As filed with the Securities and Exchange Commission on April 19, 2006.
Registration Statement No. 333-130819
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1
to
Form SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Little Squaw Gold Mining Company
(Exact name of Registrant as specified in its charter)
Alaska | 1040 | 91-0742812 |
(State or jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employee Identification No.) |
3412 S. Lincoln Dr., Spokane, Washington 99203-1650 | (509) 624-5831 |
(Address of principal executive offices) | (Registrant’s telephone number, including area code) |
Richard R. Walters, President Little Squaw Gold Mining Company 3412 S. Lincoln Dr. Spokane, Washington 99203-1650 (509) 624-5831 | Copy to: Kenneth G. Sam, Esq. Dorsey & Whitney LLP Republic Plaza Building, Suite 4700 370 Seventeenth Street Denver, CO 80202-5647 Phone: (303) 629-3400 Facsimile: (303) 629-3450 |
(Name, address and telephone number of agent for service) |
Approximate date of proposed sale to the public: From time to time after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933,
please check the following box.
[X]_______________________
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering.
[ ]_______________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same offering.
[ ]_______________________
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same offering.
[ ]_______________________
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.
[ ]_______________________
THIS POST-EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(C) OF THE SECURITIES ACT OF 1933, AS AMENDED, MAY DETERMINE.
Explanatory Note
This Post-Effective Amendment to Form SB-2 is being filed in order to update the prospectus included in this registration statement (Registration No. 333-130819) to reflect the registrant's annual report on Form 10-KSB for the fiscal year ended December 31, 2005, as filed with the Securities and Exchange Commission on March 31, 2006.
The information contained in this prospectus is not complete and may be changed. The selling shareholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these shares, and the Selling Shareholders are not soliciting an offer to buy these shares in any state where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS
Subject to Completion: Dated April 18, 2006
Little Squaw Gold Mining Company
This is a public offering up to 10,431,400 shares of the common stock, par value $0.10 per share, of Little Squaw Gold Mining Company, by selling shareholders listed beginning on page 14 of this prospectus. All of the shares being offered, when sold, will be sold by selling shareholders. The shares of common stock registered for resale under this registration statement include:
1,231,400 shares of common stock held by selling shareholders;
5,000,000 shares of common stock acquirable upon conversion of 6% Convertible Debentures of Little Squaw Gold Mining Company in the principal amount of One Million United States Dollars (US$1,000,000);
1,200,000 shares of common stock acquirable upon exercise of warrants at exercise prices of $0.30 to $0.40 per share; and
3,000,000 shares of common stock acquirable upon exercise of Class A Warrants at the exercise price of $0.30 per share.
The price at which the selling shareholders may sell the shares will be determined by the prevailing market price for the shares or in negotiated transactions.
We will not receive any proceeds from the sale or distribution of the common stock by the selling shareholders. We may receive proceeds from the exercise of the warrants and/or the Class A Warrants upon exercise of these warrants, if any, and will use the proceeds from any exercise for general working capital purposes.
Our common stock is quoted on the National Association of Securities Dealers “NASD” Over-the-Counter Bulletin Board “OTCBB” under the symbol “LITS”. On April 17, 2006, the closing sale price for our common stock was $0.73 on the NASD OTCBB.
Investing in our common stock involves risks. See “Risk Factors and Uncertainties” beginning on page 5.
These securities have not been approved or disapproved by the SEC or any state securities commission nor has the SEC or any state securities commission passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is ___________________, 2006.
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TABLE OF CONTENTS
RISK FACTORS AND UNCERTAINTIES
TRANSACTIONS WITH SELLING SHAREHOLDERS
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
THE SEC’S POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
MANAGEMENT’S DISCUSSION AND ANALYSIS
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
WHERE YOU CAN FIND MORE INFORMATION
You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from the information contained in this prospectus. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of when this prospectus is delivered or when any sale of our common stock occurs.
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SUMMARY INFORMATION
The Offering
This is an offering of up to 10,431,400 shares of our common stock by certain selling shareholders.
Shares Offered By the Selling Shareholders | 10,431,400 shares of common stock, $0.10 par value per share, including: 1,231,400 shares of common stock held by selling shareholders; 5,000,000 shares of common stock acquirable upon conversion of 6% Convertible Debentures of Little Squaw Gold Mining Company in the principal amount of One Million United States Dollars (US$1,000,000); 1,200,000 shares of common stock acquirable upon exercise of warrants at exercise prices of $0.30 to $0.40 per share; and 3,000,000 shares of common stock acquirable upon exercise of Class A Warrants at the exercise price of $0.30 per share. |
Offering Price | Determined at the time of sale by the Selling Shareholders |
Common Stock Outstanding as of March 31, 2006(1) | 26,453,420 shares |
Use of Proceeds | We will not receive any of the proceeds of the shares offered by the Selling Shareholders. We may receive proceeds from the exercise of the Class A Warrants upon exercise of these warrants, if any, and will use the proceeds from any exercise for general working capital purposes. |
Dividend Policy | We currently intend to retain any future earnings to fund the development and growth of our business. Therefore, we do not currently anticipate paying cash dividends. |
OTC Bulletin Board Symbol | LITS |
(1)
Excludes 5,000,000 shares of common stock acquirable upon conversion of the 6% convertible debentures; 465,000 shares of common stock acquirable upon exercise of options at a weighted average exercise price of $0.36 per share; 1,200,000 shares of common stock acquirable upon exercise of warrants at $0.30 to $0.40 per share; 3,000,000 shares of common stock acquirable upon exercise of Class A Warrants at $0.30 per share; and 5,697,000 shares of common stock acquirable upon the exercise of Class B Warrants at $0.35 to $0.65 per share. After giving effect to these transactions, we would have 41,815,420 shares of common stock issued and outstanding as of March 31, 2006.
Unless otherwise indicated, the number of shares of our common stock outstanding excludes:
·
465,000 shares of common stock issuable upon vested exercise of options outstanding as of March 31, 2006 at a weighted average exercise price of $0.36 per share; and
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·
1,200,000 shares of common stock issuable upon exercise of warrants outstanding as of March 31, 2006 at a weighted average exercise price of $0.35 per share;
·
5,000,000 shares issuable upon conversion of 6% convertible debentures at the conversion price of $0.20 per share outstanding as of March 31, 2006;
·
3,000,000 shares of common stock issuable upon exercise of Class A Warrants at an exercise price of $0.30 through November 21, 2008.
·
310,000 shares of common stock available for future grant under our Restated 2003 Stock Option Plan as of March 31, 2006;
·
2,337,000 shares of common stock issuable upon exercise of Class B Warrants at an exercise price of $0.35 per share through January 31, 2006, $0.50 per share from February 1, 2007 through January 31, 2008, and $0.65 per share from February 1, 2008 through January 31, 2009; and
·
3,360,000 shares of common stock issuable upon exercise of Class B Warrants at an exercise price of $0.35 per share through February 24, 2007, $0.50 per share from February 25, 2007 through February 24, 2008, and $0.65 per share from February 25, 2008 through February 24, 2009.
Summary of Our Business
We, Little Squaw Gold Mining Company, are engaged in the business of acquiring, and exploring mineral properties throughout the Americas, primarily those containing gold and associated base and precious metals. We were incorporated under the laws of the State of Alaska on March 26, 1959. Our executive offices are located at 3412 S. Lincoln Dr., Spokane, WA 99203, and our phone number there is (509) 624-5831.
At this time our only property is an exploration stage property in Alaska referred to as the Chandalar property. The Chandalar property is located approximately 190 air miles NNW of Fairbanks, Alaska, and 48 miles NE of Coldfoot, in the Chandalar mining district. The center of the district is approximately 70 miles north of the Arctic Circle. We own in fee 426.5 acres of patented federal mining claims consisting of 21 lode claims, one placer claim and one mill site. We control an additional 13,406.5 acres of unpatented State of Alaska mining claims consisting of 115 claims. State mining claims provide exploration and mining rights to both lode and placer mineral deposits. The claims are contiguous, comprising a block covering 13,833 acres (21.6 square miles), and are being maintained by us specifically for the possible development of placer and lode gold deposits. We do not intend to conduct mining operations on our own account at this time. Rather we plan to undertake cost efficient and effective exploration activities to discover mineralization and potentially mineral reserves, which may upgrade the value of our properties and then joint venture or sell properties to qualified major mining companies. We intend to focus our activities only on projects that are primarily gold deposits.
We are an exploration stage company, and none of the properties that we own or control contain any known ore reserves or mineralized material under the definition of ore reserves under SEC Industry Guide 7. Although there is a history of past lode and placer production on our Chandalar property, the property is at an early stage of exploration, and the probability that ore reserves that meet SEC guidelines will be discovered on an individual prospect at Chandalar is slight. We have assayed gold mineralization in samples from 28 prospects and five past producing mine sites on our Chandalar property. A great deal of further work is required on our properties before a final determination as to the economic and legal feasibility of a mining venture can be made. There is no assurance that a commercially viable deposit will be proven through the exploration efforts by us at Chandalar. We cannot assure you that funds expended on our properties will be successful in leading to the delineation of ore reserves that meet the criteria established under SEC guidelines.
Our initial focus is on exploration of our Chandalar property. The arctic climate limits exploration activities to a summer field season that generally starts in early May and lasts until freeze up in mid-September. There are many operating mines located elsewhere within North America that are located above the Arctic Circle. Management believes year-round operations at Chandalar are feasible should an exploitable deposit of gold be proven through seasonal exploration and development.
We believe we have sufficient working capital to fund exploration work on the Chandalar property and for working capital requirements for the next 12 months. We expect to accomplish this by private placement offerings of our
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securities similar to those by which the selling shareholders acquired their shares and under comparable terms or also possibly by entering into a joint venture mineral development agreement on our Chandalar property with a senior mining company partner which could involve, in part, their purchasing our securities.
Selected Financial Data
The selected financial information presented below as of and for the periods indicated is derived from our financial statements contained elsewhere in this prospectus and should be read in conjunction with those financial statements.
STATEMENT OF OPERATIONS DATA: | Year Ended December 31, | ||
2005 | 2004 | ||
Revenue | - | - | |
Expenses | $ 362,288 | $ 553,765 | |
Other (income) expense | 23,961 | (587) | |
Net Loss | 386,249 | 553,178 | |
Loss per Common share* | $0.02 | $0.04 | |
Weighted Average Number of Common Shares Outstanding | 15,858,637 | 14,811,488 | |
* Basic. | |||
BALANCE SHEET DATA: | At December 31, | ||
2005 | 2004 | ||
Working Capital | $ 888,110 | $ 1,261 | |
Total Assets | 1,361,630 | 367,560 | |
Accumulated Deficit | (2,395,350) | (2,009,101) | |
Stockholders’ Equity | 585,700 | 279,768 | |
(1)
On January 31, 2006, we closed the first tranche of a private placement of 3,895,000 Units at $0.25 per unit for gross proceeds of $973,750. On February 24, 2006, we closed the second tranche of the private placement of 5,600,000 Units at $0.25 per unit for gross proceeds of $1,400,000. Each Unit consisted of one share of common stock and one-half of one Class B Warrant Each whole Class B Warrant is exercisable to acquire one share of common stock at the exercise price of $0.35 per share during the first year from the date of issuance; $0.50 per share during the second year from the date of issuance and $0.65 for the third year from the date of issuance. We paid a registered broker-dealer a commission of 10% of the gross proceeds of the private placement ($237,375) and issued the agent 949,500 Class B Warrants.
RISK FACTORS AND UNCERTAINTIES
Readers should carefully consider the risks and uncertainties described below before deciding whether to invest in shares of our common stock.
Our failure to successfully address the risks and uncertainties described below would have a material adverse effect on our business, financial condition and/or results of operations, and the trading price of our common stock may decline and investors may lose all or part of their investment. We cannot assure you that we will successfully address these risks or other unknown risks that may affect our business.
Estimates of mineralized material are inherently forward-looking statements subject to error. Although estimates of mineralized material require a high degree of assurance in the underlying data when the estimates are made, unforeseen events and uncontrollable factors can have significant adverse or positive impacts on the estimates. Actual results will inherently differ from estimates. The unforeseen events and uncontrollable factors include: geologic uncertainties including inherent sample variability, metal price fluctuations, variations in mining and processing parameters, and adverse changes in environmental or mining laws and regulations. The timing and effects of variances from estimated values cannot be accurately predicted.
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We have no proven or probable reserves.
We have no probable or proven reserves on our Chandalar property, which is the only mineral property we currently own. Although some mineralized material has been identified on the Chandalar property, it is not considered to be ore as defined in SEC Industry Guide 7. Consequently, we have not completed a feasibility study on our Chandalar property. We cannot be certain that minerals will be discovered in sufficient quantities and grade at Chandalar to justify commercial operations. Whether a mineral deposit will be commercially viable depends on a number of factors, some of which are: the particular attributes of the deposit, such as size, grade and proximity to infrastructure; metal prices, which are highly cyclical; and government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. If we are unable to upgrade our mineralized material to proven and probable reserves in sufficient quantities to justify commercial operations, we will be unable to develop mines and our financial condition and results of operations could be adversely affected.
We have no history of commercial production.
Small scale placer and lode miners have historically produced limited amounts of gold on the Chandalar property. Recorded historical production on the property since 1904 totals 83,987 ounces of gold (not all of the gold production has been recorded). Between 1979 and 1999 we were paid an 8% in kind production royalty of 1,246.14 ounces of gold on 15,735.54 ounces of gold mined by our placer miner lessees. Between 1970 and 1983 combined lode production from our operations and those of our lessees was 9,039 ounces of gold from 11,819 tons. These operations were economically marginal and did not yield profits of any significance to the Company. We currently have no commercial placer or lode production operation at Chandalar, and have carried on our business of exploring the property at a loss. We expect to continue to incur losses unless and until such time as our properties enter into commercial production and generate sufficient revenues to fund our continuing operations. The development of new mining operations at Chandalar will require the commitment of substantial resources toward exploration work and the completion of a feasibility study. We expect to incur substantial losses for the foreseeable future related to operating expenses, exploration activities and capital expenditures, which may increase in subsequent years as needed consultants, personnel and equipment are retained as we continue exploration and, if warranted, development activities. The amounts and timing of expenditures will depend on the progress of ongoing exploration, the results of consultants’ analysis and recommendations, the rate at which operating losses are incurred, the execution of any joint venture agreements with strategic partners, our acquisition of additional properties, and other factors, many of which are beyond our control. We may not generate any revenues or achieve profitability.
Chandalar is located within the remote Arctic Circle region and exploration and development activities may be limited by climate and location.
Our initial focus is on exploration of our Chandalar property. The arctic climate limits exploration activities to a summer field season that generally starts in early May and lasts until freeze up in mid-September. The remote location of our Chandalar property limits access and increases exploration and development expenses. Costs associated with such activities are estimated to be between 25% and 50% higher than costs associated with similar activities in the lower 48 states in the United States. Transportation and availability of qualified personnel is also limited because of the remote location. Higher costs associated with exploration activities and limitations on the periods in which we can carry on exploration activities will increase the costs and time associated with our planned activities and may affect the value of our property and securities.
We may be required to raise additional capital to fund our exploration programs on the Chandalar property.
We are an early stage company and currently do not have sufficient capital to fully fund the Plan of Operation at the Chandalar property. We estimate that we currently have sufficient capital to fund our planned exploration work on the Chandalar property and our working capital requirements for 2006; however, we estimate that we will require additional financing in 2007. We expect to accomplish this by private placement offerings of our securities similar to those by which the selling shareholders acquired their shares and under comparable terms, or by the possible exercise of outstanding warrants, or also possibly by entering into a joint venture mineral development agreement on our Chandalar property with a senior mining company partner which could involve, in part, their purchasing our securities. We estimate that we will require substantial additional financing thereafter, the level of which will depend on the results of our exploration work and recommendations of our management and consultants. Failure to obtain sufficient financing may result in delaying or indefinite postponement of exploration, development or production, if warranted, on any or all of our properties or even a
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loss of property interest. We cannot be certain that additional capital or other types of financing will be available if needed or that, if available, the terms of such financing will be favorable or acceptable to us.
Our exploration activities may not be commercially successful.
We currently have no properties that produce gold, as our initial and only property is currently the Chandalar property which is an exploration project. Mineral exploration is highly speculative in nature, involves many risks and is frequently nonproductive. Unusual or unexpected geologic formations, and the inability to obtain suitable or adequate machinery, equipment or labor are risks involved in the conduct of exploration programs. We are currently conducting exploration and deposit definition drilling at Chandalar. The success of gold exploration is determined in part by the following factors:
·
the identification of potential gold mineralization based on superficial analysis;
·
availability of government-granted exploration permits;
·
the quality of our management and our geological and technical expertise; and
·
the capital available for exploration.
Substantial expenditures are required to establish proven and probable reserves through drilling and analysis, to develop metallurgical processes to extract metal, and to develop the mining and processing facilities and infrastructure at any site chosen for mining. Whether a mineral deposit will be commercially viable depends on a number of factors, which include, without limitation, the particular attributes of the deposit, such as size, grade and proximity to infrastructure; metal prices, which fluctuate widely; and government regulations, including, without limitation, regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. We cannot assure you that any gold reserves or mineralized material acquired or discovered will be in sufficient quantities to justify commercial operations.
Exploration activities involve a high degree of risk.
Our operations will be subject to all the hazards and risks normally encountered in the exploration and, if warranted, development and production of gold and other base or precious metals. These hazards and risks include, without limitation, unusual and unexpected geologic formations, seismic activity, rock bursts, pit-wall failures, cave-ins, flooding and other conditions involved in the drilling and removal of material, any of which could result in damage to, or destruction of, mines and other producing facilities, damage to life or property, environmental damage and legal liability. Milling operations, if any, are subject to various hazards, including, without limitation, equipment failure and failure of retaining dams around tailings disposal areas, which may result in environmental pollution and legal liability.
The parameters used in estimating mining and processing efficiency are based on testing and experience with previous operations. While the parameters used have a reasonable basis, various unforeseen conditions can occur that may materially affect the estimates. In particular, past operations indicate that care must be taken to ensure that proper ore grade control is employed and that proper steps are taken to ensure that the underground mining operations are executed as planned. The mining contracts for the mines include clauses addressing these issues to help ensure planned requirements are met. Nevertheless, unforeseen difficulties may occur in planned operations.
If we make a decision to develop the Chandalar property, we plan to process the gold mineralization using technology that has been demonstrated to be commercially effective at other quartz vein hosted gold deposits in Alaska and elsewhere in the world. These techniques may not be as efficient or economical as we project, and we may never achieve profitability.
We may be adversely affected by fluctuations in gold prices.
The value and price of our securities, our financial results, and our exploration activities may be significantly adversely affected by declines in the price of gold and other precious metals. Gold prices fluctuate widely and are affected by numerous factors beyond our control such as interest rates, exchange rates, inflation or deflation, fluctuation in the value of the United States dollar and foreign currencies, global and regional supply and demand, and the political and economic conditions of gold producing countries throughout the world. The price for gold fluctuates in response to many factors beyond anyone’s ability to predict. The prices used in making the resource estimates are disclosed and differ from daily prices quoted in the news media. The percentage change in the price of a metal cannot be directly related to the estimated resource quantities, which are affected by a number of additional factors. For example, a 10 percent change in price may have little impact on the estimated resource quantities and affect only the resultant positive cash flow, or it may result in a significant change in the amount of resources. Because mining occurs over a number of years, it may be
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prudent to continue mining for some periods during which cash flows are temporarily negative for a variety of reasons including a belief that the low price is temporary and/or that a greater expense would be incurred in closing a property permanently.
Mineralized material calculations and life-of-mine plans, if any, using significantly lower gold and precious metal prices could result in material write-downs of our investments in mining properties and increased reclamation and closure charges.
In addition to adversely affecting our mineralized material estimates and its financial aspects, declining metal prices can impact operations by requiring a reassessment of the commercial feasibility of a particular project. Such a reassessment may be the result of a management decision related to a particular project. Even if the project is ultimately determined to be economically viable, the need to conduct such a reassessment may cause substantial delays in development or may interrupt operations, if any, until the reassessment can be completed.
Title to our properties may be subject to other claims.
Although we believe we have exercised the commercially reasonable due diligence with respect to determining title to properties we own or control and in the Chandalar mining district, there is no guarantee that title to such properties will not be challenged or impugned. Our mineral property interests may be subject to prior unrecorded agreements or transfers and title may be affected by undetected defects. There may be valid challenges to the title of our properties which, if successful, could impair development and/or operations.
A significant portion of our mineral rights to the Chandalar property consist of “unpatented” lode mining claims created and maintained on deeded state land in accordance with the laws governing Alaska state mining claims. At this time, we have no unpatented mining claims on federal land in the Chandalar mining district, or anywhere else. Unpatented mining claims are unique property interests, and are generally considered to be subject to greater title risk than other real property interests because the validity of unpatented mining claims is often uncertain. This uncertainty arises, in part, out of complex state laws and regulations. Also, unpatented mining claims are always subject to possible challenges by third parties or validity contests by the state government. In addition, there are few public records that definitively determine the issues of validity and ownership of unpatented state mining claims.
None of our mining property is leased from or to other parties. Estimates of mineralized materials are subject to geologic uncertainty and inherent sample variability.
No faction of our Chandalar property is held by mineral lease from another party, nor have we leased any of the property to another person or business entity.
Although any estimates of mineralized material at Chandalar would have been delineated with appropriately spaced drilling, there is inherent variability between duplicate samples taken adjacent to each other and between sampling points that cannot be reasonably eliminated. There also may be unknown geologic details that have not been identified or correctly appreciated at the current level of delineation. This results in uncertainties that cannot be reasonably eliminated from the estimation process. Some of the resulting variances can have a positive effect and others can have a negative effect on mining and processing operations. Acceptance of these uncertainties is part of any mining operation.
We currently depend on a single property - the Chandalar property.
Our only mineral property is the Chandalar property. Even though the Chandalar property encompasses several areas with known gold mineralization, unless we acquire additional properties or projects outside of Chandalar or discover additional deposits at Chandalar, we will be solely dependent upon a single mine operation at the Chandalar property for its revenue and profits, if any. We cannot provide any assurance that we will establish any reserves on the Chandalar property or that we will successfully develop any mining operations at the Chandalar property.
Government regulation may adversely affect our business and planned operations.
We believe our Chandalar, Alaska project currently complies with existing environmental and mining laws and regulations affecting its operations. Our mining, processing, development and mineral exploration activities, if any, are subject to various laws governing prospecting, mining, development, production, taxes, labor standards and occupational health, mine safety, toxic substances, land use, water use, land claims of local people and other matters. We cannot assure that new rules and regulations will not be enacted or that existing rules and regulations will not be applied in a manner which could limit or curtail production or development. The economics of any potential mining operation on our
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Chandalar property would be particularly sensitive to changes in the State of Alaska's tax regime. At present, Alaska has a 7% net profits mining license tax on all mineral production (AS 43.65), a 3% net profits royalty on minerals from state lands (AS 38.05.212) (where we hold unpatented state mining claims), and a graduated mining claim rental beginning at $0.50/acre. Alaska state corporate income tax is 9.4% if net profit is more than a set threshold amount. Alaska has an exploration incentive credit program (AS 27.30.010) whereby up to $20 million in approved accrued exploration credits can be deducted from the state mining license tax, the state corporate income tax, and the state mining royalty. All new mining operations are exempt from the mining license tax for 3 1/2 years after production begins. Amendments to current laws and regulations governing operations and activities of mining and milling or more stringent implementation thereof could have a material adverse impact on our business and financial condition.
Amendments to current laws, regulations and permits governing operations and activities of mining and exploration companies, or more stringent implementation thereof, could have a material adverse impact on our business and cause increases in exploration expenses, capital expenditures or production costs or reduction in levels of production at producing properties or require abandonment or delays in development of new mining properties.
Our operations are subject to environmental risks.
All phases of our operations, if any, will be subject to federal, state and local environmental regulation in the various jurisdictions in which it operates. These regulations mandate, among other things, the maintenance of air and water quality standards and land reclamation. They also set forth limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Environmental legislation is evolving in a manner which will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees. We cannot be certain that future changes in environmental regulation, if any, will not adversely affect our operations, if any. Environmental hazards may exist on the properties on which we hold and will hold interests which are unknown to us at present and which have been caused by previous or existing owners or operators of the properties.
Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining operations or in the exploration or development of mineral properties may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations.
Production, if any, at our mines will involve the use of hazardous materials. Should these materials leak or otherwise be discharged from their containment systems, then we may become subject to liability for hazards that may not be insured against or for clean up work that may not be insured.
We will be required to locate mineral reserves for our long-term success.
Because mines have limited lives based on proven and probable mineral reserves, we will have to continually replace and expand mineral reserves, if any, should the Chandalar property begin gold production. Our ability to maintain or increase annual production of gold once the Chandalar property is restarted, if at all, will be dependent almost entirely on our ability to bring new mines into production.
We do not insure against all risks.
Our insurances will not cover all the potential risks associated with a mining company’s operations. We may also be unable to maintain insurances to cover these risks at economically feasible premiums. Insurance coverages may not continue to be available or may not be adequate to cover any resulting liability. Moreover, insurances against risks such as environmental pollution or other hazards as a result of exploration and production is not generally available to us or to other companies in the mining industry on acceptable terms. We might also become subject to liability for pollution or other hazards which may not be insured against or which we may elect not to insure against because of premium costs or other reasons. Losses from these events may cause us to incur significant costs that could have a material adverse effect upon our financial condition and results of operations.
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We compete with larger, better capitalized competitors in the mining industry.
The mining industry is competitive in all of its phases. We face strong competition from other mining companies in connection with the acquisition of properties producing, or capable of producing, base and precious metals. Many of these companies have greater financial resources, operational experience and technical capabilities than us. As a result of this competition, we may be unable to maintain or acquire attractive mining properties on terms it considers acceptable or at all. Consequently, our revenues, operations and financial condition could be materially adversely affected.
We are dependent on our key personnel.
Our success depends on our key executives: Richard R. Walters, our President, and Ted Sharp, our Chief Financial Officer. The loss of the services of one or more of such key management personnel could have a material adverse effect on the Corporation. Our ability to manage our exploration and development activities, and hence our success, will depend in large part on the efforts of these individuals. We face intense competition for qualified personnel, and we cannot be certain that we will be able to attract and retain such personnel.
While we believe we have adequate internal control over financial reporting, we are required to evaluate our internal controls under Section 404 of the Sarbanes-Oxley Act of 2002, and any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and have an adverse effect on the price of our shares of common stock.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we expect that beginning with our annual report on Form 10-KSB for the fiscal year ended December 31, 2007, we will be required to furnish a report by management on our internal controls over financial reporting. Such report will contain among other matters, an assessment of the effectiveness of our internal control over financial reporting, including a statement as to whether or not our internal control over financial reporting is effective. This assessment must include disclosure of any material weaknesses in our internal control over financial reporting identified by our management. Such report must also contain a statement that our auditors have issued an attestation report on our management’s assessment of such internal controls. Public Company Accounting Oversight Board Auditing Standard No. 2 provides the professional standards and related performance guidance for auditors to attest to, and report on, our management’s assessment of the effectiveness of internal control over financial reporting under Section 404.
While we believe our internal control over financial reporting is effective, we are still compiling the system and processing documentation and performing the evaluation needed to comply with Section 404, which is both costly and challenging. We cannot be certain that we will be able to complete our evaluation, testing and any required remediation in a timely fashion. During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that such internal control is effective. If we are unable to assert that our internal control over financial reporting is effective as of December 31, 2007 (or if our auditors are unable to attest that our management’s report is fairly stated or they are unable to express an opinion on the effectiveness of our internal controls), we could lose investor confidence in the accuracy and completeness of our financial reports, which would have a material adverse effect on our stock price.
Failure to comply with the new rules may make it more difficult for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage and/or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on committees of our board of directors, or as executive officers.
Risks Related to this Offering
The market for our common shares has been volatile in the past, and may be subject to fluctuations in the future.
The market price of our common stock has ranged from a high $0.55 and a low $0.20 during the twelve month period ended December 31, 2005. See “Market for Common Equity and Related Stockholder Matters” beginning on page 12 of this prospectus. We cannot assure you that the market price of our common stock will not significantly fluctuate from its current level. The market price of our common stock may be subject to wide fluctuations in response to quarterly variations in operating results, announcements of technological innovations or new products by us or our competitors,
10
changes in financial estimates by securities analysts, or other events or factors. In addition, the financial markets have experienced significant price and volume fluctuations for a number of reasons, including the failure of the operating results of certain companies to meet market expectations that have particularly affected the market prices of equity securities of many exploration companies that have often been unrelated to the operating performance of such companies. These broad market fluctuations, or any industry-specific market fluctuations, may adversely affect the market price of our common stock. In the past, following periods of volatility in the market price of a company’s securities, class action securities litigation has been instituted against such a company. Such litigation, whether with or without merit, could result in substantial costs and a diversion of management’s attention and resources, which would have a material adverse affect on our business, operating results and financial condition.
We have convertible securities outstanding, which if fully exercised could require us to issue 15,362,000 shares of our common stock and result in substantial dilution to existing shareholders.
As of March 31, 2006, we had 26,453,420 shares of common stock issued and outstanding. We may be required to issue the following shares of common stock upon exercise or conversion of convertible securities: 5,000,000 shares of common stock acquirable upon conversion of the 6% Convertible Debenture; 465,000 shares of common stock acquirable upon exercise of options; 1,200,000 shares of common stock acquirable upon exercise of warrants at $0.30 to $0.40 per share; 3,000,000 shares of common stock acquirable upon exercise of Class A Warrants at $0.30 per share; and 5,697,000 shares of common stock acquirable upon the exercise of Class B Warrants at $0.35 to $0.65 per share. If these convertible securities are fully converted or exercised, we would issue an additional 15,362,000 shares of common stock, and our issued and outstanding share capital would increase to 41,815,420 shares. This total does not reflect any common shares we may issue in lieu of cash for semi-annual interest payments on the 6% Convertible Debenture. The convertible securities are likely to be exercised or converted at the time when the market price of our common stock exceeds the conversion or exercise price of the convertible securities. Holders of such securities are likely to sell the common stock upon conversion which could cause our share price to decline.
Broker-dealers may be discouraged from effecting transactions in our common stock because they are considered a penny stock and are subject to the penny stock rules.
Rules 15g-1 through 15g-9 promulgated under the Exchange Act impose sales practice and disclosure requirements on certain brokers-dealers who engage in certain transactions involving a “penny stock.” Subject to certain exceptions, a penny stock generally includes any non-NASDAQ equity security that has a market price of less than $5.00 per share. The market price of our common stock on the OTCBB during the period from January 1, 2004 to December 31, 2005, ranged between a high $0.55 and a low $0.20, and our common stock is deemed penny stock for the purposes of the Exchange Act. The additional sales practice and disclosure requirements imposed upon brokers-dealers may discourage broker-dealers from effecting transactions in our common stock, which could severely limit the market liquidity of the stock and impede the sale of our stock in the secondary market.
A broker-dealer selling penny stock to anyone other than an established customer or “accredited investor,” generally, an individual with net worth in excess of $1,000,000 or an annual income exceeding $200,000, or $300,000 together with his or her spouse, must make a special suitability determination for the purchaser and must receive the purchaser’s written consent to the transaction prior to sale, unless the broker-dealer or the transaction is otherwise exempt. In addition, the penny stock regulations require the broker-dealer to deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the United States Securities and Exchange Commission relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt. A broker-dealer is also required to disclose commissions payable to the broker-dealer and the registered representative and current quotations for the securities. Finally, a broker-dealer is required to send monthly statements disclosing recent price information with respect to the penny stock held in a customer’s account and information with respect to the limited market in penny stocks.
In the event that your investment in our shares is for the purpose of deriving dividend income or in expectation of an increase in market price of our shares from the declaration and payment of dividends, your investment will be compromised because we do not intend to pay dividends.
We have never paid a dividend to our shareholders, and we intend to retain our cash for the continued development of our business. We do not intend to pay cash dividends on our common stock in the foreseeable future. As a result, your return on investment will be solely determined by your ability to sell your shares in a secondary market.
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FORWARD-LOOKING STATEMENTS
We use words like “expects,” “believes,” “intends,” “anticipates,” “plans,” “targets,” “projects” or “estimates” in this prospectus. When used, these words and other, similar words and phrases or statements that an event, action or result “will,” “may,” “could,” or “should” occur, be taken or be achieved identify “forward-looking” statements. This prospectus contains “forward-looking information” which may include, but is not limited to, statements with respect to the following:
·
future financial or operating performances of Little Squaw, its subsidiaries and its projects;
·
the future price of gold, silver or other metals;
·
the estimation of mineral resources and the realization of mineral reserves, if any, based on estimates;
·
estimates related to costs of capital, operating and exploration expenditures;
·
requirements for additional capital;
·
government regulation of exploration activities operations, environmental risk and, as applicable, reclamation and rehabilitation expenses;
·
title disputes or claims;
·
limitations of insurance coverage; and
·
the timing and possible outcome of pending regulatory and permitting matters.
Such forward-looking statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions, including, the risks and uncertainties outlined under the sections titled “Risk Factors and Uncertainties” beginning at page 5 of this prospectus, “Description of the Business” beginning at page 29 of this prospectus and “Management’s Discussion and Analysis” beginning at page 44 of this prospectus Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated or expected.
Our management has included projections and estimates in this prospectus, which are based primarily on management’s experience in the industry, assessments of our results of operations, discussions and negotiations with third parties and a review of information filed by our competitors with the Securities and Exchange Commission or otherwise publicly available. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
We qualify all the forward-looking statements contained in this prospectus by the foregoing cautionary statements.
12
DIVIDEND POLICY
We anticipate that we will retain any earnings to support operations and to finance the growth and development of our business. Therefore, we do not expect to pay cash dividends in the foreseeable future. Any further determination to pay cash dividends will be at the discretion of our board of directors and will be dependent on the financial condition, operating results, capital requirements and other factors that our board deems relevant. We have never declared a dividend.
SELLING SHAREHOLDERS
This prospectus covers the offering of up to 10,431,400 shares of our common stock by Selling Shareholders. We will not receive any proceeds from the sale of the shares by the Selling Shareholders.
If we issue all of the common stock issuable upon exercise of the warrants and/or Class A Warrants held by Selling Shareholders, we will receive proceeds of between $1,260,000 and $1,380,000, depending on the year in which they may be exercised. We intend to use such proceeds, if any, for general working capital purposes. We cannot assure you that any of the warrants will be exercised.
The shares issued to the Selling Shareholders or issuable to Selling Shareholders upon exercise of the warrants are “restricted” shares under applicable federal and state securities laws and are being registered to give the Selling Shareholders the opportunity to sell their shares. The registration of such shares does not necessarily mean, however, that any of these shares will be offered or sold by the Selling Shareholders. The Selling Shareholders may from time to time offer and sell all or a portion of their shares in the over-the-counter market, in negotiated transactions, or otherwise, at market prices prevailing at the time of sale or at negotiated prices.
The registered shares may be sold directly or through brokers or dealers, or in a distribution by one or more underwriters on a firm commitment or best efforts basis. To the extent required, the names of any agent or broker-dealer and applicable commissions or discounts and any other required information with respect to any particular offer will be set forth in an accompanying prospectus supplement. See “Plan of Distribution” beginning on page 18 of this prospectus. The Selling Shareholders reserves the sole right to accept or reject, in whole or in part, any proposed purchase of the registered shares to be made directly or through agents. The Selling Shareholders and any agents or broker-dealers that participate with the Selling Shareholders in the distribution of their registered shares may be deemed to be “underwriters” within the meaning of the Securities Act of 1933, and any commissions received by them and any profit on the resale of the registered shares may be deemed to be underwriting commissions or discounts under the Securities Act of 1933.
We will receive no proceeds from the sale of the registered shares, and we have agreed to bear the expenses of registration of the shares, other than commissions and discounts of agents or broker-dealers and transfer taxes, if any.
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Selling Shareholders Information
The following are the Selling Shareholders who own an aggregate of 10,431,400 shares of our common stock covered in this prospectus. Certain Selling Shareholders have the right to acquire the shares of common stock upon the conversion of the 6% convertible debenture or the exercise of warrants sold in our private placements. See “Transactions with Selling Shareholders” beginning on page 16 of this prospectus for further details. At March 31, 2006, we had 26,211,217 shares of common stock issued and outstanding.
Name | Before Offering | After Offering | |||
Total Number of Shares Beneficially Owned (a) | Percentage of Shares Owned (a) | Number of Shares Offered | Shares Owned After Offering (b)(c) | Percentage of Shares owned After Offering(c) | |
RAB Special Situations (Master) Fund Limited(1) | 7,500,000 | 9.99% | 7,500,000 | -- | -- |
Strata Partners, LLC(2) | 1,480,900 | 5.31% | 531,400 | 989,900 | 3.61% |
Earle & Rhea Foster(3) | 800,000 | 2.98% | 800,000 | -- | -- |
George & Carol Nichols(4) | 466,000 | 1.75% | 200,000 | 266,000 | 1.00% |
Ralph Kettell, II & Laura Kettell(5) | 600,000 | 1.61% | 600,000 | -- | -- |
Vose Partners(6) | 400,000 | 1.50% | 400,000 | -- | -- |
Wilbur Hallauer(7) | 2,081,875 | 7.81% | 400,000 | 1,881,875 | 7.06% |
Total | 13,328,775 | 36.41% | 10,431,400 | 3,137,775 | 8.79% |
(a)
All percentages are based on 26,453,420 shares of common stock issued and outstanding on March 31, 2006. Beneficial ownership is calculated based on the number of shares of common stock that each selling shareholder owns or controls or has the right to acquire within 60 days of March 31, 2006.
(b)
This table assumes that the Selling Shareholders will sell all of their shares available for sale during the effectiveness of the registration statement that includes this prospectus. The Selling Shareholders are not required to sell their shares. See “Plan of Distribution” beginning on page 18.
(c)
Assumes that all shares registered for resale by this prospectus have been issued and sold.
(1)
RAB Special Situations (Master) Fund Limited is organized under the laws of the Cayman Islands. Phillip Richards has sole investment and voting control over the securities. The Selling Shareholder holds a 6% convertible debenture in the principal amount of $1,000,000 convertible into 5,000,000 shares of common stock at $0.20 per share and a Class A Warrant exercisable to acquire 2,500,000 shares of common stock at $0.30 per share for a period of 3 years. The 6% convertible debenture and the Class A Warrant contain provisions that limit the selling shareholder’s beneficial ownership in the class of common stock of Little Squaw to 9.99%.
(2)
Includes 31,400 shares of common stock; a Class A Warrant exercisable to acquire 500,000 shares of common stock at $0.30 per share for a period of 3 years; and Class B Warrants exercisable to acquire 949,500 shares of common stock at an exercise price ranging from $0.35 to $0.65 for a period of 3 years. Rhett Gustafson has sole investment and voting control over these securities. Strata Partners, LLC is a registered U.S. broker-dealer and received the Class A Warrant and Class B Warrants as placement agent fees. We registered 31,400 shares of common stock and 500,000 shares of common stock acquirable upon the exercise of the Class A Warrant in the registration statement in which this prospectus form a part.
(3)
Includes 400,000 shares of common stock and Warrants exercisable to acquire 400,000 shares of common stock at a price of $0.30 until August 17, 2006, $0.35 from August 18, 2006 to August 17, 2007 and $0.40 from August 18, 2007 to August 17, 2008.
(4)
Includes 366,000 shares of common stock and Warrants exercisable to acquire 100,000 shares of common stock at a price of $0.30 until September 20, 2006, $0.35 from September 21, 2006 to September 20, 2007 and $0.40 from September 21, 2007 to September 20, 2008. This registration statement registers 200,000 shares of common stock for resale, including 100,000 shares of common stock and 100,000 shares of common stock acquirable upon exercise of the Warrants.
(5)
Includes 300,000 shares of common stock and Warrants exercisable to acquire 300,000 shares of common stock at a price of $0.30 until October 16, 2006, $0.35 from October 17, 2006 to October 16, 2007 and $0.40 from October 17, 2007 to October 16, 2008.
(6)
Includes 200,000 shares of common stock and Warrants exercisable to acquire 200,000 shares of common stock at a price of $0.30 until October 16, 2006, $0.35 from October 17, 2006 to October 16, 2007 and $0.40 from October 17, 2007 to October 16, 2008. James Vose has sole investment and voting control over these securities.
(7)
Includes 1,881,875 shares of common stock and Warrants exercisable to acquire 200,000 shares of common stock at a price of $0.30 until October 16, 2006, $0.35 from October 17, 2006 to October 16, 2007 and $0.40 from October 17, 2007 to October 16, 2008. This registration statement registers 400,000 shares of common stock for resale, including 200,000 shares of common stock and 200,000 shares of common stock acquirable upon exercise of the Warrants.
Except as noted above and based on information provided to us, none of the selling shareholders are affiliated or have been affiliated with any broker-dealer in the United States. Except as otherwise provided in this prospectus, none of the selling shareholders are affiliated or have been affiliated with us, any of our predecessors or affiliates during the past three years.
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TRANSACTIONS WITH SELLING SHAREHOLDERS
Transactions with RAB Special Situations (Master) Fund Limited
On November 21, 2005, the Company closed a private placement, issuing a 6% Convertible Debenture in the principal amount of US$1,000,000 and a detached 2,500,000 Class A Warrant to one institutional investor. Cash proceeds to the Company, net of cash fees to the placement agent was $900,000. The Debenture is convertible into shares of Common Stock, $0.10 par value, at US$0.20 per share, subject to certain adjustments, and the Warrant is exercisable to acquire 2,500,000 common shares at an exercise price of US$0.30 per share until November 21, 2008. Both the Convertible Debenture and Warrant are transferable. The 6% Convertible Debenture contains a mandatory conversion provision which grants the Company, at the Company’s option, the ability to force conversion of the Debenture in whole or in part, subject to a 9.99% limitation of outstanding shares ownership provision, if the market price of the Company’s common shares is sustained at or above $0.50 per share for five consecutive trading days. The Class A Warrant also contains a mandatory conversion provision which grants the Company, at the Company’s option, the ability to force conversion of the Warrant in whole or in part, subject to a 9.99% limitation of outstanding shares ownership provision, if the market price of the Company’s common shares is sustained at or above $0.75 per share for five consecutive trading days. We are registering the shares of common stock acquirable upon conversion of the 6% Convertible Debenture and exercise of the Class A Warrants for resale by the selling shareholder in the amended registration statement in which this prospectus is included.
Under the terms of the Subscription Agreement, we agreed to prepare and file the registration statement in which this prospectus forms a part. The Subscription Agreement requires us to use reasonable efforts to cause the registration statement to be declared effective by the SEC as soon as possible, but in any event not later than the earlier of (a) March 21, 2006 (one hundred twenty (120) days following the closing date of the private placement) (or April 20, 2006 (one hundred fifty (150) in the event of an SEC review of the registration statement )), and (b) the fifth trading day following the date on which Little Squaw is notified by the SEC that the registration statement will not be reviewed or is no longer subject to further review and comments. Subject to certain limitations, we agreed that if (A) the registration statement is not filed on or prior to January 20, 2006 (sixty (60) calendar days after the closing date of the private placement); (1) the registration statement is not declared effective on or prior to the earlier of (a) March 21, 2006 (one hundred twenty (120) days following the closing date of the private placement) (or April 20, 2006 (one hundred fifty (150) in the event of an SEC review of the registration statement )), and (b) the fifth trading day following the date on which Little Squaw is notified by the SEC that the registration statement will not be reviewed or is no longer subject to further review and comments, or (2) the registration statement ceases to be effective and available to the selling shareholder as to its registrable securities without being succeeded within 20 trading days by an effective amendment thereto or by a subsequent registration statement filed with and declared effective by the SEC, then, in addition to any other rights available to the selling shareholder under the subscription agreement or applicable law on the failure by the us to comply with the requirement, we will be required to issue our shares to the selling shareholder, as liquidated damages and not as a penalty, with a fair market value (determined by the average closing price of our common stock on the OTCBB during the ten days preceding the issuance of such shares) equal to two percent (2%) of the price paid by the selling shareholder for the debenture and warrants and on each monthly anniversary of such failure until we comply; provided, however, that any liquidated damages that accrue under the subscription agreement shall not exceed eight percent (8%) of the price paid by the selling shareholder for the debentures and warrants.
We are registering the shares of common stock issued in the private placement and the shares of common stock issuable upon exercise of the warrants for resale by the selling shareholder in the registration statement in which this prospectus is included.
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Transactions with Strata Partners, LLC
On September 23, 2005, we entered into a Placement Agent Agreement with Strata Partners, LLC, a U.S. registered broker dealer. Under the terms of a Placement Agent Agreement, we agreed to pay Strata Partners, LLC, as agent, a placement agent fee in the amount of agent compensation fee in an amount equal to eight percent (8%), as applicable, for sales effected by the agent and a lead agent fee agent in an amount equal to two percent (2%) of the aggregate gross proceeds of any placement during the term of the agreement. The agent also will receive warrants, as lead agent, to purchase common shares equal to three percent (3%) of the total number of common shares (or common stock equivalents) sold by us in the placement and warrants as selling agent to purchase additional common shares equal to seven percent (7%) of the total number of common shares (or common stock equivalents), as applicable, for sales effected by the agent. The terms, conditions and exercise price of the warrants issued to the agent were economically equivalent to the terms, conditions and exercise price of the securities issued by us in a placement. We also agreed to grant the agent the same registration rights granted to investors in a placement, if any, and reimburse the agent for all expenses incurred by it in the performance of the agent’s obligations, including but not limited to the fees and expenses of our counsel and accountants and the cost of qualifying the placement, and the sale of the securities, in various states or obtaining an exemption from state registration requirements. We reimbursed the agent for actual expenses, including but not limited to accounting, legal and professional fees, incurred by the agent in connection with the Placement, that were not to exceed one-half percent (0.5%) of the gross offering proceeds. We agreed that the agent would serve as exclusive placement agent until January 31, 2006, extendable for a period of time thereafter by mutual consent.
On January 31, 2006, we closed a private placement of 3,895,000 Units, at a price of $0.25 per Unit for gross proceeds of $973,750. We paid Strata Partners an agent’s commission of 10% of the gross proceeds ($97,370) and issued the agent 389,500 Class B Warrants in connection with the transaction.
On February 24, 2006, we closed a private placement of 5,600,000 Units, at a price of $0.25 per Unit for gross proceeds of $1,400,000. We paid Strata Partners an agent’s commission of 10% of the gross proceeds ($140,000) and issued the agent 560,000 Class B Warrants in connection with the transaction.
We previously issued Strata Partners, LLC 31,400 shares of common stock during the three months ended September 30, 2005, in reimbursement for certain expenses under the terms of a previous Placement Agent Agreement that terminated on July 1, 2005.
We are registering the shares of common stock issued in the private placement and the shares of common stock issuable upon exercise of the warrants for resale by the selling shareholder in the registration statement in which this prospectus is included. We also registered 949,500 shares of common stock acquirable upon the exercise of Class B Warrants in a registration statement on Form SB-2 filed with the SEC.
Transactions with Other Selling Shareholders
On August 12, 2005 our Board of Directors authorized a direct private placement offering of 1,200,000 units at $0.25 per unit. Each unit consists of one share of common stock, and a three-year full share purchase warrant exercisable at $0.30, $0.35 and $0.40 in the respective successive years. During the nine months ended September 30, 2005, we sold a total of 500,000 units for proceeds of $125,000. Subsequently, 700,000 units were sold during the fourth quarter of 2005 for proceeds of $175,000. No fees or commissions were paid, and net proceeds to us were $300,000.
On August 17 2005, we completed a private placement of 400,000 units to Earle & Rhea Foster, a selling shareholder, at $0.25 per unit.
On September 19, 2005, 2005, we completed a private placement of 100,000 units to Carol S. & George C. Nichols, Jr. a selling shareholder, at $0.25 per unit.
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On October 17, 2005, we completed a private placement of 300,000 units to Laura O. & Ralph W. Kettell, II, a selling shareholder, at $ 0.25 per unit.
On October 17, 2005, we completed a private placement of 200,000 units to Vose Partners, a selling shareholder, at $0.25 per unit.
On October 17, 2005, we completed a private placement of 200,000 units to Wilbur G. Hallauer, a selling shareholder, at $0.25 per unit. Mr. Hallauer beneficially owned greater than 10% of our issued and outstanding common stock prior to the private placement. Except as described above and based on information available to us, there are no other relationships between us and any of these selling shareholders.
We are registering the shares of common stock issued in the private placement and the shares of common stock issuable upon exercise of the warrants for resale by the selling shareholder in the registration statement in which this prospectus is included.
PLAN OF DISTRIBUTION
We are registering the shares of common stock on behalf of the selling shareholders. When we refer to selling shareholders, we intend to include donees and pledgees selling shares received from a named Selling Shareholder(s) after the date of this prospectus. All costs, expenses and fees in connection with this registration of the shares offered under this registration statement will be borne by us. Brokerage commissions and similar selling expenses, if any, attributable to the sale of shares will be borne by the selling shareholders. Assuming that the registration statement is effective, sales of shares may be effected by the selling shareholders from time to time in one or more types of transactions (which may include block transactions) on the over-the-counter market, in negotiated transactions, through put or call options transactions relating to the shares, through short sales of shares, or a combination of such methods of sale, at market prices prevailing at the time of sale, or at negotiated prices. Such transactions may or may not involve brokers or dealers. The selling shareholders have advised us that they have not entered into any agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of their securities, nor is there an underwriter or coordinating broker acting in connection with the proposed sale of shares by the selling shareholders.
The selling shareholders may effect such transactions by selling shares directly to purchasers or through broker-dealers, which may act as agents or principals. Such broker-dealers may receive compensation in the form of discounts, concessions, or commissions from the selling shareholders and/or purchasers of shares for whom such broker-dealers may act as agents or to whom they sell as principal, or both (which compensation as to a particular broker-dealer might be in excess of customary commissions).
The selling shareholders and any broker-dealers that act in connection with the sale of shares might be deemed to be “underwriters” within the meaning of Section 2(11) of the Securities Act, and any commissions received by such broker-dealers and any profit on the resale of shares sold by them while acting as principals might be deemed to be underwriting discounts or commissions under the Securities Act. The selling shareholders may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares against some liabilities arising under the Securities Act.
Because the selling shareholders may be deemed to be “underwriters” within the meaning of Section 2(11) of the Securities Act, the selling shareholders will be subject to the prospectus delivery requirements of the Securities Act. We have informed the selling shareholders that the anti-manipulative provisions of Regulation M promulgated under the Exchange Act may apply to their sales in the market.
In the event that the registration statement is no longer effective, the selling shareholders may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities Act, provided they meet the criteria and conform to the requirements of such Rule, including the minimum one year holding period.
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Upon being notified by any Selling Shareholders that any material arrangement has been entered into with a broker-dealer for the sale of shares through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, we will file a supplement to this prospectus, if required, under Rule 424(b) of the Act, disclosing:
·
the name of each selling shareholder(s) and of the participating broker-dealer(s),
·
the number of shares involved,
·
the price at which the shares were sold,
·
the commissions paid or discounts or concessions allowed to the broker-dealer(s), where applicable,
·
that the broker-dealer(s) did not conduct any investigation to verify information set out or incorporated by reference in this prospectus; and
·
other facts material to the transaction.
LEGAL PROCEEDINGS
Neither we nor any of our property are currently subject to any material legal proceedings or other regulatory proceedings.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The section sets forth certain information with respect to our current directors, executive officers and key employees as of March 31, 2005. The term for each director expires at our next annual meeting or until his or her successor is appointed.
Directors and Executive Officers
Name
Age
Office with the Company
Appointed to Office
_____________________________________________________________________________________________
Richard R. Walters
61
President, Director
2003
Charles G. Bigelow
74
Director
2003
James K. Duff
60
Chairman, Director
2003
James A. Fish
75
Director
2003
Kenneth S. Eickerman
48
Director
2004
William Orchow
60
Director
2004
William V. Schara(1)
49
Director
2006
Ted Sharp(2)
49
Treasurer, Secretary,
2006
Chief Financial Officer
________________________
(1) Mr. Schara was appointed as a director to fill a vacancy on our board of directors (resulting from the resignation of Jackie Stephens on September 13, 2005) on February 13, 2006.
(2) Mr. Sharp replaced Becky L. Corigliano as our Treasurer, Secretary and Chief Financial Officer on March 1, 2006. Ms. Corigliano resigned effective February 17, 2006.
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Background and Experience
Richard R. Walters: Mr. Walters has been the President and a director since June 24, 2003; he was Acting Chief Financial Officer until November 1, 2003. He is an economic geologist, and holds a degree in geology from Washington State University (1967). He is a Certified Professional Geologist by the American Institute of Professional Geologists and licensed to practice as a geologist in the states of Alaska and Washington. From March 1994 to March 2000 he was a director, Chief Operating Officer and President of Yamana Resources, Inc., a Toronto Stock Exchange listed company now known as Yamana Gold Inc. From April 2000 to December 2004 he was the president of Marifil S.A., a private mineral exploration and holding company in Argentina. In February of 2005 Marifil S.A. was merged into Marifil Mines Limited a public company traded on the Toronto Ventures Exchange. Mr. Walters is a director and the Executive Vice President of Marifil Mines Limited.
Charles G. Bigelow: Mr. Bigelow has been a director since June 30, 2003. He is an economic geologist with a degree in geology from Washington State University (1955). From 1972 to June 2005, he has served as the president of WGM Inc., a private consulting and project management firm of geologists operating in Alaska. During the previous five years, he was also a Director and the President and Chief Executive Officer of Ventures Resource Corporation, a public mineral exploration company listed on the Toronto Ventures Stock Exchange. He is now retired.
James K. Duff: Mr. Duff has been the Chairman of the Board of Directors since June 24, 2003. He is a geologist with over 35 years of diverse international experience in the mining industry. He is currently the President of South American Operations for Coeur d’Alene Mining Corporation, a public company traded on the New York Stock exchange. He also serves on the board of directors of American International Ventures, a U.S. gold exploration company that trades on the NASDAQ OTC BB. He previously worked for Coeur d’Alene Mines for 12 years where he was Vice President of Business Development. Mr. Duff has a BS degree in geology from the Mackay School of Mines at the University of Nevada, Reno and an MS degree in geology from the University of Idaho, and he completed the Program for Management Development at the Harvard School of Business. He is a past President and honorary Life Member of the Northwest Mining Association.
James A. Fish: Mr. Fish has been a director since June 24, 2003. He received a degree in geology from Berea College in Kentucky in 1952 and a law degree from Gonzaga University School of Law in 1962. He has been an officer and director of Hanover Gold Company, Inc. since 1995 and Vice President for the last two years. Hanover is a development stage mining company listed on the NASD OTC BB. Since 1987, Mr. Fish has been Vice President and General Counsel for N.A. Degerstrom, Inc., a privately held mining and construction company based in Spokane, Washington.
Kenneth S. Eickerman: Mr. Eickerman became a director on March 4, 2004. He received a B.A. degree in Business Administration from Washington State University and is a Certified Public Accountant. Currently, Mr. Eickerman is the Controller for Revett Minerals Inc., a Canadian mining company trading on the Toronto Stock Exchange. Within the last five years he served as Vice President and Controller of Mustang Line Contractors, Inc. for three years, a company that builds electric transmission lines. Previously, he was the Controller and Treasurer for Apollo Gold, Inc for five years. Mr. Eickerman is Chairman of the Audit Committee and its designated Financial Expert.
William Orchow: Mr. Orchow became a director on July 20, 2004. Mr. Orchow is a director, President and Chief Executive Officer of Revett Minerals, Inc., a Canadian company trading on the Toronto Stock Exchange. From November 1994 to December 2002, Mr. Orchow was President and Chief Executive Officer of Kennecott Minerals Company, where he was responsible for the operation and business development of all of Kennecott Mineral’s mines with the exception of its Bingham Canyon mine. From June 1993 to October 1994, he was President and Chief Executive Officer of Kennecott Energy Company, the third largest producer of domestic coal in the United States, and prior to that was Vice President of Kennecott Utah Copper Corporation. Mr. Orchow has also held senior management and director positions with Kennecott Holdings Corporation, the parent corporation of the aforementioned Kennecott entities. He has also been a director and member of the executive committee of the Gold Institute, a director of the National Mining Association and a director of the National Coal Association. Mr. Orchow is currently a member of the board of trustees of Westminster College in Salt Lake City and chairman of its finance committee. He graduated from the College of Emporia in Emporia, Kansas with a bachelor’s degree in science. Mr. Orchow serves on the Audit Committee.
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William V. Schara: Mr. Schara is a Certified Public Accountant, and has a Bachelor of Science Degree in Accounting from Marquette University. He was also appointed to the Company’s Audit Committee on February 13, 2005. Since December 2004 he has been employed as a management consultant for, and then since July of 2005 as the Chief Financial officer of, Minera Andes Inc., a Canadian development stage mining company listed on the Canadian Ventures Exchange and the NASDAQ OTC BB exchange. He previously worked for ten years for Yamana Gold Inc. and its predecessor companies, the last four years of which were in the capacity of Vice President of Finance and Chief Financial Officer. Yamana Gold Inc. is a production stage Canadian public company trading on the Toronto Stock Exchange, the American Stock Exchange and the London Alternative Investment Market Exchange. Mr. Schara is a director of Marifil Mines Limited, an exploration stage Canadian public company traded on the Canadian Ventures Exchange. Mr. Schara has more than 25 years experience in finance and accounting with extensive experience in business start-ups, international business, and managing small public companies and mining company joint ventures. Mr. Schara serves on the Audit Committee.
Ted R. Sharp: Mr. Sharp was appointed as our Chief Financial Officer, Secretary, and Treasurer effective March 1, 2006. Mr. Sharp is a Certified Public Accountant, and has Bachelor of Business Administration Degree in Accounting from Boise State University. Since 2003, he has been President of Sharp Executive Associates, Inc., a privately-held accounting firm providing Chief Financial Officer services to clients. Prior to 2003, he worked for 14 years in positions of Chief Financial Officer, Managing Director of European Operations and Corporate Controller for Key Technology, Inc., a publicly-traded manufacturer of capital goods. Mr. Sharp has more than 25 years of experience in treasury management, internal financial controls, U.S. Security and Exchange compliance and Corporate Governance. There are no family relationships among Mr. Sharp and other directors or executive officers of the Company. The Company has entered into a management consulting contract with Mr. Sharp, engaging him on a part-time basis.
Our Directors are elected for a one-year term and until their successors have been elected and qualified. Executive Officers are appointed to serve until the meeting of the Board of Directors following the next annual meeting of shareholders and until their successors have been elected and qualified. There are no arrangements or understandings between any of the directors, executive officers, and other persons pursuant to which any of the foregoing persons were named as Directors or executive officers.
Jackie Stephens was a member of our Board of Directors during the year before resigning on September 13, 2005. Becky L. Corigliano served as our Treasurer, Secretary and Chief Financial Officer during the year ended December 31, 2005, before resigning effective February 17, 2006.
As noted above, except for Mr. Eickerman, the Directors also act as directors for companies with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to Section 15(d) of the Act.
No Director, or person nominated to become a Director or Executive Officer, has been involved in any legal action involving us during the past five years.
Promoters and Control Persons: Not Applicable
Board Committees
Our Board of Directors has an Audit Committee and a Compensation Committee. The members of the Audit Committee are Mr. Eickerman, Mr. Orchow and Mr. Schara. The responsibilities of the Audit Committee include monitoring compliance with Company policies and applicable laws and regulations, making recommendations to the full Board of Directors concerning the adequacy and accuracy of internal systems and controls, the appointment of auditors and the acceptance of audits, and monitoring management's efforts to correct any deficiencies discovered in an audit or supervisory examination. Each of these Directors is an independent Director. The Audit Committee had four meetings in 2005. On March 4, 2004, Mr. Stephens resigned from the Audit Committee, and on September 13, 2005 resigned from the Board of Directors. Mr. Eickerman became a member of the Audit Committee and was designated by the Board of Directors as the Chairman of the Audit Committee and its Financial Expert. On February 13, 2006, Mr. Schara was appointed to replace Mr. Fish on the Audit Committee.
The Compensation Committee is composed of Mr. Fish, as its Chairman, and Mr. Bigelow. This Committee receives and considers recommendations from the President for compensation for consultants and the Directors. The Committee also is responsible for the administration of all awards made by the Board of Directors pursuant to the Restated 2003 Share Incentive Plan.
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Our entire Board of Directors acts as a Nominating Committee. This committee does not have a charter nor has it adopted a policy with regard to consideration of director candidates recommended by shareholders. The Board of Directors does not believe that it is necessary to adopt specific criteria or procedures.
Code of Ethics
The Board of Directors considers and implements our business and governance policies.
On November 7, 2005, our Board of Directors adopted a Code of Business Conduct and Ethics for directors, officers and executive officers of Little Squaw Gold Mining Company and its subsidiaries and affiliates. All our directors and employees have been provided with a copy of this Code, and it is posted on our World Wide Web site at www.littlesquawgold.com . The document is intended to provide guidance for all directors and employees (including officers) and other persons who may be considered associates of our company to deal ethically in all aspects of its business and to comply fully with all laws, regulations, and company policies. If we make any amendments to this Code other than technical, administrative or other non-substantive amendments, or grant any waivers, including implicit waivers, from a provision of this Code to our chief executive officer, or chief financial officer, we will disclose the nature of the amendment or waiver, its effective date and to whom it applies on our website or in a report on Form 8-K filed with the Securities and Exchange Commission. A copy of the Code will be sent without charge to anyone requesting a copy by contacting us at our principal office.
This Code is in addition to other detailed policies relevant to business ethics that we may adopt from time to time.
Insider Trading Policy
We adopted an Insider Trading Policy on February 13, 2006. The policy defines an “insider” as a person who possesses, or has access to, material information concerning us that has not been fully disclosed to the public. Any employee, officer or director who believes he or she would be regarded as an insider who is contemplating a transaction in our stock must contact our CEO or CFO prior to executing the transaction to determine if he or she may properly proceed. In addition, all officers, directors and employees listed within the policy are prohibited from trading in our securities except during limited trading windows defined within the policy. Our Insider Trading Policy is posted on our website at www.littlesquaw.com .
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EXECUTIVE COMPENSATION
Summary Compensation Table
A summary of cash and other compensation paid in accordance with management consulting contracts for our President and Chief Executive Officer for the three most recent years is as follows:
Summary Compensation Table
Long-Term Compensation | |||||||||
Annual Compensation | Awards | Payouts | |||||||
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | |
Name and Principal Position | Year | Salary(1) ($) | Other Annual Bonus ($) | Restricted Stock Comp. ($) | Awards SARs(#) | Securities Underlying Options/ ($) | LTIP Payouts ($) | All other Comp. | |
R. Walters | 2003 | 12,075 | 0 | 0 | -0- | 0 | 0 | 0 | |
President | 2004 | 38,763 | 0 | 0 | -0- | 0 | 0 | 0 | |
2005 | 66,638(1) | 0 | 0 | -0- | 0 | 0 | 0 | ||
Ted R. Sharp | |||||||||
CFO (2) | 2005 | nil | Nil | Nil | nil | nil | nil | nil | |
Becky Corigliano | |||||||||
CFO(3) | 2003 | 0 | 0 | 7,500 | -0- | 0 | 0 | 0 | |
2004 | 18,900 | 0 | 6,710 | -0- | 0 | 0 | 0 | ||
2005 | 18,000 | 0 | 0 | -0- | 0 | 0 | $0 | ||
(1) Includes $12,863 in accrued fees from 2004. (2) Mr. Sharp was appointed as our Chief Financial Officer effective March 1, 2006. (3) Becky L. Corigliano served as the Treasurer/Secretary and Acting Chief Financial Officer of Little Squaw Gold Mining Company beginning November 1, 2003 and was appointed Chief Financial Officer by the Board of Directors on March 4, 2004. Ms. Corigliano resigned effective February 17, 2006. | |||||||||
Option/SAR Grants in Last Three Fiscal Years
There were no Option/SAR grants to executives or directors in fiscal 2005 or 2003.
On March 4, 2004, we issued options to purchase shares of common stock to the directors pursuant to the 2003 share incentive plan, in each case exercisable for a ten year period from the date of issuance at an exercise price of $0.29 per share. The options were valued using a 45% discount of the average closing price of the last five trading days of 2003. The options were issued to the following directors:
Director | Option Shares | Vesting | ||
Charles G. Bigelow | 5,000 | Immediately | ||
James K. Duff | 5,000 | Immediately | ||
James A. Fish | 5,000 | Immediately | ||
Jackie E. Stephens (resigned effective September 13, 2005)(1) | 5,000 | Immediately | ||
(1) Expired March 13, 2006. |
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On December 31, 2004, we issued options to purchase shares of common stock to the directors pursuant to the 2003 Share Incentive Plan, in each case exercisable for a ten year period from the date of issuance at an exercise price of $0.22 per share. The options were valued using the average closing price of the last five trading days of 2004 at a 45% discount. The options were issued to the following directors:
Director | Option Shares | Vesting | ||
Charles G. Bigelow | 50,000 | Immediately | ||
James K. Duff | 50,000 | Immediately | ||
Kenneth S. Eickerman | 50,000 | Immediately | ||
James A. Fish | 50,000 | Immediately | ||
William Orchow | 50,000 | Immediately | ||
Jackie E. Stephens (resigned effective September 13, 2005)(1) | 50,000 | Immediately | ||
(1) Expired March 13, 2006. |
On November 12, 2004, our Board of Directors approved the issuance of 50,000 shares of common stock to each of its six independent directors for services in 2004. Charles G. Bigelow, James K. Duff, James A. Fish, Kenneth S. Eickerman, William Orchow and Jackie E. Stephens (resigned September 13, 2005) each received 50,000 shares under our 2003 Share Incentive Plan.
On March 1, 2006, we issued 25,000 shares of common stock, vesting May 1, 2006, and options to purchase 50,000 shares of common stock, vesting May 1, 2006, exercisable for a ten year period from the date of issuance at an exercise price of $0.40 per share to Ted R. Sharp under our Restated 2003 Share Incentive Plan, in connection with his appointment as our Treasurer, Secretary and Chief Financial Officer.
On March 29, 2006, we issued 50,000 shares of common stock and options to purchase 50,000 shares of common stock exercisable for a ten year period from the date of issuance at an exercise price of $0.65 per share to William V. Schara under our Restated 2003 Share Incentive Plan, in connection with his appointment to our Board of Directors.
Director Compensation
The Directors receive $500 for each board meeting and $300 for each committee meeting. During 2004 we deferred $10,600 in board compensation.
Independent Contractor Agreements
We entered into an Independent Contractor Agreement dated June 30, 2003 for a term of four months with Richard R. Walters, as a consultant. The Agreement was renewed on October 1, 2003 through September 30, 2004. On November 12, 2004 and again on November 7, 2005, the Agreement was renewed retroactively to October 1, 2004 and October 1, 2005, respectively, by our Board of Directors for an additional one year period under the original terms. The services provided by Mr. Walters include serving as our President and Chief Operating Officer and such other executive management functions as shall be requested by the Board of Directors. The Agreement renews each year on the anniversary date for a one year term, pending board approval. Either party may terminate the Agreement upon 15 days written notice. As consideration for performance of the services, we agreed to pay Mr. Walters a fee of $175 per day worked, pro rated for each partial day worked. Subsequent to the end of 2005, the Agreement was amended by the Board of Directors to increase the fee to $300 per day worked, pro rated for each partial day worked. Mr. Walters is not an employee.
Mr. Walters is entitled to reimbursement for his expenses, with any expense greater than $1,000 being subject to prior approval by the Compensation Committee. We may accrue and defer the payment of the fees and/or expenses from time to time until the Compensation Committee determines we have sufficient funds to make payment. Due to limited cash resources between July 1, 2004 and October 1, 2005, we accrued but did not pay Mr. Walters amounts payable under his contract. On December 31, 2005, Mr. Walters was paid all the accrued fees. No benefits are provided to Mr. Walters by us other than the compensation for his services.
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We entered into an Independent Contractor Agreement, effective November 1, 2003, with Becky Corigliano, our former Chief Financial Officer, as a consultant. Her consulting services initially were limited to treasurer and corporate secretary functions. As part of those services, she was the Secretary, Treasurer and Acting Chief Financial Officer. On March 4, 2004, she became the Chief Financial Officer. On November 12, 2004 and again on November 7, 2005, the Agreement was renewed retroactively to November 1, 2004 and November 1, 2005, respectively, by the Board of Directors for an additional one year period under the original terms. The initial term of this Agreement is for a period of one year from the effective date. Either party may terminate the Agreement upon 15 days written notice. As consideration for the performance of the services, we paid Ms. Corigliano a fee of $150 per day worked, prorated for each partial day worked. We also guaranteed a minimum of 10 full days work per month, a minimum monthly payment of $1,500. Ms. Corigliano also was reimbursed for reasonable expenses previously approved by us. Ms. Corigliano received 67,103 shares of common stock subsequent to February 26, 2004 as a result of her designation as Chief Financial Officer. The shares issued to her were treasury shares held by us. The shares are subject to the restricted securities requirements of the Securities Act of 1933. No benefits were provided to Ms. Corigliano by us other than the accrued compensation for her services. Ms. Corigliano was not an employee. Ms. Corigliano resigned effective February 17, 2006.
We entered into an Independent Contractor Agreement, effective March 1, 2006, with Ted R. Sharp as a Management Consultant to serve as Secretary, Treasurer and Chief Financial Officer. The term of this Agreement is through December 31, 2006. Either party may terminate the Agreement upon 15 days written notice. As consideration for the performance of the services, we will pay Mr. Sharp a fee of $7,500 per month. Mr. Sharp also will be reimbursed for reasonable expenses previously approved by us. As additional compensation for services, we issued 25,000 shares of Restricted Common Stock and 50,000 Stock Options under the Restated 2003 Share Incentive Plan. No benefits are provided to Mr. Sharp by us for his services. Mr. Sharp is not an employee and serves on a part time basis.
We entered into an Independent Contractor Agreement, effective January 10, 2006, with Robert G. Pate as a Management Consultant to serve as the Assistant Project Manager for the Chandalar project. Effective March 1, 2006 our Board of Directors confirmed the appointment of Mr. Pate as Vice President. The term of this Agreement is through December 31, 2006. Either party may terminate the Agreement upon 15 days written notice, however we may terminate Mr. Pate only for just cause. As consideration for the performance of services, we will pay Mr. Pate a fee of $4,500 per month for a 15 day per month base work period plus $225 per day for each non-field day worked in excess to 15 days per month and $450 per day for each field day worked beyond the 15 day base period. Additionally, we will pay Mr. Pate an extra $150 per day for each field day worked within the 15 day base period. Mr. Pate also will be reimbursed for reasonable expenses previously approved by us. As additional compensation for services, we have issued 25,000 shares of Restricted Common Stock and 50,000 Stock Options under the Restated 2003 Share Incentive Plan. No benefits are provided to Mr. Pate by us for his services. Mr. Pate is not an employee and serves on a part time basis.
We entered into an Independent Contractor Agreement, effective March 1, 2006, with Susan J. Schenk as a Management Consultant to serve as Manager of Investor Relations. The term of this Agreement is through December 31, 2006. Either party may terminate the Agreement upon 15 days written notice; however, we may terminate Ms. Schenk only for just cause. As consideration for the performance of services, we will pay Ms. Schenk a fee of $4,000 per month plus $150 per day for each day worked in excess of 16 days per month. Ms. Schenk also will be reimbursed for reasonable expenses previously approved by us. As additional compensation for services, we have issued 25,000 shares of Restricted Common Stock and 50,000 Stock Options under the Restated 2003 Share Incentive Plan. No benefits are provided to Ms. Schenk by us for her services. Ms. Schenk is not an employee and serves on a part time basis.
We entered into an Independent Contractor Agreement, effective January 10, 2006, with James C. Barker as a Management Consultant to serve as the Project Manager for the Chandalar project. The term of this Agreement is through December 31, 2006. Either party may terminate the Agreement upon 15 days written notice. As consideration for the performance of services, we will pay Mr. Barker a fee of $625 per day for each field day worked, or $550 per day for each non-field day worked in each calendar month up to 15 days per month, then $450 per day for each non-field day worked in excess of 15 days per month. Mr. Barker also will be reimbursed for reasonable expenses previously approved by us. No benefits are provided to Mr. Barker by us for his services. Mr. Barker is not an employee and serves on a part time basis.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial ownership of shares of our common stock as of March 31, 2006 by:
·
each person who is known by us to beneficially own more than 5% of our issued and outstanding shares of common stock;
·
our named executive officers;
·
our directors; and
·
all of our executive officers and directors as a group.
Name of Shareholder | Amount and Nature of Beneficial Ownership | Percent of Class (1) | |
Directors and Named Executive Officers | |||
Richard R. Walters, President, Chief Executive Officer and Director | 809,060 | 3.06% | |
William Orchow, Director | 182,500 | (3) | * |
Charles G. Bigelow, Director | 170,000 | (2)(3) | * |
James A. Fish, Director | 167,000 | (2)(3) | * |
James K. Duff, Chairman and Director | 267,903 | (2)(3) | * |
Kenneth S. Eickerman, Director | 100,000 | (3) | * |
Ted R. Sharp, Secretary, Treasurer and Chief Financial Officer | 75,000 | (7) | * |
Robert G. Pate, Vice President | 75,000 | (8) | * |
William V. Schara | 100,000 | (9) | * |
All current executive officers and directors as a group | 1,946,463 | (4) | 6.96% |
5% or greater shareholders | |||
RAB Special Situations (Master) Fund Limited | 7,500,000 | (5) | 9.99% |
Wilbur G. Hallauer | 2,081,875 | (6) | 7.81% |
* Less than 1%. (1) Calculated based on 26,453,420 shares of common stock issued and outstanding as of March 31, 2006. (2) Includes 5,000 shares of common stock acquirable upon exercise of vested options exercisable before March 3, 2014. (3) Includes 50,000 shares of common stock acquirable upon exercise of vested options exercisable December 31, 2014. (4) Includes shares of common stock acquirable upon exercise of vested options exercisable described in footnotes (2), (3), (7), (8) and (9). (5) RAB Special Situations (Master) Fund Limited is organized under the laws of the Cayman Islands. The shareholder holds a 6% convertible debenture in the principal amount of $1,000,000 convertible into 5,000,000 common stock at $0.20 per share and a Class A Warrant exercisable to acquire 2,500,000 shares of common stock at $0.30 per share before November 20, 2008. The 6% convertible debenture and the Class A Warrant contain provisions that limit the selling shareholder’s beneficial ownership in the class of common stock of Little Squaw to 9.99%. (6) Includes 1,881,875 shares of common stock and 200,000 shares of common stock acquirable upon exercise of Warrants. (7) Includes 25,000 shares of common stock and 50,000 shares of common stock acquirable upon exercise of options, both of which were issued on March 1, 2006 and vest on May 1, 2006. The options are exercisable before May 1, 2016. (8) Includes 25,000 shares of common stock and 50,000 shares of common stock acquirable upon exercise of vested options issued on February 13, 2006. The options are exercisable before February 13, 2016. (9) Includes 50,000 shares of common stock and 50,000 shares of common stock acquirable upon exercise of vested options before March 29, 2016. | |||
We have no knowledge of any other arrangements, including any pledge by any person of our securities, the operation of which may at a subsequent date result in a change in control of our company.
We are not, to the best of our knowledge, directly or indirectly owned or controlled by another corporation or foreign government.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related Transactions
On January 21, 2005, we separately had related party transactions with William Orchow, a director, Wilbur G. Hallauer and another shareholder in which these parties advanced an aggregate amount of $100,000 to us for operating capital purposes. The advances were evidenced by six month promissory notes payable on demand with accrued interest at 6% per annum. We had the right, any time prior to their maturity date on July 20, 2005, and without notice, to convert the Notes into restricted shares of our common stock and warrants. The initial conversion rate was $0.30 per share and included one warrant per share initially at $0.45. The exercise price of the warrants escalated to $0.55 and $0.75 in the second and third year from the date of issue. No payable demand was made, and the Notes matured on July 20, 2005, where upon we requested of all Note holders an extension of the term of the Notes. All parties to the Notes agreed to extend the term of the Notes for an indefinite period until we had the financial resources to repay them. In connection with the agreement to extend the term of the Notes the parties also agreed that the interest rate on the Notes would increase from 6% to 12%. At September 30, 2005, we had accrued $3,000 of interest related to the Notes, which was subsequently paid. On October 18, 2005 a principal payment of $25,000 plus interest due was paid on one of the convertible promissory notes in the amount of $50,000 leaving a total balance due of $75,000. On December 20, 2005, the remaining balance of $75,000 and two months interest was paid on the convertible promissory notes.
Equity Compensation Plan Information
At a special meeting of shareholders on January 23, 2004, the shareholders voted to adopt the Little Squaw Gold Mining Company 2003 Share Incentive Plan. The Plan permits the grant of nonqualified stock options, incentive stock options and shares of common stock to participants of the Plan. The purpose of the Plan is to promote our success and enhance the value of our assets by linking the personal interests of the participants to those of our shareholders, by providing participants with an incentive for outstanding performance. Pursuant to the terms of the Plan, 1,200,000 shares authorized but unissued common stock were reserved for issue. Options granted to participants under the Plan must be exercised no later than the tenth employment anniversary of the participant. Eligible participants in the Plan include our employees, directors and consultants.
In November 2005 our Board of Directors ratified changes to the Plan that brought it into compliance with new IRS laws (principally Code 409A) that require companies to recognize the fair market value of stock options and other share based payments awarded to employees and associates as compensation expense. The new law becomes effective for us on January 1, 2006. Any new shares issued under our Plan will be based on their then current market price or higher. The Plan is now referred to as the Restated 2003 Share Incentive Plan.
During 2004, 620,000 shares of common stock and options to purchase common stock were issued under the original Plan. No shares were issued in 2005 under either the original or Restated Plan.
As of December 31, 2005, securities authorized for issuance under our original 2003 Share Incentive Plan, approved by the shareholders, as equity compensation were as follows:
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DESCRIPTION OF SECURITIES
Little Squaw Gold Mining Company is authorized to issue 200,000,000 shares of common stock, $0.10 par value, and 10,000,000 shares of preferred stock, no par value.
Common Stock
Each holder of our common stock is entitled to one vote per share in the election of directors and on all other matters submitted to the vote of shareholders. No holder of our common stock may cumulate votes in voting for our directors.
Subject to the rights of the holders of any our preferred stock that may be outstanding from time to time, each share of our common stock will have an equal and ratable right to receive dividends as may be declared by the our board of directors out of funds legally available for the payment of dividends, and, in the event of liquidation, dissolution or winding up of our corporation, will be entitled to share equally and ratably in the assets available for distribution to our shareholders. No holder of our common stock will have any preemptive right to subscribe for any of our securities.
Our common stock is quoted on the NASD Over-the-Counter Bulletin Board under the trading symbol “LITS.”
Preferred Stock
Our directors are authorized by our Articles of Incorporation to issue, by resolution and without any action by our shareholders, up to 10,000,000 shares of preferred stock, no par value , in one or more series, and our directors may establish the designations, dividend rights, dividend rate, conversion rights, voting rights, terms of redemption, liquidation preference, sinking fund terms and all other preferences and rights of any series of preferred stock, including rights that could adversely affect the voting power of the holders of our common stock.
One of the effects of undesignated preferred stock may be to enable the board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a tender offer, proxy contest, merger or otherwise, and thereby to protect the continuity of our management. The issuance of shares of preferred stock pursuant to the board of directors’ authority described above may adversely affect the rights of holders of common stock. For example, preferred stock issued by us may rank prior to the common stock as to dividend rights, liquidation preference or both, may have full or limited voting rights and may be convertible into shares of common stock. Accordingly, the issuance of shares of preferred stock may discourage bids for the common stock at a premium or may otherwise adversely affect the market price of the common stock. As of the date of this filing, the directors have not designated any such preferred shares and therefore, no preferred shares are issued or outstanding.
Transfer Agent
The transfer agent and registrar for the our common stock is Columbia Stock Transfer Company, 1602 E. Seltice Way, Suite A PMB#303, Post Falls, ID 83854, U.S.A. Phone: (208) 664-3544; Fax: (208) 777-8998.
THE SEC’S POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our Amended Articles of Incorporation provide that directors and officers shall be indemnified by us to the fullest extent authorized by the Alaska Corporations Code Section 490, against all expenses and liabilities reasonably incurred in connection with services for us or on our behalf. The Amended Articles of Incorporation also authorize the board of directors to indemnify any other person who we have the power to indemnify under Alaska law, and indemnification for such a person may be greater or different from that provided in the Amended Articles of Incorporation.
To the extent that indemnification for liabilities arising under the Securities Act may be permitted for our directors, officers and controlling persons, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
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DESCRIPTION OF THE BUSINESS
Overview
We, Little Squaw Gold Mining Company, are engaged in the business of acquiring and exploring mineral properties throughout the Americas, primarily those containing gold and associated base and precious metals. We are incorporated under the laws of the State of Alaska on March 26, 1959. Our executive offices are located at 3412 S. Lincoln Dr., Spokane, WA 99203, and our phone number there is (509) 624-5831.
At this time our only property is an exploration stage property in Alaska referred to as the Chandalar property. The Chandalar property is located approximately 190 air miles NNW of Fairbanks, Alaska, and 48 miles NE of Coldfoot, in the Chandalar mining district (Map 1). The center of the district is approximately 70 miles north of the Arctic Circle. We own in fee 426.5 acres of patented federal mining claims consisting of 21 lode claims, one placer claim and one mill site. We control an additional 13,406.5 acres of unpatented State of Alaska mining claims consisting of 115 claims. State mining claims provide exploration and mining rights to both lode and placer mineral deposits. The claims are contiguous, comprising a block covering 13,833 acres (21.6 square miles), and are being maintained by us specifically for the possible development of placer and lode gold deposits.
![[lsgpea130819pr1806f001.jpg]](lsgpea130819pr1806f001.jpg)
Map 1 Location of the Chandalar mining district showing principal mines and prospects.
We do not intend to conduct mining operations on our own account at this time. Rather we plan to undertake cost efficient and effective exploration activities to discover mineralization and potentially mineral reserves, which may upgrade the value of our properties and then joint venture or sell properties to qualified major mining companies. We intend to focus our activities only on projects that are primarily gold deposits.
We are an exploration stage company. None of the properties that we own or control contain any known ore reserves or mineralized material under the definition of ore reserves within SEC Industry Guide 7. Although there is a history of past lode and placer production on our Chandalar property, the property is at an early stage of exploration. The probability that ore reserves that meet SEC guidelines will be discovered on an individual prospect at Chandalar is slight.
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A great deal of further work is required on our properties before a final determination as to the economic and legal feasibility of a mining venture can be made. There is no assurance that a commercially viable deposit will be proven or probable through the exploration efforts by us at Chandalar. We cannot assure you that funds expended on our properties will be successful in leading to the delineation of ore reserves that meet the criteria established under SEC guidelines.
Our initial focus is on exploration of our Chandalar property. The arctic climate limits exploration activities to a summer field season that generally starts in early May and lasts until freeze up in mid-September. There are many operating mines located elsewhere within North America that are located above the Arctic Circle. Management believes year-round operations at Chandalar are feasible should an exploitable deposit of gold be proven through seasonal exploration and development.
Our Planned Exploration for 2006
Our 2006 exploration plans include the following:
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Explore the Chandalar property and to find and then acquire additional gold exploration properties of merit.
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Complete the seasonal exploration program on the Chandalar property that was recommended by our geologic consultant. The focus of that program is on drilling ten prospects with about 10,000 feet of reverse circulation drilling in some 30 holes. Other high-grade gold-quartz vein targets and their associated low-grade aureoles have also been identified and will receive further evaluation work along with an area search for additional gold showings. Exploration of the potentially significant placer deposits at Chandalar will be a secondary priority, and will start with an engineering scoping studying using current data.
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Acquire additional gold exploration properties in Alaska and elsewhere in the Americas that will allow us to conduct field operations year round.
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Support state and federal industrial development projects that could bring power and a road into Chandalar.
We believe we have sufficient capital to complete our 2006 exploration program.
Our Property and Projects
Our principal asset is ownership of the Chandalar property, which controls most of a historic mining district known as the Chandalar mining district. It consists of contiguous patented federal mining claims and unpatented State of Alaska mining claims totaling 13,833 acres ( 21.6 square miles). The patented ground holds the most important of the presently known gold-bearing structures. The Chandalar property is currently at the exploration stage. The Chandalar district has a history of prior production, but there is no current production, except for some small-scale placer operations by an independent miner, Mr. Delbert Ackels, on inlier claims of our claim block (Map 2).
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![[lsgpea130819pr1806f002.jpg]](lsgpea130819pr1806f002.jpg)
Map 2 Our mining claims in the Chandalar mining district.
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During 2004 we contracted the services of an independent geological consulting company, Pacific Rim Geological Consultants, Inc., of Fairbanks Alaska to review and analyze previous work done on Chandalar. The report was commissioned in February and completed in May, and is titled “Gold Deposits of the Chandalar Mining District, Northern Alaska: An information Review and Recommendations”. Pacific Rim concluded that the gold mineralization at Chandalar is mesothermal, which can be described as formed at moderate to high temperatures and moderate to high pressures by deposition from hydrothermal fluids. Largely because of that, the property is believed to have multi-million ounce gold discovery potential. Pacific Rim recommended an initial exploration program to better assess the gold lodes and the placer gold deposits at a cost of about $1.4 million.
Information contained in this registration statement related to our Chandalar property is derived from the report entitled “Gold Deposits of the Chandalar Mining District, Northern Alaska: An information Review and Recommendations”, by Pacific Rim Geological Consultants, Inc.
A preliminary field program to follow up on the work recommended by Pacific Rim was completed in two phases during the 2004 summer field season by James C. Barker, a Certified Professional Geologist licensed to practice in Alaska and under contract to us. Mr. Barker was one of the two co-authors of the Pacific Rim report. The 2004 field work and subsequent data analyses and reporting was completed at a cost of about $77,000. A detailed technical description of the activity and results are contained in a December 20, 2004 report by Mr. Barker titled “Summary of Field Investigations 2004”.
The first phase of the exploration program ended a twenty year hiatus of hard rock exploration on the property and involved a photo geologic lineament study, expansion of the claim block to catch outlying vein showings and reconnaissance sampling. The lineament study identified fifty-nine sites thought to be favorable for discovery of mineralization. The second phase of the 2004 season’s program identified six new gold-bearing quartz veins, bringing the total number of known gold-bearing quartz veins and quartz vein swarms on the Chandalar property to more than 28 (Map 3).
Mr. Barker was again retained to carry out a surface exploration program during the 2005 summer field season. This program was of a more modest nature than previously because of lack of funds, lasting only the month of July. In all, 189 exploratory samples of stream sediments, soils and rock chips were taken, and a series of ten prospect maps were upgraded. This program was completed at a cost of approximately $58,000.
Subsequently, on January 10, 2006, we entered into a consulting contract with Mr. Barker designating him as the Project Manager for the 2006 Chandalar exploration program.
We believe we have sufficient funds to continue our planned methodical exploration of the Chandalar gold mining district during 2006 by using geochemical and geophysical surveys over the extensively soil covered terrain, to continue building a suite of exploration drill targets and to conduct an initial drill test of at least ten targets identified as part of our 2006 exploration program.
History of Property
Gold was discovered in the Chandalar district in 1904, and over the years various operators have produced about 85,000 ounces of gold mainly from placer deposits, but also from high-grade gold-quartz veins. We were incorporated in 1959 for the purpose of acquiring the gold mining properties of the Chandalar mining district. Our operations during the 1960's resulted in the development of a mining camp, a mill, several airstrips, and development of a small amount of ore reserves in underground workings.
In 1972 and 1976, all of the lode mining claims in the Chandalar district were acquired by us except for seven 40-acre unpatented state claims. In 1978, we acquired all of the placer mining claims in the Chandalar district. During 2003, we purchased the seven 40-acre unpatented state mining claims in exchange for 350,000 shares of our common stock. In September of 2003 we staked 55 state unpatented mining claims, in 2004 we staked another eight unpatented state mining claims, and in 2005 we staked one more unpatented state mining claim, thereby increasing the total size of our Chandalar property to 9,993 acres (15.6 square miles).
During the 1970's and early 1980’s the lode and placer properties were leased to various parties for exploration and development and gold production. The quartz lodes were last worked from 1970 to 1983, when 9,039 ounces of gold were recovered from the milling of 11,819 tons averaging 1.02 ounces of gold per ton (oz/t Au). The material was extracted from surface and underground workings on three of four mineralized quartz structures lying mostly on the patented federal mining claims owned by us. Recorded placer gold production of the Chandalar district is 76,270 ounces of 845 fine gold. Our lessees produced 15,735.5 ounces of that total amount of placer gold between 1979 and 1999. All production of native (or raw) gold on the property has been 845 fineness (1,000 fine is pure gold). The raw gold is a natural alloy containing about 85% gold, 14% silver and 1% copper. The unpatented claims are located on property that was formerly all owned by the federal government; however, as of 1991, title to all of the properties had been transferred to the State of Alaska. By that date we had converted all previously held unpatented federal mining claims into unpatented state mining claims.
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In November of 1989 and May of 1990 we entered into a ten year mining lease with Gold Dust Mines, Inc. for all our placer mining interests located on the Big Creek, St. Mary's Creek, Little Squaw Creek, Big Squaw Creek, and Tobin Creek. The lease provided for annual advance rentals of $7,500 per creek drainage mined plus a ten percent (10%) royalty of all raw placer gold production to be paid in kind. Two percent (2%) of the 10% royalty were to be paid directly to the underlying royalty interest holders (i.e. our former management), and was to consist of the coarsest and largest particles of all gold produced. The Company received the remaining 8% of the gold royalty. During 1998 and 1999, Gold Dust’s placer mining lease was limited to Big Creek. There was no mining conducted in 2000, 2001, 2002 or 2003. Since 1999, however, Gold Dust failed to pay the $7,500 annual lease fee on the creek drainage it mined and failed to make the annual rental payments on the state mining claims it was mining on, as required by the mining lease, in all a sum of $32,380. A portion of the 1999 production royalties owed to us in the amount of eleven ounces of gold nuggets was also not paid. In February 2000, the owners of Gold Dust, Mr. and Mrs. Delbert Ackels (guarantors of Gold Dust’s obligations to us) declared a Chapter 7 bankruptcy, which the court discharged in May of 2000. Our mining lease with Gold Dust was the sole asset of Gold Dust.
During the spring of 1990, Gold Dust Mines, Inc. (the lessee) transported about $2.6 million in capital equipment to our Chandalar mining claims over the winter haul road from Coldfoot, located on the Alaska pipeline highway. This machinery included a large gravity-type alluvial mineral treatment plant (an IHC-Holland wash plant) together with a Bucyrus-Erie dragline, two big Caterpillar tractors, front end loaders, a churn drill and other large pieces of placer gold mining equipment. During the last part of the 1993 season, Gold Dust Mines moved its placer operations to the Big Creek and St. Mary's Creek drainages. In 1994, placer mining operations were concentrated on the St. Mary's Creek drainage. During 1995, placer mining operations were conducted on the St. Mary's Creek and Big Creek Drainages. During 1996, a lease amendment was entered into between us, as lessor, and Gold Dust Mines, as lessee, wherein Little Squaw Creek, Big Squaw Creek and Tobin Creek drainages were excluded from the lease. During 1996 to 1999, these placer mining operations were conducted only on the St. Mary’s Creek and Big Creek drainages.
During 1988, a consulting mining engineer was hired to compile historical information on the entire placer and lode gold district. His comprehensive report was completed in January 1990, and is available for review by interested persons. A few conclusions from his report are incorporated in this section.
In the late summer of 1997, a placer mining lease was executed by us with Day Creek Mining Company, Inc., an Alaskan corporation. The lease included the placer mining claims only for the Tobin Creek, Big Squaw Creek and Little Squaw Creek drainages. It did not include the Big Creek and St. Mary’s Creek drainages. The lessee was to have performed minimum exploratory drilling during each year of the lease. Only a minimum amount of drilling was performed the first year, with some good results down stream from the Mello Bench on Little Squaw Creek. Due to lack of financing, the lessee could not comply with the drilling requirements in 1998, and the lease was terminated by us giving a declaration of forfeiture to the lessees in February of 1999. Lessee has not contested the declaration of forfeiture.
We allowed some of our state mining claims on Big Creek and Little Squaw Creek to lapse in 2000 for lack of funds to pay the State of Alaska annual rental fees required to maintain them. The individual who had owned Gold Dust Mines, Inc. (Mr. Ackels) continued to do the annual assessment work on the remaining claims on behalf of us through the year 2002. In July of 2003, Mr. Ackels located state mining claims on his own behalf in the areas previously vacated by us. Mr. Ackels’ claims are now inliers to our mining claim block, and he conducts seasonal placer mining operations on those claims, including a significant operation on Big Creek during 2005 which, pending a survey of claim corners, may have encroach on one of our claims. We intend to maintain and, and if needed, defend our claimholder rights.
We did not accomplish any physical work on our Chandalar property during 2003 other than the location of additional state mining claims. All of our state mining claims were maintained in good standing by carrying forward and applying to the 2003/2004 annual state mandated assessment work requirements the value in excess of the minimum annual labor requirements built up from previous years. Dollar value in excess of the required annual amount can be carried forward as a credit for up to four years.
During 2004 we staked additional claims at Chandalar and completed a two phase summer field program, which was conducted by a certified professional geologist who is an independent consultant and licensed to practice in the State of Alaska. The objective of the field program was to assess the validity of historic records, refine known drilling targets and identify new drilling targets. Several prospects of previously unevaluated or unknown gold mineralization were found as described below in this document.
During 2005 we staked another claim, and completed a modest prospecting and geologic mapping program, which was limited by our lack of funds.
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During the first quarter of 2006, machinery, camp construction materials and supplies were “cat trained” over a winter haulage route to a site on our Chandalar mining claims. Nearly half a million dollars worth of equipment, materials and services were purchased, and then trucked to the Coldfoot jump-off point on the Dalton Highway. From there, bulldozers, snow cats and sleds moved the 67 tons of cargo about 70 miles over an historic miner’s trail to the property. The State of Alaska is trying to clear the access right-of-way to this same trail for possible future road development. We now has the vital machinery and supplies in place to support our upcoming 2006 summer gold exploration program, scheduled to begin after “spring break-up” in late May. In addition to this first phase of mobilization, we have secured a contract with an Anchorage-based drilling services firm to provide 10,000 feet of reverse circulation drilling on our Chandalar property this summer. We have also engaged in setting up the rest of the project’s support structure, including obtaining all necessary state permits, and various contracts for sampling, assaying, geologic mapping, camp catering, and aerial services.
Total recorded production from the Chandalar mining district is about 85,000 ounces of gold (845 fine), although actual historic production was probably much greater than the recorded production. Recorded lode gold production from high-grade gold-quartz vein-shear zone deposits is 7,692 ounces from the Mikado and Little Squaw Mines combined, and 1,347 ounces from the Summit Mine. A total of 75,636 ounces of gold came from placer deposits. Most of the placer production was derived from the Big Creek and Little Squaw Creek drainages, with some additional production from the Tobin Creek drainage.
We believe that the long term potential for the Chandalar mining district lies in the development of the gold quartz lodes that will initially require a substantial drilling exploration commitment.
Location and Access
The Chandalar mining district lies north of the Arctic Circle at a latitude of about 67°30' N. The district is about 190 air miles north of Fairbanks and 48 air miles east-northeast of Coldfoot, an important road traffic service center on the Dalton Highway. The Dalton Highway, which parallels the Trans Alaska Pipeline, is a major highway link to the Prudhoe Bay oil fields on Alaska’s North Slope.
Access to Chandalar is either by aircraft from Fairbanks, or overland during the winter season via a 55-mile-long trail from Coldfoot to Chandalar Lake and then by unimproved road to Tobin Creek on our property. Multi-engine cargo aircraft can land at the state maintained 4,700 foot airfield at Chandalar Lake or at our 3,700 foot Squaw Lake airstrip.
All-weather road access to our property would have dramatic positive economic impacts on the exploration for and development of any gold deposits we may find of our claims. On April 11, 2005 the State of Alaska (the plaintiff), after due notice, filed a lawsuit against the United States and sixteen companies and individuals (the defendants) to gain quiet title to the state’s right-of-way for the historic Coldfoot to Chandalar Lake Trail. We consider this action by the State of Alaska to resolve title and right-of-way issues for road access into Chandalar to be a material event favorable to us should the state succeed in its lawsuit. Current access to our Chandalar property is only either by winter ice trail over this route, or by aircraft to airstrips located on the property. To date, the State of Alaska has settled with fourteen of the seventeen defendants either by default or agreement. The principal defendant, the U.S. Secretary of the Interior, has not settled. Negotiations are proceeding. On December 8, 2005 a U.S. District Court judge for the District of Alaska issued a Schedule and Planning Order for the pre-trial development of the case. It specifies a time table during 2006 for the disclosure of all documents and witnesses, and motions to add other parties. It further states that all discovery must be completed by February 1, 2007, and any dispositive motions must be filed by March 2, 2007. When the time allowed for discovery and motion has passed, and all dispositive motions have been ruled upon, the Court will call upon the parties to certify that the case is ready for trial. We believe this will happen in the late Spring of 2007, pending lack of a pre-trial settlement. The Order contains an estimate that this case will require ten days for trial by jury.
The Chandalar district is situated in rugged terrain just within the south flank of the Brooks Range where elevations range from 1,900 feet in the lower valleys to just over 5,000 feet on the surrounding mountain peaks. The region has undergone glaciation due to multiple ice advances originating from the north and while no glacial ice remains, the surficial land features of the area reflect abundant evidence of past glaciation. The district is characterized by deeply incised creek valleys that are actively down-cutting the terrain. The steep hill slopes are shingled with frost-fractured slabby slide rock, which is the product of arctic climate mass wasting and erosion. Consequently, bedrock exposure is mostly limited to ridge crests and a few locations in creek bottoms. Vegetation is limited to the peripheral areas at lower elevations where there are relatively continuous spruce forests in the larger river valleys. The higher elevations are characterized by artic tundra.
Snow melt generally occurs toward the end of May followed by an intensive, though short, 90-day growing season with 24 hours of daylight and daytime temperatures that range from 60-80° Fahrenheit. Freezing temperatures return in late August and freeze-up typically occurs by early October. Winter temperatures, particularly in the lower elevations, can drop to -50° F or colder for extended periods. Annual precipitation is 15-20 inches, coming mostly in late summer as rain and as snow during the first half of the winter. Winter snow accumulations are modest. The area is essentially an arctic desert.
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Mining Claims
At Chandalar, we currently own in fee twenty-one 20-acre patented federal lode claims, one 15-acre patented federal placer claim, and one 5-acre patented federal mill site. In addition, we hold twenty-seven 40-acre unpatented State of Alaska claims lying largely within eighty-eight 160 acre unpatented state claims (one 40-acre claim is a re-stake over an older one for security reasons). The mining claims were located to cover most known gold bearing zones within an area approximately five miles by eight miles. The total land position amounts to 13,833 acres (21.6 square miles) consisting of 426.5 acres of patented claims and 13,406.5 acres of unpatented claims. The claims are contiguous and form a single block that comprises our only mining property at this time.
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![[lsgpea130819pr1806f003.jpg]](lsgpea130819pr1806f003.jpg)
Map 3 Mines, prospects and our drill targets in the Chandalar mining district.
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Holders of State of Alaska unpatented mining claims are required to complete a minimum amount of annual labor on each claim and to additionally pay an annual rental on them. In the case of a claim block or group where the claims are adjacent, the total amount of required annual labor is determined by multiplying the number of claims by the amount required for an individual claim, and the excess value of labor expended on any one or more of the claims can be applied to the labor requirements on the other claims within the block or grouping. The amount of required annual labor work varies with the size and type of mining claim and the amount of annual rental payable varies with the size, type and age of the claim. Labor expenses in excess of the annual requirement can be carried forward as a credit for up to four years. However in the case of our Chandalar property, we have chosen to carry forward any excess value credit separately for each of our two types of state claims. Also, the holder of a state mining claim may make a cash payment to the state equal to the value of labor required in lieu of doing the assessment work.
The annual labor requirement for our Chandalar holdings is $100 per 40-acre claim and $400 per 160-acre claim, except there is no annual labor requirement for the assessment in year we stake a claim. The combined annual labor requirement for our claims in 2006 is $28,300. This will increase to $37,900 in 2007, provided no additional claims are staked in the interim.
In the 2003/2004 assessment year, which ended on August 31, 2004, we spent $46,970 on work that qualified for annual labor requirements. Our combined excess value credit for the two types of claims was $54,595, with $14,400 expiring on September 1, 2005, $18,425 expiring on September 1, 2006, and $5,073 expiring on September 1, 2008.
In the 2004/2005 assessment year, which ended on August 31, 2005, we spent $73,072 on work that qualified for annual labor requirements. Our combined excess value credit for the two types of claims was $88,067, with $18,425 expiring on September 1, 2006, $5,073 expiring on September 1, 2008, and $64,569 expiring on September 1, 2009.
The annual rental fees for our unpatented state mining claims are, with one exception, $130 for the 40-acre claims and $100 for the 160-acre claims, subject to a one time 50% rental reduction for the 160-acre claims on the next rental due date after their staking. The annual rental for the one 40-acre claim exception is $25 because of its recent age. All of our Chandalar property mining claims rental fees are fully paid through November 30, 2006, and are included in mineral property maintenance expense and professional services expenses on our statement of operation. The total annual rental obligation in 2006 for the Chandalar property is $11,005. The aggregate annual claim rental fees will increase to $12,205 in 2007, provided no additional claims are staked within the 2006 assessment year.
The total annual combined mining claims assessment work and rental holding costs in 2006 for our Chandalar property is $39,305. This will increase to $50,105 in 2007, provided no additional claims are staked in the interim. Our private property (patented mining claims) does not lie within any borough and is not subject to any property tax levies.
Our former management holds a mineral production royalty reservation on portions of the Chandalar property. It is a 2% royalty defined as a gross product royalty on placer gold mining and as a net smelter return on lode mining production. The royalty on placer gold production is an “in kind” royalty to consist of the coarsest and largest particles of all gold produced. All of the patented federal mining claims are subject to this royalty as are 20 of the 115 unpatented state mining claims. The royalty is applicable to about 1,185 acres of the 13,833 acre property. We have an option agreement to purchase the royalty for a one time cash payment of $250,000. The option terminates on June 23, 2013, if not exercised on or before that date.
Geology and Previous Exploration and Development
Lode gold occurs at Chandalar as high-grade quartz veins within large northwest trending shear zones in Paleozoic schists. To date more than 30 gold-bearing quartz veins or swarms of gold-bearing quartz veins have been identified on the property. The quartz veins are classified as being mesothermal of metamorphic orogenic origin. Mesothermal vein systems commonly have great vertical range, and at Chandalar the vertical extent of the gold mineralization is known to be in excess of 1,500 feet. The gold-bearing quartz veins are typically one to six feet thick, with exceptional thicknesses of up to twelve feet in parts of the Mikado mine. Portions of some of the veins where they display a ribbon appearance are of particularly good gold grade, often in the multi-ounce per ton range. Some of the veins are known to be more than a thousand feet long, and occur intermittently along laterally extensive shear zones; the Mikado shear for example, has been identified over a strike length of six miles. A thick blanket of frozen soil, rock scree and talus and landslides covers an estimated 80% to 90% of the property, largely concealing the gold-quartz veins making their exploration and discovery challenging.
Our patented lode mining claims contain the most important gold-bearing structures in the district, as far as is now known. Although high-grade gold showings in the Chandalar district have long been recognized in published literature, exploration and development work necessary to establish the extent of mineralization has never been accomplished. The principal evaluation work done in the past on the lode deposits was done on the Mikado, Summit, Little Squaw, and Eneveloe-Bonanza Mines by lessees in the late 1970’s early 1980’s. Each of these mines has been minimally developed by several hundred feet of underground workings aggregating almost 2,000 feet in all. Limited surface work in the past within the district established the existence of gold-bearing zones on other prospects similar to the veins found at these mines. Sufficient development work has
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never been accomplished on any of the veins and gold-bearing zones to define the presence of ore reserves that meet the criteria of SEC Industry Guide 7.
Drilling of the veins by previous operators is either extremely limited or, in most cases, non-existent. A low-grade gold aureole commonly occurs around the high-grade gold-quartz veins where chloritically and sericitically altered rocks contain stockworks of quartz veinlets. These aureoles, which extend outwards as much as 100 feet, have never been tested for low-grade bulk tonnage mining potential. We have identified several targets that may host high-grade gold-quartz vein deposits within low-grade bulk tonnage deposits, and substantial drilling and engineering work will be required to determine if such potential deposits exist in commercially viable quantities.
2004 and 2005 Field Programs
During the 2004 summer field season we conducted a two phase reconnaissance surface and underground sampling program on the Chandalar property. A deep soil sampling technique developed by us was employed to identify gold anomalies that may reflect hidden gold-quartz veins. The highlight of the first phase was the re-discovery of the historic Pioneer prospect. The Pioneer quartz vein is partially exposed in some old trenches and prospect pits. The Pioneer prospect, which is associated with a major shear zone at least three miles long, contains very high-grade gold values of unknown extent. A channel sample across the vein assayed 2.30 ounces of gold per ton over a width of 2.5 feet.
The 2004 summer field program was augmented by a structural geology study of the Chandalar district using existing high altitude aerial photography. The study was done by BlueMap Geomatics Ltd. located in Vancouver, British Columbia. The gold bearing quartz veins on the property occur within large shear zones or faults that form lineaments, and major structural intersections may be a controlling factor in the emplacement of the gold mineralization. BlueMap Geomatics identified numerous pronounced linears that they interpreted to represent deep-seated faults. This work was useful in defining sites for follow up exploration in 2005 that resulted in new prospects (Rock Glacier and Prospector East.)
Similar surface prospecting work and mineralization site appraisals continued during the summer of 2005, although at a lower level of activity for lack of sufficient funding. A summary description of the principal mines and prospects examined during the 2004 and 2005 summer field seasons is shown on Map 3 and is represented in the Table below. The samples described in the paragraphs below and in the prospect descriptions and in the Table were collected by us unless otherwise indicated. The samples typically consist of five to seven pounds of rock fragments collected on the surface or on the dumps of old workings or from within old prospect pits. Each sample consists of between twelve and twenty dollar size rock chips or fragments. The sampled material is primarily of vein quartz or rocks containing quartz veinlets. The samples were assayed by ALS Chemex USA Inc. in Sparks, Nevada using fire assays with a gravimetric finish for gold. (ALS Chemex operates under ISO certification and is a global provider of assays to mineral exploration and mining companies.) The samples are preliminary and strictly of a reconnaissance nature. In many cases the samples were not taken across the full width of the quartz veins, and therefore the samples do not represent a quantitative measurement of the gold content of the veins, nor should they be interpreted to indicate that mineralization is present in a quantity and grade that would represent an economically viable ore deposit. Substantial additional sampling and geological and engineering work would have to be completed to confirm the presence of proven and probable reserves that meet SEC standards, and no assurance can be given that any such reserves will eventually be defined. Soil samples taken by us and reported below are strictly of a reconnaissance nature. The soil samples were taken by hammering a hollow steel pipe (split set rock bolt) about five feet into the ground. Then material from the last one to two feet inside the pipe was collected and submitted to ALS Chemex for geochemical analysis using atomic adsorption methods.
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TABLE OF THE MINES AND PROSPECTS OF OUR HOLDINGS
IN THE CHANDALAR MINING DISTRICT
Map No. | Prospect | Comments (1) Au = Gold; Ag = Silver; ounces of gold per ton = oz Au/t (Detailed prospect descriptions can be found in the “Chandalar Mining District Summary of Field Investigations 2004 Phase I & II” and the “Chandalar Mining District, A Report of Findings and Recommendations, 2005” reports. |
1 | Crystal | 4 to 6 veins 6 to 9 feet wide are present with gold-bearing ribbon zones; 4.5 tons @ 45 oz Au/t produced in 1908 according to historic reports in our possession; high grade gold values are confirmed by our sampling |
2 | Big Squaw | channel sample across 12-ft. quartz vein with trace gold |
3 | Pioneer | mineralization hosted in shear zone; two channel samples across different portions of the vein collected by us assayed 2.30 oz Au/ton across 2.5 ft. and 0.82 oz Au/ton across 3.0 ft.; vein traced 2,000 ft. by soil samples and quartz float train; a sample of quartz float assayed 1.37 oz Au/t |
4 | Pallasgren | continuous chip samples by us across a 30-ft. wide quartz outcrop show strongly geochemically anomalous gold; random samples of a quartz vein exposed in a nearby prospect pit assayed 0.39 oz Au/t; associated soil sample assayed 1.91 ppm Au; massive iron bleed below quartz zone into creek |
5 | Grubstake | a 1981 sample from 1.6 ft. quartz vein assayed 0.32 oz Au/ton according to records in our possession |
6 | Grubstake East | caved adit explored quartz vein with mineralized vein material found in the mine dump; sampling by us verified the presence of anomalous gold in quartz; one sample from dump assayed 0.17 oz Au/t |
7 | Prospector East | 3-ft. quartz vein exposed intermittently by pits for about 400 ft.; samples taken by us show highly anomalous silver associated with galena |
8 | Indicate-Tonapah | several large quartz veins and numerous old small mine workings and stamp mill sites; old unverified assays show strongly anomalous gold values; our chip sample across one 10 foot vein assayed .02 ppm Au; our random sample of nearby old stamp mill feed assayed 0.74 oz Au/t |
9 | Chandalar | vein parallel to Eneveloe vein; reports in our possession include a 2-ft. channel sample from a 6-ft. vein that assayed 2.26 oz Au/ton; a 1.5-ft. channel sample collected by us across a 5-ft. vein assayed 1.1 oz Au/ton |
10 | Jupiter | a 10-ft. quartz vein is exposed in road cut with disseminated sulfide minerals, and a second vein discovery was reported in 1981; we took a sample across the 10-ft. that assayed 0.11 oz Au/ton |
11 | Bonanza | three continuous channel samples collected by us of a 9-ft. zone of quartz, schist and clay assayed 0.5-ft. at 0.06 oz Au/ton, 3.0-ft. at 0.06 oz Au/ton and 6.0-ft. at 0.10 oz Au/ton |
12 | Drumlummon | reports in our files refer to several veins and gold-bearing quartz; apparently no further work has been done since early 20th century; we found limonitic quartz breccia float associated with hydrothermally altered rocks; four samples of quartz float all anomalous in gold |
13 | St. Mary's | reports in our possession indicate 0.24 oz Au/ton from an 11-ft. thick vein and fault; three of our samples show traces of gold; placer gold deposit mined out below vein |
14 | Star Group | several veins; old unverified assays with one of 1.34 oz Au/ton, and 1981 trenching program reported trace to 0.74 oz Au/ton; vein can be traced for 4,000 ft. |
15 | Star No. 3 | reports in our possession include a trench sample of 0.24 oz Au/ton across a 3.5-ft. vein; we have not yet verified |
16 | Shamrock | Samples collected by us indicate anomalous values of gold |
17 | Wildcat | Poorly exposed quartz vein at least 6-ft. thick with no visible mineralization |
18 | Jackpot | a tunnel exposes a 1.5-ft. vein of ribbon quartz; a reconnaissance of vein material collected by us on the dump assays 1.97 oz Au/ton |
19 | Woodchuck | a 3- to 6-ft. vein exposed in shaft; records in our possession indicate highly anomalous gold values |
20 | Little Kiska | records in our possession indicate presence of gold and antimony; pending our verification |
21 | Pedro | records in our possession indicate presence of gold; a quartz vein can be seen on high slope, but has not yet been investigated |
22 | Grubstake West | reports in our possession of old prospect pit with gold mineralization in quartz; Company remain to verify |
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23 | Big Creek Bowl | numerous boulders of sulfide-quartz vein traced for 800 ft. indicate several mineralized quartz veins |
24 | Mercury | a 2-ft. quartz vein we found on the high ridge west of Big Squaw Creek; possible west extension of the Eneveloe veins that assayed 0.01 oz Au/t |
25 | Rock Glacier | large area of vein and associated rock occurs on a rock glacier that gouges the valley bottom of Little Squaw Creek where a number of quartz veins and shear zones intersect valley bedrock; ten random samples taken by us of the glacial quartz debris assayed an average of 2.38 ppm Au; 27 of 31 soil samples taken from glacial debris source area highly assayed anomalous in gold; four gold-bearing veins indicated under soil cover |
26 | Big Tobin | soil sampling by us defines a gold-arsenic anomaly & possible presence of a concealed quartz vein |
27 | Uranus | historic reports in our possession indicate presence of two quartz veins exposed in two prospect pits; the site was relocated by us and a reconnaissance sample collected by us of loose quartz vein material in one caved-in prospect pit assayed 1.47 oz Au/t; a 6-foot continuous chip sample across a quartz vein exposed in the second prospect pit assayed 0.40 oz Au/t; we have taken four soil samples along a 500-foot quartz float train that are anomalous in gold |
28 | McLellan | old unreported prospect pits discovered by us ; 4 to 6 veins present; reconnaissance sampling by us of one of the veins in an old trench assays 1.10 oz Au/t: several gold anomalous soil samples taken in the vicinity |
Little Squaw Mine | according to records in our possession about 380 tons of development material were produced at a grade of 1.65 oz Au/ton; drill intercepts, including one of 10 ft. at 0.66 oz Au/ton, show deeper underlying untested mineralization | |
Mikado Mine | gold occurs within fractured rock and quartz lenses of a shear zone; according to records in the our possession past production totaled 10,418 tons at a grade of 0.99 oz Au/ton | |
Summit Mine | at least two gold-quartz veins are present; according to records in our possession, 142 tons of development material were produced at a grade of 4.82 oz Au/ton; overall, a total of 1,401 tons at 1.29 oz Au/ton were produced; drill hole records show more veins were cut beneath the mine workings – DDH 82-7 intercepted 5 feet @ 1.0 oz Au/t | |
Eneveloe Mine | at least two gold-quartz veins are present; according to records in our possession, a zone of 1.0 oz Au/ton or greater was encountered on both levels of 1982 vintage tunnels, but there is no record of production; three 1982 drill hole intercepts contain significant gold values and indicate extensions of the veins | |
Little Squaw Placer Mine | according to information in our possession reported production from drift mining on Mello Bench is 29,237 oz gold at a grade of 0.96 oz Au/cubic yard; 10.6 oz gold nugget recovered; significant volumes of unmined gold-bearing gravel remain |
(1) Values shown in this column include only samples collected by the Company in 2004 and 2005 as channel samples or representative chip samples. Assays were performed by ALS Chemex.
Summary of Prospects
A summary of our material gold prospects is set forth in the following:
Little Squaw Vein: This gold-quartz vein is partially explored by trenches and two short tunnels decades old. According to records in our possession, previous operators defined an existing shoot of mineralized material containing approximately 2,000 tons at a grade of 1.55 oz Au/t. A reconnaissance sample taken by us from a quartz vein exposed in one of the trenches assayed 5.24 oz Au/t. Channel sampling by us in a tunnel below that trench yielded 19.98 oz Au/t over 3.54 feet of true width. This sample run includes a 0.84 foot interval of “ribbon quartz” that assays 89.12 oz Au/t with 15.85 oz Au/t. Another channel sample of this ribbon quartz taken ten feet farther along in the tunnel assayed 5.16 oz Au/t over 0.85 feet. The ribbon quartz derives its appearance from lenticular seams of dark colored iron sulfides and mica minerals within white quartz. We have concluded that the previously defined shoot of mineralized material is open to expansion by drilling, and we believe that previous operators may have underestimated the gold grade of the shoot because of technical difficulties in properly sampling zones within the quartz vein that contain wires and nuggets of native gold.
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Crystal Prospect: In 1909 four tons of ore were extracted from an 8-foot-deep shaft driven into an 8-foot-wide quartz vein that was processed in a crude (three-stamp) mill. Historic records in our possession show that the four tons assayed 47.08 oz Au/t. The location of the Crystal Prospect was uncertain until we re-discovered it this year. The old shaft and associated trenches are completely sloughed in, but a set of veins can be traced over a strike length of at least 400 feet. Thick soil cover hampered efforts to find the limits of the veins. The main quartz vein is at least 5-to-6 feet thick, and a channel sample taken by us of a 0.67-foot-thick footwall portion of ribbon quartz assayed 3.64 oz Au/t. The Crystal vein appears to be very similar to the Little Squaw vein located along strike projection 1.5 miles away, but a correlation cannot be established because the intervening area is entirely covered. Extensive dozer trenching and soil sampling is planned to define the lateral extensions and possible linkage of these veins.
McLellan Prospect: This area contains a swarm of 5 previously unreported quartz veins that are poorly exposed, that we have traced for a distance of at least 1,000 feet along strike. Ribbon quartz has so far been found associated with two of the veins. The ribbon quartz characteristically weathers recessively because of the effect of decomposing sulfide minerals, and it is typically not exposed without trenching. A reconnaissance sample of this material gathered from the surface by us assayed 1.10 oz Au/t. The McLellan Prospect is located about 1,500 feet from the Crystal Prospect, and we believe that it may be a faulted offset of the Crystal vein. Follow-up soil sampling and trenching is planned at the McLellan Prospect.
Pioneer Prospect: The Pioneer quartz vein, which saw limited development in the early 1900’s, is partially exposed in old trenches and prospect pits. The Pioneer prospect contains very high-grade gold values of undetermined extent, but it is associated with a major shear zone that is at least three miles long. A channel sample collected by us across the vein assayed 2.30 oz Au/t over a width of 2.5 feet, and another channel sample of a 3-foot-wide quartz vein taken 35 feet along strike from the first channel sample assayed 0.82 oz Au/t. Six anomalous soil samples taken by us from a depth of 4 to 5 feet along the soil covered projections of the vein average 0.260 parts per million (ppm) gold and are interpreted to indicate the possible presence of a buried vein extending outward from both ends of the trench, suggesting a possible vein strike length in excess of 1,500 feet with at least 150 feet of vertical relief exposed. Additional soil sampling and dozer trenching are planned to further define drilling targets at the Pioneer prospect.
Prospector East Prospect: Mineralization detected at this prospect is unusual for the Chandalar district because the prospect is characterized by high silver values relative to gold. It is located on north side of the property in low hills where few other veins have been found, probably because of thick soil cover. Two reconnaissance samples collected by us from the dump of an old caved tunnel assayed 23.8 oz Ag/t, 0.08 oz Au/t and 11.7 % Pb, and the other sample assayed 5.5 oz Ag/t, 0.09 oz Au/t and 2.2% Pb. The vein appears to be about 3 feet thick and is exposed in some old prospect pits over a strike length of 400 feet. So far, we have not been able to collect channel samples directly from the vein. The results of the dump samples can only be interpreted as an indication that important mineralization is present. Highly anomalous values in bismuth, silver and lead, along with the absence of zinc give this prospect a very distinct geochemical signature, which may be indicative of district scale metal zoning. Follow up trenching and soil sampling are planned.
Rock Glacier Prospect: A jumbled mass of ice bound soil, cobbles and boulders exceeding a million tons contains abundant rubble of vein quartz fragments that are highly anomalous in gold. Assays of twelve rock chip reconnaissance samples taken by us that were collected randomly of numerous quartz cobbles and boulders average 2.38 ppm gold, and the average geochemical assay of three the soil samples taken by us of material binding the slide material is 0.48 ppm gold. The rock glacier originates in a large meadow about a thousand feet up a mountainside. Soil samples taken in this source area show strong gold anomalies indicating buried mineralized quartz veins. An extensive soil sampling program is planned in this area, and geophysical techniques, such as ground magnetics and induced potential, may be useful to trace the veins below the thick cover. Map 4 and its accompanying table include details of locations and the assay of samples taken on this prospect.
Uranus Prospect: A series of previously unreported and closely spaced gold-quartz veins was found in a saddle high on a ridge opposite the Rock Glacier Prospect. Random chips of decomposed mineralized quartz are strewn in discrete linear streaks over the ground, forming a down hill quartz train more than 500 feet long. A randomly collected reconnaissance sample of this material taken by the Company shows it to be anomalous in gold content. Additionally, four soil samples taken by the Company along the quartz float train average 0.21 ppm Au. Two old prospect pits expose iron stained quartz. A reconnaissance sample of loose quartz vein material in one pit located within the quartz float train assayed 1.47 oz Au/t. A second old prospect pit some distance away partially exposes a large quartz vein, shown to be at least six feet thick. A six-foot continuous chip sample across the vein assayed 0.40 oz Au/t. The mineralized zone is of unknown width and length as there is no exposed bedrock except for in the two old pits, making this prospect especially intriguing for drilling exploration.
Big Tobin Prospect: Soil sampling has revealed an important set of mineralized shears in the Big Tobin area. They are important because they strike northeast in contrast to all other known mineralized structures, and they trend directly toward the Mikado gold deposit about 1,000 feet away. The projected structural intersection is a target that merits additional follow-up work.
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Mikado Mine: Records in our possession indicate that this mine has produced about 10,000 tons at an average grade of one ounce of gold per ton. Twenty-five-year-old mining engineering records show that significant un-mined mineralized material remains in the portion of the mine that was previously developed but that is now caved in. The previously mined vein carried multi-ounce gold grades in some places. Three reconnaissance rock samples collected by us that were gathered from the mine dumps in 2004 and 2005 assayed 23.28 oz Au/t with 5.24 oz Ag/t, 1.57 oz Au/t with 0.83 oz Ag/t and 0.95 oz Au/t with 0.19 oz Ag/t. Our consulting geologists have concluded that there are at least two shoots of strongly mineralized material which are open to extension at depth, and we intend to test these possible extensions by drilling during the 2006 field program.
![[lsgpea130819pr1806f005.gif]](lsgpea130819pr1806f005.gif)
Map 4 and Table. Sample map with assays of the Rock Glacier prospect on the Chandalar property
Our Chandalar mining claims cover all or major portions of three main drainages and lesser parts of a fourth drainage that radiate from the areas in which the gold-bearing quartz veins and associated shear zones are located. They include most of the areas where placer mining operations occurred in the past, as well as substantial portions of these drainages that have never been mined. The placer gold deposits in the Chandalar district are characterized by high-grade concentrations of native gold that occur in multiple horizons in second and third order streams in the vicinity of auriferous quartz lodes. At least 76,000 ounces of gold are known to have been produced from four placer deposits at Chandalar, with recovery of some nuggets, the largest of which was 10.6 ounces according to records in our possession. The placer gold deposits were exploited by both open-cut and underground drift mining methods limited to unconsolidated but frozen gravels. Limited drilling by previous operators indicates that certain areas on the property, especially along Little Squaw and Big Squaw Creeks have potential for the discovery of significant quantities of placer gold. Substantial drilling and engineering work will be required to determine if such potential deposits exist in commercially viable quantities.
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Progress was made during the 2004 and 2005 summer field seasons in defining geological features helpful in planning future drilling campaigns. The discovery of hydrothermal alteration haloes that envelop locations of strong gold mineralization within the major shear zones may be significant. We are methodically building a considerable suite of substantive drilling targets on the Chandalar property. The primary focus of the 2005 geological field program was to technically assess a suite of the prospects defined by the 2004 program for initial drilling in 2006. We believe that this work was successful in effectively advancing ten quartz lode gold prospects to the drilling stage (Map 3). Drill targets include both high-grade quartz vein underground deposits and targets for lower-grade deposits of disseminated gold within hydrothermally altered wall rocks of quartz veins, which may be amenable to surface bulk mining methods. This drilling is intended to provide an initial test of the ten targets, and, following appraisal of the results, is expected to lead to intensified drilling on a few selected sites in 2007. The aim of the 2007 drilling would be to establish a mineral resource on the selected sites. We believe we have sufficient funds to undertake the proposed drilling program in 2006. We may not have sufficient funds to accomplish the 2007 follow up drilling, and may have to rely on further sales of our securities to pay for it. There can be no assurance that we would be successful in completing such a securities offering on terms acceptable to us.
Risks Related to the Chandalar Project
Competition
There is aggressive competition within the minerals industry to discover and acquire properties considered to have commercial potential. We compete for the opportunity to participate in promising exploration projects with other entities, many of which have greater resources than us. In addition, we compete with others in efforts to obtain financing to acquire, explore and develop mineral properties.
Employees
We have no employees at this time. We reply on consulting contracts for our management and administrative personnel needs, including the persons who act as our President/Chief Executive Officer and Vice President. These contracts will expire on December 31, 2006 and January 31, 2007, respectively, unless renewed by the compensation committee of our board of directors. The contract with our former Chief Financial Officer/Secretary/Treasurer expired on February 17, 2006 with that individual’s resignation. We have three additional management consulting contracts that became effective in the first quarter of 2006 and terminate on December 31, 2006.
We have established accounts with the State of Alaska to enable it to process payrolls to meet our 2006 Chandalar project field labor needs. The first of approximately ten hourly paid employees is scheduled to begin work in the first week of May 2006. These are seasonable jobs that are all expected to be terminated by October 2006.
Regulation
Our activities in the United States are subject to various federal, state, and local laws and regulations governing prospecting, development, production, labor standards, occupational health and mine safety, control of toxic substances, and other matters involving environmental protection and taxation. It is possible that future changes in these laws or regulations could have a significant impact on our business, causing those activities to be economically reevaluated at that time.
Environmental Risks
Minerals exploration and mining are subject to potential risks and liabilities associated with pollution of the environment and the disposal of waste products occurring as a result of mineral exploration and production. Insurance against environmental risk (including potential liability for pollution or other hazards as a result of the disposal of waste products occurring from exploration and production) is not generally available to us (or to other companies in the minerals industry) at a reasonable price. To the extent that we become subject to environmental liabilities, the remediation of any such liabilities would reduce funds otherwise available to us and could have a material adverse effect on our financial condition. Laws and regulations intended to ensure the protection of the environment are constantly changing, and are generally becoming more restrictive.
Our Chandalar property contains an inactive small mining mill site with tailings impoundments, last used in 1983. The mill was capable of processing 100 tons of ore feed per day. A grand total of 11,918 tons were put through the mill, and into two small adjacent tailings impoundments. A December 19, 1990 letter from the Alaska Department of Environmental Conservation to the Division of Mining of the Department of Natural Resources states: ”Our samples indicate the tailings impoundments meet Alaska D.E.C. standards requirements and are acceptable for abandonment and reclamation.” The Alaska DNR conveyed acknowledgement of receipt of this report to us in a letter dated December 24, 1990. We subsequently reclaimed the tailings impoundments, and expect that no further remedial action will be required. Vegetation has established itself on the tailings
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impoundments, thereby mitigating erosional forces. Concerning a related matter, the Alaska D.E.C. has identified a small area of low-level mercury contamination in a graveled staging area next to the mill and has designated it to be a medium priority assessment site in its state contaminated sites database. We have accrued a $50,000 liability to execute a remediation plan proposed by us and approved by the Alaska D.E.C. Other than this minor mercury contamination, we know of no matters of concern to the Alaska D.E.C. regarding our and our predecessors’ exploration and production activities on the properties.
Title to Properties
Our only mining property (Chandalar) lies on Alaska state land, except for the patented mining claims owned by us. The major portion of our property consists of State of Alaska unpatented mining claims. The validity of unpatented state mining claims is often uncertain, and such validity is subject to contest. Unpatented mining claims are unique property interests and are generally considered subject to greater title risk than patented mining claims, which are real property interests that are owned in fee simple. An important part of our property is patented federal mining claims held in fee simple.
The State of Alaska requires locators and holders of unpatented state mining claims to complete annual assessment work and to pay an annual cash rental on the claims in order to keep the claimant’s title to the mining rights in good standing. We are not in default of any annual assessment work filing or annual claim rental payment.
State of Alaska unpatented mining claims are subject to a title reservation of 3% net profits royalty for all mineral production on net mining income of $100,000 or more.
Our management has done a title chain search of the Company’s patented federal mining claims. They believe we are the owner of the private property, and that the property is free and clear of liens and other third party claims except for a 2% mineral production royalty held by former management.
We have attempted to acquire and maintain satisfactory title to our undeveloped Chandalar mining property, but we do not normally obtain title opinions on our properties in the ordinary course of business, with the attendant risk that title to some or all segments our properties, particularly title to the State of Alaska unpatented mining claims, may be defective.
Alaska Taxes Pertaining to Mining
Alaska has tax and regulatory policies that are widely viewed by the mining industry as offering one of the most favorable environments for new mines development in the United States. The mining taxation regime in Alaska has been stable for many years. There is discussion of taxation issues in the legislature but no changes have been proposed that would significantly alter the current state mining taxation structure. Although management has no reason to believe that new mining taxation laws which could adversely impact our Chandalar property will materialize, such event could and may happen in the future.
MANAGEMENT’S DISCUSSION AND ANALYSIS
General
Exploration Activities in 2004 and 2005
During 2004 and 2005, we focused on advancing exploration of the Chandalar property through surface prospecting and geologic mapping and sampling methods. No drilling or underground exploration work was involved. In 2004, Pacific Rim Geological Consulting Inc. of Fairbanks, Alaska completed a comprehensive independent technical report on the Chandalar property. Pacific Rim reviewed all of Little Squaw’s extensive data on the Chandalar property that the Company has built up over the years, which includes data from various operators dating back to the early 1900’s. They concluded the gold mineralization is of the mesothermal type, and the property has multi-million ounce gold discovery potential. Pacific Rim recommended additional exploration, some of which was completed in two phases during the 2004 summer field season by an independent certified professional geologist, James C. Barker, under contract to the Company. Mr. Barker was one of the two co-authors of the Pacific Rim report. The summer field program was augmented by a structural geology study of the Chandalar district using existing high altitude aerial photography. BlueMap Geomatics identified numerous pronounced linears that it interpreted to represent deep-seated faults. Interested parties may obtain a copy of this report form the Company by written request. The 2004 field work and subsequent data analyses and reporting were completed at a cost of about $77,000. A detailed technical description of the activity and results are contained in a December 20, 2004 report by Mr. Barker titled “Summary of Field Investigations 2004.” This work has been useful in defining targets for future exploration.
The objective of the 2004 exploration field program was to assess the validity of historic records, refine known drilling targets and identify new drilling targets. Several prospects of previously unevaluated or unknown gold mineralization were found, including six previously unknown gold-bearing quartz veins. During the 2004 summer field program we conducted a
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reconnaissance surface and underground sampling program of numerous gold-bearing veins on the property. We also conducted a soil geochemical sampling program using a deep penetrating sampling technique we developed to identify gold anomalies that may reflect hidden gold-quartz veins. Two previously unknown prospects containing six gold-quartz veins were discovered as a result of the field work, bringing the total number of known gold-bearing quartz veins and vein swarms on the property to 32. We expect to find more mineralized structures as exploration progresses because more than 80% of the property is covered by soil and landslide debris.
During the first quarter of 2005, we had planned to conduct the seasonal exploration program on the Chandalar property that was recommended by our geologic consultant, James C. Barker. His proposed program was budgeted at $1.4 million. We expected to raise sufficient capital to hire Mr. Barker and other qualified independent geologic consultants to complete a two phase program, which would have included infrastructure repairs, geological field work, taking 600 rock and 4,000 soil samples, and doing ground-based and aerial geophysics surveys, aerial topographic surveys, and 5,000 feet of reverse air circulation drilling.
The planned 2005 summer program was to have been conducted in two staged phases as follows:
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PHASE I would be geological investigations primarily to pin-point proposed drill sites throughout the district. This work would consist of various exploration activities, including the use of targeted soil sampling grids and ground and aerial geophysics.
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PHASE II would be a reverse circulation drill program of 5,000 feet or more.
Phase I geophysical and geochemical surveys were anticipated to better define the fault structures, initially defined by BlueMap Geomatics, that host mineralized quartz veins. A technical assessment was then expected to be made of locations where drilling was thought to be warranted during phase II. Several sites where old drill holes indicate the downward extensions of quartz vein gold mineralization were targeted for verification drilling. The wide-spread occurrences of gold mineralization in large, through-going structures, at least four of which have a mining history, was reasoned to justify the work proposed in Phases I and II.
We were unable to obtain the financing required to undertake this phased exploration program due to unfavorable stock market conditions for the mining sector in early 2005. Instead, we undertook a modest surface exploration of the Chandalar property during the month of July 2005. Mr. Barker was again retained to carry out a surface exploration program during the 2005 summer field season. A small field crew concentrated work on ten of the gold quartz vein prospects, where geologic maps were produced of each and 189 rock, soil and stream sediment samples were taken for analysis. Importantly, their geologic reconnaissance found a close special association between many of the gold bearing quartz veins and intrusive bodies of mafic igneous rock masses (greenstones). Our geologists believe there may be a genetic link between the greenstones and the gold mineralization that can be used as an exploration tool. This program was completed at a cost of approximately $58,000. A detailed technical description of the activity and results are contained in a January 2, 2006 report by Mr. Barker titled “Chandalar Mining District, A Report of Findings and Recommendations, 2005”.
Subsequently, on January 10, 2006, we entered into a management consulting contract with Mr. Barker designating him as the Project Manager for the 2006 Chandalar exploration program.
We also retained the services of a licensed consulting geologist, Melvin Klohn, during the 2005 field season to review its extensive Chandalar property data and make a comprehensive week-long visit to site. Mr. Klohn examined most of the significant gold prospects on the property and said that he found the gold bearing quartz veins to be very similar to the important category of gold deposits often called “lode gold” or greenstone gold, which are major contributors to world gold production. He noted the district’s prospects are aligned along a series of sub-parallel structural belts in a structural pattern similar to that of the famous Red Lake district in Ontario, Canada. He concluded that the Chandalar property presents a unique and appealing gold exploration opportunity.
Our work during the 2005 summer field season investigated old reports of quartz vein showings at the Pallasgreen and Drumlummon prospects. These sites had not been evaluated since their discovery by prospectors early in the 1900s. At the Pallasgreen prospect, mineralization was found along a multiple quartz vein system for approximately 400 feet. Soil samples geochemically anomalous in gold and an extensive “iron bleed” zone are indicative of mineralization in this area. The iron bleed, or ferricrete, is considered to be caused by ground water dissolution of buried metallic sulfides and re-participation of the metal ions, particularly iron, in the surface hydrologic bleed zone. Additionally, gold in soil values were found about 4,000 feet westward along strike, which will be further evaluated in 2006 as a possible extension of the Pallasgreen veins. Anomalous soil and rock results were also found in the Drumlummon area and in an unnamed site of vein quartz north of the Pallasgreen prospect. An additional 160-acre state mining claim was located to include this area in our property holding.
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In 2005, we also completed further prospect definition work at the Pioneer, Crystal and Uranus sites, which established proposed drill targets. The Uranus results are of particular interest. There, a surface train of quartz float has been mapped for 500 feet down a hillside. An old prospect pit several feet deep was sunk into the quartz train. It is caved-in, but contains many lose chunks of iron stained quartz vein material A reconnaissance sample composed of many random pieces of these chunks of quartz assayed 1.47 oz Au/t. Four intermittent soil samples taken from beneath the quartz float train average 0.21 ppm Au. Nearby, but separate from the quartz float train, is a second old prospect pit that partially exposes a large, sulfide impregnated quartz vein. A six-foot continuous chip sample across this vein assayed 0.40 oz Au/t. We view this information as reflecting a gold bearing quartz vein system, containing a series of sub-parallel veins, concealed beneath soil and tundra. The 2006 exploration plan includes cutting trenches across this soil-covered area using an excavator. Given further positive findings, an initial drill testing of the Uranus site would take place.
Pre-drilling prospect mapping was also initiated during the 2005 field season at the Little Squaw, Eneveloe, Grubstake West, Rock Glacier and Summit areas. Little Squaw quartz vein rubble was traced about 2,500 feet eastward from the known exposures, and geologic mapping indicates that at least two mineralized quartz veins continue in that direction. The two Summit quartz veins were projected about 2,000 feet westward where they are believed to be partially covered by active accumulations of slide rock. Nevertheless, stream sediment sampling together with deep penetration soil sampling results from sites along and below its projection were highly anomalous in gold.
Plans for 2006
The planned 2006 seasonal exploration program for the Chandalar property is very similar to the combination of Mr. Barker's Phase I and Phase II recommended project plan for 2005 and is based on Mr. Barker’s January 2, 2006 report titled “Chandalar Mining District, A Report of Findings and Recommendations, 2005.” The quantity of proposed drilling in Phase II has been increased from 5,000 feet or more to 10,000 feet or more, and the project's projected cost is now approximately $1.7 million dollars, as shown in the table below.
Proposed 2006 Chandalar Exploration Program Budget
EXPENSE CATEGORY | |
Planning, Permitting, Hiring | $ 43,000 |
Equipment and Major Supplies Purchases (ATVs, Tractors, Vehicles) | 350,000 |
Mobilization/Demobilization and interim charter Air Support | 141,000 |
Contracted Geological and Technician Services | 307,000 |
Contracted Camp Services | 163,000 |
Contracted Aerial Geophysical Survey | 50,000 |
Contracted Geological Studies | 46,000 |
Contracted Geophysical Surveys | 25,000 |
Contracted Drilling Services | 189,000 |
Contracted Assaying Services | 142,000 |
Site Fuel Consumption | 50,000 |
Travel | 40,000 |
Final Analyses and Report | 40,000 |
Sub Total | $ 1,586,000 |
Company Overhead (Management, Office support, Taxes and Insurance) | 150,000 |
TOTAL | $ 1,736,000 |
During late 2005 and early 2006, we raised sufficient cash to conduct the intended 2006 seasonal exploration program on the Chandalar property. See “Liquidity and Capital Resources” below for details of these financing activities.
We began our 2006 exploration program during the first quarter of 2006 with the mobilization of machinery, camp construction materials and supplies to a site on our Chandalar mining claims. About $347,000 worth of equipment was purchased, with a mid-sized excavator cost of about $180,000 accounting for roughly half of the total. In all, nearly half a million dollars worth of equipment, materials and services were purchased, and then trucked to the Coldfoot jump-off point on the Dalton Highway. From there, we moved the 67 tons of cargo about 70 miles overland to the property. Most of the machinery and supplies necessary to support the 2006 summer gold exploration program, scheduled to begin late in the second quarter, is in place.
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In addition to this first phase of mobilization, we have secured a contract with an Anchorage-based drilling services firm to provide 10,000 feet of reverse circulation drilling. We have also engaged in setting up the rest of the Chandalar project’s support structure, including obtaining all necessary state permits, and various contracts for sampling, assaying, geologic mapping, camp catering, and aerial services.
Also during the first quarter of 2006, and following the initial mobilization, we staked an additional 24 state mining claims, adding 3,840 acres to the Chandalar mining claim block. We staked these claims to protect indicated mineral occurrences lying outside of, and to the east and west of, our 2005 claim block with the intention of more fully prospecting them during the 2006 summer field season.
There can be no assurance that even with exploration proceeding according to the 2006 recommended program, it will lead to the discovery and delineation of ore reserves that will conform to the criteria specified in SEC Industry Guide 7.
The drilling program planned for 2006 is intended to provide an initial test of the ten targets, and, following appraisal of the results, is expected to lead to intensified drilling on a few selected sites in 2007. The aim of the 2007 drilling would be to establish a mineral resource on the selected sites. We believe we have sufficient funds to undertake the proposed exploration and drilling program in 2006. Additionally, we have sufficient funds and financing to continue operations at a fully-staffed level for the next 12 months. We may not have sufficient funds to accomplish the 2007 follow up drilling, and may have to rely on further sales of its securities to pay for it. There can be no assurance we would be successful in completing such a securities offering on terms acceptable to us.
Liquidity and Capital Resources
We are an exploration stage company and has incurred losses since our inception. We have no recurring source of revenue and our ability to continue as a going concern is dependant on our ability to raise capital to fund its future exploration and working capital requirements. Our plans for the long term continuation as a going concern include financing our future operations through sales of our common stock and/or debt and the eventual profitable development of its mining properties. Our plans may also, at some future point, include the formation of exploration, development or mining joint ventures with senior mining company partners on specific mineral properties whereby the joint venture partner would provide the necessary financing in return for equity in the property. During the second half of 2005 and the first quarter of 2006, We were successful in obtaining financing for operations through 2006.
On December 31, 2005, we had total liabilities of $775,930, and total assets of $1,361,630. This compares to total liabilities of $87,792 and total assets of about $367,560 on December 31, 2004. As of December 31, 2005, our liabilities consisted of $709,546 of convertible debenture, $6,575 accrued interest payable, $50,000 for accrued remediation costs and $9,809 in outstanding accounts payable. The Convertible Debenture has a face amount of $1,000,000 and is reflected on our financial statements of our net of an unamortized discount of $145,227 for the fair value of the debenture’s beneficial conversion feature, and an unamortized discount of $145,227 for the fair value of the detached warrant. As of December 31, 2005, we had current assets of $904,494, including cash and cash equivalents of $891,380; current liabilities of $16,384; and working capital of $888,110.
Our principal source of liquidity during the years ended December 31, 2005 and 2004, has been through debt and equity financing. Financing activities provided cash of $1,216,875 during the year ended December 31, 2005, and $288,313 during the year ended December 31, 2004. We used cash in operating activities of $358,350 during the year ended December 31, 2005, and $346,915 during the year ended December 31, 2004.
Private Placement Offerings
Placement Agent Agreement
On September 23, 2005, we entered into a Placement Agent Agreement with Strata Partners, LLC, a U.S. registered broker dealer. Under the terms of a Placement Agent Agreement, we agreed to pay Strata Partners, LLC, as agent, a placement agent fee in an amount equal to eight percent (8%), as applicable, for sales effected by the agent and a lead agent fee agent in an amount equal to two percent (2%) of the aggregate gross proceeds of any placement during the term of the agreement. The agent also will receive warrants, as lead agent, to purchase common shares equal to three percent (3%) of the total number of common shares (or common stock equivalents) sold by the Company in the placement and warrants as selling agent to purchase additional common shares equal to seven percent (7%) of the total number of common shares (or common stock equivalents), as applicable, for sales effected by the agent. The terms, conditions and exercise price of the warrants to be issued to the agent shall be economically equivalent to the terms, conditions and exercise price of the securities issued by us in a placement. We also agreed to grant the agent the same registration rights granted to investors in a placement, if any, and reimburse the agent for all expenses incurred by it in the performance of the agent’s obligations, including but not limited to the fees and expenses of our counsel and
46
accountants and the cost of qualifying the placement, and the sale of the securities, in various states or obtaining an exemption from state registration requirements. We agreed to reimburse the agent for actual expenses, including but not limited to accounting, legal and professional fees, incurred by the agent in connection with the Placement, not to exceed one-half percent (0.5%) of the gross offering proceeds. We agreed that the agent would serve as exclusive placement agent until January 31, 2006, extendable for a period of time thereafter by mutual consent. We paid Strata Partners, LLC (the lead agent and sole selling agent) all of the fees outlined above in connection with our November 21, 2005 placement of 6% Convertible Debentures and Class A Warrants.
We had previously issued Strata Partners, LLC 31,400 shares of common stock during 2005, in reimbursement for certain expenses under the terms of a previous Placement Agent Agreement that terminated on July 1, 2005.
Private Placements
On August 12, 2005 our Board of Directors authorized a direct private placement offering of 1,200,000 units at $0.25 per Unit. Each unit consists of one common share and a three-year full share purchase warrant exercisable at $0.30, $0.35 and $0.40 in the respective successive years. During the quarter ended September 30, 2005, we sold a total of 500,000 units for proceeds of $125,000. The remaining 700,000 units were sold during the fourth quarter of 2005, for proceeds of $175,000. No fees or commissions were paid, and net proceeds to us were $300,000.
Convertible Debenture
On November 21, 2005, we closed a private placement, issuing a 6% Convertible Debenture in the principal amount of US$1,000,000 and a detached 2,500,000 Class A Warrant to one institutional investor. Cash proceeds to us, net of cash fees to the placement agent was $900,000. The Debenture is convertible into shares of Common Stock, $0.10 par value, at $0.20 per share, subject to certain adjustments, and the Warrant is exercisable to acquire 2,500,000 common shares at an exercise price of $0.30 per share until November 21, 2008. Both the Convertible Debenture and Warrant are transferable. The 6% Convertible Debenture contains a mandatory conversion provision which grants us, at our option, the ability to force conversion of the Debenture in whole or in part, subject to a 9.99% limitation of outstanding shares ownership provision, if the market price of our common stock is sustained at or above $0.50 per share for five consecutive trading days. The Class A Warrant also contains a mandatory conversion provision which grants us, at our option, the ability to force conversion of the Warrant in whole or in part, subject to a 9.99% limitation of outstanding shares ownership provision, if the market price of our common shares is sustained at or above $0.75 per share for five consecutive trading days.
In connection with the placement, we issued to the placement agent a 500,000 Class A Warrant under the terms of a Placement Agent Agreement which is convertible into 500,000 common shares at an exercise price of US$0.30 until November 21, 2008. This Class A Warrant includes the same mandatory conversion provision as the warrant issued to the debenture holder. The fair value of this warrant was estimated using the Black-Scholes option pricing model. The warrant with a fair value of $30,000 is included in deferred financing costs, bringing the total to $130,000 with the cash fee paid to the agent as described above. The deferred financing costs are being amortized over the life of the convertible debenture, which resulted in amortization of $3,611 to interest expense being recorded in 2005.
Upon the issuance of the 6% Convertible Debenture on November 21, 2005, we were required allocate value to the warrant issued with the debenture, and to record a discount on the debenture for its conversion feature. In accordance with EIFT No. 00-27 “Application of Issue No. 98-5 to Certain Convertible Instruments” we recorded a discount in the amount of $150,000. This discount is being amortized over the life of the convertible debenture, which resulted in accretion of $4,773 to the convertible debenture being recorded in 2005.
Also, in accordance with EITF 98-5, “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios”, the Warrants issued in connection with the 6% Convertible Debenture were accounting for under APB 14, “Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants”. Under APB 14, the proceeds received from the investor are to be allocated to the 6% Debenture and the Warrant in proportion to their respective fair values. The fair value of the warrants was calculated using the Black-Scholes option pricing model. The warrants with a fair value of $150,000 are presented as a component of additional paid-in capital in shareholder’s equity. This discount is being amortized over the life of the Convertible Debenture, which resulted in amortization of $4,773 to interest expense being recorded in 2005.
47
Private Placements Subsequent to the Close of 2005
On November 7, 2005, our Board of Directors approved an equity financing of up to $2,000,000 of our securities at a price equal to or greater than the terms of the November 21, 2005 Convertible Debenture. On January 31, 2006, we closed the first tranche of 3,895,000 Units, at a price of $0.25 per Unit for gross proceeds of $973,750. Each Unit consisted of one share of common stock and one half of one (1/2) Class B Warrant. Each whole Class B Warrant is exercisable to acquire one additional share of common stock at an exercise price of $0.35 per share during the one-year period commencing on the Closing Date, $0.50 per share during the second year following the Closing Date, and $0.65 per share during the third year following the Closing Date. Additionally, each Class B Warrant contains a mandatory conversion provision which grant us, at our option, the ability to force conversion of each whole Warrant if the market price of our common shares is sustained at or above $0.875 per share for five consecutive trading days. In connection with this portion of the placement, we paid an Agent’s commission of 10% of the gross proceeds and issued the agent 389,500 Class B Warrants.
On February 24, 2006, we closed the second tranche of an additional 5,600,000 Units, at a price of $0.25 per Unit for gross proceeds of $1,400,000. This second closing brings the total gross proceeds received to $2,373,750 and the total Units sold to 9,495,000, including an oversubscription of 1,495,000 Units which had been approved by our Board of Directors on February 13, 2006. Each Unit consisted of one share of our common stock and one half of one (1/2) Class B Warrant. The Units of this second closing are identical to those of the first closing on January 31, 2006. In connection with this portion of the placement, we paid an Agent’s commission of 10% of the gross proceeds and issued the agent 560,000 Class B Warrants, bringing the total number of Class B Warrants issued to the Agent for both tranches to 945,500.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Contractual Obligations
With the exception of management consulting contracts and the Convertible Debenture described above, we had no material contractual obligations as of December 31, 2005.
Inflation
We not believe that inflation has had a significant impact on its consolidated results of operations or financial condition.
Critical Accounting Policies
We have identified our critical accounting policies, the application of which may materially affect the financial statements, either because of the significance of the financials statement item to which they relate, or because they require management judgment in making estimates and assumptions in measuring, at a specific point in time, events which will be settled in the future. The critical accounting policies, judgments and estimates which management believes have the most significant effect on the financial statements are set forth below:
·
Estimates of the recoverability of the carrying value of our mining and mineral property assets. Our estimate of carrying value is based partially on the valuation opinion of a qualified independent third party. However, if future results vary materially from the assumptions and estimates used by us and this third party, we may be required to recognize an impairment in the assets’ carrying value.
·
Expenses and disclosures associated with accounting for stock-based compensation. We used the Black-Scholes option pricing model to estimate the fair market value of stock options issued under our stock-based compensation plan, which determines the recognition of associated compensation expense. This valuation model requires the use of judgment in applying assumptions of risk-free interest rate, stock price volatility and the expected life of the options. While we believe we have applied appropriate judgment in the assumptions and estimates, variations in judgment in applying assumptions and estimates used in this valuation could have a material effect upon the reported operating results.
·
Estimates of our environmental liabilities. Our potential obligations in environmental remediations or reclamation activities are considered critical due to the assumptions and estimates inherent in accruals of such liabilities, including uncertainties relating to specific reclamation and remediation methods and costs, the application and changing of environmental laws, regulations and interpretations by regulatory authorities.
48
·
Accounting for Convertible Securities. We used the Black-Scholes option pricing model and other valuation considerations to estimate the fair market value of the detachable warrant and beneficial conversion feature of a convertible debenture. We used APB-14, EITF No. 98-5, EITF No. 00-27 and other guidance to allocate value to the individual components of this convertible security. The associated discounts to the fair value of the convertible debenture form the basis for amortization and accretion over future periods. While we believe we have applied appropriate judgment in the assumptions and estimates, variations in judgment in applying assumptions and estimates used in the valuation or future results, could have a material effect upon the allocation of fair value of the components of the convertible securities, together with the reported operating results as discounts are recognized as interest expense over the life of the securities.
Significant Equipment Purchases and Requirements
With the completion of the private placements in 2005 and in 2006, we are aggressively implementing our drilling plans for the Chandalar property. In the first quarter of 2006, we have paid $349,215 in cash for capital equipment to support the 2006 summer exploration season. The main capital items are a mid-sized excavator, a small (D-4 size) dozer, seven all terrain vehicles, a pick-up truck and welding unit. In addition, we are negotiating a contract with a drilling company to perform drilling services using equipment owned by the drilling company. All heavy equipment, except the contractor’s drill, was moved overland to the site in March 2006. The drill is scheduled to be flown to the site in July of 2006.
Expected Significant Changes in the Number of Employees
We have established accounts with the State of Alaska to enable us to process payrolls to meet our 2006 Chandalar project field labor needs. The first of approximately ten hourly paid employees is scheduled to begin work in the first week of May 2006. These are seasonal jobs that are all expected to be terminated by October 2006.
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Our common stock is quoted on the OTC Bulletin Board which is sponsored by the National Association of Securities Dealers (NASD). The OTC Bulletin Board is a network of security dealers who buy and sell stock. The dealers are connected by a computer network which provides information on current “bids” and “asks” as well as volume information. The OTC Bulletin Board is not considered a “national exchange.”
Our Common stock is traded on the NASDAQ Over The Counter Bulletin Board under the symbol “LITS”. The following table shows the high and low bid information for the Common stock for each quarter of the fiscal years 2003, 2004 and 2005. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
Fiscal Year
High Closing
Low Closing
2003
First Quarter
$0.13
$0.06
Second Quarter
$0.15
$0.08
Third Quarter
$0.90
$0.12
Fourth Quarter
$0.75
$0.45
2004
First Quarter
$0.75
$0.51
Second Quarter
$0.72
$0.37
Third Quarter
$0.47
$0.28
Fourth Quarter
$0.55
$0.35
2005
First Quarter
$0.50
$0.34
Second Quarter
$0.45
$0.30
Third Quarter
$0.33
$0.23
Fourth Quarter
$0.35
$0.21
The above quotations reflect inter-dealer prices, without retail mark-up, markdown or commission and may not necessarily represent actual transactions.
As of April 17, 2006, the closing price for our common stock was $0.73 per share as quoted by the NASD OTCBB.
49
HOLDERS OF RECORD
As of December 31, 2005, there were 3,366 shareholders of record of our common stock and approximately 858 additional shareholders whose shares are held through brokerage firms or other institutions. As of March 31, 2006 we had 3,339 registered shareholders.
TRANSFER AGENT AND REGISTRAR
Our registrar and transfer agent for our common shares is Columbia Stock Transfer Company, 1602 E. Seltice Way, Suite A PMB#303, Post Falls, ID 83854, U.S.A. Phone: (208) 664-3544; Fax: (208) 777-8998.
USE OF PROCEEDS
We will not receive any of the proceeds of the shares offered by the Selling Shareholders. We may receive proceeds from the exercise of the Class A Warrants upon exercise of these warrants, if any, and will use the proceeds from any exercise for general working capital purposes.
LEGAL MATTERS
The law firm of Payne, Hamlin, Coffin & Brooke has acted as our counsel by providing an opinion on the validity of the securities.
EXPERTS
The financial statements as of December 31, 2005 and 2004, included in this prospectus and elsewhere in the registration statement have been audited by DeCoria, Maichel & Teague P.S., independent registered public accounting firm, as indicated in their report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in auditing and accounting in giving said reports.
The information contained in the report titled “Gold Deposits of the Chandalar Mining District, Northern Alaska: An information Review and Recommendations” was prepared by Pacific Rim Geological Consultants, Inc., of Fairbanks Alaska.
The information contained the report titled “Summary of Field Investigations 2004” was prepared by James C. Barker, a Certified Professional Geologist licensed to practice in Alaska.
The information contained in the report titled “Interim Summary Report: Little Squaw Gold Mining Company, Properties in the Chandalar Mining district, Alaska” was prepared by Melvin Klohn, a geologist licensed to practice in the state of Washington.
The information contained in the report titled “Structural and Lithological Features Observed From Air Photo Mosaic” was prepared by BlueMap Geomatics Ltd., of Vancouver British Columbia.
The information contained in the report titled “Chandalar Mining District, A Report of Findings and Recommendations, 2005” was prepared by James C. Barker, a Certified Professional geologist licensed to practice in Alaska.
Copies of the above referenced reports are available upon written request to Little Squaw Gold Mining Company, 3412 S. Lincoln Dr., Spokane, WA 99203, Attn: Richard Walters.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Exchange Act and, accordingly, file current and periodic reports, proxy statements and other information with the SEC. We have also filed a registration statement on Form SB-2 under the Securities Act, as amended, in connection with this offering. This prospectus, which is part of the registration statement, does not contain all of the information contained in the registration statement. For further information with respect to us and the shares of common stock offered hereby, reference is made to such registration statement, including the exhibits thereto, which may be read, without charge, and copied at the public reference facilities maintained by the SEC at One Station Place, 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. The SEC maintains a site on the World Wide Web at http://www.sec.gov that contains current and periodic reports, proxy statements and other information regarding registrants that filed electronically with the SEC. Statements contained in this prospectus as to the intent of any contract or other document referred to are not necessarily complete, and in each instance reference is made to the copy of such contract or other document filed as an exhibit to this registration statement, each such statement being qualified in all respects by such reference.
50
AUDITED FINANCIAL STATEMENTS
TABLE OF CONTENTS | |
Page | |
Report of Independent Registered Public Accounting Firm | F-2 |
Balance Sheets, December 31, 2005 and 2004 | F-3 |
Statements of Operations for the years ended December 31, 2005 and 2004 and from the date of inception on March 26, 1959 through December 31, 2005 | F-4 |
Statements of Changes in Stockholders’ Equity (Deficit) from the date of inception on March 26, 1959 through December 31, 2005 | F-5 |
Statements of Cash Flows for the years ended December 31, 2005 and 2004 and from the date of inception on March 26, 1959 through December 31, 2005 | F-12 |
Notes to Financial Statements | F-14 |
F-1
![[lsgpea130819pr1806f007.gif]](lsgpea130819pr1806f007.gif)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Little Squaw Gold Mining Company
We have audited the accompanying balance sheets of Little Squaw Gold Mining Company, (An Exploration Stage Company) (“the Company”) as of December 31, 2005 and 2004, and the related statements of operations, changes in stockholders’ equity and cash flows for the years then ended and from the date of inception on March 26, 1959 through December 31, 2005. 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 audits 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 provide 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 Little Squaw Gold Mining Company as of December 31, 2005 and 2004, and the results of its operations and its cash flows for the years then ended and from the date of inception on March 26, 1959 through December 31, 2005 in conformity with accounting principles generally accepted in the United States of America.
/s/ DeCoria, Maichel & Teague P.S.
DeCoria, Maichel & Teague P.S.
March 4, 2006
Spokane, Washington
F-2
Little Squaw Gold Mining Company
(An Exploration Stage Company)
Balance Sheets
December 31, 2005 and 2004
2005
2004
ASSETS
Current assets:
Cash and cash equivalents
$
891,380
$
32,855
Interest receivable
2,386
Prepaid expenses
10,728
6,198
__________
__________
Total current assets
904,494
39,053
__________
__________
Plant, equipment, and mining claims:
Equipment, net of depreciation
3,595
4,441
Mining and mineral properties
321,041
321,041
__________
__________
Total plant, equipment and mining claims
324,636
325,482
__________
__________
Other assets:
Deferred financing costs
126,389
Other assets
6,111
3,025
__________
__________
Total other assets
132,500
3,025
__________
__________
Total assets
$
1,361,630
$
367,560
__________
__________
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
9,809
$
5,020
Accounts payable – related parties
32,772
Accrued interest payable
6,575
__________
__________
Total current liabilities
16,384
37,792
__________
__________
Long-term liabilities:
Accrued remediation costs
50,000
50,000
Convertible debenture, net of discounts
709,546
__________
__________
Total long-term liabilities
759,546
50,000
__________
__________
Total liabilities
775,930
87,792
__________
__________
Stockholders' equity
Preferred stock; no par value, 10,000,000
shares authorized; no shares issued or outstanding
Common stock; $0.10 par value, 200,000,000 shares authorized;
16,833,420 and 15,364,117 issued and outstanding, respectively
1,683,342
1,536,411
Additional paid-in capital
1,297,708
752,458
Deficit accumulated during the development stage
(2,395,350)
(2,009,101)
__________
__________
Total stockholders’ equity
585,700
279,768
__________
__________
Total liabilities and stockholders' equity
$
1,361,630
$
367,560
__________
__________
The accompanying notes are an integral part of these financial statements.
F-3
Little Squaw Gold Mining Company
(An Exploration Stage Company)
Statements of Operations
From Inception
Years Ended
(March 26, 1959)
December 31,
Through
2005
2004
December 31, 2005
____________
____________
____________
Revenue:
Royalties, net
$
$
$
398,752
Lease and rental
99,330
Gold sales and other
31,441
____________
____________
____________
529,523
____________
____________
____________
Expenses:
Other costs of operations
8,030
Management fees and salaries
66,900
70,525
1,018,957
Directors' fees – cash
13,500
17,200
96,475
Directors' fees – share based
143,200
143,200
Professional services
202,893
236,082
881,470
Other general and administrative expense
64,579
53,824
278,797
Mineral property maintenance
7,638
8,097
20,555
Office supplies and other expense
5,932
10,344
244,481
Depreciation
846
493
6,094
Reclamation and miscellaneous
14,000
115,102
Loss on partnership venture
53,402
Equipment repairs
25,170
____________
____________
____________
362,288
553,765
2,891,733
____________
____________
____________
Other (income) expense:
Interest income
(3,325)
(587)
(30,447)
Interest expense
27,286
63,587
____________
____________
____________
Total other (income) expense
23,961
(587)
33,140
____________
____________
____________
Net loss
$
386,249
$
553,178
$
2,395,350
____________
____________
____________
Net loss per common share – basic
$
0.02
$
0.04
$
0.36
____________
____________
____________
Weighted average common
shares outstanding-basic
15,858,637
14,811,488
6,642,128
____________
____________
____________
The accompanying notes are an integral part of these financial statements.
F-4
Little Squaw Gold Mining Company
(An Exploration Stage Company)
Statements of Changes in Stockholders' Equity (Deficit)
From Inception (March 26, 1959) Through December 31, 2005
Deficit
Accumulated
Additional
During the
Shares Issued for
Basis of Assignment of Amount
Common stock
Paid-in
Exploration
Treasury
Year
Transaction
Cash
Non-cash Consideration
for Non-cash Consideration
Shares
Par Value
Capital
Stage
Stock
Total
1959
Issuance of shares
X
441,300
$
44,130
Net loss
$
(428)
$
43,702
1960
Issuance of shares
X
433,780
43,378
Net loss
(769)
42,609
1961
Issuance of shares
X
306,620
30,662
Issuance of shares
X
25,010
2,501
$
5,002
Net loss
(12,642)
25,523
1962
Issuance of shares
X
111,239
11,124
Issuance of shares
X
248,870
24,887
49,773
Issuance of shares
Mining leases
Par value of stock issued
600,000
60,000
Net loss
(5,078)
140,706
1963
Issuance of shares
X
223,061
22,306
Issuance of shares
X
27,000
2,700
5,400
Sale of option
110
Net loss
(5,995)
24,521
1964
Net loss
(8,913)
(8,913)
1965
Issuance of shares
X
19,167
1,917
3,833
Issuance of shares
Salaries
Price per share issued for cash
during period
19,980
1,998
3,996
Net loss
(9,239)
2,505
1966
Issuance of shares
X
29,970
2,997
Issuance of shares
X
5,200
520
520
Net loss
(7,119)
(3,082)
1967
Issuance of shares
X
3,700
370
740
Issuance of shares
Engineering and
management fees
Par value of stock issued
24,420
2,442
Issuance of shares
Accounting fees
2,030
203
406
Net loss
(5,577)
(1,416)
1968
Issuance of shares
X
64,856
6,486
12,971
Issuance of shares
Salaries
Price per share issued for
19,980
1,998
3,996
Issuance of shares
Directors’ fees
cash during period
30,000
3,000
6,000
Net loss
(7,322)
27,129
The accompanying notes are an integral part of these financial statements.
F-5
Little Squaw Gold Mining Company
(An Exploration Stage Company)
Statements of Changes in Stockholders' Equity (Deficit)
From Inception (March 26, 1959) Through December 31, 2005
Deficit
Accumulated
Additional
During the
Shares Issued for
Basis of Assignment of Amount
Common stock
Paid-in
Exploration
Treasury
Year
Transaction
Cash
Non-cash Consideration
for Non-cash Consideration
Shares
Par Value
Capital
Stage
Stock
Total
1969
Issuance of shares
X
12,760
$
1,276
$
2,552
Issuance of shares
X
338,040
33,804
85,432
Issuance of shares
Salaries
Approximate price per share
24,000
2,400
4,800
Issuance of shares
Consideration for
issued for cash during period
co-signatures
50,004
5,000
10,001
Net income
$
2,272
$
147,537
1970
Issuance of shares
X
1,000
100
400
Issuance of shares
Salaries
Price per share issued for cash in
prior period
1,500
150
300
Issuance of shares
Salaries
Price per share issued for cash in
current period
444
44
178
Net loss
(8,880)
(7,708)
1971
Issuance of shares
X
13,000
1,300
1,500
Issuance of shares
Purchase of assets of
Chandalar Mining &
Milling Co.
Par value of stock issued
336,003
33,600
Net loss
(2,270)
34,130
1972
Issuance of shares
Purchase of assets of
Chandalar Mining &
Milling Co.
Par value of stock issued
413,997
41,400
Issuance of shares
Additional exploratory
and development
costs through
payment of
Chandalar Mining &
Milling Co. liabilities
Dollar value of liabilities paid
55,657
5,566
15,805
Receipt of treasury stock
in satisfaction
tof accounts receivable
and investment in
Chandalar Mining &
Milling Co.
(125,688)
(12,569)
(977)
$
(13,546)
Issuance of shares
Mining claims
Par value of stock issued
2,240,000
224,000
13,527
Net loss
(65,175)
208,031
1973
Net loss
(16,161)
(16,161)
1974
Net loss
(13,365)
(13,365)
The accompanying notes are an integral part of these financial statements.
F-6
Little Squaw Gold Mining Company
(An Exploration Stage Company)
Statements of Changes in Stockholders' Equity (Deficit)
From Inception (March 26, 1959) Through December 31, 2005
Deficit
Accumulated
Additional
During the
Shares Issued for
Basis of Assignment of Amount
Common stock
Paid-in
Exploration
Treasury
Year
Transaction
Cash
Non-cash Consideration
for Non-cash Consideration
Shares
Par Value
Capital
Stage
Stock
Total
1975
Net loss
$
(15,439)
$
(15,439)
1976
Net loss
(5,845)
(5,845)
1977
Issuance of shares
Purchase of assets of
Mikado Gold Mines
Par value of stock issued
1,100,100
$
110,010
Net loss
(15,822)
94,188
1978
Issuance of shares
Mining claims
Par value of stock issued
400,000
40,000
Issuance of shares
Directors' fees
40,000
4,000
$
3,200
Issuance of shares
Management fees,
notes payable, and
Approximate market price per share
accrued interest
109,524
10,952
8,762
Net loss
(39,144)
27,770
1979
Net loss
(18,388)
(18,388)
1980
Net loss
(34,025)
(34,025)
1981
Net loss
(32,107)
(32,107)
1982
Issuance of shares
Directors' fees
Approximate market price per share
40,000
4,000
20,000
Net loss
(70,165)
(46,165)
1983
Net loss
(10,416)
(10,416)
1984
Net loss
(63,030)
(63,030)
1985
Issuance of shares
Directors' fees
Approximate market price per share
40,000
4,000
12,000
Net loss
(78,829)
(62,829)
1986
Issuance of shares
X
44,444
4,444
5,556
Net loss
(32,681)
(22,681)
1987
Issuance of shares
Officer salary
166,000
16,600
18,500
Issuance of stock
option
Legal fees
Approximate market price per share
12,360
Issuable shares
Directors' fees
4,095
Issuance of stock
option
Equipment
Value of equipment
60,000
Net loss
(48,057)
63,498
The accompanying notes are an integral part of these financial statements.
F-7
Little Squaw Gold Mining Company
(An Exploration Stage Company)
Statements of Changes in Stockholders' Equity (Deficit)
From Inception (March 26, 1959) Through December 31, 2005
Deficit
Accumulated
Additional
During the
Shares Issued for
Basis of Assignment of Amount
Common stock
Paid-in
Exploration
Treasury
Year
Transaction
Cash
Non-cash Consideration
for Non-cash Consideration
Shares
Par Value
Capital
Stage
Stock
Total
1988
Issuance of shares
Officer salary
194,444
$
19,444
$
(1,944)
Issuance of stock option
Legal fees
Approximate market price per share
6,200
Issuable shares
Directors' fees
1,080
Issuance of shares
Settlement of stock
option
Approximate market price when option
was granted
58,860
5,886
(5,886)
Issuance of shares
Settlement of stock
right
Approximate market price when
right was granted
19,500
1,950
(1,950)
Net loss
$
(46,961)
$
(22,181)
1989
Issuance of shares
Settlement of stock
option
Approximate market price when option
was granted
68,888
6,889
(6,889)
Issuance of shares
Settlement of stock
right
Approximate market price when right
was granted
12,000
1,200
(1,200)
Net loss
(59,008)
(59,008)
1990
Net loss
(37,651)
(37,651)
1991
Issuance of shares
Directors' fees
Approximate market price per share
24,000
2,400
Purchase of 20,000
treasury shares
X
$
(1,500)
Net loss
(42,175)
(41,275)
1992
Purchase of 32,000
treasury shares
X
(1,680)
Net loss
(41,705)
(43,385)
1993
Net loss
(71,011)
(71,011)
1994
Issuance of stock
option
Officer compensation
Approximate market price per share
6,250
Net loss
(43,793)
(37,543)
1995
Issuance of shares
Officer compensation
Approximate market price per share
153,846
15,385
4,615
Purchase of 65,000
treasury shares
X
(4,975)
Net loss
(30,728)
(15,703)
1996
Net loss
(39,963)
(39,963)
The accompanying notes are an integral part of these financial statements.
F-8
Little Squaw Gold Mining Company
(An Exploration Stage Company)
Statements of Changes in Stockholders' Equity (Deficit)
From Inception (March 26, 1959) Through December 31, 2005
Deficit
Accumulated
Additional
During the
Shares Issued for
Basis of Assignment of Amount
Common stock
Paid-in
Exploration
Treasury
Year
Transaction
Cash
Non-cash Consideration
for Non-cash Consideration
Shares
Par Value
Capital
Stage
Stock
Total
1997
Expiration of stock option
$
(6,250)
$
(6,250)
Net loss
$
(31,828)
(31,828)
1998
Net loss
(30,681)
(30,681)
1999
Net loss
(57,812)
(57,812)
2000
Net loss
(37,528)
(37,528)
2001
Net loss
(20,007)
(20,007)
Balances, December 31, 2001
8,468,506
$
846,850
351,237
(1,221,460)
$
(8,174)
(31,547)
2002
Net loss
(12,691)
(12,691)
Balances, December 31, 2002
8,468,506
846,850
351,237
(1,234,151)
(8,174)
(44,238)
2003
Issuance of shares and warrants
Conversion of related
party debts
Fair value of shares issued
1,930,130
193,013
19,323
212,336
Issuance of shares and warrants
To reimburse payment of
professional service fees
Fair value of shares issued
150,000
15,000
15,000
Issuance of shares and warrants X
1,100,000
110,000
80,310
190,310
Issuance of treasury shares (50,000)
Officer signing bonus
Fair value of shares issued
4,010
3,490
7,500
Issuance of shares and warrants
Mining claims
Fair value of shares issued
350,000
35,000
35,000
Net loss
(221,772)
(221,772)
Balances, December 31, 2003
11,998,636
1,199,863
454,880
(1,455,923)
(4,684)
194,136
2004
Issuance of shares and warrants
Conversion of related
party debts
Fair value of shares issued
824,370
82,437
82,437
Issuance of shares and warrants
Success award
Fair value of shares issued
887,500
88,750
88,750
Issuance of shares through warrant
exercise ($0.20)
X
1,090,000
109,000
109,000
218,000
The accompanying notes are an integral part of these financial statements.
F-9
Little Squaw Gold Mining Company
(An Exploration Stage Company)
Statements of Changes in Stockholders' Equity
From Inception (March 26, 1959) Through December 31, 2005
Deficit
Accumulated
Additional
During the
Shares Issued for
Basis of Assignment of Amount
Common stock
Paid-in
Exploration
Treasury
Year
Transaction
Cash
Non-cash Consideration
for Non-cash Consideration
Shares
Par Value
Capital
Stage
Stock
Total
Issuance of shares through warrant
exercise of ($0.40)
X
173,611
17,361
52,952
70,313
Issuance of treasury shares (67,103)
Officer promotion
Fair value of shares issued
2,026
4,684
6,710
Issuance of stock options
Directors compensation
Intrinsic method
59,200
59,200
Issuance of shares
Directors compensation
Fair value of shares issued
300,000
30,000
54,000
84,000
Issuance of shares
Professional services
Fair value of shares issued
90,000
9,000
20,400
29,400
Net loss
(553,178)
(553,178)
Balance, December 31, 2004
15,364,117
$
1,536,411
$
752,458
$
(2,009,101)
$
0
$
279,768
2005
Issuance of shares
Professional services
Fair value of shares issued
50,000
5,000
9,000
14,000
Issuance of shares
Professional services
Fair value of shares issued
112,903
11,291
14,678
25,969
Issuance of shares through
warrant exercise
X
75,000
7,500
9,375
16,875
Issuance of shares
Professional services
Fair value of shares issued
31,400
3,140
2,197
5,337
Issuance of shares and warrants
by private placement
X
500,000
50,000
75,000
125,000
Issuance of shares and warrants
by private placement
X
700,000
70,000
105,000
175,000
Discount of convertible debenture
for value of detached warrant issued
Fair value of warrant issued
150,000
150,000
Discount of convertible debenture
For beneficial conversion feature
Intrinsic method
150,000
150,000
Issuance of warrant for
deferred finance costs
Fair value of warrant issued
30,000
30,000
The accompanying notes are an integral part of these financial statements.
F-10
Little Squaw Gold Mining Company
(An Exploration Stage Company)
Statements of Changes in Stockholders' Equity
From Inception (March 26, 1959) Through December 31, 2005
Deficit
Accumulated
Additional
During the
Shares Issued for
Basis of Assignment of Amount
Common stock
Paid-in
Exploration
Treasury
Year
Transaction
Cash
Non-cash Consideration
for Non-cash Consideration
Shares
Par Value
Capital
Stage
Stock
Total
Net loss
(386,249)
(386,249)
Balance, December 31, 2005
16,833,420
$
1,683,342
$
1,297,708
$
(2,395,350)
$
0
$
585,700
The accompanying notes are an integral part of these financial statements.
F-11
Little Squaw Gold Mining Company
(An Exploration Stage Company)
Statements of Cash Flows
From Inception
(March 26, 1959)
Year Ended
Through
December 31,
December 31,
____________________________
____________
2005
2004
2005
____________
____________
____________
Cash flows from operating activities:
Net loss
$
(386,249)
$
(553,178)
$
(2,395,350)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation
846
493
6,587
Common stock, warrants, and options
issued for salaries and fees
45,306
179,310
431,900
Amortization of discount on convertible
debenture for value of warrant
4,773
4,773
Amortization of discount on convertible
debenture for beneficial conversion feature
4,773
4,773
Amortization of deferred financing costs
3,611
3,611
Change in:
Accrued interest receivable
(2,386)
(2,386)
Prepaid expenses
(4,530)
54
(10,728)
Other assets
(3,086)
(3,025)
(6,111)
Accounts payable, other
4,789
(17,341)
9,808
Accounts payable, related party
(32,772)
32,772
20,000
Accrued interest payable
6,575
6,575
Accrued compensation, related party
255,450
Accrued payroll taxes
19,323
Convertible success award, Walters LITS
88,750
Accrued remediation costs
14,000
50,000
____________
____________
____________
Net cash used - operating activities
(358,350)
(346,915)
(1,513,025)
____________
____________
____________
Cash flows from investing activities:
Receipts attributable to unrecovered
promotional, exploratory, and development
costs
626,942
Proceeds from the sale of equipment
60,000
Additions to property, plant, equipment, and
unrecovered promotional, exploratory, and
development costs
(7,377)
(370,342)
____________
____________
____________
Net cash - investing activities
0
(7,377)
316,600
____________
____________
____________
Cash flows from financing activities:
Proceeds from related party debt
100,000
100,000
Payments on related party debt
(100,000)
(100,000)
Proceeds from issuing convertible debenture, net
of deferred financing costs paid from proceeds
600,000
600,000
Proceeds from issuance of warrants in connection
with issuance of convertible debenture
150,000
150,000
The accompanying notes are an integral part of these financial statements.
F-12
Little Squaw Gold Mining Company
(An Exploration Stage Company)
Statements of Cash Flows
From Inception
(March 26, 1959)
Year Ended
Through
December 31,
December 31,
____________________________
____________
2005
2004
2005
____________
____________
____________
Proceeds allocated to beneficial conversion feature
of convertible debenture
150,000
150,000
Issuance of common stock, net of offering costs
316,875
288,313
1,195,979
Acquisitions of treasury stock
(8,174)
____________
____________
____________
Net cash - financing activities
1,216,875
288,313
2,087,805
____________
____________
____________
Net increase in cash and cash equivalents
858,525
(65,979)
891,380
Cash and cash equivalents, beginning of year
32,855
98,834
0
____________
____________
____________
Cash and cash equivalents, end of year
$
891,380
$
32,855
$
891,380
____________
____________
____________
Supplemental disclosures of cash flow information:
Non-cash investing activities:
Mining claims purchased - common stock
$
35,000
____________
Non-cash financing activities:
Related party liability
converted to common stock
$
88,750
$
301,086
____________
____________
____________
Issuance of warrants for deferred financing
costs of convertible debenture
$
30,000
$
0
$
30,000
____________
____________
____________
Cash paid for interest
$
7,555
$
15
$
43,856
____________
____________
____________
The accompanying notes are an integral part of these financial statements.
F-13
Little Squaw Gold Mining Company
(An Exploration Stage Company)
Notes to Financial Statements
1.
ORGANIZATION AND DESCRIPTION OF BUSINESS
Little Squaw Gold Mining Company (“Company”), was incorporated under the laws of the State of Alaska on March 26, 1959. The Company is engaged in the business of acquiring, exploring, and developing mineral properties throughout the Americas, primarily those containing gold and associated base and precious metals. The Company’s common stock trades on the NASDAQ OTC BB exchange under the ticker symbol LITS.
The Company is an exploration stage company and has incurred losses since its inception. The Company has no recurring source of revenue and its ability to continue as a going concern is dependant on the Company’s ability to raise capital to fund its future exploration and working capital requirements. The Company’s plans for the long term continuation as a going concern include financing the Company’s future operations through sales of its common stock and/or debt and the eventual profitable development of its mining properties. During the second half of 2005 and the first quarter of 2006, the Company has been successful in obtaining financing for operations through 2006.
During 2004 and 2005, the Company focused on advancing exploration of the Chandalar property through surface prospecting and geologic mapping and sampling methods. No drilling or underground exploration work was involved; however, the Company plans significant drilling and exploration work in 2006 and beyond.
Unless otherwise indicated, amounts provided in these notes to the financial statements pertain to continuing operations.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Exploration Stage Enterprise
The Company's financial statements are prepared using the accrual method of accounting and according to the provisions of Statement of Financial Accounting Standards No. 7, “Accounting for Development Stage Enterprises,” as it devotes substantially all of its efforts to acquiring and exploring mining interests that will eventually provide sufficient net profits to sustain the Company’s existence. Until such interests are engaged in commercial production, the Company will continue to prepare its financial statements and related disclosures in accordance with entities in the exploration stage.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Significant estimates used in preparing these financial statements include those assumed in estimating the recoverability of the cost of mining claims, accrued remediation costs, beneficial conversion features of convertible debt, deferred financing costs and deferred tax assets and related valuation allowances. Actual results could differ from those estimates.
Cash and Cash Equivalents
For the purpose of the balance sheet and statement of cash flows, the Company considers all highly liquid investments purchased, with an original maturity of three months or less, to be a cash equivalent. At December 31, 2005, the Company’s cash deposits, held in bank certificates of deposit, exceeded the Federal Deposit Insurance Corporation (“FDIC”) limits.
F-14
Little Squaw Gold Mining Company
(An Exploration Stage Company)
Notes to Financial Statements
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
Plant, Equipment, and Accumulated Depreciation
Plant and equipment are stated at cost, cost is determined by cash paid or shares of the Company’s common stock issued. The Company’s mill buildings and equipment are located on the Company’s unpatented state mining claims located in the Chandalar mining district of Alaska. All such assets are fully depreciated. A small amount of office equipment is located at Company offices in Spokane, Washington. Assets are depreciated over lives of five to seven years, resulting in depreciation expense of $846 and $493 being recognized for 2005 and 2004, respectively.
Income Taxes
Income taxes are recognized in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," whereby deferred income tax liabilities or assets at the end of each period are determined using the tax rate expected to be in effect when the taxes are actually paid or recovered. A valuation allowance is recognized on deferred tax assets when it is more likely than not that some or all of these deferred tax assets will not be realized.
Net Loss Per Share
Statement of Financial Accounting Standards No. 128, “Earnings per Share,” requires dual presentation of basic earnings per share (“EPS”) and diluted EPS on the face of all income statements issued after December 15, 1997, for all entities with complex capital structures. Basic EPS is computed as net income divided by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock options, warrants, and other convertible securities. The dilutive effect of convertible and exercisable securities would be:
For years ended December 31,
2005
2004
__________
__________
Stock Options
320,000
320,000
Warrants
4,200,000
1,036,389
Convertible debenture
5,000,000
0
__________
__________
Total possible dilution
9,520,000
1,356,389
__________
__________
At December 31, 2005 and 2004, the effect of the Company’s outstanding options and common stock equivalents would have been anti-dilutive. Accordingly, only basic EPS is presented.
Mining and Mineral Properties
Cost of acquiring and developing mineral properties are capitalized by the project area. Costs to maintain mineral rights and leases are expensed as incurred. Exploration costs are expensed in the period in which they occur. When a property reaches the production stage, the related capitalized costs are amortized using the units-of-production method on the basis of periodic estimates of ore reserves. Mineral properties are periodically assessed for impairment of value, and any subsequent losses are charged to operations at the time of impairment. If a property is abandoned or sold, its capitalized costs are charged to operations.
F-15
Little Squaw Gold Mining Company
(An Exploration Stage Company)
Notes to Financial Statements
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
Fair Values of Financial Instruments
The carrying amounts of financial instruments, including cash and cash equivalents, prepaid expenses, interest receivable, accounts payable and interest payable approximated their fair values as of December 31, 2005 and 2004. Related party liabilities approximated their fair values based upon the terms of payment at December 31, 2004. The convertible debenture approximated its fair value after consideration of the fair value of the related embedded beneficial conversion feature and detached warrants at December 31, 2005.
Deferred Financing Costs
Financing costs incurred in connection with the Company’s financing activities are amortized using the effective interest method over the three year life of the financing. For the year ended December 31, 2005, the Company incurred deferred financing costs in the form of $100,000 cash paid and $30,000 of warrants issued to a placement agent in connection with the Company’s issue of a convertible debenture. The fair value of the warrants was estimated using the Black-Scholes option pricing model. For the year ended December 31, 2005, there was $3,611 of amortization of deferred financing costs included in interest expense. The convertible debenture and associated warrants are discussed in Note 5 “Convertible Debenture” of these financial statements.
Reclamation and Remediation
The Company’s operations have been, and are subject to, standards for mine reclamation that have been established by various governmental agencies. In June 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 143, Accounting for Asset Retirement Obligations. SFAS 143 requires the Company to record the fair value of an asset retirement obligation as a liability in the period in which the Company incurs a legal obligation for the retirement of tangible long-lived assets. A corresponding asset is also recorded and depreciated over the life of the asset. After the initial measurement of the asset retirement obligation, the liability will be adjusted at the end of each reporting period to reflect changes in the estimated future cash flows underlying the obligation. Determination of any amounts recognized upon adoption is based upon numerous estimates and assumptions, including future retirement costs, future inflation rates and the credit-adjusted risk-free interest rates.
Remediation liabilities on non operating properties are recognized according to the provisions of Statement of Position 96-1.
The Company accrues costs associated with environmental remediation obligations when it is probable that such costs will be incurred and they are reasonably estimable. Such costs are based on management’s estimate of amounts expected to be incurred when the remediation work is performed.
F-16
Little Squaw Gold Mining Company
(An Exploration Stage Company)
Notes to Financial Statements
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
New Accounting Pronouncements
On December 16, 2004, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards, or Statement, No. 123 (revised 2004), Share-Based Payment ("Statement 123(R)"), which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation ("Statement 123"). Statement 123(R) supersedes Accounting Principles Board Opinion No. 25 ("APB 25"), Accounting for Stock Issued to Employees, and amends FASB Statement No. 95, Statement of Cash Flows. Generally, the approach in Statement 123(R) is similar to the approach described in Statement 123. Statement 123(R) requires that all share-based payments to employees, including grants of employee stock options, be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an option. Statement 123(R) is effective for small business issuers at the beginning of the first interim or annual period beginning after December 15, 2005.
As permitted by Statement 123, management currently accounts for share-based payments to employees using APB 25's intrinsic value method. Management expects to adopt Statement 123(R) on January 1, 2006 using the modified prospective method and is unable to estimate stock-based compensation expense to be recorded in 2006.
Stock-based Compensation: At December 31, 2005 and 2004, the Company had a stock plan for key employees, non-employee directors and management consultants which is more fully described in Note 5. The Company accounts for stock options as prescribed by Accounting Principles Board Opinion No. 25 and discloses pro forma information as provided by Statement 123, “Accounting for Stock Based Compensation.”
3.
MINING AND MINERAL PROPERTIES
Mining Claims
At December 31, 2005 and 2004, the Company’s mining properties were as follows:
2005
2004
__________
__________
Chandalar claims
$
264,000
$
264,000
2003 purchased claims
35,000
35,000
Unpatented state claims staked
22,041
22,041
__________
__________
Total
$
321,041
$
321,041
__________
__________
Buildings and Equipment
Located on the Company’s unpatented state mining claims in the Chandalar District are certain mining and milling buildings and other mining equipment that have long since been fully depreciated and have no book value. Accordingly, the Company has removed their cost basis and the associated accumulated depreciation from its financial statements.
See Note 9: Subsequent Events for capital asset additions after the close of 2005.
F-17
Little Squaw Gold Mining Company
(An Exploration Stage Company)
Notes to Financial Statements
4.
CONVERSION OF RELATED PARTY DEBTS
Conversion of Related Party Debts to Common Stock
On January 21, 2005, the Company separately entered into related party transactions with William Orchow, a director, Wilbur G. Hallauer, a greater than 10% shareholder, and another shareholder in which these parties advanced an aggregate amount of $100,000 to the Company for operating capital purposes. The advances were evidenced by six month promissory notes payable on demand, or if no demand is made, on July 20, 2005, with accrued interest at 6% per annum. The Company had the right, any time prior to their maturity date on July 20, 2005, and without notice, to convert the Notes into restricted shares of common stock and warrants. The initial conversion rate would have been $0.30 per share and included one warrant per share initially at $0.45. The exercise price of the warrants would have escalated to $0.55 and $0.75 in the second and third year from the date of issue. No conversion was made by the Company and no demand for payment was made by the holders of the promissory notes, and the notes subsequently matured on July 20, 2005, whereupon the Company requested of all note holders an extension of the term of the notes. All parties to the notes agreed to extend the term of the Notes for an indefinite period until the Company had the financial resources to repay them. In connection with the agreement to extend the term of the Notes, the parties also agreed that the interest rate on the notes would increase from 6% to 12% per annum for the extended period. All principal and interest obligations of the promissory notes were paid during the last quarter of 2005, and no stock was issued in connection with these related party transactions. Interest expense of $7,500 and $0 was recognized for the years ended December 31, 2005 and 2004, respectively.
5.
CONVERTIBLE DEBENTURE:
On November 21, 2005, the Company closed a private placement, issuing a 6% Convertible Debenture in the principal amount of US$1,000,000 and a detached 2,500,000 Class A Warrant to one institutional investor. The Debenture is convertible into shares of Common Stock, $0.10 par value, at US$0.20 per share, subject to certain adjustments, and the Warrant is exercisable to acquire 2,500,000 common shares at an exercise price of US$0.30 per share until November 21, 2008. Both the Convertible Debenture and Warrant are transferable. The Convertible Debenture contains a mandatory conversion provision which grants the Company, at the Company’s option, the ability to force conversion of the Debenture in whole or in part, subject to a 9.99% limitation of outstanding shares ownership provision, if the market price of the Company’s common shares is sustained at or above $0.50 per share for five consecutive trading days. The Class A Warrant also contains a mandatory conversion provision which grants the Company, at the Company’s option, the ability to force conversion of the Warrant in whole or in part, subject to a 9.99% limitation of outstanding shares ownership provision, if the market price of the Company’s common shares is sustained at or above $0.75 per share for five consecutive trading days.
In connection with the placement, the Company issued to the placement agent a 500,000 Class A Warrant under the terms of a Placement Agent Agreement which is convertible into 500,000 common shares at an exercise price of US$0.30 until November 21, 2008. This Class A Warrant includes the same mandatory conversion provision as the warrant issued to the debenture holder. Valuation of the Warrant and the associated amortization of deferred financing costs are described in Note 2 of these financial statements.
Upon the issuance of the 6% Convertible Debenture on November 21, 2005, the Company was required to allocate value to the warrant issued with the debenture, and to record a discount on the debenture for the fair value of its beneficial conversion feature. In accordance with EITF No. 00-27 “Application of Issue No. 98-5 to Certain Convertible Instruments” the Company recorded a discount in the amount of $150,000. This discount is being amortized over the life of the convertible debenture, which resulted in accretion of $4,773 to the convertible debenture being recorded in 2005.
F-18
Little Squaw Gold Mining Company
(An Exploration Stage Company)
Notes to Financial Statements
5.
CONVERTIBLE DEBENTURE, CONTINUED:
Also, in accordance with EITF No. 98-5, “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios”, the Warrants issued in connection with the Convertible Debenture were accounting for under APB 14, “Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants”. Under APB 14, the proceeds received from the investor are to be allocated to the Debenture and the Warrant in proportion to their respective fair values. The fair value of the warrants was estimated using the Black-Scholes option pricing model. The warrants with a fair value of $150,000 are presented as a component of additional paid-in capital in shareholder’s equity. This discount is being amortized over the life of the convertible debenture, which resulted in amortization of $4,773 to interest expense being recognized in 2005.
6.
STOCKHOLDERS’ EQUITY:
At December 31, 2003, the Company had one class of $0.10 par value common stock outstanding with 12,000,000 shares available for issue. At a special meeting of shareholders originally convened December 19, 2003, then adjourned to January 23, 2004, (due to the absence of a voting majority necessary to ratify certain proposals), the shareholders voted to increase the Company’s authorized shares of common stock to 200,000,000 and to create a class of preferred stock with 10,000,000 shares authorized for issue.
Common Stock Issued to Officer
On March 4, 2004, the Company issued the former CFO, Becky Corigliano, 67,103 shares of the Company’s restricted common stock from its treasury following her appointment as Chief Financial Officer. In connection with the issue, the Company recognized $6,710 of compensation expense in its 2004 financial statements based on management’s estimate of the value of the stock issued.
Common Stock Issued to Directors
On December 31, 2004, the Company issued each of its six independent directors 50,000 shares for a total of 300,000 shares, of the Company’s restricted common stock under the 2003 Share Incentive Plan. As a result the Company recognized $59,200 share based expense for director’s fees estimated by the fair value of the shares issued.
On May 13, 2005 the Company, by resolution of its Board of Directors, issued 112,903 restricted common shares to Mr. James Duff for his services as Chairman of the Board of Directors and in connection with working with the Company’s management in attempts to obtain financing for the Company. As a result the Company recognized $25,969 of share based expense estimated by the fair value of the shares issued. There were no issues of common stock in 2005 to Directors in relation to their service as directors.
F-19
Little Squaw Gold Mining Company
(An Exploration Stage Company)
Notes to Financial Statements
6.
STOCKHOLDERS’ EQUITY, CONTINUED:
Common Stock Issued to Consultants
On October 25, 2004, the Company issued 60,000 shares of the Company’s restricted common stock to Sussex Avenue Partners, LLC for consulting services relating to management advisement, strategic planning and marketing in connection with its business, together with advisory and consulting related to shareholder management and public relations. The Company issued an additional 30,000 shares of restricted common stock to Sussex Avenue Partners, LLC on December 13, 2004 for similar services. An expense of $29,400 was recorded in connection with the issuance based on the estimated value of the aggregate shares issued.
On January 6, 2005, the Company issued 20,000 restricted common shares to Mr. Terry Swanger in partial fulfillment of payment for consulting services by Swanger Eriksen and Associates as provided for in a Letter Agreement dated October 14, 2004. The consulting services were related to the development and implementation of a marketing plan to introduce the Company to U.S. markets. The Letter Agreement was terminated on February 28, 2005. An expense of $5,600 was recorded in connection with the issuance based on the estimated value of the shares issued.
On February 13, 2005, the Company issued 30,000 shares of the Company’s restricted common stock to Sussex Avenue Partners, LLC for consulting services similar to those performed during 2004. An expense of $8,400 was recognized in connection with the issuance based on the estimate value of the shares issued.
Common Stock Issued to Placement Agent
On March 1, 2005 the Company entered into a Placement Agent Agreement with a broker-dealer to act as a placement agent for the Company. On July 1, 2005, the Company issued 31,400 shares of its common stock to Strata Partners, LLC as reimbursement for expenses incurred under the terms of the agreement that terminated July 1, 2005. An expense of $5,337 was recorded in connection with the issuance based on the estimated value of the shares issued.
Private Placements
On August 12, 2005 the Company’s Board of Directors authorized a direct private placement offering of 1,200,000 units at $0.25 per Unit. Each unit consists of one common share of the Company, and a three-year full share purchase warrant exercisable at $0.30, $0.35 and $0.40 in the respective successive years. During the quarter ended September 30, 2005, the Company sold a total of 500,000 units for proceeds of $125,000. The remaining 700,000 units were sold during the fourth quarter of 2005, for proceeds of $175,000. No fees or commissions were paid, and total net proceeds to the Company were $300,000.
See Note 9: Subsequent Events for details of additional private placements made subsequent to the end of 2005.
F-20
Little Squaw Gold Mining Company
(An Exploration Stage Company)
Notes to Financial Statements
6.
STOCKHOLDERS’ EQUITY, CONTINUED:
Stock Warrants
For the years ended December 31, 2005 and 2004, the Company had the following types of stock purchase warrants outstanding:
2004 Private Placement Warrants
During 2004, and in connection with the Company’s private placement of its common stock, warrants were issued and were exercisable at $0.45 per common share and expired on September 19, 2005. As of December 31, 2004, 173,611 warrants had been exercised, yielding net cash proceeds of $70,313, leaving 1,036,389 of these warrants issued and outstanding. On May 18, 2005, the Company’s Board of Directors authorized a temporary reduction of the exercise price of these warrants to $0.25 through June 24, 2005 after which time the remaining unexercised warrants reverted back to their original $0.45 exercise price. As a result of the price reduction, 75,000 warrants were exercised during the second quarter ended June 30, 2005, yielding net cash proceeds of $16,875. The remaining warrants expired on September 19, 2005.
2005 Private Placement Warrants
In 2005, warrants were issued in connection with the Company’s private placement of its common stock on August 12, 2005, and are exercisable at $0.30, $0.35 and $0.40 per common share in the respective three successive years and expire in the third and fourth quarters of 2008, three years from their purchase date. These warrants contain no mandatory conversion provision. At December 31, 2005 there were 1,200,000 of these warrants were issued and outstanding.
Class A Warrants
The Class A Warrants were issued in connection with the Company’s private placement of its common stock on November 21, 2005, and are exercisable at $0.30 per common share and expire on November 21, 2008. The Class A Warrants contain a mandatory conversion provision which grants the Company, at the Company’s option, the ability to force conversion of the warrants in whole or in part, subject to a 9.99% limitation of outstanding shares ownership provision, if the market price of the Company’s common shares is sustained at or above $0.75 per share for five consecutive trading days. At December 31, 2005 there were two Class A Warrants issued and outstanding with exercise privileges for a total of 3,000,000 common shares.
See Note 9: Subsequent Events for details of the Class B Warrants issued subsequent to the end of the year in connection with the Company’s private placement of its common stock on January 31, 2006.
F-21
Little Squaw Gold Mining Company
(An Exploration Stage Company)
Notes to Financial Statements
6.
STOCKHOLDERS’ EQUITY, CONTINUED:
Stock Warrants, Continued
The following is a summary of warrants for 2005 and 2004:
Shares | Exercise Price | Expiration Date | |
2004 Private Placement Warrants December 31, 2003 | - | - | |
Warrants granted | 1,210,000 | 0.45 | September 19, 2005 |
Warrants exercised | (173,611) | 0.45 | |
Warrants expired | |||
Outstanding and exercisable at December 31, 2004 | 1,036,389 | 0.45 | |
Warrants granted | 0 | 0.45 | |
Warrants exercised | (75,000) | 0.25 | June 24, 2005 |
Warrants expired | (961,389) | September 19, 2005 | |
Outstanding and exercisable at December 31, 2005 | 0 | Expired | |
2005 Private Placement Warrants December 31, 2003 | - | - | |
No 2004 Activity | 0 | 0 | |
Outstanding and exercisable at December 31, 2004 | 0 | 0 | |
Warrants granted | 1,200,000 | 0.30, 0.35, 0.40 | Qtrs 3 and 4 of 2008 |
Warrants exercised | 0 | 0 | |
Warrants expired | 0 | 0 | |
Outstanding and exercisable at December 31, 2005 | 1,200,000 | 0.30, 0.35, 0.40 | |
Class A Warrants: December 31, 2003 | – | – | |
No 2004 Activity | 0 | 0 | |
Outstanding and exercisable at December 31, 2004 | 0 | 0 | |
Warrants granted | 3,000,000 | 0.30 | November 21, 2008 |
Warrants exercised | 0 | 0 | |
Warrants expired | 0 | 0 | |
Outstanding and exercisable at December 31, 2005 | 3,000,000 | 0.30 | |
Weighted average exercise of warrants outstanding at December 31, 2005 | 4,200,000 | 0.30 |
F-22
Little Squaw Gold Mining Company
(An Exploration Stage Company)
Notes to Financial Statements
6.
STOCKHOLDERS’ EQUITY, CONTINUED:
2003 Share Incentive Plan:
In 2004, the shareholders voted to adopt the Little Squaw Gold Mining Company 2003 Share Incentive Plan (“the Plan”). The Plan permits the grant of nonqualified stock options, incentive stock options and shares of common stock to participants of the Plan. The purpose of the Plan is to promote the success of the Company and enhance the value by linking the personal interests of the participants to those of the Company’s shareholders, by providing participants with an incentive for outstanding performance. Pursuant to the terms of the Plan, 1,200,000 shares of the Company’s authorized but unissued common stock were reserved for issue. Options granted to participants under the Plan must be exercised no later than the tenth anniversary of the grant. Eligible participants in the Plan include the Company’s employees, directors and consultants.
In November 2005 the Company’s Board of Directors ratified changes to the Plan that brought it into compliance with new IRS laws (principally Code 409A) that require companies to recognize the fair market value of stock options and other share based payments awarded to employees and associates as compensation expense. The new law becomes effective for the Company on January 1, 2006. Any new shares issued under the Plan will be based on their then current market price or higher. The Plan is now referred to as the Restated 2003 Share Incentive Plan.
During 2004, 300,000 shares of restricted common stock and 320,000 options to purchase common stock were issued under the original Plan. No shares have been issued under the restated Plan. The following table summarizes stock option activity under this plan:
Outstanding Options
Weighted
Average
Number of
Price
Shares
Per Share
__________
__________
Balance at January 1, 2004
0
$
0.00
Options granted
320,000
$
0.23
Options exercised
0
$
0.00
__________
__________
Balance at December 31, 2004
320,000
$
0.23
__________
__________
Options granted
0
$
0.00
Options exercised
0
$
0.00
__________
__________
Balance at December 31, 2005
320,000
$
0.23
__________
__________
The stock options are exercisable immediately upon grant and for a period of 10 years. In the event of cessation of the holder’s relationship with the Company, the holder’s exercise period terminates 6 months following such cessation. Accordingly, subsequent to December 31, 2005, 55,000 options held by a former director were forfeited on March 13, 2006.
F-23
Little Squaw Gold Mining Company
(An Exploration Stage Company)
Notes to Financial Statements
6.
STOCKHOLDERS’ EQUITY, CONTINUED:
Pro forma net loss presented below was determined as if the Company had accounted for their employee stock options under the fair value method of Statement 123. The fair value of these options was estimated at the date of grant using an option pricing model. Such models require the input of highly subjective assumptions including the expected volatility of the stock price which may be difficult to estimate for small business issuers traded on micro-cap stock exchanges. The pro forma net loss presented below considers the stock-based employee compensation expense already recognized in accordance with APB 25. The affect of Statement 123 stock option expense on basic loss per share is nil.
December 31,
2004
____________
Net loss as reported
$
553,178
Statement 123 stock option expense
58,400
____________
Pro forma net loss
$
611,578
____________
If the Company accounted for its employee stock options under Statement 123, compensation expense would have been $117,600 for the year ended December 31, 2004. There were no grants of stock options for the year ended December 31, 2005.
The fair value of each option grant was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions:
December 31,
2004
____________
Risk-free interest rate
3.50%
Expected stock price volatility
80.00%
Expected dividend yield
---
7.
REMEDIATION LIABILITY
In 1990, the Alaska Department of Environmental Conservation (“Alaska DEC”) notified the Company that soil samples taken from a gravel pad adjacent to the Company’s Tobin Creek mill site contained elevated levels of mercury. In response to the notification, the Company engaged a professional mining engineer to evaluate the cost and procedure of remediating the affects of the possible contamination at the site. In 1994, the engineer evaluated the contamination and determined it to consist of approximately 160 cubic yards of earthen material and estimated a cost of approximately $25,000 to remediate the site. In 2000, the site was listed in the Alaska DEC’s contaminated sites database as a “medium” priority contaminated site. During 2003, the Company’s management reviewed its estimate of the cost that would be ultimately required to fulfill its remediation obligations at the site and determined that its accrual for remediation should be adjusted, based upon estimated general and administrative costs that would be included in the remediation effort and the affect of inflation on the 1994 cost estimate and increased the accrual to $36,000. During 2004, management updated its estimate of undiscounted cash costs to remediate the site, and increased the accrual for remediation costs to $50,000 at December 31, 2004. At December 31, 2005 the Company reaffirmed the validity of the $50,000 estimate and did not change the accrual. The Company's remediation cost accrual is classified as a non-current liability, as management believes its remediation activities will not occur during the upcoming year.
F-24
Little Squaw Gold Mining Company
(An Exploration Stage Company)
Notes to Financial Statements
7.
REMEDIATION LIABILITY, CONTINUED:
The Company’s management believes that the Company is currently in substantial compliance with environmental regulatory requirements and that its accrued environmental remediation costs are representative of management’s estimate of costs required to fulfill its obligations. Such costs are accrued at the time the expenditure becomes probable and the costs can reasonably be estimated. The Company recognizes, however, that in some cases future environmental expenditures cannot be reliably determined due to the uncertainty of specific remediation methods, conflicts between regulating agencies relating to remediation methods and environmental law interpretations, and changes in environmental laws and regulations. Any changes to the Company’s remediation plans as a result of these factors could have an adverse affect on the Company’s operations. The range of possible losses in excess of the amounts accrued cannot be reasonably estimated at this time.
8.
INCOME TAXES
At December 31, 2005 and 2004, the Company had deferred tax assets which were fully reserved by valuation allowances. The deferred tax assets were calculated based on an expected future tax rate of 15%. Following are the components of such assets and allowances at December 31, 2005 and 2004:
2005
2004
__________
__________
Deferred tax assets arising from:
Unrecovered promotional, exploratory, and
development costs
$
56,000
$
56,000
Net operating loss carryforwards
186,000
121,000
__________
__________
242,000
177,000
Less valuation allowance
(242,000)
(177,000)
__________
__________
Net deferred tax assets
$
0
$
0
__________
__________
At December 31, 2005 and 2004, the Company had federal tax-basis net operating loss carryforwards totaling $1,237,445 and approximately $803,000, respectively, which will expire in various amounts from 2006 through 2025.
The Tax Reform Act of 1986 substantially changed the rules relative to the use of net operating loss and general business credit carryforwards in the event of an “ownership change” of a corporation. Due to the change in ownership during June 2003, the Company is restricted in the future use of net operating loss and tax credit carryforwards generated before the ownership change. As of December 31, 2005, this limitation is applicable to accumulated net operating losses of approximately $150,727, which were incurred prior to the change of ownership and would substantially limit the use of the Company’s respective, existing losses.
The above estimates are based upon management’s decisions concerning certain elections which could change the relationship between net income and taxable income. Management decisions are made annually and could cause the estimates to vary significantly.
F-25
Little Squaw Gold Mining Company
(An Exploration Stage Company)
Notes to Financial Statements
8.
INCOME TAXES, CONTINUED:
Net operating losses expire as follows:
December 31,
2006
$
38,377
2007
20,554
2008
19,205
2009
8,318
2010
19,411
Thereafter
1,131,580
__________
Total
$
1,237,445
__________
9.
SUBSEQUENT EVENTS
Private Placements
On November 7, 2005 the Board of Directors approved an equity financing of up to $2,000,000 of Company securities at a price equal to or greater than the terms of the November 21, 2005 Convertible Debenture. On January 31, 2006, the Company closed the first tranche of 3,895,000 Units, at a price of $0.25 per Unit for gross proceeds of $973,750. Each Unit consisted of one share of common stock and one half of one (1/2) Class B Warrant. Each whole Class B Warrant is exercisable to acquire one additional share of common stock at an exercise price of $0.35 per share during the one-year period commencing on the Closing Date, $0.50 per share during the second year following the Closing Date, and $0.65 per share during the third year following the Closing Date. Additionally, each Class B Warrant contains a mandatory conversion provision which grant the Company, at the Company’s option, the ability to force conversion of each whole Warrant if the market price of the Company’s common shares is sustained at or above $0.875 per share for five consecutive trading days. In connection with this portion of the placement, the Company paid an Agent’s commission of 10% of the gross proceeds and issued the agent 389,500 Class B Warrants.
On February 24, 2006, the Company closed the second tranche of an additional 5,600,000 Units, at a price of $0.25 per Unit for gross proceeds of $1,400,000. This second closing brings the total gross proceeds received to $2,373,750 and the total Units sold to 9,495,000, including an oversubscription of 1,495,000 Units which had been approved by the Board of Directors on February 13, 2006. Each Unit consisted of one share of the registrant’s common stock and one half of one (1/2) Class B Warrant. The Units of this second closing are identical to those of the first closing on January 31, 2006. In connection with this portion of the placement, the Company paid an Agent’s commission of 10% of the gross proceeds and issued the agent 560,000 Class B Warrants, bringing the total number of Class B Warrants issued to the Agent to 949,500.
F-26
Little Squaw Gold Mining Company
(An Exploration Stage Company)
Notes to Financial Statements
9.
SUBSEQUENT EVENTS, CONTINUED:
Board and Management Team Enhancements
On January 10, 2006, the Company entered into a management consulting contract with Mr. James Barker designating him as the Project Manager for the 2006 Chandalar exploration program.
On February 13, 2006, the Board of Directors of the Company elected Mr. William Schara as a director to fill a director vacancy created by the September 13, 2005 resignation of Mr. Jackie Stephens.
On March 1, 2006, the Board of Directors appointed Ted R. Sharp as Chief Financial Officer, Secretary, and Treasurer of the Company. The Company entered into a management consulting contract with Mr. Sharp, engaging him on a part-time basis. In connection with Mr. Sharp’s appointment, the Company issued 25,000 shares of Restricted Common Stock and 50,000 Stock Options under the Restated 2003 Share Incentive Plan.
Also on March 1, 2006, the Board of Directors approved the appointment of Mr. Bob Pate as Vice President. The Company entered into a management consulting contract with Mr. Pate, engaging him on a part-time basis. In connection with Mr. Pate’s appointment, the Company issued 25,000 shares of Restricted Common Stock and 50,000 Stock Options under the Restated 2003 Share Incentive Plan.
On March 6, 2006, the Company contracted with Ms. Susan Schenk as Manager of Investor Relations to assist in improving awareness of Little Squaw in equity markets. The Company entered into a management consulting contract with Ms. Schenk, engaging her on a part-time basis. In connection with Ms. Schenk’s appointment, the Company issued 25,000 shares of Restricted Common Stock and 50,000 Stock Options under the Restated 2003 Share Incentive Plan.
Purchase of Equipment
With the completion of the private placements in 2005 and in 2006, the Company is aggressively implementing its drilling plans for the Chandalar property. In the first quarter of 2006, the Company has paid $349,215 in cash for capital equipment to support the 2006 summer exploration season.
F-27
GLOSSARY OF TERMS
ADIT:
An opening driven horizontally into the side of a mountain or hill for providing access to a mineral deposit.
ALTERED ROCKS:
Bedrock wherein the minerals constituting it have been wholly or partially converted to other minerals, commonly chlorite or sericite, by the action or cooking of hot gasses and water (hydrothermal fluids) rising from deep within the earth.
ASSAY:
A chemical test performed on a sample of ores or minerals to determine the amount of valuable metals contained within the sample.
AUREOLES:
A zone surrounding an igneous or quartz intrusion in which the character of the surrounding rock has been altered by heat and introduced hot liquids.
AURIFEROUS:
Said of a substance or mineral-bearing deposit that contains gold.
BRECCIA:
A rock in which angular fragments are surrounded by a mass of fine-grained minerals.
DEVELOPMENT:
Work carried out for the purpose of opening up a mineral deposit and making the actual ore extraction possible.
DISSEMINATED ORE:
Ore carrying small particles of valuable minerals spread more or less uniformly through the host rock.
DRIFT:
A horizontal underground opening that follows along the length of a vein or rock formation as opposed to a cross-cut which crosses the rock formation.
EXPLORATION:
Work involved in searching for ore, usually by employing the science of geology and drilling or driving a drift.
EXPLORATION STAGE:
A U.S. Security and Exchange Commission descriptive category applicable to public mining companies engaged in the search for mineral deposits and ore Reserves and which are not either in the mineral development or the ore production stage.
FERRICRETE:
A soil zone more or less cemented by iron oxide.
FOOTWALL:
The rock on the underside of a vein or ore structure.
FRACTURE:
A break in the rock, the opening of which allows mineral bearing solutions to enter. A “cross-fracture” is a minor break extending at more-or-less right angles to the direction of the principal fractures.
GEOPHYSICAL
SURVEY:
Indirect methods of investigating the subsurface geology using the applications of physics including electric, gravimetric, magnetic, electromagnetic, seismic, and radiometric principles.
GRADE:
The average assay of a ton of ore, reflecting metal content.
HANGING WALL:
The rock on the over side of a vein or ore structure.
HIGH GRADE:
A subjective term said of ore containing a relatively high mineral content, often in reference to possible ores that are of relatively high value compared to those of medium or low value from within the same mineral deposit or body of mineralization. High grade ores are those generally requiring selective mining methods. As used herein, the term is applied to ore that contains one ounce or more of gold per ton.
HYDROTHERMAL:
Said of magmatic (molten rock) emanations high in water content and the rocks, mineral deposits, alteration products and springs produced by them.
INLIER CLAIMS:
Mining claims of others that lie within, or are enclosed by, a block of many claims owned by another.
LODE:
A mineral deposit consisting of a zone of veins, disseminations or breccias in consolidated rock, as opposed to placer deposits.
G-1
LOW GRADE:
A subjective term said of rock containing a relatively low ore-mineral content, often in reference to possible ores that are of relatively low value compared to those of medium or high value from within the same mineral deposit, or body of mineralization. Low grade ores are those often amenable to bulk mining methods. As used herein, the term is applied to rock that contains one tenth ounce or less of gold per ton.
MESOTHERMAL:
Said of a mineral deposit formed at moderate to high temperatures and moderate to high pressures by deposition from hydrothermal fluids at considerable depth within the earth.
METAMORPHIC
ROCKS:
Rocks which have undergone a change in texture and composition as the result of heat and pressure from having been buried deep in the earth.
MILL:
A processing plant that extracts and produces a concentrate of the valuable minerals or metals contained in an ore. The concentrate must then be treated in some other type of plant, such as a smelter, to affect recovery of the pure metal, recovery being the percentage of valuable metal in the ore that is recovered by metallurgical treatment.
RESERVES:
Identified resources of mineral-bearing rock from which the mineral can be extracted profitably with existing technology and under present economic conditions.
MINE:
An underground or surface excavation for the extraction of mineral deposits.
MINERAL:
A naturally occurring inorganic element or compound having an orderly internal structure and characteristic chemical composition, crystal form, and physical properties.
MINERAL RESERVE:
The economically mineable part of a measured or indicated mineral resource. Appropriate assessments, often called feasibility studies, have been carried out and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social, and governmental factors. These assessments demonstrate, at the time of reporting, that extraction is reasonably justified. Mineral reserves are sub-divided, in order of increasing confidence, into probable and proven categories. A probable reserve is the economically mineable part of an indicated (and in certain circumstances, measured) resource. A proven reserve is the economically mineable part of a measured resource.
MINERAL
RESOURCE:
A deposit or concentration of natural, solid, inorganic or fossilized organic substance in such quantity and at such grade or quality that extraction of the material at a profit is potentially possible.
MINERALIZED
MATERIAL or
DEPOSIT:
A mineralized body, which has been delineated by appropriate drilling and/or underground sampling to support a sufficient tonnage and average grade of metal(s). Under SEC standards, such a deposit does not qualify as a reserve until a comprehensive evaluation, based upon unit cost, grade, recoveries, and other factors, conclude current economic feasibility to extract it.
MINERALIZATION:
The presence of economic minerals in a specific area or geological formation.
ORE:
Material that can be mined and processed at a positive cash flow under current economic circumstances.
PATENTED
MINING CLAIM:
A mineral claim originally staked on land owned by in the United States Government, where all its associated mineral rights have been secured by the claimant from the U.S. Government in compliance with the laws and procedures relating to such claims, and title to the surface of the claim and the minerals beneath the surface have been transferred from the U.S. Government to the claimant. Annual mining claim assessment work is not required, and the claim is taxable real estate. Mining claims located on State of Alaska lands cannot be patented.
G-2
PLACER:
A place where gold or other heavy minerals are or can be obtained by washing sand or gravel. Placer deposits are formed by attrition by river or stream action of the lighter rocks leaving the relatively inert, tough, and heavy minerals in a concentrated layer, generally along the contact of the alluvial material with the underlying bedrock.
PROSPECT:
An area that is a potential site of mineral deposits, based on preliminary exploration. A prospect is distinct from am mine in that it is non-producing.
PROSPECTING:
The search for outcrops or other surface expressions of mineral deposits with the objective of making a valuable discovery.
RECLAMATION:
The restoration of a site to acceptable regulatory standards after mining or exploration activity is completed.
RECOVERY:
The percentage of valuable metal in the ore that is recovered by metallurgical treatment.
RESERVES:
That part of a mineral deposit, which could be economically and legally extracted or produced at the time of the reserve determination. Reserves are customarily stated in terms of “Ore” when dealing with metalliferous minerals.
RESOURCE:
The calculated amount of material in a mineral deposit, based on limited drill information.
SEC INDUSTRY
GUIDE 7:
This is the United States’ reporting standard for the mining industry for securities purposes. It is contained in a publication of the United States Security and Exchange Commission (SEC) known as Industry Guide 7, which summarizes requirements for disclosure by mining companies. It defines proven and probable Reserves using its own definitions, and prohibits the disclosure of quantitative estimates for all mineralization other than in those two Reserve categories. Similarly, it restricts disclosure of value of estimates to Reserves only, which the SEC policy generally requires to be on a historic cost accounting basis.
SHEAR or SHEARING:
The deformation of rocks by lateral movement along numerous parallel planes, known as faults, generally resulting from stress or pressure and producing such metamorphic structures as cleavage and schistosity.
STRIKE:
The direction, or bearing from true north, of a vein or rock formation measured on a horizontal surface.
TAILINGS:
Fine grained or ground up material rejected from a mill after more of the recoverable valuable minerals have been extracted. Can also mean the waste material resulting from placer mining.
UNPATENTED
MINING CLAIM:
A mineral claim staked on federal, state or, in the case of severed mineral rights, private land to which a deed from the U.S. Government or other mineral title owner has not been received by the claimant. Unpatented claims give the claimant the exclusive right to explore for and to develop the underlying minerals and use the surface for such purpose. However, the claimant does not own title to either the minerals or the surface, and the claim is subject to annual assessment work requirements and the payment of annual rental fees which are established by the governing authority of the land on which the claim is located. The claim may or may not be subject to production royalties payable to that governing authority. Mining claims located on State of Alaska lands cannot be deeded to the claimant.
VEIN:
A zone or belt of mineralized rock having a more or less regular development in length, width and depth, and lying within boundaries which clearly separates it from neighboring rock.
VEINLET:
A tiny vein, stringer or filament of mineral (commonly quartz) traversing a rock mass of different material, and usually one of a number making a Lode.
G-3
![[lsgpea130819pr1806f009.gif]](lsgpea130819pr1806f009.gif)
LITTLE SQUAW GOLD MINING COMPANY
10,431,400 Shares of Common Stock
PROSPECTUS
______________________, 2006
II-1
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Other Expenses of Issuance and Distribution.
Amount | |
Securities and Exchange Commission Registration Fee** | $ 282 |
Legal Fees and Expenses | 25,000 |
Accounting Fees and Expenses | 5,000 |
Printing and Engraving Expenses | 1,000 |
Miscellaneous Expenses | 1,000 |
Total | $ 32,282 |
** Previously paid.
Item 14. Indemnification of Directors and Officers
Pursuant to our bylaws, we are required to indemnify all of our officers and directors for such expenses and liabilities, in such manner, under such circumstances to such extent as permitted by the Alaska Corporations Code, as now enacted or hereafter amended. Unless otherwise approved by our board of directors, we shall not indemnify any of our employees who are not otherwise entitled to indemnification pursuant to our bylaws.
Alaska law permits a corporation, under specified circumstances, to indemnify its directors, officers, employees or agents against expenses (including attorney’s fees), judgments, fines and amounts paid in settlements actually and reasonably incurred by them in connection with any action, suit or proceeding brought by third parties by reason of the fact that they were or are directors, officers, employees or agents of the corporation, if such directors, officers, employees or agents acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reason to believe their conduct was unlawful. In a derivative action, that is, one by or in the right of the corporation, indemnification may be made only for expenses actually and reasonably incurred by directors, officers, employees or agents in connection with the defense or settlement of an action or suit, and only with respect to a matter as to which they shall have acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made if such person shall have been adjudged liable to the corporation, unless and only to the extent that the court in which the action or suit was brought shall determine upon application that the defendant directors, officers, employees or agents are fairly and reasonably entitled to indemnity for such expenses despite such adjudication of liability.
Our Articles of Incorporation and Bylaws also contain provisions stating that no director shall be liable to our company or any of our shareholders for monetary damages for breach of fiduciary duty as a director, except with respect to (1) a breach of the director’s duty of loyalty to the corporation or its shareholders, (2) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (3) liability under the Alaska Corporations Code (for unlawful payment of dividends, or unlawful stock purchases or redemptions) or (4) a transaction from which the director derived an improper personal benefit. The intention of the foregoing provisions is to eliminate the liability of our directors to our shareholders to the fullest extent permitted by the Alaska Corporations Code.
Item 15. Recent Sales of Unregistered Securities
During the past three years, we have offered and sold the following securities in unregistered transactions pursuant to exemptions under the Securities Act of 1933, as amended.
On March 29, 2006, the Board of Directors issued to William V. Schara 50,000 shares of Restricted Common Stock and 50,000 Stock Options under the Restated 2003 Share Incentive Plan in connection with his appointment as a director on February 13, 2006.
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On March 6, 2006, the Company contracted with Ms. Susan Schenk as Manager of Investor Relations. In connection with Ms. Schenk’s appointment, the Company issued 25,000 shares of Restricted Common Stock and 50,000 Stock Options under the Restated 2003 Share Incentive Plan.
On March 1, 2006, the Board of Directors appointed Ted R. Sharp as Chief Financial Officer, Secretary, and Treasurer of the Company. In connection with Mr. Sharp’s appointment, the Company issued 25,000 shares of Restricted Common Stock and 50,000 Stock Options under the Restated 2003 Share Incentive Plan.
On March 1, 2006, the Board of Directors approved the appointment of Mr. Bob Pate as Vice President. In connection with Mr. Pate’s appointment, the Company issued 25,000 shares of Restricted Common Stock and 50,000 Stock Options under the Restated 2003 Share Incentive Plan.
On November 21, 2005, the Company closed a private placement to raise one million dollars ($1,000,000). We issued 6% Convertible Debentures in the principal amount of One Million United States Dollars (US$1,000,000) and 2,500,000 Class A Warrants to one institutional investor, who was a non-U.S. person outside the United States. The securities were issued in an “off-shore transaction” in reliance upon an exception from registration available under Rule 905 of Regulation S of the Securities Act of 1933, as amended. The Debentures are convertible into shares of Common Stock, $0.10 par value, at US$0.20 per share, subject to certain adjustments, and each Warrant is exercisable to acquire one share of common stock at an exercise price of US$0.30 per share until November 21, 2008. The 6% convertible debentures and the Class A Warrants contain provisions that limit the selling shareholder’s beneficial ownership in the class of common stock of Little Squaw to 9.99%. In connection with the placement, the Company issued a placement agent 500,000 Class A Warrants under the terms of a Placement Agent Agreement. The warrants were issued to the agent in reliance upon Section 4(2) of the Securities Act.
On August 12, 2005 the Company’s Board of Directors authorized a direct private placement offering of 1,200,000 Units at $0.25 per Unit. Each Unit consists of one common share of the Company, and a three-year full share purchase warrant exercisable at $0.30, $0.35 and $0.40 in the respective successive years. During the quarter ended September 30, 2005, the Company sold a total of 500,000 Units for proceeds of $125,000. The remaining 700,000 Units were sold to during the fourth quarter of 2005, for proceeds of $175,000. Five accredited investors (as such term is defined in Rule 501(a) of Regulation D) participated in the offering. No fees or commissions were paid, and net proceeds to the Company were $300,000. The Company issued the Units in private placement transactions solely to “accredited investors” (as defined in Rule 501(a) of Regulation D under the Securities Act). The Company issued the Units in reliance upon the safe harbor from registration available under Rule 506 of Regulation D of the Securities Act.
On July 1, 2005, the Company issued 31,400 shares of its common stock to Strata Partners, LLC as reimbursement for expenses incurred under the terms of a Placement Agent Agreement that terminated July 1, 2005. The warrants were issued to the agent in reliance upon Section 4(2) of the Securities Act.
On May 18, 2005, the Company’s Board of Directors authorized a reduction of the exercise price of warrants, expiring on September 19, 2005, previously issued by the Company in a private placement from $0.45 per share to $0.25 through June 24, 2005. As a result of the price reduction 75,000 warrants were exercised during the second quarter ended June 30, 2005, yielding net cash proceeds of $16,875. The warrants were exercised by two accredited investors (as such term is defined in Rule 501(a) of Regulation D) in reliance upon the safe harbor from registration available under Rule 506 of Regulation D of the Securities Act.
On May 13, 2005 the Company, by resolution of its Board of Directors, issued 112,903 restricted common shares to Mr. James Duff, for his services as Chairman of the Board of Directors and in connection with working with the Company’s management in attempts to finance the Company. Mr. Duff’s value of services was determined by the other directors to be $35,000, and the shares were issued on the basis of their current market price of $0.31 per share.
On February 14, 2005, the Company issued 30,000 restricted common shares to Sussex Avenue Partners, LLC of Carlsbad, CA as partial and final payment for consulting services performed under a Consulting Agreement dated October 19, 2004.
On January 6, 2005, the Company issued 20,000 restricted common shares to Mr. Terry Swanger in partial fulfillment of payment for consulting services by Swanger Eriksen and Associates as provided for in a Letter
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Agreement dated October 14, 2004. The consulting services were related to the development and implementation of a marketing plan to introduce the Company to U.S. markets. The Letter Agreement was terminated on February 28, 2005.
On December 31, 2004, the Company issued 50,000 common shares and 50,000 options to purchase shares of common stock to its six non-executive, independent directors pursuant to its 2003 Share Incentive Plan (the “Plan”), as approved by its shareholders. The Plan permits the granting of nonqualified stock options, incentive stock options and shares of common stock to employees, directors and consultants. In each case the options are exercisable for a ten year period from the date of issuance at an exercise price of $0.22 per share. The options were valued using the average closing price of the last five trading days of 2004 at a 45% discount. The shares and options were issued to the following directors:
Director | Common Shares | Option Shares | Vesting |
Charles G. Bigelow | 50,000 | 50,000 | Immediately |
James K. Duff | 50,000 | 50,000 | Immediately |
Kenneth S. Eickerman | 50,000 | 50,000 | Immediately |
James A. Fish | 50,000 | 50,000 | Immediately |
William Orchow | 50,000 | 50,000 | Immediately |
Jackie E. Stephens | 50,000 | 50,000 | Immediately |
Each of the directors is an accredited investor (as such term is defined in Rule 501(a) of Regulation D) and the shares were issued and options were granted in reliance upon the safe harbor from registration available under Rule 506 of Regulation D of the Securities Act.
On December 13, 2004 the Company issued 30,000 restricted common shares to Sussex Avenue Partners, LLC of Carlsbad, CA as partial payment for consulting services performed under a Consulting Agreement dated October 19, 2004.
On October 27, 2004 the Company issued 60,000 restricted common shares to Sussex Avenue Partners, LLC of Carlsbad, CA as partial payment for consulting services relating to management advisement, strategic planning and marketing in connection with the Company’s business, together with advisory and consulting related to shareholder management and public relations under terms of a Consulting Agreement dated October 19, 2004. The Consulting Agreement required the Company to issue tranches of restricted common shares totaling 120,000 shares before its termination on February 5, 2005.
On March 4, 2004, the Company issued 5,000 nonqualified stock options to purchase shares of common stock to four of its non-executive, independent directors for services performed in 2003 pursuant to its 2003 Share Incentive Plan (the “Plan”), as approved by its shareholders. The Plan permits the granting of nonqualified stock options, incentive stock options and shares of common stock to employees, directors and consultants. In each case the share purchase options are exercisable for a ten year period from the date of issuance at an exercise price of $0.29 per share. The options were valued using the average closing price of the last five trading days of 2003 at a 45% discount. The options were issued to the following directors:
Director | Option Shares | Vesting |
Charles G. Bigelow | 5,000 | Immediately |
James K. Duff | 5,000 | Immediately |
James A. Fish | 5,000 | Immediately |
Jackie E. Stephens | 5,000 | Immediately |
Each of the directors is an accredited investor (as such term is defined in Rule 501(a) of Regulation D) and the options were granted in reliance upon the safe harbor from registration available under Rule 506 of Regulation D of the Securities Act.
Between March 12 and March 31, 2004 the Company issued 588,611 restricted common shares to five share holders and two directors, Mr. Charles Bigelow and Mr. James Fish, on their exercise of $0.20 per share purchase warrants. The Company realized $114,750 on these transactions; a 10% commission was payable on two transactions to Pennaluna & Company, Inc., Coeur d'Alene, Idaho. All seven individuals are accredited investors (as such term is defined in Rule 501(a) of Regulation D) and the securities were issued in reliance upon the safe harbor from registration available under Rule 506 of Regulation D of the Securities Act.
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On March 4, 2004 the Company’s Board of Directors voted to advance Becky Corigliano from Acting CFO to CFO of the Company. Ms. Corigliano’s employment agreement of November 1, 2003 with the Company included a provision that if she became the CFO of the Company by April 1, 2004, she would be awarded the remaining 67,103 treasury shares as part of her compensation. The Company issued 67,103 restricted shares to Ms Corigliano on March 27, 2004.
Between February 6 and February 26, 2004 the Company issued 175,000 restricted common shares to two shareholders and a director, Mr. James Duff, on their exercise of $0.20 per share purchase warrants. The Company realized $34,500 on these transactions; a 10% commission was payable on one transaction to Pennaluna & Company, Inc., Coeur d'Alene, Idaho. All three individuals are accredited investors (as such term is defined in Rule 501(a) of Regulation D) and the securities were issued in reliance upon the safe harbor from registration available under Rule 506 of Regulation D of the Securities Act.
On February 20, 2004, the Company issued 824,370 restricted shares of common stock at an agreed value of $0.10 per share and warrants to purchase 412,186 shares at an exercise price of $0.20 to Walters LITS, LLC as nominee; the shares of common stock and warrants were issued in exchange for and in consideration of cancellation of a debt in the amount of $82,437. Walters LITS LLC as nominee had acquired this debt from Eskil and Ellamae Anderson and Hollis Barnett on June 24, 2003. The shares of common stock subsequently were re-issued to the beneficial owners by Walters LITS LLC. Richard R. Walters received 412,185 restricted shares of common stock. Mr. Walters also received a warrant to purchase 206,093 shares of common stock at an exercise price of $0.20 per share. On March 31, 2004, Mr. Walters relinquished his right to exercise that warrant and that warrant has been cancelled. Mr. Walters is an accredited investor (as such term is defined in Rule 501(a) of Regulation D) and the securities were issued in reliance upon the safe harbor from registration available under Rule 506 of Regulation D of the Securities Act.
On February 20, 2004, 887,500 restricted shares of common stock were issued to Walters LITS LLC as nominee pursuant to the resolution adopted by the Board of Directors on June 30, 2003 authorizing the issuance of those shares, together with warrants to purchase 443,750 shares of common stock at $0.20 to Walters LITS LLC as nominee as consideration for its success in negotiating the debt and stock purchase agreement and royalty purchase option agreement with the Company's prior management. Walters LITS LLC as nominee then re-issued the shares of common stock and warrants to the beneficial owners. Richard R. Walters received a certificate for 221,875 restricted shares of common stock of the Company and a warrant to purchase 221,875 shares of common stock of the Company at $0.20 per share. On March 31, 2004, Mr. Walters relinquished his right to purchase all but 100,000 shares of that warrant; the right to purchase 121,875 shares, pursuant to that warrant, has been cancelled. Subsequently, a mandatory conversion provision of that warrant caused Mr. Walters’ remaining right to purchase 100,000 shares to expire on May 9, 2004. Mr. Walters is an accredited investor (as such term is defined in Rule 501(a) of Regulation D) and the securities were issued in reliance upon the safe harbor from registration available under Rule 506 of Regulation D of the Securities Act.
On February 4, 2004 the Company issued 500,000 restricted common shares on a warrant exercise to person considered to be a Company insider, and a Schedule 13G was filed pursuant to Rule 13d-1(c) with the SEC. The warrant exercise price was $0.20 per share; the Company realized $100,000 from the transaction.
On November 1, 2003 the Company issued to Becky Corigliano 50,000 restricted common shares as partial compensation for services to be rendered as Acting CFO in accordance with Ms. Corigliano’s employment agreement of November 1, 2003. These 50,000 shares were drawn from the Company’s 117,103 treasury shares (controlled shares) that had been re-purchased in the open market by former management.
On October 8, 2003 the Company issued 350,000 shares of common stock and warrants to purchase 175,000 shares of common stock for $0.20 per share to the beneficial owners of Walters LITS, LLC at $0.10 per share in exchange for the transfer and assignment to the Company of seven unpatented mining claims. Walters LITS, LLC had purchased these claims from Eskil Anderson, former president of the Company. Certificates evidencing the issuance of restricted shares of common stock were issued to Walters LITS, LLC as nominee on September 24, 2003. In this transaction, Richard R. Walters received 50,000 shares of common stock and a 25,000 share purchase warrant and James A. Fish, a director of the Company, received 50,000 shares of common stock and a 25,000 share purchase warrant. Mr. Walters transferred his share purchase warrant to a shareholder on January 26, 2006, and Mr. Fish exercised his warrant on March 15, 2004. Richard R. Walters, the beneficial owner of Walters LITS, LLC, and Mr.
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Fish are accredited investors (as such term is defined in Rule 501(a) of Regulation D) and the securities were issued in reliance upon the safe harbor from registration available under Rule 506 of Regulation D of the Securities Act.
On September 16, 2003, 150,000 shares of the Company’s common stock and warrants to purchase 75,000 shares of the Company’s common stock were issued as reimbursements for $15,000 of legal fees incurred on the Company’s behalf. The warrants authorized the holder to purchase one-half share for each share received. The warrant exercise price is $0.20 for one whole share and its expiry, subject to certain mandatory conversion provisions, is on the last business day of the thirty-sixth month following the date upon which the shareholders approve the increase in authorized capital. The shareholders approved the increase in authorized capital on January 23, 2004. The issuance of these securities included 75,000 common shares and 37,500 share purchase warrants to St. Louis Drumlummon Mines, Inc. and 75,000 shares and 37,500 share purchase warrants to Richard R. Walters as reimbursement for fees and expenses they incurred in the transactions. Subsequently on February 3, 2004, Mr. Walters transferred these warrants to purchase 37,500 common shares to another shareholder. Mr. Walters is an accredited investor (as such term is defined in Rule 501(a) of Regulation D) and the securities were issued in reliance upon the safe harbor from registration available under Rule 506 of Regulation D of the Securities Act. The securities were issued in private transactions not involving a public offering pursuant to Section 4(2) of the Securities Act.
In August 2003, the Company conducted an offering (the “Offering”) of restricted shares of its common stock and common stock purchase warrants for sale, in a private placement, to 23 accredited investors. The Offering resulted in the sale of 1,100,000 units for $0.20 per unit, or $220,000. Each unit consisted of one share of the Company’s common stock and one common stock purchase warrant to purchase one share of the Company’s restricted common stock for $0.45 within 24 months of the unit purchase date. The warrants expire on various dates between September 20, 2005 and October 1, 2005, if not exercised prior thereto. Certificates for these shares of common stock and the attached warrants were issued on or about October 10, 2003. In addition to a cash commission of $0.02 per share (10% of the unit price) Pennaluna & Company, Inc., Coeur d'Alene, Idaho, the Selling Agent for the private placement, received warrants to purchase 110,000 shares of common stock at the same price and upon the same terms and conditions. The Offering was exempt from registration under the Securities Act pursuant to Section 4(2) and Rule 506 of Regulation D,
On June 30, 2003 at a special meeting of the Company’s Board of Directors the directors agreed to convert related party liabilities purchased by Walters LITS from Eskil and Ellamae Anderson (this obligation had been acquired from the Andersons and Mr. Barnett by Walters LITS, LLC on June 24, 2003) for accumulated prior management services and from Hollis Barnett for past legal services, into 2,754,500 shares of the Company’s common stock with additional warrants to purchase 1,377,250 of the Company’s common stock at $0.20 per share. As a result during 2003, the Company issued 1,930,130 shares of common stock and warrants to purchase 965,065 shares of common stock for $0.20 per share to Walters LITS and extinguished $193,013 of related party debt plus related accrued payroll taxes of $19,323. Mr. Walters received 25,000 restricted common shares and a warrant to purchase 12,500 shares. Mr. Walters subsequently transferred these warrants to a shareholder on January 26, 2004. At December 31, 2003 the remaining unconverted related party debt was $82,437; this debt was subsequently cancelled by the issuance of 824,370 shares and attached warrants to Walters LITS, LLC as nominee on February 20, 2004. Additionally, at this special meeting of the directors, the directors resolved to issue Walters LITS 887,500 shares of the Company’s restricted common stock and warrants to purchase 443,750 shares of common stock for $0.20 per share as consideration for its success in negotiating the Debt and Stock Purchase Agreement and the Royalty Purchase Option; these restricted shares and warrants were issued on February 20, 2004. Additionally, at this special meeting of the directors, the directors authorized issuance of 350,000 shares of common stock and warrants to purchase 175,000 shares of common stock for $0.20 per share to Walters LITS, LLC as nominee at an agreed value of $0.10 per share as of June 30, 2003 in exchange for the transfer and assignment to the Company of seven unpatented mining claims. Walters LITS, LLC had purchased these claims from Eskil Anderson. Certificates evidencing the issuance of restricted shares of common stock were issued to Walters LITS, LLC as nominee on September 24, 2003. On October 8, 2003, these shares of common stock were transferred by Walters LITS, LLC to the beneficial owners. In this transaction, Richard R. Walters received 50,000 shares of common stock and a 25,000 share purchase warrant and James A. Fish, a director of the Company, received 50,000 shares of common stock and a 25,000 share purchase warrant. Richard R. Walters, the beneficial owner of Walters LITS, LLC, and Mr. Fish are accredited investors (as such term is defined in Rule 501(a) of Regulation D) and the securities were issued in reliance upon the safe harbor from registration available under Rule 506 of Regulation D of the Securities Act.
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Item 16. Exhibits
Other than contracts made in the ordinary course of business, the following are the material contracts that we have entered into within the two years preceding the date of this Registration Statement:
(a)
Exhibits
Exhibit Number | Description |
3.1 (1) | Amendment to Articles of Incorporation of Little Squaw Gold Mining Company dated January 27, 2004 |
3.2(5) | Articles of Incorporation and Amendments through 1977. |
3.3(5) | Bylaws |
5.1(5) | Opinion of Payne, Hamlin, Coffin & Brooke |
10.1 (2) | Independent Contractor Agreement, dated as of June 30, 2003, between Little Squaw and Richard R. Walters |
10.2 (1) | Independent Contractor Agreement, dated as of November 1, 2003, between Little Squaw and Becky Corigliano |
10.3 (1) | 2003 Share Incentive Plan, dated October 11, 2003, and effective January 27, 2004 |
10.4 (1) | 2003 Share Incentive Plan Stock Option Agreement, Richard Walters |
10.5 (3) | Placement Agent Agreement with Strata Partners, LLC, dated February 25, 2005 |
10.6 (3) | Convertible Promissory Note dated January 21, 2005, Orchow |
10.7 (3) | Convertible Promissory Note dated January 21, 2005, Hallauer |
10.8 (4) | Placement Agent Agreement with Strata Partners, LLC, dated February 25, 2005, as amended |
10.9(5) | Private Placement Agreement with Strata Partners dated September 23, 2005, as amended. |
10.10(5) | Securities Purchase Agreement by and between Little Squaw Gold Mining Company and RAB Special Situations (Master) Fund Limited dated November 21, 2005 |
10.11(5) | Form of 6% Convertible Debenture |
10.12(5) | Form of Class A Warrant |
10.13(5) | Form of Subscription Agreement related to private place of units (2005) |
10.14(5) | Form of Warrant Certificate |
10.15(5) | Restated 2003 Share Incentive Plan, dated November 7, 2005. |
10.16(6) | Form of Subscription Agreement related to private place of units (2006) |
14(5) | Code of Ethics |
23.1(5) | Consent of Melvin Klohn, a licensed professional geologist |
23.2(5) | Consent of Pacific Rim Geological Consultants, Inc., of Fairbanks Alaska |
23.3(5) | Consent of James C. Barker, a Certified Professional Geologist |
23.4(5) | Consent of BlueMap Geomatics Ltd. Located in Vancouver, British Columbia |
23.5 | |
23.6 | Consent of Payne, Hamlin, Coffin & Brooke (included in Exhibit 5.1) |
24 | Power of Attorney included with signature page. |
(1) Incorporated by reference to Form 10KSB as filed March 29, 2004.
(2) Incorporated by reference to Form 10QSB as filed November 13, 2003.
(3) Incorporated by reference to Form 10KSB as filed March 29, 2005.
(4) Incorporated by reference to Form 10QSB as filed May 16, 2005
(5) Incorporated by reference to Form SB-2 as filed December 30, 2005.
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Item 17. Undertakings.
(a)
The undersigned Registrant hereby undertakes:
(1)
To file, during any period in which offers or sales of securities are being made, a post-effective amendment to this registration statement to:
(i)
Include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii)
Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement; and notwithstanding the forgoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectuses filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in the volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.
(iii)
Include any additional or changed material information on the plan of distribution;
(2)
That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3)
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(b)
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described herein, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
(c) that, for the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of this registration statement relating to the offering, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in the registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Spokane.
LITTLE SQUAW GOLD MINING COMPANY
/s/ Richard R. Walters
By: Richard R. Walters
President (Principal Executive Officer)
Date: April 14, 2006
LITTLE SQUAW GOLD MINING COMPANY
/s/ Ted R. Sharp
By: Ted. R. Sharp
Chief Financial Officer (Principal Financial and Accounting Officer)
Date: April 18, 2006
In accordance with the Securities Act of 1933, as amended, this registration statement has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.
Date: April 18, 2006
/s/
Charles G. Bigelow, Director
Date: April 18, 2006
/s/
James K. Duff, Director
Date: April 18, 2006
/s/ Kenneth S. Eickerman
Kenneth S. Eickerman, Director
Date: April 18, 2006
/s/ James A. Fish
James A. Fish, Director
Date: April 18, 2006
/s/ Richard R. Walters
Richard R. Walters, Director
Date: April 18, 2006
/s/ William Orchow
William Orchow, Director
Date: April 18, 2006
/s/ William V. Schara
William V. Schara , Director
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POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints each of Richard R. Walters and Ted R. Sharp his attorney-in-fact and agent, with the full power of substitution and resubstitution and full power to act without the other, for them in any and all capacities, to sign any and all amendments, including post-effective amendments, and any registration statement relating to the same offering as this registration that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, to this registration statement, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, or their substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Date: April 18, 2006
/s/
Charles G. Bigelow, Director
Date: April 18, 2006
/s/
James K. Duff, Director
Date: April 18, 2006
/s/ Kenneth S. Eickerman
Kenneth S. Eickerman, Director
Date: April 18, 2006
/s/ James A. Fish
James A. Fish, Director
Date: April 18, 2006
/s/ Richard R. Walters
Richard R. Walters, Director
Date: April 18, 2006
/s/ William Orchow
William Orchow, Director
Date: April 18, 2006
/s/ William V. Schara
William V. Schara , Director
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