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UNITED STATES


SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-K


(Mark one)

[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


or


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


For the transition period from _____ to_____


Commission File Number: 000-53450


KAT GOLD HOLDINGS CORP.

(Exact name of registrant as specified in its charter)


Nevada

38-3759675

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)


1149 Topsail Rd., Mount Pearl, Newfoundland, A1N 5G2, Canada

(Address of principal executive offices) (Zip Code)


Registrant’s Telephone Number, including area code: (709) 368-9223


Securities registered pursuant to Section 12(b) of the Exchange Act:


Title of Each Class

 

Name of Each Exchange on which Registered

None

 

Not Applicable


Securities registered pursuant to Section 12(g) of the Exchange Act: Common Stock, par value $.001 par value



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 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]


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  [X]    No  [  ]






Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X]    No  [  ]


Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [X]


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


Large Accelerated Filer [  ]

Accelerated Filer [  ]

Non-Accelerated Filer [  ]

Smaller Reporting Company [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]


The aggregate market value of the voting stock held by non-affiliates of the issuer on June 30, 2011, based upon the $.12 per share closing price of such stock on that date, was $35,837,340. There were 298,644,500 shares of common stock outstanding as of April 10, 2012.


Documents incorporated by reference:  None











2





TABLE OF CONTENTS


 

 

 

PART I

 

 

 

 

4

ITEM 1. BUSINESS

 

 

 

 

 

ITEM 1A. RISK FACTORS

 

7

 

 

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

8

 

 

 

ITEM 2. PROPERTIES

 

10

 

 

 

ITEM 3. LEGAL PROCEEDINGS

 

12

 

 

 

ITEM 4. MINE SAFETY DISCLOSURES

 

15

 

 

 

PART II

 

 

 

 

 

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

 

18

 

 

 

ITEM 6. SELECTED FINANCIAL DATA

 

20

 

 

 

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

 

35

 

 

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

37

 

 

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENT DATA

 

38

 

 

 

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

 

40

 

 

 

ITEM 9B OTHER INFORMATION

 

41

 

 

 

PART III

 

 

 

 

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

45

 

 

 

ITEM 11. EXECUTIVE COMPENSATION

 

45

 

 

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

45

 

 

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

 

45

 

 

 

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

 

45

 

 

 

PART IV

 

 

 

 

 

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

50

 

 

 

SIGNATURES

 

50




3





FORWARD-LOOKING INFORMATION


This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or our future financial performance. We have attempted to identify forward-looking statements by terminology including “anticipates”, “believes”, “expects”, “can”, “continue”, “could”, “estimates”, “expects”, “intends”, “may”, “plans”, “potential”, “predict”, “should” or “will” or the negative of these terms or other comparable terminology. These statements are only predictions; uncertainties and other factors may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels or activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Our expectations are as of the date this Form 10-K is filed, and we do not intend to update any of the forward-looking statements after the date this Annual Report on Form 10-K is filed to confirm these statements to actual results, unless required by law.


PART I


ITEM 1.  BUSINESS.


Company Background


Our company, formerly known as Bella Viaggio, Inc., is a development stage company incorporated in the State of Nevada on June 6, 2007. On April 28, 2010, Kenneth Stead, an individual acquired 2,043,333 shares of our common stock from Ronald A. Davis and Ronald G. Brigham for an aggregate purchase price of $275,272. Simultaneously therewith, Mr. Stead purchased an additional 220,667 shares of our common stock from eleven other shareholders of our company. Consequently, Mr. Stead paid an aggregate purchase price of $305,000 for the 2,264,000 shares of our common stock, which constituted approximately 85.6% of all shares of our common stock then issued and outstanding. The foregoing share acquisition resulted in a change in control of our company.


On June 4, 2010, pursuant to an acquisition agreement dated as of May 28, 2010 (the “Acquisition Agreement”) by and between our company and Kat Exploration, Inc., a company organized under the laws of Nevada, we acquired 100% of the mineral rights that Kat Exploration then held in and to “Handcamp,” a gold property located in the Province of Newfoundland and Labrador, Canada. We issued 161,000,000 shares of our common stock to Kat Exploration, Inc. for the mineral rights that it had previously held in and to Handcamp. As a result of this transaction, we became virtually wholly owned by Kat Exploration, Inc. and refer to it in this Annual Report as “our parent company.”


As disclosed below under the heading “Mineral Rights Acquisition - Province of Newfoundland and Labrador,” acquisition of mineral rights in the province of Newfoundland and Labrador (the “Province”) is by online map staking. Our parent company staked an aggregate of 149 claims to Handcamp. These claims, which form a part of four separate exploration licenses, constitute exclusive legal rights to explore for minerals on Handcamp and were conveyed by our parent company to us pursuant to the Acquisition Agreement. If we discover a mineral deposit on Handcamp, we would be entitled to convert the licenses into mining leases; we presently intend to convert any applicable licenses into leases if and when we discover any such deposits. However, no such conversion is permitted until a deposit is discovered. There can be no assurance that a mineral deposit will ever be discovered on Handcamp.


Following our acquisition of Handcamp, we changed our business model to that of a mineral acquisition, exploration and development company focused primarily on gold properties. Our principal objective is to attempt to locate, mine for and sell mineral properties.  On August 26, 2010 our name was changed to Kat Gold Holdings Corp.




4





On November 25, 2011, pursuant to an asset purchase agreement dated November 23, 2011 by and between our company and our parent company, we acquired 100% of the mineral rights that our parent company then held in and to the mineral properties Rusty Ridge, Collier’s, North Lucky and South Lucky (each, a “Property” and collectively, the “Properties”) in exchange for the issuance to our parent company of 135,000,000 shares of our company’s common stock.


North Lucky, South Lucky and the Rusty Ridge properties are located in eastern Newfoundland on the Bonavista Peninsula. Collier’s is also located in eastern Newfoundland but is situated on the Avalon Peninsula. Our company’s economic interest in the Properties is based on terrestrial sedimentary and volcanic rocks of the Avalon Zone, correlative to Africa, hosting sedimentary-hosted stratiform copper (SSC) or volcanic red bed copper (VRC) mineralization with the exception of Rusty Ridge, which has iron-oxide- copper-gold (IOCG) potential.


As of the date of this Annual Report, we have not generated any revenues but we have incurred expenses related to the drilling and exploration of Handcamp.  We have no material income and/or assets other than Handcamp, Rusty Ridge, Collier’s, North Lucky and South Lucky, and have cumulative losses from inception through December 31, 2011 of approximately $132,475,916.


Our common stock is eligible for quotation on the Pink Sheets. Our common stock remains quoted under the symbol “BVIG”. Our principal executive offices are located at 1149 Topsail Road, in the City of Mount Pearl, in the Province of Newfoundland and Labrador, Canada, A1N 5G2. Our telephone number is (709) 368-9223.


We have never declared bankruptcy, we have never been in receivership, and we have never been involved in any legal action or proceedings. Since our inception, we have not, other than as described below, made any significant purchases or sales of assets, nor have we been involved in any mergers, acquisitions or consolidations and we have no subsidiaries. Our fiscal year end is December 31.


The Handcamp Property


On June 4, 2010, we acquired 100% of the mineral rights that our parent company then held in and to Handcamp. Handcamp is located approximately 20 miles north of Badger, central Newfoundland and 6 miles northeast of an abandoned copper mine. Abandoned logging roads run through Handcamp, which we believe will allow for accessibility and mobility of heavy equipment.


One 50-yard wide mineralized zone lies within a strata-bound (rock layers) structurally complex zone which lies near a major east-directed thrust within the Roberts Arm Group (volcanic rocks) and is reflected in folding, shearing (fracturing) and mylonite (fine-grained, compact rock) development. Superimposed on the volcanogenic sulfide mineralization is epigenetic (formed after the rocks were laid down) disseminated gold mineralization. We believe that the optimal sulfide mineralization is associated with sericite schist (rocks formed under high temperature and pressure) with veinlets and dissemination (finely spread minerals) having been traced over a strike length of almost a mile.


Handcamp consists of 3 contiguous claim blocks totaling 149 claims, for an area of 3,730 hectares (37.3 square km). It is located less than 2,000 m east of the Trans Canada Highway (TCH), about 15 km south of South Brook, a small community situated near the south end of Halls Bay along the north coast of Newfoundland, Canada (See “Figure 1”). Driving time from St. John’s, the capital of Newfoundland, to Handcamp is approximately 6 hours. A regional airport is located at Deer Lake 115 km west along the Trans Canada Highway. Gravel roads provide access to Handcamp from the highway (See “Figure 2”). An electrical transmission line parallels the Trans Canada Highway and passes within 1,500m of Handcamp.




5





1,700 soil samples were collected by representatives of our company along the grid, which were assayed for gold and base metals indicating what our management believes to be promising results. Rock samples were collected over the prospected areas with numerous samples showing significant mineral content with some gold numbers reaching a high of 158 grams per ton gold, 94 grams per ton and gold, 82 grams per ton gold, along with excellent zinc, copper and silver numbers (massive to semi-massive sulfides). A chip sample was cut over the main piece of the Handcamp property’s gold deposit that shows an average of 7.1 grams per ton gold over 27 feet.


Ownership


Mineral rights to Handcamp that we hold currently include licenses 017308M, 017917M, 017485M, and 011745M. License number, location, license status, work deadlines and exploration expenditure requirements are summarized in Table I and shown on Figure 2.


Please see the section entitled “Mineral Rights Acquisition - Province of Newfoundland and Labrador” for information on the acquisition of mineral rights and a description of staking procedures and assessment requirements for exploration licenses in the Province.


Table I: Handcamp Claims


License

 

Location

 

Status

 

# Claims

 

Stake Date

 

Work Due

 

Required
Expenses*

 

Mapsheets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

017308M

 

Rocky Pond

 

ISSUED

 

86

 

19/01/2010

 

19/04/2011

 

$

17,200.00

 

12H/08

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

017485M

 

Rocky Pond

 

ISSUED

 

52

 

05/03/2010

 

06/06/2011

 

$

10,400.00

 

12H/08

 

011745M

 

Rocky Pond

 

ISSUED

 

11

 

31/12/2003

 

04/04/2011

 

$

2,200.00

 

12H/08

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total:

 

 

 

 

 

226

 

 

 

 

 

$

45,200

 

 

 


*Government filing fees


Lic # 017917M is no longer in effect


Renewal date for 017485m is 05/04/2015


Renewal date for claim 017308m is 18/02/2015


Renewal date for claim 011745m is 02/02/2014




6





 


Figure 1: Location of the Handcamp Property


Geology


Handcamp occurs in the Lower to Middle Ordovician (476 to 473 million years before present) Roberts Arm Group (the “Group”), a steeply dipping west to northwest facing sequence of dominantly submarine volcanic and related sedimentary rocks (See “Figure 2”). The Group is overlain by the younger Springdale Group consisting of sub-aerially deposited volcanic rocks and terrestrial sedimentary rocks. The volcanic and sedimentary rocks are intruded by younger granitic rocks.


Rocks exposed near Handcamp are predominantly dark greenish-grey to reddish-brown and black mafic volcanic rocks accompanied by lesser felsic volcanic rocks and locally interlayers of chert and fine grained sedimentary rocks. The rocks trend roughly east-northeast at an azimuth of about 20° and typically dip to the west.


Mineralization at Handcamp consists of pyrite (iron sulfide) and sphalerite (zinc sulfide) with minor galena (lead sulfide) and chalcopyrite (copper-iron sulfide), minerals which are associated with elevated concentrations of gold, silver, lead and zinc. The gold- and silver-bearing sulfide mineralization on Handcamp occurs in patches, lenses, veinlets and disseminations hosted by a 30 to 50m thick sequence of altered fine grained sedimentary rocks, red and white chert and altered felsic and chloritized, silicified mafic tuff. The mineralized zone has been traced for approximately 1,200m and is approximately 50m wide. The zone has been intersected to a vertical depth of approximately 185m.






7





 

Figure 2: Handcamp Claims

8




Previous Exploration


The area in which Handcamp is located has had a sporadic history of exploration and development since discovery of the Handcamp gold and base metal prospect in 1928. Trenching was carried out on the prospect in 1930 and six short drill holes were completed in 1941. Orenada Mines Ltd. conducted a short 14-hole drilling program on the prospect in 1956. Geophysical surveys including magnetic and electromagnetic surveys were conducted on Handcamp between 1956 and 1977. From 1977 to 1979 Falconbridge Ltd. carried out geological, geochemical and geophysical surveys in the prospect area followed up by trenching and a nine-hole diamond drilling program. During 1982, US Borax Ltd. and Pacific Coast Mines Inc. carried out an induced polarization geophysical survey and subsequently a seven drill hole approximately 684 m drilling program.


Results of the previous exploration returned generally encouraging results that prompted our parent company to option Handcamp in 2006 from certain prospectors. At that time, our parent company established an approximately 2 km by 2 km exploration grid centered on Handcamp. Soil sampling on the grid revealed elevated concentrations of gold, copper and zinc related to the main structure on Handcamp as well in an area on the west side of the grid along a chain of small ponds. Several rock samples collected in the area also returned elevated gold. Handcamp was returned to the vendors in 2007. A high resolution airborne magnetic survey completed by the Geological Survey of Canada in 2008 revealed the presence of northeast-trending magnetic structures, one of which coincides with the location of Handcamp.


Current Exploration


During 2009, our parent company once again optioned Handcamp from the prospectors. Exploration completed by us and our parent company during 2010 included two induced polarization geophysical surveys, trenching and diamond drilling, the latter focusing on the northeast trending structure that includes Handcamp. Induced polarization surveys, especially the chargeability measurements, are useful for detecting conductive minerals such as pyrite (iron sulfide) or chalcopyrite (copper-iron sulfide) disseminated in rocks below the surface.


Results of the induced polarization survey carried out on the exploration grid established in 2006 successfully traced the mineralized structure containing Handcamp along a length of approximately 1,200m (See “Figure 3”). Other induced polarization chargeability anomalies were detected parallel to that containing Handcamp, including one that coincides with elevated gold and copper concentrations in soil samples near the chain of small lakes on the west side of the exploration grid. On the southern portion of the surveyed area, the suspected mineralized zone on Handcamp appears to bifurcate, or split into two structures.


Trenches were completed on induced polarization targets along this suspected mineralized zone to verify the presence of mineralization. The trenches locally exposed mineralization that contained elevated gold, silver lead and zinc concentrations along a length of approximately 600 m with widths of up to 20 m. A chip sample across the main part of Handcamp showing returned a weighted average of 7.3 g/ton (ppm) gold over 8.5 m. A total of 1,640 m of diamond drilling in 12 drill holes was completed as part of the 2010 exploration program on Handcamp.


Eleven of the holes were located in three fences spaced at approximately 250 to 300m intervals, the central fence located near Handcamp. The 12th hole was located about 600m south of Handcamp and was drilled to test the southern extension of the induced polarization anomaly. All of the drill holes successfully intersected alteration and mineralization associated with Handcamp. Estimated true widths of the mineralized zone intersected vary from 15 to 50m. The structure was tested to a vertical depth of 185m, or approximately 135m below intersections completed during previous drilling by US Borax and Falconbridge along Handcamp. Anomalous values of gold, silver, lead and zinc were intersected in all of the holes.


We have completed line-cutting to further test the mineralization and during Phase II we intend to conduct soil sampling, geological mapping, prospecting, IP surveys and diamond drilling. However, we will not be able to conduct any follow up programs until we receive additional financing.



9





 

Figure 3: Handcamp IP anomalies and outline of gold-in-soil anomalies, pink areas show areas underlain by rocks that are highly chargeable i.e. probably contain elevated amounts of disseminated metallic minerals such as pyrite (iron sulfide) and/or chalcopyrite (copper-iron sulfide). The areas outlined in white/blue lines show areas that have elevated concentrations of gold in the soil. North is toward the top of the map parallel to the vertical lines.


Phase I Exploration Expenditures


Details of expenditures related to Phase I exploration aggregating approximately $391,022 are presented in Table II  below.



10





Table II: Handcamp Property, Phase I Exploration: Expenditure Summary


Expenses incurred during Phase I exploration including IP, trenching and drilling on Handcamp in 2011 on mineral license 011745M.


Salaries and Related Costs

 

$

80,813.22

 

 

 

 

 

 

Geophysics

 

$

27,120.00

 

 

 

 

 

 

Onsite Facilities/Supplied Labor

 

$

7,320.00

 

 

 

 

 

 

Geological and Related Consultants

 

$

49,696.40

 

 

 

 

 

 

Trenching

 

$

14,345.00

 

 

 

 

 

 

Drilling

 

$

 

 

 

 

 

 

 

Field Expenses

 

$

130,627.93

 

 

 

 

 

 

Transportation

 

$

19,906.39

 

 

 

 

 

 

Analytical

 

$

7,314.92

 

 

 

 

 

 

 

 

 

49,768.40

 

 

 

 

 

 

Compilation of Previous Data and Information

 

$

4,110.00

 

 

 

 

 

 

Total Phase I Expenditures

 

$

391,022.28

 


Phase II We have not yet began work on any other phase of our program The objectives of the next phase of exploration are: (i) to test for further extension of mineralization related to the Handcamp mineralized zone; (ii) to drill test other targets already identified in the area; and (iii) to potentially identify new targets as a result of geophysical, geological and geochemical surveys to be carried out on extensions of the existing grid. We have completed 73km of line-cutting in preparation for the commencement of Phase II, which will include  soil sampling, geological mapping, prospecting, IP surveys and diamond drilling (See “Figure 4”). However, we have not yet begun Phase II pending receipt of sufficient financing.  Soil sampling is expected to be completed on the extended grid in an effort to locate exploration targets for follow-up exploration. An induced polarization survey will be completed as a priority along with follow-up prospecting and geological mapping on targets identified by the geophysical and geochemical surveys. Further trenching may be required in local areas to facilitate mapping. An enhanced drilling program (3,000m) is also planned that will include testing mineralization to the south where it appears to improve, as well as other targets identified from results of the geophysical and geochemical surveys already completed. It will also include holes to the north and west contingent on additional targets that may be identified by the induced polarization and soil geochemical surveys.


Further exploration beyond Phase II is contingent upon positive results from that phase. If warranted, a multi-phase exploration program will be carried out with the initiation of each new phase being contingent on positive results from the previous phase. Continued positive results from the multi-phase exploration program would lead ultimately to a third party pre-feasibility study and production decision.





11





Expenditures of approximately $4.4 million are anticipated to be required to complete Phase II and Phase III, where implementation of Phase III will be contingent on the success of Phase II. We believe that additional expenditures in the approximate aggregate amount of $6.5 million will be required in order to advance a mineral deposit or deposits on Handcamp, if any, to the stage of the completed pre-feasibility study referred to above. Should any of the exploration phases prove unsuccessful at Handcamp, any financing raised for the execution of the work could be redirected to other projects such as the other properties we recently acquired.


Figure 4: Handcamp grid expansion



12





Other Properties


North Lucky, South Lucky and the Rusty Ridge properties are located in eastern Newfoundland on the Bonavista Peninsula. Collier’s is also located in eastern Newfoundland but is situated on the Avalon Peninsula. Our company’s economic interest in the Properties is based on terrestrial sedimentary and volcanic rocks of the Avalon Zone, correlative to Africa, hosting sedimentary-hosted stratiform copper (SSC) or volcanic red bed copper (VRC) mineralization with the exception of Rusty Ridge, which has iron-oxide- copper-gold (IOCG) potential.

 

Rusty Ridge Property


Our company’s interest in the Rusty Ridge property centers upon Iron-Oxide-Copper-Gold (IOCG) potential. The primary target is an interpreted mineralized deep-seated gravity/magnetic body hosted by a plutonic entity intruding volcanic rocks. KATX undertook a technical review and a proposal for a diamond drilling program for implementation in 2010. The Rusty Ridge property is approximately 2,100 hectares in size, situated on Crown land in proximity to the community of Bunyan’s Cove, Bonavista Peninsula. Mineral Exploration License Nos. 015991M, 016773M and 018404M, aggregating 155 claims, are all in good standing.


Collier’s Property


The targeted exploration of this Property is volcanic red bed copper (“VRC”) similar to deposits found in Michigan. The Collier’s Property is approximately 500 hectares in size and is situated on Crown land in proximity to the communities of Collier’s and Conception Harbour, Avalon Peninsula. Mineral Exploration License No. 011706M, aggregating 20 claims, is in good standing. We believe that the Collier’s Property has been unexplored for at least 150 years. Our parent company staked the property in 2006 for its VRC potential associated with chalcopyrite, bornite and malachite mineralization located in a 27 meter deep shaft sunk in the 1850’s.

 

North Lucky Property


The targeted exploration of this Property is sediment-hosted stratiform copper, which is similar to the Zambian Copper Belt, Africa. The North Lucky Property is approximately 1,225 hectares in size and is situated on Crown land, south of the community of Upper Amherst Cove. Mineral Exploration License No. 016909M, aggregating 49 claims, is in good standing.

 

South Lucky Property


The targeted exploration of this Property is also sediment-hosted stratiform copper. The South Lucky Property is approximately 150 hectares in size and is situated on Crown land, 10 km southwest of the North Lucky property, north of the community of Port Rexton, Bonavista Peninsula. Mineral Exploration License No. 015995M, aggregating 6 claims, is in good standing.


Quality Assurance/Quality Control.


All of the work completed during the exploration by our parent company and ourselves during 2011 was supervised by a professionally qualified on-site geologist unless stated otherwise. The geologist was present during all of the trenching and related interval chip and channel sampling. The drill core was logged in a secure facility in South Brook. All samples were submitted to Eastern Analytical Ltd where they were analyzed by Fire Assay for gold and for various other elements by 11 and 30 element ICP. Every 20 th sample pulp (30 samples) and a suite of 10 samples that returned high gold analysis were obtained from Eastern and sent to Accurassay Ltd. in Gambo, Newfoundland, a different company, as a check on the results to conform to QA/QC protocols consistent with NI 43-101. Work was completed in 2011 under the supervision of Jim Weick and Wayne Pickett, both qualified professional geologists (P.Geo.) registered with the Professional Engineers and Geoscientists of Newfoundland and Labrador (PEG-NL).



13





Glossary of Certain Terms


Felsic rock

High content of silicon, with predominance of quartz, alkali feldspar and/or feldspathoids: the felsic minerals; these rocks (e.g., granite, rhyolite) are usually light colored, and have low density


Mafic rock

Lesser content of silicon relative to felsic rocks, with predominance of mafic minerals pyroxenes, olivines and calcic plagioclase; these rocks (e.g., basalt and gabbro) are usually dark colored, and have a higher density than felsic rocks


Tuff

A rock composed of compacted volcanic ash varying in size from fine sand to coarse gravel; at Handcamp the tuffs were probably deposited subaqueously


Chlorite

A generally green or black secondary mineral (Mg, Fe, Al) 6(Si, Al) 4O10 (OH) 8, often formed by metamorphic or hydrothermal alteration of primary dark rock minerals, resembles mica


Chloritization

The introduction of, production of, replacement by, or conversion into chlorite


Silicification

To become converted into or impregnated with silica


Induced polarization (IP)

Induced polarization (IP) is a geophysical imaging technique used to identify subsurface materials, such as disseminated conductive minerals like pyrite (iron sulfide). The method is similar to electrical resistivity tomography, in that an electric current is induced into the subsurface through two electrodes, and voltage is monitored through two other electrodes.


Time domain IP methods measure the voltage decay or chargeability over a specified time interval after the induced voltage is removed. The integrated voltage is used as the measurement.


Frequency domain IP methods use alternating currents (“AC”) to induce electric charges in the subsurface, and the apparent resistivity is measured at different AC frequencies.


Electromagnetic survey (“EM”)

Measurement of the apparent resistivity of the sub-surface by recording the response of a secondary electrical field induced by the pulsing of a current through a fixed or mobile loop. Used in mineral exploration to detect conductive materials such as massive sulfides, graphite-rich rocks are also detected by EM surveys


Magnetic survey

When carrying out a magnetic survey, airborne or ground magnetometers are used to search for magnetic anomalies in the Earth’s magnetic field. The anomalies are an indication of concentrations of magnetic minerals such as magnetite, pyrrhotite and ilmenite in the Earth’s crust. The survey is useful in differentiating different rocks types that have different concentrations of magnetic minerals as well as detecting concentrations of magnetic minerals such as pyrrhotite (iron sulfide) that may be associated with other minerals of economic interest such as chalcopyrite (copper iron sulfide), sphalerite (zinc sulfide) and/or galena (lead sulfide)




14





Mineral Rights Acquisition - Province of Newfoundland and Labrador


General


Acquisition of mineral rights in the Province is done by online map staking through its Mineral Rights Administration System, known as MIRIAD. In order to stake claims, one must be at least 19 years of age or a corporation, and must be registered with the Mineral Claims Recorders Office. A prospector’s license is not required to stake claims or conduct mineral exploration in the Province. Our parent company staked an aggregate of 149 claims to Handcamp. These claims, which form a part of four separate exploration licenses, constitute exclusive legal rights to explore for minerals on Handcamp and were conveyed by our parent company to us pursuant to the acquisition agreement. If we discover a mineral deposit on Handcamp, we would be entitled to convert the license into a mining lease; we presently intend to convert any applicable licenses into leases if and when we discover any such deposits. However, no such conversion is permitted until a deposit is discovered. The licenses are issued for a minimum of five years. However, we cannot assure you that a mineral deposit will ever be discovered on Handcamp.


Land Tenure


A mineral license gives the licensee the exclusive right to explore for minerals in, on or under the area of land described in the license. A mineral exploration license is issued for a five-year term and may be renewed and held for a maximum of twenty years, provided the required annual assessment work is completed, reported and accepted by the Department of Natural Resources of the Province, and the renewal fees area paid. A license holder has the right to convert any part of the mineral license to a mining lease provided all provisions of Section 31 of the Mineral Act of the Province are met.


Fees


The cost to stake a claim is $60: this includes a $10/claim recording fee and a $50/claim security deposit. The security deposit is refundable upon submission and acceptance of the first-year’s assessment report. The required annual assessment work increases from year to year as outlined below:


Year

 

Dollar amount

per claim

 

First

 

$

200

 

Second

 

$

250

 

Third

 

$

300

 

Fourth

 

$

350

 

Fifth

 

$

400

 

Sixth through Tenth inclusive

 

$

600

 

Eleventh through Fifteenth inclusive

 

$

900

 

Sixteenth through Twentieth inclusive

 

$

1,200

 

 

 

 

 

 

Renewal Fees

 

 

 

 

Fifth Year

 

$

25

 

Tenth Year

 

$

50

 

Fifteenth Year

 

$

100

 


Business Strategy


Our business strategy includes attempting to stake, explore and develop new properties in geologically promising areas and to continue making acquisitions of select properties that have been identified as economically attractive, technically and geologically sound and have significant upside potential.




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We intend to build our business through the exploration and development of the existing Handcamp property as well as our North Lucky, South Lucky and Rusty Ridge properties. Our strategy is to diversify our revenue sources by combining the secure and reliable revenue source of producing gold properties with the potential of gold exploration projects. However, we will not be able to implement our strategy without additional financing. We plan to explore and stake new gold properties, acquire development stage gold exploration properties, carry out exploration programs on the acquired properties, and develop any viable gold producing properties we discover, acquire and are able to pursue, assuming that we are able to raise the requisite financing for such activities. While our head office and properties are all both located in the Province, we have not limited ourselves geographically with respect to future properties.


Our search for producing gold properties has been directed towards small and medium-sized gold companies and properties. For purposes of our initial acquisitions, if any, we are seeking lower risk property interests. In building our portfolio of gold properties, we intend, subject to obtaining the requisite financing, to explore and stake new gold properties, acquire active gold producing properties as well as development stage gold properties. As we continue to develop our portfolio of interests, we will search for properties that have the following qualities:


·

At least developmental drilling exploration potential in proven producing areas and highly promising areas;


·

Significant additional production capacity in existing gold producing properties;


·

Further developmental potential; and


·

Those where we will have the ability to assume operatorship of existing gold producing properties.


Our ultimate objective is to sell any mineral properties that we have been able to develop to a major mining company, or to enter into joint ventures with it. We expect that such a company, should the opportunity arise, will in all likelihood make the decision whether to enter into a joint venture or to purchase a property in its discretion.


Our management hopes to develop relationships with certain major mining companies that could assist us in implementing our business plan; however, we cannot assure you that any such relationships will ever materialize. Management expects that the price of each property will be determined by the anticipated amount and value of minerals it contains. If our management is able to acquire a pool of gold assets, we expect that we would attempt to sell them to a major mining company that would then bring Handcamp into production.


We believe that the stage at which the interest of a major mining company is likely to be elicited is very subjective and subject to numerous facts and circumstances that we cannot presently predict with any significant confidence. However, we do believe that such companies have in the past become interested in a mining property based solely on the discovery of one promising drill hole having, in the opinion of such mining company, significant potential to contain substantial economic value.


Irrespective of any interest shown by such a company, if any, we do not anticipate that our own activities will extend beyond conducting a preliminary feasibility study, where such study is defined as having (i) established that a particular mining project appears viable, and (ii) concluded that an effective method of mineral processing can be adopted and is reasonably likely, in the reasonable opinion of a qualified person, to lead to the determination that all or a part of the mineral resource can be classified as a mineral reserve.


The Business of our Parent Company


The business of our parent company is very similar to our own. Our parent company conducts virtually identical operations as we do, with the sole exception that our business is concentrated on gold whereas the operations of our parent company comprise a wide variety of minerals, including gold.



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Seasonal Access


The exploration for and development of gold properties depends on access to areas where exploration and operations are to be conducted. Seasonal weather variations, including frost and snow, affect access in certain areas. Accordingly, seasonal variations in weather patterns affect the ability to explore and access certain properties during certain times of the year.


Markets


We are currently in the exploration stage and have not generated revenues. We are not producing gold, nor do we have any customers. The availability of a ready market and the prices obtained for gold produced depend on many factors, including the extent of domestic production and imports of gold, the proximity and capacity of other gold properties, fluctuating demand for gold, the marketing of competitive metals, and the effects of governmental regulation on production and sales.


Competition  


The strength of commodity prices has resulted in significantly increased industry operating cash flows and has led to increased exploration activity. This strength has increased competition for undeveloped lands, skilled personnel, access to drilling and other equipment, and access to processing and gathering facilities, all of which may cause drilling and operating costs to increase. Virtually all of our competitors are larger than we are and have substantially greater financial and marketing resources. In addition, virtually all of our competitors may be able to secure products and services from vendors on more favorable terms.


Government Regulation


Our operations will be subject to various types of regulation at the Canadian and United States federal, state, provincial and local levels. Such regulation includes: (i) requiring permits for drilling; (ii) implementing environmental impact practices; (iii) submitting notification and receiving permits relating to the presence, use and release of certain materials incidental to exploration and production operations; and (iv) regulating the location of exploration, the method of exploration, the use, transportation, storage and disposal of fluids and materials used in connection with exploration and production activities, surface usage and the restoration of properties upon which exploration and production occur and the transporting of production.


Our operations, if any, will also be subject to various conservation matters, including the regulation of the location, size and production rate of gold properties. The effect of these regulations may limit the rate at which gold may be extracted from certain properties and the areas which we may access at one time.


Operations on properties in which we have or may acquire an interest are subject to extensive Canadian and United States federal, provincial, state and local environmental laws that regulate the discharge or disposal of materials or substances into the environment, restoration of properties and otherwise are intended to protect the environment. Numerous governmental agencies issue rules and regulations to implement and enforce such laws, which are often difficult and costly to comply with and which carry substantial administrative, civil and criminal penalties and in some cases injunctive relief for failure to comply.


Some laws, rules and regulations relating to the protection of the environment may, in certain circumstances, impose “strict liability” for environmental contamination. These laws render a person or company liable for environmental and natural resource damages, cleanup costs and restoration costs. Other laws, rules and regulations may require the rate of gold production to be below the economically optimal rate or may even prohibit exploration or production activities in environmentally sensitive areas. In addition, provincial and state laws often require some form of remedial action, such as closure of inactive pits and restorative measures.



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We have received and are in possession of all the licenses, grants and other governmental approvals required for us to operate our business. Our cost of obtaining such governmental approvals is immaterial at the present time.


Employees


We currently have 6 employees, consisting of two geologists, two secretaries and two prospectors in addition to the individuals acting as officers as set forth hereinafter. None of such individuals is covered by a collective bargaining agreement or employment agreement. We have not experienced a strike or other adverse work stoppage due to organized labor.


ITEM 1A.  RISK FACTORS.


An investment in our common stock involves significant risks. You should carefully consider the following risks and all other information set forth in this Annual Report before deciding to invest in our common stock. If any of the events or developments described below occurs, our business, financial condition and results of operations may suffer. In that case, the value of our common stock may decline and you could lose all or part of your investment.


Risk Related to our Company


Our business, exploration results and financial condition are subject to various risks and uncertainties, including, without limitation, those set forth below, any one of which could cause a material reduction in the value of our company or our ability to raise capital or cause our ability to  be in accordance with our current business plan to vary materially and adversely from recent results or from our anticipated future results. An investment in our securities is highly speculative and involves an extremely high degree of risk. Therefore, you should thoroughly consider the risk factors discussed below and elsewhere in this Annual Report before purchasing our securities. You should understand that you may lose all or part of your investment.  No person should consider investing who cannot afford to lose their entire investment or who is in any significant way dependent upon the funds that they are investing. The risk factors contained herein are not meant to be exhaustive.


We are a development stage company with limited operating history.


We are an exploration stage company with no operating history in the mineral exploration field. These two factors make it impossible to reliably predict future growth and operating results. Accordingly, we are subject to all the risks and uncertainties which are characteristic of a relatively new business enterprise, including the substantial problems, expenses and other difficulties typically encountered in the course of its business, in addition to normal business risks.  We face a high risk of business failure because we have commenced extremely limited business operations and have no revenues. We were organized in 2006, have not earned any revenues as of the date of this Annual Report and have had only losses since our inception related to the drilling and exploration of Handcamp. We expect to continue to incur losses well into the future. There is no history upon which to base any assumption as to the likelihood that our business will be successful, and there can be no assurance that we will be able to raise sufficient capital to begin operations, that we will generate significant operating revenues in the future or that we will ever be able to achieve profitable operations in the future. We face all of the risks commonly encountered by other businesses that lack an established operating history, including, but not limited to, the need for additional capital and personnel, and intense competition.


We do not expect to generate revenues in the foreseeable future.


We are now an exploration stage company; therefore, we anticipate that we will continue to incur increased operating expenses into the foreseeable future without realizing any revenues. Consequently, we expect to incur significant losses into the foreseeable future. If we are unable to raise additional funding, we will not be able to continue our operations.



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We are an exploration stage company.


We are an exploration stage company and face a high risk of business failure because of the unique difficulties and uncertainties inherent in mineral exploration ventures. Potential investors should be aware of the difficulties normally encountered by mineral exploration companies and the high rate of failure of such companies. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays that could be encountered in connection with our planned exploration and drilling. These potential problems include, but are not limited to, unanticipated problems relating to exploration and additional costs and expenses that may exceed current estimates. Additional expenditures related to exploration may not result in the discovery of additional mineralized material. Problems such as unusual or unexpected formations and other conditions are involved in mineral exploration and often result in unsuccessful exploration efforts. If the results of our exploration do not reveal viable commercial mineralized material, we may decide to abandon the properties and claim we have and acquire new concessions for new exploration or terminate our activities all together. The acquisition of additional concessions will be dependent upon us possessing capital resources at that time in order to purchase and/or maintain such concessions. If no funding is available, we may be forced to cease our operations.


An integral part of our proposed business plan involves exploration activities and acquisitions but we do not currently have the resources to complete them.


We currently do not have resources to complete our exploration activities or to fund acquisitions.   Our strategy includes conducting Phase II and Phase III of our exploration program with respect to the Handcamp property and exploration activities with respect to the other properties we have acquired.  Expenditures of approximately $4.5 million are anticipated to be required to complete Phase II and Phase III, where implementation of Phase III will be contingent on the success of Phase II. We believe that additional expenditures in the approximate aggregate amount of $6.5 million will be required in order to advance a mineral deposit or deposits on Handcamp, if any, to the stage of the completed pre-feasibility study referred to above. In addition, we will require additional funds to commence exploration activities with respect to our other properties.  To date, we have no available sources of financing. Our strategy also includes.


Our strategy also include the acquisition of additional properties.  To date, we have funded such activities by the issuance of our stock which has caused dilution to our current stockholders.  We believe we will require additional funding to acquire additional properties. We have no current acquisition agreements and/or understandings to effect any acquisition, nor do we have the resources to complete such additional acquisitions. However, our proposed business plan contemplates making acquisitions in the future. These proposed acquisitions may include other gold, copper and other properties that our management believes to be potentially significant as well as necessary in order for our company to reach our goal of becoming a gold producer.  


There may be future dilution of our common stock and current shareholders will experience immediate dilution.


If we sell additional equity or convertible debt securities, those sales could result in additional dilution to our shareholders. Our recent acquisitions of properties involved the issuance of a substantial number of shares of our common stock. Future issuances of common stock as consideration for future acquisitions will cause such shareholders to suffer dilution.





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Our success will depend upon our ability to successfully and timely explore and mine gold, copper and other minerals.


The mining business is subject to substantial risks, including, but not limited to, the ability to identify and locate and then mine the gold, copper and other minerals. Further, if we are successful in locating and identifying the gold, copper and other minerals, our ability to mine the materials will be subject to a number of known and unknown additional risks, including, but not limited to, available labor, compliance with local laws and the ability to obtain financing on favorable terms. These risks could result in substantial unanticipated delays or expenses and, under certain circumstances, could prevent the start and/or the completion of exploration and mining activities once undertaken, any one of which could have a material adverse effect on our company’s financial condition and results of operations.


Kenneth Stead and the other members of our board of directors may have faced a conflict of interest in connection with our acquisition of Handcamp and other properties, and the purchase price may not accurately have reflected the value of Handcamp or the other properties that we purchased.


Kenneth Stead is our chief executive officer and a member of our board of directors. In addition, Mr. Stead is the president, a member of the board of directors and a controlling stockholder of Kat Exploration, Inc., our parent company. The price that we paid as well as the other terms of the Acquisition Agreement providing for our acquisition of Handcamp and the acquisition of Rusty Ridge, Collier’s North Lucky and South Lucky were determined solely by Mr. Stead based upon his belief of the fair value of each property. There was no fairness opinion issued, nor was there a special committee of independent directors formed to evaluate the fairness of the transaction, whether to or on behalf of the stockholders of either our company or our parent company. Because Mr. Stead acted and negotiated on behalf of both entities, he may have had a conflict of interest with regard to the value of the properties as well as on his belief of the fair value of the shares of our common stock that we issued to our parent company in our acquisition of the properties. As a result, we cannot assure you that the acquisition of  the properties was fair either to our company, our parent company and/or their respective stockholders.


Our relationship with our parent company may lead to a conflict of interest for our management.


Kat Exploration, our parent company, owns approximately 99% of the shares of our common stock; as a result, our parent company exercises virtually complete control of our company. In addition, there are significant similarities between the two entities’ businesses. If a conflict between the best interests of our parent company and our company should arise, our parent company would be able to determine the outcome of any such conflict without regard to the best interests of our minority stockholders. For example, our parent company is the principal source of the capital contributions that are needed to develop Handcamp; if our parent company were unable to generate sufficient cash flow, it would be unlikely to maintain its policy of advancing capital to us; such an event would have a material and adverse effect on our business and financial condition.


In addition, the identity of the members of the two entities’ board of directors and their management is very similar. In the event of any conflict, therefore, there would be few if any individuals other than our chief financial officer available to speak for our company’s interests whose own interests were not also aligned with those of our parent company, which may lead those individuals to favor the best interests of our parent company to the detriment of our own and our stockholders. In addition, the stockholder base of our parent company is much more extensive than ours is; to the extent that the individuals comprising the members of the boards of directors of the two entities face a conflict of interest between us and our parent company, such individuals may view their fiduciary duty to our parent company and its stockholders to be more compelling than the duty that they owe to us and our stockholders. Consequently, we cannot assure you that the members of our board of directors and management would act in our and our stockholders’ best interests.




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Our auditors have expressed a going concern opinion.


We have no established source of revenues, have incurred losses since inception, have a working capital deficit and are in need of capital to grow our operations so that we can become profitable. Accordingly, the opinion of our auditors for the years ended December 31, 2011 and December 31, 2010 is qualified subject to uncertainty as to whether we will be able to continue as a going concern.  This may negatively impact our ability to obtain additional funding that we may require or to do so on terms attractive to us and may negatively impact the market price of our stock.


We will require additional capital to pursue our business plan; if we are unable to raise sufficient capital to meet our needs, we may be required to cease operations.


We have no material revenues, income and/or assets (other than Handcamp and the other properties) and have cumulative losses from inception through December 31, 2011 of approximately $132,475,916.  We have financed our operations since inception through private placements of our securities as well as capital contributions from our parent company. We will need to obtain additional financing to, among other things, fund any future exploration, mining and drilling projects that we attempt to undertake and for general working capital purposes. Any additional equity financing may be dilutive to our stockholders and any such additional equity securities may have rights, preferences or privileges that are senior to those of the common stock. Debt financing, if available, will require payment of interest and may involve restrictive covenants that could impose limitations on our operating flexibility. We cannot assure you that additional funds will be available when and if needed from any source or, if available, will be available on terms that are acceptable to us. Further, we may incur substantial costs in pursuing future capital and/or financing, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other costs. Our ability to obtain needed financing may be impaired by such factors as the condition of the capital markets, our capital structure, the development stage of our company, the lack of a market for our shares of common stock, and our company’s lack of profitability, all of which could impact the availability or cost of future financings. If we are unable to raise capital or sufficient capital to meet our needs, we may be required to cease operations. In addition, and as is also disclosed in our financial statements, these matters raise substantial doubt about our ability to continue as a going concern.


We are heavily dependent on our management and a loss of any member of our management, particularly Mr. Kenneth Stead, would be severely detrimental to our prospects.


We have a very limited management and number of employees. We are highly dependent on all members of our management, in particular Mr. Kenneth Stead. Our future performance will be substantially dependent on the continued services of our management and the ability to retain and motivate them. The loss of the services of any of our officers or directors, particularly those of Mr. Stead, would materially and adversely affect our business and operations.   If he were to resign, there is no guarantee that we could replace him with qualified individuals in a timely or economic manner or if at all.  At the present time, we have not entered into any long-term employment agreements with any of our members of management or other key personnel and we do not maintain any “key-man” life insurance policies.


Defective title to our assets could have a material adverse effect on our exploration and exploitation activities.


There are uncertainties as to title matters in the mining industry. We believe we have good title to our assets; however, any defects in such titles that cause us to lose our rights in these mineral properties would seriously jeopardize our planned business operations. We have investigated our rights to explore, exploit and develop our assets in manners consistent with industry practice and, to the best of our knowledge, those rights are in good standing. However, we cannot guarantee that the title to or our rights to explore, exploit and develop our assets will not be challenged by third parties or governmental agencies. In addition, there can be no assurance that our assets are not subject to prior unregistered agreements, transfers or claims. Our title may be affected by undetected defects. Any such defects could have a material adverse effect on us.



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In the event of a dispute regarding title to our assets in foreign countries or any facet of our operations, it would likely be necessary for us to resolve the dispute in a foreign country, where we would be faced with unfamiliar laws and procedures. The resolution of disputes in foreign countries as well as in the U.S. can be costly and time consuming, similar to the situation in the United States. However, in a foreign country, we face the additional burden of understanding unfamiliar laws and procedures. We may not be entitled to a jury trial, as we might be in the United States. Further, to litigate in a foreign country, we would be faced with the necessity of hiring lawyers and other professionals who are familiar with the foreign laws. For these reasons, we may incur unforeseen losses if we are forced to resolve a dispute in a foreign country.


At the present time we are unable to pay any dividends.


The Company has not paid any cash dividends and does not anticipate paying any cash dividends on its common stock in the foreseeable future.  It is anticipated that earnings, if any, which may be generated from operations will be used to finance the continued operations of the Company.  Investors who anticipate the immediate need of cash dividends from their investment should refrain from purchasing any of our securities.


We may be exposed to risks relating to our disclosure controls and procedures and may need to incur significant costs to comply with applicable requirements


Based on the evaluation done by our management at December 31, 2011, management concluded that our disclosure controls and procedures were ineffective in that we could not assure that information required to be disclosed in our SEC reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and communicated to management so as to allow timely decisions regarding required disclosures.  Our disclosure controls and procedures are primarily adversely affected by the lack of experience within our company in complying with the requirements of a publicly reporting entity; specifically, management concluded that we have insufficient personnel resources with sufficient technical accounting expertise within our accounting function.  We are seeking to engage experienced professionals to augment our financial staff to address issues of timeliness and completeness in financial reporting when preparing SEC filings. No assurances can be given that we will be able to adequately remediate existing deficiencies in our disclosure controls and procedures. Although we believe that these corrective steps will enable our management to conclude that our disclosure controls and procedures are effective when all of the additional financial staff positions are filled and other remediation plans are implemented, we cannot assure you that this will be sufficient.


We may be unable to maintain an effective system of internal control over financial reporting, and as a result we may be unable to accurately report our financial results.


Our reporting obligations as a public company place a significant strain on our management, operational and financial resources and systems. If we fail to maintain an effective system of internal control over financial reporting, we could experience delays or inaccuracies in our reporting of financial information, or non-compliance with the SEC, reporting and other regulatory requirements. This could subject us to regulatory scrutiny and result in a loss of public confidence in our management, which could, among other things, cause our stock price to drop.


You may not be able to enforce your claims in Canada


While our company is a Nevada corporation, virtually all our assets are located in Newfoundland, Canada.  We cannot assure you that a Canadian court would not deem the enforcement of foreign judgments requiring our company to make payments outside of Canada to be contrary to Canadian policy and/or unenforceable.




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All of our officers and directors reside outside of the United States which could make it difficult to enforce potential civil liabilities and judgments.


Kenneth Stead, our president and chief executive officer, is a resident of Canada, and all our assets are located outside the United States.  As a result, it may be impossible for investors to effect service of process within the United States upon such persons or enforce in the United States against such persons judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of United States federal securities laws or state securities laws.


Risks Related to our Industry


The mining industry is highly competitive.


Competition in the mining industry is extremely intense in all aspects, including but not limited to raising investment capital for exploration and obtaining qualified managerial and technical employees. We are an insignificant participant in the mining industry due to our limited financial and personnel resources. Our competition includes large established mining companies, with substantial capabilities and with greater financial and technical resources than we have, as well as the myriad of other exploration stage companies. As a result of this competition, we may be unable to attract the necessary funding or qualified personnel. If we are unable to successfully compete for funding or for qualified personnel, our mining activities may be slowed, suspended or terminated, any of which would have a material adverse effect on our ability to continue operations.


The exploration and mining business is subject to a number of risks outside of our control.


The exploration and mining industry is highly cyclical by nature and dependent on the price of gold, copper and other minerals and future market conditions are uncertain. Factors beyond our control can adversely affect our proposed business. Factors that could adversely affect the price of gold and other minerals, most of which will be beyond our control, include but are not limited to:


·

Unfavorable interest rates and increases in inflation;


·

Changes in national, regional and local economic conditions;


·

Cost overruns, inclement weather, and labor and material shortages;


·

The impact of present or future legislation, zoning laws and other regulations;


·

availability, delays and costs associated with obtaining permits, approvals or licenses necessary to develop Handcamp;


·

Increases in taxes or fees;


·

Local law; and


·

Available labor and negotiations with unions.





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We are subject to governmental regulations that may limit our operations, increase our expenses or subject us to liability.


According to our Canadian legal counsel, we are subject to Canadian laws, ordinances and regulations regarding, among other things:


·

Environmental matters, including the presence of hazardous or toxic substances;


·

Land preservation;


·

Health and safety; and


·

Zoning, land use and other entitlements.


In developing any project, we may be required to obtain the approval of numerous Canadian governmental authorities (and others) regulating matters such as:


·

Installation of utility services such as gas, electric, water and waste disposal;


·

Permitted land uses; and


·

The design, methods and materials used in the exploration and mining for gold, copper and other minerals.


We may not now or in the future be in compliance with all regulatory requirements. If we are not in compliance with regulatory requirements, we will be subject to penalties or forced to incur significant expenses to cure any noncompliance. In addition, some of the land that we could in the future acquire if we will at such time have the requisite resources and ability, may not have received planning approvals or entitlements necessary for planned or future development. Failure to obtain entitlements necessary for development on a timely basis or to the extent desired would adversely affect our business, results of operations, financial condition and future prospects.


The speculative price of gold, copper and other minerals may adversely impact commercialization efforts.


Exploration and production is highly speculative and involves numerous natural risks that may not be overcome by knowledge and experience.  In particular, even if our company is successful in mining gold and other deposits, for which no assurances can be given, the commercialization will be dependent upon the existing market price for gold and other minerals, among other factors.  The market price of gold and other minerals has historically been unpredictable, and subject to wide fluctuations.  The decline in the price of gold and other minerals could render a discovered property uneconomic for unpredictable periods of time.


Environmental and other risks could have a material adverse impact on our business.


Mining activities pose certain environmental risks, as well as personal injury risks.  While our company will attempt to manage its risks, one or more incidents of environmental damage or personal injury resulting from our mining activities could have a material adverse impact on our business. If we become subject to onerous government regulations or other legal uncertainties, our business would likely be negatively affected. The government regulates the environmental impacts of mining operations and requires, under certain circumstances, certain environmental permits, work permits, posting of bonds, and the performance of remediation work for any physical or other disturbance to the land or the environment. We may incur significant costs and expenses in connection to comply with such governmental regulations. Depending on market conditions and the options available to us, we may attempt to enter into a joint venture with an operating company or permit an operating company to undertake exploration work. We may also consider seeking equity or debt financing (including borrowing from commercial lenders).



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Increased insurance risk could negatively affect our business.

Insurance and surety companies may take actions that could negatively affect our proposed business, including increasing insurance premiums, requiring higher self-insured retentions and deductibles, requiring additional collateral or covenants on surety bonds, reducing limits, restricting coverage, imposing exclusions, and refusing to underwrite certain risks and classes of business. Any of these would adversely affect our ability in the future to obtain appropriate insurance coverage at reasonable costs which would have a material adverse effect on our business.


Our operations are subject to permitting requirements.


Our operations are subject to permitting requirements which could require us to delay, suspend or terminate our operations. Our operations, including but not limited to any exploitation program, require permits from the U.S. and Canadian governments. We may be unable to obtain these permits in a timely manner, on reasonable terms, or at all. If we cannot obtain or maintain the necessary permits, or if there is a delay in receiving these permits, our timetable and business plan for exploration and/or exploitation, may be materially and adversely affected.


We may experience supply and equipment shortages.


We may not be able to purchase all of the supplies and materials we need to continue our mining activities due to shortage of funds, lack of availability or other reasons. This could cause us to delay or suspend operations. Competition and unforeseen limited sources of supplies in the industry could result in occasional spot shortages of supplies, such as explosives, and certain equipment, such as bulldozers, drilling equipment and excavators, that we might need to conduct our mining activities. If we cannot find the supplies and equipment we need, we may have to suspend our operations until we do find the supplies and equipment we need. If we are unable to find the supplies in the U.S. or Canada but can find them in another location, the cost will increase significantly, as will the time to deliver.


There are risks inherent in doing business in foreign countries.


All or our properties are located in Newfoundland, Canada. Risks of doing business in a foreign country could materially and adversely affect our results of operations and financial condition. We face risks normally associated with doing business in a foreign country. These risks include, but are not limited to:


·

labor disputes;


·

invalidity of governmental orders;


·

uncertain or unpredictable political, legal and economic environments;


·

war;


·

civil and political unrest;


·

property disputes;


·

changes to existing laws or policies relating to the mining industry that increase our costs;


·

unpredictable changes in or application of taxation regulations;


·

delays in obtaining or the inability to obtain necessary governmental permits;


·

governmental seizure of land or mining concessions;





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·

limitations on ownership;


·

limitations on the repatriation of earnings;


·

increased financial costs;


·

import and export regulations, including restrictions on the export of gold and other minerals; and/or


·

foreign exchange controls.


The occurrence of one or more of these events or a change in existing policy could have a material adverse effect on our cash flows, earnings, results of operations, and financial condition. These risks may limit or disrupt our operations, restrict the movement of funds, impair contract rights, or result in the taking of property by nationalization or expropriation without fair compensation.


Risks Related to our Shares of Common Stock


Our stock price may be volatile.


Our stock price may be volatile and as a result investors could lose all or part of their investment. In addition to volatility associated with over-the-counter securities in general, the value of any investment could decline due to the impact of any of the following factors upon the market price of our common stock:


·

changes in the worldwide price for gold and other minerals;


·

disappointing results from our exploration and drilling efforts;


·

fluctuation in production costs that make mining uneconomical;


·

unanticipated variations in grade and other geological problems;


·

unusual or unexpected rock formations;


·

failure to reach commercial production or producing at lower rates than those targeted;


·

decline in demand for our common stock;


·

downward revisions in securities analysts estimates or changes in general market conditions;


·

investor perception of our industry or our company; and/or


·

general economic trends.


In addition, stock markets have experienced extreme price and volume fluctuations and the market price of securities has been highly volatile. These fluctuations are often unrelated to asset value and may have a material adverse effect on the market price of our common stock. As a result, investors may be unable to resell their shares at a fair price.




26





There is currently a limited trading market for our common stock and our stock experiences price fluctuations.


There is currently a limited market for our common stock and we can provide no assurance to investors that a more robust market will develop. If a more robust market for our common stock does not develop, our shareholders may not be able to resell the shares of our common stock they have purchased and they may lose all of their investment. Our stock is thinly traded and is therefore subject to significant fluctuations if the amount of trading increases significantly for a short period of time. Even one large trade could materially affect the price of the stock even though the status of the company remains unchanged.


The trading price of our common stock may be subject to wide fluctuations. Trading prices of our common stock may fluctuate in response to a number of factors, many of which will be beyond our control, including, without limitation, public announcements regarding our company, purchases or sales by existing stockholders, changes in government regulations, conditions in our market segment or changes in earnings estimates by analysts. These fluctuations may have a material adverse effect on the trading price of our common stock.


In addition, the stock market in general, and the market for mining companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of such companies. Market and industry factors may adversely affect the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation has often been instituted. Such litigation, if instituted, could result in substantial costs and a diversion of management’s attention and resources. In addition, we may not have complied in the past with federal and/or state securities laws and regulations, which could potentially result in litigation, penalties and/or fines, other substantial costs and expenses and a substantial diversion of management’s attention and resources.


Our shares of common stock are subject to the “penny stock” rules.


Our shares of common stock are subject to the SEC’s “penny stock” rules. Penny stocks generally are equity securities with a price of less than $5.00. The penny stock rules require broker-dealers to deliver a standardized risk disclosure document prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson, and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction, the broker and/or dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. The penny stock rules are burdensome and may reduce purchases of any offerings and reduce the trading activity for the shares. As long as our shares of common stock are subject to the penny stock rules, the holders of such shares may find it more difficult to sell their 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 and as a result we could be subject to legal action.


Although federal securities laws provide 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 legal action based upon a 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. Such an action could hurt our financial condition.



27





We may not be able to achieve secondary trading of our shares of common stock in certain states because our shares of common stock are not listed for trading on a national securities exchange.


Because our shares of common stock are not listed for trading on a national securities exchange, our shares of common stock are subject to the securities laws of the various states and jurisdictions of the U.S. in addition to federal securities laws. This regulation covers any primary offering we might attempt and all secondary trading by our stockholders. If we fail to take appropriate steps to register our shares of common stock or qualify for exemptions for our shares of common stock in certain states or jurisdictions of the U.S., the investors in those jurisdictions where we have not taken such steps may not be allowed to purchase our shares of common stock or those who presently hold our shares of common stock may not be able to resell their shares without substantial effort and expense. These restrictions and potential costs could be significant burdens on our stockholders.


We are authorized to issue up to 500,000,000 shares of our common stock and 5,000,000 shares of our preferred stock, the issuance of which could, among other things, reduce the proportionate ownership interests of current stockholders; in addition, we issued 296,000,000 shares of our common stock in connection with acquisitions.


Our board of directors has the ability, without seeking stockholder approval, to issue additional shares of our common stock in the future for such consideration as our board of directors may consider sufficient. The issuance of additional shares of common stock and/or preferred stock in the future would reduce the proportionate ownership and voting power of the shares of our common stock held by our existing stockholders. In addition, we issued 296,000,000 shares of our common stock to our parent company when we purchased Handcamp. This issuance significantly diluted the ownership interest of our present stockholders other than our parent company.


Further, our board of directors is empowered, without stockholder approval, to issue shares of our preferred stock with dividend, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the holders of our common stock. In the event of such an issuance, the shares of preferred stock could be used as a method of discouraging, delaying or preventing a change in control of our company, which could thereby prevent our stockholders from receiving the maximum value for their shares.


The concentration of ownership of our shares of common stock with insiders and their affiliates is likely to limit the ability of other stockholders to influence corporate matters.


Approximately 99% of our issued and outstanding shares of common stock are owned and controlled by our parent company and under the indirect control of Mr. Kenneth Stead as a result of his control over our parent company. Consequently, Mr. Stead has the ability to exercise control over all matters requiring approval by our stockholders, including but not limited to, the election of directors and approval of significant corporate transactions, such as our acquisition of Handcamp and our other properties.  This concentration of ownership may also have the effect of delaying or preventing a change in control of our company that might be viewed as beneficial by other stockholders or discouraging a potential acquirer from making an offer to our stockholders to purchase their shares of our common stock in order to gain control of our company. While the distribution by our parent company of our shares of common stock to its own stockholders would lessen Mr. Stead’s control of our company, he and other affiliates of our company and our parent company would remain in control of our company. In addition, the distribution would not increase your current percentage ownership of our company.





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The Spin-Off of shares our common stock proposed by Kat Exploration, Inc. could cause our market value to decline.


The Spin-Off of 261,474,694 shares our common stock by Kat Exploration to its shareholders, representing 88% of our issued and outstanding shares, could have a depressing effect on the market price of our shares, as well as the market price of our parent’s shares. The Spin-Off would increase the number of free-trading shares available for sale by the public and result in our parent company having surrendered ownership of its principal asset, being the shares held by it in the Company. Ultimately, the value of our common stock will be determined in the trading markets and will be influenced by many factors, including our operations, the growth and continuation of our proposed business, investors’ expectations of our prospects, trends and uncertainties affecting the industry in which we operate, future issuances of our capital stock and general economic and other conditions. The Spin-Off is being effected pursuant to an S-1 registered offering and, as such, is subject to regulatory approval, including state securities laws.


ITEM 1B.  UNRESOLVED STAFF COMMENTS.


Not applicable.


ITEM 2.  PROPERTIES.


Our principal executive offices are located at 1149 Topsail Road, in the City of Mount Pearl, in the Province of Newfoundland and Labrador, Canada, A1N 5G2.  In 2010 we acquired 100% of the mineral rights in and to “Handcamp,” a gold property located in the Province of Newfoundland and Labrador, Canada.  Our telephone number is (709) 368-9223. North Lucky, South Lucky and the Rusty Ridge properties are located in eastern Newfoundland on the Bonavista Peninsula. Collier’s is also located in eastern Newfoundland but is situated on the Avalon Peninsula.


ITEM 3.  LEGAL PROCEEDINGS.


We are not currently a party to any material legal or administrative proceedings. We are not aware of any material legal or administrative proceedings threatened against us. From time to time, we are subject to various legal or administrative proceedings arising in the ordinary course of our business.


ITEM 4.  MINE SAFETY DISCLOSURES


Not Applicable






29




PART II


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


Market Information


Our shares of common stock are eligible for quotation on the Pink Sheets under the symbol “BVIG”. However, our shares do not trade other than on an extremely limited and sporadic basis and are only tradable on the pink sheets. The following table sets forth for the periods indicated the range of high and low bid quotations per share as reported on the Pink Sheets since the first period for which figures are available. These quotations represent inter-dealer prices, without retail markups, markdowns or commissions and may not necessarily represent actual transactions.


Year 2010

 

High

 

Low

 

 

 

 

 

 

 

 

 

First Quarter

 

$

0.39

 

$

0.19

 

Second Quarter

 

$

0.71

 

$

0.10

 

Third Quarter

 

 

0.85

 

 

0.15

 

Fourth Quarter

 

$

0.75

 

$

0.10

 

 

 

 

 

 

 

 

 

Year 2011

 

High

 

Low

 

 

 

 

 

 

 

 

 

First Quarter

 

$

0.29

 

$

0.07

 

Second Quarter

 

$

0.15

 

$

0.07

 

Third Quarter

 

$

0.20

 

$

0.06

 

Fourth Quarter

 

$

0.30

 

$

0.12

 


On April 9, 2012, the closing price of our common stock as reported on the OTC-BB was $.11 per share.


Stockholders


As of April 9, 2012, there were approximately 18 holders of record of our common stock.


Dividends and Share Repurchases


Our company has not paid any dividends to our shareholders and does not expect to pay any such dividends in the foreseeable future, as we expect to retain any future earnings for use in the operation and expansion of our proposed business.  There are no restrictions which would limit our ability to pay dividends on common equity or that are likely to do so in the future.


Issuer Purchases of Equity Securities


None.


Equity Compensation Plans


We have not implemented a stock option plan for executives but do intend to do so in the next twelve months. We do not intend to establish any other equity compensation plans.





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Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities


On November 25, 2011, we issued 135,000,000 shares of our company’s common stock to one entity in connection with the terms of an asset purchase agreement.  The issuance was not a public offering as defined in Section 4(2) of the Securities Act of 1933 because the issuance was made to an insubstantial number of persons and because of the manner of the offering. In addition, the investor had the necessary investment intent as required by Section 4(2) since it agreed to, and received, securities bearing a legend stating that such securities are restricted. This restriction ensured that these securities will not be immediately redistributed into the market and therefore be part of a public offering. This issuance was done with no general solicitation or advertising by the Company. Based on an analysis of the above factors, the Company met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for this transaction.


ITEM 6.  SELECTED FINANCIAL DATA.


Not applicable because our company is a smaller reporting company.


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


The following discussion of our financial condition and results of operations should be read in conjunction with the audited financial statements and notes thereto for the fiscal year ended December 31, 2011, found in this Annual Report. In addition to historical information, the following discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Where possible, we have tried to identify these forward looking statements by using words such as “anticipate,” “believe,” “intends,” or similar expressions. Our actual results could differ materially from those anticipated by the forward-looking statements due to important factors and risks including, but not limited to, those set forth under “Risk Factors” in Part I, Item 1A of this Annual Report.


Forward-looking Statements


We and our representatives may from time to time make written or oral statements that are “forward-looking,” including statements contained in this annual report and other filings with the SEC, reports to our stockholders and news releases. All statements that express expectations, estimates, forecasts or projections are forward-looking statements. In addition, other written or oral statements which constitute forward-looking statements may be made by us or on our behalf. Words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “project,” “forecast,” “may,” “should,” variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in or suggested by such forward-looking statements. We undertake no obligation to update or revise any of the forward-looking statements after the date of this annual report to conform forward-looking statements to actual results. Important factors on which such statements are based are assumptions concerning uncertainties, including but not limited to, uncertainties associated with the following:


Inadequate capital and barriers to raising the additional capital or to obtaining the financing needed to implement our business plans;

 

·

Our failure to earn revenues or profits;


·

Inadequate capital to continue business;


·

Volatility or decline of our stock price;


·

Potential fluctuation in quarterly results;




31





·

Rapid and significant changes in markets;


·

Litigation with or legal claims and allegations by outside parties; and


·

Insufficient revenues to cover operating costs.


Company Overview


We were incorporated in the State of Nevada on June 6, 2007. On June 4, 2010, we acquired, in a transaction with our parent company, 100% of the mineral rights that our parent company then held in and to Handcamp in exchange for 161,000,000 shares of our common stock. Following our acquisition of the mineral rights, we changed our business model to that of a mineral acquisition, exploration and development company focused primarily on gold properties. On August 26, 2010, our name was changed to Kat Gold Holdings Corp. On November 25, 2011, we acquired 100% of the mineral rights that our parent company then held in and to the mineral properties Rusty Ridge, Collier’s, North Lucky and South Lucky in exchange for the issuance to our parent company of 135,000,000 shares of our company’s common stock.  As of the date of this Annual Report, we have generated no revenues but we have incurred expenses related to the drilling and exploration of Handcamp.


We have no material income and/or assets other than Handcamp, Rusty Ridge, Collier’s, North Lucky and South Lucky and have cumulative losses since inception through December 31, 2011 of approximately $132,475,916. We are a natural resources exploration stage company, formed for the purpose of exploring and discovering mineral properties. We are currently focused on the mining and resources sector and intend to attempt, subject to, among other factors, obtaining substantial financing, to continue to increase our holdings of gold and other precious metals. Our principal objective is to attempt to locate, mine for and sell mineral properties and to take advantage of the increased value of precious metals, and in so doing to become an efficient and profitable, precious metals exploration and mining company. We may also seek to enter into joint ventures with certain major mining companies rather than selling properties. In pursuing this goal, we currently intend to concentrate any funds we are able in the future to obtain, if any, to explore areas that we believe will have mineral resources. Our current plan is to attempt to move forward to the next stage of in-depth exploration, which consists of ground geophysics, trenching and drilling. This phase, we believe, will determine the extent of the deposit along with its value.


Plan of Operations


Our strategy is to stake, explore and develop new properties in geologically promising areas and to continue making acquisitions of select properties that have been identified as economically attractive, technically and geologically sound and have significant upside potential.


We intend to build our business through the exploration and development of the existing Handcamp gold property and Rusty Ridge, Collier’s, North Lucky and South Lucky properties; the acquisition, exploration, staking and development of future gold properties and the acquisition of producing gold properties. However, we cannot implement any of our plans unless we are able to raise additional funds.  We plan to diversify our revenue sources by combining the secure and reliable revenue source of producing gold properties with the potential of gold exploration projects. In addition, upon receipt of funding, we plan to explore and stake new gold properties, acquire development stage gold exploration properties, carry out exploration programs on the acquired properties, and develop any viable gold producing properties that we discover, acquire and are able to pursue, assuming that we are able to raise the requisite financing for such activities. We committed to examining all promising and viable properties that come to its attention with a particular interest in North American properties.




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We operate with virtually no capital. Since our acquisition of the mineral rights related to Handcamp, we have funded an exploration program using investment capital from our parent company. We have recently been awarded a grant by the province of Newfoundland and Labrador to, in part, fund our exploration of Handcamp. Under the terms of the grant, the province will contribute a sum equal to fifty percent (50%) of our costs of drilling on Handcamp up to a maximum of CDN $100,000. We are presently attempting to raise sufficient funds to purchase new gold properties and fund further exploration. We cannot assure you that we will be able to purchase any gold properties above and beyond Handcamp, Rusty Ridge, Collier’s, North Lucky and South Lucky.


Our ultimate objective is to sell any mineral properties that we have been able to develop to a major mining company, or to enter into joint ventures with it. We expect that such a company, should the opportunity arise, will in all likelihood make the decision whether to enter into a joint venture or to purchase a property in its discretion.


We hope to develop relationships with certain major mining companies that could assist us in implementing our business plan; however, we cannot assure you that any such relationships will ever materialize. We expect that the price of each property will be determined by the anticipated amount and value of minerals it contains. If we are able to acquire a pool of gold assets, our management expects that we would attempt to sell them to a major mining company that would then bring Handcamp and our other properties into production.


We believe that the stage at which the interest of a major mining company is likely to be elicited is very subjective and subject to numerous facts and circumstances that we cannot predict with any significant confidence. However, we do believe that such companies have in the past become interested in a mining property based solely on the discovery of one promising drill hole having, in the opinion of such mining company, significant potential to contain substantial economic value.


Irrespective of any interest shown by such a company, if any, we do not anticipate that our own activities will extend beyond conducting a preliminary feasibility study, where such a study is defined as having (i) established that a particular mining project appears viable, and (ii) concluded that an effective method of mineral processing can be adopted and is reasonably likely, in the reasonable opinion of a qualified person, to lead to the determination that all or a part of the mineral resource can be classified as a mineral reserve.


We carried out Phase I, the initial phase of exploratory drilling, during the summer of 2010. We have sent the core samples we obtained from the exploratory drilling for analysis and received favorable results.  A follow-up phased program is planned to further test the mineralization by soil sampling, geological mapping, prospecting, IP surveys and diamond drilling. However, we will not be able to conduct any follow up programs until we receive additional financing.


Cash Requirements


We operate with virtually no capital. At December 31, 2011 we had cash of $6,309. Since our acquisition of the mineral rights associated with Handcamp, we have funded an exploration program using capital contributed to us by our parent company. Expenditures of approximately $4.4 million are anticipated to be required to complete Phase II and Phase III, where implementation of Phase III will be contingent on the success of Phase II. We believe that additional expenditures in the approximate aggregate amount of $6.5 million will be required in order to advance a mineral deposit or deposits on Handcamp, if any, to the stage of the completed pre-feasibility study referred to above. We are currently attempting to raise sufficient funds to fund further exploration and estimate that we will require an additional $2,000,000 to fund exploration work on the Handcamp property as well as for working capital. We will require additional capital to fund exploration work on our other properties.  We are in discussions with prospective investors to provide such funding and anticipate that the receipt of such funds would enable us to satisfy our cash requirements for a period of six (6) months. We have no long term debt and have been able to meet our past financial obligations, including operational expenses, exploration expenses and acquisition costs, on a current basis.



33





In order to finance further exploration beyond the time period discussed immediately above, we believe that we will need to raise a minimum of $2,000,000 which we anticipate would enable us to satisfy our cash requirements for a period of twelve (12) months and complete Phase II. However, we cannot assure you that this amount would be sufficient to enable us to fully fund our anticipated cash requirements during this period. In addition, we cannot assure you that the requisite financing, whether over the short or long term, will be raised within the necessary time frame or on terms acceptable to us, if at all. Should we be unable to raise sufficient funds we may be required to curtail our operating plans if not cease them entirely. As a result, we cannot assure you that we will be able to operate profitably on a consistent basis, or at all, in the future.


We expended $110,910 during the year ended December 31, 2011. The major costs were accounting and legal fees which amounted to $80,567 and claim option expenses of $30,000 None of the above figures refers to the financing that we would have to raise in order to contemplate making acquisitions of any other gold properties. While our business strategy includes acquiring additional gold properties, if possible, we have no present intention to acquire additional properties from our parent company or any other source, in large part because we do not presently have the means to make any further acquisitions. We would have to raise additional financing over and above the sums discussed above in order to contemplate making acquisitions of any additional gold properties.


Going Concern


As of the date of this Annual Report, there is substantial doubt regarding our ability to continue as a going concern as we have not generated sufficient cash flow to fund our proposed business.


We have suffered recurring losses from operations since our inception. In addition, we have yet to generate an internal cash flow from our business operations or successfully raised the financing required to develop our proposed business. As a result of these and other factors, our independent auditor has expressed substantial doubt about our ability to continue as a going concern. Our company’s future success and viability, therefore, are dependent upon our ability to generate capital financing. The failure to generate sufficient revenues or raise additional capital may have a material and adverse effect upon us and our shareholders.


Management’s plans with regard to these matters encompass the following actions: (i) obtaining funding from new investors to alleviate our working capital deficiency; and (ii) implementing a plan to generate sales. Our continued existence is dependent upon our ability to resolve our liquidity problems and increase profitability in our current business operations. However, the outcome of management’s plans cannot be ascertained with any degree of certainty. Our financial statements do not include any adjustments that might result from the outcome of these risks and uncertainties.


Liquidity and Capital Resources


We had a cash balance of $6,309 as of the date of this Annual Report. Our principal source of funds has been capital contributions supplied by our parent company.

 

Cash flow from operating activities

 

Cash flows used in operating activities were ($106,281) for the year ended December 31, 2011 due to a net loss which was offset by an impairment in mineral rights and properties, as compared to ($736,090) for the year ended December 31, 2010 due to a net losswhich was offset by an impairment of Handcamp estimated value.

 

Cash flows from financing activities

 

Cash flows from financing activities were $112,590 for year ended December 31, 2011 and $736,090 for the year ended December 31, 2010, both of which were related to capital contributions from related parties.

 




34





Should we be unable to obtain further capital contributions from our parent company or otherwise raise sufficient funds, we will be required to curtail our operating plans if not cease them entirely. Our parent company has extremely limited capital available. We cannot assure you that we will receive further capital contributions from our parent company in the future or otherwise generate the necessary funding to operate or develop our business. Please see “Cash Requirements” for our existing plans with respect to raising the capital we believe will be required.


In the event that we are able to obtain the necessary financing to move forward with our business plan, we expect that our expenses will increase significantly as we attempt to grow our business. Accordingly, the above estimates for the financing required may not be accurate and must be considered in light these circumstances.


Variables and Trends


Other than the current exploration of the Handcamp gold property, we have no operating history with respect to our exploration, acquisition and development of gold properties. However, our parent company and certain of our officers and directors, including Ken Stead, Timothy Stead and Wayne Pickett, have significant mining exploration, acquisition and development experience.


Commitments


As of the date of this Annual Report, our only material capital commitment was the continued funding of the exploration of the Handcamp gold property. We anticipate that any further capital commitments that may be incurred will be financed principally through the issuance of our securities. However, we cannot assure you that additional capital resources and financings will be available to us on a timely basis, on acceptable terms, or at all.


Off Balance Sheet Arrangements


We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.


Critical Accounting Policies


We prepare financial statements in conformity with U.S. GAAP, which requires us to make estimates and assumptions that affect the amounts reported in our combined and consolidated financial statements and related notes. We periodically evaluate these estimates and assumptions based on the most recently available information, our own historical experience and various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. We believe the following accounting policies involve the most significant judgments and estimates used in the preparation of our financial statements.


Summary of Significant Accounting Policies


Business Activities. We have not yet earned any revenue from operations. Accordingly, our activities have been accounted for as those of a “Development Stage Enterprise” as set forth in Financial Accounting Standards Board Statement No. 7, “Accounting and Reporting for Development State Enterprises” (“SFAS No. 7 ). Among the disclosures required by SFAS No. 7 are that our financial statements be identified as those of a development stage operation, and that the statements of operations, stockholders’ equity and cash flows disclose activity since the date of our inception.



35





Basis of Presentation. Our financial statements are presented on the accrual basis of accounting in accordance with generally accepted accounting principles in the United State of America, whereby revenues are recognized in the period earned and expenses when incurred. We follow SFAS No. 7 in preparing our financial statements.


Management’s Use of Estimates. The preparation of financial statements in conformity with GAAP require management to make estimates 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 periods. Actual results could differ from those estimates.


Comprehensive Income (Loss). We adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 130, “Reporting Comprehensive Income,” which establishes standards for the reporting and display of comprehensive income and its components in the financial statements. There were no items of comprehensive income (loss) applicable to us during the period covered in the financial statements.


Long-Lived Assets. In accordance with SFAS No. 144, we review and evaluate our long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such factors and circumstances exist, including those noted above, we compare the assets’ carrying amounts against the estimated undiscounted cash flows to be generated by those assets over their estimated useful lives. If the carrying amounts are greater than the undiscounted cash flows, the fair values of those assets are estimated by discounting the projected cash flows. Any excess of the carrying amounts over the fair values are recorded as impairments in that fiscal period.


Statement of Cash Flows. For purposes of the statement of cash flows, we consider all highly liquid investments (i.e., investments which, when purchased, have original maturities of three months or less) to be cash equivalents.


Fair Value of Financial Instruments.  Our financial instruments consist of cash and cash equivalents. The fair value of cash and cash equivalents approximates the recorded amounts because of the liquidity and short-term nature of these items.


Advertising Costs. Advertising costs are expensed as incurred. We do not incur any direct-response advertising costs.


Recent Accounting Pronouncements


The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements will cause a material impact on its financial condition or the results of its operations.


Results of Operations for the year ended December 31, 2010 and the year ended December 31, 2011


For the year ended December 31, 2011 as compared to the year ended December 31, 2010, total revenues were $0 and $0, respectively; and net loss were $19,010,910 and $113,428,056, respectively. The net losses were attributable to operating expenses.   The operating expenses for the year ended December 31, 2011 were $110,910 as compared to $728,056 for the year ended December 31, 2010.  A substantial portion of our expenses for the year ended December 31, 2010 were related to our exploration activities that were conducted on the Handcamp property.  During the year ended December 31, 2011 we did not conduct any exploration activities and a large portion of our expenses were accounting and legal expenses related to our obligations as a public company.




36





ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.


Not applicable because our company is a smaller reporting company.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.


The financial statements required by this item are located following the signature page of this Annual Report.


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


None.


ITEM 9A.  CONTROLS AND PROCEDURES.


Disclosure Controls and Procedures


Each of our principal executive and principal financial officer has evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a - 15(e) and 15d - 15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Annual Report. Based on their evaluation, each such person concluded that our disclosure controls and procedures were not effective due to the material weaknesses in our internal control over financial reporting as of December 31, 2011 as described below.


Management’s Annual Report on Internal Control over Financial Reporting


The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15. The Company’s internal control over financial reporting is designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements. Management conducted an assessment of the Company’s internal control over financial reporting based on the framework and criteria established by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission in Internal Control – Integrated Framework. Based on the assessment, management concluded that, as of December 31, 2011, the Company’s internal control over financial reporting is not effective based on those criteria. The COSO framework requires rigid adherence to control principles that require sufficient and adequately trained personnel to operate the control system. The Company has insufficient accounting personnel for it to be able to segregate duties as required by COSO. The Company does not have sufficient resources to maintain all the reference material required to ensure that Company personnel are properly advised and trained to prepare complete disclosures in its financial information and as a result must rely on its independent registered public accounting firm to assist in these matters. Management is considering adding additional accounting staff, but at the present time does not have the financial resources to make the commitment.





37





The Company’s management, including its Chief Executive Officer and Principal Financial Officer, does not expect that the Company’s disclosure controls and procedures and its internal control processes 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 error or 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 the breakdowns can occur because of 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 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 may not be detected. 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.


Changes in Internal Control


There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during our fiscal quarter ended December 31, 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


Attestation Report of the Registered Public Accounting Firm


This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Our management’s report was not subject to attestation by our independent registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this annual report.


ITEM 9B.  OTHER INFORMATION.


On April 12, 2012, David M. Barnes resigned from the position of Chief Financial Officer of KAT Gold Holdings Corp.  The Board of Directors has appointed Ken Stead to serve as interim Chief Financial Officer until a qualified replacement is hired.












38




PART III


ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.


The names of our officers and directors as of the date hereof, as well as certain information about them, are set forth below. Unless otherwise noted, all our offers and directors were appointed on September 10, 2010.


Name

 

Age

 

Position(s)

W. Les Thistle

 

43

 

Chairman of the Board of Directors

Kenneth Stead

 

56

 

President, Chief Executive Officer, Chief Financial Officer and Director

Timothy R. Stead

 

43

 

Vice President of Field Operations and Director


*Mr. Stead became our Chief Financial Officer on April 12, 2012 upon the resignation of David Barnes.


Kenneth Stead, President, Chief Executive Officer, Chief Financial Officer and Director  


Mr. Stead is a co-founder of Kat Exploration, our parent company, and has been its president since its incorporation in December of 2005. Mr. Stead worked directly in the mining industry from the early to late 70’s, where he first started with the Iron Ore Company of Canada and worked for Noranda at its Nanasivik mine in Stratacona Sound, northern Baffin Island. In the early 1980’s, Mr. Stead worked in the oil fields of Alberta, afterwards returning to Newfoundland where he set up his own construction company from 1985 to 1995.  In 1997, Mr. Stead became a co-founder of Cornerstone Resources Inc., a junior mining company now trading on the TSX-V (CGP) until he resigned in 2004.  Mr. Stead devotes approximately 30 hours per week to our parent company as well as to other professional pursuits and 20 hours per week to our company.


Mr. Stead brings to the Board significant operational experience in the mining industry.  His prior business experience, along with his tenure at our company, gives him a broad and extensive understanding of our operations and the proper role and function of the board of directors.  In addition, his background allows him to bring to the board of directors extensive knowledge about our industry.


On April 12, 2012, Mr. Stead was appointed Chief Financial Officer.


Timothy R. Stead, Vice President of Field Operations and Director  


Mr. Stead is a co-founder of our parent company and has been its vice president of field operations since inception. Mr. Stead completed a prospector’s training course in 2000, a time when working in the field for Cornerstone Resources Inc. He has years of experience in working with sediment-hosted copper on the eastern portion of the province of Newfoundland. Mr. Stead has acquired experience and knowledge of massive sulfide deposits as well as gold, and is presently overseeing a work program on one of our parent company’s gold properties.  As the Vice President of Field Operations of our parent company in addition to his above referenced capacity with our company, Mr. Stead devotes approximately 35 hours per week to our parent company as well as to other professional pursuits and 20 hours per week to our company.


Mr. Stead brings to the Board significant operational experience in the mining industry.  His prior business experience, along with his tenure at our company, gives him a broad and extensive understanding of our operations and the proper role and function of the board of directors.  In addition, his background allows him to bring to the board of directors extensive knowledge about our industry.





39





W. Les Thistle, Chairman of the Board of Directors


Mr. Thistle was appointed legal counsel and a director of our parent company on February 19, 2010. In 1996 Mr. Thistle founded W. Les Thistle Law Office, a general practice law firm located in the City of Mount Pearl, in the Province of Newfoundland and Labrador, Canada. Mr. Thistle’s primary areas of practice are corporate law, contract law, real estate and personal injury. Mr. Thistle graduated from Memorial University of Newfoundland in 1991 with a Bachelor of Commerce degree (concentration in finance), from Osgoode Hall Law School in Toronto in 1994 with a Bachelor of Laws degree (concentration in corporate and tax law) and was admitted to the Bar of the Law Society of Newfoundland and Labrador in 1995. Mr. Thistle brings to the Board a strong legal background that provides him with a broad understanding of the legal, operational, financial and strategic issues facing the Company.  


Mr. Thistle brings to the Board significant experience in contract law.   In addition, his background allows him to bring to the board of directors extensive knowledge about our industry.


All of our directors hold their positions on our board of directors until our next annual meeting of stockholders and until their successors have been qualified after being elected or appointed. Officers serve at the discretion of our board of directors.


Family Relationships


Messrs. Kenneth Stead and Timothy Stead are brothers; other than the foregoing, there are no family relationships among the members of board of directors or management. There is no arrangement or understanding between or among our executive officers and directors pursuant to which any director or officer was or is to be selected as a director or officer, and there is no arrangement, plan or understanding as to whether non-management stockholders will exercise their voting rights to continue to elect the current members of the board of directors.


Involvement in Certain Legal Proceedings


Except as set forth herein, to our best knowledge, no officer, director or 5% or greater stockholder of our company has, during the last ten years: (i) been convicted in or is currently subject to a pending a criminal proceeding; (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to any federal or state securities or banking laws including, without limitation, in any way limiting involvement in any business activity, or finding any violation with respect to such law, nor (iii) has any bankruptcy petition been filed by or against the business of which such person was an executive officer or a general partner, whether at the time of the bankruptcy or for the two years prior thereto. To our knowledge, no director, officer or other affiliate of our company, and no record or beneficial owner of more than five percent (5%) of our securities, or any associate of any such director, officer or other affiliate or security holder is a party adverse to us or has a material interest adverse to us in reference to pending litigation.


Election of Directors and Officers


Holders of shares of our common stock are entitled to one (1) vote for each share held on all matters submitted to a vote of the stockholders, including the election of directors. Cumulative voting with respect to the election of directors is not permitted.


Our directors are elected at the annual meeting of the stockholders or at a special meeting called for that purpose. Each director shall hold office until the next annual meeting of stockholders or until the director’s successor is elected and qualified. If a vacancy occurs on the our board of directors, including a vacancy resulting from an increase in the number of directors, then the stockholders may fill the vacancy at the next annual meeting or at a special meeting called for the purpose, or our board of directors may fill such vacancy.



40





Board Committees


Our board of directors has no separate committees; however, we intend to establish an audit committee in the future. Our board of directors acts as our compensation committee. We are not a “listed company” under SEC rules and we are, therefore, not required to have a compensation committee comprised of independent directors.


Director Independence


Our board of directors has determined that none of our directors are independent as defined under the rules of the NYSE Amex Equities Company Guide (although our shares of common stock are not listed on the NYSE Amex or any other national securities exchange).


Audit Committee Financial Expert


We have not made a determination as to whether any of our directors would qualify as an audit committee financial expert.


Code of Ethics


KAT Gold Holdings Corp. has adopted a Code of Ethics applicable to its principal executive officer, principal financial officer, principal accounting officer and controller.


Stock Option Plans


We have not adopted any stock option plans for our executives.


Compensation of Directors


We have not paid the members our board of directors any compensation for serving as one of our directors. Our board of directors may in the future, and in its sole discretion, determine to award its members cash, stock or other forms of consideration for their services to our company but to date has not done so.


Section 16(a) Beneficial Ownership Reporting Compliance


Section 16(a) of the Exchange Act requires the Company’s executive officers, directors and persons who beneficially own more than ten percent of a registered class of the Company’s equity securities, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of the Company’s common stock.  Such officers, directors and persons are required by Securities and Exchange Commission regulation to furnish the Company with copies of all Section 16(a) forms that they file with the SEC.


Based solely on a review of the copies of such forms that were received by the company, or written representations from certain reporting persons that no Form 5s were required for those persons, the company is not aware of any failures to file reports or report transactions in a timely manner during the company’s fiscal year ended December 31, 2011.






41





ITEM 11.  EXECUTIVE COMPENSATION.


Summary Compensation Table


The following table sets forth the compensation paid to our executive officers during the twelve month periods ended December 31, 2011 and 2010:


Name and Principal Position

 

Year

 

Salary

($)

 

Bonus

($)

 

All Other

Compensation

($)

 

Total

($)

 

 

 

 

 

 

 

 

 

 

 

 

 

Kenneth Stead (President and CEO)

 

2011

 

0

 

0

 

0

 

0

 

 

 

2010

 

0

 

0

 

0

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

Timothy Stead (Vice President, Field Operations)

 

2011

 

 

0

0

 

0

 

0

 

 

 

2010

 

 

0

 

0

0

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

David Barnes (Chief Financial Officer)*

 

2011

 

0

 

 

0

 

0

0

 

 

 

2010

 

3,188

 

 

0

 

0

3,188

 


*Mr. Barnes has resigned as our Chief Financial Officer as of April 12, 2012


Securities Authorized for Issuance under Equity Compensation Plans


We do not presently have an equity compensation plan in place for our executives.


Employment Agreements


We have not entered into employment agreements with our executive officers.


Outstanding Equity Awards at Fiscal Year-End


None.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.


The following table sets forth certain information concerning the number of shares of our common stock owned beneficially based on 298,644,500 issued and outstanding shares of common stock as of April 1, 2012 by: (i) each of our directors; (ii) each of our named executive officers; and (iii) each person or group known by us to beneficially own more than 5% of our outstanding shares of common stock.  


Beneficial ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. We believe that all persons named in the table have sole voting and investment power with respect to shares beneficially owned by them. All share ownership figures include shares issuable upon exercise of options or warrants exercisable within 60 days of April 1, 2012, which are deemed outstanding and beneficially owned by such person for purposes of computing his or her percentage ownership, but not for purposes of computing the percentage ownership of any other person.




42





Name and address of Beneficial Owner

Number of shares

Percent of shares (1)

Directors and Named Executive Officers (2):

 

 

Kenneth Stead(3)

298,264,000

99.87%

W. Les Thistle

0

- - -

Timothy Stead

0

- - -

David Barnes(4)

0

- - -

All Officers and Directors as a Group

298,264,000

99.87%

 

 

 

5% or Greater Beneficial Owners

 

 

Kat Exploration, Inc.(3)

1149 Topsail Rd.

Mount Pearl, Newfoundland, A1N 5G2

296,000,000

99.1%

 

(1)

Beneficial ownership is calculated based on the 298,644,500 shares of common stock issued and outstanding as of the date hereof, together with securities exercisable or convertible into such shares within sixty (60) days of the date hereof for each stockholder.  The shares of common stock issuable pursuant to those convertible securities, options or warrants are deemed outstanding for computing the percentage ownership of the person holding such convertible securities, options or warrants but are not deemed outstanding for the purposes of computing the percentage ownership of any other person.


(2)   The address for each of the officers and directors is c/o Kat Gold Holdings Corp., 1149 Topsail Rd., Mount Pearl, Newfoundland, A1N 5G2, Canada.


(3)   Mr. Stead is the control person of Kat Exploration, our parent company, and may as such be deemed to “beneficially own” the shares of our common stock owned by our parent company.  Mr. Stead, however, disclaims beneficial ownership of all such shares.


(4)    Mr. Barnes has resigned as our Chief Financial Officer as of April 12, 2012.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


Acquisition of Control of our Company


On April 28, 2010, Kenneth Stead, our president and chief executive officer, acquired 2,043,333 shares of our common stock from Ronald A. Davis and Ronald G. Brigham for an aggregate purchase price of $275,272.  Simultaneously therewith, Mr. Stead purchased an additional 220,667 shares of our common stock from eleven other former stockholders of our company.  Consequently, Mr. Stead paid an aggregate purchase price of $305,000 for 2,264,000 shares of our common stock, which constituted approximately 85.6% of all shares of our common stock then issued and outstanding.  The foregoing share acquisition resulted in a change in control of our company.  


Acquisition of Handcamp and the November Properties


On June 4, 2010, pursuant to an acquisition agreement by and between our company and our parent company, we acquired 100% of the mineral rights that our parent company then held in and to Handcamp in exchange for 161,000,000 shares of our common stocks.  As a result of the issuance of these shares, our parent company owns approximately 98% of the shares of our common stock and Kenneth Stead, a controlling stockholder of our parent company, beneficially owns approximately 99% of the shares of our common stock.




43





On November 25, 2011, pursuant to a purchase agreement between our company and our parent company Kat Exploration, Inc., we acquired 100% of the mineral rights that KATX then held in and to the November Properties in exchange for 135,000,000 shares of our common stock.  This transaction had no material effect on our parent company’s percentage ownership of our company.


Capital Contribution


We have no cash balances as of the date of this Annual Report. Our principal source of funds has been cash supplied by our parent company, which has contributed an aggregate of $885,630 through December 31, 2011.


Other than the foregoing transaction, none of the directors or executive officers of our company, nor any person who owned of record or was known to own beneficially more than 5% of our company’s outstanding shares of its common stock, nor any associate or affiliate of such persons or companies, has any material interest, direct or indirect, in any transaction that has occurred during the past fiscal year, or in any proposed transaction, which has materially affected or will affect the company.


ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES


 

Year Ended

December 31, 2011

Year Ended

December 31, 2010

Audit fees

$  20,000

$   25,000

Audit-related fees

$  13,500

$     4,500

Tax fees

$          --

$           --

All other fees

$          --

$           --

Total

$  33,500

$  29,500


Audit Fees


The aggregate fees billed for professional services rendered by B&A for the audit of our annual financial statements for the fiscal years ended December 31, 2011 and December 31, 2010 amounted to $20,000 and $25,000, respectively.

 

Audit-Related Fees


During the fiscal years ended December 31, 2011 and December 31, 2010, our principal accountant rendered assurance and related services reasonably related to the performance of the audit or review of our financial statements in the amount of $13,500 and $4,500, respectively.


Tax Fees


The aggregate fees billed for professional services rendered by B&A for the tax compliance for the fiscal year ended December 31, 2011 was $-0-.

 

All Other Fees

 

During the fiscal year ended December 31, 2011 there were no fees billed for products and services provided by the principal accountant other than those set forth above.


Audit Committee Approval

 

We did not have an audit committee for the fiscal year 2011, though our board of directors has approved the services described above for such year.





44





PART IV


ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES


(A)  Financial Statements


See index to Financial Statements on Page F-1


(B)  Exhibits.


Exhibit No.

 

Description

 

 

 

3.1 (i)

 

Articles of Incorporation (1)

 

 

 

3.1 (ii)

 

Amendment to Articles of Incorporation (2)

 

 

 

3.2

 

By-Laws (1)

 

 

 

10.1

 

Form of Handcamp Purchase Agreement (3)

 

 

 

10.2

 

Form of Principal Agreement by and among the Purchaser and the Principal Sellers (4)

 

 

 

10.3

 

Form of Minority Agreement by and among the Purchaser and the Minority Sellers (4)

 

 

 

10.4

 

Asset Purchase Agreement dated November 23, 2011 (5)

 

 

 

14

 

Code of Ethics *

 

 

 

31.1

 

Certification pursuant to Section 302 of the Sarbanes-Oxley Act*

 

 

 

31.2

 

Certification pursuant to Section 302 of the Sarbanes-Oxley Act*

 

 

 

32.1

 

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

 

 

 

32.2

 

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*


*

Filed herewith.

(1)

Incorporated herein by reference to the Form SB-2 8-K filed on October 16, 2007.

(2)

Incorporated herein by reference to the Form 8-K filed on August 9, 2010.

(3)

Incorporated herein by reference to the Form 8-K filed on June 4, 2010.

(4)

Incorporated herein by reference to the Form 8-K filed on May 4, 2010.

(5)

Incorporated by reference to the Form 8-K filed on November 28, 2011.





45





SIGNATURES


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


 

KAT HOLD HOLDINGS, INC.

 

 

 

April 15, 2012

By:

/s/ Kenneth Stead

 

 

Name:  Kenneth Stead

 

 

Title: Chief Executive Officer, Chief Financial Officer and 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.


By:

/s/ Kenneth Stead

April 15, 2012

 

Name: Kenneth Stead

 

 

Title: Chief Executive Officer  (Principal Executive Officer),

Chief Financial Officer (Principal Accounting and Financial Officer),

and Director

 

 

 

 

By:

/s/ Les W. Thistle

April 15, 2012

 

Name: Les W. Thistle

 

 

Title: Chairman of the Board of Directors

 

 

 

 

By:

/s/ Timothy R. Stead

April 15, 2012

 

Name: Timothy R. Stead

 

 

Title: Director

 












46





 


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors

Kat Gold Holdings Corp. (FKA Bella Viaggio, Inc.)


We have audited the accompanying balance sheets of Kat Gold Holdings Corp. (FKA Bella Viaggio, Inc.) as of December 31, 2011 and 2010 and the related statements of operations, changes in stockholders’ (deficit), and cash flows for the two years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.


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


In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Kat Gold Holdings Corp. (FKA Bella Viaggio, Inc.) as of December 31, 2011 and 2010, and the results of its operations, changes in stockholders’ (deficit) and cash flows for the two years then ended in conformity with accounting principles generally accepted in the United States of America.


The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has insufficient working capital, a stockholders’ deficit and recurring net losses, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters also are described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.



/s/ Bongiovanni & Associates, CPA’s

Bongiovanni & Associates, CPA’s

Cornelius, North Carolina

April 13, 2012





F-1





KAT Gold Holdings Corp. (FKA Bella Viaggio, Inc.)

(A Development Stage Company)

BALANCE SHEETS

AS OF DECEMBER 31, 2011 AND 2010

 

 

ASSETS

 

12/31/2011

 

12/31/2010

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

     Cash

 

$

6,309

 

$

-

     Security deposits

 

 

6,050

 

 

10,750

          TOTAL CURRENT ASSETS

 

 

12,359

 

 

10,750

 

 

 

 

 

 

 

          TOTAL ASSETS

 

$

12,359

 

$

10,750

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

     Outstanding checks in excess of bank balance

 

$

-

 

$

71

          TOTAL CURRENT LIABILITIES

 

 

-

 

 

71

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY

 

 

 

 

 

 

     Preferred stock, $.001 par value, 5,000,000 shares authorized,

 

 

 

 

 

 

       no shares issued or outstanding

 

 

-

 

 

-

     Common stock, $.001 par value, 500,000,000 shares authorized,

 

 

 

 

 

 

       298,644,500 shares issued or outstanding at December 31, 2011

 

 

 

 

 

 

       and December 31, 2010, respectively

 

 

298,645

 

 

163,645

     Additional paid in capital

 

 

132,189,630

 

 

113,312,040

     Deficit accumulated during the development stage

 

 

(132,475,916)

 

 

(113,465,006)

          TOTAL STOCKHOLDERS' EQUITY

 

 

12,359

 

 

10,679

 

 

 

 

 

 

 

          TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

12,359

 

$

10,750



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






F-2





KAT Gold Holdings Corp. (FKA Bella Viaggio, Inc.)

(A Development Stage Company)

STATEMENTS OF OPERATIONS

FOR THE PERIOD FROM INCEPTION (DECEMBER 5, 2005) TO DECEMBER 31, 2011 AND

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

 

 

 

 

 

 

 

 

 

Cumulative

 

 

 

 

Amount

 

 

For the years

 

from Inception

 

 

ended December 31,

 

(December 5, 2005)

 

 

2011

 

2010

 

to Dec. 31, 2011

REVENUES:

 

 

 

 

 

 

 

 

 

     Sales

 

$

-

 

$

-

 

$

-

     Cost of sales

 

 

-

 

 

-

 

 

-

     Gross profit

 

 

-

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

EXPENSES:

 

 

 

 

 

 

 

 

 

     Wages

 

 

-

 

 

121,299

 

 

121,299

     Geologist and geophysicist

 

 

-

 

 

105,579

 

 

105,579

     Accounting and legal

 

 

80,567

 

 

185,943

 

 

266,510

     Office and other expenses

 

 

343

 

 

13,685

 

 

14,028

     Vehicle expenses

 

 

-

 

 

6,692

 

 

6,692

     Claim option expenses

 

 

30,000

 

 

22,500

 

 

52,500

     Drilling and excavation

 

 

-

 

 

189,280

 

 

189,280

     Travel and entertainment

 

 

-

 

 

16,429

 

 

16,429

     Assay and related

 

 

-

 

 

66,649

 

 

103,599

          Total expenses

 

 

110,910

 

 

728,056

 

 

875,916

 

 

 

 

 

 

 

 

 

 

          Loss from operations

 

$

(110,910)

 

$

(728,056)

 

$

(875,916)

 

 

 

 

 

 

 

 

 

 

     Impairment of mineral rights and properties purchased from related party

 

 

(18,900,000)

 

 

-

 

 

(18,900,000)

     Impairment of Handcamp division property purchase

 

 

-

 

 

(112,700,000)

 

 

(112,700,000)

     Total impairments

 

 

(18,900,000)

 

 

(112,700,000)

 

 

(131,600,000)

 

 

 

 

 

 

 

 

 

 

     Loss before income taxes

 

 

(19,010,910)

 

 

(113,428,056)

 

 

(132,475,916)

 

 

 

 

 

 

 

 

 

 

          Provision for income taxes

 

 

-

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

          NET LOSS

 

$

(19,010,910)

 

$

(113,428,056)

 

$

(132,475,916)

 

 

 

 

 

 

 

 

 

 

Basic and fully diluted net loss per share

 

$

(0.11)

 

$

(1.36)

 

$

(1.01)

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

176,582,000

 

 

83,144,500

 

 

131,647,854



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






F-3





KAT Gold Holdings, Corp. (FKA Bella Viaggio, Inc.)

(A Development Stage Company)

STATEMENT OF STOCKHOLDERS' DEFICIT

FOR THE PERIOD FROM INCEPTION (DECEMBER 5, 2005) TO DECEMBER 31, 2009

AND FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2011

 

 

 

 

Preferred

 

Common

Additional

 

 

 

Preferred

Stock

Common

Stock

Paid-in

Retained

 

 

Shares

Amount

Shares

Amount

Capital

Deficit

Total

 

 

 

 

 

 

 

 

Cumulative net losses since inception (December 5, 2005)

 

 

 

 

 

 

 

through December 31, 2009

-

$    -

2,644,500

$  2,645

$  36,950

$  (36,950)

2,645

 

 

 

 

 

 

 

 

Expenditures made by related party on Company's behalf

-

-

-

-

736,090

-

736,090

 

 

 

 

 

 

 

 

Purchase of Handcamp division property

-

-

161,000,000

161,000

112,539,000

-

112,700,000

 

 

 

 

 

 

 

 

Net loss for the year ended December 31, 2010

-

-

-

-

-

(113,428,056)

(113,428,056)

 

 

 

 

 

 

 

 

Balances, December 31, 2010

-

$    -

163,644,500

$  163,645

$  113,312,040

$ (113,465,006)

$  10,679

 

 

 

 

 

 

 

 

Purchase of mineral rights and properties from related party

-

-

135,000,000

135,000

18,765,000

-

18,900,000

 

 

 

 

 

 

 

 

Expenditures made by related party on Company's behalf

-

-

-

-

112,590

-

112,590

 

 

 

 

 

 

 

 

Net loss for the year ended December 31, 2011

-

-

-

-

-

(19,010,910)

(19,010,910)

 

 

 

 

 

 

 

 

Balances, December 31, 2011

-

$    -

298,644,500

$  298,645

$  132,189,630

$ (132,475,916)

$  12,359



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






F-4





KAT Gold Holdings Corp. (FKA Bella Viaggio, Inc.)

(A Development Stage Company)

STATEMENTS OF CASH FLOWS

FOR THE PERIOD FROM INCEPTION (DECEMBER 5, 2005) TO DECEMBER 31, 2011 AND

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cumulative

 

 

 

 

 

Amount

 

 

 

 

 

from Inception

 

 

 

 

 

(December 5, 2005)

 

2011

 

2010

 

to Dec. 31, 2011

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

$

(19,010,910)

 

$

(113,428,056)

 

$

(132,475,916)

Adjustments to reconcile net loss to net cash (used in) operations:

 

 

 

 

 

 

 

 

    Recapitalization of equity due to reverse merger

 

-

 

 

2,645

 

 

2,645

    Impairment of Handcamp estimated value

 

-

 

 

112,700,000

 

 

112,700,000

    Impairment of mineral rights and properties purchased from related party

 

18,900,000

 

 

-

 

 

18,900,000

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

    Security deposits

 

4,700

 

 

(10,750)

 

 

(6,050)

    Outstanding checks in excess of bank balance

 

(71)

 

 

71

 

 

-

NET CASH (USED IN) OPERATING ACTIVITIES

 

(106,281)

 

 

(736,090)

 

 

(879,321)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Capital contributions from related party

 

112,590

 

 

736,090

 

 

885,630

NET CASH PROVIDED BY FINANCING ACTIVITIES

 

112,590

 

 

736,090

 

 

885,630

 

 

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

6,309

 

 

-

 

 

6,309

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS,

 

 

 

 

 

 

 

 

BEGINNING OF THE YEAR

 

-

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

END OF THE YEAR

$

6,309

 

$

-

 

$

6,309

 

 

 

 

 

 

 

 

 

NON-CASH FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

    Purchase of Handcamp property via issuance of 161,000,000 common shares

of which 65,000,000 shares have been issued at June 4, 2010 and 91,000,000 shares

were issued on September 14, 2010, and related write- off due to impairment of the

estimated value as future cash flow is uncertain

$

-

 

$

112,539,000

 

$

112,539,000

 

 

 

 

 

 

 

 

 

     Purchase of KATX mineral rights and properties via issuance of 135,000,000

shares pursuant to contract dated November 23, 2011 using closing stock price

of $.14 at such date and related impairment of the estimated value as future

cash flow is uncertain

$

18,900,000

 

$

-

 

$

18,900,000



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





F-5





KAT GOLD HOLDINGS CORP. (FKA BELLA VIAGGIO, INC.)

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2011 and 2010


NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Business Activity

Kat Gold Holdings Corp. (the “Company”) was incorporated in the State of Nevada on June 6, 2007.  Following its acquisition of Handcamp on June 4, 2010, a gold property located in the Province of Newfoundland and Labrador, Canada (“Handcamp”), the Company changed its business model to that of a mineral acquisition, exploration and development company focused primarily on gold properties.  On August 26, 2010, the Company’s name was changed from Bella Viaggio, Inc. to Kat Gold Holdings Corp.  As of this annual report, the Company has not generated any revenues but has incurred expenses related to the drilling and exploration of Handcamp. The Company has commenced exploratory drilling operations on the Handcamp property and sent core samples obtained for analysis.  The Company is currently awaiting the results of these core samples.


The Company has not yet earned any revenue from operations. Accordingly, the Company’s activities have been accounted for as those of a “Development Stage Enterprise” as set forth in Financial Accounting Standards Board Statement ASC 915 (“FASB ASC 915”). Among the disclosures required by FASB ASC 915 are that the Company’s financial statements be identified as those of a development stage operation, and that the statements of operations, stockholders’ equity and cash flows disclose activity since the date of the Company’s inception.


Accounting Basis

The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP” accounting). The Company has adopted a December 31 fiscal year end.


Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.


Cash and Cash Equivalents - For purposes of the Statements of Cash Flows, the Company considers highly liquid investments with an original maturity of three months or less to be cash equivalents.


Comprehensive Income (Loss) The Company reports comprehensive income and its components following guidance set forth by section 220-10 of the FASB Accounting Standards Codification which establishes standards for the reporting and display of comprehensive income and its components in the consolidated financial statements. There were no items of comprehensive income (loss) applicable to the Company during the period covered in the financial statements.


Long-Lived Assets - The Company evaluates the recoverability of its fixed assets and other assets in accordance with section 360-10-15 of the FASB Accounting Standards Codification for disclosures about Impairment or Disposal of Long-Lived Assets. Disclosure requires recognition of impairment of long-lived assets in the event the net book value of such assets exceeds its expected cash flows. If so, it is considered to be impaired and is written down to fair value, which is determined based on either discounted future cash flows or appraised values. The Company adopted the statement on inception. No impairments of these types of assets were recognized during the years ended December 31, 2011 and 2010.


Risk and Uncertainties - The Company is subject to risks common to companies in the mining industry, including, but not limited to, litigation, development of new technological mining innovations and dependence on key personnel.

 

Advertising Costs - Advertising costs are expensed as incurred. The Company does not incur any direct-response advertising costs.



F-6





KAT GOLD HOLDINGS CORP. (FKA BELLA VIAGGIO, INC.)

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2011 and 2010


Income Taxes - Income taxes are computed using the asset and liability method.  Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws.  A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. It is the Company’s policy to classify interest and penalties on income taxes as interest expense or penalties expense. As of December 31, 2011, there have been no interest or penalties incurred on income taxes.


Fair Value of Financial Statements - The Company’s financial instruments consist of cash and security deposits. The carrying amount of these financial instruments approximates fair value due to either length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.


Loss Per Share - Net loss per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period. There were no potentially dilutive shares outstanding as of December 31, 2011 and 2010.


Recent Accounting Pronouncements - The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements will cause a material impact on its financial condition or the results of its operations.


The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its consolidated financial condition or the consolidated results of its operations.

 

In July 2010, the FASB amended the requirements for Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. As a result of these amendments, an entity is required to disaggregate by portfolio segment or class certain existing disclosures and provide certain new disclosures about its financing receivables and related allowance for credit losses. The new disclosures as of the end of the reporting period are effective for the fiscal year ending December 31, 2010, while the disclosures about activity that occurs during a reporting period were effective for the first fiscal quarter of 2011. The adoption of this guidance did not impact the Company’s results of operations or financial position.


In January 2010, the FASB issued authoritative guidance regarding fair value measures and disclosures. The guidance requires disclosure of significant transfers between level 1 and level 2 fair value measurements along with the reason for the transfer. An entity must also separately report purchases, sales, issuances and settlements within the level 3 fair value roll forward. The guidance further provides clarification of the level of disaggregation to be used within the fair value measurement disclosures for each class of assets and liabilities and clarified the disclosures required for the valuation techniques and inputs used to measure level 2 or level 3 fair value measurements. This new authoritative guidance is effective for the Company in fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of this guidance did not impact the Company’s results of operations or financial position.


In September 2011, the FASB issued ASU 2011-08 which provides an entity the option to first assess qualitative factors to determine whether it is necessary to perform the current two-step test for goodwill impairment.  If an entity believes, as a result of its qualitative assessment, that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required.  Otherwise, no further testing is required. The revised standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011.  The Company does not expect that the adoption of this standard will have a material impact on the Company’s results of operations, cash flows or financial condition.



F-7





KAT GOLD HOLDINGS CORP. (FKA BELLA VIAGGIO, INC.)

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2011 and 2010


In December 2011, FASB issued Accounting Standards Update 2011-11, “Balance Sheet - Disclosures about Offsetting Assets and Liabilities” to enhance disclosure requirements relating to the offsetting of assets and liabilities on an entity's balance sheet. The update requires enhanced disclosures regarding assets and liabilities that are presented net or gross in the statement of financial position when the right of offset exists, or that are subject to an enforceable master netting arrangement. The new disclosure requirements relating to this update are retrospective and effective for annual and interim periods beginning on or after January 1, 2013. The update only requires additional disclosures, as such, the Company does not expect that the adoption of this standard will have a material impact on the Company’s results of operations, cash flows or financial condition.


NOTE 2 SUPPLEMENTAL CASH FLOW INFORMATION


Supplemental disclosures of cash flow information for the years ended December 31, 2011 and 2010 are summarized as follows:


Cash paid during the years for interest and income taxes:


 

 

2011

 

2010

 

Income Taxes

 

$

 

$

 

Interest

 

$

 

$

 


NOTE 3 GOING CONCERN AND UNCERTAINTY


The Company has suffered recurring losses from operations since inception. In addition, the Company has yet to generate an internal cash flow from its business operations. These factors raise substantial doubt as to the ability of the Company to continue as a going concern.


Management’s plans with regard to these matters encompass the following actions: 1) to raise financing to enable it to continue its locate, explore and develop mineral properties as well as to generate working capital, and 2) to sell mineral properties that it has located, explored and developed by attempting to enter into joint ventures with, or to sell interests in any property it manages to develop to, a major mining company. The Company’s continued existence is dependent upon its ability to resolve its lack of liquidity and begin generating profits in its current business operations. However, the outcome of management’s plans cannot be ascertained with any degree of certainty. The accompanying financial statements do not include any adjustments that might result from the outcome of these risks and uncertainties.


NOTE 4 DEVELOPMENT STAGE RISK


Since its inception, the Company has been dependent upon the receipt of capital investment to fund its continuing activities. In addition to the normal risks associated with a new business venture, there can be no assurance that the Company’s business plan will be successfully executed. The Company’s ability to execute its business plan will depend on its ability to obtain additional financing and achieve a profitable level of operations. There can be no assurance that sufficient financing will be obtained. Further, the Company cannot give any assurance that it will generate substantial revenues or that its business operations will prove to be profitable.


NOTE 5 MATERIAL EVENT (PURCHASE OF HANDCAMP PROPERTY)


During the year ended December 31, 2010, the Company acquired (the “Acquisition”) 100% of “Handcamp,” a gold property, from Kat Exploration, Inc. (“KATX”) in exchange for 161,000,000 shares of the Company’s common stock.




F-8





KAT GOLD HOLDINGS CORP. (FKA BELLA VIAGGIO, INC.)

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2011 and 2010



Under the terms of the agreement governing the Acquisition, the Company issued 65,000,000 shares of its common stock to KATX on September 4, 2010, and the remaining 96,000,000 shares of its common stock were issued to KATX on September 14, 2010.


The common shares were valued at $0.70 per share, the closing stock price on the date of the closing, resulting in recorded goodwill of $112,700,000. The Company’s management, upon review, determined that such amount might not be fully recoverable due to future cash flows being an uncertainty and an adjustment to write down the property was recorded.  


NOTE 6 MATERIAL CONTRACTS


KATX entered into a Diamond Drilling Contract dated February 24, 2010 in which Cabo Drilling (Atlantic) Corp. agreed to provide certain drilling services at the Handcamp property. The contract covered various rates, which in the opinion of management represented market value rates, for mobilization and demobilization, overburden penetration (pipe and casing), core drilling, surveys and tests, etc. A security deposit of approximately $10,000 was made prior to commencement of mobilization and services were provided under this contract from July through September 2010 and all such services were paid for by KATX on behalf of the Company as it acquired rights to the property in June 2010.


On November 23, 2011, the Company entered into an asset purchase agreement by and between the Company and KATX. The Company acquired 100% of the mineral rights that KATX then held in and to the mineral properties Rusty Ridge, Collier’s, North Lucky and South Lucky, from KATX solely in exchange for 135,000,000 shares of the Company’s common stock.


NOTE 7 INCREASE IN AUTHORIZED COMMON SHARES AND NAME CHANGE

 

On July 7, 2010, the board of directors of the Company and shareholders owning a majority of its issued and outstanding shares of common stock of the Company voted to approve (i) an increase in its authorized common shares to 500,000,000 shares and (ii) a change in the Company’s name to Kat Gold Holdings Corp. to better reflect the nature of its operations. The Company’s articles of incorporation were amended accordingly on August 2, 2010.


NOTE 8 LOSS PER SHARE


Loss per share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding during the period. Basic and diluted loss per share was the same for the year ended December 31, 2011 as well as for the year ended December 31, 2010.


NOTE 9 COMMITMENTS AND CONTINGENCIES


Certain of the Company’s officers and directors are involved in other related business activities and most likely will become involved in other business activities in the future.


NOTE 10 INCOME TAXES


For the years ended December 31, 2011 and 2010, the Company has incurred net losses and, therefore, has no tax liability. The net deferred tax asset generated by the loss carry-forward has been fully reserved. The cumulative net operating loss carry-forward is approximately $871,000 at December 31, 2011, and will begin to expire in the year 2025.




F-9





KAT GOLD HOLDINGS CORP. (FKA BELLA VIAGGIO, INC.)

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2011 and 2010



The provision for Federal income tax consists of the following at December 31:


 

2010

 

2009

Federal income tax attributable to:

 

 

 

 

 

Current operations

$

305,000

 

$

266,000

Less: valuation allowance

 

(305,000)

 

 

(266,000)


The cumulative tax effect at the expected rate of 35% of significant items comprising our net deferred tax amount is as follows:


 

2011

 

2010

Deferred tax asset attributable to:

 

 

 

 

 

Net operating loss carryover

$

305,000

 

$

266,000

Less: valuation allowance

 

(305,000)

 

 

(266,000)

Net deferred tax asset

$

-

 

$

-


The valuation allowance increased by $39,000 and $255,000 in the years 2011 and 2010, respectively.


Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future years.


NOTE 11 RELATED PARTY TRANSACTIONS


The Company has received support from a party related through common ownership and directorship. All of the expenses herein have been borne by this entity on behalf of the Company and the direct vendor payments are treated as capital contributions in the accompanying financial statements.


In 2011, the Company received proceeds from common stock issued by the above mentioned related party and also made direct disbursements to such related party’s vendors as a conduit. At year end, all amounts were cleared up with the related party.












F-10