2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Jan. 31, 2014

Accounting Policies [Abstract]

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, CalGold de Mexico, S. de R.L. de C.V., formed to explore mining opportunities in Mexico. Equity investments in which the Company exercises significant influence, but does not control and is not the primary beneficiary, are accounted for using the equity method of accounting. Investments in which the Company does not exercise significant influence over the investee are accounted for using the cost method of accounting. All material intercompany balances and transactions have been eliminated.

Correction of Previously Reported Information

During the audit of the Company’s consolidated financial statements for the year ended June 30, 2014, the Company identified an error in the accounting for and presentation of the impact of the November 15, 2013 private placement offering (“November Offering”) on the Company’s derivative liabilities as of January 31, 2014. In the November Offering, the Company issued warrants (“November 2013 Warrants”) entitling the Investors to purchase one thousand (1,000) shares of common stock for each $1.00 principal amount of consideration received, at an exercise price of $0.001 per share. Since the exercise price per share of the November 2013 Warrants was lower than the $0.03 warrant exercise prices of the warrants issued during the 2010/2011 private placement offerings, and the $0.06 exercise price of the warrants issued in the 2012 private placement offering, the exercise prices with respect to these previous warrant issuances should have been lowered, and the amount of shares exercisable increased based on the reset provisions in each warrant agreement. The Company did not account for the reset provisions in the previously reported consolidated financial statements as of January 31, 2014.

In accordance with the SECs Staff Accounting Bulletin Nos. 99 and 108 (“SAB 99” and “SAB 108”), the Company evaluated this error and, based on an analysis of quantitative and qualitative factors, determined that the error is material to the January 31, 2014 period.  Therefore, as permitted by SAB 108, the Company corrected, in the current filing, previously reported results for the year end January 31, 2014.

The following table presents the effect of the correction of the previously reported information and the impact on the Company’s consolidated balance sheet for the year ended January 31, 2014:

	As of January 31, 2014
	As Previously Reported	Adjustments	As Restated
Liabilities and stockholders’ deficit:
Derivative liabilities	$   324,642	$    825,813	$ 1,150,455
Deficit accumulated during the exploration stage	(3,486,292)	(825,813)	(4,312,105)
Total liabilities and stockholders’ deficit	336,854	-	336,854

The following table presents the effect of the correction of the previously reported information and the impact on the Company’s consolidated statement of expenses for the year ended January 31, 2014:

	As of January 31, 2014
	As Previously Reported	Adjustments	As Restated
Loss from operations:	$  (617,994)	-	$ (617,994)
Other income (expenses):
Realized and unrealized (loss) gain on derivatives, net	3,019	(825,813)	(822,794)
Total other income (expenses)	(35,846)	(825,813)	(861,659)
Net loss	(653,840)	(825,813)	(1,479,653)

The following table presents the effect of the correction of the previously reported information and the impact on the Company’s consolidated statement of expenses for the period April 19, 2004 (inception) to January 31, 2014:

	As of January 31, 2014
	As Previously Reported	Adjustments	As Restated
Loss from operations:	$ (5,003,645)	-	$ (5,003,645)
Other income (expenses):
Realized and unrealized (loss) gain on derivatives, net	1,564,900	(825,813)	739,087
Total other income (expenses)	1,517,353	(825,813)	694,562
Net income(loss)	(3,486,292)	(825,813)	(4,312,105)

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of January 31, 2014 and 2013, and the reported revenues and expenses for the years then ended and cumulative from inception. Actual results could differ from those estimates made by management.

Cash and Cash Equivalents

The Company considers all highly liquid short-term investments purchased with an original maturity of three months or less to be cash equivalents. These investments are carried at cost, which approximates fair value. The Company maintains its cash in a restricted escrow account in an institution insured by the Federal Deposit Insurance Corporation and, at times, balances may exceed government insured limits. The Company has never experienced any losses related to these balances.

Mineral Rights, Exploration and Development Costs

Costs of acquisition and option costs of mineral rights are capitalized upon acquisition. Such costs are carried as an asset of the Company until it becomes apparent through exploration activities that the cost of such properties will not be realized through mining operations. As of January 31, 2014 and 2013, the Company capitalized $108,750 and $91,250, respectively, of costs to acquire an interest in mineral rights related to the AuroTellurio Property (Note 4).

Under U.S. GAAP, all mineral exploration expenditures associated with efforts to search for and establish mineral reserves are expensed as incurred. Costs to acquire properties are capitalized. Mine development costs incurred to construct the infrastructure necessary to extract the reserves and prepare the mine for production are also capitalized once proven and probable reserves exist, and the property is determined to be a commercially mineable property. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. During the years ended January 31, 2014 and 2013, the Company recorded $48,161 and $233,718 of mineral exploration and development expenditures, respectively. These expenditures were expensed as incurred and recorded as mineral property expenses in the Company’s consolidated statements of expenses.

Property and Equipment

The Company’s property and equipment is stated at cost less accumulated depreciation and consists of a vehicle.  Expenditures for property acquisitions, development, construction, improvements and major renewals are capitalized. The cost of repairs and maintenance is expensed as incurred.  Depreciation is provided principally on the straight-line method over the estimated useful life of the vehicle, which is 5 years. Upon sale or other disposition of a depreciable asset, cost and accumulated depreciation will be removed from the accounts and any gain or loss will be reflected in the gain or loss from operations.

Impairment of Long-lived Assets

Long-lived assets, including mineral rights, exploration and development costs, are reviewed for impairment when circumstances indicate the carrying value of an asset may not be recoverable. The Company accounts for asset impairment in accordance with ASC 360 - Property Plant and Equipment. Long-lived assets such as property and equipment and mineral rights are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment is considered to exist if the total estimated future cash flow on an undiscounted basis is less than the carrying amount of the related assets. An impairment loss is measured and recorded based on the estimated fair value of the long-lived asset.

Derivative Financial Instruments

For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For warrants and convertible derivative financial instruments, the Company uses the Black-Scholes option pricing model to value the derivative instruments at inception and subsequent valuation dates. For the year ended January 31, 2014, the Company adopted the probability-weighted scenario analysis model. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period, in accordance with FASB ASC Topic 815, Derivatives and Hedging. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

Fair Value Measurements

The Company measures fair value in accordance with FASB ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).

Stock-Based Compensation

The Company accounts for its stock-based compensation in which the Company obtains employee services in share-based payment transactions under FASB ASC Topic 718,  Compensation - Stock Compensation, which requires the Company to expense the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of such instruments over the vesting period.

The Company also adopted FASB ASC Topic 505-50, Equity-Based Payments to Non-Employees, to account for equity instruments issued to parties other than employees for acquiring goods or services.  Such awards for services are recorded at either the fair value of the consideration received or the fair value of the instruments issued in exchange for such services, whichever is more reliably measurable.

For the years ended January 31, 2014 and 2013, the Company recorded $149,995 and $432,777, respectively, in stock-based compensation as a component of general and administrative expenses.

Net Earnings (Loss) per Common Share

Basic net earnings (loss) per common share are computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted net earnings (loss) per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, the diluted weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. For the year ended January 31, 2014, a net loss was reported and the Company excluded options and outstanding warrants to purchase shares of common stock, as the effect would be anti-dilutive. For the year ended January 31, 2013, net income was reported and the Company included options and outstanding warrants to purchase shares of common stock. However, the average market price of the common shares exceeded the exercise price of the options and warrants. As such, the options and warrants did not have a dilutive effect.

Income Taxes

The Company accounts for income taxes in accordance with FASB ASC Topic 740, Income Taxes. Under FASB ASC Topic 740, deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences.

The Company maintains a valuation allowance with respect to deferred tax assets.  The Company establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current period.  Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carry-forward period under the Federal tax laws.

Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about the realizability of the related deferred tax asset.  Any change in the valuation allowance will be included in income in the year of the change in estimate.

Acquisition-Related Costs

In the years ended January 31, 2014 and 2013, the Company incurred certain costs related to the AuroTellurio Acquisition (Note 4). Those costs included legal, valuation, travel, and other professional or consulting fees. The

Company accounted for those acquisition-related costs under FASB ASC Topic 805, Business Combinations. The costs were recognized as mineral property expenses in the periods in which the costs were incurred and the services received. The Company recorded $48,161 and $233,718 in those costs for the years ended January 31, 2014 and 2013, respectively.

New Accounting Pronouncements

The Company does not expect adoption of the new accounting pronouncements will have a material effect on the Company’s consolidated financial statements.