for the easement for our exploration of the La Viuda Concessions, we will pay the land owner $14,400 for each year in which we conduct exploration work on this land.

 

We have begun Phase 1 of our exploration program and we are currently conducting mapping, trenching and sampling programs at the AuroTellurio Property.  These activities will be complemented with gravity and magnetic geophysical surveys in preparation for an initial 3,000-meter drilling program that is planned for implementation in early 2012.

 

Geologic mapping and sampling on the AuroTellurio Property have thus far confirmed that the regional structure hosting the tellurium-gold vein system at La Bambolla extends east-southeasterly onto the AuroTellurio Property. Zones of fracture-controlled silicification, strikingly similar to those described at La Bambolla, have been mapped in our La Viuda 1 concession.  We believe that these features could be spatially located at a higher level than similar alteration-mineralization features found at La Bambolla.  This interpretation tends to support our initial geologic model where a series of essentially north-trending, post-mineral faults have down-dropped segments of the original mineralized system to the east.  Our current understanding, based on geological interpretation of the existing data, is that ore-grade tellurium-gold mineralization is highly likely to exist at depth within our La Viuda 1 concession. We are building a road to access and further evaluate this potentially mineralized area.

 

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Field work involving a gravity geophysical survey over the La Viuda Concessions has just been completed and the resulting data is being interpreted.  In addition, we have completed a helicopter-borne magnetics and radiometric survey of the La Viuda Concessions.  We expect that the gravity survey results will help us understand the structural features of the project area thereby testing our current geological model.  The air-magnetics and radiometric surveys will provide information related to the selection of specific drilling targets, and will also delineate areas of hydrothermal alteration associated with a potential intrusive mineralization event in the region.

 

Results of Operations

 

We are still in our exploration stage and have generated no revenues to date.

 

Nine Months Ended October 31, 2011 and 2010

 

We incurred total operating expenses of $990,122 and $394,377 for the nine months ended October 31, 2011 and 2010, respectively. The $595,745 increase over the prior year was primarily due to increased general and administrative expenses. General and administrative expenses increased from $394,377 for the nine months ended October 31, 2010 to $773,824 for the nine months ended October 31, 2011, primarily due to stock-based compensation expenses relating to certain consulting services provided to the Company, as well as management fees, salaries and wages, and other consulting expenses. Additionally, we incurred mineral property expenses relating to the AuroTellurio Option Agreement, as discussed above, in the amount of $215,795 for the nine months ended October 31, 2011.

 

We also reported non-operating income of $691,698 for the nine months ended October 31, 2011, compared to non-operating expenses of $69,393 for the nine months ended October 31, 2010. The increase of $761,091 over the prior year was primarily due to a $690,095 unrealized gain on derivative instruments in 2011 relating to the issuance of the 2010 and 2011 warrants as a result of the private placement offering completed in December 2010 and January 2011, and the over-allotment in April, June and July 2011. In the nine months ended October 31, 2010, we reported a $67,056 unrealized loss on derivative instruments relating to the conversion options.

 

Our net losses for the nine months ended October 31, 2011 and 2010 were $298,424 and $463,770, respectively. Our net operating loss from inception through October 31, 2011 was $3,157,527.

 

Fiscal year Ended January 31, 2011 and 2010

 

We incurred total operating expenses of $542,208 and $182,380 for the years ended January 31, 2011 and 2010, respectively. These expenses increased in the fiscal year ended January 31, 2011, primarily as a result of increased general and administrative expenses. General and administrative expenses increased from $182,380 in the fiscal year ended January 31, 2010 to $489,756 in the fiscal year ended January 31, 2011, primarily due to stock-based compensation expenses relating to certain consulting and legal services provided to the Company. Additionally, we incurred acquisition-related costs, recorded as mineral property expenses on the statements of operations, as a result of the Company entering into a binding offer letter agreement in October 2010 with Mexivada, pursuant to which we would be granted an option to acquire up to an 80% legal and beneficial ownership interest in Mexivada’s La Viuda Concessions in Moctezuma, Sonora, Mexico. We did not have such costs in the prior year.

 

We also incurred non-operating expenses of $1,073,215 in the year ended January 31, 2011, compared to $141 in the year ended January 31, 2010. The increase of $1,073,074 over the prior year was primarily due to a $982,637 unrealized loss on derivative instruments relating to the issuance of the warrants as a result of the private placement offering completed in December 2010 and January 2011. The increase was also due to a $79,610 realized loss on derivative instruments relating to conversion of convertible notes to the Company’s common stock in December 2010.

 

Our net losses for years ended January 31, 2011, and 2010 were $1,615,423 and $182,521, respectively. We have generated no revenues and our net operating loss from inception through January 31, 2011 was $2,859,103.

 

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Liquidity and capital resources

 

Our cash and cash equivalents balance as of October 31, 2011 was $1,064,399, compared to $1,268,254 as of January 31, 2011.

 

In July 2011, we completed the final closing of the 2010/2011 Private Placement, in which we sold an aggregate of 77,478,258 Units of our securities for gross proceeds of $1,936,956, at an offering price of $0.025 per Unit. 55,478,258 of the Units consisted of one share of our common stock and an 18-month warrant to purchase one-half of one share of our common stock at an exercise price of $0.125 per whole share. As of February 1, 2012, we amended the terms of these warrants such that (i) their term has been extended by six months and (ii) one half of them (19,369,565) retain the exercise price of $0.125 per share and one half (19,369,564) have an exercise price of $0.05 per share. The remaining 22,000,000 Units included our Series A Preferred Stock instead of our common stock and warrants exercisable for our common stock.

 

Due to our brief history and historical operating losses, our operations have not been a source of liquidity, and our sources of liquidity primarily have been debt and proceeds from the sale of Units in our 2010/2011 Private Placement. Although we have begun the acquisition of the AuroTellurio Property, this property will require exploration and development that could take years to complete before it begins to generate revenues. There can be no assurances that the AuroTellurio Property will be successfully developed to the revenue producing stage. If we are not successful in our proposed rare and precious metals mining operations, our business, results of operations, liquidity and financial condition will suffer materially.

 

As a result of the 2010/2011 Private Placement, we have sufficient funds to meet our first year requirements under the AuroTellurio Agreement, including the requirement that we invest $750,000 in the Exploration Program.  If we determine to proceed with the exploration of the AuroTellurio Property after the first year, we will be required under the terms of the AuroTellurio Agreement to invest an additional $750,000 in the Exploration Program per year for each of the following three years. We will also be required to pay Mexivada $40,000 upon the first anniversary of the First Closing, $50,000 upon the second anniversary of the First Closing, $70,000 upon the third anniversary of the First Closing, and $100,000 upon the fourth anniversary of the First Closing, for a total of $290,000. We do not have this capital at this time and we will have to raise these amounts, plus additional amounts for general working capital purposes, in the capital markets. We plan to seek to raise such capital through additional sales of our equity or debt securities. There can be no assurance, however, that such financing will be available to us or, if it is available, that it will be available on terms acceptable to us and that it will be sufficient to fund our expected needs. If we are unable to obtain sufficient financing, we may not be able to proceed with our exploration and development plans for the AuroTellurio Property or meet our ongoing operational working capital needs.

 

Various factors outside of our control, including the price of rare and precious metals, overall market and economic conditions, the downturn and volatility in the US equity markets and the trading price of our common stock may limit our ability to raise the capital needed to execute our plan of operations in the following years. We recognize that the US economy is currently experiencing a period of uncertainty and that the capital markets have been depressed from recent levels. These or other factors could adversely affect our ability to raise additional capital. As a result of an inability to raise additional capital, our short-term or long-term liquidity and our ability to execute our plan of operations, including our ability to exercise our rights to acquire up to an additional 60% interest in the La Viuda Concessions, could be significantly impaired.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

Critical Accounting Policies

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to select appropriate accounting policies and to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. See Note “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,” in the accompanying Notes to our consolidated financial statements, for further descriptions of our major accounting policies and for information related to the impact of the implementation of new accounting pronouncements on our results of operations and financial position.

 

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In preparing our consolidated financial statements, we make estimates and assumptions that affect the accounting for and recognition and disclosure of assets, liabilities, equity, revenues and expenses. We must make these estimates and assumptions because certain information that we use is dependent on future events, cannot be calculated with a high degree of precision from data available or simply cannot be readily calculated based on generally accepted methods. In some cases, these estimates are particularly difficult to determine and we must exercise significant judgment. We periodically evaluate our estimates and judgments that are most critical in nature. We believe that the following discussion of critical accounting policies address all important accounting areas where the nature of accounting estimates or assumptions is material due to the levels of subjectivity and judgment. Actual results could differ materially from the estimates and assumptions that we use in the preparation of our financial statements.

 

Acquisition-Related Costs

 

For the year ended January 31, 2011 and the nine months ended October 31, 2011, the Company incurred certain costs related to the AuroTellurio Acquisition. Those costs included legal, valuation, travel, and other professional or consulting fees. The Company accounted for those acquisition-related costs under FASB ASC Topic 805, Business Combinations. The costs were recognized as mineral property expenses in the periods in which the costs were incurred and the services received.

 

Derivative Financial Instruments

 

For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For warrants and convertible derivative financial instruments, the Company uses the Black-Scholes model to value the derivative instruments at inception and subsequent valuation dates.  The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period, in accordance with FASB ASC Topic 815,  Derivatives and Hedging .  Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

 

Stock-Based Compensation

 

The Company accounts for its stock-based compensation in which the Company obtains employee services in share-based payment transactions under FASB ASC Topic 718,  Compensation – Stock Compensation , which requires the Company to expense the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of such instruments over the vesting period.

 

The Company also adopted FASB ASC Topic 505-50, Equity-Based Payments to Non-Employees, to account for equity instruments issued to parties other than employees for acquiring goods or services.  Such awards for services are recorded at either the fair value of the consideration received or the fair value of the instruments issued in exchange for such services, whichever is more reliably measurable.

 

Recent Accounting Pronouncements

 

For information regarding recent accounting pronouncements, see Note “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,” in the Notes to our accompanying consolidated financial statements.

 

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Description of Business

 

Overview

 

California Gold is an exploration stage mining company whose principal focus is the identification, acquisition and development of rare and precious metals mining properties in the Americas. Our primary focus is on the exploration and development of the La Viuda Concessions south of Moctezuma, Sonora, Mexico, where, we believe, deposits of tellurium, gold and silver may exist in economically minable quantities. We are still in the exploration stage and have not generated any revenues from our mining properties in Mexico.

 

The Mexivada Property Option Agreement

 

On February 11, 2011, we entered into the AuroTellurio Option Agreement with Mexivada to acquire up to an 80% interest in Mexivada’s La Viuda Concessions comprising its AuroTellurio Property south of Moctezuma, Sonora, Mexico.

 

Under the terms of the AuroTellurio Option Agreement, we will acquire up to an 80% legal and beneficial ownership interest in the AuroTellurio Property by, in addition to making certain cash payments and share issuances to Mexivada, incurring up to $3,000,000 in cumulative exploration expenditures on the Property over a four year period at an investment rate of at least $750,000 per year. We will earn a 20% vested interest in the AuroTellurio Property in the first year of the AuroTellurio Option Agreement by investing $750,000 in an exploration program and up to an additional 60% interest in the Property, in blocks of 20% each, by investing an additional $750,000 in the exploration program in each of the following three years, or sooner, and meeting all of the other required terms of the AuroTellurio Option Agreement. Each 20% interest will vest earlier if each year’s cash and stock payments to Mexivada and $750,000 exploration expenditure investment are completed earlier than scheduled.

 

The La Viuda Concessions

 

The La Viuda Concessions (discussed in greater detail below), which cover approximately 18,840 acres (7,624 hectares) south of Moctezuma, Sonora Mexico, comprise two exploration concessions granted by the Mexican government to Compania Minera Mexivada, S.A. de C.V., a wholly owned subsidiary of Mexivada. The La Viuda 1 concession surrounds a number of other mining concessions, including the La Viuda concession and a concession where the La Bambolla mine (“La Bambolla Concession”) is located.

 

La Bambolla

 

The La Bambolla Concession is owned by Minera Teloro, S.A. de C.V., a Mexican company reported in the past to be a subsidiary of First Solar, Inc. (“First Solar”), a U.S. based company that manufactures and sells photovoltaic (PV) solar power systems and solar modules based on a thin film technology using cadmium telluride (CdTe) as a semiconductor. Cadmium telluride is a compound made up of cadmium (Cd) and tellurium (Te).

 

A report in the Sonora Geological-Mining Monograph published by the Consejo de Recursos Minerales (“CRM”) describes the La Bambolla vein system as being a 2-meter thick quartz-pyrite-hematite-gold system that averages 4.0 g/ton gold and 5 g/ton silver, respectively.

 

The La Bambolla mine on the La Bambolla Concession was active during the 1960s. We have obtained geological and assay data from channel samples taken in the La Bambolla underground workings in 1986. More than 500 channel samples taken in the underground workings of the La Bambolla mine show the presence of gold and tellurium. The gold grades are in the 0.03 to 4.90 oz/ton range, and average about 0.46 oz/ton Au. The tellurium grades range from 0.01% to 3.26%, and average 0.25% Te. The tellurium content of these samples in parts per million (ppm) ranges from 100 to 32,600 ppm, and averages 2,500 ppm. These samples were not assayed for silver. Reportedly, the La Bambolla mine dumps also contain visible native tellurium as well as tellurite and sonoraite, which are secondary tellurium minerals.

 

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Tellurium

 

Tellurium is a relatively rare element in the same chemical family as oxygen, sulfur, selenium, and polonium. Of these, oxygen and sulfur are nonmetals, polonium is a metal, and selenium and tellurium are semiconductors (i.e., their electrical properties are between those of a metal and an insulator).  Nevertheless, tellurium, as well as selenium, is often referred to as a metal when in elemental form.  Tellurium production is mainly a by-product of copper processing.  The 1960's brought growth in thermoelectric applications for tellurium, as well as its use in free-machining steel, which became the dominant use.  Tellurium has been increasingly used in the production of cadmium-tellurium-based solar cells. Some of the highest efficiencies for electric power generation have been obtained by using this material1.  The average price for tellurium in US dollars per kilogram increased from $89 in 2006 to $210 in 20102. This increase in price is attributed to an increase in the production of thin film semiconductor solar cells.

 

In 2008, approximately 450 to 500 metric tons of refined tellurium was produced as a result of mining and processing ores derived from primary sources. Japan and Belgium have been the leading producers of these metals, which are recovered from copper concentrates and residues purchased primarily from mining operations in Africa, Asia, Australia, and South America. China is also a large purchaser from these regions and also produces the metals from domestic mining operations. Although some of the tellurium metal is recovered from a few gold and silver deposits with anomalously high levels of tellurium content, nearly all the world’s tellurium metal produced from ore deposits depends on profitable recovery from residues (slimes) produced during the refining of copper to copper cathode. This copper cathode is derived from the mining of copper sulfide ore from polymetallic ore bodies (for example, the Sudbury nickel district), and from lead and zinc operations. The content of tellurium metal in copper concentrate is generally below 100 ppm. The metal is commercially profitable to recover only when concentrated in residues collected from copper refineries and treated for the recovery of other metals of value, which generally include antimony and precious metals such as gold, palladium, platinum, and silver3.

 

According to the U.S. Geological Survey, more than 90% of tellurium is produced from anode slimes collected from electrolytic copper refining, and the remainder is derived from skimmings at lead refineries and from flue dusts and gases generated during the smelting of bismuth, copper, and lead ores. In copper production, tellurium is recovered only from the electrolytic refining of smelted copper. Increasing use of the leaching solvent extraction-electrowinning processes for copper extraction, which does not capture tellurium, has limited the projected future supply of tellurium from certain types of copper deposits. This expected decrease in these sources of tellurium supply has led to the exploration for other sources of tellurium, including deposits containing pure concentrations of tellurium and concentrations combined with gold and silver such as those indicated in the historical data from the La Bambolla Concession and those believed to be present in the La Viuda Concessions as well.

 

The AuroTellurio Property Exploration Program

 

In order to earn each 20% interest in the La Viuda Concessions comprising the AuroTelurio Property, we will be required to invest a minimum of US $750,000 per year in a four (4) year exploration program for the AuroTelurio Property.  To this end, we have contracted the services of a geologist familiar with the characteristics of gold-tellurium deposits.  This geologist has prepared a preliminary, nine-month Phase 1 exploration program for the AuroTelurio Property that includes geological mapping, geophysical surveying, drill site location, drilling, sampling, and assaying of surface and drill core samples.  He will also prepare a NI 43-101 compliant technical report. Timetables for these exploration activities are being developed and costs for the recommended exploration program are currently being determined.

 


1 US Geological Survey, Mineral Commodity Summaries, January 2011.

 

2 For 2006, the price listed was the average price published by Mining Journal for United Kingdom lump and powder, 99.95% tellurium. In 2010, the price listed was the average price published by Metal-Pages for 99.95% tellurium.

 

3 This paragraph has been reproduced, in relevant part, from Bleiwas, D.I., 2010, Byproduct mineral commodities used for the production of photovoltaic cells: U.S. Geological Survey Circular 1365, 10 p., available at http://pubs.usgs.gov/circ/1365/.

 

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On May 16, 2011, we signed a surface rights agreement with the land owner where the AuroTelurio Property is located.  We will pay this land owner $14,400 per year for the right to conduct our exploration of the La Viuda Concessions on the AuroTelurio Property.

 

We have begun our exploration program and we are currently conducting mapping, trenching and sampling programs at the AuroTelurio Property.  These activities will be followed by planned gravity and magnetic geophysical surveys in preparation for an initial 3,000-meter drilling program that is planned for implementation by this fall.

 

Historical data suggest that tellurium-gold mineralization at the adjoining La Bambolla mine occurs along a regional structural system with an average S 70 degrees E trend where a swarm of relatively narrow, sub-parallel, silica-rich mineralized veins are present. At La Bambolla, these veins are either vertical, or have steep dips, and range from 0.14 to 2.60 meters in width.  Based on analytical results of more than 500 underground channel samples taken at La Bambolla in the 1980's, the grades in the mine range from 0.01 to 3.26 % tellurium and 0.03 to 4.90 oz/ton gold, respectively.

 

Geologic mapping and sampling has thus far confirmed that the regional structure hosting the tellurium-gold vein system at La Bambolla extends easterly onto our AuroTelurio Property. Zones of fracture-controlled silicification, strikingly similar to those described at La Bambolla, have been mapped in our grounds to the east-southeast.  

 

The current interpretation is that these features could be spatially located at a higher level than similar alteration-mineralization features found at La Bambolla.  This interpretation, furthermore, appears to support our initial geologic model that a series of essentially north trending, post-mineral faults have down-dropped segments of the original mineralized system to the east.  Our current belief, based on projections from the existing data, is that ore-grade tellurium-gold mineralization is highly likely to exist at depth within our La Viuda Concessions.

 

Competition

 

We are a mineral resource exploration company. We compete with other mineral resource exploration companies for financing, personnel and equipment and for the acquisition of mineral properties. Many of the mineral resource exploration companies with whom we compete have greater financial and technical resources than those available to us. Accordingly, these competitors may be able to spend greater amounts on acquisitions of mineral properties of merit, on exploration of their mineral properties and on development of their mineral properties. In addition, they may be able to afford more geological expertise in the targeting and exploration of mineral properties. This competition could result in competitors having mineral properties of greater quality and interest to prospective investors who may finance additional exploration and/or development. This competition could adversely impact our ability to finance further exploration and to achieve the financing necessary to develop our mineral properties.

 

Compliance with Government Regulation

 

We are committed to complying with and are, to our knowledge, in compliance with all governmental and environmental regulations applicable to our Company and our properties. Permits from a variety of regulatory authorities are required for many aspects of mine operation and reclamation. We cannot predict the extent to which these requirements will affect our company or our properties if we identify the existence of minerals in commercially exploitable quantities. In addition, future legislation and regulation could cause additional expense, capital expenditure, restrictions and delays in the exploration of our properties.

 

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Company History

 

We were incorporated on April 19, 2004, as Arbutus Resources Inc. under the laws of the state of Nevada.  We were organized to be engaged in the acquisition and exploration of mineral properties.  We acquired a 100% undivided right, title and interest in and to twenty cells, known collectively as the Green Energy Claims, located 61 km southwest of the City of Williams Lake in South Central British Columbia, Canada.  By April 30, 2007, we had not earned any revenues, and, not having sufficient funds to commence exploration on our Green Energy Claims, we determined to seek a joint venture partner or other business option to continue operating as a viable public company.

 

On July 11, 2007, we merged with Cromwell Uranium Holdings, Inc. (“Holdings,” the “Cromwell Merger”), a Uranium exploration mining company, having changed our name on June 15, 2007 to Cromwell Uranium Corp. in anticipation of this merger. Pursuant to the Cromwell Merger, Holdings became our wholly owned subsidiary.  At the closing of the Cromwell Merger, we transferred the Green Energy Claims to a newly formed subsidiary and sold all of the capital stock of that subsidiary to our former directors.  As a result of developments in the public capital markets as well as conditions in the mining industry, among other factors, effective August 8, 2007, we and the principals of Holdings unwound the  Cromwell Merger and on August 9, 2007, we changed our name to US Uranium Inc.

 

Since that unwinding and until we entered into the AuroTellurio Option Agreement, we had been searching for an appropriate business opportunity in the precious metals mining sector.  On March 9, 2009, we changed our name to California Gold Corp.

 

Research and Development Expenditures

 

We have incurred no research and development expenditures over the last fiscal year and do not anticipate significant future research and development expenditures.

 

Employees

 

We currently have no employees. Our Chief Executive Officer and Chief Operating Officer each provide their services to us on an independent contractor basis. We have also contracted with Incorporated Communications Services (“ICI”), a California administrative services and communications corporation, which provides certain administrative services to us.

 

Additionally, we engage contractors from time to time to consult with us on specific corporate affairs or to perform specific tasks in connection with our exploration programs.

 

Offices

 

Our principal executive office is located at 4515 Ocean View Blvd., Suite 305, La Cañada, CA 91011, and our telephone number at our principal executive offices is (818) 542-6891. Our website address is www.californiagoldcorp.com; however, the material included in our website does not constitute a part of this prospectus and should not be relied on by prospective purchasers in the offering.

 

Subsidiaries

 

We currently have one subsidiary, CalGold de Mexico, S. de R.L. de C.V., through which we will hold our interests in the La Viuda Concessions and manage our business affairs in Mexico.

 

Intellectual Property

 

We do not own, either legally or beneficially, any patent, trademark or material license and are not dependent on any such rights.

 

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Description of MINeral Properties

 

The La Viuda Concessions

 

On February 11, 2011, we entered into the AuroTellurio Option Agreement with Mexivada to acquire up to an 80% interest in Mexivada’s La Viuda Concessions south of Moctezuma, Sonora, Mexico. Under the terms of the AuroTellurio Option Agreement, we will acquire up to an 80% legal and beneficial ownership interest in the Property by incurring up to $3,000,000 in cumulative exploration expenditures on the Property over a four year period at an investment rate of at least $750,000 per year, and by making certain cash payments and share issuances to Mexivada, as discussed in greater detail elsewhere in this report.

 

The La Viuda Concessions comprise two exploration concessions granted by the Mexican government to Compania Minera Mexivada, S.A. de C.V., a wholly owned subsidiary of Mexivada. The La Viuda Concessions, details of which are set forth below, cover approximately 7,624 hectares, or 18,839.31 acres.

 

Concession   Status   File No.   Legal Title #   Title Grant Date   Title Expiry Date  

Surface

Area (Ha.)

La Viuda   Granted   082/323550   232498   August 18, 2008   August 18, 2058   44
La Viuda 1   Granted   082/32407   232859   October 29, 2008   October 29, 2058   7,580.79

 

Property Location

 

The La Viuda Concessions are located in the northeastern portion of the State of Sonora, Mexico, near the Chihuahua border and just south of the town of Moctezuma. The property is approximately 280 miles southeast of Tucson, Arizona. The following map shows the approximate location of the concessions:

 

 

Figure 1 – Location map of the La Viuda Concessions in Sonora, Mexico.

 

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The La Viuda and La Viuda 1 concessions, shown on the map below, are the two concessions making up the Property. The La Viuda concession is approximately 47 hectares in size (116.14 acres), and is located to the south and southeast of a concession owned by Minera Teloro, S.A. de C.V., which, to our knowledge, is a subsidiary of First Solar. The La Viuda 1 is a large concession that covers an area of approximately 9 by 9 kilometers, encompassing about 7,574 hectares (18715.76 acres), and surrounds the La Viuda and other third party concessions.

 

The La Viuda Concessions are located approximately 15 miles south of Moctezuma and 7.5 miles due west of the town of Terapa. The Property is accessed from Terapa by a dirt road. The land owner who owns the land on which the Property is located has signed a surface rights agreement with us authorizing access to the La Viuda Concessions for exploration purposes.

 

 

Figure 2 – Location of the La Viuda and La Viuda 1 concessions (outlined in green).

 

Regional Geology

 

The La Viuda Concessions are situated within the Sierra Madre Occidental (SMO) geologic-physiographic province. The dominant rocks are volcanic of Tertiary age, which host a number of world-class precious metal mines and deposits. In the Moctezuma region, which is where the Property is located, the dominant rock types are of Lower Cretaceous age, and they consist mostly of calcareous, argillaceous and detrital rocks. These units, in turn, are intruded by an igneous body of batholitic dimensions of Early Cretaceous to Early Tertiary age. The composition of this extensive batholith is in the granitic to granodioritic range.

 

The rocks of Tertiary age in this region are represented by a volcanic package that contains one or two of horizons of limestone (host rocks for base metal mineralization in the Oposura district near Moctezuma), and by a sequence of volcanic rocks consisting of pyroclastic units, whose composition varies from mafic to felsic (e.g. dacites). A plutonic intrusive body of Tertiary age, as well as hypabyssal rocks and dikes, also occurs in the district. Silicification occurs associated with some mineralized zones; this alteration-mineralization event post-dates the volcanic/intrusive sequence in the Moctezuma District.

 

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Overlying the Tertiary rock sequence are continental clastic deposits capped by younger basalt flows. Lastly, alluvial and slope deposits of Quaternary age fill the valley floors and side slopes.

 

Local Geology

 

The main rock types in the district correspond to volcanic rocks of rhyolitic composition, and younger, possibly post-ore, andesites. The Arenillas formation, which has been widely studied by various entities, is of greater importance than other rock units for mineralization at the Bambolla concession. This formation consists of a package of volcaniclastic rocks that contains one or two limestone layers, which are host rocks for mineralization. The rocks present in the La Viuda Concessions are Tertiary calc-alkaline volcanics and dikes.

 

Plutonic rocks and dikes are also present. Tertiary sedimentary rock units, including sandstones, conglomerates, mudstones and basalts, are also evident.

 

Mineralization

 

The mineral deposits in the Oposura sector of the Moctezuma District basically consist of replacement-style, zinc-lead base metal deposits. Precious metal mineralization occurs in structurally-controlled veins, with the majority of these occurrences consisting of epithermal quartz- and quartz-carbonate veins with anomalous values of gold, silver and tellurium. A second type of structure-controlled vein type deposits occurring in the area contains base metal massive sulfides.

 

Structure

 

The La Viuda gold-mineralized structure is a WNW trending fault-controlled vein system with local exposures on the surface north of the La Viuda concession. These veins are, on the average, 0.5 to 1.0 meter in width. The vein is comprised of visible oxide minerals, mainly manganese oxides. Immediately south of La Viuda there is another vein system trending E-W to WNW and projecting to the east just south of the La Viuda concession. In this vein there is moderate sulfide mineralization along a fracture system, where stains of scorodite (?) were observed thus suggesting that this structure could be a gold carrier.

 

It appears that from La Bambolla and further to the south the mineralized structures are oriented more E-W rather than NW. The main structures at the Bambolla Mine project east and west, toward the eastern Property boundaries of La Viuda 1.

 

Grades

 

The important minerals present in the property, as documented by the Consejo de Recursos Minerales, are principally gold, silver and tellurium. However, limited surface geologic mapping and sampling work have been conducted to date to document the extent and average grades of the structures evident in the property.

 

LEGAL PROCEEDINGS

 

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Because litigation is subject to inherent uncertainties, we cannot predict, however, whether any possible proceedings, individually or in the aggregate, would have a material adverse effect on us. We are currently not aware of any pending legal proceedings to which we are a party or of which any of our property is the subject, nor are we aware of any such proceedings that are contemplated by any governmental authority.

 

36
 

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

 

Executive Officers and Directors

 

The following table sets forth certain information, as of February 10, 2012, with respect to our directors and executive officers.

 

Directors serve until the next annual meeting of the shareholders; until their successors are elected or appointed and qualified, or until their prior resignation or removal. Officers serve for such terms as determined by our Board of Directors. Each officer holds office until such officer’s successor is elected or appointed and qualified or until such officer’s earlier resignation or removal. No family relationships exist between any of our present directors and officers.

 

Name   Position(s) Held   Age   Date of Election or Appointment
as Officer/Director
             
James D. Davidson, III   President, Chief Executive Officer, Chief Financial Officer, Treasurer, Secretary and Director   62   November 12, 2007
           
George Duggan   Chief Operating Officer    63   January 17, 2011
             
David Rector   Director   62   June 15, 2007

 

The following is a brief account of the business experience during the past five years or more of each of our directors and executive officers.

 

James Davidson is and has been a private investor for more than five years. Currently, Mr. Davidson is a director of Anatolia Minerals Development Limited, a Canadian public company whose common stock trades on the Toronto Stock Exchange, and a director of Cell Power Technologies, Inc., a U.S. publicly-held company.

 

George Duggan was appointed as our Chief Operating Officer by our Board of Directors in January 2011. Since 1978, Mr. Duggan has been engaged in the media and investor relations business, operating through his own company, Incorporated Operations, and through Michael Baybak & Co., Inc. (Florida) and Communications Services Inc. (California). From 1977 to 1978, he was employed as a financial analyst at Texas Instruments Inc. Mr. Duggan received an MBA degree from the University of California at Berkeley in 1977.

 

David Rector joined our Board of Directors on June 15, 2007. He has served as the Chief Executive Officer, Chief Financial Officer, President, Secretary, Treasurer and Director of Standard Drilling, Inc. since November 2007 and as the President, Secretary, Treasurer and a director of Li3 Energy, Inc. from June 6, 2008. He also served as the Chief Executive Officer of Li3 Energy, Inc. from June 6, 2008 until October 19, 2009 and as that company’s Chief Financial Officer from June 6, 2008 until January 13, 2010. Mr. Rector served as the Chief Executive Officer, Chief Financial Officer, President, Secretary and Treasurer r of Nevada Gold Holdings, Inc. from April 19, 2004 through December 31, 2008. He was appointed a director of Nevada Gold Holdings, Inc. on April 19, 2004 and he still holds that position. Mr. Rector served as the Chief Executive Officer, Chief Financial Officer, President, Secretary, Treasurer, and a director of Universal Gold Mining Corp. from September 30, 2008 until November 17, 2010. Mr. Rector previously served as President, Chief Executive Officer and Chief Operating Officer of Nanoscience from June 2004 to December 2006. Since June 1985, Mr. Rector has been the principal of the David Stephen Group, which provides enterprise consulting services to emerging and developing companies in a variety of industries.

 

Additionally, Mr. Rector currently serves on the Board of Directors of the following public companies:

 

Name   Director Since
     
Senesco Technologies, Inc. (AMEX:SNT)   February 2002
Dallas Gold & Silver Exchange (AMEX:DSG)   May 2003
Nevada Gold Holdings, Inc. (NGHI.OB)   April 2004
Standard Drilling, Inc.(STDR.PK)   November 2007

 

37
 

As a result of these other commitments, the amount of time that Mr. Rector has to devote to our activities may be limited.

 

Mr. Rector obtained his Bachelor’s Degree in Business Administration from Murray State University in 1969.

 

Board Committees

 

We have not yet established any committees of our Board of Directors. Our Board of Directors may designate from among its members an executive committee and one or more other committees in the future. We do not have a nominating committee or a nominating committee charter. The entire Board of Directors performs all functions that would otherwise be performed by committees. Given the present size of our Board, we do not believe that it is practical for us to have committees. If we are able to grow our business and increase our operations, we intend to expand the size of our Board and allocate responsibilities accordingly.

 

Audit Committee Financial Expert

 

We have no separate audit committee at this time. The entire Board of Directors oversees our audits and auditing procedures. Neither of the current members of our Board of Directors is an “audit committee financial expert,” as that term is defined in Item 407 of Regulation S-K under the Securities Act.

 

Director Independence

 

We are not currently subject to listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the Board of Directors be “independent” and, as a result, we are not at this time required to (and we do not) have our Board of Directors comprised of a majority of “Independent Directors.”

 

Our Board of Directors has considered the independence of its Directors in reference to the definition of “Independent Director” established by the Nasdaq Marketplace Rule 5605(a)(2). In doing so, the Board of Directors has reviewed all commercial and other relationships of each director in making its determination as to the independence of its Directors. After such review, the Board of Directors has determined that David Rector qualifies as independent under the requirements of the Nasdaq listing standards.

 

Shareholder Communications

 

We do not have a policy with regard to the consideration of any director candidates recommended by security holders. To date, no security holders have made any such recommendations.

 

Code of Ethics

 

We have adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. A copy of our Code of Ethics will be provided to any person requesting same without charge. To request a copy of our Code of Ethics please make written request to our President at 4515 Ocean View Blvd., Suite 305, La Cañada, CA 91011. We believe our Code of Ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code.

 

Compliance with Section 16(a) of the Exchange Act

 

Our common stock is not registered pursuant to Section 12 of the Exchange Act. Accordingly, our officers, directors and principal shareholders are not subject to the beneficial ownership reporting requirements of Section 16(a) of the Exchange Act.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth information with respect to the beneficial ownership of our securities known by us as of February 10, 2012 by:

 

·each person or entity known by us to be the beneficial owner of more than five percent (5%) of our common stock;

 

·each of our directors;

 

·each of our executive officers; and

 

·all of our directors and executive officers as a group.

 

Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our common stock owned by them, except to the extent such power may be shared with a spouse. Information given with respect to beneficial owners who are not officers or directors of ours is to the best of our knowledge. However, as we do not have a class of stock registered under the Exchange Act, beneficial owners of our securities are not required to file Williams Act or Section 16 reports, which limits our ability to determine whether a person or entity is a beneficial owner of more than 5% of our common stock and the extent of any such beneficial owner’s holdings or the relationships among beneficial owners.

 

The percentages of common stock have been calculated on the basis of treating as outstanding for a particular person all shares of our common stock outstanding on such date and all shares of our common stock issuable to such holder in the event of exercise of outstanding options, warrants, rights or conversion privileges owned by such person at said date which are exercisable within 60 days of such date. Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our common stock owned by them, except to the extent such power may be shared with a spouse.

 

Name and Address
of Beneficial Owner
  Title of
Class
  Amount and Nature
of
Beneficial Ownership (a)
   Percent of Class (b)     
               
James D. Davidson, III
4515 Ocean View Blvd., Suite 305
La Cañada, CA 91011
    Common Stock   9,980,958(1)   9.1%     
                  
George Duggan
4515 Ocean View Blvd., Suite 305
La Cañada, CA 91011
  Common Stock   2,760,708(2)   2.5%     
                  
David Rector
4515 Ocean View Blvd., Suite 305
La Cañada, CA 91011
  Common Stock   333,333(3)         
                  
All directors and executive officers
as a group (3persons)
  Common Stock   12,075,000    11.6%     
                  
Sandor Capital Master Fund LP
2828 Routh Street, Suite 500
Dallas, TX 75201
  Common Stock   12,000,000(4)   11.0%     

 

39
 

 

Name and Address
of Beneficial Owner
    Title of
Class
  Amount and Nature
of
Beneficial Ownership (a)
   Percent of Class (b)    
               
Michael Baybak
4515 Oceanview Blvd.
La Cañada, CA 91011
  Common Stock   10,944,031(5)   9.9%
              
Barry Honig
4400 Biscayne Blvd., #850
Miami, FL 33137
  Common Stock   10,944,031(6)   9.9%
              
Gottbetter & Partners, LLP
488 Madison Avenue, 12th Floor
New York, NY 10022
  Common Stock   10,944,031(7)   9.9%
              
Fitel Nominees Limited
11 St. James Square
Manchester M2 6WH UK
  Common Stock   7,950,000(8)   7.3%
              
Dragon Equities Limited
c/o Haywood Securities Inc.
200 Burrard Street, Suite 700
Vancouver, BC V6C 3A6
  Common Stock   7,500,000(9)   6.9%
              
Brio Capital L.P.
401 East 34th St., Suite South 33C New York, NY 10016
  Common Stock   6,000,000(10)   5.5%
              
Dharma Fund PCC Limited
207 Neptune House
Marina Bay, Gibraltar
  Common Stock   6,000,000(10)   5.5%
              
E&P Fund Ltd.
c/o Nemo Asset Management
PO Box 60374
Abu Dhabi, U.A.E.
  Common Stock   6,000,000(10)   5.5%
              
Michael & Betsy Brauser TBE
3164 NE 31st Avenue,
Lighthouse Point, FL 33064
  Common Stock   6,000,000(10)   5.5%

   


*Less than 1%.

 

a.Beneficial ownership is determined in accordance with the rules of the SEC and generally includes having or sharing voting or investment power with respect to securities. Shares of common stock subject to options or warrants currently exercisable or convertible, or exercisable or convertible within 60 days of February 10, 2012, are deemed outstanding for computing the percentage of the person holding such option or warrant but are not deemed outstanding for computing the percentage of any other person.

 

b.Percentages are based on 109,451,260 shares of Common Stock issued and outstanding as of February 10, 2012.

 

40
 

1.Includes 333,333 shares of our common stock issuable upon the exercise of options that are exercisable within 60 days.

 

2.Includes 333,333 shares of our common stock issuable upon the exercise of options that are exercisable within 60 days.

 

3.Consists of 333,333 shares of our common stock issuable upon the exercise of options that are exercisable within 60 days.

 

4.Includes 4,000,000 shares of our common stock issuable upon the exercise of warrants that are exercisable within 60 days.

 

5.Includes 666,666 shares of our common stock issuable upon the exercise of options that are exercisable within 60 days held by Michael Baybak. Includes 1,007,240 shares of our common stock issuable upon the exercise of warrants that are exercisable within 60 days held by Baybak Family Partners, Ltd., a Colorado family limited partnership (“BFP”). Does not include (a) 2,992,760 shares of our common stock issuable upon the exercise of warrants held by BFP, which warrants contain a customary 9.9% blocker provision and, thus, are not exercisable within 60 days, and (b) 8,000,000 shares of our common stock issuable upon the conversion of 8,000,000 shares of our Series A Preferred Stock held by BFP, which preferred shares also contain a 9.9% blocker and, thus, are not convertible within 60 days. As general partner of BFP, Michael Baybak has voting and investment power with respect to the shares owned by BFP.

 

6.Includes 666,666 shares of our common stock issuable upon the exercise of options that are exercisable within 60 days. Includes 4,000,000 shares of our common stock held by GRQ Consultants, Inc. 401K (“GRQ”). Barry Honig has voting and investment power with respect to the shares owned by GRQ. Includes (a) 3,000,000 shares of our common stock issuable upon the exercise of warrants that are exercisable within 60 days held by GRQ and (b) 326,465 shares of our common stock issuable upon conversion of our Series A Preferred Stock held by GRQ. Does not include 5,673,535 shares of our common stock issuable upon the conversion of shares of our Series A Preferred Stock held by GRQ, which preferred shares also contain the 9.9% blocker and, thus, are not convertible within 60 days.

 

7.Includes 1,300,000 shares of our common stock held by Gottbetter Capital Group, Inc. Adam Gottbetter has voting and investment power with respect to the shares owned by Gottbetter Capital Group, Inc. and by Gottbetter & Partners, LLP (“G&P”). Includes 3,422,031 shares of our common stock issuable upon the exercise of warrants that are exercisable within 60 days held by G&P. Does not include (a) 577,969 shares of our common stock issuable upon the exercise of warrants held by G&P, which warrants contain a customary 9.9% blocker provision and, thus, are not exercisable within 60 days, and (b) 8,000,000 shares of our common stock issuable upon the conversion of 8,000,000 shares of our Series A Preferred Stock held by G&P, which preferred shares also contain a 9.9% blocker and, thus, are not convertible within 60 days.

 

8.Includes 2,650,000 shares of our common stock issuable upon the exercise of warrants that are exercisable within 60 days.

 

9.Includes 2,500,000 shares of our common stock issuable upon the exercise of warrants that are exercisable within 60 days.

 

10.Includes 2,000,000 shares of our common stock issuable upon the exercise of warrants that are exercisable within 60 days.

 

41
 

EXECUTIVE COMPENSATION

 

The following table sets forth information concerning the total compensation paid or accrued by us during the last two fiscal years ended January 31, 2012, to (i) all individuals that served as our principal executive officer or acted in a similar capacity for us at any time during the fiscal year ended January 31, 2012; (ii) all individuals that served as our principal financial officer or acted in a similar capacity for us at any time during the fiscal year ended January 31, 2012; and (iii) all individuals that served as executive officers of ours at any time during the fiscal year ended January 31, 2012, that received annual compensation during the fiscal year ended January 31, 2012, in excess of $100,000.

 

Summary Compensation Table

 

Name and
Principal Position
  Year Ending
January 31
   Salary
($)
   Bonus
($)
   Stock
Awards
($)
   Option
Awards
($)
   Non-Equity
Incentive
Plan
Compensation ($)
   Change
in
Pension
Value
and Non-
qualified
Deferred
Compensation
Earnings
($)
   All Other
Compensation
($)
   Total ($) 
(a)  (b)   (c)   (d)   (e)   (f)   (g)   (h)   (i)   (j) 
                                     
James D. Davidson, III (1)   2012    36,000    0    0    0    0    0    0    36,000 
Chief Executive Officer, Chief Financial officer   2011    0    0    0    0    0    0    0    0 
                                              
George Duggan (2),   2012    27,500    0    0    0    0    0    0    27,500 
Chief Operating Officer   2011    2,500    0    0    0    0    0    0    2,500 



 

(1) Mr. Davidson serves as our Chief Executive and Chief Financial Officer on an independent contractor basis. Although Mr. Davidson does not have an employment agreement with us, from February 1, 2011 to May 31, 2011, we paid Mr. Davidson a monthly fee of $5,000 and from June 1, 2011, we began paying Mr. Davidson a reduced fee of $2,000 per month for his services to us as our Chief Executive Officer pursuant to a consulting agreement described below.

 

(2) Mr. Duggan serves as our Chief Operating Officer on an independent contractor basis. Mr. Duggan does not have an employment agreement with us, although beginning January 17, 2011, we started paying Mr. Duggan a fee of $2,500 per month for his services to us as our Chief Operating Officer pursuant to a consulting agreement described below.

 

Outstanding Equity Awards at Fiscal Year-End

 

We have not issued any stock options or maintained any stock option or other incentive plans other than our 2007 Plan. (See “Market for Common Equity and Related Stockholder Matters – Securities Authorized for Issuance under Equity Compensation Plans,” above).  The following table sets forth information regarding stock options held by the Company’s Named Executive Officers and Directors at January 31, 2012.

 

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Option Awards  Stock Awards 
Name  Number of
securities
underlying
unexercised
options
exercisable
(#)
   Number of
securities
underlying
unexercised
options
unexercisable
(#)
   Equity
incentive
plan
awards:
Number of
securities
underlying
unexercised
unearned
options
(#)
   Option
plan
exercise
price
($)
   Option
expiration
date
   Number
of
Shares
or Units
of Stock
That
Have
Not
Vested
(#)
   Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
   Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)
   Equity
Incentive
Plan
Awards:
Market
or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)
 
James D. Davidson (1)    333,333    666,667    1,000,000    0.09    7/27/21                 
David Rector (1)   333,333    666,667    1,000,000    0.09    7/27/21                 
George Duggan (1)   333,333    666,667    1,000,000    0.09    7/27/21                 

 

(1)Each of Messrs. Davidson, Rector and Duggan received a grant of options to purchase one million (1,000,000) shares of our common stock under the 2007 Plan, with an exercise price of $0.09 per share and a term of 10 years. One third of the options vested on July 27, 2011, the date of grant and the remaining options will vest in two equal installments on each of July 27, 2012 and 2013.

 

We have no plans in place and have never maintained any plans that provide for the payment of retirement benefits or benefits that will be paid primarily following retirement including, but not limited to, tax qualified deferred benefit plans, supplemental executive retirement plans, tax-qualified deferred contribution plans and nonqualified deferred contribution plans. Similarly, we have no contracts, agreements, plans or arrangements, whether written or unwritten, that provide for payments to the named executive officers or any other persons following, or in connection with the resignation, retirement or other termination of a named executive officer, or a change in control of us or a change in a named executive officer’s responsibilities following a change in control.

 

Employment Agreements or Arrangements with Executive Officers

 

We do not have employment agreements with either of our executive officers. However, we have entered into independent contractor agreements with each of our Chief Executive Officer and our Chief Operating Officer, as discussed below, pursuant to which they are compensated for their services to us.

 

Consulting Agreements with our Chief Executive Officer and Chief Operating Officer

 

Effective February 1, 2011, we entered into an independent contractor consulting agreement with James Davidson pursuant to which we agreed to pay to Mr. Davidson $5,000 per month for 12 months beginning February 1, 2011 for his services rendered to us as our Chief Executive Officer. This agreement was amended as of June 6, 2011 such that beginning in June 2011 Mr. Davidson’s monthly compensation was reduced to $2,000 per month. The agreement with Mr. Davidson was renewed for an additional 12 months beginning February 1, 2012.

 

Effective January 17, 2011, we entered into an independent contractor consulting agreement with George Duggan pursuant to which we agreed to pay to Mr. Duggan $2,500 per month for 12 months beginning January 17, 2011 for his services rendered to us as our Chief Operating Officer. The agreement with Mr. Duggan was renewed for an additional 12 months beginning January 17, 2012.

 

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Each of these agreements runs for a term of 12 months and may be extended by agreement of the parties. Each agreement may be terminated by us for cause during its term or for any reason after the first 12 months upon five days prior notice, and by the executive officer for any reason upon 30 days prior notice. We have also agreed to reimburse the executives for all reasonable pre-approved out-of-pocket expenses incurred in connection with their performance under the agreements.

 

Compensation of Directors

 

Neither of our directors receives any compensation for serving as such, for serving on committees (if any) of the Board of Directors or for special assignments. As of the date hereof, there were no other arrangements between us and our directors that resulted in our making payments to either of our directors for any services provided to us by them as Directors.

 

Equity Compensation Plan Information

 

Our Board of Directors and stockholders owning a majority of our outstanding shares adopted our 2007 Equity Incentive Plan (the “2007 Plan”), which originally reserved a total of 3,000,000 shares of our common stock for issuance under the 2007 Plan.  In December 2010, the number of shares reserved for issuance under the 2007 Plan was increased by the Board to 16,000,000 shares of common stock, subject to adjustment under certain circumstances. This increase was approved by our then-majority stockholder. If an incentive award granted under the 2007 Plan expires, terminates, is unexercised or is forfeited, or if any shares are surrendered to us in connection with an incentive award, the shares subject to such award and the surrendered shares will become available for further awards under the 2007 Plan. 

 

In addition, the number of shares of Common Stock subject to the 2007 Plan, any number of shares subject to any numerical limit in the 2007 Plan, and the number of shares and terms of any incentive award are expected to be adjusted in the event of any change in our outstanding common stock by reason of any stock dividend, spin-off, split-up, stock split, reverse stock split, recapitalization, reclassification, merger, consolidation, liquidation, business combination or exchange of shares or similar transaction.

 

Administration

 

It is expected that the Compensation Committee of our Board of Directors, or the Board of Directors in the absence of such a committee, will administer the 2007 Plan.  Subject to the terms of the 2007 Plan, the Compensation Committee would have complete authority and discretion to determine the terms of awards under the 2007 Plan.

  

Eligible Recipients

 

Any officer or other employee of the Company or its affiliates, or an individual that the Company or an affiliate has engaged to become an officer or employee, or a consultant or advisor who provides services to the Company or its affiliates, including a non-employee director of the Board, is eligible to receive awards under the 2011 Plan.

 

Grants

 

The 2007 Plan authorizes the grant to eligible recipients of nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, performance grants intended to comply with Section 162(m) of the Internal Revenue Code (as amended, the “Code”) and stock appreciation rights, as described below:

 

44
 

 

·Options granted under the 2007 Plan entitle the grantee, upon exercise, to purchase a specified number of shares from us at a specified exercise price per share. The exercise price for shares of our common stock covered by an option cannot be less than the fair market value of the common stock on the date of grant unless agreed to otherwise at the time of the grant.

 

·Restricted stock awards and restricted stock units may be awarded on terms and conditions established by the compensation committee, which may include performance conditions for restricted stock awards and the lapse of restrictions on the achievement of one or more performance goals for restricted stock units.

 

·The compensation committee may make performance grants, each of which will contain performance goals for the award, including the performance criteria, the target and maximum amounts payable, and other terms and conditions.

 

·The 2007 Plan authorizes the granting of stock awards. The compensation committee will establish the number of shares of our common stock to be awarded and the terms applicable to each award, including performance restrictions.

 

·Stock appreciation rights (“SARs”) entitle the participant to receive a distribution in an amount not to exceed the number of shares of our common stock subject to the portion of the SAR exercised multiplied by the difference between the market price of a share of common stock on the date of exercise of the SAR and the market price of a share of common stock on the date of grant of the SAR.

 

Duration, Amendment and Termination

 

The Board has the power to amend, suspend or terminate the 2007 Plan without stockholder approval or ratification at any time or from time to time.  No change may be made that increases the total number of shares of our common stock reserved for issuance pursuant to incentive awards or reduces the minimum exercise price for options or exchange of options for other incentive awards, unless such change is authorized by our stockholders within one year. Unless sooner terminated, the 2007 Plan would terminate ten years after its adoption.

  

Outstanding Equity Awards at Fiscal Year Ended January 31, 2012

 

On July 27, 2011, the Company granted options to purchase 11,000,000 shares of its common stock to certain of its officers, consultants and its outside director. These options have a 10-year term and were granted with an exercise price of $0.09, the fair market value of our common stock on the date of grant, as determined by our Board of Directors, based on the closing price of the Common Stock on the OTB Bulletin Board on the date of grant. The one third of these options, or 3,666,667, vested on the date of the grant, with the remaining two thirds vesting on the first and second anniversaries of the date of grant. All vested options are exercisable, in full or in part, at any time after vesting, until termination.

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

In January 2011, we entered into an administrative services agreement with Incorporated Communications Services (“ICS”), a California corporation. George Duggan, our Chief Operations Officer, is the Vice President of ICS. Pursuant to the agreement with ICS, ICS will make available its address in La Cañada, California to serve as our corporate headquarters and communications office, and provide us with basic administrative services, including coordinating and routing incoming telephone calls, handling investor inquiries, assisting in the preparation of press releases, developing an informational website and coordinating with our auditors and our financial statement preparers. We will pay ICS a monthly fee of $6,000 for these services. Our agreement with ICS became effective January 1, 2011, runs for a term of 12 months and may be extended or terminated by the parties upon 60 days prior notice. This agreement has been extended by the parties for an additional 12 months.

 

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Effective February 1, 2011, we entered into an independent contractor consulting agreement with James Davidson pursuant to which we agreed to pay to Mr. Davidson $5,000 per month for 12 months beginning February 1, 2011 for his services rendered to us as our Chief Executive Officer. That agreement has been amended such that effective June 1, 2011, we have reduced Mr. Davidson’s compensation to $2,000 per month. The agreement with Mr. Davidson was renewed for an additional 12 months beginning February 1, 2012.

 

Effective January 17, 2011, we entered into an independent contractor consulting agreement with George Duggan pursuant to which we agreed to pay to Mr. Duggan $2,500 per month for 12 months beginning January 17, 2011 for his services rendered to us as our Chief Operating Officer. The agreement with Mr. Duggan was renewed for an additional 12 months beginning January 17, 2012.

 

Effective June 6, 2011, we entered into an independent contractor consulting agreement with Michael Baybak, a beneficial holder of more than 5% of our outstanding common stock, pursuant to which we agreed to pay to Mr. Baybak $6,000 per month for 24 months beginning June 6, 2011. Mr. Baybak will provide us with consulting advice with respect to our mining and exploration operations.

 

BFP purchased 8,000,000 units (including Series A Preferred Stock instead of common stock) in our 2010/2011 Private Placement for an aggregate investment of $200,000. Michael Baybak has voting and investment power with respect to the shares owned by BFP.

 

GRQ purchased 6,000,000 units (including Series A Preferred Stock instead of common stock) in our 2010/2011 Private Placement for an aggregate investment of $150,000. Barry Honig has voting and investment power with respect to the shares owned by GRQ.

 

G&P purchased 8,000,000 units (including Series A Preferred Stock instead of common stock) in our 2010/2011 Private Placement for an aggregate investment of $200,000. Adam S. Gottbetter has voting and investment power with respect to the shares owned by G&P.

 

In connection with and at the time of the Cromwell Merger, we issued 31,000,000 shares of our common stock to James Davidson, our Chief Executive Officer, in repayment of $31,000 of cash advances to us, and expenses incurred on behalf of us, by Mr. Davidson. On December 22, 2010, we repurchased and cancelled 13,000,000 of those shares from Mr. Davidson at a price of $13,000.

 

We have entered into a 12 month retainer agreement (which began on December 1, 2010) with G&P pursuant to which we pay G&P a monthly fee of $5,500 for providing to us legal services relating to SEC regulatory compliance and reporting requirements. Additionally, we have agreed to pay G&P a flat fee of $50,000 for G&P’s legal representation relating to our acquisition of the AuroTelurio Property from Mexivada, such fee to be payable in full upon the closing of our acquisition of the initial 20% interest in the AuroTelurio Property. We will also pay G&P legal fees (calculated and billed on an hourly basis) up to a maximum of $50,000 for the preparation and filing of this resale registration statement of Form S-1 covering the shares of our common stock underlying the warrants contained in the units sold in our 2010/2011 Private Placement.

 

In December 2010, we issued 500,000 shares of our restricted common stock to G&P for services provided to us by that service provider in 2007 and 2008.

 

Other than as disclosed immediately above, there have been no transactions since the beginning of our last fiscal year, and there are no currently proposed transactions, in which we were or are to be a participant and the amount involved exceeds the lesser of $120,000 or 1% of the average of our total assets at year end for the last two completed fiscal years, and in which any of our directors, executive officers or beneficial holders of more than 5% of our outstanding common stock, or any of their respective immediate family members, has had or will have any direct or material indirect interest.

 

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PLAN OF DISTRIBUTION

 

Securities Offered in a Primary Offering

 

We may sell the securities in one or more of the following ways:

 

through underwriters or dealers for resale to the public or to institutional investors;

 

directly to a limited number of institutional purchasers or to a single purchaser;

 

through agents; or

 

if indicated in the prospectus supplement, pursuant to delayed delivery contracts, by remarketing firms or by other means.

 

Any dealer or agent, in addition to any underwriter, may be deemed to be an underwriter within the meaning of the Securities Act, and any discounts or commissions they receive from us and any profit on the resale of the offered securities by them may be treated as underwriting discounts and commissions under the Securities Act. The terms of the offering of the securities with respect to which this prospectus is being delivered will be set forth in the applicable prospectus supplement and will include:

 

the name or names of any underwriters, dealers or agents;

 

the purchase price of such securities and the proceeds to us from such sale;

 

any underwriting discounts, agency fees and other items constituting underwriters’ or agents’ compensation;

 

the public offering price;

 

any discounts or concessions that may be allowed or reallowed or paid to dealers and any securities exchanges on which the securities may be listed; and

 

the securities exchange on which the securities may be listed, if any.

 

If underwriters are used in the sale of securities, such securities will be acquired by the underwriters for their own account and may be resold from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. The securities may be offered to the public either through underwriting syndicates represented by managing underwriters or directly by one or more underwriters acting alone. Unless otherwise set forth in the applicable prospectus supplement, the obligations of the underwriters to purchase the securities described in the applicable prospectus supplement will be subject to certain conditions precedent, and the underwriters will be obligated to purchase all such securities if any are so purchased by them. Any public offering price and any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time.

 

The securities may be sold directly by us or through agents designated by us from time to time. Any agents involved in the offer or sale of the securities in respect of which this prospectus is being delivered, and any commissions payable by us to such agents, will be set forth in the applicable prospectus supplement. Unless otherwise indicated in the applicable prospectus supplement, any such agent will be acting on a best efforts basis for the period of its appointment.

 

If dealers are utilized in the sale of any securities, we will sell the securities to the dealers, as principals. Any dealer may resell the securities to the public at varying prices to be determined by the dealer at the time of resale. The name of any dealer and the terms of the transaction will be set forth in the prospectus supplement with respect to the securities being offered.

 

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Securities may also be offered and sold, if so indicated in the applicable prospectus supplement, in connection with a remarketing upon their purchase in accordance with a redemption or repayment pursuant to their terms, or otherwise, by one or more firms, which we refer to herein as the “remarketing firms,” acting as principals for their own accounts or as our agents, as applicable. Any remarketing firm will be identified and the terms of its agreement, if any, with us and its compensation will be described in the applicable prospectus supplement. Remarketing firms may be deemed to be underwriters, as that term is defined in the Securities Act in connection with the securities remarketed thereby.

 

If so indicated in the applicable prospectus supplement, we will authorize agents, underwriters or dealers to solicit offers by certain specified institutions to purchase the securities to which this prospectus and the applicable prospectus supplement relates from us at the public offering price set forth in the applicable prospectus supplement, plus, if applicable, accrued interest pursuant to delayed delivery contracts providing for payment and delivery on a specified date in the future. Such contracts will be subject only to those conditions set forth in the applicable prospectus supplement, and the applicable prospectus supplement will set forth the commission payable for solicitation of such contracts.

 

Underwriters will not be obligated to make a market in any securities. We can give no assurance regarding the activity of trading in, or liquidity of, any securities

 

Agents, dealers, underwriters and remarketing firms may be entitled, under agreements entered into with us, to indemnification by us, as applicable, against certain civil liabilities, including liabilities under the Securities Act, or to contribution to payments they may be required to make in respect thereof. Agents, dealers, underwriters and remarketing firms may be customers of, engage in transactions with, or perform services for, us in the ordinary course of business.

 

The place, time of delivery and other terms of the offered securities will be described in the applicable prospectus supplement. Our offering of securities pursuant to this prospectus will be commenced promptly after the date on which the registration statement of which this prospectus is a part is declared effective, and will be made on a continuous basis, at a fixed price, and may continue for a period in excess of 30 days from such date of effectiveness.

 

In connection with an offering, an underwriter may purchase and sell securities in the open market. These transactions may include short sales, stabilizing transactions, and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of securities than they are required to purchase in the offering. “Covered” short sales are sales made in an amount not greater than the underwriters' option to purchase additional securities from us, if any, in the offering. If the underwriters have an over-allotment option to purchase additional securities from us, the underwriters may close out any covered short position by either exercising their over-allotment option or purchasing securities in the open market. In determining the source of securities to close out the covered short position, the underwriters may consider, among other things, the price of securities available for purchase in the open market as compared to the price at which they may purchase securities through the over-allotment option. “Naked” short sales are any sales in excess of such option or where the underwriters do not have an over-allotment option. The underwriters must close out any naked short position by purchasing securities in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the securities in the open market after pricing that could adversely affect investors who purchase in the offering.

 

Accordingly, to cover these short sale positions or to otherwise stabilize or maintain the price of the securities, the underwriters may bid for or purchase securities in the open market and may impose penalty bids. If penalty bids are imposed, selling concessions allowed to syndicate members or other broker-dealers participating in the offering are reclaimed if securities previously distributed in the offering are repurchased, whether in connection with stabilization transactions or otherwise. The effect of these transactions may be to stabilize or maintain the market price of the securities at a level above that which might otherwise prevail in the open market. The impositions of a penalty bid may also affect the price of the securities to the extent that it discourages resale of the securities. The magnitude or effect of any stabilization or other transactions is uncertain. These transactions may be effected on the OTC Market or otherwise and, if commenced, may be discontinued at any time.

 

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Securities Offered by the Selling Shareholders

 

The selling shareholders may, from time to time, sell any or all of their shares of our common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. If the shares of common stock are sold through underwriters, the selling shareholders will be responsible for underwriting discounts or commissions or agent’s commissions. All selling shareholders who are broker-dealers are deemed to be underwriters. These sales may be at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale or at negotiated prices. The selling shareholders may use any one or more of the following methods when selling shares:

 

any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;

 

ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

 

block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

 

purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

 

transactions other than on these exchanges or systems or in the over-the-counter market;

 

through the writing of options, whether such options are listed on an options exchange or otherwise;

 

an exchange distribution in accordance with the rules of the applicable exchange;

 

privately negotiated transactions;

 

short sales;

 

broker-dealers may agree with the selling shareholders to sell a specified number of such shares at a stipulated price per share;

 

a combination of any such methods of sale; and

 

any other method permitted pursuant to applicable law.

 

The selling shareholders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus.

 

The selling shareholders may also engage in short sales against the box, puts and calls and other transactions in our securities or derivatives of our securities and may sell or deliver shares in connection with these trades.

 

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Broker-dealers engaged by the selling shareholders may arrange for other broker-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling shareholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The selling shareholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved. Any profits on the resale of shares of common stock by a broker-dealer acting as principal might be deemed to be underwriting discounts or commissions under the Securities Act. Discounts, concessions, commissions and similar selling expenses, if any, attributable to the sale of shares will be borne by a selling shareholder. The selling shareholders may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares if liabilities are imposed on that person under the Securities Act.

 

In connection with the sale of the shares of our common stock or otherwise, the selling shareholders may enter into hedging transactions with broker- dealers, which may in turn engage in short sales of the shares of common stock in the course of hedging in positions they assume. The selling shareholders may also sell shares of common stock short and deliver shares of common stock covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The selling shareholders may also loan or pledge shares of common stock to broker-dealers that in turn may sell such shares.

 

The selling shareholders may from time to time pledge or grant a security interest in some or all of the shares of our common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of our common stock from time to time under this prospectus after we have filed an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling shareholders to include the pledgee, transferee or other successors in interest as selling shareholders under this prospectus.

 

The selling shareholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus and may sell the shares of common stock from time to time under this prospectus after we have filed an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling shareholders to include the pledgees, transferees or other successors in interest as selling shareholders under this prospectus. The selling shareholders also may transfer and donate the shares of common stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

 

The selling shareholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions paid, or any discounts or concessions allowed to, such broker- dealers or agents and any profit realized on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the shares of common stock is made, a prospectus supplement, if required, will be distributed which will set forth the aggregate amount of shares of common stock being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the selling shareholders and any discounts, commissions or concessions allowed or re-allowed or paid to broker-dealers. Under the securities laws of some states, the shares of common stock may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states the shares of common stock may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with. There can be no assurance that any selling shareholder will sell any or all of the shares of our common stock registered pursuant to the shelf registration statement, of which this prospectus forms a part.

 

Each selling shareholder has informed us that it does not have any agreement or understanding, directly or indirectly, with any person to distribute our common stock. None of the selling shareholders who are affiliates of broker-dealers, other than the initial purchasers in private transactions, purchased the shares of common stock outside of the ordinary course of business or, at the time of the purchase of the common stock, had any agreements, plans or understandings, directly or indirectly, with any person to distribute the securities.

 

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We are required to pay all fees and expenses incident to the registration of the shares of common stock. Except as provided for indemnification of the selling shareholders, we are not obligated to pay any of the expenses of any attorney or other advisor engaged by a selling shareholder. We have agreed to indemnify the selling shareholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.

 

If we are notified by any selling shareholder that any material arrangement has been entered into with a broker-dealer for the sale of shares of common stock, we will file a post-effective amendment to the registration statement. If the selling shareholders use this prospectus for any sale of the shares of our common stock, they will be subject to the prospectus delivery requirements of the Securities Act.

 

The anti-manipulation rules of Regulation M under the Securities Exchange Act of 1934 may apply to sales of our common stock and activities of the selling shareholders, which may limit the timing of purchases and sales of any of the shares of common stock by the selling shareholders and any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the shares of common stock to engage in passive market-making activities with respect to the shares of common stock. Passive market making involves transactions in which a market maker acts as both our underwriter and as a purchaser of our common stock in the secondary market. All of the foregoing may affect the marketability of the shares of common stock and the ability of any person or entity to engage in market-making activities with respect to the shares of common stock.

 

Once sold under the registration statement, of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands of persons other than our affiliates.

 

Our common stock is currently quoted on the OTCBB and trades below $5.00 per share; therefore, the common stock is considered a “penny stock” and subject to SEC rules and regulations which impose limitations upon the manner in which such shares may be publicly traded. These regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the associated risks. Under these regulations, certain brokers who recommend such securities to persons other than established customers or certain accredited investors must make a special written suitability determination regarding such a purchaser and receive such purchaser’s written agreement to a transaction prior to sale. These regulations have the effect of limiting the trading activity of the common stock and reducing the liquidity of an investment in the common stock.

 

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DESCRIPTION OF SECURITIES

 

Authorized Capital Stock

 

Our Amended and Restated Articles of Incorporation were further amended in December 2010 to increase our authorized capital stock to 322,000,000 shares, par value $0.001 per share, consisting of 300,000,000 shares of common stock and 22,000,000 of blank-check preferred stock.

 

Equity Securities Issued and Outstanding

 

On February 10, 2012, there were issued and outstanding:

 

·109,451,260 shares of our common stock;

 

·22,000,000 shares of our Series A Preferred Stock, all of which are currently convertible into a like number of shares of our common stock;

 

·Warrants to purchase 39,929,129 shares of our common stock, all of which are currently exercisable; and

 

·Options to purchase 11,000,000 shares of our common stock.

  

Common Stock

 

Holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the shareholders and do not have cumulative voting rights. Accordingly, holders of a majority of the shares of our common stock entitled to vote in any election of directors may elect all of the directors standing for election. Apart from preferences that may be applicable to any holders of preferred stock outstanding at the time, holders of our common stock are entitled to receive dividends, if any, ratably as may be declared from time to time by the Board out of funds legally available therefor. Upon our liquidation, dissolution or winding up, the holders of our common stock are entitled to receive ratably our net assets available after the payment of all liabilities and liquidation preferences on any outstanding preferred stock. Holders of our common stock have no preemptive, subscription, redemption or conversion rights, and there are no redemption or sinking fund provisions applicable to our common stock. The rights, preferences and privileges of holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock which we may designate and issue in the future. Each outstanding share of our common stock is duly authorized, fully paid and non-assessable.

 

Preferred Stock

 

Under the terms of our Amended and Restated Articles of Incorporation, as amended, our Board of Directors has authority, without any vote or action of our shareholders, to issue up to 22,000,000 shares of “blank check” preferred stock in one or more series and to fix the relative rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption terms (including sinking fund provisions) and liquidation preferences and the number of shares constituting a series or the designation of such series.

 

Series A Non-Voting Convertible Preferred Stock

 

The following is a brief description of the terms of our Series A Non-Voting Convertible Preferred Stock (the “Series A Preferred Stock”).  This summary does not purport to be complete in all respects.  This description is subject to and qualified in its entirety by reference to our Articles of Incorporation, as amended most recently on December 30, 2010, which amendment was filed as Exhibit 10.4 to our Current Report on Form 8-K filed with the SEC on January 18, 2011, and our Certificate of Designation of the Series A Non-Voting Preferred Stock dated December 23, 2010, which was filed as Exhibit 10.3 to our Current Report on Form 8-K filed with the SEC on December 30, 2010.

 

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In December 2010, our Board of Directors designated 22,000,000 shares of our blank check preferred stock as Series A Preferred Stock. The shares of Series A Preferred Stock have the preferences and other rights, voting powers, restrictions and limitations as to dividends, qualifications and other terms and conditions as set forth in the Certificate of Designation and summarized in relevant part below:

 

Conversion.  Subject to certain ownership limitations as described below, the Series A Preferred Stock is convertible at any time at the option of the holder into shares of our common stock at a conversion ratio of one to one. The number of shares of our common stock issuable upon conversion of the Series A Preferred Stock is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions. Subject to limited exceptions, a holder of shares of Series A Preferred Stock will not have the right to convert any portion of its Series A Preferred Stock if the holder, together with its affiliates, would beneficially own in excess of 9.99% of the number of shares of our common stock outstanding immediately after giving effect to its conversion.

 

Dividends.  The holders of the Series A Preferred Stock shall be entitled to receive dividends at the same time and in the same amount per share as the holders of our common stock shall receive, when, as, and if declared by our Board of Directors.

 

Voting Rights.  Holders of the Series A Preferred Stock do not have any voting rights. 

 

Transferability. The Series A Preferred Stock is not subject to any contractual transfer restrictions.

 

Liquidation Rights. The Series A Preferred Stock ranks, with respect to rights upon liquidation, winding-up or dissolution, pari passu with our common stock.

 

While we do not currently have any plans for the authorization or issuance of any additional series of preferred stock, the issuance of such preferred stock could adversely affect the rights of the holders of our common stock and Series A Preferred Stock and, therefore, reduce the value of the such stock. It is not possible to state the actual effect of the future issuance of any additional series of preferred stock on the rights of holders of our currently outstanding stock unless and until our Board of Directors determines the specific rights of the holders of any such additional preferred stock; however, these effects may include:

 

·Restricting dividends on the common or preferred stock;
·Diluting the voting power of the common stock;
·Impairing the liquidation rights of the common or preferred stock; or
·Delaying or preventing a change in control of the Company without further action by the stockholders.

 

Options

 

Our Board of Directors adopted, and stockholders holding a majority of our outstanding common stock approved, the 2007 Plan in June 2007. In December 2010, our Board of Directors adopted, and our majority stockholders approved, an increase in the number of shares of our common stock issuable under the 2007 Plan from 3,000,000 to 16,000,000. If an incentive award granted under the 2007 Plan expires, terminates, is unexercised or is forfeited, or if any shares are surrendered to us in connection with an incentive award, the shares subject to such award and the surrendered shares will become available for further awards under the 2007 Plan. As of the date hereof, we have granted options under the 2007 Plan exercisable for 11,000,000 shares of our common stock.

 

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Warrants

 

The 2007 Warrants

 

In June 2007, in connection with the Cromwell Merger, we sold $595,000 of our convertible debentures in a private placement.  The debentures were converted upon the closing of the Cromwell Merger into debenture units, each consisting of one share of our common stock and one five year warrant to purchase one share of our common stock at an exercise price of $0.75 per share.   As a result of this transaction, we currently have warrants outstanding to purchase 1,190,000 shares of our common stock at an exercise price $0.75 per share. These warrants expire on July 11, 2012. We have reserved an equivalent number of shares of our common stock for issuance upon exercise of these warrants. Each of these warrants contains standard anti-dilution protection for stock splits, stock dividends and stock combinations, provides for weighted average price protection, and provides for “cashless exercise” to the extent a registration statement covering the shares underlying the warrant is not then in effect. These warrants do not carry registration rights.

 

The material terms and provisions of our warrants issued in 2007 are summarized above. However, this summary of some provisions of the warrants is not complete. For the complete terms of the warrants, reference is made to the form of warrant filed as exhibit 10.7 to our Current Report on Form 8-K, filed with the SEC on July 13, 2007 and incorporated herein by reference. 

 

The 2010/2011 Warrants

 

In July 2011, we completed the 2010/2011 Private Placement. As a result of this 2010/2011 Private Placement, we have outstanding warrants to purchase 38,739,129 shares of our common that expire between June 21, 2012 and December 12, 2012. Each of these warrants was issued with an exercise price of $0.125 per whole share. As of February 1, 2012, we amended the terms of these warrants such that (i) their term has been extended by six months and (ii) one half of them (19,369,565) retain the exercise price of $0.125 per share and one half (19,369,564) have an exercise price of $0.05 per share. We have reserved an equivalent number of shares of our common stock for issuance upon exercise of these warrants. Each of the warrants issued in the 2010/2011 Private Placement contains standard anti-dilution protection for stock splits, stock dividends and stock combinations, and provides for weighted average price protection.

 

Subject to limited exceptions, a warrant holder who purchased units in the 2010/2011 Private Placement containing Series A Preferred Stock rather than common stock (22,000,000 units in the aggregate) will not have the right to exercise any portion of its warrants if the holder, together with its affiliates, would beneficially own in excess of 9.99% of the number of shares of our common stock outstanding immediately after giving effect to such exercise.

 

The material terms and provisions of our warrants issued in the 2010/2011 Private Placement are summarized above. However, this summary of some provisions of the warrants is not complete. For the complete terms of the warrants, reference is made to the form of warrant filed as exhibit 10.2 to our Current Report on Form 8-K, filed with the SEC on December 30, 2010 and incorporated herein by reference. 

 

Convertible Securities

 

As of the date hereof, other than the Series A Preferred Stock, we have not issued any convertible securities.

 

Registration Rights

 

We granted “piggyback” registration rights to the investors in the 2010 Private Placement covering the shares of common stock included in the Units, or, as applicable, issuable upon conversion of the Series A Preferred Stock included in the Units, and mandatory registration rights covering the shares of common stock issuable upon exercise of the warrants included in the units.

 

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Anti-Takeover Effects of Provisions of Nevada State Law

 

We may be or in the future we may become subject to Nevada’s control share laws. A corporation is subject to Nevada’s control share law if it has more than 200 shareholders, at least 100 of whom are shareholders of record and residents of Nevada, and if the corporation does business in Nevada, including through an affiliated corporation. This control share law may have the effect of discouraging corporate takeovers. We currently have [39] holders of record of our Common Stock.

 

The control share law focuses on the acquisition of a “controlling interest,” which means the ownership of outstanding voting shares that would be sufficient, but for the operation of the control share law, to enable the acquiring person to exercise the following proportions of the voting power of the corporation in the election of directors: (1) one-fifth or more but less than one-third; (2) one-third or more but less than a majority; or (3) a majority or more. The ability to exercise this voting power may be direct or indirect, as well as individual or in association with others.

 

The effect of the control share law is that an acquiring person, and those acting in association with that person, will obtain only such voting rights in the control shares as are conferred by a resolution of the shareholders of the corporation, approved at a special or annual meeting of shareholders. The control share law contemplates that voting rights will be considered only once by the other shareholders. Thus, there is no authority to take away voting rights from the control shares of an acquiring person once those rights have been approved. If the shareholders do not grant voting rights to the control shares acquired by an acquiring person, those shares do not become permanent non-voting shares. The acquiring person is free to sell the shares to others. If the buyer or buyers of those shares themselves do not acquire a controlling interest, the shares are not governed by the control share law.

 

If control shares are accorded full voting rights and the acquiring person has acquired control shares with a majority or more of the voting power, any shareholder of record, other than the acquiring person, who did not vote in favor of approval of voting rights, is entitled to demand fair value for such shareholder’s shares.

 

In addition to the control share law, Nevada has a business combination law, which prohibits certain business combinations between Nevada corporations and “interested shareholders” for three years after the interested shareholder first becomes an interested shareholder, unless the corporation’s Board of Directors approves the combination in advance. For purposes of Nevada law, an interested shareholder is any person who is: (a) the beneficial owner, directly or indirectly, of 10% or more of the voting power of the outstanding voting shares of the corporation; or (b) an affiliate or associate of the corporation and at any time within the previous three years was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then-outstanding shares of the corporation. The definition of “business combination” contained in the statute is sufficiently broad to cover virtually any kind of transaction that would allow a potential acquirer to use the corporation’s assets to finance the acquisition or otherwise to benefit its own interests rather than the interests of the corporation and its other shareholders.

 

The effect of Nevada’s business combination law is to potentially discourage parties interested in taking control of our Company from doing so if it cannot obtain the approval of our Board of Directors.

 

Transfer Agent

 

The transfer agent for our common stock is Continental Stock Transfer & Trust Company. The transfer agent’s address is 17 Battery Place, New York, New York 10004, and its telephone number is (212) 845-3212.

 

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INDEMNIFICATION OF DIRECTORS AND OFFICERS

 

Nevada Revised Statutes (“NRS”) Sections 78.7502 and 78.751 provide us with the power to indemnify any of our directors and officers. The director or officer must have conducted himself/herself in good faith and reasonably believe that his/her conduct was in, or not opposed to our best interests. In a criminal action, the director, officer, employee or agent must not have had reasonable cause to believe his/her conduct was unlawful.

 

Under NRS Section 78.751, advances for expenses may be made by agreement if the director or officer affirms in writing that he/she believes he/she has met the standards and will personally repay the expenses if it is determined such officer or director did not meet the standards.

 

Our Articles of Incorporation provide a limitation of liability such that no director or officer shall be personally liable to us or any of our shareholders for damages for breach of fiduciary duty as an officer or director, except for liability (i) for acts or omissions which involve intentional misconduct, fraud or a knowing violation of the law, or (ii) the paying of dividends in violation of Section 78.300 of the NRS.

 

Our Bylaws provide that we shall indemnify each director or former director against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, actually and reasonably incurred by him or them including an amount paid to settle an action or satisfy a judgment, inactive criminal or administrative action or proceeding to which he is or they are made a party by reason of his or her being or having been our director. Each such director, on being appointed, is deemed to have contracted with us on the terms of the foregoing indemnity.

 

Our Bylaws also provide that we may indemnify each director or former director of a corporation of which we are or were a stockholder, and any officer, employee of agent of ours or of a corporation of which we are or were a stockholder, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, actually and reasonably incurred by him or them including an amount paid to settle an action or satisfy a judgment, inactive criminal or administrative action or proceeding to which he is or they are made a party by reason of his or her being or having been such director, officer, employee or agent.

 

Additionally, our Bylaws provide that we shall indemnify our Secretary or Assistant Secretary (if he is not a full time employee of ours and notwithstanding that he (or she) is also a director) against all costs, charges and expenses incurred by him (or her) arising out of the functions assigned to the Secretary, and each such Secretary or Assistant Secretary, on being appointed, is deemed to have contracted with us on the terms of the foregoing indemnity.

 

Our Board of Directors may take such action as it deems necessary to carry out these indemnification provisions, including adopting procedures for determining and enforcing indemnification rights and purchasing insurance policies. Our Board of Directors may also adopt bylaws or resolutions or authorize the entry into contracts implementing indemnification arrangements as may be permitted by law. Neither the amendment nor repeal of these indemnification provisions, nor the adoption of any provision of our amended and restated certificate of incorporation or bylaws inconsistent with these indemnification provisions, will eliminate or reduce any rights to indemnification relating to their status or any activities prior to such amendment, repeal or adoption.

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted for our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

 

LEGAL MATTERS

 

The validity of the common stock offered hereby will be passed upon for us by Gottbetter & Partners, LLP, 488 Madison Avenue, 12th Floor, New York, NY 10022-7518.

56
 

 

EXPERTS

 

The consolidated financial statements as of January 31, 2011 and 2010 included in this Prospectus and in the Registration Statement have been so included in reliance on the report of MaloneBailey, LLP, an independent registered public accounting firm, appearing elsewhere herein and in the Registration Statement, given on the authority of said firm as experts in auditing and accounting.

 

WHERE YOU CAN FIND MORE INFORMATION

 

After the effectiveness of the registration statement of which this prospectus is a part, we will be required to file annual reports, quarterly reports, current reports and other information with the SEC. You may read or obtain a copy of these reports at the SEC’s public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the public reference room and their copy charges by calling the SEC at 1-800-SEC-0330. The SEC maintains a website that contains registration statements, reports, proxy information statements and other information regarding registrants that file electronically with the SEC. The address of the website is http://www.sec.gov.

 

We have filed with the SEC a registration statement on Form S-1 under the Securities Act to register the shares offered by this prospectus. The term “registration statement” means the original registration statement and any and all amendments thereto, including the schedules and exhibits to the original registration statement or any amendment. This prospectus is part of that registration statement. This prospectus does not contain all of the information set forth in the registration statement or the exhibits to the registration statement. For further information with respect to us and the shares we are offering pursuant to this prospectus, you should refer to the registration statement and its exhibits. Statements contained in this prospectus as to the contents of any contract, agreement or other document referred to are not necessarily complete, and you should refer to the copy of that contract or other documents filed as an exhibit to the registration statement. You may read or obtain a copy of the registration statement at the SEC’s public reference facilities and Internet site referred to above.

 

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

 

Under the Nevada Revised Statutes, our directors and officers are not individually liable to us or our stockholders for any damages as a result of any act or failure to act in their capacity as an officer or director unless it is proven that:

 

·His act or failure to act constituted a breach of his fiduciary duty as a director or officer; and

 

·His breach of these duties involved intentional misconduct, fraud or a knowing violation of law.

  

Nevada law allows corporations to provide broad indemnification to its officers and directors.  At the present time, our Articles of Incorporation and Bylaws also provide for broad indemnification of our current and former directors, trustees, officers, employees and other agents. 

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

 

57
 

 

CALIFORNIA GOLD CORP.

(FORMERLY US URANIUM, INC.)

(AN EXPLORATION STAGE COMPANY)

INDEX TO FINANCIAL STATEMENTS

 

 

Report of Independent Registered Public Accounting Firm F-2
   
Balance Sheets as of January 31, 2011 and 2010 F-3
   
Statements of Expenses for the years ended January 31, 2011 and 2010 and for the period from April 19, 2004 (inception) through January 31, 2011 F-4
   
Statement of Changes in Stockholders’ Deficit for the period from April 19, 2004 (inception) through January 31, 2011 F-5
   
Statements of Cash Flows for the years ended January 31, 2011 and 2010 and for the period from April 19, 2004 (inception) through January 31, 2011 F-6
   
Notes to the Financial Statements F-7 - F-18
   
Consolidated Balance Sheets as of October 31, 2011 (unaudited) and January 31, 2011 F-19
   
Consolidated Statements of Expenses for the three and nine months ended October 31, 2011 and 2010 and for the period from April 19, 2004 (inception) through October 31, 2011 (unaudited) F-20
   
Consolidated Statements of Cash Flows for the nine months ended October 31, 2011 and 2010 and for the period from April 19, 2004 (inception) through October 31, 2011 (unaudited) F-21
   
Notes to the Financial Statements (unaudited) F-22

 

F-1
 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors

California Gold Corp.

(An Exploration Stage Company)

La Cañada, California

 

We have audited the accompanying balance sheets of California Gold Corp. (an exploration stage company) (the “Company”) as of January 31, 2011 and 2010, and the related statements of expenses, shareholders’ deficit, and cash flows for the years then ended. These financial statements are the responsibility of California Gold Corp.’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of California Gold Corp. as of January 31, 2011 and 2010 and the results of its expenses and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

MaloneBailey, LLP

www.malonebailey.com

Houston, Texas

 

May 16, 2011

 

F-2
 

 

CALIFORNIA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

BALANCE SHEETS

 

   January 31,
2011
   January 31,
2010
 
           
ASSETS          
           
Current assets:          
Cash  $1,268,254   $373 
Prepaid expenses – related parties   33,784    - 
Total current assets   1,302,038    373 
           
Mining rights   20,000    - 
Total assets  $1,322,038   $373 
           
LIABILITIES AND STOCKHOLDERS' DEFICIT          
           
Current liabilities:          
Accounts payable  $27,129   $29,519 
Accounts payable - related party   52,250    175,394 
Notes and interest payable - related party   -    20,930 
Derivative liabilities   2,305,770    - 
Other accrued liabilities   2,500    142 
Total current liabilities   2,387,649    225,985 
Total  liabilities   2,387,649    225,985 
           
Commitments and contingencies   -    - 
           
Stockholders' deficit:          
Preferred stock, par value $0.001 per share, 22,000,000 and 10,000,000 shares authorized  at January 31, 2011 and 2010, respectively; 22,000,000 shares issued and outstanding at January 31, 2011 and none at January 31, 2010   22,000    - 
Common stock, par value $0.001 per share, 300,000,000 shares authorized; 92,701,260 and 58,063,002 shares issued and outstanding at January 31, 2011 and 2010, respectively   92,701    58,063 
Additional paid-in capital   1,678,791    960,005 
Deficit accumulated during the exploration stage   (2,859,103)   (1,243,680)
Total stockholders' deficit   (1,065,611)   (225,612)
Total liabilities and stockholders' deficit  $1,322,038   $373 

 

The accompanying notes are an integral part of these financial statements. 

 

F-3
 

 

CALIFORNIA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

STATEMENTS OF EXPENSES

 

   Year Ended
January 31,
2011
   Year Ended
January 31,
2010
   April 19,
2004
(Inception)
to January
31, 2011
(Unaudited)
 
             
Expenses               
                
Mineral property expenses  $52,452   $-   $78,102 
Bad debt expense   -    -    559,483 
General and administrative   489,756    182,380    1,148,181 
Total operating expenses   542,208    182,380    1,785,766 
Loss from operations   (542,208)   (182,380)   (1,785,766)
                
Other income (expenses):               
Interest income   271    1    291 
Interest expense   (1,621)   (142)   (1,763)
Realized and unrealized loss on derivatives, net   (1,062,247)   -    (1,062,247)
Amortization of debt discount   (9,618)   -    (9,618)
Total other income (expenses)   (1,073,215)   (141)   (1,073,337)
Net loss  $(1,615,423)  $(182,521)  $(2,859,103)
Loss per common share:               
Loss per common share- basic and diluted  $(0.03)  $(0.00)     
Weighted average number of common shares outstanding - basic and diluted   62,444,953    58,148,618      

 

The accompanying notes are an integral part of these financial statements. 

 

F-4
 

 

 

CALIFORNIA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT

 

               Deficit     
           Additional   Accumulated     
   Common Stock   Preferred Stock   Paid-In   During the     
   Shares   Amount   Shares   Amount   Capital   Stage   Total 
Balance - April 19, 2004 (inception)   -   $-    -   $-   $-   $-   $- 
Loss for the year ended January 31, 2005   -    -    -    -    -    -    - 
Balance - January 31, 2005   -   $-    -   $-   $-   $-   $- 
Common stock issued for cash   46,990,000    46,990    -    -    (39,590)   -    7,400 
Common stock issued for cash   6,985,000    6,985    -    -    4,015    -    11,000 
Common stock issued for cash   1,778,000    1,778    -    -    54,222    -    56,000 
Loss for the year ended January 31, 2006   -    -    -    -    -    (29,275)   (29,275)
Balance - January 31, 2006   55,753,000   $55,753    -   $-   $18,647   $(29,275)  $45,125 
Loss for the year ended January 31, 2007   -    -    -    -    -    (21,158)   (21,158)
Balance - January 31, 2007   55,753,000   $55,753    -   $-   $18,647   $(50,433)  $23,967 
Common stock issued for services   12,700,000    12,700    -    -    (10,700)   -    2,000 
Cancellation of common stock   (44,450,000)   (44,450)   -    -    44,450    -    - 
Common stock issued for expenses paid by officer   31,000,002    31,000    -    -    -    -    31,000 
Common stock issued for convertible debentures   1,190,000    1,190    -    -    593,810    -    595,000 
Contributed capital for donated services   -    -    -    -    235,668    -    235,668 
Loss for the year ended January 31, 2008   -    -    -    -    -    (935,664)   (935,664)
Balance - January 31, 2008 (unaudited)   56,313,002   $56,313    -   $-   $881,875   $(986,097)  $(48,029)
Cancellation of common stock   (2,000,000)   (2,000)   -    -    2,000    -    - 
Common stock issued for cash   4,000,000    4,000    -    -    16,000    -    20,000 
Common stock issued for cash   120,000    120    -    -    59,880    -    60,000 
    -    -    -    -         -      
Loss for the year ended January 31, 2009   -    -    -    -    -    (75,062)   (75,062)
Balance - January 31, 2009   58,313,002   $58,313    -   $-   $959,755   $(1,061,159)  $(43,091)
Cancellation of common stock   (250,000)   (250)   -    -    250    -    - 
Loss for the year ended January 31, 2010   -    -    -    -    -    (182,521)   (182,521)
Balance - January 31, 2010   58,063,002   $58,063    -   $-   $960,005   $(1,243,680)  $(225,612)
Common stock issued for services   4,500,000    4,500    -    -    229,945    -    234,445 
Cancellation of common stock   (15,000,000)   (15,000)   -    -    (48,000)   -    (63,000)
Common stock, preferred stock, and derivative warrants instruments sold in private placement offering at $0.025 per share, less offering costs of $15,500   41,478,258    41,478    22,000,000    22,000    1,523,478    -    1,586,956 
Derivatives resulting on above stock issued                       (1,323,133)        (1,323,133)
Common stock issued for convertible notes   3,660,000    3,660    -    -    179,205    -    182,865 
Contribution to capital on forgiveness of related party debt   -    -    -    -    157,291         157,291 
Loss for the year ended January 31, 2011   -    -    -    -    -    (1,615,423)   (1,615,423)
Balance - January 31, 2011   92,701,260   $92,701    22,000,000   $22,000   $1,678,791   $(2,859,103)  $(1,065,611)

 

The accompanying notes are an integral part of these financial statements. 

 

F-5
 

 

CALIFORNIA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

STATEMENT OF CASH FLOWS

 

   Year Ended
January 31,
2011
   Year Ended
January 31,
2010
   April 19,
2004
(Inception)
to January
31, 2011
(Unaudited)
 
Cash flows from operating activities:               
Net loss  $(1,615,423)  $(182,521)  $(2,859,103)
Adjustments to reconcile net loss to net cash used in operating activities:               
Stock-based compensation   234,445    -    503,113 
Amortization of debt discount   9,618    -    9,618 
Unrealized and realized loss on derivatives, net   1,062,247    -    1,062,247 
Changes in operating assets and liabilities:               
Prepaid expenses   (33,784)   -    (33,784)
Accounts payable   (3,320)   (17,685)   (31,218)
Accounts payable - related party   34,521    175,394    209,915 
Accrued expenses   2,500    -    2,642 
Interest accrued on notes payable from related party   1,621    142    1,621 
Net cash used in operating activities   (307,575)   (24,670)   (1,134,949)
Cash flows from investing activities:               
Investment in mining rights   (20,000)   -    (20,000)
Net cash used in investing activities   (20,000)   -    (20,000)
Cash flows from financing activities:               
Proceeds from related party loans   71,500    20,930    92,430 
Proceeds from common and preferred stock issued, net of offering costs   1,586,956    -    2,393,773 
Payments from cancellation of common stock   (63,000)   -    (63,000)
Net cash provided by financing activities   1,595,456    20,930    2,423,203 
Net increase (decrease) in cash   1,267,881    (3,740)   1,268,254 
Cash - beginning of period   373    4,113    - 
Cash - end of period  $1,268,254   $373   $1,268,254 
                
Supplemental disclosure of cash flow information:               
Cash paid during the period for :               
Interest  $-   $-   $- 
Income taxes   -    -    - 
                
Noncash investing and financing activities:               
Contributed capital - loss on extinguishment of debt owed to related party  $374   $-   $374 
Debt discount due to derivative liabilities   9,618    -    9,618 
Contributed capital - payables settled by stockholder   157,665    -    157,665 
Issuance of common stock for convertible notes   182,865    -    3,660 
Derecognition of derivatives related to convertible notes   91,365    -    91,365 
Issuance of derivative warrant instruments   1,323,133    -    1,323,133 
Related party note receivable write-off   -    -    557,927 
Common stock cancellation   15,000    250    61,700 

 

The accompanying notes are an integral part of these financial statements.

 

F-6
 

 

 

CALIFORNIA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2011 AND 2010

 

NOTE 1 – GENERAL ORGANIZATION AND BUSINESS

 

California Gold Corp. (“California Gold” or the “Company”) is a Nevada corporation whose principal focus is the identification, acquisition and development of rare and precious metals mining properties in the Americas. The Company is still in the exploration stage and has not generated any revenues from its mining properties to date.

 

The Company was incorporated on April 19, 2004 under the name of Arbutus Resources Inc. On August 9, 2007, the Company changed its name to US Uranium Inc. On March 9, 2009, the Company changed its name to California Gold Corp.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of January 31, 2011 and 2010, and the reported revenues and expenses for the years then ended and cumulative from inception.  Actual results could differ from those estimates made by management.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid short-term investments purchased with an original maturity of three months or less to be cash equivalents. These investments are carried at cost, which approximates fair value. The Company maintains its cash in institutions insured by the Federal Deposit Insurance Corporation (FDIC) and, at times, balances may exceed government insured limits. The Company has never experienced any losses related to these balances. Beginning December 31, 2010 through December 31, 2012, all noninterest-bearing transaction accounts are fully insured, regardless of the balance of the account, at all FDIC-insured institutions. Beginning 2013, insurance coverage will revert to $250,000 per depositor at each financial institution.

 

Mineral Rights, Exploration and Development Costs

 

Mineral claims and rights include acquired interests in production, development and exploration stage properties. The mineral rights are capitalized at their fair value at the acquisition date, either as an individual asset purchase or as part of a business combination.  Such costs are carried as an asset of the Company until it becomes apparent through exploration activities that the cost of such properties will not be realized through mining operations.  Mineral exploration costs are expensed as incurred, and when it becomes apparent that a mineral property can be economically developed as a result of establishing proven or probable reserve, the exploration costs, along with mine development cost, are capitalized.  The costs of acquiring mineral claims, capitalized exploration costs, and mine development costs are recognized for depletion and amortization purposes under the units-of-production method over the estimated life of the probable and proven reserves.  If mineral properties, exploration, or mine development activities are subsequently abandoned or impaired, any capitalized costs are charged to operations in the current period.

 

F-7
 

 

CALIFORNIA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2011 AND 2010

 

Derivative Financial Instruments

 

For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For warrants and convertible derivative financial instruments, the Company uses the Black-Scholes model to value the derivative instruments at inception and subsequent valuation dates.  The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period, in accordance with FASB ASC Topic 815, Derivatives and Hedging .  Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

 

Fair Value Measurements

 

The Company measures fair value in accordance with FASB ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).

 

Income Taxes

 

The Company accounts for income taxes in accordance with FASB ASC Topic 740, Income Taxes.  Under FASB ASC Topic 740, deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences.

 

The Company maintains a valuation allowance with respect to deferred tax assets.  The Company establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current period.  Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carryforward period under the Federal tax laws.

 

Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about the realizability of the related deferred tax asset.  Any change in the valuation allowance will be included in income in the year of the change in estimate.

 

 Net Earnings (Loss) per Common Share

 

Basic net earnings (loss) per share are computed by dividing the net earnings (loss) attributable to the common stockholders by the weighted-average number of shares of common stock outstanding during the period.  Diluted net earnings (loss) per share are computed using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, which is the case for all periods presented in these financial statements, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive.

 

F-8
 

 

CALIFORNIA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2011 AND 2010

 

Acquisition-Related Costs

 

For the year ended January 31, 2011, the Company incurred certain costs related to the AuroTellurio Acquisition (as defined below in Note 4). Those costs included legal, valuation, travel, and other professional or consulting fees. The Company accounted for those acquisition-related costs under FASB ASC Topic 805, Business Combinations. The costs were recognized as mineral property expenses in the periods in which the costs were incurred and the services received. The Company recorded $52,452 in costs for the year ended January 31, 2011 and none for the year ended January 31, 2010.

 

Stock-Based Compensation

 

The Company accounts for its stock-based compensation in which the Company obtains employee services in share-based payment transactions under FASB ASC Topic 718, Compensation – Stock Compensation , which requires the Company to expense the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of such instruments over the vesting period.

 

The Company also adopted FASB ASC Topic 505-50, Equity-Based Payments to Non-Employees, to account for equity instruments issued to parties other than employees for acquiring goods or services.  Such awards for services are recorded at either the fair value of the consideration received or the fair value of the instruments issued in exchange for such services, whichever is more reliably measurable.

 

For the year ended January 31, 2011, the Company recorded $489,756 in the general and administrative expense on the statements of operations. The Company did not issue any share-based payments to employees and non-employees in the year ended January 31, 2010.

 

New Accounting Pronouncements

 

The Company does not expect adoption of the new accounting pronouncements will have a material effect on the Company’s financial statements.

 

 NOTE 3 – MINING RIGHTS

 

On October 5, 2010, the Company entered into a binding offer letter agreement, as amended November 21, 2010, with Mexivada Mining Corp., pursuant to which the Company would be granted an option to acquire up to an 80% legal and beneficial ownership interest in Mexivada’s La Viuda and La Viuda-1 concessions comprising its AuroTellurio tellurium-gold-silver property (the “Property”) in Moctezuma, Sonora, Mexico. Under the terms of the Letter Agreement, the Company paid a deposit of $20,000, which will be credited to the Company towards its first annual payment due at the closing of the acquisition. The $20,000 the Company paid to Mexivada is included in the balance sheet at January 31, 2011 as “Mineral rights” pending the Closing of the acquisition. The Company will pay an additional $10,000 and issue 250,000 common shares to Mexivada upon the Closing, which the Company expects to be prior to the end of the Company’s second fiscal quarter. Additionally, the Company will make the following cash payments and share issuances to Mexivada: (i) $40,000 and 250,000 shares on the first anniversary of the Closing; (ii) $50,000 and 300,000 shares on the second anniversary of the Closing; (iii) $70,000 and 350,000 shares on the third anniversary of the Closing; and (iv) $100,000 and 500,000 shares on the fourth anniversary of the Closing.

 

On February 11, 2011, the Company entered into a property option agreement (the “AuroTellurio Option Agreement”) with Mexivada, which formalized and replaced the Letter Agreement. Under the terms of the AuroTellurio Option Agreement, in addition to cash payments and share issuances mentioned above, the Company will incur $3,000,000 in cumulative exploration expenditures on the Property over a four year period at an investment rate of at least $750,000 per year. The Company will earn a 20% vested interest in the AuroTellurio Property in the first year of the AuroTellurio Option Agreement by investing $750,000 in an exploration program and up to an additional 60% interest in the Property, in blocks of 20% each, by investing an additional $750,000 in the exploration program in each of the following three years, or sooner, and meeting all of the other required terms of the AuroTellurio Option Agreement. Each 20% interest will vest earlier if each year’s cash and stock payments to Mexivada and $750,000 exploration expenditure investment are completed earlier than scheduled.

 

F-9
 

 

CALIFORNIA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2011 AND 2010

 

Mexivada and its Mexican subsidiary hold only the mineral rights in the AuroTellurio Property, which rights were granted by the government of Mexico.  Neither Mexivada nor its Mexican subsidiary owns the real property rights to the land underlying the La Viuda Concessions.  The Company expects to obtain a surface rights agreement with the landowner on whose property the La Viuda Concessions are located to conduct its exploration program, and obtaining this agreement is a precondition to the Closing.

 

Under the terms of the Agreement, the Company will act as “Operator,” exclusively responsible, in consultation with Mexivada, for carrying out and administering exploration, development and mining work on the AuroTellurio Property.  If costs of the exploration program exceed the agreed upon $300,000 investment, the Company will share additional costs with Mexivada on a proportionate share basis.  Once the Company has earned its full 80% interest in the AuroTellurio Property, the Company will form a joint venture with Mexivada applicable to the further development and commercialization of the AuroTellurio Property. The Closing is expected to take place prior to the end of the Company’s second fiscal quarter.

 

 NOTE 4 – RELATED PARTY TRANSACTIONS

 

Accounts Payable – Related Party

 

At January 31, 2011 and January 31, 2010, the Company owed $52,250 and $175,394, respectively, to certain stockholders for legal and consulting fees, and to Incorporated Communications Services for administrative services. During the year ended January 31, 2011, $157,665 of the payable to Gottbetter & Partners, LLP (“G&P”) for legal services provided during August 2007 and November 2010 was forgiven and treated as a contribution of capital to the Company. See Note 8.

 

Conversion of Related Party Note Payables

 

Modified Promissory Notes

 

Between September 2009 and October of 2010, an officer and three stockholders loaned the Company an aggregate of $31,500 for working capital purposes. The loans bore interest between 0% and 10%, matured between October 2010 and September 2011 and were unsecured.  In September 2010, two of the related party non-interest bearing loans, totaling $5,000, matured.  The two loans were modified in September 2010, whereby the maturity dates were extended from September 9, 2010 to September 9, 2011. The Company evaluated the modification under FASB ASC 470-50 and determined they did not qualify as extinguishments of debt.

 

On October 13, 2010, the aforementioned loans issued to an officer and three stockholders by the Company in 2009 and 2010, totaling $31,500, were amended to require their mandatory conversion, without interest, at a conversion price of $0.025 per share upon the initial closing of a private placement offering, which occurred on December 22, 2010.  In addition, the interest rates on all of the notes were reduced to zero and the accrued interest on the notes totaling $1,511 was forgiven.

 

The Company evaluated the aforementioned loan modifications under FASB ASC 470-50 and determined the modifications qualified as an extinguishment of debt due to a substantive conversion option being added. In accordance with FASB ASC 470-50-40-2, the extinguishment of debt was accounted for as a capital transaction. A gain on the extinguishment of $1,511 was recorded as additional paid-in capital. The Company also evaluated the conversion options under FASB ASC 815-15 for derivative treatment and determined the conversion options are not required to be accounted for as derivatives.

 

F-10
 

 

CALIFORNIA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2011 AND 2010

 

Upon the initial closing of a private placement offering on December 22, 2010, the $31,500 promissory notes were converted to 1,260,000 shares at a conversion price of $0.025 per share. See Note 8.

 

Convertible Notes

 

In June 2010, a stockholder loaned the Company $10,000 for working capital purposes. The loan was unsecured, bore interest of 10 percent per annum, and was initially due in June 2011. On September 16, 2010, this loan was modified whereby the interest rate was reduced to zero and the term of the loan was revised to September 2011. In addition, a conversion option was added whereby the note is convertible at the holder’s option at $0.03 and mandatorily convertible at a lower rate of $0.025 upon the initial closing of a private placement offering, which occurred on December 22, 2010.

 

The Company evaluated the aforementioned loan modification under FASB ASC 470-50 and determined the modification qualified as an extinguishment of debt due to a substantive conversion option being added. The Company also evaluated the conversion option under FASB ASC 815-15 for derivative treatment and determined the conversion option is required to be accounted for as a derivative due to the conversion rate reset provision. The issuance date fair value of the conversion option was determined to be $2,137 (see Note 6). In accordance with FASB ASC 470-50-40-2, the extinguishment of debt was accounted for as a capital transaction. A net loss on the extinguishment of $1,885 was recorded as additional paid-in capital.

 

On September 16, 2010, the Company issued related party convertible notes totaling $45,000 to an officer and two stockholders.  The convertible notes are non-interest bearing, mature in one year, and are convertible at the option of the borrower into common shares at a conversion rate of $0.03 per share. In addition, the notes are mandatorily convertible at a lower rate of $0.025 upon the initial closing of a private placement offering, which occurred on December 22, 2010.

 

The Company evaluated the aforementioned conversion options under FASB ASC 815-15 for derivative treatment and determined the conversion options are required to be accounted for as a derivative due to the conversion rate reset provisions. The issuance date fair value of the conversion options was determined to be $9,618 (see Note 6). This original fair value was recorded as a discount on the notes and was to be amortized over the life of the notes using the effective interest rate method. At the date of the conversion on December 22, 2010, any unamortized debt discount was recorded as an expense and included in other expenses on the statement of expenses as of January 31, 2011.

 

On September 16, 2010, the Company issued another related party convertible note totaling $5,000 to a stockholder. The convertible note is non-interest bearing, mature in one year, and is convertible at the option of the borrower into common shares at a conversion rate of $0.03 per share. In addition, the note is mandatorily convertible at a lower rate of $0.025 upon the initial closing of a private placement offering, which occurred on December 22, 2010. The money on the note was not received by the Company until December 22, 2010, the date of the initial closing of a private placement offering, and therefore, the Company concluded it did not qualify for derivative treatment; instead, it was treated as a regular purchase of the Company’s common stock.

 

Upon the initial closing of a private placement offering on December 22, 2010, the total of $65,000 convertible notes were converted to 2,400,000 shares at $0.025 per share. See Note 8.

 

F-11
 

 

CALIFORNIA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2011 AND 2010

 

Compensation of Officers and Directors

 

In January 2011, the Company entered into an arrangement with George Duggan to serve as the Company’s Chief Operating Officer effective January 17, 2011. Under the terms of the arrangement, the Company will pay Mr. Duggan a $2,500 fee per month for his services. The $2,500 fee for the month of January was accrued for as of January 31, 2011 and recorded in the general and administrative expense on the statements of operations.

 

Legal, Consulting, and Other Professional Fees

 

The Company has entered into a 12-month retainer agreement with G&P, effective December 1, 2010, pursuant to which the Company will pay G&P, a stockholder of the Company, a monthly fee of $5,500 for providing legal services relating to SEC regulatory compliance and reporting requirements. As of January 31, 2011, the Company had an outstanding advance payment for these services in the amount of $22,000 and incurred $11,000 in legal fees as of January 31, 2011.

 

On December 15, 2010, the Company issued 500,000 shares to G&P for legal services provided to the Company, fair valued at $12,500, which was recorded as the stock-based compensation expense in the general and administrative expense on the statements of operations.

 

For the years ended January 31, 2011 and 2010, legal fees to G&P totaled $189,155 and $135,554, respectively, and primarily related to SEC filings, acquisitions, private placement offerings, and other general corporate matters. The legal fees incurred are included in the general and administrative expense on the statements of operations. The $46,250 and $175,394 of legal fees outstanding are in the accounts payable to related party on the balance sheets as of January 31, 2011 and 2010, respectively.

 

In December 2010, the Company entered into a consulting agreement with Oberal International, Inc. (“Oberal”), a stockholder of the Company. Oberal will provide the Company with regular and customary capital markets and corporate finance consulting advice, including recommendations concerning investor and strategic introductions to potential industry partners. The agreement became effective December 15, 2010, runs for a term of 90 days and may be extended upon the mutual agreement between the parties. In consideration of services to be rendered by Oberal, the Company agreed to pay Oberal $25,250 for the term of the agreement. As of January 31, 2011, the Company had an outstanding advance payment for these services in the amount of $11,783 and incurred $13,467 in consulting fees as of January 31, 2011. The consulting fees incurred are included in the general and administrative expense on the statements of operations.

 

In January 2011, the Company entered into an administrative services agreement with Incorporated Communications Services (“ICS”), a California corporation. George Duggan, the Company’s Chief Operations Officer, is the Vice President of ICS. Pursuant to the agreement with ICS, ICS will make available its address in La Canada, California to serve as the Company’s corporate headquarters and communications office, and provide the Company with basic administrative services, including coordinating and routing incoming telephone calls, handling investor inquiries, assisting in the preparation of press releases, developing an informational website and coordinating with the auditors and financial statement preparers. The Company will pay ICS a monthly fee of $6,000 for these services. This agreement with ICS became effective January 1, 2011, runs for a term of 12 months and may be extended or terminated by the parties upon 60 days prior notice. As of January 31, 2011, the Company recorded an accrual of $6,000 for services provided by ICS for the month of January 2011, which is recorded in the general and administrative expense on the statements of operations.

 

F-12
 

 

CALIFORNIA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2011 AND 2010

 

In January 2011, the Company entered into a consulting agreement with Melechdavid, Inc., a stockholder of the Company. Melechdavid, Inc. will provide certain consulting services to the Company’s business for a term of 90 days, commencing on January 18, 2011, the effective date of this agreement, and fair valued at $12,500. The agreement may be extended upon the mutual agreement between the parties. In consideration of services to be rendered by Melechdavid, Inc., the Company agreed to issue the 500,000 restricted shares of its common stock, $0.001 per share. As of January 31, 2011, the Company has not yet issued its common stock to Melechdavid, Inc. In the general and administrative expense on the statements of operations for the year ended January 31, 2011, the Company recorded the $1,944 of stock-based compensation expense for the services provided by Melechdavid, Inc. to the Company in January 2011.

 

The Company incurred certain acquisition-related consulting and marketing costs to Michael Baybak & Co., Inc., a stockholder of the Company, totaling $13,819 for the year ended January 31, 2011. There were no fees payable to Michael Baybak & Co., Inc. for the year ended January 31, 2010.

 

NOTE 5 – DERIVATIVE LIABILITIES

 

Convertible Notes

 

As discussed in Note 5, $55,000 in outstanding convertible notes qualified for derivative treatment under FASB ASC 815-15 due to conversion rate reset provisions. The Company estimated the fair value of these liabilities on September 16, 2010 to be $11,755. $2,137 was included in the gain/loss determination for extinguished debt and $9,618 was recorded as a discount on the associated debt.

 

The derivative liabilities were fair valued on December 22, 2010, the conversion date, at $91,365 resulting in a loss on the change in fair value of $79,610 for the year ended December 31, 2010. Due to conversion, the Company derecognized derivative liabilities associated to convertible notes to equity, in accordance with FASB ASC 815. Additionally, any unamortized debt discount was recorded as an expense and included in other expenses on the statement of expenses as of January 31, 2011.

 

The Company used the Black-Scholes option pricing model to estimate the fair values with the following assumptions: the market price of the Company’s common stock on the measurement dates of $0.01 and $0.05, no expected dividend yield; expected volatilities ranging from 246% to 271%; risk-free interest rates of 0.25%; and expected terms ranging from 1 to 0.7 years.

 

 Derivative Warrant Instruments

 

In December 2010 and January 2011 Unit Offering, the Company incurred liabilities for the estimated fair value of derivative warrant instruments in the form of warrants.  The estimated fair value of the derivative warrant instruments was calculated using the Black-Scholes option pricing model and amounted $1,323,133 at the grant dates as of December 22, 2010 and January 13, 2011. These estimates were revalued to $2,305,770 at balance sheet date as of January 31, 2011, with the total $982,637 change in value recorded as unrealized loss in non-operating expense.

 

The fair value of each warrant granted in the private placement offering has been estimated on the dates of grant using the Black-Scholes pricing model, under the following assumptions:

 

Common stock issuable upon exercise of warrants   30,739,129 
Market price of the Company’s common stock on the measurement dates    0.05 and $0.09 
Exercise price  $1.125 
Risk free interest rate   0.475%
Dividend yield   0.00%
Volatility   257.95%
Expected exercise term in years   1.5 

 

F-13
 

 

CALIFORNIA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2011 AND 2010

 

NOTE 6 – FAIR VALUE MEASUREMENTS

 

As defined in FASB ASC Topic 820, fair value is the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This Topic requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair value measurements. The statement requires fair value measurements be classified and disclosed in one of the following categories:

 

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

 

Level 2: Pricing inputs other than quoted market prices included in Level 1 that are based on observable market data and are directly or indirectly observable for substantially the full term of the asset or liability. These include quoted market prices for similar assets or liabilities, quoted market prices for identical or similar assets in markets that are not active, adjusted quoted market prices, inputs from observable data such as interest rate and yield curves, volatilities or default rates observable at commonly quoted intervals or inputs derived from observable market data by correlation or other means.

 

Level 3: Pricing inputs that are unobservable or less observable from objective sources. Unobservable inputs should only be used to the extent observable inputs are not available. These inputs maintain the concept of an exit price from the perspective of a market participant and should reflect assumptions of other market participants. An entity should consider all market participant assumptions that are available without unreasonable cost and effort. These are given the lowest priority and are generally used in internally developed methodologies to generate management's best estimate of the fair value when no observable market data is available.

 

Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.

 

Certain assets and liabilities are reported at fair value on a recurring or nonrecurring basis in the Company’s balance sheet. The following methods and assumptions were used to estimate the fair values:

 

Cash, Prepaid assets, Mining rights (deposits), Accounts payable, and Accrued liabilities

The carrying amounts approximate fair value because of the short-term nature or maturity of the instruments.

 

Derivative liabilities

The Company’s determination of fair value of its derivative instruments incorporates various factors required under FASB Topic ASC 815. The fair values of the Company’s derivatives are valued using less observable data from objective sources as inputs into internal valuation models. Therefore, the Company considers the fair value of its derivatives to be Level 3 hierarchy. At January 31, 2011, the aggregate Level 3 fair value of the derivative liabilities was $2,305,770. There were no derivatives as of January 31, 2010.

 

F-14
 

 

CALIFORNIA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2011 AND 2010

 

NOTE 7 – EQUITY

 

Common Stock

 

On July 5, 2007, the Company effected a forward split of its common stock on the basis of 6.35 shares for each share issued and outstanding. The accompanying financial statements and all share information in these footnotes have been adjusted on a retroactive basis to reflect the impact of this forward stock split.

 

During July 2005, the Company issued 46,990,000 shares to its founders for $7,400 in cash.

 

During July 2005, the Company issued 6,985,000 shares for $11,000.

 

During August 2005, the Company issued 1,778,000 shares for $56,000.

 

On May 29, 2007, the Company issued 12,700,000 shares to its former officers for services provided. The common stock was valued at $2,000.

 

In August 2007, the Company issued 1,190,000 shares as a result of the conversion of the Debentures, in the amount of $595,000.

 

For the period ended January 31, 2008, the Company recognized a total of $235,668 for donated consulting services. The consulting services were performed by third parties in connection with the acquisition of Holdings, and with the reversal of the acquisition of Holdings. The third parties made the determination to forgive the Company’s liability. The forgiveness of debt was recorded as contributed capital.

 

During February 2008, the Company issued 120,000 shares for $60,000.

 

During the year ended January 31, 2009, the Company cancelled 2,000,000 shares.

 

On September 18, 2008, the Company issued 4,000,000 shares for $20,000.

 

During the year ended January 31, 2010, the Company cancelled 250,000 shares.

 

On December 10, 2010, the Company increased its total authorized shares of preferred stock from 10,000,000 to 22,000,000 and designated such shares as Series A Convertible Preferred Stock, par value $0.001 per share, to be issued to certain accredited investors in the private placement offering. Each share of Series A Preferred Stock is convertible at any time into one share of common stock, subject to a 9.99% conversion blocker, and participates in dividends and other distributions on an equivalent basis with the Company’s common stock. The Series A Preferred Stock does not carry voting rights.

 

On December 10, 2010, the Company amended its 2007 Stock Option Plan by increasing to 16,000,000 shares the number of common shares authorized for issuance, subject to change in the case of any recapitalization of the Company’s common stock.

 

On December 21, 2010, the Company issued 3,660,000 shares to certain note holders upon conversion of outstanding convertible promissory notes. See Note 5.

 

On December 21, 2010, the Company issued 18-month warrants to the PPO subscribers, pursuant to which the PPO subscribers will have the right to purchase, at $0.125 per whole share, one-half of a share for each common share purchased in the PPO completed in December 2010 and January 2011. See Note 6.

 

F-15
 

 

CALIFORNIA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2011 AND 2010

 

On December 21, 2010, the Company’s Board of Directors authorized to reserve for issuance (i) the 22,000,000 shares of common stock into which the Series A Convertible Preferred Stock is convertible; (ii) the 30,739,129 and 1,190,000 shares issuable upon conversion of the 2010 and 2007 warrants, respectively; and (iii) the 16,000,000 shares that can be issued under the Company’s 2007 Stock Option Plan.

 

Private Placement Offering

 

On December 22, 2010, the Company sold to various persons (collectively, the “Investors”) 58,478,258 units of its securities (the “Units”) for gross proceeds of $1,461,956, at an offering price of $0.025 per Unit.  Each of 36,478,258 of the Units consists of one common share and a warrant to purchase one-half share at $0.125 per whole share. Each of the remaining 22,000,000 Units consists of one share of the Company’s Series A Convertible Preferred Stock and warrants to purchase one-half of one share of common stock. The warrants will be exercisable from issuance until eighteen months after the closing of the PPO. 

 

On January 13, 2011, the Company sold an additional 5,000,000 Units for a total price of $125,000. The Company repurchased and cancelled 2,000,000 Units for $50,000. As of January 13, 2011, cumulatively the Company has sold a total of 61,478,258 Units for a total price of $1,586,956. The Company incurred closing costs of $15,500, resulting in net proceeds from the Offering of $1,571,456. The Company plans to apply the net proceeds of the closing primarily towards the AuroTellurio Acquisition (see Note 4) and certain outstanding accounts payable and working capital.

 

Capital Contribution

 

During the year ended January 31, 2011, a stockholder of the Company, G&P, wrote off accounts payable totaling $157,665 on behalf of the Company.  No shares were issued in exchange for this capital contribution.

 

Shares for Services

 

Pursuant to a Consulting Services Agreement between the Company and an unrelated party, dated as of October 15, 2010, the Company issued 4,000,000 shares as consideration for professional services rendered relating to business development and corporate finance. The 4,000,000 shares were valued at $220,000, or $0.05 per share, using the closing price of the Company’s common stock on the date the agreement was executed.

 

On December 15, 2010, the Company issued the 500,000 shares to G&P, a stockholder of the Company, for legal services previously provided to the Company. The 500,000 shares were valued at $12,500, or $0.025 per share, using the purchase price of the Company’s common stock in the initial private placement offering held in December 2010.

 

Pursuant to a Consulting Services Agreement as of January 18, 2011 between the Company and Melechdavid, Inc., a stockholder of the Company, the Company agreed to issue the 500,000 restricted shares for future services relating to business development and corporate finance. The 500,000 shares were valued at $12,500, or $0.025 per share, using the purchase price of the Company’s common stock in the second private placement offering held in January 2011.

 

The Company recognized non-cash stock-based compensation expense of $234,445 during the year ended January 31, 2011 in connection with these issuances.

 

F-16
 

 

CALIFORNIA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2011 AND 2010

 

Pursuant to a merger agreement in 2007, the Company cancelled 44,450,000 shares and issued 31,000,000 shares to a merger partner stockholder. As a result of cancelling and unwinding the Merger, those 31,000,000 shares were canceled.

 

In connection with the terms of the 2007 Merger, and cancellation and reversal of the Merger, an officer and director of the Company made advances to, and incurred expenses on behalf of the Company of $31,000.  The Company reimbursed this officer by issuing 31,000,000 shares.  On December 22, 2010, the Company repurchased and cancelled 13,000,000 of those shares from Mr. Davidson at a price of $13,000.

 

NOTE 8 – CONVERTIBLE DEBENTURES AND WARRANTS

 

On June 22, 2007, and June 28, 2007, the Company issued a series of convertible debentures.  In connection with a failed merger attempt in 2007, the money was loaned to the proposed merger partner and warrants were issued in connection with the conversion of the loans into common stock.  These warrants remain outstanding.

 

A summary of the status of 2007 warrants granted as of January 31, 2011 and 2010 is as follows:

 

       Average 
       Exercise 
Description  Shares   Price 
         
Outstanding at January 31, 2009   1,190,000   $0.75 
Outstanding at January 31, 2010   1,190,000   $0.75 
Outstanding at January 31, 2011   1,190,000   $0.75 

 

A summary of the status of 2007 warrants outstanding as of January 31, 2011 is presented below:

 

Warrants Outstanding   Warrants Exercisable 
        Weighted   Weighted       Weighted 
Range of       Average   Average       Average 
Exercise   Number   Remaining   Exercise   Number   Exercise 
Prices   Outstanding   Life Years   Price   Exercisable   Price 
$0.75    1,190,000    1.46   $0.75    1,190,000   $0.75 

 

NOTE 9 – INCOME TAXES

 

No provision for federal income taxes has been recognized for the years ended January 31, 2011 and 2010 as the Company incurred a net operating loss for income tax purposes in each year and has no carryback potential.

 

The Company had deferred income tax assets as of January 31, 2011 and 2010 as follows:

 

   2011   2010 
         
Loss carryforwards  $805,412   $240,014 
Less - Valuation allowance   (805,412)   (240,014)
Total net deferred tax assets  $-   $- 

 

F-17
 

 

CALIFORNIA GOLD CORP.  

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2011 AND 2010 

 

The Company had net operating loss carryforwards for income tax reporting purposes of $2,301,176 and $685,753 as of January 31, 2011 and 2010, respectively, that may be offset against future taxable income. These net operating loss carryforwards may be carried forward in varying amounts until the time when they begin to expire in 2027 through 2031. Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs or a change in the nature of the business.  Therefore, the amount available to offset future taxable income may be limited.

 

NOTE 10 – COMMITMENTS AND CONTINGENCIES

 

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

 

As discussed above in Note 5, the Company entered into several agreements with related parties. On December 1, 2010, the Company entered into a 12-month retainer agreement with G&P, pursuant to which the Company will pay G&P a monthly fee of $5,500 for providing legal services relating to SEC regulatory compliance and reporting requirements.

 

In January 2011, the Company entered into an administrative services agreement with Incorporated Communications Services. Pursuant to this agreement, ICS will make available its address in La Canada, California to serve as the Company’s corporate headquarters and communications office, and provide the Company with basic administrative services, including coordinating and routing incoming telephone calls, handling investor inquiries, assisting in the preparation of press releases, developing an informational website and coordinating with the auditors and financial statement preparers. The Company will pay ICS a monthly fee of $6,000 for these services. This agreement with ICS became effective January 1, 2011, runs for a term of 12 months and may be extended or terminated by the parties upon 60 days prior notice.

 

On January 17, 2011, the Company entered into an independent contractor consulting agreement with George Duggan pursuant to which the Company agreed to pay to Mr. Duggan $2,500 per month for 12 months beginning January 17, 2011 for his services rendered to the Company as the Chief Operating Officer. The agreement runs for a term of 12 months and may be extended by agreement of the parties.  The agreement may be terminated by the Company for cause during its term or for any reason after the first 12 months upon five days prior notice, and by the executive officer for any reason upon 30 days prior notice. The Company has also agreed to reimburse the executives for all reasonable pre-approved out-of-pocket expenses incurred in connection with their performance under the agreements.

 

In January 2011, the Company entered into a consulting agreement with Melechdavid, Inc., which will provide certain consulting services to the Company’s business for a term of 90 days, commencing on January 18, 2011, the effective date of this agreement, and fair valued at $12,500. The agreement may be extended upon the mutual agreement between the parties. In consideration of services to be rendered by Melechdavid, Inc., the Company agreed to issue the 500,000 restricted shares of its common stock, $0.001 per share.

 

 NOTE 11 – SUBSEQUENT EVENTS

 

Consulting Agreement

 

On February 1, 2011, the Company entered into an independent contractor consulting agreement with James Davidson pursuant to which the Company agreed to pay to Mr. Davidson $5,000 per month for 12 months beginning February 1, 2011 for his services rendered to the Company as the Chief Executive Officer.

 

F-18
 

 

CALIFORNIA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

   October 31,
2011
   January 31,
2011
 
         
ASSETS        
           
Current assets:          
Cash  $1,064,399   $1,268,254 
Due from third party   5,907    - 
Prepaid expenses   18,812    - 
Prepaid expenses – related party   -    33,784 
Total current assets   1,089,118    1,302,038 
           
Property and equipment, net   8,306    - 
Mining rights   47,500    20,000 
Total assets  $1,144,924   $1,322,038 
           
LIABILITIES AND STOCKHOLDERS' DEFICIT          
           
Current liabilities:          
Accounts payable  $46,842   $27,129 
Accounts payable – related party   9,400    52,250 
Derivative liabilities   2,159,709    2,305,770 
Other accrued liabilities   -    2,500 
Total current liabilities   2,215,951    2,387,649 
Total  liabilities   2,215,951    2,387,649 
           
Commitments and contingencies   -    - 
           
Stockholders' deficit:          
Preferred stock, par value $0.001 per share, 22,000,000 shares authorized ; 22,000,000 shares issued and outstanding   22,000    22,000 
Common stock, par value $0.001 per share, 300,000,000 shares authorized ; 109,451,260 and 92,701,260 shares issued and outstanding , respectively   109,451    92,701 
Additional paid-in capital   1,955,049    1,678,791 
Deficit accumulated during the exploration stage   (3,157,527)   (2,859,103)
Total stockholders' deficit   (1,071,027)   (1,065,611)
Total liabilities and stockholders' deficit  $1,144,924   $1,322,038 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

F-19
 

 

CALIFORNIA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

CONSOLIDATED STATEMENTS OF EXPENSES

(Unaudited)

 

   Three Months Ended   Nine Months Ended   From Inception to 
   October 31,
2011
   October 31,
2010
   October 31,
2011
   October 31,
2010
   October 31,
2011
 
                     
Expenses:                         
Mineral property expenses  $85,387   $-   $215,795   $-   $293,897 
Bad debt expense   -    -    -    -    559,483 
Depreciation expense   440    -    503    -    503 
General and administrative expenses   222,960    266,039    773,824    394,377    1,922,005 
                          
Total operating expenses   308,787    266,039    990,122    394,377    2,775,888 
                          
Loss from operations   (308,787)   (266,039)   (990,122)   (394,377)   (2,775,888)
                          
Other income (expenses):                         
Interest income   571    -    1,603    -    1,894 
Interest expense   -    (565)   -    (1,621)   (1,763)
Realized and unrealized gain (loss) on derivatives, net   176,140    (67,056)   690,095    (67,056)   (372,152)
Amortization of debt discount   -    (716)   -    (716)   (9,618)
                          
Total other income (expenses)   176,711    (68,337)   691,698    (69,393)   (381,639)
                          
Net loss  $(132,076)  $(334,376)  $(298,424)  $(463,770)  $(3,157,527)
                          
Loss per common share:                         
Loss per common share - basic and diluted  $(0.00)  $(0.01)  $(0.00)  $(0.01)     
                          
Weighted average number of common shares outstanding - basic and diluted   109,443,018    58,766,299    102,791,334    58,298,296      

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.  

 

F-20
 

 

CALIFORNIA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   Nine Months Ended   From Inception to 
   October 31,   October 31,   October 31, 
   2011   2010   2011 
Cash flows from operating activities:               
Net loss  $(298,424)  $(463,770)  $(3,157,527)
Adjustments to reconcile net loss to net cash used in operating activities:               
Depreciation expense   503    -    503 
Stock-based compensation   423,042    220,000    926,155 
Amortization of debt discount   -    716    9,618 
Unrealized and realized (gain) loss on derivatives, net   (690,095)   67,056    372,152 
Changes in operating assets and liabilities:               
Due from third party   (5,907)   -    (5,907)
Prepaid expenses   (18,812)   -    (18,812)
Prepaid expenses – related party   33,784    -    - 
Accounts payable   19,713    30,286    (11,505)
Accounts payable – related party   (42,850)   78,207    167,064 
Accrued expenses   (2,500)   -    142 
Interest accrued on notes payable from related party   -    1,621    1,621 
Net cash used in operating activities   (581,546)   (65,884)   (1,716,495)
Cash flows from investing activities:               
Purchase of property and equipment   (8,809)   -    (8,809)
Acquisition of mining rights   (10,000)   -    (30,000)
Net cash used in investing activities   (18,809)   -    (38,809)
Cash flows from financing activities:               
Proceeds from related party loans   -    66,500    92,430 
Proceeds from common and preferred stock issued, net of offering costs of $3,500   396,500    -    2,790,273 
Payments from cancellation of common stock   -    -    (63,000)
Net cash provided by financing activities   396,500    66,500    2,819,703 
Net increase (decrease) in cash   (203,855)   616    1,064,399 
Cash - beginning of period   1,268,254    373    - 
Cash - end of period  $1,064,399   $989   $1,064,399 
                
Noncash investing and financing activities:               
Contributed capital - loss on extinguishment of debt owed to related party  $-   $374   $374 
Debt discount due to derivative liabilities   -    9,618    9,618 
Contributed capital - payables settled by stockholder   -    -    157,665 
Issuance of common stock for convertible notes   -    -    3,660 
Re-class of derivatives related to convertible notes   -    -    91,365 
Issuance of derivative warrant instruments   544,035    -    1,867,168 
Related party note receivable write-off   -    -    557,927 
Common stock cancellation   -    -    61,700 
Issuance of common stock for acquisition of mining rights   17,500    -    17,500 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

F-21
 

 

CALIFORNIA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1 – GENERAL ORGANIZATION AND BUSINESS

 

California Gold Corp. (“California Gold” or the “Company”) is a Nevada corporation whose principal focus is the identification, acquisition, and development of rare and precious metals mining properties in the Americas. The Company is still in the exploration stage and has not generated any revenues from its mining properties to date.

 

The Company was incorporated on April 19, 2004 under the name of Arbutus Resources, Inc. On August 9, 2007, the Company changed its name to US Uranium, Inc. On March 9, 2009, the Company changed its name to California Gold Corp.

 

NOTE 2 – BASIS OF PRESENTATION

 

The accompanying unaudited interim consolidated financial statements as of October 31, 2011 and 2010 and for the three and nine months then ended have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission and on the same basis as the annual audited financial statements. The consolidated financial statements as of and for the three and nine months ended October 31, 2011 and 2010 are unaudited. In the opinion of management, these consolidated financial statements include all adjustments, which, unless otherwise disclosed, are of a normal recurring nature, necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented. The results for interim periods are not necessarily indicative of results for the entire year. The balance sheet at January 31, 2011 has been derived from audited financial statements; however, the notes to the consolidated financial statements do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. The accompanying unaudited interim consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended January 31, 2011 as filed with the SEC.

 

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, CalGold de Mexico, S. de R.L. de C.V., formed to explore mining opportunities in Mexico. All material intercompany balances and transactions have been eliminated. 

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Reclassifications

 

Certain amounts in prior periods have been reclassified to conform to current period presentation.

 

Acquisition-Related Costs

 

For the three and nine months ended October 31, 2011, the Company incurred certain costs related to the AuroTellurio Acquisition (as defined below in Note 4). Those costs included legal, valuation, travel, and other professional or consulting fees. The Company accounted for those acquisition-related costs under FASB ASC Topic 805, Business Combinations . The costs were recognized as mineral property expenses in the periods in which the costs were incurred and the services received. The Company recorded $85,387 and $215,795 in costs for the three and nine months ended October 31, 2011, respectively, and none for the three and nine months ended October 31, 2010.

 

F-22
 

 

CALIFORNIA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

 

Costs of acquisition and option costs of mining rights are capitalized upon acquisition. As of October 31, 2011 and January 31, 2010, the Company capitalized $47,500 and $20,000, respectively, of costs related to the first closing under the AuroTellurio Option Agreement conducted on August 4, 2011.

 

To determine if capitalized costs are in excess of their recoverable amount, periodic evaluation of the carrying value of capitalized costs and any related property and equipment costs are performed based upon expected future cash flows and/or estimated salvage value in accordance with ASC 360-10-35-15, Impairment or Disposal of Long-Lived Assets . As of October 31, 2011, no impairment was required for the Company’s capitalized mining rights.

 

Stock-Based Compensation

 

The Company accounts for its stock-based compensation in which the Company obtains employee services in share-based payment transactions under FASB ASC Topic 718, Compensation – Stock Compensation , which requires the Company to expense the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of such instruments over the vesting period.

 

The Company also adopted FASB ASC Topic 505-50, Equity-Based Payments to Non-Employees, to account for equity instruments issued to parties other than employees for acquiring goods or services.  Such awards for services are recorded at either the fair value of the consideration received or the fair value of the instruments issued in exchange for such services, whichever is more reliably measurable.

 

For the three and nine months ended October 31, 2011, the Company recorded $82,498 and $423,042, respectively, in stock-based compensation as a component of general and administrative expenses. The Company recorded $220,000 in stock-based compensation to a non-employee during the three and nine months ended October 31, 2010.

 

Net Earnings (Loss) Per Share

 

Basic net earnings (loss) per common share are computed by dividing net earnings (loss) by the weighted-average number of common shares outstanding during the period. Diluted net earnings (loss) per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, which is the case for all periods presented in these consolidated financial statements, the diluted weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. For the three and nine months ended October 31, 2011, the Company excluded options and outstanding warrants to purchase 11,000,000 and 19,369,565 shares of common stock, respectively, as the effect would be anti-dilutive.

 

New Accounting Pronouncements

 

The Company does not expect adoption of the new accounting pronouncements will have a material effect on the Company’s consolidated financial statements.

 

NOTE 4 – MINING RIGHTS

 

On February 11, 2011, the Company entered into a property option agreement (the “AuroTelurio Option Agreement”) with Mexivada Mining Corp. (“Mexivada”) to acquire up to an 80% interest in Mexivada’s concessions comprising its AuroTelurio tellurium-gold-silver property (the “La Viuda Concessions,” the “AuroTelurio Property” or the “Property”) in Mexico.

 

F-23
 

 

CALIFORNIA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

 

Under the terms of the AuroTelurio Option Agreement, the Company will acquire up to an 80% legal and beneficial ownership interest in the AuroTelurio Property by making certain cash payments and share issuances to Mexivada and incurring certain exploration expenditures on the Property. See Note 10 for the Company’s commitments under the AuroTelurio Option Agreement.

 

Mexivada and its Mexican subsidiary hold only the mineral rights in the AuroTellurio Property, which rights were granted by the government of Mexico. Neither Mexivada nor its Mexican subsidiary owns the real property rights to the land underlying the La Viuda Concessions. Prior to the first closing under the AuroTellurio Option Agreement on August 4, 2011, the Company obtained a surface rights agreement with the landowner on whose property the La Viuda Concessions are located to conduct its mineral exploration program. The agreement became effective June 17, 2011, runs for a term of 12 months and may be extended for two additional years under the same terms. The Company will pay the land owner $14,400 for each year in which the Company carries out exploration work on this land.

  

On August 4, 2011, the Company conducted the first closing (the “First Closing”) under the AuroTellurio Option Agreement. The purchase price for the First Closing was $30,000 in cash and 250,000 restricted shares of common stock of the Company, fair valued at $17,500 based on the market price on the date of issuance. The $30,000 in cash includes the $20,000 deposits paid to Mexivada in December 2010 in connection with signing the binding offer letter agreement, which provided the Company with additional time to perform its due diligence, raise a financing, and prepare a definite purchase agreement. At the closing, the Company paid the remaining $10,000 in cash and issued 250,000 shares of common stock to Mexivada.

 

In exchange, the Company received from Mexivada four fully executed title deeds, each transferring to the Company a twenty percent (20%) interest in the La Viuda Concessions comprising the AuroTellurio Property, to be held in escrow by the Company's counsel until fully vested in accordance with their terms. If the Company defaults on its commitments under the AuroTelurio Option Agreement or otherwise determines not to proceed with the acquisition of the AuroTelurio Property, all unvested interests and related title deeds in the AuroTelurio Property will be returned to Mexivada.

 

NOTE 5 – RELATED PARTY TRANSACTIONS

 

Compensation of Officers and Directors

 

Officers and director fees totaled $13,500 and $0 for the three months ended October 31, 2011 and 2010, respectively, and $50,000 and $0 for the nine months ended October 31, 2011 and 2010, respectively. The total compensation of officers and directors was recorded as a component of general and administrative expenses.

 

Legal, Consulting and Other Professional Fees

 

Effective December 1, 2010, the Company has entered into a 12-month retainer agreement with a stockholder, pursuant to which the Company will pay a monthly fee of $5,500 for providing legal services relating to SEC regulatory compliance and reporting requirements. In May 2011, the Company signed an addendum to the retainer agreement for legal representation relating to the Mexivada acquisition. The Company reached the maximum payment of $50,000 per the addendum as of October 31, 2011.

 

F-24
 

 

CALIFORNIA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

 

For the three months ended October 31, 2011 and 2010, the Company’s professional legal fees totaled $59,445 and $40,088 respectively, and primarily related to SEC filings and other general corporate matters. For the nine months ended October 31, 2011 and 2010, the Company’s legal fees totaled $101,674 and $108,055, respectively, and primarily related to SEC filings, acquisitions, private placement offerings, and other general corporate matters. The legal fees incurred were included as a component of general and administrative expenses. A total of $9,400 outstanding payable for legal services provided was included in the Company’s consolidated balance sheets as of October 31, 2011, compared to $46,250 outstanding as of January 31, 2011. As of October 31, 2011 and January 31, 2011, the Company prepaid $0 and $22,000 for legal services rendered.

 

Additionally, the Company incurred consulting expenses with several of its stockholders, which provided the Company with regular and customary capital markets and corporate finance consulting advice. The Company incurred $0 and $11,783 in consulting fees during the three and nine months ended October 31, 2011. The $11,783 fees were recorded as a prepaid expense in the Company’s consolidated balance sheets as of January 31, 2011. In addition, the Company issued the 500,000 restricted shares of its common stock, $0.001 per share, on February 28, 2011, to one of its stockholders and recorded the $0 and $10,555 of stock-based compensation expense for the services provided to the Company in the three and nine months ended October 31, 2011. Consulting fees and the stock-based compensation expense were included as a component of general and administrative expenses in the Company’s consolidated statements of expenses.

 

On June 6, 2011, the Company entered into consulting agreement with another stockholder of the Company. The Company engaged the stockholder to provide certain consulting services related to the Company’s business for a minimum period through June 5, 2013 for a monthly compensation fee of $6,000. The Company incurred $18,000 and $30,000 in consulting fees related to this agreement for the three and nine months ended October 31, 2011, which were included as a component of general and administrative expenses.

 

In January 2011, the Company entered into an administrative services agreement with Incorporated Communications Services (“ICS”), a California corporation. George Duggan, the Company’s Chief Operations Officer, is the Vice President of ICS. Pursuant to the agreement with ICS, ICS will make available its address in La Canada, California to serve as the Company’s corporate headquarters and communications office, and provide the Company with basic administrative services, including coordinating and routing incoming telephone calls, handling investor inquiries, assisting in the preparation of press releases, developing an informational website and coordinating with the auditors and financial statement preparers. The Company pays ICS a monthly fee of $6,000 for these services. This agreement with ICS became effective January 1, 2011, runs for a term of 12 months and may be extended or terminated by the parties upon 60 days prior notice. The Company incurred $18,000 and $54,000 in management fees for the three and nine months ended October 31, 2011, which were included as a component of general and administrative expenses. Additionally, the Company reimbursed ICS for the expenses related to the services provided in the amount of $2,296 and $8,649 for the three and nine months ended October 31, 2011. As of October 31, 2011 and January 31, 2011, the outstanding payable to ICS was $0 and $6,000, respectively, recorded in the Company’s consolidated balance sheets.

 

NOTE 6 – DERIVATIVE LIABILITIES

 

Derivative Warrant Instruments

 

In the December 2010 and January 2011 Unit Offering, the Company incurred liabilities for the estimated fair value of derivative warrant instruments in the form of warrants. The estimated fair value of the derivative warrant instruments was calculated using the Black-Scholes option pricing model and amounted to $1,323,133 at the grant dates as of December 22, 2010 and January 13, 2011. These estimates were re-valued as being $2,305,770 and $1,674,290 at the balance sheet dates as of January 31, 2011 and October 31, 2011, respectively. The Company recorded $128,981 and $631,480 change in value as unrealized gain in non-operating income for the three and nine months ended October 31, 2011, respectively.

 

F-25
 

 

CALIFORNIA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

 

The fair value of each warrant granted in the private placement offering has been estimated on the dates of grant using the Black-Scholes option pricing model, under the following assumptions:

 

Common stock issuable upon exercise of warrants   30,739,129 
Market price of the Company’s common stock on the measurement dates  0.05 and 0.09 
Exercise price  $0.125 
Risk free interest rate   0.475%
Dividend yield   0.00%
Volatility   257.95%
Expected exercise term in years   1.5 

 

In April 2011, the Company added to the Unit Offering a first over-allotment option. As such, the Company incurred liabilities for the estimated fair value of derivative warrant instruments in the form of warrants. The estimated fair value of the derivative warrant instruments was calculated using the Black-Scholes option pricing model and amounted to $71,973, $131,077, and $88,824 at the grant dates of April 7, 2011, April 13, 2011, and April 30, 2011, respectively. The April 2011 grants were re-valued as being $238,389 at the balance sheet date of October 31, 2011. The Company recorded a $22,123 and $53,485 change in value as unrealized gain in non-operating expense for the three and nine months ended October 31, 2011, respectively.

 

The fair value of each warrant granted in the private placement offering has been estimated on the dates of grant using the Black-Scholes option pricing model, under the following assumptions:

 

Common stock issuable upon exercise of warrants   4,000,000 
Market price of the Company’s common stock on the measurement dates     0.08 and 0.10 
Exercise price  $0.125 
Risk free interest rate range   0.61 – 0.81
Dividend yield   0.00%
Volatility range   268.16 – 284.75 %
Expected exercise term in years   1.5 

 

In June and July 2011, the Company closed its first and second over-allotment options. The Company incurred liabilities for the estimated fair value of derivative warrant instruments in the form of warrants. The estimated fair value of the derivative warrant instruments was calculated using the Black-Scholes option pricing model and amounted to $149,203 and $102,957 at the grant dates of June 15, 2011 and July 15, 2011, respectively. The grants were re-valued as being $247,030 at the balance sheet date of October 31, 2011. The Company recorded a $25,036 and $5,130 change in value as unrealized gain in non-operating expense for the three and nine months ended October 31, 2011.

 

The fair value of each warrant granted in the private placement offering has been estimated on the dates of grant using the Black-Scholes option pricing model, under the following assumptions:

 

Common stock issuable upon exercise of warrants   4,000,000 
Market price of the Company’s common stock on the measurement dates     0.07 and 0.08 
Exercise price  $0.125 
Risk free interest rate range   0.37 – 0.38
Dividend yield   0.00%
Volatility range   315.50 – 317.98
Expected exercise term in years   1.5 

 

F-26
 

 

CALIFORNIA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 7 – FAIR VALUE MEASUREMENTS

 

As defined in FASB ASC Topic 820, fair value is the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This Topic requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair value measurements. The statement requires fair value measurements be classified and disclosed in one of the following categories:

 

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

 

Level 2: Pricing inputs other than quoted market prices included in Level 1 that are based on observable market data and are directly or indirectly observable for substantially the full term of the asset or liability. These include quoted market prices for similar assets or liabilities, quoted market prices for identical or similar assets in markets that are not active, adjusted quoted market prices, inputs from observable data such as interest rate and yield curves, volatilities or default rates observable at commonly quoted intervals or inputs derived from observable market data by correlation or other means.

 

Level 3: Pricing inputs that are unobservable or less observable from objective sources. Unobservable inputs should only be used to the extent observable inputs are not available. These inputs maintain the concept of an exit price from the perspective of a market participant and should reflect assumptions of other market participants. An entity should consider all market participant assumptions that are available without unreasonable cost and effort. These are given the lowest priority and are generally used in internally developed methodologies to generate management's best estimate of the fair value when no observable market data is available.

 

Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.

 

Certain assets and liabilities are reported at fair value on a recurring or nonrecurring basis in the Company’s consolidated balance sheets. The following methods and assumptions were used to estimate the fair values:

 

Cash, Prepaid assets, Mining rights (deposits), Accounts payable, and Accrued liabilities

The carrying amounts approximate fair value because of the short-term nature or maturity of the instruments.

 

Derivative liabilities

The Company’s determination of fair value of its derivative instruments incorporates various factors required under FASB Topic ASC 815. The fair values of the Company’s derivatives are valued using less observable data from objective sources as inputs into internal valuation models. Therefore, the Company considers the fair value of its derivatives to be Level 3 hierarchy. At October 31, 2011 and January 31, 2011, the aggregate Level 3 fair value of the derivative liabilities was $2,159,709 and $2,305,770, respectively.

 

F-27
 

 

CALIFORNIA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

 

The following table sets forth a reconciliation of changes in the fair value of financial assets and liabilities classified as level 3 in the fair value hierarchy:

 

   Significant Unobservable Inputs (Level 3) 
   Three Months Ended   Nine Months Ended 
   October 31,   October 31,   October 31,   October 31, 
   2011   2010   2011   2010 
Balance as of July 31, 2011 and January 31, 2011  $(2,335,849)  $-   $(2,305,770)  $- 
Change in fair value   176,140    -    690,095    - 
Additions   -    (78,811)   (544,034)   (78,811)
Ending balance as of October 31, 2011  $(2,159,709)  $(78,811)  $(2,159,709)  $(78,811)
                     
Realized and unrealized gain (loss) on derivatives, net, included in earnings for the period ended October 31, 2011 and 2010  $176,140   $(67,056)  $690,095   $(67,056)

  

NOTE 8 – EQUITY

 

Private Placement Offering

 

On December 22, 2010, the Company sold to various persons (collectively, the “Investors”) 58,478,258 units of its securities (the “Units”) for gross proceeds of $1,461,956, at an offering price of $0.025 per Unit. Each of 36,478,258 of the Units consists of one common share and a warrant to purchase one-half share at $0.125 per whole share. Each of the remaining 22,000,000 Units consists of one share of the Company’s Series A Convertible Preferred Stock and warrants to purchase one-half of one share of common stock. The warrants will be exercisable from issuance until eighteen months after the closing of the PPO. 

 

On January 13, 2011, the Company sold an additional 5,000,000 Units for a total price of $125,000. The Company repurchased and cancelled 2,000,000 Units for $50,000.

 

In connection with the aforementioned over-allotment options, the Company sold an additional 8,000,000 Units for a total price of $200,000 in the quarter ended April 30, 2011. Additionally, the Company sold 8,000,000 units for a total purchase price of $200,000 in the quarter ended July 31, 2011.

 

As of July 31, 2011, cumulatively, the Company has sold a total of 77,478,258 Units for a total price of $1,936,956. The Company incurred closing costs of $19,000, resulting in net proceeds from the Offering of $1,917,956. The Company plans to apply the net proceeds of the closing primarily towards the AuroTellurio Acquisition (see Note 4), for the relief of certain outstanding accounts payable, and for working capital purposes.

 

AuroTellurio Acquisition

 

On August 4, 2011, in connection with the First Closing under the AuroTellurio Option Agreement, the Company issued to Mexivada 250,000 shares of its restricted common stock, at $0.001 per share. The issued stock was fair valued at $17,500 based on the market price on the date of issuance.

 

F-28
 

 

CALIFORNIA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 9 – STOCK-BASED COMPENSATION

 

Shares for Services

 

The Company issued 500,000 restricted shares of common stock to one of its stockholders for consulting services rendered and recognized stock-based compensation expense of $0 and $10,555 during the three and nine months ended October 31, 2011. During the three and nine months ended October 31, 2010, the Company issued 4,000,000 common shares to the individual in payment for the services to be rendered and recorded $220,000 as stock-based compensation. The Company valued the shares based on market value on the date of the agreements.

 

Stock Options

 

The Company has a stock-based compensation plan known as the 2007 Stock Option Plan (the “Plan”). The Plan provides for the granting of incentive and non-qualified stock options to acquire common shares in the capital of California Gold Corp. The number of shares authorized under the Plan is 16,000,000. As of October 31, 2011, 5,000,000 shares remain available for future grants under the Plan.

 

On July 27, 2011, the Company granted options to purchase 11,000,000 shares of its common stock to its employees and outside consultants. These options have a 10-year term and were granted with an exercise price of $0.09. The one third of these options, or 3,666,667, vested on the date of the grant, with the remaining two thirds vesting on the first and second anniversaries of the date of grant. All vested options are exercisable, in full or in part, at any time after vesting, until termination. As of October 31, 2011, no options were exercised or forfeited. The Company recorded stock-based compensation expense attributable to options of $82,498 and $412,487 during the three and nine months ended October 31, 2011. As of October 31, 2011, there was approximately $577,481 of total unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over the period of 1.75 years.

 

Outstanding options had $0 intrinsic value at October 31, 2011, due to the exercise price being greater than the value of the Company’s common stock at the reporting date.

 

The fair value of options granted in July 2011 was measured at the date of grant using the Black-Scholes option-pricing model with the following assumptions:

 

Market price of the Company’s common stock on grant date  $0.09 
Risk free interest rate   3.01%
Dividend yield   0.00%
Volatility   260.65%
Expected life   6 years 
Expected forfeiture rate   0.00%

 

NOTE 10 – COMMITMENTS AND CONTINGENCIES

 

In addition to $30,000 cash payment and 250,000 stock issuance made at the First Closing under the AuroTellurio Option Agreement on August 4, 2011 (see Note 4), assuming the Company exercises its right to acquire each of the four twenty percent (20%) interests in the AuroTelurio Property, the Company will make the following cash payments and share issuances to Mexivada: (i) $40,000 and 250,000 shares on the first anniversary of the Closing; (ii) $50,000 and 300,000 shares on the second anniversary of the Closing; (iii) $70,000 and 350,000 shares on the third anniversary of the Closing; and (iv) $100,000 and 500,000 shares on the fourth anniversary of the Closing. In connection with the AuroTellurio Option Agreement, the Company will pay an aggregate total of $290,000 in cash and 1,650,000 restricted shares of its common stock.

 

F-29
 

 

CALIFORNIA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

 

Under the terms of the AuroTellurio Option Agreement, the Company is also committed to incur $3,000,000 in cumulative exploration expenditures on the Property over a four year period at an investment rate of at least $750,000 per year. The Company will earn a 20% vested interest in the AuroTellurio Property in the first year of the AuroTellurio Option Agreement by investing $750,000 in an exploration program and up to an additional 60% interest in the Property, in blocks of 20% each, by investing an additional $750,000 in the exploration program in each of the following three years, or sooner, and meeting all of the other required terms of the AuroTellurio Option Agreement. Each 20% interest will vest earlier if each year’s cash and stock payments to Mexivada and $750,000 exploration expenditure investment are completed earlier than scheduled.

 

Under the terms of the Agreement, the Company will act as “Operator,” exclusively responsible, in consultation with Mexivada, for carrying out and administering exploration, development and mining work on the AuroTellurio Property. If costs of the exploration program exceed the agreed upon $3,000,000 investment, the Company will share additional costs with Mexivada on a proportionate share basis. Once the Company has earned its full 80% interest in the AuroTellurio Property, the Company will form a joint venture with Mexivada applicable to the further development and commercialization of the AuroTellurio Property.

 

The Company obtained a surface rights agreement with the landowner on whose property the La Viuda Concessions are located to conduct its mineral exploration program, effective June 17, 2011. The Company will pay the land owner $14,400 for each year in which the Company carries out exploration work on this land. The Company has begun Phase 1 of its exploration program and it is currently conducting mapping, trenching and sampling programs at the AuroTellurio Property. These activities will be followed by planned gravity and magnetic geophysical surveys in preparation for an initial 3,000-meter drilling program that is planned for implementation by the end of the year or in early 2012. As of the date of this filing, the Company incurred $311,631 since inception in its exploration and development expenditures, which are expensed as incurred.

 

NOTE 11 – SUBSEQUENT EVENTS

 

The Company evaluates subsequent events through the date when financial statements are filed with the SEC.

 

Effective November 4, 2011, the Company has entered into a geophysical survey agreement with MPX Geophysics Ltd. (“MPX”), pursuant to which MPX will perform aerial surveys over the AuroTellurio Property by the end of the year or in yearly 2012 for an estimated amount of $69,260.

 

F-30
 

 

38,739,129 Shares of Common Stock

Offerred by the Selling Stockholders

 

 

25,000,000 Shares of Common Stock

Offerred by the Company

 

California Gold Corp.

 

PROSPECTUS

 

____________, 2012

 

   
 

 

PART II

 

INFORMATION NOT REQUIRED IN PROSPECTUS

 

Item 13.  Other Expenses of Issuance and Distribution.

 

Set forth below is an estimate (except for registration fees, which are actual) of the approximate amount of the fees and expenses payable by us in connection with the issuance and distribution of the shares of our common stock.  The selling stockholders will not be responsible for any of the expenses of this offering.

 

EXPENSE  AMOUNT 
     
SEC Registration fee  $468 
Accounting fees and expenses  $5,000 
Legal fees and expenses  $50,000 
Miscellaneous  $ 10,000 
Total  $ 65,468 

 

Item 14.  Indemnification of Directors and Officers.

 

Nevada Revised Statutes (NRS) Sections 78.7502 and 78.751 provide us with the power to indemnify any of our directors, officers, employees and agents.  The person entitled to indemnification must have conducted himself in good faith, and must reasonably believe that his conduct was in, or not opposed to, our best interests.  In a criminal action, the director, officer, employee or agent must not have had reasonable cause to believe that his conduct was unlawful.

 

Under NRS Section 78.751, advances for expenses may be made by agreement if the director or officer affirms in writing that he has met the standards for indemnification and will personally repay the expenses if it is determined that such officer or director did not meet those standards.

 

Our Amended and Restated Articles of Incorporation, as amended, provide a limitation of liability such that no director or officer shall be personally liable to us or any of our stockholders for damages for breach of fiduciary duty as an officer or director or for any act or omission of any such officer or director, except for liability (i) for acts or omissions which involve intentional misconduct, fraud, or a knowing violation of the law, or (ii) the payment of dividends in violation of Section 78.300 of the Nevada Revised Statutes.

 

Our Board of Directors may take such action as it deems necessary to carry out these indemnification provisions, including adopting, subject to stockholder approval, an amendment to our Amended and Restated Articles of Incorporation containing an explicit provision that we shall indemnify and hold harmless each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was an officer or director of ours or is or was serving at our request as an officer or director of another corporation or of a partnership, joint venture, trust or other enterprise to the fullest extent authorized by the Nevada General Corporation Law, adopting procedures for determining and enforcing indemnification rights and purchasing insurance policies. Our Board of Directors may also adopt bylaws or resolutions or authorize the entry into contracts implementing indemnification arrangements as may be permitted by law.

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted for our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

 

II-1
 

 

Item 15.  Recent Sales of Unregistered Securities.

 

RECENT SALES OF UNREGISTERED SECURITIES

 

During the last three years, we have issued unregistered securities to various persons. None of these transactions involved any underwriters, underwriting discounts or commissions, or any public offering. The sales of these securities were deemed to be exempt from the registration requirements of the Securities Act by virtue of Section 4(2) thereof, Regulation S promulgated thereunder and/or Regulation D promulgated thereunder, as transactions by an issuer not involving a public offering. The recipients of securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the certificates issued in such transactions. All purchasers of our securities were accredited or sophisticated persons, or were non-U.S. persons, and had adequate access, through employment, business or other relationships, to information about us.

 

On August 4, 2011, we issued 250,000 shares of our restricted common stock to Mexivada Mining Corp (“Mexivada”) at the first closing in partial payment towards our acquisition of interests in Mexivada’s La Viuda and La Viuda-1 concessions comprising its AuroTellurio tellurium-gold-silver property south of Moctezuma, Sonora, Mexico.

 

On July 15, 2011, we completed the second and final closing of an over-allotment option on the 2010/2011 Private Placement.  Under this over-allotment option, we sold to various institutional and accredited investors and non-U.S. persons 16,000,000 additional Units for gross proceeds of $400,000. In total, the Company sold 77,478,258 Units in the 2010/2011 Private Placement for aggregate gross proceeds of $1,936,956.45.

 

We are incorporating herein by reference the disclosures in Item 7.01 of our Current Report on Form 8-K, filed with the SEC on June 21, 2011 and in Item 3.02 of our Current Report on Form 8-K, filed with the SEC on December 30, 2010, which together describe in detail the earlier closings of the 2010/2011 Private Placement.

 

In December 2010, we issued 500,000 shares of our restricted common stock to Gottbetter & Partners, LLP for services provided to us by that service provider in 2007 and 2008.

 

In October 2010, we issued 4,000,000 shares of our restricted common stock to one consultant and in January 2011, we issued 500,000 of our restricted common stock to another consultant, for services provided to us by these consultants.

 

On September 16, 2010, our Chief Executive Officer and three of our other stockholders loaned us a total of $65,000 for working capital purposes. These loans were evidenced by 0% convertible notes (the “Convertible Notes”) that were converted on a mandatory basis at the closing of our 2010/2011Private Placement, at a price of $0.025 per share. On December 22, 2010, the first closing of our 2010/2011 Private Placement, we issued an aggregate of 2,400,000 shares of our restricted common stock to our Chief Executive Officer and three of our other investors upon conversion of the Convertible Notes.

 

Between September 9, 2009 and October 12, 2009, we closed a private placement of our promissory notes for an aggregate principal amount of $10,000. On December 10, 2009, we closed a private placement of our 12 month, 10% promissory notes for an aggregate principal amount of $10,000.  From March 3, 2010, to March 23, 2010, we closed an additional private placement of our 12 month, 10% promissory notes for an aggregate principal amount of $11,500.  In these private placements, we offered and sold these notes to our Chief Executive Officer and three of our other stockholders. On December 22, 2010, the first closing of our 2010/2011 Private Placement, we issued an aggregate of 1,260,000 additional shares of our restricted common stock to our Chief Executive Officer and these three stockholders upon the conversion of $31,500 of outstanding promissory notes held by these persons. These notes, which are discussed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2011, filed with the SEC on May 17, 2011, were amended by agreement to become convertible on the same terms as the Convertible Notes.

 

II-2
 

 

Item 16.  Exhibits.  

 

The following exhibits are filed as part of this Registration Statement.

In reviewing the agreements included (or incorporated by reference) as exhibits to this Registration Statement, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements. The agreements may contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the parties to the applicable agreement and:

 

¨should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

 

¨have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

 

¨may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and

 

¨were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

  

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this Registration Statement and the Company’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.

 

Exhibit

No.

 

SEC Report Reference

Number

  Description
2.1   2.1   Agreement and Plan of Merger and Reorganization dated July 11, 2007, among the Registrant, Cromwell Uranium Holdings, Inc. and Cromwell Acquisition Corp. (1)
         
3.1   3.1   Amended and Restated Articles of Incorporation of Registrant as filed with the Nevada Secretary of State on August 29, 2007 (2)
         
3.2   3.1   Certificate of Amendment to Articles of Incorporation of Registrant as filed with the Nevada Secretary of State on March 9, 2009 (3)
         
3.3   10.3   Certificate of Designation of Series A  Convertible Preferred Stock as filed with the Nevada Secretary of State on December 23, 2010 (4)
         
3.4   10.4   Certificate of Amendment to Articles of Incorporation of Registrant as filed with the Nevada Secretary of State on December 30, 2010 (5)
         
3.5   3.2   By-Laws of Registrant (6)
         
4.2   10.17   Form of Investor Warrant dated July 11, 2007, for purchase of Registrant’s common stock (1)

 

II-3
 

 

Exhibit

No.

 

SEC Report Reference

Number

  Description
4.3   10.3   Reversal Loan Promissory Note dated August 8, 2007 between the Registrant and Cromwell Uranium Holdings, Inc. (7)
         
4.4   4.4   Form of 0% Promissory Note of the Registrant dated September 9, 2009 through December 10, 2009 (12)
         
4.5   4.1   Form of 10% Promissory Note of the Registrant dated March 22, 2010 (8)
         
4.6   4.6   Form of 0% Convertible Promissory Note of the Registrant dated September 16, 2010 (12)
         
4.7   10.2   Form of Investor Warrant Dated December, 2010 for purchase of Registrant’s common stock (4)
         
5.1   *   Opinion of Gottbetter & Partners, LLP
         
10.1   10.1   Registrant’s 2007 Stock Option Plan adopted June 15, 2007, as amended  December 21, 2010 (12)
         
10.2   10.2   Form of 2007 Stock Option Plan Option Agreement (12)
         
10.3   10.15   Registration Rights Agreement dated July 11, 2007 among Registrant and the persons named therein (1)
         
10.4   10.1   Reversal Agreement dated August 8, 2007 between the Registrant, Robert McIntosh and Cromwell Uranium Holdings, Inc. (2)
         
10.5   10.2   Reversal Loan and Control Share Pledge and Security Agreement dated August 8, 2007 between the Registrant, Robert McIntosh and Cromwell Uranium Holdings, Inc. (5)
         
10.6   10.1   Restricted Stock Purchase Agreement dated November 12, 2007 between the Registrant and James D. Davidson (9)
         
10.7   10.1   Form of Subscription Agreement dated September __, 2008 among the Registrant, Gottbetter & Partners, LLP, as escrow agent, and the investors named therein (10)
         
10.8   10.8   Form of 12 month 0% Promissory Note Loan Agreement dated September __. 2009 by and among the Registrant and the Lenders named therein (12)
         
10.9   10.2   Form of 12 month 10% Promissory Note Loan Agreements dated December 10. 2009 and March 5, 2010 by and among the Registrant and the Lenders named therein (8)
         
10.10   10.10   Form of 12 month 0% Convertible Promissory Note Loan Agreement dated September 16, 2010 by and among the Registrant and the Lenders named therein (12)

 

II-4
 

 

Exhibit

No.

 

SEC Report Reference

Number

  Description
10.11   10.11   Form of Amendment to Promissory Notes Agreement dated October 29, 2010 by and among the Registrant and the Lenders named therein (12)
         
10.12   10.1   Form of Subscription Agreement among the Registrant, Gottbetter & Partners, as Escrow Agent, and purchasers of Registrant’s common stock (4)
         
10.13   10.4   Form of Subscription Agreement among the Registrant, Gottbetter & Partners, as Escrow Agent, and purchasers of Registrant’s Series A preferred Stock (4)
         
10.14   10.5   Form of Subscription Agreement Addendum of the Registrant dated December 22, 2010
         
10.15   10.15   Share Cancellation Agreement dated December 22, 2010 between the Registrant and James D. Davidson (12)
         
10.16   10.16   Consulting Agreement dated October 15, 2010 between the Registrant and Edward Karr (12)
         
10.17   10.17   Settlement Agreement dated December 15, 2010 between the Registrant and Gottbetter & Partners, LLP (12)
         
10.18   10.18   Administrative Services Agreement dated January 1, 2011 between the Registrant and Incorporated Communications Services (12)
         
10.19   10.19   Consulting Agreement dated January 17, 2011 between the Registrant and George Duggan (12)
         
10.20   10.20   Form of Consulting Agreement dated January 18, 2011 between the Registrant and Consultant (12)
         
10.21   10.21   Consulting Agreement dated January 28, 2011 between the Registrant and James D. Davidson (12)
         
10.22   10.22   Property Option Agreement dated February 11, 2011 among the Registrant, Mexivada Mining Corp. and the other parties named therein (12)
         
10.23   10.23   Form of Surface Rights Agreement dated May 2011 (English translation) (13)
         
10.24   10.24   Amendment dated June 6, 2011 to Consulting Agreement dated January 28, 2011 between the Registrant and James D. Davidson (13)
         
10.25   10.25   Consulting Agreement dated June 6, 2011 between the Registrant and Michael Baybak (13)
         
14.1   14.1   Code of Ethics (1)
         
16.1   16.1     Letter from Davis Accounting Group, P.C., dated July 8, 2010 to the SEC regarding statements included in Form 8-K (11)
         
21   21   List of Subsidiaries (12)

 

II-5
 

 

Exhibit

No.

 

SEC Report Reference

Number

  Description
         
23.1   *   Letter of Consent from Independent Registered Public Accounting Firm, MaloneBailey, LLP
         
23.2   *   Letter of Consent from Gottbetter & Partners, LLP (included in Exhibit 5.1)

 

 

* Filed herewith.

 

(1)Filed with the SEC on July 13, 2007, as an exhibit, numbered as indicated above, to the Registrant’s current report (SEC File No. 333-134549) on Form 8-K, which exhibit is incorporated herein by reference.

 

(2)Filed with the SEC on August 9, 2007, as an exhibit, numbered as indicated above, to the Registrant’s current report (SEC File No. 333-134549) on Form 8-K, which exhibit is incorporated herein by reference.

 

(3)Filed with the SEC on March 11, 2009, as an exhibit, numbered as indicated above, to the Registrant’s quarterly report (SEC File No. 333-134549) on Form 10-Q, which exhibit is incorporated herein by reference.

 

(4)Filed with the SEC on December 30, 2010, as an exhibit, numbered as indicated above, to the Registrant’s current report (SEC File No. 333-134549) on Form 8-K, which exhibit is incorporated herein by reference.

 

(5)Filed with the SEC on January 18, 2011, as an exhibit, numbered as indicated above, to the Registrant’s current report (SEC File No. 333-134549) on Form 8-K/A-1, which exhibit is incorporated herein by reference.

 

(6)Filed with the SEC on May 30, 2006, as an exhibit, numbered as indicated above, to the Registrant’s registration statement (SEC File No. 333-134549) on Form SB-2, which exhibit is incorporated herein by reference.

 

(7)Filed with the SEC August 9, 2007, as an exhibit, numbered as indicated above, to the Registrant’s current report (SEC File No. 333-134549) on Form 8-K, which exhibit is incorporated herein by reference.

 

(8)Filed with the SEC on June 14, 2010, as an exhibit, numbered as indicated above, to the Registrant’s quarterly report (SEC File No. 333-134549) on Form 10-Q, which exhibit is incorporated herein by reference.

 

(9)Filed with the SEC on November 11, 2007, as an exhibit, numbered as indicated above, to the Registrant’s current report (SEC File No. 333-134549) on Form 8-K, which exhibit is incorporated herein by reference.

 

(10)Filed with the SEC on December 15, 2008, as an exhibit, numbered as indicated above, to the Registrant’s quarterly report (SEC File No. 333-134549) on Form 10-Q, which exhibit is incorporated herein by reference.

 

(11)Filed with the SEC on July 9, 2010, as an exhibit, numbered as indicated above, to the Registrant’s current report (SEC File No. 333-134549) on Form 8-K, which exhibit is incorporated herein by reference.

 

(12)Filed with the Securities and Exchange Commission on May 17, 2011, as an exhibit, numbered as indicated above, to the Registrant’s annual report (SEC File No. 333-134549) on Form 10-K, which exhibit is incorporated herein by reference.

 

(13)Filed with the SEC on August 10, 2011, as an exhibit, numbered as indicated above, to the Registrant’s current report (SEC File No. 333-134549) on Form 8-K, which exhibit is incorporated herein by reference

 

II-6
 

 

Item 17.  Undertakings.

 

The undersigned registrant hereby undertakes:

 

1.           To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

 

i.To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
ii.To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;

 

iii.To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

 

2.           That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

3.          To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

 

4.           That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

 

5.           That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

 

i.Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

 

ii.Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

 

II-7
 

 

iii.The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

 

iv.Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

 

6.          Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the undersigned Registrant pursuant to the provisions described in Item 15 or otherwise, the Registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

 

II-8
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, on February 10, 2012.

 

  California Gold Corp.
     
  By: /s/ James D. Davidson
  Name: James D. Davidson
  Title: President and Chief Executive Officer

 

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated:

 

Signature   Title   Date
         
/s/ James D. Davidson   Principal Executive and Financial
Officer and Chairman of the
  February 10, 2012
James D. Davidson   Board of Directors    
         
/s/ David Rector   Director   February 10, 2012
David Rector        

 

 
 

 

EXHIBIT INDEX

 

Exhibit

No.

 

SEC Report Reference

Number

  Description
2.1   2.1   Agreement and Plan of Merger and Reorganization dated July 11, 2007, among the Registrant, Cromwell Uranium Holdings, Inc. and Cromwell Acquisition Corp. (1)
         
3.1   3.1   Amended and Restated Articles of Incorporation of Registrant as filed with the Nevada Secretary of State on August 29, 2007 (2)
         
3.2   3.1   Certificate of Amendment to Articles of Incorporation of Registrant as filed with the Nevada Secretary of State on March 9, 2009 (3)
         
3.3   10.3   Certificate of Designation of Series A  Convertible Preferred Stock as filed with the Nevada Secretary of State on December 23, 2010 (4)
         
3.4   10.4   Certificate of Amendment to Articles of Incorporation of Registrant as filed with the Nevada Secretary of State on December 30, 2010 (5)
         
3.5   3.2   By-Laws of Registrant (6)
         
4.2   10.17   Form of Investor Warrant dated July 11, 2007, for purchase of Registrant’s common stock (1)
         
4.3   10.3   Reversal Loan Promissory Note dated August 8, 2007 between the Registrant and Cromwell Uranium Holdings, Inc. (7)
         
4.4   4.4   Form of 0% Promissory Note of the Registrant dated September 9, 2009 through December 10, 2009 (12)
         
4.5   4.1   Form of 10% Promissory Note of the Registrant dated March 22, 2010 (8)
         
4.6   4.6   Form of 0% Convertible Promissory Note of the Registrant dated September 16, 2010 (12)
         
4.7   10.2   Form of Investor Warrant Dated December, 2010 for purchase of Registrant’s common stock (4)
         
5.1   *   Opinion of Gottbetter & Partners, LLP
         
10.1   10.1   Registrant’s 2007 Stock Option Plan adopted June 15, 2007, as amended  December 21, 2010 (12)
         
10.2   10.2   Form of 2007 Stock Option Plan Option Agreement (12)
         
10.3   10.15   Registration Rights Agreement dated July 11, 2007 among Registrant and the persons named therein (1)
         
10.4   10.1   Reversal Agreement dated August 8, 2007 between the Registrant, Robert McIntosh and Cromwell Uranium Holdings, Inc. (2)

 

 
 

 

Exhibit

No.

 

SEC Report Reference

Number

  Description
10.5   10.2   Reversal Loan and Control Share Pledge and Security Agreement dated August 8, 2007 between the Registrant, Robert McIntosh and Cromwell Uranium Holdings, Inc. (5)
         
10.6   10.1   Restricted Stock Purchase Agreement dated November 12, 2007 between the Registrant and James D. Davidson (9)
         
10.7   10.1   Form of Subscription Agreement dated September __, 2008 among the Registrant, Gottbetter & Partners, LLP, as escrow agent, and the investors named therein (10)
         
10.8   10.8   Form of 12 month 0% Promissory Note Loan Agreement dated September __. 2009 by and among the Registrant and the Lenders named therein (12)
         
10.9   10.2   Form of 12 month 10% Promissory Note Loan Agreements dated December 10. 2009 and March 5, 2010 by and among the Registrant and the Lenders named therein (8)
         
10.10   10.10   Form of 12 month 0% Convertible Promissory Note Loan Agreement dated September 16, 2010 by and among the Registrant and the Lenders named therein (12)
         
10.11   10.11   Form of Amendment to Promissory Notes Agreement dated October 29, 2010 by and among the Registrant and the Lenders named therein (12)
         
10.12   10.1   Form of Subscription Agreement among the Registrant, Gottbetter & Partners, as Escrow Agent, and purchasers of Registrant’s common stock (4)
         
10.13   10.4   Form of Subscription Agreement among the Registrant, Gottbetter & Partners, as Escrow Agent, and purchasers of Registrant’s Series A preferred Stock (4)
         
10.14   10.5   Form of Subscription Agreement Addendum of the Registrant dated December 22, 2010
         
10.15   10.15   Share Cancellation Agreement dated December 22, 2010 between the Registrant and James D. Davidson (12)
         
10.16   10.16   Consulting Agreement dated October 15, 2010 between the Registrant and Edward Karr (12)
         
10.17   10.17   Settlement Agreement dated December 15, 2010 between the Registrant and Gottbetter & Partners, LLP (12)
         
10.18   10.18   Administrative Services Agreement dated January 1, 2011 between the Registrant and Incorporated Communications Services (12)
         
10.19   10.19   Consulting Agreement dated January 17, 2011 between the Registrant and George Duggan (12)
         
10.20   10.20   Form of Consulting Agreement dated January 18, 2011 between the Registrant and Consultant (12)
         
10.21   10.21   Consulting Agreement dated January 28, 2011 between the Registrant and James D. Davidson (12)

 

 
 

 

Exhibit

No.

 

SEC Report Reference

Number

  Description
10.22   10.22   Property Option Agreement dated February 11, 2011 among the Registrant, Mexivada Mining Corp. and the other parties named therein (12)
         
10.23   10.23   Form of Surface Rights Agreement dated May 2011 (English translation) (13)
         
10.24   10.24   Amendment dated June 6, 2011 to Consulting Agreement dated January 28, 2011 between the Registrant and James D. Davidson (13)
         
10.25   10.25   Consulting Agreement dated June 6, 2011 between the Registrant and Michael Baybak (13)
         
14.1   14.1   Code of Ethics (1)
         
16.1   16.1     Letter from Davis Accounting Group, P.C., dated July 8, 2010 to the SEC regarding statements included in Form 8-K (11)
         
21   21   List of Subsidiaries (12)
         
23.1   *   Letter of Consent from Independent Registered Public Accounting Firm, MaloneBailey, LLP
         
23.2   *   Letter of Consent from Gottbetter & Partners, LLP (included in Exhibit 5.1)

 

 

* Filed herewith.

 

(1)Filed with the SEC on July 13, 2007, as an exhibit, numbered as indicated above, to the Registrant’s current report (SEC File No. 333-134549) on Form 8-K, which exhibit is incorporated herein by reference.

 

(2)Filed with the SEC on August 9, 2007, as an exhibit, numbered as indicated above, to the Registrant’s current report (SEC File No. 333-134549) on Form 8-K, which exhibit is incorporated herein by reference.

 

(3)Filed with the SEC on March 11, 2009, as an exhibit, numbered as indicated above, to the Registrant’s quarterly report (SEC File No. 333-134549) on Form 10-Q, which exhibit is incorporated herein by reference.

 

(4)Filed with the SEC on December 30, 2010, as an exhibit, numbered as indicated above, to the Registrant’s current report (SEC File No. 333-134549) on Form 8-K, which exhibit is incorporated herein by reference.

 

(5)Filed with the SEC on January 18, 2011, as an exhibit, numbered as indicated above, to the Registrant’s current report (SEC File No. 333-134549) on Form 8-K/A-1, which exhibit is incorporated herein by reference.

 

(6)Filed with the SEC on May 30, 2006, as an exhibit, numbered as indicated above, to the Registrant’s registration statement (SEC File No. 333-134549) on Form SB-2, which exhibit is incorporated herein by reference.

 

(7)Filed with the SEC August 9, 2007, as an exhibit, numbered as indicated above, to the Registrant’s current report (SEC File No. 333-134549) on Form 8-K, which exhibit is incorporated herein by reference.

 

(8)Filed with the SEC on June 14, 2010, as an exhibit, numbered as indicated above, to the Registrant’s quarterly report (SEC File No. 333-134549) on Form 10-Q, which exhibit is incorporated herein by reference.

 

 
 

 

(9)Filed with the SEC on November 11, 2007, as an exhibit, numbered as indicated above, to the Registrant’s current report (SEC File No. 333-134549) on Form 8-K, which exhibit is incorporated herein by reference.

 

(10)Filed with the SEC on December 15, 2008, as an exhibit, numbered as indicated above, to the Registrant’s quarterly report (SEC File No. 333-134549) on Form 10-Q, which exhibit is incorporated herein by reference.

 

(11)Filed with the SEC on July 9, 2010, as an exhibit, numbered as indicated above, to the Registrant’s current report (SEC File No. 333-134549) on Form 8-K, which exhibit is incorporated herein by reference.

 

(12)Filed with the Securities and Exchange Commission on May 17, 2011, as an exhibit, numbered as indicated above, to the Registrant’s annual report (SEC File No. 333-134549) on Form 10-K, which exhibit is incorporated herein by reference.

 

(13)Filed with the SEC on August 10, 2011, as an exhibit, numbered as indicated above, to the Registrant’s current report (SEC File No. 333-134549) on Form 8-K, which exhibit is incorporated herein by reference