UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 2 to
FORM 10-K
(Mark One)
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For fiscal year ended: December 31, 2009 |
OR
o | 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) |
Nevada | 20-3724068 | |||
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
1640 Terrace Way Walnut Creek, California | 94597 | |||
(Address of principal executive offices) | (Postal Code) |
Registrant’s telephone number, including area code: (775) 835-6177
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act: Common Stock, Par Value of $0.001 Per Share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 o
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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a smaller reporting company. See the definitions of the “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer o Accelerated Filer o
Non-Accelerated Filer o Smaller reporting company x
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes o No x
On June 30, 2009, the last business day of the registrant’s most recently completed second fiscal quarter, 48,121,946 shares of its Common Stock, $0.001 par value per share (its only class of voting or non-voting common equity) were held by non-affiliates of the registrant. The market value of those shares was $10,586,828, based on the last sale price of $0.22 per share of the Common Stock on that date. For this purpose, shares of Common Stock beneficially owned by each executive officer and director of the registrant and each beneficial owner of 10% or more of the Common Stock outstanding have been excluded because such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
As of April 14, 2010, there were 76,430,476 shares of the registrant's common stock, par value $0.001, issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
Explanatory Note
This Amendment No. 2 to the Annual Report on Form 10-K of Nevada Gold Holdings, Inc. (the “Company”), for the fiscal year ended December 31, 2009, is being filed solely to include the report of the Company’s independent registered public accounting firm, GBH CPAs PC, on its opinion with respect to the Company’s consolidated financial statements for the fiscal years ended December 31, 2009 and 2008, appearing on page F-2, which report was inadvertently omitted from the Company’s Form 10-K/A filed on April 20, 2010.
Except as described above, this Amendment No. 2 to Form 10-K does not revise, update or in any way affect any information or disclosure contained in the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2009, as filed on April 20, 2010, and we have not updated the disclosures contained therein to reflect any events that have occurred after that date.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
NEVADA GOLD HOLDINGS, INC. | ||
Dated: April 22, 2010 | By: | /s/ David Rector |
David Rector | ||
Chief Executive Officer, President, Secretary and Treasurer |
50
FINANCIAL STATEMENTS |
Page | ||
Report of Independent Registered Public Accounting Firm | F-2 | |
Consolidated Balance Sheets as of December 31, 2009 and 2008 | F-3 | |
Consolidated Statements of Operations for the years ended December 31, 2009 and 2008 | F-4 | |
Statements of Changes in Stockholders’ Equity (Deficit) for the period from June 9, 2006 to December 31, 2009 | F-5 | |
Consolidated Statements of Cash Flows for the years ended December 31, 2009 and 2008 | F-6 | |
Notes to Financial Statements | F-7 |
F-1
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
Nevada Gold Holdings, Inc.
(An Exploration Stage Company)
Walnut Creek, California
We have audited the accompanying consolidated balance sheets of Nevada Gold Holdings, Inc. (the “Company”) (an exploration stage company) as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for the year ended December 31, 2009, for the period from Inception (October 2, 2008) through December 31, 2008 and for the period from Inception (October 2, 2008) through December 31, 2009. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, audits of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
The 2008 consolidated statements have been restated for the correction of an error. See Note 8 to the consolidated financial statements describing the restatement.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Nevada Gold Holdings, Inc. as of December 31, 2009 and 2008 and the consolidated results of their operations and their consolidated cash flows for the year ended December 31, 2009, for the period from Inception (October 2, 2008) through December 31, 2008 and for the period from Inception (October 2, 2008) through December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and has accumulated losses since inception. Those conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to those matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ GBH CPA's PC
GBH CPA's PC
www.gbhcpas.com
Houston, Texas
April 15, 2010
F-2
NEVADA GOLD HOLDINGS, INC.
(An Exploration Stage Company)
Consolidated Balance Sheet
ASSETS | ||||||||
December 31, | December 31, | |||||||
2009 | 2008 | |||||||
(Restated) | ||||||||
CURRENT ASSETS | ||||||||
Cash | $ | 158,398 | $ | - | ||||
Cash held in trust | - | 253,440 | ||||||
Total Current Assets | 158,398 | 253,440 | ||||||
OTHER ASSETS | ||||||||
Mining reclamation bond | 15,444 | - | ||||||
Total Other Assets | 15,444 | - | ||||||
TOTAL ASSETS | $ | 173,842 | $ | 253,440 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable | $ | 70,480 | $ | 233,354 | ||||
Derivative liability | - | 112,500 | ||||||
Note payable | 100,000 | - | ||||||
Total Current Liabilities | 170,480 | 345,854 | ||||||
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; 72,631,946 and 71.001.946 shares issued and outstanding, respectively | 72,632 | 71,002 | ||||||
Additional paid-in capital (deficit) | 817,944 | (142,520 | ) | |||||
Deficit accumulated during the exploration stage | (887,214 | ) | (20,896 | ) | ||||
Total Stockholders' Equity (Deficit) | 3,362 | (92,414 | ) | |||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $ | 173,842 | $ | 253,440 |
The accompanying notes are an integral part of these consolidated financial statements.
F-3
NEVADA GOLD HOLDINGS, INC.
(An Exploration Stage Company)
Consolidated Statement of Operations
From Inception | From Inception | |||||||||||
For the Year | on October 2, | on October 2, | ||||||||||
Ended | 2008 Through | 2008 Through | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2009 | 2008 | 2009 | ||||||||||
REVENUES | $ | - | $ | - | $ | - | ||||||
EXPENSES | ||||||||||||
General and administrative | 615,580 | 431 | 616,011 | |||||||||
Exploration costs | 205,156 | 20,465 | 225,621 | |||||||||
Total Expenses | 820,736 | 20,896 | 841,632 | |||||||||
OTHER INCOME (EXPENSE) | ||||||||||||
Interest expense | (158,082 | ) | - | (158,082 | ) | |||||||
Gain on settlement of derivative liability | 112,500 | - | 112,500 | |||||||||
Total Other Income (Expense) | (45,582 | ) | - | (45,582 | ) | |||||||
LOSS BEFORE INCOME TAXES | (866,318 | ) | (20,896 | ) | (887,214 | ) | ||||||
INCOME TAX EXPENSE | - | - | - | |||||||||
NET LOSS | $ | (866,318 | ) | $ | (20,896 | ) | $ | (887,214 | ) | |||
BASIC AND DILUTED LOSS PER COMMON SHARE | $ | (0.01 | ) | $ | (0.00 | ) | ||||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED | 72,445,261 | 70,633,946 |
The accompanying notes are an integral part of these consolidated financial statements.
F-4
NEVADA GOLD HOLDINGS, INC.
(An Exploration Stage Company)
Consolidated Statement of Stockholders' Equity (Deficit)
Deficit | ||||||||||||||||||||
Accumulated | Total | |||||||||||||||||||
Additional | During the | Stockholders' | ||||||||||||||||||
Common Stock | Paid-In | Exploration | Equity | |||||||||||||||||
Shares | Amount | Capital | Stage | (Deficit) | ||||||||||||||||
Balance at inception on | ||||||||||||||||||||
October 2, 2008 | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
Common stock issued | ||||||||||||||||||||
to founders for cash | ||||||||||||||||||||
on October 2, 2008 | 30,480,000 | 30,480 | (30,480 | ) | - | - | ||||||||||||||
Recapitalization pursuant to | ||||||||||||||||||||
reverse merger | 39,393,946 | 39,394 | (220,372 | ) | - | (180,978 | ) | |||||||||||||
Common stock issued for debt | ||||||||||||||||||||
issuance costs on | ||||||||||||||||||||
December 31, 2008 | 300,000 | 300 | 37,200 | - | 37,500 | |||||||||||||||
Common stock issued for cash | ||||||||||||||||||||
on December 31, 2008, net of | ||||||||||||||||||||
$31,540 of direct issuance costs | 828,000 | 828 | 71,132 | - | 71,960 | |||||||||||||||
Net loss for the period from | ||||||||||||||||||||
inception on October 2, 2008 | ||||||||||||||||||||
through December 31, 2008 | - | - | - | (20,896 | ) | (20,896 | ) | |||||||||||||
Balance, December 31, 2008 | 71,001,946 | 71,002 | (142,520 | ) | (20,896 | ) | (92,414 | ) | ||||||||||||
Common stock issued for cash, | ||||||||||||||||||||
net of $4,130 of direct issuance costs | 3,330,000 | 3,330 | 787,920 | - | 791,250 | |||||||||||||||
Common stock issued for | ||||||||||||||||||||
services rendered | 300,000 | 300 | 74,700 | - | 75,000 | |||||||||||||||
Common shares cancelled | (2,000,000 | ) | (2,000 | ) | 2,000 | - | - | |||||||||||||
Contributed services | - | - | 75,000 | - | 75,000 | |||||||||||||||
Stock-based compensation | - | - | 20,844 | - | 20,844 | |||||||||||||||
Net loss for the year ended | ||||||||||||||||||||
December 31, 2009 | - | - | - | (866,318 | ) | (866,318 | ) | |||||||||||||
Balance, December 31, 2009 | 72,631,946 | $ | 72,632 | $ | 817,944 | $ | (887,214 | ) | $ | 3,362 |
The accompanying notes are an integral part of these consolidated financial statements.
F-5
NEVADA GOLD HOLDINGS, INC.
(An Exploration Stage Company)
Consolidated Statement of Cash Flows
From Inception | From Inception | |||||||||||
For the Year | on October 2, | on October 2, | ||||||||||
Ended | 2008 Through | 2008 Through | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2009 | 2008 | 2009 | ||||||||||
OPERATING ACTIVITIES | ||||||||||||
Net loss | $ | (866,318 | ) | $ | (20,896 | ) | $ | (887,214 | ) | |||
Adjustments to Reconcile Net Loss to Net Cash | ||||||||||||
Provoded by (Used in) Operating Activities | ||||||||||||
Common stock issued for services | 95,844 | - | 95,844 | |||||||||
Contributed services | 75,000 | - | 75,000 | |||||||||
Gain on change in derivative liability | (112,500 | ) | - | (112,500 | ) | |||||||
Changes in Operating Assets and Liabilities: | ||||||||||||
Increase in accounts payable | (162,874 | ) | 52,376 | (110,498 | ) | |||||||
Net Cash Provided by (Used in) Operating Activities | (970,848 | ) | 31,480 | (939,368 | ) | |||||||
INVESTING ACTIVITIES | - | - | - | |||||||||
Purchase of mining reclamation bond | (15,444 | ) | - | (15,444 | ) | |||||||
Change in cash held in trust | 253,440 | (253,440 | ) | - | ||||||||
Net Cash Provided by (Used in) Investing Activities | 237,996 | (253,440 | ) | (15,444 | ) | |||||||
FINANCING ACTIVITIES | ||||||||||||
Proceeds from issuance of common stock, net of issuance costs | 791,250 | 71,960 | 863,210 | |||||||||
Proceeds from notes payable | 100,000 | 150,000 | 250,000 | |||||||||
Net Cash Provided by Financing Activities | 891,250 | 221,960 | 1,113,210 | |||||||||
NET DECREASE IN CASH | 158,398 | - | 158,398 | |||||||||
CASH AT BEGINNING OF PERIOD | - | - | - | |||||||||
CASH AT END OF PERIOD | $ | 158,398 | $ | - | $ | 158,398 | ||||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||||||
CASH PAID FOR: | ||||||||||||
Interest | $ | 8,082 | $ | - | $ | 8,082 | ||||||
Income Taxes | $ | - | $ | - | $ | - |
The accompanying notes are an integral part of these consolidated financial statements.
F-6
NEVADA GOLD HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2009 and 2008
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Nevada Gold Holdings, Inc. (the “Company”, 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., a Nevada corporation, was incorporated under the laws of the State of Nevada on October 2, 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. As a result of the merger, the Company recorded an aggregate stock issuance of 39,393,946 shares of common stock with a net value of $(180,978). The negative recapitalization net value recognized was the result of the Company restating the equity structure of the legal subsidiary using the exchange ratio established in the acquisition agreement to reflect the number of shares of the legal parent issued in the reverse acquisition. Nevada Gold Enterprises, Inc. was 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.
NOTE 2 - GOING CONCERN
The Company's consolidated 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 and has accumulated losses since inception. 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.
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 consolidated 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
a. Accounting Method
The Company’s financial statements are prepared using the accrual method of accounting. The Company has elected a December 31 year-end.
F-7
NEVADA GOLD HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2009 and 2008
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
b. Revenue Recognition
The Company has not earned any revenues since inception. The Company will develop appropriate revenue recognition policies at such time that planned principal operations become feasible.
c. Income Taxes
The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not.
d. Use of Estimates
The preparation of the 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.
e. Basic Earnings (Loss) Per Share
Basic net earnings (loss) per common share is computed by dividing net earnings (loss) applicable to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted net earnings (loss) per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be issued upon exercise of common stock options. In periods where losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.
The dilutive effect of outstanding stock options and warrants is reflected in diluted earnings per share by application of the treasury stock method. The dilutive effect of outstanding convertible securities is reflected in diluted earnings per share by application of the if-converted method.
F-8
NEVADA GOLD HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2009 and 2008
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
e. Basic Earnings (Loss) Per Share (Continued)
The following is a reconciliation of basic and diluted earnings per share for 2009 and 2008:
Periods Ended | ||||||||
December 31, | ||||||||
2009 | 2008 | |||||||
Numerator: | ||||||||
Net income (loss) available to common shareholders | $ | (866,318 | ) | $ | (20,896 | ) | ||
Denominator: | ||||||||
Weighted average shares - basic | 72,445,261 | 70,633,946 | ||||||
Net income (loss) per share - basic | $ | (0.01 | ) | $ | (0.00 | ) | ||
Potential dilutive effect of common stock equivalents: | ||||||||
Options and warrants | - | - | ||||||
Convertible Debt | - | - | ||||||
Denominator: | ||||||||
Weighted average shares - diluted | 72,445,261 | 70,633,946 | ||||||
Net income (loss) per share - diluted | $ | (0.01 | ) | $ | (0.00 | ) |
For the year ended December 31, 2009, fully diluted earnings per share excludes the dilutive effect of 4,470,000 common stock equivalents from options and warrants and 1,250,000 common stock equivalents from convertible debt, because their inclusion would be anti-dilutive. For the period ended December 31, 2008, fully diluted earnings per share excludes the dilutive effect of 600,000 common stock equivalents from convertible debt, because their inclusion would be anti-dilutive.
f. Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.
g. Common Stock
The holders of the Company’s common stock are entitled to receive dividends out of assets or funds legally available for the payment of dividends of such times and in such amounts as the board from time to time may determine. Holders of common stock are entitled to one vote for each share held on all matters submitted to a vote of shareholders. There is no cumulative voting of the election of directors then standing for election. The common stock is not entitled to pre-emptive rights and is not subject to conversion or redemption. Upon liquidation, dissolution or winding up of the company, the assets legally available for distribution to stockholders are distributable ratably among the holders of the common stock after payment of liquidation preferences, if any, on any outstanding payment of other claims of creditors.
F-9
NEVADA GOLD HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2009 and 2008
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
h. Preferred Stock
Shares of preferred stock may be issued from time to time in one or more series, each of which shall have such distinctive designation or title as shall be determined by the board of directors of the Company. Preferred stock shall have such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as may be adopted from time to time by the board of directors.
i. General and Administrative Expenses
General and administrative expenses include those costs not directly related to the sales of the Company’s products. These expenses include travel, administrative compensation, and various legal and professional fees.
j. Principles of Consolidation
The accompanying financial statements include the accounts of Nevada Gold Holdings, Inc. and its wholly owned subsidiary Nevada Gold Enterprises, Inc. All significant intercompany transactions have been eliminated.
F-10
NEVADA GOLD HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2009 and 2008
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
k. Recent Accounting Pronouncements
In May 2009, the Company adopted the Codification standards that establish 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). The standard requires and 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. Management has reviewed all subsequent events through the date that the financial statements were issued in accordance with this pronouncement. The adoption of this standard did not have a material impact on the Company’s financial condition or results of operation.
In June 2009, the Financial Accounting Standards Board ("FASB") established the FASB Accounting Standards Codification (the "Codification") as the source of authoritative accounting principles recognized by the FASB to be applied by non-governmental entities in the preparation of financial statements in conformity with GAAP. 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. The introduction of the Codification does not change GAAP and other than the manner in which new accounting guidance is referenced, the adoption of these changes had no impact on our consolidated financial statements.
No other recent accounting pronouncements are expected to have a material effect on the Company’s consolidated financial statements.
l. Income Taxes
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will to be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Net deferred tax assets consist of the following components as of December 31, 2009 and 2008:
2009 | 2008 | |||||||
Deferred tax assets: | ||||||||
NOL carryover | $ | 346,013 | $ | 8,149 | ||||
Valuation allowance | (346,013 | ) | (8,149 | ) | ||||
Net deferred tax asset | $ | -- | $ | -- |
The income tax provision differs from the amount of income tax determined by applying the U.S. federal and state income tax rates of 39% to pretax income from continuing operations for the years ended December 31, 2009 and 2008 due to the following:
2009 | 2008 | |||||||
Income tax benefit at statutory rate | $ | (337,864 | ) | $ | (8,149 | ) | ||
Valuation allowance | 337,864 | 8,149 | ||||||
$ | - | $ | - |
At December 31, 2009, the Company had net operating loss carryforwards of approximately $900,000 that may be offset against future taxable income through 2030. No tax benefit has been reported in the December 31, 2009 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount. Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal income tax reporting purposes are subject to annual limitations.
F-11
NEVADA GOLD HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2009 and 2008
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
l. Income Taxes (Continued)
Net operating loss carryforwards may be limited as to use in future years as a result of any change in ownership.
NOTE 4 – DEBT AND EQUITY
On October 2, 2008 the Company issued 30,480,000 shares of common stock various individuals. These shares were issued as founders’ shares and were recorded for the cash value the founders paid of $25. In the accompanying consolidated statement of stockholders’ equity (deficit), the $25 has been included in the reverse merger recapitalization.
On December 31, 2008, the Company sold in a private placement offering an aggregate of 828,000 post-split 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 convertible note payable with an unrelated party. Under the terms of this convertible note, interest accrues at a rate of 10.0 % per annum, and the balance, including accrued interest, was due on December 31, 2009, was convertible at $1.00 per share that was adjustable based on the conversion prices of options, warrants or other convertible instruments issued by the Company. The Company analyzed the conversion feature of the note and determined that the conversion feature was a derivative liability. The derivative liability was valued at $112,500 based on the intrinsic value between the original conversion price and the stock price on December 31, 2008. The Company recorded a debt discount for the value of the derivative liability. Upon the closing of the Merger, the purchaser of the note also received 300,000 post-split shares of Common Stock under the terms of the convertible note. These shares were valued at $0.125 per share ($37,500). The Company recorded a debt discount for the value of the 300,000 shares issued to the purchaser of the convertible note. On June 24, 2009, the Company prepaid $100,000 of principal on this note, $4,603 in accrued interest, 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 ($50,000) and were recorded as common stock issued for services for the year ended December 31, 2009. On September 21, 2009, the Company paid the remaining $50,000 in note principal and $8,082 in accrued interest, thus satisfying the note in full. As a result of the convertible note repayment, the derivative liability was settled and the Company recognized a $112,500 gain for the year ended December 31, 2009; additionally, the debt discount on the convertible note, totaling $150,000 ($112,500 from the derivative liability and $37,500 from the 300,000 shares) was recognized as interest expense for the year ended December 31, 2009. As of December 31, 2009 the Company has no remaining obligations under the terms of the note.
Effective March 9, 2009, the Company issued 330,000 post-split 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 post-split 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.
On November 5, 2009 the Company received 2,000,000 shares from David Mathewson, who surrendered the shares pursuant to his resignation as an officer of the Company. The shares were subsequently cancelled by the Company in April, 2010.
F-12
NEVADA GOLD HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2009 and 2008
NOTE 4 – DEBT AND EQUITY (Continued)
Private Placement Offerings
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 after closing costs 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 fair value of the warrants was recognized in additional paid in capital for the year ended December 31, 2009.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 after offering costs of $4,130. 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 fair value of the warrants was recognized in additional paid in capital for the year ended December 31, 2009. 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. The fair value of the warrants was recognized in additional paid in capital for the year ended December 31, 2009.
Bridge Loan
On December 7, 2009 the Company entered into a Bridge Loan Agreement with Theory Capital Corp., an unrelated third party entity (“Theory”), whereby Theory loaned a total of $100,000 to the Company. The note accrues interest at a rate of 10.0% per annum, and is due and payable in full on June 4, 2010. The note is mandatorily convertible into common stock upon the Company’s closing of a private placement offering, or the due date, whichever comes first. The loan is convertible into common stock at the market value of the shares on the date of conversion. The Company’s management has assessed the conversion feature of the note and concluded that it is a contingent conversion feature, which will not be recorded until the triggering event (a future private placement offering by the Company) takes place.
F-13
NEVADA GOLD HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2009 and 2008
NOTE 4 – DEBT AND EQUITY (Continued)
Stock Option Awards
On November 5, 2009, the Company’s Board of Directors granted to David Rector, in connection with his appointment as the Company’s Chief Executive Officer, President, Secretary and director, incentive stock options to purchase 1,000,000 shares of Common Stock at a purchase price of $0.135 per share (the closing bid price quoted on the OTCBB on the date of grant), vesting 100% on December 31, 2010, and expiring November 4, 2014.
On November 16, 2009, the Company’s Board of Directors granted to John N. Braca, in connection with his appointment as a director, non-qualified stock options to purchase 250,000 shares of Common Stock at a purchase price of $0. 127 per share (the closing bid price quoted on the OTCBB on the date of grant), vesting 100% on December 31, 2010, and expiring November 15, 2014.
The Company’s 2008 Equity Incentive Plan (the Plan), which is shareholder-approved, permits the grant of share options and shares to its employees for up to 4 million shares of common stock. The Company believes that such awards better align the interests of its executive officers, key employees, consultants and directors with those of its shareholders.
The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the table below. Expected volatilities are based on implied volatilities from, historical volatility of the Company’s stock, and other factors. The Company uses historical data to estimate option exercise and employee termination within the valuation model; separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected term of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding; the range given below results from certain groups of employees exhibiting different behavior. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.
2009 | ||||
Expected volatility | 193 | % | ||
Expected dividends | 0 | % | ||
Expected term (in years) | 3 | |||
Risk-free rate | 2.3 | % |
F-14
NEVADA GOLD HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2009 and 2008
NOTE 4 – DEBT AND EQUITY (Continued)
Stock Option Awards
A summary of option activity under the Plan as of December 31, 2009, and changes during the year then ended is presented below:
Options | Shares | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term | Aggregate Intrinsic Value | ||||||||||||
Outstanding at January 1, 2008 | - | - | ||||||||||||||
Granted | 1,250,000 | $ | 0.13 | 4.9 | $ | - | ||||||||||
Exercised | - | - | - | - | ||||||||||||
Forfeited or expired | - | - | - | - | ||||||||||||
Outstanding at December 31, 2009 | 1,250,000 | $ | 0.13 | 4.9 | - | |||||||||||
Exercisable at December 31, 200 | - | - | - | - |
The weighted-average grant-date fair value of options granted during the years ended December 31, 2009 and 2008, was $0.12 and $-0-, respectively.
A summary of the status of the Company’s nonvested shares as of December 31, 2009, and changes during the year ended December 31, 2009, is presented below:
Nonvested Shares | Shares | Weighted-Average Grant-Date Fair Value | ||||||
Nonvested at January 1, 2009 | - | - | ||||||
Granted | 1,250,000 | $ | 0.13 | |||||
Vested | - | - | ||||||
Forfeited | - | - | ||||||
Nonvested at December 31, 2009 | 1,250,000 | $ | 0.13 |
F-15
NEVADA GOLD HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2009 and 2008
NOTE 4 – DEBT AND EQUITY (Continued)
Warrants
A summary of warrant activity as of December 31, 2009, and changes during the year then ended is presented below:
Options | Shares | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term | Aggregate Intrinsic Value | ||||||||||||
Outstanding at January 1, 2009 | - | - | ||||||||||||||
Granted | 3,220,000 | $ | 0.50 | 4.6 | $ | - | ||||||||||
Exercised | - | - | - | - | ||||||||||||
Forfeited or expired | - | - | - | - | ||||||||||||
Outstanding at December 31, 2009 | 3,220,000 | $ | 0.50 | 4.6 | - | |||||||||||
Exercisable at December 31, 2009 | 3,220,000 | $ | 0.50 | 4.6 | - |
NOTE 5 – FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and establishes a three level hierarchy for measuring fair value. Fair value measurements are classified and disclosed in one of the following categories:
Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities that we have the ability to access at the measurement date.
Level 2: Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable for the asset or liability, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived from observable market data by correlation or other means. Instruments categorized in Level 2 include non-exchange traded derivatives such as over-the-counter forwards and swaps.
Level 3: Unobservable inputs for the asset or liability, including situations where there is little, if any, market activity for the asset or liability.
The valuation assumptions utilized to measure the fair value of the Company’s derivatives were observable inputs based on market data obtained from independent sources and are considered Level 2 inputs (quoted prices for similar assets, liabilities (adjusted) and market-corroborated inputs).
F-16
NEVADA GOLD HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2009 and 2008
NOTE 5 – FAIR VALUE MEASUREMENTS (Continued)
The following table presents for each hierarchy level our assets and liabilities, including both current and non-current portions, measured at fair value on a recurring basis, as of December 31, 2008 (no assets are measured at fair value on a recurring basis at December 31, 2009):
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets — Current: | ||||||||||||||||
$ | -- | $ | -- | $ | -- | $ | -- | |||||||||
Liabilities — Current: | ||||||||||||||||
Derivative – conversion feature of debt | $ | -- | $ | 112,500 | $ | -- | $ | -- |
In consideration of credit risk, the Company considers that it is of substantial credit quality and has the financial resources and willingness to meet its potential repayment obligations associated with the derivative transactions.
The estimated fair value of financial instruments is the amount at which the instrument could be exchanged currently between willing parties. The carrying amounts reported in the consolidated balance sheet for cash and cash held in trust, and accounts payable approximate fair value due to the immediate or short-term maturity of these financial instruments. We use available marketing data and valuation methodologies to estimate the fair value of debt. The following disclosure does not impact our financial position, results of operations or cash flows.
December 31, 2009 | December 31, 2008 | |||||||||||||||
Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | |||||||||||||
Short-Term Debt | ||||||||||||||||
Convertible Debt | 100,000 | 100,000 | -- | 150,000 | ||||||||||||
Long-Term Debt | $ | 100,000 | $ | 100,000 | $ | -- | $ | 150,000 |
NOTE 6 – COMMITMENTS AND CONTINGENCIES
Litigation
The Company is party to various legal actions arising in the ordinary course of business. Matters that are probable of unfavorable outcomes to the Company and which can be reasonably estimated are accrued. Such accruals are based on information known about the matters, the Company’s estimates of the outcomes of such matters and its experience in contesting, litigating and settling similar matters. None of the actions are believed by management to involve future amounts that would be material to our financial position or results of operations after consideration of recorded accruals although actual amounts could differ materially from management’s estimate that are reasonably possible to occur will not have a material adverse affect on the Company’s financial position or results of operations.
F-17
NEVADA GOLD HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2009 and 2008
NOTE 6 – COMMITMENTS AND CONTINGENCIES (Continued)
Mining Lease
The Company is required under the terms of our property lease to make annual lease payments. The Company is also required to make annual claim maintenance payments to Federal Bureau of Land Management and to the county in which its property is located in order to maintain its rights to explore and, if warranted, to develop its property. If the Company fails to meet these obligations, it will lose the right to explore for gold on its property.
The Company’s property lease is for an initial period of ten years from May 2007 and may be extended in five year increments for up to a total term of 99 years. The Company may terminate this lease at any time. Until production is achieved, the Company’s lease payments (deemed “advance minimum royalties”) consist of an initial payment of $5,000, which was made upon the effectiveness of the lease, followed by annual payments according to the following schedule:
Due Date of Advance Minimum Royalty Payment | Amount of Advance Minimum Royalty Payment | |||
January 15, 2008 (paid) | $ | 10,000 | ||
January 15, 2009 (paid) | $ | 15,000 | ||
January 15, 2010 (paid) | $ | 30,000 | ||
January 15, 2011 | $ | 45,000 | ||
January 15, 2012 and annually thereafter during the term of the lease | The greater of $60,000 or the dollar equivalent of 90 ounces of gold |
The Company is required to make annual claim maintenance payments to the Bureau of Land Management and to the counties in which its property is located. If the Company fails to make these payments, it will lose its rights to the property. As of the date of this Report, the annual maintenance payments are $133.50 per claim, consisting of payments to the Bureau of Land Management and to the counties in which the Company’s properties are located. The Company’s property consists of an aggregate of 206 lode claims. The aggregate annual claim maintenance costs are currently $32,256.
NOTE 7 – SUBSEQUENT EVENTS
On February 5, 2010, the Company entered into a financing arrangement with JMJ Financial (“JMJ”), pursuant to which the JMJ may lend the Company up to $3,200,000. The Company issued convertible promissory notes to JMJ in an aggregate principal amount of $3,200,000. The Company received $200,000 from JMJ pursuant to these notes on February 5, 2010. The Notes bear a one-time interest of 8% and mature three years from the date of issuance. Prepayment under the Notes is not permitted, unless approved by the JMJ. Under the terms of the Notes, JMJ is entitled, at its option, to convert all or part of the principal amount and accrued interest into shares of the Company’s Common Stock at a conversion price equal to 70% of the lowest trade price of the Common Stock in the twenty (20) trading days immediately prior to the conversion, subject to adjustment in certain circumstances.
On February 17, 2010, the Company entered into a six month consulting agreement whereby the Company receives certain investor relation and corporate communications services in exchange for the issuance of 1,000,000 post-split shares of the Company’s common stock as of the date of the agreement. The agreement can be terminated immediately by either party upon written notice.
F-18
NEVADA GOLD HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2009 and 2008
NOTE 8 - - CORRECTION OF AN ERROR
The Company has restated the consolidated balance sheet, consolidated statements of operations and cash flows as of and for the period ended December 31, 2008 for matters related to the following errors: (i) an overstatement of current liabilities, (ii) an overstatement of general and administrative expenses, and (iii) the incorrect classification of the cost of the Tempo Mineral Prospect.
Following is a description of the errors related to the overstatement of current liablities at December 31, 2008, and the overstatement of general and administrative expenses for the period from inception through December 31, 2008: The Company overstated current liabilities 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. This overstatement was offset by $112,500 that the Company recorded as additional paid in capital instead of as a current liability related to the derivative liability on the conversion feature of a convertible note payable.
Following is a description of the error related to the overstatement of general and administrative expenses for the period from inception through December 31, 2008: The Company overstated 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 incorrect classification of the cost of the Tempo Mineral Prospect: The asset was originally classified as an asset and 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 was considered to be an exploration cost for the period ended December 31, 2008.
The effects on the Company’s previously issued consolidated financial statements for the fiscal year ended December 31, 2008, of the aforementioned errors 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 | ) | ||||||||
Mining reclamation bond | - | - | - | |||||||||
Total assets | 273,905 | 253,440 | (20,465 | ) | ||||||||
Accounts payable and accrued expenses | 363,996 | 233,354 | (130,642 | ) | ||||||||
Derivative liability | - | 112,500 | 112,500 | |||||||||
Total liabilities | 363,996 | 345,854 | 18,142 | |||||||||
Total stockholders’ equity (deficit) | (90,091 | ) | (92,414 | ) | (2,323 | ) | ||||||
For the Period Ended December 31, 2008 | ||||||||||||
Exploration costs | - | 20,465 | 20,465 | |||||||||
General and administrative expense | 90,282 | 431 | 89,851 | |||||||||
Net loss | (90,282 | ) | (20,896 | ) | 69,386 | |||||||
Net loss per share, basic and diluted | (0.00) | (0.00) | (0.00) | |||||||||
Cash provided by (used in) operating activities | (25) | 31,480 | 31,455 | |||||||||
Cash provided by (used in) investing activities | - | (253,440) | (253,440) | |||||||||
Cash provided by (used in) financing activities | - | 221,960 | 221,960 |
F-19