fc_10ksb-80131.htm
U.S.
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-KSB
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For
the Fiscal Year Ended
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Commission
File Number
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January
31, 2008
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0-20722
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FIRSTGOLD
CORP.
Delaware
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16-1400479
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(State
of Incorporation)
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(I.R.S.
Employer Identification)
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Principal
Executive Offices:
3108
Ponte Morino Drive, Suite 210
Cameron
Park, CA 95682
(530)
677-5974
Securities
registered pursuant to Section 12(b) of the Exchange Act:
Title of Each Class
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Name of Each Exchange on Which
Registered
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None
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None
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Securities
registered pursuant to Section 12(g) of the Exchange Act:
Title of Each
Class
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Common
Stock |
$0.001 Par
Value |
Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 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
Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will 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-KSB
or any amendment to this Form 10-KSB. [ X ]
The
issuer’s revenues for its most recent fiscal year were $551,279.
As of May
1, 2008 the aggregate value of the voting stock held by non-affiliates of the
Registrant, computed by reference to the average of the bid and ask price on
such date was approximately $59,417,972 based upon the closing price of $0.49
per share.
As of May
1, 2008, the Registrant had outstanding 130,717,460 shares of common
stock.
Transitional
Small Business Disclosure
Format: Yes [ ] No [
X ]
Documents
Incorporated by Reference
Certain
exhibits required by Item 13 have been incorporated by reference from
Firstgold’s previously filed Form 8-K’s, Form 10-QSB and Form
10-KSB.
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Page
of
Report
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PART I |
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ITEM 1. |
DESCRIPTION
OF BUSINESS
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1
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ITEM 2. |
DESCRIPTION
OF PROPERTY
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14
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ITEM 3. |
LEGAL
PROCEEDINGS
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16
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ITEM 4. |
SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS |
17
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PART II |
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ITEM 5. |
MARKET FOR COMMON
EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER
PURCHASES OF EQUITY SECURITIES |
18
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ITEM 6. |
MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION |
23
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ITEM 7. |
FINANCIAL
STATEMENTS
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35
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ITEM 8. |
CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE |
36
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ITEM
8A(T). |
CONTROLS AND
PROCEDURES |
36
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PART III |
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ITEM 9. |
DIRECTORS, EXECUTIVE
OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF
THE EXCHANGE ACT |
38
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ITEM 10. |
EXECUTIVE
COMPENSATION
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44
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ITEM 11. |
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS |
48
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ITEM 12. |
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTION |
51
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ITEM 13. |
EXHIBITS |
53
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ITEM
14. |
PRINCIPAL
ACCOUNTANT FEES AND SERVICES |
55
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SIGNATURES |
57
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PART
I
ITEM
1. DESCRIPTION OF
BUSINESS
General
Firstgold
Corp. (“we,” “us,” “our” or “Firstgold”) has a business strategy whereby it will
invest in, explore and if warranted, conduct mining operations of its current
mining properties and other mineral producing properties. Firstgold
is a public company that in the past has been engaged in the acquisition and
exploration of gold-bearing properties in the continental United
States. Currently, Firstgold’s principal assets include various
mineral leases associated with the Relief Canyon Mine located near Lovelock,
Nevada along with various items of mining equipment and improvements located at
that site. Firstgold has also secured rights to explore approximately
25,000 acres of property located in Elko County, Nevada, and has staked claims
on approximately 4,200 acres of land at the Horse Creek exploration project near
Winnemucca, NV, claims on approximately 3,300 acres of land located at it
Honorine Gold exploration project near Winnemucca, NV, and claims on
approximately 2,300 acres of land at its Fairview-Hunter exploration project,
near Fairview, NV.
From 1995
until the beginning of 2000, Firstgold had followed the above described business
activity focusing on the exploration and mining of gold and silver ore
deposits. With the fall of the precious metal markets,
Firstgold attempted to redevelop its business strategy, and from approximately
July 2001 until February 2003 Firstgold discontinued all business
activity. During the period of inactivity, ASDi LLC, an entity
controlled by A. Scott Dockter who is also the Chief Operating Officer of
Firstgold, made the necessary expenditures to maintain the current status of the
Relief Canyon mining claims. In February 2003, Firstgold resumed its
business of acquiring, exploring and if warranted developing its mining
properties.
Firstgold's
mailing address is 3108 Ponte Morino Drive, Suite 210, Cameron Park,
CA 95682 and its telephone number is (530) 677-5974.
The
Company
Firstgold
Corp., a Delaware corporation, has been engaged in the acquisition and
exploration of gold-bearing properties in the continental United States since
1995. In fiscal 1999 Firstgold placed its only remaining property,
the Relief Canyon Mine, located in Pershing County, Nevada, on a care and
maintenance status. During fiscal 2000, Firstgold executed a contract
to sell the Relief Canyon Mine to A. Scott Dockter, then Chairman of Firstgold;
however the sale was never completed and the asset remains the property of
Firstgold. It is now Firstgold’s intention to resume mining at the
Relief Canyon Mine. See “Business” below for further
detail.
Firstgold’s
independent accountants have included a “going concern” explanatory paragraph in
their report dated May 15, 2008 on
Firstgold’s financial statements for the fiscal year ended January 31, 2008,
indicating substantial doubt about Firstgold’s ability to continue as a going
concern (See Note 2 of Financial Footnotes).
If
Firstgold’s exploration program is not successful or if insufficient funds are
available to carry out Firstgold’s business plans, then Firstgold will not be
able to execute its business plan.
For
financial information regarding Firstgold, see “Financial
Statements.”
Business
Firstgold
is an “exploration stage” company engaged in the search and/or verification of
ore deposits (reserves) in its property. Our business will be to
acquire, explore and, if warranted, develop various mining properties located in
the state of Nevada. We plan to carryout comprehensive exploration
and, if warranted, development programs on our properties. While we
currently plan to fund and conduct these activities ourselves, in the future we
may engage in joint venture, royalty or partnership arrangements pursuant to
which other companies would agree to finance and carryout the exploration and
possible future development programs on our mining properties. Our
current plan will require the hiring of various mining employees to perform
exploration and mining activities for our various mining
properties.
Properties
Relief Canyon
Mine
The
Relief Canyon Mine is an open-pit, heap leaching operation located approximately
110 miles northeast of Reno, Nevada. Firstgold held 50 unpatented
mining claims covering approximately 1000 acres until October 2004 at which time
Firstgold completed re-staking the Relief Canyon mill site and lode
claims. Firstgold currently holds a total of 146 claims including 120
mill site claims and 26 unpatented mining claims. The annual payments
to maintain these claims are approximately $15,600. The mine is
readily accessible by improved roads. Water for mining and processing
operations is provided by two wells located on the property in close proximity
to the mine and processing facilities. Power is provided by a local
rural electric association and phone lines are present at the mine
site. Relief Canyon is located in the Humboldt Range, a mining
district in Pershing County, Nevada.
Background and
History
On
January 10, 1995, Firstgold purchased the Relief Canyon mine from J.D. Welsh
& Associates for $500,000. The mine at that time consisted of 39
unpatented lode mining claims covering approximately 780 acres and a lease for
access to an additional 800 acres contiguous to the 39 claims located on
Firstgold’s property. When first acquired, the property included a
building containing five carbon tanks and a boiler for carbon strip solution,
four detoxified leach pads, a preg pond for gold bearing solution, a barren pond
for solution from which gold had been removed, water rights, and various
permits. From acquisition through November 1997, Firstgold
refurbished the processing facilities by the purchase and installation of all
equipment required to process the gold bearing leach solution when the mine was
returned to production in 1997. During 1997, Firstgold staked an
additional 402 claims. However, subsequent to January 31, 1998,
Firstgold reduced the total claims to 50 (covering approximately 1,000
acres). In 1999 Firstgold placed the mine in a care and maintenance
status.
If mining
operations are not resumed at the Relief Canyon mine, it is possible Firstgold
may be required to reclaim the mine. Reclamation consists of
recontouring the four heaps to a 3:1 slope, sale and removal of the building and
its contents, evaporation of all water in both ponds and burial of the building
foundation and floor within the ponds' liners under the soil contained in the
pond berms. Finally, native vegetation must be re-established in all
areas of disturbance. A cash bond has been posted which will cover
the cost of these reclamation activities.
During
1996, Repadre Capital Corporation (“Repadre”) purchased for $500,000 a net
smelter return royalty (Repadre Royalty). Repadre was to receive a 1.5% royalty
from production at each of the Relief Canyon Mine and Mission Mines. In July
1997, an additional $300,000 was paid by Repadre for an additional 1% royalty
from the Relief Canyon Mine. In October, 1997, when the Mission Mine lease was
terminated, Repadre exercised its option to transfer the Repadre Royalty solely
to the Relief Canyon Mine resulting in a total 4% royalty. The total amount
received of $800,000 has been recorded as deferred revenue in the accompanying
financial statements.
Plan for Relief
Canyon
Based on
past exploration by us and work done by others, we believe the Relief Canyon
Mine presents the potential for gold bearing ore deposits which will hopefully
be validated through further exploration of additional mining
claims.
The
Relief Canyon properties include 146 millsite claims and unpatented mining
claims contained in about 1,000 acres.
Firstgold’s
operating plan is to place the most promising mining targets into production
during the 2008 calendar year, and use the net proceeds from these operations,
if any, to fund expanded exploration and, if warranted, development of its
entire property holdings. By this means, Firstgold intends to
progressively enlarge the scope and scale of the mining and processing
operations, thereby increasing Firstgold’s annual revenues and eventually its
net profits.
Firstgold’s
goals for environmental protection and reclamation are for minimal environmental
disturbance during mining, and reclamation and/or restoration of the disturbed
area after mining ceases. The economics of Firstgold’s operations
will permit this environmentally responsible plan of operations.
We will
initially focus on exploring the North Relief Canyon mining
property. We recently posted a $613,500 reclamation bond with the
Nevada Bureau of Mining Regulations and Reclamation (“BMRR”) which allows us to
apply for new permits for mining and processing on the
property. Posting the reclamation bond completes the Activities of
Compliance mandated by the Bureau of Land Management (“BLM”) and Nevada
Department of Environmental Protection (“NDEP”) before any work can
commence. We have completed all of the environmental work required by
NDEP in the Administrative Order of Consent issued May 2005 (the
AOC). The purpose of the AOC is to bring the Relief Canyon mine up to
current environmental compliance.
On
September 25, 2006 we submitted our “Plan of Operations” for the Relief Canyon
Mining Project to the NDEP. The Plan contains extensive details on
how the mine will operate if and when production is achieved. The
Plan includes an intention to reprocess the existing heaps containing
approximately 8 million tons of ore and the construction of a new heap leach
pad. The Plan also includes facilities and processes which are
compliant with our “Green Initiative” to construct and operate an
environmentally conscience project.
On
October 19, 2006 we received notice from the NDEP that we would be allowed to
attach our current Plan of Operations as an amendment to a previous Plan of
Operations submitted in 1996. This consolidation of Plans is expected
to significantly reduce the processing time and documentation necessary to
secure our production permit from the NDEP which will allow us to commence
processing ore at the Relief Canyon Mining Project. On April 9, 2007
we received notice from the NDEP that Firstgold’s 1996 Plan of Operation had
been reinstated, and that the NDEP was processing the amendment. With
this approval, Firstgold is allowed to proceed at Relief Canyon with onsite
construction, drilling, operations and, if deemed appropriate, production,
subject to final determination and posting of reclamation bonds.
To assist
us in this effort, we have retained Dyer Engineering Consultants, Inc. as our
lead engineering firm for the permitting and compliance engineering work at the
Relief Canyon and other exploration projects in Nevada.
Currently,
we can proceed with the permits to commence full scale exploration and mining
activities. The estimated time for completing the permitting process
is between six months to nine months. However, upon posting the
reclamation bond, we are able to carry on limited operations pending full
permitting for full mining operations.
Description of Past
Exploration and Existing Exploration Efforts
Over 400
historic reverse circulation holes have been drilled at the Relief Canyon
project. Of the 400 holes drilled, 106 had intercepts of gold bearing
ore structures of 0.1 gold/ton content.
The
mineral zone of Relief Canyon is open ended on three sides. It is
projected that ongoing drilling will increase the size of possible
reserves. Most of the drilling to date was targeted for open pit
mining, resulting in shallow holes which did not test for possible deeper ore
deposits. A significant number of deep holes were drilled on the
North end of the property.
In late
May 2007 we completed 57 drill holes on existing heaps at Relief Canyon using
sonic drilling. The patented sonic drill head works by sending high frequency
resonant vibrations down the drill string of the drill bit while the operator
controls the frequencies to suit the specific conditions of the soil/rock
geology. This round of drilling was intended to improve our understanding of the
mineral content in the existing heap leach pads. We have also
completed 83 reverse circulation drill holes in the existing pit area. Fire
assays have been returned on the first 174 of these holes which are designed to
evaluate three specific exploration target areas.
We have
retained SRK Engineering to perform a resource evaluation of the Relief Canyon
Property.
Firstgold
owns 3 reverse circulation drill rigs and two diamond core drill
rigs. In addition to providing exploration drilling to Firstgold,
these drilling rigs, along with operating crews, have been contracted out from
time to time to other nearby mining operations. This rental activity
produced $551,279 of revenue during fiscal 2008.
Ore Processing
Facilities
In
October 2006, we commenced revitalization of our process solution
ponds. The existing Pregnant and Barren ponds, which were converted
to secondary overflow containment, have been cleaned and relined with the latest
technology of fluid containment. In keeping with our “Green
Initiative,” this will include new leak detection equipment and
protocols. In addition, a new enclosed solution transmission system
will be constructed between the site of the proposed heap leach pad and the
existing solution ponds. Upon completion, we plan to process
approximately 8 million metric tons of existing lower grade oxide ores by heap
leaching. Heap leaching consists of stacking crushed or run-of-mine
ore in impermeable ponds, where a weak cyanide solution is applied to the top
surface of the heaps to absorb the gold.
An ore
processing facility, with capacity to process up to 20,000 tons of material per
day, is presently under construction at the property site. A new jaw
crushing unit is also currently being erected. Planned construction
will commence on the new heap leach pad, pending approval and issuance of the
proper permit from NDEP. This permit is in the final stages of
evaluation, having completed its public commentary period.
Antelope
Peak
On
October 24, 2006, we entered into a Mineral Lease Agreement with the owners of
approximately 25,000 acres of property located in Elko County, Nevada (the
“Antelope Peak” property). The Lease allows Firstgold the exclusive
right to explore for and, if warranted, develop gold, silver and barite minerals
on the leased property. The Lease has an initial term of five (5)
years; however the term can be automatically extended thereafter for so long as
Firstgold is engaged in mining operations.
To date
we have performed an Aerial Ground Magnetic Survey which allows our geologists
to identify targets for more detailed exploration. We have also
conducted extensive ground sampling on the property.
Horse
Creek
On July
9, 2007, we completed staking claims on approximately 4,200 acres of potentially
mineralized ground Humboldt County, Nevada. We have conducted
preliminary sampling of the area. During the course of the property
evaluation, rock chip samples were collected. This sampling has shown the
potential presence of intrusion-related gold systems. The next phase of this
project will be to conduct extensive mapping of the area’s bedrock
geology. Additionally, we plan to conduct an airborne geophysical
survey to map the magnetic character of the rocks. Geochemical
exploration efforts will continue with more rock chip sampling as well as an
in-depth soil sampling survey.
Fairview-Hunter
On
January 11, 2008 we secured claims on approximately 2,300 acres of potentially
mineralized ground near Fairview, Nevada. We are conducting
preliminary sampling of the area. During the course of the property
evaluation, rock chip samples were collected. The next phase of this
project will be to conduct extensive mapping of the area’s bedrock
geology. Additionally, we plan to conduct an airborne geophysical
survey to map the magnetic character of the rocks. Geochemical
exploration efforts will continue with more rock chip sampling as well as an
in-depth soil sampling survey.
Honorine
Gold
On
February 22, 2008, we secured claims on approximately 3,300 acres of potentially
mineralized ground north of Winnemucca, Nevada. We are conducting
preliminary sampling of the area. During the course of the property
evaluation, rock chip samples were collected. The next phase of this
project will be to conduct extensive mapping of the area’s bedrock
geology. Additionally, we plan to conduct an airborne geophysical
survey to map the magnetic character of the rocks. Geochemical
exploration efforts will continue with more rock chip sampling as well as an
in-depth soil sampling survey.
Crescent Red Caps
LLC
In early
2005 we entered into a Letter of Intent to form a joint venture to acquire the
exploration rights to certain properties which consisted of two leases of
unpatented mining claims located in northeastern Nevada, approximately 60 miles
southwest of Elko, Nevada in Lander County for which ASDi LLC was the
lessee. In furtherance of this intended joint venture on January 25,
2006 ASDi LLC and Firstgold entered into an Operating Agreement for the Crescent
Red Caps LLC, a Nevada limited liability company (“Crescent Red Caps LLC”)
formed for the intended purpose of exploring the properties. The terms of the
Operating Agreement for Crescent Red Caps LLC provided for Firstgold to own an
initial 22.22% interest in the LLC and be the Manager and the remaining 77.78%
interest to be held by ASDi LLC, a California limited liability company owned by
A. Scott Dockter, COO of Firstgold. Additionally, by the terms of the
Operating Agreement, Firstgold, by making expenditures over three years (January
2006 - January 2009) aggregating $2,700,000, could acquire a 66.66% overall
interest in the Crescent Red Caps LLC. Firstgold would then have the
opportunity to purchase the remaining Crescent Red Caps LLC interest held by
ASDi LLC based on the results of the exploration work contemplated by these
additional expenditures.
On
October 13, 2006 and November 1, 2006 the lessors gave notices of termination of
the two leases. The lessors claimed that the proposed assignment of
the leases by ASDi LLC to Crescent Red Caps LLC was either ineffective or in
breach of the leases. ASDi LLC disputed the lease terminations and on
February 8, 2007, the lessors filed a lawsuit seeking to terminate the leases
(see the section “Legal Proceedings” below). As a result of the recent
settlement of this litigation ASDi LLC, Firstgold and Crescent Red Caps LLC
relinquished all rights to any interest in the above leases or
properties. Firstgold had not yet expended any significant amounts on
its exploration program on the properties prior to this lease
dispute.
Industry
Overview
The gold
mining and exploration industry has experienced several factors recently that
are favorable to Firstgold as described below.
The spot
market price of an ounce of gold has increased from a low of $253 in February
2001 to a high of $1,011 in March 2008. The price was $923 as of
January 31, 2008 and $853 as of May 1, 2008. This current price level
has made it economically more feasible to produce gold as well as made gold a
more attractive investment for many. Accordingly, the gross margin
per ounce of gold produced per the historical spot market price range above
provides significant profit potential if we are successful in identifying and
mining gold at the Relief Canyon mine.
By
industry standards, there are generally four types of mining
companies. Firstgold is considered an “exploration stage”
company. Typically, an exploration stage mining company is focused on
exploration to identify new, commercially viable gold
deposits. “Junior mining companies” typically have proven and
probable reserves of less then one million ounces of gold, generally produces
less then 100,000 ounces of gold annually and / or are in the process of trying
to raise enough capital to fund the remainder of the steps required to move from
a staked claim to production. “Mid-tier” and large mining (“senior”)
companies may have several projects in production plus several million ounces of
gold in reserve.
Generally
gold reserves have been declining for a number of years for the following
reasons:
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The
extended period of low gold prices from 1996 to 2001 made it economically
unfeasible to explore for new deposits for most mining
companies.
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The
demand for and production of gold products have exceeded the amount of new
reserves added over the last several consecutive
years.
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Reversing
the decline in lower gold reserves is a long term process. Due to the
extended time frame it takes to explore, develop and bring new production on
line, the large mining companies are facing an extended period of lower gold
reserves. Accordingly, junior companies that are able to increase
their gold reserves more quickly should directly benefit with an increased
valuation.
Additional
factors causing higher gold prices over the past two years have come from a
weakened United States dollar. Reasons for the lower dollar compared
to other currencies include the historically low US interest rates, the
increasing US budget and trade deficits and the general worldwide political
instability caused by the war on terrorism.
Competition
Of the
four types of mining companies, we believe junior companies represent the
largest group of gold companies in the public stock market. All four
types of mining companies may have projects located in any of the gold producing
continents of the world and many have projects located near the Relief Canyon
mine in Nevada. Many of our competitors have greater exploration,
production, and capital resources than we do, and may be able to compete more
effectively in any of these areas. Firstgold’s inability to secure
capital to fund current exploration and possible future production capacity,
would establish a competitive cost disadvantage in the marketplace which would
have a material adverse effect on its operations and potential
profitability.
We also
compete in the hiring and retention of experienced
employees. Consequently, though unlikely, it is possible that we may
not be able to hire or retain qualified miners or operators in the numbers or at
the times desired.
Employees
As of
January 31, 2008, we had 61 full-time employees. Employees include a
Mine Manager, Chief Geologist and Senior Geologist, a Lead Driller and a Plant
Metallurgist. We anticipate hiring additional employees during the current year
to work on the mining sites in Nevada as our exploration program
continues. While skilled equipment and operations personnel are in
demand, we believe we will be able to hire the necessary workers to sustain our
exploration program. Our employees are not expected to be subject to
a labor contract or collective bargaining agreement. We consider our
employee relations to be good.
Consulting
services, relating primarily to geologic and geophysical interpretations, and
relating to such metallurgical, engineering, and other technical matters as may
be deemed useful in the operation of our exploration activities, will be
provided by independent contractors.
Government
Controls and Regulations
Our
exploration, mining and processing operations are subject to various federal,
state and local laws and regulations governing prospecting, exploration,
development, production, labor standards, occupational health, mine safety,
control of toxic substances, and other matters involving environmental
protection and employment. United States environmental protection
laws address the maintenance of air and water quality standards, the
preservation of threatened and endangered species of wildlife and vegetation,
the preservation of certain archaeological sites, reclamation, and limitations
on the generation, transportation, storage and disposal of solid and hazardous
wastes, among other things. There can be no assurance that all the
required permits and governmental approvals necessary for any mining project
with which we may be associated can be obtained on a timely basis, or
maintained. Delays in obtaining or failure to obtain government
permits and approvals may adversely impact our operations. The
regulatory environment in which we operate could change in ways that would
substantially increase costs to achieve compliance. In addition,
significant changes in regulation could have a material adverse effect on our
operations or financial position.
Outlined
below are some of the more significant aspects of governmental controls and
regulations which materially affect our interests in the Relief Canyon, Horse
Creek and Antelope Peak properties.
Regulation of Mining
Activity
Firstgold’s
mining activities, including exploration, and possible future development and
production activities are subject to environmental laws, policies and
regulations. These laws, policies and regulations affect, among other
matters, emissions to the air, discharges to water, management of waste,
management of hazardous substances, protection of natural resources, protection
of endangered species, protection of antiquities and reclamation of
land. The mines are also subject to numerous other federal, state and
local laws and regulations. At the federal level, the mines are
subject to inspection and regulation by the Division of Mine Safety and Health
Administration of the Department of Labor (“MSHA”) under provisions of the
Federal Mine Safety and Health Act of 1977. The Occupation and Safety
Health Administration (“OSHA”) also has jurisdiction over certain safety and
health standards not covered by MSHA. Mining operations and all
future exploration and development will require a variety of
permits. Although we believe the permits can be obtained in a timely
fashion, permitting procedures are complex, costly, time consuming and subject
to potential regulatory delay. We do not believe that existing
permitting requirements or other environmental protection laws and regulations
would have a material adverse effect on our ability to explore and eventually
operate the mines. However, we cannot be certain that future changes
in laws and regulations would not result in significant additional expenses,
capital expenditures, restrictions or delays associated with the operation of
our properties. We cannot predict whether we will be able to obtain
new permits or whether material changes in permit conditions will be
imposed. Granting new permits or the imposition of additional
conditions could have a material adverse effect on our ability to explore and
operate the mining properties in which we have an interest.
On June
9, 2005, we received permission from the NDEP to commence designated
environmental activities previously requested by us. In January 2006,
we made a cash deposit of $243,204 to cover future reclamation costs as required
by the NDEP for the Relief Canyon Mine.
In
September 2006, we submitted our “Application for Water Pollution Control Permit
and Design Report” for the Relief Canyon project with the NDEP. This
document provides the BLM and NDEP with information regarding the
characteristics of the site, proposed management of process fluids, monitoring
and tentative plans for the eventual closure of operations. In
addition, this fulfills Nevada state requirements and illustrates the plan to
prevent undue degradation of public lands while the Relief Canyon Mining Project
is in operation.
On
October 19, 2006 we received notice from the NDEP that we would be allowed to
attach our current Plan of Operations for Relief Canyon submitted on September
15, 2006 as an amendment to the previous Plan of Operations submitted in
1996. This consolidation of Plans is expected to significantly reduce
the processing time and documentation necessary to secure our production permit
from the NDEP for the Relief Canyon project. We were also required to
increase the reclamation cost deposit from $243,204 to $613,500 which was placed
in a blocked account with our bank in Sacramento, California in March
2007.
On April
9, 2007 we received notice from the NDEP that Firstgold’s Plan of Operation had
been reinstated. With this approval, Firstgold is allowed to commence
onsite operations subject to final determination and posting of reclamation
bonds.
On
November 16, 2006, the NDEP notified Firstgold of certain violations that had
occurred pertaining to the unauthorized release of water from one of the
overflow containment ponds at the Relief Canyon mining site in early November
2006. On August 14, 2007, Firstgold was notified that a fine of $9,000 had been
assessed for these violations. Firstgold paid the fine in full on
August 21, 2007. Such violation and fine is not expected to affect the
permitting process or exploration program at the Relief Canyon Mine
site.
Legislation
has been introduced in prior sessions of the U.S. Congress to make significant
revisions to the U.S. General Mining Law of 1872 that would affect our
unpatented mining claims on federal lands, including a royalty on gold
production. It cannot be predicted whether any of these proposals
will become law. Any levy of the type proposed would only apply to
unpatented federal lands and accordingly could adversely affect the
profitability of portions of any future gold production from the Relief Canyon
mine.
The State
of Nevada, where our mine properties are located, adopted the Mined Land
Reclamation Act (the “Nevada Act”) in 1989 which established design, operation,
monitoring and closure requirements for all mining facilities. The
Nevada Act has increased the cost of designing, operating, monitoring and
closing mining facilities and could affect the cost of operating, monitoring and
closing existing mine facilities. The State of Nevada also has
adopted reclamation regulations pursuant to which reclamation plans must be
prepared and financial assurances established for existing
facilities. The financial assurances can be in the form of cash
placed on deposit with the State or reclamation bonds underwritten by insurance
companies. We prepared a specific reclamation plan of the Relief
Canyon Mine and began implementation of the plan in April 2005. This
work was completed in the summer of 2005. As a result of completing
the work, the State of Nevada reduced the financial assurance amount to $243,204
which we have deposited in a blocked account with our bank in Sacramento,
California. In March 2007, we increased the reclamation cost deposit
to $613,500. We have now completed the Activities of Compliance
required by BLM and NDEP which was a prerequisite to the issuance of mining
permits. Our ability to commence full mining operations at the Relief
Canyon Mine is subject to our obtaining all necessary mining
permits.
Environmental
Regulations
Legislation
and implementation of regulations adopted or proposed by the United States
Environmental Protection Agency (“EPA”), the BLM and by comparable agencies in
various states directly and indirectly affect the mining industry in the United
States. These laws and regulations address the environmental impact
of mining and mineral processing, including potential contamination of soil and
water from tailings, discharges and other wastes generated by mining
process. In particular, legislation such as the Clean Water Act, the
Clean Air Act, the Federal Resource Conservation and Recovery Act (“RCRA”), and
the National Environmental Policy Act require analysis and/or impose effluent
standards, new source performance standards, air quality standards and other
design or operational requirements for various components of mining and mineral
processing, including gold-ore mining and processing.
Such
statutes also may impose liability on us for remediation of waste we have
created.
Gold
mining and processing operations by an entity would generate large quantities of
solid waste which is subject to regulation under the RCRA and similar state
laws. The majority of the waste which is produced by such operations
is “extraction” waste that EPA has determined not to regulate under RCRA's
"hazardous waste" program. Instead, the EPA is developing a solid
waste regulatory program specific to mining operations under the
RCRA. Of particular concern to the mining industry is a proposal by
the EPA entitled “Recommendation for a Regulatory Program for Mining Waste and
Materials Under Subtitle D of the Resource Conservation and Recovery Act”
(“Strawman II”) which, if implemented, would create a system of comprehensive
Federal regulation of the entire mine site. Many of these
requirements would be duplicates of existing state
regulations. Strawman II as currently proposed would regulate not
only mine and mill wastes but also numerous production facilities and processes
which could limit internal flexibility in operating a mine. To
implement Strawman II the EPA must seek additional statutory authority, which is
expected to be requested in connection with Congress' reauthorization of
RCRA.
We also
are subject to regulations under (i) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (“CERCLA" or “Superfund”) which regulates
and establishes liability for the release of hazardous substances and (ii) the
Endangered Species Act (“ESA”) which identifies endangered species of plants and
animals and regulates activities to protect these species and their
habitats. Revisions to “CERCLA” and “ESA” are being considered by
Congress; however, the impact of these potential revisions on us is not clear at
this time.
The Clean
Air Act, as amended, mandates the establishment of a Federal air permitting
program, identifies a list of hazardous air pollutants, including various metals
and cyanide, and establishes new enforcement authority. The EPA has
published final regulations establishing the minimum elements of state operating
permit programs. Firstgold will be required to comply with these EPA
standards to the extent adopted by the State of Nevada.
In
addition, we are required to mitigate long-term environmental impacts by
stabilizing, contouring, resloping, and revegetating various portions of a
site. While a portion of the required work was performed concurrently
with prior operations, completion of the environmental mitigation occurs once
removal of all facilities has been completed. These reclamation
efforts are conducted in accordance with detailed plans which have been reviewed
and approved by the appropriate regulatory agencies. We have made the
necessary cash deposits and we made provision to cover the estimated costs of
such reclamation as required by permit.
We
believe that our current exploration activities at the Relief Canyon
Mine, are in substantial compliance with federal and state regulations and is
consistent with our Green Initiative approach to environmental impact and that
no further significant capital expenditures for environmental control facilities
will be required unless and until production resumes at the site.
Factors
Affecting Firstgold's Business
As a
development stage company with an unproven business strategy, we may not be able
to achieve positive cash flows and our limited history of operations makes
evaluation of our future business and prospects difficult. We have
been actively pursuing our business strategy only since February
2003. Consequently, we have only recently reactivated our business
operations and we have not generated substantial revenues, other than drilling
revenue, interest income, and dividend income, since our
reactivation. As a result, we have only a limited operating history
upon which to evaluate our future potential performance. Our
prospects must be considered in light of the risks and difficulties encountered
by new companies which have not yet established their business
operations.
We will
need additional funds to finance our mining and exploration activities as well
as fund our current operations. Our ability to meet our long-term
obligations in the ordinary course of business is dependent upon our ability to
raise additional capital through public or private equity financings, establish
increasing cash flow from operations, entering into joint ventures or other
arrangements with capital sources, or secure other sources of financing to fund
operations.
Our prior
and current independent certified public accountants have expanded their opinion
contained in our financial statements as of and for the years ended January 31,
1997, through January 31, 2008 to include an explanatory paragraph related to
our ability to continue as a going concern, stating, in the audit report dated
May 15, 2008, that “the Company has incurred a net loss of $7,632,537 and had
negative cash flow from operations of $4,832,217. In addition,
the Company had an accumulated deficit of $31,391,140 and a shareholders’
surplus of $5,174,290 at January 31, 2008.” These factors, among
others, as discussed in “Note 2- Going Concern” to the financial statements,
raise substantial doubt about the Company’s ability to continue as a going
concern. The auditors recognize that the cash flow uncertainty makes
their basic assumptions about value uncertain. When it seems
uncertain whether an asset will be used in a “going concern” or sold at auction,
the auditors assume that the business is a “going concern” for purposes of all
their work, and then they disclose that there is material uncertainty about that
assumption. It is definitely a consequence of our negative cash flows
from operations that we continually need additional cash. At any
time, a serious deficiency in cash reserves could occur and it is not always
possible or convenient to raise additional capital. A problem in
raising capital could result in temporary or permanent insolvency and
consequently potential claims by unpaid creditors and perhaps closure of the
business. All of these things are possibilities. It is
certain, in any case, that analysts and investors view unfavorably any report of
independent auditors expressing substantial doubt about a company's ability to
continue as a going concern.
The price
of gold has experienced an increase in value over the past several years,
generally reflecting among other things relatively low interest rates in the
United States; worldwide instability due to terrorism; and a continuing global
economic slump. Any significant drop in the price of gold may have a
materially adverse affect on the results of our operations unless we are able to
offset such a price drop by substantially increased production.
The
disclosures of our mineral resources are only estimates. We have no
proven or probable reserves and have no ability to currently measure or prove
our reserves other then estimating such reserves relying on information produced
in the 1990’s supplemented by our current exploration data. Therefore
we are unable to determine the quantity of gold we may be able to
recover. We can only estimate a potential mineral resource which is a
subjective process which depends in part on the quality of available data and
the assumptions used and judgments made in interpreting such
data. There is significant uncertainty in any resource estimate such
that the actual deposits encountered or reserves validated and the economic
viability of mining the deposits may differ materially from our
expectations.
Gold
exploration is highly speculative in nature. Success in exploration
is dependent upon a number of factors including, but not limited to, quality of
management, quality and availability of geological data and the expertise to
interpret it and availability of exploration capital. Due to these
and other factors, the probability of our exploration program identifying
individual prospects having commercially significant reserves cannot be
predicted . It is likely that many of the claims explored
will not contain any commercially viable reserves. Consequently,
substantial funds will be spent on exploration which may identify only a few, if
any, claims having commercial development potential. In addition, if
commercially viable reserves are identified, significant amounts of capital will
be required to mine and process such reserves.
Our
mining property rights consist of 146 mill site and unpatented mining claims at
the Relief Canyon Mine, our staked claims at the Horse Creek exploration
property, the Honorine Gold exploration property, the Fairview-Hunter
exploration property, and our leasehold interest
in the Antelope Peak property. The validity of unpatented or staked
mining claims is often uncertain and is always subject to
contest. Unpatented mining and staked claims are generally considered
subject to greater title risk than patented mining claims, or real property
interests that are owned in fee simple. If title to a particular
property is successfully challenged, we may not be able to carryout exploration
programs on such property or to retain our royalty interests on that property
should production take place, which could reduce our future
revenues.
Mining is
subject to extensive regulation by state and federal regulatory
authorities. State and federal statutes regulate environmental
quality, safety, exploration procedures, reclamation, employees’ health and
safety, use of explosives, air quality standards, pollution of stream and fresh
water sources, noxious odors, noise, dust, and other environmental protection
controls as well as the rights of adjoining property owners. We
believe that we are currently operating in substantial compliance with all known
safety and environmental standards and regulations applicable to our Nevada
property. However, there can be no assurance that our compliance
could be challenged or that future changes in federal or Nevada laws,
regulations or interpretations thereof will not have a material adverse affect
on our ability to resume and sustain mining operations.
The
business of gold mining is subject to certain types of risks, including
environmental hazards, industrial accidents, and theft. Prior to
suspending operations, we carried insurance against certain property damage loss
(including business interruption) and comprehensive general liability
insurance. While we maintain insurance consistent with industry
practice, it is not possible to insure against all risks associated with the
mining business, or prudent to assume that insurance will continue to be
available at a reasonable cost.
We have
not obtained environmental liability insurance because such coverage is not
considered by management to be cost effective. We currently carry
insurance on all of our properties.
We are
substantially dependent upon the continued services of A. Scott Dockter, our
COO. While we have an employment agreement with Mr. Dockter, there is
no key person life insurance or disability insurance on Mr.
Dockter. While Mr. Dockter expects to spend the majority of his time
assisting Firstgold, there can be no assurance that Mr. Dockter’s services
will remain available to Firstgold. If Mr. Dockter’s services are not
available to us, we would be materially and adversely
affected. However, Mr. Dockter has been a significant
stockholder of Firstgold since its inception and considers his investment of
time and money in Firstgold of significant personal value.
As of
January 31, 2008, Firstgold had approximately 117,432,317 shares of Common Stock
outstanding and convertible debentures which are convertible into up to
1,444,444 shares of our Common Stock. Additionally, warrants to
purchase a total of 39,257,146 shares of our Common Stock and options to
purchase 4,650,000 shares of our Common Stock were outstanding as of January 31,
2008. The possibility that substantial amounts of our
outstanding Common Stock may be sold by investors or the perception that such
sales could occur, often called "equity overhang," could adversely affect the
market price of our Common Stock and could impair our ability to raise
additional capital through the sale of equity securities in the
future
ITEM
2. DESCRIPTION OF
PROPERTY
Firstgold’s
executive office is located at 3108 Ponte Morino Drive, Suite 210, Cameron Park,
California 95682. Firstgold also owns and maintains an office at 1055
Cornell Avenue, Lovelock, Nevada 89419.
Mining
Property Rights
Relief Canyon
Property
Our
mining property rights are represented by 146 unpatented mill site and mining
lode claims which were re-staked in October 2004 and June
2006. Unpatented mining claims are generally considered subject to
greater title risks than patented mining claims or real property interests that
are owned in fee simple. To remain valid, such unpatented claims are
subject to annual maintenance fees. As of January 31, 2008, we were
current in the payment of such maintenance fees.
Dalton Livestock and
Winchell Ranch Mineral Lease
On
October 24, 2006, we entered into a Mineral Lease Agreement with the owners of
approximately 25,000 acres of property located in Elko County, Nevada (the
“Antelope Peak” property). The Lease allows Firstgold the exclusive
right to explore for and, if warranted, develop gold, silver and barite minerals
on the leased property. The Lease includes exploration, mining and
access rights, deposit of waste material, mineral processing and water
rights. The Lease has an initial term of five (5) years; however the
term can be automatically extended thereafter for so long as Firstgold is
engaged in mining operations.
Firstgold
paid $20,000 upon the signing of the Lease and is required to pay rent of
$50,000 per year. Firstgold is required to expend the following sums
for exploration work on the premises: first year - $150,000; second year -
$450,000; third year - $1,000,000; fourth year - $1,500,000; and fifth year -
$2,000,000. In addition, should mining operations be commenced,
the Lessors would be entitled to a percentage of net smelter returns ranging
from 2% to 5% depending on the price of gold. A finder’s fee of 2,000,000 common
shares and 2,000,000 warrants to purchase common shares at a price of $0.50 per
common share were issued to an unrelated third party at the date of signing the
Lease. The warrants have a term of three years.
Horse Creek
Property
On July
9, 2007, we completed staking claims on approximately 4,200 acres of ground in
the Horse Creek area located approximately 100 miles Northeast of Reno,
Nevada. These claims are staked claims on property owned by the U.S.
Bureau of Land Management (“BLM”). Such staking of claims is
permitted on U.S. Government property; however such claims must be filed with
the BLM and any significant drilling or development activity will be subject to
the review and approval of the BLM and NDEP.
Upon
conclusion of all mineral exploration and mining operations, if any, Firstgold
is required to restore the property.
Fairview-Hunter
On
January 11, 2008 we entered into a Mineral Lease Agreement with the Randall
Stoeberl, dba RSgold. of approximately 2,300 acres of potentially mineralized
ground near Fairview, Nevada (“Fairview-Hunter” property). The Lease
allows Firstgold the exclusive right to explore for and, if warranted, develop
gold, silver and barite minerals on the leased property. The Lease
includes exploration, mining and access rights, deposit of waste material,
mineral processing, and water rights. The Lease has an initial term
of ten (10) years; however the term can be automatically extended thereafter for
so long as Firstgold is engaged in mining operations.
Firstgold
paid $25,000 upon the signing of the Lease and is required to pay rent of
$25,000 the first year, with payments increasing each subsequent year by $5,000,
with a maximum annual payment of $50,000. Firstgold is required to
complete an intial 2000 feet of drilling in the first year, with no specified
obligations thereafter. In addition, should mining operations
be commenced, the Lessors would be entitled to 3% of net smelter
returns.
These
claims are staked claims on property owned by the U.S. Bureau of Land Management
(“BLM”), and controlled by Randall Stoeberl. Such staking of claims
is permitted on U.S. Government property; however such claims must be filed with
the BLM and any significant drilling or development activity will be subject to
the review and approval of the BLM and NDEP.
Honorine
Gold
On
February 22, 2008, we entered into a Mineral Lease Agreement with the
Randall Stoeberl, dba RSgold. of approximately 3,300 acres of
property located in Humboldt County, Nevada (the “Honorine Gold”
property). The Lease allows Firstgold the exclusive right to explore
for and, if warranted, develop gold, silver and barite minerals on the leased
property. The Lease includes exploration, mining and access rights,
deposit of waste material, and mineral processing. The Lease has an
initial term of ten (10) years; however the term can be automatically extended
thereafter for so long as Firstgold is engaged in mining
operations.
Firstgold
paid $15,000 upon the signing of the Lease and is required to pay rent of
$15,000 the first year, with payments increasing each subsequent year by
$15,000, with a maximum annual payment of $50,000. Firstgold is
required to complete an intial 2000 feet of drilling in the first year, with no
specified obligations thereafter. In addition, should mining
operations be commenced, the Lessors would be entitled to 5% of net smelter
returns.
These
claims are staked claims on property owned by the U.S. Bureau of Land Management
(“BLM”), and controlled by Randall Stoeberl. Such staking of claims
is permitted on U.S. Government property; however such claims must be filed with
the BLM and any significant drilling or development activity will be subject to
the review and approval of the BLM and NDEP.
ITEM
3. LEGAL
PROCEEDINGS
On
February 8, 2007, a complaint was filed against ASDi, LLC, Crescent Red Caps
LLC, Firstgold, and Scott Dockter by the Lessors of the Crescent Valley and Red
Caps mining properties. The complaint was filed in the Sixth Judicial
District Court of Lander County, Nevada (Case No. 9661). In the
complaint the plaintiffs allege that ASDi, LLC wrongfully assigned its lessee
rights in the Crescent Valley and Red Caps mining properties to Crescent Red
Caps LLC (of which Firstgold is the Managing Member). The complaint
sought the termination of the leasehold rights granted to ASDi, LLC and quiet
title and punitive damages. The complaint also sought an order
against Firstgold restricting public claims of ownership or control of the
mining properties. ASDi, LLC and Firstgold believed the leases were not assigned
and that any transfer of the leases or mining claims was not wrongful nor
required the Lessors’ consent. Consequently, ASDi, LLC and Firstgold pursued a
vigorous defense of this action. On April 3, 2007, a preliminary
hearing was held in which the defendants sought a Summary Judgment to have the
leasehold termination notices declared void. The Court did not grant
the defendants’ motion thus requiring the matter to proceed to trial on the
merits. In addition, on May 11, 2007, the Court entered a preliminary injunction
against public claims of ownership of any interest in the leases or the mining
property by defendants.
On June
7, 2007, the plaintiffs filed a Motion For Order to Show Cause claiming that
defendants had violated the injunction based upon certain statements made on
Firstgold’s website and certain disclosures made in Firstgold’s annual report on
Form 10-KSB and should be found in contempt of the injunction. A hearing on the
Motion to Show Cause was held on November 20, 2007 and on January 4, 2008 the
Court ruled in Defendant’s favor finding no contempt of the
injunction. In late March, 2008 the parties reached a settlement
agreement and the case was dismissed by the Court on April 4,
2008. As a result of the Settlement, Firstgold paid $150,000 to
Plaintiffs and Firstgold, ASDi LLC and Crescent Red Caps LLC relinquished all
right, title and interest in the Red Caps and Crescent Valley leases to the
Plaintiffs. Consequently, Firstgold no longer has any interest in
these leases and will not pursue any further exploration activity on such leased
property.
On
September 24, 2007, a complaint was served on Firstgold by Swartz Private
Equity, LLC. The complaint was filed in the District Court for the
Western District of New York (Case No. 07CV6447). In the complaint,
plaintiff alleges that pursuant to an Investment Agreement dated October 4,
2000, and entered into with Firstgold’s former management, it is entitled to the
exercise of certain warrants in the amount of 1,911,106 shares of Firstgold
common stock or the equivalent cash value of $0.69 per share and a termination
fee of $200,000. Firstgold filed an answer to the complaint on
December 3, 2007 and expects to vigorously defend this action. The
lawsuit is now in the discovery phase.
On
January 30, 2008, a complaint was served on Firstgold by Park Avenue Consulting
Group, Inc. The complaint was filed in the Supreme Court of the State
of New York but was subsequently removed to the Federal District Court for the
Southern District of New York (Case No. 08CV01850). In the complaint,
plaintiff alleges that pursuant to a Retainer Agreement entered into on
September 1, 2000 and an Addendum thereto entered into on September 7, 2000, it
is entitled to the issuance of warrants to purchase 1,000,000 shares of
Firstgold stock, a monthly retainer fee of 50,000 shares of Firstgold stock and
a monthly cash retainer fee, a $50,000 finder’s fee, and other damages to be
proven at trial. Firstgold filed an Answer on April 15, 2008 and on
May 5, 2008 filed a Counterclaim seeking reimbursement of all costs of this
lawsuit. Firstgold expects to vigorously defend this action.
ITEM
4. SUBMISSION OF MATTERS
TO A VOTE OF SECURITY HOLDERS
None
PART
II
ITEM
5. MARKET FOR COMMON
EQUITY, RELATED STOCKHOLDER
MATTERS
AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.
Market
for Our Common Stock
In July
1997, our Common Stock was approved for quotation on the Over-the-Counter
(“OTC”) Bulletin Board where it traded under the symbol “NGLD” until June
2001. In June 2001, our Common Stock was moved to the “Pink Sheets”
published by the Pink Sheets LLC (previously National Quotation Bureau,
LLC). On June 7, 2005, our Common Stock was again approved for
quotation on the OTC Bulletin Board with its symbol of “NGLD.” Due to
our name change to Firstgold Corp., effective December 1, 2006 our trading
symbol was changed to “FGOC.” As of May 1, 2008 the closing bid price
of our Common Stock was $0.49 per share.
In
January 2008, Firstgold filed an application to become listed on the Toronto
Stock Exchange (“TSX”). This application had been pending with the
TSX while Firstgold satisfied various listing requirements including securing
additional capital. On May 12, 2008 the TSX approved Firstgold’s application for
listing its common shares and effective May 14, 2008 Firstgold’s shares became
listed for trading under the symbol “FGD”.
Price
Range of Our Common Stock
A public
trading market having the characteristics of depth, liquidity and orderliness
depends upon the existence of market makers as well as the presence of willing
buyers and sellers, which are circumstances over which we do not have
control. The following table sets forth the high and low sales prices
reported by the OTC Bulletin Board for our Common Stock in the periods
indicated. The quotations below reflect inter-dealer prices, without
retail mark-up, markdown or commission, and may not represent actual
transactions.
FIRSTGOLD
CORP. COMMON STOCK
|
|
Low
|
|
|
High
|
|
|
|
|
|
|
|
|
Year
Ending January 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth
Quarter (November-January)
|
|
$ |
0.625 |
|
|
$ |
0.97 |
|
Third
Quarter (August-October)
|
|
$ |
0.52 |
|
|
$ |
0.69 |
|
Second
Quarter (May-July)
|
|
$ |
0.56 |
|
|
$ |
0.72 |
|
First
Quarter (February-April)
|
|
$ |
0.33 |
|
|
$ |
0.73 |
|
|
|
|
|
|
|
|
|
|
Year
Ending January 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth
Quarter (November-January)
|
|
$ |
0.255 |
|
|
$ |
0.39 |
|
Third
Quarter (August-October)
|
|
$ |
0.30 |
|
|
$ |
0.47 |
|
FIRSTGOLD
CORP. COMMON STOCK
|
|
|
Low
|
|
|
High
|
|
|
|
|
|
|
|
|
|
|
Second
Quarter (May-July)
|
|
$ |
0.19 |
|
|
$ |
0.53 |
|
First
Quarter (February-April)
|
|
$ |
0.14 |
|
|
$ |
0.245 |
|
Stockholders
As of
January 31, 2008, there were approximately 1,145 holders of record of our Common
Stock. This amount does not include stockholders whose shares are
held in street name.
Dividend
Policy
We have
never declared or paid any cash dividends on our Common Stock. We
currently anticipate that we will retain all future earnings for the expansion
and operation of our business and do not anticipate paying cash dividends in the
foreseeable future.
Securities
Authorized For Issuance Under Equity Compensation Plans
On July
26, 2006, our Board of Directors adopted the 2006 Stock Option Plan which was
submitted to and approved by stockholders at the 2006 annual stockholders
meeting held on November 17, 2006. Under the terms of the 2006 Plan, we may
grant options to purchase up to 5,000,000 shares of our common stock which can
include Incentive Stock Options issued to employees and Nonstatutory Stock
Options issuable to employees or consultants providing services to Firstgold on
such terms as are determined by our board of directors. Our Board
administers the 2006 Plan. Under the 2006 Plan, options vest not less
than 20% per year and have 10-year terms (except with respect to 10%
stockholders which have five-year terms). If an option holder
terminates his/her employment with us or becomes disabled or dies, the option
holder or his/her representative will have a certain number of months to
exercise any outstanding options. If we sell substantially all of our
assets or are a party to a merger or consolidation in which we are not the
surviving corporation, then we have the right to accelerate unvested options and
will give the option holder written notice of the exercisability and specify a
time period in which the option may be exercised. All options will
terminate in their entirety to the extent not exercised on or prior to the date
specified in the written notice unless an agreement governing any change of
control provides otherwise. As of January 31, 2008, options to
purchase 4,650,000 shares of common stock had been issued as
follows: 750,000 options issued to A. Scott Dockter; 400,000 options
issued to James Kluber; 750,000 options issued to Terrence
Lynch; 1,000,000 options issued to Stephen Akerfeldt; 500,000 options
issued to each of Donald Heimler, Fraser Berrill and Kevin Bullock; and 250,000
options issued to an employee for the purchase of Firstgold restricted common
stock. At the 2007 Annual Stockholders Meeting held on September 20,
2007, stockholders approved an increase in the shares issuable under the 2006
Plan to 10,000,000 shares.
Equity
Compensation Plan Information
Plan
Category
|
Number
of securities to be issued upon exercise of outstanding options, warrants
and rights as of January 31, 2008
|
Weighted-average
exercise price of outstanding options, warrants and right
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column (a))
|
|
(a)
|
(b)
|
(c)
|
Equity
compensation plans to be approved by security holders
|
4,650,000
|
$ 0.62
|
5,350,000
|
Equity
compensation plans not approved by security holders
|
N/A
|
|
|
TOTAL
|
4,650,000
|
$ 0.62
|
5,350,000
|
Shares
Issuable Upon Conversion of Convertible Debentures
The
$650,000 principal balance of Convertible Debentures are convertible into shares
of our Common Stock at a per share conversion rate of $0.45.
Repurchase
of Equity Securities
None
Recent
Sales of Unregistered Securities
During
Firstgold’s most recent fiscal year ending January 31, 2008, it issued the
following securities pursuant to exemptions from registration under the
Securities Act.
On June
22, 2007, Firstgold issued 18,843,421 units at a price of $0.45 per
unit. Each unit consisted of one share of Firstgold common stock and
½ warrant to purchase a share of Firstgold common stock at an exercise price of
$0.65 per share. Firstgold raised gross proceeds of $8,479,539.45
from the sale of the units. From this amount, Firstgold paid a
Selling Agent Fee of $593,568 and issued 1,866,667 units to the Selling Agent as
compensation units. The warrants expire eighteen (18) months from the
date of issuance.
On April
12, 2007, Firstgold issued 5,673,110 Units at a price of $0.45 per
Unit. Each Unit consisted of one share of Firstgold common stock and
½ warrant to purchase a share of Firstgold common stock at an exercise price of
$0.65 per share. The warrants expire eighteen (18) months from the
date of issuance. Firstgold raised net proceeds of $2,374,200 from
the sale of the Units after paying a selling agent commission of
$178,703.
The units
referred to above were offered and sold exclusively to individuals residing or
entities formed outside the United States and are not deemed to be “U.S.
persons” as that term is defined under Regulation S. Each investor
represented that it is purchasing such shares for its own account.
Both the
offer and the sale of the Firstgold shares were made outside the United States
and are deemed to be “offshore transactions” as that term is defined under
Regulation S. The share certificates contain a legend indicating that such
shares can only be transferred in compliance with the provisions of Regulation
S. In light of the foregoing, such sales were deemed exempt from
registration pursuant to Regulation S of the 1933 Act. The shares are
deemed to be “restricted securities” as defined in Rule 144 under the 1933
Act.
The
following issuances of stock, warrants, and other equity securities were made
without any public solicitation to a limited number of investors or related
individuals or entities in separately negotiated transactions. Each
investor represented to us that the securities were being acquired for
investment purposes only and not with an intention to resell or distribute such
securities. Each of the individuals or entities had access to
information about our business and financial condition and was deemed capable of
protecting their own interests. The stock, warrants and other
securities were issued pursuant to the private placement exemption provided by
Section 4(2) or Section 4(6) of the Securities Act. These are deemed
to be “restricted securities” as defined in Rule 144 under the Securities Act
and the warrant certificates and the stock certificates bear a legend limiting
the resale thereof.
On May
18, 2007, Firstgold issued 749,998 Units at a price of $0.45 per
Unit. Each Unit consisted of one share of Firstgold common stock and
½ Warrant to purchase a share of Firstgold common stock at an exercise price of
$0.65 per share. The warrants expire eighteen (18) months from the
date of issuance. Firstgold raised gross proceeds of $337,500 from
the sale of the Units.
On March
23, 2007, we issued options to purchase an aggregate of 250,000 shares of our
common stock to each of our three independent Directors from the 2006 Stock
Option Plan. The options are exercisable at $0.65 per share and vest
50% at the time of issue, and 50% on the first anniversary of the issue
date. The options expire in 10 years.
During
Firstgold's fiscal year ending January 31, 2007, it issued the following
securities pursuant to exemptions from registration under the Securities
Act:
On
January 31, 2007, James W. Kluber, Executive Vice President and Chief Financial
Officer of Firstgold, converted $209,251 of convertible debt and interest
thereon into 1,630,918 shares of our common stock. The conversion
price was $0.15 per share. The issuance of shares upon the conversion
of debt was made pursuant to the private placement exemption provided by Section
4(2) of the Securities Act. All shares issued are deemed to be
“restricted securities” as defined in Rule 144 under the Securities Act and the
stock certificate bears a legend restricting the resale thereof.
On
January 9, 2007, we issued options to purchase an aggregate of 250,000 shares of
our common stock to a new director from our newly adopted 2006 Stock Option
Plan. The options are exercisable at $0.50 per share. The
options fully vest after one year and expire in ten years.
On
October 26, 2006 Firstgold issued 2,000,000 shares of restricted common stock
and warrants to purchase 2,000,000 shares of restricted common stock immediately
exercisable at a price of $0.50 per share. The shares and warrants
were issued to one investor as a finder’s fee related to the Antelope Peak
Lease.
On
October 4, 2006 Firstgold issued 100,000 shares of restricted common stock to
one person in partial settlement of an existing litigation matter.
On
September 26, 2006, Firstgold entered into a Securities Purchase Agreement (the
“Purchase Agreement”) and a Registration Rights Agreement (the “Registration
Rights Agreement”), as amended on November 1, 2006, in connection with a private
placement of convertible debentures, in the aggregate principal amount of
$3,000,000 and bearing interest of 8% per annum (the
“Debentures”). The Debentures were funded $1,000,000 on September 26,
2006, $1,000,000 on December 1, 2006 and $1,000,000 March 16,
2007. The Debentures are due and payable three years from the date of
issue unless they are converted into shares of the Company’s common stock or are
repaid prior to their expiration date. Additionally, pursuant to the
Purchase Agreement, the investor was issued warrants (the “Warrants”) to
purchase an aggregate of 3,500,000 shares of Firstgold common stock exercisable
at $0.45. The Warrants have a term of four years and are immediately
exercisable.
On
September 15, 2006, Firstgold issued 1,523,229 shares of restricted common stock
in conversion of the remaining $400,000 in principal of outstanding Secured
Convertible Debentures held by Cornell Capital Partners from a prior financing
transaction. An additional 117,852 shares of restricted common stock
was issued in conversion of $30,948 of accrued interest on the Secured
Convertible Debentures.
In
September 2006, we issued options to purchase an aggregate of 250,000 shares of
our common stock to one director from our newly adopted 2006 Stock Option
Plan. The options are exercisable at $0.50 per share. The
options expire in ten years.
In July
2006, we issued options to purchase an aggregate of 1,350,000 shares of our
common stock to three employees and one director from our newly adopted 2006
Stock Option Plan. The options are exercisable at between $0.32 and
$0.50 per share. 500,000 of these options expire in five years while
the balance of options expire in ten years.
In June
2006, Firstgold issued 2,399,087 shares of restricted common stock in conversion
of $600,000 in principal of outstanding Secured Convertible Debentures held by
Cornell Capital Partners from a prior financing transaction.
In March
2006 Firstgold issued 500,000 shares of restricted common stock at a price of
$0.20 per share to an investor for total proceeds of
$100,000. Additionally, 500,000 warrants to purchase common stock at
a price of $0.40 per share were issued to the investor. The warrants
expire three years from the date of issuance.
In March
2006 $200,000 was funded per the terms of the Debenture referred to in paragraph
(i) below. Of the $200,000 funded $20,000 was paid for various loan
fees and closing costs. All of the original terms and conditions of
the Debenture and related documents remain unchanged.
ITEM
6. MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
For more
detailed financial information, please refer to the audited January 31, 2008
Financial Statements included in this Form 10-KSB.
Caution
about forward-looking statements
This Form
10-KSB includes “forward-looking” statements about future financial results,
future business changes and other events that haven’t yet
occurred. For example, statements like we “expect,” we “anticipate”
or we “believe” are forward-looking statements. Investors should be
aware that actual results may differ materially from our expressed expectations
because of risks and uncertainties about the future. We do not
undertake to update the information in this Form 10-KSB if any forward-looking
statement later turns out to be inaccurate. Details about risks
affecting various aspects of Firstgold’s business are discussed throughout this
Form 10-KSB and should be considered carefully.
Plan
of Operation for the Next Twelve Months
Certain
key factors that have affected our financial and operating results in the past
will affect our future financial and operating results. These
include, but are not limited to the following:
●
|
Gold
prices, and to a lesser extent, silver
prices;
|
|
Current
mineralization at the Relief Canyon Mine are estimated by us (based on
past exploration by Firstgold and work done by
others).
|
|
Our
proposed exploration of properties now include 146 millsite and unpatented
mining claims contained in about 1000 acres of the Relief Canyon Property;
the 25,000 acre Antelope Peak property; and approximately 4,200 acres in
the Horse Creek area of Nevada.
|
|
Our
operating plan is to continue exploration work on the Relief Canyon mining
property during calendar 2008. During 2008, we plan
to resume heap leaching at the Relief Canyon mine and we anticipate
realizing production revenue from the Relief Canyon mine
thereafter. Through the sale of additional securities and/or
the use of joint ventures, royalty arrangements and partnerships, we
intend to progressively enlarge the scope and scale of our exploration,
mining and processing operations, thereby potentially increasing our
chances of locating commercially viable ore deposits which could increase
both our annual revenues and ultimately our net profits. Our
objective is to achieve annual growth rates in revenue and net profits for
the foreseeable future.
|
|
We
expect to make capital expenditures in calendar years 2008 and 2009 of
between $10 million and $20 million, including costs related to the
exploration, development and operation of the Relief Canyon mining
property. We will have to raise additional outside capital to
pay for these activities and the resumption of exploration activities and
possible future production at the Relief Canyon
mine.
|
|
Additional
funding or the utilization of other venture partners will be required to
fund exploration, research, development and operating expenses at the
Horse Creek and Antelope Peak properties when and if such activity is
commenced at these properties. In the past we have been dependent on
funding from the private placement of our securities as well as loans from
related and third parties as the sole sources of capital to fund
operations.
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Results
of Operation
Our
current business strategy is to invest in, explore and if warranted, conduct
mining operations of our current mining properties and other mineral producing
properties. Firstgold is a public company that in the past has been
engaged in the acquisition and exploration of gold-bearing properties in the
continental United States. Currently, our principal assets include
various mineral leases associated with the Relief Canyon Mine located near
Lovelock, Nevada along with various items of mining equipment and improvements
located at that site. We have also entered into a mineral lease to
explore approximately 25,000 acres of property located in Elko County,
Nevada.
Operating Results for the
Fiscal Years Ended January 31, 2008 and 2007
Although
we commenced efforts to re-establish our mining business early in fiscal year
2004, no mining operations have commenced and no revenue from mining production
has been recognized during the fiscal years 2007 and 2008,
respectively. However, we recognized $551,279 of revenue from the
leasing of some of our drilling rigs and crew to other nearby mining operations.
We have granted a 4% net smelting return royalty to a third party related to the
Relief Canyon mining property which has been recorded as an $800,000 deferred
option income.
During
the fiscal year ended January 31, 2008 we spent $2,195,024 on exploration,
reclamation and maintenance expenses related to our mining
properties. Exploration, reclamation and maintenance expenses
expended during the year ended January 31, 2007 were $132,166. These
expenses relate primarily to exploration costs and property improvements at our
Relief Canyon mining claims. We expended $2,261,816 on retro fitting
the on-site mill facility and $2,098,686 for acquisition of mining
equipment. We incurred operating expenses of $5,715,150 during the
year ended January 31, 2008. Of this amount, $2,065,464 reflects director,
officer and staff compensation and related payroll taxes during the year,
$1,651,672 reflect fees for outside professional services, and $645,509 for
promotional expense. A large portion of the outside professional
services reflects legal and accounting work pertaining to our annual and
quarterly SEC reporting, preparation of two SB-2 registration statements
occurring in fiscal year 2008 and litigation expenses related to the Red Caps
and Crescent Valley leases. During the year ended January 31, 2007 we
incurred operating expenses of $1,955,816 of which $850,869 represents director,
officer and staff compensation and related payroll taxes during the year,
$445,940 reflect fees for outside professional services and $396,361 for
promotional expenses.
It is
anticipated that both mining costs and operating expenses will increase
significantly as we resume our exploration program and mining
operations.
We
incurred interest expense of $869,444 during the year ended January 31, 2008
which compares to interest expenses of $596,975 incurred during the year ended
January 31, 2007. The amount of loans outstanding on average was
higher during fiscal year 2008 compared to fiscal year 2007, which was primarily
the result of the increase in convertible debentures on average during fiscal
2008. The higher interest expense during fiscal year 2008 was
primarily due to the increase in accretion of warrants issued in fiscal years
2007 and 2008 as a debt discount as well as the write-off of balances of
derivative liabilities upon conversion of convertible debt in fiscal
2008.
In
conjunction with the Convertible Debentures issued during fiscal years 2007 and
2008, we allocated the proceeds received between convertible debt and the
detachable warrants based upon the relative fair market values on the date the
proceeds were received. Subsequent to the initial recording, the
change in the fair value of the detachable warrants, determined under the
Black-Scholes option pricing formula, and the change in the fair value of the
embedded derivative in the conversion feature of the convertible debentures are
recorded as adjustments to the liabilities at January 31, 2008 and
2007. This resulted in $703,992 of expense relating to the change in
the fair value of Firstgold’s stock reflected in the change in the fair value of
the warrants and derivatives (noted above) and is included as other income
(expense). This expense was $616,493 for the fiscal year ending
January 31, 2007.
Our total
net loss for the year ended January 31, 2008 increased to $7,632,537compared to
a net loss of $4,728,070 incurred for the fiscal year ended January 31,
2007. The larger net loss in fiscal year 2008 reflects the
substantial increase in operating expenses as we pursue our exploration programs
and reactivate our mining activities, the increase in operating expense from
additional staffing levels as well as costs associated with capital raising
activities and litigation, coupled with the limited revenues recognized during
fiscal year 2008.
Liquidity
and Capital Resources
We have
incurred significant operating losses since inception which has resulted in an
accumulated deficit of $31,391,140 as of January 31, 2008. At January
31, 2008, we had cash and other current assets of $1,125,613 compared to
$412,752 at January 31, 2007and net working capital deficit of
$2,500,387. Since the resumption of our business in February 2003, we
have been dependent on borrowed or invested funds in order to finance our
ongoing operations. As of January 31, 2008, we had outstanding
debentures and notes payable in the gross principal amount of $1,006,417 (net
balance of $857,937 after $148,480 of note payable discount and $0 of derivative
liabilities) which reflects an decrease of $1,922,312 compared to notes payable
in the gross principal amount of $2,780,249, (net balance of
$3,642,727 after $1,382,643 of note payable discount and
$2,245,121 of derivative liabilities) as of January 31,
2007.
In
January 2006 we made a cash deposit of $243,204 in a blocked account to cover
future reclamation costs as required by the Nevada Division of Environmental
Protection for the Relief Canyon Mine. On March 28, 2007 we provided
the United States Department of the Interior, Bureau of Land Management with a
letter of credit which is secured by a certificate of deposit in the amount of
$613,500. On April 12, 2007 the Nevada Division of Environmental
Protection returned the $243,204 previously held in the blocked
account.
On
January 25, 2006, Firstgold entered into a joint venture with ASDi, LLC to
develop two Nevada mining properties known as the Red Caps Project (“Red Caps”)
and Crescent Valley Project (“Crescent Valley”). Pursuant to the
Operating Agreement for the Crescent Red Caps LLC, ASDi LLC was to contribute
the Red Caps and Crescent Valley mining leases to the Crescent Red Caps LLC in
exchange for Firstgold issuing 2.5 million shares of its common stock and
warrants to purchase 2.5 million shares of Firstgold common stock at an exercise
price of $0.40 per share and a term of three years to ASDi
LLC. Pursuant to the joint venture, Firstgold initially owned a
22.22% interest in the Crescent Red Caps LLC, a Nevada limited liability company
and ASDi LLC held a 77.78% interest. Firstgold was to expend up to
$1,350,000 on each project over the next three years. Due to the
settlement of litigation relating to these mining leases, the joint venture has
been terminated prior to Firstgold having spent any significant amounts for
exploration expenses relating to these properties. However, Firstgold
incurred approximately $1,100,000 in legal expenses relating to this
litigation.
Our
primary sources of operating capital have been debt and equity financings. In
January, 2006 we entered into a Securities Purchase Agreement which resulted in
proceeds from the issuance of convertible debentures as follows: $600,000 on
January 27, 2006; $200,000 on March 12, 2006; and $200,000 on July 18,
2006.
On
September 26, 2006 we entered into another Securities Purchase Agreement which
resulted in proceeds from the issuance of convertible debentures as follows:
$1,000,000 on September 26, 2006; $1,000,000 on December 1, 2006; and $1,000,000
on March 16, 2007.
On
October 10, 2006 we issued convertible debentures raising proceeds of
$650,000.
On April
12, 2007 we received net proceeds of $2,374,200 from the sale of Units in
Canada.
On May
18, 2007 we received gross proceeds of $337,500 upon the issuance of units
consisting of Firstgold common stock and warrants.
On June
22, 2007 we received net proceeds of $7,885,972 upon the issuance of units
consisting for Firstgold common stock and warrants sold in Canada.
Subsequent
to the fiscal year ended January 31, 2008, we received net proceeds of
$7,791,398 from the sale of Units in Canada.
By
attempting to resume mining operations, we will require approximately $10
million to $20 million in working capital above the amounts realized during
calendar year 2008 to bring the Relief Canyon Mine into full production and
carry out planned exploration on our other properties. We believe we
have sufficient working capital to fund our current business plan for Relief
Canyon. However, should additional funds become necessary, our
intention would be to pursue several possible funding opportunities including
the sale of additional securities, entering into joint venture arrangements, or
incurring additional debt.
Due to
our continuing losses from business operations, the independent auditor’s report
dated May 15, 2008, includes a “going concern” explanation relating to the fact
that Firstgold’s continuation is dependent upon obtaining additional working
capital either through significantly increasing revenues or through outside
financing. As of January 31, 2008, Firstgold’s principal commitments
included its obligation to pay ongoing maintenance fees on 146 unpatented mining
claims and the annual minimum rent due on the Winchell Ranch mineral lease and
mortgage payments relating to its offices in Lovelock, Nevada.
It is
likely that we will need to raise additional capital to fund the long-term or
expanded development, promotion and conduct of our mineral
exploration. Due to our limited cash flow, operating losses and
limited assets, it is unlikely that we could obtain financing through commercial
or banking sources. Consequently, any future capital requirements
will be dependent on cash infusions from our major stockholders or other outside
sources in order to fund our future operations. Prior to the
transactions with Cornell Capital Partners, Firstgold’s president had paid a
substantial portion of Firstgold’s expenses since restarting its business in
February 2003. Although we believe that our creditors and investors
would continue to fund Firstgold’s expenses if such became necessary based upon
their significant debt and/or equity interest in Firstgold, there is no
assurance that such investors would continue to pay our expenses in the
future. If adequate funds are not available in the future, through
public or private financing as well as borrowing from other sources, Firstgold
might not be able to establish or sustain its mineral exploration or mining
program.
Recent Financing
Transaction
On
September 26, 2006, we entered into a Securities Purchase Agreement (the
“Purchase Agreement”) and other agreements, which were amended on November 1,
2006, with Cornell Capital Partners LP in connection with the private placement
of convertible debentures, in the aggregate principal amount of $3,000,000 and
bearing interest at 8% per annum (the “Debentures”). The Debentures
were issued for $1,000,000 on September 26, 2006, $1,000,000 on December 1,
2006, and $1,000,000 on March 16, 2007.
Each
Debenture had a three (3) year term from the date of issue unless they were
converted into shares of Firstgold Common Stock or were repaid prior to the
expiration dates. The conversion rate was adjustable and at any
conversion date, would be the lower of $0.4735 per share (and subsequently
reduced to $0.45 per share) or 95% of the Market Conversion
Price. Consequently, the number of shares of Firstgold Common Stock
into which the Debentures could have been converted would never be less than
6,666,666 shares but could have been substantially more if the average market
price of Firstgold’s Common Stock fell below $0.45. On July 13, 2007,
Cornell Capital converted $450,000 principal amount of the third Debenture at
the Fixed Conversion Rate of $0.45 per share into 1,000,000 shares of Firstgold
common stock. On September 13, 2007, Cornell Capital converted the
first $1,000,000 Debenture at the Fixed Conversion Rate of $0.45 per share into
2,222,222 shares of Firstgold common stock. As of October 31, 2007,
Cornell Capital had converted the balance of its Debentures with accrued
interest at the Fixed Conversion Rate of $0.45 per share into 3,858,228 shares
of Firstgold Common Stock.
Firstgold
paid a Commitment Fee to Cornell Capital Partners, LP of 9% of gross proceeds or
a total of $270,000. Firstgold also paid Yorkshire Advisors, LLC (an
affiliate of Cornell Capital Partners) a due diligence fee of $5,000 and a
Structuring Fee of $20,000. Net proceeds to Firstgold from this
financing were approximately $2,705,000.
In
conjunction with the Purchase Agreement, we entered into an Investor
Registration Rights Agreement (the “Registration Rights
Agreement”). The Registration Rights Agreement requires us to
register at least 18,750,000 shares of our Common Stock to cover the conversion
of the Debentures (assuming conversion prices substantially below $0.4735) and
3,500,000 shares of our Common Stock issuable upon conversion of warrants (the
“Warrants”) granted to the Debenture holder. We are required to keep
this Registration Statement effective until the Debentures have been fully
converted, repaid, or becomes due and the Warrants have been fully exercised or
expire. Both the Debentures and the Warrants are currently
convertible or exercisable, respectively.
In
conjunction with the Purchase Agreement, we entered into a Security Agreement
(the “Security Agreement”). The Security Agreement creates a secured
interest in favor of the Debenture holder in our mining interest and assets in
the Relief Canyon Mine property. This security interest was created
by recordation of an Amended Memorandum of Security Agreement filed in Pershing
County, Nevada on November 15, 2006. Consequently, if a default would
occur under the Debenture, the Debenture holder could take over or sell all of
our interests, business and assets associated with the Relief Canyon
Mine.
In
conjunction with the Purchase Agreement, we granted warrants to purchase
2,000,000 shares of Firstgold Common Stock exercisable at $0.45 per share and
1,500,000 shares exercisable at $0.60 per share. However, on March
16, 2007, the exercise price of the $0.60 per share warrants was changed to an
exercise price of $0.45 per share. The Warrants have a term of four
years. The exercise price may be reduced if shares of Firstgold’s
Common Stock are sold at a price below the Warrant exercise price.
On
October 10, 2006 we received $650,000 upon the issuance of Convertible
Debentures with certain investors which bear interest at 8% per annum and are
convertible into shares of Firstgold common stock at the Fixed Conversion Price
of $0.4735 per share (and subsequently reduced to $0.45 per share) which would
equal approximately 1,372,756 if the entire principal were converted into
Firstgold common stock. In conjunction with the Convertible
Debentures, we granted 746,843 warrants to purchase shares of Firstgold Common
Stock, 426,767 exercisable at $0.45 per share and 320,076 exercisable at $0.60
per share. The Warrants have a term of four years.
On April
12, 2007 we received gross proceeds of $2,552,900 upon the issuance of Units
consisting of 5,673,110 shares of our common stock and warrants to purchase
2,836,555 shares of our common stock at an exercise price of $0.65 per share.
The warrants have a term of 18 months. Due to the fact that these Units were not
registered in an effective resale prospectus by October 15, 2007, an additional
542,310 “penalty shares” and 271,156 “penalty warrants” were issued to these
investors and included in this prospectus.
On May
18, 2007 we received gross proceeds of $337,500 upon the issuance of Units
consisting of 749,998 shares of our common stock and warrants to purchase
375,002 shares of our common stock at an exercise price of $0.65 per
share. The warrants have a term of 18 months.
On June
22, 2007, we received gross proceeds of $8,479,539.45 upon the issuance of Units
at $0.45 per Unit consisting of 18,843,421 shares of our common stock and
Warrants to purchase 9,421,711 shares of our common stock at an exercise price
of $0.65 per share. The warrants have a term of 18 months. Due to the fact that
these Units were not registered in an effective resale prospectus by November
15, 2007, an additional 1,884,342 “penalty shares” and 942,171 “penalty
warrants” were issued to these investors.
Subsequent
to the fiscal year ended January 31, 2007, we received gross proceeds of
$8,342,843 upon the issuance of Units at $0.65 per Unit consisting of 12,835,143
shares of our common stock and warrants to purchase 6,417,572 shares of our
common stock at an exercise price of $0.80 per share. The warrants
have a term of 18 months.
Subsequent
to the fiscal year ended January 31, 2008, we issued a Convertible Debenture in
the principal amount of $1,100,000 and bearing interest or 10% per annum. The
transaction included the issuance of warrants to purchase 1,100,000 shares of
Firstgold common stock at an exercise price of $1.00 per share.
Off-Balance Sheet
Arrangements
During
the fiscal year ended January 31, 2008, Firstgold did not engage in any
off-balance sheet arrangements as defined in Item 303(c) of the SEC’s Regulation
S-B.
Critical
Accounting Policies
Our
discussion and analysis of our financial condition and results of operation are
based upon our financial statements, which have been prepared in accordance with
generally accepted accounting principles in the United
States.
The
preparation of financial statements requires management to make estimates and
disclosures on the date of the financial statements. On an on-going
basis, we evaluate our estimates, including, but not limited to, those related
to revenue recognition. We use authoritative pronouncements,
historical experience and other assumptions as the basis for making
judgments. Actual results could differ from those
estimates. We believe that the following critical accounting policies
affect our more significant judgments and estimates in the preparation of our
financial statements.
Exploration Stage
Company
Effective
January 1, 1995 (date of inception), Firstgold is considered an exploration
stage company as defined in SFAS No. 7. Firstgold’s exploration stage
activities consist of the development of several mining properties located in
Nevada. Sources of financing for these exploration stage activities
have been primarily debt and equity financing. Firstgold has, at the
present time, not paid any dividends and any dividends that may be paid in the
future will depend upon the financial requirements of Firstgold and other
relevant factors.
Valuation of long-lived
assets
Long-lived
assets, consisting primarily of property and equipment, patents and trademarks,
and goodwill, comprise a significant portion of our total
assets. Long-lived assets are reviewed for impairment whenever events
or changes in circumstances indicate that their carrying values may not be
recoverable. Recoverability of assets is measured by a comparison of
the carrying value of an asset to the future net cash flows expected to be
generated by those assets. The cash flow projections are based on
historical experience, management’s view of growth rates within the industry,
and the anticipated future economic environment.
Factors
we consider important that could trigger a review for impairment include the
following:
(a) significant
underperformance relative to expected historical or projected future operating
results,
(b) significant
changes in the manner of our use of the acquired assets or the strategy of our
overall business, and
(c) significant
negative industry or economic trends.
When we
determine that the carrying value of long-lived assets and related goodwill and
enterprise-level goodwill may not be recoverable based upon the existence of one
or more of the above indicators of impairment, we measure any impairment based
on a projected discounted cash flow method using a discount rate determined by
our management to be commensurate with the risk inherent in our current business
model.
Deferred Reclamation
Costs
In August
2001, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Asset
Retirement Obligations,” which established a uniform methodology for accounting
for estimated reclamation and abandonment costs. The statement was
adopted February 1, 2003. The reclamation costs will be allocated to
expense over the life of the related assets and will be adjusted for changes
resulting from the passage of time and revisions to either the timing or amount
of the original present value estimate.
Prior to
adoption of SFAS No. 143, estimated future reclamation costs were based
principally on legal and regulatory requirements. Such costs related
to active mines were accrued and charged over the expected operating lives of
the mines using the units of production method based on proven and probable
reserves. Future remediation costs for inactive mines were accrued
based on management’s best estimate at the end of each period of the
undiscounted costs expected to be incurred at a site. Such cost
estimates included, where applicable, ongoing care, maintenance and monitoring
costs. Changes in estimates at inactive mines were reflected in
earnings in the period an estimate was revised.
Exploration
Costs
Exploration
costs are expensed as incurred. All costs related to property
acquisitions are capitalized.
Mine Development
Costs
Mine
development costs consist of all costs associated with bringing mines into
production, to develop new ore bodies and to develop mine areas substantially in
advance of current production. The decision to develop a mine is based on
assessment of the commercial viability of the property and the availability of
financing. Once the decision to proceed to development is made, development and
other expenditures relating to the project will be deferred and carried at cost
with the intention that these will be depleted by charges against earnings from
future mining operations. No depreciation will be charged against the property
until commercial production commences. After a mine has been brought into
commercial production, any additional work on that property will be expensed as
incurred, except for large development programs, which will be deferred and
depleted.
Reclamation
Costs
Reclamation
costs and related accrued liabilities, which are based on our interpretation of
current environmental and regulatory requirements, are accrued and expensed,
upon determination.
Based on
current environmental regulations and known reclamation requirements, management
has included its best estimates of these obligations in its reclamation
accruals. However, it is reasonably possible that our best estimates
of our ultimate reclamation liabilities could change as a result of changes in
regulations or cost estimates.
Valuation of Derivative
Instruments
FAS
No. 133 "Accounting for Derivative Instruments and Hedging Activities" requires bifurcation of
embedded derivative instruments and measurement of their fair value for
accounting purposes. In determining the appropriate fair value, the Company uses
the Black Scholes model as a valuation technique. Derivative
liabilities are adjusted to reflect fair value at each period end, with any
increase or decrease in the fair value being recorded in results of operations
as Adjustments to Fair Value of Derivatives. In addition, the fair values of
freestanding derivative instruments such as warrants are valued using Black
Scholes models.
Stock-Based
Compensation
We
currently account for the issuance of stock options to employees using the fair
market value method according to SFAS No. 123R, Share-Based Payment.
Recent Accounting
Pronouncements
In
February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid
Financial Instruments”, which amends SFAS No. 133, “Accounting for Derivatives
Instruments and Hedging Activities” and SFAS No. 140, “Accounting for Transfers
and Servicing of Financial Assets and Extinguishment of
Liabilities”. SFAS No. 155 amends SFAS No. 133 to narrow the scope
exception for interest-only and principal-only strips on debt instruments to
include only such strips representing rights to receive a specified portion of
the contractual interest or principle cash flows. SFAS No. 155 also
amends SFAS No. 140 to allow qualifying special-purpose entities to hold a
passive derivative financial instrument pertaining to beneficial interests that
itself is a derivative instrument. Firstgold is currently evaluating
the impact of this new Standard but believes that it will not have a material
impact on Firstgold’s financial position, results of operations, or cash
flows.
In March
2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial
Assets” which provides an approach to simplify efforts to obtain hedge-like
(offset) accounting. This Statement amends FASB Statement No. 140,
“Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities”, with respect to the accounting for separately recognized
servicing assets and servicing liabilities. The Statement (1)
requires an entity to recognize a servicing asset or servicing liability each
time it undertakes an obligation to service a financial asset by entering into a
servicing contract in certain situations; (2) requires that a separately
recognized servicing asset or servicing liability be initially measured at fair
value, if practicable; (3) permits an entity to choose either the amortization
method or the fair value method for subsequent measurement for each class of
separately recognized servicing assets or servicing liabilities; (4) permits at
initial adoption a one-time reclassification of available-for-sale securities to
trading securities by an entity with recognized servicing rights, provided the
securities reclassified offset the entity’s exposure to changes in the fair
value of the servicing assets or liabilities; and (5) requires separate
presentation of servicing assets and servicing liabilities subsequently measured
at fair value in the balance sheet and additional disclosures for all separately
recognized servicing assets and servicing liabilities. SFAS No. 156
is effective for all separately recognized servicing assets and liabilities as
of the beginning of an entity’s fiscal year that begins after September 15,
2006, with earlier adoption permitted in certain
circumstances.
The
Statement also describes the manner in which it should be initially
applied. Firstgold does not believe that SFAS No. 156 will have a
material impact on its financial position, results of operations or cash
flows.
In
July 2006, the FASB released FASB Interpretation No. 48, “Accounting
for Uncertainty in Income Taxes,” an interpretation of FASB Statement
No. 109 (FIN 48). FIN 48 clarifies the accounting and reporting
for uncertainties in income tax law. This interpretation prescribes a
comprehensive model for the financial statement recognition, measurement,
presentation and disclosure of uncertain tax positions taken or expected to be
taken in income tax returns. This statement is effective for fiscal
years beginning after December 15, 2006. The Company is
currently in the process of evaluating the expected effect of FIN 48 on its
results of operations and financial position.
In
September 2006, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Issues No. 157, “Fair Value Measurements” (“SFAS 157”),
which defines the fair value, establishes a framework for measuring fair value
and expands disclosures about fair value measurements. This statement
is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal
years. Early adoption is encouraged, provided that the Company has
not yet issued financial statements for that fiscal year, including any
financial statements for an interim period within that fiscal year. The Company
is currently evaluating the impact SFAS 157 may have on its financial condition
or results of operations.
In
September 2006, the FASB issued SFAS No. 158, “Employer’s Accounting for Defined
Benefit Pension and Other Post Retirement Plans.” SFAS No. 158 requires
employers to recognize in its statement of financial position an asset or
liability based on the retirement plans over or under funded status. SFAS
No. 158 is effective for fiscal years ending after December 15,
2006. The Company is currently evaluating the effect that the
application of SFAS No. 158 will have on its results of operations and financial
condition.
In
September 2006, the United States Securities and Exchange Commission (SEC)
issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements” (“SAB 108”). This SAB provides guidance on the
consideration of the effects of prior year misstatements in quantifying current
year misstatements for the purpose of a materiality assessment. SAB 108
establishes an approach that requires quantification of financial statement
errors based on the effects on each of the company’s balance sheets, statements
of operations and related financial statement disclosures. The SAB
permits existing public companies to record the cumulative effect of initially
applying this approach in the first year ending after November 15, 2006 by
recording the necessary correcting adjustments to the carrying values of assets
and liabilities as of the beginning of that year with the offsetting adjustment
recorded to the opening balance of retained earnings. Additionally,
the use of the cumulative effect transition method requires detailed disclosure
of the nature and amount of each individual error being corrected through the
cumulative adjustment and how and when it arose.
The
Company is currently evaluating the impact SAB 108 may have on its results of
operations and financial condition.
In
October 2006, the Emerging Issues Task Force (“EITF”) issued EITF 06-3, “How
Taxes Collected from Customers and Remitted to Governmental Authorities Should
Be Presented in the Income Statement (That is, Gross versus Net Presentation)”
to clarify diversity in practice on the presentation of different types of taxes
in the financial statements. The Task Force concluded that, for taxes
within the scope of the issue, a company may adopt a policy of presenting taxes
either gross within revenue or net. That is, it may include charges to
customers for taxes within revenues and the charge for the taxes from the taxing
authority within cost of sales, or, alternatively, it may net the charge to the
customer and the charge from the taxing authority. If taxes subject to
EITF 06-3 are significant, a company is required to disclose its accounting
policy for presenting taxes and the amounts of such taxes that are recognized on
a gross basis. The guidance in this consensus is effective for the first
interim reporting period beginning after December 15, 2006 (the first quarter of
our fiscal year 2007). We do not expect the adoption of EITF 06-3 will
have a material impact on our results of operations, financial position or cash
flow.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (SFAS 159). Under the provisions of
SFAS 159, companies may choose to account for eligible financial instruments,
warranties and insurance contracts at fair value on a contract-by-contract
basis. Changes in fair value will be recognized in earnings each
reporting period. SFAS 159 is effective for financial statements issued for
fiscal years beginning after November 15, 2007, and interim periods within those
fiscal years. Firstgold is required to and plans to adopt the
provisions of SFAS 159 beginning in the first quarter of
2008. Firstgold is currently assessing the impact of the adoption of
SFAS 159.
ITEM
7. FINANCIAL
STATEMENTS
FIRSTGOLD
CORP.
FINANCIAL
STATEMENTS
FOR
THE YEARS ENDED
JANUARY
31, 2008 AND 2007
INDEX
TO FINANCIAL STATEMENTS
|
|
|
|
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
F-1
|
|
|
Balance
Sheet |
F-2
|
|
|
Statements of
Operations |
F-4
|
|
|
Statements of
Shareholders’ Deficit |
F-5
|
|
|
Statements of
Cash Flows |
F-10
|
|
|
Notes to
Financial Statements |
F-14
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of
Directors and Shareholders
Firstgold
Corp.
We have
audited the balance sheets of Firstgold Corp. (a development stage company) (the
“Company”) as of January 31, 2008 and 2007, and the related statements of
operations, comprehensive loss, shareholders' deficit, and cash flows for each
of the two years in the period ended January 31, 2008 and the period from
January 1, 1995 to January 31, 2008. These financial statements are
the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provided a reasonable basis
for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Firstgold Corp. as of January 31,
2008, and the results of its operations and its cash flows for each of the two
years in the period ended January 31, 2008, and the period from January 1, 1995
to January 31, 2008 in conformity with accounting principles generally accepted
in the United States of America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has incurred a net loss of $7,632,537 and had
negative cash flow from operations of $4,832,217. In addition, the
Company had an accumulated deficit of $31,391,142 and a shareholders’ surplus of
$5,174,290 at January 31, 2008. These factors, among others, as
discussed in Note 2 to the financial statements, raise substantial doubt about
the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
HUNTER
& RENFRO LLP
Sacramento,
California
May 15,
2008
FIRSTGOLD
CORP.
(A
DEVELOPMENT STAGE COMPANY)
BALANCE
SHEET
|
|
January
31,
|
|
|
January
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
|
|
$ |
383,223 |
|
|
$ |
150,647 |
|
Receivables
|
|
|
196,811 |
|
|
|
114,737 |
|
Deposits
|
|
|
295,281 |
|
|
|
7,368 |
|
Prepaid
expense
|
|
|
250,298 |
|
|
|
140,000 |
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
1,125,613 |
|
|
|
412,752 |
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net of accumulated depreciation
of $205,084 and $20,850 at January 31, 2008 and
2007, respectively
|
|
|
8,438,997 |
|
|
|
928,029 |
|
|
|
|
|
|
|
|
|
|
Other
Assets
|
|
|
|
|
|
|
|
|
Restricted
cash
|
|
|
674,850 |
|
|
|
250,981 |
|
Deferred
reclamation costs
|
|
|
680,326 |
|
|
|
641,026 |
|
|
|
|
|
|
|
|
|
|
Total
other assets
|
|
|
1,355,176 |
|
|
|
892,007 |
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
10,919,786 |
|
|
$ |
2,232,788 |
|
LIABILITIES
AND SHAREHOLDERS' DEFICIT
Current
liabilities
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
2,730,596 |
|
|
$ |
598,788 |
|
Accrued
expenses
|
|
|
538,987 |
|
|
|
1,198,174 |
|
Notes
payable
|
|
|
356,417 |
|
|
|
130,249 |
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
3,626,000 |
|
|
|
1,927,211 |
|
|
|
|
|
|
|
|
|
|
Long-term
liabilities
|
|
|
|
|
|
|
|
|
Convertible
debenture and related derivative liabilities
|
|
|
|
|
|
|
|
|
net
of unamortized discount of $0 and $402,135 and deferred
|
|
|
|
|
|
|
|
|
financing
costs of $148,480 and $1,382,642 at
|
|
|
|
|
|
|
|
|
January
31, 2008 and 2007,respectively
|
|
|
501,520 |
|
|
|
3,110,344 |
|
Accrued
reclamation costs
|
|
|
680,326 |
|
|
|
641,026 |
|
Deferred
revenue
|
|
|
937,650 |
|
|
|
800,000 |
|
|
|
|
|
|
|
|
|
|
Total
long-term liabilities
|
|
|
2,119,496 |
|
|
|
4,551,370 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
5,745,496 |
|
|
|
6,478,581 |
|
The
accompanying notes are an integral part of these financial
statements
FIRSTGOLD
CORP.
(A
DEVELOPMENT STAGE COMPANY)
BALANCE
SHEET
|
|
January
31,
|
|
|
January
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
surplus (deficit)
|
|
|
|
|
|
|
Common
stock, $0.001 par value
|
|
|
|
|
|
|
250,000,000
shares authorized at January 31, 2008 and 2007,
respectively
|
|
|
|
|
|
|
117,432,317
and 77,839,601 shares issued and outstanding at
|
|
|
|
|
|
|
January
31, 2008 and 2007, respectively
|
|
|
117,432 |
|
|
|
77,839 |
|
Additional
paid in capital
|
|
|
36,447,996 |
|
|
|
19,434,973 |
|
Deficit
accumulated during the exploration stage
|
|
|
(31,391,142 |
) |
|
|
(23,758,605 |
) |
|
|
|
|
|
|
|
|
|
Total
shareholders' surplus (deficit)
|
|
|
5,174,290 |
|
|
|
(4,245,793 |
) |
|
|
|
|
|
|
|
|
|
Total
liabilities and shareholders' surplus (deficit)
|
|
$ |
10,919,786 |
|
|
$ |
2,232,788 |
|
The
accompanying notes are an integral part of these financial
statements
FIRSTGOLD
CORP.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF OPERATIONS
For
the Years Ended January 31, 2008 and 2007
|
|
|
|
|
|
|
|
For
the Period
|
|
|
|
For
the Years Ended
|
|
|
From
January 1,
|
|
|
|
January 31,
|
|
|
1995
to January
|
|
|
|
2008
|
|
|
2007
|
|
|
31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Sales
|
|
$ |
551,279 |
|
|
$ |
- |
|
|
$ |
551,279 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration
and maintenance costs
|
|
|
(2,195,024 |
) |
|
|
(1,591,497 |
) |
|
|
(4,089,352 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
loss
|
|
|
(1,643,745 |
) |
|
|
(1,591,497 |
) |
|
|
(3,538,073 |
) |
Operating
expenses
|
|
|
(5,715,150 |
) |
|
|
(1,955,816 |
) |
|
|
(21,582,974 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(7,358,895 |
) |
|
|
(3,547,316 |
) |
|
|
(25,121,050 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
191,919 |
|
|
|
14,065 |
|
|
|
278,671 |
|
Dividend
income
|
|
|
|
|
|
|
|
|
|
|
30,188 |
|
Other
income
|
|
|
|
|
|
|
|
|
|
|
6,565 |
|
Gain on
settlement of obligations
|
|
|
1,107,875 |
|
|
|
18,649 |
|
|
|
1,126,524 |
|
Adjustments to
fair value of derivatives
|
|
|
(703,992 |
) |
|
|
(616,493 |
) |
|
|
(1,357,903 |
) |
Interest
expense
|
|
|
(869,444 |
) |
|
|
(596,975 |
) |
|
|
(3,875,456 |
) |
Loss
from joint venture
|
|
|
|
|
|
|
|
|
|
|
(859,522 |
) |
Loss on
sale of marketable securities
|
|
|
|
|
|
|
|
|
|
|
(281,063 |
) |
Bad
debt expense
|
|
|
|
|
|
|
|
|
|
|
(40,374 |
) |
Loss on
disposal of plant, property
|
|
|
|
|
|
|
|
|
|
|
|
|
and
equipment
|
|
|
|
|
|
|
|
|
|
|
(334,927 |
) |
Loss on
disposal of bond
|
|
|
|
|
|
|
|
|
|
|
(21,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other income (expense)
|
|
|
(273,642 |
) |
|
|
(1,180,754 |
) |
|
|
(5,328,297 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(7,632,537 |
) |
|
$ |
(4,728,070 |
) |
|
$ |
(30,449,347 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted loss per share
|
|
$ |
(0.07 |
) |
|
$ |
(0.07 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted weighted-average
|
|
|
|
|
|
|
|
|
|
|
|
|
shares
outstanding
|
|
|
100,162,546 |
|
|
|
71,416,951 |
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF SHAREHOLDERS' DEFICIT
For
the Years Ended January 31, 2008 and 2007
and
for the Period from January 1, 1995 to January 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Other
Com-
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
Paid
in
|
|
|
prehensive
|
|
|
|
|
|
Accumulated
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
(Loss)
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 1994
|
|
|
6,768,358 |
|
|
$ |
6,768 |
|
|
|
- |
|
|
|
- |
|
|
$ |
(636,084 |
) |
|
$ |
(629,316 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(233,877 |
) |
|
|
(233,877 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
December 31, 1995
|
|
|
6,768,358 |
|
|
|
6,768 |
|
|
|
- |
|
|
|
- |
|
|
|
(869,961 |
) |
|
|
(863,193 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued to creditors and shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
Warehouse Auto Centers, Inc.
|
|
|
305,709 |
|
|
|
306 |
|
|
|
305,403 |
|
|
|
- |
|
|
|
(305,709 |
) |
|
|
- |
|
Shares
issued to investors and underwriters
|
|
|
5,135,130 |
|
|
|
5,135 |
|
|
|
4,701,835 |
|
|
|
|
|
|
|
|
|
|
|
4,706,970 |
|
Shares
issued to purchase Washington Gulch
|
|
|
3,800,000 |
|
|
|
3,800 |
|
|
|
177,200 |
|
|
|
|
|
|
|
|
|
|
|
181,000 |
|
Shares
issued in exchange for net profits interest
|
|
|
1,431,642 |
|
|
|
1,432 |
|
|
|
440,605 |
|
|
|
|
|
|
|
|
|
|
|
442,067 |
|
Shares
issued to others
|
|
|
21,000 |
|
|
|
221 |
|
|
|
220,779 |
|
|
|
|
|
|
|
|
|
|
|
221,000 |
|
Shares
issued to Repadre
|
|
|
100,000 |
|
|
|
100 |
|
|
|
99,900 |
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
Shares
issued to repurchase 50% interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in
Relief Canyon
|
|
|
1,000,000 |
|
|
|
1,000 |
|
|
|
999,000 |
|
|
|
|
|
|
|
|
|
|
|
1,000,000 |
|
Net
loss for the period January 1, 1996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to
January 31, 1997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,803,784 |
) |
|
|
(1,803,784 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
January 31, 1997
|
|
|
18,761,839 |
|
|
|
18,762 |
|
|
|
6,944,722 |
|
|
|
- |
|
|
|
(2,979,454 |
) |
|
|
3,984,030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued to Warehouse Auto Centers, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shareholders
subsequently cancelled
|
|
|
(25,242 |
) |
|
|
(25 |
) |
|
|
(25,217 |
) |
|
|
|
|
|
|
|
|
|
|
(25,242 |
) |
Shares
issued to others
|
|
|
12,500 |
|
|
|
13 |
|
|
|
4,987 |
|
|
|
|
|
|
|
|
|
|
|
5,000 |
|
Additional
shares issued to investors and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
underwriters
for delay in share trading
|
|
|
513,514 |
|
|
|
513 |
|
|
|
204,487 |
|
|
|
|
|
|
|
|
|
|
|
205,000 |
|
The
accompanying notes are an integral part of these financial
statements
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF SHAREHOLDERS' DEFICIT
For
the Years Ended January 31, 2008 and 2007
and
for the Period from January 1, 1995 to January 31, 2008
Shares
issued to Repadre
|
|
|
200,000 |
|
|
|
200 |
|
|
|
199,800 |
|
|
|
|
|
|
|
|
|
|
|
200,000 |
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,883,309 |
) |
|
|
(5,883,309 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
January 31, 1998
|
|
|
19,462,611 |
|
|
|
19,463 |
|
|
|
7,328,779 |
|
|
|
- |
|
|
|
(8,862,763 |
) |
|
|
(1,514,521 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued in exchange for rent
|
|
|
15,000 |
|
|
|
15 |
|
|
|
5,985 |
|
|
|
|
|
|
|
|
|
|
|
6,000 |
|
Shares
issued to IBK
|
|
|
5,616,977 |
|
|
|
5,617 |
|
|
|
542,383 |
|
|
|
|
|
|
|
|
|
|
|
548,000 |
|
Shares
issued in exchange for property
|
|
|
150,000 |
|
|
|
150 |
|
|
|
55,350 |
|
|
|
|
|
|
|
|
|
|
|
55,000 |
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(753,219 |
) |
|
|
(753,219 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
January 31, 1999
|
|
|
25,244,588 |
|
|
|
25,245 |
|
|
|
7,932,497 |
|
|
|
- |
|
|
|
(9,615,982 |
) |
|
|
(1,658,240 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-for-two
stock split
|
|
|
12,672,441 |
|
|
|
12,671 |
|
|
|
(12,671 |
) |
|
|
|
|
|
|
|
|
|
|
- |
|
Shares
issued in exchange for debt conversion
|
|
|
3,205,674 |
|
|
|
3,206 |
|
|
|
1,279,065 |
|
|
|
|
|
|
|
|
|
|
|
1,282,271 |
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(919,735 |
) |
|
|
(919,735 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
January 31, 2000
|
|
|
41,122,703 |
|
|
|
41,122 |
|
|
|
9,198,891 |
|
|
|
- |
|
|
|
(10,535,717 |
) |
|
|
(1,295,704 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for cash
|
|
|
1,796,000 |
|
|
|
1,796 |
|
|
|
663,204 |
|
|
|
|
|
|
|
|
|
|
|
665,000 |
|
Additional
shares issued for delay in registration
|
|
|
239,200 |
|
|
|
239 |
|
|
|
(239 |
) |
|
|
|
|
|
|
|
|
|
|
- |
|
Shares
issued for offering costs
|
|
|
120,000 |
|
|
|
120 |
|
|
|
(60,120 |
) |
|
|
|
|
|
|
|
|
|
|
(60,000 |
) |
Shares
issued for legal settlement
|
|
|
1,000,000 |
|
|
|
1,000 |
|
|
|
649,000 |
|
|
|
|
|
|
|
|
|
|
|
650,000 |
|
Shares
issued for services
|
|
|
78,271 |
|
|
|
78 |
|
|
|
69,922 |
|
|
|
|
|
|
|
|
|
|
|
70,000 |
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,382,723 |
) |
|
|
(2,382,723 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
January 31, 2001
|
|
|
44,356,174 |
|
|
|
44,356 |
|
|
|
10,520,657 |
|
|
|
- |
|
|
|
(12,918,440 |
) |
|
|
(2,353,427 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for cash
|
|
|
2,500,000 |
|
|
|
2,500 |
|
|
|
147,500 |
|
|
|
|
|
|
|
|
|
|
|
150,000 |
|
Warrants
issued with debt
|
|
|
|
|
|
|
|
|
|
|
20,000 |
|
|
|
|
|
|
|
|
|
|
|
20,000 |
|
The
accompanying notes are an integral part of these financial
statements
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF SHAREHOLDERS' DEFICIT
For
the Years Ended January 31, 2008 and 2007
and
for the Period from January 1, 1995 to January 31, 2008
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,502,366 |
) |
|
|
(1,502,366 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
January 31, 2002
|
|
|
46,856,174 |
|
|
|
46,856 |
|
|
|
10,688,157 |
|
|
|
- |
|
|
|
(14,420,806 |
) |
|
|
(3,685,793 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued upon exercise of warrants
|
|
|
550,000 |
|
|
|
550 |
|
|
|
54,450 |
|
|
|
|
|
|
|
|
|
|
|
55,000 |
|
Offering
costs
|
|
|
|
|
|
|
|
|
|
|
(1,467 |
) |
|
|
|
|
|
|
|
|
|
|
(1,467 |
) |
Warrants
issued with debt
|
|
|
|
|
|
|
|
|
|
|
13,574 |
|
|
|
|
|
|
|
|
|
|
|
13,574 |
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(215,533 |
) |
|
|
(215,533 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
January 31, 2003
|
|
|
47,406,174 |
|
|
|
47,406 |
|
|
|
10,754,714 |
|
|
|
- |
|
|
|
(14,636,339 |
) |
|
|
(3,834,219 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued upon exercise of warrants
|
|
|
200,000 |
|
|
|
200 |
|
|
|
19,800 |
|
|
|
|
|
|
|
|
|
|
|
20,000 |
|
Warrants
issued with debt
|
|
|
|
|
|
|
|
|
|
|
63,918 |
|
|
|
|
|
|
|
|
|
|
|
63,918 |
|
Other
comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(204,820 |
) |
|
|
|
|
|
|
(204,820 |
) |
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(470,823 |
) |
|
|
(470,823 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
January 31, 2004
|
|
|
47,606,174 |
|
|
|
47,606 |
|
|
|
10,838,432 |
|
|
|
(204,820 |
) |
|
|
(15,107,162 |
) |
|
|
(4,425,944 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for cash
|
|
|
671,667 |
|
|
|
672 |
|
|
|
100,078 |
|
|
|
|
|
|
|
|
|
|
|
100,750 |
|
Offering
costs
|
|
|
|
|
|
|
|
|
|
|
(124,337 |
) |
|
|
|
|
|
|
|
|
|
|
(124,337 |
) |
Warrants
issued with common stock
|
|
|
|
|
|
|
|
|
|
|
124,337 |
|
|
|
|
|
|
|
|
|
|
|
124,337 |
|
Warrants
issued with debt
|
|
|
|
|
|
|
|
|
|
|
1,284,234 |
|
|
|
|
|
|
|
|
|
|
|
1,284,234 |
|
Sale
of marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
204,820 |
|
|
|
|
|
|
|
204,820 |
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,278,140 |
) |
|
|
(1,278,140 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
January 31, 2005
|
|
|
48,277,841 |
|
|
|
48,278 |
|
|
|
12,222,744 |
|
|
|
- |
|
|
|
(16,385,302 |
) |
|
|
(4,114,280 |
) |
The
accompanying notes are an integral part of these financial
statements
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF SHAREHOLDERS' DEFICIT
For
the Years Ended January 31, 2008 and 2007
and
for the Period from January 1, 1995 to January 31, 2008
Shares
issued for cash
|
|
|
5,000,000 |
|
|
|
5,000 |
|
|
|
1,070,000 |
|
|
|
|
|
|
|
|
|
|
|
1,075,000 |
|
Shares
issued in exchange for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
debt
conversion
|
|
|
12,326,231 |
|
|
|
12,326 |
|
|
|
1,836,609 |
|
|
|
|
|
|
|
|
|
|
|
1,848,935 |
|
Shares
issued to purchase 22%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
interest
in Crescent Red Caps LLC
|
|
|
2,500,000 |
|
|
|
2,500 |
|
|
|
497,500 |
|
|
|
|
|
|
|
|
|
|
|
500,000 |
|
Warrants
issued with investment in joint venture
|
|
|
|
|
|
|
|
|
|
|
359,523 |
|
|
|
|
|
|
|
|
|
|
|
359,523 |
|
Warrants
issued for services
|
|
|
|
|
|
|
|
|
|
|
15,690 |
|
|
|
|
|
|
|
|
|
|
|
15,690 |
|
Net
loss for the period February
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,
2005 to January 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,645,231 |
) |
|
|
(2,645,231 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
January 31, 2006
|
|
|
68,104,072 |
|
|
|
68,104 |
|
|
|
16,002,066 |
|
|
|
- |
|
|
|
(19,030,535 |
) |
|
|
(2,960,365 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for cash
|
|
|
1,428,500 |
|
|
|
1,428 |
|
|
|
237,846 |
|
|
|
|
|
|
|
|
|
239,275 |
|
Shares
issued in exchange for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
debt
conversion
|
|
|
6,207,029 |
|
|
|
6,207 |
|
|
|
1,550,263 |
|
|
|
|
|
|
|
|
|
1,556,263 |
|
Stock
issued for services
|
|
|
2,000,000 |
|
|
|
2,000 |
|
|
|
738,000 |
|
|
|
|
|
|
|
|
|
740,000 |
|
Warrants
issued for services
|
|
|
|
|
|
|
|
|
|
|
373,905 |
|
|
|
|
|
|
|
|
|
373,905 |
|
Stock
issued in settlement of litigation
|
|
|
100,000 |
|
|
|
100 |
|
|
|
38,900 |
|
|
|
|
|
|
|
|
|
39,000 |
|
Warrants
issued with debt
|
|
|
|
|
|
|
|
|
|
|
173,114 |
|
|
|
|
|
|
|
|
|
173,114 |
|
Stock
options issued
|
|
|
|
|
|
|
|
|
|
|
322,879 |
|
|
|
|
|
|
|
|
|
322,879 |
|
Net
loss for the period February
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,
2006 to January 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,828,780 |
) |
|
|
(4,828,780 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
January 31, 2007
|
|
|
77,839,601 |
|
|
$ |
77,839 |
|
|
|
19,434,973 |
|
|
|
- |
|
|
|
(23,859,315 |
) |
|
|
(4,346,501 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for cash
|
|
|
25,266,529 |
|
|
|
25,267 |
|
|
|
10,190,498 |
|
|
|
|
|
|
|
|
|
|
|
10,215,765 |
|
The
accompanying notes are an integral part of these financial
statements
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF SHAREHOLDERS' DEFICIT
For
the Years Ended January 31, 2008 and 2007
and
for the Period from January 1, 1995 to January 31, 2008
Shares
issued in exchange for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
debt
conversion
|
|
|
7,080,450 |
|
|
|
7,080 |
|
|
|
5,060,004 |
|
|
|
|
|
|
|
|
|
|
|
5,067,084 |
|
Stock
issued for services
|
|
|
277,000 |
|
|
|
277 |
|
|
|
168,154 |
|
|
|
|
|
|
|
|
|
|
|
168,431 |
|
Shares
issued upon exercise of warrants
|
|
|
4,380,180 |
|
|
|
4,380 |
|
|
|
810,114 |
|
|
|
|
|
|
|
|
|
|
|
814,494 |
|
Shares
issued upon exercise of stock options
|
|
|
61,906 |
|
|
|
62 |
|
|
|
(62 |
) |
|
|
|
|
|
|
|
|
|
|
- |
|
Additional
shares issued for delay in registration
|
|
|
2,526,651 |
|
|
|
2,527 |
|
|
|
(2,527 |
) |
|
|
|
|
|
|
|
|
|
|
- |
|
Stock
options issued
|
|
|
- |
|
|
|
- |
|
|
|
786,842 |
|
|
|
|
|
|
|
|
|
|
|
786,842 |
|
Net
loss for the period February
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,
2007 to January 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,632,537 |
) |
|
|
(7,632,537 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
January 31, 2008
|
|
|
117,432,317 |
|
|
$ |
117,432 |
|
|
|
36,447,996 |
|
|
|
|
|
|
|
(31,391,142 |
) |
|
|
5,174,290 |
|
The
accompanying notes are an integral part of these financial
statements
FIRSTGOLD
CORP.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF CASH FLOWS
For
the Years Ended January 31, 2008 and 2007
and
for the Period from January 1, 1995 to January 31, 2008
|
|
|
|
|
|
|
|
For
the Period
|
|
|
|
|
|
|
|
|
|
From
January 1,
|
|
|
|
For the Years Ended January
31,
|
|
|
1995
to January
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(7,632,537 |
) |
|
$ |
(4,728,070 |
) |
|
$ |
(30,449,347 |
) |
Adjustments
to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
|
|
|
|
used
in operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion
of warrants issued as a debt discount
|
|
|
43,278 |
|
|
|
13,512 |
|
|
|
1,287,774 |
|
Accretion
of beneficial conversion
|
|
|
- |
|
|
|
- |
|
|
|
107,468 |
|
Accretion
of debt discount
|
|
|
279,438 |
|
|
|
248,962 |
|
|
|
224,004 |
|
Adjustments
to fair value of derivatives
|
|
|
703,992 |
|
|
|
616,493 |
|
|
|
653,910 |
|
Loss
from joint venture
|
|