S-1 1 v331059_s1.htm FORM S-1

 

As filed with the Securities and Exchange Commission on January 7, 2013

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

Form S-1

 

REGISTRATION STATEMENT UNDER

THE SECURITIES ACT OF 1933

 

Aurora Gold Corporation

(Exact name of registrant as specified in its charter)

 

Delaware   1040   13-3945947
(State or Other Jurisdiction of incorporation or organization   (Primary Standard Industrial Classification Code Number)   (IRS Employer Identification Number)

 

    Lars Pearl

C/- Coresco AG

Level 3

Gotthardstrasse 20

6304 Zug

Switzerland

 

C/- Coresco AG

Level 3

Gotthardstrasse 20

6304 Zug

Switzerland

Telephone: (+41) 7887-96966

Facsimile: (+41) 44 274 2818

 

Telephone: (+41) 7887-96966

Facsimile: (+41) 44 274 2818

(Address, including zip code and telephone number,

including area code, of registrant’s principal

executive offices)

 

(Address, including zip code and telephone number,

including area code, of agent for service)

 

Copies of all communications and notices to:

Joseph Sierchio, Esq.

Elishama Rudolph, Esq.

Sierchio & Company, LLP

430 Park Avenue

7th Floor

New York, New York 10022

Telephone: (212) 246-3030

Facsimile: (212) 246-3039

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 of the Securities Act of 1933, as amended, check here: x

 

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

 

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

 

 
 

 

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

 

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

 

Large Accelerated Filer £   Accelerated Filer £
     

Non-accelerated Filer    £

(Do not check if a smaller reporting company)

  Smaller reporting company x

 

Calculation of Registration Fee

 

Securities to be Registered  Number of
Shares
Registered
  

Proposed

Maximum

Offering

Price Per

Share (1)

  

Proposed

Maximum

Offering Price (1)

   Registration Fee 
Common Stock Par Value $0.001   135,000,000(2)  $0.04   $5,400,000   $736.56 
Total   135,000,000(3)       $5,400,000   $736.56(4)

 

(1) Estimated solely for the purpose of computing the registration fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended; the closing sale price of our stock on January 2, 2013, as quoted on the OTC Markets Group Inc. QB tier was $0.04 per share.
   
(2) Represents 135,000,000 shares of our common stock, par value $0.001 per share, purchased by Alltech Capital Limited pursuant to a subscription agreement dated September 21, 2012, which we have agreed to register for resale on its behalf.
   
(3) This registration statement includes an indeterminate number of additional shares of common stock issuable for no additional consideration pursuant to any stock dividend, stock split, recapitalization or other similar transaction effected without the receipt of consideration, which results in an increase in the number of outstanding shares of our common stock. In the event of a stock split, stock dividend or similar transaction involving our common stock, in order to prevent dilution, the number of shares registered shall be automatically increased to cover the additional shares in accordance with Rule 416(a) under the Securities Act.
   
(4) Paid herewith.

 

Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act, or until the registration statement shall become effective on such date as the commission, acting under said section 8(a), may determine.

 

 
 

 

Subject to Completion, Dated January 7, 2013

 

The information in this Prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This Prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sales is not permitted.

 

Prospectus

 

 

Aurora Gold Corporation

 

135,000,000 Shares of Common Stock

 

This prospectus (the “Prospectus”) relates to the resale by Alltech Capital Limited (the “Selling Stockholder” or “Alltech”) of up to 135,000,000 shares of our common stock, which the Selling Stockholder purchased pursuant to a subscription agreement dated as of September 21, 2012. The shares were purchased pursuant to an exemption from the from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), including, Regulation S as the Selling Stockholder is not a U.S. Person (as that term is defined in Regulation S of the Securities Act) and the Selling Stockholder purchased the shares in a transaction outside of the United States. The certificate representing the shares bears a restrictive legend in accordance with Regulation S. In addition, we and the Selling Stockholder have complied or will comply with the following requirements of Regulation S:

 

1.          the offer or sale was made in an offshore transaction;

 

2.          we did not make any directed selling efforts in the United States;

 

3.          no offer or sale was made to a U.S. person or for the account or benefit of a U.S. person;

 

4.          the Selling Stockholder certified that it was not a U.S. person and was not acquiring the securities for the account or benefit of any U.S. person;

 

5.          the Selling Stockholder agreed to resell such securities only in accordance with the provisions of Regulation S, pursuant to registration under the Securities Act, or pursuant to an available exemption from registration; and agreed not to engage in hedging transactions with regard to such securities unless in compliance with the Securities Act; and

 

6.          we are required to refuse to register any transfer of the securities not made in accordance with the provisions of Regulation S pursuant to registration under the Securities Act, or pursuant to an available exemption from registration.

 

Although we will pay substantially all the expenses incident to the registration of the shares, we will not receive any proceeds from the sales by the Selling Stockholder.

 

 
 

 

The Selling Stockholder and any underwriter, broker-dealer or agent that participates in the sale of the shares or interests therein may be deemed “underwriters” within the meaning of Section 2(11) of the Securities Act. Any discounts, commissions, concessions, profit or other compensation any of them earns on any sale or resale of the shares, directly or indirectly, may be underwriting discounts and commissions under the Securities Act. If the Selling Stockholder is considered to be an “underwriter” within the meaning of Section 2(11) of the Securities Act, it will be subject to the prospectus delivery requirements of the Securities Act.

 

Purchase of our shares of common stock is highly speculative and involves a high degree of risk. You should carefully consider the risks and uncertainties described under the heading “Risk Factors” beginning on page 6 of this Prospectus before making a decision to purchase any of the Securities offered pursuant to this Prospectus.

 

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

The Date Of This Prospectus Is January 7, 2013

 

 
 

 

Table of Contents

 

  Page #
Prospectus Summary 3
The Offering 4
Risk Factors 6
Note Regarding Forward-Looking Statements 13
Use of Proceeds 13
Determination Of Offering Price 14
Market Price of and Dividends On Our Common Stock and Related Stockholder Matters 14
Management’s Discussion and Analysis Of Financial Condition and Results of Operations 16
Description of Our Business and Properties 31
Directors, Executive Officers and Control Persons 37
Executive Compensation 43
Security Ownership of Certain Beneficial Owners and Management 47
Transactions With Related Persons, Promoters and Certain Control Persons 48
Description of Our Securities 50
The Selling Stockholder 52
Plan of Distribution 53
Limitation of Liability and Indemnification of Officers and Directors; Insurance 54
Disclosure of Commission Position On Indemnification for Securities Act Liabilities 55
Legal Matters 55
Experts 56
Where to Find Additional Information 56
Index to Consolidated Financial Statements 56
Consolidated Financial Statements 56

 

You should rely only on the information contained in this Prospectus. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell these securities in any jurisdiction where an offer or sale is not permitted. You should assume that the information appearing in this Prospectus is accurate only as of the date on the front cover of this Prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.

 

2
 

 

Prospectus Summary

 

This summary contains material information about us and the offering which is described in detail elsewhere in the Prospectus. Since it may not include all of the information you may consider important or relevant to your investment decision, you should read the entire Prospectus carefully, including the more detailed information regarding our company, the risks of purchasing our common stock discussed under “Risk Factors” on page 6, and our financial statements and the accompanying notes.

 

Unless the context otherwise requires, the terms “we,” “our,” “us,” the “Company” and “Aurora Gold” refer to Aurora Gold Corporation, a Delaware corporation.

 

Our Business

 

We were incorporated under the laws of the State of Delaware on October 10, 1995, under the name “Chefs Acquisition Corp.” Initially formed for the purpose of engaging in the food preparation business, we redirected our business efforts in late 1995 following a change of control, which occurred on October 30, 1995, to the acquisition, exploration and, if warranted, the development of mineral mineralized material properties. We changed our name to “Aurora Gold Corporation” on August 20, 1996, to more fully reflect our mineralized material exploration business activities.

 

Our general business strategy is to acquire mineral properties either directly or through the acquisition of operating entities. Our continued operations and the recoverability of mineral property costs is dependent upon the existence of economically recoverable mineral reserves, confirmation of our interest in the underlying properties, our ability to obtain necessary financing to complete the development and upon future profitable production.

 

Since 1996 we have acquired and disposed of a number of properties. We have not established reserves on any of the properties that we owned or in which we have or have had an interest.

 

We currently have interest in a strategic land package of nine (9) properties none of which contain any reserves. The exploration license areas are divided into 2 groups, the Săo Domingos and the Sao Joao areas. Please refer to “Description of Our Business and Properties.” We have no revenues, have sustained losses since inception, have been issued a going concern opinion by our auditors and rely upon the sale of our securities to fund operations. We will not generate revenues even if any of our exploration programs indicate that a mineral deposit may exist on our properties. Accordingly, we will be dependent on future financings in order to maintain our operations and continue our exploration activities. Please refer toRisk Factors.”

 

Our principal and technical office, from which we conduct our exploration and property acquisition activities, is located at C/- Coresco AG, Level 3, Gotthardstrasse 20, 6304 Zug, Switzerland. The telephone number is (+41) 7887-96966.

 

Risk Associated With Our Business

 

The search for valuable minerals as a business is extremely risky. We can provide investors with no assurance that the exploration of any of the properties in which we have or may acquire an interest will uncover commercially exploitable mineral reserves. It is likely that such properties will not contain any reserves and, in all likelihood, any funds spent on exploration will probably be lost. In addition, problems such as unusual or unexpected geological formations or other variable conditions are involved in exploration and, often result in unsuccessful exploration efforts.

 

3
 

 

In addition, due to our limited capital and mineralized materials, we are limited in the amount of exploration work we can do. As a result, our already low probability of successfully locating mineral reserves will be reduced significantly further. Therefore, we may not find a commercial mineable ore deposit prior to exhausting our funds. Furthermore, exploration costs may be higher than anticipated, in which case, the risk of utilizing all of our funds prior to locating any ore deposits shall be greatly increased. Factors that could cause exploration costs to increase are: adverse conditions, difficult terrain and shortages of qualified personnel. Please refer toRisk Factors.”

 

The Offering

 

Securities Being Offered:   A total of up to 135,000,000 shares of our common stock.
Offering Price Per Share:   The Selling Stockholder will determine at what price it may sell the offered shares, and such sales may be made at prevailing market prices, or at privately negotiated prices.
Selling Stockholder:   The Selling Stockholder purchased the shares pursuant to a subscription agreement dated September 21, 2012. Please refer to the section entitled “The Selling Stockholder” of this Prospectus.
Authorized Capital Stock:   300,000,000 shares of common stock, each with a par value of $0.001.
Shares Outstanding Prior to Completion of the Offering:   249,144,706, without giving effect to the shares eligible for issuance upon exercise of outstanding options.
Shares Outstanding upon Closing of the Offering:   249,144,706, without giving effect to the shares eligible for issuance upon exercise of outstanding options.
Transfer Agent:   Worldwide Stock Transfer, LLC, 433 Hackensack Avenue, Level L, Hackensack, New Jersey 07601.
Risk Factors:  

The search for valuable minerals as a business is extremely risky. We can provide investors with no assurance that the exploration of any of the properties in which we have or may acquire an interest will uncover commercially exploitable mineral reserves. It is likely that such properties will not contain any reserves and, in all likelihood, any funds spent on exploration will probably be lost. In addition, problems such as unusual or unexpected geological formations or other variable conditions are involved in exploration and, often result in unsuccessful exploration efforts.

 

In addition, due to our limited capital and mineralized materials, we are limited in the amount of exploration work we can do. As a result, our already low probability of successfully locating mineral reserves will be reduced significantly further. Therefore, we may not find a commercial mineable ore deposit prior to exhausting our funds. Furthermore, exploration costs may be higher than anticipated, in which case, the risk of utilizing all of our funds prior to locating any ore deposits shall be greatly increased. Factors that could cause exploration costs to increase are: adverse conditions, difficult terrain and shortages of qualified personnel. Please refer toRisk Factors.”

Use of Proceeds:   Although we will pay substantially all the expenses incident to the registration of the shares, we will not receive any proceeds from the sales by the Selling Stockholder. See “Use of Proceeds.”

 

4
 

 

Selected Financial Data

 

We have not generated any operating revenues to date. Our plans, funding requirements, sources and alternatives relating thereto are presented and discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

The following table sets forth, for the nine month periods ended September 30, 2012 and 2011, and for the fiscal years ended December 31, 2011 and 2010, certain selected consolidated financial data. This information should be read in conjunction with our Audited Consolidated Financial Statements and Notes thereto for the period ended December 31, 2011, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere herein.

 

The selected financial data provided below are not necessarily indicative of our future results of operations or financial performance.

 

Consolidated Statements
of Operations Data:
  For the Nine
Months Ended
September 30,
2012
(Unaudited)
   For the Nine
Months Ended
September 30,
2011
(Unaudited)
   For the Year
Ended December
31, 2011
   For the Year
Ended December 31,
2010
 
Revenue  $0   $0   $0   $0 
Operating loss  $(661,204)  $(1,025,177)  $(1,869,827)  $(2,302,083)
Net loss available to common stockholders  $(566,344)  $(3,782,688)  $(4,627,338)  $(2,302,083)
Basic and diluted net loss per share  $(0.01)  $(0.04)  $(0.05)  $(0.03)
Weighted average number of common shares outstanding used in basic and diluted net loss per share calculation   112,726,318    89,036,372    90,537,439    81,069,047 

 

Consolidated Balance Sheet Data:  September 30, 2012
(Unaudited)
   December 31, 2011   December 31, 2010 
Cash and cash equivalents  $1,241   $237,426   $579,191 
Working Capital  $(576,152)  $(300,218)  $227,326 
Total assets  $1,241   $237,426   $3,532,696 
Total liabilities  $577,393   $537,644   $372,019 
Total stockholders’ equity (deficiency)  $(576,152)  $(300,218)  $3,160,667 

 

5
 

 

Risk Factors

 

You should carefully consider the risks described below before purchasing any shares. Our most significant risks and uncertainties are described below; if any of the following risks actually occur, our business, financial condition, or results of operations could be materially adversely affected, the trading of our common stock could decline, and you may lose all or part of your investment therein. You should acquire the Shares only if you can afford to lose your entire investment. Our filings with the Securities and Exchange Commission (the “SEC”) also contain forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks we have described below. Please refer toNote Regarding Forward-Looking Statements on page 13 of this Prospectus.

 

Risks Related to Our Business, Property and Industry

 

We are an exploration stage company and have incurred substantial losses since inception.

 

We have never earned any revenues. In addition, we have incurred net losses of $22,966,943 for the period from our inception (October 10, 1995) through September 30, 2012, and, based upon our current plan of operation, we expect that we will incur losses for the foreseeable future.

 

Potential investors should be aware of the difficulties normally encountered by mineral exploration companies and the high rate of failure of such companies. We are subject to all of the risks inherent to an exploration stage business enterprise, such as limited capital, mineralized materials, lack of manpower, and possible cost overruns associated with our exploration programs. Potential investors must also weigh the likelihood of success in light of any problems, complications, and delays that may be encountered with the exploration of our properties.

 

Because we are small and do not have much capital, we must limit our exploration activity. As such we may not be able to complete an exploration program that is as thorough as we would like. In that event, an existing ore body may go undiscovered. Without an ore body, we cannot generate revenues and you will lose your investment.

 

Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing.

 

Our independent registered public accounting firm has issued its report, which includes an explanatory paragraph for going concern uncertainty on our consolidated financial statements as of and for the year ended December 31, 2011. Because we have not yet generated revenues from our operations our ability to continue as a going concern is currently heavily dependent upon our ability to obtain additional financing to sustain our operations. Such financing may take the form of the issuance of common or preferred stock or debt securities, or may involve bank financing. Although we have completed several equity financings, the fact that our auditors have issued a “going concern” opinion may hinder our ability to obtain additional financing in the future. Currently, we have no commitments to obtain any additional financing, and there can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all.

 

6
 

 

We cannot assure you that our common stock will be re-listed, or that once re-listed, it will remain listed.

 

As a result of the delay in filing our periodic reports with the SEC, we were unable to comply with the listing standards of OTCBB and our common stock was removed from the OTCBB effective May 20, 2009. Our common stock was again listed on the OTCBB on August 5, 2010. We are currently listed on the OTC Markets Group Inc. QB tier (the “OTCQB”), an interdealer quotation system that is, in almost all respects, comparable to the OTCBB and which requires that we timely file periodic reports with the SEC. If we were to become delinquent in our filings, our common stock may be de-listed from the OTCQB. If it is de-listed again in the future, the price of our common stock will likely be adversely affected and there may be a decrease in the liquidity of our common stock.

 

Because we do not have any revenues, we expect to incur operating losses for the foreseeable future.

 

We have never generated revenues and we have never been profitable. Prior to completing exploration on our mineral properties, we anticipate that we will incur increased operating expenses without realizing any revenues. We therefore expect to incur significant losses into the foreseeable future. If we are unable to generate financing to continue the exploration of our properties, we will fail and you will lose your entire investment.

 

None of the properties in which we have an interest or the right to earn an interest have any known reserves.

 

We currently have interest in a strategic land package of nine (9) properties none of which contain any reserves. Based on our exploration activities through the date of this Prospectus, we do not have sufficient information upon which to assess the ultimate success of our exploration efforts. If we do not establish reserves we may be required to curtail or suspend our operations, in which case the market value of our common stock may decline and you may lose all or a portion of your investment.

 

We have only completed the initial stages of exploration of our properties, and thus have no way to evaluate whether we will be able to operate our business successfully. To date, we have been involved primarily in organizational activities, acquiring interests in properties and in conducting preliminary exploration of properties. We have not earned any revenues and have not achieved profitability as of the date of this Prospectus.

 

We are subject to all the risks inherent to mineral exploration, which may have an adverse affect on our business operations.

 

Potential investors should be aware of the difficulties normally encountered by mineral exploration companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration of the mineral properties that we plan to undertake. These potential problems include, but are not limited to, unanticipated problems relating to exploration and additional costs and expenses that may exceed current estimates. If we are unsuccessful in addressing these risks, our business will likely fail and you will lose your entire investment.

 

 

7
 

 

We are subject to the numerous risks and hazards inherent to the mining industry and resource exploration including, without limitation, the following:

 

·interruptions caused by adverse weather conditions; and
·unforeseen limited sources of supplies resulting in shortages of materials, equipment and availability of experienced manpower.

 

The prices and availability of such equipment, facilities, supplies and manpower may change and have an adverse effect on our operations, causing us to suspend operations or cease our activities completely.

 

It is possible that our title for the properties in which we have an interest will be challenged by third parties.

 

We have not obtained title insurance for our properties. It is possible that the title to the properties in which we have our interest will be challenged or impugned. If such claims are successful, we may lose our interest in such properties. For more information please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

Our failure to compete with our competitors in mineral exploration for financing, acquiring mining claims, and for qualified managerial and technical employees will cause our business operations to slow down or be suspended.

 

Our competition includes large established mineral exploration companies with substantial capabilities and with greater financial and technical mineralized materials than we have. As a result of this competition, we may be unable to acquire additional attractive mining claims or financing on terms we consider acceptable. We may also compete with other mineral exploration companies in the recruitment and retention of qualified managerial and technical employees. If we are unable to successfully compete for financing or for qualified employees, our exploration programs may be slowed down or suspended.

 

Compliance with environmental regulations applicable to our operations may adversely affect our capital liquidity.

 

Mining is subject to potential risks and liabilities associated with pollution of the environment and the disposal of waste products occurring as a result of mineral exploration and production. All phases of our operations in Brazil, where our properties are located, will be subject to environmental regulations. Environmental legislation in Brazil is evolving in a manner which will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees. It is possible that future changes in environmental regulation will adversely affect our operations as compliance will be more burdensome and costly.

 

Because we have not allocated any money for reclamation of any of our mining claims, we may be subject to fines if a mining claim is not restored to its original condition upon termination of our activities.

 

Our directors may face conflicts of interest in connection with our participation in certain ventures because they are directors of other mineral mineralized material companies.

 

Our directors may also be a director of other companies (including mineralized material exploration companies) and, if those other companies participate in ventures in which we may participate, our directors may have a conflict of interest in negotiating and concluding terms respecting the extent of such participation. It is possible that due to our directors’ conflicting interests, we may be precluded from participating in certain projects that we might otherwise have participated in, or we may obtain less favorable terms on certain projects than we might have obtained if our directors were not also directors of other participating mineral mineralized materials companies. In an effort to balance their conflicting interests, our directors may approve terms equally favorable to all of their companies as opposed to negotiating terms more favorable to us but adverse to their other companies. Additionally, it is possible that we may not be afforded certain opportunities to participate in particular projects because those projects are assigned to our directors’ other companies for which the directors may deem the projects to have a greater benefit.

 

8
 

 

Our future performance is dependent on our ability to retain key personnel, loss of which would adversely affect our success and growth.

 

Our performance is substantially dependent on performance of our senior management. In particular, our success depends on the continued efforts of Mr. Pearl, our President and Chief Executive Officer. The loss of his services could have a material adverse effect on our business, results of operations and financial condition as our potential future revenues would most likely dramatically decline and our costs of operations would rise. We do not have employment agreements in place with any of our officers or our key employees, nor do we have key person insurance covering our employees.

 

Risks Related To Our Common Stock

 

Our failure to timely file certain periodic reports with the SEC poses significant risks to our business, each of which could materially and adversely affect our financial condition and results of operations.

 

We did not timely file with the SEC our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, and our Quarterly Report on Form 10-Q for the quarterly periods ended March 31, June 30, and September 30, 2009. Consequently, we were not compliant with the periodic reporting requirements under the Securities Exchange Act of 1934, as amended. As a result of our failure to have timely filed our periodic reports with the SEC, our stock was removed from trading on the OTC Bulletin Board (the “OTCBB”) and began trading on the “Pink Sheets.” Our common stock was again listed on the OTCBB on August 5, 2010. In addition, our failure to timely file those and possibly future periodic reports with the SEC could subject us to enforcement action by the SEC and shareholder lawsuits. Any of these events could materially and adversely affect our financial condition and results of operations and our ability to register with the SEC public offerings of our securities for our benefit or the benefit of our security holders.

 

There currently is a limited market for our common stock on the OTCQB.

 

Our common stock is quoted on the OTCQB. Trading in our common stock has been very limited, which could affect the price of our stock. We have no plans, proposals, arrangements or understandings with any person with regard to the development of an active trading market for our common stock and no assurance can be given that an active trading market will develop.

 

We may conduct further offerings in the future in which case our current stockholders’ shareholdings will be diluted.

 

Since our inception, we have relied on equity sales of our common stock to fund our operations. We may conduct further equity offerings in the future to finance our current projects or to finance subsequent projects that we decide to undertake. If common stock is issued in return for additional funds, the price per share could be lower than that paid by our current stockholders. We anticipate continuing to rely on equity sales of our common stock in order to fund our business operations. If we issue additional stock, our current stockholders’ percentage interest in us will be diluted. The result of this could reduce the value of their stock.

 

9
 

 

We have the ability to issue additional shares of our common stock without asking for stockholder approval, which could cause our stockholders’ investment to be diluted.

 

Our Articles of Incorporation authorize our Board of Directors (the “Board”) to issue up to 300,000,000 shares of common stock. The power of the Board to issue shares of common stock or warrants or options to purchase shares of common stock is generally not subject to stockholder approval. Accordingly, any time the Board determines that it is in the best interests of the corporation to issue shares of its common stock, your investment will be diluted.

 

We have issued nearly all of our authorized shares of common stock and will likely have to either increase the number of shares we are authorized to issue, or conduct a reverse stock split.

 

Our Articles of Incorporation authorize out Board to issue up to 300,000,000 shares of our common stock. As of December 15, 2012, there are 249,144,706 shares of our common stock issued and outstanding. Accordingly, in order to conduct any future equity financings we will likely have to either increase the number of shares we are authorized to issue, or conduct a reverse stock split.

 

The value and transferability of our shares may be adversely impacted by the limited trading market for our stock on the OTCQB, which is a quotation system, not an issuer listing service, market or exchange. Because buying and selling stock on the OTCQB is not as efficient as buying and selling stock through an exchange, it may be difficult for our stockholders to sell their shares or you may not be able to sell their shares for an optimum trading price.

 

The OTCQB is a regulated quotation service that displays real-time quotes, last sale prices and volume limitations in over-the-counter securities.

 

When fewer shares of a security are being traded on the OTCQB, volatility of prices may increase and price movement may outpace the ability to deliver accurate quote information. Lower trading volumes in a security may result in a lower likelihood of an individual’s orders being executed and current prices may differ significantly from the price one was quoted by the OTCQB at the time of the order entry. The dealer’s spread (the difference between the bid and ask prices) may be large and may result in substantial losses to the seller of securities on the OTCQB if the common stock or other security must be sold immediately.

 

Our stock price historically has been volatile and may continue to be volatile.

 

The market price of our common stock has been, and is expected to continue to be, highly volatile. Factors, many of which are beyond our control, include, in addition to other risk factors described in this section, the announcements of technological innovations by us or other companies, regulatory matters, new or existing products or procedures, concerns about our financial position, operating results, litigation, government regulation, developments or disputes relating to agreements, patents or proprietary rights, general economic, industry and market conditions may have a significant impact on the market price of our stock. In addition, the future sales of shares of common stock by our stockholders and the holders of our then outstanding warrants and options could have an adverse effect on the market price of our outstanding shares of common stock.

 

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The trading price of our common stock has, from time to time, fluctuated widely and in the future may be subject to similar fluctuations. The trading price may be affected by a number of factors including the risk factors set forth herein, as well as our operating results, financial condition, general economic conditions, market demand for our common stock, and various other events or factors both in and out of our control. In recent years, broad stock market indices, in general, and smaller capitalization companies, in particular, have experienced substantial price fluctuations. In a volatile market, we may experience wide fluctuations in the market price of our common stock. These fluctuations may have a negative effect on the market price of our common stock. To the extent our stock price fluctuates and/or remains low, it could cause our stockholders to lose some or all of their investment and impair our ability to raise capital through the offering of additional equity securities.

 

Future sales of our common stock could adversely affect its price and our future capital-raising activities could involve the issuance of equity securities, which would dilute your investment and could result in a decline in the trading price, if any, of our common stock.

 

We may sell securities in the public or private equity markets if and when conditions are favorable, even if we do not have an immediate need for additional capital at that time. Sales of substantial amounts of our common stock, or the perception that such sales could occur, could adversely affect the prevailing market price of our common stock and our ability to raise capital. We may issue additional common stock in future financing transactions or as incentive compensation for our executive management and other key personnel, consultants and advisors. Issuing any equity securities would be dilutive to the equity interests represented by our then-outstanding shares of common stock. The market price, if any, for our common stock could decrease as the market takes into account the dilutive effect of any of these issuances. Furthermore, we may enter into financing transactions at prices that represent a substantial discount to the market price of our common stock. A negative reaction by investors and securities analysts to any discounted sale of our equity securities could result in a decline in the trading price of our common stock.

 

Alltech Capital Limited, a private corporation, owns approximately 54% of our issued and outstanding stock. This ownership interest may preclude you from influencing significant corporate decisions.

 

As of December 15, 2012, Alltech owned 135,000,000 shares, or approximately 54%, of our outstanding common stock. As a result, Alltech may be able to exercise significant influence over matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, and will have significant control over our management and policies. Alltech’s interests may be different from yours. For example, it may support proposals and actions with which you may disagree or which are not in your interest. This concentration of ownership could delay or prevent a change in control of our company or otherwise discourage a potential acquirer from attempting to obtain control of our company, which in turn could reduce the price of our common stock. In addition, Alltech could use its voting influence to maintain our existing management and directors in office, or support or reject other management and board proposals that are subject to stockholder approval, such as the adoption of employee stock plans and significant unregistered financing transactions.

 

There are options to purchase shares of our common stock currently outstanding.

 

As of December 15, 2012, we have granted options to purchase shares of our common stock to various persons and entities, under which we could be obligated to issue up to 9,650,000 shares. The exercise prices of these options range from $0.05 to $0.12 per share. If issued, the shares underlying these options would increase the number of shares of our common stock currently outstanding and dilute the holdings and voting rights of our then-existing stockholders.

 

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There are warrants to purchase shares of our common stock currently outstanding.

 

As of December 15, 2012, there were 8,000,000 warrants outstanding to purchase an equal number of shares of our common stock at an exercise price of $0.08 per share through June 20, 2013. If issued, the shares underlying these warrants would increase the number of shares of our common stock currently outstanding and dilute the holdings and voting rights of our then-existing stockholders.

 

We do not intend to pay dividends for the foreseeable future.

 

We currently intend to retain future earnings, if any, to support the development and expansion of our business and do not anticipate paying cash dividends in the foreseeable future. Our payment of any future dividends will be at the discretion of our Board after taking into account various factors, including but not limited to our financial condition, operating results, cash needs, growth plans and the terms of any credit agreements that we may be a party to at the time. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize their investment. Investors seeking cash dividends should not purchase our securities.

 

Our common stock is a “penny stock,” and because “penny stock” rules will apply, our stockholders may find it difficult to sell the shares of our common stock they currently own.

 

Our common stock is a “penny stock” as that term is defined under Rule 3a51-1 of the Exchange Act. Generally, a “penny stock” is a common stock that is not listed on a securities exchange and trades for less than $5.00 a share. Prices often are not available to buyers and sellers and the market may be very limited. Penny stocks in start-up companies are among the riskiest equity investments. Broker-dealers who sell penny stocks must provide purchasers of these stocks with a standardized risk-disclosure document prepared by the SEC. The document provides information about penny stocks and the nature and level of risks involved in investing in the penny stock market. A broker must also give a purchaser, orally or in writing, bid and offer quotations and information regarding broker and salesperson compensation, make a written determination that the penny stock is a suitable investment for the purchaser and obtain the purchaser’s written agreement to the purchase. Many brokers choose not to participate in penny stock transactions. Because of the penny stock rules, there is less trading activity in penny stocks and our stockholders are likely to have difficulty selling their shares.

 

FINRA sales practice requirements may also limit a stockholder’s ability to buy and sell our common stock.

 

In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit our stockholders’ ability to buy and sell our common stock and have an adverse effect on the market for our shares.

 

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Cost of compliance with changing regulation of corporate governance and public disclosure has and will continue to result in additional expense.

 

Keeping abreast of, and in compliance with, changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, new SEC regulations and, in the event we ever apply and are approved for listing on NASDAQ or another registered stock exchange, NASDAQ and stock exchange rules, has required and will in the future require an increased amount of management attention and external resources. We intend to continue to invest all reasonably necessary resources to comply with evolving standards, which may result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities.

 

Note Regarding Forward-Looking Statements

 

This Prospectus contains forward-looking statements which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These statements are expressed in good faith and based upon our current assumptions, expectations and projections, but there can be no assurance that these expectations will be achieved or accomplished.

 

Such forward-looking statements include statements regarding, among other things, (a) the potential for us to locate any reserves, our potential profitability, and cash flows, (b) our growth strategies, (c) expectations from our exploration activities, (d) our future financing plans, and (e) our anticipated needs for working capital.

 

Although forward-looking statements in this report reflect the good faith judgment of our management, forward-looking statements are inherently subject to known and unknown risks and uncertainties. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and matters described in this Prospectus generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Prospectus. We assume no obligation to update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Prospectus, other than as may be required by applicable law or regulation.

 

We have little likelihood of long-term success unless we are able to continue to raise capital from the sale of our securities or financing from other sources until, if ever, we generate positive cash flow from operations.

 

Use Of Proceeds

 

Although we will pay substantially all the expenses incident to the registration of the shares, we will not receive any proceeds from the sales by the Selling Stockholder. We received a total of $5,000,000 from the sale of the shares to the Selling Stockholder.

 

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Determination Of Offering Price

 

The Selling Stockholder will determine at what price it may sell the offered shares, and such sales may be made at prevailing market prices, or at privately negotiated prices. Please refer to “Plan of Distribution.”

 

Market Price of and Dividends On Our Common Stock and Related Stockholder Matters

 

Our common stock is currently quoted on the OTCQB. Our common stock was removed from the OTCBB effective May 20, 2009, and relisted on the OTCBB on August 5, 2010. Please refer to “Risk Factors.”

 

The following table sets forth the high and low bid prices for shares of our common stock for the calendar quarters indicated as reported by the various listing services for the last two years. These prices represent quotations between dealers without adjustment for retail mark-up, markdown or commission and may not represent actual transactions. Our stock is also quoted on the Stuttgart Exchange under the symbol A4G.SG and the Frankfurt Exchange under the symbols “A4G.F,” and “XE7RA.A4G.DE” and on the Berlin-Bremen Exchange under the symbol “A4G.BER.”

 

   First Quarter   Second Quarter   Third Quarter   Fourth Quarter  
2012 – High  $0.12   $0.09   $0.05   $0.06 
2012 – Low  $0.04   $0.04   $0.04   $0.04 
2011 – High  $0.40   $0.32   $0.18   $0.10 
2011 – Low  $0.24   $0.12   $0.09   $0.10 

  

The closing price of our common stock on January 2, 2013, was $0.04.

 

As of December 15, 2012, there were approximately 743 holders of record of our common stock. We have not paid any cash dividends. Please refer to “Dividend Policy” below. We do not have securities authorized for issuance under an equity compensation plan.

 

As of December 15, 2012, there were 9,650,000 stock options outstanding under our incentive stock option plan. The stock options are exercisable at prices ranging from $0.05 to $0.12 per share, with expiration dates ranging from October 10, 2016 to April 19, 2017.

 

As of December 15, 2012, there were 8,000,000 warrants outstanding to purchase an equal number of shares of our common stock at an exercise price of $0.08 per share through June 20, 2013. If the holders were to acquire all 8,000,000 shares issuable upon the exercise of outstanding warrants, we would receive an additional $640,000.

 

We did not make any repurchases of our securities during the fiscal year ended December 31, 2011, or the subsequent period through December 15, 2012.

 

Transfer Agent

 

The transfer agent of our common stock is Worldwide Stock Transfer, LLC, having an office at 433 Hackensack Avenue, Level L, Hackensack, NJ, USA 07601.

 

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Penny Stock

 

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Our stock is currently a “penny stock.” Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, deliver a standardized risk disclosure document prepared by the Commission, which: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of Securities’ laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form as the Commission shall require by rule or regulation. The broker-dealer also must provide to the customer, prior to effecting any transaction in a penny stock, (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitably statement.

 

These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our stock if it becomes subject to these penny stock rules.

 

Rule 144

 

At December 15, 2012, there were 249,144,706 shares of our common stock issued and outstanding, of which 159,990,838 shares are deemed “restricted securities,” within the meaning of Rule 144. Absent registration under the Securities Act, the sale of such shares is subject to Rule 144, as promulgated under the Securities Act.

 

In general, under Rule 144, subject to the satisfaction of certain other conditions, a person deemed to be one of our affiliates, who has beneficially owned restricted shares of our common stock for at least one year is permitted to sell in a brokerage transaction, within any three-month period, a number of shares that does not exceed the greater of 1% of the total number of outstanding shares of the same class, or, if our common stock is quoted on a stock exchange, the average weekly trading volume during the four calendar weeks preceding the sale, if greater.

 

Rule 144 also permits a person who presently is not and who has not been an affiliate of ours for at least three months immediately preceding the sale and who has beneficially owned the shares of common stock for at least nine months to sell such shares without restriction other than the requirement that there be current public information as set forth in Rule 144. To the extent that Rule 144 is otherwise available, this provision is currently applicable to all of the restricted shares. If a non-affiliate has held the shares for more than one year, such person may make unlimited sales pursuant to Rule 144 without restriction.

 

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The possibility that substantial amounts of our common stock may be sold under Rule 144 into the public market may adversely affect prevailing market prices for the common stock and could impair our ability to raise capital in the future through the sale of equity securities. Please refer to “Risk Factors.”

 

Dividend Policy

 

We have never paid cash dividends on our capital stock and do not anticipate paying any cash dividends in the foreseeable future, but intend to retain our capital mineralized materials for reinvestment in our business. Any future determination to pay cash dividends will be at the discretion of our Board of and will be dependent upon our financial condition, results of operations, capital requirements and other factors as the Board deems relevant.

 

Management’s Discussion And Analysis Of Financial Condition

And Results Of Operations

 

The following information should be read in conjunction with our audited consolidated financial statements and related notes thereto for the years ended December 31, 2011 and 2010, included elsewhere in this Prospectus. We also urge you to review and consider our disclosures describing various risks that may affect our business, which are set forth under the heading “Risk Factors.”

 

General

 

We are a mineral exploration company engaged in the exploration of base, precious metals and industrial minerals worldwide. We were incorporated under the laws of the State of Delaware on October 10, 1995, under the name “Chefs Acquisition Corp.” We conduct our exploration and property acquisition activities through our head office which is located at is located at C/- Coresco AG, Level 3, Gotthardstrasse 20, 6304 Zug, Switzerland. The telephone number is (+41) 7887-96966. We also maintain an office in Brazil at Av. Jornalista Ricardo Marinho, 360, sala 113, Ed. Cosmopolitan, Barra da Tijuca, Rio de Janeiro, CEP 22631-350.

 

We had no revenues during the fiscal years ended December 31, 2011 and 2010. Funds raised in fiscal 2012 and 2011 were used for exploration of our properties and general administration. We have sustained losses since inception, have been issued a going concern opinion by our auditors and rely upon the sale of our securities to fund operations. We will not generate revenues even if any of our exploration programs indicate that a mineral deposit may exist on our properties. Accordingly, we will be dependent on future financings in order to maintain our operations and continue our exploration activities.

 

On June 15, 2010, pursuant to the Asset Purchase Agreement between Global Minerals Ltd. (“GML”) and Mount Royale Ventures, LLC (“MRV”), as Sellers, us and AGC Resources LLC, our wholly-owned subsidiary(“AGC”), as Buyers, AGC acquired 50% interest in the Front Range Gold Project joint venture (“JV”), and title to the Gold Hill Mill, and became a joint venture partner with Gold Reef Mining Company, Mi Vida Enterprises, Inc., Gold Hill Mines, Inc. and Southern Cross Prospecting Company (“Property Owners”).

 

On March 10, 2011, Mi Vida Enterprises, Inc., Gold Hill Mines, Inc. and Southern Cross Prospecting Company intervened in a preexisting lawsuit commenced by MRV against Gold Reef Mining Company in Boulder County District Court (the “Action”). Among other things, they have alleged that GML was in material default of the JV agreement prior to the assignment by GML of its rights in the JV to AGC in June of 2010, that GML wrongfully assigned its rights in the JV without permission of the Property Owners, and have asked the court to declare the JV terminated. The Property Owners also alleged that the transfer of title to the Gold Hill Mill was subject to a right of first refusal in favor of Gold Hill Mines, Inc., and that MRV conveyed its title to the Gold Hill Mill to AGC without giving proper notice to Gold Hill Mines Inc. and in violation of a right of first refusal in favor of Gold Hill Mines, Inc., and requested the court to enter an order granting Gold Hill Mines Inc. an option to purchase the Gold Hill Mill for $10,000, the amount set in the right of first refusal.

 

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A court decision in favor of the Property Owners may have a material adverse effect on our ability to collect the purchase price, plus royalty from the sale of AGC to Devtec Management Ltd. since an unfavorable court decision may result in AGC losing its 50% interest in the JV as well as its interest in and to the Gold Hill Mill.

 

On June 14, 2011, we entered into an Asset Purchase Agreement with Devtec Management Ltd. (“Devtec”), pursuant to which we sold our subsidiary, AGC Resources LLC, which owns certain properties in Boulder, Colorado, to Devtec for a total of $2 million, plus royalty. Devtec will pay us $1 million upon production of the cumulative total of 1,000 ounces of gold and/or silver, and a further $1 million on the nine month anniversary of the payment of the first $1 million. Additionally, Devtec will pay us a 5% royalty from the start of production.

 

Effective as of October 11, 2011, our Board granted 4,200,000 stock purchase options pursuant to our 2007 Stock Option Plan (the “Plan”). Each of the options has an issue date, effective date and vesting date of October 11, 2011, with an exercise price of $0.12 per share. The term of these options is five years. The options are exercisable at any time from the grant date up to and including the October 10, 2016.

 

Effective as of November 24, 2011, our Board granted 3,650,000 stock purchase options pursuant to our Stock Option Plan. Each of the options has an issue date, effective date and vesting date of November 24, 2011, with an exercise price of $0.05 per share. The term of these options is five years. The options are exercisable at any time from the grant date up to and including the November 24, 2016.

 

Effective as of December 15, 2011, we entered into debt settlement agreements with four creditors pursuant to which we issued 10,937,721 shares of our common stock and the creditors agreed to forgive and release us from paying an aggregate of $218,754.42 owed to the creditors.

 

Effective as of December 20, 2011, we entered into subscription agreements pursuant to which we sold an aggregate of 8,000,000 units of our securities at a purchase price of $0.04 per unit, for a gross aggregate price of $320,000, to six investors in reliance upon an exemption from securities registration afforded by, but not limited to, the provisions of Regulation S of the Securities Act of 1933. Each unit consisted of one share of our common stock, $0.001 par value per share and one Series A Stock Purchase Warrant (the “Series A Warrants”). Each full Series A Warrant entitles the holder to purchase an additional share of our common stock at an exercise price of $0.08 per share for a period of eighteen months commencing on December 20, 2011 and expiring on June 20, 2013.

 

Significant developments during the nine month period ended September 30, 2012 and Subsequent Events to December 15, 2012

 

From January 1, 2012 through December 15, 2012, we have been evaluating our property holdings in order to determine whether to implement exploration programs on our existing properties or to acquire interests in new properties.

 

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For the nine month periods ended September 30, 2012 and 2011, we recorded exploration expenses of $131,724 compared to $261,304, respectively.

 

On September 21, 2012, we entered into a subscription agreement with Alltech pursuant to which we agreed to sell to Alltech 135,000,000 shares of our common stock, representing approximately 54% of our issued and outstanding shares of common stock, for a purchase price of $5,000,000. The closing of the transaction occurred on October 5, 2012. As a result of the sale a change in control of the Company occurred. As a condition to the closing of the transaction, we agreed to increase the size of our board of directors to five (5) members and to appointed two board members selected by Alltech. The board of directors appointed each of Messrs. Vladimir Bernshtein and Andrey Ratsko to serve as directors of the Company. Additionally, Mr. Bernshtein has been named as the Company’s Chief Business Development Director.

 

Exploration Activities

 

We are a junior mineral exploration company and conducts principal and technical activities from Coresco AG, Level 3, Gotthardstrasse 20, 6304 Zug, Switzerland. The telephone number is (+41) 41 711 0281. These offices are provided to the Company on a month-to-month basis. We believe these offices are adequate for the business requirements during the next 12 months; we do not own any real property.

 

Management and the board reviewed and clarified our strategic objectives to concentrate efforts on existing operations where infrastructure already exists, properties presently being developed or in advanced stages of exploration that have potential for additional discoveries and grass-roots exploration opportunities. We are currently concentrating on property exploration activities in Brazil.

 

The properties are in the exploration stage only and without a known body of mineral reserves. Development of the properties will follow only if satisfactory exploration results are obtained. Mineral exploration and development involves a high degree of risk and few properties that are explored are ultimately developed into producing mines. There is no assurance that the mineral exploration and development activities will result in any discoveries of commercially viable bodies of mineralization. The long-term profitability of the operations will be, in part, directly related to the cost and success of the exploration programs, which may be affected by a number of factors.

 

We currently have an interest in a strategic land package of nine (9) properties none of which contain any reserves. The exploration license areas are divided into 2 groups, the Săo Domingos and the Sao Joao areas.

 

Three and nine months ended September 30, 2012 (Fiscal 2012) versus three and nine months ended September 30, 2011 (Fiscal 2011)

 

Revenues and Net Loss – The Company has yet to generate any revenues or establish any history of profitable operations. The Company recorded a net loss of $(566,344) for the nine months ended September 30, 2012 (September 30, 2011: net loss $3,782,688) and $(70,112) for the three months ended September 30, 2012 (September 30, 2011: net loss $446,985) or $(0.00) (September 30, 2011: $(0.00)) and $(0.01) [September 30, 2011: $(0.04)] per share.

 

Expenses – The general and administrative expenses consist primarily of personnel costs, legal costs, investor relations costs, stock based compensation costs, accounting costs and other professional and administrative costs. General and Administrative expenses were $218,587 for the nine months ended September 30, 2012 (September 30, 2011: $139,250) and $27,995 for the three months ended September 30, 2012 (September 30, 2011: $54,095). The decrease quarter on quarter costs reflects further cash conservation initiatives implemented my management. Included in expenses are professional accounting and legal fees of $80,450 for the nine months ended September 30, 2012 (September 30, 2011: $189,198) and $47,674 for the three months ended September 30, 2012 (September 30, 2011: $25,219) which represents further initiatives by management to settle long outstanding financial liabilities.

 

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Exploration expenditures – Exploration expenses are charged to operations as they are incurred. The Company recorded exploration expenses of $131,724 for the nine months ended September 30, 2012 (September 30, 2011: $261,304) and $7,772 for the three months ended September 30, 2012 (September 30, 2011: $23,055) the majority relating to maintenance activities at the Brazilian properties during the current quarter and Colorado and Brazil mine in prior quarter.

 

Depreciation expense – Depreciation expenses charged to operations were nil for the nine months ended September 30, 2012 and nil for the three months ended September 30, 2012. (Nine months ended September 30, 2011: $22,001 and three months ended September 30, 2011: $6,538).

 

Gain on extinguishment of liabilities – During the three and nine months ended September 30, 2012, the Company recorded gain on extinguishment of liabilities of $94,860, which represents further initiatives by management to settle long outstanding financial liabilities.

 

Liquidity and Capital Resources

 

September 30, 2012 versus December 31, 2011:

 

Recent developments in capital markets have restricted access to debt and equity financing for many companies. Our exploration properties are in the exploration stage and have not commenced commercial production. Consequently, we have no history of earnings or cash flow from our operations. As a result, we are reviewing our 2012 fiscal exploration and capital spending requirements in light of the current and anticipated global economic environment.

 

We currently finance our activities primarily by the private placement of securities. There is no assurance that equity funding will be accessible to us at the times and in the amounts required to fund our activities. There are many conditions beyond our control, which have a direct bearing on the level of investor interest in the purchase of our securities. We may also attempt to generate additional working capital through the operation, development, sale or possible joint venture development of our properties; however, there is no assurance that any such activity will generate funds that will be available for operations. Debt financing has been used to fund our property acquisitions and exploration activities. We do not have “standby” credit facilities, or off-balance sheet arrangements and it does not use hedges or other financial derivatives. We have no agreements or understandings with any person as to additional financing.

 

On September 21, 2012, we entered into a subscription agreement with Alltech pursuant to which we agreed to sell to Alltech 135,000,000 shares of our common stock, representing approximately 54% of our issued and outstanding shares of common stock, for a purchase price of $5,000,000. The closing of the transaction occurred on October 5, 2012.

 

In October 2011, we filed a Registration Statement on Form S-1 offering up to a maximum of 50,000,000 units of our securities at an offering price of $0.10 per Unit in a direct public offering, without any involvement of underwriters or broker-dealers. Each Unit consists of one (1) share of common stock at a $0.001 par value per share and one (1) Stock Purchase Warrant. Each full Warrant entitles the holder to purchase one additional share of common stock at a price of $0.20 for a period of two years commencing November 1, 2011 through October 31, 2013. The Units will be sold by the Chief Executive Officer and Chief Financial Officer. A Notice of Effectiveness was issued April 25, 2012. The offer will expire January 20, 2013. To date, no funds have been obtained from this offering.

 

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At September 30, 2012, we had cash of $1,241 (December 31, 2011: $237,426) and a working capital deficiency of $(576,152) and $(300,218) as at December 31, 2011. Total liabilities as of September 30, 2012, were $577,393 (December 31, 2011: $537,644).

 

During April 2012, we entered into a debt settlement agreement for $18,000 in accounts payable which was settled for 300,000 shares of common stock at an issue price of $0.06 per share.

 

During March 2012, we entered into debt settlement agreements for advances received from an individual and a company during fiscal 2011, as well as $14,454 of amounts in accounts paable and accrued expenses. $119,454 was settled for 1,990,900 shares of common stock at an issue price of $0.06 per share. Further details are provided under the common stock notes to these financial statements.

 

Our general business strategy is to acquire mineral properties either directly or through the acquisition of operating entities. Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America and applicable to a going concern which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. As discussed in note 1 to the consolidated financial statements, we have incurred recurring operating losses since inception, have not generated any operating revenues to date and have used cash of $381,481 from operating activities in 2012 through September 30. We require additional funds to meet our obligations and maintain our operations. We do not have sufficient working capital to (i) pay our administrative and general operating expenses through June 30, 2013 and (ii) to conduct our preliminary exploration programs. Without cash flow from operations, we may need to obtain additional funds (presumably through equity offerings and/or debt borrowing) in order, if warranted, to implement additional exploration programs on our properties. While we may attempt to generate additional working capital through the operation, development, sale or possible joint venture development of our properties, there is no assurance that any such activity will generate funds that will be available for operations. Failure to obtain such additional financing may result in a reduction of our interest in certain properties or an actual foreclosure of our interest. We have no agreements or understandings with any person as to such additional financing.

 

Our exploration properties have not commenced commercial production and we have no history of earnings or cash flow from our operations. While we may attempt to generate additional working capital through the operation, development, sale or possible joint venture development of our property, there is no assurance that any such activity will generate funds that will be available for operations.

 

Cash Flow

 

Nine months ended September 30, 2012 versus nine months ended September 30, 2011:

 

Operating activities: We used cash of $381,481 (September 30, 2011: $986,424). Changes in prepaid expenses and other assets resulted were nil during the period (September 30, 2011: increase of $7,016) and changes in accounts payable and accrued expenses (including related party) resulted in an increase in cash of $224,063 (September 30, 2011: decrease in cash of $732).

 

Investing Activities: There were no investing activities during the period (September 30, 2011: $80,000 financial warranty from Colorado Mined Land Reclamation bonds returned).

 

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Financing Activities: We intend to finance activities by raising capital through the equity markets. In October 2011, we filed a Registration Statement on Form S-1 offering up to a maximum of 50,000,000 units of the Company's securities at an offering price of $0.10 per Unit in a direct public offering, without any involvement of underwriters or broker-dealers. Each Unit consists of one (1) share of common stock at a $0.001 par value per share and one (1) Stock Purchase Warrant. Each full Warrant entitles the holder to purchase one additional share of common stock at a price of $0.20 for a period of two years commencing November 1, 2011 through October 31, 2013. The Units will be sold by the Chief Executive Officer and Chief Financial Officer. A Notice of Effectiveness was issued April 25, 2012. The offer will expire January 20, 2013. To date, no funds have been obtained from this offering.

 

On September 21, 2012, we entered into a subscription agreement with Alltech pursuant towhich we agreed to sell to Alltech 135,000,000 shares of our common stock, representing approximately 54% of our issued and outstanding shares of common stock, for a purchase price of $5,000,000. The closing of the transaction occurred on October 5, 2012.

 

In August 2012 we received an advance of $50,000 from a director and officer of the Company. The advance is non-interest bearing and is due on successful capital raising.

 

On April 16, 2012, we entered into subscription agreements for 1,316,000 shares of common stock at a purchase price of $0.06 per share for a gross aggregate price of $78,960. Pursuant to the subscription agreements, each of the Investors has represented that they are not a U.S. person; as such term is defined in Regulation S. In connection with the offering, we agreed to pay a cash commission equal to 8% of all funds received or an aggregate of up $48,000 on the total maximum $600,000 subscription.

 

During April 2012, we entered into a debt settlement agreement for $18,000 in accounts payable which was settled for 300,000 shares of common stock at an issue price of $0.06 per share.

 

During March 2012, we entered into debt settlement agreements for advances received from a director of the Company and a company during fiscal 2011 as well as $14,454 of amounts in accounts payable and accrued expenses. $119,454 was settled for 1,990,900 shares of common stock at an issue price of $0.06 per share.

 

In March 2012, we entered into subscription agreements for 625,217 shares of common stock at a purchase price of $0.06 per share for a gross aggregate price of $37,513. Share certificates were not issued as at March 31, 2012 and they were treated as an Advance for Stock Subscriptions. The share certificates were issued in April 2012. Pursuant to the subscription agreements, each of the Investors has represented that they are not a U.S. person; as such term is defined in Regulation S. In connection with the offering, the Company has agreed to pay a cash commission equal to 8% of all funds received or an aggregate of up $48,000 on the total maximum $600,000 subscription that is being offered.

 

On December 20, 2011, we entered into subscription agreements for 8,000,000 shares of common stock at a purchase price of $0.04 per share for a gross aggregate price of $320,000. Attached to each unit of common stock is one (1) series A stock purchase warrant. Each full Series A warrant entitles the holder to purchase an additional share of the Company’s common stock at an exercise price of $0.08 per share for a period of eighteen months commencing on December 20, 2011 and expiring on June 20, 2013. Pursuant to the subscription agreements, each of the Investors has represented that they are not a U.S. person; as such term is defined in Regulation S. In connection with the offering, we agreed to pay a cash commission equal to 8% of all funds received or an aggregate of up $25,600. The actual total amount was $8,800.

 

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On December 15, 2011, we entered into debt settlement agreements with creditors and related parties in consideration for the issue of our common stock at a per share price of $0.02 per share. $218,754 was settled for 10,937,721 shares of common stock.

 

During the fiscal year 2011 the Company received funds from advances from individuals and a company, totalling $257,000 that were non-interest bearing, were due on demand and were unsecured. As at the end of the fiscal year this total amount was reduced to $137,000 due to $120,000 of this advance being converted to common stock for settlement of this indebtedness in December 2011 at $0.04 per share.

 

In September 2011, we issued 1,671,000 shares to an individual for cash at $0.10 per share. In September 2011, we issued 150,000 shares to a company for services rendered at $0.16 per share.

 

In April 2011, as an incentive to assist with future private placements, we authorized the payment of a non-cash finder’s fee of 450,000 shares of common stock in connection with the private placement completed in April 2010. The shares were issued in May 2011. All shares issued were to individuals and companies who reside outside the United States of America. The issuance of the shares was exempt from the registration requirements of Securities Act by virtue of Section 4(2) thereof as well as the exemption from registration requirements afforded by Regulation S.

 

Year Ended December 31, 2011 (Fiscal 2011) versus Year Ended December 31, 2010 (Fiscal 2010)

 

Revenues and Net Loss – We have yet to generate any revenues or establish any history of profitable operations. For the year ended December 31, 2011, we recorded a net loss of $4,627,338 (2010: net loss $2,302,083) or $(0.05) [2010: $(0.03)] per share.

 

Expenses – General and administrative expenses consist primarily of personnel, legal, investor relations, stock based compensation, accounting and other professional and administrative costs. For the year ended December 31, 2011 we recorded General and Administrative expenses of $550,655 (2010: $397,848). Professional fees for accounting of $129,353 (2010: $120,220) and legal $111,772 (2010: $308,323) were also incurred. The majority of the legal costs incurred during fiscal 2010 relate to the Global Asset Purchase Agreement on June 14, 2011.

 

Exploration expenditures – Exploration expenses are charged to operations as they are incurred. For the year ended December 31, 2011, we recorded exploration expenses of $307,613 (2010: $644,313).

 

Depreciation expenses – Depreciation expenses charged to operations for the year ended December 31, 2011, were $27,897 (2010: $17,738).

 

AGC Resources LLC (Boulder, Colorado Property Disposed June 14, 2011)

 

On June 14, 2011, we entered into an Asset Purchase Agreement with Devtec, pursuant to which the Company sold its subsidiary, AGC, which owns certain properties in Boulder, Colorado (see Note 3(c) of our 2011 consolidated financial statements for a discussion of the specific assets purchased by AGC in June 2010), to Devtec for a total of $2 million, plus royalty. Under the terms of the agreement, Devtec will pay us $1 million upon production of the cumulative total of 1,000 ounces of gold and/or silver, and a further $1 million on the nine month anniversary of the payment of the first $1 million. Additionally, Devtec will pay us a 5% royalty from the start of production.

 

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We are unable to reasonably estimate the amount of minerals the properties will produce, if any, and thus there is uncertainty as to whether the purchase price will be collected. Further, the collection of any purchase price is also contingent on the outcome of the court case described in Note 3 of our 2011 consolidated financial statements. Given these factors, collection of the purchase price is not considered reasonably possible at the time of this report given the current uncertain status of exploration work on the Boulder, Colorado properties and the uncertainties of the related legal action and thus no purchase price has been recorded as of September 30, 2012. Once collection of the purchase price becomes assured and the aforementioned uncertainties resolved, the purchase price will be recorded in the Consolidated Statements of Operations.

 

Accordingly, we have recognized a loss on the sale of our subsidiary of $2,757,511 for the year ended December 31, 2011, which represents the net book value of the assets transferred to Devtec on June 14, 2011 (no liabilities were assumed by Devtec) as follows:

 

Reclamation bonds  $245,221 
Buildings and equipment  $753,605 
Participating interest in mineral property  $1,758,685 
Total  $2,757,511 

 

Liquidity and Capital Resources

 

December 31, 2011 versus December 31, 2010:

 

Recent developments in capital markets have restricted access to debt and equity financing for many companies. Our exploration properties are in the exploration stage and have not commenced commercial production. Consequently, we have no history of earnings or cash flow from its operations. As a result, we are reviewing its 2012 exploration and capital spending requirements in light of the current and anticipated, global economic environment.

 

We currently finance our activities primarily by the private placement of securities. There is no assurance that equity funding will be accessible to us at the times and in the amounts required to fund our activities. There are many conditions beyond our control which have a direct bearing on the level of investor interest in the purchase of our securities. We may also attempt to generate additional working capital through the operation, development, sale or possible joint venture development of its properties; however, there is no assurance that any such activity will generate funds that will be available for operations. Debt financing has been used to fund our property acquisitions and exploration activities. We do not have “standby” credit facilities, or off-balance sheet arrangements and it does not use hedges or other financial derivatives. We have no agreements or understandings with any person or entity as to additional financing.

 

At December 31, 2011, we had cash of $237,426 (2010: $579,191) and working capital deficiency of $(300,218) (2010 working capital of $227,326). Total liabilities as of December 31, 2011 were $537,644 (2010: $372,019).

 

On December 20, 2011, we entered into subscription agreements for 8,000,000 shares of common stock at a purchase price of $0.04 per share for a gross aggregate price of $320,000. Attached to each unit of common stock wass one (1) series A stock purchase warrant. Each full Series A warrant entitles the holder to purchase an additional share of our common stock at an exercise price of $0.08 per share for a period of eighteen months commencing on December 20, 2011 and expiring on June 20, 2013. Pursuant to the subscription agreements, each of the Investors has represented that they are not a U.S. person; as such term is defined in Regulation S. In connection with the offering, we agreed to pay a cash commission equal to 8% of all funds received or an aggregate of up $25,600.

 

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On December 15, 2011, we entered into debt settlement agreements with creditors and related parties in consideration for the issue of our common stock at a per share price of $0.02 per share. $218,754 was settled for 10,937,721 shares of common stock.

 

During the 2011 we received funds from advances from individuals and a company, totaling $257,000, that were non-interest bearing, were due on demand and were unsecured. As at the end of the year this total amount was reduced to $137,000 due to $120,000 of this advance being converted to common stock for settlement of this indebtedness in December 2011 at $0.04 per share.

 

In September 2011, we issued 1,671,000 shares to an individual for cash at $0.10 per share. In September 2011, we issued 150,000 shares to a company for services rendered at $0.16 per share.

 

In April 2011, as an incentive to assist with future private placements, we authorized the payment of a non cash finder’s fee of 450,000 shares of our common stock in connection with the private placement completed in April 2010. The shares were issued in May 2011. All shares issued were to individuals and companies who reside outside the United States of America. The issuance of the shares was exempt from the registration requirements of Securities Act by virtue of Section 4(2) thereof as well as the exemption from registration requirements afforded by Regulation S.

 

During the period January 1 to December 31, 2010, we received cash of $3,895,000 from a private placement of 12,983,335 common shares at $0.30 per share, paid non cash finder’s fees of 1,126,111 shares in connection with the private placement, issued 685,900 shares in settlement of indebtedness and expenses amounting to $205,770 and paid a non cash finder’s fee of 500,000 shares in connection with a property acquisition valued at $0.30 per share. The shares were issued to individuals and companies who reside outside the USA. The issuance of the shares were exempt from the registration requirements of Securities Act by virtue of Section 4(2) thereof as well as the exemption from registration requirements afforded by Regulation S. Furthermore during 2010, two loans payable were repaid at $250,000 each and two advances payable received during the year ended December 31, 2009 were repaid at $50,000 each.

 

Our general business strategy is to acquire mineral properties, or the rights to such properties, either directly or through the acquisition of operating entities. The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the USA and applicable to a going concern concept which contemplates the realization of assets and the satisfaction of liabilities and commitments during the normal course of business. We have incurred recurring operating losses since inception, have not generated any operating revenues to date and during 2011 operating activities used cash of $1,062,075 (2010: $2,423,112). We require additional funds to meet our obligations and maintain the operations. We do not have sufficient working capital to (i) pay administrative and general operating expenses through December 31, 2012 and (ii) to conduct preliminary exploration programs. Without cash flow from operations, we may need to obtain additional funds (presumably through equity offerings and/or debt borrowing) in order, if warranted, to implement additional exploration programs on the properties. While we may attempt to generate additional working capital through the operation, development, sale or possible joint venture development of the properties, there is no assurance that any such activity will generate funds that will be available for operations. Failure to obtain such additional financing may result in a reduction of interest in certain properties or an actual foreclosure of interest. We have no agreements or understandings with any person as to such additional financing.

 

Our exploration properties have not commenced commercial production and we have no history of earnings or cash flow from operations. While we may attempt to generate additional working capital through the operation, development, sale or possible joint venture development of property, there is no assurance that any such activity will generate funds that will be available for operations.

 

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Cash Flow

 

Operating activities: During the year ended December 31, 2011, our operating activities used cash of $1,062,075 (2010: $2,423,112). The following is a breakdown of cash used for operating activities: Depreciation and amortization of $27,897 (2010: $17,738). Changes in prepaid expenses and other assets resulted in an increase in cash of $20,344 (2010: $54,449). Changes in accounts payable and accrued expenses (including related party) resulted in an increase in cash of $55,343 (2010: decrease $403,216).

 

Investing Activities: During the year ended December 31, 2011, $80,000 of the financial warranty with respect to the Colorado Mined Land Reclamation bonds was returned to us. During the year ended December 31, 2010, we spent $500,000 acquiring the Front Range Gold joint venture property and related buildings and equipment in Boulder, Colorado, USA, $17,800 on equipment and $325,221 was spent on Mined Land Reclamation Bonds with the State of Colorado and the Front Range Project joint venture.

 

Financing Activities: We intend to finance activities by raising capital through the equity markets.

 

Dividends

 

We have neither declared nor paid any dividends on our common stock. We intend to retain our earnings to finance growth and expand our operations and do not anticipate paying any dividends on our common stock in the foreseeable future.

 

Asset-Backed Commercial Paper

 

We have no asset-backed commercial paper.

 

Fair Value of Financial Instruments and Risks

 

Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair value.

 

The carrying value of cash, accounts payable and accrued expenses, accounts payable and accrued expenses – related parties, advances payable and advances payable – related party, and loans payable approximate their fair value because of the short-term nature of these instruments.

 

Management is of the opinion that we are not exposed to significant interest or credit risks arising from these financial instruments.

 

We operate outside of the United States of America (primarily in Brazil) and are exposed to foreign currency risk due to the fluctuation between the currency in which we operate in and the U.S. dollar.

 

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Share Capital

 

At December 15, 2012, we had:

 

·Authorized share capital of 300,000,000 common shares with par value of $0.001 each.
·249,144,706 common shares were issued and outstanding (December 31, 2011 – 109,912,589).
·9,650,000 (December 31, 2011: 9,050,000) stock options were outstanding under the incentive stock option plan. The stock options are exercisable at prices ranging from $0.05 to $0.12 per share, with expiration dates ranging from October 10, 2016 to April 9, 2017. If the holders were to acquire all 9,650,000 (December 31, 2011: 9,050,000) shares issuable upon the exercise of all incentive stock options outstanding, we would receive an additional $779,500 (December 31, 2011: $1,206,500).
·8,000,000 warrants outstanding ( December 31, 2011: 8,000,000).

 

Market Risk Disclosures

 

We have not entered into derivative contracts either to hedge existing risks or for speculative purposes during the nine months ended September 30, 2012, and the subsequent period to December 15, 2012.

 

Off-balance Sheet Arrangements and Contractual Obligations

 

We do not have any off-balance sheet arrangements or contractual obligations at September 30, 2012, and the subsequent period to December 15, 2012, that are likely to have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that have not been disclosed in our consolidated financial statements.

 

Application of Critical Accounting Policies

 

The accounting policies and methods we utilize in the preparation of our consolidated financial statements determine how we report our financial condition and results of operations and may require our management to make estimates or rely on assumptions about matters that are inherently uncertain. Our accounting policies are described in Note 2 to our December 31, 2011, consolidated financial statements. Our accounting policies relating to mineral property and exploration costs and depreciation and amortization of property, plant and equipment are critical accounting policies that are subject to estimates and assumptions regarding future activities.

 

Buildings and Equipment

 

Buildings and equipment are carried at cost (including development and preproduction costs, capitalized interest, other financing costs and all direct administrative support costs incurred during the construction period, net of cost recoveries and incidental revenues), less accumulated depletion and depreciation including write-downs. Following the construction period, interest, other financing costs and administrative costs are expensed as incurred.

 

On the commencement of commercial production, depletion of each mining property is provided on the unit-of-production basis, using estimated proven and probable reserves as the depletion basis.

 

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Buildings and equipment utilized directly in commercial mining activities are depreciated, following the commencement of commercial production, over their expected economic lives using either the unit-of-production method or the straight-line method.

 

Depreciation for non-mining equipment is provided over the following useful lives:

 

Vehicles: 10 years;

Office equipment, furniture and fixtures: 2 to 10 years.

 

We review the carrying values of its buildings and equipment whenever events or changes in circumstances indicate that their carrying values may not be recoverable. An impairment is considered to exist if total estimated future cash flows, or probability-weighted cash flows on an undiscounted basis, are less than the carrying value of the assets. An impairment loss is measured and recorded based on discounted estimated future cash flows associated with values beyond proven and probable reserves and resources. In estimating future cash flows, assets are grouped at the lowest level for which there is identifiable future cash flows that are largely independent of cash flows from other asset groups. Generally, in estimating future cash flows, all assets are grouped at a particular property for which there is identifiable cash flows. Buildings and equipment utilized directly in commercial mining activities are depreciated, following the commencement of commercial production, over their expected economic lives using either the unit-of-production method or the straight-line method.

 

Mineral Properties and Exploration Expenses

 

We account for our mineral properties on a cost basis whereby all direct costs, net of pre-production revenue, relative to the acquisition of the properties are capitalized. All sales and option proceeds received are first credited against the costs of the related property, with any excess credited to earnings. Once commercial production has commenced, the net costs of the applicable property will be charged to operations using the unit-of-production method based on estimated proven and probable recoverable reserves. The net costs related to abandoned properties are charged to operations.

 

Exploration costs are charged to operations as incurred until such time that proven reserves are discovered. From that time forward, we will capitalize all costs to the extent that future cash flow from mineral reserves equals or exceeds the costs deferred. The deferred costs will be amortized over the recoverable reserves when a property reaches commercial production. As at December 31, 2011 and 2010, we did not have proven reserves. Exploration activities conducted jointly with others are reflected at our proportionate interest in such activities.

 

We review the carrying values of its mineral properties on a regular basis by reference to the project economics including the timing of the exploration and/or development work, the work programs and the exploration results experienced by us and others. The review of the carrying value of any producing property will be made by reference to the estimated future operating results and net cash flows. When the carrying value of a property exceeds its estimated net recoverable amount, provision is made for the decline in value.

 

The recoverability of the amounts recorded for mineral properties is dependent on the confirmation of economically recoverable reserves, confirmation of our interest in the underlying mineral claims, our ability to obtain the necessary financing to successfully complete their development and the attainment of future profitable operations or proceeds from disposition.

 

Estimated costs related to site restoration programs during the commercial development stage of the property are accrued over the life of the project.

 

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Related Party Transactions

 

Our proposed business raises potential conflicts of interests between certain of our officers and directors and us. Certain of our directors are directors of other mineral resource companies and, to the extent that such other companies may participate in ventures in which we may participate, our directors may have a conflict of interest in negotiating and concluding terms regarding the extent of such participation. In the event that such a conflict of interest arises at a meeting of our directors, a director who has such a conflict will abstain from voting for or against the approval of such participation or such terms. In appropriate cases, we will establish a special committee of independent directors to review a matter in which several directors, or management, may have a conflict. From time to time, several companies may participate in the acquisition, exploration and development of natural resource properties thereby allowing for their participation in larger programs, involvement in a greater number of programs and reduction of the financial exposure with respect to any one program. It may also occur that a particular company will assign all or a portion of its interest in a particular program to another of these companies due to the financial position of the company making the assignment.

 

In determining whether we will participate in a particular program and the interest therein to be acquired by it, the directors will primarily consider the potential benefits to us, the degree of risk to which we may be exposed and our financial position at that time. Other than as indicated, we have no other procedures or mechanisms to deal with conflicts of interest. We are not aware of the existence of any conflict of interest as described herein.

 

Other than as disclosed below, during the nine month period ended September 30, 2012, none of our current directors, officers or principal shareholders, nor any family member of the foregoing, nor, to the best of our information and belief, any of our former directors, senior officers or principal shareholders, nor any family member of such former directors, officers or principal shareholders, has or had any material interest, direct or indirect, in any transaction, or in any proposed transaction which has materially affected or will materially affect us.

 

There have been no transactions or proposed transactions with officers and directors during the nine months ended September 30, 2012 to which we are a party except as follows:

 

During the nine-month period ended September 30, 2012 consulting fees of $297,190 (September 30, 2011: $191,742) were incurred to by our directors and officers (or companies of the officers and directors). The transactions were recorded at the exchange amount, being the value established and agreed to by the related parties.

 

Included in accounts payable and accrued expenses and advance payable (related parties) as at September 30, 2012 and December 31, 2011 were $322,419 and $nil respectively payable to officers and directors of the Company for consulting fees and various expenses incurred on our behalf.

 

CURRENT OUTLOOK

 

General Economic Conditions

 

Current problems in credit markets and deteriorating global economic conditions have lead to a slowdown of growth. The slowdown of growth is a major concern, as one of the biggest risks to a full recovery for the metals industry would be a weak and/or slow demand resurgence in critical end markets. Prices for raw materials continue to climb and/or remain near record highs. It is difficult in these conditions to forecast metal prices and demand trends for products that we would produce if we had current mining operations. Credit market conditions have also increased the cost of obtaining capital and limited the availability of funds. Accordingly, management is reviewing the effects of the current conditions on our business.

 

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It is anticipated that for the foreseeable future, we will rely on the equity markets to meet our financing need. We will also consider entering into joint venture arrangements to advance our projects.

 

Capital and Exploration Expenditures

 

We are reviewing our capital and exploration spending in light of current market conditions. As a result of our review, we may curtail a portion of our capital and exploration expenditures during 2011.

 

We are currently concentrating our exploration activities in Brazil and Canada and examining data relating to the potential acquisition or joint venturing of additional mineral properties in either the exploration or development stage.

 

Exploration Past, Present and Plans for Next Twelve Months

 

The following Plan of Operation contains forward-looking statements that involve risks and uncertainties, as described below. The actual results could differ materially from those anticipated in these forward-looking statements. During the next 12 months the Company intends to raise additional funds through equity offerings and/or debt borrowing to meet the general and administrative operating expenses and to conduct work on exploration properties. There is, of course, no assurance that we will be able to do so and the Company does not have any agreements or arrangements with respect to any such financing. The exploration properties have not commenced commercial production and we have no history of earnings or cash flow from operations. While we may attempt to generate additional working capital through the operation, development, sale or possible joint venture development of properties, there is no assurance that any such activity will generate funds that will be available for operations.

 

We intend to concentrate exploration activities on the Brazilian Tapajos properties and examine data relating to the potential acquisition or joint venturing of additional mineral properties in either the exploration or development stage in other South American countries. Additional contractors and consultants may be hired on as and when the requirement occurs.

 

The exploration work program for the remainder of 2012 will focus on the Brazilian properties. In Brazil we intend to follow up results from previous work on the Sao Domingo property, including the previous drilling and mapping over the Fofoca Prospect (“Fofoca”) area. Follow up evaluation of the geophysical anomaly west of Fofoca is required to test any strike continuity of potential economic mineralisation. This work will entail surface mapping, sampling of soils on a grid basis to delineate geochemical anomalies, stream sediment sampling, geophysical surveying and drilling.

 

We have set up a field operations centre at the Săo Domingos property and intend to continue to focus exploration activities on anomalies associated with the Săo Domingos property. We selected the Săo Domingos property based on its proximity to the other properties, and the logistics currently in place. Access to the Săo Domingos property is by light aircraft to a well-maintained strip, by road along the government maintained Trans Garimpeiro highway, and by boat along the multitude of waterways in the Amazon Basin. Work conducted both on a regional and prospect scale since 2006 has included mapping, rock chip sampling, a large scale soil geochemical sampling grid, ground-based geophysical testing, partial trenching over the vein systems and sub-surface drill testing of several prospect areas at Fofoca, Esmeril, Santa Isabel and Atacadão.

 

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The Fofoca is the primary area of interest that has been identified to date. Hydrothermal alternation observed at Fofoca and surrounding prospects is considered characteristic of epithermal style mineralization systems in the region. Fofoca has been interpreted as a multiple lode gold system, with lodes that are shear hosted in granite country rocks and strike approximately east-west dipping moderately to the south. Gold mineralization is associated with quartz veining which hosts various sulphides, including pyrite, arsenopyrite, galena and chalcopyrite. Fofoca has over 580 meters of potential strike with typical breccia vein widths of over one meter dipping at around 80 degrees south. Thicknesses of approximately 20 meters of quartz stockwork have been seen in drill core in the central parts of deposit caused by post-mineralization brittle faulting.

 

Exploration work completed at Fofoca in 2006 included logging of six trenches over anomalous quartz veins, followed by a 17 hole, HQ/NQ drill program (2,606 meters) to test the trenches at depth. Drilled to a maximum depth of 185 meters, with an average depth of 153 meters, the drilling returned several high grade, thin intercepts of auriferous quartz veins.

 

A second HQ/NQ drilling campaign (FOF-18 and 19) started in mid-2007 in which we drilled two holes into Fofoca. This program targeted down dip extensions, with drill hole 18 descending to 250 meters, but only encountered small stockwork vein systems. Generally the drill holes encountered thin hydrothermally brecciated, vuggy, sulphidic quartz veins with alterations ranging from argillic through to potassic (possible overprinting), which is typical for this style of mineralisation. No metallurgical test work was undertaken.

 

Based on mapping, sampling, trenching and ground-based IP surveys, the Fofoca structure appears to continue to the west, being displaced by late stage faulting to the north. This structural trend is believed to link Fofoca with the Cachoeirinha (Fofoca West) area, providing the potential to add significantly to currently outlined resources. No drilling has been conducted on Fofoca West. We will continue to evaluate the potential of the São Domingós Project and will work to determine whether the Fofoca could evolve along strike and link up with other noted targets further along strike. Further drilling, trenching and geophysics is planned to further assess the São Domingós Project.

 

Currently the system still remains open along strike in both directions and at depth. We will continue to evaluate the potential, and are confident that Fofoca could evolve further and link up with other noted targets further along strike.

 

A recent discovery was made on the Atacadau area and has been called Colibri. Here artisanal miners uncovered an area of stock work mineralization that was subsequently sampled and returned some high-grade assays. Further sampling of material that was exposed by artisanal activity around the Colibri occurrence was conducted. Whilst monitoring the artisanal activity mapping and measurements of the structures and orientations of theoretical mineralization channels were conducted. The results showed that there are possible correlations to the Atacadau mineralization noted from previous mapping and drilling. We intend to cut trenches across the strike of the mineralizing structures to better understand the size both laterally and along strike. We will then test the strike extent with geophysics in a similar manner as that conducted on the Fofoca area.

 

During 2012, we will continue to follow up exploration results on the Fofoca area and plan to initiate further exploration programs on other areas of the Sao Domingos property. It is anticipated that we will drill a series of holes within the Fofoca area for engineering and metallurgical test work as well as to test for depth extensions of the known gold occurrences. Other exploration on the Săo Domingos property areas will involve further mapping of the outcrop geology and sampling soils and scree from shafts of previous workers in order to confirm lithologies and structural trends noted from drilling and published government maps. Currently, five anomalous areas on the Sao Domingos property have been identified from soil and rock chip sampling, at Atacadão, Esmeril, Colibri, Fofoca and Cachoeira, and we plan to conduct further investigation. Several other areas have been identified from remote sensing satellite imagery which will also be followed up.

 

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By viewing spectral wave band ratio’s designed to indicate iron oxides and clay minerals, we were able to decipher areas of past artisanal activity which could lead to the discovery of further hard rock targets, as demonstrated by the discovery of further extensions to potential mineralisation at Colibri and the newly discovered, Toucano, gold occurrence.

 

The Toucano occurrence was a recent discovery, made during the 4th Quarter of 2011 located in the same vicinity as the Colibri gold occurrence and close to the Fofoca resource area and the Attacadau occurrence. Toucano was found as a result of reviewing remote sensing imagery acquired during the last quarter of 2011 and the occurrence of recent artisanal activity. Aurora conducted detailed mapping over the Toucano occurrence and completed channel sampling across the exposed strike of potentially mineralised lithologies. As a result of the significant channel sample results and the other high grade rock chip results taken from exposures within the Toucano system, we intend to focus exploration delineating the potential area of mineralised material.

 

We have completed a revised exploration plan and budget to test the lateral and depth extent of the Toucano occurrence with bulk sampling, trenching and drilling during the 2012 exploration season. Exploration will also focus on testing for any sub parallel mineralisation that may be associated with a broader mineralizing envelope that may include the Colibri gold occurrence. Previous sampling of areas within Colibri assayed up to 5.94 g/t Gold in quartz veinlets associated to stock work mineralization.

 

Exploration will also focus on the extension of the Fofoca area of mineralised material to test the strike extent as follow up to significant gold assays from trenches along strike.

 

We recently concluded a first pass project wide evaluation of tailings and alluvial potential. Results showed that follow up test work is recommended and Aurora intends to apply for a trial mining license to carry out bulk sampling of potentially economic material. Concurrently a technical team has been assembled to continue the evaluation of both the alluvial potential and the geometry of the hard rock mineralisation in preparation for subsurface test work.

 

Description of Our Business and Properties

 

We conduct our activities from our principal and technical office located at Coresco AG, Level 3, Gotthardstrasse 20, 6304 Zug, Switzerland The telephone number is (+41) 7887-96966. These offices are provided to us on a month to month basis. We believe that these offices are adequate for our purposes. We do not own any real property or significant assets. Management believes that this space will meet our needs for the next 12 months.

 

Mining Properties

 

We currently have an interest in a strategic land package of nine (9) properties none of which contain any reserves. The exploration license areas are divided into 2 groups, the Săo Domingos and the Sao Joao areas.

 

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We have calculated a body of mineralized material to Guide 7 standards calculated in accordance with the Australasian Joint Ore Reserves Committee (the “JORC”) code for reporting of Mineral Resources and Ore Reserves (the “JORC Code”). The JORC resource is currently estimated at 130,000 ounces at 2.0 g/t calculated on a 0.5 g/t cut off. This mineralized material is located on the Săo Domingos property discussed below. The rest of the Brazil properties are in the preliminary exploration stage and do not contain any known bodies of ore. We are also examining data relating to the potential acquisition of other exploration properties in Latin America, South America.

 

Mineral exploration and development involves a high degree of risk and few properties that are explored are ultimately developed into producing mines. There is no assurance that planned production will result in a commercial success, as production is gold price and politically sensitive. Once production has commenced the Company is able to gauge the onward commercial viability of the project. There is no assurance that planned mineral exploration and development activities will result in any further discoveries of commercially viable bodies of mineralization. The long-term profitability of operations will be, in part, directly related to the cost and success of exploration programs, which may be affected by a number of factors.

 

We currently have an interest in nine (9) properties located in Tapajos gold province in Para State, Brazil, Colibri and Sao Domingo, and due to their proximity to each other, the 2 properties are jointly called the Sao Domingo project. We have conducted exploration activities on the properties and have ranked the properties in order of merit and may discontinue such activities and dispose of some of the rights to mineral exploration on the properties if further exploration work is not warranted.

 

The geology of the Săo Domingos property is predominantly composed of paleo-proterozoic Parauari Granites that play host to a number of gold deposits in the Tapajos Basin. Typical Granites of the younger Maloquinha Intrusive Suite have been noticed in the vicinity of Molly Gold Target, and basic rocks considered to be part of the mesoproterozoic Cachoeira Seca Intrusive Suite occur around the Esmeril target area. The Săo Domingos property was a previous large alluvial operation, and the property area covers numerous areas of workings. The Săo Domingos property lies in the Tapajos Province of Para State, Brazil It is situated approximately 250 km SE of Itaituba, the regional centre. Small aircraft service Itaituba daily and on occasions flights can be sourced via Manaus. Access from Itaituba to site is by small aircraft or unsealed road of average to poor quality. The road is subject to seasonal closures and ‘wet’ season site access is granted via light aircraft utilizing the local airstrip.

 

Our strategy is to concentrate our efforts on: (i) existing operations where an infrastructure already exists; (ii) properties presently being developed and/or in advanced stages of exploration which have potential for additional discoveries; and (iii) grass-roots exploration opportunities. We are currently concentrating our property exploration activities in Brazil. We are also examining data relating to the potential acquisition of other exploration properties in Latin America, South America.

 

Mineral exploration and development involves a high degree of risk and few properties that are explored are ultimately developed into producing mines. There is no assurance that our planned production will result in a commercial success, as production is gold price and politically sensitive. Once production has commenced we will be able to gauge the onward commercial viability of the project. There is no assurance that our planned mineral exploration and development activities will result in any further discoveries of commercially viable bodies of mineralization. The long-term profitability of our operations will be, in part, directly related to the cost and success of our exploration programs, which may be affected by a number of factors. Please refer to “Risk Factors.”

 

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Figure 1. Brazil, South America-property locality guide

 

Properties

 

Brazil

 

Săo Domingos

 

Location and access

 

The Săo Domingos property lies in the Tapajos Province of Para State, Brazil It is situated approximately 250 km SE of Itaituba, the regional centre, and includes an area of over 33,033.44 hectares (“ha”). Small aircraft service Itaituba daily and on this occasion flights were sourced via Manaus. Access from Itaituba to site is by small aircraft or unsealed road of average to poor quality. The road is subject to seasonal closures and as the visit was at the end of the ‘wet’ season site access was granted via light aircraft utilizing the local airstrip.

 

Tenure

 

a)DNPM Process 850.684/06:

 

We have good title over the mineral rights object of the Brazilian Department of Mines We have good title over the mineral rights, which were granted as Departamento Nacional de Produçăo Mineral (“DNPM”) Process number 850.684/06 and which is valid and in force, free and clear of any judicial and extrajudicial encumbrances and taxes. The São Domingos mineral rights are located at the Municipality of Itaituba, State of Pará, and are registered in our name. On September 13, 2006, we applied to the DNPM for the conversion of the Application to an Exploration Permit covering an area of 4,914.18 hectares. No payments or royalties are due regarding DNPM Process 850.384/06.

 

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b)DNPM Process 850.782/05:

 

We have good title over the mineral rights object of the DNPM Process No. 850.782/05, which is valid and in force, free and clear of any judicial and extrajudicial encumbrances and taxes. On November 8, 2005, it was submitted to DNPM the Exploration Claim for gold in the Municipality of Itaituba, State of Pará. The Exploration Permit was granted on November 28, 2006, for a three-year period. The transfer to Aurora was approved on March 24, 2009 and on September 28, 2009, it was requested the renewal of the Exploration Permit. This area was reduced from 6,756 hectares to 5,651.98 hectares due to the overlapping with Garimpeira (alluvial) Mining properties held by Mr Celio Paranhos. However the DNPM´s general attorney in Brasilia agreed with our legal thesis and nullified all applications filed by Mr Paranhos (about to 1,900 applications). A new Exploration Permit rectifying the previous one was granted on August 20, 2010, for a three-year period, for an area of 6,656.20 hectares. No payments or royalties are due regarding the DNPM Process 850.782/05 since it was acquired through a permutation agreement with Altoro Mineração Ltda.

 

c)DNPM Process 850.012/06 and 850.013/06:

 

The exploration claims were submitted to DNPM on January 19, 2006, for gold covering an area of 1,128.08 hectares and 750.55 hectares respectively, in the Municipality of Itaituba, State of Pará. According to information obtained such claims were correctly prepared and the required documents are in place. The tenements 850.012/06 and 850.013/06 are held by Mr Antonio Oliveira Ferreira and were submitted to DNPM on January 19, 2006. The tenements are located at Itaituba, State of Pará and are valid and in force, free and clear of any judicial and extrajudicial encumbrances and taxes, but the area was blocked since it is inside of a Garimpeira Reserve. The transfer to us will be submitted after the Exploration Permits are granted. There are no payments or royalties related to the tenements according to the agreement entered into with the previous owner.

 

d)DNPM Process 850.119/06:

 

The exploration claim was submitted to DNPM on March 7, 2006, for gold covering an area of 1,068.72 hectares, in the Municipality of Itaituba, State of Pará. Aurora has good title over the mineral rights object of the DNPM Process No. 850.119/06, which is valid and in force, free and clear of any judicial and extrajudicial encumbrances and taxes. We are the sole registered and beneficial holder of and own and possess good title to the referred mineral rights. The Exploration Permit has not been granted yet. The above-mentioned area is not related to any payments or royalties to third parties since we claimed them directly.

 

e)DNPM Process 859.587/95:

 

The tenement, was held by Vera Lucia Lopes, and is valid and in force, and is free and clear of any judicial and extrajudicial encumbrances and taxes. It is located at the Municipality of Itaituba, State of Pará. On November 27, 1995, it was submitted to DNPM the Exploration Claim for gold. The Exploration Permit was granted on September 15, 2006, for a three-year period covering an area of 5,000 hectares, and it was valid until September 15, 2009. On July 15, 2009, it was requested the renewal of the Exploration Permit which was granted and transferred to us and published on June 29, 2012. There are no payments or royalties related to the tenements since all payments due under the terms of the agreement entered into with the previous owner have been already made.

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f)DNPM Processes 850.014/06, 850.581/06 and 850.256/07:

 

We have the right to acquire good title over the mineral rights object of the Tenements. The Tenements are registered in the name of Antonio Oliveira Ferreira. The exploration claims were submitted to DNPM respectively on January 19, 2006, August 8, 2006 and April 17, 2007 for gold covering the areas of 421.45 hectares, 4276.03 hectares and 4036.00 hectares, in the Municipality of Itaituba and Jacareacanga, State of Pará. According to information obtained such claims were correctly prepared and the required documents are in place. The tenement 850.014/06 has not been transferred to Samba yet since the Exploration Permit has not been granted so far. The Exploration Permit for the Process 850.581/06 was granted on February 15, 2011 for a three-year period, for an area of 4273.03 hectares. The transfer to Samba Brazil Mineração Ltda has not been presented yet. The Exploration Permit for the Process 850.256/07 was granted on November 30, 2007 for a three-year period but it was cancelled on May 21, 2008 because the holder didn’t pay the annual fees on time. On June 10, 2008 it was presented an appeal to have the annulment dismissed, which hasn’t been analyzed yet. However, if the appeal is not approved, Samba Brazil’s rights over this tenement are guaranteed since only Samba Brazil has presented a Bid application for this process on July 18 2008. According to the Agreement signed between Samba Brazil and Antonio Oliveira Ferreira on June 5, 2008, a total amount of 120,000 Brazilian Real’s has already been paid by Samba Brazil for the acquisition of the Tenements.

 

Săo Joăo – Samba Minerals farm in agreement

 

In May 2008 we signed an agreement with Samba Minerals Limited (“Samba”), which was subsequently amended in August 2008, whereby Samba can earn up to an 80% participating interest in the Săo Joăo project by funding exploration expenditures to completion of a feasibility study on the property. Upon completion of a feasibility study, we will immediately transfer an 80% participation interest in the property to Samba and enter into a formal joint venture agreement to govern the development and production of minerals from the property. Samba can terminate its participation by providing us 30 days’ notice in writing. Upon withdrawal from its participation, Samba would forfeit to us all of its rights in relation to the project and would be free of any and all payment commitments yet to be due. Samba will be the manager of the Săo Joăo project. On October 17, 2011, we terminated the license and Option Agreement by providing written notice to Samba.

 

Comandante Araras Project - DNPM Processes 853.785/93 to 853.839/93 inclusive (relinquished):

 

On October 17, 2011, we terminated the license and Option Agreement by providing written notice to Samba. We are free of all and any future payment commitments. The interest in the properties was formally relinquished in January 2012.

 

São João Project - DNPM Processes 851.533/94 to 851.592/94 inclusive (relinquished):

 

On October 17, 2011 we terminated the license and Option Agreement by providing written notice to Samba. We are free of all and any future payment commitments. The interest in the properties was formally relinquished in January 2012.

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Geology

 

The geology of the Săo Domingos property is predominantly composed of paleo-proterozoic Parauari Granites that play host to a number of gold deposits in the Tapajos Basin. Typical Granites of the younger Maloquinha Intrusive Suite have been noticed in the vicinity of Molly Gold Target, and basic rocks considered to be part of the mesoproterozoic Cachoeira Seca Intrusive Suite occur around the Esmeril target area.

 

The Săo Domingos property was a previous large alluvial operation, and the property area covers numerous areas of workings.

 

Location and access

 

The Săo Joăo property is located in the central portion of the Southern Tapajos basin and is accessed by light aircraft from the regional centre of Itaituba. Access is also possible by unsealed roads linking up to the Transgarimpeiro highway and by a purpose cut heavy vehicle access track linking Sao Joao to the exploration centre at the primary project at Sao Domingo.

 

Geology

 

The prime targets for the Săo Joăo property are located around and on the intersection of regional NW and NNW faults within the Pararui Intrusive Suite and this area has been the focus of large-scale alluvial workings. The Pararui Intrusive Suite has proven to host the vast majority of gold deposits elsewhere within the Tapajos Gold Province. We conducted a rock chip program over an area currently being excavated for gold in quartz systems via shallow underground workings. The sample results have demonstrated that the quartz vein systems are highly mineralized and considered continuous for at least 200m. We are confident that the quartz vein systems are much more extensive and are currently planning to increase the sample density of rock and soil sampling over, and adjacent to, the current workings to locate further mineralized vein systems, and to drill test their depth extensions in the near future.

 

Previous mining activity over a number of years focused on the alluvial deposits within its many tributaries, and has now progressed to include the saprolite host rock and out cropping quartz veins.

 

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British Columbia, Canada – Kumealon Property (relinquished):

 

On January 20, 2012, we relinquished our claim over the Kumealon property located in British Columbia, Canada.

 

Directors, Executive Officers and Control Persons

 

The following table and text set forth the names and ages of all our directors and executive officers as of December 15, 2012. All of the directors will serve until the next annual meeting of stockholders and until their successors are elected and qualified, or until their earlier death, retirement, resignation or removal. There are no family relationships between or among the directors, executive officers or persons nominated or charged by our company to become directors or executive officers. Executive officers serve at the discretion of the Board, and are appointed to serve by the Board. Also provided herein are brief descriptions of the business experience of each director and executive officer during the past five years and an indication of directorships held by each director in other companies subject to the reporting requirements under the Federal securities laws.

 

Our Board currently consists of five members. Directors serve for a term of one year and stand for election at our annual meeting of stockholders. Pursuant to our Bylaws, any vacancy occurring in the Board, including a vacancy created by an increase in the number of directors, may be filled by the stockholders or by the affirmative vote of a majority of the remaining directors though less than a quorum of the Board. A director elected to fill a vacancy shall hold office only until the next election of directors by the stockholders. If there are no remaining directors, the vacancy shall be filled by the stockholders.

 

Name and Address   Age   Current Position   Director or Officer Since

Lars M. Pearl

C/- Coresco AG

Level 3

Gotthardstrasse 20

6304 Zug, Switzerland

  49   President, Chief Executive Officer and Director   April 27, 2007

Ross Doyle

C/- Coresco AG

Level 3

Gotthardstrasse 20

6304 Zug, Switzerland

  39   Chief Financial Officer and Director   October 11, 2011

Agustin Gomez de Segura (1)

C/- Coresco AG

Level 3

Gotthardstrasse 20

6304 Zug, Switzerland

  56   Director   November 15, 2010

Vladimir Bernshtein (2)

C/- Coresco AG

Level 3

Gotthardstrasse 20

6304 Zug, Switzerland

  35   Chief Business Development Director and Director   October 5, 2012

Andrey Ratsko (2)

C/- Coresco AG

Level 3

Gotthardstrasse 20

6304 Zug, Switzerland

  57   Director   October 5, 2012

 

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(1) On October 11, 2011, Mr. Gomez de Segura was appointed as Chairman of the Board.

 

(2) Pursuant to the terms of the subscription agreement entered into between us and Alltech, Alltech has the right to appoint two directors to our board. Each of Messrs. Bernshtein and Ratsko were appointed on October 5, 2012, and were chosen by Alltech as their director designees.

 

Effective as of June 17, 2011, Mr. Michael Montgomery resigned from his position as Chief Operating Officer and a director of ours.

 

The following is a description of the employment history for each of our directors and officers for the last five years:

 

Lars Pearl, 49, President, Director and Chief Executive Officer of Cigma Metals Corporation (2004 to 2008); Mr. Pearl has been self employed as a geological consultant from 1993 to 2004. Mr. Pearl has spent over 10 years as a geological consultant to projects in Australia, Tanzania, Russia, Kazakhstan, Peru, Colombia and Ecuador. During the last 5 years Mr. Pearl was acting as a consultant geologist to various companies, including Aurora Gold Corporation, Cigma Metals Corporation, Carnavale Resources Ltd and De Beira Goldfeilds in Australia, Brazil, Peru, Ecuador and Tanzania before joining the board of Aurora Gold Corporation in April 2007. Mr. Pearl devotes approximately 80% of his time dealing with the affairs of Aurora Gold. Mr. Pearl received a Bachelor of Applied Geology degree from the University of Technology, Sydney Australia in 1993. Mr. Pearl’s extensive experience, training and education as a geologist and his experience with other resources exploration companies make him particularly qualified to serve as our director.

 

Ross Doyle, 39, Ross Doyle has been employed as a strategic business analyst and CFO for the past 15 years. During this period his time was spent working with large commodity trading firms and financial institutions. During the last 5 years Mr Doyle worked as a CFO at the head office of Glencore International AG in their Coal division. Subsequent to departing Glencore, Mr Doyle has advised other commodity firms in a similar capacity, before joining the board of Aurora Gold Corporation in October 2011. Mr. Doyle received a Bachelor of Commerce from the University of Queensland, Brisbane Australia and is a Chartered Accountant. Mr. Doyle’s extensive experience, training and education with other resources companies makes him particularly qualified to act as our CFO and as a director.

 

Agustin Gomez de Segura, 56, was awarded a Diploma in Engineering in Physical Chemistry from the Moscow Technological University “MISA” (former Moscow Institute for Steel and Alloys). Mr. Gomez de Segura also completed 4 years of a Doctorate in Metal's Physics at Moscow Technological University. Mr. Gomez de Segura has had several senior roles in publicly listed companies. Mr. Gomez de Segura's positions both past and present include: Director for Labtam Information & Scientific Instruments (Australia) from 1983 till 1990. He was the Chairman of Advisory Board of Alina Bank (Russia) from 1994 till 1997. Mr. de Segura’s extensive scientific experience, training and education and his overall business experience make him particularly qualified to serve as our director.

 

Vladimir Bernshtein, 35, has been active in the mining industry with Alltech Investments Limited (AIL) since 2004 and as the Investment Director since 2008. During this time Mr. Bernshtein has been involved in various AIL projects including Oil & Gas exploration in Western Siberia, Sakhalin Island and Kamchatka and Gold exploration in Kyrgyzstan. Mr. Bernshtein’s extensive experience in the mining industry make him particularly qualified to serve as our director.

 

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Andrei Ratsko, 57, is a geologist with vast experience within the exploration and mining sector having worked in Africa and the Commonwealth of Independent States. Mr. Ratsko received his M.Sc. in Geography and Geomorphology from Lomonosov State University in Moscow. Since 2008 Mr Ratsko has been employed by Alltech Group as the Director General of CJSC TK Geo Resource, which holds licenses for precious and base metals in the Chuy region of the Kyrgyz Republic. Before joining Alltech Group Mr. Ratsko was an Executive Director at Swencore Consulting Inc., where he worked on various exploration projects in Tanzania. Mr. Ratsko’s extensive experience as a geologist in the mining industry makes him particularly qualified to serve as our director.

 

There are no family relationships between any of the directors or executive officers.

 

Consideration of Director Nominees

 

Director Qualifications

 

We believe that our Board, to the extent that our limited resources permit, should encompass a diverse range of talent, skill and expertise sufficient to provide sound and prudent guidance with respect to our operations and interests. Each director also is expected to: exhibit high standards of integrity, commitment and independence of thought and judgment; use his or her skills and experiences to provide independent oversight to our business; participate in a constructive and collegial manner; be willing to devote sufficient time to carrying out their duties and responsibilities effectively; devote the time and effort necessary to learn our business; and, represent the long-term interests of all shareholders.

 

The Board has determined that the Board as a whole must have the right diversity, mix of characteristics and skills for the optimal functioning of the Board in its oversight of our affairs. The Board believes it should be comprised of persons with skills in areas such as: finance; real estate; banking; strategic planning; human resources and diversity; leadership of business organizations; and legal matters. The Board may also consider in its assessment of the Board’s diversity, in its broadest sense, reflecting, but not limited to, age, geography, gender and ethnicity.

 

In addition to the targeted skill areas, the Board looks for a strong record of achievement in key knowledge areas that it believes are critical for directors to add value to the Board, including:

 

·Strategy—knowledge of our business model, the formulation of corporate strategies, knowledge of key competitors and markets;
·Leadership—skills in coaching and working with senior executives and the ability to assist the Chief Executive Officer;
·Organizational Issues—understanding of strategy implementation, change management processes, group effectiveness and organizational design;
·Relationships—understanding how to interact with investors, accountants, attorneys, management companies, analysts, and communities in which we operate;
·Functional—understanding of finance matters, financial statements and auditing procedures, technical expertise, legal issues, information technology and marketing; and
·Ethics—the ability to identify and raise key ethical issues concerning our activities and those of senior management as they affect the business community and society.

 

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Nomination Procedures

 

We have no nominating committee, and all nominating functions are handled directly by the full Board, which the Board believes is the most effective and efficient approach, based on the size of the Board and our current and anticipated operations and needs. As outlined above in selecting a qualified nominee, the Board considers such factors as it deems appropriate which may include: the current composition of the Board; the range of talents of the nominee that would best complement those already represented on the Board; the extent to which the nominee would diversify the Board; the nominee’s standards of integrity, commitment and independence of thought and judgment; and the need for specialized expertise.

 

The Board and Board Meetings

 

Our Board consists of five members. Directors serve for a term of one year and stand for election at our annual meeting of stockholders. Pursuant to our Bylaws, any vacancy occurring in the Board, including a vacancy created by an increase in the number of directors, may be filled by the stockholders or by the affirmative vote of a majority of the remaining directors though less than a quorum of the Board. A director elected to fill a vacancy shall hold office only until the next election of directors by the stockholders. If there are no remaining directors, the vacancy shall be filled by the stockholders.

 

At a meeting of stockholders, any director or the entire Board may be removed, with or without cause, provided the notice of the meeting states that one of the purposes of the meeting is the removal of the director. A director may be removed only if the number of votes cast to remove him exceeds the number of votes cast against removal.

 

Our Board and management are committed to responsible corporate governance to ensure that we are managed for the long-term benefit of its shareholders. To that end, the Board and management periodically review and update, as appropriate, our corporate governance policies and practices. In doing so, the Board and management review published guidelines and recommendations of institutional shareholder organizations and current best practices of similarly situated public companies. The Board and management also regularly evaluate and, when appropriate, will revise our corporate governance policies and practices in accordance with the requirements of the Sarbanes-Oxley Act of 2002 and the rules and listing standards issued by the SEC.

 

During the year ended December 31, 2011, the Board held a total of four (4) meetings. All members of the Board attended all meetings of the Board.

 

Committees

 

We have no committees of the Board.

 

Legal Proceedings

 

During the past five years none of our directors, executive officers, promoters or control persons has been:

 

·the subject of any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
·convicted in a criminal proceeding or is subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
·subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;

 

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·found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law;
·the subject of any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:
oAny Federal or State securities or commodities law or regulation; or
oAny law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or
oAny law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity.
oany federal or state judicial or administrative proceedings based on violations of federal or state securities, commodities, banking or insurance laws and regulations, or any settlement to such actions (excluding settlements between private parties); and
oany disciplinary sanctions or orders imposed by a stock, commodities or derivatives exchange or other self-regulatory organization.

 

CODE OF ETHICS

 

We have adopted a Code of Ethics that applies to all of our officers, directors and employees, including its Chief Financial Officer and Chief Executive Officer, which complies with the requirements of the Sarbanes-Oxley Act of 2002 and applicable FINRA listing standards. Accordingly, the Code of Ethics is designed to deter wrongdoing, and to promote, among other things, honest and ethical conduct, full, timely, accurate and clear public disclosures, compliance with all applicable laws, rules and regulations, the prompt internal reporting of violations of the Code of Ethics, and accountability.

 

CORPORATE GOVERNANCE

 

We have adopted Corporate Governance Guidelines applicable to our Board, which can be viewed on our website at http://aurora-gold.com/corporate-governance/.

 

Board Leadership Structure

 

We currently have five directors, three of whom are also executive officers. Our Board has reviewed our current Board leadership structure — which consists of a Chief Executive Officer a Chief Financial Officer and a Chairman of the Board— in light of the composition of the Board, our size, the nature of our business, the regulatory framework under which we operates our stockholder base, our peer group and other relevant factors, and has determined that this structure is currently the most appropriate Board leadership structure for our company. Nevertheless, the Board intends to carefully evaluate from time to time whether our Chief Executive Officer and Chairman positions should be combined based on what the Board believes is best for us and our stockholders.

 

Board Role in Risk Oversight

 

Risk is inherent in every business, and how well a business manages risk can ultimately determine its success. We face a number of risks, including strategic risks, enterprise risks, financial risks, and regulatory risks. While our management is responsible for day to day management of various risks we face, the Board, as a whole, is responsible for evaluating our exposure to risk and to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed. The Board reviews and discusses policies with respect to risk assessment and risk management. The Board also has oversight responsibility with respect to the integrity of our financial reporting process and systems of internal control regarding finance and accounting, as well as its financial statements.

 

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Director Independence

 

Our securities are not listed on a U.S. securities exchange and, therefore, we are not subject to the corporate governance requirements of any such exchange, including those related to the independence of directors. However, at this time, after considering all of the relevant facts and circumstances, our Board has determined that only Mr. Gomez de Segura is independent from our management and qualifies as “independent director” under the standards of independence under the applicable FINRA listing standards. Upon our listing on any national securities exchange or any inter-dealer quotation system, it will elect such independent directors as is necessary under the rules of any such securities exchange.

 

Certain Relationships

 

There are no family relationships among or between any of our officers and directors. Our proposed business raises potential conflicts of interests between certain of our officers and directors and us. Certain of our directors are directors of other mineral resource companies and, to the extent that such other companies may participate in ventures in which we may participate, our directors may have a conflict of interest in negotiating and concluding terms regarding the extent of such participation. In the event that such a conflict of interest arises at a meeting of our directors, a director who has such a conflict will abstain from voting for or against the approval of such participation or such terms. In appropriate cases, we will establish a special committee of independent directors to review a matter in which several directors, or management, may have a conflict. From time to time, several companies may participate in the acquisition, exploration and development of natural resource properties thereby allowing for their participation in larger programs, involvement in a greater number of programs and reduction of the financial exposure with respect to any one program. It may also occur that a particular company will assign all or a portion of its interest in a particular program to another of these companies due to the financial position of the company making the assignment.

 

In determining whether we will participate in a particular program and the interest therein to be acquired by it, the directors will primarily consider the potential benefits to us, the degree of risk to which we may be exposed and its financial position at that time. Other than as indicated, we have no other procedures or mechanisms to deal with conflicts of interest. We are not aware of the existence of any conflict of interest as described herein.

 

Compensation of Directors

 

Our Board determines the non-employee directors’ compensation for serving on the Board and its committees. In establishing director compensation, the Board is guided by the following goals:

 

·compensation should consist of a combination of cash and equity awards that are designed to fairly pay the directors for work required for a company of our size and scope;
·compensation should align the directors’ interests with the long-term interests of stockholders; and
·compensation should assist with attracting and retaining qualified directors.

 

Standard Arrangements

 

We do not pay a fee to our outside, non-officer directors. We reimburse our directors for reasonable expenses incurred by them in attending meetings of the Board. During the years ended December 31, 2010 and in 2011 through December 15, 2012, we paid non-officer directors, $0, $0 and $0, respectively, in consulting fees.

 

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Executive Compensation

 

The responsibility for establishing, administering and interpreting our policies governing the compensation and benefits for our executive officers lies with our Board. In this connection the Board has not retained the services of any compensation consultants.

 

The goals of our executive compensation program are to attract, motivate and retain individuals with the skills and qualities necessary to support and develop our business within the framework of our small size and available resources. In 2012, we designed our executive compensation program to achieve the following objectives:

 

·attract and retain executives experienced in the resource exploration industry;
·motivate and reward executives whose experience and skills are necessary to our ultimate success;
·reward performance as warranted; and
·align the interests of our executive officers and stockholders by motivating executive officers to increase stockholder value.

 

Summary Compensation Table

 

The following table summarizes the compensation earned by the Named Executive Officers during the fiscal years ended December 31, 2011, and 2010:

 

Name and
principal
position
(a)
  Year
December 31,
(b)
  Salary
($)
(c)
   Bonus
($)
(d)
   Stock
awards
($)
(e)
   Option
awards
($)
(f)
   Non-equity
incentive
plan
compensation
($)
(g)
   Non-qualified
deferred
compensation
earnings
($)
(h)
   All other
compensation
($)
(i)
   Total
($)
(j)
 
Lars M. Pearl
  2011   135,529    -0-    -0-    103,480    -0-    -0-    -0-    239,009 
President, CEO and Director (2)  2010   181,850    -0-    -0-    -0-    -0-    -0-    -0-    181,850 
                                            
Ross Doyle
  2011   31,980              99,631    -0-    -0-    -0-    131,611 
CFO and Director (2)  2010   -0-    -0-    -0-    -0-    -0-    -0-    -0-    -0- 
                                            
Michael Montgomery
  2011   -0-    -0-    -0-    -0-    -0-    -0-    -0-    -0- 
Former COO and Director (2)  2010   157,741    -0-    -0-    -0-    -0-    -0-    -0-    157,741 

 

43
 

 

(1) Effective as October 1, 2012, each of Messrs. Pearl and Doyle agreed to reduce their salary to $6,000 per month.

 

(2) Effective as of June 17, 2011, Mr. Michael Montgomery resigned as our COO and a director.

 

On October 11, 2011, we entered into a services agreement with Global Strategic Synergies Gmbh (“Global Strategic”) pursuant to which Mr. Ross Doyle serves as our Chief Financial Officer. Pursuant to the terms of the services agreement, Global Strategic is paid a monthly consulting fee of 10,000 Swiss Francs. The services agreement may be terminated by either party upon advanced written notice to the other party of 20 business days. Mr. Doyle is an equal shareholder in Global Strategic with his wife.

 

None of our officers or directors is a party to an employment agreement with us. Our entire Board sets the current year compensation levels of each of the above named Executive Officers. Effective January 1, 2010, Mr. Pearls’ annual salary was $191,945 payable in monthly installments of approximately $15,995. During the fourth quarter of 2010, Mr. Pearl’s annual salary was revised to $152,868 payable in monthly installments of approximately $12,739. Effective March 1, 2010, Mr. Montgomery’s annual salary was $184,248 payable in monthly installments of approximately $15,774.

 

Options/SAR Grants Table

 

In 2007, our Board approved the Plan which was subsequently approved by our shareholders in July 2007, to offer an incentive to obtain services of key employees, directors and consultants of ours. The Plan provides for the reservation for awards of an aggregate of 10% of the total shares of Common Stock outstanding from time to time. No Plan participant may receive stock options exercisable for more than 1,000,000 shares of common stock in any one calendar year. Under the Plan, the exercise price of an incentive stock option must be at least equal to 100% of the fair market value of the common stock on the date of grant (110% of fair market value in the case of options granted to employees who hold more than 10% of our capital stock on the date of grant). The term of stock options granted under the Plan is not to exceed ten years and the stock options vest immediately upon granting.

 

On January 20, 2012, we awarded 1,600,000 stock purchase options to directors and officer, with an exercise price of $0.05 per share. The term of these options is five years. The options are exercisable at any time from the grant date up to and including November 20, 2017.

 

On November 24, 2011, we awarded 3,650,000 stock purchase options to directors, officers, consultants and employees with an exercise price of $0.05 per share. The term of these options is five years. The options are exercisable at any time from the grant date up to and including November 24, 2016.

 

On October 11, 2011, we awarded 4,200,000 stock purchase options to directors, officers, consultants and employees with an exercise price of $0.12 per share. The term of these options is five years. The options are exercisable at any time from the grant date up to and including October 10, 2016.

 

We awarded no stock purchase options, or any other rights, to any of our directors or officers during the years ended December 31, 2010 and 2009.

 

On August 6, 2007, we awarded 2,300,000 stock purchase options to directors, officers and employees with an exercise price of $0.26 per share. The term of these options is five years. The options were exercisable at any time from the grant date up to and including August 6, 2012.

 

44
 

 

The following is a summary of stock option activity for the year ended December 31, 2011 and the status of stock options outstanding and exercisable at December 31, 2011:

 

   Stock Options #  

Exercise Price

Ranges $

 
Outstanding and exercisable at December 31, 2010   1,700,000    0.26 
Forfeited during year   500,000    - 
Granted during year   7,850,000    0.12 - 0.05 
Outstanding and exercisable at December 31, 2011   9,050,000      

 

The following is a summary of stock option granted and the status of stock options outstanding and exercisable at December 31, 2011 (we do not have any Stock Awards outstanding as of December 31, 2011):

 

Option Awards
Name 

Number of 

Securities 

Underlying 

Unexercised 

Options 

Exercisable 

(#)

  

Number of

Securities

Underlying

Unexercised

Options

Unexercisable

(#)

  

Number of

Securities

Underlying

Unexercised

Unearned

Options

(#)

  

Option

Exercise

Price per

Share ($)

  

Option

Expiration Date

Lars Pearl   1,000,000    -    -   $0.26   August 6, 2012
Cameron Richardson   200,000    -    -   $0.26   August 6, 2012
Lars Pearl   1,000,000    -    -   $0.12   October 10, 2016
Agustin Gomez de Segura   1,000,000    -    -   $0.12   October 10, 2016
Ross Doyle   1,000,000    -    -   $0.12   October 10, 2016
Joseph Sierchio   200,000    -    -   $0.12   October 10, 2016
Coresco AG   1,000,000    -    -   $0.12   October 10, 2016
Lars Pearl   1,250,000    -    -   $0.05   November 23, 2016
Agustin Gomez de Segura   1,100,000    -    -   $0.05   November 23, 2016
Ross Doyle   1,100,000    -    -   $0.05   November 23, 2016
Luis Mauricio   200,000    -    -   $0.05   November 23, 2016
Total   9,050,000                   

 

Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value Table

 

At December 31, 2011, we had 9,050,000 (December 31, 2010 - 1,700,000) stock purchase options outstanding. As of December 15, 2012, we had 9,650,000 stock purchase options outstanding

 

At no time during the last completed fiscal year did we, while a reporting company pursuant to Section 13(a) of 15(d) of the Exchange Act, adjust or amend the exercise price of the stock options or SARs previously awarded to any of the named executive officers, whether through amendment, cancellation or replacement grants, or any other means.

 

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Long-Term Incentive Plans

 

There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers, except that our directors and executive officers may receive stock options at the discretion of our Board. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of our Board.

 

We have no plans or arrangements in respect of remuneration received or that may be received by our executive officers to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control, where the value of such compensation exceeds $60,000 per executive officer.

 

Compensation of Directors

 

We reimburse our directors for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our Board. Our Board may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director. For the year ended December 31, 20111, we compensated Mr. Agustin Gomez de Segura, a non-employee director, $40,000 for his services as a member of our Board. No director received and/or accrued any compensation for their services as a director, including committee participation and/or special assignments, or incurred in connection with attending board meetings in the year ended December 31, 2010. Effective as of October 1, 2012, we have agreed to compensate each of our directors $6,000 per month for their services, other than Mr. de Segura, who is compensated at a rate of $3,000 per month for his services.

 

Employment Contracts

 

On October 11, 2011, we entered into a services agreement with Global Strategic pursuant to which Mr. Ross Doyle serves as our Chief Financial Officer. Pursuant to the terms of the services agreement, Global Strategic is paid a monthly consulting fee of 10,000 Swiss Francs. The services agreement may be terminated by either party upon advanced written notice to the other party of 20 business days.

 

During the year ended December 31, 2011, consulting fees of $295,701 (year ended December 31, 2010 - $339,591) were paid to directors and officers of ours and its subsidiary. The transactions were recorded at the exchange amount, being the value established and agreed to by the related parties.

 

There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. Our directors and executive officers may receive stock options at the discretion of our Board. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of our Board.

 

We have no plans or arrangements in respect of remuneration received or that may be received by our executive officers to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control, where the value of such compensation exceeds $60,000 per executive officer.

 

46
 

 

Security Ownership of Certain Beneficial

Owners and Management

 

The following table sets forth certain information regarding the beneficial ownership of our common stock as of December 15, 2012, by (i) each person who is known by us to own beneficially more than five percent (5%) of our outstanding common stock; (ii) each of the our directors and officers; and (iii) all of our directors and officers as a group. At December 15, 2012, there were 249,144,706 shares of our common stock issued and outstanding.

 

Name and Address of Beneficial Owner 

Amount and Nature of

Beneficial Owner (1)

   Percentage
of Class
 
5% Owners          
Alltech Capital Limited
c/o Kaiser Partner Trust Services Anstalt
Pflugstrasse 10/12, Postfach 538
9490, Vaduz
Liechtenstein
   135,000,000    54.2%
           
Officers and Directors          
Lars M. Pearl
C/- Coresco AG
Level 3
Gotthardstrasse 20
6304 Zug, Switzerland
   6,017,628(2)   2.4%
Ross Doyle
C/- Coresco AG
Level 3
Gotthardstrasse 20
6304 Zug, Switzerland
   5,205,545(3)   2.1%
Agustin Gomez de Segura
C/- Coresco AG
Level 3
Gotthardstrasse 20
6304 Zug, Switzerland
   5,428,896(4)   2.2%
Vladimir Bernshtein
C/- Coresco AG
Level 3
Gotthardstrasse 20
6304 Zug, Switzerland
   0    0%
Andrey Ratsko
C/- Coresco AG
Level 3
Gotthardstrasse 20
6304 Zug, Switzerland
   0    0%
Officers and directors (5 persons)   16,652,069    6.7%

* less than 1%.

 

(1) Calculated pursuant to rule 13d-3(d) of the Exchange Act. Beneficial ownership is calculated based on 249,144,706 shares of common stock issued and outstanding on a fully diluted basis as of December 15, 2012. Under Rule 13d-3(d) shares not outstanding which are subject to options, warrants, rights or conversion privileges exercisable within 60 days are deemed outstanding for the purpose of calculating the number and percentage owned by such person, but are not deemed outstanding for the purpose of calculating the percentage owned by each other person listed.

 

47
 

 

(2) Includes: (a) 1,488,533 shares of our common stock owned by Mr. Pearl; (b) 25% of the 4,916,379 shares of our common stock owned by Coresco AG, a consulting group of which Mr. Pearl is a 25% owner; (c) 1,000,000 stock purchase options awarded on October 11, 2011, the stock purchase options are exercisable at $0.12 per share and have a term of five years. The options are exercisable at any time from the grant date up to and including the October 10, 2016; (d) 250,000 of the 1,000,000 stock purchase options awarded on October 11, 2011, to Coresco AG, a consulting group of which Mr. Pearl is a 25% owner, the stock purchase options are exercisable at $0.12 per share and have a term of five years. The options are exercisable at any time from the grant date up to and including October 10, 2016; (e) 1,250,000 stock purchase options awarded on November 24, 2011, the stock purchase options are exercisable at $0.05 per share and have a term of five years. The options are exercisable at any time from the grant date up to and including November 23, 2016; and (f) 800,000 stock purchase options awarded on January 13, 2012, the stock purchase options are exercisable at $0.05 per share and have a term of five years. The options are exercisable at any time from the grant date up to and including January12, 2017.

 

(3) Includes: (a) 1,626,450 shares of our common stock owned by Mr. Doyle; (b) 25% of the 4,916,379 shares of our common stock owned by Coresco AG, a consulting group of which Mr. Doyle is a 25% owner; (c) 1,000,000 stock purchase options awarded on October 11, 2011, the stock purchase options are exercisable at $0.12 per share and have a term of five years. The options are exercisable at any time from the grant date up to and including October 10, 2016; (d) 250,000 of the 1,000,000 stock purchase options awarded on October 11, 2011, to Coresco AG, a consulting group of which Mr. Doyle is a 25% owner, the stock purchase options are exercisable at $0.12 per share and have a term of five years. The options are exercisable at any time from the grant date up to and including October 10, 2016; (e) 1,100,000 stock purchase options awarded on November 24, 2011, the stock purchase options are exercisable at $0.05 per share and have a term of five years. The options are exercisable at any time from the grant date up to and including November 23, 2016.

 

(4) Includes (a) 3,328,896 shares of our common stock owned by Mr. de Segura; (b) 1,000,000 stock purchase options awarded on October 11, 2011, the stock purchase options are exercisable at $0.12 per share and have a term of five years. The options are exercisable at any time from the grant date up to and including October 10, 2016; and (c) 1,100,000 stock purchase options awarded on November 24, 2011, the stock purchase options are exercisable at $0.05 per share and have a term of five years. The options are exercisable at any time from the grant date up to and including November 23, 2016.

 

Changes in Control

 

On September 21, 2012, we entered into a subscription agreement with Alltech pursuant to which we agreed to sell to Alltech 135,000,000 shares of our common stock, representing approximately 54% of our issued and outstanding shares of common stock, for a purchase price of $5,000,000. The closing of the transaction occurred on October 5, 2012. As a result of the sale a change in control of the Company occurred.

 

Transactions With Related Persons, Promoters

and Certain Control Persons

 

Our proposed business raises potential conflicts of interests between certain of our officers and directors and us. Certain of our directors are directors of other mineral resource companies and, to the extent that such other companies may participate in ventures in which we may participate, our directors may have a conflict of interest in negotiating and concluding terms regarding the extent of such participation. In the event that such a conflict of interest arises at a meeting of our directors, a director who has such a conflict will abstain from voting for or against the approval of such participation or such terms. In appropriate cases, we will establish a special committee of independent directors to review a matter in which several directors, or management, may have a conflict. From time to time, several companies may participate in the acquisition, exploration and development of natural resource properties thereby allowing for their participation in larger programs, involvement in a greater number of programs and reduction of the financial exposure with respect to any one program. It may also occur that a particular company will assign all or a portion of its interest in a particular program to another of these companies due to the financial position of the company making the assignment.

 

48
 

 

In determining whether we will participate in a particular program and the interest therein to be acquired by it, the directors will primarily consider the potential benefits to us, the degree of risk to which we may be exposed and its financial position at that time. Other than as indicated, we have no other procedures or mechanisms to deal with conflicts of interest. We are not aware of the existence of any conflict of interest as described herein.

 

Transactions with Related Persons

 

Other than as disclosed below, during the fiscal year ended December 31, 2011 and through December 15, 2012, none of our current directors, officers or principal shareholders, nor any family member of the foregoing, nor, to the best of our information and belief, any of our former directors, senior officers or principal shareholders, nor any family member of such former directors, officers or principal shareholders, has or had any material interest, direct or indirect, in any transaction, or in any proposed transaction which has materially affected or will materially affect us.

 

There have been no transactions or proposed transactions with officers and directors during the last two years to which we are a party except as follows:

 

During the nine-month period ended September 30, 2012, we incurred consulting fees of $297,190 (September 30, 2011: $191,742) to our directors and officers (or companies of the officers and directors). The transactions were recorded at the exchange amount, being the value established and agreed to by the related parties. Included in accounts payable and accrued expenses and advances payable (related parties) at September 30, 2012 and December 31, 2011 were $322,419 and $Nil respectively payable to our officers and directors for consulting fees and various expenses incurred on our behalf.

 

On December 15, 2011, we entered into debt settlement agreement with Mr. Ross Doyle pursuant to which we issued Mr. Doyle 1,626,450 shares of our common stock in exchange for a release from paying $32,529 we owed to Mr. Doyle.

 

On December 15, 2011, we entered into debt settlement agreement with Mr. Agustin Gomez de Segura pursuant to which we issued Mr. Gomez de Segura 2,328,896 shares of our common stock in exchange for a release from paying $46,577.92 we owed to Mr. Gomez de Segura.

 

On December 15, 2011, we entered into debt settlement agreement with Global Strategic pursuant to which we issued Global Strategic 2,065,996shares of our common stock in exchange for a release from paying $41,319.92 we owed to Global Strategic. Mr Doyle, our Chief Financial Officer, is an equal shareholder in Global Strategic with his wife.

 

On December 15, 2011, we entered into debt settlement agreement with Coresco AG pursuant to which we issued Coresco AG 4,916,379 shares of our common stock in exchange for a release from paying $98,327.58 we owed to Coresco AG. Messrs. Lars Pearl and Ross Doyle each own 25% of Coresco AG.

 

On November 24, 2011, we granted Mr. Lars Pearl, our Chief Executive Officer, 1,250,000 stock purchase options. The stock purchase options are exercisable at $0.05 per share and have a term of five years. The options are exercisable at any time from the grant date up to and including November 24, 2016.

 

49
 

 

On November 24, 2011, we granted Mr. Agustin Gomez de Segura, a director, 1,100,000 stock purchase options. The stock purchase options are exercisable at $0.05 per share and have a term of five years. The options are exercisable at any time from the grant date up to and including November 24, 2016.

 

On November 24, 2011, we granted Mr. Ross Doyle, our Chief Financial Officer, 1,100,000 stock purchase options. The stock purchase options are exercisable at $0.05 per share and have a term of five years. The options are exercisable at any time from the grant date up to and including November 24, 2016.

 

On October 11, 2011, we granted Mr. Lars Pearl, our Chief Executive Officer, 1,000,000 stock purchase options. The stock purchase options are exercisable at $0.12 per share and have a term of five years. The options are exercisable at any time from the grant date up to and including October 10, 2016.

 

On October 11, 2011, we entered into a consulting agreement with Global Strategic pursuant to which Mr. Ross Doyle serves as our Chief Financial Officer. Pursuant to the terms of the consulting agreement, Global Strategic is paid a monthly consulting fee of 10,000 Swiss Francs.

 

On October 11, 2011, we granted Mr. Ross Doyle 1,000,000 stock purchase options. The stock purchase options are exercisable at $0.12 per share and have a term of five years. The options are exercisable at any time from the grant date up to and including October 10, 2016.

 

On October 11, 2011, we granted Mr. Agustine Gomez de Segura 1,000,000 stock purchase options. The stock purchase options are exercisable at $0.12 per share and have a term of five years. The options are exercisable at any time from the grant date up to and including the October 10, 2016.

 

On October 11, 2011, we granted Coresco AG 1,000,000 stock purchase. The stock purchase options are exercisable at $0.12 per share and have a term of five years. The options are exercisable at any time from the grant date up to and including October 10, 2016. Messrs. Lars Pearl and Ross Doyle each own 25% of Coresco AG.

 

Description of Our Securities

 

Our authorized capital stock consists of 300,000,000 shares of common stock, par value $0.001 per share. As of December 15, 2012, we had 249,144,706 shares of common stock outstanding.

 

Common Stock

 

Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not have cumulative voting rights. Accordingly, holders of a majority of the shares of our common stock entitled to vote in any election of directors may elect all of the directors standing for election. Holders of our common stock are entitled to receive dividends ratably, if any, as may be declared from time to time by our Board out of funds legally available therefor. Upon our liquidation, dissolution or winding up, the holders of our common stock are entitled to receive ratably, our net assets available after the payment of all liabilities.

 

Holders of our common stock have no preemptive, subscription, redemption or conversion rights, and there are no redemption or sinking fund provisions applicable to the common stock. The outstanding shares of our common stock are, and the shares offered in this offering will be, when issued and paid for, duly authorized, validly issued, fully paid and non-assessable.

 

50
 

 

Dividends

 

We have not declared any cash dividends to date. We have no present intention of paying any cash dividends on our common stock in the foreseeable future, as we intend to use earnings, if any, to generate growth. The payment of dividends, if any, in the future, rests within the discretion of our Board and will depend, among other things, upon our earnings, capital requirements and our financial condition, as well as other relevant factors. There are no restrictions in our Certificate of Incorporation or By-laws that restrict us from declaring dividends.

 

Shares Eligible for Future Sale

 

Future sales of a substantial number of shares of our common stock in the public market could adversely affect market prices prevailing from time to time. Under the terms of this offering, the Shares offered may be resold without restriction or further registration under the Securities Act of 1933, except that any shares purchased by our “affiliates,” as that term is defined under the Securities Act, may generally only be sold in compliance with Rule 144 under the Securities Act.

 

Sale of Restricted Shares

 

Certain shares of our outstanding common stock were issued and sold by us in private transactions in reliance upon exemptions from registration under the Securities Act and have not been registered for resale. Additional shares may be issued pursuant to outstanding warrants and options. Such shares may be sold only pursuant to an effective registration statement filed by us or an applicable exemption, including the exemption contained in Rule 144 promulgated under the Securities Act.

 

Of the 249,144,706 shares of common stock outstanding as of December 15, 2012, 89,153,868 are freely tradable by persons other than our affiliates, without restriction under the Securities Act; and 159,990,838 shares are restricted securities within the meaning of Rule 144 under the Securities Act and may not be sold unless an exemption from the registration requirements of the Securities Act is available (including 144).

 

Sales Pursuant to Rule 144 by Non-Affiliates

 

Under Rule 144, a person who is not deemed to have been one of our affiliates at the time of or at any time during the three months preceding a sale, and who has beneficially owned the restricted ordinary shares proposed to be sold for at least six (6) months, including the holding period of any prior owner other than an affiliate, is entitled to sell their shares without complying with the manner of sale and volume limitation or notice provisions of Rule 144. We must be current in our public reporting if the non-affiliate is seeking to sell under Rule 144 after holding his shares between 6 months and one year. After one year, non-affiliates do not have to comply with any other Rule 144 requirements.

 

Sales under Rule 144 by Affiliates

 

Persons who have beneficially owned restricted shares of our common stock for at least six months but who are our affiliates at the time of, or at any time during the three months preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of either of the following:

 

51
 

 

·1% of the number of shares of common stock then outstanding; or
·the average weekly trading volume of the common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale, provided that the common stock is listed on a national securities exchange or on The NASDAQ Stock Market.

 

Sales under Rule 144 by our affiliates are further limited under Rule 144, including the provisions thereof relating to the manner of sale, notice requirements and availability of current public information about us.

 

Legal Proceedings

 

Although from time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business, we are currently not aware of any other legal proceedings or claims that we believe will have, individually, or in the aggregate, a material adverse affect on our business, financial condition or operating results.

 

The Selling Stockholder

 

The Selling Stockholder, Alltech Limited Capital, is a corporation organized under the laws of Gibraltar. The Selling Stockholder purchased its shares of our common stock pursuant to a subscription agreement dated as of September 21, 2012. Pursuant to the terms of the subscription agreement, we have agreed to register for resale all 135,000,000 shares of our common stock purchased by the Selling Shareholder. Although we will pay substantially all the expenses incident to the registration of the shares, we will not receive any proceeds from the sales by the Selling Stockholder; we did, however, receive $5,000,000 from the Selling Stockholder for the sale of our shares.

 

Name of Selling Stockholders (1) 

No. of 

Shares 

Beneficially 

Owned 

Prior to the 

Offering

  

% of Issued 

and 

Outstanding 

Shares Owned 

Prior to the 

Offering

  

Number of 

Shares 

Registered 

Under This 

Offering

  

% of Issued 

and 

Outstanding 

Shares Owned 

After This 

Offering (2)

 
Alltech Capital Limited (3)   135,000,000    54.2    135,000,000    0 

 

(1) Calculated pursuant to Rule 13d-3(d) of the Exchange Act. Beneficial ownership is calculated based on 249,144,706 shares of common stock issued and outstanding on a fully diluted basis as of December 15, 2012. The Selling Stockholder has sole voting and investment power with respect to all such shares. Under Rule 13d-3(d) of the Exchange Act, shares not outstanding which are subject to options, warrants, rights or conversion privileges exercisable within 60 days are deemed outstanding for the purpose of calculating the number and percentage owned by such person, but are not deemed outstanding for the purpose of calculating the percentage owned by each other person listed. To the best of our knowledge, the Selling Stockholder has not had a short position in our common stock; is not a broker-dealer or an affiliate of a broker-dealer (a broker-dealer may be a record holder); has not held any position or office, or has had any material relationship with us or any of our affiliates within the past three years. The Selling Stockholder and any broker-dealers or agents that are involved in selling these shares are deemed to be underwriters within the meaning of the Securities Act for such sales. An underwriter is a person who has purchased shares from an issuer with a view towards distributing the shares to the public. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be considered to be underwriting commissions or discounts under the Securities Act.

 

(2) The Selling Stockholder may sell some, all or none of its shares. We do not know how long the Selling Stockholder will hold the shares offered hereunder before selling them. We currently have no agreements, arrangements or understandings with the Selling Stockholder regarding the sale of any of the shares by it.

 

(3) Alltech Capital Limited is a subsidiary of Alltech Group, a Russian based private direct investment company established in 1993 by graduates from Moscow State Technical University. The strategy of Alltech Group is to invest in high-risk and high-yielding projects using bot its own and raised capital. Alltech Group is active in various industries, including oil and gas; coal and anthracite and development of residential and commercial real estate.

 

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Plan of Distribution

 

The Selling Stockholder of our common stock and any of its pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of common stock on the OTCQB or any other stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The Selling Stockholder may use any one or more of the following methods when selling shares:

 

·ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
·block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
·purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
·an exchange distribution in accordance with the rules of the applicable exchange;
·privately negotiated transactions;
·settlement of short sales entered into after the effective date of the registration statement of which this Prospectus is a part;
·an agreement with a broker-dealers to sell a specified number of such shares at a stipulated price per share;
·through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
·a combination of any such methods of sale; or
·any other method permitted pursuant to applicable law.

 

The Selling Stockholder may also sell shares under Rule 144, if available, rather than under this Prospectus.

 

Broker-dealers engaged by the Selling Stockholder may arrange for other broker-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Stockholder (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA NASD Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with NASD IM-2440.

 

In connection with the sale of the common stock or interests therein, the Selling Stockholder may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they assume. The Selling Stockholder may also sell shares of the common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities. The Selling Stockholder may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this Prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this Prospectus (as supplemented or amended to reflect such transaction).

 

53
 

 

The Selling Stockholder and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Act. In no event shall any broker-dealer receive fees, commissions and markups which, in the aggregate, would exceed eight percent (8%).

 

We are required to pay certain fees and expenses incurred by us incident to the registration of the shares. We have agreed to indemnify the Selling Stockholder against certain losses, claims, damages and liabilities, including liabilities under the Act.

 

Because the Selling Stockholder may be deemed to be an “underwriter” within the meaning of the Act, it will be subject to the prospectus delivery requirements of the Securities Act including Rule 172 thereunder. In addition, any securities covered by this Prospectus which qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather than under this Prospectus. There is no underwriter or coordinating broker acting in connection with the proposed sale of the resale shares by the Selling Stockholder.

 

We agreed to keep this Prospectus effective until the date on which the shares may be resold by the Selling Stockholder without registration and without regard to any volume limitations by reason of Rule 144 or any other rule of similar effect. The resale shares will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale shares may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.

 

Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale shares may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the Selling Stockholder will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of shares of the common stock by the Selling Stockholder or any other person. We will make copies of this Prospectus available to the Selling Stockholder and have informed them of the need to deliver a copy of this Prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).

 

Limitation Of Liability and Indemnification of Officers and

Directors; Insurance

 

Our Articles of Incorporation limit the liability of directors to the maximum extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except liability for:

 

·any breach of their duty of loyalty to the corporation or its stockholders;
·acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
·unlawful payments of dividends or unlawful stock repurchases or redemptions; or
·any transaction from which the director derived an improper personal benefit.

 

Our Bylaws provide that we will indemnify our directors, officers, employees and other agents to the fullest extent permitted by law. We believe that indemnification under our Bylaws covers at least negligence and gross negligence on the part of indemnified parties. Our Bylaws also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in connection with their services to us, regardless of whether our Bylaws permit such indemnification.

 

54
 

 

There is no pending litigation or proceeding involving any of our directors or officers as to which indemnification is required or permitted, and we are not aware of any threatened litigation or proceedings that may result in a claim for indemnification.

 

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

 

Disclosure of Commission Position On Indemnification

for Securities Act Liabilities

 

Our directors and officers are indemnified by our bylaws against amounts actually and necessarily incurred by them in connection with the defense of any action, suit or proceeding in which they are a party by reason of being or having been our directors or officers or of our subsidiaries. Our articles of incorporation provide that none of our directors or officers shall be personally liable for damages for breach of any fiduciary duty as a director or officer involving any act or omission of any such director or officer. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to such directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

 

In the event that a claim for indemnification against such liabilities, other than the payment by us of expenses incurred or paid by such director, officer or controlling person in the successful defense of any action, suit or proceeding, is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

 

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

 

In the event that a claim for indemnification against such liabilities (other than our payment of expenses incurred or paid by a director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

 

Legal Matters

 

The validity of the Shares offered hereby will be passed upon for us by Sierchio & Company, LLP, 430 Park Avenue, 7th Floor, New York, New York 10022. Joseph Sierchio, the managing partner of Sierchio & Company, LLP, is the beneficial owner of 200,000 stock options.

 

55
 

 

Experts

 

Our consolidated financial statements at December 31, 2011 and 2010, and for the years then ended, appearing herein have been audited by Peterson Sullivan, LLP, an independent registered public accounting firm, as set forth in its report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

 

Where You Can Find Additional Information

 

We file current, quarterly and annual reports with the SEC on forms 8-K, 10-Q and 10-K. Our filings may be inspected and copied at the Public Reference Room maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You can obtain information about operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. Copies of such material can be obtained from the public reference section of the SEC at prescribed rates. For further information with respect to us and the securities being offered hereby, reference is hereby made to the registration statement, including the exhibits thereto and the financial statements, notes, and schedules filed as a part thereto.

 

Index to Consolidated Financial Statements

 

    Page #
September 30, 2012 and 2011 (Unaudited)    
Consolidated Balance Sheets September 30, 2012 (unaudited) and December 31, 2011   F-1
Consolidated Statements of Comprehensive Income (Loss) (unaudited) Three and Nine months ended September 30, 2012 and 2011; and for the period from October 10, 1995 (Inception) to September 30, 2012   F-2
Consolidated Statements of Cash Flows (unaudited) Nine months ended September 30, 2012 and 2011 and for the period from October 10, 1995 (Inception) to September 30, 2012   F-3
Consolidated Statements of Stockholders’ Equity (Deficiency) for the Period from October 10, 1995 (Inception) to September 30, 2012   F-4
Notes to Consolidated Financial Statements (unaudited) Nine Months Ended September 30, 2012 and 2011   F-14
December 31, 2011 and 2010 (Audited)    
Report of Independent Registered Public Accounting Firm   F-25
Consolidated Balance Sheets as of December 31, 2011 and 2010   F-26
Consolidated Statements of Operations from October 10, 1995 (inception) to December 31, 2011 and for the years ended December 31, 2011 and 2010   F-27
Consolidated Statements of Stockholders’ Equity (Deficiency) and Comprehensive Income (Loss) for the period from October 10, 1995 (inception) to December 31, 2011   F-28
Consolidated Statements of Cash Flows for the period from October 10, 1995 (inception) to December 31, 2011 and for the years ended December 31, 2011 and 2010   F-32
Notes to Consolidated Financial Statements Years Ended December 31, 2011 and 2010   F-34

 

56
 

 

Aurora Gold Corporation

(An Exploration Stage Enterprise)

Consolidated Financial Statements (Expressed in U.S. Dollars)

Quarterly Report for the Period Ended September 30, 2012

(Unaudited)

Consolidated Balance Sheets

 

AURORA GOLD CORPORATION        
(An exploration stage enterprise)  As at   As at 
Consolidated Balance Sheets  September 30   December 31 
   2012 (Unaudited)   2011 
(Expressed in U.S. Dollars)  $   $ 
         
ASSETS          
Current assets          
Cash   1,241    237,426 
Total current assets   1,241    237,426 
Total assets (all current)   1,241    237,426 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY)          
Current liabilities          
Accounts payable and accrued expenses   254,974    400,644 
Advances payable   -    45,000 
Accounts payable – related party   240,419      
Advances payable – related party   82,000    92,000 
Total current liabilities   577,393    537,644 
           
Stockholders’ Equity (Deficiency)          
Common stock          
Authorized: 300,000,000 (December 31, 2011: 300,000,000) common shares with par value of $0.001 each          
Issued and outstanding:          
114,144,706 (December 31, 2011: 109,912,589) common shares   114,145    109,913 
Advances for stock subscriptions   -    20,000 
Additional paid-in capital   22,346,349    22,040,994 
Accumulated deficit during the exploration stage   (22,966,943)   (22,400,600)
Accumulated other comprehensive income (loss)   (69,703)   (70,525)
Stockholder’ equity (deficiency)   (576,152)   (300,218)
Total liabilities and stockholders’ equity (deficiency)   1,241    237,426 

 

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

 

F-1
 

 

Aurora Gold Corporation

(An Exploration Stage Enterprise)

Consolidated Financial Statements (Expressed in U.S. Dollars)

Quarterly Report for the Period Ended September 30, 2012

(Unaudited)

Consolidated Statements of Comprehensive Income (Loss)

 

   Cumulative
October 19,
1995
(inception) to
September 30, 
2012
$
   For the
Three
Months
Ended
September
30, 2012
$
   For the
Three
Months
Ended
September
30, 2011
$
   For the
Nine
Months
Ended
September 30, 
2012
$
   For the
Nine
Months
Ended
September
30, 2011
$
 
Operating Expenses                         
General and administrative   2,555,501    27,995    54,095    218,587    139,250 
Depreciation and amortization   145,126    -    6,538    -    22,001 
Imputed interest on loan payable – related party   1,560    -    -    -    - 
Interest and bank charges   395,430    584    1,461    1,173    6,540 
Foreign exchange loss (gain)   (13,756)   -    (3,702)   1,563    486 
Professional fees – accounting and legal   1,888,486    47,674    25,219    80,450    189,198 
Property search and negotiation   479,695    -    -    -    - 
Salaries, management and consulting fees   3,698,880    80,947    95,098    227,707    406,398 
Exploration expenses   9,863,063    7,772    23,055    131,724    261,304 
Write-off of equipment   240,338    -    -    -    - 
    19,254,323    164,972    201,764    661,204    1,025,177 
Other income (loss)                         
Gain (loss) on disposition of subsidiary   (2,541,037)   -    (245,221)   -    (2,757,511)
Interest income   22,353    -    -    -    - 
Gain on sale of rights to Matupa agreement (net)   80,237    -    -    -    - 
Loss on investments   (37,971)   -    -    -    - 
Loss on spun-off operations   (316,598)   -    -    -    - 
Gain (loss) on extinguishment of liabilities   (919,605)   94,860    -    94,860    - 
    (3,712,621)   94,860    (245,221)   94,860    (2,757,511)
Net Loss   (22,966,944)   (70,112)   (446,985)   (566,344)   (3,782,688)
Other comprehensive income (loss)                         
Foreign currency translation adjustments        (2,875)   591    822    2,510 
Comprehensive income (loss)        (72,987)   (446,394)   (565,522)   (3,780,178)
Net Loss Per Share – Basic and Diluted        *   $(0.00)   (0.01)  $(0.04)
Weighted Average Shares Outstanding – Basic and Diluted        114,144,706    89,540,183    112,726,318    89,036,372 

 

* amount is less than $(0.01) per share

 

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

 

F-2
 

 

Aurora Gold Corporation

(An Exploration Stage Enterprise)

Consolidated Financial Statements (Expressed in U.S. Dollars)

Quarterly Report for the Period Ended September 30, 2012

Consolidated Statements of Cash Flows

 

   Cumulative
October 19, 1995
(inception)
to September 30
2012
$
   For the Nine
Months
Ended
September
30, 2012
$
   For the Nine
Months
Ended
September
30, 2011
$
 
Net loss for the period   (22,966,944)   (566,344)   (3,782,688)
Adjustments to reconcile net loss to cash used in operating activities               
Depreciation and amortization   145,126    -    22,001 
Stock compensation expense on stock option grants   1,624,012    55,660    - 
Expenses satisfied with issuance of common stock   1,202,054    -    24,500 
Expenses satisfied with transfer of marketable securities   33,903    -    - 
Imputed interest on loan payable - related parties   1,560    -    - 
Write-off of mineral property assets   240,338    -    - 
Adjustment for spin-off of Aurora Metals (BVI) Limited   316,498    -    - 
Loss on disposal of subsidiary   2,757,511    -    2,757,511 
Realized loss on investments   37,971    -    - 
Gain on sale of rights to Matupa agreement (net)   (80,237)   -    - 
(Gain) loss on extinguishment of liabilities   919,605    (94,860)   - 
Foreign exchange (gain) loss related to notes payable   (24,534)   -    - 
Change in operating assets and liabilities               
Decrease (Increase) in receivables and other assets   (206,978)   -    - 
(Increase) decrease in prepaid expenses and other assets   (20,459)   -    (7,016)
Increase (decrease) in accounts payable and accrued expenses (including related party)   1,331,114    224,063    (732)
Net Cash Used in Operating Activities   (14,689,460)   (381,481)   (986,424)
Cash Flows From Investing Activities               
Purchase of equipment   (205,348)   -    - 
Proceeds on disposal of equipment   16,761    -    - 
Payment for mineral property Reclamation Bonds   (245,221)   -    80,000 
Proceeds from disposition of marketable securities   32,850    -    - 
Acquisition of mineral property costs and related equipment   (672,981)   -    - 
Payment for incorporation cost   (11,511)   -    - 
Net Cash Provided by (Used in) Investing Activities   (1,085,450)   -    80,000 
Cash Flows From Financing Activities               
Proceeds from common stock less issuance costs   14,140,912    96,473    167,100 
Loan proceeds from related party   289,000    -    - 
Net proceeds from (payments on) convertible notes and loans   969,252    -    - 
Net proceeds from (payments on) advances payable   45,000    -    257,000 
Net proceeds from (payments on) advances payable – related parties   142,000    50,000    - 
Net Cash Provided by Financing Activities   15,586,164    146,473    424,100 
Effect of Exchange Rate Changes on Cash   189,987    (1,177)   (3,565)
(Decrease) Increase in Cash   1,241    (236,185)   (485,889)
Cash at Beginning of Period   -    237,426    579,191 
Cash at End of Period   1,241    1,241    93,302 

 

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

 

F-3
 

 

Aurora Gold Corporation

(An Exploration Stage Enterprise)

Consolidated Financial Statements (Expressed in U.S. Dollars)

Quarterly Report for the Period Ended September 30, 2012

Consolidated Statements of Stockholders’ Equity (Deficiency)

 

   Common Stock Shares
Amount
   Additional
paid-in
capital
   Advances for
Stock
Subscriptions
   Accumulated
(deficit)
during
Exploration
Stage
   Accumulated
other
comprehensive
income (loss)
   Total
stockholders'
equity
(deficiency)
 
   #   $   $   $   $   $   $ 
Balance, October 10, 1995  -   -   -   -   -   -   - 
Issuance of common stock for settlement of indebtedness   11,461,153    11,461    -    -    -    -    11,461 
Net (loss) for the period             -    -    -    -    - 
Balance December 31, 1995   11,461,153    11,461    -    -    -    -    11,461 
Adjustment for reverse stock split   (7,640,766)   (7,641)   -    -    -    -    (7,641)
Issuance of common stock for - cash at $0.001 per share   5,800,000    5,800    341,761    -    -    -    347,561 
- resource property   300,000    300    2,700    -    -    -    3,000 
Net (loss) for the period                       (361,208)   -    (361,208)
Balance December 31, 1996   9,920,387    9,920    344,461         (361,208)   -    (6,827)
Issuance of common stock for - cash in March 1997 at $1.00 per share (less issue costs of $4,842)   750,000    750    744,408    -    -    -    745,158 
Net (loss) for the period                  -    (615,880)   -    (615,880)
Balance December 31, 1997   10,670,387    10,670    1,088,869    -    (977,088)   -    122,451 
Issuance of common stock for:                                   
- settlement of indebtedness   96,105    96    68,601    -    -    -    68,697 

 

F-4
 

 

   Common Stock Shares
Amount
   Additional
paid-in
capital
   Advances for
Stock
Subscriptions
   Accumulated
(deficit)
during
Exploration
Stage
   Accumulated
other
comprehensive
income (loss)
   Total
stockholders'
equity
(deficiency)
 
   #   $   $   $   $   $   $ 
- cash in May 1998 at $1.25 per share   200,000    200    249,800    -    -    -    250,000 
- cash in November 1998 at $0.75 per share   71,667    72    53,678    -    -    -    53,750 
- cash in December 1998 at $0.75 per share   143,333    143    107,357    -    -    -    107,500 
Grant of options to employees and directors             518,900    -    -    -    518,900 
Grant of options to consultants             172,100    -    -    -    172,100 
Net (loss) for the period                  -    (1,151,604)   -    (1,151,604)
Balance December 31, 1998   11,181,492    11,181    2,259,304    -    (2,128,692)   -    141,794 
Issuance of common stock for:                                   
- settlement of indebtedness   231,286    231    160,151    -    -    -    160,382 
- cash in March 1999 at $0.656 per share   22,871    23    14,977    -    -    -    15,000 
- finder's fee in February 1999 at $0.81 per share   25,000    25    20,287    -    -    -    20,312 
Grant of options to consultants             29,500    -    -    -    29,500 
Cash advanced on stock subscriptions                  425,000    -         425,000 
Net (loss) for the period                  -    (855,391)   -    (855,391)
Balance December 31, 1999   11,460,649    11,461    2,484,219    425,000    (2,984,083)   -    (63,403)
Issuance of common stock for:                                   
- settlement of indebtedness   199,000    199    99,301    -    -    -    99,500 

 

F-5
 

 

   Common Stock Shares
Amount
   Additional
paid-in
capital
   Advances for
Stock
Subscriptions
   Accumulated
(deficit)
during
Exploration
Stage
   Accumulated
other
comprehensive
income (loss)
   Total
stockholders'
equity
(deficiency)
 
   #   $   $   $   $   $   $ 
- cash in March 2000 at $0.50 per share   350,000    350    174,650    (175,000)   -    -    - 
- cash in March 2000 at $0.455 per share   550,000    550    249,450    (250,000)   -    -    - 
Cancellation of shares in April 2000   (90,706)   (91)   (56,600)   -    -    -    (56,691)
Exercise of options in June 2000   405,000    405    3,645    -    -    -    4,050 
Spin-off of Aurora Metals (BVI) Limited             316,498    -    -    -    316,498 
Net (loss) for the period                  -    (677,705)   -    (677,705)
Balance December 31, 2000   12,873,943    12,874    3,271,163    -    (3,661,788)   -    (377,751)
- Net income for the period                  -    128,545    -    128,545 
- Unrealized holding losses on available-for-sale securities                  -    -    (141,928)   (141,928)
Balance December 31, 2001   12,873,943    12,874    3,271,163    -    (3,533,243)   (141,928)   (391,134)
Issuance of common stock for:                                   
- settlement of indebtedness   3,708,038    3,708    351,492    -    -    -    355,200 
- Net loss for the period                  -    (137,329)   -    (137,329)
- Unrealized holding losses on available-for-sale securities                  -    -    141,928    141,928 
Balance, December 31, 2002   16,581,981    16,582    3,622,655    -    (3,670,572)   -    (31,335)
Issuance of common stock for:                                   
- settlement of indebtedness   2,752,450    2,752    114,806    -    -    -    117,558 

 

F-6
 

 

   Common Stock Shares
Amount
   Additional
paid-in
capital
   Advances for
Stock
Subscriptions
   Accumulated
(deficit)
during
Exploration
Stage
   Accumulated
other
comprehensive
income (loss)
   Total
stockholders'
equity
(deficiency)
 
   #   $   $   $   $   $   $ 
- cash in  December 2003 at $0.25 per share   100,000    100    24,900    -    -    -    25,000 
- Net loss for the period                  -    (96,404)   -    (96,404)
- Unrealized holding losses on available-for-sale securities                  -    -    -    - 
Balance, December 31, 2003   19,434,431    19,434    3,762,361    -    (3,766,976)   -    14,819 
Issuance of common stock for:                                   
- cash in January 2004 at $0.25 per share, less issuance costs   100,000    100    22,400    -    -    -    22,500 
Imputed interest             1,560    -    -    -    1,560 
- Net loss for the period                  -    (223,763)   -    (223,763)
- Unrealized holding losses on available-for-sale securities                  -    -    -    - 
Balance, December 31, 2004   19,534,431    19,534    3,786,321    -    (3,990,739)   -    (184,884)
Issuance of common stock for:                                   
- cash in July 2005 at $0.05 per share   13,000,000    13,000    637,000    -    -    -    650,000 
- settlement of indebtedness   3,684,091    3,684    158,816    -    -    -    162,500 
- Net (loss) for the period                  -    (457,271)   -    (457,271)
- Unrealized holding losses on available-for-sale securities                  -    -    (4,614)   (4,614)

 

F-7
 

 

   Common Stock Shares
Amount
   Additional
paid-in
capital
   Advances for
Stock
Subscriptions
   Accumulated
(deficit)
during
Exploration
Stage
   Accumulated
other
comprehensive
income (loss)
   Total
stockholders'
equity
(deficiency)
 
   #   $   $   $   $   $   $ 
Balance, December 31, 2005   36,218,522    36,218    4,582,137    -    (4,448,010)   (4,614)   165,731 
Issuance of common stock for - cash in February 2006 at $0.50 per share less issuance costs of $110,000:   8,000,000    8,000    3,882,000    -    -    -    3,890,000 
- non cash finder's fee in December 200 at $0.70 per share   250,000    250    174,750    -    -    -    175,000 
- cash in December 2006 at $0.50 per share   1,000,000    1,000    499,000    -    -    -    500,000 
- Net (loss) for the period                  -    (5,463,855)   -    (5,463,855)
- Foreign currency translation adjustments                  -    -    (3,692)   (3,692)
- Reclassification adjustment for losses on available-for-sale securities included in net loss                  -    -    4,614    4,614 
Balance, December 31, 2006   45,468,522    45,468    9,137,887    -    (9,911,865)   (3,692)   (732,202)
Issuance of common stock for:                                   
- cash in March 2007 at $0.50 per share   500,000    500    249,500    -    -    -    250,000 
- cash in July 2007 at $0.25 per share   5,000,000    5,000    1,245,000    -    -    -    1,250,000 
- settlement of indebtedness in August 2007 at $0.20 per share   250,000    250    49,750    -    -    -    50,000 

 

F-8
 

 

   Common Stock Shares
Amount
   Additional
paid-in
capital
   Advances for
Stock
Subscriptions
   Accumulated
(deficit)
during
Exploration
Stage
   Accumulated
other
comprehensive
income (loss)
   Total
stockholders'
equity
(deficiency)
 
   #   $   $   $   $   $   $ 
- cash in September 2007 at $0.20 per share   4,000,000    4,000    796,000    -    -    -    800,000 
Stock option compensation expense             454,295    -    -    -    454,295 
- Net (loss) for the period                  -    (3,259,732)   -    (3,259,732)
- Foreign currency translation adjustments                  -    -    (65,255)   (65,255)
Balance, December 31, 2007   55,218,522    55,218    11,932,432    -    (13,171,597)   (68,947)   (1,252,894)
- Issuance of common stock for - non cash finder's fee in July 2008 at $0.10 per share   250,000    250    24,750    -    -    -    25,000 
- settlement of indebtedness in December2008 at $0.06 per share   2,603,333    2,603    153,597    -    -    -    156,200 
- Net (loss) for the period                  -    (520,105)   -    (520,105)
- Foreign currency translation adjustments                  -    -    36,259    36,259 
Balance, December 31, 2008   58,071,855    58,071    12,110,779    -    (13,691,702)   (32,688)   (1,555,540)
- Issuance of common stock for - settlement of indebtedness in September 2009 at $0.15 per share   5,000,000    5,000    1,748,616    -    -    -    1,753,616 
- cash in September 2009 at $0.10 per share less finder's fee   3,000,000    3,000    255,000    -    -    -    258,000 

 

F-9
 

 

   Common Stock Shares
Amount
   Additional
paid-in
capital
   Advances for
Stock
Subscriptions
   Accumulated
(deficit)
during
Exploration
Stage
   Accumulated
other
comprehensive
income (loss)
   Total
stockholders'
equity
(deficiency)
 
   #   $   $   $   $   $   $ 
- non cash finder's fee September 2009 at $0.10 per share   420,000    420    41,580    -    -    -    42,000 
- settlement of indebtedness in November 2009 at $0.18 per share   100,000    100    17,899    -    -    -    17,999 
- settlement of indebtedness in November 2009 at $0.24 per share   150,000    150    35,611    -    -    -    35,761 
- cash in December 2009 at $0.30 per share   1,666,667    1,667    498,333    -    -    -    500,000 
- Net (loss) for the period                  -    (1,779,477)   -    (1,779,477)
- Foreign currency translation adjustments                  -    -    (60,171)   (60,171)
Balance, December 31, 2009   68,408,522    68,408    14,707,818    -    (15,471,179)   (92,859)   (787,812)
- Issuance of common stock for cash in April 2010 at $0.30 per share less finder's fee (paid with 1,126,111 shares included herein)   14,109,446    14,110    3,880,890    -    -    -    3,895,000 
- non cash property acquisition in June 2010 at $0.40 per share   5,000,000    5,000    1,995,000    -    -    -    2,000,000 
- settlement of indebtedness in September 2010 at $0.30 per share   160,500    161    47,989    -    -    -    48,150 
- settlement of indebtedness in September 2010 at $0.30 per share   325,400    325    97,295    -    -    -    97,620 

 

F-10
 

 

   Common Stock Shares
Amount
   Additional
paid-in
capital
   Advances for
Stock
Subscriptions
   Accumulated
(deficit)
during
Exploration
Stage
   Accumulated
other
comprehensive
income (loss)
   Total
stockholders'
equity
(deficiency)
 
   #   $   $   $   $   $   $ 
- payment of expenses in September 2010 at $0.30 per share   200,000    200    59,800    -    -    -    60,000 
- non cash finder's fee in September 2010 related to the June 2010 property acquisition at $0.30 per share   500,000    500    149,500    -    -    -    150,000 
- Net (loss) for the period                  -    (2,302,083)   -    (2,302,083)
- Foreign currency translation adjustments                  -    -    (198)   (198)
Balance, December 31, 2010   88,703,868    88,704    20,938,292    -    (17,773,262)   (93,057)   3,160,677 
-Issuance of common stock for non cash finder’s fee in May 2011 at $0.042 per share   450,000    450    (450)   -    -    -    - 
-Issuance of common stock for cash in September 2011 at $0.10 per share   1,671,000    1,671    165,429    -    -    -    167,100 
-Issuance of common stock for settlement of indebtedness in September 2011 at $0.16 per share   150,000    150    24,350    -    -    -    24,500 
-Issuance of common stock for settlement of indebtedness in December 2011 at $0.02 per share   10,937,721    10,938    207,816                   218,754 

 

F-11
 

 

   Common Stock Shares
Amount
   Additional
paid-in
capital
   Advances for
Stock
Subscriptions
   Accumulated
(deficit)
during
Exploration
Stage
   Accumulated
other
comprehensive
income (loss)
   Total
stockholders'
equity
(deficiency)
 
   #   $   $   $   $   $   $ 
-Issuance of common stock for cash in December 2011 at $0.04 per share   8,000,000    8,000    312,000                   320,000 
-Issuance of common stock for cash in December 2011 at $0.04 per share - oversubscribed                  20,000              20,000 
-Stock option compensation expense             393,557                   393,557 
- Net (loss) for the period                  -    (4,627,338)   -    (4,627,338)
- Foreign currency translation adjustments                  -    -    22,532    22,532 
Balance, December 31, 2011   109,912,589    109,913    22,040,994    20,000    (22,400,600)   (70,525)   (300,218)
Issuance of common stock for settlement of indebtedness in March 2012 at $0.06 per share   1,990,900    1,991    117,463                   119,454 
Issuance of common stock for cash in March 2012 at $0.06 per share – shares not issued until April 2012                  17,513              17,513 
Issuance of common stock for cash in April 2012 at $0.06 per share   1,316,000    1,316    77,644                   78,960 
Issuance of common stock for settlement of indebtedness in April 2012 at $0.06 per share   300,000    300    17,700                   18,000 

 

F-12
 

 

   Common Stock Shares
Amount
   Additional
paid-in
capital
   Advances for
Stock
Subscriptions
   Accumulated
(deficit)
during
Exploration
Stage
   Accumulated
other
comprehensive
income (loss)
   Total
stockholders'
equity
(deficiency)
 
   #   $   $   $   $   $   $ 
Issuance of common stock in April 2012 for Advances for Stock Subscriptions   625,217    625    36,888    (37,513)             - 
Stock option compensation expense             55,660                   55,660 
- Net (loss) for the period                       (566,344)        (566,344)
- Foreign currency translation adjustments                            822    822 
Balance, September 30, 2012   114,144,706    114,145    22,346,349    -    (22,966,944)   (69,703)   (576,153)

 

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

 

F-13
 

 

Aurora Gold Corporation

(An Exploration Stage Enterprise)

Consolidated Financial Statements (Expressed in U.S. Dollars)

Quarterly Report for the Period Ended September 30, 2012

Notes to Consolidated Financial Statements

 

1.Organization, Nature of Business, Going Concern and Management’s Plans

 

Aurora Gold Corporation (“the Company”) was formed on October 10, 1995 under the laws of the State of Delaware and is in the business of location, acquisition, exploration and, if warranted, development of mineral properties. The Company’s focus is on the exploration and development of its exploration properties located in the Tapajos Gold Province, State of Pará, Brazil (see Note 3). The Company has not yet determined whether its properties contain mineral reserves that may be economically recoverable and has not generated any operating revenues to date.

 

These interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The general business strategy of the Company is to acquire mineral properties either directly or through the acquisition of operating entities. The Company has incurred recurring operating losses since inception, has not generated any operating revenues to date and during the period ended September 30, 2012, operating activities used cash of $381,481 (September 30, 2011: $986,424). The Company requires additional funds to meet its obligations and maintain its operations.

 

These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in this regard are to raise equity financing through private or public equity investment in order to support existing operations and expand its business. The Company currently has a Prospectus out on offer and these details are included in further detail in these notes. There is however no assurance that such additional funding will be available to the Company when required, or on terms acceptable to the Company. In the event that the Company cannot obtain additional funds, on a timely basis, or the operations do not generate sufficient cash flow, the Company may be forced to curtail development or cease activities. These consolidated financial statements do not include any adjustments that might result from this uncertainty.

 

2.Summary of Significant Accounting Policies

 

a.Basis of Preparation

 

The Company follows accounting standards set by the Financial Accounting Standards Board (FASB). The FASB sets accounting principles generally accepted (GAAP) in the United States that the Company follows to ensure they consistently report their financial condition, results of operations, and cash flows. References to GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards Codification (ASC) or also referred to as Codification.

 

These interim consolidated financial statements have been prepared in accordance with GAAP and include the accounts of the Company and its wholly owned subsidiaries, Aurora Gold Mineração Ltda (“Aurora Gold Mineração”) and AGC Resources LLC (“AGC”) (through to date of disposition of AGC, June 14, 2011) Collectively, they are referred to herein as “the Company.” Significant inter-company accounts and transactions have been eliminated.

 

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such Securities and Exchange Commission (SEC) rules and regulations. The interim period consolidated financial statements should be read together with the audited consolidated financial statements and accompanying notes included in the Company’s audited consolidated financial statements for the year ended December 31, 2011. In the opinion of the management of the Company, the unaudited consolidated financial statements contained herein contain all adjustments (consisting of a normal recurring nature) necessary to present a fair statement of the results of the interim periods presented.

 

F-14
 

 

b.Use of Estimates

 

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

 

c.Cash Equivalents

 

Cash equivalents comprise certain highly liquid instruments with a maturity date of three months or less when purchased. The Company has cash equivalents of $1,241 and $93,302 at September 30, 2012 and 2011 respectively. Amounts paid for income taxes during the periods ended September 30, 2012 and 2011 were nil; and for interest paid nil respectively.

 

d.Buildings and Equipment

 

Buildings and equipment are carried at cost (including development and preproduction costs, capitalized interest, other financing costs and all direct administrative support costs incurred during the construction period, net of cost recoveries and incidental revenues), less accumulated depletion and depreciation including write-downs. Following the construction period, interest, other financing costs and administrative costs are expensed as incurred. On the commencement of commercial production, depletion of each mining property is provided on the unit-of-production basis, using estimated proven and probable reserves as the depletion basis. Buildings and equipment utilized directly in commercial mining activities are depreciated, following the commencement of commercial production, over their expected economic lives using either the unit-of-production method or the straight-line method. Depreciation for non-mining equipment is provided over the following useful lives:

 

Vehicles 10 years
Office equipment, furniture and fixtures 2 to 10 years

 

The Company reviews the carrying values of its buildings and equipment whenever events or changes in circumstances indicate that their carrying values may not be recoverable. An impairment is considered to exist if total estimated future cash flows, or probability-weighted cash flows on an undiscounted basis, are less than the carrying value of the assets. An impairment loss is measured and recorded based on discounted estimated future cash flows associated with values beyond proven and probable reserves and resources. In estimating future cash flows, assets are grouped at the lowest level for which there is identifiable future cash flows that are largely independent of cash flows from other asset groups. Generally, in estimating future cash flows, all assets are grouped at a particular property for which there are identifiable cash flows. Buildings and equipment utilized directly in commercial mining activities are depreciated, following the commencement of commercial production, over their expected economic lives using either the unit-of-production method or the straight-line method.

 

e.Mineral Property Reclamation Bonds and Other Related Refundable Costs

 

Costs paid for the purchase of reclamation bonds and other related costs that are refundable are capitalized. If amounts paid are not to be refunded then they will be expensed when it is determined they will not be refunded.

 

f.Mineral Properties and Exploration Expenses

 

The Company accounts for its mineral properties on a cost basis whereby all direct costs, net of pre-production revenue, relative to the acquisition of the properties are capitalized. All sales and option proceeds received are first credited against the costs of the related property, with any excess credited to earnings. Once commercial production has commenced, the net costs of the applicable property will be charged to operations using the unit-of-production method based on estimated proven and probable recoverable reserves. The net costs related to abandoned properties are charged to operations.

 

F-15
 

 

Exploration costs are charged to operations as incurred until such time that proven reserves are discovered. From that time forward, the Company will capitalize all costs to the extent that future cash flow from mineral reserves equals or exceeds the costs deferred. The deferred costs will be amortized over the recoverable reserves when a property reaches commercial production. As at September 30, 2012 and 2011, the Company does not have proven reserves. Exploration activities conducted jointly with others are reflected at the Company's proportionate interest in such activities.

 

The Company reviews the carrying values of its mineral properties on a regular basis by reference to the project economics including the timing of the exploration or development work, the program of works and the exploration results experienced by the Company and others. The review of the carrying value of any producing property will be made by reference to the estimated future operating results and net cash flows. When the carrying value of a property exceeds its estimated net recoverable amount, provision is made for the decline in value.

 

The recoverability of the amounts recorded for mineral properties is dependent on the confirmation of economically recoverable reserves, confirmation of the Company’s interest in the underlying mineral claims, the ability of the Company to obtain the necessary financing to successfully complete their development and the attainment of future profitable operations or proceeds from disposal.

 

Estimated costs related to site restoration programs during the commercial development stage of the property are accrued over the life of the project.

 

g.Stock-Based Compensation

 

The Company accounts for share-based payments under the fair value method of accounting for stock-based compensation consistent with GAAP. Under the fair value method, stock-based compensation cost is measured at the grant date based on the fair value of the award using the Black-Sholes option pricing model and is recognized to expense on a straight-line basis over the requisite service period, which is generally the vesting period. Where upon grant the options vest immediately the stock-based costs are expensed immediately.

 

h.Interest Expense

 

Interest expense for the periods ended September 30, 2012 and 2011 were nil.

 

i.Foreign Currency Translation and Transactions

 

The Company's reporting currency is the United States Dollar (USD). Aurora Gold Mineração Ltda is a foreign operation and its functional currency is the Brazilian Real (Real). Certain contractual obligations in these consolidated financial statements are stated in Brazilian Real’s. At the periods ended September 30, 2012 and 2011 the Brazilian Real exchange rate to the USD was $0.49290 to 1 Real (September 30, 2011: USD $0.55330 to 1 Real).

 

The Company translates foreign assets and liabilities of its subsidiaries, other than those denominated in USD, at the rate of exchange at the balance sheet date. Income and expenses of these subsidiaries are translated at the average rate of exchange throughout the reporting period. Gains or losses from these translations are reported as a separate component of other comprehensive income (loss) until all or a part of the investment in the subsidiaries is sold or liquidated. The translation adjustments do not recognize the effect of income tax because the Company expects to reinvest the amounts indefinitely in operations.

 

Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the local functional currency are included in foreign exchange (gain) loss in the consolidated statements of operations.

 

j.Concentration of Credit Risk

 

Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company places its cash with high credit quality financial institutions in Brazil and Canada. The Company occasionally has cash deposits in excess of federally insured limits. The Company had funds deposited in banks beyond the insured limits as of September 30, 2012 and 2011 respectively. The Company has not experienced any losses related to these balances, and management believes the credit risk to be minimal.

 

F-16
 

 

k.Fair Value of Financial Instruments and Risks

 

Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair value. The carrying value of cash, accounts payable, accrued expenses and advances payable (including related parties) approximate their fair value because of the short-term nature of these instruments.

 

Management is of the opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments. The Company operates outside of the United States of America (primarily in Brazil) and is exposed to foreign currency risk due to the fluctuation between the currency in which the Company operates in and the USD.

 

l.Income Taxes

 

The Company has adopted ASC 740, Accounting for Income Taxes, which requires the Company to recognize deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns using the liability method. Under this method, deferred tax liabilities and assets are determined based on the differences between the financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. In July 2006, the FASB issued an interpretation, which clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with GAAP. This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken in a tax return. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Estimated interest and penalties related to recording uncertain tax positions when recorded are included as a component of income tax expense on the consolidated statement of operations. The Company has not recorded any liabilities for uncertain tax positions or any related interest and penalties. The Company’s tax returns are open to audit for the years ending December 31, 2008 to 2011 respectively.

 

m.Basic and Diluted Net Income (Loss) Per Share

 

Earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the reporting period including common stock issued effective the date committed. Common stock issuable is considered outstanding as of the original approval date for the purposes of earnings per share computations. Diluted earnings (loss) per common share is computed by dividing net earnings (loss) by the sum of (a) the basic weighted average number of shares of common stock outstanding during the period and (b) additional shares that would have been issued and potentially dilutive securities. During the nine months ended September 30, 2012 and 2011 the diluted earnings (loss) per share was equivalent to the basic earnings (loss) per share because all potentially dilutive securities were anti-dilutive due to the net losses incurred. Potentially dilutive securities consist of stock options and warrants outstanding at the end of the reporting period. Stock options outstanding as at September 30, 2012 were 9,650,000 (September 30, 2011:1,200,000). Warrants outstanding as at September 30, 2012 were 8,000,000 (September 30, 2011: Nil).

 

n.Interim Financial Statements

 

In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.

 

The unaudited financial statements should be read in conjunction with the Company’s audited financial statements and notes for the year ended December 31, 2011, which are included in the Company’s Annual Report on Form 10-K.

 

F-17
 

 

o.Recent Accounting Pronouncements

 

The Company considers the effects of new accounting pronouncements on the accounting, presentation and disclosure of its consolidated financial statements, as such pronouncements become known. In June 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-05, Comprehensive Income or ASU 2011-05. The guidance in ASU 2011-05 revises the manner in which entities present comprehensive income in their financial statements. An entity is required to report the components of comprehensive income in either one or two consecutive financial statements:

 

·A single, continuous statement must present the components of net income and total net income, the components of other comprehensive income and total other comprehensive income, and a total for comprehensive income.
·In a two-statement approach, an entity must present the components of net income and total net income in the first statement. That statement must be immediately followed by a financial statement that presents the components of other comprehensive income, a total for other comprehensive income, and a total for comprehensive income.

 

ASU 2011-05 does not change the items that must be reported in other comprehensive income. The amendments in ASU 2011-05 are effective for fiscal years beginning after December 15, 2011 and the Company adopted this guidance effective January 1, 2012. In the consolidated statements of comprehensive income (loss) the Company has presented comprehensive income in a single continuous statement.

 

At present, there are no other such pronouncements not yet effective that the Company expects will have a material impact on these consolidated financial statements.

 

3.Mineral Properties and Exploration Expenses

 

(a)São Domingos Project in the Municipality of Itaituba, in the Tapajos gold province of the State of Para, Brazil, Department of National Production Minerals (DNPM) Processes 850.684/06 and 850.782/05:

 

i.DNPM Processes 850.684/06:

 

Aurora has good title over the mineral rights, which were granted as DNPM Process number 850.684/06 and which is valid and in force, free and clear of any judicial and extrajudicial encumbrances and taxes. The São Domingos mineral rights are located at the Municipality of Itaituba, State of Pará, and are registered in the name of Aurora. On September 13, 2006 the Company applied to the DNPM for the conversion of the Application to an Exploration Permit covering an area of 4,914.18 hectares. No payments or royalties are due regarding DNPM Process 850.384/06.

 

ii.DNPM Processes 850.782/05:

 

Aurora has good title over the mineral rights object of the DNPM Process No. 850.782/05, which is valid and in force, free and clear of any judicial and extrajudicial encumbrances and taxes. On November 8, 2005 it was submitted to DNPM the Exploration Claim for gold in the Municipality of Itaituba, State of Pará. The Exploration Permit was granted on November 28, 2006 for a three-year period. The transfer to Aurora was approved on March 24, 2009 and on September 28, 2009 it was requested the renewal of the Exploration Permit. This area was reduced from 6,756 hectares to 5,651.98 hectares due to the overlapping with Garimpeira (alluvial) Mining properties held by Mr Celio Paranhos. However the DNPM´s general attorney in Brasilia agreed with Aurora’s legal thesis and nullified all applications filed by Mr Paranhos (about to 1,900 applications). A new Exploration Permit rectifying the previous one was granted on August 20, 2010 for a three-year period, for an area of 6,656.20 hectares. No payments or royalties are due regarding the DNPM Process 850.782/05 since it was acquired through a permutation agreement with Altoro Mineração Ltda.

 

F-18
 

 

iii.DNPM Processes 850.012/06 and 850.013/06:

 

The exploration claims were submitted to DNPM on January 19, 2006, for gold covering an area of 1,128.08 hectares and 750.55 hectares respectively, in the Municipality of Itaituba, State of Pará. According to information obtained such claims were correctly prepared and the required documents are in place. The tenements 850.012/06 and 850.013/06 are held by Mr Antonio Oliveira Ferreira and were submitted to DNPM on January 19, 2006. The tenements are located at Itaituba, State of Pará and are valid and in force, free and clear of any judicial and extrajudicial encumbrances and taxes, but the area was blocked since it is inside of a Garimpeira Reserve. The transfer to Aurora will be submitted after the Exploration Permits are granted. There are no payments or royalties related to the tenements according to the agreement entered into with the previous owner.

 

iv.DNPM Process 850.119/06:

 

The exploration claim was submitted to DNPM on March 7, 2006, for gold covering an area of 1,068.72 hectares, in the Municipality of Itaituba, State of Pará. Aurora has good title over the mineral rights object of the DNPM Process No. 850.119/06, which is valid and in force, free and clear of any judicial and extrajudicial encumbrances and taxes. Aurora is the sole registered and beneficial holder of and owns and possesses good title to the referred mineral rights. The Exploration Permit has not been granted yet. The above-mentioned area is not related to any payments or royalties to third parties since Aurora claimed them directly.

 

v.DNPM Process 859.587/95:

 

The tenement, was held by Vera Lucia Lopes, and is valid and in force, and is free and clear of any judicial and extrajudicial encumbrances and taxes. It is located at the Municipality of Itaituba, State of Pará. On November 27, 1995, it was submitted to DNPM the Exploration Claim for gold. The Exploration Permit was granted on September 15, 2006, for a three-year period covering an area of 5,000 hectares, and it was valid until September 15, 2009. On July 15, 2009, it was requested the renewal of the Exploration Permit which was granted and transferred to Aurora and published on June 29, 2012. There are no payments or royalties related to the tenements since all payments due under the terms of the agreement entered into with the previous owner have been already made.

 

(b)Gold properties in the Municipality of Itaituba, in the Tapajos gold province of the State of Para, Brazil, Department of National Production Minerals (DNPM) Processes

 

vi.Comandante Araras Project - DNPM Processes 853.785/93 to 853.839/93 inclusive (relinquished):

 

On October 17, 2011 the Company terminated this licence and Option Agreement by providing written notice to Samba. The Company is free of all and any future payment commitments. The interest in the properties was formally relinquished in January 2012.

 

vii.São João Project - DNPM Processes 851.533/94 to 851.592/94 inclusive (relinquished):

 

On October 17, 2011 the Company terminated this licence and Option Agreement by providing written notice to Samba. The Company is free of all and any future payment commitments. The interest in the properties was formally relinquished in January 2012.

 

viii.DNPM Processes 850.014/06, 850.581/06 and 850.256/07:

 

The Company has the right to acquire good title over the mineral rights object of the Tenements. The Tenements are registered in the name of Antonio Oliveira Ferreira. The exploration claims were submitted to DNPM respectively on January 19, 2006, August 8, 2006 and April 17, 2007 for gold covering the areas of 421.45 hectares, 4276.03 hectares and 4036.00 hectares, in the Municipality of Itaituba and Jacareacanga, State of Pará. According to information obtained such claims were correctly prepared and the required documents are in place. The tenement 850.014/06 has not been transferred to Samba yet since the Exploration Permit has not been granted so far. The Exploration Permit for the Process 850.581/06 was granted on February 15, 2011 for a three-year period, for an area of 4273.03 hectares. The transfer to Samba Brazil Mineração Ltda has not been presented yet. The Exploration Permit for the Process 850.256/07 was granted on November 30, 2007 for a three-year period but it was cancelled on May 21, 2008 because the holder didn’t pay the annual fees on time. On June 10, 2008 it was presented an appeal to have the annulment dismissed, which hasn’t been analyzed yet. However, if the appeal is not approved, Samba Brazil’s rights over this tenement are guaranteed since only Samba Brazil has presented a Bid application for this process on July 18 2008. According to the Agreement signed between Samba Brazil and Antonio Oliveira Ferreira on June 5, 2008, a total amount of 120,000 Brazilian Real’s has already been paid by Samba Brazil for the acquisition of the Tenements.

 

F-19
 

  

(c)British Columbia, Canada – Kumealon Property (relinquished)

 

On January 20, 2012 the Company’s Kumealon claim over the property was relinquished.

 

(d)Sale of AGC Resources

 

On June 14, 2011, the Company, entered into an Asset Purchase Agreement with Devtec Management Ltd. (“Devtec”), pursuant to which the Company sold its subsidiary, AGC, which owns certain properties in Boulder, Colorado (see note 3(b) for a discussion of the specific assets purchased by AGC in June 2010), to Devtec for a total of $2 million, plus royalty. Under the terms of the agreement, Devtec will pay the Company $1 million upon production of the cumulative total of 1,000 ounces of gold and/or silver, and a further $1 million on the six-month anniversary of the payment of the first $ 1 million. Additionally, Devtec will pay the Company a 5% royalty from the start of production.

 

The Company was unable to reasonably estimate the amount of minerals the properties will produce, if any, and thus there was uncertainty as to whether the purchase price will be collected. Given this, collection of the purchase price is not considered reasonably possible at the time of these consolidated financial statements given the current uncertain status of exploration work on the Boulder, Colorado properties and thus no purchase price has been recorded as of September 30, 2012. Therefore, the Company recognized a loss on the sale of its subsidiary of $2,757,511 for the nine months ended September 30, 2011, which represented the net book value of the assets transferred to Devtec on June 14, 2011 (no liabilities were assumed by Devtec) as follows:

 

Reclamation bonds  $245,221 
Buildings and equipment  $753,605 
Participating interest in mineral property  $1,758,685 
   $2,757,511 

 

Subsequent to the sale of AGC, the Company determined it would not retain ownership to the reclamation bonds asset associated with the properties. A loss of $245,221, the carrying value of the bonds, was recorded during the three months ended September 30, 2011. The disclosed total loss from the sale of AGC was adjusted to include the loss on the disposition of the reclamation bonds.

 

4.Advances Payable

 

During March 2012, the Company entered into debt settlement agreements for $105,000 of advances received from a director of the Company and a company during fiscal 2011. During August 2012, the Company received $50,000 from a director and officer as an advance, which is non-interest bearing and due on successful capital raising. As at September 30, 2012 advances payable were $82,000.

 

5.Common Stock

 

On September 21, 2012, Aurora Gold Corporation (the “Company”), entered into a subscription agreement (the “Subscription Agreement ”) with Alltech Capital Limited (“Investor”), pursuant to which the Company agreed to sell, and the Investor agreed to purchase, 135,000,000 shares of the Company’s common stock for a purchase price of $5,000,000. The closing of the transaction contemplated by the Subscription Agreement occurred in October, 2012 (see Note 9), subject to each of the Company and Investor satisfactorily meeting or waiving the closing conditions contained in the Subscription Agreement. A copy of the Subscription Agreement was lodged with the SEC on September 27, 2012.

 

F-20
 

 

The Company intends to finance activities by raising capital through the equity markets. In October 2011 the Company filed a Registration Statement on Form S-1 offering up to a maximum of 50,000,000 units of the Company's securities at an offering price of $0.10 per Unit in a direct public offering, without any involvement of underwriters or broker-dealers. Each Unit consists of one (1) share of common stock at a $0.001 par value per share and one (1) Stock Purchase Warrant. Each full Warrant entitles the holder to purchase one additional share of common stock at a price of $0.20 for a period of two years commencing November 1, 2011 through October 31, 2013. The Units will be sold by the Chief Executive Officer and Chief Financial Officer. A Notice of Effectiveness was issued April 25, 2012. The offer will expire January 20, 2013. To date, no funds have been obtained from this offering.

 

On April 16, 2012, the Company entered into subscription agreements for 1,316,000 shares of common stock at a purchase price of $0.06 per share for a gross aggregate price of $78,960. Pursuant to the subscription agreements, each of the Investors has represented that they are not a U.S. person; as such term is defined in Regulation S. In connection with the offering, the Company has agreed to pay a cash commission equal to 8% of all funds received or an aggregate of up $48,000 on the total maximum $600,000 subscription.

 

During April 2012, the Company entered into a debt settlement agreement for $18,000 in accounts payable which was settled for 300,000 shares of common stock at an issue price of $0.06 per share.

 

During March 2012, the Company entered into debt settlement agreements for advances received from a director of the Company and a company during fiscal 2011 as well as $14,454 of amounts in accounts payable and accrued expenses. $119,454 was settled for 1,990,900 shares of common stock at an issue price of $0.06 per share. As at March 31, 2012 advances on stock subscriptions were $37,513 and received during that quarter.

 

In March 2012, the Company entered into subscription agreements for 625,217 shares of common stock at a purchase price of $0.06 per share for a gross aggregate price of $37,513. Share certificates were not issued as at March 31, 2012 and they were treated as an Advance for Stock Subscriptions. The share certificates were issued in April 2012. Pursuant to the subscription agreements, each of the Investors has represented that they are not a U.S. person; as such term is defined in Regulation S. In connection with the offering, the Company has agreed to pay a cash commission equal to 8% of all funds received or an aggregate of up $48,000 on the total maximum $600,000 subscription that is being offered.

 

On December 20, 2011, the Company entered into subscription agreements for 8,000,000 shares of common stock at a purchase price of $0.04 per share for a gross aggregate price of $320,000. Attached to each unit of common stock is one (1) series A stock purchase warrant. Each full Series A warrant entitles the holder to purchase an additional share of the Company’s common stock at an exercise price of $0.08 per share for a period of eighteen months commencing on December 20, 2011 and expiring on June 20, 2013. Pursuant to the subscription agreements, each of the Investors has represented that they are not a U.S. person; as such term is defined in Regulation S. In connection with the offering, the Company has agreed to pay a cash commission equal to 8% of all funds received or an aggregate of up $25,600. The actual amount included in creditors for the period ended March 31, 2012 was $8,800. It is anticipated this will be the total amount of commission paid.

On December 15, 2011, the Company entered into debt settlement agreements with creditors and related parties in consideration for the issue of the Company’s common stock at a per share price of $0.02 per share. $218,754 was settled for 10,937,721 shares of common stock.

 

In September 2011, 1,671,000 shares were issued to an individual for cash at $0.10 per share. In September 2011, 150,000 shares were issued to a company for services rendered at $0.16 per share.

In April 2011, as an incentive to assist with future private placements, the Company authorized the payment of a non-cash finder’s fee of 450,000 shares of common stock of the Company in connection with the private placement completed in April 2010. The shares were issued in May 2011. All shares issued were to individuals and companies who reside outside the United States of America. The issuance of the shares was exempt from the registration requirements of Securities Act by virtue of Section 4(2) thereof as well as the exemption from registration requirements afforded by Regulation S.

 

F-21
 

 

6.Stock Options

 

In 2007, the Company's Board of Directors approved the 2007 Stock Option Plan (amended September 29, 2008) (“the Plan”) to offer an incentive to obtain services of key employees, directors and consultants of the Company. The Plan provides for the reservation for awards of an aggregate of 10% of the total shares of Common Stock outstanding from time to time. No Plan participant may receive stock options exercisable for more than 2,500,000 shares of Common Stock in any one calendar year. Under the Plan, the exercise price of an incentive stock option must be at least equal to 100% of the fair market value of the common stock on the date of grant (110% of fair market value in the case of options granted to employees who hold more than 10% of the Company's capital stock on the date of grant). The term of stock options granted under the Plan is not to exceed ten years and the stock options vest immediately upon granting.

 

The following is a summary of stock option activity and the status of stock options outstanding and exercisable at September 30, 2012:

 

   Stock
Options
#
   Weighted 
Average 
Exercise Price
$
   Remaining
Contractual
Life (years)
As At
   Aggregate
Intrinsic value
As At
 
Outstanding and exercisable at December 31, 2011   9,050,000    0.110    4.28    36,500 
Forfeited during quarter March 31, 2012   (200,000)   0.260    -    - 
Granted during quarter March 31, 2012   1,600,000    0.050    -    - 
Outstanding and exercisable at March, 31, 2012   10,450,000    0.090    4.21    42,000 
Granted during quarter June 30, 2012   200,000    0.065    -    - 
Outstanding and exercisable at June, 30, 2012   10,650,000    0.097    3.97    34,125 
Forfeited during quarter September 30, 2012   (1,000,000)   0.260    -    - 
Granted during quarter September 30, 2012   -    -    -    - 
Outstanding and exercisable at September, 30, 2012   9,650,000    0.080    3.74    52,500 

 

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value for all “in-the-money” options (i.e. the difference between the Company’s closing stock price on the last trading day of the fiscal year and the exercise price, multiplied by the number of shares) that would have been received by the option holders had all option holders exercised their options on September 30, 2012.

 

During the quarter ended September 30, 2012, Lars Pearl’s 1,000,000 options lapsed on August 6, 2012.

 

Effective April 10, 2012, the Company’s board of directors granted 200,000 stock purchase options pursuant to the Company’s 2007 Stock Option Plan. Each of the Options has an issue date, effective date and vesting date of April 10, 2012, with an exercise price of $0.065 per share. The term of these Options are five years. The Options are exercisable at any time from the grant date up to and including April 9, 2017.

 

During the quarter ended March 31, 2012, Cameron Richardson departed the Company, an exercise notice for the 200,000 options held was not lodged and consequently the options lapsed during the quarter.

 

Effective January 13, 2012, the Company’s board of directors granted 1,600,000 stock purchase options pursuant to the Company’s 2007 Stock Option Plan. Each of the Options has an issue date, effective date and vesting date of January 13, 2012, with an exercise price of $0.05 per share. The term of these Options are five years. The Options are exercisable at any time from the grant date up to and including January 12, 2017.

 

F-22
 

 

Effective November 24, 2011, the Company’s board of directors granted 3,650,000 stock purchase options pursuant to the Company’s 2007 Stock Option Plan. Each of the Options has an issue date, effective date and vesting date of November 24, 2011, with an exercise price of $0.05 per share. The term of these Options are five years. The Options are exercisable at any time from the grant date up to and including November 23, 2016.

 

Effective October 11, 2011, the Company’s board of directors granted 4,200,000 stock purchase options pursuant to the Company’s 2007 Stock Option Plan. Each of the Options has an issue date, effective date and vesting date of October 11, 2011, with an exercise price of $0.12 per share. The term of these Options are five years. The Options are exercisable at any time from the grant date up to and including October 10, 2016.

 

On June 15, 2011 Michael Montgomery resigned from the board of directors, an exercise notice for the 500,000 options held was not lodged and consequently the options lapsed on July 15, 2011.

 

The total fair value of options granted during the three months ended June 30, 2012 was $11,979 (June 30, 2011: nil) and expensed in full as options were vested in full on grant. The fair value of options are determined using the Black Scholes option pricing model that takes into account the exercise price, the expected life of the option, the share price at grant date (April 10, 2012) and expected price volatility of the underlying share, the expected dividend yield (nil assumed) and the risk free interest rate (4.50% used) for the term of the option. Management determined 2.50 years to be the average expected likely life of the options and utilized the simplified method due to the fact that the Company has not had significant options granted to develop historical data to provide a reasonable basis to estimate option lives. Volatility rates were calculated at the grant date of the option tranche and a rate of 161.04% was used.

 

The total fair value of options granted for the three months ended March 31, 2012 was $43,681 (March 31, 2011: nil) and expensed in full as options were vested in full on grant. The fair value of options are determined using the Black Scholes option pricing model that takes into account the exercise price, the expected life of the option, the share price at grant date (January 13, 2012) and expected price volatility of the underlying share, the expected dividend yield (nil assumed) and the risk free interest rate (4.50% used) for the term of the option. Management determined 2.50 years to be the average expected likely life of the options and utilized the simplified method due to the fact that the Company has not had significant options granted to develop historical data to provide a reasonable basis to estimate option lives. Volatility rates were calculated at the grant date of the option tranche and a rate of 120.89% was used.

 

As of September 30, 2012, there are outstanding Warrants to purchase 8,000,000 shares of common stock with an exercise price of $0.08 expiring June 20, 2013.

 

7.Related Party Transactions

 

Related party transactions not disclosed elsewhere in these consolidated financial statements include:

·During the nine-month period ended September 30, 2012 consulting fees of $297,190 (September 30, 2011: $191,742) were incurred to directors and officers (or companies of the officers and directors) of the Company. The transactions were recorded at the exchange amount, being the value established and agreed to by the related parties.
·Included in accounts payable and accrued expenses and advances payable (related parties) at September 30, 2012 and December 31, 2011 were $322,419 and $Nil respectively payable to officers and directors of the Company for consulting fees and various expenses incurred on behalf of the Company.

 

8.Non-Cash Investing and Financing Activities

 

In September 2011, 150,000 shares were issued to a company for services rendered at $0.16 per share. The shares were issued to a company who resides outside the United States of America.

 

In April 2011, as an incentive to assist with future private placements, the Company authorized the payment of a non-cash finder’s fee of 450,000 shares of common stock of the Company in connection with the private placement completed in April 2010. The shares were issued in May 2011. The issuance of these shares had no net effect on total shareholders' equity or results of operations as they related to fees associated with issuance of shares.

 

F-23
 

 

9.Subsequent Events

 

On September 21, 2012, Aurora Gold Corporation (the “Company”), entered into a subscription agreement (the “Subscription Agreement ”) with Alltech Capital Limited (“Investor”), pursuant to which the Company agreed to sell, and the Investor agreed to purchase, 135,000,000 shares of the Company’s common stock for a purchase price of $5,000,000. The closing of the transaction contemplated by the Subscription Agreement occurred in October 2012, subject to each of the Company and Investor satisfactorily meeting or waiving the closing conditions contained in the Subscription Agreement. A copy of the Subscription Agreement was lodged with the SEC on September 27, 2012.

 

On October 5, 2012, the Company, completed the sale of 135,000,000 shares of the Company’s common stock for a purchase price of $5,000,000, to Alltech Capital Limited pursuant to the terms of a subscription agreement entered into between the Company and the Alltech Capital Limited dated September 21, 2012. As a result of the sale of 135,000,000 shares of the Company’s common stock of approximately 54%, a change in control of the Company has occurred. As a condition to the closing of the transaction, the Company agreed to increase the size of its board of directors to five (5) members and to appoint two board members selected by the Investor. The board of directors appointed each of Messrs. Vladimir Bernshtein and Andrey Ratsko to serve as directors of the Company. Additionally, Mr. Bernshtein has been named as the Company’s Chief Business Development Director.

 

Other than the aforementioned there were no subsequent events at the date of filing.

 

F-24
 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders

Aurora Gold Corporation

 

We have audited the accompanying consolidated balance sheets of Aurora Gold Corporation (an exploration stage company) and Subsidiary ("the Company") as of December 31, 2011 and 2010, and the related consolidated statements of operations, stockholders' equity (deficiency) and comprehensive income (loss), and cash flows for the years then ended, and for the period from October 10, 1995 (date of inception) to December 31, 2011. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated 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 has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Aurora Gold Corporation (an exploration stage company) and Subsidiary as of December 31, 2011 and 2010, and the results of their operations and their cash flows for the years then ended, and for the period from October 10, 1995 (date of inception) to December 31, 2011, in conformity with accounting principles generally accepted in the United States.

 

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has incurred operating losses since inception, has not been able to generate any operating revenues to date, and used cash from operations of $1,062,075 in 2011. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans regarding those matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/S/ PETERSON SULLIVAN LLP

 

Seattle, Washington

March 23, 2012

 

F-25
 

 

AURORA GOLD CORPORATION

(An exploration stage enterprise)

Consolidated Balance Sheets

December 31, 2011 and 2010

(Expressed in U.S. Dollars)

 

AURORA GOLD CORPORATION        
(An exploration stage enterprise)   As at   As at
Consolidated Balance Sheets   December 31   December 31
December 31, 2011 and 2010   2011   2010
(Expressed in U.S. Dollars)   $   $
ASSETS            
Current assets            
Cash     237,426     579,191
Prepaid expenses and other assets     -     20,154
Total current assets     237,426     599,345
Non-current assets            
Mineral property reclamation bonds     -     325,221
Buildings and equipment, net     -     849,445
Participating interest in mineral property (Note 3)     -     1,758,685
Total non-current assets     -     2,933,351
Total assets     237,426     3,532,696
             
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY)            
Current liabilities            
Accounts payable and accrued expenses     400,644     354,755
Accounts payable and accrued expenses – related parties     -     17,264
Advances payable     45,000     -
Advances payable – related parties     92,000     -
Total current liabilities     537,644     372,019
Stockholders’ Equity (Deficiency)            
Common stock            
Authorised: 300,000,000 (2010: 300,000,000) common shares with par value of $0.001 each            
Issued and outstanding: 109,912,589 (2010: 88,703,868) common shares     109,913     88,704
Advances for stock subscriptions     20,000     -
Additional paid-in capital     22,040,994     20,938,292
Accumulated deficit during the exploration stage     (22,400,600     (17,773,262
Accumulated other comprehensive income (loss)     (70,525     (93,057
Stockholder’ equity (deficiency)     (300,218     3,160,677
Total liabilities and stockholders’ equity (deficiency)     237,426     3,532,696

 

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

 

F-26
 

 

AURORA GOLD CORPORATION

(An exploration stage enterprise)

Consolidated Statements of Operations

(Expressed in U.S. Dollars)

 

    Cumulative              
  October 10 1995              
  (inception)     Year Ended     Year Ended  
  to December 31     December 31     December 31  
  2011     2011     2010  
  $     $     $  
Expenses                        
Administrative and general     2,336,914       550,655       397,848  
Depreciation and amortization     145,126       27,897       17,738  
Imputed interest on loan payable - related party     1,560       -       -  
Interest and bank charges     394,257       7,867       26,148  
Foreign exchange loss (gain)     (15,319 )     (1,613 )     7,778  
Professional fees - accounting and legal     1,808,036       241,125       428,543  
Property search and negotiation     479,695       -       150,000  
Salaries, management and consulting fees     3,471,173       668,926       629,715  
      8,621,442       1,494,857       1,657,770  
Exploration expenses     9,731,339       307,613       644,313  
Write-off of equipment     240,338       67,357       -  
      18,593,119       1,869,827       2,302,083  
Other income (loss)                        
Gain / (loss) on disposition of subsidiary     (2,541,037 )     (2,757,511 )     -  
Interest income     22,353       -       -  
Gain on sale of rights to Matupa Agreement (net)     80,237                  
Loss on investments     (37,971 )     -       -  
Loss on spun-off operations     (316,598 )     -       -  
Loss on debt extinguishment     (1,014,465 )     -       -  
      (3,807,481 )     -       -  
Net loss for the period     (22,400,600 )     (4,627,338 )     (2,302,083 )
                         
Loss per share                        
- basic and diluted             (0.05 )     (0.03 )
                         
Weighted average number of common shares                        
Outstanding                        
- basic and diluted             90,537,439       81,069,047  

 

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

 

F-27
 

 

AURORA GOLD CORPORATION

(An exploration stage enterprise)

Consolidated Statements of Stockholder’s Equity (Deficiency)

and Comprehensive Income (Loss)

October 10, 1995 (inception) to December 31, 2011

(Expressed in U.S. Dollars)

 

                       Accumulated   Total 
               Advances for   Accumulated   Other   stockholders' 
   Common Stock   Additional   Comprehensive   Stock   (deficit) during   comprehensive   equity 
   Shares   Amount   paid-in capital   (loss)   Subscriptions   exploration stage   income (loss)   (deficiency) 
   #   $   $   $   $   $   $   $ 
                                 
Balance, October 10, 1995   -    -    -    -    -    -    -      
Issuance of common stock for - settlement of indebtedness   11,461,153    11,461    -    -    -    -    -    11,461 
Net (loss) for the period             -    -    -    -    -    - 
Total comprehensive (loss)                  -                   - 
Balance December 31, 1995   11,461,153    11,461    -    -    -    -    -    11,461 
Adjustment for reverse stock split   (7,640,766)   (7,641)   -    -    -    -    -    (7,641)
Issuance of common stock for - cash at $0.001 per share   5,800,000    5,800    341,761    -    -    -    -    347,561 
- resource property   300,000    300    2,700    -    -    -    -    3,000 
Net (loss) for the period                  (361,208)