UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2009
or
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 333-140148
Nevada Gold Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 20-3724068 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
1640 Terrace Way, Walnut Creek, CA | 94597 |
(Address of principal executive offices) | (Zip Code) |
(925) 930-0100
(Registrant’s telephone number, including area code)
1265 Mesa Drive, Fernley, Nevada 89408
(775) 835-6177
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ | Accelerated filer ¨ |
Non-accelerated filer (Do not check if a smaller reporting company) ¨ | Smaller reporting company x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of November 16, 2009, there were 76,151,946 shares of the registrant’s common stock, par value $0.001 per share, outstanding.
NEVADA GOLD HOLDINGS, INC.
Form 10-Q
TABLE OF CONTENTS
Page | ||
AVAILABLE INFORMATION | 2 | |
FORWARD-LOOKING STATEMENTS | 3 | |
EXPLANATORY NOTE | 4 | |
PART I—FINANCIAL INFORMATION | 5 | |
Item 1. | Financial Statements. | 5 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | 13 |
Item 4T. | Controls and Procedures. | 14 |
PART II—OTHER INFORMATION | 14 | |
Item 1. | Legal Proceedings. | 14 |
Item 1A. | Risk Factors. | 15 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | 15 |
Item 3. | Defaults upon Senior Securities. | 15 |
Item 4. | Submission of Matters to a Vote of Security Holders. | 15 |
Item 5. | Other Information. | 16 |
Item 6. | Exhibits. | 16 |
SIGNATURE | 17 |
AVAILABLE INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the United States Securities and Exchange Commission (“SEC”). You may read and copy any document we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549, U.S.A. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330 (or 1-202-551-8090). The SEC maintains an internet site that contains annual, quarterly and current reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. Our electronic SEC filings are available to the public at http://www.sec.gov.
Our public internet site is http://www.nevadagoldholdings.com. We make available free of charge through our internet site, via a link to the SEC’s internet site at http://www.sec.gov, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we electronically files such material with, or furnish it to, the SEC. We also make available through our internet site, via a link to the SEC’s internet site, statements of beneficial ownership of our equity securities filed by our directors, officers, 10% or greater shareholders and others under Section 16 of the Exchange Act.
These documents are also available in print without charge to any person who requests them by writing or telephoning:
Nevada Gold Holdings, Inc.
c/o Gottbetter & Partners, LLP
488 Madison Avenue
New York, New York 10022-5718
212-400-6900
Facsimile 212-400-6901
2
FORWARD-LOOKING STATEMENTS
This Quarterly Report contains forward-looking statements, including, without limitation, in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere. Any and all statements contained in this Report that are not statements of historical fact may be deemed forward-looking statements. Terms such as “may,” “might,” “would,” “should,” “could,” “project,” “estimate,” “pro forma,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,” “believe,” “continue,” “intend,” “expect,” “future,” and terms of similar import (including the negative of any of the foregoing) may be intended to identify forward-looking statements. However, not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this Report may include, without limitation, statements regarding (i) the plans and objectives of management for future operations, including plans or objectives relating to exploration programs, (ii) a projection of income (including income/loss), earnings (including earnings/loss) per share, capital expenditures, dividends, capital structure or other financial items, (iii) our future financial performance, including any such statement contained in a discussion and analysis of financial condition by management or in the results of operations included pursuant to the rules and regulations of the SEC, and (iv) the assumptions underlying or relating to any statement described in points (i), (ii) or (iii) above.
The forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which we have no control over. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties. Factors that may influence or contribute to the inaccuracy of the forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation, our inability to obtain adequate financing, insufficient cash flows and resulting illiquidity, our inability to expand our business, government regulations, lack of diversification, volatility in the price of gold, increased competition, results of arbitration and litigation, stock volatility and illiquidity, and our failure to implement our business plans or strategies. A description of some of the risks and uncertainties that could cause our actual results to differ materially from those described by the forward-looking statements in this Report appears in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (the “2008 From 10-K”) in the section captioned “Risk Factors” and elsewhere in this Report.
Readers are cautioned not to place undue reliance on forward-looking statements because of the risks and uncertainties related to them and to the risk factors. We disclaim any obligation to update the forward-looking statements contained in this Report to reflect any new information or future events or circumstances or otherwise.
You should read this Report in conjunction with the discussion under the caption “Risk Factors” in the 2008 Form 10-K, the audited consolidated financial statements and notes thereto in the 2008 Form 10-K, the unaudited consolidated financial statements and notes thereto in this Report, and other documents which we may file from time to time with the SEC.
3
EXPLANATORY NOTE
On December 31, 2008, Nevada Gold Acquisition Corp., a Nevada corporation formed on December 18, 2008, and a wholly owned subsidiary of Nevada Gold Holdings, Inc., merged with and into Nevada Gold Enterprises, Inc., a Nevada corporation formed on October 7, 2008 (“NGE”), with NGE being the surviving corporation (the “Merger”). As a result of the Merger, NGE became our wholly-owned subsidiary.
Pursuant to the Merger, we ceased operating as a distributor of party and drinking supplies and acquired the business of NGE to engage in the exploration and eventual development of gold mines and will continue NGE’s existing business operations as a publicly-traded company under the name Nevada Gold Holdings, Inc.
The Merger was treated as a reverse merger and recapitalization for financial accounting purposes. NGE is considered the acquirer for accounting purposes, and our historical financial statements for periods prior to the Merger have become the historical financial statements of NGE for periods prior to the Merger in all subsequent filings with the SEC.
For more information about the Merger and related transactions and the accounting treatment thereof, see “Business—Historical Development” in the 2008 Form 10-K.
4
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
NEVADA GOLD HOLDINGS, INC.
(An Exploration Stage Company)
Consolidated Balance Sheets
(Unaudited)
September 30, | December 31, | |||||||
2009 | 2008 | |||||||
(Restated) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash | $ | 278,212 | $ | - | ||||
Cash held in trust | - | 253,440 | ||||||
Total Current Assets | 278,212 | 253,440 | ||||||
OTHER ASSETS | ||||||||
Mining reclamation bond | 15,444 | - | ||||||
Total Other Assets | 15,444 | - | ||||||
TOTAL ASSETS | $ | 293,656 | $ | 253,440 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable and accrued expenses | $ | 20,353 | $ | 247,002 | ||||
Notes payable | - | 150,000 | ||||||
Total Current Liabilities | 20,353 | 397,002 | ||||||
STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
Preferred stock:$0.001 par value, 10,000,000 shares authorized; no shares issued and outstanding | - | - | ||||||
Common stock:$0.001 par value, 300,000,000 shares authorized authorized; 76,151,946 and 72,521,946 shares issued and outstanding, respectively | 76,152 | 72,522 | ||||||
Additional paid-in capital | 862,620 | - | ||||||
Deficit accumulated during the exploration stage | (665,469 | ) | (216,084 | ) | ||||
Total Stockholders' Equity (Deficit) | 273,303 | (143,562 | ) | |||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $ | 293,656 | $ | 253,440 |
The accompanying notes are an integral part of these consolidated financial statements.
5
NEVADA GOLD HOLDINGS, INC.
(An Exploration Stage Company)
Consolidated Statements of Operations
(Unaudited)
From Inception | ||||||||||||
For the Three | For the Nine | on October 7, | ||||||||||
Months Ended | Months Ended | 2008 Through | ||||||||||
September 30, | September 30, | September 30, | ||||||||||
2009 | 2009 | 2009 | ||||||||||
REVENUES | $ | - | $ | - | $ | - | ||||||
COSTS AND EXPENSES | ||||||||||||
General and administrative | 148,196 | 434,385 | 630,004 | |||||||||
Exploration costs | 15,000 | 15,000 | 35,465 | |||||||||
Total Costs and Expenses | 163,196 | 449,385 | 665,469 | |||||||||
LOSS BEFORE INCOME TAXES | (163,196 | ) | (449,385 | ) | (665,469 | ) | ||||||
OTHER INCOME (EXPENSES) | - | - | - | |||||||||
INCOME (LOSS) BEFORE INCOME TAXES | (163,196 | ) | (449,385 | ) | (665,469 | ) | ||||||
INCOME TAX EXPENSE | - | - | - | |||||||||
NET LOSS | $ | (163,196 | ) | $ | (449,385 | ) | $ | (665,469 | ) | |||
BASIC AND DILUTED LOSS PER COMMON SHARE | $ | (0.00 | ) | $ | (0.01 | ) | ||||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED | 75,232,381 | 73,622,605 |
The accompanying notes are an integral part of these consolidated financial statements
6
NEVADA GOLD HOLDINGS, INC.
(An Exploration Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
(Unaudited)
Deficit | ||||||||||||||||||||
Accumulated | Total | |||||||||||||||||||
Additional | During the | Stockholders' | ||||||||||||||||||
Common Stock | Paid-In | Exploration | Equity | |||||||||||||||||
Shares | Amount | Capital | Stage | (Deficit) | ||||||||||||||||
Balance at inception on October 7, 2008 | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
Common stock issued to founders for cash on October 7, 2008 | 32,000,000 | 32,000 | - | (31,975 | ) | 25 | ||||||||||||||
Recapitalization pursuant to reverse merger | 39,393,946 | 39,394 | (252,372 | ) | (40,381 | ) | (253,359 | ) | ||||||||||||
Common stock issued for loan fees | 300,000 | 300 | 37,200 | - | 37,500 | |||||||||||||||
Value of conversion feature of convertible debt | - | - | 112,500 | - | 112,500 | |||||||||||||||
Common stock issued for cash | 828,000 | 828 | 102,672 | - | 103,500 | |||||||||||||||
Net loss for the period from inception on October 7, 2008, through December 31, 2008 | - | - | - | (143,728 | ) | (143,728 | ) | |||||||||||||
Balance, December 31, 2008 | 72,521,946 | 72,522 | - | (216,084 | ) | (143,562 | ) | |||||||||||||
Common stock issued for cash | 3,330,000 | 3,330 | 787,920 | - | 791,250 | |||||||||||||||
Common stock issued for services rendered | 300,000 | 300 | 74,700 | - | 75,000 | |||||||||||||||
Net loss for the nine months ended September 30, 2009 | - | - | - | (449,305 | ) | (449,305 | ) | |||||||||||||
Balance, September 30, 2009 | 76,151,946 | $ | 76,152 | $ | 862,620 | $ | (665,469 | ) | $ | 273,303 |
The accompanying notes are an integral part of these consolidated financial statements.
7
NEVADA GOLD HOLDINGS, INC.
(An Exploration Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
From Inception | ||||||||
For the Nine | on October 7, | |||||||
Months Ended | 2008 Through | |||||||
September 30, | September 30, | |||||||
2009 | 2009 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net loss | $ | (449,385 | ) | $ | (665,469 | ) | ||
Adjustments to Reconcile Net Loss to Net Cash | ||||||||
Used in Operating Activities: | ||||||||
Common stock issued for services rendered | 75,000 | 75,000 | ||||||
Changes in Operating Assets and Liabilities: | ||||||||
Accounts payable | (226,649 | ) | (10,625 | ) | ||||
Net cash used in operating activities | (601,034 | ) | (601,094 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Purchase of mining reclamation bond | (15,444 | ) | (15,444 | ) | ||||
Relocation of cash held in trust | 253,440 | - | ||||||
Net cash provided by (used in) investing activities | 237,996 | (15,444 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Common stock issued for cash | 791,250 | 894,750 | ||||||
Proceeds from notes payable | - | 150,000 | ||||||
Cash paid on notes payable | (150,000 | ) | (150,000 | ) | ||||
Net cash provided by financing activities | 641,250 | 894,750 | ||||||
NET INCREASE IN CASH | 278,212 | 278,212 | ||||||
CASH AT BEGINNING OF PERIOD | - | - | ||||||
CASH AT END OF PERIOD | $ | 278,212 | $ | 278,212 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
CASH PAID FOR: | ||||||||
Interest | $ | - | $ | - | ||||
Income taxes | $ | - | $ | - | ||||
NON-CASH FINANCING ACTIVITIES | ||||||||
Recapitalization | $ | - | $ | 253,334 |
The accompanying notes are an integral part of these consolidated financial statements.
8
NEVADA GOLD HOLDINGS, INC.
Notes to the Consolidated Financial Statements
September 30, 2009 and December 31, 2008
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Nevada Gold Holdings, Inc. (formerly known as Nano Holdings International, Inc.) was incorporated under the laws of the State of Delaware on April 16, 2004. Nevada Gold Enterprises, Inc., was incorporated under the laws of the State of Nevada on October 7, 2008.
On December 31, 2008, Nevada Gold Acquisition Corp., a Nevada corporation formed on December 18, 2008, and a wholly owned subsidiary of Nevada Gold Holdings, Inc., merged with and into Nevada Gold Enterprises, Inc. (the “Merger”). Nevada Gold Enterprises, Inc., was the surviving corporation in the Merger. As a result of the Merger, Nevada Gold Enterprises, Inc., became a wholly-owned subsidiary of Nevada Gold Holdings, Inc.
Pursuant to the Merger, Nevada Gold Holdings, Inc. ceased operating as a distributor of party and drinking supplies and acquired the business of Nevada Gold Enterprises, Inc., to engage in the exploration and eventual development of gold mines and will continue the Company’s existing business operations as a publicly-traded company under the name Nevada Gold Holdings, Inc.
The Merger was treated as a reverse merger and recapitalization for financial accounting purposes. Nevada Gold Enterprises, Inc., is considered the acquirer for accounting purposes, and Nevada Gold Holdings, Inc. is considered the surviving company for legal purposes. Accordingly, the accompanying financial statements present the historical financial statements of Nevada Gold Enterprises, Inc., as the historical financial statements of Nevada Gold Holdings, Inc., i.e. a reverse merger. As used herein, the “Company” means Nevada Gold Holdings, Inc., a Delaware corporation, and its subsidiary, Nevada Gold Enterprises, Inc., a Nevada corporation.
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.
9
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Recent Accounting Pronouncements
In May 2009, the FASB issued FAS 165, “Subsequent Events”. This pronouncement establishes standards for accounting for and disclosing subsequent events (events which occur after the balance sheet date but before financial statements are issued or are available to be issued). FAS 165 requires an entity to disclose the date subsequent events were evaluated and whether that evaluation took place on the date financial statements were issued or were available to be issued. It is effective for interim and annual periods ending after June 15, 2009. The adoption of FAS 165 did not have a material impact on the Company’s financial condition or results of operation.
10
In June 2009, the FASB issued FAS 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles”. FAS 168 will become the source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of this Statement, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative. This statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of FAS 168 did not have a material impact on the Company’s results of operations, financial condition, or cash flows.
NOTE 4 - SIGNIFICANT TRANSACTIONS
On December 31, 2008, the Company sold in a private placement offering an aggregate of 828,000 shares of common stock for cash at $0.125 per share. On December 31, 2008, the Company also received $150,000 pursuant to a secured note payable with an unrelated party. Under the terms of this note, interest accrues at a rate of 10.0 % per annum, and the balance, including accrued interest, is due on December 31, 2009. Upon the closing of the Merger, the purchaser of the note also received 300,000 shares of Common Stock under the terms of the note. These shares were valued at $0.125 per share. On June 24, 2009, the Company prepaid $100,000 of principal on this note, and issued 200,000 shares of common stock to the holder of the note payable, as consideration for waiving certain disputed anti-dilution clauses of the note. These shares were valued at $0.25 per share. As of September 30, 2009, the Company had repaid the note principal and interest in full, and held no further obligations under the terms of the note.
Effective March 9, 2009, the Company issued 330,000 shares of common stock for cash at $0.125 per share.
On May 11, 2009, the Company entered into a consulting agreement whereby the Company receives certain investor relation and corporate communications services in exchange for the issuance of 100,000 shares of the Company’s common stock. Of these shares, 50,000 were issued upon execution of the agreement, at a value of $0.25 per share. The remaining 50,000 shares were issued on August 26, 2009, also at $0.25 per share.
Effective May 13, 2009, the Company’s shares of common stock were forward split on a 2 shares for 1 share basis, in the form of a stock dividend. The accompanying financial statements have been restated to reflect the forward stock split on a retro-active basis.
11
On June 24, 2009, the Company consummated a private placement offering whereby the Company issued 2,000,000 units in exchange for cash at $0.25 per unit (for net proceeds of $500,000). Each unit consists of one share of common stock and one warrant to purchase one share of common stock at $0.50 per share, exercisable for a period of five years. Concurrent with the private placement offering, the Company agreed to grant an additional 200,000 warrants to the related placement agent, which were valued at $44,456 using the Black-Scholes options pricing model assuming common stock volatility of 153% and a risk-free rate of 3.94. Each of these warrants allows the recipient the right to purchase one share of the Company’s common stock at a price of $0.25 per share, for a period of up to five years. The Company performed an analysis of the 2,000,000 warrants using the Black-Scholes options pricing model, assuming common stock volatility of 153% and a risk-free rate of 3.94%, resulting in an aggregate relative fair value of $235,327. The warrants were deemed not to be derivatives.
On September 18, 2009, the Company consummated a private placement offering whereby the Company issued 1,000,000 units in exchange for cash at $0.25 per unit (for net proceeds of $250,000). Each unit consists of one share of common stock and one warrant to purchase one share of common stock at $0.50 per share, exercisable for a period of five years. Each of these warrants allows the recipient the right to purchase one share of the Company’s common stock at a price of $0.25 per share, for a period of up to five years. The Company performed an analysis of the warrants using the Black-Scholes options pricing model, assuming common stock volatility of 134% and a risk-free rate of 3.94%, resulting in an aggregate relative fair value of $109,474. The warrants were deemed not to be derivatives.
In connection with the private placement offering, the Company had previously entered into a Placement Agency Agreement with Gottbetter Capital Markets, LLC (the “Placement Agent”), in which the Company agreed (i) to pay a cash fee to the Placement Agent equal to 10% of the gross proceeds from the sale of PPO Units to investors introduced to the Company by the Placement Agent and 2% of the gross proceeds from the sale of PPO Units to any other investors, and (ii) to issue to the Placement Agent warrants to purchase a number of shares of Common Stock equaling 10% of the PPO Units sold to investors introduced to the Company by the Placement Agent and 2% of the PPO Units sold to any other investors, exercisable for a period of five years at an exercise price of $0.50 per share. In connection with the closing on September 18, 2009, the Placement Agent earned a cash fee of $5,000 and warrants to purchase 20,000 shares of Common Stock. The Company valued these warrants at $2,181, pursuant to the Black-Scholes options pricing model.
NOTE 5 - - CORRECTION OF AN ERROR
The Company will restate issued balance sheets, statements of operations and statements of cash flows contained in the financial statements referred to above for matters related to the following errors: (i) an overstatement of accounts payable and accrued expenses at December 31, 2008, and March 31 and June 30, 2009, (ii) an understatement of general and administrative expenses for the period from inception through December 31, 2008, (iii) an overstatement of cash held in trust at December 31, 2008, and an understatement of notes payable at March 31, 2009, and (iv) the incorrect valuation of the Tempo Mineral Prospect.
Following is a description of the errors related to the overstatement of accounts payable and accrued expenses at December 31, 2008, and March 31 and June 30, 2009, and the understatement of general and administrative expenses for the period from inception through December 31, 2008: The Company overstated accounts payable due to the Company’s accounting consultant misconstruing certain transactions taking place within the Company’s trust account, which is maintained by an external accountant. Certain cash payments on prior period liabilities were incorrectly recorded as accruals of new accounts payable and accrued expenses. Company understated general and administrative expenses, as certain expense payments were incorrectly recorded as accruals of liabilities.
Following is a description of the error related to the overstatement of cash held in trust at December 31, 2008, and an understatement of notes payable at March 31, 2009: The Registrant overstated its cash held in trust at December 31, 2008, by including the proceeds of the $150,000 Bridge Note described in the Super 8-K. The proceeds of the Bridge Note were not actually received by the Registrant until January 7, 2009, and should not have been included in cash held in trust at December 31, 2008. The Registrant understated notes payable at March 31, 2009, by failing to include the $150,000 Bridge Note. (As reported in the Form 10-Q for the quarter ended June 30, 2009, on June 24, 2009, the Registrant prepaid $100,000 of principal on the bridge Note, and the balance was correctly reflected at June 30, 2009.)
Following is a description of the error related to the incorrect valuation of the Tempo Mineral Prospect: The asset was originally valued at the predecessor owner’s cost of $20,465. In accordance with SEC Staff guidance, since there has not been a final or bankable feasibility study and the designation of proven and probable reserves, the Tempo Mineral Prospect is expected to be assigned no fair value at December 31, 2008, and subsequent balance sheet dates.
The effects on the Company’s previously issued consolidated financial statements for the fiscal year ended December 31, 2008, of the errors related to the overstatement of accounts payable and accrued expenses, the understatement of general and administrative expenses and the incorrect valuation of the Tempo Mineral Prospect are summarized as follows:
As | ||||||||||||
Previously | As | Increase | ||||||||||
December 31, 2008 | Reported | Restated | (Decrease) | |||||||||
Cash held in trust | $ | 253,440 | $ | 253,440 | $ | - | ||||||
Total current assets | 253,440 | 253,440 | - | |||||||||
Mining claims | 20,465 | - | (20,465 | ) | ||||||||
Total assets | 273,905 | 253,440 | 20,465 | ) | ||||||||
Accounts payable and accrued | ||||||||||||
expenses | 363,996 | 247,002 | (116,994 | ) | ||||||||
Total liabilities | 363,996 | 397,002 | 33,006 | |||||||||
Total stockholders’ equity (deficit) | (90,091 | ) | (143,562 | ) | (53,471 | ) | ||||||
For the Year Ended December 31, 2008 | ||||||||||||
Exploration costs | - | 20,465 | 20,465 | |||||||||
General and administrative expense | 90,282 | 123,263 | 32,981 | |||||||||
Net loss | (90,282 | ) | (143,728 | ) | (53,446 | ) |
12
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
Results of Operations
For the three months ended September 30, 2009
We were incorporated on October 7, 2008. Accordingly we are unable to present comparative numbers from corresponding periods of the 2008 fiscal year.
During the three months ended September 30, 2009, we incurred general and administrative expenses of $148,196. The expenses were primarily legal, accounting and other professional fees incurred in connection with our merger with Nevada Gold Enterprises, Inc. and the related public filings, as well as similar expenses pertaining to a subsequent equity offering. The Company also incurred exploration costs in the amount of $15,000. These factors resulted in a net loss of $163,196 for the three months ended September 30, 2009.
For the nine months ended September 30, 2009
We were incorporated on October 7, 2008. Accordingly we are unable to present comparative numbers from corresponding periods of the 2008 fiscal year.
During the nine months ended September 30, 2009, we incurred general and administrative expenses of $434,385. These expenses were primarily legal, accounting and other professional fees incurred in connection with our merger with Nevada Gold Enterprises, Inc. and the related public filings, as well similar expenses pertaining to a subsequent equity offering. The Company also incurred exploration costs in the amount of $15,000. These factors resulted in a net loss of $449,385 for the nine months ended September 30, 2009.
From inception through September 30, 2009
From inception on October 7, 2008 through September 30, 2009, we incurred general and administrative expenses of $630,004. The expenses were primarily legal, accounting and other professional fees. This figure also includes $112,500 for the value of the convertible feature attached to the convertible debt. The Company also incurred $35,465 in exploration costs. These factors resulted in a net loss of $665,469 for the period from inception on October 7, 2009 through September 30, 2009.
Liquidity and Capital Resources
At September 30, 2009, we had $278,212 in cash on hand and $20,353 in current liabilities. We used $601,034 and $601,094 of cash in our operating activities during the nine months ended September 30, 2009 and from inception through September 30, 2009, respectively. We also used $15,444 for a mining reclamation bond during those same periods.
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The Company’s cash requirements were satisfied primarily though the sale of shares of our common stock, and debt financing. We received $791,250 and $894,750 during the nine months ended September 30, 2009 and from inception through September 30, 2009, respectively. In addition, we borrowed $150,000 from an unrelated third-party lender in a note that accrued interest at a rate of 10.0% per annum. We repaid this note in full, including all accrued interest, during the nine months ended September 30, 2009. We estimate that we will require approximately $500,000 for our operating requirements in the next 12 months. We presently have not identified any source for those funds and there is no guarantee that we will be successful in obtaining the funds we require.
Item 4T. Controls and Procedures.
Under the supervision and with the participation of our sole officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of September 30, 2009 (the “Evaluation Date”). Based on this evaluation, our sole officer concluded as of the Evaluation Date that our disclosure controls and procedures were not effective to ensure that the information relating to us, including our consolidated subsidiaries, required to be disclosed by us in the reports filed or submitted by us under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our sole officer, as appropriate to allow timely decisions regarding required disclosure.
We are a small organization with limited personnel. We were unable to implement an effective system of disclosure controls and procedures as of the Evaluation Date. We expect to develop a system of disclosure controls and procedures during the remainder of 2009 as we expand our business and develop our mining claims.
With the participation of our sole officer, we evaluated any change in our internal control over financial reporting that occurred during the fiscal quarter covered by this Report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. There has been no such change in our internal control over financial reporting identified in connection with that evaluation.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time we may be involved in claims arising in connection with our business. There can be no assurance as to the ultimate outcome of any such claim. The amount of reasonably possible losses in connection with any actions that may be brought against us could be material to our consolidated financial condition, operating results and/or cash flows.
As of the date of this Report, there are no material pending legal proceedings to which the Company or any of its subsidiaries is a party or of which any of their property is the subject, nor are there any such proceedings known to be contemplated by governmental authorities.
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Item 1A. Risk Factors.
There have been no material changes from Risk Factors as previously disclosed in our 2008 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On September 18, 2009, the Company sold in a private placement offering (the “PPO”) 1,000,000 units of its securities (the “PPO Units”) to one investor, at a purchase price of $0.25 per PPO Unit, for aggregate consideration of $250,000 before deducting expenses related to the PPO. Each PPO Unit consisted of (i) one share of Common Stock and (ii) a warrant to purchase one share of Common Stock, exercisable for a period of five years at an exercise price of $0.50 per share. The securities sold in the PPO were exempt from registration under the Securities Act of 1933 because they were sold to an accredited investor as defined under Regulation D and otherwise in accordance with the provisions of Rule 506 of Regulation D.
In connection with the PPO, the Company had previously entered into a Placement Agency Agreement with Gottbetter Capital Markets, LLC (the “Placement Agent”), in which the Company agreed (i) to pay a cash fee to the Placement Agent equal to 10% of the gross proceeds from the sale of PPO Units to investors introduced to the Company by the Placement Agent and 2% of the gross proceeds from the sale of PPO Units to any other investors, and (ii) to issue to the Placement Agent warrants to purchase a number of shares of Common Stock equaling 10% of the PPO Units sold to investors introduced to the Company by the Placement Agent and 2% of the PPO Units sold to any other investors, exercisable for a period of five years at an exercise price of $0.50 per share. In connection with the closing on September 18, 2009, the Placement Agent earned a cash fee of $5,000 and warrants to purchase 20,000 shares of Common Stock.
From the proceeds of the PPO, the remaining $50,000 principal amount of the originally $150,000 promissory note issued by the company in a private placement on December 31, 2008, was repaid, together with $3,479.45 of accrued interest thereon.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
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Item 5. Other Information.
None.
Item 6. Exhibits.
The following Exhibits are being filed with this Quarterly Report on Form 10-Q.
In reviewing the agreements included as exhibits to this Form 10-Q, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements. The agreements may contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the parties to the applicable agreement and:
· | should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; |
· | have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; |
· | may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and |
· | were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. |
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this Form 10-Q and the Company’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov. See “Available Information.”
Exhibit | ||
Number | Description | |
10.1* | Form of Subscription Agreement in connection with the Company’s private placement offering of units of securities, each unit consisting of one share of the Company’s Common Stock and a warrant to purchase one share of Common Stock | |
10.2* | Form of Warrant to Purchase Common Stock | |
31.1* | Certification of principal executive and principal financial officer pursuant to Rule 13a-14(a) and 15d-14(a) | |
32.1* | Certification of principal executive and principal financial officer pursuant to 18 U.S.C. Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002 (This certification is being furnished and shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference.) |
* Filed herewith
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
NEVADA GOLD HOLDINGS, INC. | |||
Dated: November 17, 2009 | By: | /s/ David Rector | |
David Rector | |||
President and Chief Executive Officer |
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EXHIBIT INDEX
Exhibit | ||
Number | Description | |
10.1 | Form of Subscription Agreement in connection with the Company’s private placement offering of units of securities, each unit consisting of one share of the Company’s Common Stock and a warrant to purchase one share of Common Stock | |
10.2 | Form of Warrant to Purchase Common Stock | |
31.1 | Certification of principal executive and principal financial officer pursuant to Rule 13a-14(a) and 15d-14(a) | |
32.1 | Certification of principal executive and principal financial officer pursuant to 18 U.S.C. Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002 (This certification is being furnished and shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference.) |