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EX-10.9 - EXHIBIT 10.9 - BONANZA GOLD CORP.ex10_9apg.htm


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-K


[X]

Annual Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 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: 000-54027



BONANZA GOLD CORP.

(Name of small business issuer in its charter)


 

 

Nevada

20-8560967

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification Number)


Columbia Tower

701 Fifth Avenue, Office 4263, Seattle, WA

98104

(Address of principal executive offices)

(Zip Code)


Registrant’s telephone number, including area code: (206) 262-7461


 

 

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Name of each exchange on which registered

 

 

 

 

 

 

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

Common Stock $.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 15(d) of the Exchange 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 Exchange Act during the past 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 Website, if any, every Interactive DataFile 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 in response to Item 405 of Regulation S-K is not contained in this herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [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 definition of “accelerated filer,” “larger accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):


Large accelerated filer [   ]      Accelerated filer [   ]      Non- accelerated filer [   ]      Smaller reporting company [X]


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 issuer’s common stock held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $783,450,750 based on $.15, the price at which the registrant’s common stock was last sold on that date.

 

As of April 16, 2012, the issuer had 5,223,005 shares of common stock outstanding.


Documents incorporated by reference: None


 



BONANZA GOLD CORP.


FORM 10-K

TABLE OF CONTENTS


 

 

 

 

Page

 PART I.

 

 

 

 

1

 

Item 1.

 

Business

 

 

1

 

Item 1A.

 

Risk Factors

 

 

2

 

Item 1B.

 

Unresolved Staff Comments

 

 

11

 

Item 2.

 

Properties

 

 

11

 

Item 3.

 

Legal Proceedings

 

 

11

 

Item 4.

 

Mining Claims Disclosures

 

 

11

 

 PART II.

 

 

 

 

12

 

Item 5.

 

Market for Registrant’s Common Equity Related Stockholder Matters and Issuer Purchases of Equity Securities

 

 

12

 

Item 6.

 

Selected Financial Data

 

 

13

 

Item 7.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

13

 

Item 7A

 

Quantitative and Qualitative Disclosures About Market Risk

 

 

16

 

Item 8.

 

Financial Statements and Supplementary Data

 

 

17

 

Item 9.

 

Changes in and Discussions with Accountants on Accounting and Financial Disclosure

 

 

19

 

Item 9A.

 

Controls And Procedures

 

 

 

 

Item 9B.

 

Other Information

 

 

19

 

 PART III.

 

 

 

 

20

 

Item 10.

 

Directors, Executive Officers and Corporate Governance

 

 

20

 

Item 11.

 

Executive Compensation

 

 

21

 

Item 12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

 

21

 

Item 13.

 

Certain Relationships and Related Transactions, and Director Independence

 

 

22

 

Item 14.

 

Principal Accountant Fees and Services

 

 

22

 

 PART IV.

 

 

 

 

23

 

Item 15.

 

Exhibits and Financial Statement Schedules

 

 

23

 

SIGNATURES

 

 

24

 







PART I


Note about Forward-Looking Statements


Most of the matters discussed within this report include forward-looking statements on our current expectations and projections about future events.  In some cases you can identify forward-looking statements by terminology such as “may,” “should,” “potential,” “continue,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” and similar expressions.  These statements are based on our current beliefs, expectations, and assumptions and are subject to a number of risks and uncertainties, many of which are difficult to predict and generally beyond our control, that could cause actual results to differ materially from those expressed, projected or implied in or by the forward-looking statements.  Such risks and uncertainties include the risks noted under “Item 1A Risk Factors.”  We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

ITEM 1.  BUSINESS


General


Bonanza Gold Corp. (“we,” the “Company” or the “Registrant”) was incorporated under the laws of the State of Delaware in December 2006 under the name “Cold Gin Corporation.”  On December 27, 2010, we entered into an Agreement and Plan of Reorganization with Bonanza Gold Corp., a wholly-owned subsidiary of the Company, pursuant to which we merged with and into Bonanza Gold Corp, with Bonanza Gold Corp. being the surviving corporation.


We were initially established to become a developer of Internet media content for mixed martial arts fans and consumers.  We have not derived any revenue from the martial arts business.  Due to a change of control that occurred in August 2010, we abandoned the martial arts business.  Accordingly, results from operations related to the martial arts business have been reclassified from current operations to that of discontinued operations.  Effective December 10, 2010, we transitioned our business focus from that of a developer of Internet media for martial arts to a company engaged in the exploration and mining of minerals.


The Company’s management has experience in the field of mineral exploration and has already invested in two properties and intends to continue to invest resources into our exploration and drilling program, and intends to extend the campaign over the next several years. Depending upon our ability to obtain sufficient funding, we may also acquire additional properties for exploration. In addition, assuming sufficient funding, we plan to engage an internationally recognized mining and geological consultancy firm to assist us in our drilling efforts.


We believe that an expanded exploration and drilling program is currently our best option for increasing the value of our Company. However, we have no revenues, our stock has no trading volume, and we believe our stock price does not reflect the true value of our Company. These factors limit our ability to obtain financing. Therefore, in an effort to generate revenue to continue our operations we have acquired two properties, one located in Arizona and the other in Mexico. While, due to the lack of capital, we have not commenced such exploitation program at this time, we have the legal and functional capability to do so, including the required exploitation permits.


In December 2010 we engaged in a reincorporation merger and changed our domicile from Delaware to Nevada and our name to Bonanza Gold Corp.  In connection with the reincorporation merger each outstanding share of our common stock was exchanged for one hundred fifty shares of the common stock of the Nevada entity and our number of authorized common shares was increased to 250,000,000.  Thereafter, our trading market experienced some unusual activity.  In an effort to stabilize the market, we effectuated a 150:1 reverse merger on March 4, 2011.


Recent Developments


On April 29, 2011 we executed a property purchase agreement for the acquisition of certain assets from Independent Resources, Inc. pursuant to which we acquired an undivided interest in six (6) claims representing 1002.16 ha that has been staked and recorded as MTO Cell Claims.  The property is located east of Harrison Lake and northwest of Hope in southwestern British Columbia.  We acquired the assets for Ten Thousand Dollars ($10,000), which was funded by a loan from our former Chief Executive Officer.


On May19, 2011 we executed a termination agreement pursuant to which we terminated our payment obligations under two asset purchase agreements for properties in Arizona and Mexico and assigned the properties back to the seller.


On June 30, 2011 we executed a property purchase agreement for the acquisition of certain property from United Copper Holdings Ltd pursuant to which we acquired a 75% interest in 28 lode claims and approximately 560 acres located in Okanogan County, State of




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Washington. We acquired the property from the seller for two hundred thousand shares of common stock, of which one hundred thousand were issued upon execution of the agreement, fifty thousand are to be issued six months thereafter and fifty thousand shares are to be issued twelve months thereafter. In addition, the seller retained a 5% Net Smelter Returns Royalty on the gross mineral production. We also agreed to provide a work commitment in the amount of One Million Dollars ($1,000,000) to be paid over a two year period commencing on the closing of the acquisition and we will earn an additional twenty five percent interest in the property after Five Hundred Thousand Dollars ($500,000) of the work commitment is expended.  We also agreed to enter into a consulting agreement for a one year term with an option to renew for an additional one year for the seller to act as a consulting prospector, engineer or financial consultant to us.  The amounts paid to the seller as consulting fees will be applied against the work commitment.  We are also obligated to enter into a joint venture agreement with the seller after we earn the additional 25% interest.


On February 28, 2012 we executed a property purchase agreement with Century Copper LLC for the acquisition of the property known as the Kelvin Project, consisting of one (1) patented mining claim (the “Zellweger Patented Claim”) and twenty-six (26) lode mining claims (the “Kelvin Prospect Claims”) in Sections 8, 9 and 17, Township 4 South, Range 13 East, G.&S.R.B.&M., Pinal County, Arizona.  The purchase price for the assets was Two Million Dollars ($2,000,000), which will be payable as follows: (i) Fifty Thousand Dollars ($50,000) for the Zellweger Patented Claim, of which (x) Ten Thousand Dollars ($10,000) was previously paid upon execution of a letter of intent between the parties; and (y) Forty Thousand Dollars ($40,000) was payable upon execution of the agreement; and (ii) One Million Nine Hundred Fifty Thousand Dollars ($1,950,000), of which (x) One Hundred Fifty Thousand Dollars ($150,000) was payable on or before February 28, 2012; (ii) Two Hundred Thousand Dollars ($200,000) is to be paid annually thereafter commencing on February 28, 2013 until the total amount is paid or the agreement is mutually terminated.   In addition, we agreed to issue to the seller One Million (1,000,000) of our post-split shares of common stock, of which (i) Two Hundred Fifty Thousand (250,000) shares shall be issuable within four (4) months of the closing of the transactions pursuant to the agreement; (ii) Two Hundred Fifty Thousand (250,000) shares shall be issuable within eight (8) months of the closing of the transactions pursuant to the agreement; (iii) Two Hundred Fifty Thousand (250,000) shares shall be issuable within twelve (12) months of the closing of the transactions pursuant to the agreement; and (iv) Two Hundred Fifty Thousand (250,000) shares shall be issuable within eighteen (18) months of the closing of the transactions pursuant to the agreement.


Pursuant to the terms of the agreement, the seller will retain (i) a five percent (5%) Net Smelter Returns Royalty (“NSR”) on the Kelvin Prospect Claims and any additional lode claims located adjacent to the existing twenty-six (26) claims; and (ii) a two percent (2%) NSR on the gross mineral production from the Zellweger Patented Claim.  In addition, we agreed to provide a work commitment for the property of One Million Dollars ($1,000,000) over five (5) years and will grant the seller an additional One Million (1,000,000) shares of post-split common stock upon discovery of a twenty-five million (25,000,000) ton copper deposit on said property.  


The agreement further provides that in the event we fail to pay any installments when due under the agreement, and such breach is not timely cured after receipt of notice thereof by the seller, then we shall forfeit all rights to the assets, including a forfeiture of payments made under the agreement up to the date of forfeiture, with all such payments being retained by the seller as liquidated damages.  The seller shall has the right to terminate the agreement if we default in any other requirements under the agreement and have not taken reasonable steps to cure such default within sixty (60) days of receipt of notice thereof from the seller.  We have the right to terminate the agreement at any time upon prior written notice to the seller.  In the event of termination of the agreement by either party, (i) we are required to deliver to the seller within one hundred twenty (120) days, copies of all reports, maps, drill logs, assay results and any other relevant technical data compiled by us with respect to the property; (ii) remove from the property, within twelve (12) months, all facilities erected, installed or brought upon the property by us, and any facilities remaining after the expiration of such period will automatically become the property of the seller; and (iii) all payments theretofore paid by us to the seller shall be retained by the seller in consideration for entering into the agreement and for the rights conferred on us thereby.


Executive Officers of the Registrant


Craig Russell currently serves as our President, Chief Executive Officer, Treasurer and Secretary.  The Company does not have any other executive officers.


Employees


The Company currently has one employee, Craig Russell, who is also an executive officer and a director.


Item 1A.  RISK FACTORS


An investment in our common stock involves various risks. You should carefully consider the risk factors set forth below in conjunction with the other information contained in this report before purchasing our common stock. If any of the risks discussed in




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this report actually occur, our business, operating results, prospects and/or financial condition could be adversely impacted.  This could cause the market price of our common stock to decline and could cause you to lose all or part of your investment.


Risks Related to our Business and Our Industry


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. We expect to continue to incur losses well into the future. Our activities to date have been limited to organizational efforts with respect to a different line of business and the acquisition of two exploration properties but we have not conducting any exploration activities yet. 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.


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.


A shortfall of funding will have a negative impact on our ability to implement our business plan.


Pursuit of the Company’s business plan is dependent upon obtaining sufficient funding to support such plan. We have certain work commitment obligations in the amount of One Million Dollars ($1,000,000) which are to be paid over a two year period commencing on the closing of the acquisition of the property located in the State of Washington, and additional capital commitments in the amount of Two Million Dollars ($2,000,000) described above under Recent Developments regarding the Kelvin Project. There can be no assurance that we will have the funds necessary to maintain this commitment. Our current operating funds are insufficient either to complete our planned exploration, to fund our commitments or to begin a limited exploitation program. Therefore, we will need to obtain additional funding in order to implement our business plan. There is no guarantee that such funding will be available on terms acceptable to us or at all. Additionally, even if we are able to obtain sufficient funding, there can be no assurance that we will be able to successfully implement our plan or that unanticipated expenses, problems or difficulties will not occur which would result in material delays in its implementation.


Our current business plan contemplates that we will incur significant expenses in connection with the exploration and exploitation, if warranted. We do not currently have sufficient funds to commence a small scale exploitation program. We will require additional funding even to conduct limited mining activities. We will also require additional funding if the costs of our exploration or exploitation, if any, on the Assets are greater than anticipated.


We will require additional funding to sustain our business operations. We do not currently have any arrangements for funding and we can provide no assurance to investors that we will be able to find such funding on terms acceptable to us or at all. Obtaining additional funding would be subject to a number of factors, including, without limitation, the market prices for copper, silver and gold, investor acceptance of our business plan, the credibility of our exploration results, investor confidence and interest in our sector generally and




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our Company in particular and general market conditions. These factors may make the timing, amount, terms or conditions of additional funding unavailable to us.


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.


The exploration industry is capital intensive and of high risk.


The industry within which the Company expects to engage in is historically capital intensive and of high risk.  The Company’s ability to achieve profitable operations will be dependent upon many factors, including its ability to raise sufficient capital to explore the Assets and ability to discover viable and economic mineralized material.  The ability to discover such mineralized materials are subject to numerous factors, most of which are beyond the Company’s control and are not predictable.  Exploration for gold is speculative in nature, involves many risks and is frequently unsuccessful.  Any exploration program entails risks relating to:


· the ability to discover economic ore deposits;


· the subsurface location of economic ore deposits;


· the development of appropriate metallurgical processes;


· the receipt of necessary governmental approval; and


· the construction of mining and processing facilities at any site chosen for mining.


In addition, the commercial viability of a mineral deposit is dependent on a number of factors including:


· the price;


· exchange rates; and


· the particular attributes of the deposit, such as its size, grade and proximity to infrastructure, financing costs, taxation, royalties, land tenure, land use, water use, power use, importing and exporting, and environmental protection.


The effect of these factors cannot be accurately predicted, and the occurrence of any one or more factors could have a material adverse impact on the Company and its proposed operations.


Limited geological work has been conducted on existing mining claims, we do not have evidence that economic resources exist on the property.


We have conducted limited geological work on two sites. The Company has also received a completed National Instrument 43-101 Report from an independent consultant which discloses certain technical information about the Company’s mineral projects as well as estimates of proven and probable mineral resources.  While these results appear encouraging, additional exploration work will be required to be performed by the Company to determine whether economic resources exist on the claims, and if such resources do indeed exist, whether they are economically recoverable.  The amount and cost of such exploration work cannot be determined at this time.  No assurances can be given that additional mapping, surveying, and drilling will be sufficient to conclude that economic mineral deposits exist on such claims, and whether such mineral deposits, if any, are recoverable.  Therefore, we may be required to conduct additional exploration activities in addition to those proposed herein, the results of which likewise cannot be predicted.  No assurances can be given that we will be able to raise additional capital to conduct the additional exploration activities, or that such additional activities will prove successful.


The speculative prices of gold, silver and copper may adversely impact commercialization efforts.


As stated above, exploration and production is highly speculative and involves numerous natural risks that may not be overcome by knowledge and experience.  In particular, even if the Company is successful in identifying gold, silver, or copper deposits, for which no assurances can be given, the commercialization will be dependent upon the existing market price for gold, silver, or copper, among




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other factors.  The market price of gold, silver, and copper has historically been unpredictable, and subject to wide fluctuations.  The decline in the price of gold, silver, or copper could render a discovered property uneconomic for unpredictable periods of time.


The mineral exploration industry is subject to numerous regulations which may adversely impact our mining efforts.


The mineral exploration and mining industry is subject to numerous statutory and regulatory requirements and controls at various governmental levels.  Regulations can impact the manner and methodology of mining activities undertaken by the Company.  The impact of such regulations cannot be predicted, and may cause unexpected delays, and/or become cost prohibitive, thereby rendering any prospect uneconomic.


The legal and regulatory environment that pertains to the mining industry is uncertain and may change. Uncertainty and new regulations could increase our operating costs and prevent us from exploring and drilling for mineralized material and developing the Assets, even if we determine such development is warranted. In addition to new laws and regulations being adopted, existing laws may be applied to mining operations that have not yet been so applied. Any such new laws may increase our operating costs which could have a material adverse effect on our results of operations and financial condition. Changes in regulatory policy could also have a material adverse effect on our exploration and future production activities. Any changes in government policy may result in changes to laws affecting, without limitation:


· ownership of our concessions;


· land tenure;


· development of infrastructure;


· mining policies;


· monetary policies;


· taxation;


· rates of exchange;


· environmental regulations; and/or


· labor relations.


Any such changes may affect our ability to continue our exploration and drilling program, to undertake mining operations with respect to the Assets in the manner currently contemplated, or our ability to explore or develop future properties. We must take into account the possibility, particularly in British Columbia, that future governments may adopt substantially different policies, which might extend to expropriation of assets.


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 the Company will attempt to manage its risks, one or more incidents of environmental damage or personal injury resulting from its mining activities could have a material adverse impact on the business of the Company. 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) or a sale of the Company or its assets.


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




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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.


We have no proven or probable reserves.


We have not established the presence of any proven or probable reserves, as those terms are defined by the U.S. Securities and Exchange Commission (the “SEC”), on the Assets. If the Assets do not contain mineralized material that we can extract at a profit, any funds spent by us on exploration or development of the Assets could be lost. The SEC defines a “reserve” as “that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination.” Any mineralized material discovered by us should not be considered proven or probable reserves.


In order to demonstrate the existence of proven or probable reserves under SEC guidelines, it would be necessary for us to continue exploration to demonstrate the existence of sufficient mineralized material with satisfactory continuity and then obtain a positive feasibility study that demonstrates with reasonable certainty that the mineralized material can be economically extracted and produced. We have not completed a feasibility study with regard to the assets we have, nor do we intend to perform such feasibility study until such time as we obtain sufficient funding and it is advisable under our then current business plan. Exploration is inherently risky, the probability of any individual property having reserves is extremely remote and few properties ultimately prove economically successful.


Estimates of mineralized material are based on interpretation and assumptions which may be unreliable.


Estimates of our mineralized material, if any, will be based on interpretation and assumptions and may yield less under actual conditions than current estimates. When making determinations about whether to advance any of our projects to production, we must rely upon such estimated calculations as to the mineralized material on the property. Until the mineralized material is actually mined and processed, any amounts and values can only be considered estimates.


These estimates are imprecise and depend on geological interpretation and statistical inferences drawn from drilling and assay sampling analysis, which may prove to be unreliable. We cannot assure you that the estimates of our mineralized material will be accurate or that we can mine or process this mineralized material profitably.


Any material changes in estimates of our mineralized material could affect the economic viability of the Assets and could have a material adverse effect on our operations and financial position. There can be no assurance that minerals recovered in small scale will be recovered at production scale.


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. government. 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.


Competition in the mining industry is intense and we have limited financial and personnel resources with which to compete.


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.





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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 Mexico 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.


One of our properties is located in British Columbia and in the past we have owned property located in Mexico. 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;


· crime and security issues including but not limited to drug cartel activity;


· 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;


· limitations on ownership;


· limitations on the repatriation of earnings;


· increased financial costs;


· import and export regulations, including restrictions on the export of gold, silver and copper; 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. Finally, any country that is a developing country may make it more difficult for us to obtain required funding.


We are required to make payments to retain certain concessions.


Our ability to retain good title to our assets and continue our exploration and drilling program is subject to payment of surface taxes imposed by governments. The amount of surface taxes is set by regulation and may increase over the life of the concession and include periodic adjustments for inflation. Our failure or inability to pay the surface taxes to governmental agencies may cause us to lose our interest in one or more of our concessions.




7





Our concessions are located in a remote area.


There is extremely limited infrastructure on our properties, which may impair our access to the properties.  Inclement weather and/or natural disasters may affect the roads surrounding the properties, which may delay or prevent us from conducting our proposed business operations or cause significant damage to costly infrastructure, for which we may or may not be insured. While we plan to conduct our exploration and drilling year round, it is possible that inclement weather and/or natural disasters could delay our mining activities, which could have a material adverse effect on our business, results of operations and financial condition.


Defective title to the 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.


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.


Material losses in excess of insurance coverage could adversely affect our exploration and future production activities.


We have limited insurance against losses or liabilities that could arise from our operations. If we incur material losses or liabilities in excess of our insurance coverage, our financial position could be materially and adversely affected. Mining operations involve a number of risks and hazards including without limitation:


· environmental hazards;

· industrial accidents;

 

· metallurgical and other processing problems;

 

· failure of pit walls or dams;

 

· acts of God; and/or

 

· equipment and facility performance problems.

Such risks could have various negative consequences, including, without limitation:


· damage to, or destruction of, mineral properties or production facilities;

 

· personal injury or death;

 

· environmental damage;

 

· delays in exploration; and/or

 

· monetary losses.

Industrial accidents could have a material adverse effect on our future business and operations. We cannot be certain the insurance we have in place will cover all of the risks associated with our mining activities or that we will be able to maintain insurance to cover




8




these risks at economically feasible premiums. We also might become subject to liability for pollution or other hazards which we cannot insure against or which we may elect not to insure against because of premium costs or other reasons. Losses from such events may have a material adverse effect on our ability to continue operations.


We are dependent upon our officers.


The Company is dependent on Craig Russell, its current President and Chief Executive Officer and director, to effectuate many of the Company’s services and plans for the implementation of our proposed activities and business.  Mr. Russell has significant experience in the area of exploring for and/or mining precious metals.    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.  Investors must be willing to entrust all of the affairs of the Company to current management.


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 the securities offered hereby.


Future issuance of securities could cause dilution to existing shareholders.


The Company has the authority to issue up to 250,000,000 shares of common stock, and to issue options and warrants to purchase shares of our common stock without stockholder approval.  Future issuances of common will dilute the holdings of our existing stockholders and may reduce the market price of our common stock.  Holders of our common stock are not entitled to preemptive rights.


Certain of our officers may have conflicts of interest.


Certain conflicts of interest exist with respect to management and the operations of the Company.  Although management has committed to devote sufficient time and attention to the affairs of the business, management is not subject to any written agreement regarding such matters.  Consequently, other business interests may arise which could compromise the time and attention devoted by management to the affairs of the Company.


An adverse evaluation of our internal controls could result in loss of investor confidence.  


We are required to evaluate our internal controls under Section 404 of the Sarbanes-Oxley Act of 2002 annually and any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and have a material adverse effect on the price of our common stock. Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we have furnished a report by our management on internal controls for the fiscal year ended December 31, 2011. Such a report contains, among other matters, our assessment of the effectiveness of our internal controls over financial reporting, including a statement as to whether or not our internal controls are effective. This assessment must include disclosure of any material weakness in our internal controls over financial reporting identified by our management. Due to among other things, our lack of segregation of duties, our internal controls over financial reporting are ineffective as of the date hereof, and there is no assurance that they will be effective in the future. If we are unable to effectuate and maintain the effectiveness of our controls, investors could lose confidence in our financial reports and our stock price may decline.


We are subject to adverse changes in currency values.


Since some of our expenses will be paid in foreign currency, and our investment capital is in United States dollars, we are subject to adverse changes in currency values which will be difficult to prevent or predict. Our operations in the future could be affected by changes in the value of the foreign currency against the United States dollar. At the present time, since we have no production and limited investment, we have no plans or policies to utilize forward sales contracts or currency options to minimize this exposure. If and when these measures are implemented, there is no assurance they will be cost effective or be able to fully offset the effect of any currency fluctuations.


Risks related to Owning Our Stock


Our stock price may be volatile.


 


9




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, silver and copper;


· 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.


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.


The value of our common stock is partially related to the value of our mineralized material.


The value of our common stock may relate directly and/or indirectly to the value of the mineralized material contained in the Assets and fluctuations in the price of any such mineralized material could have a material adverse effect on the value of any investment in our common stock.


Several factors may affect the prices for mineralized material, including, without limitation:


· global supply and demand;




10





· global or regional political, economic or financial events and situations;


· investors expectations with respect to the rate of inflation;


· currency exchange rates;


· interest rates; and/or


· investment and trading activities of hedge funds and commodity funds.


In addition, investors should be aware that there is no assurance that our mineralized material will maintain a constant price or have long term value. In the event the price of our mineralized material declines, the value of an investment in our common stock may also decline.


Reporting our investments in mineral properties as an expense may have a negative impact of our stock price.


Since we have no proven or probable reserves, our investment in the Assets is not reported as an asset in our financial statements which may have a negative impact on the price of our stock. We prepare our financial statements in accordance with accounting principles generally accepted in the United States of America and intend to report substantially all exploration and drilling expenditures as expenses until we are able to establish proven or probable reserves. If we are able to establish proven or probable reserves, we would report development expenditures as an asset subject to future amortization using the units-of-production method. Since it is uncertain when, if ever, we will establish proven or probable reserves, it is uncertain whether we will ever report these expenditures as an asset. Accordingly, our financial statements report fewer assets and greater expenses than would be the case if we had proven or probable reserves, which could have a negative impact on our stock price.


ITEM 1B.  UNRESOLVED STAFF COMMENTS


Not applicable.


ITEM 2.  PROPERTIES


The Company rents office space located at Colombia Tower, 701 Fifth Avenue, Office 4263, Seattle, WA 98104, the rent charges are approximately $1,500 per month. The Company recently acquired an undivided interest in six (6) claims representing 1002.16 ha that has been staked and recorded as MTO Cell Claims located east of Harrison Lake and northwest of Hope in southwestern British Columbia.  We also acquired a 75% interest in 28 lode claims and approximately 560 acres located in Okanogan County, State of Washington.


ITEM 3.  LEGAL PROCEEDINGS


We are not currently a party to any legal proceedings, and we are not aware of any proceeding pending or threatened against us by any governmental authority or other party.


ITEM 4.  MINE SAFETY DISCLOSURES


Not Applicable




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PART II


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


Market Information


Our common stock has been listed on the OTC Bulletin Board under the symbol “BNZA” since January 5, 2011.  Prior to this, our common stock was listed on the OTC Bulletin Board under the symbol “CLGC”.  There has been limited trading activity for our common stock for each quarter since September 1, 2008 as reported on the OTC Bulletin Board.


YEAR ENDED DECEMBER 31, 2011

High

Low

Fourth quarter

$1.00

$1.00

Third quarter

$1.00

$0.15

Second quarter

$0.15

$0.15

First quarter

$5.99

$0.29

YEAR ENDED DECEMBER 31, 2010

 

 

Fourth quarter

$1.15

$1.15

Third quarter

--

--

Second quarter

--

--

First quarter-

--

--


Holders


As of April 10, 2012, there were approximately 10 shareholders of record of our common stock and 5,223,005 shares of common stock deemed outstanding, which includes 50,000 shares that have not been issued but were committed to be issued in connection with our assets acquisitions.


Dividends and Share Repurchases


We have not paid any dividends to our shareholders.  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 Plan Information


Not applicable.


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


On June 30, 2011, the Company issued 100,000 shares on a post reverse split basis of common stock in connection with the Okanogan County mineral property acquisition. The offer and sale of the foregoing securities was made solely to “accredited investors” and in reliance upon Regulation S of the Securities Act of 1933, as amended and Regulation S.


On July 8, 2011, the Company issued to one investor 150,000 Units (each unit being comprised of one share of the Company’s common stock and a warrant exercisable over a three year period for 150,000 shares of common stock at an exercise price of $1.25 per share).  The Units were sold at a price of $.20 per Unit for an aggregate of $30,000.  The offer and sale of the foregoing securities was made solely to “accredited investors” and in reliance upon Regulation S of the Securities Act of 1933, as amended and Regulation S.


On August 16, 2011 the Company issued a total of 200,000 shares of common stock to one director for cash in the amount of $0.05 per share for a total of $10,000. The offer and sale of the foregoing securities was made solely to “accredited investors” and in reliance upon Regulation S of the Securities Act of 1933, as amended and Regulation S.


On September 6, 2011, the Company issued to one investor 125,000 Units (each unit being comprised of one share of the Company’s common stock and a warrant exercisable over a three year period for 125,000 shares of common stock at an exercise price of $1.25 per




12




share).  The Units were sold at a price of $.20 per Unit for an aggregate of $25,000.  The offer and sale of the foregoing securities was made solely to “accredited investors” and in reliance upon Regulation S of the Securities Act of 1933, as amended and Regulation S.


On October 27, 2011, the Company issued to one investor 250,000 Units (each unit being comprised of one share of the Company’s common stock and a warrant exercisable over a three year period for 250,000 shares of common stock at an exercise price of $1.25 per share).  The Units were sold at a price of $.20 per Unit for an aggregate of $50,000.  The offer and sale of the foregoing securities was made solely to “accredited investors” and in reliance upon Regulation S of the Securities Act of 1933, as amended and Regulation S.


On November 23, 2011, a stockholder and former officer of the Company forgave $152,768 of their advances to the Company and contributed the same amount to capital.


On December 1, 2011, the Company issued to one investor 250,000 Units (each unit being comprised of one share of the Company’s common stock and a warrant exercisable over a three year period for 250,000 shares of common stock at an exercise price of $1.25 per share).  The Units were sold at a price of $.20 per Unit for an aggregate of $50,000.  The offer and sale of the foregoing securities was made solely to “accredited investors” and in reliance upon Regulation S of the Securities Act of 1933, as amended and Regulation S.


On February 14, 2012, the Company issued to one investor 300,000 Units (each unit being comprised of one share of the Company’s common stock and a warrant exercisable over a three year period for 300,000 shares of common stock at an exercise price of $1.25 per share).  The Units were sold at a price of $.20 per Unit for an aggregate of $60,000.  The offer and sale of the foregoing securities was made solely to “accredited investors” and in reliance upon Regulation S of the Securities Act of 1933, as amended and Regulation S.


On March 9, 2012, the Company issued to one investor 2,500,000 Units (each unit being comprised of one share of the Company’s common stock and a warrant exercisable over a three year period for 2,500,000 shares of common stock at an exercise price of $1.25 per share).  The Units were sold at a price of $.10 per Unit for an aggregate of $250,000.  The offer and sale of the foregoing securities was made solely to “accredited investors” and in reliance upon Regulation S of the Securities Act of 1933, as amended and Regulation S.


ITEM 6.  SELECTED FINANCIAL DATA


Not applicable because the 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, 2010, found in this 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 report.


Company Overview


The Company was incorporated under the laws of the State of Delaware in December 2006 under the name “Cold Gin Corporation.”  On December 27, 2010, we entered into an Agreement and Plan of Reorganization with Bonanza Gold Corp., a wholly-owned subsidiary of the Company, pursuant to which we merged with and into Bonanza Gold Corp, with Bonanza Gold Corp. being the surviving corporation. In connection with the reincorporation merger we changed our domicile from Delaware to Nevada, our name to Bonanza Gold Corp. and each outstanding share of our common stock was exchanged for one hundred fifty shares of the common stock of the Nevada entity.  Thereafter, our trading market experienced some unusual activity.  In an effort to stabilize the market, we effectuated a 150:1 reverse stock split on March 4, 2011.


We were initially established to become a developer of Internet media content for mixed martial arts fans and consumers.  We have not derived any revenue from the martial arts business.  Due to a change of control that occurred in August 2010, we abandoned the martial arts business.  Accordingly, results from operations related to the martial arts business have been reclassified from current operations to that of discontinued operations.  Effective December 10, 2010, we transitioned our business focus to that of a developer of Internet media for martial arts to a company engaged in the exploration and mining of minerals.


The Company’s management has experience in the field of mineral exploration and intends to continue to invest resources into our exploration and drilling program, and intends to extend the campaign over the next several years. Depending upon our ability to obtain




13




sufficient funding, we may also acquire additional properties for exploration. In addition, assuming sufficient funding, we plan to engage an internationally recognized mining and geological consultancy firm to assist us in our drilling efforts.


We believe that an expanded exploration and drilling program is currently our best option for increasing the value of our Company. However, we have no revenues, our stock has no trading volume, and we believe our stock price does not reflect the true value of our Company. These factors limit our ability to obtain financing. Therefore, in an effort to generate revenue to commence continue our operations we have acquired two properties, one located in Arizona and the other in Mexico. While, due to the lack of capital, we have not commenced such exploitation program at this time, we have the legal and functional capability to do so, including the required exploitation permits.


Recent Developments


On April 29, 2011, we executed a property purchase agreement for the acquisition of certain assets from Independent Resources, Inc. pursuant to which we acquired an undivided interest in six (6) claims representing 1002.16 ha that has been staked and recorded as MTO Cell Claims.  The property is located east of Harrison Lake and northwest of Hope in southwestern British Columbia.  We acquired the assets for Ten Thousand Dollars ($10,000), which was funded by a loan from our former Chief Executive Officer.


On May19, 2011, we executed a termination agreement pursuant to which we terminated our payment obligations under two asset purchase agreements for properties in Arizona and Mexico and assigned the properties back to the seller.


On June 30, 2011, we executed a property purchase agreement for the acquisition of certain property from United Copper Holdings Ltd pursuant to which we acquired a 75% interest in 28 lode claims and approximately 560 acres located in Okanogan County, State of Washington. We acquired the property from the seller for two hundred thousand shares of common stock, of which one hundred thousand were issued upon execution of the agreement, fifty thousand are to be issued six months thereafter and fifty thousand shares are to be issued twelve months thereafter. In addition, the seller retained a 5% Net Smelter Returns Royalty on the gross mineral production. We also agreed to provide a work commitment in the amount of One Million Dollars ($1,000,000) to be paid over a two year period commencing on the closing of the acquisition and we will earn an additional twenty five percent interest in the property after Five Hundred Thousand Dollars ($500,000) of the work commitment is expended.  We also agreed to enter into a consulting agreement for a one year term with an option to renew for an additional one year for the seller to act as a consulting prospector, engineer or financial consultant to us.  The amounts paid to the seller as consulting fees will be applied against the work commitment.  We are also obligated to enter into a joint venture agreement with the seller after we earn the additional 25% interest.


On February 28, 2012 we executed a property purchase agreement with Century Copper LLC for the acquisition of the property known as the Kelvin Project, consisting of one (1) patented mining claim (the “Zellweger Patented Claim”) and twenty-six (26) lode mining claims (the “Kelvin Prospect Claims”) in Sections 8, 9 and 17, Township 4 South, Range 13 East, G.&S.R.B.&M., Pinal County, Arizona.  The purchase price for the assets was Two Million Dollars ($2,000,000), which will be payable as follows: (i) Fifty Thousand Dollars ($50,000) for the Zellweger Patented Claim, of which (x) Ten Thousand Dollars ($10,000) was previously paid upon execution of a letter of intent between the parties; and (y) Forty Thousand Dollars ($40,000) was payable upon execution of the agreement; and (ii) One Million Nine Hundred Fifty Thousand Dollars ($1,950,000), of which (x) One Hundred Fifty Thousand Dollars ($150,000) was payable on or before February 28, 2012; (ii) Two Hundred Thousand Dollars ($200,000) is to be paid annually thereafter commencing on February 28, 2013 until the total amount is paid or the agreement is mutually terminated.   In addition, we agreed to issue to the seller One Million (1,000,000) of our post-split shares of common stock, of which (i) Two Hundred Fifty Thousand (250,000) shares shall be issuable within four (4) months of the closing of the transactions pursuant to the agreement; (ii) Two Hundred Fifty Thousand (250,000) shares shall be issuable within eight (8) months of the closing of the transactions pursuant to the agreement; (iii) Two Hundred Fifty Thousand (250,000) shares shall be issuable within twelve (12) months of the closing of the transactions pursuant to the agreement; and (iv) Two Hundred Fifty Thousand (250,000) shares shall be issuable within eighteen (18) months of the closing of the transactions pursuant to the agreement.


Pursuant to the terms of the agreement, the seller will retain (i) a five percent (5%) Net Smelter Returns Royalty (“NSR”) on the Kelvin Prospect Claims and any additional lode claims located adjacent to the existing twenty-six (26) claims; and (ii) a two percent (2%) NSR on the gross mineral production from the Zellweger Patented Claim.  In addition, we agreed to provide a work commitment for the property of One Million Dollars ($1,000,000) over five (5) years and will grant the seller an additional One Million (1,000,000) shares of post-split common stock upon discovery of a twenty-five million (25,000,000) ton copper deposit on said property.  


The agreement further provides that in the event we fail to pay any installments when due under the agreement, and such breach is not timely cured after receipt of notice thereof by the seller, then we shall forfeit all rights to the assets, including a forfeiture of payments made under the agreement up to the date of forfeiture, with all such payments being retained by the seller as liquidated damages.  The seller shall has the right to terminate the agreement if we default in any other requirements under the agreement and have not taken




14




reasonable steps to cure such default within sixty (60) days of receipt of notice thereof from the seller.  We have the right to terminate the agreement at any time upon prior written notice to the seller.  In the event of termination of the agreement by either party, (i) we are required to deliver to the seller within one hundred twenty (120) days, copies of all reports, maps, drill logs, assay results and any other relevant technical data compiled by us with respect to the property; (ii) remove from the property, within twelve (12) months, all facilities erected, installed or brought upon the property by us, and any facilities remaining after the expiration of such period will automatically become the property of the seller; and (iii) all payments theretofore paid by us to the seller shall be retained by the seller in consideration for entering into the agreement and for the rights conferred on us thereby.


Critical Accounting Policies


Management believes that the critical accounting policies and estimates discussed below involve the most complex management judgments due to the sensitivity of the methods and assumptions necessary in determining the related asset, liability, revenue and expense amounts. Specific risks associated with these critical accounting policies are discussed throughout this MD&A, where such policies have a material effect on reported and expected financial results. For a detailed discussion of the application of these and other accounting policies, refer to the individual Notes to the Financial Statements for the year ended December 31, 2011.


Revenue Recognition


The Company recognizes revenues when products are shipped or services are delivered to customers, pricing is fixed or determinable, and collection is reasonably assured. Net revenues include product sales net of returns and allowances.


Use of Estimates


The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Estimates are based on historical experience, management expectations for future performance, and other assumptions as appropriate. Key areas affected by estimates include the assessment of the recoverability of long-lived assets, which is based on such factors as estimated future cash flows.  We re-evaluate estimates on an ongoing basis; therefore, actual results may vary from those estimates.


Fair Values of Financial Instruments


The carrying values of cash, accounts receivable, accounts payable and accrued expenses approximate the fair values of these instruments due to their short-term nature. The carrying amount for borrowings under the financing agreement approximates fair value because of the variable market interest rates charged for these borrowings. We adopted SFAS No. 157, Fair Value Measurements (ASC 820-10) , for financial assets and financial liabilities in the first quarter of fiscal 2009, which did not have an impact on our financial statements.


In accordance with FASB Staff Position (“FSP FAS”) 157-2, Effective Date of FASB Statement No. 157 , we deferred application of SFAS No. 157 until January 1, 2010, the beginning of our fiscal year, in relation to nonrecurring nonfinancial assets and nonfinancial liabilities including goodwill impairment testing, asset retirement obligations, long-lived asset impairments and exit and disposal activities. As of December 31, 2010 the application of SFAS 157 had no impact on our financial statements.


Concentration of Credit Risk


Financial instruments, which potentially subject us to concentrations of credit risk, consist of cash and cash equivalents and accounts receivable. We place our cash with high quality financial institutions and at times may exceed the FDIC insurance limit. We extend credit based on an evaluation of the customer’s financial condition, generally without collateral. Exposure to losses on receivables is principally dependent on each customer’s financial condition. We monitor our exposure for credit losses and maintain allowances for anticipated losses, as required.


Recently Issued Accounting Standards


For a discussion of the adoption and potential impacts of recently issued accounting standards, refer to the “Recently Issued Accounting Standards” section of Note 1, “Summary of Significant Accounting Policies,” in the Notes to Financial Statements.


Plan of Operations


We are developing a gold and metals exploration company.  Craig Russell, our Chief Executive Officer, President, Chief Financial Officer, Secretary and Treasurer, has experience in the precious metals industry.  The Company plans to leverage his vast knowledge




15




of the industry to acquire properties for exploration.  We recently acquired two properties for our mineral exploration activity and intend to commence exploration activities, upon receipt of additional financing.


Off Balance Sheet Arrangements


There are no off balance sheet arrangements.


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


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 income (loss) were $784,177 and ($1,103,671), respectively. The net losses were attributable to operating expenses.   The operating expenses for the year ended December 31, 2011 were primarily expenses incurred for the acquisition of our two mineral exploration properties, including legal fees, management and consulting fees,, and general audit and bookkeeping fees.


Liquidity and Capital Resources


At December 31, 2011 we had cash or cash equivalents of $14,366 and had a working capital deficit of ($11,519).  We had an outstanding loan to our former Chief Executive Officer that was forgiven in November 2011which was unsecured, non-interest bearing and had no fixed term of repayment.   We are obligated to finance a work commitment in the amount of One Million Dollars over a two year period that commenced June 2011; however we currently do not have the funds to finance such a commitment.  In order to finance the work commitment we will need to raise additional funds.


We have incurred negative cash flow from operations since we started our business. We have spent, and expect to continue to spend, substantial amounts in connection with implementing our business strategy, including our planned exploration activities. Net cash used in operating activities for the year ended December 31, 2011 consisted primarily of our net loss and to a lesser extent, an increase in accounts payable. Based on our current plans, we believe that our cash will not be sufficient to enable us to meet our planned operating needs in the next 12 months.


In 2011, our primary sources of cash were from the sale of common stock pursuant to which we raised $165,000.  During 2010 our primary source of cash was advances from our then Chief Executive Officer ($101,143) and affiliates ($90).  Our cash used in investing activities was for the acquisition of mineral properties.


Until we raise additional funds, we will be unable to commence drilling activities.  However, the actual amount of funds we will need to operate is subject to many factors, some of which are beyond our control. We have based our estimate on assumptions that may prove to be wrong. We may need to obtain additional funds sooner or in greater amounts than we currently anticipate. Potential sources of financing include strategic relationships, public or private sales of our shares or debt and other sources. We may seek to access the public or private equity markets when conditions are favorable due to our long-term capital requirements. We do not have any committed sources of financing at this time, and it is uncertain whether additional funding will be available when we need it on terms that will be acceptable to us, or at all. If we raise funds by selling additional shares of common stock or other securities convertible into common stock, the ownership interest of our existing stockholders will be diluted. If we are not able to obtain financing when needed, we may be unable to carry out our business plan. As a result, we may have to significantly limit our operations and our business, financial condition and results of operations would be materially harmed.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


Not applicable because the Company is a smaller reporting company.

 


16






ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA




BONANZA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)


TABLE OF CONTENTS


DECEMBER 31, 2011



Report of Independent Registered Public Accounting Firm

F-2


Balance Sheets as of December 31, 2011 and 2010

F-3


Statements of Operations for the Years Ended

December 31, 2011 and 2010 and for the Period from

August 7, 2006 (inception) to December 31, 2011

F-4


Statement of Stockholders’ Equity (Deficit) as of

December 31, 2011

F-5


Statements of Cash Flows for the Years Ended

December 31, 2011 and 2010 and for the Period from

August 7, 2006 (inception) to December 31, 2011

F-6


Notes to Financial Statements

F-7 – F-16




F-1






Silberstein Ungar, PLLC CPAs and Business Advisors                                                         

Phone (248) 203-0080

Fax (248) 281-0940

30600 Telegraph Road, Suite 2175

Bingham Farms, MI 48025-4586

www.sucpas.com


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Boards of Directors

Bonanza Gold Corp.


We have audited the accompanying balance sheets of Bonanza Gold Corp. as of December 31, 2011 and 2010, and the related statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended and the period from August 7, 2006 (inception) to December 31, 2011.  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 has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.


In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bonanza Gold Corp., as of December 31, 2011 and 2010 and the results of its operations and cash flows for the years then ended and for the period from August 7, 2006 (inception) to December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.


The accompanying financial statements have been prepared assuming that Bonanza Gold Corp. will continue as a going concern.  As discussed in Note 12 to the financial statements, the Company has incurred losses from operations, has a working capital deficit, and is in need of additional capital to grow its operations so that it can become profitable.  These factors raise substantial doubt about the Company’s ability to continue as a going concern.  Management’s plans with regard to these matters are described in Note 12. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.


/s/ Silberstein Ungar, PLLC

Silberstein Ungar, PLLC


Bingham Farms, Michigan

April 5, 2012



F-2







BONANZA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

BALANCE SHEETS

AT DECEMBER 31, 2011 AND 2010

 

 

 

 

 

 

 

December 31,

 

December 31,

 

 

2011

 

2010

ASSETS

 

 

 

 

Current Assets

 

 

 

 

Cash and cash equivalents

$

14,367 

$

 

 

 

 

 

Mineral Properties, net

 

18,000 

 

 

 

 

 

 

Other Assets

 

 

 

 

Deposits

 

10,000 

 

 

 

 

 

 

Total Assets

$

42,367 

$

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

Liabilities

 

 

 

 

Current Liabilities

 

 

 

 

Accounts Payable

 

25,886 

$

7,509 

Advances from directors

 

 

95,945 

Note Payable - current portion

 

 

800,000 

Total Current Liabilities

 

25,886 

 

903,454 

 

 

 

 

 

Long-Term Liabilities

 

 

 

 

Note Payable

 

 

200,000 

Total Long-term Liabilities

 

 

200,000 

 

 

 

 

 

Total Liabilities

 

25,886 

 

1,103,454 

 

 

 

 

 

Stockholders' Equity (Deficit)

 

 

 

 

Common stock, par $0.001, 250,000,000 shares authorized,

2,373,005 and 1,258,000 shares issued and outstanding, respectively

2,373 

 

188,700 

Additional paid in capital

 

406,465 

 

(115,620)

Deficit accumulated during the exploration stage

 

(392,357)

 

(1,176,534)

Total Stockholders' Equity (Deficit)

 

16,481 

 

(1,103,454)

 

 

 

 

 

Total Liabilities and Stockholders' Equity (Deficit)

$

42,367 

$

 

 

 

 

 

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




F-3







BONANZA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

PERIOD FROM AUGUST 7, 2006 (INCEPTION) TO DECEMBER 31, 2011

 

 

 

 

 

 

 

 

 

 Year ended December 31, 2011

 

 Year ended December 31, 2010

 

Period from August 7, 2006 (Inception) to December 31, 2011

 

 

 

 

 

 

 

REVENUE

$

 

$

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

Selling, general and administrative

 

215,741 

 

1,103,567 

 

1,391,778 

 

 

 

 

 

 

 

LOSS FROM OPERATIONS

 

(215,741)

 

(1,103,567)

 

(1,391,778)

 

 

 

 

 

 

 

OTHER INCOME (EXPENSES)

 

999,918 

 

(104)

 

999,421 

 

 

 

 

 

 

 

INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES

 

784,177 

 

(1,103,671)

 

(392,357)

 

 

 

 

 

 

 

PROVISION FOR INCOME TAXES

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

$

784,177 

$

(1,103,671)

$

(392,357)

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC

 

1,553,121 

 

1,306,236 

 

 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: DILUTED

 

1,736,712 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) PER SHARE: BASIC

$

0.50 

$

(0.84)

 

 

NET INCOME (LOSS) PER SHARE: DILUTED

$

0.45 

 

 

 

 

 

 

 

 

 

 

 

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




F-4







BONANZA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

PERIOD FROM AUGUST 7, 2006 (INCEPTION) TO DECEMBER 31, 2011

 

 

 

 

 

 

 

 Common Stock

 Additional Paid in

 (Deficit) Accumulated During Exploration   

 Stockholders’ Equity  

 

 Shares

 Amount

 Capital

 Stage

 (Deficit)

Beginning balance, August 7, 2006

$

$

$

$

Common stock issued

850,000 

850 

1,000 

1,850 

Net loss for the period ended December 31, 2006

(1,750)

(1,750)

Balance, December 31, 2006

850,000 

850 

1,000 

(1,750)

100 

 

 

 

 

 

 

Net loss for the year ended December 31, 2007

(2,382)

(2,382)

Balance, December 31, 2007

850,000 

850 

1,000 

(2,282)

 

 

 

 

 

 

Shares Issued for cash

500,000 

500 

49,500 

50,000 

Shares issued for services

10,000 

10 

990 

1,000 

Net loss for the year ended December 31, 2008

(44,375)

(44,375)

Balance, December 31, 2008

1,360,000 

1,360 

51,490 

(47,564)

4,343 

 

 

 

 

 

 

Net loss for the year ended December 31, 2009

(24,356)

(24,356)

Balance, December 31, 2009

1,360,000 

1,360 

51,490 

(72,863)

(20,013)

 

 

 

 

 

 

Conversion of debt to contributed capital

18,560 

18,560 

Cancellation of shares

(112,000)

(112)

112 

Shares issued for mineral property acquisition

5,000 

830 

835 

Shares issued for mineral property acquisition

5,000 

830 

835 

Stock split 1 to 150

187,442 

(187,442)

Net loss for the year ended December 31, 2010

 

 

 

(1,103,671)

(1,103,671)

Balance, December 31, 2010

1,258,000 

188,700 

(115,620)

(1,176,534)

(1,103,454)

 

 

 

 

 

 

Reverse stock split 1:150

(187,442)

187,442 

Shares issued for rounding

Cancellation of shares issued for mineral property acquisition

(10,000)

(10)

(10)

Shares issued for mineral property acquisition

100,000 

100 

7,900 

8,000 

Equity units inclusive one common share and one warrant issued for cash on July 8, 2011 at $0.20 per unit

150,000 

150 

29,850 

30,000 

Common stock issued for cash on August 16, 2011 at $0.05 per unit

200,000 

200 

9,800 

10,000 

Equity units inclusive one common share and one warrant issued for cash on September 6, 2011 at $0.20 per unit

125,000 

125 

24,875 

25,000 

Equity units inclusive one common share and one warrant issued for cash on October 27, 2011 at $0.20 per unit

250,000 

250 

49,750 

50,000 

Forgiveness of debt by former director

152,768 

152,768 

Equity units inclusive one common share and one warrant issued for cash on December 1, 2011 at $0.20 per unit

250,000 

250 

49,750 

50,000 

Shares issued for mineral property acquisition

50,000 

50 

9,950 

10,000 

Net income for the year ended December 31, 2011

784,177 

784,177 

Balance, December 31, 2011

2,373,005 

$

2,373 

$

406,465 

$

(392,357)

$

16,481 

 

 

 

 

 

 

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




F-5




 

BONANZA GOLD CORP.

 

(AN EXPLORATION STAGE COMPANY)

 

STATEMENTS OF CASH FLOWS

 

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

 

PERIOD FROM AUGUST 7, 2006 (INCEPTION) TO DECEMBER 31, 2011

 

 

 

 

 Year ended December 31, 2011

 

 Year ended December 31, 2010

 

Period from August 7, 2006 (Inception) to December 31, 2011

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net income (loss) for the period

$

784,177 

$

(1,103,671)

$

(392,357)

 

Adjustments to Reconcile Net Income (Loss) to Net Cash Used in Operating Activities

 

 

 

 

 

 

Common stock issued for services

 

 

 

1,000 

 

Impairment of mineral properties

 

10,000 

 

1,001,670 

 

1,011,670 

 

Gain on disposal of mineral properties

 

(1,000,010)

 

 

(1,000,010)

 

Changes in Assets and Liabilities

 

 

 

 

 

 

 

Increase (decrease) in accounts payable

 

18,377 

 

659 

 

25,886 

 

Increase (decrease) in accrued interest

 

 

104 

 

497 

 

Net Cash Used in Operating Activities

 

(187,456)

 

(101,238)

 

(353,314)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

Investment in mineral properties

 

(20,000)

 

 

(20,000)

 

Net Cash Used in Investing Activities

 

(20,000)

 

 

(20,000)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Advances from directors

 

56,823 

 

101,143 

 

170,811 

 

Proceeds from notes payable - affiliate

 

 

90 

 

200 

 

Payments on notes payable

 

 

 

(180)

 

Proceeds from sale of common stock

 

165,000 

 

 

216,850 

 

Proceeds from loan from director

 

 

 

 

Net Cash Provided by Financing Activities

 

221,823 

 

101,233 

 

387,681 

 

 

 

 

 

 

 

 

 

Net Decrease in Cash and Cash Equivalents

 

14,367 

 

(5)

 

14,367 

 

Cash and Cash Equivalents - Beginning

 

 

 

 

Cash and Cash Equivalents - End

$

14,367 

$

$

14,367 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

 

 

Cash paid for interest

$

92 

$

$

92 

 

Cash paid for income taxes

$

$

$

 

SUPPLEMENTAL NON-CASH INVESTING AND FINANCING INFORMATION:

 

 

 

 

 

 

 

Common stock issued for acquisition of mineral properties

$

28,000 

$

1,670 

$

29,670 

 

Note payable issued for acquisition of mineral properties

$

$

1,000,000 

$

1,000,000 

 

Forgiveness of debt and accrued interest by former directors recorded as

contributed capital

$

152,768 

$

18,560 

$

171,328 

 

Cancellation of note payable in connection with disposal of mineral properties

$

(1,000,000)

$

$

(1,000,000)

 

 

 

 

 

 

 

 

 

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

 



F-6






BONANZA GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2011

 

 

NOTE 1 – ORGANIZATION AND BUSINESS


Bonanza Gold Corp. (“we” the “Company” or the “Registrant”) was incorporated under the laws of the State of Delaware in December 2006 under the name “Cold Gin Corporation.”  Effective December 10, 2010, we transitioned our business focus from that of a developer of Internet media for martial arts to a company engaged in the exploration and mining of minerals. On December 27, 2010, we entered into an Agreement and Plan of Reorganization with Bonanza Gold Corp., a wholly-owned subsidiary of the Company, pursuant to which we merged with and into Bonanza Gold Corp, with Bonanza Gold Corp. being the surviving corporation.


The Company is currently in the exploration stage. All activities of the Company to date relate to its organization, initial funding and share issuances.


 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Exploration Stage Company

The accompanying financial statements have been prepared in accordance with generally accepted accounting principles related to exploration stage companies. An exploration-stage company is one in which planned principal operations have not commenced or if its operations have commenced, there has been no significant revenues there from.


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.


Cash and Cash Equivalents

The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents. The Company had $14,367 and $0 cash as of December 31, 2011 and 2010, respectively.


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.


Use of Estimates

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


Revenue Recognition

The Company will recognize revenue when products are fully delivered or services have been provided and collection is reasonably assured.


Stock-Based Compensation

Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718. To date, the Company has not adopted a stock option plan and has not granted any stock options.




F-7






BONANZA GOLD CORP.

 (AN EXPLORATION STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2011


 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


Mineral properties

The Company follows Section 930 of the FASB Accounting Standards Codification for its mineral properties.  Mineral properties and related mineral rights acquisition costs are capitalized pending determination of whether the drilling has found proved reserves.  If a mineral ore body is discovered, capitalized costs will be amortized on a unit-of-production basis following the commencement of production.  Otherwise, capitalized acquisition costs are expensed when it is determined that the mineral property has no future economic value.  General exploration costs and costs to maintain rights and leases, including rights of access to lands for geophysical work and salaries, equipment, and supplies for geologists and geophysical crews are expensed as incurred.  When it is determined that a mining deposit can be economically and legally extracted or produced based on established proven and probable reserves, further exploration costs and development costs as well as interest costs relating to exploration and development projects that require greater than six (6) months to be readied for their intended use incurred after such determination will be capitalized.  The establishment of proven and probable reserves is based on results of final feasibility studies which indicate whether a property is economically feasible.  Upon commencement of commercial production, capitalized costs will be transferred to the appropriate asset categories and amortized on a unit-of-production basis.  Capitalized costs, net of salvage values, relating to a deposit which is abandoned or considered uneconomic for the foreseeable future will be written off.  The sale of a partial interest in a proved property is accounted for as a cost recovery and no gain or loss is recognized as long as this treatment does not significantly affect the unit-of-production amortization rate.  A gain or loss will be recognized for all other sales of proved properties and will be classified in other operating revenues.  Maintenance and repairs are charged to expense, and renewals and betterments are capitalized to the appropriate property and equipment accounts.


The provision for depreciation, depletion and amortization (“DD&A”) of mineral properties is calculated on a property-by-property basis using the unit-of-production method.  Taken into consideration in the calculation of DD&A are estimated future dismantlement, restoration and abandonment costs, which are net of estimated salvage values.  Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts.


To date, the Company has not established the commercial feasibility of any exploration prospects; therefore, all general exploration costs, if any, are being expensed.


Foreign Currency

The operations of the Company are located in United States. The Company maintains both U.S. Dollar and British Pound Sterling accounts. The functional currency is the United States Dollar. Transactions in foreign currencies other than the functional currency, if any, are re-measured into the functional currency at the rate in effect at the time of the transaction. Re-measurement gains and losses that arise from exchange rate fluctuations are included in income or loss from operations. Monetary assets and liabilities denominated in the functional currency are translated into U.S. Dollars at the rate in effect at the balance sheet date. Revenue and expenses denominated in the functional currency are translated at the spot exchange rate. Other comprehensive income includes the foreign exchange gains and losses that arise from translating from the functional currency into U.S. Dollars.


Comprehensive Income

The Company has established standards for reporting and display of comprehensive income, its components and accumulated balances. When applicable, the Company would disclose this information on its Statement of Stockholders’ Equity. Comprehensive income comprises equity except those resulting from investments by owners and distributions to owners. The Company has not had any significant transactions that are required to be reported in comprehensive income.



F-8






BONANZA GOLD CORP.

 (AN EXPLORATION STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2011


 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


Basic Income (Loss) Per Share

Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are no such common stock equivalents outstanding as of December 31, 2011.


Recent Accounting Pronouncements

Bonanza does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.


 

NOTE 3 – EMPLOYMENT AGREEMENTS


On June 24, 2011 the Company appointed Mr. Craig Russell to its board of directors.  There was no arrangement or understanding between Mr. Russell and any person pursuant to which he was selected as a director. The agreement requires monthly compensation of $6,500. Total compensation paid on this employment agreement was $45,500 for the year ended December 31, 2011


On October 11, 2011, the Company received written notice of the resignation of Lynn Harrison as President and Chief Executive Officer of the Company, effective as of October 11, 2011.  On October 11, 2011, the Board of Directors appointed Craig Russell to be President and Chief Executive Officer of the Company to fill the outstanding vacancies.  Mr. Russell was not selected as President and Chief Executive Officer pursuant to any arrangement or understanding with any other person, and does not have any reportable transactions under Item 404(a) of Regulation S-K.


 

NOTE 4 – DEPOSITS


On October 31, 2011, the Company signed a letter of intent to purchase the Kelvin Deposit property. The letter of intent required a $10,000 non-refundable deposit.  The deposit will be applied to the acquisition costs once a binding definitive agreement has been signed.


 

NOTE 5 – MINERAL PROPERTIES


On December 10, 2010, the Company acquired mineral properties that consisted of an undivided 100% interest in 2 patented claims, 6 federal claims and 25 prospects comprising 660 acres near Kingman, Arizona in exchange for 5,000 shares on a pre-split basis of the Company’s common stock and a promissory note in the amount of $1,000,000.


Also on December 10, 2010, the Company acquired mineral properties that consisted of a seventy-five percent (75%) interest in and to the three (3) mining concessions in the project area known as “Monte de El Favor”, these are El Favor, Exploitation title No. 165974 and Guadalupe, Exploitation title No. 183638 and Buenaventura Exploitation title issued No. 218973, which approximate 217.49 hectares in total located in the Municipality of Hostotipaquillo, State of Jalisco, Mexico in exchange for 5,000 shares on a pre-split basis of the Company’s common stock.



F-9






BONANZA GOLD CORP.

 (AN EXPLORATION STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2011


 

NOTE 5 – MINERAL PROPERTIES (CONTINUED)


On May 19, 2011, the Company executed a termination agreement with Precious Metals Exploration, Ltd. (“Precious Metals”), pursuant to which the parties terminated all payment obligations under the two asset purchase agreements, dated December 10, 2010, pursuant to which the Company had acquired (i) an undivided interest in 2 patented claims, 6 federal claims and 25 prospects comprising 660 acres near Kingman, Arizona (the “Arizona Assets”) and (ii) a 75% interest in and to three mining concessions in the project area known as “Monte de El Favor” in Jalisco, Mexico (the “Mexican Assets”).  The Company and Precious Metals also executed an assignment agreement, dated May 19, 2011, pursuant to which the Company assigned the Arizona Assets and the Mexican Assets to Precious Metals.


As the mineral properties had been fully impaired at December 31, 2010, the termination of these agreements resulted in a gain on the disposal of the mineral properties of $1,000,010 which is recorded in other income.


On April 29, 2011, the Company executed an asset purchase agreement for the acquisition of certain assets from Independent Resources, Inc. (the “Seller”) pursuant to which the Company acquired  an undivided  interest in six (6) mineral claims representing 1002.16 ha that has been staked and recorded as MTO Cell Claims (the “Assets”).  The property is located east of Harrison Lake and northwest of Hope in southwestern British Columbia. The Company acquired the Assets from the Seller for Ten Thousand Dollars (US$10,000.00), which was funded by a loan from the Chief Executive Officer to the Company at that time. The Company tested this property for impairment and determined that the value was $0 and accordingly recorded an impairment charge of $10,000 at December 31, 2011.

 

On June 30, 2011, the Company executed a Property Purchase Agreement (the “Agreement”) for the acquisition of certain property from United Copper Holdings Ltd. (the “Seller”) pursuant to which the Company acquired a 75% interest in 28 lode claims and approximately 560 acres.  The property is located in Okanogan County, State of Washington (the “Assets”). The Company acquired the Assets from the Seller in exchange for 200,000 shares of its common stock (the Shares”), which will be issued to the Seller as follows: (i) 100,000 Shares, valued at $8,000 were issued upon the closing of the Agreement; (ii) 50,000 Shares, issued on December 31, 2011, valued at $10,000; and (iii) 50,000 Shares are to be issued within 12 months of the closing of the Agreement.  In addition, the Seller will retain a 5% Net Smelter Returns Royalty on the gross mineral production.


Pursuant to the terms of the Agreement, the Company agreed to provide a work commitment (the “Work Commitment”) for the Assets of $1,000,000 over a 2-year period and the Company will be entitled to earn a further 25% interest in the Assets after $500,000 of the Work Commitment is expended.   The Company also agreed to grant to the Seller an additional 200,000 Shares upon discovery of a 25 million ton copper deposit within the Work Commitment period.


The parties further agreed to enter into a consulting agreement for a one-year term with an option to renew for an additional one year pursuant to which the Seller will act as a consulting prospector, engineer or financial consultant to the Company and will be solely responsible to lead activities related to the Assets.  The amounts to be paid to the Seller as consulting fees will be applied against the Work Commitment.   The Agreement also provides that the parties will enter into a joint venture agreement after the Company earns the additional 25% interest.



F-10






BONANZA GOLD CORP.

 (AN EXPLORATION STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2011


 

NOTE 5 – MINERAL PROPERTIES (CONTINUED)


We believe that an expanded exploration and drilling program is currently our best option for increasing the value of our Company. However, we have no revenues, our stock has no trading volume, and we believe our stock price does not reflect the true value of our Company. These factors limit our ability to obtain financing. Therefore, in an effort to generate revenue to continue our operations we have acquired a property located in Okanogan County, State of Washington. While, due to the lack of capital, we have not commenced such exploitation program at this time, we have the legal and functional capability to do so, including the required exploitation permits.


At December 31, 2011, we had not yet obtained sufficient funding to commence exploration on these properties, we had not yet received any revenues, and we had a working capital deficit. Our auditors had determined there was sufficient doubt about our ability to operate as a going concern.


 

NOTE 6 – ADVANCES FROM DIRECTOR


A shareholder and former officer had provided loans to the Company to fund operations.  The loans were unsecured, non-interest bearing and due on demand.


On November 23, 2011, the shareholder and former officer of the Company forgave $152,768 of their advances to the Company which was recorded as contributed capital in accordance with ASC 470-10.


 

NOTE 7 – CAPITAL STOCK


The total number of shares of capital stock which the Company shall have authority to issue is 250,000,000 common shares with a par value of $.001. As part of the change in control, the Company cancelled 112,000 shares on July 8, 2010. Additionally as part of the change in control the former shareholder agreed to forgive debts outstanding to them totaling $18,560 which have been recorded as contributed capital.


The Company agreed to issue 5,000 and 5,000 shares on a pre-split basis of common stock in connection with the two mineral property acquisitions discussed in Note 3. The shares were valued at $0.167 per share. The Company also agreed to make various payments under note obligations incurred in connection with the property acquisition, none of which were paid. Further to the execution of the termination agreement dated May 19, 2011 the above note payable is no longer due. In addition the agreed 5,000 and 5,000 shares on a pre-split basis of common stock in connection with the two mineral property acquisitions discussed in Note 3 were cancelled.


On December 27, 2010, we entered into an Agreement and Plan of Reorganization with Bonanza Gold Corp., a wholly-owned subsidiary of the Company, pursuant to which we merged with and into Bonanza Gold Corp, with Bonanza Gold Corp. being the surviving corporation.  In connection with the merger each outstanding share of our common stock was exchanged for one hundred fifty shares of the common stock of the Nevada entity.


On January 5, 2011, the Bonanza enacted a 1 to 150 reverse stock split of the Company’s common stock and increased the authorized shares of common stock to 250,000,000


In March 2011, payment of the first $200,000 of the note payable connected to the mineral property acquisition was due. No payment was made and the note and the related agreement were subsequently terminated.



F-11






BONANZA GOLD CORP.

 (AN EXPLORATION STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2011


 

NOTE 7 – CAPITAL STOCK (CONTINUED)


Also in March 2011, an additional 5,000 post reverse split basis were to be granted in connection with the mineral property acquisition and were subsequently terminated.


On June 30, 2011 the Company agreed to issue 100,000 shares on a post reverse split basis of common stock in connection with the Okanogan County mineral property acquisition discussed in Note 3. The shares were valued at $0.08 per share.


On July 8, 2011, the Company issued to one investor 150,000 Units (each unit being comprised of one share of the Company’s common stock and a warrant exercisable over a three year period for 150,000 shares of common stock at an exercise price of $1.25 per share).  The Units were sold at a price of $.20 per Unit for an aggregate of $30,000. 


On August 16, 2011 the Company issued a total of 200,000 shares of common stock to one director for cash in the amount of $0.05 per share for a total of $10,000.


On September 6, 2011, the Company issued to one investor 125,000 Units (each unit being comprised of one share of the Company’s common stock and a warrant exercisable over a three year period for 125,000 shares of common stock at an exercise price of $1.25 per share).  The Units were sold at a price of $.20 per Unit for an aggregate of $25,000. 


On October 27, 2011, the Company issued to one investor 250,000 Units (each unit being comprised of one share of the Company’s common stock and a warrant exercisable over a three year period for 250,000 shares of common stock at an exercise price of $1.25 per share).  The Units were sold at a price of $.20 per Unit for an aggregate of $50,000. 


On November 23, 2011, a stockholder and former officer of the Company forgave $152,768 of their advances to the Company and contributed the same amount to capital.


On December 1, 2011, the Company issued to one investor 250,000 Units (each unit being comprised of one share of the Company’s common stock and a warrant exercisable over a three year period for 250,000 shares of common stock at an exercise price of $1.25 per share).  The Units were sold at a price of $.20 per Unit for an aggregate of $50,000. 


The Company had 2,373,005 shares of common stock issued and outstanding as of December 31, 2011.


Warrants issued in connection with sale of common shares


Description of warrants


(i) Warrants issued during quarterly period ended September 30, 2011


For the period from July 8, 2011 through September 6, 2011, in connection with the sale of 150,000 and 125,000 shares of its common stock at $0.20 and $0.20 per share respectively or $55,000 in gross proceeds to the investors, the Company issued warrants to purchase 275,000 shares of its common stock exercisable at $1.25 per share earned and exercisable upon issuance expiring three (3) years from the date of issuance.



F-12






BONANZA GOLD CORP.

 (AN EXPLORATION STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2011


 

NOTE 7 – CAPITAL STOCK (CONTINUED)


The fair value of the warrant grant estimated on the date of grant uses the Black-Scholes Option-Pricing Model with the following assumptions:


Expected life (year)

 

3.00

 

 

 

 

 

Expected volatility

 

49.48%

*

 

 

 

 

Risk-free interest rate

 

0.75%

 

 

 

 

 

Dividend yield

 

0.00%

 


* As a thinly traded public entity it is not practicable for the Company to estimate the expected volatility of its share price. The Company selected five (5) comparable public traded goldmine companies to calculate the expected volatility.  The reason for selecting comparable public traded goldmine companies is that the Company plans to engage in goldmine business.  The Company calculated five (5) comparable public traded goldmine companies’ historical volatility over the expect life of the warrants and averaged the five (5) comparable public traded goldmine companies’ historical volatility as its expected volatility.


The Company allocated the gross proceeds of $55,000 between common stock and warrants based on their relative fair value, estimated on the date of grant, valued common stock and the warrant at $23,404 and $31,596, respectively, using the Black-Scholes Option-Pricing Model with the above assumptions.


(ii) Warrants issued during quarterly period ended December 31, 2011


For the period from October 27, 2011 through December 1, 2011, in connection with the sale of 250,000 and 250,000 shares of its common stock at $0.20 and $0.20 per share respectively or $100,000 in gross proceeds to the investors, the Company issued warrants to purchase 500,000 shares of its common stock exercisable at $1.25 per share earned and exercisable upon issuance expiring three (3) years from the date of issuance.


The fair value of the warrant grant estimated on the date of grant uses the Black-Scholes Option-Pricing Model with the following assumptions:


Expected life (year)

 

3.00

 

 

 

 

 

Expected volatility

 

43.21

*

 

 

 

 

Risk-free interest rate

 

0.75%

 

 

 

 

 

Dividend yield

 

0.00%

 


 

* As a thinly traded public entity it is not practicable for the Company to estimate the expected volatility of its share price. The Company selected five (5) comparable publicly traded goldmine companies to calculate the expected volatility.  The reason for selecting comparable public traded goldmine companies is that the Company plans to engage in the goldmine business.  The Company calculated five (5) comparable public traded goldmine companies’ historical volatility over the expect life of the warrants and averaged the five (5) comparable public traded goldmine companies’ historical volatility as its expected volatility.



F-13






BONANZA GOLD CORP.

 (AN EXPLORATION STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2011


 

NOTE 7 – CAPITAL STOCK (CONTINUED)


The Company allocated the gross proceeds of $100,000 between common stock and warrants based on their relative fair value, estimated on the date of grant, valued common stock and the warrant at $81,967 and $18,033, respectively, using the Black-Scholes Option-Pricing Model with the above assumptions.


Exercise of warrants and warrants outstanding


For the year ended December 31, 2011, none of the warrants have been exercised and as of December 31, 2011 warrants to purchase 775,000 shares of Company common stock remain outstanding.


Summary of warrant activities


The table below summarizes the Company’s non-derivative warrant activities through December 31, 2011:


 

Number of warrants

Exercise price per share

Weighted average exercise price

Fair value at grant date

Aggregate intrinsic value

Balance, December 31, 2010

0

-

-

-

-

 

 

 

 

 

 

Granted

775,000

$1.25

$1.25

$49,629

-

 

 

 

 

 

 

Cancelled

-

-

-

-

-

 

 

 

 

 

 

Exercised (Cashless)

-

-

-

-

-

 

 

 

 

 

 

Exercised

-

-

-

-

-

 

 

 

 

 

 

Expired

-

-

-

-

-

 

 

 

 

 

 

Balance, December 31, 2011

775,000

$1.25

$1.25

$19,266

-

 

 

 

 

 

 

Earned and exercisable, December 31, 2011

775,000

$1.25

$1.25

$19,266

-

 

 

 

 

 

 

Unvested, December 31, 2011

-

-

-

-

-

 

 

The following table summarizes information concerning outstanding and exercisable warrants as of December 31, 2011:


 

Warrants Outstanding

Warrants Exercisable

Range of exercise prices

Number outstanding

Average remaining life (in years)

Weighted average exercise price

Number outstanding

Average remaining life (in years)

Weighted average exercise price

 

 

 

 

 

 

 

$1.25

775,000

2.49

$1.25

775,000

2.49

$1.25

 

 

 

 

 

 

 

$1.25

775,000

2.49

$1.25

775,000

2.49

$1.25



F-14






BONANZA GOLD CORP.

 (AN EXPLORATION STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2011


 

NOTE 8 – COMMITMENTS AND CONTINGENCIES


An officer has provided office services without charge. There is no obligation for the officer to continue this arrangement. Such costs are immaterial to the financial statements and accordingly are not reflected herein. The officers and directors are involved in other business activities and most likely will become involved in other business activities in the future.


Pursuant to the terms of the Agreement dated June 30, 2011 to purchase a property located in Okanogan County, State of Washington, the Company agreed to provide a work commitment (the “Work Commitment”) for the Assets of $1,000,000 over a 2-year period and the Company will be entitled to earn a further 25% interest in the Assets after $500,000 of the Work Commitment is expended. The Company also agreed to grant to the Seller an additional 200,000 Shares upon discovery of a 25 million ton copper deposit within the Work Commitment period.


 

NOTE 9 – INCOME TAXES


For the year ended December 31, 2011, 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 $392,000 at December 31, 2011, and will expire beginning in the year 2026.


The provision for Federal income tax consists of the following at December 31, 2011 and 2010:


Federal income tax (expense) benefit attributable to:

2010

2009

Current operations

$  (266,670)     

$     375,250

Less: valuation allowance

266,670

(375,250)

Net provision for Federal income taxes

$                0

$                0

 

 

The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows at December 31, 2011 and 2010:


 

2011

2010

Deferred tax asset attributable to:

 

 

   Net operating loss carryover

$    133,400     

 $   400,070

Valuation allowance

    (133,400)

 (400,070)

Net deferred tax asset

$                0

$              0


 

NOTE 10 – RELATED PARTY TRANSACTIONS


A shareholder and former officer had provided loans to the Company to fund operations.  The loans were unsecured, non-interest bearing and due on demand.


On November 23, 2011, the shareholder and former officer of the Company forgave $152,768 of their advances to the Company which was recorded as contributed capital in accordance with ASC 470-10.


 

NOTE 11 – OTHER INCOME (EXPENSE)


Other income (expense) of $999,918 for the year ended December 31, 2011 consisted of a gain on the disposal of mineral properties of $1,000,010 (see note 5) and interest expense of $92.



F-15






BONANZA GOLD CORP.

 (AN EXPLORATION STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2011


 

NOTE 12 – GOING CONCERN


The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying financial statements, the Company incurred losses of $392,357 since its inception, has not yet produced revenues from operations, and has a working capital deficit. These factors raise substantial doubt about the Company's ability to continue as a going concern.


The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event that the Company cannot continue as a going concern. Management anticipates that it will be able to raise additional working capital through the issuance of stock and through additional loans and advances from investors.


The ability of the Company to continue as a going concern is dependent upon the Company’s ability to attain a satisfactory level of profitability and obtain suitable and adequate financing. There can be no assurance that management's plan will be successful.


 

NOTE 13 – SUBSEQUENT EVENTS


On February 6, 2012, the Company issued to one investor 300,000 Units (each unit being comprised of one share of the Company’s common stock and a warrant exercisable over a three year period for 300,000 shares of common stock at an exercise price of $1.25 per share).  The Units were sold at a price of $.20 per Unit for an aggregate of $60,000.


On February 28, 2012, the Company executed a Property Purchase Agreement (the “Agreement”) for the acquisition of certain property from Century Copper LLC (the “Seller”) pursuant to which the Company acquired a 100% interest in 1 patented mining claim and 26 lode mining claims located in Pinal County, State of Arizona (the “Assets”). The Company acquired the Assets from the Seller in exchange for $2,000,000 and 1,000,000 of its post-split common stock (the Shares”), which will be issued to the Seller as follows: i) 250,000 of its shares are to be issued within 4 months of closing of the definitive agreement, ii) 250,000 of its shares are to be issued within 8 months of the closing of the definitive agreement, iii) 250,000 of its shares are to be issued within 12 months of the closing of the definitive agreement, and iv) 250,000 of its shares are to be issued within 18 months of the closing of the definitive agreement. In addition, the Seller will retain; i) a 5% Net Smelter Returns Royalty on the 26 mining claims included in the property, ii) a 2% Net Smelter Returns Royalty on the gross mineral production patented mining claim.  Furthermore the buyer will provide a work commitment for the property of $1,000,000 over 5 years and the buyer will grant the Seller “earn-in” shares tied to mineral deposit discoveries over the 5 year work commitment period.  The shares will be issued under this feature would require an additional 1,000,000 post-split shares of the public company upon discovery of a 25 million ton copper deposit on said property.


On March 5, 2012, the Company issued to one investor 2,500,000 Units (each unit being comprised of one share of the Company’s common stock and a warrant exercisable over a three year period for 2,500,000 shares of common stock at an exercise price of $1.25 per share).  The Units were sold at a price of $.10 per Unit for an aggregate of $250,000.


In accordance with ASC 855-10, the Company has analyzed its operations subsequent to December 31, 2011 to the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements other than the items discussed above.



F-16






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


None.


ITEM 9A. CONTROLS AND PROCEDURES


Disclosure Controls and Procedures


The Company has adopted and maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports filed under the Exchange Act, such as this annual report, is collected, recorded, processed, summarized and reported within the time periods specified in the rules of the SEC.  The Company’s disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management to allow timely decisions regarding required disclosure.  As required under Exchange Act Rule 13a-15, the Company’s management, including the Chief Executive Officer and Principal Financial Officer, has conducted an evaluation of the effectiveness of disclosure controls and procedures as of the end of the period covered by this report.  Inasmuch as we only have one individual serving as our officer, director and employee we have determined that the Company has, per se, inadequate controls and procedures over financial reporting due to the lack of segregation of duties despite the fact that the Company has very little operating activity.   Management recognizes that its controls and procedures would be substantially improved if there was a greater segregation of the duties of Chief Executive Officer and Chief Financial Officer and as such is actively seeking to remediate this issue. Management believes that the material weakness in its controls and procedures referenced did not have an effect on our financial results.  Based on that evaluation, the Chief Executive Office and Principal Financial Officer concluded that the disclosure controls and procedures are ineffective.


Management’s 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(f).  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 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 ineffective based on those criteria.


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 error 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 have been no changes in internal controls over the financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.


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


ITEM 9B. OTHER INFORMATION


None.



19






PART III


ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE


Below is certain information regarding our directors and executive officers as of April 10, 2012:


Name

Age

Position


Craig Russell

27

Chairman, President, Chief Executive Officer and Chief Financial Officer


Craig Russell.  Mr. Russell, age 27, was appointed President and Chief Executive Officer of the Company on October 11, 2011.  Prior thereto, since July 2010, he had been acting as a consultant to the Company.  From September 2008 through July 2010, Mr. Russell worked in the ecommerce industry at Quidco as a business development analyst tasked with analyzing and developing new business processes. Prior thereto, from July 2006 through September 2008, Mr. Russell worked for John Lewis as a project coordinator. Mr. Russell holds a degree in Economics along with training in Mineral Project and Finance appraisal from University College London.


Mr. Russell’s training in mineral project and finance appraisal make him a desirable director.  He has valuable knowledge about our industry.


Employees


At December 31, 2011 we had one full-time employee.


Directors’ Term of Office


Directors will hold office until the next annual meeting of stockholders and the election and qualification of their successors.  Officers are elected annually by our board of directors and serve at the discretion of the board of directors.


Director Independence


Our director, Craig Russell, is not independent because of his position as an executive officer of the Company.


Audit Committee and Audit Committee Financial Expert


Our board of directors acts as our audit committee and compensation committee. We do not have an “audit committee financial expert,” as that term is defined in Item 407(d) of Regulation S-K promulgated under the Securities Act. The board of directors believes that its member is financially literate and experienced in business matters and is capable of (1) understanding generally accepted accounting principles (“GAAP”) and financial statements, (2) assessing the general application of GAAP principles in connection with our accounting for estimates, accruals and reserves, (3) analyzing and evaluating our financial statements, (4) understanding our internal controls and procedures for financial reporting, and (5) understanding audit committee functions, all of which are attributes of an audit committee financial expert. However, the board of directors believes that no audit committee member has obtained these attributes through the experience specified in the SEC's definition of “audit committee financial expert.” Further, as is the case with many small companies, it would be difficult for us to attract and retain board members who qualify as “audit committee financial experts,” and competition for such individuals is significant. The board of directors believes that its current audit committee is able to fulfill its role under SEC regulations despite not having a designated “audit committee financial expert.”


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 SEC initial reports of ownership and reports of changes in ownership of the Company’s common stock.  Such officers, directors and persons are required by SEC 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.



20






Code of Ethics


We have established and maintain a Code of Ethics which is applicable to all employees, officers, and directors. Our policy is designed to deter wrongdoing and to promote honest and ethical conduct and compliance with all applicable laws and regulations. It also communicates our expectations of our employees and helps enable us to provide accurate and timely disclosure in our filings with the SEC and other public communications. In addition, the policy incorporates guidelines pertaining to topics such as environmental compliance, health and safety compliance; diversity and non-discrimination; vendor relations, employee privacy; and business continuity.


We will provide any person, without charge, upon written or oral request made to our corporate headquarters, a copy of our Code of Ethics.


ITEM 11.  EXECUTIVE COMPENSATION


There was compensation paid to our Chief Executive Officer and our other executive officers (“Named Executive Officers”) for services rendered of $45,500 and $-0-during the years ended December 31, 2011 and 2010.


SUMMARY COMPENSATION TABLE

Name and

principal position

Year

Salary

($)

Bonus

($)


Stock

Awards

($)

Option

Awards

($)

Non-Equity

Incentive Plan

Compensation

($)

Nonqualified

Deferred

Compensation

Earnings ($)

All Other

Compensation

($)

Total

($)

Craig Russell (1)

President,

Chief Executive Officer,

Principal Executive Officer,

Chief Financial Officer,

Principal Financial Officer,

Principal Accounting Officer and Director

2011


2010

$45,500


$0

0


0

0


0

0


0

0


0

0


0

0


0

$45,500


$0


Option/SAR Grants in Last Fiscal Year


None.


Outstanding Equity Awards at Fiscal Year-End


None.


Compensation of Directors


None of the Company’s directors received any compensation for services as directors during the last fiscal year.


Equity Compensation Plan Information


Not applicable.


Employment Agreements


None.


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


The following table sets forth certain information regarding beneficial ownership of our common stock and warrants to purchase shares of our common stock as of April 10, 2012 by (i) each person (or group of affiliated persons) who is known by us to own more than five percent of the outstanding shares of our common stock, (ii) each of our directors and executive officers, and (iii) all of our directors and executive officers as a group.


Beneficial ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. The principal address of each of the stockholders listed below is c/o Columbia Tower, 701 Fifth Avenue, Office 4263,



21






Seattle, WA, 98104-5119.  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 10, 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.  Such amounts include the 50,000 shares that were to be issued in connection with our acquisitions, but have not yet been issued.


All references to the number of shares and per share amounts have been retroactively restated to reflect a 150 for 1 reverse stock split of all the outstanding common stock of the Company, which was effective in March 2011.


Principal Stockholders Table


 

 

 

 

 

 

 

 

 

Name of Owner

 

Shares Owned

 

Percentage of Shares

Outstanding

 Craig Russell

 

 

200,000

 

 

 

3.87

%

 Lynn Harrison

 

 

860,000

 

 

 

16.62

%

 Martello Nominees Limited Acct

 

 

150,000

 

 

 

2.90

%

 Rare Earth Minerals International Ltd.

 

 

6,850,000

(1)

 

 

79.21

%

 All officers and directors as a group (1 person)

 

 

200,000

 

 

 

3.87

 %


(1) Includes3,425,000 are shares of common stock and 3,425,000 are
shares of common stock underlying currently exercisable warrants



ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE


During the year ended December 31, 2010 and December 31, 2011 we received advances from a shareholder of $5,245 and $-0-, respectively.  The advances were unsecured, non-interest bearing and have no fixed term of payment.  During the year ended December 31, 2010 and 2011we also received advances to fund operations from our Chief Executive Officer and principal  shareholder in the amount of $95,945.  The advances were unsecured, non-interest bearing and due on demand and were forgiven and contributed to capital.


ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES


Silberstein Ungar, PLLC serves as our independent registered public accounting firm.


INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES AND SERVICES


Aggregate fees including expenses billed to us for the years ended December 31, 2011 and 2010, for processional services performed by Silberstein Ungar, PLLC-were as follows:


  

 

2011

 

2010

Audit Fees and Expenses

 

$

15,100

 

 

 

9,500

 

Audit-Related Fees

 

 

 

 

 

 

 

 

Tax Fees

 

 

 

 

 

 

 

 

All Other Fees

 

 

 

 

 

 

 2,250

 

Total 

 

$

15,100

 

 

 

11,750

 



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PART IV


ITEM 15.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES


(a)(1)

The following financial statements are included in this Annual Report on Form 10-K for the fiscal year ended December 31, 2010:


 

 

 

 

1.

Report of Independent Registered Public Accounting Firm

 

 

 

 

 

2.

Balance Sheets as of December 31, 2011 and 2010

 

 

3.

Statements of Operations for the years ended December 31, 2011 and 2010 and for the period from August 7, 2006 (inception) to December 31, 2011

 

 

 

 

 

4.

Statement of Changes in Stockholders’ Equity (Deficit) as of December 31, 2011

 

 

 

 

 

5.

Statements of Cash Flows for the years ended December 31, 2011 and 2010 and for the period from August 7, 2006 (inception) to December 31, 2011

 

 

6.

Notes to the Financial Statements


(a)(2)

All financial statement schedules have been omitted as the required information is either inapplicable or included in the Consolidated Financial Statements or related notes.


(a)(3)

The following exhibits are either filed as part of this report or are incorporated herein by reference:


3.1

Certificate of Incorporation of Cold Gin Corporation, as amended (incorporated herein by reference from the Company’s Exhibit to its Information Statement on Schedule 14C filed on December 3, 2010)


3.2

Articles of Incorporation of Bonanza Gold Corp., as amended (incorporated herein by reference from the Company’s Exhibit to its Information Statement on Schedule 14C filed on December 3, 2010)


3.3

Articles of Merger (incorporated herein by reference from the Company’s Exhibit to its Information Statement on Schedule 14C filed on December 3, 2010)


3.4

Certificate of Merger (incorporated herein by reference from the Company’s Exhibit to its Information Statement on Schedule 14C filed on December 3, 2010)


3.5

By-Laws of Bonanza Gold Corp.  (incorporated herein by reference from the Company’s Exhibit to its Information Statement on Schedule 14C filed on December 3, 2010)


3.5

Certificate of Amendment to the Articles of Incorporation of Bonanza Gold Corp. (incorporated herein by reference from the Company’s Exhibit to its Information Statement on Schedule 14C filed on February 9, 2011)


10.1

Asset Purchase Agreement, dated December 10, 2010, by and between Precious Metals Exploration, Ltd. and Cold Gin Corporation (incorporated herein by reference from the Company’s Exhibit 10.1 to its Current Report on Form 8-K filed on December 14, 2010)


10.2

Asset Purchase Agreement, dated December 10, 2010, by and between Precious Metals Exploration, Ltd. and Cold Gin Corporation (incorporated herein by reference from the Company’s Exhibit 10.2 to its Current Report on Form 8-K filed on December 14, 2010)


10.3

Promissory Note in the amount of One Million Dollars ($1,000,000), dated December 14, 2010, payable to Precious Metals Exploration, Ltd. (incorporated herein by referenced from the Company’s Exhibit 10.3 to its Current Report on Form 8-K filed on December 14, 2010) 


10.4

Agreement and Plan of Reincorporation, dated as of December 27, 2010, by and between Cold Gin Corporation and Bonanza Gold Corp. (incorporated by reference from the Company’s Exhibit 10.4 to its Annual Report on Form 10-K for the year ended December 31, 2010 filed on March 31, 2011)



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10.5

Asset Purchase Agreement dated April 30, 2011 by and between Independent Resources Inc and Bonanza Gold Corp (incorporated by reference from the Company’s Exhibit 10.1 to its Current Report on Form 8-K filed on May 5, 2011)


10.6

Termination Agreement dated May 19, 2011 by and between Precious Metals Exploration, Ltd and Bonanza Gold Corp. (incorporated by reference from the Company’s Exhibit 10.2 to its Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 filed on May 23, 2011)


10.7

Assignment and Assumption Agreement dated May 19, 2011 by and between Precious Metals Exploration, Ltd and Bonanza Gold Corp. (incorporated by reference from the Company’s Exhibit 10.3 to its Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 filed on  May 23, 2011)


10.8

Asset Purchase Agreement dated June 27, 2011 by and between United Copper Holdings Ltd and Bonanza Gold Corp (incorporated by reference from the Company’s Exhibit 10.1 to its Current Report on Form 8-K filed on July 5, 2011)


10.9

Property Purchase agreement dated as of February 28, 2012 by and between Century Cooper, LLC (1)


14.1

Code of Ethics (incorporated by reference from the Company’s Exhibit 14.1 to its Annual Report on Form 10-K for the year ended December 31, 2010 filed on March 31, 2011)


31.1

Certification pursuant to Rule 13a-14(a)/15d-14(a) (1)


31.2

Certification pursuant to Rule 13a-14(a)/15d-14(a) (1)


32.1

Certification pursuant to Section 1350 of the Sarbanes-Oxley Act of 2002 (1)



(1) Filed herewith.




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.



 

 

 

 BONANZA GOLD CORP.

 Date: April 16, 2012

By: /s/ Craig Russell

 

 Craig Russell

 

Chairman,  Chief Executive Officer and

Chief Financial Officer

 

(Principal Executive Officer, Principal Accounting Officer  and Principal Financial Officer)




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