CAPITAL
GOLD CORPORATION
100,479,757
Shares of Common Stock
This
prospectus relates to the resale of 100,479,757 shares
of
our common, including 38,233,727 shares of common stock issuable upon the
exercise of outstanding warrants and options, that may be offered and sold
from
time to time by the selling stockholders listed herein.
We
will
not receive any proceeds from the sale of the shares of common stock by the
selling stockholders other than payment of the exercise price of the warrants
and options.
Our
common stock is listed on the Over-The-Counter Bulletin Board under the symbol
"CGLD." The last reported sales price per share of our common stock as reported
by the OTC Bulletin Board on December 1, 2006, was $0.32. On common stock
also
trades on the Toronto Stock Exchange (“TSX”) under the symbol “CGC.” On December
1, 2006, the closing price of our common stock on the TSX was $0.36 CDN
(approximately $0.31USD).
Please
see the risk factors beginning on page 4 to
read
about certain factors you should consider before buying shares of common
stock.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or determined that this prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.
The
date
of this prospectus is December 5, 2006
No
dealer, salesman or any other person is authorized to give any information
or to
represent anything not contained in this prospectus. You must not rely
on any
unauthorized information or representations. This prospectus is an offer
to sell
these securities and it is not a solicitation of an offer to buy these
securities in any state where the offer or sale is not permitted. The
information contained in this Prospectus is current only as of this
date.
TABLE
OF CONTENTS
|
|
Page
|
Prospectus
Summary
|
3
|
Risk
Factors
|
4
|
Forward-looking
Statements
|
14
|
Use
of Proceeds
|
14
|
Dividend
Policy
|
14
|
Price
Range of Common Stock
|
14
|
Selected
Consolidated Financial
Data
|
15
|
Management’s
Discussion and Analysis
of Financial Condition And
Results of Operations
|
16
|
Our
Business
|
28
|
Management
|
38
|
Executive
Compensation
|
42
|
Principal
Stockholders
|
45
|
Certain
Relationships and Related
Transactions
|
47
|
Selling
Stockholders
|
48
|
How
the Shares May Be
Distributed
|
58
|
Description
of Securities Being
Registered
|
60
|
Legal
Matters
|
62
|
Experts
|
62
|
Where
you can find More
information
|
62
|
Glossary
|
62
|
Financial
Statements
|
F-1
|
PROSPECTUS
SUMMARY
In
the following summary, we have highlighted information that we believe is
the
most important about us. However, because this is a summary, it may not contain
all information that may be important to you. You should read this entire
prospectus, including the information incorporated by reference and the
financial data and related notes, before making an investment decision. When
used in this prospectus, the terms “we,” “our” and “us” refer to Capital Gold
Corporation and not to the selling stockholders. You should also see the
“Glossary”
for
definitions of some of the terms used to describe our business.
About
Capital Gold
Through
a
wholly-owned subsidiary and an affiliate, Capital Gold Corporation owns 100%
of
16 mining concessions located in the Municipality of Altar, State of Sonora,
Republic of Mexico totaling approximately 3,544 hectares (8,756 acres or 13.7
square miles). We are in the process of constructing and developing an open-pit
gold mining operation to mine two of these concessions. We sometimes refer
to
the planned operations on these two concessions as the El Chanate
Project.
We
plan
to construct a surface gold mine and facility at El Chanate capable of producing
about 2.6 million metric tons per year of ore from which we anticipate
recovering about 44,000 to 48,000 ounces of gold per year, over a seven year
mine life. We are following the updated feasibility study (the “2005 Study”) for
the El Chanate Project prepared by M3 Engineering of Tucson, Arizona which
was
completed in October 2005, as further updated by an August 2006 technical
report
from SRK Consulting, Denver, Colorado (the “2006 Update”). The original
feasibility study (the “2003 Study”) was completed by M3 Engineering in August
2003. Since completion of the 2003 Study, both the price of gold and production
costs have increased and equipment choices have broadened from those identified
in the 2003 Study.
Pursuant
to the 2005 Study, as updated by the 2006 Update using a $450 per ounce gold
price, our estimated mine life is now seven years as opposed to five years
and
the ore reserve is 490,000 ounces of gold present in the ground (up 122,000
ounces or 33%). Of this, we anticipate recovering approximately 332,000 ounces
of gold (up 74,000 ounces or 29%) over a seven year life of the mine. The
targeted cash cost (which include mining, processing and on-property general
and
administrative expenses) per the 2005 Study is $259 per ounce (up $29 per
ounce). The 2005 Study contains the same mining rate as the 2003 Study of
7,500
metric tonnes per day of ore. It should be noted that, during the preliminary
engineering phase of the project it was decided to design the crushing screening
and ore stacking system with the capability of processing 10,000 tonnes per
day
of ore. This will make allowances for any possible increase in production
and
for operational flexibility. It was found that the major components in the
feasibility study would be capable of handling the increase in tonnage. Design
changes were made where necessary to accommodate the increased tonnage. The
2005
Study takes into consideration a more modern crushing system than the one
contemplated in the 2003 Study. The crushing system referred to in the 2005
Study is a new system, that, we believe will be faster to install and provide
more efficient processing capabilities than the used equipment referred to
in
the 2003 Study. In October 2006, we received purchase orders for the new
crushing system. In addition, the 2005 Study assumes a contractor will mine
the
ore and haul it to the crushers. In the 2003 Study, we planned to perform
these
functions. We engaged a mining contractor in December 2005.
Construction
activities at the El Chanate Project commenced in August 2006. Engineering
Procurement and Construction Management activities commenced June 1, 2006.
Also
in August 2006, we completed debt financing for the construction of the El
Chanate mine. We anticipate, but cannot assure, that gold production will
begin
in early calendar year 2007 with revenues anticipated to begin by the end
of the
second calendar quarter 2007.
Our
principal executive offices are located at 76 Beaver Street, 26th
floor,
New York, NY10005, and our telephone number is (212) 344-2785.
The
Offering
Common
stock to be offered
by
the selling stockholders
|
100,479,757 Shares |
|
|
Common
stock outstanding
prior
to this offering
|
133,060,127 Shares |
|
|
Use of Proceeds |
We will not receive any of the proceeds
from
the sale of the shares of common stock because they are being offered
by
the selling stockholders and we are not offering any shares for sale
under
this prospectus, but we may receive proceeds from the exercise of
warrants
and options held by the selling stockholders. We will apply such
proceeds,
if any, toward the construction of our mining operation in Mexico,
and for
working capital. See "Use
of Proceeds." |
|
|
Over-The-Counter
Bulletin
Board
symbol
|
CGLD |
|
|
Toronto Stock Exchange symbol |
CGC |
The
100,479,757 shares
of
our common stock offered consist of:
· |
Up
to 37,361,000 shares of common stock issuable upon the exercise of
outstanding warrants;
|
· |
Up
to 872,727 shares of common stock issuable upon the exercise of
outstanding options; and
|
· |
Up
to 62,246,030 shares of common stock owned by certain of the selling
stockholders.
|
Summary
Financial Data
In
the
table below, we provide you with our summary historical financial data. We
have
prepared this information using our audited financial statements for each
of the
five years in the period ended July 31, 2006.
It
is
important that you read this summary historical financial data in conjunction
with our historical financial statements and related notes and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations"
appearing elsewhere in this prospectus.
Statement
of Operations Data
|
|
For
the Years Ended
|
|
|
|
July
31,
|
|
|
|
2002
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
|
|
(consolidated)
|
|
(consolidated)
|
|
(consolidated)
|
|
(consolidated)
|
|
(consolidated)
|
|
Revenues
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$ |
- |
|
Mine
Expenses
|
|
$
|
709,961
|
|
$
|
1,028,899
|
|
$
|
673,050
|
|
$
|
851,374
|
|
$
|
1,940,805
|
|
Selling,
General and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Administrative
|
|
$
|
639,652
|
|
$
|
770,629
|
|
$
|
687,722
|
|
$
|
1,005,038
|
|
$
|
2,135,493
|
|
Stock
& Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued
for Services
|
|
$
|
222,338
|
|
$
|
288,623
|
|
$
|
379,033
|
|
$
|
187,844
|
|
$
|
89,391
|
|
Depreciation
&
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
|
|
$
|
3,105
|
|
$
|
-
|
|
$
|
-
|
|
$
|
7,431
|
|
$
|
38,969
|
|
Total
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(Expense)
|
|
$
|
2,027,810
|
|
$
|
(
11,735
|
)
|
$
|
(
950,005
|
)
|
$
|
46,005
|
|
$
|
(600,034
|
)
|
Minority
Interest
|
|
$
|
54,543
|
|
$
|
180,625
|
|
$
|
51,220
|
|
$
|
-
|
|
$
|
-
|
|
Write
Down of Mining,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Milling
and Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and Equipment
|
|
$
|
999,445
|
|
$
|
-
|
|
$
|
300,000
|
|
$
|
-
|
|
$
|
-
|
|
Net
Loss
|
|
$
|
(492,148
|
)
|
$
|
(1,919,261
|
)
|
$
|
(2,938,590
|
)
|
$
|
(2,005,682
|
)
|
$
|
(4,804,692
|
)
|
Balance
Sheet Data
|
|
|
|
|
|
As
of July 31,
|
|
|
|
2002
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
|
|
(consolidated)
|
|
(consolidated)
|
|
(consolidated)
|
|
(consolidated)
|
|
(consolidated)
|
|
Working
Capital
|
|
$
|
1,192,871
|
|
$
|
105,661
|
|
$
|
182,939
|
|
$
|
4,239,991
|
|
$
|
7,031,526
|
|
Total
Assets
|
|
$
|
2,056,851
|
|
$
|
761,607
|
|
$
|
485,753
|
|
$
|
5,551,871
|
|
$
|
9,545,580
|
|
Stockholders’
Equity
|
|
$
|
1,622,119
|
|
$
|
651,000
|
|
$
|
281,594
|
|
$
|
5,269,055
|
|
$
|
8,929,937
|
|
RISK
FACTORS
WE
ARE SUBJECT TO VARIOUS RISKS THAT MAY MATERIALLY HARM OUR BUSINESS, FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. YOU SHOULD CAREFULLY CONSIDER THE RISKS
AND
UNCERTAINTIES DESCRIBED BELOW AND THE OTHER INFORMATION IN THIS PROSPECTUS
BEFORE DECIDING TO PURCHASE OUR COMMON STOCK. IF ANY OF THESE RISKS OR
UNCERTAINTIES ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL CONDITION OR OPERATING
RESULTS COULD BE MATERIALLY HARMED. IN THAT CASE, THE TRADING PRICE OF OUR
COMMON STOCK COULD DECLINE AND YOU COULD LOSE ALL OR PART OF YOUR
INVESTMENT.
Risks
related to our business and operations
We
have not generated any operating revenues. If we are unable to commercially
develop our mineral properties, we will not be able to generate profits and
our
business may fail.
To
date,
we have no producing properties. As a result, we have no current source of
operating revenue and we have historically operated and continue to operate
at a
loss. Our ultimate success will depend on our ability to generate profits
from
our properties. Our viability is largely dependent on the successful commercial
development of our El Chanate gold mining project in Sonora,
Mexico.
We
lack operating cash flow and rely on external funding sources. If we are
unable
to continue to obtain needed capital from outside sources until we are able to
generate positive cash flow from operations, we will be forced to reduce
or
curtail our operations.
We
do not
generate any positive cash flow from operations and we do not anticipate
that
any positive cash flow will be generated for some time. Our primary focus
is the
development of our El Chanate Project which, we anticipate, will cost between
$17.5 and $18.5 million. We also anticipate non-mine related operating expenses
of approximately $1.4 million. During the fiscal year ended July 31, 2006,
we
raised approximately $8,115,000 through private placements of our shares
and
warrants and from the exercise of warrants and options. Also, in August 2006,
we
and two of our Mexican subsidiaries entered into a credit agreement (the
“Credit
Agreement”) with Standard Bank PLC (“Standard Bank”) to borrow up to US$12.5
million for the purpose of constructing, developing and operating the El
Chanate
Project. To the extent that we need to obtain additional capital to commence
operations, cover any material cost overruns, cover ongoing general and
administrative expenses and/or fund exploration, management intends to raise
such funds through the sale of our securities, the sale of a royalty interest
in
the future production from the Chanate properties and/or joint venturing
with
one or more strategic partners. We cannot assure that adequate additional
funding will be available.
If
we are
unable to obtain needed capital from outside sources, we will be forced to
reduce or curtail our operations.
Our
year end audited financial statements contain a “going concern” explanatory
paragraph. Our
inability to continue as a going concern would require a restatement of assets
and liabilities on a liquidation basis, which would differ materially and
adversely from the going concern basis on which our financial statements
included in this report have been prepared.
Our
consolidated financial statements for the year ended July 31, 2006 included
herein have been prepared on the basis of accounting principles applicable
to a
going concern. Our auditors’ report on the consolidated financial statements
contained therein includes an additional explanatory paragraph following
the
opinion paragraph on our ability to continue as a going concern. A note to
these
consolidated financial statements describes the reasons why there is substantial
doubt about our ability to continue as a going concern and our plans to address
this issue. Our July 31, 2006 consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty. Our
inability to continue as a going concern would require a restatement of assets
and liabilities on a liquidation basis, which would differ materially and
adversely from the going concern basis on which our consolidated financial
statements have been prepared. See, Management's
Discussion and Analysis of Financial Condition and Results of Operations;
Liquidity and Capital Resources; Plan of Operations.”
Our
Credit Facility with Standard Bank imposes restrictive covenants on us.
Our
Credit Facility with Standard requires us, among other obligations, to meet
certain financial covenants including (i) a debt service coverage ratio of
not
less than 1.2 to 1.0, (ii) a projected debt service coverage ratio of not
less
than 1.2 to 1.0, (iii) a loan life coverage ratio of at least 1.6 to 1.0,
(iv) a
project life coverage ratio of at least 2.0 to 1.0 and (v) a minimum reserve
tail. We are also required to maintain a certain minimum level of unrestricted
cash. In addition, the Credit Facility restricts, among other things, our
ability to incur additional debt, create liens on our property, dispose of
any
assets, merge with other companies or make any investments. A failure to
comply
with the restrictions contained in the Credit Facility could lead to an event
of
default thereunder which could result in an acceleration of such indebtedness.
We
will be using reconditioned and used equipment which could adversely affect
our
cost assumptions and our ability to economically and successfully mine the
project.
We
plan
to use reconditioned and used carbon column collection equipment to recover
gold. Such equipment is subject to the risk of more frequent breakdowns and
need
for repair than new equipment. If the equipment that we use breaks down and
needs to be repaired or replaced, we will incur additional costs and operations
may be delayed resulting in lower amounts of gold recovered. In such event,
our
capital and operating cost assumptions may be inaccurate and our ability
to
economically and successfully mine the project may be hampered, resulting
in
decreased revenues and, possibly, a loss from operations.
As
a result of the projected short mine life of seven years, if major problems
develop, we will have limited time to correct these problems and we may have
to
cease operations earlier than planned.
Pursuant
to the 2005 Study as updated by the 2006 Update, the anticipated mine life
will
be only seven years. If major problems develop in the project, or if we fail
to
achieve the operating efficiencies or costs projected in the feasibility
study,
we will have limited time to find ways to correct these problems and we may
have
to cease operations earlier than planned.
The
gold deposit we have identified at El Chanate is relatively small and low-grade.
If our estimates and assumptions are inaccurate, our results of operation
and
financial condition could be materially adversely affected.
The
gold
deposit we have identified at our El Chanate Project is relatively small
and
low-grade. If the estimates of ore grade or recovery rates contained in the
feasibility study turn out to be higher than the actual ore grade and recovery
rates, if costs are higher than expected, or if we experience problems related
to the mining, processing of, or recovery of gold from, ore at the El Chanate
Project, our results of operation and financial condition could be materially
adversely affected. Moreover, it is possible that actual costs and economic
returns may differ materially from our best estimates. It is not unusual
in the
mining industry for new mining operations to experience unexpected problems
during the start-up phase and to require more capital than anticipated. There
can be no assurance that our operations at El Chanate will be
profitable.
Our
currently permitted water rights may not be adequate for all of our total
project needs over the entire course of our anticipated mining operations.
If we
need to obtain additional rights, but are unable to procure them our planned
operations may be adversely affected.
The
2005
feasibility study indicates our average life of mine water requirements,
for ore
processing only, will be about 94.6 million gallons per year (11.4 liters
per
second). The amount of water we are currently permitted to pump for our
operations is approximately 71.3 million gallons per year (8.6 liters per
second). Our currently permitted water rights may not be adequate for all
of our
total project needs over the entire course of our anticipated mining operations.
We are looking into ways to rectify this issue. If we need to obtain additional
rights, but are unable to procure them our planned operations may be adversely
affected.
We
have a limited number of prospects. As a result, our chances of commencing
viable mining operations are dependent upon the success of one
project.
Our
only
current properties are the El Chanate concessions and our Leadville properties.
At present, we are not doing any substantive work at our Leadville properties
and, in fact, have written these properties off. Our El Chanate concessions
are
owned by one of our wholly-owned subsidiaries, Oro de Altar. Minera Santa
Rita
S. de R.L. de C.V., another of our Mexican subsidiaries leases the land and
claims at El Chanate from Oro de Altar. FG, our former joint venture partner,
has the right to receive five percent of Minera Santa Rita's annual dividends,
when declared. We currently do not have operations on either of our properties,
and we must commence such operations to receive revenues. Accordingly, we
are
dependent upon the success of the El Chanate concessions.
Gold
prices can fluctuate on a material and frequent basis due to numerous factors
beyond our control. If and when we commence production, our ability to generate
profits from operations could be materially and adversely affected by such
fluctuating prices.
The
profitability of any gold mining operations in which we have an interest
will be
significantly affected by changes in the market price of gold. Gold prices
fluctuate on a daily basis. During 2005, the spot price for gold on the London
Exchange fluctuated between $411.10 and $537.50 per ounce. Between January
1,
2006 and December 1, 2006, the spot price for gold on the London Exchange
has
fluctuated between $524.75 and $725.00 per ounce. Gold prices are affected
by
numerous factors beyond our control, including:
· |
the
level of interest rates,
|
· |
world
supply of gold and
|
· |
stability
of exchange rates.
|
Each
of
these factors can cause significant fluctuations in gold prices. Such external
factors are in turn influenced by changes in international investment patterns
and monetary systems and political developments. The price of gold has
historically fluctuated widely and, depending on the price of gold, revenues
from mining operations may not be sufficient to offset the costs of such
operations.
We
have
entered into metals trading transactions to hedge against fluctuations in
gold
prices, using call option purchases and forward sales, and have entered into
various interest rate swap agreements. The terms of our debt financing with
Standard Bank require that we utilize various price hedging techniques to
hedge
a portion of the gold we plan to produce at the El Chanate Project and hedge
at
least 50% of our outstanding loan balance. There can be no assurance that
we
will be able to successfully hedge against gold price and interest rate
fluctuations and if we fail to maintain the minimum level of hedge transactions
required by the terms of our debt financing, our ability to draw amounts
from
Standard Bank may be adversely affected.
Further,
there can be no assurance that the use of hedging techniques will always
be to
our benefit. Hedging instruments that protect against metals market price
volatility may prevent us from realizing the full benefit from subsequent
increases in market prices with respect to covered production, which would
cause
us to record a mark-to-market loss, decreasing our revenues and profits.
Hedging
contracts also are subject to the risk that the other party may be unable
or
unwilling to perform its obligations under these contracts. Any significant
nonperformance could have a material adverse effect on our financial condition,
results of operations and cash flows.
In
addition, we expect to settle our forward sales at a time when the El Chanate
Project is in production. If the completion of the project is delayed or
if we
are unable for any reason to deliver the quantity of gold required by our
forward sales, we may need to settle the forward sales by purchasing gold
at
spot prices. Depending on the price of gold at that time, the financial
settlement of the forward sales could have a material adverse effect on our
financial condition, results of operations and cash flows.
Our
material property interests are in Mexico. Risks of doing business in a foreign
country could adversely affect our results of operations and financial
condition.
We
face
risks normally associated with any conduct of business in foreign countries
with
respect to our El Chanate Project in Sonora, Mexico, including various levels
of
political and economic risk. The occurrence of one or more of these events
could
have a material adverse impact on our efforts or future operations which,
in
turn, could have a material adverse impact on our future cash flows, earnings,
results of operations and financial condition. These risks include the
following:
· |
invalidity
of governmental orders,
|
· |
uncertain
or unpredictable political, legal and economic
environments,
|
· |
war
and civil disturbances,
|
· |
changes
in laws or policies,
|
· |
delays
in obtaining or the inability to obtain necessary governmental
permits,
|
· |
governmental
seizure of land or mining claims,
|
· |
limitations
on ownership,
|
· |
limitations
on the repatriation of earnings,
|
· |
increased
financial costs,
|
· |
import
and export regulations, including restrictions on the export of gold,
and
|
· |
foreign
exchange controls.
|
These
risks may limit or disrupt the project, restrict the movement of funds or
impair
contract rights or result in the taking of property by nationalization or
expropriation without fair compensation.
We
anticipate selling gold in U.S. dollars; however, we incur a significant
amount
of our expenses in Mexican pesos. If and when we sell gold, if applicable
currency exchange rates fluctuate our revenues and results of operations
may be
materially and adversely affected.
If
and
when we commence sales of gold, such sales will be made in U.S. dollars.
We
incur a significant amount of our expenses in Mexican pesos. As a result,
our
financial performance would be affected by fluctuations in the value of the
Mexican peso to the U.S. dollar.
Changes
in regulatory policy could adversely affect our exploration and future
production activities.
Any
changes in government policy may result in changes to laws
affecting:
· |
environmental
regulations,
|
· |
repatriation
of income and
|
Any
such
changes may affect our ability to undertake exploration and development
activities in respect of present and future properties in the manner currently
contemplated, as well as our ability to continue to explore, develop and
operate
those properties in which we have an interest or in respect of which we have
obtained exploration and development rights to date. The possibility,
particularly in Mexico, that future governments may adopt substantially
different policies, which might extend to expropriation of assets, cannot
be
ruled out.
Compliance
with environmental regulations could adversely affect our exploration and
future
production activities.
With
respect to environmental regulation, environmental legislation generally
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.
|
There
can
be no assurance that future changes to environmental legislation and related
regulations, if any, will not adversely affect our operations. We could be
held
liable for environmental hazards that exist on the properties in which we
hold
interests, whether caused by previous or existing owners or operators of
the
properties. Any such liability could adversely affect our business and financial
condition.
We
are not insured against any losses or liabilities that could arise from our
operations because we have not commenced operations at El Chanate. Although
we
plan on obtaining insurance once construction begins,
such insurance may not be adequate. If
we incur material losses or liabilities because we do not have insurance
or our
coverage is not adequate, our financial position could be materially and
adversely affected.
We
are in
the process of developing our Mexican concessions and hope to commence mining
operations during the first calendar quarter of 2007. If and when we commence
mining operations, such operations will involve a number of risks and hazards,
including:
· |
metallurgical
and other processing,
|
· |
mechanical
equipment and facility performance problems.
|
Such
risks could result in:
· |
damage
to, or destruction of, mineral properties or production
facilities,
|
· |
personal
injury or death,
|
· |
monetary
losses and /or
|
· |
possible
legal liability.
|
Industrial
accidents could have a material adverse effect on our future business and
operations. Although as we move forward in the development of the El Chanate
Project we plan to obtain and maintain insurance within ranges of coverage
consistent with industry practice. In this regard, prior to execution of
the
credit agreement with Standard Bank, we obtained basic insurance coverage
of
$2,000,000 for property and equipment in transit to the El Chanate Project
as
well as $4,000,000 for the property and equipment upon delivery to the site.
We
plan to increase coverage as warranted thereafter as the property and equipment
are erected and placed into service. We cannot be certain that this insurance
will cover the risks associated with mining or that we will be able to maintain
insurance to cover these risks at economically feasible premiums. We also
might
become subject to liability for pollution or other hazards which we cannot
insure against or which we may elect not to insure against because of premium
costs or other reasons. Losses from such events may have a material adverse
effect on our financial position.
Calculation
of reserves and metal recovery dedicated to future production is not exact,
might not be accurate and might not accurately reflect the economic viability
of
our properties.
Reserve
estimates may not be accurate. There is a degree of uncertainty attributable
to
the calculation of reserves, resources and corresponding grades being dedicated
to future production. Until reserves or resources are actually mined and
processed, the quantity of reserves or resources and grades must be considered
as estimates only. In addition, the quantity of reserves or resources may
vary
depending on metal prices. Any material change in the quantity of reserves,
resource grade or stripping ratio may affect the economic viability of our
properties. In addition, there can be no assurance that mineral recoveries
in
small scale laboratory tests will be duplicated in large tests under on-site
conditions or during production.
We
are dependent on the efforts of certain key personnel and we need to retain
additional personnel and/or contractors to develop our El Chanate Project.
If we
lose the services of these personnel or we are unable to retain additional
personnel and/or contractors, our ability to complete development and operate
our El Chanate Project may be delayed and our planned operations may be
materially adverse affected.
We
are
dependent on a relatively small number of key personnel, including but not
limited to John Brownlie, Vice President of Operations, who oversees the
El
Chanate Project, and Dave Loder, the General Manager of the El Chanate Project,
the loss of any one of whom could have an adverse effect on us. In addition,
while certain of our officers and directors have experience in the exploration
and operation of gold producing properties, we may need to retain additional
personnel and/or contractors to develop and operate our El Chanate Project.
Certain of these personnel and consultants, including Messrs. Brownlie and
Loder, have already been engaged. There can be no guarantee that any needed
personnel or contractors will be available to carry out necessary activities
on
our behalf or be available upon commercially acceptable terms. If we lose
the
services of our key personnel or we are unable to retain additional personnel
and/or contractors, our ability to complete development and operate our El
Chanate Project may be delayed and our planned operations may be materially
adversely affected.
There
are uncertainties as to title matters in the mining industry. We believe
that we
have good title to our properties; however, any defects in such title that
cause
us to lose our rights in mineral properties could jeopardize our planned
business operations.
We
have
investigated our rights to explore, exploit and develop our concessions in
manners consistent with industry practice and, to the best of our knowledge,
those rights are in good standing. However, we cannot assure that the title
to
or our rights of ownership of the El Chanate concessions will not be challenged
or impugned by third parties or governmental agencies. In addition, there
can be
no assurance that the concessions in which we have an interest are not subject
to prior unregistered agreements, transfers or claims and title may be affected
by undetected defects. Any such defects could have a material adverse effect
on
us.
Should
we successfully commence mining operations in Mexico, our ability to remain
profitable long term, should we become profitable, eventually will depend
on our
ability to find, explore and develop additional properties. Our ability to
acquire such additional properties will be hindered by competition. If we
are
unable to acquire, develop and economically mine additional properties, we
most
likely will not be able to be profitable on a long-term
basis.
Gold
properties are wasting assets. They eventually become depleted or uneconomical
to continue mining. The acquisition of gold properties and their exploration
and
development are subject to intense competition. Companies with greater financial
resources, larger staffs, more experience and more equipment for exploration
and
development may be in a better position than us to compete for such mineral
properties. If we are unable to find, develop and economically mine new
properties, we most likely will not be able to be profitable on a long-term
basis.
Our
ability on a going forward basis to discover additional viable and economic
mineral reserves is subject to numerous factors, most of which are beyond
our
control and are not predictable. If we are unable to discover such reserves,
we
most likely will not be able to be profitable on a long-term
basis.
Exploration
for gold is speculative in nature, involves many risks and is frequently
unsuccessful. Few properties that are explored are ultimately developed into
commercially producing mines. As noted above, our long-term profitability
will
be, in part, directly related to the cost and success of exploration programs.
Any gold exploration program entails risks relating to
· |
the
location of economic ore bodies,
|
· |
development
of appropriate metallurgical processes,
|
· |
receipt
of necessary governmental approvals and
|
· |
construction
of mining and processing facilities at any site chosen for mining.
|
The
commercial viability of a mineral deposit is dependent on a number of factors
including:
· |
the
particular attributes of the deposit, such as its
|
o |
proximity
to infrastructure,
|
· |
importing
and exporting gold and
|
· |
environmental
protection.
|
The
effect of these factors cannot be accurately predicted.
Risks
related to ownership of our stock
There
is a limited market for our common stock. If a substantial and sustained
market
for our common stock does not develop, our stockholders may have difficulty
selling, or be unable to sell, their shares.
Our
common stock is tradable in the United States in the over-the-counter market
and
is quoted on the Over-The-Counter Bulletin Board and our shares of common
stock
trade on the Toronto Stock Exchange. There is only a limited market for our
common stock and there can be no assurance that this market will be maintained
or broadened. If a substantial and sustained market for our common stock
does
not develop, our stockholders may have difficulty selling, or be unable to
sell,
their shares.
Our
stock price may be adversely affected if a significant amount of shares,
primarily those offered herein, are sold in the public
market.
As
of
December 1, 2006, approximately 76,627,724 shares of our Common Stock,
constituted "restricted securities" as defined in Rule 144 under the Securities
Act of 1933. We have registered herein and in prior registration statements
more
than half of these shares for public resale. In addition, we have registered
herein and in prior registration statements 37,361,000
shares of Common Stock issuable upon the exercise of outstanding warrants
and
872,727 shares of Common Stock issuable upon the exercise of outstanding
options. All of the foregoing shares, assuming exercise of all of the above
options and warrants, would represent in excess of 50% of the then outstanding
shares of our Common Stock. Registration
of the shares permits the sale of the shares in the open market or in privately
negotiated transactions without compliance with the requirements of Rule
144. To
the extent the exercise price of the warrants or options is less than the
market
price of the Common Stock, the holders of the warrants are likely to exercise
them and sell the underlying shares of Common Stock and to the extent that
the
exercise prices of these securities are adjusted pursuant to anti-dilution
protection, the securities could be exercisable or convertible for even more
shares of Common Stock. We
also
may
issue
shares
to be used to meet our capital requirements or use shares to compensate
employees, consultants and/or directors. We are unable to estimate the amount,
timing or nature of future sales of outstanding Common Stock. Sales of
substantial amounts of our Common Stock in the public market could cause
the
market price for our Common Stock to decrease. Furthermore, a decline in
the
price of our Common Stock would likely impede our ability to raise capital
through the issuance of additional shares of Common Stock or other equity
securities.
We
do not intend to pay cash dividends in the near future.
Our
board
of directors determines whether to pay cash dividends on our issued and
outstanding shares. The declaration of dividends will depend upon our future
earnings, our capital requirements, our financial condition and other relevant
factors. Our board does not intend to declare any dividends on our shares
for
the foreseeable future. We anticipate that we will retain any earnings to
finance the growth of our business and for general corporate purposes.
Provisions
of our Certificate of Incorporation, By-laws and Delaware law could defer
a
change of our management which could discourage or delay offers to acquire
us.
Provisions
of our Certificate of Incorporation, By-laws and Delaware law may make it
more
difficult for someone to acquire control of us or for our stockholders to
remove
existing management, and might discourage a third party from offering to
acquire
us, even if a change in control or in management would be beneficial to our
stockholders. For example, our Certificate of Incorporation allows us to
issue
different series of shares of common stock without any vote or further action
by
our stockholders and our Board of Directors has the authority to fix and
determine the relative rights and preferences of such series of common stock.
As
a result, our Board of Directors could authorize the issuance of a series
of
common stock that would grant to holders the preferred right to our assets
upon
liquidation, the right to receive dividend payments before dividends are
distributed to the holders of other common stock and the right to the redemption
of the shares, together with a premium, prior to the redemption of other
series
of our common stock. In this regard, in August 2006, we adopted a stockholder
rights plan and, under the Plan, our Board of Directors declared a dividend
distribution of one Right for each outstanding share of Common Stock to
stockholders of record at the close of business on August 14, 2006. Each
Right
initially entitles holders to buy one one-thousandth of a share of Series
B
Common Stock for $3.00 once the Rights become exercisable. The Rights generally
are not transferable apart from the common stock and will not be exercisable
unless and until a person or group acquires or commences a tender or exchange
offer to acquire, beneficial ownership of 20% or more of our common stock.
However,
the
Rights
Agreement provides an exemption for any person who is, as of August 15, 2006,
the beneficial owner of 20% or more of our outstanding common stock, so long
as
such person does not, subject to certain exceptions, acquire additional shares
of our common stock after that date. The Rights will expire on August 15,
2016,
and may be redeemed prior thereto at $0.001 per Right under certain
circumstances. Please see “Description Of Securities Being Registered;
Anti-Takeover Provisions.”
If
our Common Stock is deemed to be a "penny stock," trading of our shares would
be
subject to special requirements that could impede our stockholders' ability
to
resell their shares.
"Penny
stocks" as that term is defined in Rule 3a51-1 of the Securities and Exchange
Commission are stocks:
i. |
with
a price of less than five dollars per share;
|
ii. |
that
are not traded on a recognized national
exchange;
|
§ |
whose
prices are not quoted on the NASDAQ automated quotation system;
or
|
iii. |
of
issuers with net tangible assets equal to or less than
|
§ |
-$2,000,000
if the issuer has been in continuous operation for at least three
years;
or
|
§ |
-$5,000,000
if in continuous operation for less than three years,
or
|
§ |
of
issuers with average revenues of less than $6,000,000 for the last
three
years.
|
Our
Common Stock is not currently a penny stock because we have net tangible
assets
of more than $2,000,000. Should our net tangible assets drop below $2,000,000
and we do not meet any of the other criteria for exclusion of our Common
Stock
from the definition of penny stock, our Common Stock will be a penny
stock.
Section
15(g) of the Exchange Act, and Rule 15g-2 of the Securities and Exchange
Commission, require broker-dealers dealing in penny stocks to provide potential
investors with a document disclosing the risks of penny stocks and to obtain
a
manually signed and dated written receipt of the document before effecting
any
transaction in a penny stock for the investor's account. Moreover, Rule 15g-9
of
the Securities and Exchange Commission requires broker-dealers in penny stocks
to approve the account of any investor for transactions in such stocks before
selling any penny stock to that investor. This procedure requires the
broker-dealer:
i. |
to
obtain from the investor information concerning his or her financial
situation, investment experience and investment objectives;
|
ii. |
to
determine reasonably, based on that information, that transactions
in
penny stocks are suitable for the investor and that the investor
has
sufficient knowledge and experience as to be reasonably capable of
evaluating the risks of penny stock transactions;
|
iii. |
to
provide the investor with a written statement setting forth the basis
on
which the broker-dealer made the determination in (ii) above; and
|
iv. |
to
receive a signed and dated copy of such statement from the investor,
confirming that it accurately reflects the investor's financial situation,
investment experience and investment objectives.
|
Should
our Common Stock be deemed to be a penny stock, compliance with the above
requirements may make it more difficult for holders of our Common Stock to
resell their shares to third parties or to otherwise dispose of them.
FORWARD-LOOKING
STATEMENTS
Risks
Associated With Forward-Looking Statements
Certain
statements in this prospectus constitute “forwarding-looking statements” within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the
Securities and Exchange Act of 1934. Certain, but not necessarily all, of
such
forward-looking statements can be identified by the use of forward-looking
terminology such as “believes,” “expects,” “may,” “will,” “should,” or
“anticipates” or the negative thereof or other variations thereon or comparable
terminology, or by discussions of strategy that involve risks and uncertainties.
All statements other than statements of historical fact, included in this
prospectus regarding our financial position, business and plans or objectives
for future operations are forward-looking statements. Without limiting the
broader description of forward-looking statements above, we specifically
note
that statements regarding exploration and mine development and construction
plans, costs, grade, production and recovery rates, permitting, financing
needs,
the availability of financing on acceptable terms or other sources of funding,
and the timing of additional tests, feasibility studies and environmental
permitting are all forward-looking in nature.
Such
forward-looking statements involve known and unknown risks, uncertainties
and
other factors, including but not limited to, the risk factors discussed below,
which may cause our actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed
or
implied by such forward-looking statements and other factors referenced in
this
prospectus. We do not undertake and specifically decline any obligation to
publicly release the results of any revisions which may be made to any
forward-looking statement to reflect events or circumstances after the date
of
such statements or to reflect the occurrence of anticipated or unanticipated
events.
USE
OF PROCEEDS
Proceeds,
if any, from stockholders exercising some or all of the Warrants and Options
will be used for the development of our El Chanate project and for working
capital.
DIVIDEND
POLICY
We
have
not paid any cash dividends since our inception and do not anticipate paying
cash dividends in the foreseeable future.
PRICE
RANGE OF COMMON STOCK
Our
common stock is quoted on the OTC Bulletin Board under the symbol " CGLD.
"
The
following table sets forth the range of high and low closing bid quotes of
our
Common Stock per quarter for the past two fiscal years and the first fiscal
quarter of the year ending July 31, 2007 as reported by the OTC Bulletin
Board
(which reflect inter-dealer prices without retail mark-up, mark-down or
commission and may not necessary represent actual transactions).
Quarter
Ending |
|
|
High
|
and
|
Low
|
|
|
|
|
|
|
|
|
|
October
31, 2006
|
|
|
0.33
|
|
|
0.28
|
|
|
|
|
|
|
|
|
|
July
31, 2006
|
|
|
0.43
|
|
|
0.32
|
|
April
30, 2006
|
|
|
0.39
|
|
|
0.33
|
|
January
31, 2006
|
|
|
0.42
|
|
|
0.28
|
|
October
31, 2005
|
|
|
0.27
|
|
|
0.17
|
|
|
|
|
|
|
|
|
|
July
31, 2005
|
|
|
0.24
|
|
|
0.16
|
|
April
30, 2005
|
|
|
0.40
|
|
|
0.17
|
|
January
31, 2005
|
|
|
0.39
|
|
|
0.23
|
|
October
31, 2004
|
|
|
0.33
|
|
|
0.19
|
|
As
of
March 22, 2006, our Common Stock began trading on the Toronto Stock Exchange
under the symbol "CGC." The high and low trading prices for our Common stock
for
the periods indicated below are as follows:
Period
Ending |
|
|
High
and Low
|
|
|
|
|
US$/CDN$
|
|
|
US$/CDN$
|
|
|
|
|
|
|
|
|
|
Quarter
ended October 31, 2006
|
|
|
0.36/0.40
|
|
|
0.28/0.32
|
|
Quarter
ended July 31, 2006
|
|
|
0.49/0.55
|
|
|
0.28/0.32
|
|
March
22 2006 - April 30, 2006
|
|
|
0.44/0.50
|
|
|
0.33/0.37
|
|
On
December 1,
2006,
the
last reported sale price of our common stock as reported on the OTC Bulletin
Board was $0.32 per share. As of December 1, 2006, there were approximately
1,524 holders of record of our common stock not including holders in street
name.
SELECTED
CONSOLIDATED FINANCIAL DATA
Our
selected historical consolidated financial information presented as of July
31,
2002, 2003, 2004, 2005 and 2006 and for each of the five years ended July
31,
2006 was derived from our audited consolidated financial statements.
This
information should be read in conjunction with the historical consolidated
financial statements and related notes included herein, and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations."
Statements
of
Operations Data
|
|
|
For
the Years Ended
July
31,
|
|
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
|
|
(consolidated)
|
|
|
(consolidated)
|
|
|
(consolidated)
|
|
|
(consolidated)
|
|
|
(consolidated)
|
|
Revenues
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
Mine
Expenses
|
|
$
|
709,961
|
|
$
|
1,028,899
|
|
$
|
673,050
|
|
$
|
851,374
|
|
$
|
1,940,805
|
|
Selling,
General and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Administrative
|
|
$
|
639,652
|
|
$
|
770,629
|
|
$
|
687,722
|
|
$
|
1,005,038
|
|
$
|
2,135,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stocks
and Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued
for Services
|
|
$
|
222,338
|
|
$
|
288,623
|
|
$
|
379,033
|
|
$
|
187,844
|
|
$
|
89,391
|
|
Depreciation
&
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
|
|
$
|
3,105
|
|
$
|
-
|
|
$
|
-
|
|
$
|
7,431
|
|
$
|
38,969
|
|
Total
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(Expense)
|
|
$
|
2,027,810
|
|
$
|
(
11,735
|
)
|
$
|
(
950,005
|
)
|
$
|
46,005
|
|
$
|
(600,034
|
)
|
Minority
Interest
|
|
$
|
54,543
|
|
$
|
180,625
|
|
$
|
51,220
|
|
$
|
-
|
|
$
|
-
|
|
Write
Down of Mining,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Milling
and Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and Equipment
|
|
$
|
999,445
|
|
$
|
-
|
|
$
|
300,000
|
|
$
|
-
|
|
$
|
-
|
|
Net
Loss
|
|
$
|
(492,148
|
)
|
$
|
(1,919,261
|
)
|
$
|
(2,938,590
|
)
|
$
|
(2,005,682
|
)
|
$
|
(4,804,692
|
)
|
Cash
Flows Data
|
|
|
For
the Years Ended
July
31,
|
|
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
|
|
(consolidated)
|
|
|
(consolidated)
|
|
|
(consolidated)
|
|
|
(consolidated)
|
|
|
(consolidated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Cash (Used) in Operations
|
|
$
|
(1,094,098
|
)
|
$
|
(1,889,349
|
)
|
$
|
(1,423,372
|
)
|
$
|
(1,841,821
|
)
|
$
|
(8,720,598
|
)
|
Net
Cash Provided by (Used in)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
Activities
|
|
$
|
670,886
|
|
$
|
1,429,249
|
|
$
|
2,992
|
|
$
|
(712,868
|
)
|
$
|
(618,774
|
)
|
Net
Cash Provided by Financing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Activities
|
|
$
|
511,453
|
|
$
|
494,601
|
|
$
|
1,362,776
|
|
$
|
6,598,819
|
|
$
|
(7,753,817
|
)
|
Effects
of Exchange
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rates
on Cash
|
|
$
|
(
2,728
|
)
|
$
|
62,476
|
|
$
|
19,637
|
|
$
|
28,975
|
|
$
|
45,506
|
|
Net
Increase (Decrease)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in
Cash
|
|
$
|
85,513
|
|
$
|
96,977
|
|
$
|
(
37,967
|
)
|
$
|
4,073,105
|
|
$
|
(1,540,050
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of July 31,
|
|
|
|
2002
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
|
|
(consolidated)
|
|
(consolidated)
|
|
(consolidated)
|
|
(consolidated)
|
|
(consolidated)
|
|
Cash
and Cash Equivalents
|
|
$
|
149,433
|
|
$
|
246,410
|
|
$
|
208,443
|
|
$
|
4,281,548
|
|
$
|
2,741,498
|
|
Total
Current Assets
|
|
$
|
1,659,888
|
|
$
|
359,960
|
|
$
|
387,098
|
|
$
|
4,522,807
|
|
$
|
7,647,169
|
|
Mining
Concessions
|
|
$
|
-
|
|
$
|
-
|
|
$
|
44,780
|
|
$
|
70,104
|
|
$
|
70,104
|
|
Property
and Equipment (Net)
|
|
$
|
346,378
|
|
$
|
344,780
|
|
$
|
-
|
|
$
|
650,941
|
|
$
|
1,035,972
|
|
Intangible
Assets (Net)
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
17,842
|
|
$
|
13,800
|
|
Total
Assets
|
|
$
|
2,056,851
|
|
$
|
761,607
|
|
$
|
485,753
|
|
$
|
5,551,871
|
|
$
|
9,545,580
|
|
Total
Current Liabilities
|
|
$
|
467,017
|
|
$
|
254,299
|
|
$
|
204,159
|
|
$
|
282,816
|
|
$
|
615,643
|
|
Stockholders’
Equity
|
|
$
|
1,622,119
|
|
$
|
651,000
|
|
$
|
281,594
|
|
$
|
5,269,055
|
|
$
|
8,929,937
|
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You
should read the following discussion and analysis of our financial condition
and
results of operations in conjunction with our financial statements and related
notes included elsewhere in this prospectus. This discussion and analysis
and
plan of operations contains forward-looking statements that involve risks,
uncertainties and assumptions. Our actual results may differ materially from
those anticipated in these forward-looking statements as a result of a number
of
factors including, but not limited to, those set forth under "Risk Factors" and
elsewhere in this prospectus.
Result
of Operations
Fiscal
year ended July 31, 2006 compared to fiscal year ended July 31,
2005
Net
Loss
Our
net
loss for the year ended July 31, 2006 was approximately $4,805,000, an increase
of approximately $2,799,000 or 140% from the fiscal year ended July 31, 2005.
The primary reasons for the increase in loss during the fiscal year ended
July
31, 2006 was due to 1) an increase in mine related expenditures of approximately
$1,090,000 in the current period, 2) an increase in selling, general and
administrative expenses of approximately $1,130,000 as compared to the same
period a year ago, 3) losses of approximately $582,000 in the current period
due
to the change in fair value of our derivative instruments, 4) loss on sale
of
equipment in the current period of approximately $202,000, including commission
paid, and 5) increase in stock compensation expense in the current period
as
compared to a year ago. Net loss per share was $0.04 and $0.03 for the fiscal
year ended July 31, 2006 and 2005, respectively.
Revenues
We
generated no revenues from mining operations during the fiscal years ended
July
31, 2006 and 2005. There were de minimis non-operating revenues during the
fiscal year ended July 31, 2006 and 2005 of approximately $184,000 and $46,000,
respectively. These non-operating revenues primarily represent interest and
miscellaneous income.
Mine
Expenses
Mine
expenses during the fiscal year ended July 31, 2006 were $1,941,000, an increase
of $1,090,000 or 128% from the fiscal year ended July 31, 2005. The increase
in
mine expenses was primarily due to an increase in professional, engineering
and
consulting costs over the same period a year ago as we ramped up our engineering
and planning on our El Chanate Project for production.
Selling,
General and Administration Expense
Selling,
general and administrative expenses during the fiscal year ended July 31,
2006
were $2,135,000, an increase of $1,130,000 or 112% from the fiscal year ended
July 31, 2005. The increase in selling, general and administrative expenses
resulted primarily from an increase in professional and consulting fees related
to investor relations and accounting, listing fees with the TSX and travel
expenses incurred during the fiscal year ended July 31, 2006. The increase
also
resulted from charges related to options granted to employees during the
current
period of approximately $272,000 due to the adoption of SFAS 123R.
Stock
and Warrants Issued for Services
Stock
based compensation during the fiscal years ended July 31, 2006 and 2005 was
approximately $89,000 and $188,000, respectively. These charges resulted
from
options granted to non-employees for services rendered during the fiscal
years
ended July 31, 2006 and 2005.
Depreciation
and Amortization
Depreciation
and amortization expense during the fiscal years ended July 31, 2006 and
2005
was approximately $39,000 and 7,000, respectively. The primary reason for
the
increase was due to the addition of property and equipment placed into service
during the current period, mostly related to the El Chanate
Project.
Other
Expense
Other
expense during the fiscal year ended July 31, 2006, was approximately $782,000.
This was primarily due to us entering into two identically structured derivative
contracts with Standard Bank in March 2006. Each derivative consisted of
a
series of forward sales of gold and a purchase gold cap. We agreed to sell
a
total volume of 121,927 ounces of gold forward to Standard Bank at a price
of
$500 per ounce on a quarterly basis during the period from March 2007 to
September 2010. We also agreed to a purchase gold cap on a quarterly basis
during this same period and at identical volumes covering a total volume
of
121,927 ounces of gold at a price of $535 per ounce. Under FASB Statement
No.
133, “Accounting for Derivative Instruments and Hedging Activities” (“FAS 133”),
these contracts must be carried on the balance sheet at their fair value,
with
changes to the fair value of these contracts reflected as Other
Income or Expense.
These
contracts were not designated as hedging derivatives; and therefore, special
hedge accounting does not
apply.
The
first
derivative was entered into on March 1, 2006 for a premium of $550,000; and
the
second was entered into on March 30, 2006 for a premium of $250,000. The
gold
price rose sharply in second quarter 2006, and was the primary reason for
the
decrease in premium on the derivative contracts. The change in fair value
during
the fiscal year ended July 31, 2006 reduced the carrying value on these
derivative contracts by approximately $582,000, and was reflected as an other
expense during the current period. There was no such transactions entered
into
during the same period in 2005.
During
the fiscal year ended July 31, 2006, we also sold our Equipment Held for
Resale
and received proceeds, net of commissions, of $192,000. We recorded a loss
on
sale of this equipment of approximately $202,000.
Loss
from Changes in Foreign Exchange Rates
During
the fiscal year ended July 31, 2006, we recorded equity adjustments from
foreign
currency translations of approximately $49,000. These translation adjustments
are related to changes in the rates of exchange between the Mexican Peso
and the
US dollar.
Liquidity
and Capital Resources; Plan of Operations
As
of
July 31, 2006, we had working capital of approximately $7,032,000. Our plans
over the next 12 months primarily include the construction of the El Chanate
open-pit gold mine in Mexico, commencement of gold production at this mine
site
and continued exploration.
Our
planned activities over the next twelve months in Mexico, in order of priority,
are as set forth below. The activities and the costs may vary materially,
especially if there are significant increase in costs related to such items
as
fuel, construction materials and labor. As of December 1, 2006, we have paid
approximately $8,600,000 of the costs listed in the table. The following
costs
are primarily derived from the 2005 Study as updated by M3 in August 2006.
Activity
|
|
Estimated
Cost
|
|
|
|
|
|
Mexico |
|
|
|
|
|
|
|
Crushing |
|
|
3,950,000 |
|
Heap
leaching |
|
|
4,040,000 |
|
Carbon
handling & refining |
|
|
960,000 |
|
|
|
|
|
|
Power
system |
|
|
930,000 |
|
Water
system |
|
|
965,000 |
|
|
|
|
|
|
Trucks
and other mining equipment |
|
|
460,000 |
|
|
|
|
|
|
Engineering
and planning |
|
|
1,050,000 |
|
|
|
|
|
|
Ancillaries
(building, shops, lab and
road) |
|
|
1,172,000 |
|
|
|
|
|
|
Owner’s
costs |
|
|
2,700,000 |
|
|
|
|
|
|
Working
capital |
|
|
1,600,000 |
|
|
|
|
|
|
General
and administrative |
|
|
210,000 |
|
|
|
|
|
|
Sub-total
|
|
$ |
18,037,000 |
|
|
|
|
|
|
New
York and Colorado |
|
|
|
|
|
|
|
|
|
General,
administrative and professional expenses
|
|
|
1,380,000
|
|
|
|
|
|
|
Total
|
|
$ |
19,417,000 |
|
Historically,
we have not generated any material revenues from operations and have been
in a
precarious financial condition. Our consolidated financial statements have
been
prepared on a going concern basis, which contemplates the realization of
assets
and satisfaction of liabilities in the normal course of business. We have
recurring losses from operations. Our primary source of funds used during
the
fiscal year ended July 31, 2006 was from the sale and issuance of equity
securities during fiscal 2005 and 2006. We anticipate that our operations
through fiscal 2007 will be funded from the balance of the proceeds from
these
placements, sale of our securities (possibly through the exercising of certain
options and warrants) and the loan proceeds from the credit agreement entered
into in August 2006 with Standard Bank Plc. The private placements of our
securities and the Standard Bank credit agreement are discussed below.
2006
Private Placements & Warrant Exercises
We
closed
two private placements in 2006 pursuant to which we issued an aggregate of
21,240,000 units, each unit consisting of one share of our common stock and
a
warrant to purchase ¼ of a share of our common stock for net proceeds of
$4,999,500, net of commissions of $310,500. We also received net proceeds
of
$2,373,600, net of commissions of $206,430, from the exercising of 8,600,000
warrants in February 2006. The Warrant issued to each purchaser is exercisable
for one share of our common stock, at an exercise price equal to $0.30 per
share. Each Warrant has a term of eighteen months and is fully exercisable
from
the date of issuance. We issued to the placement agent in one of the placements
eighteen month warrants to purchase up to 934,000 shares of our common stock
at
an exercise price of $0.25 per share. Such placement agent warrants are valued
at approximately $189,000 using the Black-Scholes option pricing method.
February
2005 Private Placement
In
the
private placement that closed in February 2005, we issued 27,200,004 units,
each
unit consisting of one shares of our Common Stock and one Common Stock Purchase
Warrant for an aggregate gross purchase price of approximately $6.8 million
and
we received approximately $6.2 million in net proceeds. The Warrant issued
to
each purchaser was originally exercisable for one share of our Common Stock,
at
an exercise price equal to $0.30 per share. We temporarily lowered the exercise
price of the Warrants to $0.20 per shares for the period commencing on November
28, 2005 and ending on January 31, 2006, after which time the exercise price
increased back to $0.30 per share Each Warrant has a term of two years
and is fully exercisable from the date of issuance. We issued to the placement
agent two year warrants to purchase up to 2,702,000 shares of our Common
Stock
at an exercise price of $0.25 per share. Such placement agent warrants are
valued at approximately $414,000 using the Black-Scholes option pricing
method.
Pursuant
to our agreement with the purchasers we registered the foregoing shares and
shares issuable upon the exercise of the foregoing Warrants for public resale.
We also agreed to prepare and file all amendments and supplements necessary
to
keep the registration statement effective until the earlier of the date on
which
the selling stockholders may resell all the registrable shares covered by
the
registration statement without volume restrictions pursuant to Rule 144(k)
under the Securities Act or any successor rule of similar effect and the
date on
which the selling stockholders have sold all the shares covered by the
registration statement. If, subject to certain exceptions, sales of all shares
registered cannot be made pursuant to the registration statement, we will
be
required to pay to these selling stockholders in cash or, at our option,
in
shares, their pro rata share of 0.0833% of the aggregate market value of
the
registrable shares held by these selling stockholders for each month thereafter
until sales of the registrable shares can again be made pursuant to the
registration statement. In this regard, we paid $7,100 to the purchasers
representing liquidated damages.
In
addition, we agreed to have our Common Stock listed for trading on the Toronto
Stock Exchange. If our Common Stock was not listed for trading on the Toronto
Stock Exchange within 180 days after February 8, 2005, we were required to
issue
to these selling stockholders an additional number of shares of our Common
Stock
that is equal to 20% of the number of shares acquired by them in the private
placement. We did not timely list our shares on the Toronto Stock Exchange
and,
in August 2005, we issued 5,440,000 shares to the selling stockholders. We
subsequently registered these 5,440,000 shares for public resale.
Project
Finance Credit Facility
On
August
15, 2006, we entered into a credit agreement (the “Credit Agreement”) involving
our wholly-owned subsidiaries MSR and Oro, as borrowers, us, as guarantor,
and
Standard Bank plc (“Standard Bank”), as the lender and the offshore account
holder. Under the Credit Agreement, MSR and Oro have agreed to borrow money
in
an aggregate principal amount of up to US$12.5 million (the “Loan”) for the
purpose of constructing, developing and operating our El Chanate Project
(the
“Mine”). We are guaranteeing the repayment of the loan and the performance of
the obligations under the Credit Agreement. The Loan is scheduled to be repaid
in fourteen quarterly payments with the first principal payment due after
certain Mine start-up production and performance criteria are satisfied,
which
we believe will occur in the first calendar quarter of 2008. The Loan bears
interest at LIBOR plus 4.00%, with LIBOR interest periods of 1, 2, 3 or 6
months
and with interest payable at the end of the applicable interest
period.
The
Credit Agreement contains covenants customary for a project financing loan,
including but not limited to restrictions (subject to certain exceptions)
on
incurring additional debt, creating liens on our property, disposing of any
assets, merging with other companies and making any investments. We are required
to meet and maintain certain financial covenants, including (i) a debt service
coverage ratio of not less than 1.2 to 1.0, (ii) a projected debt service
coverage ratio of not less than 1.2 to 1.0, (iii) a loan life coverage ratio
of
at least 1.6 to 1.0, (iv) a project life coverage ratio of at least 2.0 to
1.0
and (v) a minimum reserve tail. We are also required to maintain a certain
minimum level of unrestricted cash, and upon meeting certain Mine start-up
production and performance criteria, MSR and Oro will be required to maintain
a
specified amount of cash as a reserve for debt repayment.
The
Loan
is secured by all of the tangible and intangible assets and property owned
by
MSR and Oro pursuant to the terms of a Mortgage Agreement, a Non-Possessory
Pledge Agreement, an Account Pledge Agreement and certain other agreements
entered into in Mexico (the “Mexican Collateral Documents”). As additional
collateral for the Loan, we, together with our subsidiary, Leadville Mining
& Milling Holding Corporation, have pledged all of our ownership interest in
MSR and Oro. In addition to these collateral arrangements, MSR and Oro are
required to deposit all proceeds of the Loan and all cash proceeds received
from
operations and other sources in an offshore, controlled account with Standard
Bank. Absent a default under the loan documents, MSR and Oro may use the
funds
from this account for specific purposes such as approved project costs and
operating costs.
As
part
of the fee for entering into and closing the Credit Agreement, we issued
to
Standard Bank 1,150,000 shares of our restricted common stock and a warrant
for
the purchase of 12,600,000 shares of our common stock at an exercise price
of
$0.317 per share, expiring on the earlier of (a) December 31, 2010 or (b)
the
date one year after the repayment of the Credit Agreement. Previously, pursuant
to the mandate and commitment letter for the facility, we issued to Standard
Bank 1,000,000 shares of our restricted common stock and a warrant for the
purchase of 1,000,000 shares of our common stock at an exercise price of
$0.32
per share, expiring on the earlier of (a) December 31, 2010 or (b) the date
one
year after the repayment of the Credit Agreement. We recorded the issuance
of
the 1,000,000 shares of common stock as deferred financing costs of
approximately $270,000 as a reduction of stockholders' equity on our balance
sheet as of July 31, 2006. The issuance of these shares was recorded at the
fair
market value of our common stock at the commitment letter date or $0.27 per
share. In addition, the warrants have been valued at approximately $253,000
using again the Black-Scholes option pricing model and are reflected as deferred
financing costs as a reduction of stockholders' equity on our balance sheet
as
of July 31, 2006. We have registered for public resale the 2,150,000 shares
issued to Standard Bank and the 13,600,000 shares issuable upon exercise
of
warrants issued to Standard Bank.
In
March
2006, we entered into a gold price protection arrangement with Standard Bank
to
protect us against future fluctuations in the price of gold. We agreed to
a
series of gold forward sales and call option purchases in anticipation of
entering into the Credit Agreement. Under the price protection agreement,
we
have agreed to sell a total volume of 121,927 ounces of gold forward to Standard
Bank at a price of $500 per ounce on a quarterly basis during the period
from
March 2007 to September 2010. We will also purchase call options from Standard
Bank on a quarterly basis during this same period covering a total volume
of
121,927 ounces of gold at a price of $535 per ounce. We paid a fee to Standard
Bank in connection with the price protection agreement. In addition, we provided
aggregate cash collateral of approximately $4.3 million to secure our
obligations under this agreement. The cash collateral was returned to us
after
the Credit Agreement was executed in August 2006.
On
October 11, 2006, we completed the initial draw down on our credit facility
from
Standard Bank receiving proceeds of $1,250,000. We anticipate using these
proceeds for the repurchase of the 5% net profits interest formerly held
by FG
and to continue the mine development at the El Chanate Project. On November
1,
2006, and December 1, 2006 we completed the second and third draw down on
our
credit facility from Standard Bank receiving proceeds of $3,500,000 and
$2,250,000, respectively. We anticipate using these proceeds mainly for the
remaining balances on the Crushing and conveyor system purchase orders and
site
work for the leach pad and ponds at our El Chanate Project.
On
October 11, 2006, prior to our initial draw on the Credit Facility, we entered
into interest rate swap agreements in accordance with the terms of the Credit
Facility, which requires that we hedge at least 50 percent of our outstanding
debt under this facility. The agreements entered into cover $9,375,000 or
75% of
the outstanding debt. Both swaps covered this same notional amount of
$9,375,000, but over different time horizons. The first covered the six months
commencing October 11, 2006 and a termination date of March 31, 2007 and
the
second covering the period from March 30, 2007 and a termination date of
December 31, 2010. We intend to use discretion in managing this risk as
market conditions vary over time, allowing for the possibility of adjusting
the
degree of hedge coverage as we deem appropriate. However, any use of interest
rate derivatives will be restricted to use for risk management
purposes.
To
the
extent that the balance of funds from the private placements and the proceeds
from the credit facility are not adequate for our needs and we need to obtain
additional capital to complete the mine, commence operations, cover any material
cost overruns, cover ongoing general and administrative expenses and/or fund
exploration, management intends to raise such funds through the sale of our
securities (including, possibly, from the exercise of outstanding warrants),
the
sale of a royalty interest in the future production from the Chanate properties
and/or joint venturing with one or more strategic partners. We cannot assure
that, if we need additional funding, such funding will be available. If we
need
additional funding but are unable to obtain it from outside sources, we will
be
forced to reduce or curtail our operations. Please see “We
lack operating cash flow and rely on external funding sources. If we are
unable
to continue to obtain needed capital from outside sources until we are able
to
generate positive cash flow from operations, we will be forced to reduce
or
curtail our operations”
in
“Risk
Factors.”
Environmental
and Permitting Issues
Management
does not expect that environmental issues will have an adverse material effect
on our liquidity or earnings. In Mexico, although we must continue to comply
with laws, rules and regulations concerning mining, environmental, health,
zoning and historical preservation issues, we are not aware of any significant
environmental concerns or existing reclamation requirements at the El Chanate
concessions. We received the required Mexican government permits for
construction, mining and processing the El Chanate ores in January 2004.
The
permits were extended in June 2005. Pursuant to the extensions, once we file
a
notice that work has commenced, we have one year to prepare the site and
construct the mine and seven years to mine and process ores from the site.
We
filed the notice on June 1, 2006. We received the explosive permit from the
government in August 2006. This permit expires on December 31, 2006, and
we are
in the renewal process for 2007.
We
own
properties in Leadville, Colorado for which we have recorded an impairment
loss.
Part of the Leadville Mining District has been declared a federal Superfund
site
under the Comprehensive Environmental Response, Compensation and Liability
Act
of 1980, and the Superfund Amendments and Reauthorization Act of 1986. Several
mining companies and one individual were declared defendants in a possible
lawsuit. We were not named a defendant or Principal Responsible Party. We
did
respond in full detail to a lengthy questionnaire prepared by the Environmental
Protection Agency ("EPA") regarding our proposed procedures and past activities
in November 1990. To our knowledge, the EPA has initiated no further comments
or
questions.
We
do
include in all our internal revenue and cost projections a certain amount
for
environmental and reclamation costs on an ongoing basis. This amount is
determined at a fixed amount of $0.13 per metric tonne of material to be
milled
on a continual, ongoing basis to provide primarily for reclaiming tailing
disposal sites and other reclamation requirements. At this time, there do
not
appear to be any environmental costs to be incurred by us beyond those already
addressed above. No assurance can be given that environmental regulations
will
not be changed in a manner that would adversely affect our planned operations.
Although, we have not yet initiated production, we have estimated the
reclamation costs for the El Chanate site to be approximately $2.1 million.
These costs would be accrued proportionately over the estimated mine life
of 7
years.
Equipment
Disposition
In
June
2005, we purchased used crushing equipment for approximately $325,500. We
spent
about $68,329 disassembling, transporting and inspecting the equipment. However,
in late summer 2005, we determined to use new rather than used crushing
equipment. In May 2006, we sold this crushing equipment held for resale and
received proceeds, net of commissions, of $192,000. We recorded a loss on
sale
of this equipment of approximately $202,000 during the fiscal year ended
July
31, 2006.
Contractual
Obligations as of July 31, 2006
Lease
Commitments
We
occupy
office space in New York City under a non cancelable operating lease that
commenced on September 1, 2002 and terminates on August 31, 2007. In addition
to
base rent, the lease calls for payment of utilities and other occupancy
costs.
Approximate
future minimum payments under this lease are as follows:
Year
Ending July 31,
2007 |
|
51,000
|
|
2008
|
|
|
4,200 |
|
|
|
$ |
55,200 |
|
Rent
expense under the office lease in New York City was approximately $63,000
and
$63,000 for the years ended July 31, 2006 and 2005, respectively.
In
June
2006, MSR retained the contracting services of a Mexican subsidiary of M3
Engineering & Technology Corporation (“M3M”) to provide EPCM (engineering
procurement construction management) services. M3M will supervise the
construction and integration of the various components necessary to commence
production at the El Chanate Project. The contracted services shall not exceed
$1,200,000 and the contract is based on the EPCM services to be provided
by M3M.
As of December 1, 2006, approximately $467,000 has been incurred pursuant
to the
contract.
New
Accounting Pronouncements
During
December 2004, the FASB issued Statement of Financial Accounting Standards
No.
123 (Revised 2004), "Share-Based Payment" ("SFAS 123R"). On April 14, 2005,
the
Securities and Exchange Commission issued an amendment to Rule 4-01 of
Regulation S-X that allows companies to implement SFAS 123R at the beginning
of
their next fiscal year, instead of the next reporting period that begins
after
June 15, 2005 as originally required. Accordingly, we adopted SFAS 123R
effective January 1, 2006 using the “modified prospective” method in which
compensation cost is recognized beginning with the effective date base on
(a)
the requirements of SFAS 123R for all share-based payments granted after
the
effective date and (b) the requirements of SFAS 123 for all awards granted
to
employees prior to the effective date of SFAS 123R that remain unvested on
the
effective date. In addition, we expect to continue to utilize the Black-Scholes
option-pricing model, which is an acceptable option valuation model in
accordance with SFAS 123R, to estimate the value of stock options granted
to
employees.
Beyond
those restricted stock and stock option awards previously granted, we cannot
predict with certainty the impact of SFAS 123R on its future consolidated
financial statements as the type and amount of such awards are determined
on an
annual basis and encompass a potentially wide range depending upon the
compensation decisions made by our Board of Directors. SFAS 123R also requires
the benefits of tax deductions in excess of compensation cost recognized
in the
financial statements to be reported as a financing cash flow, rather than
an
operating cash flow as currently required under Statement of Financial
Accounting Standards No. 95, “Statement of Cash Flows” (“SFAS 95”). This
requirement, to the extent it exists, will decrease net operating cash flows
and
increase net financing cash flows in periods subsequent to adoption. We cannot
estimate what those amounts will be in the future because they depend on,
among
other things, when employees exercise stock options. We believe this
pronouncement will not have a material impact on our consolidated financial
statements.
On
March
29, 2005, the SEC issued Staff Accounting Bulletin No. 107 (“SAB 107”) which
expresses the view of the SEC Staff regarding the interaction of SFAS 123R
and
certain SEC rules and regulations and provides the staff’s views regarding the
valuation of share-based payment arrangements. We believe that the views
provided in SAB 107 are consistent with the approach taken in the valuation
and
accounting associated with share-based compensation issued in prior periods
as
well as those issued during 2005.
In
June
2005, the FASB’s Emerging Issues Task Force (“EITF”) issued EITF Issue No. 05-02
“The Meaning of “Conventional Convertible Debt Instrument” in EITF Issue 00-19
“Accounting for Derivative Financial Instruments Indexed to, and Potentially
Settled in, A Company’s Own Stock”, which retains the exception in paragraph 4
of EITF Issue No. 00-19 for conventional debt instruments. Those instruments
in
which the holder has an option to convert the instrument into a fixed number
of
shares (or a corresponding amount of cash at the issuer’s discretion) and its
ability to exercise the option is based on either (a) the passage of time
or (b)
a contingent event, should be considered “conventional” for purposes of applying
that exception. The consensus should be applied on a prospective basis for
new
or modified instruments starting from the third quarter of 2005. When there
is a
modification of a convertible debt instrument, the change in the fair value
of
an embedded conversion option should be included in the analysis of determining
whether a debt extinguishment has occurred. The change in the fair value
of the
embedded conversion option is calculated as the difference between the fair
value of the conversion option immediately prior to and after the modification.
Also, when a modification of a convertible debt instrument occurs, the change
in
the fair value of the embedded conversion prior should be recognized as a
discount (or premium) with a corresponding increase (or decrease) in additional
paid-in capital. Lastly, a beneficial feature should not be recognized or
reassessed upon modification of a convertible debt instrument. The adoption
of
EITF No. 05-02 is not expected to have a material effect on our consolidated
financial statements or results of operations.
In
November 2005, FASB issued FSP FAS 115-1 and FAS 124-1, "The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments" ("FSP FAS 115-1"), which provides guidance on determining
when investments in certain debt and equity securities are considered impaired,
whether an impairment is other-than-temporary, and on measuring such impairment
loss. FSP FAS 115-1 also includes accounting considerations subsequent
to the recognition of an other-than-temporary impairment and requires certain
disclosures about unrealized losses that have not been recognized as
other-than-temporary impairments. FSP FAS 115-1 is required to be
applied to reporting periods beginning after December 15, 2005. We adopted
FSP FAS 115-1 in the first quarter of 2006 We have determined that the
adoption of this statement will not have a material impact on our consolidated
results of operations or financial condition.
In
November 2004, the FASB issued SFAS No. 151, “Inventory
Costs - An amendment of ARB No. 43, Chapter 4”
(“SFAS
No. 151”). SFAS No. 151 amends the guidance in Accounting Research Bulletin
No. 43, Chapter 4, “Inventory
Pricing,”
to
clarify the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and wasted material (spoilage). Additionally, SFAS No. 151
requires that the allocation of fixed production overheads to the cost of
conversion be based on the normal capacity of the production facilities.
SFAS No. 151 was adopted in the first quarter of 2006. We have determined
that the adoption of SFAS No. 151 will not have a material impact on the
consolidated financial statements.
In
December 2004, the FASB issued Statement of Financial Accounting Standards
No.
153 (SFAS 153”), “Exchanges of Non-monetary Assets-an amendment of APB Opinion
No. 29.” SFAS 152 addresses the measurement of exchanges of non-monetary assets.
It eliminates the exception from fair value measurement for non-monetary
exchanges of similar productive assets in paragraph 21(b) of APB Opinion
No. 29
“Accounting for Non-monetary Transactions” and replaces it with an exception for
exchanges that do not have commercial substance. A non-monetary exchange
has
commercial substance if the future cash flows of the entity are expected
to
change significantly as a result of the exchange. As required by SFAS 153,
we
adopted this new accounting standard effective July 1, 2005. The adoption
of
SFAS 153 did not have a material impact on our financial
statements.
In
May
2005, the FASB issued SFAS No. 154, Accounting
Changes and Error Corrections.
SFAS No. 154 establishes retrospective application as the required
method for reporting a change in accounting principle in the absence of explicit
transition requirements specific to the newly adopted accounting principle.
SFAS No. 154 also provides guidance for determining whether
retrospective application is impractical. SFAS No. 154 is effective
for accounting changes and corrections of errors made in fiscal years beginning
after December 15, 2005. We do not anticipate that the adoption of
SFAS No. 154 will have a material impact on our results of operations
or financial position.
Disclosure
About Off-Balance
Sheet Arrangements
On
October 11, 2006, prior to the initial draw on our Credit Facility, we
entered into interest rate swap agreements with total notional amounts of
$18,750,000 in accordance with the terms of the Credit Facility. There was
one
six month swap contract totaling $9,375,000 (75% of the outstanding debt)
with
an effective date of October 11, 2006 and a termination date of March 31,
2007
and one three-year nine month swap contract totaling $9,375,000 (75% of the
outstanding debt) with an effective date of March 30, 2007 and a termination
date of December 31, 2010. These swaps were entered into for the purpose of
hedging a portion of our variable interest expenses. Although we are required
by
our lenders to hedge at least 50% of the outstanding debt, we retain the
authority to hedge a larger share of this exposure, and we will use discretion
in managing this risk as market conditions vary over time. We only issue
and/or
hold derivative contracts for risk management purposes.
We
do not
have any other transactions, agreements or other contractual arrangements
that
constitute off-balance sheet arrangements.
Critical
Accounting Policies
Our
financial statements and accompanying notes are prepared in accordance with
accounting principles generally accepted in the United States of America.
Preparing financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue,
and expenses. These estimates and assumptions are affected by management’s
application of accounting policies. Critical accounting policies for us include
impairment of long-lived assets, accounting for stock-based compensation
and
environmental remediation costs.
Impairment
of Long-Lived Assets
In
accordance with SFAS 144, “Accounting for the Impairment and Disposal of
Long-Lived Assets,” we review our long-lived assets for impairments. Impairment
losses on long-lived assets are recognized when events or changes in
circumstances indicate that the undiscounted cash flows estimated to be
generated by such assets are less than their carrying value and, accordingly,
all or a portion of such carrying value may not be recoverable. Impairment
losses then are measured by comparing the fair value of assets to their carrying
amounts.
Environmental
Remediation Costs
Environmental
remediation costs are accrued based on estimates of known environmental
remediation exposure. Such accruals are recorded even if significant
uncertainties exist over the ultimate cost of the remediation. It is reasonably
possible that our estimates of reclamation liabilities, if any, could change
as
a result of changes in regulations, extent of environmental remediation
required, means of reclamation or cost estimates. Ongoing environmental
compliance costs, including maintenance and monitoring costs, are expensed
as
incurred. There were no environmental remediation costs incurred or accrued
at
July 31, 2006.
Stock
Based Compensation
In
connection with offers of employment to our executives as well as in
consideration for agreements with certain consultants, we issue options and
warrants to acquire our common stock. Employee and non-employee awards are
made
in the discretion of the Board of Directors.
Effective
February 1, 2006, we adopted the provisions of SFAS No. 123R. Under FAS 123R,
share-based compensation cost is measured at the grant date, based on the
estimated fair value of the award, and is recognized as expense over the
requisite service period. We adopted the provisions of FAS 123R using a modified
prospective application. Under this method, compensation cost is recognized
for
all share-based payments granted, modified or settled after the date of
adoption, as well as for any unvested awards that were granted prior to the
date
of adoption. Prior periods are not revised for comparative purposes. Because
we
previously adopted only the pro forma disclosure provisions of SFAS 123,
we will
recognize compensation cost relating to the unvested portion of awards granted
prior to the date of adoption, using the same estimate of the grant-date
fair
value and the same attribution method used to determine the pro forma
disclosures under SFAS 123, except that forfeitures rates will be estimated
for
all options, as required by FAS 123R.
Accounting
for Derivatives and Hedging Activities
We
entered into two identically structured derivative contracts with Standard
Bank
in March 2006. Each derivative consisted of a series of forward sales of
gold
and a purchase gold cap. We agreed to sell a total volume of 121,927 ounces
of
gold forward to Standard Bank at a price of $500 per ounce on a quarterly
basis
during the period from March 2007 to September 2010. We also agreed to a
purchase gold cap on a quarterly basis during this same period and at identical
volumes covering a total volume of 121,927 ounces of gold at a price of $535
per
ounce. Although these contracts are not designated as hedging derivatives,
they
serve an economic purpose of protecting us from the effects of a decline
in gold
prices. Because they are not designated as hedges, however, special hedge
accounting does not apply. Derivative results are simply marked to market
through earnings, with these effects recorded in other
income
or
other
expense,
as
appropriate under FASB Statement No. 133, “Accounting for Derivative Instruments
and Hedging Activities” (“FAS 133”).
On
October 11, 2006, prior to our initial draw on the Credit Facility, we entered
into interest rate swap agreements in accordance with the terms of the Credit
Facility, which requires that we hedge at least 50 percent of our outstanding
debt under this facility. The agreements entered into cover $9,375,000 or
75% of
the outstanding debt. Both swaps covered this same notional amount of
$9,375,000, but over different time horizons. The first covered the six months
commencing October 11, 2006 and a termination date of March 31, 2007 and
the
second covering the period from March 30, 2007 and a termination date of
December 31, 2010. We intend to use discretion in managing this risk as
market conditions vary over time, allowing for the possibility of adjusting
the
degree of hedge coverage as we deem appropriate. However, any use of interest
rate derivatives will be restricted to use for risk management
purposes.
We
use
variable-rate debt to finance a portion of the El Chanate Project. Variable-rate
debt obligations expose us to variability in interest payments due to changes
in
interest rates. As a result of these arrangements, we will continuously monitor
changes in interest rate exposures and evaluate hedging opportunities. Our
risk
management policy permits us to use any combination of interest rate swaps,
futures, options, caps and similar instruments, for the purpose of fixing
interest rates on all or a portion of variable rate debt, establishing caps
or
maximum effective interest rates, or otherwise constraining interest expenses
to
minimize the variability of these effects.
The
interest rate swap agreements will be accounted for as cash flow hedges,
whereby
“effective” hedge gains or losses are initially recorded in other comprehensive
income and later reclassified to the interest expense component of earnings
coincidently with the earnings impact of the interest expenses being hedged.
“Ineffective” hedge results are immediately recorded in earnings also under
interest expense. No component of hedge results will be excluded from the
assessment of hedge effectiveness. The amount expected to be reclassified
from
OCI to earnings during the 12 months ending July 31 2007 from these two swaps
was determined to be immaterial.
We
are
exposed to credit losses in the event of non-performance by counterparties
to
these interest rate swap agreements, but we do not expect any of the
counterparties to fail to meet their obligations. To manage credit risks,
we
select counterparties based on credit ratings, limits our exposure to a single
counterparty under defined guidelines, and monitor the market position with
each
counterparty as required by SFAS 133.
OUR
BUSINESS
We,
directly or indirectly, own concessions located in the State of Sonora, Mexico
and rights to property located in the California Mining District, Lake County,
Colorado. We are engaged in the business of exploring for gold and other
minerals on our Mexican concessions. We have written off our Colorado
properties.
Sonora,
Mexico
El
Chanate
Through
our wholly-owned subsidiary, Oro de Altar S. de R. L. de C.V. (“Oro”), and our
affiliate, Minera Santa Rita S. de R.L. de C.V. (“MSR”), we own 100% of the
following 16 mining concessions, all of which are located in the Municipality
of
Altar, State of Sonora Republic of Mexico.
The
16
mining concessions are as follows:
Concession
Name
|
|
Title
No.
|
|
Hectares
|
|
1 San
Jose
|
|
|
200718
|
|
|
96.0000
|
|
2 Las
Dos Virgen
|
|
|
214874
|
|
|
132.2350
|
|
3
Rono I
|
|
|
206408
|
|
|
82.1902
|
|
4
Rono 3
|
|
|
214224
|
|
|
197.2180
|
|
5
La Cuchilla
|
|
|
211987
|
|
|
143.3481
|
|
6
Elsa
|
|
|
212004
|
|
|
2,035.3997
|
|
7
Elisa
|
|
|
214223
|
|
|
78.4717
|
|
8
Ena
|
|
|
217495
|
|
|
190.0000
|
|
9
Eva
|
|
|
212395
|
|
|
416.8963
|
|
10
Mirsa
|
|
|
212082
|
|
|
20.5518
|
|
11
Olga
|
|
|
212081
|
|
|
60.5890
|
|
12
Edna
|
|
|
212355
|
|
|
24.0431
|
|
13
La Tira
|
|
|
219624
|
|
|
1.7975
|
|
14
La Tira 1
|
|
|
219623
|
|
|
18.6087
|
|
15
Los Tres
|
|
|
223634
|
|
|
8.000
|
|
16
El Charro
|
|
|
206,404
|
|
|
40.0000
|
|
Total
|
|
|
|
|
|
3,543.3491
|
|
At
the El
Chanate Project, our current planned mining activities, will involve mining
on
two concessions, San Jose and Las Dos Virgens. We will utilize four other
concessions for processing mined ores. In the future, provided we have adequate
funding, we plan to explore some or all of these concessions to determine
whether or not further activity is warranted.
Surface
Property Ownership
Anglo
Gold purchased surface property ownership, consisting of 466 Hectares in
Altar,
Sonora, on January 27, 1998. The ownership was conveyed to our subsidiary,
Oro
de Altar S.A. de C.V., in 2002. MSR, one of our wholly-owned Mexican affiliates,
has a lease on the property for the purpose of mining the Chanate gold deposit.
The purchase transaction was recorded as public deed 19,591 granted by Mr.
Jose
Maria Morera Gonzalez, Notary Public 102 of the Federal District, registered
at
the Public Registry of Property of Caborca, Sonora, under number 36026, book
one, volume 169 of the real estate registry section on May 7, 1998.
General
Information and Location
The
El
Chanate Project is located in the State of Sonora, Mexico, 37 kilometers
northeast of the town of Caborca. It is accessible by paved and all weather
dirt
roads typically traveled by pickup trucks and similar vehicles. Driving time
from Caborca is approximately 40 minutes. Access from Caborca to the village
of
16 de September is over well maintained National highways. Beyond the 16
de
September village, routes to the property are currently over well traveled
gravel and sandy desert roads suitable for lightweight vehicles. We acquired
rights for a service road to allow immediate access for mine construction
activities. This service road access was acquired from the village of 16
de
September, and construction of this road is now complete. In addition to
this
service road, we had negotiated long term access that does not pass through
the
village of 16 de September. However, an issue arose with regard to whether
the
land owner from whom we negotiated this right had adequate title to this
land.
We continue to rely on the existing access through the village of 16 de
September.
The
project is situated on the Sonora desert in a hot and windy climate, generally
devoid of vegetation with the exception of cactus. The terrain is generally
flat
with immense, shallow basins, scattered rock outcropping and low rocky hills
and
ridges. The desert floor is covered by shallow, fine sediment, gravel and
caliche. The main body of the known surface gold covers and irregularly shaped
area of approximately 1,800 feet long by 900 feet wide. Several satellite
mineral anomalies exist on surfaces which have not been thoroughly explored.
Assays on chip samples taken from trenches at these locations by us indicate
the presence of gold mineralization.
The
general El Chanate mine area has been mined for gold since the early
19th
century.
A number of old underground workings exist characterized by narrow shafts,
to a
depth of several tens of feet and connecting drifts and cross cuts. No
information exists regarding the amount of gold taken out; however, indications
are that mining was conducted on a small scale.
Geology
The
project area is underlain by sedimentary rocks of the Late Jurassic - Early
Cretaceous Bisbee Group, and the Late Cretaceous Chanate Group, which locally
are overlain by andesites of the Cretaceous El Charro volcanic complex. The
sedimentary strata are locally intruded by andesitic sills and dikes, a
microporphyritic latite and by a diorite stock. The sedimentary strata are
comprised of mudstone, siltstone, sandstone, conglomerate, shale and limestone.
Within the drilled resource area, a predecessor exploration company
differentiated two units on the basis of their position relative to the Chanate
fault. The upper member is an undifferentiated sequence of sandstone,
conglomerate and lesser mudstone that lies above the Chanate fault and it
is
assigned to the Escalante Formation of the Middle Cretaceous Chanate Group.
The
lower member is comprised of mudstone with mixed in sandstone lenses and
thin
limestone interbreds; it lies below the Chanate fault and is assigned to
the
Arroyo Sasabe Formation of the Lower Cretaceous Bisbee Group. The Arroyo
Sasabe
formation overlies the Morita Formation of the Bisbee Group. Both the Escalante
and Arroyo Sasabe formations are significantly mineralized proximal to the
Chanate fault, while the Morita Formation is barren.
The
main
structural feature of the project area is the Chanate fault, a 7 km long
(minimum) northwest-striking, variably southwest-dipping structure that has
been
interpreted to be a thrust fault. The Chanate fault is overturned
(north-dipping) at surface, and is marked by brittle deformation and shearing
which has created a pronounced fracture foliation and fissility in the host
rocks. In drill holes the fault is often marked the presence of an andesite
dike. Reports prepared by a predecessor exploration company describe the
fault
as consisting of a series of thrust ramps and flats; however, geologic cross
sections which we have reviewed but did not prepare may negate this
interpretation.
Alteration/Mineralization
A
predecessor exploration company has defined a 600 meter long, 300 meter wide,
120 meter thick zone of alteration that is centered about the Chanate fault.
The
strata within this zone have been silicified and pyritized to varying degrees.
In surface outcrop the mineralized zone is distinguished by its bleached
appearance relative to unmineralized rock. The mineralized zone contains
only
single digit ppm (parts per million) levels of gold. Dense swarms of veinlets
form thick, mineralized lenses, within a larger area of sub-economic but
anomalous gold concentrations. Drill hole data indicates that the mineralized
lenses are sub-horizontal to gently southwest-dipping and are grossly parallel
to the Chanate fault. The fault zone itself is also weakly mineralized, although
strata in the near hanging wall and footwall are appreciably mineralized.
Work
to Date
The
El
Chanate property has been the site of small scale mining of high grade quartz
veins (La Cuchilla mine) during the last century. Modern exploration includes
work by Phelps Dodge in the 1980’s as part of a copper exploration program.
Kennecott conducted geologic mapping and geochemical sampling in 1991 and
dropped the property. A Mexican subsidiary of AngloGold explored the property
intermittently between 1992 and 1997, and has conducted extensive surface
geologic mapping, geochemical sampling, geophysical studies and drilling,
including 11,000 meters of trenching, over 14 line-kilometers of induced
polarization geophysical surveys, 61 line-kilometers of VLF-magnetometer
geophysical surveys, 87 line-kilometers of enzyme leach geochemical surveys
and
34,000 meters of R.C. drilling in 190 holes and 1080 meters of diamond drilling
in 9 holes. That company also commissioned various consultant studies concerning
petrography, fluid inclusions, air photo interpretation and structural analyses,
and conducted some metallurgical test work.
In
April
and May 2002, to confirm previous results obtained by third parties and to
provide specifically located metallurgical test samples, we drilled six diamond
core holes totaling 1,508 feet into the main mineralized zone at El Chanate.
Management believes that the diamond drill results generally confirmed the
previous results and,
in
June 2002 and January 2003, we drilled an additional 45 reverse circulation
holes totaling 9,410 feet. This reverse circulation drill program confirmed
previous results and also expanded certain mineralized areas. In May 2004,
three
core holes were drilled for a total of 2,155 feet. The total number of holes
is
now 256. Of these, 235 are reverse circulation drill holes and 21 are diamond
drill holes. Detailed check assays were obtained both for core samples and
for
reverse drill samples that initially assayed greater than 0.3 gm/tonne. Chemex
Labs, Vancouver, Canada, preformed both the initial and the check assays,
and
the check assays supported the initial assay results.
In
August
2002, we retained SRK Consulting (a global engineering company) Denver,
Colorado, to conduct a scoping engineering study for the El Chanate Project.
This study was completed in October 2002 and concluded that the El Chanate
Project deserved additional work and that the property contained important
gold
mineralization. The base case for this study assumed a gold price of
$320.
Following
SRK’s positive conclusion, in February 2003, we retained M3 Engineering of
Tucson, Arizona to begin work on a feasibility study. M3 completed the study
in
August 2003. Based on 253 drill holes and more than 22,000 gold assays, this
study (the “2003 Study”) provided details for an open pit gold mine. The 2003
Study indicated that at a gold price of $325, the initial open pit project
contains proven and probable reserves of 358,000 ounces of gold contained
within
13.5 million metric tonnes of ore with an average grade of 0.827 grams/tonne.
It
estimated that the mine could recover approximately 48,000 - 50,000 ounces
of
gold per year or 248,854 ounces over a five year mine life.
In
October 2005, M3 completed an update of the 2003 Study (The “2005 Study”). The
2005 Study includes the following changes from the 2003 Study:
· |
an
increase in the mine life from five to six
years,
|
· |
an
increase in the base gold price from $325/oz to
$375/oz,
|
· |
use
of a mining contractor,
|
· |
revised
mining, processing and support costs,
|
· |
stockpiling
of low grade material for possible processing in year six, if justified
by
gold prices at that time,
|
· |
a
reduced size for the waste rock dump and revised design of reclamation
waste dump slopes,
|
· |
a
revised process of equipment selection
and
|
· |
evaluation
of the newly acquired water well for processing the
ore.
|
In
view
of a significant rise in the gold price, in June 2006, we commissioned SRK
Consulting, Denver, Colorado, to prepare an updated Canadian Securities
Administration National Instrument 43-101 compliant technical report on our
El
Chanate Project. SRK completed this technical report in August 2006 (the
“2006
Update”). The 2006 Update provided the following updated information from the
2005 Study:
· |
a
33% increase in proven and probable gold
reserves,
|
· |
an
increase in mine life from six to seven
years,
|
· |
an
increase in the base gold price from $375/oz to $450/oz
and
|
· |
Stockpiling
of low grade material for possible processing in year seven, if justified
by gold prices at that time.
|
Pursuant
to the 2005 Study, as updated by the 2006 Update using a $450 per ounce gold
price, our estimated mine life is now seven years as opposed to five years
and
the ore reserve is 490,000 ounces of gold present in the ground (up 122,000
ounces or 33%). Of this, we anticipate recovering approximately 332,000 ounces
of gold (up 74,000 ounces or 29%) over a seven year life of the mine. The
targeted cash cost (which include mining, processing and on-property general
and
administrative expenses) per the 2005 Study is $259 per ounce (up $29 per
ounce). The 2005 Study contains the same mining rate as the 2003 Study of
7,500
metric tonnes per day of ore. It should be noted that, during the preliminary
engineering phase of the project it was decided to design the crushing screening
and ore stacking system with the capability of processing 10,000 tonnes per
day
of ore. This will make allowances for any possible increase in production
and
for operational flexibility. It was found that the major components in the
feasibility study would be capable of handling the increase in tonnage. Design
changes were made where necessary to accommodate the increased tonnage. The
2005
Study takes into consideration a more modern crushing system than the one
contemplated in the 2003 Study. The crushing system referred to in the 2005
Study is a new system, that, we believe will be faster to install and provide
more efficient processing capabilities than the used equipment referred to
in
the 2003 Study. In March 2006, we made a $250,000 down payment to a US Supplier
to acquire a portion of a new crushing system. In October 2006, we paid an
additional $230,000 towards this equipment and we now have purchase orders
for
all of the new crushing system.
In
addition, the 2005 Study assumes a contractor will mine the ore and haul
it to
the crushers. In the 2003 Study, we planned to perform these functions. As
discussed below, we have retained a mining contractor.
The
2005
Study assumes a mining production rate of 2.6 million tonnes of ore per year
or
7,500 tonnes per day. The processing plant will operate 365 days per year.
The
processing plan for this open pit heap leach gold project calls for crushing
the
ore to 100% minus 3/8 inch. Carbon columns will be used to recover the
gold.
The
following Summary is extracted from the 2005 Study, as updated by the 2006
Update. Please note that the reserves as stated are an estimate of what can
be
economically and legally recovered from the mine and, as such, incorporate
losses for dilution and mining recovery. The 489,952 ounces of contained
gold
represents ounces of gold contained in ore in the ground, and therefore does
not
reflect losses in the recovery process. Total gold produced is estimated
to be
approximately 339,047 ounces, or approximately 69% of the contained gold.
The
gold recovery rate is expected to average approximately 69% for the entire
ore
body. Individual portions of the ore body may experience varying recovery
rates
ranging from about 73% to 48%. Oxidized and sandstone ore types may have
recoveries of about 73%; fault zone ore type recoveries may be about 64%;
and
siltstone ore types recoveries may be about 48%.
El
Chanate Project
Production
Summary
|
Metric
|
U.S.
|
Materials
Reserves
Other
Mineralized Materials
Waste
Total
Contained
Gold
Production
Ore
Crushed
Operating
Days/Year
Gold
Plant Average Recovery
Average
Annual Production
Total
Gold Produced
|
19.9
Tonnes @ 0.767 g/t*
0
Million Tonnes
19.9
Million Tonnes
39.8
Million Tonnes
15.24
Million grams
2.6
Million Tonnes /Year
7,500
Mt/d*
365
Days per year
69.2
%
1.38
Million grams
10.55
Million grams
|
21.9
Million Tons @ 0.022 opt*
0
Million Tons
21.9
Million Tons
43.8
Million tons
489,952
Oz
2.86
Million Tons/Year
8,250
t/d
365
Days per year
69.2
%
44,395
Oz
339,047
Oz
|
*
“g/t”
means grams per metric tonne , “Mt/d means metric tonnes per day and “opt” means
ounces per ton.
Pursuant
to the 2005 Study, as updated by the 2006 Update, based on the current
reserve
calculations, the mine life is estimated to be approximately seven years,
and at
least another year will likely be required to perform required reclamation.
The
2005 Study forecasts initial capital costs of $17.9 million, which includes
$1.7
million of working capital. Annual production is planned at approximately
44,000
to 48,000 ounces per year at an average operating cash cost of $259 per
ounce.
We believe that cash costs may decrease as the production rate increases.
Total
costs (which include cash costs as well as off-property costs such as property
taxes, royalties, refining, transportation and insurance costs and exclude
financing costs) will vary depending upon the price of gold (due to the
nature
of underlying payment obligations to the original owner of the property).
Total
costs are estimated in the 2005 Study to be $339 per ounce at a gold price
of
$417 per ounce (the three year average gold price as of the date of the
study).
We will be working on measures to attempt to reduce costs going forward.
Ore
reserves and production rates are based on a gold price of $375 per ounce,
which
is the Base Case in the 2005 Study. During 2005, the spot price for gold
on the
London Exchange has fluctuated between $411.10 and $537.50 per ounce. Between
January 1, 2006 and December 1, 2006, the spot price for gold on the London
Exchange has fluctuated between $524.75 and $725.00 per ounce.
Management
believes that the capital costs to establish a surface, heap leach mining
operation at El Chanate will be between $17.5 and $18.5 million. For more
information on the capital costs and our funding activities, please see
“Management's
Discussion and Analysis of Financial Condition and Results of Operations;
Liquidity and Capital Resources; Plan of Operations.”
Management
believes the El Chanate Project will benefit substantially from rising
gold
prices, which as of December 1, 2006 was around $645 per ounce. Mineralized
material previously below operating cut-off gold grades could possibly
become
economic if future engineering studies support lowering the cutoff grade
due to
gold prices substantially above the $450 per ounce used in the 2006 Update
to
define the proven and probable reserves mentioned above. We are currently
looking at processing techniques that may be capable of supporting higher
production rates that may be justified due to rising gold prices. However,
the
new crushing system will likely have to be modified to handle the additional
tonnage required for expanding our production. The crushing system for
which we
received purchase orders, with certain modifications, is expected to have
a
capacity beyond the 7,500 metric tons per day that are initially planned.
In
February 2005, Metcon Research Inc. of Tucson, Arizona completed gold recovery
studies on existing samples at fine grind sizes of 100 mesh, 150 mesh and
200
mesh. These studies were undertaken to determine whether extraction by
fine
grinding is economical given the increased price of gold. Generally, fine
grinding, while more expensive, will achieve higher gold recoveries than
the
heap leach method recommended in the feasibility study. Metcon found that
increasing amounts of gold were recovered at finer grind sizes. However
in May
2004, M3, who conducted the feasibility study, reported that at El Chanate,
heap
leaching remains the most economical and optimal method of extracting gold
at
current prices.
In
May
2004, three core holes were drilled at El Chanate to define gold grades,
to
obtain metallurgical samples from siltstone hosted ores, and to evaluate
previous deep drilling results by Anglo Gold in the Los Dos Virgens Zone.
Two of
the core holes tested and confirmed the presence of gold in the deep Los
Dos
Virgens Zone that lies below the level of the planned open pit. This zone
was
previously identified by Anglo Gold’s reverse circulation drilling and, with
increasing gold prices, we are analyzing with core drilling the conditions
that
might allow an enlarged open pit to include ores from the Los Dos Virgens
zone.
The third core hole was drilled in the main high grade part of the deposit
to
obtain ore samples for metallurgical column testing from siltstone host
rocks.
The
latest metallurgical column test studies were completed in February 2005
at
Metcon’s laboratory in Tucson Arizona to determine the optimal conditions at El
Chanate for recovering gold from within siltstone host rocks using heap
leach
technology. The siltstone drill core samples were tested at crush sizes
of 100
percent -3/8 inch and 100 percent -1/4 inch, and these column tests showed
recovery rates of 42% and 46% respectively. With rising gold prices, management
believes the ore reserves may increase beyond the level currently published
in
the 2006 Update. Although we are optimistic about the results, there can
be no
assurance that improved gold recoveries alone will result in an increase
in
reserves.
In
January 2004, we received permits from the Mexican Department of Environmental
Affairs and Natural Resources necessary to begin construction of the El
Chanate
Project. The permits were extended in June 2005. Pursuant to the extensions,
once we file a notice that work has commenced, we have one year to prepare
the
site and construct the mine and seven years to mine and process ores from
the
site. We filed the notice on June 1, 2006. These permits also cover the
operation of a heap-leach gold recovery system.
In
2005,
we acquired 15 year rights of way for the current access road, and we acquired
the right to purchase 81 hectares of land near the main highway. We have
use of
the land; however, our actual purchase of the land is conditioned upon
the Ejido
(local cooperative) privatizing the land, before the acquisition is finalized.
We subsequently purchased an extension of our rights-of-way from 15 to
30 years.
We have completed an access road on this land that will provide access
for water
and power lines. In addition to this road, we acquired a water concession,
and
our water well is located within a large regional aquifer. The 2005 feasibility
study indicates our average life of mine water requirements, for ore processing
only, will be about 94.6 million gallons per year (11.4 liters per second).
The
amount of water we are currently permitted to pump for our operations is
approximately 71.3 million gallons per year (8.6 liters per second). Our
currently permitted water rights may not be adequate for all of our total
project needs over the entire course of our anticipated mining operations.
We
are looking into ways to rectify this issue.
In
December 2005, MSR
entered
into a Mining Contract with a Mexican mining contractor, Sinergia Obras
Civiles
y Mineras, S.A. de C.V. (“Contractor”) The Mining Contract becomes effective if
and when MSR sends the Contractor a formal Notice of Award. Pursuant to
the
Mining Contract, the contractor had the right to terminate the contract
or
modify its initial mining rates if it did not receive the formal Notice
by June
1, 2006. MSR
would
not be obligated to proceed with the Mining Contract if those modified
rates are
unacceptable to it. In
August
2006, the Mining Contract was amended to extend MSR’s right to deliver the
Notice to November 1, 2006 and, provided that the Notice specifies a date
of commencement of the Work (as defined in the contract) not later than
February 1, 2007, the mining rates set forth in the Mining Contract will
still apply; subject to adjustment for the rate of inflation between
September 23, 2005 and the date of commencement of the Work. As
consideration for these changes, we paid the Contractor $200,000 of the
requisite advance payment discussed below. On November 1, 2006, MSR delivered
the Notice of Award specifying January 25, 2007 as the date of commencement
of
Work.
Pursuant
to the Mining Contract, the Contractor, using its own equipment, will generally
perform all of the mining work (other than crushing) at the El Chanate
Project
for the life of the mine. Subsequent to delivery of the Notice to Proceed
and
prior to the commencement of any work by the Contractor, MSR must pay the
Contractor a mobilization payment of $70,000, and must also make an advance
payment of $520,000 to the Contractor (all of which has already been advanced).
The advance payments are recoverable by MSR out of 100% of subsequent payments
due to the Contractor under the Mining Contract. Pursuant to the Mining
Contract, upon termination, the Contractor would be obligated to repay
any
portion of the advance payment that had not yet been recouped. The Contractor’s
mining rates are subject to escalation on an annual basis. This escalation
is
tied to the percentage escalation in the Contractor’s costs for various parts
for its equipment, interest rates and labor. One of the principals of the
Contractor is one of the former principals of Grupo Minero FG S.A. de C.V.
(“FG”). FG was our former joint venture partner.
In
June
2006, MSR retained the contracting services of a Mexican subsidiary of
M3
Engineering & Technology Corporation (“M3M”) to provide EPCM (engineering
procurement construction management) services. M3M will supervise the
construction and integration of the various components necessary to commence
production at the El Chanate Project. The contracted services shall not
exceed
$1,200,000 and the contract is based on the EPCM services to be provided
by M3M.
As of December 1, 2006, approximately $467,000 has been incurred pursuant
to the
contract.
In
March
2006, we paid $250,000 as a down payment for a portion of a new crushing
system
capable of producing 7,500 metric tons per day of ore. The total cost for
all of
the crushing equipment (inclusive of site preparation and installation)
will be
approximately $4,000,000. In October 2006, we paid an additional $230,000
towards this equipment and we now have purchase orders for all of the new
crushing system. As of the date of this report, we have issued purchase
orders
for all of the crushing equipment. We also retained Golder Associates,
- a
geotechnical engineering firm, for the detailed engineering of the leach
pads
and ponds. The engineering was completed in August 2006 and construction
of the
leach pads began in September 2006.
Our
Current Plans for the El Chanate Project
Construction
of the access road is complete and equipment can be moved to the property.
Some
road up grading will likely be required before very large equipment is
moved to
a final location. A crushing and conveying system has been selected and
ordered.
We
have
initiated construction on the crushing, heap leaching, carbon handling
and
refining portions of the project. Also included in the construction phase
will
be installation of power and water lines. These construction phase activities
will require some additional detailed engineering, but major parts of the
project are turnkey and already have existing detailed engineering drawings.
Some buildings for an office, chemical laboratory, warehouse and truck
shops
also will be built as part of the construction phase. Please see “Management's
Discussion and Analysis of Financial Condition and Results of Operations;
Liquidity and Capital Resources; Plan of Operations”
for the
anticipated costs of our activities over the next 12 months.
Our
acquisition and ownership of the El Chanate Project
In
June
2001, we purchased 100% of the issued and outstanding stock of Minera Chanate,
S.A. de C.V. from AngloGold North America Inc. and AngloGold (Jerritt Canyon)
Corp. Minera Chanate’s assets at the time of the closing of the purchase
consisted of 106 exploitation and exploration concessions in the States
of
Sonora, Chihuahua and Guerrero, Mexico. By June of 2002, after property
reviews
and to minimize tax payments, the 106 had been reduced to 12 concessions.
To
cover certain non-critical gaps between concessions, three new concessions
were
located, and the number of concessions is now 16. These concessions are
contiguous, totaling approximately 3,544 hectares (8,756 acres or 13.7
square
miles). We sometimes refer to these concessions as the El Chanate concessions.
Although there are 16 concessions, we only plan to mine two of these concessions
at the present time. We sometimes refer to the planned operations on these
two
concessions as the El Chanate Project We also own outright 466 hectares
(1,151
acres or 1.8 square miles) of surface rights at El Chanate and no third
party
ownership or leases exist on this fee land or the El Chanate concessions.
In the
future, assuming adequate funding is available, we plan on conducting
exploration activities on some of the other concessions.
Pursuant
to the terms of the agreement with Anglo Gold, in December 2001, we made
a
$50,000 payment to AngloGold. AngloGold will be entitled to receive the
remainder of the purchase price by way of an ongoing percentage of net
smelter
returns of between 2% and 4% plus a 10% net profits interest (until the
total
net profits interest payment received by AngloGold equals $1,000,000).
AngloGold's right to a payment of a percentage of net smelter returns and
the
net profits interest will terminate at such point as they aggregate $18,018,355.
In accordance with the agreement, the foregoing payments are not to be
construed
as royalty payments. Should the Mexican government or other jurisdiction
determine that such payments are royalties, we could be subjected to and
would
be responsible for any withholding taxes assessed on such payments.
Under
the
terms of the agreement, we have granted AngloGold the right to designate
one of
its wholly-owned Mexican subsidiaries to receive a one-time option to purchase
51% of Minera Chanate (or such entity that owns the El Chanate concessions
at
the time of option exercise). That option is exercisable over a 180 day
period
commencing at such time as we notify AngloGold that we have made a good
faith
determination that we have gold-bearing ore deposits on any one of the
identified groups of El Chanate concessions, when aggregated with any ore
that
we have mined, produced and sold from such concessions, of in excess of
2,000,000 troy ounces of contained gold. The exercise price would equal
twice
our project costs on the properties during the period commencing on December
15,
2000 and ending on the date of such notice. Based on current information
available to us, we do not believe a deposit of the size that would trigger
these back-in rights is likely to be identified at El Chanate.
In
February 2002, MSR, one of our wholly-owned Mexican affiliates, now the
leasee
of the El Chanate concessions, as discussed below, entered into a joint
venture
agreement with Grupo Minero FG S.A. de C.V. to explore, evaluate and develop
the
El Chanate concessions. Grupo Minero FG S.A. de C.V., referred to as FG,
is a
private Mexican company that owns and operates the La Colorada open-pit
gold
mine outside of Hermosillo in Sonora, Mexico.
Effective
March 31, 2004, the joint venture agreement with FG was terminated. In
consideration of FG’s contributions to the venture of $457,455, we issued to FG
2,000,000 restricted shares of our Common Stock valued at $800,000 and
MSR
issued to FG a participation certificate entitling FG to receive five percent
of
the MSR’s annual dividends, when declared. The participation certificate also
gives FG the right to participate, but not to vote, in the meetings of
MSR’s
Board of Managers, Technical Committee and Partners. We recognized a loss
of
$150,382 on the write off of the joint venture minority interest. In September
2006, we repurchased the participation certificate from FG for $500,000
with FG
retaining a 1% net profits interest in MSR, payable only after a total
$20
million in net profits has been generated from operations at El Chanate.
MSR
also received a right of first refusal to carry out the works and render
construction services required to effectuate the El Chanate Project. This
right
of first refusal is not applicable where a funding source for the project
determines that others should render such works or services.
FG
has
assigned or otherwise transferred to MSR all permits, licenses, consents
and
authorizations (collectively, “authorizations”) for which FG had obtained in its
name in connection with the development of the El Chanate Project to the
extent
that the authorizations are assignable. To the extent that the authorizations
are not assignable or otherwise transferable, FG has given its consent
for the
authorizations to be cancelled so that they can be re-issued or re-granted
in
MSR’s name. The foregoing has been completed.
During
March 2002, prior to the sale of Minera Chanate and pursuant to the FG
joint
venture agreement, Minera Chanate, in a series of transactions, sold all
of its
surface land and mining claims to Oro de Altar S. de R. L. de C.V. ("Oro"),
another of our wholly-owned subsidiaries. Oro, in turn, leased the foregoing
land and mining claims to Minera Santa Rita.
Leadville,
Colorado Properties
We
own or
lease a number of claims and properties, all of which are located in California
Mining District, Lake County, Colorado, Township 9 South, Range 79. During
the
quarter ended April 30, 2006, activity at our Leadville, Colorado properties
consisted primarily of mine maintenance. Primarily as a result of our focus
on
El Chanate, we ceased activities in Leadville, Colorado. During the year
ended
July 31, 2002, we performed a review of our Leadville mine and mill improvements
and determined that an impairment loss should be realized. Therefore, we
significantly reduced the carrying value of certain assets relating to
our
Leadville, Colorado assets by $999,445. During the year ending July 31,
2004, we
again performed a review of our Colorado mine and mill improvements and
determined that an additional impairment loss should be recognized. Accordingly,
we further reduced the net carrying value to $0, recognizing an additional
loss
of $300,000.
Competition
The
acquisition of gold properties and their exploration and development are
subject
to intense competition. Companies with greater financial resources, larger
staffs, more experience and more equipment for exploration and development
may
be in a better position than us to compete for such mineral properties.
Our lack
of revenues and limited financial resources further hinder our ability
to
acquire additional mineral properties.
Human
Resources
As
of
December 1, 2006, we had 18 full time employees and/or consultants, including
our current officers and administrative personnel in the US and, in Mexico,
a
General Project Manager, an Administration Manager and an Environmental
Manager.
In addition, our chief financial officer devotes approximately 50% of his
time
to us.
Facilities
Our
executive office is located at 76 Beaver Street, 26th
Floor,
New York, New York 10005. Telephone Number 212-344-2785. We lease the offices
from an unaffiliated party. The lease expires on August 31, 2007. Annual
rent
for the lease year ended August 31, 2006 was approximately $51,000 plus
utilities and other occupancy expenses.
We
also
maintain an office at 418 Harrison Avenue, Suite 2, Leadville, CO 80461
pursuant
to an oral month-to-month arrangement. The office is approximately 400
square
feet and rent is $365 per month.
Legal
Proceedings
We
are
not presently a party to any material litigation.
MANAGEMENT
The
following sets forth biographical information about each of our directors
and
executive officers as of the date of this prospectus:
Name
|
Age
|
Position
|
|
|
|
Gifford
A. Dieterle
|
74
|
President,
Treasurer & Chairman of the Board
|
Christopher
Chipman
|
33
|
Chief
Financial Officer
|
Robert
Roningen
|
71
|
Director,
Senior Vice President and Secretary
|
Jack
V. Everett
|
85
|
Director,
Vice President - Exploration
|
Roger
A. Newell
|
63
|
Director,
Vice President - Development
|
Jeffrey
W. Pritchard
|
48
|
Director,
Vice President - Investor Relations
|
John
Brownlie
|
57
|
Vice
President - Operations
|
J.
Scott Hazlitt
|
54
|
Vice
President - Mine Development
|
Ian
A. Shaw
|
66
|
Director
|
John
Postle
|
65
|
Director
|
Mark
T. Nesbitt
|
61
|
Director
|
Directors
are elected at the meeting of stockholders called for that purpose and
hold
office until the next stockholders meeting called for that purpose or until
their resignation or death. Officers of the corporation are elected by
the
directors at meetings called by the directors for its purpose.
GIFFORD
A. DIETERLE, President, Treasurer and Chairman of our Board of Directors.
Mr.
Dieterle was appointed President in September 1997 and has been an officer
and
Chairman since 1981. He was our Chief Financial Officer from 1981 to March
1,
2006. He has a M.S. in Geology obtained from New York University. From
1977
until July 1993, he was Chairman, Treasurer, and Executive Vice-President
of
Franklin Consolidated Mining Company. From 1965 to 1987, he was lecturer
in
geology at the City University of N.Y. (Hunter Division). Mr. Dieterle
has been
Secretary-Treasurer of South American Minerals Inc. since 1997 and a director
of
that company since 1996.
CHRISTOPHER
M. CHIPMAN, Chief Financial Officer. Mr. Chipman has been our Chief Financial
Officer since March 1, 2006. Since November 2000, Mr. Chipman has been
a
managing member of Chipman & Chipman, LLC, a consulting firm that assists
public companies with the preparation of periodic reports required to be
filed
with the Securities and Exchange Commission and compliance with Section
404 of
the Sarbanes Oxley Act of 2002. The firm also provides outsourced financial
resources to clients assisting in financial reporting, forecasting and
accounting services. Mr. Chipman is a CPA and, from 1996 to 1998, he was
a
senior accountant with the accounting firm of Grant Thornton LLP. Mr. Chipman
was the Controller of Frontline Solutions, Inc., a software company (March
2000
to November 2000); a Senior Financial Analyst for GlaxoSmithKline (1998-2000);
and an Audit Examiner for Wachovia Corporation (1994-1996). He received
a B.A.
in Economics from Ursinus College in 1994. He is a member of the American
and
Pennsylvania Institute of Certified Public Accountants. Mr. Chipman devotes
approximately 50% of his time to our business.
ROBERT
RONINGEN, Senior Vice President, Secretary and Director, has been engaged
in the
practice of law as a sole practitioner and is a self-employed consultant
geophysicist in Duluth, Minnesota. From 1988 to August 1993, he was an
officer
and director of Franklin Consolidated Mining Company, Inc. He graduated
from the
University of Minnesota in 1957 with a B.A. in geology and in 1962 with
a degree
in Law.
JACK
V.
EVERETT, Vice President - Exploration and Director since 1995. He has been
a
consulting mining geologist since 1971, with expertise in all phases of
exploration for base and precious metals. Following his 1947 graduation
from
Michigan State University, he was District Geologist for Pickands Mather
&
Company on the Cuyuna Iron Range, Minnesota. From 1951 to 1970, he was
Chief
Geologist and Exploration Manager for W.S. Moore Company, Duluth, Minnesota
an
iron mining company with gold and base metal sulfide holdings in the U.S.
and
Canada.
ROGER
A.
NEWELL, Vice President - Development and Director, has been in the mining
industry for over 30 years. From 1974 through 1977, he was a geologist
with
Kennecott Copper Corporation. From 1977 through 1989, he served as Exploration
Manager/Senior Geologist for the Newmont Mining Corporation and, from 1989
through 1995, was the Exploration Manager for Gold Fields Mining Company.
He was
Vice President Development, for Western Exploration Company from 1997 through
2000. Since 1995, he has been a senior consultant in the Minerals Advisory
Group
LLC, Tucson, Arizona, a company that provides technical and engineering
advice
to clients regarding mineral projects. He has been self-employed as a geologist
since 2001. He has a M.Sc. from the Colorado School of Mines and a Ph.D.
in
mining and mineral exploration from Stanford University.
JOHN
BROWNLIE, Vice
President - Operations, has worked for us since May 2006 and is in charge
of
supervising the construction, start-up and operation of the mine. Mr. Brownlie
provided team management for mining projects requiring technical,
administrative, political and cultural experience over his 28 year mining
career. From 2000 to 2006, Mr. Brownlie was a consultant providing mining
and
mineral related services to various companies including SRK, Oxus Mining
plc and
Cemco Inc. From 1995 to 2000, he was the General Manager for the
Zarafshan-Newmont Joint Venture in Uzbekistan, a one-million tonne per
month
heap leach plant which produced over 400,000 ounces of gold per year. From
1988
to 1995, Mr. Brownlie served as the Chief Engineer and General Manager
for
Monarch Resources in Venezuela, at both the El Callao Revemin Mill and
La
Camorra gold projects. Before that, was a resident of South Africa and
associated with numerous mineral projects across Africa. He is also a mechanical
engineer and fluent in Spanish.
JEFFREY
W. PRITCHARD, Vice President - Investor Relations and Director, has worked
for
us since 1996. He has been in the marketing/public relations field since
receiving a Bachelor’s degree from the State University of New York in 1979.
Jeff has served as the Director of Marketing for the New Jersey Devils
(1987-1990) and as the Director of Sales for the New York Islanders (1985-1987).
He also was an Executive Vice President with Long Island based Performance
Network, a marketing and publishing concern from 1990 through 1995.
J.
SCOTT
HAZLITT, Vice President - Mine Development, has been in the mining business
since 1974. He has worked primarily in mine feasibility, development, and
mine
operations. Mr. Hazlitt was a field geologist for ARCO Syncrude Division
at
their CB oil Shale project in 1974 and 1975. He was a contract geologist
for
Pioneer Uravan and others from 1975 to 1977. He was a mine geologist for
Cotter
Corporation in 1978 and 1979, and was a mine geologist for ASARCO from
1979 to
1984. He served as Vice President of Exploration for Mallon Minerals from
1984
to 1988. From 1988 to 1992, Mr. Hazlitt was a project geologist and Mine
Superintendent for the Lincoln development project. From 1992 to 1995,
he was
self-employed as a consulting mining geologist in California and Nevada.
He was
Mine Operations Chief Geologist for Getchell Gold from 1995 to 1999. His
work
experience has included precious metals, base metals, uranium, and oil
shale.
Mr. Hazlitt has served as mine manager at our Hopemore Mine in Leadville,
Colorado starting in November 1999. Since 2001, he has focused on development
of
our El Chanate concessions. His highest educational degree is Master of
Science
from Colorado State University. He is a registered geologist in the state
of
California.
IAN
A.
SHAW is a member of our Board of Directors and the Board’s Audit Committee. He
has been Managing Director of Shaw & Associates since 1993. Shaw &
Associates is a corporate services consulting firm specializing in corporate
finance, regulatory reporting and compliance with clients that are typically
public companies in the resource industry. Since April 2006, Mr. Shaw has
been
the Chief Financial Officer of Centenario Copper Corporation, a corporation
with
copper properties in Chile. From 2001 to 2003, he was Vice President of
Finance
and Chief Financial Officer of Defiance Mining Corporation (formerly Geomaque
Explorations Inc.), a company operating gold mines in Mexico and Honduras.
Mr.
Shaw has over 30 years of experience in the mining industry during which
time he
was an officer of the following companies: Blackhawk Mining Inc., Curragh
Inc.
and Sherritt Gordon Mines Inc. He currently is a director or officer of
the
following public companies: Metallica Resources Inc., Pelangio Mines Inc.
and
Unor Inc. Mr. Shaw is a Chartered Accountant and received a B. Comm. from
Trinity College at the University of Toronto in 1964.
JOHN
POSTLE is a member of our Board of Directors and the Board’s Audit Committee. He
is Consulting Mining Engineer associated with Roscoe Postle Associates
Inc., an
entity in which he was a founding partner in 1985 and a former principal.
Mr.
Postle provides mining consulting services to a number of international
financial institutions, corporations, utilities and law firms. He worked
for
Cominco Ltd (1965-1970), Falconbridge Ltd (1970-1975) and D.S. Robertson
and
Associates (1976-1985) at a number of open pit and underground operations
in
both operating and planning capacities. Mr. Postle is a Past Chairman of
the
Mineral Economics Committee of the Canadian Institute of Mining, Metallurgy
and
Petroleum (“CIM”), and was appointed a Distinguished Lecturer of the CIM in
1991. In 1997, he was awarded the CIM Robert Elver Mineral Economics Award.
He
is currently Chairman of a CIM Standing Committee on Ore Reserve Definitions.
Mr. Postle has a B.A.Sc. Degree in Mining Engineering from the University
of
British Columbia in 1965 and a M.Sc. Degree in Earth Sciences from Stanford
University in 1968.
MARK
T.
NESBITT is a member of our Board of Directors and the Board’s Audit Committee.
Since 1988, he has been a natural resources attorney in Denver, Colorado
specializing in domestic and international mining transactions, agreements,
negotiations, title due diligence, corporate and general business counsel.
Mr.
Nesbitt has been an Adjunct Professor at the University of Denver School
of
Law's since 2001, is an active member of the Rocky Mountain Mineral Law
Foundation, having served as a Trustee from 1987 to 1993, and from 2003
to the
present, co-chairman of the Foundation's Mining Law and Investment in Latin
America, and Chairman of the same institute in 2003, and Chairman of the
Foundation's first Land and Permitting Special Institute in 1994. He also
has
served continuously over the years on the Foundation's Special Institutes
Committee, Long Range Planning Committee, and numerous other committees.
Mr.
Nesbitt is a member of the International, American, Colorado and Denver
Bar
Associations, Rocky Mountain Mineral Law Foundation, International Mining
Professionals Society (Treasurer since 2000), and the Colorado Mining
Association. He is also a former Director of the Colorado Mining Association
and
past President of the Rocky Mountain Association of Mineral Landmen. He
received
a B.S. degree in Geology from Washington State University in 1968 and a
J.D.
from Gonzaga University School of Law in 1975.
Key
Employee
DAVID
LODER has been the General Manager of our El Chanate Project since March
2005.
Mr. Loder is a registered professional mining engineer with over 30 years
experience in the mining industry, spending the last 15 years managing
open-pit
gold heap leach operations. He has been a General Manager responsible for
the
overall planning and start-up for open-pit gold mining operations in Sonora,
Mexico and elsewhere in Latin America. From 2003 to 2004, he was general
manager
of the Bellavista mine owned by Glencairn Gold in Costa Rica. From 1995
to 2001,
Mr. Loder was general manager of the Santa Gertrudis mine owned by Campbell
Resources in Sonora, Mexico. Mr. Loder is a Registered Professional Engineer
in
the United States and Canada.
Compensation
of Directors
Our
Independent Directors each receive a fee of $1,000 per month. Otherwise,
Directors are not compensated for acting in their capacity as Directors.
Directors are reimbursed for their accountable expenses incurred in attending
meetings and conducting their duties.
EXECUTIVE
COMPENSATION
The
following table shows all the cash compensation paid or to be paid by us
or any
of our subsidiaries, as well as certain other compensation paid or accrued,
during the fiscal years indicated, to our Chief Executive Officer, Gifford
A.
Dieterle, and (ii) the only executive officers other than the CEO who was
serving as an executive officer at the end of the last completed fiscal
year and
whose total annual salary and bonus exceeded $100,000 (collectively, the
“Named
Executives”).
SUMMARY
COMPENSATION TABLE
|
|
|
|
|
|
Long-Term
Compensation
|
|
|
|
Annual
Compensation
|
|
Award
|
|
Payouts
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
Name
and Principal Position
|
|
Year
|
|
Salary
|
|
Bonus
($)
|
|
Other
Annual Compensation ($)
|
|
Restricted
Stock Award ($)
|
|
Options
SARs
|
|
LTIP
Payouts ($)
|
|
All
Other Compensation (i)
|
|
Gifford
A. Dieterle
|
|
|
2006
|
|
|
169,000
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
1,500,000*
|
|
|
-0-
|
|
|
-0-
|
|
Chief
Executive
|
|
|
2005
|
|
|
123,000
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
Officer
|
|
|
2004
|
|
|
104,000
|
|
|
20,000
|
|
|
-0-
|
|
|
-0-
|
|
|
250,000
|
|
|
-0-
|
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J.
Scott Hazlitt
|
|
|
2006
|
|
|
101,000
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
25,000
|
|
|
-0-
|
|
|
-0-
|
|
Vice
President
|
|
|
2005
|
|
|
97,000
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
Mine
Development
|
|
|
2004
|
|
|
96,000
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
|
-0-
|
|
* 250,000
shares issuable upon exercise of options, which options cannot be exercised
unless and until the options have been approved by our stockholders.
The
following table sets forth information with respect to the Named Executives
concerning the grants of options and Stock Appreciation Rights ("SAR")
during
the past fiscal year:
OPTION/SAR
GRANTS IN LAST FISCAL YEAR
Individual
Grants
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
Name
|
|
Options/
SARs Granted
|
|
Percent
of Total Options/SARs Granted to Employee in Fiscal Year
|
|
Exercise
or Base Price ($/SH)
|
|
Expiration
Date
|
Gifford
A. Dieterlie
|
|
1,250,000
|
|
22.4%
|
|
$.
05
|
|
1/3/2007
|
Gifford
A. Dieterlie*
|
|
250,000
|
|
4.5%
|
|
$.
32
|
|
7/31/2008
|
J.
Scott Hazlitt
|
|
25,000
|
|
0.4%
|
|
$.05
|
|
1/3/2007
|
* Shares
issuable upon exercise of options, which options cannot be exercised unless
and
until the options have been approved by our stockholders.
The
following table sets forth information with respect to the Named Executives
concerning exercise of options during the last fiscal year and unexercised
options and SARs held as of the end of the fiscal year:
Aggregated
Option/SAR Exercises and Fiscal Year-End Option/SAR
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
Name
|
|
Shares
Acquired on Exercise (#)
|
|
Number
of Value Realized
|
|
Unexercised
Options/SARs at FY-End(#) Exercisable/ Unexercisable
|
|
Value
of Unexercised In-the-Money Option/SARs at FY-End(#) Exercisable/
Unexercisable
|
|
Gifford
A. Dieterle*
|
|
|
200,000
|
|
|
44,000
|
|
|
1,550,000
|
|
$
|
308,500
|
|
Scott
Hazlitt
|
|
|
300,000
|
|
|
75,000
|
|
|
25,000
|
|
$
|
7,000
|
|
*
Includes 250,000 shares issuable upon exercise of options, which options
cannot
be exercised unless and until the options have been approved by our
stockholders.
Employment
and Change of Control Agreements
Effective
July 31, 2006, we entered into employment agreements with the following
executive officers: Gifford A. Dieterle, our President and Treasurer, Roger
A.
Newell, our Vice President of Development, Jack V. Everett, our Vice President
of Exploration, and Jeffrey W. Pritchard, our Vice President of Investor
Relations. On
December 5, 2005, effective January 1, 2007, we entered into an employment
agreement with J. Scott Hazlitt, our Vice President of Mine
Development.
The
agreements run for a period of three years and automatically renew for
successive one-year periods unless we or the executive provides the other
party
with written notice of our or his intent not to renew at least 30 days
prior to
the expiration of the then current employment period.
Mr.
Dieterle is entitled to a base annual salary of at least $180,000,
Mr. Hazlitt is entitled to a base annual salary of atleast $105,000
and each of the other executives is entitled to a base annual salary
of
at least $120,000. Each executive is entitled to a bonus or salary increase
in
the sole discretion of our board of directors. In addition, Messrs.
Dieterle, Newell, Everett and Pritchard each received two year options to
purchase an aggregate of 250,000 shares of our common stock at an exercise
price
of $0.32 per share (the closing price on July 31, 2006).
We
have
the right to terminate any executive’s employment for cause or on 30 days’ prior
written notice without cause or in the event of the executive’s disability (as
defined in the agreements). The agreements automatically terminate upon
an
executive’s death. “Cause” is defined in the agreements as (1) a failure or
refusal to perform the services required under the agreement; (2) a material
breach by executive of any of the terms of the agreement; or (3) executive’s
conviction of a crime that either results in imprisonment or involves
embezzlement, dishonesty, or activities injurious to us or our reputation.
In
the event that we terminate an executive’s employment without cause or due to
the disability of the executive, the executive will be entitled to a lump
sum
severance payment equal to one month’s salary, in the case of termination for
disability, and up to 12 month’s salary (depending upon years of service), in
the case of termination without cause.
Each
executive has the right to terminate his employment agreement on 60 days’ prior
written notice or, in the event of a material breach by us of any of the
terms
of the agreement, upon 30 days’ prior written notice. In the event of a claim of
material breach by us of the agreement, the executive must specify the
breach
and our failure to either (i) cure or diligently commence to cure the breach
within the 30 day notice period, or (ii) dispute in good faith the existence
of
the material breach. In the event that an agreement terminates due to our
breach, the executive is entitled to severance payments in equal monthly
installments beginning
in the month following the executive’s termination equal to three month’ salary
plus one additional month’s salary for each year of service to us. Severance
payments cannot exceed 12
month’s salary.
In
conjunction with the employment agreements, our board of directors deeming
it
essential to the best interests of our stockholders to foster the continuous
engagement of key management personnel and recognizing that, as is the
case with
many publicly held corporations, a change of control might occur and that
such
possibility, and the uncertainty and questions which it might raise among
management, might result in the departure or distraction of management
personnel
to the detriment of our company and our stockholders, determined to reinforce
and encourage the continued attention and dedication of members of our
management to their engagement without distraction in the face of potentially
disturbing circumstances arising from the possibility of a change in control
of
our company, we entered into identical agreements regarding change in control
with the executives. Each
of
the agreements regarding change in control continues through December 31,
2009
(December
31, 2010 for Mr. Hazlitt) and extends automatically to the third
anniversary thereof unless we give notice to the executive prior to the
date of
such extension that the agreement term will not be extended.
Notwithstanding the foregoing, if a change in control occurs during the
term of
the agreements, the term of the agreements will continue through the second
anniversary of the date on which the change in control occurred. Each of
the
agreements entitles the executive to change of control benefits, as defined
in
the agreements and summarized below, upon his termination of employment
with us
during a potential change in control, as defined in the agreements, or
after a
change in control, as defined in the agreements, when his termination is
caused
(1) by us for any reason other than permanent disability or cause, as defined
in
the agreement (2) by the executive for good reason as defined in the agreements
or, (3) by the executive for any reason during the 30 day period commencing
on
the first date which is six months after the date of the change in control.
Each
executive would receive a lump sum cash payment of three times his base
salary
and outplacement benefits. Each agreement also provides that the executive
is
entitled to a payment to make him whole for any federal excise tax imposed
on
change of control or severance payments received by him.
In
May
2006, we entered into an employment agreement with John Brownlie, pursuant
to
which Mr. Brownlie serves as Vice President Operations. Mr. Brownlie receives
a
base annual salary of $150,000 and is entitled to annual bonuses. Upon
his
employment, he received options to purchase an aggregate of 200,000 shares
of
our common stock at an exercise price of $.32 per share. 50,000 options
vested
immediately and the balance vest upon our achieving “Economic Completion” as
that term will be defined in the loan agreement with Standard Bank plc
(when we
have commenced mining operations and have been operating at anticipated
capacity
for 60 to 90 days). The term of the options is two years from the date
of
vesting. The agreement runs for an initial two year period and automatically
renews thereafter for additional one year periods unless terminated by
either
party within 30 days of a renewal date. We can terminate the agreement
for cause
or upon 30 days notice without cause. Mr. Brownlie can terminate the agreement
upon 60 days notice without cause or, if there is a breach of the agreement
by
us that is not timely cured, upon 30 days notice. In the event that we
terminate
him without cause or he terminates due to our breach, he will be entitled
to
certain severance payments.
Pursuant
to a September 1, 2006 amended consulting agreement, Christopher Chipman
is
engaged as our Chief Financial Officer. Pursuant to the agreement, Mr.
Chipman
devotes approximately 50% of his time to our business. He receives a monthly
fee
of $10,000. The agreement runs for an initial one year period, and is renewable
thereafter for an additional year. Mr. Chipman can terminate the Agreement
on 60
days notice. In conjunction with the amended consulting agreement, we entered
into a change of control agreement similar to the agreements entered into
with
other executive officers; except that Mr. Chipman’s agreement renews annually
and his benefits are based upon one times his base annual fee.
In
connection with the original engagement agreement with Mr. Chipman, in
March
2006, Mr. Chipman received a two year option to purchase an aggregate of
50,000
shares of our common stock at an exercise price of $.34 per share. The
option
vests at the rate of 10,000 shares per month. Notwithstanding the foregoing,
the
options are not exercisable unless and until the issuance of the options
is
approved by our stockholders.
Please
also see “Certain
Relationships and Related Transactions”
below.
PRINCIPAL
STOCKHOLDERS
The
following table sets forth as of December
1,
2006,
the
number and percentage of outstanding shares of Common Stock beneficially
owned
by:
· |
Each
person, individually or as a group, known to us to be deemed
the
beneficial owners of five percent or more of our issued and outstanding
Common Stock;
|
· |
each
of our Directors and the Named Executives;
and
|
· |
all
of our officers and Directors as a group.
|
As
of the
foregoing date, there were no other persons, individually or as a group,
known
to us to be deemed the beneficial owners of five percent or more of the
issued
and outstanding Common Stock.
This
table is based upon information supplied by Schedules 13D and 13G, if any,
filed
with the Securities and Exchange Commission, and information obtained from
our
directors and named executives. For purposes of this table, a person or
group of
persons is deemed to have “beneficial ownership” of any shares of Common Stock
which such person has the right to acquire within 60 days of December
1,
2006.
For
purposes of computing the percentage of outstanding shares of Common Stock
held
by each person or group of persons named in the table, any security which
such
person or persons has or have the right to acquire within such date is
deemed to
be outstanding but is not deemed to be outstanding for the purpose of computing
the percentage ownership of any other person. Except as indicated in the
footnotes to this table and pursuant to applicable community property laws,
we
believe, based on information supplied by such persons, that the persons
named
in this table have sole voting and investment power with respect to all
shares
Common Stock which they beneficially own. Unless otherwise noted, the address
of
each of the principal stockholders is care of us at 76 Beaver Street,
26th
floor,
New York, NY10005.
Name
and Address
of
Beneficial
Owner
|
|
Amount
& Nature
of
Beneficial
Ownership
|
|
Approximate
Percentage(1)(2)
|
|
|
|
|
|
Gifford
A. Dieterle*
|
|
2,650,000(2)(4)
|
|
2.0%
|
|
|
|
|
|
Jack
Everett*
534
Observatory Drive
Colorado
Springs, CO 80904
|
|
1,310,000(3)(4)
|
|
1.0%
|
|
|
|
|
|
Robert
Roningen*
2955
Strand Road
Duluth,
MN 55804
|
|
2,143,750(2)(5)
|
|
1.6%
|
|
|
|
|
|
Jeffrey
W. Pritchard*
|
|
956,354(2)(4)
|
|
**
|
|
|
|
|
|
Christopher
Chipman*
4014
Redwing Lane
Audubon,
PA 19407
|
|
-0-(4)
|
|
0.0%
|
|
|
|
|
|
Roger
A Newell*
1781
South Larkspur Drive
Golden,
CO 80401
|
|
1,477,273(2)(4)
|
|
1.1%
|
|
|
|
|
|
John
Brownlie*
6040
Puma Ridge
Littleton,
CO 80124
|
|
-0-(4)
|
|
0.0%
|
|
|
|
|
|
Scott
Hazlitt*
9428
W. Highway 50
Salida.
CO 81201
|
|
1,025,000
|
|
**
|
|
|
|
|
|
Ian
A. Shaw*
20
Toronto Street, 12 Floor
Toronto,
Ontario M5C-2B8
Canada
|
|
-0-(4)
|
|
0.0%
|
|
|
|
|
|
John
Postle*
2169
Constance Drive
Oakville
Ontario
Canada
L6j 5l2
|
|
-0-(4)
|
|
0.0%
|
|
|
|
|
|
Mark
T. Nesbitt*
1580
Lincoln St., Ste 700
Denver,
CO 80203-1501
|
|
41,666(4)(6)
|
|
**
|
|
|
|
|
|
RAB
Special Situations
(Master)
Fund Limited
1
Adam Street
London,
WC2N 6LE, UK
|
|
16,358,700(7)
|
|
12.3%
|
|
|
|
|
|
SPGP
17,
Avenue Matignon
75008
Paris, France
|
|
20,270,000(8)
|
|
14.2%
|
|
|
|
|
|
Standard
Bank PLC
320
Park Avenue
New
York, NY 10022
|
|
15,750,000(9)
|
|
10.8%
|
|
|
|
|
|
All
Officers and
Directors
as a
Group
(11)
|
|
9,594,043(2)(3)(4)(5)(6)
|
|
7.0%
|
*
Officer
and/or Director of Capital Gold.
** Less
than
1%.
(1) |
Based
upon 133,060,127, shares issued and outstanding as of December
1, 2006.
|
(2) |
For
Messrs. Dieterle, Roningen, Pritchard and Newell, includes,
respectively, 1,300,000 shares, 750,000 shares, 622,727 shares
and 750,000 shares issuable upon exercise of options and/or warrants.
|
(3) |
Includes
shares owned by Mr. Everett’s wife.
|
(4) |
Excludes
for Messrs. Dieterle, Everett, Pritchard, Chipman, Brownlie,
Shaw, Postle, Nesbitt and
Newell, respectively, 250,000 shares, 250,000 shares, 250,000
shares,
50,000 shares, 200,000 shares,
100,000 shares, 100,000 shares, 100,000 shares and 250,000 shares
issuable upon exercise of options, which options cannot be exercised
unless and until the options have been approved by our
stockholders.
|
(5) |
Includes
shares owned by Mr. Roningen’s wife. All of the foregoing shares are
pledged as collateral for payment of a bank
note.
|
(6) |
Includes
shares owned by Mr. Nesbitt’s wife.
|
(7) |
The
shares are held of record by Credit Suisse First Boston LLC.
We have been
advised that William P. Richards is the Fund Manager for RAB
Special
Situations (Master) Fund Limited, with dispositive and voting
power over
the shares held by RAB Special Situations (Master) Fund Limited.
|
(8) |
Includes
shares issuable upon exercise of warrants to purchase an aggregate
of
9,600,000 shares. We have been advised that Xavier Roulet, is
a natural
person with voting and investment control over shares of our
Common Stock
beneficially owned by SPGP.
|
(9) |
Includes
shares issuable upon exercise of warrants to purchase an aggregate
of
13,600,000 shares. We have been advised that Standard Bank
PLC’s
directors and senior management are natural persons with voting
and
investment control over shares of our common stock beneficially
owned by
Standard Bank PLC.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
During
the fiscal years ended July 31, 2006 and 2005, we paid Roger Newell $63,000
and
$68,000, respectively, for professional geologist and management services
rendered to us, plus expenses. Mr. Newell also earned wages of $30,000
during
the last three months of the fiscal year ended July 31, 2006. During the
fiscal
years ended July 31, 2006 and 2005, we paid Jack Everett consulting fees
of
$78,500 and $56,900, respectively. In addition, Mr. Everett earned wages
of
$10,000 during the last month of fiscal 2006. During the fiscal year ended
July
31, 2006 and 2005, we paid Robert Roningen legal and consulting fees of
$8,000
and $6,625, respectively.
In
January 2006, we extended the following stock options through January 3,
2007,
all of which are exercisable at $0.05 per share: Messrs. Dieterle - 1,250,000
shares; Roningen - 500,000 shares; Pritchard - 327,727 shares; Newell -
500,000
shares; and Hazlitt - 25,000 shares. Upon their engagement with us, we
issued
50,000 options to Mr. Chipman and 200,000 options to Mr. Brownlie (see
“Employment and Change of Control Agreements” in “Executive Compensation”
above). On July 31, 2006, we issued 250,000 Common Stock options each to
Messrs.
Dieterle, Pritchard, Everett and Newell exercisable at $0.32 per share
expiring
on July 31, 2008.
We
utilize Caborca Industrial S.A. de C.V., a Mexican corporation 100% owned
by
Messrs. Dieterle and Pritchard, two of our officers and directors for mining
support services. These services include but are not limited to the payment
of
mining salaries and related costs. Caborca Industrial bills us for these
services at cost. Mining expenses charged by it amounted to approximately
$122,000 and $24,000 for the year ended July 31, 2006 and 2005.
SELLING
STOCKHOLDERS
The
following table provides information regarding the selling stockholders
and the
number of shares of common stock they are offering, which includes shares
issuable upon exercise of options and warrants held by the selling stockholders.
Under the rules of the SEC, beneficial ownership includes shares over which
the
indicated beneficial owner exercises voting or investment power. Shares
of
common stock subject to warrants and options that are currently exercisable
or
will become exercisable within 60 days are deemed outstanding for computing
the percentage ownership of the person holding the options but are not
deemed
outstanding for computing the percentage ownership of any other person.
Notwithstanding the foregoing, certain of the selling stockholders elected,
at
the time of the initial issuance of the warrants, to include provisions
in the
warrant, which provide that the warrants may not be exercised if such action
would result in the holder, together with its affiliates, beneficially
owning
more than 4.99% of our common stock. In addition, certain of the selling
stockholders elected, at the time of the initial issuance of the warrants,
to
include provisions in the warrant, which provide that the warrants may
not be
exercised if such action would result in the holder, together with its
affiliates, beneficially owning more than 9.99% of our common stock.
Unless
otherwise indicated in the footnotes below, we believe that the persons
and
entities named in the table have sole voting and investment power with
respect
to all shares beneficially owned. The information regarding shares beneficially
owned after the offering assumes the sale of all shares offered by each
of the
selling stockholders. The percentage ownership data is based on 133,060,127
shares of our common stock issued and outstanding as of December 1, 2006.
The
shares of common stock covered by this prospectus may be sold by the selling
stockholders, by those persons or entities to whom they transfer, donate,
devise, pledge or distribute their shares or by other successors in interest.
We
are registering the shares of our common stock for resale by the selling
stockholders defined below. The shares are being registered to permit public
secondary trading of the shares, and the selling stockholders may offer
the
shares for resale from time to time. See "How
The Shares May Be Distributed"
below
The
following table has been prepared based solely upon information furnished
to us
as of the date of this prospectus by the selling stockholders listed below.
The
selling stockholders identified below may have sold, transferred or otherwise
disposed of, in transactions exempt from the registration requirements
of the
Securities Act, all or a portion of their shares since the date on which
the
information in the following table is presented.
None
of
the selling stockholder has had any position, office or other material
relationship with us or any of our affiliates within the past three years,
other
than as disclosed in the footnotes to the table.
Selling
Stockholder
|
|
Common
Stock Owned Prior To
Offering
|
|
No.
of Shares Being
Offered
|
|
Common
Stock Owned After The
Offering
|
Peter
Alan Lloyd(1)
|
|
90,000(1)
|
|
90,000(1)
|
|
—
|
|
|
|
|
|
|
|
Terence
Owen Lloyd(2)
|
|
515,000(2)
|
|
515,000(2)
|
|
—
|
|
|
|
|
|
|
|
SPGP(3)
|
|
20,270,000
(3)
|
|
20,270,000
(3)
|
|
—
|
|
|
|
|
|
|
|
RAB
Special Situations (Master) Fund Limited (5)
|
|
16,504,200
(5)
|
|
16,504,200
(5)
|
|
—
|
|
|
|
|
|
|
|
NCL
Smith & Williamson Ltd(6)
|
|
330,000(6)
|
|
330,000(6)
|
|
—
|
|
|
|
|
|
|
|
Galloway
Ltd(7)
|
|
2,200,000(7)
|
|
2,200,000(7)
|
|
—
|
|
|
|
|
|
|
|
Regent
Pacific Group Ltd(8)
|
|
1,320,000(8)
|
|
1,320,000(8)
|
|
—
|
|
|
|
|
|
|
|
Excalibur
Limited Partnership(9)
|
|
391,460(9)
|
|
391,460(9)
|
|
—
|
|
|
|
|
|
|
|
Tameem
Auchi(10)
|
|
176,000(10)
|
|
176,000(10)
|
|
—
|
|
|
|
|
|
|
|
|
|
1,760,000(11)
|
|
1,760,000(11)
|
|
—
|
|
|
|
|
|
|
|
Sook
Hee Chang(12)
|
|
48,000(12)
|
|
48,000(12)
|
|
—
|
|
|
|
|
|
|
|
AGF
Precious Metals Fund(13)
|
|
3,520,000(13)
|
|
3,520,000(13)
|
|
—
|
|
|
|
|
|
|
|
Caisse
de Depot et Placement
|
|
|
|
|
|
|
du
Quebec(14)
|
|
4,630,800(14)
|
|
4,630,800(14)
|
|
—
|
|
|
|
|
|
|
|
Minh-Thu
Dao-Huy(15)
|
|
405,000(15)
|
|
405,000(15)
|
|
—
|
|
|
|
|
|
|
|
Michael
White(16)
|
|
29,568(16)
|
|
29,568(16)
|
|
—
|
|
|
|
|
|
|
|
Neil
McLoughlin(17)
|
|
179,441(17)
|
|
179,441(17)
|
|
—
|
|
|
|
|
|
|
|
Jay
Smith(18)
|
|
161,660(18)
|
|
161,660(18)
|
|
—
|
|
|
|
|
|
|
|
Charles
L. Stafford(19)
|
|
449,700(19)
|
|
396,000(19)
|
|
53,700
|
|
|
|
|
|
|
|
Selling
Stockholder
|
|
Common
Stock Owned Prior To
Offering
|
|
No.
of Shares Being
Offered
|
|
Common
Stock Owned After The
Offering
|
Standard
Bank Plc.(20)*
|
|
15,750,000(20)
|
|
15,750,000(20)
|
|
—
|
|
|
|
|
|
|
|
IBK
Capital Corp. (21)
|
|
3,636,000(21)
|
|
3,636,000
(21)
|
|
—
|
|
|
|
|
|
|
|
Josephine
Scott
|
|
1,018,500(22)
|
|
672,727
|
|
345,773
|
|
|
|
|
|
|
|
Peter
I. Wold
|
|
550,000
(23)
|
|
250,000
|
|
300,000
|
|
|
|
|
|
|
|
John
P. Wold
|
|
450,000
(23)
|
|
250,000
|
|
200,000
|
|
|
|
|
|
|
|
John
S. Wold
|
|
1,000,001
(23)
|
|
250,001
|
|
750,000
|
|
|
|
|
|
|
|
Andrew
Fraser (24)
|
|
336,900(24)
|
|
336,900(24)
|
|
—
|
|
|
|
|
|
|
|
RBC/David
Paterson Trust (25)
|
|
397,000(25)
|
|
397,000(25)
|
|
—
|
|
|
|
|
|
|
|
Van
Eck International Investors Gold Fund*
|
|
8,300,000(26)
|
|
8,300,000(26)
|
|
—
|
|
|
|
|
|
|
|
Van
Eck Long/Short Gold Portfolio Ltd.*
|
|
1,700,000(27)
|
|
1,700,000(27)
|
|
—
|
|
|
|
|
|
|
|
Global
Gold and Precious
|
|
1,000,000(28)
|
|
1,000,000(28)
|
|
—
|
|
|
|
|
|
|
|
Eric
T. Inkilainen
|
|
250,000(29)
|
|
250,000(29)
|
|
—
|
|
|
|
|
|
|
|
Russ
Fromm*
|
|
750,000(30)
|
|
750,000(30)
|
|
—
|
|
|
|
|
|
|
|
Shane
Baghai
|
|
100,000(31)
|
|
100,000(31)
|
|
—
|
|
|
|
|
|
|
|
Philip
Emanuele
|
|
750,000(32)
|
|
750,000(32)
|
|
—
|
|
|
|
|
|
|
|
Robert
Krahn
|
|
250,000(33)
|
|
250,000(33)
|
|
—
|
|
|
|
|
|
|
|
Firestone
Fund Limited
|
|
2,450,000(34)
|
|
2,450,000(34)
|
|
—
|
|
|
|
|
|
|
|
Banque
Vontobel Geneve SA
|
|
1,465,000(35)
|
|
1,465,000(35)
|
|
—
|
|
|
|
|
|
|
|
Guy
Huet
|
|
50,000(36)
|
|
50,000(36)
|
|
—
|
|
|
|
|
|
|
|
Alison
Dyer
|
|
7,500(37)
|
|
7,500(37)
|
|
—
|
|
|
|
|
|
|
|
Beat
Invest Ltd.
|
|
100,000(38)
|
|
100,000(38)
|
|
—
|
|
|
|
|
|
|
|
Donald
G. Lang
|
|
225,000(39)
|
|
225,000(39)
|
|
—
|
|
|
|
|
|
|
|
Selling
Stockholder
|
|
Common
Stock Owned Prior To
Offering
|
|
No.
of Shares Being
Offered
|
|
Common
Stock Owned After The
Offering
|
Stuart
W. Lang
|
|
75,000(40)
|
|
75,000(40)
|
|
—
|
|
|
|
|
|
|
|
Ebner
Beteiligungsgesellschaft
|
|
425,000(41)
|
|
425,000(41)
|
|
—
|
|
|
|
|
|
|
|
Ebner
Industrieofenbau
|
|
312,500
(42)
|
|
312,500
(42)
|
|
—
|
|
|
|
|
|
|
|
Sentinel
Associates Ltd.
|
|
75,000(43)
|
|
75,000(43)
|
|
—
|
|
|
|
|
|
|
|
Shirley
Hom
|
|
7,500(44)
|
|
7,500(44)
|
|
—
|
|
|
|
|
|
|
|
HNW
Investments Inc.
|
|
500,000(45)
|
|
500,000(45)
|
|
—
|
|
|
|
|
|
|
|
GM
CH Becker
|
|
1,250,000(46)
|
|
1,250,000(46)
|
|
—
|
|
|
|
|
|
|
|
Michael
J. Hampton
|
|
300,000(47)
|
|
300,000(47)
|
|
—
|
|
|
|
|
|
|
|
Yuet-Ha
Mo
|
|
30,000(48)
|
|
30,000(48)
|
|
—
|
|
|
|
|
|
|
|
Gonzalo
Ojeda
|
|
100,000(49)
|
|
100,000(49)
|
|
—
|
|
|
|
|
|
|
|
John
Andrew McKee
|
|
25,000(50)
|
|
25,000(50)
|
|
—
|
|
|
|
|
|
|
|
The
Gresham Family Trust
|
|
300,000(51)
|
|
300,000(51)
|
|
—
|
|
|
|
|
|
|
|
Eddye
Ann Kelley
|
|
250,000(52)
|
|
250,000(52)
|
|
—
|
|
|
|
|
|
|
|
Robert
Louis Rosenthal
|
|
250,000(53)
|
|
250,000(53)
|
|
—
|
|
|
|
|
|
|
|
Gregory
James McCoach
|
|
500,000(54)
|
|
500,000(54)
|
|
—
|
|
|
|
|
|
|
|
Robert
H. Norris and Shirley B. Norris Real Estate Trust
|
|
1,250,000(55)
|
|
1,250,000(55)
|
|
—
|
|
|
|
|
|
|
|
Hans
Von Michaelis
|
|
600,000(56)
|
|
500,000(56)
|
|
100,000
|
|
|
|
|
|
|
|
William
M. Knapp
|
|
500,000(57)
|
|
500,000(57)
|
|
—
|
|
|
|
|
|
|
|
Christin
Elizabeth Gwilliam
|
|
500,000(58)
|
|
500,000(58)
|
|
—
|
|
|
|
|
|
|
|
Craig
L. McCarty
|
|
250,000(59)
|
|
250,000(59)
|
|
—
|
|
|
|
|
|
|
|
Daniela
Porter
|
|
75,000(60)
|
|
75,000(60)
|
|
—
|
|
|
|
|
|
|
|
Selling
Stockholder
|
|
Common
Stock Owned Prior To
Offering
|
|
No.
of Shares Being
Offered
|
|
Common
Stock Owned After The
Offering
|
Sydney
Trust
|
|
750,000(61)
|
|
750,000(61)
|
|
—
|
|
|
|
|
|
|
|
Dee
Hunt
|
|
250,000(62)
|
|
250,000(62)
|
|
—
|
|
|
|
|
|
|
|
J
Gandt
|
|
58,750(63)
|
|
58,750(63)
|
|
—
|
|
|
|
|
|
|
|
CM
Prinsloo
|
|
37,500(64)
|
|
37,500(64)
|
|
—
|
|
|
|
|
|
|
|
Hansard
|
|
37,500(65)
|
|
37,500(65)
|
|
—
|
|
|
|
|
|
|
|
J.
Hruska
|
|
25,000(66)
|
|
25,000(66)
|
|
—
|
|
|
|
|
|
|
|
U.
Vlok
|
|
25,000(66)
|
|
25,000(66)
|
|
—
|
|
|
|
|
|
|
|
ICM
Fox
|
|
25,000(66)
|
|
25,000(66)
|
|
—
|
|
|
|
|
|
|
|
Kelly
Glik
|
|
22,500(67)
|
|
22,500(67)
|
|
—
|
|
|
|
|
|
|
|
JSW
Cross
|
|
18,750(68)
|
|
18,750(68)
|
|
—
|
|
|
|
|
|
|
|
Richard
Feiner
|
|
200,000(4)
|
|
200,000(4)
|
|
—
|
|
|
|
|
|
|
|
*
|
This
selling stockholder has identified itself as an affiliate of
a registered
broker-dealer.
|
(1)
|
The
stockholder’s brother, Terence Owen Lloyd, shares voting and investment
control with the stockholder. Terence Owen Lloyd disclaims beneficial
ownership of the shares owned by Peter Alan
Lloyd.
|
(2)
|
Some
of the shares are held of record by Jocar Nominees Limited. The
stockholder is the brother of Peter Alan
Lloyd.
|
(3)
|
Shares
offered and owned include 9,600,000 shares issuable upon exercise
of
warrants
issued in the February 2005 private placement. The selling stockholder
has
identified Xavier
Roulet,
as a natural person with voting and investment control over shares
of our
common stock beneficially owned by the selling stockholder.
|
(4)
|
Shares
offered and owned include 200,000 shares issuable upon exercise
of
options.
|
(5) |
The
shares are held of record by Credit Suisse First Boston LLC.
We have been
advised that William P. Richards is the Fund Manager for RAB
Special
Situations (Master) Fund Limited, with dispositive and voting
power over
the shares held by RAB Special Situations (Master) Fund Limited.
|
(6)
|
The
shares are held of record by NCL Investments Limited. Shares
offered and
owned include 150,000 shares issuable upon exercise of warrants
issued in
the February 2005 private placement. The selling stockholder
has
identified Mr. P. A. Irving as a natural person with voting and
investment
control over shares of our common stock beneficially owned by
the selling
stockholder.
|
(7)
|
Shares
offered and owned include 1,000,000 shares issuable upon exercise
of
warrants issued in the February 2005 private placement. The selling
stockholder has identified Denham Eke as a natural person with
voting and
investment control over shares of our common stock beneficially
owned by
the selling stockholder. Mr. Eke disclaims beneficial ownership
of the
shares offered.
|
(8)
|
The
shares are held of record by Willbro Nominees Limited. The selling
stockholder has identified Jamie Gibson as a natural person with
voting
and investment control over shares of our common stock beneficially
owned
by the selling stockholder.
|
(9)
|
The
selling stockholder has identified William Hechter, the president
of the
selling stockholder’s general partner as a natural person with voting and
investment control over shares of our common stock beneficially
owned by
the selling stockholder. Mr. Hechter disclaims beneficial ownership
of the
shares offered.
|
(10) |
The
shares are held of record by Fitel Nominees Limited.
|
(11) |
The
shares are held of record by Fitel Nominees Limited. The selling
stockholder has identified Mr. Nadhmi Auchi as a natural person
with
voting and investment control over shares of our common stock
beneficially
owned by the selling stockholder.
|
(12) |
Shares
offered and owned include 40,000 shares issuable upon exercise
of warrants
issued in the February 2005 private placement. The selling stockholder
has
indicated that her husband, Paul Ensor, also exercises voting
and
investment control over shares of our common stock beneficially
owned by
the selling stockholder.
|
(13) |
The
shares are held of record by Roytor & Co. Shares offered and owned
include 1,600,000 shares issuable upon exercise of warrants issued
in the
February 2005 private placement. The selling stockholder has
identified
Charles Oliver and Bob Farquharson as natural persons with voting
and
investment control over shares of our common stock beneficially
owned by
the selling stockholder. Messrs. Oliver and Farquharson disclaim
beneficial ownership of the shares
offered.
|
(14) |
The
shares are held of record by Fiducie Desjardins. Includes shares
issuable
upon exercise of warrants to purchase an aggregate of 2,400,000
shares. We
have been advised that Stephen Kibsey has dispositive power and
Ginette
Depelteau, as representative of Caisse de Depot et Placement
du Quebec,
has voting power over the shares held by Caisse de Depot et Placement
du
Quebec.
|
(15)
|
The
shares are held of record by GundyCo. The
selling stockholder is an officer of IBK Capital Corp., the placement
agent. Shares offered and owned include 37,000 shares issuable
upon
exercise of warrants issued in the 2006 Private Placements, and
exclude
all of the shares issuable upon exercise of warrants owned by
IBK.
|
(16)
|
The
selling stockholder is an officer of IBK Capital Corp., the placement
agent. Shares offered and owned exclude all of the shares issuable
upon
exercise of warrants owned by IBK.
|
(17)
|
Some
of the shares are held of record by Willbro Nominees Limited.
|
(18)
|
The
shares are held of record by GundyCo.
|
(19)
|
Shares
offered and owned include 125,000 shares issuable upon exercise
of
warrants issued in the February 2005 private placement and shares
issued
in trust for the benefit of his children. Shares owned include
an
aggregate of 53,700 shares owned by Mr. Stafford’s
children.
|
(20)
|
Shares
offered includes 13,600,000 shares issuable upon exercise of
warrants. The
selling stockholder has identified its directors and senior management
as
a natural persons with voting and investment control over shares
of our
common stock beneficially owned by the selling
stockholder.
|
(21)
|
Shares
offered and owned represent shares issuable upon exercise of
placement
agent warrants issued with regard to the February 2005 private
placement
and one of the 2006 Private Placements. The selling stockholder
was the
placement agent for the February 2005 private and part of the
2006 Private
Placements. The selling stockholder has identified William F.
White,
Minh-Thu Dao-Huy and Michael F. White as natural persons with
voting and
investment control over shares of our common stock beneficially
owned by
the selling stockholder. Securities owned individually by Minh-Thu
Dao-Huy
and Michael White are not included in the number of shares beneficially
owned by IBK.
|
(22)
|
Shares
owned includes 672,727 shares issuable upon exercise of options
and
exclude 250,000 shares issuable upon exercise of options, which
options
cannot be exercised unless and until the options have been approved
by our
stockholders. The selling stockholder is one of our
employees.
|
(23)
|
John
P. Wold and Peter I. Wold are brothers. John S. Wold is the father
of John
P. and Peter I. Wold. Each disclaims beneficial ownership of
the shares
owned by the others.
|
(24)
|
The
shares are held of record by Willbro Nominees Limited.
|
(25)
|
The
shares are held of record by Willbro Nominees Limited. The selling
stockholder has identified David Paterson as a natural person
with voting
and investment control over shares of our common stock beneficially
owned
by the selling stockholder.
|
(26)
|
Shares
offered and owned include 1,660,000 shares issuable upon exercise
of
warrants issued in the 2006 Private Placements. The selling stockholder
has identified Joseph Foster, the portfolio manager for Van Eck
Associates
Corporation (the selling stockholder’s investment adviser), as a natural
person with voting and investment control over shares of our
common stock
beneficially owned by the selling stockholder. Van Eck International
Investors Gold Fund and Van Eck Long/Short Gold Portfolio Ltd.
are both
clients of related investment
advisors.
|
(27)
|
Shares
offered and owned include 340,000 shares issuable upon exercise
of
warrants issued in the 2006 Private Placements. The selling stockholder
has identified Joseph Foster, the portfolio manager for Van Eck
Absolute
Return Advisers Corp. (the selling stockholder’s investment adviser), as a
natural person with voting and investment control over shares
of our
common stock beneficially owned by the selling stockholder. Van
Eck
International Investors Gold Fund and Van Eck Long/Short Gold
Portfolio
Ltd. are both clients of related investment
advisors.
|
(28)
|
Shares
offered and owned include 200,000 shares issuable upon exercise
of
warrants issued in the 2006 Private Placements. The selling stockholder
has identified Jean Bernard Guyon, as a natural person with voting
and
investment control over shares of our common stock beneficially
owned by
the selling stockholder.
|
(29)
|
Shares
offered and owned include 50,000 shares issuable upon exercise
of warrants
issued in the 2006 Private
Placements.
|
(30)
|
Shares
offered and owned include 150,000 shares issuable upon exercise
of
warrants issued in the 2006 Private
Placements.
|
(31)
|
Shares
offered and owned include 20,000 shares issuable upon exercise
of warrants
issued in the 2006 Private Placements.
|
(32)
|
Shares
offered and owned include 150,000 shares issuable upon exercise
of
warrants issued in the 2006 Private Placements. 100,000 of these
shares
issuable upon exercise of warrants and 400,000 shares owned and
offered by
the stockholder are owned by him for the benefit of his two minor
children.
|
(33)
|
Shares
offered and owned include 50,000 shares issuable upon exercise
of warrants
issued in the 2006 Private
Placements.
|
(34)
|
Shares
offered and owned include 490,000 shares issuable upon exercise
of
warrants issued in the 2006 Private Placements. The selling stockholder
has identified HL Huet and Guy Huet, directors, as natural persons
with
voting and investment control over shares of our common stock
beneficially
owned by the selling stockholder. HL Huet and Guy Huet disclaim
beneficial
ownership of the shares offered.
|
(35)
|
Shares
offered and owned include 300,000 shares issuable upon exercise
of
warrants issued in the 2006 Private Placements. The selling stockholder
has identified Michel A. Pasche and F. Von Engelbrechten, as
natural
persons with voting and investment control over shares of our
common stock
beneficially owned by the selling
stockholder.
|
(36)
|
The
shares are held of record by Bank Julius Baer & Co. Ltd. Shares
offered and owned include 10,000 shares issuable upon exercise
of warrants
issued in the 2006 Private Placements. The selling stockholder
is a
director of Firestone Fund Limited. The selling stockholder disclaims
beneficial ownership of the shares owned by
Firestone.
|
(37)
|
Shares
offered and owned include 1,500 shares issuable upon exercise
of warrants
issued in the 2006 Private Placements. The selling stockholder
has
identified Alfred G. Wirth and Thomas A. Starkey of Wirth Associates
Inc.
as persons with voting and investment control over shares of
our common
stock beneficially owned by the selling
stockholder.
|
(38)
|
Shares
offered and owned include 20,000 shares issuable upon exercise
of warrants
issued in the 2006 Private Placements. The selling stockholder
has
identified Alfred G. Wirth and Thomas A. Starkey of Wirth Associates
Inc.
as persons with voting and investment control over shares of
our common
stock beneficially owned by the selling
stockholder.
|
(39)
|
Shares
offered and owned include 45,000 shares issuable upon exercise
of warrants
issued in the 2006 Private Placements. The selling stockholder
has
identified Alfred G. Wirth and Thomas A. Starkey of Wirth Associates
Inc.
as persons with voting and investment control over shares of
our common
stock beneficially owned by the selling stockholder. Donald and
Stuart
Lang are brothers.
|
(40)
|
Shares
offered and owned include 15,000 shares issuable upon exercise
of warrants
issued in the 2006 Private Placements. The selling stockholder
has
identified Alfred G. Wirth and Thomas A. Starkey of Wirth Associates
Inc.
as persons with voting and investment control over shares of
our common
stock beneficially owned by the selling stockholder. Donald and
Stuart
Lang are brothers.
|
(41)
|
Shares
offered and owned include an aggregate of 85,000 shares issuable
upon
exercise of warrants issued in the 2006 Private Placements. Ebner
Beteiligungsgesellschaft owns 100% of Ebner Industrieofenbau.
Accordingly,
all shares owned by Ebner Industrieofenbau are deemed to be beneficially
owned by Ebner Beteiligungsgesellschaft and included in the shares
listed
as owned and offered by Ebner Beteiligungsgesellschaft (the shares
owned
by Ebner Industrieofenbau are also listed in the table separately
as owned
by Ebner Industrieofenbau). The selling stockholder has identified
Alfred
G. Wirth and Thomas A. Starkey of Wirth Associates Inc. as persons
with
voting and investment control over shares of our common stock
beneficially
owned by the selling stockholder.
|
(42)
|
Shares
offered and owned include 62,500 shares issuable upon exercise
of warrants
issued in the 2006 Private Placements. The selling stockholder
has
identified Alfred G. Wirth and Thomas A. Starkey of Wirth Associates
Inc.
as persons with voting and investment control over shares of
our common
stock beneficially owned by the selling stockholder. Ebner
Industrieofenbau is wholly-owned by Ebner Beteiligungsgesellschaft.
|
(43)
|
Shares
offered and owned include 15,000 shares issuable upon exercise
of warrants
issued in the 2006 Private Placements. The selling stockholder
has
identified Alfred G. Wirth and Thomas A. Starkey of Wirth Associates
Inc.
as persons with voting and investment control over shares of
our common
stock beneficially owned by the selling
stockholder.
|
(44)
|
Shares
offered and owned include 1,500 shares issuable upon exercise
of warrants
issued in the 2006 Private Placements. The selling stockholder
has
identified Alfred G. Wirth and Thomas A. Starkey of Wirth Associates
Inc.
as persons with voting and investment control over shares of
our common
stock beneficially owned by the selling
stockholder.
|
(45)
|
Shares
offered and owned include 100,000 shares issuable upon exercise
of
warrants issued in the 2006 Private Placements. The selling stockholder
has identified Alfred G. Wirth and Thomas A. Starkey of Wirth
Associates
Inc. as persons with voting and investment control over shares
of our
common stock beneficially owned by the selling
stockholder.
|
(46)
|
Shares
offered and owned include 250,000 shares issuable upon exercise
of
warrants issued in the 2006 Private Placements. The selling stockholder
has identified James Fitzpatrick as a person who shares voting
and
investment control over shares of our common stock beneficially
owned by
the selling stockholder.
|
(47)
|
Shares
offered and owned include 60,000 shares issuable upon exercise
of warrants
issued in the 2006 Private
Placements.
|
(48)
|
Shares
offered and owned include 10,000 shares issuable upon exercise
of warrants
issued in the 2006 Private
Placements.
|
(49)
|
Shares
offered and owned include 20,000 shares issuable upon exercise
of warrants
issued in the 2006 Private
Placements.
|
(50)
|
Shares
offered and owned include 5,000 shares issuable upon exercise
of warrants
issued in the 2006 Private
Placements.
|
(51)
|
Shares
offered and owned include 60,000 shares issuable upon exercise
of warrants
issued in the 2006 Private Placements. The selling stockholder
has
identified James A. Gresham and Margaret F. Gresham, Trustees
of the
trust, as natural persons with
voting and investment control over shares of our common stock
beneficially
owned by the selling stockholder.
|
(52)
|
Shares
offered and owned include 50,000 shares issuable upon exercise
of warrants
issued in the 2006 Private
Placements.
|
(53)
|
Shares
offered and owned include 50,000 shares issuable upon exercise
of warrants
issued in the 2006 Private
Placements.
|
(54)
|
Shares
offered and owned include 100,000 shares issuable upon exercise
of
warrants issued in the 2006 Private
Placements.
|
(55)
|
Shares
offered and owned include 250,000 shares issuable upon exercise
of
warrants issued in the 2006 Private Placements. The selling stockholder
has identified Robert H. Morris, Trustee of the trust, as the
natural
person with voting and investment control over shares of our
common stock
beneficially owned by the selling
stockholder.
|
(56)
|
Shares
offered and owned include 100,000 shares issuable upon exercise
of
warrants issued in the 2006 Private Placements. Shares owned
includes
100,000 shares owned jointly with the Stockholder’s spouse. The
Stockholder has indicated that his spouse shares voting and investment
control over shares of our common stock beneficially owned by
him.
|
(57)
|
Shares
offered and owned include 100,000 shares issuable upon exercise
of
warrants issued in the 2006 Private
Placements.
|
(58)
|
Shares
offered and owned include 100,000 shares issuable upon exercise
of
warrants issued in the 2006 Private
Placements.
|
(59)
|
Shares
offered and owned include 50,000 shares issuable upon exercise
of warrants
issued in the 2006 Private Placements. All securities are held
by the
selling stockholder’s IRA.
|
(60)
|
Shares
offered and owned include 15,000 shares issuable upon exercise
of warrants
issued in the 2006 Private Placements.
|
(61)
|
Shares
offered and owned include 150,000 shares issuable upon exercise
of
warrants issued in the 2006 Private Placements. The selling stockholder
has identified Lukas Nakos and James Fitzpatrick as natural persons
who
share voting and investment control over shares of our common
stock
beneficially owned by the selling
stockholder.
|
(62)
|
Shares
offered and owned include 50,000 shares issuable upon exercise
of warrants
issued in the 2006 Private Placements. The selling stockholder
has
identified James Fitzpatrick as a person who shares voting and
investment
control over shares of our common stock beneficially owned by
the selling
stockholder.
|
(63)
|
Shares
offered and owned include 11,750 shares issuable upon exercise
of warrants
issued in the 2006 Private Placements. The selling stockholder
has
identified James Fitzpatrick as a person who shares voting and
investment
control over shares of our common stock beneficially owned by
the selling
stockholder.
|
(64)
|
Shares
offered and owned include 7,500 shares issuable upon exercise
of warrants
issued in the 2006 Private Placements. The selling stockholder
has
identified James Fitzpatrick as a person who shares voting and
investment
control over shares of our common stock beneficially owned by
the selling
stockholder.
|
(65)
|
Shares
offered and owned include 7,500 shares issuable upon exercise
of warrants
issued in the 2006 Private Placements. The selling stockholder
has
identified Finola Nolan and James Fitzpatrick as natural persons
who
shares voting and investment control over shares of our common
stock
beneficially owned by the selling
stockholder.
|
(66)
|
Shares
offered and owned include 5,000 shares issuable upon exercise
of warrants
issued in the 2006 Private Placements. The selling stockholder
has
identified James Fitzpatrick as a person who shares voting and
investment
control over shares of our common stock beneficially owned by
the selling
stockholder.
|
(67)
|
Shares
offered and owned include 4,500 shares issuable upon exercise
of warrants
issued in the 2006 Private Placements. The selling stockholder
has
identified James Fitzpatrick as a person who shares voting and
investment
control over shares of our common stock beneficially owned by
the selling
stockholder.
|
(68)
|
Shares
offered and owned include 3,750 shares issuable upon exercise
of warrants
issued in the 2006 Private Placements. The selling stockholder
has
identified James Fitzpatrick as a person who shares voting and
investment
control over shares of our common stock beneficially owned by
the selling
stockholder.
|
HOW
THE SHARES MAY BE DISTRIBUTED
The
selling stockholders and any of their pledgees, donees, assignees and
successors-in-interest may, from time to time, sell any or all of their
shares
of common stock on any 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 stockholders 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;
|
· |
short
sales
that are not violations of the laws and regulations of any state
or the
United States;
|
· |
broker-dealers
may agree with the selling stockholders to sell a specified number
of such
shares at a stipulated price per
share;
|
· |
a
combination of any such methods of sale;
and
|
· |
any
other method permitted pursuant to applicable
law.
|
The
selling stockholders may also sell shares under Rule 144 under the Securities
Act, if available, rather than under this prospectus.
Broker-dealers
engaged by the selling stockholders may arrange for other brokers-dealers
to
participate in sales. Broker-dealers may receive commissions or discounts
from
the selling stockholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated.
The
compensation paid to a particular broker-dealer may be less than or in
excess of
customary commissions.
The
selling stockholders may from time to time pledge or grant a security interest
in some or all of the Shares owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties
may
offer and sell shares of common stock from time to time under this prospectus,
or under an amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act of 1933 amending the list of
selling
stockholders to include the pledgee, transferee or other successors in
interest
as selling stockholders under this prospectus.
The
selling stockholders have been apprised that, if a particular offer of
common
stock is to be made on terms constituting a material change from the information
set forth above with respect to how the shares may be distributed, then,
to the
extent required, a post-effective amendment to the accompanying registration
statement must be filed with the Securities and Exchange
Commission.
The
selling stockholders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors
in
interest will be the selling beneficial owners for purposes of this
prospectus.
The
selling stockholders 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 Securities Act. In
addition, each of the selling stockholders who is a registered broker-dealer
or
is affiliated with a registered broker-dealer has advised us that:
· |
it
purchased the shares in the ordinary course of business; and
|
· |
at
the time of the purchase of the shares to be resold, it had no
agreements
or understandings, directly or indirectly, with any person to
distribute
the shares.
|
We
have
advised the selling stockholders that they are required to comply with
Regulation M promulgated under the Securities and Exchange Act during such
time
as they may be engaged in a distribution of the shares. With
certain exceptions, Regulation M precludes a selling stockholder, any affiliated
purchasers, and any broker-dealer or other person who participates in the
distribution from bidding for or purchasing, or attempting to induce any
person
to bid for or purchase any security which is the subject of the distribution
until the entire distribution is complete. Regulation M also prohibits
any bids
or purchases made in order to stabilize the price of a security in connection
with the distribution of that security. All of the foregoing may affect
the
marketability of the shares offered hereby in this prospectus.
We
are
required to pay all fees and expenses incident to the registration of the
shares. We have agreed to indemnify the selling stockholders against certain
losses, claims, damages and liabilities, including liabilities under the
Securities Act.
Insofar
as indemnification for liabilities arising under the Securities Act may
be
permitted to our directors, officers, and controlling persons, we have
been
advised that in the opinion of the SEC this indemnification is against
public
policy as expressed in the Securities Act and is therefore,
unenforceable.
Under
the
securities laws of certain states, the shares may be sold in those states
only
through registered or licensed broker-dealers. In addition, the shares
may not
be sold unless the shares have been registered or qualified for sale in
the
relevant state or unless the shares qualify for an exemption from registration
or qualification.
DESCRIPTION
OF SECURITIES BEING REGISTERED
The
following section does not purport to be complete and is qualified in all
respects by reference to the detailed provisions of our certificate of
incorporation and our by-laws, copies of which have been filed with the
Securities and Exchange Commission.
Our
authorized capital stock consist of: (i) 200,000,000 shares of stock, $.0001
par
value. 133,060,127 shares of common stock were issued and outstanding as
of the
date of this prospectus.
Our
Board
of Directors is empowered, without stockholder approval, to issue shares
of
stock in classes and series with such voting powers, designations, preferences
and relative participating or other special rights and qualifications,
limitations or restrictions thereof, as shall be determined from time to
time by
our Board of Directors
Common
Stock
Shares
of
our common stock are entitled to one vote per share, either in person or
by
proxy, on all matters that may be voted upon by the owners of our shares
at
meetings of our stockholders. There is no provision for cumulative voting
with
respect to the election of directors by the holders of common stock. Therefore,
the holder of more than 50% of our shares of outstanding common stock can,
if
they choose to do so, elect all of our directors. In this event, the holders
of
the remaining shares of common stock will not be able to elect any
directors.
The
holders of common stock:
· |
have
equal rights to dividends from funds legally available therefore,
when and
if declared by our board of
directors;
|
· |
are
entitled to share ratably in all of our assets available for
distribution
to holders of common stock upon liquidation, dissolution or winding
up of
our affairs; and
|
· |
do
not have preemptive rights, conversion rights, or redemption
of sinking
fund provisions.
|
The
outstanding shares of our common stock are duly authorized, validly issued,
fully paid and nonassessable.
Anti-Takeover
Provisions
We
are
subject to the provisions of Section 203 of the Delaware General
Corporation Law. Subject to exceptions, Section 203 prohibits a
publicly-held Delaware corporation from engaging in a “business combination”
with an “interested stockholder” for a period of three years from the date of
the transaction in which the person became an interested stockholder, unless
the
interested stockholder attained this status with the approval of the board
of
directors or unless the business combination is approved in a prescribed
manner.
A “business combination” includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. Subject
to
exceptions, an “interested stockholder” is a person who, together with
affiliates and associates, owns, or within three years did own, 15% or
more of
the corporation’s voting stock. This statute could prohibit or delay the
accomplishment of mergers or other takeover or change in control attempts
with
respect to us and, accordingly, may discourage attempts to acquire us.
Provisions
of our certificate of incorporation and bylaws also may make it more difficult
to acquire control of us.
Our
Certificate of Incorporation allow us to issue different series of shares
of
stock without any vote or further action by our stockholders. Our Board
of
Directors has the authority to designate series of our stock and to fix
and
determine the relative rights and preferences of such classes and series.
As a
result, our Board of Directors could authorize the issuance of a series
of stock
that would grant to holders the preferred right to our assets upon liquidation,
the right to receive dividend payments before dividends are distributed
to the
holders of common stock and the right to the redemption of the shares,
together
with a premium, prior to the redemption of our common stock. In this regard,
in
August 2006, we adopted a stockholder rights plan and, under the Plan,
our Board
of Directors declared a dividend distribution of one Right for each outstanding
share of Common Stock to stockholders of record at the close of business
on
August 14, 2006. Each Right initially entitles holders to buy one one-thousandth
of a share of Series B Common Stock for $3.00 once the Rights become
exercisable. The Rights generally are not transferable apart from the common
stock and will not be exercisable unless and until a person or group acquires
or
commences a tender or exchange offer to acquire, beneficial ownership of
20% or
more of our common stock. However, the Rights Agreement provides an exemption
for any person who is, as of August 15, 2006, the beneficial owner of 20%
or
more of our outstanding common stock, so long as such person does not,
subject
to certain exceptions, acquire additional shares of our common stock after
that
date. The Rights will expire on August 15, 2016, and may be redeemed prior
thereto at $0.001 per Right under certain circumstances.
Our
amended by-laws: (i) require
stockholders that seek to bring business before a meeting of stockholders,
including nominations of candidates for election as directors, to provide
notice
of such business to us, and certain other information, within a specified
period
prior to the meeting; (ii) authorize the Board of Directors to determine
the
record date applicable to any proposed stockholder action to be taken by
written
consent without a meeting, and require us to appoint an independent inspector
to
the review the validity and sufficiency of any consents received in connection
with any such proposed action; and (iii) do
not
permit stockholders to call special
stockholders' meeting.
These
provisions may make it more difficult for someone to acquire control of
us or
for our stockholders to remove existing management, and might discourage
a third
party from offering to acquire us, even if a change in control or in management
would be beneficial to our stockholders.
In
addition, the
foregoing provisions could deprive stockholders of the opportunity to realize
a
premium on the shares of common stock owned by them.
Transfer
Agent And Registrar
The
transfer agent and registrar for our common stock and warrants is American
Stock
Transfer and Trust Company, 59 Maiden Lane, Plaza Level, New York, NY 10038.
LEGAL
MATTERS
The
validity of the common stock offered in this prospectus has been passed
upon for
us by Richard Feiner, Esq., 381 Park Avenue South, Suite 1601, New York,
New
York 10016. Mr. Feiner owns options to purchase an aggregate of 200,000
shares
of our common stock.
EXPERTS
Our
consolidated financial statements included in this prospectus have been
audited
by Wolinetz, Lafazan & Company, P.C., independent registered public
accountants, to the extent and for the periods set forth in their report
appearing elsewhere herein, and are included in reliance upon such report
given
upon the authority of said firm as experts in auditing and
accounting.
WHERE
YOU CAN FIND MORE INFORMATION
We
have
filed with the Securities and Exchange Commission a registration statement
(which contains this prospectus) on Form SB-2 under the Securities Act
of 1933.
The registration statement relates to the shares offered by the selling
stockholders. This prospectus does not contain all of the information set
forth
in the registration statement and the exhibits and schedules to the registration
statement. Please refer to the registration statement and its exhibits
and
schedules for further information with respect to us, the common stock,
the
debentures and the warrants. Statements contained in this prospectus as
to the
contents of any contract or other document are not necessarily complete
and, in
each instance, we refer you to the copy of that contract or document filed
as an
exhibit to the Registration Statement. You may read and obtain a copy of
the
registration statement and its exhibits and schedules from the SEC, as
described
below.
We
file
annual, quarterly and special reports, proxy statements and other information
with the Securities and Exchange Commission. You may read and copy any
document
we file at the Securities and Exchange Commission's public reference rooms
at
450 Fifth Street, N.W., Washington, D.C. 20549. Please call the Securities
and
Exchange Commission at 1-800-SEC-0330 for further information on the public
reference rooms. Many of our Securities and Exchange Commission filings
are also
available to the public from the Securities and Exchange Commission's Website
at
"http://www.sec.gov."
GLOSSARY
Reserve:
|
That
part of a mineral deposit which could be economically and legally
extracted or produced at the time of the reserve determination.
Reserves
must be supported by a feasibility study done to bankable standards
that
demonstrates the economic extraction ("Bankable standards"
implies that
the confidence attached to the costs and achievements developed
in the
study is sufficient for the project to be eligible for external
debt
financing.) A reserve includes adjustments to the in-situ tonnes
and grade
to include diluting materials and allowances for losses that
might occur
when the material is mined.
|
Proven
Reserve:
|
Reserves
for which (a) quantity is computed from dimensions revealed
in outcrops,
trenches, workings or drill holes; grade and/or quality are
computed from
the results of detailed sampling and (b) the sites for inspection,
sampling and measurement are spaced so closely and the geologic
character
is so well defined that size, shape depth and mineral content
of reserves
are well-established.
|
|
|
Probable
Reserve:
|
Reserves
for which quantity and grade and/or quality are computed from
information
similar to that used for proven (measured) reserves, but the
sites for
inspection, sampling, and measurement are farther apart or
are otherwise
less adequately spaced. The degree of assurance, although lower
than that
for proven reserves, is high enough to assume continuity between
points of
observation.
|
|
|
mineralized
material
|
The
term “mineralized material” refers to material that is not included in the
reserve as it does not meet all of the criteria for adequate
demonstration
for economic or legal extraction.
|
|
|
non-reserves
|
The
term “non-reserves” refers to mineralized material that is not included in
the reserve as it does not meet all of the criteria for adequate
demonstration for economic or legal extraction.
|
|
|
exploration
stage
|
An
“exploration stage” prospect is one which is not in either the development
or production stage.
|
|
|
development
stage
|
A
“development stage” project is one which is undergoing preparation of an
established commercially mineable deposit for its extraction
but which is
not yet in production. This stage occurs after completion of a
feasibility study.
|
|
|
production
stage
|
A
“production stage” project is actively engaged in the process of
extraction and beneficiation of mineral reserves to produce
a marketable
metal or mineral product.
|
.
ADDITIONAL
DEFINITIONS
Caliche:
|
Sediment
cemented by calcium carbonate near surface.
|
|
|
Diorite:
|
Igneous
Rock.
|
|
|
Dikes:
|
Tabular,
vertical bodies of igneous rock.
|
|
|
Fissility:
|
Shattered,
broken nature of rock.
|
|
|
Fracture
Foliations:
|
Fracture
pattern in rock, parallel orientation, resulting from
pressure.
|
|
|
Heap
Leaching:
|
Broken
and crushed ore on a pile subjected to dissolution of metals
by leach
solution.
|
|
|
Hydrometallurgical
Plant:
|
A
metallurgical mineral processing plant that uses water to leach
or
separate and concentrate elements or minerals.
|
|
|
Intercalated:
|
Mixed
in.
|
|
|
Litho
static Pressure:
|
Pressure
brought on by weight of overlaying rocks.
|
|
|
Major
Intrusive
Center:
|
An
area where large bodies of intrusive igneous rock exist and
through which
large amounts of mineralizing fluids rose.
|
|
|
Mesothermal:
|
A
class of hydrothermal ore deposit formed at medium temperatures
and a
depth over one mile in the earth’s crust.
|
|
|
Microporphyritic
Latite:
|
Extremely
fine grained siliceous igneous rock with a distribution of
larger crystals
within.
|
|
|
Mudstone:
|
Sedimentary
bed composed primarily of fine grained material such as clay
and
silt.
|
|
|
PPM:
|
Part
per million.
|
|
|
Pyritized:
|
Partly
replaced by the mineral pyrite.
|
|
|
Reverse
Circulation
Drilling
(or R.C.
Drilling):
|
Type
of drilling using air to recover cuttings for sampling through
the middle
of the drilling rods rather than the outside of the drill rods,
resulting
in less contamination of the sampled interval.
|
|
|
Sericitized:
|
Rocks
altered by heat, pressure and solutions resulting in formation
of the
mineral sericite, a very fine grained mica.
|
|
|
Siltstone:
|
A
sedimentary rock composed of clay and silt sized particles.
|
|
|
Silicified:
|
Partly
replaced by silica.
|
|
|
Stockwork
Breccia:
|
Earth's
crust broken by two or more sets of parallel faults converging
from
different directions.
|
|
|
Stockwork:
|
Ore,
when not in strata or in veins but in large masses, so as to
be worked in
chambers or in large blocks.
|
|
|
Surface
Mine:
|
Surface
mining by way of an open pit without shafts or underground
working.
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
The
Board of Directors and Stockholders of
Capital
Gold Corporation
New
York,
New York
We
have
audited the accompanying consolidated balance sheet of Capital Gold Corporation
and Subsidiaries (A Development Stage Enterprise) (“the Company”) as of July 31,
2006, and the related consolidated statements of operations, changes
in
stockholders’ equity and cash flows for each of the two years in the period
ended July 31, 2006 and for the period September 17, 1982 (Inception)
to July
31, 2006. These consolidated financial statements are the responsibility
of the
Company’s management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We
conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan
and perform the audit to obtain reasonable assurance about whether the
financial
statements are free of material misstatement. The Company is not required
to
have, nor were we engaged to perform, an audit of its internal control
over
financial reporting. Our audit included consideration of internal control
over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstance, 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. Also, 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 consolidated financial position of Capital
Gold
Corporation and Subsidiaries as of July 31, 2006 and the consolidated
results of
their operations and their cash flows for each of the two years in the
period
ended July 31, 2006 and for the period September 17, 1982 (Inception)
to July
31, 2006 in conformity with accounting principles generally accepted
in the
United States of America.
The
accompanying financial statements have been prepared assuming that the
Company
will continue as a going concern. As discussed in Note 1 to the consolidated
financial statements, the Company is a development stage enterprise whose
operations have generated recurring losses since its inception. These
factors
raise substantial doubt about the Company’s ability to continue as a going
concern. Management’s plans regarding these matters are described in Note 18.
The consolidated financial statements do not include any adjustments
that might
result from the outcome of this uncertainty.
WOLINETZ,
LAFAZAN & COMPANY, P.C.
Rockville
Centre, New York
October
24, 2006
(Except
for Note 25, as to which the date is November
1, 2006)
CAPITAL
GOLD CORPORATION
(A
DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED
BALANCE SHEET
ASSETS
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
|
|
|
Cash
and Cash Equivalents
|
|
$
|
2,741,498
|
|
Loans
Receivable - Affiliate (Note 11)
|
|
|
41,745
|
|
Prepaid
Assets
|
|
|
40,074
|
|
Marketable
Securities (Note 3)
|
|
|
90,000
|
|
Deposit
|
|
|
250,000
|
|
Other
Current Assets (Note 4)
|
|
|
4,483,852
|
|
|
|
|
|
|
Total
Current Assets
|
|
|
7,647,169
|
|
|
|
|
|
|
Mining
Concessions (Note 10 )
|
|
|
70,104
|
|
|
|
|
|
|
Property
& Equipment - net (Note 5)
|
|
|
1,035,972
|
|
|
|
|
|
|
Intangible
Assets - net (Note 6)
|
|
|
13,800
|
|
|
|
|
|
|
Other
Assets:
|
|
|
|
|
Other
Investments (Note 12)
|
|
|
21,480
|
|
Deferred
Financing Costs
|
|
|
450,777
|
|
Mining
Reclamation Bonds
|
|
|
35,550
|
|
Other
|
|
|
43,047
|
|
Derivative
Contracts (Note 23)
|
|
|
218,076
|
|
Security
Deposits
|
|
|
9,605
|
|
Total
Other Assets
|
|
|
778,535
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
9,545,580
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
Accounts
Payable
|
|
$
|
258,972
|
|
Accrued
Expenses
|
|
|
356,671
|
|
Total
Current Liabilities
|
|
|
615,643
|
|
|
|
|
|
|
Commitments
and Contingencies
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
Common
Stock, Par Value $.0001 Per Share;
|
|
|
|
|
Authorized
200,000,000 shares; Issued and
|
|
|
|
|
Outstanding
131,635,129 Shares
|
|
|
13,163
|
|
Additional
Paid-In Capital
|
|
|
40,733,825
|
|
Deficit
Accumulated in the Development Stage
|
|
|
(31,388,503
|
)
|
Deferred
Financing Costs (Note 20)
|
|
|
(522,541
|
)
|
Deferred
Compensation
|
|
|
(52,500
|
)
|
Accumulated
Other Comprehensive Loss
|
|
|
146,493
|
|
|
|
|
|
|
Total
Stockholders' Equity
|
|
|
8,929,937
|
|
Total
Liabilities and Stockholders' Equity
|
|
$
|
9,545,580
|
|
The
accompanying notes are an integral part of the financial
statements.
CAPITAL
GOLD CORPORATION
(A
DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED
STATEMENT OF OPERATIONS
|
|
|
|
|
|
For
the Period
|
|
|
|
|
|
September
17, 1982
|
|
|
|
|
|
(Inception)
|
|
|
|
July
31,
|
|
To
|
|
|
|
2006
|
|
2005
|
|
July
31, 2006
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
Costs
and Expenses:
|
|
|
|
|
|
|
|
|
|
|
Mine
Expenses
|
|
|
1,940,805
|
|
|
851,374
|
|
|
9,604,713
|
|
Write-Down
of Mining, Milling and Other Property and Equipment
|
|
|
-
|
|
|
-
|
|
|
1,299,445
|
|
Selling,
General and Administrative Expenses
|
|
|
2,135,493
|
|
|
1,005,038
|
|
|
11,998,460
|
|
Stocks
and Warrants issued for Services
|
|
|
89,391
|
|
|
187,844
|
|
|
9,499,238
|
|
Depreciation
and Amortization
|
|
|
38,969
|
|
|
7,431
|
|
|
414,126
|
|
Total
Costs and Expenses
|
|
|
4,204,658
|
|
|
2,051,687
|
|
|
32,815,982
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from Operations
|
|
|
(4,204,658
|
)
|
|
(2,051,687
|
)
|
|
(32,815,982
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
Interest
Income
|
|
|
183,719
|
|
|
42,483
|
|
|
979,717
|
|
Miscellaneous
|
|
|
-
|
|
|
3,522
|
|
|
36,199
|
|
Loss
on Sale of Property and Equipment
|
|
|
(201,829
|
)
|
|
-
|
|
|
(155,713
|
)
|
Gain
on Sale of Subsidiary
|
|
|
-
|
|
|
-
|
|
|
1,907,903
|
|
Option
Payment
|
|
|
-
|
|
|
-
|
|
|
70,688
|
|
Loss
on change in fair value of derivative
|
|
|
(581,924
|
)
|
|
|
|
|
(581,924
|
)
|
Loss
on Write-Off of Investment
|
|
|
-
|
|
|
-
|
|
|
(10,000
|
)
|
Loss
on Joint Venture
|
|
|
-
|
|
|
-
|
|
|
(901,700
|
)
|
Loss
on Option
|
|
|
-
|
|
|
-
|
|
|
(50,000
|
)
|
Gain
(Loss) on Other Investments
|
|
|
-
|
|
|
-
|
|
|
(3,697
|
)
|
Loss
on Write -Off of Minority Interest
|
|
|
-
|
|
|
-
|
|
|
(150,382
|
)
|
Total
Other Income (Expense)
|
|
|
(600,034
|
)
|
|
46,005
|
|
|
1,141,091
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
Before Minority Interest
|
|
|
(4,804,692
|
)
|
|
(2,005,682
|
)
|
|
(31,674,891
|
)
|
Minority
Interest
|
|
|
-
|
|
|
-
|
|
|
286,388
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(4,804,692
|
)
|
$
|
(2,005,682
|
)
|
$
|
(31,388,503
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss Per Common Share - Basic and Diluted
|
|
$
|
(0.04
|
)
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Common Shares Outstanding
|
|
|
112,204,471
|
|
|
75,123,922
|
|
|
|
|
The
accompanying notes are an integral part of the financial
statements.
CAPITAL
GOLD CORPORATION
(A
DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR
THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 2006
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Additional
Paid-In
Capital
|
|
Deficit
Accumulated
in
the
Development
Stage
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
September 17, 1982 (Inception)
|
|
|
-0-
|
|
$
|
-0-
|
|
$
|
-0-
|
|
$
|
-0-
|
|
$
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial
Cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officers
- At $.001 Per Share
|
|
|
1,575,000
|
|
|
1,575
|
|
|
-
|
|
|
-
|
|
|
1,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Investors - At $.001 Per Share
|
|
|
1,045,000
|
|
|
1,045
|
|
|
-
|
|
|
-
|
|
|
1,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial
- Mining Claims - Officer - At $.002 Per Share
|
|
|
875,000
|
|
|
875
|
|
|
759
|
|
|
-
|
|
|
1,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued For:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
At $.50 Per Share
|
|
|
300,000
|
|
|
300
|
|
|
149,700
|
|
|
-
|
|
|
150,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(
8,486
|
|
|
(
8,486
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- July 31, 1983
|
|
|
3,795,000
|
|
|
3,795
|
|
|
150,459
|
|
|
(
8,486
|
)
|
|
145,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued For:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Pursuant to Initial Offering
At
$1.50 Per Share, Net of
Offering
Costs of $408,763
|
|
|
1,754,741
|
|
|
1,755
|
|
|
2,221,594
|
|
|
-
|
|
|
2,223,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
48,890
|
|
|
48,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- July 31, 1984
|
|
|
5,549,741
|
|
|
5,550
|
|
|
2,372,053
|
|
|
40,404
|
|
|
2,418,007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
18,486
|
|
|
18,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- July 31, 1985
|
|
|
5,549,741
|
|
|
5,550
|
|
|
2,372,053
|
|
|
58,890
|
|
|
2,436,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued For:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mineral
Lease At $1.00 Per Share
|
|
|
100
|
|
|
-
|
|
|
100
|
|
|
-
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
4,597
|
|
|
4,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- July 31, 1986
|
|
|
5,549,841
|
|
|
5,550
|
|
|
2,372,153
|
|
|
63,487
|
|
|
2,441,190
|
|
The
accompanying notes are an integral part of the financial
statements.
CAPITAL
GOLD CORPORATION
(A
DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY - (Continued)
FOR
THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 2006
|
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Additional
Paid-In
Capital
|
|
|
Deficit
Accumulated
in
the
Development
Stage
|
|
|
Total
|
|
Net
Loss
|
|
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
(
187,773
|
)
|
$
|
(187,773
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- July 31, 1987
|
|
|
5,549,841
|
|
|
5,550
|
|
|
2,372,153
|
|
|
(
124,286
|
)
|
|
2,253,417
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued For:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
Rendered At $1.00 Per Share
|
|
|
92,000
|
|
|
92
|
|
|
91,908
|
|
|
-
|
|
|
92,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(
328,842
|
)
|
|
(328,842
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- July 31, 1988
|
|
|
5,641,841
|
|
|
5,642
|
|
|
2,464,061
|
|
|
(
453,128
|
)
|
|
2,016,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(
379,852
|
)
|
|
(
379,852
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- July 31, 1989
|
|
|
5,641,841
|
|
|
5,642
|
|
|
2,464,061
|
|
|
(
832,980
|
)
|
|
1,636,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued For:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.70 Per Share
|
|
|
269,060
|
|
|
269
|
|
|
194,219
|
|
|
-
|
|
|
194,488
|
|
At
$.50 Per Share
|
|
|
387,033
|
|
|
387
|
|
|
199,443
|
|
|
-
|
|
|
199,830
|
|
Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.50 Per Share
|
|
|
68,282
|
|
|
68
|
|
|
34,073
|
|
|
-
|
|
|
34,141
|
|
Commissions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.70 Per Share
|
|
|
15,000
|
|
|
15
|
|
|
(
15
|
)
|
|
-
|
|
|
-
|
|
Commissions
Paid
|
|
|
-
|
|
|
-
|
|
|
(
2,100
|
)
|
|
-
|
|
|
(
2,100
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(
529,676
|
)
|
|
(
529,676
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- July 31, 1990
|
|
|
6,381,216
|
|
|
6,381
|
|
|
2,889,681
|
|
|
(1,362,656
|
)
|
|
1,533,406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued For:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
At $.60 Per Share
|
|
|
318,400
|
|
|
319
|
|
|
180,954
|
|
|
-
|
|
|
181,273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(
356,874
|
)
|
|
(
356,874
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- July 31, 1991
|
|
|
6,699,616
|
|
|
6,700
|
|
|
3,070,635
|
|
|
(1,719,530
|
)
|
|
1,357,805
|
|
The
accompanying notes are an integral part of the financial
statements.
CAPITAL
GOLD CORPORATION
(A
DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY - (Continued)
FOR
THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 2006
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Additional
Paid-In
Capital
|
|
Deficit
Accumulated
in
the
Development
Stage
|
|
Total
|
|
Common
Stock Issued For:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.30 Per Share
|
|
|
114,917
|
|
$
|
115
|
|
$
|
34,303
|
|
$
|
-
|
|
$
|
34,418
|
|
At
$.50 Per Share
|
|
|
2,000
|
|
|
2
|
|
|
998
|
|
|
-
|
|
|
1,000
|
|
At
$.60 Per Share
|
|
|
22,867
|
|
|
23
|
|
|
13,698
|
|
|
-
|
|
|
13,721
|
|
At
$.70 Per Share
|
|
|
10,000
|
|
|
10
|
|
|
6,990
|
|
|
-
|
|
|
7,000
|
|
At
$.80 Per Share
|
|
|
6,250
|
|
|
6
|
|
|
4,994
|
|
|
-
|
|
|
5,000
|
|
At
$.90 Per Share
|
|
|
5,444
|
|
|
5
|
|
|
4,895
|
|
|
-
|
|
|
4,900
|
|
Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.32 Per Share
|
|
|
39,360
|
|
|
39
|
|
|
12,561
|
|
|
-
|
|
|
12,600
|
|
At
$.50 Per Share
|
|
|
92,353
|
|
|
93
|
|
|
46,084
|
|
|
-
|
|
|
46,177
|
|
Exercise
of Options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.50 Per Share By Related Party
|
|
|
100,000
|
|
|
100
|
|
|
49,900
|
|
|
-
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(
307,477
|
)
|
|
(
307,477
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- July 31, 1992
|
|
|
7,092,807
|
|
|
7,093
|
|
|
3,245,058
|
|
|
(2,027,007
|
)
|
|
1,225,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued For:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.30 Per Share
|
|
|
176,057
|
|
$
|
176
|
|
$
|
51,503
|
|
$
|
-
|
|
$
|
51,679
|
|
At
$.50 Per Share
|
|
|
140,000
|
|
|
140
|
|
|
69,964
|
|
|
-
|
|
|
70,104
|
|
At
$.60 Per Share
|
|
|
10,000
|
|
|
10
|
|
|
5,990
|
|
|
-
|
|
|
6,000
|
|
At
$.70 Per Share
|
|
|
17,000
|
|
|
17
|
|
|
11,983
|
|
|
-
|
|
|
12,000
|
|
At
$1.00 Per Share
|
|
|
50,000
|
|
|
50
|
|
|
49,950
|
|
|
-
|
|
|
50,000
|
|
Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.50 Per Share
|
|
|
495,556
|
|
|
496
|
|
|
272,504
|
|
|
-
|
|
|
273,000
|
|
Commissions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.50 Per Share
|
|
|
20,220
|
|
|
20
|
|
|
(
20
|
)
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions
Paid
|
|
|
-
|
|
|
-
|
|
|
(
1,500
|
)
|
|
-
|
|
|
(
1,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(
626,958
|
)
|
|
(
626,958
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- July 31, 1993
|
|
|
8,001,640
|
|
|
8,002
|
|
|
3,705,432
|
|
|
(2,653,965
|
)
|
|
1,059,469
|
|
The
accompanying notes are an integral part of the financial
statements.
CAPITAL
GOLD CORPORATION
(A
DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY - (Continued)
FOR
THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 2006
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Additional
Paid-In
Capital
|
|
Deficit
Accumulated
in
the
Development
Stage
|
|
Total
|
|
Common
Stock Issued For:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.30 Per Share
|
|
|
249,330
|
|
$
|
150
|
|
$
|
43,489
|
|
$
|
-
|
|
$
|
43,639
|
|
At
$.50 Per Share
|
|
|
377,205
|
|
|
377
|
|
|
189,894
|
|
|
-
|
|
|
190,271
|
|
Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.30 Per Share
|
|
|
500,000
|
|
|
500
|
|
|
149,500
|
|
|
-
|
|
|
150,000
|
|
At
$.50 Per Share
|
|
|
130,000
|
|
|
130
|
|
|
71,287
|
|
|
-
|
|
|
71,417
|
|
At
$.50 Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By
Related Party
|
|
|
56,000
|
|
|
156
|
|
|
77,844
|
|
|
-
|
|
|
78,000
|
|
At
$.70 Per Share
|
|
|
4,743
|
|
|
4
|
|
|
3,316
|
|
|
-
|
|
|
3,320
|
|
Exercise
of Options For Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.50 Per Share
|
|
|
35,000
|
|
|
35
|
|
|
17,465
|
|
|
-
|
|
|
17,500
|
|
At
$.50 Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By
Related Party
|
|
|
150,000
|
|
|
150
|
|
|
74,850
|
|
|
-
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(
665,909
|
)
|
|
(
665,909
|
)
|
Balance
- July 31, 1994
|
|
|
9,503,918
|
|
|
9,504
|
|
|
4,333,077
|
|
|
(3,319,874
|
)
|
|
1,022,707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued For:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.30 Per Share
|
|
|
150,000
|
|
$
|
150
|
|
$
|
49,856
|
|
$
|
-
|
|
$
|
50,006
|
|
At
$.40 Per Share
|
|
|
288,200
|
|
|
288
|
|
|
115,215
|
|
|
-
|
|
|
115,503
|
|
At
$.50 Per Share
|
|
|
269,611
|
|
|
270
|
|
|
132,831
|
|
|
-
|
|
|
133,101
|
|
At
$.60 Per Share
|
|
|
120,834
|
|
|
121
|
|
|
72,379
|
|
|
-
|
|
|
72,500
|
|
At
$.70 Per Share
|
|
|
23,000
|
|
|
23
|
|
|
16,077
|
|
|
-
|
|
|
16,100
|
|
Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.40 Per Share
|
|
|
145,000
|
|
|
145
|
|
|
60,755
|
|
|
-
|
|
|
60,900
|
|
At
$.50 Per Share
|
|
|
75,000
|
|
|
75
|
|
|
34,925
|
|
|
-
|
|
|
35,000
|
|
Exercise
of Options For:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.50 Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By
Related Party
|
|
|
350,000
|
|
|
350
|
|
|
174,650
|
|
|
-
|
|
|
175,000
|
|
Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.50 Per Share
|
|
|
35,000
|
|
|
35
|
|
|
17,465
|
|
|
-
|
|
|
17,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions
Paid
|
|
|
-
|
|
|
-
|
|
|
(
1,650
|
)
|
|
-
|
|
|
(
1,650
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(
426,803
|
)
|
|
(
426,803
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- July 31, 1995
|
|
|
10,960,563
|
|
|
10,961
|
|
|
5,005,580
|
|
|
(3,746,677
|
)
|
|
1,269,864
|
|
The
accompanying notes are an integral part of the financial
statements.
CAPITAL
GOLD CORPORATION
(A
DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY - (Continued)
FOR
THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 2006
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Additional
Paid-In
Capital
|
|
Deficit
Accumulated
in
the
Development
Stage
|
|
Total
|
|
Common
Stock Issued For:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.40 Per Share
|
|
|
75,972
|
|
$
|
76
|
|
$
|
30,274
|
|
$
|
-
|
|
$
|
30,350
|
|
At
$.50 Per Share
|
|
|
550,423
|
|
|
550
|
|
|
270,074
|
|
|
-
|
|
|
270,624
|
|
At
$.60 Per Share
|
|
|
146,773
|
|
|
147
|
|
|
87,853
|
|
|
|
|
|
88,000
|
|
At
$.70 Per Share
|
|
|
55,722
|
|
|
56
|
|
|
38,949
|
|
|
|
|
|
39,005
|
|
At
$.80 Per Share
|
|
|
110,100
|
|
|
110
|
|
|
87,890
|
|
|
|
|
|
88,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.40 Per Share
|
|
|
104,150
|
|
|
104
|
|
|
38,296
|
|
|
-
|
|
|
38,400
|
|
At
$.50 Per Share
|
|
|
42,010
|
|
|
42
|
|
|
20,963
|
|
|
-
|
|
|
21,005
|
|
At
$.60 Per Share
|
|
|
4,600
|
|
|
5
|
|
|
2,755
|
|
|
|
|
|
2,760
|
|
At
$.70 Per Share
|
|
|
154,393
|
|
|
155
|
|
|
107,920
|
|
|
|
|
|
108,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.35 Per Share
|
|
|
23,428
|
|
|
23
|
|
|
(
23
|
)
|
|
|
|
|
|
|
At
$.50 Per Share
|
|
|
50,545
|
|
|
50
|
|
|
(
50
|
)
|
|
|
|
|
|
|
At
$.60 Per Share
|
|
|
2,000
|
|
|
2
|
|
|
(
2
|
)
|
|
|
|
|
|
|
At
$.70 Per Share
|
|
|
12,036
|
|
|
12
|
|
|
(
12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of Options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.35 Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By
Related Party
|
|
|
19,571
|
|
|
20
|
|
|
6,830
|
|
|
|
|
|
6,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.35 Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By
Related Party
|
|
|
200,429
|
|
|
200
|
|
|
69,950
|
|
|
-
|
|
|
70,150
|
|
At
$.50 Per Share
|
|
|
95,000
|
|
|
95
|
|
|
47,405
|
|
|
-
|
|
|
47,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
Portion of Options
|
|
|
-
|
|
|
-
|
|
|
261,500
|
|
|
-
|
|
|
261,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(
956,043
|
)
|
|
(
956,043
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- July 31, 1996
|
|
|
12,607,715
|
|
|
12,608
|
|
|
6,076,152
|
|
|
(4,702,720
|
)
|
|
1,386,040
|
|
The
accompanying notes are an integral part of the financial
statements.
CAPITAL
GOLD CORPORATION
(A
DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY - (Continued)
FOR
THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 2006
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Additional
Paid-In
Capital
|
|
Deficit
Accumulated
in
the
Development
Stage
|
|
Total
|
|
Common
Stock Issued For:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.35 Per Share
|
|
|
50,000
|
|
$
|
50
|
|
$
|
17,450
|
|
$
|
-
|
|
$
|
17,500
|
|
At
$.40 Per Share
|
|
|
323,983
|
|
|
324
|
|
|
128,471
|
|
|
-
|
|
|
128,795
|
|
At
$.50 Per Share
|
|
|
763,881
|
|
|
762
|
|
|
381,174
|
|
|
-
|
|
|
381,936
|
|
At
$.60 Per Share
|
|
|
16,667
|
|
|
17
|
|
|
9,983
|
|
|
-
|
|
|
10,000
|
|
At
$.70 Per Share
|
|
|
7,143
|
|
|
7
|
|
|
4,993
|
|
|
-
|
|
|
5,000
|
|
At
$.80 Per Share
|
|
|
28,750
|
|
|
29
|
|
|
22,971
|
|
|
-
|
|
|
23,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.50 Per Share
|
|
|
295,884
|
|
|
296
|
|
|
147,646
|
|
|
-
|
|
|
147,942
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.35 Per Share
|
|
|
44,614
|
|
|
45
|
|
|
(
45
|
)
|
|
|
|
|
|
|
At
$.40 Per Share
|
|
|
41,993
|
|
|
42
|
|
|
(
42
|
)
|
|
|
|
|
|
|
At
$.50 Per Share
|
|
|
37,936
|
|
|
38
|
|
|
(
38
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.35 Per Share
|
|
|
8,888
|
|
|
9
|
|
|
3,099
|
|
|
|
|
|
3,108
|
|
At
$.40 Per Share
|
|
|
9,645
|
|
|
10
|
|
|
3,848
|
|
|
|
|
|
3,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and Equipment At $.60 Per Share
|
|
|
7,500
|
|
|
8
|
|
|
4,492
|
|
|
|
|
|
4,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.35 Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By
Related Party
|
|
|
136,301
|
|
|
136
|
|
|
47,569
|
|
|
|
|
|
47,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(
805,496
|
)
|
|
(
805,496
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- July 31, 1997
|
|
|
14,380,900
|
|
|
14,381
|
|
|
6,847,723
|
|
|
(5,508,216
|
)
|
|
1,353,888
|
|
The
accompanying notes are an integral part of the financial
statements.
CAPITAL
GOLD CORPORATION
(A
DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY - (Continued)
FOR
THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 2006
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Additional
Paid-In
Capital
|
|
Deficit
Accumulated
in
the
Development
Stage
|
|
Total
|
|
Common
Stock Issued For:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.20 Per Share
|
|
|
10,000
|
|
$
|
10
|
|
$
|
1,990
|
|
$
|
-
|
|
$
|
2,000
|
|
At
$.25 Per Share
|
|
|
100,000
|
|
|
100
|
|
|
24,900
|
|
|
-
|
|
|
25,000
|
|
At
$.27 Per Share
|
|
|
45,516
|
|
|
46
|
|
|
12,244
|
|
|
-
|
|
|
12,290
|
|
At
$.28 Per Share
|
|
|
150,910
|
|
|
151
|
|
|
41,349
|
|
|
-
|
|
|
41,500
|
|
At
$.30 Per Share
|
|
|
60,333
|
|
|
60
|
|
|
18,040
|
|
|
-
|
|
|
18,100
|
|
At
$.31 Per Share
|
|
|
9,677
|
|
|
10
|
|
|
2,990
|
|
|
-
|
|
|
3,000
|
|
At
$.32 Per Share
|
|
|
86,750
|
|
|
87
|
|
|
27,673
|
|
|
-
|
|
|
27,760
|
|
At
$.33 Per Share
|
|
|
125,364
|
|
|
125
|
|
|
41,245
|
|
|
-
|
|
|
41,370
|
|
At
$.35 Per Share
|
|
|
75,144
|
|
|
75
|
|
|
26,225
|
|
|
-
|
|
|
26,300
|
|
At
$.38 Per Share
|
|
|
49,048
|
|
|
49
|
|
|
18,311
|
|
|
-
|
|
|
18,360
|
|
At
$.40 Per Share
|
|
|
267,500
|
|
|
268
|
|
|
106,732
|
|
|
-
|
|
|
107,000
|
|
At
$.45 Per Share
|
|
|
65,333
|
|
|
65
|
|
|
29,335
|
|
|
-
|
|
|
29,400
|
|
At
$.50 Per Share
|
|
|
611,184
|
|
|
610
|
|
|
304,907
|
|
|
-
|
|
|
305,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.23 Per Share
|
|
|
48,609
|
|
|
49
|
|
|
11,131
|
|
|
-
|
|
|
11,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of Options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.22 Per Share
|
|
|
82,436
|
|
|
82
|
|
|
18,054
|
|
|
-
|
|
|
18,136
|
|
At
$.35 Per Share
|
|
|
183,846
|
|
|
184
|
|
|
64,162
|
|
|
-
|
|
|
64,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.22 Per Share
|
|
|
105,000
|
|
|
105
|
|
|
22,995
|
|
|
-
|
|
|
23,100
|
|
At
$.35 Per Share
|
|
|
25,000
|
|
|
25
|
|
|
8,725
|
|
|
-
|
|
|
8,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.22 Per Share
|
|
|
67,564
|
|
|
68
|
|
|
(
68
|
)
|
|
-
|
|
|
|
|
At
$.35 Per Share
|
|
|
291,028
|
|
|
291
|
|
|
(
291
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(
807,181
|
)
|
|
(
807,181
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- July 31, 1998
|
|
|
16,841,142
|
|
|
16,841
|
|
|
7,628,372
|
|
|
(6,315,397
|
)
|
|
1,329,816
|
|
The
accompanying notes are an integral part of the financial
statements.
CAPITAL
GOLD CORPORATION
(A
DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY - (Continued)
FOR
THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 2006
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Additional
Paid-In
Capital
|
|
Deficit
Accumulated
in
the
Development
Stage
|
|
Total
|
|
Common
Stock Issued For:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$0.20 Per Share
|
|
|
12,500
|
|
$
|
13
|
|
$
|
2,487
|
|
$
|
-
|
|
$
|
2,500
|
|
At
$0.22 Per Share
|
|
|
45,454
|
|
|
45
|
|
|
9,955
|
|
|
-
|
|
|
10,000
|
|
At
$0.25 Per Share
|
|
|
248,788
|
|
|
249
|
|
|
61,948
|
|
|
-
|
|
|
62,197
|
|
At
$0.27 Per Share
|
|
|
132,456
|
|
|
132
|
|
|
35,631
|
|
|
-
|
|
|
35,763
|
|
At
$0.28 Per Share
|
|
|
107,000
|
|
|
107
|
|
|
30,493
|
|
|
-
|
|
|
30,600
|
|
At
$0.29 Per Share
|
|
|
20,000
|
|
|
20
|
|
|
5,780
|
|
|
-
|
|
|
5,800
|
|
At
$0.30 Per Share
|
|
|
49,333
|
|
|
49
|
|
|
14,751
|
|
|
-
|
|
|
14,800
|
|
At
$0.32 Per Share
|
|
|
152,725
|
|
|
153
|
|
|
48,719
|
|
|
-
|
|
|
48,872
|
|
At
$0.33 Per Share
|
|
|
149,396
|
|
|
149
|
|
|
49,151
|
|
|
-
|
|
|
49,300
|
|
At
$0.35 Per Share
|
|
|
538,427
|
|
|
538
|
|
|
187,912
|
|
|
-
|
|
|
188,450
|
|
At
$0.40 Per Share
|
|
|
17,000
|
|
|
17
|
|
|
6,783
|
|
|
-
|
|
|
6,800
|
|
At
$0.50 Per Share
|
|
|
53,000
|
|
|
53
|
|
|
26,447
|
|
|
-
|
|
|
26,500
|
|
At
$0.55 Per Share
|
|
|
6,000
|
|
|
6
|
|
|
3,294
|
|
|
-
|
|
|
3,300
|
|
At
$0.65 Per Share
|
|
|
33,846
|
|
|
34
|
|
|
21,966
|
|
|
-
|
|
|
22,000
|
|
At
$0.68 Per Share
|
|
|
13,235
|
|
|
13
|
|
|
8,987
|
|
|
-
|
|
|
9,000
|
|
At
$0.70 Per Share
|
|
|
153,572
|
|
|
154
|
|
|
107,346
|
|
|
-
|
|
|
107,500
|
|
At
$0.90 Per Share
|
|
|
57,777
|
|
|
58
|
|
|
51,942
|
|
|
-
|
|
|
52,000
|
|
At
$1.00 Per Share
|
|
|
50,000
|
|
|
50
|
|
|
49,950
|
|
|
-
|
|
|
50,000
|
|
At
$1.10 Per Share
|
|
|
150,000
|
|
|
150
|
|
|
164,850
|
|
|
-
|
|
|
165,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$0.21 Per Share
|
|
|
37,376
|
|
|
37
|
|
|
7,812
|
|
|
-
|
|
|
7,849
|
|
At
$0.30 Per Share
|
|
|
19,450
|
|
|
19
|
|
|
5,816
|
|
|
-
|
|
|
5,835
|
|
At
$0.36 Per Share
|
|
|
34,722
|
|
|
35
|
|
|
12,465
|
|
|
-
|
|
|
12,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commission:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$0.21 Per Share
|
|
|
158,426
|
|
|
158
|
|
|
(
158
|
)
|
|
-
|
|
|
-
|
|
At
$0.25 Per Share
|
|
|
28,244
|
|
|
28
|
|
|
(
28
|
)
|
|
-
|
|
|
-
|
|
At
$0.30 Per Share
|
|
|
132,759
|
|
|
133
|
|
|
(
133
|
)
|
|
-
|
|
|
-
|
|
At
$0.35 Per Share
|
|
|
40,000
|
|
|
40
|
|
|
(
40
|
)
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services:
|
|
|
95,238
|
|
|
95
|
|
|
19,905
|
|
|
-
|
|
|
20,000
|
|
At
$0.25 Per Share
|
|
|
17,000
|
|
|
17
|
|
|
4,233
|
|
|
-
|
|
|
4,250
|
|
At
$0.30 Per Share
|
|
|
145,941
|
|
|
146
|
|
|
43,636
|
|
|
-
|
|
|
43,782
|
|
At
$0.50 Per Share
|
|
|
71,808
|
|
|
72
|
|
|
35,832
|
|
|
-
|
|
|
35,904
|
|
The
accompanying notes are an integral part of the financial
statements.
CAPITAL
GOLD CORPORATION
(A
DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY - (Continued)
FOR
THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31,
2006
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Additional
Paid-In
Capital
|
|
Deficit
Accumulated
in
the
Development
Stage
|
|
Total
|
|
Compensation
portion of Cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
portion of Cash Issuances
|
|
|
-
|
|
$
|
-
|
|
$
|
618,231
|
|
$
|
-
|
|
$
|
618,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
Portion of Options
|
|
|
-
|
|
|
-
|
|
|
304,900
|
|
|
-
|
|
|
304,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of Options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$0.10 Per Share
|
|
|
510,000
|
|
|
510
|
|
|
50,490
|
|
|
-
|
|
|
51,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$0.70 Per Share
|
|
|
100,000
|
|
|
100
|
|
|
69,900
|
|
|
-
|
|
|
70,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,964,447
|
)
|
|
(1,964,447
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- July 31, 1999
|
|
|
20,222,615
|
|
|
20,221
|
|
|
9,689,625
|
|
|
(8,279,844
|
)
|
|
1,430,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued For:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.18 Per Share
|
|
|
27,778
|
|
|
28
|
|
|
4,972
|
|
|
-
|
|
|
5,000
|
|
At
$.20 Per Share
|
|
|
482,500
|
|
|
483
|
|
|
96,017
|
|
|
-
|
|
|
96,500
|
|
At
$.21 Per Share
|
|
|
47,500
|
|
|
47
|
|
|
9,953
|
|
|
-
|
|
|
10,000
|
|
At
$.22 Per Share
|
|
|
844,821
|
|
|
845
|
|
|
185,012
|
|
|
-
|
|
|
185,857
|
|
At
$.30 Per Share
|
|
|
100,000
|
|
|
100
|
|
|
29,900
|
|
|
-
|
|
|
30,000
|
|
At
$.35 Per Share
|
|
|
280,000
|
|
|
280
|
|
|
97,720
|
|
|
-
|
|
|
98,000
|
|
At
$.37 Per Share
|
|
|
56,000
|
|
|
56
|
|
|
19,944
|
|
|
-
|
|
|
20,000
|
|
At
$.38 Per Share
|
|
|
100,000
|
|
|
100
|
|
|
37,900
|
|
|
-
|
|
|
38,000
|
|
At
$.40 Per Share
|
|
|
620,000
|
|
|
620
|
|
|
247,380
|
|
|
-
|
|
|
248,000
|
|
At
$.42 Per Share
|
|
|
47,715
|
|
|
48
|
|
|
19,952
|
|
|
-
|
|
|
20,000
|
|
At
$.45 Per Share
|
|
|
182,445
|
|
|
182
|
|
|
81,918
|
|
|
-
|
|
|
82,100
|
|
At
$.50 Per Share
|
|
|
313,000
|
|
|
313
|
|
|
156,187
|
|
|
-
|
|
|
156,500
|
|
At
$.55 Per Share
|
|
|
122,778
|
|
|
123
|
|
|
67,377
|
|
|
-
|
|
|
67,500
|
|
At
$.58 Per Share
|
|
|
12,069
|
|
|
12
|
|
|
6,988
|
|
|
-
|
|
|
7,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.20 Per Share
|
|
|
4,167
|
|
|
4
|
|
|
829
|
|
|
-
|
|
|
833
|
|
At
$.22 Per Share
|
|
|
46,091
|
|
|
46
|
|
|
10,094
|
|
|
-
|
|
|
10,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
Portion
|
|
|
-
|
|
|
-
|
|
|
94,430
|
|
|
-
|
|
|
94,430
|
|
The
accompanying notes are an integral part of the financial
statements.
CAPITAL
GOLD CORPORATION
(A
DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY - (Continued)
FOR
THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31,
2006
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Additional
Paid-In
Capital
|
|
Deficit
Accumulated
in
the
Development
Stage
|
|
Total
|
|
Exercise
of Options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.25 Per Share
|
|
|
30,000
|
|
$
|
30
|
|
$
|
7,470
|
|
$
|
-
|
|
$
|
7,500
|
|
At
$.40 Per Share
|
|
|
95,000
|
|
|
95
|
|
|
37,905
|
|
|
-
|
|
|
38,000
|
|
At
$.50 Per Share
|
|
|
25,958
|
|
|
26
|
|
|
12,954
|
|
|
-
|
|
|
12,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.20 Per Share
|
|
|
26,750
|
|
|
27
|
|
|
(
27
|
)
|
|
-
|
|
|
-
|
|
At
$.22 Per Share
|
|
|
86,909
|
|
|
87
|
|
|
(
87
|
)
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of Options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.10 Per Share
|
|
|
100,000
|
|
|
100
|
|
|
9,900
|
|
|
-
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of Options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.22 Per Share
|
|
|
150,000
|
|
|
150
|
|
|
32,850
|
|
|
-
|
|
|
33,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Based Compensation
|
|
|
-
|
|
|
-
|
|
|
221,585
|
|
|
-
|
|
|
221,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,530,020
|
)
|
|
(1,530,020
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- July 31, 2000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unconsolidated)
|
|
|
24,024,096
|
|
|
24,023
|
|
|
11,178,748
|
|
|
(9,809,864
|
)
|
|
1,392,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued For:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.15 Per Share
|
|
|
120,000
|
|
|
120
|
|
|
17,880
|
|
|
-
|
|
|
18,000
|
|
At
$.17 Per Share
|
|
|
80,000
|
|
|
80
|
|
|
13,520
|
|
|
-
|
|
|
13,600
|
|
At
$.18 Per Share
|
|
|
249,111
|
|
|
249
|
|
|
44,591
|
|
|
-
|
|
|
44,840
|
|
At
$.19 Per Share
|
|
|
70,789
|
|
|
71
|
|
|
13,379
|
|
|
-
|
|
|
13,450
|
|
At
$.20 Per Share
|
|
|
1,322,500
|
|
|
1,323
|
|
|
261,677
|
|
|
-
|
|
|
263,000
|
|
At
$.21 Per Share
|
|
|
33,810
|
|
|
34
|
|
|
7,066
|
|
|
-
|
|
|
7,100
|
|
At
$.22 Per Share
|
|
|
2,472,591
|
|
|
2,473
|
|
|
541,497
|
|
|
-
|
|
|
543,970
|
|
At
$.23 Per Share
|
|
|
65,239
|
|
|
65
|
|
|
14,935
|
|
|
-
|
|
|
15,000
|
|
At
$.24 Per Share
|
|
|
123,337
|
|
|
123
|
|
|
29,477
|
|
|
-
|
|
|
29,600
|
|
At
$.25 Per Share
|
|
|
610,400
|
|
|
611
|
|
|
151,884
|
|
|
-
|
|
|
152,495
|
|
At
$.26 Per Share
|
|
|
625,769
|
|
|
626
|
|
|
162,074
|
|
|
-
|
|
|
162,700
|
|
At
$.27 Per Share
|
|
|
314,850
|
|
|
315
|
|
|
84,695
|
|
|
-
|
|
|
85,010
|
|
At
$.28 Per Share
|
|
|
7,143
|
|
|
7
|
|
|
1,993
|
|
|
-
|
|
|
2,000
|
|
At
$.30 Per Share
|
|
|
33,333
|
|
|
33
|
|
|
9,967
|
|
|
-
|
|
|
10,000
|
|
At
$.35 Per Share
|
|
|
271,429
|
|
|
272
|
|
|
94,728
|
|
|
-
|
|
|
95,000
|
|
At
$.38 Per Share
|
|
|
453,158
|
|
|
453
|
|
|
169,547
|
|
|
-
|
|
|
170,000
|
|
At
$.40 Per Share
|
|
|
300,000
|
|
|
300
|
|
|
119,700
|
|
|
-
|
|
|
120,000
|
|
At
$.50 Per Share
|
|
|
10,000
|
|
|
10
|
|
|
4,990
|
|
|
-
|
|
|
5,000
|
|
The
accompanying notes are an integral part of the financial
statements.
CAPITAL
GOLD CORPORATION
(A
DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY - (Continued)
FOR
THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31,
2006
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Additional
Paid-In
Capital
|
|
Deficit
Accumulated
in
the
Development
Stage
|
|
Accumulated
Other
Comprehensive
Income
(Loss)
|
|
Total
|
|
Compensation
Portion:
|
|
|
-
|
|
$
|
-
|
|
$
|
24,000
|
|
$
|
-
|
|
$
|
-
|
|
$
|
24,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.27 Per Share
|
|
|
30,000
|
|
|
30
|
|
|
8,070
|
|
|
-
|
|
|
-
|
|
|
8,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$0.20 Per Share
|
|
|
33,850
|
|
|
34
|
|
|
6,736
|
|
|
-
|
|
|
-
|
|
|
6,770
|
|
At
$0.23 Per Share
|
|
|
15,000
|
|
|
15
|
|
|
3,435
|
|
|
-
|
|
|
-
|
|
|
3,450
|
|
At
$0.11 Per Share
|
|
|
87,272
|
|
|
87
|
|
|
9,513
|
|
|
-
|
|
|
-
|
|
|
9,600
|
|
At
$0.34 Per Share
|
|
|
50,000
|
|
|
50
|
|
|
16,950
|
|
|
-
|
|
|
-
|
|
|
17,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
Portion:
|
|
|
-
|
|
|
-
|
|
|
21,777
|
|
|
-
|
|
|
-
|
|
|
21,777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commission:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$0.11 Per Share
|
|
|
266,500
|
|
|
267
|
|
|
(267
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
At
$0.20 Per Share
|
|
|
26,150
|
|
|
26
|
|
|
(26
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
At
$0.22 Per Share
|
|
|
15,000
|
|
|
15
|
|
|
(15
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
Portion:
|
|
|
-
|
|
|
-
|
|
|
36,595
|
|
|
-
|
|
|
-
|
|
|
36,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of Options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$0.02 Per Share By
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related
Party
|
|
|
225,000
|
|
|
225
|
|
|
4,725
|
|
|
-
|
|
|
-
|
|
|
4,950
|
|
At
$0.10 Per Share
|
|
|
200,000
|
|
|
200
|
|
|
19,800
|
|
|
-
|
|
|
-
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$0.02 Per Share By Related Party
|
|
|
53,270
|
|
|
53
|
|
|
1,120
|
|
|
-
|
|
|
-
|
|
|
1,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
Portion:
|
|
|
-
|
|
|
-
|
|
|
25,463
|
|
|
-
|
|
|
-
|
|
|
25,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commission:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$0.02 Per Share
|
|
|
350,000
|
|
|
350
|
|
|
(350
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
Portion:
|
|
|
-
|
|
|
-
|
|
|
132,300
|
|
|
-
|
|
|
-
|
|
|
132,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commission:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$0.05 Per Share
|
|
|
1,000,000
|
|
|
1,000
|
|
|
(1,000
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
Portion:
|
|
|
-
|
|
|
-
|
|
|
400,000
|
|
|
-
|
|
|
-
|
|
|
400,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Based Compensation
|
|
|
-
|
|
|
-
|
|
|
7,002,500
|
|
|
-
|
|
|
-
|
|
|
7,002,500
|
|
The
accompanying notes are an integral part of the financial
statements.
CAPITAL
GOLD CORPORATION
(A
DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY - (Continued)
FOR
THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 2006
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Additional
Paid-In
Capital
|
|
Deficit
Accumulated
in
the
Development
Stage
|
|
Accumulated
Other
Comprehensive
Income
(Loss)
|
|
Total
|
|
Comprehensive
Loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(
9,418,266
|
)
|
|
-
|
|
|
(9,418,266
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
Adjustment from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
Currency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(
493
|
)
|
|
(
493
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Comprehensive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(9,418,759
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- July 31, 2001
|
|
|
33,539,597
|
|
|
33,540
|
|
|
20,633,674
|
|
|
(19,228,130
|
)
|
|
(
493
|
)
|
|
1,438,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.022 Per Share
|
|
|
1,400,976
|
|
|
1,401
|
|
|
29,420
|
|
|
-
|
|
|
-
|
|
|
30,821
|
|
At
$.08 Per Share
|
|
|
250,000
|
|
|
250
|
|
|
19,750
|
|
|
-
|
|
|
-
|
|
|
20,000
|
|
At
$.10 Per Share
|
|
|
980,000
|
|
|
980
|
|
|
97,020
|
|
|
-
|
|
|
-
|
|
|
98,000
|
|
At
$.11 Per Share
|
|
|
145,456
|
|
|
145
|
|
|
15,855
|
|
|
-
|
|
|
-
|
|
|
16,000
|
|
At
$.115 Per Share
|
|
|
478,260
|
|
|
478
|
|
|
54,522
|
|
|
-
|
|
|
-
|
|
|
55,000
|
|
At
$.12 Per Share
|
|
|
500,000
|
|
|
500
|
|
|
59,500
|
|
|
-
|
|
|
-
|
|
|
60,000
|
|
At
$.125 Per Share
|
|
|
40,000
|
|
|
40
|
|
|
4,960
|
|
|
-
|
|
|
-
|
|
|
5,000
|
|
At
$.14 Per Share
|
|
|
44,000
|
|
|
44
|
|
|
6,116
|
|
|
-
|
|
|
-
|
|
|
6,160
|
|
At
$.15 Per Share
|
|
|
383,667
|
|
|
384
|
|
|
57,166
|
|
|
-
|
|
|
-
|
|
|
57,550
|
|
At
$.18 Per Share
|
|
|
25,000
|
|
|
25
|
|
|
4,475
|
|
|
-
|
|
|
-
|
|
|
4,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.115 Per Share
|
|
|
69,565
|
|
|
70
|
|
|
(
70
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
At
$.22 Per Share
|
|
|
100,000
|
|
|
100
|
|
|
(
100
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
At
$.08 Per Share
|
|
|
20,625
|
|
|
21
|
|
|
(
21
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
At
$.14-$.22 Per Share
|
|
|
282,475
|
|
|
282
|
|
|
(
282
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.10 Per Share
|
|
|
35,950
|
|
|
36
|
|
|
3,559
|
|
|
-
|
|
|
-
|
|
|
3,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of Options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.022 Per Share by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related
Party:
|
|
|
227,273
|
|
|
227
|
|
|
4,773
|
|
|
-
|
|
|
-
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of Options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.022 Per Share by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related
Parties
|
|
|
909,092
|
|
|
909
|
|
|
19,091
|
|
|
-
|
|
|
-
|
|
|
20,000
|
|
At
$.022 Per Share by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Others
|
|
|
1,205,929
|
|
|
1,206
|
|
|
25,325
|
|
|
-
|
|
|
-
|
|
|
26,531
|
|
The
accompanying notes are an integral part of the financial
statements.
CAPITAL
GOLD CORPORATION
(A
DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY - (Continued)
FOR
THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 2006
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Additional
|
|
in
the
|
|
Other
|
|
|
|
|
|
Common
Stock
|
|
Paid-In
|
|
Development
|
|
Comprehensive
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Stage
|
|
Income
(Loss)
|
|
Total
|
|
Additional
Paid-In Capital Arising From Investment In Joint Venture Subsidiary
by Minority Interest
|
|
|
- |
|
|
|
|
|
51,934
|
|
|
-
|
|
|
-
|
|
|
51,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Based Compensation
|
|
|
-
|
|
|
-
|
|
|
222,338
|
|
|
-
|
|
|
-
|
|
|
222,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
Loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(
492,148
|
)
|
|
-
|
|
|
(
492,148
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
Adjustment from Foreign Currency Translation
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(
6,753
|
)
|
|
(
6,753
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Comprehensive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(
498,901
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- July 31, 2002
|
|
|
40,637,865
|
|
|
40,638
|
|
|
21,309,005
|
|
|
(19,720,278
|
)
|
|
(
7,246
|
)
|
|
1,622,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.022 Per Share
|
|
|
250,000
|
|
|
250
|
|
|
5,250
|
|
|
-
|
|
|
-
|
|
|
5,500
|
|
At
$.10 Per Share
|
|
|
50,000
|
|
|
50
|
|
|
4,950
|
|
|
-
|
|
|
-
|
|
|
5,000
|
|
At
$.12 Per Share
|
|
|
1,250,000
|
|
|
1,250
|
|
|
148,750
|
|
|
-
|
|
|
-
|
|
|
150,000
|
|
At
$.14 Per Share
|
|
|
235,714
|
|
|
236
|
|
|
32,764
|
|
|
-
|
|
|
-
|
|
|
33,000
|
|
At
$.15 Per Share
|
|
|
1,016,865
|
|
|
1,017
|
|
|
151,513
|
|
|
-
|
|
|
-
|
|
|
152,530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of Options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.022 Per Share by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related
Party
|
|
|
922,727
|
|
|
923
|
|
|
19,377
|
|
|
-
|
|
|
-
|
|
|
20,300
|
|
At
$.05 Per Share by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related
Party
|
|
|
200,000
|
|
|
200
|
|
|
9,800
|
|
|
-
|
|
|
-
|
|
|
10,000
|
|
At
$.05 Per Share by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Others
|
|
|
100,000
|
|
|
100
|
|
|
4,900
|
|
|
-
|
|
|
-
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$4.00 Per Share
|
|
|
14,363
|
|
|
13
|
|
|
57,378
|
|
|
-
|
|
|
-
|
|
|
57,391
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
Paid-In Capital Arising from Investment In Joint Venture
Subsidiary By
Minority Interest
|
|
|
-
|
|
|
-
|
|
|
159,919
|
|
|
-
|
|
|
-
|
|
|
159,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Based Compensation
|
|
|
-
|
|
|
-
|
|
|
288,623
|
|
|
-
|
|
|
-
|
|
|
288,623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
Loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(
1,919,261
|
)
|
|
-
|
|
|
(
1,919,261
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
Adjustment from Foreign Currency Translation
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
60,879
|
|
|
60,879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Comprehensive Loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(
1,858,382
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- July 31, 2003
|
|
|
44,677,534
|
|
|
44,677
|
|
|
22,192,229
|
|
|
(21,639,539
|
)
|
|
53,633
|
|
|
651,000
|
|
The
accompanying notes are an integral part of the financial
statements.
CAPITAL
GOLD CORPORATION
(A
DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY - (Continued)
FOR
THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 2006
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Additional
Paid-In
Capital
|
|
Deficit
Accumulated
in
the
Development
Stage
|
|
Accumulated
Other
Comprehensive
Income
(Loss)
|
|
Total
|
|
Common
Stock Issued for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.05 Per Share
|
|
|
150,000
|
|
|
150
|
|
|
7,350
|
|
|
-
|
|
|
-
|
|
|
7,500
|
|
At
$.11 Per Share
|
|
|
245,455
|
|
|
245
|
|
|
26,755
|
|
|
-
|
|
|
-
|
|
|
27,000
|
|
At
$.12 Per Share
|
|
|
5,929,565
|
|
|
5,929
|
|
|
705,318
|
|
|
-
|
|
|
-
|
|
|
711,247
|
|
At
$.13 Per Share
|
|
|
349,691
|
|
|
350
|
|
|
45,110
|
|
|
-
|
|
|
-
|
|
|
45,460
|
|
At
$.14 Per Share
|
|
|
346,284
|
|
|
346
|
|
|
48,133
|
|
|
-
|
|
|
-
|
|
|
48,479
|
|
At
$.15 Per Share
|
|
|
368,665
|
|
|
369
|
|
|
54,931
|
|
|
-
|
|
|
-
|
|
|
55,300
|
|
At
$.16 Per Share
|
|
|
593,750
|
|
|
594
|
|
|
94,406
|
|
|
-
|
|
|
-
|
|
|
95,000
|
|
At
$.17 Per Share
|
|
|
145,000
|
|
|
145
|
|
|
24,505
|
|
|
-
|
|
|
-
|
|
|
24,650
|
|
At
$.18 Per Share
|
|
|
55,554
|
|
|
56
|
|
|
9,944
|
|
|
-
|
|
|
-
|
|
|
10,000
|
|
At
$.20 Per Share
|
|
|
365,000
|
|
|
365
|
|
|
72,635
|
|
|
-
|
|
|
-
|
|
|
73,000
|
|
At
$.23 Per Share
|
|
|
45,439
|
|
|
45
|
|
|
10,405
|
|
|
-
|
|
|
-
|
|
|
10,450
|
|
At
$.24 Per Share
|
|
|
74,166
|
|
|
74
|
|
|
17,726
|
|
|
-
|
|
|
-
|
|
|
17,800
|
|
At
$.25 Per Share
|
|
|
80,000
|
|
|
80
|
|
|
19,920
|
|
|
-
|
|
|
-
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of Options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.02 Per Share by Related
Party
|
|
|
250,000
|
|
|
250
|
|
|
5,250
|
|
|
-
|
|
|
-
|
|
|
5,500
|
|
At
$.05 Per Share by Related
Party
|
|
|
1,415,000
|
|
|
1,415
|
|
|
69,338
|
|
|
-
|
|
|
-
|
|
|
70,753
|
|
At
$.12 Per Share by Related
Party
|
|
|
97,826
|
|
|
98
|
|
|
11,152
|
|
|
-
|
|
|
-
|
|
|
11,250
|
|
At
$.02 Per Share by Related
Party
|
|
|
272,727
|
|
|
273
|
|
|
5,327
|
|
|
-
|
|
|
-
|
|
|
5,600
|
|
At
$.05 Per Share by Related
Party
|
|
|
300,000
|
|
|
300
|
|
|
14,700
|
|
|
-
|
|
|
-
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.12 Per Share
|
|
|
7,500
|
|
|
8
|
|
|
892
|
|
|
-
|
|
|
-
|
|
|
900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
Paid-In Capital Arising from Investment In Joint Venture Subsidiary
By Minority Interest
|
|
|
-
|
|
|
-
|
|
|
100,156
|
|
|
-
|
|
|
-
|
|
|
100,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Based Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related
Parties
|
|
|
-
|
|
|
-
|
|
|
314,000
|
|
|
-
|
|
|
-
|
|
|
314,000
|
|
Other
|
|
|
-
|
|
|
-
|
|
|
65,033
|
|
|
-
|
|
|
-
|
|
|
65,033
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued In Connection with Termination of Joint
Venture
|
|
|
2,000,000
|
|
|
2,000
|
|
|
798,000
|
|
|
-
|
|
|
-
|
|
|
800,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
Loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(
2,938,590
|
)
|
|
-
|
|
|
(
2,938,590
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
Adjustment fromForeign Currency Translation
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(24,894
|
)
|
|
(
24,894
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
Gain on Marketable Securities
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
60,000
|
|
|
60,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Comprehensive Loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(
2,903,484
|
)
|
Balance
- July 31, 2004
|
|
|
57,769,156
|
|
|
57,769
|
|
|
24,713,215
|
|
|
(24,578,129
|
)
|
|
88,739
|
|
|
281,594
|
|
The
accompanying notes are an integral part of the financial
statements.
CAPITAL
GOLD CORPORATION
(A
DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY - (Continued)
FOR
THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 2006
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Additional
Paid-In
Capital
|
|
Deficit
Accumulated
in
the
Development
Stage
|
|
Accumulated
Other
Comprehensive
Income
(Loss)
|
|
Deferred
Financing
Costs
|
|
Total
|
|
Common
Stock Issued for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.10 Per Share
|
|
|
175,000
|
|
|
175
|
|
|
17,325
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
17,500
|
|
At
$.11 Per Share
|
|
|
381,763
|
|
|
382
|
|
|
41,612
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
41,994
|
|
At
$.12 Per Share
|
|
|
2,378,493
|
|
|
2,379
|
|
|
283,042
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
285,421
|
|
At
$.13 Per Share
|
|
|
582,307
|
|
|
582
|
|
|
75,118
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
75,700
|
|
At
$.14 Per Share
|
|
|
35,714
|
|
|
36
|
|
|
4,964
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
5,000
|
|
At
$.15 Per Share
|
|
|
101,333
|
|
|
101
|
|
|
15,099
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
15,200
|
|
At
$.20 Per Share
|
|
|
25,000
|
|
|
25
|
|
|
4,975
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.25 Per Share
|
|
|
27,200,004
|
|
|
27,200
|
|
|
6,772,801
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
6,800,001
|
|
Shares
issued for Cash Through Private PlacementPrivate Placement
costs
|
|
|
|
|
|
|
|
|
(637,991
|
)
|
|
|
|
|
|
|
|
-
|
|
|
(637,991
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.11 Per Share
|
|
|
188,173
|
|
|
188
|
|
|
20,511
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
20,699
|
|
At
$.12 Per Share
|
|
|
71,334
|
|
|
71
|
|
|
8,489
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
8,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of Options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.022 Per Share by Related
Party
|
|
|
227,273
|
|
|
227
|
|
|
4,773
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
5,000
|
|
At
$.05 Per Share by Related
Party
|
|
|
400,000
|
|
|
400
|
|
|
19,600
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
20,000
|
|
At
$.05 Per Share by
Other
|
|
|
|
|
|
250
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
12,500
|
|
At
$.22 Per Share by
Other
|
|
|
250,000
|
|
|
250
|
|
|
54,750
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
55,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.12 Per Share by
Other
|
|
|
300,000
|
|
|
300
|
|
|
35,700
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
36,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.12 Per Share
|
|
|
193,666
|
|
|
194
|
|
|
(194
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non
Registration Penalty:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
$.19 Per Share
|
|
|
5,440,000
|
|
|
5,440
|
|
|
(5,440
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Based Compensation
|
|
|
|
|
|
|
|
|
158,584
|
|
|
|
|
|
|
|
|
|
|
|
158,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
Financing Costs
|
|
|
-
|
|
|
-
|
|
|
252,541
|
|
|
-
|
|
|
-
|
|
|
(252,541
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(
2,005,682
|
)
|
|
-
|
|
|
-
|
|
|
(2,005,682
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
Adjustment from Foreign Currency Translation
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
28,975
|
|
|
-
|
|
|
28,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
Gain on Marketable Securities
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
40,000
|
|
|
-
|
|
|
40,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Comprehensive Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,936,707
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- July 31, 2005
|
|
|
95,969,216
|
|
$
|
95,969
|
|
$
|
31,851,724
|
|
$
|
(26,583,811
|
)
|
$
|
157,714
|
|
$
|
(252,541
|
)
|
$
|
5,269,055
|
|
The
accompanying notes are an integral part of the financial
statements.
CAPITAL
GOLD CORPORATION
(A
DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ EQUITY - (Continued)
FOR
THE
PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 2006
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Additional
Paid-In-capital
|
|
Deficit
Accumulated
in
the
Development
Stage
|
|
Accumulated
Other
Comprehensive
Income/(Loss)
|
|
Deferred
Financing
Costs
|
|
Deferred
Compensation
Costs
|
|
Total
Stockholder
Equity
|
|
Balance
at July 31, 2005
|
|
|
95,969,216
|
|
|
95,969
|
|
|
31,851,724
|
|
|
(26,583,811
|
)
|
|
157,714
|
|
|
(252,541
|
)
|
|
-
|
|
|
5,269,055
|
|
Change
in par value to $0.0001
|
|
|
-
|
|
|
(86,372
|
)
|
|
86,372
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Deferred
Financing Costs
|
|
|
1,000,000
|
|
|
100
|
|
|
269,900
|
|
|
-
|
|
|
-
|
|
|
(270,000
|
)
|
|
-
|
|
|
-
|
|
Issuance
of common stock upon
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
warrant
and option exercises, net
|
|
|
4,825,913
|
|
|
482
|
|
|
741,338
|
|
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
741,820
|
|
Issuance
of common stock upon
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
warrant
and option exercises, net
|
|
|
8,600,000
|
|
|
860
|
|
|
2,372,740
|
|
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
2,373,600
|
|
Private
placement, net
|
|
|
21,240,000
|
|
|
2,124
|
|
|
4,997,376
|
|
|
-
|
|
|
-
|
|
|
|
|
|
-
|
|
|
4,999,500
|
|
Options
and warrants issued for services
|
|
|
|
|
|
|
|
|
414,375
|
|
|
-
|
|
|
|
|
|
|
|
|
(52,500
|
)
|
|
361,875
|
|
Unrealized
loss on marketable securities
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
(60,000
|
)
|
|
|
|
|
-
|
|
|
(60,000
|
)
|
Equity
adjustment from foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
48,779
|
|
|
|
|
|
-
|
|
|
48,779
|
|
Net
loss for the year ended July 31, 2006
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(4,804,692
|
)
|
|
-
|
|
|
|
|
|
-
|
|
|
(4,804,692
|
)
|
Balance
- July 31, 2006
|
|
|
131,635,129
|
|
|
13,163
|
|
|
40,733,825
|
|
|
(31,388,503
|
)
|
|
146,493
|
|
|
(522,541
|
)
|
|
(52,500
|
)
|
|
8,929,937
|
|
The
accompanying notes are an integral part of the financial
statements.
CAPITAL
GOLD CORPORATION
(A
DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED
STATEMENT OF CASH FLOWS
|
|
|
|
For
The
Period
|
|
|
|
|
|
September
17,
1982
|
|
|
|
July
31,
|
|
(Inception)
To
|
|
|
|
2006
|
|
2005
|
|
July
31, 2006
|
|
Cash
Flow From Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(4,804,692
|
)
|
$
|
(2,005,682
|
)
|
$
|
(31,388,503
|
)
|
Adjustments
to Reconcile Net Loss to
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Used in Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and Amortization
|
|
|
38,969
|
|
|
7,431
|
|
|
422,696
|
|
Gain
on Sale of Subsidiary
|
|
|
-
|
|
|
-
|
|
|
(1,907,903
|
)
|
Minority
Interest in Net Loss of Subsidiary
|
|
|
-
|
|
|
-
|
|
|
(286,388
|
)
|
Write-Down
of Impaired Mining, Milling and Other
|
|
|
-
|
|
|
|
|
|
|
|
Property
and Equipment
|
|
|
-
|
|
|
-
|
|
|
1,299,445
|
|
Loss
on Sale of Property and Equipment
|
|
|
201,829
|
|
|
-
|
|
|
155,713
|
|
Loss
on change in fair value of derivative
|
|
|
581,924
|
|
|
|
|
|
581,924
|
|
Loss
on Write-Off of Investment
|
|
|
-
|
|
|
-
|
|
|
10,000
|
|
Loss
on Joint Venture
|
|
|
-
|
|
|
-
|
|
|
901,700
|
|
Loss
on Write-Off of Minority Interest
|
|
|
-
|
|
|
-
|
|
|
150,382
|
|
Value
of Common Stock and Warrants Issued for Services
|
|
|
361,875
|
|
|
187,844
|
|
|
12,585,615
|
|
Changes
in Operating Assets and Liabilities:
|
|
|
|
|
|
|
|
|
|
|
(Increase)
Decrease in Prepaid Expenses
|
|
|
(21,082
|
)
|
|
(54,299
|
)
|
|
(21,082
|
)
|
(Increase)
Decrease in Other Current Assets
|
|
|
(5,243,003
|
)
|
|
(10,601
|
)
|
|
(5,265,839
|
)
|
(Increase)
in Other Deposits
|
|
|
(170,000
|
)
|
|
(80,000
|
)
|
|
(268,000
|
)
|
Decrease
in Other Assets
|
|
|
755
|
|
|
-
|
|
|
(42,668
|
)
|
(Increase)
in Security Deposits
|
|
|
-
|
|
|
(1,170
|
)
|
|
(9,605
|
)
|
Increase
(Decrease) in Accounts Payable
|
|
|
166,932
|
|
|
39,953
|
|
|
342,184
|
|
Increase
(Decrease) in Accrued Expenses
|
|
|
165,895
|
|
|
74,703
|
|
|
136,929
|
|
Net
Cash Used in Operating Activities
|
|
|
(8,720,598
|
)
|
|
(1,841,821
|
)
|
|
(22,603,400
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flow From Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
(Increase)
in Other Investments
|
|
|
(260
|
)
|
|
(11,330
|
)
|
|
(21,740
|
)
|
Purchase
of Mining, Milling and Other Property and Equipment
|
|
|
(810,425
|
)
|
|
(657,683
|
)
|
|
(3,191,282
|
)
|
Purchase
of Concessions
|
|
|
-
|
|
|
(25,324
|
)
|
|
(25,324
|
)
|
Investment
in Intangibles
|
|
|
(89
|
)
|
|
(18,531
|
)
|
|
(18,620
|
)
|
Proceeds
on Sale of Mining, Milling and Other Property and
Equipment
|
|
|
192,000
|
|
|
-
|
|
|
275,638
|
|
Proceeds
From Sale of Subsidiary
|
|
|
-
|
|
|
-
|
|
|
2,131,616
|
|
Expenses
of Sale of Subsidiary
|
|
|
-
|
|
|
-
|
|
|
(101,159
|
)
|
Advance
Payments - Joint Venture
|
|
|
-
|
|
|
-
|
|
|
98,922
|
|
Investment
in Joint Venture
|
|
|
-
|
|
|
-
|
|
|
(101,700
|
)
|
Investment
in Privately Held Company
|
|
|
-
|
|
|
-
|
|
|
(10,000
|
)
|
Net
Assets of Business Acquired (Net of Cash)
|
|
|
-
|
|
|
-
|
|
|
(42,130
|
)
|
Investment
in Marketable Securities
|
|
|
-
|
|
|
-
|
|
|
(50,000
|
)
|
The
accompanying notes are an integral part of the financial
statements.
CAPITAL
GOLD CORPORATION
(A
DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED
STATEMENT OF CASH FLOWS
(Continued)
|
|
|
|
For
The
Period
|
|
|
|
|
|
September
17,
1982
|
|
|
|
|
|
(Inception)
|
|
|
|
July
31,
|
|
To
|
|
|
|
2006
|
|
2005
|
|
July
31, 2006
|
|
|
|
|
|
|
|
|
|
Net
Cash Used in Investing Activities
|
|
|
(618,774
|
)
|
|
(712,868
|
)
|
|
(1,055,779
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flow From Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
Advances
to Affiliate
|
|
|
(10,326
|
)
|
|
(3,571
|
)
|
|
(45,322
|
)
|
Decrease
in Loans Receivable - Others
|
|
|
-
|
|
|
2,065
|
|
|
-
|
|
Proceeds
of Borrowings - Officers
|
|
|
-
|
|
|
-
|
|
|
18,673
|
|
Repayment
of Loans Payable - Officers
|
|
|
-
|
|
|
-
|
|
|
(18,673
|
)
|
Proceeds
of Note Payable
|
|
|
-
|
|
|
-
|
|
|
11,218
|
|
Payments
of Note Payable
|
|
|
-
|
|
|
-
|
|
|
(11,218
|
)
|
Proceeds
From Issuance of Common Stock, Net
|
|
|
8,114,920
|
|
|
6,700,325
|
|
|
26,850,844
|
|
Commissions
on Sale of Common Stock
|
|
|
-
|
|
|
-
|
|
|
(5,250
|
)
|
Deferred
Finance Costs
|
|
|
(350,777
|
)
|
|
(100,000
|
)
|
|
(450,777
|
)
|
Expenses
of Initial Public Offering
|
|
|
-
|
|
|
-
|
|
|
(408,763
|
)
|
Capital
Contributions - Joint Venture Subsidiary
|
|
|
-
|
|
|
-
|
|
|
304,564
|
|
Purchase
of Certificate of Deposit - Restricted
|
|
|
-
|
|
|
-
|
|
|
(5,000
|
)
|
Purchase
of Mining Reclamation Bonds
|
|
|
-
|
|
|
-
|
|
|
(30,550
|
)
|
Net
Cash Provided By Financing Activities
|
|
|
7,753,817
|
|
|
6,598,819
|
|
|
26,209,746
|
|
Effect
of Exchange Rate Changes
|
|
|
45,506
|
|
|
28,975
|
|
|
190,932
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(Decrease) In Cash and Cash Equivalents
|
|
|
(1,540,050
|
)
|
|
4,073,105
|
|
|
2,741,498
|
|
Cash
and Cash Equivalents - Beginning
|
|
|
4,281,548
|
|
|
208,443
|
|
|
-
|
|
Cash
and Cash Equivalents - Ending
|
|
$
|
2,741,498
|
|
$
|
4,281,548
|
|
$
|
2,741,498
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
|
Cash
Paid For Interest
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
Cash
Paid For Income Taxes
|
|
$
|
15,099
|
|
$
|
-
|
|
$
|
39,886
|
|
Non-Cash
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
Issuances
of Common Stock as Commissionson Sales of Common Stock
|
|
$
|
-
|
|
$
|
23,240
|
|
$
|
440,495
|
|
Issuance
of common stock as payment for financing costs
|
|
$
|
270,000
|
|
$
|
-
|
|
$
|
270,000
|
|
Issuance
of common stock and warrants as payment for Expenses
|
|
$
|
-
|
|
$
|
-
|
|
$
|
192,647
|
|
Issuance
of Common Stock as Payment for Mining,
|
|
|
|
|
|
|
|
|
|
|
Milling
and Other Property and Equipment
|
|
$
|
-
|
|
$
|
-
|
|
$
|
4,500
|
|
Exercise
of Options as Payment of Accounts Payable
|
|
$
|
-
|
|
$
|
36,000
|
|
$
|
36,000
|
|
The
accompanying notes are an integral part of the financial
statements.
CAPITAL
GOLD CORPORATION
(A
DEVELOPMENT STAGE ENTERPRISE)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
July
31,
2006
NOTE
1 -
Basis of Presentation
Capital
Gold Corporation ("Capital Gold", "the Company", "we" or "us") was
incorporated
in February 1982 in the State of Nevada. During March 2003 the Company's
stockholders approved an amendment to the Articles of Incorporation
to change
its name from Leadville Mining and Milling Corp. to Capital Gold Corporation.
In
November 2005, the Company reincorporated in Delaware. The Company
owns rights
to property located in the State of Sonora, Mexico and the California
Mining
District, Lake County, Colorado and is engaged in the exploration for
gold and
other minerals from its properties in Mexico. All of the Company's
mining
activities are now being performed in Mexico. The Company is a development
stage
enterprise.
On
June
29, 2001, the Company exercised an option and purchased from AngloGold
North
America Inc. and AngloGold (Jerritt Canyon) Corp. 100% of the issued
and
outstanding stock of Minera Chanate, S.A. de C.V., a subsidiary of
those two
companies (“Minera Chanate”). Minera Chanate's assets consisted of certain
exploitation and exploration concessions in the States of Sonora, Chihuahua
and
Guerrero, Mexico. We sometimes refer to these concessions as the El
Chanate
Concessions.
Pursuant
to the terms of the agreement, on December 15, 2001, the Company made
a $50,000
payment to AngloGold. AngloGold will be entitled to receive the remainder
of the
purchase price by way of an ongoing percentage of net smelter returns
of between
2% and 4% plus 10% net profits interest (until the total net profits
interest
payment received by AngloGold equals $1,000,000). AngloGold's right
to a payment
of a percentage of net smelter returns and the net profits interest
will
terminate at such point as they aggregate $18,018,355. In accordance
with the
agreement, the foregoing payments are not to be construed as royalty
payments.
Should the Mexican government or other jurisdiction determine that
such payments
are royalties, we could be subject to and would be responsible for
any
withholding taxes assessed on such payments.
Under
the
terms of the agreement, the Company has granted AngloGold the right
to designate
one of its wholly-owned Mexican subsidiaries to receive a one time
option to
purchase 51% of Minera Chanate (or such entity that owns the Minera
Chanate
concessions at the time of option exercise). That Option is exercisable
over a
180 day period commencing at such time as the Company notifies AngloGold
that it
has made a good faith determination that it has gold-bearing ore deposits
on any
one of the identified group of El Chanate Concessions, when aggregated
with any
ore that the Company has mined, produced and sold from such concessions,
of in
excess of 2,000,000 troy ounces of contained gold. The exercise price
would
equal twice the Company's project costs on the properties during the
period
commencing on December 15, 2000 and ending on the date of such
notice.
The
accompanying financial statements have been prepared assuming that
the Company
will continue as a going concern. However, the Company is a development
stage
enterprise and since its inception has had no mining revenues and has
incurred
recurring losses aggregating $31,388,503. These factors raise substantial
doubt
about the Company's ability to continue as a going concern. As indicated
in Note
18, while the Company believes that it has sufficient funds to complete
the
construction of the mine, the Company has no source of income and does
not
anticipate revenues from its planned mining operations until the second
calendar
quarter 2007. As a result, it may need additional funding to commence
mining
operations, cover any potential material cost overruns on the El Chanate
project, cover ongoing general and administrative expenses and/or fund
exploration. Continuation of the Company is dependent on (1) achieving
sufficiently profitable operations (2) subsequently maintaining adequate
financing arrangements and (3) its exiting the development stage. The
achievement and/or success of the Company's planned measures, however,
cannot be
determined at this time. These financial statements do not reflect
any
adjustments relating to the recoverability and classification of assets
carrying
amounts and classification of liabilities should the Company be unable
to
continue as a going concern. Pursuant to the terms and conditions set
forth in
the Company’s credit facility with Standard Bank (see Note 20), Minera Santa
Rita, S.A de R.L. de C.V.(“MSR”) and Oro de Altar S. de R. L. de C.V. (“Oro”),
the Company’s wholly-owned subsidiaries, have pledged all of its assets as
collateral to secure the obligations under the terms of the credit
facility. In
addition, the Company has pledged all of its shares of MSR and Oro
to further
secure the obligations under the terms of this credit facility. The
Company is
also subject to comply with certain financial covenants.
NOTE
2 -
Summary of Significant Accounting Policies
Principals
of Consolidation
The
consolidated financial statements include the accounts of Capital Gold
Corporation and its wholly owned and majority owned subsidiaries, Leadville
Mining and Milling Holding Corporation, MSR and Oro. The Company accounted
for
its Mexican joint venture operation through the date of termination
(see Note 7)
as a subsidiary since it controlled the decision making process and
it owned 69%
of the venture. All significant intercompany accounts and transactions
are
eliminated in consolidation.
Cash
and
Cash Equivalents
The
Company considers highly liquid investments with original maturities
of three
months or less from the date of purchase to be cash equivalents. Cash
and cash
equivalents include money market funds and short term U.S. treasury
bonds.
Marketable
Securities
The
Company accounts for its investments in marketable securities in accordance
with
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain
Investments in Debt and Equity Securities."
Management
determines the appropriate classification of all securities at the
time of
purchase and re-evaluates such designation as of each balance sheet
date. The
Company has classified its marketable equity securities as available
for sale
securities and has recorded such securities at fair value. The Company
uses the
specific identification method to determine realized gains and losses.
Unrealized holding gains and losses are excluded from earnings and,
until
realized, are reported as a separate component of stockholders'
equity.
Mining,
Milling and Other Property and Equipment
Mining,
milling and other property and equipment is reported at cost. It is
the
Company's policy to capitalize costs incurred to improve and develop
the mining
and milling properties. General exploration costs and costs to maintain
rights
and leases are expensed as incurred. Management of the Company periodically
reviews the recoverability of the capitalized mineral properties and
mining
equipment. Management takes into consideration various information
including,
but not limited to, historical production records taken from previous
mine
operations, results of exploration activities conducted to date, estimated
future prices and reports and opinions of outside geologists, mine
engineers,
and consultants. When it is determined that a project or property will
be
abandoned or its carrying value has been impaired, a provision is made
for any
expected loss on the project or property.
Depletion
of mining and milling improvements will be computed at cost using the
units of
production method. Depreciation is computed using the straight-line
method over
the estimated useful lives of the related assets.
Deferred
Financing Costs
Deferred
financing costs which were included in other assets and a component
of
stockholders’ equity relate to costs incurred in connection with bank borrowings
and will be amortized over the term of the related borrowings.
Intangible
Assets
Purchased
intangible assets consisting of rights of way and easements are carried
at cost
less accumulated amortization. Amortization is computed using the straight-line
method over the economic lives of the respective assets, generally
five years.
It is the Company’s policy to assess periodically the carrying amount of its
purchased intangible assets to determine if there has been an impairment
to
their carrying value. Impairments of other intangible assets are determined
in
accordance with SFAS 144. There was no impairment at July 31, 2006.
Impairment
of Long-Lived Assets
In
accordance with SFAS 144, "Accounting for the Impairment and Disposal
of
Long-Lived Assets" the Company reviews its long-lived assets for impairments.
Impairment losses on long-lived assets are recognized when events or
changes in
circumstances indicate that the undiscounted cash flows estimated to
be
generated by such assets are less than their carrying value and, accordingly,
all or a portion of such carrying value may not be recoverable. Impairment
losses then are measured by comparing the fair value of assets to their
carrying
amounts. During the year ended July 31, 2002 the Company performed
a review of
its Colorado mine and mill improvements and determined that an impairment
loss
should be recognized. Accordingly, at July 31, 2002 the Company reduced
by
$999,445 the net carrying value of certain assets relating to its Leadville,
Colorado facility to $300,000 and further reduced the net carrying
value to $0
at July 31, 2004, which approximated management's estimate of fair
value.
Fair
Value of Financial Instruments
The
carrying value of the Company's financial instruments, including cash
and cash
equivalents, loans receivable and accounts payable approximated fair
value
because of the short maturity of these instruments.
Revenue
Recognition
Revenues,
if any, from the possible sales of minerals will be recognized by the
Company
only upon receipt of final settlement funds from the purchaser.
Foreign
Currency Translation
Assets
and liabilities of the Company's Mexican subsidiaries are translated
to US
dollars using the current exchange rate for assets and liabilities.
Amounts on
the statement of operations are translated at the average exchange
rates during
the year. Gains or losses resulting from foreign currency translation
are
included as a component of other comprehensive income (loss).
Comprehensive
Income (Loss)
Comprehensive
income (loss) which is reported on the accompanying consolidated statement
of
stockholders' equity as a component of accumulated other comprehensive
income
(loss) consists of accumulated foreign translation gains and losses
and net
unrealized gains and losses on available-for-sale securities.
Income
Taxes
The
Company records deferred income taxes using the liability method as
prescribed
under the provisions of SFAS No. 109. Under the liability method, deferred
tax
assets and liabilities are recognized for the expected future tax consequences
of temporary differences between the financial statement and income
tax bases of
the Company's assets and liabilities. An allowance is recorded, based
upon
currently available information, when it is more likely than not that
any or all
of the deferred tax assets will not be realized. The provision for
income taxes
includes taxes currently payable, if any, plus the net change during
the year in
deferred tax assets and liabilities recorded by the Company.
Equity
Based Compensation
In
connection with offers of employment to the Company’s executives as well as in
consideration for agreements with certain consultants, the Company
issues
options and warrants to acquire its common stock. Employee and non-employee
awards are made in the discretion of the Board of Directors.
Such
options and warrants may be exercisable at varying exercise prices
currently
ranging from $0.02 to $0.41 per share of common stock with certain
of these
grants becoming exercisable immediately upon grant subject to shareholder
approval. Currently, certain grants vest for a period of five months
to two years (generally concurrent with service periods for grants
to
employees/consultants - See Note 22 - Employee and Consulting
Agreement ). Certain grants contain a provision whereby they become
immediately exercisable upon a change of control.
Effective
February 1, 2006, the Company adopted the provisions of SFAS No. 123R.
Under FAS
123R, share-based compensation cost is measured at the grant date,
based on the
estimated fair value of the award, and is recognized as expense over
the
requisite service period. The Company adopted the provisions of FAS
123R using a
modified prospective application. Under this method, compensation cost
is
recognized for all share-based payments granted, modified or settled
after the
date of adoption, as well as for any unvested awards that were granted
prior to
the date of adoption. Prior periods are not revised for comparative
purposes.
Because the Company previously adopted only the pro forma disclosure
provisions
of SFAS 123, it will recognize compensation cost relating to the unvested
portion of awards granted prior to the date of adoption, using the
same estimate
of the grant-date fair value and the same attribution method used to
determine
the pro forma disclosures under SFAS 123, except that forfeitures rates
will be
estimated for all options, as required by FAS 123R.
The
cumulative effect of applying the forfeiture rates is not material.
FAS 123R
requires that excess tax benefits related to stock options exercises
be
reflected as financing cash inflows instead of operating cash
inflows.
The
fair
value of each option award is estimated on the date of grant using
a
Black-Scholes option valuation model. Expected volatility is based
on the
historical volatility of the price of the Company stock. The risk-free
interest
rate is based on U.S. Treasury issues with a term equal to the expected
life of
the option. The Company uses historical data to estimate expected dividend
yield, expected life and forfeiture rates. The estimated per share
weighted
average grant-date fair values of stock options and warrants granted
during the
years ended July 31, 2006 and 2005, were $0.32 and $0.38, respectively.
The fair
values of the options granted were estimated based on the following
weighted
average assumptions:
|
|
Years
ended July 31,
|
|
|
2006
|
|
2005
|
|
|
|
|
|
Expected
volatility
|
|
95%
- 165%
|
|
70%
- 100%
|
Risk-free
interest rate
|
|
5.95%
|
|
3.10%
|
Expected
dividend yield
|
|
-
|
|
-
|
Expected
life
|
|
1
-
2 years
|
|
3
years
|
Stock
option and warrant activity for employees during the years ended
July 31, 2005
and 2006 is as follows:
|
|
Number
of
Options
|
|
Weighted
Average
exercise
price
|
|
Weighted
average
remaining
contracted
term
(years)
|
|
Aggregate
intrinsic
value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at July 31, 2004
|
|
|
5,588,636
|
|
$
|
.32
|
|
|
-
|
|
$
|
-
|
|
Options
granted
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Options
exercised
|
|
|
(877,273
|
)
|
|
.09
|
|
|
-
|
|
|
-
|
|
Options
expired
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Outstanding
at July 31, 2005
|
|
|
4,711,363
|
|
$
|
.30
|
|
|
0.30
|
|
$
|
1,277,977
|
|
Options
granted
|
|
|
4,611,363
|
|
|
.13
|
|
|
-
|
|
|
-
|
|
Options
exercised
|
|
|
(590,909
|
)
|
|
.05
|
|
|
-
|
|
|
-
|
|
Options
expired
|
|
|
(3,161,363
|
)
|
|
.05
|
|
|
-
|
|
|
-
|
|
Warrants
and options outstanding at July 31, 2006
|
|
|
5,570,454
|
|
$
|
.16
|
|
|
1.17
|
|
$
|
702,250
|
|
Warrants
and options exercisable at July 31, 2006
|
|
|
4,120,454
|
|
$
|
.10
|
|
|
0.71
|
|
$
|
680,250
|
|
Unvested
stock option and warrant balances for employees at July 31, 2006
are as
follows:
|
|
Number
of
Options
|
|
price
|
|
term
(years)
|
|
value
|
|
Outstanding
at August 1, 2005
|
|
|
-
|
|
|
-
|
|
|
-
|
|
$
|
-
|
|
Options
granted
|
|
|
150,000
|
|
$
|
.32
|
|
|
1.83
|
|
|
16,500
|
|
Unvested
Options outstanding at July 31, 2006
|
|
|
150,000
|
|
$
|
.32
|
|
|
1.83
|
|
$
|
16,500
|
|
Stock
option and warrant activity for non-employees during the years ended
July 31,
2005 and 2006 is as follows:
|
|
Number
of
Options
|
|
price
|
|
term
(years)
|
|
Aggregate
Intrinsic
|
|
Outstanding
at July 31, 2004
|
|
|
1,300,000
|
|
$
|
.31
|
|
|
-
|
|
$
|
-
|
|
Options
granted
|
|
|
31,452,004
|
|
|
.29
|
|
|
-
|
|
|
-
|
|
Options
exercised
|
|
|
(550,000
|
)
|
|
.09
|
|
|
-
|
|
|
-
|
|
Options
expired
|
|
|
(300,000
|
) |
|
.23
|
|
|
-
|
|
|
-
|
|
Outstanding
at July 31, 2005
|
|
|
31,902,004
|
|
$
|
.30
|
|
|
1.13
|
|
$
|
3,430,120
|
|
Options
granted
|
|
|
6,844,000
|
|
|
.28
|
|
|
-
|
|
|
-
|
|
Options
exercised
|
|
|
(4,235,004
|
)
|
|
.27
|
|
|
-
|
|
|
-
|
|
Options
expired
|
|
|
(350,000
|
)
|
|
.10
|
|
|
-
|
|
|
-
|
|
Warrants
and options outstanding at July 31, 2006
|
|
|
34,161,000
|
|
$
|
.29
|
|
|
1.33
|
|
$
|
2,540,530
|
|
Warrants
and options exercisable at July 31, 2006
|
|
|
33,911,000
|
|
$
|
.29
|
|
|
1.31
|
|
$
|
2,539,630
|
|
Prior
to
the adoption of FAS 123R, the Company applied the intrinsic value-based
method
of accounting prescribed by Accounting Principles Board (“APB”) Opinion
No. 25, Accounting
for Stock Issued to Employees,
and
related interpretations including FASB Interpretation No. 44, Accounting
for Certain Transactions involving Stock Compensation an interpretation
of APB
Opinion No. 25
issued
in March 2000 (“FIN 44”), to account for its fixed plan stock options.
Under this method, compensation expense was recorded on the date of
grant only
if the current market price of the underlying stock exceeded the exercise
price.
SFAS No. 123, Accounting
for Stock-Based Compensation,
established accounting and disclosure requirements using a fair value-based
method of accounting for stock-based employee compensation plans. In
December 2002, the FASB issued SFAS No. 148, Accounting
for Stock-Based Compensation Transition and Disclosure, an amendment
of FASB
Statement No. 123.
This
Statement amended FASB Statement No. 123, Accounting
for Stock-Based Compensation,
to
provide alternative methods of transition for a voluntary change to
the fair
value method of accounting for stock-based employee compensation.
The
following table illustrates the effect on the net loss and net loss
per share as
if the Company had applied the fair value recognition provisions of
SFAS
No. 123 to stock based compensation prior to February 1, 2006:
|
|
Year
Ended
July
31, 2006
|
|
Net
loss
|
|
$
|
(4,804,692
|
)
|
Add
stock-based employee compensation expense (recovery) included
in reported
net income (loss)
|
|
|
-
|
|
Deduct
total stock-based employee compensation expense determined
under fair value based method
for
all awards, net
of tax
|
|
|
(773,263
|
)
|
Pro
forma net loss
|
|
$
|
(5,577,955
|
)
|
Pro
forma net loss per common share (Basic and diluted)
|
|
$
|
(.05
|
)
|
Weighted
average common shares outstanding: Basic and
diluted
|
|
|
112,204,471
|
|
Net
loss per common share basic and diluted
|
|
$
|
(.04
|
)
|
Reclassifications
Certain
items in these financial statements have been reclassified to conform
to the
current period presentation. These reclassifications had no impact
on the
Company’s results of operations, stockholders’ equity (deficit) or cash
flows.
Net
Loss
Per Common Share
The
computation of basic net loss per share of common stock is computed
by dividing
net loss for the period by the weighted average number of common shares
outstanding during that period.
Because
the Company is incurring losses, the effect of stock options and warrants
is
antidilutive. Accordingly, the Company's presentation of diluted net
loss per
share is the same as that of basic net loss per share.
Concentrations
of Credit Risk
Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist principally of cash and cash equivalents and
marketable
securities. The Company maintains cash balances at financial institutions
which
exceed the Federal Deposit Insurance Corporation limit of $100,000
at times
during the year.
Accounting
for Derivatives and Hedging Activities
The
Company entered into two identically structured derivative contracts
with
Standard Bank in March 2006. Each derivative consisted of a series
of forward
sales of gold and a purchase gold cap. The Company agreed to sell a
total volume
of 121,927 ounces of gold forward to Standard Bank at a price of $500
per ounce
on a quarterly basis during the period from March 2007 to September
2010. The
Company also agreed to a purchase gold cap on a quarterly basis during
this same
period and at identical volumes covering a total volume of 121,927
ounces of
gold at a price of $535 per ounce. Although these contracts are not
designated
as hedging derivatives, they serve an economic purpose of protecting
the company
from the effects of a decline in gold prices. Because they are not
designated as
hedges, however, special hedge accounting does not apply. Derivative
results are
simply marked to market through earnings, with these effects recorded
in
other
income
or
other
expense,
as
appropriate under FASB Statement No. 133, “Accounting for Derivative Instruments
and Hedging Activities” (“FAS 133”).
Use
of
Estimates
The
preparation of financial statements in conformity with U.S. generally
accepted
accounting principles requires management to make estimates and assumptions
that
affect the reported amounts of assets and liabilities and the disclosures
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 these estimates.
Environmental
Remediation Costs
Environmental
remediation costs are accrued based on estimates of known environmental
remediation exposure. Such accruals are recorded even if significant
uncertainties exist over the ultimate cost of the remediation. It is
reasonably
possible that the Company's estimates of reclamation liabilities, if
any, could
change as a result of changes in regulations, extent of environmental
remediation required, means of reclamation or cost estimates. Ongoing
environmental compliance costs, including maintenance and monitoring
costs, are
expensed as incurred. There were no environmental remediation costs
accrued at
July 31, 2006.
Recently
Issued Accounting Pronouncements
In
December 2004, the FASB issued Statement of Financial Accounting Standards
No.
123 (Revised 2004), "Share-Based Payment" ("SFAS 123R"). On April 14,
2005, the
Securities and Exchange Commission issued an amendment to Rule 4-01
of
Regulation S-X that allows companies to implement SFAS 123R at the
beginning of
their next fiscal year, instead of the next reporting period that begins
after
June 15, 2005 as originally required. Accordingly, the Company adopted
SFAS 123R
effective January 1, 2006 using the "modified prospective" method in
which
compensation cost is recognized beginning with the effective date based
on (a)
the requirements of SFAS 123R for all share-based payments granted
after the
effective date and (b) the requirements of SFAS 123 for all awards
granted to
employees prior to the effective date of SFAS 123R that remain unvested
on the
effective date. In addition, the Company expects to continue to utilize
the
Black-Scholes option-pricing model, which is an acceptable option valuation
model in accordance with SFAS 123R, to estimate the value of stock
options
granted to employees.
Beyond
those restricted stock and stock option awards previously granted,
the Company
cannot predict with certainty the impact of SFAS 123R on its future
consolidated
financial statements as the type and amount of such awards are determined
on an
annual basis and encompass a potentially wide range depending upon
the
compensation decisions made by the Company's Board of Directors. SFAS
123R also
requires the benefits of tax deductions in excess of compensation cost
recognized in the financial statements to be reported as a financing
cash flow,
rather than an operating cash flow as currently required under Statement
of
Financial Accounting Standards No. 95, "Statement of Cash Flows" ("SFAS
95").
This requirement, to the extent it exists, will decrease net operating
cash
flows and increase net financing cash flows in periods subsequent to
adoption.
The Company believes this pronouncement will not have a material impact
on its
consolidated financial statements.
On
March
29, 2005, the SEC issued Staff Accounting Bulletin No. 107 ("SAB107")
which
expresses the view of the SEC Staff regarding the interaction of SFAS
123R and
certain SEC rules and regulations and provides the staff's views regarding
the
valuation of share-based payment arrangements. The Company believes
that the
views provided in SAB 107 are consistent with the approach taken in
the
valuation and accounting associated with share-based compensation issued
in
prior periods as well as those issued during 2005.
In
June
2005, the FASB's Emerging Issues Task Force ("EITF") issued EITF Issue
No. 05-02
"The Meaning of "Conventional Convertible Debt Instrument" in EITF
Issue 00-19
"Accounting for Derivative Financial Instruments Indexed to, and Potentially
Settled in, A Company's Own Stock", which retains the exception in
paragraph 4
of EITF Issue No. 00-19 for conventional debt instruments. Those instruments
in
which the holder has an option to convert the instrument into a fixed
number of
shares (or a corresponding amount of cash at the issuer's discretion)
and its
ability to exercise the option is based on either (a) the passage of
time or (b)
a contingent event, should be considered "conventional" for purposes
of applying
that exception. The consensus should be applied on a prospective basis
for new
or modified instruments starting from the third quarter of 2005. When
there is a
modification of a convertible debt instrument, the change in the fair
value of
an embedded conversion option should be included in the analysis of
determining
whether a debt extinguishment has occurred. The change in the fair
value of the
embedded conversion option is calculated as the difference between
the fair
value of the conversion option immediately prior to and after the modification.
Also, when a modification of a convertible debt instrument occurs,
the change in
the fair value of the embedded conversion prior should be recognized
as a
discount (or premium) with a corresponding increase (or decrease) in
additional
paid-in capital. Lastly, a beneficial feature should not be recognized
or
reassessed upon modification of a convertible debt instrument. The
adoption of
EITF No. 05-02 is not expected to have a material effect on the Company’s
consolidated financial statements or results of operations.
In
November 2005, FASB issued FSP FAS 115-1 and FAS 124-1, "The Meaning
of
Other-Than-Temporary Impairment and Its Application to Certain Investments"
("FSP FAS 115-1"), which provides guidance on determining when investments
in
certain debt and equity securities are considered impaired, whether
an
impairment is other-than-temporary, and on measuring such impairment
loss. FSP
FAS 115-1 also includes accounting considerations subsequent to the
recognition
of an other-than-temporary impairment and requires certain disclosures
about
unrealized losses that have not been recognized as other-than-temporary
impairments. FSP FAS 115-1 is required to be applied to reporting periods
beginning after December 15, 2005. The Company was required to adopt
FSP FAS
115-1 in the first quarter of 2006. The adoption of this statement
did not have
a material impact on the Company's consolidated results of operations
or
financial condition.
In
November 2004, the FASB issued SFAS No. 151, "Inventory Costs - An
amendment of
ARB No. 43, Chapter 4" ("SFAS No. 151"). SFAS No. 151 amends the guidance
in
Accounting Research Bulletin No. 43, Chapter 4, "Inventory Pricing,"
to clarify
the accounting for abnormal amounts of idle facility expense, freight,
handling
costs, and wasted material (spoilage). Additionally, SFAS No. 151 requires
that
the allocation of fixed production overheads to the cost of conversion
be based
on the normal capacity of the production facilities. SFAS No. 151 was
required
to be adopted in the first quarter of 2006. The Company determined
that the
adoption of SFAS No. 151 will not have a material impact on the consolidated
financial statements.
In
December 2004, the FASB issued Statement of Financial Accounting Standards
No.
153 (SFAS 153"), "Exchanges of Non-monetary Assets-an amendment of
APB Opinion
No. 29." SFAS 152 addresses the measurement of exchanges of non-monetary
assets.
It eliminates the exception from fair value measurement for non-monetary
exchanges of similar productive assets in paragraph 21(b) of APB Opinion
No. 29
"Accounting for Non-monetary Transactions" and replaces it with an
exception for
exchanges that do not have commercial substance. A non-monetary exchange
has
commercial substance if the future cash flows of the entity are expected
to
change significantly as a result of the exchange. As required by SFAS
153, the
Company adopted this new accounting standard effective July 1, 2005.
The
adoption of SFAS 153 did not have a material impact on the Company's
financial
statements.
In
May
2005, the FASB issued Statement of Financial Accounting Standards No.
154,
“Accounting Changes and Error Corrections—a replacement of APB Opinion No. 20
and FASB Statement No. 3” (“SFAS 154”). This statement replaces APB opinion No.
20, “Accounting Changes” and FASB Statement No. 3, “Reporting Accounting Changes
in Interim Financial Statements” and changes the requirements for the accounting
for and reporting of a change in accounting principle. This statement
applies to
all voluntary changes in accounting principle. It also applies to changes
required by an accounting pronouncement in the unusual instance that
the
pronouncement does not include specific transaction provision. When
a
pronouncement includes specific transaction provisions, those provisions
should
be followed. SFAS 154 is effective for accounting changes and corrections
of
errors made in fiscal years beginning after December 15, 2005. The
Company will
adopt the provisions of SFAS No. 154 for its fiscal year beginning
after July
31, 2006. Management currently believes that adoption of the provisions
of SFAS
No. 154 will not have a material impact on the Company’s consolidated financial
statements.
In
February 2006, the FASB issued SFAS 155, "Accounting for Certain Hybrid
Financial Instruments" ("SFAS No.155") - an amendment of FASB Statements
No. 133
and 140. SFAS 155 amends FAS 133, "Accounting for Derivative Instruments
and
Hedging Activities" ("SFAS No.133"), and SFAS 140 ("SFAS No.140"),
"Accounting
for Transfers and Servicing of Financial Assets and Extinguishments
of
Liabilities", to permit fair value re-measurement of any hybrid financial
instrument that contains an embedded derivative that would otherwise
require
bifurcation. Additionally, FAS 155 seeks to clarify which interest-only
strips
and principal-only strips are not subject to the requirements of SFAS
133 and to
clarify that concentrations of credit risk in the form of subordination
are not
embedded derivatives. This Statement is effective for all financial
instruments
acquired or issued after the beginning of an entity's first fiscal
year that
begins after September 15, 2006. Management does not believe the adoption
of
this standard will have a material impact on the financial condition
or the
results of operations of the Company.
On
July
13, 2006, the Financial Accounting Standards Board issued Interpretation
No. 48,
"Accounting for Uncertainty in Income Taxes" ("FIN 48"). The requirements
are
effective for fiscal years beginning after December 15, 2006. The purpose
of FIN
48 is to clarify and set forth consistent rules for accounting for
uncertain tax
positions in accordance with Statement of Financial Accounting Standards
No.
109, "Accounting for Income Taxes". The cumulative effect of applying
the
provisions of this interpretation are required to be reported separately
as an
adjustment to the opening balance of retained earnings in the year
of adoption.
Management does not believe the adoption of this standard will have
a material
impact on the financial condition or the results of operations of the
Company.
NOTE
3 -
Marketable Securities
Marketable
securities are classified as current assets and are summarized as
follows:
|
|
July
31,
2006
|
|
|
|
|
|
Marketable
equity securities, at cost
|
|
$
|
50,000
|
|
Marketable
equity securities, at fair value (See Notes 11 & 13)
|
|
$
|
90,000
|
|
NOTE
4 -
Other Current Assets
Other
current assets consist of the following at July 31, 2006:
Cash
collateral on project facility (Note 20)
|
|
$
|
4,267,445
|
|
Other
current assets
|
|
|
216,407
|
|
Total
Other Current Assets
|
|
$
|
4,483,852
|
|
NOTE
5 -
Property and Equipment
Property
and Equipment consist of the following at July 31, 2006:
Construction
in progress
|
|
$
|
661,899
|
|
Water
Well
|
|
|
141,243
|
|
Building
|
|
|
116,000
|
|
Equipment
|
|
|
75,757
|
|
Vehicle
|
|
|
51,385
|
|
Improvements
|
|
|
15,797
|
|
Office
Equipment
|
|
|
12,266
|
|
Furniture
|
|
|
1,843
|
|
|
|
|
|
|
Total
|
|
$
|
1,076,190
|
|
|
|
|
|
|
Less:
accumulated depreciation
|
|
|
(
40,218
|
)
|
|
|
|
|
|
Property
and equipment, net
|
|
$
|
1,035,972
|
|
Depreciation
expense for the year ended July 31, 2006 and 2005 was $33,838 and $6,742,
respectively.
In
March
2006, the Company made a $250,000 down payment to a US supplier to
acquire a new
crushing system, including conveyors, for use at its El Chanate project.
The
total price for this equipment is approximately $1,164,000.
The Company is required to purchase the equipment by the end of the
third
quarter of 2006, or the supplier is entitled to retain the down payment.
As the
Company has adequate funds to purchase this equipment, it anticipates
purchasing
the equipment within the requisite time period (see Note 24 - “Subsequent
Events” for further details).
On
May
19, 2006, the Company sold its Equipment Held for Resale and received
proceeds,
net of commissions, of $192,000. The Company recorded a loss on sale
of this
equipment of approximately $202,000.
NOTE
6 -
Intangible Assets
Intangible
assets consist of the following as of July 31, 2006:
Investment
in Right of way
|
|
$
|
18,620
|
|
|
|
|
|
|
Less:
accumulated amortization
|
|
|
(
4,820
|
)
|
|
|
|
|
|
Intangible
assets, net
|
|
$
|
13,800
|
|
Amortization
expense for the year ending July 31, 2006 and 2005 was $4,131 and $689,
respectively.
NOTE
7 -
Joint Venture
On
February 23, 2002, MSR, one of the Company’s wholly-owned Mexican subsidiaries,
entered into a joint venture agreement with Grupo Minero FG S.A. de
C.V. (“FG”)
to explore, evaluate and develop the El Chanate concessions. FG is
a private
Mexican company.
Pursuant
to the agreement with FG, the venture was to be conducted in five phases.
The
first two phases entailed continued exploration and evaluation of the
mining
potential of lots within the concessions.
Pursuant
to the agreement, FG has paid us $75,000 to participate in the venture
and
contributed an additional $75,000 towards the first phase of the venture
for
which it received a 30% interest in the venture. The balance of the
costs for
Phase one and the costs for Phase two were to be split equally between
the
parties.
In
April
2004, effective March 31, 2004, MSR, one of the Company’s wholly-owned Mexican
affiliates, and FG executed an agreement (the "Termination Agreement")
terminating their joint venture agreement (the "JV Agreement") with
regard to
the El Chanate project in Mexico.
Pursuant
to the Termination Agreement, the parties amicably terminated the JV
Agreement
and released each other from all obligations under the JV Agreement.
In
consideration of FG's contributions to the venture of $457,455, the
Company
issued to FG 2,000,000 restricted shares of its common stock valued
at $800,000
and MSR issued to FG a participation certificate entitling FG to receive
five
percent of the MSR's annual dividends, when declared. In connection
with the
issuance of these 2,000,000 shares, the Company recognized a charge
to
operations of $800,000. Additionally, the Company recognized a loss
of $150,382
on the write off of the joint venture minority interest. The participation
certificate also gives FG the right to participate, but not to vote,
in the
meetings of MSR's Board of Managers, Technical Committee and Partners.
MSR also
received a right of first refusal to carry out the works and render
construction
services required to effectuate the El Chanate project. This right
of first
refusal is not applicable where a funding source for the project determines
that
others should render such works or services.
FG
has
assigned or otherwise transferred to MSR all permits, licenses, consents
and
authorizations (collectively, "authorizations") for which FG had obtained
in its
name in connection with the development of the El Chanate project to
the extent
that the authorizations are assignable. To the extent that the authorizations
are not assignable or otherwise transferable, FG has given its consent
for the
authorizations to be cancelled so that they can be re-issued or re-granted
in
MSR's name. The foregoing has been accomplished. (see Note 24 - “Subsequent
Events” for details on the Company’s acquisition of its five percent net profits
interest from FG.
NOTE
8 -
Sale of Subsidiary Stock
On
March
20, 2002, the Company sold all of the issued and outstanding shares
of stock of
its wholly-owned subsidiary, Minera Chanate, to an unaffiliated party
for a
purchase price of $2,131,616, payable in three installments. We received
the
first installment of $639,485 and paid commissions of $51,159 in March
2002. A
second payment of $497,377 plus interest at the rate of 4.5% per annum
was paid
in August 2002. A third payment of $994,754 plus interest at the rate
of 4.5%
per annum, was paid in December 2002. Commissions of $41,733 and $80,821
were
paid in connection with the second and third installments, respectively.
In
connection with the above transaction the Company recognized a gain
of
$1,907,903.
During
March 2002, prior to the sale of Minera Chanate and pursuant to the
FG joint
venture agreement (see Note 6), Minera Chanate, in a series of transactions,
sold all of its surface land and mining claims to Oro, another of the
Company’s
wholly-owned subsidiaries. Ora, in turn, leased the foregoing land
and mining
claims to MSR.
NOTE
9 -
Mining Reclamation Bonds
These
represent certificates of deposit that have been deposited as security
for
Mining Reclamation Bonds in Colorado. They bear interest at rates varying
from
4.35% to 5.01% annually and mature at various dates through 2010.
NOTE
10 -
Mining Concessions
Mining
concessions consists of the following:
El
Charro
|
|
$
|
25,324
|
|
El
Chanate
|
|
|
44,780
|
|
|
|
|
|
|
Total
|
|
$
|
70,104
|
|
The
El
Chanate exploitation and exploration concessions are carried at historical
cost
and were acquired in connection with the purchase of the stock of Minera
Chanate
(see Note 1).
The
Company acquired an additional mining concession - El Charro. El Charro
lies
within the current El Chanate property boundaries. The Company is required
to
pay 1 1/2% net smelter royalty in connection with the El Charro
concession.
NOTE
11 -
Loans Receivable - Affiliate
Loans
receivable - affiliate consist of expense reimbursements from a publicly-owned
corporation in which the Company has an investment. The Company's president
and
chairman of the board of directors is an officer and director of that
corporation. These loans are non-interest bearing and due on demand
(see Note 3
& 13).
NOTE
12 -
Other Investments
Other
investments are carried at cost and consist of tax liens purchased
on properties
located in Lake County, Colorado.
NOTE
13 -
Other Comprehensive Income(Loss)-Supplemental Non-Cash Investing
Activities
Other
comprehensive income (loss) consists of accumulated foreign translation
gains
and losses and unrealized gains and losses on marketable securities
and is
summarized as follows:
Balance
- July 31, 2004
|
|
$
|
88,739
|
|
|
|
|
|
|
Equity
Adjustments from Foreign Currency Translation
|
|
|
28,975
|
|
Unrealized
Gains on Marketable Securities
|
|
|
40,000
|
|
|
|
|
|
|
Balance
- July 31, 2005
|
|
|
157,714
|
|
|
|
|
|
|
Equity
Adjustments from Foreign Currency Translation
|
|
|
48,779
|
|
Unrealized
Gains (loss) on Marketable Securities
|
|
|
(60,000
|
)
|
|
|
|
|
|
Balance
- July 31, 2006
|
|
$
|
146,493
|
|
NOTE
14 -
Related Party Transactions
In
August
2002, the Company purchased marketable equity securities of a related
company.
The Company recorded approximately $10,350 and $9,300 in expense reimbursements
including office rent from this entity for the year ended July 31,
2006 and
2005, respectively (see Notes 3 and 11). The Company utilizes a Mexican
Corporation 100% owned by two officers/Directors and stockholders of
the Company
for mining support services. These services include but are not limited
to the
payment of mining salaries and related costs. The Mexican Corporation
bills the
Company for these services at cost. Mining expenses charged by the
Mexican
Corporation and reported on the statement of operations amounted to
approximately $122,000 and $24,000 for the year ended July 31, 2006
and 2005,
respectively.
During
the fiscal years ended July 31, 2006 and 2005, the Company paid its
V.P.
Development and Director $63,000 and $68,000, respectively, for professional
geologist and management services rendered to the Company, plus expenses.
This
individual also earned wages of $30,000 during the last three months
of the
fiscal year ended July 31, 2006. During the fiscal years ended July
31, 2006 and
2005, the Company paid its V.P. Exploration and Director consulting
fees of
$78,500 and $56,900, respectively. In addition, this individual earned
wages of
$10,000 during the last month of fiscal 2006. During the fiscal year
ended July
31, 2006 and 2005, we paid a director legal and consulting fees of
$8,000 and
$6,625, respectively.
The
Company’s V.P. Development and Director has, since 1995, been a Senior
Consultant in the Minerals Advisory Group LLC, Tucson, Arizona, an
entity that
provided $25,000 worth of services to the Company for the fiscal year
ended July 31, 2006.
In
January 2006, the Company extended the following stock options through
January
3, 2007, all of which are exercisable at $0.05 per share: Chief Executive
Officer and Director - 1,250,000 shares; Director - 500,000 shares;
V.P.
Investor Relations and Director - 327,727 shares; V.P. Development
and Director
- 500,000 shares; and V.P. Mine Development - 25,000 shares. There
was not a
material increase in the intrinsic value of these options at the date of
modification as compared to the intrinsic value of the original issuance
of
these stock options on the applicable
measurement date.
NOTE
15 -
Stockholders' Equity
Common
Stock
At
various stages in the Company’s development, shares of the Company’s common
stock have been issued at fair market value in exchange for services
or property
received with a corresponding charge to operations, property and equipment
or
additional paid-in capital depending on the nature of the services
provided or
property received.
During
the year ended July 31, 2006, the Company issued 4,825,913 shares of
stock upon
the exercising of common stock purchase warrants and options for net
proceeds of
$741,820, including 200,000 and 300,000 shares to its CEO and V.P.
Mine
Development for net proceeds of $10,000 and $15,000, respectively.
The Company
has also issued 1,000,000 shares of Common Stock (See Note 20) in connection
with receiving a commitment letter from Standard Bank informing the
Company of
its approval for providing a $12 million (now $12.5 million) senior
financing
facility.
The
Company closed two private placements in 2006 pursuant to which the
Company
issued an aggregate of 21,240,000 units, each unit consisting of one
share of
the Company’s common stock and a warrant to purchase ¼ of a share of the
Company’s common stock for net proceeds of $4,999,500, net of commissions of
$310,500. The Company also received net proceeds of $2,373,600, net
of
commissions of $206,430, from the exercising of 8,600,000 warrants
in February
2006. The Warrant issued to each purchaser is exercisable for one share
of the
Company’s common stock, at an exercise price equal to $0.30 per share. Each
Warrant has a term of eighteen months and is fully exercisable from
the date of
issuance. The Company issued to the placement agent in one of the placements
eighteen month warrants to purchase up to 934,000 shares of the Company’s common
stock at an exercise price of $0.25 per share. Such placement agent
warrants are
valued at approximately $189,000 using the Black-Scholes option pricing
method.
Recapitalization
On
September 22, 2005, The Board of Directors recommended an amendment
to the
Company's Certificate of Incorporation to increase the Company's authorized
shares of capital stock from 150,000,000 to 200,000,000 shares. In
addition, the
Board of Directors recommended that the Company reincorporate in the
State of
Delaware. These amendments were approved by the stockholders on November
18,
2005 and the Company effected the reincorporation in Delaware and the
authorized
share increase on November 21, 2005. In addition, the par value was
decreased
from $0.001 per share to $0.0001 per share.
Warrant
Re-pricing
In
December 2005, the Board of Directors ratified the temporary re-pricing
of
certain warrants that were issued in connection with the February 2005
private
placement from $0.30 per share to $0.20 per share exercise price. In
addition,
warrants issued to the placement agent were also re-priced from $0.25
per share
to $0.20 per share exercise price. These re-pricings were in effect
for the
period November 28, 2005 through January 31, 2006.
NOTE
16 -
Income Taxes
For
income tax purposes, the Company has available net operating loss carryforwards
("NOL") as of July 31, 2006 of approximately $15,000,000 to reduce
future
federal taxable income. If any of the NOL's are not utilized, they
will expire
at various dates through 2025. There may be certain limitations as
to the future
annual use of the NOLs due to certain changes in the Company's
ownership.
Income
tax benefit attributable to net loss differed from the amounts computed
by
applying the statutory Federal Income tax rate applicable for Each
period as a
result of the following:
|
|
Year
Ended July 31,
|
|
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
Computed
"expected" tax benefit
|
|
$
|
5,823,176
|
|
$
|
4,661,620
|
|
Decrease
in tax benefit resulting from net operating loss for which no
benefit is currently available
|
|
|
5,823,176
|
|
|
4,661,620
|
|
|
|
$
|
- |
|
$
|
-
|
|
The
Company has deferred tax assets of approximately $5,823,176 at July
31, 2006
resulting primarily from net operating loss carryforwards. The Deferred
tax
assets have been fully offset by a valuation allowance resulting from
the
uncertainty surrounding their future realization. The difference between
the
federal statutory rate of 34% and the Company's effective tax rate
of 0% is due
to an increase in the valuation allowance of $1,161,556 and $553,740
in 2006 and
2005, respectively.
NOTE
17 -
Loss on Equipment Option
In
March
2004, the Company obtained exclusive non-refundable options to purchase
an ore
crusher and related assets for a total cost of $700,000. The Company
paid
$50,000 for these options, which ultimately expired. Accordingly, the
Company
realized a loss of $50,000.
NOTE
18 -
Liquidity and Going Concern Uncertainty
The
Company is a development stage enterprise with no mining revenues and
has
incurred recurring losses amounting to $31,388,503 through July 31,
2006. The
Company incurred net losses of $4,804,692 and $2,005,682 during the
years ended
July 31, 2006 and 2005, respectively. These factors, among others,
raise
substantial doubt about the Company's ability to continue as a going
concern
(see Note 1).
During
the year ended July 31, 2006, the Company has successfully obtained
external
financing through sales of its stock and exercise of options and, subsequent
to
the fiscal year end, it closed on a credit facility (see “Note 20 - Project
Finance Facility” and Note 24 - ‘Subsequent Events” below). However, as the
Company has no source of income and does not anticipate revenues from
its
planned mining operations until the second calendar quarter 2007, it
may need
additional funding to commence mining operations, cover any material
cost
overruns on the El Chanate project, cover ongoing general and administrative
expenses and/or fund exploration.
There
can
be no assurance that sufficient funds, if required during the next
year or
thereafter, will be generated from operations or that funds will be
available
from external sources. The lack of additional capital resulting from
the
inability to generate cash flow from operations or to raise capital
from
external sources would force the Company to substantially curtail or
cease
operations and would, therefore, have a material adverse effect on
its business.
Furthermore, there can be no assurance that any such required funds,
if
available, will be available on attractive terms or that they will
not have a
significant dilutive effect on the Company's existing stockholders.
The
accompanying consolidated financial statements do not include any adjustments
related to the recoverability or classification of asset carrying amounts
or the
amounts and classification of liabilities that may result should the
Company be
able to continue as a going concern.
The
Company has developed a plan to address potential liquidity and funding
issues
until mining operations in Mexico can support ongoing cash flow needs.
Should
additional funds be needed, the Company intends to raise such funds
through the
sale of its securities, the exercising of certain warrants, the sale
of a
royalty interest in the future production from the Chanate properties
and/or
joint venturing with one or more strategic partners.
There
is
no assurance, however, that any of the Company's proposed plans to
raise capital
and otherwise fund operations, if needed, will prove successful. The
Company's
ability to continue as a going concern is dependent upon its ability
to obtain
sufficient funding as discussed above and its inability to do so will
delay or
cease the Company's planned operations as discussed above.
NOTE
19 -
Commitments and Contingencies
Minera
Chanate Option
Under
the
terms of the Minera Chanate purchase agreement, Capital Gold has granted
AngloGold's designee to receive a one-time option to purchase 51% of
Minera
Chanate (or such entity that owns the Minera Chanate concessions at
time of
exercise) based upon the achievements of certain events (see Note
1).
Lease
Commitments
The
Company occupies office space in New York City under a non-cancelable
operating
lease that commenced on September 1, 2002 and terminates on August
31, 2007. In
addition to base rent, the lease calls for payment of utilities and
other
occupancy costs.
Approximate
future minimum payments under this lease are as follows:
Year
Ending July 31,
|
|
|
|
|
|
|
|
|
2007
|
|
$ |
51,000 |
|
2008
|
|
|
4,200
|
|
|
|
$
|
55,200
|
|
Rent
expense under the office lease in New York City was approximately $63,000
and
$63,000 for the years ended July 31, 2006 and 2005, respectively.
In
June
2006, the Company's Mexican operating subsidiary retained the contracting
services of a Mexican subsidiary of M3 Engineering & Technology Corporation
("M3M") to provide EPCM (engineering procurement construction management)
services. M3M will supervise the construction and integration of the
various
components necessary to commence production at the El Chanate Project.
The
contracted services shall not exceed $1,200,000 and the contract is
based on the
EPCM services to be provided by the M3. As of July 31, 2006, the Company
has
incurred approximately $72,000 in services provided.
Land
Easement
On
May
25, 2005, MSR entered into an agreement for an irrevocable access easement
and
an irrevocable fluids (electricity, gas, water and others) easement
to land
located at Altar, Sonora, Mexico. The term of the agreement is 5 years,
extendable for 1-year additional terms, upon MSR’s request. The agreement would
be suspended only by force majeure or Acts of God; and extendable for
duration
of suspension. In
consideration for these easements, $18,000 was paid upon the signing
of the
agreement and yearly advance payments equal to 2 annualized general
minimum
wages (365 X 2 general minimum wages) in force in Altar, Sonora, Mexico,
are
required. These yearly payments are to be made on September 1 of each
year,
using the minimum wage in effect on that day for the calculation of
the amount
payable. These payments are to be made for as long as the construction
and
production mining works and activities of MSR are being carried out,
and are to
cease as soon as such works and activities are permanently stopped.
El
Charro
In
May
2005, the Company acquired rights to the El Charro concession for approximately
$20,000 and a royalty of 1.5% of net smelter return. The Company acquired
the El
Charro concession because it is surrounded entirely by the Company’s other
concessions.
Environmental
Remediation Costs
Environmental
remediation costs are accrued based on estimates of known environmental
remediation exposure. Such accruals are recorded even if significant
uncertainties exist over the ultimate cost of the remediation. It is
reasonably
possible that the Company's estimates of reclamation liabilities, if
any, could
change as a result of changes in regulations, extent of environmental
remediation required, means of reclamation or cost estimates. Ongoing
environmental compliance costs, including maintenance and monitoring
costs, are
expensed as incurred. There were no environmental remediation costs
accrued at
July 31, 2006.
NOTE
20 -
Project Finance Facility
On
February 2, 2005, the Company mandated Standard Bank London Limited
as the
exclusive arranger of a project finance facility of up to $10 million
for the
Company’s El Chanate gold mining project and associated hedging. As required
by
the mandate, the Company issued to Standard Bank 1,000,000 common stock
purchase
warrants and paid an initial cash fee of $100,000. Such warrants have
been
valued at approximately $253,000 using the Black-Scholes option pricing
model
and are reflected as deferred financing costs as a reduction of stockholders'
equity on the Company's balance sheet. Such costs will be amortized
to
operations over the life of the debt and in the event the transaction
with
Standard Bank is not consummated, such costs will be charged to operations
immediately. The initial cash fee of $100,000 is included in Deferred
Finance
Costs on the Company's balance sheet. Per the Company’s arrangement with
Standard Bank, the shares issuable upon exercise of the 1,000,000 common
stock
purchase warrants have been included in a registration statement filed
with the
Securities and Exchange Commission covering their public resale.
On
November 11, 2005 the Company received a commitment letter from Standard
Bank
informing it that its credit committee had approved the banks arranging
and
providing for a senior project financing facility for up to $12 million.
Amongst
other requirements, the commitment letter requires us to raise additional
equity
funding, net of expenses, that, along with cash on hand, is adequate
to cover
all required covenants and completion conditions. In connection with
this
letter, the Company paid $100,000 and issued 1,000,000 shares of the
Company
common stock. The Company recorded the $100,000 as deferred financing
costs on
the Company's balance sheet. Such costs will be amortized to operations
over the
life of the debt and in the event the transaction with Standard Bank
is not
consummated, such costs will be charged to operations immediately.
The Company
recorded the issuance of the 1,000,000 shares of common stock as deferred
financing costs of approximately $270,000 as a reduction of stockholders'
equity
on the Company's balance sheet. The issuance of these shares was recorded
at the
fair market value of the Company's common stock at the commitment letter
date or
$0.27 per share. Pursuant to this letter, instead of delivering on
the Closing
Date of the facility an additional 14,600,000 common stock purchase
warrants, as
contemplated in the original Mandate, the Company would be required
to deliver
an additional 1,000,000 shares of common stock and an additional 12,600,000
common stock purchase warrants.
During
March 2006, as part of the process with Standard Bank, the Company
entered into
a gold price protection agreement with Standard Bank plc to protect
it against
future fluctuations in the price of gold. The Company agreed to a series
of gold
forward sales and call option purchases in anticipation of entering
into a
credit agreement with Standard Bank, which will be used to fund part
of the cost
of development of the Company's El Chanate project. As of July 31,
2006, the
Company was continuing to negotiate with Standard Bank on the terms
of the
credit agreement. Under the price protection agreement, the Company
has agreed
to sell a total volume of 121,927 ounces of gold forward to Standard
Bank at a
price of $500 per ounce on a quarterly basis during the period from
March 2007
to September 2010. The Company will also purchase call options from
Standard
Bank on a quarterly basis during this same period covering a total
volume of
121,927 ounces of gold at a price of $535 per ounce. The Company paid
a premium
to Standard Bank associated with these transactions. In addition, the
Company
provided cash collateral of approximately $4.3 million to secure the
Company’s
obligations under this agreement and recorded this as an other current
asset as
of July 31, 2006. The cash collateral will be returned to the Company
when the
loan agreement is executed and all conditions precedent to funding
have been
satisfied.
See
“Note
23 & 24” for further information on this derivative instrument and progress
of the credit agreement with Standard Bank.
NOTE
21 -
Mining and Engineering Contracts
In
early
December 2005, the Company’s wholly-owned Mexican subsidiary, MSR, which holds
the rights to develop and mine El Chanate Project, entered into a Mining
Contract with a Mexican mining contractor, Sinergia Obras Civiles y
Mineras,
S.A. de C.V,("Sinergia"). The Mining Contract becomes effective if
and when MSR
sends the Contractor a formal "Notice of Award".
Pursuant
to the Mining Contract, the Contractor, using its own equipment, will
generally
perform all of the mining work (other than crushing) at the El Chanate
Project
for the life of the mine. The Mining Contract becomes effective upon
delivery by
MSR to the Contractor of a formal "Notice to Proceed". Subsequent to
delivery of
the "Notice to Proceed" and prior to commencement of any work by Sinergia,
MSR
must pay Sinergia a mobilization payment of $70,000, and must also
make an
advance payment of $520,000 to Sinergia. This advance payment is recoverable
by
MSR out of 100% of subsequent payments due to Sinergia under the Mining
Contract. Sinergia's mining rates are subject to escalation on an annual
basis.
This escalation is tied to the percentage escalation in Sinergia's
costs for its
equipment, interest rates and labor. If the "Notice to Proceed" was
not received
by Sinergia by June 1, 2006, Sinergia could elect to either terminate
the
agreement or modify its initial mining rates. MSR is not obligated
to proceed
with the Mining Contract if those modified rates are unacceptable to
MSR. On
June 1, 2006, MSR sent a letter to Sinergia requesting a meeting to
discuss
possible modifications to the Mining Contract and a deferment of the
June 1st
deadline. See Note 24 “Subsequent Events” for further information.
In
June
2006, the Company's Mexican operating subsidiary retained the contracting
services of Mexican subsidiary of M3 Engineering & Technology Corporation
("M3M") to provide EPCM (engineering procurement construction management)
services. M3M will supervise the construction and integration of the
various
components necessary to commence production at the El Chanate Project.
The
contracted services shall not exceed $1,200,000 and the contract is
based on the
EPCM services to be provided by M3M. As of July 31, 2006, the Company
has
incurred approximately $72,000 pursuant to this contract.
NOTE
22 -
Employee and Consulting Agreements
On
March
1, 2006, the Company entered into a consulting agreement with Christopher
Chipman pursuant to which the Company has retained Mr. Chipman as its
Chief
Financial Officer. Pursuant to the Agreement with Mr. Chipman, Mr.
Chipman
devotes approximately 50% of his time to the Company's business. He
receives a
monthly fee of $7,500 and he was issued two year options to purchase
an
aggregate of 50,000 shares of the Company's common stock at an exercise
price of
$.34 per share. The options will vest at the rate of 10,000 shares
per month
during the initial period of his engagement. Notwithstanding the foregoing,
the
options are not exercisable unless and until the issuance of the options
is
approved by the Company's stockholders. The agreement runs for an initial
one
year period, and is renewable thereafter for an additional year. The
Company can
terminate the agreement at any time; however, if the Company terminates
the
agreement other than for cause (as defined in the agreement), the Company
is
required to pay Mr. Chipman the fees otherwise due and payable to him
through
the last day of the then current term of the Agreement or six months
from such
termination, which ever is shorter. Mr. Chipman can terminate the Agreement
on
30 days notice.
On
May
12, 2006, the Company entered into an employment agreement with John
Brownlie,
pursuant to which Mr. Brownlie serves as Vice President Operations.
Mr. Brownlie
receives a base annual salary of $150,000 and is entitled to annual
bonuses.
Upon his employment, he received options to purchase an aggregate of
200,000
shares of the Company’s common stock at an exercise price of $.32 per share.
50,000 options vested immediately and the balance vest upon the Company
achieving "Economic Completion" as that term is defined in the loan
agreement
with Standard Bank plc (when the Company has commenced mining operations
and has
been operating at anticipated capacity for 60 to 90 days). The term
of the
options is two years from the date of vesting. The agreement runs for
an initial
two year period, and automatically renews thereafter for additional
one year
periods unless terminated by either party within 30 days of a renewal
date. The
Company can terminate the agreement for cause or upon 30 days notice
without
cause. Mr. Brownlie can terminate the agreement upon 60 days notice
without
cause or, if there is a breach of the agreement by the Company that
is not
timely cured, upon 30 days notice. In the event that the Company terminates
him
without cause or he terminates due to the Company’s breach, he will be entitled
to certain severance payments. The Company utilized the Black-Scholes
method to
fair value the 200,000 options received by Mr. Brownlie. The Company
recorded
approximately $70,000 as deferred compensation expense as of the date
of the
agreement and recorded the vested portion or $17,500 as stock compensation
expense for the year ended July 31, 2006.
Effective
July 31, 2006, the last day of the Company’s fiscal year, the Company entered
into employment agreements with the following executive officers: Gifford
A.
Dieterle, the Company’s President and Treasurer, Roger A. Newell, the Company’s
Vice President of Development, Jack V. Everett, the Company’s Vice President of
Exploration, and Jeffrey W. Pritchard, the Company’s Vice President of Investor
Relations.
The
agreements run for a period of three years and automatically renew
for
successive one-year periods unless the Company or the executive provides
the
other party with written notice of the Company’s or his intent not to renew at
least 30 days prior to the expiration of the then current employment
period.
Mr.
Dieterle is entitled to a base annual salary of at least $180,000 and
each of
the other executives is entitled to a base annual salary of at least
$120,000.
Each executive is entitled to a bonus or salary increase in the sole
discretion
of the Company’s board of directors. In addition, each of the executives
received two year options to purchase an aggregate of 250,000 shares
of the
Company’s common stock at an exercise price of $0.32 per share (the closing
price on July 31, 2006). The Company utilized the Black-Scholes method
to fair
value the 1,000,000 options received by the executives as part of these
employment agreements. The Company recorded approximately $204,000
as stock
compensation expense as of July 31, 2006.
The
Company has the right to terminate any executive's employment for cause
or on 30
days' prior written notice without cause or in the event of the executive's
disability (as defined in the agreements). The agreements automatically
terminate upon an executive's death. "Cause" is defined in the agreements
as (1)
a failure or refusal to perform the services required under the agreement;
(2) a
material breach by executive of any of the terms of the agreement;
or (3)
executive's conviction of a crime that either results in imprisonment
or
involves embezzlement, dishonesty, or activities injurious to the Company
or the
Company’s reputation. In the event that the Company terminates an executive's
employment without cause or due to the disability of the executive,
the
executive will be entitled to a lump sum severance payment equal to
one month's
salary, in the case of termination for disability, and up to 12 month's
salary
(depending upon years of service), in the case of termination without
cause.
Each
executive has the right to terminate his employment agreement on 60
days' prior
written notice or, in the event of a material breach by us of any of
the terms
of the agreement, upon 30 days' prior written notice. In the event
of a claim of
material breach by us of the agreement, the executive must specify
the breach
and the Company’s failure to either (i) cure or diligently commence to cure the
breach within the 30 day notice period, or (ii) dispute in good faith
the
existence of the material breach. In the event that an agreement terminates
due
to the Company’s breach, the executive is entitled to severance payments in
equal monthly installments beginning in the month following the executive's
termination equal to three month' salary plus one additional month's
salary for
each year of service to us. Severance payments cannot exceed 12 month's
salary.
In
conjunction with the employment agreements, the Company’s board of directors
deeming it essential to the best interests of the Company’s stockholders to
foster the continuous engagement of key management personnel and recognizing
that, as is the case with many publicly held corporations, a change
of control
might occur and that such possibility, and the uncertainty and questions
which
it might raise among management, might result in the departure or distraction
of
management personnel to the detriment of the company and the Company’s
stockholders, determined to reinforce and encourage the continued attention
and
dedication of members of the Company’s management to their engagement without
distraction in the face of potentially disturbing circumstances arising
from the
possibility of a change in control of the company, the Company entered
into
identical agreements regarding change in control with the executives.
Each of
the agreements regarding change in control continues through December
31, 2009
and extends automatically to the third anniversary thereof unless the
Company
gives notice to the executive prior to the date of such extension that
the
agreement term will not be extended. Notwithstanding the foregoing,
if a change
in control occurs during the term of the agreements, the term of the
agreements
will continue through the second anniversary of the date on which the
change in
control occurred. Each of the agreements entitles the executive to
change of
control benefits, as defined in the agreements and summarized below,
upon his
termination of employment with us during a potential change in control,
as
defined in the agreements, or after a change in control, as defined
in the
agreements, when his termination is caused (1) by us for any reason
other than
permanent disability or cause, as defined in the agreement (2) by the
executive
for good reason as defined in the agreements or, (3) by the executive
for any
reason during the 30 day period commencing on the first date which
is six months
after the date of the change in control. Each executive would receive
a lump sum
cash payment of three times his base salary and outplacement benefits.
Each
agreement also provides that the executive is entitled to a payment
to make him
whole for any federal excise tax imposed on change of control or severance
payments received by him.
NOTE
23 -
Sales Contracts, Commodity and Financial Instruments
In
March
2006, the Company entered into two identically structured derivative
contracts
with Standard Bank (See Note 20). Each derivative consisted of a series
of
forward sales of gold and a purchase gold cap. The Company agreed to
sell a
total volume of 121,927 ounces of gold forward to Standard Bank at
a price of
$500 per ounce on a quarterly basis during the period from March 2007
to
September 2010. The Company also agreed to a purchase gold cap on a
quarterly
basis during this same period and at identical volumes covering a total
volume
of 121,927 ounces of gold at a price of $535 per ounce. Under FASB
Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities"
("FAS 133"),
these contracts must be carried on the balance sheet at their fair
value, with
changes to the fair value of these contracts reflected as Other Income
or
Expense. These contracts were not designated as hedging derivatives;
and
therefore, special hedge accounting does not apply.
The
first
derivative was entered into on March 1, 2006 for a premium of $550,000;
and the
second was entered into on March 30, 2006 for a premium of $250,000.
The gold
price rose sharply during the period March 1, 2006 through July 31,
2006 and was
the primary reason for the decrease in premium on the derivative contracts.
As
of July 31, 2006, the carrying value of these derivatives was approximately
$218,000. The change in fair value on these derivative contracts was
approximately $582,000 for the year ended July 31, 2006, and was recorded
as an
other expense.
NOTE 24 - Subsequent Events
On
August
14, 2006, the Board of Directors (the "Board") of the Company declared
a
dividend (the "Dividend") of one Series B common share purchase right
(a
"Right") for each outstanding share of common stock, par value $.0001
per share.
Each Right represents the right to purchase one one-thousandth of Series
B
Share. The Dividend is payable to holders of record on August 14, 2006.
In
connection with the Dividend, the Company entered into a Rights Agreement
with
American Stock Transfer & Trust Company as Rights Agent (the "Rights
Agreement"), specifying the terms of the Rights. The Rights will impose
a
significant penalty upon any person or group that acquires beneficial
ownership
of 20% or more of the Company's outstanding common stock without the
prior
approval of the Board. The Rights Agreement provides an exemption for
any person
who is, as of August 15, 2006, the beneficial owner of 20% or more
of the
Company’s outstanding common stock, so long as such person does not, subject
to
certain exceptions, acquire additional shares of the Company’s common stock
after that date. The Rights Agreement will not interfere with any merger
or
other business combination approved by the Board.
On
August
15, 2006, The Company entered into a credit agreement (the “Credit Agreement”)
involving the Company’s wholly-owned subsidiaries MSR and Oro, as borrowers, the
Company, as guarantor, and Standard Bank plc (“Standard Bank”), as the lender
and the offshore account holder. Under the Credit Agreement, MSR and
Oro have
agreed to borrow money in an aggregate principal amount of up to US$12.5
million
(the “Loan”) for the purpose of constructing, developing and operating the
Company’s El Chanate project (the “Mine”). The Company is guaranteeing the
repayment of the loan and the performance of the obligations under
the Credit
Agreement. The Loan is scheduled to be repaid in fourteen quarterly
payments
with the first principal payment due after certain Mine start-up production
and
performance criteria are satisfied, which the Company believes will
occur in the
first calendar quarter of 2008. The Loan bears interest at LIBOR plus
4.00%,
with LIBOR interest periods of 1, 2, 3 or 6 months and with interest
payable at
the end of the applicable interest period.
The
Credit Agreement contains covenants customary for a project financing
loan,
including but not limited to restrictions (subject to certain exceptions)
on
incurring additional debt, creating liens on the Company’s property, disposing
of any assets, merging with other companies and making any investments.
The
Company is required to meet and maintain certain financial covenants,
including
(i) a debt service coverage ratio of not less than 1.2 to 1.0, (ii)
a projected
debt service coverage ratio of not less than 1.2 to 1.0, (iii) a loan
life
coverage ratio of at least 1.6 to 1.0, (iv) a project life coverage
ratio of at
least 2.0 to 1.0 and (v) a minimum reserve tail. The Company is also
required to
maintain a certain minimum level of unrestricted cash, and upon meeting
certain
Mine start-up production and performance criteria, MSR and Oro will
be required
to maintain a specified amount of cash as a reserve for debt
repayment.
The
Loan
was secured by all of the tangible and intangible assets and property
owned by
MSR and Oro pursuant to the terms of a Mortgage Agreement, a Non-Possessory
Pledge Agreement, an Account Pledge Agreement and certain other agreements
entered into
in
Mexico (the “Mexican Collateral Documents”). As additional collateral for the
Loan, the Company, together with its subsidiary, Leadville Mining & Milling
Holding Corporation, pledged all of its ownership interest in MSR and
Oro. In
addition to these collateral arrangements, MSR and Oro will be required
to
deposit all proceeds of the Loan and all cash proceeds received from
operations
and other sources in an offshore, controlled account with Standard
Bank. Absent
a default under the loan documents, MSR and Oro may use the funds from
this
account for specific purposes such as approved project costs and operating
costs.
As
part
of the fee for entering into and closing the Credit Agreement, the
Company has
issued to Standard Bank 1,150,000 shares of the Company’s restricted common
stock and a warrant for the purchase of 12,600,000 shares of the Company’s
common stock at an exercise price of $0.317 per share, expiring on
the earlier
of (a) December 31, 2010 or (b) the date one year after the repayment
of the
Credit Agreement. Previously, pursuant to the mandate and commitment
letter for
the facility, The Company issued to Standard Bank 1,000,000 shares
of the
Company’s restricted common stock and a warrant for the purchase of 1,000,000
shares of the Company’s common stock at an exercise price of $0.32 per share,
expiring on the earlier of (a) December 31, 2010 or (b) the date one
year after
the repayment of the Credit Agreement. The Company has registered for
public
resale the 1,000,000 shares and the 1,000,000 shares issuable upon
exercise of
warrants issued to Standard Bank pursuant to the mandate and commitment
letter
and the Company has agreed to register for resale the shares and the
shares
issuable upon exercise of the warrants issued to Standard at the closing
of the
Credit Agreement.
On
August
30, 2006, Standard Bank returned to the Company the $4.3 million held
as cash
collateral to protect the Company against future fluctuations in the
price of
gold as part of a gold price protection agreement with Standard Bank
plc (See
Note 4 & 20).
On
September 1, 2006, the Company amended its consulting agreement with
its Chief
Financial Officer. Pursuant to the agreement, the Company’s Chief Financial
Officer devotes approximately 50% of his time to our business. He receives
a
monthly fee of $10,000. The agreement runs for an initial one year
period, and
is renewable thereafter for an additional year. He can terminate the
Agreement
on 60 days notice. In conjunction with the amended consulting agreement,
the
Company entered into a change of control agreement similar to the agreements
entered into with other executive officers; except that the Company’s CFO
agreement renews annually and his benefits are based upon one times
his base
annual fee.
Subsequently
to July 31, 2006, the Company issued purchase orders on material and
equipment
regarding its El Chanate Project amounting to approximately $5,600,000.
As of
October 24, 2006, the Company has paid approximately $2,500,000 on
these
commitments, including an additional down payment of approximately
$230,000 on
the new crushing system, including conveyors.
On
September 13, 2006, the Company repurchased the 5% net profits interest
formerly
held by Grupo Minera FG (“FG”), and subsequently acquired by Daniel Gutierrez
Cibrian, with respect to the operations at the El Chanate mine. That
net profits
interest had originally been granted to FG in connection with the April
2004
termination of the joint venture agreement between FG and MSR, Capital
Gold’s
wholly owned Mexican subsidiary (See Note 7).
The
purchase price for the buyback of the net profits interest was $500,000,
and was
structured as part of the project costs financed by the recently completed
loan
agreement with Standard Bank, Plc. (See Note 20). Mr. Gutierrez will
retain a 1%
net profits interest in MSR, payable only after a total $US 20 million
in net
profits has been generated from operations at El Chanate.
On
October 10, 2006, the Company completed the initial draw down on its
credit
facility from Standard Bank receiving proceeds of $1,250,000. The Company
anticipates using the proceeds for the repurchase of the 5% net profits
interest
formerly held by FG and to continue the mine development at the El
Chanate site.
On
October 11, 2006, subsequent to the end of the fiscal year, and prior
to the
initial draw on its credit facility with Standard Bank, the Company
entered into
interest rate swap agreements in accordance with the terms of the Credit
Facility, which requires that the Company hedge at least 50 percent
of its
outstanding debt under this facility. The agreements entered into cover
$9,375,000 or 75% of the outstanding debt. Both swaps covered this
same notional
amount of $9,375,000, but over different time horizons. The first covered
the
six months commencing October 11, 2006 and a termination date of March
31, 2007
and the second covering the period from March 30, 2007 and a termination
date of
December 31, 2010. The Company intends to use discretion in managing this
risk as market conditions vary over time, allowing for the possibility
of
adjusting the degree of hedge coverage as the Company deems appropriate.
However, any use of interest rate derivatives will be restricted to
use for risk
management purposes.
NOTE 25 - Subsequent Events -
Sinergia
On
August
2, 2006, the Company amended the November 24, 2005 Mining Contract
(See Note 21)
between its subsidiary, MSR, and Sinergia. Pursuant to the amendment,
MSR's
right to deliver the Notice to Proceed to Sinergia is extended to November
1,
2006. Provided that this Notice is delivered to Sinergia on or before
that date,
with a specified date of commencement of the Work (as defined in the
contract)
not later than February 1, 2007, the mining rates set forth in the
Mining
Contract will still apply; subject to adjustment for the rate of inflation
between September 23, 2005 and the date of commencement of the work. As
consideration for these changes, the Company paid Sinergia $200,000
of the
requisite advance payment discussed below. On
November 1, 2006, MSR delivered the Notice of Award specifying January
25, 2007
as the date of commencement of Work.
Pursuant
to the Mining Contract, Sinergia, using its own equipment, will generally
perform all of the mining work (other than crushing) at the El Chanate
Project
for the life of the mine. Subsequent to delivery of the Notice to Proceed
and
prior to the commencement of any work by Sinergia, MSR must pay Sinergia
a
mobilization payment of $70,000, and must also make an advance payment
of
$520,000 to Sinergia (all of which has already been advanced). The advance
payments are recoverable by MSR out of 100% of subsequent payments due
to
Sinergia under the Mining Contract. Pursuant to the Mining Contract,
upon
termination, Sinergia would be obligated to repay any portion of the
advance
payment that had not yet been recouped. Sinergia’s mining rates are subject to
escalation on an annual basis. This escalation is tied to the percentage
escalation in Sinergia’s costs for various parts for its equipment, interest
rates and labor. One of the principals of Sinergia is one of the former
principals of FG. FG was our former joint venture partner.
100,479,757
SHARES OF
COMMON
STOCK
CAPITAL
GOLD CORPORATION
PROSPECTUS
December
5, 2006