ITEM 1.
BUSINESS
Item 1. Description of Business
Description of Aultra Gold, Inc (fka New World Entertainment Corp.) Business
Organizational History
Aultra Gold Inc. (formerly known as New World Entertainment Corp. and Morningstar Industrial Holdings Corp.) was incorporated under the laws of the State of Nevada on January 26, 2005 as Katie Gold Corp. and it was primarily engaged in the acquisition and exploration of mining properties until April 2006.
On March 10, 2006, our shareholders unanimously adopted a resolution to conduct a forward split of our common stock on a 20 share for 1 share basis, payable as a dividend. The record date for the dividend was Friday, March 17, 2006, and the pay date was Monday, March 20, 2006. As a result of the dividend, the amount of our issued and outstanding common stock increased from 3,570,000 shares to 71,400,000 shares.
On March 21, 2006, a Certificate of Amendment was filed with the Secretary of State in Nevada to change our name from Katie Gold Corp. to Morningstar Industrial Holdings Corp. At this time, we were still engaged in the acquisition and exploration of mining properties.
On April 26, 2006, we filed Articles of Merger with the Secretary of State in Nevada to merge with New World Entertainment Corp., a private company incorporated in Nevada. As a result of the merger, we changed its name from Morningstar Industrial Holdings Corp. to New World Entertainment Corp and underwent a change in management.
On May 26, 2006, we entered into a Loan Agreement under which 10,833,333 additional shares of our common stock were to be issued (as further described below). For reasons discussed below we subsequently decided to terminate such arrangement without further obligations whatsoever, and the resolution to issue the 10,833,333 shares of common stock was revoked without such shares issuance taking place.
In addition, for reasons discussed below on January 22, 2007, we entered into a Share Exchange Agreement to issue 24,496,668 shares of our common stock and we expect a total of 95,896,668 shares of commons tock will be issued subsequent to this issuance (which is reduced from the amount of 106,730,001 shares previously reported under an 8K Report filed February 28, 2007 by cancellation of 10,833,333 common shares associated with the termination of the May 26, 2006 Loan Agreement as discussed below).
On January 18, 2007, we filed a Certificate of Amendment to increase the number of shares of Common Stock which we are authorized to issue from 75,000,000 shares of Common Stock to 150,000,000 shares.
On March 22, 2007, we filed a Certificate of Correction to correctly provide that the number of shares of Common Stock which we are actually authorized to issue is 500,000,000 shares and not 75,000,000 shares. The increase to 500,000,000 was approved by our shareholders holding majority of our issued and outstanding shares of common stock as of April 26, 2006, and our filing of a Certificate of Amendment on January 18, 2007, erroneously referenced that we were only authorized to issue up to 150,000,000 shares of our common stock.
As discussed further above and below, on April 26, 2006, we filed Articles of Merger with the Secretary of State in Nevada to merge with New World Entertainment Corp., a private company incorporated in Nevada. At the time of the merger with New World Entertainment Corp., we intended to pursue acquisition and licensing of online gaming technologies; however, pursuant to the terms of the Release Agreement as more fully described forth below, we have since abandoned the strategy of acquiring and licensing of online gaming technologies.
On October 22, 2007 one of our shareholders, Aultra Gold Capital, agreed to cancel 30,000,000 shares which reduced the number of outstanding shares to 65,293,334 as of that date. However in April 2008 the Company agreed to re-issue those shares to Rauno Perttu.
On January 6, 2010, the Corporation entered into an Asset Purchase Agreement (the “Agreement”) with Dutch Gold Resources, Inc. (“Dutch Gold”), a Nevada corporation, and DGRI ADGI Acquisition Corporation (the “Purchaser”), effective as of December 31, 2009. Pursuant to the Agreement, the Corporation sold substantially all of its assets to the Purchaser, who is a wholly owned subsidiary of Dutch Gold (the “Transaction”). As consideration for these assets, Dutch Gold issued 9,614,667 shares of its common stock, par value $0.001 per share, to the Corporation. In accordance with the transaction, Dutch Gold acquired substantially all of the assets related to the Corporation’s gold and mineral business, including inventory, accounts receivable, certain supply and distribution and other vendor contracts, good will and other various assets and intangibles. The parties made customary representations, warranties and indemnities that are typical and consistent for a transaction of this size and scope.
On December 31, 2009, pursuant to a Stock Purchase Agreement by and among Dutch Gold, Rauno Perttu, Strategic Minerals Inc., a Nevada corporation, and Aultra Gold Capital Inc., a Turks and Caicos corporation, Dutch Gold acquired controlling interest of the Company for a purchase price of One Million newly-issued shares of Dutch Gold’s common stock, par value 0.001 per share.
Also, on [December 31, 2009], John Yee resigned as the Director and Secretary of the Corporation, Richard Crofts resigned as Director, and Baljinder Bhullar resigned as Chief Executive Officer. Daniel Hollis was appointed as Chairman, Chief Executive Officer and Chief Financial Officer.
On March 2, 2010, the Corporation filed a Certificate of Amendment amending and restating its Articles of Incorporation to increase its capitalization from (i) 150,000,000 to 510,000,000, of which 500,000,000 shares will be Common Stock and 10,000,000 shares will be preferred stock par value $0.001 per share (the “Preferred Stock”), (ii) effect a forward split of the Corporation’s Common Stock on a 1 for 10 basis and (iii) authorize the Board of Directors to provide for the issuance of shares of Preferred Stock in series and, by filing a certificate pursuant to the Nevada Revised Statutes, to establish from time to time the number of shares to be included in each such series, and to fix the designation, power, preferences and rights of the shares of each such series and the qualifications, limitations and restrictions thereof.
On March 24, 2010, the Corporation filed a Certificate of Change to its Articles of Incorporation to decrease the number of authorized shares of Common Stock from 500,000,000 to 50,000,000 and concurrently effecting a 1 for 10 reverse split of the Company’s issued and outstanding shares of Common Stock and change in par value $0.001 per share to par value $0.00001 per share. Approval of the Company’s stockholders was not required to be obtained, as authorized by NRS Section 78.209, et seq. As a result of the reverse stock split, each 10 shares of the Company’s Common Stock issued and outstanding on such date was split into 1 share of the Registrant's Common Stock.
On March 29, 2010, the Company entered into an Agreement and Plan of Share Exchange (the “Agreement”) with Shamika Gold Inc., a Canada Corporation (“Shamika”), and certain shareholders of Shamika (the “Shamika Holders”). Pursuant to the Agreement, the Company acquired all of the outstanding shares (the “Shamika Shares”) from the Shamika Holders in exchange for an aggregate of 25,500,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) (the “Exchange”). The former holders of the Shamika Shares now beneficially own approximately 51% of the outstanding shares of our Common Stock. Accordingly, the Exchange represents a change in control. For financial accounting purposes, the acquisition was a reverse acquisition of the Company by Shamika, under the purchase method of accounting, and was treated as a recapitalization with Shamika as the acquirer. Upon consummation of the Exchange, the Company adopted the business plan of Shamika.
As a result of the Exchange, Shamika became a wholly-owned subsidiary of the Company. The Company shares were issued to the Shamika Holders on a pro rata basis, on the basis of the shares held by such Shamika Holders at the time of the Exchange. The board of directors and officers was reconstituted by the resignation of: Rauno Perttu from his role as President, Secretary and director, Daniel Hollis from his role as Chief Financial Officer and director, Lance Rosemarin from his role as director, and the appointment of Robert Vivian as President and Chief Executive Officer and Terence Orstlan as Secretary and director.
Our fiscal year end is December 31.
Description Of Events Leading Up To, And Including, The Share Exchange Agreement Dated January 22, 2007 - Via Which We Acquired Aultra Gold Inc. (Canada)
Organizational History
Aultra Gold Inc. (Canada) (hereinafter referred to as “AGI”) was incorporated on January 20, 2006 as Dutch Mining (Canada) Ltd. under the laws of Canada, pursuant to the Business Corporations Act of British Columbia. It completed a formal name change to Aultra Gold Inc. on December 8, 2006. On January 22, 2007 (the “Closing Date”), we entered into a definitive Share Exchange Agreement (the "Agreement") with Strategic Minerals Inc., a Nevada corporation, AGI and certain other shareholders of AGI.
Pursuant to the Agreement we agreed to acquire up to 100% of the outstanding equity of AGI from the stockholders of AGI (the “AGI Shareholders”) in exchange for the issuance by us to the AGI Shareholders of one share of our common stock, $0.001 par value (the “Common Stock”), for each issued common share of AGI (the “Acquisition”).
General Overview of Business
AGI is engaged in the business of acquiring and exploring gold and mineral properties with proven and probable reserves principally located in Nevada and Montana, USA, with the objective of identifying gold and mineralized deposits economically worthy of continued production and/or subsequent development, mining or sale.
On May 31, 2006, AGI acquired the Basin Gulch property in Granite County, Montana, from Strategic Minerals, Inc. a Nevada corporation (“Strategic”) whereby Strategic granted AGI the exclusive right to explore, evaluate, develop, and mine the Basin Gulch Property. In consideration of the acquisition of the Basin Gulch Property, AGI issued to Strategic 20,000,000 of its common shares. Strategic is a related party to AGI.
Recent Developments
Change in Authorized Share Capital
On January 18, 2007, we filed a Certificate of Amendment to increase the number of shares of Common Stock which we are authorized to issue from 75,000,000 shares of Common Stock to 150,000,000 shares.
On March 22, 2007, we filed a Certificate of Correction to correctly provide that the number of shares of Common Stock which we are actually authorized to issue is 500,000,000 shares of Common Stock and not 75,000,000 shares. The increase to 500,000,000 was approved by our shareholders holding majority of our issued and outstanding shares of common stock as of April 26, 2006, and our filing of a Certificate of Amendment on January 18, 2007, erroneously referenced that we were only authorized to issue up to 150,000,000 shares of our common stock.
On October 22, 2007 one of our shareholders, Aultra Gold Capital, agreed to cancel 30,000,000 shares which reduced the number of outstanding shares to 65,293,334 as of that date. In April 2008 it was agreed that those shares would be re-issued to Mr. Rauno Perttu.
Other Information
On April 6, 2006 Robert Biagioni resigned as our President, Chief Executive Officer and as a member of our board of directors. In addition, on that date Victoria Arnott also resigned as a member of our board of directors.
On April 6, 2006 Michelle Dobson was appointed as our President, Chief Executive Officer and sole director to fill the corresponding vacancies.
Effective January 22, 2007, Ms. Dobson resigned from her positions as our Chief Executive Officer, President, Chief Financial Officer and sole director. Effective as of equal date, Mr. Rauno Perttu was appointed as our President, Secretary and Director to fill the corresponding vacancies created. In addition, effective as of the same date, Messrs. Edward Lawson, Richard Crofts and Jeremy Caddy were also appointed as our directors, and Ms. Baljinder Bhullar was appointed as our Chief Financial Officer to fill the corresponding vacancy created.
On January 23, 2007 we also completed a private placement for 200,000 units (the “Units”) at a price of $1.50 per Unit for aggregate gross proceeds of $300,000. Each Unit consists of one share of our Common Stock and one warrant (the “Warrant”) entitling the purchaser to purchase one share of the our Common Stock at an exercise price of $2.50 per share for a period of one year commencing from the Closing Date.
On March 22, 2007 Jeremy Caddy resigned as our director and Ms. Baljinder Bhullar was appointed as a member of our board of directors to fill the corresponding vacancy created.
On October, 12, 2007 Mr. Edward Lawson resigned as a director of the Company.
On October 12, 2007 Mr. John Yee was appointed as a Director, replacing Mr. Lawson who had resigned on October 12, 2007and Secretary, replacing Mr. Perttu who resigned as Secretary on the same date.
On November 6, 2007 Ms. Balhjinder Bhullar resigned as Chief Financial Officer and a director. Mr. Rauno Perttu was appointed Interim Chief Financial Officer until the Company could find a replacement.
Share Exchange Agreement
On January 22, 2007 (the “Closing Date”) we entered into a definitive Share Exchange Agreement (the "Agreement") with Strategic Minerals Inc., a Nevada corporation, AGI and certain other shareholders of AGI. Pursuant to the Agreement, which is subject to certain regulatory approval, we agreed to acquire 100% of the outstanding equity of AGI from the AGI Shareholders, and AGI Shareholders agreed to assign and transfer to us 98.2% of the outstanding equity of AGI, in exchange for the issuance by us to the AGI Shareholders of one share of our Common Stock for each issued common share of AGI (the “Acquisition”). As of the date of this Annual Report, we are continuing to negotiate with the remaining AGI Shareholders to acquire the remaining portion of the outstanding equity of AGI not acquired upon the execution of the Agreement. Therefore, subject to certain regulatory approval, we would be required to issue up to 24,496,668 shares of our Common Stock to the AGI Shareholders (the “Consideration Shares”) and there will be approximately 95,896,668 shares of our common stock issued and outstanding subsequent to the issuance of the Consideration Shares (which is reduced from the amount of 106,730,001 shares previously reported under in our Current Report on Form 8-K filed on February 28, 2007 due to cancellation of 10,833,333 shares associated with the termination of the May 26, 2006 Loan Agreement as discussed below). AGI’s main business is acquiring and exploring gold and mineral properties with proven and probable reserves principally located in Nevada and Montana, USA, with the objective of identifying gold and mineralized deposits economically worthy of continued production and/or subsequent development, mining or sale.
Contemporaneously with the Acquisition, we entered into a Registration Rights Agreement with the AGI Shareholders pursuant to which we agreed to use our best efforts to prepare and file a registration statement with the SEC on Form SB-2 (the “Registration Statement”) registering for offer and sale 17,160,000 of the Consideration Shares (the “Registerable Securities”) within 120 days of the Closing Date, and to use our best efforts to cause the Registration Statement to become effective under the Securities Act of 1933, as amended (the “Securities Act”) no later than the earlier of (i) 240 days after the Closing Date and (ii) the sixth (6th) business day following the date on which we are notified by the SEC that such Registration Statement will not be reviewed or is no longer subject to further review and comments (subject to a 20 day extension if fully reviewed) (the "Effective Date"). The Registration Statement may also at our discretion and with the consent of the required investors include our securities other than the Registerable Securities.
In addition, on January 23, 2007, we entered into a Subscription Agreement with 555 Holdings LLC, a Nevada limited liability company (“555 LLC”), whereby we sold 200,000 units (each a “Unit”, and collectively the “Units”) to 555 LLC at a price of $1.50 per Unit, for gross proceeds of $300,000. Each Unit consists of one share of Common Stock and one non-transferable Common Stock purchase warrant (the “Warrant”). Each Warrant will entitle 555 LLC to purchase one share of our Common Stock for a period of one year commencing from the Closing Date at an exercise price of $2.50 per share.
The aforementioned transactions resulted in a change in control of our company. As a result of the Agreement, (i) AGI became our wholly-owned subsidiary, (ii) we succeeded to the business of AGI, and (iii) we underwent a change of our management (as further provided below) and business direction, and will from the Closing Date be solely involved in AGI’s business of acquiring and exploring gold and mineral properties with proven and probable reserves principally located in Nevada and Montana, USA, with the
objective of identifying gold and mineralized deposits economically worthy of continued production and/or subsequent development, mining or sale. Furthermore, in connection with the foregoing on January 18, 2007, we amended our articles of incorporation to change our name from New World Entertainment Corp. to Aultra Gold Inc (the “Amendment”). The Nevada Secretary of State declared the Amendment effective as of January 18, 2007. In addition, as a result, our trading symbol has changed from NWWE.OB to AGDI.OB.
We claimed an exemption from the registration requirements of the Securities Act for the private placement of the aforementioned securities pursuant to Section 4(2) of the Securities Act and/or Regulation D promulgated thereunder since, among other things, the transaction did not involve a public offering, the investors are accredited investors and/or qualified institutional buyers, the investors had access to information about our company and their investment, the investors took the securities for investment and not resale, and we took appropriate measures to restrict the transfer of the securities.
Termination of a Material Definitive Agreement.
On April 26, 2006, we filed Articles of Merger with the Secretary of State in Nevada to merge with New World Entertainment Corp., a private company incorporated in Nevada. As a result of the merger, we changed its name from Morningstar Industrial Holdings Corp. to New World Entertainment Corp and underwent a change in management. At the time of the merger with New World Entertainment Corp., we intended to pursue acquisition and licensing of online gaming technologies; however, pursuant to the terms of the Release Agreement as more fully set forth above, we have since abandoned the strategy of acquiring and licensing of online gaming technologies.
We have resolved to focus our business on continuing to engage in the acquisition, and exploration of mineral properties with a view to exploiting any mineral deposits it discovers that demonstrate economic feasibility. In furtherance of this focus, the following transactions have been terminated:
Termination of May 2006 Loan Agreement
On May 3, 2006, we entered into a $3,250,000 secured Loan Agreement (the "Loan Agreement") with 555 LLC and Global Developments Inc., a Delaware company (“Global”, collectively referred to as the "Lenders"), pursuant to which Loan Agreement we issued $3,250,000 in aggregate principal amount of promissory notes (collectively the "Notes") to the Lenders. In lieu of the interest on the Notes, we agreed to simultaneously with the issuance of the Notes to issue three and one third restricted shares of our Common Stock for every dollar loaned by the Lenders, amounting to 10,833,333 shares of Common Stock (the "Shares"). We claimed an exemption from registration requirements of the Securities Act pursuant to Section 4(2) of the Securities Act and/or Regulation D promulgated thereunder based upon the representations of the Lenders that they are each an "accredited investor" (as defined under Rule 501 of Regulation D) and that they were purchasing such securities without a present view toward a distribution of the securities.
The proceeds of the Loan Agreement were used in connection with a further loan arrangement with Liverpoole, Inc., a privately-owned corporation organized under the laws of Antigua (“Liverpoole”), whereby the amount of $3,250,000 (the “Loan Amount”) would have been repaid to us by Liverpoole. On May 7, 2007 with quarterly installments due to us from Liverpoole in the amount $500,000 each, and the first quarterly payment due on August 3, 2006, Liverpoole defaulted under all of its repayment obligations to us, and further failed to complete its obligations under a certain share exchange agreement as set forth below.
Termination of the Share Exchange Agreement with Liverpoole Inc. and World Mobile Network Corp.
On May 12, 2006, in connection with the Loan Agreement, we entered into a share exchange agreement with Liverpoole (the “Liverpoole Share Exchange Agreement”) for the acquisition of all of the issued and outstanding shares of Liverpoole in exchange for 25,000,000 shares of our Common Stock. In connection therewith, in order to secure the right to enter into such agreement with Liverpoole, we entered into an agreement with World Mobile Network Corp., a publicly-held corporation (“World Mobile”), pursuant to which World Mobile agreed to assign us its exclusive right to acquire Liverpoole in exchange for 20,000,000 shares of our Common Stock.
Pursuant to its business plan, Liverpoole intended to enter into an agreement to purchase a 75% interest in various assets of a privately owned corporation organized under the laws of Antigua, which sought to acquire an interest in an online gaming business. Such assets included the rights to URL's, customer lists, certain software and licenses, as well as the rights to certain Internet domain names. In order to secure the right to enter into such agreement with Liverpoole, we entered into the aforementioned arrangement with World Mobile. Subsequently the principal of Liverpoole refused to complete his obligations under the Liverpoole Share Exchange Agreement.
On September 30, 2006 the US Congress passed H.R. 4954 the Safe Port Act, including “The Unlawful Internet Gambling Enforcement Act of 2006”, which was signed by President Bush on October 13, 2006, prohibiting acceptance of any payment instrument for unlawful Internet gambling. In consequence, we, 555 LLC, Global, Liverpoole and World Mobile, the parties to the aforementioned agreements, including the Loan Agreement and the Liverpoole Share Exchange Agreement (collectively the “Agreements”), entered into a certain Settlement and Release Agreement dated December 8, 2006 (the “Release Agreement”), terminating all rights and obligations as they related to us under the Agreements. Specifically, (i) Global an d 555 LLC each irrevocably released us from our obligation to repay the Loan Amount to Global and 555 LLC, and each further released Liverpoole from all obligations associated with the Loan
Amount, including any right to demand repayment of the Loan Amount from Liverpoole; (ii) we released Liverpoole from all obligations associated with the Loan Amount, including any right to demand repayment of the Loan Amount or to demand an exchange of the shares from Liverpoole pursuant to the Liverpoole Share Exchange Agreement; (iii) Liverpoole released us from all of our obligations associated with the Liverpoole Share Exchange Agreement, including any right to demand an exchange of the shares pursuant to the Liverpoole Share Exchange Agreement; and (iv) World Mobile released us from all of our obligations associated with the Loan Amount and the Liverpoole Share Exchange Agreement, including any right to demand an exchange of the shares pursuant to the Liverpoole Share Exchange Agreement. Pursuant to the terms of the Release Agreement, we terminated our relationship, rights and all obligations previously associated with Liverpoole, World Mobile or the privately owned Antiguan entity and any associated interests in any online gaming businesses and further abandoning the strategy of acquiring and licensing of online gaming technologies.
DESCRIPTION OF AGI’S BUSINESS
General Overview of Business
AGI is engaged in the business of acquiring and exploring gold and mineral properties with proven and probable reserves principally located in Nevada and Montana, USA, with the objective of identifying gold and mineralized deposits economically worthy of continued production and/or subsequent development, mining or sale. On May 31, 2006, AGI acquired the Basin Gulch property in Granite County, Montana, from Strategic Minerals, Inc. a Nevada corporation (“Strategic”) whereby Strategic granted AGI the exclusive right to explore, evaluate, develop, and mine the Basin Gulch Property. In consideration of the acquisition of the Basin Gulch Property, AGI issued to Strategic 20,000,000 of its common shares.
Mining Lease Agreement
On May 31, 2006, AGI entered into a Mining Lease Agreement with Strategic, whereby Strategic granted AGI the exclusive right to explore, evaluate, develop, and mine the Basin Gulch Property, Montana, in consideration of AGI issuing to Strategic 20,000,000 common shares of its capital stock. The advanced exploration and test mining project consists of eleven patented mineral claims, surrounded by the Deer Lodge National Forest, totaling about 217.9 acres. The claims are all located at the head of Basin Gulch, on the northern slopes of the West Fork Buttes, within the Sapphire Range of the Western Montana Rocky Mountains. The Company acquired its Basin Gulch Property from a private company, principals of whom were also common directors with the Company. In addition, Aultra has staked 50 unpatented claims to fill in around the patented claim block. The fifty unpatented claims total approximately 900 additional acres.
The three-stage Mining Lease Agreement is structured as follows:
Stage 1 initial payment:
The Company paid its initial cash payment of $10,000 and prior to July 30, 2006 satisfied its reporting obligations to Strategic regarding all the exploration and studies conducted on the premises of Basin Gulch Property.
Stage 2 advance production royalties:
To further evaluate and develop the minerals, the AGI fulfilled the following obligations:
i) By June 10, 2006, it paid a cash payment of $15,000 directly to the underlying property owner;
ii) by September 10, 2006 made a cash payment of $25,000 directly to the underlying property owner;
iii) a cash payment of $50,000 will become due and payable on March 10, 2007 and September 10, 2007 and thereafter on those anniversary dates of each year until production has commenced.
Stage 3 production royalties:
Upon commencement of production, AGI must pay the greater of:
i)A twice annual cash payment of $50,000 due on March 10 and September 10 of each year; or
ii)3% of the gross sales receipts of the gold and silver sold, due semi-annually on March 10 and September 10 of each year;
Should production be suspended for a period of 6 months or longer, the twice annual advance production royalty of $50,000 listed above resume. Upon the completion of payments totaling $8,000,000, AGI will have purchased the mineral rights to this property. In the current 2007 fiscal, payments totaling $50,000 have be made directly to the underlying property owner, which satisfy AGI’s interpretation of its minimum obligations of AGI under the Mining Lease Agreement and are consistent with the interpretation of Mining Lease Agreement since it was signed in 2006 AGI believes that the issuance of 20,000,000 shares valued at $0.50 satisfies its purchase obligation with Strategic Minerals, Inc. There are two principals involved in Strategic. In February 2008 one principal in Strategic claimed that the Company was in default and that individual had taken possession of the property by means of a “private foreclosure”. AGI and the other principal of Strategic believe the attempted action is without merit and intend to vigorously defend its rights to the property.
Description of AGI’s Properties
Description of Basin Gulch Property, Montana
The Basin Gulch area has historically been mined by traditional placer methods, including hydraulic mining since the early part of the last century. The remains of this mining activity still exist on the site in the form of collapsed short adits, excavations, mine ponds, remains of log cabins and out buildings, and log and dirt dams and hydraulic diversion structures. Cable Mountain Mine Inc. (CMM), who discovered the Basin Gulch deposit, explored the lode source of the placer gold from the late 1980s until 1997. To date, 323 reverse circulation and core holes have been drilled on the property for a total of 89,800 feet, with holes ranging from 80 feet to 1,050 feet in depth. In addition, 40 test trenches with a total length of 17,000 feet have taken place. In addition to the drilling, there have been two geophysical surveys, soil geochemistry surveys, topographic surveys, and geologic mapping projects carried out on the property. A large portion of these studies, in whole, or in part, was reviewed in preparation of this report.
The Basin Gulch Project is an advanced stage exploration project with a substantial investment already made in previous exploration work on the property. However, no mining has yet taken place on the site, beyond the older placering and very limited lode prospect pits. In addition, due diligence studies have been carried out on the Basin Gulch Mine property over the last 20 years or so by a number of investigators, and a number of publicly-available reports have been produced by the Montana Bureau of Mines and Geology (MBMG) and the USGS on the general geology of the area.
A NI 43-101, Independent Third-Party Evaluation, prepared by David Brown and Associates (“DBA”) has been provided for the Basin Gulch project, which is an advanced exploration and test mining gold porphyry project. The reader is warned that a NI 43-101 study is a Canadian report, and is not compliant with U.S. SEC regulations. The report and earlier reports not compliant with current SEC regulations used terms such as “ore”, "measured," "indicated," and "inferred" "resources," which current SEC regulations strictly forbid. An effort has been made to remove such words from this document. Basin Gulch consists of eleven patented mining claims, surrounded by the Deer Lodge National Forest, totaling about 217.9 acres and 50 unpatented claims totaling approximately 900 acres. A number of consultants, exploration companies, and Federal and State of Montana Agencies, other than DBA, prepared the geological and mineralogical models of Basin Gulch. The claims are all located at the head of Basin Gulch, on the northern slopes the West Fork Buttes, within the Sapphire Range of the Western Montana Rocky Mountains. The property is about 19 road miles west of the town of Philipsburg, Montana, within the Rock Creek Mining District of Granite County. The property is owned by the Metesh Family of Philipsburg, and is under lease agreement to AGI. The Basin Gulch area is historically a placer mining area lacking a historical association with an operating lode mine. The local placers have been operated since before the turn of the 20th century up until just recently. A title study was not part of this report, nor was a claims validation study made. However, those studies were done by Anderson Engineering of Dillon, Montana in the mid-1990s, and there is no reason to believe the results of their work have changed. The property deeds can be viewed at the Granite County Courthouse in Philipsburg, Montana.
The Claims:
The claims are all located in south-central Granite County, in portions of Section 34, Township 7 North, Range 16 West, and Sections 3, 4, and 9, Township 6 North, Range 16 West. The patented mining claims making up the Basin Gulch Group include the following:
i)
Landes
(Mineral Survey 5565)
ii)
Shylock
(Mineral Survey 6354)
iii)
Shively
(Mineral Survey 5755)
iv)
Quartz Hill
(Mineral Survey 5564)
v)
Spencerian
(Mineral Survey 8140)
vi)
Gold Hill 5
(Mineral Survey 5755)
vii)
Basin
(Mineral Survey 9026)
viii)
Blue Bell Lode
(Mineral Survey 9530)
ix)
White Pine
(Mineral Survey 8137)
x)
Yellow Pine
(Mineral Survey 8139)
xi)
Jack White
(Mineral Survey 8138)
These claims were re-traced on the ground by Anderson Engineering of Dillon, Montana in 1996.
Mineralization:
The lode mineralization at the head of Basin Gulch is associated with a gaseous Eocene silicic intrusive that invaded between the plates of two Precambrian thrust sheets. The intrusive formed a major diatreme complex that is centered on the gold and silver mineralization. The intrusive event also formed a number of smaller, parasitic diatremes and breccia zones scattered throughout the property and off the property for several miles in all directions. The gold mineralization is found throughout the site near the surface and at depths in excess of 1,000 feet at levels averaging about 0.01 ounces per ton, with higher grade areas and intercepts, with the higher grade zones associated with the edges of the various diatremes and post- and pre-diatreme faulting that cut the diatremes. The highest grades appear associated with voids formed near and within the diatreme when juvenile and surrounding bedrock material fell back into the diatreme throat during periods of quiescence. This association with voids and faulting has been recognized at other gold sites and is well described in literature.
Mr. Rauno Perttu, who discovered the Basin Gulch deposit in 1987, explored the lode source of the placer gold from the late 1980s until 1997. To date, 323 reverse circulation and core holes have been drilled on the property for a total of 89,800 feet, with holes ranging from 80 feet to 1,050 feet in depth. In addition, 40 test trenches with a total length of 17,000 feet have taken place. AGI’s predecessors, Cable Mountain Mine, Inc., Chevron Resources, and Cyprus Exploration have performed the work at various stages in the project. In addition to the drilling, there have been two geophysical surveys, soil geochemistry surveys, topographic surveys, and geologic mapping projects carried out on the property.
Two targets, termed Block A and Block B, have been blocked out to a certain extent on the property with drilling. These two blocks have been explored with 82 drill holes and some 25,546 feet of drilling. In addition, assay samples of every 5-foot interval were taken, for a total of just over 4,700 samples analyzed. They are both located on the edges of the major diatreme complex at the head of Basin Gulch. The mineralization itself is fairly simple, with the gold being fine to very coarse in nature, and easily extracted using cyanidation, and possibly other recovery methods. Test work done for Cable Mountain Mine indicates a recovery rate of over 90% with a simple cross-current mill.
A previous investigation and evaluation by CMM for the site using the GEMCON computer program yielded a volume of 129,000,000 tons of rock grading 0.019 ounce per ton for the entire areas A and B site. The results of this study were not available for inspection in preparation of the above mentioned NI 43-101. However, this data base was used for the gold volume calculation made of Block A and Block B. The evaluation did not include several other areas of gold mineralization identified by surface sampling, trenching and drilling.
Based on the results of this third-party evaluation, several recommendations are made to complete field evaluation of this advanced exploration project. The following are those basic elements.
i)Complete drilling and sampling of two identified high grade zones with diamond core drilling to give adequate evaluation of potential mineralization volumes.
ii)Complete several core holes in the areas of one and two-point anomalies that were encountered during the previous exploration efforts.
iii) Perform test underground mining in the two high grade targets after completion of the drilling recommended above.
Permitting Status:
The previous exploration permits on the property have lapsed. New exploration drilling permits are being applied for by AGI, and the previous permitting process in the 1990s is expected to streamline the new permits.
In Montana, public and private lands are handled similarly in the permitting process. AGI must apply for either a blanket exploration permit for Montana, or a specific permit for the Basin Gulch project. In either case, proposed drill sites and trenches must be located on a map, with a detailed description of how the preparation and reclamation of each site will be completed. The State will then have the choice of sending out an inspector to review the proposed plan. The State will subsequently calculate and reclamation bond amount for the work proposed, based on existing State standards. Upon AGI posting the bond, it may then proceed with the exploration work.
During work in the 1990s, none of the proposed exploration follow-up sites had any deleterious aspects that needed mitigating, so no significant obstacles to exploration are anticipated.
Regarding anticipated test mining, this work can be conducted under Small Miner’s Exclusion (SME) provisions of the Montana permitting process. The SME process is much faster and simpler than the permitting process for larger mines in Montana, and can be completed within weeks to a few months of filing of an application. This property contains a large, open-ended gold and silver resource, parts of which AGI believes may be economically mineable under relatively rapid small mine regulations.
This property was locally extensively drilled as a large, low-grade open-pit mine, but is being revaluated for its localized high-grade deposits. This property is believed to have major potential for deeper high-grade reserves. The property at Basin Gulch, Montana will be evaluated for an initial small miner’s permit to begin development of the first “gold hot spot”, based on extensive existing data. As funding permits, drilling of the first known vein target and of the deep “boiling zone” of the southeastern-most nested diatreme will commence. If viable gold recovery from lower grade surface mineralization can be confirmed by means other than cyanide, AGI plans to reevaluate the extensive lower grade surface mineralization.
The following is AGI’s current future test mining plan if money is available. Additional testing and drilling may modify this plan.
i)Upon satisfactory completion of the follow-up evaluation in the BG94-42 area, DMC plans to drive an intercept tunnel, starting approximately 100 feet below the drill collar, to evaluate the gold zone by bulk sampling. This adit would be located to allow extension of the drift to also bulk sample the diatreme zone encountered in hole BG94-5. The gold in the BG94-42 area was found to be free gold and should be recoverable by simple gravity methods. The tunnel would be completed to a standard that will allow it to be used as a production facility under a State of Montana Small Miner’s Exclusion operating permit.
ii)While the work in the first area is progressing, follow-up exploration of the other identified areas of high-grade mineralization is planned to continue, along with step-out exploration for new potential mineralization shoots. With success in these new areas, AGI anticipates that the initial Small Miner’s Exclusion operation will be systematically expanded into a larger mining operation.
Projected Costs for Plan of Mining Operations
Our business plan calls for significant expenses in connection with the mining plans for development of production on the Basin Gulch Property. Until funding becomes available, the plan cannot be implemented.
We do not have sufficient funds to conduct the 2009 work phases of further drilling and assaying, and completion of the mine plan on the Basin Gulch Property, and the Company will require additional financing in order to complete the work.
Description of Jungo
On June 1, 2007, Aultra Gold, Inc. (the "Company"), entered into a formal binding Agreement of Purchase and Sale (the "Agreement") with W.R. Hansen, an individual (the “Seller”), pursuant to which the Company acquired from the Seller certain mining claims together with all improvements and all equipment owned by the Seller located thereon, located in Humboldt County, State of Nevada (the “Property”). In consideration of the purchase of the Property, the Company agreed to: (i) reimburse the Seller for all staking and filing costs related to the Property, (ii) issue to the Seller 50,000 restricted shares of the Company’s common stock, $0.001 par value per share (the “Common Stock”), valued at $0.50 per share, (iii) upon its sole determination of sufficient mineralization to place the Property in production, to further issue to the Seller additional 50,000 restricted shares of the Company’s Common Stock, such that the Company shall make such a determination not later than 30 days following the acquisition of the data contemplated by paragraph 3.3 of the Agreement, (iv) not later than 10 days following the date the Property is placed into development for production of metals, to issue to the Seller an additional 100,000 restricted shares of the Company’s Common Stock, and (v) as further consideration after the Property is placed in production, to direct to the Seller a monthly Net Smelter Royalty of 2% upon all gold, silver, copper, or other metals (the “Metals”) produced and sold from the Property (each royalty payment shall be paid not later than 30 days following the last day of the month in which the metals were produced and sold). Closing of the sale and purchase of the Property occurred on the same date, as under the Agreement both the Company and the Seller have performed their mutual obligations under paragraph 2.2 and Section 4 thereof.
Other Opportunities in Nevada:
With funding, AGI plans to stake claims over a new Nevada exploration target in the middle of north-central Nevada. This region contains several large existing gold mines. Additionally, AGI has been offered additional attractive gold properties, subject to near-term funding.
Compliance with Government Regulation
We will be required to comply with all regulations, rules and directives of governmental authorities and agencies applicable to the exploration of minerals in United States generally, and in Montana and Nevada specifically. Such operations are subject to various laws governing land use, the protection of the environment, production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, well safety and other matters. Unfavorable amendments to current laws, regulations and permits governing operations and activities of resource exploration companies, or more stringent implementation thereof, could have a materially adverse impact and cause increases in capital expenditures which could result in a cessation of operations. The Company has had no material costs related to compliance and/or permits in recent years, and anticipates no material costs in the next year. The Company will not be required to obtain a permit in order to conduct Phases 1 and 2 of its proposed exploration program for Basin Gulch.
We will have to sustain the cost of reclamation and environmental mediation for all exploration and development work undertaken. The amount of these costs is not known at this time as we do not know the extent of the exploration program that will be undertaken beyond completion of the currently planned work programs. Because there is presently no information on the size, tenor, or quality of any resource or reserve at this time, it is impossible to assess the impact of any capital expenditures on earnings or our competitive position in the event a potentially economic deposit is discovered.
If we enter into production, the cost of complying with permit and regulatory environment laws will be greater than in the exploration phases because the impact on the project area is greater. Permits and regulations will control all aspects of any production program if the project continues to that stage because of the potential impact on the environment. Examples of regulatory requirements include:
·
Water discharge will have to meet water standards;
·
Dust generation will have to be minimal or otherwise re-mediated;
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Dumping of material on the surface will have to be re-contoured and re-vegetated;
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An assessment of all material to be left on the surface will need to be environmentally benign;
·
Ground water will have to be monitored for any potential contaminants;
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The socio-economic impact of the project will have to be evaluated and if deemed negative, will have to be re-mediated; and
·
There will have to be an impact report of the work on the local fauna and flora.
Competition
Many companies are engaged in the exploration and development of mineral properties. The Company is at a disadvantage with respect to those competitors whose technical staff and financial resources exceed the Company’s. Our lack of revenues and limited financial resources further hinder our ability to acquire additional mineral interest.
Employees
As of March 15, 2009, the Company’s subsidiary, AGI, had a full time employment agreement with Mr. Rauno Perttu, the Company’s CEO, President and director, pursuant to which Mr. Perttu provides services to the Company. The Company anticipates that it will be conducting most of its business through agreements with consultants and third parties.
RISK FACTORS
You should carefully consider the risks described below as well as other information provided to you in this document, including information in the section of this document entitled “Information Regarding Forward Looking Statements.” The risks and uncertainties described below are not the only ones facing the Company. Additional risks and uncertainties not presently known to the Company or that the Company currently believes are immaterial may also impair the Company’s business operations. If any of the following risks actually occur, the Company’s businesses, financial condition or results of operations could be materially adversely affected, the value of the Company common stock could decline, and you may lose all or part of your investment.
Risks Related to Our Financial Results:
Our company was recently formed, and we have not proven that we can generate a profit. If we fail to generate income and achieve profitability, an investment in our securities may be worthless.
We have no operating history and have not proved that we can operate successfully. We face all of the risks inherent in a new business. If we fail, your investment in our common stock will become worthless. From our inception on January 26, 2005 to the end of the period ended December 31, 2009, we have not earned any revenue. The exploration for commercially exploitable mineral deposits or reserves, as well as general, legal, accounting and administrative expenses associated with our reporting requirements with the SEC, is expected to require from us total expenditures over the next twelve months in an approximate amount of $[21,850,000]. We presently do not have sufficient funds to pursue our stated plan of operation for the next twelve-month period. We will require additional financing for our operational expenses, and further exploration work for commercially exploitable mineral deposits or reserves. We are seeking these additional funds via equity financing, private placements or loans from our directors or current shareholders. Currently, we do not have arrangements for additional funds. Your investments in our common stock must therefore be regarded as the placing of funds at a high risk in a recently formed company with all the unforeseen costs, expenses, problems, and difficulties to which such companies without proven record are subject to.
We have had losses since our inception. We expect losses to continue in the future and there is a risk we may never become profitable.
We have incurred operating losses of $________ and $633,870 during the year ended December 31, 2009 and 2008, respectively. In addition, during that period, we have a net working capital deficiency of $______ at December 31, 2009. We expect to continue to incur significant operating expenses as we maintain our current line of power-line products and continue research and development toward new advance power-line technologies. Our operating expenses have been and are expected to continue to outpace revenues and result in significant losses in the near term. We may never be able to reduce these losses, which will require us to seek additional debt or equity financing. If such financing is available, of which there can be no assurance, you may experience significant additional dilution.
We have a limited operating history. There can be no assurance that we will be successful in growing our gold and other mineral exploration activities.
We have a limited history of operations. As a result, there can be no assurance that we will be successful in our acquisition and exploration of gold and mineral properties activities. Our success to date in entering into ventures to acquire mineral properties is not indicative that we will be successful in entering into any further ventures. Any potential for future growth in our mineral exploration activities will place additional demands on our executive officers, and any increased scope of our operations will present challenges due to our current limited management resources. Our future performance will depend upon our management and their ability to locate and negotiate additional exploration opportunities in which we are solely involved or participate in as a joint venture partner. There can be no assurance that we will be successful in our efforts. Our inability to locate additional opportunities, to hire additional management and other personnel, or to enhance our management systems, could have a material adverse effect on our results of operations. There can be no assurance that our operations will be profitable.
If we do not obtain additional financing, our business will fail.
Despite obtaining financing in the amount of $_____ during fiscal 2009, we will need to obtain additional financing in order to complete our business plan. We currently do not have any operations and we have no income. We do not have any arrangements for financing and we may not be able to find such financing if required. Obtaining additional financing would be subject to a number of factors, including investor acceptance of mineral claims and investor sentiment. These factors may adversely affect the timing, amount, terms, or conditions of any financing that we may obtain or make any additional financing unavailable to us.
Our independent auditors have expressed doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing.
In their report, our independent auditors stated that our accompanying financial statements filed herewith were prepared assuming that we will continue as a going concern. We are uncertain if we will have sufficient cash to operate for the next twelve months, our ability to sustain our operations beyond this period without further financing cannot be assured.
We continue to experience net operating losses. Our ability to continue as a going concern is subject to our ability to generate a profit and/or obtain necessary funding from outside sources, including obtaining additional funding from the sale of our securities, increasing sales or obtaining loans and grants from various financial institutions where possible. The going concern uncertainty modification in the auditor's report increases the difficulty in meeting such goals and there can be no assurances that such methods will prove successful.
Fluctuations in our operating results and announcements and developments concerning our business affect our stock price.
Our quarterly operating results, the number of stockholders desiring to sell their shares, changes in general economic conditions and the financial markets, the execution of new contracts and the completion of existing agreements and other developments affecting us, could cause the market price of our common stock to fluctuate substantially.
Our management believes that long-term profitability and growth will depend on its ability to:
§ Develop the reputation of AGI as a successful mining property acquisition and exploration company;
§ Successfully identify and exploit mining opportunities;
§ Develop viable strategic alliances; and
§ Maintain sufficient volume of successful new mining opportunities.
RISKS RELATED TO OUR BUSINESS AND OUR INDUSTRY
We will need to increase the size of our organization, and may experience difficulties in managing growth.
We are a small company with only one employee as of December 31, 2009. We hope to experience a period of expansion in headcount, facilities, infrastructure and overhead and anticipate that further expansion will be required to address potential growth and market opportunities. Future growth will impose significant added responsibilities on members of management, including the need to identify, recruit, maintain and integrate additional independent contractors and managers. Our future financial performance and our ability to compete effectively will depend, in part, on our ability to manage any future growth effectively.
We require additional working capital in order to achieve commercial production at the Basin Gulch Property.
The company has no current operating funds to complete the intended plan of mining operations for the Basin Gulch Property and/or the Jungo property. The Company does not have sufficient funds on hand for the unpaid amounts of our estimated costs related to maintaining the minimum annual payment obligations associated with the maintenance of the Basin Gulch Property as discussed in this Current Report and our estimated administrative costs for 12 months from the date of this Current Report. Therefore, we will need to obtain additional financing in order to complete our business plan. As of December 31, 2009, the Company had no cash. The Company has no income from operations.
Our business plan calls for significant expenses in connection with the continued evaluation and development to production of the Basin Gulch Property. The Company does not have sufficient funds to conduct the initial mine development work on the property. The Company will require additional financing in order to complete remaining phases of mine development and production capacity. The Company will also require additional financing if the costs of the mine development for the Basin Gulch Property are greater than anticipated. Even after completing all proposed plans for mining operations the Company will have to spend substantial funds on further drilling and engineering studies in order to establish the diatreme targets for the Basin Gulch Property.
Our proposed exploration plan is dependent on additional financing. After obtaining funding to conduct exploration and development, at the completion of each phase of our operating plan we will evaluate the results and make a determination to proceed to the next phase of mine development and its associated estimated cost. The results of each phase of work will allow us to update our geological information on the Basin Gulch Property and the Jungo Property, and will be used to base our decision to proceed to the next phase of mine evaluation and development.
Each subsequent phase of mine development will require additional funds beyond the Company’s current cash resources. The
Company will need to obtain additional financing from the sale of its securities to fund these operational expenditures and future administrative costs. Our administrative costs will be dependent upon the time frame undertaken to complete the remaining phases of our plan of mining operations. We do not have funding in our current operating funds sufficient to cover our administrative costs for the period of one year from the date of this Current Report, which are estimated to be $150,000. To the extent we need more than one year to complete the remaining exploration or our administrative costs are higher than estimated, we will require additional financing to cover administrative costs.
We will require additional financing to sustain our business operations if we are not successful in earning revenues once initial production work is complete. We do not currently have any arrangements for financing and may not be able to find such financing if required. Obtaining additional financing would be subject to a number of factors, including the market price for gold and precious metals, investor acceptance of our property and general market conditions. These factors may make the timing, amount, terms or conditions of additional financing unavailable to us.
The most likely source of future funds presently available to us is through the sale of equity capital. Any sale of share capital will result in dilution to existing shareholders. The only other anticipated alternative for the financing of further exploration would be advances from related parties and joint venture or sale of a partial interest in the Basin Gulch Property to a third party in exchange for cash or exploration expenditures, which is not presently contemplated.
Our officers and directors are involved in other businesses which may cause them to devote less time to our business.
Our officers' and directors' involvement with other businesses may cause them to allocate their time and services between us and other entities. Consequently, they may give priority to other matters over our needs which may materially cause us to lose their services temporarily which could affect our operations and profitability.
We are dependent on our management and the loss of any officer could hinder the implementation of our business plan.
We are heavily dependent on the members of our management team, the loss of any of whom could have a material adverse affect on our ability to implement our business plan. While we have entered into employment agreement with our Chief Executive Officer, employment agreements could be terminated for a variety of reasons. If, for some reason, the services of our management, or of any member of management, were no longer available to us, our operations and proposed businesses and endeavors may be materially adversely affected. Mr. Perttu, our Chief Executive Officer, and our Chief Financial Officer, is primarily responsible for the success of our business operations. As we continue with our intended operations, other officers may be instrumental in setting up our financial and operational controls and procedures, and we may need to hire additional personnel to perform such functions. Any failure of management to implement and manage our business strategy and growth may have a material adverse affect on us. There can be no assurance that our operating control systems will be adequate to support its future operations and anticipated growth. Failure to manage our growth properly could have a material adverse affect on our business, financial condition or result of operations.
The imprecision of mineral deposit estimates may prove any resource calculations that we make to be unreliable.
Mineral deposit estimates and related databases are expressions of judgment based on knowledge, mining experience, and analysis of drilling results and industry practices. Valid estimates made at a given time may significantly change when new information becomes available. By their nature, mineral deposit estimates are imprecise and depend upon statistical inferences, which may ultimately prove unreliable. Mineral deposit estimates included here, if any, have not been adjusted in consideration of these risks and, therefore, no assurances can be given that any mineral deposit estimate will ultimately be reclassified as reserves.
We are sensitive to fluctuations in the price of gold and other minerals, which is beyond our control. The price of gold and other metals is volatile and price changes are beyond our control.
The prices for gold and other metals fluctuate and are affected by numerous factors beyond our control. Factors that affect the price of gold and other metals include consumer demand, economic conditions, over supply from secondary sources and costs of production. Price volatility and downward price pressure, which can lead to lower prices, could have a material adverse effect on the costs of and the viability of our projects.
Mineral exploration and prospecting is highly competitive and speculative business and we may not be successful in seeking available opportunities.
The process of mineral exploration and prospecting is a highly competitive and speculative business. In seeking available opportunities, we will compete with a number of other companies, including established, multi-national companies that have more experience and financial and human resources than us. Because we may not have the financial and managerial resources to compete with other companies, we may not be successful in our efforts to acquire new projects. However, while we compete with other exploration companies, there is no competition for the exploration or removal of mineral from our claims.
Compliance with environmental considerations and permitting could have a material adverse effect on the costs or the viability of our projects. The historical trend toward stricter environmental regulation may continue, and, as such, represents an unknown factor in our planning processes.
All mining in United States is regulated by the government agencies at the Federal and State levels. Compliance with such regulation could have a material effect on the economics of our operations and the timing of project development. Our primary regulatory costs will be related to obtaining licenses and permits from government agencies before the commencement of mining activities. An environmental impact study that must be obtained on each property, in order to obtain governmental approval to mine on the properties, is also a part of the overall operating costs of a mining company.
The gold and mineral mining business is subject not only to worker health and safety, and environmental risks associated with all mining businesses, but is also subject to additional risks uniquely associated with gold and other minerals mining. Although we believe that our operations will be in compliance, in all material respects, with all relevant permits, licenses and regulations involving worker health and safety, as well as the environment, the historical trend toward stricter environmental regulation may continue. The possibility of more stringent regulations exists in the areas of worker health and safety, the dispositions of wastes, the decommissioning and reclamation of mining and milling sites and other environmental matters, each of which could have an adverse material effect on the costs or the viability of a particular project.
Mining and exploration activities are subject to extensive regulation by Federal and State governments. Future changes in governments, regulations and policies, could adversely affect our results of operations for a particular period and our long-term business prospects.
Mining and exploration activities are subject to extensive regulation by Federal and State Governments. Such regulation relates to production, development, exploration, exports, taxes and royalties, labor standards, occupational health, waste disposal, protection and remediation of the environment, mine and mill reclamation, mine and mill safety, toxic substances and other matters. Compliance with such laws and regulations has increased the costs of exploring, drilling, developing, constructing, operating mines and other facilities. Furthermore, future changes in governments, regulations and policies, could adversely affect our results of operations in a particular period and its long-term business prospects.
The development of mines and related facilities is contingent upon governmental approvals, which are complex and time consuming to obtain and which, depending upon the location of the project, involve various governmental agencies. The duration and success of such approvals are subject to many variables outside of our control.
Because of the inherent dangers involved in mineral exploration and production, there is a risk that we may incur liability or damages as we conduct our business.
Exploration and establishment of mining operations to production involves numerous hazards. As a result, the Company may become subject to liability for such hazards, including pollution, cave-ins and other hazards against which the Company cannot insure or against which the Company may elect not to insure. The payment of such liabilities may have a material adverse effect on the Company’s financial position.
If we do not conduct mineral exploration on our mineral claims and keep the claims in good standing, then our right to the mineral claims will lapse and we will lose everything that we have invested and expended towards these claims.
We must complete mineral exploration work on our mineral claims and keep the claims in good standing. If we do not fulfill our work commitment requirements on our claims or keep the claims in good standing, then our right to the claims will lapse and we will lose all interest that we have in these mineral claims.
We are subject to compliance with securities law, which exposes us to potential liabilities, including potential rescission rights.
We have periodically offered and sold our common stock to investors pursuant to certain exemptions from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) as well as those of various state securities laws. The basis for relying on such exemptions is factual; that is, the applicability of such exemptions depends upon our conduct and that of those persons contacting prospective investors and making the offering. We have not received a legal opinion to the effect that any of our prior offerings were exempt from registration under any federal or state law. Instead, we have relied upon the operative facts as the basis for such exemptions, including information provided by investors themselves.
If any prior offering did not qualify for such exemption, an investor would have the right to rescind its purchase of the securities if it so desired. It is possible that if an investor should seek rescission, such investor would succeed. A similar situation prevails under state law in those states where the securities may be offered without registration in reliance on the partial preemption from the registration or qualification provisions of such state statutes under the National Securities Markets Improvement Act of 1996. If investors were successful in seeking rescission, we would face severe financial demands that could adversely affect our business and operations. Additionally, if we did not in fact qualify for the exemptions upon which it has relied, we may become subject to significant fines and penalties imposed by the SEC and state securities agencies.
RISKS RELATED TO OUR COMMON STOCK
There is no active trading market for our common stock.
Our common stock is quoted on the Pink Sheets, and we are currently in the process of seeking to reestablish quotation of our common stock on the Over the Counter Bulletin Board quotation service. However, currently, there is no active trading market for any of our securities, and we cannot assure you that a market for our stock will develop. Consequently, our shareholders may not be able to use their shares for collateral or loans and may not be able to liquidate at a suitable price in the event of an emergency. In addition, our shareholders may not be able to resell their shares at or above the price they paid for them or may not be able to sell the shares at all. Accordingly, there can be no assurance as to the liquidity of any markets that may develop for the securities, the ability of holders of the securities to sell their securities, or the prices at which holders may be able to sell their securities.
The shares of common stock eligible for future sale could negatively affect the market price of our common stock
The Company has approximately a total of ________ shares of Common Stock issued and outstanding. If the Company's stockholders sell substantial amounts of the Company's common stock in the public market, including shares issued upon the exercise of outstanding options or warrants, the market price of its common stock could fall. These sales also may make it more difficult for the Company to sell equity or equity-related securities in the future at a time and price that the Company deems reasonable or appropriate. Stockholders who have been issued shares in the Acquisition will be able to sell their shares pursuant to Rule 144 under the Securities Act of 1933, beginning one year after the stockholders acquired their shares.
Our common stock may be deemed to be a penny stock and, as such, we are subject to the risks associated with “penny stocks”. Regulations relating to “penny stocks” limit the ability of our shareholders to sell their shares and, as a result, our shareholders may have to hold their shares indefinitely.
Our common stock is currently listed for trading on the Over the Counter Market, which is generally considered to be a less efficient market than markets such as NASDAQ or other national exchanges, and which may cause difficulty in obtaining future financing. Furthermore, our common stocks may be deemed to be “penny stock” as that term is defined in Regulation Section “240.3a51 -1” of the Securities and Exchange Commission (the “SEC”). Penny stocks are stocks: (a) with a price of less than U.S. $5.00 per share; (b) that are not traded on a “recognized” national exchange; (c) whose prices are not quoted on the NASDAQ automated quotation system (NASDAQ -where listed stocks must still meet requirement (a) above); or (d) in issuers with net tangible assets of less than U.S. $2,000,000 (if the issuer has been in continuous operation for at least three years) or U.S. $5,000,000 (if in continuous operation for less than three years), or with average revenues of less than U.S. $6,000,000 for the last three years.
Section “15(g)” of the United States Securities Exchange Act of 1934, as amended, and Regulation Section “240.15g(c) 2” of the SEC require broker dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor’s account. Potential investors in the Company’s common shares are urged to obtain and read such disclosure carefully before purchasing any common shares that are deemed to be “penny stock”.
Moreover, Regulation Section “240.15g -9” of the SEC requires broker dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker dealer to: (a) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (b) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (c) provide the investor with a written statement setting forth the basis on which the broker dealer made the determination in (ii) above; and (d) receive a signed and dated copy of such statement from the investor confirming that it accurately reflects the investor’s financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult for investors in the Company’s common shares to resell their common shares to third parties or to otherwise dispose of them. Stockholders should be aware that, according to Securities and Exchange Commission Release No. 34-29093, dated April 17, 1991, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include:
Moreover, Regulation Section “240.15g -9” of the SEC requires broker dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker dealer to: (a) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (b) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (c) provide the investor with a written statement setting forth the basis on which the broker dealer made the determination in (ii) above; and (d) receive a signed and dated copy of such statement from the investor confirming that it accurately reflects the investor’s financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult for investors in the Company’s common shares to resell their common shares to third parties or to otherwise dispose of them. Stockholders should be aware that, according to Securities and Exchange Commission Release No. 34-29093, dated April 17, 1991, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include:
(i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;
(ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;
(iii) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons;
(iv) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and
(v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses.
Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities.
As an issuer of “penny stock” the protection provided by the federal securities laws relating to forward looking statements does not apply to us.
Although the federal securities law provide a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, if we are a penny stock we will not have the benefit of this safe harbor protection in the event of any claim that the material provided by us contained a material misstatement of fact or was misleading in any material respect because of our failure to include any statements necessary to make the statements not misleading.
Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and operating results and stockholders could lose confidence in our financial reporting.
Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. If we cannot provide reliable financial reports or prevent fraud, our operating results could be harmed. We may be required in the future to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which requires increased control over financial reporting requirements, including annual management assessments of the effectiveness of such internal controls and a report by our independent certified public accounting firm addressing these assessments. Failure to achieve and maintain an effective internal control environment, regardless of whether we are required to maintain such controls could also cause investors to lose confidence in our reported financial information, which could have a material adverse effect on our stock price.
Shares eligible for future sale, if at all, may adversely affect the market price of our common stock, as the future sale of a substantial amount of our restricted stock in the public marketplace could reduce the price of our common stock.
From time to time, certain of our stockholders may be eligible, if at all, to sell all or some of their shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144, promulgated under the Securities Act (“Rule 144”), subject to certain limitations. In general, pursuant to Rule 144, a stockholder (or stockholders whose shares are aggregated) who has satisfied a one-year holding period may, under certain circumstances, sell within any three-month period a number of securities which does not exceed the greater of 1% of the then outstanding shares of common stock or the average weekly trading volume of the class during the four calendar weeks prior to such sale. Rule 144 also permits, under certain circumstances, the sale of securities, without any limitations, by a non-affiliate of our company that has satisfied a two-year holding period. Any substantial sale of common stock pursuant to Rule 144 or pursuant to any resale prospectus may have an adverse effect on the market price of our securities.
We do not expect to pay dividends in the future. Any return on investment may be limited to the value of the Company’s stock.
We do not anticipate paying cash dividends on our stock in the foreseeable future. The payment of dividends on our stock will depend on our earnings, financial condition and other business and economic factors affecting us at such time as the board of directors may consider relevant. If we do not pay dividends, its stock may be less valuable because a return on your investment will only occur if our stock price appreciates.
ITEM 1B.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
ITEM 2.
DESCRIPTION OF PROPERTY
Principal Executive Offices
We currently hold an arrangement to rent our main office comprising of 2,000 square feet which is located at 120 North 5th Street, Jacksonville, Oregon 97530, at a cost of $1,500 per month on a month to month basis.
Minerals Properties
For a further description of our properties, see Item 1 “Description of Business”
ITEM 3.
ITEM 3.
LEGAL PROCEEDINGS
On or about April 17, 2007, a lawsuit was filed by 761273 B.C. Ltd., Calderan Ventures Ltd., Scott Kostiuk, William Parkin, Ronald Oliver, Lubomir Palecek and Krista Dayton under the laws of the Province of British Columbia, Canada in the British Columbia Supreme Court for a total amount of $ 203,311.88 ( CAD$225,000*1) against our company, Rauno Perttu, our President, Chief Executive Officer and a member of our board of directors, and Baljinder Bhullar, our Chief Financial Officer and a member of our board of directors, and others with regards to an alleged contractual obligation and resulting alleged restitution obligation pursuant to an alleged settlement agreement entered into by Aultra Gold Inc. The Action was commenced by Writ of Summons without a Statement of Claim. Six of approximately 57 shareholders of Aultra Gold (Canada) decided not to participate in the January 22, 2007 share exchange transaction the Company, despite facts that four of the six complainants had executed their share exchange materials. The six minority shareholders requested the return of their share subscription funds from Aultra Gold (Canada), and a settlement arrangement was being negotiated to accommodate their requests, with a prospective April 15th, 2007 closing date. These discussions were deferred pending receipt of certain public financings in the Company. We have entered an Appearance to the Action and will be preparing our statement of defense in response to any Statement of Claim that may in the future be received and we intend to contest the case vigorously. In early 2009 the Company received notice that a judgement had been entered against the Company in the amount of CAD $239,206. The Company received no prior notice of a hearing. In communications with the complainants attorney stated that notice was provided to an attorney who they believed was representing Aultra. This attorney denies representing Aultra. Aultra has no assets in Canada and intends to vigously defend itself should this action be pursued in the United States.
There are two principals involved in Strategic. In February 2008 one principal in Strategic claimed that the Company was in default and that individual had taken possession of the property by means of a “private foreclosure”. AGI and the other principal of Strategic believe the attempted action is without merit and intend to vigorously defend its rights to the property. No action has been filed to day
From time to time we may be a defendant and plaintiff in various legal proceedings arising in the normal course of our business. We are currently not a party to any material pending legal proceedings or government actions, including any bankruptcy, receivership, or similar proceedings. In addition, management is not aware of any known litigation or liabilities involving the operators of our properties that could affect our operations. Should any liabilities incurred in the future, they will be accrued based on management’s best estimate of the potential loss. As such, there is no adverse effect on our consolidated financial position, results of operations or cash flow at this time. Furthermore, our management does not believe that there are any proceedings to which any of our directors, officers, or affiliates, any owner of record of the beneficially or more than five percent of our common stock, or any associate of any such director, officer, affiliate, or security holder is a party adverse to our company or has a material interest adverse to us.
ITEM 4.
ITEM 4.
(REMOVED AND RESERVED)
PART II
ITEM 5.
ITEM 5.
MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS.
(a) Market Information
Since March 1, 2006, the Company's Common Stock has been quoted on the OTC Bulletin Board and subsequently Pink Sheets under the symbol NWWE. In February 2008, the Company was successful in its efforts to resume trading on the OTC Bulletin Board and now trades under the symbol AGDI.OB.
For the periods indicated, the following table sets forth the high and low bid prices per share of our common stock. These prices represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions.
* For the period indicated, quotation of the Company’s common stock commenced on March 13, 2006.
The shares quoted are subject to the provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the Exchange Act"), commonly referred to as the "penny stock" rule. Section 15(g) sets forth certain requirements for transactions in penny stocks and Rule 15g9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.
The Commission generally defines penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Rule 3a51-1 provides that any equity security is considered to be a penny stock unless that security is: registered and traded on a national securities exchange meeting specified criteria set by the Commission; authorized for quotation on The NASDAQ Stock Market; issued by a registered investment company; excluded from the definition on the basis of price (at least $5.00 per share) or the registrant's net tangible assets; or exempted from the definition by the Commission. Trading in the shares is subject to additional sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors, generally persons with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse.
For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of such securities and must have received the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the first transaction, of a risk disclosure document relating to the penny stock market. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, and current quotations for the securities. Finally, the monthly statements must be sent disclosing recent price information for the penny stocks held in the account and information on the limited market in penny stocks. Consequently, these rules may restrict the ability of broker dealers to trade and/or maintain a market in the company’s common stock and may affect the ability of shareholders to sell their shares.
(b) Numbers of Shareholders
The approximate number of holders of our Common Stock as of April __, 2010 was [68].
(c) Dividends
We have never declared or paid any cash dividends on our common stock. We do not anticipate paying any cash dividends to stockholders in the foreseeable future. In addition, any future determination to pay cash dividends will be at the discretion of the Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements, and such other factors as the Board of Directors deem relevant.
(d) Securities authorized for issuance under equity compensation plans
Equity Compensation Plan Information
As of the end of our fiscal year ended December 31, 2009, we did adopt a form of an incentive stock option plan.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth for each named executive officer certain information concerning the outstanding equity awards as of December 31, 2009.
[PC- these guys above severed until 12.3109 and then Daniel Hollis was appointed that day so who do I put in this chart?]
Recent Sales of Unregistered Securities
During 2007 Fiscal Year
On January 22, 2007, per the terms of the Share Exchange Agreement entered into on same date, subject to certain regulatory approval, we agreed to issue up to 24,496,668 shares of our Common Stock to the AGI Shareholders.
On January 23, 2007 we completed a private placement for 200,000 units (the “Units”) at a price of $1.50 per Unit for aggregate gross proceeds of $300,000. Each Unit consists of one share of our Common Stock and one warrant (the “Warrant”) entitling the holder to purchase one share of our Common Stock at an exercise price of $2.50 per share for a period of one year commencing from the date of purchase.
On June 1, 2007 we agreed to issue 50,000 shares of our Common Stock in relationship to the purchase of the Jungo property.
During 2008 Fiscal Year
On ___, 2008, the Company re-issued 30,000,000 to shareholder who had those shares cancelled in 2007.
Subsequent to January 1, 2009
The Company re-issued 30,000,000 to shareholder who had those shares cancelled in 2007.
On December 31, 2009, pursuant to a Stock Purchase Agreement by and among Dutch Gold, Rauno Perttu, Strategic Minerals Inc., a Nevada corporation, and Aultra Gold Capital Inc., a Turks and Caicos corporation, Dutch Gold acquired controlling interest of the Company for a purchase price of One Million newly-issued shares of Dutch Gold’s common stock, par value 0.001 per share.
Acquisition of Control of Aultra Gold, Inc.
On December 31, 2009, pursuant to a Stock Purchase Agreement by and among the Company, Rauno Perttu, Strategic Minerals Inc., a Nevada corporation, and Aultra Gold Capital Inc., a Turks and Caicos corporation, the Company sold controlling interest of Aultra Gold for a purchase price of One Million newly-issued shares of the Company’s common stock, par value $0.001 per share to Dutch Gold, Inc.
Acquisition of Aultra Gold, Inc.’s Assets
On January 6, 2010, the Company entered into an Asset Purchase Agreement with Dutch Gold, Inc. Pursuant to the Agreement, the Company acquired all of Aultra Gold’s assets. As consideration for these assets, the Company issued 9,614,667 shares of its common stock, par value $0.001 per share, to Aultra Gold.
In accordance with the transaction, the Company acquired substantially all of the assets related to Aultra Gold’s gold and mineral business, including inventory, accounts receivable, certain supply and distribution and other vendor contracts, good will and other various assets and intangibles. The parties made customary representations, warranties and indemnities that are typical and consistent for a transaction of this size and scope.
In January 2010, the Company announced that an independent consulting geologist conducted an NI 43-101 compliant report, indicating the mineral resource at the Basin Gulch property was sizeable. That report is available as a Form 8K at www.sec.gov and on the Company website, www.dutchgold.com
Fiscal year ended December 31, 2009, 2087 and 2007
Information regarding our sales of our unregistered securities for the fiscal years ended December 31, 2097, 2008 and 2007, has been previously furnished in our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K.
All of the above offerings and sales were deemed to be exempt under rule 506 of Regulation D and/or Section 4(2) of the Securities Act of 1933, as amended. No advertising or general solicitation was employed in offering the securities. The offerings and sales were made to a limited number of persons, all of whom were accredited investors, business associates of PowerLinx, Inc., or executive officers of PowerLinx, Inc., and transfer was restricted by PowerLinx, Inc., in accordance with the requirements of the Securities Act of 1933, as amended. In addition to representations by the above-referenced persons, we have made independent determinations that all of the above-referenced persons were accredited or sophisticated investors, and that they were capable of analyzing the merits and risks of their investment, and that they understood the speculative nature of their investment. Furthermore, all of the above-referenced persons were provided with access to our Securities and Exchange Commission filings.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
ITEM 6.
ITEM 6.
SELECTED FINANCIAL DATA
Not required for smaller reporting companies.
ITEM 7.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
Some of the statements contained in this Current Report that are not historical facts are "forward-looking statements" which can be identified by the use of terminology such as "estimates," "projects," "plans," "believes," "expects," "anticipates," "intends," or the negative or other variations, or by discussions of strategy that involve risks and uncertainties. We urge you to be cautious of the forward-looking statements, that such statements, which are contained in this Current Report, reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors affecting our operations, market growth, services, products and licenses. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of the risks we face, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events. Factors that may cause actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without limitation:
1. Actions of regulatory agencies, changes in regulations and in interpretation of regulations;
2. Our ability to raise appropriate capital within expected time periods;
3. Commodity price fluctuations;
4. Availability of goods and services; and
5. Variations in geological conditions.
All written and oral forward-looking statements made in connection with this Current Report that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Given the uncertainties that surround such statements, you are cautioned not to place undue reliance on such forward-looking statements.
Plan of Operation
We do not have sufficient funds to conduct work phases of further drilling and assaying, and completion of the mine plan on the Basin Gulch Property or the Jungo Property, we will require additional financing in order to complete the work associated with the projected cost to initial production, totaling estimated at $6,850,000. The entire estimated costs of our plan for mining operations, assuming the diatreme targets for the Basin Gulch property are $21,850,000. See Section 2.01 entitled “Projected Costs for Plan of Mining Operations.”
Aultra’s goals and objective for the current year will be adjusted according to the availability of funds and changing market conditions. Management has identified several work programs for its Basin Gulch and Jungo properties which vary in the amount of funding required from less than $1,000,000 to as much as $22,000,000. Management’s goal is to raise at least $2,000,000 to move these properties forward. As additional funds become available, management plans to continue to advance its current properties and also plans the acquisition of additional properties which it has identified. Management’s goal is to perform additional evaluation and exploration with a view to possibly obtaining a JV partner on those projects to allow the Company to grow more quickly and to expand the Company’s project base. Management estimates that the initial cost to pursue this course of action to be approximately $1,000,000. In addition Management is reviewing additional mineral properties throughout the world. The acquisition of such properties appears very attractive however such an approach would require even more immediate or short term cash, in the range of $6,000,000. Management has had and will continue to have discussions both for acquisitions and financing with the goal that both the properties and financing can be arranged in a coordinated time frame. Management’s focus in these efforts is to enhance shareholder value and create a base of operations from which future expansion and growth can occur.
Much of the past year has been spent to obtaining trading status on the OTC as well as a number of changes at the management and director level of the Company. While the effects from some of the changes continue, we believe that our reorganizational efforts have been successful and a stronger and more experience management team is in the process of being created, which will lay the foundation of our future growth.
Basin Gulch Management
Aultra Gold’s Basin Gulch project in place in Montana is scheduled for development as funding, which is not yet available, allows. Although Basin Gulch contains an open-ended bulk-tonnage gold/silver system that contains extensive gold and silver mineralization, with outstanding hypothetical high-grade exploration targets untested, the current rules in Montana mean that a large-scale open pit gold mine will be difficult to permit. Several local targets were discovered in the previous exploration of the property. These may potentially be permitted and developed in a short period of time, especially under the small miners provisions in Montana. In addition, the property contains excellent targets for bulk gold/silver mineralization within a nested diatreme complex and along associated structures. These targets will be systematically explored. The initial mineralization can be mined under Montana’s small mine provisions, so permitting can be potentially completed in weeks instead of years, once funding is available.
Our officers and directors will handle our administrative duties with the help of three consultants as discussed below. Mr. Rauno Perttu, our CEO, has more than 35 years in economic geology and management. He discovered and explored the Basin Gulch property. AGI has discussed contract geological and engineering help with experienced professionals, once funding is available.
The contractor who, with funding, will initially develop the drift into the first gold mineralized zone on the Basin Gulch property is Mr. William R. Hansen, a veteran mining engineer who graduated from the school of mines in nearby Butte, Montana. Mr. Hansen has his own drilling company and contract underground mining business. He is familiar with Basin Gulch and is experienced with Montana’s regulations and regulators. He brings his own experienced miners. Both Mr. Perttu and Mr. Hansen know and can quickly bring in key consultants who are very knowledgeable and respected in the region, if needed.
Under Montana’s regulations, development at Basin Gulch can be initiated through a step by step process beginning with a Small Miner’s exclusion that will allow the adit (i.e. horizontal mine entry) to be started within a few weeks time after the application is filed.
As a result of the Exchange Agreement, (i) AGI became our wholly-owned subsidiary, and (ii) we succeeded to the business of AGI, which was formed in January 2006, as our sole business. Our results of operations for the fiscal year ended December 31, 2006 are set forth on the audited financial statements filed as part of this Annual Report. This discussion and analysis should be read in conjunction with the financial statements and notes, and financial statements and notes, included with this Annual Report.
Cost and revenue assumptions-Basin Gulch
The focus of our initial operating plan is aimed at the exploitation of a gold-bearing breccia zone. AGI then plans to
drift to a secondary diatreme 200 feet beyond the breccia. As soon as funding permits, AGI plans drilling of nearby known target areas of gold and silver mineralization.
With funding, AGI also plans permitting activities for a series of small sequential cuts in an advancing test mine front, with corresponding sequential reclamation to minimize environmental disturbance. AGI’s goal will be to conduct exploration of identified and potential gold and silver zones with the intent of finding sufficient new underground reserves to allow continuous operations. AGI also plans to drill deep diatreme targets as early as funding and permitting allow. If a large high-grade “boiling zone” deposit is discovered, it will be incorporated into future development plans.
Until we realize production from the Basin Gulch Property we will not generate significant revenues and may not be successful. Once we are able to start, if we can’t generate sufficient revenues to continue operations, we will be forced to suspend or cease operations.
Limited Operating History- Need for Additional Capital
There is limited historical information about us upon which to base an evaluation of our performance. We are at an exploration stage operation and have had limited revenues. We cannot guarantee that we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise. We must raise approximately $3.5 to $5 million in planned equity financing and three trenches of $5 million each in debt financing over the next three years in order to carry-out our Plan of Operations as discussed further above.
We have no assurance that future financings will be available to us on acceptable terms. If financing is not available to us on acceptable terms, we may be unable to continue our operations.
Results of Operations for the Period from Inception through December 31, 2008
We have earned a minimal amount of revenues from our incorporation on January 26, 2005 to December 31, 2009. We do not anticipate earning revenues unless we enter into commercial production on the Basin Gulch Property, which will not happen for the foreseeable future. We have not commenced the exploration stage of our business and can provide no assurance that we will discover economic mineralization on the property, or if such minerals are discovered, that we will enter into commercial production.
We incurred operating expenses in the amount of $_______ for fiscal 2008 compared to $633,870 for fiscal 2008. These operating expenses were comprised of mineral property costs of [$136,834 (2007 $ 172,414)], transfer agent costs of [$4,049], professional fees of $227,041 (2007-$20,944) filing fees of $4,049 (2007 $4,691) and office, bank charges and other sundries, of $20.9444. The professional fees for 2008 include the accrued costs of the Canadian judgment which although dispute and will be contested in the US has been reflected in the financial statements.
We have not attained profitable operations and are dependent upon obtaining financing to pursue exploration activities. For these reasons our auditors believe that there is substantial doubt that we will be able to continue as a going concern.
General and Administrative Expenses
General and administrative expense consisted of accounting and professional fees and other general expenses. General and administrative expenses for the for the fiscal year ended December 31, 2009 were $_______, as compared to $633,870for the fiscal year ended December 31, 2008. The primary reason for the increase in general and administrative expenses was professional fees in particular the accrual for the Canadian judgment.
Net income (loss) for the fiscal year ended to December 31, 2009 was a loss of ($______), as compared to a net loss of ($633,870) for the fiscal year ended December 31, 2008.
Liquidity and Capital Resources
At December 31, 2008, our cash was $-0- and we had currently liabilities of $1,397,845. Since our inception on January 26, 2005, to the end of the period ended December 31, 2008, we have incurred losses of $2,416,144. We attribute our net loss to having no revenues to offset our operating expenses.
We have no cash flow from operations and do not have cash and or equivalents to meet our core operational requirements for the next 12 months, but we will also be required to raise additional working capital to fund our Plan of Mining Operations of approximately $3.5 to $5 Million in planned equity financing and three trenches of $5 Million each in debt financing over the next three years in order to carry-out the Plan of Operations as discussed further above.
We have no assurance that future financings will be available to us on acceptable terms. If financing is not available to us on acceptable terms, we may be unable to continue our operations. Should our costs and expenses prove to be greater than we currently anticipate, or should we change our current Plan of Mining Operations in a manner that will increase or accelerate our anticipated costs and expenses, such as through the acquisition of new properties, the depletion of our working capital would be accelerated. To the extent that it becomes necessary to raise additional cash in the future as our current cash and working capital resources are depleted, we will seek to raise it through the public or private sale of debt or equity securities, the procurement of advances on contracts or funding from joint-venture or strategic partners, debt financing or term loans, or a combination of the foregoing. We also may seek to satisfy indebtedness without any cash outlay through the private issuance of debt or equity securities.
We have no assurance that future financings will be available to us on acceptable terms. If financing is not available to us on acceptable terms, we may be unable to continue our operations.
Future Plans
Aultra’s goals and objective for the current year will be adjusted according to the availability of funds and changing market conditions. Management has identified several work programs for its Basin Gulch and Jungo properties which vary in the amount of funding required from less than $1,000,000 to as much as $22,000,000. Management’s goal is to raise at least $2,000,000 to move these properties forward. As additional funds become available, management plans to continue to advance its current properties and also plans the acquisition of additional properties which it has identified. Management’s goal is to perform additional evaluation and exploration with a view to possibly obtaining a JV partner on those projects to allow the Company to grow more quickly and to expand the Company’s project base. Management estimates that the initial cost to pursue this course of action to be approximately
$1,000,000. In addition Management is reviewing additional mineral properties throughout the world. The acquisition of such properties appears very attractive however such an approach would require even more immediate or short term cash, in the range of $6,000,000. Management has had and will continue to have discussions both for acquisitions and financing with the goal that both the properties and financing can be arranged in a coordinated time frame. Management’s focus in these efforts is to enhance shareholder value and create a base of operations from which future expansion and growth can occur.
Much of the past year has been spent to obtaining trading status on the OTC as well as a number of changes at the management and director level of the Company. While the effects from some of the changes continue, we believe that our reorganizational efforts have been successful and a stronger and more experience management team is in the process of being created, which will lay the foundation of our future growth.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. For a description of those estimates, see Note 3, Significant Accounting Policies, contained in the explanatory notes to our audited financial statements for the year ended December 31, 2008, contained in this Current Report. On an on-going basis, we evaluate our estimates, including those related to reserves, deferred tax assets and valuation allowance, impairment of long-lived assets, fair value of equity instruments issued to consultants for
services and estimates of costs to complete contracts. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions; however, we believe that our estimates, including those for the above-described items, are reasonable.
Revenue Recognition
Revenue is recognized when the product is shipped to a customer, or in the limited circumstances, at destination, when terms provide that title passes at destination. Estimated amounts for sales returns and allowances are recorded at the time of sale.
Recent Accounting Pronouncements
FASB Interpretation No 47, “Accounting for Conditional Asset Retirement Obligations” (“FIN 47”) was issued in March 2005 and clarifies the accounting prescribed in SFAS No. 143, “Accounting for Asset Retirement Obligations”. FIN 47 requires the recognition of a liability for the fair value of a conditional asset retirement obligation if the fair value can be reasonably estimated, even though uncertainty exists as to the timing and method of settlement. Management is currently evaluating the requirements of FIN 47 and has not yet determined the impact on the financial statements.
FASB Interpretation No 48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109” (“FIN 48”), was issued in July 2006. This interpretation clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” It prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken, or expected to be taken, on a tax return. The Company will be required to adopt FIN 48 in the first quarter of fiscal 2008. Management is currently evaluating the requirements of FIN 48 and has not yet determined the impact on the financial statements.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurement” (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value and expands disclosures about assets and liabilities measured at fair value. The Company will be required to adopt SFAS 157 in the first quarter of fiscal 2009. Management is currently evaluating the requirements of SFAS 157 and has not yet determined the impact on the financial statements.
In September 2006, the FASB issued SFAS No. 158 (“SFAS 158”), “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106, and 132(R).” SFAS 158 requires an employer to recognize a plan’s funded status in its statement of financial position, measure a plan’s assets and obligations as of the end of the employer’s fiscal year and recognize the changes in a defined benefit postretirement plan’s funded status in comprehensive income in the year in which the changes occur. The Company will be required to recognize the funded status of benefit plans and adopt the new disclosure requirements effective August 31, 2007. The Company will be required to measure plan assets and benefit obligations as of the date of the fiscal year-end statement of financial position effective August 31, 2009. Management is currently evaluating the requirements of SFAS 158, but based on the current funded status of the plans, management does not anticipate SFAS 158 will have a material impact on the Company's financial statements.
ITEM 7.
FINANCIAL STATEMENTS NAD SUPPLEMENTARY DATA
The required Financial Statements and the notes thereto are contained in a separate section of this report beginning with the page following the signature page.
ITEM 8.
ITEM 8.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On October 16, 2009, the Board of Directors of the Registrant dismissed Moore & Associates Chartered, its independent registered public account firm.
On August 27, 2009, the Public Company Accounting Oversight Board (“PCAOB”) revoked the registration of Moore and Associates Chartered because of violations of PCAOB rules and auditing standards in accounting the financial statements, PCAOB rules and quality controls standards, and Section 10(b)of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and noncooperation with the Board investigation.
On the same date, October 16, 2009, the accounting firm of Gruber & Company, LLC, CPAs was engaged as the Registrant’s new independent registered public account firm. The Board of Directors of the Registrant and the Registrant's Audit Committee approved of the dismissal of Moore & Associates Chartered and the engagement of Gruber & Company, LLC, CPAs as its independent auditor. None of the reports of Moore & Associates Chartered on the Company's financial statements for either of the past two years or subsequent interim period contained an adverse opinion or disclaimer of opinion, or was qualified or modified as to uncertainty, audit scope or accounting principles, except that the Registrant's audited financial statements contained in its Form 10-K for the fiscal year ended December 31, 2008 a going concern qualification in the registrant's audited financial statements.
During the Registrant's two most recent fiscal years and the subsequent interim periods thereto, there were no disagreements with Moore and Associates, Chartered whether or not resolved, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to Moore and Associates, Chartered's satisfaction, would have caused it to make reference to the subject matter of the disagreement in connection with its report on the registrant's financial statements.
The Registrant has requested that Moore and Associates, Chartered furnish the registrant with a letter addressed to the Securities and Exchange Commission stating whether it agrees with the above statements. Moore and Associates, Chartered has responded stating that they will not be providing the requested letter.
On October 16, 2009, the registrant engaged Gruber & Company, LLC, CPAs as its independent accountant. During the two most recent fiscal years and the interim periods preceding the engagement, the Registrant has not consulted Gruber & Company, LLC, CPAs regarding any of the matters set forth in Item 304(a)(2)(i) or (ii) of Regulation S-B.
ITEM 9A
ITEM 9A (T).
CONTROLS AND PROCEDURES
Item 9A (T). Controls and Procedures
The President of Aultra Gold Inc. acts both as our chief executive officer and principal accounting officer and is responsible for establishing and maintaining disclosure controls and procedures for the company.
We are required to maintain disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosure. As of December 31, 2008 we conducted an evaluation, under the supervision, and with the participation of management, Rauno Perttu, acting as our chief executive officer and principal accounting officer, of the effectiveness of the design and operation of our disclosure controls and procedures.
Based on this evaluation, our chief executive officer and principal accounting officer concluded that, as of the end of the fiscal period ending December 31, 2008 our disclosure controls and procedures were not effective to ensure that the information required to be disclosed in reports we submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that such information was accumulated and communicated to our chief executive officer and principal accounting officer in a manner that allowed for timely decisions regarding required disclosure.
Management does not expect that our Disclosure Controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company's CEO and CFO and effected by the company's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that: pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
As of December 31, 2008 management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.
Identified Weaknesses
The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board was the lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures.
-We omitted to disclose of our “Management’s Annual Report on Internal Control over Financial Reporting” in our initial Annual Report filed on Form 10-K for the fiscal year ended December 31, 2007;
- During 2007, we did not timely file our Quarterly Report on Form 10-Q for the six months ending June 30, 2007 and our Annual Report for year ending December 31, 2007;
-We lack sufficient trained personnel with experience in accounting and financial reporting functions due to the size of our Company and our lack of financial resources to pay such personnel; and
-We do not have a sufficient number of employees to adequately segregate accounting duties to provide for sufficient internal controls.
These material weaknesses were first identified by Mr. Perttu in connection with the preparation and review of our unaudited financial statements as of September 30, 2008 in or about November 2008.
Management also believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.
Management's Remediation Initiatives
In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated a plan to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management.
Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Board. While we are actively seeking outside members, including candidates with accounting experience, we cannot provide any assurance that we will be successful. Given the size of our company, lack of revenues and current lack of financing to continue with our business, it is unlikely that anyone will agree to join our Board until general economic conditions and our own business prospects improve significantly.
Changes in Internal Control Over Financial Reporting.
During the fiscal quarter ended December 31, 2008, there were no changes in our internal controls over financial reporting that we believe could materially affect, or is reasonably likely to materially affect, our internal controls over financial reporting.
This Annual Report does not include an attestation report of the Company’s registered accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the company’s registered public accounting firm pursuant to temporary rules of the SEC.
ITEM 9B.
ITEM 9B.
OTHER INFORMATION
None.
PART III
ITEM 10:
ITEM 10:
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Executive Officers and Directors
The following table sets forth information regarding our directors and executive officers as of April __, 2010, who are our directors and executive officers:
(1) On October 12, 2007, Rauno Perttu became the interim Chief Financial Officer upon the resignation of Ms. Baljinder Bhullar
(2) On March 22, 2007 Jeremy Caddy resigned as our director and Ms. Baljinder Bhullar was appointed as a member of our board of directors to fill the corresponding vacancy created. On October 12. 2007 Ms. Bhullar resigned as a director.
(3) Appointed a director and Corporate Secretary on October 12. 2007
(4) Appointed as the CEO, President, CFO and sole director of the Company on April 1, 2006. Subsequently, Ms. Dobson resigned as the Company’s CEO, President, CFO and sole director on January 22, 2007.
On October 12, 2007 Mr. Lawson resigned as a director of the Company.
Set forth below is a biographical description of each director and senior executive officer of the Company and AGI based on information supplied by each of them.
Rauno Perttu - President and Chief Executive Officer, Interim Chief Financial Officer, Director
Mr. Rauno Perttu age 63, acts as the President, Secretary and Director of the Company effective January 22, 2007. An academically distinguished geologist with a M.S. in Geology, Mr. Perttu is a registered Engineering Geologist in Oregon who has held senior positions with some of North America’s leading resource companies. At the Kennecott Corporation, he initially worked as a senior geologist, was later promoted to Coal Manager, and then to Director of Business Development. Before Kennecott, Mr. Perttu held senior geologist positions at Gulf Minerals, Resources International, and Pacific Power and Light Company. For the last 20 years, he has worked as a consultant, initiating and managing exploration and development programs in North America, Chile, Columbia, and Venezuela. He has been involved in the discovery of gold and silver deposits in Montana, Utah, and Nevada. He has 36 years of experience in economic geology. He has evaluated companies for acquisition and commodities for diversification. He has worked internationally in all phases of mineral and metals exploration, evaluation, and development. Mr. Perttu has managed modest sized to major projects and programs from the initial conceptual stage through all the subsequent steps, including discovery, acquisition, and determination of economic feasibility, development and production. This background has given him experience in, not only the technical, but also the business aspects of the mineral industry.
Richard Crofts - Director
Richard Crofts is a resident of France and the United Kingdom. Richard Crofts is originally from Edinburgh, yet his years in the financial services field have taken him throughout the world. The majority of Richard's experience has been in Risk and Insurance related business as well as Mergers and Acquisitions. Throughout his professional career, he has sat on the Board of Directors for several European companies in the Insurance/Reinsurance Credit and Financial Products industries. He has also advised numerous Gas, Oil and Mining ventures, primarily with respect to insurance risk and credit.
In 2001, Richard founded Euramca SA, a private insurance consulting firm based out of Paris, France. In October 2003, Richard was appointed to the Board of Directors of the Benjamin Rothschild Reinsurance Group. In late 2004, he co-founded Groupe PARI, an insurance and reinsurance consultancy firm based out of Paris, France and Algiers, Algeria. Richard Crofts was appointed to the board of Global Developments in November 2006.
John Yee Corporate Secretary and Director
John K. Yee, age 62, real estate developer, involved in many large land and housing projects in the lower mainland Canada British Columbia and US States. for the past 30 years.
Mr. Yee spent 15 years in the golf and hospitality industries in the United States Canada and Asia. Mr. Yee has a multinational background and was involved in numerous ventures in the US, Canada, Japan and more specifically in the Far East. In 1994 Mr. Yee was appointed Director of Goldrush Casino and Mining Cooperation (“Goldrush”), a Vancouver Stock Exchange listed company GDH which is no longer in operation. He then became President and Director of Goldrush during 1995 to 1996, to oversee the business plans of the Company.
The Company’s mining property was in Black Hawk, Colorado with hotel and casino properties in Colorado and Las Vegas.
In 2003 to 2005 Mr. Yee was the Chairman of Magnum d’Or Resources Inc. an OTC public listed Company (Symbol MAG.OB). Under his management, Magnum acquired large gold and copper potential properties in Mongolia. The Shandi property is in an excellent geological region and borders the famous Ivanhoe Mines as well as International Uranium Corp. In 2004 Mr. Yee was also instrumental in acquiring another significant property in upper Mongolia the Khul Morit for Magnum and was instrumental in a JV structure with Placer Dome for the Khul Morit Mongolian Property.
Currently Mr. Yee is serving as director for 3 other private mining Companies.
Board Committees:
At this time, the board has no committees, including an audit, nominating or compensation committee, but the Company intends to create such committees sometime during the fiscal year ending December 31, 2007. Furthermore, our Board of Directors intends to form an Audit Committee based on the following terms.
Members of our audit committee will serve for a term or terms as determined by our Board of Directors. The purpose of the Audit Committee of the Board of Directors of the Company will be to provide assistance to the Board in fulfilling its responsibility relating to oversight of corporate accounting, reporting practices of the Company, the quality and integrity of the financial reports of the Company, the Company's compliance with legal and regulatory requirements, the qualifications and independence of the Company's independent auditors and the performance of the Company's independent auditors and internal audit function. The Committee shall maintain free and open communication between the directors, the independent auditors, the internal auditor and the financial management of the Company.
The Committee shall be composed of at least three directors who are independent of the management of the Company and are free of any relationship that, in the opinion of the Board of Directors, would interfere with their exercise of independent judgment as Committee members. All members of the Committee must have a working familiarity with basic finance and accounting practices and shall meet the independence, experience and expertise requirements of the New York Stock Exchange and other applicable laws and regulations (including SEC Rule 10A-3). At least one member of the Committee must have accounting or related financial management expertise as defined by the Securities and Exchange Commission (the "SEC") and, in the judgment of the Board of Directors, be capable of serving the functions expected of an audit committee financial expert.
Nominating Committee
At this time, our board of directors does not have a nominating committee. Since the filing of our annual report for the fiscal year ended December 31, 2007, there have not been any material changes to the procedures by which our security holders may recommend nominees to our board of directors.
Family Relationships
There are no family relationships among any of our officers or other directors
Compliance With Section 16(A) Of The Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers and persons who beneficially own more than ten percent of a registered class of our equity securities to file with the SEC initial reports of ownership and reports of change in ownership of common stock and other equity securities of our Company. Officers, directors and greater than ten percent stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To our knowledge, the following persons have failed to file, on a timely basis, the identified reports required by Section 16(a) of the Exchange Act, as of December 31, 2007:
Code of Ethics
As of the date of this Annual Report, the Company has not adopted a Code of Ethics (the “Code of Ethics”) applicable to the Company’s principal executive, financial and accounting officer or persons performing similar functions. The Company intends to adopt the Code of Ethics sometime in the second calendar quarter of 2008.
ITEM 11:
ITEM 11:
EXECUTIVE COMPENSATION.
The following table sets forth information concerning the total compensation that the Company has paid or that has accrued on behalf of Company’s chief executive officer and other executive officers with annual compensation exceeding $100,000 during the years ended December 31, 2008. None of the Company’s officers received compensation in excess of $100,000 during any of the year ended December 31, 2008.
Summary Compensation Table
(1) Appointed as the CEO, President and Director of the Company on January 22, 2007.
The following table sets forth the compensation earned by the Company’s Chief Executive Officer during the fiscal year ended December 31, 2007, and other executive officers whose annual compensation exceeded $100,000 during any of the fiscal year ended December 31, 2007. None of the Company’s officers received compensation in excess of $100,000 during fiscal year ended December 31, 2007.
(1)
Resigned as the Company’s CEO, President and sole Director on March 31, 2006.
The following table sets forth information concerning the total compensation that AGI has paid or that has accrued on behalf of AGI’s chief executive officer and other executive officers with annual compensation exceeding $100,000 from inception on January 1, 2007 to December 31, 2008.
Summary Compensation Table
(1) With the exception of reimbursement of expenses incurred by our named executive officers during the scope of their employment, none of the named executive received any other compensation, perquisites or personal benefits in excess of $10,000.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
During our fiscal year ended December 31, 2007, we did adopt a form of an incentive stock option plan.
Employment and Consultancy Agreements
On January 31, 2006, AGI entered into an Employment Agreement (the “Employment Agreement”) with Mr. Rauno Perttu to employ Mr. Perttu as its CEO and President. On January 22, 2007, AGI was acquired by the Company pursuant to the terms of the Agreement. In connection with this acquisition, Mr. Perttu agreed to serve as the CEO, President and a director of the Company under the terms of the Employment Agreement and will be compensated for the provision of such services to the Company pursuant to the Employment Agreement. The following are the material terms of the Employment Agreement:
· Mr. Perttu is entitled receive an annual salary of $120,000 per year. The Employment Agreement provides for continuous employment without a set date of termination. AGI may terminate Mr. Perttu employment when Mr. Perttu shall reach such age as AGI’s Board of Directors determines as the appropriate retirement age for the senior employees of company. Mr. Perttu may terminate his employment with the company upon not less than 3 months notice. AGI also provides Mr. Perttu with Director’s Liability Insurance and contributes to his pension. Additionally, AGI may terminate Mr. Perttu’s employment agreement upon not less than 6 months notice. Pursuant to the Termination of Control protection, upon termination of Mr. Perttu employment due to a change of control of AGI, Mr. Perttu is entitled to severance pay. The severance pay is equal to three times the amount of Mr. Perttu’s compensation package, as further defined in the Employment Agreement.
The Company has not entered into any other employment agreements with any of its other officers or directors.
Director Compensation
The following table sets forth with respect to each named director, compensation information inclusive of equity awards and payments made in the fiscal year ended December 31, 2007.
(1)
With the exception of reimbursement of expenses incurred by our directors during the scope of their services, none of the named executive received any other compensation, perquisites, and personal benefits in excess of $10,000.
Currently, the Company’s directors that are non-officers of the Company do not receive a cash retainer annually nor do they receive any remuneration for attendance at a board meeting, other than reimbursement for travel expenses.
ITEM 12:
ITEM 12:
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of March 30, 2009 with respect to the beneficial ownership of the Company's outstanding common stock following the acquisition of AGI by (i) any holder of more than five (5%) percent; (ii) each of the named executive officers, directors and director nominees; and (iii) our directors, director nominees and named executive officers as a group. Except as otherwise indicated, each of the stockholders listed below has sole voting and investment power over the shares beneficially owned.
Equity Compensation Plan Information
As of the end of our fiscal year ended December 31, 2007, we did adopt a form of an incentive stock option plan.
2007 Stock Option Plan
As a collateral agreement to the Agreement, following the completion of the acquisition of AGI, the Company’s Board of Directors agreed to the adoption of the Stock Option Plan and ratified it on January 25, 2007 effective as of February 1, 2007 providing for the issuance of up to 5,225,000 shares of Common Stock of the Company to the officers, directors, employees and consultants of the Company and/or its subsidiaries. Pursuant to the Stock Option Plan, the Company granted options to purchase an aggregate of 200,000 shares of common stock at $1.50 per share to the newly appointed directors and officers that held options to purchase ordinary shares of AGI following the completion of the acquisition, as well as to the newly appointed directors and officers of the Company.
The principal terms and conditions of the stock options granted under the Stock Option Plan are that vesting of the options granted to Directors of the Company occurs in three stages: (1) 50% on January 25, 2008; (2) 25% on January 25, 2009; and (3) 25% on January 25, 2010. The options granted are exercisable at $1.50 per share. Furthermore, the stock options granted under the Stock Option Plan are generally non transferable other than to a legal or beneficial holder of the options upon the option holder’s death. The rights to vested but unexercised options cease to be effective: (1) 18 months after death of the stock options holder; (2) 6 months after Change of Control of the Company; 12 months after loss of office due to health related incapacity or redundancy; or (5) 12 months after the retirement of the options holder from a position with AGI.
Of the options to purchase an aggregate of 200,000 shares of common stock that were granted, the following stock options have been granted to directors of the Company:
(1)
These options expired during the fiscal year 2007 as a result of their resignations as directors.
ITEM 13:
ITEM 13:
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Neither our directors and officers, nor any proposed nominee for election as a director, nor any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to all of our outstanding shares, nor any promoter, nor any relative or spouse of any of the foregoing persons has any material interest, direct or indirect, in any transaction since our incorporation or in any presently proposed transaction which, in either case, has or will materially affect us.
Our management is involved in other business activities and may, in the future become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between our business and their other business interests. In the event that a conflict of interest arises at a meeting of our directors, a director who has such a conflict will disclose his interest in a proposed transaction and will abstain from voting for or against the approval of such transaction.
Board Determination of Independence
Our board of directors has determined that Mr. Richard Crofts are each “independent” as that term is defined by the National Association of Securities Dealers Automated Quotations (“NASDAQ”). Under the NASDAQ definition, an independent director is a person who (1) is not currently (or whose immediate family members are not currently), and has not been over the past three years (or whose immediate family members have not been over the past three years), employed by the company; (2) has not (or whose immediate family members have not) been paid more than $60,000 during the current or past three fiscal years; (3) has not (or whose immediately family has not) been a partner in or controlling shareholder or executive officer of an organization which the company made, or from which the company received, payments in excess of the greater of $200,000 or 5% of that organizations consolidated gross revenues, in any of the most recent three fiscal years; (4) has not (or whose immediate family members have not), over the past three years been employed as an executive officer of a company in which an executive officer of the Company has served on that company’s compensation committee; or (5) is not currently (or whose immediate family members are not currently), and has not been over the past three years (or whose immediate family members have not been over the past three years) a partner of the Company’s outside auditor. A director who is, or at any time during the past three years, was employed by the Company or by any parent or subsidiary of the Company, shall not be considered independent.
ITEM 14:
ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES
* Moore & Associates billed us as estimated $15,600 during the fiscal year ended December 31, 2007.
Audit fees consist of fees related to professional services rendered in connection with the audit of our annual financial statements. All other fees relate to professional services rendered in connection with the audit and review of financial statements included in our Current Reports on Form 8-K, Quarterly Reports on Form 10-QSB and Annual Reports on Form 10-K filing and amendments.
Our policy is to pre-approve all audit and permissible non-audit services performed by the independent accountants. These services may include audit services, audit-related services, tax services and other services.
ITEM 15:
ITEM 15:
EXHIBITS.
SIGNATURES
Pursuant to the requirements of Section 13 and 15 (d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Aultra Gold, Inc.
Dated: April 15, 2010
By:
/s/ Robert Vivian
Name: Robert Vivian
Title: President and Chief Executive Officer and Interim Financial Officer
(Principal Executive, Accounting and Financial Officer)
Aultra Gold, Inc.
An Exploration Stage Company
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Aultra Gold, Inc.
We have audited the accompanying consolidated balance sheets of Aultra Gold, Inc. as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for each of the years in the two-year period ended December 31, 2009. Aultra Gold, Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Aultra Gold, Inc. as of December 31, 2009 and 2008, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 10 to the financial statements, conditions exist which raise substantial doubt about the Company’s ability to continue as a going concern unless it is able to generate sufficient cash flows to meet its obligations and sustain its operations. Management’s plan in regard to these matters is also described in Note 10. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/Gruber & Company, LLC
Gruber & Company, LLC
Lake Saint Louis, Missouri
April 15, 2010
Aultra Gold Inc.
An Exploration Stage Company
(Formerly New World Entertainment Corp.)
Consolidated Balance Sheets
As at December 31, 2009
(Stated in United States Dollars)
See notes to financial statements
Aultra Gold Inc.
An Exploration Stage Company
(Formerly New World Entertainment Corp.)
Consolidated Statement of Operations
From inception on January 26, 2005 to December 31, 2009
(Stated in United States Dollars)
See notes to financial statements
Aultra Gold Inc.
An Exploration Stage Company
(Formerly New World Entertainment Corp.)
Consolidated Statement of Cash Flows
From January 26, 2005 to December 31, 2009
(Stated in United States Dollars)
See notes to financial statements
Aultra Gold Inc.
An Exploration Stage Company
(Formerly New World Entertainment Corp.)
Consolidated Statements of Stockholders’ Equity
From inception on January 26, 2005 to September 30, 2009
(Stated in United States Dollars)
See notes to financial statements
Aultra Gold Inc.
An Exploration Stage Company
(Formerly New World Entertainment Corp.)
Notes to Financial Statements
December 31, 2008
(Stated in United States Dollars)
1. Nature of Operations
a) Organization
Aultra Gold Inc. (the “Company”) was incorporated under the laws of the State of Nevada on January 26, 2005 as Katie Gold Corp. and it was primarily engaged in the acquisition and exploration of mining properties until April 2006. The Company’s fiscal year end is December 31.
On March 21, 2006, a Certificate of Amendment was filed with the Secretary of State in Nevada to change the name of the Company from Katie Gold Corp. to Morningstar Industrial Holdings Corp. At this time, the Company was still engaged in the acquisition and exploration of mining properties.
On April 26, 2006, the Company filed Articles of Merger with the Secretary of State in Nevada to merge with New World Entertainment Corp., a private company incorporated in Nevada. As a result of the merger, the Company changed its business and its name from Morningstar Industrial Holdings Corp. to New World Entertainment Corp.
On December 7, 2006, a Certificate of Amendment was filed with the Secretary of State in Nevada to change the name of the Company from New World Entertainment Corp. to Aultra Gold Inc. The Nevada Secretary of Stated declared the amendment effective on January 18, 2007.
On January 22, 2007, the Company entered into a definitive Share Exchange Agreement (the “Agreement”) with Strategic Minerals Inc., a Nevada corporation, Aultra Gold Inc. (fka Dutch Mining (Canada) Ltd.) (“AGI”), a company formed under the laws of the Province of British Columbia, and certain other shareholders of AGI. Pursuant to the Agreement, which is subject to certain regulatory approval, the Company agreed to acquire 100% of the outstanding equity of AGI from the stockholders of AGI (the “AGI Shareholders”) in exchange for the issuance by the Company to the AGI Shareholders of one share of common stock, $0.001 par value (the “Common Stock”), of the Company for each issued common share of AGI (the “Acquisition”). Therefore, subject to certain regulatory approval, the Company shall be required to issue 24,496,668 shares of Common Stock to the AGI Shareholders (the “Consideration Shares”) and there will be approximately a total of 95,896,668 shares of Common Stock issued and outstanding subsequent to the Acquisition. AGI was incorporated on January 20, 2006 in Canada under the Business Corporations Act of British Columbia. AGI’s main business is acquiring and exploring gold and mineral properties with proven and probable reserves principally located in Nevada and Montana, USA, with the objective of identifying gold and mineralized deposits economically worthy of continued production and/or subsequent development, mining or sale.
b) Change of Business
On April 26, 2006, the Company filed Articles of Merger with the Secretary of State in Nevada to change its name from Morningstar Industrial Holdings Corp. and underwent a change in management and direction and was involved in the acquisition and licensing of online gaming technologies.
On May 12, 2006 the Company entered into a share exchange agreement with Liverpoole Inc., a privately-owned corporation organized under the laws of Antigua, for the acquisition of all of the issued and outstanding shares of Liverpoole in exchange for 25,000,000 shares of the Company, upon completion of the agreement. In connection therewith, in order to secure the right to enter into such agreement with Liverpoole, the Company entered into an agreement with World Mobile Network Corp., a publicly-held corporation, pursuant to which, upon the completion of the agreement, World Mobile Network Corp. agreed to assign its exclusive right to acquire Liverpoole to the Company in exchange for 20,000,000 shares of the Company. As of December 31, 2006, these agreements were not been finalized.
Effective January 22, 2007 this transaction was terminated.
Effective January 22, 2007, all management and directorship changed.
Aultra Gold Inc.
An Exploration Stage Company
(Formerly New World Entertainment Corp.)
Notes to Financial Statements
December 31, 2008
(Stated in United States Dollars)
1. Nature of Operations-continued
c) Going Concern
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company’s financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business.
As shown in the accompanying financial statements, the Company has incurred a net loss of $1,230,048 for the period from January 26, 2005 (inception) to December 31, 2008. The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the development of acquisitions. Management has plans to seek additional capital through a private placement and public offering of its common stock. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
d) Share Exchange Agreement with Liverpoole Inc.
On May 12, 2006 the Company entered into a share exchange agreement with Liverpoole Inc., a privately-owned corporation organized under the laws of Antigua, for the acquisition of all of the issued and outstanding shares of Liverpoole in exchange for 25,000,000 shares of the Company, upon completion of the agreement. In connection therewith, in order to secure the right to enter into such agreement with Liverpoole, the Company entered into an agreement with World Mobile Network Corp., a publicly-held corporation, pursuant to which, upon the completion of the agreement, World Mobile Network Corp. agreed to assign its exclusive right to acquire Liverpoole to the Company in exchange for 20,000,000 shares of the Company. As of December 31, 2006, these agreements have not been finalized.
Effective January 22, 2007, termination of the May 12, 2006 Share Exchange Agreement with Liverpoole Inc. and World Mobile Network Corp.
2.
Significant Accounting Policies
a) Basis of Accounting
These financial statements are prepared in accordance with generally accepted accounting principles (“GAAP”) in United States. The Company has elected a December 31 year-end. Summarized below are those policies considered particularly significant to the Company.
b) Use of Estimates
The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of any contingent assets and liabilities as at the date of the financial statements, as well as the reported amounts of revenues earned and expenses incurred during the period. Actual results could differ from those estimates.
c) Financial Instruments and Financial Risk
The Company’s financial instruments consists of cash, prepaid expenses, investments, accounts payable and accrued liabilities, the fair values of which approximate their carrying amounts due to the short-term nature of these instruments.
Aultra Gold Inc.
An Exploration Stage Company
(Formerly New World Entertainment Corp.)
Notes to Financial Statements
December 31, 2008
(Stated in United States Dollars)
2.
Significant Accounting Policies-continued
d) Cash
For the purposes of the statement of cash flows, the company considers all funds held in its bank accounts and funds held in trust by
third parties as cash.
e) Investment in mining properties
Land and Mining Claims - Land and mining claims are recorded at the lower of cost, less accumulated depletion, or fair value. Costs of developing mining properties (after completion of exploration) are capitalized. Exploration costs are expensed as incurred until the establishment of a commercially minable deposit or reserve which can be economically and legally produced. When a mining property reaches the production stage, the related capitalized costs are amortized using the units of production method on the basis of proven and probable ore reserves. The Company’s mining properties are periodically assessed for impairment of value and any losses are charged to operations at the time of impairment.
f) I mpairment of Long-Lived Assets
The Company accounts for long-lived assets pursuant to Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. The Company evaluates its land and mineral properties, buildings, machinery and equipment and other long-lived assets for impairment at least annually and when indications of possible impairment exist and assesses their recoverability based upon anticipated future cash flows from the asset’s or group of assets’ use or sale. If changes in circumstances lead Company management to believe that any of its long-lived assets may be impaired, the carrying value of long-lived assets are reduced by the estimated excess of the carrying value over the fair value of the assets. Fair value is determined by the discounted future cash flows from the asset or group of assets. No impairment was recognized during the years ended December 31, 2008 or 2007.
g) Loss per Share
Basic loss per share is computed by dividing loss attributable to common shareholders by the weighted average number of common shares outstanding during the period. Fully diluted loss per share is not disclosed as it is anti-dilutive.
h) Management’s Estimates
The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates.
i) Share Capital
Share capital issued for non-monetary consideration is recorded at an amount based upon fair market value as estimated by management.
Aultra Gold Inc.
An Exploration Stage Company
(Formerly New World Entertainment Corp.)
Notes to Financial Statements
December 31, 2008
(Stated in United States Dollars)
2.
Significant Accounting Policies-continued
j) Comprehensive Income
The Company applies Statement of Financial Accounting Standards No. 130 Reporting Comprehensive Income (SFAS No. 130). Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non owner sources. It includes all changes in equity during a period except from those resulting from investments by owners and distributions to owners.
k) Income taxes
Deferred Income taxes are provided for temporary differences between the financial reporting and tax basis of assets and liabilities using enacted tax laws and rates for the years when the differences are expected to reverse.
l) Stock based compensation
The Company accounts for stock-based compensation in accordance with SFAS No. 123 for “Accounting for stock-based compensation” and related interpretations.
The Company’s Board of Directors agreed to the adoption of the Stock Option Plan and ratified it on January 25, 2007 effective as of February 1, 2007 providing the issuance of up to 5,225,000 shares of Common Stock of the Company to the officers, directors, employees and consultants of the Company an/or its subsidiaries. Pursuant to the Stock Option Plan, the Company granted options to purchase an aggregate of 200,000 shares of Common Stock at $1.50 per share to the newly appointed directors and officers that held options to purchase ordinary shares of the Company following the completion of the acquisition, as well as to the newly appointed directors and officers of the Company. These options were cancelled effective January 1, 2008.
On May 6, 2008, the Board of Directors of Aultra Gold, Inc. (the "Company"), approved a 2008 Stock Option Plan which provides up to 10,000,000 common shares be made available to certain individuals as an incentive. The plan has a vesting period of 36 month as follows: 10% at the end of six months, an additional 10% at the end of twelve months, an additional 15% at the end of eighteen months, an additional 15% at the end of twenty four months, an additional 25% at the end of thirty months and finally an additional 25% at the end of thirty-six months
As part of this plan the Board granted 6,500,000 options at the then market price of $.14 per share.
m) Asset retirement obligations
Asset retirement obligations requires recognition of a legal liability for obligations relating to retirement of property, plant and equipment, and arising from the acquisition, construction, development, or normal operation of those assets. Such asset retirement cost, must be recognized at fair value, when a reasonable estimate of fair value can be estimated, in the period in which it is incurred, added to the carrying value of the asset, and amortized into income on a systematic basis over its useful life.
As at December 31, 2008, the Company does not have any asset retirement obligations.
3. Investment
Details are as follows:
This investment represents a minority interest of less than 10%. The shares were valued at market as stated as at December 31, 2008.
Aultra Gold Inc.
An Exploration Stage Company
(Formerly New World Entertainment Corp.)
Notes to Financial Statements
December 31, 2008
(Stated in United States Dollars)
4.
Acquisition of Subsidiary
On January 22, 2007, the Company entered into a definitive Share Exchange Agreement (the “Agreement”) with Strategic Minerals Inc., a Nevada corporation, Aultra Gold Inc. (fka Dutch Mining (Canada) Ltd.) (“AGI”), a company formed under the laws of the Province of British Columbia, and certain other shareholders of AGI. Pursuant to the Agreement, which is subject to certain regulatory approval, the Company agreed to acquire 100% of the outstanding equity of AGI from the stockholders of AGI (the “AGI Shareholders”) in exchange for the issuance by the Company to the AGI Shareholders of one share of common stock, $0.001 par value (the “Common Stock”), of the Company for each issued common share of AGI (the “Acquisition”). Therefore, subject to certain regulatory approval, the Company shall be required to issue 24,496,668 shares of Common Stock to the AGI Shareholders (the “Consideration Shares”) and there will be approximately a total of 95,896,668 shares of Common Stock issued and outstanding subsequent to the Acquisition.
The purchase method of accounting has been applied with the shares issued as consideration being recorded at $3,356 that being the value given up after considering price fluctuations, liquidity issues and exchange rates.
At the date of the acquisition, the value of the identifiable net assets of AGI was as follows:
5.
Related Party Balances and Transactions
Related party transactions are recorded at their cost, are non-interest bearing, unsecured and have no specific terms for repayment.
As at December 31, 2007, the Company has a receivable MB Primes Management Ltd. (“MB Primes”), a company with directors in common, $61,995 which was written off during the quarter ended March 31, 2008
As at December 31, 2007, the Company has a receivable with Bio Remediation Inc. (“Bio Remediation”), a company with directors in common, $27,056 which was written off during the quarter ended March 31, 2008
As at December 31, 2008, the Company owes it’s President a total of $418,390 which is a combination of unpaid salary of $116,878
and $301,512 of Company expenses paid for by the President.
The Company acquired its Basin Gulch Property from a private company, one principal of whom is a common director with the Company. Refer to Note 6.
Aultra Gold Inc.
An Exploration Stage Company
(Formerly New World Entertainment Corp.)
Notes to Financial Statements
December 31, 2008
(Stated in United States Dollars)
6. Mineral Property Interests
a) Basin Gulch Property, Montana, USA
On May 31, 2006, the Subsidiary Aultra Gold Inc. (formerly known as Dutch Mining (Canada) Ltd.) acquired Basin Gulch Property, consisting of eleven patented mineral claims of 217.9 acres, paid by the issuance of 20,000,000 shares of the Company. The share issuance has been recorded at the carrying costs of the property to the optionor, as the optionor is a related party to the company and as there has been no substantial change in ownership of the property by the optionors (nominal amount), who received 20,000,000 shares of the 24,496,668 shares outstanding of the Subsidiary.
The three-stage agreement is structured as follows:
Stage 1 initial payment:
The Subsidiary paid an initial cash payment of $10,000 and must fulfill the following:
i) on or before July 30, 2006 report all the exploration and studies conducted on the Property.
Stage 2 advance production royalties:
To further evaluate and develop the minerals, the Subsidiary must fulfill the following
i) on or before June 10, 2006, the Company must make a cash payment of $15,000 (paid);
ii) on or before September 10, 2006 the Company must make a cash payment of $25,000 (paid);
iii) the Company must make a cash payment of $50,000 due on March 10 and September 10 of each year until production has commenced.
Stage 3 production royalties:
Upon commencement of production, the Subsidiary will pay the greater of:
i) a twice annual cash payment of $50,000 due on March 10 and September 10 of each year;
ii) 3% of the gross sales receipts of the gold and silver sold, due semi-annually on March 10 and September 10 of each year;
Should production be suspended for a period of 6 months or longer, the twice annual advance production royalty of $50,000 listed above will resume.
Upon the completion of payments totaling US$8,000,000, the Subsidiary will have purchased the mineral rights to this property. In the current period, payments of $50,000 (paid) have be made, which satisfy this agreement.
b) Jungo Property, Nevada, USA
On June 1, 2007, the Company entered into a formal binding Agreement of Purchase and Sale (the “Agreement”) with W.R. Hansen, an individual (the “Seller”), pursuant to which the Company acquired from the Seller certain mining claims together with all improvements and all equipment owned by the Seller located thereon, located in Humboldt County, State of Nevada (the “Property”). In consideration of the purchase of the Property, the Company agreed to (i) reimburse the Seller for all staking and filing costs related to the Property, (ii) issue the Seller 50,000 restricted shares of the Company’s common stock, $0.001 par value per share (the “Common Stock”), valued at $0.50 per share, (iii) upon its sole determination of sufficient mineralization to place the Property in production, to further issue to the Seller additional 50,000 restricted shares of the Company’s Common Stock, such that the Company shall make such a determination not later than 30 days following the acquisition of the data contemplated by paragraph 3.3 of the Agreement, (iv) not later than 10 days following the date the Property is placed into development for production of metals, to issue to the Seller an additional 100,000 restricted shares of the Company’s Common Stock, and (v) as further consideration after the Property is placed in production, to direct to the Seller a monthly Net Smelter Royalty of 2% upon all gold, silver, copper, or other metals (the “Metals”) produced and sold from the Property (each royalty payment shall be paid not later than 30 days following the last day of the month in which the metals were produced and sold).
Aultra Gold Inc.
An Exploration Stage Company
(Formerly New World Entertainment Corp.)
Notes to Financial Statements
December 31, 2008
(Stated in United States Dollars)
7.
Share Capital
a)
Details of share capital are as follows:
Authorized: 500,000,000 common shares with a par value of $.001
b)
On January 23, 2007, the Company entered into a Private Placement Agreement with 555 Holdings LLC, a Nevada limited liability company (“555 LLC”), whereby it sold 200,000 units (each a “Unit”, and collectively the “Units”) to 555 LLC at a price of $1.50 per Unit, for gross proceeds of $300,000. Each Unit consists of one share of Common Stock of the Company and one non-transferable Common Stock purchase warrant (a “Warrant”). Each Warrant will entitle 555 LLC to purchase one share of the Common Stock of the Company for a period of one year commencing from the Closing Date at an exercise price of $2.50 per share.
c)
Refer to note 9.
8. Income Taxes
A reconciliation of income taxes at statutory rates is as follows:
The Company has non-capital losses of approximately $269,173, which are available to reduce future taxable income in Canada and which expire in 2027. Subject to certain restrictions the Company also has mineral property expenditures of approximately $100,000 available to reduce taxable income in future years. The Company has not recognized any future benefit for these tax losses and resource deductions, as it is not considered likely that they will be utilized.
Aultra Gold Inc.
An Exploration Stage Company
(Formerly New World Entertainment Corp.)
Notes to Financial Statements
December 31, 2008
(Stated in United States Dollars)
8.
Income Taxes-continued
9.
Commitments
a)
The Company had a lease for premises which expires on January 31, 2009 however effective September 1, 2007 the leased premises was terminated by the landlord.
b)
By agreement dated February 15, 2006, the Company entered into a five-year consulting agreement with a company that has directors and officers in common. The monthly payments for general consulting services are $55,000 (CDN) and the flat fee for other disbursements is $1,500 (CDN). All payments relating to extra ordinary expenses, investor awareness program, media relations, and corporate identity program are based on actual cost plus 10%.
Effective September 30, 2006 this agreement was suspended and then subsequently cancelled.
10.
Recent Accounting Pronouncements
In February 2007, the Financial Accounting Standards Board (the “FASB”) issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS 159). SFAS 159 allows the company to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the requirements of SFAS 159 and the potential impact on the Company’s financial statements.
In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106 and 132(R)” (SFAS 158”). SFAS 158 requires an employer that sponsors one or more single-employer defined benefit plans to (a) recognize the overfunded or underfunded status of a benefit plan in its statement of financial position, (b) recognize as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit cost pursuant to SFAS 87, “Employers’ Accounting for Pensions”, or SFAS 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions”, (c) measure defined benefit plan assets and obligations as of the date of the employer’s fiscal year-end, and (d) disclose in the notes to financial statements additional information about certain effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition asset or obligation. SFAS 158 is effective for the Company’s fiscal year ending December 31, 2007. The adoption of SFAS No. 158 is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
Aultra Gold Inc.
An Exploration Stage Company
(Formerly New World Entertainment Corp.)
Notes to Financial Statements
December 31, 2008
(Stated in United States Dollars)
10. Recent Accounting Pronouncements-continued
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurement" ("SFAS 157"). The Statement provides guidance for using fair value to measure assets and liabilities. The Statement also expands disclosures about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurement on earnings. This Statement applies under other accounting pronouncements that require or permit fair value measurements. This Statement does not expand the use of fair value measurements in any new circumstances. Under this Statement, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the entity transacts. SFAS 157 is effective for the Company for fair value measurements and disclosures made by the Company in its fiscal year beginning on January 1, 2008. The Company is currently reviewing the impact of this statement.
In March 2006, the FASB issued SFAS No. 156, “ Accounting for Servicing of Financial Assets ”, which amends SFAS No. 140 “ Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities ”. SFAS No. 156 may be adopted as early as 1 January 2006, for calendar year-end entities, provided that no interim financial statements have been issued. Those not choosing to early adopt are required to apply the provisions as of the beginning of the first fiscal year that begins after 15 September 2006 (e.g. 1 January 2007, for calendar year-end entities). The intention of the new statement is to simplify accounting for separately recognized servicing assets and liabilities, such as those common with mortgage securitization activities, as well as to simplify efforts to obtain hedge-like accounting. Specifically, the FASB said SFAS No. 156 permits a service using derivative financial instruments to report both the derivative financial instrument and related servicing asset or liability by using a consistent measurement attribute, or fair value. The adoption of SFAS No. 156 is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
In February 2006, the FASB issued SFAS No. 155, “ Accounting for Certain Hybrid Financial Instruments ”, which amends SFAS No. 133, “ Accounting for Derivative Instruments and Hedging Activities ” and SFAS No. 140. SFAS No. 155 permits fair value measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or hybrid financial instruments containing embedded derivatives. The adoption of SFAS No. 155 is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.