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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended: December 31, 2011

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

SHAMIKA 2 GOLD, INC.

(Exact name of registrant as specified in its charter)

 

Nevada 000-52689  98-0448154
(State or Other Jurisdiction (Commission File (I.R.S. Employer
of Incorporation) Number) Identification Number)

 

1350 Broadway, 11th Floor

New York, New York 10018

(Address of principal executive offices)

 

(Registrant's telephone number, including area code (212) 216-8000)

 

Securities registered under Section 12(b) of the Exchange Act: None

 

Securities registered under Section 12(g) of the Exchange Act: Common Stock, par value $0.00001 per share.

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes ¨ No x

 

Indicate by a check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.       Yes ¨      No x

 

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes    x     No ¨

 

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months ( or for such shorter period that the registrant was required to submit and post such files.

 

Yes x No¨

 

 

 
 

  

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosures will be contained, to the best of issuer's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

 

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 definitions of “large accelerated filer”, “accelerated filer”, or “smaller reporting company in Rule 12b-2 of the Exchange Act (check one):

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ¨ No x

 

Registrant’s revenues for its most recent fiscal year: $0.00

 

The aggregate market value of the common stock, $0.00001 par value, held by non-affiliates of the issuer, based upon the closing price of Common Stock on June 30, 2011, as reported on the Over the Counter Bulletin Board under the symbol “SHMX.OB,” was approximately $2,232,368.

 

The number of shares outstanding of each class of our common equity as of April 13, 2012 is as follows: 

 

Class of Common Equity   Number of Shares
Common Stock, par value $0.00001   297,004,053

 

Transitional Small Business Disclosure Format (check one): Yes ¨ No x

 

 

2
 

 

 

TABLE OF CONTENTS

 

PART I
     
Item 1.   Business   5
Item 1A   Risk Factors   12
Item 1B   Unresolved Staff Comments   18
Item 2.   Properties   18
Item 3.   Legal Proceedings   19
Item 4.   Mine Safety Disclosures   19
         
         
PART II
Item 5.   Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities   19
Item 6.   Selected Financial Data   24
Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations   24
Item 7A   Quantitative and Qualitative Disclosures About Market Risk   28
Item 8.   Financial Statements and Supplementary Data   29
Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure   29
Item 9A   Controls and Procedures   29
Item 9B.   Other Information   32
         
PART III
Item 10.   Directors, Executive Officers and Corporate Governance   32
Item 11.   Executive Compensation   33
Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters   35
Item 13.   Certain Relationships and Related Transactions and Director Independence   35
Item 14.   Principal Accountant Fees and Services   36
         
PART IV
Item 15.   Exhibits, Financial Statement Schedules   36
         
    SIGNATURES   39

 

 

3
 

  

PART I

 

Forward-Looking Statements

 

The following discussion should be read in conjunction with our audited Financial Statements and Notes thereto included herein beginning on page F-1.

 

Certain statements in this Report may include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended and the Private Securities Litigation Reform Act of 1995, as amended. We intend that such forward-looking statements be subject to the safe harbors created thereby.

 

All such forward-looking information involves risks and uncertainties and may be affected by many factors, some of which are beyond our control. These factors may include, without limitation:

  Develop the reputation of Shamika 2 Gold, Inc. (“S2G”) as a successful mining property acquisition and exploration company;
  Successfully identify and exploit mining opportunities;
  Develop viable strategic alliances; and
  Maintain sufficient volume of successful new mining opportunities.
  Regulatory, competitive or other economic influences.

 

Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Factors that may cause actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without limitation:

 

●   Our ability to obtain additional funding as the exploration for commercially exploitable mineral deposits or reserves, as well as general, legal, accounting and administrative expenses associated with our reporting requirements with the SEC, is expected to require from us total expenditures over the next two years in an approximate amount of $2,000,000.
●   Our ability to obtain additional funding as we presently do not have sufficient funds to pursue our stated plan of operation for the next twelve-month period.

●   Our ability to be successful in our acquisition and exploration of gold and mineral properties activities.
●   Our ability to attract and retain management.

●   The intensity of competition for commercially exploitable mineral deposits or reserves; and existing and potential performance issues with suppliers and customers;
●   governmental export and import policies;

●   global trade policies;
●   worldwide political stability and economic growth;

●   potential entry of new, well-capitalized competitors into our markets;
●   changes in our capital structure and cost of capital; and

●   general economic conditions.

 

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The words “believe”, “expect”, “anticipate”, “intend”, “project”, “estimate” and “plan” or the negative or other variations, or by discussions of strategy that involve risks and uncertainties, identify forward-looking statements. We urge you to be cautious of the forward-looking statements, that such statements, which are contained in this Annual Report, reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors affecting our operations, market growth, services, products and licenses. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of the risks we face, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events.

 

When we express an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have reasonable basis. However, our forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by those forward-looking statements. Such risks include, but are not limited to: currency fluctuations; geological and metallurgical assumptions; minerals assumptions, processes and facilities; labor relations; timing of receipt of necessary governmental permits or approvals; domestic and foreign laws or regulations, particularly relating to the environment and mining; domestic and international economic and political conditions: our ability to obtain or maintain necessary financing; other risks and hazards associated with mining exploration and development. More detailed information regarding these risk factors is included in this filing under Risk Factors, and elsewhere throughout this report. Given these uncertainties, readers are cautioned not to place undue reliance on our forward-looking statements.

 

All subsequent written and oral forward-looking statements attributable to Shamika 2 Gold or to persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Shamika 2 Gold disclaims any intention or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

 

References in this Annual Report on Form 10-K (the “Annual Report”) to “we”, “us,” “our,” “Registrant,” “the Company,” “Shamika 2 Gold” and “S2G” mean Shamika 2 Gold, Inc. and our subsidiaries, unless the context otherwise requires.

 

ITEM 1. BUSINESS

 

Description of Business

 

Corporate History

 

The Company was first known as Katie Gold Corp. (“Katie Gold”), incorporated under the laws of the State of Nevada on January 26, 2005. It was primarily engaged in the acquisition and exploration of mining properties.

 

On July 21, 2005, Katie Gold became a mandatory fully reporting issuer with the SEC by way of filing a Form SB-2, prospectus.

 

On February 9, 2006, Katie Gold obtained a listing on the OTC Bulletin Board and its stock commenced trading on March 22, 2006 under the OTC symbol “KGOC.OB”.

 

On March 21, 2006, the Company changed its name to Morningstar Industrial Holdings Corp. As a result, the Company’s trading symbol changed to "MSIH.OB".

 

On April 26, 2006, by Articles of Merger, the Company merged with a private Nevada company named New World Entertainment Corp. and assumed that name. As a result, the Company’s trading symbol changed to "NWWE.OB".

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On January 18, 2007, the Company changed its name to Aultra Gold, Inc. (“Aultra USA”). As a result, the Company’s trading symbol changed to "AGDI.OB".

 

On January 22, 2007, Aultra USA entered into a Share Exchange Agreement (the "Agreement") with Strategic Minerals Inc., a Nevada corporation,  Aultra Gold Inc. (f/k/a Dutch Mining (Canada) Ltd.) (“Aultra Canada”), a company formed under the laws of the Province of British Columbia, and certain other shareholders of Aultra Canada. Pursuant to the Agreement, which was subject to certain regulatory approval, Aultra USA agreed to acquire 100% of the outstanding equity of Aultra Canada from its stockholders (the “Aultra Canada Shareholders”) in exchange for the issuance by Aultra USA of one share of common stock, $0.001 par value (the “Common Stock”), of the Company for each issued common share of Aultra Canada (the “Acquisition”).

 

On December 31, 2009, pursuant to a Stock Purchase Agreement by and among Dutch Gold, Rauno Perttu, Strategic Minerals Inc., and Aultra Gold Capital Inc., a Turks and Caicos corporation, Dutch Gold acquired controlling interest of Aultra USA for a purchase price of One Million newly-issued shares of Dutch Gold’s common stock, par value 0.001 per share.

 

On January 6, 2010, Dutch Gold Resources, Inc. (“Dutch Gold”), a Nevada corporation acquired all of the assets of Aultra USA.

 

On March 2, 2010, the Company filed a Certificate of Amendment amending and restating its Articles of Incorporation to increase its capitalization from (i) 150,000,000 to 510,000,000, of which 500,000,000 shares will be Common Stock and 10,000,000 shares will be preferred stock par value $0.001 per share (the “Preferred Stock”), (ii) effect a forward split of the Corporation’s Common Stock on a 1 for 10 basis and (iii) authorize the Board of Directors to provide for the issuance of shares of Preferred Stock in series and, by filing a certificate pursuant to the Nevada Revised Statutes, to establish from time to time the number of shares to be included in each such series, and to fix the designation, power, preferences and rights of the shares of each such series and the qualifications, limitations and restrictions thereof.

 

On March 24, 2010, the Company filed a Certificate of Change to its Articles of Incorporation to decrease the number of authorized shares of Common Stock from 500,000,000 to 50,000,000 and concurrently effecting a 1 for 10 reverse split of the Company’s issued and outstanding shares of Common Stock and change in par value $0.001 per share to par value $0.00001 per share.

 

On March 26, 2010, Aultra USA entered into an Agreement and Plan of Share Exchange (the “Exchange Agreement”) with Shamika Gold, Inc., a Canadian corporation (“Shamika”), and the stockholders of Shamika (the “Shamika Stockholders”) whereby Aultra USA acquired all of the issued and outstanding capital stock of Shamika in exchange (the “Exchange”) for 25,500,000 newly issued shares of Common Stock par value $0.00001 per share (the “Common Exchange Shares”).  As a result of the Exchange, Shamika became a wholly-owned subsidiary of the Company.  The Company shares were issued to the Shamika Holders on a pro rata basis, on the basis of the shares held by such Shamika Holders at the time of the Exchange. Shamika Resources Inc., a Canadian private company became the controlling shareholder (51%) of the Company.  Further to the transaction, Aultra USA changed its name to Shamika 2 Gold, Inc. As a result, the Company’s trading symbol changed to “SHMX”.

 

Upon completion of the Exchange transaction, the board of directors and officers was reconstituted by the resignation of: Rauno Perttu from his role as President, Secretary and director, Daniel Hollis from his role as Chief Financial Officer and director, Lance Rosemarin from his role as director.

 

As of the date of this filing, the Board of directors of the Company consists of Mr. Henry Riedl, and Mr. Kim Koffel.

 

The officers of the Company are, as at the date of this filing, Mr. Henry Riedl, President, Chief Executive Officer, Chief Financial Officer and Corporate Secretary.

 

 

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General Overview of Business

 

S2G is engaged in the business of acquiring and exploring gold and mineral properties principally located in Canada, with the objective of identifying gold and mineralized deposits economically worthy of continued production and/or subsequent development, mining or sale.

 

Recent Developments

 

Congo Property

 

On April 2, 2010, the Company acquired production exploration permits located in the Democratic Republic of Congo for the sum of $500,000. On April 6, 2011, the Company assigned all rights and interests in the assets and liabilities of its mineral rights in the Congo to a related company, Shamika Congo Kahele SPRL. The Company has no further operations or interests in the Congo.

 

 

Cambodia Property

 

On February 25, 2011 (“Closing”), S2G entered into the First Amendment to the Agreement and Plan of Securities Exchange (the “Agreement”) with MIG International Mining Group, a company organized under the laws of the Republic of Mauritius (“MIG Mauritius”), certain shareholders of MIG Mauritius (the “MIG Mauritius Holders”) and Millennium International Group, LLC, a California limited liability company (“MIG US,” and collectively with the MIG Mauritius Holders, the “MIG Mauritius Holders”).

 

Pursuant to the Agreement, the Company agreed to acquire 85% of the outstanding equity of MIG Mauritius (“MIG Mauritius Shares”), from the MIG Mauritius holders solely in exchange for an aggregate for fifty-seven million (57,000,000) newly issued shares of the Company’s common stock (“Common Stock”), par value $0.00001 per share (“Shamika Exchange Shares”) and five hundred thousand (500,000) shares of the Company’s Series B Performing Preferred Stock, par value $0.00001 per share (the “Performing Preferred Shares”). The result would have entitled the Company to receive a dividend equal to forty-five percent (45%) of the net operating profit, after taxes, of MIG’s mining project operations in Samlaut, Cambodia (the “Performing Preferred Shares”, collectively with the Shamika Exchange Shares, the “Exchange Shares”).  The Shamika Exchange Shares were to be issued to the MIG Mauritius Holders on a pro rata basis, on the basis of the shares held by such MIG Mauritius Holders at the time of the Exchange. The deal was expected to close following the completion of funding certain investment commitments to the project. Following the closing, the former holders of the Shamika Exchange Shares would have beneficially owned approximately 51% of the outstanding shares of our Common Stock and 100% of the total outstanding shares of Performing Preferred Shares.

 

In addition, the Company agreed to provide the project financing, required for the realization of the exploration and exploitation projects related to: the 254km2 property in Samlaut District, Battambang and Pailin provinces, in the Kingdom of Cambodia; the 94km2 property in Kompovpur Village, Samlaut District, in Battambang province, Kingdom of Cambodia; and other projects, subject to board approval.

 

During the fourth quarter of 2011, due to the inability of the Company to raise the required financing needed to obtain the permits and further the project, the Agreement was nullified and the project discontinued. Each party to the Agreement released the other from any claims. The Company has no further operations or interests in Cambodia.

 

Quebec Property

 

On December 20, 2010, the Company entered into the Montclerg Property- Property Sale Agreement (the “Agreement”) with Lam Chan Tho (“Tho”). Pursuant to the Agreement, the Company acquired all of the interests in certain mineral claims owned by Tho in consideration for five million shares of the Company’s Common Stock, and payment of a royalty of two and one half percent of the net smelter returns, as further described in the Agreement. No activity was incurred on this site in 2011. The Company plans to expend resources to explore and further develop this claim in 2012.

 

 

7
 

 

Dutch Gold Inc. – Subscription Agreements

 

On November 16, 2010, Dutch Gold Resources, Inc. executed a Subscription Agreement to purchase up to $2,000,000 of units in the Company's private placement offering. As of December 31, 2011 and 2010, the Company had received a total of $200,000 and $100,000, respectively in payments from Dutch Gold for 8 and 4 units, respectively. Each unit is comprised of 83,334 common shares and 41,667 warrants of the Company’s common stock. The exercises of the Subscription Agreements with Dutch Gold resulted in the issuance of a total of 666,672 shares of common stock of the Company, par value $0.00001 per share, and the issuance of a total of 333,336 Warrants of the Company’s common stock at the exercise price of $0.50 per share and expiring in three years.  All of the Warrants are subject to a mandatory exercise provision which will require Dutch Gold to exercise the Warrants provided that the average closing price of the Company’s Common Stock has been equal to or greater than $0.75 for ten consecutive trading days.

 

Loan Agreements

 

Asher Enterprises Inc.

 

On December 14, 2010, the Company issued a Secured Convertible Note in the amount of $78,500 to Asher Enterprises Inc. due 9 months after issuance and bearing interest at the rate of 8% per annum.  The note is convertible into common shares of the Company at any time during the period beginning on the date of the Note and ending on the complete satisfaction of the Note.  The conversion price shall equal the Variable Conversion Price defined as 58% multiplied by the Market Price defined as the average of the lowest 3 Trading Prices on the OTCBB during the 10 day trading period ending one day prior to the date of Conversion Notice.  In the event of default, the Note is immediately payable and the minimum amount due is 150% times (outstanding principal + unpaid interest).  On June 21, 2011, the Convertible Note and the accrued interest were converted to 1,223,988 common shares of the Company.

 

On January 3, 2011, the Company issued a Secured Convertible Note in the amount of $50,000 to Asher Enterprises Inc. due September 3, 2011 and bearing interest at the rate of 8% per annum.  The note is convertible into common shares of the Company at any time from January 3, 2011 and ending on the complete satisfaction of the Note.  The conversion price shall equal the Variable Conversion Price defined as 58% multiplied by the Market Price defined as the average of the lowest 3 Trading Prices on the OTCBB during the 10 day trading period ending one day prior to the date of Conversion Notice.  In the event of default, the Note is immediately payable and the minimum amount due in default is 150% of outstanding principal plus unpaid interest. In July, 2011, the Convertible Note was converted to 1,696,455 common shares of the Company.

 

On March 3, 2011,  the Company issued a Secured Convertible Note in the amount of $53,000 to Asher Enterprises Inc. due 9 months after issuance and bearing interest at the rate of 8% per annum.  The note is convertible into common shares of the Company at any time during the period beginning on the date of the Note and ending on the complete satisfaction of the Note.  The conversion price shall equal the Variable Conversion Price defined as 58% (later amended to 31%) multiplied by the Market Price defined as the average of the lowest 3 Trading Prices on the OTCBB during the 10 day trading period ending one day prior to the date of Conversion Notice.  In the event of default, the Note is immediately payable and the minimum amount due is 150% of outstanding principal plus unpaid interest.  In multiple transactions from September to December 2011, the Convertible Note and accrued interest were converted to 30,775,032 common shares of the Company.

 

On April 28, 2011,  the Company issued a Secured Convertible Note in the amount of $50,000 to Asher Enterprises Inc. due 9 months after issuance and bearing interest at the rate of 8% per annum.  The note is convertible into common shares of the Company at any time during the period beginning on the date of the Note and ending on the complete satisfaction of the Note.  The conversion price shall equal the Variable Conversion Price defined as 58% (later amended to 31%) multiplied by the Market Price defined as the average of the lowest 3 Trading Prices on the OTCBB during the 10 day trading period ending one day prior to the date of Conversion Notice.  In the event of default, the Note is immediately payable and the minimum amount due is 150% of outstanding principal plus unpaid interest.  Asher can request payment in shares. In December 2011, $15,600 of the face value of the note was converted to 49,550,756 common shares of the Company.

 

 

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On June 28, 2011,  the Company issued a Secured Convertible Note in the amount of $50,000 to Asher Enterprises Inc. due 9 months after issuance and bearing interest at the rate of 8% per annum.  The note is convertible into common shares of the Company at any time during the period beginning on the date of the Note and ending on the complete satisfaction of the Note.  The conversion price shall equal the Variable Conversion Price defined as 52% multiplied by the Market Price defined as the average of the lowest 3 Trading Prices on the OTCBB during the 10 day trading period ending one day prior to the date of Conversion Notice.  In the event of default, the Note is immediately payable and the minimum amount due is 150% of outstanding principal plus unpaid interest.  Asher can request payment in shares.

 

On September 19, 2011,  the Company issued a Secured Convertible Note in the amount of $8,500 to Asher Enterprises Inc. due 9 months after issuance and bearing interest at the rate of 8% per annum.  The note is convertible into common shares of the Company at any time during the period beginning on the date of the Note and ending on the complete satisfaction of the Note.  The conversion price shall equal the Variable Conversion Price defined as 31% multiplied by the Market Price defined as the average of the lowest 3 Trading Prices on the OTCBB during the 10 day trading period ending one day prior to the date of Conversion Notice.  In the event of default, the Note is immediately payable and the minimum amount due is 150% of outstanding principal plus unpaid interest.  Asher can request payment in shares.

 

War Chest Capital Multi-Strategy Fund LLC

 

On March 2, 2011 the Company issued a Secured Convertible Note in the amount of $102,500 to War Chest Capital Multi-Strategy Fund LLC., due September 2, 2011 and bearing interest at the rate of 9.875% per annum.  The note is convertible into common shares of the Company at any time during the period beginning on the date of the Note and ending on the complete satisfaction of the Note.  The lender has the option to convert the outstanding principal and interest of this Note into fully-paid and non-assessable shares of the Company’s Common Stock at a 30% discount to the Fair Market Value but not to exceed $0.75 per share.  In the event of default, the Note is immediately payable.  In the event of default, additional interest will accrue at the rate equal to the lesser of (i) 15% per annum in addition to the Interest Rate or (ii) the highest rate permitted by law, per annum until all outstanding principal, interest and fees are repaid in full. This note was repaid in full in August 2011.

 

Coventry Enterprises, LLC

 

On March 17, 2011, the Company issued a Convertible Note in the amount of $50,000 to Coventry Enterprises, LLC.  The note is convertible into common shares of the Company at any time during the period beginning on the date of the Note and ending on the complete satisfaction of the Note.  The Conversion Price per share of Common Stock shall be the lower of $.30 or thirty five percent (35%) of the average of the three lowest Volume Weighted Average Price (“VWAP”) prices of the Company’s Common Stock for the fifteen trading days preceding a Conversion Date. The VWAP will be determined by Bloomberg LP Professional Service. As compensation for entering into the note, the Company issued 50,000 shares of common stock to Coventry Enterprises, LLC.

 

Description of S2G’s Properties

 

Description of Montclerg

 

This project is situated on lands close to the town of St-Augustin de Woburn in an area known as the Eastern Townships, which is approximately 200 kilometres east of Montreal. The property consists of 23 mineral claims having an area of 17.5 square kilometres. Preliminary surveys have found traces of gold on the property and it is recommended that we undertake additional investigation to localize and determine the extent of the source. Our business plan calls for the completion of a 43-101 report and a program of further exploration based on the recommendations. This property has no known reserves and the proposed program is exploratory in nature. There are no current detailed plans to conduct exploration on the property.

 

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Mineralization:

 

Acquisition process of mineral rights

 

Mineral rights are acquired through solicitation as per the mining code established by the government of the country. The basis and duration of the mineral rights relate to the rules of the mining code of the concerned countries. These mining codes are readily available to the public for detailed information as per acquisition, mineral, surface, exploration, extraction licenses and rights.

 

Type of claims

 

The concessions are essentially alluvial and eluvial deposits. They are governmental exploration mining concessions.

 

Mineralization:

 

We plan to account for probable or proven reserves as defined by the SEC section (a) of Industry Guide 7. However, we have not completed the analysis to do so. We have utilized a cutting-edge remote exploration satellite technology to determine the probable reserves and this was followed with in the field geological samples, outcrops, holes, as explained below:

 

Montclerg Property

 

This project is situated on lands close to the town of St-Augustin de Woburn in an area known as the Eastern Townships, which is approximately 200 kilometres east of Montreal. The property consists of 23 mineral claims having an area of 17.5 square kilometres.

 

The company plans to conduct surveys and other exploration work amounting to approximately $2,000 per claim for an aggregate amount of $86,000 in 2012. The company also plans to prepare a 43-101 report at a cost of approximately $400,000.

 

Preliminary surveys have found traces of gold on the property and it is recommended that we undertake additional investigation to localize and determine the extent of the source. Property brooks Arnold Morin is located about 200 km east of Montreal and 35 km south of Lake Township Megantic in Woburn, about 15 km south of the village of St-Augustin de Woburn (maps 1: 50 000 sheets 21 th / 21 th and 2 / 7). Canada border - the U.S. is located near the eastern boundaries of the property. The property covers a total area of approximately 1750 hectares divided into a block of 41 contiguous lots. The property is situated in the southern Quebec Appalachians, in the region of the Megantic. The property sector includes, among other things, the massive Lake Chains and granite Devinien Lake to spiders. The formation of the Arnold River, part of the Chain Lakes massif, is regarded as a scale of Grenville. The rock formation is stuck in a thrust fault against the mixing unit Cambro-Ordovician. It consists of a mixture of meta-crystalline gray sandstone, more or less dark grained ranging from fine to medium. We also find granitic gneisses and quartzo-feldspathic granulites (Cheve, 1978). The thickness of this formation may reach several kilometers in the southern part of Quebec.1

 

An inspection of the Morin placer occurred on November 3 and 4, 2010. Two pannings were done in favorable places for gold deposition. Two gold nuggets were found in the second panning. The SM analysis suggests that the gold is coming from a regolith. This hypothesis is possible since the river valley is perpendicular to the main glacial flow in a similar way as Gilbert River and Mining brook, where gold-bearing placers are known. The valley is of SW-NE orientation. It is this orientation (perpendicular to the main glacial flow) that preserved the pre-Johnville sediments at Mining brook and at Gilbert River.

 

1 Prospect Report, Projet Ruisseau-Morin, par Bertrand Brassard, Géologue, M. Sc., January 1994

 

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Projected Costs for Plan of Mining Operations

 

Our business plan calls for significant expenses in connection with the mining plans for development of production on the properties. Until funding becomes available, the plan cannot be implemented.

 

We do not have sufficient funds to conduct the 2012 work phases and the Company will require additional financing in order to complete the exploration work.

 

Compliance with Government Regulation

 

We will be required to comply with all regulations, rules and directives of governmental authorities and agencies applicable to the exploration of minerals in Canada. Such operations are subject to various laws governing land use, the protection of the environment, production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, well safety and other matters. Unfavorable amendments to current laws, regulations and permits governing operations and activities of resource exploration companies, or more stringent implementation thereof, could have a materially adverse impact and cause increases in capital expenditures which could result in a cessation of operations. The Company has had no material costs related to compliance and/or permits, and anticipates no material costs in the next year.

 

We will have to sustain the cost of reclamation and environmental mediation for all exploration and development work undertaken. These costs are generally incurred as part of the mining process. To date, no mining has taken place so no liability has been incurred.  The amount of these costs is not known at this time as we do not know the extent of the exploration program that will be undertaken beyond completion of the currently planned work programs. Because there is presently no information on the size, tenor, or quality of any resource or reserve at this time, it is impossible to assess the impact of any capital expenditures on earnings or our competitive position in the event a potentially economic deposit is discovered.

 

If we enter into production, the cost of complying with permit and regulatory environment laws will be greater than in the exploration phases because the impact on the project area is greater.  Permits and regulations will control all aspects of any production program if the project continues to that stage because of the potential impact on the environment. Examples of regulatory requirements include:

 

  Water discharge will have to meet water standards;
  Dust generation will have to be minimal or otherwise re-mediated;
  Dumping of material on the surface will have to be re-contoured and re-vegetated;
  An assessment of all material to be left on the surface will need to be environmentally benign;
  Ground water will have to be monitored for any potential contaminants;
  The socio-economic impact of the project will have to be evaluated and if deemed negative, will have to be re-mediated; and
  There will have to be an impact report of the work on the local fauna and flora.

  

Competition

 

Many companies are engaged in the exploration and development of mineral properties. The Company is at a disadvantage with respect to those competitors whose technical staff and financial resources exceed the Company’s. Our lack of revenues and limited financial resources further hinder our ability to acquire additional mineral interest.

 

Employees

 

As of December 31, 2011, the Company had no full time employees. The Company anticipates that it will be conducting most of its business through agreements with consultants and third parties.

 

 

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ITEM 1A. RISK FACTORS

 

You should carefully consider the risks described below as well as other information provided to you in this document, including information in the section of this document entitled “Information Regarding Forward Looking Statements.” The risks and uncertainties described below are not the only ones facing the Company. Additional risks and uncertainties not presently known to the Company or that the Company currently believes are immaterial may also impair the Company’s business operations. If any of the following risks actually occur, the Company’s businesses, financial condition or results of operations could be materially adversely affected, the value of the Company common stock could decline, and you may lose all or part of your investment.

 

Risks Related to Our Financial Results:

 

Our company was recently formed, and we have not proven that we can generate a profit. If we fail to generate income and achieve profitability, an investment in our securities may be worthless.

 

We have no operating history and have not proved that we can operate successfully. We face all of the risks inherent in a new business.  From our inception on January 13, 2010 to the end of the period ended December 31, 2011, we have not earned any revenue. The exploration for commercially exploitable mineral deposits or reserves, as well as general, legal, accounting and administrative expenses associated with our reporting requirements with the SEC, is expected to require from us total expenditures over the next twelve months in an approximate amount of $500,000 . We presently do not have sufficient funds to pursue our stated plan of operation for the next twelve-month period. We will require additional financing for our operational expenses, and further exploration work for commercially exploitable mineral deposits or reserves.

 

We are seeking these additional funds via equity financing, private placements or loans from our directors or current shareholders. Currently, we do not have arrangements for additional funds. Your investments in our common stock must therefore be regarded as the placing of funds at a high risk in a recently formed company with all the unforeseen costs, expenses, problems, and difficulties to which such companies without proven record are subject to.

 

We have had losses since our inception. We expect losses to continue in the future and there is a risk we may never become profitable.

 

We have incurred losses of $2,811,768 during the year ended December 31, 2011.  In addition, during that period, we have a net working capital deficiency of $393,486 at December 31, 2011. We expect to continue to incur significant operating expenses as we maintain our current exploration programs.  Our operating expenses have been and are expected to continue to outpace revenues and result in significant losses in the near term. We may never be able to reduce these losses, which will require us to seek additional debt or equity financing. If such financing is available, of which there can be no assurance, you may experience significant additional dilution.

 

We have no operating history. There can be no assurance that we will be successful in growing our gold and other mineral exploration activities.

 

We have no history of operations. As a result, there can be no assurance that we will be successful in our acquisition and exploration of gold and mineral properties activities. Our success to date in entering into ventures to acquire mineral properties is not indicative that we will be successful in entering into any further ventures. Any potential for future growth in our mineral exploration activities will place additional demands on our executive officers, and any increased scope of our operations will present challenges due to our current limited management resources. Our future performance will depend upon our management and their ability to locate and negotiate additional exploration opportunities in which we are solely involved or participate in as a joint venture partner. There can be no assurance that we will be successful in our efforts. Our inability to locate additional opportunities, to hire additional management and other personnel, or to enhance our management systems, could have a material adverse effect on our results of operations. There can be no assurance that our operations will be profitable.

 

If we do not obtain additional financing, our business will fail.

 

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We need to obtain additional financing in order to pursue our business plan. We currently do not have any operations and we have no income. We do not have any arrangements for financing and we may not be able to find such financing if required. Obtaining additional financing would be subject to a number of factors, including investor acceptance of mineral claims and investor sentiment. These factors may adversely affect the timing, amount, terms, or conditions of any financing that we may obtain or make any additional financing unavailable to us.

 

Our independent auditors have expressed doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing.

 

In their report, our independent auditors stated that our accompanying financial statements filed herewith were prepared assuming that we will continue as a going concern. We are uncertain if we will have sufficient cash to operate for the next twelve months, our ability to sustain our operations beyond this period without further financing cannot be assured.

 

We continue to experience net operating losses. Our ability to continue as a going concern is subject to our ability to generate a profit and/or obtain necessary funding from outside sources, including obtaining additional funding from the sale of our securities, increasing sales or obtaining loans and grants from various financial institutions where possible. The going concern uncertainty modification in the auditor's report increases the difficulty in meeting such goals and there can be no assurances that such methods will prove successful.

 

Fluctuations in our operating results and announcements and developments concerning our business affect our stock price.

 

Our quarterly operating results, the number of stockholders desiring to sell their shares, changes in general economic conditions and the financial markets, the execution of new contracts and the completion of existing agreements and other developments affecting us, could cause the market price of our common stock to fluctuate substantially.

 

Our management believes that long-term profitability and growth will depend on its ability to:

 

§Develop the reputation of S2G as a successful mining property acquisition and exploration company;

 

§Successfully identify and exploit mining opportunities;

 

§Develop viable strategic alliances; and

 

§Maintain sufficient volume of successful new mining opportunities.

 

RISKS RELATED TO OUR BUSINESS AND OUR INDUSTRY

 

We will need to increase the size of our organization, and may experience difficulties in managing growth.

 

We are a small company with no employees as of December 31, 2011. We hope to experience a period of expansion in employees, facilities, infrastructure and overhead and anticipate that further expansion will be required to address potential growth and market opportunities. Future growth will impose significant added responsibilities on members of management, including the need to identify, recruit, maintain and integrate additional independent contractors and managers. Our future financial performance and our ability to compete effectively will depend, in part, on our ability to manage any future growth effectively.

 

We require additional working capital in order to achieve commercial production at the Montclerg Property.

 

The company has no current operating funds to complete the intended plan of mining operations for the Montclerg Property.  The Company does not have sufficient funds on hand for the unpaid amounts of our estimated costs related to maintaining the minimum annual payment obligations associated with the maintenance of the Montclerg Property as discussed in this Annual Report and our estimated administrative costs for 12 months from the date of this Annual Report. Therefore, we will need to obtain additional financing in order to complete our business plan. As of December 31, 2011, the Company had no cash. The Company has no income from operations.

 

 

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Our business plan calls for significant expenses in connection with the continued evaluation and development to production of the Montclerg Property. The Company does not have sufficient funds to conduct the initial mine development work on the property.  The Company will require additional financing in order to complete remaining phases of mine development and production capacity.

 

Our proposed exploration plan is dependent on additional financing.  After obtaining funding to conduct exploration and development, at the completion of each phase of our operating plan we will evaluate the results and make a determination to proceed to the next phase of mine development and its associated estimated cost.  The results of each phase of work will allow us to update our geological information on the properties and will be used to base our decision to proceed to the next phase of mine evaluation and development.

 

Each subsequent phase of mine development will require additional funds beyond the Company’s current cash resources. The Company will need to obtain additional financing from the sale of its securities to fund these operational expenditures and future administrative costs. Our administrative costs will be dependent upon the time frame undertaken to complete the remaining phases of our plan of mining operations. We do not have funding in our current operating funds sufficient to cover our administrative costs for the period of one year from the date of this Annual Report, which are estimated to be $350,000 .  To the extent we need more than one year to complete the remaining exploration or our administrative costs are higher than estimated, we will require additional financing to cover administrative costs.

 

We will require additional financing to sustain our business operations if we are not successful in earning revenues once initial production work is complete. We do not currently have any arrangements for financing and may not be able to find such financing if required. Obtaining additional financing would be subject to a number of factors, including the market price for gold and precious metals, investor acceptance of our property and general market conditions. These factors may make the timing, amount, terms or conditions of additional financing unavailable to us.

 

The most likely source of future funds presently available to us is through the sale of equity capital. Any sale of share capital will result in dilution to existing shareholders. The only other anticipated alternative for the financing of further exploration would be advances from related parties and joint venture or sale of a partial interests in the properties to a third party in exchange for cash or exploration expenditures, which is not presently contemplated.

  

Our officers and directors are involved in other businesses which may cause them to devote less time to our business.

 

Our officers' and directors' involvement with other businesses may cause them to allocate their time and services between us and other entities. Consequently, they may give priority to other matters over our needs which may materially cause us to lose their services temporarily which could affect our operations and profitability.

 

We are dependent on our management and the loss of any officer could hinder the implementation of our business plan.

 

We are heavily dependent on the members of our management team, the loss of any of whom could have a material adverse affect on our ability to implement our business plan. If, for some reason, the services of our management, or of any member of management, were no longer available to us, our operations and proposed businesses and endeavors may be materially adversely affected. There can be no assurance that our operating control systems will be adequate to support its future operations and anticipated growth. Failure to manage our growth properly could have a material adverse affect on our business, financial condition or result of operations.

 

The imprecision of mineral deposit estimates may prove any resource calculations that we make to be unreliable.

 

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Mineral deposit estimates and related databases are expressions of judgment based on knowledge, mining experience, and analysis of drilling results and industry practices. Valid estimates made at a given time may significantly change when new information becomes available. By their nature, mineral deposit estimates are imprecise and depend upon statistical inferences, which may ultimately prove unreliable. Mineral deposit estimates included here, if any, have not been adjusted in consideration of these risks and, therefore, no assurances can be given that any mineral deposit estimate will ultimately be reclassified as reserves.

 

We are sensitive to fluctuations in the price of gold and other minerals, which is beyond our control. The price of gold and other metals is volatile and price changes are beyond our control.

 

The prices for gold and other metals fluctuate and are affected by numerous factors beyond our control. Factors that affect the price of gold and other metals include consumer demand, economic conditions, over supply from secondary sources and costs of production. Price volatility and downward price pressure, which can lead to lower prices, could have a material adverse effect on the costs of and the viability of our projects.

 

Mineral exploration and prospecting is highly competitive and speculative business and we may not be successful in seeking available opportunities.

 

The process of mineral exploration and prospecting is a highly competitive and speculative business. In seeking available opportunities, we will compete with a number of other companies, including established, multi-national companies that have more experience and financial and human resources than us. Because we may not have the financial and managerial resources to compete with other companies, we may not be successful in our efforts to acquire new projects. However, while we compete with other exploration companies, there is no competition for the exploration or removal of mineral from our claims.

 

Mining and exploration activities are subject to extensive regulation by Federal and State governments. Future changes in governments, regulations and policies, could adversely affect our results of operations for a particular period and our long-term business prospects.

 

Mining and exploration activities are subject to extensive regulation by Federal and State Governments. Such regulation relates to production, development, exploration, exports, taxes and royalties, labor standards, occupational health, waste disposal, protection and remediation of the environment, mine and mill reclamation, mine and mill safety, toxic substances and other matters. Compliance with such laws and regulations has increased the costs of exploring, drilling, developing, constructing, operating mines and other facilities. Furthermore, future changes in governments, regulations and policies, could adversely affect our results of operations in a particular period and its long-term business prospects.

 

The development of mines and related facilities is contingent upon governmental approvals, which are complex and time consuming to obtain and which, depending upon the location of the project, involve various governmental agencies. The duration and success of such approvals are subject to many variables outside of our control.

 

Because of the inherent dangers involved in mineral exploration and production, there is a risk that we may incur liability or damages as we conduct our business.

 

Exploration and establishment of mining operations to production involves numerous hazards. As a result, the Company may become subject to liability for such hazards, including pollution, cave-ins and other hazards against which the Company cannot insure or against which the Company may elect not to insure. The payment of such liabilities may have a material adverse effect on the Company’s financial position.

 

If we do not conduct mineral exploration on our mineral claims and keep the claims in good standing, then our right to the mineral claims will lapse and we will lose everything that we have invested and expended towards these claims.

 

We must complete mineral exploration work on our mineral claims and keep the claims in good standing. If we do not fulfill our work commitment requirements on our claims or keep the claims in good standing, then our right to the claims will lapse and we will lose all interest that we have in these mineral claims.

 

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We are subject to compliance with securities law, which exposes us to potential liabilities, including potential rescission rights.

 

We have periodically offered and sold our common stock to investors pursuant to certain exemptions from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) as well as those of various state securities laws. The basis for relying on such exemptions is factual; that is, the applicability of such exemptions depends upon our conduct and that of those persons contacting prospective investors and making the offering. We have not received a legal opinion to the effect that any of our prior offerings were exempt from registration under any federal or state law. Instead, we have relied upon the operative facts as the basis for such exemptions, including information provided by investors themselves.

 

If any prior offering did not qualify for such exemption, an investor would have the right to rescind its purchase of the securities if it so desired. It is possible that if an investor should seek rescission, such investor would succeed. A similar situation prevails under state law in those states where the securities may be offered without registration in reliance on the partial preemption from the registration or qualification provisions of such state statutes under the National Securities Markets Improvement Act of 1996. If investors were successful in seeking rescission, we would face severe financial demands that could adversely affect our business and operations. Additionally, if we did not in fact qualify for the exemptions upon which it has relied, we may become subject to significant fines and penalties imposed by the SEC and state securities agencies.

  

RISKS RELATED TO OUR COMMON STOCK

 

There is only a limited trading market for our common stock.

 

Our common stock is quoted on the Over the Counter Bulletin Board quotation service. Our shareholders may not be able to use their shares for collateral or loans and may not be able to liquidate at a suitable price in the event of an emergency. In addition, our shareholders may not be able to resell their shares at or above the price they paid for them or may not be able to sell the shares at all. Accordingly, there can be no assurance as to the liquidity of any markets that may develop for the securities, the ability of holders of the securities to sell their securities, or the prices at which holders may be able to sell their securities.

 

The shares of common stock eligible for future sale could negatively affect the market price of our common stock.

 

As of April 13, 2012 the Company has approximately a total of 297,004,053 shares of Common Stock issued and outstanding. If the Company's stockholders sell substantial amounts of the Company's common stock in the public market, including shares issued upon the exercise of outstanding options or warrants, the market price of its common stock could fall. These sales also may make it more difficult for the Company to sell equity or equity-related securities in the future at a time and price that the Company deems reasonable or appropriate. Stockholders who have been issued shares in the Acquisition will be able to sell their shares pursuant to Rule 144 under the Securities Act of 1933, beginning one year after the stockholders acquired their shares.

 

Our common stock may be deemed to be a penny stock and, as such, we are subject to the risks associated with “penny stocks”. Regulations relating to “penny stocks” limit the ability of our shareholders to sell their shares and, as a result, our shareholders may have to hold their shares indefinitely.

 

Our common stock is currently listed for trading on the Over the Counter Market, which is generally considered to be a less efficient market than markets such as NASDAQ or other national exchanges, and which may cause difficulty in obtaining future financing. Furthermore, our common stocks may be deemed to be “penny stock” as that term is defined in Regulation Section “240.3a51 -1” of the Securities and Exchange Commission (the “SEC”). Penny stocks are stocks: (a) with a price of less than U.S. $5.00 per share; (b) that are not traded on a “recognized” national exchange; (c) whose prices are not quoted on the NASDAQ automated quotation system (NASDAQ -where listed stocks must still meet requirement (a) above); or (d) in issuers with net tangible assets of less than U.S. $2,000,000 (if the issuer has been in continuous operation for at least three years) or U.S. $5,000,000 (if in continuous operation for less than three years), or with average revenues of less than U.S. $6,000,000 for the last three years.

 

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Section “15(g)” of the United States Securities Exchange Act of 1934, as amended, and Regulation Section “240.15g(c) 2” of the SEC require broker dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor’s account. Potential investors in the Company’s common shares are urged to obtain and read such disclosure carefully before purchasing any common shares that are deemed to be “penny stock”.

 

Moreover, Regulation Section “240.15g -9” of the SEC requires broker dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker dealer to: (a) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (b) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (c) provide the investor with a written statement setting forth the basis on which the broker dealer made the determination in (ii) above; and (d) receive a signed and dated copy of such statement from the investor confirming that it accurately reflects the investor’s financial situation, investment experience and investment objectives.

 

Compliance with these requirements may make it more difficult for investors in the Company’s common shares to resell their common shares to third parties or to otherwise dispose of them. Stockholders should be aware that, according to Securities and Exchange Commission Release No. 34-29093, dated April 17, 1991, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include:

 

(i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;

 

(ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;

 

(iii) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons;

 

(iv) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and   

 

(v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses.

 

Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities.

 

As an issuer of “penny stock” the protection provided by the federal securities laws relating to forward looking statements does not apply to us.

 

Although the federal securities law provides a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, if we are a penny stock we will not have the benefit of this safe harbor protection in the event of any claim that the material provided by us contained a material misstatement of fact or was misleading in any material respect because of our failure to include any statements necessary to make the statements not misleading.

 

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Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and operating results and stockholders could lose confidence in our financial reporting.

 

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. If we cannot provide reliable financial reports or prevent fraud, our operating results could be harmed. Failure to achieve and maintain an effective internal control environment, regardless of whether we are required to maintain such controls could also cause investors to lose confidence in our reported financial information, which could have a material adverse effect on our stock price.

 

Shares eligible for future sale, if at all, may adversely affect the market price of our common stock, as the future sale of a substantial amount of our restricted stock in the public marketplace could reduce the price of our common stock.

 

From time to time, certain of our stockholders may be eligible, if at all, to sell all or some of their shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144, promulgated under the Securities Act (“Rule 144”), subject to certain limitations. In general, pursuant to Rule 144, a stockholder (or stockholders whose shares are aggregated) who has satisfied a one-year holding period may, under certain circumstances, sell within any three-month period a number of securities which does not exceed the greater of 1% of the then outstanding shares of common stock or the average weekly trading volume of the class during the four calendar weeks prior to such sale. Rule 144 also permits, under certain circumstances, the sale of securities, without any limitations, by a non-affiliate of our company that has satisfied a two-year holding period. Any substantial sale of common stock pursuant to Rule 144 or pursuant to any resale prospectus may have an adverse effect on the market price of our securities.

 

We do not expect to pay dividends in the future. Any return on investment may be limited to the value of the Company’s stock.

 

We do not anticipate paying cash dividends on our stock in the foreseeable future. The payment of dividends on our stock will depend on our earnings, financial condition and other business and economic factors affecting us at such time as the board of directors may consider relevant. If we do not pay dividends, its stock may be less valuable because a return on your investment will only occur if our stock price appreciates.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

None.

  

ITEM 2. PROPERTIES

 

Principal Executive Offices

 

We currently have an arrangement to maintain our main office located at 1350 Broadway, New York, New York 10018.

 

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Minerals Properties

 

For a further description of our properties, see Item 1 “Description of Business”

 

ITEM 3. LEGAL PROCEEDINGS

 

From time to time, we are involved in claims and suits that arise in the ordinary course of our business. Although management currently believes that resolving any such claims against us will not have a material adverse impact on our business, financial position or results of operations, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future. Except as disclosed herein, we are not aware of any material, existing or pending legal proceedings nor are we involved as a plaintiff in any material proceeding or pending litigation.

 

The Company was named as a defendant in a civil suit commenced in the Vancouver Supreme Court, British Columbia, Canada in an action entitled Al Kassab v. Dutch Gold Resources, Inc., Shamika 2 Gold, Inc., et. al.. The Plaintiff alleges that he was entitled to receive 400,000 shares of the Company’s common stock from the Company and the other named Defendants. Dutch Gold Resources, Inc. is indemnifying the Company in the action.

 

ITEM 4. MINE AND SAFETY DISCLOSURES

 

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and this Item is included in Exhibit 95 to this annual report on Form 10-K. There are no current mine safety violations for the Company.

  

PART II

 

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

 

(a) Market Information.

 

Quotations for our common stock are reported on the OTC Bulletin Board under the symbol "SHMX."  The following table sets forth the range of high and low bid price information for the common stock for each fiscal quarter for the past two fiscal years.  High and low bid quotations represent prices between dealers without adjustment for retail mark-ups, markdowns or commissions and may not necessarily represent actual transactions:

 

For the periods indicated, the following table sets forth the high and low bid prices per share of our common stock. These prices represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions.

   High   Low 
           
Fiscal Year 2011 (January 1, 2011 - December 31, 2011)          
First quarter (January 1, 2011 - March 31, 2011)  $0.87   $0.20 
Second quarter (April 1, 2011 - June 30, 2011)  $0.34   $0.065 
Third quarter (July 1, 2011 - September 30, 2011)  $0.09   $0.014 
Fourth quarter (October 1, 2011 - December 31, 2011)  $0.015   $0.0006 
           
Fiscal Year 2010 (March 26, 2010 - December 31, 2010)          
First quarter (March 26, 2010 - March 31, 2010) *  $1.50   $1.00 
Second quarter (April 1, 2010 - June 30, 2010)  $1.00   $0.50 
Third quarter (July 1, 2010 - September 30, 2010)  $0.50   $0.25 
Fourth quarter (October 1, 2010 - December 31, 2010)  $0.25   $0.53 

 

*  For the period indicated, quotation of the Company’s common stock commenced on March 26, 2010.          

 

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The shares quoted are subject to the provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the Exchange Act"), commonly referred to as the "penny stock" rule. Section 15(g) sets forth certain requirements for transactions in penny stocks and Rule 15g9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.

 

The Commission generally defines penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Rule 3a51-1 provides that any equity security is considered to be a penny stock unless that security is: registered and traded on a national securities exchange meeting specified criteria set by the Commission; authorized for quotation on The NASDAQ Stock Market; issued by a registered investment company; excluded from the definition on the basis of price (at least $5.00 per share) or the registrant's net tangible assets; or exempted from the definition by the Commission. Trading in the shares is subject to additional sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors, generally persons with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse.

 

For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of such securities and must have received the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the first transaction, of a risk disclosure document relating to the penny stock market. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, and current quotations for the securities. Finally, the monthly statements must be sent disclosing recent price information for the penny stocks held in the account and information on the limited market in penny stocks. Consequently, these rules may restrict the ability of broker dealers to trade and/or maintain a market in the company’s common stock and may affect the ability of shareholders to sell their shares.

 

(b) Numbers of Shareholders

 

The approximate number of holders of our Common Stock as of December 31, 2011 was 2,535.

 

(c) Dividends

 

Since inception of Shamika 2 Gold, we have never declared or paid any cash dividends on our common stock. We do not anticipate paying any cash dividends to stockholders in the foreseeable future. In addition, any future determination to pay cash dividends will be at the discretion of the Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements, and such other factors as the Board of Directors deem relevant.

 

The shares quoted are subject to the provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the Exchange Act"), commonly referred to as the "penny stock" rule. Section 15(g) sets forth certain requirements for transactions in penny stocks and Rule 15g9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.

 

The Commission generally defines penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Rule 3a51-1 provides that any equity security is considered to be a penny stock unless that security is: registered and traded on a national securities exchange meeting specified criteria set by the Commission; authorized for quotation on The NASDAQ Stock Market; issued by a registered investment company; excluded from the definition on the basis of price (at least $5.00 per share) or the registrant's net tangible assets; or exempted from the definition by the Commission. Trading in the shares is subject to additional sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors, generally persons with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse.

 

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For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of such securities and must have received the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the first transaction, of a risk disclosure document relating to the penny stock market. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, and current quotations for the securities. Finally, the monthly statements must be sent disclosing recent price information for the penny stocks held in the account and information on the limited market in penny stocks. Consequently, these rules may restrict the ability of broker dealers to trade and/or maintain a market in the company’s common stock and may affect the ability of shareholders to sell their shares.

  

(d) Securities authorized for issuance under equity compensation plans

 

Equity Compensation Plan Information

 

As of the end of our fiscal year ended December 31, 2011, we had no incentive stock option plans.

 

Long-Term Incentive Plans Awards in Last Fiscal Year

 

None.

 

Recent Sales of Unregistered Securities

 

During 2011 Fiscal Year

 

On January 13, 2011, the Company sold two capital units (Units) pursuant to a subscription agreement for a cash consideration of $50,000. Each Unit consisted of 83,334 shares of common stock and 41,667 warrants.  The warrants have three year expiration.  The warrants also are subject to a mandatory exercise provision which will require the holder of the warrants to exercise the warrants when the average closing price of the Company’s Common Stock has been equal to or greater than $0.50 for ten consecutive trading days.

 

On January 3, 2011, the Company issued a Secured Convertible Note in the amount of $50,000 to Asher Enterprises Inc. due September 3, 2011 and bearing interest at the rate of 8% per annum.  The note is convertible into common shares of the Company at any time from January 3, 2011 and ending on the complete satisfaction of the Note.  The conversion price shall equal the Variable Conversion Price defined as 58% multiplied by the Market Price defined as the average of the lowest 3 Trading Prices on the OTCBB during the 10 day trading period ending one day prior to the date of Conversion Notice.  In the event of default, the Note is immediately payable and the minimum amount due in default is 150% of outstanding principal plus unpaid interest. In July, 2011, the Convertible Note was converted to 1,696,455 common shares of the Company.

 

On January 19, 2011, as a result of a subscription agreement that was executed with El Oro, Ltd. on November 16, 2010, the Company received $75,000 in payments from El Oro Ltd. for 3 Units resulting in the issuance of 250,008 shares of Common Stock of the Company, par value $0.00001 per share and 125,004 Warrants of the Company’s Common Stock at the exercise price of $0.30 per share.

 

On March 2, 2011 the Company issued a Secured Convertible Note in the amount of $102,500 to War Chest Capital Multi-Strategy Fund LLC., due September 2, 2011 and bearing interest at the rate of 9.875% per annum.  The note is convertible into common shares of the Company at any time during the period beginning on the date of the Note and ending on the complete satisfaction of the Note.  The lender has the option to convert the outstanding principal and interest of this Note into fully-paid and non-assessable shares of the Company’s Common Stock at a 30% discount to the Fair Market Value but not to exceed $0.75 per share.  In the event of default, the Note is immediately payable.  In the event of default, additional interest will accrue at the rate equal to the lesser of (i) 15% per annum in addition to the Interest Rate or (ii) the highest rate permitted by law, per annum until all outstanding principal, interest and fees are repaid in full.

 

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On March 3, 2011,  the Company issued a Secured Convertible Note in the amount of $53,000 to Asher Enterprises Inc. due 9 months after issuance and bearing interest at the rate of 8% per annum.  The note is convertible into common shares of the Company at any time during the period beginning on the date of the Note and ending on the complete satisfaction of the Note.  The conversion price shall equal the Variable Conversion Price defined as 58% (later amended to 31%) multiplied by the Market Price defined as the average of the lowest 3 Trading Prices on the OTCBB during the 10 day trading period ending one day prior to the date of Conversion Notice.  In the event of default, the Note is immediately payable and the minimum amount due is 150% x (outstanding principal + unpaid interest).  In multiple transactions from September to December 2011, the Convertible Note and accrued interest were converted to 30,775,032 common shares of the Company.

 

On March 17, 2011, the Company issued a Convertible Note in the amount of $50,000 to Coventry Enterprises, LLC. The note is convertible into common shares of the Company at any time during the period beginning on the date of the Note and ending on the complete satisfaction of the Note.  The Conversion Price per share of Common Stock shall be the lower of $.30 or thirty five percent (35%) of the average of the three lowest VWAP prices of the Company’s Common Stock for the fifteen trading days preceding a Conversion Date. The VWAP will be determined by Bloomberg LP Professional Service. As compensation for entering into the note, the Company issued 50,000 shares of common stock to Coventry Enterprises, LLC.

 

On April 14, 2011, the Company's Board of Directors authorized the issuance of an aggregate of 4,800,000 shares of Common Stock to its founders.  The market price on April 14, 2011 was $0.26 per share, so the value of this share grant was $1,248,000.

 

On April 19, 2011, the Company sold two capital units (Units) pursuant to a subscription agreement for a cash consideration of $50,000. Each Unit consisted of 83,334 shares of common stock and 41,667 warrants.  The warrants have three year expiration. The warrants also are subject to a mandatory exercise provision which will require the holder of the warrants to exercise the warrants when the average closing price of the Company’s Common Stock has been equal to or greater than $0.50 for ten consecutive trading days.

 

On April 28, 2011, the Company issued a Secured Convertible Note in the amount of $50,000 to Asher Enterprises Inc. due 9 months after issuance and bearing interest at the rate of 8% per annum. The note is convertible into common shares of the Company at any time during the period beginning on the date of the Note and ending on the complete satisfaction of the Note.  The conversion price shall equal the Variable Conversion Price defined as 58% (later amended to 31%) multiplied by the Market Price defined as the average of the lowest 3 Trading Prices on the OTCBB during the 10 day trading period ending one day prior to the date of Conversion Notice.  In the event of default, the Note is immediately payable and the minimum amount due is 150% x (outstanding principal + unpaid interest).  Asher can request payment in shares. In December 2011, $15,600 of the face value of the note was converted to 49,550,756 common shares of the Company.

 

On April 29, 2011 the Company issued 250,000 shares of the Company’s Common stock to Interactive Business Alliance, LLC, a public relations firm. The market value on that date was $0.182 per share, resulting in a value of this share grant of $45,500.

 

On June 6, 2011 the Company issued 957,565 shares of the Company’s Common stock to employees and consultants of Shamika Resources Inc. The market value on that date was $0.1305 per share, resulting in a value of this share grant of $125,000.

 

On June 14, 2011 the Company issued 1,262,819 shares of the Company’s Common stock to Centurion Private Equity, LLC. The shares represent legal costs and commitment fees pursuant to an Investment Agreement dated June 13, 2011. The market value on that date was $0.1346 per share, resulting in a value of this share grant of $170,000. As of June 14, 2011, the Company entered into an investment agreement (the “Investment Agreement”) with Centurion Private Equity, LLC (“Centurion”) to establish an equity facility pursuant to which the Company will issue registered, tradable shares of its common stock, par value $0.00001 per share (the “Common Stock”), for future financings of up to $10 million over a 36-month period. Pursuant to that certain Registration Rights Agreement (the “Registration Rights Agreement”), the Company agreed to register the shares involved in the equity facility in several tranches over the term.  Any use of this equity facility will be entirely in the Company’s discretion.

 

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On June 28, 2011,  the Company issued a Secured Convertible Note in the amount of $50,000 to Asher Enterprises Inc. due 9 months after issuance and bearing interest at the rate of 8% per annum.  The note is convertible into common shares of the Company at any time during the period beginning on the date of the Note and ending on the complete satisfaction of the Note.  The conversion price shall equal the Variable Conversion Price defined as 52% multiplied by the Market Price defined as the average of the lowest 3 Trading Prices on the OTCBB during the 10 day trading period ending one day prior to the date of Conversion Notice.  In the event of default, the Note is immediately payable and the minimum amount due is 150% x (outstanding principal + unpaid interest).  Asher can request payment in shares.

 

In July 2011 Asher Enterprises converted a Convertible Note, face value $50,000, into Common stock.  The conversion resulted in the Company issuing 1,696,455 shares of common stock.

 

On August 23, 2011, the Company issued 250,000 shares of the Company’s Common stock to MidSouth Capital Inc., a public relations firm. The market value on that date was $0.024 per share, resulting in a value of this share grant of $6,500.

 

On August 30, 2011, the Company sold a capital unit (Units) pursuant to a subscription agreement for a cash consideration of $15,000.  Each Unit consisted of 1,302,084 shares of common stock.

 

On August 30, 2011, the Company sold three capital units (Units) pursuant to a subscription agreement for a cash consideration of $112,621.88.  Each Unit consisted of 3,258,735 shares of common stock. The proceeds were used to repay a Convertible Note due to War Chest Capital Multi-Strategy Fund LLC.

 

On August 31, 2011, the Company issued 50,000 shares of Common Stock to Lam Chan Tho for consulting services. The market value on that date was $0.028 per share, resulting in a value of this share grant of $1,400.

 

On September 19, 2011,  the Company issued a Secured Convertible Note in the amount of $8,500 to Asher Enterprises Inc. due 9 months after issuance and bearing interest at the rate of 8% per annum.  The note is convertible into common shares of the Company at any time during the period beginning on the date of the Note and ending on the complete satisfaction of the Note.  The conversion price shall equal the Variable Conversion Price defined as 31% multiplied by the Market Price defined as the average of the lowest 3 Trading Prices on the OTCBB during the 10 day trading period ending one day prior to the date of Conversion Notice.  In the event of default, the Note is immediately payable and the minimum amount due is 150% x (outstanding principal + unpaid interest).  Asher can request payment in shares.

 

From September 16, 2011 to December 13, 2011 Asher Enterprises converted a Convertible Note (Asher #3), face value $53,000, into Common stock. The conversion resulted in the Company issuing 30,775,032 Common shares.

 

During 2010 Fiscal Year

 

On January 6, 2010, Aultra USA entered into an Asset Purchase Agreement with Dutch Gold, Inc.  Pursuant to the Agreement, Dutch Gold acquired all of Aultra USA's assets. As consideration for these assets, the Dutch Gold issued 9,614,667 shares of its common stock, par value $0.001 per share, to the Aultra USA shareholders.  In accordance with the transaction, Dutch Gold  acquired substantially all of the assets related to Aultra USA's gold and mineral business, including inventory, accounts receivable, certain supply and distribution and other vendor contracts, good will and other various assets and intangibles. The parties made customary representations, warranties and indemnities that are typical and consistent for a transaction of this size and scope.

 

On March 26, 2010, Aultra USA entered into an Agreement and Plan of Share Exchange with Shamika Gold Inc., a Canada Corporation (“Shamika”), and certain shareholders of Shamika (the “Shamika Holders”).  Pursuant to the Agreement, Aultra acquired all of the outstanding shares from the Shamika Holders in exchange for an aggregate of 25,500,000 shares of Aultra’s Common Stock (the “Exchange”) As a result of the Exchange, Shamika became a wholly-owned subsidiary of the Registrant and the Registrant adopted the business plan of Shamika Gold, Inc.

 

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On October 15, 2010 the Company authorized the issuance of 23,547,024 shares of common stock in exchange for the retirement and satisfaction of obligations and debt in the principal amount of $301,512, plus any and all accrued interest and fees owed to our former principal stockholder, officer and director Rauno Perttu.  Mr. Perttu assigned his rights to receive a number of the shares in independently negotiated transactions.

 

On November 19, 2010, the Company authorized the issuance of 3,600,000 additional shares of founders’ stock to the principals of its operating companies and members of its Board of Directors including 2,000,000 shares to Robert Vivian, our Chairman, Chief Executive and Financial Officer, and 1,000,000 shares to Terrance Orstlan, our Director, pending the consummation of the amendment of the Company’s Articles of Incorporation to increase its authorized common stock.

 

On December 14, 2010, the Company entered into an Agreement with Asher Enterprises, Inc. (“Securities Agreement”) whereby the Registrant issued an 8% convertible promissory note in an aggregate amount of $78,500.00 convertible into shares of the Company’s Common Stock.  The agreement contains customary representations, warranties and covenants of the Company and investors for like transactions.

 

On December 17, 2010, the Company entered into an Agreement and Plan of Securities Exchange (the “Agreement”) with the representatives of a company to be organized under the laws of the Republic of Mauritius (“Newco”), The Millennium Mining Trust, a New York trust comprised of certain intended shareholders of and contributors to Newco (the “Newco Common Holders”), and The Millennium International Group, PLC, a public limited company organized under the laws of the Kingdom of Cambodia (“Millennium”, and collectively with the Newco Common Holders, the “Newco Holders”).  Pursuant to the Agreement, the Company acquired 85% of the outstanding equity of Newco (i) in exchange for 32,000,000 newly issued shares of its restricted common stock, par value $0.00001 per share (“Shamika Exchange Shares”) to be issued to the Newco Holders; and (ii) Newco Shares from Millennium, solely in exchange for an aggregate for 25,000,000 Shamika Exchange Shares and 500,000 shares of Shamika’s Series B Performing Preferred Stock, par value $0.00001 per share (the “Performing Preferred Shares”), which entitles Millennium, among other things, to receive a dividend equal to forty-five percent (45%) of the net operating profit, after taxes of Millennium’s mining project operations in Samlaut, Cambodia (the “Performing Preferred Shares”, collectively with the Exchange Shares, the “Exchange Shares”). As a result of the Exchange, Newco will became a wholly-owned subsidiary of the Company.  The Company shares were issued to the Newco Holders on a pro rata basis, on the basis of the shares held by such Newco Holders at the time of the Exchange.

 

On December 20, 2010, the Company entered into the Montclerg Property- Property Sale Agreement (the “Agreement”) with Lam Chan Tho (“Tho”).  Pursuant to the Agreement, the Company will acquire all of the interests in certain mineral claims owned by Tho in consideration for five million shares of shares of the Company’s Common Stock, and payment of a royalty of two and one half percent of the net smelter returns, as further described in the Agreement.  This Agreement has not yet been finalized but is committed to close in 2011.

  

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

 

None.

 

ITEM 6. SELECTED FINANCIAL DATA

 

Not required for smaller reporting companies.

 

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

FORWARD LOOKING STATEMENTS

 

Some of the statements contained in this Annual Report that are not historical facts are "forward-looking statements" which can be identified by the use of terminology such as "estimates," "projects," "plans," "believes," "expects," "anticipates," "intends," or the negative or other variations, or by discussions of strategy that involve risks and uncertainties. We urge you to be cautious of the forward-looking statements, that such statements, which are contained in this Annual Report, reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors affecting our operations, market growth, services, products and licenses. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of the risks we face, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events. Factors that may cause actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without limitation:

 

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1. Actions of regulatory agencies, changes in regulations and in interpretation of regulations;

 

2. Our ability to raise appropriate capital within expected time periods;

 

3. Commodity price fluctuations;

 

4. Availability of goods and services; and

 

5. Variations in geological conditions.

 

All written and oral forward-looking statements made in connection with this Annual Report that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Given the uncertainties that surround such statements, you are cautioned not to place undue reliance on such forward-looking statements.

 

When we express an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have reasonable basis. However, our forward-looking statements are subjects to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by those forward-looking statements. Such risks include, but are not limited to: currency fluctuations; geological and metallurgical assumptions; minerals assumptions, processes and facilities; labor relations; timing of receipt of necessary governmental permits or approvals; domestic and foreign laws or regulations, particularly relating to the environment and mining; domestic and international economic and political conditions: our ability to obtain or maintain necessary financing; other risks and hazards associated with mining exploration and development. More detailed information regarding these risk factors is included in this filing under Risk Factors, and elsewhere throughout this report. Given these uncertainties, readers are cautioned not to place undue reliance on our forward-looking statements.

 

Plan of Operation

 

We do not have sufficient funds to conduct work phases of further drilling and assaying, and completion of the mine plan on the properties.

 

Shamika 2 Gold’s goals and objective for the current year will be adjusted according to the availability of funds and changing market conditions.  Management has identified several work programs for its Montclerg properties. Management’s goal is to raise at least $500,000 to move these properties forward.  As additional funds become available, management plans to continue to advance its current properties.  

 

Much of the past year has been spent on raising capital to fund the Company’s activities.  While the effects from some of the changes continue, we believe that our reorganizational efforts have been successful and a stronger and more experience management team is in the process of being created, which will lay the foundation of our future growth.

 

No Operating History- Need for Additional Capital

 

There is no historical information about us upon which to base an evaluation of our performance. We are at an exploration stage operation and have had no revenues. We cannot guarantee that we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise. We must raise approximately $500,000 to $2,000,000 in planned equity financing over the next two years in order to carry-out our Plan of Operations.

 

We have no assurance that future financings will be available to us on acceptable terms. If financing is not available to us on acceptable terms, we may be unable to continue our operations.

 

 

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Results of Operations for the Year Ended December 31, 2011 compared with the Period from Inception, January 13, 2010, through December 31, 2010

 

We have earned no revenues from Shamika 2 Gold’s inception on January 13, 2010 to December 31, 2011.  We have only commenced the exploration stage of our business and can provide no assurance that we will discover economic mineralization on properties, or if such minerals are discovered, that we will enter into commercial production. We do not anticipate earning revenues for the foreseeable future.

 

The operating loss for the year ended December 31, 2011 was $2,378,728, compared to $193,418 for the period from inception, January 13, 2010, through December 31, 2010. A substantial portion of the $2,185,310 increased operating loss is attributable to the $1,753,250 in consulting fees paid in 2011 with no comparable fees paid in the prior period. The consulting fees were paid in common shares of the Company as follows: 4,800,000 common stock issued to the founders, 1,800,000 shares issued to Frederic de La Forge for services as COO of the Company, 1,262,819 issued to Centurion Equity Fund, LLC for commitment and legal fees pursuant to an equity line of credit facility and 957,565 shares issued to various consultants for services rendered.

 

Management fees paid to a related party for the year ended December 31, 2011 were $423,670 as compared to $40,000 in the prior period, which is an increase of $383,670. The increase in management fees was for remuneration of personnel and consultants, rent, communications expense and office expenses.

 

Interest expense for the year ended December 31, 2011 was $384,840 as compared to $4,594 for the period from inception, January 13, 2010, to December 31, 2010. The increase of $380,246 is due to the increase in notes payable entered into and outstanding in 2011 as compared to 2010. Interest expense is comprised of the accrual of contractual interest, amortization of deferred financing costs and amortization of the debt discount on convertible notes payable.

 

Net loss for the year ended December 31, 2011 and 2010 was $2,811,768 and $388,261, respectively.

 

We have not attained profitable operations and are dependent upon obtaining financing to pursue exploration activities.  For these reasons our auditors believe that there is substantial doubt that we will be able to continue as a going concern.

 

Liquidity and Capital Resources

 

Currently, we do not maintain any cash accounts. Our expenses were paid and cash was provided through a management agreement with a related party.

 

At December 31, 2011, our cash was $-0- and we had currently liabilities of $395,653. Since our inception on January 13, 2010, to the end of the period ended December 31, 2011, we have incurred losses of $3,200,029. We attribute our net loss to having no revenues to offset our operating expenses.

 

Cash Flow

 

We have no cash flow from operations and do not have cash and or equivalents to meet our core operational requirements for the next 12 months, and we will be required to raise additional working capital to fund our Plan of Mining Operations of approximately $500,000 to $2,000,000 in planned equity financing over the next two years.

 

We have no assurance that future financings will be available to us on acceptable terms. If financing is not available to us on acceptable terms, we may be unable to continue our operations. Should our costs and expenses prove to be greater than we currently anticipate, or should we change our current Plan of Mining Operations in a manner that will increase or accelerate our anticipated costs and expenses, such as through the acquisition of new properties, the depletion of our working capital would be accelerated. To the extent that it becomes necessary to raise additional cash in the future as our current cash and working capital resources are depleted, we will seek to raise it through the public or private sale of debt or equity securities, the procurement of advances on contracts or funding from joint-venture or strategic partners, debt financing or term loans, or a combination of the foregoing. We also may seek to satisfy indebtedness without any cash outlay through the private issuance of debt or equity securities.

 

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Off-Balance Sheet Arrangements

 

The Company was not involved in any significant off-balance sheet arrangement during the period ended December 31, 2011.

 

Future Plans

 

Shamika 2 Gold’s goals and objective for the current year will be adjusted according to the availability of funds and changing market conditions.  Management has identified several work programs for its Montclerg property. Management’s goal is to raise at least $500,000 to move these properties forward. Management has had and will continue to have discussions both for acquisitions and financing with the goal that both the properties and financing can be arranged in a coordinated time frame.  Management’s focus in these efforts is to enhance shareholder value and create a base of operations from which future expansion and growth can occur.

 

GOING CONCERN

 

In connection with their audit report on our consolidated financial statements as of December 31, 2011, Hancock Askew & Co., LLP, our independent registered public accounting firm, expressed substantial doubt about our ability to continue as a going concern because such continuance is dependent upon our ability to generate revenues and raise capital.

 

We have explored, and continue to explore, all avenues possible to raise the funds required. We have no revenue-producing activity. We also need capital to fund overhead and administrative costs as well as transaction expenses.  We have met our operating costs to date through the equity and debt financing from our shareholders and other investors; however, there can be no assurance that our shareholders and other investors will be able or willing to make additional investments in the future to fund continued operations.

 

The Company requires further funding to continue to develop its mines and fund corporate overhead.  Although we believe that there is a reasonable basis that we will successfully raise the needed funds, we cannot provide assurance that sufficient capital to sustain operations can be met. Moreover, the Company cannot provide assurance that it will maintain a level of profitability sufficient to meet operating expenses and corporate overhead.

 

Critical Accounting Policies and Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements. The use of estimates, judgments, and assumptions creates a level of uncertainty with respect to reported or disclosed amounts in our consolidated financial statements or accompanying notes. On an on-going basis, management evaluates its estimates, judgments, and assumptions, including those that management considers critical to the accurate presentation and disclosure of our consolidated financial statements and accompanying notes. Management bases its estimates, judgments, and assumptions on historical experience, current trends, and various other factors that management believes are reasonable under the circumstances. Because of the inherent uncertainty in using estimates, judgments, and assumptions, actual results may differ from these estimates.

Our significant accounting policies are described in Note 1 to the accompanying consolidated financial statements. We believe the following assumptions and estimates are the most critical to understanding and evaluating our reported financial results.

 

Management has reviewed these critical accounting estimates and related disclosures with our Board of Directors.

 

Mineral Properties, Mineral Claim Payments and Exploration Expenses

 

The Company expenses all costs related to the acquisition, maintenance and exploration of the unproven mineral properties to which it has secured exploration rights. If and when proven and probable reserves are determined for a property and a feasibility study is completed, then subsequent development costs of the property are capitalized. Once capitalized, such costs will be amortized using the units-of-production method over the estimated life of the probable reserves. To date, the Company has not established the commercial feasibility of its exploration prospects, therefore all costs have been expensed.

 

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The Company assesses the carrying costs for impairment under ASC 930 Extractive Activities – Mining (ASC 930) annually. An impairment is recognized when the sum of the expected undiscounted future cash flows is less than the carrying amount of the mineral property. Impairment losses, if any, are measured as the excess of the carrying amount of the mineral property over its estimated fair value. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations. If a change were to occur in any of the above-mentioned factors or estimates as it relates to capitalized assets, the likelihood of a material change in our reported results may occur.

 

Convertible Instruments

 

The Company reviews the terms of convertible debt and equity instruments to determine whether there are conversion features or embedded derivative instruments including embedded conversion options that are required to be bifurcated and accounted for separately as a derivative financial instrument. In circumstances where the convertible instrument contains more than one embedded derivative instrument, including conversion options that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single compound instrument. Also, in connection with the sale of convertible debt and equity instruments, the Company may issue free standing warrants that may, depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity. In addition, certain conversion features are recognized as beneficial conversion features to the extent the conversion price as defined in the convertible note is less than the closing stock price on the issuance of the convertible notes. A change in the market price of our common stock would result in a change in the number of shares that would be issued based on the conversion features of the related convertible notes.

 

Recent Accounting Pronouncements

 

Fair Value Measurements and Disclosures ASC 820, Improving Disclosures about Fair Value Measurements: In January 2010, the Financial Accounting Standards Board (FASB) issued accounting guidance intended to improve disclosures related to fair value measurements. This guidance requires significant transfers in and out of Level 1 and Level 2 fair value measurements to be disclosed separately along with the reasons for the transfers. Additionally, in the reconciliation for the fair value measurements using significant unobservable inputs (Level 3), information about purchases, sales, issuances and settlements must be presented separately (cannot net as one number). This guidance also provides clarification for existing disclosures on (i) level of disaggregation and (ii) inputs and valuation techniques. In addition, this guidance includes conforming amendments for employers’ disclosure of postretirement benefit plan assets. This guidance was effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll-forward of activity in Level 3 fair value measurements. Those disclosures are required for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of ASC 820 did not have a material impact on the Company’s consolidated results of operations or financial position.

 

In May 2011, the FASB issued an Accounting Standards Update on fair value measurements that clarifies the application of existing guidance and disclosure requirements, changes certain fair value measurement principles, and requires additional disclosures about fair value measurements. This guidance is effective for interim and annual periods beginning after December 15, 2011. The Company does not expect the adoption of this guidance to have a material impact on its financial statements.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not required for smaller reporting companies.

 

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
   

 The Information required by Item 8 appears after the signature page of this report.

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

1.Previous Independent Registered Public Accounting Firm.

 

A.  On March 25, 2011, the Board of Directors of the Registrant dismissed its independent registered public accounting firm, Gruber & Company, LLC (“Gruber”).

 

B.  The report of Gruber on the predecessor company Aultra for the year ending December 31, 2009 and December 31, 2008 did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles other than going concern.

 

C.  The decision to change accountants was approved by the Registrant's Board of directors on March 25, 2011, and on such date Hancock Askew & Co, LLP (“Hancock”) was engaged as the Registrant's new independent registered public accountants. The Registrant did not consult Hancock regarding either: (i) the application of accounting principles to a specified transaction, completed or proposed, or the type of audit opinion that might be rendered on the Registrant's financial statements, or (ii) any matter that was either the subject of a disagreement or a reportable event in connection with its report on the Registrant’s financial statements.

 

D.  During the Registrant's two most recent fiscal years and the subsequent interim period through the date of dismissal, there were no disagreements with Gruber on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which, if not resolved to the satisfaction of Gruber, would have caused it to make reference to the matter in connection with its reports. There were no "reportable events" in connection with its report on the Registrant’s financial statements.

 

E.   The Registrant has made the contents of its Form 8-K available to Gruber and requested it to furnish a letter to the Commission as to whether Gruber agrees or disagrees with, or wishes to clarify the Registrant's expression of their views. Gruber has furnished the requested letter which is attached to the Form 8-K/A as Exhibit 16.1, filed on March 3, 2011.

 

2.New Independent Registered Public Accounting Firm.

 

The Registrant has engaged Hancock as its new independent certified public accounting firm to audit the Registrant’s financial statements for December 31, 2010 and 2011. During the two most recent years or any subsequent interim period prior to engaging Hancock, the Registrant did not consult such firm on any of the matters regarding either (i) the application of accounting principles to a specified transaction, either completed or contemplated, or the type of audit opinion that might be rendered on the Registrant’s financial statements or (ii) any matter that was either the subject of a disagreement or event identified in response to (a)(1)(iv) of Item 304 of Regulation S-K, or a reportable event as that term is used in Item 304(a)(1)(v) of Item 304 of Regulation S-K.

 

ITEM 9A CONTROLS AND PROCEDURES

 

The President of Shamika 2 Gold, Inc. acts both as our chief executive officer and principal accounting officer and is responsible for establishing and maintaining disclosure controls and procedures for the Company.

 

We are required to maintain disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosure. As of December 31, 2011, we conducted an evaluation, under the supervision, and with the participation of management, Robert Vivian, acting as our chief executive officer and principal accounting officer, of the effectiveness of the design and operation of our disclosure controls and procedures.

 

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Based on this evaluation, our chief executive officer and principal accounting officer concluded that, as of the end of the fiscal period ending December 31, 2011 our disclosure controls and procedures were not effective to ensure that the information required to be disclosed in reports we submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that such information was accumulated and communicated to our chief executive officer and principal accounting officer in a manner that allowed for timely decisions regarding required disclosure.

 

Management does not expect that our disclosure controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.

 

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company's CEO and CFO and effected by the company's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that: pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

 

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As of December 31, 2011 management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective due to a lack of segregation of duties and the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.

 

Identified Weaknesses

 

The matters involving internal controls and procedures that our management considered to be material weaknesses were as follows:

 

1)Lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures.

 

2)We lack sufficient trained personnel with experience in accounting and financial reporting functions due to the size of our Company and our lack of financial resources to pay such personnel; and

 

3)We do not have a sufficient number of employees to adequately segregate accounting duties to provide for sufficient internal controls. In particular there is not a segregation of access to cash and the ability to authorize and record transactions.

 

Management also believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

 

Management's Remediation Initiatives

 

In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated a plan to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management.

 

Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Board.  While we are actively seeking outside members, including candidates with accounting experience, we cannot provide any assurance that we will be successful. Given the size of our company, lack of revenues and current lack of financing to continue with our business, it is unlikely that anyone will agree to join our Board until general economic conditions and our own business prospects improve significantly.

 

Changes in Internal Control Over Financial Reporting.

 

During the fiscal quarter ended December 31, 2011, there were no changes in our internal controls over financial reporting that we believe could materially affect, or is reasonably likely to materially affect, our internal controls over financial reporting.

 

This Annual Report does not include an attestation report of the Company’s registered accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the company’s registered public accounting firm pursuant to temporary rules of the SEC.

 

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ITEM 9B. OTHER INFORMATION

 

None.

 

 

PART III

 

ITEM 10: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

 

Executive Officers and Directors

 

The following table sets forth information regarding our directors and executive officers as of April 13, 2012:

  

Name   Age   Position
Henry Riedl (1)   61   President, Chief Executive Officer, Interim Chief Financial Officer, Secretary and Director
Kim Koffel   59    Director
         
(1)   On. March 21, 2011, Anthony Keough resigned as the Registrant’s Secretary.  On March 28, 2011, Elizabeth Nantel was appointed as his replacement as Secretary.  On July 5, 2011, Elizabeth  Nantel resigned as Secretary and was replaced by Henry Riedl.  On November 8, 2011, H. Riedl resigned as Secretary and was replaced by Robert Vivian. On February 10, 2012, Frederic de la Forge resigned as Director and Chief Operating Officer. On March 20, 2012,  Robert Vivian resigned as Director, and Terence Ortslan resigned as Director and Henry Riedl was appointed Director, President, Chief Executive Officer and Interim Chief Financial Officer.
           

Set forth below is a biographical description of each director and senior executive officer of the Company based on information supplied by each of them.

 

Henry Riedl, President, Chief Executive Officer, Interim Chief Financial Officer, Secretary and Director

 

Mr. Riedl has served as the Company’s Director, President, Chief Executive Officer and Interim Chief Financial Officer since March 20, 2012 and as Secretary since March 28, 2012. Mr. Riedl is a Certified Management Accountant with more than thirty years’ experience as an accounting and finance executive. For the last ten years, he has been a management consultant to manufacturing and service companies in various industries. He has also executed specific mandates for the Business Development Bank of Canada (B.D.C). Mr. Riedl completed his studies toward his CMA certification at McGill University in Montreal. The Company concluded Mr. Riedl’s experiences as an accountant and finance executive and his financial experiences managing companies made him suitable to serve as a director.

 

Kim Koffel, Director

 

Mr. Koffel has served as the Company’s Director since June 8, 2011. Mr. Koffel brings extensive international program management experience with large infrastructure program in challenging environments, having worked for over twenty years across Europe, Africa and the Middle East. Due to Mr. Koffel’s extensive experience in international management, the Company concluded he was an ideal candidate to serve as a director. 

 

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Board Committees:

 

At this time, the board has no committees, including an audit, nominating or compensation committee.

 

Family Relationships

 

There are no family relationships among any of our officers or other directors

 

Compliance With Section 16(A) Of The Exchange Act

 

Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers and persons who beneficially own more than ten percent of a registered class of our equity securities to file with the SEC initial reports of ownership and reports of change in ownership of common stock and other equity securities of our Company. Officers, directors and greater than ten percent stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To our knowledge, the following persons have failed to file, on a timely basis, the identified reports required by Section 16(a) of the Exchange Act, as of December 31, 2011:

 

Name & Relationship   Number of Late Reports   Transactions not Timely Reported   Known Failure to File a Required Form
Robert Vivian   None   None   None
Terence Ortslan   None   None   None
Kim Koffel   None   None   None

 

Code of Ethics

 

As of the date of this Annual Report, the Company has not adopted a Code of Ethics (the “Code of Ethics”) applicable to the Company’s principal executive, financial and accounting officer or persons performing similar functions.

 

ITEM 11: EXECUTIVE COMPENSATION.

 

The following table sets forth information concerning the total compensation that the Company has paid or that has accrued on behalf of Company’s chief executive officer and other executive officers with annual compensation exceeding $100,000 during the years ended December 31, 2011. None of the Company’s officers received compensation in excess of $100,000 during any of the years ended December 31, 2011 and 2010.

 

Summary Compensation Table

 

Name & Principal Position   Year    

 

 

Salary ($)

    

 

 

Bonus ($)

    

 

 

Stock

Awards($)

    

 

 

Option

Awards ($) *

    

 

 

Non-Equity

Incentive Plan

Compensation ($)

    

 

Change in Pension

Value and

Non-Qualified

 Deferred

Compensation

Earnings ($)

    

 

 

All Other

Compensation

($) (2)

    

 

 

 

Total ($)

 
Robert Vivian   2010                                 
CEO, President and Director   2011           $361,400                   $361,400 
Frederic de la Forge   2010                                 
    2011           $286,000                   $286,000 

  

With the exception of reimbursement of expenses incurred by our named executive officers during the scope of their employment, none of the named executive received any other compensation, perquisites or personal benefits in excess of $10,000.

 

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The following table sets forth for each named executive officer certain information concerning the outstanding equity awards as of December 31, 2011.

 

    Option awards   Stock awards
Name and Principal Position  

Number of Securities Underlying Unexercised

Options Exercisable

   

Number

of Securities Underlying Unexercised Options Unexercisable

    Option 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

Robert Vivian, Director and Chief Executive Officer               $                     — 
                                                     
Frederic Clement de la Forge, Chief Operating Officer               $                     — 
                                                     

 

During our fiscal year ended December 31, 2011, we had no incentive stock option plan.

 

Employment and Consultancy Agreements

 

The Company has not entered into any employment agreement with any of its other officers or directors.

 

Director Compensation

The following table sets forth with respect to each named director, compensation information inclusive of equity awards and payments made in the fiscal year ended December 31, 2011.

 

Name

(a)

Fees Earned or Paid in Cash ($) (b)

 

Stock
Awards

($) (c)

 

Option

Awards ($) (d)

 

Non-Equity
Incentive Plan
Compensation ($)

(e)

Change in Pension
Value and
Nonqualified
Deferred
Compensation
Earnings (f)

All Other
Compensation

($) (g) (3)

Total

($)(h)

Robert Vivian (1) -- -- -- -- -- -- --
Terence Ortslan (1) -- -- -- -- -- -- --
Frederic Clement de La Forge (1) -- -- -- -- -- -- --
Kim Koffel (1) -- -- -- -- -- -- --
   

(1) With the exception of reimbursement of expenses incurred by our directors during the scope of their services, none of the named executive received any other compensation, perquisites, and personal benefits in excess of $10,000.

 

Currently, the Company’s directors that are non-officers of the Company do not receive a cash retainer annually nor do they receive any remuneration for attendance at a board meeting, other than reimbursement for travel expenses.

 

 

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ITEM 12:  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth certain information, as of April 13, 2012 with respect to the beneficial ownership of the Company's outstanding common stock by (i) any holder of more than five (5%) percent; (ii) each of the named executive officers, directors and director nominees; and (iii) our directors, director nominees and named executive officers as a group. Except as otherwise indicated, each of the stockholders listed below has sole voting and investment power over the shares beneficially owned.

 

Name of Beneficial Owner  Common
Stock
Beneficially
Owned (1)
   Percentage
 of
Common Stock (1)
 
Kim Koffel (1)   0    0%
Henry Riedl (1)   383,026    0.13%
All officers and directors as a group (2 persons)   383,026    0.13%

 

  (1) Applicable percentage ownership is based on 297,004,053 shares of common stock outstanding as of April 13, 2012, together with securities exercisable or convertible into shares of common stock within 60 days of April 13, 2012 for each stockholder Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock that are currently exercisable or exercisable within 60 days of April 13, 2012 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
     

Equity Compensation Plan Information

 

As of the end of our fiscal year ended December 31, 2011, we had no incentive stock option plan.

 

ITEM 13:  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

 

Neither our directors and officers, nor any proposed nominee for election as a director, nor any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to all of our outstanding shares, nor any promoter, nor any relative or spouse of any of the foregoing persons has any material interest, direct or indirect, in any transaction since our incorporation or in any presently proposed transaction which, in either case, has or will materially affect us.

 

Our management is involved in other business activities and may, in the future become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between our business and their other business interests.  In the event that a conflict of interest arises at a meeting of our directors, a director who has such a conflict will disclose his interest in a proposed transaction and will abstain from voting for or against the approval of such transaction.

 

 

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Board Determination of Independence

 

Our board of directors has determined that Mr. Kim Koffel is “independent” as that term is defined by the National Association of Securities Dealers Automated Quotations (“NASDAQ”).  Under the NASDAQ definition, an independent director is a person who (1) is not currently (or whose immediate family members are not currently), and has not been over the past three years (or whose immediate family members have not been over the past three years), employed by the company; (2) has not (or whose immediate family members have not) been paid more than $60,000 during the current or past three fiscal years;  (3) has not (or whose immediately family has not) been a partner in or controlling shareholder or executive officer of an organization which the company made, or from which the company received, payments in excess of the greater of $200,000 or 5% of that organizations consolidated gross revenues, in any of the most recent three fiscal years; (4) has not (or whose immediate family members have not), over the past three years been employed as an executive officer of a company in which an executive officer of the Company has served on that company’s compensation committee; or (5) is not currently (or whose immediate family members are not currently), and has not been over the past three years (or whose immediate family members have not been over the past three years) a partner of the Company’s outside auditor. A director who is, or at any time during the past three years, was employed by the Company or by any parent or subsidiary of the Company, shall not be considered independent.

 

ITEM 14:  PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

Our principal accountants billed the following fees for the services indicated:  Fiscal year-ended   Fiscal year ended 
   December 31, 2011   December 31 2010 
Audit fees   $39,500   $3,000 
Audit-related fees   0      
Tax fees   0      
All other fees   0   $15,600 

 

Audit fees consist of fees paid to Hancock Askew & Co LLP, our auditor during 2011 related to professional services rendered in connection with the audit of our annual financial statements. Audit fees for 2010 consist of fees paid to Gruber & Co., our prior auditor during 2010 related to professional services rendered in connection with the audit of our financial statements. No 2010 fees were for our current auditor, Hancock Askew & Co. LLP since they were retained in 2011.

 

All other fees relate to professional services rendered in connection with the audit and review of financial statements included in our Current Reports on Form 8-K, Quarterly Reports on Form 10-QSB and Annual Reports on Form 10-K filing and amendments.

 

Our policy is to pre-approve all audit and permissible non-audit services performed by the independent accountants. These services may include audit services, audit-related services, tax services and other services.

 

 

ITEM 15:  EXHIBITS.

 

Exhibit Number   Description
     
     
2.1   Share Exchange Agreement, dated January 22, 2007, entered into by and among Aultra Gold, Inc. (fka New World Entertainment Corp.), Aultra Gold, Inc. (Canada), Strategic Minerals Inc. and the shareholders of Aultra Gold, Inc. (Canada) signatories thereto., incorporated herein by reference to the Company’s Form 8-K filed with the SEC on February 28, 2007.

 

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2.2   Stock Purchase Agreement, dated December 31, 2009,  by and among Dutch Gold Resources, Inc., Rauno Perttu, Strategic Minerals Inc., and Aultra Gold Capital, Inc., incorporated herein by reference to the Company’s Form 8-K filed with the SEC on January 12, 2010.
     
2.3   Agreement and Plan of Share Exchange, dated March 2010,  by and among Aultra Gold, Inc., Nevada corporation, Shamika Gold Inc., a Canada corporation, and certain shareholders of Shamika Gold Inc., incorporated herein by reference to the Company’s Form 8-K filed with the SEC on April 2, 2010.
     
2.4   Agreement and Plan of Share Exchange, December 17, 2010,  by and among the Company, the representatives of a company to be organized under the laws of the Republic of Mauritius, The Millennium Mining Trust, and The Millennium International Group, PLC., incorporated herein by reference to the Company’s Form 8-K filed with the SEC on December 23, 2010.
     
2.5   First Amendment to the Agreement and Plan of Share Exchange, Feb 18, 2011, by and among Shamika 2 Gold, Inc., MIG International Mining Group, Mauritius and Millennium International Group, LLC, incorporated herein by reference to the Company’s Form 8-K filed with the SEC on March 4, 2010.
3.1   Articles of Incorporation of Katie Gold Corp., incorporated herein by reference to the Company’s Registration Statement filed with the SEC on SB-2 on July 21, 2005.
3.2   Bylaws of Katie Gold Corp., incorporated herein by reference to the Company’s Registration Statement filed with the SEC on SB-2 on July 21, 2005.
3.3    Certificate of Amendment filed with the Secretary of State of Nevada to change the Company's name from Morningstar Industrial Holdings Corp. to New World Entertainment Corp., incorporated herein by reference to the Company’s Form 8-K filed with the SEC on April 11, 2006.
3.4   Articles of Merger of filed on April 26, 2006 with the Nevada Secretary of State of Morningstar  Industrial  Holdings Corp (“Morning”). and NewWorld Entertainment, Corp. with Morningstar as survivor, incorporated herein by reference to the Company’s Form 8-K filed with the SEC on May 5, 2006.
     
3.5   Certificate of Amendment filed with the Secretary of State of Nevada to change the Company's name from New World Entertainment Corp. to Aultra Gold, Inc., effective as of January 18, 2007, incorporated herein by reference to the Company’s Form 8-K filed with the SEC on February 28, 2007.
     
3.6   Certificate of Change, incorporated herein by reference to the Company’s Form 8-K filed with the SEC on April 2, 2010.
4    $78,500.000 8% Convertible Promissory Note, dated December 14, 2010, payable to Asher Enterprises, Inc.,  incorporated herein by reference to the Company’s Form 8-K filed with the SEC on December 22, 2010.
10.1   Property Option Agreement, dated  February 22, 2005, by and between Larry Sosdad and Katie Gold Corp., incorporated herein by reference to the Company’s Registration Statement filed with the SEC on SB-2 on July 21, 2005.
10.2   Letter of Intent, dated April 6, 2006, between the Morningstar  Industrial  Holdings Corp. and Liverpoole Inc., incorporated herein by reference to the Company’s Form 8-K filed with the SEC on April 11, 2006.
10.3   Arrangement  dated April 6, 2006 between World Mobile Network Corp. and  Morningstar Industrial Holdings Corp., incorporated herein by reference to the Company’s Form 8-K filed with the SEC on April 11, 2006.
10.4   Registration Rights Agreement, dated January 22, 2007, by and among Aultra Gold, Inc. (fka New World Entertainment Corp.), Aultra Gold, Inc. (Canada), Strategic Minerals Inc. and the shareholders of Aultra Gold, Inc. (Canada) signatories thereto, incorporated herein by reference to the Company’s Form 8-K filed with the SEC on February 28, 2007.
10.5   Settlement and Release Agreement, dated December 8, 2006, by and among Aultra Gold, Inc. (fka New World Entertainment Corp.), World Mobile Network Corp. and Liverpoole, Inc., incorporated herein by reference to the Company’s Form 8-K filed with the SEC on February 28, 2007
10.6   Rauno Perttu Executive Employment Agreement, incorporated herein by reference to the Company’s Form 8-K filed with the SEC on February 28, 2007.
10.7   Frederic Clement de la Forge Executive Employment Agreement.

 

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10.8   Termination Letter (relating to the Agent, Consulting and Financial Public Relations Agreement ) from the Company to the Princeton Research, Inc., as Consultant, dated June 25, 2007, incorporated herein by reference to the Company’s Form 8-K filed with the SEC on September 9, 2007.
10.9   Mining Lease Agreement, dated May 31, 2006,  by and between Aultra Gold, Inc. (Canada) and Strategic Minerals Inc., incorporated herein by reference to the Company’s Form 8-K filed with the SEC on February 28, 2007.
10.10+   2003 Incentive Stock Option Plan, incorporated herein by reference to the Company’s Form 8-K filed with the SEC on February 28, 2007.
10.11+   2008 Incentive Stock Plan, incorporated herein by reference to the Company’s Form 8-K filed with the SEC on May 21, 2008.
10.12   Investor Relations Agreement, dated May 23, 2008, by and between the Company with Midwest Stock Consulting, LLC, incorporated herein by reference to the Company’s Form 8-K filed with the SEC on May 23, 2008.
10.13   Termination of 2006 Employment Contract, dated May 22, 2008, with Mr. Perttu, incorporated herein by reference to the Company’s Form 8-K filed with the SEC on May 27, 2008.
10.14   Rauno Perttu Executive Employment Agreement ,dated May 22, 2008, incorporated herein by reference to the Company’s Form 8-K filed with the SEC on May 27, 2008.
10.15   Asset Purchase Agreement, dated December 31, 2009, by and among the Company., Dutch Gold Resources, Inc. and DGRI AGDI Acquisition Corporation, incorporated herein by reference to the Company’s Form 8-K filed with the SEC on January 12, 2010.
10.16   Mining Lease Agreement, dated June 1, 2007, by and between the Company and W.R. Hansen, incorporated herein by reference to the Company’s Form 8-K filed with the SEC on June 8, 2007.
10.17   Montclerg Property- Property Sale Agreement, dated December 2010, by and between the Company and Lam Chan Tho, incorporated herein by reference to the Company’s Form 8-K filed with the SEC on December 22, 2010 and January 3, 2010.
10.18   Securities Purchase Agreement, dated December 14, 2010, by and between the Company and Ascher Enterprises, Inc., incorporated herein by reference to the Company’s Form 8-K filed with the SEC on December 22, 2010.
10.19   Investment Agreement,, dated June 13, 2011, by and between the Company and Centurion Private Equity, LLC., incorporated herein by reference to the Company’s Form 8-K filed with the SEC on June 20, 2011.
21.1   List of Subsidiaries. *
     
31.1   Certification of Chief Executive Officer pursuant to Section 302, of the Sarbanes-Oxley Act of 2002.*
     
31.2   Certification of Chief Financial Officer pursuant to Section 302, of the Sarbanes-Oxley Act of 2002.**
     
32.1   Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
     
32.2   Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.***
95.1   Mine Safety Disclosure pursuant to Section 1503(a) of the Dodd-Frank Wall Street reform and Consumer Protection Act

 

  

*Filed herewith.

**Included in Exhibit 31.1

***Included in Exhibit 32.1

+ Compensatory plan or arrangement.

 

 

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SIGNATURES

 

Pursuant to the requirements of Section 13 and 15 (d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  SHAMIKA 2 GOLD, INC.  
       
Dated:  April 13, 2012  By: /s/ Henry Riedl  
    Name: Henry Riedl  
   

Title: Chairman, President ,Chief Executive Officer, Secretary and Interim Financial Officer

 (Principal Executive, Accounting and Financial Officer)

 
       
       
    /s/ Kim Koffel  
    Kim Koffel, Director  

 


 

 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Dated:  April 13, 2012  By: /s/ Henry Riedl  
    Name: Henry Riedl  
   

Title: Chairman, President and Chief Executive Officer, Secretary,

and Interim Financial Officer

 ((Principal Executive Officer and Principal Financial Officer))

 
       
       
    /s/ Kim Koffel  
   

Kim Koffel, Director

 

 

 

 

 

39
 

 

Shamika 2 Gold, Inc.

An Exploration Stage Company

 

INDEX TO FINANCIAL STATEMENTS

 

  Page
   
Report of Independent Registered Certified Public Accounting Firm F-2
   
Consolidated Balance Sheets as of December 31, 2011 and 2010 F-3
   
Consolidated Statements of Operations for the year ended December 31, 2011 and for the period from inception January 13, 2010 to December 31, 2010, and for the period from inception January 13, 2010 to December 31, 2011 F-4
   
Consolidated Statements of Cash Flows for the year ended December 31, 2011 and for the period from inception January 13, 2010 to December 31, 2010, and for the period from inception January 13, 2010 to December 31, 2011 F-5
   
Consolidated Statement of Stockholders’ Deficit for the year ended December 31, 2011 and for the period from inception January 13, 2010 to  December 31, 2010 F-6
   
Notes to Consolidated Financial Statements F-7
   

 

F-1
 

  

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders

Shamika 2 Gold, Inc.

(an Exploration Stage Company) 

 

We have audited the accompanying consolidated balance sheets of Shamika 2 Gold, Inc. (an Exploration Stage Company) as of December 31, 2011 and 2010, and the related consolidated statements of operations, stockholders’ deficit and cash flows for the year ended December 31, 2011, the period from inception, January 13, 2010, to December 31, 2010 and the cumulative period from inception, January 13, 2010 through December 31, 2011. These financial statements are the responsibility of the management of Shamika 2 Gold, Inc. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Shamika 2 Gold, Inc. as of December 31, 2011 and 2010, and the results of its operations and its cash flows for the year ended December 31, 2011, the period from inception, January 13, 2010, to December 31, 2010 and the cumulative period from inception, January 13, 2010, through December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming that Shamika 2 Gold, Inc. will continue as a going concern.  As discussed in Note 1 to the consolidated financial statements, the Company has limited liquidity, has incurred a loss from operations, has accumulated a deficit during the exploration stage and other conditions exist which raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

/s/Hancock Askew & Company, LLP

 

Savannah, Georgia

April 13, 2012

 

F-2
 

    

Shamika 2 Gold Inc.

An Exploration Stage Company

Consolidated Balance Sheets

 

   December 31, 2011   December 31, 2010 
A S S E T S        
Current Assets          
Deferred financing costs  $2,167   $7,995 
Assets of discontinued operations (note 4)   -    500,002 
 Total Current Assets  2,167   507,997 
Long-Term Assets          
 Mineral property   350,000    - 
Total Assets  $352,167   $507,997 
           
L I A B I L I T I E S  A N D  S T O C K H O L D E R S'  D E F I C I T          
Current Liabilities          
 Accounts payable  $256,760   $200,551 
Accounts payable to related party (note 6)   33,625    9,613 
Liabilities of discontinued operations (note 4)   -    503,499 
Convertible notes payable, net of debt discount of $33,326 and $53,526, respectively   100,457    24,974 
Accrued Interest   4,811    276 
           
Total Current Liabilities   395,653    738,913 
           
 Commitments and Contingencies (note 10)          
           
           
S T O C K H O L D E R S'  D E F I C I T          
Preferred stock, $0.00001 par value 10,000,000 authorized: none issued or
outstanding
   -    - 
Common stock, $0.00001 par value, 300,000,000 shares authorized:  175,161,371 and
50,333,336 shares issued and outstanding, respectively
   1,751    503 
Additional paid-in capital   3,154,792    156,842 
Deficit accumulated during exploration stage   (3,200,029)   (388,261)
           
Total Stockholders' Deficit   (43,486)   (230,916)
Total Liabilities and Stockholders' Deficit  $352,167   $507,997 
           

 

See notes to financial statements

F-3
 

 

Shamika 2 Gold Inc.

An Exploration Stage Company

Consolidated Statements of Operations

 

    

For the year ended

December 31,

2011

    

From inception

January 13,

2010 through

December 31,

2010

    

From inception

January 13, 2010

through

December 31,

2011

 
R E V E N U E  $-   $-   $- 
Operational Expenses               
Consulting fees   1,753,250    -    1,753,250 
Legal & Professional fees   130,805    118,827    249,632 
Investor relations   49,140    -    49,140 
Management fee – related party (note 6)   423,670    40,000    463,670 
Exploration costs   -    8,550    8,550 
Other operational expenses   21,863    26,041    47,904 
Operating loss   2,378,728    193,418    2,572,146 
                
Other expenses               
Interest expense   384,840    4,594    389,434 
Organization expense   -    86,750    86,750 
                
Loss from continuing operations   (2,763,568)   (284,762)   (3,048,330)
Loss from discontinued operations (Note 4)   (48,200)   (103,499)   (151,699)
                
Net Loss  $(2,811,768)  $(388,261)  $(3,200,029)
                
Loss per share from continuing operations –basic and diluted  $(0.04)  $(0.01)     
                
Loss per share from discontinued operations –basic and diluted  $-   $-      
                
Loss per share  $(0.04)  $(0.01)     
                
Weighted Average Number of Shares Outstanding   70,166,631    50,083,334      

See notes to financial statements

 

 

F-4
 

  

Shamika 2 Gold Inc.

An Exploration Stage Company

Consolidated Statements of Cash Flows

 

 

Operating activities   

For the year ended

December 31,

2011

    

From inception

January 13, 2010

through

December 31,

2010

    

From inception

January 13, 2010

through December

31,2011 

 
Net loss  $(2,811,768)  $(388,261)  $(3,200,029)
Adjustments to reconcile net loss to cash used by operating               
activities               
Amortization of financing costs   41,651    999    42,650 
Amortization of debt discount   310,490    3,319    313,809 
Loss from discontinued operations   48,200    103,499    151,699 
Shares issued for services   1,829,900    -    1,829,900 
Changes in:               
Deferred financing costs   (18,322)   (8,995)   (27,317)
Accrued interest   9,706    276    9,982 
Accounts payable and accrued liabilities   56,209    200,551    256,760 
Accounts payable - related party   24,012    88,612    112,624 
                
Net cash used in operating activities of continuing operations   (509,922)   -    (509,922)
Net cash used in operating activities of               
discontinued operations   (51,700)   -    (51,700)
Net cash used in operating activities   (561,622)   -    (561,622)
                
Financing activities               
Proceeds from sale of common stock under subscription agreement   302,622    -    302,622 
Repayments of convertible notes   (102,500)   -    (102,500)
Proceeds from convertible notes   361,500    -    361,500 
Net cash provided by financing activities  561,622   -   561,622 
                
Total change in cash for period   -    -    - 
Cash at beginning of period   -    -    - 
Cash at end of period  $-   $-   $- 
                
Non-Cash Investing Activities               
Shares issued to acquire mineral property  $350,000   $-   $350,000 
Mining permits acquired in exchange for notes payable  $-   $500,002   $500,002 
                
Non-cash Financing Activities               
Shares issued for satisfaction of note payable and accrued interest  $206,217   $-   $206,217 
Common stock issued. Proceeds received by related party for               
reduction of related party payable  $-   $100,000   $100,000 
Payment on note payable in exchange for related party payable  $-   $(41,000)  $(41,000)
Payments on related party payable in exchange for proceeds               
from convertible note  $-   $78,500   $78,500 

 

See notes to financial statements

 

F-5
 

 

 

Shamika 2 Gold Inc.

An Exploration Stage Company

Consolidated Statement of Stockholders’ Deficit

 

 

 

   SGI Common Stock    SGI Common Stock    Additional    Deficit Accumulated
During 
     
   Shares   Dollars at Par ($.0001)   Shares   Dollars at Par ($.00001)   Paid-In-
Capital
   Exploration Stage   Stockholders' Deficit 
                                    
                                    
Shares issued at inception, January 13, 2010
(par value $0.0001)
   13,235,305   $1,323        $-   $-   $-   $1,323 
                                    
Cancellation of SGI shares due to reverse                                   
merger with Aultra Gold, Inc.   (13,235,305)   (1,323)                       (1,323)
                                    
Recapitalization due to reverse
merger with Aultra Gold, Inc. (par value $0.00001)
             50,000,000    500              500 
                                    
Common shares issued             333,336    3    99,997         100,000 
                                    
Beneficial conversion feature of
debt instrument
                       56,845         56,845 
                                    
Net loss                  -         (388,261)   (388,261)
                                    
Balances December 31, 2010             50,333,336    503    156,842    (388,261)   (230,916)
                                    
Common shares issued             124,828,035    1,248    2,710,160         2,711,408 
                                    
Beneficial conversion feature of debt instrument                       287,790         287,790 
                                    
Net loss                            (2,811,768)   (2,811,768)
                                    
Balances December 31, 2011   -   $-    175,161,371   $1,751   $3,154,792   $(3,200,029)  $(43,486)

 

 

See notes to financial statements

 

 

F-6
 

Shamika 2 Gold Inc.

An Exploration Stage Company

Notes to Consolidated Financial Statements

December 31, 2011

 

1.      Nature of Operations

 

a)  Organization and Change of Business

 

Aultra Gold Inc. (" Aultra"), was incorporated under the laws of the State of Nevada on January 26, 2005 and was primarily engaged in the acquisition and exploration of mining properties until April 2006.  On April 26, 2006, there was a change in management and direction and Aultra engaged in the acquisition and licensing of online gaming technologies. In 2008 and 2009, Aultra changed strategy to focus on exploration and mining and had acquired interests in certain mining properties in Nevada, Oregon, and Montana.

 

On January 6, 2010, pursuant to a Stock Purchase Agreement, Dutch Gold Resources, Inc. (“Dutch Gold”) acquired 6.4 million shares of Aultra common stock which was a 67% controlling interest of Aultra for a purchase price of one million newly-issued shares of Dutch Gold’s common stock.  On January 6, 2010, Aultra entered into an Asset Purchase Agreement (the “Agreement”) with Dutch Gold to be effective as of December 31, 2009 in which Aultra sold substantially all of its assets to Dutch Gold. As consideration for these assets, Dutch Gold issued 9,614,667 shares of its common stock, par value $0.001 per share, to the Aultra shareholders. In accordance with the transaction, Dutch Gold acquired substantially all of the assets related to Aultra’s gold and mineral business, including inventory, accounts receivable, certain supply and distribution and other vendor contracts, good will and other various assets and intangibles.

 

On January 13, 2010, Aultra entered into an Agreement and Plan of Share Exchange (the “Exchange”) with Shamika Gold Inc. ("SGI") and the shareholders of SGI pursuant to which Aultra acquired all of the outstanding shares of SGI. For accounting purposes, this is a reverse acquisition with SGI the accounting acquirer of Aultra.  For legal purposes Aultra issued shares to the SGI shareholders followed by a merger and recapitalization of Aultra whereby SGI shares were cancelled and Aultra is the surviving entity.

 

SGI was a Canadian private corporation created by Articles of incorporation on January 13, 2010.  SGI’s primary business activity consisted of mining property acquisition, mineral exploration and development.

 

As a result of the transaction, 50 million shares were outstanding with 25.5 million (approximately 51%)  held by the SGI shareholders, 23.5 million issued to settle liabilities and obligations of Aultra and approximately 1 million held by the former Aultra shareholders.

 

Upon consummation of the Exchange, the business plan of SGI was adopted and Aultra changed its name to Shamika 2 Gold, Inc. (the “Company”).

 

 

F-7
 

  

 

Shamika 2 Gold Inc.

An Exploration Stage Company

Notes to Consolidated Financial Statements

December 31, 2011

 

1.Nature of Operations-continued

 

b)Description of Business

 

Shamika 2 Gold, Inc. is engaged in the business of acquiring and exploring gold and mineral properties principally located in Cambodia and Canada, with the objective of identifying gold and mineralized deposits economically worthy of continued production and/or subsequent development, mining or sale.

 

c)Going Concern

 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern.  The Company’s financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business.

 

As shown in the accompanying financial statements, the Company has no cash on hand, current liabilities of $395,653, no immediate borrowing capacity, and has incurred a net loss of $2,811,768 for the year ended December 31, 2011.  These factors result in substantial doubt about the ability to continue as a going concern. The future of the Company is dependent upon its ability to obtain additional financing and upon future profitable operations from the development of acquisitions.  Management has plans to seek additional capital through a private placement and public offering of its common stock.  The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.  The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

2. Significant Accounting Policies

 

a)      Basis of Accounting

 

These consolidated financial statements are prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and include our accounts and the accounts of our majority-owned controlled subsidiary. As the Company has not generated any revenues from is principal intended activity of mining operations,  the Company is considered to be in the exploration stage. The Company currently operates in one reportable segment. Summarized below are those policies considered particularly significant to the Company.

 

b)      Use of Estimates

 

The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of any contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues earned and expenses incurred during the period.  Actual results could differ from those estimates. Evaluation of the potential impairment of mining properties is an estimate that is particularly sensitive to judgments and market conditions.

 

 

F-8
 

  

Shamika 2 Gold Inc.

An Exploration Stage Company

Notes to Consolidated Financial Statements

December 31, 2011

 

 

2. Significant Accounting Policies-continued

 

c)Financial Instruments and Financial Risk

 

The Company’s financial instruments consists of prepaid expenses, accounts payable and accrued liabilities, the fair values of which approximate their carrying amounts due to the short-term nature of these instruments.  The fair value of the Company’s debt instruments are calculated based upon the availability of debt instruments with similar terms, rates, privileges and credit quality.

 

  

d)Cash and Concentrations

 

Financial instruments, which could potentially subject the Company to credit risk, consist primarily of cash. Cash is managed for the Company by a related party, Shamika Resources Inc.  The Company is at risk of loss to the extent that the related party does not uphold its obligations to the Company.

 

 

The Company’s operations are all related to the minerals and mining industry. A reduction in mineral prices, political unrest in the countries in which the Company operates or other disturbances in the minerals market could have an adverse effect on the Company’s operations.

 

e)Environmental Costs

 

Environmental expenditures that relate to current operations are charged to operations or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are charged to operations. Liabilities are recorded when environmental assessments and/or remedial efforts are probable, and the cost can be reasonably estimated. Generally, the timing of these accruals coincides with the earlier of completion of a feasibility study or the Company’s commitments to plan of action based on the then known facts. Management has determined that no liability exists pertaining to environmental expenditures as of December 31, 2011.

 

f)Per Share Data

 

Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the year. Diluted loss per share is computed by dividing net loss by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to warrants and convertible notes.

 

 

The Company has excluded all common equivalent shares outstanding for warrants and convertible notes from the calculation of diluted net loss per share because all such securities are anti-dilutive for the periods presented. As of December 31, 2011, 458,337 warrants had been issued which represent potential shares which may be issued resulting from the provisions of convertible notes and approximately 447,814,331 common shares that may be issued upon the conversion of convertible notes.

 

 

F-9
 

 

Shamika 2 Gold Inc.

An Exploration Stage Company

Notes to Consolidated Financial Statements

December 31, 2011

 

2. Significant Accounting Policies-continued

 

g)Income Taxes

 

The Company accounts for income taxes under ASC 740, Income Taxes. Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. ASC 740 also requires that uncertain tax positions are evaluated in a two-step process, whereby (1) it is determined whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the largest amount of tax benefit that is greater than fifty percent likely of being realized upon ultimate settlement with the related tax authority would be recognized.

 

h)Revenue Recognition

 

The Company plans to recognize revenue from the sale of product when an agreement of sale exists, product delivery has occurred, title has transferred to the customer and collection is reasonably assured. The price to be received is based upon terms of a sales contract. The Company has not generated revenue activity for the periods presented in the consolidated financial statements.

 

i)Stock Based Compensation

 

The Company has adopted ASC 718, Stock Compensation, which requires the Company to measure the compensation cost of stock options and other stock-based awards to employees and directors at fair value at the grant date and recognize compensation expense over the requisite service period for awards expected to vest.

 

The Company may periodically issue stock for payment of certain professional fees and these stock issuances are expensed based on the market value of the stock on the date granted. The Company expenses these professional fees at the time of stock issuance as the stock issuance date approximates the date the services are performed. 

 

j)Asset Retirement Obligation

 

 The Company follows ASC 410-20, which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated retirement costs. The standard applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and normal use of the asset.

 

 

F-10
 

  

Shamika 2 Gold Inc.

An Exploration Stage Company

Notes to Consolidated Financial Statements

December 31, 2011

 

j)Asset Retirement Obligation - continued

 

 

ASC 410-20 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount is depreciated over the life of the asset. The liability is accreted at the end of each period through charges to operating expense. If the obligation is settled for other than the carrying amount of the liability, the Company will recognize a gain or loss on settlement. The Company has no mining projects in production as of December 31, 2011, and the asset retirement obligations are usually created as part of the production process. Accordingly, at December 31, 2011, the Company had no asset retirement obligations.

 

k)Mineral Properties, Mineral Claim Payments and Exploration Expenses

 

The Company expenses all costs related to the maintenance and exploration of the unproven mineral properties to which it has secured exploration rights. If and when proven and probable reserves are determined for a property and a feasibility study is completed, then subsequent development costs of the property are capitalized. Once capitalized, such costs will be amortized using the units-of-production method over the estimated life of the probable reserves.

 

The Company assesses the carrying costs for impairment under ASC 930 Extractive Activities – Mining (ASC 930) annually. An impairment is recognized when the sum of the expected undiscounted future cash flows is less than the carrying amount of the mineral property. Impairment losses, if any, are measured as the excess of the carrying amount of the mineral property over its estimated fair value. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.

 

l)Convertible Instruments

 

 

The Company reviews the terms of convertible debt and equity instruments to determine whether there are conversion features or embedded derivative instruments including embedded conversion options that are required to be bifurcated and accounted for separately as a derivative financial instrument. In circumstances where the convertible instrument contains more than one embedded derivative instrument, including conversion options that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single compound instrument. Also, in connection with the sale of convertible debt and equity instruments, the Company may issue free standing warrants that may, depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity. When convertible debt or equity instruments contain embedded derivative instruments that are to be bifurcated and accounted for separately, the total proceeds allocated to the convertible host instruments are first allocated to the fair value of all the bifurcated derivative instruments. The remaining proceeds, if any, are then allocated to the convertible instruments themselves, usually resulting in those instruments being recorded at a discount from their face amount. When the Company issues debt securities, which bear interest at rates that are lower than market rates, the Company recognizes a discount, which is offset against the carrying value of the debt. Such discount from the face value of the debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to income.

 

F-11
 

 

Shamika 2 Gold Inc.

An Exploration Stage Company

Notes to Consolidated Financial Statements

December 31, 2011

 

l)Convertible Instruments (continued)

 

In addition, certain conversion features are recognized as beneficial conversion features to the extent the conversion price as defined in the convertible note is less than the closing stock price on the issuance of the convertible notes.

 

Fees incurred in the placement of the convertible notes are deferred and recognized over the life of the debt agreement as an adjustment to interest expense using the interest method.

 

m)Recent Accounting Pronouncements

 

Fair Value Measurements and Disclosures ASC 820, Improving Disclosures about Fair Value Measurements: In January 2010, the Financial Accounting Standards Board (FASB) issued accounting guidance intended to improve disclosures related to fair value measurements. This guidance requires significant transfers in and out of Level 1 and Level 2 fair value measurements to be disclosed separately along with the reasons for the transfers. Additionally, in the reconciliation for the fair value measurements using significant unobservable inputs (Level 3), information about purchases, sales, issuances and settlements must be presented separately (cannot net as one number). This guidance also provides clarification for existing disclosures on (i) level of disaggregation and (ii) inputs and valuation techniques. In addition, this guidance includes conforming amendments for employers’ disclosure of postretirement benefit plan assets. This guidance was effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll-forward of activity in Level 3 fair value measurements. Those disclosures are required for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of ASC 820 did not have a material impact on the Company’s consolidated results of operations or financial position.

 

In May 2011, the FASB issued an Accounting Standards Update on fair value measurements that clarifies the application of existing guidance and disclosure requirements, changes certain fair value measurement principles, and requires additional disclosures about fair value measurements. This guidance is effective for interim and annual periods beginning after December 15, 2011. The Company does not expect the adoption of this guidance to have a material impact on its financial statements.

 

3.  Business Acquisitions

 

Prior to the reverse acquisition discussed herein, Aultra Gold Inc. was an exploration and mining company with certain claims and permits and limited operational activity.

 

Pursuant to a Stock Purchase Agreement, on January 6, 2010 Dutch Gold Resources Inc. (Dutch Gold) acquired 6,442,500 shares of Aultra which comprised a 67% controlling interest in Aultra after giving effect to a 1 for 10 reverse stock split completed by Aultra just prior to the transaction.  Dutch Gold issued one million shares of Dutch Gold’s common stock with a fair value at date of closing of $135,000 as consideration for the purchase.

 

On January 6, 2010, Dutch Gold also entered into an Asset Purchase Agreement with Aultra pursuant to which, Dutch Gold acquired all of Aultra’s assets which at the time consisted of mining property rights to several parcels in Montana, Nevada and Oregon. As consideration for these assets, Dutch Gold issued 9,614,667 shares of Dutch Gold common stock, par value $0.001 per share, to Aultra's shareholders at a total value of $1,297,980.

 

F-12
 

  

Shamika 2 Gold Inc.

An Exploration Stage Company

Notes to Consolidated Financial Statements

December 31, 2011

 

3.  Business Acquisitions (continued)

 

As a result of the January 6, 2010 transactions with Dutch Gold,  Aultra was 67% owed by Dutch Gold, and was a publically traded company with no assets, approximately $900,000 in carry over liabilities and no means of generating any future revenues.

 

SGI was a Canadian private corporation created by Articles of incorporation on January 13, 2010.  SGI’s primary business activity consisted of mining property acquisition, mineral exploration and development.

 

On March 26, 2010, Aultra Gold, Inc. entered into an Agreement and Plan of Share Exchange with SGI.  Pursuant to the agreement Aultra Gold, Inc. acquired all of the outstanding SGI shares from the SGI shareholders in exchange for an aggregate of 25,500,000 newly issued shares of Aultra’s common stock, par value $0.00001 per share resulting in, SGI and its 99.9% owned subsidiary Shamika Gold Mining Sprl., a Congolese limited partnership became subsidiaries of Aultra.  Aultra shares were issued to the SGI shareholders on a pro rata basis, on the basis of the shares held by such SGI shareholders at the time of the transaction.  In addition, Aultra issued 23,547,067 shares of its common stock to various former Aultra Shareholders to satisfy certain liabilities at the time of the transaction in the amount of $301,000 and of this amount Dutch Gold receiving 4,950,000 shares.  Upon completion of the transaction, there were 50,000,000 shares of Aultra outstanding including 952,933 shares retained by the former Aultra shareholders.

 

This transaction represents a reverse acquisition with SGI being the acquirer. The business purpose of this transaction was for SGI to be a publically traded company and have access to capital markets in the United States.

 

As Aultra had no operations subsequent to the Asset Purchase Agreement noted above, issuing shares that would result in SGI having a controlling interest allowed Aultra shareholders an exit strategy or way to get value.

 

As a result of the acquisition by SGI, Dutch Gold assumed the remaining Aultra liabilities of $616,154 which represents amounts owed to Rauno Perttu at the time of the transaction.

 

At the effective time of the acquisition, Aultra’s board of directors and officers was reconstituted by the resignation of: Rauno Perttu from his role as President, Secretary and director, Daniel Hollis from his role as Chief Financial Officer and director, and the appointment of Robert Vivian as President and Chief Executive Officer and Terence Ortslan as Secretary and Director. Therefore, subsequent to the acquisition, Dutch Gold no longer has a controlling interest in Aultra.

 

Subsequent to the transaction, Aultra changed its name to Shamika 2 Gold, Inc and adopted the business plan of the Company.

 

 

F-13
 

  

 

Shamika 2 Gold Inc.

An Exploration Stage Company

Notes to Consolidated Financial Statements

December 31, 2011

 

4.  Discontinued Operations

 

Congo

 

On January 13, 2010, Shamika Gold Mining SPRL, a subsidiary was contributed as initial capital to the Company.  During 2010 the Company spent resources on permits to develop the Congo claims: the Lubutu project consists in 72 mining blocks controlled, covering 61 km2 located on lands in Lubutu, Pting the province of Maniema. This location is in the heart of the Kibara Metallogenic Belt approximately 300 kilometers northwest of Lake Kivu.  The Poko project consists in an exploration permit located on lands in the Kilo-Moto Greenstone belt area in Congo’s Eastern region covering an area of 120 mining blocks and 101 km2.

 

During the fourth quarter of 2010, the Company reallocated its resources to find other projects and to focus efforts on the Cambodia project (see further discussion below), ceased expenditures and further, the Company decided to abandon its efforts on the Congo properties.  On April 6, 2011 the Company assigned all rights and interests in the assets and liabilities of Shamika Gold Mining SPRL to a related company, Shamika Congo Kahele SPRL.  The Company has no continuing involvement in Shamika Gold Mining SPRL.  As a result of the decision to abandon the Congo projects prior to the issuance of financial statements, the Company accounted for the subsidiary disposal as discontinued operations as of December 31, 2010.

 

Cambodia

 

During the fourth quarter of 2011, due to the inability of the Company to raise the required financing needed to obtain the permits and further the Cambodia project, the Share Exchange Agreement was nullified and the project discontinued. The company expensed $25,700 related to the termination of Share Exchange Agreement with MIG.

 

 

At December 31, 2011, there were no assets or liabilities of discontinued operations. The value of the identifiable assets and liabilities of Discontinued Operations was as follows at December 31, 2010:

 

Assets        
Mining rights and licences  $500,002 
Liabilities     
Note payable   459,000 
Accounts payable – related party   44,499 
    503,499 
Net liabilities of discontinued operations   $3,497 

 

 

 

F-14
 

   

Shamika 2 Gold Inc.

An Exploration Stage Company

Notes to Consolidated Financial Statements

December 31, 2011

 

4.  Discontinued Operations- continued.

 

The following table shows the results of discontinued operations:
   2011   2010 
Revenues  $-   $- 
           
Permits & Licences   20,000    52,549 
Other administrative costs   31,700    50,950 
Gain on disposal   (3,500)   - 
Net Loss  $48,200   $103,499 

 

No tax benefits were recorded on results of discontinued operations as realization of such does not meet recognition criteria.

 

5.  

Mining Projects

 

The Company has been engaged in three mining projects to date as follows:

 

Democratic Republic of Congo- this project was started in 2010 and discontinued in April 2011. No remaining costs are capitalized and no further exploration or activities are planned.

 

Cambodia- this project was started in 2010 and discontinued in the fourth quarter of 2011. No remaining costs are capitalized and no further exploration or activities are planned.

 

Montclerg-Quebec – this project was acquired in 2011 in exchange for the issuance of $350,000 worth of common shares of the Company. The initial value was calculated as the number of shares issued multiplied by the market value on the issue date and was based on the preliminary information about the claims and the underlying mineral deposits and as a result the acquisition cost was capitalized. The Company plans to perform additional exploration to prove reserves, but as no proven and probable reserves have been documented to date, no further costs have been capitalized to date. As of December 31, 2011, the Company has not incurred the additional costs to further explore the property and has not experienced any indicators of impairment.

 

F-15
 

   

Shamika 2 Gold Inc.

An Exploration Stage Company

Notes to Consolidated Financial Statements

December 31, 2011

 

6.  

Related Party Balances and Transactions

 

Management Fees to Related Party

 

From inception to September 30, 2011, the Company operated under a management agreement with a related party Shamika Resources, Inc, which is controlled by the Company's former CEO, Robert Vivian.  The Company had no employees or office expenses as such were provided by consultants through the management agreement with Shamika Resources, Inc.  During 2011 and 2010, the agreement with Shamika Resources, Inc. was informal and $684,821 and $40,000, respectively was accrued to be paid to Shamika Resources, Inc. under the agreement. However, the management fees were reduced following a negotiated debt forgiveness in connection with the termination of the agreement effective September 30, 2011 in the amount of $294,776 for a net 2011 expense of $390,045. As of December 31, 2011, there is no outstanding amount due to Shamika Resources Inc. As of December 31, 2010, $9,613 was due to Shamika Resources, Inc.

 

During 2010 and 2011, the Company did not maintain any cash or bank accounts but relied upon advances from and payables to Shamika Resources, Inc, under the management agreement. Shamika Resources, Inc. held any cash the Company raised as a result of debt or equity issuances and made payments for services on the Company's behalf.

 

From October 1, 2011 to December 31, 2011, the Company operated under an informal consulting agreement with Henry Riedl, the Company’s current CEO. During this period, $33,625 was accrued to be paid to Mr. Riedl under the agreement. As of December 31, 2011, the entire $33,625 remains in accounts payable to related party.

 

 Related party payables are recorded at their cost, are non-interest bearing, unsecured and have no specific terms for repayment.

 

7.

Share Capital

 

During 2010 and 2011 the Company sold capital units (Units) using a subscription agreement. Each Unit consisted of 83,334 shares of common stock and 41, 667 warrants. The warrants have a three year expiration. The warrants also are subject to a mandatory exercise provision which will require the holder of the warrants to exercise the warrants when the average closing price of the Company’s common Stock has been equal to or greater than $0.75 for ten consecutive trading days.

 

As a result of a subscription agreement that was executed with Dutch Gold on November 16, 2010, the Company received $100,000 in payments from Dutch gold for 4 units. During 2010 the Company issued 333,336 Common Stock of the Company, par value $0.00001 per share and 166,668 warrants with a $0.50 exercise strike price.

 

On October 15, 2010 the Company authorized the issuance of 23,547,024 shares of common stock in exchange for the retirement and satisfaction of obligations and debt in the principal amount of $301,512, plus any and all accrued interest and fees owed to our former principal stockholder, officer and director Rauno Perttu. Mr. Perttu assigned his rights to receive a number of the shares in independently negotiated transactions.

 

On November 19, 2010, the Company authorized the issuance of 3,600,000 additional shares of founders’ stock to the principals of its operating companies and member of its Board of Directors including 2,000,000 shares to Robert Vivian, our Chairman, Chief Executive and Financial Officer, and 1,000,000 shares to Terrance Orstlan, our Director, pending the consummation of the amendment of the Company’s Articles of Incorporation to increase its authorized common stock.

 

On December 14, 2010, the Company entered into an Agreement with Asher Enterprises, Inc. (“Securities Agreement”) whereby the Registrant issued an 8% convertible promissory note in an aggregate amount of $78,500.00 Convertible into shares of the Company’s Common Stock. The agreement contains customary representations, warranties and covenants of the Company and investors for like transactions.

 

On January 13, 2011, the Company received $50,000 in payments from Dutch Gold for 2 Units resulting in the issuance of 166,668 Common Stock of the Company, par value $0.00001 per share and 83,334 Warrants of the Company’s Common Stock with a $0.50 exercise strike price.

On January 19, 2011, as a result of a subscription agreement that was executed with El Oro on Ltd. November 16, 2010, the Company received $75,000 in payments from El Oro Ltd. for 3 Units resulting in the issuance of 250,002 Common Stock of the Company, par value $0.00001 per share and 125,001 Warrants of the Company’s Common Stock at the exercise price of $0.30 per share.

 

On March 17, 2011 the Company executed a Convertible Note in the amount of $50,000 in favor of Coventry Enterprises LLC.  Pursuant to the terms of the Note, the Company is required to issue the Holder 50,000 common shares, par value $0.00001 per share.  The value of the shares issued is based upon the market price of the Company’s common stock on the date of issuance. The Company charged the value of the shares, $17,500, to interest expense.

 

On April 14, 2011, the Company issued 4,800,000 shares of the Company’s Common stock to the founders of the Company. The market value on that date was $0.26 per share, resulting in a value of this share grant of $1,248,000.

 

On April 19, 2011, the Company received $50,000 in payments from Dutch Gold for 2 Units resulting in the issuance of 166,668 Common Stock of the Company, par value $0.00001 per share and 83,334 Warrants of the Company’s Common Stock with a $0.50 exercise strike price.

 

F-16
 

 

Shamika 2 Gold Inc.

An Exploration Stage Company

Notes to Consolidated Financial Statements

December 31, 2011

7.

Share Capital – continued

 

On April 29, 2011 the Company issued 250,000 shares of the Company’s Common stock in return for services to Interactive Business Alliance, LLC, a public relations firm. The market value on that date was $0.182 per share, resulting in a value of this share grant of $45,500.

 

On May 24, 2011 the Company issued 1,800,000 shares of the Company’s to Frederic de La Forge as compensation for services as COO of the Company. The market value on that date was $0.13 per share, resulting in a value of this share grant of $234,000.

 

On June 6, 2011 the Company issued 957,565 shares of the Company’s Common stock to employees and consultants of Shamika Resources Inc. in payment for services. The market value on that date was $0.1305 per share, resulting in a value of this share grant of $125,000 and was charged to expense over the service period.

 

On June 14, 2011 the Company issued 1,262,819 shares of the Company’s Common stock to Centurion Private Equity, LLC. The shares represent legal costs and commitment fees pursuant to an Investment Agreement dated June 13, 2011. The market value on that date was $0.1346 per share, resulting in a value of this share grant of $170,000. As of June 14, 2011, the Company entered into an investment agreement (the “Investment Agreement”) with Centurion Private Equity, LLC (“Centurion”) to establish an equity facility pursuant to which the Company will issue registered, tradable shares of its common stock, par value $0.00001 per share (the “Common Stock”), for future financings of up to $10 million over a 36-month period. Pursuant to that certain Registration Rights Agreement (the “Registration Rights Agreement”), the Company agreed to register the shares involved in the equity facility in several tranches over the term. Use of this equity facility would be entirely in the Company’s discretion.

 

Subject to an effective registration statement, the Company may draw on the $10 million facility from time to time, as and when we determine appropriate in accordance with the terms and conditions of the Investment Agreement.  The maximum amount that the Company is entitled to put in any one notice is such number of shares of common stock as equals $500,000 provided that the number of shares sold in each put shall not exceed a share volume limitation equal to the lesser of: (i) a number of shares equal to the Company Designated Maximum Put Dollar Amount divided by the Company Designated Minimum Put Share Price, or (ii) 15% of the aggregate trading volume (the “Volume Limitation”) of the common stock traded on our primary exchange during any pricing period for such put excluding any days where the lowest intra-day trade price is less than the ”Trigger Price” (which is the greater of: (a) the floor price plus a fixed discount of $0.01, subject to adjustment in certain circumstances; or (b) the floor price if any set by us divided by 0.98).  The offering price of the securities to Centurion will equal the lesser of: (i) 98% of the average of the lowest three daily volume weighted average price, or “VWAPs,” of our common stock during the fifteen trading day period beginning on the trading day immediately following the date Centurion receives our put notice (the “Market Price”) or (ii) the Market Price minus $0.01. However, if, on any trading day during a pricing period, the lowest intra-day trading price of the common stock is lower than the Trigger Price, then that day’s trading volume is excluded from the calculation of the Volume Limitation on the number of shares that we are entitled to sell in that put.  There are put restrictions applied on days between the put notice date and the closing date with respect to that particular put.  During such time, we are not entitled to deliver another put notice.

 

The Investment Agreement provides that the Company must deliver an advance put notice to Centurion at least five business days but no more than ten business days prior to any intended put date.  The advance put notice must provide the number of shares included in the put and the put date.

 

F-17
 

  

Shamika 2 Gold Inc.

An Exploration Stage Company

Notes to Consolidated Financial Statements

December 31, 2011

7.

Share Capital – continued

 

The Company may terminate the facility at any time for any reason during an Extended Put Period (as defined in the Investment Agreement), provided that such termination shall have no effect on the parties’ other rights and obligations under the Investment Agreement and the Registration Rights Agreement.  The Investment Agreement contains customary representations and warranties of each of the Company and Centurion.

 

In addition, the Company executed a Registration Rights Agreement with Centurion whereby the Company agreed to register a number of shares of its Common Stock equal to the Commitment Shares, the Fee Shares, any shares of Common Stock to be issued in connection with a put and any shares resulting from a dividend, stock split, exchange, reclassification or similar distribution.  The Company agreed to file a registration statement with the Securities and Exchange Statement to register such shares within 60 days and to have such registration be effective within 120-150 days and to keep such registration statement, or additional registration statements if necessary, remain effective until either all of the registered shares are sold or the shares may be sold in accordance with Rule 144 of the Securities Act of 1933, as amended.

 

The Company failed to file an effective registration statement and register the necessary shares. Accordingly, no shares have been issued under this agreement with Centurion and the Company has no further ability to use this facility.

 

On June 21, 2011 Asher Enterprises converted a Convertible Note (Asher #1), face value $78,500, into Common stock. The conversion resulted in the Company issuing 1,223,988 Common shares.

 

On June 28, 2011, the Company issued 5,000,000 shares of Common stock to Lam Cham Tho. The shares were issued pursuant to the Purchase Agreement for the Montclerg Property. The market value on that date was $0.07 per share, resulting in a value of this share grant of $350,000.

 

In July 2011 Asher Enterprises converted a Convertible Note (Asher #2), face value $50,000, into Common stock. The conversion resulted in the Company issuing 1,696,455 Common shares.

 

On August 23, 2011, the Company issued 250,000 shares of the Company’s Common stock to MidSouth Capital Inc., a public relations firm as payment for services. The market value on that date was $0.024 per share, resulting in a value of this share grant of $6,000.

 

On August 30, 2011, the Company sold a capital unit (Units) pursuant to a subscription agreement for a cash consideration of $15,000.  Each Unit consisted of 1,302,084 shares of common stock.

 

On August 30, 2011, the Company sold three capital units (Units) pursuant to a subscription agreement for a cash consideration of $112,622.  Each Unit consisted of 3,258,735 shares of common stock. The proceeds were used to repay the $102,500 Convertible Note due to War Chest Capital Multi-Strategy Fund LLC.

 

On August 31, 2011, the Company issued 50,000 shares of Common Stock to Lam Chan Tho for consulting services. The market value on that date was $0.028 per share, resulting in a value of this share grant of $1,400.

 

From September 16, 2011 to December 13, 2011 Asher Enterprises converted a Convertible Note (Asher #3), face value $53,000, into Common stock. The conversion resulted in the Company issuing 30,775,032 Common shares.

 

From December 14, 2011 to December 29, 2011 Asher Enterprises converted a portion of Convertible Note (Asher #4), face value $15,600, into Common stock. The conversion resulted in the Company issuing 49,550,756 Common shares.

 

From November 21, 2011 to December 29, 2011 Coventry Enterprises converted a portion of their $50,000 Convertible Note, face value $9,117, into Common stock. The conversion resulted in the Company issuing 15,499,793 Common shares.

 

Summary of Warrants Outstanding

 

   Warrants
Outstanding
   Weighted
Average
Exercise Price
   Aggregate
Intrinsic
Value
 
Inception January 2010   -    -    - 
Issued   166,668    .50    - 
Outstanding December 31, 2010   166,668    .50    - 
Issued   291,669    .42    - 
Exercised   -    -    - 
Forfeited   -    -    - 
Outstanding December 31, 2011   458,337    .46    - 

  

The remaining average contractual life of warrants outstanding is 2 years. All warrants are exerciseable as of December 31, 2011.

F-18
 

 

Shamika 2 Gold Inc.

An Exploration Stage Company

Notes to Consolidated Financial Statements

December 31, 2011

 

8.Income Taxes

 

The Company had net operating loss carry-forwards available to offset future taxable income approximating $3,200,000 and $388,000 as of December 31, 2011 and 2010. Such operating losses expire beginning in 2030.

 

The Company has determined that realization of a deferred tax asset that has resulted from the net operating losses is not likely and therefore a full valuation allowance has been recorded against this deferred income tax asset. The deferred tax asset, which is fully reserved by a valuation allowance, approximated $1,088,000 and $130,000 as of December 31, 2011 and 2010, respectively. There are no other material deferred tax positions recorded by the Company.

 

No income tax benefit has been recorded on the 2011 or 2010 financial statements. Total income tax expense (benefit) differed from the amounts computed by applying the U.S. Federal statutory tax rates to pre-tax loss for the period ending December 31, 2011 and 2010 as follows:

 
 

   2011   2010 
Total expense (benefit) computed by:          
           
Applying the U.S. Federal statutory rate   (34)%   (34)%
           
Valuation allowance   34%   34%
           
Effective tax rate (benefit)   -    - 

 

We do not have an accrual for uncertain tax positions as of December 31, 2011 or 2010. If interest and penalties were to be assessed, we would charge interest to Interest Expense, and penalties to Other Operational Expense. It is not anticipated that unrecognized tax benefits would significantly increase or decrease within 12 months of the reporting date.

 

9.           Convertible Notes

 

During 2011 and 2010 various convertible notes were issued to lenders and converted into shares as previously described in Note 7.

 

The Company had convertible promissory notes outstanding at December 31, 2011 and 2010 as follows: 

 

   2011   2010 
           
Asher Enterprises #1  $-   $78,500 
Asher Enterprises #4   34,400    - 
Asher Enterprises #5   50,000    - 
Asher Enterprises #6   8,500      
Coventry   40,883    - 
    133,783    78,500 
Less debt discount   (33,326)   (53,526)
           
   $100,457   $24,974 

 

F-19
 

 

Shamika 2 Gold Inc.

An Exploration Stage Company

Notes to Consolidated Financial Statements

December 31, 2011

 

9.Convertible Notes - continued

 

The Company has issued various convertible notes.

 

The notes bear interest at the rate of 8% per annum and mature between January 28, 2012 and June 19, 2012. The Company has the option to repay the note at a premium or to pay all outstanding principal and interest at maturity.  If not repaid prior to or upon maturity, the notes will automatically convert into common shares. Under the convertibility terms of the convertible promissory notes, the principal, plus accrued interest can be converted at any time or upon maturity, at the option of the holder, either in whole, or in part, into fully paid common shares of the Company.  The notes contain a beneficial conversion feature which allows the holders of the notes to convert the notes into common shares of the Company at a price less than fair market value at date of conversion.   This amount is recorded as a discount to the principal amount of the notes and is amortized to interest expense utilizing the straight-line method over the term of the related note as the results are not materially different from those which would result from the interest method.  As of December 31, 2011 and 2010, $33,326 and $53,526, respectively, remained in unamortized discount associated with the beneficial conversion feature.   During 2011, the Company recognized interest expense on the notes of $384,840 which was comprised of $32,699 in contractual interest, $310,490 in amortization of the debt discount and $41,651 in amortization of financing costs. During 2010, the Company recognized interest expense on the note of $4,594 which was comprised of $276 in contractual interest, $3,319 in amortization of the debt discount and $999 in amortization of financing costs.

 

On March 2, 2011 the Company issued a secured convertible note in the amount of $102,500 to War Chest Capital due September 2, 2011 and bearing interest at 9.875%. This note was repaid in full, including accrued interest in August 2011.

 

10.Commitments and Contingencies

 

From time to time, we are involved in claims and suits that arise in the ordinary course of our business. Although management currently believes that resolving any such claims against us will not have a material adverse impact on our business, financial position or results of operations, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future.

 

11.Subsequent Events

 

Between January 3 and January 9, 2012 Asher Enterprises converted part of Note #4 in the amount of $13,200 resulting in the issuance of 60,419,397 shares of the Company’s common stock. The remaining principal owing on the note is $21,200.

 

Between January 3 and January 6, 2012 Coventry Enterprises converted part of a Note in the amount of $15,656 resulting in the issuance of 61,423,285 shares of the Company’s common stock. The remaining principal owing on the note is $25,227.

 

In April 2012, the Company received approximately $20,000 in convertible note proceeds. The notes bear interest at 8% and are due in 9 months. The notes are convertible at a 50% discount to market value, with a minimum conversion price of $0.01 per share if not repaid in full prior to maturity.

 

 

 

F-20